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S&T: Positive EBITDA and good performance in south-eastern Europe

Share of total sales realized by solutions and services business is now 54 %

Sales volumes in the core S&T fields of business during the first quarter of 2009 reflect the general situation in the IT market. Whereas the area of managed services (MS), which mainly involves long-term service contracts, saw growth in sales of 2.6 % compared to 2008 and realized 23.5 million euros, sales in the area of enterprise systems (ES), which focuses on infrastructure, fell by 23.4 % to 45.2 million euros. Business solutions (BS), with its provision of consulting services, registered a contraction in sales of 13.8 % to 29.9 million euros. “The decline in our total sales revenues is primarily a result of the current situation in the overall infrastructure market, which is traditionally difficult during any first quarter. We have managed to defend our market share in the infrastructure business and have kept gross margins stable in percentage terms, but we are, of course, less than satisfied with the financial result. However, the MS area of business has really developed well. In the business solutions area we are currently seeing extremes – during Q1, we were awarded a number of new, large contracts, but at the same time a number of ongoing projects were postponed or cancelled at short notice by customers. Such a situation makes our work with planning of resources and costs very difficult and has an impact on the results,” explains Christian Rosner, CEO S&T.

Good results in the Adriatic region and Romania

In geographical terms, the Adriatic region and Romania made particularly good contributions to the overall group results during the first quarter. In contrast, the DACH region (Germany, Austria, Switzerland) as well as Russia, Turkey, Hungary and Ukraine could not avoid the impact of the ongoing crisis. In the German-speaking countries in particular, there were a number of projects that were cancelled or postponed, including projects in which implementation was about to start or was already underway, and for which personnel and budget resources had already been allocated. Rosner: “We have already initiated some appropriate measures in the business units to tailor the available resources to current needs. We are currently assessing our continued involvement in Turkey and, furthermore, our office in Bosnia-Herzegovina has been reduced to a small operational core team and, in Russia, we are looking to establish a strategic partnership with a leading local provider.”

Balancing act with personnel resources

At the end of the first quarter of 2009, S&T had 3,048 employees (full time equivalent), which is 87 (2.8 %) less than at the beginning of the year. “For us as a service provider, we have to play a balancing act of ensuring that we retain key resources in order to maintain the high quality of our services, while at the same time acknowledging that we are forced to cut costs. It is also the case that measures implemented in terms of personnel do not have an immediate effect on the cost structure as the resulting savings are only seen two or three months later. We envisage having approximately 2,850 staff at the end of June and hope that no further reductions will then need to be made,” comments Rosner.

Share price on the rise

Following a decision by the Austrian Takeover Commission regarding the issue of AvW, the S&T share price has shown a clearly positive trend once again. The price at the end of the first quarter was 8.53 euros (March 31, 2009) but within a few days of the decision being publicized it had reached a level of 13.50 euros (April 17, 2009). S&T currently (April 29, 2009) has a market capitalization of 42.98 million euros and the share price is 11.99 euros.

Q2 2009: Positive financial results expected

“We are expecting a positive operational result for the second quarter of 2009,” states Rosner. “The forecasts in our individual countries show a positive development in the infrastructure business in comparison to the first quarter. The business solutions area should now have bottomed out in terms of sales and the third quarter should produce positive figures again here. At present, we are also forecasting a positive result for the third quarter and sales revenues that should not be much below those of last year.”