For Heidelberg, Digital transformation is bearing fruit – the subscription model is attracting considerable interest, with further growth in demand for innovative digital packaging and label presses.
After nine months of financial year 2017/2018 (April 1 to December 31, 2017), the digital transformation initiated at Heidelberger Druckmaschinen AG (Heidelberg) is increasingly taking shape. Among other things, initial agreements have been signed under the new subscription model whereby customers are ensured a performance product comprising press, services, consumables, and software over a period of several years. The successful market launch of this new business model is a further important step toward achieving the future growth targets. The demand for innovative digital presses remains high, with a recent significant increase in incoming orders in virtually all regions. What’s more, the Heidelberg Digital Unit provides a new competence center for digital marketing and e-commerce. Among other things, this is intended to triple e-commerce sales in the years ahead to some €300 million. Furthermore, series production of the Heidelberg Assistant has started, initially in four countries. This will provide customers with digital support throughout the life cycle of their products.
Heidelberg is on course to achieve its annual targets for financial year 2017/2018. Driven by the high demand for digital product and business models, incoming orders developed encouragingly in the third quarter of the financial year, increasing by more than 16 percent. Virtually all regions that are of relevance for Heidelberg recorded improvements, especially Europe and the U.S. The order backlog of €693 million at December 31, 2017 was at a very good level for a post-drupa year.
“Heidelberg is systematically transforming into a modern digital technology company. The considerable customer demand for our new digital solutions is just what we were hoping for. This applies to the subscription models setting a new trend in our sector, our e-commerce offerings of the new Digital Unit, and our industrial digital presses for packaging and labels. Our medium-term target of using technological leadership, digital transformation, and operational excellence to generate sales of some €3 billion and a net profit after taxes in excess of €100 million is increasingly within our grasp,” commented Heidelberg CEO Rainer Hundsdörfer.
EBITDA improves to €105 million
Profitability rose further compared with the previous year’s figures. After three quarters, EBITDA excluding restructuring result climbed from €94 million to €105 million. As a result, the EBITDA margin after nine months was 6.3 percent after a figure of 5.6 percent in the previous year.
The improvements at operating level and the conversion of a convertible bond in July 2017 led to an increase in shareholders’ equity to €345 million (previous year: €246 million). The net financial debt at December 31, 2017 fell to €244 million (previous year: €282 million).
“Our financing structure is very solid. We have a low leverage and maintain sufficient liquidity to finance our planned investments in new business models,” said Heidelberg CFO Dirk Kaliebe. “In addition, further acquisitions might become an option, if they help speed up our digital transformation.”
After initially expecting a further moderate increase over the previous year, Heidelberg is now predicting that the result for financial year 2017/2018 will be significantly down on the previous year’s figure (€36 million).
In terms of the annual operating targets, this means that – adjusted for the above-mentioned special tax effect – Heidelberg is standing by its guidance published with the figures for the second quarter of 2017/2018 on November 9, 2017.
Developments in North America are looking brighter in the second half of the financial year, but exchange-rate effects in Asia and from the U.S. dollar in particular, as well as the deliberate reduction in business with remarketed equipment, are continuing to have a negative impact on business. In financial year 2017/2018, the company is still aiming to achieve an EBITDA margin in the region of 7 to 7.5 percent through measures to boost efficiency.
The strategic focus in financial year 2017/2018 is on initiating and implementing the strategic measures that form part of “Heidelberg goes digital!” – strengthening the company’s technology leadership, digital transformation of the business model, and achieving operational excellence. These measures are already starting to have a positive impact and will play a key role in achieving the company’s medium-term targets. Confidence about this has grown further as the financial year has progressed.