Gelsenkirchen, July, 3 2008. Masterflex AG (ISIN DE0005492938), has obtained new insights into individual projects in the framework of the goal the new CEO has announced of focusing on consistent earnings growth and the related evaluation of all activities that do not fit with our core high-tech hose systems business. The evaluation has lead to value impairments (in line with IFRS) being charged of € 8.1 million that do not impact on cash flow. In addition, provisions of € 0.3 million have been made.
The projects involved include in particular an investment made in early 2007 in a start-up company that had developed a novel high-tech process for coating surfaces. This investment was at the time expected to emphatically help us expand our technology leadership in the field of Advanced Material Design (surface technology). Said company was granted various loans. The expectations that the innovative process would swiftly be ready for market launch have not, however, materialized. Talks in recent weeks with potential clients and possible strategic investors have not generated the hoped-for success.
As a consequence, given current earnings forecasts and the tight liquidity situation the start-up is expected to face in the future, the Management Board of Masterflex AG has resolved to avail itself of the option of a value impairment for the shares in and receivables from the company of a total of € 6.2 million as already mentioned in the Risk Report in the 2007 Annual Report. In addition, provisions have been made of € 0.3 million.
Moreover, as part of this step, the Management Board has decided to adjust the ongoing balance-sheet valuations of other projects that, for example, do not match a specific risk/opportunity benchmark. This specifically affects two long-standing development projects:
- the 'LaryVent respiration mouth' project will be completely written off and the project no longer moved forward. The value impairment charged totals € 1.1 million and covers the development expense of € 0.8 million and the licenses and commercial copyrights obtained of € 0.3 million.
- the 'hose inner surface coatings' project will see a partial value impairment of € 0.8 million charged on various third-party services that have not resulted in the desired progress in development. Masterflex AG remains convinced that the project will be a success. For this reason the Company will in future increasingly commit its own expertise to the project.
After a close examination, neither the above-mentioned nor other major development projects being run by Masterflex AG reveal an additional need for amortization to be charged.
The Management Board of Masterflex AG would like to emphasize that this value impairment process as part of the new strategy concept is necessary among other things in order to enable the Company to concentrate fully on expanding its successful core high-tech hose system business.
All future Masterflex AG activities will be measured against the growth and value added they offer for our core business, which rests on long-standing successful and superior core competencies. The Company seeks to consistently extend the superlative profitability of the high-tech hose system segment to the entire company and appreciably boost our enterprise value.
In Q1 2008 our core business performed successfully. Against this background, the Masterflex AG Management Board has reconfirmed its forecast for business 2008 of a growth in operating EBIT of between 6 and 12 percent.
Masterflex AG will be arranging a conference call for analysts to follow closely on from release of this publication.