Fnac Darty Sa Ord

Ladies and gentlemen, hello and welcome to the conference for the semestral results of NACDARTI. I will give the floor to Enrique Martinez. You have the floor. Thank you very much. Hello, everyone. I would like to thank you for being connected today with us for this conference call dedicated to the results of the first semester of NACDARTI. We will present those results with Jean-Luc Clotinier, who is with me today, before we start talking about the details of the financial elements I would like to talk about a few elements which were in the headlines those past few days. We confirmed yesterday that a second inquiry wasn't going after the irregularities which was observed in a very limited number of Dalit shops. After a series of internal control reviews, we made sure that the public prosecutor of Paris was aware of that since January 2021. And of course, we lodged a complaint. This judicial inquiry is not targeting the Fnac Dalit group, but is targeting individuals which were at the origin of those actions. A few collaborators decided to benefit from a few loopholes existing in our internal control systems in order to act this way. The group is condemning strongly those practices, even if it's not significant at the scale of the group. It remains illegal and completely unacceptable, especially if we take into account the practices and the ethic of the group and its collaborators. We are actively cooperating to the current inquiry, and we made sure that an external audit firm, PricewaterhouseCoopers, can help us in order to make sure that such accidents can't happen again. I would like to talk about something else. The group wished to participate with a few French e-commerce stakeholders to the e-commerce charter, which is supported by the Ministry of the Ecology called Transition Bavariae. Pompili and the Secretary of State for the Digital Economy said, oh, we have signed yesterday this common charter, which aim is to reduce environmental impact of the e-commerce activities. With this project, the group would like to make sure to reach ambitious actions regarding its e-commerce processes and also to accompany the customers in order for them to and have more knowledge when it comes to buy online. We would like to work for a more sustainable economy and we are very proud to be one of the stakeholders of this project. So now we will start to dive into the details and talk about the different elements of the financial elements for the same as the 2021. As usual, you will be able to find those documents on the website of the group. So now let's have a look at the third slide. I would first of all remind you that this semester was really impacted by the fact that we needed to carry on the health restrictions in all the different territories where connectivity is present. It is penalizing the operating conditions of our different shops and businesses and restricting They are usual activities because we needed to close down a few shops of our group, a few aisles sometimes, depending on the territories. For example, in France, more than 90 shops were closed. And all the shops were closed for a month and a half. And as you know, the ticketing services were really impacting. especially during the first semester because of the cancellation and the massive postponing of shows and cultural events. Today, the restrictions are not as stringent, but we need to abide by the personal protective measures, especially when it comes to the possibility to have access to a few shops. So now slide four. We are really happy of our activity level for this past semester. The different markets remained very dynamic. The online activity remained very important in parallel. And on top of that, we had a good performance in our different shops during this period. and we managed to once again attract new online customers during this period of time. So just in a nutshell, we had sound results which were registered for the first semester of 2021, and now we managed for the first semester to have an income of 3,465,000,000 euros, which is an increase, represents an increase by 21% in comparable data due to our sound operational execution and thanks to the work of other regions and the fact that the different product categories remained attractive. More than 28% of the group were done thanks to our digital platform and the attractivity of our platforms remained present. Our margin was reduced. was maintained and gross margin rate was 29.7% and we managed to have a very important product mix. We managed to compensate the lowering of the sales for the ticketing service for the first semester of 2021 because of the governmental measures and also because of the withdrawal of the activities of the natural decouverte shops. and because of the deductive technical effect of the franchise. During the second semester, the group managed to change around the trend for this gross margin rate with the dynamic for the second quarter, which was better than during the first quarter. Then the operational result was 34 million euros for the first semester of 2021 with an increase of €92 million compared with the first semester of 2020 for the same perimeter in spite of the ticket-in-service and the activity of the Iberian Peninsula which was impacted by the crisis. So to conclude, we are very happy about the results which are allowing us to be in advance regarding the UNCOM and to expect our personal results. So now slide five, we managed to really focus on the different product categories, which was really a boost for our income during the entire semester, especially because the technical and IT equipment really seduced or attracted our customers and were very successful because of the teleworking context. We also, and the television was also a key product with the broadcasting of the European football game. The cultural dimension was also crucial to this adventure and it was promoted in France especially because of the past culture. This launch in the Ontario Territory and this generalization in the Ontario Territory will help 10 million young people of 18 years of age to be able to use a price of 300 euros in order to buy books, audio, products, videos, or to buy tickets for shows in all the snack shops. Our partnership with the platform Z-Way allows us to distribute to different shops and in the group e-commerce platforms Swaper, one of the first rechargeable battery scooter, which can be recharged in 50 seconds. The home and design segment is really following a good trend with the deployment of a cuisine cooking Dati offer, which was carried on during the opening of 11 points of sales for per se and seven under the format of the franchise. And we knew that was an acceleration of the segment of the services with the launching June of three new offers for the repair services by the subscription which was the forefront of its new strategic plan every day. So now let's focus on the sixth slide. This semester was duly impacted by the presentation of our strategic plan every day. which has an ambition to be able to help us to embody the new standards of a successful omni-channel retail system of tomorrow. There is a digitalized form and the human-focused form. In order to do that, we have the growth of our U.S. activities, which will be crucial, and at the heart of our omni-channel strategy, we have gained two million two mediums of new clients on the web for the first semester 2021 associated to the Click and Collect, which was really successful. So we really tried to have the share of the active mixed customers both on two channels, the web channel and the different American motor shops, which was an increase of four points on the year by the end of June 2021 and we know that more than 70,000 sales were done this semester thanks to video conferences or via chats with sailors which shows that we knew how to use our new omnichannel trade levers. Also we carry on with our strategic plan with the opening of 18 new shops and 15 franchises allowing us to have a new fleet of 923 shops, among them 359 franchised by the end of June. Then, last but not least, we have got a trial period. It led to the deployment of four shopping shops in the Manor shops by the end of 2020, and now we are going forward in Switzerland, and we announced the opening of 27 shops by the end of the first semester of 2022. Thanks to these partnerships, MacDarty is now aiming to have an additional income of at least 100 million euros in the full year. And we have an intuitive impact on the free cash flow of the group expected, which was expected, which is 500 million euros of the period 2021 to 2023, in spite of the investment linked to the development of the partnerships, like Steven. So now we're going to try to develop a series of actions aiming to accompany our customers in order to consume more responsibly. and to make sure that our products are more sustainable and for better shelf life. And we have an opening with Wave 6 of 16 new points of sales, which will lead to a new number of points of sales of 130,000 in 2021. So we will try to have more at-home repair services representing 560,000 repairs in workshops or at home, which is an increase of 29% compared with the first semester 2020. There is also new certain classes for new trainings, which will be able to welcome new apprenticeships or technicians on the integrity of the territory. And for the third time in a row, Natura Decovert got the B Corp certification, showing its continued commitment with its customers in order to accompany them in a sustainable way of life. And on top of that, the group is carrying on with its actions in other areas linked to the environmental and social responsibility. Because of that, Natura Decovert confirmed its commitment for the climate. especially with the initiative Ambition for Climate, showing the concrete commitment of the big companies in the fight against climate change, presenting projects aiming to reduce the carbon footprint. When it comes to the services, we are trying to accelerate the deployment and the development of DARTMAX. Our subscription repair services for all the household appliances concern the fact that we would like to go from a transactional model to a subscription-based model. We currently launched three new offers in France, extending, hence, the covering of new categories of products. We have the small household appliances, our TV and cinema, sound and photo and multimedia. This complimentary offer is helping us to really meet the expectations of the customers when it comes to the repair services, with an ambition to reach at least 2 million subscribers for DatiMax by 2025. We are really... satisfied by the impact of our DARTIMA section on the evolution of the customer behavior. We observed that the basket of subscribers of DARTIMA is 25% higher than the average basket, which shows that there is an increase, a very crucial increase in value, which is linked to our service-based program. To conclude, I would say that we can keep on delivering on the operational point of view, except if we had supplying issues that we anticipated by the beginning of the year. And now we can start to, we have a good availability of the products for the second part of the year, and now there are the first key actions coming from every day that are ongoing, and I give the floor to Jean-Brieuc. So let's talk about the retail performance of each region before we talk about operational performance and financial performance of the groups. Let's start with slide nine. The French and Switzerland zone is in the most for us. So we have a growth of 22.6 percent. So as it was said, there was a closure of different shops and commercials and malls of more than 10,000 square meters for weeks, which led to the closure of 90 McDonald's shops on top of that the shops for selling products which were deemed non-essential led to the rise of sales on the semester but thanks to new distributed channels we can make sure to make sure that the move the cells from the closed shops to the shops which could remain open, and also the performance will contribute to progression, even if there is a high comparison base. And also the different equipment linked to what to do with TV, the telephones and IT products were increasing. even if there was a shortage of components mentioned before by Enrique. And also, they also tried to be more comfortable at home, so that's why they started to buy products of better quality. The air-clamatizer was the only category which was not as successful because there was not so many heatwaves as the past year. And also, the literary products were experiencing a strong growth, led by the book sector, which benefited from the maintenance of the possibility of shops to remain open, more shops to remain open, compared with the last year, and the launch of the Passe-Quinter for the young people of 18 years of age in all the snacks of France. The services are increasing. It is linked to the franchise, which is showing an increase of 63% of the sales on the semester, which is held by winning proximity format and also by a new system on the first semester and also a very good level of sales by the end of 2020. Twenty, the ticketing services, and also showing the impact of the semester after the government measures, and they're forbidding people from gathering, and so compared with the beginning of 2020, before the first lockdown period, which was not impacted by those measures. This strong dynamism of this Income with a good management of professional cost allowed us in France and Switzerland to have an operational result, a recurring operational result of 33 million euros, which means an increase of 78 million euros compared with last year. So now slide 10, it talks about the Iberian Peninsula. There was a growth of the income of 18.2 percent compared with the last semester. I would like to remind you that those shops were opened later. than the other regions, and after the first quarter, the growth was 3%. The area has a strong growth of 30% over the second quarter. Also, other product categories were experiencing a growth, especially phones and television, sound systems, and the book. IET has very strong growth, which is more innovative because of the basic very high effect, and then there is also macroeconomic environment which is penalized by the health crisis in Spain and Portugal, and also strong competition this semester, especially for technical products, so that's why they penalize the recurrent personal results of the area, which remain negative for the first semester with minus 4 million euros, but it is an increase compared with the past year with plus 8.5 million euros. So now let's talk about Belgium and Luxembourg in slide 11. So the Belgium and Luxembourgish area is impacted by a very strong growth of its income, an increase of 13 percent. This is a comparable data of the semester. It is helped by the sound performance of the different shops and the dynamic of the online sales. also the help of the teleworking systems, which are implemented within companies, boosting the sales for the household appliances and books. So there was the GERCURIC version of results of plus 5.6 million euros, an increase of 5 million euros compared to the first semester of 2020. So now let's talk about the P&L results in the slide 12. So I won't talk about the Gross margin rate, Enrique talked about at the beginning of the conference. Let's talk about the costs we mastered. We controlled the operational costs during the semester, which allowed us to have an income of 300 points as a base with 28.7%. This reduction was realized in spite of the increase of the personal charges. And as Erika said, the operational result is higher than what's gone into the first semester 2018, which was 32 million euros, so it's the same scope until clicking to account this year at the Covert. So it's a full year and outside of the CEC. with the issues of the ticketing services in the southern European countries. So this performance allows the group to reach the recurring operational growth margin rate for the first semester 2021 online with the one of the first semester 2019 for the comparable scope. So that's why when it comes to the non-recurrent Operational cost, it is 3 million euros, which is really below what's going on with the 2020. If we had a deprecation of the DATI brand for 13 million euros and the cost directly linked to the health crisis of 6 million euros, it means that the operational result is 32 million euros. So we had a new financial structure, which is OCEAN, an extension of the OCEF budget line, the OCEF line. thanks to the payment extension of the guarantee of the state-backed loan reimbursed last March, was compensated the interest gained registered with the fluctuation of our debt in 2021. So the net result of the group of the consolidated loans system is a growth of 136 million euros compared to the first semester of 2020 with 16 million euros after the accounting on the first semester of 2021 with the tax adjustment in link with the investment of the Dutch subsidiary BCC in November 2021. So now let's talk about the available free cash flow, the free cash flow by the end of June in slide 13. So it's a very thin free cash flow outside of the IFRS 16 of 560, 77 million euros, which is a decrease compared with past year. This decrease comes from the negative evolution of the working capital. So the first semester of 2021, we reached to constitute our stock in the context of the sales in growth and we anticipated the fact that we needed to buy new goods because there were shortages of the few components necessary to the manufacturing of the few products sold by the group. So when it comes to the capital expenditures, the group maintained a good management of the operational investment of the semester, which has a decrease of 4 million euros compared with last year and reaching 46 million euros compared with the everyday plan. The group is trying to maintain it in yearly investment spending with a normative level of around 120 million euros outside of the investment dedicated to the modernization of the logistic equipment, which could impact during the fiscal year and outside of investment linked to the partnership with MANRR. So the group remained confident that the fact that we would be able to reach €500 million of operational free cash flow generated in the period of CHIME 2021-2023. So now let's say a few words about the financial structure and you will be able to see all of that on slide 14. The financial situation of the group is healthy with more than 1.4 billion euros of equity. By the end of the first semester, the financial debt, net debt, financial debt of the group was traditionally higher at the end of the first year because of the seasonality of our activity. So by the 30th of June, 2021, high financial debt of the group outside of the IFRS 16 was 450 euros. 4 million euros on top of that. Just a reminder, the group announced last March the success of its new financing strategy, which was the reimbursing of all the state-backed loan, which was up to 500 million euros, and to extend the credit line to 500 million euros with a maximum maturity in 2028. And also, we're willing to try to reimburse the senior team loan facility of €200 million, which will reach to an end in April 2021, and also place convertible bonds up to €200 million by 2027. Thanks to these two new financial structures that the SNAC is optimizing the average cost of its debt with no major deadline for the reimbursement before 2024. Therefore, the group is now, by the end of June, around 500 million euros of free cash flows, allowing us to have an RCF of 500 million euros, which makes us very trustful regarding the uncertainties to be able, in order to face with, by trusting our position, the potential negative abolition of the health crisis. Then by the end of June, the lever that net ADA outside of the RFI 16 calculated on 18 months was 1.1 times. So it means that we will communicate on the annual yielded results after the shareholders come back with the Thank you very much.

As you understood, it's very complicated, the first half. needs to be encouraging. We want to review our expectations for higher expectations. The first house is quite encouraging that our activity is still impacted by the sanitary conditions. The new French government announcement seems to mean that there would be an impact on how to access the big shopping centers, and this could have an impact on the exploitation of our stores. So we are very careful about these measures. The economic turnover in the Iberian Peninsula slower than expected. In consequence, MacDarty stays confident but still careful on how we will perform on the second half and we will stay focused on our commercial execution to fulfill the big commercial meetings we will have, the big events we'll have, to also manage our cost and to generate cash flow with our objective from the everyday plan. And that is why with the first half that is encouraging, But within the ensure sanitary environment, the group will review its perspective 2021 with higher ones. We await turnover to increase by 5% in comparison to 2020, and we expect a current operational result between 2020 60 into 70 million euros. That is all I wanted to tell you today, and I am available with Jean-Brieuc to answer your questions. Ladies and gentlemen, if you'd like to ask a question, you can tap 01 on your phone. We have a first question. I have three cash rent questions. The first one is about the upgrade of the guidance on sales. Is it due to the very good performance on the second house or is it due to the because the future performance will also be higher on the second half. And what is the schedule? Is it between May and July? What are your expectations? Is there a strong reducing of our activity with the opening of bars, restaurants and others? And the final question about the cash flow. There is a risk here. Cash flow could be lower than in 2020. In your opinion, will the BFM change, will it be positive or negative, or will we need to renew our inventories again? Thank you for your questions. I will answer the first one, and then I'll let Jean-Marie answer the others. The first half, as we see, was really encouraging. For the second half, just to remind you of the fact, last year the second half was really huge. We had an increase of 8% and a real increase of our results. And our forecast here shows that we could have a similar result or a slightly lower result. So we expect the end of 2021 to be as 2019. But we think that we were very strong on our first half. We will be strong as well on our second half, but slightly less strong. And we take into account a lot of characteristics of features to calculate that. So this is just a forecast. We cannot be too precise. We think that we are on a good path and we will be able later to give you more details on the end of 2021. But we think that the turnover will be around 5% of increase. For July we cannot comment because As you know, it's still current. We cannot comment on the current situation. But we do not anticipate brutal changes in the current growth. So, of course, we stay very careful. But today we have a turnover that is higher than last year for the same period. And I think that the next week will be decisive for our group's success. Jean-Brieuc, the BFA at the end of the year, it's a bit like last year. It will depend on how we do in December. And of course, it could mean anything. It could go in any direction. We can see that on the last half of last year, we had a great BFR because we had low inventories. And now we have higher inventories, so it might impact the BFR negatively. So for the BFR, it will depend on the end of the year. As for the cash flow, there will be an increase of the EBITDA compared to last year. There will be in 2021 the decrease of the CRO and the decrease of corporate tax, so we will benefit from that. Usually we pay 40% and here it's going to decrease and then it would be 30-35%. As for cash flow, it will also decrease, so that will help with our cash flow. And again, the working capital requirement will probably decrease too. So here are the few details I can give you about how the cash flow will look at the end of the year. I can't give you all the details. Thank you, that was very clear. Thank you. There is another question from Florent from Nicat. You have the floor. Good evening. Congratulations for the results you presented tonight. I have a question... around a cadence. To go back to the July performances, I know that you don't want to communicate them, but can we have a trend for April, May, June, maybe? Are there any differences between those months? Because, as you know, we have a minus 5% on the second half. So did you see any slow, any decrease like in Maison du Monde? As for current operating margin, is it 5.2% for the second half? It would be a level unseen since 2016. So what could explain that 5.2% margin, that very, very low margin? I know that the ticket sale has been impacted, but we also integrated natural and decovert, and we also... split with BCC so this should have an impact as well. I would like more clarification on that. As for April, May and June, the comparison is really not easy to make because last year in June we had a very, very successful month so we cannot compare. However, what we've seen here is that we've expected and we had a very good trimester a very good quarter and of course sales have helped but it's not as much as for our competitors so yes we could be at the same level of 2019 and that would be very satisfying because it means that we've overcome the crisis and we've to have sales online and in stores, and we could have the same profitability rate as in 2019. So we would be very happy with that, and we're very satisfied with the performance we expect. And can we have an idea of the impact of the ticket sale on the EBIT to know what the margin would be? We won't give you the numbers, but it's quite significant. Two years ago, like for like, we had 278 million euros. So that would be our level for 2019. Another question, please. How about online sales profitability? Can you tell us, can you isolate that number and tell us how much it helps the margin? It's a very important question. As you can see, the profitability of the group is not an issue. It depends on many, many factors, on services, on accessories, on goods. However, we showed already at the end of 2020 that with 25% online sales, we can gain 7 to 8 points more in comparison to 2019. So we've shown that our online sales system is working. It's a system in itself, and that's also our... orientation adapted to go more to a subscription system, we need to have a cost margin profitability rate that is positive and that's the case for the sales, the online sales. Thank you. Ladies and gentlemen, if you wish to ask a question, you can select 01 on your phone. We have a question from Geoffroy Michelet from Autogeschelle. You have the floor. Good evening. Thank you for answering my question and congratulations for this online performance that is still growing. That's very impressive. Even if stores might close and the ratio has been turned, I want to talk about the online performance at the end of the year. What could it mean in terms of additional logistical costs? Thank you. The logistic are not concerned here. For this year, the system is already in place, thank God. It will really depend on the new sanitary restrictions. Will stores close or not? It will depend on that. Because at home delivery through stores can be impacted. We have a mix. It's about 50-50. It's quite important. We hope that the stores will stay open to sale, of course, but also to maintain online sales. So we think that it will stay coherent with 2020. We'll show what we can see. But one thing is sure, we've grown, we've matured. Between 18 months, we had 7 million more clients on our online platform. So of course this has an impact on our online sales. And it didn't happen overnight. So we think that there will be more and more hybrid behavior by our customers. And this will probably be the consequence of the COVID crisis. We will have a new generation of clients, of customers who maybe don't go to stores. Thank you very much. Next question from Marie Dufour from Société Générale. You have the floor. Good evening. I have two questions. The first is, have we gained market share on the first half especially in comparison to Amazon and second question I would like to better understand if in your forecast for the whole year and especially for the second half if you've integrated an increase in prices which probably will happen at the end of the year we know that for the fourth quarter prices might increase. So is it something that you've included and can you tell us more about what it means for the fourth quarter? Or will it be rather for the first quarter of 2022? Well, thank you for your question. Amazon is really difficult to It's really difficult to have the results of Amazon. They're not really transparent, so I can't really comment. We need more information, but if we look at what we have, I think our performance has been really good, better than everyone in the country because of online service, also because some of our closed stores may managed to stay open, so we're very satisfied with our place on the market. I can't compare our position to Amazon's, but I think that in comparison to the whole market, we're doing quite well. As for increasing prices, yes, we've heard the same thing. I think the increase will be quite insignificant, and the impact as well. for the past few months we've benefited from an average increase in prices not for the same products but there's a mix there are higher entry products and it's happened for the past few months and I think this will also have consequences for a group to build a longer-term strategy to be more viable. So I think it's a good thing for us. It goes in the right direction. And the inflation we're forecasting, again, we think it's going to be very low. And, of course, it will be up to the customer to pay. For us retailers, we cannot absorb this increase. So the customers will have more products to choose from, but some of them will be higher prices, and this might help us to absorb this inflation. We think, however, that this phenomenon is linked to very concrete and contextual elements such as raw material, lack of raw materials, that we're not worried. Thank you very much. Thank you. Next question. You have the floor. Thank you. A question about inventories with... Are we at risk of lacking or start products or not? Thank you for your question. I think that our supply chain is under pressure since 2020. It stops, it increases. And it's also under pressure because of the growth. If you look at 2020, there were lots of pressure because our product categories were highly demanded. Today, we have an inventory level that is at its highest at the beginning of the crisis. So our inventory... Pre-COVID is the same as during as now. So we're better placed today than at the beginning of the crisis. We're very careful for the next few months. We're going to keep an eye out. We are looking at our orders. We are ready to face our demands. and we hope that the phenomena that we've seen during the crisis will slowly disappear. Of course, some supply chains will be under pressure, but we hope that our inventories will make up for that pressure. If there are short-term pressure or significant pressure for some companies, groups and stores, we'll really be able to absorb that and we are really careful about our availability for products. Thank you. Thank you. We have a question in English now.

Yes, we have a question from Adam Crocker from the Book of Book Investments.

Please go ahead. Hello. Hopefully you can hear me. I had a question about the culture pass. And if you could just talk generally about the long impact that it might have and if there are any programs you have in place to maximize the potential there. Thank you.

I'm sorry.

There is a bit of an echo between the lines. If the technicians can help. Okay, I think it's better now. Sorry.

It's a French program for the last four years. So FNAC has been one of the first players that's been cooperating with the French government to create this program in terms of technology offer and the way we have been proposed for the young. So the pilot runs for two years and now they decide to go for a full rollout. So the first figures are quite impressive because the young, the potential is around 10 million new youngs every year and for each of them is 300 euro available to expand in cultural products in stores so it's dedicated to address this young generation for the stores and in particular for the cultural products. There was a big impact on the books in particular in the early categories like gaming and on the records and films too, but books in particular. But it's quite satisfying because this is the main, I would say, one of the main objectives for the government is to put the reading back on the young generation. way to optimize that is to be inside this platform open the the global inventory uh online for the junk or geolocation on the for the whole stores in the flag i think it's like the only chain uh nationwide that is able to propose on this level of inventory and on catalog for the jungle that's the main reason why we are able to catch a significant part of these forms that give us a good impression of how much it can be on the next coming month. And it's a program that is proposed not just for this year, it's to be projected for the following ones. So it's pretty good news for the cultural products. But probably you know that Strack is the main leader in all of them, books, records, movies, games. So for us, it's a good decision.

Thank you. We have no further questions. Well, thank you to all. Thank you for being here and for all the questions. I wish you all a good holiday and a good summertime, and we will see or we will hear each other in October for our quarter meeting, as usual. Thank you, and have a good evening, everyone. Ladies and gentlemen, the conference is now ended. Thank you for taking part. You can now disconnect.