INDUS third quarter: good operating performance

• 9M sales climb to EUR 1.36 billion
• EBIT margin at 8.6%; before impairment at 9.9%
• Free cash flow of EUR 106.1 million exceeds full-year target

In the first nine months of 2023, INDUS Holding AG increased its sales by 1.4% to EUR 1.36 billion (previous year: EUR 1.35 billion). Operating income (EBIT) rose by 19.5% to EUR 116.9 million (previous year: EUR 97.8 million). The EBIT margin increased to 8.6% (previous year: 7.3%). Non-cash impairment losses of EUR 17.6 million (previous year: EUR 39.8 million) were recognized as a result of the annual impairment test. EBIT before impairment losses therefore amounted to EUR 134.5 million (previous year: EUR 137.6 million), with a corresponding EBIT margin of 9.9% (previous year: 10.2%).

“Our broadly diversified portfolio once again demonstrated its strength in the first nine months of 2023,” said Dr. Johannes Schmidt, Chairman of the INDUS Board of Management. “Despite the very challenging environment, our portfolio companies have managed to stay well on course.”

At EUR 43.4 million, earnings after taxes were significantly higher than in the previous year (EUR -29.9 million). The full divestment of the automotive supply companies was completed in the third quarter of 2023, when SCHÄFER and SELZER, the two remaining portfolio companies in the discontinued operations, were sold and subsequently deconsolidated. Earnings per share from continuing operations amounted to EUR 2.63 (previous year: EUR 2.08).

Free cash flow provides room for further acquisitions

In the first nine months of 2023, operating cash flow increased to EUR 128.7 million (previous year: EUR 36.2 million), not least due to strict working capital management, as the supply chain issues eased. Free cash flow, which indicates among others the funds available for new acquisitions and dividend payments, increased to EUR 106.1 million (previous year: EUR 22.2 million). The equity ratio stood at 37.4% as at 30 September 2023 (previous year: 36.3%).

“The high free cash flow at the end of September, which exceeds our full-year target of EUR 100 million, gives us room for further acquisitions,” said Dr. Johannes Schmidt. “Our M&A pipeline is developing well. We are pursuing several projects in our defined future fields and are confident that an acquisition will be completed before the end of the year.”

Significant EBIT growth in Engineering and Materials

Sales in the Engineering segment rose by 4.9% to EUR 434.2 million (previous year: EUR 414.0 million). In particular, the portfolio companies in the measurement and control engineering as well as cleanroom systems segments were able to expand their business. HEIBER + SCHRÖDER and HELD, which were acquired in 2022, contributed inorganic growth of 1.8%. EBIT before impairment increased by 11.8% to EUR 44.5 million (previous year: EUR 39.8 million). After impairment losses of EUR 4.8 million (previous year: EUR 13.8 million), EBIT amounted to EUR 39.7 million (previous year: EUR 26.0 million). The EBIT margin rose to 9.1% (previous year: 6.3%). Full-year EBIT margin guidance remains at 9% to 11%.

At EUR 444.7 million, sales in the Infrastructure segment were almost on a par with the previous year (EUR 446.5 million). This figure includes inorganic growth of 0.7% from the acquisition of QUICK at the beginning of 2023. Except for the fields of green tech and infrastructure networks, the segment companies felt the effects of subdued construction activity. In the third quarter of 2023, however, sales picked up again slightly by +0.9% year-on-year. The fourth quarter is expected to be broadly stable at the current level. As a result of the annual impairment test, INDUS recorded impairment losses of EUR 7.5 million (previous year: EUR 12.7 million). After nine months, EBIT amounted to EUR 36.9 million (previous year: EUR 42.8 million), with an EBIT margin of 8.3% (previous year: 9.6%). In view of the cyclical weakness of the industry, the Board of Management now projects the EBIT margin for the full year at between 8% and 10%, i.e. one percentage point lower than before.

At EUR 484.4 million, the sales of the portfolio companies in the Materials segment remained at the previous year's level. Operating income (EBIT) increased by 31.5% to EUR 50.5 million (previous year: EUR 38.4 million). The EBIT margin reached 10.4% (previous year: 7.9%). Impairment losses of EUR 5.3 million (previous year: EUR 13.3 million) were recognized in the Materials segment. The adverse effects on earnings projected in the half-year report, in particular the introduction of an EU anti-dumping duty on imports of an important raw material, will not materialize before the end of 2023. In addition, most of the companies operating in the medical consumables and supplies sector have improved their results. As a result, the Board of Management has raised the EBIT margin forecast range by another percentage point to between 8% and 10%.

Good earnings expectations despite difficult overall conditions

“The geopolitical situation and the macroeconomic sentiment have not changed for the better over the past three months,” said Dr. Johannes Schmidt. “Nevertheless, we have a lot of positive energy for the last quarter of the year. The Engineering and Materials segments continued to improve their results. And the economic slowdown in the Infrastructure segment seems to have bottomed out.”

After the first nine months of the financial year 2023, the Board of Management is now forecasting full-year sales to be in the forecast range of EUR 1.8 billion to EUR 1.9 billion, reduced by EUR 0,1 billion. INDUS projects operating income at the lower end of the range of EUR 145 million to EUR 165 million and an EBIT margin at the upper end of the forecast range of between EUR 7% and 8%. EBIT excluding impairment losses is expected to be at the upper end of the guidance range. Schmidt: “Despite the slightly reduced sales target, we expect good operating results for the year as a whole and, in particular, a rising EBIT margin.”

The complete interim report is available here. An overview of the key performance indicators is available here.

About INDUS Holding AG:
Established in 1989 and headquartered in Bergisch Gladbach, INDUS Holding AG is a leading specialist for sustainable corporate development in the German-speaking SME sector. INDUS acquires two to three technology-oriented and promising industrial engineering companies for the Engineering, Infrastructure, and Materials segments annually. As a value-driven investment company with a clear focus on defined growth topics, INDUS provides its 43 operationally independent portfolio companies with active, long-term support in their corporate development, especially in the fields of innovation, market excellence, operational excellence, and sustainability. Since 1995, INDUS Holding AG has been listed in the Prime Standard of the Frankfurt Stock Exchange (DE0006200108); in 2022, the Group generated sales of around 1.8 billion euros. For more information on INDUS, visit www.indus.de.