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BUREAU VERITAS SA
BUREAU VERITAS SA
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.
Disappointing organic revenue
18 Oct 16
Organic revenue decreased by 1% in Q3 16. It is a disappointing trend as a positive turnaround was expected as from Q3 16. Q3 16 figures: Revenue reached €1,136m, -0.6% (vs +7.3% in Q3 15). Organic revenue declined by 1% (vs +0.9% in Q3 15). Acquired companies brought in 2.7pts of growth. The currency effect was a negative 2.3%. Four divisions out of eight had a decrease in organic revenue (Marine & Offshore: -9.8%, Industry: -9%, Government Services & International Trade: -4.1%, Construction: -1.6%) which more than offset the positive trend in the other divisions (Certification: +7.6%, Consumer Products: +4.5%, Commodities: +3.9%, In-service Inspection & Verification: +3.7%). The low organic revenue was due to the continuation of difficult trading conditions in the oil & gas capex-related activities (-21% in 9m 2016 following -19% in H1 16) which affected the Industry division and the deterioration of the shipping market which penalised all the businesses within the Marine & Offshore division. 9m 2016 figures: Revenue reached €3,358m (-3%) following -4.2% in H1 16. Organic revenue declined by 0.8% following -0.6% in H1 16. The acquisition of companies brought 1.8pts of growth. The currency effect was a negative 4%. The Certification division was the most dynamic with organic revenue growth of 6.1%, ahead of the In-service Inspection & Verification division, Consumer Products division and Commodities division, respectively +4.7%, +3% and +2.1%. These positive trends were offset by the collapse in revenue in the Industry division, -9.5%, the Governmental Services & International Trade, -4.2%, the Marine & Offshore division, -1.2%, and the Construction division, -0.3%.
First positive growth initiatives, nevertheless not enough
29 Jul 16
Bureau Veritas had a mitigating H1 16, as expected. The negative currency effects, the drop in oil & gas capex-related activities and the weakness of the activities in the upstream minerals market weighed on the overall performance. The reduction in the operating margin was limited thanks to the restructurings. H1 16 earnings. - Revenue was €2,221m (-4.2%). It included a negative currency effect (-4.9pts) related to the depreciation of the emerging countries’ currencies against the euro, and a change of perimeter with six acquisitions (+1.3pt). Organic revenue declined by 0.6% (-0.6% both in Q2 and Q1 16). This was largely attributable to the Industry division (-9.8%, o/w -11.4% in Q2 16) and the GSIT division to a lesser extent (-4.2%, o/w -3.2% in Q2 16). Organic revenue slowed in the Commodities division (+1.3%, o/w +0.8% in Q2 16) and remained weak in the Construction division (+0.4%, o/w +0.1% in Q2 16). All were more or less offset by organic revenue growth in Marine & Offshore (+3%), IVS (+5.2%), Certification (+5.4%) and the Consumer Products (+2.3%). By geographic area, organic revenue increased in Europe (+3.6%, Asia Pacific (+1.9%) and was rather stable in MEA/Eastern Europe (+0.6%). Conversely, there was a sharp decrease in Americas (-8.7% impacted by the oil & gas activities). - The adjusted operating income decreased to €350m (-5.3%) leading to a margin rate of 15.8% of revenue (-0.2pt). The decline was due to currencies as the adjusted operating margin was stable organically. Cost management and restructurings offset the impact of lower volume and price pressure in the oil & gas business and the increase in marketing/sales expense related to the growth initiatives (BV Strategic 2016-20 plan). - The reported operating profit decreased to €303m (-10%) after the €-32m amortisation of acquisition intangibles (vs €-34m in H1 15), €11.5m restructuring costs in the Americas and Australia for Industry and Commodities, €-3.5m acquisition costs (vs €-0.4m in H1 15) - Group net profit was €160m (-9%) after a slightly lower effective income tax rate (-0.9pt to 35.9%). The operating cash flow decreased by 26% to €161m due to lower EBITDA and an increase in the change of WCR due to a change in the timing for the disbursement of indirect taxes and social contributions. Free cash flow (after interest paid) decreased to €44m (vs €74m in H1 15) after lower net capex (-33% to €57m including the disposal of facilities for €9m in Latin America). The acquisitions of companies were significant and represented cash out of €-135m (vs €-66m in H1 15). On 30 June 2016, the adjusted net financial debt amounted to €2,184m and represented 2.2x shareholders’ equity. The adjusted net debt/EBITDA ratio was 2.44x (vs 2x at year-end 2015 and 2.31x on 30 June 2015).
Slow start to the year 2016
13 May 16
Q1 16 revenue Revenue reached €1,059m (-4.2%), which included a significant negative currency impact (-4.4%) related to the depreciation of emerging countries’ currencies against the euro. The strongest negative currency effect was in the Industry division (-7.4%). The contribution from acquisitions was low (+0.8%), unlike the same period last year (+6.2% in Q1 15). Organic revenue declined slightly (-0.6% vs +4.4% in Q1 15). The negative organic trend was attributable to the Industry division (-8.1%) which was impacted by the poor trading conditions for the oil & gas related activities in the Americas and Australia, and the Government Services & International Trade (GSIT) division (-5.2%) which suffered from lower volumes in Iraq and countries dependent on commodities. The most dynamic divisions were In-service Inspection & Verification (+5.1%) and Certification (+3.6%).
Mixed short term
25 Feb 16
In a difficult context that led to low organic revenue growth (+1.9%), the group succeeded in maintaining the operating margin rate (16.7% of revenue, +0.1pt). +FY2015 figures+: - Revenue reached €4,635m (+11.1%). The apparent revenue growth was the combination of a change in the perimeter (+3.7%), a positive currency effect (+5.5%) due principally to the strengthening of the $ vs the euro, and low organic growth (+1.9%). Organic revenue growth was above the group average in four divisions (Marine & Offshore: +10.2%, Certification: +4.6%, Commodities: +3.3%, In-Service Inspection & Verification: +2.8%). Organic revenue declined in the main division (Industry: -1.6%, 22% of the total) and the Government Services & International Trade/GSIT (-1.9%). - Adjusted operating profit increased to €775m (+11.7%) corresponding to a margin rate of 16.7% of revenue (+0.1pt). Margins improved in four divisions (Marine & Offshore: +1.4pt to 26.4% of revenue, Construction: +0.7pt to 15.5% of revenue, Consumer products: +0.6pt to 24.6% of revenue, GSIT: +0.2pt to 16.6% of revenue). These were practically offset by lower margins in the other divisions (Industry: -0.9pt to 14.2% of revenue, Commodities: -0.7pt to 11.3% of revenue, IVS: -0.3pt to 13.8% of revenue, Certification: -0.1pt to 17.1% of revenue). - Operating profit increased moderately to €577m (+2.5%) due to significant other operating costs (€-198m vs €-131m in 2014). There was an impairment of goodwill related to the commodities activity (€90m), accelerated amortisation of customer relationships in the Metals & Minerals segment in Australia (€10m) and restructuring costs (€21m) corresponding to measures implemented in the Americas and Australia (industry, commodities). - Group net profit decreased to €255m (-13%) after higher net financial expenses (€89m, +10%, including a negative currency impact of €-4m) and higher effective tax rate (45.2%, +8.9pts - no deductibility of the goodwill impairment). The adjusted effective tax rate was 37% (+0.7pt). Adjusted net debt was practically unchanged and amounted to €1,863m (-1%) and the net debt/EBITDA ratio was 2.02x at year-end 2015. In 2015, FCF (after interest paid) increased significantly (+15% to €462m) taking into account lower WCR and higher net capex (+15%). Cash outflows included investments in shares of €118m, the dividend paid for €238m and share buy-backs of €45m. The fluctuations of currencies added €55m to the financial debt. The proposed dividend in respect of FY2015 is €0.51/share (+6.3%) despite still challenging trading conditions in 2016.
Postponement of projects and price pressure in oil & gas
05 Nov 15
Organic revenue growth slowed as expected in Q3 15 and the weaknesses were concentrated in the Industry, Commodities and Consumer Products divisions. Q3 15 figures: Q3 15 revenue reached €1,143m (+7.3%). Overall growth was mainly attributable to the change in the perimeter (+2.9%) and a positive currency effect (+3.5%). Organic revenue growth slowed to +0.9% (vs +3.6% in H1 15, +3.2% in Q3 14). Low organic revenue growth was due to the weakness of the mineral and oil & gas markets which impacted organic revenue growth in Asia-Pacific (-0.8% mainly attributable to poor mining and oil & gas end-markets in Australia) and the Americas (-4.5%). In addition, the group had to face the deterioration in the economic environment in emerging countries such as Brazil, and Asia (moderate growth) to a lesser extent. Lastly, some delays in the launch of electronic devices affected organic growth in the Consumer Products division (+0.1%) which amplified the total revenue slowdown. Conversely, organic revenue growth was significant in Europe (+5.2%) thanks to the commercial initiatives which paid-off and benefited from a better economic environment. The activities were buoyant in Middle East/Africa/Eastern Europe (+8.1%). 9m 2015 figures: The group had revenue of €3,462m (+14.2% and +2.7% organically). The positive currency impact was significant (+7%) and the acquisition of companies increased revenue by 4.5%. External growth corresponded to the acquisitions of seven small/medium-sized companies (o/w four transactions in China) which represent a total revenue of €70m on an annual basis. On 30 September 2015, the adjusted net debt was slightly below the €2.1bn level seen at the end of H1 15.
N+1 Singer - T. Clarke - Strong conclusion to FY16, record order book
28 Mar 17
After significant upgrades at the time of the full year update (PBT forecast +43% FY16; +14% FY17), today’s results are c.4% ahead of our expectations at the PBT level and show strong growth on the prior year (PBT +48%). All regions achieved positive growth in revenue. The outlook statement refers to a still growing order book (£350m at the end of February vs. £330m at the year end) and the strength of recent trading, with London & the South East and Scotland said to be particularly positive. The Group has reiterated its ambitions to improve margins, but we have not incorporated this into our forecasts at this stage. We have nudged up our FY’17 forecasts (PBT +5%) and introduced FY’18 forecasts that imply 2% PBT growth. Despite the well justified bounce in the share price, the shares still trade at a significant discount to the peer group (7.6x FY17 PE, 4% yield).
N+1 Singer - Morning Song 22-03-2017
22 Mar 17
Carador Income Fund (CIFU LN) Premium rating restored, high levels of refinancing activity | Cello Group (CLL LN) Outlook getting brighter – watch Pulsar | Eckoh (ECK LN) Largest ever US secure payments win | eg solutions (EGS LN) Full year results in line | Futura Medical (FUM LN) Licensing deal for CSD500 in Portugal | Verona Pharma (VRP LN) Global agreement with QuintilesIMS to support development of RPL554 | Xaar (XAR LN) 2016 results slightly ahead, reduced visibility in 2017
28 Mar 17
ClearStar* (CLSU): Building a background for growth (CORP) | Sound Energy (SOU): TE-8 results (HOLD) | LiDCO* (LID): 2017 should be a transformative year (CORP) | Proteome Sciences* (PRM): FY 2016 in line. Moving towards breakeven (CORP) | Fulcrum (FCRM): Significant market potential, rising margins and a strong balance sheet (BUY) | Mortgage Advice Bureau (MAB1): Strong and growing intellectual property (BUY) | 7digital* (7DIG): Open offer result (CORP)