ANNUAL REPORT <strong>2010</strong> Foreword by the Management Board: Michael Lanik, CRO 6 Martin Bergler, CFO Peter Sturz, COO IS Peter Trawnicek, COO BS
Foreword by the Management Board | Positioning and Markets | Investor Relations | Corporate Governance | Group Management <strong>Report</strong> | Consolidated Financial Statements | Service Ladies and Gentlemen, Dear Shareholders! Crisis are opportunities for fresh start, while every start needs a solid foundation to begin with. And we at S&T are restructuring our business based on our best practices to create space for something even better – for our shareholders, customers and employees. The global recession shows recovery in <strong>2010</strong>. However, the markets in which S&T have been emerging at very different paces. Our CEE markets have developed significantly different from the rest of the S&T business. Whereas almost all S&T subsidiaries in Eastern Europe were profitable in <strong>2010</strong>, there was significant deterioration of the business in Germany, Switzerland, Austria and Japan. The losses in these subsidiaries were covered by financial resources available to the Group in <strong>2010</strong>, but led to a shortage in liquidity in the second half of the year. Subsequently we had to announce the shutdown of our German and Swiss subsidiaries via bankruptcy proceedings. To salvage the business in Austria comprehensive restructuring measures have been taken. <strong>2010</strong> was the most challenging year in the Group’s history. Revenues dropped to EUR 351 million, a decline of 9 % from the previous year, and whereas the profit from operations amounted to EUR -17 million (before goodwill write-offs) but including restructuring costs, the consolidated EBIT of EUR -40 million also includes the impairment adjustment on goodwill, amongst other factors, from the closings in German and Switzerland. Whereas gratifying growth rates are already evident in Western Europe following the difficult years 2009 and <strong>2010</strong>, this development is being delayed in the CEE region. In <strong>2010</strong>, Pierre Audoin Consultants (PAC) saw signs of a recovery on the software and IT services markets in CEE, even if the volume still remains substantially below the record year 2008. However, this situation should change in 2011. We expect considerable order-generating potential, particularly from public institutions and in our infrastructure and applications segments. In 2011 we are striving to successfully conclude the process being prepared since <strong>2010</strong> for the participation of an investor and the strengthening of our equity base. An experienced M&A advisor is supporting us in structuring and completing the planned transaction, in order to quickly take this important step. Following the successful restructuring of the financial framework, we expect a return to growth and renewed profitability. Thank you for your confidence in S&T! The Management Board In order to combat these developments, we initiated comprehensive restructuring measures in <strong>2010</strong>, which are being intensified, bundled and managed by our newly appointed Chief Restructuring Officer Michael Lanik, who has been working on these efforts since January 2011. The theme for the current financial year is to focus on our strengths and to restructure or eliminate loss-making operations. This the only way S&T can achieve the desired turnaround and appeal to new investors. S&T has managed the worst of the crisis, clearly proven by recent developments in revenues. Nevertheless, securing liquidity and reducing costs remain the focal points of our efforts. We were given a positive sign by banks, whose financing package approved in February 2011 included the extension of payment for the corporate bond due in 2011 until April 1, 2012. The good news is that demand in all business areas, Business Solutions as well as Infrastructure Solutions, is increasing. We have adjusted our portfolio to reflect the changing market conditions. This includes flexible, high quality services with higher margins and long-term customer contracts. Software as a Service, Outsourcing and Virtualization are just a few of the current strategic initiatives enabling S&T to demonstrate that even in difficult times, there is room for innovation, and that innovation and restructuring are not mutually exclusive. Michael Lanik, CRO Peter Sturz, COO IS Martin Bergler, CFO Peter Trawnicek, COO BS 7
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