Full-year revenue declined by 3% to EUR 448.6 million (2017: EUR 461.8 million), mainly due to difficult market conditions in Automotive in the second half of 2018
- Normalised EBITA margin of 7.9% in 2018 (2017: 8.1%)
- Normalised EBITA margin of 4.2% in Q4 (Q4 2017: 5.6%)
- Industrial activities further increased normalised EBITA margin to 12.5% in 2018 (2017: 10.5%)
- Simplification measures in 2018, mostly in Passenger Cars, resulted in annualised savings of EUR 6.4 million, with full-year non-recurring costs of EUR 8.8 million
- Business units Passenger Cars and Commercial Vehicles combined into one Automotive group, under permanent leadership of the Executive Board
- Strong financial position, and more than EUR 12 million returned to shareholders
- Proposed dividend of EUR 0.87 per share, unchanged from 2017; pay-out ratio 52% of normalised full-year net profit

Key figures
(x EUR 1 million unless otherwise stated)Q4 20181, 2Q4 2017 3,4 Difference in %Revenu 101.9 109.5 -7%
EBITDA 9.9 11.8 -16%
EBITA 4.2 6.1 -31%
Net profit 2.2 3.7 -41%
ROS 4.2% 5.6

(x EUR 1 million unless otherwise stated)FY 20181, 2FY 2017 3,4 Difference in %Revenu 448.6 461.8 -3%
EBITDA 58.5 60.0 -3%
EBITA 35.4 37.5 -6%
Net profit 22.6 23.3 -3%
ROS 7.9% 8.1 %

1 Normalised for FY 2018 non-recurring restructuring costs of EUR 8.8 million (after tax EUR 6.5 million): Q1 2018: EUR 1.1 million (after tax EUR 0.8 million); Q2 2018: EUR 4.8 million (after tax EUR 3.4 million) Q3 2018: EUR 0.6 million (after tax EUR 0.6 million); Q4 2018: EUR 2.3 million (after tax EUR 1.7 million)
2 Normalised for non recurring expense related to tax audits of EUR 2.3 million
3 Normalised for FY 2017 non-recurring restructuring costs of EUR 5.1 million (after tax EUR 3.8 million): Q1 2017: EUR 1.2 million (after tax EUR 0.9 million); Q2 2017: EUR 0.8 million (after tax EUR 0.6 million) Q3 2017: EUR 1.7 million (after tax EUR 1.2 million); Q4 2017: EUR 1.4 million (after tax EUR 1.1 million)
4 Restated due to application of IFRS 9, IFRS 15 and IFRS 16 as per 1 January 2018.

Joep van Beurden, Kendrion CEO:
"We had a challenging second half of 2018, as the performance of our Automotive activities was negatively affected by the slowdown in the automotive end markets. Our Industrial activities continued to perform strongly. In Q4, the earlier decline in the sales of diesel cars and the production bottlenecks caused by the introduction of the new Worldwide Harmonised Light Vehicles Test Procedure (WLTP) widened into a more general drop in the sales of passenger cars, especially in Europe and China. Kendrion's automotive business felt the impact. Kendrion's Industrial activities continued to benefit from the favourable conditions in the German machine-building sector and further expanded its business with China as its main growth area.
We implemented the simplification measures we announced earlier in the Passenger Cars business unit, and all measures are effective as of 1 January 2019. Per the same date, the business units Passenger Cars and Commercial Vehicles have been combined into one Automotive group, under permanent leadership of the Executive Board. We expect this structure to enhance our global commercial visibility and to allow for better optimisation of our eight production facilities around the world.
We take a long-term view of the opportunities for both our Automotive and Industrial activities which remain intact. We continue to focus our resources and investments in Passenger Cars, specifically in the areas of electrification, autonomous driving, safety and comfort, in permanent magnet brakes for robotics and in China where we see and tap into healthy growth opportunities. We started the second phase of our capacity expansion for electromagnetic brakes, and successfully ramped up our mass production line for park lock actuators for Great Wall in China. In Europe, we further increased revenue and development activities in smart damping.

Over the past three years, we have significantly simplified and streamlined our organisation to improve our ability to withstand temporary economic headwinds. The past year provides evidence of just how important that is, as we continue to invest in the longer-term opportunities in front of us. Kendrion has robustly optimised its organisation, is financially healthy and relentlessly focused on important organic growth opportunities.
We propose to keep our dividend for 2018 at EUR 0.87, unchanged from 2017. We reiterate our long-term financial targets of at least 20% ROIC and an EBITDA margin of more than 15% by 2023 and look to the future with confidence, despite the short-term economic outlook."

Progress on strategy
Since 2016, we have simplified and refocused the company based on the "Simplify, Focus and Grow" pillars. This has increased our profitability, improved our resilience to market uncertainties and has placed us in a good position to benefit from important long-term trends.
The simplification measures implemented in 2018 resulted in one-off costs totalling EUR 8.8 million (2017: EUR 5.1 million), with corresponding savings on an annualised basis of EUR 6.4 million (2017: EUR 5.0 million). The table below shows all realised normalised costs and corresponding savings during the past three years.

(x EUR 1 million)FY 2016FY 2017FY 2018
Costs 5.7 5.1 8.8
Annual savings 7.0 5.0 6.4
Cumulative costs 5.7 10.8 19.6
Cumulative annual savings 7.01 2.01 8.4

In August 2018, Kendrion announced its strategic update for 2019 – 2023. Although we will continue our activities to further improve the operational effectiveness of the organisation, the emphasis for the next five years will be on the "Focus and Grow" pillars. To this end, we continue to invest in our three focus areas: Automotive, specifically in the areas of electrification, autonomous driving, safety and comfort, in permanent magnet brakes for robotics and in China.
As a further step towards improving operational effectiveness, Kendrion implemented a new organisational structure in which the Commercial Vehicles and Passenger Cars business units and the central corporate organisation have been combined into one functional Automotive group, under direct and permanent leadership of Kendrion's Executive Board. This new structure is operational as of 1 January 2019 and is expected to enhance our global commercial visibility and to allow for better optimisation of our eight production facilities around the world. The commercial organisation of the Automotive group is led by a newly appointed Chief Commercial Officer responsible for sales, product management, R&D, and project management. The automotive factories are headed by a newly appointed Chief Operating Officer, responsible for producing and delivering the highest quality products at the lowest operational costs. We have also established a global purchasing organisation in China. The Automotive Financial Director complements the Management Team.
Furthermore, as part of the strategic update announced in August 2018, Kendrion has set three ambitious financial goals for 2023: to deliver an ROI of at least 20%, realise an EBITDA margin of more than 15% and distribute a dividend of 35 to 50% of net profit.

Financial review
Revenue
After a solid first half of 2018, in which our revenue grew by 2% and our EBITA by 10% relative to the first half of 2017, the market for passenger cars deteriorated in the second half of 2018, with weaker than expected sales in both Europe and China affecting our leading automotive customers. The Industrial activities performed strongly in 2018. New product introductions in the aerospace and machine automation segment and good performance of the medical segment contributed to top line growth.
Overall, these developments led to a decrease in revenue of 2.9% to EUR 448.6 million in 2018 from EUR 461.8 million in 2017. At constant exchange rates, the revenue decline was 2.1%. This breaks down into organic growth of 1.4% for the Industrial activities (1.8% at constant exchange rates), and a decrease of 5.1% for the Automotive activities (4.2% at constant exchange rates).
The geographical breakdown of revenue by customer location was broadly in line with 2017, with 74% from Europe, 17% from the Americas and 9% from Asia and the rest of the world.

Results
Fourth quarter of 2018
The normalised operating result before amortisation (EBITA) fell by 31% to EUR 4.2 million (Q4 2017: EUR 6.1 million). Profitability in the Industrial activities continued to increase in the fourth quarter, while the decline in revenue in Automotive was only partly offset by lower staff costs and other operating expenses. As a result, the normalised EBITA margin came in at 4.2% (Q4 2017: 5.6%).

Full year 2018
Normalised EBITA for the full year 2018 decreased by 6% to EUR 35.4 million, equivalent to 7.9% of revenue (2017: EUR 37.5 million, 8.1% of revenue), as the positive impact of the company's simplification measures did not fully offset the negative impact of the lower revenue.
Normalised net financing costs decreased to EUR 2.8 million (2017: EUR 3.4 million), mainly due to the lower financing costs of the new credit facility that Kendrion entered into with a consortium of banks in July 2018.

normalised income tax expense amounted to EUR 7.6 million in 2018 (2017: EUR 7.6 million). The normalised effective income tax rate for 2018 was 25% (2017: 25%). Reported tax expense in 2018 was significantly influenced by the estimated impact of tax audits in Germany. A provision of EUR 2.3 million, including EUR 0.3 million in interest, has been recognised for the expected outcome of the tax audits with respect to the audit years 2010 to 2014 and the anticipated impact on the years thereafter.
Normalised net profit in 2018 totalled EUR 22.6 million, a decrease of 3% compared with EUR 23.3 million reported for 2017. Normalised basic earnings per share amounted to EUR 1.69 (2017: EUR 1.73). Including restructuring costs, net profit in 2018 amounted to EUR 13.8 million.

Financial position
Normalised free cash flow, before payments related to the simplification measures, amounted to EUR 10.5 million in 2018 (2017: EUR 16.4 million). Increased working capital was the main reason for the lower free cash flow compared with 2017.
Total depreciation in 2018 was EUR 23.1 million, and investments are again expected to exceed depreciation charges in 2019 as we will continue to invest in new projects and production lines, for example in China and Villingen. The net debt position increased by EUR 9.9 million to EUR 80.5 million at the end of the year (2017: EUR 70.6 million). Kendrion's financial position remains strong with a solvency ratio of 48.5% at the end of 2018 (year-end 2017: 49.8%).

Number of employees
The number of employees (in FTEs) decreased by 108 in the fourth quarter to 2,465 at year-end (including 65 temporary employees). This represents a decrease of 180 FTEs relative to year-end 2017 (2,645 FTEs, including 140 temporary employees). The decrease is mainly due to a lower production level in 2018 combined with the effects of simplification measures.

Operational performance
Industrial activities
The Industrial activities consist of Industrial Magnetic Systems, Industrial Control Systems and Industrial Drive Systems.
Industrial activities – which account for 37% of Kendrion's revenue – achieved revenue of EUR 164.7 million in 2018 (2017: EUR 162.5 million). The Industrial activities posted modest revenue growth compared with a strong 2017, with most of the growth being contributed by the Industrial Control Systems business unit. All Industrial business units continued to benefit from the favourable market conditions in the German machine-building sector.
Industrial Magnetic Systems achieved further successful expansion of its business with China as its main growth area. Overall revenue declined as a result of the closure of the Swiss manufacturing activities and lower order intake from a major customer. Industrial Control Systems saw increased revenue driven mainly by favourable market conditions across its markets and new project launches. Industrial Drive Systems enjoyed a good year for electromagnetic brakes, driven in particular by the growing demand for automation in the robot and machine-building industry. In China, the first phase of the production line for permanent magnet brakes has been completed. The production line will play an important role in meeting demand for locally produced brakes in the years ahead.
Overall, the normalised EBITA margin for Kendrion's Industrial activities improved to 12.5% (2017: 10.5%).

Automotive activities
In 2018, the Automotive activities consisted of two business units: Passenger Cars and Commercial Vehicles. As of 1 January 2019, both business units and the central corporate organisation have been combined into one functional Automotive group.
Revenue for the Automotive activities – which account for 63% of Kendrion's revenue – amounted to EUR 283.9 million in 2018 (2017: EUR 299.3 million).
2018 was a challenging year for Passenger Cars with deteriorating market conditions in the second half of the year. Weaker-than-expected passenger car sales in both Europe and China affected leading major automotive customers. The backlog in test and validation procedures to comply with the new Worldwide Harmonised Light Vehicles Test Procedures (WLTP) and pressure on diesel sales also impacted Kendrion. Commercial Vehicles' revenue decreased mainly as a result of the closure of the Indian and Mexican plants.
Kendrion obtained new business in fuel systems, engine management, transmission systems and active damping in 2018. Kendrion moved to a larger manufacturing facility in the city of Suzhou in the first quarter of 2018 in order to accommodate the strong growth in China and the promising project pipeline. Simplification measures led to decreased indirect staff costs and other operating expenses.
Various other simplification measures were implemented in the Automotive organisation in 2018, including the sale of a small R&D centre in Ilmenau, Germany, via a management buy-out, a restructuring of our manufacturing location in Malente, Germany, and the establishment of centres of excellence in the R&D organisation.

Dividend
Kendrion aims to deliver an attractive return for its shareholders while simultaneously taking into account the company's medium and long-term strategy. The company strives to distribute an annual dividend of between 35% and 50% of the annual net profit. Kendrion proposes a dividend for 2018 of 52% of the normalised net profit of EUR 22.6 million, equivalent to EUR 0.87 per share, unchanged from 2017.
Kendrion offers shareholders an opportunity to opt for dividend in cash and/or shares. The conversion price for the calculation of the stock dividend will be determined on 30 April 2019 (before the start of trading) on the basis of the weighted average share price on 23, 24, 25, 26 and 29 April 2019, for which purposes the value of the shares to be distributed will be virtually equal to the cash dividend. The dividend will be made payable on 2 May 2019.

Outlook
The long-term outlook is unchanged and remains good for both the Automotive group and the Industrial activities. Within Automotive, many opportunities are being driven by the continued disruption of the traditional passenger car and commercial vehicles markets. Our Industrial activities will continue to benefit from technical developments and innovations, especially in the market for permanent magnet brakes for robots.
The overall sentiment regarding the global economic outlook deteriorated considerably in the final months of 2018. As a result, Kendrion expects continued pressure for its Automotive activities and expects the weaker demand in these markets seen during the latter half of 2018 to continue.
For the medium term, we remain confident about our business fundamentals, with our main objective being to deliver sustainable profitable growth for the business in the medium to long term. We reiterate our medium-term targets of a Return on Investment of at least 20% and an EBITDA margin of more than 15% by 2023.

zie & lees verder op
https://www.kendrion.com/attachment/Persbericht-2019-02-19-Annual-results-2018.pdf

tijd 09.52
De Smallcap 966,02 -1,43 -0,15% Kendrion EUR 22,20 -50ct vol. 24.004