Good order situation at start of second quarter

Heidelberg (ots) -

- Demand for contract and subscription offerings continues to develop
favorably - higher share of recurring sales
- First quarter affected by reluctance to invest due to economic
situation
- Seasonal increase in net working capital hits free cash flow
- Measures introduced to increase liquidity and safeguard
profitability

Heidelberger Druckmaschinen AG (Heidelberg) has embarked on the
second quarter of financial year 2019/2020 with a far better order
situation, compensating in part for the weak first quarter in Europe
in particular. The company is systematically continuing its digital
transformation and expanding its innovative digital business models
with a view to significantly reducing its exposure to economic
fluctuations and increasing the share of recurring business in the
medium to long term. Demand for the contract and subscription
offerings that are the main focus of this strategy continued to grow
in the first quarter of financial year 2019/2020. The medium-term
goal is to increase the share of recurring sales - primarily from
contract and subscription business - to around one-third of total
sales. With customer demand rising, Heidelberg is expanding its
subscription portfolio and is now offering additional contract
options. At present, customers are offered a fully inclusive package
that combines equipment, services, consumables, and software in one
usage-based contract that runs over several years. In the future,
however, they 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.

Towards the end of the first quarter in particular, the need for
further strategic development of the company was highlighted by the
increasing reluctance to invest, especially in western Europe, and
associated shifts in sales due to the economic slowdown. Quarterly
sales, EBITDA excluding restructuring result, and the net result
after taxes, for example, were all down on the corresponding figures
for the previous year. In mid-July, Heidelberg adapted its outlook
for financial year 2019/2020 as a whole to reflect the changed
business expectations.

Measures introduced to increase liquidity and safeguard
profitability

Despite an improving order situation at the beginning of the
second quarter and continuing positive effects from the successful
Print China 2019 trade show, Heidelberg has immediately introduced
measures to boost results. These include strategies to make working
hours more flexible in the short term - such as working-time accounts
and short-time working - and structural projects to achieve a
sustained increase in profitability. Heidelberg has also initiated a
program to significantly improve the net working capital and free
cash flow. This involves closely scrutinizing many of the investments
planned for the current financial year and the next, with a view to
cutting planned investments by some EUR 20 million. Optimized lead
times and inventory levels as well as better accounts receivable
management are also envisaged to reduce the tied-up capital by around
EUR 50 million. In addition, Heidelberg is considering portfolio
adjustments, which will involve selling some smaller areas of the
company, together with further structural optimizations. Overall, the
liquidity potential identified totals some EUR 100 million.

"The good start to the second quarter means we're confident of
achieving our planned business volume for the financial year. What's
more, the positive impact of the numerous measures we've introduced
to improve our results and free cash flow will be felt in the second
half of the financial year," said Heidelberg CEO Rainer Hundsdörfer.
"In the years ahead, the digital transformation is set to lessen our
future exposure to economic fluctuations by increasing the share of
recurring business to around one-third of our group sales. We've
already made significant progress in this respect. Additionally, we
are continuously expanding our market share by investing in our core
business," he added.

Operational development in the first quarter affected by economic
uncertainty

In the face of growing economic uncertainty, above all in central
Europe, sales at Heidelberg fell from EUR 541 million to EUR 502
million in the first quarter of 2019/2020 (April 1, to June 30, 2019.
Despite far higher demand in China following the successful Print
China trade show, incoming orders of EUR 615 million as at June 30,
2019 were down on the previous year's figure (EUR 665 million). The
order backlog increased by around 12 percent, from EUR 654 million at
the end of the previous financial year on March 31, 2019 to EUR 730
million as at June 30, 2019. This is partly due to the new
subscription contracts, which will be reflected in the sales figures
over their respective terms.

EBITDA excluding restructuring result amounted to around EUR 14
million (including an IFRS 16 impact in the region of EUR 5 million).
This, too, was down on the unadjusted figure for the previous year of
around EUR 20 million. EBIT excluding restructuring result totaled
EUR -10 million (same quarter of previous year: EUR 2 million). The
EBITDA margin excluding restructuring result (but including the
impact of IFRS 16) was 2.8 percent, following a figure of 3.7 percent
for the corresponding quarter of the previous year. The financial
result improved from EUR -16 million in the equivalent quarter of the
previous year to EUR -13 million. The net result after taxes,
including income taxes, was EUR -31 million (previous year: EUR -15
million).

Seasonal increase in net working capital negatively affects free
cash flow

The increase in net working capital, which is partly a result of
lower customer advance payments due to the lower order intake, the
high capacity utilization at the production site in Shanghai, and
investments to expand digital business models in the course of the
financial year resulted in a negative free cash flow of EUR -83
million (previous year: EUR -45 million). The considerable reduction
in the actuarial interest rate for pensions in Germany and the net
loss for the quarter were the main reasons for the lower equity of
EUR 295 million at the end of the quarter, which is equivalent to an
equity ratio of around 13 percent. Higher financial liabilities on
the reporting date were primarily due to the first-time application
of IFRS 16 (EUR 55 million) and the negative free cash flow. The net
financial debt rose accordingly, amounting to EUR 391 million at the
end of the quarter. The leverage on the reporting date for the
quarter was 2.1.

"In the short term, our focus is on optimizing the net working
capital and on asset management. This will significantly reduce our
debt and safeguard both our profitability and our financial
stability," said CFO Dirk Kaliebe.

Outlook for financial year 2019/2020

Heidelberg is expecting sales for financial year 2019/2020 as a
whole to match the previous year's level. The company anticipates
that further stable expansion of its contract business will
compensate for the economic slowdown and the associated reluctance to
invest in equipment. In the current financial year, Heidelberg is
targeting EBITDA excluding restructuring result of between 6.5 and 7
percent of sales, and is expecting to break even after taxes. Even
factoring in the higher net financial debt following application of
IFRS 16, the leverage is set to remain below the target of 2
previously announced by the company.

Image material, the interim report for the first quarter of
financial year 2019/2020, 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

Other dates:

The scheduled publication date for the financial statements for
the second quarter of 2019/2020 is November 6, 2019.

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