Message from the chairmen

Av H-Foto _Voorzitters _2016Ladies and gentlemen,

The world economy in 2017 was characterized by a wide diversity of events and emotions. In the US, the election of Trump generated some euphoria on the stock markets, but also a worldwide fear of protectionist implications of the ‘America First’ policy. In Europe, there is uncertainty about the timing and consequences of the Brexit vote, but at the same time the hope of far-reaching economic reforms following the election of Macron as French president. As the IMF revises its growth forecasts positively (USA: 2.7%, Europe: 2.2%), we are seeing an increasing number of geopolitical conflicts and tensions.

Against this ‘volatile’ background, the key participations of the AvH group recorded solid results in 2017. The consolidated net result (AvH share) amounted to 302.5 million euros, which is a 35% increase compared with 2016 (224.2 million euros). This is just short of a record result, since in 2006 a net consolidated result of 307.6 million euros had been reported, albeit thanks to an extraordinary capital gain of 150 million euros on the sale of Quick Restaurants.

In 2017, the recurring contribution of the four core segments accounted for 91.5% (277 million euros) of this group result. In itself this represents a 7% growth versus 2016 (259 million euros). This solid growth is the result of a strong contribution from all those core segments, with the strongest growth (+15.6%) and the strongest contribution (41%, or 113.9 million euros) coming from our ‘Private Banking’ segment with Delen Private Bank and Bank J.Van Breda & Co.

Where in 2015 the ‘Marine Engineering’ and ‘Private Banking’ segments still represented 83% of this ‘recurring’ group result, this figure decreased to 74% over 2017, in spite of their own good results. This is primarily explained by the increased contribution of the profits from ‘Real Estate & Senior Care’ over 2017, amounting to 54.3 million euros, and the increased contribution - partly thanks to our higher shareholding percentage - of SIPEF (15.9 million euros).

The results for 2017 are therefore not only very good in absolute terms, they are qualitatively perhaps the best ever, thanks to the recurring nature of the profit and a balanced spread within all the core segments. The consolidated net result was also influenced by two extraordinary elements. There were 17.6 million euros worth of net capital gains and impairments, consisting of capital gains on the disposal of our participations in Groupe Ogeda (13.9 million euros) and NMP (21.2 million euros). These were partly offset (to the amount of 18 million euros) by impairments. The stake of AvH in the remeasurement which SIPEF had to recognize on the acquisition of exclusive control over PT Agro Muko resulted in a remeasurement of 19.8 million euros.

The exceptional results reflect the strategic priorities which AvH has set itself. AvH wants to focus even more on a limited number of strategic participations with long-term recurring growth potential. The strategic and financial support which AvH has given to SIPEF in connection with the acquisitions of Agro Muko and Dendymarker, and of which 97.1 million USD was financed by a capital increase, should be seen in this context. AvH invested approximately 40 million euros additionally in SIPEF and increased its shareholding percentage to 30.25%.

The sale of A.A. Van Laere to CFE and the sale of NMP to the Antwerp Port Authority also fit into this logic. In December, an agreement was also reached on the sale of BDM-Asco to the US insurer The Navigators Group. This transaction will only contribute to the group result in 2018. Also in 2017, our shareholding (3%) in Ogeda and that of all the other shareholders was sold to the Japanese Astellas group, an agreement in principle was reached on the sale of Transpalux, while OQM is now ‘held for sale’. The elimination of those lines simplifies AvH’s group structure to a significant degree.

At December 31, 2017, AvH had a net cash position of 80.2 million euros. The board of directors proposes to the general meeting to increase the dividend, in line with the increase in the recurring result, by 8% to 2.20 euros per share, or a total amount of 73,693,188 euros.


DEME reported in 2017 a 20% turnover growth to 2,365.7 million euros (2016: 1,978.2 million euros), with a stable EBITDA of 456.2 million euros (2016: 450.1 million euros) and a stable net result of 155.1 million euros (2016: 155.3 million euros). Despite an investment programme for eight new vessels (capex of 614 million euros in 2017), the net debt position remained on a very decent level at 296.2 million euros.

This favourable development is the result of a strategic decision that was made 15 years ago to believe and invest in the potential of offshore wind energy for the marine engineering business. GeoSea realized a turnover of more than one billion euros in 2017. DEME wants to consolidate its leadership position in this market by continuing to invest in new vessels (the jack-up vessel Apollo, the cable-laying ship Living Stone, the next-generation installation vessel Orion with a lifting capacity of 5,000 tonnes) and by the acquisition of A2SEA, the leading specialist in the installation of offshore wind turbines.

DEME strongly believes in the potential of marine engineering, and in that light it acquired a 72.5% stake in G-tec, which specializes in offshore geotechnical and geological investigation.

Including the orders not yet finally confirmed, the order backlog reached an all-time high of 5,264 million euros, with a wide diversity of contracts for dredging works, offshore maritime works, and hydraulic civil engineering.

CFE reported a turnover of 710.5 million euros and a net profit of 23.9 million euros in 2017. This net profit was favourably impacted by the delivery of the Kons project in Luxembourg and the sale to our partner of the 50% stake in the Oosteroever project in Ostend.

All divisions of CFE made a positive contribution to this result and were able to report an increase in their order books. In this way, CFE confirms the successful turnaround of its organization and its activities. This encouraged CFE to consider the acquisition of A.A. Van Laere. Although 2017 was a disappointing year for Van Laere with substantial losses on four projects, a new management team and a solid order book will give A.A. Van Laere a fresh start under the wings of CFE.

Rent-A-Port had little land stock available, resulting in a weaker 2017. The planned investments in new dikes should allow it to offer a new zone to new customers.


Delen Private Bank and Bank J.Van Breda & Co reported a record year in terms of inflow of new assets and in terms of result. The assets under management totalled 47,796 million euros, of which 43,230 million euros off-balance sheet investments and 4,566 million euros client deposits.

Delen Private Bank had 29,410 million euros worth of assets under management at year-end 2017. This growth is fairly evenly spread between the branches in Antwerp and Brussels and the regional branches of Rumbeke, Ghent, Hasselt and Liège. The success of this regional presence urged Delen Private Bank to open branches in Leuven, Namur, Knokke and Geel-Westerlo. The focus on discretionary asset management is reflected in a share of 81% in terms of assets under management and 92% in terms of number of accounts.

In the UK, JM Finn has 9,294 million pounds worth of private assets under management, of which already 74% under discretionary management. Oyens & Van Eeghen focuses entirely on its private clients, who have entrusted 660 million euros.

Delen Private Bank realized a consolidated net profit in 2017 of 105.8 million euros. With 678.8 million euros equity and a Core Tier1 capital ratio of 29.3%, the bank is very solidly capitalized.

Bank J.Van Breda & Co also reported a strong commercial year. The total invested by clients increased by 10% to 13,743 million euros (2016: 12,449 million euros), of which client deposits +8% and off-balance sheet products +12%. Of this amount, 5.5 billion euros is entrusted to Delen Private Bank in asset management.

Bank J.Van Breda & Co continues to support its target clients with appropriate loans (+7%). Although the low interest rates have a negative impact on interest income, Bank J.Van Breda & Co was able to increase its total revenues to 141.4 million euros (134 million euros in 2016) and the net profit to 39.1 million euros (2016: 37.7 million euros).

With 538.7 million euros equity and a Core Tier1 capital ratio of 14.2%, Bank J.Van Breda & Co is also a solidly capitalized bank. Moreover, Bank J.Van Breda & Co uses its balance sheet solely for the benefit of its clients, while its lending activity is entirely local and entirely financed with local deposits. With a leverage ratio of 8.9%, Bank J.Van Breda & Co also has a very healthy balance sheet.


The ‘Real Estate & Senior Care’ segment made another increasing contribution to AvH’s group result (54.3 million euros compared with 46.2 million euros in 2016).

Leasinvest Real Estate will now focus on two asset classes (retail and offices) and three countries (Luxembourg, Belgium, Austria) with a strategy of active management and targeted acquisitions. Thanks to some capital gains and the integration of a new investment in Luxembourg (Lux Airport), the contribution increased to 14.9 million euros.

Extensa equalled its result of 2016 with a contribution of 29.9 million euros thanks to the delivery of the Herman Teirlinck building to the Flemish Administration on the Tour & Taxis site, and the good progress of construction work on the Cloche d’Or site. Extensa now hopes to obtain planning permission soon for the further development of the ‘Gare Maritime’ and the residential zone on the Tour & Taxis site. The commercialization of the ‘Gare Maritime’ looks very promising.

In the senior care segment, Anima Care now has 2,010 retirement home beds spread over 20 residences in operation, while Residalya has 2,597 beds in operation spread over 34 residences across France. Thanks to the daily commitment of 1,365 staff members in Belgium and 1,605 staff members in France, both groups already report a total operating cash flow of (before rental charges, EBITDAR) of 41.5 million euros and a net result of 11.9 million euros (AvH share: 9.5 million euros). Since the start of this activity in 2009, AvH has already invested approximately 100 million euros in this segment and taken up 278.5 million euros worth of bank debts to finance the real estate and furnishing.

Both Anima Care and Residalya have a strategy of preferring to own the real estate of the residences which they operate. Naturally this also holds a substantial unrealized added value.


Perhaps the most significant event of 2017 took place at SIPEF, which invested nearly 200 million USD in the increase of its stake in Agro Muko and in the acquisition of the Dendymarker estate. These transactions were financed in part by a capital increase of 97.1 million USD and additional debts for the remaining balance. AvH’s shareholding in SIPEF now stands at 30.25%.

As a result of these acquisitions, the planted areas increased from 55,125 ha to 71,865 ha, and once the new plantations have reached full maturity, a total area of 84,326 ha will be in operation.

Thanks to solid production figures (+11.2%) and fairly stable palm oil prices, SIPEF reported a turnover of 321.6 million USD and a strong free cash flow, which made it possible to limit the net debt position to around 83.7 million USD (compared with 45.1 million USD in 2016).

NMP can look back on a year in line with expectations. We are pleased that with the Antwerp Port Authority we were able to offer NMP a strategic partner that can give a new dynamic to the company.


In the ‘AvH & Growth Capital’ segment, the contributions from the participations overall resulted in a slight loss (-1.3 million euros).

The positive developments at Mediahuis, Telemond and Turbo’s Hoet Groep were offset by the difficult situation at Distriplus, which led to the recognition of impairments, and the start-up problems encountered by Manuchar at the Somin mine in Mexico. We should point out in particular the transformation at Corelio/Mediahuis, which by acquiring the Telegraaf Media Groep created a second home market in the Netherlands, alongside its continuing leadership position on the Belgian market.

The streamlining of the ‘Growth Capital’ portfolio creates room for AvH to take an interest in new investment opportunities, where it wants to position itself as ‘Partners for sustainable growth’ of family-led groups.


We believe that the key participations are well positioned for 2018.

We wish to thank all the staff of the group, both at the Begijnenvest offices and in the group companies, for their commitment and their contribution to the successful development of AvH.

 

March 19, 2018

 

Luc Bertrand
Chairman of the board of directors
Jan Suykens
Chairman of the executive committee