IMCD reports 12% EBITA growth in the first nine months of 2019

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Overig advies 12/11/2019 09:57
•Gross profit growth of 15% to EUR 457.3 million (+14% on a constant currency basis)
•Operating EBITA increase of 12% to EUR 175.7 million (+11% on a constant currency basis)
•Net result before amortisation and non-recurring items increase of 10% to EUR 120.1 million (+9% on a constant currency basis)
•Cash earnings per share increased by 15% to EUR 2.26
•30 August, acquisition of the food ingredients business of Matrix (Singapore and Malaysia) and 18 September acquisition of Monachem and Addpol, expanding IMCD's position in the Advanced Materials industry in India
•Strengthening of pharma activities by signing agreements to acquire the shares of DCS Pharma AG (Switzerland) and 57% of the shares of Whawon Pharm Co. Ltd. (South Korea)

Piet van der Slikke, CEO: "The first nine months resulted in an EBITA growth of 12% and a cash earnings per share growth of 15% versus the same period of last year. Both the Americas and Asia-Pacific performed satisfactorily whereas EMEA ‘s results were disappointing (EBITA -2%) caused by lower demand. Despite this, we are confident that we will continue to achieve our medium term targets on organic growth and we are positive about the acquisitions we have completed so far (Monachem and Matrix) and those we expect to complete this year (DCS, Switzerland and Whawon, South Korea)."

Key figures
EUR million
Jan. 1 - Sept. 30
Jan. 1 - Sept. 30
2018 Change Change
Fx adj.
Revenue 2,061.0 1,754.6 306.4 17% 16%
Gross profit 457.3 398.7 58.6 15% 14%
Gross profit in % of revenue 22.2% 22.7% (0.5%)
Operating EBITA 175.7 156.6 19.1 12% 11%
Operating EBITA in % of revenue 8.5% 8.9% (0.4%)
Conversion margin 38.4% 39.3% (0.9%)
Net result before amortisation / non-recurring items 120.1 109.2 10.9 10% 9%
Free cash flow 139.6 109.0 30.6 28%
Cash conversion margin 72.8% 68.0% 4.8%
Earnings per share (weighted) 1.69 1.53 0.16 10% 10%
Cash earnings per share (weighted) 2.26 1.97 0.30 15% 14%
Number of full time employees end of period 2,840 2,507 333 13%

In the first nine months of 2019, revenue was EUR 2,061.0 million, an increase of 17% compared to the same period in 2018. All regions contributed to the increase. On a constant currency basis, the increase in revenu is 16%, driven by the first time inclusion of companies acquired in 2018.\

Gross profit
Gross profit, defined as revenue less cost of materials and inbound logistics, increased from EUR 398.7 million to EUR 457.3 million, an increase of 15% compared to the first nine months of 2018. On a constant currency basis, gross profit growth was 14%, consisting of organic growth of 1% and the impact of the first time inclusion of acquisitions of 13%.
Gross profit in % of revenue decreased from 22.7% in the first nine months of 2018 to 22.2% in 2019. The gross profit margin development is the result of the first time inclusion of acquired companies with lower than IMCD's average gross profit margins, changes in local market conditions, currency exchange rate movements and the usual fluctuations in the product mix.

Operating EBITA
Operating EBITA increased by 12% from EUR 156.6 million in the first nine months of 2018 to EUR 175.7 million in the same period of 2019. On a constant currency basis, the increase was 11%.
The growth in operating EBITA was a combination of organic growth, the impact of the first time inclusion of acquisitions completed in 2018 and 2019 and the initial application of the new lease accounting standard (IFRS 16).
The operating EBITA in % of revenue decreased by 0.4%-point from 8.9% in the first nine months of 2018 to 8.5% in 2019.
The conversion margin, defined as operating EBITA as a percentage of gross profit, was 38.4% compared to 39.3% in the first nine months of 2018.

Cash flow and capital expenditure
Compared to the first nine months of 2018, free cash flow increased by 28%, from EUR 109.0 million to EUR 139.6 million. The cash conversion margin, defined as free cash flow as a percentage of operating EBITDA, was 72.8% compared to 68.0% in the first nine months of 2018. The increase in free cash flow and cash conversion margin in 2019 is the result of higher operating EBITDA and lower investments in net working capital. The initial application of IFRS 16 had a negative impact on the cash conversion margin of 5.5%. Based on the previous accounting standards, the cash conversion margin would have been 78.3%.
In the first nine months of 2019, the investment in working capital (sum of inventories, trade and other receivables minus trade and other payables) was EUR 35.2 million, compared to EUR 50.4 million in the same period of 2018. Working capital investments are the result of increased business activities.
Capital expenditure was EUR 3.5 million in the first nine months of 2019 (first nine months of 2018: EUR 2.5 million) and mainly relates to improvements of the ICT infrastructure and office furniture and equipment.

IMCD operates in different, often fragmented market segments in multiple geographic regions, connecting many customers and suppliers across a very diverse product range. In general, results are impacted by macroeconomic conditions and developments in specific industries. Furthermore, results can be influenced from period to period by, among other things, the ability to maintain and expand commercial relationships, the ability to introduce new products and start new customer and supplier relationships and the timing, scope and impact of acquisitions.
IMCD’s consistent strategy and resilient business model has led to successful expansion over the years and IMCD remains focused on achieving earnings growth by optimising its services and further strengthening its market positions. IMCD sees interesting opportunities to increase its global footprint and expand its product portfolio both organically and by acquisitions.
Based on its performance in the first nine months of 2019 and the strong fundamentals of the business, IMCD expects operating EBITA growth in 2019.

Financial calendar
27 February 2020 Full year 2019 results
7 May 2020 First quarter 2020 trading update
7 May 2020 Annual General Meeting
18 August 2020 First half year 2020 results
For further information: Investor Relations
T: +31 (0)10 290 86 84

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