Francotyp-Postalia announces preliminary 2007 results and guidance for 2008

Birkenwerder, Germany, February 26, 2008

• Revenues advance moderately during past fiscal year to €144.9 million
• EBITDA reaches €26.2 million as opposed to €32.0 million the year before
• Francotyp-Postalia envisions revenues of between €150 and €160 million for 2008
• Company planning on EBITDA of between €22 and €26 million for 2008

Birkenwerder, Germany, February 26, 2008. According to preliminary results, Francotyp-Postalia Holding AG, one of the world’s leading manufacturers of franking and inserting machines and a service provider for the mailstream market, recorded revenues of €36.0 million in a notedly weaker-than-anticipated fourth quarter of 2007, as opposed to €35.8 million for the comparable period the year before. The company’s revenues also rose moderately by 1.4 % to €144.9 million for the full 2007 fiscal year (2006: €142.9 million).
 
In fiscal 2007, Francotyp-Postalia succeeded in significantly boosting revenues in its high-growth mailstream business (consolidating and outsourcing outgoing mail, as well as hybrid mail solutions) by 39.3% to €8.5 million (2006: €6.1 million). Delays in the sale of the hybrid mail software prevented an even stronger rise. In its traditional mailroom business (franking and inserting), on the other hand, revenues for fiscal 2007 stood at €136.4 million, as opposed to €141.5 million the year before. In addition to the foreign exchange effects brought on by the weak U.S. dollar, this was also attributable to the unsatisfactory course of mailroom business, and in particular to the cool-down of the economy in the United States.
 
Profitability impacted by weaker U.S. dollar
Francotyp-Postalia posted preliminary earnings before interest, taxes, depreciation and amortization (EBITDA) of €26.2 million for the full 2007 fiscal year, as opposed to €32.0 million in 2006. In this regards, alone the weak U.S. dollar, had an impact of €1.5 million on the company’s operating profit. This was in addition to planned mailstream business start-up losses in the amount of €1.3 million. Profitability was also negatively affected by the weaker-than-anticipated course of the mailroom business during the fourth quarter of 2007, in particular on the U.S. and German markets: EBITDA for the fourth quarter of 2007 amounted to €4.2 million, as opposed to €7.0 million for the comparable quarter the year before. Adjusted for currency translation effects, the EBITDA margin for the full fiscal year for the mailroom business continues to stand at 20%.
 
Conservative forecast for the full 2008 fiscal year
Following the need to void its forecast in 2007, Francotyp-Postalia is applying conservative planning for the 2008 fiscal year: The company expects revenues of between €150 and €160 million and an EBITDA of between €22 and €26 million. This conservative planning by the company under the leadership of its new Chief Executive Officer Dr. Heinz-Dieter Sluma, who has been in office since January 1, 2008, takes into account both insecurities relating to the further course of the economy, in particular in the United States, and to the development of exchange rates, as well as the uncertainty as to whether the impending decertification program in the United States will lead to correspondingly positive revenue and profitability contributions in the mailroom business. The company expects the mailstream business to again remain the company’s growth driver in 2008 with a double-digit rise in revenues, enabling this business to provide its first positive contribution to profitability after reaching the breakeven point in January 2008.
 
Following his first 100 days in office, the company’s new Chief Executive Officer Dr. Sluma will comment in greater detail on the initial cornerstones of his strategy in connection with the presentation of the 2007 Annual Report on April 24, 2008. He already sees considerable opportunities for efficiency gains within the company to strengthen its mailroom business. Moreover, further potential for sales growth in its mailstream business will be achived through the realization of synergies between the mailstream and mailroom businesses as well as through a greater sales and marketing focus throughout the entire company. His initial conclusion: “With its traditionally strong market position, its competence throughout the entire mailstream process and its innovative products and services, Francotyp-Postalia possesses significant potential for the coming years.”
 
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About Francotyp-Postalia Holding AG

Francotyp-Postalia Holding AG can look back on a corporate history of over 80 years. The focus of business activities is developing, producing and selling franking machines and selling inserting machines. These activities in the mailroom business generate a high level of recurring income, which makes up more than 60 percent of group revenues. The engine of this revenues stability is the 248,000 electronic franking machines installed for customers which generate after-sales business. In Germany Francotyp-Postalia is the market leader in the franking machine business with a current market share of 45 percent. To the end of 2006, the global market share was approximately 9 percent. The most important markets for Francotyp-Postalia are Germany, the USA, the Netherlands and the UK.

In addition, in the mailstream business, postal services are provided. These include collection, sorting and consolidation of outgoing customer post and electronic hybrid mail, something which is gaining in importance. In the 2006 financial year (year end 31 December), with 939 employees, the Francotyp-Postalia Group generated consolidated revenues of approximately EUR 143 million* and EBITDA adjusted for non-recurring effects of approximately EUR 32.2 million*, representing an EBITDA margin of approximately 22 percent*.

(*) *In the 2005 annual financial statements reported as pro forma figures due to the first-time consolidation of the FP Group in its present form in 2005.