GRAND DUCHY OF LUXEMBOURG – IVS Group S.A. – The Board of Directors of IVS Group S.A., convened on May 28th, 2020, and chaired by Mr. Paolo Covre, examined and approved the Interim Financial report at 31 March 2020, as summarised below.
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 (80% of sales), France, Spain and Switzerland, with around 202,000 vending machines. The group has a network of 82 branches and over 3,000 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 31 March 2020
- Consolidated Revenues: Euro 100.1 million, -12.3%, compared to March 2019.
- EBITDA reported: Euro 28.1 million, +1.2% compared to 2019.
- Adjusted EBITDA*: Euro 21.5 million, -24.0% compared to 2019, with an EBITDA margin on sales of 21.4%.
- Consolidated Net Profit: Euro 8.7 million, before profits attributable to minorities (Euro 0.1 million), +19.9% vs. March 2019.
- Adjusted Net Profit: Euro 1.8 million, before minorities of Euro 0.1 million
- Completed 2 new acquisitions in Italy, with an Enterprise Value of around Euro 0.7.
Consolidated revenues in 1Q 2020, affected since March 2020 by the impact of Covid.19 pandemic – totalised Euro 100.1 million (of which 95.0 million related to the core vending business), -12.3% from Euro 114.2 million of 1Q 2019 (Euro 110.0 in vending).
Sales decreased by 15.3% in Italy, 18.2% in Spain, 7.8% in France and 18.1% in Switzerland. Coin Service division sales slightly increased (+2.6%) as an effect of the acquisition of Moneynet S.p.A. (acquired and consolidated since July 2019), while turnover decreased in the core metal coins business, and in the digital money business (Venpay S.p.A.).
The sales decline in all of the CGU is clearly everywhere mostly due to the COVID-19 pandemic and the following massive slow down – in some cases a complete shut-down – of many client segments served by IVS Group, although with different timing, in the various regions where IVS operates. The decrease in sales started significantly in Italy in the last part of February and accelerated and expanded elsewhere in March.
The total number of vends at March 2020 was equal to 186.2 million, -15.7% from 220.8 million at March 2019. Even in the context of the exceptional situation, IVS continued in 1Q 2020 to have an acquisition rate of new clients higher than the churn rate. Average price per vend in 1Q 2020 was equal to Euro 47.4 cents, from 47.1 cents of 1Q 2019 (+0.6%). Also the price increase was affected by the lock-down and/or relevant volumes decrease in the public and travel market segments, that usually enjoy higher average selling prices and added value.
During 1Q 2020 were completed 2 acquisitions in Italy, with an Enterprise Value of Euro 0.7 million, contributing less than Euro 0.1 million to sales on pro-rata basis from the date of the acquisition, and one lease contract for a vending business in Sicily, mostly active in the OCS segment, with a contribution worth Euro 1.7 million.
EBITDA reported increased by 1.2% compared to March 2019, from Euro 27.8 million to Euro 28.1 million. Reported EBITDA includes Euro 8.0 million proceeds related to the reduction of the fines applied and paid in the past years to Italian Antitrust authority after the proceeding started in 2016 against which the subsidiary IVS Italia S.p.A. appealed. The due reimbursement has not been yet paid to date, Adjusted EBITDA is equal to Euro 21.5 million, -24.0% from Euro 28.3 million at March 2019, with an EBITDA margin on sales of 21.4%. The total lock down of entire client segments, like schools and universities, and the substantial absence of consumers in public and travel locations, as metro, railways stations and airports, strongly affected volume and sales, as well as margin.
Consolidated Net Profit at March 2020 is equal to Euro 8.7 million (before profits attributable to minorities of Euro 0.1 million) +19.9% compared to Euro 7.3 of 2019 (after minorities of Euro 0.4 million). Net profit includes the Antitrust fine reimbursement and some costs and profits considered of exceptional nature, totalling Euro 1.1 million (net of tax effects) mostly related to acquisitions.
The Net Profit Adjusted for the exceptional items, i.e. the above mentioned proceed from Antitrust and other costs related to acquisitions, is equal to Euro 1.8 million (before minorities), from Euro 7.7 million at March 2019. Net Financial Position (“NFP”), is equal to Euro -394.5 million, from EURO -386.0 million at the end of 2019, after payments for net investments in the period of Euro 20.7 million, of which Euro 19.7 million for investment in fixed assets and 0.8 million for investments done in previous quarters – and Euro 0.2 million for payments related to acquisitions.
Net Debt includes also Euro 2.2 million of quarterly accrued interest on bonds and a new debt of Euro 1.7 million for a real estate lease (linked to an acquisition completed in 2019). The extraordinary capex related to the new Paris Metro contract, not yet fully operating, and the new real estate investment, amounted to Euro 9.6 million and Euro 1.7 million respectively.
Other ordinary capex, around Euro 8.8 million (of which Euro 1.9 million for revamping of used vending machines), are almost fully connected to investments already launched and committed in the months before COVID-19 emergency. As of 31 March 2020 the group had approximately Euro 24.7 million of VAT credit and other credits for Euro 8.0 million towards MISE (Italian Ministry for Economy Development) for the restitution of part of the mentioned antitrust fine; these credits, not included in Net Financial Position, are expected to be cashed in the next quarters (Euro 9.8 million of VAT credit has been reimbursed to date).
Other significant transactions and events occurred after 31 March 2020
On 1 April 2020, IVS Italia acquired Til Caff S.r.l. a vending operator in Puglia region, for a provisional value of Euro 5.2 million (Euro 2.5 paid within closing date and the rest expected by the end of 4Q 2020).
The economy and consumption scenario saw, in the months of March and in the following months, during the hardest phase of the lockdown, volumes drops up to 80-85%, although with differences amongst the nations and regions where IVS operates, according to the various timing of the pandemic and of the safety measures adopted.
Since May, some signals of recovery begun, linked with the gradual reopening of business activities, but still affected by the continuing closure of entire sectors, as schools and universities, by the only partial reopening of the public transport sector, and the overall weak trend of the hours worked. In this context, starting on March, the Group adopted appropriate actions on both economic and financial side. The organisation has been turned, as much as possible, towards a fully variable cost structure.
Labour cost was reduced by using the public and government social measures put in place in the different countries (Cassa Integrazione in Italy and similar subsidies elsewhere). The costs of rents and positioning fees (redevances) has already been renegotiated in part, or suspended, in view of the definition of new contracts, clearly justified in the closed locations (i.e. schools and universities) or mostly affected by the lock-down measures. This on going activity will generate a significant cost saving, but also a reduction of Net Financial Debt (i.e. debt arising from the rents of locations for the positioning of vending machines, according to IFRS16).
In terms of operations, the decrease of volumes and the use of temporary unemployment subsidies, was combined to a significant reorganisation of refilling and technical assistance workers, in order to optimise the logistic and efficiency of the branches.
The effects of these actions, gradually started in March, should be more visible in the P&L of the next quarter, so facing the higher decrease of volumes. From a financial stand point, all the investments that are not strictly necessary were suspended. The only significant capex are expected for the Paris Metro, as soon as it will be allowed to complete the positioning of the vending machines. The measures adopted are regarded as adequate to maintain as much as possible sufficient economic margins and the good liquidity reserves available within IVS Group, that have been even increased to date, compared to March 2020, confirming the generation of a positive operating cash-flow, although not so high as in the past.
* “Adjusted EBITDA’’: is equal to operating income, increased by depreciation, amortisation, write-downs, non-recurring costs and exceptional in nature, start-up and non cash costs.