Vantiva S.A. (THNRF) Q2 2024 Earnings Name Transcript

Vantiva S.A. (OTCPK:THNRF) Q2 2024 Earnings Convention Name July 24, 2024 12:00 PM ET

Firm Individuals

Thierry Huon – IR
Luis Martinez-Amago – CEO
Lars Ihlen – CFO

Convention Name Individuals

Antoine Lebourgeois – Bryan Garnier

Thierry Huon

Hey, women and gents. Welcome to Vantiva’s First Half 2024 Outcomes Convention Name shared by Luis Martinez-Amago, our CEO; and Lars Ihlen, our CFO. At the moment, all members are in hear mode solely. Later we’ll conduct the Q&A session. [Operator Instructions] Simply to remind you all, this convention is being recorded.

We might like to tell you that this occasion can also be accessible dwell on our Vantiva’s web site with synchronized slide present.

Throughout this convention, statements could possibly be made that represent forward-looking statements based mostly on administration’s present expectations and beliefs and are topic to a variety of dangers and uncertainties that might trigger precise outcomes to vary materially from the long run outcomes expressed, forecasted or implied by such forward-looking statements. For a extra full checklist and outline of such dangers and uncertainties, discuss with Vantiva’s submitting with the French authority Autorité des marchés financiers.

I would really like now at hand over the decision to Luis. Please go forward.

Luis Martinez-Amago

Thanks, Thierry, and hey, everybody, and thanks for becoming a member of us at the moment for this primary half outcomes presentation. Earlier than going to the outcomes, I want to talk that after 9 years of service to this firm, I’ve determined to retire and due to this fact step down from my place as Chief Govt Officer and Director of Vantiva with efficient date of August 15, 2024.

The board has determined to appoint Lars Ihlen, our present CFO and who has agreed to step as an interim CEO whereas remaining Chief Monetary Officer of Vantiva till the board’s Governance and Social Duty Committee and the Remuneration and Expertise Committee finalized the appointment of Vantiva subsequent Chief Govt Officer.

Lars brings intensive expertise and a deep understanding of Vantiva’s operations, having served as CFO of the Related Residence division for the final 11 years and after having served in varied monetary positions in Alcatel-Lucent in Norway, France and China for greater than 10 years. Clean transition plan is in place, and I’ll proceed to work carefully with Lars over the approaching weeks to make sure continuity and stability of Vantiva enterprise operations and the conclusion of the synergies plan.

It has been an incredible honor to guide the Vantiva over the previous years. I am extremely pleased with what we’ve got achieved collectively and grateful for the dedication and arduous work on Vantiva’s proficient workforce. I am assured that Vantiva will proceed to thrive and succeed within the years to return.

Okay. And with this, let’s go to the presentation of the outcomes of the primary half. As you possibly can see on this Slide 4, I am happy to report that our efficiency within the first half has met all our plans and expectations. As we anticipated and as we communicated to you again in April, the Related Home based business remains to be dealing with a low demand interval the place service suppliers are very cautious and tried to attenuate their spending as a lot as doable.

Concerning Provide Chain Companies, the DVD enterprise continued its pure decline, however it’s stabilizing in comparison with earlier years. The decreased price is slowing down and we anticipate this lower to stay decrease than anticipated. The diversification actions on this division are rising nicely and have offset a part of the affect of the DVD decline. And I’ll clarify extra within the following slides about it.

Our EBITDA margin displays the decrease volumes and the momentary duplication of our structural prices within the first half because of the Residence Networks integration, however you will note that shortly that that is not a problem. As a optimistic signal, quarter two has proven some enhancements in comparison with quarter one, and we anticipate this development to persist and even intensify within the second half. However a very powerful achievement within the first half is the velocity and the effectivity of the Residence Networks integration course of in Vantiva.

Now I need to share with you some particulars on how we’re integrating residence networks into Vantiva. I’m proud to say that our groups have been working with competence and excellence to make this integration as quick and as clean as doable. We’re forward of schedule on many fronts. We’ve got nearly completed the transition service agreements. The migration of our EPR methods is totally finished and the consolidation of the dimensions and headcount reductions will probably be achieved by the top of the yr. Placing this into perspective and evaluating this efficiency to the U.S. industrial metrics, these outcomes are merely excellent.

As well as, the acquisition and the mixing course of obtained very optimistic suggestions from our prospects, and we’ve got no business dis-synergies. What does it imply for us? It signifies that we’re in a position to ship a stronger profit from this integration and prior to what we have been anticipating initially.

Thus, regardless of this sluggish begin to the yr, I am completely happy to share with you that we’re confirming with confidence our full steerage for the yr.

Let me provide you with a fast overview on the important thing figures for the primary half. Revenues decreased by 3.4% and reached about €1 billion. Related Residence had a steady income efficiency, whereas SCS revenues dropped 10.6% to €206 million. These decrease revenues, together with the very best value construction because of the Residence Networks personal value had a unfavorable affect on the EBITDA. It was €23 million in first half ’21, down from €49 million a yr in the past.

Related Residence margin was 4.3% in comparison with the 7% a yr in the past. EBITDA margin additionally suffered and was €2 million, down from €7 million on the finish of June 2023. So the decline is because of decrease volumes and a part of it because of the provision reversal that has boosted final yr’s outcomes. Nevertheless, we’re assured that the division will obtain the budgeted efficiency on the total yr.

Company and Others contribution to group outcomes improved by €3 million within the semester at minus €11 million, because of our strict value administration. Operational free money stream earlier than curiosity and tax was optimistic of €30 million, a major enchancment from minus €74 million within the first half of 2023. Lars will clarify this in additional element shortly. To sum up, this primary half was weak, however according to our expectations, and we anticipate a robust restoration of our efficiency within the second half.

Let’s transfer now to the enterprise replace. Let me speak about Related Residence exercise. We confronted some challenges as our prospects have been very cautious of their demand. They needed to cut back their extra inventories in a aggressive market with decrease CapEx. The Americas area suffered probably the most, whereas Eurasia did barely higher. Our broadband actions have been pushed by fiber and our video enterprise carried out nicely, particularly within the APAC area.

We stored innovating and investing in our know-how to help our supply. Because of this, we received new contracts with our Wi-Fi 7 know-how and for Android TV with gadgets that features AI chips. We additionally preserve our concentrate on sustainability coverage and obtained a Platinum score by EcoVadis for the second yr in a row. Furthermore, we made a robust dedication to SBTi targets.

Let’s take a look now to the monetary efficiency of Related Residence. Income was nearly flat with a major decline in broadband enterprise, offset by the robust development within the video space. Observe that, that new contributor to revenues has proven up with diversification models that teams our personal actions.

We’re happy to point out that that our initiatives within the IoT for verticals, added worth providers and retail are actually representing a number of tens of tens of millions of euros in revenues. And that is solely the start. We anticipate this half to proceed to develop at a major tempo to get some materiality within the coming years.

EBITDA decreased from €56 million to €33 million. That is because of the extra value construction coming from Residence Networks earlier than the implementation of the synergies. However as I already talked about, we forecast a major enchancment within the second half based mostly on larger revenues and a greater value construction from the transformation plans which are being executed.

Optical discs exercise has continued to say no, however at decrease price than in earlier yr. This normalization led to a 15% lower in quantity manufacturing. Income registered higher, thanks to cost actions.

Distribution and success non-related to optical discs proceed to broaden shortly in addition to the freight brokerage remains to be affected by overcapacity. Vinyl data demand could be very stable and the manufacturing continued to extend considerably, because of extra capability in place. We’ve got now 38 presses in operation in comparison with 22% a yr in the past. The division continues to implement effectivity measures and to broaden its enterprise outdoors of the optical exercise to enhance its development perspective and consequently the margin.

Revenues of the division fell 10.9%, exhibiting a greater resistance than the disc manufacturing, down 15%. This got here from value actions and diversification actions efficiency.

EBITDA got here in at €2 million versus €7 million in first half 2023, which had benefited from a optimistic one-off affect of a provision reversal not repeated this yr. This efficiency is according to our expectations, and we anticipate an enchancment within the second a part of the yr.

And I now go away the ground to Lars for explaining the outcomes.

Lars Ihlen

Thanks very a lot, Luis. If we transfer to Web page 14, we are going to clarify how a few of our fundamental monetary indicators in comparison with H1 final yr. As Luis simply talked about, our EBITDA was down by €26 million because of decrease exercise and duplications purposes in our value construction following the Residence Networks acquisition.

The D&A and reserves elevated by €6 million versus final yr, primarily pushed by larger depreciation from a bigger asset base and a few extra guarantee prices. This offers an EBITDA of a unfavorable €23 million versus a optimistic €9 million final yr. The PPA amortization elevated by €1 million with the extra belongings activated by the Residence Networks acquisition and a following onetime write-off of €5 million.

This offset the lower we usually would have seen as we reached the top of a lot of the amortizations of the 2015 acquisitions of CWU and Cinram in H2 final yr. So on a going-forward foundation, this quantity ought to be decrease.

The non-recurring prices decreased by €85 million to a unfavorable €61 million regardless of the set of restructuring prices to cowl for the mixing exercise in Related Residence. Final yr, was, as you could bear in mind, impacted by €135 million depreciation of the goodwill in Provide Chain Options. This offers an EBIT for the semester of minus €98 million versus a unfavorable €150 million for a similar interval subsequent yr — final yr. The web results of the group was minus €167 million versus a unfavorable €229 million final yr, and we are going to clarify how we go from EBIT to the web outcomes on a later web page.

The underside of this desk reveals how we go from EBITDA to free money stream. The CapEx at EUR 26 million is €18 million decrease than final yr, and this quantity is impacted by the sale of a producing constructing in Poland and tight management on CapEx normally. The non-recurring objects reached minus €58 million, which is €32 million larger than final yr, and that is primarily pushed by the money out for the restructuring actions in Related Residence.

The working capital variance this semester was an enchancment of €91 million versus a discount of €54 million final yr. This enchancment is pushed by our efforts to renegotiate phrases for each prospects and suppliers after the mixing of Residence Networks. This resulted in a free money stream earlier than curiosity and tax of a optimistic €30 million versus a unfavorable €74 million final yr. After monetary and tax, the free money stream was unfavorable €19 million versus a unfavorable €104 million final yr. The web debt with out leases stands at €424 million based on IFRS versus €368 million in 2023.

On Web page 15, you will discover the transfer from adjusted EBITDA to EBIT and we defined all of this stuff on the earlier slide. Nevertheless, this offers a bit extra detailed breakdown of the non-recurring objects. So the impairments and write-offs improved by €131 million following the write-off of goodwill final yr in Provide Chain Options. The restructuring value is the price of all of the restructuring plans accepted to date for the Related Residence integration, and this quantities to €69 million. The opposite non-current objects of a optimistic €12 million is impacted by a foul will posting of €24 million booked following the Residence Networks acquisition.

Web page 16 explains the stroll from EBIT to the group web outcomes. Curiosity expense elevated by €12 million this semester, primarily pushed by the curiosity on the bridge mortgage. This mortgage was nearly absolutely paid again throughout March and June, and the remaining €10 million will probably be paid by the top of Q3. Different monetary decreased by €8 million versus final yr to a unfavorable €17 million. This offers a web monetary results of a unfavorable €58 million and a revenue earlier than tax of unfavorable €157 million versus a unfavorable €205 million final yr.

The tax prices reached €9 million this semester, linked to extra taxes within the U.S. following the Residence Networks integration versus a optimistic €3 million final yr that was pushed by a optimistic adjustment in Brazil. The achieve from associates improved by €25 million this semester, as we final yr introduced down a lot of the remaining values of the technical or inventive studios. This offers a web outcome at group degree of a unfavorable €167 million, which is an enchancment of €62 million versus this time final yr.

On Web page 17, we clarify how we improved the free money stream this yr. So final yr, the money burn was €74 million, which was additional negatively impacted by the unfavorable change in EBITDA of €26 million. This was partly offset by the decrease CapEx of €18 million and the money out for restructuring elevated by €23 million, principally from the price of realizing the synergies in Residence Networks.

The working capital enchancment was a powerful €144 million. And as earlier defined, that is measured because the change in working capital in H1 ’23 versus the change in working capital in H1 ’24. This yr, we had a optimistic affect of €91 million, whereas we had a unfavorable affect of €54 million for a similar interval final yr. And that is how we get to the advance of €144 million.

Lastly, we had a unfavorable affect of €9 million in pensions and different, which was primarily pushed by one-off time prices following the acquisition. All in all, this offers us a optimistic free money stream earlier than curiosity of tax of €30 million.

Lastly, on Web page 18, we are able to see our liquidity place on the finish of H1. We landed with money readily available at €39 million and an unused credit score line with Wells Fargo for €66 million. Mixed, this offers complete liquidity of €105 million in comparison with €66 million for a similar interval final yr. Together with operational leases, our complete debt reached €516 million, whereas the money readily available lowered to a web debt of €477 million.

Earlier than we conclude this session and open up the ground for questions and solutions, I feel I want to thank Luis for his contribution to Vantiva for the previous 9 years. I imply we’ve got seven years collectively in Related Residence earlier than we did the Vantiva on the group degree the final two years. Thanks lots for every little thing you have got taught, it has been wonderful to work with you for this era. And I am positive I communicate for not simply me, however for the entire administration workforce as nicely, and I hope that you can be significantly missed after fifteenth of August.

Luis Martinez-Amago

Thanks. Thanks very a lot, Lars. So with this, Thierry, perhaps we are able to transfer to the Q&A.

Query-and-Reply Session

A – Thierry Huon

Yeah, completely. So thanks, each of you. And now I suggest that we open the Q&A session. [Operator Instructions] Operator, do we’ve got questions within the checklist?

Operator

We’ve got Mr. Antoine Lebourgeois from Bryan Garnier, who’s the subsequent — the primary query. Please go forward.

Antoine Lebourgeois

Good morning, everybody. So first, Luis, I want you all the very best on this new chapter of your life. And I’ve three questions for at the moment. Firstly, might you present an replace on the restructuring money prices associated to the mixing of Residence Community?

And secondly, I might identical to to have your views on the timing of the restoration for Related Residence. Do you continue to anticipate a major restoration beginning as quickly as H2 2024? Or will a lot of the restoration be in 2025 in your view?

And final query, do you additionally anticipate working capital to contribute positively to free money stream in H2 like in H1.

Luis Martinez-Amago

Okay. I’ll take the second query, and I’ll let Lars to take the opposite two. So timing of restoration. We’re seeing indicators of market restoration already within the second half and into subsequent yr. However as you understand, Antoine, that is our enterprise takes lengthy lead instances of execution. So we’ve got nonetheless solely kind of parts. And even when prospects are insisting us to ship extra this yr we have to purchase parts.

We have to produce and we have to ship. So we could have some impact within the second half, however a lot of the restoration, even when the market could also be get better within the second half, we are going to see this in revenues late within the yr and perhaps the final months of the yr and into 2025.However the good factor is that we’re beginning to see the market get better.

And by the best way, thanks, Antoine, to your good phrases. And with this, Lars, are you able to cowl the opposite two?

Lars Ihlen

Sure. So I feel we are able to cowl the 2 on the identical time, kind of. So okay, as you understand, Antoine, we’ve got guided the yr that we are going to be optimistic in working capital after curiosity and tax, however earlier than restructuring prices. In order you possibly can see from the press launch, what we’re saying for H1 is that sure, although we’re reporting a web — or free money stream after curiosity and tax at minus €19 million. Whenever you right for the restructuring value, we’re at plus €14 million. So there may be roughly €35 million of restructuring prices has burdened the group outcome within the first quarter.

Which means we’re forward of our goal for this parameter. And even when we can’t anticipate to see the identical degree of optimistic enhancements on the working capital going ahead. We maintained our steerage, which signifies that we’re not anticipating to see this materially worse both for the second half.

Antoine Lebourgeois

Okay. Thanks.

Operator

[Operator Instructions] Gents, there aren’t any extra questions registered presently.

Luis Martinez-Amago

Okay. Thanks very a lot to all of you. And thanks for Theirry and Lars as nicely. Thanks very a lot.

Lars Ihlen

Okay. Thanks, all people. Good night. Have a pleasant summer time. Bye-bye.

Operator

Girls and gents, this concludes the convention name and webcast. Thanks all to your participation. Chances are you’ll now disconnect. Thanks.