2015 Full Year Results
Robust performance, with improved adjusted operating margin
Good start of new growth initiatives
Revenue of 4.6 billion, +11.1% versus 2014
Adjusted operating margin of 16.7%, up 10 basis points versus 2014
Exceptional charges amounting to 121 million
Record high operating cash-flow generation of 706 million, +16.4%
Adjusted net profit of 420 million, representing 0.96 per share, +6.7%
Increased proposed dividend of 0.51, +6.3%
Chief Executive Officer Didier Michaud-Daniel commented:
"In 2015, owing to its resilient business model and to the commitment of its 66,000 employees, Bureau Veritas achieved robust revenue growth despite adverse commodities markets. The Group improved its operating margin and reached a historically high level of cash flow.
In addition, the Group launched its medium term strategy that aims at enhancing its growth profile and profitability. The ongoing transformation of the company is our utmost priority. We will achieve this by executing our eight growth initiatives and leveraging on key account management, our operational excellence program and the digitalization of our services.
The global macroeconomic environment is likely to remain highly volatile in 2016, with persistent weakness in the oil & gas and minerals markets. Thanks to our diversified and balanced portfolio, we expect organic revenue growth ranging between 1% and 3% - with a progressive improvement in the second half - and a high adjusted operating margin between 16.5% and 17.0%. The Group will continue to generate strong cash flows. Acquisitions will remain a key growth driver, creating beneficial synergies within the Group and accelerating our growth initiatives.
We are confident in our ability to deliver our mid-to long-term ambition that has been presented during October 2015 Investor Days."
2015 Key figures
The Board of Directors of Bureau Veritas met yesterday and approved the financial statements for 2015. The main consolidated financial items are presented below:
(millions of euros) | 2015 | 2014 | Change |
Revenue | 4,634.8 | 4,171.5 | +11.1% |
Adjusted operating profit(a) | 775.2 | 694.0 | +11.7% |
Adjusted operating margin | 16.7% | 16.6% | +10 bp |
Operating profit | 576.9 | 563.1 | +2.5% |
Adjusted net profit(a) | 420.3 | 391.3 | +7.4% |
Net profit | 255.3 | 294.6 | (13.3)% |
Adjusted EPS(a) | 0.96 | 0.90 | +6.7% |
EPS | 0.58 | 0.67 | (13.4)% |
Operating cash flow(a) | 706.1 | 606.6 | +16.4% |
Adjusted net financial debt(a) | 1,862.7 | 1,879.9 | (0.9)% |
(a) Financial indicators not defined by IFRS accounting rules presented in Appendix 4
2015 Highlights
1 - Renewed strategy to enhance Bureau Veritas' growth profile, resilience and profitability
In 2015, after conducting an in-depth analysis of the Testing, Inspection and Certification (TIC) market, the Group has defined its strategy to enhance its growth profile, resilience and profitability in the medium to long term.
The strategy is based on:
The Group is now focused on the execution and the deployment of these eight initiatives which have already started and materialized into commercial successes.
The growth initiatives are planned to generate 2 billion of incremental revenue in 2020, equally balanced between organic growth and acquisitions.
2 - Nine targeted acquisitions completed
In 2015, the Group completed nine acquisitions, representing more than 80 million in annualized revenues.
Ningbo Hengxin, Shandong Chengxin, Shanghai Xietong and CTS are strategically positioned in the domestic Chinese market, respectively for Industry, Construction and Consumer Products. By increasing its presence in China, the Group will capture the potential arising from the gradual market liberalization of the TIC market, and benefit from structural growth drivers such as the development of the middle class, the increased environmental awareness, and the continuous improvement in local quality standards.
Two acquisitions aim at broadening the Group's offering in sectors driven by consumption: Certest will increase the Group's market share in luxury goods, and NCC will support the Group's development in Electrical & Electronics and Smartworld markets in Latin America.
Hydrocean adds innovative services around hydrodynamic digital simulation to the Marine & Offshore offer.
3 - Impact of the volatility in commodities prices
Low oil prices and of all major commodities (copper, iron ore, etc.) had an impact on the revenue and profitability of the Industry, IVS, and Commodities businesses.
Activities hit by the drop in the oil price are mainly the ones dependent on new investments (CAPEX) and assets in service (OPEX) for the oil & gas industry (around 13% of the Group's 2015 revenue). These are down by 10% at constant currency and perimeter.
Conversely, activities of the Oil & Petrochemicals segment (9% of revenue), which benefited from the price volatility and the strong year for refining volumes, are growing by 4.7% organically.
Activities of the Metals & Minerals segment (6% of revenue) were down 0.7% organically. Upstream-related activities are recording a larger decrease of 5.5%. By contrast, trade-related activities remained buoyant in the main areas where the Group operates.
The Group quickly took restructuring measures, mainly in the Americas and in Australia to adapt capacity to the slowdown in oil & gas and metals & minerals markets. This led to restructuring charges of 20.8 million. In addition, the Group impaired assets for an amount of 100 million in its Commodities business, in view of the deteriorated environment in the Metals & Minerals upstream segment, and the limited visibility on the recovery.
4 - Evolution towards a matrix organization
The Group is transforming itself in order to align the organization with the strategy. Since January 1, 2016, the Group has merged the Commodities and Industry & Facilities divisions, with the objective to leverage synergies and deploy an efficient matrix operating model, with market-centric service lines supporting operations organized by region.
The Group is now organized around four divisions: Marine & Offshore, Commodities and Industry & Facilities, Consumer Products and Government services and International trade.
Analysis of the Group's results and financial position
1 - Revenue up 5.6% on a constant currency basis
2015 revenue totaled 4,634.8 million, an increase of 11.1% compared with 2014.
Activities in Europe, the Middle East, Africa (44% of 2015 revenue; 5.3% organic growth) have benefited both from the commercial initiatives launched in 2014 and the improvement in the economic environment. Business in Asia Pacific (29% of revenue; 0.5% organic growth) reflected a slowdown in growth in Asia, and some weakness in Australia, due to the country's exposure to declining commodities markets. Activities in the Americas (27% of revenue; 2.1% organic decline) were soft, with the drop in the second half mostly attributable to the low oil price environment.
Marine & Offshore had a very strong year (+10.2%) in both In-service (60% of revenue) and New-construction (40%). The Certification business saw strong growth (+4.6%), with commercial successes with large clients. Construction showed enhanced growth (+1.3%), thanks to a better geographical diversification. As expected, Industry (1.6% organic decline) and IVS (+2.8% organic growth) have been impacted by low oil prices. In both businesses, activities outside oil & gas performed well, especially in the Power sector and in Europe. The Commodities business grew by +3.3%, with trade-related activities and Agriculture offsetting the weakness of upstream metals & minerals and oil sands in Canada. The Consumer Products business (+1.4%) experienced delays and reductions in testing programs, with respectively two major customers. The GSIT business (-1.9%) suffered from a reduction in the Verification of Conformity program in Iraq and some delays in the ramp up of new Single Window contracts.
2 - Adjusted operating profit of 775.2 million, margin up 10 basis points to 16.7%
2015 adjusted operating margin was up 10 basis points to 16.7% compared to 16.6% in 2014. The margin increase is attributable to proactive cost management and to the Excellence@BV program, and was partly reinvested in the increase of Marketing & Sales. The positive impact of currency changes offsets the decrease related to oil & gas.
Other operating expenses increased to 198.3 million in 2015 vs. 130.9 million in 2014. These include:
Operating profit came to 576.9 million, up 2.5% compared to 563.1 million in 2014.
3 - Adjusted EPS of 0.96 up 6.7%
Net financial expense stood at 89.3 million compared with 80.9 million in 2014. This change derives from an increase in net finance costs to 80 million (vs 78.1 million in 2014) and foreign exchange losses of 3.6 million (vs foreign exchange gains of 3.3 million in 2014).
Income tax expense stood at 220.7 million in 2015, compared with 175.5 million in 2014. The effective tax rate (ETR) was 45.2% for the period, compared with 36.3% in 2014. The difference with the adjusted ETR of 37.0% is mainly explained by the non-deductibility of the goodwill impairment charge. The increase in adjusted ETR compared to 2014 (34.1%) is mainly due to exceptional items.
Attributable net profit for the period was 255.3 million, versus 294.6 million in 2014. Earnings Per Share (EPS) stood at 0.58, compared with 0.67 in 2014.
Adjusted attributable net profit totaled 420.3 million, versus 391.3 million in 2014. Adjusted EPS reached 0.96, a 6 euro cent increase versus 2014.
4 - Operating cash flow up 16.4%
2015 operating cash flow rose 16.4% to 706.1 million on the back of higher EBITDA and reduced working capital requirement (WCR). At December 31, 2015, WCR totaled 411.4 million, or 8.9% of 2015 revenue, compared with 425.9 million, or 10.2% of 2014 revenue.
Purchases of property, plant and equipment and intangible assets, net of disposals (Net Capex), amounted to 165.6 million, vs 143.5 million in 2014. The Group's net capex-to-revenue ratio stood at 3.6%.
Free cash flow (available cash flow after tax, interest expenses and capex) totaled 462.1 million, versus 402 million in 2014.
At December 31, 2015, adjusted net financial debt was 1,862.7 million, i.e. 2.02x last-twelve-month EBITDA as defined in the calculation of banking covenants, compared with 2.16x at December 31, 2014.
The reduction in adjusted net financial debt of 17.2 million versus December 31, 2014 (1,879.9 million) stemmed from:
2016 Outlook
The global macroeconomic environment is likely to remain highly volatile in 2016, with persistent weakness in the oil & gas and minerals markets. Thanks to its diversified and balanced portfolio, the Group expects organic revenue growth ranging between 1% and 3% - with a progressive improvement in the second half - and a high adjusted operating margin between 16.5% and 17.0%. The Group will continue to generate strong cash flows. Acquisitions will remain a key growth driver, creating beneficial synergies within the Group and accelerating the growth initiatives.
Presentation
The results will be presented on Thursday, February 25, 2016 at 3:00 p.m. (Paris time) at the Acadιmie Diplomatique Internationale - 4 bis avenue Hoche, 75008, Paris, France
The presentation will be broadcast live and in replay mode in English on the Group's website: http://finance.bureauveritas.com.
All supporting documents will also be available on the website.
2016 financial calendar
May 12, 2016: Q1 2016 trading update
May 17, 2016: Shareholders' meeting
July 28, 2016: H1 2016 results
November 7, 2016: Q3 2016 trading update
Contacts
Analysts/Investors | Press |
Claire Plais +33 (0)1 55 24 76 09 Mark Reinhard +33 (0)1 55 24 77 80 | Vιronique 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 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: Q4 and FY Revenue by business
(in millions of euros) | 2015 | 2014 | Change | Organic | Acquisitions | Currency | |
Marine & Offshore | 101.5 | 90.0 | 12.8% | 9.4% | 0.7% | 2.7% | |
Industry | 244.9 | 264.2 | (7.3)% | (7.6)% | 1.2% | (0.9)% | |
In-Service Inspection & Verification | 165.5 | 156.2 | 6.0% | 4.4% | - | 1.6% | |
Construction | 141.7 | 129.6 | 9.3% | 0.5% | 8.6% | 0.2% | |
Certification | 98.6 | 93.9 | 5.0% | 4.7% | - | 0.3% | |
Commodities | 193.2 | 186.2 | 3.8% | 1.9% | - | 1.9% | |
Consumer Products | 165.2 | 152.1 | 8.6% | (0.8)% | 0.7% | 8.7% | |
Government Services & International Trade | 62.6 | 66.9 | (6.4)% | (4.8)% | - | (1.6)% | |
Total Q4 revenue | 1,173.2 | 1,139.1 | 3.0% | - | 1.4% | 1.6% | |
Marine & Offshore | 405.3 | 323.7 | 25.2% | 10.2% | 9.8% | 5.2% | |
Industry | 1,030.8 | 980.7 | 5.1% | (1.6)% | 2.2% | 4.5% | |
In-Service Inspection & Verification | 599.0 | 560.2 | 6.9% | 2.8% | 0.8% | 3.3% | |
Construction | 557.5 | 462.1 | 20.6% | 1.3% | 15.3% | 4.0% | |
Certification | 351.8 | 328.2 | 7.2% | 4.6% | - | 2.6% | |
Commodities | 772.8 | 696.6 | 10.9% | 3.3% | 2.0% | 5.6% | |
Consumer Products | 658.1 | 564.6 | 16.6% | 1.4% | 1.0% | 14.2% | |
Government Services & International Trade | 259.5 | 255.4 | 1.6% | (1.9)% | 1.7% | 1.8% | |
Total FY revenue | 4,634.8 | 4,171.5 | 11.1% | 1.9% | 3.7% | 5.5% |
Appendix 2: Adjusted operating profit by business
(in millions of euros) | Adjusted operating profit | Adjusted operating margin | ||||
2015 | 2014 | Change | 2015 | 2014 | Change (basis points) | |
Marine & Offshore | 107.0 | 81.0 | 32.1% | 26.4% | 25.0% | +140 |
Industry | 146.5 | 147.9 | (0.9)% | 14.2% | 15.1% | (90) |
In-Service Inspection & Verification | 82.8 | 79.1 | 4.7% | 13.8% | 14.1% | (30) |
Construction | 86.4 | 68.5 | 26.1% | 15.5% | 14.8% | +70 |
Certification | 60.0 | 56.5 | 6.2% | 17.1% | 17.2% | (10) |
Commodities | 87.4 | 83.5 | 4.7% | 11.3% | 12.0% | (70) |
Consumer Products | 162.0 | 135.6 | 19.5% | 24.6% | 24.0% | +60 |
Government Services & International Trade | 43.1 | 41.9 | 2.9% | 16.6% | 16.4% | +20 |
Total Group | 775.2 | 694.0 | 11.7% | 16.7% | 16.6% | +10 |
Appendix 3: Extracts from the full-year consolidated financial statements
Extracts from the full-year consolidated financial statements audited and closed on February 24, 2016 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.
CONSOLIDATED INCOME STATEMENT
(in millions of euros) | 2015 | 2014 |
Revenue | 4,634.8 | 4,171.5 |
Purchases and external charges | (1,322.9) | (1,178.6) |
Personnel costs | (2,383.9) | (2,149.9) |
Taxes other than on income | (51.3) | (56.4) |
Net (additions to)/reversals of provisions | (25.5) | (11.4) |
Depreciation and amortization | (205.1) | (215.2) |
Other operating income and expense, net | (69.2) | 3.1 |
Operating profit | 576.9 | 563.1 |
Share of profit of equity-accounted companies | 0.8 | 0.7 |
Operating profit after share of profit of equity-accounted companies | 577.7 | 563.8 |
Income from cash and cash equivalents | 6.2 | 1.6 |
Finance costs, gross | (86.2) | (79.7) |
Finance costs, net | (80.0) | (78.1) |
Other financial income and expense, net | (9.3) | (2.8) |
Net financial expense | (89.3) | (80.9) |
Profit before income tax | 488.4 | 482.9 |
Income tax expense | (220.7) | (175.4) |
Net profit | 267.7 | 307.5 |
Non-controlling interests | 12.4 | 12.9 |
Attributable net profit | 255.3 | 294.6 |
Earnings per share (in euros): | ||
Basic earnings per share | 0.58 | 0.67 |
Diluted earnings per share | 0.58 | 0.66 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions of euros) | Dec. 2015 | Dec. 2014 |
Goodwill | 1,800.4 | 1,814.2 |
Intangible assets | 629.4 | 650.5 |
Property, plant and equipment | 497.9 | 475.6 |
Investments in equity-accounted companies | 4.8 | 5.1 |
Deferred income tax assets | 137.2 | 129.9 |
Investments in non-consolidated companies | 1.3 | 1.1 |
Derivative financial instruments | 4.3 | 1.3 |
Other non-current financial assets | 71.0 | 50.6 |
Total non-current assets | 3,146.3 | 3,128.4 |
Trade and other receivables | 1,374.2 | 1,325.0 |
Current income tax assets | 45.5 | 63.2 |
Current financial assets | 45.3 | 35.6 |
Derivative financial instruments | 16.4 | 7.5 |
Cash and cash equivalents | 522.9 | 220.1 |
Total current assets | 2,004.3 | 1,651.4 |
Assets held for sale | 6.6 | - |
TOTAL ASSETS | 5,157.2 | 4,779.8 |
Share capital | 53.0 | 53.2 |
Retained earnings and other reserves | 1,042.3 | 1,054.8 |
Equity attributable to owners of the Company | 1,095.3 | 1,108.0 |
Non-controlling interests | 29.6 | 32.7 |
Total equity | 1,124.9 | 1,140.7 |
Non-current borrowings and debt | 2,311.0 | 1,944.8 |
Derivative financial instruments | - | 13.9 |
Other non-current financial liabilities | 52.1 | 49.6 |
Deferred income tax liabilities | 152.8 | 166.9 |
Pension plans and other long-term employee benefits | 148.4 | 158.3 |
Provisions for other liabilities and charges | 133.7 | 115.1 |
Total non-current liabilities | 2,798.0 | 2,448.6 |
Trade and other payables | 962.8 | 899.1 |
Current income tax liabilities | 72.1 | 71.7 |
Current borrowings and debt | 78.9 | 153.9 |
Derivative financial instruments | 1.8 | 23.3 |
Other current financial liabilities | 116.9 | 42.5 |
Total current liabilities | 1,232.5 | 1,190.5 |
Liabilities held for sale | 1.8 | - |
TOTAL EQUITY AND LIABILITIES | 5,157.2 | 4,779.8 |
Consolidated statement of cash flows
(in millions of euros) | FY 2015 | FY 2014 |
Profit before income tax | 488.4 | 482.9 |
Elimination of cash flows from financing and investing activities | 60.6 | 83.0 |
Provisions and other non-cash items | 46.9 | 69.9 |
Depreciation, amortization and impairment | 293.3 | 216.7 |
Movements in working capital requirement attributable to operations | 48.5 | (54.4) |
Income tax paid | (231.6) | (191.5) |
Net cash generated from operating activities | 706.1 | 606.6 |
Acquisitions of subsidiaries | (99.7) | (596.6) |
Proceeds from sales of subsidiaries | (1.6) | - |
Purchases of property, plant and equipment and intangible assets | (169.4) | (147.8) |
Proceeds from sales of property, plant and equipment and intangible assets | 3.8 | 4.3 |
Purchases of non-current financial assets | (13.7) | (11.5) |
Proceeds from sales of non-current financial assets | 6.1 | 9.6 |
Change in loans and advances granted | 10.5 | (28.7) |
Net cash used in investing activities | (264.0) | (770.7) |
Capital increase | 11.7 | 4.5 |
Purchases/sales of treasury shares | (45.2) | (46.1) |
Dividends paid | (249.7) | (216.0) |
Increase in borrowings and other debt | 387.1 | 663.4 |
Repayment of borrowings and other debt | (161.4) | (133.3) |
Repayment of amounts owed to shareholders | (3.9) | - |
Interest paid | (78.4) | (61.1) |
Net cash generated from (used in) financing activities | (139.8) | 211.4 |
Impact of currency translation differences | (1.8) | 4.5 |
Impact of change in accounting methodology | 0.0 | 0.8 |
Net increase (decrease) in cash and cash equivalents | 300.5 | 52.6 |
Net cash and cash equivalents at beginning of year | 210.3 | 157.7 |
Net cash and cash equivalents at end of year | 510.8 | 210.3 |
o/w cash and cash equivalents | 522.9 | 220.1 |
o/w bank overdrafts | (12.1) | (9.8) |
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) | 2015 | 2014 | |
Operating profit | 576.9 | 563.1 | |
Amortization of acquisition intangibles | 86.7 | 106.2 | |
Restructuring costs | 20.8 | 20.0 | |
Acquisition and disposals | 0.8 | 3.2 | |
Impairment of goodwill | 90.0 | 1.5 | |
Total other operating expenses | 198.3 | 130.9 | |
Adjusted operating profit | 775.2 | 694.0 |
Attributable adjusted net profit is defined as attributable net profit adjusted for other operating expenses after tax.
(in millions of euros) | 2015 | 2014 |
Attributable net profit | 255.3 | 294.6 |
EPS(a) ( per share) | 0.58 | 0.67 |
Other operating expenses | 198.3 | 130.9 |
Tax effect on other operating expenses | (33.3) | (34.2) |
Attributable adjusted net profit | 420.3 | 391.3 |
Adjusted EPS(a) ( per share) | 0.96 | 0.90 |
(a) Calculated using the weighted average number of shares of 437,776,451 in FY 2015 and 437,183,943 shares in FY 2014
Free cash flow is defined as follows:
(in millions of euros) | 2015 | 2014 |
Net cash generated from operating activities (operating cash flow) | 706.1 | 606.6 |
Purchases of property, plant and equipment and intangible assets net of disposals | (165.6) | (143.5) |
Interest paid | (78.4) | (61.1) |
Free cash flow | 462.1 | 402.0 |
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) | Dec. 2015 | Dec. 2014 |
Gross financial debt | 2,389.9 | 2,098.7 |
Cash and cash equivalents | 522.9 | 220.1 |
Consolidated net financial debt | 1,867.0 | 1,878.6 |
Currency hedging instruments | (4.3) | 1.3 |
Adjusted net financial debt | 1,862.7 | 1,879.9 |