Earnings Release • Oct 25, 2007
Earnings Release
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Ad-hoc | 25 October 2007 20:55
QSC grows revenues and EBITDA in 3rd quarter of 2007 / Guidance for 2007 reduced
QSC AG / Preliminary Results
Release of an Ad hoc announcement according to § 15 WpHG, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
QSC grows revenues and EBITDA in 3rd quarter of 2007 / Guidance for 2007
reduced
Cologne, October 25, 2007. In a difficult market environment characterized
by a further intensified price competition in conventional voice telephony
as a result of flat rate and Voice over IP offerings, QSC AG succeeded in
growing its revenues: According to preliminary results, they rose by 22
percent to € 83.2 million in the third quarter of 2007, as opposed to €
68.4 million for the same quarter the year before. QSC posted its strongest
growth in the Wholesale/Reseller segment, where revenues rose by 74 percent
to € 31.8 million. However, there were unanticipated delays and capacity
constraints in the company’s collaboration with large wholesale partners
and in the provision of unbundled local loops by Deutsche Telekom
respectively.
In spite of sustained price pressure in conventional voice telephony
revenues also advanced in the segments of Large Accounts and Business
Customers: In the third quarter of 2007, QSC recorded revenues of € 18.6
million with Large Accounts, as opposed to € 17.7 million during the
corresponding period the year before; revenues with Business Customers rose
to € 21.5 million, as opposed to € 20.0 million in the third quarter of
2006. QSC-internal, process-related bottlenecks in connecting new customers
slow the growth in these two segments. Nevertheless, total revenues in the
company’s three strategic segments increased by 29 percent to € 72.0
million, accounting for 87 percent of total revenues. In the non-strategic
Residential Customer segment, sustained price pressure led to an even
faster-than-anticipated decline in revenues to € 11.2 million, as opposed
to € 12.4 million for the same quarter the year before.
The disappointingly small profitability growth in the third quarter was due
to the ongoing price pressure in conventional voice telephony and delays in
connecting new customers, coupled with expansion of network coverage by
nearly 10 percent in the last quarter alone and the resulting operating
expenses. According to preliminary results, QSC generated an EBITDA of €
7.4 million in the third quarter of 2007, as opposed to € 5.2 million for
the same period the year before. Due to the continued expansion of the
network, depreciation expense rose to € 12,6 million as opposed to € 7,2
million in the third quarter of 2006. Consequently, the consolidated net
loss rose to € -4.4 million as opposed to € -2.0 million in the same period
the year before.
Since the beginning of the year, the monthly level of new orders has risen
by some 60 percent without generating a direct and corresponding revenue
growth. Because of these delays, QSC has decided to restructure its
operations and review customer management processes. The company’s
organizational structure now reflects its strategic lines of business and
the growth engines of Managed Services, Direct Access and Wholesale
business; all three business units are fully responsible for their own
processes and profitability, and report directly to the Management Board.
This will result in shorter decision-making, clearer responsibilities and
will play a key role in overcoming the bottlenecks in transforming new
orders into corresponding revenues. However the full effects of the
restructuring will not take effect until the next fiscal year.
Given the weaker-than-anticipated operational development, QSC is therefore
reducing its forecast for the current fiscal year: The company now
anticipates revenues of about € 325 million for 2007 instead of the
previous forecast of more than € 350 million, an EBITDA of about € 35
million instead of between € 50 and € 60 million, as well as a marginally
positive net income instead of the previously forecast € 15 million.
In the fourth quarter of 2007, profitability will be impacted by
non-recurring integration costs as a result of plans to merge Broadnet with
QSC. Beginning next year, this merger will produce synergy effects in the
lower single-digit range, especially in the network and in administration.
The growing level of new orders provides a solid base for QSC to resume its
high-margin growth in 2008 and beyond after overcoming the internal delays
and bottlenecks. From the first quarter of 2008 onwards, the company will
also profit from the completed network expansion to nearly 2,000 central
offices.
Queries to:
QSC AG
Arne Thull
Investor Relations
Fon: +49(0)221-6698-724
Fax: +49(0)221-6698-009
E-mail: [email protected]
Notes:
From November 19, 2007, the complete 9-months report will be available
under http://www.qsc.de/en/investor-relations.html. This corporate news
contains forward-looking statements. These forward-looking statements are
based on current expectations and forecasts of future events by the
management of QSC AG. Due to risks or mistaken assumptions, actual results
may deviate substantially from those made in such forward-looking
statements. The assumptions that may involve material deviations due to
unforeseeable developments include, but are not limited to, the demand for
our products and services, the competitive situation, the development,
dissemination and technical performance of DSL technology and its prices,
the development and dissemination of alternative broadband technologies and
their respective prices, changes in respect of telecommunications
regulation, legislation and adjudication, prices and timely availability of
essential third-party services and products, the timely development of
additional marketable value-added services, the ability to maintain and
enlarge upon marketing and distribution agreements and to conclude new
marketing and distribution agreements, the ability to obtain additional
financing in the event that management's planning targets are not attained,
the punctual and full payment of outstanding debts by sales partners and
resellers of QSC AG, and the availability of sufficient skilled personnel.
25.10.2007 Financial News transmitted by DGAP
Language: English
Issuer: QSC AG
Mathias-Brüggen-Straße 55
50829 Köln
Deutschland
Phone: +49 (0)221 66 98-112
Fax: +49 (0)221 66 98-009
E-mail: [email protected]
Internet: www.qsc.de
ISIN: DE0005137004
WKN: 513700
Indices: TecDAX
Listed: Geregelter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, Stuttgart, München, Düsseldorf
End of News DGAP News-Service
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