At the start of the year, Valora’s activity was still strongly impacted by the pandemic. Omicron constraints dominated the retail and foodservice sector, especially in the first quarter of 2022. The easing of government restrictions came later than expected, and in Germany even with an additional lag. Following the gradual lifting of restrictions, however, Valora has seen a strong recovery in revenue over the past two months.
Net sales in May and June 2022 above pre-pandemic levels
In the first half of 2022, Valora generated external revenue of CHF 1,213.2 million (HY 2021: CHF 1,030.4 million), i.e. +17.7% or +20.7% in local currency more than the same period of the previous year. Net sales amounted to CHF 943.3 million (H1 2021: CHF 814.1 million), up +15.9% or +17.8% in local currency. At -6.1% for the whole of the first half of 2022, it remained below the pre-pandemic level of 2019, while net sales for May and June were slightly above the corresponding figures for 2019.
Gross profit for the first half of 2022 amounted to CHF 428.2 million (HY 2021: CHF 356.5 million), an increase of +20.1% year-on-year. Margin improved by +1.6 percentage points to 45.4% and hence to 2019 pre-pandemic levels. Net operating expenses increased by +20.3% due to the recovery and growth based on acquisitions as well as the evolution of inflation. This also includes costs related to mergers and acquisitions and strategic projects of CHF -3.0 million. The absence of the COVID-19 support received in the first half of 2021 also resulted in a higher cost base.
Increase in EBIT in the first half of 2022
Group EBIT amounted to CHF 8.1 million (1st half of 2021: CHF 7.4 million). Excluding mergers and acquisitions and strategic projects costs, EBIT amounted to CHF 11.1 million, which, on a like-for-like basis, is up +41.9% compared to the same period. the previous year. This growth was mainly achieved thanks to the May and June results and without the significant COVID-19 related support of around CHF 30 million that Valora had received in the first half of 2021. Group net profit amounted to -5 CHF .4 million compared to CHF -3.8 million in the first half of 2021. The decrease is mainly due to higher tax charges and the negative development of EUR/CHF. Free cash flow was CHF -11.8m (H1 2021: CHF -0.1m) and was negatively impacted by higher outflows related to investments and fund increase net turnover resulting from the acquisition of additional points of sale and the general financing of growth.
Solid balance sheet with a leverage ratio well below the covenant ceiling
On the balance sheet side, Valora confirms its solidity. The Group’s equity ratio before rental debt amounts to 50.2% (51.0% as of December 31, 2021). Net debt amounted to CHF 222.4 million (December 31, 2021: CHF 209.3 million), while the leverage ratio at 2.3x EBITDA (full year 2021: 2.2x) was comparable pre-pandemic level and well below the covenant cap. With the issuance of a new Schuldscheindarlehen worth EUR 100 million with a term of five and seven years in April 2022, Valora partially refinanced in advance a Schuldscheindarlehen in EUR maturing at attractive conditions and thus improved its long-term financing profile. The transaction was finalized in July 2022.
“Based on the Group’s strong recovery, particularly in the second quarter of 2022, and its enduring resilience throughout the pandemic, Valora is confident in the value creation potential of its foodvenience strategy,” said Michael Mueller, CEO of Valora Group. Given the latest strong sales development and although the geopolitical situation has deteriorated in recent months, Valora estimates that external sales (including recent strategic initiatives) for the full year 2022 will be at the level pre-COVID-19 levels and reconfirms its EBIT target of CHF 70 million +/- ~10% for the full year 2022 (excluding M&A and strategic project costs).
Further network expansion
During the period under review, Valora successfully advanced its foodvenience strategy. With the completion of the acquisition of Frittenwerk on July 1, 2022, Valora is entering the booming fast-casual market, further developing its restaurant business, which currently focuses primarily on take-out offers. With the trendy format based in Germany, Valora aims to benefit from the development of the fast-casual segment, which is showing above-average growth. Frittenwerk should further strengthen and experience accelerated growth. The intention is to double the network to 27 sites by 2025 and more than triple 2021 EBITDA by around €2.5 million. Valora also expects a significant transfer of know-how from the Frittenwerk creative concept to its other formats.
Still in the Food Service division, the integration of Back-Factory is on track and progressing very well. The same goes for the B2B capacity expansion of Ditsch USA’s production facilities, which is expected to be finalized by the end of the first quarter of 2023.
Another success was achieved with the extension of the cooperation with Oel-Pool. Valora is taking over 71 additional stores from the petrol station operator and converting them into modern stores, subject to the approval of the Swiss Competition Commission. This will not only significantly increase Valora’s convenience retail presence at gas stations, but will also create the largest convenience store network in Switzerland with around 370 stores with by the end of 2023. Valora is thus approaching a new stage of its growth. focused on food strategy as the share of higher margin food in Valora’s overall category mix continues to grow.
Store conversions at SBB and elsewhere are in full swing
SBB’s conversion work is progressing at full speed and should be largely completed by the end of 2022. By the end of the reporting period, more than 60% of the total outlets had been renovated in the entire SBB network. Within the CFF cluster, renovated stores confirmed stronger growth in food sales compared to those not yet renovated (+37.0% vs. +13.0%). Beyond the CFF network, most of the 39 stores resulting from the collaboration with oil tanker Moveri from Oel-Pool (announced last year) have been transferred to the network of outlets with between January and May 2022.
More boxes with to deploy
The portfolio of Autonomous Stores with free checkout with box and hybrid stores with 24/7 saw new additions in the first half of 2022, in particular with the opening of new hybrid stores. Over the next few months, Valora will open five more avec boxes in Switzerland in addition to the current avec boxes in Arlesheim BL, Urdorf ZH and Oberohringen ZH. Valora is also steadily pursuing the deployment of k kiosk vending machines in Switzerland.
Group-wide conversion to renewable electricity
As for the goal of achieving net zero CO2 emissions by 2050, Valora has made considerable progress. Regarding its own emissions (Scope 1 and 2), Valora will achieve a 100% conversion to renewable electricity by the end of 2022, which will substantially contribute to its goal of halving its own emissions. by 2025. In addition, Valora has also reviewed the supply chain of its own brand products as well as those produced at Valora sites and, together with its partners, has identified further reduction potential. Valora’s ambitious goal is now to halve CO2 emissions along this supply chain by 2030. Measures focus on aspects such as regenerative farming methods, expanding the range of vegan products and a further reduction in food waste.
FEMSA and Valora join forces to jointly develop the European market leader in convenience stores and catering services
On July 5, 2022, Fomento Económico Mexicano, SAB de CV (FEMSA), a leading retail and beverage company with 2021 total revenue of over $27 billion / CHF 26.5 billion, announced a cash offer for the purchase of all held shares of Valora Holding AG (Valora) for CHF 260.00 per share. This equates to a premium of 57.3% to the volume-weighted average price over the past 60 trading days and 52.0% to the closing price of Valora stock on July 4, 2022. The Board of Valora’s board unanimously recommends that shareholders accept FEMSA’s offer. The transaction process is in progress. More details can be found at https://femsa.gcs-web.com/valora-transaction.
Every day, the approximately 15,000 employees of the Valora network work to brighten up the experience of their customers with a complete, close, fast, practical and fresh foodvenience offer. Valora’s approximately 2,700 small points of sale are located in high-traffic locations in Switzerland, Germany, Austria, Luxembourg and the Netherlands. The company includes, among others, k kiosk, Brezelkönig, BackWerk, Ditsch, Press & Books, avec, Caffè Spettacolo and the popular own brand ok.– as well as a constantly growing range of digital services. Valora is also one of the world’s leading producers of pretzels and benefits from a well-integrated baked goods value chain. In 2021, Valora achieved annual external revenue of CHF 2.2 billion. The Group’s head office is in Muttenz, Switzerland. The registered shares of Valora Holding AG (VALN) are traded on SIX Swiss Exchange AG.
More information is available at www.valora.com.