13.11.2013 07:30:00

Results for the 3rd quarter 2013 of Solocal Group

Regulatory News:

Solocal Group (Paris:LOCAL)

On the announcement of Solocal Group’s 3rd quarter of 2013 results, Jean-Pierre Remy, Chairman and CEO, said:

"The Group’s 3rd quarter results are in line with our expectations in a deteriorated environment. In this context, we have achieved important steps of our digital transformation program: very strong growth of +25%2 of our fixed and mobile Internet traffic towards professionals, enrichment of our offers, commercial agreement signed with Google and on-going verticalization of our sales approach. 2014 will see an acceleration of the transformation program and investments to enable the Group to return to growth in 2015. One of our priorities is both to sustain the very dynamic growth of our traffic and to better monetize and market our digital audiences, one of the challenges of Digital 2015."

The Board of Directors approved the Group’s consolidated financial statements as at 30 September 2013.

In millions of euros   9M 2013   9M 2012   Change  

Like-for-like
basis

Group revenues 749.4   799.9   -6.3% -5.6%
of which Internet 471.0   463.3   +1.7% +2.0%
as % of Group revenues 62.9%   57.9%      
Gross operating margin 328.8   361.8   -9.1% -8.3%
as % of Group revenues 43.9% 45.2%
 

I. Highlights of 3rd quarter 2013

Revenues decrease at the end of September in a deteriorated environment

  • Group revenues decrease of 5.6%3
  • Print revenues decrease of 15.9%3
  • Internet revenues growth of 2.0%3
  • …in an advertising market in France expected for 2013 at -2.5%4, 4% lower than in Q4 2012

Sustained acceleration of growth in audiences

  • Solocal Group: +9% of visits5 of which 29% mobile visits in Q3 2013
  • PagesJaunes.fr: +25% of traffic6 towards professionals in Q3 2013
  • Mobile: more than 28 million application downloads at the end of September 2013, up +44% in one year

Continuation of Digital 2015 transformation program

  • Significant investment: 50+ transformation projects in 2013 and 2014
  • Customers: verticalized organization in sales, marketing and operations
  • Performance-based clic offers (Google) and contacts : e-commerce, deals, transactional links
  • Reinforcing evidence of Return on Investment (ROI) delivered to customers: +330K companies enrolled in the business center
  • Strong development of Web-2-Store with Mappy and Leadformance

II. Trend in fixed and mobile Internet audiences

In millions of visits     9M 2013   9M 2012   Change
PagesJaunes 983.1 893.6 +10.0%
of which mobile 249.7 167.1 +49.4%
Mappy 241.2 236.1 +2.2%
of which mobile 85.2 53.6 +59.0%
Other (a)     143.9   135.0   +6.6%
Total excluding 123people     1,368.2   1,264.7   +8.2%
of which mobile 343.0 224.1 +53.0%
123people     173.9   331.0   -47.5%
Source : Solocal Group (a) on a like-for-like basis
 

Audiences on the Group’s websites (excluding 123people) grew by +8.2% in the first nine months of 2013 compared with 2012, thanks in particular to the strong growth of 53.0% in mobile Internet visits. At the end of September 2013, Solocal Group applications (primarily PagesJaunes and Mappy) had been downloaded more than 28 million times across all smartphones and tablets in France.

The Group’s websites continue to enjoy strong audiences in the 3rd quarter of 2013: 20 million unique visitors7 on the fixed Internet and 6 million unique visitors7 on the mobile Internet in September 2013 (respectively the 6th and 7th Group which websites are the most visited in France).

III. Financial Results

In millions of euros   9M 2013   9M 2012   Change
Group revenues 749.4   799.9   -6.3%
Internet 471.0   463.3   +1.7%
as % of Group revenues 62.9% 57.9%
Printed directories 262.2 316.2 -17.1%
as % of Group revenues 35.0% 39.5%
Other businesses 16.2 20.4 -20.6%
as % of Group revenues 2.2%   2.6%    
Gross operating margin 328.8   361.8   -9.1%
as % of Group revenues 43.9% 45.2%
Internet 202.5 206.2 -1.8%
as % of Internet revenues 43.0% 44.5%
Printed directories 121.4 147.7 -17.8%
as % of Printed directories revenues 46.3% 46.7%
Other businesses 4.9 7.9 -38.0%
as % of Other businesses revenues 30.2%   38.7%    
Operating income 282.6   322.8   -12.5%
Net financial income (101.0) (95.0) -6.3%
Share of profit or loss of an associate 0.3   (0.7)   na
Income before tax 181.9   227.2   -19.9%
Corporate income tax (75.3) (88.2) +14.6%
Corporate income tax rate 41.4%   38.7%    
Net income 106.6   139.0   -23.3%
 

In a still difficult context, the Group recorded consolidated revenues down 5.6% on a like-for-like basis8 over the first nine months of 2013 (down 6.3% on reported figures).

  • Internet business represents 63% of Group’s revenues and with low growth of +2.0% on a like-for-like basis8 (increase of 1.7% on reported figures) over the first nine months of 2013 impacted by the slowdown in display and search.
  • The decrease in Printed directories is in line with our expectations and stands at -15.9% on a like-for-like basis8(down 17.1% on reported figures) over the first nine months of 2013 thanks to an appropriate pricing policy.

The Group’s gross operating margin of 328.8 million euros over the first nine months of 2013 is down -8.3% on a like-for-like basis8 (down 9.1% on reported figures) compared to 2012: the drop in gross operating margin is affected by the revenues decrease and the disposal of Editus partially offset by cost discipline on Paper-Print-Distribution and personnel. The gross operating margin amounts to 43.9% as of 30 September 2013 compared to 45.2% as of 30 September 2012, penalised by the absence of non-recurring income9 and by the lower Internet margin following the slowdown in display and search.

The Group's operating income, down -12.5% over the first nine months of 2013 compared to 2012, reached 282.6 million euros. The decrease in operating income mainly results from the decline in gross operating margin and the increase in depreciation and amortisation in line with the increase in Internet investments.

The financial result represents a net expense of 101.0 million euros as of 30 September 2013 up 6.3% compared to 30 September 2012. The average cost of gross debt (including hedging instruments) stood at 6.88% as of 30 September 2013 compared to 5.75% (excluding RCF drawing) as of 30 September 2012. The increase of 113 basis points results from the new terms coming from the refinancing in autumn 2012.

The Group's net income stands at 106.6 million euros as of 30 September 2013, down -23.3% compared to 30 September 2012. The drop in net income is primarily related to operating income decline and to tax rate increase (partial deductibility of financial interests introduced at the end of 2012).

IV. Financial structure

Net debt10 amounts to 1,612.9 million euros as of 30 September 2013, down 128.8 million euros compared to 31 December 2012.

As of 30 September 2013, the Group had headroom of 6% on its financial leverage covenant which was 3.74X an aggregate close to gross operating margin and of 18% on its interest coverage ratio which was 3.55X the net interest expenses11.

The Group’s net cash flow decreased by -29.8% to 115.9 million euros at the end of September 2013 compared to 165.2 million euros at the end of September 2012, a decline primarily related to the drop in the gross operating margin over the period and a shift in the payment of interests for 2012 in 2013. As of 30 September 2013, the Group had a net cash of 104.7 million euros.

V. Acceleration of digital transformation

Solocal Group has launched "Digital 2015" in early 2013 to support the digital transformation of the Group.The program is articulated around four ambitions:

  • accelerate online growth,
  • enhance the effectiveness of its fixed and mobile media,
  • adopt the operational models of a digital and nimble business,
  • engage and support all teams in the transformation.

The first part of the Digital 2015 plan helped achieve a remarkable growth of the Internet fixed and mobile audiences, direct and indirect: +25% of traffic towards professionals on PagesJaunes in Q3 2013. The Group is determined to sustain this growth dynamic but also to better market and monetize the traffic of its digital audiences: it is the stake of the specialization of marketing and sales teams by business segment in 2014.

To return to growth, Solocal Group accelerates its digital transformation and moves forward with Digital 2015, a program representing an investment of approximately 170 million € over 3 years.

Digital 2015 should lead to a return to positive growth as early as 2014 in sales orders (‘édition 2015’).

The Group will detail its Digital 2015 program in the presentation of its results for the 3rd quarter of 2013.

VI. Outlook

The Group slightly lowers its 2013 objectives:

  • Revenues of around € 1 billion
  • Gross operating margin of about € 420 million

And confirms the priority given to deleveraging.

2014 will be a year of deep changes with an acceleration of the digital transformation and investments, especially in sales.

In this context and in light of an uncertain economic environment, the expected outlook for 2014 is:

  • Revenues decrease between -3 and -6%
  • Normalized12 gross operating margin expected between €355 millions and €375 millions.

Digital 2015 investments will enable Solocal to return to growth in 2015 and generate about 75% of its revenues on Internet.

About Solocal Group

Solocal Group, the leader in local communication, became the new name of PagesJaunes Groupe on 5 June 2013. The Group offers online content, advertising solutions and transactional services that connect consumers and clients locally. It brings together around 5,000 people, including more than 2,300 advisors in local communication in France and Spain to support the digital development of companies (SMEs and micro businesses, tier 1 brand accounts, etc.), 18 strong and complementary brands (PagesJaunes, Mappy, 123people, 123deal, A vendre A louer, Embauche.com, Keltravo, Chronoresto, ZoomOn, Solocal Network, ComprendreChoisir, ClicRDV, PJMS, Horyzon Media, Leadformance, QDQ, Editus and Solocal Group) and nearly 700,000 clients. In 2012, Solocal Group generated €1.07 billion in revenues, of which 58.4% via the Internet, and thus ranks among the key European players in terms of online advertising revenues. Solocal Group is listed on NYSE Euronext Paris (LOCAL). Information on Solocal Group is available at www.solocalgroup.com.

This document contains forward-looking statements. Although Solocal Group believes its expectations are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties. Important factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements include, among other things: the effects of competition, usage levels, the success of investments by the Solocal Group in France and abroad, and the effects of the economic situation. A description of the risks borne by the Solocal Group appears in section 4 "Risk Factors” of the Solocal Group’s "Document de Référence” filed with the French financial markets authority (AMF) on 29 April 2013. The forward-looking statements contained in this document apply only from the date of this document, and Solocal Group does not undertake to update any of these statements to take account of events or circumstances arising after the date of said document or to take account of the occurrence of unexpected events. All accounting data are presented in non-audited consolidated form.

1 Excluding Editus and Chronoresto
2 Internet fixed and mobile, PagesJaunes.fr Audiences excluding PagesBlanches, internal source
3 On a like-for-like basis (excluding Editus and Chronoresto)
4 French advertising market estimated in 2013 by Warc at -3.2% (in Oct. 2013 compared to +1.3% estimated in Nov. 2012) and by ZenithOptimedia at -2.5% (in Sept. 2013 compared to +1.4% estimated in Oct. 2012) and more than 10,000 company failures forecast for 2013 compared to 2012 according to an Altares study on 15/10/2013
5 compared to Q3 2012, excluding 123people, internal source
6 Fixed and mobile Internet, PagesJaunes.fr Audiences excluding PagesBlanches, internal source
7 Source: Médiamétrie NetRatings – September 2013
8 Excluding Editus and Chronoresto
9 Including investment tax credit from 2008 and 2009 recorded in 2012
10 Net debt corresponds to the total gross financial debt plus or minus the fair value of derivative asset and/or liability hedging instruments and minus cash and cash equivalents.
11 Excluding the change in the fair value of hedging instruments, amortisation of loan issue expenses and accretion income.
12 Gross Operating Margin normalized for non-cash impacts of changes to sales contracts

Appendix 1: Quarterly trend in fixed and mobile Internet audiences

In millions of visits     Q3 2013   Q3 2012   Change
PagesJaunes 325.2 285.4 +13.9%
of which mobile 92.2 64.6 +42.9%
Mappy 83.1 84.9 -2.2%
of which mobile 34.9 24.2 +44.2%
Other (a)     46.0   44.7   +2.7%
Total excluding 123people     454.2   415.0   +9.4%
of which mobile 130.8 90.1 +45.1%
123people     18.2   102.7   -82.3%

Source : Solocal Group

(a) on a like-for-like basis

 

Appendix 2: Quarterly revenues and gross operating margin

In millions of euros   Q3 2013   Q3 2012   Change
Group revenues 249.1   274.9   -9.4%
Internet 154.9   154.8   +0.1%
as % of Group revenues 62.2% 56.3%
Printed directories 88.7 113.8 -22.1%
as % of Group revenues 35.6% 41.4%
Other businesses 5.5 6.3 -12.7%
as % of Group revenues 2.2%   2.3%    
Gross operating margin 113.3   129.6   -12.6%
as % of Group revenues 45.5% 47.2%
Internet 69.8 72.1 -3.2%
as % of Internet revenues 45.1% 46.6%
Printed directories 41.6 54.2 -23.2%
as % of Printed directories revenues 46.9% 47.6%
Other businesses 1.9 3.4 na
as % of Other businesses revenues 34.5% 53.2%
 

Appendix 3: Quarterly consolidated income statement

In millions of euros   Q3 2013   Q3 2012   Change
Revenues   249.1   274.9   -9.4%
Net external expenses   (52.6)   (55.1)   +4.5%
Salaries and charges   (83.2)   (90.2)   +7.8%
Gross operating margin 113.3 129.6 -12.6%
as % of revenues   45.5%   47.2%    
Legal employee profit-sharing (3.5) (4.8) +27.1%
Share-based payment

(0.5)

(0.2)

na

Depreciation and amortisation (10.0) (9.5) -5.3%
Other income and expenses   (1.6)   0.0   na
Operating income 97.7 115.1 -15.2%
as % of revenues   39.2%   41.9%    
Net financial income   (34.2)   (29.9)   -14.4%
Share of profit or loss of an associate   0.4   (0.3)   na
Income before tax   63.9   84.9   -24.7%
Corporate income tax (27.9) (33.0) +15.5%
Corporate income tax rate   43.9%   38.8%    
Net income   36.0   51.9   -30.6%
 

Appendix 4: Consolidated income statement over the first nine months

In millions of euros   9M 2013   9M 2012   Change
Revenues   749.4   799.9   -6.3%
Net external expenses   (155.5)   (164.1)   +5.2%
Salaries and charges   (265.2)   (274.1)   +3.2%
Gross operating margin 328.8 361.8 -9.1%
as % of revenues   43.9%   45.2%    
Legal employee profit-sharing (10.6) (11.6) +8.6%
Share-based payment (1.8) (0.7) na
Depreciation and amortisation (30.0) (26.5) -13.2%
Other income and expenses   (3.8)   (0.2)   na
Operating income 282.6 322.8 -12.5%
as % of revenues   37.7%   40.4%    
Net financial income   (101.0)   (95.0)   -6.3%
Share of profit or loss of an associate   0.3   (0.7)   na
Income before tax   181.9   227.2   -19.9%
Corporate income tax (75.3) (88.2) +14.6%
Corporate income tax rate   41.4%   38.7%    
Net income   106.6   139.0   -23.3%
 

Appendix 5: Quarterly consolidated cash flow statement

In millions of euros   Q3 2013   Q3 2012   Change
Gross operating margin   113.3   129.6   -12.6%
Legal employee profit-sharing (3.5) (4.8) +27.1%
Non monetary items included in GOM 2.4 (3.4) na
Net change in working capital (29.9) (28.4) -5.3%
Acquisition of tangible and intangible fixed assets   (14.0)   (9.2)   -52.2%
Operational cash flow 68.2 83.7 -18.5%
as % of GOM 60.2% 64.6%
Cash financial income (22.5) (20.4) -10.3%
Other income and expenses (1.6) - na
Corporate income tax paid   (23.1)   (27.4)   +15.7%
Net cash flow 20.9 36.0 -41.9%
Increase (decrease) in borrowings and bank overdrafts (20.5) (0.1) na
Other   (1.6)   0.1   na
Net cash variation (1.2) 35.9 na
Net cash and cash equivalents at beginning of period   105.9   485.2   na
Net cash and cash equivalents at end of period 104.7 521.1 na
 

Appendix 6: Consolidated cash flow statement over the first nine months

In millions of euros   9M 2013   9M 2012   Change
Gross operating margin   328.8   361.8   -9.1%
Legal employee profit-sharing (10.6) (11.6) +8.6%
Non monetary items included in GOM 6.1 (1.6) na
Net change in working capital (4.5) 1.0 na
Acquisition of tangible and intangible fixed assets   (35.6)   (29.2)   -21.9%
Operational cash flow 284.2 320.4 -11.3%
as % of GOM 86.5% 88.6%
Cash financial income* (93.3) (79.0) -18.1%
Other income and expenses (3.7) (0.0) na
Corporate income tax paid   (71.4)   (76.2)   +6.3%
Net cash flow 115.9 165.2 -29.8%
Increase (decrease) in borrowings and bank overdrafts (99.4) 279.7 na
Other   (3.7)   (2.0)   na
Net cash variation 12.8 443.0 na
Net cash and cash equivalents at beginning of period   91.9   78.1   +17.7%
Net cash and cash equivalents at end of period   104.7   521.1   na
* a shift of €10 M of 2012 interest disbursed in Q2 2013
 

Appendix 7: Consolidated balance sheet

In millions of euros   30 Sept. 2013   31 Dec 2012   30 Sept. 2012
ASSETS            
Total non-current assets 215.3 212.3 221.6
Net goodwill 83.9 82.3 93.9
Other net intangible fixed assets 76.7 69.4 70.3
Net tangible fixed assets 23.6 25.5 26.3
Other non-current assets of which deferred tax assets   31.1   35.1   31.2
Total current assets 526.9 653.9 992.1
Net trade accounts receivable 290.9 429.9 324.3
Acquisition costs of contracts 64.9 68.9 0.0
Prepaid expenses 11.9 5.6 101.2
Cash and cash equivalents 112.0 111.5 524.0
Other current assets   47.2   38.0   42.6
TOTAL ASSETS   742.2   866.2   1,213.7
LIABILITIES
Total equity   (1,882.3)   (2,006.8)   (1,984.3)
Total non-current liabilities 1,677.5 1,777.2 2,057.4
Non-current financial liabilities and derivatives 1,579.2 1,686.6 1,992.2
Employee benefits (non-current) 90.8 83.3 57.6
Other non-current liabilities   7.6   7.3   7.6
Total current liabilities 947.0 1,095.7 1,140.6
Bank overdrafts and other short-term borrowings 130.9 149.9 287.6
Deferred income 529.7 632.1 571.0
Employee benefits (current) 112.8 124.4 101.4
Trade accounts payable 73.3 78.3 79.0
Other current liabilities   100.3   111.0   101.7
TOTAL LIABILITIES   742.2   866.2   1,213.7
 

Appendix 8: Consolidated net debt

In millions of euros   30 Sept. 2013   31 Dec 2012   30 Sept. 2012
 
Cash and cash equivalents   112.0   111.5   524.0
Gross Cash position   112.0   111.5   524.0
Bank overdrafts   (7.3)   (19.6)   (3.0)
Net Cash position   104.7   91.9   521.1
Bank borrowings (1,347.1) (1,368.2) (1,600.1)
Bond borrowings -Senior secured notes (350.0) (350.0) (350.0)
Revolving credit line drawn* - (75.8) (281.4)
Loan issuance expenses 28.5 37.6 27.8
Capital leases (0.1) (0.1) (0.1)
Fair value of hedging instruments (27.5) (54.6) (62.7)
Accrued interest not yet due (14.9) (16.7) (14.4)
Other financial liabilities   (6.5)   (5.7)   (10.3)
Gross financial debt   (1,717.6)   (1,833.6)   (2,291.2)
of which current (138.4) (147.0) (299.0)
of which non-current   (1,579.2)   (1,686.6)   (1,992.2)
Net debt   (1,612.9)   (1,741.7)   (1,770.1)
             
Net cash (debt) excluding fair value of financial instruments and loan issuance expenses   (1,613.9)   (1,724.7)   (1,735.3)
*At 09/30/2013, €93,0 M available under the undrawn revolving credit line (€20 M available at 12/31/2012)
 

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