Wavin Group reports strong increase in revenue and operating results in first half year 2007
Zwolle, 6 September 2007 – Wavin N.V., leading supplier of plastic pipe systems and solutions in Europe, today announces its First Half Year 2007 results:
Financial highlights H1 2007
• Revenue increased 12.3% to EUR 824,4 million (H1 2006: 734.3 million), organically 11.9% • Ebitda(2) up 19.8 % to EUR 107.3 million (H1 2006: 89.6 million) • Ebitda margin improved to 13.0% (H1 2006: 12.2%) • Net profit of EUR 44.5 million (H1 2006: net profit EUR 44.3 million included non-recurring gains of EUR 27.0 million) • Interim dividend of EUR 0.22 per share
Operational highlights
• Continued high revenue growth in Hot & Cold (up 24.8%), Cable Ducting (up 23.8%) and Water Management (up 20.2%) • Central and Eastern Europe reports strong growth of revenue (up 35.2%) and operating profit (up 41.1 %) • Increased acceptance of plastic fittings in the Hot & Cold segment • Bolt-on acquisitions of Polyfemos (Norway) and O’Brien (Ireland) completed
Wavin Group Key figures (unaudited) in EUR million
H1 2007
H1 2006
Change
Total Revenue Revenue breakdown per Business Unit(1) : Building & Installation Civils & Infrastructure Other
824.4
310.2 495.3 18.9
734.3
267.1 453.0 14.2
12.3%
16.1% 9.3% 33.1%
EBITDA (2) as % of revenue
107.3 13.0%
89.6 12.2%
19.8%
Operating result (3)
70.5
51.4
37.2%
Net profit Net profit attributable to equity holders
44.5 43.4
44.3 43.5
0.5%
Per share data (EUR) Earnings per share
0.55
Accounting principles applied are based on IFRS, all figures are unaudited (1) Restated figures reflect the redefinition of the Water Management segment. (2) All references to Ebitda reflect operating result before depreciation, amortisation and non-recurring items (3) All references to operating result include non-recurring items
Philip Houben, Wavin CEO: “Our performance over the first six months of 2007 can only be described as strong. Following an exceptionally positive start of the year, business continued to develop satisfactory, leading to significant revenue growth and further Ebitda margin expansion. It is pleasing to see that both business units and all regions contributed to the growth. Particularly our Central and Eastern Europe region performed very strong with a 35% revenue increase. The Civils & Infrastructure business unit benefited from higher activity levels especially as a result of the mild winter, whereas Building & Installation continued its excellent trend in the Hot & Cold segment.”
Revenue In the first half year total revenue grew by 12.3% to EUR 824.4 million. The Civils & Infrastructure (below-ground pipe systems and solutions) business benefited from the mild winter conditions. This is in contrast to the severe winter in some parts of Europe last year. Revenue in this segment increased 9.3% to EUR 495.3 million. In Building & Installation (above-ground pipe systems and solutions), revenue rose with 16.1% to EUR 310.2 million, driven by the ongoing replacement of traditional materials by plastic solutions. All regions saw revenue improvement compared to the first half of last year. High growth was noted in the Central and East European and South East European areas. In the North West Europe region, the relatively high growth of the German construction market in the first quarter saw a distinct slow down in Q2.
Ebitda Operating result before depreciation, amortisation and non-recurring itemsimproved ahead of revenue. Ebitda in H1 2007 was EUR 107.3 million, an increase of 19.8% over H1 2006. As a percentage of revenue, the Ebitda margin increased further to 13.0%, against 12.2% in the first half of 2006. Strong growth in the higher margin Building & Installation business unit and an improved product mix in the Civils sector, contributed to this margin expansion.
Non-recurring items in operating result Non-recurring items in the operating result amounted to EUR 6.7 million mainly related to the closure of a manufacturing site in the UK as one of the final steps of the integration programme of Hepworth Building Products.
Financing costs and tax Financing costs amounted to EUR 17.2 million versus EUR 40.2 million over the same period last year. The significantly lower net debt and a refinancing at favourable rates that was finalised in the fall of 2006 contributed to this reduction. Income tax expense was EUR 11.5 million. The announced lower corporate tax rates in the UK and Denmark had a non-recurring positive impact on the deferred tax-liabilities.
Net profit The strong operational performance and the lower financing costs in the first half year resulted in a net profit of EUR 44.5 million. The H1 2006 net profit of 44.3 million included non-recurring net gains of EUR 27.0 million, primarily as a result of the sale of a minority stake in an Australian joint venture.
Cash flow Due to the seasonality of the business, Wavin historically generates virtually all of its cash flow in the second half of the year. Free operating cash flow in H1 2007 was EUR 11.6 million. This is an increase of EUR 15.8 million compared to the same period last year. The 2006 cash flow statement is aligned with the 2007 cash flow presentation. Capital expenditure in H1 2007 was EUR 30.9 million, a significant increase compared to the low EUR 23.9 million over the first half of the previous year. Trade working capital in the period increased EUR 114.5 million from year end 2006, in line with the seasonal pattern of the business and revenue increases.
Net debt In the first half year net debt went up in line with seasonality from EUR 597.7 million per 31 December 2006 million to EUR 654.2 million per 30 June 2007. The net debt to EBITDA ratio (leverage) remained stable at just below 3.0 per 30 June 2007.
Business Unit Developments
The good economic circumstances and the mild winter across Europe resulted in favourable growth of revenue across the two business units.
Building & Installation*
Revenue (EUR million)
H1 2007
H1 2006
Growth
Hot & Cold Soil & Waste Other Building Systems
Total Building & Installation
161.0 110.5 38.7
310.2
129.0 102.9 35.2
267.1
24.8% 7.4% 9.9%
16.1%
* Restated figures reflect the redefinition of the Water Management segment.
The Building & Installation business unit (above-ground plastic pipe and fitting systems)realised 16.1% growth to EUR 310.2 million. With its substantial market position in many European countries, Wavin benefited from the ongoing substitution trend towards plastics. Building & Installation represented 37.6% of total revenue in H1 2007, compared to 36.4% in H1 2006.
Hot & Cold The Hot & Cold business segment (pipes, fittings and manifolds to supply hot and cold tap water, radiator connections and surface heating and cooling) is an important growth area for Wavin. Revenue jumped 24.8% to EUR 161.0 million, representing almost 20% of Group revenue. Generally good housing markets, the favourable price comparison with traditional materials and the cost effective installation of plastic systems, helped drive the ongoing substitution trend in favour of plastics. Wavin offers a broad range of Hot & Cold systems and solutions, covering nearly all applicable plastic-based materials. This meets the different customer preferences in the European markets. Growth in the different systems was equally encouraging. The new plastic push-fit system Wavin smartFIX was launched in Germany and Italy. Market reception was positive. The system will gradually be rolled out in other European countries. Growth in indoor climate control (floor heating and ceiling cooling systems) is driven by new governmental directives related to the energy performance of buildings and the availability of high comfort solutions in residential and commercial buildings.In many European countries these applications are more and more accepted as a preferred solution versus traditional systems.
Soil & Waste Revenue in the Soil & Waste segment (systems for the transport of waste water from kitchens and bathrooms to the sewer) grew 7.4% to EUR 110.5 million (13.4% of Group revenue). Innovative low-noise systems such as Wavin AS and Wavin SiTech improve in-house convenience, replacing cast iron alternatives.
Other Building Systems Other Building Systems, such as roof gutters and electrical conduit pipes, showed satisfying revenue of EUR 38.7 million. Revenue was up 9.9% compared to H1 2006, mainly driven by growth in roof gutter sales in Central and Eastern Europe.
Civils & Infrastructure*
Revenue (EUR million)
H1 2007
H1 2006
Growth
Foul Water Water Management Cable Ducting Water & Gas Total Civils & Infrastructure
278.9 81.0 34.9 100.5 495.3
256.3 67.4 28.2 101.1 453.0
8.8% 20.2% 23.8% -0.6% 9.3%
* Restated figures reflect the redefinition of the Water Management segment.
The business unit Civils & Infrastructure (below ground plastic pipe and fitting systems) accounted for 60% of total Group revenue. The mild winter months resulted in a strong start of the year, which levelled off in the subsequent months. H1 2007, revenue increased 9.3% to EUR 495.3 million. Growth in Central and Eastern Europe was particularly encouraging.
Foul Water Revenue in the Foul Water category (predominantly sewer systems) rose 8.8% to EUR 278.9 million. Wavin is market leader in Europe in this segment. European product concepts such as Tegra manholes and inspection chambers were further rolled out successfully.
Water Management Total revenue from Water Management applications (systems used to remove, collect, attenuate and infiltrate rain and storm water) increased 20.2% to EUR 81.0 million (2006: EUR 67.4 million), almost 10% of total Group revenue. This significant growth reflects an increasing market focus on rain water management issues. Wavin has a complete range of Water Management systems and solutions and is well positioned to play an important role in this growing market segment.
Cable Ducting In H1 2007 revenue in Cable Ducting segment was up 23.8% to EUR 34.9 million (4.2% of total Group revenue). The market of cable duct systems for data communication (Last Mile Telecom) enjoyed brisk growth in selective European markets.
Water & Gas In the Water & Gas segment (pressure pipes and fittings for the distribution of gas and potable water) revenue remained flat at EUR 100.5 million in the first half of 2007. The company has chosen to be selective in tendering for large contracts in this mature and lower margin market and focuses on technically advanced concepts with improved product characteristics. Within total Group revenue, the Water & Gas segment now comprises 12.2% versus 13.8% in H1 2006.
Other The segment ‘other’ includes incidental revenue from raw material sales, machinery and electronics sale and licence income. In the first half year this segment amounted to EUR 18.9 million.
Results per region
Performance development across virtually all geographic regions was satisfactory. Results in the Central and Eastern European region were exceptional with double digit growth at sustained high margins. In the North West region, temporary inefficiencies related to the integration of manufacturing activities of the Netherlands and Germany had a negative impact on the performance.
Revenue and EBITDA (1) (EUR million)
H1 2007
H1 2006
Growth
Total Revenue Total EBITDA (1)
UK/Ireland (2) Revenue EBITDA (1) Margin
North West Europe Revenue EBITDA (1) Margin
Nordic Europe Revenue EBITDA (1) Margin
Central and Eastern Europe Revenue EBITDA (1) Margin
South West Europe Revenue EBITDA (1) Margin
South East Europe Revenue EBITDA (1) Margin
Other (incl Wavin Overseas) (2) Revenue EBITDA (1)
824.4 107.3
226.0 36.9 16.3%
169.6 12.6 7.4%
114.5 12.7 11.1%
107.5 22.3 20.7%
91.8 9.2 10.0%
82.4 8.4 10.2%
32.6 5.2
734.3 89.6
226.2 29.0 12.8%
155.0 14.6 9.4%
104.6 11.8 11.3%
79.5 15.8 19.9%
85.8 6.7 7.8%
65.7 7.1 10.8%
17.5 4.6
12.3% 19.8%
-0.1% 27.2%
9.4% -13.7%
9.5% 7.6%
35.2% 41.1%
7.0% 37.3%
25.4% 18.3%
86.3% 13.0%
(1) All references to Ebitda reflect operating result before depreciation, amortisation and non-recurring items (2) Per 2007, the export business from Hepworth Building Products was transferred to Wavin Overseas.
On a like for like basis, business in the UK/Ireland region increased 5.0%. Per 2007, the export business from Hepworth Building Products was transferred to Wavin Overseas. In total EUR 6.7 million was transferred. The overall construction market in the UK was steady with a flat new built housing segment and a positive development of the RMI (Repair, Maintenance and Improvement) segment. The Irish market is clearly softening after the high levels in past years. Ebitda in the UK/Ireland region improved to EUR 36.9 million. This increase of 27.2% mainly results from the synergy benefits derived from the integration of Hepworth Building Products. As a consequence, margins in the region expanded to 16.3%.
In Wavin’s North West Europe region, revenue grew 9.4% to EUR 169.6 million. Germany reported a strong start of the year, but slowed down in the subsequent months. Operating results in the region lagged behind due to temporary issues regarding the rationalisation of the regional manufacturing footprint. In addition some competitive price pressure was faced in this region. Ebitda in the North West region ended EUR 2 million behind H1 2006, the margin dropped to 7.4%.
The Nordic region recorded a 9.5% increase of revenue to EUR 114.5 million. Good market conditions were especially noticeable in Sweden and the Baltic region. Ebitda increased to EUR 12.7 million with the Ebitda margin stable at 11.1%. Polyfemos, a Norwegian supplier of cable duct systems for Telecom access networks, was acquired and integrated successfully.
Market circumstances in the Central and Eastern Europe region continued to be bullish. Revenue increased 35.2% to EUR 107.5 million. The mild winter and high construction activity in the region fuelled the growth. All countries in this CEE region showed an excellent trend. Increased sales and marketing efforts in Russia and Ukraine will strengthen Wavin’s position in these emerging markets. On the back of this performance, the region delivered EUR 22.3 million Ebitda, and a margin of 20.7%.
The South West Europe region reported 7.0% revenue growth to EUR 91.8 million. Although general construction activity did not reach 2006 levels, the market for plastic pipe systems remained solid. As a result of improved product mix, margins have further improved to 10.0% from 7.8% in H1 2006.
In the South East Europe region, revenue increased to EUR 82.4 million, growing at a very healthy pace of 25.4%. All countries in the region showed good revenue growth. Especially Romania benefited from a healthy construction market. Ebitda in the region increased to EUR 8.4 million. The Ebitda margin was 10.2%, (10.8% in the same period last year). Margins were affected by market investments in Romania and challenging market circumstances in Hungary.
The Wavin Group also comprises entities such as Wavin Technology & Innovation (research and development) Wavin Overseas (the central export organisation) and the Group holding companies (Others).The increase in revenue is mainly attributable to the transfer of the UK export business to Wavin Overseas.
Dividend The total profit attributable to equity holders of Wavin N.V. amounted to EUR 43.4 million. Reported earnings per share in H1 2007 were EUR 0.55. In accordance with Wavin’s dividend policy, the interim dividend will be EUR 0.22 per share. This dividend will be paid out either in cash or in shares, at the discretion of individual shareholders. As per 7 September 2007, the ordinary shares will be registered ex-dividend. The dividend payment will take place on 5 October 2007.
Outlook 2007 Wavin maintains its earlier guidance for full year 2007. Revenue growth for the full year is expected to be close to the lower end of the earlier indicated range of 10-13% as markets in the second half of the year are expected to be less buoyant. The Ebitda margin will be slightly ahead of last year (2006: 13.1%). Barring unforeseen circumstances, net profit will be well ahead of 2006.
About Wavin Wavin is the leading supplier of plastic pipe systems and solutions in Europe. The company provides essentials: plastic pipe systems and solutions for tap water, surface heating and cooling, soil and waste, rain- and storm water, distribution of drinking water and gas and telecom applications. Wavin is headquartered in Zwolle (The Netherlands) and has a presence in 27 European countries, with manufacturing sites in 16 of those. The company employs approximately 6,700 people and reported revenues of EUR 1.5 billion for 2006. Outside Europe, it has a global network of more than 120 agents, licensees and distributors. Wavin is listed on the Amsterdam stock exchange (WAVIN). More details about Wavin can be found at www.wavin.com
For further information:
Media Relations: Herbert van Zijl Telephone: +31 38 429 4209 Mobile: +31 6 51461442 E-mail: media@wavin.com
Cautionary note regarding forward-looking statements This announcement contains forward-looking statements. Forward-looking statements are statements that are not based on historical fact, including statements about our beliefs and expectations. Any statement in this announcement that expresses or implies our intentions, beliefs, expectations or predictions (and the assumptions underlying them) is a forward-looking statement. Such statements are based on plans, estimates and projections as currently available to the management of Wavin. Forward-looking statements therefore speak only as of the date they are made and we assume no obligation to publicly update any of them in the light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. A number of significant factors could therefore cause actual future results to differ materially from those expressed or implied in any forward-looking statement. Such factors include but are not limited to conditions in the regions from which we derive a substantial portion of our revenue, potential defaults on the part of borrowers or trading counterparties, Wavin’s relationship with its key customers, relationships with key suppliers, whether market conditions or other factors permit us to pass on any increases in the costs of raw materials and our ability to effectively compete with our competitors. The forward-looking statements contained in this announcement are made as of the date hereof and Wavin assumes no obligation to update any forward-looking statement contained in this announcement.
Annexes:
Consolidated income statement
Consolidated balance sheet
Consolidate statement of cash flows
Changes in shareholders equity
Segmentation reporting
FINANCIAL CALENDAR subject to change
2007 7 September Ex-dividend date 5 October Dividend payment
2008 29 February Publication of annual figures 2007 (before start of trading) 17 April General Meeting of Shareholders 29 August Publication of H1 figures 2008 (before start of trading)
