Earnings Release • Aug 11, 2020
Earnings Release
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Improved margin and lower cost level limit EBITA decline
The current economic uncertainties have impact on TKH's operations and we expect this to continue in the second half of 2020. Forecast full year 2020: net profit from continued operations before amortization and one-off income and expenses attributable to shareholders of between € 63 million and € 69 million.
| (in € million unless otherwise stated) | H1 2020 |
H1 2019 |
Change in % |
|---|---|---|---|
| Turnover | 679.0 | 753.2 | -9.9% |
| EBITA before one-off expenses 1) | 69.0 | 77.6 | -11.0% |
| Net profit before amortization and one-off income and expenses | |||
| attributable to shareholders 1, 2,3) | 36.0 | 45.9 | -21.6% |
| Net profit | 26.6 | 42.8 | -38.0% |
| Net earnings per ordinary share attributable to shareholders (in €) | 0.63 | 1.02 | -37.8% |
| ROS 1) | 10.2% | 10.3% | |
| ROCE | 16.0% | 18.7% |
1) The one-off expenses for H1 2020 relate to costs for restructuring and integrations, totaling € 3.7 million.
2) For further details, we refer to the 'Overview of alternative performance indicators' included after the financial statements.
3) Amortization of intangible fixed assets related to acquisitions (after taxes).
Alexander van der Lof, CEO of technology company TKH: "The past few months have been turbulent due to the COVID-19 outbreak. The health of our employees and the continuity of our activities were our main priority during this period. Although the impact has been considerable, we have come through the past few months reasonably well. Thanks to the solid progress we booked with our 'Simplify and Accelerate' program, we succeeded in increasing our gross margin and maintaining our ROS at virtually the same level as last year, despite a decline in turnover. In a number of markets, such as Tire Building and Parking, TKH has been affected by the consequences of the COVID-19 outbreak. We expect to feel the effects to continue in the coming period. TKH anticipated in time by reducing operational costs. On the other hand, the investments in innovation are paying off and will enable TKH to record growth in a number of key markets. Examples include the large orders we have won for subsea connectivity systems in offshore wind projects, Airfield Ground Lighting (CEDD/AGL) for Istanbul Sabiha Gökçen Airport and 3D vision technology for 5G consumer electronics. We also made a breakthrough with our medicine dosage and dispensing system, and thanks to specific interest we were able to initiate a large-scale rollout of our high-quality Indivion system. In the coming months, we will continue to see (macroeconomic) uncertainties, which will affect TKH the most in Industrial Solutions. Thanks to our innovations and our focus on growth markets, we still have good prospects for value creation in the medium term. It goes without saying that TKH will closely monitor developments and take measures where necessary."
The COVID-19 outbreak has had a negative impact on TKH's turnover and results since the start of the outbreak. The lockdowns in France, Italy and the US in April and May, for instance, had a major impact on our operations. From June onwards, following the easing of restrictions in these countries, we did see a resumption of deliveries, but not yet back to previous levels. The activity levels in China have recovered since March, COVID-19 had only a limited impact.
We introduced a large number of measures to monitor and prevent the impact of the COVID-19 virus, including:
The measures we introduced to provide a safe and healthy working environment resulted in lower productivity and utilization levels at our manufacturing companies. In addition, there was an impact of reduced demand, as customers had less capacity available to realize projects. In a number of market segments, investments were reduced and/or postponed. This was particularly evident with respect to investments in airports and parking garages and in the industrial sector.
Turnover fell by 9.9% to € 679.0 million in the first half of the year (H1 2019: € 753.2 million). On an organic basis, turnover fell by 7.5%. Raw materials prices and currency effects had a negative impact of 0.4% on turnover. Acquisitions added 2.9% to turnover, while divestments had a negative impact of 4.8%. Turnover declined organically in all segments, although this was limited in Building Solutions.
The gross margin increased to 49.4% (H1 2019: 47.4%). TKH realized this increase in Building Solutions. Divestments and acquisitions also had an impact on the gross margin.
Operating expenses declined by 4.7% compared with the first half of 2019. The implemented integrations, cost savings and reduced cost of sales due to lockdowns, accounted for a
significant share of the cost reductions. However, as a percentage of turnover, operating expenses increased to 39.3% in the first half of 2020, from 37.1% in the first half of 2019. The relative increase is related to the divestments in 2020 and lower productivity and utilization at our manufacturing companies as a result of COVID-19. Depreciations came in at € 22.9 million, € 0.6 million above the level in the first half of 2019, due to the higher investment levels in recent years.
Operating result before amortization of intangible assets and one-off income and expenses (EBITA) declined by 11.0% to € 69.0 million in the first half of 2020, from € 77.6 million in the first half of 2019. Building Solutions' EBITA was 25.2% higher. Telecom Solutions and Industrial Solutions saw EBITA decline by 23.1% and 35.7% respectively.
ROS remained virtually unchanged at 10.2% in the first half of 2020 (H1 2019: 10.3%) due to an improvement of the gross margin and a lower cost level.
Amortization costs rose by € 3.8 million due to the acquisitions in the second half of 2019, as well as the high level of investments in R&D in recent years. TKH recognized an impairment of € 1.5 million in the first half of the year due to COVID-19.
TKH's financial result improved by € 3.2 million, mainly as a result of a book profit on divestments.
The tax rate increased to 25.3% in the first half of 2020, from 23.2% in the first half of 2019, primarily due to divestments and lower profits at companies that charge lower tax rates.
Net profit from continued operations before amortization and one-off income and expenses attributable to shareholders declined by 21.6% to € 36.0 million (H1 2019: € 45.9 million). Net profit fell by 38.0% to € 26.6 million (H1 2019: € 42.8 million).
Net bank debt, calculated in accordance with the bank covenant, increased to € 357.6 million, up € 57.0 million from year-end 2019. This increase was primarily due to the dividend paid out, higher working capital and investments, but was partly offset by the proceeds from divestments. Working capital as a percentage of turnover increased to 16.6% (mid-2019: 16.5%). The postponement of the delivery of various projects, particularly in the Industrial Solutions segment, due to lockdowns at customers increased working capital by approximately € 40 million. At the same time, the deferral of tax payments obtained as at 30 June had an impact of € 22 million.
The Net debt/EBITDA ratio stood at 1.9 at end-June 2020, which means that TKH was operating well within the financial ratio agreed with its banks. Solvency amounted to 40.5% (H1 2019: 36.9%).
The number of permanent employees (FTEs) stood at 5,692 at 30 June 2020 (end 2019: 5,980 FTEs). In addition, TKH had 265 temporary employees at 30 June 2020 (end 2019: 310).
Telecom Solutions encompasses the core technologies connectivity, vision & security and mission-critical communications. TKH develops, produces and supplies systems ranging from basic outdoor infrastructure for telecom and CATV networks through to indoor home networking applications. Around 40% of the portfolio consists of optical fibre and copper cable for hub-to-hub connectivity. The remaining 60%, consisting of components and systems in the field of connectivity and peripherals, is deployed primarily in network hubs – share in turnover 14.0%
| (in € mln) |
H1 2020 |
H1 2019 |
Change in % |
|---|---|---|---|
| Turnover | 95.1 | 102.8 | -7.6% |
| EBITA | 12.3 | 16.0 | -23.1% |
| ROS | 13.0% | 15.6% |
Turnover in the Telecom Solutions segment declined by 7.6% to € 95.1 million. Currency exchange rates had a negative effect of 0.2%. On balance, turnover declined organically by 7.4%.
EBITA was down 23.1% at € 12.3 million. ROS declined to 13.0% in the first half of 2020 (H1 2019: 15.6%).
Fibre Optic Networks – In the first half of the year, the lockdown in Europe, particularly in France, had a significant negative impact on deliveries. Due to the obstacles created by the lockdown, TKH was unable to translate the increased demand for bandwidth in combination with the 5Grelated demand into higher order intake. As a result, production was at a lower level, resulting in lower utilization. In China, we saw pressure on prices for optical fibre. At TKH, this price effect was offset by a higher share of its complementary connectivity portfolio.
Other markets – Growth was realized in broadband products for home offices. However, a number of projects were postponed as a result of COVID-19. In 2020, the production of the telecom copper cable portfolio, an area where turnover has already declined significantly in recent years, will be terminated.
Building Solutions combines the core technologies vision & security, mission-critical communications and connectivity in comprehensive solutions for security and communications applications in and around buildings, as well as for industrial inspection, quality, product and process controls. Building Solutions also focuses on efficiency solutions to reduce throughput times for the realization of installations within buildings, and on intelligent video, mission-critical communications, evacuations, access (controls) and registration systems for a number of specific sectors, including healthcare, parking, marine and offshore, tunnels and airports – turnover share 50.8%.
| (in € mln) |
H1 | H1 | Change |
|---|---|---|---|
| 2020 | 2019 | in % | |
| Turnover | 344.9 | 364.8 | -5.5% |
| EBITA before one-off expenses1) | 36.4 | 29.1 | +25.2% |
| ROS | 10.6% | 8.0% |
1) The one-off expenses in H1 2020 are costs for restructuring and integrations totaling € 3.6 million.
Turnover in the Building Solutions segment fell by 5.5% to € 344.9 million. Lower raw material prices had a negative impact of 0.7% on turnover. Acquisitions from 2019 contributed 5.9% to turnover. Divestments in 2020 reduced turnover by 9.9%. On balance, turnover declined organically by 0.8% in the first half of the year.
EBITA increased by 25.2% to € 36.4 million, mainly due to strong growth in Machine Vision. This resulted in an increase in ROS to 10.6% in the first half of the year (H1 2019: 8.0%).
Care - Despite increased demand for our communications technology for care alerts and elderly care, sales declined due to limited installation opportunities in care institutions as a result of COVID-19.
Marine & Offshore – Turnover increased on the back of orders for subsea connectivity systems won in 2019. In addition, we won new contracts with Offshore Wind Farm Kaskasi and Hollandse Kust Zuid, which means that capacity utilization will increase for the coming quarters. In addition, there are good prospects of new orders for offshore wind projects. The growth in subsea connectivity systems more than compensated for the drop in demand due to the stagnation in the construction of cruise ships.
Tunnel & Infra - Despite the obstacles, which installation technicians faced in carrying out their work, turnover remained stable due to an increased need for investments in energy networks among network companies. This had a positive impact on the demand for energy cable systems. We have decided to further expand our production capacity for these systems and expect to take this new capacity into operation from Q3 2021. The Airfield Ground Lighting (CEDD /AGL) technology felt the impact of COVID-19 and the related investment constraints at airports due to the drop in demand. Nevertheless, our AGL technology is still well positioned for new contracts, which was recently confirmed with a major order for Istanbul Sabiha Gökçen Airport.
Parking - In North America, TKH's main market for Parking solutions, TKH saw a significant negative impact on sales, as projects and tenders at airports and shopping centers were halted due to the effects of COVID-19. TKH anticipated a lower level of investment at customers by significantly reducing operational costs.
Machine Vision – in the first half of the year, a strong organic growth was booked, despite limitations created by lockdowns. In particular, there was an increase in demand for our 3D vision technology for new applications in the consumer electronics industry, which made a significant contribution to growth. The measures taken last year to achieve cost efficiencies through the integration of the 2D vision activities also contributed to higher EBITA and ROS this year.
Other markets - The building & construction market faced limitations in the execution of projects and the COVID-19 measures had an impact on production efficiency and output.
Industrial Solutions encompasses the core technologies connectivity, vision & security and smart manufacturing. TKH develops, produces and delivers specialty cable and plug and play cable systems. TKH's know-how in the automation of production processes and improvements in the reliability of production systems gives the company the differentiating potential it needs to deliver innovative, integrated production systems in a number of specialized industrial sectors, such as tire manufacturing, robot, medical and machine-building industries - turnover share 35.2%
| Key figures | |||
|---|---|---|---|
| (in € mln) |
H1 2020 |
H1 2019 |
Change in % |
| Turnover | 239.0 | 285.6 | -16.3% |
| EBITA | 27.0 | 42.0 | -35.7% |
| ROS | 11.3% | 14.7% |
Turnover in the Industrial Solutions segment fell by 16.3% to € 239.0 million. As a result of lower average raw material prices, turnover was down by 0.2%. Exchange rates had a negative effect of 0.1%. Organically, turnover fell by 16.0%.
EBITA was down 35.7% at € 27.0 million, mainly due to the postponement of the delivery of various projects to customers due to lockdown situations. ROS declined to 11.3% in the first half of 2020, from 14.7% in the first half of 2019.
Tire Building – Turnover was down due to the fact that the completion of various projects was postponed due to lockdowns at customers. The drop in demand from tire manufacturers led to the postponement of investments and thus to a lower order intake. The development of UNIXX (new tire-building platform) is progressing well, but the completion of delivery was delayed due to the temporary closure of the test site of the launching customer.
Care – After the successful delivery of Indivion at the end of 2019, the high-quality medicine dosage and dispensing system, a breakthrough in large-scale roll-out in Indivion technology from the US.
Other markets – Turnover in the industrial sector declined due to a reluctance to invest, particularly among machine manufacturers and in the robot industry. This had a negative impact on TKH's industrial connectivity activities, mainly due to the reduction of inventories.
Macro-economic uncertainties have increased since the outbreak of COVID-19. We expect this to have an impact in the second half of 2020, as it did in the first half of the year. Barring unforeseen circumstances and an escalation in the aforementioned situations, we expect the following developments per business segment for the second half of 2020.
We expect to see some recovery in the demand for fibre optic networks in Europe. TKH's strong market positions in Europe put us in a position to benefit from this recovery. We expect turnover and result to be comparable to the first half of 2020.
Turnover in Marine & Offshore and Tunnel & Infra will be higher than in the first half of the year, driven by a well-filled order book. We expect growth in Machine Vision to level off after a strong first half of the year. On balance, we expect turnover and result to be comparable to the first half of the year.
Turnover in Tire Building will decline due to postponed deliveries of existing contracts and a reluctance to invest among tire manufacturers. The latter will also have an impact on the expected order intake in the second half of the year. We expect a modest recovery in other markets, as the effects of inventory reductions will be more limited. On balance, we expect turnover and result to be lower than in the first half of the year.
The current economic uncertainties have an impact on TKH's activities and we expect this to continue in the second half of 2020. However, partly due to its solid financial position, TKH is optimally positioned to also benefit from the opportunities associated with its numerous innovations.
On balance and barring unforeseen circumstances, for the full year 2020 TKH expects net profit from continued activities before amortization and one-off income and expenses attributable to shareholders of between € 63 million and € 69 million.
Haaksbergen, 11 August 2020
Executive Board
For further information: J.M.A. (Alexander) van der Lof MBA, Chairman Executive Board tel: + 31 (0)53 5732903 Internet www.tkhgroup.com
| 17 November 2020 | Market Update |
|---|---|
| 9 March 2021 | Publication Annual results 2020 |
| 6 May 2021 | General Meeting of Shareholders |
| 17 August 2021 | Publication interim results 2021 |
Technology firm TKH Group NV (TKH) is focused on high-end innovative technologies in high growth markets within three business segments: Telecom, Building and Industrial Solutions.
Through a combination of four core technologies within the three business segments, TKH offers superior solutions that support to increase the efficiency, safety and security of its customers. The technologies are offered together with software to create smart technologies and one-stop-shop solutions with plug-and-play integrated technologies.
TKH operates on a global scale. Its growth is concentrated in Europe, North America and Asia. Employing 5,980 people, TKH achieved a turnover of € 1.5 billion in 2019.
| in thousands of euros | 1st half year 2020 | 1st half year 2019 | ||
|---|---|---|---|---|
| Total turnover | 678,958 | 753,212 | ||
| Raw materials, consumables, trade products and subcontracted work | 343,278 | 395,920 | ||
| Personnel expenses | 188,225 | 191,995 | ||
| Other operating expenses | 59,218 | 65,480 | ||
| Depreciation | 22,886 | 22,253 | ||
| Amortization | 27,958 | 24,148 | ||
| Impairments | 1,537 | 70 | ||
| Total operating expenses | 643,102 | 699,866 | ||
| Operating result | 35,856 | 53,346 | ||
| Financial income | 206 | 445 | ||
| Financial expenses | -4,024 | -4,460 | ||
| Exchange differences | -1,161 | -479 | ||
| Share in result of associates | -2,381 | 215 | ||
| Result from sale of associates | 5,596 | 0 | ||
| Fair value changes of financial liability for earn-out and put options of | ||||
| shareholders of non-controlling interests | 545 | -106 | ||
| Result before tax | 34,637 | 48,961 | ||
| Tax on profit | 8,087 | 11,262 | ||
| Net result for the period from continued operations | 26,550 | 37,699 | ||
| Result after tax for the period from discontinued operations | 0 | 5,150 | ||
| Net result | 26,550 | 42,849 | ||
| Attributable to: | ||||
| Shareholders of the company | 26,544 | 42,812 | ||
| Non-controlling interests | 6 | 37 | ||
| 26,550 | 42,849 | |||
| Earnings per share attributable to shareholders | ||||
| Ordinary earnings per share (in €) | 0.63 | 1.02 | ||
| Diluted earnings per share (in €) | 0.63 | 1.02 | ||
| Earnings per share attributable to shareholders from continued operations |
||||
| Ordinary earnings per share (in €) continued operations | 0.63 | 0.90 | ||
| Diluted earnings per share (in €), continued operations | 0.63 | 0.90 | ||
| Ordinary earnings per share before amortization and one-off income | ||||
| and expenses from continued operations (in €) | 0.86 | 1.09 | ||
| Ordinary earnings per share before amortization from continued | ||||
| operations (in €) | 0.86 | 1.09 |
| in thousands of euros | 1st half year 2020 | 1st half year 2019 |
|---|---|---|
| Net result | 26,550 | 42,849 |
| Items that may be reclassified subsequently to profit or loss (net of tax) |
||
| Currency translation differences | -4,574 | 832 |
| Currency translation differences in other associates | -105 | 50 |
| Effective part of changes in fair value of cash flow hedges (after tax) |
103 | 688 |
| Other comprehensive income (net of tax) | -4,576 | 1,570 |
| Comprehensive income for the period (net of tax) | 21,974 | 44,419 |
| Attributable to: | ||
| Shareholders of the company | 21,989 | 44,364 |
| Non-controlling interests | -15 | 55 |
| Total comprehensive income for the period (net of tax) | 21,974 | 44,419 |
| in thousands of euros | 30-06-2020 | 31-12-2019 | ||
|---|---|---|---|---|
| Assets | ||||
| Non-current assets | ||||
| Intangible non-current assets | 585,260 | 596,404 | ||
| Tangible non-current assets | 224,157 | 230,938 | ||
| Right-of-use assets | 75,772 | 80,752 | ||
| Other associates | 26,035 | 28,635 | ||
| Receivables | 1,930 | 1,966 | ||
| Deferred tax assets | 19,627 | 20,962 | ||
| Total non-current assets | 932,781 | 959,657 | ||
| Current assets | ||||
| Inventories | 254,712 | 238,801 | ||
| Receivables | 189,605 | 176,535 | ||
| Contract assets | 144,210 | 115,692 | ||
| Contract costs | 4,304 | 1,896 | ||
| Current income tax | 1,421 | 1,589 | ||
| Cash and cash equivalents | 86,287 | 78,976 | ||
| Total current assets | 680,539 | 613,489 | ||
| Assets held for sale | 2,956 | 38,775 | ||
| Total assets | 1,616,276 | 1,611,921 | ||
| Equity and liabilities | ||||
| Group Equity | ||||
| Shareholders' equity | 654,182 | 704,516 | ||
| Non-controlling interests | 92 | 304 | ||
| Total group equity | 654,274 | 704,820 | ||
| Non-current liabilities | ||||
| Interest-bearing loans and borrowings | 463,646 | 415,803 | ||
| Deferred tax liabilities | 62,050 | 65,528 | ||
| Retirement benefit obligation | 5,852 | 5,759 | ||
| Financial liabilities | 4,076 | 4,971 | ||
| Provisions | 6,088 | 6,296 | ||
| Total non-current liabilities | 541,712 | 498,357 | ||
| Current liabilities | ||||
| Interest-bearing loans and borrowings | 60,985 | 54,927 | ||
| Trade payables and other payables | 287,160 | 257.367 | ||
| Contract liabilities | 38,192 | 49,187 | ||
| Current income tax liabilities | 8,892 | 11,824 | ||
| Financial liabilities | 3,437 | 3,682 | ||
| Provisions | 21,624 | 19,069 | ||
| Total current liabilities | 420,290 | 396,056 | ||
| Liabilities directly associated with assets held for sale | 0 | 12,688 | ||
| Total equity and liabilities | 1,616,276 | 1,611,921 | ||
In the comparative figures an amount of € 3.1 million has been reclassified from short-term interest-bearing loans and borrowings to trade payables and other payables.
| 1st half | 1st half | |
|---|---|---|
| in thousands of euros | year 2020 | year 2019 |
| Cash flow from operating activities | ||
| Operating result from continued activities | 35,856 | 53,346 |
| Operating result from discontinued activities | 7,189 | |
| Depreciation, amortization and impairment | 52,360 | 48,166 |
| Share and option schemes not resulting in a cash flow | 1,636 | 770 |
| Result on disposals | 21 | -139 |
| Changes in provisions | 2,880 | 1,582 |
| Changes in working capital | -40,223 | -39,032 |
| Cash flow from operations | 52,530 | 71,882 |
| Interest received | 207 | 508 |
| Interest paid Income taxes paid |
-3,491 -11,502 |
-4,837 -11,906 |
| Net cash flow from operating activities (A) | 37,744 | 55,647 |
| Cash flow from investing activities | ||
| Repayments on loans | 36 | 971 |
| Purchases of tangible non-current assets | -12,703 | -17,933 |
| Disposals of tangible non-current assets | 575 | 302 |
| Divestment of subsidiaries | 21,154 | |
| Acquisition of subsidiaries less cash and cash equivalents acquired | -18,362 | |
| Investments in intangible non-current assets | -17,707 | -19,431 |
| Divestments in intangible non-current assets | 21 | 41 |
| Net cash flow from investing activities (B) | -8,624 | -54,412 |
| Cash flow from financing activities | ||
| Dividends paid | -62,655 | -59,120 |
| Settlement of financial liabilities regarding put options of non-controlling interests and earn-out |
-594 | -1,672 |
| Acquisition of non-controlling interests | -10 | |
| Purchased shares for share and option schemes | -12,370 | -12,396 |
| Sold shares for share and option schemes | 1,066 | 5,754 |
| Payment of lease liabilities | -8,801 | -8,422 |
| Proceeds from long-term debts | 50,064 | 95,528 |
| (Repayments)/proceeds from other long-term debts | -20 | -121 |
| Change in borrowings | 9,305 | -22,325 |
| Net cash flow from financing activities (C) | -24,005 | -2,784 |
| Net increase/(decrease) in cash and cash equivalents (A+B+C) | 5,115 | -1,549 |
| Exchange differences | -2,879 | -387 |
| Change in cash and cash equivalents | 2,236 | -1,936 |
| Cash and cash equivalents at 1 January | 76,146 | 60,905 |
| Cash and cash equivalents at 30 June | 78,382 | 58,969 |
| Cash and bank balances as included in the cash flow statement | 78,382 | 58,969 |
| Cash at companies assets held for sale | -3,680 | |
| Cash and bank balances in cash and interest pools | 7,905 | 19,041 |
| Cash and bank balances | 86,287 | 74,330 |
| Total | Non | ||
|---|---|---|---|
| shareholders' | controlling | Total group | |
| in thousands of euros | equity | interests | equity |
| Balance at 1 January 2019 | 646,459 | 1,190 | 647,649 |
| Net result | 42,812 | 37 | 42,849 |
| Total other comprehensive income | 1,552 | 18 | 1,570 |
| Total comprehensive income | 44,364 | 55 | 44,419 |
| Dividends | -58,772 | -58,772 | |
| Dividends to shareholders of non-controlling interests | -348 | -348 | |
| Acquisition of non-controlling interests | -10 | -10 | |
| Share and option schemes | 770 | 770 | |
| Purchased shares for share and option schemes | -12,396 | -12,396 | |
| Sold shares for share and option schemes | 5,754 | 5,754 | |
| Balance at 30 June 2019 | 625,831 | 1,235 | 627,066 |
| Balance at 1 January 2020 | 704,516 | 304 | 704,820 |
| Net result | 26,544 | 6 | 26,550 |
| Total other comprehensive income | -4,555 | -21 | -4,576 |
| Total comprehensive income | 21,989 | -15 | 21,974 |
| Dividends | -62,552 | -62,552 | |
| Dividends to shareholders of non-controlling interests | -103 | -103 | |
| Sold/closed non controlling interest | -197 | -197 | |
| Share and option schemes | 1,636 | 1,636 | |
| Purchased shares for share and option schemes | -12,370 | -12,370 | |
| Sold shares for share and option schemes | 1,066 | 1,066 | |
| Balance at 30 June 2020 | 654,182 | 92 | 654,274 |
The accounting policies for the valuation of assets and liabilities and determination of the result (hereafter 'valuation principles') are the same as the accounting principles applied for the consolidated financial statements 2019, with the exception of the new or amended standards and interpretations described hereafter. Annual accounts have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Section 2: 362 sub 9 of the Dutch Civil Code (Dutch Civil Code).
The interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. It does not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements 2019 of the group.
The preparation of the consolidated interim financial statements requires management to make judgments and estimates and assumptions that affect the application of accounting policies and the reported value of assets and liabilities, and income and expenses. Actual results may differ from these estimates. Next to the impact of COVID-19 mentioned below, the main sources for estimates used by management are the same as those used in preparing the 2019 consolidated financial statements.
COVID-19 has had a negative impact on both TKH Group's turnover and results since the beginning of the outbreak. The lockdowns in France, Italy and the US, among others, had a significant impact in April and May. Following the easing of the measures in those countries in June, opportunities for deliveries have been re-emerging, but are not yet back at normal levels. In China, activity levels have recovered since March and has had only a limited impact.
A large number of measures have been taken to monitor and prevent the effects of the COVID-19 virus, such as:
Isolation of the COVID-19 impact on first half results is difficult, but we believe the following is relevant to understanding the interim financial results:
The number of outstanding (depositary receipts of) shares as per 31 December 2019 amounted to 41,994,865. Due to the exercise of options rights and share schemes, a balance of 328,341 (depositary receipts of) shares were purchased in the first half of 2020. As a result, the number of (depositary receipts of) shares outstanding with third parties as per 30 June 2020 was 41,666,524.
At the General Meeting of Shareholders 2020 the dividend over 2019 was declared at € 1.50 per (depositary receipts of) ordinary share. The dividend on the priority shares was declared at € 0.05 per share. The total amount in dividends paid in the first half of 2020 was € 62,552,207 and this amount was charged to the other reserves (H1 2019: € 58,771,724).
| Telecom Solutions | Building Solutions | Industrial Solutions | Not attributable | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| in thousands of | H1 | H1 | H1 | H1 | H1 | H1 | H1 | H1 | H1 | H1 |
| euros | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
| Total turnover | 95,053 | 102,831 | 344,880 | 364,786 | 239,025 | 285,595 | 0 | 0 | 678,958 | 753,212 |
| EBITA | 12,334 | 16,037 | 36,447 | 29,103 | 26,958 | 41,956 | -6,733 | -9,532 | 69,006 | 77,564 |
| ROS | 13.0% | 15.6% | 10.6% | 8.0% | 11.3% | 14.7% | 10.2% | 10.3% | ||
| One-off expenses | -3,629 | -26 | -3,655 | 0 | ||||||
| Amortization | -560 | -524 | -22,655 | -18,974 | -4,731 | -4,640 | -12 | -10 | -27,958 | -24,148 |
| Impairments | -1,384 | -19 | -153 | -51 | -1,537 | -70 | ||||
| Operating result | 11,774 | 15,513 | 8,779 | 10,110 | 22,048 | 37,265 | -6,745 | -9,542 | 35,856 | 53,346 |
| Total turnover | |||||
|---|---|---|---|---|---|
| in thousands of euros | H1 2020 | H1 2019 | |||
| Vertical markets | |||||
| Fibre Optic Networks | 64,480 | 71,193 | |||
| Parking | 20,064 | 28,251 | |||
| Tunnel & Infra | 66,659 | 66,953 | |||
| Marine & Offshore | 31,763 | 25,958 | |||
| Care | 25,673 | 33,592 | |||
| Machine Vision | 91,376 | 63,792 | |||
| Tire Building Industry | 141,933 | 171,212 | |||
| Other vertical markets | 237,010 | 292,261 | |||
| Total turnover | 678,958 | 753,212 |
The following table shows the expected future revenue with regard to contractual performance obligations that are not (or partially) completed on the balance sheet date:
| in thousands of euros | 30-06-2020 | 31-12-2019 |
|---|---|---|
| Expected to be recognized as revenue within 1 year Expected to be recognized as revenue between 1 and 2 |
382,985 | 394,292 |
| years | 12,102 | 20,333 |
| Expected to be recognized as revenue after 2 years | 4,137 | 8,786 |
| Unsatisfied performance obligations | 399,224 | 423,411 |
The contractual performance obligations as of 31 December 2019 include the in 2020 divested companies for an amount of € 13.7 million. The decrease in the contractual performance obligations mainly occurred in Industrial Solutions, while in Building Solutions there was an increase.
| 1st half | 1st half | |
|---|---|---|
| in thousands of euros (unless stated otherwise) | year 2020 | year 2019 |
| Net result | 26,550 | 42,849 |
| Less: Non-controlling interests | -6 | -37 |
| Net profit attributable to the shareholders | 26,544 | 42,812 |
| Result after tax from discontinued operations | 0 | -5,150 |
| Net profit attributable to the shareholders of the company from continuing | ||
| operations | 26,544 | 37,662 |
| Amortization of intangible non-current assets from acquisitions | 12,741 | 11,135 |
| Taxes on amortization | -3,412 | -3,067 |
| Net profit before amortization from continuing operations attributable to the | ||
| shareholders of the company | 35,873 | 45,730 |
| One-off costs for restructurings and integrations | 3,655 | 0 |
| Result from divestments and purchase price allocations in the result of associates | -3,264 | |
| Impairments | 1,537 | 70 |
| Fair value changes of financial liability for earn-out and put options of shareholders | ||
| of non-controlling interests | -545 | 106 |
| Tax impact on impairments and one-off expenses and benefits | -1,298 | -18 |
| Net profit before amortization and one-off income and expenses attributable | ||
| to the shareholders of the company | 35,958 | 45,888 |
TKH reached an agreement with third parties in November 2019 regarding the conditional takeover of 100% of the shares of the operating company Zhangjiagang Twentsche Cable Co. Ltd. ('ZTC'), in Zhangjiagang (China). ZTC specializes in the production of copper data communication cables. In the 1st half of 2019, the total turnover of ZTC amounted to € 33.8 million with an EBITA of € 2.4 million. ZTC's activities belonged to the business segment Building Solutions. The transaction was completed in January 2020 and resulted in a one-off net profit contribution of € 5.5 million in the first half of 2020. This consists of a result on the sale of € 3.5 million, as well as a release from the legal reserve for translation differences of € 2.0 million.
In December 2019, TKH decided to divest the activities of Cruxin BV, belonging to the business segment Building Solutions. Cruxin's system integration activities have historically had strategic value for TKH in marketing proprietary technologies, but are now competing in too many markets with TKH's customers. In addition, the activities no longer fitted into TKH's risk profile. This resulted in a letter of intent in January 2020. The transaction was completed in April 2020. As a result of the intended divestment and the expected proceeds, an impairment of € 1.9 million was already recognized in 2019. The closing of the transaction in the first half of 2020 had no significant impact on results.
As of 2019, the rental and lease obligations are included in the balance sheet as (discounted) lease obligations in accordance with IFRS 16, except for the lease with a small amount or short term.
The contingent liabilities which are not reflected in the balance sheet, as reported in the consolidated financial statements for 2019, have not essentially changed in the first half 2020.
There have been no events in the past interim period that are material to the understanding of this interim report.
The 2019 annual report describes in detail certain risk categories and risk factors that could have a (negative) impact on TKH's financial position and results. On June 30, 2020, the risk categories and risk factors were re-analyzed and it was concluded that, besides to what has already been stated above regarding COVID-19, they still apply.
This report contains the interim financial report of TKH Group NV. The interim financial report ended 30 June 2020 consists of the condensed consolidated interim financial statements, the interim director's report and Executive Board declaration. The information in this interim financial report is unaudited. The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the consolidated financial statements of TKH for the year ended 31 December 2019.
The Executive Board hereby declares that to the best of their knowledge, the interim financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole, and the interim director's report gives a fair review of the information required pursuant to section 5:25d (8)/(9) of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).
Haaksbergen, 11 August 2020
Executive Board J.M.A. van der Lof MBA, chairman E.D.H. de Lange MBA H.J. Voortman Msc
The figures in the interim financial report have not been audited.
Statements included in this press release that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements. These statements are only predictions and are not guarantees. Actual events or the results of our operations could differ materially from those expressed or implied in the forward-looking statements. Forward-looking statements are typically identified by the use of terms such as "may," "will", "should", "expect", "could", "intend", "plan", "anticipate", "estimate", "believe", "continue", "predict", "potential" or the negative of such terms and other comparable terminology.
The forward-looking statements are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements.
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