Alexander van der Lof, CEO of technology company TKH: "The strong improvement in profit and the continued increase in order intake in the second quarter confirm that TKH is in an excellent strategic position. Our customers are taking a noticeable interest in the innovations within our four core technologies. The connection of TKH’s core technologies and our proposition as one-stop shop for those combined technologies in particular puts TKH in a unique position. The demand from clients for complete systems is fully in line with TKH’s vertical market approach. We offer our clients distinctive technologies that make those clients more secure and more efficient. The high level of organic growth we have realised proves that we are a strong international player with excellent prospects for continued organic growth that will be driven primarily by the vertical growth markets we have identified. We also expect profit in the second half of the year to exceed the figure for the first half”.
Financial developments in the second quarter
Turnover rose almost entirely organic, by 13.5% to € 342.7 million in the second quarter (Q2 2013: € 301.9 million). The strongest rise in turnover was seen at Industrial Solutions, where turnover came in 27.8% higher. The biggest rise in turnover was in the segment tyre manufacturing systems, due to the strong increase in order intake noted since the second half of 2012. The order intake was again at a high level in the second quarter of this year. Turnover at Building Solutions came in 2.8% higher, acquisitions in this segment lifted turnover by 1.2%. However, turnover at Telecom Solutions fell by 0.9% due to falling demand in the segment copper network systems.
TKH’s gross margin improved to 41.8% in the second quarter of 2014, compared with 40.6% in the second quarter of 2013, thanks to a better product mix.
Operating costs as a percentage of turnover fell to 32.1% in the second quarter of 2014, from 32.8% in the second quarter of 2013. The operating result before amortisation of intangible assets (EBITA) rose by 42.5% to € 33.6 million in the second quarter of 2014, from € 23.5 million in the second quarter of 2013. Industrial Solutions booked the strongest increase in EBITA. The main driver of this increase was the strong rise in turnover and improved efficiency in the manufacturing systems segment. EBITA at Telecom Solutions came in lower, although this was compared to the exceptionally strong second quarter of 2013. EBITA was higher at Building Solutions, largely due to the efficiency measures TKH has taken and the focus on the company’s vertical growth markets.
Thanks to lower financial expenses, a lower tax burden and a higher operating result, net profit before amortisation and one-off income and expenses attributable to shareholders came in 68.4% higher.
ROS rose to 9.8%, compared with 7.8% in the year-earlier period.
Financial developments in the first half
Turnover in the first half was up by 11.9% at € 657.1 million (H1 2013: € 587.1 million). Acquisitions accounted for 0.4% of total turnover. The drop in raw materials prices had a negative impact of 1.3% on turnover. Turnover increased organically by 12.8% in the first half.
Industrial Solutions’ share of total turnover increased to 50.9% in the first half of 2014, compared with 45.2% in the first half of 2013. Building Solutions’ share of total turnover fell to 36.8% from 41.1% due to the strong growth at Industrial Solutions. Telecom Solutions’ share fell to 12.3% from 13.6%.
The gross margin rose to 41.8% in the first half of 2014, from 40.9% in the first half of 2013, thanks to an improved product mix.
Operating costs (excluding one–off expenses) as a percentage of turnover fell to 32.7% in the first half of 2014, from 33.6% in the first half of 2013. This was due to higher capacity utilisation at TKH’s production locations and the efficiency programmes implemented in the second half of 2013.
At € 10.1 million, depreciation came in higher than in the first half of 2013 (€ 9.7 million) due to higher investment levels in recent years.
The operating result before the amortisation of intangible assets (EBITA) came in 41.0% higher at € 60.2 million in the first half of 2014, compared with € 42.7 million in the first half of 2013. EBITA at Industrial Solutions was up 74.3% compared to the first half of 2013, largely due to higher turnover and improved efficiency and capacity utilisation at TKH’s production locations. At Building Solutions, EBITA rose by 9.7% to € 18.3 million in the first half of 2014, from € 16.7 million in the first half of 2013. Telecom Solutions saw its EBITA decrease by 19.1%.
ROS rose to 9.2% in the first half of 2014, from 7.3% in the year-earlier period.
Amortisation charges were up by € 1.0 million at € 12.9 million (H1 2013: € 12.0 million), largely due to investments in R&D.
Financial expenses fell by € 2.3 million to € 4.8 million in the first half of 2014. This improvement was the result of lower interest expenses following the renewal of TKH’s credit facility as per October 2013, the expiration of interest rate swaps and favourable currency effects of € 0.5 million compared with the first half of 2013. The lower interest expenses were offset by lower income from participations, the income from which was positively affected by currency effects in 2013.
The tax rate fell to 21.5% in the first half of 2014, from 23.0% in the first half of 2013. In 2014, TKH renewed a significant agreement with the Dutch tax authority on the innovation box facility, which will now run to year-end 2018.
Net profit before amortisation and one-off income and expenses attributable to shareholders came in at € 37.1 million in the first half of 2014 (H1 2013: € 22.9 million). Net profit for the first half of 2014 rose to € 33.5 million (H1 2013: € 19.4 million), an increase of 73.3%.
TKH’s net bank debt, calculated in accordance with the banking covenants, increased by € 37.7 million from year-end 2013 to € 223.3 million. This increase is related to higher working capital utilisation, due to seasonal influences, and dividend payments. Solvency came in at 40.8% (H1 2013: 40.6%). The Net debt/EBITDA-ratio came in at 1.6 and the interest coverage ratio at 14.6, well within the financial ratios TKH has agreed with its banks. The working capital rose to 15.8% of turnover, compared with 15.5% as per 30 June 2013.
As per 30 June, TKH had a total of 4,918 permanent employees (FTEs) (end-June 2013: 4,683). In addition, TKH had a total of 452 temporary employees as per 30 June 2014 (end-June 2013: 305).
Developments per solutions segment
Telecom Solutions develops, produces and supplies systems ranging from basic outdoor infrastructure for telecom and CATV networks through to indoor home networking applications. The focus of the business is on the delivery of completely worry-free systems for its clients, thanks to the system guarantees it provides. Around 40% of the portfolio consists of hub-to-hub optical fibre and copper cable systems. The remaining 60%, consisting of components and systems in the field of connectivity and peripherals, is deployed primarily in the network hubs.