Casino axes dividend to cut debt pile below €1.5bn
French retailer is aiming to save €500m over 18 months
Casino said on Thursday that it will scrap its dividend for 2020 and accelerate a reduction in its debt pile, as the French retailer seeks to shore up its financial position amid a wider restructuring of the group controlled by its chief executive Jean-Charles Naouri.
Reporting its second-quarter results, Casino said that it would not pay a dividend for the 2019 financial year, or an interim dividend for 2020. Following an earlier announcement in May that it would scrap its interim dividend for 2019, Casino said that together these measures will save €500m in the next 18 months.
Casino is part of a complex corporate structure built by its chief executive and controlling shareholder Mr Naouri. It is seeking to reassure investors who are concerned that its cash flow is under pressure because it has to pay a dividend up the chain to service the debts of its parent companies, at a time when its core market of France is suffering from a multiyear price war that is eating into profitability.
In May, Casino’s parent companies including Rallye sought court protection through a “procédure de sauvegarde”, a court-led creditor protection process that allows them to freeze their debts for up to 18 months and restructure.
Casino said on Thursday that it will accelerate its debt reduction plan to reach less than €1.5bn of net debt in France at the end of 2020, and maintain it below this level. Casino’s net debt in France stood at €2.7bn at the end of 2018, and it’s targeting €2bn at the end of this year.
As part of the overall deleveraging, Casino has set a target of €2.5bn in non-core asset disposals by 2020, including real estate, and it said that it has already signed €2.1bn worth of disposals.
Overall Casino recorded sales of €8.9bn in the second quarter, up 2.3 per cent excluding calendar effects and petrol. This was led by Latin America which gained 3.8 per cent, and its e-commerce platform Cdiscount boosted sales in France. The sales performance was in line with analyst expectations.
Operating profit grew 12.9 per cent in the first half of the year to €347m, below analyst estimates of €362m.
Casino is working on several strategic priorities to improve profitability in France. It is continuing to retreat from hypermarkets and invest in proximity and e-commerce formats to address changing consumer habits. It is geographically focused on the most affluent parts of France, namely Greater Paris, Greater Lyon, and the French Riviera. And it is orienting its selection towards higher-margin products and categories such as organic and snacking.
On Thursday Casino confirmed its financial objectives for 2019, including 10 per cent growth in operating profit.
Asian stocks saw muted trading Thursday amid a mixed picture for corporate earnings. Australia’s benchmark bond yields hit a record low after the central bank governor said he’s prepared to cut interest rates again if needed.
Benchmark indexes nudged higher in Japan, Hong Kong, China and Australia. Korean stocks declined. U.S. futures were flat, while Nasdaq contracts slid. Earlier, U.S. stocks closed at record highs. After regular trading finished, Facebook climbed on higher-than-forecast revenue, while Ford and Tesla slumped on disappointing results. Australia’s dollar hit its low of the session after Reserve Bank Governor Philip Lowe’s remarks, which included the expectation for borrowing costs to be low for an “extended period.”
US After Hours ALGN -22%, PTC -14%, SAVE -13%, TSLA -9%, F / XLNX / CTXS -6%, PYPL -4% following earnings / guidance
Nikkei +0.26% Hang Seng +0.33% CSI +0.49% Shanghai +0.22% Shenzen +0.37%
Eur$ 1.1134 CNH 6.8780 CNY 6.8762 JPY 108.12 GBP 1.2475 CHF 0.9853 RUB 63.3014 TRY 5.7120 WTI$ 56.07 +0.34%
S&P +0.07% EuroAStoxx +0.51% FTSE +0.18% Dax + 0.42%
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After Hours Summary: ALGN -22%, PTC -14%, SAVE -13%, TSLA -9%, F / XLNX / CTXS -6%, PYPL -4% following earnings / guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: NTGR +8.4%, ANIK +7.8% (light volume), MTH +7.6% (light volume), AXTI +5.5%, KN +4.5%, LMAT +3.3%, CMRE +3.1%, FTI +2.3%, FB +0.8%
Companies trading higher in after hours in reaction to news: XELA +2.7% (confirms its receipt of a preliminary non-binding indication of interest from HandsOn Global Management and a private equity firm), S +1.6% / TMUS +1% (Charter [CHTR] has a plan to purchase Sprint / T Mobile assets, according to Reuters), FDC +0.5% / FISV +0.3% (ticking higher; the cos receive final required regulatory approvals and non-objections needed to complete merger -- parties expect to close proposed acquisition on or about July 29), FCX +0.5% (upgraded to Sector Perform at RBC Capital Mkts)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: ALGN -22%, PTC -14%, SAVE -12.8%, TSLA -9.2%, OII -6.8% (light volume), F -5.9%, XLNX -5.8%, SLM -5.7%, CTXS -5.5%, PYPL -4%, NOW -3.4%, LVS -3.3% (also intends to offer senior unsecured notes in a public underwritten offering), HLX -2.7% (light volume), NXGN -2.6%, ALGT -2.2% (light volume), FFIV -1.5%, SU -1%
Companies trading lower in after hours in reaction to news: CARA -10.3% (commences public offering of 5,000,000 shares of its common stock), CYOU -8.8% (discloses that indirect wholly-owned subsidiary Shanghai Jingmao Culture Communication filed voluntary petition for relief under bankruptcy laws of the People's Republic of China), BMY -3.9% (CheckMate -227 part 1a meets co-primary endpoint of overall survival; Part 2 of the Phase 3 CheckMate -227 trial did not meet the primary endpoint; also reports earnings tomorrow), STM -1.3% (ahead of earnings tomorrow), NVDA -1.3% (pulling back following XLNX results), BBY -1.1% (promotes Matt Bilunas to CFO), SQ -1% (PYPL sympathy), SC -1% (ticking lower; downgraded to Neutral at BTIG Research)