Q1 Trading update
Net sales down -2.1% (-2.9% like for like) to €612m, impacted at the end of Q1 because of the COVID-19 measures which made it also hard to arrange transport. All segments were down like for like but especially EMEA and Sports (both -3.6%) were down. As a reminder, Tarkett’s sales in China account only for 1% and thus the effect of the lockdown measures will mainly be felt in Q2, but the Group does not dare to make a statement on how severe the impact could be. To protect margins Tarkett has taken measures like any other company, temporarily laying off or reducing time if workers in all locations. EBITDA expected to be in the range of €40-43m, compared to €43.1 last year. Final figures to be released on April the 28th. Capex will be reduced to €80m compared to €125m the year before. As communicated on March 18th, the dividend will be cancelled.
It’s quite clear the hit in 2020 will make the covenants on debt be breached, but the company states the relationship with its bankers is good and they have initiated talks to waive its financial covenant. We have confidence this will indeed be a success but fear the room created in the last years could be perished in 2020 putting the outlook for a structural higher dividend in the upcoming years in jeopardy.