‘For many reasons, 2014 has been a remarkable year for Braas Monier. We have shown an outstanding operating performance, significantly improved our financial structure on the debt as well as on the equity side and, what is more, we have set the course for further above-market growth in the future, by continuing to execute successfully our Top Line Growth programme. The acquisition of Cobert and the promising product innovation ‘WrapTec‘ are good examples that we continue to deliver on our strategic milestones,’ Pepyn Dinandt, CEO of Braas Monier Building Group S.A. summarised.
With its unique systems approach, Braas Monier has outgrown many of its key markets in 2014. Lean organisational structures and an ongoing focus on improving efficiencies across the whole organisation have enabled the Group to increase its Operating EBITDA by almost one quarter despite only flat revenues. ‘We more than achieved our goal of increasing Operating EBITDA by 20% on the back of stable revenues. On the basis of our strong Cash Flow generation of EUR 89 million, we reduced net debt more rapidly than anticipated, even when including the acquisition of Cobert on a pro-forma basis, which has been financed with internal cash flow. Furthermore, we increased net income by more than EUR 100 million and delivered a positive result of close to EUR 40 million, equalling approximately EUR 1.02 per share2. This operating and financial performance enables Braas Monier to propose a substantial dividend, which is the first in its history,‘ Pepyn Dinandt adds.
Through the Group-wide ‘Top Line Growth’ programme, the management is confident that it will continue to realise profitable, above-market growth in the coming years, based on strong customer focused sales and marketing initiatives, value-adding services, the development of innovative products and solutions, such as the recently launched ‘WrapTec‘ and further value-accretive bolt-on acquisitions. In addition, a multi-year programme has been launched to systematically enhance the Group’s internal processes, including administrative, sales support, in-house logistics and production processes. ‘It is essential to look forward and systematically exploit Braas Monier’s capabilities to maximise the opportunities which inevitably arise in this ever-changing and dynamic environment,’ Pepyn Dinandt emphasised the Group’s on-going efforts to achieve above-market growth complemented by a culture of strict cost management, continuous profit improvement and a clear focus of increasing cash generation over time.
Industry experts’ expectations for a wide-spread recovery of the European building industry has not yet materialised. However, the UK, Braas Monier’s second largest market in terms of revenues, showed very strong growth in 2014, backed by governmental measures such as the ‘Help to Buy scheme’, stimulating the Company’s activities in the new build sector significantly. The German market, which like many European markets profited from a weather-related boom in the first quarter, ended up broadly flat. Other countries, especially France and Italy, experienced declines. In this challenging environment, Braas Monier achieved above-market growth in several key countries – both in growing and contracting markets – such as Germany, the UK, the Netherlands, Poland, Malaysia and China. At EUR 1,211 million, full year revenues 2014 were around last year’s level of EUR 1,219 million (-0.6%). Adjusted for currency effects, revenues grew slightly by 0.4%. Positive pricing across the Group was thus sufficient to compensate for lower volumes. Revenues in the fourth quarter reached EUR 303.6 million, 3.3% lower compared to the previous year’s period (EUR 314.0 million).
Braas Monier has strongly improved its profitability in 2014. Despite broadly unchanged revenues, Operating EBITDA rose by 23.3% or EUR 37.0 million to EUR 195.4 million (2013: EUR 158.4 million). The Group achieved a sizeable Operating EBITDA margin increase of 310 basis points to 16.1% (2013: 13.0%) on the back of positive pricing, purchasing and efficiency gains. Other operating income was also EUR 2.1 million higher than in the previous year. In the fourth quarter, when the margin is usually below the full-year average due to seasonal effects, it also exceeded the level of previous year’s quarter (13.4%) at 15.5%. Operating EBITDA in the fourth quarter increased by EUR 4.9 million or 11.7% (2013: EUR 42.1 million) to EUR 47.0 million, helped by a better than expected development during the last weeks of the year. Currency effects had a negative effect of approximately EUR 2.0 million on Operating EBITDA in 2014. EBIT improved by EUR 108.5 million to EUR 114.8 million, also due to the absence of substantial non-recurring costs of EUR 72.4 million (mainly relating to restructuring) incurred in 2013.
Braas Monier reported positive net profit, both in the fourth quarter and the full fiscal year 2014. After a loss of EUR 69.0 million in 2013, net profit in the business year under review rose by EUR 108.8 million to EUR 39.8 million.
Braas Monier generated an adjusted free cash flow of EUR 89.0 million before one-time effects in 2014 of EUR 69.4 million. Cost attached to the refinancing of the then existing debt in April 2014 and the IPO in June 2014 led to non-recurring cash outflows of EUR 20.6 million and EUR 12.7 million, respectively. In addition, EUR 36.2 million was paid from legacy non-recurring provisions, mainly in relation to restructuring measures.
As a result of the positive net profit and the capital increase of approximately EUR 100 million in connection with the IPO in June 2014, total equity rose from EUR 16.2 million at 31 December 2013 to EUR 92.9 million at the end of 2014. The leverage ratio, defined as net debt to Operating EBITDA, was reduced significantly to 1.7 times (previous year: 2.8 times). Today, the financial liabilities of the Group mainly consist of a Senior Secured Floating Rate Note of EUR 315 million and the remaining Term Loan B amounting to EUR 200 million. Both instruments mature in 2020. Further financial flexibility is provided by the Revolving Credit Facility of EUR 100 million.
The strength of Braas Monier’s operating and financial performance in 2014 has enabled the Company to already propose its first and substantial dividend of EUR 0.30 per share to its shareholders. It is this strength in performance, despite many markets being on a historical low, that gives us confidence in our continued ability to offer long-term attractive growth opportunities to our shareholders.
The building markets across Europe as well as in Asia and South Africa showed an uneven development in 2014, visibly reflected in the revenue trends of the individual reporting segments. Nevertheless, all operating segments were able to significantly improve their Operating EBITDA in 2014.
Despite the weakening of the German market in the course of 2014, revenues in the Central, Northern & Eastern Europe segment ended up flat (-0.1%). Along with a strong margin increase (from 13.8% in 2013 to 16.9% in 2014), the Operating EBITDA improved by 21.9%.
On the back of dynamic growth in the UK and positive impetus from the Netherlands, Western Europe achieved a strong revenue increase of 4.9%, which is also reflected in the above-average earnings increase. The Operating EBITDA grew by 55.4% with an EBITDA margin of 14.2% (+460 basis points compared to 2013).
While Southern Europe suffered the largest decline in revenues within the Group (-7.0%), it was still in line with expectations given the economic situation in Italy and the impact of the Ukraine crisis on the countries in South-Eastern Europe. The considerable improvements in Operating EBITDA (+17.4%) and EBITDA margin (+380 basis points to 18.3%) demonstrate the efficiency gains and strict cost control.
Adjusted for currency effects, Asia & Africa experienced the strongest revenue increase of all segments (+5.6%) and 11.6% growth in Operating EBITDA.
At Chimneys & Energy Systems, with its geographical focus on Central and Eastern Europe, revenues fell 4.7% short of the previous year’s level. However, due to an efficient and cost-focused management of the business, a 7.8% growth in Operating EBITDA was achieved and the EBITDA margin rose from 12.7% in 2013 to 14.3%.
Revenues in the Central Products & Services segment, that mainly result from the sale of components, declined in 2014 by 3.0%. This was attributable to distributors running down their stocks during the second half of 2014 in anticipation of lower sales as well as weaker demand in individual markets. As a result, despite an improved underlying cost structure, Operating EBITDA of this segment including central costs only showed a marginal improvement of EUR 0.1 million to minus EUR 3.0 million.
In 2014, the expected market recovery in Europe only really materialised in the UK. Industry experts assume that an upturn in new residential construction has been postponed into 2015 and should thus provide positive momentum for the current business year. Braas Monier overall is positive with regard to the residential market development in Europe, Asia and South Africa and expects some volume growth in the markets it is active in, barring any extraneous events driven by major geopolitical instability.
For 2015, Braas Monier expects further strong growth for the UK and moderate growth in other European countries, such as Spain and Portugal, the Netherlands, Poland, Hungary and Turkey. A stable development is anticipated for Germany, Austria and also Italy, where the market should have reached its trough. France is expected to further decline, albeit at a much lower rate than in 2014, before reaching its low point in 2015. The Russian market, small for Braas Monier, will most likely show a pronounced contraction. In the emerging markets, growth is foreseen especially in Indonesia and South Africa. The components business is expected to show a good improvement in performance supported by rising national and international building standards, especially in regards to energy efficiency and safety. With regard to the Chimney & Energy Systems business, expectations are for a similar development to the roofing business in the respective markets.
Braas Monier will continue to strive for above-market growth by rolling out further initiatives under its ‘Top Line Growth’ programme to existing and new countries. The Company expects positive effects in the components business from a number of new innovations such as ‘WrapTec‘. The relevant European market (HVAC claddings and other sealing applications) we estimate at a minimum of EUR 300 million. After the product launch in January 2015 in the pilot market Denmark, first sizeable revenue and EBITDA contributions of ‘WrapTec‘ are expected from 2016.
Through the takeover of Spanish and Portuguese market leader Cobert, Braas Monier has entered new growth markets which will generate additional revenues and earnings. The transaction was closed in January 2015. For the current fiscal year, management expects the Iberian business to generate revenues of approximately EUR 38 million and contribute approximately EUR 5 million to EBITDA (including synergies). Medium-term, in a normalised environment and including synergies, particularly related to the components business, the Group expects this acquisition to generate additional potential of at least some EUR 50 million in revenues and around EUR 10 million in EBITDA (the enterprise value at acquisition was EUR 29.5 million). Management views Braas Monier as being well-positioned for further opportunistic bolt-on acquisitions. The opening of a second plant in India at the end of September 2014 will support organic growth in 2015. Further new openings in Asia are planned for the coming years to support the Company’s growth in these large developing markets.
Based on these assumptions, Braas Monier expects revenues to grow by a mid-single-digit percentage figure, driven by growth in volumes and the first time inclusion of Cobert. Average selling price increases are expected to at least offset variable cost inflation. Currency effects will possibly have a marginal positive effect on revenues.
From a cost perspective, management expects slight increases in input costs (raw materials and wage inflation). The currently low energy prices might have the potential to ease some variable cost inflation if they were to stay at these levels throughout the year. Revenue growth together with an onging focus on strict cost control at all levels will further drive growth in the Company’s profits.
Sustainable Capex is expected to be at a level of around EUR 62 million. In addition, approximately EUR 8 million (net) will be invested in future growth projects in 2015.
The exceptional cash flows generated by the operating business will continue to allow the Group to achieve consistent and ambitious growth, both organically and through acquisitions, with an unerring focus on return on invested capital while being ever mindful of the Group’s net debt ratio and its dividend policy.
For the full Trading Statement and other information on the Group, see the investor relations section on our website www.braas-monier.com.
1) All numbers on a preliminary basis, 2013 figures restated due to first-time application of IFRS 11. Audited full year financial report to be published on 31 March 2015.
2) Related to 39,116,667 shares outstanding as at 31 December 2014.