Fnac Darty SA (FNAC.PA) Earnings Call Transcript & Summary

Good morning, and welcome to Fnac Darty's conference call. Mr. Enrique Martinez, CEO of Fnac; and Jean-Brieuc Le Tinier, CFO, will run this call. Over to you.

Thank you. Good morning to all of you. Thank you so much for joining us this morning at a very short notice. Of course, we have some very important information to share with you, and you know we're very committed to maintaining a regular and transparent dialogue with you. So the agenda, I'll, of course, start by presenting the offer that we've received and which was the subject of a meeting by our Board over the weekend and then the release this morning, then Jean-Brieuc will present our preliminary results for 2025 at this stage. And of course, after that, we'll be happy to take your questions. So for those of you connected on the webcast on Page 4 of the presentation. So the big news this morning, as you've seen, is that EP Group forwarded to Fnac Darty Board on Friday evening after market close, a public tender offer in cash for all our shares giving access to Fnac Darty Capital. As you know, EP Group is the leading group shareholder since 2023 through its subsidiary, VESA without prejudging the opinion of the workers council and the recent opinion of the Board, we already welcome this expression of interest. Over the years, we've built a relationship of trust with EP Group has allowed us to implement an ambitious strategy. Firstly with our plan, Everyday that ended in 2025 successfully and now with Beyond everyday, announced in June 2025 through 2030, also allowed us to get the necessary support for the transformative acquisition of Unieuro in Italy. We're very pleased with that. Jean-Brieuc will state -- of course, will comment on the detailed performance at the end of February, where we can already welcome this transaction in detail. So what are the characteristics of the offer? EP Group is proposing a cash purchase offer for Fnac Darty shares of price EUR 36 per share as well as the OCEANE convertible bonds of the company unit price of EUR 81.09. The offer is subject to the success threshold that's mandatory of 50% of the capital and voting rights planned by the French Financial Markets Authority. EP indicated that it doesn't plan to implement a mandatory squeeze-out procedure after the offer. The Board met over the weekend and noted the intention of Daniel Kretinsky to continue the main strategic policies employed by the company. After a detailed review of the planned offer, the Board favorably welcome this transaction. Now of course, it doesn't any way prejudge the reasoned opinion that it will issue after the report by the independent expert and that of the staff reps Committee, the Board has set up an ad hoc committee chaired by Sandra Lagumina comprising 3 other Board members. On recommendation of the ad hoc committee, the Board appointed Ledouble represented by Madam Agnès Piniot as an independent expert in order to draw up a report on the fair nature of the financial characteristics of the offer. The reasoned opinion of the Board, the expert opinion will be made public in due course of filing to the AMF. In the event of confirmation, the filing of the public offer should occur before the end of Q1 2026, subject to certain regulatory approvals, notably in respect of financial subsidies and antitrust controls and analysis by entry is planned, but no obstacle to submission the offer. We did Slide 5. This offer as part of a solid partnership. EP Group through VESA holds 28.5% of the capital and is the leading shareholder of the group since 2023. It's a milestone to support the acceleration of our strategic plan, Beyond everyday and they'll conserve the current dividend policy. So the offer must be reviewed in detail, reviewed all the necessary authorization. We can say is the Board welcomes this expression of interest by our shareholders. It's fully part and parcel of our ambitious strategy to strengthen our leadership on our markets over time, define the new retail standards that make sense. Part of the offer, we planned -- published the previous results for transparency. I'll hand over to Jean-Brieuc in a moment to tell you about that. But I'd like to say that we've delivered a very strong year in a context that is challenging, particularly in France. We've reached 2% EBIT margin. Cash flow is very positive. The good performance of countries outside France, particularly Italy that has shown very strong increase of its operating income is very satisfactory. Over now to Jean-Brieuc.

Thank you, Enrique. Good morning, and happy New Year to everyone. Thank you for being here. Let's start with Slide #7 with a technical point on the restatement of our numbers for 2024. Since H1 2025, we've based our financial communication on 2024 data deemed comparable that is including the integration of any euro in 12 months and the deconsolidation of the ticketing business. Today, we present the 2024 data restated to take into account 2 major events. First, the reclassifying under IFRS 5 at the bottom of the P&L of Nature & Découvertes. The challenges met for a number of quarters continued in spite of the initiatives taken to relaunch the activity to stimulate the business. And therefore, we looked for -- we started a process to look for a partner with a view to enabling the brand to have a shareholding and governance framework more in line with its model and its transformational needs. And so the business is now reclassified under IFRS 5 in the consolidated financial statements at 31 December 2025. So this means that there's EUR 172 million less in revenue, but a positive effect on current operating profit to the tune of EUR 14 million. And the second restatement is more marginal. It's that Unieuro as part of the acquisition, we recognized asset depreciation resulting from purchase price allocation to the tune of EUR 6 million in 2024 allocated to the rest of Europe area because it's about Italy. And so the numbers, which we will comment are based on the 2024 numbers restated, i.e., EUR 10.3 billion in revenue and EUR 200 million in operating profit. Let's move on to the preliminary results for 2025, Slide 8. Business in France was down, especially in stores. The numbers published by the French Central Bank confirmed a particularly challenging context for the retail industry with strong pressure on consumption and household confidence. And in this context, nonetheless, Fnac Darty maintained to overperform the market with its multichannel strategy and service-oriented policy. The rest of Europe generated a very satisfactory performance. Revenue for the group at end 2025 is expected to be stable at 0.7% on a like-for-like basis to the tune of EUR 10.3 billion at the end of the year with a negative impact from France in Q4, minus 0.6% on a like-for-like basis. The operating profit at end 2025 is expected to be 1.2% to EUR 203.1 million. Current operating profit for France should be down with a negative quarter Q4, whereas that of rest of Europe is slightly up, thanks to Italy. We'll tell you more in February. If you take into account the restatement in IFRS under IFRS 5 on Nature & Découvertes and the PPA mentioned with the acquisition of Unieuro, current operating profit is expected to reach 2.0% at end 2025, up 5 basis points with an optimized management of WCR. Cash flow -- free cash flow from operations is expected to reach EUR 145 million in line with 2024, not including asset disposal in H1 2024. Net CapEx showed a income of EUR 21 million and not an expenditure because we disposed of assets, a logistic warehouse in the Paris area. We're confident for the implementation of a strategic plan Beyond everyday presented in last June, and we'll give you the number in 2023 -- in 2030. We'll now can take your questions waiting for the presentation in February '25.

[Operator Instructions] First question comes to us from [indiscernible].

I've got 3 questions here. For my 3 questions, Slide 7 on the revised financial '20 -- isn't there a typo in your presentation EUR 193 million for Fnac and negative impact of Nature & Découvertes EUR 14 million, which should bring us to EUR 207 million and negative impact of EUR 6 million for Unieuro, which would bring us to EUR 213 million. The negative EUR 6 million of Uni, isn't it the opposite? EUR 6 million positive, which will be EUR 207 million, minus EUR 6 million. That is the EUR 200 million that you -- am I mistaken on the typo that seems to be on slides? And then the cost price of the 28% of Fnac Darty by Kretinsky. Can you just remind us of that given his recent transaction, the slight disposal? And third question with Ceconomy. Have you contacted Ceconomy that owns 22% of Fnac Darty share, 21.9% of the capital to be precise? If yes, what was his answer, if yes. The Ceconomy securities were restated with an accounting provision. And from my calculations and from what I see, the cost price would be EUR 262 million for Ceconomy. And so at EUR 36, its cost price would be negative to the tune of EUR 33 million because it'd be EUR 230 million. We'd have further depreciation of EUR 30 million at Ceconomy. Can you enlighten us as your contacts on this matter?

I can maybe start with that for the second and third, and then I'll hand over to Jean-Brieuc for the financials. Well, we don't -- the cost, the price of the Fnac Darty, you see the position was built up over time in a more assertive manner since 2023, but I'll let you do the math. So there may be some other analysts who can assist us with that. We have a little small idea of that. Yes, I'm sure you do. I'm sure you have a precise idea about that. On Ceconomy to our knowledge, they discovered the inflation a bit like everyone else, and we're not aware of contacts between our shareholders. Maybe there were some, I don't know. Frankly, I won't speculate. They'll assess others expression of interest and their contribution or not. But once again, we're not going to speculate as to what they -- in due course, they'll speak out and speak their mind. We're waiting. We don't know. We're like you.

To answer the first question, Alexandre, on the bridging of accounts. Last year, there was EUR 192.5 million in operating profit. There was EUR 80 million in losses from Nature & Découvertes. As to the PPA, it is an expense in 2025. It was negative in '25. So it's removed on both sides. So it's EUR 193 million, plus EUR 14 million, plus EUR 600 million, but it's not clear on the slide. On the slide, it was only on one side. And so EUR 193 million plus the EUR 14 million -- well, minus EUR 14 minus, minus EUR 6 million, I got minus EUR 213 million. If it's an expense. Then with EUR 193 million, plus EUR 14 million plus EUR 6 million. So you end up with a strange EUR 213 million number. So that's the slide I couldn't read when I did my math this morning. Okay. The display is a bit misleading. We'll correct that.

The next question comes from Karine Elias, Barclays.

I have 2 questions. A technical question. EP already is a shareholder of the company. My understanding is that the change of control would not be triggered by the bonds unless there was a change in the rating. I'd like to clarify that point. The second question is about the way you could reach -- you can -- the 50% threshold. Do you need to get funds outside Fnac Darty? And then for the refinancing because of this new offer, is there anything on the cards?

Regarding the bonds, there's a change of control that applies if there is a downgrade by 2 rating agencies. And so we'll have to wait what the rating agencies have to say on this -- about this tender to see whether this change offer can apply. We don't know whether they did. As to Kretinsky's quota, how he will finance this, he said on his own funds, there would be no additional debt for Fnac Darty. And de facto, as you can well imagine, there's no need for refinancing. We have 2 bonds due in 2029 and 2032 and an RCF, which is in 2031 with 2 extra years. So nothing in the short run.

Okay. Well, thank you for these clarifications. Just to be clear, Daniel Kretinsky will have his tender and backstops to respond to this. Thank you.

[Operator Instructions] Next question comes from [ Alexander Casas from Casas & Partners ].

Yes, since there are no further questions, and it's a highly important topic, Nature & Découvertes disposal announced this morning. Could you tell us a bit more about the underlying reasons if you knew, if you does get in the presentations. Do you have any ideas on the possible acquirer, French or foreign and an order, not of the transaction price, but what is the cost and what criteria might you view the valuation the company has these past few quarters experienced some challenging times. Question concerns Nature & Découvertes.