GLOBAL GRAPHICS SA (Euronext: GLOG), experts in developing technology for open document and print solutions, announces consolidated results for the quarter and the year ended 31 December 2007.
Comparisons for the fourth quarter 2007 with the fourth quarter of the previous year include:
- Sales of Euro 3.5 million this quarter (Euro 3.8 million at Q406 exchange rates) compared with Euro 5.0 million in Q4 2006;
- Operating profit of Euro 1.1 million this quarter, compared with Euro 1.9 million in Q4 2006;
- Adjusted operating profit of Euro 0.6 million this quarter, compared with Euro 1.6 million in Q4 2006;
- Adjusted pre-tax income of Euro 0.7 million this quarter (or Euro 0.06 per share), compared with Euro 1.6 million in Q4 2006 (or Euro 0.16 per share);
- Net income of Euro 0.0 million this quarter (or Euro 0.00 per share), compared with Euro 1.6 million in Q4 2006 (or Euro 0.16 per share); and
- Adjusted net loss of Euro 0.4 million (or an adjusted net loss Euro 0.03 per share), compared with an adjusted net profit of Euro 1.4 million in Q4 2006 (or an adjusted net profit of Euro 0.14 per share).
Commenting on performance, Jim Freidah, Chief Executive Officer, said: “Sales in all segments were affected by the beginning of an economic slowdown in Q4 2007, most notably in the US, and the weak US dollar, our primary sales currency, continued to impact on our sales and results.
“The traditional graphic arts segment continued to be slow in Q4 2007 with sales down 24.2% at constant exchange rates over sales made in this segment in Q4 2006, the slowdown affecting both our hardware manufacturer and system integrator customers.
“Revenues from the digital print and electronic document segments decreased 22.4% at constant exchange rates over sales made in these segments in Q4 2006. This was primarily due to the timing of revenue recognition of the XPS contracts signed in Q4 2006. The Company did sign three new eDocument contracts during Q4 2007, including two which were XPS-related and saw the launch of a new line of printer/MFP devices with embedded Global Graphics’ RIP technology. Whilst the slow market adoption of XPS in printing devices and application software continues to delay new business opportunities, we remain in various stages of discussion and negotiation with a broad number of potential customers for not only XPS, but our broader RIP and associated eDocument technology.”
Fourth quarter performance
Sales for the quarter amounted to Euro 3.5 million, compared with Euro 5.0 million in the fourth quarter 2006, or a decrease of 30.2 % at current exchange rates. Approximately 86.4% of the Company’s sales were denominated in US dollars this quarter (at an average rate of 1.445 US dollars for 1 Euro), and exchange rate fluctuations with the Euro continued to impact upon on the Company’s sales and results of operations. Had Q4 2007 sales been converted at the average US dollar rate applicable in the same quarter of 2006 (1.299 US dollars for 1 Euro), sales would have amounted to approximately Euro 3.8 million, representing a decrease of 23.0% over sales reported in Q4 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 0.6 million) amounted to Euro 2.8 million in Q4 2007, compared with Euro 3.2 million in Q4 2006, to Euro 3.1 million in Q3 2007, and to Euro 3.4 million in Q2 2007. The sequential decrease is due to the combined, favorable effect of the cost control policies implemented by the Company’s management throughout 2007, and also to the favorable evolution of the Euro / British pound rate in Q4 2007.
Operating profit was Euro 1.1 million this quarter (or 31.5% of this quarter’s sales), compared with Euro 1.9 million in Q4 2006 (or 37.7% of Q4 2006 sales), or a decrease of 41.6% over the figure reported for Q4 2006.
Adjusted operating profit (or EBITA, as defined in the accompanying table) was Euro 0.6 million for this quarter, compared with Euro 1.6 million in Q4 2006, or a decrease of 63.7% over the figure reported for Q4 2006. Accordingly, EBITA margin dipped to 16.7% of quarterly sales this quarter compared with 32.1% in Q4 2006.
Adjusted pre-tax income (as defined in the accompanying table) was Euro 0.7 million for this quarter, compared with Euro 1.6 million in Q4 2006, or a decrease of 60.2% over the figure reported for Q4 2006. Accordingly, adjusted pre-tax EPS was Euro 0.06 this quarter, compared with Euro 0.16 in Q4 2006.
Net income was slightly positive this quarter (Euro 0.00 per share), after effect of a tax charge of Euro 1.1 million, compared with Euro 1.6 million in Q4 2006 (or Euro 0.16 per share).
As a result, the Company reported an adjusted net loss (as defined in the accompanying table) of Euro 0.4 million for this quarter (or an adjusted net loss of Euro 0.03 per share), compared with an adjusted net income of Euro 1.4 million in Q4 2006 (or an adjusted profit of Euro 0.14 per share).
Full year performance
Sales for the year 2007 were Euro 16.4 million compared with Euro 17.0 million in 2006, or a decrease of 3.8% at current exchange rates. The abovementioned sales figure is 3.7% below the Euro 17.0 million figure provided by the Company’s management in October 2007 as the forecasted bottom end of the projected range for 2007 sales. This is notably due to the unfavorable evolution of the US dollar / Euro rate compared with Q4 2006 when the actual rate was 1.445, well above the 1.417 rate assumed for 2007 guidance preparation purposes.
Approximately 85.7% of the Company’s sales in 2007 were denominated in US dollars (at an average rate of 1.365 US dollars for 1 Euro). Had 2007 sales been converted using the average US dollar rate applicable in the same period of 2006 (i.e. at an average rate of 1.259 US dollars for 1 Euro), sales would have amounted to approximately Euro 17.7 million, or an increase of 4.2% over sales made in 2006 at constant exchange rates.
Sales for 2007 into the Company’s traditional graphic arts market showed a 27.3% decline at current exchange rates over 2006 (a 21.0% decline at constant exchange rates).
Sales into new market segments, namely digital print and electronic document technologies, increased 14.1% at current exchange rates compared with 2006 (an increase of 23.3% at constant exchange rates), and accounted for 67.4% of 2007 sales, compared with 56.8% of total sales in 2006.
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 2.9 million) amounted to Euro 12.9 million in 2007, compared with Euro 13.0 million in 2006, and well below the Euro 13.3 to 13.5 million range provided by management in last October.
Operating profit was Euro 5.2 million in 2007 (or 32.0% of 2007 sales) compared with Euro 4.3 million in 2006 (or 25.5% of 2006 sales), showing an increase of 20.6% over the figure reported for 2006.
Adjusted operating profit (EBITA) was Euro 3.0 million for 2007 (or 18.2% of 2007 sales) versus Euro 3.6 million in 2006 (or 21.0% of 2006 sales), or a decrease of 16.6% over the figure reported for 2006. This figure is 6.9% below the Euro 3.2 million figure provided by the Company’s management as the bottom end of the forecasted EBITA range for 2007, mainly as the result of the abovementioned shortfall in sales.
Adjusted pre-tax income was Euro 3.0 million for 2007 (or Euro 0.30 per share), compared with Euro 3.9 million for 2006 (or Euro 0.38 per share), or a decrease of 21.5% over the figure reported for 2006. Such adjusted pre-tax EPS is 3.2% below the Euro 0.31 per share figure provided by the Company’s management as the bottom end of the forecasted adjusted pre-tax EPS range for 2007.
Net income was Euro 3.3 million for 2007 (or Euro 0.32 per share) compared with Euro 3.0 million for 2006 (or Euro 0.29 per share), or an increase of 9.4% over the figure reported for 2006.
Adjusted net income was Euro 2.0 million for 2007 (or Euro 0.20 per share), compared with Euro 2.5 million for 2006 (or Euro 0.25 per share), or a decrease of 20.6% over the figure reported for 2006.
Jim Freidah continued: “In the short term we expect to see the factors which affected Q4 2007 to continue, including consolidation of the traditional graphic arts market, the US dollar exchange rate, current economic factors, and the continued slow adoption of the use of XPS technology in the market.
“Nevertheless, our digital print and electronic document segment remains active though it has been affected by the slow adoption of XPS technology. We remain confident about our long-term prospects because the Company is well-positioned in the market, has significant competitive advantage in printing technology, continues to develop new and unique solutions, and is built on strong financial foundations.
"In view of the expected outcome of on-going negotiations with potential customers in the coming months we will provide guidance on 2008 sales and results on Friday 25 April 2008, when the Company expects to release its results for the quarter ending 31 March 2008.
"The Company has thoroughly reviewed its organization in light of future market trends and customer needs. This review resulted in a headcount reduction which was implemented in January 2008 and we expect to post a non-recurring redundancy charge of approximately Euro 0.3 million in Q1 2008. This and other planned adjustments to expenditure during 2008 will save the Company approximately Euro 1.0 million over 2007 expenses."
Fourth quarter and full year 2007 conference call details
Global Graphics will hold a conference call today at 10.00 CET about its results for the quarter and the year ended 31 December 2007. 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 61692.
Auditors’ reports on the 2007 Company’s consolidated accounts
The attached condensed consolidated financial statements and selected explanatory notes, which were drafted by the Company’s Board of Directors on 12 February 2008, have been audited by the Company’s auditors, and are therefore final. The Company’s auditors still have additional audit procedures to perform, including, but not limited to, the Company’s statutory accounts and the full version of the notes attached to the Company’s consolidated accounts. As in previous years, their final audit reports will be included in the Company’s annual report for the year ended 31 December 2007.
2007 annual report
The Company expects to publish the electronic versions of its annual report (in English and in French) on or around 26 March 2008. Printed copies of the English and French reports will be available shortly thereafter. Should you wish to receive one or several copies of the Company’s annual report for 2007, please let us know by sending an e-mail to the following e-mail address:
[<a href="mailto:email@example.com">firstname.lastname@example.org</a>] or a request in writing to the registered office of the Company.
First quarter 2008 results announcement
Global Graphics expects to announce its financial results for the quarter ending 31 March 2008 on Friday 25 April 2008 before market opening.
Annual meeting of the Company’s shareholders
Global Graphics expects to hold its annual meeting on Friday 25 April 2008 in Brussels (Belgium). The precise timing, agenda, proposed resolutions and voting procedures will be announced a minimum of 35 days in advance of such date.
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.
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.
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