GFG released its FY25 annual report, delivering results that confirm the operational inflection we had been anticipating, rendering the fact that shares still trade at a negative EV unjustified, eNuW.
Group NMV came in at € 1,042m, up 0.3% yoy (on cc) as higher order frequency and avg. order value compensated for a slight decrease in active customers, which stood at 7.3m (-4% yoy) at the end of the year. Q4 NMV grew 0.7% yoy to € 327m. FY25 adj. EBITDA reached € 9.3m, notably above last year's loss and our € 5.6m estimate (Q4 with € 16.2m, 7.6% margin) as the group's gross margin reached 46.4% (+1.5pp yoy) and other expense ratio either remained flat (e.g. marketing) or further improved (e.g. tech and admin).
With the improved operational performance, good w/c management and no need for elevated capex, normalised FCF further improved to € -31.6m (vs. € -41.5m in FY24 and € -62.6m in FY23). With this, cash at year end stood at € 176.5m.
2/3 of segments with successful turnaround. ANZ and LATAM (79% of group NMV) showed mid single-digit NMV growth, compensating for a still challenging SEA region (-15.2% yoy on cc) where the number of active customers was down 14%. Yet, with most of the homework done (e.g. streamlined product and brand assortment, increased marketplace and service revenues and sharpened customer proposition), SEA should also return to profitable growth (gross margin already at 46.1%) within the next one to two years.
FY26 guidance confirms further op. improvements. GFG guides for NMV cc growth of -4% to +4% (eNuW old: 4.4%). The lower end reflects the currently weaker consumer sentiment across its two key end markets AZN and LATAM. More importantly, the group's adj. EBITDA is expected to further improve to € 15-25m (eNuW old: € 12.4m) as right-sized opex, customer-centric initiatives and business model adjustments (e.g. higher marketplace share, improved assortment and scaling Operations by and Fulfilled by) bear fruit.
Share buyback launched. With the majority of the convertible bond to be repurchased soon (€ 9.1m remain), the company decided to launch a share buyback program to the tune of € 3m (~4% of outstanding shares at current level), further underpinning the still attractive valuation amid the ongoing operational turnaround.
With a still negative EV, the company is implicitly priced for near insolvency while fundamentals are increasingly pointing towards successful turnaround with sustainable cash generation within the next two years. Additional progress in the still challenging SEA region could support an earlier re-rating. We hence confirm our BUY rating with a slightly increased € 1.00 PT (old: € 0.90) based on DCF.
ISIN: LU2010095458
