First-half 2015 results:
After the Board of Directors that approved the 2015 first half-year results at its 28 July 2015 meeting, JeanLouis Chaussade, CEO, made the following statement:
“The Board of Directors has approved the change of brand name to SUEZ, a short, strong name and full of history. This agreement completes the launch of our single worldwide brand. Since March, the 40 Group's trademarks are federated under a single brand positioned in the sustainable resource management, which is already bearing fruits.
The Group delivered a solid set of results over this half year, enhanced by a favourable forex effect. The "Water Europe" division reported strong performance, driven by higher volumes, prices and new services. The "International" division benefited from sustained growth in almost all geographical regions and in all its businesses. Lastly, despite a sluggish macro-economic environment, the “Recycling & recovery Europe” division showed improved performance over the second quarter.
Thus, with a more cross-functional and integrated structure and good results, the Group confirms its targets for 2015.”
2015 HALF-YEAR RESULTSREVENUE
Group revenue at 30 June 2015 was €7,295m, up +5.9% (+€404m) versus 30 June 2014, that breaks down as follows:
EBITDA1 amounted to €1,293m at 30 June 2015. Adjusted for the capital gain linked to the disposal of CEM in 2014, it rose by +8.0%; at constant scope and exchange rate, growth was +2.0%. EBITDA in the Water Europe division was up +5.5% at constant scope and exchange rate, benefiting from higher volumes in Spain and Chile, favourable price indexations in all regions and growth in new services. The Recycling and recovery Europe division performance declined by -3.1% on a comparable basis, mainly due to the negative price effect on electricity. The International division reported +0.5% growth at constant scope and exchange rate, notably linked to higher volumes in all geographical regions.
The Group EBITDA1 margin lies at 17.7% versus 17.4% for H1 2014, adjusted for the capital gain on the CEM disposal.
Over the first six months of 2015, Compass savings amounted to €70m, mainly through optimised operating performance, additional savings on procurement and cuts in overheads costs. This performance is in line with annual objectives.
EBIT1 dropped to €604m from €658m in 2014. Adjusted for the gain on the 2014 CEM disposal, it rose by 14.2%; at constant scope and exchange rate, growth was +3.7%.
Current operating income including the share of income from equity associates amounted to €502m after €616m last year3. Adjusted for the gain on the CEM disposal in 2014, it grew +3.1%. It includes -€18m for the deployment of the new worldwide brand and -€28m in restructuring costs.
Net financial income was -€200m in the first half of 2015, versus -€212m in June 2014. Average debt maturity is 6.3 years and the average cost of debt improved from 4.43%4 at 30 June 2014 to 4.30%4 this year; it benefited from lower interest rates and active debt management. The Group also paid back its supersubordinated debt issued in 2010 before the maturity date and issued a new hybrid bond at a fixed rate of 2.5%.
Tax amounted to -€50m5 in 2015 versus -€46m5 in 2014. The effective tax rate amounts to 23.1% versus 21.4% for the first half-year 2014. This rate was impacted by a tax credit received in Spain; in 2014 the tax rate was favoured by the revaluation of Acea's previously-held shares, with no tax impact.
Minorities interests remained stable in relation to 2014, at €111m.
Consequently, net income Group share amounted to €141m, versus €255m for the same period the
previous year. Adjusted for the gain on the CEM disposal in 2014, it grew +11.4%.
FREE CASH FLOW AND BALANCE SHEET
Free cash flow amounted to +€322m in the first half of 2015, up sharply by 49.7% on the same period the previous year.
Net investment amounted to €583m, up 17.3% on the previous year.
Net financial debt was €8,024m at 30 June 2015. The €838m increase since the end of December 2014 is mainly due to a dividend payment of €545m in the first half year and an unfavourable forex effect of €345m.
The net debt/EBITDA ratio amounts to 3.07x.
In May 2015, financial rating agency Moody’s reiterated the A3, stable outlook rating assigned to SUEZ ENVIRONNEMENT COMPANY.
PERFORMANCE BY DIVISION
The Water Europe division posted revenues of €2,261m with organic growth of +2.6% at 30 June 2015. The activity benefited from resilient volumes in France (+0.1%) and Spain (+0.3%) and growth in Chile (+0.9%), alongside a favourable price effect in Chile (+7.9%), Spain (+1.8%) and France (+0.4%). Moreover, new services grew by +14%. Net commercial activity over the half year was highly positive, with multiple contracts won. In France, we can highlight the award of two contracts in Gennevilliers, one for the wholesale supply of water (€234m,15 years) and the other for drinking water management (€639m, 12 years), a drinking water supply contract with the city of Calais (€79m, 12 years), alongside a water and sewage network management contract for the urban community of Alençon (€68m, 12 years). In Spain, the Trujillo contract was extended (€16m, 15 years) and in Chile a contract was signed to manage a wastewater treatment plant for CODELCO (3 years).
EBITDA1 amounted to €662m with a margin rate of 29.3% versus 28.1% in the first half of the previous year. The high growth of +5.5% at constant scope and exchange rate was driven by a favourable price effect and the ongoing improvement of operating efficiency. The Water Europe division generated €24m in Compass savings over the six-month period.
RECYCLING AND RECOVERY EUROPE
Revenue in the Recycling and recovery Europe division amounted to €3,167m, down -0.5% at constant scope and exchange rate. Performance was affected by a sharply negative price effect on secondary raw materials (especially metals, -11%), mainly affecting the first quarter; adjusted for this effect, revenue is up at constant scope and exchange rate.
Treated volumes grew by +0.8%, benefiting from the commissioning of new processing plants, including the Suffolk energy-from-waste plant. The decline in volumes sent to landfill was offset by increased recycling volumes.
In terms of geographical region, change at constant scope and exchange rate was -2.6% in France, +2.7% in
the UK and Scandinavia, +1.6% in Benelux/Germany and +0.9% in Central Europe.
Commercial activity was rich over the half year with, in France, the award of the design-build-operate contract for the Ivry-Paris-XIII waste recovery centre (€900m, 23 years), the contract to operate an energyfrom-waste unit in Carhaix (€25m, 10 years) and a contract with Total (12m€); as well as in Germany, the waste collection contract for the city of Heilbronn (€43m, 8 years).
EBITDA1 for the Recycling and recovery Europe division amounted to €368m; growth on a comparable basis contracted by -3.1%, as a consequence of the negative volume effect of the landfilling activity in France and lower electricity prices (-€7m), partially offset by good activity in the UK and a slight improvement in the Benelux/Germany and Central Europe regions. The Waste Europe division generated €25m in Compass savings over the six-month period.
The order backlog for construction activities amounts to €1.1bn, a sharp rise of +32.3% versus 30 June 2014.
The Board of Directors noted the resignation from her office as a director of Mrs.Penelope Chalmers Small, Executive Vice-President of Strategy and Communication at ENGIE Energy International, and thanked her warmly for her contribution to the Board’s activity since 2011. On the recommendation of the Nominations and Compensation Committee, the Board of Directors appointed Mrs. Judith Hartmann, Executive Vice President, Chief Financial Officer of ENGIE, as director.
OBJECTIVES FOR 2015
SUEZ maintains all its targets7 for 2015:
HALF-YEARLY FINANCIAL REPORT:
The 2015 interim report is available on the Group website (www.suez-environnement.com).
29 October 2015: Third Quarter 2015 report (conference call)
1 Excluding IFRIC 21
2 2014 basis adjusted for €129m capital gain on CEM disposal
3 Net of IFRIC 21 impact of -€38m
4 Excluding the cost of securitisation and indexed interest charges on inflation in Chile
5 Including the IFRIC 21 impact on income tax
6 Following the new organisation, Safège's contribution has been moved from the Water Europe division to the Others division
7 Based on flat industrial production in Europe in 2015
8 Excluding the €129m capital gain from the disposal of CEM
9 Subject to approval by Annual Shareholder Assembly 2016