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Paris, 31 August 2010

FIRST-HALF 2010 EARNINGS
Ongoing implementation of strategic plan
Operating margin* reaches 5.6%
Bottom line positive

At its meeting of 31 August 2010 chaired by Vincent Rouaix, the board of directors of the GFI Informatique Group approved the consolidated financial statements for the period.
 

* Operating profit on ordinary activities before goodwill impairment, factoring in the accounting changes associated with the reform of the French business tax  in 2010, in the amount of €3 million of CVAE (contribution for value added by businesses) for the first half of 2010.
** Figure as at 31 December 2009

Commenting on these results, Vincent Rouaix, chairman and chief executive officer of GFI Informatique, said: “After a first quarter during which the economic climate continued to take a toll, business indicators improved in the second quarter, thanks in part to our new sales momentum.
This positive trend, combined with the benefits of refocusing on our core businesses by divesting the Italian and German subsidiaries and Consulting and expertise in electronic payments business in France, should carry over to the second half.”

REPOSITIONING STILL UNDER WAY

Implementation of the strategic plan has meant further repositioning of the businesses in France and more commercial success. This repositioning consisted in particular in:

• consolidating our business with major accounts by increasing our delivery capabilities and the volume of fixed price project through the strengthening of our industrial division,
• structuring our commercial approach around a drive for increased share of high value added markets, supported by our sector-based organisation,
• developing our teams through enhanced skills management.

In France, this strategy of analysing our business portfolio has led the Group to sell its Consulting and expertise in electronic payments business, which was loss making and, with a yearly turnover of €10m, lacked critical size. At the same time as committing to sell this business, GFI signed a cooperation agreement with Galitt, the buyer, notably designed to allow the two partners to serve specific customers jointly.
Internationally, as was previously announced, the Group has focused on markets where it can quickly unleash synergies with the French customer base and win market share. In March 2010, this strategy led GFI to sell its German and Italian subsidiaries. These non-core businesses had been hard hit by the crisis in 2009 and were making small or negative contributions to Group earnings.

Business levels more robust in the second quarter – Profitability up

Revenue increased by 1.1% in the first half of 2010, rising to €336.8m from €333.3m a year earlier; on a like-for-like basis, revenue was down 3.1%. Trends were more dynamic in the second quarter with revenue reaching €168.9m versus €163.2m a year earlier, for a 3.5% rise on a reported basis and an organic decline of just 0.6%.
These figures reflect GFI Informatique’s decision earlier this year to terminate a number of subcontracting deals worth approximately €6m, the margins of which were below what the Group was targeting. Stripping this out, revenue would have risen by 2.9% on a reported basis and declined by just 1.3% organically.
Gross operating profit climbed to €18.8m, or 5.6% of revenue, from €12.3m (3.3% margin) in the first half of 2009 not taking into account the sale of the Italian and German subsidiaries, excluding which it reached €14.6m (4.4% of revenue).

France

Revenue generated in France totalled €241.4m, against €248.4m in the first six months of 2009. Compared with last year, the trend was more robust in the second quarter with revenue coming in at €119.7m versus €119.2m in 2009.

 

New sales successes confirm that the Group is enhancing its image with big-name customers, thanks to its sector-based approach as well as its industrialisation and proximity to customers. Successes included the Cassiopee facilities management contract with the Ministry of Justice and service centre contracts with Orange, Bouygues Telecom and SFR for offer configuration. Business levels in the Energy-Utilities sectors also rose sharply.
This sales momentum notably translated into an improved book-to-bill ratio at mid-year and considerably enhanced sales activity in quantity and quality terms.

Lastly, plans to house the Group’s Ile de France operations within a single building got under way during the first half, which should boost synergies and generate savings in the last six months of the year. Announced late in December, the move will bring Paris employees currently working at seven different locations together in one building. In spite of these one-off costs, the move will enhance operating margin starting in 2010 and have a positive impact on cash in the very near future. It will also allow internal synergies to be unleashed more quickly by mobilising the teams around a development programme that is highly motivating as well as promising for customers.

 

International

Revenue in Spain contracted by 9.2% to €33.4m after economic conditions there remained extremely trying. Gross operating profit came in at €0.6m, down from €1.2m in the first half of 2009.
Business was nonetheless buoyant during the first half with new customers won, including the Madrid city hall.

Portugal recorded revenue growth of 14.7% on the back of solid trends in payment system integration and software solution sales; revenue reached almost €15.2m, with gross operating profit coming in at €0.2m.

Revenue generated by the Belux activities was steady at €8.7m, thanks in part to new accounts including Fortis. Gross operating profit rose to €0.4m from €0.1m a year earlier, notably buoyed by the successful reorganisation in Luxembourg.

Canada saw a 51.8% jump in reported revenue to €35.3m, taking into account the Fortsum acquisition, but in organic decline of 6.5%. Gross operating profit came to €5.8m versus €1.2m in the first six months of 2009, which had been particularly disappointing.

Organic growth continued in Morocco (7.9%) with revenue rising to €2.4m in the first half despite postponements of several major projects. Gross operating profit of €0.4m was in line with our forecasts.

 

Non-current charges relatively low excluding moving costs

Expenses not related to ordinary activities totalled €7.6m, including €2.7m of restructuring costs chiefly for France and Spain and €4.9m of other costs of which €4.2m for the move to Saint-Ouen.

A positive bottom line

Operating profit rose to €9.1m from €6.7m in 2009, while net profit before income (loss) from discontinued activities was €5.1m factoring in interest expenses and a €1.0m tax charge. The latter includes €6.9m of income from the use of a deferred tax asset, notably resulting from capital tax losses on the disposal of the German and Italian subsidiaries.
Net profit excluding income (loss) from discontinued activities (Germany and Italy) thus reached €5.1m and net profit €3.4m, compared with an €11.0m loss in 2009.

Cash flow

Cash flow before interest and tax rose sharply year-on-year, climbing to €17.5m from €11.0m at 30 June 2009. As could be expected, working capital requirement increased by €8.5m during the first half, although this seasonal trend should be offset in the second half.
With capital expenditure of just €6.2m, net debt stood at €103m at end-June 2010, compared with €113m at 30 June 2009 and €95m at 31 December 2009.

OUTLOOK ENCOURAGING DESPITE STILL CHALLENGING ENVIRONMENT IN 2010

Business levels should continue to improve during the second half, as suggested by trends in business indicators during the first six months.
The improved performances recorded in the first half were thus an initial success underpinning the wisdom of the policy the Group is implementing.
This policy – focused on creating value, controlling costs and offering ever more value added to customers – will continue to be implemented.
In addition, following its reorganisation, the Group will, if circumstances allow, participate in sector consolidation through deals involving small or medium-sized companies that fit with our value-added focus and strategic vision.

The Group still plans to increase its profitability in 2010 while further reducing debt.

About GFI Informatique

GFI is a major player in the IT services sector in Southern Europe with five strategic offerings: Consulting, ERP Integration, Engineering, Infrastructures & Production and Software Solutions. As part of its industrialisation policy, the Group has 11 skills centres, two national design and production service centres and three offshore centres.

GFI Informatique is listed on the Paris Euronext, NYSE Euronext (Compartment B)
ISIN Code: FR0004038099.
 

            

Investor relations	Economic and financial press
Cyril MALHER Administrative and Financial Director + 33 (0)1 53 93 44 40 cmalher@gfi.fr	Alix Heriard Dubreuil +33 1 56 43 44 62 alix.heriard@keima.fr

 

Appendices

 

P/L (IFRS 5 presentation)

 

Analysis of revenue

Balance sheet (IFRS 5 presentation)

 

Cash Flows statements (IFRS 5 presentation)

 

 

P/L reconciliation with IFRS 5 application

Balance sheet reconciliation with IFRS 5

Cash flows statement reconciliation with IFRS 5