oriflame holding ag · oriflame holding ag first quarter 2019 investor presentation magnus...
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Oriflame Holding AGFIRST QUARTER 2019
INVESTOR PRESENTATION
Magnus Brännström, CEO
Gabriel Bennet, CFO
Nathalie Redmo, Sr. Manager IR
MAY 9, 09.30 CET
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Important information concerning IFRS
• Oriflame has implemented IFRS 15 Revenue from Contracts with Customers from 1st January 2018. Early adoption of IFRS 16 Leases has been carried out to allow all changes to be implemented at the same time.
• Unless otherwise stated, comparisons and comments on the numbers are now prepared according to the implemented IFRS 15 and IFRS 16.
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FIRST QUARTERHIGHLIGHTS
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Q1 highlights
• Sales €309.2m (€330.8m) -7% in €, -6% in lc*
− Positive development in Latin America, Africa, Europe and CIS
− Sales decline in Asia & Turkey
− Stable profitability despite weaker sales and changed geographical mix
− Q2 update: -4% QTD and -5% YTD lc sales
• Operating margin 10.5% (10.5%)
− Currency impact -30 bps
− Net profit €23.0m (€21.0m)
• Strong net financial position
− Net debt at hedged values/EBITDA 0.7 (0.4)
− Previous definition: Net debt at hedged values/EBITDA 0.3 (0.0)
*Sales comparables were negatively impacted by 2 percentage points due to a one-off effect
caused by the implementation of IFRS 15 (deferred sales in prior year comparable) in 2018.
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Operational highlights
• Price/mix -5%
− Unit decline -1%
• Registered actives -5%
− Lc productivity -1%
• The new Ecollagen Wrinkle Power introduced
• Several launches in the Colour Cosmetics and Fragrance category
• Continued strong online development
− Total traffic to sites and apps exceeded 1 million daily sessions
• Cetes Cosmetics agreed to enter a collaboration with Pharma & Beauty Group for parts of its business
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Regions
Sales
Registered actives
Operating profit
12%
(10%)
27%
(24%)
26%
(26%)
35%
(40%)
10%
(9%)
26%
(25%)
32%
(28%)
32%
(38%)
7%
(9%)
28%
(19%)
19%
(18%)
46%
(54%)
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Latin America
• Sales force and productivity
− Registered actives +8%
− Lc productivity -3%
− € productivity +1%
• Solid performance in Mexico
− Successful recruitment campaigns
− Higher activity and retention
• Positive development in Peru and Ecuador, improvements in Chile
• Operating margin -670 bps
− Costs related to recruitment and activity campaigns
− Higher administrative costs
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Q1’19 Q1’18 ChangeLTM, April’18
- March’19YE’18
Sales, €m 37.3 34.0 10% 154.6 151.3
Lc sales - - 5% - -
Operating profit, €m 3.2 5.2 (39%) 16.6 18.6
Operating margin 8.5% 15.2% - 10.7% 12.3%
Registered actives ‘000
286 264 8% 286 306
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Sales LTM excluding IFRS 15 & 16Net Sales LTM with IFRS 15 & 16Operating Margin LTM with IFRS 15 & 16Operating Margin LTM excluding IFRS 15 & 16
€m
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Europe & Africa
• Sales force and productivity
− Registered actives -2%
− Lc productivity +3%
− € productivity +3%
• Stable development in Central Europe
− Strongest performance in Poland and Greece
• Improved development in Western Europe
− Solid online leadership development in the UK and Holland
• Africa driven by strong productivity levels in Egypt and Nigeria
• Operating margin +320 bps
− Sales leverage
− Savings of administrative costs
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Q1’19 Q1’18 ChangeLTM, April’18
- March’19YE’18
Sales, €m 80.6 79.3 2% 323.5 322.2
Lc sales - - 1% - -
Operating profit, €m 13.0 10.3 27% 51.5 48.8
Operating margin 16.1% 12.9% - 15.9% 15.1%
Registered actives ‘000
737 750 (2%) 737 791
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Sales LTM excluding IFRS 15 & 16Net Sales LTM with IFRS 15 & 16Operating Margin LTM with IFRS 15 & 16Operating Margin LTM excluding IFRS 15 & 16
€m
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CIS
• Sales force and productivity
− Registered actives +9%
− Lc productivity -9%
− € productivity -12%
• Stable development in Russia
− High activity following successful recruitment campaigns
• Healthy growth in Ukraine and Kazakhstan
• Reopening of Uzbekistan during 2019
• Operating margin -100 bps
− Negative exchange rates
− Ongoing recruitment driving initiatives
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Q1’19 Q1’18 ChangeLTM, April’18
- March’19YE’18
Sales, €m 79.0 82.2 (4%) 299.8 303.0
Lc sales - - 0% - -
Operating profit, €m 8.9 10.1 (12%) 34.5 35.7
Operating margin 11.3% 12.3% - 11.5% 11.8%
Registered actives ‘000
912 836 9% 912 966
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Sales LTM excluding IFRS 15 & 16
Net Sales LTM with IFRS 15 & 16
Operating Margin LTM with IFRS 15 & 16
Operating Margin LTM excluding IFRS 15 & 16
€m
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Asia & Turkey
• Sales force and productivity
− Registered actives -20%
− Lc productivity +4%
− € productivity +3%
• Challenging market conditions in Turkey and Indonesia
• China unfavourably impacted by governmental initiatives
• Vietnam negatively affected by the new direct selling legislation
• Healthy growth in India
• Operating margin -250 bps
− Negative currency movements
− Unfavourable geographical and product mix
− Favourable timing of selling and marketing expenses
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Q1’19 Q1’18 ChangeLTM, April’18
- March’19YE’18
Sales, €m 106.3 128.4 (17%) 462.5 484.6
Lc sales - - (16%) - -
Operating profit, €m 21.7 29.4 (26%) 101.6 109.3
Operating margin 20.4% 22.9% - 22.0% 22.6%
Registered actives ‘000
951 1,184 (20%) 951 1,042
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Sales LTM excluding IFRS 15 & 16
Net Sales LTM with IFRS 15 & 16
Operating Margin LTM with IFRS 15 & 16
Operating Margin LTM excluding IFRS 15 & 16
€m
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FINANCIALS
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Q1 income statement
• Sales mix
− Unit sales -1%
− Price/mix -5%
• Gross margin 68.0% (69.7%)
− Negative currency movements
− Negative price and geographical mix effect
• Operating margin +/-0 bps
− Negative currency impact -30 bps
− Lower sales comparable
− Higher distribution and infrastructure costs
− Lower administrative costs
− Lower selling and marketing expenses*
• Net profit €23.0m (€21.0m)
− Diluted EPS €0.40 (€0.36)
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Q1’19 Q1’18 ChangeLTM, April’18 -
March’19YE’18
Sales, €m 309.2 330.8 (7%) 1,257.2 1,278.8
Lc sales - - (6%) - -
Operating profit, €m 32.5 34.8 (7%) 150.8 153.1
Operating margin 10.5% 10.5% - 12.0% 12.0%
Registered actives ‘000 2,886 3,034 (5%) 2,886 3,105
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
200
400
600
800
1000
1200
1400
1600
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Sales LTM excluding IFRS 15 & 16Net Sales LTM with IFRS 15 & 16Operating Margin LTM with IFRS 15 & 16Operating Margin LTM excluding IFRS 15 & 16
€m
*Prior year had a negative one-off effect as a result of the new accounting rules. The operating margin impact
from this was fully offset by the one-off effect on sales caused by the implementation of IFRS 15 in 2018.
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Group currency impact on sales since 2010
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Price/mix impact on sales
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Average
9%3%
5%
9%
5%4%
7% 7%
9% 9%
14% 14%15%
16%
12%11%
12%11%
7%
9%10%
14%
10%
7%
4%
(5%)
-10%
-5%
0%
5%
10%
15%
20%
Q1 '1
3
Q2 '1
3
Q3 '1
3
Q4 '1
3
Q1 '1
4
Q2 '1
4
Q3 '1
4
Q4 '1
4
Q1 '1
5
Q2 '1
5
Q3 '1
5
Q4 '1
5
Q1 '1
6
Q2 '1
6
Q3 '1
6
Q4 '1
6
Q1 '1
7
Q2 '1
7
Q3 '1
7
Q4 '1
7
Q1 '1
8
Q2 '1
8
Q3 '1
8
Q4 '1
8
Q1 '1
9
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Q1 sales and operating margin analysis
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Sales vs. PY
-7
-6
-5
-4
-3
-2
-1
0
Units Price / mix
(1%)
LC Sales (6%)
€ Sales (7%)
OP Margin vs. PY
(5%)
FX0
1
2
3
4
5
6
7
8
9
10
11
Dis
trib
. &
Infr
a.
Selli
ng &
Mark
eting
OM
Q1 2
018
Price / m
ix
Pro
duct cost
FX
(0.3%)
OM
Q1 2
019
Adm
in.
10.5%0.5%10.5%
(1.7%)
0.3%
1.7%
(0.5%)(1%)
The deviation analysis is impacted by one-off comparable effects due to the implementation of new accounting rules.
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Cash flow
Q1 operating cash flow €20.5m (€24.9m)
• Net profit before tax €+1.3m
• Non-cash items in net profit before tax €-2.6m
• Impact from changes in working capital and provisions €-8.6m
− Inventories €-4.6m
− Receivables, prepaid exp., asset derivatives €-15.4m
− Payables, accrued exp., liability derivatives €+11.2m
− Provisions €+0.2m
• Interest, charges, taxes €+5.5m
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Q1 19 Q1’18
LTM,
April’18 -
March’19
YE ’18
Net profit before income
tax, €m31.6 30.3 136.2 134.9
Op. profit before changes
in wc, €m40.0 41.2 177.5 178.8
Change in working cap.
and provisions, €m(5.5) 3.1 (7.8) 0.8
Operating CF, €m 20.5 24.9 119.5 123.9
CF Investing Activities,
€m(3.0) (3.1) (11.7) (11.8)
0
25
50
75
100
125
150
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Operating cash flow LTM Capex LTM€m
0
50
100
150
200
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Total inventory€m
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Financial position
• Net debt at hedged values €136.2m (€81.6m)
− Prev definition: Net debt at hedged values €54.9 (-€5.4m net cash)
• Net debt at hedged values/ EBITDA (LTM) 0.7 (0.4)
− Prev definition: Net debt at hedged values/ EBITDA (LTM) 0.3 (0.0)
• Net debt €163.1m (€103.3m)
• Net debt/EBITDA (LTM) 0.8 (0.5)
• Interest cover (Q1): 7.7 (8.5)
• Interest cover (LTM): 8.9 (11.2)
Covenant disclosure
• Consolidated Net Debt to Consolidated EBITDA: 0.4 (covenant at ≤ 3.0
times)
• Consolidated EBITDA to Consolidated Finance costs: 18.1 (covenant at
≥ 5.0 times / 4.0 times for RCF)
• Consolidated Net Worth: €152.1m (covenant at ≥ €120m / N/A for RCF
or in 2017 and 2018 Euro denominated private placement notes )
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* Adjusted for fair value movements of the USD private placement notes
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Interest cover (LTM)
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
-20
0
20
40
60
80
100
120
140
160
180
200
220
Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Debt at hedged values* with Simulation IFRS 15 & 16
Net Debt at hedged values* excluding IFRS 15 & 16
Net debt at hedged values* / EBITDA LTM excluding IFRS 15 & 16
Net Debt at hedged values* / EBITDA LTM with Simulation of IFRS 15 &16
€m
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* Adjusted for fair value movements of the USD private placement notes
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
-20
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Debt at hedged values* excluding IFRS 15 & 16 Net Debt at hedged values* with IFRS 15 & 16 Net Debt at hedged values* / EBITDA LTM excluding IFRS 15 & 16
Net Debt / EBITDA Target range excluding IFRS 15 & 16 Net Debt / EBITDA Target range excluding IFRS 15 & 16 Net Debt at hedged values*/ EBITDA with IFRS 15 & 16
Net Debt / EBITDA Target range with IFRS 15 & 16 Net Debt / EBITDA Target range with IFRS 15 & 16
€m
0%
5%
10%
15%
20%
0
200
400
600
800
1000
1200
1400
Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Net Sales LTM excluding IFRS 15 & 16 Net Sales LTM with IFRS 15 & 16 Op. Margin excluding IFRS 15 & 16 Op. Margin LTM with IFRS 15 & 16€m
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CONCLUSIONSAND GOING FORWARD
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Conclusions and going forward
• Q1 lc sales development -6%:
− Positive development in Latin America, Africa, Europe and CIS
− Sales decline in Asia & Turkey
− Stable profitability despite weaker sales and changed geographical mix
− Q2 update: -4% QTD and -5% YTD lc sales
• Confidence in long-term strategy and in ability to return to profitable growth:
− Solid financial position
− Growth in the vast majority of markets
− Responsible steps to drive sales and healthy margins
− Focus on strategic implementations
− Improved earnings opportunity
− Skin Care and Wellness daily routines
− Increased digitalisation
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CAUTIONARY STATEMENT
Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly
commented upon, the actual outcome could be materially affected by other factors like, for example, the effect of economic conditions,
exchange-rate and interest-rate movements, political risks, impact of competing products and their pricing, product development,
commercialisation and supply disturbances.
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