PR Newswire/Les Echos/
? PRESS RELEASE
2008 half-year results
Paris, 29th October 2008:
Groupe VIAL (ISIN: FR0010340406), France's leading independent industrial
joinery discount group, announces its consolidated results for the first half
to 30th June 2008.
? First-half highlights
Activity heavily disrupted by the implementation of ERP
As announced in April 2008, Groupe Vial was forced to choose a new integrator
for the implementation of its IT system (Enterprise Resource Planning, or ERP),
which therefore caused serious delays in its installation. Given Groupe Vial's
new size, with it now having 64 sales outlets, this new ERP has become
essential to automate and run all information flows, from sourcing to
distribution via production.
The delay in the implementation of ERP created major disruptions in
manufacturing, logistics and distribution over the first half of 2008. The lack
of automation meant that all processes had to be carried out manually.
Indeed, the Group recorded major malfunctions in all manufacturing units (
cutting errors in terms of footage, poorly adapted manufacturing), resulting in
substantial wastage and excessive consumption, of basic materials and manpower.
Some weeks, production also saw a virtual paralysis, thus significantly
lengthening delays for standard and tailor-made products.
Stocks and the availability of the entire range in stores were therefore also
disrupted, resulting in a substantial umber of delays in deliveries and in "no
sales".
Difficult economic context
The Group's activity suffered from the effects of the housing, financial and
economic crises. A number of factors made the joinery market very competitive,
by triggering aggressive pricing policies. Indeed, the fall in new housing sales
, more restrictive access to personal loans and difficulties faced by craftsmen
were all factors that caused the environment to deteriorate.
Furthermore, the first half of 2008 was characterised by a sharp increase in
the cost of basic materials and a certain rarefaction of the offer.
Within the context of a fall in demand and an increase in costs, all market
players have been forced to reduce their selling prices.
Groupe Vial's discount model does, however, remain well-positioned in terms of
price and quality within this new economic context.
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Opening of 4 stores over the first half
Over the first 6 months of the year, and despite the problems associated with
the implementation of ERP and the economic context, the Group continued to
expand its network. 4 new stores were opened, 3 of them in France and 1 in Spain
. All of these openings and those planned for the second half of the year were
already signed at the end of 2007.
At 30th June 2008, the Group's network consisted of 64 open stores and 7 sites
already signed that are planned to open over the second half of the year. These
stores are divided as follows:
- France: 64 stores = 60 open + 4 signed
- Spain: 6 stores = 4 open + 2 signed
- Portugal: 1 signed
At end-2008, Groupe Vial's network will thus consist of 71 stores, a virtual
doubling in just two years.
Finalisation of the acquisition of the wood factory in Bolivia
Within the context of the sharp increase in the price of basic materials, and
notably wood, Groupe Vial has finalised the acquisition of a Bolivian company
in order to secure the volume and price of its supplies of wood. Indeed, the
company possesses timber rights on forestry concessions guaranteeing at least 7
years of wood for Groupe Vial. It also has 3 woodworking factories for sawing
and drying wood and a wood closet factory.
This acquisition was carried out for €16.5 million.
? Audited consolidated results for the first half of 2008
(€ millions, IFRS) H1 2007 H1 2008
Sales 55.1 53.8
Gross profit 34.7 14.9
Personnel expenses -6.2 -7.0
External expenses -12.3 -15.6
Taxes -0.9 -1.4
Other operating income and expenses 0.0 -0.2
EBITDA1 15.2 -9.3
Depreciation -1.0 -1.3
Provisions and write-backs 0 -0.3
Recurring operating profit 14.2 -10.9
Operating profit 14.5 -11.1
Finance income 0.2 1.2
Cost of gross debt -1.2 -3.5
Other financial cost and income 0.0 0.2
Tax -4.2 4.5
Consolidated net profit 9.3 -8.8[[]]
1 EBITDA: Recurring operating income before depreciation and provisions
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Sales
Despite the virtual paralysis in production and logistics and a high no-sale
rate, associated with the unavailability of a significant number of products,
Groupe Vial only recorded a relatively small decrease of 2.4% in sales over the
first half of 2008, to €53.8 million. The reaching of maturity of new stores is
continuing, albeit at a slower pace than expected. At constant scope, excluding
the stores opened over the last 12 months, sales were down 9.5%, reflecting the
"no-sale" phenomenon. Indeed, the value-added of the Group's products
associated with immediate availability for standard products and very short
waiting times for tailor-made products has been significantly affected by the
ERP- related disruption.
The limited fall in activity illustrates both the efforts undertaken by all
Group staff to counter as best as possible the failure of the new IT system and
the attractive positioning of the Group's products within a particular
difficult economic context.
Gross profit
Gross profit totalled €14.9m over the first half of 2008, down 57% on the first
half of 2007. A number of factors are behind this counter performance:
- the sharp increase in the cost of basic materials, and notably wood, PVC
, aluminium and glass.
- major sales discounts and price cuts on many products in order to
remain competitive on a very aggressive market affected by the economic and
housing crises.
- major production unit disruptions associated with the implementation of
ERP that resulted in significant product wastage. Indeed, cutting and measuring
errors, defects due to the incorrect functioning of systems, forced the Group
to manufacture the same product a number of times. These dysfunctions thus
resulted in excessive consumption, and therefore cost overruns in terms of
materials, manpower and transport, as well as the destruction of a significant
amount of end products.
EBITDA and recurring operating income
For H1 2008, EBITDA was a negative €9.3 million. Personnel expenses remained
under control, rising just 12.9%, in line with the increase in the workforce
that rose from 367 employees at 30th June 2007 to 410 employees at 30th June
2008.
The increase in operating expenses as a whole also remained under control,
given the changes in the Group's size, with the number of stores up 60% between
1st January 2007 and 30th June 2008. Rents and rental charges totalled €3.1m (+
25.6%). Advertising and marketing expenses totalled €4.5m for the first half of
2008, versus €2.5m for the previous half.
Recurring operating income for the first half of 2008 was a negative €10.9
million.
Financial income and net profit
Financial income totalled €1.2m for the first half of 2008 thanks to cash
management, and in particular the issuance of OCEANE bonds convertible into and/
or exchangeable for new or existing shares.
The cost of gross debt was higher, notably due to the increase in debt
associated with the September 2007 OCEANE issue. The average interest rate for
the 1st half of 2008 was 6.18%, vs. 4.97% in 2007.
The consolidated net loss after tax was €8.8 million. This figure takes into
account a deferred tax asset of €4.5m insofar as the Group is considering
allocating this to future profit.
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? Financial structure
At 30th June 2008, consolidated shareholders equity amounted to €66.0 million,
down 12% compared to 31st December 2007, because of the half's net loss.
Shareholders equity at 30th June 2008 does not take into account the payment of
the exceptional dividend approved by the Shareholders Meeting of 22nd September
2008 totalling €8.5 million or the advance dividend payment totalling €7.4
million.
Total gross debt at 30th June 2008 was €121.6 million, stable compared to the
figure at 31st December 2007 (€120.7m).
At 30th June 2008, the debt's maturity schedule was as follows: €7.2 million
within the coming year and €114.4m beyond that.
Cash and financial assets at 30th June 2008 totalled €53.9m, including the
initial payment of €12.4m for the acquisition of the Bolivian company. The
balance of this payment, i.e. €2.1m, was paid in August 2008.
The net debt-to-equity ratio stood at 102%.
Groupe Vial has been involved in negotiations with its financial partners since
the end of the first half in order to reorganise its debt, and is looking at
various solutions including a projected OBSAAR bond issue reserved for
financial establishments. Indeed, the Ordinary and Extraordinary General
Meeting of 22nd September gave the Board its authorisation to issue OBSAAR
bonds that would replace the €55m of senior debt (initial amount) and would
reduce the Company's financial costs by enabling shareholders to acquire BSAAR
bonds.
The change in working capital requirements over the first half of 2008 was nil.
This was notably due to a slight fall in inventory levels (-3.7% to €72.8m at 30
.06.08) and accounts receivable (-17.5% to €11.4m at 30.06.08). The reduction
in this latter item, which has continued beyond 30th June, is the result of a
strategic decision by the Group to limit the risk of payment defaults by its
clients by significantly cutting approved credit.
? Corrective measures
The counter performance recorded over the first half of this year in no way
calls into question the Group's business model as a discount joinery
manufacturer-distributor. Indeed, it was essentially due to an industrial
mishap resulting from the implementation of the new ERP IT system within the
context of an economic crisis. This is why Groupe Vial has taken radical
measures to guarantee its short, medium and long-term future.
Following the recent phase of rapid expansion, the opening of new stores will
be significantly slowed. Lastly, the Group will focus all its efforts on
deploying the ERP system in order to quickly ensure its correct functioning and
to put the entire supply chain back into working order.
Product and pricing policy
Since its last catalogue was published in May, Groupe Vial has significantly
strengthened its range of renovation products. Indeed, in the face of the new-
housing slowdown but also, more importantly, given the effect of new thermal
norms and energy regulations associated with France's Grenelle de
l'Environnement agreements, Groupe Vial estimates that the joinery renovation
market should record buoyant growth in coming years. With this in mind, Groupe
Vial will reinforce its ranges of products that can be further cut into
dimensions suitable to each customer as one-price tailor-made products
available within very short timeframes.
In the 2009 catalogue, priority will again be given to renovation and to
products with high-performance energy and environmental qualities.
Within the context of a market that has become increasingly competitive, Groupe
Vial remains very well-positioned in terms of selling prices and intends to
increase its market share.
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Optimisation of sourcing and the control of basic materials
In order to reduce its exposure to the volatility of basic materials and its
dependence vis-à-vis its suppliers, Groupe Vial will strengthen its downstream
positioning, as illustrated by the acquisition of the Bolivian company.
Indeed, this company will enable the securing of supplies of wood for the Group
at a competitive price-quality ratio and with the volumes necessary to ensure
development. This integration of the wood subsidiary should have a significant
positive impact on the gross margin of Groupe Vial's wood products from the
second half of 2009.
Regarding other basic materials, Groupe Vial is deploying its skills and
experience worldwide in order to diversify sourcing.
Continuation of the project for a double-glazing glass factory
The project to construct a glass plant is continuing. The factory is expected
to be delivered during the second half of 2009, and it should become
operational in 2010.
This factory perfectly meets the Group's requirements in terms of securing its
supplies, increasing its independence vis-à-vis its suppliers and optimising
its delivery times, notably for tailor-made windows.
Slowdown in new store openings
The rate at which new stores are opened will be slowed, once all the stores
already signed have been opened. Over the second half of this year, 7 stores
will therefore be opened; 4 in France, 2 in Spain and 1 in Portugal. In 2009,
only stores already signed will be opened.
At the end of 2008, the Group will thus have a network of 71 stores covering
the bulk of the French mainland and will have a solid presence in the south of
the Iberian Peninsula.
This slowdown in the rate of new store openings will allow the Group's
operating margin to improve as the stores open for less than 2 years gradually
reach maturity.
Focus on the deployment of Enterprise Resource Planning (ERP)
All of the Group's staff and integrator teams are currently actively working
towards the successful deployment of the ERP system, and the management
committee is closely monitoring progress.
All product references and possible manufacturing options have been entered
into the database. The implementation of the "production" side is progressing,
and initial tests, which took place in September, have been conclusive. For the
"distribution" side, the first store was connected to the new system in October
, and 15 more stores should be connected by 15th December.
Total deployment across the French distribution network is slated for the first
quarter of 2009.
Groupe Vial is thus anticipating total deployment and a 100%-operational system
by the end of the first half of 2009.
? Outlook and guidance
The disruption associated with the implementation of ERP has continued to weigh
on the Group's performances in the second half of 2008. Groupe VIAL is thus
anticipating annual sales of €100 million and a net loss of around €21m.
Given the joint effect of the application of corrective measures and the
gradual implementation of ERP, the Group expects to be back in the black in 2010
.
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Next press release:
Q3 2008 sales: 14th November 2008 after market close
About Groupe VIAL (www.groupe-vial.com):
Listed on the Eurolist (Compartment B) of Euronext Paris since December 2006,
Groupe VIAL manufactures and distributes aluminium, PVC and wood joinery
products (doors, windows, gates, stairs, etc.) offering unparalleled value for
money through tight control of supply lines; efficient, modern production
facilities and the 64-store VIAL Menuiseries distribution network (including 4
stores in Spain).
Groupe VIAL is France's largest independent discount joinery specialist.
Public site: www.vial-menuiseries.com
Listed on Euronext Paris compartment B of NYSE Euronext
Reuters: VIA.PA - Bloomberg: VIA FP
Contacts
Groupe VIAL NewCap.
Jean-François Buigues Financial Communications - Investor Relations
Chief Financial Officer Steve Grobet / Pierre Laurent
investisseurs@groupe-vial.com Tel: +33 (0)1 44 71 94 94
Fax: +33 (0)1 44 71 94 90
vial@newcap.fr
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