Fiera Milano SpA

MIL:FM

Earnings Call Transcript 2023-Q2

[Operator]

Good afternoon. This is the Chorus call conference operator. Welcome, and thank you for joining the Fiera Milano Results as of 30th June 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]

Thank you. Good evening, everyone. Welcome. Thank you for joining us today. This is Vincenzo Cecere speaking, Head of Investor Relations and Sustainability. And I'm here with Francesco Conci, CEO; and Massimo De Tullio, our new CFO of Fiera Milano.

The purpose of the call is to provide you with an update on Fiera Milano's H1 2023 results. The presentation will be structured in first section. During the first section, Mr. Francesco Conci will give you an overview of the business and 2023 outlook. Then Mr. Massimo De Tullio will go through the divisional results and financial figures in greater detail. On a final note, an update on sustainability will also be provided.

At the end of the call, you will be invited for a Q&A session with the management available for your questions. I'd like to take this opportunity to introduce you to Mr. Massimo De Tullio, recently appointed as new CFO of Fiera Milano.

Mr. De Tullio has been working in Fiera Milano for 5 years at Group Planning and Control Director. Previously, he held the role of CFO for both the U.K. and Belgium legal entities at Fiat Chrysler Automobiles for over 5 years with primary focus on planning and control activities related to sales and commercial areas. His professional profile is further complemented by previous experience in the consumer division of Vodafone and the [indiscernible] auditing firm.

At this point, I leave the floor to Francesco Conci for 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. On behalf of the company, we wish Massimo to very best of luck in his new role as CFO. And now just a few introductory messages regarding the very positive set of results of this first semester.

As you may have read from the press release, the first semester 2023 showed solid results and improvement in performance compared to the first semester 2022 with 32 exhibitions held, 61 congresses events, more than 800,000 square meter occupied, revenue of EUR 132 million and EBITDA of EUR 42 million.

The very positive results of the semester were mainly due to the good general performance of the annual exhibitions in the tourism and fashion sector and of the multi-annual exhibitions due the presence of TUTTOFOOD, with performance above expectations for higher penetration of services and the ITMA, one of the most important toward exhibitions of spinning and weaving technologies. Excellent results reached by the Congress division with the Allianz-MiCo Congress Center provided to be increasingly competitive in strengthening its international attractiveness and confirming Milan as an international hub capable of offering a unique platform for relevant hosted events of global relevance.

During the second half of the year, Fiera Milano will continue, in line with forecast with the implementation of the strategic plan CONNE.C.T. 2025. This will involve a dedicated focus on executing technological and digital transformation, expanding our digital and traditional services offerings and fortify our exhibition in congresses portfolio.

Furthermore, we will actively engage in creating alliance with strategic partners and introducing new exhibition concept with them and reinforcing our market presence and develop the business internationally. Also the macroeconomic scenario expected for 2023 continues to present element of uncertainty based on the results achieved in the first semester, which already confirm a well establishment post-pandemic recovery.

We believe we can improve the previous estimate by forecasting the achievement of 2023 year and result positioned us in the upper part of EBITDA target of EUR 70 million, EUR 80 million. At this point, I will leave the floor to Massimo for the business and financial review. Please, Massimo, go ahead.

[Unknown Executive]

Good evening, everybody. Massimo De Tullio speaking. So I start with financial section of the con call, bringing you through the divisional results. So if we move to Slide #7 of the document, we can start commenting on the Italian Exhibition Business. So we had revenues for the Italian Exhibition Business amounted to EUR 110 million, which represent an increase of EUR 9 million compared to the first semester of 2022.

And let me say that this is a very good result because if we consider that this semester was affected by a less favorable seasonality compared to the last year, and this amount of increase is increasing revenue is the result of a very good performance and shows also the result of a price increase strategy that we started last year.

If we go at also commenting the Italian Exhibition Business, we can also highlight that we scored an EBITDA at EUR 33 million compared to EUR 35 million in H1 2022. This result is clearly affected by the positive increase in revenues, which has been completely offset by some, let's say, one-off costs that we incurred because of the reorganization that happened during these last 3 months.

And clearly, we -- the Italian business has been also affected by the increase in the cost of energy that all the industry has been facing during this period. If we move to the Congresses result, clearly, we had very, very good results. We had revenues at EUR 24 million, which represents an increase of EUR 6 million compared to the H1 2022.

So we had very positive results from at least 3 very important congresses; the EULAR, rheumatology, the urology one, and we had also some very important and good results from very important corporate events like Salone del Risparmio and Sales Force event. We need to realize also that this positive result compared to last year is due to the fact that in 2022, the Congress activity was affected by at least in the first 3 months by some suspensions because of the COVID situation.

So in this moment, in this year where we didn't have any particular issue related to COVID. We show the full potential of this division. Regarding the Foreign Exhibition Business, we see a EUR 3 million revenue result, which compared to EUR 2.4 million in 2022. So we have a slight increase due to the results we had in the exhibition hosted in South Africa, the s Investec Cape Town Art Fair and the Exposec exhibition, which took place in Brazil.

The EBITDA is increasing compared to the last year, and this is mainly because the [ JV ] in China in this moment is showing, let's say, positive result compared to last year where because of the COVID impact, basically, we had no event shown which took place last year in China.

Now moving to the consolidated results. Basically, we have an increase in revenue compared to last year from EUR 116 million to EUR 132 million, which again, as already shown, is basically due partially to the good performance of the exhibition of the Italian Exhibition and partially to the good performance in Congresses.

At EBITDA level, we have EUR 41.6 million, which represents an increase of EUR 2.1 million compared to the EBITDA [indiscernible] last year. Again, we have a positive variation, which is driven mainly by the increase in performance of Italian Exhibition and Congresses Exhibition, which has been partially offset by higher operating costs as already stated.

So we are speaking specifically about electricity costs and the reorganization costs. At net result level, in this moment, we are showing if we do not consider the impact of the TUTTOFOOD operation, we are showing EUR 9.2 million of net result, which compared to EUR 5.3 million achieved in H1 2022.

So basically, we are increasing by close to EUR 4 million, the net result. But if we consider then also the impact of the TUTTOFOOD operation, we scored a EUR 25.7 million net result compared to the EUR 5.3 million scored in H1 2022.

Now if we move to the balance sheet, we can comment shortly on the net working capital, which is increasing from EUR 72.4 million at the end of December to EUR 98 million at the end of June of 2023. And this increase in the net working capital which clearly is negative in this moment is due to the dynamic of the advances payment related to the Host exhibition, which will be hosted in Milan in October 2023.

Also looking at the net financial debt pre-IFRS 16, we can comment on a very positive figure. We are showing currently a EUR 64 million, approximately net financial position. So cash availability, net cash availability, let's say, compared to a net financial position of close to EUR 30 million at the end of December 2022.

And if we look at how this result of this variation, so this increase has been generated. So looking at Slide 12, we can basically see that part of this increase in net cash is due to the EBITDA, which is positive by EUR 42 million.

For sure, we have to consider the impact of the rental, let's say, that we pay for the building, which amounts to EUR [ 426 million ]. And we then have the positive impact on the working capital already commented and mainly driven by the advanced payment dynamic, which amounts to EUR 24 million, EUR 25.6 million.

And then we have CapEx for the period for EUR 2.6 million and other impact for EUR 4.8 million, of which one of the, let's say, one of the element is the security deposit with the energy supplier and the other one is the advanced payments we did for the operation with Fiere di Parma regarding TUTTOFOOD.

Now regarding the outlook for 2023, as already commented by Francesco Conci, the result of the first semester and good expectation related mainly to our organized event Host allows us to foresee basically a result, an EBITDA result, which would be close to the higher range or the higher part of the range we communicated previously.

So basically, we are very close to the EUR 80 million to be very [indiscernible]. And so we are in a good shape in this moment. We have no signal that these results cannot be achieved. And well, in this moment, I will pass the -- now the mic to Vincenzo regarding the sustainability part of the call.

[Vincenzo Cecere, executive]

Thank you, Massimo. Just a closing remarks on sustainability. We are pleased to share with you that for the third consecutive year, Fiera Milano was confirmed at the top of the Integrated Governance Index, the index which certify the capacity of the companies to integrate sustainability in their business model.

Fiera Milano has been awarded as ESG identity leader in the top 5 extra 100 categories, which is the category reserve for mid-cap and most appreciated us. Thanks for the Fiera Milano ESG strategy for this award that has been corporate governance, distinctive initiatives in the industry aiming at reducing carbon footprint of the events and stakeholder engagement process.

So I believe we have 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]

I start with a couple of questions on the guidance for 2023. I understand that you expect to be in the upper part of the EBITDA range, but can you provide some clarity on the factors contributing to this more positive outlook in particular, had an interest to understanding the impact of the, let's say, the lower-than-expected energy cost versus the overall business performance?

You mentioned some good performance expected for [ cost ] in the second half? And the second one is still on the outlook is on the net financial position as you reported a stronger cash generation in the first half. Can you just guide us for the year-end, so giving a target for the net financial position by year-end?

[Francesco Conci, executive]

So thanks, Emanuele, for your question. So clearly, there is a positive impact of the current rate of the energy. We -- when we approved our budget in December -- late in December, we calculated the negative impact of the energy cost by EUR 30 million compared to our original plan.

We can say that at this moment, that increase has been probably divided by 2, so even more probably. So we are scoring already less than EUR 7 million worsening in our cost due to the energy impact. And this clearly is helping our guideline and our EBITDA guideline to increase and to reach the upper part of the range.

There is a positive impact of as you mentioned, of Host and another [indiscernible] exhibition, which are helping also to offset some negative other impact like the reorganizational one. So the one-off costs that we incurred in this semester, which were not part of the original budget. So all in all, I think we -- as I already stated, the EUR 80 million will be probably achieved by the company.

And the second question was about the net financial position. So we think that anyway because of the seasonality of this business, we will end with a lower net financial position at the end of the year, which should be higher compared to the original one or the one forecasted previously.

And we basically expect to land in a region of EUR 40 million, EUR 45 million of net financial position. So clearly, this will be lower also of the net financial position. We are scoring in this semester, but this is due to the fact that we have already basically all the advances or most of the advances from some exhibitions that will be hosted in the second semester like [ Host ].

And we have also some cash out regarding the TUTTOFOOD exhibition and the new nature of this exhibition has also the event which clearly implies that we will have to repay Fiere di Parma with all the advances that we got from the customer.

[Emanuele Gallazzi, analyst]

Very, very clear. I have other 2 questions, some more on the operating business. One is on the Italian Exhibition Business. Can you just provide some more details on the performance of the ancillary services, in particular, [iniscernible1] business just to understand your market share and the overall performance of the services?

And the second one is on the Congress business, which continues to be very strong even in the second quarter. So can you provide an outlook for this business for the second half, maybe based on the current level of bookings?

[Francesco Conci, executive]

Thanks, Emanuele, also for this question about the services which basically allow us also to highlight that clearly, both the, let's say, traditional services and the digital media one are scoring very positively this year. What I mean is that these services are bringing to the company in this moment, a higher level of revenues compared even to 2019. So we have something like 20%, 25% increase in the revenues related to this -- to the services.

And if we consider that compared to 2019, we are in this semester, something like 20% back in terms of square meters sold, the fact that we are higher in terms of revenues from services naturally implies that we are gaining market share and all the services.

So from [indiscernible] restorations and services -- technical services provided to exhibitors like the advertising or the digital ads are all positively increasing and scoring compared to the previous addition on the exhibition last year.

So we have a very positive impact of the revenues from services, which we foresee will continue also in the second semester. So at the end of the year, year-end, we expect to be anyway 20% higher in terms of revenues from services compared to the pre-COVID situation.

And regarding Congresses, we expect also the second semester to be very positive. We are -- we see a confirmation of our capacity to attract international events. And if we look at what's happened in this first semester, we were able and capable to of 3 main big Congresses related to the medical topic like the one that is catered to the rheumatic disease, EULAR, the 1 dedicated to nephrology and 1 dedicated to urology.

On top of that, we were able also towards a very big event, very big corporate event. We confirmed for the second year, the Sales Force Convention. And on top of that, we also have the Salone del Risparmio, which is one of the largest event dedicated to the management industry.

So -- and then we were able also towards a new concept of event, which is basically like the Padel Trend Expo, which clearly is a complete novel also for the MiCo Allianz congress. So -- and the other point, which is very important to stress and is that Congresses the business, the Congresses business compared to the, let's say, Exhibition 1 has shown a complete -- a complete recovery of the pre-COVID performances both in revenues and almost also in EBITDA margin. So this is a very positive news for us. And clearly, this will allow us also to plan a further development of this line of business.

[Emanuele Gallazzi, analyst]

Okay. And if I may, just the very last question is if you can provide any comment on the EUR 50 million investment you announced today for the Congress business. I know that you split between you and the [indiscernible] Fiera Milano, but any comment on TUTTO?

[Francesco Conci, executive]

Yes. This, let's say, is also related to the Congress business. So we are aiming to add our Italian congress center and to have this congress center to become the -- one of the leading from congress center in Europe. And the investment that we announced today is going into this direction because we will provide this congress center with one of the most outstanding technologies and infrastructure for data transmission and broadcasting transmission.

So clearly, this will open for the -- our congress center opportunities in the corporate event sector, which is one of the sector we are trying to exploit and to develop. So we are very keen to start the investments we communicated today. I think there are also some additional development opportunities related to this investment that probably will become more clear in the next month.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

[Vincenzo Cecere, executive]

So thank you, everybody, for the participation. Should you have any questions, please do not hesitate to contact us at the Investor Relations team. Thank you.

[Operator]

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