Getronics to sell off Italian operations
17 January 2006 | 3318 views | 0
In recent months, Getronics has studied various strategic options for its Italian subsidiary.
Together with local management, the Board of Management has concluded that in the current Italian ICT market, the best option is to create a strong national player with access to an international network. This also ensures continued high quality service delivery to our clients.
Getronics is in exclusive negotiations to sell its entire Italian business activities to an Italian-based ICT services company. Following this transaction, the new combination significantly improves its competitive position in what continues to be a difficult market. It is intended that the new combination will have access to Getronics' remote service delivery network through a preferred business partner agreement, and that it becomes a key service partner for Getronics. The completion of the transaction is expected to take place in the course of 2006.
As a result of the decision to sell the Italian operations, the financial results of the operating company in Italy in 2005 will be reported in the 2005 annual consolidated accounts as "discontinued operations" under IFRS 5.
Besides ongoing challenging market circumstances in Italy, the financial performance of Getronics' Italian operations in Q4 2005 was also unexpectedly negatively impacted by the postponement of a large central government outsourcing project originally awarded in June 2005. The seasonal character of the saturated Italian market and the length of its sales cycles have made it impossible for the management of Getronics Italy to compensate for this postponement with new profitable service revenues in the remainder of Q4 2005. In addition, the mix of business has led to higher subcontractor and other costs than planned, resulting in a serious unexpected operational loss in Q4. We also expect an impairment of goodwill related to our Italian operations. The commercial backlog at the end of 2005 however has increased, by more then 35% compared to end of 2004.
When Getronics succeeds in selling its Italian operations it is planning to liquidate the remaining emptied company Getronics Italy S.p.A. in 2006. This would result in an expected substantial one-off tax gain.
Based on the currently available preliminary financial information, all Getronics operational regions, with the exception of Italy, are expected to have remained on track. Due to the unexpected loss of the Italian operations, however, the Company is not expecting to meet its consolidated EBITAE target of 5%. The Company's results will be disclosed on 2 March 2006 when Getronics publishes its 2005 annual results.
The Board of Management of Getronics also has decided to initiate a divestment program concerning a limited number of operating companies in continental Europe during the first half year 2006, based upon the group's long-term strategy and recently conducted 2006 budget reviews.
The earmarked operating companies do not support the Company's strategy, due to their current market positioning, portfolio-alignment or lack of scale. More importantly, they are not expected to contribute to the financial targets set by the Board of Management in its recent strategy review 2006-2008. The handful of companies involved represents around EUR 100 million in revenue and circa 1100 FTEs. The Company expects to complete the divestment program in 2006.
The Board of Management foresees no change to the services it provides to its existing clients as a result of these divestments. Getronics remains committed to operating its (remote) services network including the Getronics Service Centres, supporting 24x7 Workspace Management and Application Services on a global scale.
"This divestment program is in line with the Company's recently articulated strategy and a logical next step' says Klaas Wagenaar (CEO). "After our financial recovery in 2003 and 2004, we have started to build our Global Delivery Model on the back of our network and systems in critical on-site countries and regions, supported by service centres in near shore countries like Spain for application packaging and Mexico, Hungary and Singapore for workspace management. We are also establishing, both directly and through partnerships, access to highly skilled delivery resources in off shore countries.
Klaas Wagenaar continues: "Next to improving the effectiveness and efficiency of our delivery capabilities we have also strengthened our commercial capabilities during 2005, particularly in the key Getronics strategic countries of the Netherlands, United Kingdom and United States, as validated by our recent international wins and strengthened commercial pipeline in workspace management and related portfolio services."
"This logical next step of divestments concerns operating companies that do not fit within our new strategic framework. As a result of these divestments, Getronics will become an even more focused company with a flexible global sourcing strategy and specialised commercial capabilities targeting global and national workspace management and related application services opportunities in critical markets."