Annual Report 2015

Financial Performance, Financial Position and New Worth

Development in Revenue

technotrans’ consolidated revenue rose in absolute terms by € 10.4 million in 2015 to € 122.8 million. This represents an increase of 9.3 percent year on year (€ 112.4 million). As in the previous year, revenue growth for 2015 was organic in origin. 35 percent of consolidated revenue now comes from outside the printing industry (previous year: 33 percent). Compared with the previous year, business with customers in offset, digital and flexographic printing also developed positively once more thanks to technotrans’ good market position in the printing industry. Revenue in that area grew by 6.8 percent. Thanks to the market and revenue shares gained, technotrans again succeeded in growing in all relevant markets in 2015. The biggest boost to revenue came from our projects in the fields of laser technology, stamping and forming technology, and medical and scanner technology.

As a result of the customer structure in the printing industry but also the laser industry, technotrans traditionally generates a high proportion of its deliveries and revenue in Germany. The 2015 financial year saw the proportion of revenue achieved by the group with German customers drop from 55.1 percent in the previous year to 50.0 percent. In other European countries the revenue share was increased from 21.5 percent to 23.2 percent thanks to further revenue growth. Meanwhile the revenue share in America also edged up to 14.8 percent for the past financial year, compared with 13.7 percent in 2014. The Asia region resumed growth in the 2015 financial year, with the revenue share rising from 9.7 percent to 12.0 percent.

technotrans’ standard business with industrial customers is based on release orders. The equipping of certain machine models with technotrans products is usually agreed in advance. The time frame between the release order and delivery is rarely more than four weeks. Because of these master agreements, information on incoming orders and order backlogs is not particularly meaningful.

Price adjustments to reflect the market trend were implemented mainly in the Services area in 2015. technotrans’ business with printing press manufacturers is usually conducted on the basis of multi-year master agreements that only allow well-justified price increases during their term. The same is true of requests for price reductions by our customers. For us, long-term, partnerlike relations with our customers and safeguarding our position in the market take priority over short-term price maximisation. In the other markets, there was a stable overall development in price effects in the past financial year.

Development in Earnings

The technotrans Group achieved a marked year-on-year improvement in its earnings ratios at December 31, 2015, including an increase of around 43 percent in earnings per share (EPS).

Gross profit, in other words revenue less cost of sales, came to € 41.4 million (previous year: € 37.4 million). The improvement in gross profit of 10.7 percent compared with the previous year was based above all on the increased revenue volume and the effects of changes to the product mix. The cost of purchased materials went up by 9.2 percent in line with revenue. The cost of purchased materials ratio of 39.0 percent was therefore unchanged from the previous year. The gross margin edged up to 33.7 percent at year end (previous year: 33.3 percent).

The operating result (EBIT) of € 9.0 million easily bettered the previous year’s figure of € 6.8 million by 31.1 percent. This meant that the EBIT margin for the 2015 financial year reached 7.3 percent, up from the previous year’s 6.1 percent. We consequently achieved our goal of an EBIT margin of between 6.8 and 7.3 percent for the 2015 financial year with a figure right at the top end of our forecast range.

Margin development of technotrans group

  2015 2014 change
€ million % € million % %
Gross profit 41.4 33.7 37.4 33.3 10.6
EBITDA 12.2 9.9 9.9 8.8 23.4
EBIT 9.0 7.3 6.8 6.1 31.1
EBT 8.7 7.1 6.3 5.6 38.8
Annual net profit 6.2 5.1 4.4 3.9 40.8

Distribution costs rose more slowly than revenue, growing 5.7 percent to € 17.1 (previous year: € 16.2 million). General administrative expenses, too, increased only slightly from € 12.6 million to € 13.0 million. On the other hand development costs of € 4.3 million for the 2015 financial year were again slightly higher than in the previous year (€ 3.4 million). technotrans continues to invest in a large number of development projects focusing on the new markets.

In the year under review, the positive balance of other operating income and expenses increased by € 0.4 million to € 1.9 million. Compared with the previous year, in particular we realised additional income from insurance payouts and other income unrelated to the period. 2015 brought net exchange rate gains of € 0.6 million as a result of the high exchange rate fluctuations. This matched the level of the 2014 financial year. No hedging instruments were used to reduce the impact of exchange rate fluctuations on the operating result.

Personnel expenses in absolute terms rose from € 39.8 million in the previous year to € 42.2 million in 2015, mainly as a result of the higher regular workforce in response to business expansion and the effect of a pay increase in the group. Over the same period the personnel expenses ratio fell from 35.4 percent to 34.3 percent.

Depreciation and amortisation of € 3.2 million was slightly above the 2014 figure (€ 3.0 million). It consequently again exceeded investment in property, plant and equipment and intangible assets amounting to € 1.7 million (previous year: € 1.4 million) in the 2015 financial year.

As expected, the interest result continued to fall in 2015, amounting to € -0.3 million net (previous year: € -0.6 million). On the one hand financial liabilities were reduced as planned over the course of the year, leading to a fall in interest expense. However there was an opposite effect of € 0.05 million from the early exercising of the call-put option on the gds-Sprachenwelt share acquisition. On the other hand the interest income item also includes the earnings effect from the subsequent measurement of the conditional purchase price liability for the KLH companies in the amount of € 0.18 million. For reasons of consistency, it is disclosed under the interest result.

The tax expense of € 2.5 million for the past financial year is up on the previous year’s level of € 1.9 million; it corresponds to an effective tax rate of 28.5 percent (previous year: 29.5 percent). For the fiscal particularities, please refer to the additional explanations in Section 26 of the Notes to the Consolidated Financial Statements.

The consolidated result after tax (net profit) for the 2015 financial year came to € 6.2 million (previous year: € 4.4 million), equivalent to a return on sales of 5.1 percent (previous year: 3.9 percent). Earnings per share outstanding rose from € 0.67 to € 0.96.

Segment Report

In the Technology segment, revenue climbed to € 81.4 million in the 2015 financial year. This segment’s share of revenue is therefore 66.3 percent, representing a slight increase compared to the prior-year period (previous year: 65.6 percent). The rise of € 7.6 million or 10.4 percent compared to 2014 was realised in all relevant sub-markets of the group, in other words in mechanical and plant engineering, in the growth markets and in the printing industry. The segment again benefited above all from the organic growth in business in the non-print area. A positive business development for the group especially in the laser industry and its continuing success in adding market shares in the new markets served as the basis for the healthy revenue growth in the field of proprietary technologies for temperature control, filtration, cooling lubricant preparation and also spray lubrication. technotrans also put its growth objectives into practice in 2015 in its biggest market, the printing industry. The revenue performance was impacted positively by the increased market shares for offset printing and growing standard business in digital and flexographic printing.

Because of the customer structure, the revenue of the Technology segment is traditionally very strongly focused on Germany. However the proportion of revenue generated by German customers fell to 57.3 percent in the period under review, compared with 62.1 percent in the previous year. Meanwhile the revenue share for the rest of Europe showed another year-on-year rise from 16.8 to 19.0 percent. Revenue from the Asia region, too, went up from 9.5 percent in the previous year to 11.7 percent in the 2015 financial year. At 12.0 percent, America’s revenue share in the Technology segment was also slightly up on the prior-year figure (11.6 percent).

As expected, our subsidiaries Termotek and KLH again achieved double-digit growth in the 2015 financial year (+11 percent). This lifted their revenue share of the Technology segment to around 40 percent.

The financial performance in the Technology segment improved as expected. In 2015 the segment benefited both from the renewed revenue growth and from an enhanced product mix in all the group’s target markets. Overall, earnings before interest and taxes (EBIT) for the Technology segment thus rose year on year from € 0.4 million to € 2.1 million. The rate of return for the segment came to 2.6 percent at year end (previous year: 0.6 percent).

566 employees belonged to the Technology segment at the end of the year (previous year: 529). As in previous years, the general administrative areas have been spread between the segments pro rata, based on their revenue shares. The increase of 37 employees (+7 percent) occurred almost exclusively at the German production locations and for reasons of growth was driven predominantly by the production-focused areas.

The Services segment achieved growth of 7.2 percent in the period under review and generated revenue of € 41.4 million (previous year: € 38.6 million). After a slight drop in revenue in the previous year, technotrans achieved the expected turnaround in this area. Within the segment, growth was driven largely by after-sales business in almost all sub-markets. Merely service business in the Technical Documentation area fell short of expectations due to weak orders in the first half, and failed to end the year with revenue growth. The Services segment brought in a total of 33.7 percent of consolidated revenue in the 2015 financial year.

The regional breakdown in revenue for the Services segment reveals a comparable development to the Technology segment for the 2015 financial year. The revenue shares compared with the previous year were as follows: Germany 35.7 percent (previous year: 41.7 percent), Rest of Europe 31.5 percent (previous year: 30.5 percent), Asia 12.4 percent (previous year: 9.9 percent), and America 20.4 percent (previous year: 17.9 percent).

Revenue (EBIT) for the Services segment rose by 6.8 percent in the period under review, from € 6.4 million to € 6.8 million. The result for the segment in absolute terms is in line with expectations. With an EBIT margin of 16.5 percent, the profit level confirms the previous year.

262 employees belonged to the Services segment at the end of the year (previous year: 252). As in previous years, the general administrative areas have been spread between the segments pro rata, based on their revenue shares.

Financial Position

Principles and Goals of Financial Management

The task of financial management within the technotrans Group is handled centrally by the group parent. This primarily involves managing liquidity, securing borrowed capital and managing interest and foreign currency risks. To a large extent the group constitutes a financial entity and is thus able to optimise its capital procurement and investment opportunities. The overriding goal of technotrans’ financial policy is to assure a balance between growth, return on equity and financing security. In its financial management, technotrans continues to strive to generate internally both the financial resources required to fund the organic growth of its operations, and the investments this involves. This goal was again achieved in the 2015 financial year. Selective investment spending (€ 1.7 million) was again restricted to maintenance investments.

Limiting risks encompasses all financial risks that could threaten technotrans’ survival as a going concern. technotrans makes use of selected derivative financial instruments exclusively for the hedging of interest rate risks for borrowings incurring interest at variable rates. The company in addition steers the financing required within the group by way of the credit facilities available to technotrans AG, Termotek GmbH and KLH Kältetechnik GmbH. Bank borrowings at the balance sheet date totalled € 8.1 million (previous year: € 11.6 million). There are no exchange-rate factors affecting external borrowings. Within the group, short-term and long-term lending between the group companies is practised to some degree in order to maintain adequate liquidity locally. Substantial liquidity holdings (cash and cash equivalents) moreover exist in EUR, USD and GBP. No instruments for the hedging of foreign currency positions were used beyond the 2015 reporting date.

Capital Structure

With an equity ratio of 68.0 percent at December 31, 2015 and borrowing arrangements amounting to some € 21.5 million, technotrans has a viable and sustainable financing structure.

The most important source of financing is the cash inflow from operating activities (operating cash flow). The optimisation of working capital releases liquid funds, keeps debt low and thus improves the indicators relating to balance sheet structure (such as equity ratio) and return on investment.

Debt finance was scaled back further at all group companies in the course of the year. The maturities of existing financial liabilities average two and a half years. Short-term credit lines were used only intermittently in the past financial year. At the end of the financial year the average weighted interest rate for borrowing was approx. 3.0 percent (previous year: 3.3 percent). At the balance sheet date technotrans had available but unused borrowing facilities in the amount of € 13.5 million. Off-balance-sheet financial instruments such as leases are of only minor significance for us.

In 2015 there were no restrictions on the availability of the loans provided. For its financial and liquidity planning, technotrans AG is working on the assumption that it will have adequate liquidity including for business operations in 2016, enabling it to meet its foreseeable payment obligations at all times and also to seize acquisition opportunities independently of the banks. Based on a sound equity base and a comfortable liquidity base, in conjunction with financing commitments by the banks, technotrans is able to invest flexibly at any time.

The long-standing business ties with our banks have remained steady. However, the current environment provides no guarantee that the banks will be willing or able to continue to perform the role of our financing partner to the extent to which we are accustomed. As a listed company, technotrans also has access to capital market instruments.

The Board of Management and Supervisory Board will propose to the Annual General Meeting in May 2016 that a dividend of € 0.48 per share outstanding be distributed for the 2015 financial year.

Investment

Investment spending amounted to € 1.7 million in the year under review (previous year: € 1.4 million). This total was made up of € 1.3 million for property plant and equipment and € 0.4 million for intangible fixed assets. Spending was again kept to a reasonable minimum level. The emphasis of investing activities was on replacement purchases and IT equipment. Of the overall volume, € 1.4 million was attributable to the Technology segment and € 0.3 million to the Services segment. Because of the low level of manufacturing penetration, the scaling-back of investment spending has no impact on the efficiency of production capacity.

*company acquisition inclusive (2011: € 1.1 million, 2013: € 6.5 million)

The development expenditure reported in the Income Statement came to € 4.3 million. This amounts to 3.5 percent of revenue. In addition, € 0.2 million in development costs were recognised as an intangible asset in the financial year. Development costs within intangible assets decreased to € 1.2 million (previous year: € 1.4 million). In the year under review, the amortisation of development expenditure recognised as an intangible asset came to € 0.4 million (previous year: € 0.3 million).

Depreciation and amortisation for the 2015 financial year came to € 3.2 million (previous year: € 3.0 million), a slight increase on the prior-year figure. Of this, € 2.5 million is attributable to the Technology segment and € 0.7 million to the Services segment. The customer base acquired along with KLH and the property in Sassenberg are major sources of depreciation and amortisation. Impairment of intangible assets in the course of the impairment test conducted was not required.

No further definite investments that would require an exceptional level of financing are currently planned for fixed assets or intangible assets.

Liquidity

The cash flow from operating activities before working capital changes (cash inflow) was up € 1.8 million on the previous year, rising from € 10.2 million to € 12.0 million. The cash flow benefited especially from the increased net profit for the year of € 6.2 million (previous year: € 4.4 million).

Cashflow in € million

  2015 2014
Cashflow from Operating Activities 12.0 10.2
Net Cashflow from Operating Activities 10.2 7.1
Cashflow from Investing Activites -1.7 -2.3
Free Cashflow 8.5 4.8
Cash and Cash Equivalents at End of Period 20.0 17.2

The cash flow from operating activities (net cash from operating activities) of € 10.2 million remained above the figure for the previous year (€ 7.1 million). The changes in working capital had a positive cash flow effect of around € 0.8 million (previous year: negative effect of € 2.5 million). This change is attributable on the one hand to the cash inflow from the decrease in receivables and other current assets (€1.8 million) as well as to the increase in liabilities and prepayments received, plus other equity and liabilities items (provisions) amounting to € +1.2 million (previous year: € +1.4 million).

On the other hand there was a much higher cash outflow from the buildup of inventories of € -2.1 million compared with the previous year (€ -1.1 million), arising from business growth as at the reporting date. Furthermore, payments for interest and taxes rose to € -2.6 million overall, from € -0.6 million in the previous year.

The cash flow from investing activities (cash outflow) fell slightly as expected by € 0.6 million to € 1.7 million (previous year: € 2.3 million). The total net cash employed for investment in the 2015 financial year mainly comprised maintenance investments of € 1.7 million (previous year: € 1.4 million), whereas the final conditional purchase price component of € 0.9 million for the acquisition of Termotek GmbH needed to be financed in the previous year.

The free cash flow consists of the net cash flow from operating activities less the cash payments for investment in operating activities. The free cash flow in the period under review consequently rose to € 8.5 million (previous year: € 4.8 million).

Cash flow from financing activities was higher than in the previous year. The net cash employed for financing activities in the 2015 financial year came to € -6.1 million (previous year: € -4.6 million). The payments in connection with the redemption of loans produced cash outflows of € 3.6 million (previous year: € 3.3 million). The dividend distribution amounted to € 2.2 million in the 2015 financial year (previous year: € 1.3 million). There were outflows of liquidity amounting to € 0.3 million in connection with the acquisition of the remaining shares in gds Sprachenwelt GmbH.

Cash and cash equivalents at year-end came to € 20.0 million and were therefore again up on the previous year (€ 17.2 million). From a capital management perspective the group’s liquidity remains comfortable. In 2016, the group therefore remains in a position to meet its payment obligations from business operations at any time.

Net Worth

The net worth and capital structure of the technotrans Group remained stable in 2015. The balance sheet total at December 31, 2015 rose slightly from € 74.5 million at the prior-year reporting date to € 76.0 million.

Assests

Non-current assets at the end of 2015 came to € 25.2 million, a decrease of € 1.7 million compared with the previous year (€ 26.9 million). This development is mainly attributable to depreciation and amortisation of property plant and equipment and intangible assets.

By contrast, current assets increased from € 47.6 million to € 50.8 million. While receivables fell by € 1.3 million compared with the previous year, inventories at December 31, 2015 were up € 2.1 million overall. The higher inventories at the balance sheet date essentially reflect the group’s enlarged business base. There was a further rise in cash and cash equivalents compared with the previous year, to € 20.0 million (previous year: € 17.2 million), a new record since the initial public offering in 1998.

Equity and liabilities

Within equity and liabilities, there was an absolute rise in equity of € 4.2 million to € 51.7 million (previous year: € 47.5 million). This development reflects the successful business performance of the group in recent years. The equity ratio thus improved to 68.0 percent (previous year: 63.7 percent). The return on equity, representing net income as a proportion of equity, was 12.3 percent (previous year: 9.4 percent). Minority interests in equity amounted to € 0.9 million (previous year: € 1.0 million). There was a change on the balance sheet within liabilities at the end of the financial year. As planned, non-current liabilities fell from € 10.9 million in the previous year to € 8.0 million at the end of the 2015 financial year. Borrowings were the main source of change within this item. The € 0.4 million carrying amount for other financial liabilities at the balance sheet date was slightly lower than for 2014; it basically consists of the conditional purchase price component resulting from the interest acquired in KLH (€ 0.3 million). The deferred tax liabilities of € 0.5 million stem from the capitalisation of a customer base following on from the acquisition of the KLH companies. Current liabilities rose slightly by € 0.2 million to € 16.3 million (previous year: € 16.1 million). While current financial liabilities decreased by € 1.3 million, prepayments received rose from € 2.0 million in the previous year to € 3.4 million. At the end of the 2015 financial year, the higher volume of project business was reflected in this increase. At the balance sheet date, technotrans had financial liabilities totalling € 8.1 million (previous year: € 11.6 million). No current bank overdrafts were in use at December 31, 2015. The non-current financial liabilities stem principally from investments in fixed assets, as well as from acquisitions of interests. They are protected in part by land charges. Details of the structure of financial liabilities are provided in the Notes to the Consolidated Financial Statements (Section 11).

technotrans calculates working capital as current assets less current liabilities. At December 31, 2015 working capital was € 34.5 million, an increase of 9.5 percent on the prior-year reporting date (€ 31.5 million). The increased working capital also supplies proof of the technotrans Group’s improved liquidity situation. Cash and cash equivalents account for the lion’s share of current assets.

The group’s net liquidity, calculated as the difference between non-current plus current interest-bearing borrowings and cash and cash equivalents, amounted to € 11.6 million at the end of the year under review (previous year: € 4.8 million). The ratio of net debt to equity (gearing) is consequently negative at -22.4 percent (previous year: -10.0 percent).

Provisions remained stable in 2015 at € 6.5 million, unchanged from the previous year’s level. The long-term provisions of around € 1.1 million (previous year: € 1.1 million) comprise both personnel-related obligations (pensions) and those Board of Management remuneration components that focus on sustainable corporate performance. The short-term provisions amounting to € 5.4 million (previous year: € 5.4 million) consist of other obligations towards personnel (€ 3.6 million), payments to be made under warranty (€ 0.9 million) and other provisions (€ 0.9 million). No off-balance-sheet financial instruments are used in the technotrans Group.