Operating performance up after nine months of FY 2014/2015 – current financial year impacted by non-recurring effects
- Strategic portfolio streamlining completed
- Restructuring expenses of approximately € 70 million
- Operating result after nine months improved
- Strong sales and improved result expected for Q4
- Outlook: Basis for target EBITDA margin of at least 8 percent in FY 2015/2016
After nine months of financial year 2014/2015 (April 1 to December 31, 2014), the group restructuring measures introduced at Heidelberger Druckmaschinen AG (Heidelberg) are on course. Consequently, measures aimed at strategically streamlining the portfolio have been completed and will take effect predominantly from the start of the new financial year. By reducing low-margin activities, boosting the profitability of core sheetfed offset operations, and expanding the service and consumables business as well as the digital sector, the company has laid the foundations for achieving the planned EBITDA margin of at least 8 percent in financial year 2015/2016.
Successful development in all four strategic areas of activity
In specific terms, strategic development at Heidelberg during the first nine months included streamlining the postpress portfolio and adapting the sheetfed offset sector to new market conditions – a process that will be ongoing until the end of the financial year. The first step was also taken to expand the Consumables business area, with the takeover of Belgium-based BluePrint Products. In the digital sector, significant progress was made in developing new products with partners Gallus, Fuji, and Ricoh and through the acquisition of software provider Neo7even. The first "4D printing systems" for customized printing on three-dimensional objects were also delivered in the current financial year.
"The main focal point in the current financial year is to realign the portfolio so as to place Heidelberg on a sustainably profitable footing," said Heidelberg CEO Gerold Linzbach. "We have geared our portfolio toward profitability and growth and adjusted resources accordingly. I am confident that our strategic restructuring will enable us to achieve and maintain our target margin from next financial year onward and return to growth in the future."
Operating performance after nine months improved
As forecast, the first nine months of financial year 2014/2015 were characterized by non-recurring effects as part of the strategic streamlining of the company's portfolio. Despite the comprehensive portfolio restructuring and the associated transitional phases for a number of activities, the company has retained its operating profitability before special items.
In terms of volumes, the most notable development was the slowdown in sales of new machinery in China, which can be attributed to economic developments in the country. Consequently, sales after nine months amounted to € 1.552 billion, which is below the previous year's figure of € 1.685 billion. By contrast, all regions other than Asia/Pacific were in line with expectations.
Compared over nine months, and despite lower sales, EBITDA excluding special items increased to € 80 million (previous year: € 67 million) due to operational measures including the Gallus transaction, while EBIT excluding special items rose from € 10 million to € 29 million.
During the period under review, special items – primarily for provisions for portfolio optimization measures – were € –72 million, of which € –55 million applied to the third quarter alone. After nine months, the financial result was € –49 million (previous year: € –41 million). Due to the high non-recurring effects, the net result before taxes in the period under review dropped to € –92 million (previous year: € –32 million) and the net result after taxes fell to € –95 million (previous year: € –40 million).
Free cashflow after nine months was € –16 million (previous year: € –10 million). The value in the third quarter – € 14 million – was clearly positive compared with the same period of the previous year (€ –38 million). Accordingly, the net financial debt was lowered to € 250 million (previous quarter: € 272 million) and remains at a low level. Together with the improvements at operating level, this enabled the leverage to be maintained below the target level of 2. The equity ratio was 9 percent (end of financial year 2013/2014: 16.0 percent).
"The non-recurring expenditure necessary for portfolio restructuring is within expectations. In operational terms, we are also on course to achieve our annual targets with a strong final quarter," said CFO Dirk Kaliebe.
As at December 31, 2014, the Heidelberg Group had a global workforce of 12,280 plus 534 trainees (previous year: 12,851 plus 621 trainees).
Outlook: Basis for target EBITDA margin of at least 8 percent in FY 2015/2016
Sales and earnings for financial year 2014/2015 as a whole will be influenced by the implementation of the portfolio optimization measures initiated. The reorganization of postpress is expected to lead to lower sales in this area in the short term until implementation is complete. Furthermore, the company will continue to actively reduce low-margin business. Based on these assumptions, including the economic downturn in China, sales in financial year 2014/2015 are expected to be down around 5 percent year-on-year on the whole.
The portfolio optimization measures initiated will have both a boosting and a dampening impact on earnings during the current financial year. Overall, the measures should further improve the company's operating profitability, thereby bringing Heidelberg closer to its target of an operating margin of at least 8 percent in terms of EBITDA. Adjusted for the non-recurring effects for portfolio optimization and cost-cutting measures, it is the company's continued aim to achieve an increase in net result after taxes.
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