You are here: Home / News / Financial news / Archive 2011 / Interim figures 2011: strong turnover and profit improvement

Interim figures 2011: strong turnover and profit improvement

Highlights first half 2011

  • Increase in turnover of 30.6%, largest increase of 45.9% for Industrial Solutions.
    21.1% of turnover from innovations.
  • Strong EBITA increase of 52.5% - especially Industrial Solutions.
  • Building Solutions: investments to strengthen market positions - one-off acquisition and integration expenses of € 2.0 million.

Highlights Q2 2011

  • Turnover up 22.2%.
  • EBITA increased by 30.7%.
  • Challenging market conditions in the connectivity segment within Building Solutions.
  • Industrial Solutions order intake slightly weakened, but still high.

Outlook

  • Expected net profit before amortization between € 55 and € 60 million for the full year 2011.

Key figures first half year
(In million € unless otherwise stated)

 

 

1st half 2011

1st half 2010

Difference

In %

Turnover

549.3

420.6

+ 30.6

EBITA

46.3

30.4

+ 52.5

Net profit before amortization1)

31.3

17.9

+ 74.6

Net profit

28.9

16.0

+ 81.3

Earnings per ordinary share (in €)

0.77

0.43

+ 79.1

Solvency

43.5%

42.9%

 

ROS

8.4%

7.2%

 

ROCE

21.1%

13.0%

 


Key figures second quarter
(In million € unless otherwise stated)

 

 

Q2

2011

Q2

2010

Difference

In %

Turnover

270.7

221.5

+ 22.2

EBITA

23.3

17.8

+ 30.7

Net profit before amortization 1)

15.0

10.5

+ 43.8

Net profit

13.9

9.5

+ 47.0

ROS

8.6%

8.1%

 

1) Net profit before amortization of acquisition- related intangible assets (after tax).

Alexander van der Lof, CEO of technology company TKH: "Turnover increased substantially during the first half of 2011. In addition, through better capacity utilization the turnover was realized with better margins. The sharp rise in result of the first six months was achieved despite substantial higher costs to strengthen market positions. The R&D efforts in particular the security segment were increased. In addition, the sales force within Building Solutions was further strengthened by investments in the organization and through an increased cooperation within the TKH Group. The technology leap and market positioning this has created makes us excited about the growth opportunities that have arisen. Nevertheless, we have taken into account a possible impact due to current economic developments. "

Financial performance

In the first half of 2011 turnover increased by € 128.7 million (30.6%) to € 549.3 million (H1 2010: € 420.6 million), of which 24.4% was organic and 3.1% due to increased raw material prices. Acquisitions contributed 3.1% to the turnover growth. Turnover growth in the second quarter was 22.2%. Turnover growth in the first half was strongest in Industrial Solutions by 45.9%. Telecom Solutions realized a sales increase of 12.2%. Building Solutions turnover increased by 20.6%, of which 8.3% was due to acquisitions. The share of Industrial Solutions in total turnover rose due to the above-average turnover increase from 45% to 51%. The share of Building Solutions fell from 38% to 35% and the share of Telecom Solutions dropped from 17% to 14%. Innovations contributed again greatly to the turnover increases. The share of innovations in turnover was 21.1%.

The gross margin as a percentage of turnover decreased from 38.8% in 2010 to 37.8% in 2011. The relatively high share of work in progress in the turnover growth and higher raw material prices have a negative effect on gross margin. Operating expenses in the first half of 2011 increased by € 28.7 million compared to the same period in 2010, mainly due to the high level of activity and the further strengthening of the organization. As a percentage of turnover, the operating costs declined to 29.4% (H1 2010: 31.6%), despite the one-off expenses for the acquisition and integration of Siqura (formerly Optelecom-NKF) in the first half of 2011, which totalled € 2.0 million.

Depreciation amounted to € 7.4 million in the first half of 2011, slightly up compared to the first half of 2010.

Operating result before amortization (EBITA) rose by 52.5% from € 30.4 million in the first half of 2010 to
€ 46.3 million in the first half of 2011. EBITA within Industrial Solutions doubled compared to the first half of 2010 and Telecom Solutions showed an increase in EBITA as well. As a result of difficult market conditions, additional costs for the strengthening of the organization and the aforementioned one-off acquisition and integration costs, EBITA fell within Building Solutions.

ROS rose to 8.4% (H1 2010: 7.2%). This increase is due to the high level of innovation and improved utilization of capacity and efficiency, especially within Industrial Solutions.

Due to the acquisitions of Alphatronics and Siqura amortization expenses increased by € 0.7 million to € 6.0 million (H1 2010: € 5.3 million). Operating income after amortization (EBIT) increased in the first half of 2011 by 61.0% to € 40.4 million.

Financial expenses increased from € 2.4 million in the first half of 2010 to € 3.8 million in the first half of 2011. This increase was due to increased bank debt and in the first half of 2010 a positive exchange rate difference of
€ 1.2 million was realized. Share in result of associates of € 0.5 million related to the received dividends from the 5%-share in Nedap.

The effective tax rate in the first half of 2011 was 21.8% (H1 2010: 29.8%), resulting from the application of the Dutch innovation box. This includes one-off tax benefits over previous years. Normalized tax burden amounts to approximately 25%.

Net profit before amortization in the first half of 2011 was € 31.3 million, an increase of 74.6% over the first half of 2010 (€ 17.9 million). Net profit in the first half of 2011 rose to € 28.9 million, an increase of 81.3% over the comparable period in 2010 (€ 16.0 million). Ordinary earnings per share were € 0.77 (H1 2010: € 0.43).

Compared to the end of 2010, net debt increased by € 64.4 million to € 128.3 million, due to the higher level of activity, acquisitions, investments and an increase in working capital to 14.8% of turnover. The increase in working capital is due to a higher level of activity in which nearly half the growth was caused by strong sales growth in manufacturing systems and the acquisition of Siqura. With a net debt/EBITDA of 1.2 and an interest coverage ratio of 13.5, TKH operates well within the financial ratios agreed with the banks.

The number of staff (FTE) on June 30, 2011 was 3.954 (year end 2010: 3.706)

Developments per segment solutions

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 customers 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 year Telecom Solutions
(In million € unless otherwise stated) 

 

1st half 2011

1st half

2010

Difference

in%

Turnover

78.9

70.3

+ 12.2

EBITA

6.5

5.4

+ 20.3

ROS

8.2%

7.6%

 

Turnover within the Telecom Solutions segment increased to € 78.9 million during the first half of 2011. This increase is attributable to the fibre network systems and indoor telecom systems segments. Fibre network systems showed a growth in turnover of 26.7%. Where last year sales were still under pressure due to the severe winter, this year sales were positively affected because the investments in fibre networks in Europe were less hampered by limited funding. The turnover of the copper network systems segment declined due to the sale of the GSM operations in Poland in the third quarter of 2010. In the first half of 2010, these activities contributed to the turnover and EBITA € 4.0 and
€ 0.4 million respectively.

In the first half 2011 EBITA rose to € 6.5 million. ROS increased from 7.6% in the first half of 2010 to 8.2% as a result of better utilization of capacity.

Indoor telecom systems - home networking systems, broadband connectivity, IPTV-software solutions - 4.4% turnover share.
Turnover increased by 10.0%. The turnover increased due to a higher level of spending by consumers and an increased priority of investments in multimedia systems and peripheral devices to upgrade broadband connections.

Fibre network systems – fibre optic, fibre optic cable, connectivity systems and components, active equipment –  6.2% turnover share
Turnover increased by 26.7% mainly due to a strong second quarter. The financing of investments in fibre networks in Europe was more prosperous than the year before. Especially in the second quarter of 2011, the number of pipeline projects increased, which confirmed that there will be further growth of the investments in fibre networks.

Copper network systems – copper cable, connectivity systems and components, active equipment - 3.7% turnover share
Turnover fell by 3.8%. Excluding the turnover decrease as a result of the sale of GSM operations, turnover showed an increase of 14%. This increase was mainly due to the strong growth of connectivity systems due to an increased level of maintenance investments in copper networks.

Building Solutions

Profile
Building Solutions develops, produces and delivers solutions in the field of efficient electro technical 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 realization 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 2011

1st half 2010

Difference

in%

Turnover

193.3

160.3

+ 20.6

EBITA

9.2

11.1

- 16.9

ROS

4.8%

6.9%

 

Turnover within the Building Solutions segment increased to € 193.3 million (20.6%) in the first half of 2011. Acquisitions accounted for 8.3% of the growth and higher raw material prices for 3.6%. All segments contributed to growth. The most significant increase was realized in the security segment also due to the acquisitions of Alphatronics and Siqura.

In the first half of 2011, EBITA declined to € 9.2 million. Difficult market conditions in the connectivity segment due to a decreased level of activity in the building and construction sector had a negative impact on the result particularly in the second quarter. In addition, in the first half of 2011 there were the one-off expenses associated with the acquisition and integration of Siqura in the amount of € 2.0 million. These expenses occurred in both the first and the second quarter. No additional expenses are expected for the integration. Building Technologies showed an increase in result.

The margin (ROS) decreased from 6.9% in the first half of 2010 to 4.8% in the first half of 2011.

Building technologies – energy-saving light and light switch systems, energy management systems, care systems, structured cabling systems - 7.3% turnover share.
Turnover in building technologies increased by 12.2%. This increase was primarily due to an increasing market share within the utility sector due to the introduced innovations in the area of care systems and the increasing need for efficiency solutions in the areas of energy and structured cabling systems that can save installation time. The investments in product and market development were increased in order to further strengthen the position of this promising segment.

Security systems – systems for CCTV, video/audio analysis and detection, intercom, access control and registration, central control room integration - 10.4% turnover share
Turnover increased by 37.6%. The organic growth in security systems was more than 10%. The integration of Optelecom-NKF (Siqura) in the security cluster, which was acquired in February, was successful. The one-off costs associated with the acquisition and integration of Siqura had a negative impact on EBITA-results of € 2.0 million. R&D and marketing were strengthened by combining activities within this cluster. The addition of Siqura has significantly strengthened the position for acquiring larger orders through high-performance proprietary technology.

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 - 17.4% turnover share.
Turnover increased by 15.7%. Of this increase, 7% was due to higher raw material prices. Market conditions were challenging due to the decline in market volume in the building and construction sector and the associated margin pressure. More turnover was achieved in segments with lower margins which after a while will have the potential for additional, more interesting parts of the portfolio. In Germany, the sales of solar solutions lagged severely due to reluctance of the German government to provide subsidies. Meanwhile, the market for solar systems has been restored to a high level of investment.

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 million € unless otherwise stated) 

 

1st half 2011

1st half 2010

Difference

In %

Turnover

277.1

190.0

+ 45.9

EBITA

37.0

18.3

+ 102.1

ROS

13.4%

9.6%

 

Turnover within the Industrial Solutions segment increased to € 277.1 million during the first half of 2011; an increase of € 87.1 million, of which € 6.8 million was due to higher raw material prices. The increased turnover was realized in both connectivity systems and manufacturing systems.

EBITA rose to € 37.0 million in the first half 2011. The strong growth in sales and related utilization of capacity and efficiency resulted in the significantly increased EBITA. ROS increased from 9.6% in the first half of 2010 to 13.4%.

Connectivity systems – specialty cable systems and modules for the medical, robot, automotive and machine building industries - 23.7% turnover share
Turnover in specialty and cable systems increased by 29.2%. Increased raw material prices had a positive effect on sales of 7%. Turnover growth continued in the second quarter due to the high level of investment in the industrial sector. A significant increase in demand was achieved in the robotics- and the medical industry. The machine building industry, particularly in Germany, also showed strong growth. The trend towards ordering more complete modules and systems continued, which enabled an increase in market share.

Manufacturing systems – advanced manufacturing systems for the production of car and truck tyres, can washers, product handling systems and machine operating systems - 26.7% turnover share
Turnover rose by 64.8%, mainly driven by the tyre manufacturing systems segment. The growth was largely achieved in Asia. The tyre manufacturers, who choose our technology, gain more and more ground by the high quality and production efficiency of the technology, due to which they outperform the market. Aside from the Asian customers, several western tyre manufactures have presented investment programs for capacity- and efficiency improvements. The associated order intake increased, however the record order intake of 2010 could not be surpassed. The order intake during the second quarter amounted to € 45 million and was in line with the first quarter of 2011. The MAXX Cutter has passed the final development at our launching customer with good results and is ready for serial production and orders.

Outlook

The forecast for the second half of the year for the market segments in which TKH operates shows a mixed picture.

Within Telecom Solutions the order portfolio has increased in recent months and there are fewer restrictions on the financing of new projects for the installation of fibre networks.

Within Building Solutions it is expected that investments in the utility sector in Europe will continue to decline. In contrast, the innovations of the TKH Group in the area of security and energy saving systems show perspective for market share growth, and some segments are showing growth, including the market for infrastructure projects and the market for alternative energy.

Within Industrial Solutions there is a high level of order intake in all market segments in which TKH operates. However, various segments within the industrial market are seeing signs of a weakening demand. Whether this will impact the activity level in the second half of the year is unclear. Precaution will be taken into account here.

Barring unforeseen circumstances, TKH expects on balance that over the full year 2011 a net profit before amortization between € 55 and € 60 million will be realized.


The complete pressrelease and a presentation can be downloaded in PDF on the right.