First-half 2019 results Paris Stock Exchange:MDM

PRESS RELEASE

MAISONS DU MONDE: FIRST-HALF 2019 RESULTS

Strong sales momentum, notably driven by online and international growth

First-half profitability in line with our expected phasing

Full-year 2019 targets confirmed

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• Sales up 10.9% at constant exchange rates (+11.2% at current exchange rates) to €564m
   
• Sales growth of 8.3% at constant perimeter¹, of which +4.4% like-for-like²
   
  • Acceleration in Q2 (+6.5%) versus Q1 (+2.4%)
     
• Continued strong momentum across online (+23.3%) and international (+23.5%) activities, accounting for c.26% and c.45% of sales respectively
   
• 15 gross store openings and 6 closures for relocation
   
•  EBITDA³ of €45.6m and EBITDA margin³ of 8.1%, in line with expected phasing
   
• Leverage ratio³ of 1.4x vs. 1.5x at 30 June 2018
   
• Full-year 2019 guidance confirmed⁴:
   
  • Continued sales growth of around 10%
     
  • 35-40 gross store openings, of which two-thirds outside France, and around 10 store closures for relocation
     
  • EBITDA margin above 13% of sales

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Nantes, 29 July 2019

Maisons du Monde (Euronext Paris: MDM, ISIN Code: FR0013153541), a European leader in affordable and inspirational decoration and furniture homeware, today announces its first-half 2019 results.

Julie Walbaum, Chief Executive Officer of Maisons du Monde, commented:

“Maisons du Monde’s sales grew once again in double digits in the first half, of which 4.4% like-for-like, demonstrating the continued momentum of our omnichannel and international model. Modani continues its rapid expansion and confirms its development potential in the US. We are also very pleased with the recent acquisition of Rhinov, whose capabilities will allow us to strengthen brand differentiation and set the stage for our new strategic plan.

In line with our expectations, first-half profitability was weighed down by currency effects and, to a lesser extent, by heightened promotional activity. This temporary increase in promotions was driven by our conscious decision to bring down in-store inventory to prepare for our new strategy of streamlined and more impactful collections. We also incurred higher marketing and logistics costs than last year at Modani, linked to our growth strategy in the USA.

EBITDA will accelerate in the second half through the combined effects of our traditional seasonality, favorable foreign exchange, lower promotional intensity and a stronger contribution from Modani. We remain fully committed to achieving our full-year financial targets and preparing for the next chapter of our growth story, as presented at our recent Capital Markets Day.”

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Strong sales performance in the first half of 2019

Maisons du Monde reported sales of €564 million in the first half of 2019, up 10.9% at constant exchange rates compared to the first half of 2018. Like-for-like sales growth reached 4.4% in the first half of 2019, reflecting the robustness of the Group’s omnichannel and international strategy. This performance was achieved despite a challenging comparable base (LFL growth of 4.8% in H1 2018) and a soft retail environment in France. Like-for-like sales growth accelerated in Q2 to +6.5% versus +2.4% in Q1. Growth remained strong in online sales (+22.3%) and international business (+23.5%), representing c.26% and c.45% of Group sales.

In the first half of the year, Maisons du Monde remained focused on the implementation of its business priorities. The Group successfully launched its new indoor, outdoor and kids collections. Our first customizable sofa was released and met with immediate success. We also continued our B2B development with the launch of our new B2B catalogue, including 850 SKUs, of which 140 specifically-designed products. The opening of the Maisons du Monde Hotel & Suites in Nantes now allows us to showcase our offer. In addition, in line with our strategic decision to expand our offering in decoration services, Maisons du Monde took a majority stake in Rhinov, which allows customers to get professional interior decoration advice that fits their style and budget at a very competitive price.

Continuing our advances in enhancing our customer omnichannel experience, we improved our search engine and product categories and launched four e-catalogs (indoor, outdoor, kids and B2B). We also began testing in-store returns of decoration items ordered online.

In order to enhance the in-store experience, Maisons du Monde launched its personalized employee training program in pilot stores and continued to deploy its decoration advice corners, which are now rolled out in about 150 stores across its network at the end of H1 2019. Moreover, the group continued to strengthen its customer relationships, focusing on the personalization of its communications, the optimization of its marketing investments and the reinforcement of its brand visibility through social media, influence and PR.

Furthermore, Maisons du Monde continued to implement its store network development roadmap with 13 gross store openings, including 6 in France and 7 across international markets, of which its first store under its banner in Portugal. Six other stores were closed for relocation during the period (of which 3 in France, 1 in Belgium and 2 in Italy), as part of the Group’s active management of its store portfolio. As of 30 June 2019, Maisons du Monde operated 343 stores in 10 countries, with total sales area of 395,400 sqm, up by approximately 8,200 sqm compared to 31 December 2018.

Lastly, Modani continued to deliver strong sales growth in the first half of 2019 with sales of €20.3 million, up 19.2% on a pro forma basis compared to the first half of 2018. Two new showrooms were opened during the period, bringing the total to 15 showrooms across the US as of 30 June 2019.

Profitability evolution in line with our expected phasing for the year

Gross margin slowed in the first half of 2019, as expected, reaching 64% compared to 65% in the first half of 2018. This contraction was due to unfavorable foreign exchange effects, temporarily higher promotional activity and, to a lesser extent, a higher share of furniture sales in product mix.

In line with our expected phasing for the year, EBITDA⁵ amounted to €45.6 million in the first half 2019, down 4.9% year-on-year, resulting in an EBITDA margin of 8.1%, down 140bps compared to the first half of 2018. This anticipated drop reflected lower gross margin, as well as temporary pressure on logistics and marketing costs at Modani, linked to its rapid expansion.

We expect the Group’s EBITDA margin to improve significantly in H2 2019, thanks to traditional seasonality, more favorable foreign exchange rates, lower promotional intensity and a stronger contribution from Modani.

EBIT⁵ amounted to €26.7 million in the first half 2019, down 12.9% year-on-year, reflecting lower EBITDA and an increase in D&A of €1.5 million versus H1 2018. EBIT margin stood at 4.7% in the first half of 2019 compared to 6% in the first half of 2018.

Operating profit⁵ reached €19.5 million in the first half 2019, up 5.3% year-on-year, including a positive change in the fair value of financial derivative instruments of €4.6 million compared to a negative change of €0.8 million in the first half of 2018.

Net income⁵ amounted to €7.2 million in in the first half 2019, down 10.8% compared to €8.1 million in in the first half 2018, largely due to higher income tax.

Improvement in Free cash flow

Operating activities generated a net cash inflow⁵ of €20.1 million in in the first half 2019 compared to a net cash outflow of €8.7 million in in the first half 2019, mainly due to a positive change in working capital requirements of €0.3 million in H1 2019 compared to a negative contribution of €44.2 million in H1 2018.

Free cash flow⁵ was a net outflow of €15.1 million in in the first half of 2019 compared to a net outflow of €62 million in in the first half of 2018, including capital expenditure of €23.4 million, principally allocated to new store openings and maintenance and renovation of our store network.

Inventory levels decreased from €241.2 million at 31 December 2018 to €215.8 million at 30 June 2019, down 10.5%, reflecting the Group’s decision to bring down in-store inventory to lay the foundations for the roll-out of the business priorities presented at the Capital Markets Day, which include enhanced visual attractiveness of its offer.

Further deleveraging

The leverage ratio⁵ was 1.4x at 30 June 2019 compared to 1,5x at 30 June 2018. The Group’s net debt amounted to €204.2 million at 30 June 2019 compared to €213.1 million at 30 June 2018.

Implementation of IFRS 16 standard

The IFRS 16 “Leases” standard, applicable to financial years beginning from 1 January 2019, replaces IAS 17 and the associated IFRIC and SIC interpretations. This standard imposes a single method of accounting for contracts by lessees by recognizing an asset “right of use relating to leases” and a liability “lease debt”. The lease term is defined contract by contract and corresponds to the fixed period of the commitment taking into account the optional periods that are reasonably certain to be exercised.

On January 1, 2019, the Group elected to apply the simplified retrospective method of accounting for the cumulative effect of the initial application as an adjustment to opening equity. As a result, data for prior years have not been restated and are presented in accordance with previous accounting policies, as presented in the consolidated financial statements as of 31 December 2018. In order to facilitate the comparison with previous periods, the Group presents non IFRS financial metrics pre-IFRS 16.

H2 2019 business priorities

In the second half of 2019, Maisons du Monde will continue to implement its business priorities and prepare the roll-out of its 2020-2024 plan.

The Group will concentrate its efforts on the following five priorities:

• Further enhance its product proposition, with more and narrower decoration collections, as well as fine-tuned in-store merchandizing to improve in-store visual attractiveness;
   
• Continue to develop its store network in an agile manner, including an opening in Germany (Köln);
• Keep on strengthening its omnichannel experience with initiatives such as the roll out of in-store returns of decoration orders and the revamping of its salesforce tablet app;
   
• Further develop its customer relationships through further personalization of communications and optimized marketing;
   
• Support the expansion of Modani and further test the Maisons du Monde concept in the USA.

FY 2019 guidance confirmed⁶

Maisons du Monde confirms its full-year 2019 guidance on the back of a stronger second half, in line with our expected phasing for the year. We expect continued positive sales momentum in H2 2019 and an improvement in profitability versus H1 2019.

We expect for full-year 2019:

• Continued sales growth of around 10%;
   
• 35-40 gross store openings, of which two thirds outside France (including 5 for Modani), and around 10 store closures for relocation (mainly in France);
   
• EBITDA margin above 13% of sales.

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APPENDIX⁷

Summary of Q2 2019 sales⁸

Summary of Q2 2019 sales at constant perimeter⁹

Summary of H1 2019 sales¹⁰

Summary of H1 2019 sales at constant perimeter¹¹

Key Q2 2019 sales metrics

Key H1 2019 financial metrics before IFRS 16 impact

Reconciliation of EBITDA and EBITDA before IFRS 16 impact

Reconciliation of EBIT and EBIT before IFRS 16 impact

Reconciliation of net debt and net debt before IFRS 16 impact

Reconciliation of free cash flow and free cash flow

Consolidated income statement

Consolidated balance sheet

Consolidated cash flow statement

Evolution of the Maisons du Monde store network¹⁸

Evolution of the Modani store network

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GLOSSARY

• Sales: Represent the revenue from the sales of decorative items and furniture through the Group’s stores, website and B2B business. They mainly exclude i/ customer contribution to delivery costs, ii/ revenue from logistics services provided to third parties, and iii/ franchising revenue.
• Sales growth at constant perimeter: Represents the percentage change in sales from the Group’s stores, website and B2B business at constant scope of consolidation between one financial period (n) and the comparable preceding financial period (n-1).
• Like-for-like sales growth: Represents the percentage change at constant exchange rates in sales from the Group’s stores, website and B2B business, net of product returns between one financial period (n) and the comparable preceding financial period (n-1), excluding change in sales attributable to stores that opened or were closed during either of the comparable periods. Sales attributable to stores that closed temporarily for refurbishment during any of the periods are included.
• Gross margin: Is defined as sales minus cost of sales. Gross margin is also expressed as a percentage of sales.
• EBITDA: Is defined as current operating profit, excluding i/ depreciation, amortization, and allowance for provisions, ii/ the change in the fair value of derivative financial instruments, and iii/ pre-opening expenses. Half-year EBITDA is defined the same way as annual EBITDA, but also excludes, pro rata temporis for the period, i/ the annual catalogue-related expenses and ii/ the full-year impact of IFRIC 21 on costs related to some government levies, accounted for in full in the first half.
• EBIT: Is defined as EBITDA after depreciation, amortization, and allowance for provisions.
• Net debt: Is defined as the Group’s convertible bonds (“OCEANE”), term loan, revolving credit facilities, lease liability, deposits and guarantees, and bank overdrafts, net of cash and cash equivalents (excluding bank overdraft).
• Leverage ratio: Is defined as net debt divided by last-twelve-months EBITDA (including Modani on a pro forma basis for the period ending 30 June 2018, and excluding the liabilities from the earn-out and the put option at 30 June 2018 and excluding the put option at 30 June 2019).
• Financial metrics before IFRS 16 impact: On 1 January 2019, the Group adopted the new IFRS 16 standard and elected to apply the simplified retrospective method. As a result, prior years’ data are presented in accordance with previous accounting policies, as presented in the consolidated financial statements as of 31 December 2018. In order to facilitate the comparison with previous periods, the Group presents financial metrics excluding IFRS 16 impact, including EBITDA, EBIT, net income, free cash flow and net debt.

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Financial calendar¹⁹

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Disclaimer: Forward Looking Statement

This press release contains certain statements that constitute “forward-looking statements”, including but not limited to statements that are predictions of or indicate future events, trends, plans or objectives, based on certain assumptions or which do not directly relate to historical or current facts. Such forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward-looking statements. Accordingly, no representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Any forward-looking statements included in this press release speak only as of the date hereof and will not give rise to updates or revision. For a more complete list and description of such risks and uncertainties, refer to Maisons du Monde’s filings with the French Autorité des marchés financiers.

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About Maisons du Monde

Maisons du Monde is a creator of inspirational lifestyle universes in the homeware industry, offering distinctive and affordable decoration and furniture collections that showcase multiple styles. The Group develops its business through an integrated and complementary omnichannel approach, leveraging its international network of stores, its websites and its catalogues. The Group was founded in France in 1996 and has expanded profitably across Europe since 2003, reporting sales of €1,111 million and EBITDA of €148 million in 2018. At 31 December 2018, the Group operated 336 stores in 9 countries including France, Italy, Spain, Belgium, Luxembourg, Germany, Switzerland, the United States and the United Kingdom, and derived 40% of its sales outside France. The Group has also built a successful complementary and comprehensive ecommerce platform, whose sales grew by over 30% per year on average between 2010 and 2018. This platform, which accounted for 23% of the Group’s sales in 2018, is available in the countries where it operates stores plus Austria, the Netherlands and Portugal. In 2018, the Group acquired a majority stake in Modani, a furniture chain present in the United States through its stores and ecommerce business. Modani, founded in 2017, is an aspirational lifestyle brand, offering high-quality proprietary modern, contemporary and mid-century furniture at affordable price points, with a nationwide presence through a network of 13 showrooms.

corporate.maisonsdumonde.com

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Contacts

¹ At constant exchange rates (+8.5% at current exchange rates in H1 2019 vs. H1 2018).
² Excluding Modani and on a same-store basis.
³ Pre-IFRS 16.
⁴ Including Modani and pre-IFRS 16 impact.
⁵ Pre-IFRS 16.
⁶ Including Modani and pre IFRS 16.
⁷ The audit procedures are being finalized.
⁸ Including Modani.
⁹ Excluding Modani.
¹⁰ Including Modani.
¹¹ Excluding Modani.
¹² Before acquisition of financial assets and acquisition of subsidiaries (net of cash acquired).
¹³ Net debt divided by last-twelve-months EBITDA (including Modani on a pro forma basis for the period ending 30 June 2018, and excluding the liabilities from the earn-out and the put option at 30 June 2018 and excluding the put option at 30 June 2019).
¹⁴ Pro rata temporis for the period.
¹⁵ Including other borrowings, deposits and guarantees, and bank overdrafts.
¹⁶ Excluding bank overdrafts.
¹⁷ Pro rata temporis for the period.
¹⁸ Excluding franchise stores.
¹⁹ Indicative timetable.

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