Half-Yearly results 2024

June 30, 2024

The LISI Group achieved record sales of more than €900 million in  H1 2024 and improved its main financial indicators in line with the targets

•     Record sales up 10.0%, reflecting in particular the strong ramp-ups across all segments of the aerospace market

•     1.5-point improvement in current operating margin to 6.0%

•     Free Cash Flow recovery of +€28.5 million, thanks to strong growth in self-financing capacity despite the business acceleration and the maintenance of strategic inventories

•     Outlook: annual targets are confirmed in a volatile environment

Grandvillars, July 25, 2024 - Today LISI announced its results for the first half ended June 30, 2024. These accounts were subject to a limited review by the Statutory Auditors and were submitted to the Board of Directors that met today.

Comments on the business of the period

Consolidated sales for H1 2024 amount to €903.6 million, up +10.0% compared to the same period of 2023 and taking into account the following elements:

•       a negative exchange rate impact of -€1.6 million (0.2% of sales)

•       a price effect corresponding to the partial passthrough to customers of the impact of inflation on manufacturing costs estimated at approximately €27.4 million.

In line with the objective of maintaining positive organic growth in 2024, the increase in sales restated for currency fluctuations with no scope effect stands at +10.2% over the first six months of the year.

The EBITDA reached 11.9% of sales, a +2.5-point increase compared to the same period of the previous financial year. It benefits from the increase in production volumes and the gradual improvement in productivity after the strong recruitment phase of the previous year. 

The effect of provision allocations and reversals (mainly on inventories) is unfavorable compared to H1 2023, at -€1.0 million. 

The EBIT increased by +€17.1 million and stood at €54.0 million, representing a current operating margin of 6.0% compared to 4.5% in H1 2023.

Non-current operating income and expenses amounted to €3.1 million compared to €3.6 million in H1 2023 and are partly made up of the costs of moving, in the LISI AEROSPACE division, from the Bologne site to Chaumont as part of the continuation of the Forge 2022 project.

The financial result stands at -€8.4 million (-€7.8 million in H1 2023). It is mainly due to the following factors:

•       the effects linked to the revaluation of debts and receivables in foreign currencies and the change in the fair value of hedging instruments (+€4.5 million versus -€2.9 million in H1 2023),

•       financial expenses, corresponding to the cost of net long-term debt and the first repayment of interest linked to the financing of the Public Share Buyback Offer (€200.0 million), amounted to -14.6 €m (-€5.0m in H1 2023). The gains made on current cash investments amounted to €1.7 million (€0.1 million in H1 2023).

The corporate tax rate stands at 26.7%, in line with the historical rates observed by the Group.

Net profit amounts to €31.6 million (or 3.5% of sales), compared to €13.5 million (1.6% of sales) in H1 2023.

At €86.0 million, the operating cash flow represents 9.5% of sales, an increase of +2.8 points compared to H1 2023. It makes it possible to finance the entire financing requirement for capital expenditure programs of €55.5 million (6.1% of sales). These are primarily dedicated to pursuing strategic initiatives aimed at driving future growth, new product development, innovation and the implementation of multiyear industrial programs.

The currently high level of working capital requirements (83 days of sales) can be explained by two factors: the acceleration of activity (increase in customer accounts and other receivables of +€48.0 million) on the one hand, and the maintenance of strategic inventories (+€11.1 million) to respond to uncertain supply deadlines and secure over time the increase in production levels in the LISI AEROSPACE division on the other hand. 

Consequently, Free Cash Flow stood at -€13.3 million, an improvement of +€28.5 million compared to H1 2023.

Net debt amounts to €538.0 million in H1 2024. It amounts to 55.6% of shareholders' equity and 2.6x current gross operating surplus (annualized EBITDA). It is significantly below the covenants authorized by banking partners set at 120% of equity and 3.5x current gross operating surplus (annualized EBITDA), respectively.

LISI AEROSPACE (56% of total consolidated sales) 

•       Strong activity across all segments of the aerospace market driven by the good performance of global air traffic

•       Gradual improvement in industrial productivity after the high level of recruitment in 2023

•       Negative Free Cash Flow, reflecting the increase in working capital requirements to respond to the significant increase in activity in a context of tensions in the supply chain

Analysis sales developments

Aerospace market

The good long-term outlook for the global commercial flight of the aeronautical market is reflected in high order levels among manufacturers. The increases in monthly production rates for single-aisle aircraft were revised downwards at the end of the half-year with no impact on the division. The ambitions for increases are staggered and remain high for the Airbus A320 family (58 aircraft currently, with a target of 75 in 2026). The Boeing B737 MAX family is temporarily limited to 38 aircraft (with a target of increasing to 52 by the end of 2025).

The significant return of long-haul orders, as well as the good performance of the helicopter and military market segments, are supporting demand over the long term. 

Comments on the business of the period

Sales for the LISI AEROSPACE division amounted to €505.0 million in H1 2024, up +21.8% compared to the same period of the 2023 financial year. 

The ramp-ups of single-aisle aircraft and maintenance activities benefit all product lines. The "Fasteners" segment is thus growing in Europe by +26.2% and +22.9% in the United States on an already high comparison basis in H1 2023. The "Structural Components" segment is also going well and growing by +17.1%. 

The increase in sales of the LISI AEROSPACE division restated for currency fluctuations with no scope effect stands at +22.0% in H1 2024. 

Results

The division is gradually benefiting from volume increases and improved productivity after the strong recruitment phase of the two previous years.

The EBITDA thus increased by +4.7 points compared to the same period of the previous financial year and amounted to 13.7% of sales. The EBIT is multiplied by 2.4 compared to H1 2023 and reached €40.4 million over the half-year. The current operating margin is multiplied by 2 compared to the same period of the previous financial year and stands at 8.0% of the division's sales.

Although it remains negative, Free Cash Flow improves significantly compared to H1 2023 (- 21.9 million as of June 30, 2024 versus -€37.9 million as of June 30, 2023). It is subject to the mechanical effects of the increase in customer accounts which accompanies the sharp increase in activity. It also takes into account:

§  the securing of inventories of raw materials which are subject to the persistent volatility of procurement lead times and inflation,

§  the sharp increase in manufacturing work in progress due to an extension of production cycles that results from the strengthening of quality requirements, bottlenecks and the extension of subcontracting lead times. 

Capital expenditures are up from +€5.4 million to €31.8 million and are dedicated to implementing the means necessary to meet the increase in demand from the division's customers.

Furthermore, the LISI Group took a minority stake in the company Watch Out to support it in the development of a disruptive Artificial Intelligence solution for fully autonomous machining which is now operational (see press release dated 05/21/2024).

LISI AUTOMOTIVE (34% of total consolidated sales)

•       Good resilience in the face of the decline in global production of the division's customers

•       Market share gains maintain their momentum

•       Significant efforts to adapt to recent declines in demand which are weighing on key financial indicators

•       Positive Free Cash Flow with inventory levels under control

Analysis of sales developments

Automotive market

Global registrations of light vehicles still show a slight increase of +2.3% compared to the same period of the previous year with a slowdown in Q2 (+0.4% compared to Q2 2023).

Global sales expressed in number of registrations showed slight growth in all markets. They were the most dynamic in Europe (+4.4%) despite the drop in sales of electric vehicles; +3.6% in North America and +0.6% in China.

Comments on the business of the period

The sales of the LISI AUTOMOTIVE division amounts to €310.6 million in H1 2024, down -2.5% compared to the same period of 2023.

The decrease in sales restated for currency fluctuations with no scope effect stands at -2.1% in H1 2024 compared to a drop of -5.7% in global production of the division's customers who face uncertainties linked to technological changes and geographic market change.

Order intake for new products remains at the high level of 13.6% of sales over the half-year (14.2% in H1 2023), i.e. approximately €42.0 million (€45.2 million in H1 2023). The LISI AUTOMOTIVE division thus confirms its positioning in electromobility and its ability to quickly adapt its product ranges. These performance results also testify to its increased diversification with Chinese or American OEMs and manufacturers, for braking systems or interior fittings. 

Results

The EBITDA stood at €26.7 million (8.6% of sales), compared to €25.9 million in the first half of the previous financial year (8.1% of sales). Cost adjustment measures made it possible to offset the unfavorable effects linked to fluctuations in demand, particularly at the end of the half-year.

On the other hand, the EBIT reached €9.2 million, representing a current operating margin of 3.0%, compared to 3.5% in the same period of the previous financial year which had further benefited from increases in selling prices.

The good adaptation of inventory levels to fluctuating requirements makes it possible to maintain a slightly positive Free Cash Flow at +€1.0 million while pursuing targeted capital expenditure programs linked to the development of new products and the improvement of industrial productivity. 

LISI MEDICAL (10% of total consolidated sales) 

•       Stability of sales with catch-up in H2 compared to H1

•       Operating margin suffered the adverse effects of inventory adjustments in the supply chain at the beginning of the first half-year

•       Free Cash Flow still positive with high CAPEX levels

Analysis of sales developments

Medical market

Supported by technological innovation and growing demand, the evolution of the global medical implant market in H1 2024 is in line with its long-term growth rate.

Comments on the business of the period

The sales of the LISI MEDICAL division amount to €88.5 million in H1 2024, down -0.8% compared to the same period of the previous financial year which showed an increase of +23.8%. Added to this unfavorable comparison basis in the first quarter was a movement to adjust the inventory levels of the division's main customers and production disrupted by difficulties in sourcing raw materials. To be noted, the strong business recovery in the second quarter (+4.8%).  

The change in sales restated for currency variations with no scope effect stands at -0.9% over the halfyear.

Results

The EBITDA stood at €13.1 million (14.8% of sales), down compared to the same period of the previous financial year (€14.5 million and 16.3% of sales). The division had to quickly adapt its cost structure to face of falling demand in Q1 and was thus able to gradually catch up with 2023.

The EBIT fell to €6.7 million. At 7.6%, the current operating margin fell by -3.3 points compared to H1 2023. It suffers the adverse effects of the gap between the increase in depreciation (+0.8 point) and the expected but not yet realized increases in sales volumes. 

The working capital requirement is adjusted to the level of activity, which allows the division to maintain a positive Free Cash Flow of €2.5 million (2.8% of sales) despite significant capital expenditures. The latter are essentially dedicated to the new expansion phase of the production capacities of the Minneapolis factory (United States) launched in H2 2023 to serve the growing market for minimally invasive surgery.

OUTLOOK AND 2024 TARGETS FOR THE LISI GROUP

LISI AEROSPACE 

In civil aerospace, demand is still trending well. It benefits from a high level of maintenance linked to the sustained traffic of the commercial aircraft fleet. The book-to-bill ratio (values of orders for the halfyear / sales for the half-year) remains well above 1. All other market segments, including helicopters and the military (15% of LISI AEROSPACE's sales), are also very dynamic and have good long-term visibility. 

The priorities for H2 will remain focused on: 

•       resolving bottlenecks in order to increase production capacities,

•       deploying action plans to reduce inventories mainly made up of work in progress while securing production volumes,

•       finalizing negotiations with major ordering customers in the context of compensation linked to the effects of inflation. 

LISI AUTOMOTIVE 

The LISI AUTOMOTIVE division is expected to experience a slowdown in demand from its main customers during the second half of the year in a market experiencing profound technological and geographic changes. Added to this is strong pressure on prices across the entire automotive industry with the will to lower the manufacturing costs of electric vehicles.

The LISI AUTOMOTIVE division will therefore have to continue to demonstrate discipline and adaptation while ensuring the development and ramp-up of new products resulting from record order intake in recent years.

LISI MEDICAL 

The long-term growth outlook for minimally invasive robotic surgery and orthopedic reconstruction remains positive. The division benefits from order books that remain robust, which should make it possible, during the second half of the year, to make up part of the delay linked to the adjustment in demand at the start of the year. Priority will be given to the continued development of new products and the ramp-up of production volumes based on the extension of the Minneapolis site (United States). 

LISI Group

The aeronautical development plan supports the Group's dynamics with excellent visibility.

Based on the performance of the first half, the Group confirms the objective set on February 22, 2024 when publishing the 2023 annual results, namely the improvement of its main benchmark financial indicators: EBIT and Free Cash Flow.

Income statement of LISI Group

(in thousands of euros)                                                                                                                                                                                     06/30/2024                       06/30/2023                         12/31/2023

OPERATING PROFIT                                                                                                                                                                                       50 929                            33 340                               86 371

PROFIT (LOSS) FOR THE PERIOD                                                                                                                                                                  31 204                            12 840                               36 667

 Internal Public

Statement of comprehensive income of LISI Group

Elements that can subsequently be recycled as a result                                                                                                                                                                                   0

# Internal Public

Consolidated statement of financial position of LISI GROUP

CURRENT ASSETS

TOTAL ASSETS                                                                                                                                                                                          2 180 431                        2 033 440                          2 058 566

TOTAL EQUITY AND LIABILITIES (in thousands of euros)

SHAREHOLDERS' EQUITY

NON-CURRENT LIABILITIES

CURRENT LIABILITIES

 Internal Public

Consolidated cash flow statement of LISI Group

        CASH PROVIDED BY OR USED FOR OPERATING ACTIVITIES (A)                                                                                                         55 256                          12 020                       136 916

INVESTMENT ACTIVITIES

        CASH PROVIDED BY OR USED FOR INVESTMENT ACTIVITIES (B)                                                                                                     (60 403)                       (51 387)                       (99 774)

FINANCING ACTIVITIES

       CASH PROVIDED BY OR USED FOR FINANCING ACTIVITIES (C)                                                                                                        (62 485)                       (27 766)                       (61 220)

     CLOSING CASH POSITION                                                                                                                                                                   48 079                          73 037                       117 353

# Internal Public

Statement of changes in equity of LISI Group

                                                                                                                            Other elements                              Group's share

                                                                                                                                           of              Profit for                      of                                           Total

                                             Capital stock     Capital-linked       Treasury     Consolidated       Conversion comprehensive          the period,   shareholders'             Minority shareholders'

 Internal Public