S&T AG comments on the latest share price development of the S&T share

Tuesday, 13th November 2018

Austria

Linz, 13.11.2018. S&T AG (www.snt.at) published its third quarter 2018 results last Friday, 09.11.2018 and at the same time increased its EBITDA forecast for 2018 from EUR 80 million to at least EUR 88 million. In addition, the Agenda 2023 - doubling revenue to EUR 2000 million and disproportionally increasing the EBITDA to rise to more than EUR 200 million - was reaffirmed.

On 12.11.2018, the share price of the S&T dropped after a start at EUR 22,42 to a closing price of EUR 18,61, which corresponds to a daily loss of 15,72%. In order to reduce uncertainty in the market, S&T hereby comments on the questions raised from the investor side:

We are confirming our goal of achieving in 2018 an EBITDA of at least EUR 88 million in 2018, an increase of around 30% compared to 2017. Likewise, we reaffirm our long-term objectives by 2023.
The gross margin for the first nine months of 2018 fell from 37.5% in 2017 to 35.7%. This modest decline is largely attributable to a change in the product mix, especially due to the greater share of IT projects with lower gross margins in the “IT Services” segment, whereas the gross margin in the “IoT Solutions” segment and revenue from software developed positively. In this respect, the mid-term target of 40% gross margin remains unchanged. In the same period, the EBITDA margin further increased to 9%.
The operating cash flow in the first nine months of 2018 was seasonally at EUR -19.9 million and thereby below the value of the previous year of EUR -8.4 million. It needs be noted that in order to ensure the delivery capacity for the expected strong fourth quarter based on the high order backlog, the inventories were increased from EUR 104.0 million as of 31.12.2017 and EUR 116.5 million as of 30.06.2018 to EUR 150.2 million at the end of the third quarter of 2018. As in previous years, the Executive Board expects a very positive operating cash flow of more than EUR 50 million in the fourth quarter of 2018, in line with a significant reduction in inventories.
Another factor of uncertainty seemed to be the question of the impact of the customs dispute between the US and China on the business of the S&T Group. Based on the logistics chain of the S&T Group and the value creation in countries that are not affected by these new customs, the S&T Group is currently affected to a very limited extent. The new customs incurring in the US in the course of the fourth quarter of 2018 will amount to less than TEUR 50 for the S&T Group and are considered in the profitability forecast. The same applies for fiscal year 2019.

Hannes Niederhauser, CEO of S&T AG comments: “We are very disappointed with yesterday's market reaction, especially in view of the recent positive numbers released and cannot identify operational reasons for the share development. For several years in a row, we have been steadily increasing revenues and profitability, always meeting or exceeding our published plans. I currently do not see any inherent reason that the long-term success story of S&T is not continuing as it was until now, also considering the positive development of our order backlog of around EUR 592 million and our project pipeline of around EUR 1.5 billion as at September 30, 2018."