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Mixed 2016 but nice return to Wendel!

  • 24 Feb 17

As expected, 2016 was a mixed year with a slight decrease in organic revenue growth (-0.6% vs +1.9% in 2015) and a decline in the adjusted operating margin to 13.2% of revenue (-0.5pts). Conversely, the bottom line surged by 25% due to lower non-recurring negative items and a lower income tax rate. Q4 16 figures: Revenue reached €1,191m (+1.6%). Organic revenue was down 0.3% due to the fall of the activities in the Industry division (-10.3% attributable to the oil & gas capex-related activities in the Americas and Australia) and the Marine & Offshore division (-5% attributable to the in-service ship and new construction segments). Organic revenue grew in all other divisions. Within the growing divisions, the In-Service Inspection & Verification division had rather flat organic revenue (+0.2%) and the commodities division (+1.8%) was affected by the weakness in metals and minerals. FY2016 figures: - Revenue reached €4,549m (-1.8%). Lower revenue growth was the combination of a negative currency effect (-3.2%), the change in the perimeter (+2%) and a slight decrease in organic growth (-0.6%). Organic revenue growth decreased in the Industry (-9.7%), Marine & Offshore (-2.2%) and Government Services & International Trade (-2.4%)) divisions and was weak in the Construction (+1%) and Commodities (+2%) divisions. - The adjusted operating profit decreased to €735m (-5.2%) corresponding to a margin rate of 16.2% of revenue (-0.5pt vs +0.1pt in 2015). Margins deteriorated in four divisions (GSIT: -6.6pts to 9.9% of revenue, Industry: -1.2pts to 13.1% of revenue, Marine & Offshore: -1.1pt to 25.3% of revenue, Consumer products: -1.1pt to 24.6% of revenue) and were flat in the In-Service Inspection & Verification (18%) and the Certification (17.1%) divisions. - The operating profit increased to €610m (+5.7%) due to lower other operating costs (€-125m vs €-198m in 2015), primarily no impairment of goodwill (vs €-90m in 2015) and lower amortisation of related-acquisition intangibles (€-8m to €-79.5m) despite an accelerated amortisation of customer relationships in the oil & gas activities in the Americas (€-10m). Conversely, the restructuring costs increased to €-43m (vs €-21m in 2015) corresponding to additional measures implemented in the Americas and Australia in the Industry and Commodities division and new measures in the Marine & Offshore and GSIT divisions. - Group net profit surged by 25% to €319m thanks to a lower effective tax rate (36% vs 42.2% due to no deductibility of the goodwill impairment in 2015). Adjusted net debt increased to €1,996m (+7%) and the net debt/EBITDA ratio was 2.2x at year-end 2016 (vs 2.02x in 2015). In 2016, FCF (after interest paid) dropped to €362m (-22%) after a negative change in the WCR and despite lower net capex (-12% to €146m). Cash outflows included investments in shares of €205m, the dividend paid for €255m and share buy-backs of €43m. The proposed dividend in respect of FY2016 is €0.55/share, +7.8% (!) (vs +6.3% in 2015) despite the lower adjusted EPS, -2.1% to €0.94/share (or +3.8% at constant currency). Considering the very poor year 2016, Wendel has a nice return.



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