The economic environment for 2015 is broadly stable. Early indicators point towards growing confidence among businesses. The USA’s very dynamic economy, but also growth prospects in other emerging regions of the world, give cause for confidence. Experts on the economy forecast Germany to enjoy stronger growth once more in 2015. Based on its current plans for 2015 technotrans, too, anticipates that the business situation will be overall positive.
While the International Monetary Fund (IMF) estimates the global economy’s growth at 3.3 percent growth for 2014, its forecast for 2015 envisages a rise in global production and economic growth of 3.5 percent. On the one hand declining oil prices are having a positive impact on major national economies. On the other hand slower growth in China, Russia, the eurozone and Japan is holding the economy back. The experts from leading European economic research institutes (ifw/EUROFRAME) likewise expect to see Europe’s economy stabilise in 2015, with growth of 1.5 percent. Major factors at work include the permanently low interest levels, the devaluation of the euro and the low inflation rate. A worsening of the renewed crisis in Greece or of the conflict in Ukraine could nevertheless put the brakes on the economic recovery.
German industry’s confidence improved further at the start of the year. According to Ifo Konjunkturtest, the export outlook for the German mechanical engineering industry also improved again in January 2015 and remains on an upward trajectory thanks to the falling value of the euro and the declining oil price.
The German Engineering Federation (VDMA) expects price-adjusted output of machinery and plant in Germany to rise by 2 percent in 2015. The uncertainty surrounding the longer-term economic outlook remains high. Mechanical engineering companies see the USA as the main source of opportunities, while demand is expected to weaken in some major emerging economies.
Industry insiders expect the slight negative trend in the offset printing industry to continue. This business mood is driven mainly by the continued decline in production activity from reduced demand and lower levels of incoming orders both domestically and internationally.
In the 2015 financial year technotrans intends to devote increased attention to growing the existing portfolio organically and expanding it through acquisitions. The benchmark for organic growth is GDP growth in Germany. New products and new customers for applications in the field of mechanical and plant engineering and in the growth markets (energy storage, medical and scanner technology) will help to broaden the business basis for subsequent years. The further business development of the technotrans Group in 2015 will to a large degree depend on the world economy, on various project launches involving existing customers, and on new customers.
The Board of Management rates the business outlook for the 2015 financial year as positive overall. technotrans has set itself the goal of growing faster than the market. The GDP forecast for 2015 (ifo economic forecast and IfW Institute for the World Economy) is 1.5 percent. technotrans has set itself a revenue growth target of at least 3 percent for 2015. Overall, the Board of Management expects the technotrans Group to achieve revenue of € 116 – 120 million for 2015, assuming steady development in the world economy. The EBIT margin for 2015 should be in the range of 6.8 to 7.3 percent. For planning purposes EBIT therefore needs to be between € 7.8 and € 8.8 million. The revenue and earnings planning does not reflect possible acquisitions. The level of orders in the first two months of 2015 currently supports these expectations. On the procurement side we do not expect to see any major price changes; in the personnel arena there will be a slight rise in personnel costs. The effective tax rate for the group is expected to be in the region of 30 percent.
To handle successfully the many customer projects currently in the start-up phase, we continue to invest in resources and are also stepping up our sales activities in the new markets. The revenue volume and the time required to get the new projects off the ground will in turn materially influence the earnings position. However we are convinced that we will soon begin to reap rich rewards from investing in this way in the future growth of the company.
Given the prevailing economic environment, the Board of Management expects technotrans AG (separate financial statements) to achieve slight revenue growth in the order of 2–3 percent in the 2015 financial year. As matters stand we also anticipate an improved financial performance from the higher revenue level. Our goal is to achieve an EBIT margin of 6 percent for technotrans AG.
The revenue and earnings of the Technology segment already improved considerably last year. No negative effects are currently expected for 2015 either, and revenue overall should therefore rise further. We assume that demand for offset presses worldwide in the 2015 financial year will remain roughly on a par with 2014. On the other hand technotrans expects there to be robust demand for digital and flexographic printing presses. The laser and mechanical engineering markets, stamping and forming technology, energy storage technology as well as medical and scanner technology will remain the segment’s growth drivers. We have successfully stepped up our activities in these growth areas in recent years. The many new product launches lead us to expect a further rise in the revenue contribution of these areas in 2015.
The Services segment generates a relatively high proportion of the technotrans Group’s overall revenue and therefore plays an important part in keeping our business stable. 2015 will be another challenging year for the segment, with 2014 the first financial year that did not yield a rise in service revenue. Weak demand as a result of the continuing decline in the installed base in the print sector and the reluctance to invest that is affecting Technical Documentation business had a stronger impact than expected.
We anticipate that revenue for the Services segment will grow slightly once more in 2015 thanks to increased use of our worldwide service network by the group’s new companies, and expect the financial performance to remain on an even keel with an unchanged EBIT margin.
For 2015, the Board of Management expects a positive operating cash flow thanks to steady income and earnings, so technotrans should again be in a position to finance business operations and the maintenance investments it envisages in property, plant and equipment and intangible assets (excluding acquisitions) from cash flow. After interest and capital repayments, the current view is that the free cash flow should be positive once more.
On the financial side, based on the planned business performance the Board of Management expects borrowings to come down yet further as a result of scheduled repayments (around € 3.3 million). technotrans had cash and cash equivalents amounting to € 17.2 million at the reporting date of December 31, 2014. This is ample to be able to finance ongoing business in all group companies. technotrans also has unutilised borrowing facilities which, together with the surplus financial resources, provide considerable flexibility for following up strategic options where appropriate.
As before, the Board of Management views acquisitions as an appropriate way of strategically adding to corporate growth and accessing additional future industries. It is continually scouting for and analysing suitable options. For technotrans – in the role of strategic investor – suitable targets must not only fit in with its market and growth-led expansion strategy, but also offer the prospect of unlocking appropriate synergy potential. In addition, technologies that would specifically broaden its core skills are fundamentally of great interest. It is the declared intention of the Board of Management to accelerate the company’s growth through further acquisitions. Depending on the size of the acquisition targets, the use of both external funding and equity instruments would be considered. Our banks have expressed an interest in supporting us if required; on the other hand, in the absence of other additional takeover targets at the time of compiling this report there are as yet no firm pledges. technotrans intends broadly to maintain the current structure of the balance sheet. The equity ratio, too, is to be kept stable at its current level of above 60 percent. Depending on the financial commitment necessitated by any acquisitions, there may be a slight temporary dip in the equity ratio.
The prospects for the distribution of a dividend for the 2015 financial year are good: the company has a sound balance sheet structure and the profitability trend is positive. As matters stand we would make a distribution of dividend dependent on plans for any major investment projects that would have a priority claim on financial resources, e.g. a major acquisition, at the time that decision needs to be reached. Given these conditions, we stand by our dividend declaration that we once more intend to distribute half of our consolidated net profit in the future.