LISI GROUP - 2017 Financial report

The division, which experienced an acceleration in sales between the

first and second half of the year (+3.6% in H1, +14.4% in H2), recorded its

fourthconsecutiveyearofgrowth.Asaresult,salesrevenuereachedthe

historical level of €506.0million, an increase of +8.8%compared to 2016.

At constant scope and exchange rates, the increase was +6.5%,

reflecting significant market share gains for new products, especially

in high added value areas, in linewith the strategy deployed over the last

several years.

In addition, the division is continuing its international expansion with

encouraging developments, particularly in China (Shanghai and the new

Suzhou site) andMexico (Monterrey), which recorded higher order intake

levels. OnSeptember 21, 2017, it also announced the acquisitionof theUS

company TERMAX, a leading designer and manufacturer of metal and

plastic fastening solutions for the automotive industry.

Results

All of the Business Groups saw their performance increase compared

with last year.

As a result, LISI AUTOMOTIVE’s operating margin (6.6%) improved for

the fifth consecutive year

. The strategy of refocusing on products with

higher added value that has been in place for several years is paying off.

The recovery efforts of the French sites of the Threaded Fasteners

BusinessGroup,andoftheSaint-Florent-sur-Chersitemoreparticularly,

are continuing. Their profitability is improving, reducing the gap with the

Group average.

Free Cash Flow was positive (+€13.1 million) for the second year in a row

and significantly improved compared to 2016 (+€7.9 million), thanks

in particular to a high level of financing capacity (+€53.6 million) and

good control of working capital requirements. The division is still able

to finance a sustained CAPEX level (€37.5 million). They involve several

multi-year projects, including robotization plans, industrial equipment

dedicated to new products or the financing of projects to improve plant

operatingconditions(the“DelleduFutur”project)andincreaseproduction

capacities(extensionoftheCzechsitespecializing inthemanufactureof

mechanical safety components).

Most operational indicators are also increasing, especially the logistics

andquality indicators,aswellastheonesthatarosefromthedeployment

of the LISI Excellence Achievement Program (LEAP).

Headcount was greater compared to 2016 with 3,773 employees at

December 31, 2017 compared to 3,265 in 2016, an increase of 15.6%.

RestatedtoreflecttheinclusionofTERMAXinthescopeofconsolidation,

thenumberofemployeesattheendoftheperiodwouldbe3,321,a limited

increase of +1.7%.

OUTLOOK

LISIAUTOMOTIVEhassettheobjectivetocontinuetheprogressrecorded

over the past five financial years and to improve its profitability in the

long term thanks to the contributions of the LEAP plan (LISI Excellence

Achievement Program) and the high level of productivity investments.

The acquisition of TERMAX, which strengthens LISI AUTOMOTIVE’s

global position in clipped solutions, is fully in line with the strategy of

repositioningtowardshighervalue-addedproductslaunchedin2016.This

movement,whichrepresentsamajorfocusfor improvingtheprofitability

of the division, will be continued.

Compliance with delivery programs in a context of strong growth in

customers’ demands giving visibility to the order books, as well as the

build-up of new products, will be a point of attention at the beginning of

the year. The impact of rising rawmaterial costs on sales prices will also

be closely monitored.

LISI AUTOMOTIVE is strengthening its global position to support and

meet the needs of itsmajor car and partsmanufacturers customers and

equipment suppliers in all major world markets. In this perspective, the

acquisition of TERMAX now allows it to be present not only in Europe and

Asia, but also in North America.

2.4

LISI MEDICAL

Summary presentation of the LISI MEDICAL activity:

■■

the division’s performance penalized by a very unfavorable volume

effect in the second half of the year at LISI MEDICAL Remmele, as well

as by the increase inmedical coverage expenses;

■■

the increase in current operating profit in value;

■■

the new increase in Free Cash Flow in a context in which investments

have been doubled compared to 2016;

■■

continued decline in inventories, which have reached the historically

low level of 61 days;

■■

the gradual ramp-up of new projects expected in 2018.

Market

Driven by long-term demographic and economic factors, the global

orthopedic market continues to grow at between 4% and 5% a year. The

minimally invasive surgery segment is growing at a higher annual rate,

around6%peryear,andmanynewprojectsarebeingdevelopedingeneral

surgery or specialty surgeries.

5.7% in 2016; 4.0% in 2015; 3.0% in 2014; 2.7% in 2013 and 0.5% in 2012.

LISI 2017 FINANCIAL REPORT

FINANCIAL SITUATION