Provisional information on the Phoenix Mecano Group’s financial year 2008

Phoenix Mecano: Gross sales, operating profit (EBIT), margin, cash flow and dividend up.

Kloten/Stein am Rhein, 17 February 2009. The Phoenix Mecano Group’s provisional consolidated gross sales for 2008 rose by 7% to around €417 million, compared with €389 million the previous year. Corrected for differences in foreign-exchange rates, the growth in sales was 8%. The impact on gross sales of changes in the scope of consolidation was 7%. Provisional consolidated net sales rose from €385 million to around €413 million. Consolidated incoming orders totalled €403 million. The book-to-bill ratio, i.e. the ratio of incoming orders to gross sales, stood at 97%, mainly due to the significant economic slowdown in Q4.
 
EBIT, margin, cash flow

Unaudited operating profit (EBIT) rose by 10% from €39 million to around €43 million. The margin increased slightly from 10.0% to 10.3%. The Enclosures and Mechanical Components divisions saw their operating result rise, while the ELCOM/EMS division recorded a fall. Operating cash flow (EBITDA) increased by 8% to around €59 million, compared with €51 million the previous year. Provisional figures put the below-the-line result of the period at approximately €31 million, compared with €30 million the previous year. The disproportionately smaller increase in the result of the period compared with the operating result was mainly caused by the absence of one-off positive tax effects from 2007 as well as negative currency effects.
 

Division reports

The Enclosures division achieved a very good result once again, with growth recorded in various sectors. Particular noteworthy was the success of explosion-proof enclosures for the oil and gas segment.

In the Mechanical Components division, the good economic climate in Q1-3 was reflected in the industrial components segment (RK Rose&Krieger). Sales company RK System- und Lineartechnik, based in southern Germany, fulfilled all expectations following its acquisition at the start of the year, while the sale of start-up company Elodrive led to a significant cost reduction in H2. The Dewert segment, which manufactures drive solutions for the medical-technology and furniture industries, worked satisfactorily overall, with progress in the medical-technology segment offsetting difficult market conditions in the furniture sector.

The ELCOM/EMS division achieved mixed results. The Datatel product area, acquired in early 2008, enjoyed great success: it produces and sells special transformers and modules for use in solar inverters, and recorded organic growth of almost 200% in 2008. At the same time, the division was hit by one-off closure and relocation costs at one of its sites, extending into the low seven-figure range. The massive economic slowdown in Q4 2008 also left a clear mark on the division’s income statement.


Outlook

Since Q4 2008 the economic climate has become significantly more volatile and altogether more challenging, and there have been no signs of recovery in early 2009. The diversity of sectors in which the Phoenix Mecano Group operates is of limited benefit in this regard, since most sectors worldwide have now been affected by the slowdown.

That being said, the Group is well prepared to weather an economic downturn, even a fairly long-term one. Measures have already been taken at a number of locations to adjust capacity to reduced demand. These include cuts in temporary staff and working time accounts as well as the introduction of shorter working hours at some sites. However, crises also offer special opportunities, which strategically well-positioned and solidly financed companies like Phoenix Mecano can exploit. Our recent acquisition of parts of insolvent German group OKIN is already one major step towards improving the Group’s position. OKIN develops, produces and sells electrical drive solutions for the comfort-furniture and office sectors. The Board of Directors and management are confident of emerging stronger from the crisis and benefiting more than most in the ensuing upturn. Making a forecast for 2009 is extremely difficult. As things stand, we are anticipating a lower result than last year. However, despite integration costs linked to the acquisition of OKIN, the operating result and result of the period are expected to be positive.

Proposed dividend increase

In view of the further improvement in the Group’s result, the Board of Directors will propose to the Shareholders’ General Meeting that the dividend be raised again from CHF 9 to CHF 10 per share. The revised share buyback programme worth up to CHF 15 million, launched on 6 October 2008, will continue as planned. To date, shares worth CHF 5.4 million have been bought back.