Damovo Group's bonds dropped 10 points last week as the company posted poor financial results. A trader said its bonds started to fall a couple of points the day before the European computer services company held a conference call Wednesday regarding results from its most recent quarter, which ended April 30. Its euro-denominated floating rate 10.25% '12 notes fell to 81, while its fixed-rate notes fell to 71. "Their quarter results were not what the market was expecting," said a dealer. "People are realizing they may not achieve their EBITDA forecasts."
Damovo, a U.K.-based IT provider to large organizations, posted a E24.4 million net loss and negative EBITDA of E1.8 million for that quarter, compared with a E30.2 million net loss and EBITDA of E4.5 million in the same quarter of 2005. The trader said the company's results have been hit hard by a fall in sales at its Italian operations, which represent a large portion of its business. In a company report to note holders for the three months ending April 30, it said its Italian operations generated E25.5 million in the quarter, compared to E51.5 million in the same quarter last year. In the report, it said it has experienced delays in public sector contracts where its orders were 60% below the prior year quarter.
In April, Moody's Investors Service changed its outlook on the company to negative from stable following a weaker than expected performance in 2005. It warned in a report that a ratings downgrade would be possible over the next 12 months given difficult market conditions in Italy and the U.K., another of its large markets. Moody's assigned a B1 rating to its senior secured notes. The company has E350 million of senior debt. A call to Bob Contreras, cfo, was not returned.