GRAND DUCHY OF LUXEMBOURG – The Board of Directors of IVS Group S.A., convened on November 12th, 2020, and chaired by Mr. Paolo Covre, examined and approved the Interim Report at 30 September 2020, summarised below. The Board of Director resolved also to appoint, until the next AGM, as new director Mr. Marco Maria Fumagalli. IVS Group S.A. is the Italian leader and the second player in Europe in the business of automatic and semi-automatic vending machines for the supply of hot and cold drinks and snacks (vending).
The core vending business is mainly carried out in Italy (83% of sales), France, Spain and Switzerland, with around 224,000 vending machines. The group has a network of 88 branches and around 2,900 employees. IVS Group serves more than 15,000 corporate clients and public entities, with around 850 million vends in 2019.
IVS Group: Summary of results at 30 September 2020
- Consolidated Revenues: Euro 245.1 million, -28.4%, compared to September 2019.
- EBITDA reported: Euro 54.2 million, -32.0% compared to 2019.
- Adjusted EBITDA¹: Euro 48.6 million, -38.8% compared to 2019, with an EBITDA margin on sales of 19.8% (22.2% on sales net of redevances) .
- Consolidated Net Profit: Euro 2.7 million, before profits attributable to minorities (Euro 0.1 million).
- Adjusted Net Profit: Euro -3.3 million, before minorities.
- Net Financial Debt reduced by Euro 20.0 million compared to 31 December 2019.
- Completed 4 new acquisitions in Italy, with an Enterprise Value of around Euro 6.5 million.
Consolidated revenues at 30 September 2020 totalised Euro 245.1 million (of which 213.7 million related to the core vending business), -28.4% from Euro 342.6 million at September 2019 (of which Euro 310.4 in vending).
Vending sales (net of positioning fees) decreased by 28.0% in Italy, 37.9% in Spain, 21.2% in France and 23.6% in Switzerland. Coin Service division sales decreased by 17.8% (Moneynet S.p.A. was acquired at the end of July 2019, so the comparison of its quarterly sales is not significant), while turnover decreased in the core metal coins business and in the digital money business (Venpay S.p.A.) approximately by 27.0% and 56.8% respectively.
The decrease in all of the business areas is due to the COVID-19 pandemic and to the following slow down – in some cases shut-down – of many client sectors. The decrease in sales started significantly in the last part of February and intensified up to May; first gradual recovery signals started on June. Recovery continued in the third quarter, although always largely below the levels of 2019 corresponding period. The total number of vends in the first 9 month 2020 was equal to 453.4 million, -29.8% from 646.3 million in 9 months 2019.
Volumes decrease is linked to a big drop of estimated overall worked hours, although worked hours have an impact only on business activities and include the theoretical worked hours at home, in smart working, whilst vending volumes are affected also by other factors, as the travel passengers decrease and the shut down of schools and universities. IVS continues in any case to have an acquisition rate of new clients higher than the churn rate even in this exceptional situation.
Average price per vend in the period was equal to Euro 47.1 cents, from 48.0 cents of the corresponding period of 2019 (-1.9%). The average price decrease is influenced by the different mix of consumption, with a larger share of products sold in the corporate sector, and less in the public and travel market segments, that usually enjoy higher average selling prices and added value, compared to the corporate sector, where consumption were higher for those consolidated clients that often enjoy reserved discounted prices.
During the first 9 months of 2020 were completed² acquisitions in Italy, with an Enterprise Value of Euro 6.5 million, contributing around Euro 1.1 million to sales on pro-rata basis from the date of the acquisition, and one lease contract for a vending business in Sicily, contributing around Euro 5.0 million.
EBITDA reported was equal to Euro 54.2 million, from Euro 79.64 million at September 2019 (-32.0%). Reported EBITDA includes Euro 8.0 million proceeds related to the reimbursement of part of the fines already paid to the Italian Antitrust authority as a consequence of the proceeding started in 2016 against which the subsidiary IVS Italia S.p.A. appealed. Adjusted EBITDA is equal to Euro 48.6 million (19.8% EBITDA margin on gross sales or 22.2% on sales net of positioning fees), 38.8% down from Euro 79.4 million at September 2019. Depreciation and amortisation in at September 2020 increased by around Euro 2.0 million (+4.5%), as a consequence of the investments made in the past quarters, in particular for the vending machines and the related capex on the Paris Metro, and in part for the acquisitions completed.
In the light of the decrease of volumes and sales, and in order to protect margins, the group intervened with strong actions on many costs, including the recourse to temporary unemployment subsidies in the different Group companies, adjusting as much as possible during the emergency periods the levels of the positioning fees (rents and royalties to be paid to the space owners where the vending machines are located), reorganising the logistic to the consumptions trend, maintaining quality and service continuity to the clients. With these actions, the decrease of margins in absolute amount was contained, and EBITDA margin on sales remained at top levels for the vending sector, close to 20%.
Consolidated Net Profit at 30 Sept. 2020 is equal to Euro 2.7 million (before profits attributable to minorities of Euro 0.1 million), although still positive, dropped (-85.3%) from Euro 18.6 at 30 Sept. 2019. In addition to the above mentioned Antitrust fine reimbursement, Net profit includes some costs and profits considered of exceptional nature, totalling around Euro 2.0 million mostly related to acquisitions and new relevant projects (i.e. Moneynet and the start of Paris Metro contract), net of the related tax effects. The Net Result Adjusted for the exceptional items is equal to Euro -3.3 million (before minorities), from Euro 18.1 million profit (before minorities) at September 2019.
Net Financial Position (“NFP”) at 30 September 2020 is equal to Euro -366.0 million (including debts equal to Euro 55.0 million deriving from rent and leasing contracts, according to the new definitions of IFRS 16), with an improvement of Euro 17.0 million, from Euro -383.0 million at 30 June 2020 (and down Euro 20.0 million from Euro -386.0 million at the end of 2019), after payments for net investments in the period of Euro 34.8 million, of which Euro 32.3 million for investment in fixed assets – including those linked to newly acquired businesses and done in previous quarters – and Euro 2.5 million for payments related to acquisitions, in addition to debt taking on Euro 1.4 million for additional real estate leasing. In more detail, capex related to the new big Paris Metro contract (not yet fully operating because of the restrictions decided and recently renewed by the French authorities, in order to contain the pandemic), amounted to Euro 9.8 million. Quarterly capex remain at very low levels compared to 2019.
At the end of September 2020 the group still has (mostly in Italy) approximately Euro 15.4 million of VAT credit (of which Euro 9.7 million immediately due or that could be sold, as the reimbursement has already been requested to the Italian tax authority), and other credits for Euro 8.0 million towards MEF (Italian Ministry for Economy and Finance) for the restitution of the mentioned antitrust fine. The cash-in of these credits – at present totalling around Euro 23.0 million, not included in Net Financial Position – is expected in in the next quarters.
Other significant transactions and events occurred after 30 June 2020
As of November 11th, 2020 BNP Paribas Italian Branch, in its quality of Agent of the facility agreement of Euro 150 million entered into on December 21st, 2018 , confirmed to IVS Group that the financial covenants of the facility agreement for the twelve months period ending on December 31th, 2020 will be not tested.
The economy and consumption scenario saw, between March and May 2020, during the hardest phase of the lock-down, volumes drops up to 84%, although with differences amongst the nations and regions. Since the end of May / beginning of June, some signals of gradual recovery started, but still affected by the closure of entire sectors, as schools and universities, and by the only partial reopening of the public transport sector, and the overall weak trend of the hours actually worked. During the summer, that is in any case a period of quite low activity for the vending sector, the recovery continued, but the business volumes is still much lower compared to 2019. However, the new waves of pandemic and their effects slowing down the economy will still affect the remaining part of 2020 and possibly the beginning of 2021.
In this difficult and uncertain context, the Group has put in place effective economic, financial and industrial actions, reducing the cost of labour and the positioning fees, as much as possible, proportionally to the sales decrease. That implied also a challenging reorganization of the logistic (refilling and technical workers).
Thanks to these actions, the company was able to maintain its margins (EBITDA) at a good level, even in such an exceptional period, without penalizing the service quality to the clients. Operating profits, together with the capex reduction, allowed not only to keep the groups’ high liquidity reserves (increased during 2020), but also to generate a significant free cash-flow, with a sizeable reduction (around Euro 20.0 million) of the Net Financial Debt.
From a strategic point of view, these actions will allow IVS Group to start 2021 in a better position, compared to most of Italian and European vending players. In fact, the present crisis will cause a change in the structure of the vending industry, and the inevitable exit of weaker players. From this will emerge the opportunity, for IVS Group, to recover the volumes lost because of the pandemic, through commercial actions and external growth opportunities, with an increase of the market share and of the company’s business value.
1 “Adjusted EBITDA’’: is equal to operating income, increased by depreciation, amortisation, write-downs, non-recurring costs and exceptional in nature
2 Restated in order to include the final accounting effect of Moneynet S.p.A. acquisition (EBITDA reported at 30 September 2019 was equal to Euro 76,8 million, -29,4% compared to 30 September 2020)