For today, we decided to bring you Q1 updated overview of the indebtedness and capital structure of Croatian Blue Chips.
The outbreak of Covid-19 and its implications have put debt in spotlight for many investors. Therefore, for today we decided to present you with an updated analysis of indebtedness of Croatian blue chips, by comparing net debt to T12 EBITDA (Q1 2020 results) and % of debt financing. We also added how much additional debt these companies could take in order to reach 3xEBITDA.
Note that Adris Grupa and ZABA were excluded from the overview as Adris operates as a holding, while ZABA is a bank.
Net Debt/ EBITDA (Trailing 12m)
Among observed companies Končar, HT and Ericsson Nikola Tesla operate at a negative net debt, meaning their cash position (short term financial assets + cash and cash equivalents) exceed their financial debt.
Of the other constituents, food companies have a very low net debt/EBITDA. Atlantic Grupa operates with a net debt/EBITDA of 1.09, while Podravka with 1.35. On the flip side, 3 tourist companies operate with the highest net debt/EBITDA (of the observed ones). Valamar comes first with 3.27, followed by Arena Hospitality Group with 3.2.
We also observed how much additional debt companies could take to reach 3xEBITDA which is in the region considered as a breaking point and red flag in terms of indebtedness.
This analysis provides information on the companies’ potential for absorbing shocks as well as the potential for an internal growth through additional borrowing. It’s important to point out that companies with net debt above 3xEBITDA are not necessarily too indebted as not all them are equal and their industries differ (and the other way around – certain industries are not prone to hold any leverage).
Potential Additional Debt (HRK m) to Reach 3x EBITDA
Turning our attention to the capital structure, of the observed companies, 9 of them are mostly equity funded. Of those, HT leads the list with 97.5% equity, followed with Končar 89%. On the flip side, Optima Telekom is almost entirely debt funded with 97.8%.
Capital Structure of Croatian Companies
In Q1, Dalekovod recorded a 28% increase in sales, EBITDA of HRK 29m and a net loss of HRK 4.15m
In the first 3 months of 2020, Dalekovod recorded a high increase of 27.9% in sales, which amounted to HRK 275.5m. When observing the revenue line by sectors,
The Energy sector recorded a 77% increase in revenues, to HRK 186 million. Of that, 95% was generated on the foreign market. The department of high and low voltage is currently performing works on 22 large projects and 17 smaller projects, and the department of substations has 4 large projects and seven smaller projects. Four projects worth more than HRK 115 million were contracted during the Q1 2020.
The Infrastructure sector recorded a decline in revenue of 8% and amounted to HRK 29 million. All of the revenues were domestic market. Most of the projects, refer to the investor HŽ Infrastruktura (6 of them), while there are five projects for the HAC and two projects for the City of Zagreb.
On the operating expenses side, the company witnessed a 7.3% increase, amounting to HRK 271.5m. Operating expenses did not follow such a strong revenue growth as the company has been working on the optimization of the cost structure in the context of the restructuring process that began during the previous year. Overhead costs related to the costs of the Group’s employees are lower by HRK 6.3 million.
As a result of the above-mentioned EBITDA amounted to HRK 15m, compared to -23.08m in Q1 of 2019. Such a result puts the EBITDA margin at 5.7%.
Going further down the P&L, the company recorded a net financial result of HRK -11.83m, compared to HRK 44.5m in Q1 2019. Such a result came mostly on the back of the net FX loss. As a reminder, in Q1 2019 the financial gain came as a consequence of the sale of Dalekovod Professio (wind power plant).
In the first quarter of 2020, Dalekovod recorded a net loss of HRK -4.15m, which came on the back of the aforementioned net FX loss. However, we are happy to see the company record a solid operating performance, which was accommodating for the share price. Yesterday, the company’s share was by far the top gainer on ZSE with a +20.7% daily increase.
Trading statistics for April 2020 show an average daily turnover of EUR 8.9m (+53% YoY).
The Bucharest Stock Exchange published their trading statistics for April 2020, showing an average daily turnover of EUR 8.9m, representing a sharp increase of 53% YoY.
When observing the top traded shares, one can notice that Banca Transilvania recorded the highest turnover of RON 212.8m. Fondul Proprietatea follows with a turnover of RON 146.6m. Next come BRD with RON 115.5m and Romgaz with 86.9m.
Turning our attention to the main index of the BVB, in April, BET witnessed somewhat of a recovery, rising by 4.6% and ending the month with 7,978.64 points. As a reminder, in March, BET observed a sharp decrease of 16.4%. Such a high decrease was last time seen in December of 2018, when the index dropped by 14.8% amid governments tax proposal.
It is important to note that out of 17 BET index constituents, 8 recorded a double digit decrease, with Conpet leading the list (+19.1%). Medlife, and Alro follow, both increasing by 18.9%. On the flip side, BRD recorded the highest decrease of 3.7%.
As a result of the above entioned partial recovery, the market cap of the BVB recorded an increase of 8% MoM, amounting to EUR 26.9bn.
Share Price Performance of BET Constituents in April (%)