10th Mar 2010 07:00
Embargoed until 7am
10 March 2010
SQS Software Quality Systems AG
("SQS" or "the Company")
Results for the full year ended 31 December 2009
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 year ended 31 December 2009.
Financial Highlights:
·; Turnover €134.3 million (FY 2008: €142.9 million)
·; Gross margin improved to 33.9% during the second half (H1 2009: 29.4%) giving a gross margin of 31.7% for the full year (FY 2008: 34.7%)
·; EBITDA* €12.5 million (FY 2008: €17.3 million)
·; Adjusted* PBT €7.0 million (FY 2008: €13.1 million) - includes one-off €0.6 million restructuring expense (FY 2008: €nil)
·; Adjusted** EPS €0.21 per share (FY 2008: €0.43 per share)
·; Net cash €1.6 million as at 31 December 2009 (H1 2009: net debt position of €1.2 million) (FY 2008: net cash position of € 5.1 million)
·; Cash inflow from business activities €7.0 million (FY 2008: €12.6 million)
·; Dividend of €0.07 per share proposed (FY 2008: €0.11 per share)
*PBT and EBITDA adjusted to add back IFRS effects on pro forma interest on deferred payment milestones for acquisitions of €0.4 million (2008: €0.7 million) , amortisation of intangible assets of acquired companies of €1.6 million (2008: €1.1 million) and interests on pensions of €0.1 million (2008: €0 million)
**adjusted EPS is based on adjusted PBT less the actual tax rate for operations of 21.2% (2008: 26.7%). This tax rate includes a non-recurring tax credit of €0.6 million from our UK operations. Adjusted taxes are €0.2 million (2008: €0.6 million lower) higher than reported taxes because of €0.2 million (2008: €(0.2) million) deferred taxes under IFRS and taxes on dividend payments between SQS group companies.
Operational Highlights:
·; 160 new clients signed up during the period (FY 2008: 175) including numerous blue-chip clients and our first non-gaming US client
·; Strategic focus on delivering Managed Testing Services resulted in strong growth for this division which represented 3% of total 2009 revenues (FY 2008: nil)
·; Continued growth of our offshore facilities to meet high demand for blended onshore/offshore solutions - offshore staff equal to 26.5% of total staff at the year end (Dec 31 2008: 22.1%)
·; Average Consultancy costs reduced due to continuing increase in ratio of offshore to onshore staff
·; Restructuring undertaken in 2009 in response to economic downturn fully completed
·; Investment in sales and marketing expected to lead to benefits from FY 2010 onwards
·; Billable staff utilisation improved in the second half to 181 billed days per consultant (H1 2009: 175 billed days) (FY2008: 187 billed days)
Rudolf van Megen, Chief Executive Officer of SQS commented, "Following the impact of the recession on our first half performance, we are pleased to report improvements across all of our core markets during the second half of the year, leading to improved utilisation rates and gross margins.
"During the course of the 2009 we implemented a number of measures aimed at reducing our exposure to future downturns in the market and reinforcing our market position. Our offshore businesses continued to expand, enabling us to be more competitive and increase our leading market share. In addition, we have made good progress in our Managed Services division, leading to greater visibility and increased opportunities going forward. However, despite improving markets, ongoing economic uncertainties and pricing pressures lead us to expect gross margins to remain below pre-recession levels throughout 2010.
"That said, trading in the year to date has been satisfactory and with net cash, a broadening services and product offering and our growing off-shore skill base, we are cautiously optimistic about the year ahead."
Enquiries:
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SQS Software Quality Systems AG |
Tel. +49 (2203) 91 54 0 |
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Rudolf van Megen, Chief Executive Officer |
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Rene Gawron, Chief Financial Officer |
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Altium |
Tel. +44 (0)20 7484 4040 |
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Tim Richardson |
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Katie Hobbs |
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ICIS Limited |
Tel. +44 (0)20 7651 8688 |
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Tom Moriarty |
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Bob Huxford |
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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 1,450 employees across Europe, Asia, North America and Africa. The Group has a strong presence in Germany (Cologne, Munich, Frankfurt, Stuttgart, Goerlitz and Hamburg) and in 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 20 FTSE-100 companies, half of the DAX 30 and nearly 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 Bank, Deutsche Post, Generali, JP Morgan, Meteor, Reuters and Volkswagen.
www.sqs-group.com
Chief Executive's Statement
Introduction
We are pleased to report that trading across all of our core markets improved in the second half of 2009, with our blended onshore/offshore offerings proving increasingly attractive to our clients. As a result we experienced considerable improvements both in utilisation rates and gross margins during the second half compared to those recorded in the recession hit first half. In order to meet future demand we will seek to increase our offshore capacity further.
A core element of our strategy has been to focus on our new Managed Services offerings, with a view to enhancing our overall revenue visibility, and we were pleased to see that this division contributed 3% of our total revenues from a standing start. The investment made in our sales and marketing resources during 2009 is expected to contribute to our growth in the current year and beyond and we are anticipating a growing pipeline of new business.
New business
We are delighted to report that, despite the challenging trading conditions, we signed 160 new clients during the year (FY 2008: 175), attracted in many cases to our blended onshore/offshore solutions. We are pleased to see that our continued focus on marketing and increased investment in our sales team has resulted in a high number of new business leads and strong ongoing demand, particularly for our Managed Services offering.
In line with our strategy of obtaining greater revenue visibility, we signed a number of Managed Services contracts during the period. Key amongst these include a multi-year contract with a European private bank, a five year contract with Swiss based St. Galler Kantonal Bank, a major UK health insurance company and one of the UK's leading gaming companies. In the current year to date we have won significant Managed Services contracts with two leading banks and a global insurance provider, all against global system integrators.
Other new business in 2009 included our first ever contract with a US client that was not related to the testing of gaming software. This is a one year, fully offshore agreement involving the provision of professional testing services to a regulatory authority based on the East Coast. This contract is of particular importance in that it marks entry into a new and significant market for SQS.
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 10% of total FY 2009 revenues (FY 2008: 8%)
·; 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 but there are an increasing number of projects with blended onsite/offshore delivery. This service line accounted for 82% of total FY 2009 revenues (FY 2008: 88%).
·; for software in productive use, commonly known as the maintenance phase, we provide 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 3% of total FY 2009 revenues (FY 2008: 0%).
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. This has culminated in a product set that is able to provide consistent and measurable results, with several components integrated into other market leading tools. Our products are also fully integrated into our services and offerings. Furthermore, all staff in our offshore/onshore centres use our tools to ensure seamless interaction with the onshore element of the client project. During 2009 SQS experienced increasing demand for its software tools and has committed greater resources to their sales going forward. Tools and Maintenance accounted for 2% of total FY 2009 revenues (FY 2008: 1.2%).
IT Training and Conferences
We witnessed considerable demand for our training courses for software quality certification during the year. We also held successful SQC (Software and Systems Quality) conferences during the second half in London and Stockholm. These are the largest quality management and software testing events in the world and help raise awareness of the importance of impartiality within software testing. The conferences therefore work as an effective marketing tool both for SQS and the independent testing industry as a whole. From 2010 the brand name of the conferences will be "Iqnite" as part of a marketing initiative to attract additional interest for these events. In addition, the increased awareness generated by these events has led industry analysts such as Gartner and Forrester to recognise independent software testing as a distinct industry sector. Revenue from training and conferences remained broadly steady throughout 2009, representing approximately 3% of total revenues (FY 2008: 3%).
Market drivers
During the second half of the year we saw considerable improvements across those core markets that were worst affected by the economic downturn in the first half of 2009. This was reflected in a number of new contract wins in each of Germany, the UK and the Nordic regions. Further to this, all contracts that were deferred or put on hold during the first half of the year have since resumed or been completed. These market improvements, combined with internal restructuring measures, have resulted in staff utilisation rates improving from the H1 2009 low of 175 billed days per consultant (annualised value) to 181 billed days per consultant (annualised value) in the second half. In turn this has led to gross margins improving from 29.4% in H1 2009 to 33.9% in the second half of the year. It should be noted that these markets have still not fully recovered to the pre-recession levels of 187 billed days per consultant (annualised value).
Markets in Austria and Switzerland continued to perform better than in 2008, with strong demand for our management consultancy offerings and managed testing services. Ireland and the Netherlands (although not core markets for SQS) continue to be affected by the economic downturn and sales of services in these countries remain depressed.
Our offshore facilities have experienced continuing growth throughout the year, with consultancy headcount increasing from 258 to 310 and the ratio of offshore to onshore consultancy staff rising to 26.5% (FY 2008: 22.1%). Price deflation experienced during the first half of the year - as customers sought to reduce expenditure in reaction to the recessionary environment - levelled off during the second half. Prices are not expected to return to historic higher levels as customers seek to continue to contain costs but we believe that our considerable and growing offshore resources enable us to offer increasingly competitive pricing while maintaining control over our costs. We are therefore confident that over time the competitive advantage provided to us through our offshore capabilities will result in us further increasing our market share.
According to PAC Research (Feb 2010), the European IT services market as a whole is expected to see a return to low growth at +1.2% in 2010. However, most recently, market research firms and opinion makers such as BITKOM have reduced their IT services market growth rates for 2010 to negligible and outline the continued market uncertainties and ongoing price pressure. Additionally, a recent market study from PAC ("Testing Market in Selected Countries": January 2010) revealed a number of more encouraging features within the European software testing markets. According to the study, SQS' core market of test execution is expected to outperform the IT services market, growing at approximately 5% per annum between 2009 and 2013. Further to this, the market for Consulting and Software Tools, is predicted to record a CAGR of approximately 6% to 2013 and the key strategic market for Managed Services is expected to increase by 11% per year until 2013.
The study from PAC also revealed that the European external testing market is considerably larger than previously thought. Previous market estimates of €1.6bn in value, have been revised upwards to €4.5bn, two thirds of which is represented by external testing included within IT contractors' services. Furthermore, there is an additional market segment of €18bn relating to software testing that is not contracted to third parties but carried out by in-house testers from within businesses and their IT departments. These formerly hidden segments of the market give SQS a significantly larger potential customer base into which it can market and ultimately sell its products and services.
Business strategy
We are pleased to report that our new Managed Services offering expanded during the year in line with our strategic objective. During the year we signed 15 new Managed Services contracts and the division accounted for 3% of total revenue (2008: 0%). This trend is expected to result in improved visibility and flexibility for the Company.
As Managed Services contracts are structured so that payments are based on deliverables as opposed to day rates, SQS benefits from greater control over projects while clients get an upfront understanding of costs. Furthermore, the long term contractual nature of Managed Services agreements give SQS greater visibility and reduces its exposure to potential future downturns, as clients are unable to terminate contracts on short notice. We are looking to continue with this focus, aiming ultimately to increase Managed Services to 50% of business operations over the medium term.
Additionally, it continues to be our strategy to increase our offshore capacity with the aim of further solidifying our competitive advantage in the market. During the period we experienced increasing pricing pressure as customers looked to reduce costs in light of the economic downturn. However, our offshore capabilities allowed us to offset this trend by offering greater pricing flexibility to our clients, thereby providing SQS with a competitive advantage over sector peers. We will look to grow our offshore capabilities further in line with increasing demand.
We have also continued with our strategy of reducing our reliance on specific vertical markets while targeting customers in those verticals with the greatest growth potential. An IDC report from June 2009 identified the Utilities, Government and Healthcare sectors as being those with the greatest growth potential from an IT Services perspective.
A fourth proponent of our growth strategy is to increase sales of our software testing products. Direct sales of these tools have previously been minimal as traditionally they have been integrated into our other offerings. However, having identified an appreciable market demand, we have productised the tools as stand-alone offerings. In addition, we have invested in sales staff and increased the division's marketing resources with the aim of providing sustainable sales growth over the medium term. Although this division currently accounts for only 2% of revenues, software testing product sales are relatively high margin such that growth, even from a small base, could have a material impact upon future overall operating margins.
Dividend
SQS will pay a dividend for the full year of 7 €-c per share.
Our stated policy is to pay out approximately 30% of the adjusted profit after tax as a dividend. Strict adherence to that policy for the 2009 dividend would have resulted in a dividend per share of approximately 6 €-c. However, in light of the improved performance of the Company in the second half of the year, management have proposed a higher dividend than would have resulted from its stated policy.
In the future it is intended to return to the above mentioned dividend policy.
Subject to shareholder assembly approval on 26 May 2010, the dividend will be paid on 27 May 2010 to all shareholders on the register at 21 May 2010.
The Board
On 3 March 2009 Matthias Baunach was appointed to the Supervisory Board as the elected employee representative (in accordance with German legal requirements). Scott Hansen left the supervisory board on that date and the management of SQS would again like to express their thanks to Scott for his contribution to the Company over the past nine years.
Employees
Our onshore consultancy headcount was reduced by 53 employees during the year. This has resulted in onshore staff decreasing from 911 to 858 at the year end.
The offshore consultancy headcount continues to expand substantially and we have added 52 new employees to this segment of the business during the year, such that our offshore staff numbers have increased from 258 to 310. Therefore our total consultancy staff numbers have effectively remained constant at 1168 (2008:1169).
On behalf of the Board, I would like to take this opportunity to express our gratitude to all of our staff who contributed to SQS during the period.
Outlook
Following the impact of the recession on our first half performance, we are pleased to report improvements across all of our core markets during the second half of the year, leading to improved utilisation rates and gross margins.
During the course of the 2009 we implemented a number of measures aimed at reducing our exposure to future downturns in the market and reinforcing our market position. Our offshore businesses continued to expand, enabling us to be more competitive and increase our leading market share. In addition, we have made good progress in our Managed Services division, leading to greater visibility and increased opportunities going forward. However, despite improving markets, ongoing economic uncertainties and pricing pressures lead us to expect gross margins to remain below pre-recession levels throughout 2010.
That said, trading in the year to date has been satisfactory and with net cash, a broadening services and product offering and our growing off-shore skill base we are cautiously optimistic about the year ahead.
Rudolf van Megen
Chief Executive Officer
10 March 2010
Financial Review
Summary
Group turnover during the period was down by 6% to €134.3m (FY 2008: €142.9m). Geographically, we saw a revenue decrease in Germany and in the UK due to weak IT services markets and pricing pressure as a result of the global economic crisis. Business in Switzerland and "Other Countries" was up by 32% and 33% respectively as markets in these regions tended to be more recession resilient.
Foreign Exchange
Foreign exchange had a negative impact on the reported performance for the period. Specifically, 22% (FY 2008: 28%) of Group revenue is generated by our UK operation and on a constant currency basis (i.e. had the Pound/Euro exchange rate remained the same as in 2008) our reported revenues would have been €138.7m (€134.3m at reported exchange rate). We would have therefore recorded an additional €0.2m in profits before tax. However, the change in the currency exchange rate has an overall positive effect when translating our results from Euros into Sterling in order to calculate financial ratios.
Approximately 42% of the Group's 2009 turnover was generated in non-Euro currencies (2008: 40%). The 2009 local currency revenues were translated into Euros at the official average exchange rates for the first and second half respectively. For the conversion of the balance sheet items from foreign currency into Euros, the official mean rate as at 31 December 2009 was used.
Germany
Revenue in Germany, our largest market, amounted to €63.6m (FY 2008: €68.7m), a decrease of 7.4%. The drop in revenue was the result of sudden project suspensions and a lower than expected renewal rate of running projects mainly in the first half of 2009. At the end of March 2009 when German GDP had contracted by up to 6%, some SQS clients, and especially those from the manufacturing, auto, aero, retail and logistics verticals, implemented immediate IT project reductions and suspensions leading to lower consultant's billable utilisation and price pressure. Since then many of the suspended projects have resumed but pressure on rates across the whole IT services industry continues to prevail.
United Kingdom/Ireland/South Africa/India
These geographies have significantly higher exposure to the banking sector than other SQS markets and therefore suffered most from the global market downturn. Additionally, revenues were impacted by the fall in the value of the Sterling such that we witnessed a 27.4% decrease in Euro denominated revenues to €33.4m (FY 2008: €46.1m). On a constant currency basis (i.e. had average exchange rates remained the same as in 2008), Euro denominated revenue would have been €37.8m, suggesting an underlying contraction of 18.0%. The second half of 2009 saw the first signs of recovery in the UK market but Ireland continues to be affected by the economic downturn.
Switzerland
Operations in Switzerland witnessed strong organic growth during the year, generating revenues of €18.7m (FY 2008: €14.1m), a 32.1% rise over the previous year. The private banking and wealth management sector as well as the insurance sector created significant additional demand especially for the new SQS business line of Managed Testing Services.
Other Countries
We have witnessed significant revenue growth in 'Other Countries', which consists of Austria, the Netherlands, the Nordic countries and Egypt. Revenues in these markets increased by 33.3% to €18.6m (FY 2008: €14.0m). This growth was predominantly due to the Validate acquisition which had a full 12 months revenue contribution in 2009 (2008: 6 months).
The new German and French language offshore centre in Egypt, established in 2008, resulted in losses of €(0.4)m during the year (FY 2008: €(0.4)m) due to further investment in staff and training.
Margins and Profitability
Gross profit was down 14.2% to €42.5m (FY 2008 €49.6m) with the gross margin decreasing to 31.7% (FY 2008: 34.7%). During the year, pursuant to cost reductions and better billable staff utilisation, the gross margin improved from 29.4% in H1 2009 to 33.9% in the second half.
Adjusted profit before tax* was down by 46.6% to €7.0m (FY 2008 €13.1m) with the profit margin moving to 5.2% (FY 2008: 9.2%).
Prior to the higher than expected drop in billable staff utilisation experienced in the first half of the year the proportion of our cost base attributable to permanent staff was such that our costs remained broadly fixed despite the considerable reduction in revenue. However, since this time we have implemented a cost cutting programme which has reduced our cost base attributable to own permanent consultants, services and products by €8.9m compared with the annualised cost base of the second half of 2008.
Adjusted earnings per share** was down 51% to €0.21 (2008 €0.43).
*adjusted to add back IFRS effects on pro forma interest on deferred payment milestones for acquisitions of €0.4m, amortisation of intangible assets of acquired companies of €1.6m and an IFRS interest effect on pensions of €0.1m
**based on adjusted profit before tax less the actual tax rate for operations of 21.2% (2008: 26.7%). This tax rate includes a non-recurring tax credit of €0.6m from our UK operations. Adjusted taxes are €0.2m higher than reported taxes because of €0.2m deferred taxes under IFRS and taxes on dividend payments between SQS group companies.
Costs
Adjusted*** General & Administrative expenses totalled €21.5m (2008: €22.5m) representing 16.0% of Group revenues (2008: 15.7%). Absolute cost reductions resulted from a general cost saving programme executed during the year.
***adjusted to add back IFRS effects on amortisation of intangible assets of acquired companies of €1.6m and an IFRS interest effect on pensions of €0.1m
Sales & Marketing expenses totalled €11.1m (2008: €10.5m) representing 8.2% of Group revenues (2008: 7.4%). Cost increases resulted from adding sales capacity, mainly to support managed testing services, and from additional marketing campaigns undertaken in an effort to improve lead generation.
Research & Development expenses totalled €2.4m (2008: €3.1m) representing 1.8% of Group revenues (2008: 2.2%). Reduced costs resulted from higher investments in our next generation of software testing tools, with capitalised R&D of €3.3m (2008: €2.1m and amortisation of €2.4m (€2.1m). This resulted in a net positive effect of €0.9m (2008: €(0.1)m).
Cash Flow and Balance Sheet
Cash flow from business activities was €7.0m (2008: €12.6m), primarily as a consequence of maintaining a high level of rapid invoicing and collection from debtors. Debtor days remained steady at 55 (2008: 55). As in previous years we have exceeded the full conversion of the corresponding profit after taxes.
Cash flow from financing activities was €0.7m (2008: €(4.3)m) and includes a dividend payment of €(2.9m) in May 2009 (2008: €(4.3)m).Cash outflow from investments was €(8.2)m (2008: €(9.4)m), including €(3.3)m (2008: €(2.1)m) for capitalised R&D on products, €(2.6)m (2008: €(4.6)m) for investments in IT infrastructure and SAP as the SQS ERP system and €1.9m (2008: €(3.3)m) as cash payments for the last earn out payment under the Triton acquisition (2008: acquisition of the Validate and Verisoft shares). Cash at the year-end was €5.4m (2008: €5.8m).
Shares were issued during the year primarily to satisfy deferred consideration obligations with regards to previous acquisitions. The main share issues were 1.0m shares to the vendors of Triton as part of the final payment milestone in December 2009 and 0.06m shares to SQS employees pursuant to an employee share purchase programme in December 2009.
Taxation
The reported tax charge of €1.3m includes current tax expenses of €2.0m (2008: €3.9m), a non-recurring tax credit of €0.6m in the UK and deferred taxes of €0.2m (2008: €0.2m).
We anticipate a tax rate of 29% for 2010.
International Financial Reporting Standards (IFRS)
The Consolidated Financial Statements of SQS and its subsidiary companies ("SQS Group") are prepared in conformity with all International Financial Reporting Standards (IFRS), formerly International Accounting Standards, and Interpretations of the International Accounting Standards Board (IASB) which are applied for those financial statements whose reporting period starts on or after 1 January 2009. The accounting and valuation policies are consistent with those used for the 2008 annual Consolidated Financial Statements. The Consolidated Financial Statements have neither been audited nor reviewed.
The SQS Group Consolidated Financial Statements for the twelve month period ended 31 December 2009 is presented in Euros.
Rene Gawron
Chief Financial Officer
10 March 2010
Consolidated Income Statement
As at 31 December 2009 (IFRS)
|
|
|
|
|
Year ended 31 December 2009 |
|
Year ended 31 December 2008 |
|
k€ |
|
(Notes) |
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
134,344 |
|
142,903 |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
91,798 |
|
93,294 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
42,546 |
|
49,609 |
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
|
23,223 |
|
24,075 |
|
Sales and marketing expenses |
|
|
|
11,074 |
|
10,515 |
|
Research and development expenses |
|
|
|
2,387 |
|
3,126 |
|
|
|
|
|
|
|
|
|
Profit before tax and finance costs (EBIT) |
|
|
|
5,862 |
|
11,893 |
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
236 |
|
317 |
|
Finance costs |
|
|
|
1,198 |
|
1,368 |
|
Net finance costs |
|
|
|
-962 |
|
-1,051 |
|
|
|
|
|
|
|
|
|
Profit before taxes (PBT) |
|
|
|
4,900 |
|
10,842 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
(2) |
|
1,261 |
|
4,146 |
|
|
|
|
|
|
|
|
|
Profit for the year |
|
|
|
3,639 |
|
6,696 |
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
Owners of the parent |
|
|
|
3,639 |
|
6,696 |
|
Minority interests |
|
|
|
0 |
|
0 |
|
|
|
|
|
|
|
|
|
Consolidated profit for the year |
|
|
|
3,639 |
|
6,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, undiluted (€) |
|
(3) |
|
0.14 |
|
0.30 |
|
|
|
|
|
|
|
|
|
Earnings per share, diluted (€) |
|
(3) |
|
0.13 |
|
0.29 |
|
|
|
|
|
|
|
|
|
Adjusted earnings per share (€), for comparison only |
|
(3) |
|
0.21 |
|
0.43 |
Consolidated Statement of Financial Position
As at 31 December 2009 (IFRS)
|
|
|
31 December 2009 |
|
31 December 2008 |
|
01 January 2008 |
|
k€ |
(Notes) |
(unaudited) |
|
(adjusted) |
|
(adjusted) |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
5,351 |
|
5,753 |
|
7,220 |
|
Trade receivables |
|
24,251 |
|
26,161 |
|
27,173 |
|
Other receivables |
|
2,364 |
|
2,020 |
|
1,000 |
|
Work in progress |
|
435 |
|
301 |
|
139 |
|
Income tax receivables |
(2) |
1,429 |
|
415 |
|
157 |
|
|
|
33,830 |
|
34,650 |
|
35,689 |
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Intangible assets |
(4) |
10,402 |
|
10,740 |
|
5,999 |
|
Goodwill |
(4) |
47,513 |
|
45,484 |
|
45,495 |
|
Property, plant and equipment |
|
3,352 |
|
3,168 |
|
2,243 |
|
Income tax receivables |
(2) |
1,264 |
|
1,388 |
|
1,512 |
|
Deferred tax assets |
(2) |
445 |
|
382 |
|
867 |
|
|
|
62,976 |
|
61,162 |
|
56,116 |
|
|
|
|
|
|
|
|
|
Total Assets |
|
96,806 |
|
95,812 |
|
91,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Bank loans and overdrafts |
|
1,656 |
|
458 |
|
191 |
|
Finance lease |
|
650 |
|
548 |
|
515 |
|
Trade payables |
|
3,652 |
|
4,273 |
|
3,547 |
|
Other provisions |
|
19 |
|
44 |
|
102 |
|
Tax accruals |
|
672 |
|
2,308 |
|
1,668 |
|
Tax liabilities |
|
3,531 |
|
4,122 |
|
3,745 |
|
Other current liabilities |
|
12,991 |
|
17,276 |
|
24,162 |
|
|
|
23,171 |
|
29,029 |
|
33,930 |
|
|
|
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
|
|
Bank loans |
|
2,112 |
|
175 |
|
105 |
|
Finance lease |
|
779 |
|
557 |
|
279 |
|
Other provisions |
|
30 |
|
231 |
|
92 |
|
Pension provisions |
|
120 |
|
39 |
|
147 |
|
Deferred tax liabilities |
(2) |
2,347 |
|
2,603 |
|
1,652 |
|
Other non-current liabilities |
|
6,637 |
|
7,390 |
|
7,064 |
|
|
|
12,025 |
|
10,995 |
|
9,339 |
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
35,196 |
|
40,024 |
|
43,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
27,263 |
|
26,185 |
|
21,546 |
|
Share premium |
|
34,747 |
|
33,114 |
|
25,029 |
|
Statutory reserves |
|
53 |
|
53 |
|
53 |
|
Other reserves |
|
-7,360 |
|
-9,711 |
|
-1,863 |
|
Retained earnings |
|
6,907 |
|
6,147 |
|
3,771 |
|
Equity attributable to equity shareholders |
|
61,610 |
|
55,788 |
|
48,536 |
|
|
|
|
|
|
|
|
|
Minority interests |
|
0 |
|
0 |
|
0 |
|
Total Equity |
|
61,610 |
|
55,788 |
|
48,536 |
|
|
|
|
|
|
|
|
|
Equity and Liabilities |
|
96,806 |
|
95,812 |
|
91,805 |
Consolidated Statement of Cash Flows
As at 31 December 2009 (IFRS)
|
|
|
Year ended 31 December 2009 |
|
Year ended 31 December 2008 |
|
k€ |
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
|
|
|
|
Profit before taxes |
|
4,900 |
|
10,842 |
|
Add back for |
|
|
|
|
|
Depreciation and amortisation |
|
6,535 |
|
5,006 |
|
Profit on the sale of property, plant and equipment |
|
31 |
|
10 |
|
Other non-cash income not affecting payments |
|
-1,435 |
|
-81 |
|
Net interest income |
|
976 |
|
888 |
|
Operating profit before changes in the net current assets |
|
11,007 |
|
16,665 |
|
Decrease in trade receivables and |
|
|
|
|
|
receivables from partly completed contracts not yet billed |
|
1,910 |
|
2,635 |
|
Increase in work in progress, other assets |
|
|
|
|
|
and pre-paid expenses and deferred charges |
|
-476 |
|
-654 |
|
Decrease (Increase) in trade creditors |
|
-621 |
|
355 |
|
Decrease (Increase) in remaining accruals |
|
-3,151 |
|
-867 |
|
Increase (Decrease) in pension accruals |
|
35 |
|
-108 |
|
Increase (Decrease) in other liabilities and |
|
|
|
|
|
deferred income |
|
407 |
|
-1,333 |
|
Cash flow from operating activities |
|
9,111 |
|
16,693 |
|
Cash effect of foreign exchange rate movements |
|
-15 |
|
163 |
|
Interest payments |
|
-642 |
|
-355 |
|
Tax payments |
|
-1,419 |
|
-3,919 |
|
Net cash flow from current business activities |
|
7,035 |
|
12,582 |
|
|
|
|
|
|
|
Cash flow from investment activities |
|
|
|
|
|
Purchase of intangible assets |
|
-4,472 |
|
-4,078 |
|
Purchase of property, plant and equipment |
|
-1,801 |
|
-2,171 |
|
Cashflows arising from business combinations |
|
-1,923 |
|
-3,410 |
|
Proceeds from the sale of property, plant and equipment |
|
0 |
|
225 |
|
Foreign currency result |
|
15 |
|
-163 |
|
Interest received |
|
24 |
|
229 |
|
Net cash flow from investment activities |
|
-8,157 |
|
-9,368 |
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
Dividends paid |
|
-2,880 |
|
-4,320 |
|
Proceeds from the issue of share capital |
|
92 |
|
140 |
|
Increase of shareholder loans |
|
700 |
|
650 |
|
Repayment of finance loans |
|
-212 |
|
-469 |
|
Repayment of shareholder loans |
|
-650 |
|
0 |
|
Increase of finance loans |
|
3,347 |
|
208 |
|
Increase of finance leasing |
|
1,194 |
|
0 |
|
Redemption / termination of leasing contracts |
|
-871 |
|
-482 |
|
Net cash flow from financing activities |
|
720 |
|
-4,273 |
|
|
|
|
|
|
|
Change in the level of funds affecting payments |
|
-402 |
|
-1,059 |
|
Changes in the financial resources due to exchange rate movements |
|
0 |
|
-408 |
|
Cash and cash equivalents |
|
|
|
|
|
at the beginning of the period |
|
5,753 |
|
7,220 |
|
Cash and cash equivalents |
|
|
|
|
|
at the end of the period |
|
5,351 |
|
5,753 |
1. Summary of Significant Accounting Policies
Basis of preparation
The Consolidated Financial Statements of SQS and its subsidiary companies ("SQS Group" or "SQS Konzern") are prepared in conformity with all IFRS Standards (International Financial Reporting Standards) and Interpretations of the IASB (International Accounting Standards Board) adopted by the EU Commission and translated into the German language which are to be applied for those financial statements whose reporting period starts on or after 1 January 2009. The new and revised Standards and Interpretations of the IASB were not applied in the business year 2009 prior to the implementation date stipulated.
The Financial Information has been prepared on the historical cost basis. The Financial Information is presented in Euros and amounts are rounded to the nearest thousand (€k) except when otherwise indicated.
Statement of compliance
The Financial Information of SQS and its subsidiaries (the 'SQS Group') has been prepared in accordance with IFRS as adopted for use in the EU.
First-time application of new standards, change in accounting policy and adjustment of figures from the previous year
SQS has applied the Standards and Interpretations of the IASB as applicable in the EU which are binding for financial years commencing on or after 1 January 2009. Apart from IFRS 8 (segment reporting) and the changes in IAS 1 (presentation of comprehensive income) the changes do not have any effect on the accounting treatment of assets and liabilities or their valuation.
SQS does not apply any further changed or newly passed standards prior to the implementation date stipulated. Further, according to the assessment of SQS, the application of these standards would not have any effect on the financial statements.
Apart from the valuation of goodwill the accounting policies adopted are consistent with those of the previous financial year. Compared to prior periods goodwill was valuated in the functional currency of each cash generating unit. In prior periods goodwill had been valuated in Euro. The following balance sheet items have been amended as follows:
|
|
31.12.2008 |
31.12.2008 adjusted |
01.01.2008 |
01.01.2008 adjusted |
|
|
€k |
€k |
€k |
€k |
|
Goodwill |
52,652 |
45,484 |
45,977 |
45,495 |
|
Other reserves |
(2,543) |
(9,711) |
(1,831) |
(1,863) |
There had been no impact on profit or loss as well as earnings per share.
Basis of consolidation
The Financial Information comprises the financial statements of SQS Software Quality Systems AG and its subsidiaries as at 31 December each year. Subsidiary company financial statements are prepared on a basis consistent with those of other SQS Group companies. All companies in the SQS Group have the same accounting reference date of 31 December.
All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Subsidiaries are consolidated from the date on which control is transferred to the SQS Group and cease to be consolidated from the date on which control is transferred out of the SQS Group. SQS obtains and exercises control through voting rights.
As at 31 December 2009, the Company held interests in the share capital of more than 20 % of the following undertakings (all of those subsidiaries have been consolidated):
|
|
Country of incorporation |
31.12.2009 |
31.12.2008 |
||||
|
Share of capital |
Equity |
Result for the year |
Share of capital |
Equity |
Result for the year |
||
|
|
|
% |
|
|
|
|
|
|
Consolidated companies |
|
|
|
|
|
|
|
|
SQS Group Limited (formerly Cresta Group Limited), London, since 1 July 2006 |
UK |
100.0 |
5.413 |
873 |
100.0 |
4,015 |
756 |
|
SQS Software Quality Systems (Ireland) Ltd., since 1 July 2006 |
Ireland |
100.0 |
1,473 |
722 |
100.0 |
2,470 |
1,440 |
|
SQS Nederland BV, Houten |
The Netherlands |
90.5 |
(251) |
(73) |
90.5 |
(178) |
(45) |
|
SQS GesmbH, Vienna |
Austria |
100.0 |
575 |
227 |
100.0 |
378 |
228 |
|
SQS Software Quality Systems (Schweiz) AG, Zürich |
Switzerland |
100.0 |
1,966 |
374 |
97.0 |
1,518 |
161 |
|
SQS Group Management Consulting GmbH (formerly Triton Unternehmensberatung GmbH), Vienna, since 1 September 2007 |
Austria |
100.0 |
4.934 |
1.737 |
100.0 |
3,204 |
2,158 |
|
SQS Group Management Consulting GmbH (formerly Triton Unternehmensberatung GmbH Deutschland), Munich, since 1 September 2007 |
Germany |
100.0 |
684 |
563 |
100.0 |
119 |
43 |
|
SQS Egypt S.A.E, Cairo, since 25. February 2008 |
Egypt |
100.0 |
(554) |
(410) |
100.0 |
(396) |
(428) |
|
SQS Software Quality Systems Nordic AB (formerly Validate Technology Svenska AB), Kista, since 2. July 2008 |
Sweden |
100.0 |
300 |
(23) |
100.0 |
323 |
(18) |
|
SQS India (formerly VeriSoft InfoSystems and VeriSoft InfoServices), Pune, since 4 July 2008 |
India |
60.0 |
563 |
118 |
60.0 |
442 |
74 |
SQS AG holds 15% of the shares of SQS Portugal Lda with a book value of €0 (previous year €0).
2. Taxes on earnings
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The calculation is based on the tax rates anticipated in the respective countries as at the realisation date. These are essentially based on the statutory provisions applicable or passed by the government at the date of the Financial Statements.
As a basic principle, SQS Software Quality Systems AG in Germany is liable to corporate income tax, the solidarity surcharge and trade tax. The results of the Company are subject to corporate income tax. The German corporate income tax amounts to 15 % (2008: 15%). A 5.5% solidarity surcharge is imposed on corporate income tax. The trade income tax amounts to 15.75% of the taxable income. Consequently the total income tax rate amounts to approximately 30 %.
Consolidated income tax expense is as follows:
|
|
2009 |
|
2008 |
|
|
€k |
|
€k |
|
|
|
|
|
|
Current tax expense |
1,501 |
|
3,993 |
|
Deferred tax |
(158) |
|
225 |
|
Capitalisation of the corporation tax credit |
(81) |
|
(72) |
|
Taxes on income |
1,262 |
|
4,146 |
A reconciliation of income tax applicable to the accounting profit before income tax at the statutory income tax rate to the income tax expense in the income statement is as follows:
|
|
2009 |
|
2008 |
|
|
€k |
|
€k |
|
|
|
|
|
|
Profit before tax multiplied by the standard rate of |
|
|
|
|
German income tax of 30 % (2008: 30%) |
1,470 |
|
3,253 |
|
Adjustments in respect of current income tax of previous years |
(711) |
|
261 |
|
Differential tax rates in respect of overseas subsidiaries |
(143) |
|
81 |
|
Expenditure not allowable for income tax purposes |
22 |
|
23 |
|
Not allowable personnel expenses for stock options |
56 |
|
53 |
|
Adjustments for tax losses carried forward |
123 |
|
85 |
|
Tax of dividend payout of subsidiaries |
521 |
|
476 |
|
Other |
5 |
|
(14) |
|
Capitalisation of the corporation tax credit |
(81) |
|
(72) |
|
At effective income tax rate of 25.8 % (2008: 38.2 %) |
1,262 |
|
4,146 |
Deferred taxes with an amount of €79k (2008: €122k) were charged directly to equity.
In accordance with § 37 KStG (German corporation tax law) SQS has capitalised the corporation tax credit on 31 December 2009 at a present value of €1,264k. The present value has been discounted using an interest rate of 5.5 %. The tax credit will be paid off by eight further instalments until 2017.
For the assessment of deferred tax assets and liabilities, SQS Software Quality Systems AG applies a tax rate based on the current tax law in Germany of 30% (2008: 30%) which takes into account corporation tax, the solidarity surcharge and trade tax. For deferred tax assets and liabilities of the overseas subsidiaries, the local tax rates are taken as the basis.
Deferred income tax relates to the following:
|
|
31 December |
|
31 December |
|
|
2009 |
|
2008 |
|
|
€k |
|
€k |
|
|
|
|
|
|
Losses carried forward |
173 |
|
223 |
|
Pensions accruals |
44 |
|
2 |
|
Property subventions |
115 |
|
53 |
|
Trade receivables |
62 |
|
0 |
|
Other accruals |
51 |
|
104 |
|
Deferred tax assets |
445 |
|
382 |
|
Capitalised development costs |
(852)
|
|
(580) |
|
Capitalised Software |
0 |
|
(10) |
|
Trade receivables |
(14) |
|
(14) |
|
Capitalisation of customer relations |
(1,409) |
|
(1,863) |
|
Obligation from SQS Nordic and SQS India purchase |
(44) |
|
(122) |
|
Other |
(28) |
|
(14) |
|
Deferred tax liabilities |
(2,347) |
|
(2,603) |
|
Net deferred tax liabilities |
(1,902) |
|
(2,221) |
Deferred tax assets are recognised when it is considered probable that economic benefit will flow to the entity. Based on the earnings situation of the past and on the business expectations for the foreseeable future, value adjustments are determined if applicable.
Where a company has suffered losses, deferred tax credits thereon are capitalised if the ability in the future to set off the losses with future income is permissible under the respective national provisions. According to the planning of SQS BV and SQS Nordic, a return to taxable profits is regarded as very probable.
SQS Egypt disposes of accumulated losses carry forward of €590k. In respect of these losses no deferred tax asset has been capitalised.
3. Earnings per share
The earnings per share presented in accordance with IAS 33 are shown in the following table:
|
|
2009 |
|
2008 |
|
|
€k |
|
€k |
|
|
|
|
|
|
Profit for the year attributable to the equity shareholders |
3,639 |
|
6,696 |
|
Diluted profit for the year |
3,639 |
|
6,696 |
|
|
|
|
|
|
Weighted average number of the shares in issues, undiluted |
26,242,287 |
|
22,287,098 |
|
Dilutive effect from convertible bonds |
0 |
|
7,357 |
|
Dilutive effect from stock option programme |
776,492 |
|
856,749 |
|
Weighted average number of shares in issues, diluted |
27,018,779 |
|
23,151,204 |
|
Undiluted profit per share € |
0.14 |
|
0.30 |
|
Diluted profit per share € |
0.13 |
|
0.29 |
|
Adjusted profit per share € |
0.21 |
|
0.43 |
Undiluted earnings per share are calculated by dividing the profit for the year attributable to equity shareholders by the weighted average number of shares in issue during 2009: 26,242,287 (2008: 22,287,098).
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 2009 and 2008 were calculated based on the profit after tax:
- less the corporate income tax asset of €72k (2008: €72k),
- plus the interest cost of the purchase obligations of €386k (2008: €691k),
- plus amortisation cost of the acquired customer relationships as part of the business combinations of €1,557k (2008: €1,140k),
- plus expenses in terms of the employee participation program: the difference between the market share price and the selling price of shares €23k (2008: €0k),
- plus differences of evaluation of pensions according to IFRS and HGB (German GAAP) of €106k (2008: €0k).
- plus pension interest expenses of €46k (2008 €42k),
Further the difference between taxes on income payable under local GAAP and IFRS of €(230)k (2008: €(227k)) has been adjusted. This results in an adjusted profit after tax of €5,527k (2008: €9,628k). This divided by 26,242,287 shares (2008: 22,287,098) shows adjusted earnings per share of €0.21 (2008: €0.43).
Management considers that the stock options given to employees may have a dilutive effect. On a weighted average basis shares resulting from stock option programmes amounted to 776,492 shares (2008: 856,749). This effect leads to an immaterial difference between undiluted earnings and diluted earnings per share. The number of potential shares is calculated on a pro rata basis.
4. Intangible assets
The composition of this item is as follows:
|
Book values |
Remaining useful life |
|
31.12.2009 |
|
31.12.2008 (adjusted) |
|
01.01.2008 (adjusted) |
|
Goodwill |
Years |
|
€k |
|
€k |
|
€k |
|
|
|
|
|
|
|
|
|
|
SQS UK based business |
|
|
29,014 |
|
27,635 |
|
34,763 |
|
SQS BV, Netherlands |
|
|
555 |
|
555 |
|
555 |
|
SQS Group Management Consulting GmbH |
|
|
9,100 |
|
8,939 |
|
9,944 |
|
SQS Software Quality Systems Nordic AB |
|
|
6,714 |
|
6,301 |
|
0 |
|
SQS India |
|
|
1,898 |
|
1,821 |
|
0 |
|
Other |
|
|
233 |
|
233 |
|
233 |
|
Goodwill |
|
|
47,513 |
|
45,484 |
|
45,495 |
|
Development costs Capitalisation 2007 Capitalisation 2008 Capitalisation 2009 |
0 1 2 |
|
0 685 2,236 |
|
611 1,375 - |
|
|
|
|
|
|
2,921 |
|
1,986 |
|
|
|
Software |
1 to 3 |
|
2,634 |
|
2,350 |
|
|
|
Customer relationships |
|
|
4,847 |
|
6,404 |
|
|
|
Intangible assets |
|
|
10,402 |
|
10,740 |
|
|
Development costs were capitalised in the business year in the amount of €3,320k (in the previous year €2,063k) 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 is spread over the functional costs in accordance with an allocation key.
Effective on 1 September 2007, SQS had acquired the shares of Triton Unternehmensberatung GmbH and its subsidiaries. In 2009 the realised target of the earn-out clause led to an increase in acquisition costs of €161k. This amount led to an increase of goodwill.
In order to test the recoverability of goodwill SQS conducted impairment tests, comparing the value in use of each cash generating unit with their carrying amounts. Impairment tests were carried out for the SQS UK based business (SQS UKISA), for SQS Nederland B. V., for the SQS Group Management Consulting GmbH (formerly Triton), for the SQS Software Quality Systems Nordic AB (formerly Validate), as well as SQS India (formerly VeriSoft Infosystems and Verisoft Infoservices). Those entities are considered to be the cash generating units which are relevant for impairment testing as they represent the lowest level at which management of the SQS Group monitors the underlying value of each goodwill acquired within each transaction.
All impairment tests are based on the value in use of each cash generating unit. In order to determine the values in use management has set up budgets and forecasts for each cash generating unit. The key assumptions on which management has based its cash flow projections are the future development (growth) of revenues, the development of the gross margin based on the expected capacity of the SQS-consultants and the development of general and administrative costs as well as sales and marketing costs in relation to revenues.
In its budgets and forecasts management projected detailed cash flows over a period of five years. For the periods thereafter constant cash flows were assumed in accordance with the discounted cash flow method.
The determination of the cash flows is based on the state of knowledge as of November 2009. Beside experiences from the past management considered the recent global economical development, the actual orders on hand, the actual number of SQS-consultants as well as the strategy of SQS for the coming five years.
The budgets of the European cash generating units except SQS Nordic show an increase in revenues for 2010 between 8 % and 17 % compared to the year 2009. Regarding SQS Nordic management expects revenue growth of 31 % for 2010. For the years 2011 to 2014 the growth per year is reduced to 10 % for each of those cash generating units. Management expects that all subsidiaries are going to grow higher than the marked. Regarding SQS India management assumes a growth of 105 % for 2010 and a further growth of 20 % for each of the years 2011 until 2014.
Further management expects that the gross margin ratio will slightly be increased and that the expense ratio of general and administrative costs as well as sales and marketing costs will be decreased for most of the subsidiaries of SQS.
In accordance with IAS 36, the impairment tests were based on the following assumptions:
·; Expenses and income, assets and debts in connection with taxes on earnings, such as active and passive deferred taxes, tax reimbursement claims, tax liabilities and tax accruals, were eliminated both from the carrying amount of the cash generating unit and from the value in use,
·; The cash flows, either in or out, from financing activities have not been taken into account,
·; For reasons of practicability, in compliance with IAS 36.79, the trade receivables and trade creditors and also other liabilities were included in the calculations when estimating the future cash flows and the book value,
·; For the transition from the value of the entire business to the value in use of the equity holders, the entire liabilities at market value (= book value) were eliminated,
·; The growth rate in perpetuity of 1 %,
·; The goodwill was allocated entirely to the carrying amount of the cash generating unit in accordance with IAS 36.80 and IAS 36.81,
·; The discount rates applied to the cash flow projections were pre-tax interest rates in a range between 8.5 % and 10.7 %.
Neither in 2009 nor in 2008 impairment losses or reversals of impairment losses have been recognised.
5. Equity
SQS is listed on the AIM market in London and on the Open Market in Frankfurt (Main).
Subscribed Capital
The subscribed capital amounts to €27,263,419 (in the previous year €26,185,075). This is divided into 27,263,419 (in the previous year 26,185,075) individual registered shares with an arithmetical share in the share capital of €1 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 shares |
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Nominal value |
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Number |
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€ |
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As at 1 January 2008 |
21,546,309 |
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21,546,309 |
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Capital increase from contingent share capital due to exercise of convertible bonds (Entry of 20 February 2008) |
52,800 |
|
52,800 |
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Capital increase against contribution in kind for the acquisition of the Validate Group ( Entry of 11 August 2008) |
1,221,144 |
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1,221,144 |
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Capital increase against contribution in kind for the acquisition of the Cresta Group Ltd (3rd tranche) ( Entry of 28 November 2008) |
2,398,858 |
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2,398,858 |
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Capital increase against contribution in kind for the acquisition of the Triton Unternehmensberatung GmbH (2nd tranche) ( Entry of 29 December 2008) |
965,964 |
|
965,964 |
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As at 31 December 2008 |
26,185,075 |
|
26,185,075 |
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Capital increase against contribution in kind for the acquisition of the Triton Unternehmensberatung GmbH (3rd tranche) ( Entry of 11 December 2009) |
1,021,299 |
|
1,021,299 |
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Capital increase against cash from authorized capital for employee participation (Entry of 23 December 2009) |
57,045 |
|
57,045 |
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As at 31 December 2009 |
27,263,419 |
|
27,263,419 |
On 5 November 2009 the management board resolved to use Authorised Capital I and increased the share capital from €26,185,075 by €1,021,299 to €27,206,374 by using 1,021,299 new registered non-par value shares against contribution in kind. The subject of this contribution is the last part of the consideration for the acquisition of Triton. The supervisory board has consented to this resolution. This resolution became effective with the entry in the commercial register on 11 December 2009.
On 9 November 2009 the supervisory board resolved to use the Authorised Capital II and increased the share capital from €27,206,374 by €57,045 to €27,263,419 by using 57,045 new registered non-par value shares against cash for employee participation. The supervisory board has consented to this resolution. This resolution became effective with the entry in the commercial register on 23 December 2009.
SQS had no shares in its ownership as at 31 December 2009.
Conditional capital
The General Meeting of 2 June 2006 resolved a conditional capital by an amount of up to €1,500,000 by issuance of up to 1,500,000 new individual registered shares (Conditional Capital II). This resolution became effective with the entry of 30 June 2006. The Conditional Capital II serves to grant up to 1,500,000 share options as incentive compensation for SQS employees and executives. The increase of the Conditional Capital will be made in the case of exercising of the stock options from holders.
Authorised capital
The General Meeting of 20 May 2009 resolved a cancellation of the Authorised Capital I, the Authorised Capital II, the Authorised Capital III and the Authorised Capital IV and a creation of a new Authorised Capital I and Authorised Capital II by issuing of up to 10,400,000 and up to 2,600,000 new registered non-par value shares, respectively, against contributions in cash or in kind until 30 April 2014.
On 5 November 2009 the Authorised Capital I was partially used by using of 1,021,299 new registered non-par value shares against contribution in kind for the acquisition of Triton Unternehmensberatung GmbH (3rd tranche).
Further the management board resolved on 11 November 2009 to use the Authorised Capital II by issuing 57,045 new registered non-par value shares against cash for employee participation.
Thereafter, the authorised capital developed as follows:
|
|
€ |
|
As at 1 January 2008 |
6,398,311 |
|
Increase of Authorised Capital IV |
4,300,000 |
|
Usage of Authorised Capital I |
(1,221,144) |
|
Usage of Authorised Capital IV |
(2,298,858) |
|
Usage of Authorised Capital IV |
(965,964) |
|
As at 31 December 2008 |
6,112,345 |
|
Cancellation of Authorised Capital I |
(851,113) |
|
Cancellation of Authorised Capital II |
(1,444,514) |
|
Cancellation of Authorised Capital III |
(2,881,540) |
|
Cancellation of Authorised Capital VI |
(935,178) |
|
Increase of Authorised Capital I |
10,400,000 |
|
Increase of Authorised Capital II |
2,600,000 |
|
Usage of Authorised Capital I |
(1,021,299) |
|
Usage of Authorised Capital II |
(57,045) |
|
As at 31 December 2009 |
11,921,656 |
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).
Other reserves
Foreign currency translation differences arise on conversion of the opening reserves of subsidiary undertakings where the functional currency of the subsidiary is not the Euro. This amounts to €2,340k (2008: €1,409k).
IPO costs are accounted for net of taxes in the amount of €1,134k (2008: €1,134k).
Retained earnings
Retained earnings represent the accumulated retained profits less losses of SQS Group. The General Meeting of 20 May 2009 resolved to pay €0.11 dividends per share for the business year 2008 in the total amount of €2,880,358.25.
6. Notes to the Statement of Cash Flows
The cash flow statement 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 cash flow statement is based consist of cash and cash equivalents (cash on hand and bank balances).
Cologne, 10 March 2010
SQS Software Quality Systems AG
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(D. Cotterell) |
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(R. van Megen) |
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(R. Gawron) |
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SQS Software Quality Systems AG
Stollwerckstrasse 11
D-51149 Cologne
Related Shares:
SQS Software Quality Systems AG