Group activity for the financial year and outlook for the coming year
At €1,571.1 million, consolidated sales revenue for the 2016 financial year was up +7.8% and take into account the following positive elements:
- A scope effect of €50.1 million corresponding to:
- the contribution by LISI MEDICAL Remmele consolidated as of May 1, 2016 for €44.9 million, i.e. 2.9% of the consolidated sales revenue;
- the retroactive consolidation at January 1, 2016, of the Indian company Ankit Fasteners at +€5.2 million of sales revenue, in which a majority interest was taken;
- Gains in market shares with new products in all divisions.
Expressed at constant rates and scope, the change of +4.6% in sales revenue marked by an acceleration between the first half-year (+3.6%) and the second (+5.6%). The trend effect is the same in the three divisions which show a positive organic growth for the whole year.
Comments regarding business of the fourth quarter
|LISI consolidated||Of which LISI AEROSPACE||Of which LISI AUTOMOTIVE||Of which LISI MEDICAL|
The fourth quarter was fairly dynamic in the three divisions, with overall organic growth of +4.4%.
The fasteners segment in Europe stood out in the LISI AEROSPACE division Europe (+14.3%) thanks to the implementation of new contracts. The “North American fasteners” part recorded an overall reduction in sales revenue but saw an increase in orders from Boeing at the end of the financial year, an initial improvement after several months of substantial decreases due to the re-organization of the aircraft manufacturer’s supply chain. The “Structural components” segment also recorded a good level of activity driven by the build-up of new programs. The net currency effects amounted to –€1.4 million.
In the LISI AUTOMOTIVE division, sales increased quite rapidly during the second half-year after a lackluster start to the year (+1.1% at HY1, +3.8% at HY2) in a dynamic European market. The increase in sales revenue is particularly significant in the clipped solutions and the mechanical safety components segments carried by the gains in market shares and the build-up of new products.
The LISI MEDICAL division benefited from the integration of LISI MEDICAL Remmele on May 1 (sales revenue of €44.9 million over the period). At a constant scope, the sales revenue increased by +0.4% with a last quarter more sustained at +2.8%.
Activity summary at December 31
|12 months ending december 31||2016||2015||Changes|
|Key elements of the income statement|
|Current operating profit (EBIT)||€M||157.5||146.5||7.5%|
|Current operating margin||%||10.0||10.0||-|
|Earnings attributable to holders of company equity||€M||107.0||81.8||30.9%|
|Net earnings per share||€||2.02||1.55||30.3%|
|Key elements of the cash flow statements|
|Operating cash flow||€M||195.8||154.2||+€41.6M|
|Free Cash Flow1||€M||73.5||39.6||+€33,9M|
|Key elements of the financial structure|
|Ratio of net debt to equity||25.2%||19.7%||+5.5pts|
1 Free Cash Flow: operating cash flow minus net capital expenditure and changes in working capital requirements.
Breakdown of 2016 sales revenue
Breakdown of 2015 sales revenue
Social and societal information (Art. R 225‑105 of the Commercial Code)
Throughout the year 2016, the subsidiaries of the LISI Group complied with their regulatory obligations both through the negotiation of labor agreements or the implementation of appropriate action plans: employment of seniors, gender equality, disabled workers, well-being at work.
The LISI Group Senior Management is involved at its highest levels in the areas of health, safety and the environment. At all levels, the LISI Group’s wish remains to protect the environment and make safety at work a vehicle for continuous improvement and for its performances to reach the level of excellence in these areas, while controlling the professional risks generated by its activities.
In order to ensure and achieve this goal, LISI has adopted an HSE (Health Safety Environment) policy and organization to identify key areas for improvement, prioritize goals, and derive the appropriate actions. This policy and this organization are based on the international OHSAS 18001 standard (international standard governing the management system of health and safety at work).
At year-end 2016, the frequency rate of lost-time accidents that involved an employee (TF0) was however downgraded to reach 10.6 per million hours worked, while in 2015 it was 10.1. The frequency rate of accidents with or without lost time (TF1) was 14.3; i.e. an almost stable TF1 compared to the data for 2015.
To consolidate its performance in this area, the Group has decided to develop the E-HSE program (Excellence HSE) which aims at reinforcing the LISI Group’s common culture in this area.
Environmental information (Art. R 225-105)
For several years, the LISI Group was fully engaged in placing environmental issues at the heart of its corporate culture in order to turn them into intrinsic values.
The policy and organization put in place are based on the international standard ISO 14001 (international standard governing the environment management system) as well as on the international standard OHSAS 18001 (international standard on the health and safety management system).
As at December 31, 2016, the LISI Group employed 11,587 employees, an increase of the total workforce of 664 people, which represents a difference of +6.1% compared to 2015.
Headcount at the end of December
Financial results 2016
2016 is the sixth consecutive growth year for all management indicators in absolute value.
Gross operating profit (EBITDA) is over €237.1 million, an increase of +16.2% (+€33 million), and represents 15.1% of sales revenue. Taking account of the less favorable net effect of the provisions and reversals than in 2015, the current operating profit (EBIT) grew by +7.5% (€11.0 million) to €157.5 million at 10% of the sales revenue, the operating margin is stable compared with the previous financial year.
This resilience is explained by an improvement in the operational quality of all the Group’s activities which makes it possible to offset the excess costs generated by the industrialization of the new programs in the “Structural Components” activity of the LISI AEROSPACE division.
Hence, similarly to the previous year, this level of 10.0% complies with the objectives of the Group, taking into account its activity mix. The contribution of the productivity gains from LEAP (LISI Excellence Achievement Program), the gradual re-orientation of the activities of the automotive division towards product families with a greater margin, as well as the effects of the ambitious industrial investment plan were determining in this performance.
2016 also vouches for the gradual readjustment of the three divisions. Even if the aerospace division is still the leading contributor to the current operating profit (ROC at +€122.9 million, i.e. 78% of the Group) the automotive division shows improved profitability for the fifth consecutive financial year (at +€26.3 million). The contribution from the medical division which, as expected, benefits from the consolidation of LISI MEDICAL Remmele, also improved (at +€9.3 million).
The financial result (+€13.3 million) increased substantially compared with 2015 (-€16.0 million). The major impacts is summarized by:
- the financial expenses corresponding to the cost in the net debt benefited from the decrease in the interest rates. They amounted to -€4.2 million (-€5.0 million in 2015) i.e. an average rate of +1.70% (+2.06% in 2015);
- the revaluation of the debts and receivables in euros (+€18.3 million against -€0.1 million in 2015). The value of the debts was mechanically reduced benefiting from the substantial drop in sterling, while the value of the receivables, investments and bank accounts was mechanically increased benefiting from the substantial rise in the dollar at year end;
- the impact of the unwindings and valuations of the currency hedging instruments (-€0.7 million against -€9.4 million in 2015);
- the exit from the pension scheme in the United States which had accounted for -€1.5 million in 2015.
The non-operating costs impacted the non-current result by -€10.0 million and concern the industrial reorganization of several major sites (Villefranche-de-Rouergue, Rugby [UK] and Saint-Ouen l’Aumône) as well as studies on the re-establishment of the Bologne site.
The tax charge, calculated on the basis of the corporation tax as a percentage of the net income before taxes, reflects an effective average rate of tax of 33.7%, slightly down compared with 2015 (34.3%).
At €107.0 million, the net earnings thus clearly exceeded those of 2015 (€81.8 million), greatly improved by the financial earnings for the financial year.
The shares substantially increased to €2.02 (€1.55 in 2015).
Based upon the results, the Group will seek the approval of the Shareholders’ General Meeting to set the dividend at €0.45 per share for the 2016 financial year.
The financial structure is still solid after three years of significant investments
In a context where the levels of activity are strongly increasing, the reduction in the levels of inventories (–6 days expressed in days of sales revenue) and the further decrease in late payments by customers enabled the consolidated working capital requirement to be maintained at 76 days in 2016.
Following on from previous years, LISI maintained a steady pace of capital expenditures that reached a historically high level of €119.6 million. In 2016, they were mainly devoted to equipment specific to new products and to the extension and re-establishment of several major sites (Villefranche-de-Rouergue, Rugby [UK] and Saint-Ouen l’Aumône). With €195.8 million of operating cash flow (+€41.6 million, 12.5% of consolidated sales revenue, to be compared with 10.6% in 2015), the Group was easily able to cover these, while at the same time still generating a positive Free Cash Flow of €73.5 million, in the three divisions.
The net debt increased by +€61.6 million and amounted to €218.2 million at December, 2016 i.e. 25.2% of shareholders’ equity (19.7% in 2015). Thus, LISI’s financial structure enabled the REMMELE MEDICAL OPERATIONS acquisition in April 2016 and the ambitious investment plan, while maintaining its solid ratios.
The return on capital employed (before tax) stood at 15.5% at year-end compared to 15.9% at December 31, 2015. The capital employed increased in value to €1,177 million (compared with €1,039 million in 2015).
All the divisions in the LISI Group are developing in well-oriented markets offering solid opportunities for development.
For LISI AEROSPACE, even if the build ups have already been anticipated, the ambitious industrialization programs undertaken since 2016 have still to succeed. The costs, which are always significant, of non-quality and industrialization of very complex technical parts, in the “Structural Components” unit, laid down by the new Airbus and Safran programs on various sites, should gradually be brought down during subsequent quarters. Furthermore, confirmation of the recovery at Boeing will be essential to offset the probable slowdown of the “Fasteners – Europe” activity.
The division is moreover continuing the modernization of its production resources. It is also continuing to invest in long-term projects such as the development of the “Optiblind®” assembly system, the implementation of the “robotization” project or again the development of LISI AEROSPACE Additive Manufacturing. It intends to supply its aeronautical customers with a response that integrates additive technologies into the design and production of 3D printed mechanical parts.
On the basis of the progress recorded during the last five financial years, LISI AUTOMOTIVE has set itself the objective of continuing to improve its operational profitability in the long term, in particular thanks to the gains provided by the LEAP (LISI Excellence Achievement Program) plan and the still high level of industrial investment to accelerate the robotization and automation program in the industrial processes.
The repositioning towards products with higher added value undertaken in 2016 should also significantly contribute towards the continuous improvement of the division’s operating margin. The greater international presence, particularly on the mechanical safety components and clipped solutions market, will be another focus for development.
LISI MEDICAL will benefit from the consolidation for the full year of LISI MEDICAL Remmele which particularly opens up promising opportunities for organic growth with new and very dynamic markets
for medical appliances other than orthopedics.
In parallel, ever-increasing customer demands and the many new long-term projects under development or industrialization make even more necessary the implementation of the Group’s major transversal projects, such as LEAP (LISI Excellence Achievement Program), E-HSE (Excellence HSE) and COS (Controlling Operating System).
In this context, the LISI Group is aiming at a two-figure operating margin in 2017 and an always positive Free Cash Flow.
1 Free Cash Flow: operating cash flow minus net capital expenditure and changes in working capital requirements.