Tokmanni Group: Good fourth quarter - revenue and EBITDA grew

Tokmanni Group Corporation                      Financial Statement bulletin  9 Feb 2018     8.30 EET

This release is a summary of Tokmanni’s Financial Statement Bulletin 2017. The complete report is attached to this release as a pdf-file.

FOURTH QUARTER HIGHLIGHTS

  • Revenue grew 4.4% to EUR 248.5 million (238.1)
  • Like-for-Like revenue decreased 1.0%
  • Six new stores opened during the quarter
  • Gross profit totaled EUR 86.6 million (84.2), a gross margin of 34.8% (35.3%)
  • Comparable gross profit totaled EUR 86.1 million (83.5), a comparable gross margin of 34.6% (35.1%)
  • EBITDA amounted to EUR 29.3 million (28.4), an EBITDA margin of 11.8% (11.9%)
  • Comparable EBITDA totaled EUR 28.6 million (27.3), a comparable EBITDA margin of 11.5% (11.5%)
  • EBIT totaled EUR 25.7 million (24.6), 10.3% of revenue (10.3%)
  • Comparable EBIT totaled EUR 25.0 million (23.6), 10.1% of revenue (9.9%)
  • Cash flow from operating activities amounted to EUR 52.6 million (47.5)
  • Earnings per share amounted to 0.33 euros (0.32)

HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-DECEMBER 2017

  • Revenue grew 2.7% to EUR 796.5 million (775.8)
  • Like-for-Like revenue decreased 1.3%
  • 13 new and 2 relocated stores opened during the review period
  • Gross profit totaled EUR 267.1 million (268.4), a gross margin of 33.5% (34.6%)
  • Comparable gross profit totaled EUR 268.1 million (267.9), a comparable gross margin of 33.7% (34.5%)
  • EBITDA amounted to EUR 53.1 million (64.3), an EBITDA margin of 6.7% (8.3%)
  • Comparable EBITDA totaled EUR 55.0 million (62.8), a comparable EBITDA margin of 6.9% (8.1%)
  • EBIT totaled EUR 38.8 million (49.2), 4.9% of revenue (6.3%)
  • Comparable EBIT totaled EUR 40.6 million (47.7), 5.1% of revenue (6.1%)
  • Cash flow from operating activities amounted to EUR 27.1 million (62.5)
  • Earnings per share amounted to 0.45 euros (0.50)
  • The Board of Directors proposes to the Annual General Meeting to pay a dividend of 0.41 euros per share

TOKMANNI’S OUTLOOK FOR 2018: GOOD GROWTH AND IMPROVED PROFITABILITY

Tokmanni’s expects good revenue growth for 2018 based on the revenue from new stores opened in 2017 and stores to be opened in 2018 and low single digit Like-for Like revenue growth. As of 2018 Tokmanni’s online revenue will be included in the Group’s Like-for-Like revenue. Group profitability (adjusted EBITDA%) is expected to improve from the previous year.

Interim CEO Harri Sivula:

 

”THE FOURTH QUARTER WAS GOOD IN MANY RESPECTS”

"The beginning of 2017 was challenging sales wise for Tokmanni due to Tokmanni's internal system problems as well as external circumstances. At the same time, the market development was slower than we had expected. Despite the strong recovery in the Finnish economy, signs of a turn in the non-grocery market were seen only at the end of the year. However, due to our resolute measures, we managed to stabilize the situation towards the end of the year and the performance of the fourth quarter was good measured by many metrics. 

Fourth quarter Group revenue developed well and our revenue grew 4.4% based on revenue from new stores opened in 2016 and 2017. During the last quarter of the year we opened six new stores. The Like-for-Like revenue development was slightly negative at -1.0%. Our Christmas sales were record high but October and November Like-for-Like sales were a slightly behind last year’s sales mainly due to strong market competition as a result of the challenging first part of the year. Our gross margin was slightly below the corresponding quarter last year but our comparable EBITDA margin remained at the previous year’s good level, 11.5%.

Full-year revenue grew 2.7% but Like-for-Like revenue decreased 1.3% from the previous year. This was mainly due to the weak beginning of the year, stronger competition especially in groceries, and the impact from some new stores and store size reductions on Like-for-Like sales. The strong competition brought on by online stores and specialty discount retailers could be seen especially in the clothing and tools product categories. When analyzing the numbers, it is also good to keep in mind that 2017 had one selling day less than the previous year. As we had anticipated, our profitability weakened from the previous year. This was mainly due to the sales mix and the high amount of new stores opened during the period. In 2017, the financial structure of the Group was clearly lighter than in the previous year, as a result of which our financial expenses declined significantly and net income was almost at the previous year's level.

Expanding the store network is one of Tokmanni's revenue and earnings drivers. Over the last few years, we have invested exceptionally heavily in the opening of new stores and our store network has grown by nearly 20 stores over the last couple of years. In 2017, we opened a record number of new stores, 13 new and 2 relocated stores. In our investment program for 2018, we will invest more heavily in the maintenance of our store network than in the previous years, especially in updating our grocery stores, and in Tokmanni's digital services to support Like-for-Like sales. In 2018 we will open approximately five new stores in accordance with our target.

In 2017, we have paid even more attention to our pricing strategy, the development of our customer-focused assortment as well as the continuous development of our store concept to improve our Like-for-Like sales. At the same time, we continue to develop our private labels and direct imports to improve our profitability. In 2018, we focus heavily on among others sharpening our private label strategy and marketing to increase their share of sales.

We predict good sales growth in 2018. Based on the actions mentioned above we expect Like-for-Like revenue to turn to low single digit growth and at the same time for new stores opened in 2017 and 2018 to bring good revenue growth.”

KEY   FIGURES  10-12/2017  10-12/2016  Change%  1-12/2017  1-12/2016  Change% 
Revenue, MEUR 248.5 238.1 4.4% 796.5 775.8 2.7%
Like-for-like   revenue development, % -1.0 0.8 -1.3 -0.1
Number of baskets, M 13.3 12.8 3.6% 46.4 44.7 3.6%
Gross profit, MEUR 86.6 84.2 2.9% 267.1 268.4 -0.5%
Gross margin, % 34.8 35.3 33.5 34.6
Comparable gross profit, MEUR 86.1 83.5 3.1% 268.1 267.9 0.1%
Comparable gross margin, % 34.6 35.1 33.7 34.5
Operating expenses, MEUR -58.5 -56.8 3.0% -217.8 -207.4 5.0%
Comparable operating expenses, MEUR -58.7 -57.2 2.6% -217.0 -208.5 4.1%
EBITDA, MEUR 29.3 28.4 3.3% 53.1 64.3 -17.5%
EBITDA, % 11.8 11.9 6.7 8.3
Comparable EBITDA, MEUR 28.6 27.3 4.8% 55.0 62.8 -12.5%
Comparable EBITDA, % 11.5 11.5 6.9 8.1
Operating profit (EBIT), MEUR 25.7 24.6 4.4% 38.8 49.2 -21.3%
Operating profit margin EBIT, % 10.3 10.3 4.9 6.3
Comparable EBIT, MEUR 25.0 23.6 6.1% 40.6 47.7 -14.9%
Comparable EBIT, % 10.1 9.9 5.1 6.1
Net financial items, MEUR -1.6 -1.4 13.2% -5.8 -15.2 -61.7%
Net capital expenditure, MEUR 4.3 4.4 -2.3% 8.1 9.8 -16.7%
Net debt / adjusted EBITDA ** 2.4 1.8 2.4 1.8
Net cash from   operating activities, MEUR 52.6 47.5 27.1 62.5
Return on capital employed, % 7.6 7.2 11.4 14.5
Return on equity, % 11.7 12.3 16.0 18.1
Number of shares,   weighted average during the financial period (thousands)* 58 869 58 869 58 869 54 095
Earnings per share   (EUR/share)* 0.33 0.32 0.45 0.50
Personnel at the end   of the period 3 255 3 224 3 255 3 224
Personnel on average   in the period 3 258 3 200 3 232 3 209
* The amount of shares 2016 has been adjusted   with the effects of the bonus issue (‘share split’) carried out 04/2016. ** Rolling 12 months adjusted EBITDA 

MARKET OUTLOOK

In 2017, the Finnish economy recovered and GDP grew over 3%, significantly more than what had been expected at the beginning of the year. The Finnish Ministry of Finance forecasts GDP growth of 2.4% in 2018 and 1.9% in 2019. Unemployment is projected to decrease to 8.1% and real disposable income to rise by more than 2%, as inflation only accelerates slightly.

Tokmanni expects the Finnish retail market to grow slightly, but the competition to continue to be fierce, especially in groceries. The share of E-commerce is expected to grow in all product categories, especially in home electronics and clothing. Specialty stores are also expected to continue strengthening their positions.

Although the weak economic situation has accelerated the growth of the share of discount retail stores in the Finnish retail market, growth is expected to continue as the economy recovers. As customers have taken discount retailers as regular shopping places, have become accustomed to discount stores and found the value for money of their products to be good, they are likely to remain regular customers even when the economy recovers. The long-standing global trend which emphasizes good value-for-money, is expected to continue.

ANALYST AND PRESS CONFERENCE 

An analyst and press conference will be held on the publication day at 10.00 am EEST at the GLO Hotel, Kluuvikatu 4, Helsinki. The conference is in Finnish and will also be webcasted. An audiocast in English will be held at 11.15 am EEST (10.15 CET).

The English live audiocast can be accessed via Tokmanni’s website at ir.tokmanni.fi or through the link https://tokmanni.videosync.fi/2018-02-09-teleconference/register. On-demand versions of both webcasts will be available at ir.tokmanni.fi later during the same day.

The participants can also join a telephone conference that will be arranged in conjunction with the live webcasts. The participants are asked to dial in 5-10 minutes prior to starting time using the Participant Phone Numbers and Participant Passcode below:

Participant Passcode: 461480
FI: +358 (0)9 7479 0360
SE: +46 (0)8 5033 6573
UK: +44 (0)330 336 9104
US: +1 323-794-2095

2017 PUBLICATIONS AND ACCOUNCEMENTS 

The 2017 financial statements, Corporate Governance Statement and Corporate Responsibility Report will be published during week 8.  

All Company Announcements and press releases published by Tokmanni in 2017 can be found on the corporate website at ir.tokmanni.fi.

For further information, please contact: 

For further information, please contact:

Harri Sivula

Chairman of the Board, Interim CEO

Tel. +358 50 656 92

Harri.sivula@tokmanni.fi

Markku Pirskanen

CFO

Tel: +358 20 728 7390

markku.pirskanen(a)tokmanni.fi

Joséphine Mickwitz

Head of IR and Communications

Tel. +358 400 784 889

josephine.mickwitz@tokmanni.fi 

Tokmanni in brief

Tokmanni is the largest general discount retailer in Finland measured by number of stores and revenue. In 2017, Tokmanni’s revenue was EUR 796 million and on average it had approximately 3,200 employees. Tokmanni is the only nationwide general discount retailer in Finland, with 175 stores across Finland as at 31 December 2017. 

Distribution:

Nasdaq Helsinki

Key Media