Heidelberg goes digital! - Heidelberger Druckmaschinen AG Investor Relations | August, 2019
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Heidelberg goes digital! Heidelberger Druckmaschinen AG Investor Relations | August, 2019
Agenda 1. Strategy 2. Outlook & Financial figures © Heidelberger Druckmaschinen AG 2
Digital eco system.
Digital market place for services around the printing industry.
5. SYSTEM OF SYSTEMS HEI.OS
4. SYSTEM OF PRODUCT S
3. INTELLIGENT &
NETWORKED PRODUCT
2. INTELLIGENT
PRODUCT
1. PRODUCTS DEMAND
MGMT.
SUPPLY
MGMT.
PRINTSHOP
MGMT.
PRINTSHOP
MGMT.
HEI.OS
RESOURCE &
WASTE
FINANCE & MGMT.
BIG DATA
machines BIZ MODELS
Prinect Software Suite
(since 2000) HD Cloud (since 2008)
Smart Printshop
networked Equipment
Subscription business model
today
© Heidelberger Druckmaschinen AG 3
Focus on implementation of digital transformation.
We build the digital eco system for the print media industry.
Take over of the start-up
Crispy Mountain for cloud software
© Heidelberger Druckmaschinen AG 4
Market leadership in Sheetfed Offset. Technology leadership provides basis for digital business models. Heidelberg's sheetfed offset technology extends its lead World market share for sheetfed offset systems improved further Significant increase of sales and market share in China Productivity of Heidelberg printing systems increasingly superior © Heidelberger Druckmaschinen AG 5
The subscription model means stability.
Significant expansion of recurring revenues.
• Around 8 % of the order backlog are already subscription contracts
• Currently total volume of ~1.2 billion printed sheets under
contract, produced by the customer
• In Germany, due to the subscription business, the consumption of
consumables increased by approx. 10 % SUBSCRIBE TO A
• In the medium term, ~1/3 of the group turnover and ~2/3 of the
lifecycle business turnover should be sustainably generated SMART
through contract business
• Higher average profitability expected in the subscription business FUTURE
than in the transactional business
• Externalization of the machine component from the contracts
starts this fiscal year
© Heidelberger Druckmaschinen AG 6
Modular access to the subscription model.
Significant expansion of contract business.
• Customer demand remains good. Recurring revenues, incl.
subscription contracts and digital business, were up by ~10% to
approx. € 80m.
• In the medium term, recurring revenue – mainly from contract and
subscription offers – should increase to around 1/3 of total revenue.
© Heidelberger Druckmaschinen AG 7
Subscription model successfully launched on the market.
Heidelberg customers realize significant productivity increases.
Customer example on the Speedmaster XL106-6+P+L
With subscription model
Machine set-up time -48%
Print speed +5%
Scrap/spoilage -32%
Productivity +31%
Actually printed sheets: 2,102,034 + 435,367
Contractual target: 1,666,667 ~ +26%
© Heidelberger Druckmaschinen AG 8
The market for small and individual runs is growing.
Industrial digital presses are the technological future.
Calendars
Cosmetics Food
Degree of
• Small to medium runs with
Individuali- completely individual content individualisation
Calendars Cards sation Value through personal address
Pharma Food
• Medium to large runs with individual
Cosmetics
elements (eg. codes, ident numbers)
Serial Value through individual picture elements
production
Cards Others • Large runs with many variants
Calendars Food Mass Value durch wirtschaftliche Gruppen-
Individualisierung
Pharma customization
• Short runs (eg. reproduction, fast delivery
Cosmetics times, prototypes)
Value through offset comparability Variety of
Offset transfer • Entry into the digital business applications
© Heidelberger Druckmaschinen AG 9
Expanding web-to-pack business to the next level.
Japanese web-to-pack printer chooses Primefire – first one in Japan.
• Kyoshin Paper and Package a
successful Japanese packaging service
provider
• In 2013 they launched a web-to-pack
service called “Hacoplay” focusing on demand
of small size and quantity with digital presses
• Currently the maximum printable size
on their digital press is B2, but in future
with the B1 format from the Primefire
they can meet their demanding customer need
and further expand their web-to-pack business.
© Heidelberger Druckmaschinen AG 10Operational Excellence.
Efficiency enhancement projects will continue.
Agile production
Improve
Platform concepts and competitiveness
reduction of complexity
Targeted streamlining and
Optimize site concept structure optimization
• Wiesloch site is further • Targeted early retirement programs
consolidated and developed analogous to demographic development
towards a high-tech campus • Manufacturing Footprint
• Labour agreement in Amstetten
• Co-operation in China with MK
• Adaptation of sales structures to
new business models
• Expansion of shared services
© Heidelberger Druckmaschinen AG 11Heidelberg goes digital.
Becoming more independent of cyclical fluctuations.
Core business: Focus on stabilization
Subscription: Expansion of the contract business
Digital printing: Accelerate ramp-up
Operational Excellence: Improved efficiency
We focus on short-term measures in order to
counteract the economic weakness
© Heidelberger Druckmaschinen AG 12Agenda 1. Strategy 2. Outlook & Financial figures © Heidelberger Druckmaschinen AG 13
Outlook Financial Year 19/20.
• Sales on previous years‘ level
• EBITDA-Margin w/o restructuring result between 6.5 – 7 %
(including IFRS 16 adjustments)
• Balanced Net result
© Heidelberger Druckmaschinen AG 14First Quarter FY 2019/2020. Good order intake at the beginning of Q2. • Demand for contract and subscription offerings continues to develop positively - Expansion of the share of recurring revenues. • First quarter marked by cyclical reluctance to invest. • Seasonal increase in net working capital weighs on free cash flow. • Measures to increase liquidity and to secure profitability initiated. © Heidelberger Druckmaschinen AG 15
First Quarter FY 2019/2020.
China – ongoing growth.
• China: largest single market for our industry.
• Good demand at Print China, order intake +45 % yoy.
• Market share growth in China to >45 %.
• High factory load in China causes temporary high NWC.
Number of sold printing units in China +25% yoy. Ramp up
of local sourcing continues.
© Heidelberger Druckmaschinen AG 16Key Figures Q1 FY 2019/2020.
1st time IFRS 16*
• Despite considerably higher demand in China order intake reflects FY 18/19* FY 19/20 Δ pY
investment postponements due to worsened economic conditions in
WE; Order backlog increased slightly (FYE19: € 654m) to € 730m. Order intake 665 615 -50
• Sales - 7 % yoy due to the worsened economic conditions and Sales 541 502 -39
corresponding investment postponements.
Primarily new machinery business in segment HDT affected. EBITDA
excl. restructuring result
20 14 -6
• EBITDA margin excl. restructuring result of 2.8 % below
EBIT excl. restructuring result 2 -10 -12
previous year due to the lower volume and
a less favorable product mix. Positive effects from
Restructuring result 0 -3 -3
1st-time application of IFRS 16 amounted to approx. € 5 m.
• Net result after taxes at € -31 million.
Financial result -16 -13 +3
• Free cash flow negative due to higher NWC, investments
Net result before taxes -14 -26 -12
in digital projects, building up of new business models
and a smaller M&A deal from the software sector.
Net result after taxes -15 -31 -16
• Due to seasonal influences and as a result of the
Free cash flow -45 -83 -38
1st-time application of IFRS 16 Leverage rose to 2.1.
Leverage 1,4 2,1
© Heidelberger Druckmaschinen AG
*The previous year’s figures were not adjusted. 17First Quarter FY 2019/2020.
Measures taken to improve earnings and liquidity.
Liquidity potential:
• Investments ~ € 20m
• NWC ~ € 50m
• Portfolio optimization ~ € 30m
~ € 100m
© Heidelberger Druckmaschinen AG 18Thank you for your attention! © Heidelberger Druckmaschinen AG 19
Free cash flow.
Investments in the digital future of Heidelberg.
Q1 18/19 Q1 19/20 Δ pY
Net result after taxes -15 -31 -16
1
(1) Cash flow slightly negative Cash flow 3 -4 -7
(2) Net Working Capital rose due to the expected rise Other operating changes -35 -62 -27
in deliveries and sales in the 2nd half of FY and the 2
thereof
series launch of the digital portfolio. Net Working Capital 10 -30 -40
Cash flow and other
(3) As planned, investments at the (high) level operating changes
-32 -66 -34
of the previous year, especially for: 3
Cash used in investing
• Digital projects -12 -17 -5
activities
• Ramp up of new business models
Free cash flow -45 -83 -38
• Smaller M&A deal from the software sector
© Heidelberger Druckmaschinen AG 20Key Financial Highlights.
Sales and EBITDA by segment in Q1 19/20.
Sales by segment EBITDA* by segment • Heidelberg Digital Technology:
€ Mio. € Mio. Sales have been restraint due to the worsened economic
600 30
541
1 502 conditions. Lower sales, a less favorable product mix, and
20 655
14
1
655 1
601 601 1
lower capitalization of development costs reduced margin
20
270 226 270
and earnings.
(43%) 223 (43%)
22
10 20
451 457 451 457 • Heidelberg Lifecycle Solutions:
314 0
278 -3 Sales and earnings were marginally below the level of the
-7
same quarter of the previous year. EBITDA* margin at
0 -10
Q1 Q1 Q1 Q1 9.2 % (previous year: 9.4%).
2018/2019 2019/2020 2018/2019 2019/2020
Heidelberg Digital Technology Heidelberg Lifecycle Solutions HD Financial Services
© Heidelberger Druckmaschinen AG *EBITDA excluding restructuring result 21Order intake – regional split.
Strong China and weakening EMEA.
Regional order intake Q1 2019/20 (Q1 2018/19)
South America
North America 2.7%
(3.6%) EMEA
16.5%
(14.1%)
36.3%
€ 615m (46.2%)
(€ 665m)
33.0%
(25.1%)
Asia/Pacific 11.5%
(11.0%)
Eastern Europe
© Heidelberger Druckmaschinen AG 22Key Financial Highlights.
Decrease in equity due to decline of discount rate for domestic pensions.
> Assets FY 2019 FY 2019 FY 2020 > Equity and liabilities FY 2019 FY 2019 FY 2020
Figures in mEUR 30-06-2018 31-03-2019 30-06-2019
30-06-2018 31-03-2019 30-06-2019
Figures in mEUR
Fixed assets 824 846 896 Equity 332 399 295
Current assets 1.337 1.395 1.354 Provisions 846 880 921
thereof inventories 692 685 777 thereof provisions for pensions 523 582 651
thereof trade receivables 295 360 283 Other liabilities 1.011 962 1.051
thereof receivables from customer financing 62 60 58 thereof trade payables 234 245 221
thereof cash and cash equivalents 204 215 151 thereof financial liabilities 481 465 542
Deferred tax liabilities, deferred
Deferred tax assets, prepaid expenses, other 94 88 98 67 88 84
income
thereof deferred tax assets 68 76 73 thereof deferred tax liabilities 4 5 4
thereof prepaid expenses 27 12 25 thereof deferred income 62 83 79
Total assets 2.256 2.329 2.350 Total equity and liabilities 2.256 2.329 2.350
Equity ratio 15% 17% 13%
• Fixed assets increased mainly due to the 1st-time application of IFRS 16. Net debt 278 250 391
• Equity decreased due to decline of discount rate for domestic pensions from 2.0 to 1.5 percent – equity ratio stood at 13 %.
• Due to the expected rise in deliveries and sales in the 2nd half of FY and the series launch of the digital portfolio,
inventories exceeded the level as of the end of the 2018/2019 financial year.
• Consequently, net working capital (NWC) also rose to € 710m as of June 30, 2019 (June 30, 2018: € 606m; March 31, 2019: € 684m).
• Net debt rose to € 391m (incl. € 55 million from IFRS 16).
© Heidelberger Druckmaschinen AG 23Net Working Capital.
NWC and FCF program launched for active cash management.
800 40 • Net working capital sustainably reduced to
714 691 below 30 percent of sales.
667 684
610
600 30 • Temporary increase of NWC (Q1 € 710m) for
higher sales volume in HY2. Ramp-up of digital
business and higher volume in Chinese factory
400 20
burden NWC.
200 10 • Measures for further reduction initiated:
• Optimize lead times and inventory levels
• Improve receivables management
0 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 FY 2018/19 0
• Reduction of tied-up capital by
NWC in € m In % of sales
around €50 m envisaged.
© Heidelberger Druckmaschinen AG 24Our financial framework as of June, 30 2019.
Stable financial framework and sufficient liquidity resources (incl. IFRS 16).
Financing instruments Maturities per calendar year
€m
Other
712
RCF
32 REL
(5%)
EIB
HYB
CB
Net debt
320
(45%)
55*
51 0
(7%)
270
100 27
(14%) 9
25
337 320 Other | amortizing
150 150 RCF
(21%)
(21%)
REL | amortizing
EIB | amortizing
59 14 9 2 9 1 59** Corporate Bond (HYB) (May-2022)
(8%) 1 19 25 7 0
(8%) 6 6 19 6 3 Convertible Bond (CB) (Mar-2022)
Financial Net debt
CY 2019 CY 2020 CY 2021 CY2022 CY2023 CY2024
framework *1st-time
application
of IFRS 16 **CB Put Option in 2020
© Heidelberger Druckmaschinen AG Remark: Other financial liabilities and finance leases not included 25IFRS 16.
Significant effects of the first time application for Heidelberg.
What is IFRS 16? • On-balance accounting for all lease contracts with the lessee
• Balance sheet extension due to additional lease assets and
lease liabilities (around € 52 m)
Significant
effects of the • Increase in EBITDA excluding restructuring result (around € 15 m)/EBIT excluding
application for restructuring result (around € 2 m), while the interest/financial result (around € 2 m) is
Heidelberg burdened simultaneously
from FY 19/20
onwards • Net result before taxes essentially unchanged
• Improvement in free cash flow (around € 15 m) due to the recognition of
repayments as a cash outflow from financing activities
© Heidelberger Druckmaschinen AG 26Financial calendar 2019/2020. November 6, 2019 Publication of Half-Year Figures 2019 / 2020 February 11, 2020 Publication of Third Quarter Figures 2019/ 2020 June 9, 2020 Press Conference, Annual Analysts’ and Investors’ Conference July 23, 2020 Annual General Meeting Subject to change © Heidelberger Druckmaschinen AG 27
Disclaimer This 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 presentation. © Heidelberger Druckmaschinen AG 28
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