Alexander van der Lof, CEO of technology company TKH:
"In the first half of 2015, we were once again able to improve our results, which is a clear evidence of our strong market positions due to focus on innovations. In the period under review, innovations accounted for more than 20% of turnover. Profit at Industrial Solutions increased despite delay in deliveries in China, due to the problems of Chinese tyre manufacturers faced with US import duties on their tyres. However, Building Solutions performed especially well, with a 60% increase in result, on the back of the success of our focus on the defined vertical growth markets. Our differentiating potential in recent years has had a positive impact on margins, which also showed a nice improvement in the period under review. Our advanced technology offers good prospects that could result in a substantial growth in market shares among a number of customers with large turnover potential in the years ahead. This puts us well on track to realise our long-term growth targets to grow over the next 3-5 years with € 300 million to € 500 million in the defined seven vertical growth markets."
Financial developments second quarter
In the second quarter of 2015, turnover came in € 11.0 million (3.2%) higher at € 353.7 million (Q2 2014: € 342.7 million). Acquisitions accounted for 3.1% of turnover. Stronger foreign currencies compared to the euro had a positive impact on turnover of 2.3%, while on average higher raw materials prices added 0.9% to turnover. On balance, turnover declined by 3.1% organically.
The increase in turnover was realised by Building Solutions, with a rise of 15.9%. Turnover at Telecom Solutions and Industrial Solutions declined by 2.9% and 4.6% respectively.
The operating result before amortisation of intangible assets and one-off income and expenses (EBITA) increased by 12.7% to € 37.8 million in the second quarter of 2015 (Q2 2014: € 33.6 million). EBITA at Building Solutions increased considerably. At Telecom Solutions, EBITA also showed a marked increase, while EBITA at Industrial Solutions declined slightly.
Due to the higher operating result and reduced financial expenses, net profit before amortisation and one-off income and expenses attributable to shareholders was up 13.4% at € 24.4 million (Q2 2014: € 21.5 million).
The ROS for the TKH group increased to 10.7% in the second quarter of 2015 (Q2 2014: 9.8%).
Financial developments first half
In the first half of the year, turnover came in 5.1% higher at € 690.3 million (H1 2014: € 657.1 million). Acquisitions accounted for 3.1% of total turnover. Stronger foreign currency exchange rates compared to the euro, had a positive impact of 2.0% on turnover, while a drop in raw materials prices had a limited positive impact of 0.5% on turnover. Turnover declined by 0.5% organically.
Industrial Solutions’ share in total turnover declined to 46.5% in the first half, from 50.9% in 2014. The contribution from Building Solutions in overall turnover rose to 41.7% from 36.8%, due to strong growth in vision & security systems. Telecom Solutions accounted for 11.8% of total turnover, down from 12.3% in 2014.
Innovations once again made a strong contribution of 21.5% to turnover.
The gross margin increased to 45.9% in the first half of 2015, from 41.8% in the first half of 2014, due to an improved product mix, the acquisition of Commend and less outsourcing to third parties.
Operating costs as a percentage of turnover rose to 35.2% in the first half of 2015, from 32.7% in the first half of 2014. Excluding acquisitions, operating costs would be 34.4% of turnover. The increase was largely due to a higher level of in-house production and thus reduced outsourcing to third parties, as well as an increase in R&D costs. The impact of the developments at Imtech is adequately provided for.
Depreciations amounted to € 10.9 million, which is at a higher level than in the first half of 2014 (€ 10.1 million), due to higher investment levels in recent years.
The operating result before amortisation of intangible assets and one-off income and expenses (EBITA) came in 22.5% higher at € 73.8 million in the first half of 2015, compared with € 60.2 million in the first half of 2014. EBITA at Building Solutions increased by 64.3% compared to the first half of 2014, as a result of the acquisition of Commend, turnover growth in vision & security and connectivity systems and the associated improvement in efficiency and capacity utilisation rates at the production locations. At Telecom Solutions, EBITA increased by 18.7%. Industrial Solutions recorded an improvement of 4.0% in EBITA.
The ROS rose to 10.7% in the first half of the year (H1 2014: 9.2%).
Amortisation charges came in € 2.5 million higher at € 15.5 million (H1 2014: € 12.9 million), due to the acquisition of Commend and higher R&D investments in recent years. The amortisation charges include the preliminary Purchase Price Allocations for the acquisition of Commend.
Financial expenses fell by € 0.1 million to € 4.4 million in the first half of 2015. Interest expenses declined by € 0.8 million, which was offset by negative currency exchange rate effects as a result of the weaker euro. The result from participations improved by € 0.3 million.
The tax rate increased to 22.6% in the first half of 2015, from 21.5% in the first half of 2014, because of a larger share of profits abroad. The application of the Dutch innovation box facility once again had a positive impact on the total tax rate.
Net profit before amortisation and one-off income and expenses attributable to shareholders rose by 26.8% to € 47.0 million in the first half of 2015 (H1 2014: € 37.1 million). Net profit for the first half of 2015 was up 23.3% at € 41.3 million (H1 2014: € 33.5 million).
TKH’s net bank debt in accordance with the bank covenants, increased by € 121.2 million from the year-end 2014 figure to € 286.0 million. The increase was related to the squeeze-out of Augusta minority shareholders, the acquisition of Commend, dividend payments, investments and higher working capital due to cyclical influences. The net debt/EBITDA ratio came in at 1.6 and the interest coverage ratio at 21.7, which means TKH is operating well within the financial ratios agreed with the banks. Solvency stood at 41.3% (H1 2014: 40.8%). The working capital increased to 18.3% of turnover, compared with 15.8% at 30 June 2014.
As per 30 June 2015, TKH had 5,337 permanent employees (FTEs), up from 4,918 a year earlier. In addition, TKH had 478 temporary employees at 30 June 2015 (mid-2014: 483).
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 delivering completely worry-free systems for its clients, thanks to the system guarantees provided. 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.