Press Release 28 September 2007 Financial results for the first half of 2007 •
Revenue € 1,216 million, an overall increase of 15.8%, and a like-for-like increase of 7%
•
Operating income of € 151 million, an overall increase of 8.6%, and a like-for-like increase of 5.2%
•
Favourable trading conditions in most of Europe especially in industrial & utilities sectors
•
After several years of strong performance, weaker trading in North America due to downturn in housing market and in new residential construction
•
On-going integration of new Latin American businesses, and good level of activity despite slow post-election recovery in Mexico
The unaudited condensed consolidated accounts for the first half of the year 2007 were presented to the Board of Directors at its meeting held on 21 September.
COMMENTS On 14 February 2007, Aliaxis completed a transaction to acquire a 51% interest in a new company named Aliaxis Latinoamérica Coőperatief U.A. (“Aliaxis Latinoamérica”), which combined the Group’s existing businesses in Latin America with the newly-acquired Durman Esquivel S.A. (“Durman”). The new entity has a major market position in most countries in the Latin American region, which will provide a platform for future growth. The former controlling shareholders of Durman have a 49% interest in Aliaxis Latinoamérica, which is subject to the possible exercise of general put and call options beginning in 2011. The results of Aliaxis Latinoamérica have been consolidated into the Group’s results from 1 January 2007, and represent the only significant change in scope of the consolidation during the first half of the year. At 30 June 2007, the restatement of the assets and liabilities of Durman at their fair value required by IFRS had not been fully completed, and there may be a further impact on the Income Statement for the full year 2007 and the Balance Sheet as at 31 December 2007. Profit and loss account Aliaxis’ results for the first half of 2007 are reported under IFRS. The comparative results for 2006 were reported under Belgian GAAP and have not been restated except for revenue, which has been adjusted to reclassify certain deductions from sales into cost of sales. Revenue in the first half of 2007 was € 1,216 million (2006: € 1,050 million), an overall increase of 15.8%. Changes in the scope of the consolidation accounted for 11.6% of this increase. Adverse exchange rate movements reduced revenue by 2.8%, mainly as a result of a weakening of both the Canadian and US dollars during the period. The organic increase in revenue was thus 7.0%. Operating income was € 151 million (2006: € 139 million), an overall increase of 8.6%. At constant exchange rates, and excluding the impact of the change in scope of the consolidation, the increase in operating income was 5.2%.
The trading environment in Europe was favourable in most markets, with activity in the industrial and utilities sectors particularly strong as a result of continuing investment in infrastructure projects. Growth in Spain was more modest, however, reflecting a slowdown in the residential construction market after a period of very high growth. Demand for our products continued to grow in Germany, and a mild winter encouraged construction activity in the first quarter, although the level of activity slowed in the second quarter. After several years of strong performance, trading in North America was weaker than in the first half of 2006 as a result of the continuing uncertainty in the US housing market and its adverse impact on the level of residential housing construction in both the US and Canada. Industrial markets, however, held up reasonably well. Elsewhere, activity in Australia remained satisfactory, whilst New Zealand maintained its position despite the declining economy. In South Africa, some recovery in margins was achieved after the weakness experienced in the first half of 2006. In Latin America, the focus was on achieving an on-going integration of the acquired businesses. Individually, the businesses developed well during the first half, although in Mexico volumes were slow to pick up following the elections of 2006. Income taxes were € 41 million (2006: € 45 million), representing an effective charge of 30.4% (2006: 35.8%). The reduction resulted from the lower rate of tax payable on the profits of the newly-acquired businesses in Latin America as well as the impact of some one-off items. The Group’s share of the net profit of the period was € 94 million (2006: € 80 million), representing earnings per share of € 1.10 (2006: € 0.90). Balance sheet Intangible Assets at 30 June 2007 were € 624 million compared to € 497 million at 31 December 2006, and consisted mainly of goodwill. The increase is attributable to the goodwill arising on acquisitions made during the first half, principally Durman, together with currency translation differences on goodwill held in foreign currencies. Property Plant and Equipment increased during the period from € 553 million to € 616 million, reflecting the consolidation of the acquired assets of Durman, capital expenditure and depreciation during the first half of 2007 and currency translation differences arising during the period. Non-Cash Working Capital reached a level of € 565 million at 30 June 2007, including € 71 million arising from Durman. Excluding that amount, the increase in non-cash working capital in the first half was € 146 million (2006 first half increase: € 142 million). This increase reflects the normal seasonal pattern of trading which results in a high level of working capital at the end of the second quarter each year. The Equity attributable to the Group increased by € 93 million to € 940 million in the first half of 2007, mainly reflecting the Group share of net profit of the period. The increase in Other Non-Current Liabilities to € 242 million at 30 June 2007 (€ 123 million at 31 December 2006) mainly represents the net present value of the provisional estimated purchase price of the outstanding 49% minority interest in Aliaxis Latinoamérica, pursuant to the Group’s commitment to acquire such interest in accordance with the possible exercise of general put options beginning in 2011. Net Financial Debt at 30 June 2007 was € 668 million compared with € 472 million at 31 December 2006, an increase of € 196 million. Of that amount, approximately € 114 million represented debt incurred to finance the acquisition of Durman together with the acquired debt in the company itself. The remainder of the increase arose principally from the seasonal impact of higher working capital during the period.
PROSPECTS FOR THE SECOND HALF OF 2007 The level of trading activity in most European markets is expected to continue at a reasonable level during the second half of 2007, although some recent forecasts anticipate slower growth in the Eurozone countries. In North America, the economic environment is expected to remain difficult, especially in the USA where the housing sector downturn shows no signs of easing, causing difficulties in the mortgage markets which have led to instability in financial markets and a tightening of credit in North America and beyond. Trading in the second half of 2007 is thus expected to be more difficult than in the first half.
SUMMARY CONSOLIDATED ACCOUNTS Condensed Consolidated Income Statement
First half 2007
Full Year 2006
First half 2006 (Belgian
(€ million)
GAAP)*
(IFRS)
Revenue
1,216
Operating income
Inc/(Dec)
1,050
166 12
(IFRS) 2,116
151
139
% of turnover
12.4%
13.2%
Net financial result
(17)
(16)
(1)
(29)
Profit before income taxes
134
123
11
242
Income Taxes
(41)
(45)
4
(81)
2
3
(1)
5
Share of profit from equity accounted investees Net profit of period Attributable to: ■ Minority interests ■ Group
95
271 12.8%
81
14
166
1
1
-
1
94
80
14
165
% Earnings per share
Inc/(Dec)
Basic earnings per share (€)
1.10
0.90
22.2%
1.93
Diluted earnings per share (€)
1.09
N/A
N/A
1.92
* Comparative results for 2006 not restated, except that revenue is increased by reclassifying certain sales deductions as cost of sales.
Condensed Balance Sheet (â‚Ź million)
June 2007
December 2006
June 2006
(IFRS)
(IFRS)
(Belgian GAAP)*
Intangible Assets
624
497
480
Property Plant and Equipment
616
553
512
Investments
57
56
53
1,297
1,106
1,045
565
347
475
1,862
1,453
1,520
940
847
745
12
11
12
Total Equity
952
858
757
Other Non-Current Liabilities
242
123
124
Net Financial Debt
668
472
639
1,862
1,453
1,520
Total Non-Current Assets Non-Cash Working Capital TOTAL Equity (attributable to Group) Minority Interests
TOTAL
* Comparative balance sheet not restated except that Treasury Shares, formerly disclosed as an asset have been reclassified as a deduction from Equity.
Aliaxis, an international group of businesses with a worldwide presence, is dedicated to the manufacture and sale of plastic pipe systems and related building and sanitary products used in residential and commercial construction and renovation, as well as in a wide range of industrial and public utility applications.
Contact: Yves Mertens (Group Finance Director) Don Bailey (Group Corporate Development Manager) Tel. 32-2-775 5050 – Fax. 32-2-775 5051 E-mail: aliaxis@aliaxis.com