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WESSANEN: Disposal of Kalisterra, part of French HFS business

WESSANEN: Disposal of Kalisterra, part of French HFS business

12.7.2011 10:02

Wessanen is selling Kalisterra to a local entrepreneur for an undisclosed amount. Kalisterra is a French distribution company that sells food supplements to pharmacies. It is part of Wessanen Europe Health Food Stores (HFS) with net revenue of € 14m in 2010. The deal is expected to close per 1 October 2011. A book loss of about € 1m after tax is expected on the sale, to be reported in 2Q11.
This move is fully in line with Wessanen's strategic emphasis on creating more focus within its wholesale activities in Wessanen Europe HFS. In France, Wessanen will focus on Distriborg with its branded grocery business (which includes the leading organic brand Bjorg), branded HFS business (with its brands Bonneterre and Evernat) and wholesale HFS via Biodistrifrais.

Renegotiated terms for the € 100m credit facility:
Wessanen has renegotiated certain terms of its € 100m credit facility with the existing syndicate group of banks, being ABN Amro, ING, Rabobank and BNP Paribas. The facility was scheduled to mature in February 2012 and has now been extended to February 2014. The interest margin on the facility is reduced to 100-225 basis points over Euribor based on net debt/EBITDAE. Note that at the end of 1Q11 the group’s gearing reached 20%.

Our view:
Given the small size of the transaction, the disposal of Kalisterra does not impact the investment case. The European HFS business generated € 283m in revenues last year and a REBIT margin of 3.6% (-210bps). In 1Q11 this division reported a 6.1% decline in comparable sales and REBIT fell by € 1.0m to € 2.3m due tough competition from Ekoplaza in the Netherlands, lower volumes and higher ICT costs.
The poor performance of the Wessanen Europe HFS is in contrast to the solid performance of Wessanen Europe Grocery which reported 5.9% comparable sales growth in 1Q11 and a REBIT margin of 9.5%. Since the appointment of Piet Heijn Merckens as Wessanen’s CEO in June 2010, management has focused on streamlining and reinforcing Wessanen Europe Grocery. The announced disposal of Kalisterra shows that management is turning its attention to the HFS business. Note: Tree of Life UK might be sold too.

Wessanen has become fitter and more focused. The group’s margins should continue to improve thanks to centralized sourcing, a shift to a richer product mix, increased capacity utilisation at the Italian and German production sites and overhead reductions. We believe that the group is on the right track to realize its new roadmap with a pure focus on European organic food. It may also become an attractive prey once the disposal program is completed. We maintain our Accumulate rating.

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