Supply Chain

Revenue growth accelerates in the second quarter

The SUPPLY CHAIN division increased revenue by 5.0% from €6,206 million in the previous year to €6,517 million in the first half of 2010. Growth was suppressed by two factors: a loss of trading volume with the Arcandor Group in Germany and the withdrawal from underperforming contracts in the reporting period. Adjusted for exchange rate gains of €269 million, organic revenue growth in the first half of 2010 was 0.7% year-on-year. Growth accelerated in the second quarter: revenue grew by 10.7% from €3,061 million in the previous year to €3,387 million. In terms of organic growth, second quarter revenue was up by 3.8% compared with the prior year. 

The Supply Chain business unit generated revenue of €5,871 million in the first half of the year (previous year: €5,607 million), a rise of 4.7% year-on-year. In the Americas region, which saw continued economic recovery and a strengthening of the US dollar, revenue in the majority of sectors increased. The economy in the Asia Pacific region experienced a strong economic upswing. We demonstrated substantial growth arising from new business wins and trading upturns, notably in Australia, China and Thailand. In Europe, the economic recovery was weaker. However, the Healthcare sector in the UK accounted for a significant revenue increase. Revenue in Germany declined, mainly due to Arcandor.

Williams Lea’s revenue for the first half of 2010 grew 7.9% on the prior-year period from €598 million to €645 million, primarily reflecting increases in the Marketing Solutions and Legal Services sectors in the Americas region. This growth was dampened by a decrease in volume amongst some key European contracts. 
 

New business wins worth €500 million

In the first half of 2010, the Supply Chain business unit concluded additional contracts worth approximately €500 million in annualised revenue with both new and existing customers. The contract renewal rate for the six-month period remained stable year-on-year. In the first quarter, Williams Lea won a significant new contract with Wal-Mart (USA). 
 

Substantial increase in EBIT before non-recurring items

EBIT for the SUPPLY CHAIN division was up by 124.0% on the prior year to €112 million in the first half of 2010 (previous year: €50 million). Adjusted for restructuring costs of €24 million (previous year: €8 million), EBIT before non-recurring items amounted to €136 million, an increase on the prior year (€58 million) of €78 million or 134.5% on the same basis. Our prior-year earnings were impacted by expenses of €25 million due to the Arcandor insolvency. The EBIT margin before non-recurring items rose from 0.9% to 2.1% in the first half of 2010. 

Second quarter EBIT was €55 million compared with €16 million in the previous year. After adjustment for restructuring costs of €17 million, EBIT before non-recurring items amounted to €72 million in the second quarter with a margin of 2.1%. 

The improvement in EBIT before non-recurring items reflected the increase in existing business activity and additional margins from new business wins, underpinned by cost reductions and exchange rate gains. 

Operating cash flow was €21 million in the first half of 2010 compared with €60 million in the prior-year period. In the reporting period, it was impacted by the restructuring measures introduced. Even as revenue started to rise, we continued to reduce our working capital.