Latecoere : Reports H1 2022 Results

Toulouse, September 20, 2022

Latecoere Reports H1 2022 Results

• Strong revenue growth in the first half of 2022 of +33.8%
• Improvement in recurring EBITDA of €16.1 million in H1 2022 despite inflation pressure and global adverse economic situation
• 2022 outlook confirmed, including increased trading activity and significant improvement in recurring EBITDA
• Latecoèere is on track to deliver on its M&A strategy: Post integration of Malaga Aerospace, Defence & Electronics Systems SA (MADES) as of May 2022, target is to close the acquisitions of Figeac Aero's Hermosillo industrial site (Mexico) and Avcorp Industries Inc. during Q4'2022.

Latecoere, a tier 1 partner to major international aircraft manufacturers, today announced that the Board of Directors with Chairman Pierre Gadonneix approved Latecoere's financial statements for the six- month period ended June 30, 2022, on September 19, 2022.

Thierry Mootz, Group Chief Executive Officer, stated: "We are on track to deliver our targets for 2022. The half year results reflect the increased level of production in the aeronautical sector and the changes implemented by management to optimize the group footprint and operating cost base, resulting in an improvement in recurring EBITDA. We are starting to see the result of our cost reduction programs, the optimization of the group's footprint as well as our commercial efforts, supported by an industry backdrop that is experiencing a recovery in demand."

1st Half Year 2022 Results

(€ million)	Jun 30, 2022	Jun 30, 2021 ³
Revenue	242,3	181,1
Reported growth	33,8%	-21,9%
On like-for-like and constant exchange rate basis1	18,8%	-31,7%
Recurring EBITDA2	(6,9)	(23,0)
Recurring EBITDA margin on revenue	-2,8%	-12,7%
Recurring operating income	(22,7)	(36,5)
Recurring EBIT margin on revenue	-9,4%	-20,2%
Non recurring items	0,3	(2,8)
Other non recurring items	0,3	(2,8)
Operating income	(22,4)	(39,3)
Net Cost of debt	(3,3)	(1,4)
Other financial income/(expense)	1,2	(14,2)
Financial result	(2,1)	(15,6)
Income tax	(2,8)	(1,7)
Net result	(27,3)	(56,6)
Operating free cash flows	(75,5)	(16,7)

• Growth at constant exchange rates and scope of consolidation: Organic growth is obtained by neutralizing the effect of the EUR/USD exchange rate (use of a constant exchange rate for the periods concerned) and by applying a constant scope of consolidation (neutralization of the impact of acquisitions/disposals).

• Recurring EBITDA corresponds to current operating income before depreciation, amortization and impairment of current tangible and intangible assets.

• Adjusted data. See Note 4 to the Condensed Consolidated Financial Statements. In 2021, the Group presented, in parallel with the IFRS consolidated financial statements, an adjusted income statement (of a strictly non-accounting nature) mainly due to the significant volume of transactions that did not qualify as hedge accounting and which did not allow the Group to recognize the foreign exchange gains and losses arising from these instruments at the same level as the underlying asset concerned. As the use of instruments not qualifying for hedge accounting has become immaterial, the Group has concluded to no longer present adjusted financial statements from January 1, 2022. However, in order to ensure comparability of information, the Group presents adjusted data as of June 30, 2021 in its business report. The reconciliation table between the 2021 adjusted data and the consolidated data is available in Note 4 of the notes to the Group's condensed consolidated financial statements.

Latecoere's half-year financial results for 2022 reflect the increased level of production in the aeronautical sector as a whole. Revenues amounted to €242.3 million, up by €61.2 million or +33.8%. At constant exchange rates and scope, the increase was +18.8%. The increase in revenues benefited from higher production rates, notably for the A320 and Embraer programs, albeit the long-haul market segment continues to be challenging and impacted by the B787 production halt that ended in August 2022.

The Group also benefited over the period from the contribution of the activities of the new acquisitions, with a perimeter variance effect of €19.0 million, and a favorable currency effect of €14.1 million.

The Group reported a recurring EBITDA for the first half of 2022 of €(6.9) million, a demonstrable improvement of €16.1 million over the first half of 2021. This improvement was mainly driven by a recovery in margins in both business lines, in line with the recovery in production rates, and in addition by a favorable currency effect of €5.1 million and the impact of acquisitions €(0,7) million.

Latecoere's net financial income amounted to €(2.1) million in the first half of 2022, compared with €(15.6) million in the first half of 2021. The previous period had been impacted by a one-off effect related to the amortization of the shareholder loan in the amount of €(16.4) million following its early repayment.

The Group's net income for the first half of 2022 amounted to €(27.3) million, compared with €(56.6) million for the previous period.

Free cash flow from operations for the period amounted to €(75.5) million, which was mainly impacted by an increased working capital requirement of €(38.0) million in connection with the recovery in activity, and by the acquisition of MADES for an amount of €(19.0) million.

At June 30, 2022, net debt amounted to €147.9 million, an increase of €83.0 million compared to December 31, 2021, mainly due to the €80.6 million reduction of the cash position. The cash position at June 30, 2022 was €197.0 million.

The hedging portfolio amounted to $570 million at June 30, 2022 at an average EUR/USD rate of 1.16. Since June 30, 2022, the Group has continued to put in place hedges for 2024, enabling it to improve the average realized hedging rate.

Aerostructures

Revenues for Latecoere's Aerostructures Division rose by +22.3% at constant exchange rates and scope of consolidation, compared to €82.8 million for the first half of 2021. The segment's activity benefited from significant overall recovery in production rates, notably on the A320 and Embraer programs, despite ongoing production challenges of the Boeing 787 program, following the temporary halt in production in July 2021. Boeing has resumed 787 deliveries in August 2022, and Latecoere expect the Boeing 787 program will gradually resume production in the second half of 2022.

The division's recurring EBITDA amounted to €(2.4) million, an improvement of €11.1 million, benefiting in particular from the upturn in activity and the improvement in the hedged rate for the period.

	Aerostructures			30/06/2022			30/06/2021*
	(€ million)
	Consolidated revenue			114,9			82,8
	On like-for-like and constant exchange rate basis			22,3%			-36,5%
	Inter-segment revenue			11,6			10,2
	Revenue			126,5			93,1
	Recurring EBITDA			(2,4)			(13,5)
	Recurring EBITDA margin on revenue			-1,9%			-14,5%
	Recurring operating income			(11,2)			(21,0)
	Recurring EBIT margin on revenue			-8,9%			-22,6%

* Adjusted data. See Note 4 to the Condensed Consolidated Financial Statements

Interconnection Systems

Revenues of €127.4 million were up +15.4% at constant exchange rates and scope of consolidation compared with €98.3 million in the first half of 2021. This growth is notably driven by the increase in deliveries from the A320 program.

Recurring EBITDA for the Interconnection Systems division reached €(4.5) million, up by +€4.0 million compared to the previous period, benefiting from the improving production dynamics for the A320 and A350 programs during the period.

	Systèmes d'interconnexion			30/06/2022			30/06/2021*
	(€ million)
	Consolidated revenue			127,4			98,3
	On like-for-like and constant exchange rate basis			15,4%			-26,3%
	Inter-segment revenue			0,5			0,5
	Revenue			127,9			98,8
	Recurring EBITDA			(4,5)			(9,5)
	Recurring EBITDA margin on revenue			-3,5%			-9,6%
	Recurring operating income			(11,4)			(15,6)
	Recurring EBIT margin on revenue			-8,9%			-15,7%

* Adjusted data. See Note 4 to the Condensed Consolidated Financial Statements

Confirmation of 2022 outlook

The Group confirms its guidance for the fiscal year 2022 in terms of recurring EBITDA and free cash flow from operations, namely:

• Revenue growth in excess of +20% on a reported basis and organic growth (at constant exchange rates and scope of consolidation) at the high end of the range of 15 to 19%;
• Significant improvement in recurring EBITDA, derived from ongoing cost reduction arising from Latecoere's footprint optimization strategy and the ongoing recovery within the commercial aerospace sector, offset by inflationary pressure impacting 2022 and beyond. We expect EBITDA close to breakeven but still negative in 2022; and
• Operating free cash flow will be impacted by the remaining one off costs of Latecoere's restructuring plans, the increase in working capital due to revenue growth and key investments to strengthen Latecoere's competitive position, including M&A.

Post-closing events

None to report

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About Latecoere

As a "Tier 1" international partner of the world's major aircraft manufacturers (Airbus, Boeing, Bombardier, Dassault, Embraer and Mitsubishi Aircraft), Latecoere is active in all segments of the aeronautics industry (commercial, regional, business and military aircraft), in two areas of activity:

• Aerostructures (46% of turnover): fuselage sections and doors,
• Interconnection Systems (54% of turnover): wiring, electrical furniture and on-board equipment.

As of December 31, 2021, the Group employed 4,764 people in 14 different countries. Latecoere, a French limited company capitalised at €133,912,589.25 divided into 535,650,357 shares with a par value of €0.25, is listed on Euronext Paris - Compartment B, ISIN Codes: FR0000032278 - Reuters: LAEP.PA - Bloomberg: LAT.FP.

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