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spk02: Good evening, ladies and gentlemen. Welcome to the telephone conference call for the presenting the H1 results of 2024 for Fnac Dati. Mr. Enrique Martinez, Chief Executive Officer, the floor is yours. Thank you very much. Good evening, everybody. I'm delighted to be with you today following last week's announcement of our plan to make a strategic acquisition of UniEuro in Italy. This evening, we will first outline the details of our half-year results and then go back to the structural operation for our group. We're looking at the agenda now, the plan. I'm going to start off with the main lessons learned from H1 and then go back to the key aspects of our strategic plan to acquire the euro. And then Jean-Brieuc Le Tidier, our CFO, will present our financial results. And afterwards, of course... We'll take any questions after my conclusion. Now, moving on to slide four. If I had to summarize this half year, there are two words for me, resilience and rigorous implementation of our strategy. Our H1 results reflect the resilience of our business model in an uncertain geopolitical and economic environment, which remains less than promising for the retail sector. Despite this, the Fnac Dati Group's performance is on par with expectations from all our geographies return to growth in Q2, proof that our business model is holding up well. On the offering side, technical products have benefited from the appeal of new products incorporating artificial intelligence and are therefore enjoying a good dynamic. Our brands, with a strong focus on innovation and technology, are an advantage. H1 also enabled us to progress in implementing our strategic plan while keeping a firm grip on costs. We are therefore confirming our 2024 guidance. Furthermore, our group has also pursued rigorously its ESG commitment, and we have improved our ratings. Finally, the plan to acquire UniEuro represents a unique strategic opportunity to strengthen our European leader position in specialized retail and further enhance the efficiency of our business model. Now, slide six. I'd like to go back to the key points of the UniEuro acquisition project in detail. It is very important for our group. I want to share with you my enthusiasm for this project, which will significantly change the face of FnacDati and make it possible to get into Italy. In integrating UniEuro, our new group would have a turnover of over 10 billion euros, 30,000 employees, and would operate over 1,500 stores. This project would confirm our position as Europe's leading specialist retailer and a key player in market consolidation. Beyond the figures, this transaction fits in perfectly with Fnac Dati's strategy and is perfectly in line with our everyday plan. Furthermore, the Fnac Dati Group has already demonstrated its ability to integrate European companies while respecting and enhancing the specific characteristics of local markets. We therefore anticipate that this transaction creates value for all stakeholders, and I will come back to this later. Moving on to slide seven, in concrete terms, we plan to launch a combined takeover bid, or mixed one, through an investment vehicle 51% controlled by the Fnacdati Group, which would thus consolidate it in its accounts. and jointly 49,000% owned by Ruby Equity Investment, a sister company of Vessar Investment. Each uni-euro share would be valued at approximately €12 per share, €9 in cash, and 0.1 FNAC Dati shares, with a premium of 31% of the volume-weighted average share price over those last three months at 15th of July. This represents approximately €249 million. for euros, 400% of your euros share capital. This transaction therefore presents a limited financial risk and preserves our financial flexibility to pursue our capital allocation policy. On slide eight. I'd like to show you this, in fact, about what the integration would mean for Uniru. This operation is basically a strong complementarity between Fnacdati and Uniru. We share the same vision of only channel and service-based rating. We have strong brands that are recognized and appreciated by our customers. The turnover of the new Fnacdati group would increase by more than 30% and exceed €10 billion. Our current operating income would be close to €230 million, with a stable operating margin of 2.2% after synergies are taken into account. The combination of our teams would bring our total workforce to around 30,000. And finally, our network would increase by half to more than 1,500 stores, enabling us to offer our customers and supply partners extended geographical coverage. This transaction represents a major strategic step forward for FnacDati and UniEuro. Together, we are well positioned to capitalize on our combined strengths, optimize operations, and pursue our sustainable growth objectives. This transaction would also enable UniEuro to accelerate its digital transformation, which is already underway, and to strengthen its position in the sale of services benefiting from the undisputed expertise of FNAC and DATI. On slide nine, this gives us a look at how we're going to finance this offer. The acquisition of UniEuro would be carried out, as already indicated, an investment vehicle jointly owned by Fnac Dati Group and Ruby Equity Investment. There'd be two kinds of financing. Firstly, a cash component for approximately 75%, two-thirds contributed by Ruby Equity Investment, i.e. around 122 million euros, and one-third contributed by Fnac Dati, about 67 million euros. In fact, we will pay out 56 million euros Because we already have a 4.4% stake in Unieuro, the impact on our financial leverage will therefore be very limited. Secondly, a component in Fnac Dati shares for around 25%. This will be financed by a dedicated capital increase. for an amount estimated at 60 million euros, i.e. some 2 million Fnac Dati shares. The dilution of Fnac Dati shareholders would therefore be very limited, as around 6.6% of capital after the operation. Now on slide 10, to talk about the timing, I'd like to remind you that the launch of the takeover bid is subject to the usual regulatory approvals. With regard to the Italian ones, we will file our offer at the end of July, beginning of August, to obtain the necessary approvals for the launch of the transaction at the end of August, beginning of September. We plan to open this offer during the concentration control review. The takeover should therefore be finalized in Q4 2024. And now I'd like to hand over to Jean-Briuc, who will describe our results for the first half of this year. Jean-Briuc. Thank you, Enrique. Good evening, everybody. Let's look on slide 12, the financial highlights for H1. Our results, which I will detail at the moment, are in line with our expectations. In a persistently uncertain economic and geopolitical environment, we are very satisfied with the group's performance. This is particularly true of the second quarter, which shows signs of improvement, as all our geographies are reporting growth. The same applies to all our product categories, except, as expected, for gaming and large household appliances. Once again, the group outperformed the French market, which remained in negative territory in Q2 at minus 2.3%, whereas we posted a growth rate of plus 0.7% in real terms. Moving on to slide 13, with the details of trends in revenue and gross margins. The group, in the first half of 2024, posted revenue of €3.4 billion, up by 1.4% on a reported basis and stable on a like-for-like basis. Firstly, by channel, which is one of Fnac Darcy's strengths, the proportion of online sales remains high at 21%. Click and Collect accounted for 51% of online sales, At the end of June, a 1.9 point increase compared to H1 2023, which shows once again the relevance and stability of the only channel model over the long term. Moving on now to performance by category, trends are similar across all geographies. We're covered with growth resuming across all categories in Q2. Editorial products went down, impacted as expected by particularly high trends. basis for comparison in gaming, which, as you will recall, enjoyed record sales last year, partly due to the return to stock after several months of the latest Sony generation console, and also due to the worldwide loss of Zelda. Conversely, the performance of book sales remains very strong, driven mainly by the appeal of new reading trends. Services continue to grow in all geographies with the ongoing development of our offering, and in particular the rollout of Darty Max. Technical products returned to growth in H1 thanks to a particularly dynamic second quarter. TVs benefited fully from customers' appetite for large, high-tech models during the Euro 2024. Telephony and PCs performed well thanks to new products incorporating AI features. The whole category should fully benefit from the new cycle of innovation in the second half of the year. Sales of household appliances were virtually stable, benefiting from the excellent momentum of small appliances, while sales of large appliances continued to suffer from very low volumes, closely linked to the downturn in the property market. Finally, the diversification category turned into a solid performance, especially games and stationary, with double-digit growth over the period. Looking now at performance by geographic region, before commenting on performance in detail, I'd like to emphasize that all our geographies returned to growth in the second quarter. The France-Switzerland region posted like-for-like sales growth of plus 0.1% in the first half, including plus 0.7% in the second quarter alone. Based on Banque de France data published earlier this week, Schmackdarty continues to outperform the overall market. In addition, The scope effect in the second quarter corresponds mainly to the closure of three stores in non-French-speaking Switzerland in the first half of 2024. Moving on to the Iberian Peninsula, sales returned to growth in the second quarter, up 2.2% on a like-for-like basis, enabling us to achieve a virtually stable first half. In Spain, the return to growth seen in March is continuing and should continue in the future. In Portugal, the momentum is very good, and the integration of media market activities, which generated sales of €51 million in the first half, is proceeding in line with our expectations. Finally, the Belgian Luxembourg region reported like-for-like sales, growth of 1.4% in the second quarter, and stable sales for the first half. Sales benefited in particular from significant growth in services. Let's now move on to the gross margin. The gross margin rate for the period was impacted by the diluted technical effect from New Depart franchise and integration, which had a negative effect of 20 bps. Restated for this impact, our position, which is more focused on premium products, and growth in our service activities, in particular Dartimax, enabled us to increase our gross margin rate with a net improvement of 10 bps. Moving on to our operating costs, which amounted to 1,086 million euros in H1-2034, up 11 million over the first half of 2023. Excluding the integration of EDMASK in Portugal, costs improved by 3 million euros. They fell slightly as a percentage of sales. The embedded effect of higher rents, plus 7.5% compared with H1-2033, The full-year impact of April 2020 mandatory salary talks, plus 4.6% compared to H1 2023, and inflation in other cost items were offset by lower energy costs and the effectiveness of the performance plans rolled out across all the group's divisions.
spk01: Let's talk about other items in the financial results. The current operating income stands at $36 million. stable compared with the end of June 23, reflecting the tight control of operating costs that I've just described, including the integration of MediaMarkt and the startup costs of Weaven, it improved slightly. Non-current items amounted to negative 27 million euros, mainly involving a restructuring cost of around 11 million euros, of which almost half at Nature and Découverte and the fair value adjustment of IT projects standing at around 15 million. As a reminder, last year they included a provision for some 85 million euros for the non-recurring charge anticipated in connection with the ADLC litigation. Operating loss from the first half year was therefore 63 million. Financial expenses stood at 37 million euros and improvement of 7 million. compared to last year. This can be analyzed, on the one hand, by the cost of net financial debt, which rose by $3 million, and the IFRS 16 charges, which rose by some $7 million, as a result of higher interest rates. The balance is due to the impact of the recognition in the first half of 23 of the impairment and disposal of the investment in the Daphne Purple Fund. After taking into account tax income of $27 million, net income from continuing operations attributable to equity holders of the parent company for the first half of the year amounted to negative $75 million, a market improvement on the $116 million figure for the first half of 23. Now let's move on to free cash flow from operations. As of 30 June 24, our EBITDA was stable. Working capital requirements are up due to the seasonal nature of our business and the impact of integrating MediaMarkt in Portugal. Net operating investment was positive at plus $38 million due to asset disposals, in particular a logistics warehouse in the Paris region. This is a classic asset arbitrage operation resulting in a consolidating sale and leaseback which has no impact on our financial leverage. It was also carried out at a capitalization rate that compares favorably with the group's current debt. Overall, free cash flow from operations, excluding IFRS 16, stood at minus 673 million. Restated for the integration of media market activities in Portugal, it is stable compared to 30 June 23. A few words about our financial structure on slide 17. The group's financial position is sound and solid, with shareholder equity of almost 1.5 billion euros. At the end of the first half, the group's financial position Net financial debt is traditionally higher than at the end of the financial year due to the seasonal nature of our business. At 30 June, 24 of the group's net debt, excluding IFRS 16, stood at $496 million. At the end of June, net debt to EBITDA, excluding IFRS 16, was calculated over a rolling 12-month period, was 1.8 times, in line with the maximum leverage target of 2x set by the group as a part of its everyday strategy plan. In March, we successfully completed a bond issue for €550 million, maturing in April 2029 and bearing a fixed annual interest rate of 6%. We took advantage of a favorable market environment to refinance two bond issues in advance. This transaction was well received by a diversified base of institutional investors, both in France and internationally, and was oversubscribed several times. Lastly, we have 583 million euros in cash and cash equivalents, plus an RCF credit line and a DTTL for 600 million euros undrawn to date. We therefore benefit from a maturity profile and solid long-term liquidity. The group's ratings by leading agencies, standards, and pools, BB+, negative outlook, Fitch Ratings, and Scope Ratings, BB Plus and BBB, respectively, both with stable outlooks, reflect their confidence in the relevance of the group's omnichannel model, its operating performance, and its financial discipline. Fitch and S&Ps confirmed their ratings following the announcement of the proposed acquisition of UniEuro. Finally, for the fourth year in a row, the group proposed the payment of a dividend of 0.45 euros per per share at its annual general meeting in May, representing a payout ratio of fully 39% of the adjusted net profit from continuing operations group share. This dividend was paid in cash on the 5th of July for a total amount of 12.5 million euros. I will now hand over to Enrique, who will bring this presentation to a close. Thank you, Jean-Rieu. To conclude with slide 19... The planned acquisition of UniEuro is a unique opportunity to strengthen our position as European leader in specialized distribution and to establish our number one and number two positions in our main markets. Following this integration, we would be number one in Western and Southern Europe. This consolidation would create value, particularly because we could aim to generate at least 20 million euros in synergies before tax, On a full year basis, starting in 2025 but also because our retail model based on services and omni channel capabilities would be strengthened to serve our customers and suppliers. This transaction also confirms the support of our largest shareholder for our long term development plans it involves a limited financial risk which preserves our financial flexibility to pursue our capital allocation policy. Together with all of our employees, we would be proud to promote our group throughout Europe and to share our vision of a retail sector committed to sustainable consumption. As Jean Brieux explained, we have had a very satisfactory first half year in a rather stagnant market. Our performance was solid despite the continuing slowdown in consumer spending. All of our regions returned to growth in the second quarter, which is a good sign. Our gross margins rose by 10 basis points, excluding the dilutive impact of the franchise and changes in the scope of consolidation, and we're able to keep our costs under control. Admittedly, the geopolitical and economic context remains uncertain, but we see a new cycle of product innovation and re-equipment in technical products, which gives us confidence. We are very focused on the successful execution of the two major events in the second half of the year, back to school and the end of year's festivities launched by Black Friday. FNAC will be celebrating its 70th anniversary, and the Contract of Trust continues to celebrate its 50th anniversary, which will ensure that our brands have good visibility. I'm therefore looking forward to the second half of the year with confidence and determination, satisfied with the work accomplished at the start of the year. To conclude, against the backdrop of slowing inflation, And following interest rates, we have the fact to suggest that we should return to group in 2024. And we're therefore controlling our financial targets. The growth should be coming back in 2024, at least equal to that of 2023, thanks to the purchase of Uniroo. The current operating results in 2024 will be at least equal to that of 2023, which should be $171 million. We are counting on cumulative operating cash flow at around $500 million over the very 21-24. This corresponds to a level of $180 million in 2024. And in conclusion, because it is now more topical than ever, we are delighted to see the culmination of our partnership around the Paris 2024 Olympic Games. After the success of the ticketing and the 9 million tickets sold, which is a record that's broken, our after-sales technicians will remain mobilized during the whole of the games at the Olympic venues, and our sales staff will be stationed in our FNAC area in the Olympic Village. I'm proud to see the strong commitment of all the group's teams to this unique project. Joan, thank you so much. We've concluded our presentation. We're available to answer any questions you may have at this point. Ladies and gentlemen. If you wish to ask a question, please press star 1 on your telephone. The first question is from Alessandra Cuglietta from Kepler. Thank you for taking my question. I wanted to go back to the point dealing with growth this year at the beginning of 24 because we had echoes of other players in logistics which are talking about a slowdown in June or a stoppage in June because of the dissolution of the National Assembly. Do you have a similar trend in your company? Or why are you still confident that despite that we had the Banque de France in June backed off in a certain number of product categories. Could you comment on this point? You want to see our results and the results of the first quarter. If we had a catastrophic month, we wouldn't have been able to do those results. So, you know, political considerations make, might have a very short effect, a short lived effect, but, uh, We're back to growth. We have a renewed growth, which is... So we have categories which are doing very well. We've been accompanied by technical products and the television sector and technical products and sporting areas and computers are all doing well. And all of this despite a summer which is not hot. As you know, one of the categories... which is often very interesting during these products, are white goods and household appliances. So India's disturbances due to the climate are not significant. So I think we've done a very good half year despite these effects. That answers my question. Perhaps a bit of a follow-up.
spk02: A quick parallel, perhaps you're gaining market share thanks to your position in services compared to other players impacted perhaps over the same period. It's too early to tell, in fact, because the figures are somewhat in the rears, but it's our feeling that we were more or less in line and perhaps did better than the average of the sector. Okay, thank you. Very clear. The next question will be in English. From Charlie Roodbar.
spk00: Good afternoon. Thank you very much indeed for taking my question. Apologies, it's in English. I was just wondering if you could please talk about the, you mentioned the impact of AI technologies coming through, and I was just wondering if you could talk about your expectations for that and what you're seeing going through the market. Thank you.
spk02: I'm going to reply in French because that's how it is. We launched a range of products with Microsoft in mid-June, and we presented the entire product offering at the end of the first quarter. So we can see a whole series of innovations to do with smartphones and computers. There's a good mix, in fact, that will be out in the third and fourth quarters. so it's starting to be substantiated. I'm not going to give you any guidance, but I think it'll go, you'll see this later on in the year, but we do feel, however, it'll accelerate the cycle. The replenishments, basically. And that will probably boost the average sales price as well because our products have technical features that are more developed in terms of battery life, performance, speed, processing speed. So it probably means a higher price where historically we always have an increasingly larger market share, especially at the beginning of the cycle of innovations. So be quite clear at the beginning, and we all know that it'll be far more consistent in the second half of the year of 2024 and the first quarter of 2020.
spk00: Understood. Thank you very much indeed.
spk02: I'd like to remind you that if you wish to ask a question, just dial star 1 on your phone. Quick reminder, just dial star 1 on your phone. The next question will be in French from from TPI4. Apologies, he's quit the conference. If you wish to ask a question, just dial star one. There are no more questions, gentlemen. Okay, that was very clear. Thank you very much. The fact that we announced what the announcements made last week made things a little easier to understand. So thank you very much to all of you for attending. We hope you have a good summer and see you soon for the remainder of the adventure. Thank you. Ladies and gentlemen, this concludes our conference call today. Thank you for attending. You can now sign out.
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