Fiera Milano SpA

MIL:FM

Earnings Call Transcript 2022-Q3

[Operator]

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Fiera Milano results as of the 30th of September, 2022 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 and good evening, everyone. Welcome. Thank you for joining the call today. This is Vincenzo Cecere speaking, and I'm here with Luca Palermo, CEO; and Andrea Maldi, CFO of Fiera Milano.

The purpose of the call is to provide you with an update on Fiera Milano results to September 2022. The presentation will be structured in 5 sections. During the first section, Mr. Luca Palermo will give you an overview of the business and 2022 outlook. Then Mr. Andrea Maldi will go through the corporate divisional results and financial figures in greater details, and an update on sustainability commitment will be provided. At the end of the call, you will be invited for a Q&A session. At this point, I will give the floor to Luca Palermo, Thanks.

[Luca Palermo, executive]

Thank you, Mr. Vincenzo. Good evening, everyone, and thank you for joining the call today. Just few introductory message from -- before going through the quarterly presentation by Andrea Maldi.

We have to start with the accelerated results achieved in the first 9 months of 2022 that represents for us a sign of well published recover after the difficult years of pandemic. Business continuity unlike what had happened in 2021, to confirm the solid foundation for the future. And I remember that starting from 2023, we will present our rich calendar full of [indiscernible]. So this will be another good year for us.

Fiera Milano is providing -- is proving to be an increasingly competitive in the international attractiveness and both playing a role in developing the Italian company, a broad platform and also confirming Milan as an exhibition center with an international outlet. I'm thinking about the very such find that Fiera Milano has organized to offer our design global reference to support the export in Asia, and for the main operating sector made in Italy. And Gastech that was in September, a couple of nice increasing the direct economic impact on our territory.

Considering the very positive results recorded in the first 9 months of the year, both on terms of significant participation in the revision and the maintenance of the expected tax level in volume, we revised our EBITDA target upwards for the year 2022 in the new range of over EUR 50 million to EUR 55 million, higher than the range of EUR 40 million to EUR 50 million, decline in February 2021 and in our connected to 2025 plan.

So just to go to the figures. I leave the floor to Andrea Maldi for the financial business review, and we will keep -- I will answer to your question after the presentation.

[Andrea Maldi, executive]

Thank you, Luca. Good afternoon, everybody. So let me start from saying that we are very enthusiastic and positive about the results that we have achieved in the first 9 months of 2022. The results and the operation proves to be back -- to continue to be back on track compared to the pre-pandemic situation. And you have seen we have been recording a revenue of about EUR 162 million, with an increase of EUR 121 million compared to the 9 months 2021. It's true and it's fair to say that on that comparing the '22 is a little bit leading given the fact that in 2021, we had almost 6 months in the first half of the year of lockdown.

So the EBITDA that we have achieved is EUR 50 million, which is significantly strong and higher than our budget and our last quarter that was in the range, so higher for more than EUR 4 million compared to our last expectation. This is bringing us to a net result of EUR 1 million at the year-end at the 9 months end, with a net financial position as of September 2022 of EUR 51.2 million with a significant improvement of almost 3.7 compared to December 31, 2021.

I think that, as we said, the industry is gradually returning to the pre-pandemic level. As you know, we can say that the fact that we are achieving the pre-pandemic level faster than the sector. We are estimating to be at the year-end with a percentage of 22% below the COVID issues, which is fairly better than the 40% that was forecasted into the source of advanced market research, which is a leading, let's say, industry sector with expertise and that we have used a benchmark to state our connect plan.

In addition to the strong results that Luca mentioned, in addition to the strong results that we have recorded in the first 9 months, we have revised upward EBITDA target in the range of EUR 50 million to EUR 55 million, which is proven on the fact that we continue to think that this trend we consolidated through the year-end in the last quarter. Let me state and then said that alongside the economic financial targets, the group commitment to develop and increase sustainability of the business model continues.

As a matter of fact, we have achieve sustainability -- sorry, the first sustainability rating during this quarter, which is an important proof of the fact that we are doing very well on the sustainability field. At the same time, we have also -- did a significant project in the field of sustainability, mainly related to the capability of major -- the life cycle assessment. So the cost, let's say, the carbon footprint of our events. We had a couple of real tests, and we are aiming to develop this kind of practice around the industry of the sales, not only in our organized events but also into the often [indiscernible] through our -- the relationship with our customer and organizers.

But if we -- without taking too much time, if you want to move a little bit into Page 8, we start to break down the performance in the division. Just to remind you that we plan to look at our revenue at our P&L, we generate unit with the Italian one, which is clearly the most important one. And as you can see in Page 8, the quarter did very well. We [ drove ] EUR 42 million and EBITDA of EUR 5.6 million. The number of -- significant number of exhibitions is 10, has been held here in the Fiera Milano with all the was important in our portfolio from Salone to the fashion industry that come back also is about to come better. So in September. And at the same time, we have boosted Gastech, [ hich ] is the largest iteration in the world is to the energy industry, which is the first time that came to Milan. And then a record attended almost 40,000 industrial professional with 300 TOs and opinion leader with a spread of about 750 exhibition company.

If we move to the foreign exhibition segment, we have recorded an important result of EUR 2.7 million of revenue in the quarter. Don't get too much let's say, distracted by the 0 on EBITDA because this is clearly the effect of the different mix of way of consolidating our accounting for the results. Basically the result of the very good results that we have achieved in Brazil, where we almost hosted 7 exhibition with about 120,000 square meters sold, has been completely offset by the fact that we are missing completely the activity in China.

As you know, China is still accounting with a 0 tolerance about COVID, dealing lockdown, for inbound and outbound business. And therefore, the EBITDA is affected here by the loss recurred in that country in terms of cost that we are incurring, but we are not able to record. While Brazil is presenting its full impact to the full set of portfolio of events in a planned with a good level of marginality and profitability.

If we do well into Congress, which is the other pillar on Page 10. As you can see, we are doing quite well. We almost have EUR 12 million in the quarter, these are just a quarter result of the 9 months. EUR 12 million in the quarter with an EBITDA of about EUR 5 million. And as you can see, we have hosted more than 10 Congress events just in the third quarter of 2022. In this case, the numbers are much more comparable with the third quarter 2021 because the third quarter of 2021 was at the time, a period of activity that we have used to restart.

Just to sign -- to market cap events. As you know, we have signed the agreement with Allianz to transform our Congress Center into the renamed Allianz MiCo. This is going to be a strong partnership in order to spread our activity in the corporate segment businesses. At the same time, we are still doing our next step in order to be able to manage the new Congress center in to arena, which is about to be completed in 2024 end of 2024, beginning of 2025.

The remaining part of the presentation, mainly on the balance sheet on Page 11 is quite detailed. So I think that this would be worth in [indiscernible] land for Page 14, which is seen as a bit of a snapshot of what's going on in the net financial position. As you can see, we are moving from the EUR 55.6 million as of June, coming into EUR 51.2 million in the quarter -- in the third quarter. If you remember, we start from a net financial position at year-end, December 2021 of about EUR 47 million. Clearly, the first announcement has been the most strong -- the most important one in terms of cash generation. The fact that we have a lot of -- the vast majority of events really concentrated in a short time period from basically March to June, especially after the fact that we have re-forecasted our calendar due to the Omicron [indiscernible].

And therefore, for us, it's pretty normal to see that our cash flow is going to get worse through the end of the year while our calendar is going to be less, let's say, crowded, let's say, this work compared to the first 6 months. The EUR 51.2 million is made by a cash, free cash flow negative of EUR 4.4 million, where clearly, we have EBITDA of the period of EUR 10 million, the cash out coming from the impact of the IFRS 16 for about EUR 13.1 million, the net working capital, which is negative for about EUR 1.4 million. And this is clearly generating a negative operating cash flow of EUR 5.1 million, just to give you the explanation.

We -- still a couple of strong, in my opinion, closure in terms of financial information. The fact that we are raising our guidance, it's an important statement because we are confident to continue reporting the improvement that we did in this 9 months to the year-end. At the same time, we have in mind the fact that our financial position is still strong. And we have in mind the potential target closure for year-end in the range of the EUR 20 million, which has been at the same level that we said back in the previous quarter call.

If you look at Page 16, as we try to highlight said that in terms of financial stability and liquidity position, we are in a very comfortable zone. As you can see, the ratio of the current assets comparted to the current liabilities. So current assets on current liability is a ratio of almost 1:1. At the same time, the fixed assets are fully covered by equity non current liability, if you look at the second ratio, which is Equity plus noncurrent liability versus fixed assets. These are clearly a little bit of theoratical representation from the financial books that are proven the solid position that we have been able to create with our leverage and with our equity structure.

I will now give the floor, the page to Vincenzo, which is going to deep dive more on the sustainability steps and achievement that we have done not only in the quarter but in the 9 months. Couple of damages being quoted by me at the beginning, but Vincenzo will give you more color.

[Vincenzo Cecere, executive]

Thank you, Andrea. Just a quick update on the ESG side but very relevant for us. Sustainalytics an ESG rating agency issued the first ESG rating of Fiera Milano with a score of 16.9 on a scale between 0 and 100 where 0 indicates the best rating, and positioning Fiera Milano Group in the second best rating class with low energy risk. Fiera Milano was included in the top 15% among the approximately 15,000 companies covered by Sustainalytics worldwide. Most appreciate the aspects where corporate governance, which was panic strong above average as in safety, human capital development and industry-specific environment initiatives of Fiera Milano, such as the carbon footprint measurement of our own exhibitions.

We are very proud of this result, which will help us to measure this of our custom ability practices and plan with the ambition to improve our ESG performance rating for the next 6 months.

I believe we have concluded with the call in the presentation. We can start with the Q&A session. Thank you.

[Operator]

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

[Emanuele Gallazzi, analyst]

I will start with 3 questions. The first one is on the Congress business and which positing strong performance in the third quarter. Can you comment a little bit more on it and in particularly on the very high profitability of the business?

My second one is on the guidance for net cash. You mentioned EUR 20 million by year-end. Can you help us understand the bridge from EUR 51 million in the third quarter to EUR 20 million, just because EUR 30 million cash burn in the quarter seems a lot.

And the last one is on 2023. I know it might be too early, but considering your guidance for EBITDA between EUR 80 million and EUR 90 million, I just would like to understand your confidence on it considering the current macro environment and the EBIT in 2022. Thank you

[Luca Palermo, executive]

Emanuele, Luca speaking. For sure, this year, we have seen a strong rebound of the Congress activities. This is a fact that mainly corporation we were investing more than forecasted. So we have the chance to work with some of the most important medical worldwide medical congresses, that they went very well. And we performed better both in terms of services we provided in terms of people attending the congresses.

Plus the fact that we were able to fill our calendar with a lot of corporate event with a very short fairly life cycle, to say, during the need of this corporation to point out a way to bring together people after years of quarantine. So in 2022, we have to say that we have exited something that was unpredictable, and we do believe that is for sure in 2022 something that we can consolidate at the end of the year because still now, we are booking for rooms in the new congresses activities. So this is what happened in this. On cash, Andrea, you want to answer on cash? Answer and then we will come back to 2023 based on the first evidence we have, okay?

[Andrea Maldi, executive]

Thank you, Luca. So thanks, Emanuele, for the question. I think that as you can see, [indiscernible] are quickly financial elements. Yes, the PFM around the EUR 20 million [indiscernible] is a prudential one. But it also -- I can give you some [indiscernible] there. I feel that you can consider a natural cash flow from our first quarter in the range of EUR 20 million, EUR 25 million. At the same time, we are having our buyback plan, which has been launched which we look at the very beginning in my last communication.

And when I say that it's prudentially because I'm now thinking to including the target, a potential cash as was meant related to inorganic operation that might happen into the quarter. Therefore, I want to give a prudential outlook of the financial position of year-end, just to be a bit of bridge for your consideration.

Yes, the third question on 2023.

[Emanuele Gallazzi, analyst]

On 2023. exactly.

[Andrea Maldi, executive]

Yes. The third question was -- we are still working equally in order to present our next 4 meeting the budget for 2023. What is sensible to mention is that the business consolidation is still strong and in line with what we have reported now in the first 9 months, also with a strong recovery, which is growing faster than expected. And of course these all are quality news.

I think that the one thing that we are trying to evaluate, and we are taking our time also to get the [indiscernible] impact we were all macroeconomic movement, it's clearly the energy cost, which might have an impact in our product development in 2023. We have taken all the items that are necessary to eventually compensate or mitigate the impact. As you have seen, there is a little bit of up and down into the as to the gas cost. Last week, I see that the gas cost went really below the [indiscernible] at the lowest level in the last 3 months. We are now approaching year-end. We will need to set a target price for 2023. And according to that target price, we will put in place some mitigation items in order to try to recover most of the disadvantage, which is clearly coming from the energy and inflation rate.

Just to give you a bit of further color, we are also working to -- with the office [indiscernible] necessary to increase the impact of our sort go guidance overall approach. Today, this is providing us support for about 50%, and we are doing investment in order to almost duplicate by year-end 2023, beginning of 2024, the impact, quality impact coming from alternative energy.

This is clearly, I'm saying end of 2023 because you know that it's not just about building up or installing the panel, but it's also about the -- being able to make it working, activating, which takes a little bit of time in executing all the procedures. So in a very prudential approach, I think that we will take the full benefit in year 2024 of about 30% impact in our energy strategy, which is clearly a very good quality outcome that we're going to be straight to the market as well in the future more in detail.

[Operator]

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

[Gian Gadini, analyst]

Just a question on the top line for 2023. So could you elaborate a bit on the next few quarters events? I do expect a slow down the dependence of exhibitors or visitors. Also taking into account to the possible recession we are facing. And if you have some updates or any updates on the negotiations with [indiscernible] during this year?

[Luca Palermo, executive]

Okay. We will assess all of our 52 events next year. Remember that next year, we will have the biannual events. I mentioned Tuttofood and [indiscernible] as an example. But also some international events like ITMA in June next year. We have not announced is now at level of [ Exposito ]. And looking at the trends we are assisting in this period in time in all the events we are hosting in this moment in time, we have no evidence that the visitors are going down.

So these are 2 indicators that are providing to us enough support to be consistent in the pipeline -- in the trajectory of our top line. I hope this could create -- this is what we are seeing at a moment in time.

Then a second question about sale department. We are going higher in the process after having signed the internship. So as announced, let's over time, we are doing this technical stuff in order to be able to create -- to have the proper framework and to present to the board a potential binding -- final binding proposal.

Sorry, okay. [indiscernible] This discussion going on, we have this letter of intent with [indiscernible] period of discussion with them in order to build up a potential unique credit proposition mainly on Congresses. We are working with the counterpart and with the shareholders of the counterpart to understand business casing, financial and which kind of meeting for Fiera Milano is necessary to go ahead.

Gives you many products in Pharma, okay? Nothing to add from others. Okay.

[Operator]

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

[Luca Palermo, executive]

Okay. Okay. Thank you. Okay. Thank you.

[Operator]

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