Séché Environnement: Consolidated Results for 2013

Regulatory News:

Séché Environnement (Paris:SCHP):

Solid organic growth: revenue up 5.7% on an organic basis

• Strong recurring revenue
• Contribution of business developments carried out in 2012

EBITDA stable at €78.6m (17.7% of revenue excluding IFRIC 12)

• Weaker mix effects
• Influence of one-off factors: low availability of Strasbourg-Sénerval; rainfall, etc.

Net income of consolidated companies: €13.1m, up 45.6% relative to 2012 (adjusted for Hime)

• Consolidated net income (Group share): €8.7m after taking into account the losses (€-3.8m) of discontinued activities (Hungaropec – application of IFRS 5)
• Dividend maintained at €0.95 per share¹

Solid financial position

• Improvement in operating cash flow and net debt under control
• Debt ratios unchanged from 2012

Outlook

• EBITDA growth: contribution of Strasbourg-Sénerval; optimization of facilities …
• Continued concession investments (€20m) for consolidated Capex of €60m
• Stable debt ratios

Commenting on these results², Joël Séché said: "2013 was an atypical year because of the number of non-recurring items that affected our results.
We suffered from the prolonged unavailability of the Strasbourg-Sénerval facilities, while exceptional rainfall during the year increased the cost of leachate treatments. Both these factors weighed on EBITDA growth. In addition, the renegotiation of the public service delegation contract for the Pau incinerator at the municipal authority’s request, coupled with the requested application of the Olivet decree, had an unexpected impact on current operating income. Lastly, our decision to terminate our activities in Hungary because of persistent difficulties in this country had a direct impact on net income.
Despite these adverse one-off factors, Séché Environnement’s fundamentals remain solid and continue to improve. Growth was vigorous during the year despite the macroeconomic environment and, as we had foreseen, operating profitability began to improve in the second half of the year. The Group’s financial position remains very healthy, with unchanged balance-sheet ratios despite heavy investment in our principal public service delegation contracts.
In 2014, in a macroeconomic environment not conducive to generating strong growth, the Group’s priority is to continue the gradual improvement in its operating profitability”.

Comments on consolidated results at December 31, 2013³

Audited consolidated data in €m

* Pursuant to IFRS 5 on discontinued operations
** At constant scope and exchange rates⁴

As at December 31, 2013, Séché Environnement generated consolidated net income (Group share) of €8.7m, compared with a net loss of €(82.4)m a year earlier. In 2012, this result included a negative impact from Hime of €82.3m (net of tax).

The Group’s activity was solid in 2013, with revenue excluding IFRIC 12 up by 5.0% (+5.7% on an organic basis). In a sluggish macroeconomic environment, the Group generated strong recurring activity, boosted by the contribution of business developments carried out at the end of 2012.

This business growth made it possible to stabilize EBITDA at around its 2012 level of €78.6m, even though operating income was hit by the weak availability of the Strasbourg incinerator (€-2.5m) and by significant additional treatment costs linked to exceptional rainfall during the year (€-2.7m).

The modification of the terms of the public service delegation contract for the Pau incinerator led to the recording of an exceptional provision of €-2.8m. This weighed on Current Operating Income (COI), which fell by 12.3% compared with 2012.

The Net Income of Consolidated Companies, representative of the performance of companies under operating control, jumped by 45.6% compared with 2012 to €13.1m (vs. €9.0m in 2012 excluding the impact of Hime).

Séché Environnement generated solid operating cash flow even though Capex was high in 2013 (€56.6m) because of the scale of concession investments (€25.4m).

The Group consequently has a healthy financial position, and its balance-sheet ratios were stable at December 31, 2013 compared with a year earlier.

Detailed analysis of 2013 financial statements

Stable EBITDA

• Weakening of mix effects
• Influence of one-off factors

EBITDA was stable year-on-year at €78.6m vs. €78.8m at December 31, 2012.

This stability resulted from:

• the contribution of scope and foreign-exchange effects (+€0.6m);
• the €1.1m decrease in the contribution of the internal business scope, mainly because of the non-extension of spot contracts in PCB markets;
• the €0.3m increase in the contribution of the French business scope thanks to the weakening of adverse mix effects (€-3.5m in 2013 vs. €-9.4m in 2012), and despite the impact of non-recurring exogenous factors (€-1.0m).

Among these non-recurring items, it is worth recalling that 2013 EBITDA was dented by the delayed availability of the Strasbourg incinerator (€-2.5m) and exceptionally heavy rainfall in western France throughout the year, which drove up the cost of leachate treatment (€-2.7m).

Current Operating Income: exceptional impact from the renegotiation of the public service delegation contract in Pau

COI amounted to €32.7m, or 7.4% of revenue excluding IFRIC 12, down from €37.3m a year earlier.

This €4.6m decrease resulted from:

• the exceptional impact of the modification, at the municipal authority’s request, of the terms of the public service delegation contract for the Pau incinerator and the application of the Olivet decree (€-2.8m);
• the expected change in renewal expenses linked to the entry into the business scope during the full year of the Nantes-Alcéa incinerator (€-1.8m).

Financial income in line with expectations

Financial income stood at €(11.9)m compared with €(156.0)m at December 31, 2012. In 2012, financial income bore the weight of a net charge of €145.5m relating to Hime. Excluding this exceptional item, financial income would have come to €(10.6)m in 2012.

This change, in line with expectations, reflects the increase in average net debt over the year, which was not fully offset by the small drop in the cost of debt from 5.17% in 2012 to 5.10% in 2013.

Consolidated net income

• Reduction in corporate tax recognized (excluding the effect of Hime in 2012)
• Sharp improvement in the net Income of consolidated companies
• Recognition of losses on Hungaropec (€-3.8)m.

The corporate tax charge (excluding the effect of Hime) was lowered by €2.6m to €6.7m owing to the change in operating results.

The net Income of consolidated companies, which measures the performance of companies under operating control, came to €13.1m, a sharp improvement (+45.6%) relative to 2012 (+€9.0m adjusted for the impact of Hime).

Faced with the suspension of the activity of its Hungaropec facility and persistent difficulties with the Hungarian administration, Séché Environnement decided to discontinue its Hungarian operations.

The income from these discontinued operations is recorded on a separate line (IFRS 5) and totaled €(3.8)m, of which:

• an operating loss of €(1.4)m
• a €(2.4)m writedown of the net asset value

For this reason, consolidated net income (Group share) came to €8.7m compared with €(82.4)m in 2012.

Solid financial structure

• Net debt under control despite strong concession investments
• Financial ratios maintained at a corporate level

Concession investments ("IFRIC 12 investments”) peaked in 2012 owing to public service delegation contracts at Strasbourg-Sénerval and Nantes-Alcéa.

The Group invested €56.6m (including €25.4m of concession investments) compared with €49.7m (including €17.2m of concession investments) in 2012.

As such, the Group’s Capex remained under tight control at 7.0% of revenue excluding IFRIC 12 in 2013 compared with 7.7% of revenue excluding IFRIS 12 in 2012.

Cash flow was stable, in line with EBITDA, at €66.0m (vs. €66.7m in 2012).

Operating cash flow grew sharply to €21.4m (vs. €11.3m in 2012) thanks to tight control of the WCR and, above all, the tax gain (€11.1m) recorded in the full year on the reimbursement of advanced payments of 2012 corporate tax in 2012.

As a result, net debt was under control at €225.4m compared with €223.6m at December 31, 2012.

The Group has maintained ratios at a corporate level with gearing (net debt/shareholders’ equity) stable at 0.71x shareholders' equity (versus 0.71x at December 31, 2012) and leverage (net debt/EBITDA) stable at 2.85x EBITDA (versus 2.78x at December 31, 2012).

Outlook

A specialist in the recovery and treatment of waste, especially hazardous industrial waste, Séché Environnement is a central player in high value-added markets with high entry barriers.

Amid a sluggish economic environment in 2014, and in a context of weak industrial production, especially in France, where the Group generates more than 95% of its revenue, Séché Environnement will capitalize on the solidity of its recurring activity with industrial and municipal customers and focus on improving the profitability of its facilities.

The reduction in mix effects (notably thanks to the stabilization of the contribution of PCB markets), the ramp-up of newly consolidated facilities and, above all, the full contribution of Strasbourg-Sénerval and its new heat network should enable the Group to continue the gradual improvement in its profitability that began in the second half of 2013.

In 2014, the Group foresees Capex of around €60m, including €20m of concession investments.

The gradual improvement in operating profitability, coupled with the return to a normalized Capex level, should allow the group to start cutting debt again in 2015 with the aim of achieving financial leverage of around 2.5x EBITDA in 2016.

APPENDICES

CONDENSED ANNUAL FINANCIAL STATEMENTS

Income statement

Balance sheet

Statement of cash flows

Next communication

Publication of revenue in the quarter ending March 31, 2014 April 29, 2014 after market close

About Séché Environnement

Séché Environnement is one of the leading players in the treatment and storage of all types of non-radioactive industrial and household waste in France, whether from industry or from local communities. Its facilities enable it to offer high-quality comprehensive solutions that incorporate all environmental requirements.

Séché Environnement is the leading independent operator in the country with a unique positioning at the hub of the high value-added waste recovery, treatment and storage markets.

The Group offers integrated specialized services:

• recovery or energy recovery of hazardous and non-hazardous waste;
• treatment (incineration, physical-chemical, etc.);
• storage of ultimate hazardous and non-hazardous waste

It is actively developing its business on waste management outsourcing markets for its clientele of large communities and major industrial companies.

Séché Environnement has been listed on Eurolist by Euronext since November 27, 1997
(Compartment B – ISIN: FR 0000039139 – Bloomberg: SCHP.FP – Reuters: CCHE.PA)

Important notice

This press release may contain information of a provisional nature. This information represents either trends or targets at the date of the press release's publication and may not be considered as results forecasts or as any other type of performance indicators. This information is by nature subject to risks and uncertainties that are difficult to foresee and are usually beyond the Company's control, which may imply that expected results and developments differ significantly from announced trends and targets. These risks notably include those described in the Company’s Registration Document, which is available on its website at (www.groupe-seche.com). This information therefore does not reflect the Company's future performances, which may differ considerably, and no guarantee can be given as to the achievement of these forward-looking figures. The Company makes no commitment on the updating of this information. More comprehensive information on the Company may be obtained in the Documentation section of its website at www.groupe-seche.com under Regulated Information. This press release does not constitute an offer of shares nor a solicitation in view of an offer of shares in any country whatsoever, including the United States. Distribution of this press release may be subject to the laws and regulations in force in France or abroad. Persons in possession of this press release must be aware of these restrictions and observe them.

¹ Proposal by the Board of Directors conditional on its approval by the AGM on April 25, 2014.
² At the Board of Directors’ meeting of February 28 2014 during which the accounts at December 31, 2013 were closed.
³ Comparative data for 2012 are restated for the application of accounting rule IFRS 5 on discontinued operations
⁴ Scope changes:

• Unwinding of the investment ins Saur, with no accounting impact in 2013;
• Full consolidation of Tree and Triadis Béziers in the full year and consolidation by the equity method of Gerep and Sogad (application of IFRS 10, 11 and 12).