10.02.2010 | Austria

S&T Concludes 2009 with a Good Q4

Despite precautionary provisions S&T achieved a positive EBIT of 1.6 million euros. Preliminary results of the 2009 business year and Q4 2009 for S&T AG
The most difficult year on record for the worldwide IT industry, according to Gartner, was also S&T’s very first year “in reverse gear” following a long lasting period of growth. The 2009 financial year for S&T was characterized by sales of 412 million euros (2008: 502 million euros*, - 18%). Moreover, the business results were burdened by the devaluations of Central and Eastern European currencies of importance to S&T. At the same time, 2009 also featured trend-setting measures initiated by S&T’s management. In this regard, the cost basis for 2010 was considerably optimized, the new organization was rolled out and risks were minimized. Despite the restructuring costs and the difficult market environment, S&T managed to achieve a positive EBIT of 0.3 million euros in the 2009 financial year. Initial successes in Q3 and a significant improvement in Q4 earnings affirm a positive development in 2010.

Even if the Management Board of S&T expected a market-related decline in sales before the beginning of 2009, the first half-year 2009 already showed that S&T was particularly hard hit by the market development due to its focus on particular sectors (e.g. automotive and machine industry) and its geographical presence in CEE. Budget cuts and IT project delays by customers negatively impacted consulting services. This unfavorable development was largely compensated by group-wide cost reductions, without correspondingly slashing service quality or expertise however. The infrastructure service and outsourcing businesses have remained stable to a very large extent und achieved good profitability.

Against this backdrop, S&T generated preliminary sales of 412 million euros in 2009 and a positive EBIT of 0.3 million euros. These results basically correspond to the latest company outlook. “Despite the market influences more than half of our sales decline can be attributed to the many risky projects we did not consider offering, and to the divestments in China, Russia and Turkey of course”, says Christian Rosner, CEO of S&T AG, commenting on the business development. S&T is maintaining its presence on the Russian and Chinese markets based on strategic partnerships and minority interest.

Moving ahead with the long-term business strategy and a sales offensive

On balance, the year 2009 clearly demonstrated the success of S&T’s strategic orientation with its persistent focus on promoting its service business. Especially the long-term agreements in the fields of managed services and outsourcing contributed to the company’s stability. These service revenues once again accounted for about one-half of the total revenue.

Margins in new customer business remained lower than expected, due to strong cost pressure exerted by customers. S&T is moving to counteract this with an increasingly offensive sales strategy in 2010, and already began in Q3 to expand its sales efforts in all countries and business units. Accordingly, several projects could be realized in Q4, particularly in the Infrastructure Solutions (IS) segment. S&T will also devote its full attention towards strengthening its existing customer business and acquiring new customers in the Business Solutions (BS) area, driven by the appointment of Peter Trawnicek to the Management Board, who assumed responsibility for this segment effective February 1, 2010.

Q4 2009 business development

Only few restructuring measures had to be taken in Q4 to adjust operations to market conditions, most notably in Japan, where two branches were closed and the number of employees was reduced slightly below 100 people (2008: 131). The comparatively strong fourth quarter in the IT services sector was also profitable for S&T in 2009. The S&T Group achieved total sales of 129 million euros (Q4 2008: 149 million euros*), generating an EBIT of 1,6 million euros (Q4 2008: 5.5 million euros*). December 31, 2009 S&T Group employed a staff of 2581*.

Summary and outlook

Despite the downturn in 2009, S&T succeeded in expanding its offering in the outsourcing and industry solutions fields and in further intensifying its long-term strategic orientation. The company considers itself well-positioned for 2010, based on a significantly improved cost structure and expanded sales and marketing activities. “We are cautiously optimistic about the order situation and the IT market in our regions, although the predictability of the industry is still difficult”, says S&T CEO Christian Rosner. “But even in an ongoing volatile environment, our competence and commitment will enable us to generate added value on behalf of our customers in line with our slogan - we create values”, he concludes.

*) Note:
All figures contained in this announcement represent preliminary and unaudited figures. Due to the closing of the subsidiary in Turkey, the conversion of the company’s business operations in Russia into a cooperation agreement with a minority shareholding, and the ongoing sale of the subsidiary in China, the previous activities in these markets will be reported as discontinued operations in accordance with the stipulations of IFRS 5. The comparable figures for 2008 are correspondingly adapted.
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