- Expected EBIT of EUR 6.4 million in 2019 to rise to EUR 10.5 million in 2022
- Revenue expected to reach around EUR 100 million in 2023
- New syndicated loan agreed with noticeably improved conditions
Gelsenkirchen, 2 September 2019 – With its “Back to Double Digit” (B2DD) optimisation programme, the Masterflex Group aims to raise its own earnings power over the next three years from around 8% recently to a double-digit EBIT margin on a sustained basis from 2022 onwards. Dr. Andreas Bastin, CEO of Masterflex Group: “We have been able to grow continuously over the past nine years while doubling our revenue to EUR 77.2 million. During this time, we have also been consistently profitable with an average operating EBIT margin of 10.8%. At the same time, this mark is our claim to ourselves, even though we have not been able to reach it recently: This is because several of our subsidiaries are continually demonstrating that a double-digit EBIT margin is possible in our market and with our outstanding market position as an innovation leader and supplier with the broadest materials expertise, and we have also been able to demonstrate this on several occasions at Group level in the past. Therefore, our goal is to achieve a sustained double-digit EBIT margin from 2022.”
This target for the financial year 2022 is to be combined with further growth of the Group. By 2023, organic growth is expected to boost revenue to EUR 100 million, compared with EUR 77.2 million in 2018. In the planning calculations for the optimisation programme, EBIT for 2022 is expected to reach EUR 10.5 million. In the planned earnings growth, based on operating EBIT of EUR 6.4 million expected for 2019 (after EUR 6.3 million in 2018), the effects from the optimisation programme will play a major role with EUR 2.5 million. Further earnings contributions are to be generated from volume growth and price effects of EUR 9.7 million net at operating EBIT level. At the same time, the cost base will increase by a total of EUR 8.1 million until 2022, mainly due to inflationary effects (excluding effects from the optimisation programme).
After an operating EBIT margin of around 8% in 2018 and 2019, this ratio is expected to improve by around one percentage point per year on an operating basis. Negative one-off effects from the optimisation programme will amount to between EUR 0.5 million and a maximum of EUR 1.0 million. The main components of the contrasting positive earnings contributions of EUR 2.5 million per year from 2022 onwards are personnel cost savings and an increase in personnel productivity. These measures should contribute EUR 1.4 million to improving earnings. Further effects will result from cost optimisation in the use of materials and in other operating expenses as well as planned measures in the innovation area.
Parallel to developing the optimisation programme, Masterflex Group was able to conclude a new framework agreement for a syndicated loan. The agreement was signed in August 2019 and the conversion is scheduled to take place on 30 September 2019. From 2020, this will result in improvements in the financial result of at least EUR 0.1 million per year and, above all, a further significant increase in the overall financial scope for future growth because the annual repayments have been reduced or partially agreed at final maturity. Mark Becks, CFO of Masterflex Group: “With the new syndicated loan, our banking partners are taking account of our solid development. We are better positioned in all areas: fewer covenants, lower interest charges and an improved maturity structure. These are the best prerequisites to continue growing in combination with our solid Group equity ratio of 53.5% and to finance this growth very solidly. At the same time, we are expanding our scope for potential growth investments.”
The measures of the B2DD optimisation programme will above all boost the further development in the strategic field of Operational Excellence. At the same time, Masterflex also intends to make significant progress in the other strategic fields of internationalisation, innovation and digitisation. The goal of organic growth to EUR 100 million in revenue in 2023 is to be achieved in particular through an even stronger focus on expanding activities in the USA and China. Both regions of the future have already made a significant contribution to growth in recent years – albeit to date at a slightly slower rate than the momentum in Europe. Dr. Andreas Bastin: “In our opinion, it must be possible to achieve disproportionately strong growth in these two regions in the coming years. To a certain extent, China is already setting the pace for revenue growth, while in the USA we are not yet satisfied with the growth. Now, we are concentrating on developing both directions – growth momentum and profitability – equally forward in both regions with targeted measures, particularly in marketing and sales.”
In addition, the international supplier structure in the market for flexible connection systems made of demanding plastics continues to open up opportunities for growth through targeted acquisitions. Even though the dynamic pace of market consolidation is being held back by the unchanged high valuations and price expectations, Masterflex will continue to exploit acquisition opportunities in line with its own target criteria. Dr. Andreas Bastin: “Including possible acquisitions, it is our strategic goal to develop the Group to a revenue volume of EUR 200 million by 2030. However, we will not be guided primarily by our revenue target, but by our catalogue of criteria and by a critical consideration of all opportunities and risks.”
The Executive Board of Masterflex SE will today at 4 p.m. present the current development and the optimisation programme with its measures, effects and targets to interested shareholders in an audio webcast.