Speech of Dr Felix A. Zimmermann
Board Member for Finance and Controlling
Financial Statements Press Conference of TAKKT AG on 14 April 2000 in Stuttgart
Only the spoken word applies.
Ladies and Gentlemen,
Let me also start with a decisive sentence:
It was a very good financial year for TAKKT AG
Lower tax rate as a result of the spin-off
In spite of the expenses associated with the spin-off and the initial public offering, we were able to improve profit after tax by 8.1 per cent. This is due to the reduction in the tax rate from 49 to 37 per cent.
In part, this is a result of the spin-off.
A few words of explanation:
The spin-off of the Mail Order Division of GEHE AG to TAKKT AG naturally had an effect on our balance sheet structure. The necessary inter-company transfers led to the disclosure of hidden reserves in foreign subsidiaries. At the spin-off date, these hidden reserves were set off against the transferred shareholders' equity in order to continue the previous valuation of assets and liabilities.
That applies to the foreign subsidiary companies.
For the domestic companies, on the other hand, the current business operations were sold. Tax regulations made it necessary to disclose previously hidden reserves in the respective companies' financial statements of the domestic companies. Goodwill, which thereby increased by Euro 109.5 million to Euro 168 million, will be amortised over a 15-year period, effecting profits. This led to a lower taxable domestic income and a lower income tax burden for TAKKT AG.. Spin-off related depreciation was thus a major reason why TAKKT AG was able to reduce its tax rate to 37 per cent.
Pro-forma financial statements
To give you, as investors and analysts, a better insight into the asset, financial and earnings situation of the Group, the TAKKT Group has voluntarily prepared a pro-forma consolidated balance sheet at 31 December 1998 and pro-forma consolidated profit and loss accounts for the periods from 1 January to 31 December 1998 and 1 January to 31 December 1999, respectively.
On this basis the following can be seen:
In spite of the weaker economic climate in several European countries, and specifically in Germany, the TAKKT group - due to its carefully designed product portfolio, its balanced customer structure and its international position - was able to continue its growth trend unhindered in the year being reported. Compared to the previous year, group turnover rose by 16.4% to Euro 627.6 million. These strong gains were achieved with the help of both strong external and internal growth. This becomes clear when we consider the group turnover without acquisitions, which rose by 7.8 per cent to Euro 556.5 million.
Four-year comparison of turnover
If we compare the turnover for 1999 with the turnover for the previous years, we can see one thing quite clearly:
The strong growth has a continuity. Turnover in 1996 was Euro 394.1 million (plus 2.9 per cent). In 1997 it rose to Euro 469.5 million (plus 19.1 per cent) and in 1998 to Euro 539.2 million (plus 14.8 per cent).
Regional distribution
The sales revenue was distributed almost equally between
- Germany (32.0 per cent),
- The rest of Europe (31.7 per cent)
- And North America (36.3 per cent).
Distribution of turnover among TAKKT subsidiaries
Group turnover was distributed as follows among the individual business divisions:
- KAISER + KRAFT EUROPA: 52.0 per cent
- Topdeq: 11.7 per cent
- K + K America: 36.3 per cent
Results
The dynamic turnover performance of the Group was reflected in very good results. EBITDA improved by 8.3 per cent to Euro 70.5 million. Without the extraordinary expenses - for the initial public offering -EBITDA would have come to Euro 72.5 million, which would have been an increase of 11.4 per cent.
Four-year EBITDA comparison
Good results have become a tradition at TAKKT: Over the last four years we have continuously increased EBITDA - in step with the increases in turnover.
1996:
Euro 44.3 million (ratio: 11.2 per cent)
1997:
Euro 52.0 million (ratio: 11.1 per cent)
1998:
Euro 65.1 million (ratio: 12.1 per cent)
1999:
Euro 72.5 million (ratio: 11.6 per cent, before extraordinary item)
Charges against profits
The spin-off did not affect the operating profitability of the company. But in the second half of 1999, the results are reduced for the first time by the amortisation of disclosed hidden reserves amounting to Euro 4.3 million. Although this had no effect on liquidity, it did affect EBIT.
Four-year EBIT comparison
EBIT developed as follows:
1996: Euro 39.5 million (ratio: 10.0 per cent)
1997: Euro 46.2 million (ratio: 9.8 per cent)
1998: Euro 58.8 million (ratio: 10.9 per cent)
1999: Euro 58.5 million (ratio: 9.3 per cent, before extraordinary item)
Due to the increased volume of finance resulting from the spin-off, an interest expense of about Euro 2.5 million was incurred in the second half of 1999. This in turn, affected pre-tax profits.
Four-year comparison of pre-tax profits
Due to the spin-off, the profit before tax and extraordinary items at the end of the year amounted to Euro 52.5 million (minus 9.0 per cent).
1996:
Euro 38.9 million (ratio 9.9 per cent)
1997:
Euro 45.5 million (ratio 9.7 per cent)
1998:
Euro 57.8 million (ration 10.7 per cent)
1999:
Euro 52.5 million (ratio 8.4 per cent, before extraordinary item)
Four-year comparison of after-tax profits
Due to the lower tax rate, which was explained above, the profit after tax for the financial year rose from Euro 29.5 million to Euro 31.9 million, (plus 8.1 per cent). The earnings per share amounted to 44 cents.
1996:
Euro 20.7 million (ratio: 5.3 per cent)
1997:
Euro 25.1 million (ratio: 5.3 per cent)
1998:
Euro 29.5 million (ratio: 5.5 per cent)
1999:
Euro 31.9 million (ratio: 5.1 per cent)
Let us consider the individual segments.
1999 was the first financial year in which TAKKT AG carried out voluntary segment reporting. The results of the individual groups were as follows:
KAISER + KRAFT EUROPA
As in the previous years the largest turnover, amounting to Euro 326.5 million (an increase of 4.3 per cent), was recorded by KAISER + KRAFT EUROPA [comprising the KAISER + KRAFT, Gaerner and Gerdmans sub-divisions]. Excluding the acquisition of Gerdmans, turnover was Euro 302.4 million (plus 1.6 per cent). EBITDA in 1999 was Euro 43.6 million, an increase of 8.2 per cent.
The development of this business division was uneven: growth was above average in France, Switzerland, Spain and Hungary while there were slight declines stemming from the economic climate in Poland, the Czech Republic and the UK. The new commitment in Portugal - where we have been present with a Portuguese catalogue since the middle of 1999 - showed initial success.
Topdeq
Topdeq has developed very well. In the reporting year the company had a turnover of Euro 73.1 million, an increase of 16.0% over the previous year. This was a remarkable achievement, and we see no reason to assume that it was influenced by the economic climate. EBITDA also rose by 12 per cent to Euro 9.3 million, and was thus significantly higher than in the previous year.
K + K America
Boosted by a strong US economy, K + K America [comprising the companies C&H Distributors, Avenue Industrial Supply and Conney Safety Products (fully consolidated for the first time)], had above-average growth rates.
While turnover was Euro 163.2 million in 1998, it soared by 39.7 per cent to Euro 228.0 million in 1999. After eliminating the effects of exchange rate changes, the companies' turnover on a dollar basis exceeded that of the previous year by 27.3 per cent. Excluding the acquisition, K + K America improved by 16.2% to Euro 181.0 million. This trend was also apparent in EBITDA. In the reporting year, this key figure was Euro 23.2 million, an increase of 40.5 per cent.
Balance sheet structure
Overall, the balance sheet total increased from Euro 235.7 million to Euro 370.9 million. This includes fixed assets of Euro 237.3 million (previous year: Euro 123.9 million). Current assets amount to Euro 130.4 million (previous year: Euro 110.0 million). Liabilities increased by Euro 107.0 million to Euro 242.2 million.
Taking into account the disclosed hidden reserves and the equity of TAKKT AG, the financing volume has risen to Euro 220 million. With an equity ratio of over 25 per cent, TAKKT has a sound financial structure even after the spin-off.
Cash flow
The company's earning power has always been strong. In the reporting year, the cash flow after tax and amortisation was Euro 45.8 million; 27.6 per cent more than in the previous year. The cash flow per share in 1999 amounted to 63 cents.
Capital expenditure
A glance at the capital expenditures shows that TAKKT AG invested Euro 121.1 million in the reporting year. Due to the spin-off, Euro 117.0 million of this was for domestic goodwill and tangible assets. Investments in replacements and expansion of capacity came to Euro 4.1 million. The main emphasis of these investments was in the area of information technology. Investments were also made in modernising the working conditions for our employees.
Personnel
The increased business volumes have led to the creation of new jobs at the TAKKT Group in the reporting year. Overall, the number of personnel rose by 12.6 per cent. In 1999, the Group thus had an average of 1,497 employees (full-time equivalents) compared with 1,330 in 1998.
KAISER + KRAFT EUROPA created extra jobs, especially in the area of e-commerce. On average, KAISER + KRAFT EUROPA increased its personnel by 1.1% to 801 employees. Both Topdeq and K + K America also took advantage of the excellent business climate to create new jobs. They increased their workforce respectively by 12.7 per cent to 169 and by 32.7 per cent to 515 full-time employees. The management holding company TAKKT AG itself employed 24 employees at 31.12.1999.
Ladies and Gentlemen,
As you see, 1999 was a very good financial year for TAKKT AG. We are proud of this success, although the spin-off and the initial public offering were great challenges, which we were glad to face.
TAKKT AG will continue to grow dynamically in the future. The figures for the first quarter of 2000, which Mr Gayer has presented to you, prove this.
We want the Group's market penetration throughout the world to increase noticeably. Systematic acquisitions, both in the core markets and in countries that are not yet actively served, play an important role in these considerations in addition to organic growth.
It cannot be repeated too often that investment in e-commerce has a high strategic importance in this context and is therefore systematically pursued by us.
For us, e-commerce is the next logical step in the development of our business. We are fully equipped to face the challenges of the future.
Contact:
Georg Gayer
Tel.: (49) 711 / 5001-239
Dr. Felix A. Zimmermann
Tel.:(49) 711 / 5001-861