2020 Third Quarter Results
- Like-for-like revenues down -10.5% versus Q3 2019 (whereas Q2 organic change was down 20.3%) and net revenues down -14.4% versus Q3 2019
- Adjusted EBITDA up at €118 million in Q3 2020 versus €115 million in Q3 2019; margin at 15.2% of net revenues compared to 12.7% in Q3 2019, up 250 basis points
- Significant cost reduction of €34 million in Q3, including €16 million of structural savings
- Lower purchasing costs by €16 million in Q3, driven by oil price declines in Q2 2020
- Deleveraging thanks to strong free cash flow generation. Net financial debt, including leases recorded under IFRS 16, of €585 million or 2.2x LTM Adjusted EBITDA at the end of September
- Strong level of liquidity at the end of September (€1.1 billion)
- 2020 Adjusted EBITDA margin expected broadly in line with last year’s margin (2019: 9.4%) and financial leverage (financial debt to LTM Adj. EBITDA) below 3.0x at the end of December
The Company uses alternative performance indicators (not defined by IFRS) described in detail in appendix 1 (page 6). Adjusted EBITDA, as reported, is presented below after IFRS 16 consideration:
€ million | Q3 2020 | Q3 2019 | Change |
Net sales | 776.9 | 907.1 | -14.4% |
of which organic growth | -10.5% | ||
Adjusted EBITDA | 117.7 | 115.0 | +2.4% |
% net sales | 15.2% | 12.7% |
Commenting on these results, CEO
- Q3 2020 highlights
As anticipated, demand remained below last year’s level in Q3 2020. The resurgence of the pandemic and partial lockdowns continue to affect investment decisions and customer behaviors. Some key end-user markets are particularly impacted (Workplace, Sports, Hospitality), while Healthcare and Residential are more dynamic.
Specific safety and sanitary measures are still in place in all our production facilities and offices. During the quarter, all manufacturing sites were able to produce and deliver to customers seamlessly while adapting to the lower level of demand.
The Group successfully deployed Change to Win strategic actions to structurally reduce the cost base. In addition, short term measures have allowed to further flex costs, leading to a total cost reduction of €34m in the quarter. Additional actions have been identified and will be deployed in the coming quarters.
Thanks to a strong focus on customer receivables and inventory, working capital was reduced compared to end of June. Capex was contained and will be around €80 million in 2020. The Group generated a strong free cash flow in Q3, leading to significant deleveraging compared to the end of June. Net financial debt, including leases recorded under IFRS 16, amounted to €585 million at the end of September (€728 million at end
Furthermore, the Group ended the quarter with a strong level of liquidity of €1.1 billion, out of which €825 million in undrawn committed credit lines and €258 million in cash.
- Net sales by segment
€ million | Q3 2020 | Q3 2019 | % change | % organic change |
EMEA | 212.6 | 223.5 | -4.9% | -4.7% |
184.4 | 230.1 | -19.9% | -15.0% | |
CIS, APAC & LATAM | 156.6 | 171.0 | -8.4% | +1.8% |
Sports | 223.2 | 282.4 | -21.0% | -19.1% |
TOTAL | 776.9 | 907.1 | -14.4% | -10.5% |
The EMEA segment reported net revenues of €212.6 million, down -4.9% compared to Q3 2019, mainly reflecting a revenue decline of -4.7% on a like-for-like basis. Residential activity recorded revenue growth in the quarter. In Commercial, resilient products have been progressively recovering. The demand for commercial carpet remained weak during the quarter due to its higher exposure to the Workplace segment, but sequentially improved compared to Q2 2020. Overall, the performance improved sequentially compared to Q2 2020 in all countries outside the Nordics, which had been highly resilient over the course of H1 2020.
The North American segment reported net revenues of €184.4 million, down -19.9% compared to last year, reflecting the -15.0% revenue decline on a like-for-like basis and the depreciation of the dollar versus the euro during the quarter. The level of activity sequentially improved compared to Q2 (-32.0% in Q2 2020). Commercial activities have been slowly recovering as they were penalized by uncertainties in the Workplace and Hospitality segments. Conversely, Residential improved due to favorable refurbishment and new home construction trends. Given the low level of demand, furlough was still in place at the beginning of the quarter.
Net revenues in the CIS, APAC and
As anticipated, net revenues of the Sports segment were down -21.0% compared to last year in the quarter, driven by a lower activity (-19.1% on a like-for-like basis) and a negative forex impact related to the dollar depreciation versus the euro. The overall level and seasonality of the business have been affected by projects being delayed, postponed or cancelled. The activity in
- Adjusted EBITDA
Reported adjusted EBITDA amounted to €117.7 million in Q3 2020 compared to €115.0 million in Q3 2019. The adjusted EBITDA margin reached 15.2%, a step improvement compared to last year (Q3 2019: 12.7%). All Flooring segments recorded margin improvement during the quarter. Restated from a positive IP settlement which lifted the margin in Q3 2019, Sports also increased its profitability.
The significant slowdown of activity penalized EBITDA by -€34.5 million. It has been more than offset by the combination of a positive inflation balance and a strong level of cost reduction.
Selective increase in selling prices benefited the results by +€2.7 million compared to last year. Purchasing costs improved by +€15.5 million compared to Q3 2019, mainly reflecting low oil prices in Q2. Wage inflation amounted to -€3.8 million in Q3 2020, reflecting salary increases implemented late 2019 and early 2020.
In addition,
Exchange rates (CIS countries excluded) had a negative effect amounting to -€5.1 million. This decrease reflected the depreciation of the dollar versus the euro and negative exchange rate fluctuations related to the Norwegian krona and the Brazilian real. The net impact of currency and selling price movements in the CIS countries also had a negative effect (lag effect of -€3.4 million) driven by the devaluation of the ruble.
- Cost reduction breakdown Q3 and 9M 2020
Q3 2020
€ million | Productivity gains and SG&A | o/w structural actions | Covid-19 specific measures | o/w governmental support | Total cost reduction |
Gross profit | 11.9 | 11.9 | 2.4 | 2.7 | 14.3 |
SG&A | 12.0 | 4.0 | 7.1 | 0.9 | 19.1 |
Total Q3 | 23.9 | 15.9 | 9.6 | 3.6 | 33.5 |
9M 2020
€ million | Productivity gains and SG&A | o/w structural actions | Covid-19 specific measures | o/w governmental support | Total cost reduction |
Gross profit | 21.7 | 21.7 | 12.2 | 8.7 | 33.9 |
SG&A | 24.1 | 13.0 | 26.2 | 5.5 | 50.3 |
Total 9M | 45.8 | 34.7 | 38.4 | 14.2 | 84.2 |
- FY 2020 Outlook
Significant uncertainties remain on demand level as the pandemic is still active, with new lockdowns enacted across key regions.
Thanks to ongoing achievements in cost reduction,
- Confirmed mid-term objectives
The longer-term impact of the Covid-19 pandemic on demand has yet to be seen. Some end-user segments, such as Workplace and Sports, are expected to remain penalized at least in the first part of 2021. However, 2020 performance is demonstrating the resilience of
The Group will continue to strengthen its cost actions and maintain selectivity in its investments.
The Group stated upon its interim release that its mid-term objectives are still valid. Organic growth is targeted above GDP growth in key regions in 2021 and 2022. Furthermore,
The analysts’ conference will be held on
https://www.tarkett.com/en/content/financial-results
This press release may contain forward-looking statements. Such forward-looking statements do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets. These statements are, by their nature, subject to risks and uncertainties as described in the Company’s annual report registered in
Financial calendar
February 18, 2021 : Q4 and Full Year 2020 financial results – press release after close of trading on theParis stock exchange and conference call the following morningApril 28, 2021 : Q1 2021 financial results - press release after close of trading on theParis stock exchange and conference call the following morningJuly 29, 2021 : Q2 and H1 2021 financial results – press release after close of trading on theParis stock exchange and conference call the following morningOctober 28, 2021 : Q3 2021 financial results - press release after close of trading on theParis stock exchange and conference call the following morning
Investor Relations Contact
Media contacts
Brunswick - tarkett@brunswickgroup.com - Tel.: +33 (0) 1 53 96 83 83
Hugues Boëton – Tel. : +33 (0)6 79 99 27 15 –
About
With a history of 140 years,
Appendices
1/ Alternative performance indicators definitions
- Organic growth measures the change in net sales as compared with the same period in the previous year, at constant scope of consolidation and exchange rates. The exchange rate effect is calculated by applying the previous year’s exchange rates to sales for the current year and calculating the difference as compared with sales for the current year. It also includes the impact of price adjustments in CIS countries intended to offset movements in local currencies against the euro. In Q3 2020, a -€13.1 million negative adjustment in selling prices was excluded from organic growth and included in currency effects.
- Scope effects reflect:
- current-year sales for entities not included in the scope of consolidation in the same period in the previous year, up to the anniversary date of their consolidation;
- the reduction in sales relating to discontinued operations that are not included in the scope of consolidation for the current year but were included in sales for the same period in the previous year, up to the anniversary date of their disposal.
In € million | 2020 | 2019 | Change | o/w exchange rate effect | o/w scope effect | o/w organic change | |
610.7 | 624.5 | -2.2% | +0.7% | - | -2.9% | ||
626.3 | 787.8 | -20.5% | -0.2% | - | -20.3% | ||
1,237.0 | 1,412.3 | -12.4% | +0.2% | -12.6% | |||
776.9 | 907.1 | -14.4% | -3.8% | - | -10.5% | ||
2,013.8 | 2,319.4 | -13.2% | -1.4% | - | -11.8% |
- Adjusted EBITDA is the operating income before depreciation, amortization and the following adjustments: restructuring costs, gains or losses on disposals of significant assets, provisions and reversals of provisions for impairment, costs related to business combinations and legal reorganizations, expenses related to share-based payments and other one-off expenses considered non-recurring by their nature.
Adjusted EBITDA in € million | 2020 | % margin 2020 | 2019 | % margin 2019 | |
42.4 | 6.9% | 43.1 | 6.9% | ||
64.0 | 10.2% | 83.6 | 10.6% | ||
106.3 | 8.6% | 126.7 | 9.0% | ||
117.7 | 15.2% | 115.0 | 12.7% | ||
224.0 | 11.1% | 241.6 | 10.4% |
Given the exceptional situation following the Covid-19 pandemic, the Group publishes its net financial debt and the financial leverage ratio at the end of
Net financial debt is defined as the sum of interest bearing loans and borrowings minus cash and cash equivalents. Interest bearing loans and borrowings refer to any obligation for the repayment of funds received or raised that are subject to repayment terms and interest charges. They also include leases recorded
- under IFRS 16 since the application of the new accounting norm.
- Financial leverage is the ratio financial net debt including leases recorded under IFRS 16 to LTM (Last Twelve Months) Adjusted EBITDA. As per our credit documentation, the financial leverage retained for the covenant is calculated before IFRS16 application. At the end of September, the financial leverage as per our credit documentation was at 2.1x Adjusted EBITDA. The covenant attached to our bank loans is tested at the end of each semester. It has to be below 3.5x at end of June and below 3.0x at end December.
Tarkett obtained from its banking partners a covenant holiday for 2020. The Schuldschein private placements are also subject to a leverage covenant. It is only tested once a year and has to be below 3.0x at the end of December.
€ million | ||||
Reported Net Financial Debt | A | 637 | 728 | 585 |
out of which Lease Liabilities | 89 | 97 | 93 | |
Net Financial Debt pre-IFRS 16 | B | 547 | 631 | 492 |
LTM reported Adjusted EBITDA | C | 280 | 260 | 262 |
Lease charge | (31) | (31) | (31) | |
LTM Adjusted EBITDA pre-IFRS16 | D | 250 | 229 | 231 |
Reported leverage(1) | A/C | 2.3x | 2.8x | 2.2x |
Leverage as per covenants(2) | B/D | 2.2x | 2.8x | 2.1x |
IFRS16 impact on leverage | 0.1x | 0.0x | 0.1x |
(1) Reference for Mid-term objective: Leverage comprised between 1.6x and 2.6x at year-end
(2) Credit documentation is based on pre-IFRS 16 accounting standards - Covenant is 3.5x end of June, 3.0x end of December
2/ Bridges (€ million)
Net sales bridge by segment | Adjusted EBITDA bridge |
Q3 2019 | 907.1 |
+/- EMEA | (10.6) |
+/- | (34.5) |
+/- CIS, APAC & LATAM | 3.0 |
+/- Sports | (53.5) |
Q3 2020 LfL | 811.5 |
+/- Currencies | (21.5) |
+/- Selling price lag effect in CIS | (13.1) |
Q3 2020 | 776.9 |
Q3 2019 | 115.0 |
+/- Volume / Mix | (34.5) |
+/- Sales Pricing | 2.7 |
+/- Raw Material & Freight | 15.5 |
+/- Salary Increase | (3.8) |
+/- Productivity | 11.9 |
+/- SG&A | 12.0 |
+/- Covid-19 measures | 9.6 |
+/- One-offs & Others | (2.2) |
+/- Selling price lag effect in CIS | (3.4) |
+/- Currencies | (5.1) |
Q3 2020 | 117.7 |
9M 2019 | 2,319.4 |
+/- EMEA | (71.4) |
+/- | (114.3) |
+/- CIS, APAC & LATAM | (21.7) |
+/- Sports | (66.3) |
9M 2020 LfL | 2,045.7 |
+/- Currencies | (14.9) |
+/- Selling price lag effect in CIS | (17.0) |
9M 2020 | 2,013.8 |
9M 2019 | 241.6 |
+/- Volume / Mix | (112.3) |
+/- Sales Pricing | 4.0 |
+/- Raw Material & Freight | 24.0 |
+/- Salary Increase | (11.7) |
+/- Productivity | 21.7 |
+/- SG&A | 24.1 |
+/- Covid-19 measures | 38.4 |
+/- One-offs & Others | 5.2 |
+/- Selling price lag effect in CIS | (4.0) |
+/- Currencies | (7.1) |
9M 2020 | 224.0 |
Attachment
- Tarkett_Q3 2020_Results_ENG
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