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Cyta expenses cut by €50 mn possible

22/10/2015 12:59
Cyta will be able to operate more efficiently and profitably if it cuts expenses by € 50 mn, according to the Detecon report, revealed by StockWatch today.

The study concerns the reorganization of Cyta in order to become more effective.

The new organizational structure proposed in the study of Detecon took effect from Monday.

One of the key findings of the study is the possibility that Cyta cut costs to compensate for the "extremely worrisome" loss of income which is observed.

The study was completed a year ago but the Cyta's internal processes have delayed implementation.

The international consultants estimate that Cyta, which is heading for privatization in 2016, has large room for spending cuts and therefore to almost double its profits.

With the implementation of the voluntary retirement plan 550 employees left, which led to annual savings of € 34 mn.

Today it is estimated that about 1600 permanent and 600 hourly-paid employees work at Cyta.

Detecon estimates that costs can be reduced even more, and fall to €247 mn from about € 300 mn (after savings from the pension plan).

The bulk of the savings - about € 15 mn - may result from the centralization of the tendering process for goods and services.

Another €11 mn may result from granting specific services - mainly cleaning services - to third parties (outsourcing).

This will contribute to a further reduction of personnel, which according to the consultants, still has some room to be further reduced and save € 4 mn.

The consultants refer to a second round of early retirements from which the agency would save € 8 mn annually.

Around €6 mn may result from improving the efficiency of the organization and another €5 mn from a payroll review.

As regards revenues, Detecon is based on a mild contraction scenario by 3% from € 422 mn to €409 mn.

The actual 2014 data based on audited accounts show that the road for Cyta, is far longer than what the consultants have described and the margins for improved profitability, bigger.

Revenues of Cyta fell to approximately €400 mn in 2014 from €430 mn in 2013 and expenses amounted to € 315 mn from € 340 mn.

Even with these higher levels of costs and lower revenue, Cyta’s profits reached €47 mn in 2014.

Detecon report is attached.