REXEL ANNUAL RESULTS 2017
- SALES OF €3.405bn IN Q4, UP IN EVERY GEOGRAPHY
On a constant and same-day basis, sales up 5.4% of which:
Europe: +5.5%, benefiting from accelerating sales across most European countries
North America: +3.2%, supported by Canada and proximity business in the US
Asia-Pacific: +12.7%, mainly driven by China and Australia
Organic actual-day growth of 2.7% including -2.7% from calendar and +1.6% from copper
Reported growth down 1.5%, including unfavorable currency (-3.6%) and scope (-0.5%) effects
- ADJUSTED EBITA UP 8.7% IN Q4, WITH A MARGIN OF 4.7% DESPITE AN UNFAVORABLE CALENDAR EFFECT
Solid gross margin, up 39 bps at 24.5%, driven by Europe and North America
Adj. EBITA margin up 26 bps, while accelerating investments in the US
- STRONG INCREASE IN RECURRING NET INCOME OF +32.2% IN Q4
- INCREASE IN PROPOSED DIVIDEND TO €0.42 PER SHARE, PAYABLE IN CASH
|Key figures1||Q4 2017||YoY change||FY 2017||YoY change|
|On a reported basis||-1.5%||+1.1%|
|On a constant and actual-day basis||+2.7%||+2.9%|
|On a constant and same-day basis||+5.4%||+3.5%|
|As a percentage of sales||4.7%||4.4%|
|Change in bps as a % of sales||+26bps||+13bps|
|Recurring net income||€83.0m||+32.2%||€291.2m||+16.4%|
|FCF before interest and tax||€364.8m||vs. €414.7m||€384.3m||vs. €439.1m|
|Net debt at end of period||€2,041.2m||6.0% reduction|
1 See definition in the Glossary section of this document 2 At comparable scope of consolidation and exchange rates and excluding (i) amortization of PPA and (ii) the non-recurring effect related to changes in copper-based cables price
Financial statements as of December 31, 2017 were authorized for issue by the Board of Directors on January 13, 2018. They have been audited by statutory auditors.
The following terms: Reported EBITA, Adjusted EBITA, EBITDA, Recurring net income, Free Cash Flow and Net Debt are defined in the Glossary section of this document.
Unless otherwise stated, all comments are on a constant and adjusted basis and, for sales, at same number of working days.
In Q4, sales were down 1.5% year-on-year on a reported basis and up 5.4% on a constant and same-day basis, reflecting improvement in sales trends in all three geographies.
In FY, sales were up 1.1% year-on-year on a reported basis and up 3.5% on a constant and same-day basis.
In the fourth quarter, Rexel posted sales of €3,405.4 million, down 1.5% on a reported basis. On a constant and same-day basis, sales were up 5.4%, including a 1.6% positive effect due to the change in copper-based cable prices.
The 1.5% decrease in sales on a reported basis included:
A negative currency effect of €123.7 million (i.e. -3.6% of Q4 2016 sales), mainly due to the depreciation of the US dollar and the British pound against the euro,
A negative net scope effect of €18.3 million (i.e. -0.5% of Q4 2016 sales), resulting from the recent divestments in South East Asia,
A negative calendar effect of 2.7 percentage points.
In FY 17, Rexel posted sales of €13,310.1 million, up 1.1% on a reported basis. On a constant and same-day basis, sales were up 3.5%, including a 1.4% positive impact due to the change in copper-based cable prices.
The 1.1% increase in sales on a reported basis included:
A negative currency effect of €161.6 million (i.e. -1.2% of FY 2016 sales), mainly due to the depreciation of the US dollar and the British pound against the euro,
A negative net scope effect of €61.4 million (i.e. -0.5% of FY 2016 sales), mainly resulting from divestments (Poland, Slovakia, Baltics and South East Asia), partly offset by the acquisition of Brohl & Appell in the US,
A positive calendar effect of 0.6 percentage points.
Europe (56% of Group sales): +5.5% in Q4 and +4.2% in FY on a constant and same-day basis
In the fourth quarter, sales in Europe increased by 4.0% on a reported basis, including a negative currency effect of €15.6m (mainly due to the depreciation of the British pound against the euro) in Q4 2016. On a constant and same-day basis, sales were up 5.5%, reflecting growth acceleration across most countries.
Sales in France (38% of the region's sales) were up 8.2%, reflecting the efficiency of the model allowing to benefit from market growth;
Sales in Scandinavia (14% of the region's sales) posted strong growth, up 7.4%, in a healthy Swedish market (+11.1%), driven by medium C&I as well as utility-related projects;
Sales in Germany (11% of the region's sales) were up 4.1%, mainly fueled by the industrial end-market, notably cables;
In the UK (10% of the region's sales) sales dropped by 5.3%, mainly due to internal restructuring and 15 branch closings in 2017 impacting our business in a declining market.
Benelux (9% of the region's sales) posted solid growth, thanks to good momentum in Belgium, up 7.6% and in the Netherlands, up 13.5%, driven by photovoltaic equipment;
Sales in Switzerland (6% of the region's sales) grew by 0.7% in an environment that remains competitive.
North America (34% of Group sales): +3.2% in Q4 and +2.4% in FY on a constant and same-day basis
In the fourth quarter, sales in North America were down 9.7% on a reported basis, including a negative currency effect of €88.3m (mainly due to the depreciation of the US dollar against the euro). On a constant and same-day basis, sales were up 3.2%, driven by Canada and the proximity business in the US.
- In the US (77% of the region's sales), sales were up 2.1% on a same-day basis. The sales growth was mainly driven by Rexel's proximity and
automation businesses, offsetting pressure in Project business:
- Branch openings (4 in Q4 and 17 in FY17) contributed for +1.3% of growth in the quarter;
- +1.2% contribution from strong demand in O&G, up 25% in the quarter;
- Rexel's Project business continues to be affected by disruptions in the supply chain of a large supplier as well as lower wind and power projects.
- In Canada (23% of the region's sales), sales strongly accelerated, up 6.7% on a same-day basis, mainly driven by the commercial end-market and
Oil & Gas:
- Rexel posted a high single-digit rise in the commercial business, thanks to lighting and building installation contractors;
- The Oil & Gas business (8% of sales) also rose strongly, up 37% in the quarter.
Asia-Pacific (10% of Group sales): +12.7% in Q4 and +3.4% in FY on a constant and same-day basis
In the fourth quarter, sales in Asia-Pacific were stable on a reported basis, including a negative scope effect of €18.1m and a negative currency effect of €20.0m. On a constant and same-day basis, sales were up 12.7%.
In Asia (52% of the region's sales), sales were up 18.2%:
- In China (70% of Asia), sales grew by 12.0% on a constant and same-day basis reflecting good momentum in industrial automation products and solutions;
- In South East Asia (10% of Asia), sales dropped by 12.0%. The operations were sold in Q4 2017 and consolidated until November 30, 2017;
- Middle East and India (20% of Asia) posted a strong performance thanks to a large project in the Middle East and strong automation business in India.
In the Pacific (48% of the region's sales), sales were up 7.2% on a constant and same-day basis:
- In Australia (83% of Pacific), sales were up 9.8%, mainly reflecting the good momentum in the residential end-market (up in the double digits) and market share gains;
- In New Zealand (17% of Pacific), sales were down 3.7% due to lower project sales.
Continued improvement in gross margin: +39bps in Q4 and +16bps in FY
Adjusted EBITA margin of 4.7% in Q4, up 26bps, and of 4.4% in FY, up 13bps
This quarter, we have restated operating expenses (opex) and Depreciation to reflect a change in corporate-hosted allocation in order to provide greater clarity of underlying operating leverage by region (see appendix 7)
In the fourth quarter, gross margin was up 39 bps year-on-year, at 24.5% of sales and opex (including depreciation) amounted to 19.8% of sales, representing a 13bp deterioration year-on-year.
In Europe, gross margin stood at 26.9% of sales, up 41bps year-on-year, in spite of an unfavorable cable margin contribution of -26bps. These effects were offset by the benefits stemming from strong operating leverage in France and better purchasing conditions in the UK thanks to the merger of banners.
In North America, gross margin stood at 22.5% of sales. This represented a 54bps improvement year-on-year, mainly thanks to better purchasing conditions and pricing initiatives, especially in our proximity business in the US. This improvement was offset by opex (including depreciation) that increased by 56bps (to 18.7% of sales), impacted by investments in future growth in the US, including branch openings, counter resets, commercial actions and logistics initiatives.
In Asia-Pacific, gross margin stood at 17.5% of sales, a deterioration of 40bps year-on-year. However, adjusted EBITA margin improved by 104bps, thanks to country mix, volume contribution, bad debt reversal and strict cost control which offset the 40 bps impact on gross margin due to the phasing of a project in Middle East.
As a result, adjusted EBITA stood at €159.3m, up 8.7% in Q4.
Adjusted EBITA margin rose by 26 basis points to 4.7% of sales, reflecting:
an improved adjusted EBITA margin in Europe at 6.3% of sales, up 76bps,
a stable adjusted EBITA margin in North America at 3.8% of sales and
an improved adjusted EBITA margin in Asia-Pacific at 2.4% of sales, up 104bps.
In Q4, reported EBITA stood at €162.4 million (including a €3.1m positive one-off copper effect), up 5.5% year-on-year.
In the full year, gross margin stood at 24.4% of sales, up 16bps year-on-year, thanks both to North America (up 43bps at 22.5% of sales) and Europe (up 7bps at 26.8% of sales) and offsetting the deterioration in Asia-Pacific (down 44bps at 17.8% of sales).
Opex (incl. depreciation) were broadly stable year-on-year at 20.1% of sales.
As a result, adjusted EBITA stood at €580.1m, up 6.1% at 4.4% of sales, up 13bps year-on-year. Excluding South East Asian operations (fully divested in 2017), adjusted EBITA grew by 7.5% in full-year 2017.
Reported EBITA stood at €594.3m in the full-year (including a €14.2m positive one-off copper effect) up 10.1%.
Net income decreased to €104.9m in the full-year, mainly due to goodwill impairment
Recurring net income increased to €291.2 million in the full-year, up 16.4% yoy
Operating income in the full year stood at €322.3 million, vs. €397.0m in 2016.
Amortization of intangibles resulting from purchase price allocation amounted to €19.0 million (vs. €18.7 million in 2016).
Other income and expenses amounted to a net charge of €253.0 million (vs. a net charge of €124.0 million in 2016). They included €44.1 million of restructuring costs (vs. €59.3 million in 2016). They also included a charge of €133.7m from goodwill impairment in Germany (€86.2 million), Finland (€34.5 million) and New Zealand (€13.0 million) and a loss on asset disposals of €68.7 million, including a €57.6 million loss from South East Asia divestment in Q4.
Net financial expenses in the full year amounted to €145.9 million (vs. €146.3 million in 2016). Both periods included charges related to refinancing operations:
2017 included a net charge of €18.8 million, related to early redemptions of (i) the remaining outstanding USD330m from the Senior notes issued in April 2013 and (ii) the €500m from Senior notes issued in May 2015. 2017 was also impacted by a €10.9 million non-recurring expense associated with the discounting of letters of credit due from overseas financial institutions;
2016 included a net charge of €16.3 million related to the early redemption of (i) the €650m Senior notes issued in April 2013 and (ii) the early repayment of USD170m (c. €150m) from the Senior notes issued in April 2013.
Restated for those net charges, net financial expenses decreased from €130.0 million in 2016 to €116.2 million in 2017. This largely reflected lower average debt year-on-year and lower average effective interest rate, thanks to the various refinancing operations. The average effective interest rate on gross debt decreased by 37bps year-on-year in 2017 to 3.2% (vs. 3.5% in 2016).
Income tax in the full year represented a charge of €71.5 million (vs. €116.4 million in 2016), a decrease of 38.6%, mainly reflecting a 29.6% decrease in profit before tax. The effective tax rate is lower at 40.5% (vs. 46.4% in 2016), reflecting the non-cash one-off effect of the revaluation of our deferred tax liabilities in the US following the adoption of the new tax reform. This was offset by non-tax-deductible charges from goodwill impairment and capital loss on asset disposal.
Net income in the full year dropped by 21.9% to €104.9 million (vs. €134.3 million in 2016).
Recurring net income in the full year amounted to €291.2 million, up 16.4% year-on-year (see appendix 2).
Net debt reduced by 6% year-on-year at December 31, 2017
The indebtedness ratio stood at 2.8x at December 31, 2017
In the full year, free cash flow before interest and taxwas an inflow of €384.3 million (vs. an inflow of €439.1 million in 2016). This net inflow included:
Net capital expenditure of €110.3 million (vs. €98.6 million in 2016),
An outflow of €118.4 million from change in working capital on a reported basis (vs. an outflow of €26.1 million in 2016). On a constant and adjusted basis, working capital increased by 50bps as a percentage of the last 12-month sales, from 10.3% at December 31, 2016 to 10.8% at December 31, 2017. This increase reflected higher inventories to support a deeper and larger offer and the opening of branches/counters in the US, as presented at the latest Capital Markets Day, and a decrease by 1.5 days of payables.
At December 31, 2017, net debt stood at €2,041.2 million, down 6.0% year-on-year (vs. €2,172.6 million at December 31, 2016).
It took into account:
€120.8 million of dividend paid early July,
€101.9 million of net interest paid in FY (€24.5 million paid in Q4),
€102.5 million of income tax paid in FY (€11.2 million paid in Q4),
€111.0 million of positive currency effect in FY (positive effect of €13.3 million in Q4).
At December 31, 2017, the indebtedness ratio (Net financial debt/ EBITDA), as calculated under the Senior Credit Agreement terms, stood at 2.8x vs. 3.0x at December 31, 2016.
INCREASE IN PROPOSED DIVIDEND TO €0.42 PER SHARE, PAYABLE IN CASH
Rexel will propose to shareholders a dividend of €0.42 per share, 2 cents higher compared to last year and representing 44% of the Group's recurring net income (vs. 48% last year). This is in line with Rexel's policy of paying out at least 40% of recurring net income.
This dividend, payable in cash early in July 2018, will be subject to approval at the Annual Shareholders' Meeting to be held in Paris on May 24, 2018.
In 2018, we expect further growth in a market environment that should remain favorable in most of our main geographies. We will continue to invest in our digitization strategy across the group and in our operations in the US and should also benefit from the contribution from our US initiatives launched in 2017.
Consistent with our medium-term ambition, we target at comparable scope of consolidation and exchange rates:
sales up in the low single digits (on a same-day basis);
a mid- to high-single-digit increase in adjusted EBITA1;
a further improvement of the indebtedness ratio (net debt-to-EBITDA2)
1 excluding (i) amortization of PPA and (ii) the non-recurring effect related to changes in copper-based cables price
2 as calculated under the Senior Credit Agreement terms
NB: The estimated impacts per quarter of (i) calendar effects by geography, (ii) changes in the consolidation scope and (iii) currency fluctuations (based on assumptions of average rates over the rest of the year for the Group's main currencies) are detailed in appendix 5.
April 27, 2018 First-quarter results
May 24, 2018 Annual Shareholders' Meeting
July 31, 2018 Second-quarter and half-year results
October 31, 2018 Third-quarter and nine-month results
The financial report for the period ended December 31, 2017 is available on the Group's website (www.rexel.com), in the "Regulated information" section, and has been filed with the French Autorité des Marchés Financiers.
A slideshow of the fourth-quarter and full-year 2017 results is also available on the Group's website.
Rexel, worldwide expert in the multichannel professional distribution of products and services for the energy world, addresses three main markets - residential, commercial and industrial. The Group supports its residential, commercial and industrial customers by providing a tailored and scalable range of products and services in energy management for construction, renovation, production and maintenance.
Rexel operates through a network of some 2,000 branches in 26 countries, with more than 27,000 employees. The Group's sales were €13.3 billion in 2017.
Rexel is listed on the Eurolist market of Euronext Paris (compartment A, ticker RXL, ISIN code FR0010451203). It is included in the following indices: SBF 120, CAC Mid 100, CAC AllTrade, CAC AllShares, FTSE EuroMid, STOXX600. Rexel is also part of the following SRI indices: FTSE4Good, STOXX® Global ESG Leaders, Ethibel Sustainability Index Excellence Europe, Euronext Vigeo Eiris Eurozone 120 and Dow Jones Sustainability Index Europe, in recognition of its performance in corporate social responsibility (CSR).
For more information, visit Rexel's web site at www.rexel.com
FINANCIAL ANALYSTS / INVESTORS
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REPORTED EBITA (Earnings Before Interest, Taxes and Amortization) is defined as operating income before amortization of intangible assets recognized upon purchase price allocation and before other income and other expenses.
ADJUSTED EBITA is defined as EBITA excluding the estimated non-recurring net impact from changes in copper-based cable prices.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is defined as operating income before depreciation and amortization and before other income and other expenses.
RECURRING NET INCOME is defined as net income adjusted for non-recurring copper effect, other expenses and income, non-recurring financial expenses, net of tax effect associated with the above items.
FREE CASH FLOW is defined as cash from operating activities minus net capital expenditure.
NET DEBT is defined as financial debt less cash and cash equivalents. Net debt includes debt hedge derivatives.
For appendices, please open the PDF file by clicking on the link at the end of the press release.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: REXEL via Globenewswire