Annual Report 2017

Goals and strategies

Over recent years we have successfully completed the reorganisation of technotrans into a sustainably profitable business. The key moves were the shift in strategy and structures following the global economic crisis (2008-2009) and the focus on new growth areas.

The overriding goal of the technotrans Group is to increase the value of the company in the long term. The corporate strategy is geared towards steadily expanding the current market position as a specialist for liquid technology (fluid management and thermal management). To achieve that goal, technotrans concentrates on its core skills while focusing investment on measures that enable it to expand its product range further and gain a foothold in new application areas. Organic growth is also generated through partnerships in the areas where its core skills are called for. Targeted acquisitions are another driver of growth. technotrans focuses to a very large extent on niche markets where it is possible to achieve a market share in the region of 50 percent or more, taking into account the scale of its own business and the available resources. This is the key to being able to capitalise on economies of scale in offering our customers both technology and prices that are benchmarks. technotrans is well-placed to realise such goals thanks to its clear focus on system partnerships with major industrial clients (OEM) which operate worldwide and expect their suppliers to have a similar organisation.

Our growth potential comes from tapping into new industries and applications, expanding our international customer base and capitalising on cross-selling effects in the various areas of business. Developing new products through technological innovation and providing customer-specific solutions that are based on standard platforms are also part of our strategy.

Increasing customer benefit: Our product portfolio and processes are continually being revised and are evolving in tandem with changing customer requirements. As a systems supplier to the printing industry, technotrans has held a leading position in its product areas for many years. Based on our close ties with the manufacturers of offset as well as digital and flexographic printing presses, along with our unique expertise, we intend to consolidate our role as technology partner in this industry and beyond, and – wherever possible – build on it.

The growth strategy’s implementation is supported by the corporate structure in that the three business units – in which the core skills are concentrated – and also the international sales and service locations are given growth targets to realise.

Given the economy’s digital transformation, it is only logical to revisit the business models of the technotrans Group. As specialists in their niches, the group companies face the challenge of seizing their opportunities promptly so that they can retain or extend their market position and access new markets.

Broadening the business base: By addressing a variety of markets, the group is not as heavily dependent on the business cycles of individual industries. This enables it to absorb fluctuations more easily, giving it greater stability. technotrans will also continue to extend its business base in future. This entails both the further penetration of established markets and entry into new industries and application fields, making use of technotrans’ core skills.
In order to achieve its growth targets, it has been successfully developing and expanding new applications outside the printing industry for a number of years.

Promoting internationalisation: Today, markets today are global – including for SMEs. That obliges a number of companies in the technotrans Group to step up the development of their international activities.

As well as organically accessing new markets, technotrans’ growth strategy involves the acquisition of companies with core skills that specifically complement those present in every area of the group. Acquisitions are fundamentally structured in such a way that they directly deliver increased value added. Wherever possible and advisable, we bind the holders of key expertise to the company in the longer term.

Deepening integration: Across the group, capacities and potential are being integrated to put them to optimum effect. The aim is to create long-term value added in every area of the company. To increase efficiency further, we will advance the projects designed to develop the group and increasingly harmonise processes and structures. technotrans’ strategies include the systematic expansion of shared infrastructures and cross-disciplinary functions, for instance in procurement or the international sales and service network.

Profitable growth will remain the focus of technotrans’ strategic development. The company has set itself the goal of growing faster than the market. By 2020 it aims to increase consolidated revenue to around € 300 million. In pursuit of that goal, the new growth markets of the group in particular have been identified as sources of overproportional revenue growth over the coming years. The growth-oriented measures in addition include acquiring complementary business areas, technologies or products. The Board of Management seeks a steady improvement in the return on sales (EBIT margin).

A sustained ability to distribute dividends and sound financing based on a high equity ratio also feature in the group’s overall goal.

Principles and goals of financial and liquidity management

Based on a comfortable liquidity base, in conjunction with financing commitments by the banks, technotrans is able to invest flexibly at any time. The task of financial management within the technotrans Group is handled centrally by the group parent.

Financial and liquidity management primarily involves managing liquidity, securing borrowed capital and managing interest and foreign currency risks. To a large extent the group constitutes a financial entity and is thus able to optimise its capital procurement and investment opportunities. The overriding goal of technotrans’ financial policy is to assure a balance between growth, return on equity and financing security.
In its financial management, technotrans continues to strive to generate internally both the financial resources required to fund the organic growth of its operations, and the investments this involves. This goal was again achieved in the 2017 financial year.

The most important source of financing remains the cash inflow from operating activities (operating cash flow). The optimisation of working capital releases liquid funds, keeps debt low and thus improves the indicators relating to balance sheet structure (such as equity ratio) and return on investment.

Limiting risks encompasses all financial risks that could threaten technotrans’ continuation as a going concern. technotrans makes use of selected derivative financial instruments exclusively for the hedging of interest rate risks for borrowings incurring interest at variable rates.

technotrans covers its capital requirements from operating cash flow and by raising medium and long-term financing. If required, the company also manages the group’s need for financing via the available short-term credit facilities of technotrans AG, Termotek GmbH, KLH Kältetechnik GmbH and GWK Gesellschaft Wärme Kältetechnik mbH. Bank borrowings amounted to € 23.0 million (previous year: € 28.1 million) at the balance sheet date.
For financing, technotrans uses its long-standing association with several German financial institutions. Stabilising factors in long-term financing include a broadly spread credit volume as well as a balanced repayment structure for alternative financial instruments.

There are no exchange-rate factors affecting external borrowings. Within the group, short-term and long-term lending between the group companies is practised to some degree in order to maintain adequate liquidity locally. Substantial liquidity holdings (cash and cash equivalents) moreover exist in EUR, USD, GBP and AED at the balance sheet date. No instruments for the hedging of foreign currency positions were used beyond the 2017 reporting date.

Off-balance-sheet forms of financing used by technotrans include above all tenancy and operating leases, above all for IT accessories and company vehicles. Future operating lease obligations at December 31, 2017 totalled € 4.6 million (previous year: € 5.6 million).

Capital structure

technotrans' capital structure comprises a sound equity base and a demand-led level of borrowing. With an equity ratio of 55.7 percent at December 31, 2017 (previous year: 51.0 percent) and total borrowing arrangements amounting to € 40.0 million (previous year: € 46.5 million), technotrans has a viable and sustainable financing structure. At the balance sheet date, cash and cash equivalents came to € 14.8 million (previous year: € 23.9 million) and available but unused borrowing facilities amounted to € 17.0 million.

No new financing was raised in the course of 2017.
At December 31, 2017 the maturities of the group’s existing debt financing averaged four years. Short-term credit lines were used only intermittently in the past financial year. At the end of the financial year the average weighted interest rate for borrowing was approx. 1.7 percent (previous year: 1.8 percent). Wherever economically advisable, technotrans supplements financing by operating lease agreements. Other off-balance-sheet financial instruments are of only minor significance. In 2017 there were no restrictions on the availability of the loans provided.

For its financial and liquidity planning, technotrans AG is working on the assumption that it will have adequate liquidity including for business operations in 2018, enabling it to meet its foreseeable payment obligations at all times. Based on a sound equity base and a comfortable liquidity base, in conjunction with financing commitments by the banks, technotrans is able to invest flexibly at any time.
As a listed company, technotrans also has access to capital market instruments.