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De'Longhi
Earnings Release • Jul 30, 2019
4398_10-q_2019-07-30_605d512a-a7d2-4206-a148-5294e4f4a56d.pdf
Earnings Release
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De'Longhi S.p.A.
Results for the first half of 2019: revenues and ebitda recovering in the second quarter.
Today, the Board of Directors of De' Longhi SpA has approved the consolidated results of the first half-year 20191 .
In the second quarter, the Group achieved:
- Revenues up 3.8% to € 469.1 million (+ 2.1% at organic 2 level);
- adjusted 3 EBITDA at € 61.3 million (€ 56.4 million on a normalized 1 basis, slightly up on 2018);
- an operating result (Ebit) of € 41.4 million (€ 41.1 million in normalized1 values, equal to 8.8% of revenues, up 6.5%);
- a net profit of € 31.4 million (€ 31.6 million in normalized1 values, +7.1% on 2018).
In the first half-year, the Group achieved:
- revenues of € 845.5 million (-1.1% on 2018);
- adjusted3 Ebitda of € 97.8 million (€ 88.2 in normalized1 terms);
- an operating result (Ebit) of € 58 million (€ 57.5 million in normalized1 terms);
- a net profit of € 42.8 million (€ 43.3 million in normalized1 terms).
The net financial position at June 30, 2019 amounted to € 105.5 million, (including a negative effect of applying IFRS161 equal to € 77.7 million). On a normalized1 basis, the NFP was € 183.1 million, improving by € 27.2 million in the 12 months.
The guidance for the full year is confirmed: revenues' organic growth between 2% and 4% and an adjusted Ebitda (normalized) slightly down compared from the previous year in absolute value and in normalized terms.
1 The figures of the first quarter 2019 include the effects of the adoption of IFRS 16 accounting standard. For comparative purposes, in some cases the figures are "normalized", i.e. presented on a comparable basis with those of the previous year, hence excluding the aforementioned effects deriving from the IFRS 16 adoption.
2 "Organic" stands for at constant exchange rates and excluding the impact of derivatives.
3 "Adjusted" stands for before non recurring items and inputed costs of the stock options plan.
Results summary and business review
| 1st Half (Jan. 1st - June 30) | 1st quarter (April 1st - June 30) | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 1st Half 2019 | 2019 "normalized" |
2018 | 2019 "normalized" |
2018 | |||||
| (Eur million unless specified) | |||||||||
| Revenues | 845.5 | 845.5 | 854.7 | 469.1 | 452.1 | ||||
| change % | -1.1% | -1.1% | 3.8% | ||||||
| organic ch. % | -2.5% | -2.5% | 2.1% | ||||||
| net ind. margin | 399.5 | 399.5 | 407.1 | 217.7 | 209.0 | ||||
| % of revenues | 47.2% | 47.3% | 47.6% | 46.4% | 46.2% | ||||
| adjusted Ebitda | 97.8 | 88.2 | 109.1 | 56.4 | 55.7 | ||||
| % of revenues | 11.6% | 10.4% | 12.8% | 12.0% | 12.3% | ||||
| Ebitda | 95.5 | 85.8 | 105.0 | 55.4 | 52.6 | ||||
| % of revenues | 11.3% | 10.1% | 12.3% | 11.8% | 11.6% | ||||
| Ebit | 58.0 | 57.5 | 77.9 | 41.1 | 38.6 | ||||
| % of revenues | 6.9% | 6.8% | 9.1% | 8.8% | 8.5% | ||||
| Net Income | 42.8 | 43.3 | 55.9 | 31.6 | 29.5 | ||||
| % of revenues | 5.1% | 5.1% | 6.5% | 6.7% | 6.5% |
general outlook The first half of the year was characterized by a modest reduction in revenues, mainly due to some transitory effects that specifically affected the capsule systems and air conditioning segments, especially in the first quarter. These discontinuities, together with the weakness of the cooking and food preparation segment, conditioned the results of the half-year, which was supported however by a favorable second quarter, marking a reversal of the trend with a recovery of both growth and margin generation.
Looking at the general picture of the consumer goods markets, a climate of greater competitiveness persists, characterized by more aggressive commercial practices, especially for non-premium price ranges and for the kitchen segment.
On the contrary, in terms of coffee machines, the trend for espresso fullauto machines and manual machines proved to be still very strong in the second quarter, with double-digit growth.
In general, price pressure has eased over the quarter, but this will not interfere with the Group's strategy to maintain a sustained level of advertisement and communication investments.
revenues In the first half of the year, Group revenues fell by 1.1% (-2.5% organic), reaching € 845.5 million, but supported by a second quarter up 3.8% to € 469.1 million.
markets In general, the performance of the markets during the first half-year was understandably conditioned by the weakness of the first quarter, with growth only in the north-eastern Europe, while the other areas remained
in negative territory, being impacted, to varying degrees, by the discontinuities of the first months of the year.
On the contrary, the second quarter marked a clear recovery in Europe and North America, a slight improvement in the MEIA area and a decline in some Asian markets (including China) affected by discontinuities in the capsule segment.
| EUR million | 1st Half 2019 |
chg. % | organic chg. % |
2nd Quarter 2019 |
chg. % | organic chg. % |
|---|---|---|---|---|---|---|
| North East Europe | 226.0 | 10.7% | 10.2% | 118.6 | 16.8% | 15.1% |
| South West Europe | 334.2 | -3.7% | -3.9% | 179.4 | -1.6% | -1.8% |
| EUROPE | 560.2 | 1.6% | 1.3% | 298.0 | 5.0% | 4.3% |
| APA (Asia/Pacific/Americas) | 224.3 | -5.9% | -9.3% | 137.3 | 2.0% | -1.0% |
| MEIA (MiddleEast/India/Africa) | 61.0 | -6.0% | -10.3% | 33.8 | 0.7% | -3.6% |
| TOTAL REVENUES | 845.5 | -1.1% | -2.5% | 469.1 | 3.8% | 2.1% |
Going into greater detail in the second quarter:
- the South-West Europe region posted a slight decrease in revenues - despite the good performance of Germany, France and Italy - as a result of the effects of discontinuities in the capsule systems segment which weighed on Switzerland and Austria;
- the expansion of markets in the North-East Europe region continued in a sustained manner, with double-digit growth and accelerating vs. the first quarter. It's worthwhile mentioning the positive performance of Russia, Ukraine and CIS countries, Poland and the UK. In the quarter, both coffee and comfort products grew significantly, confirming a greater penetration of the De'Longhi brand in this rapidly expanding area;
- in the APA (Asia-Pacific-Americas) region, United States and Canada were the Group's first market, returning to double-digit growth after having exhausted the negative effects of the discontinuities of the first quarter. In contrast, greater China was down, suffering from the contraction in sales flows of Nestlé capsule machines;
- finally, the MEIA (Middle East India Africa) region was substantially in line with the previous year (but in a moderate decline in organic terms), with Turkey and UAE contracting, but with Saudi Arabia in positive territory.
- products In general, also with regard to the product categories, the six months showed a more difficult start of the year followed by a second quarter in
recovery in all categories, except for the capsule coffee machines and cooking and food preparation segment.
Trend was positive for the espresso coffee makers segment, which, excluding the discontinuities in the capsule systems category, showed a positive expansion, accelerating in the second quarter (in which they grew double digit).
The cooking and food preparation segment was still declining, both in the quarter and in the six months, in a fairly generalized way across almost all product categories.
The home care segment, both in the ironing and floor-care families, was up double digit both in the semester and in the second quarter.
Finally, in the climatization segment, the double-digit growth recorded in the second quarter (driven by the portable air conditioners) led the halfyear performance to be in line with the previous year, after the marked decline in the first quarter.
operating margins The net industrial margin stood at € 399.5 million in the half-year, a slight decrease compared to last year as a percentage of revenues (from 47.6% to 47.2%); however, in the second quarter, the margin, equal to € 217.7 million, improved slightly, going from 46.2% of revenues to 46.4%.
The normalized adjusted EBITDA for the half-year amounted to € 88.2 million (€ 97.8 million post-IFRS 16), down to 10.4% of revenues (from 12.8%). In the second quarter, however, there was a recovery of this margin, equal to € 56.4 million, which was down only 30 basis points vs. last year (from 12.3% to 12%), thus reducing the gap from the 490 basis points of the first quarter.
The factors weighing on the margin, in the quarter, were the increase in organizational, R&D and promotional costs, a negative exchange rates and hedging effect, as well as a limited impact of the increase in duties on comfort products produced in China and sold in North America, while the contribution of the product mix was positive.
The normalized Ebitda decreased to € 85.8 million (€ 95.5 million post-IFRS 16) equal to 10.1% of revenues. In the quarter, the normalized value of this margin was € 55.4 million (up from € 52.6 million) with a slight increase on revenues from 11.6% to 11.8%.
Normalized Ebit in the first half amounted to € 57.5 million (€ 58 million post-IFRS 16): normalized Ebit in the second quarter was € 41.1 million, improving on revenues from 8.5% to 8.8%.
financial charges The normalized net financial charges for the six months amounted to € 7.2 million (€ 8.2 million after IFRS 16), down by € 1.8 million on 2018.
net profit The normalized net profit was € 43.3 million (€ 42.8 million post-IFRS 16), down by € 12.6 million on 2018, while in the quarter an increase of € 2.1 million to € 31.6 million was achieved.
| net financial position | at 30.06.2019 | at 30.06.2019 " " normalized |
at 31.12.2018 | at 30.06.2018 | |
|---|---|---|---|---|---|
| EUR million | EUR million | EUR million | EUR million | ||
| Net financial position | 105.5 | 183.1 | 228.1 | 155.9 | |
| change in the 6 months | -122.7 | -45.0 | |||
| change in the 12 months | -50.5 | 27.2 | |||
| Bank net financial position | 188.3 | 188.3 | 229.0 | 157.0 | |
| change in the 6 months | -40.7 | -40.7 | |||
| change in the 12 months | 31.4 | 31.4 |
In the balance sheet, the normalized net financial position stood at € 183.1 million, improving by € 27.2 million in the 12 months, but down by € 45 million in the first half year, after investments of € 29.2 million and dividends for € 55.3 million.
The application, starting from January 1st, of IFRS 16 had the effect of reducing the financial position by € 77.7 million in the half year, bringing it to the value of € 105.5 million at June 30.
the working capital With regard to net working capital, the normalized value at June 30 was equal to € 344.2 million, up € 79.3 million compared to the same date in 2018. The change is attributable to modest increases in trade receivables and in the warehouse and to a more marked reduction in trade payables. As a ratio to 12 months rolling revenues, working capital amounted to 16.6%.
Finally, the impact of the application of IFRS 16 on working capital was negligible.
Other resolutions of the Board of Directors
In continuity with the publication of the Non-Financial Statement, the Board of Directors, in today's meeting, also approved the second Group Sustainability Report, relating to the 2018 financial year. The publication of this document will take place concurrently with the release of the Half Year Financial Report at June 30, 2019.
Foreseeable business development and guidance
On the basis of the trend recorded in the second quarter, the company reiterates the guidance for the year previously released of an organic revenues' growth between 2% and 4% and an slightly below last year, in absolute terms and on a normalized basis.
Regulatory statements
The manager responsible for the preparation of the company's accounts, Stefano Biella, hereby declares, as per article 154 bis, paragraph 2, of the "Testo Unico della Finanza", that all information related to the company's accounts contained in this press release are fairly representing the accounts and the books of the company.
Contacts
| for analysts, investors and the press |
Investor Relations: Fabrizio Micheli, T: +39 0422 4131 e-mail: [email protected] |
|---|---|
| on the web | http://www.delonghigroup.com/en/investor_relations |
ANNEXES
Consolidated results of De' Longhi S.p.A. as of June 30, 2019
1. Consolidated Income Statement
| Euro million | First Half 2019 |
% of revenues |
First Half 2019 normalized |
% of revenues |
First Half 2018 |
% of revenues |
|---|---|---|---|---|---|---|
| Net Revenues | 845.5 | 100.0% | 845.5 | 100.0% | 854.7 | 100.0% |
| Change | (9.2) | (1.1%) | (9.2) | (1.1%) | ||
| Materials consumed and other production costs (services and |
||||||
| production payroll costs) | (446.0) | (52.8%) | (446.0) | (52.8%) | (447.6) | (52.4%) |
| Net industrial margin | 399.5 | 47.2% | 399.5 | 47.2% | 407.1 | 47.6% |
| Costs for services and other | ||||||
| operating costs | (210.1) | (24.8%) | (219.7) | (26.0%) | (209.9) | (24.6%) |
| Labour cost (non industrial) | (91.6) | (10.8%) | (91.6) | (10.8%) | (88.1) | (10.3%) |
| Ebitda before non recurring items | ||||||
| and stock option plan (adjusted | ||||||
| Ebitda) | 97.8 | 11.6% | 88.2 | 10.4% | 109.1 | 12.8% |
| Change | (11.3) | (10.4%) | (20.9) | (19.2%) | ||
| Other non recurring items / stock | ||||||
| option plan | (2.3) | (0.3%) | (2.3) | (0.3%) | (4.1) | (0.5%) |
| EBITDA | 95.5 | 11.3% | 85.8 | 10.1% | 105.0 | 12.3% |
| Amortization | (37.5) | (4.4%) | (28.3) | (3.3%) | (27.1) | (3.2%) |
| EBIT | 58.0 | 6.9% | 57.5 | 6.8% | 77.9 | 9.1% |
| Change | (19.9) | (25.6%) | (20.4) | (26.2%) | ||
| Net financial charges | (8.2) | (1.0%) | (7.2) | (0.9%) | (9.1) | (1.1%) |
| Profit before taxes | 49.8 | 5.9% | 50.3 | 5.9% | 68.8 | 8.1% |
| Taxes | (7.0) | (0.8%) | (7.0) | (0.8%) | (12.9) | (1.5%) |
| Net profit pertaining to the Group of the continuing |
||||||
| operations | 42.8 | 5.1% | 43.3 | 5.1% | 55.9 | 6.5% |
2. Revenues breakdown by geography
| Euro million | Half year 2019 |
% | Half Year 2018 |
% | change | change % |
|---|---|---|---|---|---|---|
| EUROPE | 560.2 | 66.3% | 551.4 | 64.5% | 8.8 | 1.6% |
| APA (Asia / Pacific / Americhe) | 224.3 | 26.5% | 238.5 | 27.9% | (14.1) | (5.9%) |
| MEIA (Middle East / India / Africa) | 61.0 | 7.2% | 64.9 | 7.6% | (3.9) | (6.0%) |
| Total Revenues | 845.5 | 100.0% | 854.7 | 100.0% | (9.2) | (1.1%) |
| Euro million | 2nd quarter 2019 |
% | 2nd quarter 2018 |
% | change | change % |
|---|---|---|---|---|---|---|
| EUROPE | 298.0 | 63.5% | 283.9 | 62.8% | 14.1 | 5.0% |
| APA (Asia / Pacific / Americhe) | 137.3 | 29.3% | 134.6 | 29.8% | 2.7 | 2.0% |
| MEIA (Middle East / India / Africa) | 33.8 | 7.2% | 33.6 | 7.4% | 0.2 | 0.7% |
| Total Revenues | 469.1 | 100.0% | 452.1 | 100.0% | 17.0 | 3.8% |
3. Consolidated Balance Sheet
| Euro million | 30.06.2019 | 30.06.2019 normalized |
30.06.2018 | 31.12.2018 |
|---|---|---|---|---|
| ‐ intangible assets | 316.7 | 316.7 | 321.4 | 316.9 |
| ‐ tangible assets | 316.0 | 238.9 | 234.5 | 237.2 |
| ‐ financial assets | 30.6 | 30.6 | 26.9 | 29.6 |
| ‐ deferred tax assets | 54.0 | 54.0 | 36.6 | 36.1 |
| Fixed assets | 717.2 | 640.2 | 619.4 | 619.8 |
| ‐ inventories | 477.9 | 477.9 | 458.6 | 404.8 |
| ‐ trade receivables | 251.2 | 251.2 | 247.5 | 429.3 |
| ‐ trade payables | (325.5) | (325.5) | (380.3) | (419.8) |
| ‐ other net current assets / (liabilities) | (59.3) | (59.4) | (61.0) | (91.8) |
| Net working capital | 344.3 | 344.2 | 264.9 | 322.5 |
| Non current liabilities | (106.2) | (106.2) | (102.5) | (104.4) |
| Net capital employed | 955.4 | 878.2 | 781.8 | 837.8 |
| Net debt / (cash) | (105.5) | (183.1) | (155.9) | (228.1) |
| Total shareholders' Equity | 1,060.8 | 1,061.3 | 937.7 | 1.065.9 |
| Total net debt /(cash) and shareholders' equity | 955.4 | 878.2 | 781.8 | 837.8 |
4. Detailed Net Financial Position
| Euro million | 30.06.2019 | 30.06.2019 normalized |
30.06.2018 | 31.12.2018 |
|---|---|---|---|---|
| Cash and cash equivalents | 473.3 | 473.3 | 490.0 | 569.3 |
| Other financial receivables | 53.9 | 53.5 | 28.2 | 54.2 |
| Current financial debt | (144.5) | (126.6) | (101.0) | (156.1) |
| Current net financial assets / (debt) | 382.7 | 400.2 | 417.3 | 467.5 |
| Non current net financial assets / (debt) | (277.2) | (217.1) | (261.3) | (239.4) |
| Total Net Financial Position | 105.5 | 183.1 | 155.9 | 228.1 |
| of which: | ||||
| ‐ Net financial position versus banks and other lenders | 188.3 | 188.3 | 157.0 | 229.0 |
| ‐ lease related debt | (77.7) | ‐ | ‐ | ‐ |
| ‐ Net assets /(liabilities) other than bank debt (fair value of derivatives, financial liabilitiesfor business combinations and |
||||
| financial payables connected to pension funds) | (5.2) | (5.2) | (1.0) | (0.9) |
5. Consolidated Cash Flow Statement
| Euro million | 30.06.2019 (6 months) |
30.06.2018 (6 months) |
31.12.2018 (12 months) |
|---|---|---|---|
| Cash flow from operations | 79.5 | 98.9 | 289.5 |
| Cash flow from working capital | (36.1) | (26.1) | (111.3) |
| CAsh flow from investments | (29.2) | (28.6) | (66.4) |
| Cash flow before IFRS 16 Leasing | 14.1 | 44.2 | 111.8 |
| Cash flow from application of IFRS 16 to leasing contracts | (77.7) | ‐ | ‐ |
| Operating cash flow | (63.6) | 44.2 | 111.8 |
| Dividends distributed | (55.3) | (149.5) | (149.5) |
| Cash flow from changes in Fair value and Cash flow hedge reserves | (2.1) | 6.1 | 5.0 |
| CAsh flow from other changes in the Net Equity | (1.7) | 4.5 | 10.3 |
| Cash flow from changes in the Net Equity | (59.1) | (138.8) | (134.3) |
| Net Cash Flow | (122.7) | (94.7) | (22.5) |
| Opening Net Financial Position | 228.1 | 250.6 | 250.6 |
| losing Net Finacial Position | 105.5 | 155.9 | 228.1 |