Business News
Investment propensity slows technotrans down
Tuesday 05. August 2008 - Revenues for 2008 drupa-half-year below last year / measures to improve EBIT will bring results already in second half-year / targets for full-year cut by 10 percent
Group revenue in the second quarter 2008 again remained below the prior-year level. Amounting to 33.4 million, it was almost 5 million or 12.6 percent down on the figure at the corresponding point in the previous year. At the half-way mark, revenue therefore totalled only 70.7 million, a downturn of 7.7 percent (previous year 76.6 million). Whereas the Services segment maintained its healthy progress with growth of 6 percent, investment reticence in the run-up to the drupa industry exhibition and the weaker economic environment affected the Technology segment to a much greater degree than had been expected. Exchange rate movements in the US dollar since the previous year affected revenue to the tune of some 1.2 million.
Although the gross margin of 33.1 percent was stabilised more or less at the customary level after six months, gross profit fell by 9.9 percent or around 2.5 million due to lower revenue. The together with the rise in distribution costs by almost 1 million in connection with the drupa prompted a decline in the operating result to 4.8 million (previous year 7.8 million). The EBIT margin was only 6.8 percent in the first half. As a result of the lower revenue level, measures have been introduced to stabilise and improve earnings in the latter part of the year.
The effective tax rate for the group remains virtually unchanged (39.3 percent); this indicator is still dominated by a lack of profit contributions by the subsidiaries. Net income after six months was 2.6 million (previous year 4.7 million), equivalent to earnings per share (average number of shares outstanding) of 0.41 (previous year 0.70).
Whereas the employee total for the group was 831 at the end of 2007, this figure dropped to 823 after six months of the current year. New personnel were recruited only in the high-growth areas of the company, such as the Services segment; capacity in other areas was adjusted to some degree to reflect the lower volume of revenue. The number of contract workers, who are not included in this group total, is likewise falling.
The segments
Restrained investment prior to the drupa and the general cooling-down of the economy had a marked impact on revenue for the Technology segment. Revenue in the second quarter of 23.8 million was over 5 million or 18.5 percent down on the prior-year quarter. At the half-way mark, revenue totalled 51.4 million (previous year 58.4 million, -12 percent). Revenue from printing press manufacturers developed according to schedule, whereas business with end customers and especially project business were weaker than planned. In a few instances orders have been turned down due to poor price quality.
The low revenues and the additional burden of drupa costs of almost 1 million meant that the second-quarter result for the segment was only 0.2 million. This leaves earnings of 1.6 million for the first half, equivalent to a rate of return for the segment of 3.0 percent.
Revenue for the Services segment again rose in the second quarter, by 6.3 percent, to 9.6 million (previous year 9.1 million). This maintained the healthy progress, with the result that revenue for the first six months totalled 19.3 million (previous year 18.2 million, up 6.0 percent). The global document solutions business area (gds, Technical Documentation) was particularly successful. Its success stemmed both from services performed on behalf of third parties and from its self-developed software. On the other hand the Product Support Service was adversely affected in this quarter by installation work linked to the drupa, because, in the interests of presenting the product range optimally on printing press manufacturers’ exhibition stands the technicians’ services were not charge in full.
This also affected the segment’s profitability, as a result of which it earned only 1.4 million in the second quarter (previous year 1.2 million). The result for the segment after six months is 3.0 million, equivalent to a rate of return for the segment of 15.3 percent.
Outlook
“In view of cyclical weakness and the meagre impetus given by the drupa, we are working on the assumption that it will not be possible to make good the first half’s revenue shortfall of around 10 million on our budgeted target in the second half of the year,” says Henry Brickenkamp, Spokesman of the Board of Management of technotrans AG. “Rather, we are working on the assumption that we will miss our revenue target for the full year of 160 million by probably around 15 million.” Nevertheless technotrans business model will help to progress better than the general industry even in a more challenging market environment.
Chief Financial Officer Dirk Engel adds: “In order to stabilise and boost earnings in these circumstances, we have implemented a number of measures that will improve the operating result by 3 million per year, and expect to realise around 2 million in such savings in the current financial year. In order to achieve this we step up our own production activities for refrigeration technology, we optimise the efficiency of our production operations, and we adjust capacities to the lower level of revenue. Our objective, based on the new revenue forecast, is an EBIT margin of 7 to 8 percent for the year as a whole.” The necessary instruments to react flexibly to a fluctuation in demand are implemented and have proven their effectiveness already in the past.
The Technology segment is particularly affected by the economic climate. Henry Brickenkamp outlines the perspective: “We expect revenue for the remainder of the year to be slightly higher than in the first half, but we are not expecting any significant drupa effect.” Management is nevertheless exceptionally pleased with the response to the presentation at the show and to the topics that were chosen to spotlight. “Interest in the cleaning systems area and the topic of energy efficiency was exceptionally high and we are convinced that we have chosen the right strategic direction for the company’s mid- to long-term development.”
The Services segment representing 25 percent of total revenues again helps to stabilise the situation in turbulent times. “We again anticipate a positive development as the year continues. On the one hand the systems installed in the market are getting older as a result of the reluctance of companies to invest, and there is increased demand for servicing and spares. We in addition expect our new subsidiaries to make positive contributions. This segment furthermore includes the Technical Documentation area (global document solutions – gds). This area has been enjoying growth way above the average for a number of years, and its products and services provide a source of business that is largely independent of the fortunes of the printing industry. We are therefore prepared to continue developing gds strategically in order to enter a completely new dimension with what is already a very successful cornerstone of our Services segment.”
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.