Jumbo (BABr.AT, OW, TP EUR11.0)
Potential 500bps VAT cut to 18% triggers 2016 profit upgrades of 12% to EUR137m (+25% yoy)
Greece/Taxation: According to press reports, Greek government is planning to implement a flat 18% VAT rate for all services and commodities with the exception of medicines.
This tax-reform should come into force in H2 2015 leading to:
- a 5% reduction in the 23% VAT rate imposed on many products and services,
- but also a 5% hike for key commodities (ie food, electricity, catering, books & stationery).
In all, a potential flat 18% VAT rate should boost earnings outlook for retailers (especially Jumbo as domestic sales accounted for 75% of group total in fiscal H1 2015a).
Assuming that: a) VAT cut to a flat 18% takes effect as of July 2015, and b) Jumbo prices remain stable at current levels (since we believe Jumbo will not pass a potential VAT reduction to clients), this should, ceteris paribus, lead to group gross margin enhancement of 304bps to 55.24% (+420bps as far as Greece is concerned) vs our base line estimate of 52.2% for fiscal 2016e.
This, in turn, should trigger fiscal 2016e group net earnings upgrades of 12% to EUR137.3m against our call of EUR122.4m.
- VAT cut of 500bps to 18% positively affecting fiscal 2016e ex-bookies Greek sales of EUR424.1m (66.6% of total). That said, total Greece sales (including EUR36.9m bookies contribution) should reach EUR461m in fiscal 2016e, up 6% y-o-y, on our forecasts
- On the flip side, VAT on bookies/stationery, which make up 8% of domestic sales, will rise to 18% from 13% currently
- Fiscal 2016e group sales to reach EUR636.8m (+9.5% y-o-y from EUR581.4m in 2015e); we see Jumbo international operations at EUR175.8m, up 19.9% y-o-y (27.6% of group total)
Potential 2016e group EPS upgrades on 18% flat VAT implementation
|Current BETAe||Post flat 18% VAT||Revisions|
Senior Equity Analyst
BETA Securities S.A.
29 Alexandras Ave.
GR – 11473