2017-10-25 07:30:54 CEST
2017-10-25 07:30:54 CEST
REGULATED INFORMATION
Tokmanni Group Oyj - Interim report (Q1 and Q3)
Tokmanni Group:Third quarter revenue grew 4.5%, Like-for-Like growth 0.8%
TOKMANNI GROUP THIRD QUARTER: REVENUE GREW 4.5%, LIKE-FOR-LIKE GROWTH 0.8%
Numbers in brackets refer to the corresponding period previous year if nothing
else is mentioned.
THIRD QUARTER HIGHLIGHTS
* Revenue grew 4.5% to EUR 195.4 million (187.0)
* Like-for-Like revenue grew 0.8%, clearly above the market
* 1 new store opened during the quarter
* Comparable gross profit totaled EUR 66.0 million (64.8), 33.8% of revenue
(34.7%)
* Comparable EBITDA totaled EUR 16.2 million (18.1), 8.3% of revenue (9.7%)
* Comparable EBIT totaled EUR 12.7 million (14.4), 6.5% of revenue (7.7%)
* Cash flow from operating activities totaled EUR -6.4 million (6.7)
* Earnings per Share totaled 0.16 euros (0.18)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-SEPTEMBER 2017
* Revenue grew 1.9% to EUR 547.9 million (537.6)
* Like-for-Like revenue decreased -1.5%
* 7 new and 2 relocated stores opened during the review period
* Comparable gross profit totaled EUR 182.0 million (184.4), 33.2% of revenue
(34.3%)
* Comparable EBITDA totaled EUR 26.3 million (35.5), 4.8% of revenue (6.6%)
* Comparable EBIT totaled EUR 15.6 million (24.1), 2.8% of revenue (4.5%)
* Cash flow from operating activities totaled EUR -25.6 million (15.0)
* Earnings per share totaled 0.12 euros (0.16)
TOKMANNI'S SHORT TERM OUTLOOK 2017 UNCHANGED
Tokmanni expects revenue growth for 2017 based on the revenue from new stores
opened in 2016 and 2017. Revenue of like-for-like stores is expected to remain
at the level of the previous year. Group profitability (comparable EBITDA%) is
expected to decrease from last year's level.
TOKMANNI'S INTERIM CEO HARRI SIVULA: RIGHT DIRECTION IN CHALLENGING MARKET
"Tokmanni's third quarter revenue developed well. Our revenue grew 4.5% and our
Like-for-Like sales returned to growth after two challenging quarters. This was
a direct result of our long-term development work and actions started in the
spring on more focused and efficient marketing and campaigning and the
determined development of our assortment and seasonal products. In the same
period the market developed clearly below Tokmanni's expectations. The non-
grocery market decreased by almost -7% on the previous year, when Anttila's
estimated sales is adjusted from the 2016 comparable numbers. Despite the
recovery of the Finnish economy the non-grocery market has not yet returned to
growth.
We can't be very satisfied with the development of Tokmanni's profitability for
2017 so far. In the third quarter, gross margin continued to be affected by the
sales mix and the slightly lower direct import and private label share of sales
compared to the corresponding period 2016. In the fourth quarter, the private
label and imported product share of sales normally increases and at the same
time we continue to develop our sourcing and our strict cost control continues
in order to improve our profitability.
The year 2017 has been an active year regarding new store openings and so far we
have opened seven new and two relocated stores around Finland. As a latest
addition we opened a store in Helsinki in the Citycenter shopping center at the
end of August. The store has been very well received and the number of customers
has been high. We will still open six additional new stores this year and in
total we will increase our selling space by approximately 27,000 square meters
net in 2017. The year 2017 has been exceptionally active in new store openings
due to the opportunity created by Anttila to accelerate the network expansion.
This has required much more employee input than planned and at the same time the
large number of new stores has led to a temporary increase in the share of
operating expenses. Next year the expansion pace will be at a more normalized
level.
Tokmanni's, and the whole industry's, busiest season has already begun and also
this Christmas season we will offer our customers interesting products at
competitive prices. At the same time our aim in our sourcing as well as sales
and marketing planning is to create good prerequisites for the full year 2018
starting right from the beginning of the year. We will also continue our
development efforts and measures to achieve our long-term goal."
Key figures
7-9/2017 7-9/2016 Change% 1-9/2017 1-9/2016 Change% 1-12/2016
--------------------------------------------------------------------------------
Revenue, MEUR 195.4 187.0 4.5% 547.9 537.6 1.9% 775.8
--------------------------------------------------------------------------------
Like-for-like
revenue
development, % 0.8 -1.5 -0.1
--------------------------------------------------------------------------------
Number of baskets,
M 11.6 11.1 4.1% 33.1 31.9 3.7% 44.7
--------------------------------------------------------------------------------
Gross profit, MEUR 66.2 64.7 2.2% 180.5 184.2 -2.0% 268.4
--------------------------------------------------------------------------------
Gross margin, % 33.9 34.6 32.9 34.3 34.6
--------------------------------------------------------------------------------
Comparable gross
profit, MEUR 66.0 64.8 1.8% 182.0 184.4 -1.3% 267.9
--------------------------------------------------------------------------------
Comparable gross
margin, % 33.8 34.7 33.2 34.3 34.5
--------------------------------------------------------------------------------
Operating expenses -50.4 -47.1 7.0% -159.3 -150.6 5.8% -207.4
--------------------------------------------------------------------------------
Comparable
operating expenses -50.7 -47.6 6.6% -158.3 -151.3 4.6% -208.5
--------------------------------------------------------------------------------
EBITDA, MEUR 16.7 18.4 -9.4% 23.8 36.0 -33.8% 64.3
--------------------------------------------------------------------------------
EBITDA, % 8.6 9.9 4.3 6.7 8.3
--------------------------------------------------------------------------------
Comparable EBITDA,
MEUR 16.2 18.1 -10.1% 26.3 35.5 -25.7% 62.8
--------------------------------------------------------------------------------
Comparable EBITDA,
% 8.3 9.7 4.8 6.6 8.1
--------------------------------------------------------------------------------
Operating profit
(EBIT), MEUR 13.1 14.8 -11.0% 13.1 24.6 -47.0% 49.2
--------------------------------------------------------------------------------
Operating profit
margin EBIT, % 6.7 7.9 2.4 4.6 6.3
--------------------------------------------------------------------------------
Comparable EBIT,
MEUR 12.7 14.4 -12.0% 15.6 24.1 -35.4% 47.7
--------------------------------------------------------------------------------
Comparable EBIT, % 6.5 7.7 2.8 4.5 6.1
--------------------------------------------------------------------------------
Net financial
items, MEUR -1.5 -1.5 -2.2% -4.2 -13.8 -69.3% -15.2
--------------------------------------------------------------------------------
Net capital
expenditure, MEUR 2.3 2.4 -3.6% 3.8 5.3 -28.6% 9.8
--------------------------------------------------------------------------------
Net debt /
comparable EBITDA
** 3.4 2.5 3.4 2.5 1.8
--------------------------------------------------------------------------------
Net cash from
operating
activities, MEUR -6.4 6.7 -25.6 15.0 62.5
--------------------------------------------------------------------------------
Return on capital
employed, % 3.9 4.4 3.9 7.3 14.5
--------------------------------------------------------------------------------
Return on equity,
% 6.4 7.9 4.8 6.4 18.1
--------------------------------------------------------------------------------
Number of shares,
weighted average
during the
financial period
(thousands)* 58 869 58 869 58 869 52 504 54 095
--------------------------------------------------------------------------------
Earnings per share
(EUR/share)* 0.16 0.18 0.12 0.16 0.50
--------------------------------------------------------------------------------
Personnel at the
end of the period 3 212 3 133 3 212 3 133 3 224
--------------------------------------------------------------------------------
Personnel on
average in the
period 3 301 3 254 3 223 3 212 3 209
--------------------------------------------------------------------------------
* 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
According to the Finnish Grocery Trade Association's FTGA (www.pty.fi) the non-
grocery market, the market closest comparable to Tokmanni, decreased by -11.0%
in the third quarter 2017 and -9.1% in January-September 2017 despite improved
consumer confidence and other positive signals. The total sales of department
stores and hypermarket chains decreased according to the FTGA statistics by
-2.0% in the third quarter 2017 and -1.7% in the January-September period. FTGA
member department stores and hypermarket chains are K-Citymarket, Prisma, Sokos,
Stockmann, Tokmanni and Minimani. In addition, Anttila is included in the
comparable numbers.
According to Tokmanni's estimate, the non-grocery market decreased -6.7% in the
third quarter and decreased 2.7% in the January-September 2017 period when
Anttila's estimated sales is adjusted from the 2016 comparable numbers. The
total sales of department stores and hypermarket chains decreased -0.3% in the
third quarter and grew 0.7% in January-September 2017 when Anttila's estimated
sales is adjusted from the 2016 comparable numbers.
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 third
quarter Tokmanni had 169 stores across Finland.
During the third quarter 2017, Tokmanni continued to develop its store network
and opened a new store in the Citycenter shopping center in Helsinki. Tokmanni
will open six new stores in the fourth quarter. In total Tokmanni will open net
13 new stores and 2 relocated stores in 2017 which will increase selling space
by approximately 27,000 square meters, well above its annual target. Tokmanni's
target is to increase its selling space by approximately 12,000 square meters
per year.
To date, Tokmanni has signed agreements for 2 new and 2 relocated stores in
2018. Based on these stores, Tokmanni's selling space will increase by
approximately 7,500 square meters. Tokmanni plans to reduce the store space of
some existing stores in order to improve the selling space efficiency. This may
have an impact on the net selling space increase.
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 full capacity in
approximately 24 months.
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.
Good revenue growth - right direction for Like-for-Like sales
Third quarter 2017 revenue grew 4.5% to EUR 195.4 million (187.0). The results
of Tokmanni's marketing efforts, development of the product assortment and the
store concept were seen in Like-or-Like sales which grew 0.8%. Demand was
particularly high for home, home decoration and garden products. We continued to
develop our assortment and seasonal offering and among others launched our new
Kotikulta lighting range. Kotikulta is Tokmanni's private label and the range
includes almost 130 decorative and Christmas lighting products and LED candles.
The demand for products related to home decoration clearly increased during the
quarter. The weak spring and delayed summer postponed garden product sales, but
during the third quarter sales accelerated. The increased competition from
online and specialty discounters could be seen in the clothing and tools product
categories.
Tokmanni's number of baskets grew by 4.1% to 11.6 million (11.1) in the third
quarter.
Revenue for the review period January-September 2017 grew 1.9% to EUR 547.9
million (537.6). Growth was based on revenue from new and relocated stores
opened in 2016 and 2017. Like-for-Like sales decreased by
-1.5% due to the challenges at the beginning of the year.
The sales mix and challenging first half of the year impacted profitability
Third quarter 2017 gross profit amounted to EUR 66.2 million (64.7), 33.9% of
revenue (34.6%). Comparable gross profit totaled EUR 66.0 million (64.8), which
corresponds to 33.8%:n of revenue (34.7%). The gross profit was primarily
impacted by the sales mix and the lower share of direct import and private label
sales compared to the previous year.
January-September 2017 gross profit totaled EUR 180.5 million (184.2), a gross
margin of 32.9% (34.3%). Comparable gross profit amounted to EUR 182.0 million
(184.4), a 33.2% gross margin (34.3%).
Third quarter 2017 operating expenses amounted to EUR 50.4 million (47.1). The
comparable operating expenses totaled EUR 50.7 million (47.6). January-September
2017 operating expenses totaled EUR 159.3 million (150.6). The comparable
operating expenses totaled EUR 158.3 million (151.3). The increase in operating
expenses was mainly due to the increased number of stores.
Third quarter 2017 EBITDA was EUR 16.7 million (18.4) and the EBITDA margin was
8.6% (9.9%). Third quarter comparable EBITDA amounted to EUR 16.2 million
(18.1), 8.3% of revenue (9.7%). January-September 2017 EBITDA was EUR 23.8
million (36.0), 4.3% of revenue (6.7%). The comparable EBITDA was EUR 26.3
million (35.5), 4.8% of revenue (6.6%).
Third quarter EBIT totaled EUR 13.1 million (14.8), corresponding to an 6.7%
EBIT margin (7.9%). Comparable EBIT amounted to EUR 12.7 million (14.4), 6.5% of
revenue (7.7%). January-September 2017 EBIT totaled EUR 13.1 million (24.6),
2.4% of revenue (4.6%). Comparable EBIT totaled EUR 15.6 million (24.1), 2.8% of
revenue (4.5%).
The third quarter 2017 net financial items amounted to EUR -1.5 million (-1.5).
January-September net financial items totaled EUR -4.2 million (-13.8). The
comparison number 2016 includes a one-off financial cost of EUR 4.4 million,
which relates to accrued, capitalized emission fees from previous loans, which
were released in conjunction with the refinancing.
The third quarter result before taxes totaled EUR 11.7 million (13.3). Taxes
totaled EUR -2.4 million (-2.7). The result for the quarter was EUR 9.3 million
(10.6). Earnings per share were 0.16 euros (0.18). The January-September result
before taxes amounted to EUR 8.8 million (10.8). Taxes amounted to EUR -1.8
million (-2.2). The result for the review period totaled EUR 7.0 million (8.6).
Earnings per share were 0.12 euros (0.16).
Balance sheet, financing and cash flow
At the end of September 2017, Tokmanni had interest bearing debt totaling EUR
187.5 million (196.1). Tokmanni's inventories totaled EUR 189.5 million (169.5).
The increase was due to the higher amount of stores in the network, lower than
expected sales in the spring as well as earlier than 2016 inventory build-up for
the Christmas season. Net debt/comparable EBITDA was 3.4 (2.5) at the end of
September. Third quarter cash flow from operating activities amounted to EUR
-6.4 million (6.7). January-September 2017 cash flow from operating activities
amounted to EUR -25.6 million (15.0). The negative cash flow was due to working
capital build-up. At the end of September 2017, cash and cash equivalents
amounted to EUR 5.1 million (41.5). At the end of September Tokmanni had more
than EUR 130 million unused credit and commercial paper limits.
Capital expenditure
Net capital expenditure for the period July-September 2017 totaled EUR 2.3
million (2.4). The January-September 2017 amounted to EUR 3.8 million (5.3). The
January-September number includes a repayment of EUR 2.9 million temporary
financing related to the construction of the Närpiö store, which was returned
when the store was completed. Gross 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 27,000 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. No major changes to these risks have occurred during the
quarter.
MARKET OUTLOOK
The retail market outlook has been described in detail in Tokmanni's January-
June 2017 Half year report. No major changes to the market outlook have occurred
although the non-grocery market development so far has been weaker than
expected.
TOKMANNI'S SHORT TERM OUTLOOK UNCHANGED
Tokmanni expects revenue growth for 2017 based on the revenue from new stores
opened in 2016 and 2017. Revenue of like-for-like stores is expected to remain
at the level of the previous year. Group profitability (comparable EBITDA%) is
expected to decrease from last year's level.
IR CALENDAR
Tokmanni will publish its financial information in 2018 as follows:
* February 9, 2018 - Financial Statements Review for 2017
* April 25, 2018 - Business Review for January-March 2018
* August 9, 2018 - Half Year Financial Review for January-June 2018
* October 24, 2018 - Business Review for January-September 2018
The 2017 Financial statements and sustainability report will be published during
week 8.
Tokmanni 's Annual General Meeting is planned to be held on 14 March 2018.
Tokmanni's Board of Directors will summon the meeting at a later date.
Helsinki, 24.10.2017
Tokmanni Group Corporation
Board of Directors
For further information, please contact:
Harri Sivula, interim CEO, Tel. +358 50 656 92, harri.sivula@tokmanni.fi
Markku Pirskanen, CFO, Tel. +358 20 728 7390, markku.pirskanen@tokmanni.fi
Joséphine Mickwitz, Head of IR and Communications, tel. +358 400 784 889,
josephine.mickwitz@tokmanni.fi
RESULT PRESENTATION
Tokmanni's interim CEO Harri Sivula and CFO Markku Pirskanen will present the
review to analysts, investors and media representatives on the publication day
in Finnish at 10.00 am EET (9.00 CET) and in English at 11.00 am EET (10.00
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:
(09) 7479 0360 (Finnish callers)
+44 (0)330 336 9401 (UK callers)
+1 719-325-2340 (US callers)
Passcode: 886122
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.
Comparable EBITDA represents EBITDA adjusted to exclude items that Tokmanni's
management considers to be exceptional and non-trading items, including the
2017 loss on real estate and 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 comparable EBITDA and other measures
mentioned below as a key performance indicators to assess Tokmanni's underlying
operational performance. As of the third quarter 2017, Tokmanni has adapted its
terminology to market practice by replacing the term "adjusted" with
"comparable".
Adjustments affecting comparability
MEUR 7-9/2017 7-9/2016 1-9/2017 1-9/2016 1-12/2016
--------------------------------------------------------------------------------
Gross profit 66.2 64.7 180.5 184.2 268.4
--------------------------------------------------------------------------------
Changes in fair value of currency
derivatives -0.2 0.1 1.5 0.2 -0.5
--------------------------------------------------------------------------------
Comparable Gross Profit 66.0 64.8 182.0 184.4 267.9
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Operating expenses -50.4 -47.1 -159.3 -150.6 -207.4
--------------------------------------------------------------------------------
Changes in fair value of
electricity derivatives -0.3 -0.5 -0.2 -0.7 -1.1
--------------------------------------------------------------------------------
Loss on real estate sales - - 1.2 - -
--------------------------------------------------------------------------------
Comparable operating expenses -50.7 -47.6 -158.3 -151.3 -208.5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EBITDA 16.7 18.4 23.8 36.0 64.3
--------------------------------------------------------------------------------
Operating profit (EBIT) 13.1 14.8 13.1 24.6 49.2
--------------------------------------------------------------------------------
Changes in fair value of currency
derivatives -0.2 0.1 1.5 0.2 -0.5
--------------------------------------------------------------------------------
Changes in fair value of
electricity derivatives -0.3 -0.5 -0.2 -0.7 -1.1
--------------------------------------------------------------------------------
Loss on real estate sales - - 1.2 - -
--------------------------------------------------------------------------------
Comparable EBITDA 16.2 18.1 26.3 35.5 62.8
--------------------------------------------------------------------------------
Comparable operating profit (adj.
EBIT) 12.7 14.4 15.6 24.1 47.7
--------------------------------------------------------------------------------
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:
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