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SECOND-QUARTER & HALF-YEAR 2016 RESULTS (unaudited)
ORGANIC SALES SLIGHTLY UP IN Q2, SUPPORTED BY STRONG CALENDAR EFFECT
IMPROVED GROSS MARGIN AND ADJUSTED EBITA MARGIN IN Q2
FULL-YEAR FINANCIAL TARGETS CONFIRMED
PARIS, July 29, 2016 (GLOBE NEWSWIRE) --
SALES OF €3.350bn IN Q2
IMPROVED GROSS MARGIN IN Q2, UP 26bps YEAR-ON-YEAR
ADJUSTED EBITA MARGIN OF 4.5% IN Q2, UP 5bps YEAR-ON-YEAR
FULL-YEAR FINANCIAL TARGETS CONFIRMED
|Key figures1||Q2 2016||YoY change||H1 2016||YoY change|
|On a reported basis||-2.2%||-2.0%|
|On a constant and actual-day basis||+0.1%||-0.9%|
|On a constant and same-day basis||-2.3%||-1.9%|
|As a percentage of sales||4.5%||4.2%|
|Change in bps as a % of sales||+5bps||-8bps|
|Net income from continuing op.||€57.0m||+184.4%||€95.8m||+121.8%|
|Recurring net income||€77.3m||-7.2%||€134.0m||+0.5%|
|FCF before interest and tax from continuing op.||€188.1m||vs. €144.2m||€(6.9)m||vs. €2.4m|
|Net debt at end of period||€2,380.2m||-6.9%||€2,380.2m||-6.9%|
1 See definition in the Glossary section of this document
Patrick BERARD, Chief Executive Officer, said:
"Rexel's second quarter performance showed a positive signal with a slight increase in profitability compared to last year, despite an environment that remained quite difficult. This improvement was mainly due to an increase in gross margin and the continuing effects of our cost reductions in North America.
The second half should benefit from positive elements, such as the construction recovery in France and a gradual reduction in the negative impact from oil and gas activity, mainly in North America. Nevertheless, uncertainty surrounding Brexit and industrial activity levels in North America and China lead us to remain cautious.
In this context and given the first-half performance, we confirm our financial targets for the full-year 2016, as announced in February.
In my new role as CEO of Rexel, I will focus in the second part of the year, with my team, on delivering our 2016 targets, along with reviewing our action plans and updating our 2020 ambitions. I will present the outcome of this review next February, along with our 2016 annual results."
FINANCIAL REVIEW FOR THE PERIOD ENDED JUNE 30, 2016
In Q2, sales were slightly up on an organic basis (+0.1%), boosted by a strong calendar effect of 2.4% offsetting the 2.3% decline on a constant and same-day basis (including a 1.3% negative copper effect)
In H1, sales were down 0.9% on an organic basis, favored by a calendar effect of 1.0%, and down 1.9% on a constant and same-day basis (including a 1.2% negative copper effect)
In Q2, Rexel posted sales of €3,349.9 million, down 2.2% on a reported basis and slightly up (+0.1%) on an organic basis. On a constant and same-day basis, sales were down 2.3%, including a 1.3% negative impact due to the change in copper-based cable prices.
The 2.2% drop in sales on a reported basis included:
In H1, Rexel posted sales of €6,510.5 million, down 2.0% on a reported basis and down 0.9% on an organic basis. On a constant and same-day basis, sales were down 1.9%, including a 1.2% negative impact due to the change in copper-based cable prices.
The 2.0% drop in sales on a reported basis included:
Europe (56% of Group sales): -0.9% in Q2 and -0.3% in H1 on a constant and same-day basis
In the second quarter, sales in Europe increased by 1.5% on a reported basis including a positive net scope effect of €5.0m and a negative currency effect of €34.7m (mainly due to the depreciation of the British pound against the Euro). On a constant and same-day basis, sales were down by 0.9% and grew by 0.7% excluding the negative impact of copper.
North America (34% of Group sales): -4.2% in Q2 and -4.3% in H1 on a constant and same-day basis
In the second quarter, sales in North America were down 6.3% on a reported basis including a negative currency effect of €37.9m (mainly due to the depreciation of the US and Canadian dollars against the Euro). On a constant and same-day basis, sales were down 4.2%. The year-on-year drop in sales to the Oil & Gas industry continued to impact sales since the beginning of the year, but it is gradually improving (minus 21% year-on-year).
Excluding these unfavorable effects, sales were up 1.4% in the quarter, mainly reflecting growth in the non-residential end-market.
Excluding these unfavorable effects, sales were down 4.0% in the quarter, reflecting a weak macro-economic environment.
Asia-Pacific (10% of Group sales): -3.2% in Q2 and -1.6% in H1 on a constant and same-day basis
In the second quarter, sales in Asia-Pacific were down 6.1% on a reported basis, including a negative effect of €22.3m from currencies due to the depreciation of the Chinese Yuan against the Euro. On a constant and same-day basis, sales were down 3.2%, reflecting contrasting performance between Pacific and Asia.
Improved adjusted EBITA margin in Q2 (up 5bps at 4.5% of sales) thanks to increased gross margin (up 26bps at 24.2% of sales) and reduced opex in North America (down 15bps at 17.7% of sales)
In Q2, gross margin stood at 24.2% of sales, up 26bps year-on-year. It improved in Europe (up 17bps at 26.5% of sales) and Asia-Pacific (up 92bps at 18.5% of sales), while it was stable in North America (at 22.2% of sales).
Opex (incl. depreciation) stood at 19.7% of sales, up 21bps year-on-year. This reflected contrasting situations between Europe (up 22bps at 21.1% of sales) and Asia-Pacific (up 137bps at 17.1% of sales), on the one hand, and North America (down 15bps at 17.7% of sales), on the other hand. In Europe, opex mainly increased as a result of increased investment and depreciation, while in Asia-Pacific, opex increased due to Asia. In North America, opex were reduced by €10.2m, mainly reflecting the continued benefits from actions taken in recent quarters.
As a result, adjusted EBITA in the quarter stood at €150.4m (vs. €148.7m in Q2 2015), up 1.1% and 5bps year-on-year, at 4.5% of sales.
In H1, gross margin stood at 24.5% of sales, up 10bps year-on-year. It improved in Europe (up 7bps at 26.9% of sales) and Asia-Pacific (up 15bps at 18.3% of sales), while it was slightly down in North America (down 6bps at 22.2% of sales).
Opex (incl. depreciation) stood at 20.3% of sales, up 17bps year-on-year. This reflected contrasting situations between Europe (up 22bps at 21.4% of sales) and Asia-Pacific (up 92bps at 17.1% of sales), on the one hand, and North America (down 8bps at 18.6% of sales), on the other hand.
As a result, adjusted EBITA in the half-year stood at €272.3m (vs. €280.0m in H1 2015), down 2.7% and 8bps year on-year, at 4.2% of sales (reminder: adjusted EBITA margin in Q1 was down 20bps year-on-year at 3.9% of sales).
Reported EBITA stood at €147.1m in Q2 (including a €3.3m negative one-off copper effect) and at €260.9m in H1 (including a €11.4m negative one-off copper effect).
Strong increase in net income from continuing operations, mainly driven by lower net financial expenses
Recurring net income up 0.5%, at €134.0m in H1
Operating income in H1 stood at €219.7 million, up 5.8% year-on-year.
Net financial expenses in H1 amounted to €76.9 million (vs. €139.4 million in H1 2015). Both periods included charges related to refinancing operations. H1 2016 included a net charge of €10 million related to the early repayment of a €650m bond issued in 2013 and maturing in June 2020 at a coupon of 5.125%, which was replaced by a new issuance, in May, of a €650m maturing in June 2023 at a coupon of 3.500%. H1 2015 included a net charge of €52.5 million, related to early redemption of two bond lines at coupons of 7.000% and 6.125%. Restated for those net charges, net financial expenses fell from €86.9 million in H1 2015 to €66.9 million in H1 2016. This largely reflected lower average debt year-on-year and lower average effective interest rate, thanks to the various refinancing operations. The average effective interest rate decreased again by 50 basis points year-on-year in H1 2016 to 3.7% on gross debt (vs. 4.2% in H1 2015).
Income tax in H1 represented a charge of €47.0 million. The effective tax rate stood at 32.9% (vs. 36.7% in H1 2015).
Net income from continuing operations in H1 rose by 121.8% to €95.8 million (vs. €43.2 million in H1 2015).
As the disposal of our Latin American operations represented a loss of €41.7 million in H1 2015, net income was strongly up in the half-year at €95.8 million (vs. €1.5 million in H1 2015).
Recurring net income in H1 amounted to €134.0 million, up 0.5% year-on-year (see appendix 2).
Solid free cash flow generation of €188.1m before interest and tax and net debt reduced by €115.4m in Q2
Sound financial structure and reduced net financial expenses through continued optimization of financings
In Q2, free cash flow from continuing operations before interest and taxwas an inflow of €188.1 million (vs. an inflow of €144.2 million in Q2 2015). This net inflow included:
At June 30, 2016, net debt stood at €2,380.2 million, reduced by €115.4 million compared to the net debt of €2,495.6 million at the end of March.
It took into account:
At June 30, 2016, the indebtedness ratio (Net financial debt / EBITDA), as calculated under the Senior Credit Agreement terms, stood at 3.2x (stable vs. June 30, 2015), in line with our covenant and reflecting the traditional seasonality effect. Rexel confirms its strong commitment to maintaining a sound financial structure with an indebtedness ratio at or below 3x at the end of the year.
Rexel boasts a sound financial structure with strong financial flexibility, comfortable headroom vis-à-vis its bank covenant and an average debt maturity of 4 years, with no repayment before June 2020.
In Q2, Rexel continued to optimize its financings in order to further reduce its cost of financing.
In the past quarter, Rexel refinanced its 5.125% EUR Senior notes due June 2020 through the issuance of €650m 3.500% EUR Senior notes due June 2023. As previously commented, a one-off net charge was recognized in the net financial expenses for €10.0 million and the Net Present Value (NPV) of cash flows related to this refinancing transaction is c. €22 million. This operation will allow Rexel to further reduce its cost of financing in the coming quarters.
As regards the second half of the year, we expect contrasting effects:
As a result, 2016 full-year financial targets remain unchanged:
As announced on June 24, Ian Meakins, who joined the Board of Directors on July 1, will become Non-Executive Chairman of the Board on October 1.
Rexel will present both its 2017 full-year financial targets and its updated 2020 ambitions, along with the 2016 full-year results, at a financial meeting to be held in Paris on February 13, 2017.
October 28, 2016 Third-quarter and 9-month results
February 13, 2017 Fourth-quarter and full-year results
The financial report for the period ended June 30, 2016 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 second-quarter 2016 results is also available on the Group's website.
ABOUT REXEL GROUP
Rexel, a global leader in the professional distribution of products and services for the energy world, addresses three main markets - residential, commercial and industrial. The Group supports its customers to be at their best in running their business, by providing a broad range of sustainable and innovative products, services and solutions in the field of technical supply, automation and energy management. Rexel operates through a network of some 2,100 branches in 35 countries, with c. 28,000 employees. The Group's sales were €13.5 billion in 2015.
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: DJSI Europe, FTSE4Good Europe & Global, EURO STOXX Sustainability, Euronext Vigeo Europe 120 and ESI Excellence Europe. Finally, Rexel is included on the Ethibel EXCELLENCE Investment Register in recognition of its performance in corporate social responsibility (CSR). For more information, visit Rexel's web site at www.rexel.com
FINANCIAL ANALYSTS / INVESTORS
|Marc MAILLET||+33 1 42 85 76 firstname.lastname@example.org|
|Florence MEILHAC||+33 1 42 85 57 email@example.com|
|Pénélope LINAGE||+33 1 42 85 76 firstname.lastname@example.org|
|Brunswick: Thomas KAMM||+33 1 53 96 83 email@example.com|
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.
For appendices, please open the PDF file.
The Group is exposed to fluctuations in copper prices in connection with its distribution of cable products. Cables accounted for approximately 14% of the Group's sales and copper accounts for approximately 60% of the composition of cables. This exposure is indirect since cable prices also reflect copper suppliers' commercial policies and the competitive environment in the Group's markets. Changes in copper prices have an estimated so-called "recurring" effect and an estimated so called "non-recurring" effect on the Group's performance assessed as part of the monthly internal reporting process of the Rexel Group: i) the recurring effect related to the change in copper-based cable prices corresponds to the change in value of the copper part included in the sales price of cables from one period to another. This effect mainly relates to the Group's sales; ii) the non-recurring effect related to the change in copper-based cables prices corresponds to the effect of copper price variations on the sales price of cables between the time they are purchased and the time they are sold, until all such inventory has been sold (direct effect on gross profit). Practically, the non-recurring effect on gross profit is determined by comparing the historical purchase price for copper-based cable and the supplier price effective at the date of the sale of the cables by the Rexel Group. Additionally, the non-recurring effect on EBITA corresponds to the non-recurring effect on gross profit, which may be offset, when appropriate, by the non-recurring portion of changes in the distribution and administrative expenses.
The impact of these two effects is assessed for as much of the Group's total cable sales as possible, over each period. Group procedures require that entities that do not have the information systems capable of such exhaustive calculations to estimate these effects based on a sample representing at least 70% of the sales in the period. The results are then extrapolated to all cables sold during the period for that entity. Considering the sales covered. the Rexel Group considers such estimates of the impact of the two effects to be reasonable.
This document may contain statements of future expectations and other forward-looking statements. By their nature, they are subject to numerous risks and uncertainties, including those described in the Document de Référence registered with the French Autorité des Marchés Financiers (AMF) on April 7, 2016 under number D16-0299. These forward-looking statements are not guarantees of Rexel's future performance, Rexel's actual results of operations, financial condition and liquidity as well as development of the industry in which Rexel operates may differ materially from those made in or suggested by the forward-looking statements contained in this release. The forward-looking statements contained in this communication speak only as of the date of this communication and Rexel does not undertake, unless required by law or regulation, to update any of the forward-looking statements after this date to conform such statements to actual results to reflect the occurrence of anticipated results or otherwise.
The market and industry data and forecasts included in this document were obtained from internal surveys, estimates, experts and studies, where appropriate, as well as external market research, publicly available information and industry publications. Rexel, its affiliates, directors, officers, advisors and employees have not independently verified the accuracy of any such market and industry data and forecasts and make no representations or warranties in relation thereto. Such data and forecasts are included herein for information purposes only.
This document includes only summary information and must be read in conjunction with Rexel's Document de Référence registered with the AMF on April 7, 2016 under number D16-0299, as well as the consolidated financial statements and activity report for the 2015 fiscal year which may be obtained from Rexel's website (www.rexel.com).
Second-Quarter & Half-Year 2016 results http://hugin.info/143564/R/2031821/756205.pdf
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