Business News
technotrans on track despite economic downturn
Tuesday 04. November 2008 - as expected revenue 8.3 percent below prior year / EBIT after 9 months 7.2 million / timely measures for cost reduction to secure performance over the next quarters
Business in the technotrans Group in the third quarter progressed as expected, and as smoothly as in the first half of the year. Revenue of 34.9 million bettered the weak second quarter, the downturn compared with the prior-year quarter was 9.4 percent. Revenue after nine months reached 105.6 million, which is 8.3 percent or almost 10 million below the revenue for the prior-year period ( 115.1 million). The Services segment continued to perform well, with nine-month revenue up 5 percent. On the other hand the downturn in the Technology segment in the third quarter was 13.3 percent compared with the prior-year quarter, confirming the earlier assessment that the after-effects of this year’s drupa industry exhibition will have no significant impact on business in the second half.
The drop in revenue of some 10 million at the nine-month mark has naturally had an impact on earnings. The gross margin reached 32.6 percent. Earnings before interest and taxes (EBIT) totalled 7.2 million, corresponding to an EBIT margin of 6.8 percent, and this year had to absorb drupa expenses of around 1 million. Net income after nine months was 3.9 million (previous year 6.9 million), equivalent to earnings per share (average number of shares outstanding) of 0.61 (previous year 1.00).
At year-end 2007, the technotrans Group employed a total of 831 persons, whereas the number decreased to 823 after nine months 2008. As a result of the capacity adjustment measures announced for the technotrans Group, there will be a significant fall in the employee total by the middle of next year.
Cost reduction program expanded
Already in mid-October the package of cost-cutting measures has been increased worldwide to a total of around 8 million, to ensure that the company adjusts in good time to the changes in the market. More than half of this saving will come from reduced personnel costs. The aim is to continue to operate successfully, even if the revenue volume in the next business year is likely to be lower.
The segments
Revenue in the Technology segment reached 25.4 million in the third quarter; although this was up on the second quarter ( 23.8 million), it was simultaneously 13.3 percent down on the corresponding prior-year period ( 29.3 million). The nine-month revenue total of 76.8 million (previous year 87.7 million, -12.4 percent) is one result of a marked reluctance to invest in light of the worldwide financial crisis.
Whereas the second quarter was dominated by drupa expenses, the third-quarter result for the segment improved to 0.8 million, representing an EBIT margin of 3.3 percent. Nine-month earnings totalled 2.4 million (previous year 6.7 million), reflecting among other things the lower level of revenue. The EBIT margin was 3.1 percent.
Revenue for the Services segment reached 9.5 million in the third quarter, representing growth of 3.0 percent. Over the nine-month period it has consequently risen by 5.0 percent to 28.8 million (previous year 27.4 million). Both the Product Support Service and the Technical Documentation area (global document solutions – gds) contributed towards this welcome development. gds will be presenting version 6 of the software tool docuglobe at the forthcoming Tekom annual conference. This is moreover not the only source of optimism regarding this segment’s continuing positive development.
The rate of return for the segment in the third quarter was again very good at 16.1 percent ( 1.5 million), leading to earnings of 4.5 million after nine months (margin 15.6 percent). As demand for spares and upgrades has always developed positively even at times when investment propensity is low, we are confident of maintaining that level in the future.
Outlook
The economic prospects worldwide have become much less promising since mid-way through the year as a result of the financial crisis. “For the current financial year, we still adhere to our latest forecast that revenue overall will be around 8 percent down on the previous year,” says Dirk Engel, CFO of technotrans AG. “Excluding restructuring expense, we stand by our target of achieving an EBIT margin of 7 to 8 percent, which would translate into net income in the order of 5 to 6 million. That would then be the basis for our decision on the dividend distribution for 2008.”
All major printing press manufacturers have published lower order intake during the past weeks. “We will feel the impact of this trend to some degree in the fourth quarter, and possibly to a greater extent in the next financial year. At an early stage, we are already responding to these foreseeable changes in the market,” says Henry Brickenkamp, Spokesman of the Board of Management of technotrans AG. “In taking this action, technotrans has paved the way for continuing to operate successfully and on our traditional level of profitability next year, from possibly an even lower level of revenue.”
Management expects that the company will be able to compensate for this trend in part by stepping up end customer and project business. “Wherever funds or the current level of orders do not suffice to merit investment in new systems, we will look for potential for supplying retrofit solutions now that customers are increasingly looking to reduce their cost structure,” Brickenkamp explains. technotrans is for example able to offer solutions for automation and for reducing levels of consumables.
The strategy of “more technotrans per printing press” moreover remains intact. Cleaning systems will give the company access to a lucrative new market segment in the medium term. “We in addition expect that the current market environment will prompt printing press manufacturers to scrutinise their production structures carefully, which at least in the medium term should promote an increasing trend towards outsourcing. At first glance the current market situation seems to present us with difficulties and challenges, but we are equally convinced that it offers good opportunities and prospects for companies such as technotrans that are capable of adapting very flexibly to changing circumstances,” Brickenkamp summarises the view of the management.