Heidelberg focuses on implementing its digital transformation

Heidelberg (ots) -

- Consistent expansion of contract business
- Rising share of recurring sales reduces dependency on economic
cycles
- Sales and results targets for financial year 2018/19 achieved
- Cautious outlook for 2019/2020: Sales and profitability forecast at
previous year's level

Following the successful end to financial year 2018/2019,
Heidelberger Druckmaschinen AG (Heidelberg) aims to vigorously pursue
its digital transformation. The company is to become less susceptible
to economic fluctuations in the future, primarily due to the
expansion of innovative digital business models and the higher
proportion of recurring contract sales these will bring.
Approximately 30 contracts were concluded in financial year 2018/2019
and customer demand is rising, which is why Heidelberg is continuing
to expand its subscription offerings. At present, customers are
offered a fully inclusive package that combines equipment, services,
software and consumables in one usage-based contract that runs over
several years. In the future, customers will also be able to combine
and utilize individual components from this offering over a defined
period of time and in line with set standards. This will enable them
to switch to usage-based service models in a phased process. In the
medium term, approximately a third of overall sales and around two
thirds of lifecycle sales at Heidelberg are to be generated on a
sustainable basis through contract business.

Furthermore, Heidelberg is working on an industry platform that
will offer print shops an automated, usage-based means of meeting
their needs for software applications and consumables. Due to the
ramp-up of the Heidelberg digital portfolio, primarily in the growing
packaging segment, the number of installed systems will increase,
thus generating considerable growth in stable, recurring sales of
consumables, which will outstrip machine-only business. In China, for
example, Heidelberg has, for the first time, joined with a leading
packaging manufacturer to invest in a new online business model for
designing, ordering, and printing custom folding cartons under the
name 'boxuni.'

"We are vigorously pursuing the Group's reorganization. Thanks to
the expansion of digital business models and the considerably higher
share of recurring contract sales associated with these, we are going
to get back onto a growth trajectory in the medium term and reduce
our exposure to economic fluctuations," explains Heidelberg CEO
Rainer Hundsdörfer.

Heidelberg achieves targets for 2018/2019

As announced when the preliminary figures were published in early
May, Heidelberg has achieved its operating goals following a strong
end to financial year 2018/2019 (April 1, 2018 to March 31, 2019).
For instance, at EUR2,490 million, group sales were around 3 percent
up on the previous year (EUR2,420 million). By contrast, the economic
slowdown and the dampening effect this had on the dynamics of new
machine orders meant that incoming orders, which reached EUR2,559
million at the end of March 2019, could not achieve the same level as
in the previous year (EUR2,588 million).

The company's operating margin based on EBITDA excluding
restructuring result was also within the target range, at 7.2 percent
(previous year: 7.1 percent). Absolute EBITDA was EUR180 million
(2017/2018: EUR172 million). In the year under review, the
restructuring result was, as planned, EUR-20 million (previous year:
EUR-16 million). At EUR-49 million, the financial result was similar
to that of the previous year (EUR-48 million). In total, the net
result before taxes reached EUR32 million (previous year: EUR39
million). Generating a net result after taxes of EUR21 million,
Heidelberg achieved an increase on the previous year (EUR14 million)
in line with expectations.

At EUR27 million, free cash flow in the fourth quarter was
positive while, for the year as a whole, it was EUR-93 million and
therefore considerably below the previous year's figure of EUR-8
million, as had been anticipated. As announced, during the financial
year under review, a considerably larger sum was invested in growth
areas such as digital projects, the expansion of new business models,
and the new innovation center at the Wiesloch-Walldorf site.
Following a capital increase, the net financial debt was EUR250
million (March 31, 2018: EUR236 million) and, at 1.4, leverage (net
financial debt in relation to EBITDA) remained well below the target
value of 2.

"As planned, we have finished financial year 2018/2019 with
moderately improved sales and results. Our core business developed
well and, from a financial standpoint, we have a very solid footing
for the future," commented Dirk Kaliebe, the company's CFO.

Cautious outlook for 2019/2020: Sales and pro?tability forecast at
prior-year level

Looking forward, despite growing weakness in the global economy
towards the end of the financial year, Heidelberg expects to see a
stable performance in its core business and growth in digital
subscription model. However, with underlying economic conditions
making companies more reluctant to invest in new technologies the
ramp-up in the area of digital printing can be expected to be more
conservative than originally planned. Postpress sales will grow at a
slower rate as the antitrust authorities blocked the acquisition of
MBO. In addition, the downturn in trade in consumables is likely to
be greater than expected.

As the global economic slowdown over recent months was reflected
in a reduction in momentum in terms of orders for new machinery and
the latest annual forecast by the industry association VDMA was more
pessimistic in light of the growing uncertainty on the world markets
due to trade disputes - in particular the trade dispute between the
US and China - and Brexit, Heidelberg is entering the new financial
year 2019/2020 with caution and anticipates revenue on a par with the
reporting year's level.

With regard to the operating result, taking into account the
expected effects of IFRS 16, Heidelberg is aiming for an EBITDA
margin excluding restructuring result of 7.5 to 8.0 percent:
Operating profitability is thus expected to be at the level of the
reporting year after adjustment for the anticipated effects of IFRS
16.

As in the previous years, the 2019/2020 financial year will see
restructuring expenses for transformation activities and the
optimization of processes and structures as part of operational
excellence. As in the previous year, Heidelberg expects these
expenses to amount to around EUR 20 million in the new financial
year.

In terms of the financial result, the positive effects of the
partial repayment of the high yield bond in the past year will be
more than offset by IFRS 16 and the temporary increase in net working
capital. Based on the expected stable development in sales and the
operating result, the net result after taxes is also forecast to
remain stable - and presumably not significantly affected by IFRS 16
- at the level of the year under review.

"There is no alternative to the 'Heidelberg goes digital!'
strategy. We will continue to see the fruits of our strategic
activities. Unfortunately, current economic developments are
dampening our growth dynamic, even though the market potential for
digitization in the printing industry and for digital packaging
printing remains high," says Hundsdörfer.

Next important date:

The Annual General Meeting for financial year 2018/2019 is taking
place in Mannheim on July 25, 2019.

The Annual Report for financial year 2018/19, image material, and
additional information about the company are available in the Press
Lounge of Heidelberger Druckmaschinen AG at www.heidelberg.com.

Heidelberg IR now on Twitter:

Link to the IR Twitter channel: https://twitter.com/Heidelberg_IR
On Twitter under the name: @Heidelberg_IR

Important note:

This press release contains forward-looking statements based on
assumptions and estimations by the Management Board of Heidelberger
Druckmaschinen Aktiengesellschaft. Even though the Management Board
is of the opinion that those assumptions and estimations are
realistic, the actual future development and results may deviate
substantially from these forward-looking statements due to various
factors, such as changes in the macroeconomic situation, in the
exchange rates, in the interest rates, and in the print media
industry. Heidelberger Druckmaschinen Aktiengesellschaft gives no
warranty and does not assume liability for any damages in case the
future development and the projected results do not correspond with
the forward-looking statements contained in this press release.

Further information:
Corporate Communications
Thomas Fichtl
Phone: +49 6222 82-67123
Fax: +49 6222 82-67129
E-mail: Thomas.Fichtl@heidelberg.com

Investor Relations
Robin Karpp
Phone: +49 6222 82-67120
Fax: +49 6222 82-99 67120
E-mail: robin.karpp@heidelberg.com

Original-Content von: Heidelberger Druckmaschinen AG, übermittelt durch news aktuell