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At €299.5 million, Group VAS for 2006/7 remains stable year on year due to the biegelaar acquisition despite considerable pressure on prices and sale of direct marketing unit
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Reaching €26.2 million, Group EBT for 2006/7 exceeds original forecast by €3 million, buoyed mainly by more pronounced effects of disposal
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Forecast 2007/8: slight contraction of VAS; continued pressure on prices and exceptional charges associated with optimisation programme reflected in bottom-line results
Freudenstadt, November 9, 2007. Based on preliminary figures, schlott gruppe has exceeded its EBT forecast of approx. €23 million for the financial year ended September 30, 2007, achieving earnings before taxes of €26.2 million in the annual period as a whole, up from the total of €22.0 million posted for FY 2005/6. The better-than-expected EBT total for the financial year just ended was attributable mainly to the greater impact that deconsolidation of the company's former direct marketing unit had on earnings. Having been successfully implemented within a particularly short time frame during the previous financial year, the entire transaction was concluded effective from July 31, 2007.
Value-added sales (VAS) at Group level, which includes a pro rata amount contributed by direct marketing for the period leading up to the sale of this unit in FY 2006/7, benefited from the initial consolidation of Dutch-based production site biegelaar in the reporting period, thus reaching €299.5 million, after €302.0 million a year ago, despite considerable pressure on prices; revenue amounted to €551.3 million, compared with €517.6 million. Owing to the mandatory capitalisation of corporation tax credits and the effects of Germany's corporate tax reform, net profit for the financial year was propelled to around €33 million, after €11.8 million posted in FY 2005/6.
Within the print segment, the takeover of biegelaar lifted VAS to €248.2 million, compared with a figure of €240.2 million last year. Up to the date of deconsolidation on August 1, 2007, the former direct marketing unit contributed €49.4 million to VAS, compared with €59.6 million during the full 2005/6 financial year. Operating as a provider of intragroup services, the corporate services generates an insignificant amount of revenues.
As announced previously, operational earnings performance was adversely affected by further downward pressure on prices within the print segment. Before accounting for the effects of consolidation, the breakdown of results by segment was as follows: EBT within the print segment declined from €30.8 million to €13.4 million. Income generated from the lucrative sale of direct marketing propelled EBT within the corporate services segment to €10.7 million, as opposed to a previous loss before taxes of €3.8 million. Pro rata EBT attributable to the former direct marketing unit stood at €3.2 million, compared with a loss before taxes of €3.9 million last year.
Given the unsatisfactory market trend witnessed within the print division and against the backdrop of fierce price competition, the Management Board of schlott gruppe is currently drawing up a far-reaching action plan to boost profitability and enhance the company's competitiveness on a sustainable basis. The objective is to achieve tangible cost reductions as early as the current financial year. However, the full extent of these streamlining measures is not expected to materialise until the subsequent years. The overall costs associated with this programme have been budgeted at approx. €15 million in FY 2007/8. With VAS forecast to decline slightly year on year and competitive pressures expected to remain at an elevated level, the Management Board of schlott gruppe is targeting a break-even result before taxes and the aforementioned costs of optimisation.
The optimisation programme is aimed not only at offsetting current and anticipated further price-related pressures but also at achieving a marked increase in EBT as early as the 2008/9 financial year. The objective for subsequent periods is to return to a solid double-digit result before taxes and a satisfactory return on equity.
Against this background, schlott gruppe will relieve the overall pressure on its cost structures by a substantial double-digit amount in the million-euro range. Correspondingly, the company is also expecting to return to a high level of free cash flow. The streamlining measures will be presented in detail at the financial press conference on January 23. In view of the significant changes expected to dominate the supply side of the industry in the foreseeable future, schlott gruppe's acquisition strategy will remain firmly focused on achieving profitable external growth.
Notes to financial data:
Alongside "revenue/sales", schlott gruppe uses so-called "value-added sales" (VAS) as a financial indicator – both in its external communications and as part of its internal controlling mechanisms. Revenue is subject to fluctuations that are attributable to the volume of paper supplied by customers as raw material for certain projects. In contrast to paper purchased directly by the company, paper supplied by customers is not included in the accounts of schlott gruppe. In the 2005/6 financial year, the so-called paper provision ratio stood at 79.9 per cent. As a financial indicator, "value-added sales" eliminates fluctuations relating to paper supplied by customers, thus reflecting the actual sales performance.
