euromicron AG pushes ahead massively and successfully with the Agenda 500 - High expenditures again on integration, consolidation and realignment impact earnings in 2013
- Adjusted guidance targets achieved: Total operating performance increases to €328.7 million
- Integration costs of €5.5 million, special effects from project valuations of €4.9 million and order postponements at the production companies and project postponements at the system houses totaling almost €7.9 million result in an EBIT of around €5.5 million
- Good foundation for further development and expansion created: Orders books of €126.5 million, slightly above the previous year's figure of €125.2 million
As planned, euromicron AG is pushing massively ahead with the Group's integration phase ("Agenda 500"), which has a time frame of 2 to 2 years, and paving the way to achieving its ambitious growth targets by 2016. These targets are geared toward growth in sales to around €500 million and a return to an EBIT margin of 8% to 11%.
Against this backdrop, euromicron AG used the year of core integration 2013, as announced, to press ahead intensively with consolidation and realigning the company. So as to prepare the Group for the next major stage in its growth, the initial integration measures commenced in 2012 were transitioned to a structured process and a far higher number of projects were accomplished in 2013. As a consequence, the Group now has more uniform processes, a broader know-how base, more innovative products, an optimized IT landscape, more modern locations and more professional structures than at the start of the integration phase in 2012.
To enable that, a record amount was invested in integration of the company in 2013. In order to realign euromicron and make it ready for the future, extensive investments in reducing and restructuring the workforce were made, just about all IT fields and processes were included in an initial stage, the divisions were reorganized and a raft of cost-cutting measures were carried out. As a result, integration and restructuring costs rose sharply again in 2013, with a total of around €5.5 million being spent on related measures in the year under review, a sum that - as in the previous year - was funded from the company's operating income.
With the integration measures, the Executive Board of euromicron AG intends to create a stable, consolidated and streamlined platform for the planned acquisition and integration of a larger company as of 2015.
In operating business, the mainly politically induced uncertainties as part of the energy debate, modernization of transport networks, future-oriented radio technology for public authorities or broadband expansion, above all for customers from the WAN arena, were reflected in increasingly hesitant and deferred capital spending. Accompanying that, euromicron's system houses increasingly had to cope with project delays and postponements in the course of 2013, which meant a higher cost burden and reduced earnings, whereas its production companies faced postponements in the call-off of deliveries by important regular customers and so lost a large part of their planned income.
Finally, the beginning of December saw a successive pickup in capital spending, such as by Deutsche Telekom in VDSL2 vectoring, which brought about a high level of capacity utilization, but was not sufficient for the company to achieve its customary strong performance of the final quarters of previous years and compensate for the dual effect of project postponements and lower call-offs of deliveries. euromicron AG accordingly adjusted its guidance for the year as whole with its ad-hoc announcement on December 4, 2013.
Total operating performance and consolidated sales
Despite project postponements and lower call-offs of deliveries, euromicron posted stable sales at December 31, 2013, of €329.4 million, around the same level of the previous year, but not enough to compensate for the extra costs for the planned stage of growth in 2013 in terms of earnings. Total operating performance rose slightly to €328.7 million, a year-on-year increase of 1.4%.
Earnings before interest and taxes (EBIT) were €5.5 million after integration costs of around €5.5 million, special effects from project valuation (approximately €4.9 million) and a loss of EBIT totaling some €7.9 million due to order postponements at the production companies and project postponements at the system houses. EBITDA was €14.4 million, giving an EBITDA margin of 4.4% compared with 7.6% the year before. The consolidated net loss for shareholders of euromicron AG in 2013 was € -0.9 million compared with consolidated net income of €8.6 in the previous year. Undiluted earnings per share were € -0.12 versus €1.29 in the previous year.
Order situation at the Group
New orders at the euromicron Group from January 1 to December 31, 2013, were €327.7 million and so at the good level of the previous year (€327.8 million). Order books were €126.5 million, above the previous year's figure of €125.2 million. As a result, euromicron's production companies in particular are embarking on the next fiscal year 2014 with well-filled order books following the postponement of call-of orders in 2013.
Balance sheet structure
The euromicron Group's total assets at December 31, 2013, increased by 15.8% to €328.9 million compared with €283.9 million in the previous year.
The average headcount (excluding trainees) at the euromicron Group in the year under review rose from a total of 1,597 to 1,653. Personnel costs in fiscal year 2013 increased to €99.2 million, mainly as a result of changes in the consolidated companies, costs for reducing and restructuring the workforce at the Group and measures to create formalized structures and Competence Centers. This was countered by initial savings from the integration and restructuring measures in the area of human resources.
The euromicron Group's equity and liquidity was strengthened further as a result of the capital increase in December 2013, which increased equity by €6.8 million, is to be used to fund acquisitions and is a key component in the euromicron Group's overall financing concept. It was reduced in fiscal 2013 by the dividend payout, the overall result in 2013 and the change in the majority interest in equity. As a result, equity at December 31, 2013, was €122.6 million, €3.6 million above the previous year's figure of €119.0 million. The equity ratio was 37.3% (previous year: 41.9%), still at a very stable level given the increase in total assets.
As in past years, euromicron's banks again regarded it as a strong and dependable partner in fiscal year 2013. There is keen interest on the part of the financial institutes to keep on intensifying their commitment at euromicron even despite the temporary negative impact on earnings and balance sheet ratios and to actively accompany the company on its path toward its sales target of €500 million in the coming years. The key financial indicators, which were adjusted due to the integration phase effective December 31, 2013, in agreement with the Group's long-term financing partners, were adhered to.
Share and investor relations
euromicron's share started the 2013 stock market year at a price of €18.74 and moved in line with the overall market in the first two months. In the months subsequent to the announcement that the dividend would be adjusted in March 2013, the price largely fluctuated in a range between €14 to €16. Publication of the solid semi-annual figures in the third quarter was followed by a positive trend, with the share touching €17.74 at one stage. The share's exit from the TecDAX in September 2013 had virtually no effect and its positive performance continued at the start of the fourth quarter. Finally, a downward trend was initiated with the announcement of the adjusted guidance in December 2013, coinciding with a phase of stock market weakness. There was a recovery after the capital increase, when the share stood at €13.86, with the result that at the end of the year it was above the placement price and was listed at €14.35. euromicron's market capitalization at the end of the year was €102.9 million. The volume of shares traded was around 7.4 million, at the level of the previous year.
The Executive Board and Supervisory Board have agreed to retain liquid funds within the company for fiscal 2013, the year with the highest expenditure on integration, restructuring and realignment in the history of the euromicron Group. Given that the planned positive economic effects of the Agenda 500 are not yet reflected in the key ratios, but the burdens can be seen directly in a balance sheet loss for euromicron AG, the Executive Board and Supervisory Board will propose to the General Meeting on May 14, 2014, to refrain from making a dividend payout for 2013. After completion of the integration phase, the Executive Board of euromicron AG aims - as in the years of building the Group - to let all shareholders share in the anticipated success of the company and to resume paying a dividend on the basis of achievement of the original quality of earnings of 8% to 11%.
euromicron AG intends to largely complete the phase of consolidation and restructuring of the company in 2014 and, on this optimized platform, to press ahead with enhancing its structures, processes and financial and human resources. That initially comprises completely accomplishing the Agenda 500 projects that have been initiated and leading them to a successful result or transitioning them to a continuous improvement process. The Executive Board of euromicron AG also plans to round out the company further in terms of technology, geography or resources and expertise by acquiring smaller specialist companies.
"With these long-planned strategic steps in the company's development and the associated integration phases, we will create the basis for our Group's further organic growth, smooth acquisition and integration of a largish company and so achievement of the planned quality of earnings of 8% to 11% on sales of around €500 million in 2016," says the Chairman of the Executive Board of euromicron AG, Dr. Willibald Späth.
The company also reports that 2014 has got off to a very promising start in operational terms - as evidenced by the level of new orders in the first months. Order books at February 2014 still have the same high volume of €125 million. "We are also working vigorously to complete the projects and delivery orders that were postponed in 2013 and have since been placed. We feel sure that, given an increasingly positive climate for investment, we will be able to reflect the progress we have made with the Agenda 500 in our earnings and are aiming in 2014 to grow sales to €340 to €360 million and achieve an EBITDA margin of around 6% to 8%," adds Späth.
euromicron AG (www.euromicron.de) is an all-round solution provider for communications, transport, data and security. euromicron's network infrastructures integrate voice, video and data transport wirelessly, via copper cable and by means of fiber-optic technologies. euromicron builds leading applications, such as security, control, healthcare or surveillance systems, on the basis of these cutting-edge network infrastructures.
Founded on its expertise as a developer and producer of fiber-optic components, euromicron AG is a strongly growing, highly profitable group that is listed on the stock market, has a medium-sized character and focuses on operational growth, integration and further market penetration, internationalization and expansion.