To Our Shareholders
The growth strategy of the Comet Group led to another set of record results in 2017. Sales grew by 32% to CHF 438.4 million. Net income rose by 30% to CHF 35.5 million. The Group continued to add value and, under its new CEO René Lenggenhager, set the stage for sustained future success.
The Comet Group accelerated its growth in 2017. It expanded the business with key accounts, developed relationships with prospective customers, mastered the challenge of meeting the high demand, and also moved ahead in important projects to prepare for future growth. Consolidated net sales expanded to CHF 438.4 million, surpassing the prior year by CHF 106 million.
Growth in all segments and regions
Comet grew strongly in 2017. All regions and business segments contributed to the sales growth. The largest contribution came from the Plasma Control Technologies (PCT) segment: Its sales soared 53% to CHF 210.5 million. Thanks to its strong position in the market for high-end RF solutions, PCT benefited disproportionately from the expansion of manufacturing capacity in the semiconductor market and increased its business with key accounts. A broad-based network of suppliers helped PCT meet the strong demand with on-quality, on-time deliveries. Thanks to customized, highly reliable solutions, sales of the X-Ray Modules (IXM) segment increased by 13% to CHF 78.8 million. IXM was buoyed especially by strong growth in the security inspection market.
X-Ray Systems (IXS) further expanded its market position, notably in the key automotive and electronics markets. Its sales grew by 13% to CHF 137.3 million. The emerging and expanding ebeam Technologies segment (EBT) almost doubled its sales, to CHF 29.5 million. Besides the growth in sales of its modules, a high backlog of orders from the previous year in the systems business was filled in 2017.
“René Lenggenhager and his team are tackling strategic work important for Comet’s future.”
Hans Hess, Chairman of the Board
Economic profit again boosted from the prior year – Growth successfully managed operationally
The high sales volume enabled a significant increase in the Group’s EBITDA operating earnings to CHF 63.4 million (2016: CHF 47.7 million). The largest contributor was the PCT segment, where earnings were up by 80% to CHF 55.7 million. IXM raised its EBITDA by 9% to CHF 18.0 million. In the IXS segment, elevated expenditures for investments in product portfolio renewal and in greater market development resulted in an EBITDA earnings decrease to CHF 8.3 million (2016: CHF 11.5 million). Within the EBT segment, heavier competition weighed on the ebeam systems business. EBT invested in the professionalization of its processes, in cost reduction and in the standardization of the product portfolio. Coupled with the budgeted high investment in the development of new applications, this led to a segment EBITDA deficit of CHF 16.2 million (2016: deficit of CHF 9.1 million).
The Comet Group’s net income rose to CHF 35.5 million (2016: CHF 27.3 million). This was despite a negative effect of CHF 2.1 million on net income as a result of an adjustment to the pension plans in Switzerland, which in the previous year had had a positive impact of CHF 1.4 million. Economic profit, even with a shortage of contributions to it from two segments, improved significantly to CHF 16.2 million (2016: CHF 10.8 million). Return on capital employed (ROCE) increased from 14.7% to 16.2%. With an equity ratio of 53%, the Group is very soundly financed. Despite the demands of generating the pronounced sales growth, the ratio of net working capital to sales improved, easing to 23% (2016: 24%), an indicator of the Group’s improved operating efficiency.
“With the additional levers of digitalization, diversification, agility & speed, go-to-market, and the corresponding projects, we will be best able to exploit further opportunities.”
René Lenggenhager, CEO
Key foundations put in place for future growth
The Comet Group is profitable and in dynamic motion. It deepened its relationships with existing and prospective customers, widened its market access, invested in innovative solutions and worked to hone its operating efficiency. Innovative new products were successfully launched, such as the IoT-capable iVarioTM x-ray generator, the highly stable cito Plus RF generator, and the FF CT metrology systems. In the digital print sector, in partnership with Uteco, it took only ten months to develop and launch the new ebeam-based GAIA printing system. The field tests for the bacterial inactivation of dry foods using ebeam, a project by Bühler, were successful, underscoring the effectiveness of ebeam in the application. While the development of a new ebeam-based product generation at Tetra Pak means a delay in the current rollout with this partner, Tetra Pak’s commitment to ebeam is unbroken. Important forward-looking investments were made in the expansion of the software competencies and in test and development infrastructure, exemplified by the ultra-modern Smart Lab in Flamatt for testing the new RF generators. Lab One, opened in October in Silicon Valley as a landmark step, is the Comet Group’s first test and application center to provide all its technologies under one roof.
In procurement, among other measures to raise operational excellence, product groups were combined in order to obtain better purchasing prices. The construction work for the expansion of manufacturing capacity in Flamatt is progressing to plan. The move-in date is expected for late summer 2018. The new construction not only creates urgently needed space for further growth but the new facilities there will also improve operating efficiency.
Readying for the future
With the Group’s preparations to fully utilize its potential – through digitalization, further diversification, increasing the agility of the organization, and improving go-to-market – important efforts are underway to ready Comet for the future.
To even better meet the demands which further strong growth in business places on the company, the management team was reinforced at the Executive Committee level. CEO René Lenggenhager has been leading the Group since May 2017. With the addition of Prisca Hafner as Chief Human Resources Officer in January 2018, the CHRO position (previously part of a dual role) is now staffed separately. Also with effect from January 2018, Stephan Haferl became president of the IXM segment.
Following the decision of Charles Flükiger to leave the Group, the search for a new president of EBT is underway. The Board of Directors thanks Charles Flükiger for his great commitment over the past 37 years.
The Board and management are confident that in the years ahead the Comet Group will steadily continue to generate value-added and that it will already reach its 2020 growth target in 2019: sales of CHF 500 million and an EBITDA margin of 16% to 18%. For 2018 we expect sales of CHF 460 million to CHF 490 million and a return on capital employed (ROCE) of between 17% and 20%. This implies an EBITDA margin of 14% to 16%.
At the Annual Shareholder Meeting on April 26, 2018, the Board of Directors will propose a distribution of CHF 1.50 per share from distributable paid-in capital (2017: CHF 1.20), exempt from Swiss anticipatory tax. This represents a dividend of 33% of the Group’s net income.
Great achievements by a company are only possible through close cooperation and the efforts of many. The Board and management would like to thank the Group’s partners and customers for their valuable contribution. A special thank-you goes to our suppliers, without whose great flexibility and high quality standards the compelling results could not have been achieved. As well, we extend our sincere thanks to the employees of the Comet Group, whose strong commitment and hard work made the year’s record performance possible. We also thank our shareholders for their continuing confidence.