Bull revises its objectives for 2006
Paris,
June
13, 2006 -
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Net reduction in prospects for the company's Italian subsidiary expected to result in operating loss of €19 million for this subsidiary, with a commensurate impact on Group EBIT1 .
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Slower than anticipated growth in the open server market, with a negative impact of around €6 million on the Group's EBIT.
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As a result, Bull is anticipating for the 2006 financial year similar revenues compared to 2005, rather than growth of 4% to 4.5%, as well as total EBIT of between €13 and €18 million compared with the €40 to €45 million initially anticipated.
Italian subsidiary penalized by climate of uncertainty
As we indicated in February this year, the worsening situation in the Italian economy means that we will not be able to achieve the objectives originally set out for our Italian subsidiary. Most notably, the period of indecision around the general election affected the public sector market more than we had expected, and has generated considerable difficulties affecting the whole of the IT market in Italy. For Bull, this should translate into a 30% to 50% fall in orders in the first six months of 2006.
The adjustment measures taken in 2005 were further reinforced in April 2006, although they could not fully compensate for the impact of the deterioration of this business. As a result, an operating loss of €19 million for our subsidiary is anticipated for the 2006 financial year as a whole, rather than the stable situation that had been expected, with a commensurate impact on Group EBIT for 2006.
Strong competitive pressure in the open server marketplace
This marketplace has proved tighter than expected since the beginning of the year, in particular as a result of the increased pressure on sales prices. The fact that a number of significant opportunities in France have failed to materialize has accentuated the gap between our initial expectations and actual results.
The combination of these unfavorable factors is likely to have a negative impact of some €6 million on Group EBIT in 2006.
Revision of objectives for 2006
Taking note of the various elements as described above, Bull is now expecting stable revenues for the 2006 financial year compared with 2005, and consolidated EBIT of between €13 and €18 million.
Excluding the impact of Italy, revenues for 2006 are expected to grow by 1% to 2%, with EBIT of between €32 and €37 million.
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2006
Initial objective
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2006
Revised objective
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2006
Revised objective (excluding Italy)
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Revenue growth
(year-on-year)
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+3.0%
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+4.0 to 4.5%
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Stable
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+1.0% to 2.0%
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EBIT
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€38 million
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€40 to €45 million
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€13 to
€18 million
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€32 to
€37 million
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(based on IFRS standards, all figures are unaudited with the exception of data for 2005)
Specific action plan
In order to achieve the objectives set out in Bull's Horizon 2008 strategic plan - in particular, an average organic growth rate of 4% to 6% and an operating margin of at least 5% in 2008 - the Group has started defining a targeted plan of action, the implementation of which has already begun in Italy, with the following main objectives:
- Continued cost reduction
- Accelerating the repositioning of its offerings in line with its strategic focus
- Refocusing of R&D efforts
- Changing the organization in Italy and diversifying the business with greater emphasis on the private sector.
Services business on target for a satisfactory full-year performance
With the European and Latin American markets still dynamic, revenues from the Group's Services business are expected to grow by some 10% during 2006. Success in the telecoms market also continues, and this is being supported by the creation of a Central European competence center following the acquisition of AMG.net in March 2006.
As a result of the measures announced in February, the fall in revenues from the Maintenance business should be stabilized at a level of between -10% and -12% for the financial year as a whole.
Maintaining a clear strategic direction
The competitive difficulties that the Group is encountering in no way affect the strategic vision set out in February 2006, as the dynamism of the Services business demonstrates.
A healthy financial position
The Group's financial position remains extremely healthy, with a net cash position that stood at €232 million at the end of December 2005.
It should also be noted that the Group has at its disposal indefinite tax loss carry forwards to the value of some €1.5 billion, and would use this fiscal leverage within the framework of its external growth program.
1Earnings before interest and tax and other gains or losses
Investor relations
Patrick Massoni - Tel: +33 (0)1 30 80 32 36 - patrick.massoni@bull.net
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