Heidelberg Starts Second Quarter Strong
Tuesday, August 06, 2019
Press release from the issuing company
Heidelberger Druckmaschinen AG (Heidelberg) has embarked on the second quarter of financial year 2019/2020 with a far better order situation, compensating in part for the weak first quarter in Europe in particular. The company is systematically continuing its digital transformation and expanding its innovative digital business models with a view to significantly reducing its exposure to economic fluctuations and increasing the share of recurring business in the medium to long term. Demand for the contract and subscription offerings that are the main focus of this strategy continued to grow in the first quarter of financial year 2019/2020. The medium-term goal is to increase the share of recurring sales – primarily from contract and subscription business – to around one-third of total sales. With customer demand rising, Heidelberg is expanding its subscription portfolio and is now offering additional contract options. At present, customers are offered a fully inclusive package that combines equipment, services, consumables, and software in one usage-based contract that runs over several years. In the future, however, they will also be able to combine and utilize individual components from this offering over a defined period of time and in line with set standards.
Towards the end of the first quarter in particular, the need for further strategic development of the company was highlighted by the increasing reluctance to invest, especially in western Europe, and associated shifts in sales due to the economic slowdown. Quarterly sales, EBITDA excluding restructuring result, and the net result after taxes, for example, were all down on the corresponding figures for the previous year. In mid-July, Heidelberg adapted its outlook for financial year 2019/2020 as a whole to reflect the changed business expectations.
Measures introduced to increase liquidity and safeguard profitability
“The good start to the second quarter means we’re confident of achieving our planned business volume for the financial year. What’s more, the positive impact of the numerous measures we’ve introduced to improve our results and free cash flow will be felt in the second half of the financial year,” said Heidelberg CEO Rainer Hundsdörfer. “In the years ahead, the digital transformation is set to lessen our future exposure to economic fluctuations by increasing the share of recurring business to around one-third of our group sales. We’ve already made significant progress in this respect. Additionally, we are continuously expanding our market share by investing in our core business,” he added.
Operational development in the first quarter affected by economic uncertainty
EBITDA excluding restructuring result amounted to around € 14 million (including an IFRS 16 impact in the region of € 5 million). This, too, was down on the unadjusted figure for the previous year of around € 20 million. EBIT excluding restructuring result totaled € –10 million (same quarter of previous year: € 2 million). The EBITDA margin excluding restructuring result (but including the impact of IFRS 16) was 2.8 percent, following a figure of 3.7 percent for the corresponding quarter of the previous year. The financial result improved from € –16 million in the equivalent quarter of the previous year to € –13 million. The net result after taxes, including income taxes, was € –31 million (previous year:?€ –15 million).
Seasonal increase in net working capital negatively affects free cash flow
€ –45 million). The considerable reduction in the actuarial interest rate for pensions in Germany and the net loss for the quarter were the main reasons for the lower equity of € 295 million at the end of the quarter, which is equivalent to an equity ratio of around 13 percent. Higher financial liabilities on the reporting date were primarily due to the first-time application of IFRS 16 (€ 55 million) and the negative free cash flow. The net financial debt rose accordingly, amounting to € 391 million at the end of the quarter. The leverage on the reporting date for the quarter was 2.1.
“In the short term, our focus is on optimizing the net working capital and on asset management. This will significantly reduce our debt and safeguard both our profitability and our financial stability,” said CFO Dirk Kaliebe.
Outlook for financial year 2019/2020
Image material, the interim report for the first quarter of financial year 2019/2020, and additional information about the company are available in the Press Lounge of Heidelberger Druckmaschinen AG at www.heidelberg.com.
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