- Slight VAS growth in very challenging market environment
- EBT falls short of previous year's figure
- Planned disposal of direct marketing and continued focus on print
Freudenstadt, January 24, 2007. schlott gruppe has today presented and discussed in detail its annual report for the 2005/6 financial year at a Financial Statements Press Conference and Analysts' Meeting convened by the company. The results already published for the 2005/6 financial year ended September 30, 2006, have been confirmed in their entirety. In addition, schlott gruppe has announced its preliminary results for the first quarter of the 2006/7 financial year.
The company succeeded in raising value-added sales (VAS) slightly year on year, up from €83.1 million to €83.9 million in Q1 2006/7. Consoli-dated revenue amounted to €145.7 million, compared with €141.0 million a year ago. At €9.0 million, earnings before taxes (EBT) fell short of last year's figure of €9.7 million.The capitalisation of corporation tax credits will have a favourable impact on net profit for the first quarter and the full financial year, for which the positive effect has been calculated at €5.0 million. Net profit for the first quarter stood at €10.4 million, compared with €5.7 million a year ago. Earnings per share were €1.68 in the first quarter of the current financial year (previous year: €0.92). For the first time, the results include Dutch gravure printer biegelaar acquired in autumn 2006 and consolidated as of November 2006.
The year-on-year decline in first-quarter pre-tax earnings (EBT) was attributable mainly to the print business unit, which achieved EBT of €9.1 million (previous year: €10.4 million) on value-added sales of €68.2 million (previous year: €66.0 million). This confirms the com-pany's assessment of the European gravure-printing market, which is currently undergoing rapid consolidation. As a direct result of this trend, prices have come under substantial pressure throughout the industry, with cost-reduction measures failing to compensate fully for the considerable discounts offered. In the long term, however, schlott gruppe is determined to reap the rewards of its position as one of the top two players in Europe's rapidly consolidating gravure-printing market.
The direct marketing business unit maintained its forward momentum generated during the previous quarters. This segment has undergone considerable market realignment in recent years, an approach that has provided access to new customer groups. At the same time, the com-pany has reduced costs in the direct marketing segment by a significant margin, as well as enhancing efficiency levels. The business unit has emerged reinvigorated from this regimen and is now focusing on future growth.
This is reflected in the improved earnings performance recorded during the first quarter of 2006/7. Earnings before interest and taxes were propelled from €0.1 million a year ago to €0.6 million in the first quarter of the current financial year, despite a decline in VAS from €16.2 million to €15.1 million in line with budget. The reported discon-tinuation of production in Sweden is currently being implemented in line with company plans. The expenses associated with these measures were fully provisioned for in the last financial year.
As anticipated, expenses within the corporate services business unit before finance income/cost, i.e. before the refinancing of operational facilities, were lower than a year ago. However, due to higher finance costs, the loss before taxes rose to €1.1 million, compared with a loss of €0.7 million in the same period a year ago.
Operating against the current backdrop of a challenging market envi-ronment, schlott gruppe is anticipating a year-on-year decline in pre-tax profit for FY 2006/7 within the print segment, as already announced. The corporate services segment is expected to produce a slight year-on-year improvement in EBT.
As part of today's Financial Statements Press Conference, the company pointed out that its targeted business performance is subject to risks, citing the current pressure on prices within the marketplace as a key aspect that may potentially prompt additional investments in customer relationships for the purpose of securing capacity utilisation in the long term. Additionally, schlott gruppe highlighted the possibility of additional expenses arising from the upcoming wage negotiations for 2007.
Consolidation within the European gravure-printing industry has be-come increasingly dynamic. This trend will open up new possibilities for schlott gruppe to continue its well-established strategy of corporate acquisition and to further expand its current market share of 11.2 per in Europe in the medium term. On January 23, schlott gruppe issued an ad hoc announcement outlining its plans to dispose of its direct marketing unit and to reinvest freed-up funds within the area of gravure printing.
As one of Europe's largest direct marketing specialists, meiller direct, the direct marketing subsidiary of schlott gruppe, is considered to be an attractive partner for companies planning to position themselves in this growth market. The sector is likely to be further buoyed by the liberali-sation of Germany's postal market. The sale is to be executed in the current financial year.
Bernd Rose, Chairman of the Management Board of schlott gruppe, emphasized the company's strategic prospects: "We have thoroughly prepared meiller direct to return to a growth path. The company is therefore a prime player in the direct marketing industry and it is the right time to pass it on to a new partner.
At the same time the gravure-printing market has become extremely dynamic. This will produce a number of opportunities for us within the field of corporate acquisitions. We are very well placed to seize these opportunities and extend our leading position in Europe."
Heiko Arnold, Chief Financial Officer at schlott gruppe, echoed this view: "We shall use our long-standing experience in acquiring and integrating companies to our best advantage within the current envi-ronment of market consolidation. In disposing of the direct marketing business unit, we will be able to strengthen our balance sheet and thus create additional room to manoeuvre."
Notes to financial data:
Alongside "revenue/sales", schlott gruppe uses so-called "value-added sales" (VAS) as a financial indicator – both in its external communica-tions 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 custom-ers 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 fluctua-tions relating to paper supplied by customers, thus reflecting the actual sales performance.
