Quarterly Report • May 14, 2020
Quarterly Report
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S&T AG Quarterly statement Q1 2020 1
| EUR MIO. | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenues | 270.1 | 225.1 |
| Gross profit | 107.8 | 85.3 |
| EBITDA | 25.0 | 21.2 |
| Amortization and depreciation | 13.8 | 10.4 |
| EBIT before PPA amortization1) | 13.7 | 12.2 |
| Net income after non-controlling interests | 9.5 | 9.4 |
| Operating cash flow | 6.4 | -13.0 |
| Free cash flow2) | 1.0 | -18.7 |
| EUR MIO. | 31.03.2020 | 31.12.2019 |
|---|---|---|
| Cash and cash equivalents | 276.1 | 312.3 |
| Equity | 384.8 | 385.1 |
| Equity ratio | 33.5% | 31.4% |
| Net cash (+)/Net debt (-)3) | 7.1 | 29.5 |
| Working capital4) | 159.8 | 153.9 |
| Backlog | 873.0 | 841.5 |
| Project-pipeline | 2,217.6 | 2,157.5 |
| Employees5) | 4,934 | 4,934 |
The depiction in EUR million can cause differences due to rounding off in relation to the previous reports.
1) EBIT before amortization from purchase price allocations
2) Operating cash flow less purchase of non-current non-financial assets
3) Cash and cash equivalents less non-current and current financing 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
For two months now, the Corona crisis has kept us firmly in its grip, leaving deep traces both in our daily lives as well as in the global economy.
Although there were some fluctuations, the first quarter went very well for S&T AG overall because the figures marked the 45th record quarter. Revenues in Q1 climbed 20% from EUR 225 million to EUR 270 million compared to the same quarter last year. EBITDA grew by 18.2% to EUR 25 million, and earnings per share rose by 7% to 15 cents per share. Fluctuations, because while January and February were above our expectations, by March the first effects of Covid-19 were becoming apparent. Without Corona one-off procurement costs of EUR 1.8 million, EBITDA would have been even better. The gross margin of more than 39% should be highlighted, the result of our consistent focus on proprietary technologies. Due to the PEC ("Profit Efficiency Cash") program, the operating cash flow developed very positively in Q1: It improved by EUR 19.4 million from minus EUR 13 million to EUR 6.4 million in Q1.
Since mid-March we have been feeling the first significant effects of the Covid-19 pandemic. China's gross national product slumped by 12% in Q1 and the global economy is expected to shrink by up to 10% in 2020. While industries such as airlines, entertainment and tourism are collapsing, there is growth in communication and medical technology as well as online trade. S&T is well diversified and resilient with its broad customer base – no customer accounted for more than 2% of total revenues in 2019. Over 3,000 employees, or 70% of our workforce, worked from the home office in April. As a result of the containment of the SARS-CoV-2 virus in many countries, our employees are gradually returning to their workplace as of the beginning of May.
In the medium term I see S&T as a winner in the Covid-19 crisis. This is based on 4 principles:
Due to the Corona crisis, we continue to expect fluctuations during 2020, which even S&T AG will not be able to completely avoid in the short term. Based on the preliminary figures for the month of April, we anticipate revenues in 2020 to be slightly above the previous year's level despite the Corona crisis: We expect revenues of around EUR 1,150 million and an EBITDA of EUR 115 million in 2020. We therefore confirm our ambitious medium-term goal for 2023 of EUR 2 billion in revenues and an EBITDA of EUR 220 million!
Hannes Niederhauser, CEO
In Q1 of the current financial year 2020, S&T group has been able to further increase both revenues and profitability compared to the same quarter of the previous year, although with delays starting to occur at S&T group suppliers there has already been a shift in revenues and income. Revenues increased by 20%, partly due to first-time consolidation effects, with respect to Kapsch CarrierCom group in particular. EBITDA increased by 18.2%: with the implementation of the new IFRS 16 (Leases) accounting standard already during Q1 2019, the increase is attributable to operational improvements. This is also reflected in the increased gross margin, which peaked at 39.9% (PY: 37.9%). By contrast, the consolidated net income attributable to S&T shareholders improved by only 2% due to increased depreciation and amortization, currency effects and finance expense.
Revenues in Q1 of the current financial year increased from EUR 225.1 million to EUR 270.1 million compared to the same quarter of the previous year. Gross profit also increased from EUR 85.3 million to EUR 107.8 million, corresponding to an increase in gross margin from 37.9% to 39.9%. This is due in particular to the updated portfolio mix in the IoT Solutions segments. An EBITDA of EUR 25.0 million (PY: EUR 21.2 million) was achieved in the past quarter as a result. Were it not for delays in the supply chain causing postponement of deliveries amounting to around EUR 6 million until the next quarters and without increased one-off procurement costs, the increase in revenues and EBITDA would have been correspondingly higher. Depreciation and amortization expenses increased from EUR 10.4 million in Q1 2019 to EUR 13.8 million in Q1 2020 as a consequence of the increase in amortization on capitalized development costs and other intangible assets from purchase price allocations. Personnel expenses rose from EUR 54.5 million to EUR 65.3 million due to changes in the scope of consolidation. These effects are the reason for the only slight increase in net income after non-controlling interests from EUR 9.4 million to EUR 9.5 million. Earnings per share (undiluted) increased from 14 cents in Q1 2019 to 15 cents in Q1 2020 as a result.
S&T group is controlled using the following three segments:
| Q1 2020 (EUR MIO.) |
IT SERVICES | IOT SOLUTIONS EUROPE |
IOT SOLUTIONS AMERICA |
S&T GROUP |
|---|---|---|---|---|
| Total revenues | 121.1 | 153.1 | 30.8 | 305.1 |
| Internal revenues | -3.8 | -24.2 | -7.0 | -35.0 |
| Revenues | 117.3 | 128.9 | 23.8 | 270.1 |
| EBITDA | 7.2 | 15.7 | 2.1 | 25.0 |
| Q1 2019 (EUR MIO.) |
IT SERVICES | IOT SOLUTIONS EUROPE |
IOT SOLUTIONS AMERICA |
S&T GROUP |
|---|---|---|---|---|
| Total revenues | 102.5 | 110.1 | 37.8 | 250.4 |
| Internal revenues | -4.0 | -17.0 | -4.3 | -25.3 |
| Revenues | 98.5 | 93.1 | 33.5 | 225.1 |
| EBITDA | 7.8 | 12.1 | 1.3 | 21.2 |
The "IT Services" segment contributed 43.4% to revenues, "IoT Solutions Europe" segment 47.7% and "IoT Solutions America" segment around 8.9%. The "IT Services" segment's EBITDA of EUR 7.2 million was slightly lower than in the previous year (EUR 7.8 million) despite increased revenues. In the "IoT Solutions Europe" segment, EBITDA increased from EUR 12.1 million to EUR 15.7 million, an increase of more than 30% compared to Q1 2019. Consequently, almost 63% of S&T group's EBITDA was generated in the "IoT Solutions Europe" segment during Q1 2020. In addition, EUR 2.1 million (PY: EUR 1.3 million) of S&T group's EBITDA was attributable to the "IoT Solutions America" segment, which is a positive development despite lower revenues, due mainly to the increased gross margin (Q1 2020: 39.8% | Q1 2019: 35.9%).
The financial and liquidity situation in Q1 of the current financial year has improved compared with Q1 2019: While equity remained virtually unchanged in absolute terms at EUR 384.8 million as of March 31, 2020 (December 31, 2019: EUR 385.1 million) due to the additional shares acquired, equity ratio increased to 33.5% as of the quarterly reporting date (December 31, 2019: 31.4%) due to the lower balance sheet total. Cash and cash equivalents amounted to EUR 276.1 million (December 31, 2019: EUR 312.3 million), while current and non-current financing liabilities amounted to EUR 269.0 million (December 31, 2019: EUR 282.7 million). During the first quarter of the current fiscal year, operating cash flow improved significantly from minus EUR 13.0 million in the previous year to EUR 6.4 million in Q1 2020: This underlines the improvements brought about by the "PEC program", which has increased operating cash flow by almost EUR 20 million. The number of employees remained unchanged at 4,934 as of March 31, 2020 (December 31, 2019: 4,934 | March 31, 2019: 4,350).
| CONSOLIDATED INCOME STATEMENT | Q1 2020 TEUR |
Q1 2019 TEUR |
|---|---|---|
| Revenues | 270,079 | 225,106 |
| Capitalized development costs | 3,716 | 3,287 |
| Other income | 753 | 2,002 |
| Expenses for materials and other services purchased | -162,232 | -139,768 |
| Personnel expenses | -65,317 | -54,500 |
| Depreciation and amortization | -13,770 | -10,426 |
| Other operating expenses | -21,990 | -14,964 |
| Result from operations | 11,239 | 10,737 |
| Finance income | 536 | 151 |
| Finance expenses | -2,628 | -1,286 |
| Financial result | -2,092 | -1,135 |
| Result from associated companies | -6 | -2 |
| Earnings before taxes | 9,141 | 9,600 |
| Income taxes | -615 | -977 |
| Net income | 8,526 | 8,623 |
| Results from the period attributable to owners of non-controlling interests | -1,019 | -754 |
| Results from the period attributable to owners of interests in parent company |
9,545 | 9,377 |
| Earnings per share (undiluted) | 0.15 | 0.14 |
| Earnings per share (diluted) | 0.14 | 0.14 |
| Average number of shares in circulation (in thousands undiluted) | 65,267 | 66,089 |
| Average number of shares in circulation (in thousands diluted) | 66,320 | 67,127 |
| STATEMENT OF OTHER COMPREHENSIVE INCOME | Q1 2019 TEUR |
|
|---|---|---|
| Net income | 8,526 | 8,623 |
| Items that may be subsequently reclassified to profit or loss | ||
| Unrealized gains/losses from currency translation | -3,691 | 1,984 |
| Net loss on debt instruments at fair value through other comprehensive income | -12 | -17 |
| Other comprehensive income | -3,703 | 1,967 |
| Total comprehensive income | 4,823 | 10,590 |
| of which attributable to | ||
| owners of non-controlling interests | -1,225 | -309 |
| owners of interests in parent company | 6,048 | 10,899 |
| ASSETS | 31.03.2020 TEUR |
31.12.2019 TEUR |
|---|---|---|
| NON-CURRENT ASSETS | ||
| Property, plant and equipment | 96,959 | 99,809 |
| Intangible assets | 291,052 | 294,878 |
| Investments in associated companies | 283 | 289 |
| Financial assets non-current | 6,304 | 7,984 |
| Contract assets from customer contracts | 2,573 | 3,331 |
| Other non-current assets | 16,424 | 16,464 |
| Deferred taxes | 34,322 | 34,430 |
| 447,917 | 457,185 | |
| CURRENT ASSETS | ||
| Inventories | 149,510 | 146,766 |
| Trade receivables | 167,743 | 212,150 |
| Contract assets from customer contracts | 24,537 | 27,206 |
| Financial assets current | 24,527 | 14,533 |
| Other receivables and assets | 59,093 | 55,602 |
| Cash and cash equivalents | 276,130 | 312,284 |
| 701,540 | 768,541 | |
| Total assets | 1,149,457 | 1,225,726 |
| EQUITY AND LIABILITIES | 31.03.2020 TEUR |
31.12.2019 TEUR |
| EQUITY | ||
| Subscribed capital | 66,096 | 66,096 |
| Capital reserves | 170,017 | 170,057 |
| Accumulated results | 164,290 | 154,745 |
| Other reserves | -7,059 | -3,562 |
| Treasury shares | -19,529 | -14,647 |
| Equity attributable to owners of interests in parent company | 373,815 | 372,689 |
| Non-controlling interests | 10,966 | 12,363 |
| 384,781 | 385,052 | |
| NON-CURRENT LIABILITIES | ||
| Financing liabilities non-current | 215,583 | 219,979 |
| Other financial liabilities non-current | 55,084 | 54,573 |
| Contract liabilities from customer contracts | 11,170 | 13,710 |
| Other non-current liabilities | 61 | 231 |
| Deferred taxes | 13,434 | 13,368 |
| Provisions | 30,110 | 29,964 |
| 325,442 | 331,825 | |
| CURRENT LIABILITIES | ||
| Financing liabilities current | 53,434 | 62,765 |
| Trade payables | 157,405 | 205,037 |
| Contract liabilities from customer contracts | 71,493 | 59,971 |
| Other financial liabilities current | 58,052 | 66,450 |
| Provisions | 46,292 | 54,384 |
| Other current liabilities | 52,558 | 60,242 |
| 439,234 | 508,849 | |
| Total equity and liabilities | 1,149,457 | 1,225,726 |
| CONSOLIDATED CASH FLOW STATEMENT | Q1 2020 TEUR |
Q1 2019 TEUR |
|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Earnings before taxes | 9,141 | 9,600 |
| Depreciation and amortization | 13,770 | 10,426 |
| Interest expenses | 2,628 | 1,286 |
| Interest and other income from the disposal of financial assets | -536 | -151 |
| Result from associated companies | 6 | 2 |
| Increase/decrease of provisions | -7,758 | -10,564 |
| Gains/losses from the disposal of non-current non-financial assets | -14 | -18 |
| Changes in inventories | -2,730 | -10,205 |
| Change in trade receivables and contract assets | 48,513 | 47,539 |
| Changes in other receivables and assets | -12,290 | -7,653 |
| Changes in trade payables and contract liabilities | -37,789 | -43,895 |
| Changes in other liabilities | -8,859 | -7,026 |
| Other non-cash income and expenses | 4,203 | -487 |
| Cash and cash equivalents from operations | 8,285 | -11,146 |
| Income taxes paid | -1,889 | -1,875 |
| Net cash flows from operating activities | 6,396 | -13,021 |
| CASH FLOW FROM INVESTING ACTIVITIES | ||
| Purchase of non-current non-financial assets | -5,434 | -5,695 |
| Purchase/sale of financial instruments | -19 | 0 |
| Proceeds from sale of non-current non-financial assets | 253 | 42 |
| Disposal/purchase of financial instruments | 2,562 | 421 |
| Payments to acquire subsidiaries less cash assumed and plus overdrafts assumed | -6,900 | -2,768 |
| Interest income | 155 | 85 |
| Net cash flows from investing activities | -9,383 | -7,915 |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Increase in financing liabilities and other financial liabilities | 924 | 8,315 |
| Decrease in financing liabilities and other financial liabilities | -15,200 | -10,079 |
| Interests paid | -1,179 | -964 |
| Acquisition of non-controlling interests | -125 | -290 |
| Payments for acquisition of treasury shares | -5,457 | 0 |
| Capital increase (less transaction costs) | 6 | 0 |
| Net cash flows from financial activities | -21,031 | -3,018 |
| Changes in exchange rates | -4,463 | 502 |
| Changes in financial funds | -28,481 | -23,452 |
| Financial funds as of the beginning of the period | 265,165 | 152,593 |
| Financial funds as of the end of period | 236,684 | 129,141 |
| Overdrafts | 34,051 | 13,362 |
| Restricted cash | 5,395 | 2,023 |
| Total cash and cash equivalents | 276,130 | 144,526 |
The consolidated financial statements include S&T AG and all subsidiaries in which S&T AG has direct or indirect control. In the first three months of the financial year 2020, the number of fully consolidated companies developed as follows:
| GROUP COMPANIES (NUMBER) | 2020 |
|---|---|
| Number of fully-consolidated companies as of January 1 | 79 |
| Mergers of group companies | -1 |
| Companies acquired | 1 |
| Number of fully-consolidated companies as of March 31 | 79 |
On January 1, 2020, a master purchase agreement was signed for the acquisition of 100% of the business shares in Cronus eBusiness SRL, Bucharest, Romania, by S&T Romania s.r.l., Bucharest, Romania, a direct/indirect 100% subsidiary of S&T AG. Cronus eBusiness SRL is one of the leading providers of IT solutions, in particular solutions based on Cisco products, in Romania. S&T group's portfolio in Romania has been significantly strengthened in the network and network security sector as a result of this acquisition.
The purchase price consists of a fixed purchase price paid in cash of EUR 1.5 million and a variable portion of EUR 173 thousand depending on the profit generated in the financial year 2019 and the equity on December 31, 2019. The newly acquired company has been included as one of S&T group's consolidated companies starting January 1, 2020.
Assets an liabilities acquired have been accounted for – in the consolidated financial statement during first-time consolidation – at the following preliminary fair values:
| NET ASSETS ACQUIRED | TEUR |
|---|---|
| Cash and cash equivalents | 849 |
| Non-current assets | 175 |
| Inventories | 14 |
| Trade receivables and contract assets (nominal value TEUR 1,873) | 1,437 |
| Other receivables and assets | 106 |
| Non-current liabilities | -61 |
| Deferred tax liabilities | -9 |
| Trade payables and contract liabilities | -1,253 |
| Other current liabilities | -60 |
| Net assets at fair value | 1,198 |
| GOODWILL | TEUR |
|---|---|
| Consideration transferred | 1,673 |
| Net assets at fair value | -1,198 |
| Goodwill | 475 |
The goodwill resulting from the preliminary purchase price allocation was allocated to the "IT Services" segment.
The analysis of the cash flow due to the acquisition is as follows:
| Cash flow from investing activities | -651 |
|---|---|
| Cash and cash equivalents assumed through takeover of subsidiary | 849 |
| Purchase price paid in cash | -1,500 |
| NET FLOW OF CASH | TEUR |
Since full consolidation, the company has contributed EUR 439 thousand to consolidated revenues and EUR -56 thousand to net income.
As of December 31, 2019, the purchase price allocation in connection with the acquisition of shares in Epro Electronic GmbH, Schorndorf, Germany, and its subsidiary Epro Electronic Production Kft. (from now on under its new name Kontron Electronics Kft.), Kapoly, Hungary, had been recorded based on preliminary fair values.
The final determination of the acquired assets and liabilities at fair value and the resulting goodwill – carried out within twelve months of the acquisition date – did not result in any change compared to the preliminary record dated December 31, 2019.
Linz, May 7, 2020
Queiroz eh
Hannes Niederhauser eh Michael Jeske eh Peter Sturz eh Richard Neuwirth eh Carlos Manuel Nogueira
| 07.05.2020 | Q1-quarterly statement 2020 (Earnings-Call Q1 2020) |
|---|---|
| 16.06.2020 | Annual shareholder meeting (virtually) |
| 06.08.2020 | Half-year report 2020 (Earnings-Call Q2 2020) |
| 05.11.2020 | Q3-quarterly statement 2020 (Earnings-Call Q3 2020) |
Due to the uncertainties, caused by Covid-19, surrounding the holding of investor conferences, S&T AG's planned participation in these conferences is not mentioned here. Details on possible conference participations are available under https://ir.snt.at/Financial_calendar.en.html.
S&T AG, 4021 Linz, Industriezeile 35 Investor Relations: +43 1 80191 1196 | [email protected]
www.snt.at
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