Getronics issues profit warning as sales droop

Source: Getronics

Getronics announces today its unaudited trading update for Q1 2007. The Company will provide unaudited condensed consolidated half-year results on 29 August 2007.

Key items[1]:
Due to lower than expected Q1 2007 results in the Company's operation in the United Kingdom and a reduced forecast for this operation for the full-year 2007 and following years, the Company decided on 1 May 2007 to record a goodwill impairment charge of EUR 25 million.
As a consequence of this goodwill impairment in the United Kingdom, the Group's net profit is also impacted by the same amount. The Company, may, therefore, no longer be able to generate a net profit for the full-year 2007.
In Q1 2007, total revenue decreased by 2% to EUR 630 million (Q1 2006: EUR 642 million), mainly due to the impact of divestments[2] during 2006, changes in currency rates and lower product revenues, which decreased by 14% to EUR 72 million (Q1 2006: EUR 84 million) as the Company continued to de-emphasise product sales. Service revenue was stable at EUR 558 million (Q1 2006: EUR 558 million). On organic basis[3] service revenue increased by 4.7%.
On organic basis, service revenue in the Netherlands was up 4.6% in Q1 2007, in the Rest of Europe up 9.3%, in North America down 6% and in the Rest of the World up 11.4%.
The Company continues to work towards an EBITAE margin[4] of between 4.0% and 4.5%. Although this range becomes challenging as relevant labour markets remain tight, resulting in a relatively high use of subcontractors, the positive effects of the Breakout Programme should become visible in the second half of 2007.
Getronics re-confirms its EBITAE margin target of at least 5% to be achieved by the end of 2008 as well as its target debt/EBITDA ratio of 2 or less by the end of 2008.

[1] Unaudited results from continuing operations including Japan.
[2] In Q1 2006, the following companies that were divested later during 2006 were still included in the consolidated results: HR Services, KZA, the operations in Austria, the Czech Republic, Slovakia, Poland and France. As of Q3 2006, operations in France were classifiens in France ns in France were classified as discontinued operations. As such, and in compliance with IFRS 5 to disclose the results of discontinued operations as a single amount in the income statement for the current and prior year, the Q1 2006 revenue from continuing operations presented in this release excludes the Q1 2006 revenue from the French operations of EUR 16 million.
[3] Service revenue growth on organic basis is a non-IFRS measure and is calculated by excluding the impact of acquisitions and divestments, using constant currency rates. This measure is only used to provide service revenue growth rates for the Company's operations on a like-for-like basis.
[4] The EBITAE margin range is excluding one-off items such as curtailment gains and the Breakout Programme costs.

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