Ascom reports stable revenue and Group profit in line with expectations - EBITDA guidance of 14-15% for 2013 confirmed

Aug 22, 2012
  • Stable revenue of CHF 213.4 million on Group level
  • Group profit of CHF 2.6 million in line with expectations and June's communication
  • Wireless Solutions:
    - Outstanding first two quarters
    - Revenue growth of 9.7% in local currencies
    - Increased EBITDA margin of 14.9%
  • Network Testing:
    - On-going slow market demand reflected in figures
    - Turnaround according to plan
    - Measures executed to reduce divisional cost base by CHF 15 million
    - Moderate market recovery expected in second half-year
  • Divestment of Security Communication executed
  • Guidance 2013: EBITDA margin of 14-15% on Group level confirmed

Ascom is closing the first half-year of 2012 with stable revenue of CHF 213.4 million (2011: CHF 213.4 million). The group net result is CHF 2.6 million and is in line with the June's communication.
Wireless Solutions
Revenue of the Wireless Solutions Division increased by 9.7% in local currencies and 6.9% in Swiss francs to CHF 141.5 million (2011: CHF 132.4 million). The Wireless Solutions Division is growing and has continued to invest strongly in innovative products to strengthen its sales organization and to make smaller acquisitions in the healthcare communication space. The R&D investments were CHF 11.5 million (8.1% of the revenue). The Wireless Solutions Division represents about 70% of the whole Ascom Group in terms of net sales and is a stable profit generator. With its currently about 1250 employees, the division plans to expand its leadership position in Mission-Critical Communication in healthcare to global markets. The US market is developing very favorably and the acquisition of the GE Healthcare Nurse Call business towards the end of the reporting period in connection with Ascom's existing mobility offering will further strengthen the growth potential.

While growing its revenue, the Wireless Solutions Division also further improved its profitability. The division saw its best ever first two quarters in terms of profitability and generated an EBITDA of CHF 21.1 million (2011: CHF 17.8 million), reaching an EBITDA margin of 14.9% (2011: 13.4%).

Wireless Solutions is uniquely positioned to benefit from growing global demand for efficient healthcare communication solutions based on the needs of the ageing population's connectivity and treatment and on helping hospital operators and governments/authorities to lower the costs of their healthcare systems.

Network Testing
The Network Testing Division continues to be the global leader in the network testing market and has kept its market share in its largest business unit, the Test & Measurement market. Overall, revenue fell to CHF 60.8 million (2011: CHF 70.3 million). In terms of EBITDA, the division generated in the first six months a loss of CHF 11.8 million, which includes restructuring expenses of CHF 8.8 million. These restructuring expenses were necessary in order to reduce the run rate cost base by CHF 15 million. The restructuring program was fully implemented and executed in the first six months and the full savings will materialize as of 1 January 2013.

Restructuring measures became necessary due to telecom operators starting to reduce their operating costs and their investments end of 2011 and to push out the rollout of next-generation networks in 4G technologies such as LTE. However, given the ongoing exponential growth of mobile data traffic, there is no doubt that mobile operators sooner or later must invest in LTE to accommodate customer demand. As seen in the past, introduction of new technologies can take longer than anticipated, when the economical environment is as unstable as it is now.

Ascom not only executed the CHF 15 million cost-saving program in the first half of the year, but also initiated several measures to find growth opportunities in order to support the top line. Network Testing has continued to invest heavily in R&D. In the first six months, investments amounted to CHF 14.3 million, which is clearly the highest R&D spending in the industry (23.5% of revenue). These investments will result in a continuous flow of innovations in 2012 and 2013.

Despite the difficult economic environment, Ascom Network Testing has kept its global sales presence in order to benefit from growing demand in the future. In connection with the execution of the CHF 15 million cost-saving program, Ascom Network Testing has identified a further potential to lower its cost base by another CHF 5 million. Therefore, the division will have from the beginning of 2013 onwards a cost base reduced by at least CHF 20 million. A pipeline of new products and innovations, global sales presence and a by CHF 20 million drastically reduced cost base form an attractive base to do business even in a very demanding environment and opens interesting profitability perspectives for Network Testing, when the demand will pick up.

Security Communication divested
At the Half-Year Media Conference in 2011, Ascom announced that the Group was aiming to focus on two globally oriented divisions, Wireless Solutions and Network Testing. Ascom has diligently found better owners for the core business units of the former Security Communication Division and executed five transactions. The divestment process was executed in a timely manner transferring the business units with all assets and liabilities to new owners. Transactions could be finalized with a positive impact on the income statement.

No capital increase planned
As of 30 June 2012, Ascom reported cash and cash equivalents of CHF 55.3 million and an equity ratio of about 40%. No capital increase is planned.

Outlook
The economic environment remains unstable and risky. However, Ascom has demonstrated its willingness and capability to adapt to changing market conditions in a timely manner. When the demand slows down and customers delay investments, it is the task of the Board of Directors and of the management to find the right balance between safeguarding short-term profitability and continuing necessary investments in order to benefit from the upturn later.

Ascom has communicated a 14-15% EBITDA margin target on Group level for 2013. Ascom confirms that plan, taking into account that our strongest division, Wireless Solutions, has achieved a 15% EBITDA margin already in 2011 and has started in the first two quarters stronger than last year. In the Network Testing Division, we have already lowered the cost base by CHF 15 million in the first half of the year and are committed to start the business year 2013 with a CHF 20 million lower cost base. This year, the results of the Network Testing Division are obviously burdened with the restructuring expenses (CHF 8.8 million in the first six months). The full benefits of the CHF 20 million cost savings will materialize in 2013. For the second half of this year, the management expects for Network Testing a certain market pick-up in the Americas and some promising opportunities in China. Even though we remain cautious, we expect for the full year 2012 a certain revenue growth on Group level. Net profit for this year however, will be lower compared to 2011 due to additional restructuring expenses and the difficult overall market environment for Network Testing.

Key financial figures, income statement

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Key figures for the divisions

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The full 2012 Half-Year Report of the Ascom Group is available online at
www.ascom.com/hyr2012-en

The presentation of the Media & Analyst Conference can be downloaded at
www.ascom.com/presentation-half-year-results-2012.pdf

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).

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).