SALES OF €3.194bn IN Q3
ADJUSTED EBITA MARGIN OF 4.0% IN Q3
FULL-YEAR FINANCIAL TARGETS CONFIRMED, AT THE LOW-END OF THE FEBRUARY GUIDANCE
NEW EXECUTIVE COMMITTEE WITH AN INCREASED REPRESENTATION OF COUNTRY/REGION MANAGERS
|Key figures 1||Q3 2016||YoY change||9m 2016||YoY change|
|On a reported basis||-5.6%||-3.2%|
|On a constant and actual-day basis||-4.3%||-2.1%|
|On a constant and same-day basis||-3.7%||-2.5%|
|As a percentage of sales||4.0%||4.1%|
|Change in bps as a % of sales||-51bps||-22bps|
|Net income from continuing op.||€37.6m||-20.9%||€133.4m||+47.0%|
|Recurring net income||€53.5m||-17.1%||€187.5m||-5.2%|
|FCF before interest and tax from continuing op.||€31.2m||vs. €36.6m||€24.4m||vs. €39.0m|
|Net debt at end of period||€2,511.0m||-4.3%||€2,511.0m||-4.3%|
1 See definition in the Glossary section of this document
In Q3, sales were down 4.3% on an organic basis, including a cumulative 1.5% negative effect from copper
(-0.9%) and calendar (-0.6%); on a constant and same-day basis, they were down 3.7%
In 9m, sales were down 2.1% on an organic basis, including a positive calendar effect of 0.4%; on a constant and same-day basis, they were down 2.5%, including a 1.1% negative copper effect
In Q3, Rexel posted sales of €3,193.9 million, down 5.6% on a reported basis. On a constant and same-day basis, sales were down 3.7%, including an 0.9% negative effect due to the change in copper-based cable prices.
The 5.6% drop in sales on a reported basis included:
In 9m, Rexel posted sales of €9,704.4 million, down 3.2% on a reported basis. On a constant and same-day basis, sales were down 2.5%, including a 1.1% negative impact due to the change in copper-based cable prices.
The 3.2% drop in sales on a reported basis included:
Europe (55% of Group sales): -1.6% in Q3 and -0.8% in 9m on a constant and same-day basis
In the third quarter , sales in Europe decreased by 5.8% on a reported basis, including a negative net scope effect of €5.9m and a negative currency effect of €50.9m (mainly due to the depreciation of the British pound against the euro). On a constant and same-day basis, sales were down 1.6%, and down 0.5% excluding the negative impact of copper.
North America (35% of Group sales): -6.0% in Q3 and -4.9% in 9m on a constant and same-day basis
In the third quarter , sales in North America were down 5.8% on a reported basis, including a negative currency effect of €4.0m and a positive scope effect of €5.5m. On a constant and same-day basis, sales were down 6.0%. Despite an easier comparable base, the year-on-year drop in sales to the Oil & Gas industry continued to impact sales in Q3, notably in the US, where they were down 31% in Q3 2016 after a 36% drop in Q3 2015; in Canada, this effect started to improve as sales to the Oil & Gas industry were down 6% in Q3 2016 after a 38% drop in Q3 2015.
Excluding these unfavorable effects, sales were down 2.4% in the quarter, mainly reflecting a drop in sales to the industrial end-market. Platt, in the Northwest, continued to post solid sales growth.
Excluding these unfavorable effects, sales were down 2.2% in the quarter, mainly reflecting a drop in sales to the industrial end-market.
Asia-Pacific (10% of Group sales): -5.6% in Q3 and -3.0% in 9m on a constant and same-day basis
In the third quarter , sales in Asia-Pacific were down 3.4% on a reported basis, including a positive scope effect of €9.4m and a positive currency effect of €1.1m. On a constant and same-day basis, sales were down 5.6%, mainly reflecting poor performance in Asia.
Continued improvement in gross margin: +41bps in Q3 and +21bps since the beginning of the year
Adjusted EBITA margin of 4.0% in Q3, down 51bps, of which 21bps due to one-offs and 30bps mainly reflecting lower sales; adjusted EBITA margin of 4.1% since the beginning of the year, down 22bps
In Q3, gross margin stood at 23.9% of sales, up 41bps year-on-year. It improved in all geographies: Europe (up 26bps at 26.4% of sales), North America (up 27bps at 22.1% of sales) and Asia-Pacific (up 121bps at 17.7% of sales).
Opex (incl. depreciation) in the quarter stood at 19.9% of sales, up 92bps year-on-year. Opex in Q3 included two one-off effects:
Restated for those one-off effects, opex were down 0.7% (instead of rising by 0.4%) and represented 19.8% of sales (instead of 19.9%), up 71bps year-on-year (instead of 92bps).
Adjusted EBITA in the quarter stood at €127.6m at 4.0% of sales, down 51bps year-on-year, of which:
In 9m, gross margin stood at 24.3% of sales, up 21bps year-on-year. It improved in all geographies: Europe (up 14bps at 26.7% of sales), North America (up 5bps at 22.1% of sales) and Asia-Pacific (up 54bps at 18.1% of sales).
Opex (incl. depreciation) were broadly stable in value; they stood at 20.1% of sales, up 43bps year-on-year.
As a result, adjusted EBITA stood at €399.9m at 4.1% of sales, down 22bps year-on-year.
Reported EBITA stood at €124.9m in Q3 (including a €2.7m negative one-off copper effect) and at €385.8m in 9m (including a €14.1m negative one-off copper effect).
Strong increase of 47.0% in net income from continuing operations, mainly driven by lower net financial expenses
Operating income in 9m stood at €327.1 million, broadly stable year-on-year.
Net financial expenses in 9m amounted to €114.1 million (vs. €177.5 million in 9m 2015). Both periods included charges related to refinancing operations:
Restated for those net charges, net financial expenses decreased from €125.0 million in 9m 2015 to €97.0 million in 9m 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 on gross debt decreased again by 35bps year-on-year in 9m 2016 to 3.61% (vs. 3.96% in 9m 2015).
Income tax in 9m represented a charge of €79.7 million (vs. €59.0 million in 9m 2015), a rise of 35.1%, mainly reflecting a 42.4% increase in profit before tax. The effective tax rate stood at 37.4% (vs. 39.4% in 9m 2015).
Net income from continuing operations in 9m rose by 47.0% to €133.4 million (vs. €90.7 million in 9m 2015).
As the disposal of our Latin American operations represented a loss of €69.3 million in 9m 2015, net income in 9m was strongly up at €133.4 million (vs. €21.4 million in 9m 2015).
Recurring net income in 9m amounted to €187.5 million, down 5.2% year-on-year (see appendix 2).
Net debt reduced by 4.3% year-on-year at September 30, 2016
Sound financial structure; continued actions to reduce net financial expenses and optimize financings
In Q3, free cash flow from continuing operations before interest and tax was an inflow of €31.2 million (vs. an inflow of €36.6 million in Q3 2015). This net inflow included:
At September 30, 2016, net debt stood at €2,511.0 million, down 4.3% year-on-year (vs. €2,622.6 million at September 30, 2015).
It took into account:
In Q3, Rexel continued to optimize its financings in order to further reduce its cost of financing and enhance its financial structure.
Further to the early repayment of a €650m bond line issued in 2013 and maturing in June 2020 that was already mentioned in our Q2 & H1 results Press Release, Rexel will redeem in November USD170 million (c. €150 million) from the USD500m bond line issued in April 2013 and maturing in June 2020 (at a 5.250% coupon). In addition, Rexel also extended its Senior Credit Agreement by one year, to November 2021.
All these actions contribute to further reduce Rexel's cost of financing and enhance its financial structure. The average effective interest rate on gross debt is expected to decrease by c. 30bps between the first half and the second half of the year, from c. 3.7% in H1 2016 to c. 3.4% in H2 2016. Rexel boasts a sound financial structure with average maturity of around 4 years and with no significant repayment before June 2020.
UPDATE ON MANAGEMENT TEAM AND GOVERNANCE
Appointment of a new Executive committee with an increased representation of country/region managers
Ian Meakins became Non-Executive Chairman of the Board of Directors on October 1
As a first step in its transformation program, Rexel announced today, in a separate Press Release, the appointment of a new Executive Committee with a strong focus on operations. The new Executive Committee, comprising 11 members, of which 6 are in charge of key business units, will be headed by and report to Patrick BERARD, Chief Executive Officer, and will also include:
As regards the Group governance and as announced on June 24, Ian MEAKINS, who joined the Board of Directors on July 1, became Non-Executive Chairman of the Board of Directors on October 1. Under his chairmanship, Rexel's Board of Directors, along with Rexel's management team, will define the next strategic steps for the Group. As announced on July 29, the outcome of this strategic review and updated ambitions for the Group will be presented on February 13, 2017.
Taking into consideration the performance of the first nine months and also:
we confirm our 2016 full-year financial targets, at the low-end of the February guidance:
An update on Rexel's strategy and ambitions will be presented at a financial meeting to be held in Paris on February 13, 2017.
February 13, 2017 Fourth-quarter and full-year results 2016
The financial report for the period ended September 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 third-quarter and 9-month 2016 results is also available on the Group's website.
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 2,000 branches in 32 countries, with c. 27,000 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|
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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 by clicking on the link at the end of the press release.
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).