Amaro (UD), 29 August 2008
Consolidated revenues: +19% from 35.45 million to 42.12 million
Consolidated gross profit: +31% from 17.77 million to 23.30 million
Consolidated EBITDA: from 0.68 million to 1.68 million
Consolidated EBIT: from -1.46 million to -2.66 million
Consolidated EBT: from -0.70 million to -4.14 million
Net financial position: 6.95 million
Today, the Board of Directors of Eurotech S.p.A. examined and approved the results related to the first half 2008.
Group sales in the first six months of the year reported 19% growth over the same period of 2007, increasing from 35.45 million to 42.12 million. 2008s first half results are characterised by a change of the consolidation area due to the acquisition of the Japanese Group Advanet, finalized during the second half of 2007.
Gross profit for the first half of 2008 came to 23.30 million (+31% year on year), for a margin on sales of 55.3%, which is a significant improvement over the first half of 2007 (17.77 million, equal to 50.1% of sales revenues), primarily due to the higher profitability of the Advanet Group, but also to the new products the Eurotech Group has released.
EBITDA in the first half came to 1.68 million, for a clear improvement over the 0.68 million of the same period of the previous year. The EBITDA margin on sales increased from 1.9% to 4.0%. As a result of this increase in revenues and in gross margin, the first half of 2008 was better able to absorb, in absolute terms, operating costs, that for Eurotech are primarily fixed ones: this lead to a stronger performance for EBITDA than for the first six months of 2007, both in absolute terms and as a margin on sales.
It is also important to note that operating costs are distributed in a nearly even manner throughout the year, whereas revenues have historically been greater in the second half. This means that operating costs had, in percentage terms, a greater impact on revenues than is expected for the second half of the year and for the full financial year.
EBIT came to a loss of 2.66 million and a margin on sales of -6.3%, as compared with a loss at the EBIT level of 1.46 million and margin on sales of -4.1% for the first half of 2007. EBIT in the first half of 2008 was significantly affected by the non-monetary impact of depreciation and amortisation due to the price allocation of the acquisitions of Applied Data Systems Inc., the Arcom Group, and the Advanet Group: the negative impact of this price allocation totalled 2.62 million for the first half of 2008 and 1.27 million for the first half of 2007.
The pre-tax loss came to 4.14 million (vs. a loss of 0.90 million for the first half of 2007). Net of the price allocation effects, the loss would have been 1.29 million (and 0.57 million for the first half of 2007). Compared to last years first half, in 2008 we are missing the positive contribution of the interests on the portion of cash used during the second half of 2007 to acquire Advanet and we have also greater negative interests coming from the fundings activated to support the acquisition.
In the first half of 2008, the net loss for the Group amounted to 5.07 million, compared with the loss of 0.90 million for the same period last year. Net of the price allocation effects, this result would be negative for 3.48 million (and positive for 60 thousand for the first half of 2007).
As of 30 June 2008, the Group posted a net financial position of 6.95 million, substantially in line with the value posted at the end of 2007 (6.38 million). The small difference is mainly linked to the non-monetary effects deriving from the cash in foreign currencies.
Still at 30 June 2008, the Group net working capital was of 23.07 million, down 15% from 27.15 million posted at 31 december 2007. This reduction is a consequence of the companys policy to control and contain net working capital.
Summarizing, these first six months of 2008 have been a period of transition, with the key moment in the process of integrating the various affiliates of the Group represented by the merger of ADS and Arcom Inc in the U.S., officially completed on the first of July 2008 and which resulted in the establishment of Eurotech Inc. The unification of these two U.S. firms under the Eurotech brand will further strengthen the brand itself, which will now benefit from significantly greater visibility.
The merger of ADS and Arcom was also a means to harmonising all corporate processes, from development to logistics and sales, which laid the groundwork for achieving synergies and economies of scale and that, in turn, has led to a process of naturally reducing costs, the effects of which should begin to be seen as early as the second half of 2008.
Regarding the strategic alliances in place, we expect them to start producing positive effects on our market proposition.
With reference to Finmeccanica, its entrance into the shareholding of Eurotech is in the finishing phase: authorizations to formally close this operation are being finalized and, once the closing will be completed, we expect that the tight relationship with Finmeccanica will further strengthen the partnership that began in 2006 and will have a positive impact on market penetration.
Also the partnership with Intel, related to both NanoPCs and HPCs, has had and will continue to have positive effects. For example, the new Catalyst platform of Eurotech, based on the innovative low-power Atom processor and suitable for the production of MID (Mobile Internet Devices), is obtaining positive feedbacks from the market.
Finally, the new ready-to-use products such as ZyPad (the wearable computer) and ZyWan (the Mobile Access Router) are scoring important design wins, which is proof of the fact that focusing on innovation is a successful strategy over the medium term, even when faced with generalised difficulties in the global economy.
In accordance with section 2 of Article 154-bis the Consolidated Finance Act, Financial Reporting Manager, Sandro Barazza, declared that the accounting information contained in this press release corresponds to accounting records, corporate books, and accounting entries.