Maxeda - The Times They Are A-changin' - Model Update - Positioning

All,

Please find our updated analysis here.

The European market feels very soft, and we are not sure a new French PM is immediately going to fix this. It’s raining bonds from the 90s down to wherever they like to fall, and names with any complication are being tossed out of portfolios. Maxeda is that kind of name; having been unable to conclude a deal in the good times, we think it will struggle to do so in this environment and with tougher comps ahead. Still trading around 90.625c/€, the bonds still have six months, but for now, the risk is skewed to the downside.

Investment Considerations:

- We are shorting Maxeda bonds at 90.125c/€ for 4% of NAV with a view to increasing this position around Q3 results and into March '26. Maxeda remains a bet on a successful refinancing / A&E, which hasn't come together in a strong market all summer. Now the YoY comps should begin to toughen considerably, and the market has just gone into reverse. The odds of a near-term deal have shrunk, and while a normal refinancing seems out of the question for now (never count out the private credit binge), an A&E transaction should provide less risk to the trade.

- The company still has six months. The RCF is undrawn, and the bonds don't come due until October next year. So negotiations should continue through March/April 2026, and we will review this position when the market catches itself. 

- In a restructuring, we see the SSNs recover only 75c/€ in cash, as well as equity, which should travel for free. So the bonds have been throwing themselves at the A&E.

- We think we have included about every conceivable upside in our forecast operating case, safe for outright growth from housing transactions, which are strong, but hard to predict. We are not even including the payables outflow of -€14m.

Key Conclusions:

- Maxeda’s strong trading tailwinds have faded, with tougher year-on-year comparables ahead. Revenues are set to fall, but margins should improve, keeping gross profit broadly stable. 

- Refinancing negotiations are ongoing. Management’s operational discipline is notable, but the window for an amend-and-extend deal is narrowing; absent a breakthrough by March, focus will shift to a debt-for-equity swap (Recap Table). Any deal is supported by €30m excess cash, €36m in bond repurchases and a €5m annual cashflow gain from Belgian tax changes, while inventory stabilises after the Blue Yonder roll-out (Current Trading).

- Shareholders could retain a meaningful stake if they agree among themselves and with creditors. A small haircut paired with an equity injection could achieve deleveraging without a full D/E swap, though creditor flexibility on coupon levels may be required to keep the capital structure sustainable. Clearly, creditors are resisting (Recap Table).

- The DCF suggests lower valuations than trading comps, which is acceptable given those comps reflect ultimate exit multiples. However, the company’s weak free-cash-flow conversion (<50%) implies limited debt-carrying capacity and potential recoveries of only ~80 c/€ in debt instruments (DCF).

- Maintenance CapEx has been under-invested; normalised levels are likely near €40m. Deferred spend has flattered short-term cashflows, but we use €40m in our terminal value (DCF).

- Maxeda’s weather-driven sales surge in Q4 ’25/Q1 ’26 was temporary. As conditions normalise, revenues should soften while margins hold near 37% (Model).

- Housing transactions are rising—particularly in Belgium—supported by new renovation regulations mandating energy and asbestos upgrades. This may provide a short-term DIY boost, but we treat the demand spike as a one-off, moderating growth (not margin) forecasts into year-end, due to tough YoY comps lying ahead (Housing Transactions).

- Structurally, Maxeda remains over-levered and losing market share to larger, better-capitalised European peers. The most realistic long-term outcome remains a trade sale to a French, German, or UK competitor, likely at a discount to prevailing trading multiples (Industry).

Q225/26:

- Overall revenues have been slightly below our projections, but margins have compensated to arrive at the same projected Gross Profit. This is in both countries due to weather normalising vs a year ago, when low-margin seasonal products began to drive revenues. We are expecting this normalisation to continue.

- Management on their best behaviour: Recent accounts show minimal cash drag beyond a small tax charge and (too low) CapEx. Management are squeezing every cent out of the business.

- The market appears stable, with a slight positive undercurrent in both countries, but Belgium in particular, where management point to, but do not specify, a tax change in customers' favour.

- Tax outflows have been half of what we expected. Management say, the Belgian tax code has changed to Maxeda's advantage and that we should continue to work with only €-5m outflow p.a..

- Inventory continued slightly tighter as we are still finding the new normal after implementation of Blue Yonder. The program has come to an end, and there should be no further unwind.

- The company bought back another €6m of bonds in the market. These should be cancelled in the forthcoming recapitalisation/refinancing.

Here to discuss this name with you,

Wolfgang

E: wfelix@sarria.co.uk
T: +44 203 744 7003
www.sarria.co.uk