Ferrari Group PLC (FERGR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Ferrari Group plc Half Year 2026 Results Call. [Operator Instructions] I will now hand over to Paolo Mantovani, Head of IR, to begin the meeting. Paola, please go ahead.

Hello, and good morning, everyone. Thank you for joining our first half 2026 financial results presentation. I'm joined today by Alessandro Nicolo Ugo, our CFO. Marco Deiana, our CEO, could not join us today, but he will be meeting with investors over the coming weeks. So please do get in touch if you would like to arrange a follow-up meeting. As usual, we will start with an operational and financial update, and then we will open for questions. If you haven't got our results materials in front of you, please note that they are available to download from our IR website. And with that, I will now hand over to Alessandro to start today's presentation.

Thank you, Paola. Good morning, everyone, and thanks for joining us. We are pleased with our performance in the first half. Revenue growth was positive. Momentum continued into the second half and then the growing trends in the business remain increasing. I will take you through the numbers in more detail shortly. But first, let me highlight what drove the performance. We saw growth in both ship and volumes and the value of goods transported. North America and Brazil performed particularly well, as did the Rest of the World. At the same time, we continue to operate in a challenging environment. Geopolitical tension remain elevated, particularly in the Middle East. China continued to be soft, and trading remains uneven across the luxury sector with our Luxury and Jewelry performing better than average. Again, this backdrop, our extended network and global expertise remains a real strength as we continue to adapt effectively to the evolving environment. We believe the performance in the first half demonstrated the flexibility and the resilience of our business and the strength of our market position. Let's now look at the progress we are making in our strategy, on Slide 4. At our full year results, we retained our priorities for growth, expanding our network developing our client and service offering, strengthening the business through improved execution and share of wallet gains. 6 month on, we have made strong progress across each of these areas. Let me start with our network. Our new hubs in Vietnam, New Zealand, Thailand and Saudi Arabia are now operational, and that started to contribute to revenue. Preparations are continued in Indonesia and the Philippines, and Paris remain on track for opening by the end of the year. Around 20% of our network is currently at an early stage of scaling. These locations are operating below their full capacity, although much of the investment is already in place. Typically, we expect location to progress towards full operating potential within around 18 months of launch. We are also expanding our services offering. During the start, we launched our partnership with [indiscernible] And Swiss Port in Amsterdam to provide secure ground handling and storage valuable cargo. At the same time, we are evolving our new division dedicated to diamonds and precious metals. This initiative broadens our addressable market and create opportunities to do more with both existing and new clients. So overall, we have delivered the key milestones we set ourselves. [indiscernible] Infrastructure and capability for this phase of expansion is now in place and we expect the pace of incremental investment to moderate. Our focus is now more on building utilization across the expanded network and developing our new activities. As these investments mature, we expect their contribution to revenue to increase. Let's turn to the financial highlights on Slide 5. Revenue for the first half was EUR 187 million, an increase of 6.2% at constant currency. Adjusted EBITDA was EUR 47.8 million, slightly ahead of last year. As expected, the adjusted EBITDA was slightly lower at 25.5%, reflecting the investment phase I have just described. Net profit increased to EUR 25.7 million. Cash generation also remained healthy, and we ended the period with a net financial position of EUR 78 million. I'll now take you through the main drivers in more detail. Starting with revenue, Slide 6, both shipment volumes and the value of Gostransporten contributed to organic growth in the first half. Currency was a small headwind, mainly reflecting the weaker U.S. dollar. So overall, the underlying revenue performance was positive, with growth coming from both activity levels and the value of the goods moving through our network. Turning to our service lines on the next slide. International service remains our largest activity, represented around 65% of the group revenue. Revenue increased by 3.8%, supported by higher shipment volumes and higher average values across both existing and new. Domestic services performed particularly well, with revenue up 12% and [indiscernible] International service volume also supported domestic activity, particularly in France, Germany, Italy and the U.S. Warehouse & logistics Services declined by 7.2%, this is mainly reflect lower activity in China compared with the first half of last year. Growing markets, including Italy and South Korea provide some offset here. Finally, Special & Other Services grew by 3% or 6% at constant currency. This was achieved despite the postponement of some events, notably in Dubai. We also saw growing demand for our hand-carried services across the network. Now let's look at the performance by region on Slide 8. Europe, our largest region, continued to grow at 4% year-on-year with strong contribution from France, Germany, Italy, Switzerland and the U.K. In Asia, Japan and South Korea performed well, but this was more than offset by continued weakness in China, which drove a decline of 10% year-on-year for the region as a whole. Vietnam is still a new operation, but activity is picking up and they have started to contribute to revenue. North America and Brazil was the standout performer. It is now our second largest region by revenue contribution, growth of 18% year-on-year or 22% at constant currency was supported by increased activity among strategic clients in the U.S., higher value of goods transported and the impact of higher gold price in Brazil. Rest of the World also performed well, particularly in India and Dubai, despite continued tension in the Middle East. Our new Saudi hub has also started contributing as planned. So geographically, the picture remained missed, but notably, strength across a number of our markets more than compensated for the [indiscernible] Conditions remain difficult. Turning now to profitability on the next slide. Adjusted EBITDA was EUR 47.8 million, up 20 basis points compared to the last year with a margin of 25.5%. There are two main factors to keep in mind when we look at the margin. The first is the weaker performance of [ Park leisure ]. The second is our current investment cycle. As I mentioned earlier, a significant part of our network is still at early stage or in scaling. The cost base is already largely in place, while utilization and revenue are [indiscernible] . As this operation mature, we expect high utilization to support both revenue growth and improved operating efficiency. The next slide gives you some more detail on the move in the margin. The main point I will highlight is personnel costs, which had an impact of [ 1.4% ], which added around 100 employees across the network during the first half. These high support our new hubs, new business line and other where we are seeing the increase in demand. So this is a large investment in the capacity we need to support for two growth. Looking at the underlying cost base, we continue to maintain good discipline. Cost of service increased at lower rate than revenue. Shipping is our larger service cost, representing around 82% of the total. Above all, shipping costs declined as a percentage of revenue in the first half. This demonstrates the efficiency we can achieve as volume increase and reconsolidate activity across the network. We have already covered the personnel cost, so I want to repeat that here. Moving most of our tangible investment during the period related to our new offices and warehouses include New Zealand, the U.K. and Vietnam. Maintenance Capex remained around 2% of revenue. Our intangible in vessel mainly related to digitalization. We continue to roll out system across the network, improve the quality and collection and progress its implementation. Overall CapEx remained stable year-on-year. This remains a [indiscernible] Business, and we continue to be disciplined in how we invest. Turning to cash flow on Slide 13. Operating cash generation remained healthy in the first half, supported by EBITDA and revenue growth. We continue to invest in both tangible and intangible assets as a part of our growth strategy. Financial cash flow mainly reflect lease repayments of around EUR 7.5 million and the EUR 30 million dividend paid during the period. As a result, we ended the first half with a cash of EUR 128 million. And finally, our net financial position. We ended June with a net cash of EUR 78 million. Operating cash generation remains strong. This was partly offset by the dividend payment and continued investment in the business. Financial liability also increased mainly because of the new leases associated with our expanded network. Overall, our balance sheet remains strong and will give us significant flexibility. Before we turn to our outlook, I want to spend a moment on capital allocation. Our approach is straightforward. We want to invest for growth, maintain our strong balance sheet and believe a sustainable returns to shareholders. Our first priority is reinvestment. This includes our network, technology and digital capabilities as well as selected opportunities in new business lines. We are also open to M&A where it boosts our capabilities and geographical footprint. Second, we want to maintain a resilient balance sheet. This gives us flexibility to fund future growth opportunities as they arise. Third, we remain committed to a sustainable and progressive ordinary dividend. The dividend for 2025 financial year represent a 56% payout ratio, well above our 40% floor. And finally, we have capital behind the needs of the business, we will consider returning into shareholders. This includes the potential for special dividends. As we announced today, subject to our investment requirements and available cash, the Board may consider a special dividend in the second half. Let me finish with our outlook. For the second half, we have set many of the trends we saw in H1 to continue. China is likely to remain challenging and [indiscernible] in the Middle East continues but we have navigated this and with well in the first half and underlying momentum in the business remain positive. We remain, therefore, on track to achieve our full year objectives, and we are tightening the organic revenue growth guidance to 4% to 6% above our previous 3% to 6% range. We continue to expect adjusted EBITDA margin to remain broadly stable year-on-year and ordinary CapEx slowed in line with the last year. On the guidance, there is an important point I will leave with you. We have added significant capacity to the business over the past few years. Much of the infrastructure and capability is now in place, but the meaningful part of the network is not yet operating at its full potential. Our focus now is on building utilization across this operation. As they develop, we expect them to contribute more revenue and improve operating efficiency. So we entered the second half focus on execution and confidence in the growth opportunities ahead. Thank you very much for your attention. I will now hand back to the moderator to start the Q&A session.

[Operator Instructions] Our first question is from David Kerstens from Jefferies.

I've got a couple of questions. First of all, you said momentum continued into the second half. Can you give an indication what the organic revenue growth was in the third quarter so far against a tougher comparison, I think, in the second half of last year? I think you said clearly about -- you talked about the drivers for the margin recovery anticipated in the second half to get to the 26% for the full year. And you said the pace of incremental investment will moderate. Is that statement mainly referring to the second half of the year or also in general for 2027 and beyond? Is your network now having sufficient critical mass? And should we see a faster recovery towards the 27% to 29% in the medium term? And then maybe finally, if you could share some indication what is the basis for the special dividend? And what is the minimum level of cash you would like to keep on your balance sheet?

Okay. Thank you for your questions, and I'll try to answer to the whole Q3, so for the trends of the Q3, we have good sensation on what we achieve right now. So as mentioned in the discussion before we would like to [indiscernible] Our guidance to 4% to 6%, because we see the continuous momentum in our business and our operation till today. So it's confirmed. Regarding the investment to moderate, of course, is a consideration, both related to the second half of the year. For instance, we expect to finish the investment in the new Paris as we mentioned, and also is also true for the coming years. So both second half and the coming years as well, we expect to moderate the pace of the investment for the special dividends, of course, we can disclose on that. But the point is that, as we mentioned earlier, we know that we have level of the cash need in terms of operation that allow us to pay a special dividend potentially in the coming months. So of course, it's not any other sort of special operation arise because we are always open to see any potential in the market. But if there is not that this consideration, we consider that if there are not a growth opportunity to capture to consider special dividends.

Our next question is from Rafael [indiscernible] From [indiscernible]. Our next question comes from Belton Palazuelo from DLT.

I have a couple of questions, if I may. The first one, you said that in 2026, your current objective is to maintain EBITDA margin. So seeing what you expect, that means that the second half some recouping. So let's say, confirm that the second half will, let's say, increasing margin. And then you're seeing that now in 2027, the margins will start increasing. That is my first question. My second question is regarding the special dividend. I think it's very important that you stated this, so market doesn't think even to [indiscernible] Lazy balance sheet. So what type of opportunities currently you're analyzing because I've seen in your balance sheet that opportunity, the M&A that we have executed in the first half, it has not been material. So are you analyzing any, let's say, material operation that can derail this dividend? And then the amount of the dividend. I think another person asked it in the call, what type of dividend? Is it going to look like the dividend you already paid this year more small? And then my last question is regarding the leases because between EBIT and EBITDA, let's say, the difference is growing and growing. So let's say, in the next 4 to 5 years, what -- at what rate would the leases increase, more or less, less than your revenue growth? Or what is the expectation because the gap between EBITDA and EBITA keeps on going as you open more facilities.

Yes. So the first -- thank you, Ben. The first question was on margin. As I said, we expect margin stable in 2026 because we know that the revenues coming from new opening started to support. So also, we expect that Q3 and Q4 are on line with our expectation of the market, the fact that the new employees that we are starting to create more revenues and at the same time, the phase of investments for the 2026 is mainly done. So our expectation is that in the second half, there will be an increase to reach the level of 2025 in terms of margin. For the special dividends, of course, we will be -- we will provide more detail soon. But I can say that will be no higher on what we did in July. So this could be considered the maximum level, but it's something that we cannot discuss after the Q3, and we'll be more precise on that. Of course, everything is subject to growth opportunities that are potentially in the market unless there is these opportunities we go ahead with special dividend, as mentioned before. The EBITDA, as you say, and you referred to the lease, the leases for the future years. I think that the pace of the lease of the future years will grow less than proportionally than growth of the revenue because the great year investment was the last 2 years and this year. But the big one was the service rollouts will be opening at the end of October. So I think we concluded this peak, and we enter in a more moderate phase, and our expectation that the increase on this part is less than proportional than the revenue to answer to your question.

Our next question is from Robert Jan Vos from ABN AMRO.

The first one is, if I read correctly, you said in the press release, the value of the goods shipped increased 30%, but shipment volumes increased 4%. How much of the value increase is related to the higher gold prices? And to what extent is the growth in North America and Brazil a function of these higher gold prices? Second, maybe you can elaborate a little bit on the working capital investments. It was EUR 11 million, if I'm not mistaken, in the half year. Is that a normal buildup? Or has it maybe to do with the new openings and should some of it unwind in the second half? Yes. My final question is also on the special dividend. You talked about that you cannot say anything specific on the size at this stage. But what about the timing? Is it likely that you will announce something at the Q3 trading update? Or will it be a separate announcement if you decide to go to -- if you decide to do special dividends? Those are my questions.

Okay. Okay. Thank you for your question, Robert. The first one was related to volume and value. Yes. So volume increased less percentage because there is also the efficiency of the distribution and the consolidation of the floor. There are some impact that reduced the spread geographical spread. So we have less shipment to some destinations. Some geopolitical crisis harder because the markets are softer right now. So the number of the shipment is also connected to the destination. So also the consolidation of the floor make a bit of change. The increase of the value is partially driven by, of course, the increase of the value of the gold. This is clear and this also reflected a greater distribution created to U.S. So the consideration that you that you mentioned is correct. The increase of the value of the gold is something that is related. And of course, there is the general increase of the price of the value that we deliver. So not only the metals behind that, but also the price of the pieces that we moved. This is also true because we are in a different scale in country that create new routes and taking us to load value on a consolidated method. Regarding the working capital, our expectation is that in the second half, the pace will reduce. And this is what we expect for the future, for the special dividends. Again, as I mentioned, it's something that we are looking at taking in consideration potential growth opportunities very soon, I think that we provide a dedicated communication on that and I think that will arise within the communication of the Q3 results.