Francotyp-Postalia Holding AG generates revenues of €33.9 million in the third quarter of 2007
- Strong growth in Mailstream business
- Mailroom business develops below expectations
- EBITDA of €5.9 million
- General market situation requires revision to outlook
Birkenwerder, November 15, 2007, Francotyp-Postalia Holding AG, a leading, globally operating manufacturer of franking and inserting machines and a service provider for the Mailstream market, recorded revenues of €33.9 million in the third quarter of 2007, as opposed to €35.7 million in the same quarter the year before. Revenues in the company's traditional Mailroom business (franking and inserting) totaled €31.7 million, revenues in the young, high-growth Mailstream business line totaled €2.2 million. For the first nine months of the year, Francotyp-Postalia Holding AG increased its revenues to €108.9 million, as opposed to €107.3 million the year before.
Mailroom business: Growth in rentals
The industry-wide weakening of the U.S. market in recent months also affected Francotyp-Postalia's Mailroom business. Nevertheless, the company increased its revenues in North America by 4.7% during the first nine months of the current fiscal year, from US$36.0 million to US$37.7 million. In Europe (excluding Germany), revenues declined moderately by 2.2% from €35.8 million to €35.0 million. As expected, revenues in Germany for the first nine months stood at a low level of €35.5 million, as opposed to €37.9 million the year before due to the special effects of decertification and new postage tables in 2006. However Francotyp-Postalia was able to increase its revenues on the German market by one percent during the third quarter of 2007.
The rental business developed on a highly positive note in the company's major markets. During the first nine months of the current fiscal year, Francotyp-Postalia rented approximately 28% more machines than the year before. The number of rental contracts rose by 24% in the United States, and by a strong 78% in the United Kingdom, the most important European growth market. While this success will result in a lower revenue contribution in the near-term compared to direct sales , over the long term it will increase the company's recurring revenues stream.
Mailstream business: Strong pace of growth sustained
In its Mailstream business, which was established in late 2006, Francotyp-Postalia Holding AG increased revenues by 62.2% during the first nine months of the current fiscal year to €6.0 million. Mailstream business includes consolidating and outsourcing outbound mail, as well as the corresponding software. In the third quarter of 2007, freesort, which is active in consolidation business, opened a further branch office in Hanover and acquired Consol-D, a strong regional player in the Stuttgart area.
EBITDA impacted by weak U.S. dollar
In the third quarter of 2007, earnings before interest, taxes, depreciation and amortization (EBITDA) totaled €5.9 million, as opposed to €7.1 million for the corresponding period the year before. During the first nine months of 2007, Francotyp-Postalia thus recorded an EBITDA of €21.7 million, which represents a consolidated EBITDA margin of approximately 20%, compared to €25.1 million for the same period the previous year.
In addition to weaker revenues in Mailroom business and the start-up costs in Mailstream business, the company's profitability was in particular impacted by the declining dollar. Overall, Francotyp-Postalia anticipates a negative effect on profitability of around €2 million for the current fiscal year as a result of the weak U.S. dollar.
Outlook: General market situation necessitates revision
Given the results of the third quarter 2007 and assuming a continued weakness of the dollar, Francotyp-Postalia is revising its forecasts for the full 2007 fiscal year. Revenues in the Mailroom business are expected to grow by somewhat less than 5% and the adjusted EBITDA is anticipated to fall somewhat short of the previous year's level, both before currency-translation effects,. The company continues to expect double-digit revenue growth in its Mailstream business.
Following a weaker-than-anticipated course of business in the third quarter of 2007, the increasing introduction of centormail in the United States, in particular, gives rise to expectations for a stronger fourth quarter in the Mailroom business. There should also be a rise in centormail unit sales in the United Kingdom, as this product was brought to market at the end of the third quarter.
In addition, the first measures under the "25 plus" program, which was announced in connection with the presentation of the Semiannual Report, are beginning to come to bear. In Canada, for example, productivity is being optimized through a program aimed at greater efficiency. Another major element of this program is to streamline sales and marketing operations in Germany. In the United States, on the other hand, the aim is to strengthen the sales and marketing network in order to be able to optimally utilize the market potential in the B segment that will open up in 2008 as a result of Phase IV of the decertification program.
Detailed comments on the first six months of the year are available at our website:
http://www.francotyp.com/en/ir/FPH_Q3_2007_e.pdf
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