Tokmanni Group Corporation Half-year Financial Report January–June 2020

Tokmanni Group Corporation        Half-year Financial Report        29 July 2020 at 8.30 a.m.

Very strong growth in second-quarter revenue and comparable EBIT

SECOND QUARTER 2020 HIGHLIGHTS

  • Revenue grew by 19.2% (10.2%) and was EUR 286.0 million (239.9)
  • Like-for-like revenue for stores grew by 17.5% (5.3%)
  • Comparable gross profit totalled EUR 98.6 million. (84.5), with the comparable gross margin being 34.5% (35.2%)
  • Comparable EBIT amounted to EUR 30.6 million (18.7), representing 10.7% of revenue (7.8%)
  • Cash flow from operating activities amounted to EUR 78.9 million (37.8)
  • Earnings per share were EUR 0.38 (0.21)

JANUARY–JUNE 2020 HIGHLIGHTS

  • Revenue grew by 13.3% (9.4%) and was EUR 484.9 million (428.0)
  • Like-for-like revenue for stores grew by 11.8% (4.8%)
  • Comparable gross profit totalled EUR 162.4 million (143.1), with the comparable gross margin being 33.5% (33.4%)
  • Comparable EBIT amounted to EUR 30.9 million (16.5), representing 6.4% of revenue (3.9%)
  • Cash flow from operating activities amounted to EUR 55.3 million (9.5)
  • Earnings per share were EUR 0.34 (0.14)

TOKMANNI’S OUTLOOK FOR 2020

Tokmanni forecasts strong growth in revenue and like-for-like revenue in 2020.
Group profitability (comparable EBIT margin) is expected to improve on the previous year.

Tokmanni’s outlook for the latter half of 2020 is based on the assumption that there will be no significant disturbances in the market environment of Tokmanni’s business.

CEO Mika Rautiainen:

SALES AND RESULT GREW VERY STRONGLY – MANY THANKS TO THE CUSTOMERS AND PERSONNEL

When the coronavirus crisis and the exceptional restrictions were imposed in March, customer visits at Tokmanni stores fell sharply. We took immediate action to address the uncertainty in early April by further adjusting the pricing of our products. We also took steps to ensure the safety of our personnel and stores, so that customer service and shopping at Tokmanni stores would be as risk-free as possible. Our successful actions produced very good sales and results.

In the second quarter, Tokmanni’s revenue grew by 19.2% to EUR 286.0 million (239.9). The product categories offered by Tokmanni are well suited to a situation in which Finns are spending more time at home and at their cottages and are favouring domestic tourism. The increase in sales of leisure, gardening and home improvement products and food products was particularly strong in the second quarter. Clothing sales were somewhat lower than in the previous year. It is a pleasure to see that our customers have also increasingly found their way to Tokmanni’s online store. The online store accounted for 1.4% (0.6%) of revenue in the second quarter and the business was profitable.

The efficiency of our supply chain weakened due to action points related to ensuring the safety of our warehouse personnel. The sales strong growth combined with weaker efficiency in the supply chain resulted in considerable deficiencies in shelf availability. The situation is currently improving and returning to normal.

The comparable gross margin fell in the second quarter due to our strong sales programme and unusual sales structure. Strong growth in revenue and strict cost control, however, enabled a significant improvement in EBIT.

Tokmanni has pride in its low prices, dares to renew and does things together. These values have guided us this spring, as before. Our personnel have worked for the benefit of our customers throughout the spring, encouraging one another in a good spirit. As a reward for a job well done, we are paying our entire personnel with an additional bonus for the second quarter, which is EUR 0.6 million in total.

We are confident Tokmanni’s business will continue to run smoothly despite the fact that there are naturally considerable uncertainty factors concerning the autumn and the rest of the year. We will continue to offer our customers a wide assortment of attractive products at low prices. We remain committed to ensuring the health and wellbeing of our personnel, customers and partners. Measures for improving profitability and further increasing the role of our online store are key elements of our strategy.

The wheels have once again been set in motion!

Impacts of the coronavirus pandemic on Tokmanni’s business

Since the exceptional restrictions related to the coronavirus epidemic were imposed in March, Tokmanni’s customer flows declined but, on the other hand, the size of the average basket grew. However, the situation started to recover at a rapid pace from April onwards, and currently shopping behaviour has returned to almost normal. As a result of the epidemic, the sales structure in the second quarter was abnormal in a number of ways, including the fact that demand for groceries increased while demand for clothing declined. On the whole, Tokmanni has benefitted from the fact that customers have not been travelling abroad.

To ensure the safety of customers and employees, we have implemented numerous special arrangements and taken various steps, which have resulted in extra costs. The measures to reinforce customer and employee safety will be continued and increased, if necessary. During the coronavirus epidemic, Tokmanni had three verified cases of coronavirus among its personnel. All of Tokmanni’s stores have remained open during the coronavirus epidemic.

Tokmanni has a joint sourcing company in China with the Norwegian general discount retailer Europris. The sourcing company is operating normally despite signs of uncertainty over a second wave of the pandemic. In the early stages of the epidemic, the supply chain in China suffered from a 2–4-week delay in deliveries. Despite this, we were able to get the spring and summer season products to the stores on time. Christmas is the most important season for Tokmanni and imports from China play a key role in this. The Christmas products are already in production, and some are already being shipped to Finland.

The reliability of the operations of the logistics centre and supply chain is critical for Tokmanni. To secure the reliability of its operations in the early stages of the epidemic, Tokmanni took several measures to ensure the safety of the warehouse personnel, which in part reduced the efficiency of the supply chain. The strong growth in sales combined with weaker efficiency in the supply chain resulted in considerable deficiencies in shelf availability. To improve shelf availability, Tokmanni has recruited more employees for its warehouse and procured equipment to improve the performance of the logistics centre. Shelf availability is currently clearly improving. Tokmanni has prepared comprehensive contingency plans to ensure continuity in its logistics, including in case of a second wave of the coronavirus epidemic.

Tokmanni’s liquidity is good. At the end of June 2020, the company’s cash and cash equivalents and undrawn credit limits totalled EUR 98.8 million (30 June 2019: 55.2). Tokmanni’s balance sheet includes a long-term loan of EUR 100 million, which will fall due in October 2021 under its current terms and conditions. The company is in negotiations to extend or refinance the loan.

Tokmanni’s operations are proceeding according to its strategy. The operations and the strategy involve systematic risk assessments and the necessary measures for managing risks.

Key figures
4-6/
2020
4-6/
2019
Change
%
1-6/
2020
1-6/
2019
Change
%
1-12/
2019
Revenue, MEUR 286.0 239.9 19.2% 484.9 428.0 13.3% 944.3
Like-for-like revenue development, % 17.5 5.3 11.8 4.8 4.3
Customer visit development % 3.5 7.5 3.2 7.3 6.9
Gross profit, MEUR 98.1 84.3 16.4% 162.3 143.1 13.4% 325.2
Gross margin, % 34.3 35.1 33.5 33.4 34.4
Comparable gross profit, MEUR 98.6 84.5 16.7% 162.4 143.1 13.4% 325.3
Comparable gross margin, % 34.5 35.2 33.5 33.4 34.4
Operating expenses -52.4 -51.8 1.3% -101.9 -99.1 2.9% -198.9
Comparable operating expenses -52.9 -51.5 2.7% -101.3 -98.3 3.1% -197.9
EBITDA, MEUR 46.6 33.5 39.4% 62.3 45.9 35.8% 130.6
EBITDA, % 16.3 13.9 12.8 10.7 13.8
Comparable EBITDA, MEUR 46.7 34.0 37.4% 63.0 46.8 34.7% 131.6
Comparable EBITDA, % 16.3 14.2 13.0 10.9 13.9
Operating profit (EBIT), MEUR 30.6 18.2 68.2% 30.2 15.6 93.0% 69.4
Operating profit margin EBIT, % 10.7 7.6 6.2 3.7 7.3
Comparable EBIT, MEUR 30.6 18.7 63.7% 30.9 16.5 87.0% 70.4
Comparable EBIT, % 10.7 7.8 6.4 3.9 7.5
Net financial items, MEUR -2.5 -2.6 -6.4% -5.0 -5.3 -4.6% -10.5
Net capital expenditure, MEUR* 3.1 5.6 -45.1% 6.3 8.3 -24.0% 15.4
Net debt / comparable EBITDA ** 2.5 3.7 2.5 3.7 2.9
Net cash from operating activities, MEUR 78.9 37.8 55.3 9.5 84.0
Return on capital employed, % 5.1 3.2 5.1 2.7 11.8
Return on capital employed %, rolling 12 months 14.0 9.7 14.0 9.7 11.8
Return on equity, % 13.4 8.7 12.0 5.8 26.8
Return on equity %, rolling 12 months 33.7 24.4 33.7 24.4 30.1
Equity ratio, % 25.0 20.3 25.0 20.3 25.3
Number of shares, weighted average during the financial period (thousands) 58 819 58 869 58 836 58 869 58 869
Diluted number of shares, weighted average during the financial period (thousands) 58 844 58 869 58 843 58 869 58 869
Earnings per share, basic (EUR/share) 0.38 0.21 0.34 0.14 0.80
Earnings per share, diluted (EUR/share) 0.38 0.21 0.34 0.14 0.80
Personnel at the end of the period 4 199 4 019 4 199 4 019 3 659
Personnel on average in the period 3 920 3 784 3 719 3 606 3 647

* Net capital expenditure, excluding non-current receivables from others
** Rolling 12 months comparable EBITDA

Analyst and press conference

Tokmanni’s CEO Mika Rautiainen and CFO Markku Pirskanen will present the review to analysts, investors and media representatives on the publication day at 10:00 am at Scandic Simonkenttä, Simonkatu 9, 00100 Helsinki, Finland in conference room Bulsa-Freda. The conference is in Finnish and will also be webcasted. A webcast in English will be held at 11:30 am (Finnish time).

The live webcast can be accessed via Tokmanni's website at https://ir.tokmanni.fi/en/investors or through the link https://tokmanni.videosync.fi/2020-q2-results

The participants can also join an English telephone conference that will be arranged in conjunction with the live presentations. The participants are asked to dial in 5-10 minutes prior to starting time using the Participant Phone Number and Participant Passcodes below.

Finland: +358 981 710 310
Sweden: +46 856 642 651
United Kingdom: +44 333 300 0804
United States: +1 631 913 1422

Passcode, English webcast: 25462781#
Passcode, Finnish webcast: 50649202#

On-demand versions of both presentations will be available at https://ir.tokmanni.fi/en later during the same day.

For further information, please contact

Mika Rautiainen, CEO, tel. +358 020 728 6061, mika.rautiainen(at)tokmanni.fi
Markku Pirskanen, CFO, tel. +358 20 728 7390, markku.pirskanen(at)tokmanni.fi
Maarit Mikkonen, Head of IR and Communications, tel. +358 40 562 2282, maarit.mikkonen(at)tokmanni.fi

Tokmanni in brief

Tokmanni is Finland's leading general discount retailer by number of stores and revenue. In 2019, Tokmanni’s revenue totalled EUR 944.3.4 million, and the company had around 3,700 employees. Tokmanni is also the only nationwide general discount retailer in Finland, and it currently almost 200 around the country.

Distribution

Nasdaq Helsinki
Key media

About Us

Tokmanni is Finland’s leading discount retailer chain. Some 3,600 Tokmanni employees make customers’ everyday life and special occasions easier by offering a versatile and up-to-date assortment of Finnish and international brand-name products and other high-quality products at prices that are always affordable. With nearly 200 stores around Finland and an online store, Tokmanni is always close to its customers. Tokmanni’s revenue in 2018 amounted to EUR 870.4 million. Tokmanni's shares are listed on Nasdaq Helsinki.