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Hamon Press Information Release Regulated information 24 February 2009, 6:00 PM 2008 Annual Results New order bookings, backlog and operating margin are up ! Significant increase in new order bookings and backlog, reflecting the excellent positioning of the Group and its products ● New order bookings at EUR 469.5 million (+8%) ● Backlog at end of year at EUR 391.0 million (+40%) Net result of EUR 18.9 million ● Net result exceeds previous record level of 2007 ● EBIT margin reaches a new historical high of 11.9% of revenue (+2%) ● Reduction of finance costs despite the impact of exchange rate variations on financial debt in foreign currencies ● Result of discontinued operations of EUR – 1.8 million, following the settlement of the SPX claim. Revenue in temporary decline, due to ● Relatively low opening backlog as of 1st January 2008 ● Longer duration of execution of the projects ● Decline of the average US dollar exchange rate in 2008 Strengthening of the balance sheet structure ● Net financial debt of EUR 10.8 million (EUR -16.1 million versus 2007) ● Net financial debt / equity ratio of 0.2 ● Net financial debt representing 23% of the 2008 EBITDA Reactivation of the Group activities in Brazil as of 1st October 2008 End of the non-compete period agreed with SPX, which allows Hamon to develop its wet cooling activities in North America and dry cooling activities worldwide. Return to dividends ● Advance payment on dividends of EUR 0.30 per share on 5 September 2008 ● Payment of remaining part of dividend amounting to EUR 0.27 per share on 15 May 2009 1 Hamon Press Information Release Prospects In view of the general economic environment, it has been decided not to release any guidance on the future results. However the Group confirms its good positioning for 2009 given its excellent backlog and its strong financial structure. Comment : unless mentioned otherwise, all the comparisons made in the present document refer to 2007. OVERVIEW OF THE MAIN CHANGES OF THE YEAR 1. Commercial activities Group in EUR million 2008 2007 New order bookings 469,5 435,0 Backlog on 31/12 391,0 279,7 New order bookings reached a record level at EUR 469.5 million. The activities of the Hamon Group expanded favorably in 2008, based on a strong demand for the products of our various business units during the first half year. The second half year remained strong, with new order bookings 9% higher than during the second half of 2007. The new orders booked have a longer period of execution (18 to 36 months versus 9 to 15 months in the past). Indeed, Hamon is booking more and more contracts related to new units, mainly for power plants; delaying the recognition of revenue resulting from execution of these new orders in our financial statements. Backlog, amounting to EUR 391.0 million, is at a very high level and allows us to expect good future results. 2 Hamon Press Information Release 2. Summarized consolidated income statement in EUR million 2008 2007 Revenue 366,7 432,6 EBITDA 46,6 46,3 Operating profit before restructuring costs 43,8 43,4 Restructuring costs -0,1 0,0 Operating profit after restructuring costs (EBIT) 43,7 43,4 EBIT/Revenue 11,9% 10,0% Net finance costs -8,6 -9,9 Share of the profit (loss) of associates 0,0 0,0 Result before tax (continued operations) 35,1 33,5 Income tax expenses -14,4 -14,0 Net result from continued operations 20,7 19,5 Net result of discontinued operations -1,8 -1,2 Net result for the year 18,9 18,3 Share of the group in the net result 18,5 18,2 Results in EUR per share Average number of shares 7 191 472 7 191 472 EBITDA per share 6,48 6,44 Earnings per Share (EPS) 2,57 2,54 The income statement presentation has been modified. To improve its readability, interests received on Cash & equivalents and exchange rate differences related to debt are now included in net finance costs.. Net result, amounting to EUR 18.9 million, exceeds the historical level of 2007. It is worth noting that this net result is obtained with an EBIT of EUR 43.7 million and an 11.9% operating margin, a new absolute record for the Group. These excellent results would have been even better if revenue had not been limited to EUR 366.7 million. This decline in revenue is explained by: - The relatively low level of opening backlog as of 1st January 2008 - The longer average execution period of our projects whose effect, given the adopted accounting method, is to delay the recognition of turnover of the contracts in progress; as a comparison, with a similar kind of new orders as in 2007, the same level of new orders booked in 2008 would have generated revenue around EUR 45 million higher. - The negative change in the average exchange rate of the US dollar versus 2007, which reduced our revenue by EUR 14.3 million. 3 Hamon Press Information Release In other terms, with the same product mix and US dollar exchange rate as in 2007, the 2008 revenue would have reached EUR 426 million, a level close to 2007. Gross margin and EBIT would have been EUR 10.7 million higher (EUR 1.7 million impact of US dollar and around EUR 9 million impact of product mix). Hamon activities remained extremely strong, with overhead costs well under control. On the other hand, whereas 2007 had been impacted by expenses related to the exit of our fire engineering activities in South Africa (EUR -1.5 million), the year 2008 benefits from the sale of the GEI shares in India, or a result before tax of EUR +0.8 million. It should be noted that the income statement presentation has been modified to make it more readable; the interest income on cash & equivalents and the exchange rate differences related to the debt are now in interest income or interest charges, below the operating result. For a more detailed overview of the business, please see the analysis by business unit. Net finance costs reduced thanks to the improved borrowing conditions subsequent to the 28 December 2007 debt refinancing. This refinancing had a EUR 2 million impact on the 2007 accounts. In 2008, exchange rate fluctuations and the active management of the Group debt in USD, used to cover the long position of the Group in US dollar, have negatively impacted the result by EUR 2.1 million. The effective tax rate, at 41.1%, is slightly lower than in 2007; this is mainly due to the lower part of the result represented by the U.S. activities, more heavily taxed. On the other hand, the Group believes that it should be able, during the next few years, to progressively benefit from its deferred tax assets amounting to EUR 6.3 million in the balance sheet as of 31 December 2008 (excluding the deferred tax assets which have not been taken into account, amounting to EUR 23 million). The net result of discontinued operations includes EUR 1.5 million of costs related to the agreement concluded between Hamon and SPX in December 2008, putting an end to five years of expensive legal proceedings. It should be noted that the consolidation scope has been modified and includes : - from 1st August 2008 the activities of ACS ; 4 Hamon Press Information Release - from 1st October 2008 the activities of Hamon Research Cottrell do Brazil, which contributed EUR 5.8 million to revenue; EUR 1.9 million to EBIT and EUR 1.0 million to net result. 3. Overview by business unit a) Cooling systems Cooling systems in EUR million 2008 2007 New order bookings 147,0 130,5 Revenue 109,4 102,6 Backlog 122,6 93,1 EBIT 9,7 4,2 EBIT / revenue 8,8% 4,1% Average headcount 432 417 Cooling Systems booked new orders amounting to EUR 147 million in 2008. Among the main new orders booked are the construction of two natural draft cooling towers with flue gas injection for a new RWE power plant in Westfalen, Germany; the revamping and performance enhancement of six natural draft cooling towers in France, Germany and Switzerland; the construction of mechanical draft cooling towers in Chile, in Qatar, in Australia. Hamon also concluded a contract for supplying fan-assisted natural draft cooling towers for EnBw, illustrating once again the continuously improving technological excellence of Hamon. Revenue amounted to EUR 109.4 million. This figure takes into account the general trend of longer durations of the projects, due to a shift towards more new construction and less revamping. The consequence of this longer execution period is to slow down the revenue recognition of orders booked late 2007 and in 2008. The EBIT improvement, +130% versus 2007, results from the constant effort given to the good project execution and from strict control of overhead costs at all levels. 5 Hamon Press Information Release b) Heat exchangers Heat Exchangers in EUR million 2008 2007 New order bookings 49,4 53,0 Revenue 48,9 39,8 Backlog 36,8 34,9 EBIT 4,6 2,4 EBIT / revenue 9,4% 6,1% Average headcount 170 163 New orders bookings amount to EUR 49.4 million. The delay in some order bookings, due to over activity of the oil & gas industry, was partially offset during the second half year. The main new orders include those for a Hellenic Petroleum refinery and for Turkmengaz. Moreover, the number of “hot tenders” remains very high. Revenue increased sharply, reflecting the excellence of the Hamon production tools and their high level of utilization. The operating result was about double that of 2007, reaching EUR 4.6 million thanks to the revenue increase while maintaining the same level of fixed costs together with good project management. c) Air pollution control outside NAFTA APC outside NAFTA in EUR million 2008 2007 New order bookings 53,2 48,7 Revenue 37,6 56,9 Backlog 41,9 23,1 EBIT 3,1 6,1 EBIT / revenue 8,2% 10,7% Average headcount 112 59 The BU APC outside NAFTA has taken over all the APC activities of the Group outside of the United States, Mexico and Canada. Since 1st October, it includes the Brazilian activities. This BU booked a high level of new orders during the year, which shows the excellence of its products and the good fit of its global sourcing strategy with the needs of its customers, especially for Cottrell electrostatic precipitators (ESP) and fabric filters. Hamon booked its first major new order in South Africa for the revamping and performance enhancement of the ESPs of six 600 MW boilers of the Eskom power plant in Matla. In addition, Hamon remains active in upgrading waste incinerators to bring them into compliance with 6 Hamon Press Information Release regulations, among others for the Remival unit in Reims (France). The reduced revenue is due to the low backlog at the end of 2007 and to the longer execution period for orders booked during the year, which means a lower level of recognition in 2008. The operating result, amounting to EUR 3.1 million, is explained by a lower revenue in 2008 and by the efforts made to expand the activities of the business unit in South Africa and in Eastern Europe, including a headcount increase. Despite these elements, the EBIT margin remains good and close to the Group target, at 8.2% of revenue. The increase in average headcount results mainly from the South African, Brazilian (from 1st October 2008) and Indian activities. d) Air pollution control USA APC USA in EUR million 2008 2007 New order bookings 113,0 111,1 Revenue 76,8 150,7 Backlog 65,8 24,1 EBIT 17,1 28,1 EBIT / revenue 22,3% 18,6% Average headcount 175 182 New order bookings, at EUR 113 million, are comparable to 2007. Expressed in USD, they increased by 13% The largest new orders are related to deSOx / deNOx using the WGS+ Exxon Mobil technology for oil refineries (Valero Memphis and Delaware), fabric filters for power plants (Consumer Energy, Pacificorp) and dry FGD (flue gas desulphurization) for Sun Coke Energy. The change in revenue and EBIT can be explained by two main factors: - Low backlog as of end of December 2007. - Longer duration of execution of the orders booked by the business unit, which means a lower recognition in 2008 of the orders booked during the year. The EBIT margin, at 22.3%, sets a new record following : - Tight control of operating costs, thanks to a continuous improvement of the productivity of our 7 Hamon Press Information Release personnel. - A change to the customer mix, with a growing importance of activities for the oil & gas industry, traditionally with a higher margin. - The finalizing of several contracts which ended up with higher margins than what had been budgeted. e) Chimneys Chimneys in EUR million 2008 2007 New order bookings 99,6 91,6 Revenue 91,5 83,1 Backlog 117,1 104,6 EBIT 9,1 4,9 EBIT / revenue 10,0% 5,9% Average headcount 63 64 The Chimneys BU – Hamon Custodis in the United States and in Canada – continued to benefit from a strong new chimney market. In 2008, it booked new orders for two new chimneys for Georgia Power, one for NorthEast Utilities and revamping contracts among others with Arizona Public Service, Pacificorp and Inco in Canada. The good progress and execution of the projects signed in 2006 and in 2007 for the construction of new chimneys allowed increased revenue and improved profitability thanks to the volume effect and to tight cost control. 8 Hamon Press Information Release 4. Summarised consolidated balance sheet Consolidated balance sheet in EUR million 31/12/2008 31/12/2007 Non-current assets 67,1 57,0 Current assets excl. cash 159,8 142,2 Cash & equivalent 59,1 35,7 Total assets 285,9 234,8 Equity 49,4 34,4 Group share 48,7 34,1 Minority interests 0,7 0,3 Non-current liabilities, excl. borrowings 9,6 13,9 Non-current borrowings 40,3 50,5 Current liabilities, excl. borrowings 157,1 124,0 Current borrowings 29,6 12,1 Total equity and liabilities 285,9 234,8 Net financial debt 10,8 26,9 Net working capital (continued operations) 5,9 18,2 The Hamon balance sheet structure shows continued improvements. Equity amounts to EUR 49.4 million after taking into account the advance payment on dividends made in September 2008. The non-current assets variation results from: • The settlement of the receivable from SPX (EUR - 5 million). • Goodwill resulting from the acquisition of ACS and of the Brazilian activities (EUR + 11 million). • Investments made during the year (EUR + 4 million). Net financial debt, amounting to EUR 10.8 million, fell sharply thanks to the operating cash flows. It represents only 23% of EBITDA (based on the last 12 months) and 0.2 x equity – ratios; improving continuously. 9 Hamon Press Information Release 5. Events after the balance sheet date Hamon has entered into a commercial joint venture with Solel, one of the world leaders in solar panels, in the area of thermal solar power plants, a booming market. Hamon Solel will supply the solar powered steam generation systems (SSGS), namely mirrors, the steam generation and recovery components, excluding the steam turbine and power generator. Together with taking a stake in Xylowatt (a company active in biomass gasification), this agreement shows the willingness of the Hamon Group to participate to the renewable energy sector. AUDITOR’S REPORT The auditor, Deloitte Reviseurs d'entreprises SC s.f.d. SCRL represented by Laurent Boxus, confirmed that the accounting information included in this press release does not result into any qualification and is in accordance with the financial statements approved by the board of directors. 10 Hamon Press Information Release ANNEXURE - CONSOLIDATED INCOME STATEMENT N o 2008 2007 2006 t in EUR '000' e Revenue 366 679 432 648 354 423 Cost of sales -279 240 -339 799 -285 260 Gross profit 87 439 92 849 69 163 Sale & marketing costs -8 697 -9 872 -8 677 General & administrative costs -34 018 -35 147 -24 772 Research & development costs -663 -580 -700 Other operating income / (expenses) -210 -3 813 -2 605 Operating profit before restructuring costs 43 851 43 437 32 409 Restructuring costs -132 -8 -441 Operating profit (EBIT) 43 719 43 429 31 968 Interest income 1 255 1 240 430 Finance costs -9 904 -11 126 -7 600 Share of the profit (loss) of associates 0 0 407 Result before tax 35 070 33 543 25 205 Income tax expenses -14 411 -13 952 -10 351 Net result from continued operations 20 659 19 591 14 854 Net result of discontinued operations -1 788 -1 246 -1 754 Net result for the year 18 871 18 345 13 100 Equity holders of the company 18 500 18 258 13 021 Minority interest 371 87 79 Earnings per share Continued and discontinued operations Basic earnings per share (EUR) 2,57 2,54 2,19 Diluted earnings per share (EUR) 2,57 2,54 2,19 Continued operations Basic earnings per share (EUR) 2,82 2,71 2,48 Diluted earnings per share (EUR) 2,82 2,71 2,48 The income statement presentation has been modified. To improve its readability, interests received on Cash & equivalents are now presented in interest income and exchange rate differences related to debt in interest charge, below operating profit. 11 Hamon Press Information Release Forward looking statements This presentation contains forward-looking information that involves risks and uncertainties, including statements about Hamon’s plans, objectives, expectations and intentions. Readers are cautioned that forward-looking statements include known and unknown risks and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Hamon. Should one or more of these risks, uncertainties or contingencies materialize, or should any underlying assumptions prove incorrect, actual results could vary materially from those anticipated, expected, estimated or projected. As a result, neither Hamon nor any other person assumes any responsibility for the accuracy of these forward-looking statements. For all additional information For all additional information, please contact : Hamon Investors Relations email@example.com Francis Lambilliotte, CEO firstname.lastname@example.org +32.10.39.04.05 Bernard Van Diest, CFO email@example.com +32.10.39.04.22 Financial calendar Presentation to analysts 4/03/2009 Shareholders meeting 28/04/2009 Trading update Q1 2009 28/04/2009 Payment of remaining part of dividend 15/05/2009 Publication of the first half-year 2009 results 28/08/2009 Hamon profile The Hamon Group is a world player in engineering & contracting (design, installation and project management). Its activities include the design, the manufacturing of critical components, the installation and the after-sale services of cooling systems, process heat exchangers, air pollution control (APC) systems, and chimneys, used in power generation, oil & gas and other heavy industries like metallurgy, glass, chemicals. Hamon & Cie www.hamon.com Rue Emile Francqui 2, B-1435 Mont-St-Guibert, Belgique 12
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