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Pre-Brexit stockpiling sees Balta lift UK sales

BaltaDec19Pre-Brexit stockpiling by UK retailers helped Balta achieve ‘modest sales growth against a generally challenging and volatile environment’ in the UK in the third quarter. Overall residential caret sales were flat.

‘Our residential division had revenue of €47.1m, flat versus the third quarter of 2018, resulting in a year-to-date top-line decline of 3%. In the UK, we realised modest sales growth against a generally challenging and volatile environment. Our performance in the third quarter benefited from modest pre-Brexit stocking by some of our customers. In Continental Europe we succeeded in increasing the prices of our products while volumes continued to be subdued. We continue to focus on growing our share of higher margin products, representing 37% of Q3 2019’s residential revenue,’ says the group.

‘Adjusted EBITDA in Q3 was €3.5m, up from €2.5m on a like-for-like basis for the same period last year. On a like- for-like basis, adjusted EBITDA margin in residential increased to 7.5% from 5.4%, benefiting from a growing share of higher margin products, price increases we realised outside of the UK and the first benefits from our lean projects, partly offset by our investments in NEXT [the group’s three year plan to boost profits].

‘Our rugs division realised revenue of €43.5m, up 0.4% versus the third quarter of 2018, resulting in a year -to-date growth of 13.3%. In the US, our ecommerce sales from the dedicated state-of-the-art warehouse in Savannah have continued to progress albeit still at a low level. Revenue in the quarter was further impacted by the one-off adjustment for the higher than anticipated sales discounts on sales in previous quarters. In Europe, top-line grew versus the third quarter of 2018, against the backdrop of a challenging market environment.

‘Adjusted EBITDA in Q3 was €2.6m, down from €6.3m on a like-for-like basis in the same period last year. This drop in the adjusted EBITDA margin from 14.4% to 6.0% is mainly a result of a one-off adjustment for the higher than foreseen sales discounts at Balta USA on sales in previous quarters and costs for NEXT, in particular in relation to the start-up of the US ecommerce activities. Without these effects, rugs had a solid underlying margin generation.

‘Our commercial division realised revenue of €58.4m, up 7.1% versus the third quarter of 2018, resulting in a year- to-date growth of 11.7%. The US business continued its strong organic growth spurred by additional share gains. In Europe, revenue declined year on year on the back of lower volumes as the market environment remained more challenging, while pricing improved. We continued to execute our strategy to grow our presence in the direct channel, targeting architects and designers, by adding dedicated sales personnel.

‘Adjusted EBITDA in Q3 was €10.5m, up from €9.1m on a like-for-like basis for the same period last year with adjusted EBITDA margin further improving from 16.7% to 18.0% on a like-for-like basis. Overall volume growth and the impact from price increases had a positive effect on margins, more than offsetting cost inflation and investments in NEXT, in particular for expanding our sales teams.’

‘Third quarter results for our residential and commercial divisions were in line with our expectations, showing improved margins versus last year, despite the upfront investments in NEXT. In rugs, revenue growth was in line with expectations, however, margins were again penalised by exceptional items. We continue to focus on implementing the various growth and cost saving initiatives identified in NEXT, which will start benefiting our results and will contribute significantly to 2020 earnings. We remain on track for the full year 2019 guidance we provided in March,’ says Cyrille Ragoucy, Balta ceo.