Sales grown to €136 million / international presence increased / expansion of the Group to enter its next phase
euromicron AG, a leading provider of network and fiber optic technology, grew its sales by 18 percent to €137 million last fiscal year, while consolidated earnings before interest and taxes increased by around 55 percent to €12 million in 2007. The EBIT margin rose from 6.6 to 8.8 percent, while consolidated net profit grew from €4.4 to €7 million. Earnings per share increased from 95 cents to €1.53.
The euromicron Group’s sales last year rose by just under 18 percent to around €137 million. That means that euromicron AG has grown more than 150 percent over the past five years in what is now its sole business segment of network technology. The acquisitions in 2007 account for increased sales totaling around €14 million in the fiscal year, meaning that organic growth is just below 6 percent. As in the previous year, sales grew at all business units: the companies operating in component production and assembly increased sales by some 19 percent and the project and system companies by 17 percent. Sales even rose 21 percent in distribution and services.
Reorganization and expansion of the Group is also making rapid progress: “Restructuring of our company into an integrated group has been achieved and is now entering its next phase,” said Chairman of the Executive Board Dr. Willibald in presenting the figures at the company’s General Meeting in Frankfurt. Following expansion of the Northern grouping in past years, the company had expanded the Southern grouping last year with an eye on achieving this integration target. As a result, the companies Pfeiffer, NTA, TBS Telefonbau Schneider, Krumm Telekom and o-n-e optical network elements had been merged into euromicron solutions GmbH and, in 2008, the remaining shares in Gustav Hartmann Nachrichten- und Fernmeldetechnik GmbH had been acquired and the company integrated in the Southern grouping. The aim in the next two years is to give the newly created units the time to collect themselves organizationally and in their contents and personnel. “As a result, euromicron AG will become a system house whose name is a byword for all products and services relating to high-quality networks and powerful products,” said Späth.
The success of the two segments can already been seen from the figures: euromicron North grew its sales by 8 and euromicron South by 27 percent. The Northern grouping increased its earnings before interest and taxes by 21 percent, driven by expansion in high-margin business. euromicron South even boosted its EBIT by 34 percent.
Internationalization driven forward
According to Späth, this visible success is also due to the purchase of Cteam, an established and prestigious vendor in the Austrian mobile communications market. Cteam’s customers include numerous well-known Austrian mobile operators. He added that euromicron Holding GmbH, Austria, which had been specially established for the acquisition of Cteam, gave the Group the chance to integrate further companies or associates and take the plunge into Eastern Europe. Further target markets included Italy, and Switzerland was still one – but the company would not act in a rush. “We have clear ideas of what we want – and as long as we do not find anything that lives up to what we want, we will not take any hasty steps,” stated Späth.
Backed by this positive balance, the company would easily achieve the sales budget of €180 million and the growth target of €200 million to mark the tenth anniversary of its flotation this year, said Späth. The goal of €20 million for operating income was also realistic. The next sales target would then be €300 million and could possibly be surpassed by 2010.
Growth demands changes in the balance sheet structure
The company’s strong growth and favorable costs of capital are the starting point for realigning its capital structure and focusing more strongly on return on equity, continued Späth. Consequently, short-, medium- and long-term financing had been optimized in 2007, in particular by significantly increasing the proportion of long-term outside capital. Long-term financing is geared to the forecast return on investment of the acquired companies and is the foundation for the Group’s stabile and long-term financial planning.
“In addition, we increasingly leverage the financing of our expansion strategy - despite the financial crisis – euromicron AG is able to raise external capital on the capital markets at better conditions than the returns that will be achieved by the acquired companies,” explained Späth.
As a result of the buy and build strategy and related increase in virtually all balance sheet items, including total assets, the Group’s equity ratio fell from 61 percent to 48 percent; however, stockholders’ equity increased from €67 to €70 million in absolute terms. Späth noted that this by no means meant that euromicron would depart from its conservative line of financing: the company would ensure that it was always able to repay its external funding with three to four net annual profits and maintain its relative independence from the capital market.
A higher dividend again
However, Späth was disappointed at how euromicron’s share had performed: the financial market crisis had caused investors to take their money out of second-tier and technology stocks and this had also impacted the shares of euromicron, as a small-cap company. Accordingly, the share price fell in the past year from €21.50 to €19 and even currently stood at €16. Nevertheless, shareholders in euromicron AG would profit from the company’s commercial success: the Executive Board and Supervisory Board of euromicron AG had again proposed an increase in the dividend by 14 percent to 80 cents for 2007. The dividend yield from euromicron’s share is thus around 4.5 percent and even 6 percent on the current basis.
In order to enhance the share’s attractiveness, communication with the capital market would again be intensified this year. In this way the company had already acquired prestigious addresses in Germany, Austria and Switzerland as new investors and so further improved and widened the shareholder base of euromicron AG. At the same time as enlarging the shareholder base, the company completed the first stage of the share buyback program as planned last year. “Shareholders profit doubly from this program,” explained Späth: first, it stabilized the share price and, purely arithmetically, increased profit per share; second, the company could use its own shares as a solid currency for further acquisitions.
The growth markets of medicine and green IT
One of the future growth segments for euromicron AG identified by Späth was medical engineering: “In medicine, health professionals will increasingly use efficient networks so that they can discuss difficult diagnoses with specialists, while video-based remote operations will become a firm part of everyday life,” he stated. In his estimate, powerful networks will also play a major role in supervised apartment buildings and care institutions, as well as in payment and toll systems. The changes in the statutory requirements for storing data will also necessitate expansion and conversion of the necessary networks. The resultant demands placed on data security represent an opportunity for euromicron with its product range in the coming years. Another important and interesting business segment named by Späth was green IT, i.e. energy-efficient use of computer systems. In the past years, data centers had been expanded mostly with an eye to achieving more computing power and faster transfer times – today, they are to operate with greater economy in terms of energy use. In this regard, euromicron had been early to develop initial solutions with its Power over Ethernet system.