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Realtech AG

Quarterly Report May 7, 2008

347_10-q_2008-05-07_cc02b8aa-be87-45ed-a075-99d18aa847ad.pdf

Quarterly Report

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8 1st Quarter of 2008 at a Glance

Q1 2008 Q1 2007
Revenues and income TEUR $\Delta$ % TEUR
Revenues 16.493 16 14.184
Revenues consulting 13.121 15 11.385
Revenues software 3.372 20 2.799
Revenues Germany 7.295 19 6.117
Revenues foreign countries 9.198 14 8.067
Earnings before interest, taxes, depreciation and amortization (EBITDA) 1.296 27 1.017
Earnings before interest and taxes (EBIT) 1.093 42 771
Earnings before taxes (EBT) 1.161 22 953
Net income 606 91 318
Earnings per share (in EUR) O, 12 100 0,06
Investments and depreciation
Investments in intangible and tangible assets 124 (2) 127
Depreciation 203 (17) 246
Key figures
Gross margin (in %) 38,3 (2) 39,1
EBITDA margin (in %) 7,9 10 7,2
EBIT margin (in %) 6,6 22 5,4
Cash flow from operating activities 1.565 4 1 1.108
Cash flow from investing activities (2.915) 38 (4.726)
Cash flow from financing activities 66 500 11
Assets, shareholders' equity and liabilities (end of quarter)
Total assets 65.886 $\overline{3}$ 63.789
Non-current assets 14.258 $\mathbf{I}$ 14.141
Current assests 51.628 $\overline{4}$ 49.648
Net cash and cash equivalents 29.563 $\overline{2}$ 28.970
Shareholders' equity 47.875 $\overline{4}$ 46.225
Equity ratio (in %) 72,7 $\circ$ 72,5
Noncurrent liabilities $\circ$ $\circ$
Current liabilities 17.661 $\overline{3}$ 17.106
Employees (end of quarter) 671 15 584
  • Croup revenue up 16 percent to EUR 16.5 million
  • Consulting revenue up 15 percent
  • Software business increased by 20 percent
  • EBIT up 42 percent
  • O Increase in net cash and cash equivalents and cash flow

Dear shareholders and business partners.

: Nicola Glowinski Chief Executive Officer

: Dr. Rudolf Caspary Chief Technology Officer

The fiscal year 2007 proved to be something of a record year for REALTECH in many respects. We not only met our targets for the year, we even exceeded them in some areas. We were especially satisfied with the company's improved profitability. At the same time, the company's performance also lays the foundations for the new fiscal year 2008. We have set ourselves very exacting goals and ambitious challenges. It is all the more satisfying then to be able to report that the company's performance in the first quarter of the current year directly picked up on and sustained the successful figures for last year. The details are as follows:

Business development

Revenues rose by 16 percent in the first three months of 2008 compared with the same period in the previous year, from EUR 14,184 thousand to EUR 16,493 thousand. Both segments contributed to this increase, with revenue in the consulting segment increasing by 15 percent from EUR 11,385 thousand to EUR 13,121 thousand. Revenues in the software solutions segment increased by 20 percent from EUR 2,799 thousand to EUR 3,372. The contribution made by this segment towards total revenue increased slightly to 21 percent (previous year: 20 percent).

In Germany, revenues in the first three months of this year increased by 19 percent from EUR 6,117 thousand to EUR 7,295 thousand. The share of Group revenue generated in Germany increased to 44 percent (previous year: 43 percent); 56 percent of Group revenue in Q1/2008 (compared with 57 percent last year) continued to be earned abroad. The biggest contribution was again made by the European region where revenue increased by 9 percent from EUR 6,127 thousand to EUR 6,675 thousand. At the same time, this figure as a share of total revenue fell from 43 percent to 41 percent. Revenues increased by 20 percent in the US region from EUR 724 thousand to EUR 869 thousand, although this region's share of Group revenue remained unchanged at 5 percent. Revenue continued to develop as positively as ever in the Asia-Pacific region, where revenues were up by 36 percent from EUR 1,216 thousand to EUR 1,654 thousand. Asia-Pacific therefore contributed 10 percent (previous year: 9 percent) to Group revenue.

The current order book confirms all our planning assumptions and should help us achieve our forecast financial performance.

$\triangle$ Earnings

Costs of revenues rose 18 percent from EUR 8,368 thousand to EUR 10,177 thousand. This increase was due to the recruitment of more consultants than last year as part of a planned investment in the future. As these costs increased more strongly than revenue, this percentage increased as a proportion of revenue from 61 percent to 62 percent.

This development resulted in 14 percent growth in gross profit in the first quarter of 2008 compared to the same quarter in 2007 from EUR 5,545 thousand to EUR 6.316 thousand. Based on revenue, this value fell slightly from 39 percent to 38 percent. This development was due to the increase in gross profit in the consulting segment in absolute terms from EUR 3.168 thousand to EUR 3,579 thousand and a reduction in the gross profit margin from 28 percent to 27 percent. Gross profit in the software segment increased from EUR 2,378 thousand to EUR 2,737 thousand. The value of this figure as a percentage of revenue dropped from 85 percent to 81 percent. Consulting therefore accounted for 57 percent and software 43 percent of gross profit.

Revenues by regions (millions EUR)

Ongoing measures to boost revenue gave rise to an increase in selling and marketing expenses, which rose 21 percent from EUR 1.940 thousand in the first quarter of last year to EUR 2,350 thousand in the first quarter of this year. The proportion of revenue continued to amount to 14 percent.

General and administrative expenses were more or less unchanged during the first three months of 2008 and amounted to EUR 1,819 thousand compared with EUR 1,809 thousand in the first quarter of 2007. Relative to revenue, these expenses fell from 13 percent to 11 percent.

Research and development costs increased by 8 percent from EUR 1,070 thousand to EUR 1,156 thousand as a result of new product developments and development activities in the USA. The figure as a percentage of revenue fell from 8 percent to 7 percent.

These developments led to a substantial improvement in operating income. EBITDA rose by 27 percent to EUR 1,296 thousand in the first quarter of the fiscal year (compared to EUR 1.017 thousand in the same period in the previous year) and EBIT increased by 42 percent to EUR 1,093 thousand (compared to EUR 771 thousand in the same period in the previous year).

Net interest of EUR 103 thousand remained unchanged from the figures for the same 3-month period in the previous year. Income from financial assets and securities included income from the sale of securities and fell from EUR 78 thousand in Q1/2007 to EUR 1 thousand.

Net income and earnings per share almost doubled compared to the same quarterly period in the previous year to EUR 606 thousand (previous year: EUR 318 thousand) and EUR 0.12 (previous year: EUR 0.06) respectively.

Financial situation

Cash flow from operating activities in the first three months of the fiscal year 2008 was EUR 1,565 thousand - substantially higher than the EUR 1,108 thousand reported for Q1/2007 reflecting both an improvement in net income and - above all - a reduction in trade receivables on the same key date last year.

Konzernumsatz um 18 Prozent gesteigert +++ Software- Erlöse mit 23 Proze Wachstum +++ Consulting-Geschäft um 17 Prozent ausgebaut +++ Operatives Ergebr
Alternatives Stych and Consultation of the Maria Handales Stych und Konzernergebnis erneut erheblich verbessert *** Netto-Liquidität erhi

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Cash flow from investing activities in the first three months of 2008 amounted to minus EUR 2,915 thousand compared with EUR 4,726 thousand the year before. This change was essentially the result of the slower increase in the number of securities compared with the previous year. Investments in tangible and intangible assets amounted to EUR 124 thousand (previous year: EUR 127 thousand). This particularly involved procuring replacements.

Assets

Total assets increased by 3 percent compared with December 31, 2007 to EUR 65,886 thousand on March 31, 2008 due to an increase in cash and cash equivalents and an increase in other receivables and assets.

Trade receivables on the reporting date amounted to EUR 20,398 thousand, compared to EUR 21,159 thousand on December 31, 2007, and thus represented 31 percent of total assets. This decrease of 4 percent can particularly be attributed to consistent improvements in the Group's receivables management.

On the key date of March 31, 2008 the REALTECH Group held net cash and cash equivalents of EUR 29,563 thousand compared with EUR 28,066 thousand on December 31, 2007 and EUR 28.970 thousand on March 31, 2007. This increase can essentially be attributed to the company's improved profitability and a reduction in its trade receivables. Net cash and cash equivalents represented 45 percent of assets.

Provisions were reduced in comparison to December 31, 2007 from EUR 8,561 thousand to EUR 5,855 thousand, primarily due to the utilization of bonus provisions at the end of the year, as well as provisions for outstanding incoming invoices.

Shareholders' equity, which stood at EUR 47,875 thousand on March 31, 2008, was on a par with the figure on December 31, 2007 (EUR 47,202 thousand). The company's equity ratio on both key dates was 72.7 percent.

$\sum$ Employees

On the key date of March 31, 2008, the REALTECH Group employed 671 people, which is 15 percent more than at the end of the first quarter of 2007 (584). In Germany, the head count increased by 12 percent, from 221 to 247 employees. As a result, the percentage of REALTECH employees working in Germany fell from 38 percent to 37 percent.

The number of employees working in REALTECH companies in other countries increased in the same period by 17 percent from 363 to 424. Almost all regions contributed towards this development, with an increase of 16 percent from 300 to 348

employees in the European region excluding Germany and an increase of 29 percent in the Asia-Pacific region from 47 to 60; the number of employees in the US remained the same at 16.

The company consistently pursued it corporate objectives and by the key date of March 31 the number of consultants had increased by 16 percent from 396 to 458 while expansion in the company's sales operations were also reflected in a 42 percent increase in employees from 69 to 90. The number of people working in development decreased by 16 percent from 57 to 48 employees while the administration headcount increased by 8 percent from 62 to 67.

Outlook

At the outset of the fiscal year 2008 REALTECH was able to sustain the performance reported in 2007: the most successful fiscal year vet reported in the history of REALTECH AG. Its quarter-on-quarter figures show an increase in reported revenue of 16 percent and in operating results (EBIT) of 42 percent.

REALTECH has successfully transformed itself from a pure technology consultancy firm for SAP systems into a consulting specialist for business processes and projects of strategic importance. The company has already been distinguishing itself for several years through its competent consulting services for business processes in connection with SAP applications. On top of this, REALTECH also continues to support its customers in optimizing, consolidating and operating complex IT infrastructures. In expanding its consulting portfolio to also cover operational processes, the company has tapped another promising market - and REALTECH has plans to position itself even more firmly as a supplier of business process integration in the future.

In the consulting business, REALTECH strives to focus on future-oriented topics and thus achieve profitable growth in all three segments: in SAP technology consulting, in the preparation for SAP NetWeaver and in solutions for business processes using SAP NetWeaver/ESOA. In particular, the company intends to maintain the consistent focus it adopted in 2005 on higher-volume projects that require intensive consulting services. In this context, REALTECH intends to concentrate in particular on further strengthening the business process integration segment, as well as on broadly marketing SAP NetWeaver competence by training new employees.

In the software business, REALTECH will continue to concentrate on its two product lines: its the Guard! software family and applications especially tailored for use with SAP. The company's activities in 2008 will again revolve around current technological developments, alongside plans to continue developing solutions in both product lines, making them even more user-friendly,

and enhancing them by adding new service features and functions. In this way, REALTECH products will help make the company's customers more competitive while at the same time covering future market requirements. REALTECH plans envisage the software business area making a significantly increased, positive contribution towards the company's net income again in 2008.

Once again in 2008, the REALTECH Group perceives the main focus of its activities to be in Europe, with the core markets of Germany, Italy and Spain offering the greatest potential for growth. For example, the company maintained its leading position in SAP technology consulting in Spain in 2007, and aims to further build on this excellent position in 2008. Business also progressed as planned in 2007 in the USA and the Asia-Pacific region, with the result that REALTECH also anticipates stable growth rates there in 2008.

For fiscal year 2008, REALTECH has set itself ambitious, but achievable goals. The Executive Board aspires to achieve revenue growth of 14 percent for the corporate group, and hopes to see income from operations (EBIT) rise by 11 percent. These positive expectations are based on the clearly defined range of services that the company has offered since restructuring. REALTECH intends to build on these foundations in order to continue to achieve profitable growth with high margins – which should also be reflected in the future distribution of dividends to shareholders. The first step has already been taken as the figures for the first quarter of 2008 amply demonstrate.

Responsibility statement:

"To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the net assets, financial position and earnings of the Group, and the interim management report of the Group 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 financial year."

Warm regards,

Your Executive Board REALTECH AG

$\bullet$ Note

REALTECH AG has prepared its (nonaudited) quarterly financial statements in accordance with the accounting standards of the International Accounting Standards Board (IASB), i.e. the International Financial Reporting Standards (IFRS) as applicable in the EU. The IAS, IFRS, and corresponding interpretations of the International Financial Reporting Interpretations Committee (IFRIC) applicable as of March 31, 2008 have been taken into account. The figures for the previous vear were also determined based on the same standards.

The consolidation and valuation methods used to prepare the quarterly financial statements and to establish the comparative figures for the previous year were basically the same as those used in the consolidated financial statement as of December 31. 2007. A detailed description of the individual methods is published in the notes of the 2007 annual report.

No matters of particular significance that may affect the company's income or circumstances that have affected business development are known other than those listed here

: Highlights

With its the Guard! Application Manager 4.0 REALTECH guarantees implementation in just five days. This means that the product meets

the core requirements for faultless SAP operation in an extremely short time. The implementation guarantee covers SAP installations with up to 100 different SAP systems.

With the new version of its proven monitoring solution for SAP NetWeaver REALTECH has launched a product which has been improved in a number of different ways: the new version now enables SAP basis administrators to manage powerful monitoring functions centrally. The solution extends the functions of the SAP CCMS standards (Computer Center Management System) and the SAP Solution Manager. Installation, maintenance and the individual configuration of the REALTECH data collectors can now be performed for entire SAP systems in the shortest of times from a single central interface.

The new version also includes pre-designed monitoring packages which contain all the settings and parameters required for the reliable monitoring of complete systems, from operating systems through to databases and ABAP and Java-based applications. These packages can be easily distributed across the IT environment per "drag & drop" to enable performance analyses to be carried out and SAP service levels verified in large and complex environments quickly and simply.

REALTECH shows what it can do at CeBIT 2008

REALTECH's trade show concept this year revolved entirely around positioning its own portfolio together with partners. REALTECH was able to present itself as a partner at a total of three stands at the CeBIT.

Visitors to the Microsoft stand had the chance to find out about our integration solution, theGuard! ApplicationManager, which allows SAP monitoring data to be displayed in the Microsoft System Center Operations Manager 2007. REALTECH is the first provider to make this possible.

Novell presented REALTECH as its preferred partner for Linux migrations in the SAP environment. Common topics here included the latest trends with regard to virtualization and high availability in the SAP environment, as well as solutions with the BI Accelerator.

The REALTECH presence on the stand of Pandacom focused particularly on the topics of IT service management and business process management. Customers were able to find out how new functions in theGuard! Service Management Center can be used to effectively monitor business-critical processes.

The trade show was a success for all areas. Both customers and the specialist press responded in a highly positive manner to the services presented.

REALTECH implements online childcare information service in Wolfsburg

The City of Wolfsburg's online childcare search service provides the city's citizens with an all-round picture of the childcare services available in Wolfsburg. An important contribution to the evolution of a child and family-friendly city as part of the local "Enjoy Being a Family" campaign.

REALTECH assumed overall responsibility for the related IT project. REALTECH came up with the detailed specifications and the

design for a solution based on the product brief stipulated by the City of

Wolfsburg. The solution was then implemented and successfully launched in collaboration with City of Wolfsburg employees. One particularly tricky challenge in this project was complying with the mandatory web accessibility criteria for the state institutions involved.

Standardized forms are now used to present all the crèches available and to enable users to make a realistic comparison of all the services on offer. The City of Wolfsburg is one of a very few local authorities in Germany to create a portal of this kind which enables citizens to see exactly where places are available on a day to day basis.

: Shares

Free float: 34,38% AvW Invest Aktiengesellschaft: 15,01% Nobel Compagnie Financière: 4,95% Rainer Schmidt: 14,59% Peter Stier: 14,20% Daniele Di Croce: 16,87%

Shareholder structure as of 31.03.08

Share performance and market capitalization

Prime Software

$\blacksquare$ TecDax

REALTECH shares began the current year at a price of EUR 11.72 only to fall over a period of three weeks bottoming out at the quarterly low of EUR 9.48 on January 23. The share price subsequently rose consistently reaching its high for the first quarter of 2008 on February 22 a week after REAL-TECH reported its provisional figures for its 2007 financial statements.

During the second half of the quarter the price of REALTECH shares fluctuated between EUR 11.33 and EUR 12.75 closing the quarter at EUR 12.10 (12 percent higher on March 31, 2008 than on the same key date a year previously) at a market capitalization of EUR 64 million or 133 percent of book equity. Significantly, after January 23, 2008, the share price was consistently above the TecDax and Prime Software comparative indices.

Shareholder structure and volume of trade in REALTECH shares

The REALTECH AG shareholder structure changed in the first quarter of 2008 compared with the end of the year 2007 in that Nobel Compagnie Financière reduced its holding to 4.95%. The company's free float increased to 34.38 percent on 31 March 2008.

On average, around 8,640 REALTECH shares were traded every day during Q1/2008 - 36 percent less than during the same quarter in the previous year (13,588). 72 percent of the shares were traded in Xetra (previous year: 71 percent), while 28 percent were traded on other stock exchanges (previous year: 29 percent).

Basics
Market segment
Date of issue
Prime Standard
Security identification no.
26. April 1999
Exchange ID
700 890
Issue price
RTC
Key figures
54,00 EUR
Q1 2008 Q1 2007
Earnings per share
EUR
ash flow per share
EUR
0,12
0,06
Shares and share options held by the issuer and the
company's executive bodies as of March 31, 2008.
Issuer
REALTECH AG
Executive board
- shares
Dr. Rudolf Caspary
29.000 shares, 49.000 stock options
Nicola Glowinski
hareholders' equity per share
0,30
ghest share price
0,21
9,12
west share price
8,94
12,75
11,53
re price at the end of quarter 12,10
ket capitalization at
8,95
nd of quarter
10,80
ber of shares at
64 Mio.
56 Mio.
nd of quarter
5.248.452 5.173.452
37.000 shares, 88.000 stock options
Supervisory board
Daniele Di Croce
Rainer Schmidt
885.500 shares
Peter Stier
765.500 shares
745.500 shares

$S_{\overline{M}}$
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$\overline{M}
{\overline{M}}$
$\overline{M}{\overline{M}}$
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: Consolidated Statements of Income

Q1 2008 Q1 2007
EUR EUR
Revenues 16.492.747 14.183.599
Costs of revenues 10.176.644 8.638.250
Gross profit 6.316.103 5.545.349
Selling and marketing expenses 2.349.007 1.940.293
General and administrative expenses 1.818.795 1.808.584
Research and development expenses 1.156.380 1.069.866
Other operating expenses 456.028 462.737
Other operating income 556.584 507.588
Operating income 1.092.478 771.457
Net interest 103.992 103.935
Income from financial assets and securities 78.305
Foreign currency exchange gains / losses (35.701) (595)
Income before taxes (and minority interests) 1.160.770 953.102
Income taxes 540.445 651.193
Income before minority interests 620.325 301.909
Minority interests (14.050) 16.264
Net income 606.275 318.173
Accumulated profit/loss carried forward 7.276.847 5.336.833
Retained earnings 7.883.122 5.655.006
Earnings per share - basic O, 12 0,06
Earnings per share - diluted O, 11 0,06
Average number of shares outstanding - basic 5.248.452 5.173.452
Average number of shares outstanding - diluted 5.549.452 5.632.452

Segment Reporting

Q1 2008 Q1 2007
EUR EUR
Consulting
Revenues 13.121.191 11.384.516
Costs of revenues 9.542.189 8.216.760
Gross profit 3.579.002 3.167.756
Software
Revenues 3.371.557 2.799.083
Costs of revenues 634.455 421.490
Gross profit 2.737.102 2.377.593

: Consolidated Statements of Cash Flows

Q1 2008 Q1 2007
EUR EUR
Net income 606.275 318.173
Depreciation of fixed assets 203.146 245.989
Change in income tax payable 137.496 476.785
Payments for income taxes (204.648) (126.488)
Change in accrued expenses (2.706.970) (1.117.517)
Change in trade accounts receivable 760.961 (1.710.766)
Change in other assets (283.060) (330.273)
Change in trade accounts payable and in other current liabilities 3.051.814 3.351.761
Cash flow from operating activities 1.565.013 1.107.664
Asset disposals (10.728) (22.763)
Purchase of intangible assets (23.832) (7.873)
Purchase of tangible assets (100.407) (119.505)
Investment in financial assets 829 3.430
Change in current securities (2.884.712) (4.683.180)
Proceeds from interests 103.448 106.235
Payments for interests 544 (2.300)
Cash flow from investing activities (2.914.858) (4.725.956)
Other change in shareholders' equity and in minority interests 65.863 11.216
Cash flow from financing activities 65.863 11.216
Change in cash and cash equivalents (1.283.982) (3.607.075)
Cash and cash equivalents at the beginning of the period 9.885.536 12.972.973
Cash and cash equivalents at the end of the period 8.601.554 9.365.898

: Consolidated Statements of Changes in Shareholders' Equity

$Q1$ 2008 Q1 2007
EUR EUR
Shareholders' equity as of January 1 47.202.610 45.895.870
Net income 606.275 318.173
Unrealized profit / loss from securities translations 63.265 (25.573)
Translation adjustments (31.285) 54.184
Minority interests 33.884 (17.395)
Shareholders' equity as of March 31 47.874.749 46.225.259
ASSETS 31.03.2008
EUR
31.12.2007
EUR
Non-current assets
Intangible assets
Concessions, industrial rights and similar rights and assets 298.907 297.716
Goodwill 4.335.679 4.335.679
4.634.586 4.633.395
Tangible assets
Property, plant and equipment 7.690.903 7.772.756
Technical equipment and machines 43.450 44.911
Other equipment and office equipment 1.717.864 1.709.024
9.452.217 9.526.691
Financial assets
Securities 37.168 32.872
Other loans 52.175 52.199
89.343 85.071
Deferred tax assets 82.050 304.141
14.258.196 14.549.298
Current assets
Receivables and other assets
Trade receivables 20.398.248 21.159.209
Tax assets 226.541 211.759
Other assets 1.440.733 950.362
22.065.522 22.321.331
Securities 20.961.030 18.180.309
Cash ans cash equivalents 8.601.554 9.885.536
51.628.106 50.387.176
Total assets 65.886.302 64.936.474
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Subscribed capital 5.248.452 5.248.452
Additional paid-in capital 34.200.867 34.200.867
Revaluation surplus 231.780 168.515
Cumulative translation differences (167.249) (135.964)
Retained earnings 7.883.122 7.276.847
47.396.972 46.758.717
Minority interests 477-777 443.893
47.874.749 47.202.610
Current liabilities
Trade accounts payable 2.228.346 2.186.072
Income tax payable 1.347.930 1.415.082
Provisions 5.854.803 8.561.773
Other liabilities 3.239.320 3.553.972
Deferred income 4.990.217 1.498.706
17.660.616 17.215.605
Deferred tax liabilities 350.937 518.259
Total shareholders' equity and liabilities 65.886.302 64.936.474

: Consolidated Balance Sheets

: Financial Calendar 2008 2009

c May 29, 2008 Annual General Meeting, Palatin, Wiesloch, 10.00 a.m.
c August 7, 2008 Quarterly Report 2 2008
c November 6, 2008 Quarterly Report 3 2008
С November 10-12, 2008 Deutsches Eigenkapitalforum, Frankfurt
March 26, 2009
c
Annual Report 2008
May 7, 2009 Quarterly Report 1 2009
August 6, 2009 Quarterly Report 2 2009
November 5, 2009 Quarterly Report 3 2009
.
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Investor Relations .
Volker Hensel Industriestraße 39c Tel.: +49.6227.837.500 [email protected] $\bullet$
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