Operational margin rises sharply and achieves target corridor again at 12.6 percent
In 2010, TAKKT Group returned to the growth path more quickly and successfully than expected. Thanks to the economic upturn and the growth initiatives introduced, almost all Group companies achieved the turnaround and partly generated significant improvements in turnover and results. The positive effects of the restructuring measures initiated in the crisis year of 2009 exceeded expectations. Corporate management anticipates an organic increase in turnover of around four percent and further margin improvement for the current year.
Key facts for 2010
“The success of 2010 was topped in the fourth quarter with a strong finish,” commented CEO Dr Felix A. Zimmermann on the result for the year. “With organic growth in consolidated turnover of around five percent, we even exceeded our last forecast for the financial year by one percentage point. We did not only benefit from the global economic recovery, but also reaped the rewards of our rapid response to the changes in economic conditions in 2009.” This is demonstrated in particular by the disproportionately high improvement in results. Not only the measures taken to improve efficiency, but also the numerous growth initiatives launched had an effect – first and foremost the strengthening of online sales channels. TAKKT has been able to increase the share of turnover induced online from one percent to approximately 19 percent over the last ten years.
In the 2010 financial year, TAKKT Group generated turnover of EUR 801.6 (731.5) million. This corresponds to a year-on-year increase of 9.6 percent. Adjusted for acquisition and currency effects, turnover rose by 4.8 percent.
Unlike the usual pattern in which the gross profit margin develops contrary to the economic trend, the gross profit margin rose further to 42.9 percent, after reaching a high of 42.0 percent in the prior recession year. TAKKT benefited in particular from positive structural effects, such as a higher proportion of warehouse business.
Disproportionate increase in profitability
EBITDA (earnings before interest, taxes, depreciation and amortisation) was reported at EUR 100.6 (68.7) million. At 12.6 (9.4) percent, the EBITDA margin was within TAKKT’s own target corridor of twelve to 15 percent already in the first year after the crisis.
“The economic upturn in 2010 was more dynamic than anticipated. Growth in Germany was a particularly positive surprise. Overall, significantly higher order numbers resulted in an improved utilisation of infrastructure capacity. Advertising efficiency also developed positively. Furthermore, an important reason for the disproportionate rise in profits was the positive effect of the FOCUS restructuring programme started in 2009 worth nine million euros,” explained Dr Florian Funck, CFO. “This is the result of the discontinuation of one-off expenditure for 2009 of some five million euros and the higher than expected sustainable, positive effects on earnings of around four million euros per year.”
Goodwill adjustment at Topdeq
An extraordinary expense was recorded in the 2010 financial year due to goodwill adjustment for the Topdeq activities. The impairment test conducted in the fourth quarter showed that, due to the negative course of business even after the phase-out of the economic crisis, the existing goodwill had to be written down in the amount of EUR 12.9 million. This non-cash item results in a corresponding reduction of all earnings figures below EBITDA. Therefore, earnings before interest and taxes (EBIT) amounted to EUR 68.0 (49.4) million. The EBIT margin rose to 8.5 (6.8) percent.
The TAKKT cash flow – defined as the profit for the period plus depreciation and deferred tax affecting profit – increased to EUR 70.3 (56.1) million. The cash flow margin of 8.8 (7.7) percent of consolidated turnover was thus significantly higher than the previous year.
Excellent growth in fourth quarter
In the fourth quarter, TAKKT Group even exceeded the dynamic growth recorded in the previous quarters and achieved higher growth than expected. Turnover increased from EUR 186.6 million in the previous year to EUR 214.3 million in 2010. Thereby, organic turnover growth was 9.4 percent in the final quarter. EBITDA in Q4 2010 amounted to EUR 24.3 (13.4) million.
Both divisions with satisfactory development
The two divisions TAKKT EUROPE and TAKKT AMERICA within the new Group structure established at the beginning of 2010, reported similar growth figures for the year. However, the business development of the individual groups within the divisions varied.
TAKKT EUROPE started the 2010 financial year with a decline in turnover, but went on to serve as the driving force for the Group during the course of the year. Thanks in part to the strong economic trend in Germany, the Business Equipment Group (BEG) – the largest group in the division – reported the highest growth level in the Group with a double-digit increase in turnover. In terms of operational profitability, the BEG has also set the benchmark with an EBITDA margin above the Group’s target corridor. The Office Equipment Group (OEG) did not benefit from the general economic upswing and reported a further fall in turnover in 2010. Nevertheless, the group for high-quality office equipment is still generating a positive operating result, despite the clear double-digit turnover decline. During the course of the second half-year, an extensive repositioning of the OEG was initiated. The positive effects of this measure will only bear fruit from 2011 onwards. Overall, turnover at TAKKT EUROPE rose by 7.1 percent to EUR 467.1 (436.0) million. This corresponds to a share of 58.3 (59.6) percent of consolidated turnover. At 16.9 (12.6) percent, the EBITDA margin again exceeded TAKKT Group’s long-term target corridor.
The TAKKT AMERICA division increased its turnover to USD 442.8 (411.2) million. This corresponds to a year-on-year improvement of 7.7 percent. Adjusted for the acquisition of Central, turnover grew by 5.4 percent. Converted into the reporting currency euro, turnover for the division came to EUR 334.7 (295.6) million. TAKKT AMERICA therefore generated 41.7 (40.4) percent of consolidated turnover. TAKKT AMERICA continues to benefit from the broad diversification of its customer and product portfolio. The Specialties Group (SPG) posted the strongest improvement with a high single-digit rate of organic growth. Including Central, growth here was even in double-digit figures. Despite the start-up costs for the new Hubert companies in Europe, the operational result of SPG reached the upper end of the target corridor for the Group. The Plant Equipment Group (PEG) achieved a good single-digit increase in turnover thanks to the continued rise in order numbers. As capacity utilisation has still not returned to the envisaged level and the savings generated by the FOCUS programme have not yet taken their full effect in 2010, the EBITDA margin remained at a single-digit level. However, corporate management was satisfied with the development. Although the companies in the Office Equipment Group (OEG) tend towards late-cyclical development, the group recorded a mid-single-digit rise in turnover. With profitability in high single-digit figures, the OEG fared well.
Overall, the EBITDA margin of TAKKT AMERICA was 8.6 (7.1) percent in the year under review.
Outlook for 2011: four percent turnover growth target
For the current year, the TAKKT Management Board is expecting a further positive development. “The current economic indicators suggest a positive outlook, at least for the first six months of 2011. Overall, we are expecting organic growth in turnover of around four percent in 2011,” summarises Zimmermann on the outlook for 2011. On the profit side, the TAKKT Management Board is forecasting a further improvement in operational margins. “Of course, we also remain open to acquisitions, if the right opportunity arises,” Zimmermann concludes.
We invite you to directly address the Management Board with your questions. We will be hosting a conference call for this purpose at 15:00 (CET) on 17 February 2011, during which we will be available for questions. To take part, please dial the following number: +49 69 201744-295 (access code: 779134#).
Press conference on annual financial statements
Further details on the financial statements 2010 and anticipated future business developments will be published at the press conference on the annual financial statements, which will be held in Stuttgart on 24 March 2011.
Short profile of TAKKT AG
TAKKT is the leading B2B direct marketing specialist for business equipment in Europe and North America. The Group is represented with its brands in more than 25 countries. The product range of the TAKKT subsidiaries comprises some 160,000 items for the areas of business and warehouse equipment, classic and design-oriented office furniture and accessories, and supplies for retailers, the food service industry and the hotel market.
TAKKT Group employs some 1,800 staff, has three million customers worldwide and distributes more than 55 million catalogues and mailings per year.
TAKKT AG is listed on the SDAX and was admitted to Deutsche Boerse’s Prime Standard on 01 January 2003
Dr Felix A. Zimmermann, CEO
Tel. +49 711 3465-8201
Dr Florian Funck, CFO
Tel. +49 711 3465-8207
Preliminary IFRS figures for TAKKT Group for the 2010 financial year
(in EUR million)