Cherry finishes 2021 fiscal year with sustained robust revenue growth and high profitability
/ Key word(s): Annual Report
Cherry finishes 2021 fiscal year with sustained robust revenue growth and high profitability
Munich, March 31, 2022 - Cherry AG [ISIN: DE000A3CRRN9] today published its consolidated financial statements for the 2021 fiscal year and its forecast for the full year 2022.
"With growth of almost 30%, we have successfully remained on course for expansion over the past twelve months, in line with expectations," said Rolf Unterberger, CEO of Cherry AG, commenting on Cherry's business performance in the 2021 fiscal year. "Our favorable product mix enabled us to sustain our high level of profitability, even in the increasingly difficult economic environment during the second half of the year. Our strategic positioning with the Group's four business units is therefore once again proving to be highly successful. Our medium- and long-term global growth will continue to be driven by major trends in gaming, mobile working, and the digitalization of healthcare."
The 2021 fiscal year was characterized by strong revenue growth of 29.4% to EUR 168.5 million (2020: EUR 130.2 million), despite momentum being held down by pandemic-related supply chain disruptions in the second half of the year, which led to temporary fluctuations in the ordering behavior of Cherry's customers in the GAMING business area. Nonetheless, the GAMING business area, comprising the Components and Gaming Devices business units, and the PROFESSIONAL business area, comprising the Peripherals and Digital Health business units, accounted for an almost equal share of Group revenue.
Revenue generated in the GAMING business area went up by 12.6% to EUR 82.8 million in the 2021 fiscal year (2020: EUR 73.5 million), whereby the slower growth rate in the second half of the year was largely attributable to the impact of the COVID-19 pandemic. The growth rate also reflected fluctuations in the ordering behavior of Cherry's customers for keyboard switches as a result of supply chain bottlenecks. At the same time, the new MX Ultra Low Profile keyboard switch for the first customer Alienware (Dell), designed for use in high-end gaming notebooks, has contributed to revenue in the GAMING business area since January. The business area also entered new sales markets for Gaming Devices in the year under report, particularly in Hong Kong, Macau, Malaysia, Indonesia, and Australia. Finally, the MX 3.0S Wireless, the first wireless gaming keyboard with extremely low latency, contributed to revenue in this business area from the third quarter onwards. With an adjusted EBITDA margin of 35.4% (2020: 37.3%), profitability in this business area remained at a high level. The slight decline was mainly due to higher material and shipping costs as well as start-up costs for the new MX Ultra-Low Profile switch.
Revenue in the PROFESSIONAL business area jumped by 51.2% to EUR 85.7 million in the 2021 fiscal year (2020: EUR 56.7 million), due in particular to entering the e-commerce market with office peripherals, the successful rollout of our ST-1506 e-health terminals in the German healthcare market, and the first-time consolidation of Active Key GmbH after its acquisition on May 7, 2021. The adjusted EBITDA margin in this business area improved to 22.8% due to the improved product mix (previous year: 17.1 percent). The Peripherals business unit's product portfolio was expanded to include new mechanical keyboards such as the G80-3000N TKL and the MX 10.0N as well as the STREAM KEYBOARD WIRELESS, the 2.4-GHz wireless version of the highly popular STREAM KEYBOARD.
Cherry reports EBITDA with and without adjustments and normalizations. Adjustments and normalizations mainly eliminate the non-recurring costs incurred in the first half of 2021, including transaction costs in conjunction with the acquisition of Active Key GmbH, subsequent costs relating to the entry of Argand Partners at Cherry, and IPO costs. EBITDA margin came in at 25.4% (non-adjusted) and 29.0% (adjusted) in fiscal year 2021. Operating profit (EBIT margin) was 16.4% (non-adjusted) and 20.0% (adjusted). The non-recurring items arising in the 2021 fiscal year also had a corresponding negative impact of EUR 6.1 million on net profit for the year. In addition, net non-recurring expenses of EUR 9.9 million were incurred in the financial result for the early repayment of loans. Accordingly, Group net profit for the 2021 fiscal year amounted to EUR 9.3 million.
"Adjusted for non-recurring items, we again achieved a high EBITDA margin of 29.0% for the year as a whole," added Bernd Wagner, CFO of Cherry AG. "In conjunction with our high equity ratio of 71.3% and liquidity of around EUR 110 million at the end of the year, we are ideally equipped to achieve our planned further growth."
Net working capital, i.e. current assets (excluding cash and cash equivalents) less current liabilities (excluding financial liabilities), climbed by 240.9% year-on-year to EUR 38.0 million as of December 31, 2021, mainly reflecting the increase in business volumes. The main drivers were inventories with + EUR 16.9 million and receivables with + EUR 8.7 million. Net working capital thus corresponded to 22.5% of revenue. Cash flows from operating activities totaled EUR 7.8 million. Investments amounting to EUR 14.4 million (2020: EUR 2.6 million) were financed out of cash and cash equivalents. At the end of the reporting period, cash at bank amounted to EUR 109.7 million (December 31, 2020: 22.9 million).
Total assets rose by 41.5% to stand at EUR 411.0 million as of December 31, 2021 (December 31, 2020: EUR 290.5 million), mainly reflecting the impact of increased business volumes and the IPO completed during the course of the year.
Cherry has implemented a broad set of measures to bolster its strategic course of growth in the medium and long term. These include in particular the further strengthening of its management resources, investments in new, highly automated assembly machines and IT infrastructure, the build-up of inventories with a view to ensuring supply capability for the further planned expansion of the Group's e-commerce business, and stepping up sales activities in defined new markets. The Management Board's medium-term prediction of double-digit revenue growth therefore remains in place based on expected underlying conditions and market trends.
The 2022 fiscal year, however, remains subject to a high degree of uncertainty due to the COVID-19 pandemic and the ongoing war in Ukraine. In addition to various regional lockdowns in China, which are affecting warehouses and production sites within the supply chains, this also includes fluctuating customer ordering behavior in light of the limited availability of other components, particularly semiconductors, and high inventory levels. For these reasons, the Management Board forecasts lower revenue growth in the current fiscal year than in the previous 12-month period.
At the same time, the planned level of growth-oriented investments, particularly those earmarked to develop management capacities, the cost of regional expansion and the growth of the e-commerce business as well as accelerating inflation are likely to place temporary pressure on operating profit. Moreover, the Russia-Ukraine conflict is expected to have an additional negative impact on profitability due to higher material, energy and logistics costs.
For the GAMING business area, the Management Board therefore expects revenue growth in the mid-single-digit percentage range in the current fiscal year with a slightly lower (adjusted) EBITDA margin due to macroeconomic developments as well as temporary increases in material prices, shipping costs, and non-recurring marketing expenses for expansion in the Asia-Pacific region. In addition to Cherry's existing customers for the new MX Ultra Low Profile switch, four of whom are to be supplied for the first time in the course of 2022, the Management Board aims to continue expanding Cherry's customer base going forward. Furthermore, the expected growth in the GAMING business area will be driven by the additions to the Gaming Devices product portfolio initiated in the 2021 fiscal year and the recently entered sales markets in Southeast Asia.
The Management Board expects revenue to grow in the low double-digit percentage range in the 2022 fiscal year. In addition to the targeted expansion of the product portfolio in the Peripherals business unit, growth will be driven primarily by the selective expansion of sales channels, particularly in the e-commerce business via major online marketplaces in Europe in the second half of the year. Moreover, in the Digital Health business unit, the successful ST-1506 e-health terminal and, from the second half of the year, the new PP-1516 e-health PIN pad designed for use in the telematics infrastructure for healthcare in Germany, are expected to contribute to overall revenue growth. The (adjusted) EBITDA margin in this business area will be impacted by increased investments in new products, software, manpower, and marketing expenses designed to drive future growth in the e-commerce business and expansion in the Asia-Pacific region and thus also decrease slightly.
Taking these factors into account, the Management Board expects Group revenue in the region of EUR 170 million to EUR 190 million for the 2022 fiscal year with an adjusted EBITDA margin of 23% to 26%. Beyond 2022, the Management Board anticipates double-digit revenue growth and an improved adjusted EBITDA margin.
*) The Cherry AG Group did not exist in its current structure in the 2020 fiscal year. For this reason, unaudited comparative figures are presented for the previous year.
The Annual Report, together with the Combined Management Report, the Consolidated Financial Statements and the Separate Financial Statements of Cherry AG are available on the Cherry website at https://ir.cherry.de.
Cherry AG [ISIN: DE000A3CRRN9] is a global manufacturer of high-end mechanical keyboard switches and computer input devices. The business focus is on mechanical keyboard switches for gaming keyboards as well as various computer input devices, which are used in a wide range of applications - especially in the areas of gaming, office, industry and cybersecurity as well as solutions for the healthcare industry. Since its founding in 1953, Cherry, with its two business areas Gaming and Professional, has stood for innovative and high-quality products that are developed specifically to meet the needs of its customers.
Cherry has its operational headquarters in Auerbach in Germany's Upper Palatinate region and employs over 500 people in production facilities in Auerbach, Zhuhai (China) and Vienna (Austria) as well as in several sales offices in Auerbach (Germany), Paris, Kenosha (USA), Taipei and Hong Kong.
More information is available online at: www.cherry.de
Dr. Kai Holtmann
31.03.2022 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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