Results for H1 2023: Sales growth driven by Sport and price
increases implemented in 2022 Stable EBITDA and good free cash flow
generation
Results for H1 2023:
Sales growth driven by Sport and price increases
implemented in 2022
Stable EBITDA and good free cash flow
generation
Second quarter and first half 2023 results
- Q2 turnover up +3.5% compared to Q2 2022, of which
+7.5% in organic growth thanks to strong activity in Sport (+31.3%)
and selling price increases deployed in 2022
- H1 turnover up +2.8% compared to H1 2022, of which
+3.9% in organic growth, given volumes up in Sport and a positive
selling price effect which offset volumes down in EMEA and North
America
- Adjusted EBITDA of €126 million in H1 2023, i.e., 7.8%
of sales, stable compared to H1 2022 (€126 million, 8.1% of
sales)
- EBIT of €49 million in H1 2023, up compared to H1 2022
(€44 million)
- Net profit of €2.8 million compared to €12.6 million in
the first half of 2022
- Good free cash flow generation (+€27 million) thanks to
a thight management of working capital and, especially on
inventories in a structurally cash-consuming period
- Net financial debt of €649 million slightly down
compared to December 2022 and stable leverage at 2.8x adjusted
EBITDA
Paris, 26 July
2023: The Supervisory Board of Tarkett (Euronext Paris:
FR0004188670 TKTT), met today and reviewed the Group’s consolidated
results for the half-year of 2023.
The Group uses
alternative performance indicators (not defined under IFRS),
described in detail in Appendix 1 on page 6 of this document:
In millions of euros |
H1 2023 |
H1 2022 |
Change in % |
Revenue |
1,608.3 |
1,564.0 |
+2.8% |
Of which organic change |
+3.4% |
+13.8% |
Adjusted EBITDA |
126.1 |
126.2 |
+0.0% |
% of revenue |
7.8% |
8.1% |
Adjusted EBIT |
59.2 |
55.3 |
+7.1% |
% of revenue |
3.7% |
3.5% |
EBIT |
48.5 |
44.2 |
+9.7% |
% of revenue |
3.0% |
2.8% |
Net profit attributable to shareholders of the
company |
2.8 |
12.6 |
- |
Fully diluted earnings per share (€) |
0.04 |
0.19 |
Free cash flow |
27.3 |
-260.3 |
- |
Net debt |
648.9 |
778.0 |
- |
Leverage (Net debt to adjusted EBITDA over 12 months) |
2.8x |
3.2x |
|
Net revenue in H1 2023 was
€1,608 million, up by 2.8% compared to the first half of 2022.
Organic growth reached 3.9%. The total effect of the selling price
increases implemented in 2022 across all segments is +5.5% on
average in 2023 compared to H1 2022. Over the period, volume fell
by -2.1%. The strong Sport activity largely offsets the
volume shrinkage in flooring, which is particularly pronounced in
EMEA against a backdrop of weakness in the Residential segment. The
currency effect contributed negatively, notably due to the
depreciation of the Russan ruble, the Norwegian krone and the pound
sterling in EMEA and the dollar.
Adjusted EBITDA amounted to
€126.1 million, i.e., 7.8% of revenue, compared to €126.2 million
in H1 2022, i.e., 8.1% of revenue.
The decrease in volumes sold contributed
negatively to EBITDA. The combined effect of volume and product mix
is -€45 million owing to the decrease in flooring, including more
profitable products in the Commercial segment.
Raw material, energy and transport prices
started to fall in the second quarter, with a positive net effect
on the half-year of +€8 million compared to 2022, but wage
inflation remains significant (-€16 million).
Selling price increases rolled out throughout
the 2022 financial year led to a positive effect of +€85 million in
H1 2023 compared to H1 2022 and is now starting to offset the
additional costs linked to inflation of raw materials recorded
since the second half of 2021.
SG&A are slightly up (€10 million) to
support the growth of Sport and the launch of new flooring
collections.
Foreign exchange had a negative -€15 million
impact compared to the first half of 2022 due to the depreciation
of the ruble and the weakening of the dollar.
The adjusted EBITDA margin for the first half of
the year showed a slight decline (7.8% of sales compared to 8.1% in
the first half of 2022).
EBIT amounted to €48.5 million
in H1 2023 up from €44.2 million in 2022. EBIT
adjustments (detailed in Appendix 1) amounted to €10.7
million in H1 2023 compared to €11.1 million in H1 2022. These
include restructuring costs related to the Commercial, General and
Administrative Expenses Savings Plan and the streamlining of the
industrial organisation in Asia.
Financial expenses amounted to
€33.9 million in H1 2023, compared to €14.4 million in H1 2022.
This increase is mainly due to the rise in average gross debt over
the half-year compared to H1 2022. The rise in interest rates is
largely neutralised by hedging instruments implemented in 2021.
The income tax expense amounted to €11.4 million
in 2023, down compared to the previous year (€16.4 million) given
the decrease in profit before tax.
Net profit in H1 2023 is €2.8
million, i.e., a diluted earnings per share of €0.04.
- H1 Revenue and EBITDA by segment
Revenue by segment
In millions of euros |
H1 2023 |
H1 2022 |
Change |
Of which organic growth |
Of which organic growthOrganic
growth(incl. CIS price
changes)(1) |
EMEA |
443.1 |
487.0 |
-9.0% |
-7.2% |
-7.2% |
North America |
458.1 |
450.8 |
+1.6% |
+0.7% |
+0.7% |
CIS, APAC & Latin America |
277.8 |
291.0 |
-4.5% |
+0.7% |
-1.9% |
Sports |
429.3 |
335.1 |
+28.1% |
+26.9% |
+26.9% |
TOTAL |
1,608.3 |
1,564.0 |
+2.8% |
+3.9% |
+3.4% |
(1) Selling price adjustments in the CIS
countries are historically intended to offset currency movements
and are therefore excluded from the “organic growth” indicator (see
Appendix 1). Significant price increases were implemented in 2021
and 2022 to offset the effects of inflation in purchasing costs,
therefore the Group also measures the change in like-for-like sales
including price adjustments in the CIS countries.
Adjusted EBITDA by segment
In millions of euros |
H1 2023 |
H1 2022 |
Margin 2023 |
Margin 2022 |
EMEA |
37.0 |
54.2 |
8.4% |
11.1% |
North America |
41.4 |
31.1 |
9.0% |
6.9% |
CIS, APAC & Latin America |
36.6 |
40.5 |
13.2% |
13.9% |
Sports |
42.6 |
28.4 |
9.9% |
8.5% |
Central |
-31.6 |
-28.1 |
- |
- |
TOTAL |
126.1 |
126.2 |
7.8% |
8.1% |
Comments by segment
The EMEA segment achieved a
revenue of €443 million, down -9.0% compared to H1 2022. Volumes
are down in the residential segment, where demand has slowed
sharply due to the rise in interest rates and inflation which have
slowed down the renovation and new construction market. The
commercial segment is holding up better: our vinyl products for the
healthcare and education and carpets for the office or hospitality
experienced volumes of business close to 2022.
The segment’s adjusted EBITDA amounts to €37
million, i.e. 8.4% of sales, versus €54 million/11.1% of sales in
H1 2022. This decline mainly reflects lower volumes, higher salary
increases than in previous years, and a negative effect of exchange
rates on European currencies against the euro. The effect of raw
material purchase prices is still negative over the entire
six-month period compared to the previous year, but it is fully
offset by selling price increases.
The North America segment
reported revenue of €458 million, up +1.6% compared to H1 2022,
reflecting solid like-for-like growth of +0.7% at constant exchange
rates and scope due to the selling price increase. The commercial
segments (offices, healthcare and education) held up well and their
volume of business was similar to last year over the six-month
period. They benefited from a sequential improvement in
accessories, carpet tiles and vinyl during the second quarter. The
volume in residential remains very low against a backdrop marked by
inflation and the rise in interest rates, which weighed on the
renovation and construction of housing.
Adjusted EBITDA in the segment increased
significantly to €41 million, i.e. 9% of sales, compared to €31
million/6.9% of sales in the first half of 2022, reflecting a
favourable product mix effect, and a positive balance of inflation
buoyed by the price increases deployed in 2022 and the start of the
downturn in material costs compared to last year.
Sales in the CIS, APAC and Latin America
segment amounted to €278 million, down -4.5% given the
devaluation of the ruble against the euro. Sales at constant
exchange rates and scope were slightly up +0.7%. They benefited
from the improvement compared to the first half-year 2022 in
volumes in Russia (+14%) and Ukraine (+89%) while the Group carried
out a selective price drop to maintain the level of activity in a
context that remains complex. In Asia, demand was quite low over
the first half-year and the level of stock among distributors
remains high. Selling price increases implemented in 2022 partially
compensate for the lack of volume. The economic context also
weighed on volumes in Latin America, but to a lesser extent.
Adjusted EBITDA for the CIS, APAC, Latin America
segment fell to €37 million adjusted EBITDA, i.e., 13.2% of sales,
versus €41 million/13.9% of sales in H1 2022, mainly due to the
devaluation of the ruble. In the first half of the year, Russia
accounted for less than 8% of Group sales and Ukraine less than
0.6%.
Revenue of Sport reached a new record
and amounted to €429 million, a considerable increase of
+28.1% compared to H1 2022. The level of activity remains
particularly buoyant in a still dynamic market, particularly for
artificial turf sports fields and athletics tracks in North
America. Like-for-like growth at constant exchange rates and scope
is +26.9%.
As a result of this very sustained activity,
Sport posts a clear increase in adjusted EBITDA: €43 million /9.9%
of sales compared to €28.4 million/8.5% of sales in the first half
of 2022. This EBITDA growth results from the combination of the
volume effect and an improvement in the margins of the main
projects.
- Balance Sheet and Cashflow 2023
At the end of June 2023, working capital
requirements fell by €10 million compared to the end of
December 2022, despite strong seasonality, particularly in Sport.
The Group implemented significant actions to reduce inventories,
which now represent 70 days of activity compared to 110 days at the
end of June 2022. In addition, annual negotiations with key
suppliers have improved payment terms. Combined with the downside
effect of purchase prices, these actions have led to a very
significant reduction in working capital requirements: -€206
million compared to June 2022. Factoring programs represented a net
financing of €182.6 million at the end of June 2023, up from the
end of December 2022 (€174.2 million) and the end of June 2022
(€184.0 million).
Capital expenditures are under
control and amount to €40.4 million given the capacity investment
in Sport for yarn manufacturing and automation projects. In H1
2022, investments amounted to €46.4 million.
Despite the seasonality of its activities and
thanks to inventory control, the Group generates a positive
free cash flow in the first half-year of €27.3
million, while the first half-year is usually cash-consuming.
Net financial debt amounts to
€649 million at the end of June 2023, versus €655 million at the
end of December 2022 and €778 million at the end of June 2022.
Compared to December 2022, debt is slightly down, and
leverage remains the same at 2.8x the adjusted
EBITDA for the last 12 months.
At the end of June 2023, the Group had a
high level of liquidity amounting to €552 million
comprising the undrawn RCF in an amount of €251 million, other
confirmed and unconfirmed credit lines in an amount of €78 million
and €223 million in cash.
- Outlook
The macroeconomic environment will continue to
weigh on the level of demand for our flooring products in the
second half of the year, particularly in Europe. North America
could benefit from a more favourable economic dynamic, with some
activity indicators in the building sector now better oriented,
especially in the residential sector.
Activity in Sport is still benefiting from a
buoyant market and a solid order book that should allow for
continued dynamic growth until the end of the 2023 season.
The purchase prices of most of the Group’s raw
materials have decreased in the first half of the year and the
Group does not anticipate any further increases for the time being.
Wage inflation is higher than in previous years, and energy prices
in Europe could rise again at the end of the year. At this stage,
the Group maintains the selling price level reached at the end of
2022.
To compensate the low level of activity in
Europe, the Group launched cost reduction actions and adapted its
production plans in the factories to these downturned levels of
activity.
Tarkett will continue to pay particular
attention in the second half of the year to the control working
capital and inventory levels in this weak business environment to
maximise its cash generation and reduce its debt at the end of
December.
This press release may contain forward-looking
statements. These 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 Registration Document
available on its website
(https://www.tarkett-group.com/en/category/urd/). They do not
reflect the future performance of the Company, which may differ
significantly. The Company does not undertake to provide updates to
these statements.
Limited review procedures on the interim
consolidated financial statements have been performed. Limited
review report from auditors is currently being issued, and interim
consolidated financial statements for 2023 are available on
Tarkett’s website
https://www.tarkett-group.com/en/document/?_categories=financial-documents
Financial calendar
- 19 October 2023: Q3 2023 Revenue - press release after close of
trading
Investor Relations and Individual Shareholders
Contact
investors@tarkett.com
Media contactsBrunswick -
tarkett@brunswickgroup.com - Tel.: +33 (0) 1 53 96 83 83Hugues
Boëton – Tel.: +33 (0) 6 79 99 27 15 – Benoit Grange – Tel.:
+33 (0) 6 14 45 09 26
About Tarkett With a 140-year history, Tarkett
is a worldwide leader in innovating flooring and sports surface
solutions, with revenue of 3.4 billion euros in 2022. The Group has
12,000 employees and 25 R&D centres, 8 recycling centres and 34
production sites. Tarkett designs and manufactures solutions for
hospitals, schools, housing, hotels, offices, shops and sports
fields, serving customers in more than 100 countries. To build “The
Way to Better Floors”, the Group is committed to the circular
economy and sustainable development, in line with its Tarkett
Human-Conscious Design® approach. Tarkett is listed on the Euronext
regulated market (compartment B, ISIN: FR0004188670, ticker: TKTT).
TKTT). www.tarkett-group.com
***
Appendices
1/ Definition of alternative performance indicators (not
defined under IFRS)
- Organic growth measures the change in revenue
as compared with the same period in the prior year, outside of the
exchange rate effect and changes in scope. The foreign exchange
effect is obtained by applying the prior year’s exchange rate to
sales for the current year and calculating the difference with
sales for the current year. It also includes the effect of price
adjustments in the CIS countries intended to offset the change in
local currencies against the euro. In 2023, a -€7.5 million
negative impact of selling price adjustments is excluded from
organic growth and included in the foreign exchange effect.
- The effect of changes in scope is composed of:
- current year sales by entities not included in the scope of
consolidation in the same period of the prior year, until the
anniversary of their consolidation, the reduction in sales due to
discontinued operations that are not included in the current year's
scope of consolidation but were included in sales for the same
period of the prior year, until the anniversary of their
disposal.
In millions of euros |
2023 revenue |
2022 revenue |
Change |
Of which volume |
Of which selling prices |
Of which CIS selling prices |
Of which exchange rate effect |
Of which effect of changes in scope |
Group Total Q1 |
698.5 |
684.7 |
+2.0% |
-7.8% |
+6.9% |
+0,4% |
+2.3% |
+0.2% |
Of which organic growth |
-0.9% |
|
|
|
Of which selling price increases |
|
+7.3% |
|
|
Group Total Q2 |
909.8 |
879.3 |
+3.5% |
+2.4% |
+5.2% |
-1.2% |
-2.9% |
+0.0% |
Of which organic growth |
+7.5% |
|
|
|
Of which selling price increases |
|
+4.0% |
|
|
Group Total S1 |
1,608.3 |
1,564.0 |
+2.8% |
-2.1%
|
+5.9% |
-+0.4% |
-0.7% |
+0.1% |
Of which organic growth |
+3.9% |
|
|
|
Of which selling price increases |
|
+5.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Adjusted EBITDA is the operating result before
depreciation and amortisation restated for the following income and
expenses: restructuring costs with the aim of increasing the
Group’s future profitability, gains and losses on significant asset
disposals, provisions and reversals of provisions for impairment,
costs related to business combinations and legal reorganisations,
expenses related to share-based payments and other one-off expenses
considered non-recurring by their nature.
In millions of euros |
H1 2023 Adjusted EBITDA |
H1 2022 Adjusted EBITDA |
Margin H1 2023 |
Margin H1 2022 |
|
|
Group Total – Q1 |
31.8 |
37.3 |
4.6% |
5.5% |
|
Group Total – Q2 |
94.2 |
88.9 |
10.4% |
10.1% |
|
Group Total - H1 |
126.1 |
126.2 |
+7,8% |
8.1% |
|
In
millions of euros |
of which adjustments |
H1 2023 |
Restructuring |
Gains/losses on asset disposals/impairment |
Business combinations |
Share-based payments |
Other |
H1 2023 adjusted |
EBIT |
48.5 |
3.8 |
0.3 |
0.0 |
3.6 |
2.9 |
59.2 |
Impairment, amortisation and depreciation |
65.4 |
- |
- |
- |
- |
- |
65.4 |
Other |
1.5 |
- |
- |
- |
- |
- |
1.5 |
EBITDA |
115.4 |
3.8 |
0.3 |
0.0 |
3.6 |
2.9 |
126.1 |
In
millions of euros |
of which adjustments |
H1 2022 |
Restructuring |
Gains/losses on asset disposals/impairment |
Business combinations |
Share-based payments |
Other |
H1 2022 adjusted |
EBIT |
44.2 |
- |
6.9 |
0.2 |
3.2 |
0.8 |
55.3 |
Impairment, amortisation and depreciation |
72.9 |
- |
0.2 |
- |
- |
- |
73.1 |
Other |
-2.2 |
- |
- |
- |
- |
- |
-2.2 |
EBITDA |
114.9 |
- |
7.1 |
0.2 |
3.2 |
0.8 |
126.2 |
- Free cash flow is defined as cash generated
from operations before change in working capital, plus or minus the
following inflows and outflows: change in working capital,
repayment of lease liabilities, net interest received (paid), net
tax collected (paid), various operational elements collected
(disbursed), acquisition of tangible and intangible assets and
income (loss) from fixed asset disposals.
Free cash flow (in millions of euros) |
H1 2023 |
H1 2022 |
Cash flow from operations before change in working capital
and repayment of lease liabilities |
111.1 |
109.1 |
Repayment of lease liabilities |
-18.0 |
-16.1 |
Cash flow from operations before change in working capital;
including repayment of lease liabilities |
93.1 |
93.0 |
Change in working capital |
23.2 |
-275.9 |
of which change in factoring programmes |
4.3 |
16.7 |
Net interest paid |
-25.1 |
-13.1 |
Net tax paid |
-18.7 |
-13.7 |
Miscellaneous operating items paid |
-5.0 |
-4.7 |
Acquisition of tangible and intangible assets |
-40.7 |
-46.4 |
Miscellaneous operating items paid |
0.5 |
0.6 |
Free cash flow |
27.3 |
-260.3 |
- Net financial debt is defined as the sum of
interest bearing loans and borrowings minus cash and cash
equivalents. Borrowings correspond to any obligation to repay funds
received or raised that are subject to repayment terms and
interest. They also include liabilities on leases.
- Financial leverage is the ratio of net
financial debt, including leases accounted for as per IFRS 16, to
adjusted EBITDA over the last 12 months.
In millions of euros |
|
30 June 2023 |
31 December 2022 |
Financial debts - long term |
|
696,3 |
711.0 |
Financial debts and bank overdrafts - short term |
|
44,9 |
45.2 |
Financial debts excluding IFRS 16 (A) |
|
741.2 |
756.2 |
Lease liabilities - long term |
|
103.2 |
91.7 |
Lease liabilities - short term |
|
27.4 |
27.7 |
Lease liabilities - IFRS 16 (B) |
|
130.6 |
119.4 |
Gross debt - long term |
|
799,5 |
802.7 |
Gross debt - short term |
|
72,3 |
72.9 |
Gross debt (C) = (A) + (B) |
|
871.8 |
875.6 |
|
|
|
|
Cash and cash equivalents (D) |
|
222.8 |
220.8 |
|
|
|
|
Net debt (E) = (C) - (D) |
|
648.9 |
654.8 |
|
|
|
|
Adjusted EBITDA 12 months (F) |
|
234.8 |
234.9 |
|
|
|
|
Ratio (E) / (F) |
|
2.8x |
2.8x |
2/ Bridges in millions of euros, H1 and Q2
2023
Revenue by segment
Adjusted EBITDA by nature
Q2 2022 |
879.3 |
+/- EMEA |
-31.3 |
+/- North America |
1.6 |
+/-CIS, APAC & Latin America |
25.0 |
+/- Sports |
70.9 |
Q2 2023 Like-for-Like |
945.5 |
+/- Currencies |
-10.8 |
+/- "Lag effect" in CIS (1) |
-24.9 |
+/- Scope |
0.0 |
Q2 2023 |
909.8 |
- Including selling price increases
Q2 2022 |
88.9 |
+/- Volume / Mix |
-21.2 |
+/- Selling prices |
45.3 |
+/- Raw materials and transport |
17.9 |
+/- Salary increases |
-8.6 |
+/- Productivity |
3.4 |
+/- SG&A |
-3.1 |
+/- Non-recurring and other |
-1.3 |
+/- "Lag effect" in CIS (1) |
-21.6 |
+/- Currencies |
-4.6 |
+/- Scope |
-0.8 |
Q2 2023 |
94.2 |
- Including selling price increases
H1 202 |
126.2 |
+/- Volume / Mix |
-45.1 |
+/- Selling prices |
92.9 |
+/- Raw materials and transport |
7.6 |
+/- Salary increases |
-16.0 |
+/- Productivity |
4.0 |
+/- SG&A |
-10.2 |
+/- Non-recurring and other |
-9.3 |
+/- "Lag effect" in CIS(1) |
-15.6 |
+/- Currencies |
-6.8 |
+/- Scope |
-1.7 |
H1 2023 |
126.1 |
H1 2022 |
1,564.0 |
+/- EMEA |
-35.0 |
+/- North America |
3.1 |
+/-CIS, APAC & Latin America |
2.0 |
+/- Sports |
90.2 |
H1 2023 Like-for-Like |
1,624.3 |
+/- Scope |
1.7 |
+/- Currencies |
-3.3 |
+/- "Lag effect" in CIS(1) |
-14.4 |
H1 2023 |
1,608.3 |
(1)Including selling price increases
- Tarkett_H1 2023_Results_EN
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