Business News
technotrans with operating profit in spite of revenue decline – non-recurring effects lead to net loss
Tuesday 10. March 2009 - revenue down 11.5 million or 7.5 percent / EBIT 7.5 million before impairment / net income -2.9 million / dividend to be omitted / further decline in revenue expected for 2009 / focus on profitability
Revenue for the technotrans group fell to 141.7 million (-7.5 percent, previous year 153.2 million) for the financial year 2008. The targets, which had been revised in view of the economic situation already after the first half of 2008 to 140 to 145 million, were therefore achieved. The downturn affected exclusively the larger Technology segment, which posted revenue of only 103.8 million as against 116.9 million in the previous year, a drop of 11.2 percent. The decline for the group as a whole was cushioned somewhat by growth of 4.4 percent for the Services segment, from 36.3 million to 37.9 million.
The drop in revenue by 11.5 million or 7.5 percent – compounded by various non-recurring factors like expenses for drupa and restructuring as well as impairment costs – means that earning as a whole are well down on the figures for recent years. Gross profit was down 29.0 percent on the prior-year figure at 35.7 million ( 50.3 million). The gross margin averaged 32.6 percent for the first three quarters and was therefore at the customary level. Only as a result of the amortisation of development expenditure recognised as an intangible asset and patents acquired it was forced down to 25.2 percent for the full year. “The assumptions on the anticipated development of revenue in the current market environment were one of the key factors behind the impairment,” explains Henry Brickenkamp, Spokesman of the Board of Management. “The restructuring measures in the light of the lower level of revenue and the lower future depreciation and amortisation applied will, however, produce a lasting improvement in earnings in the next few years.”
Earnings before interest and taxes (EBIT) was in balance at 0.0 million as a result of the aforementioned factors; a figure of 13.9 million had been achieved in the previous year. The key figure EBITDA, which does not include depreciation and amortisation, was likewise well down at 12.2 million (previous year 18.2 million) in view of the revenue shortfall. The technotrans Group reported a net loss of just under -2.9 million for the 2008 financial year (previous year net profit of 9.1 million). Basic earnings per share according to IFRS consequently amounted to -0.45 (precious year 1.33). In order to support the substance of the company and to safeguard liquidity in the current environment the dividend shall be omitted for the first time. “In the interest of social peace we can not introduce short time for our workers and at the same time show generosity towards our shareholders. This would certainly be a problematic signal,” says Dirk Engel, Finance Director of technotrans AG.
On January 1, 2009 the group employed a total of 787 persons, 44 or 5.3 percent fewer than at the corresponding point of the previous year (831). The fall in Germany of 6.1 percent to 541 (576) employees was more acute than at the international locations (246, -3.5 percent). Management expects to complete the capacity adjustments including temporary workers by up to 15 percent, which have been initialized last year, by the middle of 2009.
The segments
Revenue for the Technology segment dropped by 11.2 percent to 103.8 million (previous year 116.9 million) due to the prevailing economic situation in 2008. The lower revenue level had already dented the earnings of the Technology segment in the course of the financial year. The additional non-recurring factors at the end of the year likewise predominantly affected the Technology segment, as a result of which there was a marked loss of -4.3 million (previous year +7.7 million).
The Services segment generated stable revenue and earnings in the course of the year, despite the inhospitable market environment. For example, revenue was up 4.4 percent to 37.9 million (previous year 36.3 million) even though the downturn in project business meant that the installations volume as a whole was likewise on the retreat. This positive development was predominantly attributable to the global document solutions business unit. 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 remained at a stable, healthy level throughout the year, before the non-recurring factors again had a negative impact at year-end. EBIT of 4.0 million consequently did not quite reach the prior-year level ( 5.9 million). The rate of return for the segment was thus ultimately only 10.6 percent.
Development of Cash flow
Net cash from operating activities experienced a relatively modest drop from 10.6 million to 6.7 million in 2008. The change in current assets, predominantly due to the higher receivables and lower liabilities at the reporting date, had an overall negative effect of 3.6 million on cash flow.
Overall investment in 2008 was again slightly above average at 6.4 million, in particular due to the new building at the Sassenberg location and the launch of mySAP. The free cash flow, representing net cash from operating activities less the net cash used for investment spending, was slightly positive as expected, at 0.4 million (previous year -0.6 million) for the year as a whole.
7.5 million (previous year 2.5 million) was paid out for the buy-back of treasury shares. The shareholders in addition received 4.5 million in the form of dividends for the 2007 financial year. Financial liabilities amounting to 1.6 million were repaid and new borrowings of 9.7 million raised to finance the share buy-back and investment spending. Cash and cash equivalents at the end of the period were down by 3.8 million to 6.9 million (previous year 10.7 million).
Outlook
At the start of the 2009 financial year, all the signs are that the global economy entered a recession. The severity of the economic crisis still remains a matter of guesswork, because growth rates have been downgraded at ever shorter intervals since the third quarter of 2008. The worldwide reluctance to invest has had a profound impact on the order books of German printing press manufacturers, which between them account for over 60 percent of the world market. According to a survey conducted by the German Engineering Federation (VDMA), orders plunged by far more than 50 percent in the last months compared with the same period of the previous year.
As technotrans is a systems supplier whose systems and devices are by and large supplied already factory-fitted to new printing presses, it has seen its Technology segment suffer in particular measure from this development. “As matters stand, we must expect to see this OEM business likewise slashed by half in the coming months,” Henry Brickenkamp says. “An additional burden is that some of our customers still have a relatively high level of inventories at the start of 2009; these will first have to be reduced as a priority. We therefore expect that we will not be able to stabilise sales at the new, lower level until these stocks have been shifted. Overall, therefore, we are preparing for a further substantial downturn in revenue in the Technology segment, at least in the first half of the year.”
“Based on our current scenarios we are expecting revenue to decline in the 2009 financial year, though the extent of this drop cannot be reliably predicted in view of the volatile environment at the start of this year,” Dirk Engel, CFO of technotrans, comments. “We believe there is considerable uncertainty in the targets for 2009, and it is impossible to make any substantiated forecasts about 2010. We will therefore monitor them very closely in the course of the year so that we are able to respond without delay whenever variation comes to light. In the present circumstances, our priority is always to be able to respond appropriately to factors affecting our financial performance.”
Management will step up the cost-cutting programme launched in the 2008 financial year, with a volume of 8 million annually, in order to adjust to the prevailing level of demand. Engel: “This programme includes the transfer of the cleaning systems product area from Gersthofen to our Sassenberg location in the early part of the year, measures such as the introduction of short-time and, ultimately, also further structural adjustments. Our aim is to steer the company in such a way that its operations under all circumstances show a profit, even in the midst of the toughest economic crisis in its history.”
Brickenkamp adds: “All in all, we have prepared well for the challenges that lie before us. Equipped with an awareness of the risks to the possible short-term development and the right package of measures, we will achieve our goal of operating profitability by year-end. Meanwhile we will use the opportunities available to the company for its medium and long-term future. We continue to tailor our actions to technotrans’ prospects as a growth company primed for sustained profitability.”