Wincor Nixdorf turnaround in net sales and earnings expected

Published: 9 November 2015 y., Monday

Wincor Nixdorf AG ended fiscal 2014/2015 slightly better than anticipated in the revised outlook issued at the end of the first half. Net sales totaled €2,427 million, down 2% on the prior-year figure (2013/2014: €2,469 million). Operating profit before restructuring measures amounted to €102 million (€135 million without exceptional items). After taking restructuring measures into account, EBITA was €22 million, reflecting the €80 million incurred as expenses under the restructuring program initiated during the fiscal year just ended. Thus, the Group's profit for fiscal 2014/2015 stood at €8 million (€104 million). Against the backdrop of ongoing activities to restructure and reposition the Group, Wincor Nixdorf considers itself well placed to achieve a turnaround in its business performance in the current fiscal year 2015/2016. Wincor Nixdorf expects to generate slight growth in net sales, while operating profit is predicted to rise substantially by an estimated 50% to €150 million. As the amount still outstanding with regard to restructuring expenses is expected to be €40 million for the fiscal year, Wincor Nixdorf anticipates that EBITA after restructuring expenses will stand at €110 million. "Particularly when it comes to earnings, we feel that the positive start to our first quarter lends support to our outlook for the current fiscal year," said Eckard Heidloff, CEO & President of Wincor Nixdorf, in commenting on the company's forecast for the fiscal year.

Wincor Nixdorf Aktiengesellschaft and Diebold, Incorporated, with registered office in North Canton, Ohio, United States of America, are currently in discussions regarding a potential business combination. On 24 September 2015 the companies entered into a term sheet regarding the key parameters of a potential strategic business combination, to be implemented through a public tender offer for all issued and outstanding shares of Wincor Aktiengesellschaft. These discussions are ongoing.

Over the course of the current fiscal year 2015/2016 Wincor Nixdorf will be looking to make visible progress in the fields targeted for strategic growth, in addition to pursuing substantial cost savings on top of those already achieved. In total, the company expects a positive impact on earnings equivalent to €50 million in 2015/2016 as a result of these efforts. Among the key factors generating forward momentum are measures implemented swiftly by Wincor Nixdorf – and already completed – with a view to reducing costs and raising efficiency levels. Software and software-related services are also set to generate further substantial increases in Group earnings.

In this context, the company expects the main outlines of the seven-point "Delta" program to be reflected even more clearly in its business performance. The program is designed to speed up the expansion of Software and Professional Services operations and to further boost profitability in the Services business, which will also include expansion in the high-end field such as Managed Services and Outsourcing. It also involves significant capacity adjustments on the Hardware side so that the Group can respond more effectively to market volatility yet still maintain its significant abilities as an innovator. Furthermore, now that the company's cashless and mobile payment operations have been established as a separate unit, they should be able to develop more rapidly and make an additional contribution to growth at Group level. "The transformation program we have initiated will bring significant changes to our Group. The effects that have already become visible within our business serve as confirmation that the approach we have taken is correct and that we must continue to pursue these measures with the necessary vigor," said CEO & President Eckard Heidloff.

The overall objective of the realignment process that the company is currently undergoing is to insure that Wincor Nixdorf can in future benefit more fully from the rapidly advancing trend of digitalization, particularly in industrialized countries. At the same time, Wincor Nixdorf will see a gradual improvement in its operational capacity to respond to or smooth out potential fluctuations, e.g., in the emerging markets, without compromising its abilities as an innovator.

Global Net Sales Dampened by BRIC Countries in Fiscal 2014/2015.

The downturn in Wincor Nixdorf's business in the three key BRIC markets of Brazil, Russia, and China left a noticeable mark on business in the various reporting regions when compared to prior-year figures. All three countries, classified as Emerging Markets, are located in different reporting regions and exerted downward pressure on net sales in the respective categories.

In Germany, net sales fell by 6% to €555 million (2013/2014: €588 million). This was attributable primarily to weaker retail business compared to the previous fiscal year, which had benefited from several large-scale projects. On this basis, Germany's share of the Group's total net sales fell to 23% (2013/2014: 24%). In Europe (excluding Germany), net sales declined by 4% to €1,097 million (2013/2014: €1,142 million). This was due largely to a year-on-year reduction in net sales from business activities in Eastern Europe, with Russia proving particularly unfavorable. As a result, Europe's (excluding Germany) share of the Group's total net sales fell to 45% (2013/2014: 46%). The Asia/Pacific/Africa region saw net sales rise by 8% to €480 million (2013/2014: €445 million). Despite a marked downturn in business in China, the Group managed to generate forward momentum in the majority of the Asian/Pacific countries. The overall contribution of Asia/Pacific/Africa to the Group's total net sales rose to 20% (2013/2014: 18%). As a region, the Americas recorded net sales of €295 million, which was comparable to last year's figure (2013/2014: €294 million). The expansion of European retailers into the United States had prompted particularly extensive purchase orders in fiscal 2013/2014. Thus, the proportion of Group net sales generated in the Americas was unchanged year on year at 12% (2013/2014: 12%).

Divergent Performances by the Segments.

Against the backdrop of prevailing economic conditions and sluggish investment spending, the Banking segment saw net sales rise slightly in the period under review. By contrast, net sales in the Retail segment declined. Business in this area was adversely affected by tentative investment spending on the part of large retail companies, particularly in Europe. The Banking segment accounted for 65% of total net sales (2013/2014: 63%), while the Retail segment contributed 35% (2013/2014: 37%) to total net sales. Net sales within the Banking segment totaled €1,582 million (2013/2014: €1,566 million). This corresponds to a year-on-year increase of 1%. In the Retail segment net sales fell by 6% to €845 million (2013/2014: €903 million).

Software/Services Up, Hardware Down.

The downturn in hardware sales that affected the previous year's results continued during the year under review. This led to a decline in the Group's total net sales, as the moderate level of growth achieved by Software and Services was not enough to compensate for the decline in Hardware. Additionally, the share of Hardware in total net sales for the Group continued to fall; correspondingly, the business streams Software and Services expanded their share to 58% (2013/2014: 54%). At €1,015 million, consolidated net sales of Hardware were down 10% on the previous year (2013/2014: €1,127 million). This substantial year-on-year decline was caused by a number of factors, the three most important being lower sales of banking hardware in key emerging markets, base effects due to the fact that the previous year's figure for the retail business included several particularly large orders, and finally the ongoing decline in market prices. As a result of this downturn, the contribution made by the Hardware business to total consolidated net sales fell to 42% (2013/2014: 46%). By contrast, net sales relating to Software/Services grew by 5% to €1,412 million during the year under review (2013/2014: €1,342 million). In part, this growth was driven by further increases in Software and Professional Services. Additionally, the area of IT Services saw net sales expand in the period under review. This was attributable to more buoyant business with Product-relates Services as well as Managed Services. Outsourcing business developed at a level comparable to last year's performance.

Personnel Restructuring Proceeds.

In total, 9,100 people were employed within the Group worldwide as of September 30, 2015 (2013/2014: 9,198). Existing personnel restructuring measures were given substantial impetus with the launch of the Delta program. Over the fiscal year under review, 450 jobs were cut across the Group, covering all the points of the program, while around 120 new jobs were created as part of the company's nearshoring efforts. Additionally, some 200 employees were recruited with regard to project-related activities.

In regional terms, the main focus of HR downsizing measures was on North and Latin America as well as Asia/Pacific. Wincor Nixdorf also further reduced its staffing levels in Germany. In the region covering Europe, the number of redundancies and new appointments was roughly equal. In Germany, the number of employees at the end of the year under review stood at 3,689 (2013/2014: 3,738). The number of staff employed outside Germany fell to 5,411 (2013/2014: 5,460).

Šaltinis: wincor-nixdorf.com
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