The results for the 2018 first half are driven by solid organic1 growth based in good part on renewable activities and networks. Performance of client solutions is mixed, with a positive contribution from B2B and B2T activities offsetting the impacts caused by lower margins in some B2C activities.
These effects, combined with the very good performance of merchant activities, mainly due to excellent results from the energy management business in the first quarter, and with the predicted growth in the second half of the year, are expected to offset the anticipated adverse impacts of the unplanned maintenance at certain Belgian nuclear units.
Thus, ENGIE confirms its 2018 full-year guidance*.
The Group pursues its strategic repositioning aimed at reducing its carbon footprint and exposure to commodities prices in order to accelerate its development in low CO2 power generation, networks and client solutions.
Following the disposal of its stake in Glow in Asia-Pacific, announced in June, the Group's coal-fired electricity generation capacity should represent only 5% of its total installed capacity.
During the first half of the year, ENGIE also continued to develop through dynamic organic growth and through targeted external growth, notably with renewables projects won through competitive offerings representing more than 800 MW and with acquisitions of major wind and solar developers made in the United States and in France.
Net debt has been significantly reduced and the Group's financial structure remains very solid. This is confirmed by the recent upgrade of S&P's outlook from negative to stable, with a maintained A- rating. Also, Moody’s confirmed its A2 rating with a stable outlook.
At the presentation of the 2017 results, ENGIE announced a new dividend policy, with a 7.1% higher dividend of EUR 0.75 per share in cash for fiscal year 2018. An interim dividend of EUR 0.37 will be paid for fiscal year 2018 on October 12, 2018.
Upon the presentation of the 2018 first half financial results, Isabelle Kocher, ENGIE CEO, stated: “The return to organic growth observed in 2017 is confirmed in the 2018 first half, supported by the continued development in the majority of our activities. In low CO2 power generation, the growth in the renewable projects pipeline was sustained, mainly as a result of winning bids and targeted acquisitions in different countries. ENGIE also benefits from a higher regulated asset base in networks following the regulation of gas storage activities in France, effective since the 2018 first half. In addition, commercial developments have been confirmed in the client solutions activities: ENGIE realized numerous opportunities in services with 11% revenue growth and 13% increase in installation and engineering backlog and currently has a global portfolio of 24 million contracts for the supply of services and the sale of energy to individuals, in particular with a leading position on gas and electricity market offers in France. Finally, the daily commitment of our teams allows us to continue our strategic repositioning and to confirm all objectives for this year, in the service of a more harmonious progress.”
Revenues amounted to EUR 30.2 billion in 2018 first half, up 0.1% on a reported basis and 0.8% on an organic basis, compared with 2017 first half.
Reported revenue growth was affected by an adverse exchange rate, mainly due to the depreciation of the US dollar and Brazilian real against the euro, offset by an overall positive scope effect. Organic revenue growth was mainly driven by a sharp increase in renewable power generation, mainly hydro power, in France and Brazil, and by the introduction of gas storage regulation in France. These impacts were partly offset in particular by the new accounting treatment of long-term gas supply contracts in Europe since the end of 2017, with no impact on EBITDA.
EBITDA amounted to EUR 5.1 billion, up 1.3% on a reported basis and up sharply by 6.2% on an organic basis, compared with 2017 first half.
Reported growth includes an adverse exchange rate effect, mainly due to the depreciation of the US dollar and Brazilian real against the euro. It also includes a slightly negative scope effect stemming chiefly from the sale of the Loy Yang B coal-fired power plant in Australia in early 2018 and of the thermal generation business in the United Kingdom and Poland in 2017, partly offset by two new hydro power station concessions acquired in Brazil in late 2017 and several acquisitions in 2017, including Tabreed, the leader in district cooling networks in the Middle East, and Keepmoat Regeneration, the leader in regeneration services for local authorities in the United Kingdom.
The strong organic EBITDA growth was mainly driven by revenue related developments. The excellent performance from the energy management activities, due to favorable market conditions in Europe and to the impact of the change of management set up for some of GEM Business Unit’s long-term contracts, and the impacts of the Lean 2018 performance program also contributed to this organic growth. These impacts more than offset the outages at the Belgian nuclear power plants during the period.
Organic EBITDA performance varied by segment:
Current operating income after share in net income of entities accounted for using the equity method amounted to EUR 3.1 billion, up 1.4% on a reported basis and 7.2% on an organic basis compared with first-half 2017, in line with EBITDA growth.
Net recurring income Group share related to continued operations amounted to EUR 1.5 billion in 2018 first half, a sharp increase of 11.4% compared with the previous year, driven by the improvement in current operating income after share in net income of entities accounted for using the equity method, coupled with an improvement in the recurring effective tax rate.
Net income Group share relating to continued operations amounted to EUR 1.1 billion in 2018 first half, an improvement on the prior year period. It includes the highly positive change in the fair value of hedges of commodity purchases and sales and the impact of lower restructuring provisions, partially offset by lower gains on disposals compared with 2017 first half and by impairment losses during the period.
Net income Group share amounted to EUR 0.9 billion, compared with EUR 1.2 billion in 2017 first half. It includes a loss of EUR 0.2 billion related to the upstream and midstream LNG business classified as “Discontinued operations”.
Net financial debt stood at EUR 20.5 billion, down EUR 2.0 billion compared with December 31, 2017. This variation is mainly due to cash flow from operations of EUR 3.3 billion, to the impacts of the portfolio rotation program of EUR 3.4 billion (including the closing of the sale of the exploration and production business, of the Loy Yang B coal-fired power plant in Australia and of the distribution business in Hungary, as well as the classification of the interest in Glow, a power plant operator in the Asia-Pacific region, as “Assets held for sale”), to the net change in hybrid bonds outstanding of EUR 0.4 billion and to a slightly favorable exchange rate effect. These items were partially offset by gross investments in the period of EUR 3.6 billion and by dividends paid to ENGIE SA shareholders of EUR 0.8 billion and to non-controlling interests of EUR 0.5 billion.
Cash flow from operations (CFFO) amounted to EUR 3.3 billion, down EUR 0.6 billion compared with 2017 first half. The decrease stems chiefly from the return to a normal level of change in working capital of EUR 1.2 billion, partly offset by an increase in operating cash flow generated , a reduction in the cost of debt and lower tax expense.
At the end of June 2018, the net financial debt / EBITDA ratio stands at 2.2x, well below the target of ≤2.5x. The average cost of gross debt decreased slightly compared to end of 2017, reaching 2.53%.
The net economic debt8/ EBITDA ratio stands at 3.8x, stable compared to end of 2017.
On April 30, 2018, S&P upgraded its outlook for ENGIE from negative to stable, maintaining an A- rating.
On June 13, 2018, Moody’s confirmed its A2 rating with a stable outlook on ENGIE.
ENGIE successfully pursues its strategic repositioning: :
The Group confirms its 2018 financial targets10:
* Notably, the confirmation of the 2018 guidance is based on the assumption of a restart of Belgian nuclear units according to the schedule published in REMIT as of today.
1Excluding forex and scope.
2 Variations vs. 2017 first half.
3 Including share in net income of associates.
4 i.e. excl. E&P and LNG.
5 2017 figures restated for E&P International activities and LNG midstream and upstream activities classified as discontinued operations as from March 2018 and for IFRS 9 & 15.
6 Cash Flow From Operations (CFFO) = Free Cash Flow before maintenance Capex.
7 Cash generated from operations before income tax and working capital requirements.
8 Figures restated for LNG midstream and upstream activities classified as discontinued operations as from March 2018 and pro forma provisions and leases.
9 Cumulated impact from January 1, 2016 to June 30, 2018.
10 These targets and indications exclude E&P and LNG contributions and assume average weather conditions in France, full pass through of supply costs in French regulated gas tariffs, unchanged significant Group accounting principles except for IFRS 9 & 15, no significant regulatory and macro-economic changes, commodity price assumptions based on market conditions as of December 31st, 2017 for the non-hedged part of the production, and average foreign exchange rates as follows for 2018: EUR /$: 1.22; EUR /BRL: 3.89 and do not consider significant impacts on disposals not already announced at Dec, 31st 2017. In addition, the confirmation of the 2018 guidance is based on the assumption of a restart of Belgian nuclear units according to the schedule published in REMIT as of today.
The presentation of the Group’s 2018 first half financial results used during the investor conference call is available from the Group’s website:
The figures presented here are those customarily used and communicated to the markets by ENGIE. This message includes forward-looking information and statements. Such statements include financial projections and estimates, the assumptions on which they are based, as well as statements about projects, objectives and expectations regarding future operations, profits, or services, or future performance. Although ENGIE management believes that these forward-looking statements are reasonable, investors and ENGIE shareholders should be aware that such forward-looking information and statements are subject to many risks and uncertainties that are generally difficult to predict and beyond the control of ENGIE, and may cause results and developments to differ significantly from those expressed, implied or predicted in the forward-looking statements or information. Such risks include those explained or identified in the public documents filed by ENGIE with the French Financial Markets Authority (AMF), including those listed in the “Risk Factors” section of the ENGIE (ex GDF SUEZ) reference document filed with the AMF on March 28, 2018 (under number D.18-0207). Investors and ENGIE shareholders should note that if some or all of these risks are realized they may have a significant unfavorable impact on ENGIE.
We are a global energy and services group, focused on three core activities: low-carbon power generation, mainly based on natural gas and renewable energy, global networks and customer solutions. Driven by our ambition to contribute to a harmonious progress, we take up major global challenges such as the fight against global warming, access to energy to all, or mobility, and offer our residential customers, businesses and communities energy production solutions and services that reconcile individual and collective interests. Our integrated - low-carbon, high-performing and sustainable - offers are based on digital technologies. Beyond energy, they facilitate the development of new uses and promote new ways of living and working. Our ambition is conveyed by each of our 150,000 employees in 70 countries. Together with our customers and partners, they form a community of imaginative builders who invent and build today solutions for tomorrow.
2017 turnover: 65 billion Euros. Listed in Paris and Brussels (ENGI), the Group is represented in the main financial (CAC 40, BEL 20, Euro STOXX 50, STOXX Europe 600, MSCI Europe, Euronext 100, FTSE Eurotop 100, Euro STOXX Utilities, STOXX Europe 600 Utilities) and extra-financial indices (DJSI World, DJSI Europe and Euronext Vigeo Eiris - World 120, Eurozone 120, Europe 120, France 20, CAC 40 Governance). To learn more : www.engie.com
Income statement and cash flow statement data for the six months to June 30, 2017 have been restated following the first time application of IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with Customers, and the classification of the upstream and midstream liquefied natural gas (LNG) business as “Discontinued operations”. A reconciliation of the reported data with the restated comparative data is presented in Note 2 “Restatement of 2017 comparative data” to the interim condensed consolidated financial statements.
Develop low CO2 power generation activities
From 1st of January to 30th of June 2018:
From 1st of July 2018:
Develop networks, mainly gas
From 1st of January to 30th of June 2018:
Develop integrated solutions for clients
From 1st of January to 30th of June 2018:
From 1st of July 2018: