Strong growth in 2007 revenue
€2.067 billion, +12%
+9.6% on a like-for-like basis
2007 adjusted operating profit estimate raised
€312 million , +16% vs. 2006
Robust growth prospects for 2008, confirming the resilience of Bureau Veritas’ business
Expected growth of revenue and adjusted operating profit above 15%
Numerous acquisitions under study
Paris-La Défense, February 7, 2008 - Bureau Veritas, the world’s second largest group in conformity assessment and certification services in the fields of quality, health and safety, environment and social responsibility, has announced a solid increase in 2007 revenues and confirmed excellent growth prospects for 2008.
Frank Piedelièvre, Bureau Veritas President and Chief Executive Officer stated: ”The overall result for 2007 was clearly positive. We exceeded the symbolic €2 billion mark in revenues and 15% in adjusted operating margin. In line with our targets, the performances posted reflect the dynamic nature of Bureau Veritas and add weight to our strategic focuses. We have posted an organic growth largely above 10% in four of our eight businesses and the year was particularly strong in terms of external growth, with the take over of the Spanish leader ECA. We are confident in the group’s growth prospects. In 2008, we expect growth in revenues and adjusted operating profit to be above 15% at constant exchange rate basis and excluding 2008 acquisitions”.
I- Change in consolidated revenue
Q4 2007 revenue totalled €599.6 million, up 20.5% relative to Q4 2006 and showing organic growth of 10.7%, with a 13.4% increase from changes in the scope of consolidation and a 3.6% negative impact from currencies.
Full-year 2007 revenue totalled €2,066.9 million. The 12.0% increase relative to 2006 broke down as follows: - Organic growth of 9.6%, resulting from a strong in growth in the Marine, Industry, Consumer Products, Government Services & International Trade and Certification businesses, with lower growth in the Inspection & In-Service Verification and Construction businesses and virtually stable revenue in the Health, Safety & Environment business.
- A 5.2% increase from acquisitions, namely ECA in Spain, CCI Holdings, Intico, IRC and Alert Solutions in Australia, NEIS, AQSR and Guardian Inspection in the USA and Innova in Germany.
- A 2.8% negative impact from currencies, stemming from a stronger euro relative to the US dollar, the Hong Kong dollar and the Japanese yen over the period.
II- Outlook
Given that revenue was slightly higher than expected, the Group estimates that 2007 adjusted operating profit is set to total €312 million, including the contribution from ECA from October 15 to December 31, 2007, compared with the previous estimate of €300 million, which didn’t include any contribution from ECA.
2008 is set to follow the targets announced for 2011: a doubling in revenue relative to 2006, based on average organic growth of 8% a year and on acquisitions, a 150 basis-point improvement in operating margin on a same-structure basis (excluding acquisitions) and an average annual growth in attributable net profit of 15-20% (excluding non-recurring items) over the period.
Note that Bureau Veritas’ portfolio of activities is well-diversified in terms of businesses, markets and geographical locations and this limits the Group’s exposure to economic cycles.
Assuming the same scope of consolidation as at end-December 2007 (excluding acquisitions made in 2008), and constant currencies, 2008 revenue and adjusted operating profit are expected to rise by more than 15% relative to 2007.
In addition, acquisitions prospects are also extremely positive and the Group is currently considering several targets which ought to result in acquisitions in H1 2008. Bureau Veritas has recently signed an agreement to acquire the Chilean leader Cesmec (2007 revenue of € 21.5 million). The closing of this acquisition should take place before March 31, 2008.
III- Revenue growth by business
Euro millions | 2007 | 2006 | Overall growth | Organic growth | Marine | 65.2 | 54.7 | 19.1% | 22.4% | Industry | 88.6 | 65.0 | 36.2% | 16.2% | Inspection and In-Service Verification (IVS) | 85.0 | 69.7 | 22.0% | 3.4% | Health, Safety and Environment (HSE) | 59.1 | 48.9 | 21.0% | 2.3% | Construction | 115.8 | 95.1 | 21.7% | 8.1% | Certification | 74.6 | 68.2 | 9.5% | 4.9% | Consumer Products | 68.0 | 63.1 | 7.8% | 17.4% | Government Services and International Trade (GSIT) | 43.3 | 32.9 | 31.8% | 14.9% | Total Q4 | 599.6 | 497.6 | 20.5% | 10.7% | Marine | 247.2 | 208.9 | 18.3% | 21.2% | Industry | 299.1 | 231.5 | 29.2% | 18.1% | Inspection and In-Service Verification (IVS) | 268.4 | 242.9 | 10.5% | 4.8% | Health, Safety and Environment (HSE) | 201.2 | 188.9 | 6.5% | 0.1% | Construction | 393.1 | 375.4 | 4.7% | 3.1% | Certification | 247.1 | 230.4 | 7.3% | 6.9% | Consumer Products | 259.1 | 248.3 | 4.4% | 11.8% | Government Services & International Trade (GSIT) | 151.7 | 119.9 | 26.5% | 18.6% | Total full-year | 2 066.9 | 1 846.2 | 12.0% | 9.6% |
Marine
Revenue in the Marine business rose 19.1% in Q4 2007, representing organic growth of 22.4% and a 3.3% negative impact from currencies. Full-year 2007 revenue in the business rose 18.3% or 21.2% on a same-currency basis.
Momentum in the Marine business stemmed primarily from a buoyant growth in the classification and inspection activities for new ships in all categories: oil tankers, bulk carriers, container ships, liquefied gas carriers, cruise ships and ferries. In geographical terms, growth was particularly high in China.
Against a still very solid market backdrop, the order book on December 31, 2007 totalled 30.2 million gross tons vs. 17.4 million on December, 31 2006.
The in-service ship inspection business also grew, with a fleet of 7,919 ships classed by Bureau Veritas, representing 58.3 million gross tons compared with 7,482 ships (or 54.6 million gross tons) on December 31, 2006.
Industry
Revenue in the Industry business rose 36.2% in Q4 2007, representing organic growth of 16.2%, a 23.3% increase from changes in the scope of consolidation and a 3.3% negative impact from currencies. Over the full-year, revenue rose 29.2%, with organic growth of 18.1%, a 14.1% increase from acquisitions and a 3.0% negative impact from currencies.
The Industry business benefited from a strong in growth in Latin America (Brazil in particular), Asia (China and India), the Middle East and the Caspian Sea (particularly in United Arab Emirates, Kuwait and Kazakhstan) as well as in the UK and Russia. In all of these countries, demand was underpinned by oil and gas infrastructure investments.
External growth stemmed from the extension of activities in Australia with the acquisition in June of CCI Holdings and the consolidation over the full year of Intico Integrity Engineering.
Inspection & In-Service Verification (IVS)
Revenue in the Inspection & In-Service Verification (IVS) business rose 22.0% in Q4 2007, representing organic growth of 3.4%, a 19.7% increase from changes in the scope of consolidation and a 1.1% negative impact from currencies. Over the full-year, revenue rose 10.5%, with organic growth of 4.8%, a 6.0% increase from acquisitions and a 0.3% negative impact from currencies.
In France (66% of total revenue in the business), revenue rose 5.2% over the full-year with the winning and renewal of multi-site contracts with major industrial and retail sector clients.
In the UK (17% of revenues), in a context of strong competition, revenue fell 3.4% on a same-currency basis.
In Spain (6% of revenues), revenue was multiplied by four, with the integration of the national leader ECA as of October 15, 2007.
In the Netherlands (4% of revenues), revenue rose by 8.1%, or 1.7% on a same-structure basis, with the rest stemming from the consolidation over the full year of Nagtglas.
Health, Safety & Environment (HSE)
Revenue in the Health, Safety & Environment (HSE) business rose 21.0% in Q4 2007, representing organic growth of 2.3%, a 23.7% increase from acquisitions and a 5.0% negative impact from currencies. Over 2007, revenue rose 6.5% with organic growth of 0.1%, a 9.6% increase from acquisitions and a 3.2% negative impact from currencies.
Overall low organic growth in the division’s 2007 revenue stemmed from the following: - Solid growth in France (33% of revenue) of 6.7% generated by a portfolio of dynamic products (occupational risk, corporate social responsibility and energy efficiency) and the winning of contracts with key clients for emission measurements.
- A decline in revenue for all of the companies recently acquired in the USA, the UK and Australia. This is the result of a willingness to streamline the business portfolio, by phasing out some services such as soil remediation in the USA and noise monitoring in the UK while at the same time repositioning on services in growing demand (carbon strategy, green building certification, industrial hygiene and safety at work, energy audits).
T he 9.6% increase from changes in the scope of consolidation in 2007 stemmed from the acquisition of ECA in Spain, IRC and Alert Solutions in Australia, and Trotters in Denmark.
Construction
Revenue in the Construction business rose by 21.7% in Q4 2007, with organic growth of 8.1%, a 16.6% increase from changes in the scope of consolidation and a 3.0% negative impact from currencies. Over the full-year, revenue rose 4.7%, with organic growth of 3.1%, a 3.8% increase from acquisitions and a 2.2% negative impact from currencies.
High organic growth of 8.1% in Q4 stemmed from healthy performances in France (+12.8%) and Japan (51.2%) and to a lesser extent Spain (+3.0%), whereas sales dropped 15.2% in the USA.
Full-year organic growth was more modest (+3.1%) and broke down as follows: - In France (53% of revenue in the business), revenue rose by 9.1%, mainly on the back of growth in new housing and commercial buildings. Growth was also driven by the development of new inspection and audit services such as technical due diligence, property audits and HQE building certifications.
- In the USA (17% of revenue), revenue fell by 20.1% on a like-for-like basis. The downtrend apparently bottomed out in H1 2007 when revenue fell 23.8% on a like-for-like basis compared with a lesser decline of 16.1% in H2. The Code Compliance business continued to suffer from the fall in volumes of building permits but started to benefit from new outsourcing contracts granted by municipalities in California, Texas and Pennsylvania;
- In Spain (11% of revenue), organic growth stood at 6.2% with some slowdown in H2 in the technical control business for private buildings. In contrast, the inspection and infrastructure works control business remained robust. Note that ECA’s exposure to the residential market is limited (22% of ECA revenues in 2007), since infrastructure projects are more dominant (78%).
- In Japan, organic growth stood at 25.3% driven by the privatisation and gradual extension of the code compliance market.
T he 3.8% increase from changes in the scope of consolidation in 2007 stemmed from the acquisition of ECA in Spain and Guardian in the USA.
Certification
Revenue in the Certification business rose 9.5% in Q4 2007, with organic growth of 4.9%, a 6.1% increase from changes in the scope of consolidation and a 1.5% negative impact from currencies. Over full-year 2007, revenue rose 7.3%, with organic growth of 6.9%, a 2.0% increase from acquisitions and a 1.6% negative impact from currencies.
Organic growth of 6.9% in 2007 revenue in the Certification business was a robust performance in view of the fact that renewal of ISO 9000-2000-certification in 2006 generated additional revenues. The strong performance in 2007 stemmed from: - Healthy momentum in certification activities prompted by the environment, social responsibility, health and safety segments (ISO 14001, OHSAS 18001, SA 8000, ISO 22000 and HACCP).
- Development in certification and customized audits adapted to the requirements of major companies (network audits, supply chain audits, solution-oriented audits).
- Higher growth in global contracts signed with key accounts.
- Double-digit growth in several emerging economies (China, India, Brazil, Russia).
C hanges in the scope of consolidation (+2.0%) stemmed from the first-time consolidation of Zertifizierung Bau in Austria, AQSR in North America and ECA in Spain.
Consumer Products
Revenue in the Consumer Products business rose 7.8% in Q4 2007, representing organic growth of 17.4%, a 0.1% increase from changes in the scope of consolidation and a 9.7% negative impact from currencies. Over the full-year, revenue rose 4.4%, with organic growth of 11.8%, and negative impacts of 0.1% from changes in the scope of consolidation and 7.3% from currencies.
Organic growth was strong in business segments linked to toys and analytical testing of textiles. Q4 was particularly robust for tests on toys following the various measures decided by a number of manufacturers and retailers to recall products. In geographical terms, demand from Europe, and especially Germany, rose more rapidly than demand from the USA.
Changes in the scope of consolidation were negligible (-0.1%), with the acquisition of Innova in Germany having offset the disposal of laboratory MTL in Italy.
Government Services and International Trade
Revenue in the Government Services and International Trade business rose 31.8% in Q4 2007, with organic growth of 14.9%, an 18.7% increase from changes in the scope of consolidation and a 1.8% negative impact from currencies. Over the full-year, revenue rose by 26.5%, with organic growth of 18.6%, a 9.7% increase from acquisitions and a 1.8% negative impact from currencies.
The business benefited from the revenue generated over the full-year by two pre-shipment inspection contracts signed during 2006 in Cambodia and Mali, as well as sharp growth in inspected imports to Angola and to the Democratic Republic of Congo, as well as an increase in verification of conformity contracts in the Middle East and especially Saudi Arabia.
Note that, the contract with Ecuador is set to be halted during Q1 2008. The contract generated €11.8 million in revenue in 2007. Several new contracts are being negotiated.
The consolidation of the coal testing activity (around 50% of revenues at CCI Holdings) accounted for 9.7% of growth in the business.
IV- Further acquisitions
Over the full-year 2007, Bureau Veritas acquired 16 companies, representing annual revenues of more than €260 million.
In Q4 2007 and since the beginning of the year, the group continued its strategy to acquire companies to bolster its positions in Europe and South America:
- ECA
On October 15, 2007, Bureau Veritas completed the formal acquisition of 100% of ECA GLOBAL, following approval by the Spanish anti-trust authorities. Note that the acquisition enabled Bureau Veritas to become the leading group in Spain in inspection and in-service verification services, industry services, certification and technical control of buildings.
The process to integrate ECA into the group is well advanced at both the operating and the administrative and financial levels. A dispute with the former owners of ECA Global led the group to record an additional acquisition cost of €4.5 million. The overall cost of the acquisition therefore worked out to €156 million, of which €28 million for the acquisition of 43% in 2004 and 2005, €123.5 million for the acquisition of the additional 57% in October 2007 and €4.5 million for the additional cost.
2007 revenue totalled €194 million. The contribution to consolidated Q4 2007 revenue, i.e. for the period running from October 15, 2007 to December 31, 2007 totalled €46 million and broke down among the following businesses: construction (34% of revenue of which 7% linked to private housing and 27% to infrastructure projects), IVS (29%), HSE (20%), Industry (10%) and Certification (7%).
- Qualista
In October 2007, Bureau Veritas took over two French companies, SARL Qualista and EURL Qualista Audits, specialised in certification, audit and training at various players in the agro-industrial sector (food retailing, collective and hospital catering).
Combined revenues of the two companies totalled €0.4 million in 2007. The acquisition should enable Bureau Veritas to strengthen its positions in certification for industry and food retailing in France.
- MTL Engenharia
In November 2007, the group acquired Brazilian company, MTL Engenharia, specialised in asset integrity management for industrial installations in the oil and gas sectors. The company generated revenue of €1.3 million in 2007. The acquisition has enabled Bureau Veritas to increase its technical expertise and consolidate its position in the Industry business in Brazil.
- SurveyCan
In November 2007, the group acquired SurveyCan, leader in inspection and in-service verification of lifts and lifting equipment, electrical and combustion installations in the Canary Islands. In 2007, SurveyCan’s revenue totalled €1.2 million. The acquisition has rounded out Bureau Veritas’ and ECA’s positions in the Canary Islands.
- Chemtox
In December 2007, the group acquired Danish company Chemtox, specialised in Health, Safety and Environment audits and in particular, analysis of chemical substances. The company is present in Denmark, Norway, and more recently in Sweden. In 2006/07, Chemtox had sales of more than
€5 million (year-ending 30 June 2007). The acquisition should enable Bureau Veritas to bolster its positions in Scandinavia in the field of HSE.
- Serma
In December 2007, Bureau Veritas acquired two laboratories in France (Belfort and Pessac) specialised in analysis of materials for the aerospace and power sectors. Serma had sales of €3 million in 2007. The acquisition has enabled Bureau Veritas to bolster its network of laboratories in France for the aerospace and power sectors.
- Cesmec
In January 2008, Bureau Veritas signed an agreement with a view to acquiring Chilean group, Cesmec (the deal is set to be finalised before 31 March 2008). Cesmec is present in Chile, Peru and Argentina and supplies a large range of conformity assessment services. In 2007, Cesmec had revenue of
€21.5 million and EBITA of €2.1 million. The acquisition should significantly bolster Bureau Veritas’ presence in South America where it now employs 3,700 staff with a leading position in inspection and laboratory testing services in Chile. It should also enable the group to extend its activities in the mining industry, thereby strengthening and enhancing the portfolio of services at CCI Holdings, the Australian company acquired in June 2007.
Agenda
March 26, 2008: Publication of 2007 earnings
About Bureau Veritas
Founded in 1828, Bureau Veritas is an international group specialised in the inspection, analysis, audit, and certification of products, infrastructure (buildings, industrial sites, equipment, ships, etc.) and management systems (ISO standards etc.) in relation to regulatory or voluntary frameworks.
Bureau Veritas ranks as the world’s second largest group in conformity assessment and certification services in the fields of quality, health and safety, environment, and social responsibility (”QHSE”) and the world leader in QHSE services not including commodity testing. Bureau Veritas is recognised and accredited by major national and international organisations.
Bureau Veritas is present in 140 countries through a network of 700 offices and laboratories. It has more than 33,000 employees and a client base of more than 280,000.
In the last ten years, since 1996, Bureau Veritas has quadrupled its sales to €1.846 billion in 2006. Its operating profit has increased seven-fold to €268 million. In 2006, the group posted consolidated net profit of €154 million.
Since October 24, 2007, Bureau Veritas has been listed on the Euronext Paris Eurolist (Compartment A, code ISIN FR 0006174348, mnemonic: BVI).
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