Fiera Milano SpA

MIL:FM

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Fiera Milano First Quarter 2022 Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Vincenzo Cecere, Head of Investor Relations and Sustainability. Please go ahead, sir.

[Vincenzo Cecere, executive]

Good evening, everyone. Welcome. Thank you for joining the call today. This is Vincenzo Cecere speaking. I'm right here with Andrea Maldi CFO of Fiera Milano. Purpose of the call is to provide you with an update on Fiera Milano's Q1 results to March 2022.

The presentation will be structured in 3 sections. During the first section, Mr. Andrea Maldi will give you an overview of the Q1 2022 results and the preview on full-year outlook. Then he will go through the quarterly divisional results and financial figures. Lastly, you will be invited for a Q&A session at the end of the call.

At this point, I will leave the floor to Mr. Andrea Maldi. Thanks.

[Andrea Maldi, executive]

Thank you, Vincenzo. Good evening, everybody. I'm Andrea Maldi and I will start this presentation for the executive summary.

Moving to Slide #4 in which as you can see Fiera Milano in the first quarter confirmed a strong recovery of the business. We had 11 exhibition held and almost same turn in terms of numbers Congress in just 2 months Q1 2022. This has been a very important signal for us because it's reconfirming the consolidation of the result that we had very strongly in Q4 2021. And so the numbers in terms of exhibition that we manage is exactly confirming the direction taken.

Just to further comment is that if you look at the financials, the revenue of Fiera Milano in Q1 2022 have been in the range of EUR 21 million with clearly a strong increase with the comparison in Q1 2021 that I will try to quote as less as possible during the call because clearly, it's a bit of an unfair comparison given the fact that in Q1 2021, Fiera Milano was lockdown in terms of business due to the government restriction for the pandemic issues. Despite we had no business compared to the quarter in 2022 in which we had the consolidation of this restart.

The EBITDA is negative 2.4 million, clearly improving the shape or with the figures of Q1 2021. But I think that the most important things that we need to highlight when commencing the Q1 2022 results is the fact that we have consciously decided to postpone and pull the numbers of events that were supposed to take place in January, February, March to the subsequent month of the year. We did this consciously back in December when we have revisited this calendar year for 2022 in order to create a protection. And to grant the execution for some of these events that were supposed to happen in the highest peak of the pandemic issues with Omicron COVID-19.

And this has clearly been a success, a successful decision, because we've been able to reconfirm the same events. And we have been able to grant that execution of the 2022 year in terms of operation. To prove the success of the season is also the fact that some of the events that just taken -- just took place, sorry, in the coming months after January and February, we had strong results that have been very successful in terms of square meters sold but mainly also in terms of visitors. Also, international visitors, if we excluded the discussion with China that we will see during the presentation in the next step.

A quick outlook on 2022. As we said, in 2022 we are going to, based on our expectation, based on our forecast, to reconfirm and to consolidate the results that we had last year, confirming the expectation in terms of budget and the results. And clearly, the guidance that we will maybe decide later during the conversation of about EUR 40 million to EUR 50 million is going to be secured, thanks to decision to reprotect some of these events we already set.

If we move for a while to, I suggest that we start to dive there to present the discussion into the different business line of Fiera Milano. We started with Page 8 with the Italian exhibition business. So, we are talking about the domestic business, which is clearly, 99.9% of the P&L of Fiera Milano in Q1, actually, referring only to Q1. We had, as we said, 10 exhibitions that had been hosted in Q1 2022, with about 150,000 square meter. And what is really important with more than 3,500 exhibitor participating in our events. There have been some events, as I said, has been postponed. Just to give you some names, BIT the tourism events that has been moved from February to April. And then we will have Transpotec Logitec that has been postponed from January to May and the HOMI that has been moved within the quarter from January to March. As you know, Salone del Mobile has been rescheduled from April to June. Mido will take place in May. It was supposed to take place in February. And then we have Mostra Convegno from March to June. This is the detail of the event that has been moved into the quarter.

As we said, if we look at the results of these events during the quarter 1 and the one that already took place in April, the results has been very good. Most of them have over-performed compared to our budget and expectation in Q1. I'm referring mainly to the events of Linea Pelle, HOMI Fashion&Jewels, Myplant & Garden, and Milano Unica that have really done better results than our expectation.

You see in Page 9 you can have a look, a snapshot already of the description that I just made. We have divided the event that took place in terms of years in Q1 between the directly manager, HOMI, HOMI Fashion&Jewels, and PTE.

We clearly you know that the one that has suffered the most in terms of [ reposition ] has been HOMI for which we are going to take important action in order to structure the new events for the next year. And then we have the hosted events which are Linea Pelle, Milano Unica, mipel, Myplant & Garden, Micam, and The One Milano which has been extremely successful with a strong international presence. And worth to mention that these kind of events they were also, let's say, already planned, starting, and taking place. In the same days of the initial of the wars now, so, of the war with Ukraine which is one of the events that we are going to analyze later in the call which might -- for which we're taking careful measure in order to avoid any impact in 2022.

Quick snapshot on the foreign business. Clearly, the international business is really important for Fiera Milano, especially because it represents all sort of strong partnership that we had with other operators. But clearly, the Q1 is the less impacted because if we look at the drill down of the different country we have the Investec Cape Town Art Fair that are being held in February 2022. With a strong success, especially again for the number of exhibitors.

But again, for the geographic and the international level of presence of the visitor that came to the events.

In China, I think that China is one of the critical areas that we need to have a look -- a careful look into care. Clearly, we don't have an exhibition in Q1 2022 planned, and, therefore, there is no impact but we are really carefully looking at what can be the outlook for 2022, especially considering the fact that there are still a strong measure of lockdown. And most of these events are expected to be shifted to the second part of the year.

And probably also we did a bit of reduction in terms of square meters and size of the event.

Brazil is well under control with a stronger plan of the entire pattern of events which is going to take place from June to September and October. So in the second part of the year, according to our budget and to our calendar. And then finally, we are on track of execution with the 2 new partnership that we signed. We already mentioned to you in the previous communication with dmg and [ inform ]. We are an operator. The first one is for the launch of FIND that will be back in October. These are not -- will be back in October 2022 in Singapore. These are not sizeable events in terms of results. As for me, that matters sizable events in terms of the new footprint in order to design the international strategy to be in the right place, like Singapore, which is essentially also with a drop of Hong Kong is going to be the new door of South Asia for international businesses.

I like to give you a snapshot of Page 11 of the Congress. Clearly, the Congress business is always a very strong one. Sorry, in Q1 2022, we had the 10 Congress events which, the main one being clearly the Ferrari fashion show, the convention by Banca Generali, the 23rd of the National Congress of AICCER which is the Congress of Italian Association.

And then we have the Azimut Convention.

You know that we'll be going to manage the Congress Turin Centre, in the next (sic) [near] future. We are supposed to start business therein between the end of '24, beginning of '25. And in terms outlook, the Congress for us is an important pillar because it's the one that is going to recover pre-pandemic position sooner than the fair. We are expecting to be back on track already in 2023, at the end of '23. I think that we're now trying -- We'd like also to try to enter a little bit more into sort of balance sheet and financial position point which is clearly worth to mention.

And I'd like to start from Slide 14, where we clearly, we would like to represent the fact that we have a structure net working capital which is equal to EUR 79.3 million in Q1, 2022, compared to the EUR 86 million back in the same period of 20 -- sorry. Not in the same period. Back to December 2021. The main net working capital contribution accounting are coming structure of the financial flow of our business in straight tables. And the advance as you know we have an important portion of business, which is paid in advance and the balance as well compared to the events. And this is more the advance are moving from EUR 36 million to EUR 51 million, resulting in an increased EUR 15.1 million related to the advance invoice which is customary revision for Q2 2022. At the same time, where the more strong reduction payable and that's why we resulted in the decrease of our net working capital.

It's worth to mention the fact that during Q1 2022, we paid a lot of suppliers that were related to the events held at the end of Q4 2021. Again, it's not typical in our cycle, but in 2021 we had a quarter with 30 events just taking place in one quarter. So the entire list of our events has been managing in almost 5 months. Therefore, we had accumulated liabilities to pay, some of them would be shifted to the first quarter. And that's why we have this increase in payable payments during this period of 2022.

In -- net financial position is very strong. We are at EUR 33.2 million positive compared to a net cash position of EUR 47.4 million as of December 2021. As regards change, which is in the range of the EUR 14 million, is mainly referring as we mentioned to the structure of the decrease of the net working capital. To the [ worth ] of the net working capital that we just mentioned and described a few minutes ago.

I think the Slide 15 is very useful to furthere dive into our cash dimension and cash structure. We have divided the operation cash flow and the change in operation cash flow.

It clearly moved from positive EUR 74.2 million to EUR 15.9 million. As you can see at the end of March 2022. And this is quite a sizeable important piece of this movement in operating cash flow is coming from the [ guest ] Difference in the net working capital we just commented. An important piece is coming from the IFRS 16 which is means to refer to the fact that we are paid, in Q1, the financial impact. Where the financial impact in Q1 of the fourth quarter lease agreement for the building, for the rent.

I think that we went quite quickly into financial and economics. Is just the first quarter of 2021 -- '22, sorry. If I really need to give you an highlight, again, I would simply say the fact that despite we are commenting financial results which are not positive in terms of EBITDA, we are extremely proud of the results and of a stronger recovery of the business that took place in that period. And the shift compared to our budget and the outlook of the financial is simply reflecting the fact that we have postponed an important series of important events to the month starting from April going down into the 2022 calendar year.

And that's why also anticipating a few of the comments we made in the next session. We are pretty confident to confirm the outlook of the EBITDA in the range of EUR 40 million to EUR 50 million for the 2022. Which was exactly the range that was established back into the connect plan which has been presented to the market in February last year.

I think that I don't have further comments for the quarter, I'd like to open to a session of Q&A.

[Operator]

[Operator Instructions] The first question is from Emanuele Gallazzi with Equita.

[Emanuele Gallazzi, analyst]

I have 3 questions. Well, the first one is a general one about, let's say your view on the business normalization process, in the sense that last year in your business plan, the expectations were for an exhibition business returning to pre-COVID level in 2025. Do you still have this view, or let's say, are you more confident about the normalization process of your main business?

The second one is about second-quarter exhibition. You just mentioned that they are performing better than initially expected. Can you just elaborate on it?

And the last one is about your guidance. I just would like to understand your level of confidence on it. And I know that you're going on the EBITDA level, but can you give us an idea of your expectation for the net cash position by the end?

[Andrea Maldi, executive]

So, first of all, thanks for your questions. I think that you are touching some of the important points for us. Going back, I go with my memory, but please remind me if I'm missing something. The first question was about the normalization process of the business. I think that we confirmed to be on track with our view. We still think that the Congress will recover sooner than the Fair events and we're supposed to be back in 2023. While we're still confirming the full, let's say, record of the Fiera business in 2025.

Also, considering for Fiera Milano the difference between the 2 years in order, which is one of the elements of the evaluation.

If we can be of any help, I would like to add, I said that in 2022, the industry source of information, [ AMA ] are confirming the fact that the business should run on an average of 40% less than pre-COVID events, pre-COVID situation. We have been preparing and providing a budget for 2022, which is in the set of minus 30% so with already an improvement compared to the industry referral. And if you discount for a while, the change in calendar, we are running in the range of the 30% into the actual event that really took place in that period. So this should be in my opinion, very helpful to comment to your question and to support the fact that our forecast of 2023 and 2025 for these two businesses are still supported by policy seniors.

Yes, if you look at some other confirmation, we're basically referring to the events that took place in that period, and I can start to mention, for example, the Turin event that took place just in the month of April that has been extremely successful. We have more than 1,000 individuals. 15% was coming from abroad and from 35 different countries. And the buyers that had been listed into our today events were in the representation of almost 47 countries.

In terms of occupied square meter, the event performed in line with our expectation even slightly better. There has been also an increase of revenue margins coming from services rendered during the event, which has been, again, an important signal of the revamping of the business.

We can quote some other important events that took already place. One was the [ Milano ] event. Again one of our experts that took over the place back in March.

This has been very strong, a lot of visitors, a lot of quality, an important quality of visitors because there are sensitive numbers that I can tell you that has been really a quality visitor. We mean a visitor that is there to do business. There's been a lot of business during that event, which is one of the most important signals for the, for the industry, for the sectors.

And then I just, probably during the conversation quite quickly mentioned the fact that we had that during the first quarter, some of the events connected to the industry of the fashion in particular Linea Pelle and Milano Unica and Micam in Q1, which have clearly been very important in the different sub-industries and they have always reduced -- for us, you need to have a look into ways of these events.

For us, they have reduced a better performance in the sense that we have a higher sales and margin for services. But most importantly for the exhibitors and for the organizers is kind of -- It's been successful because the visitors and the business, and again, the quality of visitors that they've been able to attract have been confirmed with a lot of satisfaction from the exhibitor success.

This is clearly a way to look at the success of the event. In terms of -- I think that you mentioned also, I found a question on the overall structure and confidence on the guidance for the range of the guidance for the year. Look, we did it just before the -- clearly the closing of the quarter deep review of our list of events. Again, I repeat myself in saying that the reprotection of some of the -- and the restructure of the calendar that it has been one of the busy activities for most of the team here from December to beginning of January, has been extremely successful because most of the events are, again -- all the events, sorry, are again on track and supposed to take place in 2022.

From a cost structure perspective, we have a lot of cost control and of course, measures to, let's say, shift the back of the increase on utilities thanks to the edging contract that we are doing back in the past which is still protecting us until the end of 2022.

The most important events like Salone del Mobile or the industry might be impacted by the Russian conflict. I'm still confirming the full efficacy of the quarter or the quarters are here and the venues and the number that they promised they will meet in our budget. Therefore I'm pretty -- I don't want to be overestimating the level of confidence, but I think that our guidance can be safely confirmed in the range of the EUR 40 million to EUR 60 million for 2022.

[Emanuele Gallazzi, analyst]

My last point was on the net cash position. Perhaps you can just give us a rough idea of your expectation?

[Andrea Maldi, executive]

Yes. I think that clearly the 2022 isn't even a year and clearly we know that our financial position is worsening compared to the strong closure that we had in December 2021 and we are supposed, in any case, to do better than the initial guidance from the plan connect because we are thinking to close in the range of positive 0 to EUR 15 million, and then EUR 5 million to EUR 15 million positive of net cash at year-end December 2022.

Clearly, we are monitoring very carefully the Ukrainian war and conflict. There are as you know, industries that are strongly impacted from this event. Clearly, we have 2 points. The first one is the cost of energy for which we are taking carefully any kind of measurement to mitigate the impact.

And second, there is a shortage in terms of some of the materials which are very important for us in our industries. Adjusting to aluminum, adjusting to wood which are really very important for our services.

In this case, clearly, I think that we need to be able to capture the fact that the market is increasing the demand and we are sourcing, we are trying to leverage any kind of source in order to be able really to recruit the raw material that is important for our services. And we are fully on track with our execution of the plan on the service side. And therefore, this is another element which has given me quite confidence in the outlook that, let's say we are going to confirm for 2022.

Clearly, this is, of course, this is under the assumption that we will not have a dramatic further escalation of the war or things that are not under our control. But I think that in this case, probably the impact will not be just on Fiera Milano or on our industry, but we will have plenty of businesses which are going to be impacted by further escalations.

[Operator]

The next question is from Gian Marco Gadini with Banca Akros.

[Gian Gadini, analyst]

Could you give us some updates on the thoughts with [ Diagro Agrementale ], please?

[Andrea Maldi, executive]

Okay, thanks for your question. You're clearly touching a very sensitive point for which I can really elaborate without trying to violate any of the condition. I can tell you that discussion are going still strong in place and this kind of M&A activity is really coming from the needs of the market to aggregate the industry of the [ Diagro Agrementale ] and therefore, there is strong demand in the market for us to do something which is going to be meaningful in the market. And this is why we are in strong discussion with them. I think that we will continue to give any kind of further disclosure as soon as we'll be in the condition to have reported also maybe a milestone achieved.

So far you need to stay with the fact that we are still working to achieve that result.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered at this time. Do you have any closing comments? Mr. Cecere, the floor is back to you for any closing comments.

[Vincenzo Cecere, executive]

Thank you everybody for the participation. Should you have any other questions, do not hesitate to write to our Investor Relations email. Thank you.

[Operator]

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