The economic crisis and the subsequent depression in demand brought a clear turnover and earnings decrease for TAKKT Group in 2009. "We nevertheless believe that we are emerging stronger from the recession," stated CEO Dr Felix A. Zimmermann at today's financial statements press conference in Stuttgart. "Due to our highly cash-generative business model and strong financial background, we still had sufficient flexibility in 2009 to make way for further future profitable growth with the takeover of Central Restaurant Products (Central) and the expansion of our e-business despite the tense overall economic situation." A return to the growth path is expected for the current year.
Significant events in 2009
- Turnover down by 26.2 percent adjusted for currency and acquisition effects
- Double-digit adjusted operational margin
- FOCUS and GROWTH programmes implemented
- Expansion course continued with Central acquisition
- Ordinary dividend for 2009 to remain unchanged at EUR 0.32 per share
In the 2009 financial year, TAKKT Group generated turnover of EUR 731.5 (2008: 932.1) million. This corresponds to a 21.5 percent fall compared to the previous year. The acquisition of Central and the stronger US dollar on average throughout the year had a compensating effect. Adjusted for these effects, the drop amounted to 26.2 percent. While the gross profit margin rose anti-cyclically to 42.0 (41.4) percent, the operational result saw a sharp decrease. EBITDA (earnings before interest, tax, depreciation and amortisation) fell to EUR 68.7 (133.1) million. The reasons for the drop were lower advertising efficiency and lower capacity utilisation in all divisions, in addition to weaker turnover. The EBITDA margin sank to 9.4 (14.3) percent. Adjusted for one-off expenditure totalling EUR 5.2 million in connection with the FOCUS programme, the Group posted an EBITDA margin of 10.1 percent. "Ultimately, given the significant fall in turnover, we can be satisfied with our adjusted EBITDA margin of around ten percent," said CFO Dr Florian Funck.
Profit after tax fell to EUR 27.8 (75.1) million. There were several reasons for the decline, besides the weak overall business development: firstly, the increase in depreciation and amortisation to EUR 19.2 (15.8) million, primarily due to additional intangible assets acquired as part of the Central takeover. Secondly, increased finance expenses compared to the previous year due to the higher level of debt. Thirdly, the higher tax ratio of 34.3 (32.4) percent, which largely is the result of deferred taxes on loss carry-forwards.
Good cash flow – sound balance sheet
Despite the substantial fall in turnover, TAKKT Group generated a relatively good cash flow of EUR 56.1 (97.1) million. The cash flow margin as a percentage of Group turnover was 7.7 (10.4) percent. Through the reduction in current assets and lower routine capital expenditure, free cash flow, which is for acquisitions, borrowings repayments and shareholder dividends, was still in the crisis year 2009 EUR 66.4 (69.9) million. TAKKT’s balance sheet structure remains sound: after the share buy-back, the Central acquisition and the dividend payment, the equity ratio is 44.5 (61.1) percent.
Rapid and comprehensive reaction to the crisis
TAKKT management responded to the fall in turnover by launching the FOCUS and GROWTH programmes. The programmes reviewed the value contribution and potential of all the Group's activities, and pooled and prioritised the growth initiatives in the Group.
As a result of FOCUS the Topdeq activities in the USA were discontinued as of the year-end and the streamlining of the Plant Equipment Group's warehouse structure from four to two sites was initiated. In Europe for example, the company's production capacities were adjusted, and the warehouse nearby was closed. Overall, the restructuring resulted in one-off expenses of EUR 5.2 million. All measures were initiated respectively completed in 2009. The structural changes to the Group are also reflected by the two new divisions TAKKT EUROPE and TAKKT AMERICA valid since the beginning of the 2010 financial year.
"As a result of FOCUS we are expecting annual savings of more than three million euros from 2010 onwards," commented Zimmermann on the earnings effect of the measures taken in 2009.
In October 2009, the e-commerce company Certeo started operations in Germany as part of the GROWTH initiatives. Certeo is TAKKT Group's first pure internet brand in Europe and sells business equipment to corporate customers. Expanding the e-commerce activities will also play an important role in the Group's strategic focus. Furthermore, Hubert's European activities were extended to France after the successful start in Germany. KAISER + KRAFT additionally launched a new company in Russia.
Turnover decrease in all divisions
KAISER + KRAFT EUROPA remains highly profitable
The largest division in TAKKT Group, KAISER + KRAFT EUROPA, was severely hit by the recession, reporting a fall in turnover of 29.7 percent to EUR 379.2 (539.3) million. The decline rates began to slow down in the second half of the year. EBITDA fell by 48.4 percent to EUR 56.6 (109.8) million. At 14.9 (20.4) percent, the EBITDA margin was well below the previous year's figure. Despite this significant fall, KAISER + KRAFT EUROPA maintained its operating margin at the upper end of the TAKKT target corridor of 12 to 15 percent, thereby continuing to be the most profitable division. Adjusted for the one-off costs of the FOCUS programme of EUR 2.4 million, the margin was at 15.6 percent.
Topdeq: withdrawal from US business
Business in the Topdeq division was negatively impacted both by the economic decline and the withdrawal from the USA in the fourth quarter 2009 as determined by the FOCUS programme.
Turnover for the year fell to EUR 57.3 (82.7) million. Adjusted for currency effects, this is equivalent to a drop of 31.4 percent. For the first time since 2004, the operational result was negative at EUR minus 1.5 million, following a positive figure of EUR 6.1 million in the previous year. In contrast, the Topdeq division's European activities still contributed positively to the operational result. However, the target of achieving a double-digit operational margin, originally set for 2010, will thus only be possible at a later date.
K + K America recovers towards year-end
All three K + K America groups suffered from turnover reduction in 2009. There were, however, considerable differences regarding the extent of this decrease within the division. While the Plant Equipment Group (C&H, Avenue) suffered downward trends comparable to those seen in Europe, the Office Equipment Group (NBF group) and in particular the Specialties Group (Hubert, Central) – whose customers are largely from the service sector – fared relatively well. The latter even succeeded in generating modestly positive organic turnover growth in the fourth quarter of 2009.
All in all, turnover fell by 9.6 percent to USD 411.2 (454.9) million. Adjusted for Central, the fall amounted to 20.0 percent. Translated into the reporting currency of euros, turnover came to EUR 295.6 (310.9) million, a decline of 4.9 percent. EBITDA fell to EUR 21.1 (25.5) million, and the EBITDA margin accordingly was at 7.1 (8.2) percent. In addition to economic factors, start-up losses at the new Hubert companies in Germany and France also depressed earnings, as did one-off expenses for FOCUS of EUR 1.6 million.
Unchanged ordinary dividend of EUR 0.32
High cash flow generation is a key strength of TAKKT's business model. At the Annual General Meeting for the financial year 2009 on 04 May 2010, the Management and Supervisory Boards will therefore propose an unchanged ordinary dividend of 32 cents per share. Due to the year's weak business development and the balance sheet structure, there will be no special dividend for 2009.
Outlook for 2010: return to growth
In view of the improvement in economic conditions and the mildly positive signals from the first weeks of the current financial year, the Management Board anticipates a return to the growth course in 2010. Although most groups are still expecting negative growth for the first quarter, turnover development at Group level should become positive from the second quarter onwards. Provided that the global economy does not experience serious setbacks, corporate management is expecting top-line turnover growth of up to two percent for the full year. Based on the expected business recovery and efficiency gains resulting from the FOCUS programme, the operational margin is expected to increase by at least one percentage point to more than eleven percent.
Changes in TAKKT Supervisory Board
Michael Klein has notified the company in writing, that he will be resigning as member of TAKKT AG’s Supervisory Board with effect from the end of the next Annual General Meeting. A decision on his successor as well as a successor for Dr Eckhard Cordes will also be taken at the Annual General Meeting.
The figures for financial years 2008 and 2009 were prepared on the basis of the new IFRS regulations on catalogue accounting, which are applicable from 01 January 2009.