Investor Presentation • Mar 9, 2018
Investor Presentation
Open in ViewerOpens in native device viewer
2017 FY RESULTS & 2018-2023 UPDATED GUIDELINES
ePRICE SpA – March 2018 0 ANALYST CALL MILAN, 9 TH MARCH 2018
This presentation has been prepared by ePRICE S.p.A. for information purposes only and for use in presentations of the Group's results and strategies.
For further details on the ePRICE Group, reference should be made to publicly available information.
Statements contained in this presentation, particularly regarding any possible or assumed future performance of the Group, are or may be forward-looking statements based on ePRICE S.p.A.'s current expectations and projections about future events, and in this respect may involve some risks and uncertainties.
Actual future results for any quarter or annual period may therefore differ materially from those expressed in or implied by these statements due to a number of different factors, many of which are beyond the ability of ePRICE S.p.A. to control or estimate precisely, including, but not limited to, the Group's ability to manage the effects of the uncertain current local and global economic conditions on our business and to predict future economic conditions, the Group's ability to achieve and manage growth, the degree to which ePRICE S.p.A. enters into, maintains and develops commercial and partnership agreements, the Group's ability to successfully identify, develop and retain key employees, manage and maintain key customer relationships and maintain key supply sources, unfavourable development affecting consumer spending, the rate of growth of the Internet and online commerce, Italian advertising market, competition, fluctuations in exchange rates, any failure of information technology, inventory and other asset risk, credit risk on our accounts, regulatory developments and changes in tax laws.
ePRICE S.p.A. does not undertake any obligation to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this presentation.
Any reference to past performance of the ePRICE Group shall not be taken as an indication of future performance.
This document does not constitute an offer or invitation to purchase or subscribe to any shares and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
By attending the presentation you agree to be bound by the foregoing terms.
"Serving the evolution of Italian households"
ePRICE SpA – March 2018 2 (1) TTM Gross Merchandise Volume: includes revenues from products, shipping and 3P marketplace sales, net of returns and VAT included. Revenue from services includes transports, warranties, B2B and other revenues. GMV from services does not include B2B, ADV&Infocommerce.
(2) Customers who bought at least once on ePRICE or on the marketplace. (3) ePRICE Home Service
-10.0% 0.0% 10.0% 20.0% 30.0% 40.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Online Tech&Appliances Market Growth: 2017 vs 2016 2016 % GROWTH 2017 % GROWTH
With stores reducing contribution and Online absorbing margin, some retailers got into trouble.
(4) http://www.rassegna.it/articoli/mediaworld-sara-sciopero-contro-chiusure-e-trasferimenti-forzati
2017 Online Market Dynamics
ONLINE HALVED THE GROWTH VS FY16
Tech & Appliances Retail in Italy B2C Sales
Source: ePRICE re-elaboration on Forrester Research, GFK, other public sources and internal estimates, 2017.
APPLIANCES LESS AFFECTED BY MARKET SLOWDOWN
Tech & Appliances Online Retail in Italy B2C Sales
ePRICE SpA – March 2018 5 (1) Gross Merchandise Volume includes revenues from products, shipping and 3P marketplace sales, net of returns and VAT included. Revenue from services includes deliveries, warranties, B2B, ADV&Infocommerce and other revenues. GMV from services does not include B2B, ADV&Infocommerce. (2) Services&other have been restated and now include warranties.
and VAT included (3) Only items & orders from B2C GMV goods
| Profit & Loss w/o VC | F20Y17 | FY2016 | YOY |
|---|---|---|---|
| GMV Total Revenues |
253.3 188.7 |
254.4 197.9 |
-0.4% -4.6% |
| Cost of Revenues | -161.0 | -167.7 | -4.0% |
| Gross Profit | 27.7 | 30.2 | -8.1% |
| Gross Margin % | 14.7% | 15.3% | |
| Sales & Marketing | -13.6 | -11.0 | 23.1% |
| Fullfilment | -19.7 | -19.0 | 3.8% |
| IT | -1.8 | -1.4 | 28.6% |
| G&A | -6.6 | -7.3 | -9.4% |
| EBITDA ADJUSTED | -14.0 | -8.5 | 64.2% |
| Ebitda Adjusted % | -7.4% | -4.3% | |
| Non recurring costs | -1.3 | -1.2 | 10.1% |
| EBITDA | -15.3 | -9.7 | 57.4% |
| Ebitda % | -8.1% | -4.9% | |
| EBIT | -22.8 | -14.0 | 63.3% |
| Ebit % | -12.1% | -7.1% | |
| - | |||
| EBT from continuing operations | -24.4 | -14.7 | 66.1% |
| Ebt % | -12.9% | -7.4% | |
| Net result | -25.4 | -14.7 | 72.9% |
| -13.5% | -7.4% | ||
| EBT from discontinued activies | 0.7 | 24.8 | |
| Net result | -24.8 | 10.1 | -346.3% |
| -13.1% | 5.1% |
GM down by 60 bps vs.FY16 mainly due to aggressive price competition and also increased % of damaged products (peaked during transfer to new FF center), partially compensated by positive contribution of Marketplace and Infocommerce.
S&M increased 23% YoY mainly due to cost accounted for TV & Radio campaigns (started October 2017) related to the new focus on brand positioning.
IT costs increased vs 16 due to SAP&IT platforms maintenance costs.
G&A costs decreased 9.4% YoY mainly due to the positive impact of the R&D tax contribution.
Non recurring items in FY 17 include 0.9 €MN related to SAP rollout costs incurred in February and one-off logistics costs incurred for the new fullfillment center. 0.4 €MN are related to SOP.
Includes 0.7 €MN related to earn-outs from BMH sale. In 2016 it included 24.8€MN capital gain from the sale of BMH and Saldiprivati.
| Cash flow | FY 2016 | FY 2017 |
|---|---|---|
| Cash flow from operations Cash flow from Op - Discontinued Act. |
-9.4 1.3 |
-15.1 0.0 |
| Net capex Acquisitions/Disposals |
-7.7 -3.9 |
-13.4 -2.6 |
| Cash flow from investing activities | -11.6 | -16.0 |
| Cash Flow from Inv - Discontunued Act. | 52.2 | 1.2 |
| Cash flow from financing activities | -11.3 | -3.6 |
| Cash Flow | 21.2 | -33.5 |
| Cash position at the beginning of year | 33.5 | 54.7 |
| Cash position at the end of year | 54.7 | 21.2 |
| Balance Sheet | FY 2016 | FY 2017 |
|---|---|---|
| Total Assets | 33.9 | 41.3 |
| Net Working capital | (4.4) | (5.5) |
| Other non current assets | 7.2 | 6.3 |
| Net Invested Capital | 36.7 | 42.1 |
| Net Equity | 92.9 | 63.4 |
| Net Financial Position | (56.2) | (21.3) |
| Comments |
|---|
| • Cash flow from operations: limited Working capital change thanks to the seasonal recovery in Q4 on supplier payments. |
| • Cash flow from investing activites: • Capex increased YoY mainly due to new Fulfilment Center (c. 6 €MN) and SAP. Ordinary Capex at around 5.5 €MN. • c. 2.6 €MN cash-out related to M&A |
| • Cash flow from financing activities: 3.6 €MN related to dividend paid and treasury shares purchase, net of c. 1.0 €MN cash-in from Warrant conversion |
| • Balance Sheet: total assets increased due to the investment in the new SAP platform and to tangible assets of the new FF center. |
1
1P Sales on Core Categories «Family Capex» more resilient to price pressure. Last mile services and warranties grew at the expected attach rate allowing to maintain category leadership where full-service is key to customer satisfaction.
Long Tail Categories, non-service driven, can be managed and become profitable by accelerating shift to 3p Marketplace with a beneficial effect on reduced inventory, higher GM and lower marketing expense. Shift gradually started towards year end 2017.
After deploying the new Fulfilment Center and SAP to gain efficiency, it is now time to reduce the cost base in order to be able to cope with weak market conditions and redesign a leaner management organization.
Turbulence in the Offline Players scenario could be a sign of an acceleration of the shift to 4 online, because the different cost structure begins to show.
1. ePRICE assets (big data, services and network) are a strong advantage in categories where our 1 clients devotes time and effort to the purchase process: the "Core Categories".
1. Core Categories are more protected from price pressure because of the investment level 2 required to full-service the client's needs.
1. In Long Tail Categories, where customer choice is driven by price, product availability and fast 3 delivery, Amazon excels and all many small players compete too.
1. By concentrating ePRICE on Core Categories we are able to reduce the cost base, reduce 5 inventory and focus our marketing effort where we can achieve an higher GM.
XX% = visibility on YE target as of March 2018
Planned actions worth up to 15-20% of 2017 cash costs (in terms of savings + improved margin) or up to c. 10 €MN in FY18, back end loaded
Consumer Spending in Europe Forecast, 2016-2022 (\$ pro capite, CAGR%)
Tech&Appliance Offline and Online Market in Italy 2017 (€BN, Penetration %)
MDAs & Home Comfort Devices Installed in Italy by Device (MN units)
Smart Home Market value in Italy (€MN)
Source: re-elaboration on data ASAP, Osservatorio Internet of Things Politecnico di Milano
APPLIANCES LEADERSHIP = RELEVANCE
ePRICE MDA Sales 2017-2023 projections
2023 TARGETS
Home Service 2023
ePRICE SpA – March 2018 19 (1) Net Promoter Score is a management tool that can be used to gauge the loyalty of a firm's customer relationships. It can be as low as −100 (everybody is a detractor) or as high as +100 (everybody is a promoter). An NPS that is positive (i.e., higher than zero) is felt to be good, and an NPS of +50 is excellent.
* Slight revenue decrease in 2018 rebalanced by aggressive efficiency plan, worth up to c. 10 €MN
REVENUES and GMV GROWING AT DIFFERENT SPEED in FY18
| 2017 | 2018 | TARGET | DRIVERS | |
|---|---|---|---|---|
| MARKET GROWTH TECH&APPLIANCES |
c.10% | c.10% | 10% - 12% |
Conservative growth Shutdown of offline stores |
| (1) GMV |
€ 207M | mid single digit increase |
2x | Market Growth, Marketplace, MDA |
| REVENUES | €168M | slight decrease | 2x | Core Cat Market Growth, Infocommerce, B2B |
| GROSS MARGIN (2) before Transport |
14.7% | +200/400 bps | 22%-26% | Marketplace growth, Mix&Sourcing, Rebates, Infocommerce and Efficiency |
| (2) MARKETING |
7.2% | 5.0% - 6.0% |
Core Categories Focus, Brand Awareness |
|
| (2) FULFILMENT TRANSPORT & INTERNAL |
10.4% | 10.0% - 11.5% |
Scale & efficiency program offset by B2B development. Fulfilment includes Transport and Installation Services. |
|
| (2) IT + G&A |
4.5% | 2.0% - 3.0% |
Efficiencies and scalability | |
| (2) EBITDA adj. |
-7.4% | significant improvement, back-end loaded |
5% - 6% |
#1 specialty player EBITDA, enhanced by marketplace and services |
| (2) CAPEX |
4.5% | 2.0 - 3.0% |
2.0% - 3.0% |
Recurring CAPEX |
ePRICE SpA – March 2018 22 (1) GMV (Gross Merchandise Volume) includes revenue from products, deliveries and revenue from marketplace, net of returns and VAT included. Infocommerce and Advertising and B2B revenues not included., representing c.5.5% of revenues in 2017; (2) % of revenues.
More conservative 2018-2023 market estimates after a disappointing year.
Efficiency plan with a leaner organization, worth up to 15-20% of cash costs savings and margin improvement in 2018 (up to 10 €MN), back-end loaded.
Core Categories: confirmed leadership and focus on "Family Capex" (MDA, A/C, TV) and related services (warranties, delivery and installation, smart home).
Long tail/non service driven categories: accelerating shift to Marketplace to effectively cover demand and improve profitability (up to 50% penetration).
EBITDA and CF positive in 2019, including potential earn-outs and disposals.
NFP positive throughout the plan. Up to 18 €MN from earn-outs and disposals.
| Mar 18 | Apr 18 |
May 18 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| M | T | W | T | F | M | T | W | T | F | M | T | W | T | F |
| 1 | 2 | 2 | 3 | 4 | 5 | 6 | 1 | 2 | 3 | 4 | ||||
| 5 | 6 | 7 | 8 | 9 | 9 | 10 | 11 | 12 | 13 | 7 | 8 | 9 | 10 | 11 |
| 12 | 13 | 14 | 15 | 16 | 16 | 17 | 18 | 19 | 20 | 14 | 15 | 16 | 17 | 18 |
| 19 | 20 | 21 | 22 | 23 | 23 | 24 | 25 | 26 | 27 | 21 | 22 | 23 | 24 | 25 |
| 26 | 27 | 28 | 29 | 30 | 30 | 28 | 29 | 30 | 31 | |||||
| Mar 8, 2018 | Approval of Draft Financial Statements and Consolidated Financial Statements at Dec. 31st, 2017 |
|---|---|
| Apr 17, 2018 |
ORDINARY SHAREHOLDERS' MEETING |
| May 9, 2018 |
Approval of Interim Financial Report as at March 31st, 2018 |
The share capital of ePRICE S.p.A. is equal to Euro 826,297 composed by n. 41,314,850 ordinary shares without par-value.
| RELEVANT SHAREHOLDERS | NUMBER OF SHARES | % SHARE CAPITAL |
|---|---|---|
| Paolo Ainio1 | 9,447,615 | 22.87% |
| Arepo BZ S.a.r.l. |
8,613,850 | 20.85% |
| Pietro Boroli | 2,138,997 | 5.18% |
| Treasury Shares |
1,023,202 | 2.48% |
(1) of which 221.750 (0,54%) held trough PUPS S.r.l., 80% controlled by Paolo Ainio
There are no other shareholders, outside of those listed above, with a shareholding of more than 5% that have notified Consob and ePRICE S.p.A. according to art. 117 of Consob Regulation no. 11971/99 on notification requirements of major holdings.
Via San Marco 29
20121 Milan, Italy
corporate.eprice.it
Micaela Ferruta
Head of Investor Relations and Strategic Planning
+39 0230315400
investors.eprice.it
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.