Alexander van der Lof, CEO of technology firm TKH:
“The year 2012 was dominated by challenging market conditions in the building and construction sector and a certain degree of reluctance to invest in the industrial sector. However, with a ROS of 9.7%, the fourth quarter showed that thanks to its strong strategy TKH can realise solid results even in difficult conditions. TKH made considerable progress in 2012 in bolstering its foundations in the field of technology and will continue to do so in the years to come.”
In 2012, turnover was up € 41.3 million (3.9%) at € 1,102.4 million, from € 1,061.1 million in 2011. Acquisitions lifted turnover by 9.1%. Reduced raw material prices had a negative impact of 0.2% on turnover. On balance, turnover fell by 5.0% organically.
Building Solutions showed the strongest increase in turnover, booking a rise of 14.3%. Turnover in Telecom Solutions was up by 3.3%. However, Industrial Solutions recorded a decline of 3.8%. For the full-year 2012, Industrial Solutions accounted for 45% of turnover, down from 49% in 2011, while the share from Building Solutions increased to 40%, from 36%. Telecom Solutions accounted for 15% of turnover, unchanged from the previous year. Innovations once again made a strong contribution to turnover, accounting for 21.2%, compared with 22.8% in 2011.
The gross margin was up in 2012 at 40.9%, from 38.9% in 2011. Operating costs excluding one-off expenses, as a percentage of turnover, rose to 33.1% in 2012, from 30.2% in 2011. When acquisitions are also excluded, operating costs in 2012 were at a comparable level to 2011. While the cost level was higher in the first half of 2012 compared with the same period 2011, we brought this more into line with market conditions in the second half. Depreciations came in at € 17.5 million, above the € 15.3 million booked in 2011, due to the higher level of investments in 2011 and 2012.
The operating result before amortisation of intangible assets and one-off income and expenses fell by 6.4% to € 86.2 million in 2012, from € 92.1 million in 2011. The EBITA in Telecom Solutions was up 13.5% compared with 2011. At Building Solutions, EBITA rose by 11.9% mainly due to acquisitions. EBITA at Industrial Solutions was 13.8% lower than in the previous year, primarily due to lower order intake in 2011 and in the first half of 2012. The ROS for TKH Group as a whole dropped to 7.8% in 2012, from 8.7% in 2011.
In 2012, an amount of € 4.2 million was spent in relation to acquisition costs, largely for the acquisition of the majority stake in Augusta Technologie (2011: € 2.0 million for the acquisition of Siqura). The one-off expenses for the implementation of efficiency programmes came in at € 8.0 million in 2012 and are included in the costs. In 2012, in the context of these programmes, we also included an impairment of € 3.3 million in the fourth quarter, largely related to loss-making activities in Building Solutions, which will be discontinued and/or divested.
The operating result including these one-off expenses fell by € 16.1 million or 17.8% to € 74.0 million.
Amortisation charges were up € 7.8 million at € 20,9 million, from € 13.1 million in 2011, largely due to the acquisition of KLS Netherlands (2011), Aasset Security and Augusta Technologie.
Financing costs increased to €12.1 million in 2012, from € 7.4 million in 2011. This increase was primarily due to a higher outstanding interest-bearing debt and a negative currency exchange rate effect of € 0.7 million compared to 2011.
The 2012 results include a exceptional gain of € 3.0 million from the release of a provision for earn-out and put-options held by minority shareholders.
The tax burden rose to 23.9% in 2012, from 22.3% in 2011, largely because 2011 included a one-off benefit on previous years from the application of the Dutch innovation tax facility.
Net profit before amortisation and one-off income and expenses, attributable to shareholders came in at € 47.8 million in 2012, down 20.9% from the € 60.5 million reported in 2011. Net profit in 2012 was € 31.0 million, down from € 54.1 million in 2011. Earnings per share before amortisation and one-off income and expenses came in at € 1.28, compared with € 1.63 in 2011. Ordinary earnings per share were € 0.77, from € 1.44 in 2011.
Cash flow from operating activities increased to € 75.2 million, from € 47.4 million in 2011. In 2012, operating capital as a percentage of turnover was 13.1%, up from 11.6% in 2011, largely due to acquisitions.
TKH made net investments in tangible and intangible assets of € 25.7 million in 2012, compared with € 21.9 million in 2011. A large proportion of these related to investments in production locations. TKH also invested € 96.1 million net in acquisitions and participations and € 14.1 million in intangible fixed assets, mainly R&D, patents and licences, which compares to € 7.7 million in 2011. Net bank debt had increased to € 188.2 million at year-end 2012, up € 94.4 million from year-end 2011. The solvency ratio dropped to 41.1% in 2012, from 45.6% in 2011. TKH operates well within the financial ratios agreed with its banks. The net debt/EBITDA ratio was 1.6 and the interest coverage ratio was 9.8.
TKH employed a total staff of 4,736 FTEs at year-end 2012, compared with 4,062 a year-earlier. The increase in the number of employees was almost entirely due to acquisitions.
Progress in realisation of targets and execution of strategy
TKH Group once again devoted considerable attention to its strategic targets and the realisation thereof. Key milestones were the strengthening of our position in vision technology following the acquisition of a majority stake in Augusta Technologie, plus the realisation of our target to book at least 20% of the TKH annual turnover in vision and security systems. These milestones have created opportunities for new growth in selected vertical markets in which TKH can excel thanks to its high-grade technology and added value in the form of services and total solutions. TKH decided to change the name of the ‘security systems’ segment to ‘vision & security systems’, partly in view of the strong increase in the share of turnover from vision technology in this segment.
TKH believes there is still room for improvement in the ROS through a shift in the business mix and the positioning of parts of the portfolio in market segments where we can provide greater added value. TKH once again made substantial investments in technology and R&D capacity to ensure that we are able to build on and increase our technological lead. This could in turn lead to new market positions and growth in market share. The ROS dropped to 7.8% in 2012, from 8.7% in 2011, largely due to the high cost level combined with the surplus production capacity in the first half, plus investments in the organisation. The improvement in the ROS in the fourth quarter to 9.7% supports the ambition for further growth. It should be noted that TKH’s ROS is always strongest in the fourth quarter.
The strong contribution of 21.2% innovations to 2012 turnover, compared with 22.8% in 2011, once again underlines the success of TKH Group.
Developments per solutions segment
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.