- Group earnings affected by continuing weakness in demand and prices
- Additional restructuring measures agreed for direct marketing
- Original forecast for operational Group EBT adjusted from €26 million to €20 million for FY 2005/6
- Reported EBT expected to total €22 million due to accounting measures and non-recurring effects
Despite further productivity advances, schlott gruppe has been unable to counterbalance the general market trend in full. In the third quarter, the Company failed to offset the decline in prices and volumes witnessed over the course of the first half of the year. This trend continued across the entire range of services. Furthermore, contrary to initial expectations, there are no tangible signs that this situation will improve by the end of the financial year on 30 September 2006. Correspondingly, the decline in EBT within the area of print will be higher than previously outlined.
The direct marketing unit has had to contend with challenging market conditions, particularly in Scandinavia. Owing to losses incurred in this region, segment EBT for 2005/6 will not be slightly above break-even as originally estimated. Based on revised budgeting, the loss is expected to be around two million euros.
In view of this, the original forecast for Group EBT at operating level of approx. €26 million has been adjusted to €20 million for FY 2005/6. Reported EBT will be approx. €2 million higher due to measures outlined in the subsequent sections and is thus expected to total €22 million.
In view of the continuing adverse conditions within the direct marketing unit, particularly in Scandinavia, the Management Board has agreed further restructuring measures. The requisite measures, the main focus being on Scandinavia, have already been initiated. The cost of these measures will affect reported EBT in the region of approx. €2.6 million.
This will be counterbalanced by a positive effect of €4.5 million associated with changes to depreciation periods for machines and technical equipment. To date, schlott gruppe has applied a particularly conservative approach to depreciation, i.e. the periods chosen were shorter than the actual useful life of the assets. According to IAS 16, the useful life of an asset is now subject to annual assessment. Based on the latest assessment, the depreciation periods, beginning with the current financial year, are to be extended. The positive effect of this measure will also have an equally favourable impact on the results of subsequent financial years.
The Management Board anticipates that FY 2006/7 will mark the return of more palpable earnings growth. However, the demand side is not expected to show any signs of improvement. In fact, average prices may fall below the levels recorded in the current financial year. At present, an improvement in earnings is expected to be driven solely by the elimination of one-off effects as well as by additional cost streamlining. New company-specific agreements based on the latest industry-wide framework agreement on wages within the printing industry as well as the deployment of the new machine in Freudenstadt will contribute to these efforts.
