Even after two years of the pandemic, Valora remains solidly positioned in terms of balance sheet and activity. In view of the development of its business in the second half of 2021, the group is convinced of the strong value creation potential of its Foodvenience strategy and continues to invest in its implementation.
On the road to recovery – 2021 EBIT in line with financial outlook despite Omicron
With an EBIT of CHF 30.3 million, the Valora group closed the 2021 financial year in the middle part of the range communicated before the Omicron wave, an increase of +115.5% or CHF +16.2 million compared to the previous year. Although the pandemic continued to weigh on Valora’s business in 2021, progress in vaccination and the easing of health measures from March onwards have accelerated the recovery. In the second half, the recovery continued especially in the Food category, reaching a peak in September/October.
While in the first half, net sales in the Food category were -26% below their pre-crisis level in 2019, they recovered -5% in the second half of 2021. The strongest catch-up was recorded in the Food Service division, which for the first time achieved a clearly positive EBIT thanks to a considerable operational leverage effect on profitability. As a result, the EBITDA margin of the Food Service division recovered in the second half of 2021 to reach 76% of its pre-crisis level.
Michael Mueller, CEO of the Valora Group, comments: The Retail division has shown itself to be very resilient throughout the coronavirus crisis and the Food Service division, benefiting from a recovery in turnover, has demonstrated in the second half of 2021 its ability to further significantly increase profitability, while customer footfall still suffered from coronavirus-related restrictions. At the same time, we have additional potential that we can exploit, both in terms of growing B2B and B2C activities and synergies resulting from the acquisition of Back-Factory, which we completed in November 2021.
Increase in gross profit margin in 2021 thanks to a stronger increase in Food turnover
Over the full financial year 2021, Valora’s net revenues increased by +3.1% CHF1’749.6 million (financial year 2020: CHF 1’697.4 million), while external sales remained stable CHF 2’230.1 million (financial year 2020: CHF 2,233.3 million). The two months of January and February 2021, which were affected by the coronavirus (unlike January and February 2020), are also taken into account. From March to December, a period affected by the coronavirus crisis in these two years, growth was +8.9% and +6.0% compared to the previous year, while the turnover of the Food category increased respectively by +22.7 % and +18.1%.
Thanks in particular to the increase in the share of revenue from the Food category, the gross profit margin increased by +0.8 percentage point during the 2021 financial year, from 43.8% to 44.6%. Gross profit increased from CHF 743.3 million to CHF 780.2 million.
Continuation of disciplined and flexible cost management
The group continued its disciplined and flexible cost management in all areas of activity. At the same time, Valora continued to help its franchise and agency partners remain economically viable. The group has benefited from short-time work programs and received government support contributions related to the pandemic. The total amount of assistance received was, however, comparatively lower than in 2020, with in particular lower rental concessions due to the coronavirus in 2021. As operational efficiency could be further improved, the cost ratio remained relatively stable -42.9% (FY2020: -43.0%), despite increased spending on digital innovations and mergers and acquisitions. Compared to the 2019 pre-crisis level, 55% of the decline in gross profit was offset by lower costs.
Return to positive net profit for the group
The group’s EBIT amounted to CHF 30.3 million for the financial year 2021 (financial year 2020: CHF 14.1 million), an increase of +115.5% compared to the previous year. After a loss of CHF -6.2 million the previous year, the Valora group is back in the black figures with a net profit of CHF 8.3 million. Solid EBITDA and targeted cash management with regard to net current assets and investments enabled a free cash flow of CHF 25.1 million (financial year 2020: CHF 38.1 million).
Strong balance sheet and high leverage ratio
The group once again stresses the solidity of its balance sheet. The equity ratio before rental commitments thus improved to reach 51.0% (31 December 2020: 47.3%) and net debt remained stable at CHF 209.3 million (31 December 2020: CHF 211.8 million). The suspension of the dividend for the 2020 financial year also contributed to this result. As a result, the leverage ratio rose to 2.2x EBITDA. It therefore remained below the level of the previous year (2020: 2.5x) and significantly below the group’s upper syndicated credit limit set in the Leverage Ratio Covenant. The additional debt capacity resulting from the group’s capital increase of CHF 70 million carried out in November 2020 remains fully available for strategic projects.
Foodvenience activity with more Food, increased convenience and greater availability of the offer
In addition to expanding its business, Valora accelerated the implementation of its Foodvenience strategy in 2021. The biggest milestone was the acquisition of German snacks specialist Back-Factory. The extension of its network to some 80 Back-Factory points of sale has enabled Valora to develop its presence in city centers and increase the purchasing potential of its Food Service platform in Germany. In addition, compared to the pre-crisis level, Valora is now one of the five largest German gastronomy companies (so far top 10 according to foodservice magazine 4/2020). Since the first consolidation with the group results in November 2021, Back-Factory had already made a small positive contribution to EBIT, which was however neutralized by transaction costs.
A new important step has been taken with the partnership with the service station operator Moveri in Switzerland. With the acquisition of Back-Factory, it creates considerable synergy potential within the business, enables Valora to access attractive convenience sites and increases the share of higher-margin Food in the group’s category mix. from 1er January 2022, Valora will take over 39 gas station shops from Moveri. In terms of number of shops and net income, its Swiss network of service stations will almost double. With the transition of shops to the avec format, the entire avec network will grow to around 300 points of sale (after the CFF roll-out is completed).
The transformation of the SBB sites is progressing and should be almost completed by the end of 2022. By the end of 2021, Valora had modernized or opened almost 50% of the points of sale of the entire SBB network. From March to December 2021, the modernized SBB points of sale generated Food turnover +19.8% higher than for the same period of the previous year, while the turnover of the points of sale not yet modernized was ‘moved only slightly (+1.8%). All categories combined, the overall turnover was also higher in the transformed points of sale (+7.4% against -2.5%). Almost all of the increase in rents resulting from the successful SBB call for tenders is already included in the 2021 annual result.
Additionally, Valora has brought more convenience to the customer experience. The group has thus offered its stationary Foodvenience offer even outside normal opening hours, like the online retail trade. In this context, Valora launched into the vending machine business with k kiosk. Initially, it is planned to install 300 distributors in Switzerland by the end of 2022. In the digital field, Valora is pursuing a 24/7 approach as part of its Autonomous Stores initiative with different variants, all based on a self-service -checkout via app. These include the with box without box, which is now also being tested in a smaller format. Hybrid shops with 24/7 are also included. Equipped with the same technology, they are currently operated at four sites, partly manned and partly autonomously. Currently, the team continues to move forward with 24/7 solutions.
Attractive market prospects for B2B business
Revenue from the B2B business with pickled bakery products fully recovered in 2021 and is experiencing strong growth in the United States. After the successful extension of the capacities of the second production line at Ditsch USA in 2020, a further extension of around CHF 10 million is planned for 2022 to take into account the expected growth of the American market of around +2 +3% per year. Compared to other Valora business units, the B2B business is more exposed to the current inflationary trend. In addition to raw and packaging materials as well as logistics and personnel costs were also strongly affected in 2021. The effects of inflation could already be passed on to customers in the US to a large extent, while that price increases in Germany are expected to unfold fully with some delay in 2022.
Halving CO emissions2 in scopes 1 and 2 by 2025
In 2021, Valora also advanced its ESG initiatives within the framework of the three orientations People, Planet and Products. For the first time, the group analyzed its carbon footprint throughout the value creation chain (scope 1 to 3). CO missions2 having the highest ecological impact at Valora, the group is striving to decarbonize its value creation chain. It is thus committed to the path of climate neutrality which it intends to achieve by 2050 and will strive to halve the emissions of scopes 1 and 2 by 2025. To do this, it will spend 100% group-wide renewable electricity during the course of this year. It will also work closely with its supplier partners to reduce scope 3 emissions, with greater emphasis on its own brands.
Financial outlook for 2022 and long-term objectives confirmed
With the Omicron wave, Valora’s activities were again affected by restrictions at the end of 2021 and the beginning of 2022. With regard to future business developments, Valora nevertheless assumes that the rapid recovery experienced between March and October 2021 will continue. will continue thanks to the lifting of the main restrictions linked to Covid. Based on the 2021 results and with the prospect of a further recovery, Valora is still expecting an EBIT of CHF 70 million for 2022 (+/- ~10%). This implies a return to the pre-crisis level in the second half of 2022. The long-term objective, initially communicated for 2025, remains valid. However, due to the pandemic, Valora should reach this target 18 to 24 months later.
Proposals to the general meeting
To clearly express its confidence in the future development of the business, the Board of Directors of Valora Holding SA will propose, on April 6, 2022, a distribution to shareholders of CHF 3 per share giving right to a dividend. Half of the distribution will be deducted from the profit on the balance sheet and half from the reserves constituted from capital contributions, the latter being exempt from anticipatory tax. If both proposals are accepted, the distribution will be around April 14, 2022. As announced, the Board of Directors will also propose its current Vice-Chairman Sascha Zahnd for the election of the new Chairman of the Board of Directors. Sascha Zahnd is to succeed Franz Julen, who will not stand for re-election, after 15 years on the Board of Directors, including five as Chairman. All other members of the Board of Directors will stand for election. In accordance with Ordinance 3 COVID-19 promulgated by the Federal Council, the 2022 general meeting will take place without the personal presence of the shareholders.