Solid second quarter improves half-year balance sheet - economic uncertainties remain

Heidelberg (ots) -

- Q2 sales up 9 percent to EUR 622 million
- EBITDA (excluding restructuring result) rises to EUR 55 million in
Q2
- Focus on increasing liquidity and safeguarding profitability
- Outlook for financial year 2019/2020 remains unchanged

In the second quarter (July 1 through September 30, 2019), Heidelberger
Druckmaschinen AG (Heidelberg) succeeded in almost compensating for the
relatively weak start to the year. As a result, sales for the quarter (up 9
percent to EUR 622 million), EBITDA (excluding restructuring result) (up 28
percent to EUR 55 million), and incoming orders (up 1 percent to EUR 648
million) all improved. The main boost to business came from the ongoing
digitization of processes (Push-to-Stop technology) in the core business of
sheetfed offset printing, which is currently generating higher sales in the
United States and China in particular. Digital business models such as
subscription are also making a positive contribution, as is the growing
proportion of recurring sales from contract business and e-commerce.
Subscription business now accounts for over 10 percent of the order backlog, for
instance. The medium-term goal at Heidelberg is to significantly reduce the
company's exposure to economic fluctuations by generating around a third of
total sales from recurring business.

Heidelberg responds to continuing economic uncertainties

However, business in Germany, the United Kingdom and the rest of central Europe
remains difficult because of the reluctance to invest caused by the economic
situation. Prominent economic research institutions and the Mechanical
Engineering Industry Association (VDMA) in Germany remain skeptical about the
prospects. Heidelberg will therefore continue to systematically push ahead with
the measures already initiated to safeguard profitability and improve liquidity.

"Recent months have shown that our basic strategy is right - the proportion of
contract business is growing, an increasing number of customers is making use of
our digital solutions in sheetfed offset, and we're using targeted investments
in our core business to safeguard our global market and technology leadership,"
said Heidelberg CEO Rainer Hundsdörfer. "The solid progress in the second
quarter means we're confident of achieving the planned sales target for the
financial year. The difficult economic climate worldwide is affecting both us
and our customers, though, so we'll be taking a highly systematic approach to
implementing the measures initiated to improve our net result and free cash flow
in the coming months," he added.

Cost-efficiency strategies and further streamlining both organizational and
management structures at the company are key to securing sustainable results.
This includes downsizing the Management Board. Board member Stephan Plenz, Chief
Technology Officer and in charge of the Heidelberg Digital Technology segment,
will be leaving the company by mutual agreement when his current contract ends
in June 2020.

The company is using three main approaches to address the working capital and
free cash flow situation, which remains unsatisfactory despite improvements in
the second quarter. Firstly, planned investments are being cut by some EUR 20
million. Secondly, a reduction of around EUR 50 million in tied-up capital is to
be achieved by optimizing throughput times and inventory levels while also
improving accounts receivable management. In addition, portfolio adjustments and
further structural optimizations are expected to generate around EUR30 million
in cash for the company. Overall, the liquidity potential thus totals some EUR
100 million.

Improved operational development in second quarter - economic uncertainties
remain

Despite the continuing economic uncertainties, especially in central Europe,
Heidelberg recorded a significant increase in sales, from EUR 573 million to EUR
622 million, in the second quarter of financial year 2019/2020 (July 1 to
September 30, 2019) (EUR 1,124 million for 1H 2019/2020compared to EUR 1,114
million for 1H 2018/2019). Incoming orders also improved slightly, from EUR 641
million in the previous year to EUR 648 million (EUR 1,263 million for 1H
2019/2020compared to EUR 1,306 million for 1H 2018/2019). This was mainly due to
positive developments in China and North America, while European business was
weaker. The order backlog increased by around 16 percent, from EUR 654 million
at the end of the previous financial year on March 31, 2019 to EUR 756 million.
This is partly down to the new subscription contracts, which already account for
over 10 percent of the order backlog and will be reflected in the sales figures
over their respective terms.

EBITDA excluding restructuring result in the quarter under review amounted to
around EUR 55 million (including an IFRS 16 impact of EUR 4 million). This, too,
was significantly up on the unadjusted figure for the previous year of around
EUR 43 million (EUR 69 million for 1H 2019/2020 compared to EUR 62 million for
1H 2018/2019). EBIT excluding restructuring result totaled EUR 32 million for
the quarter (same quarter of previous year: EUR 26 million) and EUR 22 million
for the first six months (previous year: EUR 27 million). The EBITDA margin
excluding restructuring result (but including the impact of IFRS 16) was 8.9
percent, following a figure of 7.4 percent for the corresponding quarter of the
previous year (6.2 percent for 1H 2019/2020 compared to 5.5 percent for 1H
2018/2019). The financial result improved from EUR -12 million in the equivalent
quarter of the previous year to EUR -10 million (EUR -23 million for 1H
2019/2020 compared to EUR -28 million for 1H 2018/2019). The net result after
taxes, including income taxes, was EUR 14 million for the second quarter
(previous year: EUR 8 million) and EUR -16 million for the first six months
(previous year: EUR -6 million).

Progress with free cash flow in second quarter

Despite the typical increase in net working capital in the course of the
financial year that took place in the second quarter ready for the stronger
second half of the year, the company succeeded in significantly reducing the
free cash flow drain from EUR -42 million to EUR -16 million in the reporting
period (including the impact of IFRS 16). This resulted in a figure of EUR -100
million for the first half-year (previous year: EUR -86 million).

The considerable reduction in both the actuarial interest rate for pensions in
Germany and the net loss for the quarter were the main reasons for the lower
equity of EUR 244 million at the end of the quarter, which is equivalent to an
equity ratio of just over 10 percent. As expected, the net debt on the reporting
date increased to EUR 416 million. This was primarily due to IFRS 16 being
applied for the first time (EUR 59 million) and the negative free cash flow. The
leverage on the reporting date for the quarter was 2.1.

"Our clear goal is to significantly improve the free cash flow by the end of the
financial year, so our unequivocal focus is on increasing profitability, on
optimizing net working capital, and on asset management," said Heidelberg CFO
Marcus Wassenberg. "The aim of the various measures we have already introduced
is to generate additional liquidity of around EUR 100 million as quickly as
possible. At the same time, we are making a conscious effort to further improve
cost discipline in all areas of our company with a view to safeguarding
profitability in this increasingly difficult economic climate," he added.

Outlook for financial year 2019/2020 remains unchanged

Against the backdrop of the measures introduced, the solid performance in the
second quarter, and the assumption that the economic environment will not
deteriorate further, Heidelberg confirms its targets for financial year
2019/2020 as a whole, with sales at the same level as in the previous year. The
target range for EBITDA excluding restructuring result is 6.5 to 7 percent of
sales, and a break-even net result after taxes is expected. The leverage should
be below the target value of 2.

Image material, the interim report for the first half of financial year
2019/2020, and additional information about the company are available in the
Press Lounge of Heidelberger Druckmaschinen AG at www.heidelberg.com.

Heidelberg IR now on Twitter:

Link to the IR Twitter channel: https://twitter.com/Heidelberg_IR On Twitter
under the name: @Heidelberg_IR

Other dates:

The scheduled publication date for the financial statements for the third
quarter of 2019/2020 is February 11, 2020.

Important note:

This press release contains forward-looking statements based on assumptions and
estimations by the Management Board of Heidelberger Druckmaschinen
Aktiengesellschaft. Even though the Management Board is of the opinion that
those assumptions and estimations are realistic, the actual future development
and results may deviate substantially from these forward-looking statements due
to various factors, such as changes in the macro-economic situation, in the
exchange rates, in the interest rates, and in the print media industry.
Heidelberger Druckmaschinen Aktiengesellschaft gives no warranty and does not
assume liability for any damages in case the future development and the
projected results do not correspond with the forward-looking statements
contained in this press release.

Chairman of the Supervisory Board / Vorsitzender des Aufsichtsrats: Dr.
Siegfried Jaschinski · Management Board / Vorstand: Rainer Hundsdörfer, Chairman
/ Vorsitzender · Dr. Ulrich Hermann · Stephan Plenz · Marcus A. Wassenberg
Registered Office: Heidelberg · Mannheim Registry Court / Amtsgericht Mannheim -
Registergericht - HRB 330004 · Ust.-IdNr. DE 143455661 Commerzbank AG Heidelberg
IBAN: DE32 6724 0039 0192 2640 01 BIC: COBADEFF672 · Deutsche Bank AG Heidelberg
IBAN: DE22 6727 0003 0029 8000 01 BIC: DEUTDESM672 2/6

Further information:
Corporate Communications
Thomas Fichtl
Phone: +49 6222 82-67123
Fax: +49 6222 82-67129
E-mail: Thomas.Fichtl@heidelberg.com

Investor Relations
Robin Karpp
Phone: +49 6222 82-67120
Fax: +49 6222 82-99 67120
E-mail: robin.karpp@heidelberg.com

Original-Content von: Heidelberger Druckmaschinen AG, übermittelt durch news aktuell