Global Graphics reports third quarter 2007 results

Comparisons for the third quarter 2007 with the third quarter of the previous year include:
<ul>
<li>Sales of Euro 3.5 million this quarter (Euro 3.8 million at Q306 exchange rates) compared with Euro 3.6 million in Q3 2006;</li>
<li>EBIT of Euro 0.9 million this quarter, compared with Euro 0.7 million in Q3 2006;</li>
<li>Pro forma operating profit (EBITA) of Euro 0.3 million this quarter, compared with Euro 0.4 million in Q3 2006;</li>
<li>Pro forma pre-tax income of Euro 0.3 million this quarter (or Euro 0.03 per share), the same as in Q3 2006;</li>
<li>Net income of Euro 0.5 million this quarter (or Euro 0.05 per share), compared with Euro 0.3 million in Q3 2006 (or Euro 0.03 per share); and</li>
<li>Pro forma net income of Euro 0.1 million (or Euro 0.01 per share), the same as in Q3 2006.</li></ul>

Jim Freidah, chief executive officer stated, “Revenues from new business in digital print and electronic document technology continued to be strong during the third quarter showing continued year-on-year growth.  We signed our first contract for our newly launched next-generation Electronic Document technology during the quarter and expect to sign further contracts during the fourth quarter.  We also continue to be in active negotiations with a broad number of potential new digital print customers.  However, the slow adoption rate of the Microsoft® Vista™ operating system, or more specifically the slow release of XPS-related software applications that run on Vista, has had the effect of lessening urgency among printing hardware manufacturers.  This has caused many to delay their launch of XPS-compatible equipment, which in turn has translated into longer contract and revenue cycles for Global Graphics.  

“With regard to our traditional graphic arts segment, sales in this segment experienced their typically weaker third quarter levels and continue to be down year-on-year due to consolidation.  Graph Expo in September, this segment’s largest tradeshow of the year, was well attended, and combined with upgrade sales of the new version of the Harlequin RIP should drive stronger Q4 results.”

Third quarter performance
Sales for the quarter amounted to Euro 3.5 million, compared with Euro 3.6 million in the third quarter 2006, or a decrease of 1.9% at current exchange rates. Approximately 74.8% of the Company’s sales were denominated in US dollars this quarter (at an average rate of USD 1.377 for 1 Euro), and exchange rate fluctuations with the Euro continued to impact upon on the Company’s sales and results of operations. Had this quarter’s sales been converted at the average US dollar rate applicable in the same quarter of 2006 (USD 1.274 for 1 Euro), sales would have amounted to approximately Euro 3.8 million, representing an increase of 5.3% over those reported in Q3 2006 at constant exchange rates.

Total operating expenses (excluding cost of sales, intangible assets amortization and share compensation expenses, as well as the net effect of capitalized development expenses of Euro 0.7 million) for this quarter amounted to Euro 3.1 million, as in Q3 2006, and compared to 3.4 million in Q2 2007.

EBIT was Euro 0.9 million this quarter (or 25.3% of quarterly sales), compared with Euro 0.7 million in Q3 2006 (or 18.8% of Q3 2006 sales), or an increase of 32.0% over the figure reported for the same period of the previous year.

EBITA (pro forma operating profit, as defined in the accompanying table) was Euro 0.3 million for this quarter, compared with Euro 0.4 million in Q3 2006, or a decrease of 14.8% over the figure reported for the same period of the previous year. Accordingly, EBITA margin dipped to 8.9% of quarterly sales this quarter compared with 10.3% in Q3 2006.  Using the exchange rates prevailing in the third quarter 2006, i.e. at constant exchange rates, EBITA would have amounted to approximately Euro 0.5 million in Q3 2007, showing an increase of 41.3% over the EBITA figure actually reported in Q3 2006.

Pro forma pre-tax income (as defined in the accompanying table) was Euro 0.3 million for this quarter, as in the same period of 2006. Accordingly, pro forma pre-tax EPS was Euro 0.03 this quarter, the same as in Q3 2006.

Net income was Euro 0.5 million this quarter (or Euro 0.05 a share), compared with Euro 0.3 million in Q3 2006 (or Euro 0.03 a share), or an increase of 47.0% over the figure reported for the same period of the previous year.

Pro forma net income (as defined in the accompanying table) was Euro 0.1 million for this quarter, as in the same period of 2006. Accordingly, pro forma EPS was Euro 0.01 this quarter, the same as in Q3 2006.

First nine months performance
Sales for the first nine months of 2007 were Euro 12.9 million compared with Euro 12.1 million in the same period of 2006, or an increase of 7.1% at current exchange rates. Approximately 85.5% of the Company’s sales were denominated in US dollars in the first nine months of 2007 (at an average rate of USD 1.343 for 1 Euro).  Had sales for the first nine months of 2007 been converted using the average US dollar rate applicable in the same period of 2006 (i.e. at an average rate of USD 1.238 for 1 Euro), sales would have amounted to approximately Euro 13.9 million, or an increase of 15.4% over sales made in the same period of 2006 at constant exchange rates.

EBIT was Euro 4.1 million for the first nine months of 2007 (or 32.1% of the period’s sales) compared with Euro 2.5 million (or 20.5% of the period’s sales) for the first nine months of 2006, or an increase of 67.8% over the figure reported for the same period of 2006.

EBITA was Euro 2.4 million for the first nine months of 2007 (or 18.6% of the period’s sales) versus Euro 2.0 million (or 16.4% of the period’s sales) for the first nine months of 2006, or an increase of 21.5% over the figure reported for the same period of 2006.  Using the exchange rates prevailing in the first nine months of 2006, i.e. at constant exchange rates, EBITA would have amounted to approximately Euro 3.1 million for the first nine months of 2007, showing an increase of 55.6% over the EBITA figure actually reported for the first nine months of 2006.

Pro forma pre-tax income was Euro 2.4 million for the first nine months of 2007 (or Euro 0.23 per share), compared with Euro 2.2 million (or Euro 0.22 per share) for the first nine months of 2006, or an increase of 6.7% over the same period of 2006.

Net income was Euro 3.3 million for the first nine months of 2007 (or Euro 0.32 per share) compared with Euro 1.4 million for the first nine months of 2006 (or Euro 0.14 per share), or an increase of 136.0% over the same period of the previous year.

Pro forma net income was Euro 2.2 million for the first nine months of 2007 (or Euro 0.21 per share) compared with Euro 1.1 million in the first nine months of 2006 (or Euro 0.11 per share), an increase of 97.6% over the same period of 2006.

Share repurchase programme
In accordance with the authority granted to the Board of Directors by the shareholders in their meeting on 27 April 2007 the Company continued with its share repurchase programme in the course of the quarter ended 30 September 2007.
A total of 59,398 shares were repurchased by the Company in the third quarter 2007 at an average price of Euro 8.07 a share. It is the Company’s intention to continue to repurchase its own shares at such times and in such quantities as deemed appropriate.
More information on the Company’s share repurchase programme is available in the information memorandum on such programme (available in both French and English) which was released by the Company in April 2007, and can be downloaded from the Company’s website at: www.globalgraphics.com.

2007 guidance revision
Jim Freidah added: “Two major factors are now beginning to affect our 2007 guidance.  The first, as I have already noted in my comments on the third quarter, is that the slow launch of XPS-based applications and the subsequent lack of urgency of equipment manufacturers to launch XPS compatible devices will have an effect on our revenue stream.  The second is the continued weakening of the US dollar which has not only had an effect on our year-on-year performance during the first nine months (we have noted earlier the Euro 12.9 million sales we achieved in the first nine months of 2007 converted at the average USD rate applicable during the first nine months of 2006 would have amounted to Euro 13.9 million), but whose effect now has to be considered on the guidance that we issued in April this year for the full year 2007.

“Consequently we are now revising our sales and earnings guidance for 2007.  We now expect total sales for the full year 2007 to range between approximately Euro 17.0 million to Euro 18.0 million.  In view of the fact that our operating expenses have remained under tight control, we are adjusting EBITA slightly downwards at between approximately Euro 3.2 million and Euro 4.0 million. We continue to expect non-operating items (including exchange differences with regards to our currency hedging strategy) to have a nominal effect on our reported performance and therefore expect 2007 pro-forma pre-tax EPS to range between Euro 0.31 and Euro 0.40. Such revised guidance is based on actual spot market rates, namely 1.417 US dollars for 1 Euro and 2.04 US dollars for 1 British Pound.”

Third quarter 2007 conference call details
Global Graphics will hold a conference call today at 14.00 pm CET.  Callers should dial +44 (0)20 7162 0025 and mention "Global Graphics quarterly results conference call" to the operator.  The call will be available for replay for 7 working days by dialing number +44  (0)20 7031 4064 (freephone number UK only: 0800 358 1860), access code 770049.

Fourth quarter and full year 2007 results announcement
Global Graphics expects to announce its financial results for the quarter and full year ending 31 December 2007 on Friday 8 February 2008 before market opening.

<table><tr><td><pre class="qHead">GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED INTERIM INCOME STATEMENT
In thousands of Euro, except share data in Euro
Unaudited and unreviewed figures

                                                Quarters         Nine months
                                           ended 30 September  to 30 September
                                             2007      2006     2007     2006

</pre><pre class="qBodyEven">Sales                                       3,538     3,608   12,908   12,050</pre>
<pre class="qBodyOdd">Cost of sales                                (114)     (114)    (354)    (343)</pre>
<pre class="qBodyEven">Amortization of intangible assets             (18)      (17)     (52)     (51)</pre>
<pre class="qBodyOdd">GROSS PROFIT                                3,406     3,477   12,502   11,656</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">Selling, general & administrative expenses (1,192)   (1,366)  (4,206)  (4,492)</pre>
<pre class="qBodyOdd">Research and development expenses          (1,198)   (1,391)  (3,741)  (4,502)</pre>
<pre class="qBodyEven">Share compensation expenses                  (101)      (22)    (349)    (133)</pre>
<pre class="qBodyOdd">Amortization of intangible assets             (19)      (19)     (57)     (57)</pre>
<pre class="qBodyEven">OPERATING PROFIT                              896       679    4,149    2,472</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyOdd">Interest income (note 5)                       19        29       37       80</pre>
<pre class="qBodyEven">Interest expenses (note 5)                      0       (30)      (6)    (109)</pre>
<pre class="qBodyOdd">Foreign exchange gains (losses), net (note 5)  10       (67)     (29)     315</pre>
<pre class="qBodyEven">PROFIT BEFORE INCOME TAX                      925       611    4,151    2,758</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyOdd">Income tax (benefit) expense (note 6)         437       279      894    1,378</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">NET PROFIT                                    488       332    3,257    1,380</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyOdd">EARNINGS PER SHARE (note 7)</pre>
<pre class="qBodyEven">Basic net profit per share                   0.05      0.03     0.32     0.14</pre>
<pre class="qBodyOdd">Diluted net profit per share                 0.05      0.03     0.32     0.13</pre>
</td></tr></table><p><p><p>
<p><p>
The accompanying selected explanatory notes are an integral part of these consolidated interim financial statements.<p><p>
<p><p>
<p><p>
</p><table><tr><td><pre class="qHead">GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEET
In thousands of Euro                        30 Sept. 2007    31 Dec. 2006
                                              Unaudited
                                               figures
</pre><pre class="qBodyEven">ASSETS</pre>
<pre class="qBodyOdd">NON-CURRENT ASSETS</pre>
<pre class="qBodyEven">Property, plant and equipment                   1,021          1,039</pre>
<pre class="qBodyOdd">Intangible assets                               3,720          1,770</pre>
<pre class="qBodyEven">Goodwill                                        8,177          8,514</pre>
<pre class="qBodyOdd">Other non-current assets                          141            149</pre>
<pre class="qBodyEven">Deferred tax assets (note 4)                    3,266          4,269</pre>
<pre class="qBodyOdd">TOTAL NON-CURRENT ASSETS                       16,325         15,741</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">CURRENT ASSETS</pre>
<pre class="qBodyOdd">Inventories                                        99             94</pre>
<pre class="qBodyEven">Trade receivables                               4,150          3,814</pre>
<pre class="qBodyOdd">Current tax receivables                           438            423</pre>
<pre class="qBodyEven">Other current assets                               90            164</pre>
<pre class="qBodyOdd">Prepaid expenses                                  475            440</pre>
<pre class="qBodyEven">Cash                                            3,358          3,310</pre>
<pre class="qBodyOdd">TOTAL CURRENT ASSETS                            8,610          8,245</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">TOTAL ASSETS                                   24,935         23,986</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyOdd">LIABILITIES & SHAREHOLDERS’ EQUITY</pre>
<pre class="qBodyEven">SHAREHOLDERS’ EQUITY</pre>
<pre class="qBodyOdd">Share capital (note 8)                          4,111          4,099</pre>
<pre class="qBodyEven">Share premium (note 8)                         28,844         28,754</pre>
<pre class="qBodyOdd">Share options outstanding                       2,457          2,108</pre>
<pre class="qBodyEven">Reserve for own shares (note 9)                (1,178)          (399)</pre>
<pre class="qBodyOdd">Accumulated deficit                            (3,886)        (7,143)</pre>
<pre class="qBodyEven">Foreign currency translation adjustment        (7,628)        (6,638)</pre>
<pre class="qBodyOdd">TOTAL SHAREHOLDERS’ EQUITY                     22,720         20,781</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">LIABILITIES</pre>
<pre class="qBodyOdd">NON-CURRENT LIABILITIES</pre>
<pre class="qBodyEven">Other non-current liabilities                       2              2</pre>
<pre class="qBodyOdd">TOTAL NON-CURRENT LIABILITIES                       2              2</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">CURRENT LIABILITIES</pre>
<pre class="qBodyOdd">Bank overdrafts                                     0            234</pre>
<pre class="qBodyEven">Trade payables                                    262            457</pre>
<pre class="qBodyOdd">Other payables                                    385            837</pre>
<pre class="qBodyEven">Customer advances and deferred revenue          1,566          1,675</pre>
<pre class="qBodyOdd">TOTAL CURRENT LIABILITIES                       2,213          3,203</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyEven">TOTAL LIABILITIES                               2,215          3,205</pre>
<pre class="qBodyEmpty">&nbsp</pre>
<pre class="qBodyOdd">TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY       24,935         23,986</pre>
</td></tr></table><p><p><p>
<p><p>
The accompanying selected explanatory notes are an integral part of these consolidated interim financial statements.<p><p>
<p><p>
<p><p>
</p><table><tr><td><pre class="qHead">GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
In thousands of Euro
Unaudited and unreviewed figures
                                                           Nine months
                                                         to 30 September
                                                         2007       2006
</pre><pre class="qBodyEven">CASH FLOWS FROM OPERATING ACTIVITIES</pre>
<pre class="qBodyOdd">Profit before income tax                                4,151      2,758</pre>
<pre class="qBodyEven">Adjustments for:</pre>
<pre class="qBodyOdd">- Depreciation on property, plant and equipment           287        145</pre>
<pre class="qBodyEven">- Amortization of intangible assets                       109        108</pre>
<pre class="qBodyOdd">- Amortization of capitalized development expenses        227         41</pre>
<pre class="qBodyEven">- Share compensation expenses                             349        133</pre>
<pre class="qBodyOdd">- Interest expenses (interest income)                     (31)        29</pre>
<pre class="qBodyEven">- Foreign currency exchange losses (gains)                 29       (315)</pre>
<pre class="qBodyOdd">- Expenses offset against the share premium (note 8)       (2)

Editors notes

About Global Graphics

Global Graphics (http://www.globalgraphics.com) is a leading developer of technology for open document and print solutions. It provides sophisticated high performance software components to the graphic arts/commercial print and digital print markets and for PDF (Portable Document Format) software applications.  The Company supplies its RIPs, PDF document, workflow and color solutions mostly to a customer base of Original Equipment Manufacturers (OEMs), system integrators, software developers and resellers. These partners include the world’s leading vendors of digital pre-press systems, large-format color printers, color proofing systems, digital copiers and printers for the corporate and SOHO (Small Office / Home Office) markets, and a wide variety of market leading software applications.

Forward-looking statements
This press release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These include statements regarding the Company’s growth, funding, expansion plans and expected results for future periods. Such statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Although management believes that their expectations reflected in the forward-looking statements are reasonable based on information currently available to them, they cannot assure any reader that the expectations will prove to have been correct. Accordingly, any reader should not place undue reliance on these forward-looking statements. In any event, these statements speak only as of the date of this release. The Company undertakes no obligation to revise or update any of these statements to reflect events or circumstances after the date of this release, nor to reflect new information nor the occurrence of unanticipated events

Contact

Alain Pronost, CFO
Tel: + 33 6 62 60 56 51

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