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Interim results 2010

Interim results 2010: TKH sees turnover and results improvements boosted in Q2

Highlights first half 2010

 

  • Increase in turnover of 19%
  • Industrial Solutions strongest increase at 31%
  • Turnover share from innovations 21.2%
  • Innovations improve the market position in a large number of segments
  • Strong EBITA increase in Building and Industrial Solutions

 

Highlights Q2 2010

 

  • Turnover increase in Q2 34%
  • EBITA in Q2 up 42% compared with Q1
  • Improvement margin (ROS) in Q2 to 8.1%.

 

Outlook

 

  • Expected net profit before amortisation of between € 34 and € 38 million for the full year 2010.

 

 

Key figures first-half year

 

 

(in € million unless otherwise stated) 1st half 2010 1st half 2009 Difference in %
Turnover  420.6 353.5 + 19.0
EBITA before exceptional charges  30.4        13.8         + 120.0
EBITA after exceptional charges  30.4 6.6  
Net profit before amortisation1) and exceptional charges  17.9 4.4  
Net profit  16.0 -2.6  
Net earnings per ordinary share (in €) 0.43 -0.08  
Solvency ratio  42.9% 43.6%  
ROS before exceptional charges  7.2% 3.9%  
ROCE before exceptional charges  13.0% 9.4%  

 

Key figures second quarter

 

 

(in € million unless otherwise stated) Q2 2010 Q2 2009 Difference in %
Turnover  221.5 165.0 + 34.2
EBITA before exceptional charges  17.8      8.4      + 115.0
EBITA after exceptional charges  17.8 1.1  
Net profit before amortisation1) and exceptional charges  10.5 2.4  
Net profit  9.5 -3.7  
ROS before exceptional charges  8.1% 5.0%  

1)        Amortisation of intangible non-current assets relating to acquisitions (after taxes).

 


Alexander van der Lof, CEO of technology company TKH: “The improved market conditions combined with the great demand for our innovations translated into a considerable increase in the organic turnover for Building and Industrial Solutions. This, aided by the sharp reduction in cost levels, led to a substantial increase in profit. The expected market conditions in our segments are mixed. Based on the strong results in the first half and the encouraging order portfolio for most activities, we expect to close the full year with a strong result improvement." 

 

 

Financial developments

 

In the first half of 2010, turnover rose by 19.0% to € 420.6 million (H1 2009: € 353.5 million). Higher raw materials prices affected the first half year turnover increase by 6.4%. The increase in turnover was very strong in the second quarter of 2010 with 34.2%.

 

The increase in turnover was realised within the Building and Industrial Solutions segments. Turnover in Telecom Solutions dropped slightly. The share in total turnover from Industrial Solutions increased to 45% from 41%, due to the above average increase in turnover. The share in the total turnover from Building Solutions remained unchanged at 38%, while the share in the total turnover from Telecom Solutions fell to 17%, from 21%. Innovations contributed strongly to the turnover increases. The contribution to turnover from innovations was 21.2%.    

 

The gross margin as a percentage of turnover dropped from 41.3% to 38.8%. This drop was due to the increase in work in progress, a shift in the mix of activities and increased raw materials prices. Operating costs as a percentage of turnover were down at 31.6% in the first half of 2010, compared with 37.4% (before exceptional charges) in the first half of 2009. In the first half of 2010, targeted investments were made in the acceleration of innovations and the strengthening of the commercial organisation. In the course of the first quarter, the measures taken in 2009 to reduce working hours were fully reversed.

 

Depreciations, at € 6.9 million, were below the level of the first half of 2009 (H1 2009: € 8.2 million), due to the low investment levels of the past 18 months.

 

The operating result before amortisation of intangible assets (EBITA) increased with 120.0% from € 13.8 million (before exceptional charges) in the first half of 2009 to € 30.4 million in the first half of 2010.

 

In the second quarter of 2010, EBITA was up € 5.3 million (42.3%) compared with the first quarter of 2010. When compared to the second quarter of last year, EBITA more than doubled to € 17.8 million, from € 8.3 million. The improvement in the results was due partly to the efficiency measures resulting from the more focused deployment of resources within the group and the reduction of the overhead costs. The result in the Building and Industrial Solutions segments increased substantially due to the reduced cost levels and the increased turnover. The reduction in turnover at Telecom Solutions combined with the increased value of Asian currencies led to a drop in the result from this segment.

 

There were no exceptional items in the half year results of 2010.

 

The ROS (margin on the turnover) in the second quarter of 2010 increased to 8.1% from 6.3% in the first quarter of 2010.

 

Amortisation charges increased in the first half of 2010 to € 5.3 million (H1 2009: € 4.3 million), largely due to the capitalised R&D expenditure over the past 18 months.

 

Financial income and expenses dropped to € 2.4 million in the first half of 2010, from € 5.6 million in the first half of 2009. This decrease was due to currency exchange effects and a reduced debt burden. The tax burden was 29.8%.

 

Net profit before amortisation over the first half of 2010 was € 17.9 million (H1 2009: € 4.4 million excluding exceptional charges). Net profit after amortisation in the first half of 2010 was € 16.0 million (H1 2009: loss of € 2.6 million, including exceptional charges). Ordinary earnings per share came in at € 0.43 (H1 2009: minus € 0.08).

 

The net debt increased by €25.4 million compared to year-end 2009, to € 94.8 million, largely as a result of the increase in working capital due to the higher turnover. This resulted in a negative operational cash flow of € 1.8 million (H1 2009: € 65.9 million positive). Working capital as a percentage of turnover stood at 12.0% (H1 2009: 18.3%). The solvency ratio was down slightly at 42.9% (year-end 2009: 43.9%). TKH operates well within the financial ratios as laid down in its credit agreements. The net debt/EBITDA ratio was 1.4 and the interest coverage ratio stood at 8.5.

 

The number of people in permanent employment (FTEs) as per 30 June 2010 totalled 3,627 (year-end 2009: 3,564).

 

 

 

Developments per solutions segment

 

Telecom Solutions

 

Profile

Telecom Solutions develops, produces and delivers systems for applications from basic outdoor infrastructure for telecom and CATV networks to indoor home networking. The focus is on providing clients with care-free systems due to the system guarantees we provide. Around 40% of the portfolio consists of optical fibre and copper cable for node-to-node connections. The remaining 60%, consisting of components and systems in the field of connectivity and peripheral equipment, is used mainly in the network’s nodes.

 

Key figures first-half yearTelecom Solutions

 

 

  1st half 2010 1st half 2009 Difference in %
Turnover  70.3 74.0 -   5.1
EBITA 1) 5.4 8.8 - 38.9
ROS1) 7.6% 11.9%  

1)  Excluding exceptional charges in 2009

 

 

Turnover within the Telecom Solutions was down in the first half of 2010, falling to € 70.3 million. This drop was due entirely to the first quarter of 2010. Compared with the second quarter of 2009, turnover in the segment remained stable in the second quarter of 2010. Turnover in optical fibre networks systems and outdoor copper network systems was down, while turnover in indoor telecom systems increased.

 

EBITA fell to € 5.4 million in the first half of 2010. This drop was the result of the lower turnover and the ensuing reduced capacity utilisation level, due to the harsh winter conditions in the first quarter. The increase in value in Asian currencies and ensuing higher purchasing costs also had a negative impact on the EBITA.

 

Indoor telecom systems - home networking systems, broadband connectivity, IPTV-software solutions – turnover share 5.2%

Turnover increased by 10.5% due to the fact that upgrading hardware and software for broadband connections had a higher priority among consumers.

 

Fibre network systems – fibre optic, fibre optic cable, connectivity systems and components, active equipment – turnover share 6.4%

Turnover was down 14.2%. In the market segments within Europe and Asia where TKH is active, demand was down some 14% in the first half of the year. This was partly due to the harsh winter conditions in the first quarter of 2010, which stagnated the installation of the networks. In addition, the rollout of a number of projects was hindered by limited financing opportunities among our customers.  

 

Copper network systems – copper cable, connectivity systems and components, active equipment – turnover share 5.1%

Turnover was down 6.1%, largely as a result of the harsh winter conditions in the first quarter of 2010. The second quarter saw a limited recovery of the level of maintenance investments in network nodes.

 

 

Building Solutions

 

Profile

Building Solutions develops, produces and delivers solutions in the field of efficient electro technology ranging from applications within buildings to technical systems which, linked to software, provide efficiency solutions for the care and security sectors. The know-how focuses on connectivity systems combined with efficiency solutions to reduce the throughput-time for the realisation of installations within buildings. In addition, the segment focuses on intelligent video, intercom and access monitoring systems for a number of specific sectors, including elderly care, parking and security for buildings and work sites.         

 

Key figures first-half year Building Solutions

 

 

(in € million unless otherwise stated) 1st half 2010 1st half 2009 Difference in %
Turnover  160.3 134.4 + 19.3
EBITA 1) 11.1 4.7 + 136.8
ROS 1) 6.9% 3.5%  

 

1)  Excluding exceptional charges in 2009

 

 

Turnover within the Building Solutions segment increased to € 160.3 million in the first half of the year. Turnover increased by 7.4% due to the effect of raw materials prices. Turnover growth was realised in a cautious market and largely on the basis of the innovations in this segment.

 

EBITA increased to € 11.1 million. All sub-segments booked increased results because of the increased turnover, despite the fact that cost levels were relatively high due to advance investments for product and market development. The efficiency measures introduced in 2009 made a significant contribution to the EBITA growth. 

 

Building technologies – energy-saving light and light switch systems, energy management systems, care systems, structured cabling systems – turnover share 8.5% 

Turnover was up 9.5%. The increase in turnover was driven by innovations in the field of domotica solutions and lighting systems to reduce energy use, as well as efficiency solutions for cabling systems within buildings for energy and data communication solutions. TKH increased investments in product and market development of the building technologies portfolio. 

 

Security systems – systems for CCTV, video/audio analysis and detection, intercom, access control and registration, central control room integration – turnover share 9.9%

Turnover increased by 8.6%, despite the fact that in the first half of last year a number of large projects were delivered. Also here, TKH made considerable investments in the expansion of the commercial organisation to further increase market penetration in Europe and Asia.

 

Connectivity systems – specialty cable, connectivity components and systems for shipping, rail, infrastructure, solar and wind energy as well as installation and energy cable for niche markets – turnover share 19.7%

Turnover was up 30.9%. The increased raw materials prices had a positive effect of around 15% on turnover. Unlike last year, customers returned to investing in building up stocks rather than reducing stocks to enable them to respond to the shorter throughput times of projects. Strong growth was booked in infrastructure projects and cable systems for solar solutions.

 

 

Industrial Solutions

 

Profile

Industrial Solutions, develops, produces and delivers solutions ranging from specialty cable, plug and play cable systems to integrated systems for the production of car and truck tyres. Its knowledge in the field of automation of production processes and the improvement of the reliability of production systems gives TKH the distinctive ability to respond to the need in a number of specialised industrial sectors, such as tyre manufacturing, robotics, medical and machine construction industries, to increasingly outsource the construction of production systems or modules. 

 


Key figures first half year Industrial Solutions

 

 

(in € millions unless otherwise stated) 1st half 2010 1st half 2009 Difference in %
Turnover  190.0 145.1 +   31.0
EBITA 1) 18.3 4.2 + 338.8
ROS 1) 9.6% 2.9%  

1)  Excluding exceptional charges in 2009

 

Turnover in the Industrial Solutions segment increased to € 190.0 million in the first half of 2010. The effect of raw materials prices raised turnover by 8.2%. There was a clear increase in the level of investments in capital goods, which led to substantial turnover growth in this segment. Innovations also made a positive contribution to growth. The high level of order intake seen in the first quarter of 2010 continued into the second quarter.

 

EBITA increased to € 18.3 million, partly due to the strong increase in turnover. The cuts in overhead costs and the reduction of the portfolio in the manufacturing systems sub-segment, introduced in 2009, made a considerable contribution to the strong improvement in the margin.

 

Connectivity systems – specialty cable systems and modules for the medical, robot, automotive and machine building industries – turnover share 24.0%

Turnover in cable systems and speciality cable increased by 24.3%. The willingness to invest recovered to a large extent and the trend towards outsourcing activities in the form of complete modules and systems is once again increasing. Turnover in the robot industry and machine building sector in particular showed a strong recovery.    

 

Manufacturing systems – advanced manufacturing systems for the production of car and truck tyres, can washers, product handling systems and machine operating systemsturnover share 21.2%

Turnover increased by 39.4%. This was largely due to the strong increase in order intake since the fourth quarter of 2009. Increased financing opportunities and a recovering end market led to increases in investments in efficiency improvements and expansion of production capacity in the tyre manufacturing industry. Asia in particular made a considerable contribution to turnover growth. Our innovative solutions boosted our market position and increased the investment priority among our clients.

 

Outlook
 
The outlook for the second half of the year for the market segments in which TKH operates is mixed.
 
Within Telecom Solutions, the order portfolio increased in recent months and there are signs of fewer restrictions with respect to financing for new projects in the area of optical fibre networks. Investments in the maintenance of copper telecom networks remain at a low level.
 
In Building Solutions, investments in the building construction sector in Europe are expected to continue to drop. However, TKH group’s innovations in the field of security and energy-saving systems provide perspective for growth in market share. In addition, there are several market segments that are showing growth, including the market for infrastructure projects and the market for alternative energy generation.
 
In the Industrial Solutions segment, order intake is at a high level in all of the market segments in which TKH is active. The order book is well filled and capacity utilisation is showing an upward trend in the second half of the year.  
 
The increased value of Asian currencies and higher raw materials prices will have a negative effect on the margin in the second half of the year.
 
On balance and barring unforeseen circumstances, TKH expects to realise a net profit before amortisation of between € 34 and € 38 million for the full year 2010.
 
 
Haaksbergen, 25 August 2010
 
The complete press release and the powerpoint presentation can be downloaded in PDF