S&T: Results Q2 2009
Extensive cost cutting program takes effect
Board of Directors expects upwards trend in the second half of the year
Vienna, 28 July 2009 - As expected, S&T’s results continued to improve in Q2 2009 compared to Q1, despite significant restructuring costs. The decrease in sales in the Business Solutions and Enterprise Systems divisions is a reflection of the overall trend in the IT market. With an EBIT in Q2 2009 of -0,39 million euros (2008: 1.5 million euros) and an EBITDA of 1,0 million euros (2008: 3.2 million euros) S&T was not able to entirely avoid the consequences of the economic crisis. However, when allowing for restructuring costs of more than 0.8 million euros, S&T has delivered a positive operating EBIT of +0,4 million euros. S&T expects to see incoming orders stabilize and results improve in Q3 and Q4 2009.
"The drop in total Q2 sales reflects the current situation in the IT market as a whole. Additionally, we have to bear in mind the downturn of many eastern European currencies compared to the euro. We have not lost market share despite lower sales figures. We have been able to weather the sharp downturn in the market with a corresponding reduction in headcount and costs," comments S&T CEO Christian Rosner with regard to the latest figures. The gross margin improved in percentage terms at 41.5% (Q2 2008 40.0%), the share of consulting and services business in the total sales rose to 57.5% (54.3 million euros out of a total of 94.3 million euros).
Performance in the three S&T business fields
The Managed Services (MS) division, characterized primarily by long-term service and outsourcing contracts, recorded stable sales results of 23.3 million euros (Q2 2008: 23.9 million euros) while sales in Enterprise Systems (ES) decreased by 28% to 40,1 million euros. The consultancy division Business Solutions (BS) experienced a drop in sales of 17.0% to 31 million euros. "In the BS division the bottom has been reached. Our ES business has delivered the expected figures despite an extremely difficult market environment; the MS business performed well as expected," explains Rosner.
Restructuring measures reflected in results
The restructuring costs of 0,8 million euros are primarily due to the reduction in staff from approximately 3,100 to 2,800 employees. "For a service company such as S&T it is a major challenge to maintain the right key personnel resources in order to guarantee the quality of our service portfolio and expertise while reducing costs in line with the development in sales and margins. The savings resulting from staff reductions and other cost savings will have a positive effect on the results in Q3 and Q4 2009," concludes Christian Rosner.
Positive trends in several countries and numerous large orders
Especially Slovenia, Croatia, Macedonia, Serbia, the Czech Republic and Romania, as well as the German speaking region, performed well in Q2 2009. Unfortunately, Japan, China, Hungary and the Ukraine were not able to avoid the effects of the crisis and many projects were cancelled or postponed. However, a positive note is that the Ukraine is reporting success stories once more: two large orders - with the telecoms supplier Kievstar and the Raiffeisen Bank Aval – were recently concluded. Other recent successes: the S&T client EVN signed contracts for capacious projects in Bulgaria and Macedonia. Orange Moldavia will be relying on the expertise of S&T in the future. In Romania, S&T will be responsible for implementing large projects for ANSVSA, the Ministry of Agriculture, and the Romanian Bank for Development, a subsidiary of Société Générale Group. The Austrian clients AMAG and Styria Publishing have also entrusted S&T with new projects in Q2.
Strategic partnership in Russia and the CIS countries
The partnership announced in June with the Russian Amphora Group will be finalized shortly. Both companies expect significant synergies for projects in Russia and the CIS countries.
Acquisitions and outlook
Christian Rosner when asked about possible takeovers: "We are currently examining two interesting candidates for acquisition in our core regions that would support a significant increase in market share and core expertise." Regarding future development in 2009 the CEO of S&T replies "In comparison to the difficult first quarter, our business has stabilized in the second. A slight improvement is expected in Q3 and the positive trend should be even more apparent in the traditionally successful Q4, if the current investment plans of our clients remain unchanged. We will give our initial forecast for the full year 2009 in September."