Business News
Dramatic Revenue Downturn Leaves Marks on Earnings
Tuesday 05. May 2009 - Revenue down 14 million or 37.7 percent to 23.2 million / first quarter EBIT still red at -0.9 million / focus on profitability und cash
The technotrans Group posted revenue of only 23.2 million in the first quarter of 2009. This represents an overall fall of 37.7 percent (previous year 37.3 million). As latterly expected, revenue for the Technology segment was virtually halved compared with the previous year. These figures reflect the order books of printing press manufacturers worldwide, but the ongoing reduction in inventories by OEMs is a further burden. Under the influence of the 14 million fall in revenue at the threemonth mark, gross profit reached 6.3 million (previous year 12.6 million). Particularly the fact that the capacity reduction measures did not yet achieve their full effect in the first months of the year meant that the gross margin of 27.0 percent was lower than usual.
Although all cost items beyond the cost of sales had already been cut back significantly, an operating loss (EBIT) of 0.9 million was posed for the first three months (previous year profit of 3.0 million). Nevertheless, the result was already balanced at this level in the final month of the quarter, and the break-even point therefore was brought down relatively swiftly in line with the lower level of revenue, as was intended.
After interest ( 0.3 million) and virtually no taxes, a net loss for the period of 1.2 million is reported. This corresponds to earnings per outstanding shares of -0.19 (previous year 0.26).
At March 31, the technotrans Group employed a total of 729 persons (March 31, 2008: 823). Taking account of the temporary workers that technotrans was employing in the first few months of the past financial year, the goal of reducing personnel capacity worldwide initially by up to 15 was therefore achieved ahead of schedule.
The segments
The downturn in the capital goods area has yet again gathered considerable pace in recent months. Unsurprisingly, this has had a profound impact on the Technology segment, which saw its revenue fall year on year by 49.2 percent from 28.0 million to 14.2 million.
This halving of revenue inevitably had a drastic impact on the Technology segment’s earnings. Compared with 1.5 million in the previous year, EBIT for the first three months of the new financial year was -2.1 million. Despite the measures already initiated, personnel costs in the first months of the year were not yet in line with the much lower volume.
Revenue for the Services segment remained virtually unchanged from the previous year at 9.0 million ( 9.2 million). Flying in the face of expectations, revenue for installations in the first quarter remained relatively high, whereas spare parts sales if anything fell short of expectations. Revenue for gds, the global document solutions business unit, equally did not quite reach the target level.
The result for the Services segment of 1.1 million was likewise down slightly on the prior-year level ( 1.4 million), and the margin was therefore only 12.6 percent. This latter development was attributable to the unexpectedly high volume of installations, which to a greater degree was still handled in conjunction with subcontractors.
Financial position
Cash flow developed satisfyingly since the start of the financial year. The changes in working capital had a positive effect, with the result that the net cash from operating activities already reached 5.5 million in the first quarter of the new financial year (previous year -2.5 million). Bearing in mind that the investment volume was much lower than in the previous year and other financing activities were scaled back, cash outflows in the first quarter were much lower than in the prior-year reference period. Free cash flow therefore reached 5.1 million in the first quarter, whereas it had been negative at -4.6 million at the corresponding point of the previous year. On balance, liquidity at the end of the period improved to 10.7 million, an increase of 44.7 percent on the prior-year quarter ( 7.4 million).
Outlook
There has been an unprecedentedly sharp downturn in exports, mechanical engineering and ultimately also in the printing industry in the past few quarters. “Our expectations envisaged a very weak start to the financial year, and we prepared the company for such a development,” says Henry Brickenkamp, Spokesman of the Board of Management of technotrans AG. “There are still no signs of a recovery but there are certain signs that we might be able to maintain the volume at the current level over the coming months. Still it is too early to exclude a further downturn in revenue as the year progresses. Our activities worldwide are therefore geared towards systematically adjusting to the next phases of consolidation.” Management believes that the development of the industry is still too volatile to make any sensible forecasts for the current financial year. Nevertheless, from where technotrans currently stands it appears possible that revenue for 2009 could be in the order of 85 to 95 million; this would be 50 to 60 million down on the previous year.
As well as the package of measures launched last year to safeguard and optimise profitability, management has identified a number of other projects to streamline group structures; the combined effect is that technotrans is using every possible means of adjusting appropriately to market changes. “We will feel the positive effects also in 2010, irrespective of whether there are signs of an upturn in economic activity by then,” Dirk Engel, CFO of technotrans, points out. “It is still our target to steer the company in a way that secures profitability on an operating level regardless of declining revenues. “On that basis, we will endeavour at least to post a positive operating result for 2009. If, however, the measures to enhance earnings for future years should unexpectedly necessitate any significant outlay, that might render our target unattainable.”
“Our second priority area is liquidity,” Engel points out. “We already succeeded in generating a comfortably positive cash flow in the first quarter. As matters stand we expect to be in a position to generate the necessary financial resources under our own steam as the year progresses, even from a lower level of revenue, and will consequently not have recourse to additional borrowed capital. Given the financial crisis, that is an important advantage.”