Full-Year 2016 results · 2017. 4. 5. · 2016 highlights 2016 has demonstrated the Group’s...

Full-Year 2016 results

5 April 2017

2 Full-Year 2016 results

Contents

1. Introduction

2. FY 2016 financial statements

3. Business review

4. Outlook

5. Q & A

Appendix: Key financial data by business

1. Introduction

2. Consolidated income statement and statement of financial position

3. Business of subsidiaries

4. Strategy and Outlook

Contents

Présentation PowerPoint1. Introduction

Pascal Lebard – Chairman and Chief Executive Officer


4

2016 highlights

2016 has demonstrated the Group’s ability to delive r solid earnings (excluding the Security division)

Antalis: EBITDA €88 million vs. €94 million in 2015� Earnings held up well in spite of a negative forex impact (mainly sterling) and the sharp decline

in paper volumes � Positive impacts of product mix transformation strategy

� Continued increase in the contribution of Packaging and Visual Communication to Antalis’ margin: up 4 points year on year to 33%

� Continued acquisitions of Packaging and Visual Communication businesses and consolidation of the paper sector (additional full-year sales of €24 million)

Arjowiggins: pro forma EBITDA €28 million vs. €25 m illion in 2015, up 14.0%� Marked turnaround in the operating performances of the Graphic and Creative Papers divisions� Continued decline in results of the Security division � Strengthening of Arjowiggins' financing capacity

� Sale of Arjowiggins Healthcare to Meeschaert Private Equity in partnership with the company's executive management team for an enterprise value of €33 million

� Sale of 15% stake in Arjo Systems and Arjo Solutions (Security Solutions) for an amount of €7 million

Résultats annuels 2016

5

Key pro forma figures for 2016 (excluding ArjowigginsHealthcare which was sold)

Pro forma sales down 7.0% to €2,933 million (down 3 .5% at constant exchange rates)

Pro forma EBITDA stable at €105 million; EBITDA mar gin up 0.2 points to 3.6%

Net loss of €52 million� €72 million in non-recurring expenses, including €14 million in legal costs related to

litigation with BAT, €18 million in asset write-downs (mainly in the Security division), and €40 million in other non-recurring expenses (notably restructuring costs and a quality-related legal dispute)

Net debt stood at €315 million, compared to €235 mi llion at 31 December 2015 � Positive impact of disposals totalling €25 million, offset by costs of financing Antalis

acquisitions (€8 million), disbursements related to restructuring costs (€64 million) and other non-recurring items (€29 million)

� Excluding these items, cash-flow generation was well balanced (negative €5 million)


6

Litigation with British American Tobacco (BAT)

Decision of the High Court of Justice of 11 July 20 16� BAT’s claims based on the UK Companies Act 2006 were all dismissed by the Court. BAT’s

claims based on the 1986 Insolvency Act were partially accepted by the Court with regard to the second dividend totalling €135 million, however, the Court did not rule on the amount of any relief to be paid by Sequana pending further hearings

Decision of the High Court of Justice of 10 Februar y 2017� Sequana was ordered to pay BAT an amount of $138.4 million in principal capped at the

amount of the second dividend (€135 million) plus interest (€17 million)� Granted a stay of execution pending the decision of the Court of Appeal� The Court also ordered Sequana to pay part of BAT’s legal costs totalling approximately

€11 million

Sequana has taken legal advice and considers that i t still has solid legal arguments to raise on its own appeal, notably in relation to the application of Article 423 of the Insolvency Act concerning the second dividend.

On the strength of these arguments and the decision handed down in the first judgment, rejecting all of BAT’s claims based on th e Companies Act, no provision was set aside in relation to this matter in the account s for the year ended 31 December 2016

The appeal is unlikely to be heard before 12 to 18 months


The preventive procedure ( procédure de sauvegarde ) is continuing and Sequanareiterates its aim of exiting this procedure rapidl y

� Sale of Arjowiggins Security BV to Oberthur Fiduciaire for a gross amount of €30 million planned for May, after the opinion to be issued by the relevant work councils

� The disposal process of the Security division is already under way

� Confirmation of proposed IPO of Antalis, in the form of a distribution of a minority stake of Antalis International shares to its shareholders (between 10% and 30%)

� Preparatory work already in progress� This operation should complete in June

� Bridge loans contracted in November 2016 and March 2017 with Bpifrance Participations and Impala Group, respectively, for an amount of €32 million in exchange for a partial pledge on Antalis International shares along with a strengthening of Arjowiggins’ equity capital� Loans redeemable in cash or in Antalis International shares

7

Implementation of the strategic plan announced on 15 February 2017


8

1. Introduction




Contents

Présentation PowerPoint2. FY 2016 financial statements

Xavier Roy-Contancin – Chief Financial Officer


9

Consolidated analytical income statement

Net income (loss) attributable - - - (52) (67)to owners

(1) 2016 pro forma data exclude the contribution of Arjowiggins Healthcare which was sold in June 2016.

(2) 2015 pro forma data presented in 2016 exclude the contribution of the Arjowiggins businesses sold in H1 2015 (Security Solutions and Brazilian banknote business) and in H1

2016 (Arjowiggins Healthcare).

(*) Percentage and margin changes are based on figures rounded out to one decimal place.

2016 reported

Non-recurring items - - (72) (76) -Net financial expense - - (36) (41) -Income taxes - - (7) (23) -

Sales 2,933 3,153 - 7.0% 2,975 3,300 - 9.9%

EBITDA 105 106 - 1.1,% 107 126 - 14,9%EBITDA margin (%)(*) 3.6% 3.4% + 0.2 point 3.6% 3.8% - 0.2 points

Recurring operating income 61 57 + 7.5% 63 73 - 13.5%Operating margin (%)(*) 2.1% 1.8% + 0.3 point 2.1 % 2.2% - 0.1 points

2015pro forma (2)

%* 2016 / 2015

reported2016

pro forma (1)

down 3.5% at

constant exchange

rates

(in € millions)2015

reported

%* 2016 pro forma /2015 pro forma


10

Breakdown of non-recurring items

Non-recurring items (72)

Restructuring costs (26)Asset write-downs (18)Other non-recurring items (28)

(€ millions) at 31 December 2016 Arjowiggins: €(4) m

Antalis: €(22) m

Incl. €(14)m for BAT

litigation and

€(10)m for quality-related

legal dispute


11

Consolidated statement of financial position

(€ millions) 31 Dec. 2016

Goodwill 305 301Property, plant & equipment and intangible assets 183 221Other fixed assets 186 189

Operating WCR 255 259 Other current assets (liabilities) (81) (105)Assets (liabilities) held for sale 14 25

Shareholders' equity 390 468Non-controlling interests - -Provisions 157 187Net debt 315 235

31 Dec. 2015


Total assets 862 890

Total equity and liabilities 862 890

12

Breakdown of provisions

(in € millions)

Pension provisions 104 101

Restructuring provisions 21 57

Other risk and contingency provisions 32 29

Total 157 187

31 Dec. 201531 Dec. 2016

Antalis: €4m

Arjowiggins: €17 million


13

Change in net debt

(in € millions) 2016

Consolidated net debt – 1 January (235) (311)

EBITDA 107 126Change in WCR of businesses (27) 8CAPEX (38) (49)Asset disposals 11 14

Operating cash flow 53 99

Net finance costs (34) (35)Income tax expense (7) (12)

Restructuring costs & other non-recurring items (93) (93)

Disposals / (acquisitions) 18 135

Financial restructuring programme - (6)Currency impact (6) 1

Other items (11) (13)

Consolidated net debt – 31 December (315) (235)

2015


• 2016

Disposals Arjowiggins : 25 M€

Acquisitions Antalis : (8) M€

• 2015

Acquisitions Antalis : (24) M€

Disposals Arjowiggins: 158 M€

• 2016

Antalis : (23) M€

Arjowiggins: (58) M€

Legal costs : (12) M€

• 2015

Antalis : (36) M€

Arjowiggins : (57) M€

14

Consolidated net debt

Consolidated net debt of €315 million vs. €235 million at 31 Dec. 2015

� Antalis: €254 million � Arjowiggins: €49 million

Financial ratios (covenants) at 31 December 2016

� Antalis � Net debt/EBITDA = 2.9 (≤ 3.35)� Recurring operating income/net finance costs = 4.2 (≥ 2.30)


15

1. Introduction




Contents

Présentation PowerPoint3. Antalis business review

Hervé Poncin – Chief Operating Officer of Antalis


16

Market conditions

A challenging business environment� Uncertain economic climate in the UK and a number of other countries (Spain, Brazil,

Turkey, Russia)� Strong devaluation in the pound sterling with an unfavourable forex impact on Antalis’ sales

and EBITDA � No impact on margin management (both sales and cost base in sterling)

� Major fluctuations in currencies against the euro (South African rand, Chilean peso, etc.)

Contrasting market conditions � In 2016, the paper market registered its biggest decline since those witnessed in 2009

and 2013� The printing paper market contracted by 6%� The drop in volumes was even more marked in the office paper segment, which

contracted by 10%� Packaging and Visual Communication businesses held up well

Consolidation of the European paper distribution ma rket continued apace


17

2016 highlights

Continued strategic development in the Packaging an d Visual Communication sectors� Strengthening of central teams� Continued targeted acquisitions policy

� Acquisition of TFM Industrial, a Peruvian distributor of technical packaging solutions for the agri-food, pharmacy and construction sectors (2016 sales of approximately €5 million)

� Acquisition of Norway-based Gregersen, a distributor of equipment and consumables in the visual communication sector (2016 sales of approximately €6 million)

� Organic growth boosted by cross selling

Consolidation of the paper distribution market� Acquisition of Swan Paper distribution business in Ireland (2016 sales of approximately

€13 million)

Steady increase in e-commerce penetration� 26.6% of stock orders are now placed on line, a year-on-year increase of 1.8 points in the sales

penetration rate

Continued adaptation of the supply chain for greate r flexibility, especially in Benelux


18

Resilient operating performance

Sales down 6.3% year-on-year (down 2.3% at constant exchange rates)� Negative FX impact for an amount of €109 million (mainly attributable to sterling)� Decrease in paper volumes � Growth in the Packaging and Visual Communication businesses (up 4%) buoyed by the

companies acquired in 2015, which added €51 million to full-year sales� Contributed 33% to Antalis’ margin in 2016 vs. 29% in 2015 (increase of 4 points)

Operating performance held up well� EBITDA came in at €88 million vs. €94 million in 2015; EBITDA margin was stable at 3.6%

� Negative impact of lower volumes, partially offset by an enhanced product mix and lower overheads

� Negative FX impact for an amount of €5 million (mainly attributable to sterling)� Recurring operating income of €64 million vs. €68 million in 2015

Debt was held at €254 million, including acquisitio n financing requirements, thanks to tight control over working capital requirements


19

Key income statement items

down 2.3% at

constant exchange

rates

(€ millions)

Sales 2,459 2,625 - 6.3%

EBITDA 88 94 - 5.8%EBITDA margin (%) 3.6% 3.6% -

Recurring operating income 64 68 - 5.3%Operating margin (%) 2.6% 2.6% -

2016 2015Change

2016/2015 €51 million related to

2015 acquisitions


Capital employed 449 442ROCE 14.4% 15.4%

EBITDA trends

2015

EBITDA

Forex

impact

Inflation Overheads Bad debts 2016

EBITDA

Margins/Mix/

Volumes

Variable

costs

2015 EBITDA

(excl. FX

impact)


Acquisitions

(21)

8994

2

12(5)

13 882

0

10

20

30

40

50

60

70

80

90

100

(9)

21

Key cash flow items

(in € millions)

EBITDA 88 94

Change in WCR (15) 41Capex (17) (17)Disposals of fixed assets 3 11

Operating cash flow 59 129

Net debt (254) (232)

2016 2015


22

Breakdown of sales and EBITDA

2016 sales by region 2016 EBITDA by region 2016 sales by business

Packaging20%

Main European countries 51%

Rest of the world11%

Germany & Austria13%

Rest of the world9%

France

11%

Rest of Europe 40%

UK& Ireland

27%

Papers71%

Rest of Europe38%

Visual Communication

9%


23

1. Introduction




Contents

Présentation PowerPoint3. Arjowiggins business review

Pascal Lebard – Chief Executive Officer


24

2016 highlights

Strengthening of Arjowiggins financing capacity � Sale of Arjowiggins Healthcare to Meeschaert Private Equity in partnership with the company's

executive management team for an enterprise value of €33 million� Sale of 15% stake in Arjo Systems and Arjo Solutions (Security Solutions) for an amount of

€7 million

Interesting sales and marketing developments within the divisions � Arjowiggins Graphic

� Development of growth drivers outside the traditional printing and writing market (Teknocard); growth in specialty products (gift cards in the US, shopping bags for major global brands)

� Arjowiggins Creative Papers� New creative paper range for digital printing using dry and liquid toners; development of

specialty applications (non-traditional applications using tracing paper, extension of Priplak’sgeographical reach to the US)

� Arjowiggins Security� Commercial successes underpinned by recent innovations (Wink security thread) but in a

context of fierce competition and deteriorating margins


25

Improved operating performance, reflecting the positive impact of the industrial restructuring plan

Key 2016 pro forma figures (excluding Arjowiggins H ealthcare)

Sales down 11.9% to €668 million (down 10.7% at con stant exchange rates)� Decline in printing paper volumes accentuated by the expected drop in volumes of standard

coated paper following the closure of the Wizernes mill � Decline in volumes of banknote paper in a context of overcapacity and downward pressure on

selling prices� Most of the specialty businesses performed well (eco-friendly papers, laminated, tissue paper,

bookbinding, Priplak)

EBITDA up 14% like-for-like to €28 million (from €2 5 million in 2015); EBITDA margin grew by 0.9 points to 4.2% � Positive impact of lower overheads thanks to industrial restructuring� Partially offset by lower volumes of printing paper and banknote paper � Lower prices for raw materials and energy

Recurring operating income at €9 million vs. €2 mil lion in 2015 (on a like-for-like basis)

Excluding the Security division, Arjowiggins’ EBITDA came in at €41 million in 2016

compared to €15 million in 2015 (up €26 million)


26

Key income statement items

2016 reported

Sales 668 758 - 11.9% 710 905 - 21.6%

EBITDA 28 25 + 14.0% 30 45 - 31.8%EBITDA margin (%) 4.2% 3.3% + 0.9 points 4.3% 4.9% - 0.6 points

Recurring operating income 9 2 NA 11 18 - 37.4% Operating margin (%) 1.4% 0.3% + 1.1 points 1.6% 2.0% - 0.4 points

2015pro forma (2)

Change 2016/2015 (reported)

2016pro forma (1)

down 10.7% at

constant exchange

rates

(in € millions)2015

reported

Change 2016 pro forma /2015

pro forma


(2) 2015 pro forma data presented in 2016 exclude the contribution of the Arjowiggins businesses sold in H1 2015 (Security Solutions and Brazilian banknote

business) and in H1 2016 (Arjowiggins Healthcare).


Capital employed 140 194ROCE 8.1% 9.4%

2015

EBITDA

Change

in 2015

reporting

scope

Prix & Mix Overheads Overheads

Wizernes &

Charavines

2016 EBITDA

from

continued

operations

Security 2015

EBITDA (excl.

Security)

2015 EBITDA (from continued

operations)

FX

gains/losses

EBITDA trends


Healthcare Volumes Pulp, RMs

& energy

Graphic & Creative Papers

20 41

(2)

2

(14)

25

45

18

(10)

(2)(10)

0

10

20

30

40

50

(6)

15

28

Key cash flow items

(in € millions)

EBITDA 30 45

Change in WCR (15) (31)Capex (21) (32)Disposals of fixed assets 9 3

Operating cash-flow 3 (15)

Net debt (49) (1)

2016 2015


29

Pro forma results by division

� Drop in volumes of standard coated paper due to closure of Wizernes mill

� Resilient performance in eco-friendly papers and laminated and tissue businesses

� Lower overheads arising from closure of Wizernes mill

� Positive impact of lower raw material prices

329

369

2016

17

(1)

20162015

2015

Graphic

Pro forma sales (€ millions) Pro forma EBITDA (€ milli ons)

216228

2016

24

16

2016 20152015

Creative papers� Decline in volumes of fine papers,

accentuated by � flooding at the Stoneywood mill in

early January and production difficulties linked to the transfer of production from Charavines

� Lower overheads related to industrial restructuring

� Partially offset by the negative impact of sub-contracting costs related to inventory rebuilding

Pro forma EBITDA (€ millions)

- 5.3%

- 10.8%

NA


NA

Pro forma sales (€ millions)

30

Pro forma results by division

� Decline in volumes of banknote paper in a context of overcapacity and downward pressure on selling prices

� Accentuated by- a quality issue that slowed down

and disrupted production and productivity

- last-minute cancellation of a major order which did not make it possible to offset these volumes

Security

(13)

2016

2015

123

161

2016 2015

Pro forma sales (€ millions) Pro forma EBITDA (€ milli ons)

10- 24.0%

NA


31

Breakdown of 2016 sales and EBITDA

Creative Papers30%

Security 18%

Graphic52%

Rest of the world7%

US12%

France20%

UK

9%

Europe (excl. France & UK)

37%

Asia15%

Sales by regionSales by division EBITDA by division (1)

Graphic45%

Creative Papers55%

Coated

14%

Green

46%

Specality

40%

(1) excludes €13 million in negative

EBITDA from the Security division


32

1. Introduction




Contents

Présentation PowerPoint4. Outlook

Pascal Lebard – Chairman and Chief Executive Officer


Contrasting market conditions� Continuing decline in volumes of printing paper � Good momentum in Antalis’ Packaging and Visual Communication businesses and in

Arjowiggins’ specialty businesses� Higher prices for raw materials and chemicals (pulp, latex) and energy (gas)

Antalis� Positive impacts of lower overheads (continued adaptation of the supply chain for greater

flexibility)� Enhanced margin as a result of product mix transformation strategy and the positive impact of

acquisitions completed in 2016� Continued increase in the overall contribution of Packaging and Visual Communication to

Antalis’ margin

Arjowiggins� Continued positive impacts of the Graphic and Creative papers divisions’ industrial

restructuring, partially offset by losses in the Security division� Turnaround of the French banknote business using proceeds from the sale of Arjowiggins

Security BV should the disposal process be unsuccessful

The planned IPO for Antalis will unlock its value. It will also provide Sequana with the additional financial resources needed to run its op erations and meet its obligations .

33

Outlook for 2017


34

1. Introduction




Contents

Présentation PowerPoint5. Q & A

Pascal Lebard – Chairman and Chief Executive Officer of Sequana

Xavier Roy-Contancin – Chief Financial Officer

Hervé Poncin – Executive Vice-President of Sequana, Chief Operating Officer of Antalis


35

1. Introduction




Contents

Présentation PowerPoint www.sequana.com

� +33 1 58 04 22 80

� [email protected]


36

1. Introduction




Contents

Présentation PowerPoint

Appendix - Key financial data by business


37

Results by business

(in € millions)

Sales – Antalis 2,459 2,625 - 6.3%

Sales – Arjowiggins 668 758 - 11.9%

Eliminations & holding company (194) (230) -

Consolidated net sales 2,933 3,153 - 7.0%

EBITDA – Antalis 88 94 - 5.8%

EBITDA – Arjowiggins 28 25 + 14.0%

EBITDA – Eliminations & holding company (11) (13) -

Consolidated EBITDA 105 106 - 1.1%

2016

pro forma (1)

Change 2016 pro forma/2015 pro forma

Recurring operating income – Antalis 64 68 - 5.3%

Recurring operating income – Arjowiggins 9 2 NA

Recurring op. loss – Eliminations & holding co. (12) (13) - 4.7%

Consolidated recurring operating income 61 57 + 7.5%137

2015

pro forma (2)


(2) 2015 pro forma data presented in 2016 exclude the contribution of the Arjowiggins businesses sold in H1 2015 (Security Solutions and Brazilian

banknote business) and in H1 2016 (Arjowiggins Healthcare).


38

Antalis

(in € millions)

Sales – Europe 2,232 2,384 - 6.4%

Sales – Rest of the World 227 241 - 5.7%

Sales – Antalis 2,459 2,625 - 6.3%

EBITDA Europe 78 85 - 7.6%

EBITDA – Rest of the World 10 9 + 11.5%

EBITDA – Antalis 88 94 - 5.8%

2016

Recurring operating income – Europe 58 63 - 6.7%

Recurring op. income – Rest of the World 6 5 + 12.4%

Recurring operating income – Antalis 64 68 - 5.3 %

2015Change

2016 /2015

Europe

2016 sales by region

Rest of the world

2016 sales by region

Asia24%

South Africa32%

Latin America

44%

Rest of Europe44 %

Germany & Austria

14%

UK& Ireland

30%

France

12%


39

Results by division

(in € millions)

Sales - Graphic 329 369 - 10.8%Sales - Creative Papers 216 228 - 5.3%Sales - Security 123 161 - 24.0%

Sales 668 758 - 11.9%

EBITDA Graphic 17 (1) NAEBITDA Creative Papers 24 16 + 49.0%EBITDA Security (13) 10 NA

EBITDA 28 25 + 14.0%

2016pro forma (1)

Recurring op. income/(loss) - Graphic 11 (9) NAR O I - Creative Papers 20 12 NARecurring op. inc (loss) - Security (22) (1) NA

Recurring operating income 9 2 NA

2015pro forma (2)

% change2016 pro forma/ 2015 pro forma


(2) 2015 pro forma data presented in 2016 exclude the contribution of the Arjowiggins businesses sold in H1 2015 (Security Solutions and

Brazilian banknote business) and in H1 2016 (Arjowiggins Healthcare).


1. Introduction




Contents

Présentation PowerPoint www.sequana.com

� +33 1 58 04 22 80

� [email protected]

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