SoLocal Group: Confirmation of outlook for 2016 in spite of business inflection due to the delay in the financial restructuring plan

BOULOGNE-BILLANCOURT, France--()--Regulatory News:

SoLocal Group (Paris:LOCAL):

Q3 2016 results:

  • Internet revenues of €156 M (representing 79% of total revenues), up +3%1
  • EBITDA2: €60 M, down -24%1, EBITDA/revenue margin3 of 30%

Outlook for 2016 confirmed:

  • Internet revenue growth rate between 0% and +2%
  • EBITDA/revenue margin2: ≥ 28%

“Conquer 2018” plan postponed by 6 months due to the delay in the financial restructuring plan impacting the commercial performance and cash flow generation.

Jean-Pierre Remy, Chief Executive Officer of SoLocal Group, stated: “The financial performance in Q3 2016 confirms the annual outlook. However the uncertainty around the financial restructuring plan is hurting our operations and since last October has been affecting the sales momentum, the cash flow generation and the outlook for 2018.

We urgently need more visibility on our refinancing to be able to work on our business priorities and to focus on mid term growth objectives.”

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1  

In Q3 2016, compared to Q3 2015

2 Total (Internet + Print & Voice) recurring EBITDA
3 Total (Internet + Print & Voice) recurring EBITDA to revenue margin
 

I. Revenues and EBITDA

The Board of Directors approved the Group’s consolidated accounts on the basis of going concern as of 30 September 2016.

In millions of euros   Q3 2015   Q3 2016   Change   9M 2015   9M 2016   Change
Internet revenues   152   156   +3%   477   478   0%
Local Search   119   120   +1%   371   363   -2%
Number of visits (in million) 569 616 +8% 1,678 1,822 +9%
ARPA1 (in €) 226 245 +8% 698 728 +4%
Number of clients (in thousand) 525 490 -7% 532 499 -6%
Digital Marketing 33 36 +10% 106 115 +8%
Penetration rate (in number of clients)   22%   23%   +1pt   22%   23%   +1pt
Print & Voice revenues   60   41   -32%   181   124   -32%
Revenues   212   197   -7%   658   602   -9%
 

The Group posted revenues of €197 million in Q3 2016 a decrease of -7% compared to Q3 2015:

  • Internet revenues at €156 million in Q3 2016 (representing 79% of total revenues) are up +3% versus Q3 2015:
    • Audience growth: Internet visits record a growth +8% in Q3 2016 vs Q3 2015 of which +24% mobile (representing 47% of total audience).
    • Local Search revenues: +1% in Q3 2016 vs Q3 2015 resulting from
      • Local Search ARPA1: +8% in Q3 2016 vs Q3 2015, leading to year-to-date Local Search ARPA growth of +4% in line with historical trends
      • Client base: -7% in Q3 2016 vs Q3 2015, still limited by reduced investments in telesales client acquisition.
    • Digital Marketing revenues: +10% in Q3 2016 vs Q3 2015, with a steady growth of local programmatic, not yet fully reflecting sales order dynamic.
  • Print & Voice revenues at €41 million in Q3 2016 are down by -32% over the period, mainly due to the strong decline of PagesBlanches.
In millions of euros   Q3 2015   Q3 2016   Change   9M 2015   9M 2016   Change
Internet recurring EBITDA   56   47   -16%   155   137   -12%
EBITDA / revenue margin   37%   30%   -7 pts   33%   29%   -4 pts
Print & Voice recurring EBITDA 22 12 -44% 62 34 -44%
EBITDA / revenue margin   36%   30%   -6 pts   34%   28%   -6 pts
Recurring EBITDA 78 60 -24% 217 171 -21%
EBITDA / revenue margin   37%   30%   -7 pts   33%   28%   -5 pts
Note: Internet EBITDA and Print & Voice EBITDA for 2015 quarterly data have been adjusted to have indicators computed on comparable methods between 2015 and 2016
 

Recurring EBITDA was €60 million in Q3 2016, down -24% versus Q3 2015, mainly driven by the drop in Print & Voice EBITDA.

The EBITDA to revenue margin was 30% in Q3 2016, down -7 points compared to Q3 2015, due to a strong decline in Print & Voice revenues (-32%).

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1 Average Revenue Per Advertiser
 

II. Net income and financial structure

In millions of euros   Q3 2015   Q3 2016   Change   9M 2015   9M 2016   Change
Recurring EBITDA   78   60   -24%   217   171   -21%
Depreciation and amortisation   (13)   (15)   +17%   (35)   (44)   +26%
Net financial expense (21) (19) -11% (64) (56) -13%
Corporate income tax   (21)   (11)   -44%   (50)   (30)   -40%
Recurring income from continued activities   24   14   -41%   68   41   -39%
Contribution to net income from non recurring items   (1)   (0)   -73%   (4)   (3)   -38%
Net income from divested activities   (6)   -   na   (13)   -   na
Net income   17   14   -19%   51   39   -24%
 

Depreciation and amortisation amounted to -€15 million in Q3 2016, up +17% compared to Q3 2015, due to impact of IT refoundation investments.

Net financial expenses was -€19 million in Q3 2016, reduced by -11% compared to Q3 2015, as the hedging instruments matured at the end of 2015.

Corporate income tax expense was -€11 million in Q3 2016, reduced by -44% compared to Q3 2015, and in line with the profit before tax.

Recurring net income from continued activities amounted to €14 million Q3 2016, down -41% compared to Q3 2015.

Net income from divested activities was nil in Q3 2016 as the divestment of non-growing and non-profitable Internet businesses has been fully achieved in 2015.

The Group’s net income was €14 million in Q3 2016, down -19% compared to Q3 2015.

Net debt4 totalled €1,097 million as of 30 September 2016. The Group is in breach with its leverage bank covenant but complies with all other bank covenants. This provides creditors (excluding Tranche C1) with the right to accelerate at any time (subject to the mandatory provisions of the Commercial Code) the payment of the entire amount of SoLocal Group’s financial debt owed to external creditors. The three creditors parties to the agreement with the Company agreed, provided that the revised financial restructuring plan is adopted, to abstain from requesting the acceleration of SoLocal Group’s debt, as a result of the breach of covenant leverage.

The Group’s free cash flow was -€15 million in Q3 2016, down -€24 M compared to Q3 2015, mainly driven by drop in EBITDA and negative working capital impact due to higher pressure from clients and suppliers given the uncertainty linked to the financial restructuring of the Group.

As of 30 September 2016, the Group had a net cash position of €90 million5.

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4 Net debt is the gross financial debt plus or minus the fair net asset value of asset and/or liability derivative instruments used for cash flow hedging purposes, minus cash and cash equivalents
5 Net of bank overdrafts, including own bonds

III. Outlook

The Group confirms its outlook for 2016 and expects:

  • Internet revenue growth between 0% and +2%6
  • EBITDA to revenue margin ≥ 28%7

Subject to the approval of the revised financial restructuring plan by creditors and shareholders, the implementation of “Conquer 2018” plan has been delayed by 6 months due to the delay in the financial restructuring plan impacting the commercial performance and cash flow generation.

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6 in 2016 compared to 2015
7 Total (Internet + Print & Voice) recurring EBITDA to revenue margin
 

About SoLocal Group

SoLocal Group, European leader in local online communication, reveals local know-how, and boosts local revenues of businesses. The Internet activities of the Group are structured around two business lines: Local Search and Digital Marketing. With Local Search, the Group offers digital services and solutions to clients which enable them to enhance their visibility and develop their local contacts. Thanks to its expertise, SoLocal Group earned the trust of some 530,000 clients of those services and over 2.2 billions of visits via its 4 flagship brands (PagesJaunes, Mappy, Ooreka and A Vendre A Louer) but also through its partnerships. With Digital Marketing, SoLocal Group creates and provides Internet users with the best local and customised content about professionals. With over 4,400 employees, including a salesforce of 1,900 local communication advisors specialised in five verticals (Home, Services, Retail, Health & Public, BtoB) and Internationally (France, Spain, Austria, United Kingdom), the Group generated in 2015 revenues of 873 millions euros, of which 73% on Internet and ranks amongst the first European players in terms of Internet advertising revenues. SoLocal Group is listed on Euronext Paris (LOCAL). More information may be obtained at www.solocalgroup.com.

IV. Appendices

During the 2015 financial year, the Group disposed of four non-profitable and no-growing activities (Horyzon Media web agency display, ZoomOn social local media, Lookingo "daily deals" and Sotravo online home improvement quotes).

The accounts as of 30 September 2016 published by the Group are made up as follows: Consolidated, Divested activities and Continued activities.

Starting in 2015, SoLocal Group is isolating the momentum of continued activities from that of the activities that it has divested from. The comments on the financial performance indicators concern the scope of continued activities. Recurring EBITDA excludes non recurring items, such as restructuring and integration costs.

Consolidated Income statement

In millions of euros Q3 2016   Q3 2015
Consolidated

  Divested  

  activities  

Continued activities Consolidated

  Divested  

  activities  

Continued activities
    Recurring Non recurring     Recurring Non recurring
 
Revenues 197 - 197 - 213 1 212 -
Net external expenses (51) - (51) - (53) (2) (51) -
Personnel expenses (87) - (87) - (85) (2) (83) -
Recurring EBITDA 60 - 60 - 75 (3) 78 -
 
Non recurring items (0) - - (0) (0) 2 - (2)
EBITDA 59 - 60 (0) 75 (1) 78 (2)
 
Depreciation and amortization (15) - (15) - (22) (9) (13) -
Operating income 44 - 44 (0) 54 (10) 65 (2)
 
Financial income 0 - 0 - 1 - 1 -
Financial expenses (19) - (19) - (22) - (22) -
Net financial expense (19) - (19) - (21) - (21) -
 
Share of profit or loss of an associate - - - - - - - -
Income before tax 25 - 25 (0) 33 (10) 44 (2)
 
Corporate income tax (11) - (11) 0 (16) 4 (21) 1
Effective tax rate 45% na 45% 34% 48% 43% 47% 38%
Income for the period 14 - 14 (0) 17 (6) 24 (1)
 
In millions of euros 9M 2016 9M 2015
Consolidated

  Divested  

  activities  

Continued activities Consolidated

  Divested  
  activities  

Continued activities
    Recurring Non recurring     Recurring Non recurring
 
Revenues 602 - 602 - 663 5 658 -
Net external expenses (156) - (156) - (157) (8) (149) -
Personnel expenses (274) - (274) - (297) (5) (292) -
Recurring EBITDA 171 - 171 - 209 (8) 217 -
 
Non recurring items (3) - - (3) (9) (5) - (4)
EBITDA 169 - 171 (3) 201 (12) 217 (4)
 
Depreciation and amortization (44) - (44) - (45) (10) (35) -
Operating income 125 - 127 (3) 156 (22) 182 (4)
 
Financial income 1 - 1 - 2 - 2 -
Financial expenses (57) - (57) - (66) (0) (66) -
Net financial expense (56) - (56) - (64) (0) (64) -
 
Share of profit or loss of an associate - - - - 0 - 0 -
Income before tax 69 - 71 (3) 92 (22) 118 (4)
 
Corporate income tax (30) - (31) 1 (41) 9 (52) 2
Effective tax rate 44% na 43% 34% 44% 41% 44% 38%
Income for the period 39 - 40 (2) 51 (13) 67 (3)

Consolidated Cash Flow Statement

In millions of euros   Q3 2015   Q3 2016   Change   9M 2015   9M 2016   Change
Recurring EBITDA   78   60   -24%   217   171   -21%
Non monetary items included in EBITDA and other   5   4   -15%   9   4   -54%
Net change in working capital (24) (34) 38% (32) (52) 65%
Acquisition of tangible and intangible fixed assets (19) (13) -29% (53) (49) -7%
Cash financial income (13) (17) 31% (55) (35) -36%
Non recurring items (7) (7) -10% (20) (22) 8%
Acquisition costs of shares - - na - - na
Corporate income tax paid   (8)   (8)   3%   (9)   2   -127%
Net Cash flow from continued activities   12   (15)   -227%   58   20   -66%
Net Cash flow from divested activities   (3)   -   -100%   (5)   -   -100%
Net cash flow   9   (15)   -262%   53   20   -62%
Increase (decrease) in borrowings and bank overdrafts (10) (4) -66% (30) 11 -138%
Capital increase - (0) na 3 (0) -100%
Other   (2)   1   -153%   1   6   687%
Net cash variation   (3)   (17)   449%   26   37   44%
Net cash and cash equivalents at beginning of period   72   108   49%   44   53   22%
Net cash and cash equivalents at end of period   69   90   30%   69   90   30%

Consolidated Balance Sheet

In million of euros        
ASSETS     30-Sep-15   31-Dec-15   30-Sep-16
Total non-current assets 235 251 260
Net goodwill 80 95 96
Other net intangible fixed assets 123 123 125
Net tangible fixed assets 23 28 32
Other non-current assets of which deferred tax assets     9   4   7
Total current assets 431 508 426
Net trade accounts receivable 263 353 253
Acquisition costs of contracts 32 38 28
Prepaid expenses 11 9 13
Cash and cash equivalents 72 54 92
Other current assets     54   54   41
TOTAL ASSETS     666   759   686
 
LIABILITIES              
Total equity     (1,310)   (1,328)   (1,294)
Total non-current liabilities 1,239 1,244 121
Non-current financial liabilities and derivatives 1,130 1,118 1
Employee benefits (non-current) 95 85 98
Other non-current liabilities     14   41   22
Total current liabilities 737 843 1,859
Bank overdrafts and other short-term borrowings 20 26 1,176
Deferred income 424 483 380
Employee benefits (current) 97 121 97
Trade accounts payable 90 95 85
Other current liabilities     106   117   120
TOTAL LIABILITIES     666   759   686

Revised “Conquer 2018” plan

         
Revised Conquer 2018  

Initial

Conquer

2018

In millions of euros   2015   2018   CAGR

2015-2018

  Growth

2017-2018

  Growth

2017-2018

Internet revenues   640   735   +5%   +9%   +10%
ARPA Local Search (en €) 940 1,014 +3% +3% +4%
Number of clients (en K) 528 474 -4% -1% +3%
Penetration rate (en nombre de clients)   22%   27%   +5pts   +1pt   +3pts
Group revenues   873   826   -2%   +3%   +3%
Recurring EBITDA   270   235   -5%   +5%   +9%
EBITDA / revenue margin   31%   28%            

Internet new orders

Internet new orders (in% of total new orders)   9M 2014   9M 2015   9M 20161   Change

9M 2015

vs 9M 2014

  Change

9M 20161

vs 9M 2015

Local Search   78%   78%   73%   -4%   +1%
Digital Marketing   22%   22%   27%   -6%   +34%
Internet   70%   75%   81%   -5%   +8%
1 Adjusted since 10/19/2016 for double counting of some websites orders, without any accounting impact

Contacts

SoLocal Group
Press
Delphine Penalva, +33 (0)1 46 23 35 31
dpenalva@solocal.com
or
Edwige Druon, +33 (0)1 46 23 37 56
edruon@solocal.com
or
Alexandra Kunysz, +33 (0)1 46 23 47 45
akunysz@solocal.com
or
Investors
Elsa Cardarelli, +33 (0)1 46 23 40 92
ecardarelli@solocal.com
or
Sébastien Nony, +33 (0) 1 46 23 49 03
snony@solocal.com

Contacts

SoLocal Group
Press
Delphine Penalva, +33 (0)1 46 23 35 31
dpenalva@solocal.com
or
Edwige Druon, +33 (0)1 46 23 37 56
edruon@solocal.com
or
Alexandra Kunysz, +33 (0)1 46 23 47 45
akunysz@solocal.com
or
Investors
Elsa Cardarelli, +33 (0)1 46 23 40 92
ecardarelli@solocal.com
or
Sébastien Nony, +33 (0) 1 46 23 49 03
snony@solocal.com