Amplifon SpA

MIL:AMP

Earnings Call Transcript 2019-Q4

[Operator]

Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the Amplifon Full Year 2019 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Ms. Francesca Rambaudi, Investor Relations Director of Amplifon. Please go ahead, madam.

[Francesca Rambaudi, executive]

Thank you. Good afternoon, and welcome to Amplifon's Conference Call on Full Year 2019 Results. Before we start, a few logistic comments. This morning, we issued a press release related to our full year 2019 results and this presentation is posted on our website in the Investors section. The call can be accessed also via webcast and dial in details are on Amplifon website as well as on our press release.

I have to bring your attention to the disclaimer on Slide 1, as some of the statements made during this call may be considered forward-looking statements. Lastly, please note that from January 2019, we adopted the accounting principles IFRS 16 Leases. The comparative data for 2018 have not been restated, while the key data for 2019 is also presented without the application of IFRS 16. Therefore, the comparative analysis and commentary in this presentation refers, unless otherwise specified, to 2019 key data without the application of IFRS 16.

With that, I am now pleased to turn the call over to our CEO, Enrico Vita.

[Enrico Vita, executive]

Thank you, Francesca. Good afternoon, everyone. Thank you for joining us today. So I would like to start by commenting with you another very, very successful year for our company, which is -- which was the fifth record year in a row. Then at the end, I will comment for what is now possible on the very recent developments related to the coronavirus.

So with reference to 2019, we are very pleased. We are very happy about our performance, and I would like immediately to highlight a couple of key achievements for the year. First, the execution on GAES was close to perfection. The integration went very smoothly, even in relation to the most delicate topics like the reorganization, and the business performance of Spain was excellent, well above our best expectations.

GAES allowed us to reach a new dimension, and I personally believe that Spain will represent a significant boost to the growth of revenues and profitability of our company in the next few years.

Second point to highlight, the company's organic growth was also very strong, again, well above market reference. As we will see later, this result was supported by the great success of the Amplifon Product Experience, which is now live in 6 key markets. As a result, at global level, we gained further market share continuing to play our leading role in the consolidation of our industry.

So let's now look at our numbers for the year in the next chart. 2019 was clearly an excellent year across all the key financial metrics. In fact, revenues were up by 27.1%. And as said, the composition of the growth was very healthy. In fact, the organic growth was close to 7%. I would like also to remind you that this value does not include a double-digit organic growth posted by GAES.

With regards to the EBITDA recurring, we exceeded the EUR 300 million mark at the EUR 301 million, further increasing the margin by 20 basis points from 17.2 to 17.4. And these results, I think, is certainly remarkable considering the consolidation of GAES whose initial profitability was much lower than the company average.

Then we posted an all-time high net profit recurring of circa EUR 133 million, increasing by almost 24% versus 2018. Finally, the net profit as reported and after IFRS 16 was close to EUR 109 million, allowing us to propose at the next shareholders' meeting a dividend increase of circa 15% to EUR 0.16 from the EUR 0.14 of previous year.

Let's now move to the next chart to comment together our results for the last quarter for -- of the year. We had a very strong finish of the year. In the quarter, revenues were up 27%, 26.2% at constant exchange rate. Once again, we delivered an excellent organic growth above 8%, despite a pretty challenging comparison base versus last year. We also posted a significant increase in terms of EBITDA recurring, growing by almost 28%, whilst the profitability improved by 10 basis points again, even after the consolidation of GAES. As said, a very strong finish to the year in a quarter, which is, as you know, very important for us, being by far the biggest in terms of seasonality.

Then if we go to the next chart, here I can tell you that without doubt, a significant contribution to the strong performance of last year was driven by the continued success of the rollout of the Amplifon Product Experience in the 5 markets involved in the launch during 2019. In fact, with no surprise, the results in these 5 markets were very similar to the ones achieved in the Italian market in 2018: Same very quick growth in penetration; same, if not better, positive impact on the ASP and on the return of our marketing investments. Also very good penetration of our APP, which in the higher digitalized markets at the Netherlands and Australia, reached even 30%, 40% adoption.

In 2020, we will get to the full year benefit of these rollouts as well as we will extend the rollout to the other markets.

With this, I will now leave Gabriele to give you more details of our -- on our financial performance.

[Gabriele Galli, executive]

Thanks, Enrico, and good afternoon, everybody. Moving to the following chart, Chart #6. We have a look at EMEA, which posted, in the full year, an excellent performance driven by a strong organic growth and boosted by the outstanding results of Spain. In the full year, EMEA showed an outstanding revenue growth of around 31% in local currency, driven by an excellent 7.4% organic growth, excluding GAES, and by an extraordinary M&A contribution of 23.9% for the combined effect of GAES consolidation, GAES' strong double-digit organic growth and the continuous bolt-on program, primarily in France and Germany.

In Q4, revenue growth in local currency was 28.9%, driven by a very strong 7.8 organic growth, thanks to the excellent organic growth reported across the EMEA markets and by the contribution of acquisitions accounting for 21.1%. The resulting revenue growth, both in the full year and Q4 compares with a challenging comparable basis reported last year.

In the full year, Italy posted an outstanding organic growth, driven by the rollout of the Amplifon Product Experience and by the new successful advertising campaign. Spain showed an excellent and above expectation organic performance, growing double-digit for both GAES, which is reported in the M&A growth and the Amplifon businesses. France and Germany, as well, reported a strong performance fostered by a strong organic growth, also thanks to the Amplifon Product Experience rollout and the contribution of acquisitions.

In terms of profitability, excellent top line growth, coupled with increased operational efficiency and a better-than-expected profitability improvement in Spain allowed in the full year an EBITDA recurring increase of 37%, with an 80 basis point margin improvement from 18.8% to 19.6%, even after a strong increase of marketing investments. In Q4, EBITDA recurring increased by around 38% to EUR 97 million, with a margin improvement of around 160 basis points also after GAES' integration.

Moving to following slide, Slide #7, we have a look at Americas' performance, which posted in the full year a strong revenue growth in local currency of 17.5%. The growth was driven by a 4.5% organic growth, coupled with a strong contribution from M&A, primarily reflecting the GAES' LATAM business consolidation as of beginning of '19, further boosted by a double-digit organic revenue growth in the period. Currency tailwind for U.S. dollar appreciation gave a further 5.6% contribution to revenue growth.

In Q4, revenue increased by 24.2% in local currency, with organic growth accelerating to 8.6%, driven by a good performance of Miracle-Ear and Amplifon Hearing Health Care and by M&A contribution at 15.6%.

Moving to profitability. EBITDA recurring in the full year strongly increased by 30.9% versus last year from EUR 46 million to EUR 60 million, with a 130 basis point margin improvement. In Q4, the EBITDA margin also improved by 130 basis points to 23.1% versus 21.8% in Q4 '18. The excellent profitability in Americas was driven by a strong operational efficiency, which also more than compensated the dilutive effect of GAES' LATAM consolidation.

Moving to Slide #8. We have a look at APAC performance. In the full year, revenue increased by 8.6% in local currency, significantly above the reference market. The revenue growth was driven by a 5.7% organic growth, coupled with a 2.9% contribution from M&A due to the inclusion of our joint venture in China. Currency headwind had a negative contribution of around minus 1%, leading total revenue growth to 7.6% from EUR 174 million to EUR 188 million.

In Q4, revenue increased by 12.1% in local currency, driven by a strong 11% organic growth despite a still flattish market in both Australia and New Zealand and the M&A contribution amounting to 1.1%. In the full year, Australia reported a robust sales performance well above market, driven by a solid organic growth strongly accelerating to double digits in Q4, also thanks to the successful rollout of Amplifon Product Experience and despite the bushfires in the second half of December. The performance in New Zealand was solid and improving, despite still low return customer for the anniversary of the regulatory change.

EBITDA in the full year was EUR 44.3 million versus EUR 43.8 million last year. In Q4, EBITDA came in at EUR 10.4 million, up 17.7% versus Q4 '18. The margin contraction in the full year was due to lower fixed cost absorption primarily related to investments to strengthen our organization in Australia in a still flattish market environment, in addition to the dilutive effect of the Chinese joint venture consolidation.

Moving to following slide, Slide #9, let's have a look at the strong platform we are building in the core Australian market. As you know, in '19, the market growth was certainly below the historical trend, which is something very unusual for this market. The year-end was not easy too. You know all the issues related to bushfires in the last part of December. However, we firmly believe that there are no structural issues in the market and that we will see the market growth bounce back to the usual growth rate pretty soon.

Hence, in this context, our strategic decision was to take advantage of the situation to further consolidate our leadership in the market. In fact, first, we continue to invest in marketing and in organization to gain share. Then, as you already know, last February, we finalized the acquisition of Attune, the largest independent player in the market whose medical model perfectly complements the retail model of National Hearing Care. Attune leverages on 55 points of sales and has an annual turnover in the region of AUD 30 million, around EUR 18 million. The cash out was 1.9x the sales.

Moving to Slide 10. We appreciated the profit and loss evolution in Q4. Total revenue increased by 27% to EUR 507 million, driven by an outstanding organic growth accounting for 8.2%, an extraordinary M&A contribution accounting for 18% fostered by GAES consolidation, GAES double-digit top line growth and bolt-on acquisition for countries and the currency tailwind accounting for 0.8%, thanks to the U.S. dollar appreciation. Continued profitability improvement, also after GAES integration, led recurring EBITDA margin to 21%, with an increase of 10 basis points versus '18.

Total recurring EBITDA posted an increase of 27.8% to EUR 107 million versus EUR 83.4 million last year. D&A increased by EUR 10 million to EUR 30.5 million, following the important increase of investments made during the past quarters and the purchase price allocation related to the GAES acquisition. EBIT was at EUR 76 million, with a growth of 21%. Financial expenses posted a growth of EUR 2.4 million to 4.4%, following the increase in the net financial position after the GAES acquisition. Profit before tax was at EUR 71.6 million versus EUR 61 million in Q4 '18, with an increase of 17.5%. Tax rate posted an increase of around 20 basis points to 26.1%, leading recurring net profit to EUR 53 million versus EUR 45 million last year, with a 17.7% increase. The reported figure includes a EUR 3.8 million one-off expenses at the EBITDA level related to the GAES integration versus $2.5 million one-off expenses for the GAES acquisition last year.

Just a few words on the application of IFRS 16, which as you know has only an accounting impact, leaving cash flow unchanged. The capitalization of the right-of-use led to EUR 23.6 million EBITDA increase due to the different account of the rental cost, with a resulting recurring EBITDA with IFRS 16 of EUR 130.2 million, with a ratio to sales of 25.7%.

Moving to Slide 11. We have a look at profit and loss evolution in the full year. Total revenues came in at EUR 1.732 billion with an outstanding 27.1% growth, driven by a strong organic growth of 6.8%, excluding GAES, coupled with an extraordinary 19.9% M&A growth driven by GAES consolidation and the GAES double-digit organic growth, plus the bolt-on acquisition in core countries and the positive contribution coming from U.S. dollar appreciation of around 1%.

Strong operating leverage led recurring EBITDA margin to 17.4%, with an increase of 20 basis points versus previous year. Recurring EBITDA up by an extraordinary 28.8% to EUR 301 million.

Following the increased investment made in the past quarter and the purchase price allocation related to GAES acquisition, D&A increased by EUR 32 million leading EBIT to EUR 197 million, with a growth of 21.9% versus '18. Net financial expenses posted an increase of EUR 1.6 million, following the increased net financial position because of the GAES acquisition, partially offset by the refinancing of 2013 bond made in July '18.

Profit before tax was EUR 181 million, with a growth of 23% versus '18. Tax rate posted a further reduction of 50 basis points from 27.5% to 27%, in line with the lower than 30% guidance. The improvement of EBITDA, financial expenses and tax rate led the increase of net profit to almost 24% from EUR 107 million to EUR 133 million.

EPS adjusted for one-off items and PPA posted an outstanding increase of 30% from $0.52 to $0.68 per share. The reported figure included EUR 22.3 million one-off expenses at EBITDA level related to the GAES integration in '19, and EUR 8.4 million related to the GAES acquisition in '18. With the application of IFRS 16, recurring EBITDA came in at EUR 393 million with a ratio to sales of 22.7%.

Moving to Slide #12, we have a look at the cash flow evolution. Following IFRS 16 application, we slightly modified the cash flow representation, introducing the operating cash flow before repayment of lease liabilities and the repayment of lease liabilities, which were respectively equal in the period to EUR 320 million and minus EUR 18 million.

Operating cash flow in the period was equal to around EUR 239 million versus EUR 186 million in '18, with a strong EUR 52 million improvement versus last year, following the outstanding conversion of EBITDA improvement. On a recurring basis, operating cash flow was EUR 260 million versus EUR 194 million in '18, with an improvement of over 34%. Net CapEx increased to EUR 89 million, primarily for the perimeter changes due to the GAES' consolidation and for the investment in our new group ERP system. Free cash flow posted an outstanding growth of around EUR 40 million, ending up at EUR 150 million. On a recurring basis, the free cash flow in '19 was EUR 171 million versus EUR 118 million last year, improving by over 45% versus previous year.

M&A posted a cash absorption of $66.5 million versus EUR 620 million last year, which included the GAES acquisition, while cash used in financing activity was around EUR 7 million lower than '18, despite higher dividend distribution. Net cash flow generated in the period was positive by EUR 55 million versus a cash absorption of around EUR 545 million last year, resulting in a net financial position at EUR 787 million versus EUR 841 million last year.

Moving to Slide 13. We have a look at the debt profile trend and the key financial ratios. As mentioned in the previous chart, the net debt closed at EUR 787 million, with liquidity accounting for positive EUR 138 million, short-term debt accounting for EUR 172 million and medium long-term debt accounting for around EUR 753 million. The application of IFRS 16 led to accounting of lease liabilities, which amounted to EUR 425 million, leading the total debt and lease liability to EUR 1.21 billion.

Total net equity was EUR 696 million. According to the new definition of covenants agreed with banks and investors at the beginning of the year, the ratio of net debt over EBITDA decreased from 2.46 at year-end '18 to 1.90 at year-end 2019.

A final note to remind you the successful placement of the 7-year EUR 350 million bond we made at the beginning of February, it represents a significant optimization of the financial structure via diversification of sources and extension of the average debt maturity. The response of debt investor was very strong with a demand more than 10x higher compared to the initial amount offered. This allowed excellent pricing terms with a yield at 1.24%.

With this, I would now hand over to Enrico for 2020 outlook.

[Enrico Vita, executive]

Thank you, Gabriele. So to conclude today's presentation, a comment on the recent developments related to the coronavirus. So far, the impact on our business has been negligible. Much on the contrary, I can share with you that we have had a strong start to 2020. And in fact, January and February has been stronger, we see it everywhere including Italy. However, as you know, the situation is very fluid and things can change day after day. And this uncertainty makes premature for us today to assess and estimate any potential impact on the business for the next few -- 2 months.

What I can tell you now is that we are confident that, of course, in the medium and long term, the market fundamentals remain intact and that we expect our business model, which outperformed in the recent years, will be still be winning moving forward. I say this not only on the back of our clear competitive advantages, but also in consideration of the key initiatives already successfully implemented in 2019, but we expect to continue to deliver strong results also in 2020. I refer to the continuation -- to the continued rollout of the Amplifon Product Experience, the second phase of the integration with GAES in Spain leading to material synergies and to our ability to combine organic growth with bolt-on acquisitions. That's why I believe we will continue to perform the market also this year.

With this, I would like to thank you all for your attention and we look forward to take your questions. Francesca, over to you.

[Francesca Rambaudi, executive]

Thanks, Enrico. Now I turn the call over to Ariana in order to open for the Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question is from Niccolò Storer with Kepler.

[Niccolò Guido Storer, analyst]

The first one, very predictable, on coronavirus. I think that -- okay, you had a good results in January and February, but is it reasonable to assume that over the next few months, you could have less people coming into the store? So should this be the case, which kind of measures are you thinking to put in place to limit potential damages?

And on the supply side, are you at risk of not having products in the stores due to some hiccups in the supply chain?

Second question, maybe on profitability in APAC region. In November, if I remember well, you were confident in recovering the ground lost and closing the year at a similar level through 2018. This has not been the case. So what has changed in the very last month of the year?

[Enrico Vita, executive]

Right. So with regards to the first question, as I said, the phenomenon of the coronavirus here in Europe emerged just 10 days ago. So it is a very, very recent issue. As I said, at the moment, we have seen a very, very limited, minimal, if not negligible impact. Of course, we have already started to work on possible contingency plan in case of things are going to worsen in the next weeks and in the next month. But it's really very premature to say what kind of actions we have already because, as I said, the phenomenon emerged just 10 days ago. But we have started to work hard also on a possible contingency plan.

With regards to the supply side, no, we do not have any issue at the moment, according also to the information that we have, basically, almost all manufacturers have reopened their facility in China. This is one of the reasons why we have always preferred to have quite a large spectrum of suppliers, so to have the opportunity actually to supply from any of them in case of possible issues. And I have to say that today, this kind of decision was absolutely the right one.

Then coming back to your second question in before, with regards to the profitability in the APAC region. Yes, we say that we were going to be, more or less, in line with the profitability of previous year. We are not that far because at the end of the day if you make the calculation, the math, we are not speaking about several millions. I have to say that the performance in Asia Pacific in the last quarter however, is -- was quite strong in terms of revenue. So although we have to also remember that the comparison base was easier than in the previous quarters. We have also to remind you that in the second part of December in particular, we have seen quite significant slowdown because of the phenomena of the bush fires in the second half of December.

But despite of that, the organic growth in the region in the fourth quarter was double digit, which is anyway an encouraging performance.

[Operator]

Your next question is from Veronika Dubajova with Goldman Sachs.

[Veronika Dubajova, analyst]

I have 3, please. The first one is actually a follow-up on COVID-19 and we have -- hoping you can clarify for us. One, sort of how many stores have you had to close? How many of your stores are in the affected regions where you have had to close stores?

And two, kind of as you look at your bookings on a forward basis, are you seeing any changes in activity on that front? So maybe you haven't yet seen a change in revenues, but in terms of incomings and bookings into the system, that would be helpful.

My second question is, please, on the high single-digit growth in the U.S., quite impressive. Just would love to understand whether you feel this is sustainable as you move into 2020. Anything that would have been sort of helped one time in the fourth quarter? Or is this sort of high single-digit growth rate now the right run rate as you think about 2020 in the U.S.?

And then my final question is for Gabriele, just a quick financial one. If you can give us some guidance for the financial expenses, given the debt refinancing, that would be helpful.

[Enrico Vita, executive]

Thank you, Veronika, for your questions. So starting from the first one. So the number of stores in the north of Italy and the stores that have been closed. So, so far, just 1 shop has been closed. So just 1 shop. In terms of number of shops in the north of Italy, in particular, in the Lombardia, Piemonte, Veneto and Emilia, so let's say, the most affected regions, about 40%, 45% of our total number of stores are located in these regions.

With regards to the bookings and the footfall in our stores. So the -- I mean, we have seen some slowdown only for the time being in those regions that we -- I mentioned before, so Lombardi, Veneto and Emilia Romagna and Piemonte mainly. Of course, in these regions, sales were good also last week, actually, but we have seen some slowdown in terms of footfall. But also in this regard, we have to remember that our stores are not mass-market stores. So there are -- I mean, there are not many people together at the same time in the stores. So I would say that the decrease in terms of footfall was, for the time being, quite limited.

But as I said, just -- I mean, just a few days since the issue has emerged so strongly, so it is very difficult for us to assess what can be the kind of impact that we should expect for the coming weeks, so very, very early. The situation, to be honest, is quite unpredictable.

With regards to the second question, so the U.S. growth. Yes, we are very pleased with the growth in terms of organic growth in the U.S. This was, as usual, driven by Miracle-Ear and Amplifon Hearing Health Care, but we have also seen an improvement in the performance of Elite, which is something that, as you know, we were envisaging, we were targeting. So overall, I expect for the U.S., quite a strong performance throughout all of 2020.

With regards to the first question, I leave to Gabriele.

[Gabriele Galli, executive]

In terms -- what we made during -- I mean, the first month of 2020 was to replace a part of the credit lines devoted to the acquisition of GAES with a 7-year bond. In terms of cost, the cost is very much aligned to the cost of the lines that we substituted. But of course, the advantage of the bond is that in terms of duration, we have a 7-year maturity versus the 3.5 years maturity of the line substituted. And in terms of financial diversification, the bond also allowed a very strong financial diversification, allowing us to have some further credit lines from banks available for the future in case we need them to make some extraordinary operation.

In terms of full cost, as I said, we are very much aligned. Moving forward, we expect financial expenses in line or slightly decreasing compared to 2019. Also, thanks to the fact that we did very good cash generation. We had -- in '19 our leverage went down the mark of 2.04%, and this is the number to each, as you can imagine, we have a margin grid for interest cost. So below this amount, the cost of the debt is a little bit reduced in -- for the remaining GAES financing and those for some bilateral lines. So we're pretty positive that, moving forward, we can sustain this level of debt and that will also reduce thanks to the cash flow generation, with a total amount of financial expenses in line with the expenses we had up to last year with a debit, which was 3x lower before the GAES acquisition.

[Operator]

The next question is from Catherine Tennyson with Bank of America.

[Catherine Tennyson, analyst]

I have 3 quick ones, if I may. The first one would be on your own brand rollout. If you could just give us a little bit of color going into 2020 as to what are your next key geographies for rolling out with that product? And what's your current split of your total units sold that are actually classified as own brand now? That's the first one.

My second would be, could you just give a little bit of breakdown on the contribution from acquisitive growth that we saw in Q4 in Europe. How much of that was excluding GAES, just how we should think about that going forward into 2020?

And the final is just a housekeeping one on the corporate costs. So it was a bit of a step-up. If you could just give a little bit of color on that and how we should think about those going through the remainder of the year.

[Enrico Vita, executive]

Thank you so much for your question, Catherine. So I will start with the last one, so corporate costs. The corporate costs in Q4, actually, were higher than in the first 3 quarters. But the reason for that is mainly related to some strategic projects, which were ongoing at corporate level, for example, the new ERP system that we have implemented in Italy, starting from the first of January. Also, I would like to remind that the phasing of this project has been much, let's say, focused in the second half. As you can also maybe remember, in the first half of '19, the weight of corporate costs versus the first half of '18 was lower than the previous year. So it is a matter also of phasing of this corporate cost along 2019.

With regards to the second question and therefore, the growth of -- organic growth of EMEA region excluding GAES, the organic growth of the EMEA region, there is no -- it is not -- the organic growth of GAES is not included. All the contribution coming from GAES, so the acquisition as well as the organic growth of GAES is including in the acquisition line. So the organic growth of Europe is not including at all the organic growth of GAES.

With regards to the first question, and therefore, the rollout of the APP in 2020, we will roll out in further 2 or 3 countries, for sure, Belgium, for sure, the U.K. Also, we will complete the rollout in Germany as well as we will have the second phase of the rollout in Miracle-Ear in the U.S.

With regards to the penetration of the APP in the different markets, I would say, as mentioned, the penetration in the countries that were -- in which we have rolled it out in '19 has been very similar to the one that we had in Italy in 2018. So for example, in the Netherlands, the penetration is already at about 90%, in Australia it is more or less 80%. So very, very similar pattern than the one that we have experienced in Italy in 2018.

[Catherine Tennyson, analyst]

Just sorry, if I didn't make myself clear there. On the acquisitive growth in Europe in Q4, how much of that acquisitive growth was GAES, and how much was with other smaller bolt-on stores?

[Enrico Vita, executive]

Sorry, sorry. So GAES, on the total, which was in the region let me, just a second, which was in the region of about 20 -- 21%, GAES was in the region of 18%.

[Operator]

The next question is from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

Two questions. The first, just a follow-up on the GAES contribution. It would be interesting to have, say, the contribution, also maybe on the full year that is better proxy for next year in terms of sales and EBITDA, if possible. Just to understand how much was the dilution, or if you can elaborate on the kind of dilution that GAES was contributing to the results.

Second is on COVID-19. For sure, you are monitoring on a daily basis. I wanted to understand if you are seeing any similar situation, so any sign of problems outside of Italy? Because, clearly, we have so many cases outside of Italy, and I'm interested to understand if there is a risk of a negative situation spreading outside of Italy.

And on this topic, maybe on -- maybe qualitative terms, you were commenting about the contingency plan. Can you give us a sense of what are the main lever that you can use to -- so there's any flexibility, for example, on the rents or on the personnel, apart from, let's say, cost of goods sold and marketing.

[Enrico Vita, executive]

Okay. So with regards to this second question, so far, no impact at all outside Italy. And as I said, in terms of sales, also the impact in Italy has been very minimal. We have seen, of course, some reduction in terms of footfall, as I said before, in the -- in particular, in the northern regions. So far, as I said, also this kind of reduction in footfall -- in footfall, actually, has been quite not dramatic, quite limited, as I said. Please consider always that our stores are not like supermarkets or other kind of mass stores. So usually, in the stores, we have 1 or 2 people, or 2 people at the same time.

[Domenico Ghilotti, analyst]

Yes, sorry to interrupt. I was a bit concerned by the average of your clients -- the average age of your clients. So this was...

[Enrico Vita, executive]

For sure. This is a point, but as I said -- and also, we are also taking some measures, like arranging the agendas for our appointments in order to have just 1 person or maximum 2 person people at the same time in the stores. So we are also trying also to limit the psychological barriers so that for some could be preventing them to come to our stores.

So in terms of contingency, well as I said, it's very premature to say. But we are looking at every kind of opportunity very well. I mean, we are also running many, many different projects. We can also phase these projects in different ways. We have also to look at any kind of other opportunities in terms of cost. You know that we are still working in order to reduce the cost of purchase, in particular, in the indirect and the direct purchases. So there are many different areas, which we are looking at, we have just started. And as I said, so far, we have not seen any impact in the business. For sure, we will be ready to face any possible challenge if will arise.

[Domenico Ghilotti, analyst]

Do you have any kind of flexibility in the rents, if you have to, for example, if you are forced to close some stores?

[Enrico Vita, executive]

Well, it's too premature to say that we are going to close stores. So I do not see that. I do not see at all, actually, at the moment. I do not -- this kind of -- this necessity, actually.

[Gabriele Galli, executive]

So those, if I may add, I mean, rent is just a limited portion of cost. It accounts for 5%. We have a lot of flexibility, of course, on the most important item of the P&L, which is, for example, the people, but also on other items. So rent is not really a big one.

[Domenico Ghilotti, analyst]

Why flexibility on the people? So because of some agents that are paid on a variable basis?

[Enrico Vita, executive]

For sure. For sure, and also -- there is -- this is also this element actually. With regards to GAES, we do not provide the revenues for a single country or a single business. What I can tell you is that GAES has continued to perform very strongly throughout all of '19. And also -- what also I can tell you is that despite of the fact, in the first quarter of last year, you may recall that GAES already started to perform very strongly. Also, in this just the 2 months of the year, GAES has continued to -- GAES, well, actually I should not speak any more about GAES, but I should speak about Spain. Spain has continued to perform very strongly. So -- and also in terms of profitability, we have seen a further improvement basically throughout the year. So I'm very confident that everything else being the same, also in 2020, we will see a very strong performance from Spain, which will contribute to the company results, both in terms of revenue growth, but also in terms of profitability.

[Domenico Ghilotti, analyst]

Because my question was due to the fact that if I add the very strong organic growth well above my expectation and the GAES' contribution that I had in mind, I came up with the results that was suggesting probably that M&A contribution coming from, say, the other M&A, the bolt-on, were a bit lower than expected. So I was trying to understand...

[Enrico Vita, executive]

That's correct. That's correct. That's absolutely correct. And in the last quarter, I would say that the -- this Miller bolt-on acquisition accounted for about to 2%, which is a bit lower than the average. You're absolutely right, but no specific reasons. These are more, let's say, based on opportunistic cases. So there is no specific reasons. But yes, you're absolutely right.

[Operator]

Next question is from Kit Lee with Jefferies.

[Nyeok Lee, analyst]

Just 3 last for me, please. Just firstly, on your private label platform rollout, you've noted positive ASP impact. Just wondering if this is mostly due to customers trading up to more premium products? Or have you seen some like-for-like price increase?

And my second question is on your Chinese joint venture. I guess, it's been probably almost a year now since you have that business in China. What have you learned from it? And does that change your thinking about the market opportunity there? If you can share some, I guess, thoughts over, that would be great.

And then the final one would be on your new buyback policy. I guess, how do you think about spending on buyback for 2020? Thank you.

[Enrico Vita, executive]

Thank you for your questions. So I will answer the first 2 and I will leave the last one to Gabriele. So with regards to the Amplifon Product Experience, very strong results also in '19. I'd say that also in the other countries where we have implemented, we have seen a very, very similar pattern -- in terms of penetration. So very high penetration achieved, I would say, also very quickly.

In terms of average selling price, I always mentioned about the positive effect in Italy, between 1% and 2% in these countries like Germany, like Netherlands, like France. This year, we have seen even a better -- a better result, I would say, in the region of 2%, 3%. So even a better improvement in terms of average selling price than in Italy. This is also because in those countries, we were starting from a lower average selling price than in Italy.

And the reason for that is both. I mean, both people trading up to more richer, let's say, richer products, so products with connectivity, rechargeability and so on. But also, we have had also some price adjustments. So the combination of the 2 was the reason for this kind of positive impact on the average selling price.

With regards to the Chinese joint venture, I can tell you that no, we do not see the current situation in China affecting at all our plans. What I mean is that we still see -- we have been always very clear on the fact that China for us is a medium, long-term opportunity. And for sure, these -- the recent events are not going to change our view on China at all. Actually, for what is possible, we are still working in order to increase our presence, our presence there in the next months and next years.

With regards to the buyback, Gabriele?

[Gabriele Galli, executive]

Yes. So as you know, buyback has historically been done in order to finance our stock grant plan. Every year, we used to renew the buyback plan for the forthcoming 18 months. So I mean, we are doing basically the same also this year. In terms of buying shares in the market in the next month, we still have a significant amount of shares in our portfolio to finance the plan for 2020 and 2021. So I don't think during 2020, we are going to be in the market buying stock grant. But we wanted to have the stock grant, sorry, shares. But we wanted to have the opportunity to -- I mean, have the power to do so in case that we need. But no discontinuity versus the part.

[Operator]

[Operator Instructions] The next question is from Christopher Seidenfaden with Mediobanca.

[Christopher Seidenfaden, analyst]

I was just wondering if you could say a little bit more about 2 areas: one, the Amplifon Product Experience in terms of KPIs you look at internally, what you can say about the rollout in general of this multichannel ecosystem, as you call it. So that's -- I've noted that, of course, you've done very, very well in Italy. You're going into France and Germany with this. You're already deploying it well in Australia. But if you could say a little bit more about that.

And then about your own brand, in terms of -- if you could give us an update about the rollout of your own brand and where you're at in the various countries.

[Enrico Vita, executive]

Well, basically, the 2 things that you mentioned are strictly connected. What I mean is that the Amplifon Product Experience is a part of -- actually is combined with new Amplifon product line, so our own branded product line. In terms of number, I think that we mentioned many times the success in Italy where the penetration is already well above 90%, and where we have had an increase in terms of average selling price in the region between 1% and 2%. As I said also early on, very similar pattern also in the other markets where we have rolled it out in '19. So I think I already mentioned the fact that in the Netherlands, we are already at 90% penetration, which -- with an average selling price uplift, which is above 2%.

And also in this country as well as in Australia, we have a very high penetration of the Amplifon app. In the Netherlands, in the private market, the penetration of the Amplifon app is in the region of 40%. Similar pattern also in Australia, where today, the penetration is about 80%. In terms of average selling price uplift, we are above 2%. Also here, I say a very, very good penetration of the Amplifon app, which is above 30% and so on and so forth. So very similar pattern in all the countries, which -- where we have rolled out the new Amplifon line in '19. And this is also the kind of pattern that we envisage for the countries that will be involved in the rollout in 2020.

[Christopher Seidenfaden, analyst]

Could you say anything about conversion rates, perhaps from the digital ecosystem from the data and how you, sort of, approach clients in reaction to that? Is there anything you can add on that? That would be great.

[Enrico Vita, executive]

Well, actually, on a qualitative base, I would say that we had also other important benefits coming from the rollout of the Amplifon product line. I would mention, for sure, the increase also in terms of return of our marketing investments as well as conversion rates. You are absolutely right, of course, that we do not disclose the numbers. But you are absolutely right in saying that we have had also some improvement in terms of conversion rates.

[Operator]

[Operator Instructions] Ms. Rambaudi, gentlemen, there are no more questions registered at this time.

[Francesca Rambaudi, executive]

Thank you, Ariana, and thank you, everybody, for joining the call.

[Enrico Vita, executive]

Thank you, everyone, and thank you. Thank you.

[Gabriele Galli, executive]

Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.