LISI GROUP - 2017 Financial report

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product families with a greater margin, and the effects of the industrial
investmentplanweredeterminingfactors.Inaddition,inaccordancewith
itscommitments,theGroupreducedtheadditionalcostsgeneratedinthe
steepramp-upphaseofthenewprograms intheStructuralComponents
isalsoworthnotingthedecrease in launchingcosts
for new products and the positive productivity effects fromautomation.
2017 also confirms the gradual readjustment of the three divisions. All
of them saw their current operating profit increase in value compared
to the previous year. While the aerospace division remains the largest
contributor to consolidated operating profit (75% of the Group, 78% in
2016), the automotive division improved its profitability by 6.6%. The
Medical division posted current operating profit thewere up€9.8million,
or 7.1%of sales revenues.
The strongly negative impact of the financial result (€-21.6 million)
compared to 2016 (€+13.3 million) can be explained by the following main
items:
■■financialexpenses,whichcorrespondtothecostof long-termnetdebt,
totaled€-5.9million(€-5.1millionin2016),anaveragefixedrateof2.01%
(1.70% in 2016). This rate increase was offset by gains on current cash
investments (€+2.8 million, compared to €+0.8 million in 2016);
■■the revaluation of debts and receivables denominated mainly in US
dollars (€-32.4million, compared to €+17.5million in 2016). Receivables
and investments in foreign currencies were automatically affected by
the sharp decline of that currency against the euro;
■■the positive impact of the valuations of the currency hedging
instruments (€+13.9 million versus €+0.9 million in 2016).
Non-current costs had a negative effect of €-3.7 million on net earnings
(€-10.0million in2016) andmainly concern studies of the relocationof the
Bologne (Haute-Marne) site.
The tax charge, calculated on the basis of the corporation tax as a
percentageof thenet incomebefore taxes, reflects aneffective average
rate of tax of 26.8%, down compared with 2016 (33.7%). The current
effective rate would be 31.1% if the one-time items for the year were
adjusted (rate change in France and the United States, the additional
contribution and the elimination of the 3% contribution on dividends in
France, the “transition tax” in the United States).
At €108.0 million, net earnings were thus higher than in 2016
(€107.0million).
This amounts to €2.04 per share (€2.02 in 2016).
Based upon the results, the Group will seek the approval of the
Shareholders’ General Meeting to set the dividend at €0.48 per share for
the 2017 financial year.
The good level of profitability achieved in 2017 largely financed the
record amount of investments while generating an extremely positive
free cash flow.
Operating cash flow reached €203.8 million (+€8.0 million, 12.4% of
consolidated sales revenues, compared with €195.8 million in 2016).
In an environment of strong growth, the Group managed to reduce its
inventories again. Expressed in days in sales revenue, they decreased by
sevendayscomparedtothe2016financialyear,againofnearlytwoweeks
in two years. Thanks to strict management discipline, customer late
payment rates were reduced, thus diminishing the consolidatedworking
capital requirement to 74 days in 2017 (76 days in 2016).
In line with previous years, LISI continued its industrial investment plan
in 2017 at a steady pace. Up by more than €20million, these investments
represent 8.5%of sales revenues and weremainly dedicated to:
■■breakout technical initiatives in all divisions (automation);
■■thebeginningofthelastphaseoftheVillefranche-de-Rouergueproject;
■■the start of operations of the Forge 2020 project (Bologne site);
■■an increase in capacities dedicated to the manufacturing of new
products.
However, the Group was able to finance the investment programs and
generate positive free cash flow of €46.3 million despite an unfavorable
currency impact of €-27.4million.
LISI enters 2018 with a healthy financial structure
In a 2017 marked by an unprecedented amount of investment, LISI
maintained the soundness of its financial structure. As a result, the
profitability of the capital employed (before tax), which was 15.0% at the
end of the year, comparedwith 15.5%as of December 31, 2016, was proof
of a good level of resistance.
The increase innet financial debt, which includes 100%of the acquisition
of TERMAX1 , was limited to €82.0million and totaled €300.2million as of
December 31, 2017. It accounted for 33.4%of shareholders’ equity (25.2%
in 2016) and 1.2x EBITDA.
OUTLOOK
The year 2018 will be rich in challenges:
■■LISI AEROSPACE: the completion of several challenging projects,
including the relocation of the Polish site dedicated to blade finishing,
the continued reduction of excess industrialization costs, compliance
with delivery programs in Structural Components, the downward
adjustment of the activity in Fasteners Europe with significant
consequences for the first part of the year;
■■LISI AUTOMOTIVE: the industrialization of new orders, the extension
of the Czech site the specializes in the production of mechanical
safety components, the "Delle du Futur" project, the management of
the ability to pass on in creases in rawmaterial prices in selling prices;
■■LISI MEDICAL: return to overall growth.
The Group is fully committed to achieving double-digit current operating
profit, positive free cash flow and a growth in value of its management
indicators in an environment of currency volatility. The continuation
and deployment of many structuring industrial projects (automation
and productivity improvement, innovation) and the launching of the first
initiatives to digitize production methods aims to give it a technological
(1) TheacquisitionofTERMAXwasorganizedintwostages:first,theshareholdersofTERMAXCorporationsold51%ofsharecapitaltoLISIAUTOMOTIVEforapproximately€51million.
EventhoughtheLISIGroupisexpectedtoacquirethebalanceofsharecapitalby2020,itdecidedtorecognizeallcorrespondingdebt(approximately€123million)asofDecember31,
2017.
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LISI 2017 FINANCIAL REPORT
FINANCIAL SITUATION
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