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© wrangler dreamstime.com Electronics Production | August 26, 2015

Net loss of KEUR 7,017 for Connect Group

Connect Group NV reports on 1st half-year 2015 sales of EUR 56.9 million. Sales for the comparable period of 2014 were EUR 64.8 million. The first-half figures represent a stabilisation of sales, as sales for the 2nd half of 2014 amounted to EUR 56.2 million.
The gross margin was 6.4 percent, against 11.7 percent in 2014. General and administrative expenses (4.5 percent of sales) and selling expenses (4.0 percent of sales) decreased by 0.6 and 1.3 percentage points respectively. This decrease was the result of job cuts and the streamlining of staff structures.

Other operating income included a reversal of a provision for bad debts in 2014 and a capital gain on the sale of several machines in 2015.

The operating result before the goodwill impairment was a loss of KEUR 1,837 in the first 6 months of the year, against a first-half profit of KEUR 517 in 2014).

Taking into account the plans for the group’s future, the Board conducted an impairment test. Based on the results thereof, the Board took the decision to write off the goodwill initially stemming from the acquisition of the Connect Group as part of the IPTE Group. The goodwill was originally amortized over a period of 10 years, but, following a change in the IFRS rules, became part of the annual impairment test on the basis of which no further write-downs were necessary.

The net loss for the first 6 months of 2015 is the result of three important factors:
  • H1 sales (EUR 56.9 million) were 10% lower than forecast;
  • Due to changes in the product mix (more assembly operations with lower added value), the material margin was 2.5 percentage points lower than forecast (budgeted material margin: 36 percent; actual material margin: 33.5 percent);
  • The restructuring decided at the end of 2014 was started in the first half of 2015. Due to a number of different factors, the decisions taken at the end of 2014 are being implemented later than originally planned. As a result, wage costs for the first 6 months of 2015 were significantly higher than forecast.

The order book developed positively, amounting to EUR 87 million at the end of the 1st half of 2015, against EUR 82.8 million at the end of 2014. The order book contains formal commitments from customers, but may be subject to adjustments in numbers and timeframes. For this reason it cannot be used as a financial indicator of future results.

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