- Year-on-year decline in Q3 EBT due to strike
- EBT forecast for full financial year reaffirmed
- Outlook Q4: print forecast to record steady performance;
direct marketing expected to achieve turnaround
Freudenstadt, 10 August 2005. schlott gruppe confirms its preliminary results for the third quarter (April to June) of the 2004/5 financial year, as announced on July 26.
As reported, the company was unable to match the substantial growth in earnings achieved over the first six months in the third quarter, mainly due to production stoppages associated with industrial action taken during collective wage negotiations. Both the print and the direct marketing divisions were impacted by these developments. The costs attributable to industrial action totalled approx. two million euros. The situation was further compounded by increasing pressure on prices within the printing sector.Consolidated earnings before taxes (EBT) amounted to €3.1 million (Q3 2003/4: €4.8 million). EBT for the first nine months totalled €14.5 million (9M 2003/4: €13.7 million). Buoyed by a solid first half, nine-month EBT thus grew by 5.8 per cent year on year.
Output within the print unit declined by 8.2 per cent to 125.0 thousand metric tons in the third quarter (Q3 2003/4: 136.2 thsd.) as a result of strike-related stoppages. Value-added sales receded from €66.5 million in Q3 2003/4 to €60.0 million in third quarter of the current financial year. Pre-tax profit within this area amounted to €5.0 million, compared with €7.5 million in the same period a year ago.
The disappointing earnings performance of the direct marketing unit continued over the course of the third quarter, compounded by company strikes. Within this business unit, value-added sales fell to €12.9 million, after a total of €14.5 million recorded in the same period a year ago. The loss before taxes stood at €2.3 million, compared with a loss of €1.4 million in Q3 2003/4.
Within this context, quarterly performance was adversely affected not only by the continued economic malaise within the industry but also by measures implemented to streamline cost structures, including the closure of the group’s loss-making sales office in the United Kingdom. Additionally, the realignment of marketing strategies by mail-order companies means that specific revenue has been transferred to the fourth quarter.
Thus, business in the final quarter of the financial year will benefit accordingly. This, together with the absence of non-recurring expense items, would appear to suggest a return to above-par results in the fourth quarter. Within the Group, value-added sales, i.e. sales adjusted for transitory material-related expenses, declined by 8.8 per cent to €73.8 million (Q3 2003/4: €80.9 million). Value-added sales for the first nine months of the current financial year amounted to €245.6 million, compared with €251.3 million for the same period a year ago. Consolidated revenue for the third quarter also declined year on year, down from €132.4 million to €116.7 million. Within this context, the paper-provision ratio declined to 73.7 per cent compared with 75.8 per cent in the same period of the previous year. Consolidated revenue generated in the first nine months of the financial year amounted to €413.0 million, compared with €425.9 million in the same period a year ago. Here the paper-provision ratio remained virtually unchanged year on year (73.2 per cent after 73.1 per cent).
Net profit for the third quarter totalled €1.4 million, compared with €3.0 million in Q3 2003/4. For the first nine months, net profit edged up by 3.7 per cent to €8.4 million, after €8.1 million, buoyed by the group’s solid performance in the first half. Earnings per share (EPS) for the third quarter declined to €0.22, down from €0.49 in Q3 2003/4. However, for the first nine months EPS rose from €1.32 to €1.35.
The weak third quarter will not affect schlott gruppe’s annual forecast of consolidated EBT of €25.6 million for the full 2004/5 financial year. This target remains unchanged. In addition, business in the fourth quarter will benefit from the solid levels of capacity utilisation generally achieved by the print division in this period. Furthermore, the direct marketing segment looks set to achieve turnaround.
Notes to financial data:
Alongside “revenue/sales”, schlott gruppe uses so-called “value-added sales” as a financial indicator – both in its external communications and as part of its internal controlling mechanisms. Revenue is subject to fluctuations that are beyond the company’s sphere of influence. These fluctuations 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 2003/4 financial year, the so-called paper provision ratio was 72.3 per cent. As a financial indicator, “value-added sales” eliminates fluctuations relating to paper supplied by customers, thus reflecting the actual business performance.
The Group has categorised its activities into three business units: print, direct marketing and corporate services. Revenues and earnings generated by corporate services are derived solely from internal charging for services rendered as well as internal cost allocation. The results for the Group as a whole outlined above are derived from the print and direct marketing business units as well as the corporate services unit and consolidation effects.
Interim Report 3rd quarter 200/5
