Restructuring Existing Debt and Securing New Financing.

Damartex announces the signature on 19 July 2023 of an agreement with its legacy banking partners and its reference shareholder on the restructuring of its current financial debt and the securing of new financing.

Against a difficult macroeconomic backdrop of war in Ukraine, inflationary pressure and the energy crisis, the Group posted consolidated sales of € 650.4 Mn in the 2022/2023 financial year, down -9.5% at actual exchange rates on the previous year[1]. The slowdown in business was felt in every quarter of the year.

Anticipating a cash crunch in the first quarter of the 2023/2024 financial year, Damartex has stepped up the measures already implemented to reduce costs and optimize its cash position, including by increasing the use of cash pooling.

At the same time, the Group proactively engaged in discussions with its banking partners and reference shareholder as part of a conciliation procedure^[2] to secure existing financing and negotiate the terms of new financing, which resulted in a conciliation protocol, the main terms of which are set out in the appendix.

Patrick Seghin, Chairman of the Management Board, said: “I would like to thank Damartex’s legacy banking partners and the Despature family group, our reference shareholder, for their confidence and support in restructuring our financial debt and securing new financing. This will enable us to deal with the current situation and give the Group the visibility it needs to implement its new strategy, which we will present on 6 September 2023.”

Outlook

As part of the conciliation process currently underway, the Company has appointed a financial expert to carry out an independent review of its business plan. As a result of this work, which is by its nature exceptional given the context, the Company is publishing below the estimated results for the financial year ending 30 June 2023 and the forecasts for the current financial year for certain financial aggregates considered relevant for investors. These indicators are provided solely for the purposes of transparency and equivalence of information and therefore should not and cannot be assimilated to profit forecasts within the meaning of Commission Delegated Regulation (EU) 2019/980 of 14 March 2019, nor do they constitute Group guidance.

Taking into account a cautious view of economic conditions, ongoing efforts to reduce costs and manage cash, and the implementation of its new strategic plan, the
Company :

• €0 Mn and €-1 Mn and a cash position of around €-75 Mn. In accordance with the published financial calendar, the annual results will be published on 5 September 2023 after the close of trading.
• €655 Mn, consolidated EBITDA of around €17 Mn and operating cash flow generation (before financing and investments/divestments) of around €19 Mn.

Warnings

The above-mentioned forecasts are based on data, assumptions and estimates considered reasonable by the Group at the date they were drawn up. These data, assumptions and estimates may change or be modified as a result of uncertainties linked in particular to the economic or financial environment.

The occurrence in particular of one or more of the risks described in the 2022/2023 Annual Report could have an impact on the Group’s business, financial situation, results or prospects. The Group therefore gives no undertaking or guarantee that the data presented herein will materialize.

Appendix

The main terms of the protocol are as follows:

• the provision to Damartex by its partner banks of state-guaranteed so-called “Resilience” loans totalling €35 million in principal, with a 12-month grace period on principal and interest and an option for Damartex to opt for a further 12-month grace period on principal;
• the refinancing of the existing RCF lines[3] by a new syndicated revolving credit facility made available to Damartex by its four banks, for a total principal amount of €120 million, unsecured, maturing in 24 months, with an option to extend for a further 6 months subject to the Group meeting certain thresholds;
• the provision to Damartex by the Despature family group, its reference shareholder[4], of a shareholder loan totalling €8.5 million in principal, of which :
  • €3.5 million in principal will be repaid on the business day following the maturity date of the new syndicated revolving credit facility, subject to its full and effective repayment; and
  • two instalments of €2.5 Mn each in principal (i.e. €5 Mn in total) will be repaid on the business day following the final maturity date of the “Résilience” state-guaranteed loans, subject to their full and effective repayment, one of the instalments being repayable on the business day following each principal repayment date of the “Résilience” state-guaranteed loans, the other instalment being repayable in fine;
• the continuation of the overdrafts granted to Damartex by two banks, for a total principal amount of €21 million, for a period of 24 months; and
• confirmation of documentary credits, in the principal amount of €10.5 million, granted by a banking institution, split between Damart SAS and Damartex UK Ltd, for a period of 24 months.

Under the terms of the documentation relating to the new syndicated revolving credit facility provided for in the protocol, and until full repayment of the sums due under this facility (i.e. July 2025 or January 2026 as the case may be), the Company has undertaken not to (i) propose a dividend distribution to the General Meeting or (ii) repay the principal of the reference shareholder loan.

The entry into force of the protocol remains subject to the finalization of the credit documentation and the judgement of the Lille Métropole Commercial Court approving the protocol in accordance with the provisions of article L. 611-8 II of the French Commercial Code, which are expected to occur by the end of July 2023.

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[1]   See the press release dated 20 July 2023, available online at www.damartex.com, relating to consolidated sales for the 2022/2023 financial year.

[2]   Proceedings opened by the President of the Commercial Court of Lille Métropole in favour of the Company, of Damart SAS and of D.S.B. SARL on 25 April 2023.

[3]   Refers to the RCF (Revolving Credit Facilities) credit lines totalling €120 Mn with four French banks, which were fully drawn down on the date the protocol was signed.

[4]   Through J.P.J.D. SCA, which held 55.25% of the Company’s share capital and 62.51% of its voting rights as of 30 June 2023.

A Continued Momentum of Agility Against a Still Deteriorated Backdrop.

Damartex ended the 2022/2023 financial year with sales of €650.4 Mn, down against the previous year (-9.5% at actual exchange rates, -9.0% at like-for-like exchange rates), still impacted by the unfavourable macroeconomic environment and the contraction in consumption observed in certain markets, particularly the UK. After a first half down on the previous year, the Group posted sales of €285.8 Mn in the second half, down -9.9% at actual exchange rates (down -8.9% at like-for-like exchange rates).

In the fourth quarter, business slowed again, particularly in the Fashion and Home & Lifestyle divisions. Despite a Healthcare division boosted in particular by the excellent performance of Santéol, Damartex closed its final quarter at €131.9 Mn, down -8.5% at actual exchange rates (down -7.9% at like-for-like exchange rates).

Sales for the Fashion division totalled € 498.4 Mn for the 2022/2023 financial year, down -6.9% at actual exchange rates (-6.5% at like-for-like exchange rates). Despite buoyant in-store sales, which rose by +8.7%, the Damart brand posted a -5.9% decline in sales at actual exchange rates, affected in particular by a fall in mail-order sales and, more generally, consumer spending. Afibel posted sales down -21.8% at actual exchange rates. Driven by its brand positioning, Xandres continued to enjoy sustained growth, with sales up by a substantial +22.3% at actual exchange rates over the full year.

The Home & Lifestyle division continued to be severely affected by the deterioration in the macroeconomic environment, posting sales of
€ 111 Mn, down -24.8% at actual exchange rates over the financial year (-23.9% at like-for-like exchange rates).

Lastly, the Healthcare division posted sales of €41.1 Mn, up +14.3% at actual exchange rates and +14.7% at like-for-like exchange rates. Driven by Santéol, a homecare provider specializing in respiratory assistance, which posted growth of +51.5% at actual exchange rates over the 2022/2023 financial year, the Healthcare division turned in a fine performance over the year as a whole, confirming its relevance.

Outlook

In a degraded economic and commercial environment that continues to have a negative impact on sales, Damartex continues to demonstrate agility and rigour in the management of its activities, costs and cash flow, as demonstrated by the signing of an agreement on the restructuring of its current financial debt and the securing of new financing¹ .

In view of the current situation, the Group anticipates an impact on its results and profitability for the financial year ending 30 June 2023, as detailed in the press release on the refinancing agreement¹ . 

At its annual results presentation on 6 September 2023, Damartex will unveil its new strategic plan to support the Group’s development.

¹See the press release on the refinancing agreement published today and available on the Damartex website.

A resilient and high-growth Health division, in an environment that remains difficult and uncertain.

Damartex closed the third quarter of the 2022/2023 financial year with a turnover of € 153.9 Mn, down from the previous year (-11,1% at actual exchange rates, -9,8% at like-for-like exchange rates). With the notable exception of healthcare – a, essential sector, the context in which the Group operates remains marked by a contraction in consumption. Damartex continues to suffer the effects of inflation and the loss of purchasing power of households, particularly senior citizens in the clothing and home equipment sector, and particularly in the German and English markets.

Over the first nine months of the financial year, Damartex posted revenue of € 518.5 Mn, down -9,8% at actual exchange rates (-9,3% at like-for-like exchange rates).

The “Fashion” division recorded revenues of € 402.0 Mn over the first nine months, down -7.1% at actual rates (-6.7% at like-for-like exchange rates). In the third quarter, sales decreased by -8.4% at actual rates (-7.3% at like-forlike exchange rates). The Damart and Afibel brands were down -9.9% actual rates (-8.6% at like-for-like exchange rates) and -16.1% respectively. With the exception of Thermolactyl which continues to perform well, the activity is still marked by a slowdown in consumption for leisure / pleasure purchases. The Xandres banner posted a revenue growth of +24.0%, driven by the Belgian store
network and its brand positioning.

Revenue from the “Home & Lifestyle” division stood at € 85.3 Mn, down -27,2% at actual rates (-26,4% at like-for-like exchange rates) over the first nine months of the financial year. In the third quarter, sales amounted to € 27.2 Mn, down -26,5% at actual rates (-24,9% at like-for-like exchange rates). 3Pagen and
Coopers of Stortford remain negatively impacted by the external environment.

The “Healthcare” division, dedicated to the health business, continues its strong performance and posted revenue growth of +25.5% at actual rates over the first nine months of the year, at € 31.2 Mn. The division continues to demonstrate its resilience, particularly through the strong growth of Santéol and the development of MSanté. In the third quarter, the business recorded an increase of +16.8% at actual rates (+17,8% at like-for-like exchange rates) to € 9.6 Mn.

Outlook

Despite a still difficult commercial situation that continues to significantly affect the sales of its main businesses and thus impact its financing capacities, the Damartex Group can count on the dynamism of its Healthcare division to continue to deploy its transformation plan. In the coming months, the Group intends to pursue its activities by demonstrating agility in the face of a still complicated and uncertain economic context, encouraging caution and flexibility.

Agility and Strong Fundamentals in a Still Challenging Environment

Damartex ended the first half of the 2022/2023 financial year with sales of €364.6 Mn, down on the previous year (-9.2% at actual exchange rates, -9.1% at like for like exchange rates). In a context marked by inflation and the decline in purchasing power, sales amounted to €229.2 Mn, down -6.4% in the second quarter (-6.0% at like for like exchange rates).
The slowdown in the UK market is becoming more pronounced and is impacting the Group’s brands in this region.
Damartex also continues to recruit customers: + 700,000 new customers over the last quarter (down -28% compared with last year).

Sales for the Fashion division totalled € 284.9 Mn for the first half of the year, down -6.6% at actual exchange rates (down -6.4% at like for like exchange rates). Second-quarter sales were slightly down by -2.4% at actual exchange rates (-2.2% at like for like exchange rates).
Damart remained stable over the 2nd quarter compared with the previous financial year: in contrast to the UK market, where consumption is stagnating, Damart performed well in France and Belgium, particularly in terms of sales in stores.
Afibel ended the quarter down -27.7% at actual rates. Xandres continued to perform well and ended the second quarter with a very strong increase of +56.5% at actual rates.

The Home & Lifestyle division, still affected by a contraction in post-covid consumption in the home equipment sector, closed the half-year with sales of €58.1 Mn, down -27.6% at actual rates (-27.2% at like for like exchange rates). The downturn in consumer spending in the German and UK markets, which began in the 1st quarter of the year, again weighed on 3Pagen and Coopers of Stortford sales in the 2nd quarter, down -29.7% and -21.4% respectively at actual exchange rates.

The Healthcare division, dedicated to the healthcare business and recently strengthened, continues to grow, posting a strong increase in turnover of +29.8% at actual exchange rates in the first half of the year, reaching €21.6 Mn (+30.1% at like for like exchange rates).
Second-quarter sales amounted to €10.5 Mn, up sharply by +24.7% at actual rates (+25.2% at like for like exchange rates). The division was driven in particular by the very good performance of Santéol, which posted strong growth of +59.8% over the period.

Damartex demonstrates its strong capacity to adapt and remains confident in its diversification strategy through its three divisions, which will remain a strength for the coming quarters.
In a market environment marked by strong uncertainty, particularly in the UK market, caution and fine-tuned steering will continue to guide the Group in the coming months.

The Extra-Financial Performance Statement presents the strategy and CSR indicators of the Damartex Group. It is published every year, after an external audit.

Damartex has formalised its CSR policy, Change Our World, around three pillars: planet, ethics and solidarity.

Commitment to the planet

• We have measured the carbon footprint of the entire value chain (scope 1, 2, 3). The Group emitted 533,582 tonnes of CO2 eq in 2022, i.e. 14kg of CO2 eq per product sold (down 10% on 2020). Our ambitions, aligned with a 1.5°C trajectory, are a 25% reduction by 2025 and 50% by 2030.

• A more responsible Offer: eco-design rules are defined, life cycle analyses are carried out and trusted labels are selected. 16% of products are currently eco-designed. Our ambition is to have a 100% responsible offer by 2030.

• Plastic packaging waste is either eliminated or replaced by cardboard, paper or recycled plastic. The group has reduced the use of plastic by 27% in 1 year. Our ambition is to generate zero single-use plastic packaging by 2030.

Commitment to people

• Happy and talented employees: the autonomy and fulfilment of our employees are essential to improve performance and agility. The employee satisfaction survey rate was 67.75% in 2021. Giving meaning to daily life by involving everyone in CSR is a major challenge Our ambition is to have 100% of employees involved in CSR.

• Responsible purchasing: the policy is based on three pillars: the responsible purchasing charter, the involvement of buyers and social and environmental audits. In 2022, 57.5% of products purchased came from audited factories. Our ambition is for 100% of our products to come from audited factories.

Commitment to seniors

• Our ambition in 2030 is to make the Group and its foundation a key player in the inclusion of seniors.

• Innovation and quality for seniors are at the heart of the Group’s DNA. Customer satisfaction is measured by the Net Promoter Score. It was 34.4 in 2022.

• The On Seniors’ Side Foundation supports solidarity projects in the countries where the Group operates. Its mission is to “change the way society looks at seniors and act for their well-being”. Since its creation in 2019, the Foundation has financed and supported 89 projects for a total of €500,000.

The Change Our World axis is a major issue in the Damartex Group’s transformation plan: the teams are aligned and commit themselves a little more each day to achieve our ambitions.

Group Agility in a Still Deteriorated Economic Environment 

In the first quarter of the 2022/2023 Financial year, the Damartex Group’s revenues amounted to €135.4 Mn, down -13.7% at actual exchange rates compared with the 1^st quarter of 2021/2022 (-13.8% at like for like exchange rates).

Over this period, the Group recruited 302,000 new customers. This compares to 415,000 new customers in the same quarter last year.

In general, the Group’s activity was negatively influenced by a difficult economic environment: purchasing power crisis, geopolitical uncertainty, death of the Queen in the United Kingdom, etc.

Sales for the “Fashion” division came to €101.5 Mn for the quarter, down ‑13.2% at actual exchange rates (-13.3% at like for like exchange rates). Despite strong sales in stores, Damart posted a -13.8% drop in turnover at actual rates, which was affected by the temporary closure of websites this summer following a cyber attack. Afibel closed the quarter with revenues down -22.1% at actual exchange rates, while Xandres continued its good performance with a significant +17.8% increase in revenues over the period. The “Home & Lifestyle” division, marked by a “post-covid” contraction in the consumption of home & garden items, recorded sales of €22.7 Mn in the first quarter, down -28.5% at actual and like for like exchange rates. The Coopers of Stortford, 3Pagen and Vitrine Magique brands recorded a decline of ‑26.8%, ‑32.9% and -17.4% respectively at actual rates.

Finally, the “Healthcare” division, which includes the activities of Santéol, MSanté, Sédagyl and Médical Santé, recently acquired, recorded strong growth of +35.0% at actual exchange rates, with revenues of €11.2 million.

It was driven in particular by the healthcare services business with MSanté, and by the solid performance of Santéol, which showed very strong growth of +60.5% over the period.

In this 1^st quarter, Damartex confirms the dynamism of its “Healthcare” division, recently reinforced with the acquisition of Icelus Medical, and the solid fundamentals of its “Fashion” division to evolve in a still deteriorated economic environment.

The Group remains agile to respond to it. Current sales of Thermolactyl products by Damart, as a result of the return of cold weather, are an illustration of this, even if they alone cannot predict the general trend of Damartex’s activity.

The Group remains cautious about the rapid and uncertain evolution of the macroeconomic situation.

Strengthening of Santéol in the Paris Region

The Damartex group announces the acquisition of 100% of the shares of the ADS company by Santéol holding. This operation, like the previous ones, is part of the implementation of the Group’s transformation plan “Transform to Accelerate – TTA 2.0”.

The ADS company, a home healthcare provider (so-called PSAD) specializing in respiratory assistance, is based in Villeparisis in Seine-et- Marne (France).
Founded in 2014 by David Sdez, it has achieved a turnover of over €3 Mn in 2021 thanks to the trust of over 5,500 patients who recognize its quality of service.

This merger will enable Santéol to accelerate its development. Combined with the existing presence in the west of Paris, Santéol will be in a position to best serve all patients in the Paris region.
With his expertise, David Sdez will provide commercial support for the integration of ADS into the Santéol group over the next twelve months.

In line with its ambition to become the European leader in the Silver economy, the Damartex group expresses through this acquisition its desire to continue the development of its Healthcare division.

The integration of ADS strengthens Santéol’s position as a leader in respiratory Home Healthcare Service segment, with more than 22,000 patients cared for and a geographical coverage that allows for more local service.

ADS will be integrated into the Damartex Group’s accounts as of 1 July 2022.

Progress of the TTA 2.0 Transformation Plan Slowdown in Business in an Inflationary Context

Damartex closed the 2021/2022 fiscal year with sales of €719.0 million, down -5.9% at actual rates compared with the previous year (-7.1% at like for like exchange rates), impacted by a difficult economic context. After a stable first half compared with the previous year, the Group posted revenues of

€317.2 Mn in the second half of the year, suffering from a slowdown in sales of -12.3% at actual rates (-13.2% at like for like exchange rates) against the same period last year.

Damartex continues to strengthen its customer base, which was enhanced by 1.4 million new customers in the first half of the year, by adding 0.8 million new customers in the second half of the year, including 0.3 million in the fourth quarter.

In the fourth quarter, business fell significantly, particularly affecting the “Fashion” and “Home & Lifestyle” divisions. Despite a good performance in “Healthcare”, driven in particular by the dynamism of recent acquisitions, the quarter closed at €144.2 Mn, down -13.5% (-14.1% at like for like exchange rates).

Sales for the “Fashion” division amounted to € 535.5 Mn over the 2021/2022 financial year, down -3.5% at actual exchange rates. This division has seen strong growth in stores (+23.8% compared with last year). The revenue level observed for this sales channel is also up +19% compared with 2019/2020.

Damart remained robust in the face of the economic situation, but suffered a slight decline of -2.4% at actual rates over a year marked by the slowdown in the traditional “mail order” channel, while Afibel recorded a decline of -8.9% at actual rates. Benefiting from its positioning in the affordable luxury segment, Xandres posted record performances in Belgium and the Netherlands, representing an increase of +20.4% at actual exchange rates.

The “Home & Lifestyle” division was particularly affected by the deterioration in the macroeconomic environment, and posted revenues of €147.6 million, down -16.9% at actual exchange rates over the year (down -18.6% at like for like exchange rates). The sales of the three banners suffered from a very unfavourable base effect on e-commerce, which had benefited from the health crisis.

Lastly, sales for the “Healthcare” division, which includes the Sedagyl, Medical Santé, Santéol and MSanté banners, amounted to €35.9 million, up significantly by +14.3% at actual exchange rates and +13.4% at like for like exchange rates. This good momentum in the Healthcare division continues to be reinforced by recent acquisitions, perfectly in line with the TTA 2.0 transformation plan.

Santéol, a home healthcare provider specializing in respiratory assistance, continued to grow at +18.4% at actual rates in FY 2021/22, while Sédagyl, an marketplace for home care, recorded a decline of -9.2% at actual rates, negatively impacted by the Covid base effect.

Despite a deteriorated macroeconomic and geopolitical environment, Damartex is continuing to deploy its strategic plan: Transform to Accelerate 2.0 to support its development while coping with persistent tensions on supplies. The Group is exercising caution by remaining extremely agile with regard to the rapid evolution of the economic environment, and anticipates, as mentioned at the time of the publication of the third quarter revenues, a negative impact on the annual results of the 2021/2022 fiscal year.

Further development in the “Healthcare” sector and restructuring of the homecare (MAD) activity

As part of its ‘Transform To Accelerate – TTA 2.0’ transformation plan, the Damartex group announced its acquisition of 100% of the shares in the Médical Santé group, thereby reinforcing its position as a European leader in the Silver Economy.

Created in 1997 by Charles-Henri Bastien and based in Mons-en-Barœul (59), the Médical Santé group boasts a staff of 85 employees and offers homecare health products (MAD) and services (PSAD). Médical Santé generated a turnover of € 10 M in 2021 thanks to the trust it has built with more than 800 chemists as well as hospitals and associations, and also through the development of e-commerce.

Following this acquisition, Damartex plans on merging Médical Santé with Sédagyl, the Group’s platform for comfortable living solutions. It was created in 1995 and specialises in homecare for seniors. Their complementary business models will further the Group’s goal of offering the best omnichannel products and services offer on the market, while establishing a relationship with its patients and customers based on respect and trust.

Charles-Henri Bastien will support the integration of Médical Santé through the summer of 2022. Christian Marie, who has extensive experience in this sector, will join the Damartex group as the Managing Director of the new homecare department (with Médical Santé and Sédagyl) and will be in charge of developing this activity.

“I am delighted and extremely proud of Médical Santé’s integration within the Damartex group, which shares our values. The synergies between our brands will make it possible to continue developing a comprehensive and innovative offer that will set us apart on the homecare market,” said Charles-Henri Bastien, the General Director and Founder of Médical Santé.“We look forward to bringing on board the Médical Santé teams. The merger with Sédagyl will lead to the emergence of a French player offering an omnichannel solution to assist the elderly and enable them to stay at home as long as possible, which is what the vast majority of them desire,” added Patrick Seghin, Chair of the Damartex executive management board.