LISI GROUP - 2018 Financial report

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The financial structure remains solid with operating cash flow of
€116.8 million (12.5% of sales revenues), which largely finances an
investment plan of €75.6 million (-20.9% compared to 2017). New
equipment continued to focus on performance improvement and the
modernization of production resources (“Usine Vitrine du Futur” label
obtained for the Saint-Ouen-l’Aumône facility).
Concurrently, the division reduced its inventories by -€5.7 million during
the year. These were nevertheless adversely impacted by the decline in
business in Europe and represent 97 days of sales revenue, compared to
93 days in 2017.
Taking all these items into account, Free Cash Flow remains largely
positiveat€29.6million(3.2%ofthedivision’ssalesrevenue)andreverted
to 2016 levels following a record year in 2017 (€61.6 million).
Theheadcountdecreasedoverthefinancialyearwith7,214persons(7,251
in December 2017).
2.3 ILISI AUTOMOTIVE
■■Growthofnearly15% insalesrevenueto€581.1million,supportedbythe
US acquisitions Termax in 2017 and Hi-Vol in 2018;
■■Market share gains in “Clipped Solutions” and “Safety Mechanical
Components”, acceleration in international growth;
■■Operating margin affected by the steep decline in business during the
second half of the year due to the entry into effect on September 1 of a
new approval process for vehicles (Worldwide harmonized Light
vehiclesTestProcedures-WLTP-);negative impactof increases inraw
material costs;
■■Annual Free Cash Flow* remains positive;
(1) Source ACEA Association des constructeurs Automobiles Européens.
■■Disposal of Beteo (specializing in surface treatment - Germany) on
December 31, 2018 (Sales revenue: €6.9 million in 2018).
Market
Worldwide automotive market recorded a drop of -0.5%(1) compared to
the previous year, following a dynamic first half (+3.5%). The year can be
divided into two periods: growth from January to August, followed by a
sudden weakening which started in September with the entry into force
of a new approval procedure for vehicles according to the WLTP-Euro 6
standards, more stringent regarding the emission of pollutants.
This procedure forced several manufacturers to stop or delay the sale of
certain models that no longer met the requirements while they adapted
theirengines.TheEuropeanmarketborethefullbruntofthischangeand
dropped for four consecutive months falling to -8.7% in December. Over
the year as a whole, its stability concealed various changes among the
five major national markets: Spain (+7%) and France (+3%) continued to
grow,Germanysubsided(-0.2%),andItaly(-3.1%)andtheUnitedKingdom
(-6.8) dropped noticeably. In total, 15.2 million new passenger cars were
sold within the European Union last year, rounding out a fifth year of
consecutive growth.
The Chinese market, on the other hand, experienced a downturn for the
firsttime intenyears(-3.1%),withadistinctcontraction inthesecondhalf
oftheyear(-5.8% inQ3and-12.9% inQ4).TheNAFTAregion(Canada,USA
and Mexico) displayedmore resilience and closed the year at -0.2%, with
December 2018 at the same level as December 2017.
Among the main European manufacturers who are LISI AUTOMOTIVE
customers, BMW (+4.2%), VW (+1.5%) and Daimler (+13%) outperformed
themarket, PSA (-3.7%) underperformed and Renault-Dacia remained at
the same level (-0.6%).
Activity
In millions of euros 2018 2017 Changes
Sales revenue 581.1 506.0 +14.8%
Current operating profit (EBIT) 34.0 33.3 +2.2%
Operating cash flow 57.6 53.6 +7.5%
Net CAPEX -43.6 -37.5 +16.3%
Free cash flow* 4.1 13.1 -68.7%
Registered employees at period end 3,931 3,773 +4.2%
Average full time equivalent headcount** 4,067 3,522 +15.4%
*Free Cash Flow: operating cash flowminus net capital expenditure and changes in working capital requirements.
** including temporary workers
The LISI AUTOMOTIVE division’s sales revenue grew by +14.8% to
€581.1 million. This is the result of the division’s continued international
development (Termax consolidated since November 1, 2017 and Hi-Vol
sinceOctober1,2018)andthesignificantramp-up innewproductsforthe
“Clipped Solutions” and “Safety Mechanical Components” segments. The
optimism generated by good performance was nevertheless dampened
by the entry into effect of a new approval procedure for vehicles on
September 1: theWorldwide harmonized Light vehicles Test Procedures
(WLTP-Euro 6), which is more stringent regarding the discharge of
pollutants. Thedownturn in theChinesemarket during the secondhalf of
the year also pushed the division’s sales down. At constant scope and
exchange rates, sales revenue grew by +0.9%, translating new gains in
market shares in a context where the production of LISI AUTOMOTIVE’s
main customers dropped by -2.6% compared to the prior financial year.
However, this slight increase in sales revenue is the result of two
extremelyvolatilehalf-yearperiods:thefirsthalfwasveryactiveat+6.8%
and required the use of overtime and temporary workers, while the
second half of the year registered a significant business downturn
(-4.9%), which became evenmore pronounced during the fourth quarter
(-6.8%).