INDUS continues to grow strongly in H1 2017 and confirms forecast
• Revenues and earnings pick up; earnings per share climb to EUR 1.58
• EBIT margin temporarily influenced by repositioning costs in Q2
• Positive start for new portfolio companies, M+P and PEISELER
The German economy continued its upward trend in the first six months of 2017, which is also reflected in the strong growth of the INDUS Group. Sales revenues of INDUS Holding AG rose by EUR 88.6 million to EUR 803.5 million in the first half of 2017, up 12.4% on the prior year period (EUR 714.9 million). The increase is primarily attributable to organic growth in all segments. Earnings before interest and taxes (EBIT) climbed 4.9% to EUR 72.7 million (H1 previous year: EUR 69.3 million). Adjusted for the effects of company acquisitions, EBIT amounted to EUR 78.5 million (H1 previous year: EUR 75.5 million). Earnings per share climbed 5.3% from EUR 1.50 to EUR 1.58.
Overall, the performance in the first six months was in line with expectations, although the EBIT margin, at roughly 9%, declined somewhat as expected due to the repositioning of a Swiss portfolio company (H1 previous year: 9.7%). The adjusted EBIT margin (after effects of acquisitions, see above) stood at 9.8% (H1 previous year: 10.6%). At EUR 422.5 million, sales revenues hit a new record also in the second quarter of the year (Q2 previous year: EUR 382.0 million). Second-quarter EBIT includes one-time expenses from the above-mentioned repositioning in the amount of approx. EUR 5 million and therefore dropped to EUR 38.0 million, which was slightly below the previous year’s EUR 38.8 million.
INDUS’ Construction/Infrastructure segment continued its very good performance thanks to the construction boom in Germany. The segment’s revenues were up by 24.5% on the previous year to EUR 161.9 million. Operating EBIT increased by 10.8% to EUR 21.5 million. The EBIT margin stood at a good 13.3%. This gratifying performance is expected to continue in the second half of the year.
Order books of the Automotive Technology segment are well filled. The INDUS companies increased their sales revenues by 6% to EUR 192.3 million in the first half of 2017. Nevertheless, the pressure on margins, especially for suppliers of series parts to the auto industry, is higher than ever before. The repositioning of a segment company is largely proceeding according to plan. As a result of this repositioning, EBIT declined by EUR 1.3 million to EUR 7.9 million. The EBIT margin stood at 4.1%. Against this background, the EBIT margin target of 6% will not be reached this year, with the margin now expected to amount to between 5% and 6%.
At EUR 174.0 million, sales revenues in the Engineering segment were up by an impressive 17% on the first half of 2016 and were supported by all segment companies. EBIT increased by a disproportionate 40% to EUR 26.0 million. The EBIT margin reached a very good 15%, which clearly exceeded the previous year’s 12.5%. The Board of Management expects strong figures for the full year 2017 also for this segment.
Sales revenues in the Medical Engineering/Life Science segment rose by 3.3% to EUR 78.4 million. EBIT amounted to EUR 9.3 million, while the EBIT margin reached a good 11.9%. Following a very modest start to the year in the first quarter, the portfolio companies reported clearly higher earnings in the second quarter, when the EBIT margin reached 13.9%, suggesting a good performance for the full year.
The Metals Technology segment boosted its revenues by 10.1% to EUR 196.8 million in the first six months of the year, driven by growth at nearly all segment companies. Due to the repositioning of the Swiss portfolio company and the related one-time expenses for the restructuring in the second quarter, the operating result, at EUR 12 million, remained below the good level of the previous year (EUR 15.7 million). The EBIT margin amounted to 6.1% at the half-year stage. The segment’s EBIT margin target of 8% will not quite be reached this year.
As INDUS was able to acquire two hidden champions in the first half of 2017, the company’s portfolio increased to 46 companies. In January, INDUS acquired M+P INTERNATIONAL Mess- und Rechnertechnik, Hanover, a provider of measurement and test systems for vibration testing. Its customers include the automotive industry, the electrical and electronics equipment industry and the aerospace industry. The PEISELER Group, Remscheid, a manufacturer of high-precision subsystems and rotating equipment for machine tools, was taken over in April. PEISELER today serves both manufacturers of machine tools and end customers in sectors such as automotive, mechanical engineering and shipbuilding, medical engineering, watches and electrics as well as aircraft and turbine construction. Both companies are showing a positive performance.
Earnings after taxes rose by 5.4% from EUR 37.0 million in H1 2016 to EUR 39.0 million. As a result of the two acquisitions and an increase in working capital specifically planned for the spring, operating cash flow declined by EUR 21.5 million to EUR 9.8 million in the first six months. The Board of Management expects the opposite effect for the second half of the year. At EUR 10.9 million, net cash used for interest payments was clearly below the previous year’s EUR 14.0 million. Cash flow from investment activity amounted to EUR 63.8 million in the reporting period. This was EUR 9.4 million below the previous year’s EUR 54.4 million and includes the acquisitions of the INDUS subsidiaries. Fixed asset investments were up by EUR 10.9 million on the previous year to EUR 30.9 million. As had been planned, cash and cash equivalents were reduced clearly below the high level of EUR 127.2 million recorded at the end of 2016 and now amount to EUR 101.2 million.
“Between them, the Group and its 46 portfolio companies are performing excellently, the economic trend is good and order books are well filled,” says Jürgen Abromeit. “As we were more or less aware of the difficult conditions in the automotive industry and the scope of the repositioning requirements of the two companies from the Automotive and Metals Technology segments, we were able to consider them in our projections.” The INDUS Board of Management has confirmed its forecast after the second quarter of 2017 and projects annual sales revenues to increase to over EUR 1.5 billion and earnings before interest and taxes (EBIT) to come in at between EUR 145 million and EUR 150 million. The two repositioning exercises are to be largely completed within the first half of 2018. After the two acquisitions made in the first half of the year, the company is currently preparing another takeover. Against the background of the economic trend, the Board of Management projects a strong performance for the INDUS Group also for 2018.
The full interim report for the period ended 30 June 2017 of INDUS Holding AG is here available for download.