QSC lowers guidance following weak quarter
Cologne, October 16, 2014. According to preliminary calculations, QSC's operating business developed on a weaker note during the past quarter than had been planned. Revenues totaled € 106.6 million, as opposed to € 113.8 million for the same quarter the year before. Contrary to expectations, significant advances in both business with new ICT products as well as IT Consulting and IT Outsourcing failed to materialize in the face of a noticeable downturn in the economy following the summer vacation season.
As a result of revenues that failed to materialize in high-margin lines of business, preliminary calculations show that EBITDA of € 8.8 million in the third quarter of 2014, too, was down from the previous year's level of € 19.4 million; the year before, the return of a deferred income line item in the amount of € 5.2 million per quarter had had the effect of increasing profitability. Moreover, profitability was additionally burdened by an unfavorable revenue mix in the company's largest business unit, Direct Sales: QSC generated higher revenues here than otherwise customary through sales of hardware and benefited less than customary from new orders. Order bookings, themselves, rose sharply in the third quarter of 2014, reaching a total of € 55.3 million. According to preliminary calculations, free cash flow stood at € 3.7 million, in contrast to € 6.5 million in the third quarter of 2013.
Following the second disappointing quarter in a row, QSC is adjusting its guidance for the full 2014 fiscal year and is now focusing squarely on a return to its customary high profitability. QSC anticipates revenues of at least € 430 million and an EBITDA of at least € 40 million for the 2014 fiscal year. The full amount of the lower EBITDA will impact free cash flow, which will now thus amount to at least € 6 million. At the same time, during the fourth quarter of 2014 QSC will also be responding to a stricter accounts receivable management on the part of major suppliers in times of an economic downturn; this will produce an additional negative working capital effect in the amount of some € -18 million. Altogether, this will lead to a negative free cash flow of max. € -12 million for the full 2014 fiscal year. QSC continues to plan to distribute a dividend of at least 10 cents per share for the full 2014 fiscal year.
With a view to the disappointing second quarter of 2014, the company had already launched an initial package of measures following the summer vacation season: QSC is now broadening the "Clarity" program and expects to see considerable cost savings during the course of fiscal 2015. Plus several growth measures. To strengthen its core business and innovation activities, the company is additionally planning to make one or two further acquisitions over the course of the coming months. When at the end of January 2015 it announces its initial preliminary numbers for fiscal 2014, QSC will be offering an outlook for the 2015 fiscal year, including the effects of a comprehensive package of measures aimed at regaining the company's customary profitability.
The 9-month report of QSC AG will be available for download from www.qsc.de/en/qsc-ag/investor-relations.html as of November 10, 2014. This ad-hoc release contains forward-looking statements. They are based on current expectations and predictions of future events by the Management of QSC AG. Due to the risks of mistaken assumptions, actual results could vary substantially from those made in such forward-looking statements.
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