EUROTECH: BOARD OF DIRECTORS APPROVES THE 2011 DRAFT STATUTORY
AND CONSOLIDATED FINANCIAL STATEMENTS
Amaro, Italy, 15 March 2012 - - - - - - - - - - Consolidated
revenues: from 99.27 million to 93.81 million, -5.5% Consolidated
gross profit: from 50.41 million to 46.54 million Consolidate Adj
EBITDA: from 6.81 million to 4.0 million Consolidated EBITDA: from
7.39 million to 3.09 million Consolidated EBIT: from -0.74 million
to -4.87 million Consolidated pre-tax loss: from -3.81 million to
-6.61 million Group net loss: from -6.08 million to -7.25 million
Net financial debt: 14.33 million Group shareholders' equity: 135.0
million Eurotech S.p.A.: net loss from -0.52 million to 18.49
million
The Board of Directors of Eurotech S.p.A has today examined and
approved the draft Statutory Financial Statements and Consolidated
Financial Statements at 31 December 2011, which will be presented
to the Ordinary Shareholders' Meeting. The Group posted a decrease
in revenues of 5.5%, falling from 99.27 million in 2010 to 93.81
million in 2011. This decrease was the result of a combination of
factors and events, attributable to the adverse macroeconomic
situation and is explained below. Long-term, Eurotech's geographic
coverage of three continents has been an asset because it allows
the Group to maximise its chances of seizing business opportunities
wherever they arise and to balance out the effects of poor economic
performance in a given region. However, this was not evident in
2011 as each geographic segment in which we have a significant
operations was hit, although to different extent, by adverse
events: the US came close to defaulting, Europe suffered from a
debt and Euro crisis, and Japan experienced an earthquake and
subsequent devastating tsunami. Naturally, we could not have
foreseen such widespread negative scenarios across our three key
regions. Consequently, from March onwards Eurotech's management
dealt with an increasingly adverse global setting, one that was
markedly different from that projected at end-2010 and that had
been initially confirmed by good order levels in the first two
months of the year. The uniformly unfavourable macroeconomic
situation put strong constraints on our ability to generate sales
and this inevitably resulted in a small contraction in revenues of
5.5%.
EUROTECH spa Via F. Solari, 3/A 33020 Amaro (UD) - ITALY Tel. +39
0433 485411 Fax. +39 0433 485455 ir@eurotech.com
www.eurotech.com
In particular, the Group's fourth quarter was not as strong as in
2010. Historically, the last quarter of the year posts the major
part of revenues, which are concentrated in the month of December.
The recovery in the global macroeconomic situation noted at the end
of 2010 did not continue during 2011. In fact, it stalled further
in the important second and third quarters. The last quarter of
2011 was our strongest quarter, but revenues still fell below those
of the fourth quarter of 2010. Due to the fact that in our
operative model the majority of costs are fixed, it's important for
us to remain above the operating leverage activation threshold: for
a level of costs equal to that of 2011, the leverage is activated
above 100103 million, depending on gross profit margin. Therefore,
93.81 million in revenues was insufficient to generate significant
EBITDA, with inevitable consequences for the Group's final profit
margin.
Geographic performance North America posted a dip in both sales and
orders, particularly from July onwards, coinciding with the time in
which the attention paid to the nation's possible default reached
its zenith. The extensive political debate on the subject and the
last-minute corrective measures meant public and private investment
stalled until late autumn, affecting our ability to develop the
sales anticipated in the second half of the year. The situation now
seems to have returned to normal and we intend to confirm this
after in the coming months. The sector most affected by the risk of
default in the US was defence. Our business was affected by budgets
being shifted between programmes more than by the overall cut in
spending, which particularly affected operational missions and
large new projects. This resulted in the cancellation of some
deliveries scheduled for the second half of the year, forcing us to
go in search of new orders, with further effects on the likelihood
of Parvus generating the fourth-quarter sales that were initially
forecast. There is also some good news, as often happens following
a radical change in scenario: with the reallocation of
defence-programme budgets, many opportunities have returned and if
we can take advantage of them we will be able, in the coming years,
to recapture the success enjoyed by Parvus since we acquired it in
2003. Europe continued to feel the effects of the financial crisis
and the pressures on the Euro, limiting the ability and the will of
companies and governments to invest in new development programmes.
We believe that, in principle, Europe is still a market with a good
potential for our solutions, even if this potential is currently
struggling to be seen, with inevitable negative effects on the
revenues generated by Eurotech in the region. The Japanese market
was greatly affected by the blow inflicted upon the nation by the
tsunami. An economic blackout of the Japanese economy in spring
2011 caused orders to be postponed, some to the following year. As
a result, Japan's contribution to total sales was lower than
expected. However, the outlook for the Japanese economy in 2012 is
good. The reconstruction is underway and, as happened in the past,
this should generate GDP growth that more than offsets the lack of
growth in 2011 caused by the earthquake and subsequent tsunami.
HPC Business Unit With regard to the HPC (High Performance
Computing) business unit, in July Selex Elsag placed a large order
for an Aurora solution to be used in cybersecurity applications.
Not only is the order worth around 4 million, but it is also
important because it demonstrates other possible uses for the
Aurora platform besides the university and researchinstitute
applications that have characterised our HPC business in the past.
From the very start, the Aurora architecture was conceived to be
effectively used also in industrial and service sectors, and the
application in the field of
cybersecurity confirms that our initial vision was correct. The HPC
strategic business unit's contribution to total sales increased in
2011 compared to 2010 and we expect this trend to continue in
2012.
In summary, the level of sales in 2011 is not attributable to a
single factor or event but to the combined effect of a number of
factors and events, in confirmation of the general unfavourable
environment during the year. Management is continuing to monitor
the macroeconomic situation closely. As it did in 2011, in the
first months of 2012 management is taking steps to make the
structure more efficient and thereby lower the operating leverage
activation threshold. Specific initiatives are also underway to
find new business opportunities and increase sales beyond this
threshold. We are therefore working on two fronts so that the
operating leverage can eventually give the desired results in terms
of profit margins. The considerable efforts made over the last
three years to create an integrated and cohesive Group have been
crucial in this respect, and the recent inclusion of Dynatem Inc.
as a catalyst for further technical and commercial synergies
between the United States and Japan is just one more reason to take
a positive view of the future.
Financial performance Gross profit was 49.6%, just few fractions of
percentage point under management's 50% benchmark. The change
compared to the previous year, when gross profit was 50.8%, is due
to the diverse mix of products sold, which have different profit
margins depending on their type as well as the sectors and
geographical markets in which they are sold. In particular, this
was influenced by the lower contribution of US defence sales, which
have margins considerably higher than the Group average. A
low-margin one-off order of around $1.5 million placed in the
fourth quarter and not offset, as initially forecast, by an
equivalent higher margin delivery in the defence sector was also a
drag. The greater contribution of the HPC strategic business unit
also had an impact, since generally, sales being equal, HPC SBU has
higher COGS and lower OPEX than the NanoPC SBU; however, this gross
profit margin of less than 50% is offset by a recovery of margins
at the EBITDA level. Before adjustments for internal increases and
non-recurring costs, operating costs fell by 1.7 million, from
47.25 million (with operating costs as a percentage of revenues at
47.6%) to 45.55 (with operating costs as a percentage of revenues
at 48.6%), not accounting for non-recurring costs, and to 46.46
million accounting for non-recurring costs. This considerable
reduction in costs is the result of a path undertaken several years
ago. The 2009 crisis was an opportunity for Eurotech to learn how
to considerably streamline its structure, mainly preserving two
fundamental pillars of our business model: the ability to generate
innovations and the ability to sustain rapid growth in sales when
opportunities arise. We did not act blindly, taking drastic cost
cutting measures, because it was essential that we preserve the
pillars on which our competitiveness is founded. But, with great
determination and consistency, we gradually and inexorably
implemented a streamlining strategy that we can now say, looking
back over the past three years, has worked. Cost reductions of 1.7
million in 2011 alone in tangible proof of that. The management
remains focused on the streamlining of the operating structure,
carried out in 2011 and that will also produce benefits in 2012.
Meanwhile, in parallel with cost cutting we have also invested in
activities that are expected to provide returns in the coming
years, always with the aim of keeping the pace on the innovative
drive that is our hallmark. With reference to our capability to
generate revenues, the current structure can sustain higher sales
than current levels with only minor changes to the workforce and
without making any changes to infrastructure. EBITDA fell from 6.81
million in 2010 to 4.0 million (gross of adjustments for 0.91
million resulting from non-recurring costs linked to the recall of
a custom product). Adjusted EBITDA as a percentage of revenues was
4.3% in 2011,
compared with EBITDA as a percentage of revenues of 6.9% in 2010.
Non-adjusted EBITDA as a percentage of revenues was 3.3%. The
year-on-year change is mainly attributable to the reduction in
sales, as well as to the decrease in other revenues, which in 2010
included a capital gain on sales of shareholdings of 0.6 million,
grants of 0.2 million and the greater impact of adjustments to
costs for capitalisation. EBIT fell from -0.74 in 2010 to -4.87
million in 2011. EBIT as a percentage of revenues was -5.2% in 2011
compared to -0.7% in 2010. EBIT in 2011 was affected by the EBITDA
already commented on above and the depreciation & amortisation
posted to the income statement in 2011. The non-monetary impact of
the price allocation relating to the acquisition of Eurotech Inc.
(formerly Applied Data Systems Inc. and formerly Arcom Control
Systems Inc.), Dynatem Inc. and the Advanet Group on EBIT was 3.45
million in 2011, compared to 3.37 million in 2010.
The pre-tax loss in 2011 was -6.61 million (vs. a loss of -3.81
million in 2010). This performance was influenced by the factors
outlined above. The price allocation and the evaluation of the put
option (the latter relating to 2010 only) had an impact on the
pre-tax result of 3.45 million in 2011 and 4.57 million in
2010.
The Group net loss came to -7.25 million in 2011, compared with a
net loss of -6.08 million in 2010. This performance reflects not
only the pre-tax result, but also the tax burden on the various
units. Price allocation had a 0.84million effect on Group net
results in 2011 (2010: 3.03 million).
At 31 December 2011 the Group had net financial debt of 14.33
million compared to 8.64 million at end-2010. Despite this trend,
the company generated a positive cash flow from operating
activities, which were more than offset by use of financial
resources for investments.
Group shareholders' equity amounted to 135.04 million (2010: 131.52
million) and is equal to the consolidated shareholders' equity,
since there are no more minority interests to take into
consideration (in 2010, the consolidated shareholders' equity was
135.48 million).
Statutory Financial Statements of the Eurotech S.p.A. Parent
Company Revenues totalled 13.36 million, compared to 11.19 million
in 2010, an increase of 19.4%. The net result was -18.49 million,
compared with -0.52 million in 2010. 2011 net result was affected
by depreciation of shereholdings for 13.54 million. Shareholders'
equity at 31 December 2011 was 89.19 million, compared with 107.71
million in 2010. The Parent Company had a net debt of 7.5 million,
compared with 0.7 million at end-2010.
Pursuant to Article 154-bis, Paragraph 2, of the Italian
Consolidated Finance Act, the Financial Reporting Manager, Sandro
Barazza, hereby declares that the financial disclosure contained in
this press release corresponds to the Company's documentary
evidence, corporate books, and accounting records. *** The Board
has also approved the Corporate Governance Report containing
information on the ownership structure pursuant to Article 123-bis
of the Italian Consolidated Finance Act which will be published
within the deadlines and in accordance with the methods provided
for by current regulations. *** In accordance with the new
provisions of Article 154-ter, Paragraphs 1 and 1-bis, of the
Italian Consolidated Finance Act, the annual financial report
including the draft statutory and consolidated financial
statements, the management report, the corporate governance report
and the declaration of the Financial Reporting Manager, together
with the reports of the Independent Auditor and the Board of
Statutory Auditors, will be published no later than 30 March
2012.
THE EUROTECH GROUP Eurotech is a global company (ETH.MI) that
integrates hardware, software, services and expertise to deliver
embedded computing platforms and sub-systems to leading OEMs,
system integrators and enterprise customers for successful and
efficient deployment of their products and services. Drawing on
concepts of minimalist computing, Eurotech lowers power draw,
minimizes physical size and reduces coding complexity to bring
sensors, embedded platforms, subsystems, ready-to-use devices and
high performance computers to market, specializing in defense,
transportation, industrial and medical segments. By combining
domain expertise in wireless connectivity as well as communications
protocols, Eurotech architects platforms that simplify data
capture, processing and transfer over unified communications
networks. Our customers rely on us to simplify their access to
state-of-art embedded technologies so they can focus on their core
competencies. Learn more about Eurotech at www.eurotech.com.
Company contacts: Investor relations Andrea Barbaro Tel. +39 0433
485411 e-mail: andrea.barbaro@eurotech.com Corporate Press Office
Cristiana della Zonca Tel. +39 0433 485411 e-mail:
cristiana.dellazonca@eurotech.com International Press Office Jana
Sanchez, CitySavvy Tel. +44 20 7395 1000 or +44 7985 917 060
e-mail: jana@citysavvy.com
ANNEXES FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
OPERATING RESULTS (/ 000) Re ve nue s from sales of products and
services Cos t of materials Gr os s profit Ser v ic e costs Leas e
& hire costs Pay r oll costs Other provisions and other costs
Other revenues EBITDA ADJ (*) Non recurrent (costs) revenues EBITDA
(**) Depr ec iation & amortisation A s s et impairment Ope r at
ing profit (EBIT) Shar e of associates' profit of equity Financ e
expense Financ e income Pr of it before taxes Inc ome tax Ne t
profit (loss) before m inor it y inerest M inor it y interest Gr
oup net profit (loss) for period Bas e earnings (losses) per share
Dilut e d earnings (losses) per share
F Y 2011
%
F Y 2010
%
93,806 ( 47,266) 46,540 ( 16,483) ( 2,464) ( 25,378) ( 1,229) 3,014
4,000 ( 910) 3,090 ( 7,708) ( 257) ( 4,875) 123 ( 7,840) 5,979 (
6,613) ( 633) ( 7,246) 0 ( 7,246) ( 0.206) ( 0.206)
100.0% - 50.4% 49.6% - 17.6% - 2.6% - 27.1% - 1.3% 3.2% 4.3% - 1.0%
3.3% - 8.2% - 0.3% - 5.2% 0.1% - 8.4% 6.4% - 7.0% - 0.7% - 7.7%
0.0% - 7.7%
99,269 ( 48,863) 50,406 ( 17,042) ( 2,377) ( 26,447) ( 1,385) 3,654
6,809 585 7,394 ( 7,851) ( 284) ( 741) ( 1,630) ( 4,822) 3,380 (
3,813) ( 2,200) ( 6,013) 66 ( 6,079) ( 0.173) ( 0.173)
100.0% - 49.2% 50.8% - 17.2% - 2.4% - 26.6% - 1.4% 3.7% 6.9% 0.6%
7.4% - 7.9% - 0.3% - 0.7% - 1.6% - 4.9% 3.4% - 3.8% - 2.2% - 6.1%
0.1% - 6.1%
( *) Profit before non recurrent cost, depreciation, amortization,
interests and tax (EBITDA) ( **) Profit before depreciation,
amortization, interests and tax (EBITDA)
CONSOLIDATED BALANCE SHEET & STATEMENT OF FINANCIAL
POSITION
('000) at December 31, 2011 at Decem b er 31, 2010
ASSETS Intangible assets Pr oper ty , Plant and equipment Inv es
tments in affiliate companies Inv es tments in other companies Def
er r ed tax assets Other non current financial assets Medium/long
term borrow ing allow ed to affiliates companies and other Group
companies Other non-current assets To t al non-current assets Inv
entor ies Contr ac ts in progress Tr ade receivables Inc ome tax
receivables Other current assets Rec eiv ables from affiliates
companies Shor t term borrow ing allow ed to affiliates companies
and other Group companies Cas h & cash equivalents To t al
current assets To t al assets 125,922 5,897 278 270 1,439 226 0 843
134,875 23,734 2,356 26,724 938 2,569 1,163 178 13,596 71,258
206,133 120,328 6,582 308 230 1,658 236 636 1,018 130,996 21,587
257 28,962 1,879 3,305 9 0 23,751 79,750 210,746
LIABILIT IES AND EQUITY Shar e capital Shar e premium reserve Other
reserves Gr o up shareholders' equity Eq u it y attributable to m
ino r it y interest To t al shareholders' equity Medium- /long- ter
m borrow ing Employ ee benefit obligations Def er r ed tax
liabilities Other non-current liabilities To t al non-current
liabilities Tr ade payables Shor t- ter m borrow ing Der iv ativ e
instruments Inc ome tax liabilities Other current liabilities Bus
ines s combination liabilities To t al current liabilities To t al
liabilities To t al liabilities and equity 8,879 136,400 ( 10,236)
135,043 0 135,043 10,482 1,718 12,111 1,586 25,897 18,388 17,253
376 1,731 7,229 216 45,193 71,090 206,133 8,879 136,400 ( 13,761)
131,518 3,966 135,484 22,873 1,681 12,307 2,225 39,086 18,824 8,985
339 1,214 5,748 1,066 36,176 75,262 210,746
STATEMENT OF CHANGES IN EQUITY
Sh ar e capital ('000) B al an ce as at December 31, 2010 8,879
L eg al reserve
Sh ar e premium reserve
C o n ver si o n reserve
Oth er reserves
C ash flow hedge reserve
Exch an g e rate differences reserve ( 777) ( 1,340) ( 6,079) Tr
easu r y shares Pr o fi t (loss) for period
Gr o u p shareholders' equity
M i n o r i ty interest capital & reserves 3,900
Pr o fi t third parties 66
Eq u i ty to Minority interest 3,966
(loss) of attributable
To tal shareholders' equity
39
136,400
25,938
( 31,203)
( 339)
131,518
135,484
2010 Result allocation Profit (loss) as at December 31, 2011
Comprehens i ve other profit (loss) - Hedge transactions - Foreign
balance sheets conversion diff erenc e - Exchange diff erenc es on
equity method - Exchange diff erenc es on equity investments in f
oreign companies Comprehensive result Minority purchase
-
-
-
-
( 6,079)
-
-
-
6,079
-
66
( 66)
-
-
-
-
-
-
-
-
-
-
( 7,246)
( 7,246)
-
-
-
( 7,246)
-
-
-
8,576 8,576 -
( 18) ( 18) 1,597
( 37)
-
-
( 7,246) -
( 37) 8,576 ( 18) 653 1,928 1,597
( 3,966)
-
( 3,966)
( 37) 8,576 ( 18) 653 1,928 ( 2,369)
( 37) -
653 653 -
B al an ce as at September 30, 2011
8,879
39
136,400
34,514
( 35,703)
( 376)
( 124)
( 1,340)
( 7,246)
135,043
-
-
-
135,043
NET FINANCIAL POSITION
at December 31, at December 31, ('000) Cas h & cash equivalents
Cas h equivalent Shor t term borrow ing allow ed to affiliates
companies Der iv ativ e instruments Shor t- ter m borrow ing Bus
ines s aggregation liabilities Shor t - t e r m financial position
Shor t - t e r m net financial position Medium/long term borrow ing
allow ed to affiliates companies Bus ines s aggregation liabilities
Other non current financial assets Medium/long term borrow ing M e
dium - /long- t e r m net financial position A B=A C D E F
G=C+D+E+F H=B+G I J K L M =I+J+K+L 2011 ( 13,596) ( 13,596) ( 178)
376 17,253 216 17,667 4,071 0 0 ( 226) 10,482 10,256 2010 ( 23,751)
( 23,751) 0 339 8,985 1,066 10,390 ( 13,361) ( 636) 0 ( 236) 22,873
22,001
( NET FINANCIAL POSITION) NET DEBT
N=H+M
14,327
8,640
WORKING CAPITAL
at Decem b er at December 31, ('000) 31, 2011 (b ) 2010 (a) C h an
g es (b -a)
Inventories Contr ac ts in progress Tr ade receivables Rec eiv
ables from affiliates companies Inc ome tax receivables Other
current assets Cur r ent assets Tr ade payables Inc ome tax
liabilities Other current liabilities Cur r ent liabilities Ne t w
or k ing capital
23,734 2,356 26,724 1,163 938 2,569 57,484 ( 18,388) ( 1,731) (
7,229) ( 27,348) 30,136
21,587 257 28,962 9 1,879 3,305 55,999 ( 18,824) ( 1,214) ( 5,748)
( 25,786) 30,213
2,147 2,099 ( 2,238) 1,154 ( 941) ( 736) 1,485 436 ( 517) ( 1,481)
( 1,562) ( 77)
Grafico Azioni Eurotech (BIT:ETH)
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