Derichebourg : Results for fiscal year 2019/2020

PRESS RELEASE

Paris, December 3, 2020

Results for fiscal year 2019/2020

Resilience of recurring EBITDA and good outlook for fiscal year

2020/2021

The Board of directors of the Group, meeting on December 3, 2020 under the chairmanship of Daniel Derichebourg, approved the annual and consolidated financial statements as of September 30, 2020. At this meeting, the Chairman and Chief Executive Officer said that: "the diversity of the businesses within the Group has allowed it to remain resilient during this unusual year. Even though the economic consequences of the health crisis have affected the net profit/loss for the past fiscal year, there is a promising outlook for growth this year".

Revenue: €2.5 billion

The revenue for fiscal year 2019/2020 was €2.5 billion, down by 8.9% compared to the previous fiscal year. The Environmental Services Division declined by 11.9% and the Multiservices Division declined by 2.5%.

In the Environmental Services Division, the contribution of Derichebourg España (formerly Lyrsa) over 9 months did not offset the effects of a lockdown of almost 2 months and the sharp decline in the first quarter of the fiscal year, even though the fiscal year ended with comparable volumes to the previous year.

In the Multiservices Division, the growth in Cleaning (France and abroad) did not offset the decline in aeronautics-related activities (outsourced services and temporary work).

(in thousand tons)	09/30/2020	9/30/2019	Change
Ferrous metals	3,159.2	3,445.8	-8.3%
Non-ferrous metals	552.3	535.1	3.2%
Total volumes	3,711.5	3,980.93	-6.8%
(in millions of euros)	09/30/2020	9/30/2019	Change
Ferrous metals	681.9	858.9	-20.6%
Non-ferrous metals	692.7	674.7	2.7%
Services	252.8	313.1	-19.3%
Environmental Services revenue	1,627.4	1,846.7	-11.9%
Multiservices revenue	836.2	857.6	-2.5%
Holding company revenue	0.4	0.8	-43.7%
Total half-year revenue, Derichebourg Group	2,464.1	2,705.0	-8.9%

11.9% decline in Environmental Services Division revenue

The volume of ferrous scrap metals sold by the Group decreased by 8.3%. At constant scope, it was at 17.7%, around half of which is due to the lockdown period. Derichebourg España contributed 323,000 tons.

The first quarter was particularly difficult, with continuous price decreases over several months, making it impossible to recover the full impact of lower sales prices through purchasing. A period of recovery (January- February) was interrupted by the health situation, which led to a lockdown (notably in France and Spain), disrupting the Group's activities, which dropped to 15% of its normal level within a few days, before slowly recovering, and then much more strongly from mid-May, until September when it reached levels close to those of the previous fiscal year.

Turkey is the only country (outside of China) whose steel production remained resilient during this year and continued, notably in the second half, to drive the ferrous scrap metal market.

Average prices were distinctly lower than the previous year, with a 20.6% decrease in ferrous scrap metal revenue.

With regard to non-ferrous metals, the decrease at constant scope was at 20.1%, and Lyrsa, which has a very strong business in non-ferrous metals (flotation and refining of aluminum ingots, shredding of batteries and refining of lead ingots) contributed 124,600 tons, representing growth of 3.2% by volume.

It was a difficult year for aluminum and lead (prices down due to low demand in the automotive sector in spring) and the drop in stainless steel (very low demand in Europe). The year was better for the copper market.

At constant scope, service activities have been growing: the household waste collection business was at a consistent level throughout the fiscal year, and new contracts were won in France and in Canada, thanks to its selective positioning on contracts valuing the service provider's environmental performance. During the second half, the WEEE processing business benefited from a high replacement level of household electrical equipment in France, and an increase in the collection of these appliances.

2.5% decrease in Multiservices Division revenue

Two months of reduced business in all service lines and the more enduring crisis for services related to the aeronautics and aviation sectors negatively impacted the new growth forecast for revenue from Multiservices, with the latter declining by 2.5%.

The Services segment, which mainly comprises Cleaning, saw its revenue grow by 10% due to three different effects:

• Positive change in terms of recurring business in France;
• Additional work during the business resumption period to reassure clients;
• Consolidation over 12 months of the Spanish subsidiary SILNET, in which a majority stake was acquired at the end of July 2019, and the strong revenue growth of SILNET since the acquisition.

On the contrary, businesses related to the aeronautics and aviation sectors saw a sharp drop in revenue despite 5.5 months of "normal" activity: -26% for Derichebourg Aeronautics Services and -40% for Derichebourg Aeronautics Recruitment.

5.4% decline in recurring EBITDA

Recurring EBITDA of the Group was €180.9 million, down 5.4% compared to last year. Several factors explain

this limited decline:

• the unit margin control policy in the Environmental Services Division: margins were maintained for non-ferrous metals, and were slightly lower for ferrous scrap metals, mainly during the first quarter of the fiscal year;
• the contribution of Derichebourg España over 9 months: €15 million. The integration is progressing satisfactorily (commercial synergies, ad-hoc cost synergies). Its EBITDA has already grown by 1 point to 5% compared to the time of acquisition;
• the growth in the profitability of the household waste collection business in France, which is reaping the benefits of its selective approach to tenders (only for contracts that value the use of technology and the quality of services, and not only price);
• the use of short-time working for the period from March to June and the use of long-termshort-time working for outsourced aeronautics service activities;
• the initial application of IFRS 16, which contributed to the improvement of recurring EBITDA by €20.8 million compared to last year.

Recurring EBITDA1 of the Environmental Services Division was €142.2 million, a decline of €19.9 million compared to last year.

Recurring EBITDA of the Multiservices Division was €44.0 million, up by €11.0 million, slightly less than the impact of IFRS 16 on this division of €11.9 million. The contribution of the services segment has increased, while that of activities related to aeronautics has strongly decreased.

Recurring operating profit2 was down by 39.5%

After taking into account depreciation and amortization, higher than the previous year due to the impact of IFRS 16 of €20.5 million for this item, operating profit was €62.4 million, down by 39.5% compared to last year.

Operating Profit

After taking into account the various non-recurring items:

• Revaluation of the investment in Reyfra, historically held by Derichebourg Environnement in the context of the acquisition of Lyrsa, up €7.7 million following its transition from equity method to full consolidation;
• The profit related to a favorable outcome of an appeal in a legal dispute initiated by Veolia of €3.7 million;
• restructuring costs at Derichebourg España of €1.2 million, in the French subsidiaries of the Recycling business of €1.8 million, and in the aeronautics sector-related subsidiaries of €5.6 million;
• losses on the disposals of various subsidiaries and investments of €6.8 million;
• upward revaluation of the monitoring cost of a former landfill site in Italy of €2.3 million.

Operating profit was €56.2 million, down by 42.4%.

1. Recurring EBITDA = Recurring operating profit + net depreciation and amortization on tangible and intangible assets and on voting rights
2. Recurring operating profit = Operating profit +/- non-recurring items

Net profit

The net profit attributable to shareholders was €21.3 million, down 61.6% compared to last year. Taking into account the government recommendations of March 2020, the Board of directors proposed to allocate net income to retained earnings and not to distribute a dividend this year.

Capital expenditure

The Group continued with its policy of investing in high-performance and high value-added technological systems that further strengthen the resilience of its business. Capital expenditure (excluding IFRS 16) was €101 million, down by more than €40 million compared to the previous fiscal year, which reflects the Group's ability to adapt its investments to the available resources.

Outlook

The current fiscal year began with better prospects than last year: the prices of ferrous scrap metal and non- ferrous metal are increasing. Business has not been significantly disrupted by the second lockdown. Cleaning is now more highly valued by clients due to its contribution to protecting their business activities.

The Group considers that on the basis of its first two months of activity, during the current fiscal year it should be able to generate recurring EBITDA up by approximately 15% to 20%, which means recurring EBIT up by approximately 30% to 45%. Tangible capital investments should be below 50% of recurring EBITDA.

This forecast is based on the following assumptions:

• no worsening of the health situation,
• no major geopolitical crises;
• no additional barriers to trade flows for raw materials from recycling.

In the longer term, the Group is also confident in the mission of its main businesses, particularly the recycling of metal waste, which helps protect the environment, and contributes to the circular economy and a more responsible growth model. Metal production (ferrous or non-ferrous) through raw materials from recycling is expected to increase in the coming years:

• CO2 emissions significantly reduced compared to primary metal production;
• lower energy consumption per ton produced;
• less investment, locally available resources and preservation of local jobs.

ISIN Code: FR 0000053381 - DBG