Solid Q3 performance: Increased profitability and strong
deleveraging
2020 Third Quarter Results
- Like-for-like revenues down -10.5% versus Q3 2019
(whereas Q2 organic change was down 20.3%) and net revenues down
-14.4% versus Q3 2019
- Adjusted EBITDA up at €118 million in Q3 2020 versus
€115 million in Q3 2019; margin at 15.2% of net revenues compared
to 12.7% in Q3 2019, up 250 basis points
- Significant cost reduction of €34 million in Q3,
including €16 million of structural savings
- Lower purchasing costs by €16 million in Q3, driven by
oil price declines in Q2 2020
- Deleveraging thanks to strong free cash flow
generation. Net financial debt, including leases recorded under
IFRS 16, of €585 million or 2.2x LTM Adjusted EBITDA at the end of
September
- Strong level of liquidity at the end of September (€1.1
billion)
- 2020 Adjusted EBITDA margin expected broadly in line
with last year’s margin (2019: 9.4%) and financial leverage
(financial debt to LTM Adj. EBITDA) below 3.0x at the end of
December
Paris, October 28, 2020: The
Supervisory Board of Tarkett (Euronext Paris: FR0004188670 TKTT)
met today and reviewed the Group’s consolidated results for the
third quarter 2020.
The Company uses alternative performance
indicators (not defined by IFRS) described in detail in appendix 1
(page 6). Adjusted EBITDA, as reported, is presented below after
IFRS 16 consideration:
€ million |
Q3 2020 |
Q3 2019 |
Change |
Net sales |
776.9 |
907.1 |
-14.4% |
of which organic growth |
|
|
-10.5% |
Adjusted EBITDA |
117.7 |
115.0 |
+2.4% |
% net sales |
15.2% |
12.7% |
Commenting on these results, CEO Fabrice
Barthélemy said: “Since the outbreak of the Covid-19
pandemic, we have been focused on protecting the health and safety
of our employees and customers and preserving profitability and
cash flows. In March, we accelerated cost reduction actions and
identified additional opportunities for cost savings. We have
successfully delivered so far and have demonstrated the resilience
of our business model. In the third quarter, we increased our
profitability compared to last year, while deleveraging and
maintaining a strong level of liquidity. Amidst challenging market
conditions, our teams are fully committed to seize new
opportunities, gain market share and intensify our Change to Win
strategic roadmap deployment.”
- Q3 2020 highlights
As anticipated, demand remained below last
year’s level in Q3 2020. The resurgence of the pandemic and partial
lockdowns continue to affect investment decisions and customer
behaviors. Some key end-user markets are particularly impacted
(Workplace, Sports, Hospitality), while Healthcare and Residential
are more dynamic.
Specific safety and sanitary measures are still
in place in all our production facilities and offices. During the
quarter, all manufacturing sites were able to produce and deliver
to customers seamlessly while adapting to the lower level of
demand.
The Group successfully deployed Change to Win
strategic actions to structurally reduce the cost base. In
addition, short term measures have allowed to further flex costs,
leading to a total cost reduction of €34m in the quarter.
Additional actions have been identified and will be deployed in the
coming quarters.
Thanks to a strong focus on customer receivables
and inventory, working capital was reduced compared to end of June.
Capex was contained and will be around €80 million in 2020. The
Group generated a strong free cash flow in Q3, leading to
significant deleveraging compared to the end of June. Net financial
debt, including leases recorded under IFRS 16, amounted to €585
million at the end of September (€728 million at end June 2020),
which represents a financial leverage of 2.2x LTM Adjusted EBITDA
(2.8x at end of June).
Furthermore, the Group ended the quarter with a
strong level of liquidity of €1.1 billion, out of which €825
million in undrawn committed credit lines and €258 million in
cash.
- Net sales by segment
€ million |
Q3 2020 |
Q3 2019 |
% change |
% organic change |
EMEA |
212.6 |
223.5 |
-4.9% |
-4.7% |
North America |
184.4 |
230.1 |
-19.9% |
-15.0% |
CIS, APAC & LATAM |
156.6 |
171.0 |
-8.4% |
+1.8% |
Sports |
223.2 |
282.4 |
-21.0% |
-19.1% |
TOTAL |
776.9 |
907.1 |
-14.4% |
-10.5% |
The EMEA segment reported net
revenues of €212.6 million, down -4.9% compared to Q3 2019, mainly
reflecting a revenue decline of -4.7% on a like-for-like basis.
Residential activity recorded revenue growth in the quarter. In
Commercial, resilient products have been progressively recovering.
The demand for commercial carpet remained weak during the quarter
due to its higher exposure to the Workplace segment, but
sequentially improved compared to Q2 2020. Overall, the performance
improved sequentially compared to Q2 2020 in all countries outside
the Nordics, which had been highly resilient over the course of H1
2020. France and Germany were at the forefront of this improvement.
The North American segment
reported net revenues of €184.4 million, down -19.9% compared to
last year, reflecting the -15.0% revenue decline on a like-for-like
basis and the depreciation of the dollar versus the euro during the
quarter. The level of activity sequentially improved compared to Q2
(-32.0% in Q2 2020). Commercial activities have been slowly
recovering as they were penalized by uncertainties in the Workplace
and Hospitality segments. Conversely, Residential improved due to
favorable refurbishment and new home construction trends. Given the
low level of demand, furlough was still in place at the beginning
of the quarter.
Net revenues in the CIS, APAC and Latin
America segment were €156.6 million, down -8.4% in Q3
2020, due to unfavorable exchange rate fluctuations driven by the
Russian ruble and the Brazilian real. Organic growth was at +1.8%
in Q3 reflecting volume increases in CIS countries, which benefited
from dynamism in residential activity. This good performance was,
however, partially offset by a negative lag effect (net effect of
currency and selling price adjustments) during the quarter. The
level of activity remained depressed in APAC during the quarter as
some countries were affected by second waves of Covid-19. Australia
was particularly penalized by a strict second lockdown. The Group
was successful in growing organically in Latin America after a
significant decline in Q2 2020, mainly due to price increases.
As anticipated, net revenues of the
Sports segment were down -21.0% compared to last
year in the quarter, driven by a lower activity (-19.1% on a
like-for-like basis) and a negative forex impact related to the
dollar depreciation versus the euro. The overall level and
seasonality of the business have been affected by projects being
delayed, postponed or cancelled. The activity in North America
significantly decreased compared to last year, after demonstrating
resilience in Q2 despite the shelter-in-place measures. The
slowdown was mostly driven by the turf business, which had been
particular buoyant over the past few years. In other regions,
activity remained below last year’s level but sequentially improved
compared to Q2 2020 which had been particularly weak.
- Adjusted EBITDA
Reported adjusted EBITDA amounted to €117.7
million in Q3 2020 compared to €115.0 million in Q3 2019. The
adjusted EBITDA margin reached 15.2%, a step improvement compared
to last year (Q3 2019: 12.7%). All Flooring segments recorded
margin improvement during the quarter. Restated from a positive IP
settlement which lifted the margin in Q3 2019, Sports also
increased its profitability.
The significant slowdown of activity penalized
EBITDA by -€34.5 million. It has been more than offset by the
combination of a positive inflation balance and a strong level of
cost reduction.
Selective increase in selling prices benefited
the results by +€2.7 million compared to last year. Purchasing
costs improved by +€15.5 million compared to Q3 2019, mainly
reflecting low oil prices in Q2. Wage inflation amounted to -€3.8
million in Q3 2020, reflecting salary increases implemented late
2019 and early 2020.
In addition, Tarkett achieved significant cost
reduction of €33.5 million in Q3 2020 compared to Q3 2019. The
Group pursued its optimization program across its manufacturing
sites with success, while substantially accelerating its SG&A
cost savings plan. Net productivity gains and SG&A cost savings
totaled €23.9 million, out of which €15.9 million was structural
savings. Since the beginning of the year, the Group generated €34.7
million of structural savings and is on track with its annual
target which has been enhanced on September 28th 2020 (above €45
million).
Tarkett also maintained some of its specific
Covid-19 measures during the quarter, such as furlough in the US in
early Q3. These measures yielded €9.6 million of savings.
Exchange rates (CIS countries excluded) had a
negative effect amounting to -€5.1 million. This decrease reflected
the depreciation of the dollar versus the euro and negative
exchange rate fluctuations related to the Norwegian krona and the
Brazilian real. The net impact of currency and selling price
movements in the CIS countries also had a negative effect (lag
effect of -€3.4 million) driven by the devaluation of the
ruble.
- Cost reduction breakdown Q3 and 9M
2020
Q3 2020
€ million |
Productivity gains and SG&A |
o/w structural actions |
Covid-19 specific measures |
o/w governmental support |
Total cost reduction |
Gross profit |
11.9 |
11.9 |
2.4 |
2.7 |
14.3 |
SG&A |
12.0 |
4.0 |
7.1 |
0.9 |
19.1 |
Total Q3 |
23.9 |
15.9 |
9.6 |
3.6 |
33.5 |
9M 2020
€ million |
Productivity gains and SG&A |
o/w structural actions |
Covid-19 specific measures |
o/w governmental support |
Total cost reduction |
Gross profit |
21.7 |
21.7 |
12.2 |
8.7 |
33.9 |
SG&A |
24.1 |
13.0 |
26.2 |
5.5 |
50.3 |
Total 9M |
45.8 |
34.7 |
38.4 |
14.2 |
84.2 |
- FY 2020 Outlook
Significant uncertainties remain on demand level
as the pandemic is still active, with new lockdowns enacted across
key regions. Tarkett therefore remains cautious on year end
activity. As a result, Tarkett anticipates revenue decline in H2
2020 broadly in line with H1 2020 (organic change: -12.6% in H1
2020). North America is expected to sequentially improve in Q4 2020
compared to Q3 2020, notably due to the favorable comparison basis
(Q4 2019 organic change: -18.9% in North America).
Thanks to ongoing achievements in cost
reduction, Tarkett targets an Adjusted EBITDA margin for 2020
broadly in line with last year’s level (2019 margin: 9.4% of net
revenues) and a financial leverage below 3.0x. The leverage
objective (net financial debt to Adjusted EBITDA between 1.6x and
2.6x at year end) has been suspended on April 8th 2020 due to the
context.
- Confirmed mid-term objectives
The longer-term impact of the Covid-19 pandemic
on demand has yet to be seen. Some end-user segments, such as
Workplace and Sports, are expected to remain penalized at least in
the first part of 2021. However, 2020 performance is demonstrating
the resilience of Tarkett business model even in a depressed
environment.
The Group will continue to strengthen its cost
actions and maintain selectivity in its investments. Tarkett will
also pursue its Change to Win strategic initiatives to foster
sustainable growth and gain market share. This includes leveraging
its strong expertise in Healthcare and Education, developing
innovative and environmentally-friendly solutions for customers,
accelerating the deployment of an ambitious circular economy
program.
The Group stated upon its interim release that
its mid-term objectives are still valid. Organic growth is targeted
above GDP growth in key regions in 2021 and 2022. Furthermore,
Tarkett aims to reach an Adjusted EBITDA margin of at least 12% by
2022. Lastly, the Group targets a financial leverage comprised
between 1.6x and 2.6x at each year end of 2021 and 2022.
The analysts’ conference will be held on
Thursday October 29, 2020 at 11:00 am CET and an
audio webcast service (live and playback) along with the results
presentation will be available on:
https://www.tarkett.com/en/content/financial-results
This press release may contain forward-looking
statements. Such forward-looking statements do not constitute
forecasts regarding results or any other performance indicator, but
rather trends or targets. These statements are, by their nature,
subject to risks and uncertainties as described in the Company’s
annual report registered in France with the French Autorité des
Marchés financiers available on its website (www.tarkett.com).
These statements do not reflect the future performance of the
Company, which may differ significantly. The Company does not
undertake to provide updates of these statements.
Financial calendar
- February 18, 2021: Q4 and Full Year 2020 financial results –
press release after close of trading on the Paris stock exchange
and conference call the following morning
- April 28, 2021: Q1 2021 financial results - press release after
close of trading on the Paris stock exchange and conference call
the following morning
- July 29, 2021: Q2 and H1 2021 financial results – press release
after close of trading on the Paris stock exchange and conference
call the following morning
- October 28, 2021: Q3 2021 financial results - press release
after close of trading on the Paris stock exchange and conference
call the following morning
Investor Relations Contact
Tarkett – Emilie Megel – emilie.megel@tarkett.com - Tel.: +33 (0) 1
41 20 46
39
Media contactsTarkett -
Véronique Bouchard Bienaymé - communication@tarkett.com Brunswick -
tarkett@brunswickgroup.com - Tel.: +33 (0) 1 53 96 83 83Hugues
Boëton – Tel. : +33 (0)6 79 99 27 15 – Benoit Grange – Tel. :
+33 (0)6 14 45 09 26
About Tarkett
With a history of 140 years, Tarkett is a
worldwide leader in innovative flooring and sports surface
solutions, with net sales of €3 billion in 2019. Offering a wide
range of products including vinyl, linoleum, rubber, carpet, wood,
laminate, artificial turf and athletics tracks, the Group serves
customers in over 100 countries across the globe. Tarkett has
12,500 employees and 33 industrial sites, and sells 1.3 million
square meters of flooring every day, for hospitals, schools,
housing, hotels, offices, stores and sports fields. Committed to
change the game with circular economy, the Group has implemented an
eco-innovation strategy based on Cradle to Cradle® principles, with
the ultimate goal of contributing to people’s health and wellbeing,
and preserving natural capital. Tarkett is listed on Euronext Paris
(compartment B, ISIN: FR0004188670, ticker: TKTT) and is included
in the following indices: SBF 120 and CAC Mid 60. www.tarkett.com.
Appendices
1/ Alternative performance indicators
definitions
- Organic growth measures the change in net
sales as compared with the same period in the previous year, at
constant scope of consolidation and exchange rates. The exchange
rate effect is calculated by applying the previous year’s exchange
rates to sales for the current year and calculating the difference
as compared with sales for the current year. It also includes the
impact of price adjustments in CIS countries intended to offset
movements in local currencies against the euro. In Q3 2020, a
-€13.1 million negative adjustment in selling prices was excluded
from organic growth and included in currency effects.
- Scope effects reflect:
- current-year sales for entities not included in the scope of
consolidation in the same period in the previous year, up to the
anniversary date of their consolidation;
- the reduction in sales relating to discontinued operations that
are not included in the scope of consolidation for the current year
but were included in sales for the same period in the previous
year, up to the anniversary date of their disposal.
Net SalesIn € million |
2020 |
2019 |
Change |
o/w exchange rate effect |
o/w scope effect |
o/w organic change |
|
|
Total Group – Q1 |
610.7 |
624.5 |
-2.2% |
+0.7% |
- |
-2.9% |
|
Total Group – Q2 |
626.3 |
787.8 |
-20.5% |
-0.2% |
- |
-20.3% |
|
Total Group – H1 |
1,237.0 |
1,412.3 |
-12.4% |
+0.2% |
|
-12.6% |
|
Total Group – Q3 |
776.9 |
907.1 |
-14.4% |
-3.8% |
- |
-10.5% |
|
Total Group – 9M |
2,013.8 |
2,319.4 |
-13.2% |
-1.4% |
- |
-11.8% |
|
- Adjusted EBITDA is the operating income before
depreciation, amortization and the following adjustments:
restructuring costs, gains or losses on disposals of significant
assets, provisions and reversals of provisions for impairment,
costs related to business combinations and legal reorganizations,
expenses related to share-based payments and other one-off expenses
considered non-recurring by their nature.
Adjusted EBITDAin € million |
2020 |
% margin 2020 |
2019 |
% margin 2019 |
|
|
Total Group – Q1 |
42.4 |
6.9% |
43.1 |
6.9% |
|
Total Group – Q2 |
64.0 |
10.2% |
83.6 |
10.6% |
|
Total Group – H1 |
106.3 |
8.6% |
126.7 |
9.0% |
|
Total Group – Q3 |
117.7 |
15.2% |
115.0 |
12.7% |
|
Total Group – 9M |
224.0 |
11.1% |
241.6 |
10.4% |
|
Given the exceptional situation following the Covid-19
pandemic, the Group publishes its net financial debt and the
financial leverage ratio at the end of September 2020:
Net financial debt is defined as the sum of
interest bearing loans and borrowings minus cash and cash
equivalents. Interest bearing loans and borrowings refer to any
obligation for the repayment of funds received or raised that are
subject to repayment terms and interest charges. They also include
leases recorded
- under IFRS 16 since the application of the new accounting
norm.
- Financial leverage is the ratio financial net
debt including leases recorded under IFRS 16 to LTM (Last Twelve
Months) Adjusted EBITDA. As per our credit documentation, the
financial leverage retained for the covenant is calculated before
IFRS16 application. At the end of September, the financial leverage
as per our credit documentation was at 2.1x Adjusted EBITDA. The
covenant attached to our bank loans is tested at the end of each
semester. It has to be below 3.5x at end of June and below 3.0x at
end December. Tarkett obtained from its banking partners a covenant
holiday for 2020. The Schuldschein private placements are also
subject to a leverage covenant. It is only tested once a year and
has to be below 3.0x at the end of December.
€ million |
|
Dec. 19 |
June 20 |
Sept. 20 |
Reported Net Financial Debt |
A |
637 |
728 |
585 |
out of which Lease Liabilities |
|
89 |
97 |
93 |
Net Financial Debt pre-IFRS 16 |
B |
547 |
631 |
492 |
LTM reported Adjusted EBITDA |
C |
280 |
260 |
262 |
Lease charge |
|
(31) |
(31) |
(31) |
LTM Adjusted EBITDA pre-IFRS16 |
D |
250 |
229 |
231 |
Reported leverage(1) |
A/C |
2.3x |
2.8x |
2.2x |
Leverage as per covenants(2) |
B/D |
2.2x |
2.8x |
2.1x |
IFRS16 impact on leverage |
|
0.1x |
0.0x |
0.1x |
(1) Reference for Mid-term objective: Leverage comprised between
1.6x and 2.6x at year-end(2) Credit documentation is based on
pre-IFRS 16 accounting standards - Covenant is 3.5x end of June,
3.0x end of December
2/ Bridges (€ million)
Net sales bridge by segment |
Adjusted EBITDA bridge |
Q3 2019 |
907.1 |
+/- EMEA |
(10.6) |
+/- North America |
(34.5) |
+/- CIS, APAC & LATAM |
3.0 |
+/- Sports |
(53.5) |
Q3 2020 LfL |
811.5 |
+/- Currencies |
(21.5) |
+/- Selling price lag effect in CIS |
(13.1) |
Q3 2020 |
776.9 |
Q3 2019 |
115.0 |
+/- Volume / Mix |
(34.5) |
+/- Sales Pricing |
2.7 |
+/- Raw Material & Freight |
15.5 |
+/- Salary Increase |
(3.8) |
+/- Productivity |
11.9 |
+/- SG&A |
12.0 |
+/- Covid-19 measures |
9.6 |
+/- One-offs & Others |
(2.2) |
+/- Selling price lag effect in CIS |
(3.4) |
+/- Currencies |
(5.1) |
Q3 2020 |
117.7 |
9M 2019 |
2,319.4 |
+/- EMEA |
(71.4) |
+/- North America |
(114.3) |
+/- CIS, APAC & LATAM |
(21.7) |
+/- Sports |
(66.3) |
9M 2020 LfL |
2,045.7 |
+/- Currencies |
(14.9) |
+/- Selling price lag effect in CIS |
(17.0) |
9M 2020 |
2,013.8 |
9M 2019 |
241.6 |
+/- Volume / Mix |
(112.3) |
+/- Sales Pricing |
4.0 |
+/- Raw Material & Freight |
24.0 |
+/- Salary Increase |
(11.7) |
+/- Productivity |
21.7 |
+/- SG&A |
24.1 |
+/- Covid-19 measures |
38.4 |
+/- One-offs & Others |
5.2 |
+/- Selling price lag effect in CIS |
(4.0) |
+/- Currencies |
(7.1) |
9M 2020 |
224.0 |
- Tarkett_Q3 2020_Results_ENG
Tarkett (EU:TKTT)
Graphique Historique de l'Action
De Fév 2024 à Mar 2024
Tarkett (EU:TKTT)
Graphique Historique de l'Action
De Mar 2023 à Mar 2024