Ascom posted solid results: EBITDA margin and revenue within the guidance - new owners will be sought for Security Communication
Ascom posted solid results for the first half-year of 2011, despite the challenging macroeconomic environment. Earning power at Group level remained stable, and was with an EBITDA margin of 11.7% within the defined full-year guidance. Group revenue was affected by negative currency effects and the expected lower business volume of Security Communication. On an adjusted basis, revenue was overall stable and thus also in line with company's guidance. Wireless Solutions succeeded in generating organic growth while the revenue development of Network Testing was flat.
The financial result was heavily impacted by negative currency effects, thus the first half of 2011 ended with lower year-on-year profit of CHF 9.0 million. With cash and cash equivalents of CHF 80.4 million and an increased equity ratio of 35.9%, Ascom is financially sound.
Based on a thorough review of strategic alternatives, the Board of Directors decided to focus the Ascom Group's business on the two divisions Wireless Solutions and Network Testing since both offer interesting global growth perspectives with a strong product focus. New owners will be sought for Ascom's smallest Division Security Communication.
Ascom expects to close the full-year 2011 with a higher EBITDA margin of 13-14% in its continued operations and confirms its mid-term guidance, provided the economic environment and exchange rate situation do not further deteriorate substantially.
Overall stable revenue development
In the first half-year, the Group recorded consolidated revenue of CHF 253.1 million (2010: CHF 281.2 million). Adjusted for currency translation and divestment effects, Group revenue was largely stable and within the company's guidance range.
Despite negative currency effects, Wireless Solutions achieved a very good result, recording revenue of CHF 132.4 million and growing organically by 5.2%. Network Testing was hardest hit by negative currency effects since the division generates almost 90% of its revenue in US dollars and Euros. Adjusting for currency translation and divestment effects, revenue was stable at CHF 70.3 million. As expected, revenue generated by Security Communication was lower at CHF 51.4 million to a large extent due to the cyclical nature of demand in the defense business.
Incoming orders for the Ascom Group in the first half-year amounted to CHF 277.1 million (2010: CHF 308.2 million). Adjusted for currency translation and divestment effects, incoming orders fell by 1.6%.
EBITDA margin in line with full-year guidance range
At Group level, profitability was largely stable and within the defined guidance range for the full year. Both growth divisions were investing as planned in new products and markets. R&D spending increased to 10.9% (2010: 9.4%). Group EBITDA ended the first half of 2011 at CHF 29.6 million (2010: CHF 33.9 million), with an EBITDA margin of 11.7% (2010: 12.1%).
Wireless Solutions succeeded in increasing profitability even further, despite negative currency effects. With an EBITDA of CHF 17.8 million (2010: CHF 17.3 million), and a higher EBITDA margin of 13.4% (2010: 12.5%) the division posted very good results.
Since the operating result of Network Testing was heavily impacted by negative currency translation effects and investments in new products and markets, EBITDA decreased to CHF 5.4 million (2010: CHF 12.3 million, including a positive divestment effect of CHF 3.4 million). The EBITDA margin was at 7.7% (2010: 15.4%).
Security Communication achieved EBITDA of CHF 3.6 million (2010: CHF 5.8 million) and an EBITDA margin of 7.0% (2010: 9.0%).
Financially sound technology group
Ascom ended the first half of 2011 with lower year-on-year profit of CHF 9.0 million (2010: CHF 17.1 million). Financial expenses were particularly affected by exchange rate losses of CHF 6.6 million as well as one-off amortization of transaction costs of CHF 1.4 million related to the early repayment of a bank loan.
Concentration of strengths
The Board of Directors decided to focus Ascom's business consistently on the two globally oriented divisions Wireless Solutions and Network Testing. Wireless Solutions is aiming for international market leadership in Mission-Critical Communication in the healthcare sector, while Network Testing intends to leverage its position as a global leader in the benchmarking and mobile network optimization market to benefit from LTE investments.
New owners will be sought for the businesses of the third and smallest division, Security Communication. Its activities include major long-term project business, and are therefore subject to high volatility and cyclicality. Given the small Swiss domestic market, growth opportunities are limited and entail substantial risks. Ascom will continue to honor its obligations towards customers and employees, and will respect their interests. Fritz Gantert, General Manager Security Communication, will step down from the Executive Board at the end of the year. The Board of Directors thanks him already now for his valuable contribution.
In addition to investing in new products and markets, Ascom will continue to explore opportunities for targeted, value-adding acquisitions. A new credit facility has been arranged to further increase the strategic flexibility of the Group. By acquiring the Finnish healthcare communications company Miratel on 1 July 2011, Ascom further strengthened its leading position as a provider of communication solutions for the healthcare sector.
Ascom expects to close the full 2011 financial year with an EBITDA margin of 13-14% in its continued operations, provided the economic environment and exchange rate situation do not further deteriorate substantially in the second half-year. The Group is expecting a strong second half-year. However, the turbulences of the financial market remain an uncertainty factor.
The full Half-Year Report 2011 of the Ascom Group is available online at
The detailed presentation for the Media & Analyst Conference is available online at
This document does not constitute an offer or solicitation to subscribe for, purchase or sell any securities. This document is not being issued in the United States of America or the United Kingdom and should not be distributed in any jurisdiction in a manner where such distribution would not comply with regulatory requirements. In particular, this document may not be distributed into the United States, to United States persons or to publications with a general circulation in the United States. In addition, the securities of Ascom have not been and will not be registered in any jurisdiction outside Switzerland. The securities of Ascom may not be offered, sold or delivered and no solicitation to purchase such securities may be made within the United States or to U.S. persons absent an applicable exemption from the registration requirements of the United States securities laws or within any other jurisdiction and in a manner where such offer, sale, delivery or solicitation might not be in compliance with regulatory requirements (including the United Kingdom).