Kölleda, 13 November 2006. Funkwerk AG, one of the leading
specialists in professional communication systems in Europe, expects
the current financial year to finish with a strong final quarter.
"From October to the end of December, we estimate sales to be well
above 80 mill. Euro and expect all three segments to write positive
figures again", announced Chairman of the Board Dr. Hans Grundner on
presentation of the nine-month report. "In our experience, the sales
shifts in business with institutions and public contractors, which
were once again evident in the third quarter, will be more than
balanced in the fourth quarter."
The "fitness program" currently implemented in all three business
segments was said to produce positive effects on the earning power of
Funkwerk as early as by the end of this year. Dr. Grundner: "The
ongoing restructuring of the TCC segment makes it difficult to
provide an accurate forecast of the business trend. However, despite
these uncertainties, we assume that the figures for both sales and
EBIT will settle within the range of the previous projections. The
exact figures depend on completion of planned projects on schedule."
Sales in Traffic & Control Communication estimated at around 100
mill. Euro for 2006
Funkwerk had reacted to the intensifying price competition, the
weaknesses in internal project management, and the reluctance of
transport companies to invest with radical restructuring measures for
the TCC segment (communication, management and information systems
for transport, logistics and industrial companies). This set of
measures included the setup of competence centres for the individual
product groups, a streamlining of the organisation, the closure of
smaller business units, and the concentration of functions at the
head office in Kölleda.
Dr. Grundner: "We have realigned our business policy in the area of
TCC and now concentrate on projects with a higher value added share
of their own. This requires setting aside sales shares in favour of
future profitability. These measures may be detrimental to the
quarterly sales and earnings figures but will have a lasting,
positive effect on our productivity from 2007."
Due to the realignment of the business policy and once again delays
in the acceptance of projects in TCC, along with the continued
weakness of the after-sales market in Automotive Communication, which
had set in at the beginning of the year, the third quarter saw
consolidated sales in the amount of 53 mill. Euro (2005: 60 mill.
Euro) remain below projections. In the first nine months of the
financial year, Funkwerk attained sales of 164.3 mill. Euro (2005:
174.1 mill. Euro), this decrease on the previous year being due
predominantly to the TCC segment. Here, the reluctance of the
European transport companies to invest and the intensification of the
price competition continued in the third quarter. Over the past nine
months, sales in TCC totalled 60 mill. Euro, marking a decrease on
the prior-year figure of 67 mill. Euro.
The ongoing projects, along with numerous orders in the information
systems product group and the backlog effects from shifts experienced
in the previous quarters, are expected to result in significantly
improved sales potential by the end of the year. "Provided that all
our projects are on schedule, we will be able to generate sales in
TCC of around 100 mill. Euro in 2006", said Dr. Hans Grundner.
Strong end-of-year business in Enterprise Communication
The Automotive Communication segment (AC, communication equipment for
vehicles) is also expected to reach its sales target of around 52
mill. Euro by the end of the year. For the past nine months, sales in
this segment saw a slight increase to 40 mill. Euro (2005: 39 mill.
Euro), a figure that could have been higher but for the weak business
in the after-sales market (7 mill. Euro as at the end of September
compared with 10 mill. Euro in the previous year). This increase in
sales is due predominantly to the new product group of integrated
telematics applications. Since the first-time consolidation of the
subsidiary, Euro Telematik, as at 1 March 2006, Funkwerk realised a
revenue of 3 mill. Euro here.
The Enterprise Communication segment (personal security, messaging
systems and access solutions for companies and institutions)
developed as expected in the third quarter, reporting revenues of
around 23 mill. Euro. Sales over the nine-month period thus totalled
65 mill. Euro, compared with 68 mill. Euro in the previous year. It
must be taken into account here, however, that strategic
considerations resulted in the discontinuation of commercial
transactions. This concentration on the company's own products and
the improvement of its own market position led to a forced decrease
in sales of around 7 mill. Euro. However, Funkwerk expects to see
strong end-of-year business in this relatively consumer-oriented
segment, with revenues totalling around 30 mill. Euro in the last
quarter.
Consolidated earnings only marginally positive in third quarter
On the whole, the earnings trend at group level was rated
unsatisfactory in the third quarter. The burdens resulting from the
restructuring measures in TCC were estimated by the Chairman to total
around 1.5 mill. Euro, while another 2.0 mill. Euro was said to be
due to deficient sales in the quarter. For the whole nine months, the
operating result (EBIT) thus aggregated 1.6 mill. Euro, down from
10.1 mill. Euro in the previous year. The consolidated earnings as at
30 September 2006 amounted to 0.9 mill. Euro, compared with 6.4 mill.
Euro in the previous year.
For the whole nine months, TCC reported an operating loss of 3.1
mill. Euro (2005: + 2.8 mill. Euro). Dr. Grundner: " The measures
initiated and the increase in sales in this area will not affect the
earnings trend until the fourth quarter." The Funkwerk Executive
Board is confident that this segment will write positive figures
again by the end of the year.
The most substantial earnings contribution in the period under review
was once again made by the AC segment, reporting a total of 3.1 mill.
Euro (2005: 4.4 mill. Euro). At 1.0 mill. Euro, the operating result
of the Enterprise Communication segment in the third quarter proved
to be on an upward trend compared to the first six months of the
year. For the whole nine months, however, the operating result
amounted to 1.6 mill. Euro and thus remained below the prior-year
figure of 2.9 mill. Euro. However, it must be taken into account here
that new legal requirements for the production of lead-free
electronics components came into effect this year which led to
considerable extra expense for the change-over to lead-free products.
The upward trend is expected to continue in the final quarter.
Increasing backlog of orders for 2007
According to the Funkwerk Executive Board, a positive pointer for
future business is the orders position. Thus at 177 mill. Euro, the
inflow of orders as at the end of September was slightly above the
prior-year level (174 mill. Euro). The book-to-bill ratio as an
indicator of future growth continues to range around 1.1. The volume
of orders of 90 mill. Euro as at the end of September rose
considerably compared to both the previous year (82 mill. Euro) and
the end of 2005 (74 mill. Euro).
The full nine-month report of Funkwerk AG is available on the
Internet at www.funkwerk.com.
For further information contact
Funkwerk AG
Im Funkwerk 5
99625 Kölleda/Thuringia
Germany
Katrin Schwarz
Investor Relations
Telephone: +49 36 35/6 00 -3 35
Fax: +49 36 35/6 00 -3 99
schwarz@funkwerk.com
rw konzept GmbH
Emil-Riedel-Straße 18
80538 Munich
Germany
Sebastian Brunner
Tel: +49 89/13 95 96 -33
Fax: +49 89/13 95 96 -34
Mobile: +49 1 75/5 60 46 73
brunner@rw-konzept.de
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