oriflame holding ag · 2018-11-07 · oriflame holding ag third quarter 2018 investor presentation...

Oriflame Holding AGTHIRD QUARTER 2018

INVESTOR PRESENTATION

Magnus Brännström, CEO

Gabriel Bennet, CFO

Nathalie Redmo, Sr. Manager IR

NOVEMBER 7, 09.30 CET

© O R I F L A M E C O S M E T I C S A G , 2 0 1 8

Important clarifying information IFRS

• Oriflame has implemented IFRS 15 Revenue from Contracts with Customers from 1st January2018. An early adoption of IFRS 16 Leases has been made to allow for all changes beingimplemented at the same time.

• To facilitate the comparison with the 2017 figures, the company has prepared fully adjusted 2018figures, excluding the impact of IFRS 15, IFRS 16 and related accounting alignments. The fullyadjusted figures are comparable with the already reported 2017 figures.

• Where not stated differently, the figures, graphs and comments in this presentation are based onthe fully adjusted 2018 figures, to facilitate the comparison with the 2017 figures

2


THIRD QUARTERHIGHLIGHTS

3


4

Q3 highlights

• Sales €292.5m (295.3m) -1% in €, +4% in lc

− Challenging market conditions and difficult comparables

− Slower performance in Asia & Turkey during second half of quarter

− Q4 update: 6% QTD and 4% YTD lc sales

• Measures taken to enhance sales growth in CIS and Latin America –negative operating margin impact in the quarter

• Operating margin 10.3% (11.0%)

− Currency impact -160 bps

− Net profit €18.8m (€17.4m)

• Strong net financial position


5

Operational highlights

• Price/mix +7%

− Unit decline -3%

• Registered actives +0%

− Lc productivity +4%

• Strongest performance in Wellness

• Key Skin Care launches:

− Pure Skin Deep Cleansing Shower Mask

− NovAge Supreme Cleansing Gel

• Emission reduction targets via The Science Based Targets initiative

• Continued strong online development

− Close to 1 million monthly active users of the Oriflame app


6

Regions

Sales

Registered actives

Operating profit

14% (14%)

25% (24%)

22% (24%)

39% (38%)

11% (11%)

25% (25%)

27% (26%)

37% (38%)

13% (13%)

23% (20%)

14% (21%)

50% (46%)


Latin America

• Sales force and productivity

− Registered actives +2%


− € productivity -1%

• Positive timing of catalogues

• Difficult comparables

• Weak development in Mexico

• Improved performance in Colombia and Peru

− Successful recruitment campaigns

• Operating margin -110 bps

− Negative currency movements

7

*Figures following the adoption of IFRS 15 and IFRS 16

€m

Q3’18* Q3’18 Q3’17 Change

LTM,

Oct’17 -

Sep’18

LTM,

Oct’16 -

Sep’17

Change YE’17

Sales, €m 37.4 40.5 40.4 0% 150.8 156.3 (4%) 157.5

Lc sales - - - 3% - - 2% -

Operating profit, €m

4.3 5.5 5.9 (7%) 19.0 21.1 (10%) 20.8

Operating margin

11.4% 13.5% 14.6% - 12.6% 13.5% - 13.2%

Registered actives ‘000

304 304 299 2% 304 299 2% 280

0%

5%

10%

15%

20%

0

20

40

60

80

100

120

140

160

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Net Sales LTM Op Margin % LTM


Europe & Africa


− Registered actives -3%


− € productivity +7%

• Modest growth in Central Europe

− Driven by Poland and Romania

• Improvements in Western Europe

− Solid leadership development

• Healthy growth in Africa

− Macroeconomic difficulties

− Strong productivity levels in Egypt and Nigeria


8


Q3’18* Q3’18 Q3’17 Change

LTM,

Oct’17 -

Sep’18

LTM,

Oct’16 -

Sep’17

Change YE’17

Sales, €m 70.6 73.2 70.7 4% 322.3 327.7 (2%) 324.7

Lc sales - - - 3% - - (1%) -


8.8 9.4 9.2 2% 44.5 46.8 (5%) 45.2

Operating margin

12.5% 12.9% 13.0% - 13.8% 14.3% - 13.9%


652 652 674 (3%) 652 674 (3%) 783

€m

0%

5%

10%

15%

20%

0

50

100

150

200

250

300

350

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Net Sales LTM Adj. Op Margin % LTM


CIS


− Registered actives +4%

− Lc productivity -6%

− € productivity -12%

• Russia lc sales -5%

− Measures taken started to gain traction

• Positive development in Ukraine, Kazakhstan and Belarus


− Negative exchange rates

− Negative timing of selling and marketing expenses

− Extraordinary investments in selling and marketing expenses

− Sales and recruitment driving initiatives impacting the pricing

9


€m

Q3’18* Q3’18 Q3’17 Change

LTM,

Oct’17 -

Sep’18

LTM,

Oct’16 -

Sep’17

Change YE’17

Sales, €m 62.2 64.3 69.9 (8%) 318.6 356.2 (11%) 356.8

Lc sales - - - (2%) - - (4%) -


6.6 5.7 9.9 (43%) 39.3 44.7 (12%) 45.4

Operating margin

10.6% 8.8% 14.2% - 12.3% 12.5% - 12.7%


727 727 698 4% 727 698 4% 859

0%

5%

10%

15%

20%

0

50

100

150

200

250

300

350

400

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Net Sales LTM Adj. Op Margin % LTM


Asia & Turkey


− Registered actives was stable


− € productivity was stable

• Slower sales growth during the second half

− Difficult comparables

− Macroeconomic conditions in Turkey

• Healthy growth in China, although lower activity

• Solid sales growth in Vietnam, improvements in Indonesia



− Negative timing of selling and marketing expenses

− Price increases

− Favourable geographical mix

10


€m

Q3’18* Q3’18 Q3’17 Change

LTM,

Oct’17 -

Sep’18

LTM,

Oct’16 -

Sep’17

Change YE’17

Sales, €m 106.4 111.7 111.7 0% 521.9 483.5 8% 510.2

Lc sales - - - 8% - - 18% -


20.5 20.4 22.1 (8%) 115.7 98.8 17% 110.3

Operating margin

19.3% 18.2% 19.8% - 22.2% 20.4% - 21.6%


976 976 975 0% 976 975 0% 1,145

0%

5%

10%

15%

20%

25%

0

50

100

150

200

250

300

350

400

450

500

550

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18



FINANCIALS

11


Q3 income statement

• Sales mix

− Unit sales -3%

− Price/mix +7%

• Gross margin 73.9% (73.8%)


− Positive price/mix effect


− Negative currency impact -160 bps

− Lower costs for SIP and bonuses*

− Lower distribution and infrastructure expenses

− Negative timing of selling and marketing expenses*

− Higher share of administrative costs*

• Net profit €18.8m (€17.4m)

− Diluted EPS €0.33 (€0.30)

12


Q3’18* Q3’18 Q3’17 Change

LTM,

Oct’17 -

Sep’18

LTM,

Oct’16 -

Sep’17

Change YE’17

Sales, €m 279.4 292.5 295.3 (1%) 1,328.7 1,338.1 (1%) 1,363.1

Lc sales - - - 4% - - 6% -


29.4 30.0 32.5 (8%) 155.4 144.8 7% 159.0

Operating margin

10.5% 10.3% 11.0% - 11.7% 10.8% - 11.7%


2,659 2,659 2,646 0% 2,659 2,646 0% 3,067

€m

0%

5%

10%

15%

20%

0

200

400

600

800

1000

1200

1400

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18


* Negative timing offset by favourable one-off effects.


Group currency impact on sales since 2010

13


Price/mix impact on sales

14

Average

9%

0%

3% 3%

5%

9%

5%

4%

7% 7%

9% 9%

14% 14%

15%

16%

12%

11%

12%

11%

7%

9%

10%

14%

10%

7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Q3 '1

2

Q4 '1

2

Q1 '1

3

Q2 '1

3

Q3 '1

3

Q4 '1

3

Q1 '1

4

Q2 '1

4

Q3 '1

4

Q4 '1

4

Q1 '1

5

Q2 '1

5

Q3 '1

5

Q4 '1

5

Q1 '1

6

Q2 '1

6

Q3 '1

6

Q4 '1

6

Q1 '1

7

Q2 '1

7

Q3 '1

7

Q4 '1

7

Q1 '1

8

Q2 '1

8

Q3 '1

8


Q3 sales and operating margin analysis

15

Sales vs. PY

-3

-2

-1

0

1

2

3

4

Price / mixUnits

(5%)

LC Sales 4%

€ Sales (1%)

OP Margin vs. PY

7%

(3%)

FX0

2

4

6

8

10

120.1%

Price / m

ix

(0%)

Oth

er

incom

e

Pro

duct cost

OM

Q3 2

018

11.0%

Selli

ng &

Mark

eting

Adm

in.

1.0%

(1.7%)

0.3%

10.3%

Dis

trib

. &

Infr

a.

1.2%

(1.6%)

FX

OM

Q3 2

017


0

2

4

6

8

10

12

14

16

18

20

OM 2016

9.5% (3.5%)

FX OM 2020

7.0%

Price / mix Product cost Admin.

1.0%

2.0%

~15.0%

Other

(1.0%)

©Oriflame Cosmetics AG, 2017

Oriflame has made certain assumptions to make / calculate an estimate of

the effects of currency, price/mix, etc. on the operating margin.

Projected Operating margin expansion 2016-2020 as communicated on CMD February 2017

%


17

Actual Operating margin expansion YTD 2017 VS. LONG-TERM TARGET 2016-2020

(2%)



(14%)

(2%)

(2%)

9.5%

(0.6%)

7.0%

0.5%

2.0%

~15.0%

(3.5%)

2.1%

1.0%

0.4%

(1.0%)

11.7%

0

2

4

6

8

10

12

14

16

18

20

(0.2%)

OM 2016 FX OM 2020Price / mix Product cost Admin. Other

%

Projected

Actual


18

Actual Operating margin expansion LTM 2018 VS. LONG-TERM TARGET 2016-2020

(2%)



(14%)

(2%)

(2%)

9.5%

(3.1%)

7.0%

0.6%

2.0%

~15.0%

(3.5%)

4.1%

1.0%

0.5%

(1.0%)

0

2

4

6

8

10

12

14

16

18

20

0.1%

OM 2016 FX OM 2020Price / mix Product cost Admin. Other

%

11.7%

Projected

Actual


Cash flow

Q3 operating cash flow €9.9m (€11.2m)

• Net profit before tax €-0.7m

• Non-cash items in net profit before tax €+0.2m

• Impact from changes in working capital and provisions €-1.2m

− Inventories €+1.5m

− Receivables, prepaid exp., asset derivatives €-1.9m

− Payables, accrued exp., liability derivatives €-0.9m

− Provisions €+0.1m

• Interest, charges, taxes €+0.4m

19

Q3 18* Q3’17 LTM’18 YE ’17

Net profit before income

tax, €m24.1 24.8 140.0 133.2

Op. profit before changes

in wc, €m37.4 37.9 187.8 177.9

Change in working cap.

and provisions, €m(15.9) (14.7) 10.6 0.1

Operating CF, €m 9.9 11.2 142.3 122.7

CF Investing Activities,

€m(3.5) (3.8) (14.5) (15.8)

*Figures calculated as per the new IFRS 15 and 16 standards

0

25

50

75

100

125

150

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Operating cash flow LTM Capex LTM€m

0

50

100

150

200

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Total inventory€m


Financial position

• Net debt at hedged values €78.8m (€62.2m)

− Net debt €101.0m (€85.4m)

• Net debt at hedged values/ EBITDA (LTM) 0.4 (0.4)

− Net debt/EBITDA (LTM) 0.5 (0.5)

• Interest cover (Q3): 7.4 (7.7)

• Interest cover (LTM): 9.9 (8.4)

Covenant disclosure

• Consolidated Net Debt to Consolidated EBITDA: 0.6 (covenant at ≤ 3.0

times)

• Consolidated EBITDA to Consolidated Finance costs: 20.3 (covenant at

≥ 5.0 times / 4.0 times for RCF)

• Consolidated Net Worth: €221.6m (covenant at ≥ €120m / N/A for RCF

or in 2017 and 2018 Euro denominated private placement notes )

20

* Adjusted for fair value movements of the USD private placement notes

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

-20

0

20

40

60

80

100

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Net Debt at hedged values* Net Debt at hedged values* / EBITDA LTM

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Interest cover (LTM)

€m


-0.2

0.2

0.6

1.0

1.4

1.8

2.2

2.6

3.0

3.4

3.8

-20

20

60

100

140

180

220

260

300

340

Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Net Debt at hedged values* Net Debt at hedged values* / EBITDA LTM Net Debt / EBITDA Target range Net Debt / EBITDA Target range

21


0%

5%

10%

15%

20%

0

200

400

600

800

1000

1200

1400

1600


Net Sales LTM OP Margin LTM€m

€m


22


€m

0%

5%

10%

15%

0

50

100

150

200

250

300

350

400


Net Sales Quarter OP Margin Quarter

-0.2

0.2

0.6

1.0

1.4

1.8

2.2

2.6

3.0

3.4

3.8

-20

20

60

100

140

180

220

260

300

340


Net Debt at hedged values* Net Debt at hedged values* / EBITDA LTM Net Debt / EBITDA Target range Net Debt / EBITDA Target range€m


CONCLUSIONSAND GOING FORWARD

23


24

Conclusions and going forward

• Q3 sales development +4%:

− Challenging market conditions

− Difficult comparables related to 50th year Anniversary activities

− Slower performance in Asia & Turkey during second half of quarter

− Measures taken to enhance sales growth in CIS and Latin America

• Initiatives successful, yet negative impact on operating margin

• Q4 QTD sales development +6%

• Confidence in long-term strategy and in ability to return to profitable growth:

− Solid financial position

− Increased digitalisation

− Improved earnings opportunity


CAUTIONARY STATEMENT

Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly

commented upon, the actual outcome could be materially affected by other factors like, for example, the effect of economic conditions,

exchange-rate and interest-rate movements, political risks, impact of competing products and their pricing, product development,

commercialisation and supply disturbances.

26

oriflame holding ag · 2018-11-07 · oriflame holding ag third quarter 2018 investor presentation...

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