Direct Energie : H1 2015 Financial Results

Paris, 2 October 2015

H1-2015 Financial Results

Continuation of strong commercial growth
229,000 new customer sites (up 33% from H1-2014)
Significantly improved margins
2015 targets adjusted upwards

Strategic production opportunity

(*) limited review of the interim financial statements
(*) unaudited interim financial statements, retrospective application of IFRIC 21 (impact of (€383 k) on the H1 2014 Current Operating Income)

Acceleration in turnover growth and profitability

In the first half of FY2015, Direct Energie posted turnover of €505.6 m, up 19.7% from H1-2014. This sharp improvement is mainly driven by strong customer acquisitions and increasing energy deliveries supported by slightly lower than usual temperatures. The final retroactive price adjustment in power for the period also has a positive impact of €2.5 m, but well below the contribution of €12.6 m recorded in the first half of 2014.

Direct Energie acquired 229,000 customer sites (up 3% from H1-2014), raising its portfolio to 1,382,000 on 30 June 2015.

In order to take advantage of decreasing commodity prices especially in power, Direct Energie made the choice to secure its energy supplies on the wholesale market instead of using the ARENH contract (ARENH - accès régulé à l'électricité nucléaire historique), whose price remained stable at €42/MWh. The Group nevertheless keeps the right, as stated in the Decree, to switch back to an ARENH sourcing depending upon future market evolution.

The combination of these factors generates a gross margin of €78.4 m, up 27.5%.

The current operating income also shows a sharp increase of 72.4% at €22.7 m thanks to monitored operational overheads.

Bottom line, the net income amounts to €23.2 m, close to doubling from H1 2014, after taking into account a positive contribution of €7.2 m linked to mark to market variations on commodity derivatives.

A strengthened financial structure

Cash flow increases to €35.9 m, confirming the extension of the competitive economic environment the Group is gradually securing. The negative impact on working capital requirements comes to €50.9 m, in line with the seasonality effect recorded on 30 June of each year.

The gross cash position at cut-off aggregates to €17.6 m (€45.6 m after reclassification of  €28 m long term cash investments on riskless instruments with maturity of more than 3 months recorded in financial assets according to the IFRS standards).

To support this growth and preserve financial flexibility, dedicated credit lines have been secured (in May, the Group arranged a revolving credit  facility of €60 m, confirmed over a 3 year period). Net debt (excluding margin calls) stands at €36.7 m on 30 June.

Upward revision of annual targets

Given these first-half results, the growth potential on the residential market and the opportunities already seized and to be seized on the segment of businesses and local authorities thanks to the scheduled termination of regulated rates (contracts expected to lift sales volumes in the coming quarters), the group raises its previously announced targets to:

- The acquisition of more than 540,000 customer sites (up from 450,000),
- A growth in turnover, at normal medium temperatures, above 20% (up from 15%),
- An increase of current operating income above 35% (up from 25%).

Purchase of a combined cycle gas turbine

On 1 October, Direct Energie signed a Sale and Purchase Agreement with the Swiss group Alpiq under which it has agreed to buy the entire share capital of Alpiq's French subsidiary 3CB. 3CB, dedicated to power production, owns and operates a combined cycle gas turbine near Bayet in the Allier region, and has about thirty employees. Built in July 2011 by Ansaldo (Siemens technology), this power plant has an installed capacity of 408 MW.

The price, fully paid in cash, is around €45 m, and subject to usual adjustments. Direct Energie plans to close the deal, which remains submitted to the meeting of conditions precedent, by end of 2015 at the best, and anticipates to finance or refinance the acquisition with a dedicated loan. In view of this timetable, there will be no material impact on 2015 EBITDA, and the group anticipates a dilutive effect of about €4.5 m on the 2016 EBITDA based on the current market prices.

This acquisition, made on attractive terms and in the context of a capacity market to be implemented, fits into the Group's vertical integration strategy. Its upstream and downstream presence will improve the sourcing conditions of the portfolio.

Xavier Caïtucoli, Chairman and CEO of Direct Energie, declared: "With about 45,000 new customers joining us every month and the acquisition of a flexible generation asset, Direct Energie positions itself as an industrial group with presence in the upstream and downstream business. This vertical integration strategy undeniably strengthens our position as France's third largest electricity and gas provider at the service of our 1.5 million customers".

Publications: The first half management report is available on its website (www.direct-energie.com). The 3^rd quarter 2015 turnover will be released on the 17^th of November 2017 after market.

About Direct Energie

Direct Energie is France's third-largest electricity and gas provider, serving more than 1.5 million customers sites (residential and businesses) in France and Belgium (under the Poweo brand name) . Direct Energie has also developed its offer for companies and local authorities, with more than 100,000 delivery points. As an integrated energy group, Direct Energie produces and supplies electricity and gas, and offers energy services to customers.
In 2014, the Group generated turnover in excess of €810 million and delivered 8.4TWh of energy.
Direct Energie's success has been underpinned for more than the past decade by its technical expertise, excellent customer relationships and capacity for innovation.

Direct Energie is listed on the Alternext compartment of Euronext Paris Stock Exchange (ALDIR / FR0004191674).
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 Securities
Stéphanie Stahr - stephanie.stahr@cmcics.com - Tel + 33 (0)1 45 96 77 83

Direct Energie
Ivan Roussin - ivan.roussin@direct-energie.com - Tel +33 (0)6 19 30 05 03
Mathieu Behar - mathieu.behar@direct-energie.com  - Tel +33 (0)6 12 48 85 85