TAKKT Group feels effects of weakening economy - Acquisitions enable growth course to continue

TAKKT AG / Key word(s): Half Year Results

31.07.2012 / 07:30


TAKKT Group feels effects of weakening economy
Acquisitions enable growth course to continue

Stuttgart, Germany, 31 July 2012. TAKKT Group benefited from the regional diversification of its business activities and its acquisition strategy in the first half-year of 2012. While turnover in Europe fell as a result of the difficult economic environment, the Group recorded significant growth in America. In the first six months of the year, consolidated turnover went up by 6.2 percent. However, adjusted for acquisition and currency effects, there was a slight decrease of 0.3 percent. Based on the development of early economic indicators, the Management Board is now predicting a slight organic reduction in turnover for 2012 overall within the context of the three scenarios outlined at the beginning of the year. The Group's most recent acquisitions - the US direct marketing company for display articles GPA and the B2B direct marketing company for packaging solutions Ratioform - will enable the Group to increase its annual turnover in absolute terms and continue its growth course. The acquisition of these two companies has also allowed TAKKT to successfully expand its product range and at the same time further diversify its portfolio on both sides of the Atlantic. Including the two acquisitions and based on current economic data, the Management Board is forecasting an increase in turnover adjusted for currency between six and eight percent and an EBITDA margin between 13 and 14 percent.

Significant events in the first half-year of 2012

- Turnover increase in reporting currency of euros of 6.2 percent

- Acquisition and currency-adjusted fall in turnover of 0.3 percent

- EBITDA margin decreases to 15.7 (2011: 16.2) percent

- Earnings per share rise to EUR 0.58 (0.57)

- Total dividend of EUR 0.85 per share paid for the 2011 financial year

- US business as well as acquisitions there and in Germany enable further growth despite economic weakness in Europe

In the first six months of 2012, TAKKT Group generated consolidated turnover of EUR 443.5 (417.6) million, representing a rise of 6.2 percent. Adjusted for acquisition and currency effects, turnover was down slightly by 0.3 percent. The organic decrease in turnover was essentially due to the lower number of orders - the average order value remained almost unchanged in comparison with the previous year's period. 'The Group's performance is in line with our expectations', said CEO Dr Felix A. Zimmermann. 'We had anticipated an economic slowdown. Up to now, we benefited from a considerably stronger economic situation in North America. Although our business in North America grew in the second quarter, there were signs that the economy was weakening there too, with the result that the Group recorded an organic drop in turnover of 2.8 percent between April and June.'

The gross profit margin decreased to 42.9 (43.5) percent in the first half-year. This was in particular due to different shares of consolidated turnover generated by the various regions, business units or products respectively compared with the same period in the previous year. In the first six months of the financial year, the EBITDA (earnings before interest, taxes, depreciation and amortisation) rose to EUR 69.7 (67.8) million, which was a disproportional increase compared with turnover growth in the reporting currency. The EBITDA margin fell to 15.7 (16.2) percent.

TAKKT's cash flow - defined as the profit for the period plus depreciation, goodwill impairment and deferred tax affecting profit- amounted to EUR 50.8 (49.4) million in the first half-year of 2012, thereby remaining at a high level. This corresponds to a cash flow margin of 11.5 (11.8) percent.

TAKKT EUROPE maintains earnings level
The difficult economic environment already evident in the first quarter for the TAKKT EUROPE division deteriorated in the second quarter and led to a further drop in turnover. All in all, TAKKT EUROPE generated turnover of EUR 245.4 (254.5) million in the first six months of 2012 - a decrease of 3.6 percent. This means that TAKKT EUROPE accounted for 55.3 (60.9) percent of consolidated turnover. Adjusted for currency effects, the drop was 4.4 percent. The main reason was a lower number of orders - the average order value was slightly down.

In terms of the two groups within TAKKT EUROPE, the Business Equipment Group (BEG) recorded a slight drop in turnover. At the same time, there was a considerable difference in the regional performance - contrary to the overall trend, Asia performed well, while results in southern Europe were unsatisfactory, as expected. The Office Equipment Group (OEG) reported a fall in turnover in the low double-digit percentage range. Due to the change in marketing strategy, order numbers at Topdeq continue to decline. However, the average order value is rising.

Despite the decrease in turnover, TAKKT EUROPE's operating result remained at a very high level in the first half of the year. The division generated an EBITDA of EUR 53.6 (57.2) million, resulting in an EBITDA margin of 21.8 (22.5) percent. The OEG also recorded a positive EBITDA alongside lower turnover.

TAKKT AMERICA: Sharp increase in turnover following GPA takeover
With effect from 01 April 2012, the TAKKT Group company K+K America Corporation acquired the company GPA, headquartered in Rhode Island, USA. The acquisition of the B2B direct marketing company for display articles will enable TAKKT to strengthen its US portfolio. The new company became part of TAKKT AMERICA's Specialties Group (SPG).

The TAKKT AMERICA division consists of the Plant Equipment Group (PEG), the Specialties Group (SPG) and the Office Equipment Group (OEG). The division generated a turnover of EUR 198.2 (163.2) million in the first six months. This corresponds to a growth of 21.4 percent. The division contributed 44.7 (39.1) percent to consolidated turnover. Adjusted for currency effects, the increase was 12.7 percent. Adjusted further for the acquisition of GPA, the division's turnover grew organically by 6.0 percent. This development was due to both the higher average order value in US dollars and a rise in order numbers.

EBITDA at TAKKT AMERICA came to EUR 20.9 (15.6) million in the first six months. This corresponds to an EBITDA margin of 10.5 (9.6) percent. Better utilisation of the direct marketing infrastructure had a positive effect on earnings. Meanwhile, scheduled start-up losses at the European Hubert companies, as well as at IndustrialSupplies.com and cateringplanet.com had a negative impact.

Growth course continues as a result of acquisitions
Following the successful takeover of GPA, the US direct marketing company for display articles, at the beginning of the second quarter, TAKKT Group continued its expansion course at the end of the second quarter with a further acquisition: With effect from 01 July 2012, the Group acquired Ratioform Holding GmbH, headquartered in Pliening near Munich. In 2011, the Ratioform Group generated pro forma turnover of EUR 83 million and a pro forma EBITDA of EUR 22.6 million. Ratioform is the leading B2B direct marketing company for transport packaging in Germany, where 75 percent of its turnover is generated. It also operates in five other European countries. The Ratioform Group comprises six companies in total. Its product range is sold to B2B customers from various different sectors using the multi-channel approach. 'With this acquisition, we are sustainably diversifying TAKKT Group's portfolio and we are doing this in an extremely attractive growth segment of B2B direct marketing. A key growth driver behind the rising demand for transport packaging is the increasing importance of online trading, which offers Ratioform excellent prospects for development', commented CFO Dr Claude Tomaszewski.

A purchase price of around EUR 210 million on a debt free basis was agreed on for the takeover of Ratioform. Besides this, an additional contingent amount of up to EUR four million will be payable at the start of 2016 if certain turnover and margin targets are met. TAKKT is financing the acquisition from acquisition loans committed at short notice and long-term credit lines already in place.

In addition to an unchanged ordinary dividend of EUR 0.32 per share, the shareholders voted in favour of paying out a special dividend of EUR 0.53 per share at the Annual General Meeting of TAKKT AG, held on 08 May 2012 in Ludwigsburg. Overall, TAKKT paid out 84.5 percent of the profit for the period to shareholders and has thus remained true to its continuous dividend policy. Even after the payout and the successful consolidation of the two acquisitions, TAKKT Group will continue to have a very solid balance sheet structure, with an equity ratio of more than 30 percent.

Outlook - economic indicators point to more cautious scenario
In light of deteriorating early indicators for economic developments in Europe and North America, the TAKKT Management Board has specified its turnover and earnings forecasts for the current financial year. The more cautious of the three scenarios outlined at the start of the year is now seen as the most probable one. This means that the Group is now expected to report a slight organic decrease in turnover. Elaborating on this, Felix A. Zimmermann said: 'With our Europe business having already made a weaker start into the new year, we are expecting in the second half of the year a slowdown in economic activity in North America. The ongoing financial and sovereign debt crisis is creating noticeable anxiety among companies. However, thanks to our acquisitions and growth initiatives, we can counteract this trend.' Including the two acquisitions and based on current economic data, the Management Board is forecasting an increase in turnover adjusted for currency between six and eight percent and an EBITDA margin between 13 and 14 percent.

TAKKT sustainability report receives red dot design award
For the first time ever, TAKKT created a sustainability report for 2012 in accordance with the international standards of the Global Reporting Initiative (GRI) classified as application level 'C+'. The report covers TAKKT Group's sustainability initiatives in detail and is available for download at http://www.takkt.de/de/holding/corporate_responsibility.html. An international panel of expert judges from the Design Centre North Rhine-Westphalia selected the report from among thousands of applicants from 43 countries and gave it the red dot award for outstanding design.

Conference call
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 (CEST) on 31 July 2012, during which we will be open to questions. To take part, please dial the following number: +49 69 201744-295 (access code: 779134#).

IFRS figures for TAKKT Group to the end of HY1 2012
(in EUR million)

  Q2 2012 Q2 2011 Change in % HY1 2012 HY1 2011 Change in %
TAKKT Group turnover 220.7 204.1 8.1 443.5 417.6 6.2
Organic growth     -2.8     -0.3
TAKKT EUROPE 114.1 120.8 -5.5 245.4 254.5 -3.6
TAKKT AMERICA 106.6 83.3 28.0 198.2 163.2 21.4
EBITDA 29.9 31.2 -4.2 69.7 67.8 2.8
EBITDA margin 13.5 15.3   15.7 16.2  
EBIT 25.3 27.0 -6.3 61.2 59.4 3.0
EBIT margin 11.5 13.2   13.8 14.2  
Profit before tax 23.1 25.3 -8.7 57.6 55.8 3.2
Pre-tax profit margin 10.5 12.4   13.0 13.4  
TAKKT cash flow 22.2 22.9 -3.1 50.8 49.4 2.8
TAKKT cash flow margin 10.1 11.2   11.5 11.8  


Company calendar
The interim report for the first nine months of 2012 will be published on 30 October 2012.

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 180,000 products 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 2,000 staff, has around three million customers worldwide and distributes more than 45 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 Claude Tomaszewski, CFO Tel. +49 711 3465-8207

Email: investor@takkt.de

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