Maxeda - 130 - Model Update - Positioning
All,
Please find our updated analysis here.
This DIY chain has been around, and it hasn't grown as long as we followed it. If anything, it has been slowly bleeding stores to franchisees and giving up market share to competitors at the same slow pace. So why should it be interesting now if the true deleveraging has only been marginal? We think the marginal deleveraging is nonetheless significant enough to leave some €10-15m of levered FCF for net store investment - a first in a long time. Bonds trade at 97, but come with 41% of equity, priced for the first time at a level its strategic exit options may actually consider.
Investment Considerations
We are buying 5% of NAV in the bonds at 97.25 on a pure yield basis (have cash lying around). We'd be looking to buy the bonds with their equity participation attached. Maxeda deleveraged by €50m and now turns a slightly positive Levered FCF, that should allow management to invest in the estate and possibly drive revenues. In the short term, there may even be a World Cup boost in Belgium and a petrol price boost if consumers have traded expensive flight tickets for investment in their homes this summer.
On the upside, these bonds have a healthy 41% of equity attached and at an implied €400m price tag for the business - reasonable and accretive for strategic acquirors. With only a little tailwind from said investments, we value the company at €500m, implying 130c/€ on the bonds.
On the downside, we are not seeing much, except the usual DIY volatility and pro cyclicality and consider that priced in at 9% YTM for a 1.4x FCCR.
Key Conclusions
The restructuring has improved the credit. While bonds swapped some €50m face value for equity, the company partially drew its revolver and had a ca. €20m advisory bill to pay at the end of the year. The D/E swap added c.€50m of equity cushion, and liquidity stands at c.€100m. Following the €50m equity injection (mostly handed through to bondholders), GoldenTree now owns 59% of the equity, with former noteholders holding 41%, creating strong alignment between the new owners and creditors (Recap; Legal).
Post-restructuring, Maxeda should generate €10–15m of levered FCF—insufficient for a comfortable 1.5x FCCR, but enough to fund modest investment rather than relying on asset sales and inventory liquidation to service debt. Leverage remains elevated, although the business is now broadly capable of carrying its capital structure (Current Trading; Model).
Trading remains soft, with negative LFL sales (on better margins, due to lower weather-related content). But big-box Planit is still struggling with the low rate of refurbishments. We continue to expect modest underlying growth as housing activity improves, particularly in Belgium, where mandatory energy-efficiency renovations might provide a structural tailwind. With investment capacity finally restored, Maxeda has scope to recover some of the market share that it lost during years of debt-driven underinvestment (Current Trading; Housing; Industry).
The restructuring valuation appears conservative (naturally, because non-defending shareholders handed over the keys). The implied c.€400m EV is around €100m below our estimate and equates to little or no growth, despite peers trading on higher multiples. We continue to value the business at c.5–5.5x EBITDA, reflecting renewed capacity to invest and grow (Recap; Valuation).
The amended documentation is now tighter than the 2020 package. The HoldCo pledge largely eliminates drop-down risk and sacred rights restrict coercive uptiering, although the Ratio Debt Basket leaves incremental priming as the principal remaining structural risk. Still, any future restructuring should face a similar situation as this one: the super-senior RCF should again recover at par, and the SSNs remain the fulcrum securities (Legal).
Q1 26/27
Revenue fell short by roughly €6-11m. LFL was -2.0%, weather-related (weather normalisation was expected), but we had begun to build fundamental growth into the model. Our mistake...
Belgium is still the drag (Brico -7.3%, Planit -3.9%) as four stores were sold to franchisees (and apparently did not trade in that period, because we can't see the corresponding uplift among franchised stores. The Netherlands broadly held up, benefiting from new stores and +2.1% LfLs. Management flagged P4/P5 recovery to +5.6%/+5.4% LFL.
Gross margin of 35.8% (vs 36.0% Q1 last year) held better than the c.60bp headwind we implicitly expected from the reclassification announced in Q425/26 and considering the mix shift to franchise.
Q1 adj EBITDA of €22m matched Q1 last year and is roughly in line with our expectations. Cost delivery continues to impress; S&D fell €8m YoY on labour, closed stores, energy and depreciation, against €2m of indexation.
Cash had been guided to be €60m, and the WC inflow was predictably smaller than last year. But the company sold another four Belgian stores (three of which to franchisees) and the proceeds were applied to the RCF, now only €27.5m drawn. The company also paid its transaction fees, which explains the lower cash figure.
Berend van Wel started as Group CEO on 1 July, replacing Guy Colleau; Dirk van den Berghe is the new Chair. Van Wel is ex-Versuni, ex-FrieslandCampina, and formerly at Maxeda.
Management declined to answer strategy questions on the call, deferring to the September Q2 update. We would expect a re-based investment plan by then given the c. €15m of normalised Levered FCF Maxeda can now invest.
Here to discuss this name with you,
Wolfgang
T: +44 203 744 7003
www.sarria.co.uk