Starrag : Half-Year Report 2023

Half-year report 2023

2 StarragAt a glanceGroup Half-year report 2023

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Starrag Group Half-year report 2023 3

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Medium-term operating earnings target almost achieved - Order intake maintained at a high level - Order backlog remains solid - Sales increased significantly

• EBIT in the first half of 2023 more than doubled to CHF 15.4 million (7.7% of sales revenue) compared to prior-year period
• Order intake maintained at a high level of CHF 183.4 million (-3.3% compared to prior-year period)
• Order backlog of CHF 307.5 million (-6.0% compared to the end of 2022) ensures capacity utilisation well into 2024
• Sales revenue in the first half-year increased by 43% to CHF 199.9 million compared to prior-year period
• Net income also more than doubled in total and per share

4 To our shareholders

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Dear shareholders

Order intake remains at a high level - strong increase in sales

After the strong increase of the last two years, incoming orders stabilised at CHF

183.4 million in the reporting period (-3.3% compared to prior-year period, -0.9% adjusted for currency effects).

At CHF 199.9 million, sales in the first six months of 2023 were 43.3% above the previous year's level (47.3% adjusted for currency effects). At 0.92, the book-to-bill ratio (incoming orders to sales) was below the previous year (1.36) due to the above-average growth in sales revenue.

The pleasing development of order intake in the past financial year is reflected in a continued high order backlog of CHF 307.5 million (+1.5% compared to prior-year period, +4.0% adjust-ed for currency effects). This solid order backlog ensures capacity utilisation until well into 2024.

By regions and customer industries

In regional terms, only new orders from European customers increased, represen­ ting 80% of the total order intake. North America (12%) maintained the previous year's level. Order intake from Asia (8%) was down, which can be explained by restrained investment activity due to weakened growth in China.

Thanks to a significant increase, Micromechanics, the largest customer industry, contributed significantly to the group-wide order intake. Transportation doubled its new orders. Aerospace held its own, while Industrial and Energy declined.

Lower cost basis boosts income

The positive effect of the structural cost reduction implemented in 2021 and the increase in Starrag Group's profitability could also be seen in the first half of 2023. In addition, the high order backlog was processed efficiently and profitably in the reporting period. The operating result (EBIT) increased by 152% to CHF 15.4 million (previous year period CHF 6.1 million). At 7.7 percentage points, this is nearly in line with the Group's medium-term operating objec-tive of 8%. Ultimately, net income came to CHF 13.6 million (+170% compared to prior-year period), or 6.8% of sales; per share it amounted to CHF 4.05.

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Strong balance sheet

Starrag Group's balance sheet remains solid and is characterised by high real estate assets and low debt. Thanks to a conservative depreciation policy for real estate and property, plant and equipment, the company has a high level of hidden reserves. At 49.8% at the end of June 2023, the equity ratio was slightly below the long- term average. At the end of the reporting semester, net debt was CHF-13.1 million (end of previous year period CHF +20.1 million). In the 2022 financial year, cash flow from operating activities amounted to CHF 12.3 million, while it declined to CHF -22.5 million in the reporting period. The main influencing factors were the decline in advance payments for large machine orders and the general increase in business volume and the associated rise in trade receivables in the first half of 2023.

Confident outlook for 2023

Starrag Group is confident about the remainder of the reporting year, provided that operating activities are not limited by external factors beyond its control. By substantially and perma-nently reducing the cost basis in the last two years, the company will move closer towards its medium-term profitability objective. In addition, it will continue to push ahead with reviewing the product portfolio, exploiting synergy potential and implementing measures to achieve opera-tional excellence.

Strategically, the Group is consistently concentrating on the market segments that offer the best growth and earnings potential in view of its technological application expertise. The medi-um-term objectives still apply, defined as sales growth of 5% per year and an EBIT margin of 8%.

For the 2023 financial year, Starrag Group expects the order intake to be around the same level as in the previous year. Thanks to the strong order backlog and good first half of the year, sales are expected to significantly exceed the previous year's figure. Consequently, operating earnings and the associated margin are also expected to increase.