Speech of Dr Felix A. Zimmermann
Board Member for Finance and Controlling
Financial Statements Press Conference of TAKKT AG on 23 March 2001 in Stuttgart
Only the spoken word applies.
Ladies and Gentlemen,
Welcome. I am pleased to report that TAKKT once again had an excellent year.
Let me begin by reiterating what Mr. Gayer has just said: We continued to expand the group by establishing important new companies, acquiring one company and investing in e-commerce. We succeeded nevertheless in maintaining strong revenue and cash flow figures.
Economy, Year 2000
But first a short overview of the economic situation at large in the past year from our point of view.
The year was characterised by strong growth until the autumn. TAKKT's most important markets, Europe and North America, developed very well. The United States were the engine of growth for the whole world until September 2000, with much higher growth rates than Europe. The economic stimulus provided by the United States, coupled with a strong dollar and thus considerable opportunities in the export market, encouraged growth in Europe. TAKKT benefited from this scenario.
Economy, fourth Quarter
The expansion in the United States slowed down considerably toward the end of the year. This led to a significant cooling off of the world economy, even though growth remained relatively strong in Europe.
We succeeded in achieving excellent results in the fourth quarter. We posted excellent growth rates for the entire year that surpassed our projections.
In the year under review we profited once again from the possibilities of the replicable systems business and with that, we built the basis for future growth.
The intensification of our advertising measures also had a positive effect, helping us to gain new market share in both established and new markets.
Group turnover
Compared to the previous year, group turnover increased by 21.5% to EUR 762.8 million. Adjusted for currency translation differences and the acquisition of Hubert, organic growth was 11.4%. That was the best rate of organic growth the TAKKT group – previously KAISER + KRAFT – ever achieved. These figures show that over the past five years our organic rate of growth was 12.75% per year, excluding currency changes. The effective growth rate repeats the group's past development. We expanded by 19.1% to 469,5 EUR million in 1997, 14.8% to EUR 539,2 million in 1998 and 16.4% to EUR 627,6 million in 1999.
Regional distribution of turnover
Turnover by region is as follows. Germany, our home market, contributed 28.6% to overall turnover, the remainder of Europe 30.9% and North America 40.5%. The last figure is marked by the acquisition of Hubert, which allowed us to significantly expand our activities in the United States.
Turnover breakdown by division
All our divisions, KAISER + KRAFT EUROPA, Topdeq and K + K America participated in the group's growth. The turnover figures for the individual divisions are as follows:
KAISER + KRAFT EUROPA: 48.0%
Topdeq: 11.5%
K + K America: 40.5%
Results
The TAKKT group not only grew in 2000, it also maintained the high quality of its results as in previous years.
Gross margin
The TAKKT group succeeded in maintaining a stable gross profit margin at a very high level. Our strong market position allowed us to hold off major purchasing price increases due to rising raw material prices. Our slight price increases were fully accepted by the market, which took into account price developments in the economy as a whole.
EBITDA
EBITDA (the result before interest, taxes, depreciation and amortisation) improved by 24.3% to EUR 87,6 (70,5) million. EBITDA grew more strongly than turnover because of the strong results of all group divisions and the excellent fourth quarter.
That's an excellent achievement, given the costs of establishing the new companies (start-up and advertising costs, both of which affected the profit and loss account), the expenses for mailing our first catalogue in Mexico as well as our investment in e-commerce. We clearly surpassed our goal of reaching a margin of 11%.
The EBITDA of the past four years proves the enormous jump in the year under review:
1996: EUR 44.3 million (margin: 11.2 %)
1997: EUR 52.0 million (margin: 11.1 %)
1998: EUR 65.1 million (margin: 12.1 %)
1999: EUR 70.5 million (margin: 11.2 %)
2000: EUR 87.6 million (margin: 11.5 %)
EBITDA Margin
At 11.5%, the EBITDA margin remained stable relative to the previous year. The figures were adjusted by EUR 2.0 million, the cost of going public in 1999. Excluding this, the EBITDA margin rose from 11.2% to 11.5%.
Spin-off and acquisition of Hubert
Contrary to the EBITDA, EBIT and the profits for the year cannot be readily compared with previous years' figures.
The spin-off, which occurred in mid-1999, continues to affect both the EBIT and the profits in the year under review. In 2000, amortisation of goodwill arising on the spin-off and interest expenses related to the financing of the spin-off have affected the entire year. It is therefore difficult to present a reasonable comparison of these two key figures with the results of previous years.
The comparability of the figures is further distorted by the acquisition of Hubert, because every comparison must take into account both interest and depreciation (as of 16 October 2000).
EBIT
Amortisation of goodwill in connection with the spin-off totalled EUR 7.3 (3.6) million. Goodwill of Hubert was amortised in the amount of EUR 2.0 million. This improved the result before taxes by only 17.0% to EUR 66.1 (56.5) million.
EBIT Margin
The EBIT margin fell slightly in the year under review from 9.0% to 8.7%.
A chart of the EBIT development in the past years would give the following picture, in spite of the lack of comparability:
1996: EUR 39.5 million (margin: 10.0%)
1997: EUR 46.2 million (margin: 9.8%)
1998: EUR 58.8 million (margin: 10.9%)
1999: EUR 56.5 million (margin: 9.0%)
2000: EUR 66.1 million (margin: 8.7%)
Profit before tax
As with the goodwill amortisation, interest expense relating to the spin-off affected the entire year under review. We also have to account for the interest expense stemming from the financing required for the acquisition of Hubert. All of this led to an additional interest expense of EUR 9.2 million, which affects comparability with the result before tax in the prior year.
Nevertheless profit before tax rose by 6.5% to EUR 53.8 million, despite the additional expenses.
Once again the figures for the previous years, in spite of the absence of comparability:
1996: EUR 38.9 million (margin 9.9%)
1997: EUR 45.5 million (margin: 9.7%)
1998: EUR 57.8 million (margin: 10.7%)
1999: EUR 52.5 million (margin: 8.0%)
2000: EUR 53.8 million (margin: 7.1%)
Profit after tax
Compared to the previous year, profit after tax in the year under review rose by 5.2% to EUR 33.6 million. We succeeded nevertheless in maintaining the tax rate at 37.6%, i.e. a rate that was lower than the one paid in previous years.
1996: EUR 20.7 million
1997: EUR 25.1 million
1998: EUR 29.5 million
1999: EUR 31.9 million
2000: EUR 33.6 million
Let us know examine the group divisions individually:
Turnover and EBITDA, KAISER + KRAFT EUROPA
As in the previous years, at 48% KAISER + KRAFT EUROPA - which consists of KAISER + KRAFT, Gaerner, Gerdmans and KWESTO - contributed most to group turnover. Turnover rose to EUR 366.4 (326.5) million, an increase of 12.2% relative to the previous year.
The EBITDA of this division, the strongest within the TAKKT group, rose from EUR 43.6 to 52.3 million.
The KAISER + KRAFT companies in Germany, Switzerland, Spain and France all posted above-average growth. The companies in Poland and Norway, however, did not perform as well as expected.
Turnover and EBITDA, Topdeq
The figures for Topdeq: Topdeq once again achieved very good growth rates. Turnover rose by 19.2% to EUR 87.1 (73.1) million. This made Topdeq, the TAKKT division specialising in designer office furniture and accessories, the leading division in terms of turnover growth within the group. The Topdeq companies in Germany, the Netherlands, Switzerland and France contributed evenly to this result. Business in Germany was characterised by the company's 10th anniversary. We benefited from this event, especially in the first quarter, by using it to promote the company and thus to boost turnover.
EBITDA fell from EUR 9.3 to 8.4 million. This resulted from planned start-up costs relating to the launch of Topdeq France as well as the start-up costs required for establishing Topdeq USA.
We are highly satisfied with the development of Topdeq France. This company was newly established at the beginning of 2000 and contributed to the continued growth of Topdeq as a whole right from the start.
Turnover and EBITDA, K + K America
K + K America was very successful in the year under review, as in previous years. This should not come as a surprise, given the excellent development of the U.S. economy until the third quarter of 2000. Turnover rose to 285.6 million dollars - an increase of 17.5%. This trend also makes itself felt in the EBITDA. It rose to EUR 33.9 million in the year under review, compared to EUR 23.2 million in the previous year.
At 35.6%, the growth rates in Euros are even better. C&H Distributors, Avenue Industrial Supply, Conney Safety Products as well as Hubert, the newly acquired company, thus boosted revenue in the year under review to EUR 309.3 (228.0) million. Excluding the acquisition of Hubert, turnover at K + K America rose by 26.5% to EUR 288.5 million. Hubert has been a part of the TAKKT group since 16 October 2000 and is included in the consolidated group statements.
Consolidated balance sheet
The balance sheet per 31 December 2000 is strongly affected by the acquisition of Hubert. Total assets rose from EUR 370.9 million to EUR 569.3 million. This relates to fixed assets in the amount of EUR 386.6 (273.3) million. Current assets are EUR 178.8 (130.5) million. Equity rose to EUR 128.1 (99.1) million. The equity ratio thus is 22.5% (26.7%). Liabilities increased from EUR 242.2 million to EUR 408.5 million. The ratio of debt to total assets thus changed accordingly to 71.8% (65.3%).
Earnings per share
In the year under review, earnings per share rose from 44 cents to 46 cents. As previously stated by Mr Gayer, we will propose a dividend payment of 10 cents to our shareholders at the annual general meeting. This equals a dividend ratio of 21.3%. The gross dividend, which includes the tax credit, will be 14 cents.
Cash flow
TAKKT remains strong in terms of revenues and cash flow. In the year under review, cash flow increased by 20.3% to EUR 55.1 (45.8) million. TAKKT thus has sufficient liquidity to finance further growth projects.
Capital investment
The investment of TAKKT AG in the year under review amounted to EUR 168.9 million. We focused on three major areas:
The largest "chunk" was related to expanding the business by acquiring Hubert in October 2000.
Secondly, we improved services by expanding the mail-order centre of KAISER + KRAFT EUROPA in Kamp-Lintfort. TAKKT is investing roughly EUR 17 million into this project, which is conceived as a leasing object. The construction work is proceeding exactly according to plan.
Thirdly, we also invested in optimising our processes. For us, this means investing primarily in our e-commerce capabilities.
Personnel
We also benefited form the positive development of business to expand our personnel capacity, even though we continued to modernise and to automate work processes. However, the rising business volume resulted in the creation of 150 new jobs. An additional 302 employees joined the TAKKT group in connection with the acquisition of Hubert.
Overall, the TAKKT group had 2,069 employees in the year under review – 452 more than in the previous year. As of the balance sheet date, the group had 1,931 (1,546) employees (full-time equivalents).
Outlook
Let us provide a brief overview of 2001. Both turnover and cash flow will continue to grow in the current year, among other things due to large investments, the establishment of new companies and the acquisition of Hubert last year.
We always remain focused on our diversified structure: our broad product range, our international orientation and of course our customers. They have always been the guarantors of our future, even when the going gets tough. That won't change.
Our core message is: TAKKT continues to grow.
Thank you for your interest. We look forward to the discussion with you.
Contact:
Georg Gayer
Tel.: (49) 711 / 5001-239
Dr. Felix A. Zimmermann
Tel.:(49) 711 / 5001-861