2016 Solid Results Support Europcar’s Strategy

  • Revenues of €2,151 million up 3.0% at constant exchange rates
  • Adjusted Corporate EBITDA of €254 million up 3.2% at constant exchange rates
  • Corporate Operating Free Cash Flow of €157 million up 83%
  • Net income reaches a record €119 million
  • Europcar meets its revised financial guidance
  • Exceptional dividend payout ratio of 50% of annual net income

SAINT-QUENTIN-EN-YVELINES, France--()--Regulatory News:

- Europcar (Paris:EUCAR) (Euronext Paris: EUCAR) today announced its 2016 results.

For Caroline Parot, Chief Executive Officer of Europcar Group:

"2016 was an important first step towards our ambitious strategic plan for 2020”.

We delivered a solid set of operational and financial results despite a challenging environment. This sound performance resulting in strong free cash flow generation is further proof of the robustness of our business model.

We made a number of acquisitions consistent with our strategy, including the purchase of two major franchisees, which have strengthened our leadership in our core business and have enhanced our footprint in the new mobility market.

We announced at our first Investor Day in October a new ambition for the Group with a dual target of reaching at least 3 billion euros of revenue and at least 14% Adjusted Corporate EBITDA margin by 2020.

Our new organization with 5 business units will enable us to accelerate our customer and market centric growth strategy. We have also made significant progress in terms of customer satisfaction and have continued to strive towards operational excellence.

Future investment into the Group’s digitalization, our customer journey, a strong focus on delivering revenue and profitability growth across all of our business units, as well as an accelerating momentum on the acquisition front gives us great confidence for 2017 and beyond”.

All data in €m, except if mentioned       FY 2016       FY 2015       Change      

Change at
constant
currency*

Number of rental days (million)       59.9       57.1       4.9%      
Average Fleet (thousand) 213.8 205.4 4.1%
Financial Utilization rate       76.5%       76.1%       + 0,4pt        
Total revenues 2,151 2,142 0.4% 3.0%
Rental revenues 2,002 1,992 0.5% 3.1%
Adjusted Corporate EBITDA 254 251 1.3% 3.2%
Adjusted Corporate EBITDA Margin 11.8% 11.7% +0,1pt
Last Twelve Months Adjusted Corporate EBITDA 254 251 1.3%
LTM Adjusted Corporate EBITDA Margin 11.8% 11.7% '+0,1pt
Operating Income 263 222 18.6%
Net profit/loss 119 (56) n.m n.m
Corporate Free Cash Flow 157 86 83.4%
Corporate Net Debt at end of the period 220 235
Corporate net debt / EBITDA 0.9 0.9 -0,07pt
 

2016 Operational highlights

2016 was an important year during which the Group strengthened its fundamentals, improved its operational performance, and implemented a range of structural initiatives paving the way for an acceleration of its strategy.

The Group continued to focus on improving its customer service through some dedicated programmes such as Customer First and Air Force One (focused on the Group’s 20 largest airport stations). These efforts have enabled the Group to deliver significant improvements in its net promoter scores with an impressive increase of 4.8 points during May-December 2016 compared to the same period in 2015.

In 2016 the Group continued to strive towards the delivery of operational excellence. With regards to the management of the fleet, the Group was able to both improve its fleet financing terms (by negotiating better terms for its SARF, the senior tranche of our fleet securitization, in September) and its fleet utilization rate (up 40 basis points at 76.5% versus 76.1% in 2015).

The Group’s leisure business, responsible for 58% of Group revenue, acted as the main growth engine for the Group as it benefited from good yield management and a strong performance, particularly in the second half of the year. InterRent, the Group’s low cost brand, had another strong year of growth in 2016 across our corporate countries as well as our franchisees.

During 2016, the Group started to execute its acquisitions plan and acquired two of its franchisees, Locaroise in France and its Irish franchisee. The Group continued to bolster its presence in the new mobility solutions market with the acquisition of Bluemove in Spain, Brunel in the UK and more recently Guidami in Italy.

The Group also continued to expand its worldwide footprint. In January 2017, the Europcar Group signed a worldwide commercial partnership with Shouqi Car Rental, a leading car rental company in China. This adds another fundamental brick in the Group’s global footprint in a key market with high potential.

2016 Financial highlights

Revenue

The Group generated revenues of €2.151 million in 2016, up 3.0% at constant exchange rates compared with 2015. On an organic basis, ie at constant exchange rates, constant perimeter and excluding petrol, the Group revenues grew by 2.6%. In the fourth quarter, Group revenue growth reached 5.2% and 3.4% on an organic basis.

This significant increase in Group revenues was the result of positive growth across all the Group’s major business units with Cars growing by 1.7%, Vans & Trucks growing by 0.7% and InterRent growing by an impressive 74%.

The number of rental days increased to 59.9 million in 2016, up 4.9% versus 2015. This growth in rental days was spread across all our key divisions with cars growing 1.5%, Vans & Trucks growing 5.3% and InterRent growing 75%. On the other hand, Revenue per rental day decreased by 1.7% at Group level, mostly impacted by a 4.4% decline in the Vans & Trucks business unit reflecting a strategic focus on extending utilization and rental duration.

Adjusted Corporate EBITDA1

2016 Adjusted Corporate EBITDA increased by 3.2% at constant exchange rates to €253.9 million compared to €246.0 million in 2015. This increase brings the Corporate EBITDA margin to 11.8% up 10 basis points versus 2015. This good performance is the result of a 40 basis points increase in the Group’s fleet financial utilization which reached 76.5% in 2016 versus 76.1% in 2015, as well as a good control of the Group’s fleet cost per unit.

Corporate Operating Free Cash Flow

2016 Corporate Operating Free Cash Flow surged to €157 million up 83% compared to €86 million in 2015. This significant increase is the reflection of our strong business model and of a more normative and structural Free Cash Flow generation level. 2015 was impacted by one off events such as the IPO process and an internal restructuring programme. As a consequence, this enables the Group to deliver a record but more importantly a more normative 62% operating free cash flow conversion rate. 2

Operating income

2016 operating income came in at €262.7 million up 19% compared to €221.5 million in 2015. This significant increase is mostly due to the fact that the Group incurred much less non-recurring expenses in 2016 compared to 2015 which was impacted by litigation, restructuring and IPO-related costs.

Net financing costs

Net financing costs under IFRS amounted to a €121.1 million net expense in 2016, a significant improvement compared to a net expense of €227.6 million incurred in 2015. The main reasons for this improvement are (1) the full year impact of the debt restructuring that followed the IPO in 2015 and (2) the impact of the renegotiation of the fleet financing in 2016.

1 Adjusted Corporate EBITDA is defined as current operating income before depreciation and amortization not related to the fleet, and after deduction of the interest expense on certain liabilities related to rental fleet financing. This indicator includes in particular all the costs associated with the fleet. See “Reconciliation with IFRS” attached.
2 The Operating Free Cash Flow conversion rate is defined as Adjusted Corporate Operating Free Cash Flow / Adjusted Corporate EBITDA expressed as a percentage.

Net income

In 2016, the Group posted a net profit of €119.2 million, compared to a €55.8 million net loss in 2015. This significant improvement arose from the good evolution of the operational performance and the significant decrease of the financing cost.

Net debt

Corporate net debt continued to decrease to reach €220 million as of December 31, 2016 (vs. €235 million as of December 31, 2015) as a result of the Group’s strong free cash flow generation and even after the amount of €47 million spent for acquisitions and strategic investments in 2016.

The fleet debt was €3,045 million as of December 31, 2016 vs. €2,821 million in December 31, 2015. This increase reflects the higher number of vehicles in the fleet in order to sustain the growth of the Group’s operations and the fleet mix evolution.

2016 revised guidance delivered

The Group has exceeded all the revised targets that were set out in July following the Group’s first half year results. The Group’s organic revenue growth was 2.6%, Adjusted Corporate EBITDA was up 3.2% at €254m and Corporate Operating Free Cash Flow conversion reached 62% in 2016.

Exceptional Dividend Payout of 50%

Finally, the board of Directors has decided to recommend the payment of an exceptional dividend for 2016 representing 50% of the Group’s net income in line with the Group’s 2016 revised guidance.

2017 guidance

In 2017, the Europcar Group plans to achieve the four following financial targets compared to 2016:

- Accelerating organic revenue growth ie above 3%

- Increase in adjusted corporate EBITDA margin (excluding New Mobility) ie above 11.8%

- A corporate operating free cash flow conversion rate above 50%

- A dividend payout ratio above 30%

The Group reiterates its strategic ambition to continue the roll out of its acquisition plan in order to increase value creation for its shareholders.

2020 Ambition and new corporate organization by business unit

Europcar announced in October 2016 its dual ambition to reach by the end of 2020:

- Over €3 billion of revenue

- Adjusted Corporate EBITDA margin above 14% (excluding New Mobility)

This €3 billion revenue target will be achieved through a mix of organic growth (€300-€500 million of additional revenue expected) and acquisitions (with an expected amount of at least €500 million over the period).

The Group’s 14% Adjusted Corporate EBITDA margin target, which excludes the impact of new mobility services, will be generated from the Group’s ability to generate significant operational leverage both organically and from its future acquisitions.

As a key enabler of this 2020 Ambition, the Group has implemented a new organization as of January 1st 2017. The Group is now organized into five business units in order to better meet with customer expectations, to be better positioned to seize new business growth opportunities and to be more efficient against its competition.

These five business units are:

- Cars, where the objective is to reinforce the Group’s strong #1 position in Europe in a market estimated to be worth around €10 billion.

- Vans & Trucks, where the objective is to become a European leader in a market estimated to be worth around €2.4 billion and where the Group’s current market is only around 9%.

- Low Cost, where the Group’s objective is also to become a European leader, in a market estimated to be worth around €1.4 billion and where the Group only has a 6% market share.

- New Mobility Services, where the Group aims to address new usages and strategically prepare for the future by building on its leadership in the new mobility solutions market.

- International Coverage, where the ambition is to continue to expand the Group’s services globally.

Post-Closing Events

On January 12th 2017, the Europcar Group signed a worldwide commercial partnership with Shouqi Car Rental, a leading car rental company in China. This adds another fundamental brick in the Group’s global footprint in a key market with high potential.

On February 17th 2017, Europcar Group made the acquisition of the remaining 25% minority stake in Ubeeqo which was held by the company’s founders. As a result, Europcar Group now owns a 100% of Ubeeqo.

On February 27th, the French Antitrust Authority announced the dismissal of its case against the French car rental industry. This decision has no impact on the 2016 full year results.

About Europcar Group

Europcar shares (EUCAR) are listed on the Euronext Paris stock exchange. Europcar is the European leader in vehicle rental service and is also a major player in mobility markets. Active in more than 140 countries, Europcar serves customers through an extensive vehicle rental network comprised of its wholly-owned subsidiaries as well as sites operated by franchisees and partners. In addition to the Europcar® brand, the company offers low-cost vehicle rentals under the InterRent® brand. A commitment to customer satisfaction drives the company and its 6,000 people forward and provides the impetus for continuous development of new services. The Europcar Lab was created to respond to tomorrow’s mobility challenges through innovation and strategic investments, such as Ubeeqo and E-Car Club.

Forward-looking statements

This press release includes forward-looking statements based on current beliefs and expectations about future events. Such forward looking statements are not guarantees of future performance and the announced objectives are subject to inherent risks, uncertainties and assumptions about Europcar Groupe and its subsidiaries and investments, trends in their business, future capital expenditures and acquisitions, developments in respect of contingent liabilities, changes in economic conditions globally or in Europcar Groupe’s principal markets, competitive conditions in the market and regulatory factors. Those events are uncertain; their outcome may differ from current expectations which may in turn affect announced objectives. Actual results may differ materially from those projected or implied in these forward-looking statements. Any forward-looking statement contained in this press release is made as of the date of this press release. Europcar Groupe undertakes no obligation to publicly revise or update any forward-looking statements in light of new information or future events.

The results and the Group's performance may also be affected by various risks and uncertainties identified in the "Risk factors" of the Registration Document registered by the Autorité des marchés financiers (the "AMF") May 20, 2015 under the number I.15-041 and its update filed with the AMF on June 12, 2015 and also available on the Group's website: www.europcar-group.com

Further details on our website:
finance.europcar-group.com

 

Appendix 1 – Management Profit and Loss

                       
Q4 2016       Q4 2015       All data in €m       FY 2016       FY 2015
495.6 488.8 Total revenue 2,150.8 2,141.9
(118.7) (119.9) Fleet holding costs, excluding estimated interest included in operating leases (488.8) (491.9)
(180.9) (165.5) Fleet operating, rental and revenue related costs (753.3) (727.0)
(85.5) (88.8) Personnel costs (339.2) (347.4)
(49.5) (54.8) Network and head office overhead (215.9) (218.5)
5.7 5.9 Other income and expense 9.7 14.2
(129.3) (137.8) Personnel costs, network and head office overhead, IT and other (545.4) (551.7)
(15.1) (16.7) Net fleet financing expense (62.0) (65.5)
(11.4) (12.7) Estimated interest included in operating leases (47.5) (55.2)
(26.5) (29.4) Fleet financing expenses, including estimated interest included in operating leases (109.5) (120.7)
40.3 36.2 Adjusted Corporate EBITDA 253.9 250.6
8.1% 7.4% Margin 11.8% 11.7%
(10.0) (8.7) Depreciation – excluding vehicle fleet (32.3) (32.8)
(23.2) (5.2) Other operating income and expenses (20.7) (61.8)
(18.5) (12.1) Other financing income and expense not related to the fleet (59.1) (162.1)
(11.4) 10.2 Profit/loss before tax 141.7 (6.1)
38.5 (2.5) Income tax (6.6) (37.6)
(6.7) (6.1) Share of profit/(loss) of associates (15.8) (12.1)
20.4 1.6 Net profit/(loss) 119.3 (55.8)
 
 

Appendix 2 – IFRS Income statement

           
In thousands of euros

At December 31,
2016

At December 31,
2015

                 
Revenue       2,150,758       2,141,923
 
Fleet holding costs (536,295) (547,186)
Fleet operating, rental and revenue related costs (753,303) (726,990)
Personnel costs (339,158) (347,388)
Network and head office overhead costs (215,897) (218,475)
Depreciation, amortization and impairment expense (32,335) (32,781)
Other income       9,699       14,216
Current operating income       283,469       283,319
 
Other non-recurring income and expenses       (20,721)       (61,774)
Operating income       262,748       221,545
 
Gross financing costs (94,189) (121,768)
Other financial expenses (28,855) (117,780)
Other financial income 1,983 11,956
Net financing costs (121,061) (227,592)
                 
Profit/loss before tax       141,687       (6,047)
 
Income tax benefit/(expense) (6,628) (37,637)
Share of profit/loss of associates accounted for under the equity method (15,765) (12,074)
                 
Net profit/(loss) for the period       119,294       (55,758)
 
Attributable to:
Owners of ECG 119,493 (55,602)
Non-controlling interests (199) (156)
 
 
Basic earnings per share attributable to owners of ECG (in euros) 0.834 (0.449)
Earnings per share attributable to owners of ECG (in euros) 0.825 (0.449)
 
 

Appendix 3 – Reconciliation

                       
Q4 2016       Q4 2015       All data in €m       FY 2016       FY 2015
161.1 159.5 Adjusted Consolidated EBITDA 754.5 766.0
(41.5) (44.7) Fleet depreciation IFRS (181.9) (184.4)
(52.8) (49.1) Fleet depreciation included in operating lease rents (209.3) (210.3)
(94.3) (93.9) Total Fleet depreciation (391.2) (394.7)
(11.4) (12.7) Interest expense related to fleet operating leases (estimated) (47.5) (55.2)
(15.1) (16.7) Net fleet financing expenses (62.0) (65.5)
(26.5) (29.4) Total Fleet financing (109.5) (120.6)
40.3 36.2 Adjusted Corporate EBITDA 253.9 250.6
(10.0) (8.7) Amortization, depreciation and impairment expense (32.3) (32.8)
15.1 16.7 Reversal of Net fleet financing expenses 62.0 65.5
11.4 12.7 Reversal of Interest expense related to fleet operating leases (estimated) 47.5 55.2
56.8 56.9 Adjusted recurring operating income 331.0 338.5
(11.4) (12.7) Interest expense related to fleet operating leases (estimated) (47.5) (55.2)
45.4 44.2 Recurring operating income 283.5 283.3
 
           

Appendix 4 – Balance sheet

 
In thousands of euros      

At December 31,
2016

     

At December 31,
2015

 
ASSETS                
 
Goodwill 459,496 457,072
Intangible assets 715,209 713,136
Property, plant and equipment 84,102 89,236
Equity-accounted investments 14,083 22,035
Other non-current financial assets 67,820 57,062
Deferred tax assets 58,743       55,730
Total non-current assets 1,399,453 1,394,271
 
Inventories 16,843 15,092
Rental fleet recorded on the balance sheet 1,640,251 1,664,930
Rental fleet and related receivables 720,623 574,652
Trade and other receivables 365,200 357,200
Current financial assets 77,003 37,523
Current tax assets 35,585 33,442
Restricted cash 105,229 97,366
Cash and cash equivalents 154,577       146,075
Total current assets 3,115,311 2,926,280
                 
Total assets       4,514,764       4,320,551
 
Equity                
Share capital 143,409 143,155
Share premium 647,514 767,402
Reserves (111,681) (74,341)
Retained earnings (losses) (48,706)       (274,821)
Total equity attributable to the owners of ECG 630,536 561,395
Non-controlling interests       730       961
Total equity       631,266       562,356
 
LIABILITIES                
Financial liabilities 953,240 801,183
Non-current financial instruments 56,216 52,090
Employee benefit liabilities 139,897 119,295
Non-current provisions 18,640 25,168
Deferred tax liabilities 107,848 131,132
Other non-current liabilities 246       306
Total non-current liabilities 1,276,087 1,129,174
 
Current portion of financial liabilities 1,224,442 1,263,783
Employee benefits 3,247 2,944
Current tax liabilities 39,227 24,511
Rental fleet related payables 679,678 662,722
Trade payables and other liabilities 440,065 424,974
Current provisions 220,752       250,087
Total current liabilities       2,607,411       2,629,021
Total liabilities       3,883,498       3,758,195
                 
Total equity and liabilities       4,514,764       4,320,551
 
           

Appendix 5 – IFRS Cash Flow

 

In thousands of euros

     

At December 31,
2016

     

At December 31,
2015

                 
Profit/(loss) before tax       141,687       (6,047)
Reversal of the following items
Depreciation and impairment charge on property, plant and equipment 14,894 15,277
Amortization and impairment charge on intangible assets 17,056 17,893
Change in provisions and employee benefits (23,015) 999
Recognition of share-based payments (304) 2,624
Costs related to the IPO - 8,692
Profit/(loss) on disposal of assets - (394)
 
Total net interest costs 98,617 127,303
Redemption premium - 56,010
Amortization of transaction costs 7,813 42,340
Amortization of bond issue premiums - -
Other non-cash items 346       1,465
Financing costs 106,776 227,118
                 
Operating income before changes in working capital       257,094       266,162
 
Changes in the rental fleet recorded on the balance sheet (20,643) (232,851)
Changes in fleet working capital (126,151) 34,869
Changes in non-fleet working capital 3,997 (57,243)
                 
Cash generated from operations       114,297       10,937
 
Income taxes received/(paid) (22,744) (39,669)
Net interest paid (98,746) (137,334)
                 
Net cash generated from (used by) operations       (7,193)       (166,066)
 
Acquisition of intangible assets and property, plant and equipment (36,905) (29,172)
Proceeds from disposal of intangible assets and property, plant and equipment 6,109 5,384
Other investments and loans - -
Acquisitions and proceeds from disposal of financial assets (27,562) (7,563)
Acquisition of subsidiaries, net of cash acquired (45,740) (23,872)
                 
Net cash used by investing activities       (104,098)       (55,223)
 
Capital increase (net of related expenses) - 448,203
(Purchases)/Sales of treasury shares (4,877)
Issuance of bonds 130,625 471,623
Redemption of bonds - (780,010)
Change in other borrowings 11,271 123,310
Payment of transaction costs (6,451) (19,820)
                 
Net cash generated from (used by) financing activities       130,568       243,306
                 
Cash and cash equivalents at beginning of period 229,368 206,317
Net increase/(decrease) in cash and cash equivalents after effect of foreign exchange differences 19,277 22,018
Effect of foreign exchange differences (138) 1,033
Cash and cash equivalents at end of period       248,507       229,368
 

(1)

   

In 2016, the change in employee benefits was due to a downward trend in the discount rate (in Germany and the UK).

(2)

In 2016, reduction in net interest expense following the renegotiation of interest rates on borrowings at the time of the IPO.

(3)

Given the average holding period for the fleet, the Group reports vehicles as current assets at the beginning of the contract. Their change from period to period is therefore similar to operating flows generated by the activity.

(4)

In 2016, reduction in taxes paid compared with 2015 given installments paid in France and Spain in 2015, and in the United Kingdom prior year’s regularizations and payment received in 2016 from the British tax authorities after the settlement of a litigation.

(5)

Including, in 2016 the acquisition of the Locaroise, French franchisee, for €8.3 million, the Irish franchisee for €23.6 million, Brunel for €6.3 million, and an equity interest in Wanderio for €1.1 million, the exercise of the first step in the Ecar put for €0.8 million, and the subscription to the Car2Go capital increase for €6.3 million.

(6)

In 2015, represents capital increases on May 15 and June 26 in a total amount of €476.5 million net of fees paid (€8.7 million recognized as other non-current expenses and €19.6 million of the €23.6 million allocated to the issue premium).

(7)

In 2015, linked to the issue of the €475 million in high yield bonds issued at 99.289%; in 2016, a new bond issue for €125 million.

(8)

In 2015, linked to early redemption of the €324 million and €400 million high-yield bonds, and to payment of redemption premiums of €56 million.

(9)

In 2016, repayment of the RCF.

 
                         

Appendix 6 - Debt

 
€million Pricing Maturity

Dec. 31,
2016

Dec. 31,
2015

High Yield Senior Notes (a) 5.75% 2022 600 475
Senior Revolving Facility (€350m) E+250bps (b) 2020 13 81
FCT Junior Notes, accrued interest not yet due, capitalized financing costs and other (203) (150)
Gross Corporate debt 410 406
Short-term Investments and Cash in operating and holding entities (189) (171)
CORPORATE NET DEBT (A) 220 235
 
€million Pricing Maturity

Dec. 31,
2016

Dec. 31,
2015

IN
Balance
Sheet

High Yield EC Finance Notes (a) 5.125% 2021 350 350
Senior asset revolving facility (€1.3bn SARF) (c) E+150bps 2020 693 658
FCT Junior Notes, accrued interest, financing capitalized costs and other 200 142
UK, Australia and other fleet financing facilities Various (d) 491 509
Gross financial fleet debt 1,734 1,659
Cash held in fleet financing entities and Short-term fleet investments (150) (161)
Fleet net debt in Balance sheet 1,584 1,498
 

OFF
BS

Debt equivalent of fleet operating leases - OFF Balance Sheet (e) 1,461 1,323
 
TOTAL FLEET NET DEBT (incl. op leases) (B) 3,045 2,821
 
TOTAL NET DEBT (A)+(B) 3,265 3,057
 

(a)

   

These bonds are listed on the Luxembourg Stock Exchange. The corresponding prospectus is available on Luxembourg Stock Exchange website (http://www.bourse.lu/Accueil.jsp)

(b)

Depending on the leverage ratio

(c)

Swap instruments covering the SARF structure have been extended to 2020

(d)

UK fleet financing maturing in 2018 with one year extension option

(e)

Corresponds to the net book value of applicable vehicles, which is calculated on the basis of the purchase price and depreciation rates of corresponding vehicles (based on contracts with manufacturers).

Contacts

Europcar / Press relations
Nathalie Poujol, +33 1 30 44 98 82
europcarpressoffice@europcar.com
or
Europcar / Investor relations
Olivier Gernandt, +33 1 30 44 91 44
olivier.gernandt@europcar.com
or
Havas Paris
Jean-Baptiste Froville, +33 1 58 47 95 39
jean-baptiste.froville@havasww.com

Contacts

Europcar / Press relations
Nathalie Poujol, +33 1 30 44 98 82
europcarpressoffice@europcar.com
or
Europcar / Investor relations
Olivier Gernandt, +33 1 30 44 91 44
olivier.gernandt@europcar.com
or
Havas Paris
Jean-Baptiste Froville, +33 1 58 47 95 39
jean-baptiste.froville@havasww.com