Market Monitor - ICT Industry - Germany

Market performance at a glance

Germany

• According to the German Federal Association for Information Technology, Telecommunications and New Media (BITKOM), overall consumer electronics/ICT sales will grow 1.5% in 2015, to EUR 155.5 billion. While turnover in the consumer electronics and telecommunications segments are expected to decrease, IT sales (IT hardware, software and services) are forecast to increase 3.2%
• In general, businesses in all subsectors (IT, telecommunications and consumer electronics) have below-average equity strength. Profit margins are tight because of fierce competition, particularly on price. The general solvency and liquidity position of ICT businesses varies from tight to sufficient.
• On average, payments in the ICT industry take between 30 and 60 days. We have seen no increase in payment delays over the past couple of months, and we expect this to remain unchanged. According to BITKOM, in 2014, ICT insolvencies increased 4.7% year-on-year, against the overall trend of decreasing business insolvencies in Germany. We expect insolvencies to level off this year.
• ICT is a very fast and innovative industry, with generally good growth prospects, but low margins, sharp price erosion and steep competition lead to an on-going trend of consolidation. Unless they are well-established in niche products, smaller companies are – and will continue to be – the losers in this cut-throat environment.
• Against this background, our underwriting approach remains necessarily selective, and we require comprehensive information on each company we underwrite. If we are to cover, we need to have the most recently available insight into the company’s financial and business performance.