Groupe Gorge : 2021 half-year financial report

2021 HALF-YEAR FINANCIAL REPORT

including

• 2021 half-year activity report
• Condensed consolidated financial statements at 30 June 2021
• Statutory Auditors' report on the half-year financial information for 2021
• Statement by the person responsible for the 2021 half-year financial report

GROUPE GORGÉ SA

30 RUE DE GRAMONT

75002 PARIS

www.groupe-gorge.com

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2021 HALF-YEAR ACTIVITY REPORT

Excerpt from the press release issued on 16 September 2021

Good profitability in the first half of 2021

In 2021 GROUPE GORGÉ generated its best first-half operating income ever. This performance, which could have materialized in 2020 were it not for the impact of the health crisis, is the first result of an innovation strategy initiated several years ago and aimed at improving the Group's margins.

Strong and growing financial results

• Organic revenue growth of 30% compared to the first half of 2020
• EBITDA up by 125% (1), reaching a margin of 12%
• Operating income of €4.3 million, up €19 million vs. H1 2020

Sustained activity in the Group's three divisions

• Drones & Systems: several milestones achieved in the BENL program and progress on other types of drones
• 3D Printing: a successful operational transformation
• Engineering & Protection Systems: order intake up by 10%

Solid outlook and increase in guidance for 2021

• A well renewed order book of €600 million
• Increase in the guidance for 2021: > 15% organic growth, i.e. > €265 million and continued profitability for the rest of the year

GROUPE GORGÉ: a high-tech specialist present in three business areas

GROUPE GORGÉ implements since several years a strategy based on three main pillars:

1. Reinforcement in high-tech activities with high added value,
2. Concentration on sectors with high growth potential,
3. A leading player in its activities with strong development ambitions.

This strategy has been deployed in three divisions, which generated revenue of €135 million in the first half of 2021:

• 43% of revenues come from the Drones & Systems division. Recognized as one of the world leaders in the field of autonomous robotics, this division provides its customers with the most efficient and technologically advanced solutions in the field of naval, submarine, land and air drones.
• 25% are generated by the 3D Printing division (through PRODWAYS GROUP, which is owned at 56%), a player focused on plastic 3D printing for industrial production, relying on its mastery of the 3D value chain: software, machines, materials, parts production.
• The Engineering & Protection Systems activity represents 32% of revenues and includes the Engineering & Technology Consulting division as well as solutions for the protection of high-risk sites, with fire safety and nuclear doors.

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Financial results: outstanding growth in revenue and operating income for a first half

(in millions of euros)	H1 2021	H1 2020	Change in	Change (%)
millions of euros
				+25%
Revenue	135.5	108.0	+27.5	(+30% organic)
EBITDA (1)
16.0	7.1	+8.9	+125%
EBITDA margin (%)	11.8%	6.6%	+5.2 pts	-
Operating result (2)	6.2	-4.3	+10.5	-
Operating income	4.3	-14.3	+18.6	-
Financial income	-0.9	-0.4	-0.4	-
Tax	-3.8	1.0	-4.9	-
Net income from discontinued activities	0.7	-1.0	+1.7	-
Net income	0.3	-14.7	+15.0	-
Profit (loss) for the period attributable to the	0.3	-10.0	+10.4	-
owners of the parent

+30% organic revenue growth

GROUPE GORGÉ generated revenue of €135 million in the first half of 2021, representing growth of 30% on a like-for-like basis. This growth was driven by good momentum in the three divisions with several growth drivers:

• The increase in the revenue generated by the Drones & Systems division was particularly dynamic at +36%,
• Accelerating growth in 3D Printing driven by the recovery (+27%),
• Good performance of the Engineering & Protection Systems division (+25% organic growth).

More details are available in the revenue press release published in July (link).

Improving profitability

During this half-year GROUPE GORGÉ generated EBITDA of €16 million, up by 125% year-on-year and 11.8% above the level of 2019. This performance gives an EBITDA margin of 12%, a new record for GROUPE GORGÉ.

This increase has enabled the Group to generate an operating result of €6.2 million, up by €10 million compared to the first half of 2020 and almost double the result of the first half of 2019. This increase is the first sign of an underlying improvement in margins that should continue over several years.

This performance is the combined result of several effects:

• Strategic refocusing operated since 2018 in favor of high value-added activities, in particular the reinforcement in the Drones & Systems division.
• The latter also continues its rise and generated an EBITDA margin of 21% this half-year.
• The successful transformation of the 3D Printing division, which achieved its best historical result with an EBITDA margin (1) of 13%. It benefited from a significant decrease in the operating cost base and the positive impact of a subsidy granted in the United States.
• Within the Engineering & Protection Systems division, the negative impact of old nuclear contracts signed several years ago, whose finalization is delayed, as well as the ramp-up of StedY, which has not yet reached financial breakeven.

Financial position: First financing in the amount of €145 million and change in net debt

During the first half of the year GROUPE GORGÉ successfully secured its first corporate syndicated loan with an impact of €145 million. It consists of a confirmed portion of €120 million with an average maturity of five years and including a renewable portion (RCF) of €35 million and an unconfirmed portion of €25 million dedicated to external growth. This financing could enable the Group to seize new opportunities to strengthen its position in its current businesses. The margin grid is defined according to the level of debt (net debt / EBITDA), on the one hand, and the achievement of certain ESG objectives, measured by indicators that are being finalized with the lenders, on the other.

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The net debt (3) of GROUPE GORGÉ amounted to €56.8 million as of 30 June 2021, up by €26 million compared to 31 December 2020. This change is due to the replenishment of the working capital requirement, a natural consequence of the good pace of the recovery of our activities, from the payment of the full dividend in the first half of the year, share buybacks carried out at the beginning of 2021 and continued significant investments in R&D, including the construction of a production site in Ostend (Belgium). The deterioration in the working capital requirement is partly due to the unfavorable financing cycle in the year 2021 of the major contract for the Drones & Systems division.

Available cash remained at a high level of €70 million.

First half of 2021: sustained activity in the Group's three divisions

Results by division

(in millions of euros)		H1 2021	H1 2020	Change
	Revenue	58.8	43.1	+36%
Drones & Systems	EBITDA(1)	12.1	5.3	+130%
EBITDA margin (%)	20.6%	12.2%	+8.4 pts
	Operating result(2)	6.5	0.8	+€5.7 million
	Revenue	34.1	26.8	+27%
3D Printing	EBITDA(1)	4.5	1.4	+214%
EBITDA margin (%)	13.2%	5.3%	+7.9 pts
	Operating result(2)
	2.2	-2.9	+€5.1 million
	Revenue	43.3	38.5	+13%
Engineering & Protection	EBITDA(1)	-0.1	0.9	-116%
Systems	EBITDA margin (%)	-0.3%	2.2%	-2.6 pts
	Operating result(2)	-1.9	-1.6	-€0.3 million

Drones & Systems: advances on several types of drones

GROUPE GORGÉ has successfully reached several important milestones in the first half of 2021 as part of the substantial contract (€450 million) with the Belgian and Dutch navies. In addition to the successful sea trials of the UMISAS sonar developed by the Group since 2014, the Group announced the success of the Preliminary Design Review, which confirms that the overall design meets all customer requirements.

The preparation of the next steps, including the production phase, is also well underway. The management team in Belgium has been set up and the Group will inaugurate the new Mouscron site, dedicated to R&D, on 22 September. In addition, construction of the Ostend plant, which will house the drone assembly line, is continuing smoothly.

At the same time, the company has made significant progress in its autonomous drone dedicated to logistics (AGV). Real-world tests since the end of 2020 have validated the quality of this solution: designed for the transport of pallets indoors and outdoors, the drone has been operating for several months in varied weather conditions without complications. Demonstrations to potential customers will take place in September.

Good order intake in the Engineering & Protection Systems division, difficulties in the nuclear sector

The commercial momentum of this division continues, driven in particular by the engineering consulting and fire protection activities, and resulted in an order intake of €44 million, up by 10% compared to the levels of the first halves of 2019 and 2020. While the nuclear business has good medium-term prospects, the focus must still be on the recovery of profitability, which is taking longer than expected and is penalized by old contracts, including one on the ITER project. Nuclear energy represented 8% of the Group's revenue in the first half of the year.

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A successful transformation of the 3D Printing division

As part of the operational transformation plan launched in 2020, in the first half of 2021 the teams and technologies of five different sites in France joined forces at their new site in Annecy (France). This new 4,500 m² building houses the PRODUCTS division's printers, the parts design and design office, and the manufacture of SLS (powder sintering technologies) printers. This new organization is already generating operational synergies, promotes the development of new products and services and enables the 3D Printing division to meet the growing demands of its customers.

Slowed by the health crisis, the revenue growth trajectory recovered well in 2021. The 3D Printing division's revenue has increased by 27% per year on average since 2015 and reached €34 million this half-year (compared with €8 million in the first half of 2015). This sustained increase over time is the result of the good rate of organic growth as well as the external growth dynamic, which has enabled the revenue profile to be transformed.

While the share of recurring revenue in revenue was only around 25% in 2015, it now represents nearly 60%. This solid revenue base consists primarily of sales of materials, which increase with the installed base of machines used in production. The software integration activity also benefited from a high recurrence rate, as did sales of 3D printed parts for the medical sector (audiology, dentistry, chiropody).

Solid outlook and increase in guidance for 2021

A well renewed order book of €600 million

The sales momentum made it possible to renew the order book, which remained stable compared to the same period last year (down 0.7% on a like-for-like basis). This performance is all the more positive as it ranks in a context of economic recovery and the still partial reopening of borders, delaying investment decisions. With more than €600 million of secured orders for the coming years, i.e. the equivalent of 2.6 years of revenue, GROUPE GORGÉ benefits from a solid revenue base and a good level of visibility for the future.

Acceleration of the development of 3D printing: integration of CREABIS well under way

In early July 2021, the Group announced the acquisition of CREABIS, a German specialist in 3D printing services for plastics, marking an acceleration of the development strategy with the return of the external growth dynamic (link to the dedicated press release). With this acquisition, the 3D Printing division now has one of the largest 3D printing services in Europe with a fleet of 52 printers offering a wide variety of technologies and materials to its customers.

The integration of CREABIS is well under way and will continue in the second half of the year. The sales and operational teams have already integrated the offerings of both companies and will be able to offer new technologies and services from the end of September. In the continuation of the external growth operations of recent years, the Group once again confirms its ability to integrate new companies effectively and to realize the potential for synergies.

Increase in guidance for 2021

The performance of the first half-year confirms GROUPE GORGÉ in its positioning and its short- and medium-term development ambitions. For each of its activities, GROUPE GORGÉ can rely on deep and structurally sound markets, a solid revenue base and growth opportunities. The change in the size of the Group, both in terms of revenue generation and profitability, is beginning to materialize in results.

GROUPE GORGÉ is therefore raising its guidance for the year 2021, setting a revenue growth target of more than 15% on a like- for-like basis (compared to "close to 15%" previously), or more than €265 million. The level of profitability should be maintained over the rest of the year.

Definition of alternative performance indicators

1. EBITDA:Operating income before "Depreciation, amortization and provisions", "Non-recurring items in operating income" and "Group share of the earnings of affiliated companies".
2. Operating result:Operating income before "Non-recurring items in operating income" and "Group share of the earnings of affiliated companies".
3. Debt / Net cash position: Net debt / Net cash and cash equivalents including treasury shares, excluding IFRS 16 lease liabilities.

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