12. Aug 2016 Substantial profit growth for Datwyler

In the first half of 2016, the Datwyler Group increased its net revenue by 7.3% to CHF 621.1 million, with both divisions contributing to growth. The EBIT margin continued to rise and exceeded the target range for the first-ever time at 13.2%. The net result went up significantly by 34.4% to CHF 56.6 million. For the year as a whole, Datwyler is confident of achieving its revenue target in the region of CHF 1,250 million for the existing business and operationally delivering an EBIT margin clearly within the upper half of the 10% to 13% target range. Regarding the existing acquisition offer for Premier Farnell, Datwyler is currently considering how to proceed in view of the higher offer submitted by Avnet, and will communicate in due
course.

Thanks to the strategic and operational optimisation measures of recent years, the Datwyler Group significantly increased its revenue and, in particular, its profits in the first half of 2016. Despite a challenging market environment, the Technical Components Division proved that it has turned the corner, with the new shared infrastructure platform offering potential for the acceleration of growth and implementation of further efficiency enhancements. The Sealing Solutions Division continued to benefit from its leading positions in dynamic global market segments.

Operating profit margin exceeds the target range for the first-ever time
The Datwyler Group increased its net revenue year-on-year in the first half of 2016 by 7.3% to CHF 621.1 million (previous year CHF 579.1 million). In contrast to preceding years, the company benefited from favourable currency rates. Adjusted for positive currency and acquisition effects, the Group achieved organic growth of 2.9%. The operating result (EBIT) was up by 21.2% to CHF 81.7 million (previous year CHF 67.4 million), with the EBIT margin consequently exceeding the target range at 13.2% (previous year 11.6%). The net result rose by 34.4% to CHF 56.6 million (previous year CHF 42.1 million).

Expansion and strengthening of the portfolio
Following successful changes to the portfolio in recent years, Datwyler has been focusing for some time on expanding and strengthening its two divisions. Following implementation of the shared infrastructure platform, emphasis within the Technical Components Division is on achieving optimum size in order to deliver the necessary economies of scale. With respect to the potential acquisition of Premier Farnell, in light of the higher offer submitted by Avnet on 28 July, Datwyler is currently considering its options and how to proceed and will make an announcement as appropriate in due course. Also as communicated previously, should the offer proceed, it would turn Datwyler into a leading high-service electronic components distributor with a combined annual revenue of some CHF 1.8 billion. Should the Board of Directors decide not to pursue the acquisition further, one-off transaction costs of around CHF 4 million to
CHF 8 million would be incurred and included in EBIT. There would also be one-off costs of approximately CHF 35 million to CHF 40 million related to currency hedging and exchange rate losses, which would encumber the financial result. In the event of a successful transaction, these one-off costs would be assigned to the purchase price and, as such, would not appear in the income statement.

The Datwyler Sealing Solutions Division is already a leading global supplier in its Automotive, Health Care, Civil Engineering and Consumer Goods market segments. To accelerate organic growth, Datwyler aims to access new geographical markets, as well as new technologies and niche markets, through targeted acquisitions within this division. The respective acquisitions of Columbia Engineered Rubber in the US in 2014 and of Origom in Italy in 2015 provide an early illustration of this strategy, while the communicated acquisition of German firm Ott (annual revenue of CHF 33 million) is another good example. Ott, a specialist in producing injection moulding applications made from thermoplastic and liquid silicone using single- and multi-component technology, is the ideal match for Datwyler’s existing technologies and offers the company the opportunity to increase the depth of its added value and tap into new niche markets with potential for growth. Datwyler also sees potential in combining acquired technologies with existing Datwyler technologies, with a view to devising innovative solutions. The acquisition of Ott is expected to be completed at the beginning of September 2016.

The Technical Components Division’s shared infrastructure platform is now in operation
The Technical Components Division delivered significant operational enhancements in the first half of the year, with the successful completion of strategic integration projects to create a shared infrastructure platform. Continuous improvements in product availability as well as shorter delivery times were attributable to the increased stability of structures and processes. The further optimisation of search functions and product information in the online shop also helped to improve the customer shopping experience. Thanks to progress against operational performance indicators, the division managed to increase its revenue by 4.8% to CHF 238.0 million (previous year CHF 227.0 million) despite demanding operating conditions. Adjusted for currency effects, this equates to organic growth of 1.8%. The improved operating result (EBIT) and EBIT margin – CHF 9.2 million (previous year: CHF 5.3 million) and 3.9% (previous year 2.3%) respectively – also prove that the division has turned the corner.

In the first half of 2016, Distrelec was able to buck its negative revenue trend, increase the average order value and the number of active customers, and improve its gross profit margin. Targeted marketing, sales price adjustments, the harmonisation of discounts, and an analysis of freight costs were among the factors contributing to this performance. In order to raise efficiency further, Distrelec expanded the shared service centre in Latvia, rationalised sales structures and intensified digital marketing activities. These ongoing improvements and optimisations entailed one-off costs of CHF 1.5 million during the first half of the year, but will have a positive impact on margins in the future.

Nedis improved its performance again year-on-year, albeit in what was still a demanding market environment. Margin pressure partly offset efficiency-enhancing measures. Nedis anticipates growth potential through new supply agreements with notable customers.

At Reichelt, the focus is on growth through enlargement of the product range and expansion at international level. Accordingly, the company has significantly extended its storage capacities. In its new markets Switzerland and the United Kingdom, revenue performance exceeded expectations, underpinning profitable growth in the first half of the year.

Datwyler believes that the market environment will continue to be challenging for the Technical Components division in the second half of 2016. Irrespective of economic developments, margin improvements on the basis of revenue-increasing and cost-cutting measures are of primary importance. The launch of new products as well as a new own brand for all business units will provide additional impetus for growth, while the new shared infrastructure platform will facilitate the implementation of further efficiency enhancements. Processes and procedures at the central distribution centre in the Netherlands also offer extra scope for optimisation.

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Datwyler Group (www.datwyler.com)
The Datwyler Group is a focused industrial supplier with leading positions in global and regional market segments. With its technological leadership and customised solutions, the Group delivers added value to customers in the markets served. Datwyler concentrates on markets that offer opportunities to create more value and sustain profitable growth. The Technical Components division is one of Europe’s foremost high-service distributors of maintenance, electronic, automation and ICT components and accessories. The Sealing Solutions division is a leading supplier of custom sealing solutions to global market segments, such as the health care, automotive, civil engineering and consumer goods industries. With a total of more than 50 operating companies, sales in over 100 countries and some 7'000 employees, the Datwyler Group generates annual revenue of some CHF 1'200 million. The Group has been listed on the SIX Swiss Exchange since 1986 (security number 3048677).