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Edited Transcript of OVS.MI earnings conference call or presentation 20-Sep-19 10:00am GMT

Half Year 2019 OVS SpA Earnings Call

VENEZIA Oct 10, 2019 (Thomson StreetEvents) -- Edited Transcript of OVS SpA earnings conference call or presentation Friday, September 20, 2019 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Nicola Perin

OVS S.p.A. - CFO

* Stefano Beraldo

OVS S.p.A. - CEO, GM & Executive Director

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Conference Call Participants

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* Andrea Bonfa

Banca Akros S.p.A., Research Division - Analyst

* Fabio Fazzari

Equita SIM S.p.A., Research Division - Analyst

* Marco Baccaglio

Kepler Cheuvreux, Research Division - Deputy Head of Research, Italy

* Scauri Andrea

Lemanik - Analyst

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Presentation

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Operator [1]

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Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS First Half 2019 Results Conference Call. (Operator Instructions)

At this time, I would like to turn the conference over to Mr. Stefano Beraldo, Chief Executive Officer of OVS. Please go ahead, sir.

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [2]

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Good morning to everyone. We are here for the 6-month result of OVS. I'll start saying that it has been still a second consequent half characterized by negative external conditions. Weather has been again after a very tough autumn/winter, which was too warm, again adverse with extremely rainy and cold months of April and May, which are 2 important months for our company. Fortunately, a good recovery in June and July enabled the company to mitigate the effect of this negative situation.

The company is still solid because it continues demonstrating that in a difficult external environment what competitors in Italy are suffering. Still traffic, still sales and market share continues to be solidly managed. A lot of actions in the merchandising in order to reduce the stock level, as expected, as announced, determine the higher markdown as a last component of extraordinary markdown. And now the company is ready to entering a normal operating situation with reference to the management of merchandising.

Extremely good cash flow results, in my opinion, as we will see better insight in the document. And finally, the renewal of the extension, that is to say, of the existing credit lines. Which represents another signal that despite the general negative view on retail -- apparel retail, the company is still considered a strong company and obviously, an important player.

I will skip Page 3 where you already received the numbers and the informations and I would maybe immediately try to go to Page 4 where we have a bridge analysis of EBITDA, which we are used to present in the -- in our publications where it is clear that EBITDA has been impacted by the negative like-for-like. And the negative like-for-like, to make a comment, a bit more color on it, is basically the result of 2 aspect: from one side, the weather, as I said; and from another side, the lower intake that we deliberately decided to utilize in order to privilege speed-to-market and stock clearance. This clearly didn't support higher sales, but it was cautious decision in order to privilege the reduction of our working capital and the highest occupation and the better mix for the next season.

And higher markdown. This was exactly as we expected. And the higher markdown is the result of the exceptional promotional activities, which we can consider as the tale of the process of stock clearance, which we started in the second half of last year, whose results has been an equivalent increase of acceleration last year. And similarly in this first half, we are benefiting from this consequent higher markdown and clearance, upon the other side, higher cash flow.

Then you'll see -- you can appreciate the effect of the cost-saving activity, which is much higher compared to the iteration negative effect. What it was noticing is that the higher markdown -- we consider the higher markdown as an exceptional, like it was in the second half of last year, while the cost saving represents a new solid base for a lower breakeven point of the company.

Page 5. Only to say -- only to make a comment on my side on the reason why the EBITDA of OVS decreased much more than UPIM. And to me, this is interesting also to compare because the reduction of OVS EBITDA has been driven by the markdown, the exceptional markdown. And the reason is that the merchandising that of the asset deliberately decided not to sell to the old customer has been the Swiss customer, I mean, as being the OVS brand merchandising. UPIM has not been impacted by this extraordinary activity, and in spite of the poor weather, its performance has been, I think, decent given the external conditions.

Page 6. To mention on one side that the inventory reduction continues and compared to the last quarter when it was still EUR 7 million higher compared to 1 year ago, now it's EUR 12 million lower compared to 1 year ago. And the other aspect is the reduction of trade payables. Trade payables decreased as a result of lower intake, as I said, but also because of the cost reduction and the lower CapEx. And this amount represents a new baseline for lower cash out in the future.

Page 7. CapEx reduction from EUR 32 million to EUR 19 million, mostly because of a lower number of opening, which doesn't mean that the company has not anymore opening opportunity. The question is that as announced, this year, we prefer to privilege cash generation, and in the meantime, strong rent reduction negotiation activities, which was not compatible with an higher rate of new openings because several times we are speaking with the same landlords. In the pipeline, we have several new opportunities for next year and also several openings are expected in the second half of this year, mostly for UPIM brand this year. By next year, there will be also new OVS openings.

In Page 8, I don't think we need to make a clearer comment unless answering to your following questions.

In Page 9, I would draw your attention to the fact that the first half is typically a period of the year where the company absorbs cash, and you can see that the average cash absorption has been in the range of EUR 80 million in 2016 and '17. Last year, the company was involved in the issue that all of you are aware about the Swiss customer, and the cash absorption has been higher. The result of the first half of this year is extremely positive in term of cash generation or absorption because you can notice that we have diminished by 50% compared to the normal performance the cash absorption in the 6 months.

Outlook for the second half. I think what I would like to reiterate is that the first half with an EBITDA of EUR 62 million compared to the EBITDA of EUR 80 million of last year must be analyzed, having in mind that EUR 80 million was the same EBITDA that we made in 2017 when the full year without exceptional adjustments because of markdown, the performance was EUR 196 million. We are now EUR 20 million below that number because of EUR 15 million of extraordinary markdown.

And the markdown -- the extraordinary markdown period, in my opinion, is over now and we are back to normal in term of inventory management. And in the second half, we are about to compare our results in term of economic performance with the second half of last year when the impact of markdown was EUR 30 million, which we do not plan to do, or at least it will depend from, obviously, the top line performance, but we will not make in a similar way, and that's for sure.

So from a business model perspective, there are other conditions in the second half to have a much better profitability because the cost base has been reduced and the impact of markdown will be low -- much lower compared to last year.

What about top line, which is always the higher risk in our business, the less predictable. Weather should help finally, and I cross fingers 3 times. But last year, weather was very negative and the beginning of the season started well. In August, weather is not important, and we made what we expected to make. So we are fine with August, and we are doing very well in September, means that like-for-like is positive, and there are much lower markdown as of now. So we are managing and -- managing the company, and the economic results are in line with our expectations.

I mentioned that the growth will continue. The 23 stores that we mentioned -- that we opened in the first half, several of them are in franchising, and we will continue opening also in the second half. Then very important, in spite of the cost reduction -- the huge cost reduction, or better to say, also thanks to the huge cost reduction, we decided to find the space in the cost for an important communication campaign, which is going to start in a few days and will cover all media channels. It will be the biggest TV campaign OVS made recently, and this campaign is not undermining all the cost advantages that we mentioned.

We opened a couple of stores, which, in my opinion, represents the new paradigm of OVS stores. They are receiving very, very nice appreciation, great appreciation from customers. And according to this format, which is an evolution, but a very interesting evolution compared to the old ones, we are also reducing further the CapEx involved for new store or for refurbished store, in spite of giving to the customer a more warmer and cozy appearance.

A few words about UPIM. UPIM is continuing performing well. And in the second half, we will open another 5 or 6 shop-in-shop not only in the 2 chains, which are Panorama and Finiper where we already opened successfully, but also with a third player, which is Croff. And with this third player, I think we are starting demonstrating that this business idea is not a dream but is starting -- it is something really working. And we also are about to finalize agreement with a fourth huge international brand present in Italy with a lot of hypermarkets. So I think that in spring next year, we will be present in 4 different hypermarket brands, covering 50% of the brands which are operating in the Italian market. The goal here is to continue opening shop-in-shop in a large extent during the next couple of years.

And last, obviously, we approved -- we got the extension of the financial package, which was an important condition for our strategy, which, in my opinion, demonstrates that still the company is deserving all the proper level of confidence from the financial institutions. And I think that this is only a start, in my opinion, because I believe that the liquidity, which is existing in the market, will enable the company to take advantage not only of drawing the lines that are presently underwritten by the banks but also benefiting from other source of cash, which, in my opinion, would become available very soon at a lower cost.

So thank you for your attention. And now we are open for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Fabio Fazzari with Equita.

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Fabio Fazzari, Equita SIM S.p.A., Research Division - Analyst [2]

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I have, first of all, a follow-up about the comment that you made before. You talked about positive like-for-like, you mean in September or so far in the third quarter? The second question is related to the gross margin. Since the extraordinary promotional policy is over, I was wondering which kind of trend we could expect for the gross margin in the second half. And lastly, if you can comment more about the agreement for the extension of the credit line about -- so all the conditions. If you can give us more color point-by-point as you reported in the document?

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [3]

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Okay. Thank you. As far as concerning the sales, the sales are positive in the second half like-for-like. In term of margin, we expect really a higher margin compared to last year. I think it's difficult for me to tell you which is the level of margin because you bring me to economic figures that we are not used to disclose given because they are predictive figure. But for sure, there would be a material improvement in gross margin compared to last year because they're driven by a material reduction of markdown versus last year. I hope this is sufficient for the moment. And as far as concern the main condition of the financial package, I hand the word to Nicola Perin.

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Nicola Perin, OVS S.p.A. - CFO [4]

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Thank you, Stefano. So I go through all the major terms of the new line of extension of current financial package of the company. In any case, you can find all the details in our interim report in the relazione semestrale or the first half interim report. So the main condition and in term of structure, the new package is considering EUR 450 million facilities, EUR 25 million below the previous package. And the reduction was a decision of OVS in order to provide the banks a clear message that we are working very hard on the improvement of the cash profile of the company. And we decided to -- have announced to give EUR 25 million in order to be aligned with our expectation in terms of cash flow.

The EUR 450 million are divided in 2 line, the B that is EUR 350 million, and the revolving facility for EUR 100 million. The B line is divided in 2 line: EUR 250 million is a term ending in the 2nd March of 2023, and the B2 is an amortizing of -- for EUR 100 million, amortizing in 6 installments for EUR 33 million per year in the next 3 year. In terms of cost, all the line would be incremental cost compared to the current situation for about 25 bps. And these would be higher if we will not be able to reduce our leverage in the future. And there you will see the margin [reader] in the relazione semestrale or in the interim report.

In term of covenants, it will be the same of the current situation, so 3.5x for the next 18 months, and then it would be reduced to 3.0x. And according to our expectation and internal expectation, a huge improvement in both Q covenants' numbers.

Then there are 2 other main contents, and this is something new compared to the former financial package. The first one is a cash strip mechanism. It's, of course, in line with the market standard practice for similar financial package. This mechanism is -- it would be applied only starting from January 2021, so not in the current year. And the main term is in -- implies a 66% of excess of cash generated to -- in the fiscal year that will be reimbursed to the banks. The excess cash flow is, of course, the cash flow minus the reimbursement, the financial cost that will be into the banks.

The other mechanism or indication is about the dividend distribution and in particular, starting from -- we cannot be a dividend distribution with the leverage ratio -- if the leverage ratio is higher or equal to 2.25x, with an exception only for this year, but generally 2020 fiscal year, where there can be a dividend distribution but cannot exceed the 3% dividend yield or EUR 10 million. I don't think we've got any terms -- these are the main terms and conditions of the new financial package. In any case, you can find all the details or more colors in our interim report that you can find in our website.

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Operator [5]

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(Operator Instructions) The next question is from Andrea Bonfa with Banca Akros.

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Andrea Bonfa, Banca Akros S.p.A., Research Division - Analyst [6]

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I got the following question. One is, let's say, a more generic one related to your, let's say, amount of intake you mentioned at the beginning of your presentation. If you can elaborate an aspect, which is not totally clear to me of the fact that you lost some sales in H1 because of the lower intake in the sense that in a scenario, in a trading environment where you lose 4 percentage point on like-for-like, how can you lose the same sale is something a bit weird for me. So if you can elaborate on that.

The second one, I was, let's say, quite convinced that the markdowns was -- were kind of over for this year after the first half, but you are still mentioning the possibility of some markdown depending on the trading environment, again, in the -- in H2. But if that is the case, can we count on some tailwinds in the cost savings? I.e., last year in H2 2018, you had some EUR 10 million lower cost. In the first half, there were EUR 20 million so this means that there are potentially at least another EUR 10 million in H2. If you can elaborate on that as well.

And finally, if I may. If let's say you have a normal weather season this year, are you counting on some positive like-for-like? Just would like to have your opinion.

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [7]

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Thank you. On the intake, the reason why I said that with a lower intake, somehow we created the condition not to generate a support to sales, but eventually, to support to a slightly component of negative sales is implicit because at the end of the story, we sell variety and deepness. If we reduce quantities, we have less option to the eyes of our customer in any case. And so if an option, for instance, goes very well, which happened, because we reduced slightly the quantities, there would be some more out of stock compared to the year before. This is per se, not something that could explain the 4% negative, something that clearly -- it is like putting less gasoline in the engine. You can be more efficient and making more kilometer with 1 liter, but if you have less liter, even if you are more prudent when you drive, you lose something.

So in term of numbers, I don't know how much we have lost because of this, maybe 0.5%. I don't -- really, I don't know, it's difficult to measure. But we reduced by about 10% the goods -- the new goods that we put in our store. Clearly, this doesn't support sales by definition, but once you decide that your priority is reducing inventory level, improving quality of the stock and you have to sell the old goods that we decided not to destroy because it is even not ethic to destroy goods, and you decide to use your network to reduce the stock, which is not commercially the wrong stock, but it's a stock in excess because it was originally expected to be delivered to other company, you suffer somehow on the quality of the merchandising. I hope this is enough in term of an answer on the intake.

On the markdown, maybe I've not been clear. I think I told and I -- maybe I'll take the opportunity to reiterate that we expect that the extraordinary markdown are over. So the markdown generated by the excess of stock which we have in our book and that was originally expected to be shipped to Sempione, this reason for the much higher markdown that we had in the second of last year, autumn/winter, and in the first half of this year, spring/summer, is over. And because now the level of stock is again the one that the company used to have, which doesn't mean that the stock is ideal. I think that this industry has an issue of stock, which all are similar, our competitor are facing. And this industry needs to reduce the level of stock in general. But this is not extraordinary anymore, so we don't expect extraordinary markdown in the second half of the year.

On the cost reduction, I'm not sure to have really catch the meaning of your question. Maybe, Nicola, you understood better the question of Bonfa?

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Andrea Bonfa, Banca Akros S.p.A., Research Division - Analyst [8]

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Maybe I can rephrase that, if you want. You mentioned EUR 20 million cost reduction in H1, which on an annualized basis means EUR 40 million roughly -- EUR 42 million. So in last year, your presentation, you mentioned that you reduced your costs about EUR 10 million, roughly. So this meaning that annual rate level, you have still, normally EUR 10 million, EUR 11 million to play with in H2 2019. I hope this is a better explanation, but that was my interpretation. But that's...

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Nicola Perin, OVS S.p.A. - CFO [9]

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Andrea, for the time being, the explanation that we can provide is this one. In the first half, we decided to put a lot of effort on cost saving, reducing the breakeven point of the company, especially the breakeven point of many stores, but also on the each quarters.

And we have been able to reduce to EUR 21 million, the cost profile of the company in first quarter and in the second quarter. Of course, we are continuing to work on these, especially on the range for the stores and many other areas. But we cannot say that we can double this amount in the second half of 2019 and to take a EUR 40 million saving cost for the full year 2019. We will see and we will provide to you. Of course, we are still working. And we have something on our radar in front of us.

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Operator [10]

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(Operator Instructions) The next question is from Andrea Scauri with Lemanik.

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Scauri Andrea, Lemanik - Analyst [11]

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I was wondering, are you planning in case the turnaround is not providing a good sign of recovery to make some closures of shops?

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [12]

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Not different or not higher than the normal, call it, cleaning policy that every month, every year you must have. We have a very little number of stores which are negative EBITDA: 7, 8 stores. We already gave notice of early termination to this landlord, which are very often coming back with cost reduction, rent reduction. No landlord is aspiring to see OVS close a store. We are closing some store, but not in a material number.

But I will take the opportunity to mention one aspect, and you mentioned turnaround. Okay, life is a turnaround, and you have to try to turn your business around every second. And we -- this is what we do in the last 13 years. But the average store EBITDA is close to 20%, probably 19% this year. As a result, not of a problem of a turnaround, but as a result of 2.5% high -- 2.8% higher markdown compared to normal.

So if our network, which today is already above 19% store EBITDA, will come back to the normal level of gross margin. We are talking about the network, which is generating more than 20% store EBITDA. And I have not to close store, even when I have, obviously, to pay off stores, which is making, maybe 10% or 9%, these store are still cash generative, no? So in other words, not that we don't want, but we don't need to close a material number of store because the super vast majority of our store is highly profitable.

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Scauri Andrea, Lemanik - Analyst [13]

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Okay. But the question was also related to the new strategy that you are telling us. The synergies that you can exploit with agreements with other chains. Putting everything together, do you still need this amount of stores if you plan to make some kind of relations with the chains or not?

And the second question, are you -- you are saying that this is not a turnaround. So if it's not a turnaround, how would you define the equity story of OVS now to be...

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [14]

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OVS has 2 brands. OVS S.p. A. has 2 brands since several years. One is OVS, and the other is UPIM. OVS' strategy is not -- OVS brand strategy is not changing materially. OVS strategy -- OVS brand strategy, as I said, is that we pay attention to a more selective growth. Still in Italy we have cash in areas which are uncovered by OVS brand and we will open -- we will privilege those openings, and we will continue with our business model without changing so much other than we will introduce more speed to market and in the slogan buy less, buy later, and buy better. Which is what we are doing today, and this is why we are able to be so reactive also to weather changes, which are impacting the company much less than they could be in absence of this higher speed that we're putting in the engine.

But there is not a material change in the strategy of OVS, other than being aware that once you achieve 7% of market share, you cannot grow with the same speed, with the same space -- in the same pace in the market as you did 7 or 8 years ago because the overlapping, somehow, is more material.

So when I say, OVS will continue to grow in a more selective way, I mean that we will privilege those locations like shopping mall where we are not in and where the overlapping is much lower. We are still -- are pleased with 50 store. 1,000, 1,200 square meter niche, which will be opened under OVS brand with an overlapping of about 3% in the network in the next 3 to 5 year. The question you refer to is maybe UPIM, we have a second brand, which...

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Scauri Andrea, Lemanik - Analyst [15]

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Exactly.

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [16]

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As you know, has been acquired and successfully transformed partially, internal network into OVS store. And then the remaining network and the brand has been revitalized with a turnaround that's true. UPIM made a turnaround. It was a money-losing company when we bought the company. Now the company is close to achieving EUR 30 million, EUR 28 million maybe, EBITDA.

And UPIM brand is now successfully exploiting this opportunity, which is because UPIM is typically very popular, very close to families, and this customer base is the same customer base of hypermarkets. And because hypermarkets are suffering, the development in term of new opening, the new footprint of UPIM, instead of being only dedicated to opening standalone store, like OVS did is to continue exploiting this opportunity to open shop-in-shops inside the hypermarket.

But now referring to the UPIM brand, and the UPIM turnaround is already completed years ago. I hope to have been able to clarify a bit your -- deliver support to your questions.

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Operator [17]

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The next question is from Marco Baccaglio with Kepler.

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Marco Baccaglio, Kepler Cheuvreux, Research Division - Deputy Head of Research, Italy [18]

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I have 2 question. The first one is about the exceptional background of the second [bust]. Because still in this presentation, you said that you had markdowns in H1 of EUR 21 million, a negative impact. And then at some point you kind of said that out of that expectational one were EUR 15 million. So I was wondering, the number I have in mind of H2 of last year was EUR 32 million. So if you can give us an idea of what was a normal course of action of a period that was exceptional.

And the second question I have is on the net debt. Because I see that you have quite size -- EUR 80 million [loan] payables at the end of July is usually compared to the same at last year. So I would expect that your -- the leverage, change of net debt in the second half of 2019 beyond the evolution of the capital loss could be way ahead of what was the leverage at the second half of 2018.

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [19]

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I hand over to Nicola. The questions are very much accounting and numbers. So I hope you are fine if I hand over to Nicola Perin. Thank you.

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Nicola Perin, OVS S.p.A. - CFO [20]

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Well, in terms of the cap of the markdown, so as you correctly mentioned last year, second half 2018, we present and we shared with you an impact of EUR 32 million -- EUR 31 million markdown. And this was the sum of different action put in place last year in order to provide answer, a business answer to the weather and to the excess of inventory accumulated because we stopped delivery to our Swiss former customer.

This action continues in the first half 2019 with a different methodology, with a different pace also. And then at the end of the story in this -- the first 6 months for 2018 and we accumulated EUR 21 million excess of markdown compared to our normal level of markdown because it then gives the company edge, it probably sees more promotional activity across our network.

What we are seeing is that in the second half of 2019, according to the level of inventory and to the quality of inventory and to the commercial action that we have put in place, even considering the lower level of intake that we are planning for the -- actually for the second half of 2019, the company will ramp the business with -- again, with a normal level of markdown, more close to what happened in the second half of 2016, '17.

So in terms of numbers, we cannot say that we will recover completely the EUR 32 million of last -- the EUR 31 million of last year. But a material portion of this number will not be part of the negative impact of [EBITDA] in 2019.

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Marco Baccaglio, Kepler Cheuvreux, Research Division - Deputy Head of Research, Italy [21]

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Okay.

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Nicola Perin, OVS S.p.A. - CFO [22]

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In terms of payables, the level of payables and the impact on the cash flow of the second half 2019. So first of all, we need to start seeing that there is no any deterioration of the [DTO]. So the case of payables remains stable, and it means that the company maintain this level of commercial relationship in negotiation with all the suppliers. The reason of the lower level of payables is part because the lower level of intake, so the purchasing of goods. A portion is linked to the savings, [cleaning] and many others. And a portion is linked to the lower level of CapEx.

We think that going forward, this lower level of Capex will be part of an additional improvement in the cash flow compared to the similar second semester of the company. Because we are starting from a lower level of payables and this will mean a lower level of cash payout for the second half and it would be a complement of our improvement cash flow, but we are expecting also for the next 6 months.

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Operator [23]

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Your next question is a follow-up from Andrea Bonfa, Banca Akros.

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Andrea Bonfa, Banca Akros S.p.A., Research Division - Analyst [24]

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And second call is about the same question on the cash flow generation. You were mentioning with the first quarter result that you are expecting a cost decline of your net debt throughout the quarters, and wondering if that is the case? And if you are happy with the consensus which is pointing to EUR 300 million on net financial position by year-end. On the latter point, if that target is confirmed, I'm wondering if looking at the higher interest cost that you just mentioned for the second half of the year because of the higher leverage, if you got internally as a target to reduce your net debt/EBITDA ratio to below 2 by year-end in order to save some financial costs for next year?

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Nicola Perin, OVS S.p.A. - CFO [25]

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I'll start from the second part of the question. Considering that the covenant is based on the last-12-month EBITDA, and the average net financial position of the last 12 months, I can say it strikes the point that it is impossible to reach a leverage lower of 2.0x. And this is the second part of the question.

What we are incorporating in our projection is -- I can say that we are confident with -- starting from the current situation, we are confident with the consensus in term of year-end net financial position, something more, something less. But in any case, it would be around. Of course, we cannot say that we can predict sales over the next month because we are in front of us a material volume of sales. But we think that this is our target and we will work very hard in order to meet this target.

In terms of cost again, we cannot -- we will work on cost not only because it will decrease or will have lower leverage. This will come in 2020. But that's a -- maybe we can take some opportunity in the market there to mix some cost with tactical action with our financial capacity actually using external facilities.

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Andrea Bonfa, Banca Akros S.p.A., Research Division - Analyst [26]

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And if I may, sorry, on the previous question that I made, I think we missed the aspect of issuer or maybe I wasn't paying attention. If you count on a normal weather -- seasonal weather for the last -- second half of the year, would that trigger from your standpoint a positive like-for-like on sales? Or what are your expectation?

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [27]

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I tried deliberately to escape -- to forget your question because I hand over to Nicola and then the operator gave the word to the next question. But I can tell you, for sure, that based on all we have in place and the weather we expect a positive like-for-like. Obviously, expectations are different from real. What I can tell you, my colleague will blame me, but we don't communicate like-for-like in the season, and I continue with this trend.

But I can tell you that today's figure for instance, simply because of weather. Simply because of weather, today, the like-for-like of the day is expected to be plus-30%, 3-0. When you play with these kind of numbers in daily situation, you have a great volatility. So today, people will buy, but in the south, they are not buying because it is very warmer. Then next week, we will have maybe plus 10%. Then in October, we have maybe minus 5% because a lot of people bought in September, if the September is cold. But all in all, because last year, we had an incredibly negative weather effect, we expect to be able to generate a positive like-for-like.

Nevertheless, I mentioned that we decided to continue with this policy of being very prudent in the sourcing. So we made a lower intake. We expect higher sell-through. We expect higher stock turn, and it will be a combination of factors that will determine the final EBITDA. If I were continuing injecting the same gasoline in the engine, the probability of having a higher like-for-like would be higher. But what I try to privilege in the last 12 months is the cash margin.

So what I look and what I ask might be, what you look at is not only the top line because if they buy too much just to make a good top line, and then the level of stock is too high, I don't generate cash margin. We introduced a new KPI in managing the performance of our product managers. And the most important KPI we introduced, originally was gross margin. Today is cash margin. So in the last 2 season, the buyer and the product manager are involved if they generate cash margin. And cash margin can be generated even with lower top line, provided that they buy maybe 20% less, they achieve maybe 5% negative like-for-like. But the cost of good unsold, which is deteriorating the cash margin, will we much lower.

And with this new methodology, we are generating at this moment more cash, and I think that for the next season, I will continue managing the company this way. So sometime, maybe we'll lose some opportunity in term of sales, but you cannot be half pregnant and you have to decide which focus you have to privilege. And in this moment, I think that becoming faster, becoming more reactive, and became more agile, and becoming able to introduce the last -- in the very last moment, in-season orders to compensate inventory what has not been acquired because the right product is different from the one that you envisaged should have been the right product 6 months ago, is becoming to me so important that I'm ready even to lose some top line in order to change the mentality of all our PM in order to bring this approach to the buying activity.

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Operator [28]

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(Operator Instructions) Gentlemen, there are no more questions registered at this time.

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Stefano Beraldo, OVS S.p.A. - CEO, GM & Executive Director [29]

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Okay. So I invite everyone, which is connected with the Italian TV to look next week, the advertising of OVS, which is in my opinion, very nice. And I'm happy to receive all the comments, even the negative ones, obviously. Thank you for the attention, and have a nice weekend. Ciao.

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Operator [30]

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