Financial Performance, Financial Position and Net Worth

The financial performance of the technotrans Group showed a marked improvement at December 31, 2017 compared with the previous year. It was also substantially influenced by the new additions from the previous year and the impact these had on the generally positive development in business over the whole financial year.

In 2017 the consolidated revenue of technotrans rose in absolute terms by € 53.3 million to € 205.1 million. Overall, technotrans therefore reports revenue growth of 35.1 percent at the balance sheet date. Organic growth, i.e. excluding the revenue contribution of the plastics industry, came to 12.4 percent. 58 percent of consolidated revenue now comes from outside the printing industry (previous year: 45 percent).
Compared with the previous year, business with customers in offset, digital and flexographic printing again developed positively thanks to technotrans’ good market position in the printing industry. As planned, revenue in that area grew by more than 2 percent.
Thanks to the market and revenue shares gained, in all relevant markets technotrans moreover again succeeded in achieving stronger organic growth than those markets themselves in 2017. The biggest gain in revenue in 2017 came from our activities in the laser and machine tool industry, which achieved year-on-year growth of 33 percent, followed by the growth markets with 29 percent growth and plastics industry business, which likewise expanded at a double-digit rate with 11 percent organic revenue growth. Revenue from services in the Technical Documentation area also achieved overall growth of 10 percent.

Because of its customer structure in all submarkets, technotrans traditionally achieves a high proportion of deliveries and revenue in Germany. The 2017 financial year saw the proportion of revenue achieved by the group with German customers climb from 52.7 percent in the previous year to 53.8 percent. The revenue share in the remainder of Europe was unchanged at 23.4 percent (previous year: 23.5 percent). Meanwhile the revenue share in America fell to 11.7 percent in the past financial year, compared with 13.8 percent in 2016. The Asia region brought in 10.9 percent (previous year: 9.9 percent), an increase on 2016. The remaining regions achieved a revenue share of 0.2 percent, representing no change from the previous year’s level.

technotrans' standard business with industrial customers is predominantly based on release orders. The equipping of certain machine models with technotrans products is usually agreed in advance. Here, the time frame between the release order and delivery is rarely more than four to six weeks. Because of these master agreements, information on incoming orders and order backlogs is not particularly meaningful. Individual group companies (such as gwk) also generate revenue from project business.

Gross profit for the group, in other words revenue less cost of sales, came to € 68.2 million (previous year: € 51.2 million). The improvement in gross profit of 33.2 percent compared with the previous year was based above all on the increased revenue volume and the effects of changes to the product mix. The increased costs in proportion to revenue meant the gross margin at year-end remained unchanged at a high level of 33.3 percent. The cost of materials is fully absorbed within the cost of sales. This item rose by around 35 percent in 2017. The cost of purchased materials ratio (cost of materials as a proportion of consolidated revenue) was therefore almost unchanged from the previous year at 38.7 percent.

The operating profit (EBIT) reached € 17.4 million, easily exceeding the prior-year level by 79.2 percent. The EBIT margin of 8.5 percent overall (previous year: 6.4 percent) was slightly ahead of the most recent expectations.

The profit performance for the 2017 financial year is essentially based on the increases in profit already realised over the course of the year thanks to higher revenue, and on improved economies of scale. In addition, the releasing of a provision for litigation costs from previous years to profit or loss in the amount of € 1.0 million had a positive impact on EBIT for the 2017 financial year. Taking into account this non-recurring effect, the adjusted EBIT margin came to 8.0 percent. technotrans thus achieved its goal of an EBIT margin of between 7.8 and 8.2 percent (or EBIT of between € 16 and 17 million) for the 2017 financial year on this adjusted basis, too.

The rise in distribution and administrative expenses in the financial year was much lower than revenue growth. Distribution costs climbed 25.2 percent to € 26.5 million (previous year: € 21.1 million) and general administrative expenses went up merely € 2.4 million to € 18.6 million (previous year: € 16.2 million).
Development costs of € 7.5 million for the 2017 financial year were again higher than in the previous year (€ 5.5 million). technotrans is investing in a large number of development projects focusing on the new markets. There are diverse development activities in the new group companies, too.

In the year under review, the positive balance of other operating income and expenses rose by € 0.4 million to € 1.8 million. Year on year, the increase is attributable in particular to a full year of consolidation of gwk. In addition, the other operating income includes the releasing of a provision for litigation costs to profit and loss, as already mentioned. However there was an opposite effect in 2017 from net exchange rate losses amounting to € 1.0 million due to the high exchange rate fluctuations. This contrasted with the previous year, when there had been barely any exchange rate effect to speak of. No hedging instruments were used to reduce the impact of exchange rate fluctuations on the operating result.

As a result of the consolidation-related growth in the core workforce and further capacity-related recruitment, there was a clear rise in the average number of employees compared with the previous year (+30.6 percent).

Taking into account the effect of moderate wage and salary increases (averaging +3 percent), personnel expenses in the year under review went up in absolute terms from € 52.9 million in the previous year to € 70.6 million. By contrast, the personnel expenses ratio (personnel expenses as a proportion of consolidated revenue) for the technotrans Group saw a slight overall reduction to 34.4 percent (previous year: 34.9 percent).

After deduction of the expense items, this leaves an operating result before depreciation and amortisation (EBITDA) of € 22.7 million. EBITDA rose year on year by € 8.6 million (61.3 percent), pushing up the EBITDA margin to 11.0 percent (previous year: 9.3 percent).

Depreciation and amortisation rose by € 0.9 million to a total of € 5.2 million (previous year: € 4.3 million). Of this, € 4.1 million is attributable to the Technology segment (previous year: € 3.7 million) and € 1.1 million to the Services segment (previous year: € 0.6 million). It essentially results from the group’s general investment activity, mainly comprising replacement investment. Depreciation of assets in connection with purchase price allocation accounts for € 1.6 million (previous year: € 1.6 million). As in the previous year, no write-downs were performed in the year under review.

The financial result was improved slightly in 2017 compared with the previous year. The balance of income and expenses came to € -0.5 million (previous year: € -0.6 million). The financial result in the year under review is in essence the result of interest expenses for the group’s debt financing, which had increased as a result of acquisition-led new borrowing in the previous year.

Because of the substantially improved profit before tax, the tax expense for the past financial year rose to € 4.7 million (previous year: € 1.9 million). This represents an effective tax rate of 27.7 percent (previous year: 20.7 percent). Disregarding the non-cash, tax-related non-recurring effects from the US tax reform approved in December 2017, the effective tax rate for the group would have been 24.3 percent. For the fiscal particularities, please refer to the additional explanations in Section 26 of the Notes to the Consolidated Financial Statements.

The consolidated result after tax (net profit) for the 2017 financial year rose by 69.0 percent and reached € 12.3 million (previous year: € 7.3 million), equivalent to a return on sales of 6.0 percent (previous year: 4.8 percent). Earnings per share outstanding therefore likewise improved by around 61 percent from € 1.09 to € 1.76.

The Technology segment achieved revenue growth of 42.4 percent to € 147.6 million in 2017 (previous year: € 103.6 million). Organically, in other words after elimination of the purchase of gwk, growth in the year under review reached 15.0 percent and therefore again outstripped the growth rates of recent years.

This segment’s share of consolidated revenue climbed to 72 percent (previous year: 68 percent), with a continuing upward trend. As in the previous year, the growth of € 44.0 million was realised in all relevant submarkets of the group. The newest group company gwk contributed € 30.5 million in total to this rise in revenue. The segment again benefited from the organic growth in business in the non-print area. Especially in the laser and machine tool industry, but also in the so-called growth markets, technotrans generated substantial revenue growth averaging 33 percent.

Because of the customer structure, the revenue of the Technology segment is traditionally very strongly focused on Germany. The proportion of revenue generated with German customers of 56.6 percent was virtually at the previous year’s level (previous year: 57.2 percent). Meanwhile the revenue share for the rest of Europe showed another year-on-year rise from 20.7 to 22.0 percent. 2017 saw the segment’s revenue share in the Asia region rise from 10.4 percent in the previous year to 11.9 percent. At 9.3 percent, America’s revenue share in the Technology segment was below the prior-year figure (11.6 percent). Other regions brought in 0.1 percent.

As expected, the Technology segment put in a positive performance over the year and therefore made a big contribution to the earnings performance of the group (EBIT). The result for the segment in 2017 improved out of proportion to revenue growth. As well as a better revenue mix, particularly pro rata cost synergies thanks to the increased volume significantly impacted the segment’s earnings situation in 2017. Overall, earnings before interest and taxes (EBIT) for the Technology segment rose year on year from € 2.9 million to € 8.1 million. The rate of return for the segment at the end of the financial year was 5.5 percent (previous year: 2.8 percent) and therefore easily exceeded the expectations at the start of year.

956 employees belonged to the Technology segment at the end of the year (previous year: 886). As in previous years, the general administrative areas have been spread between the segments pro rata, based on their revenue shares. The increase of 70 employees (+7.9 percent) stems almost exclusively from growth-related capacity expansion at the production locations of the technotrans Group.

The Services segment achieved year-on-year growth of 19.4 percent in the period under review and generated revenue of € 57.5 million (previous year: € 48.2 million). Overall, the Services segment accounted for around 28 percent of consolidated revenue in 2017 (previous year: 32 percent).

Within the segment, the increase was driven both by growing follow-on business in the technology markets and by a year-on-year improvement in the business performance in the Technical Documentation area.
Disregarding the acquisitions, organic revenue growth in the 2017 financial year reached around 7.0 percent, compared with 3.5 percent in the previous year, and was therefore above the rate forecast at the start of the year.

In the Services segment, the regional breakdown in revenue for the 2017 financial year was as follows: Germany 46.6 percent (previous year: 43.0 percent), Rest of Europe 27.1 percent (previous year: 29.4 percent), Asia 8.0 percent (previous year: 8.8 percent) and America 17.8 percent (previous year: 18.4 percent). The other regions brought in 0.5 percent.

Earnings before interest and income taxes for the Services segment rose by 35.5 percent, from € 6.8 million in the previous year to € 9.3 million. With a rate of return for the segment of 16.2 percent (EBIT margin), the previous year’s healthy level (14.2 percent) was therefore bettered. The operating result for the segment is in line with the group management’s expectations and underlined once again just how profitable this area is.

373 employees belonged to the Services segment at the end of the year (previous year: 366). As in previous years, the general administrative areas have been spread between the segments pro rata, based on their revenue shares.

The net worth of the technotrans Group at December 31, 2017 remained very sound, with an equity ratio of 55.7 percent. Organic corporate growth necessitated increased investments in property, plant and equipment in the 2017 financial year, driving up non-current assets in particular. Working capital (inventories and trade receivables) was also up on the previous year.

At December 31, 2017 the balance sheet total showed an increase of 3.2 percent to € 125.3 million (previous year: € 121.5 million).

The rise in non-current assets from € 52.1 million to € 57.8 million results from increased investments in property, plant and equipment, following the addition of two properties. First, land for the planned new construction of the Termotek GmbH production plant at the Baden-Baden location was acquired in summer 2017. Second, € 7.2 million is for the acquisition of the property at gwk’s production location in Meinerzhagen. This capital investment is directly connected to the interest acquired in the previous year. The carrying amount for intangible assets fell slightly from € 8.6 million to € 6.9 million. The impairment test carried out revealed no need for amortisation to goodwill, which is recognised at an unchanged € 23.1 million. Of the investment spending of € 11.5 million, € 9.7 million is attributable to the Technology segment and € 1.8 million to the Services segment.

Working capital (inventories and trade receivables) climbed by 17 percent (€ 7.4 million) over the year to € 50.8 million. Within this, inventories changed only minimally by one million euros. The increased assets in particular reflect the group’s expanded business base as well as reporting-date-related effects. Other current assets showed little year-on-year change at € 1.9 million (previous year: € 2.1 million). As expected, cash and cash equivalents at the 2017 balance sheet date declined to € 14.8 million in particular following the payment for the property purchase in Meinerzhagen (previous year: € 23.9 million).

Within equity and liabilities, there was an absolute increase in equity at December 31, 2017 of 12.7 percent to € 69.8 million (previous year: € 61.9 million). The allocation of € 12.2 million from the net profit for 2017 (previous year: € 7.2 million) substantially increased equity. With an equity ratio of 55.7 percent, group equity continued to make up a high proportion of the balance sheet total, and was therefore also above the target level of 50 percent.

The return on equity, representing net income as a proportion of equity, reached 17.5 percent (previous year: 11.6 percent). Minority interests in equity amounted to € 0.2 million (previous year: € 0.1 million).

At the end of the 2017 financial year, the overall non-current liabilities of € 23.3 million were € 4.5 million down on the previous year (€ 27.8 million). Non-current financial liabilities in particular declined in the year under review, from € 23.0 million to € 19.2 million. At the balance sheet date, technotrans had financial liabilities totalling € 23.0 million (previous year: € 28.1 million). These stem principally from investments in fixed assets, as well as from acquisitions of interests, and are protected in part by land charges. Details of the structure of financial liabilities are provided in the Notes to the Consolidated Financial Statements, under the Notes to the Balance Sheet 11) "Financial Liabilities”.

Current liabilities remained virtually unchanged from the previous year (€ 31.8 million) at € 32.2 million.

Within liabilities, provisions totalled € 11.0 million at the end of 2017, up € 1.2 million on the previous year. The long-term provisions of around € 1.2 million (previous year: € 1.2 million) comprise both personnel-related obligations (pensions) and those Board of Management remuneration components that focus on sustainable corporate performance. The short-term provisions amounting to € 9.8 million (previous year: € 8.6 million) consist of other obligations towards personnel (€ 6.2 million), payments to be made under warranty (€ 1.9 million) and other provisions (€ 1.7 million). A provision for litigation settlements amounting to € 1.0 million could be reversed in the year under review.

technotrans calculates net working capital as current assets less current liabilities. At December 31, 2017 net working capital was € 35.3 million, a decrease of 6.2 percent on the previous year (€ 37.6 million).

Corporate growth could be financed entirely from cash flow from operating activities in 2017. The group’s net debt, calculated as the difference at the reporting date between non-current plus current interest-bearing borrowings and cash and cash equivalents, amounted to € 9.3 million at the end of the year under review (previous year: € 5.3 million). The ratio of net debt to equity (gearing) is 13.3 percent (previous year: 8.5 percent). The ratio of net debt to EBITDA remains unchanged at 0.4. The gearing ratio is therefore still at a very comfortable rating level.

The financial position of the technotrans Group can be considered very solid. The group increased its cash flow from operating activities by a substantial € 8.0 million to € 22.2 million in the 2017 financial year. Free cash flow also improved significantly but was only mildly positive in view of the increased cash outflow for investing activities. Over and above that, the group still enjoyed adequate liquidity reserves from cash and open lines of credit.

The 2017 financial year saw the technotrans Group improve the cash flow from operating activities before working capital changes (cash inflow) by a substantial 56.7 percent to € 22.2 million (previous year: € 14.2 million). The cash flow was influenced positively especially by the operating result before income taxes, depreciation and amortisation (EBITDA).

Financial resources tied up or released by changes in working capital are expressed in the Consolidated Cash Flow Statement for the year under review in particular in the items change in trade receivables and change in liabilities. On balance, these produced a cash outflow of € 8.0 million, which was much higher than in the prior-year period (€ 2.0 million). The cash outflow for interest and taxes paid was € 2.9 million (previous year: € 2.5 million). The cash flow from operating activities (net cash from operating activities) of € 11.4 million nevertheless remained above the prior-year level (previous year: € 9.7 million) in 2017.

Cash payments for investments in fixed assets amounted to € 11.5 million in the 2017 financial year (previous year: € 22.4 million). Of this amount, spending on the two properties came to around € 8.4 million. The net cash employed for the investments mainly comprised maintenance investments of € 3.1 million (previous year: € 1.5 million). All in all, investment spending by the technotrans Group was above the target of € 10.0 million originally forecast for the 2017 financial year. In the previous year, the cash flow from investing activities also contained the cash outflows for the corporate acquisitions amounting to € 20.9 million.

As a result of the increased investing activity, free cash flow remained just positive at € 0.2 million. However this was well up on the prior-year figure (previous year: € -12.6 million). The group consequently achieved its original target of once again generating a positive free cash flow in the 2017 financial year.

The net cash used for financing activities again showed a cash outflow of € -8.9 million for the 2017 financial year (previous year: € 16.6 million cash inflow). The group had outgoings of € 5.1 million for the scheduled repayment of borrowings (loan redemptions) (previous year: € 6.0 million). € 3.8 million was paid out in the dividend distribution to technotrans shareholders (previous year: € 3.1 million).

Cash and cash equivalents at the end of the year amounted to € 14.8 million (previous year: € 23.9 million). The group in addition had available but unused borrowing facilities amounting to € 17.0 million at December 31, 2017. From a capital management perspective the group’s liquidity remains comfortable.technotrans therefore remains in a position to meet its payment obligations from business operations at any time in 2018.