(BFM Bourse) – The specialist in the sale of cultural goods and household appliances surprised investors after announcing strong cash generation in 2023, in a difficult context.
Fnac Darty regains market confidence despite a trying 2023. The specialist in the sale of cultural goods and household appliances has demonstrated resilience in a difficult economic context.
Last year, Fnac Darty reported a slight decline in turnover of 0.9% in published data (-1.1% in comparable data), at 7.875 billion euros, which is in in line with the expectations of TP ICAP Midcap which for its part forecast annual sales of 7.862 billion euros.
This constitutes a notable performance in the sector, in a context of purchasing power crisis. Maisons du Monde, another player in specialized distribution, for its part, posted a more pronounced drop in its turnover (-9.3%) in 2023.
TP ICAP Midcap underlines in its note that the group has given details for the first time on its Retail Media activity, its advertising agency, which generated 90 million euros over the year. “This activity should support the group’s growth in the years to come,” continues Florent Thy-tine, head of equity research at TP ICAP Midcap.
A little further down in the accounts, current operating profit reached 170.7 million euros in 2023, down 60 million euros over one year. It also comes out below the expectations of TP ICAP Midcap which hoped for 177 million euros in current operating profit.
Fnac Darty attributes half of this erosion of this indicator to the “particularly strong” drop in activity in Spain and at Nature & Découvertes in the fourth quarter.
A “good surprise” on cash generation
The gross margin rate is also stable at 30.2% in 2023, although lower than TP ICAP Midcap’s expectations (30.5%). The group was able to count on its services activity to preserve its profitability. More than 1 million customers are now subscribed to Darty Max, its subscription repair offering to promote product durability. The group is pleased to have repaired 2.5 million products since the launch of this service in October 2019. Confident in this model, Fnac Darty also launched Fnac Vie digitale, in 2023. This service offers in the form of a monthly subscription to support customers in their digital uses.
“These illustrations support the transformation of Fnac Darty around high value-added services, generating recurring cash flows,” explains the company.
Fnac Darty’s cash generation is indeed the surprise of this publication. The group improved its free operating cash flow, returning to positive territory at 180 million euros. And this is above consensus expectations and TP ICAP Midcap expectations, while this indicator was negative 30 million euros in 2022.
The group notably managed its working capital needs well, explains the financial intermediary, while the amount of investments was in line with the company’s expectations.
This stronger than expected cash flow generation in an adverse context is hitting the mark on the stock market. The specialist in the sale of cultural goods and household appliances gained another 4.80% around 12:00 p.m. this Friday, after a peak of +9.85% in the morning.
Other good news is that the consolidated net profit, group share, stands at 50 million euros, compared to a loss of 32 million euros a year earlier. In 2022, Fnac Darty’s accounts had been penalized by a dispute relating to the sale of the company Comet, in 2012. However, British justice ruled in favor of Fnac Darty which will therefore receive “the balance of the sum initially paid in December 2022 as well as the reimbursement of procedural costs incurred and interest, representing a positive impact on its cash flow estimated at at least 40 million euros.
An expected recovery in consumption
As an outlook, Fnac Darty is aiming for a 2024 operating profit at least equal to that achieved in 2023. The group maintains its objective of achieving a cumulative free operating cash flow of around 500 million euros over the 2021-2024 period. . An objective which assumes performance in 2024 similar to 2023, according to TP ICAP Midcap. Fnac Darty puts it at 180 million euros.
“The group hopes for a recovery in consumption thanks to a lull on the inflation front but the figures published by the Banque de France show consumption still at half mast”, however, would like to point out the financial intermediary which is not waiting however, no “particular catalyst in the first half”.
On the other hand, if the group manages to show itself resilient once again at the start of the year, this would open the way to a gradual rerating of the stock, according to TP ICAP Midcap. The intermediary also raised its recommendation to purchase due to the share’s upside potential compared to its target price, which was maintained at 33 euros.
Sabrina Sadgui – ©2024 BFM Bourse
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