2G Energy AG - Earnings Release 2016

News Details

Corporate | 25 May 2016 13:32

2G Energy AG: Dynamic start to FY 2016 with high order book position home and abroad

DGAP-News: 2G Energy AG / Key word(s): Quarter Results/Dividend

2016-05-25 / 13:32

The issuer is solely responsible for the content of this announcement.

– 2015: Revenue of EUR 152.9 million (previous year: EUR 186.6 million), EBIT margin of 3.1 % (6.1 %)

– Service business reaches 34 % revenue share (20 %)

– CHP revenue’s export share rises to 35 % (28 %)

– 2016 guidance: sales revenue of EUR 150 million to EUR 170 million, EBIT margin 3-5 %

– CHP system order book position at end-April 2016: EUR 88 million (EUR 54 million)

2G Energy AG (ISIN DE000A0HL8N9), one of the internationally leading manufacturers of gas driven combined heat and power (CHP) systems, reports consolidated sales revenues of EUR 152.9 million in the 2015 financial year (as of 31 December), on the basis of audited figures (previous year: EUR 186.6 million). Total operating revenue amounted to around EUR 154.7 million (EUR 189.6 million), taking into account EUR 0.1 million of inventory changes (EUR 2.9 million) and EUR 1.8 million of other work performed by the company and capitalized (EUR 0.1 million). A comparison with the previous year is only possible to a limited extent as operating activities in 2014 were characterized by accelerated purchasing effects ahead of the amendment to the German Renewable Energies Act (EEG) as of August 1, 2014. 2G generated earnings before interest and tax (EBIT) of EUR 4.8 million in the reporting year (EUR 11.3 million), on the basis of accounting standards according to the German Commercial Code (HGB). This corresponds to a 3.1 % EBIT margin (6.1 %). The consolidated net profit for 2015 amounts to EUR 2.6 million (EUR 6.9 million). Earnings per share excluding minority interests stand at EUR 0.59 (EUR 1.55).

Good start to FY 2016

2G has carried over a high order book position of EUR 85.5 million from 2015 into the current financial year (EUR 42.3 million). The proportion of orders on which work has not yet started amounted to EUR 52.0 million (EUR 17.4 million). The EUR 25.3 million of sales revenue generated in the first quarter (EUR 28.9 million) arises from both prior-year CHP orders that were finally invoiced and a significant level of service revenues. 2G continued to enjoy a high order book position of EUR 86.9 million as of March 31, 2016 (EUR 49.0 million). The inventory of work in progress reported a marked increase of EUR 9.9 million as of the reporting date, reflecting good production utilization. Total operating revenue amounts to EUR 35.6 million as a consequence (EUR 27.4 million). Earnings before interest and tax (EBIT) amounted to EUR 0.1 million (EUR -0.4 million). The good profitability for the January to March 2016 months is somewhat untypical seasonally, and arises mainly from the higher level of production utilisation, which resulted in an increase in gross profit given the fact that the cost of materials ratio registered a disproportionally minor increase.

Satisfactory business progress is also evident at the end of April 2016. The constantly replenishing order book position for the supply of CHP systems is at a good level of around EUR 88 million (EUR 54 million). This order book position confirms the past years’ trends toward a growing international share and a strengthening business with natural gas operated CHP systems. A total of 45 % of the orders derive from abroad (27 %, excluding the USA). In Germany, greater demand for biogas driven 2G power plants is observable due to the flexibilization and repowering of biogas systems. Following the reorganization of 2G Energy Inc. in the USA, signals from the American market are encouraging with an EUR 11.3 million order book position. Almost two thirds of this order volume consist of natural gas operated CHP systems. The UK subsidiary also continued its positive trend with a EUR 17.7 million order book position consisting mainly of biogas driven 2G power plants. From today’s perspective, the subsidy backdrop for biogas systems in the UK remains attractive until 2020.

Based on this good starting position in the CHP systems business area alone, the Management Board assumes consolidated revenue of between EUR 150 million and EUR 170 million for the full 2016 year, and an EBIT margin between 3 % and 5 %. This forecast takes into account the uncertainties due to the EU Commission withholding its approval of the 2016 German Cogeneration Act (state aid law review), which it has not issued to date. The Group’s revenue and earnings growth is also to be realized through the growing service business, further expansion of 2G Rental’s rental and lease business, the offering of new CHP solution concepts, especially for utilities and contractors, and through expanding partner concepts in Germany and abroad in sales and service, as already existing with a Veolia subsidiary in the UK and Fuji Electrics in Asia, among other examples. Such strategic alliances can also offer 2G better market and customer access on a regional basis for the North American market and parts of Europe, as well as more direct proximity to customers. The share of revenue generated abroad is to be expanded continuously further over the next two years.

2015 has been a year of transition – diversification strategy advanced successfully

The 2015 business year represented a year of transition for the company between the 2014 amendment to the German Renewable Energies Act (EEG) and the 2016 Amendment to the German Cogeneration Act (KWK-G), which resulted in fluctuations in CHP orders, and consequently production utilization, on the German market. 2G maintained capacities to ensure it could meet deadlines in producing and commissioning 2G systems and in delivering service. Taken together with around EUR 3.0 million of one-off legal, consulting and personnel costs for adjustment and restructuring measures at subsidiaries in Germany and abroad, this approach weighed down on results. Positive trends were reflected in the increase in the share of service business to 34 % of revenue (20 %), and the rise in the export share of CHP systems to 35 % (28 %). Across all business areas, 2G boosted its export share to 27 % of revenue (21 %). 2G is thereby underscoring the diversification strategy that it has continuously advanced of growing across various gas types, regional markets, sectors and products, and of becoming largely independent of individual markets and regulatory changes.

Service business grows further

Compared with the previous year, the percentage distribution of revenue within the corporate areas of CHP systems, service and after-sales shifted towards the service business in the reporting year. The proportion of revenue from selling CHP systems reduced to 60 % (72 %), the service business share increased to 34 %, by contrast (20 %), and the revenue share from the after-sales business fell from 8 % in the previous year to 6 %. In particular, servicing of 2G systems is registering significant expansion as a result of the installed base of new plants. At EUR 52.1 million, 2G generated a 40 % higher sales revenue contribution in 2015 compared with the previous year. For 2G, this signifies a stabilizing level with continuous and predictable cash flows that are independent of short-term sales trends or regulatory factors.

Cost of materials ratio falls, personal expense ratio rises

The cost of materials ratio were reduced from 70.7 % to 65.0 % of total operating revenue. Compared with the last two balance sheet dates, the company reports an almost unchanged inventory of finished goods and work in progress in this context. To this extent, the at-cost measurement of inventory changes does not reduce income, while recognized revenues have boosted income within gross profit. It is also pleasing that production efficiency was boosted while tangible price pressure continues on the market. 2G hired qualified staff particularly for its service and sales area, and for international growth. Moreover, following the acquisition of all of the shares of 2G Cenergy Inc. in February 2015, its employees are recognized in the financial statements for the first time. In absolute terms, personnel expenses grew from EUR 25.5 million to EUR 29.3 million in the reporting period. Sales, marketing and administration costs rose year-on-year to EUR 13.8 million (EUR 12.9 million). A total of EUR 3.0 million of one-off effects are included in the results (details in the annual report). The net financial result amounts to EUR -0.3 million (EUR -0.5 million), and arises mainly from interest payments for loans and bill guarantees. Given the positive earnings trends, the Group incurred EUR 1.9 million of taxes on income (EUR 4.1 million).

Healthy balance sheet structure, solid 54.9 % equity ratio

The balance sheet structure of the 2G Energy Group remained very stable during the 2015 financial year. Total assets were up by 3.5 % year-on-year to EUR 95.9 million as a result of a higher level of receivables due from customers, as well as CHP systems rented by 2G Rental to customers, which are recognized under non-current assets. Non-current assets of EUR 23.5 million (EUR 22.7 million) include intangible assets that have risen as a result of the first-time consolidation of 2G Cenergy Inc., reflecting its goodwill. Raw materials and supplies grew by EUR 0.5 million to EUR 24.1 million. Work in progress and finished goods, which are measured at cost in accordance with HGB accounting principles, amounted to EUR 27.4 million on the reporting date (EUR 27.3 million). Prepayments received of EUR 20.9 million were offset against orders being processed (EUR 20.3 million). The position of receivables and other assets grew from EUR 25.7 million to EUR 28.6 million when comparing the two balance sheet dates. Working capital (the difference between current assets and current liabilities) reported a marginal fall from EUR 32.0 million in the previous year to EUR 31.8 million. Liquid assets of EUR 10.1 million on the reporting date lie at a stable level (EUR 11.9 million). Equity amounted to EUR 52.6 million as of the balance sheet date (EUR 52.1 million). Due to the higher level of total assets, the equity ratio registered a slight reduction from 56.2 % on the previous year’s reporting date to 54.9 %. 2G repaid EUR 1.5 million of bank borrowings in the reporting year, as planned, while EUR 1.7 million of refinancing loans were newly drawn down for the operating activities of 2G Rental GmbH.

Management and Supervisory boards propose EUR 0.37 dividend

After approving and adopting the 2015 separate financial statements, the Supervisory Board at its May 25, 2016 meeting agreed with the Management Board’s proposal to propose that the 2015 AGM should again approve a EUR 0.37 dividend per share. In light of the business trend and growth anticipated for the current year, the Supervisory and Management boards wish to retain the continuity in dividend policy.

The audited and approved consolidated financial statements of 2G Energy AG can be downloaded from the company’s website under Investor Relations / Financial Publications:

http://www.2-g.com/start.php?seitenid=453&langid=18

The English language version of the annual report will be published in early June 2016 and can also be downloaded from the company’s website.

2G Energy company portrait

2G Energy AG ranks among the world”s leading manufacturers of cogeneration (CHP) systems for decentralised energy production and supply by means of combined heat and power. The company”s product portfolio includes systems with an electric capacity between 20 kW and 4,000 kW for operation with natural gas, biogas, biomethane and other lean gases. 2G has successfully installed several thousand CHP systems in 40 countries to date. Especially in the 50 kW to 550 kW performance range, 2G possesses proprietary technological combustion engine concepts characterised by low specific fuel consumptions, high operational availability and optimised service intervals. Besides the main production site at the Group headquarters 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 agricultural and industrial operations, local authorities, and the residential sector through to municipal utilities and large-scale utilities. The high level of customer satisfaction is founded on a dense service network as well as 2G power stations” high technical quality and performance. These power stations achieve an overall degree of efficiency from 85 percent and to well above 90 percent thanks to combined heat and power performance.

Along with the construction of combined heat and power stations, the company, located in Westphalia in the north-west of Germany, offers integrated solutions spanning the planning stage and installation through to service and maintenance work. In the context of the energy policy revolution, and as part of modern energy supply concepts, CHP systems are gaining considerably in importance in intelligent energy grid systems – so-called virtual power plants – due to their decentralised and scalable operation, and predictable availability.

2G is consistently expanding its technology leadership through continuous research and development work, both in gas engine technology for natural gas, biogas and synthetic gas applications (e.g. hydrogen), as well as in specific software development. The “virtual power plant” operating type has been created with a software solution, for example. Overall, the 2G system is thereby operated on a basis that is “heating-managed and electricity-oriented” in order to significantly simplify integration within a grid group. In the energy policy revolution”s future electricity market design, such digitalisation-enabled flexibility forms an indispensable system-relevant element in combination with solar, wind, biogas and natural gas producers, and creates a high barrier to market entry for competitors.

The shares of 2G Energy (ISIN DE000A0HL8N9) have been listed in the Entry Standard of Deutsche Börse AG since July 31, 2007. The share capital amounts to EUR 4,430,000, and is divided into 4,430,000 shares. The company”s founders held 55.3 % of the shares as of December 31 2015, with the free float amounting to 44.7 %.

2016 dates

July 5, 2016 Ordinary AGM, Ahaus

Sept. 27, 2016 Semiannual consolidated financial statements as of June 30, 2016

Nov. 21-23, 2016 German Equity Capital Forum 2016

Nov. 30, 2016 Q3 key figures and business trends

Further information: www.2-g.de

Contact

2G Energy AG

Benzstraße 3

48619 Heek

Telephone: +49 2568 9347-2795

Telefax: +49 2568 9347-15

E-Mail: [email protected]

Internet: www.2-g.de

2016-05-25 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG.

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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:	[email protected]
Internet:	www.2-g.de
ISIN:	DE000A0HL8N9
WKN:	A0HL8N
Listed:	Regulated Unofficial Market in Berlin, Dusseldorf, Stuttgart; Open Market (Entry Standard) in Frankfurt