Consolidated results at December 31, 2023

At the Board meeting held on March 6, 2024 to approve the financial statements for fiscal year 2023, Chairman Joël Séché stated:

„Fiscal year 2023 once again confirms the relevance of Séché Environnement’s development strategy in the French and international sustainable development markets, particularly in the circular economy and in combating climate change.

For several years now, Séché has been committed to a strategy of external growth that broadens the range of its offerings and extends its geographical coverage.

This year, in France, Séché took on new high-tech businesses in the industrial water cycle, in promising markets driven by environmental regulations. Internationally, new strategic acquisitions in Italy, Peru and Namibia have reinforced the Group’s expertise as a specialist in hazardous waste and its position as an operator of choice for industrial customers in these regions.

With its activities closely aligned with the European green taxonomy, Séché offers its industrial and public-sector customers a local product range that meets the majority of their environmental sustainability challenges.

The solid organic growth posted by the Group in 2023 confirms the sales momentum and positive trend observed in most business lines in recent years, particularly in France.

Two years ahead of target, contributed revenue is exceeding the symbolic billion-euro mark!

The high level of operating performance achieved on the historical scope demonstrates Séché’s ability to rapidly assimilate the acquisitions of recent years, to immediately implement industrial and commercial synergies with the Group’s other business lines, and to raise them to its profitability standards.

Extra-financial performance is not to be outdone following the SBTi’s approval of its Climate trajectory in line with the Paris Agreements, Séché is already on track in 2023 to meet its 2025 target for reducing its greenhouse gas emissions. At the same time, the Group has also significantly increased the amount of greenhouse gases avoided at customer sites by its recycling activities, putting it in a good position to meet its 2025 target.

New goals have been set, outlining solid prospects for growth, increased operating profitability and free cash flow generation by 2026.

On the extra-financial front, the intensification of current action plans and the implementation of new flagship projects will enable us to continue building a Group that is even more respectful of the environment, increasingly restrained in its consumption and more moderate in its impact.

These are all indicators that support Séché Environnement’s model of profitable, sustainable growth, and all ways in which it can accelerate both its own environmental transition and its development. „

Selected Financial Information

Consolidated data at December 31, 2023

Comments on consolidated financial statements at dec.31, 2023

Main non-financial results 2023

In 2023, Séché Environnement pursued its strategy of profitable growth, combining dynamic internal growth with a targeted external growth strategy.
In the buoyant environmental transition and sustainable development markets, the Group has maintained solid growth within its historical scope and successfully finalized the integration of new activities acquired at the end of 2022, notably those related to the industrial water cycle.
The Group has also made several new acquisitions in France and abroad, rounding out its range of offerings as well as its regional coverage in the heart of strategic markets.
At the end of the year, Séché Environnement’s financial and non-financial performance enabled it to achieve by 2023 several of the financial and non-financial targets set for 2025.
The Group is therefore confirming its new financial and non-financial roadmap to 2026.

Continuation of acquisition strategy – Other scope effects

In France, Séché Environnement finalized the acquisition of Assainissement Rhône-Isère (ARI), since renamed Séché Assainissement Rhône-Isère („Séché ARI“). Based in Bonnefamille (Isère) and present throughout the Auvergne-Rhône-Alpes region, this company is authorized to operate on Seveso-classified sites, and specializes in sanitation, industrial cleaning and high-pressure hydrocleaning.

Internationally, the Group has successively acquired:

• Furia Srl (Italy) : Furia is an Italian company specializing in the collection, sorting, consolidation, and recovery of hazardous and non-hazardous industrial waste. The Company also generates 40% of its revenue from soil remediation and site decontamination activities.
• Rent-A-Drum (Namibia): Rent-A-Drum is the leading waste management company in Namibia. It offers its large corporate customers a wide range of services thanks to its integrated waste recovery and treatment offering.
• Essac (Peru): Essac is one of Peru’s leading emergency responders, specializing in industrial fire emergencies. The company also provides training and team learning in industrial risks and regulations, risk prevention and industrial site audits.

During the period, the Group also successfully finalized the transfer of a portfolio of industrial water cycle activities acquired from the Veolia Group at the end of November 2022. The assets handed over include contracts with over 120 manufacturers and a network of 20 agencies in France. This handover is accompanied by the transfer of some 350 employees specializing in the industrial water cycle.

The transfer operations were completed at the end of 2023 and gave rise to significant non- recurring expenses, in particular those relating to the remuneration of Groupe Veolia for several commercial and administrative management services it continued to provide during the transfer period.

Financial performance in line with 2024-2026 roadmap objectives

Confirmation of organic growth momentum, particularly in France

At December 31, 2023, Séché Environnement posted contributed revenue of €1,013.5m, up +6.4% at constant scope and exchange rates compared with 2022.
Over the period, business was driven by markets in France (73.9% of contributed revenue), where the Group confirmed its continued sales momentum in most of its markets, while internationally, sales varied according to geographical region and subsidiary.

France: robust sales in positively oriented markets

As an integrated operator in the circular economy and environmental services sectors, Séché Environnement benefits in France from markets that are sustainably driven by regulatory changes promoting the circular economy, the fight against climate change and the challenges of ensuring the environmental safety of industrial infrastructures.

In 2023, the Group experienced buoyant industrial markets, particularly in areas linked to circular economy and services, while the extension of its offering in particular with the integration of new Services businesses – such as industrial water management – has fostered the implementation of intra-Group industrial and commercial synergies that have boosted the Group’s growth momentum.

Contracts with local authorities confirmed their resilience in an environment characterized by high utilization of waste recovery and treatment facilities and the continuation of a very positive price dynamic.

In addition, the Group benefited from a significant rise in energy sales prices, in line with the full effect of the indexation of its energy sales contracts in 2022 (steam sales in particular).

Overall, Séché Environnement posted very substantial organic growth in France, up 9.4% on the previous year, illustrating the relevance of Séché Environnement’s commercial offering to the challenges of environmental safety and sustainability for economic players, as well as to short-term imperatives in terms of access to resources, materials and energy.

International: performance varies by subsidiary

Internationally, Séché Environnement has a presence in targeted geographical areas through some of its businesses, giving the Group greater exposure to certain markets and/or local customer bases, and making the contribution of the various subsidiaries less homogeneous.

In 2023, most international markets remained buoyant, underpinned by the good level of activity of local industrial customers, as illustrated by the remarkable performance of South American subsidiaries and the solid contribution of European subsidiaries.

However, some subsidiaries reported a decline in business compared with their particularly high levels of activity in 2022, such as in South Africa, where Spill Tech had recorded exceptionally large-scale environmental emergency contracts, or Solarca, a specialist in chemical cleaning, which had benefited last year from a strong recovery in its order book following the pandemic years.

The international scope also recorded a strongly negative exchange rate effect, of (€16.3)m vs. a positive exchange rate effect of +€4.5m in 2022, essentially due to the deterioration in the parity of the South African Rand.

As a result, revenue is slightly down on 2022, by (0.8)% at constant scope and exchange rates.

Operating income up: strong contribution from historical scope

The 2023 financial year sees a further increase in consolidated operating income, particularly for the historical scope in France, where operating profitability, both gross and current, will be significantly higher than in 2022.

As a result, earnings before interest, taxes, depreciation, and amortization (EBITDA) reached €217.7m, or 21.5% of contributed revenue, up 8.0% on a reported basis (vs. €201.6m, or 22.6% of contributed revenue in 2022).

At constant scope, it came to €218.4m, a significant organic increase of +10.1% to 23.3% of contributed revenue (vs. 22.6% of contributed revenue a year ago).

The increase in gross operating profitability reflects the solid contribution of the France scope:

• EBITDA in France rose organically by +18.8% to €176.7m, or 25.7% of contributed revenue, marking a significant improvement in gross operating profitability compared with last year (23.6% of contributed revenue).

In addition to favorable commercial effects (volume and price effects), EBITDA in France reflects the positive impact of the industrial efficiency policy on tool availability and organizational productivity.

This further increase in gross operating profitability to historically high levels also illustrates Séché Environnement’s ability to rapidly onboard the new scopes acquired in recent years and to raise their profitability to Group standards.

This performance is all the more remarkable in that the increase in this balance is limited in 2023, to the tune of (€9.4)m by the cap on infra-marginal profits of electricity producers introduced by the Finance Law for 2023 (with a negative impact of €5.8m from 2022), reducing gains on electricity sales to +€2.6m.

• International EBITDA fell organically by -15.9% to €41.7m, or 16.8% of contributed revenue (vs. €52.9m to 19.9% of contributed revenue in 2022).

The lower contribution from international activities is mainly due to delays in activity at certain subsidiaries (notably Spill Tech and Solarca) given that the gross operating profitability of the international scope in 2022 had been boosted by the contribution of major environmental emergency contracts on an exceptional scale, amounting to €5m.

Current operating income (COI) came to €101.2m, or 10.0% of contributed revenue, up 10.8% on a reported basis compared to 2022 (€91.3m, or 10.2% of contributed revenue).

At constant scope, growth continued strong (+17.8% at constant exchange rates) to €105.1m, or 11.2% of contributed revenue. This increase in current operating profitability reflects the solid performance of the France scope:

• Current operating income for France reached €85.9m, or 5% of contributed revenue (vs. 9.8% of contributed revenue in 2022, reflecting organic growth in EBITDA, mainly offset by a moderate increase in depreciation and provisions, in line with tight control over capital expenditure and the quality of the customer receivables portfolio.
• International current operating income came to €19.2m, or 7% of contributed revenue (vs. €29.6m, or 11.1% of contributed revenue in 2022). This decline is essentially due to the weaker performance of International EBITDA at constant scope and exchange rates.

Operating income reached €91.4m, or 9.0% of contributed revenue, up +5.1% on a reported basis and +12.2% at constant scope and exchange rates compared with last year.

This change reflects the increase in operating income, mainly offset by impairments on intangible assets of (€7.1m). These impairments are mainly due to the non-utilization of developments carried out as part of the roll-out of the French ERP following tests carried out by pilot companies in the second half of 2023.

Further increase in net income, Group share – Proposed dividend up

Net financial income

At December 31, 2023, net financial income stood at (€22.2m), compared with (€18.5m) at the end of 2022, up 20.0% year-on-year.

This change mainly reflects:

• The increase in the cost of gross indebtedness, to (€26.1m) vs. (€17.8m) a year ago, due to a rise in the cost of gross debt to 49% vs. 2.56% in 2022, and the increase in average gross financial debt over the period (see below).
• The improvement in „Other financial income and expenses“, at +€0.9m (€1.5)m in 2022, (€1.5m) in 2022, mainly due to the recognition of accretion income on the provision for thirty-year risk, amounting to +€2.3m (vs. an expense of (€0.5m) a year ago).

Income tax

At December 31, 2023, „Income taxes“ amounted to (€17.8m) vs. (€19.2m) in 2022, giving an effective tax rate of 25.8% vs. 28.1%.

Consolidated net income

After accounting for the share in net income of associated companies, i.e. (€1.3m) at December 31, 2023, an amount identical to that for 2022, net income for the consolidated group came to €50.0m vs. €47.9m in 2022.

Net of non-controlling interests of (€2.2m), Group share of net income came to €47.8m, or 4.7% of contributed revenue at December 31, 2023 (vs. €44.6m, or 5.0% of contributed revenue in 2022).

Net income per share came to €6.13 vs. €5.72 at December 31, 2022.

The dividend will be raised from €1.10 to €1.20 per share, subject to approval by the Annual General Meeting of Shareholders on April 26, 2024. It will be withdrawn on July 8, 2024 for payment on July 10, 2024.

Confirmation of solid financial position

Free operating cash flow came to €101.3m, up 29.2% compared with 2022 (€78.4m), with an EBITDA-to-cash conversion rate of 47% (vs. 39% a year ago). This positive trend is mainly due to tight control over capital expenditure and a significant reduction in working capital requirements.

Booked capital expenditure totaled €97.2m, or 9.6% of contributed revenue (vs. €105.0m in 2022, or 11.7% of contributed revenue):

• Recurring capital expenditure (or maintenance) totaled €68.2m, or 6.7% of contributed revenue (vs. €57.4m in 2022, i.e., 6.4% of contributed revenue), with the slight year-on- year increase mainly due to periodic „major maintenance and repairs“ expenses.
• Non-recurring investment (or development investment) came to €29.0m, or 2.9% of contributed revenue (vs. 47.6m in 2022, or 5.3% of contributed revenue), and mainly concern growth investments in the Circular Economy and Services businesses.

The change in working capital requirement stood at (€6.3)m, a sharp improvement on the (€-25.1)m recorded in 2022, illustrating the success of the Group’s efforts to return to a more normative situation with regard to business growth, and despite the consequences of the cyber-attack in spring 2023 on billing and collection management.

Cash balance amounted to €162.2m, vs. €126.2m a year earlier, a +28.5% variation reflecting the good level of free cash flow generated in 2023 – excluding acquisitions. The liquidity position is solid, at €332.2m at December 31, 2023 vs. €313.1m by the end of 2022.

Net financial debt stood at €641.9m vs. €587.4m at December 31, 2022. This +€54.5m increase reflects:

• (€43.3m) to reduce the Group’s debt at constant scope and before non-cash
•   +€35.5m: a non-cash change – at constant scope – mainly linked to new IFRS 16 contracts.
•  +€62.3m, the scope effects (disbursements for the fair value of the shares and financial leases of acquired companies).

Financial leverage ratio stood at 2.9 times EBITDA vs. 2.8 times a year earlier. Excluding acquisitions completed by the end of 2023, it would have been 2.7 times EBITDA, in line with Group targets.

Solid non-financial performance in 2023

In fiscal 2023, Séché Environnement stepped up its non-financial strategy, particularly in the areas of combating climate change, water and energy efficiency, and protecting biodiversity.

In particular, the Group has:

•   Obtained SBTi approval of its climate trajectory.

In January 2023, the Science Based Target initiative (SBTi) approved Séché Environnement’s GHG emissions reduction target. SBTi thus recognizes that the target set by Séché Environnement is based on scientific criteria and in line with the Paris Agreement on combating global warming, which aims to limit global warming to 2°C by 2050. Séché Environnement’s decarbonization strategy aims to achieve an absolute reduction of -25% in direct greenhouse gas emissions (scope 1) and indirect emissions linked to energy consumption (scope 2) between 2020 and 2030.

•   Confirmed the high rates of eligibility and alignment of its activity with the European green taxonomy.

Séché Environnement has a sustainable business model as defined by the European green taxonomy.

On the basis of the six delegated acts published by the European Commission on June 5, 2023, the percentages of eligibility and alignment of the company’s activities with the achievement of the 6 environmental objectives reach 84% and 70% of revenue respectively at December 31, 2023.

These figures are well above the average for economic activities in Europe (estimated alignment at 20%)¹², illustrating the company’s contribution to the greening of the economy.

•   Achieved by 2023 the GHG emissions reduction target set for its 2025 Climate trajectory.

With greenhouse gas emissions reduced to just 555ktCO2eq in 2023, Séché Environnement is two years ahead of schedule in meeting the greenhouse gas emissions reduction target set in 2021 for 2025.

This indicator is included as an impact criterion for its November 2021 bond issue, i.e., a 10% reduction in scope 1 and 2 greenhouse gas emissions for the France 2020 scope. With a performance of +29% in 2023 in terms of greenhouse gases avoided, Séché Environnement is also well on the way to achieving its second objective set by its Climate strategy: a +40% increase in emissions avoided by materials recovery activities in the France 2020 scope.

Objectifs confirmés 2024 Outlook on track – Objectives confirmed

 Roadmap to 2026 reinforced

Séché Environnement confirms its financial and non-financial roadmap for 2024 to 2026¹³.

A solid position in the sustainable growth markets of environmental transition and sustainable development

Séché Environnement is active in the highly regulated French and international environmental transition and sustainable development markets, and benefits from the trend towards tighter regulatory constraints imposed on economic players to reduce their environmental footprint.

Séché’s activities in fact address the long-term issues facing economic players in terms of ecological transition, and in particular climate change, the depletion of natural resources and the protection of biodiversity.

The Group’s activities in rare resource reuse and the production of recovered energy also provide solutions to the short-term challenges faced by local communities and manufacturers in terms of access to raw materials, water and energy. These resources are regenerated and low in carbon, made available locally and at competitive prices.

For all these reasons, they boast strong visibility, sustained growth, high and rising operating margins, and proven resilience.

Séché backs up this strategy of organic growth with an active policy of external growth, both in France and internationally, where the Group has taken leading commercial positions in certain geographical areas, such as Northern Italy and Southern Africa.

The breadth of its offering, the resulting cross-selling synergies, and the regulatory changes impacting its markets, enable the Group to anticipate organic growth over the period well in excess of forecast GDP growth rates in the geographical areas in which it operates.

Continued strong organic growth over the 2024 – 2026 period.

In France, the Group’s business should be buoyed by the dynamic markets of the Circular economy and, above all, Industrial Services.

In Circular economy markets, Séché will focus on developing its capacities in the field of energy recovery from non-hazardous waste against a backdrop of a trend of declining treatment capacity, and material recovery from hazardous waste.

In the Services markets, Séché will benefit from a buoyant regulatory environment and from the growth dynamic resulting from its new offering in the industrial water cycle businesses and from the expected cross-fertilization with the Group’s other activities and customer bases. The Group will also benefit from the growth momentum of its „global offers“, a delegated management service for industrial customers.

Internationally, the Group is confident in its ability to maintain solid growth, and in particular:

• In Italy, where the new Mecomer-Furia group offers powerful commercial and industrial synergies, making Séché one of the leading operators in the hazardous waste market.
• In Southern Africa (South Africa and Namibia), where the Group offers the most comprehensive range of waste management and environmental safety solutions for industrial customers through its subsidiaries with complementary skills: Interwaste, Spill Tech and Rent-A-Drum.

The Group is also confident in its ability to take advantage of the positive trend in its Latin American markets, where it has strengthened its position in emergency environmental services with the recent acquisition of Essac in Peru.

For the 2024 financial year, Séché Environnement anticipates organic growth in contributed revenue of around 5%, to which will be added the contribution of the scopes acquired in 2023 of around €60m, for contributed revenue of around €1,100m.

By 2026, and on this basis, Séché anticipates contributed revenue of around €1,200m, representing an average organic growth rate of around +5% over the period.

Improvement in gross and recurring operating profitability between 2024 and 2026

The Group will work across all scopes to pursue its strategy of industrial efficiency, based on rigorous requirements in terms of safety, regulatory compliance and operational excellence.

In this context, the Group is implementing a productivity plan which enables it to anticipate:

• Improvement in the utilization rate of its industrial and logistics
• Control of industrial investment: this should stabilize over the period at around the levels reached in 2023, i.e. between €100 and €110m per year.

In 2026, the normalized investment rate would be around 9% of contributed revenue (vs. 10% previously), of which around 3% relates to maintenance investment, around 2% to safety and regulatory capital expenditure (i.e. a total of around 5% maintenance capital expenditure), and around 4% to development capital expenditure.

Séché will implement other levers to boost its gross and current operating profitability, such as optimizing the profitability of its new business scopes (particularly in the industrial water cycle), pursuing its industrial efficiency plan or controlling its operating expenses through a savings plan of the order of €20m over the period (at constant scope).

Lastly, the prevalence of Services activities in the business mix should lead to faster growth in current operating income than EBITDA over the period.

For 2024, Séché Environnement anticipates EBITDA of around €230m and current operating income of around €105m.

The Group has targets for 2026 of:

• EBITDA of between €265 and €275m, i.e. gross operating profitability of between 22% and 23% of contributed revenue.
• A current operating income of between €132 and €144m, i.e. an operational profitability level of between 11% and 12% of contributed revenue.

Maximized free cash flow generation.

Séché strive to maximize its free cash flow generation by controlling its investments around their current level, neutralizing its change in working capital requirements on average over the period, and an appropriate dividend policy.

For 2024, Séché Environnement anticipates a financial leverage ratio of less than 2.7 X EBITDA (excluding acquisitions).

Over the period 2024 to 2026, the Group intends to generate free cash flow of at least €250m over the period 2024 to 2026 (excluding acquisitions).

New 2026 non-financial commitments.

On the strength of its ability to combine economic growth with a reduction in the environmental impact of its customers, Séché Environnement has set itself new non-financial objectives for 2026:

• Pursue the decarbonization of its activities: -13% greenhouse gas emissions¹⁵ (in line with the target approved by SBTi in early 2023).
• Consolidate its ability to decarbonize its customers by increasing material recycling activities: +50% of greenhouse gases avoided.
• Improving energy efficiency: -12% reduction in energy
• Increasing energy resilience: 310% energy self-
• Reduce the water consumption of its activities: -13% reduction in water
• Preserving biodiversity: 80% progress on its Act4Nature action

These various objectives will help to reduce the environmental impact of Séché Environnement, as well as that of its customers, reinforcing the Group’s position as a key player in the environmental transition.