Yahoo Finance REXEL : FIRST-QUARTER 2018 RESULTS
FIRST-QUARTER 2018 RESULTS (unaudited)
Q1 18 IN LINE WITH OUR EXPECTATIONS
SAME-DAY SALES UP 3.9% AND STABLE RECURRING NET INCOME
IMPROVED FREE CASH FLOW
- SALES OF €3.178bn IN Q1, UP IN EVERY GEOGRAPHY
On a constant and same-day basis, sales up 3.9%, of which:
Europe: +2.8%, with a positive trend in our key countries
North America: +3.5%, supported by Canada and our proximity business in the US
Asia-Pacific: +12.9%, benefiting from strong sales growth across most countries
Organic actual-day growth of 2.8%, including -1.1% from calendar and +0.8% from copper
Reported sales growth down 4.2%, including unfavorable currency (-6.0%) and scope (-0.8%) effects
- ADJUSTED EBITA MARGIN AT 4.0%, DOWN 32bps, MAINLY DUE TO INVESTMENTS
Stable gross margin at 25.1%, with improving profitability in North America
Adj. EBITA margin down 32 bps, mainly impacted by investments in people and digital, as planned
- STABLE RECURRING NET INCOME AT €68.2m
- IMPROVED FREE CASH FLOW BEFORE INTEREST AND TAX AT €(119.2)m vs €(206.7)m in Q1 2017
Key figures1 | Q1 2018 | YoY change3 | ||
Sales | €3,178.3m | |||
On a reported basis | -4.2% | |||
On a constant and actual-day basis | +2.8% | |||
On a constant and same-day basis | +3.9% | |||
Adjusted EBITA2 | €127.2m | -4.8% | ||
As a percentage of sales | 4.0% | |||
Change in bps as a % of sales | -32bps | |||
Reported EBITA | €125.4m | -13.4% | ||
Operating income | €113.6m | -12.7% | ||
Net income | €60.7m | -3.9% | ||
Recurring net income | €68.2m | +0.1% | ||
FCF before interest and tax | €(119.2)m | +€87.5m | ||
Net debt at end of period | €2,183.9m | 10.3% reduction |
1 See definition in the Glossary section of this document 2 At comparable scope of consolidation and exchange rates and excluding (i) amortization of PPA and (ii) the non-recurring effect related to changes in copper-based cables price 3 Q1 2017 restated from IFRS 9 and 15
Patrick BERARD, Chief Executive Officer, said:
"I am pleased that our first-quarter numbers show the benefits of the transformation actions and investments we began implementing 18 months ago. We are demonstrating good growth in our main European countries, in the US and Canada as well as in Asia-Pacific. We continue to invest in our future growth and in the digitization of our business, with digital sales now representing 15.6% of revenues. In the US, the regional multi-banner strategy is now in place and should result in further efficiency gains.
Our EBITA margin at 4% mainly reflects investment in people and digital. Our Free Cash Flow has been strong, and we expect to generate a high level of cash conversion in 2018.
The first quarter gives us confidence in further improvement over the year and we confirm our financial targets for the full year, as announced in February."
FINANCIAL REVIEW FOR THE PERIOD ENDED MARCH 31, 2018
Financial statements as of March 31, 2018 were authorized for issue by the Board of Directors on April 26, 2018. They were not audited by statutory auditors.
Financial statements as of March 31, 2017 have been restated for changes in accounting policies, following the adoption of IFRS 9 "Financial instruments" and IFRS 15 "Revenue from contracts with customers"; this restatement represented a €0.4 million positive impact on operating income (Q1 2017 operating income stood at €129.8 million as reported on April 28, 2017 and stands at €130.2 million after restatement).
The following terms: Reported EBITA, Adjusted EBITA, EBITDA, Recurring net income, Free Cash Flow and Net Debt are defined in the Glossary section of this document.
Unless otherwise stated, all comments are on a constant and adjusted basis and, for sales, at same number of working days.
SALES
In Q1, sales were down 4.2% year-on-year on a reported basis (restated for IFRS 15 impact) and up 3.9% on a constant and same-day basis, reflecting improvement in sales trends in all three geographies
In the first quarter, Rexel posted sales of €3,178.3 million, down 4.2% on a reported basis, including:
A negative currency effect of €198.1 million (i.e. -6.0% of Q1 2017 sales), mainly due to the depreciation of the US dollar and the Canadian dollar against the euro,
A negative net scope effect of €27.2 million (i.e. -0.8% of Q1 2017 sales), resulting from the recent divestments in South East Asia,
A negative calendar effect of 1.1 percentage points.
On a constant and same-day basis, sales were up 3.9%, including an 0.8% positive effect due to the change in copper-based cable prices.
Europe (57% of Group sales): +2.8% in Q1 on a constant and same-day basis
In the first quarter, sales in Europe decreased by 0.2% on a reported basis, including a negative currency effect of €26m (mainly due to the depreciation of the British pound, the Swiss Franc and the Swedish Krona against the euro). On a constant and same-day basis, sales were up 2.8%, reflecting growth acceleration across most countries.
Sales in France (38% of the region`s sales) were up 3.8%, as the efficiency of the model allowed us to capture market growth, notably in the residential and industrial segments, which were up in mid-single digits;
Sales in Scandinavia (12% of the region`s sales) were up 1.6%, with positive momentum in Finland (+15.2%) and Sweden (+4.5%) offsetting the decline in Norway (-13.3%), mainly due to weather conditions and the loss of a large contract;
In the UK (12% of the region`s sales) sales dropped by 5.6%, mainly due to sales force reorganization, the weather effect and 13 branch closures (-0.9% impact), impacting our business in a declining market. Our North and Central regions were the most impacted;
Sales in Germany (11% of the region`s sales) were up 1.7%, mainly fueled by the commercial end-market, notably cables;
Benelux (9% of the region`s sales) posted solid growth, with good momentum in the Netherlands, up 13.3%, thanks to our operational focus to better serve our clients in the multi energy market;
Sales in Switzerland (6% of the region`s sales) grew by 8.7%, with positive momentum in the project business in an environment that remains competitive.
North America (34% of Group sales): +3.5% in Q1 on a constant and same-day basis
In the first quarter, sales in North America were down 9.7% on a reported basis, including a negative currency effect of €147.6m (mainly due to the depreciation of the US dollar and the Canadian dollar against the euro). On a constant and same-day basis, sales were up 3.5%, driven by Canada and the proximity business in the US.
In the US (79% of the region`s sales), sales were up 3.2% on a same-day basis. The sales growth was mainly driven by commercial (up in mid-single-digits) and residential (up in double-digits):
Initiatives are paying off with 9,000+ new customers and a 1.3% sales growth contribution from branch openings;
Good commercial impact from our new regional organization;
Strong momentum in the Pacific Northwest & Mountain Plains offsetting a slower start in the Northeast;
+0.6% contribution from demand in Oil & Gas, up 10% in the quarter;
Project business continues to be affected by lower wind and power projects.
In Canada (21% of the region`s sales), sales were up 4.8% on a same-day basis, mainly driven by strong industrial sales. We confirm the ongoing recovery in our O&G business (up 9.0%) and mining (up 4.4 %).
Asia-Pacific (9% of Group sales): +12.9% in Q1 on a constant and same-day basis
In the first quarter, sales in Asia-Pacific were down 7.0% on a reported basis, including a negative scope effect of €27.2m following the disposal of our business in South East Asia and a negative currency effect of €24.4m, mainly due to the depreciation of the Australian dollar and Renminbi against the euro. On a constant and same-day basis, sales were up 12.9%.
In the Pacific (53% of the region`s sales), sales were up 7.9% on a constant and same-day basis:
In Australia (83% of Pacific), sales were up 9.4%, mainly reflecting good performance in our 3 end-markets with residential, commercial and industrial up by high single digits;
In New Zealand (17% of Pacific), sales were up 1.1%.
In Asia (47% of the region`s sales), sales were up 19.1%:
In China (82% of Asia), sales grew by 10.3% on a constant and same-day basis, reflecting good momentum in industrial automation products and solutions;
Middle East and India (18% of Asia) posted a strong performance thanks to a large project in the Middle East (+€7m) and strong automation business in India.
PROFITABILITY
Broadly stable gross margin: -2bps in Q1 2018
Adjusted EBITA margin at 4.0% in Q1, down 32bps
In the first quarter, gross margin was broadly stable, down 2 bps year-on-year, at 25.1% of sales, and opex (including depreciation) amounted to 21.2% of sales, representing a 30bps deterioration year-on-year, mainly due to the carryover effect of investments in people and digital in a seasonally low quarter in terms of sales as well as cost and wage inflation in some markets:
In Europe, gross margin stood at 27.5% of sales, up 2bps year-on-year. In the quarter, distribution and administrative expenses (including depreciation) increased by 27 bps. Our strong operating leverage in France was offset by cost inflation in the region, drop in volumes in the UK & Norway (-20 bps) as well as investment in IT & Digital: our UK digital activities are currently onboarding our common Hybris e-platform;
In North America, gross margin stood at 22.8% of sales. This represented a 32bps improvement year-on-year, mainly thanks to better purchasing conditions and pricing initiatives, especially in our proximity business in the US, while investing in branch openings and people. This improvement was offset by opex (including depreciation) that increased by 38bps (to 19.9% of sales), impacted by higher freight costs and investment in the sales force in Canada. Overall, our strong operating leverage in the US was offset by Ebita margin deterioration in Canada;
In Asia-Pacific, gross margin stood at 18.1% of sales, a deterioration of 75bps year-on-year. However, adjusted EBITA margin improved by 35bps, thanks to volume contribution and strict cost control, offsetting the 75bps impact on gross margin, mainly due to the phasing of a project in the Middle East and country mix;
At corporate holding level, opex amounted to €6.9m, compared to €2.1 a year ago, mainly because of additional investment in IT & Digital as well as the non-recurring impact of long term incentives.
As a result, adjusted EBITA stood at €127.2m, down 4.8% in Q1.
Adjusted EBITA margin was down by 32 bps to 4.0% of sales, reflecting:
a lower adjusted EBITA margin in Europe at 5.5% of sales, down 25bps;
a lower adjusted EBITA margin in North America at 2.9% of sales, down 6 bps and
an improved adjusted EBITA margin in Asia-Pacific at 1.3% of sales, up 35bps.
In Q1, reported EBITA stood at €125.4 million (including a €1.8m negative one-off copper effect), down 13.4% year-on-year.
NET INCOME
Net income of €60.7m in Q1 2018
Stable recurring net income at €68.2 million in Q1
Operating income in the first quarter stood at €113.6 million, vs. €130.2m in 2017.
Amortization of intangibles resulting from purchase price allocation amounted to €4.4 million (vs. €4.9 million in Q1 2017);
Other income and expenses amounted to a net charge of €7.4 million (vs. a net charge of €9.8 million in Q1 2017). They included €6.8 million of restructuring costs (vs. €7.6 million in 2017).
Net financial expenses in the first quarter amounted to €24.9 million (vs. €33.6 million in Q1 2017). Both periods included charges related to refinancing operations:
Q1 2018 included a net charge of €1.1 million, related to the renegotiation of our Senior Credit Agreement in January 2018;
Q1 2017 included a net charge of €6.7 million related to the early redemption of the USD330m (c. €302m) Senior notes issued in April 2013.
Restated for those net charges, net financial expenses decreased from €27.0 million in Q1 2017 to €23.8 million in Q1 2018. This largely reflected lower average debt year-on-year and lower average effective interest rate, thanks to the various refinancing operations in 2017. The average effective interest rate on gross debt decreased by 33bps year-on-year in Q1 2018 to 2.9% (vs. 3.2% in Q1 2017).
Income tax in the first quarter represented a charge of €28 million (vs. €33.5 million in Q1 2017), a decrease of 16.2%, reflecting a lower tax rate (31.6% vs 34.7% in Q1 2017) following the positive impact of the US tax reform and an 8.2% decrease in profit before tax.
Net income in the first quarter is down 3.9% to €60.7 million (vs. €63.1 million in Q1 2017).
Recurring net income in the first quarter amounted to €68.2 million, stable compared to Q1 2017 (see appendix 2).
FINANCIAL STRUCTURE
Free cash-flow generation impacted by traditional seasonality
Net debt reduced by 10% year-on-year at March 31, 2018
In the first quarter, free cash flow before interest and tax was an outflow of €119.2 million (vs. an outflow of €206.7 million in Q1 2017). This net outflow included:
Net capital expenditure of €23.1 million (vs. €25.5 million in Q1 2017);
An outflow of €226.3 million from change in working capital on a reported basis (vs. an outflow of €329.2 million in Q1 2017). Our improved working capital is mainly due to a favorable base effect with inventory build-up in 2017 in France and in the US, leading to lower payables.
At March 31, 2018, net debt stood at €2,183.9 million, down 10.3% year-on-year (vs. €2,433.4 million at March 31, 2017).
It took into account:
€21.2 million of net interest paid during the quarter (vs €25.7 million paid in Q1 2017),
€22.5 million of income tax paid during the quarter (vs €24.2 million paid in Q1 2017),
€24.4 million of positive currency effect during the quarter (vs a positive effect of €3.9 million in Q1 2017).
OUTLOOK
Our first quarter is in line with our expectations and allows us to confirm our financial targets for the full year, as announced in February.
We target at comparable scope of consolidation and exchange rates:
sales up in the low single digits (on a same-day basis);
a mid- to high-single-digit increase in adjusted EBITA1;
a further improvement of the indebtedness ratio (net debt-to-EBITDA2).
1 excluding (i) amortization of PPA and (ii) the non-recurring effect related to changes in copper-based cables price
2 as calculated under the Senior Credit Agreement terms
NB: The estimated impacts per quarter of (i) calendar effects by geography, (ii) changes in the consolidation scope and (iii) currency fluctuations (based on assumptions of average rates over the rest of the year for the Group`s main currencies) are detailed in appendix 5.
CALENDAR
May 24, 2018 Annual Shareholders` Meeting
July 31, 2018 Second-quarter and half-year results
October 31, 2018 Third-quarter and nine-month results
FINANCIAL INFORMATION
The financial report for the period ended March 31, 2018 is available on the Group`s website (www.rexel.com), in the "Regulated information" section, and has been filed with the French Autorité des Marchés Financiers.
A slideshow of the first-quarter 2018 results is also available on the Group`s website.
ABOUT REXEL GROUP
Rexel, worldwide expert in the multichannel professional distribution of products and services for the energy world, addresses three main markets - residential, commercial and industrial. The Group supports its residential, commercial and industrial customers by providing a tailored and scalable range of products and services in energy management for construction, renovation, production and maintenance.
Rexel operates through a network of some 2,000 branches in 26 countries, with more than 27,000 employees. The Group`s sales were €13.3 billion in 2017.
Rexel is listed on the Eurolist market of Euronext Paris (compartment A, ticker RXL, ISIN code FR0010451203). It is included in the following indices: SBF 120, CAC Mid 100, CAC AllTrade, CAC AllShares, FTSE EuroMid, STOXX600. Rexel is also part of the following SRI indices: FTSE4Good, STOXX® Global ESG Leaders, Ethibel Sustainability Index Excellence Europe, Euronext Vigeo Eiris Eurozone 120 and Dow Jones Sustainability Index Europe, in recognition of its performance in corporate social responsibility (CSR).
For more information, visit Rexel`s web site at www.rexel.com.
CONTACTS
FINANCIAL ANALYSTS / INVESTORS
Ludovic DEBAILLEUX | +33 1 42 85 76 12 | |
Florence MEILHAC | +33 1 42 85 57 61 |
PRESS
Elsa LAVERSANNE | +33 1 42 85 58 08 | |
Brunswick: Thomas KAMM | +33 1 53 96 83 92 |
GLOSSARY
REPORTED EBITA (Earnings Before Interest, Taxes and Amortization) is defined as operating income before amortization of intangible assets recognized upon purchase price allocation and before other income and other expenses.
ADJUSTED EBITA is defined as EBITA excluding the estimated non-recurring net impact from changes in copper-based cable prices.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is defined as operating income before depreciation and amortization and before other income and other expenses.
RECURRING NET INCOME is defined as net income adjusted for non-recurring copper effect, other expenses and income, non-recurring financial expenses, net of tax effect associated with the above items.
FREE CASH FLOW is defined as cash from operating activities minus net capital expenditure.
NET DEBT is defined as financial debt less cash and cash equivalents. Net debt includes debt hedge derivatives.
APPENDICES
For appendices, please open the PDF file by clicking on the link at the end of the press release
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: REXEL via GlobeNewswire
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