Steady Performance and Operating Profits Indicate Recovery is Around the Corner

Six months results affected by the forex losses but good signs of crisis bottoming down

ASBISc Enterprises Plc, a leading distributor of IT products on emerging EMEA markets, had revenues of USD 231,3m in Q2 2009 and USD 469,2m in H1 2009. In Q2 2009 the Company was able to generate operating profit of USD 210 thousand, but total H1 results were under strong influence of Q1 results. However, Q2 results indicate that the Company is at a turning point and that the worst seem to have passed. The Company has improved its gross profit margin to 5.1% in Q2 2009 from 3.0% in Q1 2009 and focusing on decreasing its reliance on the traditional components segment. The Group also continued its cost cutting job, significantly decreasing its administrative and selling expenses.

“The world’s financial crisis still affects some of our biggest markets, however in Q2 2009 we were able to deliver much better results from the ones of Q1. The stabilization of the currencies alongside our hedging strategies helped the Company to deliver operational profits. On top of this, we are happy to have decreased administrative and selling expenses by 19.5% and 28.3% respectively. Together with the upgraded product mix on different markets of our operations we are confident that the worst days are behind us and we can be looking for a much brighter future. We already see some recovery in some of our markets and we strongly believe that this is the time in which opportunities are to be created and we will be there to grab them. Our gross profit margin increased from 3.0% in Q1 to 5.1% in Q2 and this indicates that without extraordinary foreign exchange losses, we can expect good profitability” – said Siarhei Kostevitch, ASBIS CEO.

Financial performance in 1h 2009

In USD m	Q2 2009	Q2 2008	Change	H1 2009	H1 2008	Change
Revenues	231,255	344,722	-32.9%	469,169	704,805	-33.4%
Gross profit	11,687	19,718	-40.7%	18,866	41,388	-54.4%
Gross profit margin	5.1%	5.7%	-10.5%	4.0%	5.9%	-32.2%
Administrative expenses	(5,356)	(6,651)	-19.5%	(10,925)	(12,371)	-11.7%
Selling expenses	(6,121)	(8,532)	-28.3%	(12,239)	(15,626)	-21.7%
Operating profit	210	4,536	-95.4%	(4,299)	13,391	n/a
EBITDA	919	5,186	-82.3%	(2,866)	14,605	n/a
Net profit	(313)	1,754	n/a	(6,520)	7,308	n/a

New distribution channels

The Group is also focusing on improving its margins and on decreasing its reliance on the traditional components segment by broadening its product portfolio and signing more distribution agreements with mostly finished-goods vendors. During the first six months of 2009, the Company has signed several new distribution agreements with various suppliers with the most important being:

• agreement with Western Digital Corporation (for all Group’s markets),
• agreement with Infortrend Technology Inc. (for all Group’s markets),
• Microsoft OEM Distributor Channel Agreement with Microsoft Ireland Operations Limited (for Croatia and Bulgaria, expanding prior cooperation in Russia, Ukraine, Kazakhstan, Belarus, Romania and Slovakia),
• agreement with D-LINK Europe Ltd. (for Middle East) and
• agreements with Lenovo Group Ltd. (for Bulgaria, Romania and Saudi Arabia).
• agreement with AOC (for: 1. North Africa, 2. Middle East with exception of Lebanon, 3. Gulf countries),
• agreement with Dell Inc. (for Bahrain).

“Our strength has always been our very good relationships with our suppliers. During H1 2009 we have signed up several significant new contracts with worldwide leading suppliers, but we also ensured that our existing long standing relationships get stronger and that we will have all support to continue our successful distribution model. As a part of our strategy of diversifying our product portfolio and increasing product lines we can offer in particular countries, we ensure that we increase the pace of transition to mobile solutions, and shift to selling more finished goods. This shall allow us to reach better margins in the future.” – added Siarhei Kostevitch, ASBIS CEO. 

Detailed information on sales structure

Traditionally ASBISc generated about 40% of its sales in Former Soviet Union countries. Due to the recent world’s financial crisis and the recession that followed in these countries, revenues derived from F.S.U. countries (specifically Russia and Ukraine), have decreased significantly in H1 2009 compared to H1 2008. Therefore, Central and Eastern Europe countries, with relatively stable sales levels in countries like Slovakia , Czech Republic and Hungary, became the Company’s no.1 sales region with 39% share in the Company’s total revenues in H1 2009.

Middle East and North Africa region was strong again with +6.6% year on year growth in H1 2009, despite the financial crisis. This region is expected to continue its good performance in future periods.

Revenue breakdown by regions in the H1 2009 and H1 2008:

	H1 2009		H1 2008
	U.S. $ thousands	% of total revenues	U.S. $ thousands	% of total revenues
Central and Eastern Europe	183,138	39.0%	232,772	33.0%
Former Soviet Union	129,488	27,6%	306,787	43.5%
Middle East and Africa	88,240	18.8%	82,813	11.8%
Western Europe	47,989	10.2%	65,864	9.4%
Other	20,314	4.3%	16,569	2.4%
Total	469,169	100%	704,805	100%

The decrease in revenues in all product types was approximately 33%, which follows the overall decrease in revenues. Despite the fact that our revenues from laptops were decreased by 16%, the Group has managed to sell more units during the first six months of 2009. The decrease in revenue number is a result of the steep decrease of the average selling price (ASP). 

Revenue breakdown by product lines in the H1 2009 and H1 2008:

	H1 2009		H1 2008
	U.S. $	% of revenues	U.S. $	% of revenues
Central processing units (CPUs)	125,524	26.75%	189,959	26.95%
Hard disk drives (HDDs)	68,215	14.54%	102,764	14,58%
Software	29,816	6.36%	100,069	14,20%
PC-mobile (laptops)	83,765	17.85%	99,956	14,18%
Other	161,850	34.5%	212,057	30.10%
Total revenue	469,169	100%	704,805	100%

Despite the main categories, the Group is developing segments with high margins, like peripherals. In the six months period ended 30 June 2009 revenue from sale of peripherals increased by 23.3% to U.S. $ 21,478 from U.S. $ 17,423 in the corresponding period of 2008.

 

For additional information, please contact:

Mr Daniel Kordel, ASBISc Enterprises PLC, Investor Relations
Tel. +00 357 99 633 793
Tel. +48 509 020 021
E-mail: d.kordel@asbis.com 

Mr Costas Tziamalis, ASBISc Enterprises PLC, Investor Relations
Tel. +00 357 25 857 000
E-mail: costas@asbis.com 

Mrs. Iwona Sacewicz, M+G
Tel. +48 22 625 71 40
E-mail: iwona.sacewicz@mplusg.com.pl

 

For more information, visit also the company's website at www.asbis.com

^{ASBISc Enterprises Plc is based in Cyprus and specializes in the distribution of computer hardware  and software, mobile solutions, blocks and peripherals, and a wide range of IT products and digital equipment. Established in 1995, the Company has a presence in Central and Eastern Europe, the Baltic States, the former USSR, the Middle East, and North Africa, selling to 75 countries in the world.}

^{The Group distributes products of many vendors and manufactures and sells private-label products: Prestigio (LCD monitors, laptops, external storage, leather-coated USB accessories, GPS devices, etc.) and Canyon (MP3 players, networking products and other peripheral devices).}

^{ASBIS has subsidiaries in 26 countries, more than 1,000 employees and 30,000 customers.}

^{The Company’s stock has been listed on the Warsaw Stock Exchange since October 2007 under the ticker symbol “ASB” (ASBIS). More information about the Company: www.asbis.com}