Quarterly Report • Aug 14, 2018
Quarterly Report
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GESCO AG Quarterly Statement 1 April to 30 june 2018
| 01.04.-30.06. | I. Quarter 2018/2019 |
I. Quarter 2017/2018 |
Change | |
|---|---|---|---|---|
| Incoming orders | (€'000) | 150,413 | 148,656 | 1.2 % |
| Sales revenues | (€'000) | 140,825 | 133,416 | 5.6 % |
| EBITDA | (€'000) | 18,720 | 17,487 | 7.1 % |
| EBIT | (€'000) | 13,089 | 10,897 | 20.1 % |
| Earnings before tax | (€'000) | 12,470 | 10,266 | 21.5 % |
| Group net income after minority interest | (€'000) | 7,404 | 5,618 | 31.8 % |
| Earnings per share acc. to IFRS | (€) | 0.68 | 0.52 | 31.8 % |
| Employees | (No.) | 2,507 | 2,588 | -3.1 % |
The GESCO Group started the new financial year 2018/2019 (01.04.2018-31.03.2019) off full of momentum and was able to again exceed the figures in the previous year's quarter, which were already very high. Despite all of the political uncertainties, the economic impetus held on and the GESCO Group managed to turn it into successful operational business throughout its companies.
In the first quarter of the financial year, the incoming orders exceeded the already excellent figures recorded in the previous year's period, sales rose and the increase in earnings was disproportionately high. Three of the four segments were able to generate more incoming orders and sales compared with the same period in the previous year. Throughout the second quarter the brisk demand continued and the volume of incoming orders rose further.
This sets the GESCO Group up with a solid basis for the second half of the year, even though some orders – particularly in the Production Process Technology segment – will only be posted as sales in the next financial year. Overall, we have reason to be optimistic about the rest of the current financial year and expect business to normalise somewhat in the second half of the year. In addition, some areas of the Mobility Technology segment are proving to be challenging with persistently high margin pressure. All in all, we confirm our forecast, which we announced during the annual accounts press conference on 28 June 2018.
Wuppertal, August 2018
Ralph Rumberg Robert Spartmann
Speaker of the Executive Board Member of the Executive Board
Frank Lemeks TOW, Ternopil/Ukraine, a wholly-owned subsidiary of Frank Walz- und Schmiedetechnik GmbH, is included in the financial statements as a fully consolidated company due to its growing economic importance. The effects on the first quarter of Frank Lemeks TOW being included in the consolidated income statement are negligible. Protomaster GmbH, Wilkau-Haßlau/Germany, which was sold in December 2017, is still included in the previous year's figures.
The financial years of GESCO AG and GESCO Group run from 1 April to 31 March of the following year, while the financial years of the subsidiaries coincide with the calendar year. This financial statement for the first quarter of financial year 2018/2019 therefore encompasses the operating months January to March 2018 of the Group's subsidiaries.
The capital goods industry in which we primarily operate continued to develop positively in this period. The GESCO Group took advantage of this economic tailwind and generated incoming orders worth € 150.4 million in the first quarter, just slightly surpassing the unusually high result recorded in the previous year of € 148.7 million. This corresponds to an organic increase of 1.2 %, which means growth of 3.3 % after adjusting the previous year's values for the Protomaster incoming orders. Sales for the same period increased from € 133.4 million to € 140.8 million, which represents growth of 5.6 %. The organic growth rate in this regard was 7.2 %.
Key earnings figures climbed disproportionately to sales figures. An increased material expenditure ratio and reduced personnel expenditure ratio (thanks to good capacity utilisation) meant that
€ 150.4 million 2018/2019
2017/2018
Sales revenues
4
earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 7.1 % to € 18.7 million (previous-year period: € 17.5 million). Depreciation and amortisation in the previous-year period amounted to € 6.6 million, which was disproportionately high due to the planned consolidation-related amortisation from the initial consolidation of the Pickhardt & Gerlach Group. This figure normalised during the reporting period and dropped to € 5.6 million. Earnings before interest and taxes (EBIT) rose by 20.1 % in light of the decline in depreciation and amortisation, demonstrating a better growth rate than for EBITDA, and came to € 13.1 million (€ 10.9 million). With a more or less unchanged financial result, a lower tax rate and a slightly reduced minority interest in incorporated companies, Group net income after minority interest rose by 31.8 % to € 7.4 million (€ 5.6 million). Earnings per share pursuant to IFRS amounted to € 0.68 (€ 0.52).
At the end of the first quarter, the order backlog amounted to € 203.7 million, roughly on a par with the level from the previous year after adjustment for Protomaster.
The Production Process Technology segment houses Group subsidiaries that largely provide products and services for series manufacturers' production processes. The companies in this segment recorded an overall increase in incoming orders of 3.1 % to € 21.5 million (€ 20.9 million). Sales growth was higher (11.5 %) and amounted to € 16.6 million (€ 14.9 million). As is standard practice in the mechanical and plant engineering industry, the companies began producing machinery and plant and equipment that are usually only completed in further course of the year, which is also when these activities first have an impact on sales and earnings. This is why EBIT for the segment is less relevant in the first quarter; while it was slightly negative in the previous-year period, it was slightly positive in the reporting period. We expect a slight year-on-year sales increase and above-average earnings growth for the segment with a view to the year as a whole.
The Resources Technology segment encompasses companies that supply material-intensive customers in the industrial sector. This segment recorded an unusually strong first quarter in the previous-year period. Starting out at this high level, the incoming orders increased again by 6.1 %, from € 72.8 million to € 77.2 million. Sales increased slightly by 1.7 % to € 71.3 million (€ 70.1 million), while EBIT of € 10.1 million was unable to reach the previous year's level of € 10.9 million, as the previous year was shaped by an unusually dynamic demand. For the year as a whole, we expect sales to grow moderately and earnings to be the same as or slightly higher than in the previous year.
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Companies in the Healthcare and Infrastructure Technology segment supply companies for mass consumer markets such as the medical, hygiene, food or sanitary sectors. In the first quarter, the companies were able to continue to generate brisk business: incoming orders rose by 9.8 % to € 37.8 million (€ 34.4 million) and sales grew almost in parallel to this at a rate of 9.2 % to € 36.2 million (€ 33.1 million). Thanks to a slightly less advantageous order mix, EBIT of € 3.5 million remained below the unusually high previous year's figure of € 3.8 million. We expect year-on-year sales and earnings to grow with a view to the year as a whole.
And finally, the Mobility Technology segment houses companies that supply the automotive, commercial vehicle and rail industries. Last year, Protomaster GmbH was sold in this segment, and Paul Beier GmbH Werkzeug- und Maschinenbau & Co. KG sold one of its segments. All in all, this resulted in the disposal of low-margin sales. In the first quarter, with € 13.9 million incoming orders were significantly lower than in the previous year (€ 20.5 million), while sales grew by 9.9 % and reached € 17.0 million (€ 15.5 million). In organic terms, in other words excluding the previous year's figures relating to Protomaster, incoming orders would have dropped by 20.7 % and sales would have increased by 26.9 %. EBIT for the segment significantly improved and rose from € -0.1 million to € 1.7 million. For the year as a whole, we expect a significant drop in sales compared to the previous year due to the changes mentioned above. While we expect earnings to significantly increase year on year, we are still expecting this segment to experience a challenging environment, with increasing customer requirements and persistent margin pressure, which is further compounded by the increasing international competition.
On account of the expansion of operating business, total assets rose by 5.0 % to € 479.0 million compared to 31 March 2018. Inventories and trade receivables experienced a particular increase. At € 44.6 million, liquid assets were up significantly on the figure at the start of the financial year (€ 38.3 million).
On the liabilities side, equity rose from € 224.3 million to € 231.4 million, with the equity ratio amounting to 48.3 % (49.2 %). Trade payables and prepayments received on orders increased in line with operating business. Current and non-current liabilities to financial institutions were practically the same as at the start of the financial year.
The GESCO Group has a remarkably solid balance sheet structure and therefore has freedom to manoeuvre both in terms of investments in the existing Group and acquisitions of other industrial SMEs.
As at the reporting date, GESCO Group employed 2,507 people compared to 2,588 people in the same period of the previous year. The figure for the previous-year period included the 118 employees of Protomaster GmbH, and in this reporting year, 23 employees from Frank Lemeks TOW are included for the first time. In organic terms, i.e. adjusted for these two changes to the scope of consolidation, the Group's workforce remained almost unchanged.
Statements on the subject of opportunities and risks in the consolidated financial statements as at 31 March 2018 remain essentially valid. For more details, please refer to the Annual Report 2017/2018, which is available online at www.gesco.de.
Dörrenberg Edelstahl GmbH reached an agreement with the Bundeskartellamt (Federal Cartel Office) to end the ongoing antitrust proceedings and paid a penalty of € 8.5 million in July 2018, i.e. after the end of this reporting period. A provision for this amount had already been made in the consolidated financial statements for financial year 2017/2018.
The brisk business activities continued in the second quarter, which comprises the subsidiaries' operating business from April to June 2018. According to preliminary figures, incoming orders at around € 160 million exceeded the previous-year figure of € 127.6 million by more than 25 %, thereby setting a new record. At around € 138 million, sales were around 5 % up on the previous year's figure of € 131.3 million. In organic terms, incoming orders would have been up by around 28 % and sales by around 9 %.
Employees
In light of the continued dynamic demand in the capital goods industry, delivery times for primary materials and components have increased considerably in recent months. If this means that deliveries of larger machines or plant and equipment will be postponed until the next financial year, this may result in us not being able to fully reach our targets for this financial year. We do not see any specific indications of this at the moment, however.
At the accounts press conference on 28 June 2018, we forecasted Group sales of between € 550 million and € 560 million and Group net income after minority interest of between € 26 million and € 27 million for financial year 2018/2019. The solid number of incoming orders boosts our optimism that we will reach our sales target, even though some of them will only be posted as sales in the next financial year. We are expecting the high demand to normalise somewhat in the second half of the year. In terms of earnings, we forecast sustained strong margin pressure in the Mobility Technology segment, as explained above. All in all, and based on the information currently available to us, we confirm the forecast we announced during the annual accounts press conference.
No further significant events occurred after the end of the reporting period.
| € '000 | 30.06.2018 | 31.03.2018 |
|---|---|---|
| Assets | ||
| A. Non-current assets I. Intangible assets |
||
| 1. Industrial property rights and similar rights | ||
| and assets as well as licences to such rights and assets | 20,712 | 21,715 |
| 2. Goodwill |
19,100 | 19,153 |
| 3. Prepayments made |
7 | 16 |
| 39,819 | 40,884 | |
| II. Property, plant and equipment |
||
| 1. Land and buildings |
65,680 | 66,175 |
| 2. Technical plant and machinery | 51,477 | 52,045 |
| 3. Other plants, fixtures and fittings |
21,183 | 21,568 |
| 4. Prepayments made and assets under construction |
9,267 | 6,908 |
| 147,607 | 146,696 | |
| III. Financial assets |
||
| 1. Shares in affiliated companies |
38 | 40 |
| 2. Shares in companies valued at equity |
1,205 | 1,215 |
| 3. Investments |
156 | 156 |
| 4. Other loans |
190 | 190 |
| 1,589 | 1,601 | |
| IV. Other assets |
1,311 | 1,360 |
| V. Deferred tax assets |
3,132 | 3,166 |
| 193,458 | 193,707 | |
| B. Current assets |
||
| I. Inventories |
||
| 1. Raw materials and supplies |
25,823 | 23,616 |
| 2. Unfinished products and services |
44,456 | 40,938 |
| 3. Finished products and goods |
72,727 | 70,514 |
| 4. Prepayments made |
1,129 | 845 |
| 144,135 | 135,913 | |
| II. Receivables and other assets |
||
| 1. Trade receivables |
82,630 | 73,190 |
| 2. Amounts owed by affiliated companies |
1 | 1,782 |
| 3. Amounts owed by companies valued at equity |
82 | 19 |
| 4. Other assets |
12,555 | 12,247 |
| 95,268 | 87,238 | |
| III. Cash and credit balances with financial institutions |
44,576 | 38,295 |
| IV. Accounts receivable and payable |
1,517 | 1,103 |
| 285,496 | 262,549 | |
| 478,954 | 456,256 |
| € '000 | 30.06.2018 | 31.03.2018 |
|---|---|---|
| Equity and liabilities | ||
| A. Equity capital |
||
| I. Subscribed capital |
10,839 | 10,839 |
| II. Capital reserves |
72,364 | 72,364 |
| III. Revenue reserves |
138,177 | 130,773 |
| IV. Own shares |
-119 | -119 |
| V. Other comprehensive income |
-4,821 | -4,398 |
| VI. Minority interest (incorporated companies) |
14,931 231,371 |
14,806 224,265 |
| B. Non-current liabilities |
||
| I. Minority interest (partnerships) |
1,608 | 1,868 |
| II. Provisions for pensions |
15,942 | 16,020 |
| III. Other non-current provisions |
600 | 589 |
| IV. Liabilities to financial institutions |
76,335 | 76,232 |
| V. Other liabilities |
3,819 | 3,822 |
| VI. Deferred tax liabilities |
3,343 | 3,139 |
| 101,647 | 101,670 | |
| C. Current liabilities |
||
| I. Other provisions |
20,536 | 21,077 |
| II. Liabilities |
||
| 1. Liabilities to financial institutions |
42,205 | 42,523 |
| 2. Trade creditors |
18,467 | 15,036 |
| 3. Payments received on account of orders |
25,294 | 18,928 |
| 4. Liabilities to affiliated companies |
510 | 316 |
| 5. Liabilities to companies valued at equity |
1 | 0 |
| 6. Other liabilities |
38,765 | 32,350 |
| 125,242 | 109,153 | |
| III. Accounts receivable and payable |
158 | 91 |
| 145,936 | 130,321 | |
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| € '000 | I. Quarter 2018/2019 |
I. Quarter 2017/2018 |
|---|---|---|
| Sales revenues | 140,825 | 133,416 |
| Change in stocks of finished and unfinished products | 2,416 | 3,160 |
| Other company-produced additions to assets | 97 | 195 |
| Other operating income | 2,540 | 1,840 |
| Total income | 145,878 | 138,611 |
| Material expenditure | -73,092 | -67,254 |
| Personnel expenditure | -37,199 | -38,038 |
| Other operating expenditure | -16,867 | -15,832 |
| Earnings before interest, tax, depreciation and amortisation (EBITDA) |
18,720 | 17,487 |
| Depreciation on property, plant and equipment and amortisation of intangible assets |
-5,631 | -6,590 |
| Earnings before interest and tax (EBIT) | 13,089 | 10,897 |
| Earnings from investments | 0 | 39 |
| Earnings from companies valued at equity | 71 | 89 |
| Other interest and similar income | 7 | 20 |
| Interest and similar expenditure | -582 | -715 |
| Minority interest in partnerships | -115 | -64 |
| Financial result | -619 | -631 |
| Earnings before tax (EBT) | 12,470 | 10,266 |
| Taxes on income and earnings | -4,286 | -3,743 |
| Group net income for the year after tax | 8,184 | 6,523 |
| Minority interest in incorporated companies | -780 | -905 |
| Group net income for the year after minority interest | 7,404 | 5,618 |
| Earnings per share (€) acc. to IFRS | 0.68 | 0.52 |
| Weighted average number of shares | 10,835,927 | 10,839,499 |
| € '000 | I. Quarter 2018/2019 |
I. Quarter 2017/2018 |
|---|---|---|
| 1. Group net income | 8,184 | 6,523 |
| 2. Revaluation of benefit obligations not impacting on income | 0 | 74 |
| 3. Items that cannot be transferred into the income statement | 0 | 74 |
| 4. Difference from currency translation | ||
| a) Reclassification into the income statement | 0 | 0 |
| b) Changes in value with no effect on income | -346 | -190 |
| 5. Difference from currency translation | ||
| from companies valued at equity | ||
| a) Reclassification into the income statement | 0 | 0 |
| b) Changes in value with no effect on income | -81 | 19 |
| 6. Market valuation of hedging instruments | ||
| a) Reclassification into the income statement | 0 | 0 |
| b) Changes in value with no effect on income | -1 | -9 |
| 7. Items that can be transferred into the income statement | -428 | -180 |
| 8. Other comprehensive income | -428 | -106 |
| 9. Total result for the period | 7,756 | 6,417 |
| of which shares held by minority interest | 775 | 903 |
| of which shares held by GESCO shareholders | 6,981 | 5,514 |
| €'000 | Subscribed capital |
Capital reserves |
Revenue reserves |
Own shares |
|---|---|---|---|---|
| As at 01.04.2017 | 10,839 | 72,364 | 118,468 | 0 |
| Distributions | ||||
| Result for the period | 5,618 | |||
| As at 30.06.2017 | 10,839 | 72,364 | 124,086 | 0 |
| As at 01.04.2018 | 10,839 | 72,364 | 130,773 | -119 |
| Distributions | ||||
| Result for the period | 7,404 | |||
| As at 30.06.2018 | 10,839 | 72,364 | 138,177 | -119 |
| €'000 | Production Process Resource Technology Technology |
||||
|---|---|---|---|---|---|
| I. Quarter 2018/2019 |
I. Quarter 2017/2018 |
I. Quarter 2018/2019 |
I. Quarter 2017/2018 |
||
| Order backlog | 40,009 | 47,991 | 75,395 | 70,487 | |
| Incoming orders | 21,506 | 20,865 | 77,221 | 72,808 | |
| Sales revenues | 16,603 | 14,896 | 71,269 | 70,051 | |
| of which with other segments | 222 | 118 | |||
| Depreciation | 721 | 717 | 1,108 | 1,011 | |
| EBIT | 336 | -259 | 10,126 | 10,916 | |
| Investments | 278 | 203 | 727 | 781 | |
| Employees (No./reporting date) | 472 | 466 | 748 | 753 |
| Minority Equity interest capital |
incorporated companies |
Total | Hedging instruments |
Revaluation of pensions |
Exchange equalisation items |
|---|---|---|---|---|---|
| 15,172 214,095 |
198,923 | -3 | -3,858 | 1,113 | |
| -1,320 -1,320 |
0 | ||||
| 903 6,417 |
5,514 | -8 | 69 | -165 | |
| 14,755 219,192 |
204,437 | -11 | -3,789 | 948 | |
| 14,806 224,265 |
209,459 | 12 | -3,349 | -1,061 | |
| -650 -650 |
|||||
| 775 7,756 |
6,981 | -1 | 0 | -422 | |
| 14,931 231,371 |
216,440 | 11 | -3,349 | -1,483 |
| Healthcare and Infrastructure Technology |
Mobility Technology |
Reconsiliation | Group | |||||
|---|---|---|---|---|---|---|---|---|
| I. Quarter | I. Quarter | I. Quarter | I. Quarter | I. Quarter | I. Quarter | I. Quarter | I. Quarter | I. Quarter |
| 2017/2018 | 2018/2019 | 2017/2018 | 2018/2019 | 2017/2018 | 2018/2019 | 2017/2018 | 2018/2019 | 2017/2018 |
| 70,487 | 41,456 | 35,682 | 46,789 | 55,265 | 0 | 0 | 203,658 | 209,425 |
| 72,808 | 37,807 | 34,448 | 13,879 | 20,535 | 0 | 0 | 150,413 | 148,656 |
| 70,051 | 36,155 | 33,097 | 17,037 | 15,505 | -239 | -133 | 140,825 | 133,416 |
| 118 | 0 | 0 | 17 | 15 | -239 | -133 | 0 | 0 |
| 1,011 | 1,526 | 1,577 | 978 | 1,178 | 1,298 | 2,107 | 5,631 | 6,590 |
| 10,916 | 3,449 | 3,791 | 1,744 | -111 | -2,566 | -3,440 | 13,089 | 10,897 |
| 781 | 1,761 | 2,009 | 3,097 | 1,436 | 38 | 0 | 5,901 | 4,429 |
| 753 | 795 | 741 | 473 | 610 | 19 | 18 | 2,507 | 2,588 |
| €'000 | I. Quarter 2018/2019 |
I. Quarter 2017/2018 |
|---|---|---|
| Group net income for the period (including share attributable to minority interest in incorporated companies) |
8,184 | 6,523 |
| Depreciation on property, plant and equipment and intangible assets | 5,631 | 6,590 |
| Earnings from companies valued at equity | -71 | -89 |
| Share attributable to minority interest in partnerships | 115 | 64 |
| Decrease in non-current provisions | -67 | -49 |
| Other non-cash income/expenditure | -105 | 98 |
| Cash flow for the period | 13,687 | 13,137 |
| Losses from the disposal of property, plant and equipment/intangible assets |
47 | 22 |
| Gains from the disposal of property, plant and | ||
| equipment/intangible assets | -145 | -265 |
| Increase in stocks, trade receivables and other assets | -16,425 | -22,440 |
| Increase in trade creditors and other liabilities | 16,037 | 17,650 |
| Cash flow from ongoing business activity | 13,201 | 8,104 |
| Incoming payments from disposals of property, | ||
| plant and equipment/intangible assets | 312 | 347 |
| Disbursements for investments in property, plant and equipment | -5,758 | -4,250 |
| Disbursements for investments in intangible assets | -143 | -178 |
| Disbursements for investments in financial assets | 0 | 20 |
| Cash flow from investment activity | -5,589 | -4,061 |
| Incoming payments from minority interests | 1 | 0 |
| Disbursements to minority interests | -1,026 | -1,583 |
| Incoming payments from raising (financial) loans | 8,146 | 3,404 |
| Outflow for repayment of (financial) loans | -8,409 | -4,752 |
| Cash flow from funding activities | -1,288 | -2,931 |
| Changes in cash and cash-equivalents | 6,324 | 1,112 |
| Exchange-rate related changes in cash and cash-equivalents | -43 | -19 |
| Financial means on 01.04. | 38,295 | 35,146 |
| Financial means on 30.06. | 44,576 | 36,239 |
| less cash held for sale | 0 | -35 |
| Financial means on 30.06. from continuing operations | 44,576 | 36,204 |
The statement of GESCO Group for the first quarter (1 April to 30 June 2018) of financial year 2018/2019 (1 April 2018 to 31 March 2019) was prepared on the basis of the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB).
The accounting and valuation principles applied generally correspond to those in the consolidated financial statements as at 31/03/2018. The financial statements are affected by the accounting and valuation methods as well as assumptions and estimates which affect the level and recognition of assets, liabilities and contingent liabilities on the balance sheet and of the income and expenditure items. Sales-related figures are accrued throughout the year.
Publication of the quarterly statement for the first quarter
30 August 2018 Annual General Meeting at the Stadthalle, Wuppertal, Germany
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14 November 2018 Publication of the half-year interim report
14 February 2019 Publication of the quarterly statement for the first nine months
27 June 2019 Annual accounts press conference and analysts' meeting
14 August 2019 Publication of the quarterly statement for the first quarter
29 August 2019 Annual General Meeting at the Stadthalle, Wuppertal, Germany
14 November 2019 Publication of the half-year interim report Dear Shareholders,
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GESCO AG Oliver Vollbrecht / Investor Relations Johannisberg 7 42103 Wuppertal, Germany Phone +49 (0) 202 24820-18 Fax +49 (0) 202 24820-49 [email protected] www.gesco.de
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