Pargesa : 2015 results

communiqué (F)

PRESS RELEASE NO. 3/2016

Geneva, 18 March 2016

• 2015 results:

  
  

  • Economic operating income stood at CHF 308.4 million, compared with CHF 339.5 million in 2014. This figure includes the non-cash impact of the derivative financial instruments embedded in the exchangeable and convertible bonds issued by GBL being marked to market, for a net amount of CHF +55.8 million (CHF −6.3 million in 2014). Excluding that impact, economic operating income was CHF 252.6 million, compared with CHF 345.8 million in 2014. This decrease primarily reflects: the absence of Lafarge's contribution in H2 2015 following the deconsolidation of that holding; the smaller contribution from private-equity and other funds; and the weakening of the euro against the Swiss franc in 2015 (operating income comes mainly from GBL's contribution, which is denominated in euros).
  • Net profit came in at CHF 638.2 million, compared with CHF 636.9 million in 2014, and included non- recurring income of CHF 329.8 million (CHF 297.4 million in 2014) consisting primarily of:
    • Pargesa's share of the non-recurring items recorded by companies accounted for using the equity method, including CHF −81.7 million from Imerys, mainly reflecting impairments within the Oilfield Solutions division, and CHF −68.3 million from Lafarge (accounted for using the equity method until 30 June 2015);
    • The partial reversal of the impairment previously recorded by GBL on its holding in Lafarge, together with the impact of the deconsolidation of that holding in July 2015, representing a net amount of CHF 243.7 million for Pargesa; Pargesa's CHF 225.2 million share of the gain resulting from GBL's disposal of 0.5% of Total's share capital (CHF 274.7 million in 2014 from the disposal of 0.6% of Total's share capital); and Pargesa's CHF 14.3 million share (CHF 74.7 million in 2014) of the net gain resulting from the delivery of Suez (formerly Suez Environnement) shares following the redemption (early and at maturity) of bonds exchangeable for Suez shares issued by GBL in 2012.
  • In 2015, the average EUR/CHF exchange rate was 1.07, compared with 1.21 in 2014, a decline of 12%.

• Dividend proposal: CHF 2.38 per bearer share, representing an increase of 4.8% on the year-earlier dividend.

The Board of Directors of Pargesa Holding SA, chaired by Paul Desmarais Jr, approved the accounts for the 2015 financial year. They will be submitted to the Annual General Meeting to be held on 3 May 2016 in Geneva.

The organisation chart below shows the Group's structure at 31 December 2015, which was composed of six main shareholdings.

Pargesa

50.0% (1)

GBL

53.9%

9.4%

2.4%

2.3%

7.5%

15.0%

Imerys

LafargeHolcim

Total

Engie

Pernod Ricard

SGS

Shareholdings are expressed as a % of capital

(1) 52.0% of voting rights, taking into account the suspended voting rights relating to treasury stock

1. Highlights of 2015 and early 2016

   
   

   • The Group's portfolio

     
     

     During H1 2015, the Boards of Directors of Holcim and Lafarge announced that they had reached an agreement on revised terms for the merger of equals between the two groups, first announced in 2014. The parties agreed on a new exchange ratio of 9 Holcim shares for 10 Lafarge shares. Lafarge and Holcim also agreed that the new group would announce a post-closing scrip dividend of 1 new LafargeHolcim share for every 20 existing shares.

     
     

     On 1 June 2015, Holcim launched its public exchange offer for all Lafarge shares, which closed on 3 July 2015 with 87.46% of Lafarge shares having been tendered to the offer. At the end of the reopening period on

     28 July 2015, the results of which were disclosed on 31 July 2015, Holcim held 96.4% of the capital, representing more than 95% of Lafarge's voting rights. A squeeze-out was therefore launched and successfully completed on 23 October 2015. As announced, in September 2015 LafargeHolcim distributed a scrip dividend at a ratio of one new LafargeHolcim share for every 20 existing shares, which had no impact on the income statement. At 31 December 2015, GBL held 9.4% of the capital of LafargeHolcim, the shares of which are listed on the SIX Swiss Exchange and Euronext Paris. GBL's holding in Lafarge, which was previously accounted for using the equity method, was reclassified under assets held for sale at 30 June 2015 and then as an available-for-sale financial asset as of 10 July 2015, the date on which the Lafarge shares were exchanged for LafargeHolcim shares. This generated a net accounting gain of EUR 442 million for GBL, with Pargesa's share amounting to CHF 243.7 million.

     
     

     In 2015, GBL sold 12.1 million Total shares, or 0.5% of Total's capital, for proceeds of EUR 556 million, generating a capital gain of EUR 282 million for GBL. Most of these shares were sold through forward contracts that expired in December 2015. These disposals generated a capital gain of CHF 225.2 million for Pargesa. At 31 December 2015, GBL held 2.4% of the capital of Total, which was still the Group's third largest holding at year-end. In February 2016, GBL sold a further 26.2 million Total shares, representing approximately 1% of the company's capital, both in the market and through a private placement by way of an accelerated bookbuilding process to institutional investors. These transactions represented a total amount of EUR 1 billion and generated a capital gain for GBL of approximately EUR 405 million, which will be booked in 2016. Following these transactions, GBL held 1.4% of Total's capital.

     
     

     Imerys' acquisition of Greek group S&B was completed on 26 February 2015. As the acquisition was partially paid in Imerys shares, the Kyriacopoulos family, the founding shareholder of S&B, now holds approximately 4.7% of Imerys' capital. GBL's holding was therefore slightly diluted, from 56.5% at end-2014 to 53.9% at 31 December 2015.

     
     

     In 2015, GBL received additional requests for the early conversion of bonds exchangeable for Suez (formerly Suez Environnement) shares, which matured in September 2015. In total, GBL delivered 5.1 million Suez shares, representing EUR 59 million in bond par value. As previously announced, the convers ions cancelled the debt and resulted in a reversal in the value adjustments previously recorded on the derivatives implicitly embedded in the bonds, as well as a gain on the Suez shares delivered. At 31 December 2015, GBL no longer held any shares in this company.

     
     

     As part of the expansion of its incubator-type investments, GBL continued to increase its stake in Umicore and held 16.6% of that company's capital at 31 December 2015 (12.4% at end-December 2014), worth EUR 720 million. GBL is now Umicore's largest shareholder.

     
     

     In July 2015, GBL announced that it had crossed the statutory threshold of 3% in the capital of adidas, a world leader in the design and distribution of sportswear. GBL held 4.7% of adidas' capital, worth EUR 890 million, at 31 December 2015. In January 2016, GBL informed the company that it had passed the statutory threshold of 5% of adidas' capital.

     
     

     Finally, in 2015 GBL acquired a stake in the capital of the listed Belgian company Ontex, a leading provider of disposable hygiene products. GBL also acquired some of the new Ontex shares issued in November 2015, in order to maintain its holding at the same level. GBL held 7.6% of Ontex' capital, worth EUR 181 million, at 31 December 2015. On 16 March 2016, GBL informed Ontex that it had passed the statutory threshold of 10% of the company's capital.

     
     

     Within GBL's Financial Pillar (Sienna Capital), Ergon Capital Partners III (ECP III) acquired in May 2015 a majority interest in Golden Goose, an Italian designer of contemporary shoes, clothes and accessories. In Q1 2015, Ergon Capital Partners II (ECP II) disposed of its majority holding in Joris Ide, a leader in insulating panels and steel envelope products. This transaction generated a net consolidated gain of EUR 14 million for GBL, with Pargesa's share amounting to CHF 8 million. Sagard III also made new investments in 2015 - in Safic-Alcan, Délices des 7 Vallées and Alvest. In July 2015 the Sagard II fund, in which both GBL and Pargesa are investors, disposed of its stake in Cérélia, generating an overall capital gain of CHF 12.4 million for Pargesa. Finally, the Sagard III fund sold its interest in the Santiane Group in September 2015, generating a capital gain of CHF 3.7 million for Pargesa.

     
     

     In February 2015, Sienna Capital announced that it was investing EUR 150 million in PrimeStone, a new fund whose strategy consists of making medium- to long-term investments in medium-sized listed companies in Europe.

     
     

     In December 2015, Sienna Capital committed to investing EUR 113 million in BDT Capital Partners II, a private-equity fund that currently manages approximately USD 8 billion in commitments. The fund's aim is to meet the long-term financial and strategic needs of family-owned and entrepreneurial businesses in the USA and Europe.

     
     

     At 31 December 2015, debt fund Kartesia had made capital calls of EUR 386 million (representing approximately 76% of the fund's commitments) invested in primary and secondary financing transactions.

     
     

     In Q1 2016, ECP III acquired a majority stake in Financière Looping SAS, a European theme-park operator.

     
     

     At 31 December 2015, GBL's commitments under its Financial Pillar amounted to EUR 413 million (EUR 520 million at 31 December 2014).

     
     

     At the end of March 2015, Pargesa Holding SA issued a CHF 150 million Swiss domestic bond in order to increase its financial resources and fund the refinancing of its 2.5% bond of CHF 150 million maturing in November 2016. The nine-year bond pays an annual coupon of 0.875% and is redeemable on 24 April 2024. The transaction took place under favourable market conditions and significantly increased Pargesa's average debt maturity.

     
     

   • Company organisation

Following the Annual General Meeting on 5 May 2015, Gérald Frère, Vice Chairman of the Board of Directors since 2002 and a member of the Board since 1992, replaced Albert Frère as Executive Director. On 2 February 2015 Albert Frère, Vice Chairman of the Board of Directors and Executive Director, and a Board member since 1981, had informed the Board of Directors that he would not seek another term as Director at the Annual General Meeting on 5 May 2015.

It was with great sadness that all those at the Company learned of the death of Andrew Allender, Deputy Managing Director, Financial Director and Secretary to the Board of Directors of Pargesa Holding SA, who passed away on 2 November 2015 at the age of 51. He had joined the company in 1989. The Board of Directors and the entire Pargesa Holding SA team would like to express their sincerest condolences to Andrew Allender's family.

Marc-Henri Chaudet, a member of the Board of Directors since 1996 and Chairman of the Audit Committee since it was created in 1997, informed the Chairman of the Board of Directors that, owing to his age, he would not seek another term as Director at the Annual General Meeting on 3 May 2016. The Board of Directors would like to thank Mr Chaudet for his loyalty and invaluable contribution over the last 20 years.

At the Annual General Meeting on 3 May 2016, the Board of Directors will submit a proposal to elect Jean-Luc Herbez as Director for a one-year term that will expire at the end of the 2017 Annual General Meeting.