Moody's cuts Damavo outlook to negative

Moody's Investors Service said it changed the outlook for Damovo Group SA's B1 corporate credit rating and Damavo III SA's senior secured notes to negative from stable following weaker-than-expected top-line performance in 2005 and a consequent deterioration in earnings.

Although the negative impact of lower sales was partly offset by margin improvements reflecting a better sales mix combined with lower operating expenses in both the trading companies and head office, Moody's said the outlook for Damovo's core markets - Italy and the United Kingdom - remains weak.

Excluding the one-off project in the Czech Republic in 2004, primary drivers of the year-on-year revenue decline were difficult market conditions in Italy and lower Interpolizie network sales, combined with a marked slowdown in contract signing with governmental organizations and agencies and lower sales in the United Kingdom reflecting the termination of a number of loss-making contracts combined with lower minutes of use under managed service contracts, the agency said.

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