We expect a strong Christmas/New Year performance

ABGSC ’20e: 2% sales decline, but +0.3pp EBIT margin

FY’19/Q4 report on 6 February

Strong ending to 2019, yielding a high dividend
Statistics Denmark has Danish retail sector sales at +0.7% for Q4 2019. We forecast a conservative 0.4% y-o-y group revenue growth, to DKK 309m, driven by strong 6% y-o-y sales growth in FK Distribution, 6% y-o-y growth in NM Online and doubling sales in Bekey. We forecast a continued 11% y-o-y decline in sales for NM newspapers. As a result, we are in line with the company’s FY guidance DKK 1,110-1,140m (ABGSCe: DKK 1,124m). On EBIT, we estimate a strong FY figure of DKK 151m, for a 13.7% margin (guidance: DKK 145-160m) following the company’s three upgrades this year. EBIT is mostly driven by a strong 23.2% EBIT margin (3.4pp y-o-y improvement) in FK Distribution driven by high efficiency and a more favourable pricing structure. We expect ~36% of EBIT to be generated in Q4, when we see high retail demand for commercial leaflets during Christmas/New Year, which we believe could result in a dividend of DKK 4.5/share (~9.5% yield).

2020e: sales -2% y-o-y with +0.3pp EBIT margin
For 2020, we reiterate our sales estimate of DKK 1,089m (-2% y-o-y decline) with strong comps from 2019e with effective price increases; we believe volumes will continue to fall but that this will be partly offset by more price increases. For the subsidiaries, we estimate y-o-y sales growth of -1%, -13%, 6% and 2% for FK distribution, NM Newspapers, NM Online and Bekey respectively. For the group, we estimate gross and EBIT margins of 51% (+0.7pp) and 13.7% (+0.3pp y-o-y), respectively. We have a conservative 5% return on its securities next year (2019: ~59%). We think NM will announce plans to improve profitability in the three smaller segments and focus areas to attract new revenue. We believe that the company may release long-term objectives for its businesses.

Price range of DKK 33-52
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