Kapsch TrafficCom – Stronger second quarter: The Group continues growth.

Highlights.

• Revenues increased by 11.3% to EUR 339.8 million
• Second quarter of 2017/18 was positive both sequentially and year-on-year
• EBIT for the first half 2017/18 is 12.1% below last year’s comparison value
• Net debt of EUR -15.7 million (gearing ratio: 7.1%)
• Nation-wide road safety and traffic management concession in Zambia
• After the end of the quarter: awarded contract for a nation-wide toll system in Bulgaria

“The second quarter was positive both sequentially and year-on-year. Revenues continued to increase and the operating result (EBIT) rose as well. Furthermore, I am delighted that for the first time Kapsch TrafficCom employed more than 5,000 employees worldwide as of the quarterly reporting date,” says Georg Kapsch, CEO of Kapsch TrafficCom.

Vienna, November 29, 2017 – Kapsch TrafficCom increased revenues by 11.3% to EUR 339.8 million in the first half of 2017/18. This was due to the ETC (Electronic Toll Collection) segment, which grew by 15.9%. The IMS (Intelligent Mobility Solutions) segment’s revenues were 1.7% lower mainly because non-core business projects have expired which were taken over in connection with the acquisition of the transportation business of Schneider Electric (in 2016).

The EBIT of EUR 25.3 million was EUR 3.4 million (-12.1%) lower than the previous year due to the low value in the first quarter of this year. The following effects influenced operating profitability in the first six months of the current fiscal year:

• Negative currency effects, mainly from the USD, ZAR and SEK currencies, placed a burden of EUR 5.9 million on the EBIT, i.e., EUR 8.2 million more than in H1 2016/17.
   
• The EBIT in H1 2016/17 contained a positive one-time effect of EUR 3.0 million.
   
• In the course of extending the tolling project in the Czech Republic in 2016, it was necessary to lower prices. This has an impact on profitability this fiscal year. The decline in profits should be offset by profitable new business.
   
• After the integration of the transportation business acquired from Schneider Electric in 2016 the synergies have not been fully realized in the US. In order to advance this process, a number of measures have been taken and already implemented in some cases. Positive effects should gradually become noticeable in the current fiscal year.
   

When adjusted by the first two points – i.e., the known one-time effect and the effects of exchange rate fluctuations, which can only be influenced to a limited extent – Kapsch TrafficCom achieved significant EBIT growth during the normal course of business.

The higher currency losses (by EUR 4.1 million) and lower currency gains (by EUR -1.9 million) compared to H1 2016/17 were the main reasons for the decline in the financial result to EUR -5.8 million (H1 2016/17: EUR -0.1 million). The profit for the period was EUR 14.1 million (H1 2016/17: EUR 20.1 million), and the earnings per share was EUR 1.12 (H1 2016/17: EUR 1.58).

Segment results.

In H1 2017/18, 76.7% of the revenue fell to the ETC segment and 23.3% to the IMS segment.

The EBIT in H1 2016/17 included a positive one-time effect of EUR 0.9 million.
 

The EBIT in H1 2016/17 included a positive one-time effect of EUR 2.1 million.
 

Free cash flow and balance sheet.

In particular, the strong increase in trade receivable of EUR 13.7 million resulted in a negative free cash flow of EUR -1.0 million in the first half of the year. As a consequence, as well as a result of the dividend payment of EUR 19.5 million and the expenses for investments and acquisitions, the net credit of EUR 19.6 million as of March 31, 2017 decreased to a net debt of EUR -15.7 million as of September 30, 2017 (gearing ratio of 7.1%). The equity ratio declined slightly from 35.0% to 34.8%, mainly as a result of the dividend payment. Nevertheless, the management believes that the balance sheet is still solid.

Outlook.

The corporate bond issued in 2010 was repaid as scheduled at the beginning of November. In 2016, Kapsch TrafficCom obtained the funds necessary for this by issuing a promissory note bond. The repayment of the 4.25% bond will discharge the interest income and has a shortening effect on the balance sheet. This has a positive effect on the equity ratio. However, it is currently examined whether the company can use the favorable interest rate environment in the medium or long term.

The company expects an increase in revenues of approximately 10% for the current fiscal year. Nevertheless, it will be a challenge to again reach the EBIT of the previous year, adjusted for the one-off effect (EUR 3.0 million) and for adverse exchange rate fluctuations. The company does not expect to achieve a positive EBIT contribution in the IMS segment in 2017/18.

You can find the report on the first half of 2017/18 at: www.kapsch.net/ktc/ir/