EBITDA margin of 15.4% at Group level
Ascom experienced a very strong second half-year and closed financial year 2014 with good results. The Group generated revenues of CHF 448.8 million (2013: CHF 459.7 million) and thus achieved stable revenue development at constant currencies despite difficult first six months. Incoming orders were slightly lower and came to CHF 461.3 million (2013: CHF 478.0 million). The order backlog increased year-on-year by 9.9% in constant currencies, providing a good basis for revenue growth in 2015. EBITDA on Group level increased year-on-year by 2.4% and amounted to CHF 69.2 million (2013: CHF 67.6 million), with an EBITDA margin of 15.4% (2013: 14.7%).
In its core business (including Wireless Solutions, Network Testing and Corporate, but excluding the activities related to the non-core real estate) Ascom generated revenues of CHF 437.6 million (2013: CHF 439.2 million), representing growth of 1.8% at constant currencies. Ascom posted in its core business, EBITDA of CHF 66.5 million with an EBITDA margin of 15.2% (2013: 15.7%).
Higher Group profit of CHF 38.5 million
Ascom invested substantially in innovation, and in spite of higher investments in R&D (2014: 10.8% of revenue), the Company closed financial year 2014 with a higher Group profit of CHF 38.5 million (2013: CHF 36.9 million). In view of this good result, the Board of Directors will propose to the Annual General Meeting a dividend payment of CHF 0.45 per registered share (2013: CHF 0.40) offering a dividend yield of about 3% and reflecting an increased pay-out ratio of 42% (2013: 39%). The dividend policy of Ascom defines a pay-out ratio between 35% and 50%.
Following continuing loan repayments, the Ascom Group showed a net cash position of CHF 27.1 million as of 31 December 2014 (2013: net debt of CHF 2.9 million), and reported an equity ratio of 51.8% (2013: 51.6%). Thus, Ascom is a financially very sound global technology group.
Ascom Wireless Solutions achieved excellent results in 2014
Wireless Solutions (which accounts for 71% of the Group's net sales) experienced a very strong second half-year and ended the financial year 2014 with excellent results. The division grew its net revenue to CHF 318.9 million, reflecting 6.4% growth year-on-year at constant currencies. Wireless Solutions achieved its best ever year in terms of profitability, achieving an EBITDA of CHF 57.3 million and an EBITDA margin of 18.0%.
In 2014, the division was able to further strengthen its strong market position in the healthcare segment, and won important orders in the healthcare market in Norway and Sweden as well as in the Netherlands. In addition, the division was able to win a long-term service contract in the UK healthcare market, and successfully completed the integration of its two acquisitions in Australia and Malaysia. Another highlight in 2014 was the successful launch of the new Ascom Myco, a smart hand-held device, which is purpose-built for the healthcare industry. First revenues are expected in 2015.
Wireless Solutions is excellently positioned to fully capitalize on the substantial potential in the healthcare industry. In order to capture significant growth opportunities an investment plan with focus on healthcare ICT will be launched in 2015. The target is to accelerate the investment into solutions, software and professional services. Ascom has the vision to be present in every tier 1 hospital worldwide by 2020.
Ascom Network Testing - improved performance during the second half-year
After a very difficult first half-year, the performance of Network Testing improved considerably in the second half-year 2014. For fiscal year 2014, the division generated revenues of CHF 119.0 million showing a decline of 8.9% year-on-year at constant currencies. With lower revenues, Network Testing achieved an EBITDA of CHF 11.2 million, corresponding to an EBITDA margin of 9.4%. In the second half-year, the division reached an EBITDA margin of 13.4% and increased its revenues by 25.8% compared to the first half-year. This gives a strong platform for the 2015 development.
In 2014, Network Testing was able to re-gain market share in Asia Pacific and showed very good results in the Middle East and Africa. A difficult market environment mainly in North America affected the division during the fourth quarter due to postponement of offers, and the Systems & Solutions product unit suffered from a slower market development and changes in customer behavior. However, the division succeeded in further solidifying its leading market position in Test & Measurement, and with attention centered on the recovery in North America, Network Testing will focus on expanding its global leading position in Test & Measurement as well as in continuing the development of its Network Analytics solutions.
Ascom is transforming into a Healthcare ICT company
Maintaining the strategic focus and supported by the strong momentum experienced in the second half-year 2014, Ascom has decided to accelerate the healthcare strategy implementation with a plan called "Ascom 2020", including an accelerated investment program of up to CHF 10 million in addition to regular investments for 2015.
As part of this program, up to 100 employees are planned to be added, expanding Sales, Marketing and Technology capabilities and creating a new Global Solutions Center. A key element of this plan is a deeper and more targeted focus on the healthcare ICT markets, where the Group has seen continuing strong development. In this fast growing space, Ascom is increasingly uniquely positioned through its portfolio of solutions, products and integration capabilities to capture significant growth opportunities. With added and dedicated resources to expand its software, solutions and hardware propositions, Wireless Solutions will transform into a provider for integrated workflow solutions in healthcare to generate long-term, sustainable shareholder returns.
Ascom sets a target to reach organic revenue growth in its core business of 3-7% at constant currencies in 2015, while achieving an EBITDA margin in the range of 13-16% due to the additional investments. For the period 2016/17, Ascom sets a goal of reaching average organic revenue growth of 5-10% at constant currencies while achieving an EBITDA margin in the range of 14-18%.
Impact of the Swiss franc appreciation in January 2015
The expansion of Ascom's international presence and the various acquisitions and divestments made in past years have significantly reduced the exposure of Ascom's business operations to fluctuations of the Swiss franc vis-à-vis other major currencies. Ascom's Swiss cost base is largely matched by earnings generated in Switzerland. However, the Swiss franc's substantial appreciation in January 2015 will have translational repercussions of about 10% on the future revenue, operating results, cash flows and balance sheet of Ascom Group when reported in Swiss francs. Importantly, Ascom does not expect a material impact from the translation of local currencies into Swiss francs on revenue growth rates or profitability margins.
Annual General Meeting 2015
In order to implement the requirements of the "Ordinance against excessive compensation in listed companies", the Board of Directors will propose all necessary changes to the Articles of Association at the upcoming Annual General Meeting.
As announced on 4 March 2015, the Board of Directors proposes with Urs Leinhäuser a new candidate to be elected as a Member of the Board of Directors of Ascom Holding AG as successor of Cornelia Gehrig, who decided not to stand for re-election. The Board of Directors further proposes to the Annual General Meeting that the five current members of the Board, Juhani Anttila, Dr J.T. Bergqvist, Dr Harald Deutsch, Christina Stercken and Andreas Umbach be re-elected for a further one-year term of office. Thus, the Board of Directors continues to consist of six members.
The complete invitation to the Annual General Meeting of 15 April 2015 will be published on 13 March 2015.
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).