| It’s not all gloom at Scitexsource: Ha’aretz 13.5.2001 10:52
Ami Ginzburg
CreoScitex‘s metamorphosis from a printing specialist into an investment corporation has yet to yield much pleasure to shareholders. Since that dramatic step, when the company’s pre-print division was sold to the Canadian-based firm, Creo, Scitex Corporation Ltd. has had little good news for them: It posted a $12.1 million net loss in first quarter 2001.
This loss, the corporation says, stems in part from financial provisions related to the sale of its pre-print division to Creo. After these provisions, as well as those for amortization of goodwill at its subsidiaries, it posted a pro forma, first-quarter net income of $3.3 million.
The company’s share price continues to tread water at $8.00, reflecting a market value of just $350 million – about 70 percent of its equity capital.
While the first quarter results were not especially bad, they are yet to indicate an imminent, dramatic turn-around. In fact, alongside the good news – primarily from its Scitex Digital Printing (SDP) subsidiary, the corporation also reported the final demise of its Vio Worldwide Limited venture. It also reported another write-off, stemming from the liquidation of Printlife.com Ltd., the Internet company in which Scitex invested some $5 million.
Printlife, of Rehovot, developed a Web-based service that let users compile image albums and have them digitally printed and bound at a regional printing center. Established on the crest of the Internet start-up wave, it managed to lure a number of strategic partners, including Polaroid, Fuji, Kodak and Indigo. But like many Internet companies of its kind, the financial needs of Printlife were too high, and the recently tightened venture capital markets led to its rapid collapse. In addition, the services it provided were very expensive.
Scitex bought into Printlife at a relatively late stage, investing almost $5 million in the company last November, based on an estimated market value of about $40 million. In its first-quarter report for 2001, Scitex announced that a liquidator had been appointed to Printlife by its major creditor, Bank Hapoalim. Scitex, the report added, had written off its investment in Printlife.
The Vio venture also failed due to the difficulty in raising additional outside backing, and its two founders, Scitex and British Telecom (BUE:BTY.BA) , pulled out. Two months ago, Scitex reported that Vio would be the subject of a management buy-out; but apparently the employees aren’t keen to finance the expensive enterprise, an 80-strong operation at its peak. Scitex has close to $30 million invested in Vio, and provisions for liabilities were included in the corporation’s December 2000 reports.
Scitex wrote off a further $30 million at the end of last year for Karat Digital Press – its digital offset press joint venture with the German press manufacturer, KBA. The corporation’s exit from the pre-print field forced it to transfer full ownership of Karat to KBA and forgo the fruits it is expected to yield. KBA will continue manufacturing the Karat machine based on laser heads developed by CreoScitex, which also supplies similar laser heads to KBA’s competitors.
The good news in Q1 of 2001 came from the two principal independent holdings of the corporation – Scitex Vision, which specializes in wide format printing technology, and SDP, which develops high-speed, digital printing systems. SDP provided the more pleasant surprise this time around, recording revenues of $41.3 million in the first three months of the year – minimally a handsome 14-percent increase on the corresponding period of 2000. Another encouraging sign from SDP was the division’s Q1 operating profits, which came to at least $3.4 million, as opposed to a relatively low operating profit of under $1 million in the first three months of 2000.
Another factor likely to have a positive effect on SDP this year is the marketing agreement the Scitex division signed with Xerox. SDP hopes the deal will help it break into a market that has, until now, been closed to the company – the institutional market, and particularly financial organizations that operate printing centers of their own, as opposed to SDP’s natural market of commercial printing houses. Scitex reports that the Xerox agreement has already borne fruit: a $4 million order from a leading financial institution in Europe.
In 2001, Scitex expects to see an increase of 10-15 percent on SDP’s revenues of $152 million in 2000. The corporation’s CEO, Yoav Chelouche, and its CFO, Yosef Zylberberg, say SDP is also likely to continue showing an operating profit of some 10 percent of revenues for the rest of the year.
Scitex Vision has also had a good first quarter, with revenues growing by 33 percent, to $22.8 million, as opposed to $17.1 million in the first quarter of 2000. The growth stemmed primarily from the sale of equipment to the tune of $16.3 million – a 39 percent increase on the $11.7 million generated in the first quarter of last year.
Despite its handsome, first-quarter sales growth, Scitex Vision’s operating profits (before amortization of intangibles) totaled only $2.5 million – a negligible increase on the corresponding period last year. Scitex explains this by noting that, in the first quarter of 2000, the corporation had yet to split into independent divisions, so the results of Scitex Vision at the time were incorporated with those of the entire company. In any event, the corporation explains, over the past few quarters, Scitex Vision has shown a consistent improvement in operating profitability – a direct offshoot of the division’s sales growth.
Scitex Vision is less satisfied with the slow implementation of the agreement with 3M for the joint marketing of printing solutions. The strategic alliance with the U.S. company was intended to expose Scitex Vision to a large group of customers and help boost the division’s growth in revenues.
According to Chelouche and Zylberberg, the reasons for the delay in implementing the 3M deal stemmed from the technical specifications that 3M demanded for the machines it markets, coupled with personnel changes at the American company that seemed to have prejudiced t |
