AI Terminal
Kontron AG (formerly S&T AG)
Quarterly Report • May 15, 2022
802_10-q_2022-05-15_dbe86819-b582-41de-ab46-354feaa609d8.pdf
Quarterly Report
Open in ViewerOpens in native device viewer
01
S&T GROUP OVERVIEW
KEY FIGURES
| IN EUR MIO. | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenues | 329.7 | 294.1 |
| Gross profit | 120.1 | 116.1 |
| EBITDA | 29.4 | 28.2 |
| Amortisation and depreciation | 14.7 | 15.5 |
| EBIT before PPA amortisation1) | 16.9 | 15.3 |
| Result after non-controlling interests | 11.6 | 10.1 |
| Operating cash flow | -60.0 | -26.8 |
| Free cash flow2) | -68.5 | -36.3 |
1) EBIT before amortisation from purchase price allocation
2) Operating cash flow less purchase of non-current non-financial assets
| IN EUR MIO. | 31.03.2022 | 31.12.2021 |
|---|---|---|
| Cash and cash equivalents | 224.3 | 296.5 |
| Equity | 433.0 | 423.3 |
| Equity ratio | 33.4% | 31.3% |
| Net Cash (+) / Net debt (-)3) | -85.8 | -14.2 |
| Working capital4) | 217.8 | 149.9 |
| Backlog | 1,439.2 | 1,334.9 |
| Project-pipeline | 3,332.0 | 3,367.0 |
| Employees5) | 6,152 | 6,206 |
3) Cash and cash equivalents less non-current and current financial liabilities
4) Inventories, trade receivables less trade payables (excl. IFRS 15)
5) Number of employees on full time equivalent basis without employees on parental leave, trainees and apprentices
02 FOREWORD
S&T IN TRANSITION
The S&T Group achieved strong, largely organic growth in revenues of 12% to EUR 330 million in Q1 of financial year 2022. EBITDA was also up 4% compared to the same period in the previous year to EUR 29 million. Order intake was once again significantly above plan at EUR 435 million. Despite many challenges, S&T maintains its course for strong growth. Our goal is to react quickly and efficiently to problems, so that we can gain market share and minimise additional costs, especially in these turbulent times. There are plenty of examples of this:
- › The COVID pandemic caused a downturn in global economic growth. Our new homeoffice-system has been highly successful, increasing the efficiency of our employees and we have been able to save 15% or EUR 2 million in rental costs for office space so far.
- › The forensic investigations, lawyers, etc. have swallowed almost EUR 1 million, significantly more taking internal work into account. The S&T Group is one of the best audited companies on the stock exchange.
- › The chip crisis and disrupted supply chains have been impacting our business for more than 12 months. We have redesigned our products, we are upcycling components and we have significantly increased our inventory. As a result, S&T is currently one of the better-performing companies in the IoT sector, we are growing significantly and gaining market share. Nevertheless, as of March 31, 2022, we are pushing a record mountain of around EUR 108 million in overdue orders, most of which we will deliver during 2022.
- › The war in Ukraine and the sanctions against Russia are also affecting the global economy. We generate around 6% of our revenues with our subsidiaries in Russia, Ukraine, Belarus and Moldova and are therefore also affected. In recent months, we have made some extensive adjustments. By the end of 2022, we will have largely withdrawn from these regions.
However, the biggest upheaval is not caused externally, but is a positive transformation that we initiated: S&T wants to transform itself, become an even more successful company and focus on the IoT sector.
That is why we are presenting the renaming of S&T AG to Kontron AG to shareholders for resolution at the Annual General Meeting on May 6, 2022. We plan to sell our IT service business areas as part of the "Focus" project and focus on the IoT sector in order to achieve future gross margins of over 50% and EBITDA margins of over 15%. "Focus" is therefore the most important strategic project in the last 10 years. A US investment bank was commissioned with the sale process in October 2021. The "Focus" project is moving forward as planned. We expect to conclude the sale in the third quarter 2022. We want to use the expected income to significantly advance the expansion of our IoT activities; we already have contacts with suitable acquisition targets in the IoT environment. Further share buybacks and a special dividend are also planned.
Despite the many challenges, we are optimistic for financial year 2022. In the 2021 financial year, we received new orders of around EUR 1,750 million; in the first quarter of 2022 this positive trend continued at EUR 435 million. Despite ongoing problems in supply chains and the loss of sales in Russia, we continue to expect organic growth of 12% to bring revenues up to EUR 1,500 million in 2022. We will promptly replace the sold-off IT service revenues with IoT revenues and plan to increase sales to EUR 2,000 million by 2025 with a significantly higher EBITDA margin of 13%. The foundations for this are currently being laid.
Hannes Niederhauser, CEO
NOTES TO THE COURSE OF BUSINESS
S&T AG — STRONG ORGANIC GROWTH DESPITE CHIP CRISIS, OPERATING CASH FLOW IMPACTED BY SEASONAL EFFECTS AND CHIP CRISIS
In the first quarter of the current financial year 2022, despite the ongoing chip crisis and the first noticeable impact of the Russian invasion of Ukraine, the S&T Group was able to significantly increase revenues, with the increase largely attributable to organic growth. Despite delivery delays of around EUR 108 million, revenues rose by 12.1% compared to the first quarter of financial year 2021 from EUR 294.1 million to EUR 329.7 million.
Profitability in the past quarter was impacted as a result of various one-off effects, such as the costs of forensic investigations in connection with the short seller attack and the resulting increased costs for the audit, as well as the allocation of a provision for the Russian and Ukrainian operations, as well as the positive effect from the reversal of purchase price liabilities. Overall, an EBITDA of EUR 29.4 million was achieved in the first 3 months of the current financial year (Q1 2021: EUR 28.2 million). EBITDA therefore increased by around 4.3%, although the gross margin of 36.4% was behind the first quarter of 2021 (39.5%). The increase in revenues and EBITDA would have been correspondingly higher, were it not for the delays in the supply chain and price increases due to the current chip shortage. Net income attributable to the S&T shareholders (after non-controlling interests) went up by almost 15% to EUR 11.6 million (Q1 2021: EUR 10.1 million), which increased earnings per share (undiluted) from 16 cents in the first quarter of 2021 to 18 cents in the first 3 months of the current financial year.
IOT SEGMENTS IN PARTICULAR IMPACTED BY CHIP SHORTAGE
The three segments of the S&T Group developed as follows:
- › "IT Services": The delays in the supply chain had the least impact in this segment, which includes all activities of the IT services business in the DACH and Eastern Europe regions. Compared to the previous year's figures, it should be noted that S&T Slovenija d.o.o. was reclassified into the "IoT Solutions Europe" segment already in 2021 as part of the "Focus" project. Revenues increased by around 18.6% from EUR 120.3 million to EUR 142.4 million, which is attributable to the realisation of larger system integration projects with a lower gross margin (Q1 2022: 31.5% | Q1 2021: 34.4%). The EBITDA after headquarter charging therefore fell from EUR 11.7 million in the first quarter of 2021 to EUR 10.4 million in the first quarter of the current financial year.
- › "IoT Solutions Europe": This segment covers all activities of the S&T Group relating to development of secure solutions for machine networks by means of a combined portfolio consisting of hardware, middleware and services. In the "IoT Solutions Europe" segment, revenues of EUR 163.5 million were achieved in the first quarter of 2022 (Q1 2021: EUR 151.9 million), which corresponds to a growth in revenues of 7.6%. Without the further increase in revenue offset in the mid-double-digit million range as a consequence of chip shortages compared to December 31, 2021, growth in revenues would have been even stronger. EBITDA after headquarter charging nevertheless increased from EUR 17.3 million to EUR 19.3 million.
The "IoT Solutions Europe" segment also includes the activities of the S&T Group in Russia and Ukraine. As a result of the Russian invasion of Ukraine and the sanctions imposed by the international community, it can be assumed that business will be further impacted in these countries, in which the S&T Group generates around 6% of its revenues.
- › Corresponding provisions in the amount of EUR 4 million have therefore been made for receivables from Russian and Ukrainian (subsidiary) companies, as recognised in the consolidated income statement to reduce profits in the first quarter.
- › Furthermore, at the end of March 2022, the Supervisory Board and the Executive Board resolved to significantly reduce the S&T Group's exposure in Russia and Belarus by the end of 2022 and to largely withdraw from these markets. Accordingly, contracts were signed in April for the sale of shares in the Russian RTSoft Group. Withdrawal from the Belarus market was also initiated in April 2022.
› "IoT Solutions America": The "IoT Solutions America" segment includes the solutions in the vertical markets of transportation and aviation as well as communications in the North America region. Revenues in this segment amounted to EUR 23.5 million in the first quarter of 2022 (Q1 2021: EUR 21.9 million), which corresponds to growth of approx. 7.3%. Without the delays in the supply chain and the still low volume of revenues in the aviation sector, significantly higher growth would have been achievable due to the order backlog. As a result, EBITDA after headquarter charging in this segment improved slightly from minus EUR 0.8 million to minus EUR 0.2 million.
| IN EUR MIO. | IT SERVICES | IOT SOLUTIONS EUROPE |
IOT SOLUTIONS AMERICA |
S&T GROUP | ||||
|---|---|---|---|---|---|---|---|---|
| Q1 2022 | Q1 2021 | Q1 2022 | Q1 2021 | Q1 2022 | Q1 2021 | Q1 2022 | Q1 2021 | |
| Total revenues | 147.2 | 123.6 | 197.9 | 182.4 | 25.9 | 24.8 | 371.0 | 330.9 |
| Internal revenues | -4.5 | -3.3 | -34.4 | -30.5 | -2.5 | -3.0 | -41.3 | -36.8 |
| Segment revenues | 142.7 | 120.3 | 163.5 | 151.9 | 23.4 | 21.9 | 329.7 | 294.1 |
| EBITDA before HQ Charging*) |
8.5 | 10.1 | 21.0 | 18.7 | -0.1 | -0.5 | 29.4 | 28.2 |
| EBITDA after HQ-Charging**) | 10.4 | 11.7 | 19.3 | 17.3 | -0.2 | -0.8 | 29.4 | 28.2 |
*) EBITDA adjusted for headquarter charging of S&T AG
**) EBITDA after all headquarter charging of S&T AG
STRONG FINANCIAL POSITION, SEASONALLY WEAKER OPERATING CASH FLOW
The net assets and liquidity position in the first quarter of the current financial year is characterised by the ongoing chip crisis, but is still stable. Equity increased from EUR 423.3 million as of December 31, 2021 to EUR 433.0 million, although no further treasury shares were acquired in the first quarter of 2022 due to the lack of authorisation from the Annual General Meeting, which would have reduced equity accordingly. Due to the slightly lower balance sheet total, the equity ratio amounted to 33.4% as of the reporting date for the quarter (December 31, 2021: 31.3%). Cash and cash equivalents amounted to EUR 224.3 million (December 31, 2021: EUR 296.5 million). Operating cash flow in the first quarter of the current financial year was impacted by the raw materials and semi-finished products built up as a result of the chip shortage and delivery delays (inventories as of March 31, 2022: EUR 219.1 million | December 31, 2021: EUR 187.4 million), which, together with the reduction in trade payables, resulted in a negative operating cash flow of minus EUR 59.9 million (Q1 2021: minus EUR 26.8 million). The number of employees as of March 31, 2022 was 6,152 (December 31, 2021: 6,206 | March 31, 2021: 6,078).
04
CONSOLIDATED INCOME STATEMENT
| CONSOLIDATED INCOME STATEMENT IN TEUR |
Q1 2022 | Q1 2021 |
|---|---|---|
| Revenues | 329,665 | 294,093 |
| Capitalised development costs | 5,506 | 4,150 |
| Other income | 10,950 | 2,034 |
| Expenses for materials and other services purchased | -209,525 | -177,970 |
| Personnel expenses | -81,542 | -75,732 |
| Depreciation and amortisation | -14,659 | -15,516 |
| Other operating expenses | -25,647 | -18,354 |
| Result from operations | 14,748 | 12,705 |
| Finance income | 266 | 498 |
| Finance expenses | -2,708 | -2,357 |
| Financial result | -2,442 | -1,859 |
| Earnings before taxes | 12,306 | 10,846 |
| Income taxes | -1,132 | -1,127 |
| Net income | 11,174 | 9,719 |
| Results from the period attributable to owners of non-controlling interests | -417 | -380 |
| Results from the period attributable to owners of interests in parent company | 11,591 | 10,099 |
| Earnings per share (undiluted) | 0.18 | 0.16 |
| Earnings per share (diluted) | 0.18 | 0.15 |
| Average number of shares in circulation (in thousands undiluted) | 63,631 | 64,452 |
| Average number of shares in circulation (in thousands diluted) | 64,631 | 65,452 |
STATEMENT OF OTHER COMPREHENSIVE INCOME
| STATEMENT OF OTHER COMPREHENSIVE INCOME IN TEUR |
Q1 2022 | Q1 2021 |
|---|---|---|
| Net income | 11,174 | 9,719 |
| Items that may be subsequently reclassified to profit or loss | ||
| Unrealised gains/losses from currency translation | -1,471 | 2,708 |
| Other comprehensive income -1,471 |
2,708 | |
| Comprehensive income | 9,703 | 12,427 |
| of which attributable to | ||
| Owners of non-controlling interests | -831 | -289 |
| Owners of interests in parent company | 10,534 | 12,716 |
04 CONSOLIDATED BALANCE SHEET
| ASSETS IN TEUR |
31.03.2022 | 31.12.2021 |
|---|---|---|
| NON-CURRENT ASSETS | ||
| Property, plant and equipment | 125,599 | 132,536 |
| Intangible assets | 104,267 | 104,207 |
| Goodwill | 208,437 | 208,251 |
| Financial assets non-current | 12,569 | 12,594 |
| Contract assets non-current | 194 | 194 |
| Other non-current assets | 20,853 | 21,018 |
| Deferred tax assets | 41,327 | 40,179 |
| 513,246 | 518,979 | |
| CURRENT ASSETS | ||
| Inventories | 219,080 | 187,349 |
| Trade receivables | 214,591 | 232,546 |
| Contract assets current | 35,108 | 32,834 |
| Financial assets current | 13,131 | 19,902 |
| Other receivables and assets current | 76,266 | 64,011 |
| Cash and cash equivalents | 224,271 | 296,512 |
| 782,447 | 833,154 | |
| Total assets | 1,295,693 | 1,352,133 |
| EQUITY AND LIABILITIES IN TEUR |
31.03.2022 | 31.12.2021 |
| EQUITY | ||
| Subscribed capital | 66,096 | 66,096 |
| Capital reserves | 168,188 | 168,283 |
| Accumulated results | 251,022 | 239,431 |
| Other reserves | -9,462 | -8,405 |
| Treasury shares | -46,848 | -46,848 |
| Equity attributable to owners of interests in parent company | 428,996 | 418,557 |
| Non-controlling interests | 4,027 | 4,706 |
| 433,023 | 423,263 | |
| NON-CURRENT LIABILITIES | ||
| Financing liabilities non-current | 234,213 | 238,376 |
| Other financial liabilities non-current | 42,944 | 54,084 |
| Contract liabilities | 16,466 | 16,952 |
| Other liabilities non-current | 488 | 488 |
| Deferred tax liabilities | 13,324 | 13,206 |
| Provisions non-current | 24,442 | 25,056 |
| 331,877 | 348,162 | |
| CURRENT LIABILITIES | ||
| Financing liabilities current | 75,855 | 72,319 |
| Trade payables | 215,903 | 269,975 |
| Contract liabilities | 89,829 | 85,025 |
| Other financial liabilities current | 44,669 | 47,712 |
| Provisions current | 34,518 | 31,436 |
| Other liabilities current | 70,019 | 74,241 |
| 530,793 | 580,708 |
Total equity and liabilities 1,295,693 1,352,133
CONSOLIDATED CASH FLOW STATEMENT
| CONSOLIDATED CASH FLOW STATEMENT IN TEUR |
Q1 2022 | Q1 2021 |
|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Earnings before taxes | 12,306 | 10,846 |
| Depreciation and amortisation | 14,659 | 15,516 |
| Interest expenses | 2,708 | 2,401 |
| Interest and other income from the disposal of financial assets | -266 | -542 |
| Increase/decrease of provisions | 2,439 | -3,342 |
| Gains/losses from the disposal of non-current non-financial assets | 14 | -58 |
| Changes in inventories | -30,020 | -11,188 |
| Changes in trade receivable and contract assets | 15,681 | 16,963 |
| Changes in other receivables and assets | -11,951 | -8,477 |
| Changes in trade payable and contract liabilities | -49,755 | -40,763 |
| Changes in other liabilities | -3,616 | -6,289 |
| Other non-cash income and expenses | -9,331 | 570 |
| Cash and cash equivalents from operations | -57,132 | -24,363 |
| Income taxes paid | -2,847 | -2,442 |
| Net cash flows from operating activities | -59,979 | -26,805 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Purchase of non-current non-financial assets | -8,493 | -9,450 |
| Purchase/sale of financial instruments | 0 | -4 |
| Proceeds from sale of non-current non-financial assets | 1,206 | 194 |
| Disposal/purchase of financial instruments | 7,313 | -798 |
| Payments to acquire subsidiaries less cash assumed and plus current account liabilities assumed | -2,070 | -2,081 |
| Interest income | 146 | 196 |
| Net cash flows from investing activities | -1,898 | -11,943 |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Increase in financing liabilities and financial liabilities | 95 | 45,000 |
| Decrease in financing liabilities and financial liabilities | -13,440 | -10,036 |
| Interests paid | -1,557 | -1,027 |
| Acquisition of non-controlling interests | 31 | -687 |
| Payments for acquisition of treasury shares | 0 | -8,675 |
| Net cash flows from financial activities | -14,871 | 24,575 |
| Changes in exchange rates | -1,948 | 1,037 |
| Changes in financial funds | -78,696 | -13,136 |
| Financial funds as of the beginning of the period | 267,934 | 254,951 |
| Financial funds as of the end of the period | 189,238 | 241,815 |
| Overdrafts | 30,252 | 32,628 |
| Restricted cash | 4,781 | 3,937 |
| Total cash and cash equivalents | 224,271 | 278,380 |
FINANCIAL CALENDAR
2022
| 05.05.2022 | Q1-quarterly statement 2022 (Earnings-Call Q1 2022) |
|---|---|
| 06.05.2022 | Annual shareholder meeting |
| 23.05.2022 | Spring Conference 2022 (23.05. - 25.05.2022) |
| 04.08.2022 | Half-year report 2022 (Earnings-Call Q2 2022) |
| 03.11.2022 | Q3-quarterly statement 2022 (Earnings-Call Q3 2022) |
| 28.11.2022 | Equity forum (28.11. - 30.11.2022) |
Further details available under https://ir.snt.at/Financial_calendar.en.html.
Please visit https://ir.snt.at/reports/Reports.en.html for access to our annual and quarterly reports, and to our releases, each of which is placed online on the day of its publication. Any changes to schedules and dates are also announced on our website in good time. This annual report was published on May 5, 2022, in German and in English. The English version is provided for convenience only. The German version is definitive. No liability is assumed for any typographical or printing errors.
This quarterly statement contains statements that refer to future developments. These are based on assumptions and assessments made by the Executive Board. Although we are of the opinion that the assumptions and estimates are realistic and correct, they are subject to certain risks and uncertainties that may cause actual future results to diverge materially from the assumptions and estimates. Factors that may result in a discrepancy include changes in the overall economic, business, financial and competitive situation, exchange and interest rate fluctuations as well as changes to the business strategy. This uncertainty has recently been heightened by the outbreak and spread of the SARS-CoV-2 virus as well as the war in the Ukraine. We accept no warranty for the developments and events actually taking place in the future according to the assumptions and assessments articulated in this annual report. The assumptions and estimates made in this report are not updated.
Austria (Headquarters)
S&T AG, 4021 Linz, Industriezeile 35 Investor Relations: +43 1 80191 1196 | [email protected]
www.snt.at
Albania · Austria · Belarus · Belgium · Canada · China · Croatia · Czech Republic · France · Germany · Hungary · Kazakhstan · Malaysia · Moldova · Montenegro · North Macedonia · Poland Portugal · Romania · Russia · Saudi Arabia · Serbia · Slovakia · Slovenia · Spain · Switzerland · Taiwan · Ukraine · United Kingdom · United States of America · Uzbekistan
