PARIS, July 30 /PRNewswire-FirstCall/ –
– Revenue Growth in the Second Quarter and Improved Operating Profit
– Objectives for the 2008 Financial Year Confirmed
– Significant Progress in the Services Business and in new Product Offerings, in Line With the Group's Strategic Repositioning
Key figures for the first six months of 2008: – Order intake increased 6.4% with a marked acceleration in the second quarter; orders booked by the Hardware and Systems Solutions business grew strongly, by 23.0% in the semester – Thanks to a 4.3% increase in revenues in the second quarter, consolidated revenues grew slightly to EUR550.6 million. The Services and Solutions business demonstrated strong growth, of 19.9%, in line with the trend over previous semesters – Gross margin of EUR124.0 million represented 22.5% of revenues. The change in gross margin reflects the transformation in the Group's portfolio of offerings, with a decrease of 2.1 points compared to the figure published for the same period in 2007. Gross margin in the Services and Solutions business increased by 0.9 points compared to the year-ago period – EBIT (see glossary) of EUR11.5 million represented 2.1% of revenues, an increase of 21% compared with the first half of 2007 (EUR9.5 million, or 1.7% of revenues) – Net income of EUR4.7 million increased slightly compared with the figure of EUR4.5 million published for the first six months of 2007 – Net cash (see glossary) of EUR171.1 million as at June 30, 2008, compared with EUR189.0 million as at June 30, 2007
Outlook: the Group confirms its target EBIT (see glossary) for the full financial year 2008 of between EUR23 million and EUR27 million
Bull – expert in open, flexible and secure information systems and one of Europe's leading players in the IT industry – today announces its results for the first six months of 2008. On July 29, 2008, the Board of Directors of Bull (Euronext Paris: BULL) approved the consolidated accounts for the period to June 30, 2008.
Thanks to a 4.3% increase in consolidated revenues in the second quarter and an strong growth of 19.9% in Services and Solutions, revenues for the first six months of 2008 were EUR550.6 million, representing an increase of 0.1% compared with the published figure of EUR550.2 million for the same period in 2007. After recasting(1) to exclude businesses sold during 2007 and 2008, growth in consolidated revenues is 1.1% (2.1% after taking account of the additional impact of exchange rates). Gross margin was EUR124.0 million, representing 22.5% of revenues, compared with EUR135.1 million, or 24.6% of revenues for the same period in the previous year. This change reflects the evolution in the Group's portfolio of offerings, most notably the increased importance of services and solutions, in line with Bull's strategy. EBIT (see glossary) was EUR11.5 million, or 2.1% of revenues; the published EBIT figure for the first six months of 2007 having been EUR9.5 million, or 1.7% of revenues for the period. Bull recorded net income of EUR4.7 million for the six month period, representing a 4.4% increase.
Didier Lamouche, Chairman and CEO of Bull, commented: "Our performance in the second quarter has enabled us to show improved profitability compared with the first six months of 2007. Our Services and Solutions business is growing particularly strongly on the one hand, and we are now starting to see a tangible increase in our new integrated product offerings on the other. This confirms that we have made the right strategic choices.
Our performance in the first six months does put us in a favorable position to achieve our objectives for the year."
Financial results for the first six months of 2008
Unless otherwise indicated, comparisons are made between the equivalent six-month period year-on-year, based on published figures.
Order intake increased 6.4% with a marked acceleration in the second quarter; orders booked by the Hardware and Systems Solutions business grew strongly, by 23.0% in the semester
Order intake grew by 6.4%, with a marked acceleration in the second quarter when they grew by 20.6% compared with the same period in 2007. Orders relating to the Hardware and Systems Solutions business increased by 23.0% thanks to the commercial success of new High-Performance Computing (HPC) offerings and secure storage solutions. Those relating to the Services and Solutions business grew by 5.7%; it is worth noting that services orders in the first half of 2007 had been especially strong, with the signing of a major contract with the State of California. Finally, orders taken by the Fulfillment and Third-Party Products business fell by 25.2%, as a result of the Group's deliberate policy of focusing on its core offerings.
Thanks to a 4.3% increase in revenues in the second quarter, consolidated revenues grew slightly to EUR550.6 million. The Services and Solutions business demonstrated strong growth, of 19.9%, in line with the trend over previous semesters
Bull recorded revenues of EUR550.6 million in the first six months of 2008, an increase of 0.1% compared with revenues of EUR550.2 million recorded during the same period in 2007. Revenue growth of 4.3% in the second quarter is due in particular to the Group's new offers.
The Services and Solutions business recorded strong growth of 19.9%, in line with the trend of recent semesters. Revenue growth of 11.7% in the first quarter, accelerated to reach 27.4% in the second quarter, supported in particular by intense business activity in France and Spain.
With revenues growing by 2.4% in the second quarter, the Hardware and Systems Solutions business benefited from good order intake at the beginning of the year. Nevertheless, revenues for the full six months decreased by 2.4% compared with the same period in 2007, with the increased strength of strategic growth offerings such as High-Performance Computing (HPC) and secure storage solutions unable fully to compensate for the decline in revenues from mature offerings over the period.
Revenues from the Maintenance and Product-Related Services (PRS) business also recorded better performance in the second quarter than in the first: with revenue erosion limited to 5.6% in the second quarter, resulting in a decline of 6.8% for the six months to June. This is the result of a number of support contracts for proprietary servers coming to an end, as anticipated.
Revenues from the Fulfillment and Third-Party Products business declined by 34.2%, as a result of the Group's deliberate policy of focusing its sales efforts on the Group's own higher added-value offerings.
The geographic breakdown of consolidated revenues shows progress in France and a stable position in Europe excluding France. Bull's other international business activities suffered a fall in revenues, most notably as a result of the decision to refocus on the sale of the Group's own core products.
Gross margin of EUR124.0 million represented 22.5% of revenues. The change in gross margin reflects the transformation in the Group's portfolio of offerings, with a decrease of 2.1 percentage points compared to the figure published for the same period in 2007. Gross margin in the Services and Solutions business increased by 0.9 points compared to the year-ago period
Gross margin from the Hardware and Systems Solutions business was 33.7% of revenues, a decline of 5.9 percentage points. The anticipated fall in volumes from the proprietary GCOS server business explains this decrease. On the other hand, the contributions to gross margin from the open servers and HPC segment rose, both in terms of the overall amount and the gross margin rate. The gross margin rate of the Services and Solutions business stands at 15.3% of revenues, an improvement of 0.9 points. This progress is the result of a number of fundamental actions undertaken, particularly in France, where average utilization rate in the first six months improved by 3 points to reach 80%. The gross margin rate in the Maintenance business improved by 0.1 points to 29.0% of revenues, with cost reduction initiatives successfully compensating for the decline in volume. Finally, the gross margin rate for the Fulfillment and Third-Party Products business was 10.4% for the period.
EBIT (see glossary) of EUR11.5 million represented 2.1% of revenues, an increase of 21% compared with the first six months of 2007 (EUR9.5 million or 1.7% of revenues)
Selling, General and Administrative expenses, expressed as a percentage of revenues, fell by 0.9 points; during the period these were EUR97.3 million compared with the figure of EUR102.3 million published for the first six months of 2007. General and administrative costs fell from EUR41.6 million in the first six months of 2007 to EUR33.6 million in the first six months of 2008 (or -19.2%), as a result of the cost reduction programs undertaken by the Group as well as the reversal of a provision for a tax risk of around EUR3 million. These savings have enabled the company to accelerate commercial investments in new growth offerings which has resulted in an increase in selling costs of 4.9% from EUR60.7 million in the first six months of 2007 to EUR63.7 million in the first six months of 2008. Regarding Research and Development, Bull is now concentrating its efforts on High-Performance Computing (HPC) and secure storage, favoring an Open Source approach. In HPC, Bull has adapted its R&D model, focusing its investments on areas that involve technical and financial collaboration with its strategic partners. As a result, although significant work is still being carried out in this area, R&D costs go from EUR23.0 million in the first six months of 2007, or 4.2% of revenues, to EUR14.3 million or 2.6% of revenues in the first six months of 2008. In parallel, the Group has reduced its R&D spend on its proprietary technologies.
As a result of the changes in gross margin and operating expenses, EBIT for the period was EUR11.5 million, compared with the figure of EUR9.5 million published for the same period in 2007.
Net income of EUR4.7 million increased slightly compared with the figure of EUR4.5 million published for the first six months of 2007
Net income includes a net restructuring charge of EUR6.6 million intended to support the reduction in the Group's cost structure. Lower net financing costs compared with the same period in 2007 are explained by a better return on investments in certificates of deposit. Tax charges for the period were a credit, thanks to a research tax credit.
Net cash position (see glossary) of EUR171.1 million as at June 30, 2008, compared with EUR189.0 million as at June 30, 2007
Operating cashflow for the first six months was slightly negative, at EUR (5) million, with the first six months traditionally being less favorable than the second half of the year. Cash outflow was the consequence of the previously anticipated unfavorable change in working capital of EUR(15.4)million, resulting from the aggressive growth in the Services and Solutions activities on the one hand, and the growing strength of integrated Product offerings on the other. In addition, non-recurring items for the period, linked principally to acquisitions and restructuring, generated cash outflow of EUR16.5 million.
At the end of June 2008, the gross cash position (see glossary) was EUR283.8 million and net cash (see glossary) stood at EUR171.1 million. The Group's funds are invested either as certificates of deposit or in Euro denominated money-market OPCVM funds.
Key highlights from the first six months of 2008
Consolidating Bull's growth in IT services, the Group announced the acquisition of CSB Consulting, an IT services company operating in Belgium and Luxembourg, specializing in value-added IT services (consulting, IT infrastructure management, project management). This acquisition reflects the Group's ambition, and that of its Belgian subsidiary, to establish its position as a key supplier of IT services to European institutions, as well as the public sector and financial services both in Belgium and Luxembourg.
Continuing its program of refocusing on its strategic business areas, in January 2008 Bull announced the sale of 100% of its subsidiary Maine Circuits Imprimes (Maine CI) to the Italian group Elco, one of the country's leading manufacturers of technical printed circuit boards for the aeronautical and military markets, as well as for industry and telecommunications.
At this year's CeBIT fair in Hanover – further strengthening its 'Bio Data Center' approach to green computing launched in 2007 – Bull announced that it had joined the Climate Savers Computing Initiative, a worldwide not-for-profit organization whose principal aim is to halve the energy consumption of computer systems by 2010.
Bull also accompanied this announcement with the launch of the NovaScale(R) B260LV (Low Voltage) blade server, designed to reduce the electricity consumption of IT infrastructures while enhancing availability. This new server enhances Bull's Bio Data Center offering and delivers a powerful combination of flexibility, performance and sustainable development within the Data Center.
High-Performance Computing: a strategic commitment
With over 100 customers in 15 countries across 3 continents, Bull's dynamic growth in High-Performance Computing (HPC) – which accelerated significantly in 2007 – continued during the first six months of 2008: in line with the Group's ambition to double its revenues in this segment in 2008.
The French Atomic Energy Authority (CEA) and Bull have signed a collaboration contract to design and build Tera 100, the future supercomputer to support the French nuclear weapons Simulation Program. This long-term project will consist of two phases: a significant upfront investment in R&D work for the development of the new Tera 100 supercomputer and the acquisition by the CEA of this first Petaflop-scale system to be designed in Europe.
World records broken
The French Atomic Energy Authority (the CEA) and Bull have achieved a world record-breaking performance for image searches in very large scale databases: some 3.7 million images a second, five times faster than the previous record. The record performance – achieved on a Bull NovaScale supercomputer using software specially developed by CEA LIST (the CEA's systems and technology integration laboratory) – opens the way to a vast range of possible applications, from strategic business intelligence to comparison of medical images, from 'data mining' on the Internet to e-business and content management.
And for the first time ever, a supercomputer has recorded an official victory against a grand master in the game of Go. The game is more complex than chess, with more different possibilities than the number of particles in the known Universe. So this world first – which combined the use of a NovaScale supercomputer and artificial intelligence software developed by INRIA (the French National Institute for Research in Computer Science and Control) – represents a real achievement.
20,000 billion operations a second (20 Teraflops): that's the performance delivered by the supercomputer Bull has delivered to Cardiff University, to support research projects at one of the UK's leading higher education establishments. The new facility will enable researchers to tackle problems of a whole new size and complexity.
Bull has also been chosen by GENCI (Grand Equipement National de Calcul Intensif) – the French national High-Performance Computing organization – and the CEA to provide a new supercomputer delivering overall performance in excess of 300 Teraflops, making the CEA's complex at Bruyeres le Chatel the largest site in Europe in the area of civil computing.
The machine, Europe's first large-scale hybrid supercomputer, features an innovative architecture that combines generalist processors and specialist graphics processors, such as those used in video games, allowing it to deliver very high levels of processing power both for production and research operations. The Bull NovaScale supercomputer will be used by the French scientific research community in key areas including climatology and sustainable development, space and aeronautical research, energy, and life and materials sciences.
Storage: a coherent strategy to reduce the complexity of data protection and improve the management of information
All kinds of organizations face exponential growth in the amount of data they have to manage. Images, videos, e-mails and voice messages make up an even greater proportion of electronic exchanges. Protecting data over long periods of time, often to meet regulatory requirements, poses many problems for IT Departments faced with strict controls over their budgets.
Against this backdrop, Bull is providing an innovative response to the issue of protecting critical information, with the launch of a range of solutions and products designed to protect data and make it easier to manage.
The first secure mobile computing platform, globull(TM), is a true confluence of innovation: the world's most secure solution, it allows users to carry their whole personal working environment with them wherever they go, in total security. globull(TM) protects against intrusions, viruses and spyware. globull(TM) represents a complete technological and ergonomic response to the need for secure computing on the move: combining a built-in hard disk and significant storage capacity with a defense-standard cryptographic processor. globull(TM) was launched in France on April 15, 2008.
Services business continues its dynamic growth, most notably in the e-government and telecommunications sectors
In Australia, Bull subsidiary AddressVision Inc. (AVI) – which specializes in providing automated postal solutions – has been chosen by Australia Post to upgrade its address recognition and mail automation capabilities for processing the country's letter mail.
As part of current and future reforms at the French Ministry of Defense, the French Navy (la Marine Nationale) is implementing a single information system for all its Human Resources (HR) functions, based on a common inter-ministerial kernel. The Navy has awarded the contract to integrate the new system to Bull, who will implement the project – with its significant organizational and functional aspects – and provide the complete host infrastructure.
In another clear illustration of Bull's expertise in information systems modernization for the public sector, Bull is leading the consortium chosen by the Egyptian Finance Ministry to provide, develop, adapt and implement an integrated tax and customs collection and management system for the country's taxation authorities. Bull has joined forces with Raya, the Finance Ministry's long-standing partner, to provide both services and project management.
OnAir, a subsidiary of Airbus and SITA, has chosen Bull and its partner Highdeal to support the development of its in-flight mobile phone service aimed at airline companies. The new services being rolled out will enable passengers to use their portable electronic devices (laptops, mobile phones and PDAs) as well as the airplane's own equipment, to communicate just as easily in the air as on the ground.
Finally, as part of its commercial growth strategy, Bull Evidian, the European leader in Identity and Access Management (IAM) and one of the top software publishers with its Enterprise Single Sign-On (E-SSO) solution, has announced a partnership with Quest, the major publisher and distributor of infrastructure management software. This agreement involves worldwide distribution of Evidian E-SSO, strengthening Evidian's international presence and opening up new, particularly in North America.
Outlook: the Group reiterates its outlook published in February 2008, for target EBIT (see glossary) of between EUR23 million and EUR27 million for the 2008 financial year
The key factors that will enable the Group to reach this target will be continued improvement of margins in the Services business, and growing sales of integrated product offerings including High-Performance Computing (HPC) and storage.
Clause de Retour a Meilleure Fortune (CRMF) or profit sharing agreement: In return for the forgiveness of a shareholder's loan, Bull agreed in 2004 to pay annually to the French State a portion of pre-tax profits (EBT) between 2005 and 2012 on condition that (i) EBT for the year is at least EUR10 million; (ii) operating cashflow for the year after restructuring payments exceeds EUR10 million; (iii) shareholders' equity does not fall below EUR10 million by application of the clause. If any of these conditions are not met, no payment is due for that period. Please refer to Bull's annual report for a full description of the CRMF.
EBIT: Earnings before Interest and Taxes, non-operating and non-recurring items and contribution of equity affiliates.
Gross cash: Cash and cash equivalents including marketable securities available for sale, deposits and guarantees.
Net cash: Gross cash minus financial debt.
Financial debt: receivables sold with recourse, bank loans and bonds.
Capital expenditure: acquisition of assets by Bull for its own account or for the account of customers of outsourcing or managed services contracts.
About Bull, Architect of an Open World(TM)
As one of the leading European IT companies, Bull delivers open, flexible and secure information systems. The group helps public and private sector customers transform their information systems, applying its know-how and expertise in three main areas:
– Capitalizing on its extensive mainframe experience, Bull designs and produces robust, innovative and open servers, based on industry-standard technologies; – Building on its alliances with leading ISVs and long-standing involvement with Open Source, Bull develops and implements flexible and interoperable application infrastructures which give business processes the freedom to evolve; – Bringing together recognized expertise in end-to-end IT security, Bull secures data and exchanges that are so critical in preserving customers' business integrity.
Bull has a particularly strong presence in the public, healthcare, finance, telecommunications, manufacturing and defense sectors. Its distribution network and business partners cover more than 60 countries worldwide.
For more information visit: http://www.bull.com/ Key figures for the half of 2008 EUR millions First half First half 2007* 2008 Revenue 550.2 100% 550.6 100% o/w Services & Solutions 200.1 36% 240.0 44% o/w Hardware & Systems Solutions 159.8 29% 156.0 28% o/w Fulfillment & 3rd party 83.0 15% 54.6 10% products o/w Maintenance & PRS 107.4 20% 100.1 18% Gross margin 135.1 24.6% 124.0 22.5% EBIT (see glossary) 9.5 1.7% 11.5 2.1% Net income 4.5 0.8% 4.7 0.9%
Numbers may not add up precisely to the total due to rounding.
To facilitate comparisons with the consolidated revenues published in 2007 is broken down here according to the new business segmentation.
Geographic breakdown of revenues: Revenue First half 2007 First half 2008 Variation EUR millions France 259.2 282.7 9.1% Europe excluding France 185.5 184.4 -0.6% Rest of the world 105.5 83.5 -20.9% Total 550.2 550.6 +0.1%
Numbers may not add up precisely to the total due to rounding.
The geographic breakdown of consolidated revenues shows significant progress in France and a stable position in Europe excluding France. Bull's other international business activities suffered a fall in revenues, most notably as a result of the decision to refocus on the sale of the Group's own core products.
. Cashflow EUR millions First half First half 2007 2008 EBIT 9.5 11.5 Depreciation 9.4 6.9 Capital expenditure (8.0) (7.6) (see glossary) Variation in (24.8) (15.4) working capital Cash financial (1.3) (1.4) charges Cash taxes (0.3) 1.0 Operating cashflow (15.5) (5.0) Cashflow from non-current (20.6) (16.5) operations Cashflow (36.1) (21.5) Gross cash position 286.1 283.8 Net cash position 189.0 171.1 Summary consolidated financial statements – Consolidated income statement EUR millions 1H07 1H08 Revenue 550.2 550.6 Gross margin 135.1 24.6% 124.0 22.5% R&D expenses (23.0) 4.2% (14.3) 2.6% Selling, General & Administrative expenses (102.3) 18.6% (97.3) 17.7% Forex gain/(loss) (0.3) (0.9) EBIT : (see glossary) 9.5 1.7% 11.5 2.1% Other operating income 4.0 0.4 Other operating expenses (6.4) (6.9) Share in the net income of associated enterprises 0.1 0.2 Operating income 7.2 5.2 Financial income (2.4) (1.4) Taxes (0.3) 0.9 Net income 4.5 4.7 Minority interests – – Net income Group share 4.5 4.7 – Simplified consolidated balance sheet EUR millions June 30 June 30 2007 2008 Tangible and intangible assets 47.3 42.0 Goodwill 37.7 43.4 Non-current financial assets* 67.3 13.8 Deferred taxes 28.0 28.0 Non-current assets 180.3 127.2 Inventory 45.0 52.2 Accounts receivable 235.0 238.8 Other current assets 58.9 63.7 Guarantee deposits 10.1 3.8 Cash and cash equivalents 202.1 257.3 Current assets 551.1 615.8 Non-current assets available for sale 0.5 – Total assets 731.9 743.0 Shareholders' equity – Group share 81.0 81.0 Minority interests 0.1 – Non-current reserves and liabilities 170.9 159.4 of which CRMF (see glossary) 26.7 26.7 Current reserves and liabilities 479.9 502.6 of which financial debt ** 97.1 112.5 Total liabilities 731.9 743.0
* The decrease of non-current financial assets is mostly due to the sale of OPCVM money-market funds not classified "monetaire Euro" by the AMF.
** Short-term borrowings stood at EUR84.5 million at 30 June 2008, and EUR101.3 million at 30 June 2007
New segmentation of Group business activities
In order to more effectively reflect its business activities, from 2008 Bull is adopting a new segmentation which describes its offerings more accurately in line with the criteria of the market in which it operates.
The new Services and Solutions segment includes all business activities linked to services: consulting, systems integration and outsourcing, licenses for both for Bull and third-party applications, and IT security and sector-specific software solutions. This way of presenting the services and solutions business is therefore more comparable with other companies operating in the same sector.
The new Hardware and Systems Solutions segment includes the Group's core product offerings including integrated solutions based on Bull GCOS, Escala and NovaScale solutions, and secure storage, including the High-Performance Computing (HPC) growth offerings. It reflects the Group's evolution from being a hardware manufacturer, to being an architect of integrated solutions. Revenues from Bull hardware supplied as part of systems integration contracts continue to be accounted for under this segment.
The Fulfillment and Third-Party Products segment includes third-party IT hardware – not in the Bull catalogue – distributed by Bull at the request of its customers. This no-strategic offering is designed to support customers who are looking for a single supplier for all their IT requirements. Separating this business into a dedicated segment should make it easier to understand.
Finally, Maintenance and Product-Related Services (PRS) remains the segment covering business activities relating to maintenance of Bull and third-party products.
This Press release includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause expected results to differ.
Although Bull believes that its expectations and the information in this Press release were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the expected results will be as set out in this Press release. Neither Bull nor any other company within the Bull Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Press release, and neither Bull, any other company within the Bull Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Press release.
(1) Revenue for 2007 has been recast to exclude the Portuguese business (divested in March 2007) and the Maine CI printed circuit boards business (divested in January 2008). Companies acquired in 2007 and 2008 contributed EUR27.9 million to consolidated revenue in the first half of 2008.
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