Quarterly Report • Feb 29, 2008
Quarterly Report
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Fiscal Half Year July 01 – December 31, 2007
Content
During first six months of fiscal year 2007/08, the turnover of 20.2 million EUR was same as previous year of 20.0 million EUR. The profit before interest and tax amounting to 1.240 million EUR was also same as the considerable good result (1.233 million EUR) of last year. The profit after tax of 0.843 million EUR compared to 0.755 million EUR of same period last year is mainly due to a more favourable financial result and a low tax rate. Based on the raised number of shares as per last year, the profit per share remained constant with 28 Cent.
The company only works on own capital. Having a capital quota of 82 % at a balance volume of 22.6 million EUR, the company possesses sufficient own capital and thus is in a position to finance without any problem the organic growth and consolidations made by acquisitions. At present, there is neither limited nor granted capital nor a return-of-share program.
The number of shares is 2.954.943 pcs at a nominal value of 1 EUR.
Management and board at the annual shareholders' meeting again finalised a dividend of EUR 0,30 per share.
The signed capital is exclusively common stock drawn to bondholders and entitled to vote. There are neither restrictions in the right to vote nor the purchase. The AK Industriebeteiligungen GmbH, Norderfriedrichskog possesses 10% of the company's capital since 25.02.2003.
Appointment and dismissal of the board is in accordance with legal regulations (§§ 84, 85 AktG). Changes in articles of the association, especially dismissal of the supervisory board is dependent of a majority of board votes of 75%. The compensation of the supervisory board breaks down to a fix and a variable part. At 13.12.2007, the general shareholders board decided, that the required statements in the financial report can be omitted as per § 285 Nr. 9a Satz 5-9 HGB and/or§ 314 Absatz 1 Nr. 6 Satz 5-9 HGB.
When controlling based on a take-over offer, it is agreed that the suppliers' contracts essential for the company may be cancelled by the latter. Especially when there is a risk that a competitor will take over. At present, there are no reimbursement agreements made by the board in such a case.
FORTEC's focus is on distribution of standard components. Due to vast and always available information via Internet, there will be a reduction of the margins in industrial business in the long run. FORTEC's goal is to compensate this development by own added-value.
By connecting the product segments of power supplies, display technology (industrial displays incl. controls) and embedded computer technology (Single-board computer) to create an Embedded Solution System, FORTEC possesses for a long time now a very attractive rare domain.
Marketing starts with delivery of system-proved and tested standard kits, accompanied by customers' service in hard- and software at the sale of standard units and ends in customer specific developments.
Target customers are mainly manufacturers in the field of industry automation, medicine technology as well as providers of security instruments.
Our big competence is to provide technology know-how in combination with sales. Years of business relations to some thousand customers are the basis of our success. Our core countries namely Germany, Austria and Switzerland still offer considerable potential although already reached leadership in some market segments. Moreover, we are represented in the Benelux by a 25% participation in an electronic company.
Our strategy is to continuously achieve over-proportional profits of market segments in a long-term still considerably growing market. The basis of our steady successful expansion politics - also in the past – is: secured profitability.
Risks that could endanger the company at present are not reported.
Balance risks if any at balance day have been considered by corresponding accruals. The company has taken care of all possibilities to deal with any possible risks.
Elementary risks are covered by considerable insurances and are yearly examined; in special cases it may not be sufficient.
Potential risks which have to be taken into consideration to exist within the market are the risks for distribution, products and marketing as well as the dependency from suppliers.
Another enormous - yet not to be underestimated - is the system-related risk of the close co-operation with only few strategic partners in the same product portfolio. Already a change in personnel could lead to the loss of an existent and successful business co-operation and this mainly in view of suppliers in the Far East with whom there are often relationships for many years and of personal matter.
A considerable risk is forecast of stock. Wrong planning could result in considerable losses. The risk to have unsellable merchandise on stock, is not only the result of false forecast, but also depends on the different quality standards set by customers and producers. Mainly the fact of the configuration of the merchandise especially from Far East as well as the political requirements of its contents and its usage.
The product liability is an increasing risk which is controlled and noted by choice of suppliers and their valuations/ratings. However, having different quality standards, frauds and/or criminal actions of suppliers, we as importer are liable towards our customers.
A yet steady growing risk is the customer's requirements as to a prolonged time of warranty and "must" of proof for the supplier according to the regulation of liability for debt in case of warranty. In addition, the costs for build-in and build-out of defective parts are to be reimbursed to the customer - costs which in total may accelerate considerably the delivered value of the product. Here, the customers started to develop a certain aggressiveness for claims which is obviously against and at expenses of the supplier. Another main topic of the risk management is the often bad payment behaviour of some middle-sized companies. Here, examination of solvency as well as current debtors is made, yet observing mainly the requirements of the goods' insurance company.
Our success also strongly depends on the vast, detailed and years of experience of our personnel. A big change in staff and especially of key-persons would definitely endanger our current success.
A big question would endanger our business model as importer of technical highquality products i.e. the change in customers' behaviour to no longer produce in Middle Europe and turn to suppliers at site. In the future, the same effect would be a changed behaviour or our suppliers to sell directly to industrial customers and not any more through their common distribution channels. In addition, similar effects could happen if the costs decrease because of the reduction of margins due to the competitor's information available to all customers via internet. This basically influences as well the personnel costs common in the German speaking region.
Due to the EDP – networking of the entire group, a break-down or a serious interference in the computer system could cause enormous damage to the company. A misuse by externals or internals, especially theft of information, business interruptions or IT – system breakouts or insufficient means for data security could endanger the company to an extreme extent.
Because of monthly statements, it is possible to recognize in-time differences in the forecast of order income, bookings, stock as well as turnover, margins and costs and thus take immediate action.
Foreign currency risks are excluded, if possible, in case of larger project by invoicing directly in the relevant currency. However, there could be negative impulses on our company in normal business especially due to a further change of the dollar parity.
The growth strategy of the group does not only involve organic increase but also company acquisitions. Here, the figure above the net asset value is balanced as goodwill and examined year by year as to the recoverability. If the expectations of the purchased company are not met, then depreciations in the group's balance made as per IFRS are done. For the future, there is a depreciation risk by ALTRAC's company goodwill of 3.3 million EUR and Autronic's company goodwill of 0.9 million EUR stated in the books. The need to depreciate can also be effected due to changed regulations IFRS, resulting in a changed procedure of rating of goodwill. In this respect, beginning January 2009 there could be changes due to the introduction of IFRS 8 instead of the previous valid IFRS 14 which will determinate the procedure of the impairment test.
As supplier to the industry of investment goods, we also have to deal with its ups and downs.
Since spring 2004, the electronic industry is again growing in cycles. After a slowly hesitating industrial recession in Middle Europe in fiscal year 2004/05 - mainly based on export business – also FORTEC noted a self-yielding economic situation during FY 2005/06 and FY 2006/07, which was basically due to national demand.
We believe, that the peak of this cycle will reveal in FY 2007/08. Therefore, we expect a somewhat side-oriented phase of the group's turnover striving to a rather strong pressure on margins.
Although considering a weak tendency within the entire market, our product portfolio still continues to offer chances to grow. It is our intention to use this potential and thus countervail the stagnating turnover by means of marketing and sales support activities. However, in the first run this will involve costs which could only be compensated by relevant profit during the periods to come.
| T O T A L A S S E T S |
€ | € | O Q S T T A L E U I T Y A N D L I A B I L I T I E |
€ | € |
|---|---|---|---|---|---|
| 3 2. 2 0 0 1. 1 7 |
3 0. 0 6. 2 0 0 7 |
3 2. 2 0 0 1. 1 7 |
3 0. 0 6. 2 0 0 7 |
||
| A. No t a ts n- cu rre n ss e |
A. S ha ho l de i ty re rs e q u |
||||
| I. Go dw i l l o |
4. 4 8 5. 7 0 9 |
4. 4 8 5. 7 0 9 |
I. Su bc i be d c i l ta r ap |
2. 9 5 4. 9 4 3 |
2. 9 5 4. 9 4 3 |
| I I. In i b le ta ts ng as se |
5 6. 7 3 0 |
5 1. 0 4 6 |
I I. Ca i l re ta p se rve |
8. 6 8 9. 3 6 3 |
8. 6 8 9. 3 6 3 |
| I I I. Ta i b le ts ng as se |
6 5 9. 8 5 2 |
6 9 0. 8 2 6 |
O I I I. he h. inc t r c om p re om e I V. Ne inc t om e |
5. 9 8 6. 0 8 5 8 4 3. 5 1 4 |
5. 3 0 0. 6 8 3 1. 5 7 1. 8 8 5 |
| I V. F ina ia l a ts nc ss e |
1. 2 5 9. 6 2 9 |
1. 2 6 2. 7 7 7 |
|||
| 6. 4 6 1. 9 2 0 |
6. 4 9 0. 3 5 8 |
1 8. 4 7 3. 9 0 5 |
1 8. 5 1 6. 8 7 4 |
||
| B. Cu t a ts rre n ss e |
B. Lo l ia b i l i ies -te t ng rm I. De fe d tax rre es |
2 0 4. 9 2 7 |
3 9 8. 9 1 0 |
||
| I. Inv ies to en r |
7. 2 3 0. 7 4 4 |
7. 1 3 6. 9 7 6 |
|||
| I I. Ac iva b les ts co un re ce |
2. 7 9 8. 4 2 4 |
4. 5 6 5. 1 8 3 |
C. S ho l ia b i l i ies t- te t r rm |
||
| I I I. O he t ts r a ss e |
5 6 1. 3 2 8 |
7 0 5. 7 2 1 |
I. Ba k l ia b i l i ies t n |
6. 3 3 6 |
0 |
| Ca I V. h- -h d, ba k ba lan s on an n ce |
5. 5 5 3. 2 7 8 |
5. 1 5 3. 4 0 7 |
I I. Tr de b les a p ay a |
1. 7 0 7. 5 6 5 |
2. 7 4 7. 3 0 4 |
| 1 6. 1 4 3. 7 7 4 |
1 7. 5 6 1. 2 8 8 |
I I I. Ac ls fo he t ta cr ua r o r xe s |
1 9 0. 0 5 6 |
5 5 1. 0 7 3 |
|
| I V. O he ls t r a cc ru a |
5 8 1. 4 5 2 |
6 7 0. 6 7 3 |
|||
| V. O he l ia b i l i ies t t r |
1. 4 4 1. 4 5 3 |
1. 1 6 6. 8 1 2 |
|||
| 4. 1 3 1. 7 8 9 |
5. 1 3 5. 8 6 2 |
||||
| To l As ta ts se |
2 2. 6 0 5. 6 9 4 |
2 4. 0 5 1. 6 4 6 |
To l Eq i d L ia b i l i ies ta ty t a n u |
2 2. 6 0 5. 6 9 4 |
2 4. 0 5 1. 6 4 6 |
| Income Statement | FY 2007/08 | FY 2006/07 |
|---|---|---|
| Sales revenues | 20.170.751 € | 20.044.833 € |
| Other operating income | 278.731 € | 543.570 € |
| Cost of material | 14.684.416 € | 15.437.106€ |
| Personnel expenses | 2.728.300 € | 2.377.465 € |
| Depreciation | 146.278 € | 147.874 € |
| Other operating expenses | 1.649.735 | 1.392.642 € |
| Operating income (EBIT) | 1.240.753 € | 1.233.316 € |
| Other interests and similar income | 85.207 € | 30.190 € |
| Taxes on income and profit | 482.446 € | 507.999 € |
| Net income | 843.514 € | 755.507 € |
| Earning per share/1st Half Year | 0.28 € | 0.28 € |
| Shares outstanding | 2.954.943 | 2.700.000 |
| Income Statement | Q2 (1.10.-31.12.07) | Q2(1.10.-31.12.06) |
|---|---|---|
| Sales revenues | 9.918.036 € | 10.956.397 € |
| Other operating income | 127.529 € | 376.418 € |
| Cost of material | 7.257.368 € | 8.758.569€ |
| Personnel expenses | 1.371.845 € | 1.239.550 € |
| Depreciation | 73.639 € | 73.623 € |
| Other operating expenses | 804.159 € | 746.789 € |
| Operating income (EBIT) | 538.554 € | 514.284 € |
| Other interests and similar income | 43.249 € | 9.633 € |
| Taxes on income and profit | 234.033 € | 221.383 € |
| Net income | 347.770 € | 302.534 € |
| Earning per share/2nd Quarter | 0.12 € | 0.11 € |
| Shares outstanding | 2.954.943 | 2.700.000 |
| I. Operative Business | FY 2007/08 | FY 2006/07 |
|---|---|---|
| Net income | € 843.514 |
€ 755.507 |
| Depreciation of tangible and intangible assets | € 146.278 |
€ 147.874 |
| Increase of inventories | € -93.768 |
€ - 465.576 |
| Reduction in accounts receivable | € 1.766.759 | € 4.403.410 |
| Change of liabilities | € -1.313.762 | € - 904.571 |
| Change of short-term accruals | € - 89.221 |
€ - 741.318 |
| Change of other assets | € 144.393 |
€ 113.636 |
| Cash flow from operating business | ----------------- € 1.404.193 |
----------------- € 3.308.962 |
| II. Investment Activities | ||
| Investments of finance/tangible and intangible assets |
€ - 127.317 | € - 631.181 |
| Earnings from assets | € 9.478 |
€ 3.293 |
| Cash from investment activities | --------------- € - 117.839 |
----------------- € - 627.888 |
| III. Financing Activities | ||
| Increase of capital reserves | € 0 |
€ 135.000 |
| Profit earned/paid | € - 886.483 | € - 810.000 |
| VI. Cash flow in total | € 399.871 |
€ 2.006.074 |
| V. Change in Liquid Funds | ||
| Cash at the beginning of period | € 5.153.407 | € 901.463 |
| Cash at the end of period | € 5.553.278 | € 2.782.785 |
| Capital stock Euro |
Capital Reserves Euro |
Development of reserves and accumulated profit Euro |
TOTAL Euro |
|
|---|---|---|---|---|
| Balance 01.07.2007 | 2.954.943 | 8.689.363 | 6.872.568 | 18.516.874 |
| Payout dividends | -886.483 | -886.483 | ||
| Period earning | 843.514 | 843.514 | ||
| Balance 31.12.2007 | 2.954.943 | 8.689.363 | 6.829.599 | 18.473.905 |
| Not transferable according to § 150 AktG according to § 47 AktG |
2.954.943 | 8.689.363 |
| Capital stock Euro |
Capital Reserves Euro |
Development of reserves and accumulated profit Euro |
TOTAL Euro |
|
|---|---|---|---|---|
| Balance 01.07.2006 | 2.700.000 | 5.654.522 | 6.311.822 | 14.666.344 |
| Share option program | 135.000 | 0 | 135.000 | |
| Payout dividends | -810.000 | -810.000 | ||
| Period earning | 755.507 | 755.507 | ||
| Balance 31.12.2006 | 2.700.000 | 5.789.522 | 6.257.329 | 14.746.851 |
| Not transferable according to § 150 AktG according to § 47 AktG |
2.700.000 | 5.789.522 |
The balancing and evaluation methods of fiscal year 2006/07 according to IAS/IFRS remain unchanged. The number of full-time employees amounts to 106 (prev. year 76). The product folio is marketed under the segment Embedded Solutions; therefore a segmential report devided into product groups is not necessary. In view of the 20 million EUR turnover in general, 15 million EUR were achieved nationally (prev. year 16 million EUR) and 5 million EUR in Europe (prev. year 4 million EUR). The board of managers at its annual shareholders' meeting on 20th December 2007 finalised a dividend of 30 Cent per share.
Landsberg, 29th February 2008
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