Fiera Milano SpA

MIL:FM

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon. This is the Chorus call conference operator. Welcome, and thank you for joining the Fiera Milano Results at the 31st March 2023 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, and thank you for joining us today. This is Vincenzo Cecere speaking, Head of Investor Relations and Sustainability. And I'm here with Francesco Conci, new CEO; and Andrea Maldi, CFO of Fiera Milano.

The purpose of the call is to provide you with an update on Fiera Milano's Q1 2023 results. The presentation will be structured in 4 sections. During the first section, Mr. Francesco Conci will give you an overview of business and 2023 outlook. Then Mr. Andrea Maldi will go through the divisional results and financial figures in greater detail. On a final note, an update on sustainability commitment [ note ] will be provided. At the end of the call, you will be invited for a Q&A session with the management available for your questions.

As you may know, following the shareholders' meeting called for April 27, 2023, new Board of Directors has been appointed, with Francesco Conci elected as the new CEO and General Manager of Fiera Milano. I would like to take this opportunity to introduce you Mr. Francesco Conci, who had been working in Fiera Milano for more than 20 years with different responsibilities, from a Group Marketing Director to CEO of Fiera Milano Congressi.

At this point, I leave the floor to Francesco Conci for a personal introduction and a general overview of the quarterly results. Please, Francesco, go ahead.

[Francesco Conci, executive]

Good evening, everyone, and thank you for joining the call today. As Vincenzo mentioned before, [indiscernible] company having been working in Fiera Milano for more than 20 years, both at Fiera Milano Congressi as Commercial Director first, Strategic Development Director later, and finally, CEO. And Fiera Milano has a strategic market in direct. I'm honored to join the Board of Directors of Fiera Milano, and I'm convinced on that. Thanks also the professional skills of all the management team. We will continue along the group path of growth by strengthening an international dimension, and enriching the portfolio of own and [ those through addition ], leveraging on the attractiveness of Milan and guaranteeing a high level of quality and sustainability of the exhibition district, in line with the strategic trajectory of the CONN.EC.T.2025.

We are ready to face the challenges to seize the opportunity that will arise in the near future. We do believe that Fiera Milano will have to play another great ruling development of Italian companies abroad and that has international lab able to offer a unique platform for hosting global and outstanding events.

Regarding the quarterly results, just few introductory message before leaving the floor to Andrea Maldi. With 13 exhibition held, 30 Congress events, and more than 250,000 square meters occupied, revenue of EUR 48.1 million and EBITDA of EUR 8.9 million, Q1 2023 confirms the relaunch of Fiera Milano activities and a well-established beginning of 2023, with high appreciation both for participant exhibitor and buyers.

In particular, this excellent result obtained by the fashion exhibition and relaunch of Borsa Internazionale del Turismo allow us to look ahead to 2023 in a positive way. We had, in fact, a very rich exhibition calendar scheduled from the full year 2023, more than 15 exhibition in Italy, 20 abroad, 160 congresses covering all the strategic industry representing the excellence of Made in Italy in the world, for example, food, design, tourism, fashion and machinery. Even if the industry is not immune to the difficulty of the macroeconomic scenario, Fiera Milano look to the future with confidence, expecting to reach an EBITDA target of EUR 70 million to EUR 80 million as at 31st December 2023.

Alongside, the economic financial objectives, the group's commitment to developing an increasingly sustainable business model continues. We have recently published our now -- new sustainability report, which I invite you to have a look at, and launched the first carbon footprint measurement for our international tourism exhibition, Bit.

At this point, I will leave the floor to Andrea for the business and financial review.

[Andrea Maldi, executive]

Thank you, Francesco, and good afternoon, everybody. Here I will try to review the financial results of the first quarter of 2023. We are extremely satisfied with the results -- the positive results that we've been able to achieve in Q1. We reached a level of EUR 48.1 million of revenues, which represent a significant increase to the comparison that we had with the Q1 2022. This is to be fair -- to be represented in a fair way because clearly, in 2022 first quarter, we have been facing the rephasing of the calendar year of the event given the Omicron pandemic development at that time.

EBITDA is extremely positive as well. We reached the level of EUR 9 million with a significant improvement again with the quarter, which is difficult to be compared in terms of performance. At the same time, the net financial position is equally getting better, starting from the positive EUR 30 million at the end of December 2022, reaching the level of EUR 37.5 million in the first quarter, with an equivalent of about EUR 7 million.

If we try to have a look at the way we represent in our financial statement, the cash-generating units of the business model of Fiera Milano, might remember that we try to segment our business into 3 categories: Italian Exhibition Business, which is clearly the main one in terms of financial and representing the core of the business, which is including all the Italian sale events. And at this point, we can say that we reached the level of EUR 40 million revenue out of the EUR 48 million with an EBITDA that stood at EUR 7.6 million positive in the first quarter of 2023. This is mainly driven to the representation that we have been able to have -- such as, it was mentioning, 13 exhibition within that period.

We have been able to occupy -- to lead more than 250,000 square meters working in the first quarter. And the main event that took place during the quarter in terms of Italian exhibition has been only PTE, the Promotion Trade Exhibition. At the same time, we have the fashion industry that has been represented by Milano Unica, with 394 companies represented in terms of exhibitions. MIDO, which is the international eyewear fair, which welcomed more than 1,000 exhibitors at the same time from 100 -- over 150 countries. So this is clearly the reason behind the fact that the Italian Exhibition Business raised the level of more than 100% compared to Q1 2022.

If we look at the second segment division, which is Foreign Business. Basically, we are pretty much aligned to what we did last year. Clearly, Q1 is not representing entirely the evolution of the Foreign Business, because most of the activity, which are coming from our joint venture with [ Deutsche Messe ] of -- Deutsche Messe is going to be represented in the second part of the year in which we are going to have 90% at the year end -- these are going to be a plan in Shanghai, in China, and the other typical China with the German partner. And this is going to have a value more or less at the year-end of EUR 2.5 million of EBITDA.

While in this quarter, we can still comment, I said that, we reached significant results with Air Fair events in Cape Town, and we have also a positive effect of the starting of the different events in Brazil, which clearly took place in the first quarter, but we've been -- but unfortunately we have to support and increase even if not significant on a group level and increase level of -- increase the size of cost in Brazil.

If we look at clearly the third division, which is extremely important for Fiera Milano, for the Group, we are talking about Congress. Congress business reaching the level of EUR 8.8 million in Q1 2023 with EBITDA, which moved from a negative EUR 0.9 million -- negative EUR 1 million in 2022 to a positive EUR 2 million in the first quarter. Clearly, again, we are talking about more than 30 Congress events that took place during the first quarter of 2023.

I think that if we move into the financial review, I'd like to specifically comment on the net financial position, which is clearly an important element of valuation of what we are doing in terms of businesses. As we discussed briefly, we moved from the positive EUR 30 million of net financial position to EUR 37.5 million, being able in the quarter to generate more than EUR 7.7 million of free cash flow. This is mainly coming from this positive EUR 7.7 million of free cash flow, mainly coming clearly from a negative impact of the application of IFRS 16 in terms of cash out for the rent of our guidance. At the same time, a positive effect of almost EUR 16.2 million coming from the very favorable net working capital, given the increase of the amount in general -- in terms of advance payment and the reduce of liabilities in terms of debtors and suppliers. This is -- these are the 2 effects that have been able to generate an operating -- operating cash flow of EUR 11.3 million, impacted then by the financial -- side of the financial figures and moving to a free cash flow of 7.7%.

I think that this is mainly the narrative of the financial of Q1. We have been able to represent the fact that in terms of ratio, our current asset versus current liabilities is still moving on the range around [ 0.7%, 0.8% ]. So almost close to the #1 level, which is clearly demonstrating the capability of financing stability and financing, clearly, our liabilities and our assets. And in terms of [ ACT plus ] current liabilities versus fixed asset, we are still in the range of 1 as well, which is clearly another significant important element of financial stability and good leverage of structure in our balance sheet.

Before moving to the Q&A session, I give the stage to Vincenzo for describing our continued journey and improve the journey into the sustainability part.

[Vincenzo Cecere, executive]

Thanks, Andrea. Just a closing remark on sustainability. Alongside economic financial objectives, the group's commitment to developing an increasingly sustainable business model continues. We have recently published our new sustainability report, which includes the 2022 performance and medium- to long-term strategic sustainability plan to 2025. The document is available on the company website, and we invite you to have a look at the document.

In February, we performed the first carbon footprint measurement of BIT, the international tourism exhibition, which aim to reduce the environmental impact coming from the different phases of the exhibition. Finally, we are proud to have joined the Global Compact, the United Nation Global Compact, which encourages companies to actively promote principle of ethical conduct in responsible business.

I believe we are concluded with the presentation and we can start with the Q&A session. Thank you.

[Operator]

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

[Emanuele Gallazzi, analyst]

Good evening, everybody. And first of all, it's very good to speak with you, Francesco. You were really clear on the future strategy of Fiera Milano consistently with the CONN.E.C.T. 2025 business plan. But I was wondering if you could share a little bit more on your view on future Fiera Milano's strategy.

And my second question is on the guidance for 2023. I just would like to understand how comfortable you are with the midpoint of the EBITDA guidance. And if you can give us a sort of updated guidance for the financial position at 2023 year-end.

[Francesco Conci, executive]

The growth strategy will continue to be focused on the 4 strategic areas, which represent the foundation of the CONN.E.C.T. 2025 strategic plan. First of all, strengthening of the portfolio of own distribution by expanding their international reach and launching new concept to resilient sector like promised macro trends; two, despite the number of hosted events and occupation of spaces through strategic alliance and partnerships; three, consolidation of leadership in the Congress business, leveraging one of the most modern and largest congress center in Europe; fourth, promotion and traditional and digital services through a platform-based model.

We will continue along the group path of growth by strengthening its international dimension and enriching the portfolio of own and outside exhibition, leveraging all the attractiveness of Milan and guaranteeing a high level of quality and sustainability of exhibition districts, in line with the strategic trajectory of the CONN.E.C.T. 2025. During the course of the year, we will present the market an update of the CONN.E.C.T. 2025 plan in order to provide you with more advanced picture of the business in terms of new market dynamics and new initiative launches.

[Andrea Maldi, executive]

Thank you, Francesco. And coming to your second question, which is more related, if I got it right, is to the guidance. The guidance for 2023 and in terms of net financial position, I think that -- despite there are still some elements of certainty related to the macroeconomic context, mainly due to the fact that we are -- we need to take care of our inflation rate going to move in 2023. With the war Ukraine and Russia, the cost of energy that might increase still in the third quarter during the period in which the Italian government is going to stock for the gas in that period. Despite this kind of element of uncertainty, we are -- we think to be -- we are actively pointing -- we think to be able to deliver at least the midpoint of the guidance provided to the market during the budget section at the end of December 2022, for the year 2023.

We are -- as you know, we are now -- we closed the first quarter in a very positive way. We are now having this analyst call with you, but we are a leader of May, for which we already know result has significant event like Salone del Mobile, and we have quite a good outlook of the way the main key events are going to take place in 2023, maybe refer to HostMilano, and the second part of the fashion industry in the season of September-October. And we have a good outlook on this, and we have a good expectation on the results of these key events, which are going to be still important for our P&L in 2023. So that's why I'm stating the fact that we are extremely confident in terms of confirming the guidance in the range of the midpoint.

At the same time, for the net financial position, I think that the target of EUR 20 million, EUR 25 million is really achievable, probably without, let's say, we are moving into a significant -- or creating expectation. I think that it might be even a bit better than what we expected to be for the year-end in terms of target.

[Emanuele Gallazzi, analyst]

Okay. If I may, other 2 questions. The first one is on, let's say, Fiere di Parma in the sense that we are basically 2 months after the closing. Can you just give us a sort of update on the strategy with Fiere di Parma?

And the second one is, I have read a lot about the Winter Olympics in Milan, and the involvement of your [indiscernible]. Can you just remind us what is the opportunity for Fiera Milano? And what should be the provision [ since past ] from the Olympics?

[Andrea Maldi, executive]

Okay. Very clear on it. Thanks for your question. Look, let me start from Fiere di Parma. As you know, as the market knows, we have been able to make the closing of Fiere di Parma in a deal, getting an 18.5% of stake into the company of Fiere di Parma. While we are speaking, right now to food, our main events in the food and agriculture industry is taking place right now with an extremely positive result in terms of exhibition, square meters sold, and in terms of digital, which is clearly something that we were expecting, but we are even exceeding the results that we are already now in our budget.

Event is going to be formally held now during [indiscernible] from Fiere di Parma, but as you can imagine, given the fact that it's taking place just after the closing, the event has been fully managed by the team of Fiera Milano in terms of realization and the organization. We are extremely confident that given the synergy that we are going to create in terms of international exhibition, capability of having -- working with the federal inventory, the future of food, powered by [indiscernible] in Fiera Milano is going to meet the financial described within the combined plan that is supporting the entire rationality of the operation of the M&A deal with Fiera di Parma.

And the fact that even this year, in 2023, results are a bit better in terms of -- compared to the one expected. So we are exceeding the -- we're exceeding the recovery versus the pre-COVID size of the food. This is a further boost that is providing support, again, the deal that we made with Fiera di Parma.

As you know, in Fiera di Parma, we are, for sure, transferring the going concern and a big time in [Technical Difficulty] strong reference with 2 Board members from Fiera Milano, included in Board of Fiere di Parma and with, let's say, shareholders agreement with other private shareholders for which we are going to manage the 51% of the shareholder count of Fiere di Parma. This is clearly a strong point for which we try and we are going to collaborate with them in terms of the development of the event here in our end. I think that's it.

[Francesco Conci, executive]

About the event gains, you have heard from the past, of course understanding as we signed towards the speed skating rink at Fiera Milano Rho for 2026 Winter. The project involves the unification of Pavilion 15 and 16 in a single unit on a total of 35,000 square meters of [indiscernible] to us in the 400 meter speed I can stand with around 6,000 seats, total visibility on the [Technical Difficulty] and as well [ trying to interact ], changing rules and for the structure necessary for the organization. In the overall '24, will be -- '24 will be dedicated to the creation of the Media Center.

The strategy with an environment sustainable will be powered almost exclusively by the photovoltaic system, one of the largest installer in Europe on the roofs of the exhibition hall, which today reached a power of 12.1 megawatt peak and which will be expanded by 2024, up to 15 megawatt peak. Approximately 6,000 parking spaces for the public and 1,600 for staff and service personnel are regular on the plant. In addition to public infrastructure, facilities such as the underground and the [ rail road ] service.

There will be a rent of approximately EUR 20 million, which will be offset by market swings that Fiera Internazionale di Milano recognized to fund Fiera Milano Congressi. The project will create new business opportunities considering also the diversification of the use or the division center, which will be increasingly competitive at international level.

[Operator]

[Operator Instructions] There are no more questions registered at this time. I turn the floor back to you for the closing remarks.

[Vincenzo Cecere, executive]

So thank you, everybody, for participating. Should you have any other questions, do not hesitate to contact us at the Investor Relations name available on our website. Thank you very much.

[Operator]

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