Earnings Report: Getronics NV

Computergram International, August 16, 1999

Dutch IT services company Getronics NV has reported its first results since completing its $2bn takeover of Wang Global in June. First-half net profit before amortization of goodwill related to the purchase was up 57% at 80.4m euros ($115.6m) on net revenue that rose 68% to 1.19bn euros ($1.27bn). After amortization, net profit was up 43% at 73.4m euros ($77.7m).

The goodwill charge relating to the Wang Global takeover will amount to between 100m euros ($106m) and 110m euros ($116m) spread over 25 years. The inclusion of Wang Global's June figures has also hit operating margins, which were down slightly at 9.1% compared with the 9.4% recorded for 1998. These are likely to fall to about 7% for FY1999, but are then expected to rise back to around 9% in the coming years.

However, the announcement appears to back up Getronics' belief that the integration is progressing well. The results show systems integration and network services making up the largest chunk of Getronics' revenue, up 64% to 729m euros ($771m) in the half, 57% of total.

Getronics hopes to grow this back to somewhere between 20% and 25% in the next two to three years as the company concentrates its efforts on its higher-margin business. This will be aided by Getronics' intention to sell its hardware reselling and distribution business, which it hopes will raise around 500m euros ($529m). Not withstanding its impending sale, revenue for the unit grew 45% in the half to 169m euros ($179m). Overall, Getronics' said 51% of sales were derived from services, up from 41% in 1998, mainly due to lower dependence of Wang Global on systems sales.