Financials supporting our growth model...DTL on FV of intangibles - -10,531 -10,531 Goodwill...
Transcript of Financials supporting our growth model...DTL on FV of intangibles - -10,531 -10,531 Goodwill...
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Financials supporting our growth model
Gert van Laar, CFO B&S Group & Peter Kruithof, Corporate Treasurer
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Putting the
balance
sheet in
perspective
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Our balance as at December 31, 2018
Net debt to be seen
in combination
with/as part of WC
76% of assets = WC
High turnaround
inventory and AR =
high turn-around
Net debt
IFRS 16 and
Options
following Fnet
acq ≠ Net Debt
Other current assets; 29.4
Accounts receivable; 205.7
Inventory; 377.9
Non-current assets; 157.3
Other current liabilities; 93.7
Trade payables; 90.8
Net Debt; 312.7
Equity; 273.1
Assets Equity and Liabilities
AR 27%
Inventory49%
Other24%
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Effects of prepayment to suppliers
INCREASED
INVENTORY
POSITION
Inventory already
recognised at balance
during transit
ACCOUNTS PAYABLE
REPLACED BY BANK
DEBT
AP days low compared to
‘classic’ distributor model
PRODUCTS
AVAILABLE
AT BEST PRICES
Competitive
advantage
in the market
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Our balance as at December 31, 2018
Other current assets; 29.4
Accounts receivable; 205.7
Inventory; 377.9
Non-current assets; 157.3
Other current liabilities; 93.7
Trade payables; 246.7
Net Debt; 156.8
Equity; 273.1
Assets Equity and Liabilities
Other current assets; 29.4
Accounts receivable; 205.7
Inventory; 377.9
Non-current assets; 157.3
Other current liabilities; 93.7
Trade payables; 90.8
Net Debt; 312.7
Equity; 273.1
Assets Equity and Liabilities
Net debt/EBITDA 2.9 | Days WC 103 Net debt/EBITDA 1.4 | Days WC 70
Accounts payable at 60 daysAccounts payable as is
OR
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How we
approach
working
capital
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Working capital development
WC
€ mln
Turnover
€ mln
600
800
1,000
1,200
1,400
1,600
1,800
2,000
60
110
160
210
260
310
360
410
460
510
560
1612 1703 1706 1709 1712 1803 1806 1809 1812 1903Accounts receivable Inventory Accounts payable Working capital
Turnover LTM Linear (Working capital) Linear (Turnover LTM)
Start of
inventory
build-up
Peak
following
seasonal
sales
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Managing
our portfolio
1
2
3
4
Controls proven to be effective
Provision for doubtful debt (as %
of turnover)
2016: 0.12%
2017: 0.08%
2018: 0.06%
Extensive KYC procedures
All debtors insured or payment
guaranteed by other means
IT controls on credit limits
Dashboards to follow our
portfolio real time
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Managing
our inventory
1
2
3
4
Controls proven to be effective
Write down (as % of turnover)
2016: 0.32%
2017: 0.29%
2018: 0.19%
Sourcing worldwide and building
up inventory for seasonal sales
Dedicated departments with
category management
Mainly A-brands with limited
exposure to economic hardship
Weekly KPI reporting for tracking
developments
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Our balance as at December 31, 2018
Balance sheet
remained solid post
FragranceNet
acquisition
WC forms main part
of asset side
balance sheet
Inventories and
receivables partly
financed by debt
As result of M&A price
discipline, goodwill on
balance sheet limited
(€ 59.9 M)
Other current assets; 29.4
Accounts receivable; 205.7
Inventory; 377.9
Non-current assets; 157.3
Other current liabilities; 184.5
Net Debt; 312.7
Equity; 273.1
A SSETS EQUITY A ND L IA BIL IT IES
Healthy
positions with
high
turnaround
and cash
generation
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Net debt development 2018
*After dividend distribution
Acq.
Topbrands
174.1
Increase of 12.1%
Turnover +12.5%
Increase of 16.3%
Turnover +16.8%
30.4
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FragranceNet.com financing structure
Acquisition finance
External financing (long term) € 40.0 M
Minority shareholders in JTG € 8.9 M
Existing bank facilities € 26.7 M
€ 75.6 M
Recognised intangibles (IFRS 3)
▪ Goodwill
(potential synergies)
not amortised: € 41.4M
▪ Other intangibles
(brand name, software,
supplier platform)
amortised: € 45.2M
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FragranceNet Purchase
Price Allocation (PPA)
▪ Valuation methodology applied:
▪ Multi-period excess earnings
method (“MEEM”)
▪ Relief from royalty method
▪ Cost method
▪ Fair value estimates and
accounting alignment existing
assets and consumed liabilities
$ ‘000 Opening
balance
01-10-2018
Fair Value Fair Value Step
up
Equity consideration 42,004 127,956 85,952
Less: Cash assumed & Non-
operational assets-6,905 -6,905 -
Transaction value 35,099 121,051 85,952
Net working capital 28,971 28,971 -
Tangible fixed assets 2,456 2,456 -
Existing IFA 2,174 2,174 -
Sourcing platform - 34,556 34,556
Private label product portfolio - 10,020 10,020
Software 491 2,037 2,628
Brand name - 3,090 3,090
Goodwill as previously booked 1,094 - -1,094
Intangible fixed assets3,759 51,877 49,100
Existing DTA (DTL) -87 -87 -
DTL on FV of intangibles - -10,531 -10,531
Goodwill recognised n/a 47,874 47,874
Total invested capital 35,099 121,052 85,952
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Impact of
IFRS 16
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IFRS 16 in the balance sheet
IMPACT ON
BALANCE SHEET
Long term assets (right-
off-use-asset) and lease
liabilities 62.8M
NO CASH
IMPACT
No cash flow impact
however impact on cash
flow statement
RENTAL
AGREEMENTS
Balance mainly impacted
by rental agreements for
warehouses
TIMING OF
APPLIANCE
Applied from 2019
onwards, not
retrospectively
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Our balance as at December 31, 2018
€ mln 31.12.2018 IFRS 16Adjusted 31.12.2018 IFRS 16 Adjusted
Non-current assets Equity attributable to
Goodwill 59.9 59.9 Owners of the company 234.0 234.0
Other intangible assets 61.7 61.7 Non-controlling interest 39.1 39.1
Property, plant and equipment 31.0 31.0 273.1 273.1
Right of use asset 62.8 62.8
Investment in associates 2.1 2.1 Non-current liabilities
Receivables 2.3 2.3 Borrowings 55.8 55.8
Deferred tax assets 0.2 0.2 Deferred tax liability 11.7 11.7
157.2 220.0 Employee benefit obligations 0.6 0.6
Lease liabilities 54.4 54.4
Current assets Other liabilities 24.6 24.6
Inventory 377.9 377.9 92.7 147.1
Trade receivables 205.7 205.7
Corporate income tax 1.8 1.8 Current liabilities
Other tax receivable 6.0 6.0 Credit institutions 271.5 271.5
Other receivables 21.7 21.7 Borrowings due within one year 12.4 12.4
Cash and cash equivalents 26.9 26.9 Lease liability due within one year 8.4 8.4
640.0 640.0 Supplier finance arrangements 21.2 21.2
Derivative financial instruments 0.3 0.3
Trade payables 69.6 69.6
Corporate income tax liability 11.8 11.8
Other taxes and security charges 14.6 14.6
Other current liabilities 30 30
431.4 439.8
Total assets 797.2 860.0 Total equity and liabilities 797.2 860.0
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IFRS 16:
effect on the P&L
Split of payments:
▪ Interest on balance
position remains in cash
flow from operations
▪ Repayment of lease
liability in cash flow from
financing activities
€ mln 2018 IFRS 16 Adjusted
Turnover 1,746.5 1,746.5
Purchase value 1,501.1 1,501.1
Gross profit 245.4 245.4
Investment income 0.2 0.2
Other gains and losses -3.1 -3.1
Personnel costs 86.3 86.3
Other operating expenses 47.2 -9.0 38.2
Total operating expenses 133.5 -9.0 124.5
EBITDA 109.0 9.0 118.0
Depreciation and amortisation 10.7 8.4 19.1
Operating result 98.3 0.6 98.9
Financial expenses 7.6 1.2 8.8
Share of profit -0.2 -0.2
Result before taxation 90.9 -0.6 90.3 Front loading effect of IFRS 16; timing difference between accounting under
IFRS and those for tax purposes.
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Seasonality
patterns
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Seasonality in turnover
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%1
50
1
150
2
150
3
150
4
150
5
150
6
150
7
150
8
150
9
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0
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1
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2
160
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160
2
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3
160
4
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5
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6
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7
160
8
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9
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0
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1
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2
170
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170
2
170
3
170
4
170
5
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6
170
7
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8
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9
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0
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1
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2
180
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180
2
180
3
180
4
180
5
180
6
180
7
180
8
180
9
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0
181
1
181
2
B&S Group B&S Group Ex Fnet
Steeper year-
end peak
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Seasonality in EBITDA and PBT
H1 H2 new H2
Sales and gross profit
shifting to H2Impact of FragranceNet
>60% EBITDA in H2
60% EBITDA
expected in H2
Straight line in
depreciation and
amortisation
Seasonal effect on
PBT even bigger
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Below
Profit
before
tax
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Tax position explained
Expectations 2019
Delay of tax decrease in Netherlands to 2020 (22.55%)
No significant change in composition of result expected
January 1, 2018
Transfer pricing agreement for all 100% group companies worldwide
Januari 1,
2018
December
31, 2018
2018
Expected tax charge: 19%
Actual tax charge: 21%
Result of:
▪ Increased contribution of Topbrands and JTG to result however taxed
at 25%
▪ FragranceNet taxed at 28%
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0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
2015 2016 2017 2018 2019
Minorities
▪ JTG
▪ Topbrands
▪ FragranceNet
Minorities (non controlling
interest) represents stake of
management in net result
5 months
Topbrands
FY Topbrands
Pre-IPO
minorities
decreased by
1/3
(management
incentive)
FragranceNet
2018, 3 months
2019, 12 months
Profit attributable to NCI as a % of total profitAcquisition philosophy:
“acquire companies
where existing
management maintains a
minority stake”
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JTG Topbrands Fragrancenet Lagaay
24.62%
JTG management
32.83%
Topbrands
management
24.62%
JTG management
30%
Lagaay management
25%
Fnet management
c. 25%
Minorities in
subsidiaries
B&S Group
(attributable to the
owners of the
company))
75.38% 67.17% 56.54% 53%
Minorities overview for 2019
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Hybrid non-controlling interest FragranceNet.com
Put/call options on
remaining sharesIFRS
Liability (Other long term liabilities) instead of NCI in Equity
In P&L however classified as NCI
(Also see note 34 Annual Report 2018)
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Non-controlling interest (NCI) FragranceNet
▪ Put and call option on remaining FragranceNet shares with following conditions:
▪ 2x 12.5% in 5 and 10 years
▪ Strike price put = strike price call
▪ Price dependent on future growth and future profitability
▪ Given the above: hybrid between equity and liability
▪ Under IFRS:
▪ Reflect NCI in profit or loss account
▪ At reporting period reclassification of NCI to long term liabilities (P&L remains unchanged)
▪ After reclassification long term liability to be revalued at fair value (present value of expected future obligation)
with changes (difference between reclassified NCI and fair value) through equity (other reserves, EUR 2.7M in
2018).
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Acquisitive
growth
▪ First 12 months following date of
acquisition = date of obtaining
effective control = date of first
consolidation
▪ From first consolidation onwards
balancesheet 100% included
▪ P&L only forward looking as
such negatively impacting ratio’s
(net debt/EBITDA and working
capital ratio’s)
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Outlook & Closing
Bert Meulman, CEO
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The global distribution
landscape is becoming
more and more complex
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Our ability to adapt is what has
always fueled our growth
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While our scale and in-depth
market knowledge give us the
first mover advantage
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Our differentiating segments are
all fueled by this principle
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Our cornerstone for
growth
Building the platform for
sustainable growthA unique concept for
continued growth
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That’s what makes
our model future proof.
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Q&A
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