BRAIN FORCE HOLDING AG (Vienna Stock Exchange: BFC, Reuters: BFC.VI), a leading IT services provider with business operations in Austria, Germany, Switzerland, Italy, the Netherlands, Czech Republic and Slovakia, announced its financial figures for the first quarter of the 2009/10 financial year (October 1 to December 31, 2009) today. The first quarter continued to be negatively impacted by a difficult economic environment, but was also shaped by two strategically important transactions: the sale of the Professional Services business in Austria, and the creation of a joint venture with an investor to finance SolveDirect’s expansion in the USA.
Positive operating results, but below record level of 2008
In the period October to December 2009, the BRAIN FORCE Group generated total revenues of € 21.03 million, down 24% from the record number one year earlier. Operating EBITDA (before non-recurring income) was halved to € 1.11 million, and operating EBIT (before non-recurring income) fell from € 1.29 to 0.20 million, but remained positive. “The earnings decline is primarily due to the absence of relevant license sales, which usually made an important contribution to this quarterly earnings in the past”, says Michael Hofer, Chief Executive Officer of BRAIN FORCE HOLDING AG.
High Group EBIT based on book gain arising from sale proceeds
On a positive note, the sale of the Professional Services business in Austria for € 3.80 million in cash resulted in a non-recurring book gain of € 2.4 million, serving as the basis for BRAIN FORCE to report a high Group EBITDA of € 3.52 million (prior year: € 2.25 million) in the first quarter of 2009/10 and an EBIT of € 2.61 million (prior year: € 1.29 million). Due to the book gain arising from the sale, the total result for the period was clearly positive at € 2.29 million. The equity ratio was 40% as at December 31, 2009 (September 30, 2009: 35%), whereas net debt rose from € 5.65 to 7.80 million. “It must be kept in mind that the proceeds from this divestment are being paid in two tranches on January 5 and March 31, 2010, and are reported as an outstanding receivable in the quarterly financial statements”, states Chief Financial Officer Thomas Melzer, explaining the balance sheet developments.
Positive EBIT achieved by all regions except North Europe
Revenues in Germany were down by 29% to € 9.57 million and EBIT declined 63% to € 0.37 million, primarily as a result of the expiration of a large project at the Frankfurt branch which could not be compensated by other incoming orders. In Central East Europe, revenues fell by 9% to € 3.71 million and EBIT by 57% to € 0.25 million. Service revenues in this region remained relatively stable, whereas weaker license sales of SolveDirect were the main reason for the earnings downturn. The revenues generated by the South West Europe region declined by 23% to € 5.71 million, and EBIT at € 0.23 million was down 47% from the prior year. Also in this case, the lower proceeds from license sales in the ERP business had a disproportionately negative impact on earnings. Business developed unfavorably in the North Europe region, where a large customer from the public sector considerably reduced project orders, and expected license sales failed to materialize. These developments led to a revenue decrease of 21% to € 2.04 million, and a negative EBIT of € -0.12 million in North Europe.
Persistent cost cutting measures begin to pay off
The restructuring measures carried out in the last year, particularly the personnel adjustments in Italy and the consistent cost savings measures, have had a positive impact. As a result, BRAIN FORCE succeeded in largely compensating for the considerable revenue decline caused by the economic crisis and generating a positive quarterly result in the Group. “However, we will not rest on our laurels and be content with this interim result. On the one hand, our performance is significantly below the prior year’s record earnings, at a time when we were still relatively untouched by the negative effects of the economic crisis. On the other hand, a lot of tough work lies ahead if we want to achieve our medium-term target of a 5% EBIT margin”, CFO Thomas Melzer emphasizes.
Lower revenue expected in 2009/10
“The outlook for the 2009/10 financial year must take several factors into account: The sale of the Professional Services business in Austria will result in the loss of the related revenue and earnings contributions. In addition, the stake in SolveDirect to be acquired by a financial investor will enable strong revenue growth in the USA, but this company will only be consolidated at equity as of the second quarter of the year and the expansion will result in negative medium-term contributions to the financial result of BRAIN FORCE. Combined with the prolonged economic crisis, total revenues of the BRAIN FORCE Group are expected to drop to about € 70 million”, Michael Hofer adds.
Positive EBIT targeted for 2009/10
The current developments at the subsidiaries in Frankfurt and the Netherlands point to the fact that further restructuring will be required, which will be determinedly implemented without delay. In Frankfurt, the significant reduction in contract orders by a globally operating airline could not be compensated by the expected additional business, which will require a reduction in personnel expenses based on short-time working or dismissing employees. In the Netherlands, the absence of license sales negatively impacts earnings, also necessitating a downward adjustment in the number of employees. “Nevertheless, our goal is to conclude the current financial year with a positive EBIT, which will include restructuring costs of up to € 1.4 million and a book gain from the sale of the Professional Services business in Austria of € 2.4 million”, CEO Michael Hofer concludes.
|Earnings data 1)||10-12/2009||10-12/2008||Chg.%|
|Operating EBITDA 2)||€ million||1.11||2.25||-51|
|Operating EBIT 2)||€ million||0.20||1.29||-84|
|Profit before tax||€ million||2.43||0.50||>100|
|Profit after tax||€ million||2.37||-3.06||>100|
|Balance sheet data||31.12.2009||30.09.2009||Chg.%|
|Net debt||€ million||7.80||5.65||+38|
|Equity ratio||in %||40||35||–|
3) Average number of employees during the period