Quarterly Results of TIM SA: Slower Growth and Impact of Previous Year's High Base
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1Q2023 the effects of the slowdown and the high base of the previous year
- Decrease in revenues and lower margin in TIM SA, net profit lower by over 50% y/y - as expected.
- Weaker results of 3LP (costs of launching new facilities), decline in EBITDA and negative net result - in line with our forecasts.
- Weaker operating CF (renewed increase in working capital: PLN +35 million q/q) and higher CAPEX - as a consequence, an increase in DN by over PLN 30 million.
- TIM's results are of secondary importance in the situation of the ongoing tender offer for 100% of the company's shares
at the price of PLN 50.69 per share.
Companies' results
Sales of TIM SA in the first quarter of 2023 decreased by 8%, reflecting the deterioration of the market situation. In addition, the margin on goods fell (-1 pp y/y and similarly q/q), which the management explains by the intensification of competition and a change in the attitude of buyers (they no longer buy "in stock"). At the same time, operating costs increased (+10% y/y), mainly in external services (transport, warehouses +13% y/y). The balance of other activities and the balance of "financials" were not significant for the final result in TIM SA.
Unfortunately, the results of the logistics company 3LP fell short of our expectations. This entity showed a 2% decrease in sales to customers from outside the Group (to approx. PLN 16.5 million), generating a loss already at the EBIT level (PLN -0.7 million, for the first time in at least 2 years).
The EBITDA result was the lowest since Q1 2020 (below PLN 5 million). The negative impact of the "financials" was partly offset by positive exchange differences (balance of financial activities in Q1 approx. PLN -2 million). The net loss in the first quarter amounted to almost PLN 3 million. In the following quarters, the results should improve, as 3LP will use the newly launched warehouse space more and more effectively, however, the weaker results of TIM SA will be weighed down (decrease in the volume of orders). Throughout 2023, we expect an increase in EBITDA with lower EBIT and a slightly negative net result.
Renewed increase in inventories and receivables offset by slightly higher trade payables
In Q1 2023, TIM SA increased the level of inventories by PLN 17 million and receivables by PLN 18.5 million. On the other hand, trade liabilities increased by approx. PLN 6 million, financing the increase in current assets only to a small extent. As a result, the net working capital (KON) increased by approx. PLN 30 million, and the cash turnover cycle increased to almost 50 days (parent data).
The quarterly value of the consolidated operating CF (PLN -10 million) was the lowest since mid-2015, mainly due to the decrease in EBITDA and the outflow of funds to working capital. Debt increased (+PLN 17 million q/q, the effect of launching new warehouses and showing long-term leases), with a clearly lower level of cash - the result is an increase in net debt (+PLN 32.5 million q/q). The increases relate mainly to 3LP, in TIM SA alone there is still net cash (PLN 12 million, but PLN 15 million less than in the previous quarter). The DN/EBITDA ratio in the Capital Group increased to 0.9x, but remains at a very safe level.
The decline in earnings was expected by us (as a result of the downturn in the industry). We are negatively surprised by thepoor 3LP data, although we hope for an improvement in the coming quarters. We maintain our full-year forecasts. On the other hand, we are aware that until the ongoing calls are resolved (beginning of July 2023), the exchange rate will react poorly to information not related to the call itself. We assume that the tender offer will be successful (the proposed conditions are attractive for TIM SA shareholders), which will result in the delisting of the company's shares from stock exchange trading
