Bureau Veritas: 2014 full year results. Organic growth improvement in Q4 and strong cash flow generation

26.February 2015 at 07:30:00 CET

Bureau Veritas: 2014 full year results

Organic growth improvement in Q4 and strong cash flow generation

Organic growth has improved in the fourth quarter (+3.4%) compared with the first nine months of the year thanks to the Group's diversified portfolio of businesses and exposure to attractive and growing end markets.

In 2014, Bureau Veritas continued to enhance its portfolio with eight targeted acquisitions in key strategic markets and geographies. These acquisitions helped rebalance the geographical footprint, in particular in North America, and have increased the Group's presence in strategic markets such as marine/offshore, infrastructure, food, petroleum and automotive.

Revenue grew by 9.4% and adjusted operating profit was up 9.7%, on a constant currency basis, demonstrating the Group's continued ability to generate profitable growth.

During the year, measures were taken to adapt to challenging conditions in Europe and in Metals and Minerals. This led to exceptional, mostly non-cash charges of EUR 60 million this year. As a consequence, attributable net profit was EUR 294.6 million, down by 14.6% versus 2013 and by 10.2% on a constant currency basis.

In spite of these adverse conditions, the Group generated very strong free cash flow during the year (+24%), thanks to improved cash collection and disciplined capital allocation.

Chief Executive Officer Didier Michaud-Daniel, commented:

"Bureau Veritas performed well in 2014. The Group delivered solid revenue growth with resilient margins, despite the challenging environment in Europe and in Minerals. Our revenue exceeded EUR 4 billion for the first time and cash flow generation was very strong.

Thanks to targeted acquisitions, our activity in the Americas has been reinforced. In parallel, we have launched new initiatives to accelerate growth and improve our competitive position in key markets.

In 2015, we expect a slight improvement in organic growth over 2014, taking into account the current oil market conditions. The operating margin should also improve moderately thanks to ongoing operational excellence initiatives. The Group will continue to generate strong cash flow. Acquisitions in attractive markets will contribute to overall growth."

Main consolidated financial items for 2014

The Board of Directors of Bureau Veritas met yesterday and approved the financial statements for the year ended December 31, 2014.

(millions of euros)  2014  2013    Chg.   Chg. at constant currencies 
Revenue 4,171.5 3,933.1 +6.1% +9.4%
Adjusted operating profit(a) 694.0

656.9 +5.6% +9.7%
as a % of revenue 16.6%

16.7% (0.1) pt -
Operating profit 563.1


(4.5)% (1.1)%
Net financial expense (80.9)


Share of profit of associates

0.7 -    
Income tax (175.4) (169.1)

Minority interests (12.9) (11.4)    
Attributable net profit 294.6


(14.6)% (10.2)%
Attributable adjusted net profit (a) 391.3


(1.4)% +3.7%
Free cash flow(a) 402.0 324.3 +24.0% +27.8%
Adjusted net financial debt (a) 1,879.9 1,328.4 +41.5%  

(a) Financial indicators not defined by IFRS accounting rules presented in Appendix 4

2014 Highlights

1 - Enhancing the Group's growth profile

During 2014, the Group continued its external growth strategy, by completing the acquisition of Maxxam, the Canadian leader and seven bolt-on acquisitions. These eight companies, representing EUR 315 million in annualized revenues, have increased the Group's presence in strategic markets including the marine/offshore, infrastructure, food, petroleum and automotive sectors.

In line with the strategy to re-balance the geographical mix of activities, these acquisitions have strengthened the Group's footprint in the Americas. In 2014, 27% of Group revenues were generated in the Americas (vs 24% in 2013), 33% in Europe (vs 35%), 28% in Asia-Pacific and 12% in Africa, the Middle East and Eastern Europe (vs 13%).

Furthermore, the Group has completed three acquisitions in China since the beginning of 2015, representing close to EUR 60 million in combined revenues in 2014. These companies reinforce the Group's positioning in the Chinese domestic market for its Construction, Industry and Consumer Products businesses.

The Group has started to implement a number of strategic initiatives designed to accelerate organic growth.

Amongst other initiatives, the Group is developing more resilient Opex-related services in the Oil & Gas, Mining, Chemicals and Power sectors. The overall TIC market (Testing, Inspection and Certification) for these sectors is vast (above EUR 55 billion globally) of which 75% correspond to Opex-related services. This market offers untapped development opportunities for the Industry business. The ambition is to replicate the business model successfully implemented by both the Marine and Construction/IVS businesses where Opex-related services already represent more than 50% of revenue.

Another initiative that has been launched in 2014 is the development of a global key account strategy. The penetration of Bureau Veritas with large corporations is still very low and outsourcing opportunities are significant as around 40% of TIC services are carried out internally. The ambition is to generate around two percentage points per annum of organic growth from this initiative in the years to come.

2 - Lower oil price environment and impact on Group activities

The Group's activities in the Oil & Gas sector are diversified and the services provided are critical for our customers:

The potential impact of lower oil price environment, based on current market conditions, is included in the Group's 2015 outlook.

However, lower oil price should be positive to economic conditions in some countries. The Group could notably benefit from a more favorable environment in the consumer products and manufacturing sectors.

3 - Improving the efficiency of operations

In reaction to the reduced level of activity derived from minerals exploration, the Group has implemented measures to rationalize its Minerals testing operations. Continued weakness in the European economy has impacted the Group's organic growth. The Group has taken measures to restructure its operations in France, and put in place a new commercial organization. This has led to exceptional, mostly non-cash charges of EUR 60 million.

In 2014, the Group continued to gradually roll out Lean Management tools to improve customer satisfaction and operational efficiency.

The centralized purchasing project now comprises six initiatives: lab equipment & supplies, office supplies, travel, car fleet, international couriers and non-exclusive contractors.

Shared service centers are ramping up, with the objective to centralize support functions such as IT services, finance and human resources.

Analysis of the Group's results and financial position

1 - Revenue up 9.4% on a constant currency basis, crossing the EUR 4 billion mark

Revenue in 2014 totaled EUR 4,171.5 million, an increase of 6.1% compared with 2013.

Three businesses, representing 45% of revenue, posted organic growth above 5%:

Organic growth was slightly positive in four other businesses:

The Government Services & International Trade (GSIT) business that was hit by the conflict in Iraq and the termination of contracts, posted an organic revenue decrease.

2 - Adjusted operating profit up 9.7% on a constant currency basis

Adjusted operating profit was EUR 694 million, up 5.6% compared to 2013, and up 9.7% at constant currencies.

The adjusted operating margin was 16.6% in 2014, stable at constant currencies compared with 2013.

The Group was able to maintain or grow its margin at constant currencies in five businesses (Commodities, IVS, Certification, Construction and Consumer Products), by improving the mix, rolling out Lean initiatives and restructuring measures. The Marine & Offshore business benefited from increased volume of activity but this was offset by investment made in technical centers. The Industry margin has slightly reduced due to the reduction of activity in France and in South Africa. The GSIT business margin was impacted by the reduction in volumes.

Other operating expenses increased to EUR 130.9 million vs. EUR 67.3 million in 2013. These include:  

In 2014, one-offs relating to the Metals & Minerals segment and the Industry business in France totaled EUR 60 million. 

After taking into account other operating expenses, operating profit came to EUR 563.1 million, versus EUR 589.6 million in 2013.

3 - Adjusted net profit up 3.7% on a constant currency basis 

Net financial expense stood at EUR 80.9 million compared with EUR 64.0 million in 2013. This increase stemmed primarily from the higher average volume of debt (acquisitions financing).

Income tax expense stood at EUR 175.4 million in 2014, compared with EUR 169.1 million in 2013. The effective tax rate (ETR) was 36.3% for the period, compared with 32.2% in 2013. The adjusted ETR was 34.1%, versus 31.1% in 2013. The increase relative to the previous year is attributable to unfavorable exchange rates, increased withholding tax in France on dividends from foreign subsidiaries, partial non deductibility of interest charges and a net increase in exceptional items.

The Group's attributable net profit for the period was EUR 294.6 million, versus EUR 345.1 million in 2013. Earnings Per Share (EPS) stood at EUR 0.67, compared with EUR 0.79 in 2013. Tax and currencies had a negative impact of EUR 9 cents on the EPS.

Adjusted attributable net profit totaled EUR 391.3 million, up 3.7% on a constant currency basis. Adjusted EPS reached at EUR 0.90 in 2014, vs EUR 0.91 in 2013. It is up 3.3% on a constant currency basis. Tax and currencies had a negative impact of EUR 8 cents on the adjusted EPS.

4 - Operating cash flow up 14.9% and free cash flow up 24%

Cash generation was very strong in 2014. Operating cash flow rose by EUR 78.7 million to EUR 606.6 million, representing a 14.9% increase versus 2013.

The amount spent on the purchase of property, plant and equipment and intangible assets, net of disposals (Net Capex), was EUR 143.5 million in 2014, vs EUR 141.1 in 2013. This limited increase reflects the reduction in capex related to the Metals & Minerals segment and an increase in other businesses. The Group's capex-to-revenue ratio stood at 3.4%, slightly below the 2013 level (3.6%).

Free cash flow (cash flow available after tax, interest expenses and capex) totaled EUR 402 million, up 24% relative to 2013.  

At December 31, 2014, adjusted net financial debt was EUR 1,879.9 million, i.e. 2.16x EBITDA as defined in the calculation of banking covenants, compared with 1.71x at December 31, 2013. More than 95% of the Group's financing matures between 2017 and 2022.

The increase in adjusted net financial debt of EUR 551.5 million versus December 31, 2013 (EUR 1,328.4 million) stemmed from:   

5 - Proposed dividend of EUR 0.48, 53% of Adjusted EPS

The Group will propose a dividend of EUR 0.48 per share at the Shareholders' Meeting to be held on May 20, 2015. This dividend represents 53% of the adjusted EPS for 2014.


In 2015, Bureau Veritas expects a slight improvement in organic growth over 2014, taking into account the current oil market conditions. The operating margin should also improve moderately thanks to ongoing operational excellence initiatives. The Group will continue to generate strong cash flow. Acquisitions in attractive markets will contribute to overall growth.


The results will be presented on Thursday, February 26, 2015 at 3:00 p.m. (Paris time)
at the Académie Diplomatique Internationale - 4 bis avenue Hoche, 75008, Paris, France

It will be broadcast live and after the event in English on the Group's website (http://finance.bureauveritas.com). The presentation document will also be available on the website.

2015 financial calendar

May 5, 2015: Q1 2015 information
May 20, 2015: Annual General Meeting
September 1, 2015: Half-Year 2015 results
October 6, 7, 2015: Investor Days
November 4, 2015: Q3 2015 information


Analysts/Investors Press
Claire Plais +33 (0)1 55 24 76 09
Mark Reinhard +33 (0)1 55 24 77 80
Véronique Gielec +33 (0)1 55 24 76 01
Finance.investors@bureauveritas.com Veronique.gielec@bureauveritas.com


About Bureau Veritas

Bureau Veritas is a world-leading provider in testing, inspection and certification. Created in 1828, the Group has more than 66,000 employees in around 1,400 offices and laboratories all across the world. Bureau Veritas helps its clients to improve their performance by offering services and innovative solutions in order to ensure that their assets, products, infrastructure and processes meet standards and regulations in terms of quality, health and safety, environmental protection and social responsibility.

Bureau Veritas is listed on Euronext Paris and belongs to the Next 20 index.
Compartment A, code ISIN FR 0006174348, stock symbol: BVI.

For more information, visit www.bureauveritas.com

This press release (including the appendices) contains forward-looking statements, which are based on current plans and forecasts of Bureau Veritas' management. Such forward-looking statements are by their nature subject to a number of important risk and uncertainty factors such as those described in the registration document filed by Bureau Veritas with the French Financial Markets Authority that could cause actual results to differ from the plans, objectives and expectations expressed in such forward-looking statements. These forward-looking statements speak only as of the date on which they are made, and Bureau Veritas undertakes no obligation to update or revise any of them, whether as a result of new information, future events or otherwise, according to applicable regulations

Appendix 1: Revenue and Adjusted operating profit by business

(in millions of euros) 2014 2013 (a)  Var.   Organic   Acquisitions  Currency
Marine & Offshore 90.1 75.2 +19.8% +2.8% +15.3% +1.7%
Industry 263.0 236.2 +11.3% +8.2% +3.4% (0.3)%
In-Service Inspection & Verification 156.1 128.7 +21.3% (0.4)% +19.9% +1.8%
Construction 129.6 117.6 +10.2% (1.9)% +11.2% +0.9%
Certification 93.9 89.9 +4.4% +4.9% - (0.5)%
Commodities 187.4 163.4 +14.7% +4.0% +11.4% (0.7)%
Consumer Products 152.1 131.1 +16.0% +4.5% +5.7% +5.8%
Government Services & International Trade 66.9 63.8 +4.9% (1.5)% +6.1% +0.3%
Total Q4 revenue 1,139.1 1,005.9 +13.2% +3.4% +8.8% +1.0%
Marine & Offshore 323.8 294.2 +10.1% +7.1% +4.8% (1.8)%
Industry 976.4 937.0 +4.2% +5.8% +4.3% (5.9)%
In-Service Inspection & Verification 560.0 467.2 +19.9% +1.2% +19.0% (0.3)%
Construction 462.1 439.7 +5.1% +0.1% +6.5% (1.5)%
Certification 328.2 335.0 (2.0)% +0.8% - (2.8)%
Commodities 701.0 666.6 +5.2% +1.5% +9.3% (5.6)%
Consumer Products 564.6 515.5 +9.5% +5.4% +5.0% (0.9)%
Government Services & International Trade 255.4 277.9 (8.1)% (7.6)% +4.1% (4.6)%
Total full-year revenue 4,171.5 3,933.1 +6.1% +2.5% +6.9% (3.3)%

(in millions of euros)  Adjusted operating profit   Adjusted operating margin 
2014 2013 (a)  Var.
 2014   2013 (a)   Var. (point) 
Marine & Offshore 81.0 78.2 +3.6% 25.0% 26.6% (1.6)
Industry 146.6 143.0 +2.5% 15.0% 15.3% (0.3)
In-Service Inspection & Verification 79.3 64.5 +22.9% 14.2% 13.8% +0.4
Construction 68.6 64.5 +6.4% 14.8% 14.7% +0.1
Certification 56.5 57.4 (1.6)% 17.2% 17.1% +0.1
Commodities 84.5 72.3 +16.9% 12.1% 10.8% +1.3
Consumer Products 135.6 123.5 +9.8% 24.0% 24.0% -
Government Services & International Trade 41.9 53.5 (21.7)% 16.4% 19.3% (2.9)
Total Group 694.0 656.9 +5.6% 16.6% 16.7% (0.1)
  1. The 2013 figures by business have been restated following the reclassification of the activity of two food analysis laboratories from the IVS business to the Consumer Products business.

Appendix 2: Acquisitions

For the year ended December 31, 2014, the Group has carried out eight acquisitions, representing EUR 315 million in annualized revenues in 2014, mainly in North and South America. These acquisitions have increased the Group's presence in the marine/offshore, infrastructure, food, petroleum and automotive sectors.

Appendix 3: Extracts from the full-year consolidated financial statements

Extracts from the full-year consolidated financial statements audited and closed on February 25, 2015 by the Board of Directors. The audit procedures for the full-year accounts have been undertaken and the Statutory Auditor's report has been published.


(in millions of euros) 2014  2013 
Revenue 4,171.5 3,933.1
Purchases and external charges (1,178.6) (1,120.5)
Personnel costs (2,149.9) (2,017.1)
Taxes other than on income (56.4) (53.8)
Net (additions to)/reversals of provisions (11.4) (19.4)
Depreciation and amortization (215.2) (149.4)
Other operating income and expense, net 3.1 16.7
Operating profit 563.1 589.6
Share of profit of associates 0.7 -
Operating profit after share of profit of associates 563.8 589.6
Income from cash and cash equivalents 1.6 2.2
Finance costs, gross (79.7) (63.0)
Finance costs, net (78.1) (60.8)
Other financial income and expense, net (2.8) (3.2)
Net financial expense (80.9) (64.0)
Profit before income tax 482.9 525.6
Income tax expense (175.4) (169.1)
Net profit 307.5 356.5
Non-controlling interests 12.9 11.4
Attributable net profit 294.6 345.1
Basic earnings per share (in euros):    
Net profit 0.67 0.79
Diluted earnings per share 0.66 0.77


(in millions of euros) Dec. 2014   Dec. 2013 
Goodwill 1,814.2 1,412.1
Intangible assets 650.5 374.5
Property, plant and equipment 475.6 401.3
Investments in associates 5.1 0.8
Deferred income tax assets 129.9 122.2
Investments in non-consolidated companies 1.1 1.2
Derivative financial instruments 1.3 -
Other non-current financial assets 50.6 44.3
Total non-current assets 3,128.4 2,356.4
Trade and other receivables 1,325.0 1,122.5
Current income tax assets 63.2 40.7
Current financial assets 35.6 6.3
Derivative financial instruments 7.5 0.6
Cash and cash equivalents 220.1 190.6
Total current assets 1,651.4 1,360.7
TOTAL ASSETS 4,779.8 3,717.1
Share capital 53.2 53.0
Retained earnings and other reserves 1,054.8 903.1
Equity attributable to owners of the Company 1,108.0 956.1
Non-controlling interests 32.7 26.0
Total equity 1,140.7 982.1
Bank borrowings 1,944.8 1,407.1
Derivative financial instruments 13.9 22.5
Other non-current financial liabilities 49.6 1.8
Deferred income tax liabilities 166.9 85.8
Pension plans and other long-term employee benefits 158.3 125.6
Provisions for other liabilities and charges 115.1 71.4
Total non-current liabilities 2,448.6 1,714.2
Trade and other payables 899.1 787.9
Current income tax liabilities 71.7 80.9
Bank borrowings 153.9 104.2
Derivative financial instruments 23.3 5.6
Other current financial liabilities 42.5 42.2
Total current liabilities 1,190.5 1,020.8

Consolidated statement of cash flows

(in millions of euros)  2014  2013
Profit before income tax 482.9 525.6
Elimination of cash flows from financing and investing activities 83.0 57.1
Provisions and other non-cash items 69.9 25.8
Depreciation, amortization and impairment 216.7 149.4
Movements in working capital requirement attributable to operations (54.4) (75.6)
Income tax paid (191.5) (154.4)
Net cash generated from operating activities 606.6 527.9
Acquisitions of subsidiaries (596.6) (165.6)
Proceeds from sales of subsidiaries - 1.9
Purchases of property, plant and equipment and intangible assets (147.8) (147.3)
Proceeds from sales of property, plant and equipment and intangible assets 4.3 6.2
Purchases of non-current financial assets (11.5) (7.4)
Proceeds from sales of non-current financial assets 9.6 7.3
Variation in loans and advances (28.7) -
Net cash used in investing activities (770.7) (304.9)
Capital increase 4.5 6.1
Purchases/sales of treasury shares (46.1) (107.7)
Dividends paid (216.0) (216.8)
Increase in borrowings and other debt 663.4 254.4
Repayment of borrowings and other debt (133.3) (149.5)
Interest paid (61.1) (62.5)
Net cash generated from (used in) financing activities 211.4 (276.0)
Impact of currency translation differences 4.5 (24.1)
Impact of changes in methodology 0.8 -
Net increase (decrease) in cash and cash equivalents 52.6 (77.1)
Cash and cash equivalents at beginning of period 157.7 234.8
Net cash and cash equivalents at end of period 210.3 157.7
o/w cash and cash equivalents 220.1 190.6
o/w bank overdrafts (9.8) (32.9)

Appendix 4: Financial indicators not defined by IFRS accounting rules

Adjusted operating profit is defined as Group operating profit before income and expenses relative to acquisitions and other non-recurring items.

(in millions of euros)  2014   2013 
Operating profit 563.1 589.6
Amortization of acquisition intangibles 106.2 51.1
Disposals and restructuring 19.8 12.8
Other acquisition-related expenses 3.4 3.4
Goodwill impairment 1.5 -
Adjusted operating profit 694.0 656.9

Attributable adjusted net profit is defined as attributable net profit adjusted for other operating expense after tax.

(in millions of euros)  2014   2013 
Attributable net profit 294.6 345.1
EPS(a) (EUR per share) 0.67 0.79
Other operating expenses 130.9 67.3
Tax effect on other operating expenses (34.2) (15.4)
Attributable adjusted net profit 391.3 397.0
Adjusted EPS(a) (EUR per share) 0.90 0.91

(a) Calculated using the weighted average number of shares of 437,183,943 in 2014 and 438,576,063 shares in 2013  

Free cash flow is defined as follows:

(in millions of euros)  2014   2013 
Cash flow generated from operating activities (operating cash flow) 606.6 527.9
Purchases of property, plant and equipment and intangible assets net of disposals (143.5) (141.1)
Interest paid (61.1) (62.5)
Free cash flow 402.0 324.3

Adjusted net financial debt is defined as net financial debt after currency hedging instruments as defined in the calculation of banking covenants.

(in millions of euros)  2014   2013 
Gross financial debt 2,098.7 1,511.3
Cash and cash equivalents 220.1 190.6
Consolidated net financial debt 1,878.6 1,320.7
Currency hedging instruments 1.3 7.7
Adjusted net financial debt 1,879.9 1,328.4