Amaro (Italy), 13 May 2013
- Consolidated revenues: from EUR 20.40 million to EUR 14.59 million
- Consolidated gross profit: from EUR 10.55 million to EUR 8.15 million
- Consolidated EBITDA: from EUR 199 thousand to EUR -920 thousand
- Consolidated EBIT: from EUR -1.71 million to EUR -2.59 million
- Consolidated pre-tax loss: from EUR -1.49 million to EUR -1.69 million
- Group net profit (loss): from EUR -1.52 million to EUR -1.73 million
- Net debt: EUR 14.24 million
- Group shareholders’ equity: EUR 114.25 million
The Board of Directors of Eurotech S.p.A. today reviewed and approved the results for the first quarter of 2013.
The quarter just ended was characterised, on the one hand, by lower revenues earned compared with past performance and, on the other hand, by a further advance in the reduction of operating costs. While the breakeven result that management expects has not emerged in these first three months due to revenue trends, the annualised objectives still hold true, in view of both the efforts made on reducing operating costs and the order book and contracts in force for the subsequent quarters and particularly for the second half of the year.
In Q1 2013, Group revenues came to EUR 14.59 million compared to EUR 20.40 in the first three months of 2012. Revenues were heavily influenced by the demands of customers in the Americas and Japan for specific scheduling of the deliveries in the second half of the year, which was more prevalent this year than in the past.
After analysing the situation in the individual geographic areas, we can state that the United States market confirmed the generally positive trends reported in 2012. In the Americas, revenue trends in the first quarter were affected by the business development strategy with larger customers and through larger contracts pursued in the recent years, a strategy which began to show results on the order intake since the second half of last year. Increases in revenues from larger customers with significant orders are essential to the growth of medium- to long-term revenues, but in the short term it implies less uniformity in the annual revenue distribution; this matter is macroscopic this year because the process of increasing the average size of the orders is still in development. Another temporary effect related to the transition toward larger contracts is the lengthening of the lead time, namely, the time required for orders to become deliveries. This occurrence is pushing back deliveries to the second half of the year.
Looking at the Japanese market, the prospects for the financial year 2013 predict a weaker Yen versus other world currencies and this should, in the medium term, bolster the business of our customers in that area, which rely heavily on exports as well as on their domestic market. However, in the short term, the earliest visible effect of a weaker Yen will be a lower value in Euro of the region’s revenues. This first quarter has been impacted by the temporary decrease in revenues earned from a major local customer which has resulted in the expected turnover in the quarter (in line with turnover earned in the first three months of 2012) shifting into the subsequent quarters.
Finally, Europe is displaying significant uncertainty, allowing us little ability to predict the future evolution due to the overall turmoil in the Euro zone member states. The persistence of this uncertainty, coupled with the HPC business line not generating revenues compared to the first quarter 2012, has had a negative effect on the economic and financial results of the Group in this area.
The order intake is developing in line with our expectations. This also allows us to continue to view the 2013 financial year with confidence, regardless of the result of the first quarter, which historically has not been representative of the overall performance on twelve months and has a low incidence on the results of the entire year.
One unquestionably positive result of the first quarter is the higher than expected gross profit, due to the increased sales of products and services with high value-added compared to what is traditionally achieved.
Gross profit for the first quarter 2013 was EUR 8.15 million, accounting for 55.9% of revenue (versus 51.8% in the first quarter 2012 and 52.3% at year-end 2012).
As we have already noted, periodic variations to the gross profit are due to a different mix of products sold and the different contribution to revenue by the geographic areas in which Eurotech operates. These changes are less evident when viewed from an annual time span, over which gross profit margin has been firmly maintained at more than 50%, a level that management continues to keep as reference.
The consistent and steady curbing of operating costs - achieved without sacrificing investments to support Group competitiveness - has made it possible to partially offset the lower revenue earned in the first quarter hence limiting the effects on EBITDA. Gross of adjustments made in the three months in question, operating costs have decreased by EUR 1.4 million, falling from EUR 11.0 million in the first quarter 2012 to EUR 9.6 million in the first quarter 2013.
As in the previous quarters, these changes were largely due to actions undertaken by management to make the Group structure more efficient and to lower the activation threshold for operating leverage. Additional benefits will emerge this year, resulting from the most recent actions taken at year-end 2012 and throughout the current year. Cost trends have also benefited from the exchange rate used to convert the financial statements of foreign subsidiaries.
In the first three months of 2013, EBITDA amounted to EUR -920 thousand, down from EUR 199 thousand in 2012.
EBIT in the first quarter 2012 was equal to EUR -2.59 million: the decrease of EUR 880 thousand against the same quarter in 2012 reflects the lower revenue generated, which was only partly compensated by a decrease in operating costs and amortisation. This performance was influenced by the EBITDA result, as well as depreciation and amortisation posted to the income statement in the first quarter of 2013, arising both from operating assets that became subject to depreciation at 31 March 2013 and from PPA effects relating to the acquisitions of Eurotech Inc. (formerly Applied Data Systems Inc.), Dynatem Inc. and Advanet Inc. The effect on EBIT of the higher values attributed as a result of PPA was EUR 830 thousand in the first three months of 2013, compared with EUR 930 thousand in the same three months in 2012.
The Group posted a pre-tax loss in Q1 2013 of EUR -1.69 million, compared with a loss of EUR -1.49 million in Q1 2012, and was affected by the factors set out above as well as by the positive contribution from financial operations as a consequence of currency exchange differentials. The effects on the pre-tax result arising from PPA amounted to EUR 830 thousand in the first three months of 2013 (EUR 930 thousand in the first three months of 2012).
The Group results amounted to EUR -1.73 million for the quarter (EUR -1.52 million at 31 December 2012) and reflect the dynamics of the result before taxes described above.
At 31 March 2013, Group net financial debt was EUR 14.24 million, compared with EUR 11.45 million at year-end 2012, owing primarily to the use of funds to sustain working capital and manage the business.
We advise the public that, as required by the CONSOB (Italian securities & exchange commission), the Consolidated Interim Management Statement at 31 March 2013 is available to anyone who requests it at the Company's registered headquarters. The report is also available on Eurotech’s website at the address www.eurotech.com
Pursuant to article 154-bis, paragraph 2, of the Italian Consolidated Finance Act, the Financial Reporting Manager of Eurotech S.p.A., Sandro Barazza, hereby declares that the financial disclosure contained in this press release corresponds to the Company’s documentary evidence, corporate books and accounting records.