Quarterly Report • Aug 8, 2016
Quarterly Report
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| 01/04/ – 30/06/ | 01/04/ – 30/06/ | 01/01/ – 30/06/ | 01/01/ – 30/06/ | |
|---|---|---|---|---|
| All amounts in € million 2015 |
2016 | 2015 | 2016 | 2015 |
| Revenues | 99.2 | 100.9 | 198.0 | 205.6 |
| EBITDA | 10.7 | 10.6 | 20.4 | 19.7 |
| Depreciation / amortisation 1 | 8.7 | 12.8 | 17.8 | 24.9 |
| EBIT | 2.0 | (2.2) | 2.6 | (5.2) |
| Net income (loss) | 0.2 | (2.7) | 0.0 | (6.1) |
| Earnings per share 2 (in €) |
0.00 | (0.02) | 0.00 | (0.05) |
| Free cash fl ow | 6.3 | 1.5 | 5.5 | (2.9) |
| Capital expenditure (capex) | 3.3 | 3.9 | 6.9 | 7.4 |
| Capex ratio 3 (in %) |
3.3 | 3.9 | 3.5 | 3.6 |
| Liquidity | 71.3 4 |
74.0 5 |
||
| Shareholders' equity | 120.3 4 |
124.2 5 |
||
| Long-term liabilities | 4 165.5 |
5 171.0 |
||
| Short-term liabilities | 59.5 4 |
63.3 5 |
||
| Balance sheet total | 345.3 4 |
358.5 5 |
||
| Equity ratio (in %) | 4 34.8 |
5 34.6 |
||
| Xetra closing price as of 30 June (in €) | 1.13 | 1.84 | ||
| Number of shares as of 30 June | 124,162,487 | 124,162,487 | ||
| Market capitalisation as of 30 June | 140.3 | 228.5 | ||
| Number of employees as of 30 June | 1,396 | 1,585 | ||
Including non-cash share-based compensation
Basic and diluted
Ratio of capital expenditure to revenues
4 As of 30 June 2016
As of 31 December 2015
Return to profi tability. QSC generated positive consolidated net income for the fi rst time in eight quarters in the second quarter of 2016. This key fi gure amounted to € 0.2 million. Thanks to the progress made in implementing the cost-cutting programme, EBIT and EBITDA also increased to € 2.0 million and € 10.7 million respectively.
Staff downscaling target now in sight. The progress made with cutting costs has been driven above all by the ongoing reduction in staff totals. As of 30 June 2016, QSC had a total of 1,396 employees and was thus already approaching its target of around 1,350 employees by the end of the year.
QSC is growing in areas where it has budgeted for growth. Revenues rose once again in the second quarter of 2016 in those business fi elds in which QSC expects to generate sustainable growth – in the Cloud and Consulting segments and in the telecommunications business with corporate customers.
Cloud revenues more than double. Cloud, the newest segment with two main areas of activity – Pure Enterprise Cloud and Internet of Things – posted a very pleasing performance in the second quarter of 2016, with revenue growth of 135% to € 4.0 million.
Consulting posts substantial revenue growth. At € 10.5 million, quarterly revenues in the Consulting segment exceeded the 10 million euro mark for the fi rst time. Growth here has been driven above all by the early focus on the technological advance at SAP from the R/3 ERP product family to S/4HANA.
" QSC can look back on a strong fi rst half to the year, in which our Company moved forward in numerous areas. Within just a few months of launching the Pure Enterprise Cloud it is now clear that this product portfolio meets the expectations of SME players."
Jürgen Hermann, CEO
"We are making faster progress with implementing our cost-cutting programme than expected at the beginning of the year. On this basis, QSC was able to generate positive consolidated net income for the fi rst time in eight quarters and also increase its free cash fl ow to € 6.3 million."
Stefan A. Baustert, CFO
QSC can look back on a strong fi rst half to the year. This was a period in which our company made progress in numerous areas, in some cases more swiftly than expected at the beginning of the year. The implementation of the cost-cutting programme is one such example. Halfway through the year, we are already close to reaching our two main targets. Compared with the end of 2014, we have already reduced our costs by € 20 million and have scaled down our workforce by 300 employees. The progress made with the streamlining of cost structures was one of the key factors that have once again enabled QSC to generate positive operating earnings, both in the fi rst and second quarters of 2016. EBIT for the fi rst six months totalled € 2.6 million. At € 5.5 million, the Company's free cash fl ow was also clearly positive.
No less important is the progress made on the revenue side, particularly in those business units in which QSC aims to generate growth. This is especially true with Cloud, our newest segment, which comprises the two main fi elds of Pure Enterprise Cloud and Internet of Things (IoT). Moreover, developments have been backed up by the continued posi tive performance of our Consulting and TC corporate customer businesses.
Just a few months after the launch of the Pure Enterprise Cloud, it is already very clear that this product portfolio meets the expectations of SMEs. The Pure Enterprise Cloud has been very warmly received by our existing cus tomers, and several are already migrating their systems to the new platform. The Pure Enterprise Cloud has also opened up numerous doors to new customers in our sales activities. Here too, several pilot projects have already been launched. Following a trial period, for example, the apt Hiller group opted for our solution in July 2016. QSC will in future be operating cloud-based digital workplaces for 400 users at this particular SME's national and international locations. Our Pure Enterprise Cloud sales activities have received additional support from market observers. In spring 2016, the Experton Group, an IT consultancy, singled out the Pure Enterprise Cloud as a "Rising Star" in the "Workplace Services" category. Experton sees QSC as being optimally positioned to join the top providers in the near future. In other areas, we are as in previous years already among the top performers. According to Experton, QSC is a "Cloud Leader" in three categories.
Experts are equally positive in their assessment of our range of IoT services. In a recent study, IT analysts at Crisp Research designated our Company as an "Innovator" – on a par with Google and Oracle. Solutions based on our internally developed IoT platform are now in use in several industries, including energy-related service providers and heating system manufacturers.
In its Consulting business, QSC benefi ted in the fi rst half of 2016 from the fact that it acted early to focus on the technological advance at SAP to the SAP S/4HANA business suite. In fact, we have been operating a proprietary HANA Competence Centre since 2014. In our TC business with corporate customers, the decision we implemented ten years ago, namely to convert our infrastructure to IP technology, is now paying off . In this area, QSC has a longstanding competitive advantage over Deutsche Telekom, which is only now in the process of implementing this measure. QSC already off ers a broad range of All-IP solutions and has convinced a growing
Positive reception for Pure Enterprise Cloud
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. number of companies that are obliged to leave their ISDN connections behind. Revenues in our TC business with corporate customers have grown noticeably in recent months and the number of newly activated connections has doubled.
QIII / 2015 QIII / 2014 207,3 209,2 Umsatz direkter Vertrieb in Mio. € The momentum built up in these business units is set to continue in the second half of the year. We nevertheless still face several challenges. The success of the Pure Enterprise Cloud makes it necessary to hire a growing number of cloud experts and to make higher volumes of capital expenditure than in the fi rst half of the year. At the same time, the migration of Outsourcing customers to the Pure Enterprise Cloud is shifting the distribution of revenues. QSC will therefore continue realigning its organisational structures, a process which will still involve one-off costs. Not only that, the decision not to acquire new customers in the conventional Outsourcing business is likely to further hold back revenues in this segment. All these factors are accounted for in the conservative forecast published at the beginning of 2016. We have, therefore, not made any changes to our full-year forecast and expect to generate revenues of € 380 mil lion to € 390 million, EBITDA of € 34 million to € 38 million and a positive free cash fl ow.
Conservative forecast issued at beginning of 2016 confirmed
There is no doubt that the fi rst half of 2016 was a success for us. It shows that our strategy is gaining traction. QSC is the digitiser of the SME segment. With the Pure Enterprise Cloud, it has exactly the right product portfolio for the new age.
Cologne, August 2016
Jürgen Hermann Chief Executive Off icer
Strong second quarter of 2016. The operating business continued to perform positively in the second quarter of the current fi nancial year. Year-on-year, QSC more than doubled the revenues in its forward-looking Cloud business. Not only that, the Company made faster progress in implementing its cost-cutting programme than expected at the beginning of the year. On this basis, QSC generated positive operating earnings for the second quarter in succession, with EBIT of € 2.0 million as against € -2.2 million in the second quarter of 2015. The Company also posted positive consolidated net income for the fi rst time in eight quarters.
QSC is growing in areas where it has budgeted for growth. As already in the fi rst quarter of 2016, revenues grew in those areas in which QSC expects to generate sustainable growth – in its Cloud and Consulting segments and in its telecommunications business with corporate customers. Overall, revenues amounted to € 99.2 million as against € 100.9 million in the second quarter of 2015. Revenues for the six-month period totalled € 198.0 million, compared with € 205.6 million in the previous year's period.
Cloud revenues surge by 135% to € 4.0 million. Cloud, the newest segment with its two main fi elds of Pure Enterprise Cloud (PEC) and Internet of Things (IoT), reported a very pleasing performance once again in the second quarter of 2016. IoT project revenues made a major contribution to this growth. When it comes to securely networking appliances, QSC is already working with energy- related service providers, heating system manufacturers and other companies. These customers benefi t from a unique one-stop range of services – from advice on software and hardware devel opment, proprietary hardware products and an IoT cloud through to the assumption of production services. The great interest shown by companies in a wide range of sectors at events such as the Hannover Messe 2016 trade fair underlines the pioneering role that QSC is gradually assuming in this forward-looking market. The Pure Enterprise Cloud is also being positively received just a few months after its launch, with initial migration projects already underway for existing Outsourcing cus tomers and new customers alike. In July, the apt Hiller Group, a metal processing company, decided to deploy the Pure Enterprise Cloud at all of its locations. This way, it intends to gradually and permanently standardise and centrally manage its previously highly hetero geneous ICT landscape. In a fi rst step, all 400 workplaces will receive Enterprise Workplace Services and thus be equipped with a full-range workplace environment from the Pure Enterprise Cloud.
(in € million)
Market observers have also recognised the potential off ered by the cloud-based solution portfolio. IT analysts at Experton have designated QSC as a "Rising Star" in the "Workplaces Services" category, and thus in the provision of cloud-based turnkey virtual workplaces. In its annual "Cloud Vendor Benchmarks", Experton particularly singled out the scope, attractiveness, degree of innovation and future potential of the Pure Enterprise Cloud.
Consulting revenues exceed € 10 million mark for first time Consulting with substantial revenue growth. At € 10.5 million, quarterly revenues in the Consulting segment exceeded the 10 million euro mark for the fi rst time. In the previous year's quarter revenues here had only reached the same mark when rounded up. This success was driven above all by the fact that QSC acted early to focus on the technological advance currently underway at SAP from the R/3 ERP product family to S/4HANA. In the second quarter of 2016, QSC generated 86% of its Consulting revenues with SAP software-related consulting services.
Decision not to acquire new customers in traditional Outsourcing business. Consistent with expectations, the revenues of € 31.6 million in the Outsourcing segment in the second quarter of 2016 fell short of the previous year's fi gure of € 34.7 million. In outsourcing and assuming ICT services, QSC is focusing in the current year on the cloud-based provision of correspond ing services. To boost its Pure Enterprise Cloud business, which promises to generate higher returns, it has consciously decided not to acquire new customers in its traditional Outsourcing business. QSC is off ering its existing customers the option of gradually migrating to industrialised, standardised outsourcing.
(in € million)
Great interest in All-IP telecommunications services. In defi ance of the market trend, QSC once again generated growth in its TC business with corporate customers in the second quarter of 2016. Revenues here grew year-on-year by 7% to € 23.3 million. QSC has been operating an All-IP network for many years already and is now benefi ting from increased demand for All-IP solutions from smaller and medium-sized companies. By contrast, QSC's TC revenues with resellers decreased further in a toughly contested market. All in all, revenues in the Telecommunications segment came to € 53.1 million as against € 54.5 million in the second quarter of 2015.
Staff downscaling target now in sight. QSC has made more rapid progress in implementing its cost-cutting program than expected at the beginning of the year. That is particularly true for staff downscaling measures. The Company plans to reduce its workforce to around 1,350 employees by the end of 2016. As of 30 June 2016, QSC still had 1,396 employees and was thus approaching its target.
Robust economic developments. QSC also owes its pleasing operating performance to the robust economic backdrop in Germany. Domestic demand has been boosted above all by the pleasing situation on the labour market. The stable upturn is also benefi ting the ICT market. The sector association BITCOM expects revenues here to grow by 1.7% to € 160.2 billion in the current year. While the TC market is stagnating, BITCOM expects revenues in the IT market to rise by 3.0% to € 83.5 billion. The cloud market, a particularly interesting area for QSC, is set to generate notably stronger growth. For this market alone, the IT analysts at Experton expect revenues with corporate customers to grow by 34% to € 12.2 billion in 2016.
Gross margin stable at 27%. By analogy with revenues, the cost of revenues showed a slight year-on-year decline and amounted to € 72.9 million in the second quarter of 2016 as against € 73.8 million in the previous year's period. Gross profi t therefore came to € 26.3 million, compared with € 27.2 million in the previous year. Despite the reduction in revenues, the gross margin remained stable at 27%.
The other major cost items also improved. Sales and marketing expenses totalled € 7.9 million in the second quarter of 2016, down from € 8.5 million in the previous year's period, while general and administrative expenses decreased from € 8.3 million to € 8.0 million. The consistent implementation of the cost-cutting programme impacted positively on all cost items.
Slight increase in EBITDA. Benefi ting from lower costs, EBITDA for the second quarter of 2016 improved to € 10.7 million, up from € 10.6 million one year earlier. The EBITDA margin remained unchanged at 11%. For the fi rst half of 2016, this key earnings fi gure rose year-on-year from € 19.7 million to € 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. The EBITDA margin presents EBITDA as a percentage of revenues.
Return to profi tability. As planned, depreciation and amortisation fell signifi cantly in the past quarter, amounting to € 8.7 million as against € 12.8 million in the second quarter of 2015. As a result, operating earnings improved to € 2.0 million, up from € -2.2 million in the previous year. QSC generated positive consolidated net income for the fi rst time in eight quarters. This key fi gure amounted to € 0.2 million, compared with € -2.7 million in the previous year's period.
QII / 2016 QII / 2015 0.2 (2.7)
Gross margin rises to 20% in Cloud business. The rapid revenue growth seen in the Cloud segment has been accompanied by a signifi cant improvement in its earnings. Gross profi t for the second quarter of 2016 came to € 0.8 million, as against € -0.3 million in the previous year. The gross margin increased by 38 percentage points to 20%. As sales and marketing expenses rose only slightly compared with the previous year, the segment contribution improved signifi cantly. At € -0.5 million, this key fi gure is now approaching breakeven. In the second quarter of the previous year, this segment had still posted a loss of € -1.6 million.
Double-digit segment margin in personnel-intensive Consulting business. Growing demand in the Consulting business has made it necessary to expand resources. The cost of revenue in this segment grew to € 8.5 million in the past quarter, up from € 7.3 million in the previous year's period. Gross profi t amounted to € 2.0 million as against € 2.7 million in the second quarter of 2015, which was infl uenced by a positive one-off item. Gross profi t rose by € 0.2 million compared with the fi rst quarter of 2016, while the gross margin improved by 1 percentage point to 19%. The segment contribution also rose to € 1.6 million, up from € 1.4 million in the previous quarter. In the previous year's quarter, this fi gure had amounted to € 2.2 million. In the second quarter of 2016, QSC therefore achieved a segment margin of 15% – a high fi gure for the personnelintensive Consulting business.
Margins remain high in Outsourcing business. Consistent with the € 3.1 million reduction in revenues to € 31.6 million, gross profi t in the Outsourcing segment decreased year-on-year by € 1.5 million to € 9.0 million. Due to lower sales and marketing expenses, however, the segment contribution showed only a slight reduction of € 0.4 million to € 7.3 million. The segment margin rose by 1 percentage point to 23%. Despite the reorganisation underway, the traditional Outsourcing business thus still generated the highest margin. The positive impact of the cost-cutting programme is particularly noticeable in this segment.
Telecommunications with stable earnings. The success in our high-margin corporate customer business made a key contribution towards stabilising the earnings situation in our Telecommunications segment, and that despite a reduction in revenues. QSC generated gross profi t of € 14.5 million in the second quarter of 2016, as against € 14.3 million in the previous year's period. The gross margin rose by 1 percentage point to 27%. At € 9.9 million, the segment contribution fell only slightly short of the previous year's fi gure of € 10.3 million. The segment margin remained unchanged at 19%.
QSC generates free cash fl ow of € 6.3 million. The improvement in QSC's earnings strength in the second quarter of 2016 also impacted positively on its fi nancial position. The most important key fi gure – free cash fl ow – reached € 6.3 million, its highest level in two years. The Company 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 2016 and 31 March 2016:
Slight rise in gross profit in TC business
| € million | 30/06/2016 | 31/03/2016 |
|---|---|---|
| Liquidity | 71.3 | 71.3 |
| Liabilities under fi nancing and fi nance lease arrangements | (2.1) | (2.8) |
| Liabilities due to banks | (155.9) | (157.8) |
| Interest-bearing liabilities | (158.0) | (160.6) |
| Net debt | (86.7) | (89.3) |
It can be seen that liquidity remained stable at € 71.3 million in the second quarter of 2016. Interest-bearing liabilities decreased by € 2.6 million to € -158.0 million. As a result, net debt also fell by € 2.6 million to € -86.7 million as of 30 June 2016.
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. In the second quarter of 2016, the Company expended a total of € 3.7 million to distribute a dividend of € 0.03 per share. This resulted in a free cash fl ow of € 6.3 million for the second quarter of 2016.
(in € million)
Moderate volume of capital expenditure. Alongside the improvement in operating earnings, the marked rise in the free cash fl ow was also due to capital expenditure remaining moderate. This expenditure decreased slightly to € 3.3 million in the second quarter of 2016, down from € 3.9 million in the previous year's period. Of capital expenditure, 63% was customer-related. Alongside this, QSC particularly invested in strengthening its own infrastructure in view of the Pure Enterprise Cloud market launch currently underway.
Solid balance sheet. QSC accords priority to ensuring matching maturities for the fi nancing of its assets and traditionally has a solid fi nancing structure. As of 30 June 2016, shareholders' equity and long-term liabilities covered 133% of the value of long-term assets. Due above all to depreciation and amortisation, long-term assets decreased to € 215.6 million as of 30 June 2016, compared with € 224.7 million at the balance sheet date at the end of 2015. Property, plant and equipment fell by € 5.9 million to € 56.5 million. Short-term assets decreased to € 129.7 million, down from € 133.8 million as of 31 December 2015. Here, a lower volume of cash and cash equivalents and other short-term assets was off set by higher prepayments and trade receivables.
Equity ratio of 35%. Shareholders' equity amounted to € 120.3 million as of 30 June 2016, as against € 124.2 million at the end of 2015. This reduction was chiefl y due to the dividend payment being directly charged to consolidated net income. The equity ratio remained unchanged at 35%.
Long-term liabilities fell to € 165.5 million as of 30 June 2016, down from € 171.0 million at the end of 2015. The largest share related to long-term liabilities due to banks, which amounted to € 151.1 million (31 December 2015: € 155.8 million). Short-term liabilities also decreased, amounting to € 59.5 million as of 30 June 2016 as against € 63.3 million at the 2015 balance sheet date.
35% equity ratio
Signifi cant progress with workforce downsizing. QSC had a total of 1,396 employees as of 30 June 2016 and thus reduced its workforce by 189 employees compared with the previous year's reporting date. The key target determining the success of the cost-cutting program, namely downsizing the workforce to around 1,350 employees by the end of the year, is thus now within reach.
QSC plans to part company with further employees in the second half of the year. At the same time, the Company intends to extend capacities, especially in its fast-growing Cloud business. The associated one-off expenses have been factored into the existing full-year forecast for 2016. The Company is also upholding its commitment to providing vocational training. A total of 17 young adults will be starting their professional training at the locations in Hamburg and Cologne in the third quarter of 2016.
No material change in opportunity and risk situation. The fi rst half of the year did not witness any material changes in the opportunities and risks presented in the 2015 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 is not aware of any events of material signifi cance subsequent to the quarter under report that would require disclosure here.
QSC confi rms forecast for 2016. Given the strong fi rst half of 2016, QSC can confi rm the forecast presented at the end of February. For 2016 as a whole, the Company expects to generate revenues of € 380 million to € 390 million, EBITDA of € 34 million to € 38 million and positive free cash fl ow. As already explained at the beginning of the year, the second half will witness capital expenditure and one-off expenses to expand the Pure Enterprise Cloud and for the personnel restructuring measures still underway. The organisational restructuring programme is expected to be completed by the end of the year. The migration of Outsourcing customers to the Pure Enterprise Cloud and the decision not to acquire new cus tomers in the traditional Outsourcing business will hold back the performance of this segment in the second half of the year. In its Telecommunications segment, QSC continues to expect a fall in business volumes with resellers, one that the growth in business with corporate customers will not be suff icient to off set. These factors will be countered by slight growth in the Consulting segment and a continuingly high rate of growth in the Cloud segment with its two growth drivers of Pure Enterprise Cloud and Internet of Things.
Dynamic growth continues in Cloud segment
| 01/04/ – 30/06/ | 01/04/ – 30/06/ | 01/01/ – 30/06/ | 01/01/ – 30/06/ | |
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Net revenues | 99,161 | 100,924 | 198,025 | 205,633 |
| Cost of revenues | (72,899) | (73,756) | (145,789) | (151,374) |
| Gross profi t | 26,262 | 27,168 | 52,236 | 54,259 |
| Sales and marketing expenses | (7,941) | (8,539) | (15,880) | (17,822) |
| General and administrative expenses | (7,974) | (8,337) | (16,363) | (16,751) |
| Depreciation/amortisation | ||||
| (including non-cash share-based compensation) | (8,749) | (12,793) | (17,847) | (24,909) |
| Other operating income | 869 | 305 | 1,419 | 599 |
| Other operating expenses | (507) | - | (979) | (580) |
| Operating profi t (loss) | 1,960 | (2,196) | 2,586 | (5,204) |
| Financial income | 37 | 105 | 87 | 195 |
| Financial expenses | (1,259) | (1,638) | (2,853) | (3,143) |
| Net income (loss) before income taxes | 738 | (3,729) | (180) | (8,152) |
| Income taxes | (581) | 1,004 | 194 | 2,057 |
| Net income (loss) | 157 | (2,725) | 14 | (6,095) |
| Earnings per share (basic) in € | 0.00 | (0.02) | 0.00 | (0.05) |
| Earnings per share (diluted) in € | 0.00 | (0.02) | 0.00 | (0.05) |
| 01/01/ – 30/06/ | 01/01/ – 30/06/ |
|---|---|
| 2015 | |
| - | - |
| - | - |
| - | - |
| (651) | 444 |
| 210 | (143) |
| (441) | 301 |
| (441) | 301 |
| 14 | (6,095) |
| (427) | (5,794) |
| 2016 |
| 30/06/2016 (unaudited) |
31/12/2015 (audited) |
|
|---|---|---|
| ASSETS | ||
| Long-term assets | ||
| Property, plant and equipment | 56,520 | 62,392 |
| Land and buildings | 24,739 | 25,152 |
| Goodwill | 67,077 | 67,077 |
| Other intangible assets | 36,996 | 41,411 |
| Trade receivables | 4,139 | 4,583 |
| Prepayments | 4,391 | 3,608 |
| Other long-term assets | 173 | 292 |
| Deferred tax assets | 21,532 | 20,207 |
| Long-term assets | 215,567 | 224,722 |
| Short-term assets | ||
| Trade receivables | 49,928 | 48,704 |
| Prepayments | 6,065 | 3,712 |
| Inventories | 865 | 884 |
| Other short-term assets | 1,510 | 6,521 |
| Cash and cash equivalents | 71,324 | 73,982 |
| Short-term assets | 129,692 | 133,803 |
| TOTAL ASSETS | 345,259 | 358,525 |
| 30/06/2016 (unaudited) |
31/12/2015 (audited) |
|
|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Issued capital | 124,162 | 124,162 |
| Capital surplus | 142,976 | 142,702 |
| Other capital reserves | (3,437) | (2,996) |
| Accumulated defi cit | (143,412) | (139,673) |
| Shareholders' equity | 120,289 | 124,195 |
| Liabilities | ||
| Long-term liabilities | ||
| Long-term liabilities under fi nancing | ||
| and fi nance lease arrangements | 559 | 1,722 |
| Liabilities due to banks | 151,140 | 155,830 |
| Convertible bonds | 30 | 27 |
| Accrued pensions | 6,545 | 6,693 |
| Other provisions | 1,631 | 1,642 |
| Other fi nancial liabilities | 4,573 | 3,879 |
| Deferred tax liabilities | 994 | 1,204 |
| Long-term liabilities | 165,472 | 170,997 |
| Short-term liabilities | ||
| Trade payables | 29,245 | 30,596 |
| Short-term liabilities under fi nancing | ||
| and fi nance lease arrangements | 1,552 | 2,761 |
| Liabilities due to banks | 4,787 | 2,140 |
| Other provisions | 6,431 | 8,368 |
| Accrued taxes | 1,320 | 381 |
| Deferred income | 3,462 | 4,020 |
| Other short-term liabilities | 12,701 | 15,067 |
| Short-term liabilities | 59,498 | 63,333 |
| Liabilities | 224,970 | 234,330 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 345,259 | 358,525 |
| Equity attributable to equity holders of QSC AG | |||||
|---|---|---|---|---|---|
| Other capital reserves | |||||
| Capital stock | Capital surplus | Fair value of marketable securities |
Actuarial gains (losses) |
Cash fl ow hedge reserve |
|
| Balance as of 1 January 2016 | 124,162 | 142,702 | - | (1,420) | (1,576) |
| Net income (loss) 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) |
| Balance as of 1 January 2015 | 124,142 | 142,069 | (1) | (1,590) | (1,475) |
| Net income (loss) for the period | - | - | 1 | - | - |
| Other comprehensive income | |||||
| for the period, net of tax | - | - | - | - | 301 |
| Total comprehensive income | - | - | 1 | - | 301 |
| Revaluation of fi nancial liabilities relating | |||||
| to business acquisition | - | - | - | - | - |
| Conversion of convertible bonds | 20 | 3 | - | - | - |
| Dividends | - | - | - | - | - |
| Non-cash share-based compensation | - | 253 | - | - | - |
| Balance as of 30 June 2015 | 124,162 | 142,325 | - | (1,590) | (1,174) |
| Accumulated defi cit |
Total share holders' equity |
|
|---|---|---|
| (139,673) | 124,195 | Balance as of 1 January 2016 |
| 14 | 14 | Net income (loss) for the period |
| Other comprehensive income | ||
| - | (441) | for the period, net of tax |
| 14 | (427) | Total comprehensive income |
| Revaluation of fi nancial liabilities relating | ||
| (28) | (28) | to business acquisition |
| (3,725) | (3,725) | Dividends |
| - | 274 | Non-cash share-based compensation |
| (143,412) | 120,289 | Balance as of 30 June 2016 |
| (117,511) | 145,634 | Balance as of 1 January 2015 |
| (6,095) | (6,094) | Net income (loss) for the period |
| Other comprehensive income | ||
| - | 301 | for the period, net of tax |
| (6,095) | (5,794) | Total comprehensive income |
| Revaluation of fi nancial liabilities relating | ||
| (175) | (175) | to business acquisition |
| - | 23 | Conversion of convertible bonds |
| (12,416) | (12,416) | Dividends |
| - | 253 | Non-cash share-based compensation |
| (136,197) | 127,526 | Balance as of 30 June 2015 |
| 01/01/ – 30/06/ | 01/01/ – 30/06/ | |
|---|---|---|
| 2016 | 2015 | |
| Cash fl ow from operating activities Net income (loss) before income taxes |
(180) | (8,152) |
| Depreciation and amortisation of fi xed assets | 17,573 | 24,656 |
| Non-cash share-based compensation | 274 | 253 |
| Loss from disposal of fi xed assets | 4 | - |
| Income tax paid | (2,003) | (1,513) |
| Income tax received | 388 | - |
| Interest received | 72 | 123 |
| Changes in provisions | (2,153) | (4,440) |
| Changes in trade receivables | (780) | 3,115 |
| Changes in trade payables | 3,816 | (7,967) |
| Changes in other assets and liabilities | 4,058 | 6,564 |
| Cash fl ow from operating activities | 21,069 | 12,639 |
| Cash fl ow from investing activities | ||
| Purchase of intangible assets | (3,945) | (4,539) |
| Purchase of property, plant and equipment | (8,140) | (8,087) |
| Proceeds from sale of property, plant and equipment | 38 | - |
| Cash fl ow from investing activities | (12,047) | (12,626) |
| Cash fl ow from fi nancing activities | ||
| Dividends paid | (3,725) | (12,416) |
| Issuance of convertible bonds | 3 | 1 |
| Proceeds from issuance of common stock | - | 23 |
| Repayment of loans | (1,066) | (2,824) |
| Interest paid | (4,162) | (3,795) |
| Changes in advance payments relating to fi nancing activities | (358) | (186) |
| Repayment of liabilities under fi nancing | ||
| and fi nance lease arrangements | (2,372) | (2,759) |
| Cash fl ow from fi nancing activities | (11,680) | (21,956) |
| Change in cash and cash equivalents | (2,658) | (21,943) |
| Cash and cash equivalents as of 1 January | 73,982 | 87,803 |
| Cash and cash equivalents as of 30 June | 71,324 | 65,860 |
QSC AG is digitising the German SME sector. With decades of experience and expertise in the areas of Cloud, Consulting, Outsourcing, and Telecommunications, QSC accompanies its customers securely into the digital age. 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 Cologne District Court under the number HRB 28281. QSC has been listed on the Deutsche Börse Stock Exchange since 19 April 2000 and, following the reorganisation of the equity 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 2015.
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 2016 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 2015 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 2016 fi nancial year onwards have not had any implications for the interim fi nancial statements as of 30 June 2016.
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 2015.
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 consolidated management report, have neither been audited pursuant to § 317 of the German Commercial Code (HGB) nor subject to any audit review.
Alongside QSC AG, the scope of consolidation includes all of the subsidiaries it controls. These subsidiaries are fully consolidated.
Q-loud GmbH was newly founded on 15 June 2016. The former company Q-loud GmbH was renamed as tengo Vermögensverwaltungs GmbH, in this case also on 15 June 2016.
Apart from for interest swaps and the put options held by minority interests, 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.
Fair value disclosures for recurring measurement:
| Class | Measurement hierarchy level * |
Fair value as of 30 June 2016 € 000s |
Description of measurement method |
|---|---|---|---|
| Interest swaps – | 2 | 3,079 | The fair value of interest derivatives is determined using present |
| hedge | value models and takes account of market data (yield curves). | ||
| accounting | The market values of the interest swaps were determined by the | ||
| intermediary bank. 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. |
| Class | Measurement hierarchy level * |
Fair value as of 30 June 2016 € 000s |
Description of measurement method |
|---|---|---|---|
| Put-options – | 3 | 1,124 | The fi nancial liability was determined on the basis of the present value |
| minority | of the expected exercise price for the put option, with a risk-adequate | ||
| interests | and maturity-congruent interest rate of 4.28% being used as of the | ||
| acquisition date. The purchase price for the remaining shares is | |||
| dependent on the fi nancial performance of FTAPI in the exercise | |||
| period for the options. Based on its planning, QSC expects the put | |||
| option to be drawn on in 2019. Measurement of the put option as of | |||
| the balance sheet date has been based on a variable contractually | |||
| agreed purchase price. As of 31 December 2015, the put option was | |||
| remeasured using an interest rate of 5%. | |||
* The measurement hierarchy level is determined on the basis of the underlying market factors referred to (IFRS 13).
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 2016 to 30 June 2016.
Consistent with the requirements of IFRS 8, the Company's internal organisational structure used by the management for business decisions and performance assessments has been referred to as the basis for delineating segments. This results in the following segments which have been applied since 1 January 2015: Telecommunications, Outsourcing, Consulting and Cloud. The key segment management fi gure referred to by the management is the segment contribution. This is defi ned as EBITDA before general and administrative expenses and the other operating result. When calculating earnings, the cost of revenues and sales and marketing expenses are thus fully allocated to the respective segment. The direct and indirect allocation of costs to individual segments is consistent with internal reporting and management logic. The indirect allocation of costs is primarily based on the volume of resources utilized by the respective segments. The Management Board does not receive any regular information about segment-specifi c capital expenditure, assets and liabilities, general and administrative expenses, depreciation and amortisation or the other operating result as components of the segment earnings fi gures.
| € 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/amortisation (including | |||||
| non-cash share-based compensation) | (8,749) | ||||
| Other operating income | 362 | ||||
| Operating profi t (EBIT) | 1,960 | ||||
| Financial income | 37 | ||||
| Financial expenses | (1,259) | ||||
| Net income (loss) before income taxes | 738 | ||||
| Income taxes | (581) | ||||
| Net income (loss) | 157 |
| € 000s | Telecom munications |
Outsourcing | Consulting | Cloud | Consolidated Group |
|---|---|---|---|---|---|
| 01/04/ – 30/06/2015 | |||||
| Net revenues | 54,520 | 34,671 | 9,999 | 1,734 | 100,924 |
| Cost of revenues | (40,223) | (24,167) | (7,287) | (2,079) | (73,756) |
| Gross profi t | 14,297 | 10,504 | 2,712 | (345) | 27,168 |
| Sales and marketing expenses | (4,034) | (2,801) | (498) | (1,206) | (8,539) |
| Segment contribution | 10,263 | 7,703 | 2,214 | (1,551) | 18,629 |
| General and administrative expenses | (8,337) | ||||
| Depreciation/amortisation (including | |||||
| non-cash share-based compensation) | (12,793) | ||||
| Other operating income | 305 | ||||
| Operating profi t (EBIT) | (2,196) | ||||
| Financial income | 105 | ||||
| Financial expenses | (1,638) | ||||
| Net income (loss) before income taxes | (3,729) | ||||
| Income taxes | 1,004 | ||||
| Net income (loss) | (2,725) |
| € 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/amortisation (including | |||||
| non-cash share-based compensation) | (17,847) | ||||
| Other operating income | 440 | ||||
| Operating profi t (EBIT) | 2,586 | ||||
| Financial income | 87 | ||||
| Financial expenses | (2,853) | ||||
| Net income (loss) before income taxes | (180) | ||||
| Income taxes | 194 | ||||
| Net income (loss) | 14 |
| € 000s | Telecom munications |
Outsourcing | Consulting | Cloud | Consolidated Group |
|---|---|---|---|---|---|
| 01/01/ – 30/06/2015 | |||||
| Net revenues | 111,337 | 71,479 | 19,814 | 3,003 | 205,633 |
| Cost of revenues | (81,373) | (50,273) | (15,642) | (4,086) | (151,374) |
| Gross profi t | 29,964 | 21,206 | 4,172 | (1,083) | 54,259 |
| Sales and marketing expenses | (8,547) | (5,774) | (956) | (2,545) | (17,822) |
| Segment contribution | 21,417 | 15,432 | 3,216 | (3,628) | 36,437 |
| General and administrative expenses | (16,751) | ||||
| Depreciation/amortisation (including | |||||
| non-cash share-based compensation) | (24,909) | ||||
| Other operating income | 19 | ||||
| Operating profi t (EBIT) | (5,204) | ||||
| Financial income | 195 | ||||
| Financial expenses | (3,143) | ||||
| Net income (loss) before income taxes | (8,152) | ||||
| Income taxes | 2,057 | ||||
| Net income (loss) | (6,095) |
The Annual Shareholders' Meeting of QSC AG held on 25 May 2016 approved the distribution of a dividend of € 0.03 per share with dividend entitlement. The dividend payment of € 3,725k was distributed directly after the Annual Shareholders' Meeting.
The Company is currently not involved in any material legal disputes.
In the fi rst six months of the 2016 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/ – 30/06/2016 | ||||
| IN-telegence GmbH | 230 | 94 | 249 | 112 |
| Teleport Köln GmbH | 14 | - | 20 | - |
| QS Communication Verwaltungs | ||||
| Service GmbH | - | 78 | - | 93 |
| 01/01/ – 30/06/2015 | ||||
| IN-telegence GmbH | 320 | 64 | 359 | 76 |
| Teleport Köln GmbH | 18 | 2 | 22 | 2 |
| QS Communication Verwaltungs | ||||
| Service GmbH | - | 66 | - | 91 |
| € 000s | Trade receivables | Trade payables |
|---|---|---|
| As of 30 June 2016 | ||
| IN-telegence GmbH | 94 | - |
| Teleport Köln GmbH | 3 | - |
| QS Communication Verwaltungs Service GmbH | - | - |
| As of 31 December 2015 | ||
| IN-telegence GmbH | 69 | - |
| Teleport Köln GmbH | 6 | - |
| QS Communication Verwaltungs Service GmbH | - | - |
IN-telegence GmbH is a provider of value-added services in the telecommunications business and largely draws on network services from QSC. To a minor extent, QSC AG also draws on the value-added services off ered by IN-telegence. Teleport Köln GmbH utilizes telecommunications services off ered by QSC. QS Communication Verwaltungs Service GmbH provides QSC with product management advice for cloud services.
The following table presents individualised information about the number of shares and conversion rights held by members of the Management Board:
| Shares | Conversion rights | ||
|---|---|---|---|
| 30/06/2016 | 30/06/2015 | 30/06/2016 | 30/06/2015 |
| 340,000 | 340,000 | 350,000 | 350,000 |
| 40,000 | 30,000 | 200,000 | - |
| - | - | 150,000 | - |
| - | - | 150,000 | - |
| - | 1 5,000 |
- | 1 150,000 |
1 Holdings at the time of leaving the Management Board
The Annual Shareholders' Meeting on 27 May 2015 approved the 2015 Stock Option Plan (2015 SOP) that provides, subject to approval by the Supervisory Board, for the issue of up to 750,000 convertible bonds with a nominal amount of € 0.01 each to members of the Management Board. The subscription period ends at the latest on 26 May 2020. The convertible bonds have terms of up to 8 years following subscription. Conversion rights may only be exercised at the earliest after the expiry of 4-year waiting period following subscription and only if at least one of the following two conditions is met: the share price must be at least 20% higher than the conversion price or the shares must have outperformed the TecDAX on a relative basis. The following table presents information about the conversion rights subscribed by Management Board members in the period under report:
| Conversion rights | |||
|---|---|---|---|
| Date | Number | Price | |
| Stefan A. Baustert | 15/01/2016 | 100,000 | 1.42 € |
| Felix Höger | 01/04/2016 | 75,000 | 1.10 € |
| Udo Faulhaber | 05/04/2016 | 150,000 | 1.10 € |
| Felix Höger | 06/04/2016 | 75,000 | 1.21 € |
The following table presents individualised information about the number of shares and conversion rights held by members of the Supervisory Board:
| Shares | Conversion rights | |||
|---|---|---|---|---|
| 30/06/2016 | 30/06/2015 | 30/06/2016 | 30/06/2015 | |
| Dr. Bernd Schlobohm, Chairman | 15,519,910 | 15,518,372 | 132,000 | 200,000 |
| 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 2016
QSC AG Management Board
CEO
Jürgen Hermann Stefan A. Baustert Udo Faulhaber Felix Höger
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 2016
QSC AG Management Board
CEO
Jürgen Hermann Stefan A. Baustert Udo Faulhaber Felix Höger
Quarterly Figures 14 November 2016
QSC AG
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
Art Direction sitzgruppe, Düsseldorf
Photography Marcus Pietrek, Düsseldorf
This translation is provided as a convenience only. Please note that the German-language original of this Quarterly Report is defi nitive.
For further information: www.qsc.de
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