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2016/02/18

2015 Financial Results

Sales growth of 12.4% and adjusted EBITDA increased by 3.7%

Net profit up 36%

Record performance in EMEA and Sports

Highlights

Net Sales for the full year reached €2,715m, an increase of +12.4% vs. 2014, thanks primarily to the addition of acquisitions, which accounted for +9.0% (mostly Desso), and to favorable exchange rates outside of the CIS (+7.2%), partly offset by a sizeable negative effect of currencies in the CIS (net of selling price increases) of -€83m (-3.4%). Organically, sales were stable (-0.3%).  The EMEA and Sports segments continued on a very good pace in H2, and North America is recovering, with a positive organic growth in the second half of the year. On the opposite, the slowdown of the CIS economies heavily impacted volumes and product mix, leading to a negative organic growth of -13.1% in the CIS, APAC and LATAM reporting segment.

The Group delivered an adjusted EBITDA of €285m vs. €275m in 2014, i.e. +3.7%. The adjusted EBITDA margin increased in all segments, except CIS. In this region the margin suffered from the decline of sales volumes and from the weakness of the ruble, but remained above Group average. Thanks to the excellent performance in the other segments the margin decrease at Group level was contained to -90 bps. The adjusted EBITDA margin reached record levels in EMEA and Sports, and increased by 120 bps in North America. All geographies benefited from gains on raw material prices. Lastly the addition of Desso had also a positive impact on the consolidated margin.

The net profit attributable to owners of the Company amounted to €83m, or €1.31 per share, versus €61m, or €0.96 per share, in 2014.

Commenting on the financial results, Michel Giannuzzi, CEO of Tarkett, declared:

“We are proud to report growing results thanks to an increased profitability in all regions except the CIS countries, which were affected by an unfavorable macro-economic environment. In addition to the record performance of EMEA and Sports, our North American Division showed in the second-half that it is now on the path to profitable growth.

These results demonstrate the strength of having a balanced business model with multiple product categories, market segments and geographies. Our organic growth and the acquisitions made over the past two years have allowed a geographical rebalancing of the Group profitability, with 80% of the EBITDA now generated in EMEA and North America regions.”

Key figures

  1. Organic growth: At same perimeter and exchange rates (NB: In the CIS, price increases implemented to offset currency fluctuations are not included in the organic growth. Organic growth in the CIS therefore reflects volume and mix variances only).

  2. Adjusted EBITDA: Adjustments include expenses related to restructuring, acquisitions and certain other non-recurring items.

  3. Net cash flow from operations: defined as cash generated from operations less on-going capital expenditure.

  4. 2014: Proforma Desso.

Net Sales by segment

Adjusted EBIDTA(2) by segment

  1. Organic growth: At same perimeter and exchange rates (NB: In the CIS, price increases implemented to offset currency fluctuations are not included in the organic growth. Organic growth in the CIS therefore reflects volume and mix variances only).

  2. Adjusted EBITDA: Adjustments include expenses related to restructuring, acquisitions and certain other non-recurring items.

 

Comments by segment

Europe, Middle East, Africa (EMEA)


In EMEA, Tarkett delivered in 2015 a record +6.7% organic growth. Most countries contributed to this excellent performance, in particular the Nordic countries, Germany and Central Europe. Spain and Italy also grew strongly. France remained in negative territory, penalized by still difficult construction and renovation markets. The addition of Desso boosted the reported sales growth to 34.7%.

The adjusted EBITDA margin reached a record level at 15.0%, up from 11.3% in 2014. Operational leverage, productivity plans, gains on raw material prices, as well as the benefit from previous year restructuring of the wood business all contributed to that performance.

The LVT category (luxury vinyl tiles) continued to be the main driver of the growth across the region. In order to satisfy this growing demand, the Group is increasing its production capacity with a new production line in Poland that will be operational in H2-2016.

The integration of Desso into the Division structure and teams is fully effective, following a very swift and efficient transition. This business delivered excellent results and took full advantage of favorable exchange rates and raw material costs.


North America

After a weak first-half, North America delivered in H2 a positive organic growth of +1.4%, thanks in particular to the carpet tiles and LVT businesses. The production of VCT (vinyl composition tiles) on the new line is now normalized, but the volumes lost during to the ramp-up phase are still to be recovered.

The adjusted EBITDA margin is well oriented, growing from 9.7% to 10.9% year to year and notably from 8.8% to 12.7% in H2, as a result of operational efficiency improvement, better product mix and favorable raw material prices.

The new leadership team is now established and will focus on regaining market shares and improving profitability.


CIS, APAC & LATAM

Net sales declined by -13.1% organically, strictly reflecting volume and mix. The market conditions in Russia were unfavorable throughout the year, in particular due to the contraction of consumer purchasing power, as salaries did not keep up with inflation. The high volatility and the weakness of the ruble impacted reported sales by -€83m, of which -€43m in the third quarter alone, when the price increases implemented in September only partially offset the fall of the ruble in the middle of the peak season. In December, an additional price increase was implemented (+6%) and another one (+10% in average) is planned for March 2016.
In APAC, Australia enjoyed a very good year. We continued to grow in China, where the company develops a ‘niches’ strategy supported by local production in carpet and more recently also in vinyl. Likewise, Latin America achieved a positive organic growth, even in Brazil where the economic situation has kept worsening.

The adjusted EBITDA margin in the segment dropped to 11.4% from 18.9% in 2014. This decline resulted essentially from a combination of reduced volumes, a lower product mix in the CIS and the heavy impact of the weak and volatile ruble, which alone accounted for -€49m.


Sports

The Sports activities delivered another outstanding performance, with an organic growth of +17.2%. All product lines performed very well. Sales of turf benefited in particular from the success of our turn-key offering and from well-received product innovation. Desso Sports was integrated into the Sports Division, bringing in particular its well-recognized hybrid-turf technology (GrassMaster). That technology was recently chosen by Stade de France in Paris, which hosts high-profile events such as the rugby Six Nations tournament and the soccer EURO 2016.

The adjusted EBITDA margin improved again, to 9.4% compared to 8.8% in 2014. The improvement is even more significant considering that 2014 margin was pushed up by a one-time profit linked to the resolution of some litigations.
 

Net profit increased by 36% at €83m

Central costs not allocated to the segments increased by €6m, mainly as a result of a higher centralization of IT teams and projects.

Adjustments to EBIT went from -€39m in 2014 to +€3m in 2015. The main difference resides in the €28m pre-tax capital gain on the sale of the Houston property. Restructuring costs were significantly lower than in 2014, since our footprint has been significantly optimized in the past two years.

The financial expenses were stable over last year despite an increase in the average debt following the acquisition of Desso. The effective tax rate came out at 36.9%, compared to 39.2% in 2014.
 

A strong balance sheet structure

Once again Tarkett generated a very solid Net cash-flow from operations of €192m, above last year’s €172m. The free cash-flow, available for dividends and acquisitions, reached €173m.

The Net debt decreased to €482m, allowing the leverage ratio to drop to 1.7x 2015 adjusted EBITDA vs 2.0x in December 2014 (proforma Desso).The liquidity and the maturity of the credit lines were significantly enhanced with the new 5-year syndicated facility of €650m signed in June 2015.

At the Annual Shareholder Meeting of April 26th, 2016, the Management Board will propose a dividend of €0.52 per share, representing 40% of the net profit attributable to owners of the Company. This proposal is in line with the Group’s mid-term guidance.
 

Outlook 

North America and EMEA regions, which now represent 80% of Group sales and EBITDA, should continue to benefit from the rise of modular products both in carpet and vinyl, as well as from a solid demand in sports surfaces. Meanwhile oil-related input costs should also be favorable and help mitigate the effects of the recession in the CIS, where we will continue to actively manage selling prices and costs.

The rapid improvement of our leverage ratio since the acquisition of Desso enables us to keep playing an active role in the consolidation of our industry.

Audited consolidated financial statements for FY 2015 and the presentation of FY 2015 results are available on Tarkett’s website. The related analysts’ conference will be held on Friday February 19th, 2016 at 10:30 am CET and an audio webcast service (live and replay) will also be available at www.tarkett.com.

Financial Calendar - Publications to be released after market closing

  • April 21, 2016: First quarter Financial Results

  • April 26, 2016: Annual General Meeting

  • July 27, 2016: Half-year Financial Results

  • October 26, 2016: Third quarter Financial Results