Annual Report 2014

Financial Performance

Development in Revenue

The technotrans Group generated revenue of € 112.4 million, which represents an increase of 6.8 percent compared with the previous year (€ 105.2 million). Thanks to a very strong fourth quarter of 2014, expectations for the full year in the order of € 110 million were slightly exceeded. Revenue growth for 2014 overall was organic in origin. It was achieved on the one hand from a 25.4 percent increase in the new markets (outside the printing industry) and on the other hand from growth in print business (+1.7 percent) for the first time in a number of years. The revenue share from outside the printing industry thus grew to around 33 percent of consolidated revenue. Our expectations of more dynamic progress for business development with new customers in other markets were therefore fulfilled. This development underlines just how successful the group’s strategic direction is proving to be. Thanks to the market and revenue shares gained in the field of offset and digital printing, technotrans succeeded in growing in all relevant markets in 2014. The biggest boost to revenue came from our projects in the fields of laser technology, stamping and forming technology, and medical technology.

By Region

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 2014 financial year saw the proportion of revenue achieved by the group with German customers climb from 54.4 percent in the previous year to 55.1 percent. In other European countries the revenue share was increased from 21.1 percent to 21.5 percent thanks to further revenue growth. The Asia region did not deliver any significant growth overall in the 2014 financial year, with the revenue share rising from 9.6 percent to 9.7 percent. Meanwhile the revenue share for America was down year on year at 13.7 percent for the past financial year, compared with 14.9 percent in 2013.

Revenue by region in percent

Development in Prices

Price adjustments to reflect the market trend were implemented mainly in the Services area in 2014. 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 an overall satisfactory development in price effects in the past financial year.

Information on Order Backlog, Incoming Orders and Order Reach

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

Development in Earnings

Gross Profit

Gross profit, in other words revenue less cost of sales, reached € 37.4 million (previous year: € 33.1 million). The improvement in gross profit by around 13 percent compared with the previous year was based in particular on the effects of changes to the product mix. On the costs side, further synergies realised from the integration of new business areas also had a positive impact on costs. Although the cost of purchased materials rose by 6.0 percent, this was in line with the movement in revenue (+6.8 percent). Despite the much stronger revenue growth in the Technology segment (+11.8 percent), the cost of purchased materials ratio of 39.0 percent was nevertheless a slight improvement on the previous year (39.3 percent). The gross margin rose as expected, reaching 33.3 percent (previous year: 31.5 percent) at year end.

Earnings Before Interest and Taxes (EBIT)

Earnings before interest and taxes (EBIT) for the 2014 financial year came to € 6.8 million, up 47.6 percent on the previous year (€ 4.6 million); this was equivalent to an EBIT margin of 6.1 percent (previous year: 4.4 percent). We consequently slightly exceeded our goal of an EBIT margin of between 4 and 6 percent for the 2014 financial year.

Earnings (EBIT/net income) 2010 to 2014

Distribution costs moved more or less in line with revenue, growing 7.8 percent to € 16.2 million(previous year: € 15.0 million). General administrative expenses increased only slightly from € 12.2 million to € 12.6 million. Development costs for the 2014 financial year were again up somewhat on the previous year, at € 3.4 million (previous year: € 3.0 million).

The overall positive balance of other operating income and expenses of € 1.5 million remained almost on a par with the previous year (€ 1.7 million). There was a net gain of € 0.6 million (previous year: net loss of € 0.3 million) thanks to the sharp currency fluctuations during the 2014 financial year; this figure mainly comprised unrealised gains. No hedging instruments were used to reduce the impact of exchange rate fluctuations on the operating result.

Personnel expenses for the 2014 financial year came to € 39.8 million (previous year: € 37.0 million). The 7.5 percent increase compared to 2013 reveals the effect of the moderate pay increase on the one hand, and one-off severance payments on the other. The personnel costs ratio of 35.4 percent was only slightly above the previous year’s level (35.2 percent).

Depreciation and Amortisation

Depreciation and amortisation of € 3.0 million was slightly below the 2013 figure (€ 3.2 million). The figure for the 2014 financial year consequently again exceeded investment in property, plant and equipment and intangible assets of € 1.4 million (previous year: € 2.3 million) because technotrans is in a position to adapt its replacement investment flexibly to the prevailing business circumstances.

Financial Result

The interest result fell again in 2014 to € -0.6 million net (previous year: € -0.9 million). On the one hand financial liabilities were reduced as planned over the course of the year, leading to a fall in interest expense. On the other hand the in-year capital investment brought technotrans interest income that served to improve the financial result.

Tax Expense

The tax expense for the past financial year amounted to € 1.9 million (previous year: € 0.8 million). The effective tax rate of 29.5 percent was well up on the previous year’s level (21,0 percent). Compared to 2013, income tax expense (actual income taxes and deferred taxes) was influenced in particular by taxes not relating to the period. 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 2014 financial year is € 4.4 million (previous year: € 3.0 million), equivalent to a rate of return of 3.9 percent (previous year: € 2.8 percent). Earnings per share outstanding rose from € 0.47 to € 0.67.

Segment Report

Revenue

In the Technology segment, revenue climbed to € 73.8 million in the 2014 financial year. The increase of € 7.8 million or 11.8 percent compared with the prior-year period is mainly attributable to the successful expansion of business in the non-print area. Here, the segment profited especially from the positive business performance in the laser industry and from substantial revenue growth for the proprietary technologies for temperature control, filtration, cooling lubricant preparation and also spray lubrication. Although the market environment revealed no signs of a recovery in demand for printing presses, technotrans also enjoyed a welcome rise in printing industry revenue in the second half of 2014 compared with both the first half of the year and the first half of the previous year. The revenue performance was impacted positively by our increased market shares for offset printing and the arrival of new production models for digital and flexographic printing. This took the revenue share of the Technology segment up to around 66 percent (previous year: 63 percent) of the total for the technotrans Group.

As expected, our subsidiaries Termotek and KLH again achieved double-digit growth (+19 percent) in the past financial year. This lifted the revenue share of the Technology segment to around 40 percent.

The Services segment was unable to match the previous year’s revenue performance (€ 39.2 million) in the period under review with a 1.5 percent lower revenue to € 38.6 million. The downturn in business stems on the one hand stems from weaker demand due to the smaller installed base in the print sector, and on the other hand from a reluctance to invest that is affecting Technical Documentation service business. The Services segment brought in a total of 34 percent (previous year: 37 percent) of revenue in the past financial year. Service business is likewise being implemented with growing success in the new subsidiaries and our non-print activities. We expect to see slight growth again in the 2015 financial year.

Revenue by segment in percent

Earnings (EBIT)

The financial performance in the Technology segment improved in the course of the financial year as expected, hand in hand with rising revenue. 2014 also saw the Technology segment achieve positive profit contributions from the improved margin, thanks to synergy benefits from the integration of the new business areas. Overall, earnings before interest and taxes (EBIT) for the Technology segment thus improved year on year from € -1.8 million to € +0.4 million. If revenue stabilises at fourth-quarter levels, we therefore consider the future prospects of a positive operating result for the segment to be good.

The financial performance in the Services segment was largely unaffected by the slight downturn in revenue in 2014 and the result for the segment (EBIT) remained flat at € 6.4 million (previous year: € 6.4 million). This represents a virtually unchanged EBIT margin of 16.6 percent. The overall financial performance in the Services segment again proved to be very stable.

By Region

Because of the customer structure, the revenue of the Technology segment is traditionally very strongly focused on Germany. The proportion of revenue generated by German customers remained roughly constant in the year under review at 62.1 percent, compared with 62.2 percent in the previous year. Meanwhile the revenue share in the rest of Europe rose from 15.3 percent to 16.8 percent. Revenue for the Asia region represented 9.5 percent of the total, roughly the same level as in the previous year (9.4 percent). Following sharp growth in America in the previous year, 2014 brought a slight downward correction and the Technology revenue share slipped from 13.1 percent to 11.6 percent.

The regional revenue breakdown for the Services segment barely changed in 2014. The revenue shares compared with the previous year were as follows: Germany 41.7 percent (previous year: 41.2 percent), Rest of Europe 30.5 percent (previous year: 30.8 percent), Asia 9.9 percent (previous year: 10.1 percent), and America 17.9 percent (previous year: 17.9 percent).

Employees

At the end of the year, the Technology segment had an unchanged 529 employees (previous year: 529) and the Services segment 252 employees (previous year: 248). As in previous years, the general administrative areas have been spread between the segments pro rata, based on their revenue shares.