Global Graphics reports first quarter 2010 results

GLOBAL GRAPHICS SA (NYSE-Euronext: GLOG), experts in developing e-document and printing software, announces its consolidated results for the quarter ended 31 March 2010.

Comparisons for the quarter ended 31 March 2010 with the same quarter of the previous year include:

• sales of Euro 2.0 million this quarter (Euro 2.1 million at Q1 2009 exchange rates) compared with Euro 2.7 million in Q1 2009;
• an operating loss of Euro 1.1 million this quarter, compared with an operating loss of Euro 0.1 million in Q1 2009;
• an adjusted operating loss of Euro 1.1 million this quarter, compared with an operating loss of Euro 0.3 million in Q1 2009;
• an adjusted pre-tax loss of Euro 1.2 million this quarter (or an adjusted pre-tax loss of Euro 0.12 per share), compared with an adjusted pre-tax loss of Euro 0.2 million in Q1 2009 (or an adjusted pre-tax loss of Euro 0.02 per share);
• a net loss of Euro 1.2 million this quarter (or a net loss of Euro 0.12 per share), compared with a net loss of Euro 0.1 million in Q1 2009 (or a net loss of Euro 0.01  per share); and
• an adjusted net loss of Euro 1.2 million this quarter (or an adjusted net loss of Euro 0.12 per share), compared with an adjusted net loss of Euro 0.2 million in Q1 2009 (or an adjusted net loss of Euro 0.02 per share).

Commenting on performance, Gary Fry, Global Graphics’ Chief Executive Officer, said: “Sales continued to be slow in the graphic arts market this quarter, an indicator of this being that one customer did not place their typical bulk order, as they had done in the same period of 2009, because they are still working off inventory.  However, in the last month of the quarter we did see the early signs of recovery in the printing segment.

“During the first quarter, we also had great uptake of our free gDoc Creator product with more than 300,000 downloads and over 40,000 product registrations.  There was also continuing strong validation from users and industry experts that our gDoc Fusion product is unique and provides great productivity benefits to the office worker.  Testimonies to this were encouraging signs from the corporate market with the signing of sixteen Corporate License Plans .  

“Our expense position was high this quarter due to some one-off product launch expenditure and the costs of hiring staff – notably Mike Finta as head of our development team and Elan Lennard as head of our quality assurance and support team –  that took place before our planned reorganization.”

First quarter 2010 performance
Sales for the quarter amounted to Euro 2.0 million, compared with Euro 2.7 million for the same quarter of 2009, or a sequential decrease of 25.0 % at current exchange rates, and of 21.3% at constant exchange rates.

Total operating expenses amounted to Euro 3.0 million this quarter, compared with Euro 2.7 million for the same quarter of 2009, or a sequential increase of 10.4% at current exchange rates.

The Company reported an operating loss of Euro 1.1 million this quarter (or a loss equal to 54.5 % of Q1 2010 sales), compared with an operating loss of Euro 0.1 million for the same quarter of 2009 (or a loss equal to 4.7% of Q1 2009 sales).

The Company reported an adjusted operating loss (or EBITA, as defined in the accompanying table) of Euro 1.1 million for this quarter, compared with and adjusted operating loss of Euro 0.3 million for the same quarter of 2009. Accordingly, EBITA margin was -53.3 % of sales in Q1 2010 compared with -9.3% of sales in Q1 2009.

The Company reported an adjusted pre-tax loss (as defined in the accompanying table) of Euro 1.2 million for this quarter, compared with an adjusted pre-tax loss of Euro 0.2 million for the same quarter of 2009. Accordingly, adjusted pre-tax EPS was a loss of Euro 0.12 in Q1 2010, compared with a loss of Euro 0.02 in Q1 2009.

The Company reported a net loss of Euro 1.2 million for this quarter (or a net loss of Euro 0.12 per share in Q1 2010), compared with a net loss of Euro 0.1 million for the same quarter of 2009 (or a net loss of Euro 0.01 per share in Q1 2009).

The Company reported an adjusted net loss (as defined in the accompanying table) of Euro 1.2 million for this quarter (or an adjusted net loss of Euro 0.12 per share in Q1 2010), compared with an adjusted net loss of Euro 0.2 million for the same quarter of 2009 (or an adjusted net loss of Euro 0.02 per share in Q1 2009).

Reorganization of the Company’s operations
On 14 April 2010, the Company implemented a reorganization of its business which was the outcome of a strategy analysis and product portfolio review which had been undertaken by the Company’s board and management team since the start of the current year.

The main features of that reorganization plan are as follows:

• the core of Company’s operations in Pune (India) has been outsourced to the local office of Global Logic, a leader in global product development services. This includes the transfer of 23 of the 31 Global Graphics’ employees in India to Global Logic.  The move gives Global Graphics access to best practice in processes and systems and retains the key skills of its Indian development and quality assurance (QA) team;
• other changes include the closure of the Company’s office in Florida, the relocation of the Manchester development & QA team to an improved facility nearby, as well as a reduction in the Company’s IT infrastructure overhead; and
• a total of approximately 30 people have been made redundant as part of this reorganization, of which 8 in India, and another 15 in the UK.

As a result of this reorganization plan, the Company expects to record a one-off expense comprised between Euro 0.4 and 0.5 million in the current quarter, and to achieve annualized savings between Euro 2.3 and 2.5 million (at current exchange rates), the latter figures taking into effect the planned hiring of additional key personnel to help the Company achieve its strategic goals.

Cash flow
The Company had a net cash position of Euro 2.3 million at 31 March 2010, compared with Euro 3.1 million at 31 December 2009, or a decrease of Euro 0.8 million during the first quarter of 2010.
Net cash used by the Company’s operations was Euro 0.6 million in the first quarter of the year ending 31 December 2010, while net cash used in investing activities (through capital expenditures of computer equipment and capitalization of eligible development expenses) was Euro 0.2 million.

2010 outlook
Gary Fry added: “We have the solutions to be able to win in production and office printing together with new business applications that are truly exciting and which are starting to be adopted by our target customers.
”After the reorganization we implemented last week we now have the operation in place to be able to execute on our strategy with an expense profile that is based upon realistic expectations.”

2009 annual report
The electronic versions of the Company’s 2009 annual report (in English and in French) have been available for download on the investor section of the Company’s website since 31 March 2010.
Printed copies of the English and French reports are also available. Should you wish to receive one or several copies of the Company’s 2009 annual report, please let us know by sending an e-mail to the following e-mail address: investor-relations@globalgraphics.com, or a request in writing to the registered office of the Company.

Annual meeting of the Company’s shareholders
Global Graphics will hold its annual meeting today from 09.00 CET in Brussels (Belgium). The final agenda, proposed resolutions and voting procedures are available for download on the investor section of the Company’s website.

Second quarter 2010 results announcement
Global Graphics expects to announce its consolidated financial results for the quarter and the six-month period ending 30 June 2010 on 29 July 2010 before market opening.

Editors notes

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