Phoenix Mecano maintains strong performance

Phoenix Mecano delivered a strong operating performance in the first nine months of 2023. Despite an economic slowdown, the Group was able to grow organically and further increase profitability. The remaining operations of the Rugged Computing business area were sold. The solid balance sheet and increased cash flow generation through divestments mean that the Group is able to launch a share buyback programme worth up to CHF 30 million. Despite the tougher macroeconomic environment, Phoenix Mecano still expects to achieve the announced EBIT increase of at least 10%.

Kloten/Stein am Rhein, 26 October 2023 

The final transaction to fully divest the Rugged Computing business area was completed in the United States this week. For this reason, Phoenix Mecano has decided to bring forward the publication of its third-quarter results, which was scheduled for 2 November, to today.  
 

The Phoenix Mecano Group's divisions performed well overall in the first nine months of 2023. The DewertOkin Technology Group division continued to gain momentum in its return to profitability and the Enclosure Systems division recorded further high-level growth. The Industrial Components division, meanwhile, felt the effects of the deteriorating economic environment. Overall, the Phoenix Mecano Group was able to maintain sales, despite the disposal of Phoenix Mecano Digital Elektronik and Phoenix Mecano Digital Tunisie, and so achieve organic growth. The Group's profitability increased further. 

In the first three quarters of 2023, the Phoenix Mecano Group's consolidated gross sales fell slightly by 1.0% from EUR 606.9 million to EUR 600.6 million. Organic growth in local currency was 5.6%. Net sales stood at EUR 594.6 million (previous year: EUR 600.5 million) while incoming orders declined from EUR 620.6 million to EUR 586.9 million, although they also rose organically by 5.4%. The book-to-bill ratio for the first nine months was 97.9%. 

The operating cash flow increased by 5.6% compared with the same period the previous year*, to EUR 64.6 million. The operating result rose by 13% year-on-year* to EUR 48.2 million.  

At EUR 34.1 million, the result of the period was up 12.1% on the previous year (EUR 30.4 million*).  

Division performance 

In the DewertOkin Technology Group (DOT Group) division, sales in the first three quarters of 2023 were up 1.9% at EUR 246.8 million. Adjusted for acquisitions and measured in local currency, the increase was 8.1%. Incoming orders rose by 18.9% to EUR 248.0 million. The operating cash flow totalled EUR 15.5 million (previous year: EUR 5.8 million) and the operating result was EUR 9.6 million (previous year: EUR -0.8 million). 

These benchmark figures suggest that inventories in the global supply chains of furniture manufacturers are gradually normalising and that consumer demand is picking up at a low level. The revival of markets coincides with a strengthened DOT Group, which is operating profitably despite low capacity utilisation. A performance enhancement programme is being launched to further accelerate the turnaround and sustainably increase the DOT Group's profitability. This will result in exceptional expenses of around EUR 4 million in financial year 2023, offset by expected annual cost savings of around EUR 2.5 million. 

In the Industrial Components division, the first nine months of financial year 2023 saw gross sales drop by 9.8% to EUR 174.2 million (previous year: EUR 193.1 million) and incoming orders decline by 26.9% to EUR 167.7 million (previous year: EUR 229.5 million). Organically, gross sales increased by 2.4%, while incoming orders fell by 7.2%. The operating cash flow was down 25.8%* at EUR 17.7 million and the operating result declined by 27.1%* to EUR 13.1 million. By concentrating on the newly streamlined portfolio following this year's divestments, Phoenix Mecano expects continuous profit increases in this division in the coming years. 

The number of projects and enquiries relating to electromechanical and measurement technology components for renewable energy applications remained at a consistently high level. In Europe, sales companies generated high order volumes of modular solutions for industrial automation and for use in robotic peripherals. 

By contrast, customers close to the mechanical engineering industry began to postpone orders and scale back inventories. As a result, orders on hand were reduced and, accordingly, the production capacities of some Phoenix Mecano subsidiaries were immediately adjusted on a selective basis. 

In the Enclosure Systems division, gross sales in the first three quarters of 2023 rose by 4.7% to EUR 179.6 million. Organically, the increase was 5.4%. Incoming orders were down 6.2% at EUR 171.2 million. The operating cash flow was EUR 33.5 million (up 2.8%). The operating result rose from EUR 27.8 million to EUR 28.6 million (up 2.6%).  

In this division too, mechanical engineering customers continued to reduce their inventories, but all business areas recorded further brisk activity in the strategic growth segments of automation and electromobility. Solutions involving industrial PCs and enclosures for power distribution in electric commercial vehicles have been in particularly high demand recently. 

Divestment of the Rugged Computing business area 
 

The remaining operations of the Rugged Computing business area, comprising the business activities of Orion Technologies, LLC, were transferred to a US-based industrial investor under an asset deal effective 25 October 2023. This final transaction means that the whole of the Phoenix Mecano Group's former Rugged Computing business area has now been sold. Orion Technologies generated sales of EUR 2.3 million in 2022 with a workforce of eight. The employees will retain their jobs.  

Taking into account the goodwill from 2017 to be reclassified from equity to the statement of income in accordance with Swiss GAAP FER 30 in the event of a disposal and the transaction costs incurred, this results in a one-off book loss of just under EUR 6 million, which will impact the 2023 operating result but not the Q4 2023 cash flow and equity.  

The Rugged Computing business area also included the companies Wiener Power Electronics GmbH, Wiener Power Electronics Corp. and Hartmann Electronic GmbH, whose sale was announced on 28 August 2023. This transaction is expected to result in a one-off gain of around EUR 12 million. 

Overall, the one-off items, including the DOT Group performance enhancement programme, will have a slightly positive impact on operating result and a significantly positive impact on cash flow. 

Share buyback programme 

Over the past 12 months, Phoenix Mecano has reduced the Group's net indebtedness from around EUR 94 million to around EUR 32 million. The solid cash flow and income situation and the additional liquidity generated by divestments enable the Group to return funds that are not immediately required to shareholders in line with its long-term distribution policy. Phoenix Mecano's Board of Directors has therefore decided to launch a share buyback programme worth up to CHF 30 million. This will not compromise the Group's ability to invest or its future dividend payouts. 

Phoenix Mecano plans to acquire shares with an equivalent value of up to CHF 15 million via a fixed-price procedure. The buyback programme will take place from 27 October 2023 until 10 November 2023, 12:00 noon, and the offer price per registered share with a par value of CHF 1.00 is CHF 367.00. This represents a premium of 4.9% compared with the closing price on 25 October 2023 and of 2.8% compared with the volume-weighted average price of the last five trading days. 
 
The net buyback price is expected to be paid out on 14 November 2023. If the number of registered shares tendered for buyback exceeds the offer, the registered shares subject to the offer will be reduced proportionately.  

Phoenix Mecano plans to subsequently launch another share buyback programme via a second trading line. The total volume of both share buyback programmes is expected to be up to CHF 30 million. 
 
The Board of Directors intends to propose cancellation of the repurchased registered shares at future Shareholders' General Meetings, and to reduce the capital accordingly.  

Zürcher Kantonalbank has been appointed to implement the buyback programme. 

The terms of the share buyback programme are published on the company's website (www.phoenix-mecano.com) and on the website of the Swiss Takeover Board. 

Outlook 

The management and Board of Directors still expect to achieve an increase in operating result from continuing operations of at least 10% in 2023, excluding one-off expenses and gains. This would be Phoenix Mecano's best operating result in the past 20 years. The global economic slowdown has not left our Group unscathed. However, thanks to the growth and profit enhancement potential built up in recent years with the long-term trends of automation, digitalisation, decarbonisation and demographic change, Phoenix Mecano is on course to continue generating attractive added value for shareholders in the years ahead. 

Results Q1 – Q3 2023 (in EUR million)

1-9 2022*

1-9 2023

in %

Incoming orders

620.6

586.9

-5.4

Gross sales

606.9

600.6

-1.0

per division:

DewertOkin Technology Group

242.2

246.8

1.9

Industrial Components

193.1

174.2

-9.8

Enclosure Systems

171.6

179.6

4.7

Net sales

600.5

594.6

-1.0

Operating cash flow

61.2

*

64.6

5.6

Margin

10.1%

*

10.8%

Operating result

42.7

*

48.2

13.0

Margin

7.0%

*

8.0%

per division:

DewertOkin Technology Group

-0.8

9.6

1371.2

-0.3%

3.9%

Industrial Components

18.0

*

13.1

-27.1

9.3%

*

7.5%

Enclosure Systems

27.8

28.6

2.6

16.2%

15.9%

Other

-2.3

-3.1

-30.8

Result of the period

30.4

*

34.1

12.1

Margin

5.0%

*

5.7%

Results Q3 2023 (in EUR million)

7-9 2022

7-9 2023

in %

Incoming orders

182.9

186.5

2.0

Gross sales

196.2

191.6

-2.3

per division:

DewertOkin Technology Group

70.2

83.3

18.6

Industrial Components

67.2

53.3

-20.7

Enclosure Systems

58.8

55.0

-6.5

Net sales

194.1

189.7

-2.3

Operating cash flow

24.0

23.5

-2.2

Margin

12.2%

12.3%

Operating result

17.8

18.0

0.9

Margin

9.1%

9.4%

per division:

DewertOkin Technology Group

-1.1

5.8

652.0

-1.5%

7.0%

Industrial Components

8.9

4.3

-51.6

13.3%

8.1%

Enclosure Systems

10.4

8.7

-16.9

17.8%

15.8%

Other

-0.4

-0.8

-73.3

Result of the period

13.2

13.5

2.6

Margin

6.7%

7.1%

* Previous year's figures corrected by means of restatement

Phoenix Mecano, 26 October 2023, Ad hoc announcement pursuant to Art. 53 LR