Speedy Q2’16 operating margins down further on capacity expansion, sales accelerate to 21% YoY (NEUTRAL)

Speedy Q2 2016 sales growth accelerated to 21% YoY (16% in Q1’16) where domestic sales jumped 15% YoY and international deliveries increased 27% YoY to 37% share in revenue (34.7% a year ago). Operating profitability continued to suffer as costs of hired services (+28% YoY) and personnel expenses (+22% YoY) jumped on capacity expansion and introduction of new services in both Romania and Bulgaria. Speedy sees significant growth potential in Romania especially in the B2C segment and international deliveries. The company is confident that with increase in capacity utilization, margins would gradually recover. Revenue growth topped our forecasts, however we had expected slightly higher margins. Q2 2016 EBITDA margin was currently down to 14% from 16.4% in Q2 2015. D&A increased significantly by 30% YoY to BGN 2.8 related to the increase in PPE. Speedy invested a total of BGN 11m YTD (BGN 4.4m in vehicles and BGN 6.7m in capacity and network expansion). Net financial expenses were up 70% YoY to BGN 380k with higher FX loss and interest expenses (IB debt was up 36% YoY to BGN 24.8m as of end-June). Net profit read BGN 1.6m, down 27% YoY, the net margin down to 4.4% from 7.3% a year ago and 4.8% in Q1 2016. H1 2016, pretty the same picture as in Q2, revenue added 18.7% YoY to BGN 68.3m, the EBITDA margin was pressed down to 14.4% from 17.8% in H1 2015, EBITDA down 4% to BGN 9.9m. D&A jumped 31% YoY to BGN 5.5m (PPE up 23% YTD to BGN 32.8m as of June). Net financial expenses were up 49% YoY to BGN 765k and net income moved down 35.7% YoY to BGN 3.1m, net margin of 4.6% vs. 8.5% in H1 2015.