Revenue of € 66.1 million after threequarters / earnings (EBIT) reaches € 3.4 million / revenue and earnings guidance for 2012 confirmed
The expected recovery in second half becomes a reality for the technotrans Group. It generated revenue of € 24.2 million in the third quarter of 2012. Thus the anticipated pattern of a steady improvement continued in that quarter, too (Q1: € 20.4 million, Q2: € 21.6 million). The fall compared with the prior-year quarter (€ 25.8 million) is now only -6.2 percent. The improvement compared with the first two quarters was largely because of the Print business area gradually returning to normal; during the first half of the year it had suffered from reluctance among investors in the run-up to the drupa industry exhibition and from the fall-out from the manroland and Kodak insolvencies. Nine months into the year, revenue was € 66.1 million compared with € 74.1 million in the prior-year period (-10.7 percent).
As expected, the higher volume of business in the third quarter also had a positive influence on earnings. Despite the lower revenue compared with the prior-year quarter (-6.2 percent), gross profit was unchanged at € 8.3 million, representing a gross margin of 34.4 percent as against 32.4 percent in the previous year. The substantial improvement in earnings is in particular down to the product mix, along with the leaner production process that is the outcome of the recent optimisation measures. Overall, EBIT was satisfactory at € 1.7 million (previous year € 1.9 million). The EBIT margin rose to 6.8 percent in the third quarter of 2012. For the first nine months of the financial year, EBIT reached € 3.4 million as against € 4.6 million in the prior-year period; that represents a margin of 5.2 percent (previous year 6.2 percent)
“We were able to determine a normalisation of demand from the printing industry during the third quarter. The progress of the business nevertheless also confirmed our expectations as not to build any above-average bounce from the drupa industry exhibition into our plans”, says henry Brickenkamp, Spokesman of the Board of Management of technotrans AG. “We therefore anticipate to achieve our original target for 2012 of revenue in the region of € 90 to 95 million, and also the EBIT is within the target corridor of 5 to 6 percent for the 2012 financial year already after the third quarter.”
The net income for the third quarter came to € 1.1 million, bringing the total for the first nine months to € 2.1 million. This equates to earnings per share outstanding of € 0.33.
Compared to the previous year, the total number of employees in the technotrans Group once again dipped slightly in the first nine months of 2012 (-38 employees on average, -5.7% compared with previous year). A focused expansion of capacity in the “New Markets” area and in Services, at gds was more than compensated by the reduction of the number of employees in the mainstream Print area. At the September 30 reporting date the group employed 653 persons (previous year 660), comprising 504 (previous year 507) in Germany and 149 abroad (previous year 153).
The segments
The Technology segment was the main beneficiary of the revival in business since mid-way through the year, realising € 14.7 million revenue in the third quarter, 15 percent more than in the second quarter of 2012. This development owed much to the normalisation of demand from the printing industry. After nine months, revenue for the Technology segment reached € 39.0 million (previous year € 47.3 million, -17.6 percent).
The segment result of € 0.1 million in the third quarter was back in the black. Because the loss of the first two quarters of 2012 came to € -1.1 million due to the substantially lower revenue, the cumulative result after nine months is now € -1.0 million. This compares with a positive € 0.2 million over the first nine months of the previous year – when revenue had been significantly higher and there had been no drupa costs. In summary, it can be noticed that the right measures have been taken to bring the cost structures in line with the lower volume of business. Volume growth, including from projects outside the printing industry, will therefore probably yield a further improvement in earnings.
Revenue in the Services segment reached € 9.5 million in the third quarter and was therefore again at the very healthy level of the prior-year quarter. The same applies to the rate of return for the segment, which also remained unchanged at 16.6 percent.
The Services segment also includes the business of our subsidiary gds AG, which acquired a majority interest in Sprachenwelt GmbH with effect from September 1, 2012. Because gds’ customers view the translation of technical documentation as an integral part of the overall service, this broadening of the “one-stop shop” approach is expected to bring beneficial effects for gds’ revenue and earnings.
Financial position
Based on net income of € 2.1 million for the first nine months, the cash flow from operating activities before changes in working capital reached € 6.5 million for the year to date (previous year € 7.3 million). While the change in working capital in the first nine months of the previous year had diminished cash flow by € -3.1 million mainly because of the higher volume of business, in the same period of 2012 it was possible to release an amount of € 0.4 million in cash from such changes. Cash from operating activities at September 30 amounted to € 7.0 million (previous year € 4.1 million). After deduction of interest and income tax payments, the net cash from operating activities for the period under review amounted to a healthy € 6.1 million (previous year € 2.7 million).
The cash sum of € 1.1 million used for investing activities comprises the cash payments for the volume of investment required and the cash outflow of gds AG in connection with the purchase price component paid for the interest acquired (around € 0.4 million). In the corresponding period of the previous year, cash totalling € 1.7 million was used; this sum included the cash outflow for the acquisition of the interest in Termotek AG. At € 5.0 million, the free cash flow after the first nine months of the current financial year was at a very healthy level (previous year € 1.0 million).
In the course of 2012 technotrans has used its good financial position and the benefits of low interest rates to bring its financing for the coming years in line with actual requirements. In particular it has financed the redemption of € 7,5 million in short-term borrowings on the one hand by raising new long-term loans amounting to € 3.9 million and on the other hand from existing surplus liquidity. Cash and cash equivalents at September 30 climbed to € 14.3 million (previous year € 11.2 million). Together with available credit facilities agreed and promised, the financial position thus continues to provide adequate leeway both to finance current business and for potential acquisitions.
The equity ratio at September 30, 2012 climbed to 57.9 percent. Since this quarter, technotrans has moreover been free of net debt and its net liquidity is positive (€ 0.4 million); in other words, the interest-bearing liabilities are lower than the cash and cash equivalents. Gearing is consequently negative.
At the end of October moreover the negotiations with an investor on the acquisition of the property in Gersthofen were brought to a successful conclusion. As a result cash and cash equivalents will rise further by around € 4.0 million.
Outlook
Nine months into the 2012 financial year, the expectations have so far largely been fulfilled. “As matters stand we therefore expect to achieve our original target for 2012 of revenue in the region of € 90 to 95 million. Visibility for the fourth quarter does not yet permit us to make any more conclusive forecasts, especially as we know from experience that revenue that we expect to realise in December does occasionally need to be postponed until January at the customer’s request”, says Henry Brickenkamp. “Based on the improvement in earnings in the third quarter, we are also confident of achieving our goal for the year of an overall EBIT margin of 5 to 6 percent”, says Dirk Engel, Chief Financial Officer of technotrans AG. “We therefore also stand by this target corridor for the 2012 financial year.”
technotrans has been creating fresh potential outside the printing industry for some time now. These activities will make a decisive contribution to the future growth of the group. “Through the projects that we are currently working on, we have created a sound basis for reaching the revenue target of € 150 million once more in the foreseeable future”, says Brickenkamp. “In addition, we are confident that the Technology segment’s financial position will steadily improve as the planned growth takes shape, especially in the non-print area. If we are able to identify other suitable acquisition targets, the company would be in a position to finance these, too, thus accelerating its growth.“
Also Termotek, the first foothold in the sphere of laser cooling, is progressing well. In the market for laser applications, there could moreover be interesting options in the shape of combinations of product groups, starting with Termotek (low performance ranges), through technotrans (medium performance ranges) to KLH (high performance ranges). Brickenkamp: “During talks held with customers, the partnership with KLH was widely endorsed. technotrans’ international service network in particular is an attractive asset for the global players in the world of mechanical engineering.”