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Kontron AG (formerly S&T AG)
Quarterly Report • May 4, 2023
802_10-q_2023-05-04_4771b9b8-6bcc-4b0c-9e1b-0ecb563cfa31.pdf
Quarterly Report
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Q1 2023 Quarterly Statement
S&T AG Geschäftsbericht 2019
KONTRON GROUP OVERVIEW
KEY FIGURES
| IN EUR MIO. | Q1 2023 CONTINUING OPERATIONS |
Q1 2022 CONTINUING OPERATIONS |
|---|---|---|
| Revenues | 277.7 | 247.0 |
| EBITDA | 29.6 | 23.7 |
| Result after non-controlling interests | 16.6 | 10.0 |
| Earnings per share (in EUR Cent) 1)2) | 26 Cent | 18 Cent |
| Operating cash flow 2) | 5.2 | -60.0 |
| Operating cash flow from continuing operations | 4.4 | -44.7 |
1) Earnings per share undilluted
2) Including discontinued operations
| IN EUR MIO. | 31.03.2023 | 31.12.2022 |
|---|---|---|
| Cash and cash equivalents | 438.4 | 437.8 |
| Net Cash (+) / Net debt (-) 3) | 185.1 | 118.3 |
| Equity | 645.8 | 635.7 |
| Equity ratio | 47.3% | 44.1% |
| Backlog | 1,572.5 | 1,459.6 |
| Project-pipeline | 3,368.9 | 3,407.2 |
| Employees 4) | 4,499 | 4,475 |
3) Cash and cash equivalents less non-current and current financial liabilities
4) Number of employees on full time equivalent basis without employees on parental leave, trainees and apprentices
02 FOREWORD
THE NEW KONTRON IS WELL ON TRACK
The first quarter of the new Kontron is behind us. In financial year 2022, we left 12 years of IT legacy and the company name "S&T AG" behind us. On December 29, 2022, that part of the Group was sold to the French company VINCI Energies S.A., and the remaining divisions saw the birth of the "new Kontron".
Kontron is now focused on the Internet of Things, a thriving market that is growing at over 15% per year. Kontron is one of the world's three largest providers in this fragmented market. We have set out to achieve higher net profits and higher growth, comparable to our competitors in this market.
And, the new Kontron is fully on track in the first quarter of 2023. This is confirmed by 14% organic growth, record order intake and a 66% increase in net income. In detail, revenue climbed from EUR 247.0 million in the previous year to EUR 277.7 million and net income from continuing operations after non-controlling interests from EUR 10.0 million to EUR 16.6 million in the first quarter of the current financial year. The decisive factor was the gross margin, which we were able to increase to 38.7% (PY: 36.2%) and, as a result, the increase in the net margin, which was increased from 3.9% to 6.0% of revenue. Order intake in the first quarter was EUR 390.7 million, compared with revenues of EUR 277.7 million, indicating a book-to-bill ratio of 141%, the eighth record quarter in a row.
The sale of the IT segment not only had a positive impact on our margins, but also on our liquidity. As of March 31 2023, following payment of the first tranches of the purchase price, our cash balance was EUR 438.4 million, with a further EUR 59 million still outstanding. Moreover, we were able to generate positive operating cash flow of EUR 5.2 million in the seasonally weak first quarter (PY: EUR -60 million). This result confirms continuation of the strong cash flow trend from the fourth quarter of 2022. A good liquidity balance is crucial in the current uncertain times, which include high interest rates. We will invest some of the existing liquidity directly in our growth – we are certain that we will be able to complete one or two significant acquisitions in 2023 – and we have also planned a record dividend and the continuation of our share buyback program.
The supply chain difficulties from 2022 have recovered noticeably. The volume of overdue orders has fallen from a peak of EUR 127 million at the end of June 2022 to currently EUR 88 million, and as a result, inventory has fallen by EUR 13.4 million in the same period.
We expect 2023 to be a very good year for Kontron. The order backlog of the new Kontron increased in the past five quarters by EUR 413 million to EUR 1,573 million. This means that all planned revenues for 2023 – the target is EUR 1,200 million – have already been covered. However, the aim of the new Kontron is not just to grow revenue, but above all to increase profitability. At the end of March 2023, we raised our net income guidance to EUR 66 million, with an EBITDA margin of 11%. This represents an increase of more than 20% compared to the previous year.
With the planned acquisitions, we are well on track for our target of EUR 2,000 million in revenue in 2025 – at the same time as significantly increasing profitability.
Hannes Niederhauser, CEO
NOTES TO THE COURSE OF BUSINESS
Strong organic growth, increased operating cash flow and high liquidity
In the first quarter of the current financial year 2023, the Kontron Group was able to significantly increase its revenue to EUR 277.7 million (PY: EUR 247.0 million), driven by strong organic growth. Delivery delays caused by the chip crisis were further reduced in the first quarter of financial year 2023 and dropped to around EUR 88 million.
Profitability rose significantly in the past quarter. Overall, an EBITDA of EUR 29.6 million was achieved in the first three months of the current financial year (Q1 2022: EUR 23.7 million). EBITDA therefore rose by around 24.9% and the gross margin increased to 38.7% (PY: 36.2%). Group net income attributable to Kontron shareholders (after minority interests) went up by almost 45.7% to EUR 16.9 million (Q1 2022: EUR 11.6 million), increasing earnings per share (undiluted) from 18 cents in the first quarter of 2022 to 26 cents in the first three months of the current financial year.
Strong results in all business segments
Due to the concentration of the Kontron Group's business activities on the IoT market in the wake of the sale of the majority of the "IT Services" business completed in December 2022, the presentation of the Kontron Group's business segments has been reorganised from financial year 2023 in accordance with the new configuration. From the first quarter of 2023, the group of companies will be reported and managed in the three segments "Europe", "Global" and "Software + Solutions."
About the three segments of the Kontron Group:
"Europe": This segment covers all activities of the Kontron Group relating to development of secure solutions for machine networks by means of a combined portfolio consisting of hardware, middleware and services in Europe. The focus of the business segment is on the products (proprietary technologies) and solutions developed by the Kontron Group for industrial automation, medical technology, connectivity and communications solutions and smart energy markets. In addition, the remaining IT services business is reported in this segment. In the first quarter of 2023, revenues of EUR 179.4 million were achieved in the "Europe" segment (Q1 2022: EUR 166.0 million), which corresponds to a growth in revenue of 8.0%. EBITDA before HQ allocations increased from EUR 16.0 million to EUR 16.4 million and includes income and expenses that were not allocated to discontinued operation for reasons of simplification.
"Global": The "Global" segment presents the former "IoT Solutions America" segment, which included solutions in the vertical markets of transport and aviation as well as connectivity and communications in the North America region. In addition, this segment includes the integrated Kontron Group's business outside Europe, particularly in Asia. Revenues in this segment amounted to EUR 49.6 million in the first quarter of 2023 (Q1 2022: EUR 38.4 million), which corresponds to growth of around 29.4%. As a result, EBITDA before HQ allocations in this segment improved greatly from EUR 0.8 million to EUR 4.0 million.
"Software + Solutions": In this segment, the Kontron Group presents its activities relating to the development and sale of software solutions and related products. The solutions, such as the susietec® IoT (Internet of Things) toolset developed specifically by Kontron, are used in various vertical markets. In particular, the solutions support industrial automation and are used in the public transport sector. In the "Software + Solutions" segment, revenues of EUR 48.7 million were achieved in the first quarter of 2023 (Q1 2022: EUR 42.6 million), which corresponds to a growth in revenue of 14.2%. EBITDA before HQ allocations increased significantly from EUR 6.9 million to EUR 9.2 million.
| IN EUR MIO. | EUROPE | GLOBAL | SOFTWARE + SOLUTIONS |
KONTRON GROUP | ||||
|---|---|---|---|---|---|---|---|---|
| Q1 2023 | Q1 2022 | Q1 2023 | Q1 2022 | Q1 2023 | Q1 2022 | Q1 2023 | Q1 2022 | |
| Total revenues | 208.7 | 186.8 | 63.9 | 49.9 | 54.6 | 48.6 | 327.2 | 285.3 |
| Internal revenues | -29.3 | -20.8 | -14.3 | -11.5 | -5.9 | -5.9 | -49.6 | -38.3 |
| Revenues | 179.4 | 166.0 | 49.6 | 38.4 | 48.7 | 42.6 | 277.7 | 247.0 |
| EBITDA before HQ Charging*) |
16.4 | 16.0 | 4.0 | 0.8 | 9.2 | 6.9 | 29.6 | 23.7 |
*) Segment "Europe" including Headquarter-charges
Strong financial position, significantly improved operating cash flow
The net assets and liquidity position at the end of the first quarter remains stable. Equity increased from EUR 635.7 million as of December 31, 2022 to EUR 645.8 million, although a total of 287,544 treasury shares were acquired in the first quarter of 2023 under share buyback program I 2023, which reduced equity by EUR 5.4 million. The equity ratio rose further to 47.3% as of the quarterly reporting date (December 31, 2022: 44.1%). Cash and cash equivalents amounted to EUR 438.4 million (December 31, 2022: EUR 437.8 million). Operating cash flow in the first quarter of the current financial year was positive and amounted to EUR 5.2 million. It was thus EUR 65.2 million, and therefore very significantly, above the previous year's figure of minus EUR 60.0 million. The number of employees as of March 31, 2023 stood at 4,499 (December 31, 2022: 4,475).
04
CONSOLIDATED INCOME STATEMENT
| CONSOLIDATED INCOME STATEMENT IN TEUR |
Q1 2023 | Q1 2022* |
|---|---|---|
| Revenues | 277,671 | 247,019 |
| Capitalised development costs | 4,629 | 5,506 |
| Other income | 6,722 | 11,587 |
| Expenses for materials and other services purchased | -170,342 | -157,721 |
| Personnel expenses | -70,387 | -61,928 |
| Depreciation and amortisation | -9,035 | -11,663 |
| Other operating expenses | -18,671 | -20,763 |
| Result from operations | 20,587 | 12,037 |
| Finance income | 3,114 | 242 |
| Finance expenses | -3,493 | -2,175 |
| Financial result | -379 | -1,933 |
| Earnings before taxes | 20,208 | 10,104 |
| Income taxes | -3,622 | -559 |
| Profit/loss from continuing operations | 16,586 | 9,545 |
| Profit/loss from discontinued operations | 6 | 1,629 |
| Net income | 16,592 | 11,174 |
| Results from the period attributable to owners of non-controlling interests | 7 | -417 |
| Results from the period attributable to owners of interests in parent company | 16,585 | 11,591 |
| Earnings per share from continuing operations (undiluted) | 0.26 | 0.16 |
| Earnings per share from continuing operations (diluted) | 0.25 | 0.15 |
| Earnings per share attributable to owners of interests in parent company (undiluted) | 0.26 | 0.18 |
| Earnings per share attributable to owners of interests in parent company (diluted) | 0.25 | 0.18 |
| Average number of shares in circulation (in thousands undiluted) | 63,625 | 63,631 |
| Average number of shares in circulation (in thousands diluted) | 66,125 | 64,631 |
*) Adjustment due to application of IFRS 5 – see Annual Report 2022
STATEMENT OF OTHER COMPREHENSIVE INCOME
| STATEMENT OF OTHER COMPREHENSIVE INCOME IN TEUR |
Q1 2023 | Q1 2022 |
|---|---|---|
| Net income | 16,592 | 11,174 |
| Items that will not be reclassified to profit or loss | ||
| Remeasurement according to IAS 19 | ||
| Gains(+)/losses(-) from remeasurement | 38 | 0 |
| 38 | 0 | |
| Items that may be subsequently reclassified to profit or loss | ||
| Unrealised gains/losses from currency translation | -1,672 | -1,471 |
| -1,672 | -1,471 | |
| Other comprehensive income | -1,634 | -1,471 |
| Comprehensive income | 14,958 | 9,703 |
| of which attributable to | ||
| Results from the period attributable to owners of non-controlling interests | 60 | -831 |
| Results from the period attributable to owners of interests in parent company | 14,898 | 10,534 |
04 CONSOLIDATED BALANCE SHEET
| ASSETS IN TEUR |
31.03.2023 | 31.12.2022 |
|---|---|---|
| NON-CURRENT ASSETS | ||
| Property, plant and equipment | 97,757 | 95,477 |
| Intangible assets | 73,494 | 72,424 |
| Goodwill | 188,368 | 189,412 |
| Financial assets non-current | 13,253 | 11,714 |
| Contract assets non-current | 1,084 | 1,061 |
| Other non-current assets | 8,362 | 8,960 |
| Deferred tax assets | 30,859 | 33,050 |
| 413,177 | 412,098 | |
| CURRENT ASSETS | ||
| Inventories | 213,396 | 192,633 |
| Trade receivables | 143,976 | 148,085 |
| Contract assets current | 46,969 | 54,227 |
| Financial assets current | 55,583 | 134,326 |
| Other receivables and assets current | 49,062 | 55,421 |
| Cash and cash equivalents | 438,415 | 437,760 |
| Assets classified as held for sale | 6,019 | 6,310 |
| 953,420 | 1,028,762 | |
| Total assets | 1,366,597 | 1,440,860 |
| EQUITY AND LIABILITIES IN TEUR EQUITY |
31.03.2023 | 31.12.2022 |
| Subscribed capital | 63,631 | 63,631 |
| Capital reserves | 123,153 | 122,582 |
| Accumulated results | 466,201 | 449,616 |
| Other reserves | -3,681 | -1,994 |
| Treasury shares | -5,365 | 0 |
| Equity attributable to owners of interests in parent company | 643,939 | 633,835 |
| Non-controlling interests | 1,891 | 1,831 |
| 645,830 | 635,666 | |
| NON-CURRENT LIABILITIES | ||
| Financing liabilities non-current | 191,794 | 193,768 |
| Other financial liabilities non-current | 31,659 | 27,714 |
| Contract liabilities | 9,342 | 5,532 |
| Other liabilities non-current | 1 | 1 |
| Deferred tax liabilities | 5,704 | 5,725 |
| Provisions non-current | 19,952 | 19,886 |
| 258,452 | 252,626 | |
| CURRENT LIABILITIES | ||
| Financing liabilities current | 61,571 | 125,703 |
| Trade payables | 204,661 | 226,336 |
| Contract liabilities | 79,627 | 78,493 |
| Other financial liabilities current | 28,417 | 24,979 |
| Provisions current | 25,124 | 26,950 |
| Other liabilities current | 58,494 | 65,348 |
| Liabilities classified as held for sale | 4,421 | 4,759 |
| Total equity and liabilities | 462,315 1,366,597 |
552,568 1,440,860 |
CONSOLIDATED CASH FLOW STATEMENT
| CONSOLIDATED CASH FLOW STATEMENT IN TEUR |
Q1 2023 | Q1 2022 |
|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING AND DISCONTINUED OPERATIONS | ||
| Earnings before tax from continuing and discontinued operations | 20,251 | 12,306 |
| Depreciation and amortisation | 9,035 | 14,659 |
| Interest expenses | 3,541 | 2,708 |
| Interest and other income from the disposal of financial assets | -3,119 | -266 |
| Increase/decrease of provisions | -1,186 | 2,439 |
| Gains/losses from the disposal of non-current non-financial assets | -40 | 14 |
| Changes in inventories | -23,174 | -30,020 |
| Changes in trade receivable and contract assets | 8,960 | 15,681 |
| Changes in other receivables and assets | 5,082 | -11,951 |
| Changes in trade payable and contract liabilities | -8,419 | -49,755 |
| Changes in other liabilities | -2,167 | -3,616 |
| Other non-cash income and expenses | -2,434 | -9,331 |
| Cash and cash equivalents from operations | 6,330 | -57,132 |
| Income taxes paid | -1,106 | -2,847 |
| Net cash flows from operating activities | 5,224 | -59,979 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Purchase of non-current non-financial assets | -7,160 | -8,493 |
| Proceeds from sale of non-current non-financial assets | 179 | 1,206 |
| Disposal/purchase of financial instruments | -333 | 7,313 |
| Payments to acquire subsidiaries less cash assumed and plus current account liabilities assumed | 0 | -2,070 |
| Proceeds /Payments from disposal/sale of subsidiaries less cash disposed and plus current account liabilities disposed |
2,161 | 0 |
| Proceeds (net) from disposal of discontinued operations | 74,413 | 0 |
| Interest income | 2,246 | 146 |
| Net cash flows from investing activities | 71,506 | -1,898 |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Increase in financing liabilities and financial liabilities | 558 | 95 |
| Decrease in financing liabilities and financial liabilities | -17,738 | -13,440 |
| Interests paid | -2,323 | -1,557 |
| Acquisition of non-controlling interests | 0 | 31 |
| Payments for acquisition of treasury shares | -5,365 | 0 |
| Net cash flows from financial activities | -24,868 | -14,871 |
| Changes in exchange rates | -285 | -1,948 |
| Changes in financial funds | 51,577 | -78,696 |
| Financial funds as of the beginning of the period | 366,996 | 267,934 |
| Financial funds as of the end of the period | 418,573 | 189,238 |
| Overdrafts | 18,548 | 30,252 |
| Restricted cash | 3,510 | 4,781 |
| Total cash and cash equivalents from continuing and discontinued operations | 440,631 | 224,271 |
FINANCIAL CALENDAR
2023
| 04.05.2023 | Q1-quarterly statement 2023 (Earnings-Call Q1 2023) | |
|---|---|---|
- 12.05.2023 Stifel German Corporate Conference
- 22.05.2023 Annual General Meeting
- 31.05.2023 Dividend payment day
- 03.08.2023 Half-year report 2023 (Earnings-Call Q2 2023)
- 03.11.2023 Q3-quarterly statement (Earnings-Call Q3 2023)
- 27.11.2023 Equity forum (27.11. - 29.11.2023)
Further details available under https://ir.kontron.com/Financial_calendar.en.html
Austria (Headquarters)
Kontron AG, 4021 Linz, Industriezeile 35 Investor Relations: +43 1 80191 1196 | [email protected]
www.kontron.com
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