Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vantiva SA (FRA:TNM2, Financial) met all plans and expectations for the first half of 2024.
- The integration of Home Networks into Vantiva is ahead of schedule, with significant progress in transition service agreements and ERP system migration.
- Operational free cash flow before interest and tax improved significantly to EUR30 million from minus EUR74 million in the first half of 2023.
- The company maintained its focus on sustainability, receiving a Platinum rating by EcoVadis for the second year in a row.
- Vantiva SA (FRA:TNM2) confirmed its full-year guidance with confidence, anticipating a strong recovery in the second half of the year.
Negative Points
- Revenues decreased by 3.4%, reaching about EUR1 billion, with a notable drop in SCS revenues by 10.6%.
- EBITDA fell from EUR49 million to EUR23 million, impacted by lower volumes and higher structural costs due to the Home Networks integration.
- The connected home division faced a low demand period, with service providers minimizing their spending.
- The DVD business continued its natural decline, although at a slower rate compared to previous years.
- Net result of the group was negative EUR167 million, an improvement from last year but still a significant loss.
Q & A Highlights
Q: Could you provide an update on the restructuring cash costs related to the integration of Home Network?
A: Lars Ihlen, CFO: We have guided that we will be positive in working capital after interest and tax but before restructuring charges. For H1, despite reporting a net free cash flow after interest and tax at minus EUR19 million, when corrected for restructuring costs, we are at plus EUR14 million. This means roughly EUR35 million of restructuring costs have burdened the group result in the first quarter.
Q: What is your view on the timing of the recovery for connected home? Do you still expect a significant recovery starting as soon as H2 2024, or will most of the recovery be in 2025?
A: Luis Martinez-Amago, CEO: We are seeing signs of market recovery already in the second half and into next year. However, due to long lead times for components and production, most of the recovery will be seen in revenues late in the year and into 2025.
Q: Do you expect working capital to contribute positively to free cash flow in H2 like in H1?
A: Lars Ihlen, CFO: We maintain our guidance that we will be positive in working capital after interest and tax but before restructuring charges. While we do not expect the same level of positive improvements in working capital as seen in H1, we do not anticipate it to be materially worse in the second half.
Q: Can you provide more details on the financial performance of the connected home division?
A: Luis Martinez-Amago, CEO: Revenue was almost flat with a significant decline in broadband business, offset by strong growth in the video area. EBITDA decreased from EUR56 million to EUR33 million due to additional cost structure from Home Networks. We forecast a significant improvement in the second half based on higher revenues and a better cost structure from transformation plans.
Q: How is the integration of Home Networks progressing?
A: Luis Martinez-Amago, CEO: The integration is ahead of schedule on many fronts. Transition service agreements are almost finished, ERP systems migration is complete, and consolidation of sites and headcount reductions will be achieved by year-end. This integration has received positive feedback from customers, and we have no commercial dyssynergies.
Q: What are the key figures for the first half of 2024?
A: Luis Martinez-Amago, CEO: Revenues decreased by 3.4% to about EUR1 billion. Connected home had stable revenue performance, while SCS revenues dropped 10.6% to EUR206 million. EBITDA was EUR23 million, down from EUR49 million a year ago. Operational free cash flow before interest and tax was positive at EUR30 million, a significant improvement from minus EUR74 million in H1 2023.
Q: What are the main financial indicators compared to H1 last year?
A: Lars Ihlen, CFO: EBITDA was down by EUR26 million due to lower activity and duplications in cost structure. D&A and reserves increased by EUR6 million. EBIT for the semester was minus EUR98 million versus a negative EUR150 million last year. The net result of the group was minus EUR167 million versus a negative EUR229 million last year.
Q: Can you explain the improvement in free cash flow this year?
A: Lars Ihlen, CFO: Last year, the cash burn was EUR74 million. This year, despite a negative change in EBITDA of EUR26 million, lower CapEx of EUR18 million and a working capital improvement of EUR144 million resulted in a positive free cash flow before interest and tax of EUR30 million.
Q: What is the liquidity position at the end of H1?
A: Lars Ihlen, CFO: We ended with cash on hand at EUR39 million and an unused credit line with Wells Fargo for EUR66 million, giving a total liquidity of EUR105 million compared to EUR66 million last year. Including operational leases, total debt reached EUR516 million, with a net debt of EUR477 million.
Q: What are the future expectations for the connected home division?
A: Luis Martinez-Amago, CEO: We expect a significant improvement in the second half based on higher revenues and a better cost structure from transformation plans. We are also seeing market recovery signs, which will positively impact revenues late in the year and into 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
