TAKKT presents solid figures for 2011 - Acquisition of leading US direct marketing company for display articles

Thu Mar 22, 2012 2:55am EDT

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Takkt AG / TAKKT presents solid figures for 2011 - Acquisition of leading US direct marketing company for display articles . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.

Total dividend of 85 cents proposed for 2011

Stuttgart, Germany, 22 March 2012. TAKKT Group continued on its growth course in the past year. "2011 proved to be a very successful year for TAKKT. With organic growth of 7.3 percent, we even managed to outperform our original expectations," said CEO Dr Felix A. Zimmermann, summarising the past financial year at today's financial statements press conference in Stuttgart. Operational profitability and the profit for the period increased markedly. The Group considers itself well prepared for the rest of 2012 in spite of a slightly gloomier economic outlook. A total dividend of 85 cents per share is to be paid out for the 2011 financial year. By acquiring the US direct marketing company for display products (turnover of ca. USD 52 million in 2011) TAKKT further expands its US portfolio and significantly strengthens its e-commerce competence.

2011 financial facts

  • Organic turnover growth of 7.3 percent
  • Gross profit margin improves to 43.3 percent
  • Share of online turnover exceeds twenty percent for the first time
  • At 14.2 percent, EBITDA margin reaches the upper third of the target corridor of 12 to 15 percent
  • Earnings per share back to pre-crisis level at EUR 1.01
  • Total dividend of 85 cents per share proposed

In the 2011 financial year, TAKKT Group generated turnover of EUR 852.2 (2010: 801.6) million. This corresponds to a year-on-year increase of 6.3 percent. Adjusted for currency effects, it even achieved a growth rate of 7.3 percent. "2011 was no easy year, even with this strong upswing. The uncertainty in the financial markets also impacted the real economy in the course of the year. We are all the more pleased that we once again markedly improved our operational profitability and earnings compared to the previous year," said CFO Dr Claude Tomaszewski.

Due to positive structural effects, the gross profit margin rose again in contrast to the normal pattern and reached 43.3 (42.9) percent. EBITDA (earnings before interest, taxes, amortisation/goodwill impairment and depreciation) increased disproportionately to turnover by 20.3 percent to EUR 121.0 (100.6) million. The EBITDA margin, TAKKT Group's most important operational key figure, reached the upper third of the long-term target corridor of 12 to 15 percent, coming in at 14.2 (12.6) percent. Excluding the effects of advanced advertising costs regarding the catalogue production, the EBITDA margin was 14.4 percent. In addition to the improved gross profit, the above-average increase in earnings was the result of better utilisation of the infrastructure and greater advertising efficiency. Another important factor was the good profitability of TAKKT EUROPE, which once again achieved a margin that was well above the Group average.

Earnings before interest and taxes (EBIT) were also higher than the previous year's figure at EUR 104.1 (68.0) million, in part because there was no need for any goodwill impairment in 2011. The EBIT margin rose to 12.2 (8.5) percent in the year under review, in comparison to a figure of 10.1 percent for 2010, adjusted for the impairment of the Topdeq goodwill.

Thanks to TAKKT Group's strong internal financing capability, net borrowings were reduced by EUR 49.4 million in the reporting period. Although average debt fell significantly, the overall decrease in finance expenses was less pronounced, coming in at EUR 8.7 (9.1) million. In particular, this was due to the cost incurred for cancelling long-term interest rate hedges as a result of the quicker debt repayment.

The tax ratio fell to 31.0 percent in 2011 compared to the previous year's level of 34.0 percent, which was adjusted for the Topdeq goodwill impairment. The profit for the period rose significantly to EUR 66.0 (34.6) million. Earnings per share increased from EUR 0.52 to EUR 1.01 and were therefore back on the same level as in 2008.

High cash flow - equity ratio close to the upper end of the target corridor
The TAKKT cash flow - defined as the profit for the period plus depreciation, goodwill impairment and deferred tax affecting profit - rose by 24.9 percent to EUR 87.8 (70.3) million. The cash flow margin as a proportion of consolidated turnover improved to 10.3 (8.8) percent. After recognising the effects on liquidity due to changes in net current assets and the regular capital expenditure, TAKKT's free cash flow amounted to EUR 70.1 (81.6) million.

As TAKKT Group did not make any major acquisitions or investments in 2011, the positive earnings development had the highest impact on the balance sheet. The Group's total equity amounted to EUR 301.0 (251.7) million at the balance sheet date. At 54.7 (46.5) percent, the equity ratio therefore came close to the upper end of TAKKT's own target corridor of thirty to sixty percent.

"In order to achieve the desired balance between sufficient financial scope for financing growth and the total cost of capital, we propose together with the Supervisory Board the payout of a special dividend of 53 cents per share to the Annual General Meeting (AGM), in addition to an ordinary dividend of 32 cents per share," Tomaszewski announced.

Divisions converge in the course of the year
TAKKT EUROPE once again the Group's strong earnings pillar

TAKKT EUROPE generated turnover of EUR 507.3 (467.1) million. The growth rate of 8.6 percent (plus 6.8 percent when adjusted for currency effects) was attributable to the very positive development in the KAISER+KRAFT, gaerner, Gerdmans and Certeo brands of the Business Equipment Group (BEG), which together reached a low double-digit increase in turnover.

In the Office Equipment Group (OEG), the repositioning initiated in 2010 and designed to put more emphasis on service-orientation began to bear fruit. The average order value and customer acquisition developed pleasingly, but the number of orders was well below the previous year's figure, as expected. In summary, the turnover generated by the OEG with its Topdeq and Furnandi brands dropped, as anticipated, by a low double-digit percentage.

EBITDA for TAKKT EUROPE again rose faster than turnover year-on-year by 27.7 percent to EUR 101.0 (79.1) million. The EBITDA margin at 19.9 (16.9) percent was above the target corridor for the Group. The BEG was once again well above this level, making it the most profitable group within TAKKT Group. In spite of its downturn in turnover, also the OEG operationally posted a higher, slightly positive result.

Growth in all three TAKKT AMERICA groups
TAKKT AMERICA generated turnover of EUR 345.2 (334.7) million in the 2011 financial year. This corresponds to a year-on-year increase of 3.1 percent. Adjusted for the currency effects of the on-average weaker US dollar compared with the euro, turnover grew by 8.0 percent in the period under review.

Following its positive result in the previous year, the Plant Equipment Group (PEG) again achieved a mid-single-digit increase in its turnover, although growth started to tail off a little already in the second quarter. As expected, the more late-cyclical companies of the Office Equipment Group (OEG) overtook the PEG in terms of their growth rates in 2011 and recorded a high single-digit increase. The Specialties Group (SPG), whose customers are primarily in the retail and service sector, posted the biggest improvement with a low double-digit rate of organic growth.

TAKKT AMERICA generated EBITDA of EUR 28.6 (28.9) million in the year under review, resulting in an EBITDA margin of 8.3 (8.6) percent. Here, it should be noted that earnings were affected by bringing forward advertising costs. Printing the first two catalogues for the year 2012 for the PEG together, led to advanced advertising costs amounting to EUR 1.3 million in 2011. Adjusted for this effect, the EBITDA margin was 8.7 percent. In terms of profitability, the SPG was able to deliver the highest contribution, followed by OEG and PEG. Scheduled start-up losses at the European Hubert companies, IndustrialSupplies.com, cateringplanet.com and NBF Canada had a negative impact on earnings.

Acquisition of leading US direct marketing company for display articles
Further diversification of the product range

Today, the TAKKT Group company K+K America Corporation has signed a contract to acquire George Patton Associates, Inc. (GPA), based in Rhode Island, USA. The Supervisory Board of TAKKT AG has already approved the transaction. By acquiring the B2B direct marketing company for display articles, TAKKT strengthens its US portfolio. The new company will form a part of the Specialties Group within TAKKT AMERICA.

With multiple web sites serving many industries, GPA generated turnover of ca. USD 52 million and an EBITDA margin of ca. twenty percent in 2011. This makes GPA a leading B2B direct marketing specialist in the US display product category. Approx. eighty percent of turnover is generated online. Therefore, the acquisition is an ideal addition for TAKKT. "We further diversify our product portfolio and noticeably extend our e-commerce competence," said Zimmermann.

A purchase price to be paid in two instalments was agreed on for acquiring the entire interest in GPA. On the closing date (expected in early April), a first instalment will approx. be USD fifty million. A second instalment was stipulated for early 2015. The minimum guaranteed amount of this second payment will be USD 48 million. A supplemental variable earn-out opportunity up to approx. USD 22 million is based on three year turnover goals. The current owners have agreed to long-term employment contracts and will remain responsible for management after the transaction has been closed. TAKKT funds the acquisition with already committed long-term credit lines. Even after closing the transaction and paying out the proposed dividend of 85 cents per share in May 2012, TAKKT will still have a very solid balance sheet structure with an equity ratio of more than forty percent. "This ensures enough scope for further growth," explained Tomaszewski.

Outlook for 2012
"TAKKT is doing well, TAKKT grows profitably and we have made a number of plans to be able to grow even stronger in the future," said Zimmermann, commenting on TAKKT's direction for the years to come. Zimmermann stated the topics of innovation and sustainability as the main driving forces for continuing on the road to success. Increasing the efficiency and value of the company will play an important role in all of its growth initiatives. This value enhancement is not based on financial aspects alone - in 2011, TAKKT introduced a systematic sustainability management system under the name of SCORE and incorporated it into the corporate strategy. As a result, sustainability becomes a fundamental component of all decisions made along the value chain.

For the current year, the TAKKT Management Board still sees three different development scenarios for the organic turnover growth (excluding acquisitions):

  • If global economic growth, as measured by the development of the gross domestic product (GDP), is at the same level as in 2011 and the purchasing managers' indices (PMI) remain between 50 and 55 points, an organic increase in turnover of three to five percent is realistic for TAKKT. In this case, the EBITDA margin would be in the upper third of the long-term target corridor of 12 to 15 percent.
  • If GDP growth falls slightly on 2011 and PMI values stay around the mark of fifty, the Group should be able to achieve turnover growth of around two percent and maintain a medium EBITDA margin.
  • If GDP growth rates are negative, pushing the economy into a recession, and the PMIs stay below fifty points for a long period of time, a decline in consolidated turnover and the EBITDA margin cannot be excluded.

Zimmermann summarised the situation as follows: "The economic indicators suggest that the middle scenario is currently the most likely of the three, though the US economy seems to be more robust at the moment than the European one."

IFRS figures for TAKKT Group for the 2011 financial year
(in EUR million)

2011 2010 Change in %
TAKKT Group
turnover
852.2 801.6 6.3
Organic growth 7.3
TAKKT EUROPE 507.3 467.1 8.6
TAKKT AMERICA 345.2 334.7 3.1
EBITDA 121.0 100.6 20.3
EBITDA margin 14.2 12.6  
EBITA 104.1 80.8 28.8
EBITA margin 12.2 10.1  
EBIT 104.1 68.0 53.1
EBIT margin 12.2 8.5
Profit before tax 95.6 59.0 62.0
Pre-tax profit margin 11.2 7.4  
TAKKT cash flow 87.7 70.3 24.9
TAKKT cash flow margin 10.3 8.8  
       
Capital expenditure (inc. acquisitions and finance leases) 11.5 6.7 71.6
TAKKT cash flow per share in EUR
Earnings per share in EUR
Dividend per share in EUR
1.34
1.01
0.85
1.07
0.52
0.32
25.2
94.2
165.6
Non-current assets
in % of total assets
376.9
68.5
377.8
69.8
-0.2
Total equity
in % of total assets
301.0
54.7
251.7
46.5
19.6
Net borrowings 93.7 139.2 -32.7
Employees (full-time equivalents)
at 31.12
1,869 1,807 3.4

Company calendar
The figures for the first three months of 2012 will be published on 26 April 2012. The AGM will be held at the Forum Ludwigsburg on 08 May 2012.

Short profile of TAKKT AG
TAKKT is the leading B2B direct marketing specialist for business equipment in Europe and North America. The Group is represented with its brands in more than 25 countries. The product range of the TAKKT subsidiaries comprises some 175,000 products for the areas of business and warehouse equipment, classic and design-oriented office furniture and accessories, and supplies for retailers, the food service industry and the hotel market.

TAKKT Group employs some 1,900 staff, has around three million customers worldwide and distributes more than 45 million catalogues and mailings per year.

TAKKT AG is listed on the SDAX and was admitted to Deutsche Boerse's Prime Standard on 01 January 2003.

Contacts:
Dr Felix A. Zimmermann, CEO                                    Tel. +49 711 3465-8201
Dr Claude Tomaszewski, CFO                                     Tel. +49 711 3465-8207

Email: investor@takkt.de




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