Quarterly Report • Nov 4, 2008
Quarterly Report
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as at September 30, 2008
| I. REPORT AS AT SEPTEMBER 30, 2008 AND THE THIRD QUARTER 2008 | 3 | |
|---|---|---|
| II. | INTERIM MANAGEMENT REPORT | 8 |
| 1. Preliminary Note | 8 | |
| 2. Report on the Financial Performance, Assets and Financial Position | ||
| of the Beta Systems Group | 9 | |
| 3. Outlook | 15 | |
| 4. Opportunities and Risk Report | 15 | |
| 5. Report on Material Transactions with related Parties | 17 | |
| 6. Events after the Balance Sheet Date | 17 | |
| AS AT SEPTEMBER 30, 2008 | 18 | |
|---|---|---|
| 1. Consolidated Statement of Income | 18 | |
| 2. Consolidated Statement of Financial Position | 20 | |
| 3. Consolidated Statement of Cash Flows | 21 | |
| 4. Consolidated Statement of Changes in Shareholder's Equity | 22 | |
| 5. Notes to the Consolidated Interim Financial Statements | ||
| as at September 30, 2008 (unaudited) | 23 | |
| IV. | DISCLOSURE OF DIRECTORS' HOLDINGS OF | 38 |
| V. | CONTACT | 39 |
Following on from a good first half-year in 2008, Beta Systems Software AG (BSS, ISIN DE0005224406) had improved its results by the end of the 2008 nine-month period for the third quarter in a row, with a slight increase in revenues. Despite the deteriorating market environment and the traditionally weaker third quarter, earnings before interest and tax (EBIT) had risen 13.9% to € 0.8 million (Q1-Q3/2007: € 0.7 million) and earnings before interest, tax, depreciation and amortization (EBITDA) by 10.3% to € 3.7 million (Q1-Q3/2007: € 3.4 million). Particularly notable was the increase in the result before tax, which climbed to € 1.1 million (Q1-Q3/2007: € 0.3 million). The result of the period under review, which came in at € 0.7 million (Q1-Q3/2007: € 0.3 million), was also clearly positive.
At the end of the first nine months of 2008, Beta Systems Software AG had raised license revenues 3.9% to € 17.2 million. In the third quarter, license revenues fell € 0.8 million to € 4.4 million in contrast to total revenues which rose 1.2% to € 19.6 million (Q3/2007: € 19.4 million) over the same period and by 1.5% to € 62.1 million (Q1-Q3/2007: € 61.2 million) at the end of nine months). In the third quarter of 2008, services revenues came in at € 3.1 million (Q3/2007: € 3.2 million) and maintenance revenues at € 10.2 million (Q3/2007: € 10.2 million), virtually unchanged from the previous year's level. Scanner hardware revenues generated by new systems, realized as part of customer-oriented total solutions for hard- and software, rose to € 5.0 million in the first nine months of 2008 (Q1-Q3/2007: € 2.4 million). Moreover, the considerable increase of € 7.9 million to € 8.4 million in the cash flow from operating activities (Q1-Q3/2007: € 0.5 million), which rose in tandem with the improved cost and results situation, was also very satisfactory.
Kamyar Niroumand, Chief Executive Officer of Beta Systems Software AG, commented as follows: "Following on from a successful first half-year in 2008, we have succeeded in raising our revenues and result again, despite the tense situation in the global capital and financial markets. We have felt the first impact of the crisis in the financial markets on our customer base in recent weeks. However, making a statement today on what the effects might be in the future is – and remains – difficult. What cannot be entirely excluded is the fact that, in the future, there may be delays or postponements in the placing of orders by our customers who mostly operate in the banking and insurance sectors. On the other hand, it is crises such these which have the effect of driving demand for IT solutions which enable compliance with official rules and regulations and provide efficient support in the event of mergers. These software products and solutions are an integral part of Beta Systems' product portfolio, which means that this crisis may also turn out to be an opportunity for Beta Systems."
4
Gernot Sagl, Chief Financial Officer of Beta Systems Software AG, added the following: "We succeeded in improving our results despite the critical situation in the financial markets not least due to consistent and ongoing cost management. Moreover, the substantial increase in our cash flow led to a significant reduction in financial liabilities, with the result that the financial position of the company has improved again significantly."
Although, from today's standpoint, any statements on the future impact of the financial crisis are difficult, the Management Board nonetheless currently stands by its expectations of an improvement in the results as compared with fiscal 2007. With a marginal increase in revenues, it has planned for an EBIT margin in the upper single-digit range and a double-digit EBITDA margin. The prerequisite for this is that all three business segments are profitable. The Management Board continues to assume that the goals of sustained profit improvement through concentration on business with software licenses and services, the building up of customer relationships, above all in the financial services sector and industry at large, the expansion of the global partner business and the ongoing implementation of the Beta 4Agility product and sales strategy will be achieved.
5
Key Operational Highlights
Beta Systems renews contract with Chief Financial Officer Gernot Sagl for another three years
In its meeting on September 12, 2008, the Supervisory Board of Beta Systems Software AG resolved to renew the contract with Chief Financial Officer (CFO) Gernot Sagl for another three years. Accordingly, the contract with Mr. Sagl will run for a further three years until December 31, 2011.
On February 18, 2008, Beta Systems Software AG announced the successful completion of its takeover of all the shares in SI Software Innovation GmbH (SI GmbH) headquartered in Neustadt. The company will continue to operate as an independent company with limited liability (GmbH) under new management. With immediate effect, the company's business will be managed by Harald Podzuweit, head of Beta Systems' Data Center Infrastructure (DCI) and Identity Management segments, and by Richard Racs, SI GmbH's managing director to date.
Similar to Beta Systems, SI GmbH, a company with over 20 years of experience in the market, has longstanding customer relationships with a large number of major enterprises and customers in the financial services sector. Beta Systems will supplement its existing product portfolio by including SI GmbH's Large Documents Management System (LDMS), thereby strengthening its mainframe business in particular. In this process, LDMS will be treated as an individual product line in its own right which, at the same time, will underscore Beta Systems' long-term commitment to the Neustadt location.
Through its acquisition of SI GmbH, Beta Systems has raised its market share in data centers in Germany's financial services sector while at the same time reinforcing its profile as a strategic IT supplier to the German savings banks and the retail banks. At the same time, the former customers of SI GmbH, as well as those of Beta Systems Software AG, will benefit from extensive support with a broad solutions portfolio for data processing in data centers. In addition, they can draw on the premium support and range of services of Beta Systems.
Lünendonk again placed Beta Systems Software AG among Germany's leading mid-sized standard software companies in 2007. The ranking lists the top ten companies, measured by revenues, with headquarters in Germany, which generate more than 60 percent of their sales through standard software production, sales and maintenance, and have total revenues of below € 500 million respectively. In 2007, Beta Systems generated revenues of € 88.6 million, thus coming fifth in the ranking. In 2006, the Berlinbased software specialist took sixth place.
Beta Systems Software AG has extended the functionalities of its Beta UX product suite to include the standardized support of further job schedulers and their log types. In doing so, Beta Systems offers archiving options for all leading Unix-based schedulers, a solution which secures the operation of systems and the transparency of business. Alongside UC4, Dollar Universe and J2U, Beta's UX History Management product now offers standard components for processing the log types of the IBM TWS for Distributed, BMC Control/M and SUN MBM scheduling systems. Job schedulers control and automate complex processes which are critical to business. The log information must be stored outside the systems for the purposes of analysis and archiving. With its support of further job schedulers, Beta Systems has reacted to the rising demand in the market for the archiving of scheduler logs and for documenting the processing of complex process chains.
Beta UX History Management is a standard software solution and part of the Beta UX product suite. It is a powerful infrastructure software product designed to automate Unix-based production processes. The suite features functions for processing and distributing log files and enables their audit-compliant archiving. This raises the efficiency and reliability in live production and facilitates the implementation of legal requirements. In addition, Beta UX offers specialized system interfaces, for SAP for instance. With Beta UX, Beta Systems enables companies to manage, record and analyze data center processes transparently as well as manage logs groupwide across platforms.
Beta Systems Software AG celebrated its 25th anniversary on September 25, 2008, in Berlin. Around 600 guests from 30 nations took part in the festivities. Company co-founder William P. Schmidt and Kamyar Niroumand, the current Chief Executive Officer, opened the ceremony and gave the floor to the guests of honor from the world of politics, science and sport. Among the VIPs were Dr. August Hanning, State Secretary in the German Federal Ministry of the Interior, and Ulrike Nasse-Meyfarth, twice German Olympic high jump champion.
7
The price of the Beta share started at € 4.90 on January 2, 2008, and had risen to € 4.99 by March 31, 2008, and to € 5.25 by June 30, 2008 (closing price in Xetra). While the performance of the Beta Systems share was more moderate in the months of July and September when it reached its lowest point of € 4.04 on July 22, 2008, August was a positive reporting month when it recorded its highest price of € 5.37. On September 3, 2008, its value climbed to € 5.39, and on September 30, 2008, it stood at € 5.20. In the wake of the extreme volatility in the global capital markets, the Beta share price also fell in October and posted € 3.75 on November 3, 2008.
Beta Systems Software AG has drawn up this Interim Management Report as at September 30, 2008, in accordance with the legal requirements. The reporting period covers the first nine months of 2008. The Interim Management Report is to be read in conjunction with the interim financial statements as at September 30, 2008.
All forward-looking statements relate to the period up until December 31, 2008. In observance of the legal provisions, this Interim Management Report is not an instrument of information in its own right but constitutes material changes to the statements made in the Combined Management Report on the Group and on the Parent Company as per December 31, 2007, and must therefore be read in connection with the latter. In respect of the forward looking statements, these are also an update on those made on December 31, 2007.
The following information relates to the consolidated results of the Beta Systems Group. The Segment Reporting has been prepared in accordance with the structure of the Company and is divided into the following business segments: Data Center Infrastructure (DCI), Identity Management (IdM) and Enterprise Content Management (ECM).
All amounts cited in the Interim Management Report and information derived therefrom (e.g. percentage figures) are figures fully rounded up to thousands of euros as presented in the Interim Consolidated Financial Statements.
The Interim Consolidated Financial Statements as at September 30, 2008, and the Interim Management Report were neither audited by the external auditor nor were they subject to a review by the external auditor.
8
As a supplier of complex IT solutions, Beta Systems generates revenues from the components of software licenses, maintenance and services. An additional source of revenue comes from hardware in the form of scanner systems.
In the third quarter of 2008, total revenues climbed 1.2% to € 19.6 million (Q3/2007: € 19.4 million). At the end of the first nine months of 2008, sales revenues came to € 62.1 million (Q1-Q3/2007: € 61.2 million).
Software license revenues declined to € 4.4 million in the third quarter of 2008 (Q3/2007: € 5.2 million) and had climbed to € 17.2 million by the end of the 2008 ninth-month period (Q1-Q3/2007: € 16.5 million). This development was attributable to the increase in license revenues in Germany, Italy and France, where Beta Systems continued to benefit from the dynamic trend in IT outsourcing.
The hardware business with scanners, which stood at € 1.8 million (Q3/2007: € 0.7 million) in the third quarter of 2007 and, by the end of the 2008 nine-month period, had advanced from € 2.4 million to € 5.0 million. As before, Beta Systems is concentrating on business with software licenses and services. It nonetheless continues to realize profitable revenue from scanner hardware in new systems as part of customer-oriented total solutions for hard- and software (above all, in the banking sector).
In the third quarter of 2008, maintenance revenues of € 10.2 million remained unchanged at the previous year's level (Q1-Q3/2007: € 10.2 million). At the end of the 2008 nine-month period, they had fallen 5.1% to € 29.9 million, down from € 31.5 million, which was attributable to contractual consolidation in the key accounts business owing to the process of concentration at banks and data centers.
Services generated revenues of € 3.1 million in the third quarter (Q3/2007: € 3.2 million) and € 10.0 million at the end of the nine-month period (Q1-Q3/2007: € 10.8 million).
In comparison with the previous year, the cost of revenues declined to € 29.1 million, down from € 29.4 million. This effect was especially due to another reduction in personnel expenses. The cost of revenues in the third quarter of 2008 rose to € 9.9 million as compared with the previous year figure of € 9.1 million, which was attributable to the greater materials usage and to the increase in the cost of services sourced.
Accordingly, the gross profit had risen to € 33.0 million (Q1-Q3/2007: € 31.8 million) at the end of nine months. In the third quarter of 2008, however, it fell slightly to € 9.7 million (Q3/2007: € 10.2 million).
Development of Costs and Expenses Development of Costs and Expenses Amounts in T€
Operating expenses declined 4.6% to € 9.5 million in the third quarter of 2008 (Q3/2007: € 9.9 million). At the end of the 2008 nine-month period, they had risen 3.8% to € 32.2 million as against the previous year's figure of € 31.1 million. This development is the result of higher research and development expenses.
Selling expenses climbed 8.0% to € 6.1 million (Q3/2007: € 5.6 million) in the third quarter of 2008. From a nine-month standpoint, they remained unchanged at € 17.2 million (Q1-Q3/2007: € 17.2 million).
General administration expenses declined both in the third quarter and in the nine-month period to € 1.4 million (Q3/2007: € 1.7 million) and € 5.4 million (Q1-Q3/2007: € 5.5 million) respectively.
Research and development expenses rose by 4.3%, from € 2.7 million to € 2.9 million, in the third quarter of 2008, and by 19.5%, from € 8.8 million to € 10.5 million, at the end of the 2008 nine-month period. The main reason for this development was the implementation of the 4Agility strategy.
Measured against revenues, operating expenses had risen to 51.9% at the end of the first nine months of 2008 (Q1-Q3/2007: 50.8%) owing to the increase in research and development expenses.
EBITDA, defined as the operating result (EBIT, including Sundry income and Other expenses) plus depreciation and amortization, remains positive at € 3.7 million and had risen 10.3% as against the previous year's figure (Q1-Q3/2007: € 3.4 million).
The finance result rose to € 0.3 million, up from € -0.4 million, in the first nine months of 2008 owing to positive interest-related effects from the discounting of trade receivables and lower level of finance expenses.
The result before income taxes improved notably and, at the end of nine months, posted € 1.1 million (Q1-Q3/2007: € 0.3 million).
Given a tax rate of 30%, the income taxes came to € -0.3 million at the end of the 2008 ninemonth period.
Accordingly, the result after income taxes for the nine-month period posted € 0.7 million as compared with the year-earlier figure of € 0.3 million.
Earnings per share thus improved to € 0.06 (Q1-Q3/2007: € 0.03), and the weighted average number of shares outstanding at the end of the first nine months of 2008 came to 13,168,304 shares.
Despite the protracted global crisis in the capital and financial markets, demand in the core market of Europe came primarily from the banking and insurance sectors. In the first nine months of 2008, the companies of the Beta Systems Group signed a series of contracts worldwide with renowned customers in all of its three business segments. In the DCI segment, contracts were concluded with GIE SILCA (financial services provider, France), Allianz Shared Infrastructure Services (IT services provider, Germany), Bancaja (financial services provider, Spain), SIA-SSB (financial services providers, Italy), Nordea Capital Market, (financial services provider, Denmark), AMB GENERALI Informatik Services (IT services provider, Germany), CSC Australia (IT services provider, Australia), R&V Allgemeine Versicherung (financial services provider, Germany), Zürich Service (financial services provider, Germany), Audi AG (Automobile, Germany), Equifax Europe (services provider, Great Britain) and Alte Leipziger Lebensversicherung (financial services provider, Germany). In the IdM segment, sales successes included contracts signed with Credit Suisse (financial services provider, Switzerland), Lufthansa Systems Infratec (IT services provider, Germany) and T Rowe (financial services provider, USA). In the ECM segment, new contracts in the first nine months of 2008 included those signed with the Central Bank of Nigeria (financial services provider, Nigeria), National Planning Commission (government administration, Nigeria), Sparkassen Informatik (financial services provider, Germany), F. Hoffmann-LaRoche (pharmaceuticals company), UniCredit Global (financial services provider, Italy) and P.S.K Zahlungsverkehrsabwicklungs-Gesellschaft (financial services provider, Austria).
At the end of the first nine months of 2008, revenues generated by the DCI segment had risen 9.9%, from € 23.1 million to € 25.4 million, in a year-on-year comparison. The segment thus held the previous year's level and was able to build on it with a revenue contribution of € 3.0 million through the acquisition of SI Software Innovation GmbH. Operating profit stood at € 11.6 million, thus virtually unchanged from the previous year's level (Q1-Q3/2007: € 11.8 million). SI GmbH's contribution to profit was € 0.3 million.
The IdM segment saw revenues fall from € 7.5 million to € 5.9 million in the first nine months of 2008, in particular owing to the fact that there was no repeat of a major order in the IT outsourcing business this year. Active cost management compensated for the effect of the decline in revenues on profit, bringing it to € -0.5 million (Q1-Q3/2007: € 0.0 million).
The business volume of the ECM segment, which posted revenues of € 30.9 million (Q1-Q3/2007: € 30.9 million), remained at the previous year's level. In particular, the increase in the materials usage ratio, brought about by changes in the revenues mix in the third quarter of 2008, caused the result to decline to € 5.6 million as compared with € 6.6 million at the end of the first nine months of 2007.
At the end of the first nine months of 2008, the number of employees in the Beta Systems Group had climbed to 634, up from the year-earlier figure of 619. This figure includes 35 employees from SI Software Innovation GmbH, a company acquired in the first quarter of 2008. Adjusted for this acquisition, employee numbers have fallen by 20 persons.
On September 30, 2008, Beta Systems disclosed cash amounting to € 3.0 million compared with € 3.2 million on December 31, 2007.
The cash flow from operating activities increased to € 8.4 million in tandem with the improved cost and profit situation (Q1-Q3/2007: € 0.5 million).
The acquisition of SI Software Innovation GmbH (€ -3.6 million) raised the cash flow from investing activities from € -0.4 million to € -1.6 million. In respect of cash inflow, however, Beta Systems Software AG generated proceeds worth € 2.4 million from the sale of a property held for sale.
The cash flow from finance activities stood at € -6.9 million at the end of the first nine months of 2008 (Q1-Q3/2007: € -0.8 million) and, along with the redemption of short-term finance in an amount of € -5.5 million, included the repayment of € 1.3 million for liabilities held for sale.
On the reporting date, trade receivables had fallen from € 38.9 million on December 31, 2007, to € 25.4 million as per September 30, 2008, and work in process project orders (POC), minus project related advances received, had risen to € 6.3 million (December 31, 2007: € 4.9 million).
Other intangible assets climbed from € 0.8 million to € 2.2 million through the acquisition of the customer base of SI Software Innovation GmbH.
Acquired software product rights climbed from € 1.6 million to € 2.6 million through the rights to Software Large Documents Management System (LDMS) purchased as part of the acquisition of SI Software Innovation GmbH.
By September 30, 2008, short-term finance had declined from € 8.2 million on December 31, 2007, to € 2.7 million.
Deferred income stood at € 7.6 million (December 31, 2007: € 7.2 million) and included maintenance revenues invoiced at the start of the year for the corresponding provision of services and recognition of revenues in the course of the year in accordance with the accruals concept.
On September 30, 2008, shareholders' equity posted € 24.5 million (December 31, 2007: € 23.7 million). The equity ratio stood at 40.0% as against 34.2% at year-end 2007.
In respect of the end of the fiscal year 2008, the Management Board confirms its outlook as per December 31, 2007, published in its Combined Management Report on the Group and the Parent Company. Although, from today's standpoint, any statements on the future impact of the financial crisis are difficult, the Management Board nonetheless currently stands by its expectations of an improvement in the results as compared with fiscal 2007. With a marginal increase in revenues, it has planned for an EBIT margin in the upper single-digit range and a double-digit EBITDA margin.
The opportunities and risk report is an update of the assumptions made in the Combined Management Report on the Group and the Parent Company as per December 31, 2007. The report is therefore to be read in conjunction with these statements. Major changes in the current financial year have occurred in relation to the following opportunities and risks:
15
With its "Beta 4Agility" growth program, initiated in the second quarter of 2007, Beta Systems is taking the opportunity of improving its market position on a sustained basis with the aim of releasing additional revenue and earnings potential through an improved and market-oriented product and solution offer and an enhanced uniform presence market in the market. This incurs the customary risks identified in the last Combined Management Report on the Group and the Parent Company associated with introducing new products in the market.
Through the acquisition of the rights of SI Software Innovation GmbH to the Large Documents Management System (LDMS) product, Beta Systems is currently extending its existing product portfolio in the mainframe business. In this process, LDMS will be treated as an individual product line in its own right. Beta Systems assumes that the synergies released from combined product portfolio can be used successfully in data centers.
The status of the ongoing compensation claim concerning the business combination of Kleindienst Datentechnik AG has remained unchanged in respect of the statements published in the 2008 Half-yearly Report.
The success of the Company is dependent to a great extent on having qualified employees and available specialized knowledge. Accordingly, preventing highly qualified employees from leaving the Company and winning additional new personnel is a decisive factor for the Company's future earnings, asset and financial position. The current dearth of qualified personnel on the labor market incurs a risk that positions open through fluctuation or growth of the company cannot be filled with suitable personnel - or only with a delay.
The persistently tense situation in the international financial markets is accelerating the consolidation process in the financial services sector and, at the same time, causing mounting pressure from the cost side in the sector. On the one hand, this favors the development of the new software solutions of Beta Systems which are focused on the adjustment of business processes, IT systems and organization as part of consolidation. On the other, however, there is the risk that, in the short term, investments may be shelved owing to liquidity and finance shortfalls.
Material transactions with related parties did not take place during the reporting period.
On November 3, 2008 Beta Systems Software AG and Proginet Corporation announced an agreement whereby the companies have streamlined their security product portfolios while strengthening their respective core competencies in identity management and secure file transfer. Under the terms of the agreement, Proginet has transferred all intellectual property rights to its SecurPass product to Beta Systems, and has licensed to Beta Systems the intellectual property rights to its SecurAccess and SecurForce security products. Proginet is also transferring to Beta Systems various customer, maintenance, and service contracts associated with these products. Beta Systems, in turn, has transferred to Proginet all of the intellectual property rights to its Harbor NSM and Harbor HFT file transfer products, and is transferring various associated customer, maintenance, and service contracts. In addition, Beta Systems has become the exclusive distributor for Proginet's complete file transfer portfolio in Europe. This includes the transferred Harbor NSM and Harbor HFT file transfer products.
Berlin, in November 2008
Kamyar Niroumand Gernot Sagl Chief Executive Officer Chief Financial Officer
This Quarterly Financial Report contains forward-looking statements which are based on assumptions and estimates made by the management of Beta Systems Software AG. Although the expectations inherent in these forward-looking statements are assumed to be realistic, no guarantee can be undertaken that these expectations prove to be correct. The assumptions may harbor risks and uncertainties which may lead to actual results diverging significantly from the forward-looking statements. The factors which may cause such divergences have been described in the Outlook report of the Combined Management Report on the Group and the Parent Company 2007 and elsewhere. An update of these forward-looking statements by Beta Systems is neither planned nor does management undertake any obligation to do so. All company, product and service brand names and logos used here are the property of the respective company.
| CONSOLIDATED STATEMENT OF INCOME | ||
|---|---|---|
| (Thousand $\epsilon$ , except share data in $\epsilon$ viz. in number of shares) | Q1-Q3/2007 (unaudited) |
Q1-Q3/2008 (unaudited) |
| Revenues Product Licenses Hardware Maintenance Services |
61,219 16,509 2,416 31,484 10,810 |
62,118 17,159 5,038 29,878 10,043 |
| Cost of Revenues | 29,445 | 29,080 |
| Gross Profit | 31,774 | 33,038 |
| Operating Expenses Selling Expenses General Administrative Expenses Research and Development Expenses Sundry Income Other Expenses |
31,070 17,164 5,469 8,795 (703) 345 |
32,236 17,209 5,392 10,505 (1,241) 371 |
| Operating Result | 704 | 802 |
| Finance Result Interest Income Interest Expenses |
(362) 6. (368) |
255 406 (151) |
| Result before Income Taxes | 342 | 1,057 |
| Income Taxes | (61) | (317) |
| Result for the Fiscal Period | 281 | 740 |
| Earnings per Ordinary Share Basic and Diluted |
0.03 | 0.06 |
| Weighted Average Number of Shares Outstanding used to compute Earnings per Ordinary Share Basic and Diluted |
8,738,666 | 13, 168, 304 |
| CONSOLIDATED STATEMENT OF INCOME | ||
|---|---|---|
| (Thousand $\in$ , except share data in $\in$ viz. in number of shares) | Q3/2007 (unaudited) |
Q3/2008 (unaudited) |
| Revenues | 19,364 | 19,596 |
| Product Licenses | 5,184 | 4,405 |
| Hardware | 745 | 1,838 |
| Maintenance | 10,214 | 10,218 |
| Services | 3,221 | 3,135 |
| Cost of Revenues | 9,145 | 9,933 |
| Gross Profit | 10,219 | 9,663 |
| Operating Expenses | 9,905 | 9,453 |
| Selling Expenses | 5,646 | 6,095 |
| General Administrative Expenses | 1,653 | 1,351 |
| Research and Development Expenses | 2,747 | 2,864 |
| Sundry Income | (260) | (964) |
| Other Expenses | 119 | 107 |
| Operating Result | 314 | 210 |
| Finance Result | (97) | $\bf{0}$ |
| Interest Income Interest Expenses |
50 (147) |
24 (24) |
| Result before Income Taxes | 217 | 210 |
| Income Taxes | 56 | 190 |
| Result for the Fiscal Period | 273 | 400 |
| Earnings per Ordinary Share | ||
| Basic and Diluted | 0.03 | 0.03 |
| Weighted Average Number of Shares Outstanding used to | ||
| compute Earnings per Ordinary Share | ||
| Basic and Diluted | 8,738,666 | 13, 168, 304 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||
|---|---|---|
| (Thousand $\in$ ) | 12.31.2007 (audited) |
09.30.2008 (unaudited) |
| Current Assets | 52,494 | 43,336 |
| Cash | 3,176 | 3,035 |
| Trade Receivables | 38,912 | 25,417 |
| Work in Process Project Orders (POC) | 4,878 | 6,300 |
| Inventories | 3,342 | 3,705 |
| Other Current Assets | 2,186 | 4,879 |
| Non-Current Assets | 16,914 | 17,989 |
| Property, Plant & Equipment | 4,202 | 3,356 |
| Goodwill | 1,522 | 2,029 |
| Other Intangible Assets | 768 | 2,200 |
| Acquired Software Product Rights | 1,599 | 2,635 |
| Deferred Tax Assets | 7,644 | 6,730 |
| Other Non-Current Assets | 1,179 | 1,039 |
| Total Assets | 69,408 | 61,325 |
| Current Liabilities | 33,990 | 26,146 |
| Short-Term Finance and Finance Leasing | 8,228 | 2,691 |
| Trade Payables | 5,915 | 8,026 |
| Deferred Income | 7,207 | 7,636 |
| Current Income Taxes | 202. | 400 |
| Advance Payments Received (POC) | 290 | |
| Provisions | 368 | 359 |
| Other Current Liabilties | 11,779 | 7,034 |
| Non-Current Liabilities | 11,705 | 10,658 |
| Employee Benefits | 2,921 | 2,898 |
| Deferred Tax Liabilities | 7,238 | 7,000 |
| Other Non-Current Liabilities | 1,546 | 760 |
| Total Liabilities | 45,695 | 36,804 |
| Shareholders' Equity | 23,713 | 24,521 |
| Share Capital | 17,276 | 17,276 |
| Capital Reserve | 10,709 | 10,709 |
| Retained Losses | (4,950) | (4,210) |
| Other Comprehensive Income | 1,097 | 1,165 |
| Treasury Shares | (419) | (419) |
| Total Liabilities and Shareholders' Equity | 69,408 | 61,325 |
| (Thousand €) | Q1-Q3/2007 (unaudited) |
Q1-Q3/2008 (unaudited) |
|---|---|---|
| Net Cash from Operating Activities | 476 | 8,406 |
| Profit for the Fiscal Period | 281 | 740 |
| Reconcilation from Profit for the Fiscal Period to | ||
| Net Cash from Operating Activities: | ||
| Depreciation and Amortization | 2,678 | 2,929 |
| Loss on the Disposal of Property, Plant & Equipment, net | 31 | 16 |
| Finance Result, net | 362 | (255) |
| Current Tax (Benefit) Expenses | 480 | 742 |
| Deferred Tax Benefit | (419) | (424) |
| Income Taxes Paid | (550) | (544) |
| Foreign Currency Gains, net | (333) | |
| Changes in Assets and Liabilities: | ||
| Decrease in Trade Receivables | 8,429 | 13,495 |
| Increase (Decrease) in Trade Payables | (3,730) | 1,962 |
| Increase (Decrease) in Deferred Revenues | 2,434 | (97) |
| Changes in other Assets and Liabilities | (9, 187) | (10, 158) |
| Net Cash used in Investing Activities | (398) | (1, 593) |
| Acquisition of Property, Plant & Equipment | (459) | (446) |
| Proceeds from the Disposals of Property, Plant & Equipment | 55 | |
| Proceeds from the Disposal of Assets Held for Sale (SI GmbH) | 2,400 | |
| Cash Paid for Investments, net of Acquired Cash | (3,591) | |
| Net Cash used in Financing Activities | (807) | (6, 942) |
| Net Change in Short-Term Finance and Finance Leasing | 1,176 | (5,536) |
| Settlement of the Liabilities Held for Sale (SI GmbH) | (1,255) | |
| Repayment of Long-Term Borrowings | (1,595) | |
| Interest Paid | (296) | (151) |
| Cost of Increase in Share Capital | (92) | |
| Decrease in Cash | (728) | (129) |
| Effect of Exchange Rate Fluctuations on Cash | (153) | (12) |
| Cash at the Beginning of the Fiscal Period | 2,050 | 3,176 |
| Cash at the End of the Fiscal Period | 1,168 | 3,035 |
| ONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| housand E, except share data in number of shares) 1-03/2008 (unaudited) |
Ordinary Shares Number of Shares |
Value | Reserve Capital |
Earnings Retained (Losses) |
Comprehensive Income (Loss) Other |
Net Income (Loss) including Other Comprehensive Income (Loss) |
Treasury Shares Number of Ordinary Shares |
Value | Sharehold Equity Total |
| alance at January 1, 2007 | .260 | 20,610 | 2.99 | ||||||
| hare Capital Increase | 4,429,638 | 5,759 | 3,322 | $\frac{6}{3}$ | |||||
| ost of Increase in Share Capital, at of Tax Effects |
698) | ě | |||||||
| et Profit for the Year | 2,310 | 2,310 | 231 | ||||||
| et Profit for the Year, including Other Comprehensive Loss ther Comprehensive Loss, net of Tax Effects Currency Translation Adjustments ther Comprehensive Loss |
g | ||||||||
| alance as at December 31, 2007 | 4,950 | 419 | |||||||
| at Profit for the Fiscal Period | 740 | DRZ | 74 | ||||||
| et Profit for the Fiscal Period, including Other Comprehensive Income ther Comprehensive Income, net of Tax Effects ther Comprehensive Income, net of Tax Effects Currency Translation Adjustments |
89 | 8 8 88 |
|||||||
| alance as at September 30, 2008 | 4.210 | .165 | 120,610 | 24.52 |
Quarterly Report as at September 30, 2008
22
Beta Systems Software AG with registered office in Germany comprises together with its subsidiaries, the Group ("Beta Systems" or "the Company") for which the subsequent Consolidated Interim Financial Statements for the fiscal period from January 1, 2008 to September 30, 2008 were compiled in accordance with IFRS standards.
The Company's principal place of business is located at Alt-Moabit 90d, D-10559 Berlin, Germany. The subsidiaries are located in Europe, Africa and North America.
The Company develops, market, implements and supports high-class automation software products and -solutions for the safe and efficient processing of large data volumes for use by enterprises, public administration as well as industry- and trade organizations for application on mainframe computers and other hardware in Mainframe-, Unix-, Linux- and Windows environments.
The Company's products are designed to increase the productivity of voluminous data processing transactions in data centers by means of the cost saving automation of manual tasks and the qualitative optimization of the use of hardware resources. Highest safety standards in critical business processes with sensitive data and the observance of legal regulations form the fundamental structure of the products. The Company's products feature a common comprehensive architecture which facilitates the development and integration of the Company's products across platforms, independent of the application.
The software products and -solutions of the Lines of Business ("LoBs") Data Center Infrastructure ("DCI"), Identity Management ("IdM") and Enterprise Content Management ("ECM") of Beta Systems support the Company's customers in the automation, safeguarding and transparency of their IT supported business processes.
These Consolidated Interim Financial Statements for Beta Systems Software AG were prepared in compliance with the International Financial Reporting Standards (IFRS) for interim financial reports (IAS 34), as they are required to be applied within the European Union. Accordingly they do not include all of the information and notes required by the International Financial Reporting Standards (IFRS) for Consolidated Annual Financial Statements, and should be read in conjunction with the Annual Consolidated Financial Statements for the fiscal year 2007 and footnotes thereto.
The recognition of revenues is performed in the period in which they accumulate also in respect of interim financial periods, i.e. seasonal revenues are not brought forward nor accrued. In the opinion of the Management Board, all adjustments considered necessary for a fair presentation (normal recurring provisions) are included. The results for the period to September 30, 2008 are not necessarily indicative of the results which may be expected for the fiscal year 2008.
Effective January 1, 2008, Beta Systems Software AG has acquired 100% of the shares in SI Software Innovation GmbH, Neustadt an der Weinstraße ("SI GmbH"). With more than 20 years market expertise, SI GmbH calls on proven customer relationships with a number of large corporations. The financial services sector constitutes a focal point. Here the two central IT service providers of the Volksbanken- und Raiffeisen-association, the GAD eG and the FIDUCIA IT AG and their more than 900 affiliated institutes belong to the entity's customer base. SI GmbH's product, Large Documents Management System ("LDMS"), is a central archiving system for document-based business processes as well as digital records, and is based on IBM's current zServer technology (mainframe). The business combination is allocated to the business segment Data Center Infrastructure (DCI), under the portfolio of which the LDMS-suite will be integrated as a separate product in future.
The purchase price amounts to T€ 3,000 plus transaction costs in the amount of T€ 19. A further valuable consideration exists in the form of a variable purchase price component. The SI GmbH is owner of an immovable property designated as held for sale. In this way the purchase price increases by the amount of the selling price of the property, less the repayment of the mortgage over the property and the direct costs related to the sale. This additional purchase price component amounts to T€ 981.
The acquisition date for purposes of initial consolidation was determined to be January 1, 2008. On the basis of a provisional estimate, goodwill in the amount of T€ 507 has been recognized. The allocation of the purchase price detailed in the following table is provisional, as current efforts to determine the market values of certain own-produced intangible assets had not been concluded at balance sheet date. Future adjustments to the purchase price allocation will be recognized retrospectively within 12 months of the purchase date in accordance with IFRS 3:
| SI Software Innovation GmbH, Neustadt an der Weinstraße | |||
|---|---|---|---|
| Purchase Price Allocation, in T€ | Book Value SI GmbH | Revalution | Market Value |
| Goodwill | $\overline{\phantom{a}}$ | 507 | 507 |
| Product Rights LDMS | $\overline{\phantom{a}}$ | 1,475 | 1,475 |
| Customer Base | $\overline{\phantom{a}}$ | 2,589 | 2,589 |
| Liabilities | $\overline{\phantom{0}}$ | (250) | (250) |
| Deferred Tax Liabilities | $\overline{\phantom{a}}$ | (1, 145) | (1, 145) |
| Cash | 409 | 409 | |
| Property, Plant & Equipment | 122 | 122 | |
| Current Liabilities | (852) | $\overline{\phantom{a}}$ | (852) |
| Assets Held for Sale | 2.400 | 2,400 | |
| Liabilities Held for Sale | (1,255) | (1,255) | |
| Net Assets, including Goodwill | 824 | 3,176 | 4,000 |
The value of the goodwill is based on a number of factors, like the value of the staff complement and synergies in the area of procurement. The SI GmbH contributes revenues in the amount of T€ 2,960 in the reporting period, and a net profit in the amount of T€ 296 to the net result.
The same financial reporting principles and measurements as were used in the Consolidated Annual Financial Statements as at December 31, 2007 were applied in the Consolidated Interim Financial Statements as at September 30, 2008.
The Consolidated Financial Statements were in principal prepared on the historical cost basis, and for the following financial and non-financial assets and liabilities on the basis of their fair value:
The methods and assumptions used in determining fair values are discussed under the heading "Accounting Policies and Valuation Methods" in the notes specific to these assets and liabilities.
The accounting policies and valuation methods set out below were applied consistently to all periods presented in the Consolidated Financial Statements and by all Group entities.
The Consolidated Financial Statements are prepared in euro thousand (T€). All amounts are commercially rounded to full T€. The euro is the parent company's functional currency. Due to the utilization of electronic data processing devices differences in the addition of rounded values and percentages may arise.
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent amounts at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Subsequent actual results could differ from those estimates.
Beta Systems Software AG is the Parent Company. All companies which are subject to a controlling interest by the Parent Company ("subsidiaries") were included in the Consolidated Interim Financial Statements by means of full consolidation. A controlling influence exists when a parent company is in the position to influence, directly or indirectly, the financial and business policies of the company.
The financial statements of the fully consolidated companies included in the Consolidated Interim Financial Statements are based on the same accounting policies and valuation methods. Intercompany revenues and expenses, accounts receivable, accounts payable, inter-company operating results and inter-company dividend payments were eliminated.
Software license revenue, consisting of new product licenses and CPU upgrades, is recognized when persuasive evidence of an arrangement exists, when delivery of the software has occurred and the execution key has been provided, the fee is fixed or determinable and receipt of payment is probable. When a licensing agreement includes multiple components, revenues are allocated to the individual elements on the basis of their fair value and recognized on an accrual basis. For revenue recognized from licenses with temporary use, the criteria described in IAS18 App 20 are tested in particular.
Maintenance revenue is recognized pro rata temporis over the maintenance service period.
Service revenue consists of services for consulting, installation and training and is recognized, on the basis of contractually agreed prices, at the time when the services are delivered.
In addition to the existing standard software products for infrastructure software, the Company also offers, in the context of consulting services, products designed to meet the individual requirements and technological resources of customers in the form of customized project solutions and individual support. On the one side these construction contracts comprise the creation of made-to-order software through modification or further development of existing standard products and on the other hand project orders which comprise the combination of hardware, software licensing, maintenance and various services.
Revenues from these construction contracts are recognized in compliance with IAS 11 according to the progress of the performance in accordance with the percentage-of-completion method, a method making reference to the degree of completion of the project and requiring the following criteria to be satisfied for revenue recognition: the amount of the revenue must be able to be determined reliably, the economic gain resulting from the delivery of the service must be probable, the percentage of completion as at reporting date must be reliably measurable and the total projected costs of the contract must be able to be determined dependably. The Company uses the cost-to-cost method to determine the degree of completion of the project, whereby the actual costs accrued for the performance already completed as at reporting date are set in ratio to the estimated total project costs at that time.
Apart from the revenue categories referred to additional revenues are realized in the LoB Enterprise Content Management (ECM) from sales of hardware (scanner systems). Revenue is recognized when ownership passes to the buyer, i.e. upon delivery of the goods and acceptance by the buyer.
Research and development projects by the Company, which result in the construction of new software products or in the substantial enhancements to existing software products, proceed without being able to be clearly differentiated into a research and a development phase. Due to the lack of conformity with the recognition criteria an allocation of the costs to the particular phases is thus not possible. All software product rights are therefore recognized as research costs in the consolidated Statement of Comprehensive Income in the period of their accrual in accordance with the principles of IAS 38.52 and IAS 38.53.
Acquired intangible assets with a limited useful life are recognized in the Statement of Financial Position in the amount of the acquisition costs, less the scheduled allocation of amortization and the possible impairment losses.
For each reporting period the costs are amortized according to the straight-line method over the estimated useful life of the software.
Pursuant to IAS 36, the unamortized intangible assets are compared, at each reporting date, to the net realizable values of those products, in order to determine whether any impairment of value exists. If an impairment of value has occurred, the amount by which the unamortized capitalized software product rights exceeds the net realizable value of that asset (the present value of future estimated sales of the products less cost of sales and selling costs) is written off.
The sundry income comprises gains on the disposal of fixed assets and gains on financial assets and hedging instruments recognized in profit or loss. The income is recognized as it accrues.
Other expenses comprise losses on the disposal of fixed assets and on financial assets and hedging instruments recognized in profit or loss, as well as impairment losses recognized. These expenses are recognized in the statement of comprehensive income in the accounting period in which they occur.
Foreign currency gains and losses are reported on a net basis.
The finance income comprises all interest income on short-term fixed cash deposits and interest provisions relating to long-term provisions. Interest income is recognized as an income as it accrues in profit and loss, using the effective interest method.
The finance expenses comprise interest expenses on short-tem finance and on long-term borrowings as well as interest provisions relating to long-term trade receivables. All borrowing costs are recognized as an expense in the accounting period in which they occur, using the effective interest method.
Current income taxes are determined based on the amounts of the corporate taxes due viz. receivable which are expected to result from the individual companies' taxable income viz. taxable loss for the current and former reporting periods. They are established under assumption of the tax regulations and tax rates valid for the respective companies as at reporting date and are recognized at that value which is expected to result as tax payment or tax refund. As settlement will be effected on a net basis, current taxes payable and current taxes receivable were offset against each other.
Deferred tax assets and liabilities are determined using the liability method according to IAS 12 for all temporary differences between the accounting base of assets and liabilities as recognized in the Consolidated Financial Statements according to IFRS and the corresponding tax base values. In addition, tax gains on future taxable earnings resulting from existing losses carried forward which are likely to be realized are also considered in the calculation. Exceptions from the application of this principle are differences relating to non-deductible goodwill and temporary differences in connection with investments.
Since the year 2008, the German corporate tax rate on undistributed earnings and on distributed earnings is 15.0%. Together with the solidarity surcharge and the trade tax rate a composite tax rate in the amount of 30.53% has since then been applied.
The basic earnings per ordinary share is calculated by dividing the net income or loss available to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the fiscal period. In particular, the number of treasury shares held is subtracted from the total number of ordinary shares issued.
Diluted earnings per ordinary share is calculated by dividing the net income or loss available to present and potentially new ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the fiscal period, adjusted for the effects of all dilutive potential ordinary shares. The dilutive effect of outstanding options is reflected by application of the treasury stock method in diluted earnings per ordinary share.
Cash comprises cash on hand and demand deposits at banks callable without notice.
Trade Receivables are stated at their acquisitions cost less valuation allowances for expected uncollectible or doubtful accounts. The carrying amounts of these trade receivables due for payment within twelve months from reporting date approximate their fair values because of their short maturity.
In addition, receivables with long-term settlement terms are included under this position. These are assessed on the basis of the present value of the expected future cash flows.
The project order contracts comprise the manufacture of customized - and continuing across various accounting periods - made-to-order project solutions designed to meet the individual requirements of customers. On the one side these construction contracts comprise the construction of made-to-order software through modification or further development of existing standard products and on the other hand project orders which comprise a combination of hardware, software licensing and various services.
The nature and the extent of the goods and services to be delivered are in compliance with the respective contract terms; usually these are construction contracts for which the extent of the contractually agreed performance is provided at a fixed fee.
Project costs comprise both direct costs as well as general production overhead costs in connection with the existing agreements indirectly allocable.
During the construction phase the construction costs including margin are recognized in the Statement of Financial Position as In Process Project Orders (POC). This represents the gross unbilled amount expected to be collected from customers for contract work performed to date, excluding progress payments already received. If advance payments and progress payments received from a customer exceed the recognized profits for a particular In Process Project Order, the net excess is presented in the Statement of Financial Position under the position "Advance Payments Received (POC)".
Inventories are stated at the lower value of the average acquisition- or production costs and the net realizable value at the reporting date. In the case of commercial inventories the net realizable value is based on the current market price while the value determined from projected income, less estimated production costs is used as a basis for the other inventories. Inventory risks resulting from storage, slow-moving-, obsolete- and damaged goods are taken into consideration by accounting for appropriate valuation adjustments.
Other current assets principally comprise prepaid expenses and deferred charges and are valued at their acquisition cost less impairment losses.
In order to limit and control existing financial foreign currency and interest risks, certain derivative financial instruments in the form of foreign currency forwards and interest caps are employed. These do not fulfill the requirements of the Fair Value Hedge in terms of Hedge Accounting.
Foreign currency forwards are stated at acquisition cost at the time of the conclusion of the contract and stated at fair value in the subsequent reporting periods. The fair value of the currency forwards is assessed on the basis of the forward rates ruling on the reporting date.
Fixed interest caps are made use of to cover interest risks. The fair value of the interest caps is principally determined on the basis of the present value of the expected future cash inflows.
The results of the valuation adjustments resulting from the changes in fair value are recognized in the applicable accounting period in the Statement of Comprehensive Income.
Property, Plant & Equipment is valued at historical acquisition cost less accumulated allocation of scheduled straight-line depreciation amounts.
The scheduled depreciation of the depreciable assets is recognized in profit or loss and is based on the assets' expected useful lives. Assets which are subject to a finance leasing arrangement are depreciated over the useful life of the asset.
The following estimated useful economic lives are applied:
| Estimated Useful Life | Years |
|---|---|
| Technical Plant and Machinery, | |
| Computer Equipment | 5. $3 -$ |
| Leasehold Improvements | $5 - 10$ |
| Facilities and Office Equipment | $3 - 13$ |
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Gains and losses on disposal of assets are determined by comparing the proceeds with the carrying amount of the asset, and are recognized within "Sundry Income" and "Other Expenses" in the Statement of Comprehensive Income respectively.
Goodwill arises on a business combination, and represents the excess of the cost of the acquisition over the Company's interest in the net fair values of the identifiable assets and liabilities of the acquiree. Goodwill is measured at this resulting difference amount, less all accumulated impairment losses resulting from impairment testing conducted in accordance with IAS 36.
Acquired intangible assets are valued in the Statement of Financial Position at acquisition cost, less scheduled accumulated amortization and accumulated impairment losses (value in use).
Intangible assets are subject to scheduled allocation of straight-line amortization. For the scheduled amortization of the intangible assets, which is recognized in profit or loss, an estimated useful economic life of five years is applied as a general rule.
The realizable value is determined on the basis of the value in use.
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific assets.
Other non-current assets include insurance policies intended to fund a portion of the Company's pension obligations. The Company values these investments at cash surrender value.
The classification of leases as finance leases viz. operating leases is determined on the basis of the economic content of the lease agreement in accordance with IAS 17.8. When all essential risks and rewards with respect to such property pass on to the lessee, the lease agreement is classified as a finance lease.
The lessee capitalizes the asset under Property, Plant & Equipment and the present value of the obligation towards the lessor is carried as a liability. The difference between the present value of the future lease installments and the sum of the discounted lease installments constitutes deferred interest costs which are realized over the term of the agreements proportionate to the total amounts payable.
Other leases are operating leases and are not recognized on the Group's Statement of Financial Position. Payments made under operating leases are recognized in the Statement of Comprehensive Income over the term of the lease.
Trade Payables are stated at their net carrying amount; this is equivalent to the repayment value. The carrying amounts of these trade payables due for payment within twelve months from reporting date approximate their fair values because of their short maturity.
Provisions are accrued when the Company has legal or valid obligations towards third parties due to past events and if it is likely that such obligations will result in an outflow of funds. Such provisions are stated at such value as can be determined at the time the annual financial statements are compiled, on the basis of the best possible estimate. If the present value of the provision, determined on the basis of customary interest rates, differs substantially from the nominal value, the provision is stated at the present value of the obligation.
Other Current Liabilities are stated at their net carrying amount, which is equivalent to the repayment value.
Long-Term Borrowings are stated in the amount of the actual inflow less transaction costs. A difference between the amount received and the repayment amount is distributed over the financing term and is stated in the Finance Result.
On the basis of existing contracts, several employees are due to receive pension payments under certain conditions upon their taking retirement.
The retirement benefit provisions are recognized in the Statement of Financial Position in accordance with IAS 19 according to the projected unit credit method under application of the corridor method and are included in "Employee Benefits".
The actuarial gains and losses are distributed under application of the corridor method. The disclosure is included in the cost of revenues and in the operating expenses. Recognition of pro rata actuarial gains and losses outside the corridor are recognized for the expected average remaining service period in respect of the employees covered under the plan in the Statement of Comprehensive Income.
Employee benefits due in respect of partial retirement plans originating from collective bargaining agreements are also included in the position "Employee Benefits".
Here included are both benefits due in respect of existing partial retirement employment agreements as well as provisions for the likely future claiming of benefits by potential claimants.
The provisions were calculated according to the actuarial principles in accordance with IAS 19.133 ff.
Financial instruments of the Company consist of non-derivative financial instruments including cash, trade receivables and trade payables, short-term finance and finance leasing and long-term borrowings, as well as derivative financial instruments in the form of foreign currency forwards.
Non-derivative financial instruments are recognized initially at fair value plus - for instruments not at fair value through profit or loss - any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described in each case.
Derivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized in profit or loss when incurred. Subsequent measurement is at fair value through profit or loss.
32
The Group has exposure to the following risk from its use of financial instruments:
The use of financial instruments and the nature and extent of the risks arising from the financial instruments to which the Company is exposed as at reporting date, as well as the Company's objectives, policies and processes for measuring and managing risk, and the Company's capital are described in full detail in the Consolidated Annual Financial Statements as at December 31, 2007, and updated in the Consolidated Interim Financial Statements as at September 30, 2008.
Financial Assets: All the Company's financial assets designated as at fair value through profit or loss, i.e. cash, trade receivables and trade payables and derivative financial instruments are assessed for indications of an impairment of value at each reporting date. Individually significant assets are tested for impairment on an individual basis.
If objective indications are found that one or more events have a negative effect on the estimated future cash flows of that asset, impairment is recorded for that asset. This is calculated as the difference between its carrying amount and the (lower) present value of the estimated and discounted future cash flows. Impairment losses are recognized in profit or loss.
Non-Financial Assets: The carrying amounts of the Company's non-financial assets, i.e. Goodwill, Other Intangible Assets and Acquired Software Product Rights are assessed for indications of an impairment of value at each reporting date. Individually significant assets are tested for impairment on an individual basis.
If such indications are found, the recoverable value of the respective asset is determined as the higher amount of the value in use and the fair value less the selling costs. Should this recoverable value be below the carrying amount for this asset, the carrying amount of the asset is reduced to its net realizable value.
A goodwill acquired in a business combination is principally tested annually for impairment. Impairment losses are recognized in profit or loss.
The assets and liabilities denominated in the Statement of Financial Positions of foreign subsidiaries were converted to euro on the basis of the appropriate foreign exchange benchmark rates at the reporting date, while the revenues and expenses in the Statement of Comprehensive Incomes were translated using the appropriate average monthly foreign exchange benchmark rates.
Cumulative currency translation adjustments resulting from changes not affecting the Statement of Comprehensive Income were reported as a separate component of "Other Comprehensive Loss" in shareholders' equity.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized directly in equity, net of any tax effects.
Each Ordinary share entitles the holder to one vote.
When share capital recognized as equity is repurchased, the repurchased shares are classified as treasury shares and the amount paid, net of any tax effects, is recognized as a deduction from equity.
The segmentation comprises the allocation of reportable data according to the business units of the Company. These are positioned into the three Lines of Business (LoBs) DCI (Data Center Infrastructure), IdM (Identity Management) and ECM (Enterprise Content Management) with individual market-driven strategies for each.
The delimitation of the LoBs is product-oriented in alignment with the business activities. For this purpose the Company's products and services are allocated to each LoB on the basis of its strategic business concept. The profit center structure is designed to provide LoB-management with direct, more self-determined operational and financial control, which also incorporates the product development of the allocated products, as well as the production and project management. Marketing-, sales- and service functions are also allocated directly to each particular LoB. The LoB-manager takes the responsibility for the global success of his business. In contrast to the fiscal year 2007, and for the purpose of improving the disclosure of operative budget responsibilities, changes from fiscal year 2008 were implemented to the internal reporting, effectively resulting in only directly attributable costs being allocated to the LoBs. The comparative amounts were adjusted accordingly.
All segments derive revenues from sales of product licenses, maintenance and consulting services as well as revenues from construction projects. Hardware sales are also realized in the ECM business segment.
Under the LoB-structure described above the functional areas Sales and Service are directly allocated to the LoBs. Simultaneously the internal cost allocation of the functional areas is in operation - this allows for a "fair according to the input involved" allocation of the costs for the functional areas Sales, Service and Development to the segments.
The revenue-relevant settlement of revenues realized between the business segments are allocated, as is shown in the following table in the "Cross Section" column, directly to the LoBs and subsequently eliminated. Inter-segment sales are transacted on the basis of the arm's length terms and conditions.
| Q3/2007 | DCI | IdM | ECM | Cross- Section |
Total Group |
|---|---|---|---|---|---|
| Revenues with Customers Inter-Segment Revenues |
8,058 | 1,936 | 9,475 | (105) | 19,364 |
| Total Revenues | 8,058 | 1,936 | 9,475 | (105) | 19,364 |
| Cost of Revenues and Operating Expenses of the Business Segments |
(3,958) | (2,533) | (7,259) | (13,750) | |
| Segment Income (Loss) for the Fiscal Period | 4,100 | (597) | 2,216 | (105) | 5,614 |
| Q3/2008 | DCI | IdM | ECM | Cross- Section |
Summe Konzern |
| Revenues with Customers Inter-Segment Revenues |
8,288 58 |
1,533 | 9,691 | 84 (58) |
19,596 |
| Total Revenues | 8,346 | 1,533 | 9,691 | $\overline{26}$ | 19,596 |
| Cost of Revenues and Operating Expenses of the Business Segments |
(4, 152) | (1,961) | (8, 166) | (14, 279) | |
| Segment Income (Loss) for the Fiscal Period | 4,194 | (428) | 1,525 | 26 | 5,317 |
| 01-03/2007 | DCI | IdM | ECM | Cross- Section |
Total Group |
| Revenues with Customers | 23,109 | 7,458 | 30,869 | (217) | 61,219 |
| Inter-Segment Revenues Total Revenues |
23,109 | 7,458 | 30,869 | (217) | 61,219 |
| Cost of Revenues and Operating Expenses of the Business Segments |
(11, 343) | (7,545) | (24, 246) | (43, 134) | |
| Segment Income (Loss) for the Fiscal Period | 11,766 | (87) | 6,623 | (217) | 18,085 |
| Q1-Q3/2008 | DCI | IdM | ECM | Cross- Section |
Total Group |
| Revenues with Customers Inter-Segment Revenues |
25,335 58 |
5,864 | 30,861 | 58 (58) |
62,118 |
| Total Revenues | 25,393 | 5,864 | 30,861 | ÷. | 62,118 |
| Cost of Revenues and Operating Expenses of the Business Segments |
(13, 839) | (6,318) | (25, 243) | (45, 400) |
The accounting policies of the operating segments are the same as those described in the "Significant Accounting Policies and Valuation Methods" and were retained unchanged from those applied during the prior year.
As for purposes of internal reporting and steering of the Company not all costs are allocated to the net results generated by the LoBs - i.e. general Cost of Revenues, the General Administrative Expenses, general Research and Development Expenses as well as Sundry Income and Other Expenses - a reconciliation of the results of the business segments to the Company's consolidated totals is as follows:
| 03/2007 | 03/2008 | |
|---|---|---|
| Total Segment Results for the Fiscal Period Unallocated Overhead Costs |
5,614 (5, 441) |
5,317 (5,964) |
| Sundry Income | 260 | 964 |
| Other Expenses Operating Result |
(119) 313 |
(107) 210 |
| Finance Result | (97) | Π |
| Result before Income Taxes | 217 | 210 |
| Income Taxes | 56 | 190 |
| Income for the Fiscal Period | 273 | 400 |
| Q1-Q3/2007 | Q1-Q3/2008 | |
|---|---|---|
| Total Segment Results for the Fiscal Period | 18,085 | 16,718 |
| Unallocated Overhead Costs | (17,739) | (16, 786) |
| Sundry Income | 703 | 1,241 |
| Other Expenses | (345) | (371) |
| Operating Result | 704 | 802 |
| Finance Result | (362) | 255 |
| Result before Income Taxes | 342 | 1,057 |
| Income Taxes | (61) | (317 |
| Income for the Fiscal Period | 281 | 740 |
No changes have occurred since December 31, 2007. In particular, the following two positions exist:
Altogether 11 applicants initiated a shareholders compensation claim against Beta Systems Software AG during the fiscal year 2005 in connection with the merger onto the Kleindienst Datentechnik AG. The shareholders compensation claim aims at a cash adjustment in the sense of § 15 Abs. 1 UmwG. In the case of an adjudging verdict a cash adjustment would become due to all previous shareholders of the Kleindienst Datentechnik AG who became shareholders of the Company as a result of the merger. In the case of a settlement an approximation by the Company's legal consultants estimates payments for a total amount of up to T€ 440. At this stage the final outcome can not be concluded exactly. In the case of a settlement this would increase the purchase price and would be allocable to the goodwill of the LoB ECM in the full amount. No effect to net income would result. In addition, the net realizable value determined pursuant to the impairment test in accordance with IAS 36 conducted as at December 31, 2007 would also cover the carrying amounts inclusive of the estimated cash adjustment.
During the previous ownership of Datasec GmbH, Siegen, which was sold as at 31 December, 2001, Kleindienst Datentechnik AG had issued an unsecured guarantee in the amount of T€ 333 in favor of Volksbank im Siegerland eG within the terms of providing its share of the security for a long-term loan to Datasec GmbH. The corresponding loan liability at Datasec GmbH is still held in full and expires on November 30, 2009. As a result of shares in Datasec GmbH being sold, Kleindienst Datentechnik AG has the right to release itself from its guarantee obligations or to obtain a right of recourse from the acquirer of the company. The Company is not aware of any evidence that would suggest delivering payment on the guarantee and estimates the fair value of the guarantee at zero. No liability is therefore recorded.
On the basis of their direct equity investment viz. on the basis of the attribution of voting rights the Deutsche Balaton AG, Heidelberg, the Heidelberger Beteiligungsholding AG, Heidelberg and the ABC Beteiligungen, Heidelberg had significant influence on the Company during the interim reporting period. As a result of the relationship of dependence of the Deutsche Balaton AG, Heidelberg, the VV Beteiligungen AG, Heidelberg and the Delphi Unternehmensberatung GmbH, Heidelberg are also related parties of Beta Systems software AG. No business relationships existed with these entities during the interim reporting period.
No other related party business relationships existed.
Quarterly Report as at September 30, 2008
| As per September 30, 2008 | Shares |
|---|---|
| Management Board | |
| Kamyar Niroumand | 129,377 |
| Gernot Sagl | - |
| Supervisory Board | |
| Sebastian Leser | - |
| Dr. Arun Nagwaney | - |
| Jürgen Dickemann | - |
| Volker Wöhrle | - |
| Stefan Hillenbach | 6,432 |
| Wilhelm Terhaag | - |
| Treasury shares | 120,610 |
|---|---|
Mr Kamyar Niroumand bought 100,000 shares OTC on March 10, 2008, as part of Directors' Dealing. The purchase from the portfolio of an institutional investor is linked to an optional holding period of one year and serves the purpose of promoting long-term loyalty to the Company.
None of the members of the Supervisory Board or the Management Board currently hold stock option rights or conversion rights to the shares of Beta Systems Software AG.
Our Investor Relations Team is at your disposal for any questions on the results as per September 30, 2008, under the telephone number +49 (0)30 726 118 -171 or email [email protected].
Beta Systems Software AG Berlin (Prime Standard: BSS, ISIN DE0005224406) develops highprofile software products and solutions for the secure and efficient processing of large data volumes. The core businesses of Beta Systems are document processing as well as IT user management data processing in data centers and compliance solutions. In addition, the Beta 4Agility suite offers large companies new integration products to enhance their agility in IT and business processes. These products serve to simplify the automation of data and document processing and enhance the security and performance of IT.
Beta Systems was founded in 1983, has been a listed company since 1997, and has a workforce of more than 600 employees. The company's principal place of business is Berlin. Beta Systems operates through Centers of Competence in Augsburg, Cologne and Calgary, as well as 18 subsidiaries worldwide and cooperations with numerous partner companies. With more than 3,000 running installations, it has a customer base of more than 1,300 major companies from the sectors of financial services and IT service providers and industry at large in Germany, Europe and the USA.
More information on the company and its products can be found under www.betasystems.com.
March 20, 2008 Announcement of the Annual Results 2007 Online Annual Press Conference, Berlin
April 30, 2008 Press Release – First Quarter Results 2008
April 2008 Road Show Frankfurt/Main
May 6, 2008 Publication – First Quarter Results 2008
May 14, 2008 Annual General Meeting 2008, Berlin
Unternehmenskontakt: Beta Systems Software AG Stefanie Frey Tel.: +49 (0)30 726 118-171 Fax: +49 (0)30 726 118-881 E-Mail: [email protected] July 31, 2008 Press Release – Second Quarter Results 2008
August 6, 2008 Publication – Second Quarter Results 2008 (Half-yearly Report)
October 30, 2008 Press Release – Third Quarter Results 2008
November 4, 2008 Publication – Third Quarter Results 2008
November 10, 2008 Analysts' conference at the German Equity Forum in Frankfurt/Main
Agenturkontakt: HBI PR&MarCom GmbH Alexandra Osmani, Alexandra Janetzko Tel.: +49 (0)89 99 38 87-0 Fax: +49 (0)89 930 24 45 E-Mail: [email protected]; [email protected]
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