PARIS, Oct. 24, 2001 (PRIMEZONE) -- BVRP Sortware (Paris Stock Exchange:BVRP).
The economic slowdown affecting the sector as a whole hit BVRP Software during the second half-year, resulting in annual consolidated turnover of E35.7 million, up by 8.7% (as opposed to +44.2% at the end of the first half year), and operating income of E0.9 million, or 2.5% of turnover, as opposed to 7.7% at the end of the first half year.
Group management responded quickly to the downturn by initiating a complete restructuring operation. This resulted in the sale of the multimedia business, a streamlining of the product range, the integration of AB Soft, downsizing in all the group's subsidiaries and a redefinition of the organization of the different businesses and their management. The goal of this reorganization is to guarantee a return to profitable growth as soon as 2002.
Key Figures
Consolidated Figures 2000/2001 1999/2000 Change
at 31/07/01
in millions
of Euros
Net turnover 35.7 32.8 +8.7 %
Operating income 0.9 3.1 -72.1 %
Current income 0.5 1.9 -75.6 %
Net income before
goodwill amortization -1.8 2.5 NS
Net income -
group share -1.8 2.4 NS
Earnings per share
(in Euros) -0.51 0.74 NS
Net Equity -
group share 13.9 15.6 -11.0 %
Net cash +3.2 +3.4 -5.2 %
Results Affected by the Economic Context
Annual turnover rose by 8.7% to stand at E35.7 million. Not including the effects of shedding the multimedia business and the consolidation of AB Soft as of June 1, 2001, turnover rose by 15.9% over last year.
In spite of consistent sales in the USA, the general economic slowdown started affecting BVRP Software, in Europe as of the third quarter, with a significant worsening in the fourth quarter.
OEM sales were particularly hit by the drop in business in the modem and PC manufacturing fields. Sales for the fourth quarter represent only 50% of sales in the second quarter. In a tough economic environment, new products in particular have suffered from a slower than anticipated start. However, growth in software business stands at 26.7% for the year as a whole.
The Services business has also experienced a downturn during the fourth quarter due to the drop in activity of some historical customers. This is only partly compensated for by the increased business from several new customers and the ongoing strong growth of TechCity. Growth in business stands at 10.7% for the year as a whole.
This poor economic climate combined with strong pressure on software prices (gross margin down 4 points to 87.1% as opposed to 91.1% in 2000), and wages and salaries which have grown faster than turnover (55.8% of turnover as opposed to 52.4% in the previous year), has pulled operating income down 72.1% to stand at E0.9 million (2.4% of turnover).
Once the heavy restructuring costs, committed as of July 31, and the shedding of the multimedia business are recorded, i.e. total extraordinary costs of E2.3 million, net income (group share) will report a loss of E1.8 million.
This is the first time that BVRP Group, created in 1984 and listed on the Paris Stock Exchange since 1996, reports a diminishing operating income and a net loss. For management, this exceptional turnaround is the direct consequence of the poor economic context. However, the large scale restructuring initiated since this summer will give such events one-off status in the company's history.
Proactive and Completed Restructuring
As soon as the effects of the economic slowdown started making themselves felt, Group management initiated the necessary measures to ensure a rapid return to high margins. Outside of the shedding of the multimedia business, which was not profitable and did not have any significant synergies with the rest of the group, a new organization of the different entities and a redefinition of the product range by sales channel was set up. This revolves around recent acquisitions (Seattle Lab and Vicomsoft in 2000, and AB Soft in 2001) and the marketing of a consistent product range.
This reorganization resulted in downsizing on a world scale (about 15% of personnel) and the halt of several products considered to be unprofitable.
Standing at E2.3 million, the first part of the costs for this extraordinary restructuring were booked in the 2000/2001 accounts. This was the amount committed at the end of July. All the restructuring charges will then be accounted for before December 31, 2001, the new accounts closing date. For the period, exceptionally extending over 17 months, the forecast result at December 31, is a net loss of between E4 and E4.5 million, a loss which takes into account the extraordinary restructuring charges for a total of E4 million.
A Particularly Healthy Financial Situation
BVRP Software's cash situation remains stable at E3.2 million as of July 31, 2001. It was reinforced in August by the issuance of convertible bonds to the Societe Generale for E5 million in compliance with the authorization given by the shareholders' meeting of July 2001. This raising of funds enabled financing of the acquisition of Guildsoft amongst others.
On the other hand, group management decided to postpone the Equity Line project until 2002 following the drop in stock market value making it much less interesting and too dilutive. The postponement of this project, aimed at financing future external growth operations, will not impact the group financials. Moreover, the group has unused committed credit lines standing at E2.5 million.
Outlook for 2002
Thanks to its wide experience, BVRP Software group management has undertaken all the necessary measures to ensure a return to profits in 2002, regardless of the economic climate.
The reorganization of the group's structures will enable complete development of growth axes in its three main countries, France, the United States and Great Britain :
-- A innovating range of products with Windows Pocket and Windows XP;
-- A stronger distribution network in Europe with AB Soft in France
and Guildsoft in the UK;
-- Strong OEM presence in the USA;
-- A partnership with Microsoft concerning the new versions of
Windows; and
-- The current internationalization of the Services business in the
UK and USA.
However, a rapid return to high profits depends largely on the general economic context in Europe and the United States. This is very difficult to gauge at present. Management remains cautious and considers that turnover growth will be between 17% (turnover E41.9 million) and 34% (turnover E48 million) whether economic slowdown continues throughout 2002 or whether economic growth has returned by the end of the first half-year. Net income will be positive in all scenarios, with a reasonable goal of 4% (E2 million) if turnover is in the higher forecast bracket of E48 million.