Heidelberg Reports 1Q 2019 Results

The business performance of Heidelberger Druckmaschinen AG in the first quarter (April 1, 2019 to June 30, 2019) of financial year 2019/20 was impacted in particular at the end of the reporting period by the increasing reluctance to invest and the corresponding shift in sales due to the economic downturn. In the traditionally weakest quarter of the year, the company recorded sales of €502 million, compared with €541 million in the same period of the previous year. Especially in Germany and parts of Europe, it was not possible to repeat the previous year’s performance. 
 
Demand for contract offerings (service, software and supply contracts for consumables and, in the final stage, subscription contracts including equipment) developed positively, with the proportion of recurring revenues rising by almost 10% year-on-year to around €80 million. Due to the ramp up, however, it has not yet been possible to compensate for the overall decline in sales.
 
Despite significantly higher demand in China as a result of the positive outcome of the Print China trade fair, as at June 30, 2019, incoming orders were down on the previous year (€665 million) at €615 million. At around €14 million (including the IFRS 16 effect of around €4 million), EBITDA excluding restructuring result was also below the unadjusted prior year figure of around €20 million. After taxes, the Group reported approximately €-31 million (previous year: €–15 million). In view of the net working capital build up during the year and investments in the expansion of digital business models, free cash flow was negative at €–83 million (previous year: €–45 million).
 
For the 2019/20 financial year as a whole, Heidelberg continues to anticipate sales at the previous year’s level. Despite the economic downturn and the associated reluctance to invest in the equipment business, the company expects to compensate for this by further stable expansion of the contract business.
 
“The increasing share of recurring contract business will have an increasingly stabilizing effect on our total sales,” CEO Rainer Hundsdörfer said. “We will counter the negative impact on earnings with short term measures and sustainable structural improvements.”
 
Investment projects in the new product and solution offerings from Heidelberg’s ongoing digital transformation will be implemented as planned. The goal remains to strengthen the contract and subscription business with recurring revenues, to expand the share of wallet per customer and to significantly reduce the impact of economic cyclicality on the company. In the medium term, the share of sales from recurring contract business is to be increased to approximately one-third of total sales.