Global Graphics reports second quarter and half year 2008 results

GLOBAL GRAPHICS SA (NYSE-Euronext: GLOG), a world leading developer of technology for open document and print solutions, announces financial results for the second quarter and the first six months of the year ending 31 December 2008.

Comparisons for the second quarter of 2008 with the second quarter of the previous year include:

  • Sales of Euro 2.6 million this quarter (Euro 2.9 million at Q2 07 exchange rates) compared with Euro 4.4 million in Q2 2007;
  • Operating loss of Euro 0.3 million this quarter compared with an operating profit of Euro 1.4 million in Q2 2007;
  • Adjusted operating loss of Euro 0.2 million this quarter compared with an adjusted operating profit of Euro 0.8 million in Q2 2007;
  • Adjusted pre-tax loss of Euro 0.2 million this quarter (or a loss of Euro 0.02 per share) compared with an adjusted pre-tax profit of Euro 0.8 million in Q2 2007 (or a profit of Euro 0.08 per share);
  • Net loss of Euro 0.5 million this quarter (or a loss of Euro 0.05 per share) compared with a net profit of Euro 1.4 million in Q2 2007 (or a profit of Euro 0.14 per share); and
  • Adjusted net loss of Euro 0.5 million this quarter (or a loss of Euro 0.05 per share) compared with an adjusted net profit of Euro 1.1 million in Q2 07 (or a profit of Euro 0.10 per share).

Commenting on performance, Johan Volckaerts, Chairman, said: “These results are certainly disappointing. The background is that economic conditions, particularly in the United States, continue to be challenging. Industry consolidation in the graphic arts segment and exchange rate fluctuations between the US dollar and the Euro continue to affect us.  However, the main factor that has had a sharp impact on these results is the difference in revenue recognition between Q207 and Q208 resulting from the three contracts we signed in November 2006. In Q207 we recognised Euro 1.3 million from these contracts and in Q208 only Euro 0.2 million, hence a sequential variance of Euro 1.1 million for the quarter and of Euro 2.3 million for the first six months of 2008.

“However, it is obvious that new business has not materialised in the timeframe that we expected, and that this has been responsible for the declining trend in our revenues.  Under Gary Fry’s leadership, we plan to reverse this trend although we do not expect to achieve this within the next few quarters.  Nevertheless, the opportunities for closing new deals with potential digital print and electronic document customers still exist and our negotiations continue with major players.”

Second quarter 2008 performance
Sales for the second quarter 2008 amounted to Euro 2.6 million, compared with Euro 4.4 million in the second quarter 2007, or a decrease of 41.5% at current exchange rates. Approximately 67.3% of the Company’s sales were denominated in US dollars this quarter (at an average rate of USD 1.561 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 2007 (i.e. USD 1.349 for 1 Euro), sales would have amounted to approximately Euro 2.9 million, representing an decrease of 34.4% over those reported in Q2 2007 at constant exchange rates.

Total operating expenses amounted to Euro 2.7 million in Q2 2008 compared with Euro 2.8 million in the same period of 2007, the same as in Q1 2008. Included in second quarter 2008 operating expenses were non-recurring expenses, which amounted to a total of Euro 0.3 million, and related to costs incurred with regards to the replacement of Jim Freidah by Gary Fry as Chief Executive Officer which occurred in late June 2008.

The Company reported an operating loss of Euro 0.3 million this quarter (or 10.1% of Q2 2008 sales), compared with Euro 1.4 million in Q2 2007 (or 31.5% of Q2 2007 sales).

Adjusted operating loss (as defined in the accompanying table) was Euro 0.2 million for this quarter (or 8.9% of the quarter’s sales), compared with an adjusted operating profit of Euro 0.8 million in Q2 2007 (or 19.0% of that quarter’s sales).

Adjusted pre-tax loss (as defined in the accompanying table) was Euro 0.2 million for this quarter, compared with an adjusted pre-tax profit of Euro 0.8 million in Q2 2007. Accordingly adjusted pre-tax EPS was a loss of Euro 0.02 this quarter compared with a profit of Euro 0.08 in Q2 2007.

The Company reported a net loss of Euro 0.5 million this quarter (or Euro 0.05 per share), compared with a net profit of Euro 1.4 million in Q2 2007 (or a profit of Euro 0.14 per share).

Adjusted net loss (as defined in the accompanying table) was Euro 0.5 million for this quarter, compared with an adjusted net profit of Euro 1.1 million in Q2 2007. Accordingly, adjusted net EPS was a loss of Euro 0.05 this quarter, compared with a profit of Euro 0.10 in Q2 2007.

First six months performance
Sales for the first six months of 2008 amounted to Euro 5.6 million, compared with Euro 9.4 million for the same period of 2007, or a decrease of 40.3% at current exchange rates. Approximately 75.2% of the Company’s sales were denominated in US dollars in the first six months of 2008 (at an average rate of USD 1.527 for 1 Euro), and exchange rate fluctuations with the Euro continued to impact upon on the Company’s sales and results of operations. Had the sales made in the first six months of 2008 been converted at the average US dollar rate applicable in the same period of 2007 (i.e. USD 1.333 for 1 Euro), sales would have amounted to approximately Euro 6.3 million, representing a decrease of 32.7% over those reported for the first six months of 2007 at constant exchange rates.

Total operating expenses amounted to Euro 5.5 million for the first six months of 2008, compared with Euro 5.8 million for the same period of 2007. Included in first six months 2008 operating expenses were non-recurring expenses amounting to a total of Euro 0.5 million which related to costs incurred with regards to the change in the Chief Executive Officer position which occurred in late June 2008, and also with respect of the redundancy programme which was implemented in January 2008.

The Company reported an operating loss of Euro 0.1 million for the first six months of 2008 (or 2.1% of the period’s sales), compared with an operating profit of Euro 3.3 million for the same period of 2007 (or 34.7% of that period’s sales).

The Company reported a nominal adjusted operating loss (as defined in the accompanying table) for the first six months of 2008 representing 0.6% of the period’s sales, compared with an adjusted operating profit of Euro 2.1 million for the same period of 2007 (or 22.2% of that period’s sales).

Adjusted pre-tax profit (as defined in the accompanying table) was Euro 0.2 million for the first six months of 2008, compared with Euro 2.1 million for the same period of 2007, or a decrease of 90.7%. Accordingly adjusted pre-tax EPS was Euro 0.02 in the first six months of 2008, compared with Euro 0.20 for the same period of 2007.

The Company reported a net loss of Euro 0.3 million for the first six months of 2008 (or a loss of Euro 0.03 per share), compared with a net profit of Euro 2.8 million for the same period of 2007 (or a profit of Euro 0.27 per share).

The Company reported an adjusted net loss (defined in the accompanying table) of Euro 0.2 million for the first six months of 2008, compared with an adjusted net profit of Euro 2.0 million for the same period of 2007. Accordingly, adjusted net EPS was a loss of Euro 0.02 per share for the first six months of 2008, compared with a profit of Euro 0.20 per share for the same period of 2007.

2008 outlook
Johan Volckaerts continued: "There are no indications that the second half of 2008 will be better than the first half, both in terms of revenues and operating profit. In view of the current volatility of the market it is not possible to provide more precise guidance.”
 
Second quarter 2008 conference call details
Global Graphics will hold a conference call today at 09.30 CET about its results for the second quarter and the first six months of the year ending 31 December 2008.
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 +44 (0)20 7031 4064 (freephone number UK only: 0800 358 1860), access code 803010.

Third quarter 2008 results announcement
Global Graphics expects to announce its financial results for the quarter and the nine-month period ending 30 September 2008 on Friday 17 October 2008 before market opening.

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 electronic document applications. The Company supplies its RIPs, electronic 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 them to reflect events or circumstances after the date of this release, nor to reflect new information nor the occurrence of unanticipated events

Contact

CFO Alain Pronost/Global Graphics

+33 6 62 60 56 51

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