Amsterdam,
13
juni
2017
|
09:31
Europe/Amsterdam

Restructuring expenses dampen profit

Continued robust growth in online sales

Samenvatting

Amsterdam, the Netherlands, 13 June 2017 – Blokker Holding posted operational EBITDA [1] for 2016 of €-49 million (versus €7 million in 2015). The holding company’s overall revenue fell by approximately 5% in 2016, from €2,076 million in 2015 to €1,965 million. Store closures are a significant factor in this revenue decline, along with the weak performance in the Household division. The solid online growth of all webshops within the group to €173 million and the 2.7% revenue growth at Leen Bakker have not managed to offset the lower total revenue. Combined with the lower margins due to promotional campaigns, this has driven down operating profit. The corporate reorganisations implemented at Blokker Nederland, Blokker Belgium, Xenos, Cook & Co and Intertoys generated high nonrecurring expenses of more than €100 million, bringing net profit in 2016 to €-180 million (versus €-52 million in 2015). Cash flow from operating activities increased from €-43 million in 2015 to €8 million in 2016. Blokker Holding has the solid financial basis required to implement the strategy change at its own pace and on its own terms. The company has a solvency ratio of 47.5% and no net debt. The company’s shareholders recently extended the €485 million line of credit to 2021.

To a significant extent, we anticipated the significant net loss we incurred in 2016. More than half of the net loss is due to the expenses associated with the corporate restructuring operation we completed according to plan in 2016. We also anticipated the fall in revenue due to store closures, particularly in Household. It was mainly Blokker that was affected by this decline, during the fourth quarter. The growth generated by the De Nieuwste Blokker stores compared to the old-style stores in the early part of 2017 is proceeding according to plan. We also continue to work on implementing the improvement plans at the various operating companies. We have the financial resources and the support from the shareholders we need to implement these plans, along with the previously announced strategy for the group as a whole.
CEO Casper Meijer

2016 highlights:

• Total net revenue for 2016 reached €1,965 million (2015: €2,076 million [2]), a 5% decline from 2015. This decrease is due in part to the closure of, on balance, 105 corporate stores. Excluding these closures, total revenue fell by 2.3%.

• Total revenue by division (excluding wholesale chains):

  • Household: - 10.2 % to €956 million
  • Toys: - 1.1 % to €658 million
  • Living: + 2.7 % to €334 million

• Online consumer revenue (Nextail) increased sharply, by 30% to €173 million (versus €133 million in 2015). One of the contributing factors was the substantial extension of the product ranges and an increase in the number of online order points in the stores (from 233 in 2015 to 918 in 2016), which generated €16.5 million in revenue in 2016. Revenue from these online order points currently accounts for nearly 10% of total online revenue.

• Operational EBITDA reached €-49 million (2015: €7 million). The decline was mainly attributable to the lower revenue, lower profit margins (due to promotions) and low product availability. Owing to substantial restructuring and reorganisation expenses (notably the expenses associated with closing loss-making stores, provisions for workforce reductions and the accelerated reduction in unmarketable inventory), net profit totalled €-180 million (versus €-52 million in 2015).

• Blokker Holding has the solid financial basis required to implement the recently announced strategy at its own pace. At year-end 2016, the solvency ratio was fixed at a very stable 47.5%. Blokker Holding has no net debt, nor has it received any funding from external banks. It also possesses sufficient financial resources, with a line of credit which was recently raised to €485 million and extended until 2021. In other developments during the financial year, the stake in associate Casa was sold to the shareholders. Cash flow from operating activities increased from €-43 million in 2015 to €8 million in 2016. Free cash flow totalled €215 million (versus €-98 million in 2015).

• Total investments in 2016 increased significantly to €85 million (versus €59 million in 2015) for:

  • E-commerce operations (Nextail)
  • IT and Supply Chain
  • Upgrading of retail formats, including De Nieuwste Blokker, the Xenos and Intertoys prototype stores, and the rollout of the new Big Bazar format

Need for far-reaching measures

Based on these results and on the necessity to implement the high-potential upgrade plans within the various retail companies sooner, Blokker Holding has decided to take further measures. On 16 May 2017, it was announced that the group will start focusing fully on Blokker in the Netherlands and Belgium, including the continued improvement of the product range and the availability of inventory. In addition, the store network will be further optimised, resulting in an extensive domestic network of more than 400 all-new Blokker stores across the Netherlands. This means that around 100 Blokker stores will be closed in 2017/2018. The roughly 100 corporate Marskramer stores will also be closed, with Marskramer continuing as a franchise format and wholesaler. This will have far-reaching effects on employment, resulting in the loss of around 1,900 jobs in the Netherlands and elsewhere. The five other retail formats – Leen Bakker, Xenos, Big Bazar, Intertoys and Maxi Toys – will be sold. The proposed sale of Leen Bakker to Gilde Equity Management was announced on 23 May 2017.

 

Outlook

We noted early in the current financial year that the De Nieuwste Blokker stores generate more revenue and are developing according to plan. More than 200 Nieuwste Blokker stores are operational at present. The stable online growth of Blokker (more than 25% annually) and the substantial increase in the product range on blokker.nl to more than 50,000 products demonstrate the online potential of this household retail format. Several improvement measures are currently underway to maintain the brand’s strong position.

The other retail formats are well positioned for sales. In 2016 Blokker Holding significantly improved its competitive position by investing in its online capabilities, upgrading its stores, improving efficiency in purchasing and distribution in the organisation, and implementing a permanent reduction in the cost structure. New owners can devote the time, financial resources and attention to the retail formats needed to facilitate further growth.

The proposed sale of Leen Bakker to Gilde Equity Management has been announced. Blokker Holding has more than sufficient financial resources to implement the plans announced on 16 May 2017 at its own pace and on its own terms. As a result of the closure of approximately 200 stores (Blokker and Marskramer formats), the restructuring expenses will continue to dampen profits significantly in 2017 and, possibly, 2018.

 

[1] With effect from the 2016/2017 financial year, operational EBITDA is defined as: ‘Earnings before interest, taxes, depreciation, amortisation, provisions, restructuring expenses, and any other items which are non-standard, exceptional or nonrecurring.’

[2] Results for 2015 have been adjusted for a comparison over a 52-week period. The previous financial year (2015) had a 53rd week. Blokker Holding reports are published based on 13 four-week periods; this results in a 53rd trading week every 5 or 6 years. Blokker Holding has a ‘split’ financial year, which runs from the fifth week of January to the fourth week of January and the following year.

 

Boilerplate

Blokker Holding is a retail company focussing on household goods, living and toys. Blokker Holding currently has 7 retail formulas with more than 2,200 stores in eight countries and circa 21,000 employees. On 16 May 2017, Blokker Holding announced its decision to focus entirely on Blokker in the Netherlands and Belgium and to sell the company’s five retail companies: Leen Bakker, Xenos, Intertoys, Maxi Toys and Big Bazar. Retail chain Marskramer will continue as a franchise format and wholesale organisation. More information: www.blokkerholding.nl.