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  SEQUANA company press release from 25/09/2018

  25/09/2018 - 07:30

First-half 2018 results


Press release
Boulogne-Billancourt, 25 September 2018
 

First-half 2018 results

Over the past year, the structure of Arjowiggins has undergone huge changes. Following the sale of Arjowiggins BV in July 2017, the Group exited completely from the banknote paper market with the sale of Arjowiggins Security (French banknote paper business) in April 2018. The sale of the Arjowiggins Graphic and Arjowiggins Creative Papers businesses to Fineska BV is currently in progress and should be finalised in Q4 2018.

Consequently, the contribution of all of these entities has been reclassified in discontinued operations in the H1 2018 and comparative H1 2017 financial statements in accordance with IFRS 5.

Therefore, the operating data presented and commented upon below only represent the operations of Antalis, Arjowiggins' residual activities and Sequana overheads.

Sequana's Board of Directors' meeting in Boulogne-Billancourt on 24 September 2018 examined and approved the financial statements for H1 2018.



Condensed analytical income statement

(€ millions) except for per share data H1 2018(3)  
H1 2017(3)
 
Δ
Sales      
Antalis
Other activities(2)
1,178.1
19.2
1,205.2
18.2
- 2.2%
NA
TOTAL 1,197.3 1,223.4 - 2.1%
EBITDA(1)      
Antalis
Antalis EBITDA margin
Other activities(2) & operating costs
36.0
3.1%
(3.3)
42.8
3.6%
(4.3)
- 15.9%
-0.5 points
NA
TOTAL 32.7 38.5 - 15.1%
Consolidated EBITDA margin 2.7% 3.1% - 0.4 points
Current operating income 22.3 29.7(4) - 24.9%
Current operating margin (% of sales) 1.9% 2.4% -0.5 points
Net income (loss) attributable to owners (71.4) 2.5 NA
Diluted earnings (loss) per share (€) (1,11) 0,04  
Average number of shares after dilution 64 789 569 64 904 303  


(1) Recurring operating income before depreciation and amortisation and excluding movements in provisions.
(2) Other activities correspond to Arjowiggins' residual activities and Sequana overheads.
(3) The Arjowiggins Security, Graphic and Creative Papers divisions have been reclassified in discontinued operations in the H1 2018 and comparative H1 2017 financial statements in accordance with IFRS 5.
(4) Includes a €2.3 million gain arising on a change to a pension plan carried on Antalis' books.



Consolidated sales were down by 2.1% on H1 2017 to €1,197 million (down 0.7% at constant exchange rates).

EBITDA declined by 15.1% to €33 million, compared with €39 million in H1 2017, and the EBITDA margin was 2.7% (down 0.4 points).

Current operating income was €22 million for the first six months of the year (down 24.9%), versus €30 million for H1 2017, which included a €2.3 million gain arising on a change to a pension plan carried on Antalis' books. Current operating margin represented 1.9% of sales (down 0.5 points).

Sequana recorded net non-recurring expenses of €78 million during the period, mainly comprising €56 million in write-downs taken on Sequana's historic goodwill in Antalis (no impact on the Group's consolidated cash position) and €17 million in restructuring and refinancing costs for Antalis. 

Arjowiggins' discontinued operations generated a net loss of €13 million which included a loss on the disposal of the banknote paper business and the net contribution of the Graphic and Creative Papers divisions to H1 2018 results.

After deducting finance costs, taxes and non-controlling interests, the net loss attributable to owners was €71 million for the six months to 30 June 2018, compared with a net profit of €3 million for H1 2017.

Consolidated net debt stood at €410 million at 30 June 2018 versus €340 million at end-June 2017. The €70 million increase in net debt since 30 June 2017 was mainly attributable to higher working capital requirements driven in particular by higher levels of inventories.

The consolidated financial statements are currently being audited and the audit report will be issued once procedures have been completed.


Resilient operating performances from Antalis

Antalis delivered resilient operating performances during the first six months of the year thanks to its capacity to pass on price increases in a context of falling volumes in the Papers sector on the European market.

Sales came in at €1,178 million, down 0.6% at constant exchange rates, days and perimeter (down 2.2% as reported) when compared with H1 2017. This drop essentially reflects the decline in Paper volumes, a 0.4% unfavourable calendar effect (or €4 million) and a negative forex impact amounting to €18 million (chiefly attributable to the Swiss franc and sterling). These unfavourable impacts were partially offset by solid growth in Packaging.

EBITDA declined by 12.7% at constant exchange rates, days and perimeter to €36 million (down 15.9% as reported). An improved product mix helped to partially offset the lower volumes of Papers and the negative forex impact (€1 million) as well as the unfavourable calendar effect (€0.8 million). 

For full-year 2018, at constant perimeter and exchange rates, Antalis should record a low single-digit decrease in sales when compared with FY 2017 and deliver an EBITDA margin of between 3.0% and 3.4%.

Given the current context of declining volumes in the paper market, the distribution sector should undergo consolidation over the medium term and Antalis intends to leverage its leading position to continue playing an important role in this process.


Highlights of the period and subsequent events

  • Refinancing of Antalis and continued strategic shift towards more dynamic geographies and sectors while consolidating its leadership in the European papers sector

During the first six months of the year, Antalis completed the refinancing of its syndicated credit facility (€285 million) and its main factoring contract (€215 million), thus securing its financing through 31 December 2021 and enabling the group to continue to pursue its targeted external acquisition strategy.

It also continued the transformation of its business model towards more dynamic geographies and sectors while consolidating its leadership in the European Papers sector. During the period, Antalis acquired the Swedish Packaging products distribution business of Alos and Igepa's Papers distribution business in Sweden and Norway and in July, Antalis signed an agreement to acquire a Romanian distributor of Visual Communication media (operation scheduled to close by early November 2018). These acquisitions represent sales of approximately €24 million on a full-year basis.

The group should complete the sale of its South African and Botswana subsidiaries – essentially focused on the Papers sector – to the local management team (sales of €71 million in 2017) by the end of September.

These different operations will boost the contribution of the Packaging and Visual Communication sectors to Antalis' overall margin.
 

  • Sequana's refocusing on the distribution sector is nearing completion

In April 2018, Arjowiggins exited completely from the banknote paper market with the sale of Arjowiggins Security (French banknote paper business).

As announced in early July 2018, the process of selling Arjowiggins Graphic and Arjowiggins Creative Papers businesses to Fineska BV is ongoing and should complete during Q4 2018. The operation values the businesses at a gross amount of €125 million and will mark Sequana's complete withdrawal from industrial production activities (with the exception of Arjobex).

Factoring in debts and other liabilities that will be deducted from the sale price based on balance sheet amounts and business levels when the sale closes, this operation should have a positive impact on the Group's consolidated cash position.

Sequana obtained new financing in 2018 to cover the liquidity requirements of Arjowiggins and the sale of the residual assets of Arjowiggins should provide Arjowiggins with additional resources.
 

  • Litigation with BAT

As regards the litigation between Sequana and British American Tobacco (BAT), appeal hearings took place at the Court of Appeal in London in June 2018. Prior to the hearings, BAT eventually dropped its claims in relation to payment of the first dividend of €443 million. Sequana awaits the decision of Court of Appeal in London concerning repayment of the second dividend of €135 million. This decision should be handed down in Q4 2018.

As with any legal dispute, the outcome is in the hands of the court, however the Group remains confident of a favourable outcome.

Concerning the legal proceedings initiated by BAT in France, on 18 September 2018, the Court of Appeal of Versailles rescinded the decision handed down on 12 June 2017 by the Commercial Court of Nanterre to terminate Sequana's sauvegarde plan. Sequana is assessing possible appeals and will file a new sauvegarde plan with the Commercial Court of Nanterre within the three month deadline.

Once the Court of Appeal in London has handed down its decision, Sequana will prepare and present its strategy accordingly.

A detailed presentation of first-half 2018 results is available on the Sequana website at www.sequana.com.


About Sequana
Sequana
(Euronext Paris: SEQ) is a major player in the paper industry, boasting leading positions in each of its two businesses:
Antalis: leader in B2B distribution of Papers and industrial Packaging and number two in the distribution of Visual Communication media in Europe with around 5,500 employees based in 43 countries.
Arjowiggins: global producer of recycled and specialty papers with around 2,600 employees.
Sequana reported sales of €2.8 billion in 2017 and employed some 8,200 people worldwide.


Sequana
Analysts & Investors
Xavier Roy-Contancin
+33 (0)1 58 04 22 80
Communication
Sylvie Noqué
+33 (0)1 58 04 22 80
contact@sequana.com
www.sequana.com

Image Sept
Claire Doligez
Priscille Reneaume
+33 (0)1 53 70 74 25
cdoligez@image7.fr
preneaume@image7.fr



Appendices

Interim consolidated statement of financial position

Assets

(€ millions) 30.06.2018 31.12.2017
Non-current assets    
Goodwill 141.9 196.8
Other intangible assets 41.6 44.5
Property, plant and equipment 45.2 124.4
Non-current financial assets 6.8 5.3
Deferred tax assets 7.3 8.6
Other non-current assets 135.6 135.1
Total non-current assets 378.4 514.7
Current assets    
Inventories 211.0 299.2
Trade receivables 392.7 416.5
Other receivables 104.9 110.6
Current financial assets 8.1 6.7
Cash and cash equivalents 89.0 128.8
Total current assets 805.7 961.8
Assets held for sale 260.7 33.7
TOTAL ASSETS 1.443.8 1.510.2



Equity and liabilities

(€ millions) 30.06.2018 31.12.2017
Equity    
Share capital 65.2 65.2
Additional paid-in capital 163.2 163.2
Cumulative translation adjustment (116.6) (111.9)
Retained earnings and other consolidated reserves 6.8 57.3
Shareholders' equity 118.6 173.8
Non-controlling interests 26.4 47.1
TOTAL EQUITY 145.0 220.9
Non-current liabilities    
Provisions 55.4 95.4
Long-term debt 299.9 30.2
Deferred tax liabilities 2.2 1.4
Other non-current liabilities - 8.4
Total non-current liabilities 357.5 135.4
Current liabilities    
Provisions 20.7 17.8
Short-term debt 201.8 433.3
Trade payables 305.0 472.8
Other payables 181.9 200.0
Total current liabilities 709.4 1 123.9
Liabilities related to assets held for sale 232.9 30.0
TOTAL EQUITY AND LIABILITIES 1 444.8 1 510.2



Interim consolidated income statement

  For the six months ended,
30 June
(€ millions) 2018 2017
Sales 1,197.3 1,223.3
Purchases consumed and change in inventories (817.8) (833.1)
Personnel expenses (150.3) (152.1)
External expenses (115.6) (113.9)
Taxes other than income taxes (1.7) (1.9)
Depreciation and amortisation (10.4) (10.2)
Net (additions to) reversals of provisions - 1.4
Other recurring income (expense) from operations (79.3) (83.9)
Current operating income 22.2 29.6
Other operating income 5.5 6.0
Other operating expenses (26.3) (16.1)
Other operating income and expenses, net (78.3) (10.1)
Operating income (loss) (56.1) 19.6
Cost of net debt (16.8) (13.4)
Other financial income and expenses, net (2.9) 5.0
Net financial income (expense) (19.7) (8.4)
Income tax benefit (expense) (0.4) (3.6)
Net income (loss) from continuing operations (76.2) 7.6
Net income (loss) from discontinued operations (12.9) (4.8)
NET INCOME (LOSS) (89.1) 2.8
Attributable to:    
 - Sequana shareholders (71.5) 2.7
 - Non-controlling interests (17.6) 0.1
     
Earnings per share    
 - Weighted average number of shares outstanding 64,789,569 64,904,303
 - Diluted number of shares 64,789,569 64,904,303
Basic earnings (loss) per share (in €)    
 - Diluted earnings (loss) per share from continuing operations (0.90) 0.12
 - Diluted earnings (loss) per share from discontinued operations (0.20) (0.07)
 - Consolidated earnings (loss) per share (1.10) 0.04
Diluted earnings (loss) per share (in €)    
 - Diluted earnings (loss) per share from continuing operations (0.90) 0.12
 - Diluted earnings (loss) per share from discontinued operations (0.20) (0.07)
 - Consolidated earnings (loss) per share (1.10) 0.04



Interim consolidated statement of cash flows

  For the six months ended,
30 June
(€ millions) 2018 2017
Cash flows from operating activities    
Continuing operations    
Operating income (loss) (56.1) 19.8
Elimination of non-cash and non-operating income and expenses:    
Depreciation, amortisation and provisions (except on current assets), net 61.6 0.6
Disposal gains and losses (0.2) (6.1)
Other non-cash items (1.1) -
Gross operating cash flow 4.2 14.3
Income taxes paid (2.3) (2.7)
Change in operating working capital (53.2) (5.5)
Change in loans and guarantee deposits (2.3) (3.9)
Cash flows from continuing operations (53.6) 2.2
Cash flows from discontinued operations 13.1 (14.3)
Net cash from (used in) operating activities (i) (40.5) (12.1)
Cash flows from investing activities    
Continuing operations    
Expenditure on acquisitions of property, plant and equipment and intangible assets (8.9) (6.9)
Proceeds from disposals of property, plant and equipment and intangible assets 0.2 12.0
Impact of changes in scope of consolidation (24.1) (3.4)
Cash flows from continuing operations (32.8) 1.7
Cash flows from discontinued operations (3.8) (4.4)
Net cash from (used in) investing activities (ii) (36.6) (2.7)
Cash flows from financing activities    
Continuing operations    
Net change in borrowings and debt 60.5 (48.9)
Net interest paid (13.0) (12.7)
Distribution of dividends (1.4) -
Cash flows from continuing operations 46.1 (61.6)
Cash flows from discontinued operations (8.5) 15.3
Net cash from (used in) financing activities (iii) 37.6 (46.3)
Effects of fluctuations in foreign exchange rates (iv) (1.2) (2.5)
CHANGE IN CASH AND CASH EQUIVALENTS (i+ii+iii+iv) (40.7) (63.6)
Net cash and cash equivalents at start of period 125.7 159.8
Net cash and cash equivalents at end of period 85.0 96.2
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (40.7) (63.6)
Analysis of net cash and cash equivalents at end of period    
Cash and cash equivalents 89.1 99.2
Short-term bank borrowings and overdrafts (4.1) (3.0)
Net cash and cash equivalents at end of period 85.0 96.2