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  ECA company press release from 03/04/2018

  03/04/2018 - 08:50

ECA Group reports 2017 full-year results


(in € millions) 2017 2016 change
Revenue 112,0 112,5 -0.5%
EBITDA 11,5 14,6 -21.7%
% revenue 10,2% 13,0% -277bps
Adjusted EBITDA 13,3 14,3 -7.3%
% adjusted revenue 12,1% 13,8% -170bps
Operating income (1,5) 12,5 -112.0%
Adjusted operating income 8,5 9,8 -13,8%
Financial income and expense (0,5) 0,0 n/a
Tax (1,3) (2,0) n/a
Net income (3,2) 10,5 -130.6%
Adjusted net income 5,6 7,6 -25.8%



'1) Appendix 2 to this press release reconciles the restated income statement with the reported financial statements for 2016

On March 28, 2018, the Board of Directors approved the 2017 financial statements, which included the contributions of two non-strategic foreign subsidiaries within the Robotics and Simulation divisions, whose closure or disposal is underway. As such, the Board has decided to present and comment on the "adjusted" results, in addition to the actual results, in order to assess the performance of its ongoing activities (Appendix 1 to this press release reconciles the adjusted information with the financial statements for the period. The figures presented in the press release are not adjusted, except when specified to the contrary).

Audit procedures were performed by the statutory auditors, and the audit report is currently being issued.

ECA Group's 2017 revenue is stable compared to 2016, at €112.0 million. As announced at the end of 2017, adjusted revenue for 2017 was up at €109.3 million, representing a 5.6% increase compared with 2016. These adjustments are related to the Robotics and Simulation divisions and represented 2017 revenue of €2.7 million.

 

Revenue by division

(in € millions) 2017 2016 Change
Robotics 62.9 63.0 -0,2%
Aerospace 36.9 28.6 +29,1%
Simulation 9.7 12.0 -19.3%
Adjusted revenue 109.3 103.4 +5.6%
Revenue 112.0 112.5 -0,5%
  • Adjusted revenue for the Robotics division was stable at €62.9 million, versus €63.0 million in 2016. Several major contracts in ground robotics and underwater robotics for Oil & Gas that were expected in the fourth quarter only began to materialize in early 2018.
  • Revenue for the Aerospace division was up 29.1% at €36.9 million, reflecting the strong performance of ELTA, which was consolidated for a full year for the first time.
  • The Simulation division was up close to 50% in the second half of the year. This growth does not offset the first half poor performance. Adjusted revenue for the Simulation division was down 19.3% and amounted to €9.7 million in 2017.

     

Income by division

(in € millions) 2017 2016 Change
Robotics 7.9 9.2 -14.3%
Aerospace 2.5 1.8 +37.4%
Simulation 2.6 2.5 +3.8%
Structure 0.3 0.8 n/a
Adjusted EBITDA 13.3 14.3 -7.3%
EBITDA 11.5 14.6 -21.7%




ECA Group's EBITDA was €11.5 million in 2017, compared with €14.6 million in 2016, a 21.7% decrease reflecting the impact of the loss-making subsidiaries within the Robotics and Simulation divisions, for which the Group announced the closure or disposal in 2018. The adjusted EBITDA of these subsidiaries was €13.3 million in 2017, compared with €14.3 million in 2016, representing a 7.3% decrease related mainly to the weaker performance of the Robotics division.

  • In the Robotics division, adjusted EBITDA amounted to €7.9 million, a 14.3% decrease over the period associated with a less favorable business mix, high commercial costs and the postponement of several major contracts that did not contribute as expected to the fourth quarter.
  • In Aeronautics, the division's EBITDA margin was up at 6.8%, compared with 6.3% in 2016. ELTA's contribution was positive, although the new ELiTE emergency locator transmitter was marketed later than initially planned.
  • Adjusted EBITDA for the Simulation division was €2.6 million, compared with €2.5 million in 2016, representing a 3.8% increase despite the drop in revenue.

Group operating income recorded a sharp decline at -€1.5 million, compared with €12.5 million in 2016. In 2017, operating income was heavily affected by the losses of the two aforementioned companies and the €2.6 million provisions for their closure or disposal. In addition, provisions for impairment of assets, in particular R&D, were recorded in the amount of €2.6 million. These provisions of €5.2 million had no impact on the Group's cash position and preserve future income. Adjusted operating income for 2017 amounted to €8.5 million, i.e. 7.7% of adjusted revenue, compared with €9.8 million in 2016. In 2016, operating income benefited from positive non-recurring items.

Group net income amounted to -€3.2 million in 2017, compared with €10.5 million in 2016. Adjusted net income stood at €5.7 million, compared with €7.6 million in 2016.

 

Financial position at 31 December 2017

At December 31, 2017, net debt stood at €13.0 million, including treasury shares of €1.5 million, compared with €3.4 million at December 31, 2016.

The increase in net debt is due in particular to the sustained pace of investments, although down compared with 2016, at €7.2 million compared with €7.5 million in the previous year. Furthermore, working capital requirements increased by €9.1 million after a €10.7 million increase in 2016. In 2017, this increase was again partially due to non-operating items for €3.3 million, compared with €3.1 million in 2016. Operating WCR (clients, suppliers and inventory) increased by €5.7 million after an increase of €7.6 million in the previous financial year. The increase in operating WCR was mainly due to the impact of major export contracts.

At the Annual General Meeting of Shareholders, in light of the results and in order to reserve its financing capacities for investments and growth opportunities, the Board of Directors will propose that no dividend be paid out for 2017.

 

Outlook

At December 31, 2017, ECA's adjusted order backlog amounted to €109 million, up 5.6% compared with 2016.

Over recent years, ECA's efforts have focused mainly on R&D, with the development of new robots, and improvements in commercial performance, by strengthening ECA's presence, in the robotics markets in particular. The strengthening of its positions in its core markets, in particular mobile robotics and robot systems, is beginning to bear fruit. Although 2017 was characterized by several order postponements, ECA Group announced two major commercial successes in early 2018, the fruition of R&D projects conducted in 2015 and 2016 :

  • the SMINEX order (see press release dated January 10, 2018) for €30 million including optional tranches marked a major step forward for the Group. It is the first substantial order of IGUANA ground robots, which were developed in the last few years;
  • in addition, the partnership with the Petrus oil services company will generate a minimum combined revenue of €6 million over the next four years and position the ECA Group's all-new A18D autonomous underwater robot on the Oil & Gas services market (see press release dated February 15, 2018).

These two successes confirm the trend of robot use in an increasing number of civil and military applications. 

During the 2018 financial year, the ECA Group is expected to continue to grow as it markets products developed in recent years, and it expects to ramp up initiatives aimed at increasing its profitability, with an emphasis on improving operating efficiency and reducing costs. The Group thus aims to generate full-year savings of €4 million, as from 2019.

The Group announced the disposal or closure of two loss-making and non-strategic subsidiaries within the Robotics and Simulation divisions. The disposal or closure should be finalized in the first half of 2018 and should have no impact on 2018 accounts.

In this context, the ECA Group aims to generate slightly higher revenue in 2018 than in 2017 and an improvement in its profitability.

 

A commented presentation of ECA Group's annual results is available on our Youtube channel: https://www.youtube.com/channel/UC-kO7VfwJB-L4F63V4Mewiw

 

Next financial date:

Publication of first quarter 2018 revenue on April 27, 2018 before the stock market opening.


 

Appendix 1: Calculation of adjusted non-GAAP indicators

The Group decided to use adjusted non-GAAP financial information for purposes of information, management and planning, since this information can be used to better assess the performance of its ongoing activities. According to the Group, this additional information, which does not replace any GAAP measures of operating and financial performance, provides relevant indicators of the Group's operating and financial performance. The figures presented by the Group are still non-adjusted consolidated figures, except when specified otherwise. The adjusted indicators are not financial aggregates defined by IFRS and may not be comparable with similar indicators chosen by other companies.

EBITDA (Earnings before interest, taxes, depreciation and amortization) is defined by the Group as being equal to operating income before depreciation and amortization, impairment losses and non-current operating income items.

The adjustments concern non-current operating income items and the impact of the Group's decision, announced at the end of 2017, to sell or close down two foreign, non-strategic subsidiaries. As at the 2017 balance sheet date, these planned closures or disposals did not fulfill the conditions for applying IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations.

The 2016 and 2017 adjusted income statements are reconciled with the Group's consolidated financial statements below.

2017 financial year

(in € thousands) 2017 consolidated income statement Contributions of subsidiaries in the process of being closed down in 2018(1) Other adjustments(2) 2017 adjusted income statement
  a b c d=a-b-c
Revenue 111,950 2,690 - 109,260
Current operating income 3,834 (4,628) - 8,461
Non-current operating income items (5,331) (633) (4,698) -
Operating income (1,497) (5,261) (4,698) 8,461
Financial interest related to gross debt (166) (22) - (143)
Financial income related to cash and cash equivalents 13 1 - 12
Cost of net financial debt (A) (152) (21) - (131)
Other financial income (B) 145 9 - 137
Other financial expense (C) (447) (70) - (377)
Financial income and expense (D = A + B + C) (454) (82) - (372)
Income tax (1,255) (384) 1,565 (2,437)
Share of income of associated companies (1) - - (1)
Net income (3,207) (5,727) (3,133) 5,652

(1) The contribution of entities for which the Group is preparing the disposal or closure in 2018 is deducted from the consolidated financial statements.

(2) Other adjustments concern: €2.6 million in provisions recognized in the disposal or closure of the concerned entities in 2018; €2.1 million in impairment losses recorded for R&D intangible assets; income of €1 million relating to the cancellation of an earn-out debt that will no longer be paid; €0.6 million in amortization of intangible assets recognized in connection with acquisitions; €0.4 million in restructuring costs. Only restructuring costs of €0.4 million have had or will have an impact on cash; the other items for €4.2 million will have no impact on cash. Provisions for impairment losses on R&D intangible assets generated income from a research tax credit

which should be recognized in the income statement at the time of amortization of the R&D item that generated it; by convention, this €0.2 million income was not adjusted. A theoretical tax adjustment was calculated on the operating income adjustments in order to determine the adjusted net income. By convention, this tax is calculated for adjustments related to items that are in theory taxable at the rate in force at the parent company.

2016 financial year

(in € thousands) 2016 consolidated income statement Contributions of subsidiaries in the process of being closed down in 2018(1) Other adjustments(2) 2016 adjusted income statement
  a b c d=a-b-c
Revenue 112,488 9,055 - 103,433
Current operating income 9,342 (476) - 9,818
Non-current operating income items 3,170 (135) 3,305 -
Operating income 12,512 (611) 3,305 9,818
Financial interest related to gross debt (135) (27) - (108)
Financial income related to cash and cash equivalents 11 2 - 9
Cost of net financial debt (A) (124) (25) - (99)
Other financial income (B) 277 38 - 239
Other financial expense (C) (131) (70) - (61)
Financial income and expense (D = A + B + C) 22 (57) - 79
Income tax (2,036) (8) 252 (2,280)
Share of income of associates (1) - - (1)
NET income 10,497 (675) 3,557 7,616

(1) The contribution of entities for which the Group is preparing the disposal or closure in 2018 is deducted from the consolidated financial statements.

(2) Other adjustments concern in particular: income related to negative goodwill recognized upon the acquisition of ELTA for €4.1 million; €0.6 million in amortization of intangible assets recognized at fair value in connection with acquisitions; €0.2 million in restructuring costs. Only restructuring costs of €0.2 million have had or will have an impact on cash; the other items for €2.5 million will have no impact on cash. Negative goodwill has no impact in terms of tax. A theoretical tax adjustment was calculated on the operating income adjustments in order to determine the adjusted net income. By convention, this tax is calculated for adjustments related to items that are in theory taxable at the rate in force at the parent company.

Appendix 2: restatement of financial statements reported previously

The financial statements as at December 31, 2016 were adjusted due to the finalization of fair value measurements of assets, liabilities and contingent liabilities acquired from ELTA and BE MAURIC. IFRS 3R provides that the fair value measurement of the assets and liabilities acquired must be subject to retrospective adjustment, as though the adjustments had been applied from the date of consolidation.

The adjustments made concern the calculation of retirement indemnities (gross impact of +€42 thousand); the valuation of a commitment to purchase non-controlling interests in "Other financial liabilities" for €807 thousand; the downward correction of the value of R&D intangible assets for €2,186 thousand; additional provisions for late penalty fees and for losses upon completion for €329 thousand, and adjusted deferred income in respect of the research tax credit for -€169 thousand.

The impact of the adjustments to the financial statements is described in the following tables:

(in € thousands) 12/31/2016
reported
Adjustments 12/31/2016
restated
Revenue 112,488 - 112,488
Current operating income 9,342 - 9,342
Non-current operating income items 4,679 (1,509) 3,170
Operating income 14,021 (1,509) 12,512
Financial income and expense 22 - 22
Income tax - - -
Share of income of associated companies - - -
Net income 12,006 (1,509) 10,497
Income attributed to equity holders of the parent company 12,046 (1,509) 10,537
Income attributed to non-controlling interests (40) - (40)

 

(in € thousands) 12/31/2016
reported
Adjustments 12/31/2016
restated
Non-current assets 57,081 (1,317) 55,764
Goodwill 17,965 17  17,982
Other intangible assets  24,852 (2,186)  22,666
Tangible fixed assets  11,398  -  11,398
Investments in associated companies  6  -  6
Other financial assets  1,492    1,492
Deferred tax assets 1,366 852  2,219
Current assets 146,745 - 146,745
Total assets 203,826 (1,317) 202,509

 

(in € thousands) 12/31/2016 reported Adjustments 12/31/2016 restated
Equity (Group share) 79,706 (2,316) 77,390
Non-controlling interests 299 (11) 288
Non-current liabilities 11,805 850 12,654
Long-term provisions  5,315 42  5,357
Long-term financial debt – portion due in more than one year  5,560  -  5,560
Financial instruments and derivatives - 807  807
Deferred tax liabilities  431  -  431
Conditional pre-payments  500 -  500
Current liabilities 112,016 249 112,176
Short-term provisions 3,933 329  4,262
Long-term financial debt – portion due in less than one year  10,086 -  10,086
Operating trade payables  22,476 -  22,476
Other current liabilities  75,522 (169)  75,353
Current tax liabilities ­- - -
Liabilities held for sale - - -
Total liabilities 203,826 (1,317) 202,509




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Disclaimer

This press release could contain statements on past events and forward-looking statements including statements regarding future goals or targets. Forward-looking statements reflect current expectations for results and future events.

Such forward-looking statements and targets depend on known and unknown risks, uncertainties and other factors that may cause actual results, performance or events to differ materially from those anticipated herein. All these risks and uncertainties could affect the Group's future ability to achieve its targets. Risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements and targets include, among other things: the risks and uncertainties mentioned in the press release; the strength of competition; the continuing growth of the market; currency fluctuations; interest rate fluctuations; raw material price fluctuations; armed conflicts or political instability; control of costs and expenses; changes in tax legislation, rules, regulation or enforcement; our ability to successfully keep pace with technology changes; our ability to attract and retain qualified personnel and key personnel; the evolution, interpretation and uniform application and enforcement of International Financial Reporting Standards (IFRS), according to which we prepare our financial statements; supply chain and manufacturing bottlenecks; the performance of our business partners (subcontractors, agents, suppliers, etc.).

Some of these risk factors are set forth and detailed in our Document de Référence (Registration Document including the annual financial report filed with the French Autorité des Marchés Financiers). This list of risks, uncertainties and other factors is not limitative. Other non-anticipated, unknown or unforeseeable factors could also have material adverse effect on our targets.



The ECA Group

Recognized for its expertise in robotics, automation systems, simulation and industrial processes, the ECA Group has been developing complete, innovative technological solutions for complex missions in hostile and confined environments since 1936. Its product offering is designed for an international client base that is demanding, both in terms of safety and effectiveness. The Group's main markets are in the defense, maritime, aeronautics, simulation, industrial and energy sectors.

In 2017, the Group reported revenue of €112 million across its three divisions: Robotics, Aerospace and Simulation.

The ECA Group is a Groupe Gorgé company.

The ECA Group is listed on Euronext Paris Compartment B.

Indexes: SBF 250, CAC SMALL 90 and CAC IT- ISIN Code: FR0010099515

Ticker Code: ECASA - Bloomberg Code: ECASA:FP


 

ECA Group

Raphaël GORGE

Chairman

T : +33 (0)1 44 77 94 80

Guenaël GUILLERME

Chief Executive Officer

T : +33 (0)4 94 08 90 00


 

Actus Finance

Anne-Pauline PETUREAUX

Analysts/Investors

Relations

T : +33 (0)1 53 67 36 72

apetureaux@actus.fr

Jean-Michel MARMILLON

Press Relations

T : +33(0)1 53 67 36 73

jmmarmillon@actus.fr