TIDMSQS
RNS Number : 3178S
SQS Software Quality Systems AG
08 September 2010
Embargoed until 7am
8 September 2010
SQS Software Quality Systems AG
("SQS" or the "Company")
Results for the six months ended 30 June 2010
SQS Software Quality Systems AG (AIM: SQS.L), the world's largest pure play
supplier of independent software testing and quality management services, today
announces its results for the six months ended 30 June 2010 (the "period").
Summary:
Following the difficult economic environment of 2009, we have benefited from an
improvement in market conditions during the first half of 2010, successfully
growing revenues across our core geographies as well as achieving a return to
normal levels of staff utilisation. We have also made identifiable progress with
our previously highlighted strategy of growing our Managed Services activities
with particular focus on growing our offshore capabilities at the same time as
maintaining investment in our traditional business.
The improved market conditions have encouraged us to accelerate our investment
plans in order to capitalise on the significant growth opportunities that we
perceive are available. This investment - which predominantly focussed on
increasing and training our consultant base and on upgrading our infrastructure
- whilst impacting on profitability in the period, is expected to materially
benefit performance in the second half of the current year and beyond. Pricing
pressures do remain and, as usual, budgeted sales of our software testing
products are weighted towards the final quarter but we expect to conclude the
year in line with expectations.
Financial Highlights:
· Turnover increased by 9.4% to EUR73.9 million (H1 2009: EUR67.5 million),
o testing services market as a whole is forecast to grow 2% in 2010 (Source:
Nelson Hall 2010)
· Gross profit up by 13.5% to EUR22.6 million (H1 2009: EUR19.9 million)
· Gross profit margin of 30.5% (H1 2009: 29.4%)
· Adjusted* PBT down to EUR2.4 million (H1 2009: EUR2.7 million) reflecting
the significant investment in headcount and managed services growth during the
period
· Adjusted** EPS of EUR0.06 per share (H1 2009: EUR0.08 per share)
· Net debt as at 30 June 2010 was EUR6.2 million (30 June 2009: net debt of
EUR1.2 million) (31 December 2009: net cash of EUR1.6 million) reflecting increased
receivables due to business growth and the payment of the FY 2009 dividend
· Debtor days at period end steady at 62 (at 30 June 2009: 62)
* adjusted to add back EUR0.2 million pro forma interest on deferred payment
milestones for acquisitions and amortisation on intangible assets of acquired
companies of EUR0.8million.
** in addition to * adjusted to add back an additional EUR0.3 million in tax
payments due under local GAAP
Operational Highlights:
· A period of significant investment which is expected to facilitate growth
during the second half of the current year and beyond
· Hired and fully trained over 200 new staff consultants in response to
improving demand for services
· Average billed days per consultant of 186 (H1 2009: 175 billed days),
back to normal levels of utilisation
· Managed Services in the period represented 7% of total revenues (FY 2009:
3%) with order intake of EUR40 million in the year to date
· Average managed services contract length of 3 years provides improved
visibility
· Continued expansion of offshore resources to meet high demand for blended
onshore/offshore solutions
o offshore staff equal to 30.8% of total staff at 30 June 2010 (31 December
2009: 26.5%)
· 91 new clients signed up during the period (H1 2009: 82) including
numerous blue-chip clients
· SQS Group reorganised into larger regional business units providing a
platform for growth and for more effective management and reporting
Rudolf van Megen, Chief Executive Officer of SQS commented, "It was encouraging
to see the increasing demand for SQS's services across all our core geographies
during the period after the economic downturn last year. In response to the
improving market outlook and in line with our stated strategy, we invested
considerable resources in increasing our headcount and in growing our Managed
Services business. The hiring and training of over 200 consultants,
predominantly within our offshore facilities, will enable us to meet the
increasing market demand for our services and to improve our positioning in a
competitive market with inevitable pressures on pricing. The EUR40 million of
Managed Services orders we have contracted in the year to date supports our
decision to invest in this area and provides a significant improvement in
revenue visibility going forward.
Whilst the investments we made increased costs during the period, we expect them
to lead to improved performance during the second half of the current year and
beyond. Pricing pressures do remain and, as usual, budgeted sales of our
software testing products are weighted towards the final quarter but we expect
to conclude the year in line with expectations and to continue to grow into
2011."
Enquiries:
+---------------------------------------+------------------------+
| SQS Software Quality Systems AG | Tel. +49 (2203) 91 54 |
| | 0 |
+---------------------------------------+------------------------+
| Rudolf van Megen, Chief Executive | |
| Officer | |
+---------------------------------------+------------------------+
| Rene Gawron, Chief Financial Officer | |
+---------------------------------------+------------------------+
| | |
+---------------------------------------+------------------------+
| Altium | Tel. +44 (0)20 7484 |
| | 4040 |
+---------------------------------------+------------------------+
| Tim Richardson | |
+---------------------------------------+------------------------+
| Katie Hobbs | |
+---------------------------------------+------------------------+
| | |
+---------------------------------------+------------------------+
| Walbrook PR Limited | Tel. +44 (0)20 7651 |
| | 8688 |
+---------------------------------------+------------------------+
| Bob Huxford | |
+---------------------------------------+------------------------+
About SQS
SQS is the world's largest pure play supplier of independent software testing
and quality management services. SQS consultants design and oversee quality
management processes during the software and IT systems life cycle and test the
resulting products for errors and omissions.
Headquartered in Cologne, Germany, SQS has approximately 1,700 employees across
Europe, Asia, North America and Africa. The Group has a presence in Germany
(Cologne, Munich, Frankfurt, Stuttgart, Goerlitz and Hamburg), the UK (London,
Woking, Birmingham, Manchester, Belfast), Ireland, the Netherlands, Switzerland,
Austria, Sweden, Norway, Finland, India, Egypt, the United States and South
Africa. SQS also has a minor stake in an operation in Portugal and a partnership
operation in Spain.
With more than 5,000 completed projects, SQS has a strong customer base
including 35 FTSE-100 companies, more than half of the DAX 30 and a third of
the STOXX-50. It supports clients in a wide range of industries, including major
corporations such as Allianz, Beazley, BP, Centrica, Commerzbank, Daimler,
Deutsche Post, Generali, JP Morgan, Meteor, Reuters and Volkswagen.
Chief Executive's Statement
Introduction
During the first half of 2010, the Company experienced increases in demand for
its services across all of its core geographies. As a result, revenues in the
period rose by 9.4% to EUR73.9 million (H1 2009: EUR67.5 million), outperforming the
software testing market as a whole, and staff utilisation rates throughout the
period were maintained at an average rate of 100%.
However, the first six months of 2010 were also a period of investment for SQS
as we positioned ourselves to capitalise on the significant growth opportunities
that we perceive are available in our markets.
In line with our stated strategy we continued to invest in expanding and
improving business practises within our offshore resources and offshore
headcount increased by 32.6% from 310 to 411. In addition, we invested resource
into improving our unique asset based methodology, SQS PractiQ, which has led to
a quicker induction of new employees as well as a higher level of
standardisation, automation and improved efficiencies within our offshore
facilities. Together these measures enable us to offer better solutions for our
clients at a competitive price.
Inevitably these investments, combined with ongoing price pressure, impacted
profits for the period. However, with a significant pipeline of new business and
lower average costs per employee going forward, we expect these investments to
have a positive impact on future revenues and profitability.
New Business
We were encouraged by the number of new business wins over the period, having
signed 91 new clients (H1 2009: 82), most of which required traditional
consultancy services to assure or de-risk IT projects. We believe that such wins
indicate a growing trend towards assigning testing projects to a pure play
independent testing provider which is fully able to deliver the necessary
testing and quality services and products.
Examples of new clients wins include:
· a contract with a leading European insurer to provide services on a test
automation solution with low maintenance efforts;
· a project with a leading German logistics company providing code quality
management services;
· a project in the Nordic region to test and manage an application for
money laundering for a provider of a wide variety of insurances, savings and
loan products; and
· a strategic project with performance and non-functional testing for the
UK's leading home and general merchandise retailer.
Our increased focus on sales of blended onshore/offshore Managed Services
offerings also proved highly successful, with 10 contracts won during the period
(H1 2009: 4). Managed Services are contracted in advance for longer periods than
the rolling three to six month contracts typical of our traditional project
business. As a result we are signing some of the largest contracts in our
history and in July 2010 we announced our largest ever single client contract
win, a Managed Services contract with an existing client worth at least EUR15
million over a three and a half year period. Order intake for Managed Services
contracts in the year to date currently stands at EUR40 million and conversion of
this pipeline will take place over the next three and a half years.
Services and product lines
Professional Services for Business and IT
SQS offers professional services for business and IT in three major fields of
the software lifecycle:
· for the business requirements phase, SQS provides management consulting
for banking and insurance business processes and helps to initiate resulting IT
projects. This service line accounted for 8% of total revenues in the period (H1
2009: 10%).
· for the software implementation or development phase, typically run as an
IT project, SQS provides professional testing services and quality management
consulting to help clients increase efficiencies. These services are
predominantly provided onsite. This service line accounted for 79% of total
revenues in the period (H1 2009: 84%) and it grew by 3% in absolute value.
· for software in productive use, or 'maintenance phase', SQS provides
Managed Testing Services under long term engagements to provide regression
testing for updates, patches and new releases. Such services typically involve
blended offshore/onshore delivery and accounted for 7% of total revenues in the
period (H1 2009: 1%).
Software Testing Products
Our unique suite of software testing products has been developed from our
experience of over 28 years' working on software testing projects, culminating
in a product set that is able to provide consistent and measurable support for
testing services (Test Management, Test Preparation, Test Automation, Test
Execution Control, Dashboard), several components of which can be integrated
into other market leading tools. Our products are fully integrated into our
services and offerings and are used by staff in our onshore and offshore
centres, ensuring seamless interaction between the two.
A recent PAC study highlighted that only 20% of the testing tools market is
professional products; standard office tools and self developed solutions
accounting for the balance. At the beginning of the period we established
Software Testing Products as a separate unit in order to better target the
testing products market and during the period we experienced a further increase
in demand for our software tools. We expect further sales in the second half
although these are likely to be weighted towards the final quarter. Tools and
Maintenance accounted for 3% of total revenues in the period (H1 2009: 2%).
IT training and Conferences
During the period the Iqnite conferences in Dusseldorf (Germany) and Geneva
(Switzerland) were held. Five further conferences will take place in September,
October and November 2010. Training still suffered to some extent from more
restrictive spending policies but we are seeing increased demand as the general
economic outlook turns more positive. Revenue from training and conferences
represented 3% of total revenues in the period (H1 2009: 3%).
Acquisitions update
On July 4, 2010 the two year earn out period with Verisoft (now SQS India) came
to an end. Final earn out accounts are expected to be agreed during the second
half of 2010 but it is anticipated that Verisoft will have achieved the majority
of its targets. Once the earn out is finalised, SQS will have acquired 75% of
the issued Verisoft shares. There is an option for SQS to acquire the remaining
25% of Verisoft which is exercisable either by SQS or the vendors until April
2016.
The earn-out period for Validate (now SQS Nordics) is now in its third year and
will run until June 2011.
Markets
A market study by Nelson Hall in April 2010 provided, for the first time, third
party confirmation of SQS's world leading position in independent pure play
testing services. The study predicts that the overall software testing services
market will grow by 2% in 2010 and that testing services contracted as part of a
development contract will remain flat in 2010 and grow by 5% in 2011, while
software testing services contracted on a stand-alone basis will grow by 8% in
2010 and 11% in 2011.
During the period we saw growth across all of the geographies in which we are
present, particularly in our core markets of the UK, Germany and the Nordic
regions.
· Our UK business recorded an excellent performance despite residual
weakness in the wider UK economy. New business demand exceeds our current
resource capacity and we are further increasing staff numbers in order to
accommodate it. We are very encouraged by the ongoing improvements within the UK
market. The Irish economy remains weak with growth relatively slow. However, we
are experiencing rising demand and are looking to add an additional 25
consultants here. Our total UK and Ireland based business accounted for 29% of
total revenues in the period (H1 2009: 24%).
· The robust health of the German economy is reflected in a good level of
growth in our German business during the period. Germany accounted 45% of total
revenues in the period (H1 2009: 48%).
· Our Nordic business (Sweden, Norway, Finland) returned to growth in the
period and recorded a similarly healthy performance to those of our other key
geographies. The Nordic business accounted for 9% of total revenues in the
period (H1 2009: 7%).
· Our Swiss, Austrian and Dutch business experienced solid demand albeit
they grew less than last year. These regions accounted for 17% of total revenues
in the period (H1 2009: 21%).
We are currently witnessing positive signs of growth in a number of verticals
including banking, retail & logistics and energy & utilities.
Business strategy
Our core strategy is to grow the Company by capitalising on its leading market
position whilst maintaining costs in line with developments in pricing. Key to
our growth is to utilise our full service capabilities and to exploit our
clients' increasing demand for independent, integrated quality and testing
solutions.
As a traditional onshore consultancy supplier, SQS has worked closely with its
clients and has developed the knowledge of their requirements relevant to
providing the optimal mix of onshore and offshore resources. Furthermore, the
multi-language capabilities of our offshore test centres has proved beneficial
in winning deals where language (e.g. full German language skills in Egypt) is
an important client concern.
An important element of our strategy is to increase the proportion of revenues
contributed by Managed Services. This involves contracting for a set fee for a
defined set of deliverables rather than the day-rate basis of our traditional
offerings. Such contracts, which tend to be over a longer-term period than
traditional project work and which do not allow clients to terminate at short
notice, allow us to gain greater visibility on revenues and to reduce our
exposure to potential economic downturns. They further benefit SQS by allowing
greater flexibility and control over project staffing.
In 2009 we stated an intention to grow Managed Services revenues to 50% of total
revenues within five years. Managed Services revenues in the period represented
7% of total group revenues and, with a considerable pipeline of new business, we
expect revenue contribution from Managed Services to increase significantly
going forward. Profit contribution is also expected to increase at an
accelerating rate as the majority of costs associated with a Managed Services
project are borne at the beginning of the contract and reduce as elements of the
workload are progressively moved offshore.
Investment into headcount and the further development of the SQS PractiQ
methodology, combined with bidding costs and other front-end weighted costs
associated with Managed Services contracts, have inevitably impacted
profitability during the first half of 2010. However, these costs were fully
expensed during the period such that the expected beneficial impact on
profitability is already being seen. Investment into SQS PractiQ is also leading
to the increasing standardisation and automation of many of the procedures
involved in software testing, which is further aiding us in reducing costs and
supporting our "test factory" approach in Managed Services.
Dividend
In accordance with German law, SQS can only pay one dividend in each financial
year. We expect to declare a dividend with our final results for the year ending
31 December 2010 in line with our current policy of paying out a fixed
proportion of full year earnings.
Employees
Significant investment was made during the period to expand the headcount and to
help facilitate business growth during the remainder of the current year and
beyond. The high levels of domain and methodology experience and expertise among
our onshore consultants enabled us to hire junior consultants. This in turn
allowed us to reduce our average cost per employee and to more effectively
address our competitive market environment, with its inevitable pressures on
pricing.
The average number of permanent consultants employed during the period was 1,249
(H1 2009: 1,144), a rise of 9%. At 30 June 2010 the permanent consultant
headcount stood at 1,332, up 14% over the six months (31 December 2009:1,168).
The increase in the number of consultants can be broken down into a net increase
of 63 onshore consultants and 101 offshore consultants. By the end of the period
all new staff members had been fully trained and are expected to be fee
generating in the second half of the current year.
Our permanent offshore consultant headcount grew 32.6% during the period to 411
at 30 June 2010, (31 December 2009: 310). Offshore consultants now represent
30.8% of total headcount against 26.5% at the start of the period.
In addition, 140 contractors contributed to revenues in the period (H1 2009:
80).
On behalf of the Board, I would like to take this opportunity to express our
gratitude to all of our staff that contributed to SQS during the period.
Outlook
It was encouraging to see the increasing demand for SQS's services across all
our core geographies during the period after the economic downturn last year. In
response to the improving market outlook and in line with our stated strategy,
we invested considerable resources in increasing our headcount and in growing
our Managed Services business. The hiring and training of over 200 consultants,
predominantly within our offshore facilities, will enable us to meet the
increasing market demand for our services and to improve our positioning in a
competitive market with inevitable pressures on pricing. The EUR40 million of
Managed Services orders we have contracted in the year to date supports our
decision to invest in this area and provides a significant improvement in
revenue visibility going forward.
Whilst the investments we have made increased costs during the period, we expect
them to lead to improved profitability during the second half of the current
year and beyond. Pricing pressures do remain and, as usual, budgeted sales of
our software testing products are weighted towards the final quarter but we
expect to conclude the year in line with expectations and to continue to grow
into 2011.
Rudolf van Megen
Chief Executive Officer
8 September 2010
Financial Review
Summary
SQS Group turnover grew by 9.4% to EUR73.9 million (H1 2009: EUR67.5 million) during
the period.
Due to a change in the internal organisation of SQS, which became effective as
of 1 January 2010, we no longer manage the Company by individual countries.
Instead we have formed larger regional entities, which can be roughly delineated
by the language predominantly spoken by the resident consultants.
Furthermore, by creating dedicated Managed Services units in each of the two
services business units, the new organisation supports the implementation of
more blended onshore/offshore delivery.
The new business units, which also represent the new accounting segments
according to IFRS 8, are:
· Central Europe Middle East (CEME), which includes the services businesses
in the markets of Germany, Switzerland, Austria, Netherlands, Luxemburg and
Egypt. Furthermore, this segment manages all billable staff that are employed by
the aforementioned countries including the German/French-language offshore
centre in Egypt.
· West Organisation North South (WONS), which includes the services
businesses in the markets of the United Kingdom, Ireland, Sweden, Norway,
Finland, USA, South Africa and India. Furthermore, this segment manages all
billable staff that are employed by the aforementioned countries including the
English-language offshore centres in India and South Africa.
· Other, which includes software testing products, training & conferences
and central group activities such as research and innovation.
Breakdown by business unit
Central Europe Middle East (CEME)
Revenue in CEME, our largest market, amounted to EUR44.8 million (H1 2009: EUR43.0
million) in the period, an increase of 4.1%. The improvement in revenue was
entirely organic and came from new managed services contracts and additional
demand for traditional IT project services.
West Organisation North South (WONS)
Our business in predominantly English speaking geographies saw a strong recovery
during the period with a 24.7% rise in revenues to EUR25.5 million (H1 2009: EUR20.4
million). This occurred primarily as the result of a strong surge in demand for
our services from the UK, Nordics and India and was especially encouraging given
that our UK business had been hardest hit by recession during 2009. The majority
of the growth came from the financial services, utilities & energy and retail
sectors.
Other Business
This segment experienced a decline in revenues in the period of 10.9% to EUR3.7
million (H1 2009: EUR4.1 million). The markets for training, conferences and
software testing products remained weak during the period, suffering late cycle
from the 2009 recession. However, we increased our resources dedicated to the
sales of these products and services during the period and have succeeded in
growing the pipeline of future business.
Margins and Profitability
Gross profit improved by 13.5% to EUR22.6 million (H1 2009: EUR19.9 million), with
the gross margin at 30.5% (H1 2009: 29.4%). This improvement was driven by
better utilisation of billable consultants but tempered by a 2% price decline
and the additional upfront investment required for the multi-year managed
service contracts of about EUR0.8 million (c. 1.1% gross margin).
Adjusted* profit before tax for the period was EUR2.4 million (H1 2009: EUR2.7
million), a decrease of 13.3% with the adjusted profit margin falling to 3.2%
(H1 2009: 4.0%). The decline is temporary and is due to the build up in sales,
test center infrastructure, and project and commercial management resources, all
consequences of our strategic target to grow managed services business to 50% of
our total business mid-term. Approximately EUR1.8 million of additional costs can
be attributed to the build up of managed services, and a further EUR1.1 million to
costs of hiring consultants and sales staff to support a return to the overall
growth of the business. We expect these investments to begin to show a return in
the second half and to contribute fully from 2011 onwards.
Adjusted* earnings per share declined to EUR0.06 (H1 2009: EUR0.08).
*adjusted to add back EUR0.2 million pro forma interest on deferred payment
milestones for acquisitions and amortisation on intangible assets of acquired
companies of EUR0.8 million
Costs
General & Administrative expenses (before IFRS amortisation on intangible assets
of acquired companies) for the period were EUR12.4 million (H1 2009: EUR10.1
million), rising as a proportion of sales to 16.8% (H1: 2009 15.0%). Additional
costs resulted chiefly from investments in managed services commercial
management and infrastructure (c. EUR1.0 million) and staff hiring costs (c.
EUR0.7million).
Sales & Marketing costs for the period were EUR6.2 million (H1 2009: EUR5.4
million), increasing to 8.4% as a proportion of sales (H1 2009: 7.9%). This
proportionately higher expense resulted from hiring additional direct sales and
telesales staff to support the managed services build out and to ensure the
return to outperformance against the overall IT market.
Research & Development expense in the period was kept broadly flat at EUR1.4
million (H1 2009: EUR1.5 million) representing 1.9% (H1 2009: 2.2%) of revenues.
These efforts were focused on development of software testing tools and our
unique PractiQ methodology.
Cash Flow and Financing
Cash flow from operating activities fell to EUR(1.5) million (H1 2009: EUR2.2
million). The primary reason for the decrease was an increase in trade
receivables of EUR7.7 million during the period as a result of the strong growth
in revenues. However, debtor days were stable at 62 (H1 2009: 62).
Cash flow from investments increased to EUR(2.9) million (H1 2009 (EUR(1.8) million)
due to investments in IT equipment and infrastructure to support staff growth
and future managed services business as well as higher capitalisation of
software testing products development costs.
Cash flow from financing activities fell by EUR1.9 million to EUR2.8 million (H1
2009: EUR(0.4) million) as the result of the dividend payment in May 2010, while
the termination of leasing contracts reduced cash by a further EUR0.2 million. The
net increase of finance loans generated EUR4.9 million of cash.
Balance Sheet
We closed the period with EUR2.7 million (30 June 2009: EUR2.8 million) of cash on
the balance sheet and borrowings of EUR8.9 million (30 June 2009: EUR4.0 million).
The resulting net debt position at the half year end was EUR(6.2) million (30 June
2009: EUR(1.2) million). These movements resulted principally from the dividend
payment of EUR1.9 million (H1 2009: EUR2.9 million) and the overall strong increase
in revenues leading to an increase in trade receivables of EUR7.7 million during
the half year. We typically have a net debt position at the half year but expect
to return to a small net cash position at the full year end.
Taxation
A tax charge of EUR0.3 million includes current tax expenses of EUR0.7 million (H1
2009: EUR0.7 million) and deferred tax income of EUR(0.5) million (H1 2009: (EUR0.1)
million). For the full year, we expect an actual tax rate of 29%.
Foreign Exchange
Approximately 55% of the Group's turnover is generated in Euros. For the
conversion of revenues and costs generated in local currencies into Euros, the
relevant official average exchange rate for the six-month-period of 2010 was
chosen. For the conversion of the balance sheet items from local currency into
Euros, the official exchange rate as at 30 June 2010 was used.
Foreign exchange had a EUR0.1 million positive impact on earnings for the period.
Had the Pound/Euro exchange rate remained the same as in H1 2009 our UK revenues
for the period would have been EUR0.4 million lower, translating to a reduction of
EUR(0.02) million in PBT.
International Financial Reporting Standards (IFRS)
The Interim Consolidated Financial Statements of SQS and its subsidiary
companies ("SQS Group") are prepared in conformity with all IFRS (International
Financial Reporting Standards, formerly International Accounting Standards) and
Interpretations of the IASB (International Accounting Standards Board) which are
mandatory at 30 June 2010, whereas the interim reports are published in an
abbreviated form according to IAS 34. The Interim Consolidated Financial
Statements have neither been audited nor reviewed.
The SQS Group Consolidated Financial Statements for the six month period ended
30 June 2010 were prepared in accordance with uniform accounting and valuation
principles in Euros.
Rene Gawron
Chief Financial Officer
8 September 2010
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Consolidated Income Statement |
+----------------------------------------------------------------------------------------------------+
| Six months ended 30 June 2010 |
+----------------------------------------------------------------------------------------------------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | months | | months | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| |(Notes) | (unaudited) | | (unaudited) | | (audited) |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| EUR'000 | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Revenue | | 73,868 | | 67,499 | | 134,344 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cost of sales | (3) | 51,317 | | 47,627 | | 91,798 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Gross profit | | 22,551 | | 19,872 | | 42,546 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| General and administrative | (3) | 13,240 | | 10,913 | | 23,222 |
| expenses | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Sales and marketing | (3) | 6,189 | | 5,359 | | 11,074 |
| expenses | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Research and development | (3) | 1,382 | | 1,463 | | 2,387 |
| expenses | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Profit before tax and | | 1,740 | | 2,137 | | 5,863 |
| finance costs (EBIT) | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Finance income | | 137 | | 80 | | 236 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Finance costs | | 509 | | 503 | | 1,198 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Net finance costs | (4) | (372) | | (423) | | (962) |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Profit before taxes (PBT) | | 1,368 | | 1,714 | | 4,901 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Income tax expense | (5) | 260 | | 612 | | 1,262 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Profit for the period | | 1,108 | | 1,102 | | 3,639 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Attributable to: | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Owners of the parent | | 1,108 | | 1,102 | | 3,639 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Non controlling interests | (15) | 13 | | 0 | | 0 |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Consolidated profit for | | 1,121 | | 1,102 | | 3,639 |
| the period | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Earnings per share, | (6) | 0.04 | | 0.04 | | 0.14 |
| undiluted (EUR) | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Earnings per share, | (6) | 0.04 | | 0.04 | | 0.13 |
| diluted (EUR) | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
| Adjusted earnings per | (6) | 0.06 | | 0.08 | | 0.21 |
| share (EUR), for comparison | | | | | | |
| only | | | | | | |
+----------------------------+---------+-------------+----------+-------------+----------+-----------+
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Consolidated Statement of Comprehensive Income |
+---------------------------------------------------------------------------------------------------------------+
| Six months ended 30 June 2010 |
+---------------------------------------------------------------------------------------------------------------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | months | | months | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | (unaudited) | | (unaudited) | | (audited) |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Profit for the period | | 1,121 | | 1,102 | | 3,639 |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Exchange differences on translating | | 2,269 | | 3,077 | | 2,351 |
| foreign operations | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| including correction of goodwill | | | | | | |
| valuation | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Other comprehensive income for the period, net | 2,269 | | 3,077 | | 2,351 |
| of tax | | | | | |
+-------------------------------------------------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Total comprehensive income for the period, net | 3,390 | | 4,179 | | 5,990 |
| of tax | | | | | |
+-------------------------------------------------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Total comprehensive income | | | | | | |
| attributable to: | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Owners of the parent | | 3,403 | | 4,179 | | 5,990 |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| Non controlling interests | | (13) | | 0 | | 0 |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | 3,390 | | 4,179 | | 5,990 |
+--------------------------------------+----------+-------------+----------+-------------+----------+-----------+
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Consolidated Statement of Financial Position |
+---------------------------------------------------------------------------------------------------------------------+
| As at 30 June 2010 (IFRS) |
+---------------------------------------------------------------------------------------------------------------------+
| | | | | 30 June | | 30 June | | 31 |
| | | | | 2010 | | 2009 | | December |
| | | | | | | | | 2009 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | |(Notes) | | (unaudited) | | (unaudited) | | (audited) |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| EUR'000 | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Current assets | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Cash and cash | | (9) | | 2,679 | | 2,814 | | 5,351 |
| equivalents | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Trade receivables | | | | 31,911 | | 26,302 | | 24,251 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Other receivables | | | | 3,062 | | 2,363 | | 2,364 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Work in progress | | | | 344 | | 301 | | 435 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Income tax | | | | 1,903 | | 1,219 | | 1,429 |
| receivables | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | 39,899 | | 32,999 | | 33,830 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Non-current assets | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Intangible assets | | (7) | | 10,202 | | 10,746 | | 10,402 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Goodwill | | (7) | | 50,060 | | 47,941 | | 47,513 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Property, plant and | | (8) | | 3,331 | | 3,061 | | 3,352 |
| equipment | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Income tax | | | | 1,426 | | 1,387 | | 1,264 |
| receivables | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Deferred tax assets | | | | 862 | | 528 | | 445 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | 65,881 | | 63,663 | | 62,976 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Total Assets | | | | 105,780 | | 96,662 | | 96,806 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Current liabilities | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Bank loans and | | (10) | | 6,826 | | 4,035 | | 1,656 |
| overdrafts | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Finance lease | | | | 501 | | 493 | | 650 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Trade payables | | | | 4,426 | | 3,749 | | 3,652 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Other provisions | | (12) | | 19 | | 11 | | 19 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Tax accruals | | | | 1,032 | | 1,902 | | 672 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Tax liabilities | | | | 4,253 | | 2,968 | | 3,531 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Other current | | (11) | | 13,197 | | 15,583 | | 12,991 |
| liabilities | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | 30,254 | | 28,741 | | 23,171 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Non-Current | | | | | | | | |
| liabilities | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Bank loans | | (10) | | 2,066 | | 14 | | 2,112 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Finance lease | | | | 744 | | 315 | | 779 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Other provisions | | (12) | | 9 | | 275 | | 30 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Pension provisions | | | | 120 | | 64 | | 120 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Deferred tax | | | | 2,395 | | 2,499 | | 2,347 |
| liabilities | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Other non-current | | | | 7,069 | | 7,578 | | 6,637 |
| liabilities | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | 12,403 | | 10,745 | | 12,025 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Total Liabilities | | | | 42,657 | | 39,486 | | 35,196 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Shareholders' equity | | (13) | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Share capital | | | | 27,263 | | 26,185 | | 27,263 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Share premium | | | | 34,792 | | 33,202 | | 34,747 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Statutory reserves | | | | 53 | | 53 | | 53 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Other reserves | | | | (5,091) | | (6,634) | | (7,360) |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Retained earnings | | | | 6,119 | | 4,370 | | 6,907 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Equity attributable | | | | 63,136 | | 57,176 | | 61,610 |
| to equity | | | | | | | | |
| shareholders | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Non controlling | | (15) | | (13) | | 0 | | 0 |
| interests | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Total Equity | | | | 63,123 | | 57,176 | | 61,610 |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
| Equity and | | | | 105,780 | | 96,662 | | 96,806 |
| Liabilities | | | | | | | | |
+-----------------------+----------+---------+----------+-------------+----------+-------------+----------+-----------+
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Consolidated Statement of Cash Flows | | |
+--------------------------------------------------------------------------------------+----------+-----------+
| Six months ended 30 June 2010 | | | | | | |
| (IFRS) | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | months | | months | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| |(Notes) | (unaudited) | | (unaudited) | | (audited) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| EUR'000 | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Net cash flow from operating | | | | | | |
| activities | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Profit before taxes and minority | | 1,368 | | 1,714 | | 4,900 |
| interests | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Add back for | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Depreciation and amortisation | | 3,306 | | 2,787 | | 6,534 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Loss on the sale of property, plant | | 8 | | 19 | | 32 |
| and equipment | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Other non-cash income | | 774 | | 391 | | (1,435) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Net interest income | | 372 | | 437 | | 976 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Operating profit before changes in | | 5,828 | | 5,348 | | 11,007 |
| the net current assets | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase (Decrease) in trade | | | | | | |
| receivables and | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| receivables from partly completed | | (7,660) | | (141) | | 1,910 |
| contracts not yet billed | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase in work in progress, other | | | | | | |
| assets | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| and pre-paid expenses and deferred | | (770) | | (342) | | (476) |
| charges | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase (Decrease) in trade | | 773 | | (524) | | (621) |
| creditors | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase (Decrease) in remaining | | 677 | | (1,684) | | (3,151) |
| accruals | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase (Decrease) in pension | | 0 | | 25 | | 35 |
| accruals | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Decrease in other liabilities and | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| deferred income | | (316) | | (510) | | 407 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cash flow from operating activities | | (1,468) | | 2,172 | | 9,111 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cash effect of foreign exchange | | (100) | | (14) | | (15) |
| rate movements | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Interest payments | (4) | (260) | | (254) | | (642) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Tax payments | (5) | (733) | | (2,672) | | (1,419) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Net cash flow from current business | | (2,561) | | (768) | | 7,035 |
| activities | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cash flow from investment | | | | | | |
| activities | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Purchase of intangible assets | | (2180) | | (2,005) | | (4,472) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Purchase of property, plant and | | (830) | | (518) | | (1,801) |
| equipment | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cashflows arising from business | | 0 | | 0 | | (1,923) |
| combinations | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Proceeds from the sale of | | 0 | | 731 | | 0 |
| intangible assets | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Foreign currency result | | 100 | | 14 | | 15 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Interest received | (4) | 18 | | 18 | | 24 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Net cash flow from investment | | (2,892) | | (1,760) | | (8,157) |
| activities | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cash flow from financing activities | | | | | | |
| | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Proceeds from the issue of share | | 0 | | 0 | | 92 |
| capital | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Dividends paid | | (1,909) | | (2,880) | | (2,880) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase of shareholder loans | | 0 | | 0 | | 700 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Repayment of bank loans | (10) | (3,040) | | (175) | | (212) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase of bank loans | (10) | 8,164 | | 3,591 | | 3,347 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Repayment of shareholder loans | | (250) | | (650) | | (650) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Increase of finance-leasing | | 192 | | 0 | | 1,194 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Repayment of lease contracts | | (376) | | (297) | | (871) |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Net cash flow from financing | | 2,781 | | (411) | | 720 |
| activities | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Change in the level of funds | | (2,672) | | (2,939) | | (402) |
| affecting payments | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Changes in the financial resources | | 0 | | 0 | | 0 |
| due to exchange rate movements | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cash and cash equivalents | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| at the beginning of the period | | 5,351 | | 5,753 | | 5,753 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| Cash and cash equivalents | | | | | | |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
| at the end of the period | | 2,679 | | 2,814 | | 5,351 |
+-------------------------------------+---------+-------------+----------+-------------+----------+-----------+
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Consolidated Statement of Changes in Equity |
+--------------------------------------------------------------------------------------------------------------------------+
| Six months ended 30 June 2010 (IFRS) |
+--------------------------------------------------------------------------------------------------------------------------+
| |
+--------------------------------------------------------------------------------------------------------------------------+
| | | Attributed to equity |
| | | owners of the parent |
+--------------------+-------------+---------------------------------------------------------------------------------------+
| | Non | Share | Share |Statutory | Other |Translation |Retained | Total | Total |
| |controlling | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | interest |capital |premium | reserves |reserves | of |earnings | | equity |
| | | | | | | foreign | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | | | | | | operations | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| 1st January 2009 | 0 | 26,185 | 33,114 | 53 | (1,134) | (8,577) | 6,147 | 55,788 | 55,788 |
| (adjusted) | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Dividends paid | | | | | | | (2,879) | (2,879) | (2,879) |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Stock option | | | 88 | | | | | 88 | 88 |
| program | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Transactions with | | | 88 | | | | (2,879) | (2,791) | (2,791) |
| shareholders | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Profit for the | | | | | | | 1,102 | 1,102 | 1,102 |
| period | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Exchange | | | | | | 3,077 | | 3,077 | 3,077 |
| differences on | | | | | | | | | |
| translating | | | | | | | | | |
| foreign operations | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Total | | | | | | 3,077 | 1,102 | 4,179 | 4,179 |
| comprehensive | | | | | | | | | |
| income | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| 30th June 2009 | 0 | 26,185 | 33,202 | 53 | (1,134) | (5,500) | 4,370 | 57,176 | 57,176 |
| (unaudited) | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Dividends paid | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Capital increase | | 1,021 | 1,412 | | | | | 2,433 | 2,433 |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Capital increase | | 57 | 58 | | | | | 115 | 115 |
| for employee | | | | | | | | | |
| participation | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Stock option | | | 75 | | | | | 75 | 75 |
| program | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Transactions with | | 1,078 | 1,545 | | | | | 2,623 | 2,623 |
| shareholders | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Profit for the | | | | | | | 2,537 | 2,537 | 2,537 |
| period | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Exchange | | | | | | (726) | | (726) | (726) |
| differences on | | | | | | | | | |
| translating | | | | | | | | | |
| foreign operations | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Total | | | | | | (726) | 2,537 | 1,811 | 1,811 |
| comprehensive | | | | | | | | | |
| income | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| 31st December 2009 | 0 | 27,263 | 34,747 | 53 | (1,134) | (6,226) | 6,907 | 61,610 | 61,610 |
| (audited) | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Dividends paid | | | | | | | (1,909) | (1,909) | (1,909) |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Capital increase | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Capital increase | | | | | | | | | |
| for employee | | | | | | | | | |
| participation | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Minority interest | (13) | | | | | | | (13) | (13) |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Stock option | | | 45 | | | | | 45 | 45 |
| program | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Transactions with | (13) | | 45 | | | | | 32 | 32 |
| shareholders | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Profit for the | | | | | | | 1,121 | 1,121 | 1,121 |
| period | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Exchange | | | | | | 2,269 | | 2,269 | 2,269 |
| differences on | | | | | | | | | |
| translating | | | | | | | | | |
| foreign operations | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| Total | | | | | | 2,269 | 1,121 | 3,390 | 3,390 |
| comprehensive | | | | | | | | | |
| income | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
| 30th June 2010 | (13) | 27,263 | 34,792 | 53 | (1,134) | (3,957) | 6,119 | 63,123 | 63,123 |
| (unaudited) | | | | | | | | | |
+--------------------+-------------+---------+---------+-----------+----------+-------------+----------+---------+---------+
Notes to the Financial Information (unaudited)
at 30 June 2010
1. Summary of Significant Accounting Policies
Basis of preparation
The Interim Consolidated Financial Statements of SQS and its subsidiaries ("SQS
Group") are prepared in conformity with all IFRS Standards (International
Financial Reporting Standards) and Interpretations of the IASB (International
Accounting Standards Board) which are mandatory at 30 June 2010, whereas the
interim reports are published in an abbreviated form according to IAS 34. The
Interim Consolidated Financial Statements have neither been audited nor
reviewed.
The Financial Information has been prepared on the basis of historical costs.
Apart from changes in the reporting form of operating segments and changes in
the accounting for losses incurred by the minority interests, the same
accounting and valuation method used for the 2009 annual Consolidated Financial
Statements was applied. Further information about the Group's accounting
principles and policies is provided in the SQS Consolidated Financial Statement
at 31st December 2009.
The Financial Information is presented in Euros and amounts are rounded to the
nearest thousand (EURk) except when otherwise indicated.
Statement of compliance
The Financial Information of SQS and its subsidiaries ('SQS Group') has been
prepared in accordance with IFRS as adopted for use in the EU.
Basis of consolidation
As at 30 June, the Company held interests in the share capital of more than 20 %
of the following undertakings:
+---------------------------+---------------+---------------------------+----------+----------+
| Consolidated companies | Country | Six | Six | Year |
| | of | month | month | ended |
| |incorporation | ended | ended | 31 |
| | | 30 | 30 |December |
| | | June | June | 2009 |
| | | 2010 | 2009 | |
+ + +---------------------------+----------+----------+
| | | Share of capital |Share of | Share |
| | | | capital | of |
| | | | | capital |
+---------------------------+---------------+---------------------------+----------+----------+
| | | % | % | % |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Group Limited, London | UK | 100.0 | 100.0 | 100.0 |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Software Quality | Ireland | 100.0 | 100.0 | 100.0 |
| Systems (Ireland) Ltd., | | | | |
| Dublin | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Nederland BV, Houten | The | 90.5 | 90.5 | 90.5 |
| | Netherlands | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS GesmbH, Vienna | Austria | 100.0 | 100.0 | 100.0 |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Software Quality | Switzerland | 100.0 | 100.0 | 100.0 |
| Systems (Schweiz) AG, | | | | |
| Zürich | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Group Management | Austria | 100.0 | 100.0 | 100.0 |
| Consulting GmbH (formerly | | | | |
| Triton | | | | |
| Unternehmensberatung | | | | |
| GmbH), Vienna | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Group Management | Germany | 100.0 | 100.0 | 100.0 |
| Consulting GmbH (formerly | | | | |
| Triton | | | | |
| Unternehmensberatung GmbH | | | | |
| Deutschland), Munich | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Egypt S.A.E., Cairo | Egypt | 100.0 | 100.0 | 100.0 |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Software Quality | Sweden | 100.0 | 100.0 | 100.0 |
| Systems Nordic AB, Kista | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Software Quality | Norway | 100.0 | 100.0 | 100.0 |
| Systems Norway AB, Oslo | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS Software Quality | Finland | 100.0 | 100.0 | 100.0 |
| Systems Finland Oy, Espoo | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
| SQS India (formerly | India | 60.0 | 60.0 | 60.0 |
| VeriSoft InfoSystems und | | | | |
| VeriSoft InfoServices), | | | | |
| Pune | | | | |
+---------------------------+---------------+---------------------------+----------+----------+
In the first half of 2010 SQS AG paid in line with the SQS Indias' acquisition
contract a further amount of EUR203k (INR13,005,000 ) as part of the purchase
price obligation.
Use of estimates
The preparation of the Interim Financial Statements in compliance with the
International Financial Reporting Standards requires the disclosure of
assumptions and estimates made by management, which have an effect on the amount
and the presentation of the assets and liabilities shown in the statement of
financial position, the income and expenditure as well as any contingent items.
The actual results may deviate from these estimates.
The main estimates and judgements of the management of SQS refer to:
· the useful life of intangible assets and property, plant and equipment,
· the future cash flows and interest rates relating to impairment tests of
goodwill,
· the valuation of the liabilities from the SQS Software Quality Systems
Nordic and SQS India purchases,
· the criteria regarding IAS 38.57 according the capitalisation of
development costs,
· the recoverability of deferred taxes on losses carried forward,
· the valuation of pension assets and liabilities and
· the rate of forfeitures of share-based payments.
There have been no material changes in estimates compared to the year 2009.
2. Segmental reporting
In January 2010 the SQS Group has changed its organisational structure. There
are two major business units acting as provider for consultancy services in
their regions. Both regional business units report their financial information
to the management of SQS AG as chief decision maker. The third reporting unit
includes the Training & Conferences business as well as the Software Testing
Products. Both, Training & Conferences (T&C) as well as Software Testing
Products (STP) are operating segments according to IFRS 8 as they are reported
separately to the management of SQS AG. However, both segments are considered as
small. Neither T&C nor STP fullfill the criteria of IFRS 8.12. Therefore the
financial information according to T&C and STP has been aggregated under the
reporting segment "Other".
Based on this organisational structure the SQS Group has established the
following three reporting segments:
· CEME (Central Europe Middle East),
· WONS (West Organisation North & South),
· Other (includes STP (Software Testing Products) and T&C (Training &
Conferences) and Group costs).
The segments "WONS" and "CEME" administrate the existing places of business as
follows:
· WONS: UKISA (UK, Ireland and Southafrika), SQS Nordic (Sweden, Norway and
Finland), SQS India (India, USA)
· CEME: SQS Germany, SQS Switzerland, SQS Austria, SQS Nederland, SQS Group
Management Consulting, SQS Egypt.
The segment "Other" includes two important roles, namely selling and leasing of
Software Testing Products and providing of Trainings as well as hosting of
Conferences.
These profits centres run all revenue and profit generating units as market
facing profit centres.
The profit centre is reportable to the Group Management Board (GMB) in Germany.
The segments CEME and WONS each have a regional board. The board includes three
roles CEO (Chief Executive Officer), CMO (Chief Market Officer), and COO (Chief
Operations Officer). Furthermore each segment has Managed Services linked to the
regional CEO.
The Group Management Board monitors the operating results of the operating
segments separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on
operating profit or loss.
The assets and liabilities have not been reported because these are not used by
the segment managers and by the Group Management Board. Furthermore, Group
financing (including finance costs and finance income) and income taxes are
managed on a group basis and are not allocated to operating segments.
The non-profit Centres include important functions such as Services & Product
Portfolio Management, Marketing Communication, Finance & Administration, IT,
Human Resources, Managed Services Support and Sales Support.
The non-profit Centres costs are allocated to the segments as far as they do
direct services to the segments. As far as they provide general services to the
whole group their costs are not allocated and shown under 'Non-allocated costs'.
In fiscal year 2009 the Company had four reportable segments namely Germany, UK
based business (including Ireland, South Africa and India as those countries are
organised as a unit "UKISA"), Switzerland, and other countries. The segment
"Other countries" included Austria, Nordic, Egypt, and the Netherlands.
Previous year information has been reclassified to correspond to the new
reporting format.
The following tables present revenue and profit information regarding the SQS
Group's operating segments for the interim period ended 30 June 2010 and 30 June
2009 and for the year ended 31 December 2009, respectively.
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Six month ended 30 | CEME | | WONS | | Other | | Total |
| June 2010 | | | | | | | |
| (unaudited) | | | | | | | |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| | EUR'000 | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| | | | | | | | |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Revenues from | 44,754 | | 25,448 | | 3,667 | | 73,869 |
| external customers | | | | | | | |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Intersegment | 384 | | 902 | | 0 | | 1,286 |
| revenues | | | | | | | |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Segment profit or | 2,563 | | 1,470 | | (1,206) | | 2,827 |
| loss | | | | | | | |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Non-allocated costs | | | | | | | (1,087) |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| EBIT | | | | | | | 1,740 |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Finance costs | | | | | | | (372) |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Income tax expense | | | | | | | (261) |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
| Profit for the | | | | | | | 1,107 |
| period | | | | | | | |
+----------------------+--------+----------+--------+----------+---------+----------+---------+
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Six month ended 30 | CEME | | WONS | |Other | | Total |
| June 2009 | | | | | | | |
| (unaudited) | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| | EUR'000 | | EUR'000 | |EUR'000 | | EUR'000 |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Revenues from | 42,983 | | 20,401 | | 4,115 | | 67,499 |
| external customers | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Intersegment | 412 | | 1,001 | | 0 | | 1,413 |
| revenues | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Segment profit or | 3,406 | | (150) | | 204 | | 3,460 |
| loss | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Non-allocated costs | | | | | | | (1,323) |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| EBIT | | | | | | | 2,137 |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Finance costs | | | | | | | (423) |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Income Tax expense | | | | | | | (612) |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Profit for the | | | | | | | 1,102 |
| period | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
2. Segmental reporting (continued)
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Year ended 31 | CEME | | WONS | |Other | | Total |
| December 2009 | | | | | | | |
| (audited) | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| | EUR'000 | | EUR'000 | |EUR'000 | | EUR'000 |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Revenues from | 84,653 | | 42,949 | | 6,742 | | 134,344 |
| external customers | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Intersegment | 859 | | 2,043 | | 0 | | 2,902 |
| revenues | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Segment profit or | 7,368 | | 1,760 | | (61) | | 9,067 |
| loss | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Non-allocated costs | | | | | | | (3,204) |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| EBIT | | | | | | | 5,863 |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Finance costs | | | | | | | (962) |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Income tax expense | | | | | | | (1,262) |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
| Profit for the | | | | | | | 3,639 |
| period | | | | | | | |
+----------------------+--------+----------+--------+----------+-------+----------+---------+
3. Expenses
The Consolidated Income Statement presents expenses according to function.
Additional information concerning the origin of these expenses, by type of cost,
is provided below:
Cost of material
The cost of material in the interim period ended 30 June 2010 amounted to
EUR5,920k (at mid-year 2009: EUR3,313k). Cost of material relates mainly to the
procurement of outside services such as contract software engineers. In
addition, certain project-related or internally used hardware and software is
shown under cost of material.
Employee benefits expenses
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Wages and salaries | | 40,628 | | 37,956 | | 72,619 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Social security | | 5,357 | | 5,423 | | 10,124 |
| contributions | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Expenses for retirement | | 750 | | 537 | | 1,826 |
| benefits | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | 46,735 | | 43,916 | | 84,569 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
The expenses for retirement benefits include the change in pension accruals and
expenses for defined contribution plans such as direct insurance and provident
fund costs.
Amortisation and depreciation
Amortisation and depreciation charged in the interim period ended 30 June 2010
amounted to EUR 3,307k (at mid-year 2009: EUR2,787k). Of this, EUR1,190k (at mid-year
2009: EUR879k) was attributable to the amortisation of development costs.
4. Net finance costs
The net finance costs are comprised as follows:
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Interest income | | 18 | | 18 | | 98 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Exchange rate gains | | 119 | | 62 | | 138 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Total finance income | | 137 | | 80 | | 236 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Interest payable | | (490) | | (455) | | (1,080) |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Exchange rate gains / | | (19) | | (48) | | (118) |
| losses | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Total finance costs | | (509) | | (503) | | (1,198) |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Net finance costs | | (372) | | (423) | | (962) |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
Finance income results from fixed deposit investments and investments in
securities maturing in short term which yield interest income, or securities
negotiable at short notice.
Interest payable relates to interest on bank liabilities and liabilities from
purchase of SQS Software Quality Systems Nordic AB, SQS India and SQS Group
Management Consulting GmbH (in 2009) calculated by using the effective interest
method.
5. Income tax expense
The line item includes current tax expenses in the amount of EUR733k (previous
interim period: EUR746k) and deferred tax income in the amount of EUR(473)k
(previous interim period: EUR(134)k).
Further information about the recognition and measurement of the income tax is
provided in the SQS Consolidated Financial Statements at 31 December 2009.
6. Earnings per share
The earnings per share presented in accordance with IAS 33 are shown in the
following table:
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Profit for the year | | 1,108 | | 1,102 | | 3,639 |
| attributable to equity | | | | | | |
| shareholders, EUR'000 | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Diluted profit for the | | 1,108 | | 1,102 | | 3,639 |
| year, EUR'000 | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Weighted average number of | | 27,263,419 | | 26,185,075 | | 26,242,287 |
| shares in issue, undiluted | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Weighted average number of | | 28,002,270 | | 26,972,614 | | 27,018,779 |
| shares in issue, diluted | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Undiluted profit per | | 0.04 | | 0.04 | | 0.14 |
| share, EUR | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Diluted profit per share, | | 0.04 | | 0.04 | | 0.13 |
| EUR | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
| Adjusted earnings per | | 0.06 | | 0.08 | | 0.21 |
| share (for comparison | | | | | | |
| only), EUR | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+------------+
Undiluted earnings per share are calculated by dividing the profit for the six
month period attributable to equity shareholders by the weighted average number
of shares in issue during the six month period ended 30 June 2010: 27,263,419
(at mid-year 2009: 26,185,075).
Diluted earnings per share are determined by dividing the profit for the year
attributable to equity shareholders by the weighted average number of shares in
issue plus any share equivalents which would lead to a dilution.
The adjusted earnings per share are calculated by adjusting the profit after tax
for deferred taxes, the interest cost of the SQS Quality Systems Nordic AB and
SQS India purchase obligations, pension interest, expenses in terms of the
employee participation program (the difference between the market share price
and the selling price of share) and amortisation cost of the acquired customer
relationships as part of the business combinations. Further the difference
between taxes on income payable under local GAAP and IFRS has been adjusted.
This adjusted profit after tax divided by the number of shares issued as at 30
June.2010 of 27,263,419 shares, (previous year 26,185,075 shares) shows adjusted
earnings per share of EUR0.06 (at mid-year 2009: EUR0.08).
7. Intangible assets
The item is comprised as follows:
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Book values | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Goodwill | | 50,060 | | 47,941 | | 47,513 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Development costs | | 3,490 | | 2,499 | | 2,921 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Software | | 2,644 | | 2,638 | | 2,634 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Customer relationships | | 4,068 | | 5,609 | | 4,847 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Intangible assets | | 60,262 | | 58,687 | | 57,915 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
Development costs were capitalised in the interim period ended 30 June 2010 in
the amount of EUR1,752k (half-year 2009: EUR1,388k) and amortised over a period of
36 months.
The amortisation of development costs is included in the costs for research and
development. The amortisation of software and remaining intangible assets as
well as impairment losses under IAS 36 are spread over the functional costs in
accordance with an allocation key.
8. Property, plant and equipment
The development of property, plant and equipment of the SQS Group is presented
as follows:
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Book values | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Freehold land and | | 490 | | 297 | | 454 |
| buildings | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Office and business | | 2,841 | | 2,764 | | 2,898 |
| equipment | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Property, plant and | | 3,331 | | 3,061 | | 3,352 |
| equipment | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
9. Cash and cash equivalents
Cash and cash equivalents comprise cash and credit balances at banks which can
be realised in the short term and which earn commercial rates of interest. The
carrying amounts are considered to be reasonable approximation of fair value.
The development of cash and cash equivalents is presented in the Consolidated
Cash Flow Statement.
10. Bank loans, overdrafts and other loans
The finance liabilities are comprised as follows:
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Bank loan and overdraft | | 6,826 | | 4,035 | | 1,656 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Current bank liabilities | | 6,826 | | 4,035 | | 1,656 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Bank loans | | 2,066 | | 14 | | 2,112 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Non-current bank | | 2,066 | | 14 | | 2,112 |
| liabilities | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Total bank liabilities | | 8,892 | | 4,049 | | 3,768 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Of these, secured | | 2,066 | | 14 | | 2,112 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
For SQS AG and some subsidiaries bank overdraft agreements are in place.
11. Other current and non-current liabilities
The item is comprised as follows:
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | Six | | Six | | Year |
| | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | EUR'000 | | EUR'000 | | EUR'000 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Liabilities in regard to | | 1,381 | | 1,546 | | 1,458 |
| social security | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Personnel liabilities | | 6,309 | | 5,957 | | 6,328 |
| (leave, bonus claims) | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Purchase obligations from | | 0 | | 4,580 | | 0 |
| SQS Group Management | | | | | | |
| Consulting GmbH | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Purchase obligations from | | 2,905 | | 2,502 | | 2,696 |
| SQS Software Quality | | | | | | |
| Systems Nordic AB | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Purchase obligations from | | 2,619 | | 2,283 | | 2,366 |
| SQS India | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Remaining other | | 3,926 | | 3,252 | | 3,649 |
| liabilities | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Deferred income | | 143 | | 65 | | 152 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Bonded loans | | 2,984 | | 2,976 | | 2,979 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | 20,267 | | 23,161 | | 19,628 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
The remaining other liabilities comprise trade accruals and other items due in
the short term. The carrying amounts are considered to be reasonable
approximation of fair value.
Further SQS has remaining liabilities from the purchase of SQS Software Quality
Systems Nordic AB with a fair value of EUR2,905k (at 31 December 2009: EUR2,696k)
and from the purchase of SQS India with a fair value of 2,619k (at 31 December
2009: 2,366). Hereof an amount of EUR2,560k and an amount of EUR1,425k is
non-current (at 31 December 2009: EUR2,377k and EUR1,181k, respectively).
The loan represents a EUR3,000k bonded loan. The loan payment is reduced by a
discount by EUR16k. The discount is set off against the loan in accordance with
IAS 39.AG 65. The interest rate is agreed with 6.93% p.a. The redemption is due
in 2012. The Deutsche Bank AG acts as appointed paying agent. The Deutsche Bank
is entitled to assign the bond to a special purpose entity, a trustee thereof, a
bank or an insurance company. The interest rate is linked to the rating of the
SQS Group following a defined rating system. If the SQS Group improves the
rating the interest rate will be decreased. If the rating decreases below a
certain bound the creditors have the right to terminate the bonded loan
immediately.
12. Other provisions
Other provisions in the amount of EUR28k (31 December 2009: EUR49k) include the
warranty costs in the amount of EUR19k (31 December 2009: EUR19k) and the vacant
property provision in the amount of EUR9k (31 December 2009 EUR30k).
13. Equity
SQS is listed on the AIM market in London and on the Open Market in Frankfurt
(Main).
The development of the equity is presented in the Consolidated Statement of
Changes in Equity.
Subscribed Capital
The subscribed capital amounts to EUR27,263,419 (at 31st December 2009:
EUR27,263,419). It is divided into 27,263,419 (at 31st December 2009: 27,263,419)
individual registered shares with an arithmetical share in the share capital of
EUR1 each. Each share entitles the holder to one right to vote. No preference
shares have been issued. The capital is fully paid up.
The movements in the issued share capital are as follows:
+-------------------------------------------+------------+----------+------------+
| |Individual | | Nominal |
| | shares | | value |
+-------------------------------------------+------------+----------+------------+
| | Number | | EUR |
+-------------------------------------------+------------+----------+------------+
| | | | |
+-------------------------------------------+------------+----------+------------+
| As at 30 June 2009 | 26,185,075 | | 26,185,075 |
+-------------------------------------------+------------+----------+------------+
| Capital increase against contribution in | 1,021,299 | | 1,021,299 |
| kind for the acquisition of the Triton | | | |
| Unternehmensberatung GmbH (3rd tranche) | | | |
| (Entry of 11 December 2009) | | | |
+-------------------------------------------+------------+----------+------------+
| Capital increase against cash from | 57,045 | | 57,045 |
| authorized capital for employee | | | |
| participation (Entry of 23 December 2009) | | | |
+-------------------------------------------+------------+----------+------------+
| As at 31 December 2009 | 27,263,419 | | 27,263,419 |
+-------------------------------------------+------------+----------+------------+
| As at 30 June 2010 | 27,263,419 | | 27,263,419 |
+-------------------------------------------+------------+----------+------------+
SQS had no shares in its ownership as at 30 June 2010.
13. Equity (continued)
Authorised capital
The authorised capital developed as follows:
+------------------------------------------------------+---------+
| | EUR'000 |
+------------------------------------------------------+---------+
| As at 30 June 2009 | 13,000 |
+------------------------------------------------------+---------+
| Usage of Authorised Capital I | (1,021) |
+------------------------------------------------------+---------+
| Usage of Authorised Capital II | (57) |
+------------------------------------------------------+---------+
| As at 31 December 2009 | 11,922 |
+------------------------------------------------------+---------+
| As at 30 June 2010 | 11,922 |
+------------------------------------------------------+---------+
Share premium
Additional paid-in capital includes any premiums received on the issuing of the
share capital. Any transaction costs associated with the issuing of shares are
deducted or set off from additional paid-in capital, net of any related income
tax benefits. Equity-settled share-based employee remuneration is also credited
to additional paid-in capital until related stock options are exercised.
Statutory reserves
The statutory reserves in SQS AG were created in accordance with Section 150 of
the Stock Corporation Act (Germany). Statutory reserves must not be used for
dividends.
Other reserves
Foreign currency translation differences arise on conversation of the opening
reserves of subsidiaries which functional currencies are not the Euro.
14. Retained earnings
Retained earnings represent the accumulated retained profits less payments of
dividend and losses of SQS Group.
The General Meeting of 26 May 2010 resolved to pay EUR0.07 dividends per share for
the business year 2009 in the total amount of EUR1,908,439.33.
15. Non Controlling Interests
Up to 2010 the excess and any further losses applicable to minorities have been
allocated against the majority interest. In the case that the subsidiary
reported profits, such profits were allocated to the majority interest until the
minority's share of losses previously absorbed by the majority had been
recovered.
Since beginning of 2010 the pro rata profit or loss and each component of other
comprehensive income are attributed to the minority interests even if those
results have a deficit balance. According to IAS 27 the profit or loss
attribution for previous periods has not been restated.
16. Notes to the Consolidated Statement of Cash flows
The Consolidated Statement of Cash flows shows how the funds of the Group have
changed in the course of the business year through outflows and inflows of
funds. The payments are arranged according to investment, financing and business
activities.
The sources of funds on which the Consolidated Statement of Cash Flows is based
consist of cash and cash equivalents (cash on hand and bank balances).
17. Related party transactions
Under IAS 24, related persons and related companies are persons and companies
who have the possibility of controlling another party or exercising significant
influence over their finance or business policy. In the SQS Group, these are the
Management Board members as well as the members of the Supervisory Board, Mr.
and Mrs. van Megen, by reason of their position as shareholders, as well as the
real estate investment fund "S.T.O.L. Immobilien Verwaltung GmbH & Co. KG",
Cologne, and "Am Westhover Berg GbR mbH", Cologne.
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Details in individual | | Six | | Six | | Year |
| shares | | month | | month | | ended |
| | | ended | | ended | | 31 |
| | | 30 | | 30 | | December |
| | | June | | June | | 2009 |
| | | 2010 | | 2009 | | (audited) |
| | | (unaudited) | | (unaudited) | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | Non-par | | Non-par | | Non-par |
| | | shares | | shares | | shares |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Rudolf van Megen, Member | | 3,283,149 | | 3,283,149 | | 3,283,149 |
| of Management Board | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Ilona van Megen, née | | 932,544 | | 932,544 | | 932,544 |
| Rumsch | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| René Gawron, Member of | | 47,129 | | 47,129 | | 47,129 |
| Management Board | | | | | | |
| David Cotterell, Member of | | 259,297 | | 259,297 | | 259,297 |
| Management Board | | | | | | |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Supervisory Board | | 17,500 | | 17,500 | | 17,500 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
| Total | | 4,539,619 | | 4,539,619 | | 4,539,619 |
+----------------------------+----------+-------------+----------+-------------+----------+-----------+
In detail, the following transactions have taken place with these persons and
companies:
As a part of the remuneration for the Management Board activities, SQS has
granted a pension commitment as post-employment benefit to one actual Management
Board member and one former Management Board member.
On 4 August 2009 Mr. van Megen has granted to SQS AG shareholder loan at normal
market conditions with an amount of EUR700k. This loan is unsecured and amounted
to EUR450k at 30 June 2010 (at 31 December 2009: EUR700k).
17. Related party transactions (continued)
SQS uses property owned by the closed real estate investment fund "S.T.O.L.
Immobilien Verwaltung GmbH & Co. KG", Cologne, and also the real estate
investment fund "Am Westhover Berg GbR mbH", Cologne. The shares in the fund are
held by employees and also Management Board member of SQS AG. The contractual
conditions of the lease of properties are compatible with normal market
conditions. The total expenses incurred under these contracts amounted in the
interim period to EUR694k (half-year 2009: EUR694k).
The total emoluments of the Management Board members amounted in the interim
period ended 30 June 2010 to EUR412k (half-year 2009: EUR673k). The emoluments of
the Supervisory Board members amounted in total to EUR41k (half-year 2009: EUR41k)
of which EUR41k had not been paid by the end of the interim period.
Members of the Management board held 13.2% (half-year 2009: 13.7 %) of the
shares in SQS as at 30 June 2009.
18. Dividends
The General Meeting of 26 May 2010 resolved to pay EUR0.07 dividends per share for
the business year 2009 in the total amount of EUR1,908,439.33.
19. Other Information
There is currently no litigation that might have significant impact on the
earnings situation of SQS AG.
20. Post interim period events
No events have occurred after the end of the interim period which have affected
the Interim Financial Statements.
Cologne, 07 September 2010
SQS Software Quality Systems AG
+------------------+----+------------------+----+------------------+
| | | | | |
+------------------+----+------------------+----+------------------+
| (R. van Megen) | | (R. Gawron) | | (D. Cotterell) |
+------------------+----+------------------+----+------------------+
SQS Software Quality Systems AG
Stollwerckstrasse 11
D-51149 Cologne
This information is provided by RNS
The company news service from the London Stock Exchange
END
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