Ascom turns the corner, but plans sell-offs

Turnaround time for Ascom's new CEO Hadorn? swissinfo.ch

Swiss technology company Ascom has announced positive financial results for the first time in three years.

Figures released on Tuesday show that net group profit for the first half of 2004 was SFr22 million ($17.3 million), in stark contrast to a loss of SFr57 million for the same period last year.

But the Bern-based company has clearly indicated more divestments may be on the way, and says it will focus in future on expanding just two of its four core divisions.

CEO Rudolf Hadorn, the former financial director who moved into the top chair in June, said the past few years had been a “hard and painful time”, but the “turnaround” was now a reality.

He said Ascom expected to post a profit for the full year 2004, and predicted sales growth of slightly under five per cent for 2005.

Analysts reacted positively to the news, but shareholders were less convinced – Ascom shares dropped slightly in trading on Tuesday, after reaching a two-year high on Monday.

Serge Rotzer of the Zurich Cantonal Bank said: “The result surprised positively, but it did not fulfil growth expectations for the four core sections.”

He said the profit figures reflected the success of restructuring efforts, but could not be seen as an operative turnaround related to increasing prosperity.

Black is back

Cash flow was in the black to the tune of SFr21 million – a considerable improvement on the negative figure of SFr20 million this time last year.

Operating profit was SFr39 million, compared with a loss of SFr25 million last year.

However, consolidated revenue was just SFr596 million, compared with SFr833 million for the first half of 2003, reflecting the impact of the company’s ongoing divestment programme.

Revenue from continued activities amounted to SFr537 million, up SFr10 million from the previous year, of which the four current core divisions accounted for SFr485 million (SFr488 million in 2003).

Future focus

Turning to strategy, Hadorn said that Ascom’s four core areas – Wireless Solutions, Security Solutions, Network Integration and Transport Revenue – had performed well since the company’s strategic rethink two years ago.

However, he said the board of directors and executive board had come to the conclusion that more tough choices would still be necessary.

Said Hadorn: “It will not be possible to pursue the organic, acquisitive development of all four areas simultaneously if major potentials are to be successfully leveraged.

“Having examined market potential, technological position and capital requirements, Ascom intends in future to concentrate on the two key areas of Wireless Solutions and Security Solutions.”

Both areas would be expanded both geographically and technologically over the next few years, providing the basis for organic growth and targeted acquisitions, he said.

Meanwhile, Ascom would “seek the right partners” for Transport Revenue and for a large part of Network Integration (Business Communication) to “ensure their further positive development on a global scale”.

Hadorn said an outright sale of one or both areas was also a distinct strategic possibility.

swissinfo with agencies

Key facts

Consolidated revenue: SFr596 million (2003: 833 million).
Revenue from continued activities: SFr537 million (527 million).
Operating result: SFr39 million (225 million loss).
EBIT: SFr30 million (45 million loss).
Group profit: SFr 22 million (57 million loss).
Net operational cash flow: SFr20 million (21 million loss).

In brief

Ascom has announced a half-yearly net profit of SFr22 million ($17.3 million), and says it is on course for positive annual figures for the first time in three years.

However, analysts say the figures do not reflect a full “operative turnaround”.

Ascom also says it will concentrate in future on just two of its current four core divisions.