Quarterly Financial Report

Transcription

1 2/2014 Quarterly Financial Report Revenue up by 32 % to over EUR 33 million Incoming orders rise to nearly EUR 30 million Foundation for igniting further growth laid

2 Quarterly Financial Report 2/2014 All figures in EUR million Quarterly report II/2014 Quarterly report II/2013 Six-month report 2014 Six-month report 2013 Incoming orders Revenue Earnings (EBIT) Net profit for the year Earnings per share in EUR Dear Shareholders, Employees, Partners and Friends of Softing AG, Softing successfully completed another two acquisitions in the second quarter of This has added a pioneering new chapter to our company s history. With the takeover of Online Development Inc. (OLDI) in Knoxville, Tennessee, Softing has acquired a company that ideally complements our product portfolio in our core field of Industrial Automation. For over 20 years, OLDI has been a technical leader in the development and manufacture of products for factory automation. It focuses on high-quality products for control and communication tasks in connection with controllers from Rockwell Automation, the leading North American manufacturer of industrial controls. In a single leap, Softing has managed to acquire a high-level presence in the US market. This is both a great opportunity and a great honor for us. Effective May 1, Softing acquired the entire Industrial Communication division of Trebing & Himstedt GmbH. Although this company is a good deal smaller than OLDI, it perfectly complements Softing in the area of fieldbus diag- nostics. The Softing team worked with the previous employees of Trebing & Himstedt who moved to Softing to smoothly and harmoniously integrate this business, a process which has largely been completed. Together with our organic growth, this will enable us to achieve new record values in our incoming orders and revenue. Expressed in figures, this means that Softing increased its revenue to EUR 33.6 million in the first six months, generating a profit from operations of EUR 2 million and a net profit of EUR 1.3 million. The table above compares the most important key figures for 2014 and After repeatedly expressing my concerns and incomprehension in the face of major political mismanagement during nearly a year of policies hostile to business in Germany, Softing has now taken a significant step towards distancing itself from local risks. As of next year, a good 40 % of our revenue should be generated outside of Europe. This is more important than ever

3 3 since miserable socialist client politics has now been joined by an acute military threat. Following the rocket launch that killed nearly 300 airline passengers, an act for which Russia indisputably bears responsibility, around 20,000 heavily armed Russian soldiers have once again amassed at the Ukraine border. Neither the West nor NATO is there to face Putin, just a country that has been bled dry and done nothing more than declare its affinity with Europe through long, hard protests. Anyone who cannot see how acutely our freedom is threatened by this is beyond help. Russia s naked military force must be kept in check. The entire West must immediately drain the Russian aggressors of their fuel through swift and, above all, tough economic sanctions. Even if sanctions come at the expense of growth and earnings in the short term, the preservation of our freedom should never be up for sale. If we lost our freedom, all earnings would ultimately go into the pockets of Putin and his corrupt entourage. Now more than ever, it is important not to blur the lines between aggressor and friend, even when our friend the USA makes silly mistakes by spying on its allies. We are threatened by Putin s imperialist aggression, not by the NSA, even though the NSA has undoubtedly gone off the rails. Europe s response must be to strengthen its network in the Atlantic region and free itself of dependence on Russian gas as quickly as possible. The shift to a truly internationally oriented company will fundamentally and permanently change the character of Softing. To be internationally oriented means more than just supplying international markets from Europe, it means having our own expertise, top-class management and local market access outside of Europe. So far, we are the only company in our field to have managed this. This is the only way we can achieve growth which will enable us to permanently surpass the EUR 100 million mark in revenue. Even though these steps have now been completed and fully financed, they have taken their toll. This can be seen in the results of the first two quarters. The auditing and legal fees for the three acquisitions in 2014, including indirect costs and the cost of establishing a new sales organization in the USA, are leaving deep marks in the earnings of the Industrial Automation segment. However, we are laying the foundations for further growth and earnings here. It would be irresponsible to refrain from doing this just to avoid short-term expenses over the course of half a year. We expect these costs to gradually disappear in the third and fourth quarters and our earnings to rise significantly to their usual level. Softing s strategic goals have been clearly defined: We want to grow to achieve revenue of over EUR 100 million annually while balancing out the risks in terms of regions and business segments in a way that ensures the greatest possible continuity in revenue and profitability. While this statement comprises only a few words, it is enough to require the full efforts of management for a sustained period of time. Based on its very strong positioning in its target markets and notifications of orders from customers, Softing expects to generate revenue growth to around EUR 65 million and EBIT in a range of EUR 5 million to just under EUR 7 million in We have never been in a better position to reach our goals. These are all good reasons to accompany us on our journey and profit from the fruits of our development. Sincerely, Dr. Wolfgang Trier (Chief Executive Officer)

4 Quarterly Financial Report 2/2014 Stock Price Directors Holdings Financial Calendar EUR Closing price, Xetra /01/13 10/02/13 12/30/13 03/31/14 06/30/14 Directors holdings as of June 30, 2014 Boards Shares Options June 30, 2014 Number March 31, 2014 Number June 30, 2014 Number March 31, 2014 Number Supervisory Board Dr. Horst Schiessl (chairman), Attorney at Law, Munich Dr. Klaus Fuchs (member of the Supervisory Board), graduate computer scientist / graduate engineer, Helfand 273, ,886 Andreas Kratzer, CPA, Switzerland (member of the Supervisory Board) 9,976 9,976 Executive Board Dr.-Ing. Dr. rer. oec. Wolfgang Trier, Munich 84,085 84,085 Maximilian zu Hohenlohe, Pfaffenhofen Financial calendar November 14, 2014 Quarterly Report 3/2014 November 28, 2014 Equity Forum in Frankfurt/Main March 31, Annual Report May 15, 2015 Quarterly Report 1/2015 August 14, 2015 Quarterly Report 2/2015 November 13, 2015 Quarterly Report 3/2015

5 5 Group Management Report for the 2/2014 Quarterly Financial Report Economic Environment Experts continue to expect growth of around 1.7 % for the German economy in 2014, with signs indicating an increasingly predatory competition in Europe. Higher growth rates are expected in North America. Industry and the auto motive sector are set to record higher growth. Softing therefore anticipates a further year-on-year increase in incoming orders and revenue both in Automotive Electronics and Industrial Automation for the full 2014 financial year. Results of Operations Revenue in the Automotive Electronics segment in the first six months of 2014 rose by 23 % to EUR 15.6 million (previous year: EUR 12.7 million). The Industrial Automation segment recorded a revenue increase of 40 % to EUR 18.0 million (previous year: EUR 12.8 million). The increase in revenue in Automotive Electronics is fully attributable to organic growth, whereas Industrial Automation grew both organically and by making acquisitions. At EUR 33.6 million, the revenue of the Softing Group in the first half of 2014 thus was up EUR 8 million year on year (previous year: EUR 25.5 million). EBIT in the reporting period came in at EUR 2.0 million (previous year: EUR 3.1 million). First-half earnings in the Industrial Automation segment were impacted by the acquisitions of Psiber Data GmbH headquartered in Krailling near Munich as of January 1, 2014 and of Online Development Inc. (OLDI) in Knoxville, Tennessee, United States, in May, as well as by the establishment of a brand new sales office in the United States, which generated substantial non-recurring expenses. These expenses will gradually disappear in the last two quarters of the year. Earnings are also expected to increase considerably based on growing revenue generated by the new sales office in the United States and release orders for products with a particularly high margin. As of June 30, 2014, orders on hand in the Group totaled EUR 9.2 million (March 31, 2014: EUR 9.7 million). The acquired companies contribute little to orders on hand because they nearly always deliver their products shortly after an order is placed. Net Assets and Financial Position The equity ratio as of June 30, 2014 was 42 % (December 31, 2013: 65 %). Around half of the investments of EUR 22.9 million in the first six months of the year were financed from the Softing Group s own funds. Further financing was provided by the Group s first loans granted at exceedingly favorable terms. As a consequence of the high investments in new technologies as described and the acquisition of Psiber Data GmbH and Online Development Inc., cash and cash equivalents decreased by just under EUR 9 million to EUR 3.3 million from EUR 12.2 million as of December 31, 2013.

6 Quarterly Financial Report 2/2014 Research and Product Development In the first six months of 2014, Softing capitalized a total of EUR 2.0 million (previous year: EUR 2.0 million) for the development of new products and the enhancement of existing ones. Other significant amounts were expensed. Employees As of June 30, 2014, the Group had 438 employees (previous year: 332). During the report ing period, no stock options were issued to employees. Opportunities for the Company s Future Development As of the reporting date of June 30, 2014, the Company s risk structure had not deviated significantly from the description in the consolidated financial statements for the year ended December 31, Material changes are also not expected for the remaining six months of For more information, we refer to our Group Management Report in the 2013 Annual Report, page 4 et seq. Outlook Based on its very strong positioning in its target markets and notifications of orders from customers, Softing expects to generate revenue growth to around EUR 65 million and EBIT in a range of EUR 5 million to just under EUR 7 million in Comparing the two operating segments, the EBIT margin in the Automotive Electronics segment is expected to be higher on account of high-margin orders and a lack of extra ordinary expenses. Events after the Reporting Period Softing AG successfully placed 451,000 new shares with institutional investors in July in an accelerated bookbuilding procedure. After the completion of the capital increase, the Company s share capital amounts to EUR 6,959,438. All shares were placed without a discount at the current market price of EUR Since this dispensed with the need to hold treasury shares as acquisition currency for the time being, Softing sold a total of 25,298 treasury shares in July at an average price of EUR per share. On account of the procedure used (in accordance with Article 5 of Commission Regulation (EC) No. 2273/2003) and the low volume of shares, Softing AG was not required by law to issue separate announcements about this. Softing AG, Haar Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Company, together with a description of the material op- portunities and risks associated with the expected development of the Company. Haar, Germany, August 12, 2014 Softing AG The Executive Board Dr. Wolfgang Trier

7 7 Consolidated statement of financial position as of June 30, 2014 and December 31, 2013 Assets EUR thousand 06/30/ /31/2013 Cash and cash equivalents 3,305 12,116 Trade receivables 11,449 10,029 Inventories 7,868 4,660 Current income tax assets Current financial assets Other current assets 1, Current assets, total 23,851 28,634 Property, plant and equipment 1,403 1,366 Intangible assets 10,291 7,289 Goodwill 28,533 2,439 Deferred tax assets Non-current assets, total 40,881 11,604 Total assets 64,732 40,238 Equity and liabilities EUR thousand 06/30/ /31/2013 Trade payables 3,903 2,357 Payables from customer-specific construction contracts Provisions and accrued liabilities Deferred revenue 1,955 1,598 Income tax liabilities Short-term borrowings and current portion of long-term borrowings 1, Other current liabilities 5,641 5,248 Current liabilities, total 14,936 10,370 Deferred taxes 2,373 2,182 Pensions and similar obligations 1,507 1,504 Long-term borrowings without current portion 9,794 0 Other non-current liabilities 8, Non-current liabilities, total 22,580 3,737 Subscribed capital 6,508 6,443 Capital reserve 5,208 4,396 Treasury shares Net retained profits (incl. retained earnings) 14,709 15,606 Equity (Group share) 26,138 26,158 Minority interests 1, Equity, total 27,216 26,131 Total equity and liabilities 64,732 40,238

8 Quarterly Financial Report 2/2014 Consolidated Statement of Comprehensive Income for the period from January 1 to June 30, 2014 and 2013 EUR thousand Quarter II/ /01/ /30/2014 Quarter II/ /01/ /30/ month report 01/01/ /30/ month report 01/01/ /30/2013 Revenue 17,523 13,344 33,590 25,499 Other own work capitalized 1,051 1,139 2,030 2,041 Other operating income Operating income 18,740 14,623 35,899 27,766 Cost of materials / cost of purchased services -6,179-3,717-11,948-6,729 Staff costs -8,076-6,459-15,173-12,846 Depreciation, amortization and impairment losses ,346-1,686 thereof impairment losses due to purchase price allocation Other operating expenses -2,482-1,896-4,410-3,399 Operating expenses -17,719-12,914-33,877-24,660 Profit/loss from operations (EBIT) 1,021 1,709 2,023 3,106 Interest income Interest expense Earnings before income taxes 856 1,707 1,846 3,092 Income taxes Net profit for the year 587 1,070 1,322 2,165 Other comprehensive income Difference from currency translation Measurement of securities Subtotal of items of other comprehensive income that will be reclassified to profit or loss for the period Profits from the sale of treasury shares Subtotal of items of other comprehensive income that will not be reclassified to profit or loss for the period Total other comprehensive income for the period Total comprehensive income for the period 592 1,899 1,337 2,990 Net profit for the year attributable to: Owners of the parent 586 1,061 1,229 2,159 Minority interests Net profit for the year 587 1,070 1,322 2,165 Total comprehensive income for the period attributable to: Owners of the parent 591 1,890 1,244 2,984 Minority interests Total comprehensive income for the period 592 1,899 1,337 2,990 Earnings per share (basic) Earnings per share (diluted) Average number of shares outstanding (basic) 6,345,547 6,304,541 6,336,902 6,219,725 Average number of shares outstanding (diluted) 6,345,547 6,304,541 6,336,902 6,219,725

9 9 Consolidated statement of cash flows for the period from January 1 to June 30, 2014 and 2013 EUR thousand Second quarter 01/01/ /30/2014 Second quarter 01/01/ /30/2013 Cash flows from operating activities Profit (before tax) 1,846 2,165 Depreciation, amortization and impairment losses on fixed assets 2,346 1,686 Other non-cash transactions Cash flows for the period 4,248 3,868 Interest income Interest expense Change in other provisions and accrued liabilities Change in trade receivables 2, Change in other assets Change in trade payables Change in other liabilities Interest received Income taxes paid Cash flows from operating activities 4,649 3,194 Investments in fixed assets -1, Cash paid for investments in internally generated intangible assets -2,030-2,041 Repayment for investments in financial assets Cash paid for the acquisition of subsidiaries -21,266 0 less acquired cash and cash equivalents Cash flows from investing activities -22,900-2,037 Cash paid for dividends -1,337-1,709 Cash received from bank borrowings 11,000 0 Cash received from the sale of treasury shares 0 1,317 Interest paid Cash flows from financing activities 9, Net change in cash and cash equivalents -8, Effects of exchange rate changes on cash and cash equivalents 0 0 Cash and cash equivalents at the beginning of the period 12,116 11,516 Cash and cash equivalents at the end of the period 3,305 12,166

10 Quarterly Financial Report 2/2014 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period from January 1 to June 30, 2014 and 2013 EUR thousand Subscribed capital Capital reserve Retained earnings Treasury shares Other Available-forsale financial assets Actuarial gains and losses Currency translation Total Attributable to shareholders of Softing AG Noncontrolling interests Total equity As of January 1, ,443 4,396 16, , , ,131 Dividend payment -2,215-2,215-2,215-2,215 Addition from capital increase Measurement of financial instruments Currency translation Minority interests 1,011 1,011 Net profit for ,229 1,229 1, ,322 As of June 30, ,508 5,208 15, , ,138 1,078 27,216 EUR thousand Subscribed capital Capital reserve Retained earnings Treasury shares Other Available-forsale financial assets Actuarial gains and losses Currency translation Total Attributable to shareholders of Softing AG Noncontrolling interests Total equity As of January 1, ,443 4,396 13, , , ,190 Sale of treasury shares ,317 1,317 Dividend payment -1,709-1,709-1,709-1,709 Measurement of financial instruments Currency translation Minority interests -6-6 Net profit for ,165 2,165 2,165 As of June 30, ,443 4,396 14, , , ,785

11 11 Consolidated Segment Reporting for the period from January 1 to June 30, 2014 and 2013 Automotive Electronics EUR thousand Quarterly report II/ /01/ /30/2014 Quarterly report II/ /01/ /30/2013 Six-month report /01/ /30/2014 Six-month report /01/ /30/2013 Revenue 7,988 7,079 15,625 12,656 Segment result (EBIT) 1, ,834 1,729 Depreciation /amortization Segment assets 12,256 12,621 Segment liabilities 6,965 5,814 Capital expenditure (not including long-term investments) Industrial Automation Revenue 9,535 6,264 17,965 12,841 Segment result (EBIT) ,377 Depreciation /amortization , Segment assets 49,135 12,117 Segment liabilities 14,876 4,372 Capital expenditure (not including long-term investments) 24, ,752 1,308 Not distributed Revenue Segment result (EBIT) Depreciation /amortization Segment assets 3,341 12,930 Segment liabilities 15,675 3,531 Capital expenditure (not including long-term investments) Total Revenue 17,523 13,343 33,590 25,497 Segment result (EBIT) 1,022 1,710 2,023 3,106 Depreciation /amortization ,346 1,686 Segment assets 64,732 37,668 Segment liabilities 37,516 13,717 Capital expenditure (not including long-term investments) 24,895 1,311 31,478 2,432

12 Quarterly Financial Report 2/2014 Selected Explanatory Notes to the Interim Report of Softing AG as of June 30, General Accounting Policies The consolidated financial statements of Softing AG as of December 31, 2013 were prepared in accordance with the International Financial Reporting Stand ards (IFRSs) based on the guidance of the International Accounting Standards Board (IASB) applicable at the reporting date. The condensed interim consolidated financial statements as of June 30, 2014, which were prepared on the basis of International Accounting Standard (IAS) 34 Interim Financial Reporting, do not contain all of the required infor mation in accordance with the requirements for the presentation of the annual report and should be read in conjunction with the consolidated financial statements of Softing AG as of December 31, In general, the same accounting policies were applied in the interim financial statements as of June 30, 2014 as in the consolidated financial statements for the 2013 financial year. 2. Change in the Basis of Consolidation Effective January 1, 2014, Softing AG acquired all interests in Psiber Data GmbH ( Psiber ), headquartered in Krailling near Munich, from the shareholders. Psiber Data GmbH in turn holds a 55% equity interest in Psiber Data Pte Ltd Singapore. This entity has been controlled by the Softing Group in accordance with IFRS 10 since May 23, 2014 and is therefore consolidated in the consolidated financial statements of Softing AG. There were no other changes to the basis of consolidation since December 31, Disclosures Regarding the Acquisition of Psiber Data GmbH Softing AG acquired all equity interests in Psiber Data GmbH with effect from January 1, Psiber is a provider of devices for the diagnosis of Ethernet cables, which are used in office installations and data centers as well as in industrial automation. By acquiring Psiber, Softing will close the strategic gap in mobile devices for diagnosis of Ethernet networks in the automation industry and also enter the market for the diagnosis of copper and optical fiber networks for data centers and office installations. The purchase price for the equity interests has a fixed and a variable component. It is expected that the entire purchase price (fixed and variable components) will be between EUR 6.0 million and EUR 9.05 million and be settled entirely from existing cash funds. Both entities have been controlled by the Softing Group in accordance with IFRS 10 since January 01, 2014 and are therefore consolidated in the consolidated financial statements of Softing AG. Furthermore, effective May 22, 2014, Softing AG acquired all interests in Online Development Incorporated ( OLDI ) headquartered in Knoxville, Tennessee, from the shareholders. At the acquisition date, Softing recognized noncurrent assets in the amount of EUR 2.3 million and current assets totaling EUR 2.9 million. Current liabilities are EUR 2.4 million. The preliminary figure for the goodwill generated from this transaction is EUR 6.4 million; the goodwill recorded is non-tax-deductible.

13 13 The minority interest in the equity of Psiber was provisionally carried in the amount of EUR 1.0 million. As part of the purchase price allocation, the minority interests have a proportionate share of the remeasured assets and liabilities. At the present time, the measurement of the assets and liabilities acquired by the Group has not been finalized. The final purchase price also depends on the earnings figures for the next two years. For the purposes of the consolidation of Psiber in the current half-yearly report, the information available at present has been included so as to carry the best possible estimates for the purchase price allocation. The statement of comprehensive income for the first six months of 2014 includes revenue of EUR 4,892 thousand as well as profits of EUR 361 thousand from Psiber. 4. Disclosures Regarding the Acquisition of Online Development Incorporated Softing AG acquired all equity interests in Online Development Incorporated (OLDI) with effect from May 22, For over 20 years, OLDI has designed and manufactured factory automation products to help industrial customers simplify control and communications tasks. The company is virtually an ideal fit with Softing s product portfolio in its core business of Softing Industrial Automation. OLDI is a Rockwell Automation Global Encompass Partner, a member of the Control System Integrator Association (CSIA) and ODVA and participates in partner programs from IBM, Microsoft, and Oracle. With the acquisition of OLDI Softing will benefit from the growth in the U.S. industrial equipment market. The acquisition will enable Softing to establish a comparatively strong position in two of the world s three largest automation markets, thus reducing its economic dependence on the European market. The purchase price for the equity interests has a fixed and a variable component. It is expected that the entire purchase price (fixed and variable components) will be the equivalent of between EUR 15.3 million and EUR 21.9 million and be settled both from existing cash funds and borrowings. At the acquisition date, Softing recognized noncurrent assets in the amount of EUR 0.1 million and current assets totaling EUR 4.0 million. Current liabilities are EUR 1.9 million. The preliminary figure for the goodwill generated from this transaction is EUR 19.7 million; the goodwill recorded is non-tax-deductible. At the present time, the measurement of the assets and liabilities acquired by the Group has not been finalized. The final purchase price also depends on the earnings figures for the next three years. For the purposes of the consolidation of OLDI in the current half-yearly report, the information available at present has been included so as to carry the best possible estimates for the purchase price allocation. The statement of comprehensive income for the first six months of 2014 includes revenue of EUR thousand as well as profits of EUR 361 thousand from OLDI.

14 Richard-Reitzner-Allee Haar/Germany Phone Fax investorrelations@softing.com Softing AG 08/ 2014 Softing AG