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at a glance · · · · · · 7 increase in consolidated operating revenue 79 improvement in net income 11 return on equity equity at 58 of total assets 8 revenue growth by automation components operational turnaround by computing solutions chf million bookings operating revenue ebit net income cash flow shareholders equity 2005 06 216.8 216.5 15.6 12.2 15.5 111.6 2004 /05 207.0 201.8 10.0 6.8 10.7 100.8 4.7 7.3 56.0 79.4 44.9 10.7 operating revenue by business unit chf million 79 automation components 21 computing solutions[close]
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five-year financial summary chf million at a glance five-year financial summary bookings order backlog operating revenue gross profit ebitda ebit earnings before taxes and minorities net income from continuing operations net income including discontinued operations cash flow depreciation and amortisation additions to fixed assets accounts receivable inventories net working capital current assets fixed assets net intangible assets net interest-bearing debt net current liabilities long-term liabilities minorities shareholders equity total liabilities and shareholders equity number of employees average 2005 06 216.8 44.9 216.5 94.5 19.9 15.6 15.7 12.2 15.5 4.3 5.4 63.1 32.7 52.3 128.7 23.9 33.8 -5.1 66.3 13.2 111.6 191.2 1 126 2004 /05 207.0 45.5 201.8 84.2 14.4 10.0 8.9 6.8 10.7 4.4 4.6 64.3 31.4 52.2 111.3 22.5 32.6 8.3 61.5 13.1 0.1 100.8 175.5 1 037 2003 /04 206.5 43.2 203.8 81.7 13.8 8.5 6.8 5.2 10.4 5.3 3.5 57.7 30.9 46.0 111.6 22.8 33.0 17.4 74.1 16.2 0.2 95.9 186.4 999 2002 /03 208.9 42.4 204.8 74.7 6.0 -0.4 -2.6 -2.7 5.8 6.4 4.7 59.9 31.0 49.7 110.2 32.6 33.5 37.2 82.7 22.9 0.5 89.7 195.8 1 033 2001/02 252.8 42.8 263.3 88.5 14.6 6.8 4.0 2.1 -40.4 8.1 7.8 4.7 68.9 41.3 62.8 127.0 38.5 35.9 33.0 79.6 27.0 0.6 96.8 204.0 1 198 net income depreciation amortisation change in provisions gain loss on sale of investments or assets[close]
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information for investors information for investors 2005 /06 registered shares nominal value chf 10 shares issued share of capital share of voting rights share price bearer shares nominal value chf 50 shares issued share of capital share of voting rights share price as of march 31 share price high share price low average daily volume p/e ratio basic earnings per share book value per share stock market capitalisation in percentage of revenue in percentage of equity dividend per share dividend yield total pay-out pay-out ratio 2004 /05 2003 /04 2002 /03 2001/02 number 1 600 000 1 600 000 1 600 000 1 600 000 45.0 45.0 45.0 45.0 80.4 80.4 80.4 80.4 the registered shares are not traded on the stock exchange 1 600 000 45.0 80.4 number chf chf chf number factor chf chf chf 1 000 chf chf 1 000 390 710 55.0 19.6 209 229 103 1 366 12.2 17.1 157 148 500 68.5 133.0 390 710 55.0 19.6 116 121 74 962 12.1 9.6 142 82 400 40.8 81.7 5.0 4.3 3 554 52.3 390 710 55.0 19.6 80 83 28 708 11.0 7.2 135 56 500 27.7 58.9 2.0 2.5 1 421 27.6 390 710 55.0 19.6 28 80 28 258 -3.8 126 19 900 9.7 22.2 390 710 55.0 19.6 71 240 66 629 24.5 2.9 136 50 460 19.2 52.1 restriction of voting rights there are no limits on registration of voting rights conditional share capital as of march 31 2006 35 270 bearer shares for issue to employees and members of the board of directors chf 1 763 500 of the company or subsidiaries financial calendar shareholders meeting 2005 06 interim report 2006 07 press and financial analysts meeting 2006 07 shareholders meeting 2006 07 july 27 2006 at the congress center metalli zug november 17 2006 june 21 2007 at the widder hotel zurich july 26 2007 at the congress center metalli zug based on continuing operations only proposal of the board of directors[close]
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information for investors share price 1.4.2005 31.3.2006 chf 230 210 190 170 150 130 110 90 apr may june july aug sept oct tm nov dec jan feb mar carlo gavazzi bearer share spi extra rebased share volume 1.4.2005 31.3.2006 number 12 000 10 000 8 000 6 000 4 000 2 000 0 apr may june july aug sept oct nov dec jan feb mar carlo gavazzi bearer share share price 1.4.2001 31.3.2006 chf 350 300 250 200 150 100 50 0 31.03.01 31.03.02 carlo gavazzi bearer share 31.03.03 tm 31.03.04 31.03.05 31.03.06 spi extra rebased[close]
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index carlo gavazzi group 4 letter to the shareholders 6 review of operations 8 group profile 10 automation components 12 computing solutions 14 corporate governance financial statements 21 consolidated financial statements of the carlo gavazzi group 39 financial statements of carlo gavazzi holding ag appendix 45 group companies[close]
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letter to the shareholders review of operations group profile automation components computing solutions corporate governance letter to the shareholders dear shareholders carlo gavazzi is celebrating its 75th anniversary in excellent health this is reflected in its expanding operating revenue and in profitability that compares well with its peers in industry moreover a net cash position and equity in excess of 58 of assets are testimony to the group s strong financial position the results of the reporting period confirm the positive trend witnessed over the past three years net income increased by 79 from chf 6.8 million to chf 12.2 million yielding a return on equity of 10.9 organic growth of bookings and operating revenue in swiss francs amounted to 4.7 and 7.3 respectively the carlo gavazzi share price continued its upward trend from april 1 2005 to march 31 2006 it increased by 81 approximately double the relevant spi extratm index with state-of-the-art products and services and focus on customer vicinity market segments and specific applications therein it is expected that the carlo gavazzi group will further improve its market position and financial performance during the current year 75 years carlo gavazzi a lifetime commitment to serve customers carlo gavazzi registered his personal business in milan in 1931 in the midst of the ravaging depression it was established to import oil burners from the usa to replace coal stokers which were used at that time for heating of residential and industrial boilers as business prospered room thermostats aquastats and pyrostats were added in order to offer customers a solution package for automated temperature control though carlo gavazzi left the comfort control business in the fifties the concept to provide solution packages to its customers rather than individual products was loyally pursued ever since in 1964 riccardo gavazzi son of the founder internationalised the business and much technical and financial resources were invested allowing the group to offer its products and services around the globe in the 75 years history of the carlo gavazzi group while technologies progressed society evolved and market approaches changed dramatically the company was re-invented many times the recipe for the group s longevity and today s prosperity is the loyal adherence to some basic principles werner s welti chairman of the board looking forward the management of the carlo gavazzi group believes that these principles will remain important for the group s future development and that the culture acquired during the last three quarters of a century will continue to contribute to its future success carlo gavazzi remains committed to re-inventing its deepest sense of self and its core business concepts not once a decade or in the midst of crisis but continuously year after year strategy new technologies permit the design of products and services that could not be imagined a few years earlier and thus render existing business models obsolete know-how-based innovation which offers quantum jumps in customer applications becomes the most critical competitive advantage carlo gavazzi is preparing for this paradigm shift as successful mastering of know-how processes is a prerequisite for creating wealth in future carlo gavazzi intends to face this innovation challenge by entering into even closer co-operation with the leading customers in the addressed market segments in a partnership with customers the company truly wishes to comprehend the specifics of their markets to speak their language to understand their problems of today and their challenges of tomorrow this will enable the group to create innovations for the next generation of applications together with its customers and most importantly will add value to them also in future financial results supported by a favourable currency development operating revenue increased in line with expectations by chf 15 million from chf 202 million to chf 217 million thanks to ongoing improvements in manufacturing processes and higher margins on new products the group was successful once more in increasing the gross profit margin substantially after the · a clear vision the recognition of market trends and opportunities · market vicinity reflected in the will to serve customers and to add value to their products · dedication and hard work of employees aiming at exceeding customers expectations · commitment to the highest quality · ethical behaviour in all dealings 4 carlo gavazzi group[close]
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previous year s improvement of 1.6 percentage points it increased this year by 1.9 percentage points to a new record level of 43.6 this result was achieved despite the persisting market price erosion of 2 to 3 annually revenue growth and efficiency improvements helped to increase ebit by 56 from chf 10.0 million to chf 15.6 million and net income by 79 from chf 6.8 million to chf 12.2 million the free cash flow of chf 17.5 million or 8 of sales and loan repayments have turned the carlo gavazzi group cash positive net cash available at year-end amounted to chf 5.1 million equity increased to chf 111.6 million or 58.4 of total assets the business units automation components with a revenue increase of 8.4 to chf 171 million the business unit exceeded expectations it progressed well in further streamlining its operations and in innovating its product range following the strategic plan the business unit made significant investments in building up its own manufacturing and sales organisation in china and in expanding its sales coverage in north america consequently revenue in southeast asia and in north america increased over-proportionally by 24 and 16 respectively the business unit also pursued successfully its efforts to concentrate product innovation and sales coverage on customers within a limited number of strategic market segments where it offers an applicationoriented selection of automation components this tailored product offering aims at allowing customers to single-source all their needs for automation components from the business unit customers increasingly honoured this strategy and the business unit s revenue from strategic market segments grew twice as much as sales to non-strategic markets repayment of share capital in view of both the strength of the operational results and the cash inflow from repayments of loans the board of directors will propose a reduction of the nominal share value to the annual shareholders meeting of july 27 2006 the nominal values of the registered and bearer shares will be reduced from chf 10.00 to chf 3.00 and from chf 50.00 to chf 15.00 respectively the proposed capital reduction will be paid out of the company s liquidity the capital repayment reflects the board s confidence in the future earnings of the company and its capability to finance growth with its internal cash flow generation outlook overall the carlo gavazzi group made solid progress during the reporting period however there is still more to be done management remains committed to add value to its customers in providing them with state-of-the-art products and services which are designed to improve efficiency and cost of the respective applications future product requirements of customers remain the key driver for the innovation of the product range today the group is well positioned to significantly expand its market shares in south-east asia north america and europe in response to the continuing market-price erosion the group intends to retain its lean structure to further improve efficiency and processes and to relocate manufacturing operations to lower-cost countries management strives to further grow profitability and to create long-term shareholder value acknowledgements the ability to deliver solid results for the third consecutive year in this fast changing market is to be attributed to the talent and the dedication of our people who worked tirelessly in transforming the carlo gavazzi group in order to better anticipate and serve the needs of our customers thanks to our employees we have emerged from a difficult situation into a leaner more agile and more innovative company on behalf of the board of directors of carlo gavazzi holding ag i wish to express my sincere thanks to our people for their outstanding performance for their dedication applied creativity and loyalty my thanks go equally to our customers and business partners for their confidence extended to the company over 75 years which is a pre-requisite for the group s present respectable position in the global market i wish to thank the shareholders for their continued trust and confidence in the management and the board of directors computing solutions operating revenue stabilised at the level of the previous year despite the discontinuation of certain non-profitable business lines the restructuring measures implemented in july 2005 were successful and the business unit reported operating profits from august 2005 with gross profit margin increasing and operating expenses dropping considerably operating profit in the reporting period of usd 0.4 million improved by usd 1.0 million over the previous year noteworthy is computing solutions alliance with a large multinational us technology group and the status it achieved as priority partner the two companies aim at marketing certain of the unit s fabric connectivity products through the multinational s global sales channel a successful partnership would significantly enhance growth and profitability of the business unit on april 6 2006 chris boutilier a proven executive with 17 years of successful track record with computing solutions was appointed president he succeeds mads lillelund who vacated his position on april 14 2006 but who will remain associated with the business unit as director werner s welti chairman of the board carlo gavazzi group 5[close]
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letter to the shareholders review of operations group profile automation components computing solutions corporate governance review of operations structure the organisational structure of the group remained unchanged during the year under review the group is composed of the two business units automation components with its head office in lainate milan italy and computing solutions with its head office in brockton ma usa currencies as the group operates in more than 20 countries and generates substantially all of its revenue in currencies other than the swiss franc foreign exchange rate movements are of particular importance compared with the previous year the us dollar and the euro strengthened against the swiss franc and consequently positively supported bookings and revenue growth in swiss francs the currency exposure for the group on profitability is limited as local revenues are matched with corresponding expenses in the same currencies consolidated gross profit margin improved by 1.9 percentage points from 41.7 to 43.6 in the reporting period the gross profit margin in the automation components business unit is significantly higher compared with the computing solutions business unit mainly due to the substantially higher material content in computing solutions business however the higher gross profit margin in acbu is partly offset by the significantly higher sales and marketing expenses of this business unit both businesses contributed to the group s positive profit development in the automation components business unit the gross profit margin increased by 1.8 percentage points mainly due to economies of scale and productivity improvements the gross profit margin in the computing solutions business unit increased by 0.9 percentage points mainly as a result of cost reduction in direct labour and productivity improvements after the july 2005 restructuring consolidated operating expenses including selling general and administrative expenses increased by chf 6.4 million or 8.7 from chf 73.5 million to chf 79.9 million approximately chf 1.4 million or 21.9 of this increase is attributable to currency movements operating expenses as a percentage of revenues amounted to 36.9 compared with 36.4 in the previous year the increase is mainly due to the major investments made in our strategic regions south-east asia and north america in the automation components business restructuring expenses recorded in 2005 /06 amounted to chf 0.8 million exclusively related to the computing solutions business for increasing productivity and streamlining the operations non-recurring restructuring costs were offset by an equal amount of non-recurring income consolidated ebit increased by chf 5.6 million or 56.0 from chf 10.0 million to chf 15.6 million the ebit margin on a consolidated basis for 2005 06 amounted to 7.2 an improvement of 2.2 percentage points over previous year net interest expense decreased by chf 0.5 million or 62.5 from chf 0.8 million to chf 0.3 million in 2005 06 the effective tax rate improved by 1.5 percentage points from 24.1 to 22.6 net income rose by chf 5.4 million or 79.4 from chf 6.8 million to chf 12.2 million earnings per share climbed from chf 9.59 to chf 17.11 return on equity improved from by 4.2 percentage points from 6.7 to 10.9 and return on capital employed improved by 5.5 percentage points from 9.2 to 14.7 bookings and backlog in 2005/06 consolidated bookings increased by chf 9.8 million or 4.7 2.5 in local currencies from chf 207.0 million to chf 216.8 million bookings exceeded revenues by chf 0.3 million for a consolidated book-to-bill ratio of 1 for the year bookings received by the automation components business unit increased by 8.7 7.0 in local currencies to chf 171.5 million bookings received by the computing solutions business unit decreased by 7.7 11.7 in local currency to chf 45.4 million mainly due to exited low-margin sheet metal and single board computing business and reduced military spending due to funds being diverted to hurricane relief efforts the order backlog of the group at year-end was 20.7 of operating revenue corresponding to work on hand for approximately two and a half months strengthened earning power consolidated revenue increased by chf 14.7 million or 7.3 5.0 in local currencies from chf 201.8 million to chf 216.5 million revenue from the automation component business unit increased by 8.4 percent 6.7 in local currencies to chf 171.0 million reflecting the business unit s strong focus on specific applications and geographic areas automation components represented 79.0 of total group operating revenue in 2005/06 compared with 78.2 in the previous year revenue from the computing solutions business unit increased by 3.4 1.1 in local currencies to chf 45.5 million the stabilisation of revenue in computing solutions was achieved despite the implemented restructuring including a reduction of the workforce by approximately 25 and the discontinuation of non-strategic low margin activities computing solutions represented 21.0 of total group operating revenue in 2005/06 compared with 21.8 in 2004/05 6 carlo gavazzi group[close]
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balance sheet and cash flow trade accounts receivable net increased by chf 2.8 million or 5.7 to chf 52.3 million representing a collection period of 80 days previous year 85 days net inventories increased by chf 1.3 million or 4.1 to chf 32.7 million corresponding to 4.0 turns previous year 3.9 turns trade accounts payable stayed flat at chf 23.4 million representing a payment period of 70 days previous year 72 days as a percentage of revenues net operating working capital remained flat at 28.5 during the reporting period loan instalments of chf 7.2 million plus interest were paid by the main shareholder and a former affiliated company accordingly receivables from the main shareholder significantly decreased by 43 from chf 16.7 million to chf 9.5 million plus interest at march 31 2006 of this amount chf 7.8 million will be repaid during 2006/07 the company turned net cash positive during the 4th quarter at march 31 2006 the net cash position amounted to chf 5.1 million total equity increased by chf 10.8 million or 10.7 from chf 100.8 million to chf 111.6 million chf 2.4 million of the increase is attributable to currency movements the equity ratio increased by 1.0 percentage points from 57.4 to 58.4 reflecting the further strengthening of the group s financial position cash flow figures also improved significantly cash flow from operating activities before changes in net working capital amounted to chf 15.5 million an increase of chf 4.8 million or 44.9 over the previous year cash flow from operating activities including changes in net working capital increased by chf 2.0 million or 14.7 from chf 13.6 million to chf 15.6 million additionally taking into consideration the investing activities the free cash flow increased by chf 8 million or 84.2 from chf 9.5 million to chf 17.5 million the free cash flow in relation to revenue improved from 4.7 to 8.1 in 2005 06 purchase of fixed assets of chf 5.4 million largely consisted of capital expenditures to renew our industrial base world-wide and to expand our operations in south-east asia net financing activities had only a minor impact on the cash position free cash flow was used mainly to increase the overall cash position of the group geographical revenue distribution 2005 2006 33 north america 42 europe without italy 19 italy 6 rest of the world 3 rest of the world 2004 2005 34 north america 43 europe without italy 20 italy key figures chf million 2005/06 216.8 216.5 94.5 78.8 15.6 12.2 17.5 2004/05 207.0 201.8 84.2 74.2 10.0 6.8 9.5 4.7 7.3 12.2 6.2 56.0 79.4 84.2 bookings operating revenue gross profit operating expense ebit net income free cash flow carlo gavazzi group 7[close]
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letter to the shareholders review of operations group profile automation components computing solutions corporate governance group profile our mission carlo gavazzi is a diversified internationally active electronics group designing manufacturing and marketing electronic equipment targeted at the global markets of industrial automation and information processing our activities the automation components business unit designs and manufactures electronic control components for the global industrial automation markets in its factories in denmark italy lithuania malta and the people s republic of china the products sensors monitoring relays timers energy management systems solid-state relays electronic motor controllers safety devices and fieldbus systems provide automation solutions for the factory and building automation markets typical customers are original equipment manufacturers of packaging machines plastic-injection moulding machines food and beverages production conveying and material handling equipment door and entrance control systems lifts and elevators as well as heating ventilation and air-conditioning devices value-added resellers and distributors are other effective channels to the market the products are marketed across europe north america and asia-pacific through a network of 20 own sales companies and through more than 40 independent national distributors our structure under the umbrella of a holding company headquartered in switzerland carlo gavazzi is organised in two business units it is the function of the holding company to ensure planning and development of the group s business portfolio to choose a coherent set of strategies and objectives to monitor their implementation and the efficiency of the corresponding management tools and processes to select the upper-level management to manage corporate finance controlling tax planning management information systems communication and investor relations the business units operate separately within the framework of defined strategies and objectives they are responsible for research and development manufacturing quality marketing and sales human resources logistics finance and control group executives lead their business units in line with the holding s objectives as businessmen with strong entrepreneurial drive and responsibility the computing solutions business unit our objectives to provide our customers with technologically innovative high quality and competitive solutions in compliance with their requirements and expectations to create an environment conducive to our employees professional and personal development to obtain a fair and equitable return for our shareholders through sustained development of our core activities our principles to create added value for our customers with our products and services in order to strengthen their market positions and establish long-term partnerships to adapt structures and processes to market needs and delegate responsibility to promote an environment conducive to mutual respect and cooperation to mark clear leadership and integrity by doing what we say 8 carlo gavazzi group designs manufactures and markets in the usa standard and custom products supporting open architecture bus structures such as vme compactpci advancedtca compacttca and microtca as well as switch fabric technologies the products include enclosures and high-speed backplanes fabric connectivity solutions as well as embedded computer systems the unit s system integration expertise provides customers with complete fully tested and certified systems whereas its fulfillment activity is a direct source for active boards motherboards and single board computers the computing solutions business unit operates manufacturing facilities both on the east and west coasts of the usa the unit s main customers are manufacturers of commercial and military telecommunications equipment mass-storage units for data processing speciality computers medical equipment and systems for industrial automation.[close]
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our strategy solution-packages for the vertical market segments automation components automatic doors vertical market segments product lines material handling packaging food beverages plastic building automation elevators hvac sensors control devices solid-state switching devices fieldbus systems computing solutions telecom vertical market segments divisions military industrial medical fabric connectivity fulfillment carlo gavazzi group 9[close]
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letter to the shareholders review of operations group profile automation components computing solutions corporate governance automation components business performance automation components with a growth of bookings and operating revenue of 8.7 and 8.4 respectively again outgrew significantly the increase in market demand estimated at 4 thanks to economy of scale effects and further efficiency improvements gross profit margin increased by 1.8 percentage points major investments were made in expanding manufacturing capacity in china lithuania and malta as well as in strengthening sales and marketing activities in the strategic regions south-east asia and north america nonetheless operating profit increased by 15.9 to reach chf 17.5 million or 10.2 of revenue growth in regions market segments and core products while revenue grew by almost 7 in europe the business unit enjoyed sales increases in its strategic regions north america and asia-pacific in excess of 15 and 20 respectively sales to the strategic market segments food beverages lift escalators and packaging to which the business unit offers comprehensive packages of automation components increased by more than 20 revenue of core products such as capacitive sensors solid-state motor controllers and energy management systems increased by more than 15 while sales of safety devices grew in excess of 30 in contrast sales of non-core products and non-strategic markets increased only modestly substantially increase its market shares in asia-pacific and north america where the business unit will continue to invest in marketing and sales personnel outlook management believes that the globally accessible market potential for automation components will grow at an average rate of 3 to 4 the focus on market segments defined applications and strategic regions should allow the business unit to outpace market growth once again although market price erosion is likely to persist the economy-of-scale effects and the completion of the production relocation to costeffective manufacturing sites should allow the business unit to defend its current level of gross profit margin automation components management is confident that it can continue to deliver a respectable performance in the current year main strategic thrust automation components will continue to provide a full package of state-of-the-art automation components for applications within the defined strategic market segments in the reporting period the business unit introduced among many other products the world s first fully pluggable industrial solidstate relay due to its small dimensions and versatile connection possibilities users benefit from cost savings both in space reduction in the control panel and in the wiring process an innovative microprocessor-based photo sensor amplifier system drastically enhances the detection reliability in critical applications its main features include an automatic gain control with automatic adjustment in case of dirt accumulation alignment control built-in diagnostics with alarm output and an immunity filter that prevents interference with neighbouring sensors to enhance the business unit s global position market management and r&d functions will be strengthened in all competence centres the business unit intends to financial results chf million bookings operating revenue operating profit number of employees 2005 06 171.5 171.0 17.5 988 2004 05 157.8 157.7 15.1 867 8.7 8.4 15.9 14.0 dino masili group executive illustration the automation components business unit provides a comprehensive package of components for the lift industry safety limit switches to determine the final position of the cabin magnetic sensors to detect the floor level sensors linked to a safety module to guarantee automatic door locking solidstate softstarters to accomplish smooth stopping and starting of the cabin and dupline® fieldbus systems to interconnect the cabin call system on each floor 10 carlo gavazzi group[close]
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