GESCO Group: Subdued development 
in the first quarter


Wuppertal, 15 August 2013 – The first quarter (1 April to 30 June 2013) of financial year 2013/2014 (1 April 2013 to 31 March 2014) was marked by subdued economic development, and significant growth momentum was also lacking in the second quarter. GESCO AG sees the current financial year as a year of transition and plans record investments of approximately € 30 million to further strengthen the Group.

General economic uncertainty has increased and, as a result, it is becoming more difficult to plan. Customers are aware of this and are placing smaller orders at shorter notice. While some subsidiaries say that business was stable, other Group companies have clearly been feeling the effects of the slowdown in the overall economy and reported falls in sales and earnings.

In the first quarter, incoming orders went down 5.0 % to € 110.4 million (previous year’s period: € 116.3 million). Group sales rose by 2.0 % to € 108.9 million (€ 106.8 million). Margins were impacted by the lower rate of capacity utilisation and overall pricing pressure. While the ratio of material expenditure decreased, there was a rise in the ratio of personnel expenditure. The latter is due to changes in the scope of consolidation as some of the new companies are more personnel intensive than the average seen across pre-existing companies. On the other hand, GESCO Group companies also largely retain core staff in weaker economic periods as having qualified employees is increasingly proving to be a strategic competitive advantage. However, the decline in flexible remuneration components can only partially offset the impact on margin resulting from the lower rate of capacity utilisation.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to € 11.9 million (€ 12.9 million). As depreciation and amortisation rose at a significantly higher rate than sales as a result of investments made in previous years and effects from first-time consolidation of the newly acquired companies, earnings before interest and taxes (EBIT) fell more than EBITDA and reached € 7.9 million (€ 9.9 million). Group net income after minority interest amounted to € 4.5 million (€ 5.8 million), corresponding to earnings per share pursuant to IFRS of € 1.35 (€ 1.74).

All of the companies acquired in 2012 were included in the financial statements in the reporting period. C.F.K. CNC-Fertigungstechnik Kriftel GmbH, which was acquired in May 2012, as well as Protomaster Riedel & Co. GmbH and Modell Technik GmbH & Co. Formenbau KG, both of which were acquired in July 2012, were not yet included in the first quarter of last year.

Order backlog was € 203.3 million at the end of the first quarter (€ 191.6 million). This figure also includes the order backlog of the new companies.

The first quarter of the financial year at GESCO Group encompasses the months April to June for GESCO AG and January to March for its subsidiaries. Business continued to move sideways during the second quarter, which encompasses the operating months April to June 2013 of the subsidiaries; there were no specific signs of a significant economic upturn. Incoming orders amounted to approximately € 101 million compared to € 109 million in the second quarter of the previous year. Group sales amounted to approximately € 109 million (€ 114 million). Margins continued to be impacted in the second quarter. Order backlog came to more than € 190 million at the end of the second quarter.

At the accounts press conference on 11 June 2013, GESCO forecasted Group sales for financial year 2013/2014 of between € 435 million and € 450 million and Group net income for the year after minority interest of between € 18.5 million and € 20.5 million. In the event that the second half of the year fails to yield any significant growth momentum, the company expects sales and earnings for the full year to be at the lower end of this forecast range, based on the information available at this time. However, should economic development pick up noticeably over the course of the second half of the year, sales and earnings could then be above the lower ends of the relevant forecast ranges.

The company also announced at the accounts press conference that it plans to invest a record figure of approximately € 30 million in GESCO Group in financial year 2013/2014. Half of this amount will go into replacements and optimisations at the usual level, and half will be used for extraordinary investments resulting from growth potential or special opportunities at individual subsidiaries. GESCO will make use of the extremely attractive financing terms and conditions currently on offer. Regardless of short-term economic development, these strategic investments in real estate and technical equipment will strengthen the Group’s sustainable performance.

Complete I. quarterly report

Video commentary by Dr. Hans-Gert Mayrose, member of the Executive Board