CGG Announces its 2018 Fourth Quarter & Full-Year Results

Paris, France | Mar 8, 2019

CGG (ISIN: FR0013181864 – NYSE: CGG), world leader in Geoscience, announced today its 2018 fourth quarter and full-year unaudited results.

From Q4 2018, CGG applied the following accounting changes:

• Following the strategic plan announced on Nov. 7, 2018 and actions undertaken afterwards, Acquisition is accounted under IFRS 5 as discontinued operations and assets held for sale and therefore is no longer included in Sales, EBITDAs and Operating income;
• In line with industry standards, CGG applied prospectively 4-year straight-line amortization for its Multi-Client library.

Q4 2018: Solid Sales and Positive Net Cash Flow at $21m

• IFRS figures: revenue at $370m, OPINC at $(282)m
• Segment revenue1 at $438m, up 21% year-on-year, driven by strong multi-client sales
• Segment EBITDAs1 at $235m, up 44% year-on-year, a 54% margin
• Segment operating income1 at $10m, impacted by $(94)m additional straight-line amortization in Multi-Client due to change in estimate

Q4 P&L Impacts of the 2021 Strategic Roadmap and Other NRC

• Group net income of $(790)m, impacted by:
  • Non-cash impairment charges of $(240)m, mainly linked to US Gulf of Mexico StagSeis data library of $(197)m, and Sercel inventory provision of $(30)m
  • Discontinued operations net loss of $(488)m, including $(263)m provisions and $(139)m non-cash impairments associated with Acquisition exit, in line with November 7, 2018 strategic announcements

FY 2018: Strong Revenue Growth and Positive Segment FCF at $134m

• IFRS figures: revenue at $1,194m, OPINC at $(180)m, Group net income at $(96)m
• Segment revenue1 at $1,227m, up 19%
• Segment EBITDAs1 at $556m, up 28%, a 45% margin
• Segment operating income1 at $142m, versus $48m last year
• Net debt of $733m and liquidity of $434m at year-end with net cash flow of $(124)m. Leverage ratio at 1.3x

2019 Outlook

• Expected high single digit revenue growth in line with increase in E&P spending
• Segment EBITDAs margin expected at c. 45%, depending on revenue mix
• Segment operating income in the range of $75-125m, including multi-client amortization of $(365)-(385)m
• Total capex in the range of $330m-365m with multi-client cash capex at $250-275m, with a cash prefunding rate above 70%, and Industrial and R&D capex at $80-90m
• Higher cash generation, with segment FCF in the range of $175-200m

1Segment figures presented before IFRS 15 and Non-Recurring Charges (NRC)

Commenting on these results, Sophie Zurquiyah, CGG CEO, said:“As the market continues its gradual recovery, CGG in its new profile delivered excellent 2018 operating results, which were above expectations. Our Geoscience, Multi-Client and Equipment businesses generated $134m of segment free cash flow validating our strategic decision to refocus the Company on its high value-add and profitable businesses.

CGG enjoys a leading technology position in Geoscience and Equipment, and as a result of our sustained investments in R&D during the downturn, we anticipate a solid pipeline of new products and innovative solutions to continue to generate strong returns in 2019 and beyond. As we enter 2019, we expect the Group to grow in line with market trends and remain focused on generating cash and are on track to deliver our 2021 plan.”

Impacts from changes of profile and in accounting methods:

Discontinued operations

Following the strategic plan announced on Nov. 7, 2018 and actions undertaken afterwards, Contractual Data Acquisition is accounted under IFRS 5 as discontinued operations and ‘assets held for sale’ and therefore is no longer included in Sales, EBITDAs, operating income and free cash flow. Previous periods have been restated accordingly for P&L and cash-flow statements (but not for the balance sheet).

Implementation of the CGG 2021 strategic plan must comply with the undertakings and requirements in the CGG safeguard plan and other applicable local legal requirements.

Change in Multi-Client four-year straight line amortization estimate

In line with industry standards, CGG applied prospectively a 4 year straight-line amortization for its Multi-Client library starting October 1, 2018. Total impact was an additional charge of $(94) million in Q4 2018, including $(57) million for the full amortization of surveys older than 4 years.

IFRS 15

CGG implemented IFRS 15 on January 1, 2018 with a modified retrospective application. The only change compared to Group historical practices is related to multi-clients prefunding revenues. These prefunding revenues are recorded at delivery of the final data while they were historically recorded based on percentage of completion. For internal reporting purposes, CGG continues using historical method with prefunding revenues recorded based on percentage of completion.

CGG, as other seismic players, presents then a dual approach in the Group’s results including: one set of figures (the “IFRS” figures) with prefunding revenue recognized in full only upon delivery of the final data and a second set of figures (the “Segment figures”) produced in accordance with the Group’s historical method, which correspond to the figures used for internal management reporting purposes and provide comparative information during the year 2018.

IFRS 16

CGG will implement IFRS 16 starting January 1, 2019 with a modified retrospective application. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance of retained earnings on January 1, 2019, with no restatement of comparative information.

*For full financial records, please reference the Investors section of this website.*