Full year results 2013
TKH Group NV
Content
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2
3
Developments 2013
Notes to the results 2013
Profile
Turnover
€ 1.2 billion
Number of employees (FTE)
4,802
Technology company
Four core technologies
Vision & security, communication, connectivity and manufacturing systems
The core technologies are combined with software and system integration into total solutions in vertical focus and growth markets within three business segments: Telecom Solutions 13% Building Solutions 41% Industrial Solutions 46%
Geographical
distribution
of turnover
(in %)Mission statement
TKH intends to be an innovative and leading technology (niche) player in
creating combinations of technologies to total solutions through which
customers are fully relieved and that lead to larger efficiency, more comfort
and larger safety.
TKH aims to be an attractive employer, to continuously exceed
customers’
expectations by offering
‘best in class’-solutions and to be a solid
investment for shareholders.
Strategy TKH
Focus on 4 core technologies in 3 business segments
Telecom
Solutions
Building
Solutions
Communication, safety, care and efficiency
Industrial
Solutions
Value creation
Growth drivers
Solutions based on 4 core technologies
Telecom Solutions
Segment | Sub segment
Building Solutions
Industrial Solutions
Indoor Telecom Systems Fibre Network Systems Copper Network Systems
Building Technologies Vision & Security Systems Connectivity Systems
Connectivity Systems Manufacturing Systems
Revenue
share Business model Markets
13% 41% 46% 4% 7% 2% 7% 20% 14% 20% 26% R& D a nd Sy s te m e ng in e e ring In ho us e M a nu fa c turin g O uts ou rce d M a nu fa c turin g A s s e m bl in g Se rv ic e • Telecom operators • Cable operators • Service providers • Telecom installers • Telecom retailers • Housing associations
• Building and construction
• Retail &logistics
• Government & financial institutions
• Traffic/tunnel/rail infrastructure
• Care institutions
• Parking organisations
• Marine and offshore
• Energy companies
• Machinery building industry
• Process industry
• Tyre building industry
• Medical industry
• Robot industry
• Automotive industry
Highlights 2013
Realisation (in millions € unless otherwise stated) H1 H2 2013 2012
Turnover € 587.1 € 610.7 € 1,197.8 € 1,102.4
Turnover change
of which impact of raw material prices organic + 11.6% - 0.9% + 1.3% + 6.0% - 1.4% + 6.7% + 8.7% - 1.2% + 4.2% + 3.9% - 0.2% - 5.0%
EBITA before one-off expenses 1) € 42.7 € 57.1 € 99.8 € 85.8
ROS 7.3% 9.3% 8.3% 7.8%
Net profit before amortisation and one-off income
and expenses attributable to shareholders € 22.9 € 33.0 € 55.9 € 47.5
Increase of turnover to € 1.2 billion, organic growth of 4.2%
Increase of net profit before amortisation and one-off expenses with 17.7%
Record order intake Industrial Solutions – breakthrough positioning tyre-manufacturing
industry
Focus with core technologies on high growth vertical markets – leads to higher ROS Strong operational result in Q4
Highlights 2013
Innovations account for 21.2% of turnover
Increase of EBITA with 16.3% to € 99.8 million
Increase H2 2013 with 17.6% compared to H2 2012
EBITA in Q4 before one-off expenses increased 15.6% – strong improvement
Building and Industrial Solutions Improved ROS to 8.3% (2012: 7.8%)
In Q4 2013 ROS of 11.0% (2012: 9.6%)
Strong improvement in Building Solutions for full 2013, Industrial Solutions improved in second half of 2013
Efficiency program in Building Solutions successfully completed – One-off expense of € 7.2 million
ACQUISITIONS
Park Assist (100%-stake)
– Building Solutions – vision & security systems Consolidation as per 31 July 2013
Innovative vision-technology company which focuses with own developed video analytics-technology on car park management Locations in New York City (USA), Australia and United Kingdom Turnover of € 15 million with 36 employees
3D3 Solutions (100%- stake held by Augusta Technologie)
– Building Solutions – vision & security systems Consolidation as per 30 April 2013
Innovative manufacturer of hardware and software in the area of three-dimensional scanning
Located in Vancouver (Canada)
Turnover of € 1.2 million with 10 employees
Telecom Solutions
(in million € unless stated otherwise) 2013 2012 Δ in %
Turnover 156.8 167.1 - 6.2
EBITA 1) 14.1 14.7 - 4.3
ROS 9.0% 8.8%
Organic decrease in turnover: 6.2%
Strong decrease copper networks due to priority of investments in fibre optic networks Increased ROS due to improved efficiency and lower raw material prices
Highlights 2013
Telecom Solutions
Higher priority for investments in 4G-networks delayed investments in fibre optic networks
Preparations for large-scale roll-out of FttH in Europe still actual Cost per connection and operational costs network reduced with new technologies – good perspective for international positioning of TKH
Growth turnover TKH in line with market developments
Efficiency improvement material consumption and production rates achieved
Segment fibre networks systems: turnover +0.7%
Optical fibre (cable), connectivity systems and components, active equipment
Highlights 2013
Telecom Solutions
Decrease due to cut-back in turnover from underperforming parts in portfolio
Reluctance in consumer spending level in Benelux in the ICT-area
Compensation from priority for upgrading broadband connections
Segment indoor telecom systems: turnover -2.3%
Home networking systems, broadband connectivity, IPTV-software solutions
Decrease investments in copper networks in favour of fibre optic networks and 4G-networks
Activities focus mainly on supply of parts and maintenance for existing networks
Segment copper networks systems: turnover -27.8%
Building Solutions
(in million € unless stated otherwise) 2013 2012 Δ in %
Turnover 490.0 436.9 + 12.2
EBITA 1) 39.4 22.5 + 74.7
ROS 8.0% 5.2%
Organic growth: +2.7%
One-off expense € 6.6 million for efficiency program
ROS excluding Augusta: 4.7% (2012: 3.4%) – challenging market conditions in building and construction sector
Reluctance investments in building and construction sector
Growth and improved positioning in care sector with systems that respond to demand for efficiency solutions
VieDome video communications platform that supports remote healthcare
On vision-technology based system for blister packaging Medication distribution systems
Reduced construction volume caused decline of 15% in data networks market
Increased demand for energy-saving lighting systems due to trend of reducing CO2 footprint
Unique proposition by combination of guiding and lighting technology
Highlights 2013
Building Solutions
Segment building technologies: turnover -5.9%
Energy-saving lighting and light switch systems, energy management systems, care systems, structured cabling systems
Highlights 2013
Building Solutions
Organic growth of 4.0% despite reluctance for investments in building and construction sector as well as in the traffic
infrastructure
Improved market conditions in Augusta’s end-markets
Implemented focus within vision & security segment in vertical growth markets leads to successful positioning:
Focus sales team with specific knowledge on growth markets
Engineering competence to come up with integrated systems
Considerable expansion of R&D capacity to expand technology lead
Segment vision & security systems: turnover +32.4%
Vision technology, systems for CCTV, video/audio-analysis and detection, intercom, access controls and registration, central control room integration
Highlights 2013
Building Solutions
Growth largely outside Benelux region
Fierce competition and margin pressure due to decline in market volume in building and construction sector
Termination of solar systems activities due to low returns Additional efficiency program in Q4 executed
Result improvement due to focus on growth markets aligned with the core technologies vision & security and communications
Segment connectivity systems: turnover +3.6%
Specialty cable, connectivity systems and components for shipping, railways, solar and wind energy as well as installation and energy cable for niche
Industrial Solutions
(in million € unless stated otherwise) 2013 2012 Δ in %
Turnover 551.0 497.6 + 10.7
EBITA 58.5 59.9 - 2.4
ROS 10.6% 12.0%
Organic growth: 9.1%
Improvement market conditions and ROS in H2 2013
Highlights 2013
Industrial Solutions
Impact raw material prices on turnover: -2.8%
Recovery investments in capital goods in H2 2013 have positive impact on turnover in medical and robot industry
Higher order intake from industry suppliers to the German automotive sector
Turnover growth from internationalisation and supply of complete systems
Segment connectivity systems: turnover +1.2%
Specialty cable systems and modules for the medical, robotic, automotive and machine building industry
Highlights 2013
Industrial Solutions
Turnover Increased 5.7% due to acquisition of Augusta Order intake in H2 to record level of € 160 million
New introduced technologies are successful
Breakthrough in top five tyre manufacturers – mainly through MAXX-technology
Lower ROS
imbalance in capacity utilisation at production facilities due to high share of new technology – relatively lower production in Asia and more temporary hires in the Netherlands
In H1 2013 higher cost level for maintaining capacity anticipating expected growth and investments in new customers and technology
Normalisation of inefficiencies as from second half 2014 Market share outsourced market remains high – 60 to 70%
Segment manufacturing systems: turnover +19.5%
Tyre manufacturing systems, can washers, machine control systems, product handling systems and test equipment
NOTES TO
Change in turnover
(in € million)Geographical distribution of turnover
(in %)
Notes to the results 2013
Development of turnover per solution
1) Turnover including change of finished goods inventory, work in progress and other operating income. (in million € unless stated otherwise) Turnover 1)
2013 Turnover 1) 2012 Total growth Impact prices raw materials Organic growth Telecom Solutions 156.8 167.1 - 6.2% - 6.2% Building Solutions 490.0 436.9 + 12.2% - 1.4% + 2.7% Industrial Solutions 551.0 497.6 + 10.7% - 1.4% + 9.1% Unallocated - 0.8 Total 1,197.8 1,102.4 + 8.7% - 1.2% + 4.2%
Notes to the results 2013
Gross margin increased to 41.7% (2011: 40.9%)
Improvement in Telecom and Building Solutions Acquisitions have a relatively high gross margin Positive impact from lower raw material prices
Increase EBITA with 16.3%
Decrease operating costs excluding acquisitions and one-off expenses to 32.6% of turnover (2012: 33.1%) due to executed efficiency programs
Cost increasing impact from new technologies in combination with high order intake in sub-segment manufacturing systems – relatively lower production in Asia and high temporary hires Expansion R&D capacity – investments in new technologies and customers
Increase depreciation with € 2.0 million due to the acquisition of Augusta and higher investment levels in 2012 and 2013
Notes to the results 2013
EBITA per Solution
(in million € unless stated otherwise) 2013 2012
EBITA 1) ROS % EBITA 1) ROS % Telecom Solutions 14.1 9.0 14.7 8.8 Building Solutions 39.4 8.0 22.5 5.2 Industrial Solutions 58.5 10.6 59.9 12.0 Other - 12.2 - 11.3 Total 99.8 8.3 85.8 7.8
Notes to the results 2013
One-off expenses
Efficiency program in mainly Building Solutions – € 7.2 million (2012: € 12.2 including acquisition costs)
Impairments of € 0.2 million for portfolio in Building Solutions that will not be continued (2012: € 3.3 million)
Increase amortisation charges with € 4.2 million
Acquisitions of mainly Augusta (2012), 3D3 Solutions and Park Assist
Exceptional income of € 0.1 million
Release of provision for earn-out and put-options held by minority shareholders (2012: € 3.0 million)
Tax burden increases to 22.5% (2012: 23.9%)
Notes to the results 2013
Change in financial result
(in € million)Increase financial expenses with € 3.1 million
Higher amortisation of capitalised financing costs, including one-off charge of € 1.6 million due to refinancing
Low interest rates have limited impact because of interest rate swaps
Inclusion of interest on defined benefit plans in financial result has an effect of € 0.4 million
Unfavourable currency exchange effect in 2013 of € 0.6 million in comparison to 2012
On balance, interest paid to banks decreased slightly with € 0.2 million
Notes to the results 2013
Profit & loss account
(in million €) 2013 2012 Δ %
Turnover 1) 1,197.8 1,102.4 + 8.7
Costs of raw materials / consumables - 698.7 - 651.8
Gross margin 499.1 41.7% 450.6 40.9% + 10.8
Operating expenses - 399.3 364.8 + 9.4
EBITA before one-off expenses 99.8 8.3% 85.8 7.8% + 16.3
One-off expenses - 7.2 - 12.2
EBITA 92.6 73.6 + 25.8
Amortisation and impairment - 25.2 - 24.2
Operating result 67.4 49.4
Financial result - 15.2 - 12.1
Change in value of provisions for
earn-out and put-options 0.1 3.0
Share in result of associates 1.4 - 0.1
Result before taxes 53.7 40.2
Taxes - 12.0 - 9.6
Net profit 41.7 3.5% 30.6 2.8%
Net result before amortisation and one of
Balance sheet per 31 December 2013
(in million €) 31-12-2013 31-12-2012
Assets
Non current assets 578.1 568.6
Inventories 185.5 196.6
Receivables 234.1 201.1
Cash and cash equivalents 79.6 66.5
Assets held for sale 0 7.2
Total 1,077.3 1,040.0
Liabilities
Equity 438.9 424.8
Long term liabilities 362.0 301.8
Short term liabilities 276.4 313.4
Change in working capital
(in € million)Notes to the balance sheet per
31 December 2013
Working capital Use of non-recourse factoring € 38.8 million (31 December 2012: € 34.5 million)Use of supply chain finance € 16.6 million (31 December 2012: € 16.5 million)
Change in net debt
(in € million)Notes to the balance sheet per
31 December 2013
Financial covenants
Net debt is based on financial covenants as agreed with banks
Net debt / EBITDA: 1.5 Interest coverage ratio: 10.9
Cash flow Statement
(in million €)
2013 2012
Operating result 67.4 49.4
Depreciation, amortisation and impairment 45.2 42.1
Share and option schemes 2.0 1.7
Result divestments - 0.5 - 0.2
Change in provision 4.1 - 0.6
Change in working capital - 8.7 - 4.8
Cash flow from operations 109.5 98.4
Interest paid - 11.7 - 11.5
Taxes paid - 19.2 - 11.7
Cash flow from operating activities 78.6 75.2
Cash flow from investing activities - 35.0 - 39.3
Acquisitions - 15.6 - 96.1
Cash flow from financing activities - 13.7 101.3 Exchange differences - 1.2 - 3.2 Change in available funds 13.1 37.9
RATIOS
2013
2012
Working capital / Turnover 1) 13.2% 13.1%
Net debt / EBITDA 2) 1.5 1.6
Gearing (net debt / equity) 3) 45.6% 39.0%
ICR (EBITDA / Financial cost) 4) 10.9 9.8
Solvency 40.7% 40.8%
Earnings per ordinary share before amortisation and
one-off income and expenses € 1.48 € 1.27
Earnings per ordinary share after amortisation € 0.98 € 0.76
1) On an annual basis
2) Based on the financial covenants as agreed with the banks 3) Based on the average positions during period concerned
Strategic developments,
BUSINESS DRIVERS
TKH focuses on distinguishing potential for
an above-average performance
Niche player strategy - focus on high quality solutions with high margins
High pricing power by innovative unique solutions
Attractive margins because of high yield on investments for customers
Commodity products are mainly used as part of total solutions
Through outsourcing of more than 60% of manufacturing a more flexible capacity is available and cost basis more variable
Focus on markets with high growth
FINANCIAL OBJECTIVES TKH
Progress realisation targets on track
Increase ROS in 2013 to 8.3% (2012: 7.8%) – Q4 to 11.0% (Q4 2012: 9.6%) ROCE in 2013: 15.9%
Focus on 7 growth verticals – accelerates realisation of targets
Targets
ROS target: 9 to 10%
ROCE target: 18 à 20%
BUSINESS DRIVERS
Focus on four core technologies
vision & security, communication, connectivity and manufacturing systems
Merge the four core technologies into specific solutions for identified niche vertical markets with special focus on high growth opportunities within the business segments Telecom, Building and Industrial Solutions:
Offer high level of service and integrated solutions Offer highly innovative ‘best in class’ systems
Focus on efficiency, security and safety solutions and improvements that offer high return on investment to customers and substitutes labour for technology
Focus on seven high growth vertical markets within the solution areas with growth potential of € 300 - € 500 million in coming 3-5 years:
Fibre Optic Networks - Care - Tunnel & Infra - Parking - Marine, Oil & Gas - Industrial Machine Vision - Tyre Building Industry
TKH – vertical growth markets – growth drivers
Advantage of focus on defined vertical growth
markets
Focus leads to maximum traction to realise growth potential
Choice for growth verticals is determined on the return potential based on internal
and external benchmarking – ROS and ROCE in combination with organic growth
opportunities
Defined turnover and return targets per segment
Executive Board directly involved in realisation targets via Solution responsibility One end-responsible per vertical market who reports directly to the Executive Board Optimal use of R&D-resources and investments to markets with largest potential Coordination of technology development priorities to growth verticals
Conclusion – TKH - High growth verticals
strategy and focus
Accelerates the increase of the ROS and ROCE
Creates substantial growth for TKH both in result and turnover Creates a better understanding of the TKH strategy at stakeholders Creates much better execution of growth opportunities
Brings TKH into a new phase of synergy implementation
Combination of the four technologies into high growth verticals Clustering of activities into vertical markets and technologies
OUTLOOK
Market conditions are volatile in the segments in which TKH operates:
Global economic situation is showing signs of improvement in a number of market segments compared with last year
General economic situation is still fragile, as market developments are still uncertain, especially in Asia
Telecom Solutions
Expected increase in investments in optical fibre networks after realised investments in 4G networks
Margin H1 2014, in line with H2 2013, to remain under a certain amount of pressure due to overcapacity at certain fibre optics manufacturers
Building Solutions
Expected continued drop in investments in building and construction sector – market conditions will continue to be challenging
Growth in a number of vertical markets TKH is focusing on, thanks to trend-setting core technologies and positive trends with regard to investments in these markets
OUTLOOK
Industrial Solutions
Strong increase in order intake 2013 in sub-segment manufacturing systems
Signs that investments in industrial sector will be on a higher level compared with last year If order intake develops positively in course of the year, profit could increase
In view of the continued economic uncertainty in a number of segments, it is too early to give a full-year 2014 profit forecast for the entire TKH group.
As usual, TKH will aim to give a profit forecast for the full year at the presentation of its first-half results in August 2014
Appendices:
Four core technologies &
Seven high growth vertical
markets
V
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& Se
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Man
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facturin
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Core technologies
Conn
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Comm
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Emergency systems Personal alarm systemsFibre Optics Networks - growth drivers
Fibre optics networks
High priority from telecom-operators for upgrading networks Successful FttH-projects proof high return on investment
Telecom operators are able to gain or defend market share through fibre optic technology
More and more parties request of total systems – opportunity for TKH to increase the scope of delivery – increase market share
Various European countries have announced large investment plans for FttH-projects
The Netherlands – FttH (>50% market share)
Telesur and NV EBS - Surinam / Aruba NETIA SA - Poland
Care – growth drivers
Care
Large need for care systems that respond to live longer independently at home: increasing aging – necessary cost reductions – efficiency
improvements – need for better care – scarcity of nursing staff
TKH core technologies respond well to the trends in the healthcare industry
Video care –
Central & South Netherlands
Remote care for the disabled – ‘s Heeren Loo – Netherlands Fully automated ‘Central
Tunnels – growth drivers
Tunnels
New legislation for tunnel technology – caused by fire Mont Blanc-tunnel
In Europe, before 2020, thousands of kilometres tunnels will be built and provided with new tunnel technology for replacement
Technologies relevant in relation to new tunnel legislation: evacuation – communication – detection – identification – safety
The TKH core technologies fit seamless as proven technology to the demands of the new tunnel technology-specification
2E Coentunnel - Amsterdam Modernisering Objecten Bediening
Zeeland (MOBZ)
Parking – growth drivers
Parking
Strong need within parking industry to: decrease OPEX – increase occupancy car parks – increase revenues by differentiated parking rates – increase
comfort and ease for parker
High returns on technology investments
TKH has distinctive advanced technology with its core technologies that responds well to the requirements of the parking industry
Marine, Oil & Gas - growth drivers
Marine, oil & gas
Strong growing market from the perspective of the TKH core technologies that respond to the increasing need to a safer environment by a good detection and analysis of risk with quick and direct communication and guiding of actions in case of emergency
Large potential market share growth due to internationalisation and focussed technical solutions with distinctiveness
Vietnam - 5 oil platforms Malampaya - Philippines (part of SHELL-agreement)
18 River Cruise Ships - Viking Lines, Meyer Werf - Germany
Tyre Building Industry - growth drivers
Tyre building industry
High priority in tyre building industry for replacement existing technology with
drivers: high productivity – less waste – improved quality – smaller batches – more regional production
Advanced TKH-technology responds to these drivers – perspective for market share growth within top five tyre manufacturers
More than 70% of equipment older than 15 years
Large investment programs announced within industry since 2011 Market share TKH in outsourced market: 60-70%
Total market share including top five tyre manufacturers: 18-20% – target 30-40%
Industrial Machine Vision - growth drivers
Machine vision
Extensive industrial automation and robotising responds to high productivity and quality of manufactured products
Vision-technology is a superior alternative for steering and control of manufacturing systems and for the human eye in the area of detection, inspection and identification Based on the advanced TKH-technology markets share growth will be realised
Strong increase in the number of applications where vision-technology will be adopted
Knorr-Bremse – quality control 3D Arthritis (reuma) Hand Scanner
Tyre building machines – quality control tyres
