FURTHER TURNOVER DECREASE IN SECOND QUARTER
08/28/2009
Main developments first half 2009
- Turnover in the first half decreased by 19.3% to € 39.4 million
- Operating result decreased to € 0.5 million (H1 2008: 4.8 million)
- Operating margin over the first half of 2009 was 1.3% (H1 2008: 9.7%)
- Net result of € 2.9 million negative (H1 2008: 3.7 million positive)
- Reorganisation provision of € 4.5 million in H1 2009
| (in € millions) | H1 2009 | H1 2008 | Change |
Turnover | 39,4 | 48,9 | -19,3% |
| Operating result | 0,5 | 4,8 | ↓ |
| Net result | -2,9 | 3,7 | ↓ |
| (in €) | |||
| Earnings per share 1) | -0,33 | 0,44 | ↓ |
1) Based on the average number of outstanding ordinary shares
Bram Schot, CEO of ICT Automatisering N.V.:
“Since the end of last year, the sectors in which ICT is active in the Netherlands have been strongly hit by the economic downturn. From the beginning of this year, the circumstances in Germany have also clearly deteriorated. Pressure on demand and tariffs was visible in all ICT’s divisions. In the second quarter, this situation worsened, resulting in an increased pressure on the operating margin in the second quarter. At this moment, ICT sees the first, cautious indications of market recovery and expects a slight improvement of the market circumstances as of the fourth quarter. However, real recovery won’t be the case yet. The reorganization which was started in the beginning of this year will be concluded at the end of the third quarter.”
Financial developments
Turnover for the first half of 2009 dropped by 19.3% to € 39.4 million (H1 2008: € 48.9 million). This decrease was the direct result of the economic crisis during the first half and occurred in all divisions. About one third of the decrease in turnover is the result of pressure on tariffs. In the first three months of this year, turnover decreased by approximately 15%.
In the second quarter, the capacity utilisation rate decreased further. Especially in May and June, the capacity utilisation rate was lower than expected as a result of a decline in efficiency during the public holidays and the fact that especially clients in Germany combined these public holidays with long-lasting factory shutdowns.
Turnover at ICT Embedded decreased by 30.2% to € 10.0 million as a result of a drop in demand and pressure on tariffs. Turnover at ICT Solutions dropped to € 18.5 million, a 19.8% decrease. A growing pressure on both demand and tariffs was also the cause here. Turnover at ICT Germany amounted to € 9.9 million compared with € 10.1 million in the first half of 2008. In stead of an anticipated increase in turnover, there was a slight decrease as a result of a loss in turnover following the factory shutdowns in the second quarter that were announced on a very short notice. Besides, Germany also had to face pressure on tariffs. Turnover at ICT Consultancy decreased to € 1.0 million, compared to € 1.3 million a year earlier. This was caused by a drop in the number of training sessions sold in especially the second quarter.
The directly to the turnover related costs for raw materials and work subcontracted dropped by 26.9% to € 3.6 million (H1 2008: € 5.0 million. Employee expenses decreased by 9.3% to € 26.0 million (H1 2008: € 28.6 million). Other operating expenses amounted to € 8.9 million, a decrease of 12.7%.
The operating result came in at € 0.5 million, compared to € 4.8 million in the first half of 2008. This was largely the result of a decreasing demand, a lower capacity utilisation rate and a decrease in tariffs. Besides, the operating result was negatively influenced because cost savings in Germany came in lower than expected after government measures (KUG – German reduction in working hours).
The provision for reorganisation charges amounted to € 4.5 million. The provision, which was fully booked in the first half of 2009, came in higher than earlier announced following the market circumstances in Germany. An extra provision of € 0.5 million has been taken for a reorganisation in Germany. Partly due to this provision, the net result came in at € 2.9 million negative compared to a net profit of € 3.7 million over the first half of 2008.
Personnel
The number of employees as of the end of June 2009 amounted to 976, a decrease of 3.8% compared to the end of December 2008 (1,015). This decrease is in line with the earlier announced reorganisation in the Netherlands where a total of 70 jobs would be lost. Most jobs have disappeared at ICT Embedded. In the second part of this year, the number of staff will decrease further as a result of the reorganisation.
Strategy and objectives
Despite the changed economic circumstances, ICT’s strategy remains unchanged and is still fully focused on further expansion in its chosen markets with the objective to be one of the leading players.
Given the economic circumstances, ICT was forced to let go of its targets set for 2011, a turnover of € 150 million, of which 60% will be realised in the Netherlands and 40% in Germany, and an operating margin of 10-12.5%. ICT believes these targets are still realistic but expects that realisation will take more time.
Outlook
ICT is observing the first cautious signs of market recovery and expects a modest improvement of the market circumstances as of the fourth quarter. We can not foresee how strong and robust this improvement will be but a real recovery won’t be the case yet. Pressure on turnover is expected to continue for the remainder of the year. However, given the expectation of a slight improvement in the market circumstances, ICT does not expect this pressure on turnover to increase. ICT does not anticipate a recovery of tariffs in 2009.
Developments and outlook per division
ICT Embedded
Turnover at ICT Embedded fell by 30.2% in the first half of the year to € 10.0 million as a result of a drop in demand and pressure on tariffs. The strong decline in demand and the mediocre outlook forced ICT into a reorganisation. This reorganisation is now almost completed. In the course of the second half year, ICT expects a modest recovery.
Due to the economic circumstances, ICT has reorganised the Rialtosoft activities, embedded software development and consultancy activities for the automotive industry, and put these under ICT Embedded B.V.
ICT Solutions
In the first six months, turnover at ICT Solutions decreased to € 18.5 million, down 19.8% compared to the year before. Especially the industrial activitie
s dropped sharply as a results of the developments at clients active in the machine building, chemical and metals business. In addition, turnover at the Traffic activities was at a low level. Besides pressure on tariffs, lower efficiency had an important impact. At this moment the situation seems to stabilize, in particular the Traffic activities show the first signs of recovery.
ICT Germany
Until December 2008 there were no signs of weakening in Germany. In the first quarter the situation deteriorated and this continued in the second quarter. As a result of the German measures regarding reduction in working hours, there were many long-lasting factory shutdowns. This put considerable pressure on the productivity. Given the developments in Germany in the first half of the year, it has been decided to implement a reorganisation in order to streamline the organisation. The associated reorganisation charge of € 0.5 million has been booked in the first half. The first signs of a recovery are visible in the Automotive market, it is however impossible to assess how fast and robust this recovery is.
ICT Consultancy
Given the disappointing development of turnover and results at ICT NoviQ, also after previous measures, it has been decided to discontinue the activities of this company. This will be concluded in the third quarter. After a good start of the year, in the second quarter Improve, the other part of the division ICT Consultancy, experienced pressure on the tariffs and drop in demand for training sessions.