Tarkett H1 results: performance reflecting progressive sales
recovery and inflation in purchasing and freight costs in Q2
H1 results: performance reflecting progressive sales
recovery and inflation in purchasing and freight costs in
Q2
Q2 and Half Year 2021 Results
- Net revenues up +2.0% in H1 2021 versus H1 2020 thanks
to Q2 2021 performance (revenues up +16% organically in Q2 2021),
reflecting organic growth of +6.3% and negative forex
impacts;
- Adjusted EBITDA at €112.7 million in H1 2021, or
8.9% of net revenues (versus 8.6% in H1 2020) as margin recovery
was impeded by inflation in purchasing and freight costs in
Q2;
- Adjusted EBIT of €37.9 million versus €25.1 million in
H1 2020;
- Net profit breakeven in H1 2021 compared to a loss of
-€64.9 million in H1 2020, which included a non-cash impairment
charge of -€54 million;
- Free cash flow of -€43.9 million in H1 2021, a lower
cash consumption than its usual seasonality reflecting a low level
of inventories due to shortages in the supply chain;
- Net debt at €523.6 million well under
control, reflecting a net financial leverage of 1.8x (after IFRS16
application) at the end of June 2021 compared to 2.8x at end of
June 2020;
- Recovery remains muted due to slow improvement in
Workplace and Hospitality. Inflation in purchasing costs and raw
material shortages accelerated recently, resulting in a negative
inflation impact now estimated at €130 million in 2021 (versus €100
million anticipated in April);
- Therefore the Group expects its 2021
Adjusted EBITDA margin to be below its 2020 margin of 10.6%. The
Group confirms, as announced in April, that it will not reach its
mid-term target (at least 12%) by 2022 and anticipates that it will
be delayed by at least one year.
Paris, July 29, 2021: The
Supervisory Board of Tarkett (Euronext Paris: FR0004188670 TKTT)
met today and reviewed the Group’s consolidated results for the
half year of 2021.
The Company uses alternative performance
indicators (not defined by IFRS) described in appendix 1 (page
6):
€ million |
H1 2021 |
H1 2020 |
Change |
Net sales |
1,261.2 |
1,237.0 |
+2.0% |
of which organic change |
+6.3% |
- |
Adjusted EBITDA |
112.7 |
106.3 |
+6.0% |
% net sales |
8.9% |
8.6% |
Adjusted EBIT |
37.9 |
25.1 |
+50.8% |
% net sales |
3.0% |
2.0% |
Result from operations (EBIT) |
30.2 |
-43.6 |
-169.4% |
% net sales |
2.4% |
-3.5% |
Net profit attributable to owners of the
Company |
0.3 |
-64.9 |
-100.4% |
Fully diluted Earnings per share (€) |
0.00 |
-1.00 |
Free cash-flow |
-43.9 |
-75.9 |
-42.2% |
Net Debt |
523.6 |
728.0 |
-28.1% |
Leverage (net debt to adjusted EBITDA) |
1.8x |
2.8x |
- H1 Net sales and Adjusted EBITDA by
segment
|
Net Sales |
Adjusted EBITDA |
in euro millions |
H1 2021 |
H1 2020 |
% change |
Organic change |
H1 2021 |
H1 2020 |
H1 2021 Margin |
H1 2020 Margin |
EMEA |
445.3 |
405.6 |
+9.8% |
+8.7% |
59.1 |
46.6 |
13.3% |
11.5% |
North America |
352.4 |
357.7 |
-1.5% |
+6.9% |
27.4 |
32.5 |
7.8% |
9.1% |
CIS, APAC & LATAM |
254.7 |
222.9 |
+14.3% |
+20.1% |
39.2 |
32.4 |
15.4% |
14.5% |
Sports |
208.9 |
250.7 |
-16.7% |
-10.7% |
12.4 |
18.9 |
6.0% |
7.6% |
Central Costs |
- |
- |
- |
- |
(25.4) |
(24.1) |
- |
- |
TOTAL |
1,261.2 |
1,237.0 |
+2.0% |
+6.3% |
112.7 |
106.3 |
8.9% |
8.6% |
The EMEA segment reported net
revenues of €445.3 million, up +9.8% reflecting an organic growth
of +8.7% and negative forex impacts mostly related to the Swedish
krona. The organic increase reflected solid growth in Residential
and improved trends in Commercial thanks to Healthcare and
Education. Workplace was still affected by the lack of investment
decisions and therefore commercial carpet sales remained lower than
last year. The level of activity was particularly dynamic in
France, Italy and Portugal which recorded a rapid recovery and
reported revenues above 2019 levels.
The EMEA segment recorded an Adjusted EBITDA
margin of 13.3%, up 180 basis point compared to H1 2020. This
improvement reflected the volume recovery coupled with solid cost
reduction, but was partially offset by further increase in
purchasing and freight costs. In addition, shortages of raw
materials and lower freight availability contributed to the
inflation. Therefore additional selling prices increases were
implemented at the end of the semester.
The North American segment
reported net revenues of €352.4 million, down -1.5% compared to H1
2020, reflecting an organic growth of +6.9% and a negative forex
impact related to the depreciation of the dollar versus the euro
over the period. After a tough start of the year, revenues in
Commercial started recovering in Q2, mainly driven by Healthcare
and Education. Hospitality improved gradually compared to last
year, but Workplace was still lagging behind. As a result, carpet
sales remained weak in the first half, while resilient products
recorded solid growth. Rubber and accessories products also
progressed. The activity in Residential remained very dynamic
reflecting solid trends in home renovation and new
construction.
The Adjusted EBITDA margin amounted to 7.8% in
H1 2021 compared to 9.1% in H1 2020, reflecting a negative mix
related to lower carpet volumes and inflation in purchasing and
freight costs, which started earlier in the region and have been
particularly significant in the first half. Therefore Tarkett has
implemented additional selling price increases to mitigate the
inflation impact. In addition, the Group’s cost reduction actions
were successful in further improving the cost structure.
Net revenues in the CIS, APAC and Latin
America segment amounted to €254.7 million, up 14.3%
compared to H1 2020, largely driven by a very strong organic growth
(+20.1%). Volumes continued to increase significantly in CIS
countries thanks to a dynamic demand for residential products. The
growth, however, slowed down at the end of the first semester due
to new lockdowns and some product availability issues related to
raw material shortages. This strong performance was mitigated by a
negative currency effect owing to a weaker rubble, partially offset
by several rounds of selling price increases (the net effect on
sales of currency and selling price adjustments in the CIS amounts
to -€9.4m). The level of activity in APAC progressed and the order
book improved despite new lockdowns. Revenues grew in Latin America
thanks to a solid performance in Brazil, mostly driven by the
success of the LVT offer and significant selling price increases to
offset Brazilian real weakening.
The CIS, APAC and Latin America segment reached
an Adjusted EBITDA margin of 15.4% in H1 2021, up 90 basis points
versus H1 2020. Profitability increased as a result of strong
growth in CIS countries coupled with further cost savings. Tarkett
also significantly increased its selling prices to compensate for
the currency depreciation and also to partially offset the
inflation in raw materials and freight.
Net revenues of the Sports
segment amounted to €208.9 million, down -16.7% mostly
reflecting an organic decline of -10.7% and a negative forex impact
related to the depreciation of the dollar versus the euro. Several
projects were postponed and cancelled at the beginning of the year.
Sales remained below last year but the order book started improving
in Q2. The revenue decrease was mostly driven by North America,
which demonstrated a solid resilience in H1 2020. In that region,
the slowdown affected artificial turf and running tracks businesses
in North America, partially offset by improvements in EMEA.
Sports recorded an Adjusted EBITDA margin of
6.0%, down 160 basis point compared to H1 2020. This decrease was
mostly driven by the lower activity and higher purchasing and
freight costs.
- Group H1 2021 results
Group net revenues amounted to
€1,261.2 million, up +2% on a reported basis and +6.3% organically
compared to H1 2020 thanks to a favorable comparison basis (H1 2020
revenues were down -12.6% organically). After a challenging first
quarter, like-for-like revenues grew in Q2 driven by solid growth
in residential across Tarkett’s key segments and soft recovery in
commercial. Some end-user commercial segments are still penalized
by the lack of investment decisions. The CIS, APAC and Latin
America segment remained very dynamic throughout the first half,
while EMEA and North America started recovering in Q2. In Sports,
the level of activity was still down compared to H1 2020 which was
particularly resilient notwithstanding the pandemic. While the
number of projects is still lower than last year, the order book is
however showing some improvement.
Adjusted EBITDA amounted to
€112.7 million in H1 2021 compared to €106.3 million in H1 2020 and
reached 8.9% of net sales compared to 8.6% in H1 2020. The
improvement was driven by volume recovery that resulted in a
positive impact on the Adjusted EBITDA of +€18.0 million in
H1 2021.
As announced previously, inflation in raw
material and freight costs intensified throughout the first half.
Purchasing costs penalized the Adjusted EBITDA by -€38.1 million
compared to H1 2020 reflecting higher raw material prices and
rapidly increasing freight costs. Shortages in the supply chain
were numerous and contributed to the cost increase and resulted in
a low level of inventories for the season. In response to this
inflation, Tarkett has been implementing additional selling price
increases. Sales pricing generated a positive impact of €12.0
million, offsetting around one third of purchasing costs inflation.
Salary increases amounted to -€5.2 million year-over-year,
reflecting contained wage increases of 2020 and 2021.
Tarkett remained focused on improving its cost
base and pursue its Change to Win initiatives to improve the cost
structure. In total, the Group delivered €46.9 million of cost
savings in H1 2021, out of which €27.2 million of productivity
gains and €19.7 million of SG&A cost reduction. Structural cost
savings amounted to €38 million and will be well above the initial
target of €30 million in 2021.
Exchange rates (CIS countries excluded) had a
positive effect amounting to +€0.9 million, as the impact of the
dollar depreciation versus the euro and negative exchange rates in
Sweden were fully offset at the Adjusted EBITDA level. The
net impact of currency and selling price movements in the CIS
countries also had a positive effect (lag effect of +€3.0 million)
as significant selling prices increases were deployed in the region
to offset the ruble depreciation and mitigate raw material
inflation.
EBIT amounted to €30.2 million
and Adjusted EBIT to €37.9 million. Depreciation
and amortization was down compared to H1 2020 due to the asset
impairment recorded in H1 2020 and last year capex containment.
The adjustments to EBIT (details in Appendix 1)
represented €7.7 million in H1 2021, including restructuring costs
of €5.9 million due to the global footprint optimization and
SG&A cost savings program. A gain of €2 million on asset
disposal is also recorded in H1 2021, while adjustments included a
non-cash impairment charge of - €54 million and tax write-off of
-€4 million in H1 2020.
Financial expenses increased by
€3.0 million to reach -€19.7 million in H1 2021. The decrease in
interest expenses driven by lower financial debt was offset by
one-off costs related to the Schuldschein refinancing. Financial
leases remained stable year-over-year. Income tax
charge amounted to -€10.6 million in H1 2021, reflecting the non
recognition of deferred tax assets related to losses carried
forward, mainly in France and higher BEAT tax in the US and CVAE in
France reflecting the profit improvement compared to last year.
Net profit was breakeven in H1 2021 compared to a
loss of €64.9 million in H1 2020.
- Balance sheet and cash flow
statement
In the first half of 2021, Tarkett recorded a
negative change in working capital which was lower than previous
years. Due to the seasonality of the business, Tarkett is usually
increasing its inventories during the first half in view of Q3
activity peak. Since the end of Q1 2021, shortages and disruptions
in the supply have been numerous, notably for oil derivatives. As a
result, inventory levels were lower than usual at the end of June
and seasonality was less pronounced.
At the end of June, Tarkett had transferred €132
million of receivables to the non-recourse factoring program, which
is almost stable compared to the end of December 2020 with a
decrease limited to -€1.3 million. The non-recourse factoring
program is excluded from the net debt calculation.
The Group continued to tightly manage its
capital spending, which was still controlled in the first half.
Capex amounted to €24 million in H1 2021, versus
€34 million in H1 2020.The Group plans to increase its capital
spending in the second half compared to last year.
Tarkett generated a free
cash-flow of -€43.9 million in H1 2021, a lower cash
consumption than its usual seasonality reflecting a low level of
inventories.
Gross debt amounted to €681.0 million and cash
to €157.3 million at the end of June 2021. Reported net
financial debt amounted to €524 million at the end of
December including €109 million of leases recorded under IFRS 16
(vs. net financial debt of €728 million at the end of June 2020).
This represents a financial leverage of 1.8x
Adjusted EBITDA at the end of June 2021, which is at the low end of
the mid-term target range set up by the Group upon announcement of
Change to Win strategic roadmap in June 2019 (Adjusted EBITDA to
Net Debt after application of IFRS 16 comprised between 1.6x and
2.6x at each year-end).
- 2021 Outlook and mid-term financial
objectives
Residential has been growing in H1 across
Tarkett’s key regions and is expected to keep on growing in H2. In
Sports, the pipeline of activity started recovering in Q2 and the
order book has improved. In other commercial segments, demand
remains globally below 2019 levels, particularly in Workplace and
Hospitality. As a result, the Group expects its revenue growth to
slowdown in H2 2021 compared to Q2 2021, which benefitted from a
favorable comparison basis.
In this context of progressive recovery, Tarkett
is pursuing its Change to Win strategic roadmap to foster
sustainable growth and gain market shares. The Group is also
maintaining a strong focus on improving its cost structure and
pursuing its cost reduction initiatives, including actions on its
industrial footprint and on the SG&A cost base. Tarkett expects
to generate at least €50 million of structural cost reduction in
2021 (compared to €30 million initially expected as announced in
February 2021).
Raw material prices and freight costs further
increased in Q2 2021, and Tarkett now expects inflation impact to
be around €130 million in 2021 (versus €100 million anticipated at
the end of April). Tarkett is proactively managing its selling
prices to mitigate this inflation and has already planned
additional selling price increases in flooring in H2.
Given this inflationary context and the slow
recovery of some commercial segments, Tarkett confirms that the
2022 Adjusted EBITDA margin objective of at least 12% will be
achieved later than initially anticipated. The Group now
anticipates it will be delayed by at least one year, at the soonest
in 2023.
The Group plans to increase its capital spending
compared to the constrained level of 2020. Notwithstanding higher
working capital requirements, the Group anticipates to generate
positive free cash flow in 2021. With net financial leverage at
1.8x at the end of June, Tarkett is already operating within its
target for the end of the year (net debt to Adjusted EBITDA after
IFRS 16 application between 1.6x and 2.6x at each year-end).
The audited consolidated financial statements
for 2021 interim results are available on Tarkett’s website
https://www.tarkett.com/en/content/financial-results. The analysts’
conference will be held on Friday July 30, 2021 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
- October 28, 2021: Q3 2021 financial results - press release
after close of trading on the Paris market and conference call the
following morning
Investor Relations
ContactInvestors@tarkett.com
Media contactsTarkett -
Véronique Bouchard Bienaymé - communication@tarkett.com Brunswick -
tarkett@brunswickgroup.com - Tel.: +33 (0) 1 53 96 83 83
About Tarkett
With a history of 140 years, Tarkett is a
worldwide leader in innovative flooring and sports surface
solutions, with net sales of € 2.6 billion in 2020. 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 more
than 12,000 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 and to reducing
its carbon footprint, the Group has implemented an eco-innovation
strategy based on Cradle to Cradle® principles, fully aligned with
its Tarkett Human-Conscious Design™ approach. Tarkett is listed on
Euronext Paris (compartment B, ISIN: FR0004188670, ticker: TKTT).
www.tarkett.com
Appendices
1. Reconciliation table for alternative performance
indicators (not defined by IFRS)
- 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 H1 2021, a -€9.4
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.
€ million |
Net Sales H1 2021 |
Net Sales H1 2020 |
% Change |
o/w exchange rate effect |
o/w scope effect |
o/w organic change |
|
|
Total Group – Q1 |
558.8 |
610.7 |
-8.5% |
-4.7% |
- |
-3.8% |
|
Total Group – Q2 |
702.4 |
626.3 |
+12.1% |
-4.0% |
- |
+16.2% |
|
Total Group - H1 |
1,261.2 |
1,237.0 |
+2.0% |
-4.3% |
- |
+6.3% |
|
- 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.
€ million |
Adjusted EBITDA H1 2021 |
Adjusted EBITDA H1 2020 |
% margin 2021 |
% margin 2020 |
|
|
Total Group – Q1 |
34.0 |
42.4 |
+6.1% |
+6.9% |
|
Total Group – Q2 |
78.7 |
64.0 |
+11.2% |
+10.2% |
|
Total Group – H1 |
112.7 |
106.3 |
+8.9% |
+8.6% |
|
€ million |
Of which adjustments |
H1 2021 |
Restructuring |
Gains / losses on assets sales / impairment |
Business combination |
Share-based payments |
Other |
H1 2021 adjusted |
Result from operating activities (EBIT) |
30.2 |
5.9 |
(2.0) |
0.0 |
1.7 |
2.0 |
37.9 |
Depreciation and amortization |
74.9 |
- |
0.1 |
- |
- |
- |
74.9 |
Others |
(0.2) |
- |
- |
- |
- |
- |
(0.2) |
EBITDA |
104.9 |
5.9 |
(1.9) |
0.0 |
1.7 |
2.0 |
112.7 |
- Free cash-flow is defined as cash generated
from operations, plus or minus the following inflows and outflows:
working capital, payment of lease liabilities, net capital
expenditure (investments in property plant and equipment and
intangible assets net from proceeds), net interest received (paid),
net income taxes collected (paid), and miscellaneous operating
items received (paid).
Free cash-flow reconciliation table (in €
million) |
H1 2021 |
H1 2020 |
Operating cash flow before working capital changes excl.
payment for lease liabilities |
103.2 |
96.4 |
Payment of lease liabilities |
(16.4) |
(16.4) |
Operating cash flow before working capital
changes |
86.9 |
80.0 |
Change in working capital |
(77.9) |
(102.2) |
o/w change in factoring programs (implemented in 2019) |
1.3 |
(16.7) |
Net interest paid |
(9.7) |
(11.1) |
Net taxes paid |
(15.3) |
(4.1) |
Miscellaneous operational items paid |
(3.9) |
(4.9) |
Acquisitions of intangible assets and property, plant and
equipment |
(29.8) |
(35.6) |
Proceeds from sale of property, plant and equipment |
5.9 |
1.9 |
Free Cash Flow |
(43.9) |
(75.9) |
- 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 December, the financial leverage
as per our credit documentation was at 1.5x 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.
in million euros |
|
June 2021 |
December 2020 |
June 2020 |
Net Financial Debt |
A |
524 |
474 |
728 |
of which Lease Liabilities |
|
109 |
109 |
97 |
Net Financial Debt pre-IFRS 16 |
B |
414 |
365 |
631 |
Adjusted EBITDA LTM |
C |
284 |
278 |
260 |
Lease charge |
|
(31) |
(31) |
(31) |
Adjusted EBTIDA LTM pre-IFRS16 |
D |
254 |
247 |
229 |
Financial leverage |
A/C |
1.8x |
1.7x |
2.8x |
Leverage as per covenants(1) |
B/D |
1.6x |
1.5x |
2.8x |
IFRS16 impact on leverage |
|
0.2x |
0.2x |
0.0x |
(1) 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) FY 2020, H2 and
Q4
Net sales by segment
H1 2020 |
1,237.0 |
+/- EMEA |
35.2 |
+/- North America |
24.7 |
+/- CIS, APAC & LATAM |
44.8 |
+/- Sports |
(26.8) |
H1 2021 LfL |
1,314.9 |
+/- Currencies |
(44.3) |
+/- Selling price lag effect in CIS |
(9.4) |
H1 2021 |
1,261.2 |
Q2 2020 |
626.3 |
+/- EMEA |
44.4 |
+/- North America |
46.4 |
+/- CIS, APAC & LATAM |
30.3 |
+/- Sports |
(19.8) |
Q2 2021 LfL (1) |
727.6 |
+/- Currencies |
(24.7) |
+/- Selling price lag effect in CIS |
(0.5) |
Q2 2021 |
702.4 |
Adjusted EBITDA by nature
H1 2020 |
106.3 |
+/- Volume / Mix |
18.0 |
+/- Sales Pricing |
12.0 |
+/- Raw Material & Freight |
(38.1) |
+/- Salary Increase |
(5.2) |
+/- Productivity |
27.2 |
+/- SG&A |
19.7 |
+/- Covid action |
(25.1) |
+/- One-offs & Others |
(6.0) |
+/- Selling price lag effect in CIS |
3.0 |
+/- Currencies |
0.9 |
H1 2021 |
112.7 |
Q2 2020 |
64.0 |
+/- Volume / Mix |
37.9 |
+/- Sales Pricing |
8.6 |
+/- Raw Material & Freight |
(32.4) |
+/- Salary Increase |
(2.6) |
+/- Productivity |
17.4 |
+/- SG&A |
7.7 |
+/- Covid actions |
(27.3) |
+/- One-offs & Others |
(1.3) |
+/- Selling price lag effect in CIS |
6.0 |
+/- Currencies |
0.7 |
Q2 2021 |
78.7 |
- Tarkett_H1 2021_Results_ENG
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