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Arques Industries AG
Exchanges: Germany

Arques Industries AG is a Germany-based company engaged in the acquisition and restructuring of companies in special situations, such as corporate spin-offs, restructuring and issues caused by unresolved successor provisions, by lack of investment in technological modernization and inefficient management strategies. The Company takes over the responsibility for managing these companies, and provides active support and development measures ranging from realignment of product portfolio and operational improvements to increasing efficiency and implementation of new technologies with the aim of stimulating growth and promoting them to a profitable state. Its subsidiaries include British School of Motoring, Auto Windscreens Ltd., Gigaset Communications GmbH and Carl Froh GmbH, among others.

Munich, 19.11.2009
Arques Industries AG Operating performance picks up momentum in the third quarter

• Positive EBITDA of EUR 9.9 million in Q3
• Financial liabilities reduced by EUR 55 million to EUR 94.5 million over the last quarter
• Further impairments upon portfolio streamlining depress results
• Optimism for the 4th quarter

Streamlining the portfolio of subsidiaries and applying strict cost management have had a positive impact on the results of ARQUES Industries AG (ISIN DE0005156004) in the third quarter. This made it possible to record EBITDA of EUR 9.9 million for the quarter, which is well above the figures for the preceding quarters of 2009 and also the year-ago result, all of which were negative. As in the prior periods, the results indicators below the level of EBITDA were again depressed by writedowns and impairments on subsidiaries. A loss of EUR 9.5 million after tax (Q3 2008: loss of EUR 78.4 million) accrued for the quarter as a result. ARQUES has succeeded in decreasing its financial liabilities by EUR 55 million to EUR 94.5 million in the third quarter. The main factor permitting this was the disposal of the holding in Actebis. Since year-end 2008, financial debt has thus been reduced by 55%. The company is also confident of being able to reduce its debt further in the fourth quarter. Given the fact that the subsidiaries are again expected to generate a positive operating performance in the final quarter of the year, positive EBITDA should also be reported for the months of October to December. The performance of the Gigaset subsidiary, which has benefited from the success of new products and expansion into new, fast-growing markets such as South America, was particularly pleasing. The fact that ARQUES succeeded in reducing the fixed costs in the holding company by more than 50%, as announced, also had a positive impact. Consequently, the goal for ARQUES in fiscal 2010 remains unchanged - at least breaking even over the year as a whole. For this to happen, the economic recovery will need to continue worldwide.

"We succeeded in stopping the downward spiral in the third quarter, ending the period with a significant operating profit. One of the factors helping us here was the improved economic environment overall. What was far more important, though, was that our efforts to enhance the risk profile of our portfolio of subsidiaries and our cost structures began to bear fruit. This is also reflected in the huge reduction in our financial liabilities," said Hans-Gisbert Ulmke, Chairman of the Executive Board of ARQUES Industries AG in commenting on the figures for the third quarter.

Nine-month figures affected by massive non-recurring effects
On the earnings side, the cumulative figures for the first three quarters have been shaped by the consistent streamlining of the company portfolio. Since the start of the year, ten subsidiaries with aggregate revenues of EUR 4.7 billion have been sold. These disposals, coupled with the revaluation of the retained subsidiaries, required writedowns and impairments totaling EUR 118.6 million to be taken, EUR 19.9 million of which related to the third quarter. This gave rise to a massive deterioration in the nine-month EBITDA, from a negative EUR 6.1 million to a negative EUR 125.1 million. A loss of EUR 114.7 million after taxes accrued in the equivalent period last year.

Big improvement in the balance sheet structure 
The further consolidation of the portfolio of subsidiaries had a lasting impact on total assets, which decreased by EUR 876,6 million overall to EUR 842.4 million at September 30, 2009 compared with year-end 2008. Financial liabilities have been reduced from EUR 212.0 million to EUR 94.5 million since December 31, 2008. The decline in the third quarter amounted to EUR 55 million, of which more than EUR 30 million is attributable to the disposal of Actebis. The equity ratio also benefited from this development in the third quarter, rising from just 11.1% at June 30 to 17.4%. The cash flow from operating activities remains dissatisfactory, with a total cash outflow of EUR 71.0 million being recorded after the third quarter. 

Optimism for the fourth quarter, break-even targeted for 2010
In the light of already advanced negotiations, the ARQUES Executive Board considers it possible that at least one further subsidiary will be sold and one company may be acquired in the final quarter of the year. In terms of the operating result (EBITDA), a profit is again targeted. In particular, this optimism is built around the strong demand at Gigaset in the run-up to Christmas. Further improvements are also projected on the debt side. Thus, the British School of Motoring (BSM), which was only acquired in February 2009 for a symbolic price, was sold, yielding net proceeds of EUR 11 million which will accrue to ARQUES in the fourth quarter of 2009 and the first quarter of 2010. Nevertheless, significant risks still remain on account of the restrictive policies of banks, credit insurers and factoring companies together with remaining uncertainty in many industries about the sustainability of the expected economic recovery. This notably holds true for the automotive sector that is a key player for ARQUES. Should the current upturn continue at the pace predicted by many experts, however, the declared goal remains to reach break-even in the coming fiscal year. After consolidation of the portfolio has been completed, ARQUES will concentrate more heavily on growth in 2010. Both the strong performance of the individual subsidiaries in the existing portfolio and also new companies still to be acquired are expected to contribute to this growth.

Copyright  2009

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