2G Energy AG — Earnings Release 2014

May 28, 2014

News Details

Corporate | 28 May 2014 08:30

2G Energy AG: CORRECTION: Dynamic start to FY 2014 with EUR 115 million order book position

2G Energy AG / Key word(s): Final Results/Forecast

28.05.2014 / 08:30

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Corporate News

2G Energy AG: Dynamic start to FY 2014 with EUR 115 million order book position

– Demand for natural gas-driven CHP systems registers significant growth in FY 2013

– Service business’s share of revenue rises to 22 % in 2013

– Equity ratio improves further to 53.2 %

– Dividend of EUR 0.37 per share will be proposed to AGM

– Q1 2014: Revenue of EUR 20 million, EBIT of EUR minus 0.9 million – in line with expectations

– FY 2014 forecast: Revenue of between EUR 145 million and EUR 165 million, EBIT margin between 6 % and 8 %

Heek, May 28, 2014 – 2G Energy AG (ISIN DE000A0HL8N9), one of the leading German manufacturers of combined heat and power (CHP) plants, generated EUR 126.1 million of consolidated revenue in the 2013 financial year (as of December 31) according to audited figures (previous year: EUR 146.5 million). Total output of around EUR 137.5 million is at the previous year’s level of EUR 139.2 million due to an increase in work in progress of approximately EUR 11.3 million (previous year: approximately EUR 7.3 million reduction in work in progress). The company generated EUR 3.1 million of earnings before interest and tax (EBIT) on the basis of German Commercial Code (HGB) accounting (previous year: EUR 16.5 million). This represents a 2.5 % EBIT margin (previous year: 11.3 %). Consolidated net income amounted to EUR 1.0 million in 2013 (previous year: EUR 11.3 million). Earnings per share stood at EUR 0.20 after deducting non-controlling interests (previous year: EUR 2.58).

FY 2013 earnings characterized by weak H1

Revenue and earnings in the 2013 financial year were characterized by a first half of the year that fell significantly short of expectations. This reflected continued recessionary economic situation in Southern Europe, cuts to feed-in and subsidy schemes, as well as barriers to financing and market entry, and business trends in the USA that initially lagged expectations. The catch-up effect during the second half the year in new order intake from both Germany and abroad was no longer sufficient to allow the company to reach its optimistic 2013 targets. During the year under review, 2G continued to deliberately invest on an anti-cyclical basis in key future growth areas. These included technological improvements of CHP systems for natural gas, biogas and lean gas operations, and capacity expansions at the company’s site in Heek and in the USA, as well as the expansion and qualification of the workforce. These investments and reserve costs were not offset by any direct sales revenue growth in 2013. Earnings were also impacted by losses incurred at 2G Italia and 2G Manufacturing (USA). When looking at the reporting year overall, it should be noted that 2G has entered the 2014 financial year with a EUR 46 million order book position for CHP systems. On the basis of German Commercial Code (HGB) accounting, work that has already started on orders, which is recognized on the balance sheet as of December 31, 2013 with a value of around EUR 23 million, is already reported with its costs in 2013, while the realization of the related revenue and earnings will not occur until during the current financial year.

Service business’ revenue share rises to 22 %

The 2013 financial year was characterized by strong business in Germany, especially for natural gas-driven 2G CHP systems. For the first time, 2G sold more natural gas-driven CHP systems (50.9 % revenue share compared with 42 .2 % in the previous year) than biogas-driven CHP systems (49.1 % revenue share compared with 57.8 % in the previous year) in Germany. The foreign share of revenue fell to around 22 % (previous year: 33 %). As expected, business improved in the United Kingdom, Poland and the USA (USA revenue EUR 11.5 million, previous year: EUR 9 million), whereas revenue in 2G’s strongest foreign market to date, Italy, registered a sharp drop to EUR 2.4 million (previous year: EUR 11 million). Outside Germany, biogas-driven CHP systems’ share of revenue remained dominant at significantly above 90 %. Across all countries, total CHP revenues were distributed 62 % to biogas (previous year: 73 % biogas) and 38 % to natural gas (previous year: 27 % natural gas). While the share of the after-sales business of 7 % of total revenue was unchanged compared with the previous year, the service share improved from 16 % in the previous year to 22 % in the reporting year.

Healthy balance sheet structure, equity ratio improves further to 53.2 %

The balance sheet structure of the 2G Energy Group remained very stable in the 2013 financial year. Total assets changed by 6.5 % year-on-year to EUR 88.6 million. This is primarily attributable to a reduction in inventories and the cash position. Non-current assets were almost unchanged across all balance sheet items. Within current assets, raw materials and supplies were reduced in line with planning. Work in progress amounted to EUR 23.5 million on the balance sheet date (previous year: EUR 12.7 million). Advance payments received of EUR 17.7 million (previous year: EUR 9.2 million) were deducted from the respective orders that are being processed. At EUR 26.8 million as of the balance sheet date, the receivables and other assets item corresponds to its previous year’s level. Working capital (current assets less current liabilities) of EUR 26.8 million was almost unchanged (previous year: EUR 30.1 million). Liquid assets fell from EUR 14.1 million as of the previous year’s balance sheet date to EUR 10.4 million. The 2G Group’s consolidated equity stood at EUR 47.2 million as of the balance sheet date (previous year: EUR 47.8 million), with the equity ratio improving further to 53.2 % (previous year: 50.4 %). During the year under review, 2G reduced its bank borrowings by EUR 3.1 million to EUR 7.2 million, as planned.

Rise in cost of materials and personnel expenses

As a result of the structural change in sales and revenue activities, the cost of materials ratio increased from 65.4 % in the previous year to 70.5 % (expressed as a percentage of total output). The taking into consideration of individual customer requirements, as well as exclusively order-related purchasing and production, changed the mix of materials costs and third-party services compared with the previous year, resulting in a deterioration of the margin. The personnel cost ratio was also up, from 12.2 % in the previous year to 15.6 % (as a percentage of total output). 2G hired qualified staff, especially in its service area, and for its international growth. Group employees increased by 83 to 518 individuals on the basis of numbers calculated as of the reporting date. In line with the further internationalization of business activities, marketing, operating and administrative expenses registered a slight year-on-year increase of EUR 10.5 million (previous year: EUR 10.0 million). The net financial result was neutral. The company incurred EUR 1.8 million of corporation taxes on income (previous year: EUR 5.1 million).

Dynamic start to FY 2014 with record order book position

The order book position for 2G CHP system deliveries of around EUR 115 million as of the end of April 2014 considerably outstrips the previous year’s level of around EUR 53 million. This order book position comprises around 58 % natural gas-driven CHP systems and 42 % biogas-driven CHP systems. The high order book position deriving from orders from Germany arises from an accelerated ordering effect due to the cut-off date for the validity of the regulations of the amendment to the German Renewable Energies Act (EEG) 2014, which was set for August 1, 2014. Along with the strong German market, the order book position in Europe is developing well, at around EUR 20 million, deriving mainly from United Kingdom and France, as well as from Japan and, in particular, the USA. With an order book position of around EUR 22 million that needs to be taken into additional consideration, the US market is becoming the strongest international sales market outside Germany. Due to project-related factors, the US order book position stretches into the 2015 financial year. In all likelihood, 2G will be able to invoice the orders deriving from Germany and Europe so that they are fully effective in terms of revenue and earnings during the third and fourth quarters of the current financial year. The foreign share of the total order book position amounted to around 18 % (ex USA), compared with 82 % deriving from Germany.

During the first quarter of 2014, 2G generated EUR 20.0 million of revenue (previous year: EUR 15.4 million) mainly from the overhang of orders for EUR 46 million of CHP systems dating back to the previous year. Total output amounted to EUR 27.5 million. The EUR 7.5 million increase in work in progress arises from work that has started on CHP system orders deriving from the aforementioned of order overhang, and new orders from the current financial year. Earnings before interest and tax (EBIT) amounted to minus EUR 0.9 million (previous year: EUR 0.2 million). This result is mainly attributable to a marked increase in inventories and work in progress. These are already reported with their costs, although recognition of revenue and earnings does not occur until during the subsequent quarters when they are completed and accepted. The order book position for CHP systems amounted to EUR 102 million as of March 31, 2014, plus an additional EUR 22 million deriving from the USA.

Once the current CHP order book position has been completed and accepted by customers, 2G will realize revenue and earnings contributions mainly during the third and fourth quarters. 2G is currently assuming that the business situation in Germany will normalize again by the end of 2014 and the start of 2015, and that international business will become more important again. The overall starting position for revenue and earnings growth in 2014 is good.

For the 2014 financial year, the Management Board is expecting to achieve revenue of between EUR 145 million and EUR 165 million, and an EBIT margin of between 6 % and 8 %. From todays perspective the Management Board sees quite a high likelihood for the revenue to reach the upper end of the given range.

Management and Supervisory boards propose EUR 0.37 dividend

Following the approval and adoption of the 2013 financial statements, the Supervisory Board at its meeting on May 27, 2014, concurred with the Management Board’s proposal to the Annual General Meeting to again pay a EUR 0.37 dividend per share for the 2013 financial year.

Download of 2013 annual report

The company makes its detailed 2013 annual report available for downloading at http://www.2-g.de/?langid=1&seitenid=86.

The annual report will also be available in English from mid-June.

2G Energy AG company profile

2G Energy AG is amongst the world’s leading manufacturer of cogeneration systems (CHP) for decentralized energy production and supply by means of combined heat and power. The company’s product portfolio includes systems with an electrical capacity between 20 kW and 4,000 kW for the operation with natural gas, biogas or bio methane. So far, 2G was able to successfully install thousands of CHPs in 25 countries. Especially, in the performance range of 50 kW to 550 kW 2G posses own technological combustion engine concepts characterized by low specific fuel consumptions. Next to the main production site at its headquarter in Heek, Germany, the company has invested in an additional production and sales & service site in St. Augustine, Florida, USA. 2G’s customers range from farmers to industrial clients, municipalities, real estate industry, up to municipal utilities and big utility companies. The high level of customer satisfaction is founded on the close-knit service network as well as the high technical quality and performance of 2G power stations. Thanks to the combined heat and power performance they achieve an overall degree of efficiency between 85 percent and well above 90 percent. To further enlarge the technologically leadership the company continuously invests in its R&D activities for gas engines for the use of natural gas, biogas and synthetic gases (e.g. hydrogen). Next to the construction of combined heat and power stations, the company, located in Westphalia in the north-west of Germany, offers integrated solutions reaching from the planning stage and installations to serial service and maintenance work. Due to its decentral locations, scalability and projectable availability combined heat and power stations shall play a crucial role as part of intelligent networked energy systems – so called virtual power stations – within the ongoing switch to clean energy.

In the context of Germany’s new energy policy, CHPs within smart grids – so-called virtual power plants – are becoming rapidly important due to their predictable availability. 2G Energy (ISIN DE000A0HL8N9) is listed in the Entry Standard of Deutsche Börse AG. The share capital amounts to EUR 4,430,000, and is split into 4,430,000 shares. As of December 31, 2013, the company’s founders held 55.9 % of the shares, with the free float amounting to 43.9 %. In 2013 financial year (January 1 to December 31), 2G Energy generated EUR 126.1 million of revenues, EUR 3.1 million of earnings before interest and tax (EBIT), and EUR 1.0 million of net income. The company employs 518 staff as of 31 Dec., 2014.

Forthcoming dates in 2014

July 16, 2014 Annual General Meeting, Heek

Sept. 30, 2014 Publication of the half-yearly consolidated financial statements as of June 30, 2014

Nov. 24-26, 2014 Deutsches Eigenkapitalforum 2014, Frankfurt

Further information: www.2-g.de

Investor relations contact

2G Energy AG

Benzstr. 3

48619 Heek

Germany

Telephone: +49 (0) 2568 93 47-2795

Fax: +49 (0) 2568 93 47-15

E-mail: ir@2-g.de

Internet: www.2-g.de

End of Corporate News

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Language:	English
Company:	2G Energy AG
	Benzstr. 3
	48619 Heek
	Germany
Phone:	+49 (0)2568-9347-0
Fax:	+49 (0)2568-9347-15
E-mail:	service@2-g.de
Internet:	www.2-g.de
ISIN:	DE000A0HL8N9
WKN:	A0HL8N
Listed:	Freiverkehr in Berlin, Düsseldorf, Stuttgart; Frankfurt in Open Market (Entry Standard)

End of News	DGAP News-Service

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