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Duell - Difficulties persist

Duell’s Q4 results were largely in line with the previously released preliminary figures. Reflecting the ongoing strain on the company's balance sheet, Duell announced that it is considering a rights issue to strengthen the balance sheet. With the expected continued operational softness and no positive drivers for the stock ahead of the potential sizeable rights issue, we further downgrade our TP to EUR 0.4 (0.9) and rating to SELL (HOLD).

Q4 operative figures brought no real surprises

Duell’s net sales were roughly in line with the previously released preliminary figures. Net sales in Q4 amounted to EUR 29.9m (EUR 34.6m in Q4/22, EUR 29m Evli) and adj. EBITA was at EUR 0.2m (EUR 1.8m in Q4/22, EUR 0.1m Evli). The weak profitability was clearly driven by the soft volume development as the company’s gross margin improved y/y.

 

Considering a larger-than-expected rights issue

Despite the successful unloading of inventory during the Q4 leading to lower net debt levels, the company’s balance sheet remained stretched. Due to the lackluster operational results and high amount of debt, the company’s net debt to adjusted EBITDA was at 7x at the end of FY 2023. As a result, the conditions for the covenants for loans from financial institutions were not met. To strengthen its balance sheet, the company announced that it is considering a rights issue. According to preliminary plans, the size of the rights issue would be up to roughly EUR 20m. The rights issue is substantial and if completed, heavily dilutive for shareholders that do not exercise their rights, as the company’s market cap is currently approximately EUR 15m. We have not included the potential right issue to our estimates as the completion, timing and conditions of the issue are still uncertain.

 

SELL (HOLD) with a TP of EUR 0.4 (0.9)

As mentioned in our previous updates, we see no signs of fast recovery in consumer confidence, in addition, the company’s customers conservative approach to inventory management is likely to continue. With the continued weak outlook, stretched balance sheet and no positive drivers for the stock ahead of the potential rights issue, we further downgrade our TP to EUR 0.4 (0.9) and rating to SELL (HOLD).

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