24 May 2017 07:00
24 May 2017
Exova Group plc
Trading Update
On track to deliver the Group's 2017 expectations
Exova Group plc ("Exova"), a leading international provider of technically demanding testing, certification and advisory services, today releases a Trading Update for the period since 31 December 2016 to date. Where stated, the financial results are for the period from 1 January to 30 April 2017 compared with the corresponding period in 2016.
Group performance for the four months to 30 April 2017
· Total revenue up +2.0% at actual rates; (6.2)% at constant currency
o (1.6)% organic growth at constant currency (+1.2% excluding Oil, Gas & Industrials)
o +3.7% growth from acquisitions, (4.6)% net of disposals
o Foreign exchange tailwind of 8.2% arising from our global footprint
· M&A pipeline continues to be strong and recent acquisitions performing well
Divisional performance in the period from 1 January 2017 to date
In Industries, we delivered strong organic revenue growth performance in Aerospace. In addition, we have also seen continued progress with other industrial clients where we delivered positive organic revenue growth. While Oil & Gas remains challenging overall with limited future visibility, our Western Canada operation delivered positive organic revenue growth in the period.
In Products, our Transportation business performed better than the Board expected despite contracting overall as a result of lower levels of engines testing. In Fire, Building Products & Certification we saw solid organic revenue growth and we cemented our position in the Australian fire testing and engineering market with the acquisition of Defire, a Sydney-based fire safety engineering consultancy business. Our Calibration business contracted due principally to lower volumes in Sweden.
In Infrastructure, Health & Environment, we saw solid organic revenue growth across Infrastructure & Environment, resulting from good growth in Europe and Singapore, partially offset by lower levels of activity in the Middle East. The phasing of projects in the Middle East poses some risk to short term performance in the sector although the overall pipeline of work in the region remains encouraging. In US Health Sciences, we strengthened our position in the market further with the acquisition of SL Pharma Labs Inc. in Delaware.
Outlook
As announced at the time of the preliminary results for the year ended 31 December 2016, the Board continues to expect modest organic revenue growth at constant currency in 2017 and recent cost actions will offset general pressure on group margins. The Company announced a recommended offer from Element Materials Technology Group Limited on 19 April 2017 with a shareholder vote to approve the offer expected to occur on 9 June 2017.
Ian El-Mokadem, Chief Executive Officer, commented:
"The Group has generally performed as expected in the first four months of 2017. We continue to generate organic growth outside of our Oil, Gas & Industrials sector, albeit to more modest levels than in 2016 as we expected. We continue to make good progress with acquisitions, with an encouraging pipeline which should continue to contribute to overall revenue growth."
Confirmation by the Exova Directors
On 28 February 2017, Exova announced its results for the year ended 31 December 2016. As part of that announcement the following statement (the "Statement") regarding the outlook for Exova was made:
"The Board expects modest organic revenue growth at constant currency in 2017. This will be driven by Exova's diversified exposure and good growth in most sectors, moderated by continuing pressure in oil & gas, and a lower point in the project cycle of our engines testing business. Organic growth is expected to be weighted towards the second-half, partly as a result of more favourable like-for-like comparisons. Our acquisitions programme should continue to contribute to overall revenue growth. We expect that recent actions we have taken to reduce cost will offset general pressure on group margins in the current financial year."
The Statement is again confirmed in the section titled "Outlook" of this Trading Update.
The Statement was originally published before commencement of the offer period triggered by the announcement by Exova on 26 March 2017 of discussions with possible offerors which could lead to an offer being made for the entire issued and to be issued share capital of Exova, and was repeated and confirmed in the announcement by Element and Exova of a recommended cash acquisition of Exova by Element on 19 April 2017 and the related scheme circular published on 12 May 2017. Accordingly, the requirements of Rule 28.1(c)(i) of the City Code apply in relation to the Statement.
The Exova Directors confirm that the Statement remains valid and confirm that the Statement has been properly compiled on the basis of the assumptions stated below and that the basis of accounting used is consistent with Exova's accounting policies.
Assumptions
The Statement was prepared on the basis of the following assumptions, any of which could turn out to be incorrect and therefore affect the validity of the Statement:
Factors within the influence and control of the Exova Directors
· There is no material change in the operational strategy of Exova from the date of this document.
· There will be no acquisitions or disposals beyond Exova's existing acquisition strategy which will have a material impact on Exova's results.
· There are no material strategic investments over and above those currently planned.
Factors outside the influence or control of the Exova Directors
· There will be no material macroeconomic change in the principal markets and regions in which Exova operates.
· There will be no material adverse events which will have a significant impact on Exova's financial results.
· There will be no changes in interest rates, bases of taxation, regulatory environment or legislation that have a material impact on Exova, including in relation to operations or accounting policies.
· There will be no material changes in customer demand or the competitive environment in which Exova operates.
· There will be no material changes in the competitive environment for acquisitions within the Testing, Inspection and Certification sector that will impact Exova's ability to continue with its existing acquisition strategy.
· There will be no business disruptions that materially affect Exova or its key customers.
· There will be no significant and sustained weakening or strengthening of the pound sterling against the currencies of the major territories in which Exova operates.
Contacts
Peter Ogden / Andy Jones - Powerscourt Group
Tel. Direct +44 (0)20 7549 0997 / +44 (0)7793 858 211
exova@powerscourt-group.com
Exova
Exova is one of the world's leading laboratory-based testing groups, trusted by organisations to test and advise on the safety, quality and performance of their products and operations. Headquartered in Edinburgh, UK, Exova operates 138 laboratories and offices in 33 countries and employs more than 4,200 people throughout Europe, the Americas, the Middle East, Asia/Asia Pacific and Africa.
Exova's capabilities help to extend asset life, bring predictability to applications, and shorten the time to market for customers' products, processes and materials. With over 90 years' experience, Exova specialises in testing across a number of key sectors ranging from Aerospace to Fire & Building Products; Oil & Gas and Industrials; Infrastructure & Environment; Transportation; and Health Sciences.
This Trading Update contains forward-looking statements that involve substantial risks and uncertainties and actual results and developments may differ materially from those expressed or implied by these statements by a variety of factors. These forward-looking statements speak only as at the date of this Trading Update. In addition, all projections, valuations and statistical analyses provided in this document may be based on unaudited pro-forma financial information, subjective assessments and assumptions. They may use alternative methodologies that produce different results and should not be relied upon as an accurate prediction of future performance.
Exova Group plc is registered in England (registration number 08907086). Its legal entity identifier ("LEI") number is 213800BFE317FGSYMZ19.