Full Year 2019 Results
Resilient Adjusted EBITDA despite challenges in North America.
Solid progress in cost reduction and deleveraging.
- FY 2019 revenues up 5.5% with organic growth at +0.7% thanks to a record year in Sports
- North America: Q4 sales down -19% versus 2018 (ERP-related operational issues). December sales better than previously anticipated. Commercial carpet production back to normal in December 2019
- Selling price increases covering purchasing cost inflation and partially offsetting wage inflation
- Adjusted EBITDA before IFRS 16 at €250 million versus €249 million in 2018. Adjusted EBITDA margin of 8.3%
- Acceleration of cost reduction in H2 2019 leading to adjusted EBITDA margin improvement in all segments outside North America. Total cost savings of €32 million in 2019
- Proposed dividend of €0.24 per share, i.e. a 40% payout ratio
- Strong free cash-flow generation of €231 million significantly reducing net debt; Leverage before IFRS 16 of 2.2x end December 2019 (vs. 2.8x end December 2018).
Commenting on these results, CEO Fabrice Barthélemy said: “ In 2019, we grew our revenues and maintained our adjusted EBITDA. The flooring business in North America had a difficult year and operational issues in Q4. We solved these issues before year end and implemented a dedicated action plan to recover our profitability in the region, including a successful industrial footprint reorganization, the launch of a SG&A cost saving program and a reshuffling of our sales force. The other segments performed well given the market conditions. The Sports segment recorded a very dynamic performance while increasing its profitability. Thanks to strong cash flow generation, we significantly reduced our net debt and regained financial flexibility.
In 2019, we also deployed our Change to Win strategic roadmap. We achieved an important milestone in circular economy with the launch of a unique recycling offer in carpet tiles that combines a breakthrough technology and innovative product formulation. In 2020, Tarkett will continue its transformation journey to deliver its midterm objectives, with a strong focus on sales efficiency and profitability in North America. ”
Change to Win strategic plan on a good track
- Sustainable growth:
- Third year in a row of double digit organic growth in Sports (+12.9% in 2019), leveraging our end-user focused strategy and global scale;
- Focus on key commercial end-user segments: workplace, education, healthcare/aged care and hospitality through implementation of key account managers’ organization.
- One Tarkett for our customers:
- Shift to single branding in North America and sales force reorganization;
- Innovation and R&D reorganization to better address customers’ needs; launch of product range simplification program.
- People and Planet:
- Introduction of new CSR objectives: 30% of recycled raw materials used in production (12% in 2019) by 2030 and reducing by 30% GHG emissions intensity (scope 1 and 2, kg CO2 e/sqm) by 2030 (-15% between 2010 and 2019);
- Launch in Europe of a unique recycling offer for commercial carpet combining breakthrough recycling technology and innovative product formulation developed by Tarkett in a partnership with a leading supplier of nylon yarns;
- Strong commitment to safety and internal mobility supported by ambitious objectives for 2025.
- Cost and financial discipline:
- Cost reduction program well on track: €32 million achieved in 2019, out of €120 million targeted between 2019 and 2022;
- Significant progress in reorganizing the industrial footprint with 3 sites closed at the end of 2019, launch of a SG&A cost reduction program in North America, EMEA and central functions in Q4 2019;
- Expansion of production capacity in growing categories (LVT products, accessories), ongoing deployment of automation program across manufacturing sites;
- Significant deleveraging over the course of the year, allowing the Group to reach 2.2x in line with its Change to Win objective, ie between 1.5x and 2.5x Adjusted EBITDA (before IFRS 16).