Ivry, 30 July 2013
Current operating income improved
in the 1st half of 2013
Improved current operating income (+7.5%)
Continuing gains in market share despite a 5.8% decline in revenues (-5.2% at constant exchange rates), against the backdrop of a deteriorating consumer environment in the Group's main markets
Strong decrease in operating costs as a consequence of cost cutting initiatives
Increase in net current income (+53.5%)
Improved free cash flow thanks to tight controls on investments and lower inventories.
Alexandre Bompard, Chairman and Chief Executive of the Fnac Group, made the following comments:
"Implementation of our 2015 Fnac strategy plan continued in the first half of 2013. The rapid change in our model confirms Fnac's resilience in an environment marked by decreasing consumption of our product categories, especially in the Iberian Peninsula. Fnac continued to register market share gains thanks to its marketing strategy. Moreover, ongoing measures aimed at strengthening our operational efficiency enabled us to improve our current operating income and free cash flow generation."
| (€ millions) | H1 2012 | H1 2013 | Change |
| Revenues | 1,773 | 1,670 | -5.8% |
| Chg. at constant exchange rates | - | - | -5.2% |
| Current operating income (ROC) | -13.4 | -12.4 | 7.5% |
| Consolidated net income | -77.7 | -31.0 | 60.1% |
| Net current income (*) | -49.2 | -22.9 | 53.5% |
| Free cash flow from operations | -303 | -292 | 3.7% |
| Net cash | -479 | 127 | NA |
| (*) Net current income from continuing operations, Group share, excluding non-current items | |||
Note: Performance in the first half of the year was affected by the seasonal nature of the Group's business. The first half usually makes only a small contribution to the full-year results. The change in free cash flow reflects the traditional steep increase in the working capital requirement at the beginning of the year.
2013 1st HALF RESULTS
| The Group's consolidated revenues amounted to €1,670 million in the 1st half of 2013, a decrease of 5.8% compared with the 1st half of 2012. There was a negative exchange rate impact of 0.6%, primarily due to the fall in the Brazilian real against the euro. At constant exchange rates, the decline in the Group's consolidated revenues was 5.2% in the first half. The Group reported a 5.1% decline in revenues at constant exchange rates in the 2nd quarter of 2013, compared with a 5.3% decrease in the 1st quarter (at constant exchange rates). Economic activity deteriorated in the first half in the main countries where the Group operates, especially in the Iberian Peninsula, which resulted in a marked downturn in some of the Group's markets. The Group continued to gain market share against this relatively unfavorable backdrop, especially in France and in the Iberian Peninsula, and so continued to benefit from the ongoing redesign of its business model. The gross margin remained stable at 30.4% in the 1st half of 2013, compared with 30.5% in the 1st half of 2012, despite increasing commercial pressure. The strong resilience of the gross margin reflects focused management and the impact of the Fnac 2015 Plan (including the favorable impact of the new product categories and the pooling of goods purchases between France, Switzerland and Belgium), which offset the investments made in pricing and promotion. Fnac Group reported a €1 million (7.5%) improvement in its current operating loss at June 30, 2013, compared with the 1st half of 2012; the 2013 operating loss amounted to €12.4 million. The ongoing improvement in operating efficiency and the reduction in overheads enabled the Group to limit the impact of the fall in sales on current operating income. Other non-current operating income and expense includes unusual items, which are likely to affect the appropriate monitoring of the Group's economic performance. These items amounted to a net expense of €7.8 million in the 1st half of 2013, which was lower than the expense reported in the 1st half of 2012, and included the cost of organizational changes, provisions for contingencies and litigation, and a capital gain on the disposal of the Group's interest in Cyrillus Deutschland. The improvement in net financial income reflects the strengthening in the Group's financial position and the decrease in the cost of net financial debt. The net loss from continuing operations amounted to €30.6 million in the 1st half, a significant improvement compared with the 1st half of 2012, where the reported loss was €71.5 million. The net current loss from continuing operations, restated for non-current items, amounted to €22.9 million, an improvement of 53.5% compared with the 1st half of 2012. Free cash flow from operations, which amounted to -€292 million recorded an improvement of €11 million compared with the 1st half of 2012. The change in free cash flow in the 1st half reflects the seasonal nature of the business, which results in a significant increase in the working capital requirement in the first quarter. Operating investments amounted to €19 million, which was a marked decrease compared with the 1st half of 2012 (€42 million). This fall reflects the tightly controlled investment policy implemented by the Group and the priority granted to expanding under franchise. The Group continued its inventory reduction policy. Inventories amounted to €470 million at the end of June, a 5.6% decrease compared with their level at the end of June 2012 (€498 million). The Group benefited from a sound financial position at the end of June 2013, with a net cash position of €127 million and Shareholders' Equity of €490 million. |
The Statutory Auditors have reviewed the summary consolidated financial statements for the 1st half of 2013, as approved by the Board of Directors' Meeting of 30 July 2013.
Summary income statement
| (€ millions) | H1 2012 | H1 2013 | Change |
| Revenues | 1,773 | 1,670 | -5.8% |
| Gross margin | 541 | 508 | -6.1% |
| As a % of revenues | 30.5% | 30.4% | - |
| Total costs | -554 | -520 | 6.1% |
| As a % of revenues | 31.2% | 31.1% | - |
| Current operating income | -13.4 | -12.4 | 7.5% |
| As a % of revenues | -0.8% | -0.7% | - |
| Other non-current operating income and expenses | -34 | -8 | 76.8% |
| Operating income | -47 | -20 | 57.0% |
| Net financial expenses | -6 | -4 | 34.1% |
| Income tax | -18 | -6 | 65.6% |
| Net income from continuing operations | -72 | -31 | 57.2% |
| Net income from discontinued operations | -6 | 0 | na |
| Consolidated net income, Group share | -78 | -31 | 60.1% |
| Net current income from continuing operations | -49 | -23 | 53.5% |
| EBITDA | 20.7 | 20.6 | -0.5% |
| As a % of revenues | 1.2% | 1.2% | - |
CONCLUSION AND OUTLOOK
The 1st half results reflect the rapid execution of the Fnac 2015 Strategy Plan. The Group continued to gain market share and improved its current operating income thanks to the ongoing strengthening of its operational efficiency.
Markets are likely to remain depressed in the 2nd half of the year. The Group intends to limit the impact of market conditions on its sales and results thanks to the implementation of its ongoing redesign of its business model, which will accelerate in the 2nd half, and will more specifically include the opening of new stores under franchise and the continued roll-out of new product categories. This should enable the Group to continue delivering market share gains. It will also continue its cost-saving and organizational efficiency policy.
CONTACTS
| ANALYSTS & INVESTORS | Nadine Coulm | nadine.coulm@fnac.com +33 (0)1 55 21 18 63 |
| PRESS | Laurent Glepin | laurent.glepin@fnac.com +33 (0)1 55 21 53 07 |
APPENDICES
Current operating Income (ROC) by operating segment
| (COI in € millions) | H1 2012 | As a % of revenues | H1 2013 | As a % of revenues | Change in value | ||
| France | -12.4 | -1.0% | -16.1 | -1.4% | -3.7 | ||
| Iberian Peninsula | 5.5 | 1.8% | 7.1 | 2.5% | 1.6 | ||
| Brazil | -3.5 | -3.1% | -2.4 | -2.6% | 1.1 | ||
| Other countries | -3.0 | -2.1% | -1.0 | -0.7% | 2.0 | ||
| Group | -13.4 | -0.8% | -12.4 | -0.7% | 1.0 |
2nd quarter revenues
| Q2 2013 | Change compared with Q2 2012 | |||
| (Rev. in € millions) | Reported change | Change at constant exchange rates | Chg. at constant exchange rates and on a same-store basis | |
| France | 567 | -4.0% | -4.0% | -5.3% |
| Iberian Peninsula | 134 | -8.0% | -8.0% | -8.2% |
| Brazil | 45 | -14.0% | -8.0% | -8.5% |
| Other countries | 63 | -7.2% | -6.3% | -6.3% |
| Group | 809 | -5.6% | -5.1% | -6.0% |
1st half revenues
| H1 2013 | Change compared with H1 2012 | |||
| (Rev. in € millions) | Reported change | Change at constant exchange rates | Chg. at constant exchange rates and on a same-store basis | |
| France | 1,161 | -3.9% | -3.9% | -5.3% |
| Iberian Peninsula | 286 | -8.8% | -8.8% | -9.5% |
| Brazil | 92 | -17.5% | -8.9% | -11.1% |
| Other countries | 131 | -6.7% | -5.9% | -5.9% |
| Group | 1,670 | -5.8% | -5.2% | -6.4% |
Number of stores
| At December 31, 2012 | At June 30, 2013 | ||||||
| Directly-owned | Under franchise | Total | Directly-owned | Under franchise | Total | ||
| France | 88 | 16* | 104 | 88 | 19* | 107 | |
| Iberian Peninsula | 42 | 0 | 42 | 42 | 0 | 42 | |
| Brazil | 11 | 0 | 11 | 11 | 0 | 11 | |
| Other countries | 13 | 0 | 13 | 13 | 0 | 13 | |
| Group | 154 | 16 | 170 | 154 | 19 | 173 | |
*including Morocco
