Press releaseFIRST QUARTER REVENUE (OCTOBER-DECEMBER 2007)
Like-for-Like Revenue:
FITCH RATINGS - 18.6%ALGORITHMICS + 23.2%
FIMALAC - 12.6%
I) First quarter revenue
Fimalac's consolidated revenue for the first quarter of fiscal 2008 (October to December 2007) amounted to €170.5 million.
Reported revenue includes a €16.2 million negative currency effect due to the weakness of the dollar and sterling, and an additional €10.1 million positive impact on revenue (including €4.3 million in the Ratings segment) from the consolidation of Korea Ratings from April 2007.
| October-December | October-December | % change | % change | ||
| (in € millions) | 2006 | 2007 | (reported) | (like-for-like*) | |
| FITCH RATINGS | 173.6 | 139.4 | - 19.7% | - 18.6% | |
| ALGORITHMICS | 28.9 | 31.4 | + 8.7% | + 23.2% | |
| Eliminations | - 0.8 | - 0.3 | |||
| Consolidated revenue | 201.7 | 170.5 | - 15.5% | - 12.6% | |
(*) Based on a comparable scope of consolidation and at constant exchange rates
1) FITCH RATINGS
Fitch Ratings reported revenue of $202.1 million (€139.4 million) for the first quarter of fiscal 2008, compared with $222.3 million (€173.6 million) for the year-earlier period. This represented a decline of 9.1% on a reported basis in dollars, corresponding to Fitch Ratings' functional currency. However, excluding the effects of the weaker dollar and sterling and the first-time consolidation of Korea Ratings, like-for-like revenue in euros declined by 18.6%.
As expected, volatility in credit markets increased during the quarter and led to decelerating issuance activity. Revenues were most impacted in structured finance areas of U.S. mortgage securities and global CDOs, while the corporate finance business, which is comprised of corporate, banking, insurance and public finance, continued to grow.
2) ALGORITHMICS
On the other hand, in the current financial environment, Algorithmics reported strong increases in license fees and consulting revenues, reporting total revenue of $45.4 million (€31.4 million) for the quarter versus $37.0 million (€28.9 million) for the year-earlier period. Like-for-like growth in euros and in dollars came to 23.2%.
II) Recent developments and outlook
Considering the continuing restricted issuance activity and uncertainty in credit capital markets, based on the information currently available and provided there are no significant change in market conditions, some of Fitch Ratings' businesses are expected to be less buoyant than in the past. As a result, its revenues for the fiscal year ending September 30, 2008 could decline by 10% to 15% like-for-like compared with fiscal 2007. Given this perspective, Fitch Ratings is cautiously managing all costs. In particular, it anticipates having a reduced headcount by 150, or roughly 7% of total employees, at fiscal year-end September 2008. In addition, action has been taken to reduce variable compensation expenses.
However, while credit markets remain pressured, the need for improved risk ratings and analysis, as well as better risk management tools and software, provide opportunity for Fitch Ratings, Algorithmics and the recently organized Fitch Solutions.
III) Treasury stock
As announced, Fimalac - the Group's parent company - pursued the share buyback program during the quarter. As of January 28, 2008, 9.83% of the capital was held in treasury versus 6.92% as of September 30, 2007.