BB Societe BIC SA

BIC Group - Press Release
Clichy - 13 February 2017
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Full Year 2016 Results

Good and Well-Balanced 2016 Results in all Consumer Categories

BIC Graphic Strategic Review partially completed

Proposed Ordinary Dividend^[1] for 2016: 3.45 euros per share (+1.5%)

Bruno Bich, Chairman and Chief Executive Officer, said: "Our solid 2016 results are further testimony to the quality and strength of our business model. In a fast-moving and challenging market environment, such as in Shavers in the U.S., Net Sales growth was robust and consistent across all consumer categories. Despite the planned increase in operational investment, Normalized Income from Operations remained healthy.

In 2017, the volatility of currencies and the unpredictable global environment will require increased levels of agility from our teams to ensure continued success. We plan to deliver mid-single digit organic growth in Net Sales. We will continue to launch new products and strengthen our distribution, with a focus on e-commerce in developed markets.

To enhance long-term growth, we plan another year of selected investments in R&D, CAPEX and Brand Support. The total impact of these investments on Normalized Income From Operations margin will be approximately -100 basis points compared to 2016, excluding major currency fluctuations."

FY 2016 Net Sales were 2,025.8 million euros, up 1.6% (+4.9% on a constant currency basis).

FY 2016 Net Sales were 2,272.4 million euros, up 1.4% (+4.2% on a constant currency basis). The negative impact of currency fluctuations (-2.8%) was mainly due to the depreciation of Latin American currencies against the euro.  

• Consumer business grew 5.3% on a constant currency basis (Europe +6.5%, North America +2.7%, Developing Markets +7.5%).
• BIC Graphic Net Sales decreased by 1.9% on a constant currency basis.

FY 2016 Gross Profit margin came in at 52.6%, compared to 51.7% for FY 2015. Excluding the impact of the special employee bonus in 2016 and the negative impact of the Argentinian ARS in 2015, Gross Profit margin would have grown by 0.7 points.

FY 2016 Normalized IFO was 409.1 million euros (i.e., a Normalized IFO margin of 20.2% or 20.6% excluding the impact of the special employee bonus).

FY 2016 Gross Profit margin came in at 50.4%, compared to 49.7% for FY 2015. Excluding the impact of the special employee bonus in 2016 and the negative impact of the Argentinian ARS in 2015, Gross Profit margin would have grown by 0.9 points. Q4 2016 Gross Profit margin was 51.6% compared to 48.3% in Q4 2015. Excluding the negative impact of the Argentinian ARS in 2015, Q4 normalized Gross Profit would have increased by 2.7%.

FY 2016 Normalized IFO was 418.9 million euros (i.e., a Normalized IFO margin of 18.4% or 18.9% excluding the impact of the special employee bonus). Q4 2016 Normalized IFO was 105.8 million euros.

• Consumer business Normalized IFO margin stood at 21.0% for FY 2016, a decline of 0.9 points on FY 2015 (down 0.5 points excluding the impact of the special employee bonus), attributable to increased investment in brand support and research and development. Q4 2016 Normalized IFO margin was 20.2% compared to 16.9% in Q4 2015.
• BIC Graphic Normalized IFO margin decreased by 0.9 points for FY 2016 to 2.4% (if the impact of the special employee bonus is excluded, it was stable at 3.3%). Q4 2016 Normalized IFO margin was 8.2%, compared to 11.3% in Q4 2015.

Income before tax fell back to 408.2 million euros, compared to 457.0 million euros for FY 2015. Net finance revenue was a positive 4.8 million euros compared to a positive amount of 32.6 million euros for FY 2015.

Income before tax fell back to 354.3 million euros, compared to 466.7 million euros for FY 2015. Net finance revenue was a negative 0.8 million euros compared to a positive amount of 26.8 million euros for FY 2015, due to favorable FY 2015 fair value adjustments to U.S. dollar denominated financial assets when compared to December 2014. In Q4 2016, net finance revenue decreased to a positive 1.5 million euros down from a positive 8.9 million euros in Q4 2015.

Net Income From Discontinued Operations was a negative 35.8 million euros compared to a positive 5.8 million euros in 2015, due to the impact of the reassessment of BIC Graphic North America and Asia Sourcing carrying value.

Net income Group Share was 249.7 million euros in FY 2016, a 23.2% drop. The effective tax rate in FY 2016 was 29.5%.

• Net Income Group Share From Continuing Operations was 285.5 million euros.
• Net Income Group Share From Discontinued Operations represented a loss of 35.8 million euros.

Q4 2016 net income Group Share was 36.0 million euros, down by 50.1%.

EPS Group Share was 5.32 euros, compared to 6.89 euros in FY 2015, down by 22.8%.

• EPS Group Share From Continuing Operations was 6.09 euros compared to 6.77 euros in FY 2015.
• EPS Group Share From Discontinued Operation was -0.77 euros compared to 0.12 euros in FY 2015.

Normalized EPS Group Share decreased by 7.8% period on period, from 6.77 euros in FY 2015 to 6.24 euros in FY 2016. EPS Group Share in Q4 2016 was 0.77 euros compared to 1.53 euros in Q4 2015, i.e., a 49.7% decrease.

At the end of December 2016, the Group's net cash position stood at 222.2 million euros.

Net cash from operating activities was +298.7 million euros with +417.2 million euros generated in operating cash flow. The negative 118.5 million euros change in working capital and other items was mainly related to an increase in trade receivables due to an increase in Q4 sales. Net cash was also negatively impacted by increased investments in CAPEX as well as by dividend payments (including the special dividend) and share buybacks.

In 2016, Shareholders' Remuneration totaled 358.6 million euros:

• 277.0 million euros related to the payment of dividends (for the 2015 fiscal year): ordinary dividend of 3.40 euros per share and special dividend of 2.50 euros per share paid in June 2016.
• 81.6 million euros in share buy-backs at the end of December 2016 (652,745 shares purchased at an average price of 124.96 euros per share).

Full Year 2016

Stationery full-year 2016 Net Sales increased by 1.3% (+5.2% on a constant currency basis). Full year 2016 volumes grew by 1.5%.

The Stationery market continued to show positive momentum in 2016 with mid-single digit growth in value terms well balanced between developed and developing markets. In a relentlessly competitive environment, we held on to market share or made gains in most geographies especially in developing markets where we had a record year in Brazil and in certain regions such as the Middle-East and Africa. In line with our strategy, we have accelerated our R&D and Brand Support investment which helped fuel our net sales growth and successful new product launches.

Developed Markets

• Net Sales registered high-single digit growth in Europe with market share gains in most countries thanks to good execution, especially during the Back-to-School season and enhanced brand support. We actively supported our products with communication programs such as the "4 colors^TM" TV campaigns broadcast throughout the region and the coloring campaign in France, the UK, Spain and Eastern countries.
• Despite a very competitive environment in North America, Net Sales registered low-single digit growth, as we continued to benefit from the success of our "Champion Brand" products such Cristal®, Atlantis® and Xtra-Fun Graphite pencils with market share gains in all of their respective segments.

Developing markets

Net Sales posted low-single digit growth and most of the regions performed well.

• We continued our successful expansion in Latin America, supported by regional advertising campaigns, notably in the ball pen and coloring segments. In Brazil, BIC reinforced its position with strong market share gains, driven by higher brand support investment and in-store visibility; we consolidated our leadership in the Modern Mass market channel.
• In the Middle-East and Africa, BIC delivered strong growth along with an outstanding performance in South Africa across the whole range, particularly in the Ball Pen and Coloring segments.
• In India, Cello Pens Net Sales decreased mid-single digit. Domestic sales were flat in a competitive environment. We continued to streamline our product portfolio and to focus on higher value-added items such as the Butterflow^TM range.

Full Year 2016 Stationery normalized IFO margin was 9.2% compared to 11.5% in 2015. Excluding the impact of the special employee bonus, Normalized IFO margin for Stationery would have been 9.6%. The year-on-year drop is attributable to the impact of an increase in operating expenses, as well as significant investment in Brand Support.

Fourth Quarter 2016

Fourth quarter 2016 Net Sales were up 8.6% (+7.8% on a constant currency basis), with mid-single digit growth in Europe and a solid performance in North America (high-single digit growth). In Developing countries, net sales growth was in the high-single digits thanks to a very good back-to-school sell-in, notably in Brazil and South Africa. In India, Cello Pens delivered an improved performance in domestic sales.

Q4 2016 Normalized IFO margin was 5.4% compared to 2.0% in Q4 2015, attributable to a strong increase in sales, a favorable FX impact during the quarter and favorable phasing of Brand Support expenses compared to Q4 2015.

Full Year 2016

Full-year 2016 Net Sales of Lighters grew by 3.1% (+5.6% on a constant currency basis). Full year 2016 volumes were up 2.3%.

Developed markets

• In Europe, growth in Net Sales was in the mid-single digits, driven by Western Europe and distribution gains in Eastern Europe. In all of these countries, we benefited from the solid performance of our core products and our utility lighters.
• North America achieved mid-single digit growth, driven by the success of added-value sleeves.

Developing Markets

Full-year 2016 net sales were stable at actual currency (in the high-single digits on a constant currency basis). 

• In Latin America, high-single digit growth in Net Sales was underpinned by distribution gains especially in Mexico, and despite a tough business environment in Brazil.
• In the Middle-East and Africa, growth was driven by the North African region on the back of strong visibility and distribution gains.

Full-year 2016 Normalized IFO margin for Lighters was 39.8% compared to 38.2% in 2015. Excluding the impact of the special employee bonus, Normalized IFO margin for Lighters would have been 40.2%, reflecting a higher gross profit margin.

Fourth Quarter 2016

Fourth quarter 2016 Net Sales were up 7.4% (+5.2% on a constant currency basis), with a solid performance in North America and a strong growth in the Middle-East and Africa.
Q4 2016 Normalized IFO margin was 39.1% compared to 33.7% in Q4 2015 benefiting from a higher gross profit margin and more favorable absorption of operating expenses.

Full Year 2016

Full-year 2016 Net Sales of Shavers grew by 3.3% (+7.0% on a constant currency basis). Full-year 2016 volumes were up by 0.6%.

In 2016, we continued to reinforce our positions in most geographies, especially in Latin America and Eastern Europe. Thanks to the "Great value" positioning of our products, consumers continued to use BIC® shavers and our new products helped us to win new consumers.

Developed Markets

• In Europe, Full-year Net Sales achieved high-single digit growth with solid performances in Eastern regions underpinned by distribution gains and successful new products launches in the region, such as the BIC® Flex 3 for men and BIC® Simply Soleil® for women.
• In North America, the total US wet shave market declined by 5.0% at the end of December 2016. The one-piece segment declined by 6.1%, reflecting consumer attrition due to less promotional activity and good performances by private labels. Despite this context, Net Sales were stable and we gained market share (+1.4 points to 28.0%^[6] in value terms) thanks to our best value/quality positioning across our entire product range and a very strong new product pipeline (the BIC® Flex 5 and the BIC® Soleil® Shine shavers).

Developing Markets

Net Sales posted double-digit growth, with solid performance across all regions.

• In Latin America, the increase in sales was driven by the success of all product ranges (BIC® 3, BIC® Comfort 3 and BIC® Soleil). This growth was also supported by distribution gains and brand support investments in the region, such as TV campaigns in Brazil to promote the BIC® Comfort 3 and BIC® Soleil shavers.
• The Middle-East and Africa benefited from the good performance across all regions and in all product ranges, especially in BIC® 1 and BIC® 3 shavers. We maintained our solid positions.

Full-year 2016 Normalized IFO margin for Shavers was 14.9% compared to 18.5% in 2015. Excluding the impact of the special employee bonus, Normalized IFO margin for Shavers would have been 15.4%. This year-on-year decrease was due to increased investment in Research and Development and in brand support.

Fourth Quarter 2016

Fourth quarter 2016 Net Sales were up 7.8% (+6.6% on a constant currency basis), driven by the good performance in Europe and developing markets, notably in Latin America.
Q4 2016 Normalized IFO margin was 15.5%, compared to 16.5% in Q4 2015 due to a negative FX impact on Gross Profit margin and continued investment in research and development.

Full-year 2016 Net Sales of Other Consumer Products decreased by 9.8% (-9.0% on a constant currency basis). Fourth quarter 2016 Net Sales were down 3.1% (-3.2% on a constant currency basis).

BIC Sport registered a double-digit decline in its full-year Net Sales on a constant currency basis notably due to an increasingly competitive environment in the U.S.

Full-year 2016 Normalized IFO for Other Consumer Products was a negative 2.7 million euros (negative 2.5 million euros excluding the impact of the special employee bonus), compared to a negative 3.4 million euros in 2015. Q4 2016 Normalized IFO for Other Consumer Products was a negative 2.5 million euros, compared to a negative 3.8 million euros in Q4 2015.

BIC Graphic Full-year 2016 Net Sales decreased by 2.5% (-1.9% on a constant currency basis). Fourth quarter 2016 Net Sales were down 12.8% (-13.6% on a constant currency basis).

Customers continued to recognize the vast expertise of BIC Graphic in the fields of quality, safety compliance and trademarks. We continued to enhance our customer service and we benefited from our "Good value" positioning and new products launches.
             
Full-year 2016 Normalized IFO margin for BIC Graphic was 2.4% compared to 3.3% in 2015. Excluding the impact of the special employee bonus, Normalized IFO margin would have been 3.3%. Q4 2016 Normalized IFO margin for BIC Graphic was 8.2% compared to 11.3% in Q4 2015, due to timing impact in Calendars' sales.

Following the BIC Graphic strategic review initiated in February 2016 and after conducting a careful review of the business, the following decisions have been made:

• BIC Graphic Europe operations will report to the European BIC Consumer Product business. The European BIC Graphic team will focus on implementing a plan to develop a sustainable business model while developing innovative services and maintaining BIC Graphic's imprinting and decorating expertise. In Developing Markets, BIC Graphic operations that have a sustainable business model will report to the local consumer business.

• Strategic alternative discussions regarding BIC Graphic North America and the Asia Sourcing operations are still on-going. We expect to be able to communicate the outcome of these discussions in the coming weeks.

In 2017, the volatility of currencies and the unpredictable global environment will require increased levels of agility from our teams to ensure continued success. We plan to deliver mid-single digit organic growth in Net Sales. We will continue to launch new products and strengthen our distribution, with a focus on e-commerce in developed markets.

To enhance long-term growth, we plan another year of selected investments in R&D, CAPEX and Brand Support. The total impact of these investments on Normalized Income From Operations margin will be approximately -100 basis points compared to 2016, excluding major currency fluctuations.

Stationery
In 2017, our objective is to deliver organic sales growth and to gain market shares through:

• new product launches, resulting from increased R&D investment;
• our strong "champion brand" strategy buoyed by higher brand support investment;
• new emerging channels such as e-commerce, in developed countries;
• more qualified distribution channels in developing countries.

Lighters
We will continue to leverage our proven safety and quality classic and added-value products, to drive sales increases with new added-value sleeve designs in developed markets. In Developing countries, we will consolidate our footprint and enhance BIC® brand awareness.

Shavers
We will continue to enhance product performance and sell at an affordable price. We expect the U.S. market to continue to slowdown: in this context, we will step up promotional activities for our added-value products. We forecast continued growth in Latin America and Eastern Europe.

Thanks to increased R&D investment, our growth will be boosted by major new product launches, including:

• the BIC^® Hybrid 5 shaver, in North America, which offers the best of our technology (moveable blades, optimized pivot.) at a fair price;
• the BIC^® Soleil^® Sensitive shaver, in Latin America, a more advanced version of our BIC® Soleil® shaver.
• BIC Shave Club, a direct to consumer online-only subscription service with a refillable shaver will be tested in France in Spring 2017.

• Continue to create long-term value by outperforming our markets and achieving low to mid-single digit organic growth in sales, thanks to:
  • expanded distribution networks in all geographies;
  • increased focus on value-added segments in developed markets;
  • enlarged consumer base in developing markets.
     
• Grow Normalized Income From Operations through increased productivity as we invest in our people, in brand support and in Research and Development with a focus on quality and innovative new products.
   
• Maintain strong cash generation to:
  • continue to grow the business organically,
  • finance strategic bolt-on acquisitions,
  • sustain total Shareholders' remuneration.

As of December 31, 2016, the total number of issued shares of SOCIÉTÉ BIC was 47,552,202 shares, representing:

• 69,098,170 voting rights,
• 68,230,150 voting rights excluding shares without voting rights.

Total number of treasury shares held at the end of December 2016: 868,020.

• Constant currency basis: constant currency figures are calculated by translating the current year figures at prior year monthly average exchange rates.
• Comparative basis: at constant currencies and constant perimeter. Figures at constant perimeter exclude the impacts of acquisitions and/or disposals that occurred during the current year and/or during the previous year, until their anniversary date. All Net Sales category comments are made on a comparative basis.
• Normalized IFO: normalized means excluding non-recurring items as detailed on page 3.
• Normalized IFO margin: Normalized IFO as percentage of net sales.
• Net cash from operating activities: principal revenue-generating activities of the entity and other activities that are not investing or financing activities.
• Net cash position: Cash and cash equivalents + Other current financial assets - Current borrowings - Non-current borrowings.
• FY 2016 as published: Figures presented within the "as published" caption are taken directly from the consolidated financial statements as of and for the 12 month-periods ended December 31, 2015 and 2016 and present BIC Graphic NAM & Asian Sourcing as discontinued operations in accordance with IFRS.
• FY 2016 restated for discontinued operations: Figures presented within the "restated for discontinued operations" caption are based on the restatement of the discontinued activities classification and aim at presenting information that is consistent with the historical presentation.

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SOCIETE BIC consolidated and statutory financial statements as of December 31, 2016, were approved by the Board of Directors on February 10, 2017. The Group's Auditors have performed their audit procedures on the consolidated financial statements and the audit reports relating to the certification of the consolidated and statutory financial statements are in the process of being issued. A presentation related to this announcement is also available on the BIC website (www.bicworld.com).
This document contains forward-looking statements. Although BIC believes its estimates are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties. A description of the risks borne by BIC appears in the "Risk factors" section of BIC's 2015 Registration Document filed with the French financial markets authority (AMF) on March 23, 2016.

For more information, please consult the corporate website: www.bicworld.com

BIC is a world leader in stationery, lighters, shavers and promotional products. For more than 60 years, BIC has honored the tradition of providing high-quality, affordable products to consumers everywhere. Through this unwavering dedication, BIC has become one of the most recognized brands in the world. BIC products are sold in more than 160 countries around the world. In 2016, BIC recorded Net Sales of 2,025.8 million euros. The Company is listed on "Euronext Paris" and is part of the SBF120 and CAC Mid 60 indexes. BIC is also part of the following Socially Responsible Investment indexes:  CDP's Climate A List, CDP's Supplier Climate A List, CDP Supplier Engagement Leader Board, FTSE4Good indexes, Ethibel Sustainability Index (ESI) Excellence Europe, Euronext Vigeo - Eurozone 120, Euronext Vigeo - Europe 120, Stoxx Global ESG Leaders Index.

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