Infront Financial Technology GmbH
Special effects impact vwd group’s first-quarter result
vwd Vereinigte Wirtschaftsdienste Aktiengesellschaft / Release of an announcement according to Article 37x of the WpHG [the German Securities Trading Act] 15.05.2013 13:24 Interim report according to Article 37x of the WpHG, transmitted by DGAP - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. --------------------------------------------------------------------------- Special effects impact vwd group's first-quarter result Sales and EBITDA fall - At EUR 20,332 thousand (-4.9%), sales fall below record level of previous year - Personnel changes drag down EBITDA to EUR 633 thousand (-68.5%) - First-quarter EBIT negative at EUR -656 thousand (-188.4%) - Target corridor for 2013 still within reach despite challenges Frankfurt am Main, May 15, 2013 - In the first quarter of 2013, vwd group's performance was hurt by the financial sector's reluctance to make investments. In nearly all European markets where vwd does business, the financial industry is facing strong pressure to cut costs and consolidate. The desire to invest is subdued. Increased expenses related to personnel changes had a significant negative impact on EBIT. In spite of these special effects, the new management team confirms its guidance for the year. Economic and industry trends Although economic growth during the first three months of the year remained below expectations, it was well above the weak fourth quarter of 2012. According to the German Institute for Economic Research (DIW), the German economy experienced marginal growth in the first quarter of 2013. The ongoing European sovereign-debt crisis continued to exert a drag on economic growth in the euro zone. After the euro zone slid back into recession last year, the first signs of economic stagnation are now emerging. The financial industry continues to grapple with the implementation of regulatory measures. This has primarily led to consolidation in the European banking industry and has had a direct impact on the demand for market data. In addition, investment budgets in this industry remain too small. During the first three months of the year, the amount of money spent by financial product providers for communications solutions and advertising continued to decline. Business development: sales fall In Germany, first-quarter sales fell 2.1% below the previous year's level. The vwd group recorded the largest drop in year-on-year sales (-17.7%) in Italy where a bitter price war in the market-data business segment prompted customers to take their business to competing providers. Business in Switzerland also declined by 14.0%. Only Belgium and the Netherlands recorded a slight boost in sales of 0.6%. In the first quarter, consolidated sales totaled EUR 20,332 thousand, falling 4.9% below the prevous year's record level (first quarter 2012: EUR 21,378 thousand). The decline in sales is largely due to the changed industry environment. The capitalization of internally produced assets plunged to EUR 104 thousand (first quarter 2012: EUR 324 thousand). By contrast, other operating incomeclimbed to EUR 1,619 thousand (first quarter 2012: EUR 398 thousand). Among other things, this increase resulted from a one-time compensation payment obtained from the settlement of a legal dispute. For this reason, the Group result of EUR 22,054 thousand was only 0.2% below the level reached in the same quarter of last year (first quarter 2012: EUR 22,100 thousand). Earnings situation: personnel changes exert a drag Expenses for transmission costs, information procurement, fees for downloading exchange data and other sales-related items decreased as a result of the decline in sales. At the same time, the decline in material expenses did not match the decline in sales. As a result, the share of material expenses increased to 38.0% (first quarter 2012: 37.2%). Other operating expenses rose to 14.6% in relation to sales (first quarter 2012: 13.9%). Non-recurring expenses related to management changes drove up personnel costs. In relation to sales, the personnel-cost ratio climbed to 52.7% (first quarter 2012: 42.9%). These effects resulted in significantly lower earnings before interest, taxes, depreciation and amortization EBITDA) of EUR 633 thousand (first quarter 2012: EUR 2,008 thousand). Depreciation, amortization and impairment of tangible and intangible assets, which are largely related to purchase-price allocations involving companies acquired in the past, totaled EUR 1,288 thousand and remained nearly unchanged (first quarter 2012: EUR 1,265 thousand). As a result, earnings before interest and taxes (EBIT) fell to EUR -656 thousand (first quarter 2012: EUR 742 thousand), mirroring the drop in EBITDA. The improved, yet still negative financial result of EUR -322 thousand (first quarter 2012: EUR -336 thousand) was impacted by fictional interest and similar expenditures related to the put option for the acquisition of the remaining shares of the EDG Group, which fell to EUR 181 thousand (first quarter 2012: EUR 273 thousand). Interest payments that were actually made and similar expenses for current loans climbed to EUR 143 thousand (first quarter 2012: EUR 69 thousand). The increase was due to the negative market valuation of the current interest hedging instruments. Actual interest payments were lower than those made in the previous year as a result of vwd group's low loan take-up in connection with favorable market interest rates. Nevertheless, earnings before taxes (EBT) recorded a significant loss at EUR - 977 thousand (first quarter 2012: EUR 407 thousand). The earnings strength of individual Group companies resulted in an increase in tax expenses to EUR 301 thousand (first quarter 2012: EUR 216 thousand), leading to net income before minority interests of EUR -1,278 thousand. In the first quarter of 2012, the Group recorded positive net income of EUR 191 thousand. Net income after minority interests totaled EUR -1,380 thousand (first quarter 2012: EUR 141 thousand). In the quarter under review, earnings per share amounted to EUR -0.05 (first quarter 2012: EUR 0.01). Market Data Solutions (MDS) Segment The MDS Segment, an area of the company that comprises the business with standardized market-data systems and portfolio-management solutions for banks, savings banks, asset managers and companies, experienced a significant drop in sales. The business with market data for professional users in particular performed poorly outside Germany and fell short of expectations. But private customers' demand for market data also weakened compared with the previous year. Compared with the first quarter of 2012, sales fell by 13.6% to EUR 9,752 thousand (first quarter 2012: EUR 11,287 thousand). The accordant decline in material expenses could not offset the increase in personnel costs resulting from the recognition of non-recurring effects. As a result, EBITDA in the MDS Segment plummeted by 46.4% to EUR 499 thousand (first quarter 2012: EUR 931 thousand). Technology Solutions (TS) Segment Demand for the tailored technology solutions and the outsourcing assistance provided by the TS Segment bucked the trend and grew. The Segment's business with current customers for the provision of market-data listings was solid. The project business also performed well. By contrast, regular sales in the service business recorded a slight decline. Transaction-related sales fell due to the continued decline in transaction activity. Overall, the Segment boosted first-quarter sales by 19.7% to EUR 6,055 thousand (first quarter 2011: EUR 5,058 thousand). Although material expenses increased on the back of sales growth and personnel expenses rose due to the pro-rata recognition of non-recurring effects, the TS Segment's EBITDA climbed by 25.8% to EUR 945 thousand (first quarter 2012: 751 thousand). Specialised Market Solutions (SMS) Segment The Specialised Market Solutions (SMS) Segment, with its publication and marketing concepts as well as its risk assessments for financial products, struggled despite the ongoing problems afflicting financial markets. With a 10.1% decline in sales to EUR 4,525.1 thousand (first quarter 2011: EUR 5,033 thousand), the SMS Segment produced an unsatisfactory overall performance. Sales revenue generated by special advertising formats as well as the distribution of financial and price data for financial products continued to decline. Sales revenue from online advertising declined significantly. In addition, sales revenue generated by certificate ratings and value-at-risk measures fell below the previous year's level for the first time. This decline can primarily be attributed to the impact of the difficult situation in the EDG Group resulting from its complete takeover by the vwd group in the previous year. Non-recurring effects also had a negative impact on the Segment's result. While savings in the cost of materials were achieved, special effects related to the rise in personnel expenses attributed to the Segment and an increase in other operating expenses caused the Segment's EBITDA to plummet by 348.6% to EUR -811 thousand (first quarter 2012: EUR 326 thousand). Financial and asset situation: sturdy foundation The loss recorded by the Group in the first quarter of 2013 only marginally impacted the balance sheet structure of the vwd group. With total assets of EUR 91,821 thousand (as of December 31, 2012: EUR 86,192 thousand), the equity ratio amounted to 22.3% (as of December 31, 2012: 5.2%). The decline is primarily due to the increase in total assets and liabilities stemming from the receipt of advance payments from customers, which experienced a seasonal jump as of March 31, 2013, compared with the reporting date in 2012. While advance payments from customers rose, accounts payable experienced a seasonal decline. As of March 31, 2013, cash and cash equivalents totaled EUR 12,980 thousand (December 31, 2012: EUR 14,336 thousand) due to a significantly lower loan take-up compared with the level recorded as of December 31, 2012. As of March 31, 2013, the vwd group can report total net financial assets of EUR 6,788 thousand. This translates into a 243.2% increase over the level recorded as of December 31, 2012 (as of December 31, 2012: EUR 1,978 thousand) and a 22.9% drop below the level recorded at the end of the same quarter last year (as of March 31, 2012: EUR 8,800 thousand). Opportunities and risks In the first quarter of 2013, no new opportunities for or risks to the future performance of the vwd group emerged compared to those presented in the financial statements for fiscal year 2012. Outlook: changes fuel growth The German Institute for Economic Research (DIW) expects the pace of economic growth experienced in Germany during the first quarter of 2013 to continue into the second quarter of 2013. Despite hopes that the economic situation in the euro zone will gradually stabilize, the business environment will remain challenging. The future growth of the vwd group will largely be shaped by the transformation process taking place in the financial industry. The industry must create and bring to life new value creation models. It is becoming increasingly important for the financial industry to actively and continuously develop new ideas and concepts that grow out of its current range of products and services. The industry needs transparent and fair information and consulting support to regain the confidence of its clients. The focus of the future should be placed on optimizing access channels and better serving client needs. For this reason, the financial industry must rethink its products and integrate customer needs into them. The vwd group offers the technological solutions and services needed for today's transformation process and will accordingly profit once the financial industry increases its desire to invest again. As a result of slow-moving reform efforts, however, it can be assumed that growth will be moderate. Developments on securities markets will also influence growth. In this area, the vwd group tends to profit from rising sales, especially from private investors. Weak sales have a negative impact. Right now, markets are experiencing a substantial recovery. It remains to be seen if this trend will hold. Despite the non-recurring effects related to personnel expenses, the company confirms its published guidance for the entire year of 2013. It expects that consolidated sales will grow moderately and total between EUR 87.0 million and EUR 96.1 million. EBITDA is expected to amount to between EUR 9.4 million and EUR 10.5 million. Frankfurt am Main, May 2013 vwd Vereinigte Wirtschaftsdienste AG The Management Board Forward-looking statements: This interim statement contains forward-looking statements that reflect the current views, expectations and assumptions of the vwd group and are based on the information available to the company at the time of its preparation. Forward-looking statements cannot guarantee that results and developments will actually occur in the future, but are subject to risks and uncertainties. Different factors may cause the future results and development of the vwd group to deviate substantially from the expectations and assumptions formulated in this statement. Changes in general economic conditions, new legal parameters, the competitive situation and financial market developments, in particular, can impact future results and developments. Contact: Investor Relations Carsten Scharf Telephone: +49 69 50701-270 Fax: +49 69 50701-114 E-mail: investorrelations@vwd.com Internet: www.vwd.com About vwd group: vwd group offers customized information, communications and technology solutions for the financial markets. As a leading European provider, it specializes in meeting individual customer requirements in the areas of asset management, retail banking, private banking and wealth management. It offers innovative solutions for financial service providers, investors and the media. vwd's business is driven by innovation, flexibility, customer centricity and strong commitment to local needs. With around 470 employees at 18 locations in 5 countries vwd is a public company, listed at the Frankfurt Stock Exchange (ISIN DE0005204705). The group's best-known brands are: finanztreff.de, vwd fonds service, vwd market manager and vwd portfolio manager. 15.05.2013 DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: English Company: vwd Vereinigte Wirtschaftsdienste Aktiengesellschaft Tilsiter Straße 1 60487 Frankfurt am Main Germany Internet: http://www.vwd.com End of Announcement DGAP News-Service ---------------------------------------------------------------------------
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