Codere — Diversifying outside Argentina

Codere (SP: CDR)

Last close As at 28/03/2024

0.55

0.00 (0.00%)

Market capitalisation

66m

More on this equity

Research: Consumer

Codere — Diversifying outside Argentina

Growth from Mexico and Spain, combined with ongoing operational efficiencies, continues to offset pressure from the Argentine division (23% of Q219 revenues). Codere is maintaining FY19 EBITDA guidance with positive net cash flow for the year. The net debt/LTM EBITDA ratio is 2.7x and the company is successfully navigating the Argentina uncertainty. We maintain our underlying EBITDA forecast for FY19, although we are lowering our FY20 EBITDA estimate by 7.1% to €368.4m as we now expect Argentina to continue contracting next year. The stock is very illiquid and trades at 4.1x EV/EBITDA for FY19e, which is at a deep discount to peers.

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Consumer

Codere

Diversifying outside Argentina

Q219 results

Travel & leisure

19 September 2019

Price

€3.46

Market cap

€410m

Net debt (€m) at June 2019 (inc IFRS 16)

1,090

Shares in issue

118.5m

Free float

5%

Code

CDR

Primary exchange

IGBM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.5

8.0

(53.3)

Rel (local)

1.3

10.5

(51.2)

52-week high/low

€7.76

€2.86

Business description

Codere is an international gaming company that manages c 57,000 gaming machines, 30,000 bingo seats and 7,600 sports betting terminals across Latin America, Spain and Italy. It was founded in 1980, listed in 2007 and completed a successful debt for equity swap in 2016.

Next events

Q319 results

November 2019

Analysts

Victoria Pease

+44 (0)20 3077 5740

Richard Williamson

+44 (0)20 3077 5700

Codere is a research client of Edison Investment Research Limited

Growth from Mexico and Spain, combined with ongoing operational efficiencies, continues to offset pressure from the Argentine division (23% of Q219 revenues). Codere is maintaining FY19 EBITDA guidance with positive net cash flow for the year. The net debt/LTM EBITDA ratio is 2.7x and the company is successfully navigating the Argentina uncertainty. We maintain our underlying EBITDA forecast for FY19, although we are lowering our FY20 EBITDA estimate by 7.1% to €368.4m as we now expect Argentina to continue contracting next year. The stock is very illiquid and trades at 4.1x EV/EBITDA for FY19e, which is at a deep discount to peers.

Year end

Revenue (€m)

Adjusted EBITDA** (€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

1,638.2

273.5

0.01

0.0

N/A

N/A

12/18

1,476.4

282.9

0.48

0.0

7.3

N/A

12/19e***

1,426.2

352.4

0.20

0.0

17.4

N/A

12/20e***

1,472.8

368.4

0.26

0.0

13.1

N/A

Note: *EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Adjusted EBITDA excludes non-recurring items. ***Includes IFRS 16 adjustments; FY19 EBITDA is c €70m higher due to IFRS 16.

Maintaining FY19 EBITDA guidance

Q219 revenue declined by 5.7% y-o-y to €354.7m and H119 revenues decreased by 6.2% to €712.4m. In constant currency, Argentina grew by 25% in H119 but declined by €71.9m due to the depreciation of the Argentine peso. Nonetheless, growth from other regions (notably Spain and Mexico), combined with ongoing cost efficiencies, mean that Codere is maintaining its FY19 EBITDA guidance of €280–290m (pre IFRS 16 changes). We are forecasting Argentine revenues to decline by 28.5% in FY19 and 12% in FY20 (to 17% of revenues) and are lowering our group FY20 revenue by 8.5% and EBITDA by 7.1%.

A history of navigating Argentine fluctuations

At the end of Q219, Codere reported net debt of €1,090m, which equates to a net debt/adjusted LTM EBITDA of 3.0x (or 2.7x before IFRS 16 adjustments). This is well within banking covenants and Codere has sufficient funds to service the debt, with comfortable interest service ratios. We expect the company to refinance the senior notes in the near term, although this is not helped by Moody’s and S&P’s recent negative rating changes (to B3 and CreditWatch Negative respectively). In line with guidance, we continue to forecast net cash flow this year and note that Codere has a long history of managing Argentine FX and inflation fluctuations, including capital controls.

Valuation: Illiquid, at deep discount for EV/EBITDA

As a result of a restrictive shareholders’ agreement, Codere’s stock is highly illiquid and trades at 4.1x EV/EBITDA and 13.1x P/E for FY20e (a deep discount to peers on an EV/EBITDA basis). Catalysts include stabilisation in Argentina, growth in Mexico, demonstrable net cash flow, successful debt refinancing and a resolution of the complex shareholders’ agreement (which includes a possible share placing).

Results summary

Revenue: Argentine currency devaluation led to a 6.2% revenue decline

Q219 revenue declined by 5.7% y-o-y to €354.7m and H119 revenues decreased by 6.2% to €712.4m. Growth across Mexico, Online, Spain, Italy and Uruguay was offset by a €71.9m decline in Argentina in H1 (€160.7m in H119 vs €232.6m in H118), due to the depreciation of Argentine peso against the euro.

In terms of gaming capacity, the total number of slots increased 0.8% to 56,589 in H119 driven by growth in Mexico, Spain and Uruguay more than offsetting the reduction in Italy, Colombia and Panama. In terms of venues, gaming halls increased from 145 to 148, and bars decreased from 9,971 to 9,864 in H119.

EBITDA: Operating efficiencies drive margin increase

Q219 adjusted EBITDA (post IFRS 16) was €88.0m with a 24.8% margin vs €86.5m in Q218. H119 adjusted EBITDA was €173.9m (24.4% margin) and pre-IFRS 16 H119 adjusted EBITDA was €138.3m vs €132.9m in H118. The improvement in EBITDA margin was due to sustained operational efficiencies, which fully offset gaming tax increases and the loss in relative weight of the high-margin Argentinean operation.

As we detail further below, our underlying pre-IFRS EBITDA estimate remains broadly unchanged (although our post IFRS EBITDA is 3.5% lower, purely due to a slight adjustment to our IFRS 16 accounting assumptions). On the back of an expected 12% decline in Argentine revenues for FY20 due to the recent further peso devaluation, we are lowering our group FY20 adjusted EBITDA by 7.1% to €368.4m.

Net debt/LTM EBITDA of 2.7x: Credit rating agencies turn negative

At H119, Codere reported net debt of €1,090m, which equates to a net debt/adjusted LTM EBITDA of 3.0x (or 2.7x before IFRS 16 adjustments). This is well within banking covenants (based on pre IFRS 16) and Codere has sufficient funds to service the debt, with comfortable interest service ratios. Within this amount, Codere had €80.9m cash and €143.7m liquidity (including liquidity from the credit facility). This compares to €81.8m and €159.7m at FY18.

We expect the company to refinance the €766m senior notes in the near term and also note that licence renewals are due in Argentina and Italy in the years 2021–24 (c €60-80m). The refinancing terms may be affected by Moody’s and S&P’s recent ratings and outlook changes (see below). In line with guidance, we continue to forecast net cash flow this year and note that Codere has a long history of managing Argentine FX and inflation fluctuations, including capital controls.

Country analysis

Due to the devaluation of the Argentine peso, Argentine revenues have been steadily falling over the past two years and now represent 23% of the group total. To counterbalance the decline, Codere has been channelling investment into other growth markets (notably Spain and Mexico) and, as a result, for Q219, Mexico comprised 24% of total revenues and 44% of adjusted EBITDA.

We highlight the significant developments in the first half below. For further information on the country dynamics, please see our July Initiation.

Exhibit 1: Q219 revenue split

Exhibit 2: Q219 LTM adjusted EBITDA split (pre IFRS 16)

Source: Codere

Source: Codere

Exhibit 1: Q219 revenue split

Source: Codere

Exhibit 2: Q219 LTM adjusted EBITDA split (pre IFRS 16)

Source: Codere

Mexico: New capacity to drive revenues

Q219 revenues (excluding online) in Mexico increased by 5.3% to €84.2m and by 7.2% in H119 to €167.8m. This was despite a more competitive environment and was driven by growth of 7.7% in the average number of slots, as well as a 6.2% depreciation of the euro against the Mexican peso in H119.

Q219 adjusted EBITDA was €40.4m (€31.9m pre IFRS 16), which compares to €33.2m in Q218. For H119, this equated to €78.6m (or €61.6m pre IFRS 16). The adjusted EBITDA margin increased from 42.0% in H118 to 46.9% in H119, due to continued cost reductions, and the positive impact of the acquisition of machines in H218.

Codere has opened four additional halls vs the prior year and this should help to drive growth going forward. We are forecasting Mexican revenues of €344.4m for FY19, with growth of 8% in FY20 to €371.9m, with an EBITDA margin of 52.8%.

Argentina: 79.6% devaluation of peso in H119

In constant currency, Argentine revenues increased by 24.8% in the first half to €160.7m and gross win per slot per day in local currency grew by 22.1%. This was well below the average inflation rate of 54.2% during H119.

Due to the 79.6% devaluation of the Argentine peso, H119 revenues declined by 30.9% to €160.7m and Q219 revenues declined by 27.2% to €80.0m. Revenues were also affected by the new tax on prizes (3%) effective since February. Q219 adjusted EBITDA was €18.7m (or €17.3m pre-IFRS 16). H119 adjusted EBITDA decreased by 35.5% to €37.0m, as a result of the devaluation of the Argentine peso and the introduction of the tax on prizes, partially offset by efficiencies implemented in the year. The adjusted EBITDA margin was 23.0% in H119, vs 24.6% in the prior year, due to the increase of gaming taxes.

In August 2019, there was another significant devaluation of the peso (as a result of a probable Peronist government) and the peso currently trades at 62 ARS/€ vs 50 ARS/€ in August and 42 ARS/€ at the beginning of the year. The government has also recently imposed capital controls in Argentina, which will not impact Codere materially in 2019 as it has already transferred the majority of Argentine cash (73%) back to Spain. We note that Codere has a long history of managing Argentine FX and inflation fluctuations, including capital controls.

Spain: Growing profitability due to cost efficiencies

H119 Spanish revenue (excluding online) increased by 5.4% to €96.1m, driven by growing revenues in retail sports betting and the slot route businesses, with 22.4% and 6.3% more installed units respectively and the progressive maturity of the sports betting capacity installed. This was offset by a 2.4% decrease in route slot unit yields (mainly driven by the increase in the number of units, especially in arcades). Q219 revenues increased by 2.6% to €47.5m, despite the difficult sports betting comparisons in Q218 (FIFA World Cup).

H119 adjusted EBITDA grew 18.7% to €22.5m with a margin of 23.4% vs 20.8%, due to continued cost efficiencies. Pre IFRS 16, H119 EBITDA was €19.1m (vs €15.4m in the prior year).

We forecast Spanish revenues of €203.9m for FY19 and further growth of 15% in FY20, helped by a greater number of sporting competitions in 2020 (notably Euro 2020). Note that from FY19, online is reported separately and is not included in the Spanish division.

Italy: Improving yields, but higher taxes affect margins

H119 revenues increased by 2.9% to €171.6m, due to the significant improvement on machine yields (21.5%), as well as the higher gaming tax (that increases the share Codere keeps from machines in bars), offsetting the reduction in capacity defined by the regulator in 2018 (11.3%). Increased fees to units connected to the network also contributed positively. Q219 revenue increased by 4.5% to €85.1m.

H119 adjusted EBITDA was €12.1m, 25.7% lower than the prior period, due to the reduction in capacity and the higher gaming taxes. Pre IFRS EBITDA for H119 was €8.3m.

We are forecasting revenues of €347.2m in FY19, growing at 2% thereafter with an EBITDA margin of 8.7% in FY19 and FY20.

Other operations (Panama, Uruguay, Colombia and Online)

H119 revenues increased by 4.4% to €116.2m. Online increased by 47.5% to €29.9m, due to increasing momentum in Spain and Mexico and despite difficult comparisons from the prior year (FIFA World Cup). Uruguay revenues increase by 6.3% to €37.3m after a strong performance in HRU and Carrasco Nobile, although Panama and Colombia declined by 13.8% (€38.3m) and 6.8% (€10.8m) due to the closure of non-performing casinos.

Adjusted EBITDA increased by 19.2% to €28.7m and pre IFRS 16 EBITDA increased by 38.0% to €21.2m, with online increasing €4.0m to €2.4m, Uruguay increasing €2.0m to €10.0m and Colombia up €1.9m to €3.1m.

We forecast other operations revenues of €239.1m in FY19 and €255.6m in FY20, with an EBITDA margin of 24.7% in FY19 and 23.9% in FY20 (as the lower margin online steadily becomes a larger percentage of the total).

Exhibit 3: Summary income statement

 €m

2014

2015

2016

2017

2018

2019e*

2020e

2021e

Mexico

341.9

355.3

329.8

339.9

328.4

344.4

371.9

394.3

Argentina

489.0

681.8

534.5

582.4

407.7

291.6

256.6

282.2

Spain

149.9

155.9

170.2

188.0

220.0

203.9

234.5

269.7

Italy

263.8

284.2

321.5

335.8

336.5

347.2

354.2

361.3

Other

141.0

162.3

189.8

192.1

183.8

239.1

255.6

270.0

Revenue

1,385.6

1,639.5

1,545.8

1,638.2

1,476.4

1,426.2

1,472.8

1,577.4

growth

0%

18.3%

-5.7%

6.0%

-9.9%

-3.4%

3.3%

7.1%

Gaming taxes

(468.9)

(571.9)

(550.8)

(597.0)

(528.1)

(500.6)

(522.8)

(566.3)

Gross profit

871.0

1,017.8

946.5

986.4

895.5

873.8

869.9

954.3

One-off items

(66.9)

(33.6)

(51.5)

(29.4)

(52.7)

(37.0)

(10.0)

(10.0)

Adjusted EBITDA**

213.2

280.1

267.7

273.5

282.9

352.4

368.4

403.7

margin

15.4%

17.1%

17.3%

16.7%

19.2%

24.7%

25.0%

25.6%

Mexico

75.1

91.5

88.5

92.9

105.9

161.3

173.7

185.7

Argentina

93.4

146.1

131.0

134.2

96.1

69.0

60.0

66.0

Spain

17.6

24.6

29.5

25.1

26.4

48.9

60.8

76.0

Italy

29.4

26.7

26.4

23.6

27.6

25.1

25.8

27.6

Other

18.9

14.2

23.1

28.2

39.9

59.1

61.0

63.3

Corporate costs

(21.2)

(23.0)

(30.9)

(30.4)

(13.0)

(11.0)

(13.0)

(15.0)

Adjusted EBITDA**

213.2

280.1

267.7

273.5

282.9

352.4

368.4

403.7

Normalised operating income (pre inflation adj)

87.7

158.1

159.7

160.5

169.0

183.7

197.7

231.0

Inflation Adjustment

0.0

0.0

0.0

0.0

(19.5)

(13.9)

(5.0)

0.0

Operating income (post inflation adj)

20.8

124.5

108.2

131.1

96.9

132.8

182.7

221.0

Net finance costs

(129.4)

(131.7)

(128.5)

(64.2)

(67.2)

(116.3)

(113.2)

(108.4)

Associates & joint ventures (post-tax share)

3.0

2.7

(0.2)

(0.1)

(0.1)

(1.0)

(1.1)

(1.1)

One-off items

(61.4)

(71.7)

(1,095.9)

17.2

(32.7)

(18.7)

0.0

0.0

Normalised PBT

(38.7)

29.1

31.0

96.2

101.7

66.4

83.5

121.5

PBT

(167.0)

(76.2)

(1,116.4)

83.9

(3.1)

(3.2)

68.5

111.5

Tax

(40.9)

(63.2)

(36.5)

(64.2)

(30.4)

(35.0)

(43.3)

(46.3)

Normalised profit after tax

(5.5)

32.0

(5.5)

32.0

63.3

31.4

40.2

75.2

Profit after tax

(207.9)

(139.4)

(1,152.9)

19.8

(33.6)

(38.2)

25.2

65.2

Minority Interest

34.9

26.3

31.2

(17.0)

(6.8)

(7.8)

(8.8)

(9.8)

Net income for equity

(173.0)

(113.1)

(1121.7)

2.8

(40.4)

(46.0)

16.4

55.4

Source: Codere, Edison Investment Research estimates. Note: *Online is included in other operations from 2019 onwards. **EBITDA is post IFRS 16 from FY19 onwards.

Estimate changes

FY19 EBITDA maintained; FY20 EBITDA lowered by 7.7%

We have lowered our FY19 revenue forecast by 3.5% to €1,426m, on the back of the devaluation of the peso, and for FY20 we are now assuming that Argentine revenues will decline a further 12% in FY20 (to 17% of revenues), due to the recent further peso devaluation. As a result, we have lowered our group FY20 revenue forecast by 8.5% to €1,472.8m.

Our FY19 pre IFRS 16 EBITDA forecast is €282.4m, which remains towards the bottom end of management guidance (€280–290m). Our headline EBITDA forecast is €352.4m vs €361.9m previously as we have slightly revised the IFRS 16 adjustments to €70m rather than €80m previously. Largely due to lower than expected Argentine revenues, our FY20 EBITDA is lowered by 7.1% to €368.4m.

Our FY19 EPS forecast declines by 37.5%, which is a combination of a number of factors: a revised IFRS 16 impact on operating costs (€70m vs €80m) and slightly higher depreciation and net finance charges. The FY20 EPS forecast decline is largely due to a lower EBITDA forecast for the group.

Net debt: Rating changes may impact refinancing

As shown in Exhibit 4 below, at H119, Codere reported net debt of €1,090m, which equates to a net debt/adjusted LTM EBITDA of 3.0x (or 2.7x before IFRS 16 adjustments, which is key for the covenants). Codere reported total financial debt of €871.7m at H119, of which €766.3m was from senior notes, which we expect to be refinanced in due course. Codere still expects to generate positive net cash in FY19, which is in line with our forecast of a €5.9m net cash flow in FY19.

On the back of the Argentine macroeconomic trends, Moody’s has downgraded Codere’s credit rating from B2 to B3, while maintaining the outlook as stable. This is despite the fact that Codere has maintained its FY19 EBITDA guidance. At the same time, S&P has put Codere on CreditWatch Negative to evaluate the company’s ability to refinance its senior notes in the context of the new political scenario.

Exhibit 4: Capitalisation (m) and leverage ratios (x)

Capitalisation table 

2018

Q219

Opco debt

 

81.4

72.4

Opco capital leases

8.6

7.9

Super senior revolving credit facility

9.9

25.0

Senior notes

 

763.5

766.3

Total financial debt

863.4

871.7

Capitalisation of operating leases

316.6

299.5

Total adjusted debt

1,180.0

1,171.2

Cash

81.8

80.9

Net debt

781.6

790.7

Total adjusted net debt

1,098.2

1,090.2

LTM adjusted EBITDA

282.9

288.3

LTM adjusted EBITDA (post IFRS 16)

367.4

364.7

Pro-forma interest expense

 

 

 

60.3

61.1

Pro-forma interest expense (post IFRS 16)

 

 

 

97.3

109.0

Leverage

Senior financial debt/LTM adjusted EBITDA

0.4x

0.4x

Total financial debt/LTM adjusted EBITDA

3.1x

3.0x

Total adjusted net debt/LTM adjusted EBITDA (post IFRS 16)

3.0x

3.0x

Total net financial debt/LTM adjusted EBITDA

2.8x

2.7x

including inflation accounting

2.9x

2.9x

Coverage

LTM adjusted EBITDA/)pro-forma interest expense

4.7x

4.7x

including inflation accounting

4.5x

4.5x

Source: Codere

Exhibit 5: Estimate changes

Revenue (€m)

EBITDA* (€m)

EPS (€)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2019e

1,477.4

1,426.2

(3.5)

361.9

352.4

(2.6)

0.32

0.20

(37.5)

2020e

1,609.9

1,472.8

(8.5)

396.7

368.4

(7.1)

0.48

0.26

(45.8)

2021e

1,747.1

1,577.4

(9.7)

447.7

403.7

(9.8)

0.86

0.55

(36.0)

Source: Edison Investment Research estimates. Note: *IFRS 16 positive impact on EBITDA revised from €80m to €70m.

Exhibit 6: Financial summary

€'m

2015

2016

2017

2018

2019e

2020e

2021e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,639.5

1,545.8

1,638.2

1,476.4

1,426.2

1,472.8

1,577.4

Cost of Sales

(621.7)

(599.3)

(651.8)

(580.9)

(552.4)

(575.8)

(623.1)

Gross Profit

1,017.8

946.5

986.4

895.5

873.8

896.9

954.3

Adjusted EBITDA

 

 

280.1

267.7

273.5

282.9

352.4

368.4

403.7

Normalised operating profit

 

 

158.1

159.7

160.5

169.0

183.7

197.7

231.0

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals, including inflation accounting

(33.6)

(51.5)

(29.4)

(72.2)

(50.9)

(15.0)

(10.0)

Share-based payments

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

124.5

108.2

131.1

96.9

132.8

182.7

221.0

Net Interest

(131.7)

(128.5)

(64.2)

(67.2)

(116.3)

(113.2)

(108.4)

Joint ventures & associates (post tax)

2.7

(0.2)

(0.1)

(0.1)

(1.0)

(1.1)

(1.1)

Exceptionals

(71.7)

(1,095.9)

17.2

(32.7)

(18.7)

0.0

0.0

Profit Before Tax (norm)

 

 

29.1

31.0

96.2

101.7

66.4

83.5

121.5

Profit Before Tax (reported)

 

 

(76.2)

(1,116.4)

83.9

(3.1)

(3.2)

68.5

111.5

Reported tax

(63.2)

(36.5)

(64.2)

(30.4)

(35.0)

(43.3)

(46.3)

Profit After Tax (norm)

(34.1)

(5.5)

32.0

63.3

31.4

40.2

75.2

Profit After Tax (reported)

(139.4)

(1,152.9)

19.8

(33.6)

(38.2)

25.2

65.2

Minority interests

26.3

31.2

(17.0)

(6.8)

(7.8)

(8.8)

(9.8)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(7.8)

25.7

15.0

56.5

23.6

31.4

65.4

Net income (reported)

(113.1)

(1,121.7)

2.8

(40.4)

(46.0)

16.4

55.4

Basic average number of shares outstanding (m)

55

1,879

2,254

119

119

119

119

EPS - basic normalised (€)

 

 

(0.14)

0.01

0.01

0.48

0.20

0.26

0.55

EPS - diluted normalised (€)

 

 

(0.14)

0.01

0.01

0.48

0.20

0.26

0.55

EPS - basic reported (€)

 

 

(2.07)

(0.60)

0.00

(0.34)

(0.39)

0.14

0.47

Dividend (€)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

18.3

(-5.7)

6.0

(-9.9)

(-3.4)

3.3

7.1

Gross Margin (%)

62.1

61.2

60.2

60.7

61.3

60.9

60.5

Adjusted EBITDA Margin (%)

17.1

17.3

16.7

19.2

24.7

25.0

25.6

Normalised Operating Margin

9.6

10.3

9.8

11.4

12.9

13.4

14.6

BALANCE SHEET

Fixed Assets

 

 

1,069.9

1,051.4

988.8

1,137.1

1,370.7

1,317.0

1,280.3

Intangible Assets

606.9

566.8

528.2

613.1

599.6

587.2

577.6

Tangible Assets

385.0

414.4

388.9

453.6

700.7

659.4

632.3

Investments & other

77.9

70.2

71.8

70.4

70.4

70.4

70.4

Current Assets

 

 

371.2

428.1

346.8

307.5

303.6

318.6

355.6

Stocks

11.6

11.4

10.0

10.9

11.0

11.0

11.0

Debtors and taxes receivable

188.4

209.3

178.3

163.6

158.6

153.6

148.6

Cash & cash equivalents

110.3

142.1

104.5

81.8

72.0

92.0

134.0

Other

60.9

65.3

54.0

51.2

62.0

62.0

62.0

Current Liabilities

 

 

(1,807.3)

(408.7)

(384.2)

(388.4)

(405.0)

(380.0)

(375.0)

Creditors

(338.5)

(160.2)

(158.4)

(169.6)

(144.6)

(119.6)

(114.6)

Tax and social security

(35.6)

(198.7)

(158.7)

(147.9)

(147.9)

(147.9)

(147.9)

Short term borrowings

(1,423.7)

(40.0)

(58.0)

(60.4)

(102.0)

(102.0)

(102.0)

Other

(9.4)

(9.8)

(9.1)

(10.5)

(10.5)

(10.5)

(10.5)

Long Term Liabilities

 

 

(249.6)

(997.1)

(946.5)

(964.0)

(1,226.0)

(1,196.0)

(1,146.0)

Long term borrowings

(76.4)

(840.1)

(795.1)

(803.1)

(1,065.1)

(1,035.1)

(985.1)

Other long term liabilities

(173.2)

(157.0)

(151.4)

(160.9)

(160.9)

(160.9)

(160.9)

Net Assets

 

 

(615.8)

73.7

5.0

92.2

43.3

59.6

114.9

Minority interests

6.3

24.8

(83.8)

(83.4)

(85.0)

(85.0)

(85.0)

Shareholders' equity

 

 

(609.5)

98.5

(78.8)

8.8

(41.7)

(25.4)

29.9

CASH FLOW

Op Cash Flow before WC and tax

280.1

267.7

273.5

282.9

352.4

368.4

403.7

Working capital

(8.3)

18.9

(13.8)

(4.8)

(30.0)

(30.0)

(10.0)

Exceptional & other (incl IFRS 16 adjustments)

(21.8)

(59.6)

(21.3)

(43.5)

(120.9)

(85.0)

(80.0)

Tax

(43.2)

(48.8)

(70.9)

(51.8)

(35.0)

(43.3)

(46.3)

Net operating cash flow

 

 

206.8

178.2

167.5

182.8

166.5

210.1

267.4

Maintenance capex

(47.0)

(80.4)

(87.1)

(82.1)

(68.0)

(68.0)

(73.0)

Growth capex inc acquisitions

(18.9)

(47.0)

(61.6)

(81.2)

(20.0)

(20.0)

(29.0)

Net interest

(31.0)

(77.8)

(67.7)

(67.1)

(64.3)

(63.2)

(63.4)

Equity financing

0.1

0.0

2.1

(0.4)

0.0

0.0

0.0

Dividends

(2.4)

(4.6)

(5.8)

(7.5)

(8.3)

(9.1)

(10.0)

Other

(47.2)

(21.6)

14.4

46.2

0.0

0.0

0.0

Net Cash Flow

60.4

(53.2)

(38.2)

(9.3)

5.9

49.9

92.1

Opening net debt/(cash)

 

 

1,305.5

1,389.8

738.1

748.6

781.6

1,095.2

1,045.3

FX (cash balance)

(8.9)

0.0

(10.3)

(8.3)

(2.9)

0.0

0.0

Other non-cash movements (inc equity swap, FX on debt)

(135.8)

704.9

37.9

(15.4)

(316.6)

0.0

0.0

Closing net debt/(cash)

 

 

1,389.8

738.1

748.6

781.6

1,095.2

1,045.3

953.2

Source: Codere, Edison Investment Research estimates

General disclaimer and copyright

This report has been commissioned by Codere and prepared and issued by Edison, in consideration of a fee payable by Codere]. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Frankfurt +49 (0)69 78 8076 960

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Codere and prepared and issued by Edison, in consideration of a fee payable by Codere]. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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