sgd group s.a.s. quarterly report june 30, 2016 · 2016. 9. 1. · on july 25th 2016, jic...
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SGD Group S.A.S.
Quarterly Report
June 30, 2016
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 1
Contents
Page
Definitions & structure of the information reported ................................................................................................. 2
Management’s discussion and analysis of financial condition and results of operations………………….. 5
Consolidated financial statements .......................................................................................................................... 9
Contact SGD Group................................................................................................................................................ 35
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 2
Important notice
This report may include forward-looking statements. Forward-looking statements are statements regarding or based upon our management’s current intentions, beliefs or expectations relating to, among other things, SGD’s future results of operations, financial condition, liquidity, prospects, growth, strategies or developments in the industry in which we operate. By their nature, forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results or future events to differ materially from those expressed or implied thereby. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this report regarding trends or current activities should not be taken as a report that such trends or activities will continue in the future. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any such forward-looking statements, which speak only as of the date of this report. The information contained in this report is subject to change without notice. No re-report or warranty, express or implied, is made as to the fairness, accuracy, reasonableness or completeness of the information contained herein and no reliance should be placed on it.
Definitions & structure of the information reported
Explanation of key income statement line items
Set forth below is a brief description of the key line items of our income statement data.
Total Revenue
Total Revenue is the sum of Revenue and Other business income.
Revenue is recognized when the significant risks and rewards of the ownership of goods are transferred to the buyer, usually upon the delivery of goods, from our pharmaceutical glass packaging operation.
Other business income consists of the sale of accessories and technical support as well as the mold development costs recharged to customers.
Transport related to sales
Transport related to sales consists of the costs of transporting our products to our customers.
Variable selling expenses
Variable selling expenses consist of commissions charged by our sales agents and sales taxes.
Costs of goods sold
Cost of goods sold is the sum of material consumption and change in inventory, production costs, production depreciation and other operating income/expense.
Materials consumption and change in inventory
Materials consumption and change in inventory consist of the cost of raw materials used in glass composition, packaging material, subcontracted decoration costs and the costs of purchasing the finished goods of our trading business, VG Emballage.
Production cost
Production cost consists of labor costs including the costs of temporary workers, costs related to the sorting of our glass packaging, energy, maintenance.
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 3
Production depreciation
Production depreciation consists of the depreciation of buildings, machinery and equipment over their respective useful lives. Production depreciation corresponds to the line item entitled ‘‘production amortization’’ in our combined financial statements.
Other operating income/expense
Other operating income/expense consists of manufacturing facility overhead and taxes, repairs and maintenance, health and safety costs, insurance premiums and the costs of claims.
Sales, general and administrative expense
Sales, general and administrative expense consists of the costs of general management, sales, marketing, research and development, engineering and legal as well as the costs of corporate and business unit operations, finance, purchasing, information technology, supply chain and quality control. Our sales, general and administrative expense includes the expenses of our headquarter operations and the expenses of certain services shared with SGD Parfumerie France and its subsidiaries such as Legal and IT, which are allocated to our business pursuant to the Transitional Service Agreement with SGD Parfumerie France. The nature of costs is personnel costs, external contracts (fees, maintenance) and depreciation. This line is net of the headquarters management fees recharged to sites.
Non-IFRS measures
Certain financial measures and ratios related thereto used in this report, including EBITDA, and EBITDA margin (collectively, the “EBITDA measures”), are not specifically defined under IFRS or any other generally accepted accounting principles. These measures are presented in this report because we believe that they are among the measures used by management to evaluate the cash available to us to fund ongoing, long-term obligations and they are frequently used by securities analysts, high yield investors and other interested parties for valuation purposes or as a common measure of the ability of issuers to incur and meet debt service obligations. These measures may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and you should not consider such items as alternatives to revenue, gross operating profit or net profit/loss of the year or any other performance measures derived in accordance with IFRS, and they may be different from similarly titled measures used by other companies. You are encouraged to evaluate each of the adjustments reflected in our presentation of the EBITDA measures and whether you consider each to be appropriate.
EBITDA
We define “EBITDA” as operating income from ordinary activities before accumulated depreciation and adjusted for non-recurring items recorded under ‘other operating income/expense’ in the income statement in the audited consolidated financial statements as of and for the 6 months ended June 30, 2016 and 2015.
For further description of the definitions, please refer to the offering memorandum and 2015 Annual Report.
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 4
Structure of the information reported
Completion of demerger on December 31st 2015
SGD has successfully completed the split of its pharmaceutical glass packaging operations from its perfumery glass packaging operations. This process has been engaged due to the different drivers and economic cycles applicable to both business units and an increased need to develop business-specific strategies. The key milestones were: 1. Legal separation of the perfumery and pharmaceutical activities, except for the Mers plant.
o Completed on April 24th, 2014. 2. Completion of the demerger with separation of the Mers plant activities.
o Concluded on December 31st, 2015. As such, all the financial information provided in this presentation refers solely (unless stated otherwise) to the financial information relating to the pharmaceutical glass packaging operations of the Company, which constitutes our sole business following the transfer of the Mers-les-Bains perfumery glass packaging operations to SGD Parfumerie France. This presentation should be read in conjunction with the SGD bondholder report and the unaudited combined account statements as at June 30, 2014 posted on the Company’s Investor Relations website.
Recent Developments
JIC has signed the share purchase agreement with Oaktree to acquire SGD
China Jianyin Investment Ltd. (“JIC”), a long-term investor, entered into exclusive discussions with Oaktree on May 9th, 2016 to acquire SGD Group S.A.S. Following Oaktree's acquisition in 2010, SGD Group S.A.S, was able to expand its leadership in high end type I glass containers, supported by its new production site in Saint Quentin, and develop a new offer in the conversion market thanks to the acquisition of the Indian market player Cogent Glass. Further to the completion of the demerger of the perfumery glass packaging operations in 2015, SGD Group S.A.S. is now focused on products dedicated to the largest pharmaceutical companies worldwide. JIC notably benefits from a successful track-record of investments in industry sector leaders, and is keen to work along with SGD Group S.A.S management to implement the group’s long-term strategy and operational excellence plan, as well as to further develop its high quality product portfolio and leverage its know-how. On July 25th 2016, JIC Investment Co., Ltd. has signed a share purchase agreement with SGD Luxembourg Holdings S.C.A., the direct parent company of the Issuer and a portfolio company of funds managed by Oaktree Capital Management, L.P., to acquire all of the issued share capital of the Issuer, if the conditions precedent to the proposed Acquisition are satisfied. The proposed Acquisition is subject to competition and other regulatory approvals. The Purchaser has informed SGD Group S.A.S (“the Issuer”) of its intention to procure that the Issuer will redeem in full the Notes on or about the closing date of the proposed Acquisition in accordance with the “Optional Redemption” provision in the Notes, should the Acquisition be completed. There can be no assurance that the proposed Acquisition will be completed or that the Issuer will redeem the Notes on or about the closing date of the proposed Acquisition or at all. If the Issuer elects to exercise its right to redeem the Notes, it will transmit a notice of redemption to holders of the Notes in advance of such redemption in accordance with the terms of the indenture governing the Notes.
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 5
Management’s discussion and analysis of financial condition and results of operations
Certain information in the discussion and analysis set forth below and elsewhere in this report includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in these forward-looking statements. This discussion and analysis should also be read in conjunction with the combined financial statements included elsewhere in this report, including the notes thereto, and financial information appearing in “Presentation of financial information and other data,” and “Selected combined financial information.”
Some of the measures used in this report, such as EBITDA, are not measurements of financial performance under IFRS, but have been prepared on the basis of IFRS amounts, and should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity or as an alternative to revenue, gross operating profit or net profit/loss of the year, as indicators of our operating performance or any other measures of performance derived in accordance with IFRS.
Certain monetary amounts, percentages and other figures included in this report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
Operating results
3 and 6 months ended June 30, 2016 compared to 3 and 6 months ended June 30, 2015
The table below sets forth certain line items from the income statement of our pharmaceutical glass packaging operations for the 3 and 6 months ended June 30, 2016 compared to the corresponding 2015 periods.
* For a reconciliation of EBITDA to operating income from ordinary activities, see “Selected consolidated financial information.”
Total Revenue
For the six months period ended June 30th 2016, revenue increased by 1.5% from €142.2 million to €144.4m.
The revenue growth was mainly driven by Cogent’s sales. The good performance of Cogent was partially
offset though by a negative FX impact coming from China and India and by softer markets in Western
Europe, especially in France. Additionally, on a year to date basis, we are still experiencing some phasing
issue in Type I sales following the inventory building from our customers (to anticipate any delay in St Quentin
ramp-up).
2016 2015 2016 2015
Total Revenue ……………………………………………………. 73.3 73.6 (0.3) (0.4)% 144.4 142.2 2.2 1.5%
Transport related to sales …………………………………………….. (3.7) (4.0) 0.3 (7.1)% (7.6) (7.5) (0.1) 1.6%
Var. selling expenses ………………………………………………… (1.4) (1.5) 0.1 (4.9)% (3.0) (2.9) (0.1) 4.8%
Cost of good sold …………………………………………………….. (52.6) (54.4) 1.8 (3.3)% (103.8) (103.4) (0.3) 0.3%
Sales, general and administrative expense ……………………….. (7.1) (6.3) (0.9) 14.0% (13.5) (12.2) (1.3) 10.5%
Operating income from ordinary activities ……………………. 8.4 7.4 1.0 13.4% 16.5 16.2 0.3 2.0%
EBITDA* …………………………………………………………………. 16.3 15.5 0.8 5.2% 32.5 31.8 0.7 2.2%
For the 6 months
ended
June 30,
(in € millions, except percentages) For the 3 months
ended
June 30,
Increase/
(decrease)
Increase/
(decrease)
Var % Var %
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 6
The table below shows the split of revenue by type of pharmaceutical glass packaging products for the 3 and 6 months ended June 30, 2016 and 2015.
*“Trading and Other” primarily relates to the revenue from our trading business VGE and the revenue from the sale of non-pharmaceutical packaging products from our Zhanjiang manufacturing facility. It is also including since May 1st, 2015 the revenue from Cogent Glass Ltd.
Revenue from Type I pharmaceutical glass packaging products decreased by €4.1 million, or (10.1)%, from €40.7 million for the 6 months ended June 30, 2015 to €36.6 million for the 6 months ended June 30, 2016. As mentioned before, this is reflecting the orders anticipations from some customers to secure any possible delay with St Quentin ramp-up. Revenue from Type II pharmaceutical glass packaging products decreased by €1.5 million, or (3.8)%, from €39.6 million for the 6 months ended June 30, 2015 to €38.1 million for the 6 months ended June 30, 2016. SGD Kipfenberg continuous strong results were more than offset by the soft markets in Western Europe and MEA on Infusion products.
Revenue from Type III pharmaceutical glass packaging products increased by €0.4 million, or 1.0%, from €35.9 million for the 6 months ended June 30, 2015 to €36.3 million for the 6 months ended June 30, 2016. This increase was supported by a strong growth in Asia Pacific and the Americas. Trading and Other revenue increased by €7.5 million, or 28.7%, from €26.0 million for the 6 months ended June 30, 2015 to €33.4 million for the 6 months ended June 30, 2016. Since May 1st 2015, this segment includes the revenues generated by our acquisition in India: Cogent Glass. Revenue generated by Cogent was €7.7 million for the period. Revenues were driven by both molded and converted pharmaceutical packaging products.
Transport related to sales
Transport costs related to sales increased by €0.1 million, or 1.6%, from €7.5 million for the 6 months ended June 30, 2015 to €7.6 million for the 6 months ended June 30, 2016.
Variable selling expenses
Variable selling expenses increased by €0.1 million, or 4.8% to €3.0 million from €2.9 million for the 6 months ended June 30, 2016.
Costs of goods sold
On the back of the increase in revenues, costs of goods sold (COGS) increased by €0.3 million, or 0.3%, from €103.4 million for the 6 months ended June 30, 2015 to €103.8 million for the 6 months ended June 30, 2016.
Sales, general and administrative expense
Sales, general and administrative expense increased by €1.3 million or 10.5% from €12.2 million for the 6 months ended June 30, 2015 to €13.5 million for the 6 months ended June 30, 2016. The increase in Sales, General and Administrative expenses is mainly driven by the strengthening of the R&D team and related to Cogent’s integration.
2016 2015 2016 2015
Type I ……………………………………………………………….. 18.6 21.2 (2.7) (12.6)% 36.6 40.7 (4.1) (10.1)%
Type II ………………………………………………………………….. 19.8 20.0 (0.3) (1.4)% 38.1 39.6 (1.5) (3.8)%
Type III …………………………………………………………………. 18.3 18.3 (0.0) (0.0)% 36.3 35.9 0.4 1.0%
Trading & Others* ………………………………………………….. 16.7 14.0 2.7 19.1% 33.4 26.0 7.5 28.7%
Total Revenue ……………………………………………………… 73.3 73.6 (0.3) (0.4)% 144.4 142.2 2.2 1.5%
For the 6 months
ended
June 30, Var %
(in € millions, except percentages) For the 3 months
ended
June 30,
Increase/
(decrease)
Var %
Increase/
(decrease)
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 7
EBITDA
EBITDA increased by €0.7 million, or 2.2%, from €31.8 million for the 6 months ended June 30, 2015 to
€32.5 million for the 6 months ended June 30, 2016 including the positive impact of Cogent for €0.9 million for this first 6 months of 2016.
Liquidity and capital resources
The following table presents a reconciliation of operating cash flow to EBITDA for our pharmaceutical glass packaging operations for the 3 and 6 months ended June 30, 2016 and 2015:
Operating cash flow before taxes
Operating cash flow before taxes increased by €16.1 million to €10.3 million for the 6 months ended June 30, 2016 from €(5.9) million for the 6 months ended June 30, 2015. This increase is mainly driven by lower Capex spending (especially due to the end of St Quentin project) versus last year. Even though, Working Capital management is showing improvements in Q2 2016, the year to date increase was mainly driven by higher inventories as the volume produced in St Quentin was higher than expected thanks to a better ramp-up. This trend was partially offset by lower receivables thanks to the good performance in collections (actions were implemented to correct last quarter situation on receivables).
Contractual obligations and commercial commitments
We are obliged to make further payments under various contracts, such as debt and lease arrangements, and under certain contingent obligations, such as debt guarantees.
Set forth below is a table that identifies some of the contractual obligations of our pharmaceutical glass-packaging operations as of June 30, 2016, after giving effect to the Master Reorganisation Agreement and the Refinancing.
2016 2015 2016 2015
Ebitda ………………………………………………………………… 16.3 15.5 0.8 5.2% 32.5 31.8 0.7 2.2%
Capital expenditure ……………………………………………….. (5.2) (17.5) 12.3 (70.3)% (14.6) (30.3) 15.7 (51.9)%
Change in working capital …………………………………………. 1.5 (2.6) 4.1 (156.3)% (7.7) (7.4) (0.3) 3.8%
Operating cash flow before taxes ……………………………………. 12.6 (4.6) 17.2 NA 10.3 (5.9) 16.1 NA
Increase/
(decrease)
Var %
For the 6 months
ended
June 30,
(in € millions, except percentages) For the 3 months
ended
June 30,
Increase/
(decrease)
Var %
Less than 1 to 5 More than Total
1 year years 5 years
Notes issued …………………………………………………….. 350.0 350.0
Operating leases …………………………………………………. 3.9 4.3 0.4 8.6
Finance leases ……………………………………………………….. 7.9 13.3 21.2
CICE/CIR & ARI facilities ……………………………………….. 10.5 10.5
Working capital facility ……………………………………………..……………10.2 10.2
Revolving Credit Facility ………………………………………………..… 43.0 43.0
Vendor's Note …………………………………………………..… 30.8 30.8
Cogent local debt ………………………………………………..…… 3.4 5.3 8.7
Factoring ………………………………………………………………. 0.0 0.0
Total ………………………………………………………………… 68.3 414.2 0.4 482.9
(in € millions)
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 8
Quantitative and qualitative disclosure about financial risk
In the ordinary course of business, we are exposed to a variety of financial risks. We monitor and manage these risks as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets, and seek to reduce their potential adverse effects on our results of operations.
All the main factors of risks have been disclosed in the Offering Memorandum and in the 2015 Annual Report. There are no significant evolutions of these factors and no change in the policy of the management to mitigate them during the first 6 months, ended June 30, 2016. For further description, please refer to the
Offering Memorandum and in the 2015 Annual Report.
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 9
Consolidated financial statements as at June 30,
2016
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 10
CONTENTS
CONSOLIDATED BALANCE SHEET 11
CONSOLIDATED INCOME STATEMENT 12
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT 14
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY 15
CONSOLIDATED CASH FLOW STATEMENT 16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18
BASIS OF PREPARATION 18
NOTE 1. PRESENTATION OF THE BUSINESS AND MAJOR EVENTS 18 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES 20 NOTE 3. SEGMENT INFORMATION 20 NOTE 4. GOODWILL 24 NOTE 5. INTANGIBLE ASSETS 25 NOTE 6. PROPERTY PLANT AND EQUIPMENT 26 NOTE 7. INVENTORIES 27 NOTE 8. TRADE AND SIMILAR RECEIVABLES 27 NOTE 9. OTHER CURRENT ASSETS 28 NOTE 10. CASH AND CASH EQUIVALENTS 28 NOTE 11. PROVISIONS 28 NOTE 12. PENSIONS AND RELATED BENEFITS 29 NOTE 13. FINANCIAL DEBT 29 NOTE 14. DEFERRED TAX 33 NOTE 15. TRADE AND SIMILAR PAYABLES 33 NOTE 16. OTHER CURRENT LIABILITIES 33 NOTE 17. OTHER OPERATING INCOME AND EXPENSE (YTD) – 6 MONTHS 33 NOTE 18. COST OF FINANCIAL DEBT (YTD) – 6 MONTHS 34 NOTE 19. OTHER FINANCIAL INCOME AND EXPENSE (YTD) – 6 MONTHS 34 NOTE 20. TAX CHARGES / INCOME 34 NOTE 21. OFF-BALANCE SHEET COMMITMENTS 34
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 11
CONSOLIDATED BALANCE SHEET
Period ended June 30, 2016
(1) The restatements in the balance sheet as of December 31, 2015 relate to the purchase price allocation of Netherlands Glass Investments and Cogent Glass that was performed within the 12-month period following the acquisition date on May 13, 2015.
(in thousands of euros) Notes 30-Jun-1631-Dec-15
Restated31-Dec-15
Non-current assets
Goodwi l l 4 11 124 11 124 14 605
Intangible assets 5 5 405 6 689 2 997
Property, plant and equipment 6 178 654 182 605 182 605
Non derivative financia l assets 5 323 38 824 38 824
Total non current assets 200 506 239 242 239 031
Current assets
Inventories 7 57 173 50 976 50 976
Trade accounts receivable 8 49 111 47 316 47 316
Other current assets 9 28 130 29 078 29 078
Current tax assets 19 38 38
Current non derivative financia l assets 387 225 225
Cash and cash equiva lents 10 14 986 9 086 9 086
Total current assets 149 945 136 719 136 719
TOTAL ASSETS 350 451 375 961 375 750
Equity and liabilities
Capita l 324 538 358 031 358 031
Retained earnings (600 245) (579 070) (579 070)
Convers ion reserves 2 401 2 449 2 449
Net profi t/loss for the year (6 166) (17 494) (16 741)
Other equity instruments 47 488 47 488 47 488
Equity (Group share) (231 857) (188 596) (187 843)
Non control l ing interests (1 020) (286) (1 250)
Total equity (232 877) (188 882) (189 093)
Non current liabilities
Pens ions 12 20 582 20 048 20 048
Borrowings 13 416 736 414 128 414 128
Deferred tax l iabi l i ties 14 516 606 606
Total non current liabilities 437 834 434 782 434 782
Current liabilities
Provis ions 11 1 508 2 978 2 978
Trade accounts payable 15 41 673 41 472 41 472
Other current l iabi l i ties 16 31 578 35 246 35 246
Current tax l iabi l i ties 795
Current bank loans and credit 13 69 940 50 365 50 365
Total current liabilities 145 494 130 061 130 061
TOTAL EQUITY AND LIABILITIES 350 451 375 961 375 750
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 12
CONSOLIDATED INCOME STATEMENT Period ended June 30, 2016
30-Jun-16 30-Jun-15
6 months 6 months
Revenue 143 636 141 173
Other bus iness income 753 1 014
Revenue and other income 144 389 142 187
Transport related to sa les (7 625) (7 505)
Variable sa le expenses (3 038) (2 898)
Materia ls consumption and change in inventory (22 662) (26 829)
Production cost (57 494) (54 925)
Production amortization (16 133) (15 104)
Overheads , tax and costs on other operations (8 232) (6 551)
Gross operating profit 29 206 28 376
Sales , Genera l and Adminis trative expense (13 482) (14 134)
Management fees 1 929
Operating income from ordinary activities 15 724 16 171
Other operating income 17 22 26
Other operating expenses 17 (3 633) (3 774)
Operating profit/loss 12 113 12 423
Cost of gross financia l debt 18 (13 263) (11 264)
Other financia l income 19 (970) (22)
Other financia l expenses 19 (2 177) (459)
Cost of net financial debt (16 410) (11 744)
Pre-tax profit/loss (4 297) 678
Tax expense/income 20 (2 651) (2 823)
Net profit/loss from continued activities (6 948) (2 145)
Net profi t/loss from discontinued activi ties (3 380)
Net profit/loss of the year (6 948) (5 525)
Non control l ing interests (782) (342)
Net profi t/loss - Group share (6 166) (5 183)
(in thousand of euros) Notes
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 13
CONSOLIDATED INCOME STATEMENT Quarter ended June 30, 2016
30-Jun-16 30-Jun-15
3 months 3 months
Revenue 73 284 72 900
Other bus iness income 62 715
Revenue and other income 73 346 73 615
Transport related to sa les (3 722) (4 007)
Variable sa le expenses (1 411) (1 484)
Materia ls consumption and change in inventory (12 381) (15 139)
Production cost (28 451) (28 122)
Production amortization (8 377) (7 863)
Overheads , tax and costs on other operations (4 199) (3 305)
Gross operating profit 14 803 13 694
Sales , Genera l and Adminis trative expense (7 150) (7 103)
Management fees 2 568
Operating income from ordinary activities 7 655 7 159
Other operating income 1 20
Other operating expenses (2 043) (2 789)
Operating profit/loss 5 613 4 390
Cost of gross financia l debt (6 354) (5 730)
Other financia l income 886 (26)
Other financia l expenses (1 522) (1 633)
Cost of net financial debt (6 989) (7 389)
Pre-tax profit/loss (1 376) (2 999)
Tax expense/income (1 417) (1 372)
Net profit/loss from continued activities (2 793) (4 371)
Net profi t/loss from discontinued activi ties (4 465)
Net profit/loss of the year (2 793) (8 836)
Non control l ing interests (408) (342)
Net profi t/loss - Group share (2 385) (8 494)
(in thousand of euros)
SGD Group - Consolidated financial statements Confidential Quarter ended June 30, 2016
Page 14
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT Period ended June 30, 2016
30-Jun-16 30-Jun-15
6 months 6 months
Net profi t/loss for the year (6 948) (5 525)
() 470
127
127 470
Total of other comprehensive income items 127 470
Comprehensive income (6 822) (5 055)
Of which :
Group share (6 087) (4 711)
Non control l ing interests (734) (344)
(in thousands of euros)
Foreign currency trans lation
Changes in fa i r va lue of hedging instruments
Total of other comprehensive income items likely to be later reclassified in net
income
SGD Group - Consolidated financial statements Confidential Period ended June 30, 2016
Page 15
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
At the end of June 30, 2016
(in thousands of euros, except per share data)Number of
shares
Amount of
capita l
Retained
earnings
Other recyclable
reserves in profi t
and loss
Convers ion
reserves
Other equity
instruments
(1)
Equity (Group
share)
Equity (minori ty
interests )Total equity
Balance at January 1, 2015 606 154 605 332 220 (575 642) 2 057 47 488 (193 877) (193 877)
Consol idated profi t/loss for the year (17 494) (17 494) (1 316) (18 810)
Other comprehensive income items
Change in trans lation adjustments 392 392 392
Change in remeasurements of defined benefi t l iabi l i ty
(asset) net of tax3 101 3 101 3 101
Total other comprehens ive income i tems 3 101 392 3 493 3 493
Comprehensive income for the period (14 393) 392 (14 001) (1 316) (15 317)
Interests on bond loan agreement (2) (6 529) (6 529) (6 529)
Non control l ing interests in Cogent Glass 1 030 1 030
Capita l increase/decrease 25 811 25 811 25 811
Balance at December 31, 2015 restated 606 154 605 358 031 (596 564) 2 449 47 488 (188 596) (286) (188 882)
Balance at January 1, 2016 606 154 605 358 031 (596 564) 2 449 47 488 (188 596) (286) (188 882)
Consol idated profi t/loss for the year (6 166) (6 166) (782) (6 948)
Other comprehensive income items
Change in trans lation adjustments (48) (48) 48 ()
Change in fa i r va lue of hedging instruments net of tax 127 127 127
Change in remeasurements of defined benefi t l iabi l i ty
(asset) net of tax
Total other comprehens ive income i tems 127 (48) 79 48 127
Comprehensive income for the period (6 166) 127 (48) (6 087) (734) (6 821)
Interests on bond loan agreement (3) (3 681) (3 681) (3 681)
Capita l increase/decrease (33 493) (33 493) (33 493)
Balance at June 30, 2016 606 154 605 324 538 (606 411) 127 2 401 47 488 (231 857) (1 020) (232 877)
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 15
(1) The change in the terms of the bond loan agreement in 2012 resulted in the bond loan agreement being reclassified from a debt instrument to an equity instrument for a total amount of €55.7 million. A partial repayment of the bond loan was made on April 29, 2014 for an amount of €15 million constituted of €8.2 million of principal (classified as other equity instruments) and €6.8 million of accrued interests (classified as financial debt)
(2) At December 31 2015, the financial interests on the bond loan agreement classified as financial
debt are booked through net equity for €(6.6) million. (3) At June 30, 2016, the financial interests on the bond loan agreement classified as financial debt
are booked through net equity for €(3.7) million.
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 16
CONSOLIDATED CASH FLOW STATEMENT Period ended June 30, 2016
6 months 6 months
(in thousand of euros) 30-Jun-16 30-Jun-15
Total consol idated net profi t/(loss ) (6 948) (5 525)
Adjustments:
El imination of net (profi t)/loss from discontinued activi ties 3 380
El imination of depreciation and provis ions 15 965 16 165
El imination of reva luation profi t and loss 127
El imination of (ga ins )/losses on disposal (8) 487
El imination of dividend income
Operating cash flow after cost of net financial debt and tax 9 136 14 506
El imination of tax expense/(income) 2 651 2 823
El imination of cost of net financia l debt 16 410 11 744
Operating cash flow before cost of net financial debt and tax 28 197 29 074
Change in inventories (6 729) (13)
Change in trade receivables (1 471) (12 029)
Change in trade payables 1 264 5 316
Change in other working capita l i tems 1 216 (995)
Impact of change in working capital requirement (5 721) (7 720)
Tax paid (2 475) (2 733)
CASH FLOW FROM OPERATING ACTIVITIES 20 001 18 621
Impact of changes in scope 1 617
Purchases of tangible and intangible assets (16 489) (25 360)
Sa le of tangible and intangible assets 102
CASH FLOWS FROM INVESTMENT ACTIVITIES (16 489) (23 641)
Repayment of loans (4 160) (882)
Net financia l interest pa id (12 665) (10 984)
Other cash flows from financing activi ties 20 697 24 507
CASH FLOWS FROM FINANCING ACTIVITIES 3 872 12 641
Impact of changes in accounting and exchange principles (1 485) 164
CHANGE IN CASH FLOW 5 899 7 786
Opening cash 9 086 7 971
Clos ing cash 14 986 15 757
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 17
CONSOLIDATED CASH FLOW STATEMENT Quarter ended June 30, 2016
3 months 3 months
(in thousand of euros) 30-Jun-16 30-Jun-15
Total consol idated net profi t/(loss ) (2 792) (8 836)
Adjustments:
El imination of net (profi t)/loss from discontinued activi ties 4 465
El imination of depreciation and provis ions 8 942 8 115
El imination of reva luation profi t and loss 127
El imination of (ga ins )/losses on disposal 517
Operating cash flow after cost of net financial debt and tax 6 277 4 261
El imination of tax expense/(income) 1 417 1 372
El imination of cost of net financia l debt 6 989 7 389
Operating cash flow before cost of net financial debt and tax 14 683 13 022
Change in inventories (2 177) 1 730
Change in trade receivables 8 738 (7 102)
Change in trade payables (4 025) 2 421
Change in other working capita l i tems (384) (1 125)
Impact of change in working capital requirement 2 152 (4 077)
Tax paid (2 156) (1 643)
CASH FLOW FROM OPERATING ACTIVITIES 14 679 7 302
Impact of changes in scope 1 617
Purchases of tangible and intangible assets (7 131) (15 221)
Sa le of tangible and intangible assets 72
CASH FLOWS FROM INVESTMENT ACTIVITIES (7 131) (13 532)
Repayment of loans (1 940) (882)
Net financia l interest pa id (11 089) (10 532)
Other cash flows from financing activi ties 3 089 20 549
CASH FLOWS FROM FINANCING ACTIVITIES (9 940) 9 135
Impact of changes in accounting and exchange principles 519 (142)
CHANGE IN CASH FLOW (1 872) 2 764
Opening cash 16 858 12 994
Clos ing cash 14 986 15 757
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PRESENTATION OF THE BUSINESS AND MAJOR EVENTS 1.1 References of the Company SGD Group S.A.S (SGD or the “Company”) is a Société par Actions Simplifiée [simplified joint stock company] formed under French law and based in France. The Company was founded in early 2007 in order to acquire the Bottling business of the Saint Gobain Group, through a leveraged buyout operation (LBO) completed on March 29, 2007. The company publishes consolidated financial statements in accordance with Article L. 233-16 of the French Commercial Code. The Company’s consolidated financial statements for the quarter ended June 30, 2016 comprise the Company and its subsidiaries (together referred to as “the Group”). The consolidated financial statements at December 31, 2016 cover a 6-month period of Group activity. 1.2 Features of the business The Group operates mainly in Europe (Germany, Spain and France), in China and in India and has 7 subsidiaries. The Group designs, manufactures and markets bottles for the pharmaceutical and perfumery industries, and is the worldwide leader in the manufacturing and marketing of bottles for the health industry, renowned for its innovation capabilities and its wide range of glass types. The Group is setting world standards for manufacturing processes and quality. 1.3 Major events of FY 2015
Building of the new Type I plant in Saint Quentin La Motte The Group decided on November 29, 2013 to build a new plant for the glass manufacturing exclusively dedicated to Pharmacy in Saint Quentin La Motte, near the Mers les Bains plant. The construction work started in April 2014 and will be completed in 2016. The transfer of the Pharmacy production was gradually transferred from the Mers les Bains plant to the Saint Quentin La Motte new plant and has been completed in December 2015.
Separation of Pharmacy and Perfumery business The last step of the reorganization took place in December 2015 after the completion of the transfer of the Pharmacy production from the Mers les Bains plant to the new Pharmacy plant in Saint Quentin La Motte and resulted in the physical and legal split of the Perfumery business of SGD S.A. This legal separation was carried out through a disposal of the Perfumery business by SGD S.A. to SGD Parfumerie France (“Perfumery Activity Transfer”) on December 31, 2015. This disposal was coupled with the disposal of the land and buidings constituting the industrial site of Mers les Bains. The total consolidated impact of the Perfumery Activity Transfer booked in profit and loss of discontinued activities was €7.6 million and mainly related to the impact of the employee benefits.
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 19
The Perfumery Activity Transfer has been agreed and accepted through the final and definite price of €1,500,000.
The following items have also been sold with the business transfer :
- receivables related to the business for €17,902,142.42 - inventories (i) of raw materials and (ii) of finished goods and new trading goods for
€45,452,622.24
- financial assets (mainly constituted of guarantees and deposits) for €2,789,247.78 - the bank account attached to the Perfumery business for €9,696,000€
The total price, that was definitely determined in the framework of the post transfer statutory accounts
achieved during the first 2016 quarter, was €77,340,012.44.
In accordance with the disposal deed, the whole price of the operation has been paid by SGD
Parfumerie France to SGD S.A. :
(i) Through an offset with the Perfumery Supported Debts for a total amount of €46,358,993.83; and
(ii) Through a vendor note that SGD S.A. has granted to SGD Parfumerie France for the balance, corresponding to the difference between α/ the Global Price of the operation and β/ the amount of Perfumery Supported Debts, i.e. an amount of €33,493,118.61. .
The real estate price for €2.500.000 million has been included in the Vendor Note.
At the end of the reorganization, SGD Group is fully dedicated to the manufacturing and marketing of products for the Pharmacy business.
On March 31, 2016, the Vendor Note has been then treated in compliance with the terms of the
« Business Transfer Agreement » signed in April 2014, i.e. carry out a series of operations of
delegation / offset / disposal of the receivable with the following steps :
- Upstream of the vendor note by SGD SA to SGD Group SAS through a reduction of a part of
the intercompany loan existing between SGD SA and SGD Group SAS
- Upstream of the vendor note by SGD Group SAS to SGD Luxembourg Holdings through a
reduction of the share capital of SGD Group SAS for a total amount of €33,493,118.61.
Business acquisition in India On May 13, 2015, SGD Group S.A.S. acquired 100% of the share capital and voting rights of a Dutch company Netherlands Glass Investments B.V. and receivables related to Shareholder’s loans. Netherlands Glass Investments B.V. is a holding company which owns 73.89% of the share capital and voting rights of an Indian company, Cogent Glass Limited. Cogent Glass Limited is an India-based manufacturer of Type I molded and tubular glass vials for the pharmaceutical industry. Cogent’s acquisition represents a major opportunity for SGD pharmaceutical division and will consolidate its leadership position in this sector. The acquisition will enable SGD Group to enter into the tubular conversion market and benefit from the fast-growing Indian pharmaceutical market. The acquisition was paid through a vendor loan granted to SGD Group SAS by OCM Luxembourg for an amount of €28,450,000. The business combination has led to the accounting of a goodwill for €14.6 million.
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 20
1.4 Major events of quarter ended June 30, 2016 The sole shareholder of SGD Group SAS, Oaktree, has carried out a strategic review of the SGD Group. Following this review, Oaktree has entered on May 9th 2016 into exclusive discussions with China Jianyin Investment Ltd (“JIC”), a long term investor, to sell SGD Group. On July 25th 2016, JIC has signed a share purchase agreement with SGD Luxembourg Holdings SCA, the direct parent of SGD Group SAS, and a portfolio company of funds managed by Oaktree Capital Management, L.P., to acquire all of the issued share capital of SGD Group SAS, if the conditions precedent to the proposed acquisition are satisfied. The proposed acquisition is subject to completion and other regulatory approvals. SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements are presented in euros and all values are rounded to the nearest thousandth unless otherwise stated. The significant accounting policies used for the consolidated financial statements for the financial semester ended June 30, 2016 are the same than the ones described in the Annual consolidated Financial Statements as at December 31, 2015. SEGMENT INFORMATION For the purpose of segment reporting, the Group’s activities are split into three operating segments in accordance with IFRS 8. In SGD Group organization, the business performance is managed by geographical area and is split into three segments (Europe, Emerging countries, Corporate & Other). The segment reporting presented below consists of operating income from ordinary activities used to calculate EBITDA and capital expenditure. The presented EBITDA does not include non-recurring items grouped under the category of “Other operating income and expenses” in the consolidated income statement. Inter-segment transactions, eliminated in the consolidated financial statements, are presented in the “Elimination” column for purposes of segment reporting. The measurement principles used by the Group in preparing this segment reporting are based on IFRS standards as adopted by the EU.
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 21
Consolidated information by segment At June 30, 2016 (YTD) – 6 months
(in thousands of euros) EuropeEmerging
countries
Corporate &
OtherElimination Group
Revenue 128 702 24 452 17 962 (27 480) 143 636
Other bus iness income 507 307 11 (72) 753
Revenue and other income 129 209 24 759 17 973 (27 552) 144 389
Transport related to sa les (5 822) (1 153) (650) (7 625)
Variable sa le expenses (2 634) (386) (18) () (3 038)
Materia ls consumption and sa le in inventory (32 321) (4 983) (12 814) 27 456 (22 662)
Production cost (44 996) (11 874) (624) () (57 494)
Production amortization (12 077) (4 786) (289) (17 152)
Other operating income/expense (6 855) (1 303) (74) (8 232)
Gross operating profit 24 504 275 3 504 (96) 28 187
Sales , General and Adminis trative expenses (2 039) (1 994) (9 449) (13 482)
Operating income from ordinary activities 22 465 (1 719) (5 945) (96) 14 705
Accumulated depreciation (12 077) (4 798) (898) (17 773)
EBITDA 34 542 3 079 (5 047) (96) 32 477
Capita l expenditures (12 229) (1 650) (671) (14 550)
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 22
At June 30, 2016 (QTD) – 3 months
(in thousands of euros) EuropeEmerging
countries
Corporate &
OtherElimination Group
Revenue 65 042 12 680 9 077 (13 516) 73 284
Other bus iness income (24) 120 (34) 62
Revenue and other income 65 018 12 800 9 077 (13 550) 73 346
Transport related to sa les (2 799) (586) (337) (3 722)
Variable sa le expenses (1 277) (141) 7 () (1 411)
Materia ls consumption and sa le in inventory (16 899) (2 579) (6 445) 13 541 (12 381)
Production cost (22 206) (5 950) (296) () (28 451)
Production amortization (6 020) (3 231) (145) (9 396)
Other operating income/expense (3 521) (648) (30) (4 199)
Gross operating profit 12 297 (335) 1 831 (8) 13 784
Sales , General and Adminis trative expenses (1 013) (989) (5 146) (7 148)
Operating income from ordinary activities 11 284 (1 324) (3 315) (8) 6 636
Accumulated depreciation (6 020) (3 239) (447) (9 706)
EBITDA 17 304 1 915 (2 868) (8) 16 342
Capita l expenditures (3 836) (1 028) (327) (5 191)
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 23
At June 30, 2015 (YTD) – 6 months
(in thousands of euros) Europe AsiaCorporate &
OtherElimination Group
Revenue 132 438 17 313 17 551 (26 129) 141 173
Other bus iness income 855 196 27 (64) 1 014
Revenue and other income 133 293 17 509 17 578 (26 193) 142 187
Transport related to sa les (5 911) (990) (604) (7 505)
Variable sa le expenses (2 875) 21 (44) (2 898)
Materia ls consumption and sa le in inventory (34 456) (5 790) (12 738) 26 155 (26 829)
Production cost (45 284) (8 992) (649) (54 925)
Production amortization (12 755) (2 038) (311) () (15 104)
Other operating income/expense (5 597) (868) (86) (6 551)
Gross operating profit 26 415 (1 148) 3 146 (38) 28 376
Sales , General and Adminis trative expenses (1 902) (1 288) (9 015) (12 205)
Operating income from ordinary activities 24 513 (2 436) (5 869) (38) 16 171
Accumulated depreciation (12 755) (2 047) (815) () (15 617)
EBITDA 37 268 (389) (5 054) (38) 31 788
Capita l expenditures (25 957) (3 859) (871) (30 687)
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 24
At June 30, 2015 (QTD) – 3 months
GOODWILL
Business combination
On May 13, 2015, SGD Group S.A.S. acquired from OCM Luxembourg EPOF II S.à.r.l. 100% of the share capital and voting rights of the Dutch company Netherlands Glass Investments B.V. Netherlands Glass Investments B.V. is a holding company which owns 73.89% of the share capital and voting rights of the Indian company, Cogent Glass Limited. Cogent Glass Limited is an India-based manufacturer of Type I molded and tubular glass vials for the pharmaceutical industry. The consideration transferred for the acquisition of Netherlands Glass Investments shares is €14,805,996 and the consideration transferred for the acquisition of the loan receivable by Cogent from OCM Luxembourg EPOF II S.à.r.l is €13,644,004, which amounts to a total consideration paid of €28,450,000. The acquisition costs related to this operation amount €0.4 million and have been booked through profit and loss as other operating expenses. The acquisition of Netherlands Glass Investments B.V. has led to the accounting of a goodwill for €14.6 million calculated according to the partial goodwill method as follows :
(in thousands of euros) Europe AsiaCorporate &
OtherElimination Group
Revenue 67 571 10 321 8 792 (13 784) 72 900
Other bus iness income 602 130 16 (33) 715
Revenue and other income 68 173 10 452 8 808 (13 817) 73 615
Transport related to sa les (3 123) (575) (309) (4 007)
Variable sa le expenses (1 461) (23) (1 484)
Materia ls consumption and sa le in inventory (19 389) (3 163) (6 421) 13 834 (15 139)
Production cost (22 130) (5 688) (303) (1) (28 122)
Production amortization (6 444) (1 262) (157) () (7 863)
Other operating income/expense (2 722) (545) (38) () (3 305)
Gross operating profit 12 904 (782) 1 557 15 13 694
Sales , General and Adminis trative expenses (914) (860) (4 761) (6 535)
Operating income from ordinary activities 11 990 (1 642) (3 204) 15 7 159
Accumulated depreciation (6 444) (1 266) (391) () (8 101)
EBITDA 18 434 (376) (2 813) 15 15 260
Capita l expenditures -18 974 -880 -694 -20 548
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 25
Impairment test
At December 31, 2015, an impairment test has been performed on Netherlands Glass Investments and Cogent Glass fixed assets. Impairment test conducted has been based on the estimated value in use of Netherlands Glass Investment and Cogent Glass, calculated using discounted cash flows methodology. Impairment test has been based on the business plan elaborated by the company covering a 5-year period from 2016 to 2020, extended to 4 years based on recent forecasts. The terminal value is calculated according to the Gordon-Shapiro method, with a perpetual growth rate of 1.5%. The discount rate used amounts to 13,7% and is the result of an average of comparable discount rates that appeared to be consistent with the Capital Asset Pricing model method. The enterprise value calculated amount to a value of €38 million, which lead the Group to book no impairment on the goodwill as of December 31, 2015. INTANGIBLE ASSETS Intangible assets from December 31, 2015 to June 30, 2016
Intangible assets are mainly composed of the capitalized IT & R&D projects, such as SAP project & licences.
(In thousands of euros)
Consideration transferred 28 450
- Loan receivable (13 644)
Net consideration transferred 14 806
Non control l ing interests (book value method) 1 029
- Identi fiable assets and l iabi l i ties assumed (4 079)
Goodwill 11 756
Accounting of negative fa i r va lue through profi t and loss (632)
Final goodwill 11 124
(in thousands of euros) Patents Software Other Total
At December 31, 2015
Gross va lue 114 26 518 10 309 36 941
Accumulated depreciation and impairment losses (50) (23 783) (10 112) (33 945)
Net value at December 31, 2015 64 2 736 197 2 996
At March 31, 2016
Gross va lue 114 26 792 14 565 41 471
Accumulated depreciation and impairment losses (50) (24 481) (11 536) (36 067)
Net value at March 31, 2016 64 2 311 3 029 5 405
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 26
PROPERTY PLANT AND EQUIPMENT Property plant and equipment from December 31, 2015 to June 30, 2016
(1) Reclassifications refer to the start up of construction work in progress during the period and the net balance of reclassifications refers to reclassifications between tangible and intangible assets.
The main capex refer to the carry over of the new Pharmacy plant built in Saint Quentin La Motte.
(in thousands of euros)Precious
metalsLand Buildings
Equipment,
machinery and
other
Construction
work in
progress
Total
At December 31, 2015
Start of year 7 385 10 886 15 489 73 249 17 906 124 916
Change in scope 177 4 097 15 930 (15) 20 189
Purchases 2 842 32 944 43 111 78 896
Sales (397) (1 501) (2 587) (4 485)
Trans lation adjustments () 103 350 51 503
Depreciation (3 167) (30 881) (34 048)
Impairment losses (787) 46 218 272 (251)
Reclass i fications and other (1) 3 686 27 972 19 128 (53 902) (3 116)
Net value 6 201 14 794 46 053 108 406 7 151 182 605
At December 31, 2015
Gross va lue 7 508 14 794 80 648 289 314 7 151 399 416
Accumulated depreciation and impairment losses (1 307) (34 595) (180 909) (216 811)
Net value at December 31, 2014 6 201 14 794 46 053 108 406 7 151 182 605
At March 31, 2016
Start of year 6 201 14 794 46 053 108 406 7 151 182 605
Change in scope
Purchases 8 6 221 7 249 13 478
Sales (686) (686)
Trans lation adjustments (7) (221) (1 081) (32) (1 340)
Depreciation (1 983) (13 276) (15 259)
Impairment losses (144) (144)
Reclass i fications and other (1) 104 658 (762)
Net value 6 201 14 787 43 960 100 098 13 607 178 654
At March 31, 2016
Gross va lue 7 508 14 787 80 280 288 908 13 607 405 091
Accumulated depreciation and impairment losses (1 307) (36 320) (188 810) (226 437)
Net value at March 31, 2015 6 201 14 787 43 960 100 098 13 607 178 654
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 27
INVENTORIES
Net inventories increased by €6.2 million in the first 2016 semester. This increase mainly results from the seasonality of the activity and from the ramp-up of the new furnaces in the Saint Quentin plant. TRADE AND SIMILAR RECEIVABLES
(in thousands of euros) 01-Jan-16Opening
correctionsVariations Reclassifications
Translation
adjustments30-Jun-16
Raw materia ls 4 376 437 (64) 4 749
Industria l suppl ies 3 665 658 (36) 4 286
Work in progress 101 101
Finished goods 50 677 4 5 177 (474) (348) 55 036
Gross value of inventories 58 819 4 6 271 (474) (448) 64 172
Raw materia ls (264) 59 3 (203)
Industria l suppl ies (1 515) (11) 14 (1 512)
Work in progress (28) (28)
Finished goods (6 036) 411 252 117 (5 256)
Provisions for depreciation of inventories (7 843) 458 252 134 (6 999)
NET VALUE OF INVENTORIES 50 976 4 6 730 (222) (314) 57 173
1 / Net value
(in thousands of euros) 30-Jun-16 31-Dec-15
Trade receivables - Gross value 50 348 48 492
Provis ion for depreciation (1 237) (1 176)
NET VALUE 49 111 47 316
2 / Change in provision for receivables
(in thousands of euros) 30-Jun-16 31-Dec-15
Start of year (1 175) (1 317)
Change in scope (68)
Reclass i fication
Provis ions for trade receivables (64) 220
Trans lation adjustments 3 (12)
Provisions for impairment of trade receivables (1 237) (1 176)
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 28
OTHER CURRENT ASSETS
CASH AND CASH EQUIVALENTS
Cash equivalents are securities (« SICAV ») held by SGD S.A. and are valuated at their market value. PROVISIONS
Provisions for quality disputes correspond to quality disputes reported/known at the time of preparing the financial statements and are related to sales. The provisions for other risks and charges refer to current general operating risks and potential tax risks. At December 31, 2015, a provision for €1.4 million was recorded for dismantling costs of the Pharmacy furnace in Mers. This provision was used in the first 2016 quarter. In 2015, a provision related to future works related to asbestos in the Mers les Bains plant has been accrued for €0.4 million for the part being considered as of the responsibility of the Pharmacy business.
(in thousands of euros) 30-Jun-16 31-Dec-15
Other trade receivables - Gross va lue 5 282 4 249
Advances paid to suppl iers 2 038 1 828
Socia l securi ty receivables - personnel and socia l welfare bodies 152 93
Tax receivables (excluding corporation tax) 17 575 18 990
Royalties receivable 1 461
Miscel laneous non-trade receivables - Gross va lue 599 86
Pre-paid expenses 2 766 2 787
Other trade receivables - Provis ions (283) (416)
TOTAL OTHER CURRENT ASSETS 28 130 29 078
(in thousands of euros) 30-Jun-16 31-Dec-15
Cash equivalents 1 248 2 936
Cash on hand 13 738 6 151
CASH AND CASH EQUIVALENTS 14 986 9 086
(in thousands of euros) 01-Jan-16 Reclassification ProvisionReversal of
provision
Translation
adjustments30-Jun-16
Provis ions for qual i ty dispute guarantees 620 (84) 536
Provis ions for lawsuits 193 (24) (2) 167
Provis ion for other risks and charges 2 165 (363) (1 360) 805
Current provisions 2 978 (363) (1 468) (2) 1 508
TOTAL PROVISIONS 2 978 (363) (1 468) (2) 1 508
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 29
PENSIONS AND RELATED BENEFITS
The assumptions regarding mortality, staff turnover and salary increases reflect the economic conditions specific to each country or Group company. Discount rates are determined by reference to the yield of investment-grade corporate bonds of companies with a AA credit rating and whose maturity is equal to the duration or the plans assessed according to the iBoxx benchmark. For the first 2016 semester, the assumptions have been unchanged compared to the ones used at December 31, 2015.
FINANCIAL DEBT a) Net financial debt
For the SGD Group, net financial debt consists of gross financial debt less cash on hand and cash equivalents.
(in thousands of euros) 30-Jun-16 31-Dec-15
Total provis ions for pens ions and s imi lar benefi ts 19 039 18 539
Other long-term benefi ts 1 543 1 509
Total provisions for pensions and employee benefits 20 582 20 048
France Germany
Discount rate
Long terme inflation rate
Salary growth 2,00% 1,00%
Pens ion increase
Mortal i ty table INSEE TD/TV 2011-2013 Heubeck 2005G
< 30 years between 2,10% and 10,00% between 6,00% and 12,00%
30 -34 years between 1,80% and 5,00 % between 5,20% and 5,80 %
35 -39 years between 1,60% and 5,00% between 4,20% and 5,00%
40 -44 years between 1,00% and 4,00% between 3,20% and 4,00%
45 -49 years between 0,50% and 3,00% between 2,20% and 3,00%
50 -54 years between 0,20% and 2,00% between 0,40% and 2,00%
55 -59 years between 0,10% and 0,50% 0,00%
> 60 year 0,00%
Turnover rate
30-Jun-16
2,00%
2,00%
2,00%
Cash equivalents 1 248 2 936
Cash on hand 13 738 6 151
Financia l debt (486 676) (464 493)
Net Value (471 690) (455 407)
31-Dec-15(in thousands of euros) 30-Jun-16
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 30
b) Loans and financial debt
The increase in the financial debt is mainly related to the increase in the Revolving Credit Facility. Detail of capitalizable interest and interest payable
c) Loan characteristics
Long-term debt High Yield Bonds As of April 24th 2014, the debt related to syndicated loans previously held by the Group was successfully refinanced through the issuance of € 350,000,000.00 High Yield Bonds. The amount of Syndicated Debt reimbursed in 2014, including capitalized interests, was €317,020,000.00. The High Yield Bonds were issued by SGD Group S.A.S for Pharmacy Business and have a maturity of 5 years, until May 15, 2019, thereby extending the maturity of long-term debt by 3 years. The High Yield Bonds carry an interest rate of 5.625%, and interests are paid in cash each semester. The discrepancy between the High Yield Bonds nominal value and the amount recorded in the balance sheet in 2016 relates to the amortization of the financing fees using the effective interest method.
Vendor’s Note (Shareholder Loan) On May 13th 2015, SGD Group S.A.S has acquired 100% of Oaktree’s shares in Netherlands Glass Investments BV and indirectly 74% of Cogent Glass Ltd shares. This acquisition occurred without any cash impact for the Group thanks to the issuance of a Vendor’s Note for a total amount of €31.6 million
High Yield bonds 343 689 342 704
Shareholder loan 30 764 28 450
Other loans including finance leases 25 467 29 882
Non-current interest payable 16 816 13 092
Non-current borrowings 416 736 414 128
Interest payable in less than one year 2 171 3 286
Loans payable in less than one year 49 411 31 258
Other loans including finance lease and trade receivables ass igned 18 358 15 822
Loans payable in less than one year and interest payable 69 940 50 365
TOTAL BORROWINGS 486 676 464 493
31-Dec-15(in thousands of euros) 30-Jun-16
Interest on bond loans 16 816 13 092
Interest on High Yield Bonds 1 754 1 794
Interest payable on other loans including finance lease 417 1 491
TOTAL INTEREST PAYABLE 18 987 16 378
31-Dec-15(in thousands of euros) 30-Jun-16
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 31
due to OCM Luxembourg EPOF II Sàrl (related party). The debt and its interests are repayable in fine with a maturity aligned with the High Yield Bonds (2019). The interest rate applied to this facility is fixed at 8%. Other loans
o Term Loans
Further to Cogent acquisition, the Group now includes in its indebtedness the local term loan debts from the State Bank of India. These term loan debts denominated in Indian Rupee are divided in four different tranches with maturities from 2016 to 2019. As of June 30, 2016, the outstanding amount of Cogent’s local debt was 5.8m in euro equivalent.
o Finance leases
On December 11th 2014, a leasing agreement of €14.3 million was signed between SGD S.A and a pool of banks (Natixis Lease and Star Lease as co-lessors; Banco do Brasil and Caisse d’Epargne de Picardie as financial partners) for the leasing of Saint-Quentin-la-Motte plant’s new equipment. As of June 30, 2016, SGD S.A had €11.0 million outstanding under this lease. Over the past few years, SGD S.A. has entered for its pharmaceutical glass packaging operations into several capital leases agreements over various assets, such as equipment or other tangible assets. As of June 30, 2016, SGD S.A had €8.8 million outstanding under these leases agreements of which €0.7m relates to new leases signed in 2016. In September 2014, SGD Asia Pacific signed a finance leasing contract with Far Eastern, an international leasing company which offers financial services in all Chinese provinces. This leasing contract enables SGD Asia Pacific to finance various equipment, such as new production lines for their strategic project. The total commitment under this agreement is €1.8 million equivalents. As of June 30 2016, SGD A.P. had €1.4 million outstanding under this lease. Bond loan – Non current interest payable In 2012, the bond loan has been reclassified in equity given the changes made on the agreement regarding the terms and conditions. As such, capitalized interests on the bond loan are now included in the financial liabilities at the end of June 2016.
Short-term debt Revolving Credit Facility On April 24th 2014, simultaneously to the High Yield Bond issuance, the Group entered into a Revolving Credit Facility Agreement. The lenders (BNP Paribas S.A., Credit Suisse International and JP Morgan Limited) have agreed to make available a Revolving Credit Facility for an amount of €35.0m to SGD S.A and SGD Kipfenberg referred as the borrowers. This Super Senior Revolving Credit Facility Agreement enables an ancillary lender to make available an ancillary facility to any of the two borrowers. Besides on October 9th 2015, the total commitment under this facility was increased by €10.0m up to the maximum amount of €45.0m allowed by the Super Senior RCF Agreement. Subsequently, Credit Agricole CIB joined the existing pool of lenders. The new rate applied to this facility is Euribor plus a margin of 3.72% and the maturity is 2018.
As of June 30, 2016, €43.0m was borrowed under the Revolving Credit Facility.
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
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Working capital facility SGD Asia Pacific has entered into a working capital facility for its pharmaceutical and cosmetics glass operations with Postal Saving Bank, a Chinese bank, for an amount of 4 million euros equivalents on December 31st 2014 to finance its working capital requirements. In the same way, Cogent has also a Trade working facility available from the State Bank of India up to 2.7m euro equivalent for Cogent. These facilities are renewable every year and are secured by land mortgages. As of June 30, 2016, this facility was fully drawn for SGD A.P. and for €2.7 million for Cogent Glass.
Other borrowings
o Inventory financing
SGD S.A. has entered into an inventory financing facility for its pharmaceutical glass packaging operations with Banque Espírito Santo et de la Vénétie for an initial amount of €2.0m on July 20th 2012. This agreement has been amended and increased to €3.5m on July 31st 2015. so as to finance its working capital requirements. The facility is secured by a floating charge over part of the inventory (€7.0m) of SGD S.A. As of December 31st 2015, we had €3.5m outstanding under this facility.
At June 30, 2016, SGD S.A. has also entered into an inventory financing facility with Banque Palatine for an amount of €2.5 million. The facility is secured by a floating charge over part of the inventory (€3.4m) of SGD S.A.
o Tax credits financing SGD Group S.A.S. has received financings in 2014 which were renewed, and in 2015 for the two followings tax credits:
- Tax credit to enhance competitiveness and employment (“CICE”): The existing ones were renewed and CICE 2015 was financed in August 2015. As of June 30 2016, the aggregate amount was €7.5m.
- Research tax credit (“CIR”): The existing ones were renewed and CIR 2013 was financed in April 2015. As of June 30 2016, the aggregate amount was €1.7m.
o Re-industrialization Subsidy (ARI)
On June 27th 2014, thanks to a specific program to support industry in France initiated by the “Ministère du Redressement Productif”, a €3.0m envelope was granted to SGD based on its project to build a new plant in St-Quentin and to upgrade the existing site of Mers. The financial support through repayable advances is split in three different tranches that can be drawn once pre-defined steps are achieved. As of June 30 2016, €1.2m was drawn out of the €3.0m total commitment.
o Factoring Since 2011, a factoring line of €40m had been made available to the Group by GE Factor and had been used by SGD S.A. and VG Emballage. Since April 24th 2014, the pharmacy receivables of SGD S.A and VGE are not anymore assigned to GE Factor. During 2015, only SGD S.A for its perfumery glass packaging operations used this financing with a re-sized factoring line of €30 million. This facility has been transferred with the Perfumery business as of December 31, 2015.
o Financial covenant
Under the Revolving Credit Facility Agreement, SGD is required to comply with a Minimum EBITDA covenant which shall not be less than € 40.5 million.
The financial covenant is calculated on a last twelve month basis and tested from the second quarter following April 24, 2014 and thereafter quarterly.
As of June 30, 2016, the Group was in compliance with this applicable financial covenant.
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
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DEFERRED TAX
A deferred tax asset is recorded only if it is probable that the Group will have future taxable profits to which the corresponding timing difference can be charged. Deferred tax assets are reviewed on each balance sheet date and written down if there is a risk of non-recovery. In the first 2016 semester, the Group chose to limit the amount of recognized deferred tax assets to the amount of deferred tax liabilities for France, China and India. TRADE AND SIMILAR PAYABLES
OTHER CURRENT LIABILITIES
OTHER OPERATING INCOME AND EXPENSE (YTD) – 6 MONTHS
At June 30, 2016, the other expenses mainly relate to the operating expenses related to the Saint Quentin building project and to the expenses linked to the physical and legal separation of the Pharmacy and the Perfumery business.
(in thousand of euros) 30-Jun-16 31-Dec-15
Total deferred tax assets
Total deferred tax l iabi l i ties (516) (606)
Net deferred tax position (516) (606)
(in thousands of euros) 30-Jun-16 31-Dec-15
Trade accounts payable 41 673 41 472
TOTAL TRADE AND SIMILAR PAYABLES 41 673 41 472
(in thousands of euros) 30-Jun-16 31-Dec-15
Debts payable to fixed asset suppl iers 4 356 7 901
Advances received from customers 1 689 2 486
Other trade payables 5 848 4 598
Socia l securi ty payables - Personnel and socia l welfare 13 289 14 683
Tax debt (excluding income tax) 4 682 3 571
Accrued expenses , accrued income and other non-trade payables 1 714 2 007
TOTAL OTHER CURRENT LIABILITIES 31 578 35 246
(in thousands of euros) 30-Jun-16 30-Jun-15
Capita l gains or losses on sales of assets 7 102
Other income/expense (3 357) (3 279)
TOTAL OTHER OPERATING INCOME/EXPENSE (3 611) (3 159)
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
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COST OF FINANCIAL DEBT (YTD) – 6 MONTHS
(1) This line refer to the interests on High Yield Bonds and on the Vendor Loan with OCM Luxembourg. OTHER FINANCIAL INCOME AND EXPENSE (YTD) – 6 MONTHS
TAX CHARGES / INCOME
(1) Theoretical tax income is calculated by applying to each entity’s profit the tax rate prevailing in the
country and not the theoretical tax rate applicable in France, i.e. 34.43%
OFF-BALANCE SHEET COMMITMENTS The off-balance sheet items are unchanged compared to December 31, 2015.
(in thousands of euros) 30-Jun-16 30-Jun-15
Interest on other long-term loans (1) (12 089) (11 053)
Interest on other short-term loans (200) (53)
Interest on financia l lease (974) (159)
TOTAL COST OF DEBT (13 263) (11 264)
(in thousands of euros) 30-Jun-16 30-Jun-15
Net financia l expense related to employee benefi ts (103) (145)
Exchange (losses) and gains (1 346) 392
Other financia l expense (1 694) (762)
Other financia l income (4) 35
TOTAL OTHER FINANCIAL INCOME/EXPENSE (3 147) (481)
(In thousands of euros) 30-Jun-16 30-Jun-15
Net/profi t loss of the consol idated companies (6 948) (5 525)
Income tax (2 651) (2 823)
Pre-tax income of the consolidated compagnies (4 297) (2 702)
Theorica l tax rate (1) 22% 20%
Theorical tax expense 927 535
Effective tax expense (2 651) (2 823)
Tax due (2 740) (2 905)
Deferred tax 89 82
SGD Group - Combined financial statements Confidential Period ended June 30, 2016
Page 35
Key contacts & Calendar
Key contacts
Email: [email protected]
Website: http://www.sgd-pharma.com
Investors website : https://www.debtdomain.com/p/Home
Telephone: +33 (0)1 40 90 36 13