LISI GROUP - 2018 Financial report

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Orders for new products taken by the division expressed in annualized
sales revenue represents 15.7% of sales revenue, i.e. about €89 million,
compared with 10.6% in 2017. In line with the strategy implemented in
recent years, the equipment manufacturers segment is the most
dynamic. For the first time, Tier 1 equipment manufacturers achieved
higher sales revenue than car manufacturers.
Results
Current operating profit grew slightly, aided by the good performance of
theUScompanyTermax. Inanoperationalcontextmarkedbythesudden
contraction in business during the second half of the year, the operating
margin held up well and settled at 5.9%, compared to 6.6% in 2017.
Following the example of sales revenue, the operatingmargin continued
toimproveduringthefirsthalfoftheyear,in linewiththegrowthrecorded
over the last five years. Nevertheless, the second half of the year was
hampered by the steep decline in business. Moreover, the increase in the
cost of raw materials had an impact of -€3.5 million on the division’s
profitability. The measures to adjust costs downward did not bear fruit
until right at the end of the period.
The division managed to maintain a positive Free Cash Flow* level
(+€4.1 million) for the third year in a row. The adequate level of operating
cashflow(9.9%ofsalesrevenue)makes itpossibletofinanceasustained
CAPEX levelof€43.6million.These involvethecontinuationofnumerous
multi-year projects, including robotization plans, industrial equipment
dedicated to new products (including the start-up of parking brake
components in Mexico) or the financing of projects to improve plant
operating conditions (“Delle du Futur” project), and increase production
capacities (expansion of the Czech plant at Čejč specializing in the
manufactureof“SafetyMechanicalComponents”,thenewMonterreysite
inMexicodedicatedtothemanufactureof“ClippedSolutions”and“Safety
Mechanical Components”).
Headcount was greater compared to 2017 with 3,931 employees at
December 31, 2018 compared to 3,773 in 2017, an increase of 4.2%. With
the restatement of the entry into the scope of consolidation of the
US company Hi-Vol (+131 persons) and the exit of the German company
BeteoatDecember31,2018(-50persons),thenumberrecordedattheend
of the period will be around 3,850, i.e. a limited increase of +2.0%.
The disposal of Beteo, its subsidiary in Germany (surface treatment),
highlights LISI AUTOMOTIVE’s desire tomanage its portfolio of activities
inadynamicmanner,withinthecontextofitsstrategyoftransitioningthe
product mix toward products with significant added value.
2.4 ILISI MEDICAL
■■Sales revenue is down by -4.6%compared to 2017;
■■Numerousproductdevelopmentshamperingbusinessandprofitability.
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. It should be noted that there is definite
volatility present in all markets andworldwide and local competition in all
CMO (Contract Manufacturing Operations ) segments.
Activity
In millions of euros 2018 2017 Changes
Sales revenue 130.7 137.0 -4.6%
Current operating profit (EBIT) 5.6 9.8 -42.6%
Operating cash flow 12.0 14.0 -14.5%
Net CAPEX -10.9 -10.6 +2.8%
Free Cash-Flow(*) -0.7 6.7 N.a
Registered employees at period end 959 909 +5.2%
Average full time equivalent headcount(**) 1,000 985 +1.5%
(*) Free Cash Flow: operating cash flowminus net capital expenditure and changes in working capital requirements.
(**) Including temporary workers.
As expected, the LISI MEDICAL division benefited from the gradual
ramp-up innewproductsgained inthefieldofminimally‑invasivesurgery
and orthopedics. Although growth accelerated between the first and
second halves of the year, sales revenue for the year still remained down
by -4.6% due to its main customer deferring some orders at the end of
the financial year.
Results
Under these circumstances, the operatingmargin was 4.3%, a decrease
of 2.8 points compared to 2017. The adaptation of costs (particularly
in headcount) was limited in view of the fact that the division needed
to ensure the development andmanufacturing of new products.
Totaling€10.9million,CAPEX levelsremainedsufficienttoacceleratethe
acquisition of equipment intended for developments and the production
of new products, as well as the establishment of prototyping cells and
small series.
In addition, the production capacity of LISI MEDICAL’s Remmele unit
in the USA increased thanks to an extension that is now operational.
CAPEX was financed by an adequate level of operating cash flow
(+€12.0million, 9.2%of sales revenue).
Nevertheless, inventory levels experienced an increase that the proper
management of other items of working capital requirements did not
offset. This was prompted by the demand from customers aiming
to increase their emergency inventories and to defer year-end orders
for deliveries in2019. Consequently, FreeCashFlowtotaled -€0.7million,
a €7.4million decrease from2017.