8th Sep 2009 07:00
Embargoed until 7am
08 September 2009
SQS Software Quality Systems AG
("SQS" or "the Company")
Results for the six months ended 30 June 2009
SQS Software Quality Systems AG (AIM: SQS.L), the world's largest supplier of independent software testing and quality management services, today announces its results for the six months ended 30 June 2009.
Financial Highlights:
Turnover €67.5 million (H1 2008: €68.9 million)
EBITDA €4.9 million (H1 2008: €8.5 million)
Adjusted* PBT €2.7 million (H1 2008: €6.7 million) - includes one-off €0.6 million restructuring expense (H1 2008: €nil)
Operating cash flow €2.2 million (H1 2008: €4.2 million)
End-markets improved during Q3 2009 giving confidence in achieving FY 2009 expectations
*PBT adjusted for IFRS amortisation (€0.8m) and pro forma interest on acquisitions of Verisoft, Validate and Triton (€0.2m)
Operational Highlights:
82 new clients signed up during the period, including Telenor, PostFinance of Switzerland, a central European insurance group and several other blue chip companies
Continued growth of our offshore facilities to meet high demand for blended onshore/off-shore solutions
Strong growth in number of contract signings for Managed Testing Services offering, in line with core strategy
Restructuring in response to economic downturn now fully completed
Cost saving measures now taking effect with significantly higher utilisation rates than in H1 2009
Rudolf van Megen, Chief Executive Officer of SQS commented, "While trading in the first half of 2009 proved to be very challenging, we are pleased to report that our key markets have begun to show signs of recovery. We are also highly encouraged by a number of new contract wins in our key strategic areas of managed services and off-shoring. The restructuring of the business carried out during the period is now complete and has enabled us to successfully adapt to the changes in the market. As such, we have now returned to improved utilisation levels and, as resultant cost savings are realised, we expect margins to return to more normal levels in the second half. As a result, whilst our core markets remain somewhat unpredictable, we are confident that market expectations for the current year are achievable."
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 |
|
|
ICIS Limited |
Tel. +44 (0)20 7651 8688 |
|
Tom Moriarty |
|
|
Bob Huxford |
About SQS
SQS is the world's largest supplier of independent software testing and quality management services. SQS consultants design and oversee quality management processes during software and IT systems development and test the resulting products for errors and omissions.
Headquartered in Cologne, Germany, SQS has approximately 1,400 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 36 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 Deutsche Bank, Deutsche Telekom, Deutsche Post, Allianz, Meteor, BP, JP Morgan, UBS, Beazley, Volkswagen, and Daimler.
www.SQS-group.com
Chief Executive's Statement
Introduction
Towards the end of the first quarter of 2009, we experienced a number of clients in our core German and UK markets taking the decision to suspend projects, prompted by the slowdown in the global economy. As a result, our revenues and profits for the first half were materially impacted. However, in recent months many of these suspended projects have been recommenced and we are securing a growing number of new contract wins within our core geographies. Although it may be too early to point to definite trends, it would appear that the German market has stabilised and that the UK is showing encouraging signs of growth.
We secured a number of new contract wins for our blended on-shore/off-shore solutions during the period. Cost reduction has become an increasingly relevant aspect of any project in the face of economic uncertainty and the recession has compelled customers to consider the adoption of the off-shoring model.
In addition, we are witnessing an increase in demand for our Managed Testing Services offering, for which we charge based on what we deliver as opposed to a traditional day-rate basis. This arrangement is particularly beneficial to us as it gives us greater flexibility and control over the projects on which we work. Furthermore, contracts of this kind are usually longer-term and cannot be terminated at short notice. This gives us greater visibility and reduces our exposure to any further potential downturn.
In response to the rapid changes in our markets during the first half of 2009, we undertook a significant restructuring program, implementing a number of cost saving measures. This restructuring has further impacted profitability for the period resulting in an additional one-off cost of approximately €0.6 million. However, the restructuring is now fully complete and the Company is achieving a substantially higher level of staff utilisation than in the first half of 2009. It is also expected to result in considerable cost savings going forward.
New Business
We are delighted to report that we continue to be highly effective at winning new business, having signed 82 new clients in the first half of 2009. In addition, our increased focus on marketing is proving successful, generating greater numbers of leads than previously.
In line with our strategy we have focused attention on sales of blended on/off-shore managed services solutions, as such projects tend to be longer term and therefore provide improved visibility for the business. In the last few months we have signed seven long term managed service contracts, mostly with clients in Switzerland, and this has been one of the fastest growing areas of our business.
New client wins include the recent signing of a 12 month £0.5 million blended on/off-shore managed service contract with the consumer division of a leading financial services group and a 12-month blended on/off-shore contract with a leading UK gas supplier. In addition we have extended a contract with the Swiss IT services company SIX Group, to a three year contract including offshore with Cairo.
Other new business includes the signing of a frame agreement with Telenor, the world's 7th largest mobile operator and leading provider of telecommunication services in the Nordic regions. We will be working with Telenor to ensure quality in both its fixed-line and mobile value chains and the agreement covers all of the Nordic geographies.
We are now beginning to see more promising conditions within a number of sectors. These include Financial Services, where we have signed a number of new contracts in the UK, Germany, Switzerland and Ireland; Food and Retail, in which we have signed testing contracts with a Tier 1 UK supermarket as well as with the world's largest provider of food services; and Legal, where we have had a number of successes with new clients following on from our extensive and successful work done at a major UK based legal firm.
Services and product lines
Professional services for business and IT
Our main revenue stream, accounting for 94.8% of total H1 2009 revenues (HY1 2008: 95.5%), is the provision of professional testing services, 90% of which are IT related. SQS is constantly refining and improving its offerings in this field and now offers over 39 software testing and quality management services, considerably more than any of our competitors. Newer offerings, such as agile testing and application security for payment cards, help us to forge relationships with clients at the highest level, and give us greater influence over the projects on which we work, creating opportunities to cross-sell additional services. Many of these newer services are attaining faster growth rates than our traditional service offerings at present, although from a smaller base.
Tools, licences, and maintenance
Our unique tools have been developed during our 27 years' experience of software testing projects. This has resulted in a product set that provides consistent and measurable results, with several components integrated into other market leading tools. Tools and maintenance accounted for approximately 2.5% of total H1 2009 revenues (H1 2008: 1.4%). Our tools are also fully integrated into our services and offerings. Furthermore, all staff in our offshore/homeshore centres use our tools to ensure seamless interaction with the onshore element of the client project.
IT training
We introduced a number of new training offerings during the year, including INTCCM (International Certified Professional in Configuration Management) and Application Lifecycle Management Practices. Since their introduction, we have witnessed considerable demand for these offerings, driven by the IREB's (International Requirements Engineering Board) newly introduced requirements for certification in these fields. As one of the first Professional Service Organisations to demand the new QAMP (Quality Assurance Management Professional) certification for its employees, SQS also introduced training for this qualification during 2008. Revenue from training developed broadly in line with the Company's top line during the period and represented approximately 2.0% of total H1 2009 revenues (H1 2008: 2.5%).
Conferences and events
Of increasing importance to SQS are our successful SQC conferences (Software and Systems Quality Conferences). These are the largest quality management and software testing events in the world and SQS held events in Geneva and Dusseldorf during the first half of 2009. These events have proved excellent marketing platforms for SQS and the independent testing industry as a whole. They also help to raise awareness among organisations of the increased effectiveness of using an impartial, independent body to provide software testing and quality management. This increased awareness has culminated in independent software testing being recognised as a distinct industry by independent analysts from Gartner and Forrester. Conferences and events contributed approximately 0.7% of total H1 2009 revenues (H1 2008: 0.6%).
Acquisitions
Triton (now called 'SQS Group Management Consulting Insurance') was acquired in 2007 and reached its earn-out expiration date on 31 August 2009. We are delighted to announce that Triton exceeded all targets set for the period by a significant margin, more than justifying the rationale for the acquisition. As a result, the Group will be issuing an additional 0.9m shares to meet the maximum consideration of €15.3m. As stated in the original announcement of the acquisition, these shares will be valued at the share price at the time the acquisition was made. There are lock-up provisions relating to parts of the share issue.
We do not anticipate making any acquisitions in the second half of 2009.
Market drivers
Towards the end of the first quarter of 2009 we witnessed a rapid slowdown in the growth rates of our markets with a number of clients suspending projects in an effort to reduce costs to combat the effects of the recession. The German economy underwent a significant contraction during this time with GDP down 5.8%. However, the market appears to have stabilised with work being resumed on many previously suspended projects, in particular those that can demonstrate a real return on investment. This is supported by the German government releasing figures stating that GDP saw a return to growth of 0.3% during Q2 2009 (EU Statistics Office: DESTATIS) as capital expenditure, withheld in Q1, was released.
Our other core market, the UK, continued to be weak into the second quarter. However, since the period end we have again seen previously suspended project work recommence and are now witnessing signs of growth. As such, we are very encouraged by a series of new contract wins and an improving pipeline of business within the geography.
It is still too early for us to tell whether the Nordic regions' economies are undergoing a period of recovery as they traditionally slow down throughout the July and August holiday season. Our Swiss business however, performed strongly throughout the first half and continues to do so, having been largely unaffected by the recession.
Our offshore facilities have continued to progress well and have remained a growing part of our business throughout the first half of the year, with headcount increasing from 290 to 333 during this time. Importantly, the slowdown in the global economy has encouraged customers to seek cheaper alternatives and has worked to expedite the deployment of our offshore resources. Therefore, the timing of our entry into this market, and the considerable and continuing expansion of our off-shore resources therein, was highly appropriate and we are confident that this area of our business will continue to see strong growth going forward.
In terms of the vertical markets in which we operate we are currently witnessing positive signs of growth in a number of sectors including Financial Services, Public Sector, Utilities, Retail, Food, Healthcare, and Insurance. According to Gartner research, the European IT services market is expected to see a return to growth at +3% in 2010.
Business strategy
To accelerate our growth, we will continue to focus on winning new business as part of our managed services offering. Managed services involve us charging for deliverables rather than on a simple day-rate basis, so is beneficial to the client as they know exactly how much a specific deliverable will cost them from the outset. This reduces execution risk and enables the client to manage resources accordingly. It is also beneficial to SQS as it gives us greater flexibility and control over the projects on which we work.
In addition, as we are contractually locked-in we gain greater visibility on revenues and clients are unable to terminate contracts at short notice, thereby reducing the Company's exposure to further potential downturns in the economy. Contracts of this kind also tend to be over a longer-term than traditional contracts, such that visibility is further increased and risk further reduced.
Currently, managed services accounts for less than 10% of business operations and it is our strategy to increase this to 50% over the medium term. The impact of this strategy is already being realised with seven managed services contracts signed during the period.
Another core strand of our strategy has been the significant increase of our off-shore capacity to enable us to provide greater pricing flexibility to our clients without affecting the standard of the service we provide. Our ability to do this has become an increasingly important differentiator for us during the economic downturn, as clients look to reduce costs where possible. We have therefore seen considerable growth in this part of our business during the first half of the year and expect this trend to continue. As such, we intend to continue to expand this side of our business in line with the growing demand.
We also continued to successfully diversify our client base among the smaller verticals in which we operate, being particularly successful in winning new clients in the Technology, Energy, Utility and Public sectors during the period. This has given us a greater balance across the 27 distinct verticals to which our clients belong, such that we have further reduced our exposure to any given sector. Our success in this strategy also demonstrates the considerable breadth of the market into which we are able to sell our services.
Dividend
We propose to maintain our current dividend policy and pay out a fixed proportion of full year earnings. In accordance with German law, SQS may only pay one dividend in each financial year and therefore we expect to declare a dividend following the annual shareholder assembly on our final results for the year ending 31 December 2009.
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 55 employees during the first half. This decrease was the result of the challenging trading environment which impacted our utilisation rate and consequently obliged us to lower our headcount. The offshore facilities continue to grow and we have added 43 new employees to this segment of the business. Overall, staff numbers have therefore decreased from 1436 to 1427.
In addition, we utilised the "Short Work" initiative introduced by the German Government in response to the economic downturn. This enables employers to temporarily send home unutilised employees on a reduced salary, the bulk of which is funded by the government. This has been particularly helpful as it has given us the flexibility to retain employees at minimal cost while awaiting the resumption of delayed projects.
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
While trading in the first half of 2009 proved to be very challenging, we are pleased to report that our key markets have begun to show signs of recovery. We are also highly encouraged by a number of new contract wins in our key strategic areas of managed services and off-shoring. The restructuring of the business carried out during the period is now complete and has enabled us to adapt to current market conditions. Following the period end we have improved utilisation rates and, as resultant cost savings are realised, we expect margins to return to more normal levels in the second half. As a result, whilst our markets remain somewhat unpredictable, we are confident that market expectations for the current year are achievable.
Rudolf van Megen
Chief Executive Officer
8th September 2009
Financial Review
Summary
Group turnover saw a marginal decline of 2% to €67.5m (H1 2008: €68.9m) during the period. Geographically, we saw a mixed picture across the countries in which we operate.
Geographical Breakdown
Germany
Revenue in Germany, our largest market, amounted to €32.4m (H1 2008: €33.9m), a decline of 4.5%. The change in the top line was entirely organic and primarily occurred in the last three months of the period as a result of unforeseen project suspensions and delays. News announced in March 2009 of an expected 6% decline in German GDP caused many clients to cut back their immediate spending by an unprecedented level.
United Kingdom/Ireland/South Africa/India
Our UK based business suffered a decline in revenues of 32.5% to €16.1m (H1 2008: €23.9m) as the result of a strong drop in demand from the financial services sector. At constant exchange rates revenue would have declined by 21.3%. This decline however, was less unexpected than in Germany and we were able to adjust our consultant numbers far earlier as a result. We were also able to re-allocate a significant number of UK based consultants to other Group regions such as Switzerland, resulting in their revenue and profit contributions being reported in these other segments.
Switzerland
Organic revenues from our Swiss operations rose by 44.3% to €9.9m (H1 2008: €6.9m), such that the region now represents 15% of total revenues. Strong demand came from a growing number of managed services deals mainly with banking clients. While the top line grew strongly the local headcount remained relatively static, such that we could utilise consultants from other SQS Group companies.
Other Countries
We witnessed significant revenue growth in Other European Countries, which consists primarily of Austria, the Netherlands, Sweden, Norway and Finland. Revenues in these markets increased 118.0% to €9.0m (H1 2008: €4.1m). However, the bulk of this growth was due to the acquisition of Validate in the Nordic regions which was made in July 2008 and therefore did not contribute to revenues in the comparable period last year.
The Validate acquisition has significantly enhanced our footprint in testing within the Nordic countries. Although the Nordic market has been suffering from the same recessionary effects as most other regions, the acquisition has been successfully integrated into the SQS group and we have already had our first cross-referenced client wins.
Margins and Profitability
Gross profit reduced by 16.9% to €19.9m (H1 2008: €23.9m), with the gross margin at 29.4% (H1 2008: 34.7%). This decline was primarily due to lower utilisation of billable consultants and, to a lesser extent, pricing pressure.
Adjusted profit before tax for the period was €2.7m (H1 2008: €6.7m), a decrease of 59.2% with the adjusted profit margin falling to 4.0% (H1 2008: 9.7%). As with our gross margins, the decline was largely as the consequence of lower utilisation of billable consultants and, to a lesser extent, pricing levels. Because two thirds of our costs are personnel costs it was not possible to immediately adjust our cost base in response to the rapid decline in revenues towards the end of Q1 2009. During this time the lost revenue from Germany was approximately €2.1m, the lost revenue from the Nordic regions was approximately €0.4m and from the UK approximately €0.5m. This loss of revenue translated almost fully to a direct reduction in profits. However, the staff base has since been adjusted such that we are now running at a significantly improved level of utilisation.
Adjusted earnings per share declined to €0.08* (H1 2008: €0.23).
*adjusted to add back to the profit after tax the pro forma interest on deferred payment milestones for acquisitions of €0.2m and amortisation on intangible assets of acquired companies of €0.8m.
Costs
General & Administrative expenses (without IFRS amortisation on intangible assets of acquired companies) totalled €10.1m (H1 2008: €10.9m), falling as a proportion of sales to 15.0% (H1: 2008 15.5%). Cost savings resulted chiefly from improved operational efficiencies and economies of scale brought about by the successful integration of acquisitions.
Sales & Marketing costs for the period were €5.4m (H1 2008: €4.8m), increasing to 7.9% as a proportion of sales (H1 2008: 7.9%). This proportionately higher expense resulted from hiring additional direct sales and telesales staff to ensure continuous outperformance against the overall IT market.
Research & Development expense was kept broadly flat at €1.5m (H1 2008: €1.4m) representing 2.2% (H1 2008: 2.1%) of revenues. These efforts were focussed on development of our unique PractiQ methodology and software testing tools.
Cash Flow and Financing
Cash flow from operating activities was €2.2m (H1 2008: €4.2m), the primary reason for the decrease being the reduced profit before tax. However, this represented a higher profit to cash conversion rate than in H1 2008. Debtor days reduced to 62 (H1 2008: 65) as a result of continued improvements to invoicing processes and collection.
Cash flow from investments was €-1.8m, less than a third of that in H1 2008 (€-6.1m) due to the absence of acquisitions and an overall reduced investment level.
Cash flow from financing activities was €-0.4m (H1 2008: €-1.8m) reducing by €2.9m during the period as the result of the dividend payment in May 2009, while the termination of leasing contracts reduced cash by a further €0.3m. The net increase of finance loans/shareholder loans generated €2.8m of cash.
Balance Sheet
We closed the period with €2.8m (H1 2008: €1.8m) of cash on the balance sheet and borrowings of €4.0m (H1 2008: €2.9m). The resulting small net debt position at the half year end was €-1.2m (HY1 2008: €-1.1m). These movements resulted principally from the dividend payment of €2.9m (H1 2008: €4.2m) and tax payments of €2.7m (H1 2008: €1.6m) shortly before the period end. We typically have a small net debt position at the half year but expect to have a net cash position at the full year end.
Taxation
A tax charge of €0.6m includes current tax expenses of €0.7m (H1 2008: €1.8m) and deferred tax income of €0.1m (H1 2008: €0.1m). For the full year, we expect an actual tax rate of 28%.
Foreign Exchange
Approximately 59% of the Group's turnover is generated in Euros. For the conversion of the balance generated in local currencies into Euros the relevant official fixed exchange rate was chosen. For the conversion of the balance sheet items from local currency into Euros the official mean rate as at 30 June 2009 was used.
Foreign exchange had a negative impact on earnings for the period. Had the Pound/Euro exchange rate remained the same as in H1 2008 our UK revenues for the period would have been €2.7m higher, translating to an additional €0.02m 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 Standards (International Financial Reporting Standards, formerly International Accounting Standards) and Interpretations of the IASB (International Accounting Standards Board) which are mandatory at 30 June 2009, 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 2009 were prepared in accordance with uniform accounting and valuation principles in Euros.
Rene Gawron
Chief Financial Officer
8 September 2009
Consolidated Income Statement
Six months ended 30 June 2009
|
Six months ended 30 June 2009 |
Six months ended 30 June 2008 |
Year ended 31 December 2008 |
||
|
€'000 |
(Notes) |
(unaudited) |
(unaudited) |
(audited) |
|
Revenue |
67,499 |
68,867 |
142,903 |
|
|
Cost of sales |
(3) |
47,627 |
44,966 |
93,294 |
|
|
|
|
||
|
Gross profit |
19,872 |
23,901 |
49,609 |
|
|
General and administrative expenses |
(3) |
10,913 |
11,271 |
24,075 |
|
Sales and marketing expenses |
(3) |
5,359 |
4,765 |
10,515 |
|
Research and development expenses |
(3) |
1,463 |
1,450 |
3,126 |
|
|
|
|
||
|
Profit before tax and finance costs (EBIT) |
2,137 |
6,415 |
11,893 |
|
|
Finance income |
80 |
205 |
317 |
|
|
Finance costs |
503 |
684 |
1,368 |
|
|
Net finance costs |
(4) |
(423) |
(479) |
(1,051) |
|
|
|
|
||
|
Profit before taxes (PBT) |
1,714 |
5,936 |
10,842 |
|
|
Income tax expense |
(5) |
612 |
1,672 |
4,146 |
|
|
|
|
||
|
Profit for the period |
1,102 |
4,264 |
6,696 |
|
|
Profit attributable to: |
||||
|
Owners of the parent |
1,102 |
4,264 |
6,696 |
|
|
Minority interests |
(15) |
0 |
0 |
0 |
|
|
|
|
||
|
Consolidated profit for the period |
1,102 |
4,264 |
6,696 |
|
|
Earnings per share, undiluted (€) |
(6) |
0.04 |
0.20 |
0.30 |
|
Earnings per share, diluted (€) |
(6) |
0.04 |
0.19 |
0.29 |
|
Adjusted earnings per share (€), for comparison only |
(6) |
0.08 |
0.23 |
0.43 |
Consolidated Statement of Comprehensive Income
Six months ended 30 June 2009
|
Six months ended 30 June 2009 |
Six months ended 30 June 2008 |
Year ended 31 December 2008 |
|
|
€'000 |
(unaudited) |
(unaudited) |
(audited) |
|
Profit for the period |
1,102 |
4,264 |
6,696 |
|
Exchange differences on translating foreign operations |
621 |
192 |
(1,162) |
|
|
|
|
|
|
Other comprehensive income for the period, net of tax |
621 |
192 |
(1,162) |
|
Total comprehensive income for the period, net of tax |
1,723 |
4,456 |
5,534 |
|
Total comprehensive income attributable to: |
|||
|
Owners of the parent |
1,723 |
4,456 |
5,534 |
|
Minority interests |
0 |
0 |
0 |
|
|
|
|
|
|
1,723 |
4,456 |
5,534 |
Consolidated Statement of Financial Position
As at 30 June 2009 (IFRS)
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
||||||
|
€'000 |
(Notes) |
(unaudited) |
(unaudited) |
(audited) |
||||
|
Current assets |
||||||||
|
Cash and cash equivalents |
(9) |
2,814 |
1,774 |
5,753 |
||||
|
Trade receivables |
26,302 |
30,406 |
26,161 |
|||||
|
not yet billed |
||||||||
|
Other receivables |
2,363 |
5,691 |
2,020 |
|||||
|
Work in progress |
301 |
297 |
301 |
|||||
|
Income tax receivables |
1,219 |
131 |
415 |
|||||
|
32,999 |
38,299 |
34,650 |
||||||
|
Non-current assets |
||||||||
|
Intangible assets |
(7) |
10,746 |
6,391 |
10,740 |
||||
|
Goodwill |
(7) |
52,652 |
45,980 |
52,652 |
||||
|
Property, plant and equipment |
(8) |
3,061 |
2,664 |
3,168 |
||||
|
Income tax receivables |
1,387 |
1,547 |
1,388 |
|||||
|
Deferred tax assets |
528 |
651 |
382 |
|||||
|
68,374 |
57,233 |
68,330 |
||||||
|
Total Assets |
101,373 |
95,532 |
102,980 |
|||||
|
Current liabilities |
||||||||
|
Bank loans and overdrafts |
(10) |
4,035 |
2,827 |
458 |
||||
|
Finance lease |
493 |
406 |
548 |
|||||
|
Trade payables |
3,749 |
5,010 |
4,273 |
|||||
|
Other provisions |
(12) |
11 |
78 |
44 |
||||
|
Tax accruals |
1,902 |
2,161 |
2,308 |
|||||
|
Tax liabilities |
2,968 |
2,967 |
4,122 |
|||||
|
Other current liabilities |
(11) |
15,583 |
23,216 |
17,276 |
||||
|
28,741 |
36,665 |
29,029 |
||||||
|
Non-Current liabilities |
||||||||
|
Bank loans |
(10) |
14 |
102 |
175 |
||||
|
Finance lease |
315 |
183 |
557 |
|||||
|
Other provisions |
(12) |
275 |
241 |
231 |
||||
|
Pension provisions |
64 |
172 |
39 |
|||||
|
Deferred tax liabilities |
2,499 |
1,523 |
2,603 |
|||||
|
Other non-current liabilities |
7,578 |
7,263 |
7,390 |
|||||
|
10,745 |
9,484 |
10,995 |
||||||
|
Total Liabilities |
39,486 |
46,149 |
40,024 |
|||||
|
Shareholders' equity |
(13) |
|||||||
|
Share capital |
26,185 |
21,599 |
26,185 |
|||||
|
Share premium |
33,202 |
25,204 |
33,114 |
|||||
|
Statutory reserves |
53 |
53 |
53 |
|||||
|
Other reserves |
(1,922) |
(1,189) |
(2,543) |
|||||
|
Retained earnings |
4,369 |
3,716 |
6,147 |
|||||
|
Equity attributable to equity shareholders |
61,887 |
49,383 |
62,956 |
|||||
|
Minority interests |
(15) |
0 |
0 |
0 |
||||
|
Total Equity |
61,887 |
49,383 |
62,956 |
|||||
|
Equity and Liabilities |
101,373 |
95,532 |
102,980 |
|||||
Consolidated Cash Flow Statement
Six months ended 30 June 2009 (IFRS)
|
Six months ended 30 June 2009 |
Six months ended 30 June 2008 |
Year ended 31 December 2008 |
||||||
|
€'000 |
(Notes) |
(unaudited) |
(unaudited) |
(audited) |
||||
|
Net cash flow from operating activities |
||||||||
|
Profit before taxes |
1,714 |
5,936 |
10,842 |
|||||
|
Add back for |
||||||||
|
Depreciation and amortisation |
2,787 |
2,059 |
5,006 |
|||||
|
Profit on the sale of property, plant and |
||||||||
|
equipment |
19 |
10 |
10 |
|||||
|
Other non-cash income not affecting |
||||||||
|
payments |
391 |
295 |
(81) |
|||||
|
Net interest income |
437 |
405 |
888 |
|||||
|
Operating profit before changes in the net |
||||||||
|
current assets |
5,348 |
8,705 |
16,665 |
|||||
|
Increase (Decrease) in trade receivables and |
||||||||
|
receivables from partly completed contracts |
||||||||
|
not yet billed |
(141) |
(786) |
2,635 |
|||||
|
Increase in work in progress, other assets |
||||||||
|
and pre-paid expenses and deferred charges |
(342) |
(4,030) |
(654) |
|||||
|
Decrease (Increase) in trade creditors |
(524) |
1,463 |
355 |
|||||
|
Decrease (Increase) in remaining accruals |
(1,684) |
113 |
(867) |
|||||
|
Increase (Decrease) in pension accruals |
25 |
25 |
(108) |
|||||
|
Decrease in other liabilities and deferred |
||||||||
|
income |
(510) |
(1,280) |
(1,333) |
|||||
|
Cash flow from operating activities |
2,172 |
4,210 |
16,693 |
|||||
|
Cash effect of foreign exchange rate |
||||||||
|
movements |
(14) |
(29) |
163 |
|||||
|
Interest payments |
(4) |
(254) |
(184) |
(355) |
||||
|
Tax payments |
(5) |
(2,672) |
(1,585) |
(3,919) |
||||
|
Net cash flow from current business |
||||||||
|
activities |
(768) |
2,412 |
12,582 |
|||||
|
Cash flow from investment activities |
||||||||
|
Purchase of intangible assets |
(2,005) |
(1,926) |
(4,078) |
|||||
|
Purchase of property, plant and equipment |
(518) |
(1,078) |
(2,171) |
|||||
|
Cashflows arising from business combinations |
0 |
0 |
(3,410) |
|||||
|
Transfer into an notary trust account to |
||||||||
|
purchase of shares |
0 |
(3,270) |
0 |
|||||
|
Proceeds from the sale of intangible assets |
731 |
0 |
0 |
|||||
|
Proceeds from the sale of property, plant and |
||||||||
|
equipment |
0 |
0 |
225 |
|||||
|
Foreign currency result |
14 |
41 |
(163) |
|||||
|
Interest received |
(4) |
18 |
127 |
229 |
||||
|
Net cash flow from investment activities |
(1,760) |
(6,106) |
(9,368) |
|||||
|
Cash flow from financing activities |
||||||||
|
Proceeds from the issue of share capital |
0 |
140 |
(4,320) |
|||||
|
Costs for IPO |
0 |
0 |
140 |
|||||
|
Dividends paid |
(2,880) |
(4,320) |
0 |
|||||
|
Increase of shareholder loans |
0 |
0 |
650 |
|||||
|
Repayment of finance loans |
(10) |
(175) |
(182) |
(469) |
||||
|
Increase of finance loans |
(10) |
3,591 |
2,815 |
208 |
||||
|
Repayment of shareholder loans |
(650) |
0 |
0 |
|||||
|
Redemption / termination of lease contracts |
(297) |
(205) |
(482) |
|||||
|
Net cash flow from financing activities |
(411) |
(1,752) |
(4,273) |
|||||
|
Change in the level of funds affecting |
||||||||
|
payments |
(2,939) |
(5,446) |
(1,059) |
|||||
|
Changes in the financial resources due to |
||||||||
|
exchange rate movements |
0 |
0 |
(408) |
|||||
|
Cash and cash equivalents |
||||||||
|
at the beginning of the period |
5,753 |
7,220 |
7,220 |
|||||
|
Cash and cash equivalents |
||||||||
|
at the end of the period |
2,814 |
1,774 |
5,753 |
|||||
|
Change in the level of funds affecting payments |
(2,939) |
(5,446) |
(1,059) |
|||||
|
Changes in the financial resources due to exchange rate movements |
0 |
0 |
(408) |
|||||
|
Cash and cash equivalents |
||||||||
|
at the beginning of the period |
5,753 |
7,220 |
7,220 |
|||||
|
Cash and cash equivalents |
||||||||
|
at the end of the period |
2,814 |
1,774 |
5,753 |
|||||
Consolidated Statement of Changes in Equity
Six months ended 30 June 2009 (IFRS)
|
Attributed to equity owners of the parent |
|||||||||
|
€'000 |
Share |
Share |
Statutory |
Other |
Translation |
Retained |
Total |
Minority |
Total |
|
capital |
premium |
reserves |
reserves |
of foreign |
earnings |
interest |
equity |
||
|
operations |
|||||||||
|
1st January 2008 |
21,546 |
25,029 |
53 |
(1,134) |
(247) |
3,771 |
49,018 |
0 |
49,018 |
|
Issue of share capital |
53 |
87 |
140 |
140 |
|||||
|
Dividends paid |
(4,319) |
(4,319) |
(4,319) |
||||||
|
Stock option program |
88 |
88 |
88 |
||||||
|
Total comprehensive income |
|
|
|
|
192 |
4,264 |
4,456 |
|
4,456 |
|
30th June 2008 (unaudited) |
21,599 |
25,204 |
53 |
(1,134) |
(55) |
3,716 |
49,383 |
0 |
49,383 |
|
Issue of share capital |
4,586 |
7,821 |
(1) |
12,406 |
12,406 |
||||
|
Stock option program |
89 |
89 |
89 |
||||||
|
Costs for Capital increase by cash contribution (net of tax) |
0 |
0 |
|||||||
|
Total comprehensive income |
|
|
|
|
(1,354) |
2,432 |
1,078 |
|
1,078 |
|
31st December 2008 (audited) |
26,185 |
33,114 |
53 |
(1,134) |
(1,409) |
6,147 |
62,956 |
0 |
62,956 |
|
Dividends paid |
(2,880) |
(2,880) |
(2,880) |
||||||
|
Stock option program |
88 |
88 |
|||||||
|
Total comprehensive income |
|
|
|
|
621 |
1,102 |
1,723 |
|
1,723 |
|
30th June 2009 (unaudited) |
26,185 |
33,202 |
53 |
(1,134) |
(788) |
4,369 |
61,887 |
0 |
61,887 |
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 2009, 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. The same accounting and valuation method used for the 2008 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 31 December 2008.
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 ('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 of incorporation |
Six month ended 30 June 2009 |
Six month ended 30 June 2008 |
Year ended 31 December 2008 |
|
Share of capital |
Share of capital |
Share of capital |
||
|
% |
% |
% |
||
|
SQS Group Limited, London |
UK |
100.0 |
100.0 |
100.0 |
|
SQS Software Quality Systems (Ireland) Ltd., Dublin |
Ireland |
100.0 |
100.0 |
100.0 |
|
SQS Nederland BV, Houten |
The Netherlands |
90.5 |
90.5 |
90.5 |
|
SQS GesmbH, Vienna |
Austria |
100.0 |
100.0 |
100.0 |
|
SQS Software Quality Systems (Schweiz) AG, Zürich |
Switzerland |
100.0 |
97.0 |
97.0 |
|
SQS Group Management Consulting GmbH (formerly Triton Unternehmensberatung GmbH), Vienna |
Austria |
100.0 |
100.0 |
100.0 |
|
SQS Group Management Consulting GmbH (formerly Triton Unternehmensberatung GmbH Deutschland), Munich |
Germany |
100.0 |
100.0 |
100.0 |
|
SQS Egypt S.A.E., Cairo |
Egypt |
100.0 |
100.0 |
100.0 |
|
SQS Software Quality Systems Nordic AB, Kista |
Sweden |
100.0 |
- |
100.0 |
|
SQS India (formerly VeriSoft InfoSystems und VeriSoft InfoServices), Pune |
India |
60.0 |
- |
60.0 |
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 valuation of the liabilities from the Triton, VeriSoft and Validate purchases
the planning premises relating to the valuation of deferred taxes on losses carried forward,
the valuation of pension assets and liabilities and
the planning premises relating to the value in use of cash generating units.
There have been no material changes in estimates compared to the year 2008.
2. Segmental reporting
Since 1st January 2009 the SQS Group applies IFRS 8 in regard of the preparation of the segmental reporting. As the segments shown in the financial statements of prior years are equivalent with the operating segments according to IFRS 8 the first application of IFRS 8 had no effects on the segmental reporting of SQS.
The following tables present revenue and profit information regarding the SQS Group's business segments for the interim period ended 30 June 2009 and 30 June 2008 and for the year ended 31 December 2008, respectively.
|
Six month ended 30 June 2009 (unaudited) |
Germany |
UK based business |
Switzerland |
Other Countries |
Total |
|
€k |
€k |
€k |
€k |
€k |
|
|
Sales |
|||||
|
External sales |
32,403 |
16,128 |
9,929 |
9,039 |
67,499 |
|
Internal sales between the segments |
1,589 |
1,042 |
424 |
2,043 |
5,098 |
|
Result |
|||||
|
Segment result |
977 |
53 |
827 |
281 |
2,138 |
|
Consolidation |
0 |
||||
|
Finance costs |
(423) |
||||
|
Income tax expense |
(613) |
||||
|
Profit for the period |
1,102 |
|
Six month ended 30 June 2008 (unaudited) |
Germany |
UK based business |
Switzerland |
Other Countries |
Total |
|
€k |
€k |
€k |
€k |
€k |
|
|
Sales |
|||||
|
External sales |
33,941 |
23,905 |
6,879 |
4,142 |
68,867 |
|
Internal sales between the segments |
617 |
356 |
294 |
887 |
2,154 |
|
Result |
|||||
|
Segment result |
3,720 |
2,213 |
247 |
235 |
6,415 |
|
Consolidation |
0 |
||||
|
Finance costs |
(479) |
||||
|
Income Tax expense |
(1,672) |
||||
|
Profit for the period |
4,264 |
|
Year ended 31 December 2008 (audited) |
Germany |
UK based business |
Switzerland |
Other Countries |
Total |
|
€k |
€k |
€k |
€k |
€k |
|
|
Sales |
|||||
|
External sales |
68,739 |
46,076 |
14,138 |
13,950 |
142,903 |
|
Internal sales between the segments |
1,971 |
1,138 |
1,106 |
2,398 |
6,613 |
|
Result |
|||||
|
Segment result |
6,426 |
3,555 |
629 |
1,283 |
11,893 |
|
Consolidation |
0 |
||||
|
Finance costs |
(1,051) |
||||
|
Income tax expense |
(4,146) |
||||
|
Profit for the period |
6,696 |
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 2009 amounted to €3,313k (at mid-year 2008: €7,378k). Cost of material mainly relates to the procurement of external services such as contract software testers. In addition, certain project-related or internally used hardware and software is shown under cost of material.
Employee benefits expenses
|
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
|
€k |
€k |
€k |
|
|
Wages and salaries |
37,956 |
35,389 |
74,686 |
|
Social security contributions |
5,423 |
4,440 |
9,772 |
|
Expenses for retirement benefits |
537 |
415 |
1,098 |
|
43,916 |
40,244 |
85,555 |
The expenses for retirement benefits include the change in pension accruals and other retirement provisions such as direct insurance and provident fund costs.
Amortisation and depreciation
Amortisation and depreciation charged in the interim period ended 30 June 2009 amounted to € 2,787k (at mid-year 2008: € 2,060k). Of this, € 879k (at mid-year 2008: 938€ k) was attributable to the amortisation of development costs.
4. Net finance costs
The net finance costs are comprised as follows:
|
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
|
€k |
€k |
€k |
|
|
Interest income |
18 |
167 |
247 |
|
Exchange rate gains |
62 |
38 |
70 |
|
Total finance income |
80 |
205 |
317 |
|
Interest payable |
(455) |
(573) |
(1,135) |
|
Exchange rate gains / losses |
(48) |
(111) |
(233) |
|
Total finance costs |
(503) |
(684) |
(1,368) |
|
Net finance costs |
(423) |
(479) |
(1,051) |
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 Validate, VeriSoft and Triton calculated by using the effective interest method.
5. Income tax expense
The line item includes current tax expenses in the amount of €746k (previous interim period: €1,779k) and deferred tax income in the amount of € (132)k (previous interim period: € (107)k).
Further information about the recognition and measurement of the income tax is provided in the SQS Consolidated Financial Statements at 31 December 2008.
6. Earnings per share
The earnings per share presented in accordance with IAS 33 are shown in the following table:
|
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
|
Profit for the year attributable to equity shareholders, €k |
1,102 |
4,264 |
6,696 |
|
Diluted profit for the year, €k |
1,102 |
4,264 |
6,696 |
|
Weighted average number of shares in issue, undiluted |
26,185,075 |
21,584,894 |
22,287,098 |
|
Weighted average number of shares in issue, diluted |
26,972,614 |
22,479,324 |
23,151,204 |
|
Undiluted profit per share, € |
0.04 |
0.20 |
0.30 |
|
Diluted profit per share, € |
0.04 |
0.19 |
0.29 |
|
Adjusted earnings per share (for comparison only), € |
0.08 |
0.23 |
0.43 |
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 2009: 26,185,075 (at mid-year 2008: 21,584,894).
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 Triton, VeriSoft and Validate purchase obligations 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 30.06.2009 of 26,185,075 shares, (previous year 21,599,109 shares) shows adjusted earnings per share of €0.08 (at mid-year 2008: €0.23).
7. Intangible assets
The item is comprised as follows:
|
Book values |
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
€k |
€k |
€k |
|
|
Goodwill |
52,652 |
45,980 |
52,652 |
|
Development costs |
2,499 |
2,270 |
1,986 |
|
Software |
2,638 |
1,103 |
2,350 |
|
Customer relationships |
5,609 |
3,018 |
6,404 |
|
Intangible assets |
63,398 |
52,371 |
63,392 |
Development costs were capitalised in the interim period ended 30 June 2009 in the amount of €1,388k (half-year 2008 € 1,114k) and amortised over a period of 36 months, since the conditions under IAS 38 were fulfilled.
The amortisation of development costs is contained 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 month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
€k |
€k |
€k |
|
|
Freehold land and buildings |
297 |
578 |
304 |
|
Office and business equipment |
2,764 |
2,086 |
2,864 |
|
Property, plant and equipment |
3,061 |
2,664 |
3,168 |
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 bank liabilities are comprised as follows:
|
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
|
€k |
€k |
€k |
|
|
Bank loan and overdraft |
4,035 |
2,827 |
458 |
|
Current bank liabilities |
4,035 |
2,827 |
458 |
|
Bank loans |
14 |
102 |
175 |
|
Non-current bank liabilities |
14 |
102 |
175 |
|
Total bank liabilities |
4,049 |
2,929 |
633 |
|
Of these, secured |
14 |
108 |
175 |
For SQS AG and some subsidiaries bank overdraft agreements are in place.
11. Other liabilities
The item is comprised as follows:
|
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
|
€k |
€k |
€k |
|
|
Liabilities in regard to social security |
1,546 |
1,611 |
1,721 |
|
Personnel liabilities (leave, bonus claims) |
5,957 |
6,933 |
8,142 |
|
Obligations from the Cresta purchase |
0 |
6,767 |
0 |
|
Obligations from the Triton purchase Obligations from the Validate purchase Obligations from the VeriSoft purchase |
4,580 2,502 2,283 |
8,745 0 0 |
4,482 2,431 2,162 |
|
Remaining other liabilities |
3,252 |
3,427 |
2,555 |
|
Deferred income |
65 |
43 |
205 |
|
Bonded loans |
2,976 |
2,953 |
2,968 |
|
23,161 |
30,479 |
24,666 |
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.
SQS has remaining liabilities from the Triton purchase with a fair value of €4,580k.The non-current liability has an amount of €0 (at 31 December 2008: €4,482k). For further details see SQS Consolidated Financial Statements at 31 December 2008.
Further SQS has remaining liabilities from the Validate purchase with a fair value of €2,502k (at 31 December 2008: €2,431k) and from the VeriSoft purchase with a fair value of 2,283k (at 31 December 2008: 2,162k). Hereof an amount of €2,205k and an amount of €2,283k is non-current.
The bonded loan represents a nominal amount of €3,000k. The loan payment is reduced by a discount. 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 €286k (31 December 2008: €314k) include the warranty costs in the amount of €11k (31 December 2008: €201k) and the vacant property provision in the amount of €52k (31 December 2008 €74k).
13. Equity
SQS is listed on the AIM 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 €26,185,075 (at 31 December 2008: €26,185,075). It is divided into 26,185,075 (at 31 December 2008: 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 |
Nominal value |
|
|
Number |
€ |
|
|
As at 30 June 2008 |
21,599,109 |
21,599,109 |
|
Capital increase against contribution in kind for the acquisition of the Validate Group (Entry of 11 August 2008) |
1,221,144 |
1,221,144 |
|
Capital increase against contribution in kind for the acquisition of the Cresta Group Ltd. (3rd tranche) (Entry of 28 November 2008) |
2,398,858 |
2,398,858 |
|
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 |
|
As at 31 December 2008 |
26,185,075 |
26,185,075 |
|
As at 30 June 2009 |
26,185,075 |
26,185,075 |
SQS had no shares in its ownership as at 30 June 2009.
Authorised capital
The General Meeting of 20 May 2009 resolved the authorisation of the management board with the approval of the supervisory board to cancel the authorised capital I, the authorised capital II, the authorised capital III and the authorised capital IV and to create a share capital until 30 April 2014 by issuing of up to 10,400,000 (authorised capital I) and up to 2,600,000 (authorised capital II) new registered non-par value shares against contributions in cash or in kind.
Thereafter, the authorised capital developed as follows:
|
€k |
|
|
As at 30 June 2008 |
10,698 |
|
Usage of authorised capital I |
(1,221) |
|
Usage of authorised capital IV |
(2,399) |
|
Usage of authorised capital IV |
(966) |
|
As at 31 December 2008 |
6,112 |
|
Cancellation of authorised capital I |
(851) |
|
Cancellation of authorised capital II |
(1,445) |
|
Cancellation of authorised capital III |
(2,881) |
|
Cancellation of authorised capital IV |
(935) |
|
Increase of authorised capital I |
10,400 |
|
Increase of authorised capital II |
2,600 |
|
As at 30 June 2009 |
13,000 |
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 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.
15. Minority Interests
There is no change in this item compared to 30 June 2008.
Up to 2003 losses applicable to minorities have exceeded the minority interest in the subsidiary's equity. In accordance with IAS 27.35 the excess and any further losses applicable to the minority have been allocated against the majority interest. In the case that the subsidiary reports profits, such profits are allocated to the majority interest until the minority's share of losses previously absorbed by the majority has been recovered. In the interim period ended 30 June 2009 no minority profits were allocated to the majority (half year 2008: €2k).
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 and 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 shares |
Six month ended 30 June 2009 (unaudited) |
Six month ended 30 June 2008 (unaudited) |
Year ended 31 December 2008 (audited) |
|
Non-par shares |
Non-par shares |
Non-par shares |
|
|
Rudolf van Megen, Member of Management Board |
3,283,149 |
3,268,149 |
3,283,149 |
|
Ilona van Megen, née Rumsch |
932,544 |
932,544 |
932,544 |
|
Children of van Megen |
- |
3,170 |
- |
|
René Gawron, Member of Management Board David Cotterell, Member of Management Board |
47,129 259,297 |
47,129 - |
47,129 259,297 |
|
Supervisory Board |
17,500 |
17,500 |
17,500 |
|
Total |
4,539,619 |
4,268,492 |
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 to one Management Board member.
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 one 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 €694k (half-year 2008: €691k).
The total emoluments of the Management Board members amounted in the interim period ended 30 June 2009 to €673k (half-year 2008: €458k). The emoluments of the Supervisory Board members amounted in total to €41k (half-year 2008: €41k) of which €41k had not been paid by the end of the interim period.
Members of the Management board held 13.7 % (half-year 2008: 15.3 %) of the shares in SQS as at 30 June 2009.
18. Dividends
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.
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 2009
SQS Software Quality Systems AG
|
(R. van Megen) |
(R. Gawron) |
(D. Cotterell ) |
SQS Software Quality Systems AG
Stollwerckstrasse 11
D-51149 Cologne
Related Shares:
SQS Software Quality Systems AG