LOCAL Solocal Groupe

Finalisation of the 2018 headcount reduction plan

Confirmation of the 2018 outlook of stabilisation of recurring EBITDA1

Regulatory News:

SoLocal Group (Paris:LOCAL)

Business activity in 2Q 20181:

• Digital sales: €143M, +3.0%
• Digital revenues : €146M, -3.5%

1H 2018 results1:

• Digital revenues : €293M, -1.2%
• Total revenues : €350M, -4.7%
• Recurring EBITDA: €70M, -11.9%
• Recurring EBITDA - Capex : €48M
• Net financial debt2: €342M

2018 outlook:

• Stabilisation of recurring EBITDA1 : €170M

Increase of +3.0% in Digital sales1 in 2Q 2018 despite a tense social context.

In line with the scheduled plan, an agreement was reached with the trade unions as part of the Employment Protection Plan (“PSE”) and the objective of 800 departures is reached in the summer 2018.

The SoLocal 2020 plan keeps being implemented with the rationalisation of the organisation, the reduction of the cost base, with the progressive launch of the new range of packaged and simplified products starting in the autumn 2018, and with the conclusion of partnerships generating growth and audience.

When releasing the 1H 2018 results as at June 30th 2018, Eric Boustouller, SoLocal’s Chief Executive Officer, declared: “Digital sales increased by +3% during 2Q 2018 despite a tense social context. During this period, we moved a step forward in the implementation of the “SoLocal 2020” transformation plan regarding the Company’s new organisational structure, thanks to the quality of the social dialogue and the responsible mindset of all stakeholders. The signature of four agreements with the main trade unions has enabled the implementation of voluntary departures as part of a mobility leave for about 700 people, allowing the Group to reach its 800 departures target as soon as this summer. 2018 marks a turning point for SoLocal, in order to achieve growth as soon as in 2019. During the 2H 2018, we will endeavour to maintain the sales dynamics by mobilising all the Company’s forces to benefit our customers. We will keep accelerating the implementation of our transformation plan, notably with the progressive launch (in a “test and learn” mode) of our new packaged and subscription-based offerings, and our new omnichannel sales organisation, which will be fully in place at the beginning of 2019.”

The Board of Directors approved the consolidated financial statements of the Group as at June 30th 2018. The limited review of the 1H 2018 accounts has been completed and the limited review report is currently being issued. The quarterly financial statements were not audited.

SoLocal focuses on continued activities vs. divested activities in the 1H 2018 results presentation, as well as in this press release. The financial performance indicators are commented within the scope of continued activities. The financial items presented in this press release for 1Q 2017, 1H 2017 and 1Q 2018 have been revised in light of the new scope of continued activities (after the disposal of certain assets, cf. Appendix I), new management rules under IFRS 15 regarding the Digital/Print sales breakdown, and the accounting restatement of a Digital/Print promotional offer. The accounting items for 2017 have been restated under IFRS 15.

I - Sales1

            In millions of euros   2Q 2017   2Q 2018   Change   1H 2017   1H 2018   Change   Digital sales 139 143 +3.0% 298 293 -1.8% Print sales   29   20   -30.6%   62   43   -30.3% Total sales   168   163   -2.7%   360   336   -6.7%  

Total sales amounted to €163 million in 2Q 2018, down -2.7% compared to 2Q 2017, with an increase in Digital sales of €4 million, up +3.0% while Print sales are down by -€9 million, i.e. by -30.6% compared with 2Q 2017.

The increase in Digital sales was driven by the success of our Presence products, Booster Contact offering and Websites, in particular the Premium websites. The decrease in Print sales is in line with the trend from previous years.

During 1H 2018, total sales amounted to €336 million, down -6.7% compared to 1H 2017, with a decrease in Digital sales of €5 million, down -1.8% (mainly due to a decrease in Digital sales in 1Q 2018), and a decrease in Print sales of -€19 million, down -30.3% over the period, in line with the global declining trend of the legacy Print business.

The operational KPIs1 of SoLocal in 2Q 2018 are as follows :

          2Q 2017   2Q 2018   Change Evergreen sales (as a % of total sales) 10% 16% +5.6 pts Number of visits (in millions)   601   604   +0.5%  

Evergreen sales represented 16% of total sales in 2Q 2018 compared with 10% in 2Q 2017. As at June, 30th 2018, about 40,000 customers of the Group subscribed to evergreen offerings.

The global audience slightly increased by +0.5%: total visits reached 604 million in 2Q 2018 compared to 601 million in 2Q 2017, driven by the mobile audience growth (increase of +10%, representing 44% of the total audience in 2Q 2018). The audience of PagesJaunes increased by +2.6% compared with 2Q 2017, with 432 million visits.

The audience of PagesJaunes increased by +1.0% in 1H 2018 compared with 1H 2017, with 864 million visits. The global audience decreased by -0.9% in 1H 2018 compared with 1H 2017 with 1.2 billion visits.

382 million contacts3 (“leads”) were generated in 1H 2018, which represents a growth of +3.2% compared with 1H 2017. The total amount of reviews increased over the period by 44%.

II – Order Backlog1,4

      In millions of euros   30th June 20175   30th June 2018   Change   Digital order backlog 384 377 -1.8% Print order backlog   68   45   -34.1% Total order backlog1,4   452   422   -6.7%  

The order backlog reached 422 million euros as at June, 30th 2018, down -6.7%. This decrease is mainly due to the strong decline of the Print business (decrease by -34.1% as of June, 30th 2018 vs. June, 30th 2017).

III - Revenues1

            In millions of euros   2Q 20175   2Q 2018   Change   1H 20175   1H 2018   Change   Digital revenues1 151 146 -3.5% 297 293 -1.2% Print revenues1   41   31   -24.1%   70   57   -19.5% Total revenues1   192   177   -8.0%   367   350   -4.7%  

The Group recorded revenues1 of €177 million in 2Q 2018, down -8.0% compared with 2Q 2017. The Group recorded revenues1 of €350 million in 1H 2018, down -4.7% compared with 1H 2017.

Digital revenues1 amounted to €146 million in 2Q 2018, down -3.5% compared with 2Q 2017, and amounted to €293 million in 1H 2018, slightly decreasing by -1.2% compared with 1H 2017. Revenues from Websites and Booster Contact products recorded a double-digit growth.

Print revenues1 amounted to €31 million in 2Q 2018, down -24.1% compared with 2Q 2017, and amounted to €57 million in 1H 2018, down -19.5% compared with 1H 2017. The Print business represents 16% of total revenues1 in 1H 2018.

Including divested activities, the Group’s consolidated revenues reached €178 million in 2Q 2018, down -9.2% compared with 2Q 2017. The Group’s consolidated revenues reached €351 million in 1H 2018, down -6.1% compared with 1H 2017.

IV - Costs

      In millions of euros   1H 20175   1H 2018   Change               Total revenues1   367   350   -4.7%   Net external expenses1 -97 -96 -0.3% Staff expenses1   -191   -183   -4.0% Recurring EBITDA1   79   70   -11.9% Restructuring costs   -   -125   - Non-recurring EBITDA1   -4   -133   NA  

Recurring net external expenses1 reached -€96 million and slightly decreased by -0.3% in 1H 2018 compared with 1H 2017.

Recurring staff expenses1 reached -€183 million in 1H 2018 and decreased by -4.0% compared with 1H 2017.

Non-recurring items impacting the EBITDA amounted to -€133 million euros and included in particular -€125 million euros of restructuring costs related to the transformation plan. Those €125 million consist of:

• €163 million provisions related to the headcount reduction carried out as part of the transformation plan,
• €40 million of provision reversal for retirement benefits as well as long-service award related to the 2018 headcount reduction,
• €2 million of restructuring costs related to fees.

Staff expenses related to employees leaving, either as volunteers from July to September 2018, or as part of the reclassification phase in October/November 2018, will be accounted for in 2H 2018 as non-recurring costs from the date of the departure validation.

V - EBITDA

      In millions of euros   1H 20175   1H 2018   Change Digital recurring EBITDA 63 59 -5.7% EBITDA / Revenues   21.1%   20.1%     Print recurring EBITDA 17 11 -35.1% EBITDA / Revenues   24.1%   19.5%     EBITDA from recurring activities 79 70 -11.9% EBITDA / Revenues   21.6%   20.0%     Contribution from non-recurring items1   -4   -133   NA EBITDA from continued activities 76 -63 -183.5% EBITDA / Revenues   20.6%   NA     EBITDA from divested activities   -2   0   -92,8% Consolidated EBITDA 74 -63 -186.0% EBITDA / Revenues   19.7%   NA      

Recurring EBITDA1 amounted to €70 million in 1H 2018, representing a decrease of -11.9% compared with 1H 2017, as the decline in revenues1 was partially offset by a decrease in staff expenses1.

Digital recurring EBITDA1 reached €59 million in 1H 2018 vs. €63 million in 1H 2017, down -5.7%.

Print recurring EBITDA1 reached €11 million in 1H 2018 vs. €17 million in 1H 2017, down -35.1%.

Recurring EBITDA1 / Revenues1 margin amounted to 20.0% in 1H 2018, down -1.6 pts compared with 1H 2017.

Non-recurring EBITDA1 reached -€133 million in 1H 2018, down -€129 million compared with 1H 2017, mainly due to the €125 million restructuring costs related to the transformation plan.

Including non-recurring items and divested activities, the consolidated EBITDA reached -€63 million.

VI – Net result

      In millions of euros   1H 20175   1H 2018   Change Recurring EBITDA from continued activities   79   70   -11.9% Depreciation and amortisation,6 -28 -33 +15.4% Financial result exc. debt restructuring1 -11 -19 +74.2% Corporate income tax1,6   -17   -11   -34.9% Recurring net income from continued activities   23   7   -69.4% Contribution of non-recurring items1 to net income   10   38   NA Restructuring costs   NA   -125   NA Net gain from debt restructuring1   266   NA   NA Net income from continued activities   299   -80   -126.8% Contribution of divested activities to net income   -3   0   -93.4% Consolidated net income   296   -80   -127.2%  

Depreciation and amortisation expenses1 amounted to -€33 million in 1H 2018, an increase of +15.4% compared with 1H 2017, primarily due to the full depreciation of losses from previous years from divested activities of -€3.7 million.

Financial result1 amounted to -€19 million in 1H 2018 vs. -€11 million in 1H 2017 (exc. debt restructuring). The change is due to financial expenses: as part of the debt financial restructuring in 1Q 2017. 2017 interest expenses were only payable for the period between March, 15th to December, 31st 2017, in accordance with the terms negotiated in the financial restructuring. There are no non-recurring financial items in 1H 2018, whereas in 1H 2017 the net gain from debt restructuring reached €266 million.

The corporate income tax expenses1 amounted to -€11 million in 1H 2018, down -34.9% compared with 1H 2017, due to a decrease in pre-tax income1.

Recurring net income from continued activities amounted to €7 million in 1H 2018, down -69.4% compared with 1H 2017.

Net income from continued activities amounted to -€80 million in 1H 2018, a decrease of €379 million compared with 1H 2017, primarily due to the restructuring costs related to the transformation plan.

Given the net income from divested activities is virtually equal to zero, the Group’s consolidated net income was -€80 million in 1H 2018.

VII – Cash-flows and financial debt

      In millions of euros   1H 20175   1H 2018   Change Recurring EBITDA from continued activities   79   70   -9.5 Non monetary items included in EBITDA1 -1 5 +5.9 Net change in working capital1 -17 -25 -7.6 Acquisitions of tangible and intangible fixed assets1 -25 -22 +3.7 Cash financial income/Expense1 -41 -17 +23.9 Non-recurring items1 -12 -12 +0.1 Corporate tax paid   -27   -12   +15.2 Free cash flow from continued activities   -44   -12   +31.7 Free cash flow from divested activities   -2   0   +1.7 Consolidated free cash flow   -46   -12   +33.4  

The net change in working capital1 reached -€25 million as at June, 30th 2018 compared with -€17 million in 1H 2017. As announced, the management team is currently working on the implementation of a plan to improve the Group’s working capital, which is expected in 2019.

Including divested activities’ contribution, the consolidated free cash flow reached €-12 million in 1H 2018.

The Group had a net cash position of €73 million as at June, 30th 20187.

Net financial debt2 amounted to €342 million as at June, 30th 2018, compared with €357 million as at June, 30th 2017.

Furthermore, the Group continues to analyse its options for the refinancing of its indebtedness with the primary aim of reducing its cost. All financing instruments are being considered, including instruments potentially giving access to the equity of SoLocal, within the framework of the authorisations voted at the Shareholders Meeting of March, 9th 2018.

VIII – 2018 Outlook

The Group confirms for 2018 its outlook of stabilisation of recurring EBITDA1: €170M.

IX – Next dates of the financial timetable

The next dates for the financial timetable are as follows:

• 3Q 2018 revenue release: October, 24th 2018 after market close

Notes :

1 Scope of continued activities.2 Net financial debt equals to total gross financial debt minus net cash and cash equivalents.3 Potential contacts generated for professionals (customers and non-customers) ie. clicks showing the user’s intention to contact the professional or to visit its shop.4 Order backlog equals to the outstanding portion of revenues still to be recognised as at June 30th 2018 from sales orders validated and engaged by our clients as at June, 30th 2018. Regarding evergreen contracts, only the current commitment period is taken into account.5 Restated under IFRS 15.6 Restated for the retrospective application of IAS 20 concerning the Crédit impôt recherche.7 Net of bank overdrafts.

About SoLocal Group

SoLocal Group aims to become the trusted and local digital partner supporting business companies to accelerate their growth. To succeed in this transformation, it relies on its six key assets some of them being unique in France: media with very high audiences, powerful geolocated data, scalable technological platforms, commercial coverage throughout France, privileged partnerships with GAFAM and numerous talents (experts in data, IT development, digital marketing, etc.). SoLocal Group's activities are structured around two axes. First, a range of "full web & apps" digital services on all devices (PCs, mobiles, tablets and personal assistants), offered in the form of packs and subscriptions, ("Digital Presence", "Digital Advertising", "Digital Website"," Digital Solutions" and "Print to Digital"), and integrating a digital coaching service, to support clients success. Second, flagship owned media (PagesJaunes and Mappy) used daily by Frenchs and offering an enriching and differentiating user experience. With more than 460,000 customers across France and 2.4 billion visits on its media, the Group generated revenues of €756 million (IAS 18) in 2017, 84% coming from Internet making it one of the leading European players in terms of online advertising revenue. SoLocal Group is listed on Euronext Paris (LOCAL). More information is available at www.solocalgroup.com.

I. Appendix I: Divested activities

During the 1H 2018, the Group divested four non-core activities ("divested activities"):

• Netvendeur on March, 9th 2018,
• Retail Explorer on May, 31st 2018,
• Effilab Dubai on June, 19th 2018,
• Effilab Australia on June, 28th 2018

II. Appendix II: Review of 1Q 2017, 1Q 2018 and 1H 2017

Sales

    1Q 2017   1Q 2018   Change

In millions ofeuros

 

Publishedon April,24th 2018

  Revised  

Publishedon April,24th 2018

  Revised  

Publishedon April,24th 2018

  Revised         Digital sales 166 159 153 150 -7.7% -6.0% Print sales   29   33   21   23   -28.8%   -30.0% Total sales   195   192   174   173   -10.8%   -10.2%  

1Q 2018 and 1Q 2017 sales, published on April, 24th 2018, were revised in light of the new scope of continued activities (following the disposal of some assets, notably Retail Explorer in 2Q 2018, cf. Appendix I) and new management rules under IFRS 15 regarding the sales breakdown between Digital and Print (as published on June 28th, 2018 in the press release “IFRS 15: a new revenue recognition accounting standard”).

Revenues

    1Q 2017

 

 

1Q 2018

  Change

In millions ofeuros

 

Publishedon April,24th 20185

  Revised5  

Publishedon April,24th 2018

  Revised  

Publishedon April,24th 2018

  Revised         Digital revenues1 150 146 152 148 +1.3% +1.2% Print revenues1   26   29   16   25   -36.9%   -12.8% Total revenues1   176   175   168   173   -4.3%   -1.2%  

The 1Q 2018 and 1Q 2017 revenues published on April, 24th 2018, were revised in light of the new scope of continued activities (following the disposal of some assets, notably Retail Explorer in 2Q 2018, cf. Appendix I), new management rules concerning the breakdown between Digital and Print under IFRS 15 (as published on June 28th, 2018 in the press release “IFRS 15: a new revenue recognition accounting standard”) and the accounting restatement concerning a Print/Digital promotional offer.

      1H 2017 In millions of euros  

Published onJuly, 27th 2017

  Restated   Digital revenues 323 297 Print revenues   62   70 Total revenues   386   367  

1H 2017 revenues were therefore impacted by the revision.

III. Appendix III : Consolidated income statement, consolidated cash flow statement and consolidated balance sheet

Consolidated income statement

      In millions of euros 30th June 20175,6 30th June 2018 Consolidated  

Divestedactivities

 

Continuedactivities

Consolidated  

Divestedactivities

 

Activitéspoursuivies

Recurring  

Nonrecur.

Recurring  

Nonrécur.

Change inRecurring

  Revenues 373 6 367 - 351 1 350 - -4.7% Net external expenses (101) (5) (97) 0 (99) (0) (96) (2) -0.3% Staff expenses (199) (4) (191) (4) (190) (1) (183) (7) -4.0% Restructuring costs   -   -   -   - (125)   -   -   (125) - EBITDA   74   (2)   79   (4) (63)   (0)   70   (133) -11.9% Depreciation and amortisation   (30)   (1)   (28)   - (33)   (0)   (33)   - +15.4% Operating income   44   (3)   51   (4) (96)   (0)   37   (133) -27.1%

Net gain from debt restructuring as atMarch, 13th 2017

266 - - 266 - - - - - Other financial income - - - - 0 - 0 - - Financial expenses   (11)   (0)   (11)   - (19)   (0)   (19)   - +75.1% Financial income   255   (0)   (11)   266 (19)   (0)   (19)   - -74.2% Income before tax   299   (3)   40   262 (115)   (0)   18   (133) -54 .7% Corporate income tax*   (3)   1   (17)   14 (35)   0   (11)   46 -34.9% Income for the period   296   (3)   23   276 (80)   (0)   7   (87) -69.4%  

Consolidated Cash Flow Statement

      In millions of euros   30th June 20175  

30th June2018

  Change Recurring EBITDA from continued activities   79   70   -9.5 Non monetary items included in EBITDA and other (1) 5 +5.9 Net change in working capital (17) (25) -7.6 Acquisition of tangible and intangible fixed assets (25) (22) +3.7 Cash financial income/Expense (41) (17) +23.9 Non-recurring items (12) (12) +0.1 Corporate income tax paid   (27)   (12)   +15.2 Free cash flow from continued activities   (44)   (12)   +31.7 Free cash flow from divested activities   (2)   (0)   +1.7 Free cash flow   (46)   (12)   +33.4 Increase (decrease) in borrowings (270) (1) +269.3 Capital increase 273 - -272.7 Other of which asset disposal   1   (0)   -1.1 Change in net cash & cash equivalents   (43)   (14)   +29.0 Net cash & cash equivalents at beginning of period   91   86   -4.9 Net cash & cash equivalents at end of period   48   73   +24.1  

Consolidated balance sheet

      In millions of euros ASSETS  

30th June20175

 

30th June2018

  Change Total non-current assets 308 325 +5.6% Net goodwill 96 89 -6.9% Net intangible fixed assets 127 112 -11.7% Net tangible fixed assets 28 23 -18.4% Other non-current assets of which deferred tax assets*   58   102   +76.0% Total current assets 359 394 +9.8% Net trade accounts receivable 270 255 -5.3% Prepaid expenses 9 9 +8.8% Cash and cash equivalents 49 73 +50.3% Other current assets   32   57   +75.1% Total assets   667   719   +7.9%   Liabilities             Total equity   (619)   (674)   -8.9% Total non-current liabilities 550 524 -4.9% Non-current financial liabilities and derivatives 399 409 +2.7% Employee benefits (non-current) 137 97 -29.2% Other non-current liabilities   15   18   +15.9% Total current liabilities 735 870 +18.3% Bank overdrafts and other short-term borrowings 6 5 -22.5% Deferred income 448 394 -11.9% Employee benefits (current) 103 113 +9.0% Trade accounts payable 84 107 +27.0% Current provisions 20 179** +804.1% Other current liabilities including taxes   75   73   -1.9% Total liabilities   667   719   +7.9%  

*The change in deferred tax assets as of June, 30th 2018 vs. June, 30th 2017 is mainly due to a provision related to the restructuring plan.** Including €163 million of provisions for restructuring.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180725005932/en/

SoLocalPressDelphine Penalva, +33 (0)1 46 23 35 31dpenalva@solocal.comorEdwige Druon, +33 (0)1 46 23 37 56edruon@solocal.comorAlexandra Kunysz, +33 (0)1 46 23 47 45akunysz@solocal.comorInvestorsNathalie Etzenbach-Huguenin, +33 (0)1 46 23 48 63netzenbach@solocal.comorAlima Lelarge Levy, +33 (0) 1 46 23 37 72alelargelevy@solocal.com