Reporting today in its own fashion was Veolia Environnement, which now trades as VEOEY on the pink sheets. The French water and cleanup firm mashed together its Q1 and Q2 figures and it used constant and current currency data to improve its outlook. While this inspires skepticism, I think CEO Antoine Frérot made the case for a turnaround at the firm he heads and its likelihood of meeting 2018 targets. The reasons were not the confusing numbers but such features as euros 121 in cost cutting, well ahead of target; a drop of 8% year/year in debt to euros 8.678 bn, still huge for a firm whose sales came to euros 11.956 bn in H1; and deals. These include getting out of the public transport business by selling its Transdev arm to the state retirement fund, la Caisse des Dépôt et des Consignations, Aug.1.

It also signed a major euros 3.3 bn deal with Yanshan Pete China, a sub of Sinopec, highlighting its move into large cleanup projects for the oil industry. It also bought two environmental firms in the USA, Kurion which treats radiation and Chemours which removes sulfur from smokestacks. In a break from tradition, M.  Frérot frankly stated (in the French conference call) that the French municipal services market (where VEOEY started out) has become unprofitable and the whole rest of the company is being used to offset the unacceptable 10.7% EBITDA margin in France. EBITDA is Earnings before interest, taxes, depreciation, and amortization. Worldwide that level is 13.2% and in emerging markets a whopping 17.4%.

Now for the numbers, all for H1. EBITDA was euros 1.56 bn, up 5.6% year/yr at constant exchange rates, and up 6.9% (with no number given) in Q2. Net profits came in for the half at euros 342 mn, up 6.4% at current exchange rates and 10.1% at constant ones. Tax rates remained flat at 29% but the total was nipped by euros 95 mn for restructuring and boosted by the Transdev deal. The resulting adjusted net was euros 251 mn.

In Q2 non-renewal of contracts in its homeland led to French sales falling 0.7%, hurt also by a drop in iron prices (which reduced the profits from collecting and recycling municipal garbage). Waste water, its other legacy business, was down 10.7%, again probably mostly in what the French call the Hexagon. M. Frérot commented that France was among the “countries where activity was less favorable” and “challenging” so VEOEY will be further restructuring there. That is a euphemism for reducing manpower there.

Return on equity rose 0.3% overall, but was much higher in markets Veolia targeted: up 2.8% in Germany; up 9.4% in North America (helped by the new lines, of course, plus the strong dollar and a major new contract from Milwaukee, WI); up 8.5% in Latin America; and up 9.1% in the Middle East and Africa. British return on equity was flat (despite a new contract with BAE Systems), EU was down 1%, and Australia down 3.2%. This is a boiled down version of 36 slides and nearly 80 pages of text accompanying the CC, all by itself an environmental disaster.

Commented M. Frérot: “We can confirm our objectives for 2016 thanks to cost cutting post with great confidence our targets for 2018.” The share is up 1.12%. It yields in euros over 3.75%.

Also reporting today was Israeli Compugen, the drug discovery startup whose results improved because its big capital spend on its South San Francisco research lab has been completed. As a result, CGEN beat analyst forecast with EPS of minus 13 cents (vs consensus expectation of minus 17 cents) and also sales coming in at $500,000 vs analyst forecasts of $350,000. Of course the company is still losing money. But CEO Dr Anat Cohen Dayag informed the world that in addition to T cell-based immuno-oncology and myeloid cell-based research into immune checkpoint targets, CGEN has also added a new line. She said “we have established a comprehensive in vivo validation system based on knockout mice, where the target of interest has been genetically removed” in early 2015. She added that it is now being applied to most immuno-oncology targets helping: “evaluate clinical relevance”; ”identify effective drug combinations”; “assess mechanisms of action” which suppress immune response. Mouse trials helped find PF-1 and CTLA-4 inhibitors by predicting which proteins they target. Now the same system is being applied to T-cell  and myeloid immune checkpoint targets. Immune checkpoints need to be turned off so the drugs given to cancer patients can kill tumors.

She said a new drug, CGEN-15029 now called COM 701, is in preclinical development for an FSA filing next year.

Despite the revelation, the market focuses on the continued losses at CGEN which has cash on hand of $74.1 mn, down from $81.4 mn at the close of 2015, and no debt. Potential for substantial payback for shareholders and help for patients via predictive biology using computerized fast throughput by CGEN. It finds new targets and cannot be ignored, as Chairman Martin Gerstal told the conference call. I tend to agree.