(News Bulletin 247) – The distribution group suffered a cash outflow of 524 million euros in France, five times more than in 2021. It has also seen its main profitability parameters deteriorate significantly.

The announcements may be raining around Casino, it is of course the financial results that the market is concentrating on this Friday. With the key to a further drop in the title: the owner of Monoprix, Franprix and Géant lost 5.4% on the Paris Stock Exchange around 1 p.m., accusing one of the strongest declines in the SBF 120.

The group reported significantly deteriorated accounts for its 2022 financial year. Already published, the company’s turnover increased by 3.7% excluding currency effects, and by only 1% in its brands in France, a small change compared to food price inflation in France.

The other lines of accounts have deteriorated. Gross operating income fell by 5.5% over one year, excluding the exchange rate effect, to settle at 2.5 billion euros, i.e. less than the consensus of 2.63 billion euros quoted by Invest Securities. Current operating income fell 12.1% excluding currency impact, to 1.117 billion euros when analysts had expected 1.12 billion euros, according to Invest Securities. The net loss, on the other hand, stood at 316 million euros, compared to 534 million euros in 2021.

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Five times more cash burned in France

Casino being a company eaten away by its heavy indebtedness, the generation of cash is a parameter closely watched by the market. Especially in France, because it is on this perimeter that Casino must respect covenants, that is to say commitments of level of indebtedness with its creditors, on a quarterly basis.

However, in France, the group generated a negative free cash flow of 524 million euros, burning nearly five times more cash than last year. The group explained in particular that its working capital requirement had been penalized in the fourth quarter by increases in inventories in connection with the weak performance of sales of its hypermarkets and supermarkets. However, the group has announced a plan to reduce its inventories by 190 million euros in its distribution brands this year.

Net debt in France was however slightly reduced, to 4.5 billion euros at the end of 2022, compared to 4.9 billion euros at the end of 2021. The group falls within the nails of its covenants, with a debt ratio secured gross Ebitda after rent of 3.1, below the ceiling of 3.5, and a ratio Ebitda after rents to net financial costs of 3, while the group must respect a threshold of 2.5.

At group level, however, gross financial debt amounted to 8.87 billion euros for 2.5 billion euros in cash, i.e. 6.37 billion euros in net debt at the end of December 2022. It has therefore increased compared to the end of 2021, when the group’s net debt worldwide reached 5.86 billion euros (with 8.14 billion euros in gross financial debt for 2.28 billion euros in cash) .

“The results are simply not good. Ebitda is lower than expected, cash flow disbursement is stronger than expected and net debt, although down (in France, editor’s note), is higher than expected. ‘anticipated’, summarizes an analyst.

“The FCF Deficit [flux de trésorerie libre, NDLR] remains significant in France, in 2022, and announcements of asset monetization are no longer enough to reassure investors”, supports Christine Kam, of Octo Finances, in a note.

Finalize the disposal plan

For 2023, Casino will tighten its costs, with a savings plan of 250 million euros and intends to reduce its debt. The group must also finalize its disposal plan in France, of which it has already made 4.1 billion euros out of the 4.5 billion euros targeted at the end of 2023.

On the sidelines of these results, Casino announced Thursday evening its entry into exclusive negotiations with Teract, owner of Jardiland and Gamm Vert, with a view to a merger. The two companies want to create two separate entities, one controlled by Casino and the other by the union of 188 agricultural cooperatives InVivo, Teract’s main shareholder.

The first “would bring together the distribution activities in France”, with the more than 9,100 stores of the Casino group and “the expertise in the operation of garden centres, pet shops and food” of Teract, which also owns the Louise bakeries, the Frais d’Ici and Bio&Co brands and the Gamm Vert and Jardiland garden centres. The second, called “Teract Ferme France” will be in charge of the supply of agricultural products and will “benefit” from its links with InVivo.

The new group intends to raise “additional” equity of “around 500 million euros”, “discussions with a certain number of investors” being already underway, according to Casino and Teract.

“The financial plan for this merger is still not very detailed and the market is focusing more on the annual results”, underlines the financial analyst quoted above. “It will be necessary to know how the allocation of the debt is distributed” between the two companies, he adds.