2017 Consolidated Annual Results Successful Financial Restructuration

Transcription

1 Regulated information Privileged information 6 March 2018, 6:00 pm 2017 Consolidated Annual Results Successful Financial Restructuration Major financial restructuring successfully accomplished: bank debt reduced by 87 m in December 2017 and capital increased by 47 m in February More than 40 m additional cash flow contribution subsequent to the capital increase and the refinancing. Debt Forg. (2017) BS 2017 Debt Capital Increase (2018) BS Pro forma Dec 2017* in m Equity 87,0 1,5 47,3 48,8 Gross Debt (87,0) 139,3 (3,7) 135,6 Cash 50,2 (3,7) 47,3 93,8 Net Debt (87,0) 89,0 (47,3) 41,8 *As if the capital increase would have taken place in December 2017 instead of February At constant perimeter (PHE not included), orders booked amounted to approximately 300 m decreasing compared to 2016 subsequent to the Group s intention to be more selective in its repositioning process. In line with the transformation plan, the current PHE disposal process is progressing as planned; this activity has significantly deteriorated results since Negative EBITDA impacted amongst others by Brazil and South Africa for which activities will cease in Transformation plan progressing as expected (organisational costs reduced by 35% versus 2015). i

2 Financial Restructuring underwent a major financial restructuring encompassing a substantial bank debt reduction of 87 m in December 2017 and a capital increase (+47 m ) in February The Banking Syndicate agreed to a debt write-off of 87 m for, and the syndicated credit facility was renegotiated for an amount of 302 m (versus 380 m previously). In addition, proceeded to a significant capital increase at the beginning of 2018 through a public offering accessible to current shareholders, with a preference right from 26 January 2018 until 9 February 2018, which generated a capital increase of EUR 47,266,017. (See Post-Closing Events hereafter in point 5) Improvement Measures In addition to the measures initiated at the end of 2016 resulting in savings of 9 m in 2017, a series of actions was decided in 2017 in order to gradually reduce the costs structure. This additional plan should lead to an increase in savings from 4 m in 2017 to 14 m in 2018 and totalize 15 m of savings in This plan is carefully monitored and is on track at this stage. The measures taken in 2016 and 2017 should generate up to 24 m of savings in 2019, representing a 35% drop compared to The disposal of the Process Heat Exchanger business unit (hereafter: PHE) is ongoing. Investments in TTC, AIT and Jacir were sold. The closing of the subsidiaries in South Africa and Brazil is processing according to plan and is expected to be finalised in The Group is also pursuing its efforts to develop the synergies resulting from its regional organisation and to optimise the Process supply chain. Commercial Activity The business units all suffered from a period of uncertainty between the publication of the June 2017 results and the announcement in January 2018 only of the successful refinancing. In parallel, the market was generally less dynamic and therefore very competitive. EBITDA The EBITDA reached m in 2017 excluding the external results of PHE. On one hand, the structure is not yet completely adjusted since the cost reduction programs launched in 2016 and 2017 only had a partial impact in 2017; they will only show their full effect in On the other hand, the result was impacted by substantial and unexpected costs in South Africa and Brazil (-5.2 m on EBITDA) and by specific difficulties related to the finalisation of certain contracts (underestimated costs, unexpected events such as strikes, non-performing subcontractors, a slower implementation, etc.). If South Africa and Brazil (which will be ii

3 definitively closed in 2018) and TTC sold in 2017 were excluded, the EBITDA would have amounted to -12 m. Net Results from Discontinued Operations Further to its planned disposal, the results of the PHE BU (except for the intra-group results) were posted on this line. The total of the 2017 negative results and the evaluation of the assets and liabilities at the best estimate of the disposal value amount to -48 m. Net Result The net result was positively influenced by the debt write-off agreed by the Banking Syndicate for an amount of 87 m and the gain realised with the disposal of TTC (20 m before tax). However, because of the Group resizing, it was necessary to record an impairment of 10 m on the goodwill of AQS. For the same reason and because of the changes made to the Belgian tax rules and the use of tax losses, the deferred taxes net position in the balance sheet was reduced by about 10 m. Taking the above described items into account, the Group closed the year with a loss of 22.6 m including -48 m related to PHE (see above). Balance Sheet A significant strengthening of the balance sheet was made possible by the 87 m debt writeoff agreed in December 2017 and announced in January 2018 and the 47 m capital increase of February It is impacted by the planned disposal of PHE which results in regrouping in one line the assets and liabilities of this division, and by the various value impairment described above. Prospects In view of the general economic context, does not release any guidance as to its future results. iii

4 I. REVIEW OF THE YEAR Commercial Activities Consolidated Financial Statements Review by Business Unit... 5 a) Coolings Systems... 5 b) Process Heat Exchangers... 6 c) Air Quality Systems (AQS)... 7 d) NAFTA Consolidated Balance Sheet Post-event Closing Auditor s Report II. CONSOLIDATED FINANCIAL DATA Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity III. ALTERNATIVE PERFORMANCE INDICATORS

5 I. REVIEW OF THE YEAR Commercial Activities Bookings (m ) Cooling Systems 155,9 169,6 Air Quality Systems 57,0 132,6 NAFTA 65,9 112,9 TOTAL excl. PHE 278,8 415,0 Process Heat Exchangers 34,1 58,0 TOTAL 313,0 473,0 Backlog (m ) TOTAL excl. PHE 397,2 513,7 Process Heat Exchangers 2,9 67,6 TOTAL 400,2 581,3 The bookings and the backlog as of 31 December 2017 (PHE not included) amount to respectively 279 m and 400 m, corresponding to a drop compared to the previous year, as a result of the Group s intention to be more selective in its repositioning process. The figures above do not include intra-bus activities, neither PHE. 2

6 2. Consolidated Financial Statements m Revenue 366,6 394,4 Gross profit 36,2 51,0 EBITDA -17,2-17,3 EBITDA/Revenue -4,7% -4,4% Recurring EBIT -23,7-24,9 Non-recurring gains and losses 3,0-5,7 Operating profit (EBIT) -20,8-30,5 Net finance costs 72,2-11,7 Share of the profit (loss) of -9,2-4,6 associates Result before tax (continued 42,2-46,8 operations) Income tax expenses -16,8-3,1 Net result from continued operations 25,4-49,8 Net result of discontinued operations -48,0-13,1 Net result for the period -22,6-63,0 Share of the Group in the net result -22,3-62,6 Further to the planned disposal of PHE, it is classified under the net result of discontinued operations heading. In 2017, the amount of -48 m on this line includes the external result of PHE as well as the evaluation of the assets and liabilities, at the best estimate of the disposal value. The amount of m accounted for in 2016 includes PHE s results. The recording of PHE s results as discontinued operations positively impacts the EBITDA. The turnover decrease in 2017 is due to the drop in bookings. The gross margin is also affected by this lack of activity volume. In addition, certain projects have shown expected outcome results lower than estimated, particularly in South Africa and Brazil, subsidiaries that will be closed in 2018, but also in other countries. Overhead costs significantly decreased thanks to the cost reduction program that was successfully implemented and to the exit of the American subsidiary Thermal Transfer Corporation on 31 March The Group decided to book an impairment on the goodwill of AQS for a total amount of 10 m. This impairment and the restructuring costs (5.7 m ) related to the implementation of the cost 3

7 reduction program are booked as non-recurring items. In addition, the 20.4 m capital gain resulting from the sale of Thermal Transfer Corporation, is also recorded in non-recurring items, together with the capital gains achieved (for the amount of 0.6 m ) from the sale of the Group s participation in AIT and JACIR. The 87 m debt write-off recorded in December 2017 has a positive impact on the net financial charges. The Group share of net result of associated companies includes our share in the loss recorded by the equity affiliates (-2.1 m ) and an impairment of the goodwill on two of them (-7.1 m ). The tax result mainly comes from the decrease of the deferred tax assets and the tax charge on the capital gain related to the sale of Thermal Transfer Corporation. On the other hand, the Group benefited from a 3.5 m tax refund, whereas only 1.5 m was previously recognised. 4

8 3. Review by Business Unit a) Cooling Systems Cooling Systems (m ) A 2017 A 2016 Bookings 155,9 169,6 Backlog 234,5 250,0 Revenue 178,2 195,2 EBITDA -5,6-11,0 EBITDA/Revenue -3,1% -5,6% Average headcount The Cooling Systems BU booked for a total amount of 156 m in This is lower than in 2016 but the margins were higher thanks to a positive new projects/customer service mix resulting from the Group s strategy aiming at strengthening its presence in the more profitable customer service segment. The major orders concern dry cooling system contracts in China and in the Middle East as well as wet cooling system contracts in Europe, in Southwest Asia and in the United States. The backlog at the end of December 2017 remains strong and represents more than one year of activity. The turnover in 2017 is lower than in 2016 further to the lower level of bookings and to late completions. An important dry cooling system project interrupted in 2016 because of solvency issues on the client s side was relaunched in the third quarter of 2017 and should significantly contribute to the 2018 results. Despite a successful execution of the costs reduction program, which led to a 18% drop in the net overhead costs, the EBITDA remains negative following a low volume of activity and exchange losses. 5

9 b) Process Heat Exchangers Process Heat Exchangers (m ) A 2017 A 2016 Bookings 34,1 58,0 Backlog 41,9 67,6 Revenue 54,5 43,3 EBITDA -11,1-12,0 EBITDA/Revenue -20,4% -27,7% Average headcount As already mentioned, the Process Heat Exchangers BU is presented as discontinued operations in the income statement. Therefore it does not contribute to the turnover and EBITDA mentioned in the consolidated income statement. The price of the barrel has remained relatively low in There were therefore less investment projects except in the Gulf countries and, to a lesser extent, in Russia. The level of bookings did not reach the objective set, mainly because of the loss of bids and the postponement of various projects to Despite a turnover increase and an improvement of the factory activity in France, the EBITDA is negative, which is due to substantial issues encountered on certain projects. 6

10 c) Air Quality Systems (AQS) AQS (m ) A 2017 A 2016 Bookings 57,0 132,6 Backlog 99,5 161,1 Revenue 109,4 103,2 EBITDA -13,6-0,7 EBITDA/Revenue -12,4% -0,7% Average headcount With 57 m, the bookings reached an historical low level, which is due to a combination of factors, including among others the notice to proceed of a major signed contract for a value of 50 m being given very late, the contract was not included in the order book at the end of Although the sales, at m, are higher than in the previous years, the margin level is not sufficient to generate a satisfactory operational profit. The loss is mainly related to: the bad performance of the South African and Brazilian subsidiaries, which are closed in 2018; surcharges incurred on a major contract; a too low activity level in Germany. The synergies, cost reductions and the higher level of customer proximity resulting from the new regional organisation will have a positive impact in

11 d) NAFTA NAFTA (m ) A 2017 A 2016 Bookings 65,9 112,9 Backlog 63,2 102,6 Revenue 80,4 103,2 EBITDA 3,3-2,6 EBITDA/Revenue 4,1% -2,5% Average headcount The NAFTA region bounced back in 2017 and shows positive operational results after a disappointing performance in However, the level of bookings remains lower than last year due to a difficult market environment and accumulated delays on some key projects. The backlog was also lower than at the end of Despite a difficult market, the EBITDA significantly increased compared to 2016 (even excluding TTC) despite a difficult market. Such a positive evolution is connected to a better execution of strong margin projects. The increase of the EBITDA is also due to a decrease in overhead costs that had been decided in order to maintain the BU s competitiveness in the area. Management still monitors the overhead costs in order to ensure the BU s long-term profitability. 8

12 4. Consolidated Balance Sheet MEUR 31/12/ /12/2016 ASSETS Deferred tax assets 9,1 20,5 Other non current assets 67,2 114,1 Inventory and w orking in progress (assets) 69,0 119,4 Trade and other receivables 149,6 152,8 Cash and cash equivalents 50,2 46,9 Other current assets 20,2 38,8 Total assets 365,4 492,6 EQUITY 1,5 28,7 LIABILITIES Deferred tax liabilities 4,0 5,1 Non current financial liabilities 74,0 153,7 Other non current liabilities 5,3 8,0 Current financial liabilities 65,3 33,8 Working in progress (liabilities) 79,2 105,3 Trade and other payables 105,2 134,0 Other current liabilities 30,9 23,9 Total liabilities 363,9 463,9 Total equity and liabilities 365,4 492,6 Working Capital 23,5 47,7 Net Debt 89,1 140,6 The balance sheet on 31 December 2017 does not include PHE assets and liabilities which are included in other current assets and other current liabilities including the assets held for sale. As already explained, the assets and liabilities of this division were valued taking into account the expectations regarding its disposal. However, PHE assets and liabilities are included in the balance sheet as of 31 December This explains most of the year-on-year variation of the various balance sheet items. On 31 December 2016 TTC assets and liabilities were recorded as other current assets and other current liabilities. The evolution as of 31 December 2017 is due to the sale of TTC during the first quarter of The decrease in deferred tax assets is mainly due to the use of tax assets and impairments booked for European and Asian companies. In addition to the impact of PHE reclassification as Assets held for sale on the balance sheet, the decrease in Other non current assets is mainly due to the impairment of AQS goodwill, the evolution of joint-venture results and the translation of assets in foreign currencies. 9

13 Standing at 1.5 m, equity benefited from the 5 m capital increase in January 2017, but was also impacted by the negative net income for the year and cumulative translation adjustments. However, it does not include the capital increase of 47 m realised in February The 87 m debt write-off has a positive impact on long-term debt, while the factoring, which is no longer off balance sheet in 2017, the increase in commercial paper and the debts contracted in South Africa and Brazil to finance the finalisation of certain projects explain the increase of the short-term debt. Net debt amounts to 89 m versus 141 m at the end of The positive impact of the debt write-off for an amount of 87 m is partially offset by the short-term debt increase resulting from the above-mentioned reasons. 5. Post-event Closing As previously announced, proceeded to a major capital increase at the beginning of 2018 through a public offering accessible to current shareholders, with a preference right from 26 January 2018 until 9 February The subscribers were Sogepa, for an amount of 25 m, three banks from the Banking Syndicate (transferees of Sogepa s and Sopal s subscription rights) for an amount of 8.7 m, Sopal/Frabelco for an amount of 4.2 m and third parties for an amount of 9.4 m. The result was a capital increase of 47,266,017. The capital increase is part of a number of transactions aiming at restructuring s equity and global indebtedness. It included a renegotiation of the Crédit Senior modalities within which the Banking Syndicate agreed on a debt write-off for an amount of approximately 86.9 m, a first test of the financial covenants on 31 December 2018, as well as a new 25 m credit granted by Sogepa. The restructuring is an important step in the large transformation and savings plan launched by the Group in The latter enables the Group to focus on its core businesses, such as water-cooling system engineering, air quality control and heat recovery systems for industrial clients. This global restructuring gives the financial strenght needed by the Group in order to finance the major changes on which the transforming plan relies and to better serve the client of its international network. 10

14 6. Auditor s Report The auditor, Ernst & Young, Reviseurs d entreprises SCCRL, represented by Vincent Etienne, has confirmed that the audit procedures on the consolidated financial information included in this press release are substantially completed and have not revealed material corrections that should be made to the information included in the press release. The audit opinion on the Consolidated IFRS Financial Statements (currently being drafted) will include an emphasis of matters paragraph referring to the company s position to use the going concern principle in preparing the Consolidated IFRS Financial Statements. 11

15 II. CONSOLIDATED FINANCIAL DATA 1. Consolidated income statement in EUR '000' in EUR '000' Revenue Cost of sales ( ) ( ) Gross profit Sales & marketing costs (14.354) (14.578) General & administrative costs (42.582) (51.995) Research & development costs (2.096) (2.016) Other operating income / (expenses) (895) (7.316) Operating profit before non-recurring items (REBIT) (23.742) (24.863) Restructuring costs (5.717) (3.304) Other non-recurring items (2.349) Operating profit (EBIT) (20.778) (30.517) Interest income Interest charges (14.892) (11.775) Share of the profit (loss) of associates & joint-ventures (9.225) (4.586) Result before tax (46.769) Income taxes (16.812) (3.071) Net result from continued operations (49.840) Net result of discontinued operations (48.020) (13.133) Net result (22.628) (62.973) Equity holders of the company (22.313) (62.593) Non controlling interests (315) (380) 12

16 2. Consolidated statement of comprehensive income in EUR '000' Net result (22.628) (62.973) Other comprehensive income - Items that may be reclassified subsequently to result (46) (38) Reclassification of previously recognized changes in fair value of available-for-sale assets to net result (247) - Change in fair value of hedging instruments Changes in currency translation reserve (5.917) Items that may not be reclassified subsequently to result Actuarial gains/loss on defined benefit plan Taxes (203) (241) Other comprehensive income, net of taxes (5.209) Comprehensive income (27.838) (61.226) Equity holders of the company (27.179) (60.820) Non controlling interests (659) (406) 13

17 3. Consolidated balance sheet in EUR '000' 31/12/ /12/2016 ASSETS Non-current assets Intangible assets Goodw ill Property, plant & equipment Investment in associates & joint-ventures Deferred tax assets Available-for-sale financial assets Trade and other receivables Current assets Inventories Amount due from customers for contract w ork Trade and other receivables Derivative financial assets Cash and cash equivalents Current tax assets Available-for-sale financial assets Current assets held for sale Total assets in EUR '000' EQUITY Share capital Reserves Retained earnings (59.410) (63.044) Equity attributable to the equity holders of the company Non controlling interests (704) (191) Total equity LIABILITIES Non-current liabilities Financial liabilities Provisions for pensions Other non-current provisions Deferred tax liabilities Other non-current liabilities Current liabilities Financial liabilities Amount due to customers for contract w ork Trade and other payables Current tax liabilities Derivative financial liabilities Other current provisions Current liabilities held for sale Total liabilities Total equity and liabilities

18 4. Consolidated statement of changes in equity Share capital Legal reserve Share premium Retained earnings ow n shares AFS reserve Sharebased payments Hedging reserve defined benefit pension plans Currency translation reserves Equity - Attribuabl e to equity holders of the parent Non controlling Interests in EUR '000' Balance at 1 January (452) (200) (596) (443) (2.325) Result for the period (62.593) (62.593) (380) (62.973) Other comprehensive income (38) (26) Total comprehensive income (62.593) (38) (60.820) (406) (61.226) Capital increases Dividends paid to shareholders (0) (0) (401) (401) Other movements (222) (3.553) (141) Balance at 31 December (59.410) (238) (132) (266) (1.377) (191) Total equity Balance at 1 January (59.410) (238) (132) (266) (1.377) (191) Result for the period (22.313) - - (22.313) (315) (22.628) Other comprehensive income (46) (247) (5.574) (4.866) (343) (5.209) Total comprehensive income (22.313) (46) (247) (5.574) (27.179) (659) (27.838) Capital increases Acquisition of non-controlling interests (955) (955) (131) (1.086) Scope exit (3.289) (3.289) (3.289) Other movements (439) (276) 276 (0) Balance at 31 December (83.118) (284) (243) 153 (38) 640 (10.078) (704) (*) refer to note

19 III. ALTERNATIVE PERFORMANCE INDICATORS Non recurring items k Restructuring costs Other non recurring items Non recurring items EBITDA k EBIT Non recurring items Depreciation EBITDA Recurring EBIT k EBIT Non recurring items Recurring EBIT Net finance costs k Interest expenses Interest income Net finance costs Working Capital k Current assets Cash & cash equivalents Current liabilities Financial liabilities Working Capital Other non current assets k Non current assets Deferred tax assets Other non current assets Other current assets k Derivative financial assets Current tax assets Available for sale financial assets Other current assets

20 Name Definition Purpose New order bookings New projects for which a contract or a letter of award has Give information on commercial activity during a given been signed between and the clients during a given period of time. period of time. Backlog Non-recurring gains and losses Comment: a study of the implementation of ESMA guidelines could involve some changes to the presentation of this indicator in the future Group disclosures. At a given date, remaining value of still active contracts with clients, corresponding to the difference between the total contract value and the revenue already recognized in P&L on these contracts. Costs or revenue related to operating activities of the company, but with an exceptional and non-recurring aspect, such as restructuring costs, write-off on non-trade related account receivables, etc. Give information on (remaining part of) new orders that the Company still has to execute in the future. Separate costs and revenue which are not part of the recurrent operational activity, hence allowing to analyze the performance of an activity without distorting this with these costs and revenue. This also allows to show and to explain these elements without mixing them up with various extraordinary costs and revenue. This also allows to calculate EBITDA as agreed in our financing agreements. EBITDA Earning Before Interest Taxes Depreciation and Amortization, i.e. operating profit excluding depreciation, amortization and non-recurring items. This indicator shows the result generated by an activity independently from its financing (interest charges), its investments (depreciation & amortization), its tax burden and its non-recurring items. Recurring EBIT Operating profit before the non-recurring items. This indicator shows an operating profit excluding the nonrecurring items, allowing thus to analyze the performance of an activity without distorting it with these costs and revenue. It comes as a complement to EBITDA, including Depreciation & Amortization, including thus some investment elements. Net finance costs Sum of interest income and interest charges. This indicator allows comparing the net interest charges to the net debt. Working Capital Sum of current assets (excluding Cash & cash equivalents) minus the sum of current liabilities (excluding financial liabilities). This indicator shows the amount that a company must finance in order to cover the gap resulting from timing differences between cash outflows (expenses) and cash inflows (revenue) related to its activity. Other non-current assets Non-current assets minus non-current deferred tax assets. This allows to single out Deferred taxes from other noncurrent assets. Deferred tax assets are an important item in our balance sheet and subject to fluctuations. Other current assets Sum of current derivative financial assets, current tax assets and available-for-sale financial assets. Simplify the balance sheet presentation. 17

21 Note concerning the forward-looking statements This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding s plans, objectives, expectations and intentions. Readers are cautioned that these statements may carry known or unknown risks and be subject to significant operational, economic and competitive uncertainties, many of which are beyond s control. Should some of these risks and uncertainties materialise or should the assumptions used prove to be incorrect, the actual results could significantly deviate from those anticipated, expected, projected or estimated. In this context, and any other person accepts no responsibility for the accuracy of the forward-looking information provided. Additional For more information, please contact: Investors Relations investorsrelations@hamon.com Bernard Goblet, CEO bernard.goblet@hamon.com Christian Leclercq, CFO christian.leclercq@hamon.com Financial Calendar General Meeting of Shareholders /04/2018 Publication of the 1 st quarter 2018 review 25/04/2018 : Profile The Group is a world player in engineering & contracting (design, installation and project management). Its activities include the design, the manufacturing of critical components, the installation and the after-sale services of cooling systems, Process heat exchangers, air quality systems (AQS), Heat Recovery Steam Generators (HRSG) and chimneys, used in power generation, oil & gas and other heavy industries like metallurgy, glass, chemicals. 18