GRAND DUCHY OF LUXEMBOURG – The Board of Directors of IVS Group S.A., convened on September 8th, 2020, and chaired by Mr. Paolo Covre, examined and approved the Half Year Report at 30June2020, summarised below.
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 core vending business is mainly carried out in Italy (80% of sales), France, Spain and Switzerland, with around 204,000 vending machines. The group has a network of 83 branches and around 3,000 employees. IVS Group serves more than 15,000 corporate clients and public entities, with around 850 million vends in 2019.
IVS Group: Summary of results at 30 June 2020
- Consolidated Revenues: Euro 161.6 million, -30.4%, compared to June 2019.
- EBITDA reported: Euro 38.4 million, -29.0% compared to 2019.
- Adjusted EBITDA¹: Euro 32.3 million, -41.4% compared to 2019, with an EBITDA margin on sales of 20.0% (22.4% on sales net of redevances).
- Consolidated Net Profit: Euro 3.8 million, -69.0% compared to June 2019, after profits attributable to minorities (Euro -0.1 million).
- Adjusted Net Profit: Euro -2.6 million, after minorities.
- Completed 3 new acquisitions in Italy, with an Enterprise Value of around Euro 6.0 million.
- Net Financial Position improved by Euro 11.5 milion since March 2020.
- Increase of cash and credit lines available to Euro 145 million.
Operating performances
Consolidated revenues in 1st Half 2020 totalised Euro 161.6 million (of which Euro 140.9 million related to the core vending business), -30.4% from Euro 232.1 million of 1st Half 2019 (Euro 211.3 million in vending).
Sales decreased by 32.9% in Italy, 39.1% in Spain, 29.7% in France and 29.4% in Switzerland. Coin Service division sales decreased by around 18.0% (including Moneynet S.p.A., acquired and consolidated since July 2019), while turnover decreased in the core metal coins business and in the digital money business (Venpay S.p.A.) approximately by 31% and 58% respectively.
The decrease in all of the business areas is due to the effects of the measures put in place to face COVID-19 pandemic and to the following slow down – in some cases shut-down – of many sectors and client served by IVS Group, although with different timing, in the various regions where IVS operates. The decrease in sales started significantly in the last part of February and intensified up to May; first gradual recovery signals started on June.
The total number of vends in 1H 2020 was equal to 301.3 million, -32.2% from 444.4 million in 1H 2019. Even in the context of this exceptional situation, in this period IVS continues to have an acquisition rate of new clients higher than the churn rate.
Average price per vend in 1st Half 2020 was equal to Euro 46.8 cents, from 47.6 cents of 1st Half 2019 (-1.7%). The average price decrease is due to the lock-down and/or relevant volumes decrease in the public and travel market segments, that usually enjoy higher average selling prices and added value, compared to the corporate sector, where consumption were higher for those consolidated clients that often enjoy reserved discounted prices, and so reducing the average price per vend.
During 1H 2020 were completed 3 acquisitions in Italy, with an Enterprise Value of Euro 6.0 million, contributing around Euro 0.5 million to sales on pro-rata basis from the date of the acquisition, and one lease contract for a vending business in Sicily, contributing around Euro 3.4 million sales, but with an EBITDA almost close to zero.
EBITDA reported was equal to euro 38.4 million, from Euro 54.0 million at June 2019. Reported EBITDA includes Euro 8.0 million proceed related to the reimbursement of the fines already paid to the Italian Antitrust authority as a consequence of the proceeding started in 2016 against which IVS Italia appealed (the reimbursement has not yet been received). Adjusted EBITDA is equal to Euro 32.3 million (20.0% EBITDA margin on gross sales or 22.4% on sales net of redevances), 41.4% down from Euro 55.1 million at June 2019.
Depreciation and amortisation in 1st Half 2020 increased by Euro 2.2 million (+7.7%) as a consequence of the effects of the acquisitions completed in 1H 2019, the investments made in the past quarters and in the 1H 2020, in particular for the vending machines and the related capex on the Paris Metro.
The lock down of entire client segments, as schools and universities, and the substantial lack of presence in public and travel locations, as metro, railways stations and airports, and the decision of reducing the working presence by large and medium companies, private or public organisations, strongly affected volume and sales, as well as margins.
Strong actions have consequently been taken on many costs, including the recourse to temporary unemployment subsidies provided for by the rules in the different countries where the Group operates. These actions are coupled to a continuous optimisation of technical and logistic organisation, according to the trends of consumption volumes on the market, but always maintaining a strong focus on the quality and continuity of the service to clients, which is a key and distinctive element for the Group, for a successful competition in a challenging market situation.
The effort on cost saving unfortunately was not sufficient to fully compensate the decrease of volumes and gross margin (and arguably it could not have been sufficient, considering the size and speed of the consumptions collapse); but at least it faced the loss, allowing the group to keep substantially stable the level of operating margins in percentage on sales.
Consolidated Net Profit at June 2020 is equal to Euro 3.8 million (after profits attributable to minorities of Euro -0.1 million) -69.0% from Euro 12.3 of 2019. In addition to the Antitrust fine reimbursement, Net profit includes some costs and profits considered of exceptional nature, totalling around Euro 1.8 million mostly related to acquisitions and new relevant projects (i.e. Moneynet and the start of Paris Metro contract). The Net Result Adjusted for the exceptional items is equal to Euro -2.4 million (after minorities), from Euro 13.2 million profit at June 2019.
Net Financial Position (“NFP”), is equal to Euro -383.0 million (including debt deriving from rent and leasing contracts according to the new definitions of IFRS 16), Euro 11.5 million down from Euro -394.5 million at 31 March 2020 (and down Euro 3.0 million from Euro -386.0 million at the end of 2019), after payments for net investments in the period of Euro 28.4 million, of which Euro 26.3 million for investment in fixed assets – including those linked to newly acquired businesses and done in previous quarters – and Euro 2.3 million for payments related to acquisitions, in addition to debt taking on Euro 1.5 million for additional real estate leasing.
Net Debt includes Euro 4.5 million of interest accrued in 1H 2020 on bonds, as well as the financial debts arising from negative MTM of IRS contracts equal to Euro 1.7 million.
In details, capex related to the new big Paris Metro contract, not yet fully operating, amounted to Euro 9.7 million). Other capex, around Euro 20.7 million (of which Euro 2.4 million for revamping of used vending machines and Euro 7.9 million for M&A activities), are almost fully connected to investments already launched and committed in the months before COVID-19 emergency. In the second quarter 2020 capex were strongly reduced compared to the previous quarters.
Thanks to cost control and cash outflows rationalisation, the Group was able to generate positive cash flow even in such a complex economic period.
At the end of June 2020 the group (in Italy) has still approximately Euro 15.0 million of VAT credit and other credits for Euro 8.0 million towards MEF (Italian Ministry for Economy and Finance) for the restitution of the mentioned antitrust fine. The cash-in of these credits – at present totalling around Euro 23.0 million, not included in Net Financial Position – is expected in the next quarters.
Other significant transactions and events occurred after 30 June 2020
The economy and consumption scenario saw, between March and May 2020, during the hardest phase of the lock-down, volumes drop up to 84%, although with differences amongst the nations and regions where IVS operates. Since mid May / beginning of June, some signals of gradual recovery started, linked with the gradual reopening of business activities, but still affected by the closure of entire sectors, as schools and universities, and by the only partial reopening of the public transport sector, and the overall weak trend of the hours worked, due also to the reduced presence in working places in many large and medium companies and public organisations.
In this context, the Group has put in place appropriate economic, financial and industrial actions.
The cost structure was turned, as much as possible, into a fully variable cost organisation. Labour cost was reduced by using the public and government social measures existing in the different countries. The costs of rents and positioning fees (redevances) has already been renegotiated in part and reduced, or suspended, in view of the definition of new contracts, also on the basis of new specific laws approved by governments for the definition of positioning fees on public contracts.
This on going activity will generate a significant cost saving and in some cases the reduction of Net Financial Debt (i.e. on debt arising from lease and rents contracts, according to IFRS16 new definitions).
In the operations, the decrease of volumes and the use of temporary unemployment subsidies, was combined to a significant reorganisation of refilling and technical assistance workers. All this work granted to maintain positive operating profits (EBITDA), even in a period of exceptional economic crisis.
From a financial stand point, almost all of the investments that were not strictly necessary have been strongly reduced. These measures allowed to keep the good liquidity reserves available within IVS Group (increased from Euro 116 million to Euro 145 million during the period), continuing to generate a positive cash-flow, as demonstrated by the decrease of net financial debt.
From a strategic point of view, these actions will allow IVS Group to stand reinforced, compared to most of Italian and European vending players, at the beginning of 2021.
The present dramatic crisis will certainly cause a change in the structure of the vending industry, and the inevitable exit of marginal players, not necessarily the small ones, already weak before the start of the pandemic. From this will emerge the opportunity, for IVS Group, to start new commercial and marketing actions, aimed at increasing the market shares and the business value.
1 “Adjusted EBITDA’’: is equal to operating income, increased by depreciation, amortisation, write-downs, non-recurring costs and exceptional in nature
