Business News

At technotrans the upswing is gradually taking shape

Thursday 05. August 2010 - Revenue for the second quarter was 2.6% higher for the first time / EBIT margin 4.4 percent / more dynamic business performance in the second half expected

For the first time in a long while, revenue for the second quarter of the 2010 financial year was higher than in the corresponding prior-year quarter. The business volume reached € 21.0 million and was therefore 2.6% up on the second quarter of 2009 (€ 20.5 million). After the cautious start to the current financial year, the second quarter thus confirmed the expectations of a modest recovery in 2010. This welcome development is attributable exclusively to the Technology segment, where the revenue trend was reversed from a fall of 21.4% in the first quarter to a rise of 4.9% in the second quarter. This increase on the one hand reflects the recovery in certain regions of the world, with Asia and South America performing particularly well. On the other hand business with printing press manufacturers revived slightly, as expected. Revenue for the first half of 2010 reached € 40.8 million.

The 2.6% rise in revenue in the second quarter also led to an improvement in earnings. A gross profit of € 6.9 million was achieved, representing a rise of 6.5% on the second quarter of the previous year (€ 6.5 million); the gross margin was 32.8% (previous year 31.6%). Half way through the year the gross profit was € 13.3 million despite the lower revenue (previous year € 12.7 million, +4.8%).

Whereas the prior-year quarter had yielded a loss of € 1.1 million at EBIT level, the second quarter of the 2010 financial year was likewise once again profitable. EBIT reached € 0.9 million, representing a slight improvement on the result for the first quarter of 2010 (€ 0.6 million); the EBIT margin was 4.4%, as against 3.2% in the first quarter of 2010. The net fall of € 1.2 million in distribution costs, administrative expenses and development costs, along with positive exchange-rate effects at group level, had a positive impact. The costs for two international exhibitions (IPEX, ExpoPrint) had to be absorbed in the quarter, as did the costs for the new financing concept that was implemented in this quarter. Whereas first-half EBIT was still negative at € -2.0 million in the previous year, it reached € 1.6 million or 3.8% in 2010. The net income for the period was € 0.5 million for the second quarter, bringing the total for the first half to € 0.8 million. This corresponds to earnings per share of € 0,13 (previous year € -0.41) for shares outstanding.

At the reporting date of June 30, 2010 the technotrans Group employed a total of 609 persons, 72 or 14.7% fewer than at the corresponding point of the previous year.

The segments
After four quarters which, with hindsight, appear to have represented the trough of the crisis, revenue for the Technology segment recovered slightly in the second quarter of 2010. This was prompted by welcome momentum in certain emerging countries; demand from printing press manufacturers likewise picked up as expected. Revenue therefore grew by 4.9% compared with the prior-year quarter (€ 12.0 million) to € 12.5 million; this confirmed the planning, in which a gradual recovery in the course of the current financial year had been anticipated. The first quarter had still suffered a 21.4% revenue downturn on the previous year. After six months, revenue therefore reached € 23.7 million, 9.4% below the still relatively high level for the prior-year period.

With restructuring costs severely undermining the result for the segment in the first half of the previous year, the loss fell to € -0.5 million in the second quarter of 2010, bringing the overall loss for the first half of 2010 to € 1.1 million. The earnings situation should improve over the coming quarters along with a further acceleration in business volume.

The Services segment achieved revenue of € 8.5 million in the second quarter of 2010, a downturn of 0.5% on the prior-year quarter. This stabilisation of the business performance provides yet more evidence that the impact of the crisis is abating. Nevertheless, revenue continues to suffer from a lack of installation business because the number of major projects remains low. On the other hand gds AG is performing well with its new subsidiary in Switzerland, which has succeeded in acquiring new customers in recent weeks.

In terms of earnings, too, the Services segment was able to help stabilise business once again. It produced a result for the segment of € 1.4 million in the second quarter, thus bringing the total for the first half of 2010 to € 2.7 million (previous year € 2.2 million). The margin after six months was a satisfactory 15.6%.

Net worth and financial position
The balance sheet total has increased by 4.1% from € 69.2 million to € 72.1 million since the start of the year. The main changes on the assets side concerned property, plant and equipment as well as intangible assets, which fell further as a result of amortisation. On the back of the slight recovery in standard business, inventories grew by around € 1.6 million to € 17.6 million, while cash and cash equivalents simultaneously rose by around € 2.6 million to € 12.9 million.

Changes on the equity and liabilities side largely concerned the financial liabilities, the maturities of which have shifted towards the medium to long-term as a result of the new financing concept. Current liabilities thus fell by around € 6.3 million, whereas non-current liabilities simultaneously rose by € 5.9 million. Largely because of this change, working capital (current assets – current liabilities) grew from € 9.0 million in the first quarter to € 17.0 million at the end of the second quarter.

Based on a net profit of € 824 thousand for the first six months of 2010, the cash flow from operating activities before changes in net current assets totalled € 2.9 million (€ -387 thousand). In the first half of the new financial year there was only a moderate need for financing of working capital, therefore cash from operating activities amounted to € 2.8 thousand (previous year € 7.9 million). Net cash from operating activities at the six-month mark was up to € 3.6 million (previous year € 6.5 million). In relation to revenue, this produced a cash flow ratio of 8.9%. The free cash flow remains positive after six months, at just under € 3.2 million.

Net debt continued to fall to € 9.5 million (end of 2009: € 12.4 million). Gearing at the reporting date was 28.7%.

Outlook
There have been increasing signs over the past few weeks that the printing industry has overcome the worst of the crisis. The latest announcements by printing press manufacturers indicate a revival in orders but revenue is still improving only very tentatively. “This underpins our expectations of a slightly more dynamic business performance in the second half which, bearing in mind the weak start to the year, will be needed if we are to achieve our revenue and earnings targets for the 2010 financial year as a whole,” says Henry Brickenkamp, Spokesperson of the Board of Management.

In pursuing activities focusing on applications away from the printing industry we are generating fresh future potential in an effort to safeguard the company’s long-term growth. An initial visible step was taken through the cooperation with Termotek AG. Termotek develops and builds laser temperature control units that occupy a technological position very close to technotrans’ core skill. The market for laser applications is growing rapidly and technotrans’ international setup paves the way for accessing additional international markets more easily. “If our shared expectations of the cooperation are fulfilled, we will be prepared to strengthen ties with Termotek still further,” Brickenkamp explains the prospects and points out that there are also various other options that technotrans is planning to explore primarily with self-developed products. “The extent to which these projects have taken on firm contours varies considerably, but in certain cases we have already reached the phase of building prototypes and will now proceed to test them in practice. If these tests prove positive, we will likewise announce our entry into these application areas.”

With a view to the figures for the first half Dirk Engel, CFO of technotrans, say: “In light of expectations that business should recover further in the second half of the year, we believe there is further scope for improvement over the year as a whole. All in all, we expect to achieve our revenue target (€ 85 to 90 million) for the current financial year; the pace of development in the second half will substantially determine how far we can progress beyond the lower end of this range. At present market visibility is insufficient for us to provide a more reliable forecast. Our performance in the first half of the year showed that technotrans has successfully returned to sustained profitability even from a low level of revenue. We continue to expect a margin of between 3 and 5% for the second half. Here, too, an upturn in revenue would have clearly positive effects and would pave the way for EBIT margins in excess of 5%.”

Note: Any forward-looking statements contained in this report represent our best judgment as to what will occur in the future. The Company’s actual results could differ materially from those forecast, depending on a number of competitive and economic factors, some of which are and will be outside the control of the Company.

http://www.technotrans.com
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