Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
€26s are at Z+253/5.5% and starting to screen value...on RV. Reminder the International business that holds UK boots is doing fine (growing) and US healthcare is recovering to positive EBTIDA. Issues are now in its core (80%) US retail pharmacy segment. It's running a 2.2% EBIT margin YTD - down from 3.7% last yr - on a weaker consumer forcing discounting and reimbursement pressures. Guidance there is not optimistic and left non-numeric for FY25 (ending August '25).
Other uncertainties:
- 25% of US retail pharmacy stores (that are unprofitable) are under review - does not mean all will be closed and cash impact is still unclear with US stores tending to be under 10-25yr leases (source: filings). All it's given for now is that leases is part of the cost analysis on closures and net closures will be cash flow and EPS accretive.
- Boots spin-off/IPO is off (group has built a 25% EBIT reliance on it through all this) but Village MD stake will be evaluated. How much it will get for the latter is unclear, its recorded large impairments against it recently (2Q).
- FY25 consensus EBIT estimates have fallen 30% since earnings to $2.3b. FCF expectations are sitting in low $1b handle. There remains high uncertainty on FY25.
Operating cash flows, even with a complete divvy cut, look to be short of generating the ~$6b due over the next 2 years. It leaves Village MD stake and any other cash generating cost cutting activates in the driving seat for shoring up liquidity. Moody's double notch downgrade and below moves will cause a near doubling in interest cost if it refi's the legacy bonds - though that won't be '26 bondholders concern.
- £25s +8
- $26s +44
- €26s +100
- $30s +110
- $44s +40
- Equities -25%, CDS +100
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.