Fiera Milano SpA

MIL:FM

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Fiera Milano Third Quarter 2021 Consolidated Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Andrea Maldi, Group CFO and Head of Investor Relations at interim of Fiera Milano. Please go ahead, sir.

[Andrea Maldi, executive]

Good afternoon, everybody. This is Andrea Maldi speaking, and thank you for attending our conference call with the analysts. I'd like to start commenting the results of the 9 months year-to-date, September 2021. As we have seen from the numbers, the financial numbers, we are pretty happy because of the fact that our EBITDA is going to be September, better than expected. We are, according to data, EUR 7 million EBITDA IFRS adjusted negative compared to the level which we have estimated back in July. And the growth -- the improved result is mainly coming from the fact that the fashion exhibition that took place during the third quarter in early September performed well in terms of margin, much better than expected for about the [ EUR 2 million ] of margin growth increase. And on top of that, we have another EUR 0.9 million, almost EUR 1 million that came from the service that we provide to the Salone del Mobile that has been held in September -- at the beginning September, one of the first big events that we have posted in September.

We do have some other improvement in our EBITDA ratio mainly coming from cost containment mainly on the staff cost and the structural cost to manage the venues in the region of about EUR 1.2 million, EUR 1.3 million. At the same time, we got another upside which is coming from the [indiscernible] item about EUR 1 million due to the fact that we have performed deeper training session funded by the special program of the full amount of [indiscernible]. The combined stats of the better margin obtained in the quarter from the major events we reported plus the cost containment on the structural cost, given an upside of almost EUR 4 million on the 9 months results in terms of EBITDA adjusted. So this is the financial performance.

When I look at the main comment that I'd like to make in this presentation, I would invite you to follow the discussion on Page 5. Basically, we need to talk about the 3 important elements which are going to take place -- that took place in terms of Singaporean partnership during the 9 months. The first one is that we have officialized that we will host the September '22 Gastech, which is the 50th edition of Gastech, which is the world's largest division for the gas and energy. This event will be, as I told you, will take place in September 2022. It is an important element to be able to position Fiera Milano to be one of the leading Europe hub for international events.

At the same time, we have launched an important partnership with dmg, and this will add up to have the FIND, which is the Furniture, INteriors and Design most importantly, Asian exhibition for the design sector will be held together with dmg and the Singapore Council in 2022 in Singapore, which is an important project that we signed with an important international organizer, dmg. And this is going to be clearly the boost for the development of the list of events of Fiera Milano in the South Asia, which is clearly one of the most interesting areas to develop our foreign or abroad operation.

The last amount that we have made in terms of key events in the quarter is that Fiera Milano Congressi, which is our shareholders, our company owned 100% by Fiera Milano and being able to win the future management of the new congress center in Turin, about 5,000 seats that will be developed by the end of 2024 and will be managed entirely by Fiera Milano, creating the second most important congress center in Italy after Fiera Milano Congressi Milan based in Turin which is going to be an area of extreme demand according to that information that we got from the market.

History announced in the early part of the execution of our strategy. So we feel to be on track with the execution of our CONN.E.C.T. 2020/2025 plan in the sense that we are increasing our prominence abroad, while executing on position in Fiera Milano as one of the main hub in Europe, being able to attract the international event. And we are part of the development business which are strongly profitable in the congress area.

We have prepared -- coming back to the financials now that we have seen most of the key events of the quarter, we have reported breakdown by segment in terms of results of the 9 months. The first one is on Page 10, which we're talking about the Italian exhibitions business, so the main domain business is clearly in third quarter have seen important performance coming from the super Salone del Mobile, and as I told you, the great performance coming from the exhibitions business and the [ e-commerce ], and Unica which are performing EUR 2 million better, I told you, than the expectation.

At the same time, we have also to register a bit better in July. We booked, as you already know, EUR 10 million, which is impacting up in the revenue and the margin, but in our EBITDA of the contribution and support coming from SIMEST there in terms of one of the fundings that we received to restore the losses of the previous year during the pandemic crisis of COVID-19.

In terms of -- I would not spend much time in terms of commenting more data of the -- so far the foreign exhibition. As you know we have 3 main areas, one is China, for which most of the events are supposed to take place from the first quarter to the end of the fourth quarter has been postponed to the last week of November and the month of December that we are not consolidating our financial results in the first 9 months. The second stream is Brazil for which we have postponed and already forecasted in our number, so nothing new, I would say. It's already embedded in our financials for which we have postponed our events to the year 2022 due to the pandemic crisis that is up and running in Brazil. And therefore, something that is not material to comment so far on the foreign business.

And we said we raise again the importance of the resumption of the business that took place in congress even more than into the division area, for which we have registered in the first quarter of 2021 almost EUR 10 million revenue with an EBITDA of 43%, almost EUR 3.2 million, and this is mainly due to the vigilance that we have been to have in Milan, which is confirming to be the most attractive cities -- one of the most attractive cities in Europe, thanks to our important congress center. We have also events such as Youth4Climate and the pre-COP26 that has been, as you know, duly published with all the media news that are actually going on around the climate change and the consideration that has been done during the event.

Just to close on the financial on the 9 months, I'd like to make a quick comment on the financial overview in terms of net financial position. As you can see in the Page 13 of the presentation, as we have seen, our financial position is improving significantly. We are in the region. We moved from the EUR 65 million debt position at the end of June to EUR 14.5 million now at the end of December, and the strong improvement is mainly driven by the -- to the cash inflow, which is coming from the events that was managed and we are going to manage from now to the year-end. We still have almost 18 events to be done in the last quarter plus the pressure that we are getting already for the previous events that we are going to host in 2022 remain in the first and second quarter of 2022. So really, this is a very good season because it means that the cash flow is coming back to be in the year in the positive virtual cycle that we added in the past.

The last comment which I'll speak is going to be one of the key discussions is that you heard that last Friday has been the Minister of Tourism has officialized the list of events organizer or venue manager that has obtained and are going to obtain a significant contribution for the losses of the COVID-19. Fiera Milano in total has been signed, still to be confirmed under theoretical mode because we still need to make some checks creation. But we have been assigned a value which is in the range of the EUR 35 million mainly coming for EUR 28 million from Fiera Milano and EUR 7 million to restore the congress business. The two together are around EUR 35 million and are entitled to cover the period of the 2020 COVID impact.

As you can imagine, these numbers are not projected -- are much accounted, sorry, into the 9 months to the accounting credit principal. We are projecting instead that we include this upside in terms of revenue cash flow for the year-end financial results. And thank you for this contribution and to the positive contribution of the business itself, we are thinking to move in the region of the EUR 54 million, EUR 55 million EBITDA IFRS at the year-end and with a financial position that in case the contribution will be made, the cash available by the end of the year, we'll see it in the positive region. So from a negative one, we see in the positive region of EUR 5 million to EUR 10 million.

I'd like again to remark that even without the cash contribution coming from the [ infrastructure event ], our net financial position, we still -- would have been still confirmed there in the region of the EUR 26 million, EUR 24 million negative, which means that it's an important result because it means that on our side with our business, we would have been able to pass 2021 without any kind of -- without worsening our financial position of the year 2020, of the starting point of the year-end 2020.

So these are the main points that we would like to strike. In summary, a very good performance. Again, just to remind that certain events would be hosted by the second part of the year, maybe from September to December, still almost [indiscernible] to go with a very easy and exceptional calendar, I think one of the few organizers in Europe that are forecasting to revamp most of the -- almost all the events and exhibitions which are part of the traditional book of Fiera in almost a quarter. The target of the previous forecasted proceeds has been confirmed and then improved better for about EUR 30 million, which is the result of the contribution. And the strong financial position, which is coming back from the report cycle of the [ year to discuss ], sorry, cycle of the cash flow plus the contribution which is about to come in the region of the EUR 35 million as we said. I don't have other comments. I would open for your questions.

[Operator]

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

[Emanuele Gallazzi, analyst]

So I have 3 questions. Well, the first one is on the grants. Just to be sure I have understood correctly, you're expecting EUR 35 million of additional grants in 2020? Are they on top of the EUR 10 million of grants you have already received from SIMEST?

The second one is a clarification on the new guidance because it is pointing to EUR 55 million of EBITDA in the midpoint, including EUR 35 million of grant. So comparing it with the previous one, it seems you are reducing the organic guidance, so excluding EUR 35 million of trends, by roughly EUR 5 million in the midpoint from EUR 25 million to EUR 20 million. Any details on the new assumption and the reason of this, let's say, revision that will be very useful for us?

And my last one is on the downpayments, which are at very high level in the third quarter. Can you just comment a little bit more on them? And also looking at the main exhibition held in the fourth quarter, if you can just give us an idea of the level of square meters sold compared to the prefunding level.

[Andrea Maldi, executive]

Okay. Thanks. I will start to get your question in the order. The first one is about the grant. Yes, we are forecasting to get EUR 35 million, and this EUR 35 million is going to be on top of the EUR 10 million that we already booked for SIMEST. That goes with the breakdown is about -- is more or less EUR 28 million for Fiera Milano for the exhibition businesses and almost EUR 7 million, 6-point-something million for the congress business.

Yes, you're right on the second question, we are pointing to the EUR 55 million of result of EBITDA adjusted. And we are positioning ourselves in terms of core business in the region of the EUR 20 million, so down starting a little bit of EUR 4 million in the previous estimation. So we are at the lower point of our previous business estimation, and this is mainly due to the fact that we wanted to consider a couple of things. So the first one is that we still have risk, in my opinion, in the execution of the event and the profit which is coming from China. As you know, this is going to be all in the last month, I told you, the last week of September, the last -- the month of December. So we see have a few points open regardless of the development of the pandemic in China which are making profit still under -- we need to take a prudent approach.

And the second one is, clearly, we have seen in October, which is not in the number of September, a great performance of our 2 pillars, the pillars which are often to the food. They performed very well in terms of the square meters and also in terms of meal in terms of visitors. We got almost 150,000 visitors during the event, which had been exceeding our expectations.

In terms of margin, they are performing EUR 4 million, roughly EUR 3 million to EUR 4 million less than forecasted during the month of July [ just by their claim ] in order to see that if you're seeing that the increase of visitor that we got from September to year-end, now that we are going to year-end, it's a number which is increasing in each and every event. But we said that we have got stabilization in terms of count, in terms of pandemic situation, but also the fact that the impact and we got the safe condition that we are putting here in our venue [ for our partner ] facilitating the visitors to come and the results of the event after to the full clearly in terms of revenue are impacted by the decision that took place back in July and August, one that all this measure in terms of safety were not yet in place not to come to participate in the event with most cases with a bigger grant from the exhibitor themselves, which we have -- they have finally noticed their higher dedication compared to their expectation of the events platform. So this is just to explain the answer to your second question. But the third one, can you just repeat what you mean?

[Emanuele Gallazzi, analyst]

Yes, it was basically on the downpayments. Just some comments on it and the cost that they are very high level. I just want to understand because I think it's a very good proxy to understand at least for the first quarter 2022. And the other one was you partially answered to me as well on the main exhibition held in the third quarter, just to have an idea of the square meters sold compared to the pre-pandemic level, just roughly if we are 50%.

[Andrea Maldi, executive]

In terms of downpayments, so you mean the [ cash advances ] we are getting from -- throughout the event yet? So I told you the picture is much better. Even my forecast and expectation, we are really cash healthy. The events that are supposed to take place already in 2022 in the first quarter, in the second. And we are in a region now of EUR 30 million of higher cash than expected. So this is an extremely positive result for us.

And in terms of the events that are going to take place in the fourth quarter, we clearly have some important time for one. And the main one are MADE expo, [ E Famoso ] and CPhI. Our expectation and that of Fiera Milano, our expectation on this is supposed to be that I just made is that we do expect to lower a little bit our margin of about, in total, EUR 2 million from MADE, CPhI. As you see, it's a prudent expectation because this is just a result of what we have seen in the last few weeks in terms of exhibition in square meter.

We do, at the same time, with prudent approach, we are not registering in our expectation year-end the improved performance that is most likely to come from the synergies that we are going to basically to sell and pro forma really on the last -- or during the event itself, which we are seeing that specifically in this year of the COVID-19, as we always like to say, an upside, a development of upside that we got in all the events that they were also to come starting from Salone just go to with the Asian exhibition that I just explained before. So this is a little bit of the answer to your question.

In terms of square meters, actually, it doesn't make a lot of sense to compare the square meters sold with the previous '19 period because clearly the world has changed in the meantime. What I can tell you is that we are still in the region of the 650,000, roughly 620,000, which is the gap for let's say that far because they tend to talk to you for the 11 months to destination at year-end, which is significantly lower than clearly the year '19. But it's almost in line with our expectations that we got in July with the fact that we are still one of the few, if you were on to seek, one of the few organizers that are preparing a very top calendar as I told you in the fourth -- in the last 4 months of the year to cover almost all of our exhibition really that is used for all. It's quite or, let's say, early to talk about at this point. But just respond a little bit more, we are in the case of preparing our 2022 budget and we would like to confirm that 2022 is going to be in line with our plan in terms of positioning that we see a boost in 2022. Okay, have I answered all of your points?

[Emanuele Gallazzi, analyst]

Yes, absolutely. Very clear.

[Operator]

The next question is from Andrea Bonfa with Banca Akros.

[Andrea Bonfa, analyst]

I got some -- the following question. Why is related to what you mentioned in the press release that basically, the tenancies for the last few exposition were obviously lower than expected and partly seeing the small portfolio compared with the initial expectation. But do you see these kinds of trends in the last, let's say, month of the year or better with the -- with your first exhibition of the company cost impacting the 2022 ones, which means that there is the risk of overall lower profitability from the various events you're undertaking? Or you are, let's say, relaxed and your expectations of profitability are more or less confirmed? This is the first question.

The second one is that looking at the upside of the agreement with your new partner for distribution in Asia that you're going to find in regards to that in particular. Which kind of profitability do they have, this kind of land which are not -- I mean, these are offered from yourself but are organized by the new partner? Because I think maybe these are not included and maybe on your business plan, but I want to double check with you on this point.

And the third one is a technicality. Nominally speaking, the rebates, the first [ EUR 5 million ] rebate, if they come, although you were likely are not in a position to pay back it. Nominally, accounting item, which accounted are based in.

[Andrea Maldi, executive]

Okay. Thanks for your questions. Let me try to answer. So when you're talking about -- we have seen yet during a decrease in terms of performance compared to our exhibition starting from budget and then our reported during the year for the events. But at the same time, what we are seeing is that as much as we expanded our exhibition into the very last end of the year, this kind of attendance [ starts to be contracted ] but to reduce the gap.

And so hopefully putting all together for the events in the calendar, in the quarter, we do have an easier reduction compared to the '19 pre-pandemic situation. And if you compare the world that we are talking about back in July, August, with the one that we are talking now in October, November is a completely different world, with all this safety system in place, with the control event and exhibition venues that are considered in the first place and the events that are taking place with a larger number of visitors, which is one of the most important elements mainly higher than it's been expected. Obviously, these are higher than expected. These are a bit seasonal now for the exhibitor, which are starting to recover impacts on the physical event. And I cannot mainly clearly see a single basis, the main customer that we are going to have in 2022 but just to confirm that we are deeply connected with them on a weekly touch base. And the signal that we are getting from the market is the most important one is that they are doing very great in organizing the events, and they are going to be in a recovery path on that with the expectation and, sometimes, I said sometimes in line with the pre-COVID funding situation.

I cannot name clearly the single one, but you can look at our book, and these are a good signal, which is making me feeling that 2022 would be almost -- which we do expect to be on track with our expectation and our plan.

The second one was about the profitability of finding out exactly whether this kind of event is a very high profit event, which is going to take place back in September -- is going to take place in September 2022 and is profitability is in line with our event and it's not decremental and is accretive in terms of volume.

The upside is coming from China. As we all know in this business, there is something that happened that is going to happen in a short time as a bigger, shorter. So finally will be the first step for our footprint in the South Asia together with one of the most important for international events organizer. And we know the profitability is quite good. We have model of revenue sharing. Therefore, we appreciate with the kind of partnership that we have been able to sign, and then we will also get in partnership with the Singapore Council which is in fact is really to see -- to create our important footprint in Singapore in terms also creating connection with local authorities and their local stakeholder.

They are going to -- the Singapore government is going to create important subsidizing to our events there. So for us, despite that we do know that I can confirm you that the profitability is quite high in the order of the revenue share, at the same time, I can tell you that it's going to be really the first milestone to create a growth strategy abroad. So this is really the most important piece.

The last one is about the EUR 45 million. And I think that your question was about are they adjustable income or not. I'd like to give you a straight answer, but I'm not in a position to do it because we are still expecting technical point of view, the technical point. With all the stakeholder involved, we just want to be sure, so therefore see that we need to -- I can't control this, I don't know if second quarter, not confirming today. There are rumors that our indication confirmation that they're not going to be partners because that they are expensive. But given the fact that still like to observe the technical point, I will prefer the stakeholder the prudent element before taking it.

[Operator]

[Operator Instructions] Gentleman, there are no more questions registered at this time. Gentleman, would you like to add any final comments to conclude the conference? Mr. Maldi, the line is yours -- is back to you for the final comments. Thank you.

[Andrea Maldi, executive]

I think that I feel that if there are not other questions, I'd like to thank all the attendees for their participation. And I'd like to wish you a great rest of the day.

[Operator]

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