- Slight VAS growth due to acquisition of biegelaar and continued organic growth abroad
- Ongoing erosion of prices in gravure printing; other areas of business perform in line with target
- Successful disposal of meiller effective from July 31, 2007
- EBT forecast for 2006/7 confirmed
- Positive tax effect expected for 2006/7 on the back of corporate tax reform in Germany
Freudenstadt, August 8, 2007. schlott gruppe today announced its results for the third quarter and first nine months (ended June 30) of the 2006/7 financial year, confirming its preliminary results published on July 25.
The key events of the third quarter was the successful disposal of the company's direct marketing unit to Austrian postal operator Österreichische Post AG; schlott gruppe's decision to sell this area of its business had been announced in January. The sale will unlock hidden reserves and free up management capacities, as well as allowing schlott gruppe to scale back the level of net debt. Following the closing of the transaction in July, the company recorded a substantial reduction in net debt, which is expected to fall visibly below the threshold of €200 million by the end of the financial year. schlott gruppe will use the resources freed up after the transaction for the purpose of gaining additional momentum in the European printing market and thus further extending its leading position.Third-quarter operating performance within the print segment was influenced to a large extent by relatively low capacity utilisation within the industry as a whole – in line with the general seasonality of this sector. Other dominating factors were strikes held as part of the collective wage negotiations as well as continuing price erosion induced by overcapacities within the gravure printing market. As there is little hope of a significant improvement in market conditions in the foreseeable future, schlott gruppe is currently channelling its efforts into adapting the company's cost base to the changing business environment. Initial measures include an outsourcing programme for logistics at the German gravure printing sites.
In accordance with the provisions set out in IFRS 5, the direct marketing unit now disposed of by schlott gruppe has again been accounted for as discontinued operations in the current interim report. In addition, this interim report includes the subsidiary company biegelaar, which was acquired in the last calendar quarter of 2006 and was consolidated effective from November 1, 2006, for the first time.
In the third quarter, value-added sales (VAS) for schlott gruppe amounted to €56.4 million, slightly higher than the figure of €54.7 million posted for the same period a year ago. Growth within this area was attributable to the initial consolidation of biegelaar. In addition, schlott gruppe was able to maintain its forward momentum when it came to organic growth generated abroad. In parallel, however, the company had to contend with significant pressure on market prices within the area of gravure printing, particularly in Germany. Revenue amounted to €105.2 million, compared with €88.6 million a year ago.
Against the backdrop of the current weakness within the area of gravure printing, the loss before taxes amounted to €3.6 million, after a profit of €3.4 million in the previous year. The net loss for the period from continued operations stood at €2.1 million, compared with a net profit of €3.1 million in the same period a year ago. The discontinued direct marketing segment contributed a net profit of €0.3 million, after a net loss of €2.4 million in the third quarter of 2005/6.
In the first nine months VAS of schlott gruppe totalled €186.4 million, compared with €177.3 million a year ago, while revenue amounted to €350.1 million, after €301.1 million in the first nine months of 2005/6. EBT was €4.3 million, compared with €15.4 million. Due to the statutory capitalisation of corporation tax credits in the amount of €5.0 million in the first quarter of the current financial year, net profit from continuing operations totalled €7.9 million for the first nine months, in contrast to €11.4 million in the same period a year ago.
The discontinued direct marketing segment generated a net profit of €1.1 million in the first nine months, compared with a net loss of €3.9 million a year ago, thus raising its profitability levels in line with the company's expectations. Overall, net profit for the first nine months stood at €9.0 million, compared with €7.5 million for the prior-year period.
Third-quarter VAS in the print segment amounted to €55.3 million, after €53.7 million in Q3 2005/6, while EBT totalled minus €2.7 million, compared with plus €4.4 million a year ago. In the first nine months of the current financial year, VAS was €183.2 million, compared with €174.1 million. EBT stood at €7.1 million, as opposed to €18.2 million in the first nine months of 2005/6.
As outlined on previous occasions, schlott gruppe's current sluggish earnings performance is attributable solely to gravure printing activities within the print division, while the company's offset printing operations and finishing activities remain encouraging and continue to develop in line with forecasts.
In the corporate services segment the loss before taxes was €0.2 million in the third quarter, compared with a loss before taxes of €0.8 million in the same period a year ago. The loss before taxes for the first nine months stood at €1.8 million, after €2.4 million a year ago.
Over the course of the financial year, the book gain from the disposal of the direct marketing unit will serve to counteract sluggish earnings currently associated with the print segment, as a result of which schlott gruppe reaffirms its forecast of pre-tax profit in the range of approx. €23 million for the current financial year. Alongside the capitalisation of corporation tax credits, the adjustment of deferred taxes within the framework of the corporate tax reform now enacted in Germany will have an additional positive effect on net profit for the current financial year.
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 2005/6 financial year, the so-called paper provision ratio was 79.9 per cent. As a financial indicator, "value-added sales" eliminates fluctuations relating to paper supplied by customers, thus reflecting the actual business performance.
Interim Report 3rd quarter 2006/7
