Europlasma : Half-year 2016 Results

Press releaseBordeaux, 26 October 2016

Commenting on the first-half results, C.E.O. Jean-Eric Petit declares:

"We are continuing to pursue Europlasma's growth path, in line with the roadmap presented to shareholders, with great determination and progress.

The consolidated results for this first-half are similar to last year's and show a contraction in net loss. Benefitting from the progress of CHO Power and Europlasma Industries, both meeting their technical and commercial objectives, overall results are however affected by an exceptional one-off situation at our Inertam subsidiary. Fortunately, the reactivity of our teams allowed us to restart very quickly this asbestos treatment activity, which will return to normative profitability in 2017, and benefit from a growth underpinned by the current pace of asbestos waste deliveries.

The cash situation remains tight, still marked as expected by significant cash outflow at the current stage of development of CHO Morcenx, securing Final Acceptance (FA) before year end is more than ever a priority."

Stable operating loss and EBITDA despite the revenue decrease. Net loss of €9 million, decreasing by €0.7 million.

Source: 2016 half-yearly consolidated financial statements closed by the Board of Directors on 26 October 2016, after limited review by the Statutory Auditors.

Activity and revenue

Revenue in the first half of 2016 amounted to €5,709 thousand, 17% lower than the first half of 2015. This decline is mainly attributable to the Asbestos Treatment (- €863 thousand) and Renewable Energies activities (- €557 thousand), with growth in the Plasma Solutions division (+€226 thousand) not managing to offset the under-performance of these other two branches.

Volumes treated fell accordingly by 23% over the period to 2,294 tonnes compared with 2,986 tonnes in the first half of 2015.

The reduction in terms of revenue, however, was less significant (-15% to €4,880 thousand) notably thanks to a more favourable product mix and the development of the transportation activity, which grew by 6% in value over the period.

Order intake continued to grow, with the order book up 7% over the period compared with the first half of 2015.

Revenue in the Renewable Energies activity (CHO Power) corresponds to revenue from the EPC contract recognised using the percentage of completion method. Since provisional additional expenses (€2,190 thousand) and the stage of completion were taken into account, insignificant revenue (€3 thousand) was recorded in the first-half of 2016, while income of €560 thousand had been booked in the first half of 2015.

Results and operating performance:

Despite the decline in consolidated revenues of 17%, net loss contracted by 7% compared with the first half of the previous year.

Group EBITDA stabilised at -€4,979 thousand compared with -€4,887 thousand at 30 June 2015.

The operating loss amounted to €8,571 thousand compared with €8,835 thousand at 30 June 2015, a €264 thousands improvement.

After taking into account negative net financial income of €423 thousand (including interest on the bond subscribed in December 2015 (OCPP) for €241 thousand), a tax expense of €26 thousand (against €1,160 thousand in H1 2015) and minority interests, the net loss stood at €9,024 thousand compared with €9,749 thousand at end-June 2015.

The performance by division revealed contrasting results, with a loss decrease in the Renewable Energies division partly offsetting the weaker performance from the other two sectors.

The Asbestos Treatment (Inertam) segment suffered the full consequences of the incident at the beginning of the half-year, with positive EBITDA of €802 thousand compared with €1,381 thousand in the first half of 2015, a drop of €579 thousand.

In addition to a fall in activity, profitability was impacted by an additional impairment of €327 thousand recorded on the goodwill of Inertam, and an increase in depreciation and provisions, which rose €496 thousand, including

€134 thousand to cover the additional costs related to the change and upgrading of operator protection following the Asbestos risks revealed in early July.

The operating loss amounted to €1,190 thousand compared with an operating profit of €249 thousand at 30 June 2015, a fall in income of €1,439 thousand.

The Plasma Solutions (Europlasma Industries) segment, which bears the full amount of the Group's corporate expenses, recorded negative EBITDA of €1,107 thousand at 30 June 2016, compared with negative EBITDA of

€747 thousand at 30 June 2015. This change reflects an increase in purchases consumed of €383 thousand and an increase in expenses of €114 thousand in connection with the strengthening of the Corporate structure in the course of 2015.

After taking into account depreciation and provisions of €625 thousand, down by €144 thousand compared with the first half of 2015, the operating loss stood at €1,816 thousand.

Excluding net Corporate expenses (amounting to €989 thousand), EBITDA from Plasma Solutions activity was negative in the amount of €118 thousand, and an operating loss of € 597 thousand was generated.

The Renewable Energies (CHO Power) segment, in which expenses are primarily related to operating, development and improvement costs at the CHO Morcenx plant, reduced its loss compared to H1 2015.

EBITDA amounted to a negative €4,671 thousand compared with negative €5,511 thousand at 30 June 2015, an improvement of €840 thousand. Operational loss at €5 579 thousand was down €1,892 thousand as compared to H1 2015 (-€7,471 thousand).

Expenses consumed over the period in respect of commissioning and improvements to the plant were reduced by €978 thousand and no penalties were imposed in the period, it being specified that these amounted to €281 thousand in the first half of 2015.

In addition, provisions and depreciation were declining by €1,098 thousand (mainly due to the accrual reversal by

€1,170 thousand on loss on completion).

These charges reductions have offset the reduction in revenues by €557 thousand as compared to H1 2015.

Financial structure

Cash of €4.2 million, down €2.7 million.

Financial liabilities of €15 million, up €2.4 million. Negative equity of €5.3 million.

Source: 2016 half-yearly consolidated financial statements closed by the Board of Directors on 26 October 2016, after limited review by the Statutory Auditors.

The balance sheet total stood at €41,314 thousand, versus €43,845 thousand at 31 December 2015, a decrease of

€2,531 thousand.

Within the balance sheet assets, cash of €4,224 thousand showed a net cash burn of €2,691 thousand over the period, mainly assigned to the needs of the Renewable Energies segment.

Within other assets, operating receivables increased by €2,049 thousand, related to, amongst others: an advance payments on the order of additional engines for CHO Morcenx amounting to €868 thousand and the establishment of the reserve and guarantee fund in the amount of €735 thousand under Inertam's factoring agreement,

Within the balance sheet liabilities, negative equity of €5,277 thousand was down €7,773 thousand compared with 31 December 2015, linked to the loss in the period of €9,024 thousand, partly offset by capital increases carried out as part of the equity line for an amount of €1,238 thousand including the issue premium.

Financial liabilities (current and non-current) of €14,974 thousand increased by €2,350 thousand as a result of the subscription of a new bridge loan in May 2016 for an amount of €1 million and the assignment of Inertam trade receivables to the factor corresponding to a recognised debt of €1,680 thousand. Loan repayments (SCI mortgage and loans and repayable advances from BPI) accounted for €639 thousand.

The Group's net debt stood at €10,750 thousand at 30 June 2016 compared with €5,709 thousand at 31 December 2015, a deterioration of €5,041 thousand linked to the reduction in cash (€2,691 thousand) and the increase in debts (€2,350 thousand).

Cash flow from operations of -€5,980 thousand deteriorated by €1,076 thousand compared with 30 June 2015.

The flow of investments and divestments of -€1,397 thousand corresponded mainly to the funds allocated to the repair of Inertam's furnace (€1,034 thousand). It should be noted that these flows had been positively impacted at 30 June 2015 by the repayment of the supplementary financial guarantee by CHO Morcenx in the amount of

€3,870 thousand.

It should also be noted that the Group's consumption of cash remains for the most part related to the finalisation of the process of delivery/acceptance of the CHO Morcenx plant.

To ensure the cash requirements for 2016 are met, the Group has implemented a plan combining action relating to the working capital requirements (WCR) and the setting up of equity financing. An Equity Line was initially subscribed in February and later cancelled and replaced by flexible bond financing in July 2016. Cash contributed by capital increases carried out as part of the Equity Line amounted to €1,238 thousand.

A bridge loan of €1,000 thousand was also taken out during the period.

This financing was accompanied by actions on the working capital requirements: a factoring solution was put in place in late February for Inertam's customers. The Group also came to agreements on the rescheduling of certain debts.

Corporate

To replace the equity line, on 21 July 2016 the Company agreed to issue bonds to Bracknor Fund Ltd, an investment fund managed by the management company Bracknor Capital Ltd. This flexible bond involved the issue of 1,500 bonds, convertible into shares with a nominal value of €10,000 each (the "OCA"). It consists of a first tranche of 200 OCA and 13 tranches of 100 OCA each, which will be accompanied by share subscription warrants (the "BSA") (the OCA and the BSA together forming the "OCABSA") for a total maximum nominal amount of the bond of €15 million.

The issue of the first tranche of 200 OCA (the "OCA Tranche 1") for Bracknor Fund represents a nominal bond amount of €2 million. It was carried out on 21 July without attached BSAs on the basis of the 10th resolution of the Combined General Meeting of 24 June 2015.

The issue of the next 13 tranches was approved by the shareholders at the Extraordinary General Meeting of 2 September 2016.

The second tranche of OCAs was issued on 2 September for a nominal amount of €1 million. Further tranches were issued on 28 September and 21 October for the same nominal amount.

At the date of publication of this press release, the conversion of the first tranches of convertible bonds had resulted in the creation of 12,195,444 new shares, representing a capital increase of €4.15 million including the issue premium, excluding fees.

On 20 September, the €1 million bridge loan that had been agreed in May 2016 by CHO Power was transferred via a novation agreement to Europlasma.

This loan of €1,014 thousand (including interest) was then converted into 2,430,807 shares on 20 September.