HighCo's Divestiture of High Connexion: Unlocking Value Through Strategic Focus and Dividend Power

HighCo (EURONEXT: ALHIGH) has announced a pivotal move to divest its 51% stake in High Connexion, a mobile marketing subsidiary, to investors Albarest Partners and Guillaume Guttin. The transaction, expected to close by June 30, 2025, marks a bold strategic shift toward accelerating growth in its core divisions: Activation (digital promotions and in-store tech) and Consulting & In-store media selling. By capitalizing on the sale's proceeds, HighCo aims to boost shareholder returns through an exceptional dividend while reinvesting in high-potential areas. This article examines how the divestiture positions HighCo to unlock value, enhance dividends, and strengthen its long-term competitiveness.

Value Realization: Exiting Non-Core Assets to Fuel Growth

High Connexion, while profitable—contributing €8.65 million in margin (12.5% of HighCo's consolidated gross profit) in 2024—operates in a crowded mobile marketing space with limited synergies to HighCo's core business. The sale allows HighCo to redirect resources to its Activation division, which grew 7% in 2024 and now accounts for 52.8% of gross profit. This division's focus on digital coupons, personalized promotions, and retail tech platforms (e.g., the Merely platform for Leroy Merlin) positions it as a leader in retail transformation.

The divestiture also simplifies HighCo's operations, reducing complexity and freeing capital for high-margin opportunities. As CEO Yannick Béhar stated, the move enables HighCo to “ramp up growth in its core businesses” amid a retail sector grappling with price wars and digital disruption.

The Exceptional Dividend: A Near-Term Catalyst for Shareholders

The transaction's most immediate impact is the €1 per share exceptional dividend, contingent on regulatory approval. Combined with the €0.25 per share regular dividend proposed for 2024 (a 25% increase over 2023), shareholders stand to gain €1.25 per share in total dividends, marking a 225% jump over prior years. This underscores HighCo's commitment to returning capital to investors while maintaining a strong net cash position of €24.74 million (excluding operating working capital).

For income-focused investors, the dividend yield—projected to surge to over 5% post-sale—is a compelling near-term opportunity. The share buyback program, expanded to €1 million in 2025, further signals management's confidence in the stock's valuation.

Future Investment: Activations and CSR as Growth Drivers

Proceeds from the sale will also fund strategic initiatives in the Activation division, including:
- Scaling Merely and Nifty platforms: HighCo's proprietary tools for retailers like Carrefour and Mouvement E.Leclerc are poised for expansion. For instance, Nifty's mobile discount coupons saw a 40% rise in pharmacy sector adoption in 2024.
- AI-driven personalization: HighCo aims to achieve 10% personalized promotions for Carrefour by 2026, leveraging data analytics to boost customer engagement.
- Carbon-neutral operations: Aligning with its EcoVadis Gold CSR rating, HighCo will invest in decarbonization projects, including reducing its 2024 carbon footprint of 7,027 tonnes CO₂e.

The “Impact 2030” CSR strategy—focusing on employee well-being, sustainable marketing, and data security—also supports long-term value. Initiatives like circular economy-linked promotions (e.g., Philips' cashback offers with Geev) and employee-led sustainability workshops enhance brand equity and regulatory compliance.

Risks and Considerations

• Regulatory Delays: The sale hinges on approval from France's Autorité de Contrôle Prudentiel et de Résolution. A delay beyond June 30 could postpone dividend payouts and reinvestment plans.
• Market Challenges: HighCo's projected 3%-4% decline in gross profit (excluding High Connexion) reflects headwinds like retailer consolidation and deflation in consumer goods. Success hinges on Activation's ability to offset these trends.

Investment Thesis: Buy with a Long-Term Lens

HighCo's divestiture is a strategic masterstroke, combining value realization with shareholder-friendly returns. The exceptional dividend offers an attractive entry point, while the Activation division's growth trajectory and sustainability focus suggest robust long-term potential.

Recommendation:
- Buy: For investors seeking dividend income and exposure to retail tech disruption. The stock's current valuation—12x 2024E P/E—appears reasonable given its cash-rich balance sheet and reinvestment plans.
- Hold: For those prioritizing stability; monitor dividend execution and regulatory progress.

Conclusion

HighCo's exit from High Connexion represents a disciplined reallocation of capital to higher-growth areas, supported by a dividend yield boost and sustainable innovation. With a strong financial position and clear focus on its core strengths, HighCo is well-positioned to capitalize on retail's digital transformation—a trend that will likely reward patient investors.

Disclosure: This analysis is for informational purposes only. Investors should conduct their own due diligence.