Elma Electronic's ROCE on the Rise: A Compounding Machine in the Making

Elma Electronic's return on capital employed (ROCE) has risen to 14% over the last five years, driven by a 34% increase in capital employed. The company has demonstrated its ability to reinvest profits and generate higher returns on capital, making it an attractive investment opportunity.

1&1 AG (WBO:DRI) has released its financial results for the second quarter of 2025, revealing mixed performance compared to the same period in 2024. The company reported revenue of EUR2.006 billion, flat from EUR2.051 billion in Q2 2024, while net income fell to EUR74.6 million, down 49% from EUR136.4 million in the previous year [1]. The profit margin decreased to 2.8%, down from 5.4% in Q2 2024, and earnings per share (EPS) fell to EUR0.15, down from EUR0.30 in Q2 2024. The company's share price remained broadly unchanged from a week ago.

Key highlights from the report include:

- Revenue: Revenue for the first half of 2025 decreased by 0.5% compared to the previous year, with a decline in hardware revenue by 3%.
- Service Revenue: Increased by 0.1% to EUR1.647 billion.
- Hardware Revenue: Declined by 3% to EUR0.359 billion.
- Gross Profit: Fell by 3% to EUR694 million from EUR716.1 million.
- Operating Profit (EBIT): EUR118.1 million, down from EUR196.1 million.
- Net Income: EUR74.6 million, compared to EUR136.4 million in the first half of 2024.
- EBITDA: EUR283.9 million.
- Free Cash Flow: EUR111.5 million, up from EUR58.5 million in 2024.
- Cash Flow from Investing Activities: Minus EUR478.9 million.
- Cash Flow from Financing Activities: EUR250.2 million.
- Total Assets: Increased to EUR8.49 billion from EUR8.1 billion at the end of 2024.
- Employee Count: 3,200 employees across Germany.
- Mobile Contracts: 12.44 million, unchanged from the previous period.
- Broadband Connections: 3.89 million at the end of the first half of 2025.

The company faced several challenges, including higher-than-expected roaming costs due to slower network growth, impacting EBITDA negatively. Additionally, the company experienced a decrease in gross profit by 3%, primarily due to increased input costs in the Landline segment. There are ongoing issues with Vantage Towers regarding the provision of antenna sites, which has led to delays and potential compensation claims.

Despite these challenges, 1&1 AG expects major cost savings in the mobile segment next year, with anticipated savings of about EUR100 million due to completed migrations and reduced roaming costs. The company also operates the first open RAN network in Europe, which is fully virtualized and efficient, using 10% to 30% less power than comparable networks.

In conclusion, 1&1 AG reported mixed financial results for Q2 2025, with revenue remaining flat and net income falling significantly. The company faces several challenges but expects improvements in the second half of the year and long-term growth opportunities.

References:
[1] https://www.ainvest.com/news/1-1-q2-2025-earnings-revenue-flat-eps-50-2508/