KENDRION N.V. 21 August 2014
Half-year results 2014Another strong quarter for Kendrion; good development continues
- Revenue for Q2 2014 EUR 110.5 million (11.2% organic growth)
- Revenue growth in first half year 2014: 36% (of which 8.9% organic growth)
- EBITA in Q2 2014 increased 53%, in part due to the Kuhnke acquisition, completed on 14 May 2013
- Return on Sales in Q2 2014 8.3% (Q1 2014 7.9%, full year 2013 6.8%)
- Good market conditions in both the industrial and the automotive activities
Key figures 1
| (x EUR 1 million) | Q2 2014 | Q2 2013 | Difference in % |
| Revenue | 110.5 | 87.0 | 27% |
| EBITA | 9.2 | 6.0 | 53% |
| Net profit | 5.5 | 3.2 | 72% |
| (x EUR 1 million) | HY1 2014 | HY1 20132 | Difference in % |
| Revenue | 215.7 | 158.4 | 36% |
| EBITA | 17.6 | 10.9 | 61% |
| Net profit | 10.5 | 5.8 | 81% |
1 The quarterly and interim figures are unaudited
2 Normalised for non-recurring costs in HY1 2013 related to the Kuhnke acuisition (EUR 1.8 million), and a non-recurring tax gain of EUR 1.6 million
Piet Veenema, CEO of Kendrion:
"Kendrion continued to perform strongly in the second quarter, partly due to the good market conditions and the volume from new projects. Revenue for electromagnetic components reached a historical high in the second quarter. Profitability also continued to grow. The integration of Kuhnke has been largely, and successfully, completed, which is reflected in the increased profitability of the former Kuhnke business units Industrial Control Systems and Automotive Control Systems. Kendrion continues to focus fully on offering high-quality innovative products to our niche markets. This will be reflected in a number of new projects that will be launched during the course of the year, in Germany and China in particular".
Over the past years Kendrion has worked hard to gain leading positions in electromagnetic niche markets. This has resulted in Kendrion's development into a highly focused, technically advanced and innovative company that is active in many areas around the world. Kendrion is now gradually moving into the market for mechatronic systems and subsystems, supported by the recent acquisition of Kuhnke. The success of this strategy is becoming increasingly evident, especially in the Industrial Division. Kendrion intends to provide its customers with increasing added value, thereby further enhancing its appeal as a strategic supplier. There is a clear focus on building an even better geographical spread, which means further growth outside of Europe. The strategy for the years 2014-2016 has been laid down in the company's Mid-term Plan "Designed to grow". Kendrion is well underway to achieve the target of annual revenue between EUR 450 - 500 million in 2015.
Financial review
Revenue
In the second quarter, organic revenue growth amounted to 11.2% (excluding currency effects), mainly due to automotive projects launched in the second half year of 2013 and the improvement in the economic conditions. The Industrial Division realised 6.5% growth in revenue and the Automotive Division achieved growth of 13.7%. This growth reflects the success of the focus on new innovative projects.
Results
Second quarter 2014
The operating result before amortisation increased to EUR 9.2 million (normalised Q2 2013: EUR 6.0 million), due to the good turnover development, but also due to an increased operating profit level in Industrial Control Systems and Automotive Control Systems, the former Kuhnke activities. The integration of Kuhnke is now almost completed; both new business units are on track. The return on sales in the second quarter was 8.3%.
First half year 2014
The operating result before amortisation in the first half year 2014 increased to EUR 17.6 million (HY1 2013: EUR 10.9 million). This was reflected in a return on sales of 8.1% (HY1 2013: 6.9%). The good turnover development as well as the efficiency measures taken in 2013 at Kuhnke are the main reasons for this improvement. All seven business units improved their results in the first half of this year. EBITA for the Industrial Division increased to EUR 6.0 million from EUR 3.5 million in the same period of last year. The Automotive Division reported EBITA of EUR 12.2 million, a significant increase compared to EUR 6.9 million in HY1 2013.
Net finance costs in the first half year increased slightly to EUR 2.7 million (HY1 2013: EUR 2.5 million).
Income tax expense for the first half year 2014 was EUR 2.6 million (HY1 2013: tax income of EUR 0.2 million, due to tax gains related to the Kuhnke acquisition).
Net profit in the first half year 2014 was EUR 10.5 million (normalised HY1 2013: EUR 5.8 million), an increase of 81%. Normalised earnings per share amounted to EUR 0.81 (EUR 0.48 in HY1 2013).
Financial position
The balance sheet total increased by approximately EUR 5 million compared to the first half year 2013, mainly due to the higher activity level. The net debt position was EUR 98.7 million at the end of the second quarter. As announced earlier, the increase compared to the end of the first quarter (EUR 49.2 million) was mainly due to the fine that the European Commission imposed on Kendrion at the end of last year (EUR 43.8 million), which was fully paid on 3 April 2014. The further increase in the debt position is due to the payment of the dividend in the second quarter. Free cash flow in the first half year, excluding the EC fine, was EUR -0.2 million.
Investments amounted to EUR 9.9 million in the first half year, at a depreciation level of EUR 7.8 million. Investments in 2014 will be substantially higher than the depreciation level, largely due to new automotive projects and the implementation of the new ERP system.
Kendrion's financial position is strong, with a solvency ratio of 40% at the end of June 2014.
New finance agreement
As announced in the press release of 15 August 2014, Kendrion recently entered into a new five- year EUR 150 million finance agreement with a consortium of three lenders (ING Bank, Deutsche Bank and BNP Paribas) to refinance the majority of its existing financing arrangements.
The number of employees in the second quarter amounted to a total of 2,810, including 129 temporary employees (Q2 2013: 2,812 employees including 164 temporary employees).
ERP Project HorizonThe ERP roll-out remains on schedule. Kendrion expects that the last main roll-out (at Kendrion Kuhnke) will be finalised before the end of the year.
New AuditorAfter a careful selection process, the Supervisory Board of Kendrion N.V. will propose to the General Meeting of Shareholders, to be held on 13 April 2015, to appoint Deloitte, a member of Deloitte Touche Tohmatsu Limited, as the company's new external audit firm. This proposed appointment will become effective for the 2015 financial year. The proposal follows the introduction of Dutch legislation stipulating that an audit firm may not conduct a statutory audit of a listed company for more than eight consecutive years. For this reason, KPMG will step down as auditor after the audit of the 2014 financial year.
Operational performance
Industrial Division
This division consists of the business units Industrial Magnetic Systems, Industrial Control Systems and Industrial Drive Systems.
The market conditions for the Industrial Division (which accounts for 35% of Kendrion's revenue) were favourable in the first half of the year. In the first half of the year, organic growth was 6.1%, driven mostly by strong organic growth of Industrial Drive Systems, due to favourable conditions in the machine construction market.
Industrial Magnetic Systems was more or less stable in the second quarter, in spite of the fact that several major large customers reduced their stock levels. Several new projects will start up in the second half of the year. Industrial Control Systems (formerly a part of Kuhnke) had a very good first half year, especially due to a good order portfolio, combined with lower cost levels. The improvement of Industrial Drive Systems continued in the second quarter, largely due to the sales to the machine equipment market, but also due to the addition of several new important customers.
Automotive Division
This division consist of the business units Passenger Car Systems, Automotive Control Systems, Commercial Vehicle Systems and Heavy Duty Systems.
Levels of activity in the worldwide automotive industry were high in the first half of 2014, which was reflected in the strong organic growth of the Automotive Division (which accounts for 65% of Kendrion's revenue). However, the projects that started in the second half of 2013 and came up to speed in the first half of 2014 were the main reason for the strong organic growth in the first half year (10.3%).
Passenger Car Systems was the main driver for the strong organic growth of this division. A number of new projects will commence in the second half of 2014, especially in Germany, which will lead to somewhat higher depreciation and direct labour costs in this division in the second half year. In the second quarter, the division was successful in acquiring new business at Chinese customers. Kendrion's new plant in Nanjing was recently officially opened. The project solenoids valves for dampers, which was announced in the first quarter, is expected to expand to the US market in the coming years. Automotive Control Systems (formerly a part of Kuhnke) was successful in further streamlining its production, which led to lower cost levels and a satisfying profit improvement. Activity levels in Commercial Vehicle Systems were also high in the first half year, however revenue growth was fairly stable due to lower revenue achieved at some Asian customers. Heavy Duty Systems had a very good first half year, especially due to the strong development of the US activities; the Indian activities stagnated due to the market conditions in that country.
Kendrion maintains its favourable view of the market developments, in part due to the good economic prospects in its most important home markets, Germany and the USA.
The good developments of the past few quarters in the Industrial Division are expected to continue in the coming months, especially in the business unit Industrial Drive Systems. The upward trend is also expected to continue in the Automotive Division. Year-end effects in this business are however always difficult to predict. During the course of the year several new projects will start up, particularly in Germany and China. Kendrion therefore reiterates its expectation of further growth in revenue for the full year 2014 as a result of the favourable developments in both divisions. The planned start-up costs of the new projects will however put some pressure on the operating margin in the second half of 2014.
In view of the unpredictability of the economic developments as an outcome of the current worldwide uncertainties, it is still difficult to issue a specific forecast for the whole 2014.
Kendrion N.V., a solution provider, develops, manufactures and markets innovative high-quality electromagnetic and mechatronic systems and components for customers all over the world. Kendrion's operations are carried out by two divisions with a total of seven business units that are focused on specific market segments, namely the Industrial Division's Industrial Magnetic Systems, Industrial Control Systems and Industrial Drive Systems business units and the Automotive Division's Passenger Car Systems, Automotive Control Systems, Commercial Vehicle Systems and Heavy Duty Systems business units.
Kendrion has leading positions in a number of business-to-business niche markets. Germany is Kendrion's main market, although other countries are becoming increasingly important.
Kendrion's activities
Kendrion develops advanced electromagnetic and mechatronic solutions for industrial and automotive applications. These are used by customers all over the world in systems such as lifts, door-locking systems, industrial robots, medical equipment, electrical switchbox systems, diesel and gasoline engines, air-conditioning installations, motor cooling systems and beverage dispensers. Kendrion's key customers include Bosch, Continental, Daimler, Delphi, Evobus, Hyundai, Siemens, ThyssenKrupp Bilstein, Volkswagen, Wabco, Yutong and ZF.
Kendrion's shares are listed on NYSE Euronext's Amsterdam market.
The Executive Board declares that, with due regard for what has been described in this report, to its knowledge, (i) the semi-annual financial statements give a true and fair view of the assets, liabilities, financial position and profits of Kendrion N.V. and the companies jointly included in the consolidation, and (ii) the semi-annual report gives a true and fair overview of the information required pursuant to Article 5-25d sub 8 and 9 of the Netherlands Financial Supervision Act.
Zeist, 21 August 2014
The Executive Board
AnnexesFor annexes we refer to the attached pdf document.
1. Financial calendar 2014 - 2015
2. Semi-annual condensed financial statements 2014
2.1. Condensed consolidated statement of comprehensive income
2.2. Condensed consolidated statement of financial position
2.3. Condensed consolidated statement of cash flows
2.4. Condensed consolidated statement of changes in equity
2.5. Risks and risk management
2.6. Notes to the condensed consolidated interim report
- > PDF half-year results 2014
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