Fnac Darty SA (FNAC) Earnings Call Transcript & Summary

Good evening. Welcome to the conference call to present first quarter revenues for the 2025 of Fnac Darty. Mr. Jean-Brieuc Le Tinier, who is the CFO, will be moderating the call. Sir, over to you.

Thank you. Good evening to you all. Thanks for joining us on this call for presenting the business for Q1 2025. I'm joined this evening by Investor Relations, Domitille Vielle; Laura Parisot. I'll present our results and we'll take our questions. Slide 3, I'll give you some information regarding our reporting. Acquisition of Unieuro gives new European dimension to our group. We wanted to adapt our financial information accordingly. As of today, we're releasing according to the 2 following geographies: France 60% of group sales; and rest of Europe that represents 40%. That includes Italy, Belgium, Portugal, Spain and Switzerland. The detail of restatements -- sorry, to be found at annex of the press release already available on our website. And lastly, and as stated to the country, in order to better reflect the business performance of our activities, we're going to comment like-for-like on a pro forma basis as if Unieuro had been consolidated in our accounts since the 1st of January 2024. And there are some major scope effects linked to store closures, either definitively Champs-Élysées in France or temporary for 2 stores in Spain for renovation and works. Lastly, I'd like to read detail with you. The impacts on our P&L as the integration of Unieuro and the deconsolidation of ticketing, starting with Unieuro, a 100% of the Unieuro P&L will be consolidated in the Fnac Darty P&L, the minority interest you'll see in the group P&L as of June 30 will essentially represent 49% of net income. Unieuro coming to our co-investor, Ruby Equity Investment, the impact on 2024 EPS, but not significant, all the impacts on the 2024 results are detailed in the pro forma information released in February '25 and in the release. For ticketing, we sold 17% of France Billet to CTS in 2024. And if we keep 35% stake of the company, we don't have control. We can only consolidate through global integration, but at equity method, we'll book our share of net income of ticketing in the current operating income and group share for the same amount, you'll understand. So the net impact on COI visible about some EUR 10 million, but the impact on net income group share is follow because we'll still consolidate 35% of the net income of ticketing as against 52% previously. That's for the scope effect and methodology. Moving to Slide 4 now. These are the key items of Q1 that are detailed throughout the presentation. So revenues slightly up like-for-like pro forma, excluding unfavorable calendar effect of minus 1%. Integration of Unieuro is well underway. Initiatives will allow us to deliver synergies of at least EUR 20 million by the end of '26. We'll release more broadly on this topic during our Analyst Day in June. Our pro forma gross margin sharply up over the period with an improvement of 60 basis points. And of course, we'll also return to the success of our bond issue maturity 2032, allowing us to buyback 77% of OCEANE 2027 in circulation and extend our debt maturity. Slide 5, as I announced in the introduction Fnac Darty recorded almost stable revenue, minus 0.6% like-for-like pro forma, plus 29% reported restated for an unfavorable calendar effect of 1%. Revenue, slightly up over the period. There were 29 days in February last year as against 28 this year, showing the importance of the calendar effect. Furthermore the bulk of the decline in the noncomparable figures due to the deconsolidation of ticketing and store closures in France, Champs-Élysées in Spain, provisional closures for work at Callao, and Valencia Bonaire online sales account for 21% of revenue over the period. Click & Collect key indicator representing 49% of sales this quarter, integration of Unieuro, and its web and Click & Collect business, less efficient. The rest of the group is reducing this rate that would have been higher than 52%, but the scope for improvement going forward. By category now, services and diversification category continuing their positive momentum with double-digit growth, positive signals observed at the end of '24. Appliance sales continuing. Small appliances, delivering good performance. And big electronics driven essentially by Italy. Technical products, booking after a drop in their activity, impacted by low volumes in telephony. Editorial products down still impacted by gaming. Doesn't benefit from the major expected launches as of the end of -- first half with the launch of Switch 2 in June. Europe, let's turn to the breakdown by geographies. France is down 2.6% data, 1.2% like-for-like versus Q1 '24 scope effect. The final closure, definitive closure Champs-Élysées, with Unieuro, the France represents in Q1 59% of total group revenues against 76% same period last year. The group continued to outperform the group in Q1. After the latest figures at the end of March, by the Bank of France, our markets are down 2% in this first quarter. We're satisfied with our outperformance like-for-like demonstrating the strength of our model. Rest of sales in Europe, rather sales represent 41% of total revenue of the group plus 0.4% like-for-like pro forma, taking into account revenue from Italy in '24. As indicated, Italy is up 1.4% like-for-like pro forma reflects the good consumer momentum of Italian households. Belgium, down 3.6% like-for-like, impacted by strong competitive pressure. Portugal, up 0.9% like-for-like driven by dynamism and sales up 1.7% driven by in-store sales. The store perimeter, in fact, reflecting the closure of stores Callao and Valencia. These are temporary closures. Switzerland pretty stable, minus 0.5% like-for-like, driven by strong online sales, scope effect of the large manner in German-speaking Switzerland. That's the gross margin over the quarter. Officially, it's down 110 basis points, impacted by the integration of Unieuro margin low that of the group pro forma. That is with a comparable scope, including Unieuro in '24. The rate is up 60 basis points, good performance due to the increase in service activity, Darty Max offsetting largely the dilutive effect of the franchise and the negative impact of deconsolidation of ticketing. Slide 8, debt maturity successfully had a bond issue for EUR 300 million maturing April 2032, an annual interest rate of 4.75%. We're going to take advantage, good market environment. And this was welcomed by diversified base of institutional investors, France, Germany, U.K. was oversubscribed. The gross proceeds used to buy the '27 convertible bonds over 77% of OCEANEs were brought during the redemption for [EUR 47] million. In parallel, our banks agreed to extend the maturity of our RCF and DDTL for amount EUR 600 million, March 2030, with 2 possibilities to extend the March '31,'32 to cover the maturity in size and maturity for 2032. It's rated by S&P, Fitch, Scope in March '25. S&P, Standard Poor's up the outlook for Fnac Darty to stable as against negative previously confirmed the BB+ rating. The group is revision based on the strength of operational performance, strengthen competitive position of the group, thanks to the acquisition Unieuro and prudent and controlled financial policy. Fitch rating, Scope rating, both confirmed the respective ratings, BB+ and BBB associated with stable income. We have extended maturity. We secured our long-term liquidity. To conclude, Slide 9. We are, as you've understood, satisfied with our performance in Q1. We reaffirmed the targets disclosed in February last anticipating of current operating income 2025, growing mid-single digit compared to 2024 excluding ticketing. And we look forward to meet you for our Investor Day. They'll be held on invitation, 11th of June Viva Tech devoted to new technology. Thanks for your attention. We're now ready to take your questions.

[Operator Instructions] First question from Clement Genelot from Bryan Garnier.

Two questions, if I may. First of all, on revenues in the Bank of France because we see a decrease in February and March, was this also the case for Fnac France? And is this continuing into April? My second question is on purchase prices. Have you been approached to buy Asian suppliers who would be prepared to increase your monthly volume in exchange for a slightly lower price given the tariffs developments and would this be good for you because perhaps it would enable you to offer slightly lower prices with higher volume? Or on the contrary, would this imply short-term increases?

Right. Thank you, Clement. Now for your first question, the figures from Bank of France are very negative in February. But there's a strong calendar effect of minus 3% for February since we lost a day. So the calendar effect is less 3 on February. So this had a significant impact on sales. I'm not going to give a comment on sales month-by-month. But we've outperformed basically the market throughout the quarter. And I'm not going to make any comments on April. We'll go back to that in July. The second question I would recall that our business is not to buy, it's to sell. And therefore, we may indeed be approached by suppliers who will boost volume in return for lower prices. We're extremely cautious about that, about accumulating stock. We're very cautious about our cash flow. We'll see if that does indeed happen. But we will stay within the limits of what we think the market can absorb. We're not there to absorb surplus stock from our suppliers. And we will look at it if it happens, but we'll look at it very cautiously indeed in relation to our cash flow and in relation to the market capacity to absorb this.

[Operator Instructions] Mr. Le Tinier, the questions are over. No further questions.

Well, I must have been extremely clear. Thank you all very much. Our next meeting will be the General Meeting on the 28th of June. And also the strategic presentation on the 11th of June, you should all have received invitations by now. Please do answer quickly because there are relatively few places for the Investor Day. And then the last meeting, 23rd of July for our annual results. Thank you all for being with us, and I wish you all a very pleasant evening. Thank you. Goodbye.

Ladies and gentlemen, this brings to an end today's conference call. Thank you for joining us. And you may now hang up. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]