Desktop and network services vendor Getronics has reported an improvement in operating profitability, as a result of clawing its way back to financial stability in the first half of the year.
In the three months ending June 30, 2004, the Amsterdam-based company made a net profit of 4m euros ($4.8m) compared to a profit of 269m euros ($323m) in the year-ago quarter, on revenue that fell 13.9% to 602m euros ($724m).
The profitability comparison was affected by a one-time gain the second quarter of 2003 from the sale of the Human Resource Solutions division in May 2003, and Getronics said that asset disposals, coupled with pricing pressure and the strengthening of the euro, had a negative impact on revenue.
Klaas Wagenaar, chief executive, pointed to an improvement in the company’s operating profit to 7m euros ($8.4m) in the second quarter, from a loss of 52m euros ($62.5m) in the year-ago quarter. The operating profit margin at Getronics’ ongoing business rose to 2.8% of revenue from 1.9%, excluding exceptional items.
Wagenaar said that in order to drive down costs, it would deliver a higher proportion of its managed desktop and network services from low-cost remote centers in Mexico, where it has 250 employees, and in Hungary, where it aims to have 50 staff at the start of the fourth quarter.
Getronics said it renewed all its major managed services engagements with sufficient profitability during the first half of the year, but said that it would take another six to nine months to convert new sales opportunities into contracted revenue. The company said: This is due to continuing economic uncertainty, particularly in western Europe, as well as budget cuts within central governments.
Getronics may be struggling to convert its pipeline into new business, but the company is certainly on a more stable financial footing, with net cash resources rising to 36m euros ($43.3m) from a deficit of 6m euros ($7.2m) at the end of December 2003.
Getronics also fully redeemed its 2008 installment bonds during the first half, which had funded its purchase of Wang Global in 1998 but subsequently pushed the company to the edge of bankruptcy 18 months ago.