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IVS Group S.A. Interim Consolidated Report shows 33 % net profit growth

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GRAND DUCHY OF LUXEMBOURG — The Board of Directors of IVS Group S.A. (Milan: IVS.MI), convened on November 15th, 2018, and chaired by Mr. Paolo Covre, examined and approved the Interim Consolidated Report as of September 30th, 2018, which shows a significant growth of IVS Group performances.

The Board, after hearing the opinion of the Remunaration Commitee, also examined and approved a Three Years Incentive Plan that provides to award shares of the company, up to a maximum of n. 350,000 shares, to key person (33 persons) operating within IVS group, subject to the achievement of a specific grid of targets.

FRANKE
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The Board consequently has mandated the chairman to convene the Shareholders Meeting to vote on the approval of the Incentive Plan, which is also preparatory to the submission of the application of listing of IVS Group shares on the STAR segment of MTA of Borsa Italiana.

Summary of results at 30 September 2018

  • Consolidated Revenues: Eur 321.5 million, +5.9%, compared to September 2017.
    Adjusted EBITDA2: Eur 70.1 million, +1.9% compared to September 30th, 2017, with an EBITDA margin on sales of 21.8%. Adjusted EBIT: Euro 37.0 million (+2.8% compared to 36.0 of 2017).
  • Group Net Profit: +33.0% equal to Eur 18.6 million, after profits attributable to minorities of Eur 1.1 million.
  • Adjusted Net Profit: Eur 19.8 million (+20.4% from Eur 16.5 million at September 2017) after minorities.
  • Completed 8 new acquisitions in Italy and France, with an Enterprise Value of around Eur 14.0 million.

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 business is mainly carried out in Italy (79% of sales), France, Spain and Switzerland, with around 190,000 vending machines, a network of 79 branches and over 2,700 employees.

IVS Group serves more than 15,000 corporate clients and public entities, with over 800 million vends per year.

Operating performances

In the first nine months of 2018 consolidated revenues reached Eur 321.5 million (of which 294.0 million related to the core vending business), with an increase of 5.9% from 303.7 million at September 2017 (Eur 280.1 million in vending).

Vending revenues increased by 5.6% in Italy, by 3.4% in Spain, 12.8% in Switzerland and decreased by 0.7% in France. Coin Service division sales increased in total by 17.1% (+6.3% in the core metal coins business), mainly due to the start-up of IoT activity in the subsidiary Venpay S.p.A.

Vending sales like-for-like and at par working days increased by 2.7% overall; with +3.7% in Italy, -1.0% in Spain, -0.1% in France and -20,3% in Switzerland. At September 2018 the total number of working days was on average 0,9 day less than the corresponding period of 2017.

In Spain, France and Switzerland was significantly lower compared to the first nine months of 2017 (-2, -1,7 e -10 working days respectively), in Italy the difference was limited to -0,5 working days.

The total number of vends of the period was equal to around 619.5 million, +3.7% from 597.5 million of 2017. Confirming the trend of previous quarters, also in the third quarter 2018 IVS shows an acquisition rate of new clients (+2.2%) higher than the churn rate (1.06%).

Average price per vend increased was equal to Euro 47.45 cents, from 46.88 cents of 1H 2017 (+1.2%).

During the first nine months were completed 7 acquisitions in Italy and 1 in France, with an Enterprise Value of Euro 14.0 million, contributing Euro 3.9 million to sales on pro-rata basis from the date of the acquisition. In the first 9 months of 2017 acquisitions were 11 (with a value of Eur 33.9 million and contributing Eur 22.3 million of contribution to sales of the period).

Adjusted EBITDA increased by 1.9% compared to the first nine months of 2017, from Eur 68.7 million to Euro 70.1 million, with an EBITDA margin on sales of 21.8%; the increase of Adjusted EBITDA at par working days is slighty higher, +2.4%. It must be reminded that the third quarter includes the summer holidays, and has therefore less volumes, especially in the corporate sector, than the other quarters.

The EBITDA of the period was affected also by some facts already mentioned in the first half: the loss on the sale of used vending machines of a newly acquired business in Switzerland, accounted above the EBITDA and not considered amongst the adjustments; the volumes lost in February due to the snowfalls; the start-up of IoT activity in the Coin Service division. Adjusted EBIT increased to Euro 37.0 million (+2.8% compared to 36.0 million of 2017).

Group Net Profit in the first nine months is equal to Eur 18.6 million (after profits attributable to minorities of Eur 1.1 million) +33.0% compared to Eur 14.0 as of September 2017 (after minorities of Eur 1.2 million). Net profit includes some costs and profits considered as exceptional, totalling Eur 1.3 million (net of tax effects) mostly related to the acquisitions competed.

The Net Profit Adjusted for the exceptional items is equal to Eur 19.8 million (after minorities), increased by 20.4% from Eur 16.5 million. In the first 9 months of 2018 the higher taxes deriving from the application of new (worsened) criteria on ACE (Italian tax incentives on growth) was offset by the higher tax deductible depreciation on new capex in advanced technologies and appliances, that will be spread over the next 7-8 years (extraordinary depreciation according to Industry 4.0 plan)

Net Financial Position (“NFP”), is equal to Eur -278.1 million (from Eur -254.1 million as of December 31st, 2017) after payments for net investments and acquisitions of Eur 54.6 million, of which Eur 37.6 million for investment in fixed assets – including those linked to newly acquired businesses and done in previous quarters – and Eur 17.0 million for acquisitions.

In addition Eur 10.3 million were paid for dividends (on 11 July 2018) and Eur 9.6 million for the antitrust fine of 2016 (monthly instalments will end on March 2019). The group has approximately Euro 12.8 million of VAT credit (not included in Net Financial Position).

The variation of Net Financial Debt is mainly due to the following items: lower reimbursement of VAT Credit (Eur 4.2 million) compared to the previous quarter; higher taxes paid in the third quarter 2018 (+Eur 3.9 million compared to the third quarter 2017); payment of additional monthly salaries (“quattordicesima”) for Eur 4.1 million paid on July, although accounted for in the previous months; finally, the growth of net working capital (Eur 5.7 million in total) for higher payments of trade payables and increase of trade receivables in some market segments, as in the OCS(Nespresso), where clients do not pay immediately cash (as usual in automatic vending machines), in the sale of products in special locations and on Italo trains (fresh food), and in the maintenance business of vending machines for external clients. These activities generate an additional income, although with lower percentage margins compared to the core vending business, but also a certain stock of working capital (trade receivables).

Other significant events occurred after 30 September 2018 and prospects for the full year

In the first nine months of 2018 IVS Group experienced a recovery of vending volumes, specifically in the coffee / hot beverages segment; the recovery remains light, in line with changes just around 1% of the Italian GDP and hours worked.

The actions related to the agreement with Nespresso Italiana are going ahead, also through new partnerships in Italy, that will generate additional volumes in the OCS market segment.

Operating margins were influenced by the increase of positioning fees (redevances), due to some decisions taken in the second half of 2017, in a context of exceptional competitive situation, aimed at maintaining some major contracts and the installed base of vending machines, although reducing percentage returns. The Group is reacting through the continuous increase of average selling prices (which in the period was mostly absorbed by the increase of such fees), that is sustainable thanks to the investments made, aimed at improving service quality and innovation.

In this scenario, IVS Group will continue its solid growth path, through acquisitions aimed at increasing local density, combined with a capex policy which will maintain a high service value and a sustainable capacity to generate high margins.

The solidity, operational excellence and leadership in digitalisations in the vending sector, a key element for building a more effective relationship with big numbers of final consumers, make IVS the most qualified actor in the consolidations process expected in the coming years in the vending industry.

2 “Adjusted EBITDA’’: is equal to operating income, increased by depreciation, amortisation, write-downs, non-recurring costs and exceptional in nature