Econocom confirms good results for 2016 and shares great prospects for 2017
VERY GOOD 2016 RESULTS CONFIRMED
– Sharp increase in revenue to €2,536 million (up 9.5%)
– Organic growth accelerated in the second half, standing at 6.7%, for the year, supported by all the group’s activities
– Recurring operating profit rose 19.2% to €140.3 million
– Operating margin rate stands at 5.5% (up 40 bps)
– Recurring earnings per share attributable to owners of the parent increased 19.2% to €0.77
– Strong generation of cash flow and net debt under control, standing at €185 million, i.e. less than 1.3 EBITDA.
GOOD GROWTH PROSPECTS FOR 2017
Continuing on a positive trend and consolidating its position in the digital transformation market:
– Sustained organic growth, in excess of 5%
– Another double-digit rise in recurring operating profit.
Following the success of its last two plans, the group will announce its next strategic development plan, “E for Excellence,” in September 2017.
The Board of Directors of Econocom Group, a European company specialising in the digital transformation of organisations, met today with Jean-Louis Bouchard acting as chairman, to finalise the 2016 full-year results.
2016 RESULTS: CONTINUING THE STRONG PROFITABLE GROWTH DYNAMIC
Econocom reported another year of strong growth in sales and profitability, as announced at the beginning of 2016. This shows, once again, the validity of the development model of the group’s mixed growth strategy, based on a balance between organic growth and selective acquisitions.
Econocom posted consolidated revenue of €2,536 million compared with €2,316 million in 2015, i.e. a 9.5% rise. Organic growth is above the market rate and reached 6.7%, driven by the group’s three business lines.
The Satellites, whose revenue accounted for almost 10% of the group’s revenue, at €247 million, reported organic growth of 11% thanks to their positioning in high-potential segments, their cutting-edge expertise and the increasing synergies with the group’s historic core businesses.
Synergies between the group’s activities are on the increase: multi-business lines sales rose by 30% in 2016 and now account for around 20% of the group’s revenue.
Recurring operating profit1 reached €140.3 million compared with 117.7 million in 2015, up 19.2%. Profitability is thus increasing at twice the rate of revenues. Operating margin increased 40 bps to 5.5% in a year that was notable for some substantial investments (sales force, ofering, communication, etc.).
Bolstered by the healthy sales dynamic, all the group’s activities contributed to the increase in Econocom’s profitability:
– Technology Management & Financing posted revenue of €1,259 million (up 9.6%, 9.4% of which is organic) and recurring operating profit of €80.2 million (up 14.4%), i.e. a 6.4% operating margin. Growth was accelerated by the company’s in-house refinancing company (EDFL), which carries the most innovative ofers and contributed €132 million to revenue (up 48%), with a limited impact of €27 million on net financial debt.
– Services reported revenue of €802 million (up 9.9%, 2.7% of which is organic). As expected, its profitability has improved significantly, with recurring operating profit standing at €46.4 million (up 30.7%), i.e. an operating margin of 5.8%, up 90 bps.
– Products & Solutions posted revenue of €475 million (up 8.6%, 6.8% of which is organic) and recurring operating profit of €13.7 million (up 13.2%), i.e. a 2.9% operating margin (up 10 bps). Growth was driven in particular by market share gains in the public sector (hospitals and education).
RECURRING EARNINGS PER SHARE, ATTRIBUTABLE TO OWNERS OF THE PARENT UP 19.2%
Profit attributable to owners of the parent stood at €39.6 million. It was heavily afected by a non-cash financial expense of €37.9 million (change in fair value of the ORNANE derivative3) as a result of the good performance of the Econocom Group share price in 2016.
Excluding non-recurring items and before amortisation of intangible assets from acquisitions, recurring net profit², attributable to owners of the parent rose by 18% to stand at €83 million. This performance reflects the group’s operational efciency and the stability of the efective income tax rates, which amounted to 31.9% (compared with 32% in 2015), excluding the adjustment to fair value of the ORNANE derivative, which is non-deductible. Recurring earnings2 per share, attributable to owners of the parent thus stood at €0.77, a substantial increase of 19.2%.
ANOTHER RISE IN SHAREHOLDER REMUNERATION
At the next General Shareholders Meeting the Board of Directors will recommend that the shareholders receive a refund of the issue premium of €0.20 per share, i.e. a 14% increase compared with 2015 and a 33% rise over two years. In line with its shareholder return policy and in an efort to manage dilution, the group also continued its treasury share buyback programme. As of 31st December 2016, it held 5.4 million treasury shares (i.e. 4.8% of its share capital) and 3.74 million ORNANE convertible bonds (i.e. 22.7% of the total bonds).
A SOLID BALANCE SHEET AND NET DEBT UNDER CONTROL
In 2016 the group generated cash flow from operating activities of €122 million, rising by 21%. Net cash at bank amounted to €285 million, 150million of which came from the successful Schuldschein loan issue in November 2016. The group’s equity stood at €279 million, while net book debt remained stable at €185 million, i.e. less than 1.3 times EBITDA. It remains under control in spite of the significant investments made in 2016: €59 million on acquisitions and on the internal refinancing company (EDFL) and €39 million as part of the shareholder return policy (repayment of share premiums and treasury share buy-back). Since 1st January 2017, Econocom has been buying back ORNANE convertible bonds backed by treasury shares sales and bondholders have requested the conversion of 400,000 ORNANE. As of 17 February, the group held 6.44 million ORNANE, i.e. 40% of the total number of bonds. These transactions have increased equity by €45 million and neutralised €31 million worth of financial debt.
GOOD OUTLOOK FOR 2017
As announced in January, the group’s Management is confident in the group’s prospects for 2017 and expects another year of:
– Sustained organic growth (in excess of 5%)
– A double-digit rise in recurring operating profit.
Recurring operating profit should thus exceed the target of €150 million set as part of the Mutation 2013-2017 plan, and includes €18 million of “operational investments” which will be used to expand the teams, develop talents, and enhance the ofering and brand image. In addition, Econocom will continue its selective acquisition policy in strategic areas.
PREPARING THE NEW STRATEGIC PLAN: “E FOR EXCELLENCE”
The Mutation 2013-2017 strategic plan allowed the group to efect its first “mutation” into a major service company specialising in the digital transformation of organisations. The group, which currently employs 10,000 people in 19 countries, has multiplied revenue by four and increased recurring operating profit six-fold in the course of its last two strategic plans.
With these successes and the encouraging start, the group will present a new strategic plan called “E for Excellence” in September 2017. Jean-Louis Bouchard, Chairman and Chief Executive Officer, said:
“2017, the last year of the Mutation plan which was announced in 2013, will be a turning point for Econocom Group. It is at this time that I have chosen to take over temporarily the operational reins of the group, in order to support the profound and exciting transformation of businesses and organisations resulting from the digital revolution. We are going to accelerate the coordination and synergies between all the group’s business lines. That’s what our “One Galaxy” project is all about. 2017 will also be the year in which we launch our new strategic plan, E for Excellence, which will be firmly focused on the added value of the ofering, the quality of our delivery and a cross-business line approach. In order to successfully deploy this plan, I would like to expand and bring new blood to our management team and promote innovative new collaboration methods. The improvement in profitability should reflect our ambition for excellence and will be a sign of the group’s success.”