Alexander van der Lof, CEO of technology company TKH: "The decrease of the profit in the second quarter, linked with the lower turnover, is mainly the result of relatively high expenses anticipating on growth. TKH once again strengthened its foundation in the first half of the year. This was also thanks to the significant contribution from the acquisitions we made. One clear example is the expansion of the vision activities, which will allow TKH to claim a leading global position in vision activities. The investments in innovations, R&D and the commercial organization, as well as the retention of capacity supports TKH's growth strategy. In a rapidly changing market, our increased R&D efforts will give TKH a strong competitive edge. We are convinced that this gives TKH more potential in the coming years, particularly in view of the downturn in economic conditions.”
In the first half of 2012, turnover dropped by 4.2% to € 526.2 million, from € 549.3 million in the first half of 2011. Of this total, 0.8% was due to a drop in raw materials prices passed on to our customers. Acquisitions increased turnover by 3.8%. Organic turnover fell by 7.2% on balance. In the second quarter, organic turnover dropped by 6.6%.
Turnover fell by 12.1% at Industrial Solutions, while turnover at Building Solutions was up 4.0% and turnover at Telecom Solutions increased by 3.4%. In the first half of 2012, the contribution from Industrial Solutions to overall turnover dropped to 46.3% from 50.5% in the same period in 2011, while the contribution from Telecom Solutions increased to 15.5%, from 14.4%, and from Building Solutions to 38.2% from 35.2%.
The gross margin increased to 40.2% in the first half of 2012 from 37.8% in the first half of 2011, thanks to the improved activity mix. All the solutions segments improved gross margins in the period under review.
The operating costs as a percentage of turnover increased to 33.8% in 2012, from 29.4% in the same period of 2011. This was due to acquisitions and in particular to the excess capacity in the Building Solutions division, which means cost levels are not in line with the current turnover level. In the second quarter a program has been started to bring the costs more in line with turnover. The acquisition costs, relating to the acquisition of the majority stake in Augusta Technologie, were € 4.0 million (2011: € 2.0 million relating to Siqura).
Total depreciations, at € 8.0 million, was up from the € 7.4 million reported in 2011 because of the higher level of investments in 2011 and 2012.
The operating result before amortization of intangible assets (EBITA) fell to € 33.5 million in the first half of 2012, a drop of 27.8% from the € 46.3 million reported in the first half of 2011. This drop was partly due to lower capacity utilization as a result of lower turnover. In addition, more than half the decline was due to the retention of capacity for growth, as well as acquisition costs.
EBITA at Industrial Solutions dropped by 14.3% compared with the first half of 2011. Telecom Solutions recorded an organic increase in EBITA of 15.9%. At Building Solutions, EBITA was down 59.5%.
The ROS dropped to 6.4%, from 8.4% in 2011.
Amortization charges increased by € 2.2 million to € 8.2 million, compared with € 6.0 million in the first half of 2011, due to investments in R&D, software and the acquisitions of companies such as Siqura, Mextal, KLS Netherlands and Aasset.
Financial expenses rose by € 1.5 million to € 4.9 million in the first half of 2012. The increase was due to the higher outstanding interest-bearing debt.
The tax burden rose to € 25.8% in the first half of 2012, from 21.8% in the first half of 2011. The latter year included a one-off gain related to the application of the innovation box for previous periods. The tax burden in the first half of 2012 was affected by one-off non-deductible acquisition costs. In the second half of 2012 a limited lower effective tax rate is expected.
In the first half of 2012, net profit before amortization came in at € 18.3 million, down from € 31.3 million in the first half of 2011. Net profit for the first half of the year fell to € 15.2 million, a drop of 47.6% compared with the € 28.9 million recorded in the first half of 2011.
Net bank debt increased by € 32.4 million to € 160.7 million, as a result of acquisitions and investments. The solvency ratio stood at 41.8%, compared with 43.5%, adjusted for the high cash position on 30 June 2012 held for the financial settlement of the acquisition of the stake in Augusta in July of this year. The net debt/EBITDA ratio was 1.5 and the interest coverage ratio was 10.6, which means TKH operates well within the financial ratios agreed with its banks. The working capital had fallen to 13.5% of turnover on 30 June 2012, compared with 14.8% as per 30 June 2011.
The number of people in permanent employment (FTE) as per 30 June 2012 was 4,255, up from 4,062 at year-end 2011.
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.