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GFT Financial Limited. 9th floor, 107 Cheapside
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261 Madison Avenue, 19th Floor,
New York City
NY 10016
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GFT Brasil Consultoria Informática Ltda. Alameda Rio Negro, n° 585 Ed. Padauiri,
10° andar, Alphaville,
06454-000 Barueri -SP
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T +44 20 3372 9200

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Tim Osler / Dawn Blenkiron / Benjamin Tranham
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GFT posts best quarterly result for two years

  • Third quarter earnings before taxes (EBT) up 14 percent year on year to EUR 4.02 million
  • Services division: year-on-year growth of 5 percent in revenue and 7 percent in earnings in first nine months
  • Resourcing division posts slight revenue growth in core business; general performance below expectations
  • Executive Board adjusts guidance for 2012 as a whole: total revenue of EUR 233 million and pre-tax earnings of EUR 11 million expected

GFT Technologies AG (GFT) closed the third quarter of 2012 with one of the best quarterly results in its history. Growth was encouraging in the Services division. At EUR 7.80 million, the EBT of the GFT Group was 14 percent down on the previous year (EUR 9.05 million). However, this figure includes investments in the innovation initiative CODE_n12 totalling EUR 1.35 million. Consolidated revenue in the first nine months amounted to EUR 174.61 million, 16 percent below the corresponding figure last year (EUR 207.87 million). There was a noticeable impact from the planned reduction of less profitable business in the field of Third Party Management. In the core business of its Resourcing segment, GFT achieved revenue growth of 4 percent but fell short of expectations. Against this backdrop, the Executive Board of GFT has adjusted its guidance for the financial year 2012: revenue of EUR 233 million and EBT of EUR 11 million is expected. “We are in the course of restructuring the Resourcing division. Measures have been initiated which will significantly strengthen and expand our position. These will already be effective in financial year 2013,” says GFT’s CEO Ulrich Dietz. “The Services division continues to make encouraging progress with growth in new orders received. Our portfolio of offerings addresses exactly those topics which interest the finance sector in these times.”

Revenue: stable performance over the year, growth of 5 percent in Services segment

In the first nine months of 2012, GFT generated revenue of EUR 174.61 million and thus 16 percent less than in the same period last year (EUR 207.87 million). The development of revenue has been stable throughout the year so far: after EUR 57.65 million in the first and EUR 58.73 million in the second quarter, GFT generated revenue of EUR 58.23 million in the third quarter. The Services division accounted for the largest share of total revenue with an amount of EUR 90.48 million (previous year: EUR 86.26 million). By contrast, the Resourcing segment generated EUR 84.13 million in the first nine months (previous year: EUR 121.41 million). This decline is due to the planned reduction of sales in the Third Party Management business. These activities accounted for revenue of EUR 16.55 million in the period under review (previous year: EUR 56.73 million). Revenue from traditional consulting activities in the field of Resource Management grew by 4 percent to EUR 67.58 million (previous year: EUR 64.68 million).

An analysis of revenue in the GFT Group’s national markets reveals that France in particular achieved significant growth with a year-on-year increase in the first nine months of 26 percent. In Germany, the planned reduction of Third Party Management business had a corresponding impact on revenue, which fell by 40 percent in comparison to the first three quarters of 2011. Despite a volatile market environment, revenue in the UK fell just short of the high prior-year level. In the face of challenging conditions in Spain, GFT succeeded in raising revenue by 6 percent. There was an even more positive development for GFT in the USA: the year-on-year increase of 68 percent was due to growing demand from the corporate and investment banking sector. As of 30 September 2012, revenue in Switzerland was in line with the prior-year figure.

EBT: earnings make strong progress over course of year, 60 percent increase in third quarter over preceding quarter

At EUR 4.02 million, the GFT Group recorded one of its best-ever quarterly results. After EUR 1.27 million in the first and EUR 2.51 million in the second quarter, the positive development of EBT was continued in the third quarter. All in all, earnings before taxes in the first nine months of 2012 amounted to EUR 7.80 million (previous year: EUR 9.05 million). The year-on-year decline of 14 percent resulted from investments for the innovation initiative CODE_n12. Expenses of EUR 1.35 million affected EBT in the first quarter.

Positive effects on EBT resulted from the Services division. In the nine months under review, segment earnings totalled EUR 7.93 million and were up 7 percent on the previous year (EUR 7.40 million). The Resourcing division was unable to meet expectations for earnings in Switzerland, the UK and Germany. With EBT of EUR 1.59 million (previous year: EUR 2.66 million), the segment fell short of the prior-year figure.

Other key figures: balance sheet structure still solid; growing number of employees

As of 30 September 2012, the GFT Group posted net income of EUR 5.10 million (previous year: EUR 6.76 million). There was growth of 3 percent in cash, cash equivalents and securities, which amounted to EUR 29.08 million at the end of the third quarter (previous year: EUR 28.16 million). Earnings per share stood at EUR 0.19 and were thus 7 cents below the prior-year figure (EUR 0.26). Headcount increased by 50 persons to a total of 1,371 employees at the end of the third quarter 2012 (previous year: 1,321). This growth resulted from an acquisition made in the USA in October 2011 and the expansion of activities in Spain. In Germany, the number of employees fell from 288 to 274 as of the reporting date.

Outlook: full-year guidance for revenue and earnings adjusted; restructuring of Resourcing division making good progress

“For the remaining three months of the financial year 2012, we expect to continue the positive trend of the third quarter on the whole,” explains GFT’s CEO Ulrich Dietz. After deducting special items – for the innovation initiative CODE_n12 – earnings before taxes at year-end will be above the prior-year figure. In the fourth quarter, the Services segment is benefitting from increased demand in the corporate and investment banking sector. Consistently strong demand for modern core banking solutions, customer management systems and outsourcing services in the financial services sector will also have a positive impact on revenue and earnings.

Challenging market conditions and weaker demand for freelance IT specialists and engineers due to the economic situation, however, will slow the development of the Resourcing division. As a consequence, the GFT Group has already taken steps to optimise the division. At the beginning of 2013, GFT will introduce measures to improve the division’s market image. “We expect this to give us a more effective market positioning,” says Dietz.

Based on the developments stated above, the Executive Board has adjusted the guidance for financial year 2012 which it announced in the Consolidated Financial Statements 2011: it now expects revenue of EUR 233 million (formerly EUR 250 million) and an EBT result of EUR 11 million (formerly EUR 12 million). The outlook for 2013 is optimistic. The planned restructuring of Resourcing business aimed at raising earnings of the entire Group is already showing initial success and will have impact in the years ahead. The GFT Group expects that the current dynamic growth of the Services segment will continue.

Key figures in accordance with IFRS*:

IFRS figures in EUR million

01.01.-30.09.2012

01.01.-30.09.2011

Revenue

174.61

207.87

EBITDA

8.81

9.49

EBIT

7.65

8.53

Earnings before taxes (EBT)

7.80

9.05

Net income as of 30.09.

5.10

6.76

Earnings per share acc. to IAS 33 in EUR

0.19

0.26

Equity ratio in percent

59

58

Employees, absolute figure as of 30.09.

1,371

1,321

* Deviations possible due to rounding differences