Seat Pagine Gialle – Underperform (Exane BNP Paribus)
Published: 6 August 2009
Cutting Guidance, yet again.
Seat Pagine Gialle (-) H1 2009 results postview
► Seat PG’s H1 2009 results: better at the EBITDA level with revenues in line
Seat PG reported H1 2009 revenues in line with expectations as stronger Italian online revenue growth helped offset the weaker performance at Thomson in the UK. Strong cost control helped the company report EBITDA of EUR179.5m, exceeding both our EBITDA expectation and that of consensus (EUR173m).
► Guidance lowered
However, management cut the top-line and EBITDA guidance it had provided less than six months ago. Italian revenues are now expected to decline around 10% vs expectations of a 5% drop previously while guidance for group EBITDA is EUR520m-540m vs EUR560m. Additional cost savings guidance (more than EUR20m vs around EUR10m previously) will not be enough to offset deteriorating top-line trends in Italy and the UK. We expect consensus expectations to be revised down. Our current forecasts now look conservative as they stand 6% below guidance. We note that the company has a poor track record in guiding the market.
► Debt concerns remain
Management was unwilling to reiterate its long-term EBITDA guidance and, in our view, is likely to reduce it within the next six months. We found the tone of the outlook statement bearish and continue to expect 2010e EBITDA to decline, putting renewed pressure on debt covenants.
► Stock to remain under pressure
Seat PG combines a late cyclical and structurally challenged print directories business with an unsustainable debt load. With top-line trends deteriorating further and the UK becoming loss-making in H2, we see no reason to turn more positive on the stock. We reiterate our Underperform stance and have placed our target price under review.
Please consult their web site for important disclaimers and disclosures concerning Exane’s research (http://www.exane.com)
