2014

27 February 2014

TenCate records € 19 million net profit for 2013

Summary of 2013

  • Decline in revenues of 4% to € 1,012 million (autonomous -3%, currency effect -2%, acquisitions / divestments +1%).
  • Defence-related revenues decline by 40%.
  • TenCate Advanced Composites records 16% growth in revenues.
  • EBITA € 48.7 million (autonomous -3%) including non-recurring costs of € 5.9 million, mainly in the fourth quarter (2012: € 8.0 million non-recurring costs).
  • Net profit € 19.0 million (autonomous -7%).
  • Decline in net interest-bearing debt by € 41 million to € 189 million; debt ratio 2.27 (2012: 2.55).
  • Dividend proposal: € 0.50 per share (2012: € 0.50), in cash or as stock dividend at shareholder’s discretion.
Key figures 2013

Key figures x € 1 million

1H12*

2H12*

2012*

1H13

2H13

2013

Revenues

539.6

509.4

1,049.0

513.7

498.3

1,012.0

Normalized EBITA

31.3

26.8

58.1

28.7

25.9

54.6

EBITA

31.3

18.8

50.1

28.7

20.0

48.7

EBIT 

24.0

11.6

35.6

21.0

14.6

35.6

Net profit

14.0

6.9

20.9

13.0

6.0

19.0

Data per share (€)

 

 

 

 

 

 

Net profit

0.54

0.27

0.81

0.50

0.22

0.72

Dividend

 

 

0.50

 

 

0.50

Other information

 

 

 

 

 

 

Cash flow from operating and investing activities

-6.5

74.9

68.4

3.3

39.3

42.6

Interest-bearing debt

312.4

229.9

229.9

238.1

189.2

189.2

Debt ratio

2.74

2.55

2.55

2.80

2.27

2.27

FTE excluding hired personnel (year-end)

4,662

4,454

4,454

4,266

4,256

4,256

* adjusted for change of accounting policy for pensions

Loek de Vries, President and CEO: ‘As expected, 2013 was a challenging year for TenCate. The year was marked by cautious government markets as a result of budgetary constraints. The leading market positions held by TenCate were, nevertheless, maintained in 2013.

The important US defence market was faced with automatic budget cuts at the start of the year. Uncertainty about the size of the US Army withdrawal from Afghanistan also had an adverse effect on defence markets. In Europe defence expenditure reached its lowest point in ten years. The defence-related revenues of TenCate declined by 40%. The proportion of defence markets in the overall revenues of TenCate decreased from 13% in 2012 to 8% in 2013.

By contrast, most private markets developed positively. The market for composites continued to perform favourably in 2013. The first revenues in automotive composites were recorded by the successful acquisition of Amber Composites in January 2013. The proportion of TenCate revenues generated in the mobility market rose to 12% in 2013. TenCate is consequently less dependent on government expenditure.

TenCate continued to focus on sustainable innovation. Innovation entails investments and costs, while revenues to offset these will only be generated over time. Major steps were taken towards commercialization in 2013 in the developments relating to digital printing and finishing technology, synthetic turf systems, the TenCate ABDSTM active blast countermeasure system and thermoplastic composite material for the automotive industry. These key areas of attention will make a contribution to the future growth of TenCate.’

Annual figures for 2013
The revenues for 2013 amounted to € 1,012 million (2012: € 1,049 million). In autonomous terms, revenues decreased by 3% (currency effect -2%; effect of acquisitions / divestments +1%). Revenues generated in private markets rose by 7%, as a result of TenCate sharpening its focus on these markets. This rise in revenues partly offset the government-related decline in revenues.

EBITA in 2013 amounted to € 48.7 million (2012: € 50.1 million). This amount includes € 5.9 million in non-recurring costs (mainly write-downs within the Advanced Textiles & Composites sector). In 2012 this balance amounted to a total of € 8.0 million.
The operating result (EBIT) remained the same as in 2012 and amounted to € 35.6 million.

The net profit for 2013 amounted to € 19.0 million (2012: € 20.9 million) and net earnings per share, € 0.72 (2012: € 0.81).

General performance by sector

Advanced Textiles & Composites Sector

The revenues of the Advanced Textiles & Composites sector declined by 7% to € 427.8 million (2012: € 460.6 million). The autonomous change amounted to -8% (currency effect -2%; effect of acquisitions / divestments +3%).
EBITA declined by 9% (autonomous -10%) to € 21.3 million (2012: € 23.5 million). The change as a result of the currency effect and acquisitions / divestments amounted to -3% and +4% respectively.
Within the Advanced Textiles & Composites sector there were € 4.7 million non-recurring costs, related to write-downs at the end of the financial year (mainly within TenCate Protective Fabrics). The EBITA margin remained virtually unchanged at 5.0% (2012: 5.1%).

Key figures x € 1 million

1H12

2H12

2012

1H13

2H13

2013

Revenues

240.9

219.7

460.6

228.4

199.4

427.8

EBITA

19.0

4.5

23.5

14.1

7.2

21.3

EBITA margin

7.9%

2.0%

5.1%

6.2%

3.6%

5.0%

Investments in tangible / intangible fixed assets

5.7

3.7

9.4

2.9

4.9

7.8

Depreciation

5.3

5.4

10.7

5.3

5.0

10.3

Amortization

2.6

2.4

5.0

3.9

2.4

6.3

Average net invested capital

332.1

286.5

286.5

297.8

284.6

284.6

FTE excluding hired personnel (year-end)

1,657

1,697

1,697

1,518

1,542

1,542

The decline in the revenues and EBITA of the Advanced Textiles & Composites sector was the result of 40% lower defence-related revenues compared with 2012. Worldwide government expenditure on defence continued to be depressed in 2013. The US defence market, which is important to TenCate, was faced with sequestration (automatic budget cuts) at the start of 2013. In Europe expenditure on defence reached its lowest point in ten years.

The revenues from protective fabrics in the industrial market (TenCate Tecasafe® Plus) grew by 12%. The strengthening of the marketing and sales organization, focusing on new markets, resulted in a strong positioning of the product portfolio and revenue growth. The number of countries that have qualified TenCate DefenderTM M increased further in 2013.
There was a rise in the revenues generated by the personal ballistic protection end market (antiballistic vests, inserts, helmets and screens). This in part offset the decline in revenues in vehicle armour.

The TenCate Advanced Composites market group recorded revenue growth of 16% in 2013, linked to increased profitability. The composites market related to the space industry showed strong growth. TenCate is qualified for deliveries of composite material to the aviation industry for the latest generation of planes from Airbus, Boeing and others.
After the successful acquisition of Amber Composites in January 2013, further progress was recorded with the development of the market for composite materials for the automotive industry and the tooling market. TenCate also entered into significant commercial and strategic alliances in these markets. TenCate is confident that in the long term it will be able to play a major role in these growth markets.

One of the cornerstones of the TenCate strategy is sustainable innovation. A significant technological breakthrough was achieved in July 2013, when the first inkjet machine based on digital printing and finishing technology for TenCate Outdoor Fabrics was put into operation. The development of the TenCate ABDSTM active blast countermeasure system (protection for army vehicles from roadside bombs) is proceeding according to plan. In September 2013 a multi-year agreement was concluded with the US Army Research, Development and Engineering Command for collaboration in research and development. Revenues for the time being consist of demonstrators for test programmes and field tests on army vehicles from various manufacturers. The TenCate ABDSTM active blast countermeasure system with its related underbody armour is expected to have positive spin-off effects for the other activities in the field of vehicle protection.

Substantial costs were incurred in 2013 for the development of technology in respect of digital printing and finishing, automotive composites and the TenCate ABDSTM active blast countermeasure system, without there being any significant revenues to offset them. These costs for business development were in part not capitalized and had, as a result, a depressive effect on the EBITA of the Advanced Textiles & Composites sector. Nevertheless, these developments are expected to provide a major contribution to the result in the future.

Geosynthetics & Grass Sector
The revenues of the Geosynthetics & Grass sector remained virtually unchanged at € 517.8 million in 2013 (2012: € 518.7 million). In autonomous terms, revenues rose by 2% (currency effect -2%). EBITA declined by 11% to € 27.9 million (autonomous -10%, currency effect -1%). The EBITA margin declined to 5.4% (2012: 6.1%). 

Key figures x € 1 million

1H12

2H12

2012

1H13

2H13

2013

Revenues

261.7

257.0

518.7

249.7

268.1

517.8

EBITA

15.8

15.7

31.5

14.9

13.0

27.9

EBITA margin

6.0%

6.1%

6.1%

6.0%

4.8%

5.4%

Investments in tangible / intangible fixed assets

3.3

2.0

5.3

1.5

3.4

4.9

Depreciation

12.4

11.9

24.3

11.0

10.6

21.6

Amortization

3.2

3.2

6.4

2.5

1.8

4.3

Average net capital invested

446.1

399.7

399.7

396.1

369.1

369.1

FTE excluding hired personnel (year-end)

2,379

2,102

2,102

2,123

2,034

2,034

TenCate Geosynthetics revenues were on the whole lower than in 2012. Pressure on government budgets had a negative effect on investments in large infrastructure projects, and consequently on the sales mix of TenCate Geosynthetics. The market group was, however, able to increase its market share. Revenues in Asia continued to fall far short of expectations, as a result of lower government investments in infrastructure projects. The Water & Environment business unit (water management and environmental solutions), however, recorded revenue growth as a result of attractive projects in Europe and Africa. The global sales organization for this business unit has been strengthened.

TenCate Grass recorded a slight growth in revenues. The market group benefited from the cautious recovery in the synthetic turf market and increasing global demand for replacements. The market for landscaping also showed continued growth.

The decline in the EBITA of the Geosynthetics & Grass sector was mainly the result of the declining profitability of the TenCate Geosynthetics market group. The less favourable sales mix and volatile raw materials costs of polyethylene and polypropylene at the beginning of the year had a negative effect on the margin. The result within the Grass group was affected by high marketing costs and the volatile costs of raw materials. The continued integration of the downstream activities had the effect of reducing costs.

In June 2013 TenCate Grass recorded a significant breakthrough with the 3D-woven GreenFieldsTM MX synthetic turf system, which is fully recyclable. The market group will provide an increasing number of clubs in the Dutch Jupiler League (first division) with synthetic turf. With its combination of weaving and extrusion technology within the company, a distinctive synthetic turf system has been developed, which has set a new standard for the use of synthetic turf in professional football. GreenFields was introduced into the United States through a distribution network at the beginning of 2014.

Other activities
At the other activities (TenCate Enbi, Xennia Technology and Holding & Services) revenues declined by 5% to € 66.4 million (2012: € 69.7 million). In autonomous terms, revenues declined by 3% (currency effect -2%). EBITA amounted to -€ 0.5 million (2012: -€ 4.9 million). Improved profitability could be primarily attributed to a lower cost level at Xennia Technology in combination with a higher gross margin.

Key figures x €1 million

1H12

2H12

2012

1H13

2H13

2013

Revenues

37.0

32.7

69.7

35.6

30.8

66.4

EBITA

-3.5

-1.4

-4.9

-0.3

-0.2

-0.5

Investments in tangible / intangible fixed assets

0.6

1.3

1.9

0.4

1.3

1.7

Depreciation

1.0

1.1

2.1

1.5

1.4

2.9

Amortization

1.5

1.6

3.1

1.3

1.2

2.5

FTE excluding hired personnel (year-end)

626

655

655

625

680

680

Explanation of the normalized result
Non-recurring costs amounted to € 5.9 million in 2013. This amount mainly related to write-downs at TenCate Protective Fabrics in the fourth quarter. In 2012 the non-recurring costs amounted to € 8.0 million. On this basis, the normalized EBITA for 2013 amounted to € 54.6 million (2012: € 58.1 million).

General performance in the second half of 2013
TenCate recorded revenues of € 498.3 million in the second half of 2013 (2012: € 509.4 million). On an autonomous basis, revenues remained at the same level (currency effect -3%, acquisitions / divestments +1%), which represented an improvement compared with the decline in revenues in the first half of the year. EBITA rose by 6% to € 20.0 million (8% autonomous, -3% currency effect, 1% acquisitions / divestments). The net profit for the second half of the year amounted to € 6.0 million (2012: € 6.9 million).

Revenues declined in autonomous terms by 1% in the fourth quarter, while EBITA remained at virtually the same level. The fourth quarter showed substantially lower defence revenues compared with 2012. TenCate Advanced Composites and TenCate Geosynthetics recorded strong revenue growth in Europe and the United States.

Other financial information
TenCate continued to pursue a cautious financial policy, as a result of the uncertainty in government-related markets. The total amount of investments was € 14.4 million in 2013 (2012: € 16.6 million).
The net interest-bearing debt declined by € 41 million to € 189 million (2012: € 230 million). The debt ratio improved to 2.27 (2012: 2.55).
The effective tax charge in 2013 declined to 33% (2012: 35%). The decline in the effective tax rate is mainly the result of the decline in losses in countries where no full deferred tax assets are formed.
The number of employees declined by 198 FTEs compared with the end of 2012. The largest decrease took place at TenCate Protective Fabrics.

Dividend proposal
It is proposed to keep the dividend for 2013 unchanged at € 0.50 per € 2.50 par value share (pay-out 69%). The dividend will be payable at shareholders’ discretion in cash or in shares charged to the share premium reserve.

Outlook
According to the most recent forecasts by the International Monetary Fund (IMF) from January 2014, global economic growth will accelerate from 2.9% in 2013 to 3.7% in 2014. According to these IMF forecasts, the mature markets will show accelerated growth, while growth in the emerging markets will decline.

TenCate obtains a relatively large part of its revenues from the United States and Europe and expects to achieve revenue growth which for most activities will be at least in line with the above growth projection. Revenue growth in composite materials as a whole is expected to be well above this. The market for automotive composites is still in its infancy.

The defence market is not expected to follow the above growth pattern. Revenues within the TenCate Defender™ M portfolio will fall back further as a result of the reduction in the deployment of US troops abroad. The growth in revenues outside the United States will only partly offset this decline.

As a result of strengthening its market position, TenCate believes that it will generate growth in revenues in the armour composites market.

The growth of protective fabrics for the industrial market is expected to continue.

The growth in revenues at TenCate Geosynthetics is expected to be in line with the macro-economic forecast referred to above.

Expectations regarding the growth of the global synthetic turf market are cautiously positive. The breakthrough of innovative synthetic turf systems in top-flight football in the Netherlands (Jupiler League) has created a new standard.


Royal Ten Cate
Almelo, the Netherlands, Thursday, 27 February 2014

Download: 140227 Press release TenCate regarding annual results 2013.pdf
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