2017-04-26 07:30:38 CEST
2017-04-26 07:30:38 CEST
REGULATED INFORMATION
Tokmanni Group Oyj - Interim report (Q1 and Q3)
Tokmanni Group Corporation's Business review 1.1. - 31.3.2017: revenue decreased -1.1% and profitability weakened - full year guidance unchanged
TOKMANNI GROUP'S BUSINESS REVIEW 1.1. - 31.3.2017: REVENUE DECREASED -1.1% AND
PROFITABILITY WEAKENED - FULL YEAR GUIDANCE UNCHANGED
Numbers in brackets refer to the corresponding period previous year if nothing
else is mentioned.
FIRST QUARTER HIGHLIGHTS
* Revenue totaled EUR 156.6 million (158.3), -1.1%
* Like-for-Like revenue decreased by -3.8%, out of which calendar impact more
than -2% and mild winter impact more than -1% according to Tokmanni's
calculations
* Adjusted gross profit totaled EUR 49.2 million (52.5), 31.4% of revenue
(33.1)
* Adjusted EBITDA totaled EUR -1.5 million (2.2), -0.9% of revenue (1.4)
* Adjusted EBIT totaled EUR -5.2 million (-1.7), -3.3% of revenue (-1.0)
* 1 new and 1 relocated store opened during the quarter
* Four new stores added to the new store pipeline in the quarter, after which
the total new store pipeline for 2017 is 12 net new and 2 relocated stores
TOKMANNI'S SHORT TERM OUTLOOK 2017 UNCHANGED
Tokmanni's expects good revenue growth for 2017 based on the revenue from new
stores opened in 2016 and 2017 and low single digit Like-for Like revenue
growth. Group profitability (adjusted EBITDA%) is expected to improve from the
previous year.
TOKMANNI'S CEO HEIKKI VÄÄNÄNEN:
"The first quarter is usually Tokmanni's slowest quarter but our performance was
a slight disappointment to us. Even if the weak performance was primarily due to
the timing of Easter, the 2016 leap day, as well as mild winter weather
conditions, the non-grocery market didn't develop according to our expectations.
Despite the improvement in consumer confidence and other positive signals the
non-grocery market continued to be weak which indicates that the market is still
fragile and that the positive market forecasts have not yet realized in the non-
grocery retail market. Slight recovery in the Finnish economy and other retail
segments has however already been seen and we continue to believe that also the
non-grocery market will grow slightly.
We are very pleased that our number of baskets increased by 3.9% which shows
that our marketing actions are correct. To my disappointment the average basket
size however decreased due to the weak demand for winter season products and
also due problems related to shelf availability which we experienced following
the implementation of a new assortment management tool. The problems related to
the tool are now under control and the shelf availability issues will be
completely solved during the second quarter, after which the tool will improve
the efficiency of our assortment management and thereby have a positive effect
on our sales.
In the first quarter we began aggressive campaigning to reach, among others,
department store Anttila's old customers. This had a negative impact on our
gross profit, which is reflected directly in our adjusted EBITDA which decreased
to EUR -1.5 million.
Despite this slow quarter, we are confident regarding our 2017 guidance. We have
increased our focus in sourcing on the spring, summer and Christmas seasons. We
are accelerating our measures to improve Like-for-Like sales by, among other
things, intensifying our campaigning actions. At the same time market conditions
are expected to improve. The year 2017 is a very busy year in opening new stores
and in the first quarter we signed four additional contracts to open new stores
in store space released by Anttila. The new stores contribute well to our
revenue growth. We also continue to develop our sourcing and cost control
remains tight in order to improve our profitability."
Key figures
1-3/2017 1-3/2016 Change% 1-12/2016
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Revenue, MEUR 156.6 158.3 -1.1% 775.8
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Like-for-like revenue development, % -3.8 0.3 -0.1
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Number of baskets, M 9.8 9.4 3.9% 44.7
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Gross profit, MEUR 48.7 51.7 -5.9% 268.4
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Gross margin, % 31.1 32.7 34.6
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Adjusted gross profit, MEUR 49.2 52.5 -6.1% 267.9
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Adjusted gross margin, % 31.4 33.1 34.5
--------------------------------------------------------------------------------
Operating expenses -53.1 -51.4 3.5% -207.4
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Adjusted operating expenses -51.6 -51.0 1.1% -208.5
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EBITDA, MEUR -3.6 1.1 -415.8% 64.3
--------------------------------------------------------------------------------
EBITDA, % -2.3 0.7 8.3
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Adjusted EBITDA, MEUR -1.5 2.2 -166.9% 62.8
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Adjusted EBITDA, % -0.9 1.4 8.1
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Operating profit (EBIT), MEUR -7.3 -2.7 167.2% 49.2
--------------------------------------------------------------------------------
Operating profit margin EBIT, % -4.7 -1.7 6.3
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Adjusted EBIT, MEUR -5.2 -1.7 212.9% 47.7
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Adjusted EBIT, % -3.3 -1.0 6.1
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Net financial items, MEUR -1.3 -5.2 -73.9% -15.2
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Net capital expenditure, MEUR 1.5 1.3 11.9% 9.8
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Net debt / adjusted EBITDA** 2.6 3.0 1.8
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Net cash from operating activities,
MEUR -37.9 -15.3 62.5
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Return on capital employed, % -2.3 -0.8 14.5
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Return on equity, % -5.2 -5.0 18.1
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Number of shares, weighted average
during the financial period
(thousands)* 58 869 44 549 54 095
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Earnings per share (EUR/share)* -0.12 -0.14 0.50
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Personnel at the end of the period 3 066 3 083 3 224
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Personnel on average in the period 3 057 3 095 3 209
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* The amount of shares 2016 has been adjusted with the effects of the bonus
issue ('share split') carried out 04/2016.
** Rolling 12 months adjusted EBITDA
MARKET DEVELOPMENT
Despite the improvement in consumer confidence and other positive signals the
market challenges continued in the beginning of 2017. The total sales of the
Finnish Grocery Trade Association's FTGA (www.pty.fi) member department stores
and hypermarket chains decreased by -3.7% during the January-March 2017 period.
The non-grocery market, the market closest comparable to Tokmanni, decreased by
-9.0% during the same period.
OPERATIONAL DEVELOPMENT
Store network development
Based on efficient roll-out and short ramp up, opening new stores is one of the
drivers for Tokmanni's revenue and earnings growth. At the end of the first
quarter, Tokmanni had 163 stores across Finland and has identified several
additional locations suitable for new stores across Finland.
During the first quarter 2017, Tokmanni continued to develop its store network
and opened a new store in Närpiö and the Kotka store was relocated. As a
consequence of department store chain Anttila's bankruptcy, Tokmanni announced
in the autumn of 2016 its interest in 14 stores released by Anttila. To date,
Tokmanni has signed in total eight agreements for Anttila's store space as
Tokmanni signed four new agreements for store space released by Anttila in the
first quarter 2017. Negotiations for a few additional stores continue.
During 2017, Tokmanni will open at least 12 net new stores and 2 relocated
stores and its selling space will increase by at least 26,000 square meters. The
company's target is to grow the store network to approximately 200 stores and to
open on average approximately five new or relocated stores per year. According
to Tokmanni's definition a store is considered a new or relocated store in its
opening year and in the following calendar year. On average a new store is
profitable in approximately 12 months and reaches maturity in approximately 24
months.
FIRST QUARTER FINANCIAL DEVELOPMENT
Seasonality
Tokmanni's business is subject to seasonality, which has a significant effect on
Tokmanni's revenue, profitability and cash flows. Generally, revenue and
profitability and cash flows are lowest in the first quarter and highest in the
fourth quarter due to Christmas sales.
Revenue and profitability impacted by timing of Easter, 2016 leap day and mild
winter
Tokmanni's revenue for the first quarter 2017 decreased to EUR 156.6 million
(158.3), -1.1%. Like-for-Like decreased by -3.8%, which was primarily due to the
timing of Easter and one extra selling day, the leap day in 2016, and to the
mild winter weather conditions. According to Tokmanni's calculations, the
calendar effect on like-for-like revenue was more than -2% and the weather
impact was more than -1%. The Finnish weather conditions have varied
considerably during the past years and especially winters have been milder than
usual. In order to mitigate the fluctuations caused by weather conditions
Tokmanni continues to develop its assortment to be less weather dependent.
The number of baskets increased by 3.9% to 9.8 million (9.4), which shows that
Tokmanni's marketing actions are working. At the same time, however, the average
basket size decreased impacting Like-for-Like revenue. The average basket size
was significantly impacted by weak demand for winter season product as well as
shelf availability issues following the implementation of a new assortment
management tool. The problems related to the tool are under control and all
shelf availability issues will be solved during the second quarter, after which
the tool will improve the efficiency of our assortment management and thereby
have a positive effect on our sales.
The first quarter 2017 gross profit amounted to EUR 48.7 million (51.7).
Adjusted gross profit totaled EUR 49.2 million (52.5), 31.4% (33.1%) of revenue.
The unfavorable development of the gross margin was mainly attributable to
aggressive campaigning especially in groceries and tecnochemicals, through which
good customer flows were secured. The products in question are mainly branded
products. Tokmanni has taken actions to bring gross margin back on its growth
path by, among others, focusing its campaigning even more efficiently and
developing its campaign product offering. Tokmanni has also in its sourcing
focused even further on seasons and related private label products, and
continues to develop its assortment to offer interesting products and lots
between seasons continuously.
First quarter operating costs totaled EUR 53.1 million (51.4). Adjusted
operating costs totaled EUR 51.6 million (51.0). The increase in costs was
primarily attributable to new stores opened in 2016 and 2017. The company
continues its tight cost control in order to reach its profitability target.
First quarter 2017 EBITDA totaled EUR -3.6 million (1.1.). First quarter
adjusted EBITDA amounted to EUR -1.5 million (2.2). First quarter operating
profit (EBIT) totaled EUR -7.3 million (-2.7). Adjusted EBIT totaled EUR -5.2
million (-1.7).
First quarter net financial items totaled EUR -1.3 million (-5.2).
Taxes amounted to EUR +1.7 million (+1.7). The net result for the period
amounted to EUR -6.9 million (-6.2). Earnings per share were -0.12 euros (-
0.14).
Balance sheet, financing and cash flow
At the end of March 2017, Tokmanni had interest bearing debt totaling EUR 172.6
million (300.3). Net debt/adjusted EBITDA was 2.6 (3.0) at the end of March. The
weakening from the previous quarter is due to the seasonality of the operations.
Tokmanni's first quarter 2017 cash flow from operating activities totaled EUR
-37.9 million (-15.3). At the end of March 2017, cash and cash equivalents
amounted to EUR 17.2 million (31.5).
Capital expenditure
Capital expenditure for the period January-March 2017 totaled EUR 2.3 million
(1.4), which includes EUR 0.2 million of unfinished construction work relating
to the Närpiö store, and which by nature is not capital expenditure but
temporary financing. The store property will be sold to the real estate investor
in the second quarter and the tied-up cash flow will be released. In the first
quarter, Tokmanni sold its Kouvola store property and a sales loss of EUR 1.2
million has been adjusted from the first quarter EBITDA. The buyer is building a
new store property which Tokmanni will rent and move into in the autumn of
2017. Capital expenditure for 2017 is expected to be higher than previous years,
due to the high selling space increase. Tokmanni will increase its selling space
by at least approximately 26,000 square meters. Opening a middle sized new store
requires approximately EUR 0.5 million in capital expenditure.
RISKS AND BUSINESS UNCERTAINTIES
Tokmanni's risks and uncertainties have been discussed in detail in the 2016
financial statements bulletin and in the 2016 Report by the Board of Directors.
No major changes to these risks have occurred during the quarter.
MARKET OUTLOOK
The Finnish Finance Ministry predicts that GDP will grow by 0.9% in 2017 and
1.0% in 2018, but that the growth of private consumption will temporarily
slowdown in 2017 as among others a result of accelerating inflation, wage
development due to the Competitive Pact (KiKy) as well as annual working time
changes. Tokmanni expects the Finnish retail market to grow slightly, but tough
competition to continue especially in the grocery market. At the same time
specialty stores and online stores will continue to strengthen their position.
TOKMANNI'S SHORT TERM OUTLOOK 2017 UNCHANGED
Tokmanni's expects good revenue growth for 2017 based on the revenue from new
stores opened in 2016 and 2017 and low single digit Like-for Like revenue
growth. Group profitability (adjusted EBITDA%) is expected to improve from the
previous year.
IR CALENDAR
Tokmanni publishes shorter business reviews for the first and third quarters,
and a comprehensive interim report covering the period January-June 2017.
Release dates are:
January-June Half Year Financial review, August 9th 2017
January-September 2017 Business review, October 26th 2017
Helsinki, 25.4.2017
Tokmanni Group Corporation
Board of Directors
For further information:
Heikki Väänänen, CEO: +358 20 728 6044 heikki.vaananen@tokmanni.fi
Sixten Hjort, CFO: +358 20 728 6043 sixten.hjort@tokmanni.fi
Joséphine Mickwitz, IR: +358 20 728 6535 josephine.mickwitz@tokmanni.fi
RESULT PRESENTATION
Tokmanni's CEO Heikki Väänänen and CFO Sixten Hjort will present the review to
analysts, investors and media representatives on the publication day in Finnish
at 10.00 am EEST (9.00 CET) and in English at 11.15 am EEST (10.15 CET).
The live webcasts can be accessed via Tokmanni's website at ir.tokmanni.fi or
through the link http://www.goodmood.fi/webcaster/accounts/tokmanni/live.
The participants can also join a telephone conference that will be arranged in
conjunction with the live webcasts. The participants are asked to dial in 5-10
minutes prior to starting time using the Participant Phone Number and
Participant Passcodes below:
(0)9 7479 0360 (Finnish callers)
+44 (0)330 336 9401 (UK callers)
+1 719-325-2340 (US callers)
Participant code: 837275
On-demand versions of both webcasts will be available at ir.tokmanni.fi later
during the same day.
Adjustments affecting comparability
Tokmanni has used the non-IFRS measure EBITDA and made adjustments to improve
comparability and give a better view of Tokmanni's operational performance.
EBITDA represents operating profit before depreciation and amortization.
Adjusted EBITDA represents EBITDA adjusted to exclude items that Tokmanni's
management considers to be exceptional and non-trading items, including changes
in the fair value of electricity and currency derivatives, which are adjusted
for by Tokmanni as they are unrealized gains or losses related to Tokmanni's
open cash flow hedge positions, and hence not related to Tokmanni's operational
performance during the periods under review. Tokmanni's management uses adjusted
EBITDA and other measures mentioned below as key performance indicators to
assess Tokmanni's underlying operational performance.
Adjustments affecting comparability
MEUR 1-3/2017 1-3/2016 1-12/2016
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Gross profit 48.7 51.7 268.4
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Changes in fair value of currency derivatives 0.6 0.7 -0.5
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Adjusted Gross Profit 49.2 52.5 267.9
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Operating expenses -53.1 -51.4 -207.4
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Changes in fair value of electricity derivatives 0.3 0.3 -1.1
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Loss on real estate sales 1.2 - -
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Adjusted operating expenses -51.6 -51.0 -208.5
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EBITDA -3.6 1.1 64.3
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Operating profit (EBIT) -7.3 -2.7 49.2
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Changes in fair value of currency derivatives 0.6 0.7 -0.5
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Changes in fair value of electricity derivatives 0.3 0.3 -1.1
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Loss on real estate sales 1.2 - -
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Adjusted EBITDA -1.5 2.2 62.8
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Adjusted operating profit (adj. EBIT) -5.2 -1.7 47.7
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Tokmanni in brief
Tokmanni is the largest general discount retailer in Finland measured by number
of stores and revenue. In 2016, Tokmanni's revenue was EUR 776 million and on
average it had approximately 3,200 employees. Tokmanni is the only nationwide
general discount retailer in Finland, with 162 stores across Finland as at 31
December 2016.
Distribution:
Nasdaq Helsinki
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