After nine months, sales and orders received well above previous year; effects of performance program increasingly concretized

The Group sales of Vossloh AG improved by 6.2 % to €662.1 million (previous year: €623.2 million) in the first nine months of the current fiscal year, largely as a result of acquisitions in 2018. In addition, the Vossloh Group recorded an 11.7 % increase in orders received from €684.0 million to €763.9 million. Since the reporting for the first half of 2019, Vossloh has reported an adjusted EBIT figure due to one-time effects from the ongoing performance program. The adjusted EBIT of the Vossloh Group for the first nine months of 2019 totaled €31.9 million, compared to €35.2 million for the same period in the previous year. One-time charges in the first nine months of the current fiscal year totaled €37.7 million and relate to staff reduction and the disposal of unprofitable or disadvantageous activities. The majority of the expenses related to the latter measure are attributable to the Customized Modules division, primarily for the sale of Cleveland Track Material Inc., Cleveland, Ohio (CTM), and the shutdown of a company in South America.

Core Components division
Orders received by the Core Components division in the course of the current year increased significantly by 31.1 % to €327.5 million (previous year: €249.9 million), driven by the positive performance of the Tie Technologies business unit. The improvement in this business unit is largely due to significant order wins in Australia. The order backlog as of September 30, 2019, also increased strongly in both business units to a total of €320.6 million (previous year: €183.2 million). The sales revenues of the Core Components division increased to €244.2 million (previous year: €203.3 million) in the first nine months of the current year. The Tie Technologies business unit was responsible for this improvement, too. The adjusted EBIT of the Core Components division was €25.8 million (previous year: €24.9 million). One-time effects from the performance program added up to €0.9 million.

Customized Modules division
Orders received by the Customized Modules division came to €370.4 million (previous year: €366.7 million) during the first nine months of 2019. As of September 30, 2019, the order backlog amounts to €363.0 million (previous year: €337.4 million). In view of the outstanding closing of the transaction, these figures still include the order backlog of the sold U.S. company CTM. The sales revenues of the division came to €353.0 million in the first nine months of 2019, roughly on par with the previous year’s figure of €356.0 million. Lower sales in Poland and the U.K. were partially compensated by higher sales in the loss-making North American market. The adjusted EBIT of the division for the first nine months of 2019 was €13.4 million (previous year: €20.4 million). In addition to the aforementioned U.S. effect, the downturn in EBIT of the Customized Modules division was largely driven by lower contributions from the French management company and the companies in the U.K. and Poland. On the other hand, EBIT contributions from Sweden increased. The one-time effects from the performance program totaled €30.5 million.

Lifecycle Solutions division
Orders received by the Lifecycle Solutions division during the reporting period (€78.8 million) were also higher compared to the corresponding figure for the previous year of €72.6 million. The division’s order backlog as of September 30, 2019, totaled €14.9 million (previous year: €25.0 million). Sales revenues in the Lifecycle Solutions division increased by 10.1 % in the first three quarters of 2019 to €76.8 million, compared to €69.7 million in the corresponding period of the previous year. EBIT fell from €4.9 million in the previous year to adjusted €3.7 million. This was largely due to a lower EBIT contributions from the sale of vehicles. A significantly increased contribution to EBIT is forecast for this subsegment in the final quarter of the current fiscal year. The one-time effects from the performance program totaled €3.8 million.

Employees
In the 2019 reporting period, the average number of employees in the Vossloh Group was 3,907. This increase in average number of employees of 159 compared to the previous year’s figure of 3,748 was due to acquisitions, among other things. The number of employees decreased by 80 to 3,857, compared to 3,937 on the December 31, 2018. As a consequence of the performance program, the number of employees is expected to see another significant decrease by the end of 2019. Some departures of the staff will be effective in 2020.

Performance program
On April 23, 2019, Vossloh resolved the cornerstones of a performance program for achieving a sustainable increase in the Company’s profitability and self-financing power in its core business rail infrastructure. The objectives of this program are, among other things, to reduce the number of employees by 5 % and dispose sustainably loss-generating or underperforming activities. From today’s perspective, these measures are expected to result in negative one-time effects on earnings, adding up to around €85 million in the 2019 fiscal year. Of this amount, around €30 million will be related to the reduction of the number of employees and around €55 million to the structural streamlining of the core business. Personnel-related measures will lead to payments in 2019 and 2020 while all other expenses are almost all book losses.

Measures related to the disposal of specific businesses have focused on the activities of the Customized Modules division in the USA. A significant breakthrough was achieved here on October 22 with the signing of a contract for the sale of the largest U.S. Group company in the Customized Modules division (CTM). In light of this development, the Executive Board has decided at the same time to dispose of all companies in the Customized Modules division in the USA and South America. These transactions including the sale of CTM are currently expected to result in one-time effects totaling around €40 million, the majority of which have already been included in the figures reported. From today’s perspective, in connection with the disposal of loss-generating activities total special charges of around €55 million are expected which are largely not cash-effective.

The sale of CTM will provide a cash inflow in the current fiscal year of the equivalent of approximately €35 million. This means that the performance program is already having a positive cash effect and thus contributes to the reduction of net financial debt in the current fiscal year. From today’s perspective, the performance program is expected to provide sustainable savings of €15 million to € 20 million per fiscal year, a large proportion of which will already take effect for the first time in 2020. These savings are an important step towards achieving double-digit EBIT margins in all divisions over the medium term and noticeably expanding the financial room for maneuver.

Outlook
The Executive Board confirms the outlook for the operational business for the 2019 fiscal year. Vossloh expects sales of between €900 million and €1 billion. EBIT expected for the operational business will probably be in the lower third of the forecast range of between €50 million and €60 million, in particular due to the weak business development of the U.S. company CTM, which was sold. As a result of the streamlined portfolio, Vossloh also expects Group sales of between €900 million and €1 billion, but a significantly improved EBIT between €65 million and €80 million in the 2020 fiscal year. This corresponds to an improvement in the EBIT margin in the 2020 financial year of around two percentage points compared with the adjusted EBIT margin in 2019.

Vossloh Group		1-9/2019	1-9/2018
Orders received	€ million	763.9	684.0
Order backlog (as of 9/30)	€ million	696.9	542.7
Sales revenues	€ million	662.1	623.2
EBIT	€ million	(5.8)	35.2
EBIT (adjusted)	€ million	31.9	-
EBIT margin (2019 adjusted)	%	4.8	5.7
ROCE	%	(0.8)	6.0
Value added	€ million	(57.3)	(8.9)
Net income	€ million	(85.4)	12.6
Earnings per share	€	(5.30)	0.57

24.10.2019

After nine months, sales and orders received well above previous year; effects of performance program increasingly concretized

An Overview of Key Figures for the Vossloh Group