Inkjet & Digital Printing
Punch Graphix nv: Growth in sales and return to profitability in 2010
Monday 28. February 2011 - Punch Graphix nv (Punch Graphix) publishes its results for 2010 today. Compared with 2009, sales rose from EUR 118.4 million to EUR 139.3 million. The net profit was EUR 4.6 million, compared with a net loss of EUR 15.9 million in 2009.
Key figures
Sales rose by 18% in 2010, with sales of both equipment and consumables increasing strongly.
The groups operational cash flow (EBITDA) rose from EUR 18.0 million in 2009 to EUR 31.3 million in 2010. The net profit in 2010 was EUR 4.6 million, including the negative result from the stake in Accentis of EUR 7.9 million.
Significant events during the year
Clear market focus on digital printing
In the field of digital printing solutions, Punch Graphix has opted for a clear focus on the Industrial Printing and Document Printing segments, which are typically the large-scale toner users. Industrial applications, and within that category especially applications in label production, were characterised by strong growth in 2010. New dealer channels in the growth markets of China, India, Mexico and Brazil are supporting this strategy.
For Industrial Printing, Punch Graphix came out with the new Xeikon 3500, the most productive toner-based label press on the market today. In line with the focus strategy, for these applications the company is the only one in the world to have developed a specific toner version which excels in terms of light resistance and meets the strict requirements of the US Food & Drug Administration with respect to food safety.
For Document Printing, Xeikon introduced an even faster version of its flagship product, the Xeikon 8000, together with new toner which, in a worldwide first, is specially adapted to market requirements in terms of productivity and ecology.
Accentis (property holding company in which Punch Graphix holds a stake)
Punch Graphix decided that it will participate in the Accentis capital increase by the exercise in full of its preferential rights, in order to protect its interests and by exercising the backstop that was granted by Punch Graphix.
Punch Graphix has acquired 433,997,766 new shares at a price of EUR 0.02 per share, representing a total cost of EUR 8,679,955. At the end of 2010, its stake represented 44.13% of the share capital of Accentis.
Extraordinary general meeting of 18 October 2010
The extraordinary general meeting of shareholders of 18 October 2010 granted the Executive Board the authority, for a period of 18 months, to acquire fully paid-up shares in the company for valuable consideration on the stock market or through other channels. The same extraordinary general meeting decided to abolish the 40 priority shares and convert them into 1 share in the groups capital. This share was transferred to the company.
Discussion of the annual results
Sales and operating income
Compared with 2009, sales rose by 18%. The most important developments were as follows:
? Both Digital Printing Solutions (13%) and Prepress Solutions (30%) recorded sales increases. This sales growth occurred in both equipment and consumables.
? Equipment sales in 2010 rose by 18% compared with 2009. Customers continue to experience difficulties in financing capital equipment. This factor mainly affects sales of the more expensive equipment in the range.
? Recurring income from consumables and service activities rose by 18%.
? In geographical terms, the sales increase was mainly located in Europe (17%) and America (20%). In Asia, a slight sales increase of 6% was recorded.
? Sales in the second half represent 53% of the annual total.
Operating income was EUR 143.0 million, compared with EUR 125.8 million in 2009. Other operating income was EUR 3.7 million, and consisted mainly of grants received and R&D costs passed on to third parties.
EBITDA
On a comparable basis, EBITDA rose by 74%. REBITDA (EBITDA corrected for non-recurring elements) increased by about 53%. The key points in this connection are as follows:
? A sales recovery got underway in 2010. ? The improved EBITDA is particularly due to sales growth combined with strict cost
management.
Operating result (EBIT)
The operating result was EUR 14.8 million. The main elements are as follows:
? The current economic crisis has had a negative effect on customers payment behaviour: impairments of customer receivables amounted to EUR 0.7 million (2009: EUR 3.7 million).
? The group recorded provisions of EUR 1.0 million (2009: EUR 8.6 million). These mainly relate to guarantee obligations and legal disputes.
? The impairment losses for 2009 included impairment on inventory of EUR 8.0 million. ? Depreciation increased from EUR 11.9 million in 2009 to EUR 12.7 million in 2010.
Financial result and result before tax
The financial result (EUR 1.5 million) mainly consists of interest income of EUR 2.5 million and interest charges of EUR 1.0 million. The result before tax was EUR 8.5 million. The result before tax for 2009 was EUR -15.9 million.
Accentis closed 2010 with a net loss of EUR 16.4 million. Punch Graphix recognised EUR 7.9 million of the net loss (negative goodwill, impairment and share in the net loss) in its consolidated income statement.
The tax burden in 2010 was 23% of the result before tax adjusted for the share in the result of associates.
Net result – group share
The group share in the net profit was EUR 4.8 million, compared with a net loss of EUR 15.7 million in 2009.
Balance sheet and cash flow statement
Shareholders equity at the end of the reporting period was EUR 170.9 million. This represents a net increase of EUR 3.9 million from last year, mainly arising from the net profit for the year (EUR 4.6 million) and purchases of treasury shares (EUR -0.7 million).
At the end of the financial year, Punch Graphix had a EUR 10 million debt receivable with respect to Punch International nv. Net financial debt increased to EUR 35.3 million.
Cash from operating activities was EUR 24.0 million for 2010, resulting from an operational cash flow of EUR 26.0 million and an increase in working capital of EUR 2.0 million.
Total net investments in the year amounted to EUR 19.8 million. The main investments were in R&D (EUR 4.1 million), intangible assets (EUR 3.1 million, relating among other things to IP investment in new applications) and tangible assets (EUR 3.8 million net). The investments for 2010 include an amount of EUR 8.7 million relating to the capital increase at Accentis.
EUR 11 million of bank loans were repaid in 2010. At the end of 2010, Punch Graphix nv had an amount receivable in respect of Punch International nv of EUR 10 million, whereas at the end of 2009 it had an amount payable in respect of Punch International nv of EUR 7 million (within the framework of a temporary liquidity facility).
From Accentis, a repayment of EUR 3.7 million on the outstanding loan was received, and interest received was EUR 2.6 million. Finally, around EUR 0.7 million of treasury shares were purchased. The financing cash flow was EUR -21.9 million and the net cash flow EUR -18.3 million.
Information about financial loan agreements
The group has a syndicated loan of EUR 75 million taken out with a bank consortium for which contractual provisions are made in covenants that are assessed on a half-yearly basis. At the end of 2010, the amount of the outstanding loan was EUR 55 million (2009: EUR 65 million). At the end of 2010, Punch Graphix was in compliance with all conditions set in the covenants.
Prospects
The implemented focused strategy and restructuring are bearing fruit. The group does not wish to announce any concrete objectives.
Changes in the Supervisory Board
On 22 February 2011, Mr Ben Van Assche resigned his membership of the Supervisory Board. The Supervisory Board and the Executive Board are indebted to Mr Van Assche for his long-standing commitment and his contribution to the development of Punch Graphix.
In 2011, Messrs Arthur Vanhoutte and Gerard Cok will be proposed as members of the Supervisory Board, for appointment at the General Meeting of Shareholders in May 2011.
Arthur Vanhoutte (born 1949) has over 35 years experience in the international graphics sector. He has held various managerial positions in production, purchasing, R&D and marketing & sales. Since 1991 he has been responsible as CEO for the EMEA activities of Mutoh Belgium. Mutoh Belgium nv (Ostend, Belgium) develops and produces large-format piezo inkjet printers for commercial applications and professional cutting plotters for lettering and contour cutting; it is a subsidiary of the Japanese Mutoh Holdings Co, Ltd (Tokyo). Mr Vanhoutte does not own any shares in the company.
Mr Gerard Cok (born 1948) is an entrepreneur, and does not own any shares in the company. The group regards Mr Cok as bringing significant added value in view of his many years of financial and professional experience, which will enable him to make a significant contribution to the further development of Punch Graphix.
Purchase of treasury shares
The Executive Board has resolved to avail itself of the authority granted it to purchase treasury shares. Under this authority, which was extended at the Extraordinary General Meeting on 18 October 2010, the directors are empowered to purchase treasury shares up to the maximum quantity that may be vested in the company by virtue of statute and the articles of association at the time of acquisition, at a price between their par value and 110% of the stock-market price at the time of acquisition. The company will periodically report on the number of treasury shares purchased and the average acquisition price in its quarterly trading updates. At the end of 2010 the company had purchased a total of 2.602.705 treasury shares at an average price of 2.52 EUR. This represents 9.06% of the total outstanding shares. 265.726 treasury shares were purchased in 2010.
Proposed dividend
The Executive Board proposes that no dividend be distributed for the 2010 financial year