In a challenging year, Schaffner lays the foundation for future growth

Media Release

In a challenging year, Schaffner lays the foundation for future growth

Market turmoil weighs on sales and earnings

Luterbach, 8 December 2015 – Sales of the Schaffner Group declined by 6% in fiscal year 2014/15 to CHF 201.8 million (prior year or PY: CHF 214.6 million). Measured in local currencies, the decrease was 2.8%. Beyond the difficult economic environment, the sales trend was attributable mainly to the slump in domestic demand in China from the country's solar converter industry, the suspension of a major order of a Western European customer for the Russian railway market, and currency effects. New orders in the fiscal year amounted to CHF 196.2 million (PY: CHF 215.9 million) and the book-to-bill ratio was 0.97 as compared to 1.01 in the year before. The Group's gross margin eased by 1.1 percentage points to 28.1% (PY: 29.2%). Operating profit before acquisition-related amortization and restructuring expenses (EBITA) was CHF 10.7 million and operating profit (EBIT) decreased by 41.3% to CHF 8.8 million (PY: CHF 15.0 million). The EBITA margin in 2014/15 came in at 5.3% (PY: 7.7% million) and the EBIT margin measured 4.4% (PY: 7.0%). Net profit for the period was CHF 6.3 million (PY: CHF 12.6 million). This result for 2014/15 includes one-time expenses of approximately CHF 2.0 million for the strategy review and the first measures to implement the new Strategy 2020. Recurring savings of more than CHF 1 million annually are being targeted after the merging of the two US manufacturing plants is completed in the first half of 2015/16.

Highs and lows in the divisions

Sales in the EMC division, at CHF 95.3 million (PY: CHF 110.0 million), were down 13% from the prior year. Excluding currency effects, the decline amounted to 9.0%. Segment profit was CHF 8.9 million (PY: CHF 15.9 million), with a segment profit margin of 9.4% (PY: 14.4%). Sales of the Power Quality business unit (part of the EMC division) grew compellingly, although the unit's still small absolute size meant it was not able to make up for the lower sales of the other product groups. In fiscal year 2014/15 the Power Magnetics division recorded sales of CHF 63.6 million (PY: CHF 67.3 million), representing a decrease of 5.5% (or 12.8% excluding acquisitions). Segment profit of Power Magnetics fell significantly to CHF 0.9 million from CHF 4.3 million one year earlier. The segment profit margin narrowed accordingly to 1.4% (PY: 6.4%). In the fiscal year the Automotive division continued its attractive growth with an increase of 14.8% in sales to CHF 42.8 million (PY: CHF 37.3 million), and segment profit more than doubled to CHF 6.2 million from CHF 2.5 million in the prior year. The segment profit margin was boosted markedly to 14.5% (PY: 6.7%).

Strategy 2020: Acceleration of growth

In 2014/15 the Board of Directors and Executive Committee thoroughly reviewed the Schaffner Group strategy and reworked it for the period to 2020. The focus of the Strategy 2020 is on accelerating growth, on structural improvement of earnings and on long-term sustainability. Group sales are to expand to at least CHF 400 million by fiscal 2019/20. Besides accelerated organic growth especially of the Power Quality product segment embedded in the EMC division, the Power Magnetics division is to achieve worldwide market leadership through a combination of internal and acquisitive growth. The comparatively high research and development spending of about 8% of sales is fueling the creation of new products that are to reach the market in the next two years; a region of great importance to the growth strategy is North America. As well, the earnings quality of the Schaffner Group is to be strengthened substantially and in a sustained way, with the intention of ensuring an operating EBITA margin of 8% over the business cycle. Schaffner's production plants have made the transition to lean manufacturing principles and the Group is ready to tackle operational excellence 2.0. This will involve multiple measures, including sweeping changes to increase responsiveness and speed along the entire value chain, and the implementation of a rigorous zero-defect strategy. Additionally, a technology road map has been created to understand long-term trends in technology and demand and to guide the Group's research and development efforts.

Sound financing structure

The Schaffner Group continues to have a sound financing structure. At the reporting date of 30 September 2015, total assets showed a decrease to CHF 146.9 million (30 September 2014: CHF 154.5 million). Net working capital was CHF 32.3 million (PY: CHF 30.6 million). In the reporting period the Schaffner Group generated free cash flow of CHF 3.1 million (PY: CHF 8.9 million). Net debt increased to CHF 18.2 million (PY: CHF 16.6 million) and the gearing ratio of net debt to shareholders' equity rose to 31% (PY: 25%). With equity of CHF 59.4 million (PY: CHF 66.6 million), the equity ratio of approximately 40% (PY: 43%) remains solidly within the target range. Shareholders' equity per share amounted to CHF 93.47 (PY: CHF 104.80).

Proposals for the 20th Annual General Meeting

In addition to the recurring agenda items, the Board of Directors of Schaffner Holding AG will propose the following resolutions to shareholders at the Annual General Meeting on 12 January 2016:

  • Distribution of CHF 6.50 (PY: CHF 6.50) per share in the form of a tax-free repayment of capital (65% of net profit).
  • Reduction of conditional share capital by CHF 449,150 from CHF 1,040,000 to CHF 590,850.
  • Creation of new authorized share capital of a maximum amount of CHF 2,066,805 to support the growth acceleration pursued under the Strategy 2020.
  • Election of BDO AG, Solothurn, as the external auditors for fiscal year 2015/16 (as Schaffner has re-tendered the audit firm appointment).

The complete notice of the 20th Annual General Meeting of Schaffner Holding AG will be published on 15 December 2015 in the Swiss Official Gazette of Commerce (SHAB) and at
www.schaffner-ir.com.

Outlook

In a continuing difficult global market environment that largely resists forecasting, the Strategy 2020 is being executed with a will. In fiscal 2015/16 the Schaffner Group intends to return to the growth path. Under its Strategy 2020, Schaffner aims to reach sales of CHF 400 million by fiscal 2019/20. The management is projecting organic growth of more than 5% per year over the cycle, and this is to be augmented considerably by acquisitions. The operating EBITA margin (EBIT before acquisition-related amortization and restructuring expenses) is to regularly surpass 8% in the medium term and the return on capital employed is to exceed the weighted average cost of capital significantly, as it has in the past.

Contacts

Alexander Hagemann
Chief Executive Officer
T +41 32 681 66 06
alexander.hagemann@schaffner.com

Kurt Ledermann
Chief Financial Officer
T +41 32 681 66 08
kurt.ledermann@schaffner.com

Key financials

In CHF ’000
except % and per-share data

2014/15

2013/14

2012/13

Net sales

201,782

214,572

194,889

Net sales, EMC division

95,346

109,993

109,686

Segment profit, EMC division

8,940

15,850

13,987

Net sales, Power Magnetics division

63,637

67,311

53,924

Segment profit, Power Magnetics division

892

4,302

2,953

Net sales, Automotive division

42,799

37,268

31,280

Segment profit/(-loss), Automotive division

6,214

2,499

-2,037

Operating profit (EBIT)

8,807

15,012

9,205

In % of net sales

4.4%

7.0%

4.7%

Net profit for the period

6,311

12,628

6,108

In % of net sales

3.1%

5.9%

3.1%

Earnings per share in CHF

9.95

19.94

9.64

Total assets

146,883

154,452

138,727

Net working capital

32,285

30,585

25,484

Free cash flow

3,062

8,892

15,959

Net debt

18,196

16,631

13,351

Gearing ratio in %

31%

25%

23%

Equity ratio in %

40%

43%

42%

Shareholders' equity per share in CHF

93.47

104.80

91.33

Repayment of excess share premium, in CHF

6.501

6.50

4.50

1Subject to approval by the Annual General Meeting on 12 January 2016

Annual report

The full Schaffner annual report 2014/15 is available at:

www.schaffner-ir.com

Webcast

The webcast of the presentation of Schaffner's full-year results for 2014/15 is available from 8 December 2015, 10:15 a.m. CET, at:

78449.choruscall.com/dataconf/productusers/schaffner/mediaframe/13702/indexl.html

Financial calendar

12 January 2016

20th Annual General Meeting

12 May 2016

Publication of half-year report 2015/16 (half-year results)

6 December 2016

Publication of annual report 2015/16 (full-year results)

12 January 2017

21st Annual General Meeting

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