Welcome to the conference for the presentation of the half year results of Fnac Darty. Enrique Martinez, Director General, and Jean-Brieuc Le Tinier, CFO, will be speaking during this call. Gentlemen, the floor is yours.
Hello. Thank you, everyone. Thank you for being with us for the presentation of our half year results. I know that the week was tough. I'll skip to the essential. I want to first express my support to the stores that had to face riots and the consequences. Most of our stores have reopened. Only one is still closed. We have three reasons for satisfaction. We've been resilient in our sales in spite of the market and the context. We've improved our gross margin thanks to our multi-channel strategy, based on value creation and service.
Can I have the second slide? Our activities during this semester, then Jean-Brieuc will tell us about the financial aspect, then we'll have time for questions after a conclusion.
As you know, the household confidence has dropped after the energy crisis, we've had a drop of consumer activity. Thanks to our operational resilience, we've managed to overcome this difficulty, we've got a reinforced service area. During the first semester, we've also resized our partnership in Switzerland and bought MediaMarkt in Portugal, this will complete our offer on that market. We have a plan which worked out successfully for 2023. We, as regards retail in France, it's a sector that is under a lot of pressure.
The first trimester, we had a drop, and the drop increased in the second semester. That has reached -2.5%. Thanks to our resilience and our multi-channel approach, we've been able to make up for this. We in France, with a sluggish consumption and negative calendar effect, we serve this at the European level. The EUR 3.344 million revenue is, of course, there's a calendar effect for the drop in the second semester, which represents about 1.5%. This is because May was full of bank holidays, the sales week was postponed to July. Even without this, the second term was characterized by a drop.
We were able, however, to have one good news, is that the gross margin stayed at a level of 21%. If you revise the impact of franchises, it really means an improvement of 35%, that confirms the model we went for, for sustainable quality and good quality service. Number seven, we've presented the key indicators to follow the financial indicators and evolution of the strategic plan. Multi-channel with 9% of in-store revenue. Our objective, as you know, is to reach 30% of mail orders, internet orders, this corresponds to our multi-channel model, with 49% of people using Click & Collect.
They buy online, and they come and pick up their goods, which is the opportunity for some window shopping and a complete shop in-store experience. We have a wide range of products and services and shows the diversity of our offer in Domestic Appliances, Technical Products, editorial products, and services. This is important for us because it includes diversification, and it represents 15% of our activity. Let's concentrate on the energy aspect. We're very committed to going green and reducing gas emissions. It's part of our 2030 objectives. Science-based target. We have a vast remodeling program for our stores with installing LEDs everywhere.
In the first semester, we should be investing part of the EUR 20 million, which is planned for the coming years for changing the lighting system and the electricals. We have a partnership with Valeco to increase the share of our green energy, and this has been working since April 2023. Number 9, before I conclude on this first part, I think it's important to share with you some of our ideas which have really marked our development. We want to be in keeping with our digital approach. Logically, we have included our customer base, but also all our new customers, trying to create a favorable environment for communication.
It's a 360-degree approach, which connects the digital approach and the in-store approach with a 2-figure growth, which is one of the best retail results in France. We started this campaign since 2021, and with the hope is still in 2024, we think that this is going to go on improving, and we're in, in really, in a good place, for the development of the choice offerings that our group can bring. This is what I wanted to say as an introduction.
Now, I want to talk about some of the operational results, by geographical zone. Let's see, to start with, the revenue and the gross margin.
As was said, the group has had a first term in 2023 with over EUR 3 billion slightly, a slight drop, but the drop is comparable with other years, and it's based on the loss of purchasing power and people postponing their decision to buy things which are not essential. There's also the bad context of June, May and June being full of bank holidays and the sales not at a good date. This explains a drop of 1.5. Our, as our team already said, we are multi-channel, and that's one of our strong points, and that keeps us at a high level with 49% of Click & Collect sales, and it shows our resilience in the long term.
Now, by category, we have quite a drop in the second semester, tri-trimester compared to the first one. There's gaming, which is doing very well, a record activity. We're able to stock up on some of the games which were missing for a long time. In many regions, we are still developing uncertain and ticket sales. Compared to the 2022 equivalent semester, we're doing much better. The sale of hardware has dropped because it was had a favorable context last year with people equipping themselves for home offices. The area of smaller planters has not progressed either. Let's see the operational performances by geographic zones.
France and Switzerland, it's dropped by 2.5%. In France, when you look at the Banque de France data published last year, Darty is still above average in the global market. However, we had to close 10 shops in Alemannic, Switzerland in 2023, and some shops in France in 2022. Now in the Iberian Peninsula, a drop of 4.3% with Portugal being in growth and Spain dropping because of the pressure on consumer behavior of a very competitive environment. Let me remind you that we, pending the last administrative authorization, we bought MediaMarkt in Portugal. Closing should happen in September 2023.
In Luxembourg and Belgium, it's the only region where sales have gone up, compared +1.7%, and this is thanks to the salary increases, which have improved the purchasing power of people. A new shop has opened in 2022, and services have increased, repairs and Darty Max and other services have gone up. For the gross margin, Darty has maintained its gross margin, thanks to its positioning in premium goods, which means that it's easier to get the customers to pay the difference.
The progression has been +35 basis points, and 25 for the mix, thanks to sales in store sales, which have been very good, particularly for editorial products, and +10% in ticket sales, thanks to good programming. Because comparing is difficult, the first trimester of last year was still affected by a COVID restriction. Operational costs inflation has been offset mainly by our efficiency program, because we managed to save with this program. With an investment of EUR 4 million compared to what we had before, if you don't count energy, the operational costs have increased only by EUR 13 million, thanks to a highly performant plan set up by management. By.
As a percentage of the turnover, it's gone up by only 1.4%. The results year by year appear here. You note the effect of the rise in energy costs are not entirely offset by the performance plans. There's the provision for IDFC, net income from continuing operations, and that's how we get at minus EUR 134 million, with a rise in point of EUR 26 million, thanks to the non-recurrent financial expenses. Selling Daphni Purple. The group invested EUR 1.6 million in this investment fund, and until 2022, the participation was reassessed at its real value.
After the first trimester, we decided to sell this off because of the market output. The investment we had made gave us sales benefit of several million EUR. We end up with EUR -163 million. At the end of June, this is what we've got. The free cash flow, which we have results which are above those of the similar date last year.
million of last year, we have a cash flow requirement, which is in keeping with the normalization of the group, which we have started at the beginning of 2023, and the operational investment for 863 million and 8 million for improvement in energy management
The financial structure of the group is healthy, with nearly EUR 1.4 million in Shareholders' Equity. The Net Financial Debt traditionally is higher at the end of the exercise due to the seasonality of activity. On 30 June 2023, Net Financial Debt outside IFRS 16 is EUR 674 million. We also have EUR 470 available at the end of June, to which to be added EUR 500 million, which can be called upon. In March 2027 to March 2028, the option was subscribed at 98.5% of our bank commitments. We have a line of EUR 500 million up until March 2027, and EUR 492 up until March 2028.
Lastly, for the third consecutive year, the group has proposed paying out dividends of EUR 1.4 per share in our General Meeting last May. It was paid on the sixth of July and represents a distribution rate of 38% of net results per share for the activities. For the first time, our shareholders had the option of receiving their dividends paid in shares. This was the case for 44%, showing that there's a lot of trust. The 535 million new shares were created as of the sixth of July. The Net Financial Debt over 12 months shows that the leverage is at 2%, which is in keeping with our strategic plan.
As you can see on slide 17, the next reimbursement will happen in 2024. As we commented in the results presentation 2022, we wish to secure the next debt line of EUR 300 million, which will arrive to maturity in May 2024. We have set up an additional credit line, which has not been drawn upon yet, in a delayed bond loan of EUR 300 million, which could be drawn upon only once, but only to reimburse the bond debts for 2024. Maturity is 3 years in case of a drawdown, which has been extended by 2 years. Thanks to this, the group can continue its credit line to maturity, benefiting to the low rate of 1.75%, and secure our level of financial security.
In S&P, we received a grade of BB+, Scope Ratings and Moody's, BBB and Ba2, both being stable. This shows that they believe that our omnichannel approach is sound, as well as our financial discipline.
Now I give the floor back to Enrique to conclude our presentation.
Thank you very much. On slide 19. The second half contracted strongly as compared to the first half. Actions were undertaken, they bore fruit. We've won market shares, we've improved our gross margins. We've also maintained strict control over our costs and operational activities. We're aware of what's ahead of us. We know our strengths as well. There are encouraging signs, even though there's a lot of uncertainty. The level of inflation is stabilizing. There's increased household purchasing power.
Lastly, the second half is usually more dynamic because there's a back to school, there's also Black Friday, Christmas, and the Rugby World Cup that will be happening this year in France. We know very well that when there's an event of this type, it brings people together, and we hope that this will have a positive impact on the sales of Technical Products, and especially on televisions. To conclude, we confirm our 2023 objective to reach current operating income of about EUR 200 million. Up until 2024, we're aiming for about EUR 500 million in cumulative free cash flow from operations, and then 2025, at least EUR 240 million in free cash flow. This will entail very strict management of our inventory. We have to maximize around EUR 520 million per year.
As Henry already said, we will be finalizing our acquisitions in Portugal, and there may be other opportunities for development. I have finished with my presentation. Thank you very much for your attention, we are now here to answer any questions you may have.
Ladies and gentlemen, if you wish to ask a question, please hit star one on your telephone pad. We have a first question. From Geoffroy Michalet. You have the floor.
Hello. Thank you very much for taking my question. I have a question in reaction to the last comments on your M&A. Could you tell us what your viewpoint is of Ceconomy at a discount? There have been rumors, or people have said that some of their activities could tie in very nicely with yours, this could allow you to gain lots of market share.
Thank you very much. People may have imagined that the acquisition has already taken place, given what was said in the press. I don't want to comment this too much in detail. As you saw, we're looking for opportunities in Portugal where our model is relevant. It all depends on the quality of the asset and also our capacity to generate synergies. Currently, on the market, as we'd anticipated, there are more opportunities than over the past few years because, well, business is difficult for everybody.
I will not comment on what we're looking at currently, but so far the situation is very stable. Currently, we're already a major player. I think on the digital market, we have developed our market share very strongly. Also Nature & Découvertes, for example, they have very important presence. Today, we wanted to show that we are a major player, and currently we have a capacity to develop organically. If there are acquisitions which we find attractive, then we will study them on a case-by-case basis. Thank you very much.
The question now by Emmanuel Tiberghien of HSBC. Over to you.
Yes, thank you.
I would like to have more information on retail media, especially in terms of its contribution to turnover. What are your expectations for BFR for the year? Lastly, for your gross margins, can one expect an similar increase for the second half? Thank you.
For BFR, as announced, it's being normalized, it's stabilizing. We've made a lot of efforts to come back to a normal level, despite results in June, which was a difficult month. For the year, as you all know, well, everything depends on sales in December. Things have returned to normal, but I'm not going to be commenting that performance today, but things are back to normal. For gross margin, generally, in absolute terms, the second half is usually lower in the first half than the first half, given the weight of Black Friday.
For example, we sell a lot more technical equipment than in the first half. Generally speaking, we have a particular focus on maintaining our margins. We will continue the efforts that we started in the first half. We will continue those in the second half, but I can't quantify that today for you. Now on BFR, I think this is something you said. This isn't the case everywhere. The quality of our inventory is highly satisfactory. The teams, our teams have made a lot of efforts to adjust our offer to demand and to make sure that their products are available despite an inflationary context. We have a satisfactory level of inventory right now, and we hope that this will lead to a satisfactory cash generation by the end of the year. Right now, we've decided to sort of show our hand.
We see that we have to be a little bit more explicit in our communication, especially the yearly results, and perhaps a fuller report. We can say is that, well, there are more opportunities in technology. We've developed an entire network of communicators and then also events in our stores. If you go to the Champs-Élysées, for example, you'd see what we're talking about. This is quite unique because the stores can connect to a network which has one of the highest levels of digital traffic. Currently, in the rankings, we are one of the sites that generates the most traffic in France. As compared to the Americans, I'm sure we're actually not far from number two.
Thank you very much.
The next question by Clément Genelot from Bryan Garnier. Over to you.
Yes, I have three questions.
First of all, on guidance and what this entails for the second half, and also, do you think things will pick up in H2? Inflation remains high in France, and then energy costs for households will start going up as soon as the end of August. To come back to inventory, you said that you were very comfortable with your levels of inventory, but what about risks for your competition, and especially, how about appetite for large appliances? Also for the Rugby World Cup, what boost do you expect from the World Cup, bearing in mind that during the World Cup for football, it didn't have an enormous impact. Thank you very much.
Thank you for your question. As for guidance, we had anticipated that the first half would be depressed.
With hindsight, it probably was a social unrest and also the fact that sales were postponed, and also so people were waiting for those sales to happen. There's also certainly tension on people's buying power. When there are sales, we can see that sales are more fluid. When we promote certain products, we can see that this does have an effect. We'll be doing much more of that during the second half. It's true that energy prices will be increasing, but salaries have also gone up. In what we're seeing in Belgium, will get adjusted much more quickly in terms of buying power, and consumption is reacting in a stronger manner. All of this is just forecasts.
producers around us are betting that at the end of the year, people will be investing more, and that consumption will be strong for everyone. December wasn't particularly satisfactory, historically speaking, but I think in December, maybe we could do better, especially in the last week. For inventory, yes, we are satisfied. I don't think that people are having difficulties with sourcing. Of course, there's a lot of tension around cash. That's true for everybody. I haven't seen any other publications yet, but I think that troubles with inventory are behind us. On appliances, but also on computer equipment, and all of this is, it's returning to normal. To finish, the World Cup.
Actually, World Championships usually don't have much of an impact on the sales of televisions. The fact that the championship is in France, we're hoping that it will nonetheless have a positive impact. We don't have any figures, but we hope that it will increase sales in television. The World Cup wasn't particularly dynamic, but it did have an impact, especially at the end of the third quarter and the beginning of the fourth, where there was a pickup, especially in large screen televisions. We're confident, and anyway, we're prepared for an uptick, and we will be launching a campaign next week around the World Cup rugby. Thank you very much.
You mentioned creative factors.
None of these factors are very important each separately, but altogether, taken together, they might have a good influence.
The next question is Florence Pen from TP ICAP.
Hello. I'm referring to Clément's question about the second semester OPEX and what we can expect as regards the impact on the yearly result with the million point two, and other elements which indicate that more inflation should be taken into account or a salary effect, which can explain your confidence?
On costs, we had inflation on the first trimester, which was high, and we've had between 5% and 6%, and we managed to master this and only have a rise in our cost of 1.6%. Second term, we're still going to have inflation costs to offset.
There's good and bad news. The bad news is that, well, there are difficulties, but the good news is that we're going to go on with our performance plans, and the cost of energy is not quite as much as we thought it would be. For the second semester, we'll probably have a fairly normal cost of energy, higher than last year, but not something under control, and the energy saving plans are a great help. We're going to have the effects on the salary costs, and we would have to improve productivity to offset that and master our expenses in the stores and for the inventory.
At SSP2, you know that we're not sure if we'll have the same level of results, we're working on it. As regards energy saving and the impact on the internal OPEX, I think we can count on maintaining the present level. When you change a store to LED, you save about 20% of energy cost. This is this offsets the increase in energy costs prices. In 2022, at the end of, that's when we started, we're deploying this till 2024, the real results will appear at the end of 2024. You talked about the bad month of June, which is not what some other players consider to be true.
What about July? We're going to have certainly to feel the impact of the riots and destruction. I don't know who had a good month of June, as far as I know, because everyone in, into sales has had a problem, and the manufacturers as well have been in difficulty. For the non-food sector in France and in Europe, there was a lull in France. We last year we had a good 2 weeks of sales in June, and that was good. This year, the sales were moved, were on the contrary, postponed. Since we'd had bad weekends, then we had the later sales, and that explained that the June and July activity was not so good.
The government then gave an extra week, which we probably won't manage to catch up entirely. The explanation being that we're in a global market, and all the phenomena and moving the sales is probably, it interacts with the purchasing retention. Compared to the trend on the market, France and the Western countries have not done well generally for non-food. Last question, about the free cash flow objective, the exceptional elements that we've been through for the first semester. You mean the free cash flow of EUR 500 million that we gave ourselves over four years, but it's not for regular expenditure? ADL will not be inside this. All right.
If you have a question, you press star one on your phone. Gentlemen, if there are no more questions?
There are no more questions right now, we're going to call it a day and remind you that you've all deserved some good holidays, take care.
Ladies and gentlemen, this is the conclusion of today's phone conference. Thank you for participating, you may now disconnect.