Ahlsell: but who will buy?
Dark police dramas, reliably solid cars and large initial public offerings. Just three of the things Scandinavia has exported to Europe in recent months. New issue values from the region are up almost a half year-on-year.
Ahlsell, a Swedish building components distributor, is the latest to eye a stock market debut. Bookbuilding for an offering on Nasdaq Stockholm starts on Tuesday. Current owner CVC, which is looking to reduce its stake, paid €1.8bn for the group in 2012. An enterprise value of about €3bn has been mooted for the IPO — about 16 times the three-year average of underlying earnings before interest, tax and amortisation (the only profit metric it has provided). That is a premium to Wolseley, a UK-based (but US-focused) distributor of heating and plumbing products, but less than Bunzl, another UK-based distributor.
Scandinavia accounts for the vast majority of sales and profits. Economic indicators there are positive, especially in Sweden (nine-tenths of profits) where housing starts were up 44 per cent in the first half of this year. Negative interest rates and a growing population have led to a construction and housing boom. Still, revenue growth is not what it was; Ahlsell’s sales more than doubled between 1999 and 2005, mostly because of acquisitions. Since then, they have risen by only a third, despite more bolt-on deals.
Margins before interest, tax and amortisation are over 8 per cent, higher than at Wolseley and Bunzl. But after the best part of two decades in private equity ownership (before CVC, Ahlsell was owned by Nordic Capital, Cinven and Goldman Sachs) it seems unlikely that profitability can improve significantly. The company has no specific margin target.
Still, reliable cash generation and a pledge to pay 40-60 per cent of net profits as dividends means growth does not need to be scintillating. Provided the pricing is reasonable, Ahlsell should be able to flush some more cash through Scandinavia’s IPO pipework.
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