Bankinter | DIA´s Q119 results show a very negative evolution in its business. The following stand out: income 1.6646 Bn € (-7.2%), EBITDA 12.4 M€ (-77.7%), EBIT -119.9 M€ (vs -6.1 M€ in Q118) and losses of -144.4 M€ (vs -16.2 M€ in Q118). On 26 April DIA had already published an advance of the preliminary results for Q119. It anticipated sales of 1.615/1.715 M€ vs 1.793 M€, an EBIT of -115/-125 M€ and net annual profits of -140/-150 M€.
In Q119 comparable sales have accelerated their decline: January -1.6%, February -3.2%, March -7.9%, totalling a fall of -4.3% in the quarter. Net debt has increased to 1.702 Bn€, 251 M€ more than at the close of 2018 (+17.3%). The EBITDA includes restructuring costs of 67 M€ and a positive impact of accounting changes of +76.0 M€. Without these exceptional events, the EBITDA rises to 12 M€ compared to 84.8 M€ in Q118.
Negative results which show that the fundamental situation of DIA´s business continues to deteriorate. The acceptance period of LetterOne´s offer at 0.67€/share ended. Since the launch of LetterOne´s offer we have recommended accepting it, apart from to the most conservative investors whom we recommended to sell in the market as close as possible to 0.67€ when the news flow put at serious risk the chances of the offer´s success. Although DIA will not be excluded from the stock market, given the doubts about the future and viability of DAI, we continue to recommend selling its shares.
DIA´s fundamental situation is very complicated with (i) Losses of -352.6 M€ in 2018, which have accelerated in 2019 and which result in Negative Own Funds of -308.5 M€ on 31 March 2019 (vs 166 M€), (ii) an excessive and growing Net Financial Debt of 1.702 Bn€ (compared to 945.4 M€ in 2017 and 1.451 Bn€ in 2018), which represents a net financial debt/EBITDA ratio of ~6.8% (vs 2.0X in 2017 and 5.9X in 2018) and which continues to grow, and (ii) maturities of bank debt for 147 M€ (31/05/1019) and 306 M€ of bonds (10/07/2019), (iv) a business model which has resulted in sustained falls in income and margins, loss of market share and negative cash generation. The increase of capital to be effected by LetterOne of 500M€, although essential to ensure the financial viability of the group, will result in a significant dilution od the current shareholders and in no sense guarantees that the Transformation Plan will succeed in the medium term.
