Séché Environnement: Consolidated Results at December 31, 2022

Strategic acquisitions in France

Solid organic growth for all scopes

Solid operating margins confirmed

Sharp increase in net income (Group)

Favorable 2023 outlook

CHANGÉ, France--(BUSINESS WIRE)--Regulatory News:

Séché Environnement (Paris:SCHP):

2022 achievements at the upper end of targets

Dividend proposed to the GM of April 28, 2023: €1.10 per share (vs. €1.00 in 2021)

Outlook for 2023 on the right track

Contributed revenue of close to €1bn:

• Scope effect linked to the full-year contribution of acquisitions in 2022
• Organic growth in the historical scope¹ at a normative rate of around +5%

EBITDA margin close to 22% of contributed revenue:

• Growth in the EBITDA margin of the historical scope¹
• Increase in profitability of the consolidated scopes in 2022

Financial leverage ratio of 2.7x EBITDA (excluding acquisitions)

At the Board of Directors meeting held on March 3, 2023 to approve the financial statements for the year ended December 31, 2022, the Chairman, Joël Séché, stated:

"At the heart of a world facing multiple challenges, Séché Environnement once again demonstrated in 2022 the relevance of its growth model in contending with long-term societal challenges and crisis situations.

This success is the result of a business model transformation strategy to which our Group has been committed for several years and which has made it an international environmental services group whose mission is to support its customers, particularly industrial customers, in their own transformation towards a sustainable growth model, capable of reducing their environmental footprint.

This winning strategy was once again validated in 2022 by very good performances in economic, operational, financial and non-financial terms. The strong growth achieved in 2022, particularly on an organic basis, stems from consolidated results that once again demonstrate the resilience of our operating margins, including in an inflationary environment, and a solid balance sheet structure that guarantees the continuation of long-term strategic development.

At the same time, the alignment with the European green taxonomy of the Group's business lines and the non-financial strategy targeting, among other things, demanding environmental goals, particularly in terms of decarbonization, demonstrate the close symbiosis between Séché Environnement's transition challenges and those of its customers.

As such, Séché Environnement enters 2023 with confidence and serenity.

More than ever committed to its customers at the heart of an industrial and territorial ecology approach to meet their challenges in preventing environmental risks and accessing their strategic resources – energy, materials and water –, our Group is strengthening its presence on resilient markets with high visibility on which it intends to operate with differentiation and added value.

The current year will be a major step in Séché Environnement's growth, including the consolidation of new activities that offer significant potential on sustainable growth markets, such as the industrial water cycle market, in France and internationally.

I would like to state my conviction that Séché Environnement will once again confirm its growth profile in 2023, generating high profitability, and that our Group will strengthen its ability to create lasting value for its shareholders and all its stakeholders, serving a more sustainable world. "

Selected financial data

Consolidated data in €m

Summary of activity, results and financial position for the year ended 31 December 2022

For the year ended December 31, 2022, Séché Environnement generated contributed revenue of €895.3m, up 21.7% on a reported basis and 14.4% at constant scope and exchange rates compared to 2021.

The Group pursued a dynamic external growth policy in 2022, with the acquisition of around €90m in revenue over the full year. It also expanded its offering by consolidating new activities in the circular economy and environmental services.

At the same time, the Group posted sustained organic growth in France and a strong rebound in its international activities, generating a further significant rise in its consolidated results. As such, the Group has strengthened its financial position and established new financial resources to sustain its growth momentum.

Implementation of a dynamic growth policy
Strategic acquisitions in Industrial Water

On January 1, 2022, Séché Environnement successfully consolidated Séché Assainissement⁴ (formerly Osis IDF) and began a strategy of local acquisitions with a view to building a national network, including the acquisition of Assainissement 34 in July 2022.

On June 10, 2022, the Group strengthened its position in the chemicals circular economy with the acquisition of All'Chem, which specializes in the manufacture of fine chemicals in France for the pharmaceutical, agrochemical and veterinary industries⁵.

Lastly, on November 30, 2022, Séché Environnement took a major position on the industrial water management markets by finalizing the acquisition⁶, from Veolia Group, of a portfolio of more than 120 contracts and a network of 20 branches in France, representing full-year revenue of around €38m at the end of 2022. Transfers of commercial contracts will continue in H1 2023.

Solid organic growth for all scopes

In 2022, Séché Environnement posted strong organic growth of 14.5% at constant scope and exchange rates compared to 2021. In France, this growth was driven by robust sales in buoyant markets, while International revenue was up sharply in all the regions in which the Group is present, accentuated by the rebound in the activities of certain subsidiaries that were still affected by the consequences of the pandemic in 2021.

France: robust sales in buoyant markets

In France, Séché Environnement, an integrated operator in the circular economy and environmental services businesses, is active on markets sustained by regulatory changes fostering the circular economy and efforts to combat climate change.

In 2022, the energy and commodities crisis supported growth by making the Group's recovery solutions more attractive in terms of the major challenges facing industrial and local authority clients in accessing available resources, materials, and energy at a competitive price.

In addition, the Group's organic growth was bolstered by market opportunities and major one-off contracts in the decontamination and environmental emergencies business lines, totaling around €10m, which accelerated growth over the first half of the year in particular.

Overall, in France, Séché Environnement posted very strong organic growth of 10.9% compared with 2021, illustrating the relevance of its commercial offering in light of long-term societal challenges and short-term imperatives in terms of access to resources, materials and energy.

International: strong performance in all regions

In 2022, the international markets saw very favorable trends in all regions, underpinned by the good performance of local economies and/or strong levels of activity for local industrial customers, which benefited from their exposure to the commodities and energy sectors.

In addition, growth during the financial year partially reflects the strong rebound in Solarca's activities and subsidiaries in Latin America (Peru and Chile), which were still heavily penalized by the consequences of the pandemic in 2021.

Lastly, international growth included the contribution of major spot contracts in the decontamination and environmental emergencies businesses, particularly in Peru (Kanay) and South Africa (Spill Tech). These one-off contracts contributed approximately €15m to growth in the first half of the year.

International activities posted very strong growth of +23.4% at constant scope and exchange rates.

Significant growth in operating income

The 2022 financial year showed a further increase in consolidated operating income and continued improvements in gross and current operating margin at constant scope.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose sharply, by +18.4% year on year, to €201.6m, or 22.6% of contributed revenue (vs. €170.3m, or 23.1% of contributed revenue, a year earlier).

at constant scope, it was up +15.2% (at constant exchange rates) to €197.5m, or 23.3% of contributed revenue.

This improvement in gross operating margin compared to 2021 reflects the solid contribution of the France scope and the sharp improvement in Gross operating profitability for the International scope:

• France EBITDA rose +11.0% to €146.9m, or 24.9% of contributed revenue, at the same level as last year.
  
  It benefited from favorable commercial effects (positive volume effects, mix effects and price effects), as well as the positive effects of the industrial efficiency policy on capacity availability. However, it contributed approximately -€6.0m to the capping of infra-marginal income of electricity producers implemented retroactively by the Finance Act for 2023.

  Excluding this impact, and all other things being equal, EBITDA in France would have amounted to 25.9% of contributed revenue (vs. 24.9% a year earlier), demonstrating the strong resilience of the gross operating margin, even in an inflationary environment.

• International EBITDA rose +29.7% (at constant exchange rates) to €50.6m, or 19.7% of contributed revenue (vs. €37.9m or 18.6% of contributed revenue in 2021), driven by the improvement in activity levels (positive volume and mix effects) across all regions, particularly in Latin America and for Solarca.

Current operating income (COI) totaled €91.3m, or 10.2% of contributed revenue, representing a sharp increase of +27.7% on a reported basis versus the previous year (€71.5m, or 9.7% of contributed revenue).

At constant scope, growth remained very strong (+26.0% at constant exchange rates) and brought COI to €90.7m, or 10.7% of contributed revenue. This increase was due to the good performance of the France and International scopes:

• France COI stood at €63.1m, or 10.7% of contributed revenue, reflecting organic growth in EBITDA minus, in particular, the increase in depreciation and amortization related to the recent investments in the Hazard Management businesses.
• International COI came to €27.6m, or 10.7% of contributed revenue (vs. €16.8m, or 8.2% of contributed revenue, in 2021). This sharp improvement (+59.5% at constant exchange rates) corresponds to the growth in EBITDA for this scope and includes the increase in depreciation due to the ramp-up of new capacity for Interwaste and Mecomer.

Operating income totaled €87.0m, or 9.7% of contributed revenue – up +26.6% (on a reported basis) compared to the previous year. This increase mainly reflects the increase in COI less the effects of business combinations, in the amount of -€4.5m, vs. -€0.9m in 2021.

Sharp increase in profit of the period (attributable to company shareholders) – Increase in dividend

Net financial income

For the year ended 31 December 2022, net financial income amounted to -€18.5m, compared with -€24.1m at the end of 2021.

This improvement reflects the slight fall in the cost of gross debt to -€17.8m, compared with -€18.4m in 2021, with the cost of gross debt at 2.56% (vs. 2.76% in 2021), and in particular the significant improvement in "Other financial income and expenses" at -€0.9m vs. -€4.7m in 2021. In 2021, this item included early repayment penalties on the senior bank debt and certain euro-PPs maturing in 2023, amounting to -€4.4m.

Income tax

For the year ended December 31, 2022, "Income tax" was -€19.2m, vs. -€14.1m one year earlier, for an effective tax rate of 28.1% vs. 31.5% in 2021.

Consolidated profit of the period

After recognizing the share of profit of equity-accounted investees in the amount of -€1.3m at December 31, 2022, vs. -€0.9m a year earlier. Profit of the period before non-controlling interests amounted to €47.9m for the year ended December 31, 2022 vs. €29.6m a year earlier.

Net of the share attributable to non-controlling equity interests totaling -€3.3m, profit of the period (attributable to company shareholders) amounted to €44.6m, representing 5.0% of contributed revenue at December 31, 2022 (vs. €28.4m, or 3.9% of contributed revenue a year earlier).

Profit of the period per share amounted to €5.72 vs. €3.64 for the year ended December 31, 2021, and the dividend was increased from €1.00 per share to €1.10 per share. The ex-dividend date is set at July 7, 2023 and the dividend will be paid from July 11, 2023.

Solid financial position

In 2022, industrial investments amounted to €105.0m, or 11.7% of contributed revenue (vs. €92.4m, or 12.6% of contributed revenue, in 2021):

• Maintenance investments were carefully managed, at €57.4m, representing 6.4% of contributed revenue (vs. €50.4m, or 6.8% of contributed revenue, in 2021), mainly due to the effects of the industrial efficiency policy.
• Development investments totaled €47.6m, or 5.3% of contributed revenue (vs. €42.0m, or 5.7% of contributed revenue in 2021), and mainly related to growth investments in Services activities and thermal treatment tools (Hazard Management).

Free operating cash flow amounted to €78.4m (vs. €77.8m in 2021), producing a ratio of free cash flow to EBITDA of 39% (vs. 46% one year earlier). This change was in particular due to the change in the working capital requirement, which was penalized by the consolidation of the new "Sanitation" activities in the amount of -€5.8m in 2022.

The cash balance amounted to €126.2m, vs. €172.2m one year earlier, reflecting the financing of acquisitions made in 2022. The liquidity position was €313.1m for the year ended December 31, 2022 vs. €342.2m at the end of 2021.

New financial debt stood at €587.4m (vs. €474.9m for the year ended December 31, 2021. This change reflects, in the amount of around +€100m, the scope effects (disbursements of the fair value of securities, WCR and financial leases of acquired companies) and in the amount of around +€27m, the non-cash variation – at constant scope – related in particular to leases (IFRS 16 effect).

Recent events and outlook

Acquisition of Assainissement Rhône-Isère (ARI)

On January 16, 2023, Séché Environnement completed the acquisition of Assainissement Rhône-Isère (ARI), since renamed Séché Assainissement Rhône-Isère.

Based in Bonnefamille (Isère) and present throughout the Auvergne-Rhône-Alpes region, this company provides sanitation, industrial cleaning and high-pressure hydrocleaning services. With its two highly qualified employees, it is licensed to work on Seveso sites and generated revenue of around €2m in 2022.

The acquisition price of around €0.7m was financed by the Group's cash.

This acquisition complements Séché Environnement's operations in the Rhône-Alpes region.

Validation of the decarbonization strategy by the SBTi

In January 2023, the Science Based Target initiative (SBTi) approved Séché Environnement's goal of reducing its greenhouse gas emissions. The SBTi acknowledged that Séché Environnement's target is based on scientific criteria and in line with the Paris Agreement on combating global warming.

Séché Environnement's decarbonization strategy targets an absolute reduction of 25% in direct greenhouse gas emissions (Scope 1) and indirect emissions related to energy consumption (Scope 2) between 2020 and 2030.

Outlook for 2023

Markets offering strong visibility and lasting positive trends

Positioned on buoyant markets offering strong visibility in the circular economy and the decarbonization of the economy, as well as the protection of the environment, human health and biodiversity, Séché Environnement offers industrial and local ecology solutions aimed at providing its clients with local, sustainable, low-carbon resources and solutions to their challenges of managing industrial and environmental risks.

It addresses the long-term issues of industrial and territorial sustainability, and meets regulatory constraints that require – in France and increasingly around the world – the implementation of restrained industrial and territorial economic policies in terms of material or energy use and the consideration of local living conditions.

In addition, faced with these clients' short-term challenges in managing the energy crisis, the sharp rise in commodity prices, and the already noticeable effects of climate change, Séché Environnement's services meet the urgent need for these clients to find local, low-carbon solutions to ensure the security of their supplies of strategic resources such as energy, raw materials, and water.

Continued organic growth at a steady pace
Full-year contribution of newly consolidated activities

For its historical scope⁷, after financial year 2022 saw strong organic growth, exceptionally large environmental emergencies contracts in France and internationally, and the post-Covid rebound in Solarca's activities and Latin America, Séché Environnement anticipates for 2023:

• In France, a return to a more normal pace of growth, in line with its sustainable growth level over the medium term;
• Internationally, the continuation of significant growth in the main scopes, such as Mecomer and Interwaste, which should continue to benefit from the ramping-up of their new capacities, while Latin America and Solarca are expected to return to pre-pandemic growth rates.

In its new scope, the Group will also benefit from the full-year contribution of the newly consolidated subsidiaries in 2022 and the pro rata contribution of acquisitions made at the beginning of 2023.

It will also benefit from sales momentum resulting from the roll-out of these activities, particularly in sanitation and industrial water management services, and the implementation of commercial and industrial synergies with the rest of the Group.

Overall, Séché Environnement's contributed revenue is expected to be close to €1bn in fiscal year 2023.

Solid operating margins for the historical scope
Increase in profitability for the recently consolidated activities

In its historical scope⁸, the Group is confident in its ability to continue to grow its EBITDA margin (EBITDA/contributed revenue) compared to 2022:

• in France, Séché Environnement will benefit from positive commercial effects on positively oriented markets, as well as the impact of its industrial efficiency strategy based on highly selective investments, improvements in its facility utilization rates and the optimization of its logistics;
• internationally, the Group should confirm the improvement in its operating margin, driven by the anticipated growth of its main subsidiaries.

For the new scope consolidated in 2022, particularly in the sanitation and industrial water businesses, Séché Environnement will work to integrate these activities and implement industrial and commercial synergies with the Group's other business lines in order to gradually bring their EBITDA margin up to Group standards, starting in 2023.

Overall, the EBITDA margin is expected to be close to 22% of consolidated contributed revenue.

Controlled industrial investments
Free cash flow generation and financial flexibility confirmed

Industrial investment is expected to be in line with 2022, in the region of €100m, or around 10% of contributed revenue, illustrating the Group's return to its target levels of industrial investment after making significant investments in growth in 2021 and 2022.

In addition, the Group will focus on maximizing its free operating cash flow generation, for example by returning to a zero working capital requirement, excluding acquisitions carried out in 2023. This will help it meet the goal of achieving a ratio of free cash flow to EBITDA of above 35% and, more broadly, of recording a financial leverage ratio⁹ (net financial debt/EBITDA) of 2.7x, excluding acquisitions.

Medium-term outlook

Financial outlook

Séché Environnement's financial achievements in 2022 boost the Group's confidence that it will deliver on its objectives by 2025¹⁰.

However, given the significant changes in the scope of consolidation in 2022 and early 2023 – as of the date of writing of this press release – Séché Environnement expects to update its medium-term outlook in 2023 to take into account the contribution of the new scopes in its three-year forecasts (through to 2026).

Non-financial performance outlook

Séché Environnement maintains its 2030 Climate strategy, which is aligned with the objectives of the 2017 Paris Agreement, under which it will reduce its own greenhouse gas emissions by 10% by 2025 and increase the greenhouse gases avoided by its clients by 40% thanks to its recycling activities.

The achievement of these objectives will draw on an action plan with three complementary drivers:

• Energy restraint: the Group aims to reduce the amount of energy consumed at each site by at least -10% between 2020 and 2025. With regard to industrial and tertiary buildings, energy reduction actions focus on heating, lighting and office tools. For industrial processes, they target air production, cooling, heat production, leachate and biogas management, as well as the optimization of the use of production and transportation vehicles.
• Energy substitution: the Group favors low-carbon energy consumption. It primarily seeks to use the energy produced from waste at its sites (biogas, heat, electricity), which has a lower emission factor than energy it purchases. In addition, the Group is stepping up its efforts to replace the fossil fuels it uses with less carbon-intensive energies (from fossil or non-fossil sources).
• Combating fugitive emissions: Séché Environnement implements policies to combat diffuse biogas emissions and to detect and reduce biogas emissions by continuously carrying out corrective actions and adapting its operations. 

Results presentation webcast March 7, 2022 at 8.30 a.m.

Connect on the home page of the Séché Environnement website

In French: https://www.groupe-seche.com/fr

In English: https://www.groupe-seche.com/en

Next release

First-quarter 2023 turnover: April 25, 2023 after market close

General Meeting of Shareholders April 28, 2023

About Séché Environnement

Séché Environnement is a leading player in waste management, including the most complex and hazardous waste, and in environmental services, particularly in the event of an environmental emergency.

SÉCHÉ ENVIRONNEMENT

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