Company News • 31.03.2008

All key corporate financials reflecting double-digit growth rates

A good year for Höft & Wessel: Turnaround accomplished

In fiscal 2007 Höft & Wessel AG, Hanover, succeeded in accomplishing a turnaround and regaining its former strength. All key business indicators developed better than planned, with double-digit growth rates being recorded.

Sales revenues were up by 35 per cent, to 99.7 (previous year: 74.0) million euros. Earnings also turned out satisfactory: earnings before taxes (EBT) amounted to 4.7 million euros, following minus 1.9 million euros in the previous year. Earnings before interest and taxes (EBIT) amounted to EUR 6.2 million, after minus 1.1 million euros had been recorded a year earlier). Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose from 3.7 million euros in the previous year to 11.3 million euros, equivalent to a gratifying 11.3 per cent of sales revenues.
 

Substantial surge in order intake and order portfolio
The Company’s order intake and order portfolio also saw dynamic growth, simultaneously setting the stage for future growth. The order intake soared by 64.5 per cent, to 155.6 (previously 94.6) million euros, and the order portfolio took a major leap from 60.0 million euros to 115.9 million euros – close to double the previous-year figure (+93.2 per cent). In this context, a major impact was made above all by the largest contract ever awarded in the history of the company by German Rail (Deutsche Bahn) for 3,200 ticket vending machines, as did a large-scale order worth 8.2 million euros placed by the public transport utility Hannoversche Verkehrsbetriebe üstra, with Höft & Wessel to modernise its bus stops and train stations.

This trend also boosted speculative appeal regarding the Company’s share price, which rose from 3.32 euros (annual low) to 4.81 euros (closing price for the year), up by 45 per cent. Earnings per share amounted to 0.52 euros, following minus 0.29 euros in the preceding year.
 

All three business divisions have grown
All three business divisions, namely Skeye, Almex and the UK Group subsidiary, Metric, contributed to these successes.

Skeye, a provider of systems for mobile data processing for the whole-sale, retail and logistics sector, managed to extend its very good market position even further. With 40.4 (previous year: 27.4) million euros in sales revenues, the targets set were substantially exceeded, with EBIT of 5.4 (previous year: 2.5) million euros being achieved.

In Germany, Skeye is a system partner to retailers and wholesalers of note and, with its mobile data recording devices it is a permanent fixture of their value-added chain, for instance in Metro’s cash & carry markets, which have virtually been equipped nationwide with the new skeye.quickpay terminals. Another highlight is its membership of the innovative “Future Store Initiative” of the Metro Group, in the course of which practical package solutions are being developed featuring RFID technology. Skeye supplies the high-performance devices skeye.integral 2 UHF used by the sales personnel of the gent’s fashion department to scan radio labels in the Galeria Kaufhof branch of the city of Essen. Other purchasers of skeye.allegro LS devices used for placing orders and for stock-taking purposes are the department store chain Karstadt, the Hammer Heimtex branches and Woolworth.

Outside Germany, the Skeye division succeeded in acquiring a new customer of note in Great Britain – the Royal Automobile Club. Its fleet of vehicles will be equipped with skeye.pad XSL devices worth more than two million euros to improve its breakdown service and driver training activities. The same device is in use by the National Institute for Statistics and the Economy in France, where it is deployed to gauge shopping baskets and to calculate the inflation rate. A distribution branch was set up in Milan with a view to developing the retail and wholesale market in Italy. At the most important trade fair in the U.S., the NRF, a cooperative venture was announced with DBK Concepts, one of the leading providers of mobile data recording devices in the U.S. Distribution partner Nu-Communitek, of New York, deploys skeye.pad XSL devices for real-time recording of customer data.

Almex, the solution provider for Ticketing & Transport, underwent a sustained recovery and met its targets for the year with 31.9 (previous year: 23.9) million euros in sales revenues. Earnings before interest and taxes (EBIT), at 1.9 million euros, saw a significant improvement compared with the previous year’s loss of 1.5 million euros.

In addition to the above-mentioned large-scale contract awards from German Rail and üstra, Almex was commissioned by such long-standing customers as the Hamburg transport utility (Hamburger Hochbahn), but also by new customers like the municipal utilities of Augsburg and Stuttgart’s tram system to supply them with ticket printers. The public transport system is increasingly being shaped by a networking philosophy in conjunction with the relevant communication standards. Almex was one of the first providers to equip the public transport utility Ostalbkreis with a uniform, contactless chip card system for ticket sales in compliance with the German VDV-KA standards*. What makes this system unique in Germany is that passengers buy a single ticket, regardless of whether they use buses, trains, or whether they happen to change lines or not.

Outside Germany, Almex was the first company worldwide to gain full certification in accordance with the ITSO standard. This standard governs the software interfaces deployed in the field of ticketing and will be a prerequisite for taking part in public tenders in the United Kingdom from this year. Almex equipped the Rhätische Bahn railway system with ticket vending machines in compliance with the Swiss S-POS standard, worth 2.5 million euros; one of the primary selling points in favour of Höft & Wessel was its efficient almex.office administration system.

The UK subsidiary Metric, one of the largest providers in the United Kingdom with 24,000 installed car park ticket vending machines, reported 27.4 (previous year: 22.7) million euros in sales revenues in the year under review and generated EBIT of 0.1 million euros, matching the previous year's result.

A large-scale order placed by the City of Cardiff helped the new car park ticket terminal Aura achieve a breakthrough. The Aura attracted a great deal of attention at specialist trade fairs in the UK, leading to a pilot installation for chip card provider Visa in London. The system features contactless payments by credit card, known as “wave and pay”, which provides for parking charges to be paid and debited to accounts virtually as motorists walk by the terminal.

In the U.S. it was possible to recruit a leading specialist in the parking business for the Management of the Metric Branch in New Jersey. Metric attended eight specialist trade fairs with the Aura in the U.S. alone, where the “pay-by-space” parking system met with a brisk response. This system provides for parking charges to be paid at a central car park terminal without a ticket having to be displayed inside the vehicle. The manufacturing costs of the Aura have meanwhile been further reduced, leading to an improvement in the profit margin on sales of this terminal.
 

Increase in international market share
The international business strategy is beginning to bear fruit, as can be seen from foreign market share, which has risen to 41.1 per cent. In the previous year, it had still been in the region of 26.1 per cent. The principal markets of the Höft & Wessel Group are Germany with a share of 44.3 per cent (previous year: 53.3 per cent) and Great Britain with 27.8 per cent (previous year: 29.4 per cent) of total sales revenues. The remaining 27.9 per cent (previous year: 17.3 per cent) is accounted for by the remaining markets.
 

Improvement in equity ratio
For one thing, positive business trends with significantly higher sales revenues and earnings contributed towards an improved equity ratio of 46.5 per cent, compared with 43.2 per cent in the previous year. For another, the cash flow from operations was also favourably impacted, rising from 4.6 million euros to 12.2 million euros; it was primarily used for new investments and to repay credit facilities.
 

Outlook for 2008
Even though economic growth is likely to weaken slightly according to forecasts by economic research institutes, Höft & Wessel plans to make use of the favourable conditions still prevailing to consolidate its market positions accordingly.

From today’s perspective, Höft & Wessel expects the current fiscal year to yield Group sales revenues in the order of 108 million euros and a further improvement in earnings.

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