oriflame holding ag · oriflame holding ag first quarter 2019 investor presentation magnus...

Oriflame Holding AGFIRST QUARTER 2019

INVESTOR PRESENTATION

Magnus Brännström, CEO

Gabriel Bennet, CFO

Nathalie Redmo, Sr. Manager IR

MAY 9, 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 information concerning IFRS

• Oriflame has implemented IFRS 15 Revenue from Contracts with Customers from 1st January 2018. Early adoption of IFRS 16 Leases has been carried out to allow all changes to be implemented at the same time.

• Unless otherwise stated, comparisons and comments on the numbers are now prepared according to the implemented IFRS 15 and IFRS 16.

2


FIRST QUARTERHIGHLIGHTS

3


4

Q1 highlights

• Sales €309.2m (€330.8m) -7% in €, -6% in lc*

− Positive development in Latin America, Africa, Europe and CIS

− Sales decline in Asia & Turkey

− Stable profitability despite weaker sales and changed geographical mix

− Q2 update: -4% QTD and -5% YTD lc sales

• Operating margin 10.5% (10.5%)

− Currency impact -30 bps

− Net profit €23.0m (€21.0m)

• Strong net financial position

− Net debt at hedged values/EBITDA 0.7 (0.4)

− Previous definition: Net debt at hedged values/EBITDA 0.3 (0.0)

*Sales comparables were negatively impacted by 2 percentage points due to a one-off effect

caused by the implementation of IFRS 15 (deferred sales in prior year comparable) in 2018.


5

Operational highlights

• Price/mix -5%

− Unit decline -1%

• Registered actives -5%

− Lc productivity -1%

• The new Ecollagen Wrinkle Power introduced

• Several launches in the Colour Cosmetics and Fragrance category

• Continued strong online development

− Total traffic to sites and apps exceeded 1 million daily sessions

• Cetes Cosmetics agreed to enter a collaboration with Pharma & Beauty Group for parts of its business


6

Regions

Sales

Registered actives

Operating profit

12%

(10%)

27%

(24%)

26%

(26%)

35%

(40%)

10%

(9%)

26%

(25%)

32%

(28%)

32%

(38%)

7%

(9%)

28%

(19%)

19%

(18%)

46%

(54%)


Latin America

• Sales force and productivity

− Registered actives +8%


− € productivity +1%

• Solid performance in Mexico

− Successful recruitment campaigns

− Higher activity and retention

• Positive development in Peru and Ecuador, improvements in Chile

• Operating margin -670 bps

− Costs related to recruitment and activity campaigns

− Higher administrative costs

7

Q1’19 Q1’18 ChangeLTM, April’18

- March’19YE’18

Sales, €m 37.3 34.0 10% 154.6 151.3

Lc sales - - 5% - -

Operating profit, €m 3.2 5.2 (39%) 16.6 18.6

Operating margin 8.5% 15.2% - 10.7% 12.3%

Registered actives ‘000

286 264 8% 286 306

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Net Sales LTM excluding IFRS 15 & 16Net Sales LTM with IFRS 15 & 16Operating Margin LTM with IFRS 15 & 16Operating Margin LTM excluding IFRS 15 & 16

€m


Europe & Africa


− Registered actives -2%

− Lc productivity +3%


• Stable development in Central Europe

− Strongest performance in Poland and Greece

• Improved development in Western Europe

− Solid online leadership development in the UK and Holland

• Africa driven by strong productivity levels in Egypt and Nigeria

• Operating margin +320 bps

− Sales leverage

− Savings of administrative costs

8


- March’19YE’18

Sales, €m 80.6 79.3 2% 323.5 322.2

Lc sales - - 1% - -

Operating profit, €m 13.0 10.3 27% 51.5 48.8



737 750 (2%) 737 791

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19


€m


CIS


− Registered actives +9%


− € productivity -12%

• Stable development in Russia

− High activity following successful recruitment campaigns

• Healthy growth in Ukraine and Kazakhstan

• Reopening of Uzbekistan during 2019


− Negative exchange rates

− Ongoing recruitment driving initiatives

9


- March’19YE’18

Sales, €m 79.0 82.2 (4%) 299.8 303.0

Lc sales - - 0% - -




912 836 9% 912 966

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Net Sales LTM excluding IFRS 15 & 16

Net Sales LTM with IFRS 15 & 16

Operating Margin LTM with IFRS 15 & 16

Operating Margin LTM excluding IFRS 15 & 16

€m


Asia & Turkey


− Registered actives -20%

− Lc productivity +4%


• Challenging market conditions in Turkey and Indonesia

• China unfavourably impacted by governmental initiatives

• Vietnam negatively affected by the new direct selling legislation

• Healthy growth in India


− Negative currency movements

− Unfavourable geographical and product mix

− Favourable timing of selling and marketing expenses

10


- March’19YE’18

Sales, €m 106.3 128.4 (17%) 462.5 484.6

Lc sales - - (16%) - -




951 1,184 (20%) 951 1,042

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0.0

100.0

200.0

300.0

400.0

500.0

600.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Net Sales LTM excluding IFRS 15 & 16

Net Sales LTM with IFRS 15 & 16

Operating Margin LTM with IFRS 15 & 16

Operating Margin LTM excluding IFRS 15 & 16

€m


FINANCIALS

11


Q1 income statement

• Sales mix

− Unit sales -1%

− Price/mix -5%

• Gross margin 68.0% (69.7%)

− Negative currency movements

− Negative price and geographical mix effect

• Operating margin +/-0 bps

− Negative currency impact -30 bps

− Lower sales comparable

− Higher distribution and infrastructure costs

− Lower administrative costs

− Lower selling and marketing expenses*

• Net profit €23.0m (€21.0m)

− Diluted EPS €0.40 (€0.36)

12

Q1’19 Q1’18 ChangeLTM, April’18 -

March’19YE’18

Sales, €m 309.2 330.8 (7%) 1,257.2 1,278.8

Lc sales - - (6%) - -



Registered actives ‘000 2,886 3,034 (5%) 2,886 3,105

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

200

400

600

800

1000

1200

1400

1600

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19


€m

*Prior year had a negative one-off effect as a result of the new accounting rules. The operating margin impact

from this was fully offset by the one-off effect on sales caused by the implementation of IFRS 15 in 2018.


Group currency impact on sales since 2010

13


Price/mix impact on sales

14

Average

9%3%

5%

9%

5%4%

7% 7%

9% 9%

14% 14%15%

16%

12%11%

12%11%

7%

9%10%

14%

10%

7%

4%

(5%)

-10%

-5%

0%

5%

10%

15%

20%

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

Q4 '1

8

Q1 '1

9


Q1 sales and operating margin analysis

15

Sales vs. PY

-7

-6

-5

-4

-3

-2

-1

0

Units Price / mix

(1%)

LC Sales (6%)

€ Sales (7%)

OP Margin vs. PY

(5%)

FX0

1

2

3

4

5

6

7

8

9

10

11

Dis

trib

. &

Infr

a.

Selli

ng &

Mark

eting

OM

Q1 2

018

Price / m

ix

Pro

duct cost

FX

(0.3%)

OM

Q1 2

019

Adm

in.

10.5%0.5%10.5%

(1.7%)

0.3%

1.7%

(0.5%)(1%)

The deviation analysis is impacted by one-off comparable effects due to the implementation of new accounting rules.


Cash flow

Q1 operating cash flow €20.5m (€24.9m)

• Net profit before tax €+1.3m

• Non-cash items in net profit before tax €-2.6m

• Impact from changes in working capital and provisions €-8.6m

− Inventories €-4.6m

− Receivables, prepaid exp., asset derivatives €-15.4m

− Payables, accrued exp., liability derivatives €+11.2m

− Provisions €+0.2m

• Interest, charges, taxes €+5.5m

16

Q1 19 Q1’18

LTM,

April’18 -

March’19

YE ’18

Net profit before income

tax, €m31.6 30.3 136.2 134.9

Op. profit before changes

in wc, €m40.0 41.2 177.5 178.8

Change in working cap.

and provisions, €m(5.5) 3.1 (7.8) 0.8

Operating CF, €m 20.5 24.9 119.5 123.9

CF Investing Activities,

€m(3.0) (3.1) (11.7) (11.8)

0

25

50

75

100

125

150

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Operating cash flow LTM Capex LTM€m

0

50

100

150

200

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Total inventory€m


Financial position

• Net debt at hedged values €136.2m (€81.6m)

− Prev definition: Net debt at hedged values €54.9 (-€5.4m net cash)

• Net debt at hedged values/ EBITDA (LTM) 0.7 (0.4)

− Prev definition: Net debt at hedged values/ EBITDA (LTM) 0.3 (0.0)

• Net debt €163.1m (€103.3m)

• Net debt/EBITDA (LTM) 0.8 (0.5)

• Interest cover (Q1): 7.7 (8.5)

• Interest cover (LTM): 8.9 (11.2)

Covenant disclosure

• Consolidated Net Debt to Consolidated EBITDA: 0.4 (covenant at ≤ 3.0

times)

• Consolidated EBITDA to Consolidated Finance costs: 18.1 (covenant at

≥ 5.0 times / 4.0 times for RCF)

• Consolidated Net Worth: €152.1m (covenant at ≥ €120m / N/A for RCF

or in 2017 and 2018 Euro denominated private placement notes )

17

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

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Interest cover (LTM)

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

-20

0

20

40

60

80

100

120

140

160

180

200

220

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Net Debt at hedged values* with Simulation IFRS 15 & 16

Net Debt at hedged values* excluding IFRS 15 & 16

Net debt at hedged values* / EBITDA LTM excluding IFRS 15 & 16

Net Debt at hedged values* / EBITDA LTM with Simulation of IFRS 15 &16

€m


18

* 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

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

-20

0

20

40

60

80

100

120

140

160

180

200

220

240

260

280

300

320

340

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 Q4 18 Q1 19

Net Debt at hedged values* excluding IFRS 15 & 16 Net Debt at hedged values* with IFRS 15 & 16 Net Debt at hedged values* / EBITDA LTM excluding IFRS 15 & 16

Net Debt / EBITDA Target range excluding IFRS 15 & 16 Net Debt / EBITDA Target range excluding IFRS 15 & 16 Net Debt at hedged values*/ EBITDA with IFRS 15 & 16

Net Debt / EBITDA Target range with IFRS 15 & 16 Net Debt / EBITDA Target range with IFRS 15 & 16

€m

0%

5%

10%

15%

20%

0

200

400

600

800

1000

1200

1400

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 Q4 18 Q1 19

Net Sales LTM excluding IFRS 15 & 16 Net Sales LTM with IFRS 15 & 16 Op. Margin excluding IFRS 15 & 16 Op. Margin LTM with IFRS 15 & 16€m


CONCLUSIONSAND GOING FORWARD

19


20

Conclusions and going forward

• Q1 lc sales development -6%:

− Positive development in Latin America, Africa, Europe and CIS

− Sales decline in Asia & Turkey

− Stable profitability despite weaker sales and changed geographical mix

− Q2 update: -4% QTD and -5% YTD lc sales

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

− Solid financial position

− Growth in the vast majority of markets

− Responsible steps to drive sales and healthy margins

− Focus on strategic implementations

− Improved earnings opportunity

− Skin Care and Wellness daily routines

− Increased digitalisation


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.

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