Business News
technotrans achieves revised targets for 2007 – Heinz Harling announces plans to step back
Wednesday 12. March 2008 - Rise in revenue to 153.2 million / EBIT diminished by R&D and acquisition / net income reaches 9.1 million or 1.33 per share / Shareholders' Meeting to approve unchanged dividend of 0.70 per share / initially defensive approach in 2008 targets
Revenue for the technotrans Group reached a new record high of 153.2 (previous year: 151.3) million, which was very close to the revised target of 154 million from November 2007. Growth, however, was lower than originally planned, at only 1.3 percent. The Services segment performed distinctly better, with growth of 6.6 percent, whereas the Technology segment ended the year broadly at the previous year’s level due to various changes. The weak US dollar (effect of currency translation) and the termination of trading in UV dryers in the USA at the end of 2006 as planned had a particularly marked effect. Both factors were compensated for at group level firstly by the acquisition of rotoclean and secondly by the growth in core business, but the sluggish business progress of 2007 ultimately did not allow leaps in growth of the magnitude that had been experienced in the 2006 financial year.
As a result of the weaker development in revenue, the overall financial performance of technotrans likewise fell short of expectations. Net income ultimately only reached the revised target from November 2007 of 9.1 million. Gross profit (revenue less cost of sales) remained on a par with the previous year at 50.3 million (50.4 million), but the gross margin fell slightly short of the previous year at 32.9 percent (33.3 percent). This was adversely affected by the purchase price allocation from the corporate acquisition, a higher material costs ratio following the introduction of a new release for two major product lines and the sharp increase in the workforce.
Earnings before interest and taxes (EBIT) reached only 13.9 million, a fall of 11.4 percent or 1.8 million on the previous year. Development costs played a major part in this downturn one year before the drupa, rising from 5.1 million to 6.3 million. All in all, the EBIT margin in the past financial year was 9.1 percent compared with 10.4 percent in the previous year. Earnings before interest, taxes, depreciation and amortisation (EBITDA) of 18.2 million were down only 3.3 percent on the prior-year figure (18.8 million). Depreciation and amortisation increased by around 1.2 million since 2006, to 4.3 million, among other things as a result of the patents and technologies acquired in connection with the takeover of rotoclean. Earnings before taxes reached 13.3 million in the 2007 financial year, a drop of around 10 percent on the previous year (14.9 million). Income tax expense of 4.3 million was down on the previous year’s figure (4.9 million), representing an effective tax rate of 32.0 percent.
The net income of the technotrans Group reached 9.1 (10.0) million, representing a year-on-year fall of 9.2 percent and within the revised target range. The net rate of return was 5.9 percent (6.6). Basic earnings per share according to IFRS, on the basis of a weighted, slightly higher number of shares (6.8 million, up from 6.7 million), consequently amounted to 1.33 (previous year 1.48).
An unchanged dividend of 0.70 per share is to be proposed to the Shareholders’ Meeting, which will take place on May 9, 2008.
At the reporting date of December 31, 2007 the group employed a total of 831 persons, 79 or 10.5 percent more than at the corresponding point of the previous year (752). The majority of the new jobs were created in Germany, predominantly in production-focused areas and also in service, including Technical Documentation in particular.
The segments
The Technology segment succeeded in stabilising revenue at 115.3 million during the 2007 financial year, the same level as in the previous year (115.7 million). The withdrawal from trading in UV dryers in the USA initially dented revenue. The acquisition of rotoclean in the early part of 2007 was intended not only to extend the product portfolio in the sphere of cleaning systems, but also to compensate for this loss of revenue to some degree. The market environment experienced a noticeable slowdown in the second half. On the one hand the economic climate worldwide has taken a turn for the worse following the financial crisis in America, and consequently undermined the propensity to invest in new equipment. On the other hand the industry is approaching its biggest exhibition, the drupa, which takes place only once every four years. It is entirely possible that customers are holding back with their investment spending to see what new products the exhibition will bring forth.
Earnings the Technology segment reached 7.4 million by year-end, a fall of 27.5 percent (previous year: 10.2). The rate of return for the segment fell to 6.4 percent as against 8.8 percent in the previous year. The key factors determining this dip in profitability were the higher cost of materials following the launch of the new release, and non-recurring expenditure in connection with the acquisition. Not least because of the measures already taken during the past financial year, the Board of Management expects the segment’s financial performance to improve again in 2008.
The Services segment yet again proved to be a pillar of stability for the group. Revenue rose by 6.6 percent to 37.9 million (previous year 35.5 million). This is attributable on the one hand to the steady rise in the number of devices and systems in the market, and on the other hand to the ongoing expansion of the international network. The global document solutions business area performed particularly well. Its success stemmed both from the production of technical documentation on behalf of third parties, and from higher sales of its self-developed docuglobe software.
The result for the segment improved by 24.0 percent to 6.2 million (previous year 5.0 million) and the of return for the segment was yet again a highly satisfactory 16.3 percent, compared with 14.0 percent in the previous year.
Financial position
Cash from operating activities showed a year-on-year increase of 8.7 percent, from 18.0 to 19.6 million. Mainly due to the rise of almost 3.3 million in income tax payments, the net cash from operating activities fell to 10.6 million (previous year 12.3 million). A total of 8.0 was invested in property, plant and equipment, first and foremost in the new building at Sassenberg and in the launch of mySAP. The net cash outflow for acquisitions, including patents and technologies, totalled some 4.5 million. The free cash flow, representing net cash from operating activities less the net cash used for investment spending, was therefore slightly negative as expected, at -0.6 million for the year as a whole (previous year 8.2 million).
Outlook
The Board of Management anticipates that the printing industry in general will stabilise at the current level and is not initially taking any major drupa bounce for granted for the remainder of the 2008 financial year. “We will therefore be driving growth entirely under our own momentum,” remarked Heinz Harling, Chairman of the Board of Management of technotrans AG. “We will exploit the opportunities that are provided by our extended product portfolio and a new or increased presence in hitherto unexplored markets.”
The Board of Management in addition aims to continue playing an active role in the current process of consolidation in the supply industry to printing press manufacturers. “We will carefully scrutinise whatever opportunities come our way. Acquisitions remain on the agenda, provided that they usefully complement our long-term corporate strategy,” added Harling.
Taking into account the combined effect of the factors described, the Board of Management initially expects revenue for the 2008 financial year to edge up to around 160 million and is consciously assuming a risk-based economic scenario. All in all, this would amount to organic growth of some four percent.
“With a slight increase in volumes and in the absence of the non-recurring effects of the previous financial year, earnings before interest and taxes should likewise improve in 2008,” commented Dirk Engel, Finance Director of technotrans AG. “Our aim is to return to our long-term benchmark of an EBIT margin of 10 percent by the end of the year. This target may appear ambitious when one considers, for example, that the drupa in the second quarter will necessitate increased outlay.”
The Board of Management therefore anticipates net income for 2008 in the order of 10.5 million; this would equate to IFRS earnings per share (based on the total number of shares outstanding at the end of 2007) of around 1.55. For many years it has been our policy to distribute approximately half of the consolidated net income to shareholders. In keeping with this dividend policy, the envisaged improvement in earnings would also offer shareholders the prospect of an increase in the dividend.
Heinz Harling to step back from front-line role
After having been instrumental in shaping the company’s strategy and growth for 28 years, the Chairman of the Board of Management Heinz Harling will be stepping back from his front-line role after this year’s Shareholders’ Meeting. In preparation for this decision, which has been prompted by personal and health considerations, arrangements for a smooth handover to his successor have been put in place over the past three years. The Supervisory Board expressly welcomes Harling’s availability to serve as future Supervisory Board Chairman of technotrans AG and thus to contribute towards the future development of the company. In future the members of the newly constituted Board of Management will be Henry Brickenkamp (Spokesperson), Dirk Engel (Finance) and John Stacey (International Organisation).