Quarterly Report • Aug 7, 2017
Quarterly Report
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SECURE. INNOVATIVE. AT YOUR SIDE.
| 01/04/ – 30/06/ | 01/04/ – 30/06/ | 01/01/ – 30/06/ | 01/01/ – 30/06/ | |
|---|---|---|---|---|
| All amounts in € million 2015 |
2017 | 2016 | 2017 | 2016 |
| Revenues | 87.2 | 99.2 | 175.9 | 198.0 |
| EBITDA | 9.7 | 10.7 | 20.2 | 20.4 |
| Depreciation and amortisation 1 | 8.0 | 8.7 | 15.8 | 17.8 |
| EBIT | 1.7 | 2.0 | 4.4 | 2.6 |
| Net income | 0.5 | 0.2 | 1.1 | 0.0 |
| Earnings per share 2 (in €) |
0.00 | 0.00 | 0.01 | 0.00 |
| Free cash fl ow | 2.8 | 6.3 | 6.4 | 5.5 |
| Capital expenditure (capex) | 5.6 | 3.3 | 9.8 | 6.9 |
| Capex ratio 3 (in %) |
6.4 | 3.3 | 5.6 | 3.5 |
| Liquidity | 55.3 4 |
67.3 5 |
||
| Shareholders' equity | 84.4 4 |
86.3 5 |
||
| Long-term liabilities | 4 148.1 |
5 159.3 |
||
| Short-term liabilities | 55.9 4 |
59.2 5 |
||
| Balance sheet total | 288.4 4 |
306.0 5 |
||
| Equity ratio (in %) | 4 29.3 |
5 28.2 |
||
| Xetra closing price as of 30 June (in €) | 1.74 | 1.13 | ||
| Number of shares as of 30 June | 124,172,487 | 124,162,487 | ||
| Market capitalisation as of 30 June | 216.1 | 140.3 | ||
| Number of employees as of 30 June | 1,371 | 1,396 | ||
Including non-cash share-based compensation.
Basic and diluted.
Ratio of capital expenditure to revenues.
4 As of 30 June 2017.
As of 31 December 2016.
02
QSC increases its consolidated net income. At € 20.2 million, EBITDA for the fi rst half of 2017 remained virtually stable, while revenues fell year-on-year by € 22.1 million to € 175.9 million. EBIT, by contrast, rose by € 1.8 million to € 4.4 million, while consolidated net income grew by € 1.1 million to € 1.1 million. As a result, the EBITDA margin improved by 1 percentage point to 11% and the EBIT margin doubled to 2%.
Rising free cash fl ow. The stronger earnings performance also benefi ted the free cash fl ow, which improved by 16% to € 6.4 million in the fi rst half of 2017, and that although QSC's capital expenditure of € 9.8 million was signifi cantly higher (+42%) than one year earlier.
High revenue growth in Cloud business. Revenues in Cloud, the newest segment, surged by 80% to € 11.5 million in the fi rst six months of the current fi nancial year. Revenues in all other business fi elds developed in line with expectations, with one exception: Due to market factors, the TC business with resellers witnessed an even more marked downturn in revenues in the year to date than originally planned at the beginning of the year.
Frankfurter Leben Group to rely on Pure Enterprise Cloud. This run-off platform for the German life insurance market will in future be procuring all aspects of its IT environment as a service from the Pure Enterprise Cloud. QSC will be providing all applications, computing capacity, storage and network services on an on-demand basis. This way, the Company will document its ability to meet the sophisticated needs of the fi nance and insurance sector.
Service portfolio extended with Multi-Cloud Consulting. QSC will in future be supporting SME players even more closely when it comes to planning and managing extensive multi-cloud scenarios. It will also be integrating public cloud and software-as-a-service off erings where these make sense. The ISG/Experton Group has already awarded QSC "Rising Star" status for this multi-cloud off ering.
"QSC is rapidly turning into a genuine digitiser for the SME sector. What's more, our strategy of building on cloud technology as the basis for digitisation is paying off . That is refl ected in our half-year fi gures and above all in the growth in our Cloud business."
Jürgen Hermann, Chief Executive Off icer
"As expected, we are boosting our earnings and fi nancial strength in 2017. That does not simply happen of its own accord. It requires the whole organisation to remain highly cost-conscious and thus create the scope to invest in our future growth."
Stefan A. Baustert, Chief Financial Off icer
About a month ago, we were able to announce that the Frankfurter Leben Group had opted to procure all aspects of its IT environment from QSC's Pure Enterprise Cloud, a decision mainly determined by the great fl exibility and scalability of our off ering. Employees at Frankfurter Leben are now drawing on QSC's data centres for all of their applications, computing capacity and storage and network services in line with their requirements. This off ers further evidence that the Pure Enterprise Cloud meets the particularly high standards this sector has in terms of security and quality.
There is no doubt that cloud technology will be the decisive trend in IT over the coming fi ve to ten years. This technology also forms the basis for our strategic positioning as digitiser to the SME sector and our half-year report documents the dynamic growth in this segment: Six-month revenues in our Cloud business grew year-on-year by 80% to € 11.5 million and we expect to see further growth in the second half. The two key pillars of this business are the Pure Enterprise Cloud and the IoT portfolio.
To ensure that this growth is managed sustainably, QSC is continuing to develop its services in line with customers' needs. Existing and potential customers are increasingly approaching us with a desire to draw on the services of large providers such as Amazon, Google and Microsoft for their standard applications, while working with QSC for applications critical to their own businesses. Pooling services this way is complex and poses enormous challenges for many SME companies. With its Multi-Cloud Consulting, QSC off ers just the right solution for this process of integration and is thus turning the Pure Enterprise Cloud into a central hub for various cloud worlds.
We are also presenting innovative solutions in the second rapidly growing market of the future – the Internet of Things. Our full-range off ering, most of which based on in-house developments, is convincing ever more major SME players. In general, these companies start out with a pilot project to document the benefi ts of working with networked appliances. Commercially viable results, however, are only realised when all scaling possibilities can be drawn on at a later date. In view of this, we work with customers to plan production on an industrial scale from the very outset of any project.
Digitising our customers is a process that is signifi cantly supported and promoted by our SAP services. For Hermes Fulfi lment, for example, QSC is providing SAP services – including consulting, hosting, support and application management – and thus assisting with the complex logistical tasks associated with online shopping. QSC has recently become just one of two companies in Germany to be awarded "SAP Recognized Expertise" status for retail – a sector in which everyone can already see what digitisation actually means in everyday life. With "IT Consulting & SAP Services", the new designation for its consulting business, QSC is now referring even more clearly than before to its particular expertise as an SAP partner.
quodi bernatem reptas aut facerori de sam, off icabor aut magnat. On esera voloreprepro totatii scieni doluptatis porem siminul parcidi caecabore nes et quam doluptium quam am quid ut int. The trend towards digitisation is also impacting positively on demand for corresponding infrastructure services. In view of this, since July QSC has been promoting its scalable IT infrastructure products more actively than in the past and now in their own standalone business unit called "Colocation & Virtual Data Centres". This unit's off ering comprises a whole range of services from traditional products such as racks and cages through to virtualised solutions and security packages. Thanks to the expansion in our backbone, our data centres provide a geographically redundant network and ensure maximum availability.
QIII / 2015 QIII / 2014 207,3 Umsatz direkter Vertrieb in Mio. € Our nationwide availability and longstanding experience in network operations mean that we are still strongly positioned in our Telecommunications business. The extent of QSC's success in its traditional TC business with corporate customers is refl ected by the fact that we won several large companies in the fi nance and services sectors as new customers in recent months. Not only that, our All-IP expertise is a very signifi cant factor here, as ever more SME players are switching from traditional to IP-based telephony.
It is no surprise that QSC has been able to succeed both in established and in new business fi elds. As digitiser to the SME sector, we also face a wealth of new opportunities. We will continue to press ahead with promoting the process of transformation and, as already communicated at our Annual General Meeting, will continue to do what's in the best long-term interests of QSC.
Cologne, August 2017
Jürgen Hermann Chief Executive Off icer
QSC improves margins in fi rst half of 2017. Based on revenues of € 87.2 million, QSC generated EBITDA of € 9.7 million in the second quarter of 2017. At the end of the fi rst six months, the Company can therefore report EBITDA of € 20.2 million. This is only slightly short of the previous year's fi gure of € 20.4 million, and that although revenues for the same period fell by € 22.1 million to € 175.9 million. This earnings strength was driven by the improvement in the cost base and the rising share of revenues in forward-looking business fi elds, and especially in the Cloud business. As a result, QSC was able to improve its margins. The EBITDA margin for the six-month period rose year-on-year by 1 percentage point to 11%, while the EBIT margin doubled to 2%. Operating earnings (EBIT) improved to € 4.4 million in the fi rst half of 2017, up from € 2.6 million in the previous year. Consolidated net income for the same period rose by € 1.1 million to € 1.1 million. The following report is chiefl y based on a comparison of the half-year fi gures. QSC believes that consideration of the fi gures for this more extended period enables readers to gain a better impression of the Company's actual earnings, fi nancial and asset situation in the current period. During the fi nancial year, the Company repeatedly witnesses fl uctuations in its fi gures from quarter to quarter, and that especially in project-based business fi elds, such as IoT and Consulting. Underlying trends are therefore more apparent over longer periods.
High growth and extended range of services in Cloud business. In the current fi nancial year, QSC is mainly expanding its newest segment, Cloud, with its two key focuses on the Pure Enterprise Cloud (PEC) and the Internet of Things (IoT). Revenues here grew by 80% to € 11.5 million in the fi rst six months of 2017.
Customers continue to show great interest in cloud-based solutions. In June 2017, for example, the Frankfurter Leben Group opted for future procurement of its entire IT environment as a service from the Pure Enterprise Cloud. This run-off platform for the German life insurance market required a highly scalable IT platform enabling applications to be rapidly integrated with data from insurers. The open and fl exible architecture of the Pure Enterprise Cloud, whose range of services is continually being extended, meets precisely this need.
With its Multi-Cloud Consulting, QSC has since May 2017 also been off ering a range of services advising customers on developing complex multi-cloud scenarios. The Company is now able to off er even closer support to its SME customers when it comes to planning and managing extensive cloud solutions involving public cloud and software-as-a-service off erings.
Q-loud GmbH, the subsidiary at which QSC has pooled its IoT activities, is also continually accessing new areas of expertise. One key focus is currently on solutions for the energy sector and measuring energy consumption. In a project with "Meine-Energie", for example, energy cameras have been in use in a project at ZF Friedrichshafen. These cameras record energy consumption directly at the meter and transmit this to a central control point. Networking end appliances and meters this way enables larger-scale consumers to optimise their consumption extremely eff iciently.
Traditional Outsourcing losing in signifi cance. As previously announced, in the current fi nancial year QSC is off ering its Outsourcing customers the option of migrating to the Pure Enterprise Cloud. This way, it is supporting them in enhancing the eff iciency of their IT. Not only that, the outsourcing market is also subject to great price competition, a factor QSC is unable to escape when extending contracts. Against this backdrop, revenues for the fi rst half of 2017 fell by € 10.7 million to € 53.0 million.
(in € million)
Consulting revenues remain high. QSC generated Consulting revenues of € 20.7 million in the fi rst half of 2017, as against € 20.5 million in the previous year. SAP-related consulting accounted for 87%, and thus once again for the largest share of revenues. To boost the external communication of this key focus, since mid-July the Consulting business has been operating under the designation "IT-Consulting & SAP-Services". The strength of QSC's SAP-related expertise was underlined at the end of June when the software group awarded "SAP Recognized Expert" status to the Company for the Retail category in Germany. This certifi cation, which is also based on customer surveys, documents the profound understanding of retailers' needs which QSC's consultants can off er. QSC is now one of only two providers in Germany to be able to point to this special expertise in the retail sector.
Stable TC business with corporate customers. QSC generated revenues of € 45.5 million in its TC business with corporate customers in the fi rst half of 2017, as against € 45.7 million in the previous year's period. In this toughly contested, price-sensitive market, the Company continued to benefi t above all from its All-IP expertise.
TC revenues with corporate customers have thus overtaken TC revenues with resellers for the fi rst time in the current fi nancial year. The latter developed even more weakly than expected in the fi rst half of 2017: At the end of the fi rst six months, revenues with resellers came to € 45.2 million, down from € 61.8 million in the fi rst half of 2016. At almost € 8 million, more than half of this reduction was due to stricter regulation. Furthermore, this business fi eld has felt the eff ects of extremely tough price and crowding-out competition.
Strong economic backdrop. The German economy continued to grow in the fi rst half of 2017, with the ifo business confi dence index also reaching new record highs. While the IT sector benefi ted from this upturn, according to a forecast issued by the Bitkom sector association TC revenues in Germany are set to stagnate once again in 2017. Alongside tough price competition, this development is also due to stricter regulation.
Cloud computing establishes itself across the board. Cloud and the Internet of Things are among the key growth drivers in the IT market. Two thirds of German companies now draw on cloud computing, and ever more frequently with support from external providers. According to a survey performed by Bitkom Research on behalf of KPMG, only 13% of companies still operate private clouds entirely under their own management. Four years ago, this fi gure was twice as high. Companies are rather opting for hybrid clouds – and thus have precisely those needs which the Pure Enterprise Cloud was designed to meet.
IoT market growing rapidly. QSC is also acting in line with current market trends with its full-stack approach for the Internet of Things. According to Bitkom, revenues with Industry 4.0 solutions, i.e. digitising and networking production activities, are set to grow by 21% to € 5.9 billion in Germany in 2017. For 2018, the sector association already expects to see revenues of € 7.2 bil lion. Key components of this business involve services – from consulting and system integra tion
through to the development of individual software solutions – and hardware provision. With its full-stack approach, QSC's wholly-owned subsidiary Q-loud already covers both of these forwardlooking markets.
(in € billion)
Gross margin stable at 26%. Based on revenues of € 175.9 million, the cost of revenues amounted to € 129.6 million in the fi rst six months of 2017 and thus undercut the previous year's fi gure by € 16.2 million. As in the previous year's period, QSC therefore achieved a gross margin of 26% in the fi rst half of 2017.
The cost-cutting programme completed at the end of 2016 also impacted positively on the other expense items. At € 12.8 million, sales and marketing expenses fell short of the previous year's fi gure of € 15.9 million, as did general and administrative expenses, which came to € 13.3 million as against € 16.4 million in the fi rst half of 2016.
QSC generates EBITDA of € 20.2 million in the fi rst half of 2017. Despite substantially lower revenues, the EBITDA of € 20.2 million generated in the fi rst half of 2017 was virtually unchanged on the previous year's fi gure of € 20.4 million. EBITDA is defi ned as earnings before interest, taxes, amortisation of deferred non-cash share-based compensation, depreciation / amortisation and impairment losses on customer-related inventories and depreciation / amortisation of property, plant and equipment and intangible assets.
Consolidated net profi t rises to € 1.1 million. Depreciation and amortisation decreased to € 15.8 mil lion in the fi rst half of the year, down from € 17.8 million in the previous year's period. As a result, operating earnings (EBIT) improved by € 1.8 million to € 4.4 million. Consolidated net income rose to € 1.1 million in the fi rst half of 2017, up from € 0.0 million in the previous year's period.
(in € million)
QSC invests in future growth in Cloud segment. At € 6.3 million, revenues in QSC's newest segment – Cloud – reached a new record level in the second quarter of 2017. At the same time, QSC continued to invest in its future growth and hired additional Cloud and IoT experts. Despite these investments, gross profi t rose to € 1.2 million, up from € 0.8 million in the previous year's quarter. At the end of the fi rst six months, this key fi gure totalled € 1.9 million, as against € 0.9 million in the fi rst half of 2016. Notwithstanding higher sales and marketing expenses the segment contribution also improved, rising from € -1.3 million in the previous year's period to € -0.8 million.
Outsourcing contributes solid margin. At € 26.3 million, revenues in the Outsourcing segment in the second quarter of 2017 fell only slightly short of the fi gure reported for the previous quarter. Gross profi t also remained virtually unchanged on the fi rst quarter of 2017. Consistent with expectations, however, this segment reported substantial reductions in revenues, and thus also in earnings, compared with the previous year. Gross profi t came to € 13.3 million at the end of the fi rst six months, as against € 18.6 million in the previous year's period. The segment contribution amounted to € 10.5 million, compared with € 14.9 million in the fi rst half of 2016. This produced consistently robust fi gures of 25% for the gross margin and 20% for the segment margin.
Double-digit segment margin in personnel-intensive Consulting business. Based on revenues of € 10.0 million, in its Consulting segment QSC generated a segment contribution of € 1.4 million in the second quarter of 2017. Like at the beginning of the year, the segment margin therefore came to 14%. At € 2.9 million, the segment margin for the fi rst six months almost matched the previous year's fi gure of € 3.0 million. Gross profi t amounted to € 3.4 million, as against € 3.8 mil lion in the previous year's period. QSC has since selectively recruited additional SAP experts. With its stronger resources, the team now expects to generate rising revenues in the second half of the year.
Telecommunications generates segment margin of 23%. QSC can point to a successful performance in its high-margin corporate customer business. This is refl ected in the segment contribution generated in the Telecommunications segment, which came to € 9.9 million in the second quarter of 2017 and thus matched the previous year's fi gure despite an € 8.6 million reduction in revenues.
The strength of the margin generated in the TC business with corporate customers is apparent when the six-month fi gures are compared with the fi gures for the previous year's period. Even though overall TC revenues fell by € 16.8 million in the year to date, the segment contribution rose by € 1.1 million to € 20.9 million. This led the segment margin to improve by 5 percentage points to 23%.
QSC increases free cash fl ow to € 6.4 million. The Company's increased earnings strength in the fi rst half of 2017 also impacted positively on its fi nancial position. The most important key fi gure – free cash fl ow – improved to € 6.4 million, as against € 5.5 million in the previous year's period. QSC calculates its free cash fl ow as the change in net liquidity/debt before acquisitions and distributions. The table below shows the relevant parameters at the two balance sheet dates on 30 June 2017 and 31 December 2016:
| € million | 30/06/2017 | 31/12/2016 |
|---|---|---|
| Liquidity | 55.3 | 67.3 |
| Liabilities under fi nancing and fi nance lease arrangements | (0.6) | (1.7) |
| Liabilities due to banks | (135.9) | (149.4) |
| Interest-bearing liabilities | (136.5) | (151.1) |
| Net debt | (81.2) | (83.8) |
It can be seen that liquidity decreased by € 12.0 million to € 55.3 million in the fi rst half of 2017. Over the same period, QSC reduced its interest-bearing liabilities by € 14.6 million. As a result, net debt also fell by € 2.6 million to € 81.2 million as of 30 June 2017.
As the free cash fl ow presents the fi nancial strength of the operating business, QSC adjusts this fi gure to exclude outgoing payments for acquisitions and distributions. The distribution of a dividend of € 0.03 per share at the end of May 2017 led to an outfl ow of funds of € 3.7 million. This resulted in a (rounded up) free cash fl ow of € 6.4 million for the fi rst half of 2017.
(in € million)
Moderate capital expenditure at 6% of revenues. QSC invested a total of € 9.8 million, cor responding to 6% of revenues, in the fi rst half of 2017, as against € 6.9 million in the previous year's period. Of this sum, more than two thirds related to technical equipment and other property, plant and equipment, while just under a third was channelled into customer-related investments. Investment activities focused on the ongoing modernisation of IT operations and data centres.
Balance sheet shaped by long-term assets. Long-term assets made up 62% of total assets as of 30 June 2017. Their value fell on account of depreciation and amortisation by € 7.0 million to € 178.0 million. Over the same period, short-term assets decreased in value by € 10.6 million to € 110.4 million. This was due to the repayment in the second quarter of an amount of € 10.0 million of the promissory note loan taken up in 2014. As a result, long-term liabilities due to banks fell by € 10.1 million to € 135.3 million.
Solid fi nancing. Long-term liabilities due to banks accounted for more than 90% of long-term liabilities in the balance sheet as of 30 June 2017. Together with shareholders' equity, they cover 131% of long-term assets. QSC's fi nancing therefore remains congruent in terms of its maturities. Shareholders' equity came to € 84.4 million as of 30 June 2017, compared with € 86.3 million at the end of 2016. This reduction was due to the dividend payment being charged directly to accumulated net income in the balance sheet. Irrespective of this, the equity ratio as of 30 June 2017 rose by 1 percentage point to 29%.
Personnel expenses down 7% year-on-year. QSC had a total of 1,371 employees as of 30 June 2017, as against 1,396 one year earlier. Personnel expenses for the fi rst half of 2017 fell to € 51.5 million, down from € 55.2 million in the previous year's period.
QSC is continuing to restructure its organisation in the current fi nancial year and has recruited additional experts for its Cloud and Consulting businesses, as well as for its sales activities.
No material change in opportunity and risk situation. The fi rst half of 2017 did not witness any material changes in the opportunities and risks presented in the 2016 Annual Report. Just like other risks or erroneous assumptions, however, the risks listed there could lead future actual earnings to deviate from QSC's expectations. Unless they constitute historic facts, all disclosures in this unaudited group interim report represent forward-looking statements. They are based on current expectations and forecasts concerning future events and may therefore change over time.
QSC expects full-year free cash fl ow to increase in 2017. Given its business performance in the fi rst half of 2017, which was largely in line with expectations, QSC can confi rm its full-year fore cast: Based on revenues of € 355 million to € 365 million, the Company plans to generate EBITDA of € 36 million to € 40 million and free cash fl ow slightly ahead of the previous year's fi gure of € 8.4 million.
The sales department expects Cloud, the newest segment, to generate the highest revenue growth once again in the second half of the year. Revenues in Consulting and the TC business with corporate customers are also expected to rise again following the stabilisation in their position in the fi rst half of 2017. In addition, the TC business with resellers is expected to make up for part of the loss of revenues in the fi rst half of 2017.
| 01/04/ – 30/06/ | 01/04/ – 30/06/ | 01/01/ – 30/06/ | 01/01/ – 30/06/ | |
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net revenues | 87,160 | 99,161 | 175,891 | 198,025 |
| Cost of revenues | (64,240) | (72,899) | (129,555) | (145,789) |
| Gross profi t | 22,920 | 26,262 | 46,336 | 52,236 |
| Sales and marketing expenses | (6,873) | (7,941) | (12,845) | (15,880) |
| General and administrative expenses | (6,412) | (7,974) | (13,262) | (16,363) |
| Depreciation and amortisation | ||||
| (including non-cash share-based compensation) | (7,963) | (8,749) | (15,843) | (17,847) |
| Other operating income | 368 | 869 | 1,027 | 1,419 |
| Other operating expenses | (313) | (507) | (1,056) | (979) |
| Operating profi t (EBIT) | 1,727 | 1,960 | 4,357 | 2,586 |
| Financial income | 23 | 37 | 70 | 87 |
| Financial expenses | (1,166) | (1,259) | (2,350) | (2,853) |
| Net income (loss) before income taxes | 584 | 738 | 2,077 | (180) |
| Income taxes | (92) | (581) | (950) | 194 |
| Net income | 492 | 157 | 1,127 | 14 |
| Attribution of net income | ||||
| Owners of the parent company | 550 | 200 | 1,243 | 102 |
| Non-controlling interests | (58) | (43) | (116) | (88) |
| Earnings per share (basic) in € | 0.00 | 0.00 | 0.01 | 0.00 |
| Earnings per share (diluted) in € | 0.00 | 0.00 | 0.01 | 0.00 |
| 01/01/ – 30/06/ 2017 |
01/01/ – 30/06/ 2016 |
|
|---|---|---|
| Net income for the period | 1,127 | 14 |
| Other comprehensive income | ||
| Line items that are not reclassifi ed in the income statement | ||
| Actuarial gains (losses) from defi ned benefi t pension plans | - | - |
| Tax eff ect | - | - |
| Line items that are not reclassifi ed in the income statement | - | - |
| Line items that might subsequently be reclassifi ed | ||
| in the income statement | ||
| Fair value measurement of cash fl ow hedge | 498 | (651) |
| Tax eff ect | (163) | 210 |
| Line items that might subsequently be reclassifi ed | ||
| in the income statement | 335 | (441) |
| Total fair value changes (net of tax) recognised directly | 335 | (441) |
| Total comprehensive income for the period | 1,462 | (427) |
| Attribution of total comprehensive income | ||
| Owners of the parent company | 1,578 | (339) |
| Non-controlling interests | (116) | (88) |
| 30/06/2017 (unaudited) |
31/12/2016 (audited) |
|
|---|---|---|
| ASSETS | ||
| Long-term assets | ||
| Property, plant and equipment | 60,522 | 62,554 |
| Land and buildings | 23,949 | 24,359 |
| Goodwill | 55,568 | 55,568 |
| Other intangible assets | 27,473 | 30,779 |
| Trade receivables | 1,649 | 2,435 |
| Prepayments | 2,838 | 3,161 |
| Other long-term assets | 174 | 190 |
| Deferred tax assets | 5,836 | 5,926 |
| Long-term assets | 178,009 | 184,972 |
| Short-term assets | ||
| Trade receivables | 46,941 | 45,816 |
| Prepayments | 7,091 | 5,107 |
| Inventories | 147 | 73 |
| Other short-term assets | 905 | 1,533 |
| Cash and cash equivalents | 55,293 | 67,336 |
| Subtotal for short-term assets | 110,377 | 119,865 |
| Assets held for sale | - | 1,166 |
| Short-term assets | 110,377 | 121,031 |
| TOTAL ASSETS | 288,386 | 306,003 |
| 30/06/2017 (unaudited) |
31/12/2016 (audited) |
|
|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Issued capital | 124,172 | 124,172 |
| Capital surplus | 143,491 | 143,217 |
| Other capital reserves | (3,158) | (3,493) |
| Accumulated defi cit | (179,705) | (177,223) |
| Equity attributable to owners of the parent company | 84,800 | 86,673 |
| Non-controlling interests | (441) | (325) |
| Shareholders' equity | 84,359 | 86,348 |
| Liabilities | ||
| Long-term liabilities | ||
| Long-term liabilities under fi nancing | ||
| and fi nance lease arrangements | 224 | 370 |
| Liabilities due to banks | 135,273 | 145,412 |
| Convertible bonds | 38 | 33 |
| Accrued pensions | 6,962 | 7,133 |
| Other provisions | 3,053 | 3,050 |
| Other fi nancial liabilities | 2,030 | 2,525 |
| Deferred tax liabilities | 539 | 775 |
| Long-term liabilities | 148,119 | 159,298 |
| Short-term liabilities | ||
| Trade payables | 26,863 | 24,890 |
| Short-term liabilities under fi nancing | ||
| and fi nance lease arrangements | 335 | 1,352 |
| Liabilities due to banks | 628 | 4,003 |
| Other provisions | 9,512 | 11,724 |
| Accrued taxes | 3,152 | 2,166 |
| Deferred income | 2,675 | 2,441 |
| Other short-term liabilities | 12,743 | 12,630 |
| Subtotal for short-term liabilities | 55,908 | 59,206 |
| Liabilities associated with assets held for sale | - | 1,151 |
| Short-term liabilities | 55,908 | 60,357 |
| Liabilities | 204,027 | 219,655 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 288,386 | 306,003 |
| Equity attributable to equity holders of QSC AG | ||||||
|---|---|---|---|---|---|---|
| Other capital reserves | ||||||
| Issued stock | Capital surplus | Actuarial gains (losses) |
Cash fl ow hedge reserve |
|||
| Balance as of 1 January 2017 | 124,172 | 143,217 | (1,923) | (1,570) | ||
| Net income for the period | - | - | - | - | ||
| Other comprehensive income | ||||||
| for the period, net of tax | - | - | - | 335 | ||
| Total comprehensive income | - | - | - | 335 | ||
| Dividends | - | - | - | - | ||
| Non-cash share-based compensation | - | 274 | - | - | ||
| Balance as of 30 June 2017 | 124,172 | 143,491 | (1,923) | (1,235) | ||
| Balance as of 1 January 2016 | 124,162 | 142,702 | (1,420) | (1,576) | ||
| Net income for the period | - | - | - | - | ||
| Other comprehensive income | ||||||
| for the period, net of tax | - | - | - | (441) | ||
| Total comprehensive income | - | - | - | (441) | ||
| Revaluation of fi nancial liabilities relating | ||||||
| to business acquisition | - | - | - | - | ||
| Dividends | - | - | - | - | ||
| Non-cash share-based compensation | - | 274 | - | - | ||
| Balance as of 30 June 2016 | 124,162 | 142,976 | (1,420) | (2,017) |
| Accumulated defi cit |
Total | Non-controlling interests |
Total equity | |
|---|---|---|---|---|
| (177,223) | 86,673 | (325) | 86,348 | Balance as of 1 January 2017 |
| 1,243 | 1,243 | (116) | 1,127 | Net income for the period |
| Other comprehensive income | ||||
| - | 335 | - | 335 | for the period, net of tax |
| 1,243 | 1,578 | (116) | 1,462 | Total comprehensive income |
| (3,725) | (3,725) | - | (3,725) | Dividends |
| - | 274 | - | 274 | Non-cash share-based compensation |
| (179,705) | 84,800 | (441) | 84,359 | Balance as of 30 June 2017 |
| (149,986) | 113,882 | (110) | 113,772 | Balance as of 1 January 2016 |
| 102 | 102 | (88) | 14 | Net income for the period |
| Other comprehensive income | ||||
| - | (441) | - | (441) | for the period, net of tax |
| 102 | (339) | (88) | (427) | Total comprehensive income |
| Revaluation of fi nancial liabilities relating | ||||
| (28) | (28) | - | (28) | to business acquisition |
| (3,725) | (3,725) | - | (3,725) | Dividends |
| - | 274 | - | 274 | Non-cash share-based compensation |
| (153,637) | 110,064 | (198) | 109,866 | Balance as of 30 June 2016 |
| 01.01. – 30.06. | 01.01. – 30.06. | |
|---|---|---|
| 2017 | 2016 | |
| Cash fl ow from operating activities | ||
| Net income (loss) before income taxes | 2,077 | (180) |
| Depreciation and amortisation of long-term assets | 15,569 | 17,573 |
| Other non-cash income and expenses | 402 | 274 |
| Profi t (loss) from disposal of fi xed assets | (21) | 4 |
| Income tax paid | (2,645) | (2,003) |
| Income tax received | 2,058 | 388 |
| Interest received | 414 | 72 |
| Changes in provisions | (2,496) | (2,153) |
| Changes in trade receivables | (468) | (780) |
| Changes in trade payables | 2,543 | 3,816 |
| Changes in other assets and liabilities | 1,662 | 4,058 |
| Cash fl ow from operating activities | 19,095 | 21,069 |
| Cash fl ow from investing activities | ||
| Purchase of intangible assets | (2,231) | (3,945) |
| Purchase of property, plant and equipment | (8,327) | (8,140) |
| Proceeds from sale of property, plant and equipment | 29 | 38 |
| Proceeds from sale of a subsidiary, | ||
| less liquid funds thereby disposed of | (430) | - |
| Cash fl ow from investing activities | (10,959) | (12,047) |
| Cash fl ow from fi nancing activities | ||
| Dividends paid | (3,725) | (3,725) |
| Issuance of convertible bonds | 5 | 3 |
| Repayment of loans | (12,683) | (1,066) |
| Interest paid | (3,058) | (4,162) |
| Changes in advance payments relating to fi nancing activities | - | (358) |
| Repayment of liabilities under fi nancing | ||
| and fi nance lease arrangements | (1,163) | (2,372) |
| Cash fl ow from fi nancing activities | (20,624) | (11,680) |
| Change in cash and cash equivalents | (12,488) | (2,658) |
| Cash and cash equivalents as of 1 January | 67,781 | 73,982 |
| Cash and cash equivalents as of 30 June | 55,293 | 71,324 |
QSC AG is digitising the German SME sector. With decades of experience and expertise in its Cloud, Internet of Things, Consulting, Telecommunications and Colocation businesses, QSC accompanies its customers securely into the digital age. Today already, cloud-based procurement models off er increased speed, fl exibility and full service availability. The Company's TÜV and ISO-certifi ed data centres in Germany and its nationwide All-IP network form the basis for maximum end-to-end quality and security. QSC's customers benefi t from one-stop innovative products and services that are marketed both directly and via partners. QSC is a stock corporation registered in the Federal Republic of Germany. Its legal domicile is Mathias-Brüggen-Strasse 55, 50829 Cologne, Germany. The Company is registered in the Commercial Register of the Cologne District Court under number HRB 28281. QSC has been listed on the Deutsche Börse stock exchange since 19 April 2000 and, following the reorganisation of the stock market, in the Prime Standard since the beginning of 2003.
These condensed interim consolidated fi nancial statements of QSC AG and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), taking due account of International Accounting Standard (IAS) 34 "Interim Financial Reporting". The interim consolidated fi nancial statements do not include all notes and disclosures required of full year-end fi nancial statements and should therefore be read in conjunction with the consolidated fi nancial statements as of 31 December 2016.
Based on the Management Board's assessment, the interim consolidated fi nancial statements contain all adjustments necessary to provide a true and fair view of the Group's net assets, fi nancial and earnings position. The results for the reporting period ending on 30 June 2017 do not necessarily provide an indication of the future development in results.
The accounting policies applied in preparing these interim consolidated are basically consistent with those applied in the consolidated fi nancial statements for the 2016 fi nancial year.
Income tax expenses for the interim reporting period have been calculated using the eff ective tax rate expected for the fi nancial year as a whole.
Those amendments to IFRSs requiring mandatory application from the 2017 fi nancial year onwards have not had any implications for the interim fi nancial statements as of 30 June 2017. The preparation of interim fi nancial statements in accordance with IFRS requires a certain degree of reference to estimates and judgements aff ecting the assets and liabilities as recognised and the disclosures made concerning contingent assets and liabilities as of the reporting date. The amounts actually arising may deviate from such estimates.
There have been no material changes in the Management Board's assessments concerning the application of accounting policies compared with the consolidated fi nancial statements as of 31 December 2016.
Unless otherwise stated, all amounts are rounded up or down to the nearest thousand euro amount (€ 000s).
These condensed interim consolidated fi nancial statements, including the interim management report, have neither been audited pursuant to § 317 of the German Commercial Code (HGB) nor subject to any audit review by any suitably qualifi ed person.
Alongside QSC AG, the scope of consolidation includes all of the subsidiaries it controls. These subsidiaries are fully consolidated.
Three companies were removed from the scope of consolidation in the fi rst half of 2017. In Janua ry 2017, QSC AG sold its 50.93% stake in FTAPI Software GmbH. On 11 May 2017, tengo GmbH and tengo Vermögensverwaltungs GmbH were merged into Broadnet NGN GmbH in line with the merger agreement dated 3 May 2017.
Disclosures on the balance sheet. The fair values of fi nancial assets and fi nancial liabilities largely correspond to their market values as of the reporting date for the interim fi nancial statements.
Disclosures on fair values measured on a recurring basis:
| Class | Measurement hierarchy level |
Fair value as of 30 June 2017 € 000s |
Description of measurement method |
|---|---|---|---|
| Interest | 2 | 1,930 | The fair value of interest derivatives is determined using present value |
| swaps – | models and takes account of market data (yield curves). The market | ||
| hedge | values of the interest swaps were determined by the intermediary bank. | ||
| accounting | Market values are derived by reference either to the mid-market price | ||
| or, when expressed as a buying or selling price, to the indicative price at | |||
| which the bank would have terminated and concluded or bought back | |||
| and sold the fi nancial instrument on the relevant market place at the | |||
| close of business on the respective measurement date. |
At the end of the reporting period, QSC AG determines whether any reclassifi cations between the measurement hierarchy levels are necessary. No reclassifi cations were made in the reporting period from 1 January 2017 to 30 June 2017.
In accordance with the provisions of IFRS 8, the basis for identifying segments consists of the Company's internal organisational structure as used by corporate management for business administration decisions and performance assessments. This results in the following segments: Cloud, Outsourcing, Consulting, and Telecommunications.
Cloud. QSC pools all activities relating to its Pure Enterprise Cloud and the Internet of Things (IoT) in its Cloud segment. The Pure Enterprise Cloud, which has been developed on an in-house basis since 2015, is based on a modular system of cloud technologies, software solutions and service components, as well as network and infrastructure services enabling IT services to be linked on an industrialised basis. Furthermore, the Cloud segment also includes the business activities pooled at QSC's Q-loud subsidiary. Q-loud off ers companies a full-stack service enabling them to network appliances and implement digital business models in the Internet of Things. This end-to-end range of services includes transformation consulting, software and hardware expertise, standard hardware, a proprietary IoT platform, security solutions and smart product manufacturing.
Outsourcing. This segment off ers traditional outsourcing services to companies wishing to outsource their IT and data storage to QSC. As soon as cloud-based outsourcing services are provided, the respective revenues are allocated to the Cloud segment.
Consulting. QSC advises companies on how to optimise their business processes with two key focuses on SAP and Microsoft. As an SAP full-service provider, QSC performs services in the fi elds of basic operations, application management, implementation, user support and maintenance, as well as in managing the necessary software licenses. The Microsoft consulting services range from needs analysis to consulting, design and implementation services through to operations and ongoing optimisation measures.
Telecommunications. Here, QSC off ers a broad range of voice and data transmission solutions. These include internet connections with asymmetric ADSL2+ lines, symmetric SDSL lines and premium internet access via wireless local loop. In this segment, QSC also off ers All-IP telephony connections (voice over IP) and corresponding telephony systems.
Furthermore, the range of services also includes further forms of voice telephony, including open call-by-call and preselect off erings and value added services.
The segment contribution is the key segment performance indicator referred to by the management. This is defi ned as EBITDA before general administration expenses and other operating income and expenses. For income statement purposes, the cost of revenues is thus allocated in full to the respective segment, as are sales and marketing expenses. The direct and indirect alloca tion of costs to individual segments is consistent with internal reporting and management structures.
Indirect cost allocation is primarily based on resource utilisation by the respective segments. The Management Board does not receive any regular information about segment-specifi c ca pital ex penditure, assets and liabilities, general administration expenses, depreciation and amortisation and other operating income and expenses as components of the respective segment earnings fi gures.
| € 000s | Telecom munications |
Outsourcing | Consulting | Cloud | Consolidated Group |
|---|---|---|---|---|---|
| 01/04/ – 30/06/2017 | |||||
| Net revenues | 44,511 | 26,344 | 10,033 | 6,272 | 87,160 |
| Cost of revenues | (31,114) | (19,734) | (8,319) | (5,073) | (64,240) |
| Gross profi t | 13,397 | 6,610 | 1,714 | 1,199 | 22,920 |
| Sales and marketing expenses | (3,533) | (1,553) | (307) | (1,480) | (6,873) |
| Segment contribution | 9,864 | 5,057 | 1,407 | (281) | 16,047 |
| General and administrative expenses | (6,412) | ||||
| Depreciation and amortisation (including | |||||
| non-cash share-based compensation) | (7,963) | ||||
| Other operating income and expenses | 55 | ||||
| Operating profi t (EBIT) | 1,727 | ||||
| Financial income | 23 | ||||
| Financial expenses | (1,166) | ||||
| Net income before income taxes | 584 | ||||
| Income taxes | (92) | ||||
| Net income | 492 |
| € 000s | Telecom munications |
Outsourcing | Consulting | Cloud | Consolidated Group |
|---|---|---|---|---|---|
| 01/04/ – 30/06/2016 | |||||
| Net revenues | 53,096 | 31,560 | 10,502 | 4,003 | 99,161 |
| Cost of revenues | (38,632) | (22,545) | (8,522) | (3,200) | (72,899) |
| Gross profi t | 14,464 | 9,015 | 1,980 | 803 | 26,262 |
| Sales and marketing expenses | (4,554) | (1,764) | (354) | (1,269) | (7,941) |
| Segment contribution | 9,910 | 7,251 | 1,626 | (466) | 18,321 |
| General and administrative expenses | (7,974) | ||||
| Depreciation and amortisation (including | |||||
| non-cash share-based compensation) | (8,749) | ||||
| Other operating income and expenses | 362 | ||||
| Operating profi t (EBIT) | 1,960 | ||||
| Financial income | 37 | ||||
| Financial expenses | (1,259) | ||||
| Net income before income taxes | 738 | ||||
| Income taxes | (581) | ||||
| Net income | 157 |
| € 000s | Telecom | Outsourcing | Consulting | Cloud | Consolidated |
|---|---|---|---|---|---|
| munications | Group | ||||
| 01/01/ – 30/06/2017 | |||||
| Net revenues | 90,674 | 53,009 | 20,733 | 11,475 | 175,891 |
| Cost of revenues | (62,975) | (39,714) | (17,335) | (9,531) | (129,555) |
| Gross profi t | 27,699 | 13,295 | 3,398 | 1,944 | 46,336 |
| Sales and marketing expenses | (6,811) | (2,778) | (482) | (2,774) | (12,845) |
| Segment contribution | 20,888 | 10,517 | 2,916 | (830) | 33,491 |
| General and administrative expenses | (13,262) | ||||
| Depreciation and amortisation (including | |||||
| non-cash share-based compensation) | (15,843) | ||||
| Other operating income and expenses | (29) | ||||
| Operating profi t (EBIT) | 4,357 | ||||
| Financial income | 70 | ||||
| Financial expenses | (2,350) | ||||
| Net income before income taxes | 2,077 | ||||
| Income taxes | (950) | ||||
| Net income | 1,127 |
| € 000s | Telecom munications |
Outsourcing | Consulting | Cloud | Consolidated Group |
|---|---|---|---|---|---|
| 01/01/ – 30/06/2016 | |||||
| Net revenues | 107,533 | 63,662 | 20,452 | 6,378 | 198,025 |
| Cost of revenues | (78,546) | (45,042) | (16,678) | (5,523) | (145,789) |
| Gross profi t | 28,987 | 18,620 | 3,774 | 855 | 52,236 |
| Sales and marketing expenses | (9,237) | (3,710) | (786) | (2,147) | (15,880) |
| Segment contribution | 19,750 | 14,910 | 2,988 | (1,292) | 36,356 |
| General and administrative expenses | (16,363) | ||||
| Depreciation and amortisation (including | |||||
| non-cash share-based compensation) | (17,847) | ||||
| Other operating income and expenses | 440 | ||||
| Operating profi t (EBIT) | 2,586 | ||||
| Financial income | 87 | ||||
| Financial expenses | (2,853) | ||||
| Net loss before income taxes | (180) | ||||
| Income taxes | 194 | ||||
| Net income | 14 |
The Annual General Meeting of QSC AG held on 24 May 2017 approved the distribution of a dividend of € 0.03 per share with dividend entitlement. The dividend payment of € 3,725,174.61 was distributed after the Annual General Meeting.
Neither QSC AG nor its group companies are involved in any court or arbitration proceedings that could materially impact on their economic position.
In the fi rst six months of the 2017 fi nancial year, QSC maintained business relationships with companies whose shareholders include members of the Company's management and its Supervisory Board. Persons and companies count as related parties pursuant to IAS 24 when one party has the possibility of exercising control or signifi cant infl uence over the other party. All contracts with these companies require approval by the Supervisory Board and are agreed on customary market terms.
| € 000s | Net revenues | Expenses | Cash received | Cash paid |
|---|---|---|---|---|
| 01/01/ – 30/06/2017 | ||||
| IN-telegence GmbH | 127 | 47 | 188 | 56 |
| Teleport Köln GmbH | 7 | 1 | 10 | 1 |
| QS Communication Verwaltungs | ||||
| Service GmbH | - | 81 | - | 111 |
| 01/01/ – 30/06/2016 | ||||
| IN-telegence GmbH | 230 | 94 | 249 | 112 |
| Teleport Köln GmbH | 14 | - | 20 | - |
| QS Communication Verwaltungs | ||||
| Service GmbH | - | 78 | - | 93 |
| € 000s | Trade receivables | Trade payables |
|---|---|---|
| As of 30 June 2017 | ||
| IN-telegence GmbH | 36 | - |
| Teleport Köln GmbH | 2 | - |
| QS Communication Verwaltungs Service GmbH | - | 17 |
| As of 31 December 2016 | ||
| IN-telegence GmbH | 73 | - |
| Teleport Köln GmbH | 4 | - |
| QS Communication Verwaltungs Service GmbH | - | 31 |
IN-telegence GmbH is a provider of value added services in the telecommunications industry. QSC draws on carrier services from the company and itself provides the company with network services.
The business activities at Teleport Köln GmbH involve managing telecommunications services, managed services and outsourcing services. This company draws on QSC's telecommunications services and itself provides QSC with a low volume of telecommunications services. QS Communication Verwaltungs Service GmbH advises QSC in the development of concepts and software for cloud-based services. The expenses incurred relate to advisory services.
The following table presents information about the number of shares and conversion rights held by members of the Management Board:
| Shares | Conversion rights | |||
|---|---|---|---|---|
| 30/06/2017 | 30/06/2016 | 30/06/2017 | 30/06/2016 | |
| Jürgen Hermann | 400,000 | 340,000 | 350,000 | 350,000 |
| Stefan A. Baustert | 40,000 | 40,000 | 200,000 | 200,000 |
| Udo Faulhaber | 100,000 | - | 150,000 | 150,000 |
| Felix Höger | 150,000 | - | 150,000 | 150,000 |
The following table presents individualised information about the number of shares and conversion rights held by members of the Supervisory Board:
| Shares | Conversion rights | |||
|---|---|---|---|---|
| 30/06/2017 | 30/06/2016 | 30/06/2017 | 30/06/2016 | |
| Dr. Bernd Schlobohm, Chairman | 15,519,910 | 15,519,910 | 132,000 | 132,000 |
| Dr. Frank Zurlino, Deputy Chairman | 10,000 | 10,000 | - | - |
| Gerd Eickers | 15,577,484 | 15,577,484 | - | - |
| Ina Schlie | - | - | - | - |
| Anne-Dore Ahlers 1 | - | - | 2,700 | 2,700 |
| Cora Hödl 1 | - | - | 4,100 | 4,100 |
1 Employee representative.
No events requiring report here have occurred after the reporting period.
Cologne, August 2017
QSC AG The Management Board
Jürgen Hermann Stefan A. Baustert Udo Faulhaber Felix Höger CEO
To the best of our knowledge, and in accordance with the applicable reporting principles for interim fi nancial reporting, the Condensed Interim Consolidated Financial Statements give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of the Group, and the Interim Consolidated Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the fi nancial year.
Cologne, August 2017
QSC AG The Management Board
CEO
Jürgen Hermann Stefan A. Baustert Udo Faulhaber Felix Höger
Quarterly Statement 6 November 2017
Arne Thull Head of Investor Relations Mathias-Brüggen-Strasse 55 50829 Cologne T +49 221 669 – 8724 F +49 221 669 – 8009 [email protected] www.qsc.de
Overall Responsibility QSC AG, Köln
Design sitzgruppe, Düsseldorf
Photography Marcus Pietrek, Düsseldorf
This translation is provided as a convenience only. Please note that the German-language original of this Half-Year Report is defi nitive.
For further information: www.qsc.de
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