PinkRoccade: heavy debts and other problems
Shares in Dutch IT outsourcing and services firm PinkRoccade tumbled 6 per cent following its first-half results. The company's cash position has improved since last year, but it is still facing difficult market conditions and is showing signs of buckling under heavy debts.
During the second quarter ended June 30, Netherlands-based PinkRoccade reported a net profit of €5.29m compared to a net loss of€E694,000 in 2002, on revenue that fell 13 per cent to €182.8m. For the six-month period, PinkRoccade reported a net profit of €7.5m, up from a net profit of €351,000 in 2002, on revenue that declined 11 per cent to €372.1m.
Profit during the period was boosted by a €3.5m gain on the sale and leaseback of an office in Apeldoorn. This also helped improve the company's cash position, which stood at €1.58m at the end of the half, compared to zero in the same period in 2002.
However, PinkRoccade is suffering from reluctance by the Dutch government to invest in major outsourcing projects and issues resulting from the country's
labour market. Despite having laid off some 350 staff last December, the company said a collective labour agreement signed in June requires it to increase salaries for staff by an average 1.7 per cent.
The company said it is also suffering from increased competition. CEO Henk Bosma said that the persistent pressure on prices would continue to have a negative impact on turnover for the time being.
Adding to its woes, PinkRoccade is facing concerning levels of debt. Although the company claims that its solvency ratio improved to 39.3 per cent at the end of the half, from 35.2 per cent in December, this only measures its ability to meet long-term obligations.
PinkRoccade managed to halve its bank debt to under €31m, but current liabilities increased 6 per cent to €160.4m. This far outweighs its immediately available funds, which including cash, cash equivalents and other current assets, stand at €41.3m.
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