Valora posts a recovery in sales and EBIT of CHF 8.5 million in Q3 2020

Valora Group sales have been consistently rising since the gradual lifting of the COVID-19-induced lockdown from the end of April 2020. While the foodvenience provider's external sales in the first half-year of 2020 were still -18.0% down on the previous year, the deficit fell to -13.1% in Q3 2020 compared to the corresponding period in the previous year. Cumulatively, external sales after the first three quarters of 2020 were -16.3% down on the previous year. The deficit in sales in 2020 compared to the same period in the previous year almost halved in September (-10.9%) in comparison with June (-19.7%).

The Retail division posted a drop in sales of -10.5% in Q3 2020 compared to the same period in the previous year, which was a +2.9 percentage point improvement over the first half-year 2020 (-13.5%). The decline in Food Service sales in Q3 2020 (-24.0%) was more pronounced than the decline in Retail; however, the division has posted a marked increase of +12.5% percentage points since the first half-year 2020 (-36.5%).

As a result of the unprecedented decline in customer footfall, Valora was running approximately 40% of its sales outlets with reduced opening hours and some 20% were closed at the height of the lockdown. At the end of September 2020, the number of sales outlets with reduced opening hours fell to 22%, with just 2% remaining shut.

EBIT of CHF 8.5 million generated in Q3 2020

The recovery in sales, a stable gross profit margin and the ongoing consistent cost control made a significant contribution to a positive development of the result. In Q3 2020, the Group generated EBIT of CHF 8.5 million and positive net profit. The Valora Group's cumulative EBIT in 2020 came to CHF 6.6 million after Q3. The result includes a positive special effect from the full booking of the rent reductions. This was retroactively amended in the half-year 2020 results in accordance with the new IFRS 16 reporting standards (see Annex).

Cash position and debt stable

Free cashflow in Q3 2020 came to CHF 1.5 million; accumulated to September 2020, it amounts to CHF 13.1 million (HY 2020: CHF 11.5 million). The positive business development and extraordinarily strict management of the net working capital more than offset the repayment of rent deferrals and investment activity. Cash position and net debt (CHF 314 million as of the end of September 2020) have therefore developed in a stable manner since the first half-year of 2020.

Valora benefited from cost savings in Q3 2020

The Group also prioritised projects, optimised its sales outlet network, further reduced central costs and used short-time working for its employees in Q3 2020, while temporarily supporting its franchise and agency partners at the same time. At the end of September 2020, 17% of Valora employees were on short-time working, mainly in the Food Service division. The cost savings realised enabled Valora to compensate for half of its reduction in gross profit.

Valora remains in dialogue with its landlords on rents. Given the lasting change in mobility and work behaviour, adjustments of the rent structure to reflect the new economic conditions of store locations are a central issue. While various partnership-based solutions have already been identified for the current financial year, negotiations for 2021 and beyond will continue.

Confident about the recovery of out-of-home consumption

Valora is confident that out-of-home consumption at high-frequency locations will recover and that the foodvenience market will remain attractive going forward. That is why the company is continuing to invest in its strategic priorities and driving their implementation forwards. The main focus of the investments is currently on converting the sales outlets secured through the SBB tender into avec convenience stores and modernised k kiosk sales outlets with an expanded food offering. Valora is also moving forward with its development of new, digital convenience solutions.

Solid financing structure

With stable net debt, Valora has established the basis on which to invest further in its core business in 2021. At the same time, Valora is evaluating all options to increase the financing flexibility in a persistently dynamic environment, in order to be able to protect against planning uncertainty and profit from potential opportunities to strengthen its market position. Valora currently has a newly negotiated, as yet unused syndicated loan facility of CHF 150 million with a five-year term and two extension options of one year each. The debt maturity profile is balanced. The next maturity date is in Q2 2021 and is for the bonded loan of EUR 72 million.

Outlook: EBIT of CHF 10–15 million expected in 2020

Given the current status of the developments up to the beginning of November 2020 and following greater cost reductions, the Valora Group expects positive EBIT of around CHF 10–15 million for the full-year 2020 – even in view of the current high number of COVID-19 cases with the accompanying tighter official restrictive measures.

Valora will have to continue living with uncertain sales development next year due to the ongoing COVID-19 crisis. In view of the renewed tightening of restrictions, the company also anticipates a 10-15% drop in sales for 2021 relative to the pre-crisis level of 2019. This outlook includes an assumption that the Retail division will continue to develop better than the Food Service division as in 2020, and that the demand for food-to-go will recover more slowly going forward due to the anticipated restrictions. On that basis, Valora can rely on a business model that has proven its resilience even during the past few months. In 2021, the Group can also benefit from the extensive sustainable adjustments made to its cost base in 2020. Valora therefore expects a significant increase in the operating result compared to 2020, in spite of the modest expectations in terms of sales. This outlook factors in the conversion of the SBB locations proceeding with the originally planned level of intensity and allows for further investment in the other areas in line with the strategic priorities. Moreover, the expected result does not include any further significant concessions from landlords for 2021. Ultimately, Valora has solid cash resources and expects to have only a slight increase in net debt in 2021, relative to the pre-crisis level of 2019.

Michael Mueller, CEO of the Valora Group, had the following to say: “We are confident that we will keep our business attractive over the long term thanks to the good market position, the sustainable cost-reduction measures and various investments in the future. We are very well positioned to overcome the COVID-19 crisis successfully and we are continuously securing this position further. The crisis is really putting our employees and operating partners to the test. All the stakeholders must show solidarity and a willingness to compromise in order to sustainably manage the adverse consequences.”

Annex

* In the first half-year 2020, there was an option or lack of clarity pertaining to the booking of COVID-19-related rent concessions. For the first half-year, Valora recorded the rent concessions linearly over the duration of the reduction and reported them proportionally in the published 2020 half-year results. In Q3 2020, the IFRS standard was specified so the previously negotiated COVID-19 rent concessions have to be booked fully at the time at which the contract was concluded. Accordingly, the first half-year 2020 (HY) has been adjusted retrospectively.

This media release is available online at www.valora.com/newsroom.