At a press conference held today SW Umwelttechnik (Vienna Stock Exchange symbol: SWUT) joint chief executives Heinz Wolschner and Dr. Bernd Wolschner unveiled the group’s results for 2005.
Heinz Wolschner told journalists: "We achieved our objectives of accelerated expansion in the Hungarian and Romanian growth markets, record investment, and the merger of our Austrian operations into a single company and brand."
Revenue SW Umwelttechnik posted a 20% increase in revenue to EUR91.2 million (m) in 2005 (2004: EUR76.3m). Organic growth accounted for 16% of the increase and initial consolidations for 4%. The group’s main geographical market, Hungary, accounted for EUR58.2m or 64% of the total. The revenue share generated by the Austrian market rose from 25% to 28% as a result of the Alpha Umwelttechnik acquisition while infrastructure, drinking water and sewerage projects pushed the contribution of the Romanian market up from 1% to 4%. An unchanged 4% of revenue was earned in other EU member states and CEE countries (Croatia, Germany, Italy, Slovenia and Slovakia).
The revenue contribution of the group’s Water Conservation business sector expanded from 27% to 32%, reflecting a strong performance in Hungary and the Austrian acquisition, while that of the Engineering sector slipped from 31% to 27%, and that of the Infrastructure sector edged down from 42% to 41%.
Earnings Earnings before interest and tax (EBIT) jumped by 70% from EUR2.3m to EUR3.9m, and the EBIT margin from 3.0% to 4.3%. These sharp improvements were driven by the increases in production capacity, as well as good capacity utilisation and resultant productivity growth.
EBITDA was up by 39%, from EUR6.2m to a record EUR8.6m, provided resources for further rapid expansion in Romania.
Finance cost mounted from EUR0.4m in 2002 to EUR2.0m as a result of book exchange losses of EUR0.7m (compared to exchange gains of EUR1.3m in 2004) due to the refinancing of the Hungarian operations in euro. The 10% capital increase and the disposal of treasury shares reduced interest expense. Higher finance cost trimmed profit from ordinary activities (POA) to EUR1.9m (2004: EUR2.0m), profit after tax to EUR1.4m (2004: EUR1.5m) and profit after minorities to EUR1.4m (2004: EUR1.6m). The strong upturn in operating profits largely offset the accounting losses caused by movements in the forint/euro exchange rate which had no impact on cash flow.
The 10% capital increase, from 600,000 no par shares to 659,999, and the sale of 25,046 own shares raised the average number of shares in circulation from 574,954 to 621,289. Earnings per share were EUR2.21 compared with EUR2.84 in 2004.
Asset and capital structure Capital and reserves grew by 21.2% to EUR24.3m (2004: EUR20.0m) owing to the secondary share issue and the sale of own shares. Although total assets also increased, by 18% to EUR80.5m (2004: EUR68.1m), the equity ratio rose from 29.4% to 30.2%.
Employees The headcount expanded by 11% to stand at 800 at year end. Comparison with the 20% gain in revenue reveals that productivity improved at the same time. The group has 209 employees in Austria, 556 in Hungary and 35 in Romania. The proportion of female employees rose from 14% to 15% during the year.
Capital expenditure In 2005 the group invested a record EUR10.2m (2004: EUR3.5m) in order to exploit the good growth opportunities in Hungary and Romania.
The lion’s share of capital expenditure — 77% of the total — went to Hungary where capacity at the South Budapest factory was further expanded, and the most modern pipe works in Hungary was built at the site. In Romania work has begun on a new factory in Timisoara, due to go into operation this summer.
Dividend recommendation Due to the group’s positive earnings performance the Management Board will be recommending an increased divided of EUR0.25 per share (2004: EUR0.20) for the 2005 financial year.
Outlook Management is again giving optimistic guidance for 2006, and anticipates further revenue and earnings growth.
All the group’s business sectors are expected to encounter robust demand in Hungary over the next few years, and the main South Budapest site and the other four factories in the country are well placed to benefit from good market conditions. However the general election may lead to uncertainties regarding public sector contract awards.
The merger of the Austrian operating subsidiaries into a single organisational structure should bring significant improvements in the marketing effort and earnings. Due to the current lack of supported electricity injection tariffs for biogas plants only facilities that have already been approved will be put out to contract and built in 2006. Further applications for planning permission and contract awards will not take place in Austria until new tariffs are in place.
Romania is expected to join the EU in 2008, creating good demand conditions for all the group’s businesses. SW Umwelttechnik is planning to invest EUR30m in three Romanian factories over the next five years. The Timisoara works will enter production in mid-2006, and construction of a factory on a 27-hectare site near Bucharest which has already been purchased is due to commence in the second half of this year.
Order backlog at balance sheet date was at an all-time high of EUR38.5m — 8% up on the year-earlier total.