Quarterly Report • Nov 5, 2009
Quarterly Report
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| I. | REPORT ON THE FIRST NINE MONTHS/THIRD QUARTER OF 2009 | 3 |
|---|---|---|
| II. | INTERIM MANAGEMENT REPORT | 8 |
| 1. Foreword | 8 | |
| 2. Report on the Financial Performance, Assets and Financial Position | 9 | |
| 3. Outlook | 17 | |
| 4. Opportunities and Risk Report | 17 | |
| 5. Report on Material Transactions with related Parties | 18 | |
| III. | CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT | |
| SEPTEMBER 30, 2009 (UNAUDITED) | 19 | |
| 1. Consolidated Statement of Income | 19 | |
| 2. Consolidated Statement of Financial Position | 21 | |
| 3. Consolidated Statement of Cash Flows | 22 | |
| 4. Consolidated Statement of Changes in Shareholders' Equity | 23 | |
| 5. Notes to the Consolidated Interim Financial Statements | 24 | |
| IV. | DISCLOSURE OF DIRECTORS' HOLDINGS OF | |
| BETA SYSTEMS SOFTWARE AG | 38 | |
V. CONTACT 39
At the end of the first nine months of 2009, the business segments of Beta Systems Software AG (BSS, ISIN DE0005224406) had been impacted to a greatly varying extent by the global financial crisis: For instance, Beta Systems achieved gratifying growth in revenues and profits in its infrastructure business (Data Center Infrastructure (DCI) and Identity Management (IdM) lines of business (LoB)). By contrast, however, the ECM solutions business for banks and insurance companies (Enterprise Content Management (ECM) LoB) suffered a significant decline in revenues and profit due to the persistently low level of new orders caused by investment decisions either being postponed or not made at all by a number of major customers. The sum total of these counter effects caused consolidated revenues at Group level to fall to € 59.5 million at the end of the nine-month period (Q1-Q3/2008: € 62.1 million) and consolidated earnings before interest and tax (EBIT) to € -0.8 million (Q1-Q3/2008: € 0.8 million). Active cost management at Group level cushioned the associated effect on profit, bringing the result (after tax) for the nine-month period to € -0.8 million and earnings per share to € -0.06 (Q1-Q3/2008: € 0.7 million and € 0.06 per share). Despite the decline in revenues, the result of the third quarter 2009 was only marginally below breakeven (Q3/2008: € 0.4 million and € 0.03 per share).
Against this background, a package of measures was agreed the focus of which is the realigning of the solutions business, along with short-term cost savings. To achieve the greatest scope for the selection of suitable options, the plan is to hive off the ECM LoB in organizational terms and under company law and set operations up as an independent subsidiary.
With these developments in mind, the Management Board has adjusted its outlook. The Company's management no longer assumes that raising revenues and profits at Group level in 2009 as against the previous year will be possible. Management still anticipates, however, that, at Group level, the customarily strong year-end business will make it possible to achieve positive annual result in fiscal 2009.
The successfully integrated acquisitions and additions to the portfolio (DETEC, SI and Proginet) in the last two fiscal years have had a sustained and positive impact in the infrastructure business (DCI/IdM). Revenues in the IdM segment, for instance, rose by € 2.4 million, the equivalent of 40.2%, from € 5.9 to € 8.2 million in the first nine months of 2009 and, in the third quarter of 2009 alone, posted € 3.0 million (+96.3%), thus almost doubling (Q3/2008: € 1.5 million). The DCI segment raised its revenues by € 3.3 million, which is 12.9%, advancing from € 25.4 million to € 28.7 million over the nine-month period. At the end of the first nine months of 2009 both segments had raised their contribution to profit again despite integration costs and a generally higher cost basis (IdM: € 0.8 million (Q1-Q3/2008: € -0.5 million); DCI: € 11.9 million (Q1-Q3/2008: € 11.6 million)).
By contrast, the global financial crisis, which had its roots in the banking sector, had a severe impact on the ECM solution business. The downturn in demand – already evident in the first half of 2009, combined with a lower level of new orders and a series of major orders either postponed or not awarded by companies in the banking and insurance industries – did not see any basic improvement in the third quarter despite isolated sales successes. Revenues had therefore declined from accumulated € 30.9 million to € 22.7 million by the end of the ninemonth period 2009. Although the contribution of € 1.4 million was still positive, it has nonetheless fallen by € 4.2 million, down from € 5.6 million.
"The results of the first nine months of 2009 must naturally be seen in the context of the global financial crisis. This crisis has left its mark, both in a positive and in a negative sense, on our software and solutions business", explained Gernot Sagl, Member of the Management Board of Beta Systems Software AG, and added: "The strong performance in the infrastructure business in particular is compelling proof that our major customers are saving through IT, and not on IT, by using our infrastructure products. The situation in the extremely volatile ECM solutions business has, however, been further exacerbated as there have been time delays with major projects, compounded by fierce price competition right through to complete project stops. We have responded to this development and laid the keystone for a fundamental realignment in the coming fiscal year with our plans for founding the new company from hived off operations. In a peer group comparison we are better positioned and more stable than many other mid-sized software companies."
The price of the Beta share started off at € 2.19 on January 2, 2009, posted € 2.00 on March 31, 2009, had climbed to € 3.22 by June 30, 2009, and closed at € 2.76 on September 30, 2009 (opening and closing price on Xetra). In the first three months of 2009, neither information by the Company nor analyses nor the release of the very positive 2008 financial data were able to boost the share price performance. Moreover, the trading volume was low. By contrast, the good figures released for the first quarter of 2009 and positive press reports lifted the share price in April and May. The trading volume also rose again in the second quarter of 2009. Against the backdrop of steady trading, the share price climbed initially in July only to fall again when the announcement was made that the Chief Executive Officer was to be relieved of his duties. Up until the end of September the share price was affected by an increased propensity to sell.
The Supervisory Board of Beta Systems Software AG made the decision to relieve Mr. Kamyar Niroumand of his duties as Chief Executive Officer of the Company in its meeting on July 18, 2009. This decision was made known by the Company in an ad hoc release on July 18, 2009.
The Supervisory Board immediately took up the search for a successor. Until the conclusion of this process, Board member Gernot Sagl will temporarily assume the duties of Kamyar Niroumand.
With effect from January 1, 2009, Beta Systems Software AG assumed economic control over DETEC Decision Technology Software GmbH and DSP DETEC Software Products GmbH, both companies based in Ruesselheim, and included these companies in the group of consolidated companies as from 2009.
The Management Board and Supervisory Board of Beta Systems as well as shareholders and the management of the DETEC companies agreed the key points of the intended acquisition in December 2008 and signed a purchase agreement. Both DETEC companies will be managed as independent entities.
The DETEC portfolio comprises products which produce optically high-quality and aesthetic documents through the formatting of output data in the Output Management business. The products and the employees involved in their development, sale and distribution and service are to be managed as an independent product line and unit and assigned to be DCI/IdM Division.
The Shareholders' Compensation Claim court case, lodged with the District Court of Munich I, concerning additional cash payment in connection with the business combination of Kleindienst Datentechnik AG with Beta Systems Software AG, was terminated by way of settlement upon the service of the record of court proceedings on April 1, 2009. The settlement was published on April 17, 2009, in the German Electronic Federal Gazette as well as in the Börsen-Zeitung (German financial newspaper). The draft of this settlement was approved by the required majority at the Annual General Meeting of Shareholders of Beta Systems held on May 23, 2007.
Payment, including incidental costs, therefore comes to T€ 509 in total and has no effect on net income but is to be recognized as goodwill (subsequent acquisition costs).
The Management Board and the Supervisory Board were discharged with regard to the fiscal year 2008 at the Annual General Meeting of the Shareholders of Beta Systems Software AG, which took place on May 15, 2009, in Berlin. KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, was mandated as independent auditor for the fiscal year 2009. Moreover, the Management Board was authorized to acquire and dispose of the Company's own shares, and the Articles of Association were changed with respect to possible pending changes in legislation. Approval was also given to the Control and Profit Transfer Agreement with SI Software Innovation GmbH. The application by the Administration for resolution concerning the creation of new Authorized Capital 2009 did not meet with the requisite majority in the Annual General Meeting of Shareholders.
According to Lünendonk, Beta Systems Software AG came fifth again in 2008 in the league table of leading mid-sized German standard software companies. The ranking lists the top 10 companies which are measured in terms of revenue and which have their headquarters in Germany, generate more than 60% of their revenues through standard software production, sales and maintenance and whose total revenues are below € 500 million respectively. In fiscal 2008, Beta Systems generated total revenues of € 90.4 million (2007: € 88.6 million), thus again taking fifth place in the ranking.
Beta Systems Software AG and isonet ag, a company based in Zurich, Switzerland, have agreed a strategic partnership. This measure has enabled Beta Systems to extend the integration of business processes into the IT infrastructure as part of its 4Agility strategy. The leading WorkflowXPert.NET technology is being used for the first time for security-relevant business processes in the area of identity management covered by the SAM Jupiter product suite.
The web-based Workflow Management System (WFMS) is modular and scalable and therefore optimally suited for use in companies of different sizes in different industries. A Workflow Designer allows role- and rule-based business processes to be simply and cost effectively visualized, created, monitored and adjusted in a service-oriented manner on a plug-in basis.
Beta Systems Software AG has drawn up this Interim Management Report as at September 30, 2009, in accordance with the legal requirements. The reporting period covers the first nine months of 2009. The Interim Management Report is to be read in conjunction with the Interim Financial Statements as at September 30, 2009.
All forward-looking statements relate to the period up until December 31, 2009. 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, 2008, 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, 2008.
The following information relates to the consolidated results of the Beta Systems Group. The Segment Report 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, 2009, and the Interim Management Report as at September 30, 2009, were neither audited by the external auditor nor were they subjected to a review by the external auditor.
As a supplier of complex IT corporate 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.
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. The persistently difficult economic situation nonetheless presents opportunities for the products and solutions of Beta Systems. On the customer side, for instance, it is accelerating the process of consolidation in the financial services sector and, at the same time, exerting pressure on companies in this sector to reduce costs. For this reason and for reason of the new pan-European laws and directives with more stringent compliance requirements, our customer companies must continue to optimize their IT processes and make them more secure. This is where they can draw on the support of the software solutions from the Beta Systems portfolio. Alongside new products, the product range comprises tried-and-tested standard products acquired in the context of acquisitions or technology transfer.
In the first nine months of 2009, the companies of the Beta Systems Group signed a series of contracts worldwide with renowned customers in all of its three business segments, among others contracts with 3 Banken EDV (IT service provider, Austria), SEB IT Service (Skandinavskia Enskilda Banken) (financial services provider, Sweden), GAD eG (IT service provider, Germany), IVV Informationsverarbeitung für Versicherungen GmbH (IT service provider, Germany), Bausparkasse Schwäbisch Hall AG (financial services provider, Germany), Highmark (health insurance company, USA), AXA Technology Services Germany GmbH (IT service provider, Germany), DnB NOR (Den norske Bank) (financial services provider, Norway) and STX Finland Oy (shipbuilding, Finland).
At the end of the first nine months of 2009, total revenues declined from € 62.1 million to € 59.5 million owing to weak demand and low order intake from banks and insurance companies (ECM LoB). In the third quarter, it contracted to € 18.7 million (Q3/2008: € 19.6 million).
In the third quarter of 2009, revenues from software licenses rose from € 4.4 million to € 5.4 million as against the previous year's figure. At the close of the first nine months of 2009, they remained at the year-earlier level of € 17.2 million (Q1-Q3/2008: € 17.2 million). This development is attributable to the reticent propensity to invest, above all in the ECM new systems business (licenses, services, hardware), caused by the global financial crisis.
The hardware business with scanners fell to € 0.6 million (Q3/2008: € 1.8 million) in the third quarter of 2009 and stood at € 2.6 million (Q1-Q3/2008: € 5.0 million) at the end of the first nine months of 2009. The higher revenues achieved in the previous year's period resulted from the execution of a number of larger-volume new system contracts signed in the previous year's quarter which were not repeated.
Maintenance revenues, which continue to be a stable mainstay of the business model, strengthened by recent acquisitions, remained virtually unchanged at € 10.1 million in the third quarter of 2009 (Q3/2008: € 10.2 million) and recorded an increase to € 30.6 million (Q1- Q3/2008: € 29.9 million) at the end of the nine-month period.
Revenues generated from services declined marginally to € 2.6 million in the third quarter (Q3/2008: € 3.1 million) and posted € 9.1 million (Q1-Q3/2008: € 10.0 million) at the end of the first nine months of 2009.
The cost of revenues decreased from € 9.9 million to € 8.5 million in the third quarter of 2009 and from € 29.1 million to € 28.4 million at the end of the first nine months of 2009 in a year-onyear comparison. The reason for this trend was the downturn in the low-margin, but costintensive, hardware revenues.
In the third quarter of 2009, gross profit climbed to € 10.2 million (Q3/2008: € 9.7 million) but, by the end of the first nine months of 2009, had fallen to € 31.1 million (Q1-Q3/2008: € 33.0 million).
Operating expenses advanced to € 10.1 million in the third-quarter of 2009, driven primarily by higher research and development costs (Q3/2008: € 9.5 million). At the end of the first nine months of 2009, however, they had declined to € 31.9 million on the back of lower selling expenses (Q1-Q3/2008: € 32.2 million).
Selling expenses had decreased by 11.6% to € 5.4 million by the end of the third quarter (Q3/2008: € 6.1 million) and by 9.4% to € 15.6 million by the end of the first nine months of 2009 in a year-on-year comparison (Q1-Q3/2008: € 17.2 million). This development is mainly due to the reduction of the ECM LoB's external selling costs.
General administrative costs declined to € 1.2 million in the third quarter of 2009 (Q3/2008: € 1.4 million) but, at the end of the first nine months 2009, had risen to € 5.6 million (Q1- Q3/2008: € 5.4 million) owing to the higher costs incurred by the purchase of the DETEC Group.
Research and development expenses advanced to € 3.4 million in the third quarter (Q3/2008: € 2.9 million) due to the higher costs incurred by the purchase of the DETEC Group. At the end of the first nine months of 2009, however, they remained virtually unchanged at the year-earlier level of € 10.7 million (Q1-Q3/2008: € 10.5 million).
Measured against revenues, operating expenses had risen to 53.7% by the end of the third quarter of 2009 (Q3/2008: 48.2%) and to 53.6% by the end of the first nine months of 2009 (Q1- Q3/2008: 51.9%).
EBIT, defined as the operating results including Sundry income and Other expenses, stood at € 0.1 million in the third quarter of 2009 (Q3/2008: € 0.2 million) and at € -0.8 million at the end of the first nine months of 2009 (Q1-Q3/2008: € 0.8 million).
EBITDA, which is EBIT plus depreciation and amortization, came to € 1.9 million in the first nine months of 2009 (Q1-Q3/2008: € 3.7 million).
At the end of the nine-month period, the finance result had declined to € -0.2 million, down from € 0.3 million posted in the previous year's period.
The result before income taxes declined to € -1.1 million in the first nine months of 2009 (Q1-Q3/2008: € 1.1 million).
Given a tax rate of 30.0%, income taxes came to € 0.3 million at the end of the nine-month period (Q1-Q3/2008: € -0.3 million).
Accordingly, the result after income taxes for the first nine months of 2009 posted € -0.8 million as compared with the year-earlier figure of € 0.7 million.
Earnings per share have thus fallen to € -0.06 (Q1-Q3/2008: € 0.06). The weighted average number of shares outstanding at the end of the first nine months of 2009 came to 13,168,304 shares.
In comparison with the previous year, all three business segments were operating at a profit in the first nine months of 2009.
The revenues of the DCI segment grew by 4.0% to € 8.7 million, up from € 8.3 million, in the third quarter and by 12.9% to € 28.7 million, up from € 25.4 million, in the first nine months of 2009. In the third quarter of 2009, the operating results of this line of business fell to € 3.4 million on the back of an increase in the cost of revenues and the operating expenses (Q3/2008: € 4.2 million). From a nine-month 2009 perspective, however, they improved to € 11.9 million (Q1-Q3/2008: € 11.6 million).
This positive development also reflects Beta Systems' acquisition strategy. Contributions to revenue and profit were made by SI Software Innovation GmbH, a company taken over in 2008, and the DETEC Group, effectively taken over in 2009, in the first nine months of 2009. The contribution of the DETEC Group to revenue and profit came to € 3.5 million and € 0.4 million respectively in the first nine months of 2009.
The revenues of the IdM segment virtually doubled in the third quarter of 2009 (+96.3%), from € 1.5 million to € 3.0 million, and had soared 40.2% to € 8.2 million, up from € 5.9 million, by the end of the first nine months of 2009. This trend was based on large new contracts signed in North America as well as on an increase in the level of service revenues in Western Europe. Moreover, maintenance revenues were boosted by an asset swap with the US company Proginet transacted in 2008. The segment result stood at € 0.6 million in the third quarter of 2009 (Q3/2008: € -0.4 million) and, at the end of the first nine months of 2009, had risen to € 0.8 million (Q1-Q3/2008: € -0.5 million).
In the solutions business for banks and insurance companies, the ECM LoB was strongly impacted by the global financial crisis which had its roots in the banking sector. The downturn in demand, already evident in the second quarter of 2009, combined with a lower level of new orders and a series of major orders either postponed or not awarded by companies in the banking and insurance industries, did not improve to any notable extent in the third quarter despite a few sales successes. Revenues in the third quarter 2009 declined accordingly, from € 9.7 million to € 7.0 million in the third quarter of 2009, and the segment result posted € 0.8 million (Q3/2008: € 1.5 million).
As a result, revenues fell from an accumulated € 30.9 million to € 22.7 million in the first nine months of 2009. Although the contribution to profit of € 1.4 million was still positive at the end of the first nine months of 2009, it had nonetheless declined by € 4.2 million, down from € 5.6 million.
At the end of the first nine months of 2009, the number of employees in the Beta Systems Group had climbed to 655, up from the year-earlier figure of 634. This figure includes 25 employees from the DETEC Group, a company acquired in the first quarter of 2009. Adjusted for this acquisition, employee numbers have fallen by 4 persons.
As per September 30, 2009, there was a reporting-date related increase in total assets to € 72.2 million (December 31, 2008: € 71.0 million).
On September 30, 2009, Beta Systems disclosed cash amounting to € 1.8 million, the figure posted on December 31, 2008.
The cash flow from operating activities came in at € 1.1 million (Q1-Q3/2008: € 8.4 million) which was below expectations. From an operational standpoint, this development is attributable to greater volatility in the solutions business for banks and insurance companies (ECM LoB) in a persistently difficult economic environment. EBITDA stood at € 1.9 million which is considerably lower than the year-earlier figure (Q1-Q3/2008: € 3.7 million). Receivables management above all necessitated and still necessitates greater efforts against the backdrop of international business. The credit standing of existing customers has not deteriorated to any notable extent here but payment behavior is on the decline against the backdrop of the still tense economic situation.
The cash flow from investing activities climbed from € -1.6 million to € -2.1 million. In the first half year, funds of € 1.3 million were paid for the purchase of the DETEC Group in accordance with the payment plan and set off against the cash funds acquired. Upon the termination of the settlement for the Kleindienst purchase, another € 0.5 million were paid in subsequent acquisition costs. During the same period in 2008, Beta Systems Software AG took receipt of incoming payments through the sale of investment property worth € 2.4 million.
The cash flow from finance activities stood at € 1.1 million at the end of the first nine months of 2009 (Q1-Q3/2008: € -6.9 million) and mainly comprised long-term borrowings for the financing of DETEC in an amount of € 0.3 million on balance (borrowing 2009: € 1.0 million, repayment: € 0.7 million). Short-term financings rose by € 1.1 million.
On the reporting date, trade receivables had fallen from € 38.3 million on December 31, 2008, to € 33.8 million on September 30, 2009, and work in process project orders (POC), minus project related advances received, had risen to € 6.3 million (December 31, 2008: € 4.7 million).
Goodwill climbed by € 2.9 million as a result of the DETEC acquisition as well as by € 0.5 million due to the settlement paid for the Kleindienst purchase of € 5.4 million in total as per September 30, 2009.
Other intangible assets rose, from € 2.5 million to € 2.8 million, also due to the takeover of the customer base of DETEC.
Acquired software product rights advanced to € 2.8 million, up from € 2.4 million, through purchasing the rights to DETEC's LaserSoft/DoXite software.
On the reporting date, trade payables had fallen from € 5.7 million on December 31, 2008, to € 4.3 million as per September 30, 2009.
There was a reporting-date related increase in deferred income to € 9.5 million (December 31, 2008: € 6.9 million) which 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.
Other current liabilities fell to € 7.3 million, down from € 8.4 million, due in particular to the lower level of personnel provisions.
Deferred taxes climbed from € 8.8 million on December 31, 2008, to € 9.6 million on September 30, 2009, owing to the DETEC acquisition.
On September 30, 2009, shareholders' equity posted € 27.8 million (December 31, 2008: € 28.6 million). The equity ratio stood at 38.5% as compared with 40.3% at year-end 2008.
The Chief Executive Officer of Beta Systems Software AG leaves the Company
The Supervisory Board of Beta Systems Software AG made the decision to relieve Mr. Kamyar Niroumand of his duties as Chief Executive Officer of the Company in its meeting on July 18, 2009. This decision was made known by the Company in an ad hoc release on July 18, 2009.
The Supervisory Board immediately took up the search for a successor. Until the conclusion of this process, Board member Gernot Sagl will temporarily assume the duties of Kamyar Niroumand.
Against the background of global economic developments and the current developments at Beta Systems, the Management Board has revised its outlook published in the Combined Management Report on the Group and on the Parent Company as at December 31, 2008. The Company's management no longer assumes that raising revenues and profits at Group level in 2009 as against the previous year will be possible. However, management still anticipates that the customarily strong year-end business will enable the Company to achieve a positive annual result in fiscal 2009.
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, 2008. 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:
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.
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 in the short term that investments may be shelved owing to liquidity and finance shortfalls.
Material transactions with related parties did not take place during the reporting period.
Berlin, November 2009
Gernot Sagl Member of the Management Board
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 divergence have been described in the Outlook report of the Combined Management Report on the Group and the Parent Company 2008 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.
| (Thousand €, except share data in € viz. in number of shares) | Q1-Q3/2008 | Q1-Q3/2009 |
|---|---|---|
| (unaudited) | (unaudited) | |
| Revenues | 62,118 | 59,493 |
| Product Licenses | 17,159 | 17,191 |
| Hardware | 5,038 | 2,553 |
| Maintenance | 29,878 | 30,603 |
| Services | 10,043 | 9,146 |
| Cost of Revenues | 29,080 | 28,424 |
| Gross Profit | 33,038 | 31,069 |
| Operating Expenses | 32,236 | 31,900 |
| Selling Expenses | 17,209 | 15,594 |
| General Administrative Expenses | 5,392 | 5,619 |
| Research and Development Expenses | 10,505 | 10,670 |
| Sundry Income | (1,241) | (390) |
| Other Expenses | 371 | 407 |
| Operating Result | 802 | (831) |
| Finance Result | 255 | (248) |
| Interest Income | 406 | 54 |
| Interest Expenses | (151) | (302) |
| Result before Income Taxes | 1,057 | (1,079) |
| Income Taxes | (317) | 324 |
| Result for the Fiscal Period | 740 | (755) |
| Earnings per Ordinary Share | ||
| Basic and Diluted | 0.06 | (0.06) |
| Weighted Average Number of Shares Outstanding used to | ||
| compute Earnings per Ordinary Share | ||
| Basic and Diluted | 13,168,304 | 13,168,304 |
CONSOLIDATED STATEMENT OF INCOME
See accompanying Notes to the Consolidated Financial Statements
| CONSOLIDATED STATEMENT OF INCOME | ||
|---|---|---|
| (Thousand €, except share data in € viz. in number of shares) | Q3/2008 | Q3/2009 |
| (unaudited) | (unaudited) | |
| Revenues | 19,596 | 18,713 |
| Product Licenses | 4,405 | 5,432 |
| Hardware | 1,838 | 602 |
| Maintenance | 10,218 | 10,109 |
| Services | 3,135 | 2,570 |
| Cost of Revenues | 9,933 | 8,542 |
| Gross Profit | 9,663 | 10,171 |
| Operating Expenses | 9,453 | 10,057 |
| Selling Expenses | 6,095 | 5,391 |
| General Administrative Expenses | 1,351 | 1,216 |
| Research and Development Expenses | 2,864 | 3,350 |
| Sundry Income Other Expenses |
(964) 107 |
(61) 161 |
| Operating Result | 210 | 114 |
| Finance Result | 0 | (141) |
| Interest Income | 24 | 2 |
| Interest Expenses | (24) | (143) |
| Result before Income Taxes | 210 | (27) |
| Income Taxes | 190 | 5 |
| Result for the Fiscal Period | 400 | (22) |
| Earnings per Ordinary Share | ||
| Basic and Diluted | 0.03 | (0.00) |
| Weighted Average Number of Shares Outstanding used to | ||
| compute Earnings per Ordinary Share | ||
| Basic and Diluted | 13,168,304 | 13,168,304 |
See accompanying Notes to the Consolidated Financial Statements
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||
|---|---|---|
| (Thousand €) | 12.31.2008 | 09.30.2009 |
| (audited) | (unaudited) | |
| Current Assets | 52,810 | 49,751 |
| Cash | 1,822 | 1,830 |
| Trade Receivables | 38,317 | 33,792 |
| Work in Process Project Orders (POC) | 4,676 | 6,253 |
| Inventories | 3,323 | 2,789 |
| Other Current Assets | 4,557 | 4,862 |
| Current Income Taxes | 115 | 225 |
| Non-Current Assets | 18,170 | 22,480 |
| Property, Plant & Equipment | 3,197 | 2,492 |
| Goodwill | 2,029 | 5,403 |
| Other Intangible Assets | 2,490 | 2,798 |
| Acquired Software Product Rights | 2,408 | 2,768 |
| Deferred Tax Assets | 7,295 | 8,169 |
| Other Non-Current Assets | 751 | 850 |
| Total Assets | 70,980 | 72,231 |
| Current Liabilities | 28,225 | 29,327 |
| Short-Term Finance and Finance Leasing | 7,120 * |
8,197 |
| Trade Payables | 5,702 | 4,348 |
| Deferred Income | 6,876 | 9,451 |
| Advance Payments Received (POC) | 160 | - |
| Other Current Liabilities | 8,367 | 7,331 |
| Non-Current Liabilities | 14,168 | 15,123 |
| Long-Term Borrowings | 1,675 * |
1,971 |
| Employee Benefits | 2,922 | 2,972 |
| Deferred Tax Liabilities | 8,812 | 9,633 |
| Other Non-Current Liabilities | 759 | 547 |
| Total Liabilities | 42,393 | 44,450 |
| Shareholders' Equity | 28,587 | 27,781 |
| Share Capital | 17,276 | 17,276 |
| Capital Reserve | 10,709 | 10,709 |
| Retained Losses | (145) | (900) |
| Other Comprehensive Income | 1,166 | 1,115 |
| Treasury Shares | (419) | (419) |
| Total Liabilities and Shareholders' Equity | 70,980 | 72,231 |
See accompanying Notes to the Consolidated Financial Statements
* including Reclassifications (for Detail refer to the Notes, "Reclassification")
| (Thousand €) | Q1-Q3/2008 (unaudited) |
Q1-Q3/2009 (unaudited) |
|---|---|---|
| Net Cash from Operating Activities | 8,406 | 1,109 |
| Result for the Fiscal Period | 740 | (755) |
| Reconcilation from Result for the Fiscal Period to | ||
| Net Cash from Operating Activities: | ||
| Depreciation and Amortization | 2,929 | 2,682 |
| (Gain) Loss on the Disposal of Property, Plant & Equipment, net | 16 | 21 |
| Finance Result, net | (255) | 248 |
| Current Tax (Benefit) Expenses | 742 | 412 |
| Deferred Tax (Benefit) Expenses | (424) | (736) |
| Income Taxes Paid | (544) | (241) |
| Changes in Assets and Liabilities: | ||
| - (Increase) Decrease in Trade Receivables |
13,495 | 4,524 |
| - Increase (Decrease) in Trade Payables |
1,962 | (1,354) |
| - Increase (Decrease) in Deferred Revenues |
(97) | 1,505 |
| - Changes in other Assets and Liabilities |
(10,158) | (5,197) |
| Net Cash used in Investing Activities | (1,593) | (2,120) |
| Acquisition of Property, Plant & Equipment | (446) | (358) |
| Interest Received | 44 | 54 |
| Cash Paid for Kleindienst Settlement | - | (509) * |
| Proceeds from the Disposal of Assets Held for Sale (SI GmbH) | 2,400 | - |
| Cash Paid for Investments, net of Acquired Cash | (3,591) | (1,307) |
| Net Cash used in Financing Activities | (6,942) | 1,070 |
| Net change in Short-Term Finance and Finance Leasing | (5,536) | 1,077 |
| Settlement of the Liabilities Held for Sale (SI GmbH) | (1,255) | - |
| Receipt of Payment from Constitution of Long-Term Borrowings | - | 296 |
| Interest Paid | (151) | (303) |
| Increase in Cash | (129) | 59 |
| Effect of Exchange Rate Fluctuations on Cash | (12) | (51) |
| Cash at the Beginning of the Fiscal Period | 3,176 | 1,822 |
| Cash at the End of the Fiscal Period | 3,035 | 1,830 |
See accompanying Notes to the Consolidated Financial Statements
* for Detail refer to the Notes, "Termination of the Shareholders' Compensation Claim from the Kleindienst Acquisition"
| Total | Shareholders' Equity |
23,713 | 4,805 | - 69 |
28,587 | (755) | (51) - |
27,781 | |
|---|---|---|---|---|---|---|---|---|---|
| Value | (419) | - | - - |
(419) | - | - - |
(419) | ||
| Treasury Shares | Number of Ordinary Shares |
(120,610) | - | - - |
(120,610) | - | - - |
(120,610) | |
| Net Income (Loss) | Comprehensive including Other Income (Loss) |
4,805 | 69 69 4,874 |
(755) | (51) (51) (806) |
||||
| Comprehensive Income (Loss) Other |
1,097 | - | 69 - |
1,166 | - | (51) - |
1,115 | ||
| Retained Earnings (Losses) |
(4,950) | 4,805 | - - |
(145) | (755) | - - |
(900) | ||
| Reserve Capital |
10,709 | - | - - |
10,709 | - | - - |
10,709 | ||
| Value | 17,276 | - | - - |
17,276 | - | - - |
17,276 | ||
| Ordinary Shares | Number of Shares Issued |
13,288,914 | - | - - |
13,288,914 | - | - - |
13,288,914 | |
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | Q1-Q3/2009 (unaudited) | (Thousand €, except share data in number of shares) | Balance as at January 1, 2008 | Net Profit (Loss) for the Year | Other Comprehensive Income (Loss), net of Tax Effects Net Profit (Loss) for the Year, including Other Currency Translation Adjustments Other Comprehensive Income (Loss) Comprehensive Income (Loss) |
Balance as at December 31, 2008 | Net Profit (Loss) for the Year | Other Comprehensive Income (Loss), net of Tax Effects Net Profit (Loss) for the Year, including Other Currency Translation Adjustments Other Comprehensive Income (Loss) Comprehensive Income (Loss) |
Balance as at September 30, 2009 |
See accompanying Notes to the Consolidated Financial Statements
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, 2009, to September 30, 2009, 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, distributes, 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 Windowsenvironments.
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.
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.
The Consolidated Interim Financial Statements was prepared in compliance with the International Financial Reporting Standards (IFRS), as they are required to be applied within the European Union, particularly IAS 34 for interim financial reports. 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 2008 and footnotes thereto.
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, 2009, are not necessarily indicative of the results which may be expected for the entire fiscal year 2009.
With effect as of January 1, 2009, Beta Systems Software AG has acquired 100% of the shares in DETEC Decision Technology Software GmbH ("DETEC GmbH") and DSP DETEC Software Products GmbH, Ruesselsheim ("DSP GmbH").
DETEC's portfolio comprises products to generate optically high-quality and sophisticated documents in the output management area through the formatting of output data. The core DETEC product, LaserSoft/DoXite, formats graphical documents from data, texts and layouts. The section is allocated to the business segment DCI. The purchase price amounts to T€ 4,749.
The acquisition date for purposes of initial consolidation is January 1, 2009. 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 carried out in accordance with IFRS 3 within 12 months after the date of acquisition and recognized with retrospective effect from such date:
| Purchase Price Allocation, in T€ | Book Value | Revalution | Market Value |
|---|---|---|---|
| Goodwill | - | 2,864 | 2,864 |
| Product Rights | - | 1,181 | 1,181 |
| Customer Base | - | 983 | 983 |
| Deferred Tax Liabilities | - | (649) | (649) |
| Cash | 1,736 | - | 1,736 |
| Property, Plant & Equipment | 144 | - | 144 |
| Other Current Receivables and Liabilities | (440) | - | (440) |
| Deferred Income | (1,070) | - | (1,070) |
| Net Assets, including Goodwill | 370 | 4,379 | 4,749 |
The value of the goodwill is the result of a number of factors, such as the value of the core workforce and synergies in the area of sales and distribution. In the reporting period, the DETEC companies contributed revenues of T€ 3,470 and a profit of T€ 363 to the consolidated result.
The Shareholders' Compensation Claim concerning the business combination of Kleindienst Datentechnik AG with Beta Systems Software AG has now been terminated upon the conclusion of settlement proceedings. The settlement was published on April 17, 2009, in the German Electronic Federal Gazette as well as in the Börsen-Zeitung (German financial newspaper). Along with payment of a settlement of T€ 431, attorney fees of T€ 78 were incurred. A total amount of T€ 509 in subsequent costs of acquisition in connection with purchasing Kleindienst have been capitalized as goodwill.
The same financial reporting principles and measurements as were used in the Consolidated Annual Financial Statements as at December 31, 2008, were applied in the Consolidated Interim Financial Statements as at September 30, 2009.
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. Inter-company revenues and expenses, accounts receivable, accounts payable, inter-company operating results and inter-company dividend payments were eliminated.
The current set of quarterly financial statements has been presented in a new format in order to allow information for comparison from the fiscal year 2008 to be adjusted to the presentation applied in the fiscal year 2009.
An amount of T€ 425 has been reclassified from the "short-term finance and finance leasing" position to the "long-term borrowings" item.
This reclassification has not any impact on net income for the current year or the equity of the previous year.
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 elements, revenues are allocated to those elements on the basis of their fair value. 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. Revenues from these long-term customer-specific 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.
Revenue of the sales of scanner systems 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.
Intangible assets acquired against payment with limited useful life are carried at cost of acquisition, less scheduled amortization and potential impairment.
In each reporting period, scheduled amortization is carried out on a straight-line basis over the estimated useful life of the software.
In accordance with IAS 36, intangible assets which have not been fully written off are assessed against their fair value if there are certain events triggering potential impairment which necessitate establishing whether or not there is a need for impairment. In the event that impairment becomes necessary, unscheduled writedowns are made on the amount by which capitalized software product rights not written down exceed the fair value (net present value of estimated sale of the products, minus selling costs).
Interest income and interest expenses are recognized as it accrues in profit and loss, using the effective interest method.
Income taxes are recognized in each reporting period on the basis of the best estimate of the weighted average annual income tax rate anticipated for the year as a whole. This tax rate is applied to the pre-tax result of the interim financial statements.
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. 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.
Herewith we refer to the description to the Revenue Recognition according to IAS 11.
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.
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:
| Technical Plant and Machinery, | |
|---|---|
| Computer Equipment | 3 - 5 |
| 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 three till 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. These defined benefit pension commitments are partly covered by investments in pension fund reinsurances earmarked for this purpose.
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 longterm 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.
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. The Company's capital is described in the Combined Management Report on the Group and the Parent Company as at December 31, 2008, and updated in the Interim Report as at September 30, 2009.
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 LoBmanagement 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 operates as entrepreneur, taking the responsibility for the global success of his business.
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 and Service.
In the following table in column "Cross Section" is shown, how revenue, realized between the business segments, is settled and allocated directly to the LoBs. Inter-segment sales are transacted on the basis of the arm's length terms and conditions. Revenues, Cost of Revenues and Operating Expenses incurred by the business segments, but historical not directly allocable to these, are accounted for and also disclosed in the "Cross Section" column in the table.
| Q3/2008 | DCI | IdM | ECM | Cross- Section |
Total |
|---|---|---|---|---|---|
| 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 | 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 |
| Q3/2009 | DCI | IdM | ECM | Cross- Section |
Total |
| Revenues with Customers Inter-Segment Revenues |
8,684 - |
3,010 - |
7,012 - |
7 - |
18,713 - |
| Total Revenues | 8,684 | 3,010 | 7,012 | 7 | 18,713 |
| Cost of Revenues and Operating Expenses | |||||
| of the Business Segments | (5,285) | (2,364) | (6,192) | - | (13,841) |
| Segment Income (Loss) for the Fiscal Period | 3,399 | 646 | 820 | 7 | 4,872 |
| Q1-Q3/2008 | DCI | IdM | ECM | Cross- Section |
Total |
| Revenues with Customers | 25,335 | 5,864 | 30,861 | 58 | 62,118 |
| Inter-Segment Revenues Total Revenues |
58 25,393 |
- 5,864 |
- 30,861 |
(58) - |
- 62,118 |
| Cost of Revenues and Operating Expenses of the Business Segments |
(13,839) | (6,318) | (25,243) | - | (45,400) |
| Segment Income (Loss) for the Fiscal Period | 11,554 | (454) | 5,618 | - | 16,718 |
| Q1-Q3/2009 | DCI | IdM | ECM | Cross- Section |
Total |
| Revenues with Customers | 28,674 | 8,224 | 22,675 | (80) | 59,493 |
| Inter-Segment Revenues Total Revenues |
- 28,674 |
- 8,224 |
- 22,675 |
- (80) |
- 59,493 |
| Cost of Revenues and Operating Expenses of the Business Segments |
(16,744) | (7,379) | (21,265) | - | (45,388) |
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:
| Q3/2008 | Q3/2009 | ||
|---|---|---|---|
| Total Segment Results for the Fiscal Period | 5,317 | 4,872 | |
| Unallocated Overhead Costs | (5,964) | (4,658) | |
| Sundry Income | 964 | 61 | |
| Other Expenses | (107) | (161) | |
| Operating Result | 210 | 114 | |
| Finance Result | - | (141) | |
| Result before Income Taxes | 210 | (27) | |
| Income Taxes | 190 | 5 | |
| Income for the Fiscal Period | 400 | (22) |
| Q1-Q3/2008 | Q1-Q3/2009 | |
|---|---|---|
| Total Segment Results for the Fiscal Period | 16,718 | 14,105 |
| Unallocated Overhead Costs | (16,786) | (14,919) |
| Sundry Income | 1,241 | 390 |
| Other Expenses | (371) | (407) |
| Operating Result | 802 | (831) |
| Finance Result | 255 | (248) |
| Result before Income Taxes | 1,057 | (1,079) |
| Income Taxes | (317) | 324 |
| Income for the Fiscal Period | 740 | (755) |
In comparison to the financial statement date any change has not occurred since December 31, 2008. In particular, the following position exists:
During the previous ownership of Datasec GmbH, Siegen, which was sold as at December 31, 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.
Regarding the termination of the Shareholders' Compensation Claim we refer to the description to the "Termination of the Shareholders' Compensation Claim from the Kleindienst Acquisition".
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.
| As per September 30, 2009 | Shares |
|---|---|
| Management Board | |
| Kamyar Niroumand1 | 134,377 |
| Niroumand family1 | 200,000 |
| Gernot Sagl | - |
| Supervisory Board | |
| Sebastian Leser | - |
| Dr. Arun Nagwaney | - |
| Jürgen Dickemann | - |
| Volker Wöhrle | - |
| Stefan Hillenbach | 6,432 |
| Wilhelm Terhaag | - |
| Treasury shares | 120,610 |
|---|---|
| ----------------- | --------- |
1 On July 18, 2009, the Supervisory Board of Beta Systems Software AG relieved Mr. Kamyar Niroumand of his duties as Chief Executive Officer of the Company. For this reason, information on the Director's Holdings of Mr. Niroumand pertain to this date.
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, 2009, under the telephone number +49 (0)30 726 118-171 or email under [email protected].
Beta Systems Software AG Berlin (Prime Standard: BSS, ISIN DE0005224406) develops high-profile software products and solutions for the automated processing of large volumes of data and documents. These products and solutions serve to enhance process optimization, improve security and make IT more agile. They guarantee compliance with business requirements in respect of governance, risk management and compliance (GRC) and raise the performance of a company's IT in respect of availability, scalability and flexibility. Beta Systems' IT infrastructure software product segment (Infrastructure & Operations Management) is geared towards optimizing job and output management in data centers across all sectors. In addition, Beta Systems offers products for automating IT user administration to companies with high numbers of users. In its ECM Solutions Division (ECM & Document Solutions) Beta Systems develops customized solutions for large enterprises in the financial services sector, industry and trading in the areas of payments, processing of incoming post and general document management.
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 19 subsidiaries worldwide and cooperations with numerous partner companies. Throughout the world more than 1,400 customers use the products and solutions of Beta Systems in more than 3,300 running installations. At present, Beta Systems generates 50 percent of its sales from international business. Around 200 of its customers are based in the USA and Canada.
More information on the company and its products can be found under www.betasystems.com.
October 29, 2009 Information by the Company on the Nine Months' Financial Statements (ad-hoc release)
November 3, 2009 Publication of the Nine Months' Financial Statements 2009
November 9, 2009 Analysts' conference at the German Equity Forum in Frankfurt am Main
Company contact: Beta Systems Software AG Stefanie Frey Tel.: +49 (0)30 726 118-171 Fax: +49 (0)30 726 118-881 e-mail: [email protected] Agency contact: 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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