Latecoere : Inside Information / News release on accounts, results

In 2022 Latecoere successfully delivered its strategy in a challenging environment

•  Strong FY 2022 revenue increase of +39% to €468 million, of which 16.5% organic

•  Recurring EBITDA loss of €8.5 million: a very significant improvement on 2021 (+€23.7 million), despite inflationary pressures, global supply chain disruptions and a challenging economic environment

•  Major achievements on external growth strategy with three strategic acquisitions in 2022, the successful integration of two prior year acquisitions, and the disposal of a loss-making business in 2023

•  Free cash flow impacted by M&A investment and revenue growth

•  Stakeholder discussions underway to reconfigure capital structure

Toulouse, March 24, 2023 - Latecoere, a tier one partner to major international aircraft manufacturers, presents its financial statements for the twelve-month period ended December 31, 2022.

Thierry Mootz, Group Chief Executive Officer, stated: "2022 was a challenging year for Latecoere and the aerospace supply chain industry in general. Nonetheless, we finished 2022 stronger than we started, having completed strategic investments, diversifying our customer base and end markets, with scope to deliver shareholder value through realization of synergies. Our strategy is already bearing fruit as our financial performance is improving, while we continued to invest in our people and organization structure, with several key appointments during 2022. The business continues to strengthen its operating platform, with a number of transformative investments underway that will reinforce Latecoere's geographic footprint and better position the company. These strategic investments lead to recent contract wins within both our aerostructures and interconnect businesses in North America and Europe, with existing and new clients during the course of 2022 and 2023. Leveraging these investments and our current operational transformation will allow us to emerge stronger and gives us confidence in our ability to fully benefit from the ongoing recovery within the aerospace and defense industry."

Full Year 2022 Results*

(€ million)	2021 ³	H1	H2	2022
Revenue Reported growth Organic growth ¹	336,0 -42,1% -40,7%	212,9 31,7% 18,8%	255,3 46,4% 14,2%	468,3 39,4% 16,5%
Recurring EBITDA ² Recurring EBITDA margin on revenue	(32,2) -9,6%	(5,1) -2,4%	(3,3) -1,3%	(8,5) -1,8%
Recurring operating income Recurring EBIT margin on revenue	(61,8) -18,4%	(20,8) -9,8%	(22,4) -8,8%	(43,2) -9,2%
Non recurring items Impairment depreciation Other non recurring items	(6,7) - (6,7)	1,9 - 1,9	(20,5) (1,5) (18,9)	(18,6) (1,5) (17,1)
Operating income	(68,5)	(18,9)	(42,9)	(61,8)
Net Cost of debt Other financial income/(expense)	(23,0) (16,3)	(2,1) (0,0)	(3,9) (12,5)	(6,0) (12,5)
Financial result	(39,3)	(2,1)	(16,4)	(18,5)
Income tax	(2,2)	(2,8)	(3,6)	(6,4)
Net result from continuing operations	(110,0)	(23,9)	(62,8)	(86,7)
Net result from discontinued operations	(2,4)	(3,4)	(37,0)	(40,4)
Net result	(112,4)	(27,3)	(99,8)	(127,1)
Operating free cash flows from continuing operations	(69,7)	(66,4)	(106,8)	(173,2)

*Unaudited FY2022 financial statements

1 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).

² Recurring EBITDA corresponds to current operating income before depreciation, amortization and impairment of current tangible and intangible assets.

³ Adjusted data. 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 December 31, 2021 in its business report. The reconciliation table between the 2021 adjusted data and the consolidated data is available in Appendix.

Full Year 2022 Results Commentary

Group revenue reached €468.3 million for the FY2022, compared with €336.0 million in 2021, an increase of €132.3 million or +39% increase.

2022 organic revenue growth, at constant exchange rates and scope, amounted to a €59.2 million increase or +16.5%, as a result of higher production rates, most notably from the A320 and Embraer programs. The Group benefited over the period from the contribution of newly acquired activities, with a perimeter variance effect of €47.5 million. The full year revenue benefit of these acquisitions will only be realized in 2023.

In addition, Group revenue benefited from favorable currency effect of €25.5 million for the FY2022.

The Group reported a recurring EBITDA of €(8.5) million for FY2022, an improvement of €23.7 million vs 2021. This improvement was achieved through margin enhancement across both business lines, supported by recovery in production rates, proactive cost management, the impact of acquisitions (+€3.6 million) and favorable currency effect (+€10.6 million).

FY 2022 recurring operating income amounted to €(43.2) million compared to €(61.8) million for the same period in 2021.

Non-recurring items of €(18.6) million, consisting of restructuring costs €(16.1) million, transactions and integration costs relating to newly acquired businesses €(9.1) million and additional impairment of €(1.5) million within the Aerostructures branch. Net disposal of assets accounted for +€8.2 million in connection with legacy site in Toulouse.

2022 net financial income amounted to €(18.5) million, driven by €(6.0) million net cost of debt, foreign exchange loss of €(5.3) million, bank fees of €(3.3) million, discount charges relating the factoring contracts of €(1.2) million and impact of amortized cost of borrowings via the effective interest rate for €(2.1) million. The previous period was impacted by one-off effects relating to shareholder loan amortization of €(16.4) million, following its early repayment, as well as the unwinding of EUR/USD hedging portfolio for €(14.6) million.

In this context, the Group's net result from continuing operations of 2022 amounted to €(86.7) million, compared with €(110) million for the previous period.

2022 net result from discontinued operations amounted to €(40.4) million and is related the sale of Latecoere's Electrical Wiring and Interconnection Systems business in Querétaro (Mexico) to Bombardier expected for Q2 2023, inclusive of asset impairment value of €(24) million.

Cash flow from continuing operations for the period amounted to €(173.2) million, which was mainly impacted by the new acquisitions & investments for a total amount of €(125.5) million (net of cash acquired).

Latecoere's hedging portfolio amounted to $580 million at December 31, 2022 at an average EUR/USD rate of 1.14. Since December 31, 2022, the Group has continued to put in place hedges for 2025, enabling it to reduce its exposure to exchange rate movements.

At the end of December 2022, cash and cash equivalent stood at €73.9 million declining by €(203.7) million as a result of Cash flow from continuing operations of €(173.2) million, Cash flow from discontinued operations for €(18.2) million and debt repayment of €(11.6) million. In this context, the net debt at the end of December 2022 stood at €297.1 million.

Aerostructures Divisional Commentary 2022 revenues for Latecoere's Aerostructures Division rose by +26.3% to €259.1 million, at constant exchange rates and scope compared with €175.5 million in 2021. The segment's activity benefited from OEM production rate recovery, notably on the A320 and Embraer programs, despite ongoing production challenges within the Boeing 787 program. Boeing 787 program resumed deliveries and Latecoere expects further recoveries during 2023.

The division's recurring EBITDA amounted to €(2.5) million, an improvement of +€13.7 million compared with 2021, benefiting from the upturn in activity the improvement in the hedged rate for the period. The business trajectory continued to improve across second half of 2022, with EBITDA nearly break-even, despite persistent inflation, supply chain challenges and the nascent recovery in the B787 program.

Aerostructures (€ million) 2021 ¹ H1	H2 2022
Consolidated revenue 175,5	114,9	144,1	259,1
Organic growth -32,5%	22,3%	30,3%	26,3%
Inter-segment revenue 19,5	11,6	9,9	21,5
Revenue 195,0	126,5	154,0	280,6
Recurring EBITDA (16,2)	(2,4)	(0,1)	(2,5)
Recurring EBITDA margin on revenue -8,3%	-1,9%	-0,1%	-0,9%
Recurring operating income (33,2)	(11,2)	(11,2)	(22,4)
Recurring EBIT margin on revenue -17,0%	-8,9%	-7,2%	-8,0%

¹ Adjusted data. See reconciliation appendix.

Interconnection Systems Divisional Commentary 2022 revenues for Latecoere's Interconnection Systems Division rose +7.1% to €209.2 million, at constant exchange rates and scope, compared with €160.5 million in 2021. This growth was achieved through the increase in deliveries from the A320 program, the A350 program and an increase in Kitting, Installation and Systems activities.

The division's recurring EBITDA amounted to €(6.0) million, an improvement of +€10.0 million compared with 2021, benefiting from the improving production rates for the A320 and A350 programs and external growth achieved in 2022.

Interconnection Systems (€ million) 2021 ¹ H1	H2 2022
Consolidated revenue 160,5	98,0	111,2	209,2
Organic growth -13,7%	15,4%	-1,1%	7,1%
Inter-segment revenue 1,1	0,5	1,1	1,6
Revenue 161,6	98,5	112,3	210,8
Recurring EBITDA (16,0)	(2,7)	(3,2)	(6,0)
Recurring EBITDA margin on revenue -9,9%	-2,8%	-2,9%	-2,8%
Recurring operating income (28,6)	(9,6)	(11,2)	(20,8)
Recurring EBIT margin on revenue -17,7%	-9,7%	-10,0%	-9,9%

¹ Adjusted data. See reconciliation appendix.

FY 2023 outlook

2022 was a challenging year for Latecoere and the aerospace supply chain industry in general. Management expects these challenges to continue into 2023, with increased headwinds arising from persistent inflationary pressures, with more acute challenges arising in managing changing customer requirements and operating within a constrained aerospace supply chain. These pressures will be against a backdrop of growth in OEM volumes for commercial, business jet and defense market sub-segments, improving overall revenues, but bringing further challenges to the industry to support this ramp up in activity. Latecoere will continue to strengthen its operating platform, people and geographic footprint, creating a more resilient business model better positioned to grow with customer requirements.

For FY 2023 Latecoere is targeting to achieve:

• • Revenue growth of more than +25% on a reported basis.

• • Stable EBITDA performance, driven by footprint optimization and cost cutting, offset by persistent inflation pressures, ongoing supply chain challenges and changing customer demand with the full benefit of these investments to be realized beyond 2023; and Free cash flow will be impacted by the remaining costs of restructuring, the increased working capital due to sales growth and by key investments to strengthen Latecoere's competitive position.

Latecoere Interconnection Systems is proud to announce that it has signed a contract with Boeing in January 2023 for the supply of wiring systems for the 737 MAX and 767 programs (both for military and civil variants). Manufacturing will begin in Q3 2023 in Hermosillo, Mexico.

In addition, Latecoere confirms that, as part of its transformation efforts, it has entered into discussions with its stakeholders, including its lenders, with a view to enhancing the Group's overall capital structure in relation to its current loans and PGEs (Prêts Garantis par l'Etat), so