Europcar - Small numbers - Positioning
All,
Please refer to our Europcar analysis here.
The call was uneventful and unsurprisingly the company is trading well below our expectations at the beginning of the year, given lockdown measures and other social restrictions - including notably travel - are still in place across much of the continent. Both Revenues and EBITDA were weaker, but in particular EBITDA at -E44m for Q1 was better than might have been expected from the drop in Revenues. Much was made of the cost-cutting efforts, but for the most part, it seems to be explained by the fleet.
Fleet:
- In the context of continued lockdowns and the complete loss of Easter travel, it was positive to see that management had opted for a significantly smaller fleet this spring - certainly compared to our expectations. The flexibility comes from the large share of leased vehicles with OEM put, which means that for the moment the at-risk fleet is making up some 40-45% of the fleet. In terms of ability to react to any changes, management estimate Europcar generally require a 2-month lead time to increase fleet by 10%, should outlook be so positive.
- The RCF at fleet level remains undrawn.
Positioning:
We remain long a legacy position of 2% of NAV in the EC Finance notes. Management did not confirm that those bonds may be taken out this year, a scenario into which they might have yielded 5%. As such we will be exiting these bonds over the coming week.
Happy to discuss,
Wolfgang
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E: wfelix@sarria.co.uk
T: +44 203 744 7003