ROTHSCHILD & CO Release Paris, 25 June 2014
Annual results
2013/2014
STABLE RECURRING OPERATING INCOME Overall revenue in 2013/2014 was €1,108 million compared to €1,147 million in 2012/2013
- Global Financial Advisory revenues were down 7% compared to the prior year. Financing
Advisory revenue up 13% and M&A revenue down 15% in line with the market
- Wealth and Asset Management revenues increased by 9% mainly due to an increase in performance fees in Asset Management. Thanks to positive markets and a net inflow, assets under management rose by 10% to €42.3 billion
- Merchant Banking revenues increased by 7%. The business is currently expanding its offer with two new debt funds (Five Arrows Credit Solutions and Oberon). Assets under management increased to €3.2 billion
Operating income fell to €129 million compared to €157 million in 2012/2013 mainly due to significant net exceptional charges (€31 million). Excluding these net exceptional charges, operating income was stable at €160 million versus €163 million in the prior year
Net income - Group share for 2013/2014 was €8 million compared to €42 million in 2012/2013.
Without the net exceptional charges, net income - Group share for 2013/2014 was €51 million compared to €64 million in 2012/2013 (see Appendix 2)
"Despite challenging conditions, our operating performance held up in most of the Group's businesses in 2013/2014, thanks to resilient revenues and ongoing cost-saving initiatives. However profits have been impacted by exceptional charges. We remain confident in our ability to benefit from an improvement in market conditions, particularly in the M&A market, and to deliver sustainable
performance." stated Nigel Higgins and Olivier Pécoux, co-Chief Executive Officers of the Group.
1
Summary Income Statement2012/2013 (in €m) Page as restated (1) | 2013/2014 | Var Var % |
Revenues 2 - 6 1,147 Staff costs 7 (709) Administrative expenses 7 (214) Depreciation and amortisation (36) Impairments 7 (31) | 1,108 (699) (251) (36) 7 | (39) (3)% 10 1% (37) (17)% - - 38 121% |
Operating Income 157 | 129 | (28) (17)% |
Other income / expense (net) 11 Impairment of Edmond de Rothschild (Suisse) 7 (46) Profit before tax 122 Income tax 7 (38) Consolidated net income 84 Non-controlling interests 7 (42) | 5 (27) 107 (43) 64 (56) | (6) (55)% 19 (41)% (15) (12)% (5) (13)% (20) (22)% (14) (33)% |
Net income - Group share 42 8 (34) (73)% | ||
Earnings per share 0.68 € | 0.11€ |
(1) The comparative consolidated income statement has been restated to reflect the introduction of IAS 19
Employee Benefits (revised). More details are provided in Appendix 3 on page 11.
The Supervisory Board of Paris Orléans SCA met on 25 June 2014 to review the consolidated financial statements for the year to 31 March 2014; these accounts had been previously approved by PO Gestion SAS, Managing Partner of Paris Orléans.
Business TrendsWe have two main activities within our Group: Global Financial Advisory, which focuses on providing advice in the areas of M&A, debt, restructuring and equity; and Asset Management in a broad sense which comprises Wealth & Asset Management and Merchant Banking. In addition, we have a Specialist Finance business which predominantly relates to the legacy banking business.
2
Global Financial Advisory
For the year to March 2014, Global Financial Advisory revenue was €688.7 million, 7% down compared to last year.
M&A revenue was down 15% year on year across most regions (€442.5 million for 2013/2014), reflecting lower M&A completions for the Group during the second half of the year compared to the second half of 2012/2013 (which was our record period for M&A revenue post the financial crisis). By way of comparison, for the year to March 2014, the number of completed M&A transactions globally
was down 14%1 compared to the prior year.
Financing Advisory revenue was up 13% year on year (€246.2 million for 2013/2014), supported by our leading position in providing independent, strategic capital advice to companies, governments and financial sponsors.
We continue to be positioned among the top financial advisers in the world, ranking 5th globally and
1st in Europe by number of completed M&A transactions1; 5th globally and 2nd in Europe by number of restructuring transactions2. We are one of the leading global independent debt advisers and we undertake more European equity advisory assignments than any other independent advisory firm3, a
position that allowed us to benefit from the significant upturn in European equity capital markets activity during the year.
Among the largest publicly announced M&A and Financing Advisory transactions completed during the financial year on which Rothschild advised, were the following:
AMR corporation, parent of American Airlines, on its Chapter 11 restructuring and merger with US Airways (US$34.0 billion)
Sprint Nextel, the 3rd largest wireless operator in the U.S, on its disposal of a 78% stake to
SoftBank (US$21.6 billion)
BPCE and Natixis, respectively the 2nd largest banking group in France and its corporate, investment and financial services arm, on the sale of Natixis' 20% stake in Banque Populaire and the Caisses d'Epargne (€12.1 billion)
A consortium of Marubeni, POSCO and China Steel on the project financing of the Roy Hill Iron
Ore Project (US$7.2 billion)
Severn Trent, the FTSE 100 company which provides and treats water and waste water in the UK
and internationally, in relation to the unsolicited offer from the Long River Partners consortium
Almeida Junior, the largest regional shopping mall operator in Brazil, on the acquisition of
Westfield's 50% stake in Westfield Almeida Junior
Central Bank of Cyprus on the restructuring and recapitalisation of the country's banking system
Government of Kazakhstan on the take private of Eurasian Natural Resources Corporation PLC (US$4.7 billion)
VINCI Concessions, a subsidiary of the French listed construction company VINCI Group, on its acquisition of a 95% stake in ANA Aeroportos de Portugal (€3.1 billion)
Koninklijke KPN, the incumbent telecoms operator in The Netherlands, on its rights issue (€3.0 billion)
Open Grid Europe, Germany's leading natural gas transmission company, on its refinancing (€2.7 billion)
Promotora de Informaciones SA, the listed Spanish media company, on the restructuring of its existing debt and raising of a new money facility (€3.3 billion combined)
1 Source: Thomson Reuters. Completed transactions.
2 Source: Thomson Reuters. Completed transactions in the year to March 2014
3 Source: Dealogic. Completed transactions >$50m in the year to March 2014
3
Arcapita, the investment banking service provider to individuals and institutions in Bahrain and internationally, on its Chapter 11 filing (US$2.7 billion)
The Izmirlian family on the dual-track sale and refinancing of More London, comprised of 10 prime office buildings on London's South Bank, which concluded in the sale of the estate to St Martins Property Group (£1.7 billion)
Salini, the Italian construction company, in relation to its merger with Impreglio (€1.7 billion)
AO.com, the UK online retailer, on its flotation on the London Stock Exchange (£1.2 billion)
Vestas Wind Systems, the Copenhagen-listed, market-leading manufacturer of wind turbines, on its capital structure refinancing through a new debt facility and equity placing (€1.3 billion)
Electra Partners, the UK based independent private equity fund manager, on the disposal of Allflex to BC Partners (US$1.3 billion)
Revenues by product over 5 years (in € million)
740 774 711 741
33%
689
45%
31% 29%
36%
55%
67% 69% 71% 64%
2009/10 2010/11 2011/12 2012/13 2013/14
M&A Financing Advisory
We continue to advise on more European M&A transactions than any of our competitors, as well as working on some of the largest and most complex transactions announced globally. For example, Rothschild is currently acting as financial advisor to:
Lafarge in its merger with Holcim to create LafargeHolcim, a global leader in building materials
(€60 billion)
Westfield, owner of one of the world's largest shopping centre portfolios, on the separation of its international business (US$18 billion) and simultaneous merger of its Australian/NZ business with Westfield Retail Trust (A$29 billion)
Alstom, a global leader in power generation, power transmission and rail infrastructure, listed in Paris, on the acquisition of its Energy activities by General Electric (€12.4 billion) and its investment to create an Energy and Transport Alliance with General Electric (€3.1 billion)
Nestlé, the world leader in nutrition, health and well-being, on the disposal to L'Oréal of an 8.0%
stake in L'Oréal in exchange for 50% stake of Galderma and €3.4 billion in cash (€6 billion)
PSA Peugeot Citroën, the global car manufacturer, on its capital increase and renewal of its revolving credit facility (€5.7 billion), as well as the strengthening of its industrial and commercial partnership with Dongfeng Motor Corporation, China's second largest carmaker
Rumo Logística, the Brazilian logistics services company, on its merger with America Latina
Logística (US$4.7 billion)
The Independent Directors of Olam, the Singapore listed agri-business, on the cash offer for securities from Temasek (US$4.2 billion)
Rolls-Royce, the world-leading provider of power systems and services for use on land, at sea and in the air, on the acquisition of the 50 per cent it did not already own in RRPS (previously Tognum), a joint venture with Daimler (€2.4 billion)
4
Wealth & Asset Management
Assets under management have increased by 10% to €42.3 billion as at 31 March 2014 (€38.4 billion as at 31 March 2013) due to market appreciation of €3.2 billion and net inflows of €0.7 billion. The net new assets were driven by inflows in Wealth Management (€1.0 billion), partially offset by outflows in Asset Management (€0.3 billion), mainly in the US.
During the year ended 31 March 2014, Wealth and Asset Management generated revenue of
€307.0 million, 9% better than the last year (€281.1 million). Revenue growth was mostly driven by the increase in assets under management and an excellent level of performance fees in the Asset Management business, reflecting the fact that Rothschild funds have out-performed their benchmark in the calendar year 2013.
Our European onshore Wealth Management businesses are growing in terms of assets under management and revenues, especially in Brussels, Frankfurt, Geneva, London and Paris. Strategic investments have been made with the hire of an onshore Italian team, a Swiss International team and within the Trust business, with senior appointments for our Singapore and Hong Kong subsidiaries. Looking ahead, in Wealth Management, the Group expects to successfully convert the current healthy asset pipeline into positive net client inflows over the coming year. However, the continuing pressure on our businesses arising from increased regulation, especially in Switzerland, means that conditions will remain difficult in 2014/2015. The US Department of Justice Program has required significant effort from our staff in the last year, and we expect to conclude this in 2014.
Assets under Management (in € billion) Net new assets (in € billion)
42.3
26.5
48%
32.6
50%
35.5 35.9
49% 44%
38.4
44%
45%
1.0
0.8
1.5 1.4
0.7
52% 50% 51%
56% 56% 55%
0.6
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
Wealth Management Asset Management
(1) (2)
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14
Wealth Management Asset Management
(1) 2011/12: net new assets exclude the outflow of €1.5 billion of assets under management linked to the partial sale of Sélection R in France.
(2) 2012/13: net new assets include the inflow of €0.8 billion of assets under management linked to the merger with HDF Finance in France
5
Merchant Banking
During the year ended 31 March 2014, Merchant Banking generated revenues of €73.6 million compared to
€69.1 million the previous year. These revenues include:
€36.2 million of management fees (€31.1 million for the year ended March 2013),
€27.7 million of net investment gains (€37.3 million for the year ended March 2013),
€13.7 million of other investment income, including interest and dividends (€19.7 million for the year ended
March 2013);
less €4.0 million of provisions (€19.0 million for the year ended March 2013).
During the year ended March 2014, disposal proceeds amounted to €65.3 million, generating net investment gains of €27.7 million. Moreover, this division invested €47.0 million, of which €11 million was in proprietary investments and €36 million was in funds managed by Merchant Banking.
The Group expanded its product offering with the launch of a new fund initiative, Five Arrows Credit Solutions ("FACS"), a fund targeted at capturing opportunities in the European high yielding junior credit market (on both primary and secondary opportunities). Shortly after the year end FACS held its final closing at €415 million. As at March 2014, the European senior credit fund (Oberon I) had closed at €200 million.
Assets under management at 31 March 2014 were €3.2 billion compared to €2.9 billion at March 2013. The majority of this increase was due to the launch of FACS, partially offset by the sale, in November 2013, of the R Capital Management team.
Merchant Banking asset value of Group's private equity assets
in €m 31/03/2012 31/03/2013 | 31/03/2014 |
Managed private funds 123 116 Paris Orléans Proprietary investments 350 333 Other 17 15 Total gross assets 490 464 | 158 347 13 518 |
Changes in the asset value (in €m)
464 47
72
(65)
of which €28m capital gains
Asset value
31 March 2013
Additions Change
in fair value
Disposals Asset value
31 March 2014
Banking and Asset FinanceThe legacy banking book continues to reduce in line with our plans to exit the corporate lending business. Legacy drawings fell to €396 million as at 31 March 2014, down from €570 million as at 31 March 2013.
6
Operating expenses
For the year ended 31 March 2014, staff costs were €699.3 million compared to €708.9 million1 in the prior year. The decrease of €9.6 million results from a one-off credit of €10.7 million arising from changes made to the UK and Swiss defined benefit pension schemes that reduce past pension costs.
Overall Group headcount increased from 2,764 to 2,804 as at March 2014.
For the year ended 31 March 2014, administrative expenses were €251.0 million compared to €214.3 million for
2012/2013, representing an increase of €36.7 million.
Staff costs & administrative expenses for the year ended 31 March 2014 included net exceptional charges of
€31m (€6 million in the year to March 2013), related to:
IT infrastructure outsourcing reorganisation costs of €16 million
Several specific legacy legal provisions of €26 million (relating to the US Department of Justice Program, the tax settlement between the UK and Swiss authorities, various provisions against legal claims and related costs)
Less a one-off credit of €10.7 million arising from changes made to defined benefit pension schemes
More details on net exceptional charges are provided in Appendix 2 on page 10.
Impairment charges and loan provisionsFor the year ended 31 March 2014, impairment charges and loan provisions were a credit of €6.8 million, mainly as a result of recoveries on previously impaired assets, compared to a charge of €31.4 million for 2012/2013.
Edmond de Rothschild (Suisse) SAA further impairment of €26.6 million relating to the 8.4% shareholding in Edmond de Rothschild (Suisse) SA has been taken for the year ended 31 March 2014 (€21.9 million was taken at the half year to September 2013), reflecting a decline in the share price.
Income tax
For the year ended 31 March 2014, the income tax charge was €42.7 million, split between a current tax charge of €25.2 million and deferred tax charge of €17.5 million, giving a reported tax rate of 40%.
It should be noted that the effective tax rate would have been 28% without:
the further impairment of Edmond de Rothschild (Suisse) SA,
the impact of reduced UK corporation tax rates (from 23% to 20%) on deferred tax assets
the effects of prior year tax adjustments
Non-controlling interests
For the year ended 31 March 2014, the charge for Non-controlling interests was €55.6 million compared to
€42.3 million for 2012/2013. The change is largely due to losses, incurred in the prior year before the June 2012
Group reorganisation, being attributed to former minority interests.
1 Flat-rate fees paid to Senior Advisors (external advisors) are now treated as staff costs rather than administrative expenses.
7
Liquidity - Capital
The Group continues to maintain a high level of liquidity. On 31 March 2014, cash placed with central banks and banks accounted for 54% of total assets (56% at March 2013).
Shareholders' equity, excluding non-controlling interests, increased from €1,225 million as at 31 March 2013 to
€1,269 million as at 31 March 2014, due to a combination of profit for the year (€8.4 million), net AFS fair value gains (€64.8 million) less dividends paid (€35 million).
The Group is regulated by the French Prudential and Resolution Authority (ACPR: Autorité de Contrôle Prudentiel et de Résolution) as a financial company ("Compagnie Financière"). Its regulatory ratios are communicated to the ACPR on 30 June and 31 December of each year. The most recent ratios are set out
below:
Basel 3 rules Full Basel 3 minimum with
31/03/2014
the CCB 1
Core Tier 1 = Tier 1 ratio 15.9% 7.0%
Global solvency ratio 18.3% 10.5%
1 : CCB = Capital Conservation Buffer
Source: PO - unaudited figures
DividendA dividend of €0.50 per share, the same as last year, will be proposed by the Managing Partner, PO Gestion SAS, at the Paris Orléans Annual General Meeting on 25 September 2014, called to approve the financial statements for the year ended 31 March 2014. The Managing Partner will propose to shareholders the right to elect for payment of the dividend, for the total amount of the dividend which they are entitled to, either in cash or new shares of Paris Orléans.
Medium-term outlook
Our priorities remain focused on improving profitability, cost discipline and capturing the synergies between our three core businesses.
The M&A market is showing positive signs at present with deal flow picking up in recent months in Europe, but still in a highly volatile global environment. If this level of activity persists we will see a positive impact in our business performance.
The Group's stable, long-term shareholding structure, its solid financial position and the quality of its people will allow it to continue the development of its activities. Because of this, the Group remains confident in its ability to
deliver stronger returns to shareholders in the longer term.
8
Appendix 1: Quarterly progression of revenues
2 quarter 77.1
2 quarter 13.8
1 Asset Management comprises the Wealth & Asset Management and the Merchant Banking businesses
2 Other comprises Central cost, legacy businesses, including Specialist Finance, and other
9
Appendix 2 ‐ Net exceptional charges in Net in c o me - Group sha r e
Financial year 2013/2014 (see page 7 )
Operating income Other (in €m) Staff Admin Total costs expenses Depreciation PBT | Net income - Group share |
- IT outsourcing (3) (12) (1) (16) - Legacy legal costs (26) (26) - Pensions credit 11 11 - EDR (Suisse) impairment (27) (27) - UK deferred tax asset write off 0 Total 8 (38) (1) (27) (58) | (11) (16) 8 (18) (6) (43) |
(31) | |
Net income - Group share excluding exceptionals 51 |
Financial year 2012/2013
Operating income Other (in €m) Staff Admin Total costs expenses Depreciation PBT | Net income - Group share |
- Legacy legal costs (6) (6) - EDR (Suisse) impairment (46) (46) - UK deferred tax asset write off 0 - Losses attributable to minority shareholders prior to June 2012 0 Total 0 (6) 0 (46) (52) | (5) (31) (2) 16 (22) |
(6) | |
Net income - Group share excluding exceptionals 64 |
10
Appendix 3: Cha nge in accounting standards since 1 Ap r il 2013
IAS 19 Employee Benefits (revised) requires changes in the recognition and measurement of defined benefits expenses. The most significant impact for the Group is to increase the net pension expense in the Income Statement by the difference between the current expected return on plan assets and the return calculated by applying the discount rate calculated in accordance with IAS 19. As a result of these changes, the income statement for the year ended 31 March 2013 has been restated:
the charge for defined benefit pensions is now €8.1 million greater
the Net income - Group share has been reduced by €5.7 million.
Finally, the adoption of IAS 19 Employee Benefits (Revised) by the Group's Swiss actuaries has caused one additional change in the Balance Sheet; the mortality assumptions in Switzerland have now become more prudent. The effect has been to increase the Swiss defined benefit fund obligation by around 4% or
€7 million. The balance sheet comparatives have been revised to reflect this change, with last year's shareholders' funds reducing by €4 million.
Appendix 4: Notes to financial information for 2013/2014
1. Statutory adjustments for revenues mainly represent reallocation of impairments, offset by various other
IFRS adjustments. The segmental analysis is prepared from non-IFRS data used internally.
2. Revenues exclude dividend income relating to Edmond de Rothschild (Suisse) SA, in line with the treatment adopted in the annual 2012/2013 Paris Orléans' consolidated accounts.
11
Financial calendar | 7 August 2014 after market close | Financial information for the first quarter of FY 2014/2015 |
| 25 September 2014 - 9.30 am - CET | Annual Shareholders General Meeting |
| 25 November 2014 after market close | Results of the first half-year of the 2014/2015 financial year |
| 13 February 2015 after market close | Financial information for the third quarter of FY 2014/2015 |
| 24 June 2015 after market close | Financial year 2014/2015 results |
Paris Orléans operates in the following areas:
Global Financial Advisory provides advisory services for mergers and acquisitions, debt financing and restructuring, and equity capital markets;
Wealth & Asset Management, and
Merchant Banking which comprises third party private equity and private debt business and proprietary investments.
Paris Orléans SCA is a French partnership limited by shares (société en commandite par actions) with a share capital of €142,208,216. Paris trade and companies registry 302 519 228. Registered office: 23 bis avenue de Messine, 75008 Paris, France. Paris Orléans is listed on NYSE Euronext in Paris, Compartment A - ISIN Code: FR0000031684.
Investor relations Press and Media Marie-Laure Becquart mlb@paris-orleans.comTél. : +33 (0)1 53 77 65 10www.paris-orleans.com
France DGM Conseil - + 33 1 40 70 11 89Michel Calzaroni - m.calza@dgm-conseil.fr
Olivier Labesse - labesse@dgm-conseil.fr
United Kingdom Smithfield - + 44 20 7360 4900John Kiely - jkiely@smithfieldgroup.com
Alex Simmons - asimmons@smithfieldgroup.com
12
|
distributed by
|
