Pompey, France 02/08/2007 07:30:00 AM
GLOBAL GRAPHICS SA (Euronext: GLOG), experts in developing technology for open document and print solutions, announces financial results for the fourth quarter and the year ended 31 December 2006.
Comparisons for the fourth quarter of 2006 with the fourth quarter of 2005 include:
- Sales of Euro 5.0 million this quarter (Euro 5.4 million at Q405 exchange rates) compared with Euro 5.0 million in Q4 2005;
- EBIT of Euro 1.9 million this quarter, compared with Euro 2.0 million in Q4 2005;
- Pro forma operating profit (EBITA) of Euro 1.6 million this quarter, compared with Euro 1.9 million in Q4 2005;
- Pro forma pre-tax income of 1.6 million this quarter (or Euro 0.16 per share) compared with Euro 1.9 million in Q4 2005 (or Euro 0.18 per share);
- Net income of Euro 1.6 million this quarter compared with Euro 3.5 million in Q4 2005; and
- Pro forma net income of Euro 1.4 million (or Euro 0.14 per share) compared with Euro 3.4 million in Q4 2005 (or Euro 0.34 per share).
Commenting on performance, Jim Freidah, Chief Operating Officer, said, “The traditional graphic arts market continued to be slow in the last quarter of 2006, fuelled by the continued consolidation between players. Consequently, sales were sluggish from both our system integrator customers, and particularly from hardware manufacturers.
“However, overall the fourth quarter showed a 7.4% increase in revenues compared to the fourth quarter of 2005 at constant exchange rates. This was due to strong sales in the digital print market, notably a major contribution in the digital press segment due to HP’s launch of next-generation RIP and workflow technology, and by the initial revenue recognition of some XPS contracts.
“During the quarter we signed two new digital print contracts, one with HP and another in Japan that brings the total of new XPS-related contracts to three. We continue to work with a number of printer manufacturers on our XPS Early Adopter Program and are in various stages of negotiation with several companies. We expect further contracts to be signed in the first half of the year.”
Fourth quarter 2006 performance
Sales for the fourth quarter 2006 amounted to Euro 5.0 million, as in the fourth quarter 2005. Approximately 90.2% of the Company’s sales were denominated in US dollars this quarter (at an average rate of USD 1.299 for 1 Euro), and exchange rate fluctuations with the Euro continued to impact upon the Company’s sales and results of operations. Had this quarter’s sales been converted at the average US dollar rate applicable in the same quarter of 2005 (USD 1.189 for 1 Euro), sales would have amounted to approximately Euro 5.4 million, representing an increase of 7.4% over those reported in Q4 2005 at constant exchange rates.
Total operating expenses (excluding cost of sales, intangible assets amortization and share compensation expenses, as well as the net effect of capitalized development expenses of Euro 0.4 million) for this quarter amounted to Euro 3.2 million, compared with Euro 3.0 million in Q4 2005, and compared to Euro 3.1 million in Q3 2006.
EBIT was Euro 1.9 million this quarter (or 37.7 % of quarterly sales), compared with Euro 2.0 million in Q4 2005 (or 40.0 % of Q4 2005 sales).
EBITA (pro forma operating profit, as defined in the accompanying table) was Euro 1.6 million for this quarter, compared with Euro 1.9 million in Q4 2005. Accordingly, EBITA margin dipped to 32.1% of quarterly sales this quarter, compared with 37.7% in Q4 2005.
Pro forma pre-tax income (as defined in the accompanying table) was Euro 1.6 million for this quarter, compared with Euro 1.8 million in Q4 2005. Accordingly, pro forma pre-tax EPS decreased slightly from Euro 0.18 in Q4 2005 to Euro 0.16 this quarter.
Net income was Euro 1.6 million this quarter (or Euro 0.16 per share), compared with Euro 3.5 million in Q4 2005 (or Euro 0.34 per share).
Pro forma net income (as defined in the accompanying table) was Euro 1.4 million for this quarter (after effect of a Euro 0.2 million deferred tax charge) compared with Euro 3.4 million for the same period of 2005 (after effect of a Euro 1.6 million deferred tax benefit). Accordingly, pro forma net EPS decreased from Euro 0.34 in Q4 2005 to Euro 0.14 this quarter.
Full year 2006 performance
Sales for the year 2006 were Euro 17.0 million versus Euro 19.6 million in 2005, or a decrease of 13.0% at current exchange rates. Approximately 82.4% of the Company’s sales in 2006 were denominated in US dollars (at an average rate of USD 1.259 for 1 Euro). Had 2006 sales been converted using the average US dollar rate applicable in 2005 (i.e. at an average rate of USD 1.239 for 1 Euro), sales would have amounted to approximately Euro 17.3 million, or a decrease of 11.5% over sales made in 2005 at constant exchange rates.
Sales for 2006 into the Company’s traditional graphic arts market showed a 13.6% decline at constant exchange rates (a 14.0% decline at current exchange rates) over 2005.
Sales into new segments, namely digital print and electronic documents, decreased 12.2% at constant exchange rates compared with 2005 (a 12.1% decrease at current exchange rates), and accounted for 56.8% of total revenues for 2006 versus 56.4% for 2005.
Total operating expenses for 2006 (excluding cost of sales, intangible assets amortization and share compensation expenses, as well as the net effect of capitalized development expenses of Euro 1.1 million) amounted to Euro 13.0 million, compared with Euro 11.8 million for 2005.
EBIT was Euro 4.3 million in 2006, or 25.5% of 2006 sales, versus Euro 3.3 million for 2005, or 16.7% of 2005 sales.
EBITA was Euro 3.6 million for 2006, or 21.0% of 2006 sales, versus Euro 7.2 million for 2005, or 36.9 % of 2005 sales.
Pro forma pre-tax income was Euro 3.8 million for 2006, or Euro 0.38 per share, compared with Euro 7.0 million, or Euro 0.70 per share, for 2005.
Net income was Euro 2.9 million for 2006 (or Euro 0.29 per share), compared with Euro 6.1 million for 2005 (or Euro 0.61 per share).
Pro forma net income was Euro 2.5 million for 2006 (after effect of a Euro 1.5 million deferred tax charge), or Euro 0.25 per share, compared with Euro 9.6 million (after effect of a deferred tax benefit of Euro 2.8 million), or Euro 0.96 per share.
2007 outlook
Jim Freidah continued, “As we look to 2007, we expect revenues from our traditional market to be slow and we anticipate continued consolidation. However, we expect a strong year for digital print. Notably, we see that demand will continue for incorporating our software into digital production presses that are used in commercial print. It is this high end of the digital print market that is eroding revenues from the traditional graphic arts market. We also see continued growth in XPS-related contracts.
“During 2007, we are also planning a major push in the electronic document space to leverage next-generation tools for document creation, conversion, and manipulation using the requirement for XPS compatibility as a catalyst. We have already launched an eDocument Early Adopter Program and will target signing new contracts before the end of the fourth quarter of 2007.
“The company plans to continue its controlled investment into new resources to support our expansion into and continued development of the electronic document and digital print segments. We plan to expand our India subsidiary (currently 21 people) as one means of helping us achieve this.
“It should be noted that the recently signed XPS contracts, as well as those we expect to sign in the coming months, are significant, multi-year, multiple-element contracts which are expected to generate revenues for the Company from 2007 onwards. However, the extent of this revenue will remain unknown to the Company’s management for as long as these contracts are not signed. Consequently, the Company considers it is more appropriate to postpone more precise guidance on 2007 sales and earnings until 19 April 2007 when it expects to release its results for the first quarter of 2007.”
Share buy-back programme
In accordance with the authority granted to the Board of Directors by the Company's shareholders at their meeting on 20 April 2006, the Company initiated its share repurchase programme in the course of the third quarter of the year ended 31 December 2006. Pursuant to such programme, a total of 37,670 of its own shares were purchased back by the Company during the year ended 31December 2006, at an average price of Euro 10.59 a share. It is the Company’s intention to continue to repurchase some of its own shares at such times and in such quantities as deemed appropriate.
All of these shares were allocated to the first of the three objectives assigned to the Company's share repurchase programme, i.e. to meet obligations arising from the Company's share option and share grant plans.
More information on the Company’s share repurchase programme may be found in the information memorandum (available in both French and English) which was released by the Company on 18 August 2006, and can be downloaded from the investor section of the Company’s website at: www.globalgraphics.com.
Fourth quarter and full year 2007 conference call details
Global Graphics will hold a conference call today at 10.00a.m. CET. Callers should dial +44 (0)20 7162 0125 and mention "Global Graphics quarterly results conference call" to the operator. The call will be available for replay for 7 working days by dialing number +44(0)20 7031 4064 (freephone number UK only: 0800 3581860), access code 736511.
Auditors’ reports on 2006 accounts
The attached consolidated financial statements and selected explanatory notes thereto which were drafted by the Company’s Board of Directors on 7 February 2007, have been audited by the Company’s auditors, and are therefore final. The Company’s auditors still have additional audit procedures to perform, including, but not limited to, the Company’s statutory accounts and the full version of the notes attached to the consolidated accounts. As in previous years, their final audit reports will be included in the Company’s annual report for the year ended 31 December 2006.
Annual report
The Company expects to publish the electronic versions of its annual report (in English and in French) on or around 21 March 2007. Printed copies of the English and French reports will be available shortly thereafter. Should you wish to receive one or several copies of the Company’s annual report for 2006, please let us know by sending an e-mail to the following e-mail address: investor-relations@globalgraphics.com, or a request in writing to the registered office of the Company.
Annual meeting
The annual meeting will take place on Thursday 19 April 2007. The precise timing, agenda and voting procedures will be announced a minimum of 35 days in advance of such date.
First quarter 2007 results announcement
Global Graphics expects to announce its financial results for the quarter ending 31 March 2007 on Thursday 19 April 2007 before market opening.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
In thousands of Euro, except share data in Euro
Quarters Years ended
ended 31 December 31 December
2006 2005 2006 2005
Unaudited figures Audited figures
Sales (note 5) 4,974 5,014 17,024 19,561
Cost of sales (137) (118) (480) (584)
Amortization of intangible assets (17) (20) (68) (2,134)
GROSS PROFIT 4,820 4,876 16,476 16,843
Selling, general & administrative expenses (1,293) (1,278) (5,785) (4,954)
Research and development expenses (1,591) (1,487) (6,093) (6,476)
Share compensation expenses (41) (83) (174) (395)
Amortization of intangible assets (19) (20) (76) (1,760)
Other operating income (expenses) 0 0 0 0
OPERATING PROFIT 1,876 2,008 4,348 3,258
Interest income 21 16 101 33
Interest expenses (21) (55) (130) (233)
Foreign exchange gains (losses), net 39 3 354 42
PROFIT BEFORE INCOME TAX 1,915 1,972 4,673 3,100
Income tax expense (benefit) (note 6) 303 (1,513) 1,681 (3,059)
NET PROFIT 1,612 3,485 2,992 6,159
EARNINGS PER SHARE (note 7)
Basic net profit per share 0.16 0.34 0.29 0.61
Diluted net profit per share 0.16 0.34 0.29 0.60
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The accompanying selected explanatory notes are an integral part of the Company’s consolidated financial statements for the year ended 31 December 2006.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In thousands of Euro
Audited figures
31 December
ASSETS 2006 2005
NON-CURRENT ASSETS
Property, plant and equipment 1,039 308
Intangible assets 1,770 782
Goodwill 8,514 8,331
Other non-current assets 149 372
Deferred tax assets (note 4) 4,269 5,737
TOTAL NON-CURRENT ASSETS 15,741 15,530
CURRENT ASSETS
Inventories 94 170
Trade receivables 3,814 3,599
Current tax receivables 423 92
Other current assets 164 34
Prepaid expenses 440 438
Cash 3,310 4,548
TOTAL CURRENT ASSETS 8,245 8,881
TOTAL ASSETS 23,986 24,411
LIABILITIES & SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Share capital (note 8) 4,099 4,063
Share premium (note 8) 28,754 28,362
Share options outstanding 2,108 1,934
Reserve for own shares (note 9) (399) 0
Accumulated deficit (7,143) (10,135)
Foreign currency translation reserve (6,638) (6,648)
TOTAL SHAREHOLDERS' EQUITY 20,781 17,576
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings 0 240
Other non-current liabilities 2 2
TOTAL NON-CURRENT LIABILITIES 2 242
CURRENT LIABILITIES
Borrowings 0 4,200
Bank overdrafts 234 321
Trade payables 457 526
Other payables 837 624
Customer advances and deferred revenue 1,675 922
TOTAL CURRENT LIABILITIES 3,203 6,593
TOTAL LIABILITIES 3,205 6,835
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 23,986 24,411
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The accompanying selected explanatory notes are an integral part of the Company’s consolidated financial statements for the year ended 31 December 2006.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
In thousands of Euro
Audited figures Years ended
31 December
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
* Profit before income tax 4,673 3,100
* Adjustments for:
- Depreciation on property, plant and equipment 214 181
- Amortisation of intangible assets 144 3,894
- Amortisation of capitalised development expenses 55 16
- Share compensation expenses 174 395
- Interest expenses (interest income) 29 200
- Foreign currency exchange losses (gains) (354) (42)
- Expenses offset against the share premium (note 8) (11) (10)
- Other items 675 642
* Change in value of operating assets and liabilities:
- Inventories 76 (101)
- Trade receivables (215) (855)
- Current tax receivables (331) 51
- Other current assets (130) 47
- Prepaid expenses (2) (82)
- Trade payables (69) 90
- Other payables 213 (561)
- Customer advances and deferred revenue 753 (121)
* Interest received 86 20
* Interest paid (127) (240)
* Income tax paid (231) (208)
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,622 6,416
CASH FLOWS FROM INVESTING ACTIVITIES
* Acquisition of property, plant and equipment (912) (213)
* Capitalised development costs (1,149) (557)
NET CASH USED IN INVESTING ACTIVITIES (note 5) (2,061) (770)
CASH FLOWS FROM FINANCING ACTIVITIES
* Proceeds from the exercise of share options (note 8) 439 456
* Repurchase of own shares (note 9) (399) 0
* Repayment of bank overdrafts (87) (158)
* Repayment of borrowings (4,440) (4,350)
NET CASH USED IN FINANCING ACTIVITIES (4,487) (4,052)
NET INCREASE (DECREASE) IN CASH (926) 1,594
CASH AT 1 JANUARY 4,548 2,640
EFFECT OF EXCHANGE RATE FLUCTUATIONS
ON CASH HELD AT 1 JANUARY (312) 314
CASH AT 31 DECEMBER 3,310 4,548
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The accompanying selected explanatory notes are an integral part of the Company’s consolidated financial statements for the year ended 31 December 2006.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
In thousands of Euro
Audited figures
Years ended
31 December
2006 2005
Shareholders’ equity at 1 January 17,576 9,699
* Recognized income for the period:
- Net profit for the period 2,992 6,159
- Change in foreign currency translation reserve 10 877
Total recognized income for the period 3,002 7,036
* Effect of share option and share grant schemes:
- Value of services rendered during the period 174 395
- Net proceeds from shares issued in the period (note 8) 428 446
Total effect of share option and share grant schemes 602 841
* Repurchase of own shares (note 9) (399) 0
Shareholders’ equity at 31 December 20,781 17,576
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The accompanying selected explanatory notes are an integral part of the Company’s consolidated financial statements for the year ended 31 December 2006.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
SELECTED EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2006
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NOTE 1: REPORTING ENTITY
These condensed consolidated financial statements as at and for the year ended 31 December 2006 comprise Global Graphics SA, a French-based company, and its subsidiaries (together referred to as ‘the Company’).
They were approved for issue by the Board of Directors on 7 February 2007.
NOTE 2: STATEMENT OF COMPLIANCE
These condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and related interpretations issued by the International Accounting Standards Board, as adopted by the European Union.
For the purposes of their inclusion in the Company’s year-end earnings release, they do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended 31 December 2005.
NOTE 3: ACCOUNTING POLICIES AND METHODS
(a) Basis of preparation
These condensed consolidated financial statements as at and for the year ended 31 December 2006 have been prepared under the historical cost convention, except for the revaluation of financial assets and financial liabilities (including derivative instruments as appropriate) at fair value through the income statement.
Non-current assets are stated at the lower of amortized cost and fair value less disposal costs, when applicable.
(b) Accounting policies and methods
The accounting policies and methods used for the preparation of the Company’s condensed consolidated financial statements as at and for the year ended 31 December 2006 are the same as those used for the preparation of the Company’s consolidated financial statements as at and for the year ended 31 December 2005, which are set out in note 2 to the Company’s consolidated financial statements for that year.
NOTE 4: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in accordance with IFRSs requires the use of certain critical accounting estimates.
It also requires management to exercise judgement in the process of applying the Company’s accounting policies, and to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other relevant factors that are believed to be reasonable under the circumstances, the results of which form the basis of making management’s judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period and future periods if the revision affects both current and future periods.
Estimates and judgements made by management in the application of IFRSs that involve a higher degree of complexity, have a significant effect on the condensed consolidated financial statements as at and for the year ended 31 December 2006, or have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next twelve months, are discussed hereafter.
(a) Impairment of goodwill and other intangible assets
The Company is required to test annually whether goodwill and intangible assets with indefinite useful lives have suffered any impairment during the year in accordance with the accounting policy set out in note 2k to the Company’s consolidated financial statements for the year ended 31 December 2005.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations used cash flow projections based on actual sales and operating results, as well as a four-year forecast for sales and operating margins approved by management. A pre-tax discount rate of 6.0% was used in discounting the projected cash flows. The key assumptions to determining their value were as follows: (i) an annual 10.0% sales growth was assumed over the forecast period; and (ii) pro forma operating margins were set to increase up to 35.0% of sales over the forecast period, such improvement over the 2006 pro forma operating margin of 21.0% being considered as achievable by management with regards to the forecast increase in sales.
Based on this review, no impairment charge was recognized in respect of this impairment test in either 2005 or 2006.
(b) Capitalisation of computer software development costs
As stated in note 2i to the Company’s consolidated financial statements for the year ended 31 December 2005, costs associated with developing or maintaining existing computer software technology and programmes are recognised as an expense when incurred.
As required by IAS 38, Intangible assets (IAS 38), costs that are directly associated with the production of identifiable and unique software products over which the Company has proprietary rights, that can be measured reliably, and where it is probable that future economic benefits attributable to such software products will flow to the Company, are recognised as intangible assets. Such costs consist solely of direct costs, and include the software development employee costs as well as an appropriate portion of relevant overheads. Computer software development costs recognized as intangible assets are then amortised over their estimated useful lives, which do not exceed three years, starting from the completion date of the corresponding development project.
(i) Capitalized development costs as at and for the year ended 31 December 2005
At 31 December 2005, the Company considered that it could demonstrate that it met all of the above-mentioned recognition criteria for two specific projects. Accordingly, a total of Euro 353,000 was capitalized and recognized as an intangible asset at that date.
Capitalized development expenses corresponding to the first project, which was completed and launched in early September 2005, are amortized from completion date over the expected useful life of the asset expected to end on 30 June 2007.
The amortization charge which was recognized with respect of this project in the quarter and in the year ended 31 December 2005 amounted to Euro 14,000 and Euro 16,000, respectively.
As the development of the second project was not completed at 31 December 2005, no amortization charge was recognized in either the quarter and in the year ended 31 December 2005 with regards to this second project.
(ii) Capitalized development costs as at and for the year ended 31 December 2006
At 31 December 2006, the Company considered it could demonstrate that it met all of these recognition criteria for three specific development projects.
Capitalized development expenses corresponding to the first project amounted to Euro 99,000 at 31 December 2006. The corresponding amortization charge which was recognized in the quarter and in the year ended 31 December 2006 with regards to this first project amounted to Euro 14,000, and Euro 55,000, respectively.
Capitalized development expenses corresponding to the other projects amounted to Euro 1,410,000 at 31 December 2006, following the capitalization of additional development expenses of Euro 368,000 and Euro 1,149,000 in the quarter and in the year ended 31 December 2006, respectively.
As the development of these projects was not completed at 31 December 2006, no amortization charge was recognized in the quarter and the year ended 31 December 2006 with regards to these two projects.
(c) Income tax
(i) Current income tax
The Company is subject to income tax in France and in all jurisdictions where it has subsidiaries (notably in the UK and the US).
Significant judgement is required in determining the provision for income taxes, as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax provisions in the period in which such determination is made.
A non-recurring, current income tax benefit of Euro 528,000 was recorded in the year ended 31 December 2005 in this respect (see note 6 for further details).
(ii) Deferred income tax
The Company recognises deferred tax assets as stated in note 2w to the Company’s consolidated financial statements for the year ended 31 December 2005. In evaluating whether it is probable or not that a deferred tax asset recognised in a specific jurisdiction may be utilised against future taxable profits to be recognised in that jurisdiction, the Company uses estimates of future taxable profits over an appropriate period of time from the balance sheet date, based on growth and profit assumptions considered to be appropriate by management.
Deferred tax assets are predominantly attributable to capital allowances available to the UK subsidiary as the result of the acquisitions made by the Company in the years ended 31 December 1999 and 2000. Although such allowances may be used without any deadline, they can only be used in a given year up to 25% of the outstanding balance at the beginning of that year.
At 31 December 2005, considering both the recent history of tax profits made by the UK subsidiary in the years ended 31 December 2003 to 2005 inclusively, and the projected tax profits to be made in the coming years, management considered it was appropriate to recognize a deferred tax asset corresponding to the amount of capital allowances the Company projected to use over the next four years: this resulted in the recognition of a deferred tax asset amounting to a total of Euro 5,695,000 at that date.
The recognition of a deferred tax asset corresponding to the amount of capital allowances the Company projected to use over the four-year period ending 31 December 2010 to offset taxable profit to be made by its UK-based subsidiary over that period resulted in the recognition of a deferred tax asset amounting to a total of Euro 4,622,000 at 31 December 2006, and a corresponding deferred tax charge amounting to Euro 106,000 and Euro 1,182,000 in the quarter and in the year ended 31 December 2006, respectively.
NOTE 5: SEGMENT REPORTING
(a) Primary reporting format - by business segment
The Company is engaged in only one segment of business. It is therefore not required to provide information in this respect.
(b) Secondary reporting format - by geographical area
The Company operates in four main geographical areas, even though the Company is managed on a worldwide basis, which are as follows: Continental Europe (including France, which is the home country of the Company), the UK, North America (USA and Canada) and Asia (notably Japan).
(i) Geographical allocation of sales
The allocation of sales made in above-mentioned geographical areas during the quarters and the years ended 31 December 2006 and 2005, respectively, is as follows:
Quarters Years ended
ended 31 December 31 December
2006 2005 2006 2005
Continental Europe 649 895 2,408 3,118
United Kingdom 243 400 1,487 1,467
North America 2,157 2,730 8,541 10,865
Asia (including Japan and India) 1,913 971 4,542 4,037
Other countries 12 18 46 74
Total sales 4,974 5,014 17,024 19,561
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(ii) Geographical allocation of capital expenditures
The allocation of capital expenditures made in above-mentioned geographical areas during the quarters and the years ended 31 December 2006 and 2005, respectively, is as follows:
Quarters Years ended
ended 31 December 31 December
2006 2005 2006 2005
Continental Europe 0 0 0 2
United Kingdom 889 363 1,962 749
North America 10 6 39 19
Asia (including Japan and India) 25 0 60 0
Other countries 0 0 0 0
Total capital expenditures 924 369 2,061 770
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NOTE 6: INCOME TAX EXPENSE (BENEFIT)
(a) Current income tax
The Company recorded a current income tax charge amounting to Euro 106,000 in the quarter ended 31 December 2006 (compared with a charge of Euro 126,000 in the quarter ended 31 December 2005), resulting in a current income tax charge of Euro 148,000 in the year ended 31 December 2006 (compared with a benefit of Euro 289,000 in the year ended 31 December 2005).
As indicated in note 4c, the current income tax benefit recorded in the year ended 31 December 2005 principally related to the write-back of the balance of a provision which was recorded at the time of the acquisition of the assets and business of the Harlequin group of companies.
(b) Deferred income tax
The Company recorded a deferred income tax charge amounting to Euro 197,000 in the quarter ended 31 December 2006 (compared with a benefit of Euro 1,639,000 in the quarter ended 31 December 2005), resulting in a deferred income tax charge of Euro 1,533,000 in the year ended 31 December 2006 (compared with a benefit of Euro 2,770,000 in the year ended 31 December 2005).
As indicated in note 4c, this deferred tax charge principally arises from the decrease in the amount of the deferred tax assets attributable to the capital allowances which the Company expects to use to offset projected taxable profit made by its UK subsidiary over a four-year period from 31 December 2006: such decrease resulted in deferred tax charges amounting to Euro 106,000 and Euro 1,182,000 in the quarter and in the year ended 31 December 2006, respectively.
Another significant component of this deferred tax charge relates to the tax effect of the capitalization of development expenses: as indicated in note 4b, the corresponding tax charges were Euro 106,000 and Euro 328,000 in the quarter and in the year ended 31 December 2006, respectively.
NOTE 7: EARNINGS PER SHARE
(a) Basic earnings per share
Basic earnings per share are calculated by dividing the profit attributable to shareholders for a period by the weighted average number of ordinary shares outstanding during that period.
(i) Computation for the quarters ended 31 December 2006 2005
Issued ordinary shares as at 1 October 10,201,779 10,116,878
Effect of the 1,583 shares issued on 9 December 2005 0 396
Effect of the 2,248 shares issued on 12 December 2005 0 489
Effect of the 999 shares issued on 13 December 2005 0 206
Effect of the 4,000 shares issued on 19 December 2005 0 565
Effect of the 30,168 shares issued on 20 December 2005 0 3,935
Effect of the 1,333 shares issued on 22 December 2005 0 145
Effect of the 3,250 shares repurchased on 19 October 2006 (2,614) 0
Effect of the 6,750 shares repurchased on 20 October 2006 (5,356) 0
Effect of the 38,333 shares issued on 9 November 2006 22,083 0
Effect of the 2,000 shares issued on 14 November 2006 1,043 0
Effect of the 3,000 shares repurchased on 28 November 2006 (1,109) 0
Effect of the 6,201 shares repurchased on 29 November 2006 (2,224) 0
Effect of the 799 shares repurchased on 30 November 2006 (278) 0
Effect of the 935 shares repurchased on 4 December 2006 (285) 0
Effect of the 2,065 shares repurchased on 7 December 2006 (561) 0
Effect of the 700 shares repurchased on 19 December 2006 (98) 0
Effect of the 5,418 shares issued on 21 December 2006 648 0
Weighted average number of ordinary shares for 10,213,028 10,122,614
the quarters ended 31 December
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(ii) Computation for the years ended 31 December 2006 2005
Issued ordinary shares as at 1 January 10,157,209 10,028,752
Effect of the 4,616 shares issued on 21 February 2005 0 3,971
Effect of the 12,582 shares issued on 1 March 2005 0 10,548
Effect of the 8,000 shares issued on 25 May 2005 0 4,844
Effect of the 6,666 shares issued on 24 June 2005 0 3,488
Effect of the 3,262 shares issued on 23 August 2005 0 1,171
Effect of the 30,000 shares issued on 25 August 2005 0 10,603
Effect of the 23,000 shares issued on 9 September 2005 0 7,184
Effect of the 1,583 shares issued on 9 December 2005 0 100
Effect of the 2,248 shares issued on 12 December 2005 0 123
Effect of the 999 shares issued on 13 December 2005 0 52
Effect of the 4,000 shares issued on 19 December 2005 0 142
Effect of the 30,168 shares issued on 20 December 2005 0 992
Effect of the 1,333 shares issued on 22 December 2005 0 36
Effect of the 3,500 shares issued on 17 February 2006 3,049 0
Effect of the 14,666 shares issued on 27 March 2006 11,251 0
Effect of the 23,000 shares issued on 2 June 2006 13,422 0
Effect of the 3,404 shares issued on 19 September 2006 970 0
Effect of the 10,130 shares repurchased on 26 September 2006 (2,692) 0
Effect of the 1,870 shares repurchased on 27 September 2006 (492) 0
Effect of the 1,470 shares repurchased on 28 September 2006 (383) 0
Effect of the 500 shares repurchased on 29 September 2006 (129) 0
Effect of the 3,250 shares repurchased on 19 October 2006 (659) 0
Effect of the 6,750 shares repurchased on 20 October 2006 (1,350) 0
Effect of the 38,333 shares issued on 9 November 2006 5,566 0
Effect of the 2,000 shares issued on 14 November 2006 263 0
Effect of the 3,000 shares repurchased on 28 November 2006 (279) 0
Effect of the 6,201 shares repurchased on 29 November 2006 (561) 0
Effect of the 799 shares repurchased on 30 November 2006 (70) 0
Effect of the 935 shares repurchased on 4 December 2006 (72) 0
Effect of the 2,065 shares repurchased on 7 December 2006 (141) 0
Effect of the 700 shares repurchased on 19 December 2006 (24) 0
Effect of the 5,418 shares issued on 21 December 2006 163 0
Weighted average number of ordinary shares for 10,185,041 10,072,006
the years ended 31 December
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(b) Diluted earnings per share
Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
The Company has only one category of dilutive potential ordinary shares, which are share options. Contingently issuable shares (i.e. ordinary shares issuable for little or no cash or other consideration upon the satisfaction of specified conditions in a contingent share agreement) are not included in the calculation of diluted earnings per share until the above mentioned conditions are satisfied, which was not the case at either 31 December 2006 or 31 December 2005.
The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average market price of the Company’s shares over the period for which the computation is performed) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
(i) Computation for the quarters ended 31 December 2006 2005
Weighted average number of ordinary shares for 10,213,028 10,122,614
the quarters ended 31 December
Adjustment for outstanding share options 64,999 122,795
Weighted average number of ordinary shares for diluted
EPS computation for the quarters ended 31 December 10,278,027 10,245,409
(ii) Computation for the years ended 31 December 2006 2005
Weighted average number of ordinary shares for 10,185,041 10,072,006
the years ended 31 December
Adjustment for outstanding share options 68,699 143,727
Weighted average number of ordinary shares for diluted
EPS computation for the years ended 31 December 10,253,740 10,215,733
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NOTE 8: SHARE CAPITAL AND SHARE PREMIUM
(a) Share capital
A total of 90,321 share options were exercised in the year ended 31 December 2006 (see note 7 for further details).
As a result, the total number of outstanding, fully paid, ordinary shares of the Company, each of par value of Euro 0.40, is 10,247,530 as at 31 December 2006.
(b) Share premium
The share premium amount increased by Euro 392,000 during the year ended 31 December 2006 through the net proceeds of the 90,321 share options exercised during that period (compared with an increase of Euro 395,000 during the year ended 31 December 2005), i.e. after deduction of Euro 11,000 for operating expenses incurred in relation with the Company’s share option plans in the year ended 31 December 2006 (a deduction of Euro 10,000 for similar expenses was recorded in the year ended 31 December 2005).
NOTE 9: REPURCHASE OF OWN SHARES
Pursuant to the authority granted to the Board of Directors by the shareholders in their meeting on 20 April 2006, the Company initiated its share repurchase programme in the course of the quarter ended 30 September 2006.
A total of 37,670 shares were purchased back by the Company in the year ended 31 December 2006 for a total of Euro 399,000, i.e. at an average price of Euro 10.59 a share.
In accordance with paragraph 33 of IAS 32, these shares are held as treasury shares, and have been deducted from equity at 31 December 2006.
More information on the Company’s share repurchase programme is available in the information memorandum on such programme (available in both French and English) which was released by the Company on 18 August 2006.
NOTE 10: CHANGE IN THE COMPOSITION OF THE COMPANY
The Company announced on 9 February 2006 its intention to set up a wholly-owned, test and quality assurance subsidiary in India and to hire approximately 20 people in the course of the current year.
The incorporation process of Global Graphics Software (India) Private Limited was completed in the course of June 2006 and a total of 17 people (of which 15 developers) joined the Indian subsidiary during the year ended 31 December 2006.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
PRO FORMA OPERATING PROFIT (EBITA) COMPUTATION
In thousands of Euro
Unaudited figures
Quarters Years ended
ended 31 December 31 December
2006 2005 2006 2005
Reported operating profit 1,876 2,008 4,348 3,258
Add back (deduct):
* Amortization of intangible assets
- recorded in cost of sales 17 20 68 2,134
- recorded in operating expenses 19 20 76 1,760
* Share compensation expenses 41 83 174 395
* Capitalization of development expenses
as required by IAS 38 (note 4) (368) (255) (1,149) (353)
* Amortization of capitalized development
expenses (note 4) 14 14 55 16
Total adjustments
to reported operating profit (277) (118) (776) 3,952
Pro forma operating profit 1,599 1,890 3,572 7,210
Pro forma operating profit in % of sales 32.1% 37.7% 21.0% 36.9%
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The Company provides information prepared in accordance with and required by IFRSs, but it believes that evaluating its ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures.
Accordingly, the Company uses pro forma financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes.
The Company’s management does not itself, nor does it suggest that investors should, consider such pro forma financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs.
The Company presents such pro forma financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s results in a manner that focuses on what the Company believes to be its ongoing business operations.
The Company’s management believes that the inclusion of pro forma financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company’s industry, many of which present the same or similar pro forma financial measures to investors.
When the Company uses such a pro forma financial measure, it provides a reconciliation of the pro forma financial measure to the most closely applicable financial measure required by IFRSs.
Investors are encouraged to review the related IFRS financial measures and the reconciliation of these pro forma financial measures to the most directly comparable IFRS financial measures as detailed above.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
PRO FORMA PRE-TAX PROFIT COMPUTATION
In thousands of Euro, except share data in Euro
Unaudited figures
Quarters Years ended
ended 31 December 31 December
2006 2005 2006 2005
Reported profit before income tax 1,915 1,972 4,673 3,100
Add back (deduct):
* Amortization of intangible assets
- recorded in cost of sales 17 20 68 2,134
- recorded in operating expenses 19 20 76 1,760
* Share compensation expenses 41 83 174 395
* Capitalization of development expenses
as required by IAS 38 (note 4) (368) (255) (1,149) (353)
* Amortization of capitalized development
expenses (note 4) 14 14 55 16
* Change in the fair value of carry-back
tax assets (4) (3) (14) (12)
Total adjustments
to reported profit before income tax (281) (121) (790) 3,940
Pro forma pre-tax profit 1,634 1,851 3,883 7,040
Pro forma pre-tax profit per share 0.16 0.18 0.38 0.70
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(*) Pro forma pre-tax profit per share is computed using the weighted average number of ordinary shares outstanding during the respective periods, i.e. 10,213,028 shares and 10,122,614 shares for the quarters ended 31 December 2006 and 2005, respectively, and 10,185,041 shares and 10,072,006 shares for the years ended 31 December 2006 and 2005, respectively.
The Company provides information prepared in accordance with and required by IFRSs, but it believes that evaluating its ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures.
Accordingly, the Company uses pro forma financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes.
The Company’s management does not itself, nor does it suggest that investors should, consider such pro forma financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs.
The Company presents such pro forma financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s results in a manner that focuses on what the Company believes to be its ongoing business operations.
The Company’s management believes that the inclusion of pro forma financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company’s industry, many of which present the same or similar pro forma financial measures to investors.
When the Company uses such a pro forma financial measure, it provides a reconciliation of the pro forma financial measure to the most closely applicable financial measure required by IFRSs.
Investors are encouraged to review the related IFRS financial measures and the reconciliation of these pro forma financial measures to the most directly comparable IFRS financial measures as detailed above.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
PRO FORMA NET PROFIT COMPUTATION
In thousands of Euro, except share data in Euro
Unaudited figures
Quarters Years ended
ended 31 December 31 December
2006 2005 2006 2005
Reported net profit 1,612 3,485 2,992 6,159
Add back (deduct):
* Amortization of intangible assets
- recorded in cost of sales 17 20 68 2,134
- recorded in operating expenses 19 20 76 1,760
* Share compensation expenses 41 83 174 395
* Net effect of the capitalization of
development expenses (note 4) (354) (241) (1,094) (337)
* Change in the fair value of carry-back
tax assets (4) (3) (14) (12)
* Tax effect of abovementioned adjustments 107 73 333 105
* Non-recurring tax benefit (see note 6) 0 0 0 (528)
Total adjustments to reported net profit (174) (48) (457) 3,517
Pro forma net profit 1,438 3,437 2,535 9,676
Pro forma net profit per share 0.14 0.34 0.25 0.96
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(*) Pro forma net profit per share is computed using the weighted average number of ordinary shares outstanding during the respective periods, i.e. 10,213,028 shares and 10,122,614 shares for the quarters ended 31 December 2006 and 2005, respectively, and 10,185,041 shares and 10,072,006 shares for the years ended 31 December 2006 and 2005, respectively.
The Company provides information prepared in accordance with and required by IFRSs, but it believes that evaluating its ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures.
Accordingly, the Company uses pro forma financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes.
The Company’s management does not itself, nor does it suggest that investors should, consider such pro forma financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs.
The Company presents such pro forma financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s results in a manner that focuses on what the Company believes to be its ongoing business operations.
The Company’s management believes that the inclusion of pro forma financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company’s industry, many of which present the same or similar pro forma financial measures to investors.
When the Company uses such a pro forma financial measure, it provides a reconciliation of the pro forma financial measure to the most closely applicable financial measure required by IFRSs.
Investors are encouraged to review the related IFRS financial measures and the reconciliation of these pro forma financial measures to the most directly comparable IFRS financial measures as detailed above.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
INFORMATION ON SHARE AND SHARE OPTION NUMBERS,
VOTING RIGHTS AND SIGNIFICANT SHAREHOLDINGS AS AT 31 DECEMBER 2006
Unaudited figures
SHARE AND SHARE OPTION NUMBERS
a) SHARE NUMBER
- Shares outstanding at 1 January 2006 10,157,209
- Shares issued in the year ended 31 December 2006 90,321
- Shares outstanding at 31 December 2006 10,247,530
b) SHARE OPTION NUMBER
- Options outstanding at 1 January 2006 246,976
- Options that were granted in the year ended 31 December 2006 30,790
- Options that were cancelled in the year ended 31 December 2006 (8,918)
- Options that expired in the year ended 31 December 2006 (6,250)
- Options that were exercised in the year ended 31 December 2006 (90,321)
- Options outstanding at 31 December 2006 172,277
of which:
Vested options, i.e. immediately exercisable at 31 December 2006 88,665
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c) CONTINGENTLY ISSUABLE SHARES
On 12 December 2006, certain directors and employees were granted 69,710 shares which will be issuable for no cash on the second anniversary of the grant date (i.e. 12 December 2008) upon the satisfaction of the following conditions:
- Continuing employment condition: the share grant recipient must be a director or an employee of the Company at any time until 12 December 2008;
- Minimum share price condition: the closing price for the Company’s share on the last trading day immediately preceding 12 December 2008, or the average of closing prices over the twenty day trading period immediately preceding such date, must be at least equal to Euro 12.00 a share; and
- The shares may not be sold, or otherwise disposed of, before 12 December 2010.
VOTING RIGHTS (*)
* Shares with a double voting right 2,999,279
* Shares with a single voting right 7,210,581
* Total number of voting rights attached to the Company’s shares 13,209,139
outstanding at 31 December 2006
SIGNIFICANT SHAREHOLDINGS
* Stichting Andlinger & Co. Euro-Foundation
- Number of shares held 2,876,617
- % of total outstanding issued shares 28.07%
- Number of voting rights held 5,587,352
- % of total voting rights (*) 42.29%
* Other shareholders
- In excess of 5% of outstanding issued shares (i.e. 512,377 shares) none
- In excess of 5% of outstanding voting rights (i.e. 660,457 rights) none
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Notes:
(*) The information on voting rights is provided with regards to voting rights relating to outstanding ordinary shares of the Company only, i.e. 10,247,530 shares at 31 December 2006, excluding the voting rights attached to the 37,670 own shares held by the Company at that date.
Editor's Notes
About Global Graphics
Global Graphics (http://www.globalgraphics.com) is a leading developer of technology for open document and print solutions. It provides sophisticated high performance software components to the graphic arts/commercial print and digital print markets and for PDF (Portable Document Format) software applications. The Company supplies its RIPs, PDF document, workflow and color solutions mostly to a customer base of Original Equipment Manufacturers (OEMs), system integrators, software developers and resellers. These partners include the world's leading vendors of digital pre-press systems, large-format color printers, color proofing systems, digital copiers and printers for the corporate and SOHO (Small Office / Home Office) markets, and a wide variety of market leading software applications.
Forward-looking statements
This press release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These include statements regarding the Company’s growth, funding, expansion plans and expected results for future periods. Such statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Although management believes that their expectations reflected in the forward-looking statements are reasonable based on information currently available to them, they cannot assure any reader that the expectations will prove to have been correct. Accordingly, any reader should not place undue reliance on these forward-looking statements. In any event, these statements speak only as of the date of this release. The Company undertakes no obligation to revise or update any of these statements to reflect events or circumstances after the date of this release, nor to reflect new information nor the occurrence of unanticipated events
Contacts
Johan Volckaerts, CEO
Tel: + 32 2 647 80 70
Alain Pronost, CFO
Tel: + 33 6 62 60 56 51