publication interim results 2010
Aalberts achieves sharp improvement of results
- revenue increases organically by 12% to EUR 782 million
- added value* margin improves substantially to 60.9%
- operating profit before depreciation (EBITDA) up by 55% to EUR 114.0 million
- operating profit (EBITA) up by 110% to EUR 81.1 million
- net profit increases by 180% to EUR 51.3 million
- earnings per ordinary share up by 182% to EUR 0.48
- improved balance sheet ratios and sharp decrease leverage ratio to < 3.0
- Industrial Services shows a robust recovery with an organic revenue growth of 23%
- Flow Control realises an organic revenue growth of 7%
- announcement of intended acquisition of Conbraco Industries (United States)
Net profit during the first half of 2010 was virtually the same as during the whole of 2009 (EUR 54.2 million). This proves the strength of our strategy and portfolio, despite the changeable and sometimes mediocre market conditions in some countries and segments.
Industrial Services’ activities improved significantly. Operating profit (EBITA) rose to EUR 24.3 million compared with EUR 7.1 million negative in 1H2009. Flow Control’s activities also improved and an EBITA of EUR 56.8 million was achieved compared with EUR 45.8 million in 1H2009.
To sum up: during the first half of 2010 the foundation for our future was strengthened further through not only an increase in revenue and net profit but also a substantial reduction of the leverage ratio (Net debt/EBITDA), stronger balance sheet ratios and market positions that, thanks to our current potential, offer considerable scope for expansion. Our strategy of profitable growth, both organically and through acquisitions, will be continued."
Financial results (before amortisation)
Revenue During the first six months of 2010 Aalberts Industries achieved an organic revenue growth of 12% to EUR 782.0 million compared with the first half of 2009. At constant exchange rates this amounts to a growth of 10.1%.
Added value During the first half of 2010 added value (revenue minus raw materials and work subcontracted) rose by 16% to EUR 476.3 million (1H2009: EUR 410.4 million). The added value margin rose to 60.9% of revenue (1H2009: 58.5%).
Operating profit Operating profit before depreciation and amortisation (EBITDA) rose by 55% to EUR 114.0 million (1H2009: EUR 73.8 million), 14.6% of revenue (1H2009: 10.5%). Operating profit after depreciation and before amortisation (EBITA) more than doubled to EUR 81.1 million (1H2009: EUR 38.7 million), 10.4% of revenue (1H2009: 5.5%).
Net interest expense In the first half of 2010 the net interest expense decreased further to EUR 13.9 million (1H2009: EUR 15.6 million) due to lower interest rates and a lower average debt position (despite working capital being increased by over EUR 76 million).
Balance sheet ratios and covenants Mid 2010 total equity amounted to 40.2% of the balance sheet total (1H2009: 35.2%). Net debt was EUR 666.6 million compared with EUR 787.7 million in mid 2009. Aalberts Industries amply complies with its bank covenants.
During the past twelve months the primary financial ratios developed as follows:
- Leverage ratio: Net debt / EBITDA (twelve months rolling) from 3.93 to 2.98;
- Interest cover ratio: EBITDA / net interest expense (twelve months rolling) from 5.1 to 7.7;
- Gearing: Net debt / total equity from 1.3 to 1.0.
Net profit Net profit over the first half of 2010 amounted to EUR 51.3 million (1H2009: EUR 18.3 million) and earnings per ordinary share amounted to EUR 0.48 (1H2009: EUR 0.17).
Capital expenditure and cash flow In the first six months of 2010 capital expenditure on property, plant and equipment amounted to EUR 22.4 million compared with EUR 23.3 million in 1H2009. In recent years significant sums have been invested. As a result the current level of investment is lower, partly in view of the fact that the capacity has not yet been fully utilised.
In the first half of 2010 net working capital was EUR 331.7 million (1H2009: EUR 344.5 million) and cash flow (net profit plus depreciation) amounted to EUR 84.1 million (1H2009: EUR 53.4 million).
Industrial Services During the first six months of 2010 Industrial Services’ revenue rose organically by 23% (22.8% at constant exchange rates) to EUR 225.0 million (1H2009: EUR 182.3 million). Operating profit before depreciation and amortisation (EBITDA) was EUR 37.9 million (1H2009: EUR 8.2 million), 16.8% of revenue (1H2009: 4.5%). Operating profit (EBITA) amounted to EUR 24.3 million (1H2009: EUR 7.1 million negative), or 10.8% of revenue (1H2009: 3.9% negative).
Industrial Services supplies products, systems and processes to specific market segments, such as the semiconductor and automotive industries, the medical sector, the aerospace and defence industries, the precision engineering sector and the sustainable energy market. This is achieved with the aid of a number of specialised and complementary technologies. Demand rose sharply, especially in the semiconductor and automotive market. The precision engineering market also showed signs of recovery. The medical sector and the defence market remained reasonably stable while certain segments of the aerospace industry still showed no improvement. Within Industrial Services the focus is on continuously increasing the added value margin by constantly improving the revenue, quality and service, with relatively fewer employees.
Flow Control Despite virtually every country experiencing a harsh winter during the first quarter of 2010, Flow Control improved both its revenue and its profit. During the first six months of 2010 revenue rose organically by 7% (5.6% at constant exchange rates) to EUR 557.0 million (1H2009: EUR 518.7 million). Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 76.1 million (1H2009: EUR 65.6 million), 13.7% of revenue (1H2009: 12.6%). Operating profit (EBITA) amounted to EUR 56.8 million (1H2009: EUR 45.8 million), or 10.2% of revenue (1H2009: 8.8%).
Flow Control focuses on a complete portfolio for residential new-build, commercial buildings, renovation and maintenance, solar energy, utility networks, district heating, fire protection, irrigation systems, the beer and soft drinks industry and other industries. Despite the market being challenging in most sectors, Flow Control achieved a relatively strong organic revenue growth and with it an increased market share. This was primarily due to the introduction of new ‘own’ products, a further intensifying of cross-selling and a focus on strengthening the sales efforts. The result was an improved added value margin. The efficiency measures implemented included the clustering of sales and distribution channels and intensifying the key account management.
In Western and Northern Europe the markets were hesitant. Although the markets in Eastern Europe improved slightly they remained difficult due to the limited availability of liquidity for new-build projects and the long, hard winter. The markets in Southern Europe continued to suffer from the effects of the financial crisis. In the United States the irrigation market showed signs of recovery while the markets for both residential and commercial buildings remained hesitant. In Asia Flow Control responded pro-actively to the many golf course projects. In the beer and soft drinks industry a number of new projects were carried out for existing customers, partly based on new products and intensive cooperation between Europe and the United States.
The intended acquisition of Conbraco Industries in the United States, announced 2 June 2010, was completed successfully on 15 July 2010 and upon closing of the books, accounting effects and disclosures will be determined. With more than 1,000 employees Conbraco Industries generates an annual revenue of approximately USD 200 million. Conbraco Industries’ results will make a direct contribution to earnings per share and will be consolidated with effect from July 2010.
The number of employees on 30 June 2010 was 10,568 (1H2009: 10,140).
Structural cost reductions, organisational improvements and growth as a result of a more active market approach and earlier investments, have further strengthened Aalberts Industries’ foundations.
Based on the current, but admittedly fluctuating, developments in the various markets and countries, and barring unforeseen circumstances, Aalberts Industries anticipates the result for 2010 will be significantly better than for 2009.
Solid balance sheet ratios will be maintained through a continuing focus on profitability, working capital management and cost control.