28.04.2010 | Austria

S&T: Restructuring in 2009 Also Burdened Q1 2010 Results

  • First-quarter sales in the Infrastructure Solutions segment remained stable compared to the previous year, but total Q1 2010 sales were down 14.6% to EUR 82.7 million. In particular, the Business Solutions segment continued to suffer from bad capacity utilization throughout the S&T Group.
  • As expected, problematic projects in Germany, Switzerland and Romania in 2009 also negatively impacted the performance of the S&T Group in Q1 2010.
  • The Management Board expects a profitable business development in the second half of 2010 in the light of the cost reduction program implemented in the past financial year, the restructuring efforts in German-speaking Europe, and strategic investments in the company’s sales capabilities.

Whereas the S&T Group generated a positive operating result in most of its markets during Q1 2010, the consequences of the previously-announced problematic projects in German-speaking Europe and Romania as well as significantly reduced sales in the Business Solutions segment compared to the previous year led to an overall negative EBIT of EUR -5.9 million in Q1 2010 (Q1 2009: EUR -1.2 million). Especially the existing order situation in Austria, Germany, Switzerland, Bulgaria, Slovakia and Ukraine resulted in a decline in total sales to EUR 82.7 million (Q1 2009: EUR 96.8 million), which was however largely compensated for in earnings by the implemented cost-saving measures.

“As in the previous quarter the unsatisfactory business results can be attributed to three main factors“, says S&T CEO Christian Rosner. “First, in many countries and in the consulting business, the economic situation in the IT market remains difficult. Even if demand is slowly rising again, the IT sector is still suffering from the dramatic collapse in sales during the last year and is thus extremely far from matching the level achieved in 2008. Second, we are continuing to repair the damage done and deal with the repercussions of the above-mentioned projects from 2009. However, these countermeasures are limited and will be concluded in the foreseeable future, and some in fact have already been fully implemented. Third, following the revenue decline in the Business Solutions segment, we have made considerable sales and marketing investments. The sales drive we initiated will also have a positive effect on earnings starting in the second half of the year”.

Heterogeneous development within the business areas

Total sales in the Infrastructure Solutions (IS) segment were also satisfactory in Q1 2010 on the basis of long-term service and outsourcing contracts. The Infrastructure Solutions segment is continuing to determinedly pursue its positioning as the leading provider of managed service and outsourcing. In particular, its focus is on the further development of the “virtual data center” and “cloud computing” portfolio.

Sales in the Business Solutions segment were down 38 percent in Q1 2010. This is due to the ongoing low level of customer investments, along with the fact that considerable resources are tied up in rectifying and completing some projects. The Management Board of the S&T Group expects a significant improvement in sales and earnings in this segment starting in Q3 2010 based on the strengthening of the sales organization, especially in the German-speaking regions of Europe, an increasing order volume and conclusion of the difficult projects.

Outlook for 2010

According to the Management Board, the structural measures have been concluded for the most part. The current work force of close to 2600 employees as well as the organizational structure and strategic orientation will remain unchanged. “We will return to growth and sustainable profitability in the second half of 2010. With the exception of the above-mentioned but unfortunately very complicated exceptional cases, customer satisfaction and project quality but also margins were at a high level. S&T will profit from the slow recovery of the IT market and we are convinced that CEE will be a growth driver starting in 2011. Our goal in the future remains to grow above the market average”, CEO Christian Rosner says in summing up the perspectives for 2010.

The interim report on the business results of the S&T Group for the first quarter of 2010 will be published on May 17. See