- Improved earnings expected in FY 2006/7
- Q3 and 9M results confirm earnings projections for FY 2005/6
- Management Board plans to propose unchanged dividend for
FY 2005/6
Freudenstadt, 24 July 2006. schlott gruppe announces its forecast for the coming financial year (October – September) 2006/7, as passed at today's Supervisory Board meeting. Within this context, the announcement of preliminary results for the third quarter and the first nine months of FY 2005/6, originally planned for 26 July 2006, has been brought forward.
Forecast for FY 2006/7
For the 2006/7 financial year schlott gruppe forecasts earnings before taxes (EBT) of more than €25 million, compared with €22 million in 2005/6. This increase is attributable to earnings growth at operating level, together with the absence of non-recurring restructuring charges of approx. €2.6 million announced for 2005/6 and associated with Scandinavian direct marketing activities. The required extension of depreciation periods in accordance with IAS 16, as disclosed previously, has been accounted for on the same scale both in the current as well as the coming financial year.
Value-added sales (VAS) are expected to increase from more than €300 million in FY 2005/6 to €310 million in FY 2006/7. Based on earnings performance in the past and in view of the projected growth in profits in the coming financial year, the Management Board of schlott gruppe intends to propose to the Supervisory Board a dividend of €1.00 per share for FY 2005/6, unchanged from that for the preceding financial year. Thus, shareholders in schlott gruppe AG will continue to benefit from an attractive dividend yield. Free cash flow after dividend payments is expected to be above €10 million in 2006/7, thus paving the way for a significant reduction in debt.
Committed to continuous improvement, schlott gruppe has established highly efficient production processes within the print division and will continue to streamline costs. This will help to counteract the anticipated year-on-year fall in average prices – as already announced – in FY 2006/7 as well as the challenging market conditions attributable to the current situation within the standard mail-order industry. Therefore, the Group will continue to generate attractive yields despite operating within a European gravure printing market dominated by intense consolidation.
The print division is expected to achieve an above-average double-digit EBT margin in FY 2006/7. Generating projected VAS of €250 million in FY 2006/7 (2005/6: more than €240 million), the slight contraction in EBT forecast for 2006/7 as a result of prevailing market conditions (2005/6: approx. €30 million) will be controlled by means of cost reductions and productivity improvements.
Within the direct marketing division, efforts to enhance earnings over the course of 2005/6 at the Group's locations in Germany and the Czech Republic proved very successful. However, as already announced, the situation in Scandinavia is such that the operating result of the direct marketing division as a whole will be impacted by a loss of approx. €2 million as well as non-recurring restructuring expense amounting to €2.6 million. Following the planned restructuring programme, the result for FY 2006/7 will no longer be encumbered by adverse conditions in Scandinavia, and the core business will operate with sustained profitability. Thus, this segment is expected to record unchanged VAS of around €60 million in 2006/7 and sustained above-par EBT (2005/6: loss of approx. €4 million including restructuring costs of approx. €2.6 million).
Benefiting from stringent cost management, the corporate services segment will achieve a lower cost base in FY 2006/7 than in FY 2005/6 (€3.8 million).
Preliminary results for the third quarter and the first nine months of 2005/6
As reported in detail on 28 June 2006, schlott gruppe performed less favourably in Q3 2005/6, both in terms of revenue and earnings, than originally forecast. The print segment has been unable to counterbalance the difficult general market trend in full, the direct marketing segment fell well short of expectations in particular due to the loss incurred by Scandinavian operations.
The required extension of depreciation periods in accordance with IAS 16, as disclosed previously, has been booked for the first time and the accumulated period in the quarter under review. The earnings figures reported below therefore include in the quarter and in the accumulated period a positive effect versus 2004/5 figures of €3.4 million for the Group (i.e. 9/12 of the full year effect of €4.5 million). €2.9 million are related to the print segment and €0.5 million to the direct marketing segment.
Overall, VAS for schlott gruppe amounted to €66.7 million in the third quarter (previous year adjusted by €3.3 million for the disposal of heckel: €70.5 million). EBT stood at €1.2 million (previous year: €3.1 million; heckel had no material impact on earnings). Revenue totalled €108.2 million (previous year adjusted for heckel: €108.3 million). In the first nine months VAS totalled €218.8 million (previous year adjusted for heckel: €234.2 million), revenue €367.9 million (previous year adjusted for heckel: €383.9 million) and EBT €12.2 million, compared with €14.5 million in the same period a year ago.
The print segment recorded VAS of €53.8 million in the third quarter (previous year adjusted for heckel: €56.7 million) and EBT of €4.4 million, compared with €5.0 million in Q3 2004/5. In the first nine months VAS amounted to €174.2 million (previous year adjusted for heckel: €185.1 million), while EBT totalled €18.2 million, compared with €21.5 million in the same period a year ago.
The direct marketing segment recorded VAS of €12.4 million in the third quarter (previous year: €12.9 million) and a loss before taxes of €2.1 million, compared with a loss of €2.3 million in the same period a year ago. In the first nine months VAS totalled €42.9 million (previous year: €47.2 million), while the loss before taxes stood at €2.8 million, compared with a loss of €4.4 million in the same period a year ago.
Recording a loss before taxes of €0.8 million and €2.4 million for the third quarter and the first nine months respectively, the corporate services segment temporarily remained below the results of +€0.5 million and -€2.0 million posted a year ago, which had been buoyed by factors relating to the balance sheet date.
Thus, the performance of schlott gruppe and the respective business units was within the updated guidance range for FY 2005/6.
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 2004/5 financial year, the so-called paper provision ratio stood at 73.2 per cent. As a financial indicator, “value-added sales” eliminates fluctuations relating to paper supplied by customers, thus reflecting the actual sales 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 and are thus not discussed in detail. The results for the Group as a whole are derived from the print and direct marketing business units as well as the corporate services unit and consolidation effects.
