3W Power/AEG Power Solutions Reports Results for Q4 and Fiscal Year 2014

AEG Power Solutions (FWB:3W9K):

Group results
(in € million)					12M 2014			12M 2013			Δ in %
Order backlog					85.7			85.2			0.6
Orders					210.0			228.5			-8.1
Revenue					203.3			260.3			-21.9
Book to Bill					1.03			0.88			17.7
EBITDA					(12.2)			(23.6)			48.2
EBITDA margin					-6.0%			-9.1%
Normalized EBITDA					(17.7)			(5.3)
Normalized EBITDA margin					-8.7%			-2.0%

(in € million)					Q4 2014			Q4 2013			Δ in %			Q4 2014			Q3 2014			Δ in %
Order backlog					85.7			85.2			0.6			85.7			99.9			-14.2
Orders					47.6			52.1			-8.6			47.6			43.9			8.6
Revenue					57.5			62.3			-7.7			57.5			47.6			20.8
Book to Bill					0.83			0.84			-1.0			0.83			0.92			-10.1
EBITDA					(5.6)			(13.4)			57.8			(5.6)			(1.1)
EBITDA margin					-9.8%			-21.5%						-9.8%			-2.2%
Normalized EBITDA					1.8			1.8			1.8			1.8			(1.2)			na
Normalized EBITDA margin					3.1%			2.9%						3.1%			-2.5%

3W Power S.A. (ISIN LU1072910919, 3W9K), the holding company of AEG Power Solutions Group, a global provider of UPS systems and power electronic solutions for industrial, commercial, renewable and distributed energy markets, today announced results for Q4 and fiscal year 2014.

AEG Power Solutions finished fiscal year 2014 with €210.0 million in orders and €203.3 million in revenue. Compared to 2013, orders were down 8.1% (2013: € 228.5 million) and revenue was down 21.9% (2013: €260.3 million). Variance was in line with expectations, and the year-on-year decreases were mainly due to the Company’s comprehensive restructuring measures. The revenue level reported for 2014 in fact met the guidance the Company had given to the market following its financial restructuring carried out in mid-2014.

EBITDA came to - €12.2 million (Normalized EBITDA, which is EBITDA impacted by one-time transactions, was - €17.7 million), up 48.2% over 2013 EBITDA of - €23.6 million (2013 Normalized EBITDA: - €5.3 million). Most important driver for the Company’s profit situation was the restructuring which included sale of assets, closing down of structural loss-making affiliates, reduction in headcount and new market focus in the core EES business. The effects of the operational restructuring measures are improving the results and provide evidence that the Company is stabilizing. On a like-for-like basis (excluding sold assets/discontinued operations), total costs were reduced by €25.2 million compared to 2013. Headcount reduced from 1,521 to 988 as at end of February 2015. Following negative Normalized EBITDA on a quarterly basis from Q1 to Q3 2014, the positive €1.8 million Normalized EBITDA in Q4 2014 demonstrates the Company’s ability to achieve profits in operating business and underlines the progress achieved in the Group’s turnaround process.

With the conversion of the old €100 million bond the Company recognized an income of €46.7 million. In combination with the cash capital increase, both successfully carried out in August 2014, this resulted in a substantial improvement of the Company’s equity which was €44.0 million as at December 31, 2014. This represented 22.5% of the total balance sheet. As a result of the operational and financial measures including asset sales, the Group’s position of cash and cash equivalents remained relatively stable at €29.9 million at the end of fiscal 2014 (2013: €32.7 million).

Several external factors, including the political crises in Russia and Ukraine as well as the conflicts in the Middle East, placed a burden on the operating business during the reporting period. These negatively affected projects and orders in the core industrial markets. Moreover, the decline in oil prices, the slowness in some European economies and downgraded growth prospects brought a high degree of uncertainty to the markets for industrial goods and infrastructure investment especially in the important oil & gas market. The macroeconomic factors negatively affected order intake as customers tend to delay investments due to uncertain outlook. Since revenues decreased at a higher rate than order intake due to the reduced scope of the Company’s activities, the Group’s Book to Bill however improved to 1.03 in 2014 (2013: 0.88).

Renewable Energy Solutions (RES)
(in € million)					12M 2014			12M 2013			Δ in %
Order backlog					8.0			14.1			-42.9
Orders					32.6			57.4			-43.1
Revenue					30.5			96.1			-68.3
Book to Bill					1.07			0.60			79.5
EBITDA					(7.8)			(6.8)			-15.4
EBITDA margin					-25.6%			-7.0%
Normalized EBITDA					(18.7)			1.2			na
Normalized EBITDA margin					-61.4%			1.2%

(in € million)					Q4 2014			Q4 2013			Δ in %			Q4 2014			Q3 2014			Δ in %
Order backlog					8.0			14.1			-42.9			8.0			13.3			-39.7
Orders					7.0			9.2			-24.4			7.0			4.6			51.8
Revenue					7.6			10.4			-26.5			7.6			6.1			24.3
Book to Bill					0.92			0.89			2.9			0.92			0.75			22.2
EBITDA					(10.5)			(8.9)			-17.6			(10.5)			(3.1)
EBITDA margin					-137.7%			-86.0%						-137.7%			-49.9%
Normalized EBITDA					(0.6)			(1.1)			45.8			(0.6)			(5.9)			89.7
Normalized EBITDA margin					-7.9%			-10.8%						-7.9%			-95.7%

Orders in RES were €32.6 million in 2014, down 43.1% year-on-year (2013: €57.4 million). RES order backlog was €8.0 million in 2014, down 42.9% year-on-year (2013: €14.1 million). The Solar restructuring measures taken, which included the sale of operations in India as well as the subsidiary skytron and the operational closing down of the Dallas office, together with the weak market situation (financing, delays and cuts in government subsidies) and no development of new product introduction, caused a significant decrease in the overall order intake. Order intake in POC was impacted by the restructuring measures taken due to the sale of the Power Controller Module business. Although a large order was obtained from a key customer in the polysilicon industry, the Company still sees no sign of a structural recovery in this weak market. The Group however continues to apply its technology to new markets and new applications and has occasionally success. RES revenue was €30.5 million in 2014, down 68.3% compared to the previous year (2013: €96.1 million). This development was significantly driven by the drop in underlying Solar and POC markets as well as divestments of non-core units within the Group.

RES EBITDA was - €7.8 million (Normalized EBITDA: - €18.7 million) in 2014, down 15.4% from EBITDA of - €6.8 million in 2013 (2013 Normalized EBITDA: €1.2 million). The modest drop in EBITDA is due to significantly lower volumes, a reduction in operating expenses, and a corresponding restructuring provision of €4.4 million (2013: € 0.1 million). Following the restructuring measures in Solar the Group decided to write off another €5.0 million (2013: €5.0 million) on POC thyristors and solar material/finished products. The chapter 11 filing of the largest customer in the POC business resulted into a bad debt provision charge of €1.1 million. These loss effects were compensated by a €18.3 million capital gain following the sale of the Power Controller Module business and a reversal of an impairment charge of €2.0 million relating to working capital.

Energy Efficiency Solutions (EES)
(in € million)					12M 2014			12M 2013			Δ in %
Order backlog					77.7			71.1			9.2
Orders					177.4			171.2			3.6
Revenue					172.8			164.2			5.3
Book to Bill					1.03			1.04			-1.5
EBITDA					3.4			0.5
EBITDA margin					2.0%			0.3%
Normalized EBITDA					3.6			5.7			-35.9
Normalized EBITDA margin					2.1%			3.5%

(in € million)					Q4 2014			Q4 2013			Δ in %			Q4 2014			Q3 2014			Δ in %
Order backlog					77.7			71.1			9.2			77.7			86.5			-10.3
Orders					40.7			42.9			-5.2			40.7			39.3			3.6
Revenue					49.9			51.9			-3.9			49.9			41.5			20.2
Book to Bill					0.82			0.83			-1.3			0.82			0.95			-13.9
EBITDA					3.9			2.8			36.9			3.9			0.9
EBITDA margin					7.8%			5.5%						7.8%			2.1%
Normalized EBITDA					2.4			6.7			-63.8			2.4			0.6
Normalized EBITDA margin					4.9%			13.0%						4.9%			1.4%

Orders in EES were €177.4 million in 2014, up 3.6% year-on-year (2013: €171.2 million). Order backlog stood at €77.7 million in 2014, up 9.2% year-on-year (2013: €71.1 million). The focus on key end-customer vertical markets such as oil and gas, power distribution and transportation is showing the first intended results. Order intake was partially hindered by the macro developments in the Middle East, Eastern Europe and the Oil & Gas markets in the second half of 2014. Orders and sales in Telecom infrastructure business maintained at 2013 level. EES revenue was €172.8 million in 2014, up 5.3% in a year-on-year comparison (2013: €164.2 million), following high order intake in Industrial Power Solutions especially during the first half of 2014.

EES EBITDA was €3.4 million (Normalized EBITDA: €3.6 million) in 2014, up from €0.5 million in 2013 (2013 Normalized EBITDA: €5.7 million). The increase in EBITDA relates to the increase in sales, the successful reduction in operating expenses and the reversal of €4.0 million impairment charges in working capital in combination with the sale of India, offset by a higher amount for restructuring charges in 2014 of €2.9 million (2013: €1.3 million).

Outlook

With the Group’s financial restructuring completed and progress in operational restructuring realized in 2014, improvements are visible in the reporting period. The goal of the group is to lay a solid foundation for future prosperous development. The Company is focused on internal measures for achieving continuous improvement and to expand market share.

Nevertheless a great deal of potential for further improvement still remains and will require additional effort in the next years. The results already achieved should not obscure the fact that the Company is still just in year two of a difficult business transformation and development path. A challenge going forward is not only to rely upon best-in-class technology and reliability, but to develop and implement a customer-facing organization that is proactive, receptive to input and adaptive to the changing commercial environments in which the Group operates. This includes the transformation of a previously uncompetitive structure into a customer-centric, lean and flexible organization and will necessarily require patience and further understanding from suppliers and customers alike. So far the Company has managed to retain key frame contracts, demonstrating that customers value our business solutions approach.

Continued opportunities exist in the Company’s future core businesses. Areas such as energy storage and data centers offer some intriguing possibilities. On the other hand the unrectified situation in Russia and Ukraine, the volatility and decline in oil price as well as an uncertain economic perspective is having an impact on current trading. For full business year 2015, we forecast revenue to be in line with the revenues of 2014 on a like for like basis. The medium-term goal remains having top-line growth in the mid-single digits and an EBITDA margin of 5% to 10%.

Jeffrey Casper, CEO, expressed the following expectation on the Company’s future development: “Continuous and sustainable improvement in the Group’s core areas will result in better growth and increased profits. This does not happen in a short period of time, but instead requires sustained and constant effort. I am committed – together with a fresh and focused core management team – to achieving these results.”

Dr. Dirk Wolfertz, Chairman of the Board of Directors, commented: The Board and the Company’s management are completely aligned in our objective. This is to restore competitiveness and to develop a consistently profitable and growing business that is among the best in our selective markets.”

-- End of Announcement --

About 3W Power/AEG Power Solutions:

3W Power S.A. (WKN A114Z9 / ISIN LU1072910919), based in Luxembourg, is the holding company of AEG Power Solutions Group. The Group is headquartered in Zwanenburg in the Netherlands. The shares of 3W Power are admitted to trading on Frankfurt Stock Exchange (ticker symbol: 3W9K).

For more information, visit www.aegps.com

This communication does not constitute an offer or the solicitation of an offer to buy, sell or exchange any securities of 3W Power. This communication contains forward-looking statements which include, inter alia, statements expressing our expectations, intentions, projections, estimates, and assumptions. These forward-looking statements are based on the reasonable evaluation and opinion of the management but are subject to risks and uncertainties which are beyond the control of 3W Power and, as a general rule, difficult to predict. The management and the company cannot and do not, under any circumstances, guarantee future results or performance of 3W Power and the actual results of 3W Power may materially differ from the information expressed or implied in the forward-looking statements. As a result, investors are cautioned against relying on the forward-looking statements contained herein as a basis for their investment decisions regarding 3W Power. 3W Power undertakes no obligation to update or revise any forward-looking statement contained herein.

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Contact information

For further information:
Hillermann Consulting
Christian Hillermann, +49 40 320 279 10
Investor Relations for AEG Power Solutions
investors@aegps.com