Direct Energie : 1st half-year 2016 results

Paris, 28 September 2016

1^st half-year 2016 RESULTS

Strong growth in business and profitability

Revenue: €863.6M (+70.8%)
Current operating income: €43.8M (+93.0%)
Net income: €52.4M (x2.3)

On-going acquisition of a new 400 MW gas power plant Upward revision of annual targets

Today, Direct Energie's Board of Directors has approved the Group's consolidated accounts for the 1^st half-year 2016 which were subject to a limited review by the Auditors. The performances over the period confirm the structural sales growth dynamic across all business segments, in a still-changing regulatory environment.

Improvement in sales results and profitability

The contribution by operational segments is detailed in section 2 of the Half-year financial report

After strong growth at the beginning of the year, the trend continued with the contribution from the second quarter amounting to €347.6M (+85% vs. Q2 2015), bringing half-year revenue to €863.6M. This significant 70.8% growth compared to the same half-year 2015 is mainly due to dynamic recruitment across all consumer segments, and in particular, the announced ramp-up of Major Accounts customers since 1^st January 2016.

The Group acquired 376,000 customer sites in France over the half-year, compared to 229,000 for the same period in 2015 including:

• 273,000 in the residential segment;
• 18,000 in the professional segment;
• 85,000 in the Major Accounts segment.

This brings the number of customer sites in the portfolio in France to 1,826,000 at end June compared to 1,591,000 at end December 2015.

Gross margin was €107.1M with a strong improvement compared to the 1^st half-year 2015, under the combined effect of the increase in delivered volumes of energy and favourable supply conditions.

In addition to this organic growth, several regulatory changes took place during the half-year, with notably the one-year extension from October 2015 of the service provision contract with Enedis, and the signature of a new contract with GrdF stipulating the assumption by the distributor of historical unpaid transportation costs. These changes have generated a positive impact of €31.5M on the period.

Moreover, the arbitrations held as part of a storage reform project in France, combined with a recent decision by the administrative court, no longer allow the Group to consider that its long-term gas capacity reservation contracts from Belgium and the Netherlands are essential to complying with its gas supplier obligations in terms of supply security in France. The Group has, therefore, made a €33.0M provision for loss-making contracts for its contracts (non-cash impact). Revenue expected from the use of these capacities over their remaining useful life proves to be lower than the cost of their booking, with no prospect of release before term.

Overall, these different items generate an impact of -€1.5M on the half-year's current operating income.

Combined with sharp monitoring of operating expenses, current operating income amounts to €43.8M, up 93.0% compared to 1^st half-year 2015, and significantly ahead of the 2016 full year targets. After taking into account tax income of €30.5M, net income amounts to €52.4M compared to €23.2M the previous year.

This performance does not take in account the implementation by public authorities of retroactive electricity tariff rulings following the cancellation by the French Council of State (Conseil d'Etat) of the two tariff decrees covering the period from August to October 2014 and November 2014 to July 2015. The Group anticipates a €14M positive impact for this second semester.

Strengthening of the financial structure and flexibility

€M		30/06/2016		31/12/2015
Non-current assets		174.7		145.5
Current assets		663.8		468.1
of which cash and cash equivalents		191.4		35.2
TOTAL ASSETS		838.5		613.6
Shareholders' Equity excluding fair value of hedging instruments		128.9		80.6
Fair value of hedging instruments		(87.5)		(110.0)
Shareholders' Equity		41.4		(29.4)
Non-current liabilities		222.5		224.5
Current liabilities		574.6		418.4
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		838.5		613.6

Given the growth in net income and the reduction in the negative impact of the fair value of hedging instruments, as a consequence of the physical delivery of underlying energy volumes, equity considerably improved to €41.4M at 30 June 2016 compared to (€29.4M) at the end of 2015.

The Group also considerably reduced its debt with net financial debt brought down to €53.8M compared to €147.9M at the end of December 2015. Restated for cash margin calls, net financial debt decreased to €20.7M at 30 June 2016 (€83M at the end of 2015).

Simultaneously, and to secure the financing for its growth, the Group continued to improve its financial flexibility with new financing facilities. At 30 June, the available unused credit lines amounted to €177M in addition to available cash of €190.2M.

On-going acquisition of a 400MW combined cycle gas turbine power plant in Belgium

Direct Energie announces the signature on 28 September of a sale and purchase agreement with the Italian group, Enel, for the acquisition of 100% of the share capital in its subsidiary Marcinelle Energie. The latter, dedicated to power production, owns and operates a combined cycle gas turbine power plant located in Charleroi, Belgium with around forty employees. Built in 2012 with Siemens-Ansaldo technology similar to that owned by Direct Energie in Bayet (Allier), the plant has installed capacity of around 400 MW.

The transaction amount, paid entirely in cash, is €36.5M, and remains subject to the usual price adjustments. In addition, an earn-out depending on the change in the electrical market structure in Belgium is foreseen. The transaction remains subject to the lifting of suspensive conditions (in particular, the authorisation from the competent Belgian authorities), and could be completed by the end of 2016.

After the acquisition of the Bayet plant at the end of 2015, this new transaction will take the Group's installed capacity to nearly 800 MW. Agreed on competitive terms, it also confirms the implementation of the announced vertical integration strategy with the reinforced presence of the Group upstream and downstream for better supply coverage of its customer portfolio. Beside, this transaction confirms the Group's ambitions on the Belgium market.

Upward revision of 2016 targets for growth and profitability

In view of the financial performance during the 1^st half-year, the Group has adjusted its annual targets for the fiscal year 2016 upwards as follows:

• Over 2 million customer sites in the portfolio;
• Revenue over €1.5Bn at seasonal average temperatures;
• Current operating income of around €85M at seasonal average temperatures.

Furthermore, the reach of a two million customer sites portfolio expected to be achieved by the end of year 2016,

Furthermore, given the commercial achievements expected in 2016, the Group will adjust accordingly its 2018 customer sites targets on the next annual results announcement.

Next publication:
Revenue for 3^rd quarter 2016 on 8 November 2016 after the markets close

Publication: The Group's Half-year Financial Report is available on its internet site (www.direct-energie.com).

About Direct Energie
Third-largest French electricity and gas provider, the Direct Energie Group has already acquired and earned the trust of more than 1.8 million residential and professional customer sites in France and Belgium (under the Poweo brand). Integrated energy provider, Direct Energie is involved in generation, electricity and gas supply as well as the sale of energy services to its customers.
Direct Energie has based its success of over thirteen years on its technical expertise, its outstanding customer relations and its capacity for innovation.
In 2015, the Group generated consolidated revenue of just over €1 Bn and supplied 11.4 TWh of energy.
For more information, visit our website www.direct-energie.com

Press contact:        
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Grégoire Lucas - glucas@image7.fr - Tel + 33 (0)1 53 70 74 94
Marie Artzner - martzner@image7.fr - Tel + 33 (0)1 53 70 74 31 or + 33 (0)6 75 74 31 73

CM CIC Market Solutions
Stéphanie Stahr - stephanie.stahr@cmcic.fr - Tel + 33 (0)1 53 48 80 57

Direct Energie
Mathieu Behar - mathieu.behar@direct-energie.com - Tel +33 (0)6 12 48 85 85

PROFIT & LOSS ACCOUNT

In thousands of euros		30/06/2016		30/06/2015
Revenues excluding Energy Management		859 008		506 520
Energy Management Margin		4 557		(867)
Revenue from ordinary activities		863 565		505 653
Cost of sales		(756 490)		(427 281)
Gross margin		107 075		78 373
Personnel expenses		(17 167)		(13 631)
Other operational income and expenses		(31 506)		(31 308)
Depreciation and amortisation		(14 575)		(10 721)
Current operating income		43 826		22 713
Changes in fair value of Energy financial derivative instruments operational in nature		(16 781)		7 322
Disposals of non-current assets		(11)		(3 356)
Impairment of non-current assets		(112)		(550)
Operating income		26 923		26 129
Cost of net debt		(5 237)		(1 504)
Other financial income and expenses		(138)		2
Financial income/(loss)		(5 375)		(1 501)
Corporate income tax		30 533		(190)
Share of net income from companies accounted for by the equity method		332		(14)
Net income from continuing operations		52 414		24 424
Net income from discontinued operations		-		(1 236)
Net income		52 414		23 189
of which Net income, Group share		52 414		23 189
Earnings per share (in €)		1.28		0.57
Diluted earnings per share (in €)		1.21		0.55

Limited review by auditors

BALANCE SHEET

In thousands of euros		30/06/2016		31/12/2015
Intangible assets		44 182		40 949
Property, plant and equipment		46 345		47 661
Investments in associates		1 306		902
Non-current derivative financial instruments		7 918		8 494
Other non-current financial assets		1 146		1 458
Other non-current assets		5 759		5 279
Deferred tax assets		68 085		40 780
Non-current assets		174 741		145 522
Inventory		23 313		36 245
Trade receivables		321 604		220 596
Current derivative financial instruments		23 666		35 843
Other current financial assets		40 511		70 688
Other current assets		63 223		69 500
Cash and cash equivalents		191 436		35 230
Current assets		663 752		468 102
TOTAL ASSETS		838 492		613 624
Share Capital and share premiums		12 193		9 003
Retained earnings and profit or loss		116 751		71 717
Treasury shares		(52)		(88)
Other comprehensive income		(87 512)		(109 981)
Shareholders' Equity - Group share		41 380		(29 350)
TOTAL SHAREHOLDERS' EQUITY		41 380		(29 350)
Non-current provisions		33 041		5 051
Non-current derivative financial instruments		57 517		81 354
Other non-current financial liabilities		115 413		114 829
Other non-current liabilities		2 545		2 164
Deferred tax liabilities		13 941		21 130
Non-current liabilities		222 457		224 528
Current provisions		11 692		6 776
Trade payables		128 624		187 818
Current derivative financial instruments		89 246		83 851
Other current financial liabilities		134 951		69 113
Other current liabilities		210 143		70 887
Current liabilities		574 656		418 445
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		838 492		613 624

Limited review by auditors

STATEMENT OF CHANGES IN EQUITY

		Share capital	Share premiums	Retained earnings and profit or loss	Treasury shares	Other comprehensive income			Total shareholders' equity
In thousands of euros						Changes in fair value	Others
Shareholders' equity at 31 December 2015		4 079	4 923	71 717	(88)	(109 981)	0		(29 350)
Net income		-	-	52 414	-	-	-		52 414
Other comprehensive income		-	-	-	-	22 469	-		22 469
Comprehensive income		-	-	52 414	-	22 469	-		74 883
Capital increase		-	-	-	-	-	-		-
Exercise of options		43	3 148	-	-	-	-		3 190
Options		-	-	862	-	-	-		862
Treasury shares purchases/sales		-	-	-	36	-	-		36
Dividend paid		-	-	(8 242)	-	-	-		(8 242)
Shareholders' equity at 30 June 2016		4 122	8 071	116 751	(52)	(87 512)	0		41 380

Limited review by auditors

CONSOLIDATED STATEMENT OF CASH FLOWS

In thousands of euros		30/06/2016		30/06/2015
Consolidated net income		52 414		23 189
Tax expenses/income		(30 533)		190
Financial income/(loss)		5 375		1 501
Income before taxes and financial expenses		27 255		24 880
Depreciation and amortisation		14 575		10 721
Impairment		112		550
Provisions		31 446		3 168
Expenses related to share-based payments		862		559
Change in deferred taxes with no income impact		(0)		(0)
Change in fair value of financial instruments		16 781		(8 848)
Other financial items with no cash impact		11		4 892
Share of income from affiliates		(332)		14
Items with no cash impact		63 456		11 055
Change in working capital requirement		(4 248)		(50 934)
Net cash flow from operating activities		86 463		(14 999)
Acquisition of fixed assets		(16 502)		(12 175)
Disposals of fixed assets		-		3
Change in deposits and guarantees		35 644		(3 457)
Change in financial assets		-		(164)
Net change in loans originated by the company		3 356		(604)
Net cash flows used in investment activities		22 497		(16 398)
Sums received from shareholders during capital increases		3 190		-
Treasury shares		36		27
Proceeds from borrowings		117 494		25 128
Repayment of borrowings		(60 870)		(533)
Interest paid		(2 975)		(1 139)
Interest received		657		355
Dividends paid		(8 242)		(6 118)
Net cash flows used in financing activities		49 291		17 721
Net change in cash and cash equivalents		158 250		(13 676)
Net change in cash and cash equivalents from discontinued operations		-		(28)
Cash and cash equivalents at beginning of year		31 993		31 308
Cash and cash equivalents at end of year		190 243		17 605

Limited review by auditors