- VAS climbs slightly despite challenging business climate
- EBT only marginally down
- Net debt remains well within target range despite acquisitions and strongly increased capex
- Earnings per share up substantially following capitalisation of corporation tax credits
Freudenstadt, February 7, 2007. schlott gruppe has today published its interim report for the first quarter (October to December) of the 2006/7 financial year. The preliminary financial results recently announced by the company have been fully confirmed. Overall, schlott gruppe performed encouragingly within a challenging market environment dominated by intense pressure on prices.
Value-added sales (VAS) at Group level rose from €83.1 million in Q1 2005/6 to €83.9 million in the first quarter of 2006/7. Revenue increased from €141.0 million to €145.7 million. Totalling €11.4 million in the first quarter of 2006/7, earnings before interest and taxes (EBIT) came in just shy of the €11.7 million figure posted in the same period a year ago. In contrast, earnings before taxes (EBT) fell slightly more pronounced year on year as a result of higher interest expense, down from €9.7 million a year ago to €9.0 million in Q1 2006/7. The figures include the Dutch rotogravure printer biegelaar, consolidated from 1 November, 2006.
Net profit for the period benefited from the capitalisation of corporation tax credits in the amount of €5.0 million and rose from €5.7 million to €10.4 million. Correspondingly, earnings per share climbed from €0.92 to €1.68. The capitalisation of corporation tax credits will have a favourable impact on the financial year as a whole, to the extent outlined above; this applies to both the Group and the parent company.
Owing to the acquisitions of reus gruppe in mid-2006 and biegelaar as well as substantial investments in the company's Freudenstadt plant, net debt rose from €188.4 million at the end of the first quarter of 2005/6 to €238.7 million at the end of the reporting period. Net debt in relation to EBITDA, a key financial ratio for the Group, stood at around 3.5 in the first quarter and was thus well within the specified target range.
Within the print segment, VAS rose from €66.0 million a year ago to €68.2 million in Q1 2006/7. EBT receded from €10.4 million to €9.1 million. This segment accounted for a sizeable proportion of the first-quarter rise in interest expense.
The integration of biegelaar commenced smoothly and in line with corporate planning. The phase-in of a new high-performance printing machine in Freudenstadt also proved successful. The concept of a fast, highly flexible system was well received by the market, thus allowing the company to achieve a high level of utilisation in the first quarter.
The direct marketing segment further improved on its performance, generating EBT of €0.7 million (Q1 2005/6: €0.2 million) on a slightly lower yet anticipated VAS of €15.1 million (Q1 2005/6: €16.2 million). This clearly underlines the level of competitive strength now achieved by the direct marketing unit. The company drew particular encouragement from the fact that all activities within this business segment were able to contribute to improved bottom-line results. The efforts of the past to strengthen direct marketing’s competitive position have resulted in the expected improvement in its profitability.
Costs incurred within the corporate services segment, before financing of operating sites, were reined back further in the first quarter. Including finance costs, the loss before taxes for this segment amounted to €1.0 million, compared with a loss of €0.7 million in the same period a year ago.
schlott gruppe recently announced its plan to dispose of the direct marketing unit in the course of the current financial year. To this end an investment bank was mandated to identify and contact potential buyers. The proceeds from the sale are to be used for the purpose of pursuing new opportunities arising from market consolidation within the European gravure-printing sector as well as further enhancing schlott gruppe's position in the competitive arena. These issues form an integral part of the company's action plan.
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.
