Rekeep (Manutencoop) - Q2 20 results comments and update

All,

Rekeep’s results have remained remarkably resilient. Its Healthcare and Public Sector concentration is just what the doctor ordered during the coronavirus crisis. Unless the current legal cases take a major turn for the worse, we continue to see Rekeep refinancing its bond in 2021, after chipping away at the principal with additional bond buybacks.

Please find our model updated for the Q2 20 results here.

 Rekeep’s Q2 20 results saw a -7.9% yoy contraction of revenues and a +3.4% yoy increase in EBITDA on a pro forma basis. Both were driven mainly by the roll off of an negative EBITDA train contract, with limited net impact from coronavirus.

Key takeaways:

- Management sees no change in client’s ability to pay – which are mainly government-linked entities.

-Backlog at EUR2.9bn, slightly above YE2019 levels. Healthcare is more than 75% of that.

- FM4 fines to be recalculated by the court. Management still has no estimates on new levels of the fines, as the recalculation procedure has not been disclosed by the court yet.

- Notes that the current provision is a more conservative calculation of the fine, hence the total amount owed should presumably go down.

- Slowdown in activity in certain segments – cultural, private clients – more than offset by extraordinary work from the pandemic.

- Covid has a more pronounced impact in April and early May, followed by a strong recovery since then.

- Temporary furlough measures did not have a meaningful impact on EBITDA during the quarter.

- Facility management saw a -11.8% yoy decrease, offset by Laundry and sterilization at +20.2% yoy.

Feel free to reach out if you would like to exchange ideas on the name.

Juliano