GRAND DUCHY OF LUXEMBOURG – The Board of Directors of IVS Group S.A. (Milan: IVS.MI), convened on August 29th, 2017, and chaired by Mr. Paolo Covre, substituting Mr. Cesare Cerea, passed away on August 7th, after a long lasting illness.
Cesare Cerea, founder on 1972 of Bergamo Distributori, the nucleus of present IVS Group, was one of the pioneers of the vending industry, well recognized in Italy and Europe for the innovations developed since the ‘80s in technologies and information systems applied to the vending sector.
In a highly fragmented industry, since his very first moves as an entrepreneur, Cesare Cerea showed a wide ranging vision; he was able to aggregate the resources and competences necessary to face successfully new and difficult challenges, establishing in 2006, through the merger of 15 regional companies, IVS Group.
A group that is now a market leader, able to pursue, in the past years of crisis and even more, today, a sustainable strategy of growth and internationalisation, based on a solid ground and excellent results.
The Board, unanimously, resolved to appoint as Chairman Mr. Paolo Covre, currently Deputy Chairman and member of the board since IVS establishment, and therefore able to assure the continuity of the principles and values on which IVS operates.
The Board also resolved to authorise the convening of the Extraordinary General Meeting of shareholders to resolve on the integration of the board of directors, the cancellation of Class B2 and B3 shares (not listed) and consequent changes in the company’s statute.
The Board then examined and approved the Half-Yearly Report as of June 30th, 2017, which shows a significant growth of IVS Group performances.
Highlights
- Consolidated Revenues: Eur 206.7 million, +12.8%, compared to June 30th, 2016.
- Adjusted EBITDA1: Eur 48.9 million, +12.1% compared to June 30th, 2016, with an EBITDA margin on sales of 23.7%.
- Group Net Profit: Eur 8.7 million, after profits attributable to minorities of Eur 0.8 million and taxes for Eur 6.2 million (increased from Eur 2.9 million of the corresponding period of 2016, principally for the changes in the application of ACE rules – Italian tax incentives to growth). Adjusted Net Profit +3.6% equal to Eur 13.7 million from Eur 13.2 million at June 2016.
- Completed in the first half 9 new acquisitions in Italy and Spain with an enterprise value (“EV”) of around Eur 33.8 million. In particular, the acquisition of Grup Ibervending in Spain, with an EV of Eur 26.2 million is a very significant move for IVS Group, and a base for a growth strategy similar to that successfully realized in Italy.
IVS Group S.A. is the Italian leader and the second player in Europe in the business of automatic and semi-automatic vending machines for the supply of hot and cold drinks and snacks (vending).
The business is mainly carried out in Italy (82% of sales), France, Spain and Switzerland, with around 185,100 vending machines, a network of 80 branches and around 2,600 employees. IVS Group serves more than 15,000 corporate clients and public entities, with approximately 800 million vends per year.
Operating performance
In the first six months of 2017 consolidated revenues reached Eur 206.7 million (of which Eur 191.2 million related to the core vending business), with an increase of 12.8% compared to Eur 183.2 million at June 30th, 2016 (Eur 168.9 million in vending).
Revenues in the vending business increased by 7.3% in Italy, by 86.9% in Spain, by 3.1% in France and by 553,3% in Switzerland. The coins management business sales (Coin Service division) increased by 1.2%.
The sales increase in the vending business in the first half comes principally from the consolidation of the acquisitions in Spain (Grup Ibervending, in the end of January 2017) and Switzerland (Demomatic, in the end of December 2016), from excellent results in the OCS segment, supported by the Nespresso™ products, but also from the organic growth (like-for-like +2.8% in absolute and +2.4% working days adjusted), as an effect of volumes increase (around +1% and +0.6% working days adjusted) and the increase of average selling price per vend, +1.1% compared to first half 2016 (from Eur 45.9 cents to Eur 46.4 cents).
Like-for-like sales increased especially in Italy in the OCS-Office Coffee Service segment, following the extended areas of the distribution agreement with Nespresso Italiana, which allowed to change into positive the past trend in this market segment.
IVS continues to have an overall acquisition rate of new client higher than the churn rate (clients lost).
The total number of vends in the first half of 2017 is equal to 412 million, +11.9% compared to first half of 2016.
During the first six months of 2017 are completed 9 acquisition in Italy and Spain, with an Enterprise Value of around Eur 33.8 million and contributing to the group sales, from the date of the acquisition, for Eur 14.5 million.
Adjusted EBITDA increased by 12.1% compared to the first six months of 2016, from Eur 43.6 million to Eur 48.9 million (23.7% margin on sales).
The ongoing efforts for integration of the acquired businesses will generate in the following 10-12 months the expected positive effects on the P&L accounts, in particular with reference to the important acquisition in Spain, which although already profitable, hasn’t yet the same levels of profitability as other parts of the group.
In the operating costs of the first half 2017 is included the provision of Eur 3.3 million related to the fine on the Antitrust procedure (for more info see paragraph “Subsequent Events” of the Half Year Report 2017); considered its non recurring and extraordinary nature, this provision is excluded from Adjusted EBITDA.
Group Net Profit in the first six months of 2017 is equal to Eur 8.7 million (after profits attributable to minorities of Eur 0.8 million).
Net profit includes some items considered by the management as exceptional in nature, totalling Eur 5.0 million (net of related tax effects): amongst these, the most important is the above mentioned provision for the Antitrust procedure; other exceptional costs for Eur 1.7 million are principally related to acquisitions (Eur 0.6 million) and other tax provisions (Eur 0.6 million).
The Net Profit Adjusted for the exceptional items is equal to Eur 13.7 million (after taxes and minorities), increased by 3.6% from Eur 13.2 million of the first half of 2016.
It must be noticed that the increase of pre taxes profit is much higher (+14.3%), but it is largely absorbed by higher taxes deriving from the immediate application of new (worsened) rules and criteria on ACE (Italian tax incentives on growth).
Other new tax rules concerning higher levels of tax deductible depreciation on capex could instead gradually and partly mitigate this increase of income taxes due in the coming quarters.
Net Financial Position (“NFP”), is equal to Eur -260.9 million, from Eur -225.6 million as of December 31st, 2016 after payments for net investments and acquisitions in the first half of Eur 54.7 million (of which Eur 23.8 million for investment in fixed assets – including capex on the newly acquired businesses and payments related to investment done in previous quarters – and Eur 30.5 million for acquisitions).
In the NFP are included also the accruals for dividends (Eur 9.4 million) paid at the beginning of July 2017 and for interests matured on bonds. The NFP includes also payments already made for the Antitrust fine equal to Eur 9.0 million.
Finally, the group has Eur 19.4 million of VAT credit with the Italian tax authority (increased from Eur 15.0 million at December 31st, 2016), non included in financial credits and so excluded by the NFP.
Other significant events occurred after June 30th, 2016 and prospects for the full year
The first half of 2017 confirmed the light recovery signals of the end of 2016, recovery that is likely to continue in the remaining part of the year. The higher than average temperature in July and August could support better results compared to the third quarter 2016, when a quite cold and rainy weather negatively affected beverages consumption.
In the second part of the year the development of the distribution agreement with Nespresso Italiana will continue, with benefits on the volumes in the OCS market segment.
On these assumptions, it is expected that the overall number of vends will exceed 800 million in 2017, a significant result and a base for further growth in Italy and abroad.
IVS growth will remain based also on new acquisitions, aimed at improving logistic efficiency and service quality in a highly fragmented sector, with thousands of small and mid sized players all around continental Europe. In this context, the acquisition of Group Ibervending represents a platform on which will be realized a growing density also in Spain, similar to that already reached in Italy.
The new tax rules entered in force in Italy since 1 April 2017 concerning the timely information to tax authorities of the revenues in the vending sector, will have an impact in the next periods on small players, with likely additional acquisition opportunities for IVS.
The financial strategy, with the successful issue of the notes due November 2022 and the high cash-flow generation, make IVS Group a very reliable counterpart for financial markets, with spare capacity to raise additional resources at good conditions, if necessary to finance interesting investments.
On July 2nd was signed the acquisition contract for the business line of Pronto Coffee, active in the distribution of the professional line of Nespresso™ coffee pods in four additional provinces in Northern Italy, complementary to those already served by IVS Italia.
On July 27th, 2017 (after an hearing hold on June 7th), the TAR (Regional Court) of Lazio notified to IVS Italia the confirmation of the fines proposed by the Italian Antitrust concerning to the investigation started on July 2014 on the 13 major Italian players in the vending industry, in relation to which the group had already posted a significant provision in 2015 Annual Report and now fully covered with the provision included in the Report at June 30th, 2017.
IVS Italia is preparing all the actions necessary to appeal, against such decision, to the Consiglio di Stato (State Central Administrative Court).
On August 2nd, 2017 was signed the binding contract regarding the sale to Luigi Lavazza S.p.A. of the 36.86% interest owned by IVS Group in Espresso Service Proximitè S.A. (France), for a price of around Eur 5.5 million.
This company is not active in the vending core business, and the minority is consolidated at equity value (at Eur 2.7 million book value).
1 “Adjusted EBITDA’’: is equal to operating income, increased by depreciation, amortisation, write-downs, non-recurring costs and exceptional in nature.
