28.10.2010 | Austria

S&T: Third Quarter 2010 Results

Massive restructuring program – Cost reductions and focus on large customers – Quarterly results burdened by restructuring costs
The massive restructuring program for the S&T Group initiated in the summer by the new CEO Thomas Streimelweger has achieved initial success. Q3 2010 was burdened by restructuring costs amounting to EUR 1.4 million and earnings continued to be negative. However, the third quarter 2010 operating loss (EBIT) adjusted for restructuring expenditures could be reduced to EUR -3.3 million, an improvement from the level of EUR -3.5 million in Q2 2010 and EUR -5.9 million in Q1 2010. The S&T Group is aiming to return to operational profitability again in Q4 2010 following four quarters with negative earnings.

While all major S&T subsidiaries in Central and Eastern Europe are operating profitably, the restructuring efforts, which in the meantime have been largely concluded, concentrated on Austria, Germany and Switzerland. In addition to cutting the staff cost base by about EUR 5.5 million from 2011 onwards and building up a central procurement department, a cost reduction and productivity enhancement program was implemented. S&T´s strategy on the market is focused on large customers and large projects.

“When I assumed the position as CEO, my top priority was to achieve an operational turnaround. A key component is shifting our emphasis away from smaller scale business to concentrate on large customers and projects. The acquisition of important major customers in the third quarter already demonstrated that this strategy is taking effect “, says Thomas Streimelweger, founder and CEO of S&T. “We succeeded in winning important, long-term SAP projects in Germany and Poland. We also increased revenue in the Infrastructure Solutions segment, and the Business Solutions segment shall be operating close to full capacity in Q4 2010 and Q1 2011. A quick return to operational profitability, possibly already in the fourth quarter, is the top of the agenda. We are also striving to strengthen our equity base. After the proposed project of a capital increase by grosso Holding did not materialize, talks are being held with several other potential investors. Talks on refinancing our long-term financial liabilities are continuing in a constructive atmosphere. An application for a guarantee according to the ULSG act will be submitted to OeKB (Österreichische Kontrollbank AG)”, Streimelweger adds.

Overall performance still unsatisfactory

Group revenue in the third quarter of 2010 amounted to EUR 90.8 million (Q3 2009: EUR 92.1 million). EBIT was unsatisfactory at EUR – 4.6 million (Q3 2009: EUR 0.1 million), and EBITDA of the S&T Group totaled EUR -3.4 million (Q3 2009: EUR 1.6 million). The operating loss (EBIT) adjusted for restructuring costs could be reduced to EUR -3.3 million. Total revenue of the S&T Group in the first nine months of 2010 amounted to EUR 264.4 million, a decrease of 6.6% from the prior-year period (EUR 283.1 million).

Revenue of the Infrastructure Solutions segment rose to EUR 71.8 million (Q3 2009: EUR 66.2 million). The revenue of the Business Solutions segment at EUR 19.0 million decreased (Q3 2009: EUR 25.9 million) as a consequence of the structural adjustment measures and efforts to rectify and finalize problem projects from the previous year.

Cost cutting and new personnel standards

The number of employees (full-time equivalents) decreased from 2,581 people as of December 31, 2009 to 2,287 at September 30, 2010 (-294). As a result, staff costs in the first three quarters were down 7.3% to EUR 81.1 million. Q3 staff costs amounted to EUR 26.1 million (Q3 2009: EUR 26.7 million). In the meantime, higher quality standards have been defined for future personnel decisions, particularly for hiring for management positions. 50 new key account managers, sales specialists and consultants will be hired in Austria, Germany and Switzerland. New managing directors for the German, Japanese and Bulgarian subsidiaries are in the search process.

Transnational market presence for trans-regional rollouts

The new verticalization strategy is designed to improve the customer service significantly. The aim is to win attractive new projects on the basis of a concentrated sector expertise and a consistent, customer-focused organization. Within an initial pilot project for the trade and retail sector, a team from different countries and product-lines will utilize the entire product and service offering of the S&T Group aiming at this large target market. Following the successful completion of this project, additional sectoral teams will be established in line with this model.

The verticalization strategy is not the only initiative aiming to enhance productivity. A group-wide outsourcing strategy, an International Delivery Center and a Shared Services Center for administrative services will raise efficiency, upgrade customer service and enable personnel savings.

Attractive new customers

S&T contracted several strategic projects in the third quarter of 2010 and won new, important large customers. S&T was selected to implement a cross-border SAP project for five European subsidiaries of ElectronicPartner (D). S&T is designing and servicing a comprehensive ERP system for the Polish gas network operator GAZ-SYSTEM, and developed a solution to optimize human resources management processes on behalf of Škoda. Datagroup, the leading telecommunications company in the Ukraine, ordered an information system from S&T for EUR 1.5 million. Knorr-Bremse chose S&T as its outsourcing partner to handle its IT service desk inquiries and will successively expand the project to selected countries.

“The concluded projects in the Business Solutions segment and the hiring of new, highly-qualified employees will enable S&T to build up a profitable project portfolio“, concludes CEO Thomas Streimelweger. “In the Infrastructure Solutions segment, we should gain profit in the fourth quarter from the ongoing trend towards increased levels of IT investments in the CEE region”.

Key Figures

  Q3 2010   Q3 2009      Q1-3 2010    Q1-3 2009    
Revenue in EUR millions   90.8   92.1   -1.5%   264.4   283.1   -6.6  
EBIT in EUR millions   -4.6   0.1   -   -14.0   -1.3    - 
Employees (FTE)   2,287   2,684   -14.8%   -   -   -  

For further information please contact:
Thomas Streimelweger
Cell: +43 664 340 26 78