Technogym — Earnings Release 2019

Mar 17, 2020

37 years of organic growth

Technogym disruptive innovation

SKILLATHLETIC: our new experience for athletic training

A new immersive training experience accessible both in existing Clubs or in new boutique fitness studios

Biocircuit: automatic and personalized workout

Revenues showed mid single-digit growth

N.A. & APAC driving the growth

All sales channels are growing YoY

Top line growth with a steady profitability

Profit and Loss statement (excluding IFRS 16)					Key comments
(€m)	Dec 2018	Dec 2019 excluding	Delta (excluding	2019 vs 2018	Net operating income drivers
		IFRS 16	IFRS 16)		Top line growth driven by volumes
Total revenue	634,1	668,9	34,8	5,5%
Cost of raw, ancillary and consumable materials and goods for resale	(200,5)	(219,3)	(18,8)	9,4%
of which (cost) not recurrent	0,0	(0,1)	(0,1)
Service, Rentals and leases	(162,5)	(168,3)	(5,8)	3,6%
of which (cost) not recurrent	(2,0)	(1,3)	0,7
Personnel cost	(133,8)	(137,7)	(3,9)	2,9%	on digital & contents
of which (cost) not recurrent	(1,0)	(2,4)	(1,4)
Depreciations, amortisations and write-downs	(22,0)	(25,2)	(3,2)	14,6%
Provision for risk and charges	(2,6)	(4,1)	(1,6)	60,8%	digital transformation
Other operations cost	(6,1)	(7,3)	(1,2)	19,4%
of which (cost) not recurrent	0,0	(0,4)	(0,4)		to the increase of bad debt provision
Share of result joint venture	0,3	1,0	0,7	h.v.
Net operating income Margin (%)	106,9 16,9%	108,0 16,1%	1,1 (0,7%)	1,0%	and deferred taxes accrual for a total of 10,3m€
Financial income and (expenses) and from investments	0,6	(1,3)	(1,9)	h.v.
Profit (loss) before tax	107,5	106,6	(0,8)	(0,8)%
Taxes	(14,0)	(22,7)	(8,7)	h.v.
of which (cost) not recurrent Profit (loss) before minority interest	12,5 93,5	2,2 83,9	(10,3) (9,5)	(10,2)%
Margin (%)	14,7%	12,5%	(2,2%)
Profit (loss) for the year of minority interests	(0,4)	(0,5)	(0,1)	23,6%	+6,1m € on Net operating income
Profit for the year	93,0	83,4	(9,6)	(10,3)%	+5,9m € on Net result
	134,4	141,5	7,1	5,3%
		21,2%
Adjusted EBITDA Margin (%)	21,2%
Profit for the year adjusted	83,5	85,4	1,9	2,2%

2019 vs 2018

• Net operating income drivers Top line growth driven by volumes Positive performance on products cost reduction offset by increase in custom duties and service costs (i.e. logistic costs, consultancy & maintenance) Increase in personnel costs is mainly due to 2018 carry over and new hires, mainly driven by increasing focus Positive FX impact driven primarily by USD and JPY: +11m € on revenues
• on digital & contents Increase in D&A is driven by higher investments for new products development and IT projects also related to digital transformation Increase in provision for risk and charges is mainly due to the increase of bad debt provision Tax variation is due to lower non recurring patent box and deferred taxes accrual for a total of 10,3m€ +6,1m € on Net operating income +5,9m € on Net result

-

Top line growth with a steady profitability

Profit and Loss statement (including IFRS 16)					Key comments
(€m)	Dec 2018	Dec 2019	Delta	2019 vs 2018
Total revenue	634,1	668,9	34,8	5,5%	Net operating income drivers
					Top line growth driven by volumes
Cost of raw, ancillary and consumable materials and goods for resale	(200,5)	(219,3)	(18,8)	9,4%
of which (cost) not recurrent	0,0	(0,1)	(0,1)
Service, Rentals and leases	(162,5)	(163,6)	(1,1)	0,6%
of which (cost) not recurrent	(2,0)	(1,3)	0,7
Personnel cost	(133,8)	(136,2)	(2,3)	1,7%
of which (cost) not recurrent	(1,0)	(2,4)	(1,4)		on digital & contents
Depreciations, amortisations and write-downs	(22,0)	(31,1)	(9,1)	41,4%
Provision for risk and charges	(2,6)	(4,1)	(1,6)	60,8%	digital transformation
Other operations cost of which (cost) not recurrent	(6,1) 0,0	(7,3) (0,4)	(1,2) (0,4)	19,4%
Share of result joint venture	0,3	1,0	0,7	h.v.	to the increase of bad debt provision
Net operating income	106,9	108,4	1,5	1,4%
Margin (%)	16,9%	16,2%	(0,7%)		and deferred taxes accrual for a total of 10,3m€
Financial income and (expenses) and from investments	0,6	(1,9)	(2,6)	h.v.
Profit (loss) before tax	107,5	106,4	(1,1)	(1,0)%	IFRS16 impact is as follows:
Taxes	(14,0)	(22,7)	(8,7)	h.v.	-4,8m € costs of rentals
of which (cost) not recurrent	12,5	2,2	(10,3)		-1,5m € costs of rentals related to employee
Profit (loss) before minority interest	93,5	83,7	(9,7)	(10,4)%	+5,9m € D&A
Margin (%) Profit (loss) for the year of minority interests	14,7% (0,4)	12,5% (0,5)	(2,2%) (0,1)	23,6%	-0,6m € financial expenses
Profit for the year	93,0	83,2	(9,8)	(10,6)%
Adjusted EBITDA	134,4	147,8	13,4	10,0%
Margin (%) Profit for the year adjusted	21,2% 83,5	22,1% 85,2	0,9% 1,7	2,0%
Percentage (%)	13,2%	12,7%	(0,4%)		+6,1m € on Net operating income
					+5,9m € on Net result

• Net operating income drivers Top line growth driven by volumes Positive performance on products cost reduction offset by increase in custom duties and service costs (i.e. logistic costs, consultancy & maintenance) Increase in personnel costs is mainly due to 2018 carry over and new hires, mainly driven by increasing focus on digital & contents Increase in D&A is driven by higher investments for new products development and IT projects also related to digital transformation Increase in provision for risk and charges is mainly due to the increase of bad debt provision Tax variation is due to lower non recurring patent box and deferred taxes accrual for a total of 10,3m€ IFRS16 impact is as follows: -4,8m € costs of rentals -1,5m € costs of rentals related to employee
• +5,9m € D&A -0,6m € financial expenses Positive FX impact driven primarily by USD and JPY: +11m € on revenues +6,1m € on Net operating income
• +5,9m € on Net result

-

-

-

TWC heading towards normalization

Working Capital (€m) Key comments

Working Capital (€m)			Key comments
(€m)	Dec 2018	Dec 2019
Inventories	89,5	76,8
Trade receivables	151,5	127,5
Trade payable	(143,9)	(127,5)
Trade Working Capital	97,1	76,8
% LTM of total revenue	15,3%	11,5%
Other current assets/(liabilities)	(40,4)	(46,8)
Current tax liabilities	(8,1)	(5,1)	Inventories
Provisions	(14,1)	(12,7)
Net Working Capital	34,6	12,2
% LTM of total revenue	5,5%	1,8%
Inventory Turnover 1 Days Sales Outstanding (DSO) 2	5,2 73	6,1 59
Days Payables Outstanding (DPO) 3	133	112

- Trade Working Capital TWC declining as percentage on revenues (11,5%)

- compared to Dec 18 (15,3% of revenues) Inventory Turnover increase by 0,9 • DSO decrease by 14 days compared to Dec 18 due to recovery plan on overdue • DPO decrease by 21 days compared to Dec 18 in line with prevailing terms of payment and purchasing mix • Inventories include mainly finished products (63,5m €) and raw materials & components (13,3m €) • Strong decrease due to: ‒ Reduction of Plants stock for Finished Products ‒ Reduction of local subsidiaries stock due to improved integration between manufacturing and logistic Other current A/L • Increased due to VAT (payable) and higher advance from

Inventories

• -
  -

Customer

Capex at 5.4% on revenues, slightly increasing Y/Y

Net Financial Debt: full deleverage

Net Financial Position (€m) Key comments

Net Financial Position (€m)			Key comments
€m	31 Dec 2018	31 Dec 2019
Cash & cash equivalent	(78,5)	(114,4)
Current financial receivables	(0,2)	(0,1)
Current bank debt	29,1	25,6
of which granted by Committed Credit facilities of which granted by Uncommitted Credit facilities	29,1 0,0	25,6 0,0
Current portion of non current debt	18,4	12,6
IFRS 16 Current liability		6,5
Other current financial debt Net current financial debt	12,7 60,2	10,1 54,8
Non current portion of non current debt IFRS 16 Non Current liability	37,6	24,7 15,2
Other non current financial debt	15,8	16,2
Non current financial debt	53,4	56,0
Net Financial Position	34,9	(3,7)
NFP / EBITDA (LTM12m)	0,26x	nd

Cash & Cash equivalent •Strong increase in cash position mainly refers to bank

deposits € denominated

• Current bank debt •Mainly composed of credit lines stand-by and shortterm financing. As of 31/12/2019 ⁻ Lines of credit and overdrafts committed for ~35m € of which 25m € drawn (revocable / floating rate: EURIBOR + spread) ⁻ Lines of credit and overdrafts uncommitted for ~63,5m € not drawn (revocable / floating rate: EURIBOR + spread) Current portion of non-current debt / Non current
  -

financial debt •Flexible financial structure based on bank amortizing loans with ~2y duration (floating: EURIBOR + spread) •Leasing exposure stands at 26,3m € in 2019 (10,1m € short term among "other current financial debt" and 16,2m € among "non current financial debt"), slightly decreasing vs Y-1 (28,5m €). •IFRS 16 impact on financial debt is 21,7m € 2019

Net Financial Position walk

€m

Annexes

€m	Dec 2018	% on Revenues	Dec 2019	% on Revenues
Inventories	89,5	14,1%	76,8	11,5%
Trade receivables	151,5	23,9%	127,5	19,1%
Trade payables	(143,9)	(22,7%)	(127,5)	(19,1%)
Trade Working Capital	97,1	15,3%	76,8	11,5%
Other current assets/(liabilities)	(40,4)	(6,4%)	(46,4)	(6,9%)
Current tax liabilities	(8,1)	(1,3%)	(5,1)	(0,8%)
Provisions	(14,1)	(2,2%)	(12,7)	(1,9%)
Net Working Capital	34,6	5,5%	12,6	1,9%
Property, plant and equipment	142,6	22,5%	167,9	25,1%
Intangible assets	35,9	5,7%	43,4	6,5%
Investments in joint ventures	18,0	2,8%	18,1	2,7%
Employee benefit obligations	(3,0)	(0,5%)	(3,1)	(0,5%)
Other non current asset and (liabilities)	16,1	2,5%	17,5	2,6%
Net Fixed Capital	209,6	33,0%	243,8	36,5%
Net Invested Capital	244,1	38,5%	256,4	38,3%
Shareholders' Equity	209,3		260,1
Financial Net Debt	34,9	5,5%	(3,7)	(0,5%)
Total Source of Funding	244,1	38,5%	256,4	38,3%

NFD = +25,3m€ excluding IFRS16

Cash Flow statement

Cash Flow statement
(€m)	Dec 2018	Dec 2019
Consolidated profit for the year	93,5	83,7
Depreciation, amortization and impairment losses Provisions	22,0 2,6	31,1 4,1
Share of net result from joint ventures	(0,3)	(1,0)
Net financial expenses Income/(expenses) from investments	(0,5) (0,1)	2,4 (0,4)
Income tax expenses	14,0	22,7
Cash flows from operating activities before changes in working capital	131,2	142,6
Change in inventory Change in trade receivables	(22,5) (37,6)	11,9 18,1
Change in trade payables	20,8	(16,9)
Change in other operating assets and liabilities	(11,1)	6,7
Non-recurrent fiscal payment	0,0	0,0
Income taxes paid	(18,6)	(26,68)
Net cash inflow from operating activities (A)	62,2	135,8
Investments in property, plant and equipment	(18,2)	(21,3)
Disposals of property, plant and equipment	0,4	1,6
Investments in intangible assets Disposals of intangible assets	(15,1) 0,3	(16,8) 0,1
Dividends received from joint ventures	0,0	1,0
Dividends paid	0,0	0,0
Minority Interest	0,0	0,0
Investments in subsidiaries, associates and other entities Disposal of subsidiaries, associates and other entities	(0,9) 0,0	(0,6) 0,0
Net cash inflow (outflow) from investing activities (B)	(33,4)	(36,0)
Repayment of IFRS 16	0,0	(6,3)
Proceeds from new borrowings Repayment of borrowings	0,0 (37,8)	25,0 (43,9)
Net increase (decrease) of current financial assets and liabilities	26,8	(3,6)
Dividends paid	(18,1)	(36,2)
Payments of net financial expenses	0,2	(0,5)
Net cash inflow (outflow) from financing activities (C)	(29,0)	(65,4)
Net increase (decrease) in cash and cash equivalents (D)=(A)+(B)+(C)	(0,2)	34,3
Cash and cash equivalents at the beginning of the year	77,8	78,5
Net increase (decrease) in cash and cash equivalents from January 1 to Aug 31	(0,2)	34,3
Effects of exchange rate differences on cash and cash equivalents Cash and cash equivalents at the end of the year	0,8 78,5	1,6 114,4

EBITDA Reconciliation

EBITDA Reconciliation
(€m)	Dec 2018	Dec 2019	Dec 2019 excluding IFRS 16	Dec 2018 vs Dec 2019 Δ %	Dec 2018 vsDec 2019 excluding
Net operating income	106,9	108,4	108,0	1,4%	1,0%
Personnel cost Service, Rentals and leases	1,0 2,0	2,4 1,3	2,4 1,3
Cost of raw, ancillary and consumable materials and goods for resale	0,0	0,1	0,1
Other operations cost	0,0	0,4	0,4
Total not recurring items	3,0	4,2	4,2	n.a	n.a
Adjusted Net operating income	109,9	112,6	112,2	2,5%	2,1%
Depreciations, amortisations and write-downs	(22,0)	(31,1)	(25,2)	41,4%
Provision for risk and charges	(2,6)	(4,1)	(4,1)	60,8%
EBITDA adjusted	134,4	147,8	141,5	10,0%	5,4%
Margin %	21,2%	22,1%	21,2%
Non recurring	3,0	4,2	4,2
EBITDA	131,4	143,6	137,3	9,3%	4,6%
Margin %	20,7%	21,5%	20,5%