CANCOM SE — Interim / Quarterly Report 2014

Aug 7, 2014

INTERIM REPORT 30 JUNE 2014

Group key figures

Q2 AT A GLANCE

in € million	Apr. 1 - Jun. 30, 2014	Apr. 1 - Jun. 30, 2013	Changes
Sales revenues	189.3	140.0	35.2%
Gross profit	63.1	45.8	37.8%
EBITDA adjusted	11.4*	7.8	46.2%
EBITDA margin adjusted	6.0%*	5.6%	0.4%
EBITA adjusted	8.2*	5.8	41.4%
Earnings per share adjusted (basic)	0.36€**	0.34€**	5.9%

FIRST HALF

in € million	Jan. 1 - Jun. 30, 2014	Jan. 1 - Jun. 30, 2013	Changes
Sales revenues	374.7	275.1	36.2%
Gross profit	123.9	89.6	38.3%
EBITDA adjusted	22.0*	14.8	48.6%
EBITDA margin adjusted	5.9%*	5.4%	0.5%
EBITA adjusted	15.9*	10.9	45.0%
Earnings per share adjusted (basic)	0.71€**	0.63€**	12.7%
average number of shares (in 1.000) (basic)	14,616	11,430	28.9%
Employees as at June 30	2,715	2,156	25.9%
in € million	Jun. 30, 2014	Dec. 31, 2013	Changes
Balance sheet	360.7	321.5	12.2%
Equity	179.6	162.9	10.3%
Equity ratio	49.8%	50.7%	-0.9%

* Adjusted for one-off effects of € 100k in Q2/2014 of € 600k in H1/2014, which were external costs related to acquisitions, not to be capitalized pursuant to IFRS.

** Adjusted for one-off effects mentioned above and amortization on intangible assets for purchase price allocation (PPA).

	Revenue CANCOM Group Jan. 1 - Jun. 30, 2013 and Jan. 1 - Jun. 30, 2014 (in € million)		EBITDA adjusted CANCOM Group Jan. 1 - Jun. 30, 2013 and Jan. 1 - Jun. 30, 2014 (in € million)
2013	275.1	2013	14.8
2014	374.7	2014	22.0
	EBITA adjusted CANCOM Group		Earnings per share adjusted CANCOM Group
	Jan. 1 - Jun. 30, 2013 and Jan. 1 - Jun. 30, 2014 (in € million)		Jan. 1 - Jun. 30, 2013 and Jan. 1 - Jun. 30, 2014 (in €)
2013	10.9	2013	0.63
2014	15.9	2014	0.71

Note:

This overview of key figures is not part of the interim report. Adjusted EBITDA, adjusted EBITA and adjusted earnings per share are not defined in IFRS. CANCOM considers adjusted key figures to be more suitable indicators of operating performance. It is intended to give readers a clearer picture of the results of operations and ensures greater comparability of data over time.

Table of contents

2	Key figures
3	Table of contents
4 - 5	Preface
6 - 11	Consolidated Interim Management Report Q2 1) Fundamental information about the Group 2) Economic report 3) Earnings, financial and assets position of the CANCOM Group 4) Stocks held by members of the Executive and Supervisory Boards as at June 30, 2014 5) Events of particular significance after the end of the reporting period 6) Risks of future development 7) Opportunities for future develpoment 8) Forecast 9) Management responsibility statement	06 06-07 07-09 09 09 09 09 09-10 10
12 - 13	Balance Sheet
14 - 15	Consolidated statement of income
16	Consolidated statement of comprehensive income
17	Statement of cash flows
18	Consolidated statement of changes in equity
19 - 20	Segment information

21 - 28 Notes to the consolidated accounts

Dear Stockholders,

CANCOM has had an eventful half-year, during which we took the momentum generated in 2013 and the first quarter to increase our consolidated sales revenues by 36.2 percent during the second quarter, and to improve the long-term profitability of the group by increasing our adjusted EBITDA by 48.6 percent.

Our strong position in the growth field of cloud computing has been recognized by Experton Group, which awarded CANCOM the title of Cloud Leader 2014 on the basis of its annual Cloud Vendor Benchmark study. We also received this major award in 2013 for our strong competitiveness and our attractive portfolio. The analysts also rated us as leading experts for our cloud transformation know-how. In other words, we are the only German provider with an integrated portfolio that enables us to offer clients freedom in choosing their individual path to cloud computing. The award has given a major boost to our operating business.

In April CANCOM made a move of great importance for our cloud and shared managed services business by signing a general agreement with HP Enterprise Services for the use of the CANCOM AHP Private Cloud in HP's cloud services portfolio for medium-sized clients. The agreement makes HP – rated by market research company Forrester as a global market leader in hosting and cloud services – our hosting and distribution partner for the CANCOM AHP Private Cloud platform. The aim is to deliver a turnkey private cloud platform as a cloud service from HP's data centers all around the world. This partnership increases our capacity to bring our own private cloud solution onto the market faster both in Germany and internationally through HP's global supply chain. We also view the fact that HP is using our solution for medium-sized comp

We are also making progress with the integration of the companies we have acquired. The recent acquisition of DIDAS Business Services GmbH, based in Langenfeld in the German federal state of North-Rhine-Westphalia, has been formally completed with the signing of the contract of sale in April and payment of the purchase price at the start of July. The company, which has now been renamed CANCOM DIDAS GmbH, will be included in the consolidated financial statements with effect from July 1, 2014.

We are optimistic about the second half of the year and the year 2014 as a whole, in line with most other IT companies. According to the latest IT sector barometer from BITKOM (the German Association for Information Technology, Telecommunications and New Media), the vast majority of IT companies expect sales revenues for the year 2014 as a whole to be higher than in 2013.

We would like to express our sincere gratitude to you, our stockholders, for your confidence in us. We at CANCOM are all working hard to ensure the group's continued success.

Sincerely yours,

Klaus Weinmann CEO

"We are continuing to grow, and we are therefore optimistic about the year 2014 as a whole."

Consolidated interim management report

relating to the consolidated financial statements page 12 et seq.

1. Fundamental information about the Group

The CANCOM Group is one of the leading providers of IT infrastructure and IT services in Germany and in Austria. Its integrated range of products and services covers the entire IT added value chain, from analysis and consulting to implementation and services.

Legal structure of the CANCOM Group

CANCOM SE, based in Munich, Germany, performs the central financial and management role for the equity investments held by the CANCOM Group.

Areas of business

The IT solutions business segment of the CANCOM Group offers a comprehensive portfolio of products and services relating to IT infrastructure and applications. The range of services offered includes IT strategy consulting, project planning and implementation, systems integration, IT procurement via e-procurement services or as part of a project, as well as professional IT services and support.

The cloud solutions business segment comprises the CANCOM Group's cloud and shared managed services business, including sales revenues from cloud hardware allocated to the projects. The segment's activities range from analysis and consulting to delivery, implementation and services. This means it offers clients the necessary orientation and support for their changeover from traditional corporate IT systems to cloud computing. As part of its range of services, the CANCOM Group is able to run parts of, or entire, IT departments for its clients, using scalable cloud and managed services – especially shared managed services. Distribution costs allocated to cloud distribution are included in the segment. In addition, the cloud business benefits from synergies with the normal CANCOM distribution system.

Focus of activities and sales markets

The CANCOM Group is one of the three largest independent integrated IT systems providers in Germany. It offers IT architecture, systems integration and managed services. As a provider of integrated solutions, CANCOM mainly focuses on IT services, in addition to distributing hardware and software in its transaction-based and product-related business. Its comprehensive range of IT services includes design of IT architectures and IT landscapes, IT strategy advice and consulting, design and integration of IT systems, and system operation.

The CANCOM Group's client base therefore primarily includes commercial end-users. These range from small and medium-sized companies to large companies, corporate groups and public-sector clients.

Explanation of the control system used within the Group

To control and monitor the performance of the individual subsidiaries, CANCOM analyses their monthly figures for, among other things, sales revenues, gross profit, operating expenditure and operating profit, and compares these key figures with the original plan as well as the quarterly forecast. For the purpose of management control, the company also regularly uses external indicators such as inflation rates, interest rates, the general economic trend and the performance of the IT sector, including forecasts. Cash management procedures include daily status assessments.

Research and development activities

Innovation is very important for economic momentum and growth. However, as it is purely a service and trading enterprise, CANCOM does not conduct research on a regular basis. Its development work focuses, for example, on software solutions and applications in IT growth segments such as cloud computing, virtualization, mobile solutions, IT security and managed services. Development activities are very limited in scope and are mainly used for the Group's own purposes.

2. Economic report

The performance of the IT market and the economy as a whole

The German economy appears to have slowed down in the second quarter of the year compared to the first quarter, but moderate growth in gross domestic product (GDP) is nevertheless expected.

The mood in the IT sector also continues to be good. According to the latest IT sector barometer from BITKOM (the German Association for Information Technology, Telecommunications and New Media), the majority of IT companies expect sales revenues to rise in the second half of the year.

Impact on the CANCOM Group's business performance

The second quarter saw a continuation of CANCOM SE's consistent growth, along with an improvement in the profitability of the Group. The sales revenues and profits for the quarter, and for the first half of the year, both exceeded the relevant values for the same periods of 2013. The increase in the Group's sales revenues and profits is driven by the cloud and shared managed services business as well as the good performance of the integrated systems business across the Group.

Significant events and investments during the second quarter

CANCOM SE has issued a sponsored Level 1 American depositary receipts (ADR) program in the United States. ADRs are securities denominated in U.S. dollars representing stocks in a non-U.S. company traded in the U.S.A. They enable U.S. investors to buy CANCOM SE common bearer stocks listed on the FWB Frankfurt Stock Exchange indirectly on the U.S. market. The custodian for CANCOM SE's ADR program is Deutsche Bank Trust Company Americas ('Deutsche Bank'). CANCOM SE's Level 1 ADRs are traded over the counter in the United States. Four ADRs represent one CANCOM stock (ratio: 4 ADRs for 1 stock).

On April 10, 2014 CANCOM SE signed a notarized contract of sale for the acquisition of all the stocks of DIDAS Business Services GmbH – now CANCOM DIDAS GmbH – from Allgeier IT Solutions AG. To pay the purchase price, CANCOM issued 263,783 new stocks by means of a capital increase against non-cash contributions. On June 25, 2014 the Supervisory Board approved a proposal by the Executive Board to use part of the Authorized Capital 2010-I to increase the company's capital stock by € 263,783, from € 14,615,791 to € 14,879,574, against non-cash contributions. There was no subscription right for existing shareholders. The capital stock was increased by the full € 263,783 (equivalent to 263,783 new stocks) and the increase was recorded in the commercial register at Munich Local Court (Amtsgericht) on July 3, 2014.

On April 29, 2014, CANCOM and HP Enterprise Services signed a general agreement on the use of CANCOM AHP Private Cloud in HP's cloud services portfolio. HP Enterprise Services will offer its virtual client service to medium-sized clients (approximately 500 to 7,000 users) on the basis of the CANCOM AHP Private Cloud architecture. HP will operate the solution in its data centers, adding further services if required, and market it jointly with CANCOM. The aim is to provide medium-sized clients with a turnkey solution as a service for virtual clients in line with HP's 'new style of IT'.

Employees

As at June 30, 2014, the CANCOM Group employed 2,715 people.

The personnel expenses for the first six months were as follows (in € '000):

	Jan. 1 - jun. 30, 2014 €'000	Jan. 1 - jun. 30, 2013 €'000
Wages and salaries	71,130	52,265
Social security contributions	11,733	9,054
Pension provisions	117	119
Total	82,980	61,438

3. Earnings, financial and assets position of the CANCOM Group

a) Earnings position

The CANCOM Group recorded an increase in its sales revenues and profits in the first six months of 2014 in comparison with the same period of 2013.

Consolidated sales revenues were up 36.2 percent, from € 275.1 million to € 374.7 million.

	CANCOM Group sales revenues Year on year comparison of figures for the first six months (in € million)
2013	275.1
2014	374.7

In Germany, sales revenues were up 30.2 percent, from € 263.1 million to € 342.6 million. In international business, the CANCOM Group's sales revenues were up from € 12.1 million to € 32.2 million.

In the IT solutions segment, sales revenues were up by 29.2 percent, from € 254.0 million in 2013 to € 328.1 million in 2014. In the cloud solutions segment, sales revenues were also up, by 120.4 percent, from € 21.1 million to € 46.5 million.

The CANCOM Group's consolidated gross profit for the first six months of the year was up 38.3 percent year on year, from € 89.6 million in 2013 to € 123.9 million in 2014. This was as a result of the successful expansion of the high-margin services business. The gross profit margin was up from 33.1 percent to 32.6 percent.

	CANCOM Group gross profit Year-on-year comparison of figures for the first six months (in € million)
2013	89.6
2014	123.9

Consolidated earnings before interest, tax, depreciation and amortization (EBITDA) for the first six months of the fiscal year 2014 were up 44.6 percent year on year, from € 14.8 million in 2013 to € 21.4 million in 2014. As a result, the EBITDA margin rose to 5.7 percent, compared with 5.4 percent in 2013.

	CANCOM Group EBITDA Year-on-year comparison of figures for the first six months (in € million)
2013	14.8
2014	21.4

Consolidated earnings before interest, tax and amortization (EBITA) amounted to € 15.3 million, an increase of 40.4 percent on the figure of € 10.9 million for the same period of 2013.

	CANCOM Group EBITA Year-on-year comparison of figures for the first six months (in € million)
2013	10.9
2014	15.3

Consolidated earnings before interest and tax (EBIT) amounted to € 10.1 million. The figure is lower than in the previous year, owing to an increase in amortization of intangible assets as a result of acquisitions.

The net income for the period after minority interests was down from € 6.8 million in 2013 to € 6.4 million in 2014. Earnings per share for the first six months of 2014 were € 0.45, compared with € 0.59 in 2013.

The order position

In the IT solutions business segment, the majority of incoming orders are converted to sales within two weeks because of our large delivery capacity. Consequently, the reporting date figures on their own do not give a true picture of our order situation in this area of business, and for this reason they are not published.

In the cloud solutions business segment, orders are often placed over long periods. For this reason, the reporting figures do not give a good indication of the order situation of this segment either.

Explanations of individual items on the statement of income

Further details on items in the statement of income are given in the notes to the consolidated statement of income.

b) Financial and assets position

Objectives of financial management

The core objective of the financial management of the CANCOM Group is to safeguard its liquidity at all times in such a way that day-to-day business activities can be continued. In addition, the Group aims to achieve optimum profitability as well as a high credit status to ensure favorable refinancing rates.

Notes on the capital structure

On the assets side of the consolidated balance sheet, there was a reduction in current assets from € 212.1 million to € 206.7 million between December 31, 2013 and June 30, 2014. Cash and cash equivalents were down from € 77.7 million to € 65.0 million. Trade accounts receivable were roughly the same as at December, 31 2013 at € 112.9 million. Inventories were up from € 15.5 million to € 17.9 million.

Non-current assets rose from € 109.3 million as at December 31, 2013 to € 154.0 million as at June 30, 2014. This was mainly owing to acquisitions.

On the liabilities side of the balance sheet, there was a significant reduction in current liabilities from € 134.7 million to € 104.6 million. This was mainly the result of a reduction in trade accounts payable from € 99.0 million to € 69.9 million.

Non-current liabilities, consisting of liabilities with a residual term of at least one year, were up from € 23.9 million as at December 31, 2013 to € 76.5 million as at June 30, 2014. The increase was primarily due to the issue of a convertible bond.

The total assets grew from € 321.5 million as at December 31, 2013 to € 360.7 million as at June 30, 2014.

Primarily owing to the retention of profits as well as the inclusion of new subsidiaries in the consolidated financial statements, there was an increase in nominal equity capital from € 162.9 million to € 179.6 million. Overall, this resulted in an equity ratio of 49.8 percent as at June 30, 2014 compared with 50.7 percent as at December 31, 2013.

Further details of the individual balance sheet items can be found in the notes to the consolidated balance sheet.

Notes to the statement of cash flows

The cash flow from ordinary activities is typically negative during the year, and there was a negative cash flow of € 21.6 million as at June 30, 2014 compared with € 27.8 million in the same period of 2013.

There was a negative cash flow from investing activities of € 28.9 million, compared with € 5.6 million in 2013. This was owing to the company acquisitions and the purchase of the business premises in Jettingen-Scheppach, Germany.

The cash flow from financing activities was € 37.9 million primarily affected by the issuance of a convertible bond this compared with a negative cash flow of € 5.1 million in 2013.

Overall, this resulted in cash and cash equivalents of € 65.0 million, compared with € 6.1 million in 2013.

4. Stocks held by members of the Executive and Supervisory Boards as at June 30, 2014

Total number of stocks	14.615.791	100%
Executive Board
Klaus Weinmann	185,270	1.3 %
Supervisory Board
Dominik Eberle	10,000	0.1 %

5. Events of particular significance after the end of the reporting period

There were no events of particular significance after the reporting date of June 30, 2014 up to the time of preparation of this management report.

6. Risks of future development

There have been no major changes in the risks of future development at CANCOM since the start of the current fiscal year. Details of the risks can be found in the annual report for 2013, starting on page 31. The annual report can be downloaded from www.cancom.de or obtained free of charge from the company.

7. Opportunities for future development

There have been no major changes in the opportunities for future development at CANCOM since the start of the current fiscal year. Details of the opportunities can be found in the annual report for 2013, starting on page 31. The annual report can be downloaded from www.cancom.de or obtained free of charge from the company.

8. Forecast

According to the leading research institutes, the German economy should grow in 2014; forecasts for GDP growth for 2014 range from 1.6 to 2.2 percent.

Gross domestic product 2014 (real change compared with 2013, as a percentage)
Eurozone	+ 1,1
Germany	+ 1,8
USA	+ 1,9
World	+ 3,2

Forecast: Deutsche Bank Economic Research, July 16, 2014

According to the latest market figures from the German Association for Information Technology, Telecommunications and New Media (BITKOM), the turnover in IT products and services should grow by 2.9 percent to € 76.3 billion in 2014 – considerably more strongly than the rest of the economy.

Trading in software is likely to grow by 5.3 percent to € 19.1 billion in the current fiscal year. Sales in IT services are expected to rise by 3.2 percent to € 36.5 billion. Experts anticipate a weaker performance from the IT hardware market, which they expect to grow by only 0.2 percent to € 20.8 billion this year.

Forecast: BITKOM, March 2014

Anticipated performance of the CANCOM Group

CANCOM aims to continue growing at a faster rate than the IT market and to expand its market share steadily, both through acquisitions and organically, on the basis of its proven expertise and outstanding market position in the IT growth areas of cloud computing, mobility, IT security and managed services.

To achieve this aim, CANCOM geared its business policy to the IT growth areas from an early stage, and designed its sales and services structure around them. The expansion of the e-commerce business and the optimized e-supply chain, which enables process and transaction costs to be reduced both for clients and for the CANCOM Group, is intended to make the Group's trading business more profitable.

CANCOM has a market presence and is close to its clients in the German-speaking countries. The Group is represented all over Germany and Austria by its many service and consulting locations. As a group, for instance through its U.S. subsidiary HPM Networks, CANCOM is able to design, configure and roll out IT infrastructure for international companies. CANCOM's collaboration with HP Enterprise Services enables it to offer clients remote managed services, in which it manages clients' ongoing IT operation in the private cloud from HP's worldwide hosting data centers, using the CANCOM AHP Private Cloud platform. The distribution partnership could accelerate the growth of the Group's business in the cloud environment.

CANCOM plans to continue consolidating its market position in the IT environment, in the German-speaking countries as well as in other countries, through selective acquisitions. The market continues to offer favorable conditions for this policy.

Owing to the Group's good positioning in the IT market - and in particular in the growth market of cloud computing - the Executive Board expects further growth in the company and an improvement in profits in the medium term if the demand for IT products and services remains steady or even rises.

For the Group as a whole, the Executive Board currently expects a significant increase in the gross profit and EBITDA in the fiscal year 2014.

9. Management responsibility statement

We confirm that, to the best of our knowledge, the consolidated interim financial statements, prepared in accordance with the applicable principles of financial reporting for interim statements, give a true and fair view of the assets, liabilities, financial position and income of the group, and that the interim management report gives 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 of the anticipated development of the group for the remaining six months of the financial year.

Munich, Germany, August 2014

CANCOM SE

The Executive Board

This document contains forward-looking statements and information based on the current expectations, assumptions and estimates of the Executive Board of CANCOM SE, and other information currently available to the man agement. The words 'expect', 'assume', 'believe', 'estimate', 'presume', 'intend', 'could', 'plan', 'project', 'should', or similar, are used to indicate forward-looking statements. All statements with the exception of facts regarding the past are expectations. These forward-looking statements include inter alia: expecta tions on the availability of products and services, the financial and earnings position, the business strategy and the Executive Board's plans for future operating activities, current and future economic performance and all state ments regarding expectations and assumptions. Although we feel that these statements and comments are based on expectations, we cannot guarantee their correctness, especially in our forecast. Various known and unknown risks, uncertainties and other factors may lead to the actual events deviating significantly from those contained in the forward-looking statements. The following influencing factors are, among others, relevant in this respect: external political influences changes in the general economic and business situation; changes in the competitive position and situation, for instance by the emergence of new competitors, new products and services or new tech nologies; changes in the investment behavior of target client groups etc. and changes to the business strategy. CANCOM cannot guarantee the pertinence, accuracy, completeness or correctness of the information or opinions in this document. CANCOM does not plan to update its forecasts beyond the legal requirements, nor does it make any commitment to do so.

Consolidated balance sheet (IFRS)

ASSETS

(in € 000)	Notes	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Current assets
Cash and cash equivalents		65,047	77,733	6,121
Trade accounts receivable		112,203	112,949	91,547
Other current financial assets	B.1.	4,927	3,508	3,732
Inventories		17,858	15,481	9,663
Orders in process		1,597	791	1,448
Prepaid expenses and other current assets	B.2.	5,084	1,687	2,476
Total current assets		206,716	212,149	114,987
Non-current assets
Property, plant and equipment		36,386	20,493	19,603
Intangible assets		41,739	22,611	15,806
Goodwill		65,041	32,703	24,600
Long-term financial assets		63	62	70
Long-term equity investments		345	28,940	0
Loans		60	60	56
Other financial assets		2,685	2,502	2,016
Deferred tax resulting from temporary differences	B.3.	2,511	1,571	1,274
Deferred tax resulting from tax loss carryforwards	B.3.	4,888	196	378
Other assets		261	169	149
Total non-current assets		153,979	109,307	63,952
Total assets		360,695	321,456	178,939

EQUITY AND LIABILITIES

(in € 000)	Notes	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Current liabilities
Short-term loans and current portion of long-term loans		1,742	770	940
Trade accounts payable		69,892	98,987	49,962
Prepayments received		2,072	6,560	1,810
Other current financial liabilities	B.4.	1,718	1,947	1,250
Provisions	B.5.	4,562	2,491	1,616
Deferred income		2,625	1,397	1,125
Income tax liabilities		3,578	1,889	2,004
Other current liabilities	B.6.	18,367	20,624	15,431
Total current liabilities		104,556	134,665	74,138
Non-current liabilities
Long-term loans		4,009	4,813	4,753
Convertible bond	B.7.	38,254	0	0
Profit participation capital and subordinated loans		6,114	5,926	5,752
Deferred income		2,909	3,249	3,849
Deferred taxes from temporary differences	B.8.	12,837	5,210	2,847
Pension provisions		169	110	123
Other non-current financial liabilities	B.9.	1,750	1,744	1,827
Other non-current liabilities	B.5.	10,505	2,866	1,998
Total non-current liabilities		76,547	23,918	21,149
Equity capital
Capital stock		14,616	14,616	11,430
Capital reserves		100,525	94,578	26,086
Net retained profits (including revenue reserves)		54,186	53,616	45,880
Equity difference resulting from currency translation and price changes		-78	-32	-11
Minority interests		10,343	95	267
Total equity capital		179,592	162,873	83,652
Total liabilities		360,695	321,456	178,939

CONSOLIDATED STATEMENT OF INCOME 1

		Q2		6 months
(in € 000)	Notes	Apr. 1 - Jun. 30, 2014	Apr. 1 - Jun. 30, 2013	Jan. 1 - Jun. 30, 2014	Jan. 1 - Jun. 30, 2013
Sales revenues		189,308	140,038	374,744	275,129
Other operating income	D.1.	145	237	451	402
Other own work capitalized		751	225	1,090	353
Gross revenue for the period		190,204	140,500	376,285	275,884
Cost of materials and purchased services		-127,124	-94,745	-252,403	-186,334
Gross profit		63,080	45,755	123,882	89,550
Personnel expenses	D.2.	-41,627	-30,886	-82,980	-61,438
Depreciation on property, plant and equipment and amortization of intangible assets		-6,024	-2,352	-11,368	-4,506
Other operating expenses	D.3.	-10,141	-7,083	-19,467	-13,350
Operating result		5,288*	5,434*	10,067*	10,256*
Interest and similar income		123	95	222	166
Interest and similar expenses		-533	-288	-895	-582
Share in profit or loss of joint ventures accounted for by the equity method		-18	0	71	0
Currency translation gains/ losses		54	-2	-7	4
Earnings before taxes		4,914	5,239	9,458	9,844

COMMENT

The following comments of the Executive Board are not part of the consolidated financial statement (IFRS):

* The operating result according to the consolidated statement of income is negatively affected by amortizations pursuant to IFRS for purchase price allocation (ppa) and "as if" adjusted.

Amortizations are one-time in case of any acquistion and noncash, that means they decline over time. That will lead to a relative improvement of operating result in the future.

IFRS amortizations from purchase price allocation (PPA)

		Q2/2014		Q2/2013
	PPA	as-if	PPA	as-if
*operating result
in € million	2.9	8.2	0.3	5.7
		H1/2014		H1/2013
	PPA	as-if	PPA	as-if
*operating result
in € million	5.2	15.3	0.6	10.9

CONSOLIDATED STATEMENT OF INCOME 2

			Q2		6 months
(in € 000)	Notes	Apr. 1 - Jun. 30, 2014	Apr. 1 - Jun. 30, 2013	Jan. 1 - Jun. 30, 2014	Jan. 1 - Jun. 30, 2013
Income tax	D.4.	-1,585	-1,550	-3,051	-2,965
Earnings after taxes from continuing operations		3,329	3,689	6,407	6,879
Earnings from discontinued operations		-100	0	-100	0
Net income/ loss for the period		3,229	3,689	6,307	6,879
thereof attributable to the stockholders of the parent company		3,304	3,626	6,417	6,793
thereof attributable to minority interests	D.5.	-75	63	-110	86
Average number of stocks outstanding (basic)		14,615,791	11,429,826	14,615,791	11,429,826
Average number of stocks outstanding (diluted)		15.671.301	11,429,826	15,175,625	11,429,826
Earnings per stock from continuing operations (basic) in EUR		0.23**	0.32**	0.45**	0.59**
Earnings per stock from continuing operations (diluted) in EUR		0.22	0.32	0.43	0.59
Earnings per stock from discontinued operations (basic) in EUR		-0.01	0.00	-0.01	0.00
Earnings per stock from discontinued operations (diluted) in EUR		-0.01	0.00	-0.01	0.00

COMMENT

The following comments of the Executive Board are not part of the consolidated financial statement (IFRS):

** The earnings per stock according to the consolidated statement of income is negatively affected by amortizations pursuant to IFRS for purchase price allocation (ppa) and "as if" adjusted.

Amortizations are one-time in case of any acquistion and noncash, that means they decline over time. That will lead to a relative improvement of earnings per stock in the future.

IFRS amortizations from purchase price allocation (PPA)

	Q2/2014		Q2/2013
	PPA	as-if	PPA	as-if
** Earnings per stock
in €	0.13	0.36	0.02	0.34
		H1/2014	H1/2013
	PPA	as-if	PPA	as-if
** Earnings per stock
in €	0.23	0.68	0.04	0.63

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Q2		6 months
(in € 000)	Apr. 1 - Jun. 30, 2014	Apr. 1 - Jun. 30, 2013	Jan. 1 - Jun. 30, 2014	Jan. 1 - Jun. 30, 2013
Net income/ loss for the period	3,229	3,689	6,307	6,879
Other comprehensive income
Currency translation differences	-72	-2	-66	-1
Income tax	22	0	20	0
Other comprehensive income for the period (after taxes)	-50	-2	-46	-1
Comprehensive income for the period	3,179	3,687	6,261	6,878
thereof attributable to the stockholders of the parent company	3,254	3,624	6,371	6,792
thereof attributable to minority interests	-75	63	-110	86

STATEMENT OF CASH FLOWS

(in € 000)	Jan. 1 - Jun. 30, 2014	Jan. 1 - Jun. 30, 2013
Cash flow from ordinary activities
Profit for the period before taxes and minority interests	9,458	9,844
Adjustments
+/- Depreciation on property, plant and equipment and amortization of intangible assets	11,368	4,506
+/- Changes in non-current provisions	-146	-42
+/- Changes in current provisions	-438	-142
+/- Income/ loss on the sale of intangible assets, property, plant and equipment and long-term financial assets	12	41
+ Interest expenses	673	416
+/- Changes in inventories	-1,831	-904
+/- Changes in trade accounts receivable and other accounts receivable	8,901	-5,773
+/- Changes in trade accounts payable and other accounts payable	-43,557	-30,874
+/- Interest paid and refunded	-622	-58
+/- Income taxes paid and refunded	-5,284	-4,810
+/- Non-cash expenses/ income	-71	0
+/- Cash inflow/outflow discontinued operations	-100	0
Net cash from operating activities	-21,637	-27,796
Cash flow from investing activities
+/- Acquisition of subsidiaries and equity instruments of other companies	-30,993	-949
+/- Cash acquired on the purchase of stocks	17,918	466
+ Cash inflow from sale of former consolidated subsidiaries	299	0
- Payments for additions to intangible assets and property, plant and equipment	-16,553	-5,287
+ Income from disposal of intangible assets, property, plant and equipment, and long-term financial assets	254	32
+ Interest received	222	166
Net cash used in investing activities	-28,853	-5,572
Cash flow from financing activities
+/- Capital stock increase expenses	4	0
+ Cash inflow from convertible bond	45,038	0
- Repayment of long-term borrowings (including current portion)	-423	-801
+/- Changes in short-term borrowings	75	0
- Interest paid	-902	-302
- Dividends paid	-5,847	-4,000
+/- Cash inflow/ outflow from finance lease	-95	-45
Net cash used in financing activities	37,850	-5,148
Net increase/ decrease in cash and cash equivalents	-12,640	-38,516
+/- Exchange rate-related changes in cash	-46	1
+/- Cash and cash equivalents at beginning of period	77,733	44,638
Cash and cash equivalents at end of period	65,047	6,121
Breakdown:
Cash and cash equivalents	65,047	6,121
	65,047	6,121

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)

	Stock	Capital stock	Capital reserves	Retained earnings	Reserves for currency translation	Reserves for securities price changes	Revaluation reserve	Net retained profits	Total investors parent company	Minority interests	Total equity capital
	units'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000
December 31, 2012	11,430	11,430	26,086	25,206	-11	1	-153	18,034	80,593	181	80,774
Capital stock increase	3,186	3,186	69,529						72,715		72,715
Change in reserves: Capital stock increase costs			-1,037						-1,037		-1,037
Transfer net retained profits / revenue reserves				3,391				-3,391	0		0
Distribution in fiscal year								-4,000	-4,000	-40	-4,040
Comprehensive income for the period					-21	-1		14,529	14,507	-46	14,461
December 31, 2013	14,616	14,616	94,578	28,597	-32	0	-153	25,172	162,778	95	162,873
Capital stock increase	0	0	0						0		0
Change in reserves: Capital stock increase costs			3						3		3
Convertible bonds			5,944						5,944		5,944
Transfer net retained profits / revenue reserves				6,023				-6,023	0		0
Distribution in fiscal year								-5,847	-5,847	0	-5,847
Comprehensive income for the period					-46	0		6,417	6,371	-110	6,261
Acquisition of minority interests				0						10,358	10,358
June 30, 2014	14,616	14,616	100,525	34,620	-78	0	-153	19,719	169,249	10,343	179,592

Segment information – IFRS

Segment information		Cloud solutions		IT solutions
	Jun. 30, 2014 €'000	Jun. 30, 2013 €'000	Jun. 30, 2014 €'000	Jun. 30, 2013 €'000
Sales revenues
- External sales	46,484	21,092	328,114	254,037
- Intersegment sales	364	4	257	32
- Total sales revenues	46,848	21,096	328,371	254,069
- Cost of materials and purchased services	-23,476	-12,744	-229,424	-173,625
- Personnel expenses	-9,990	-2,987	-68,986	-56,146
- Other income and expenses	-2,546	-876	-13,690	-10,728
EBITDA	10,836	4,489	16,271	13,570
- Depreciation and amortization	-2,909	-496	-8,350	-3,914
Operating income (EBIT)	7,927	3,993	7,921	9,656
- Interest income	24	20	146	120
- Interest expenses	-10	-59	-779	-624
- Share in profit or loss of joint ventures accounted for by the equity method	71	0	0	0
Result from ordinary activities	8,012	3,954	7,288	9,152
- Currency translation gains/ losses
Earnings before taxes	8,012	3,954	7,288	9,152
- Income tax
- Discontinued operations	0	0	0	0
Consolidated net income
thereof attributable to the stockholders of the parent company
thereof attributable to minority interests
Other information
- Assets1	56,299	8,722	239,945	166,626
- investments1	35,893	12	75,412	5,784

1) Assets and investments including goodwill from capital consolidation

2) Tax assets

• investments1 35,893 12 75,412 5,784 111,305 5,796 5,175 40 116,480 5,836

IT solutions		Totals Other companies		Reconciliation		Consolidated
Jun. 30, 2014 Jun. 30, 2013 €'000 €'000	Jun. 30, 2014 €'000	Jun. 30, 2013 €'000	Jun. 30, 2014 €'000	Jun. 30, 2013 €'000	Jun. 30, 2014 €'000	Jun. 30, 2013 €'000	Jun. 30, 2014 €'000	Jun. 30, 2013 €'000
254,037	374,598	275,129	146	0
32	621	36	0	0	-621	-36
	375,219	275,165	146	0	-621	-36	374,744	275,129
	-252,900	-186,369	-3	0	500	35	-252,403	-186,334
-56,146	-78,976	-59,133	-4,004	-2,305	0	0	-82,980	-61,438
-10,728	-16,236	-11,604	-1.811	-992	121	1	-17,926	-12,595
	27,107	18,059	-5,672	-3,297	0	0	21,435	14,762
	-11,259	-4,410	-109	-96	0	0	-11,368	-4,506
9,656	15,848	13,649	-5,781	-3,393	0	0	10,067	10,256
	170	140	360	386	-308	-360	222	166
	-789	-683	-414	-259	308	360	-895	-582
	71	0	0	0	0	0	71
	15,300	13,106	-5,835	-3,266	0	0	9,465	9,840
	0	0		0	-7	4	-7
	15,300	13,106	-5,835	-3,266	-7	4	9,458	9,844
					-3,051	-2,965	-3,051	-2,965
0	0	0	-101	0	1	0	-100
							6,307	6,879
							6,417	6,793
							-110
						Reconciliation 2
166,626	296,244	175,348	54,703	1,594	9,748	1,997	360,695	178,939

A. The principles adopted for the consolidated financial statements

1. General information

The consolidated financial statements of CANCOM SE and its subsidiaries ('the CANCOM Group' or 'the Group') for the fiscal year 2014 were drawn up according to the International Financial Reporting Standards (IFRS) or the International Accounting Standards (IAS).

The consolidated financial statements were drawn up in euro. All amounts are shown in thousand euro (€ thousand) unless otherwise stated. Rounding of figures may result in apparent inconsistencies between totals and sums of constituent parts. For the same reason, percentage may not exactly match the aggregate values shown or total 100 percent.

This consolidated interim financial report is condensed and was drawn up in compliance with IAS 34 Interim Financial Reporting. It should be read in conjunction with the IFRS-compliant consolidated financial statements for the fiscal year 2013, which can be downloaded from www.cancom.de.

2. Reporting entity

The consolidated financial statements include CANCOM SE and all subsidiaries in which CANCOM SE has either a direct or an indirect majority stockholding, or in which it holds the majority of the voting rights. These subsidiaries are fully consolidated.

CANCOM's acquisition of a further 4,666,492 stocks in Pironet NDH Aktiengesellschaft, Cologne, Germany, on January 7, 2014 increased its share of the voting rights by 32.0 percent, from 42.9 percent to 74.9 percent. The purchase price was € 4.80 per stock, or for 4,666492 stocks respectively € 22,399 thousand in total.

The company is included in the consolidated financial statements from January 1, 2014, as the period between January 1 and January 7, 2014 is considered unimportant.

The company performs the role of a managerial holding company, i.e. acquiring, holding, managing and selling equity interests in companies focusing on consulting, development, operational and supplementary IT services in Germany and other countries. Included in this role is the provision of administrative services for these companies, in addition to the management of the companies by taking over strategic control and coordination, including defining business segments and corporate policy, exercising a uniform management policy, coordination of activities, monitoring of results and co-decision on such measures taken by the companies in which Pironet NDH Aktiengesellschaft has a direct or indirect interest.

Change in the reporting entity in 2014:

Name and registered office of the company	Date from which included in the consolidated financial statements	Stockholding (in percent)	Voting rights (in percent)
Pironet NDH	January 1, 2014	74.9	74.9
Aktiengesellschaft, Cologne, Germany

The table below shows the impact on the consolidated financial statements of the change in the reporting entity as at January 1, 2014, the date from which Pironet NDH Aktiengesellschaft was included in the consolidated financial statements:

	Fair value €'000	Carrying amount €'000
Cash and cash equivalents	17,538	17,538
Trade accounts receivable	8,521	8,521
Other current financial assets	342	342
Inventories	299	299
Prepaid expenses and other current assets	631	631
Current assets	27,331	27,331
Property, plant and equipment	4,169	4,169
Intangible assets	16,381	4,976
Investments accounted for by the equity method	274	274
Other financial assets	140	140
Deferred taxes from temporary differences	817	817
Deferred taxes resulting from tax loss carryforwards	4,753	4,753
Other assets	47	47
Non-current assets	26,581	15,176
Total assets	53,912	42,507
Trade accounts payable	2,678	2,678
Prepayments received	399	399
Other current financial liabilities	260	260
Provisions	240	240
Deferred income	310	310
Income tax liabilities	635	635
Other current liabilities	2,321	2,321
Current liabilities	6,843	6,843
Deferred taxes	5,161	1,460
Pension provisions	59	59
Non-current liabilities	5,220	1,519
Total liabilities	12,063	8,362
Net assets acquired	41,849	34,145

The acquisition of the company resulted in goodwill of € 21,996 thousand, which is not tax-deductible. The main reason for the acquisition itself, and for recognizing goodwill, was to expand the Group's business, especially in the cloud computing environment.

The non-controlling interests in Pironet NDH Aktiengesellschaft were recognized at the pro rata fair value of the assets and liabilities, which amounts to € 10,358 thousand.

CANCOM SE has bought all the stocks (10,000) of HPM Incorporated, based in Pleasanton, California, through its subsidiary CANCOM, Inc. The purchase is documented in a contract of sale dated February 27, 2014. The purchase price consists of a fixed component of € 6,437 thousand (\$ 8,878 thousand) and a variable purchase price component (an earn-out component) of € 10,056 thousand. The variable component of the purchase price corresponds to each 50 percent of the planned EBITDA of the fiscal years 2014, 2015, 2016 and 2017.

HPM Incorporated trades under the name of HPM Networks. The company operates as a value added reseller (VAR) in the cloud infrastructure environment.

The company was included in the consolidated financial statements with effect from March 1, 2014.

Change in the reporting entity in 2014:

Name and registered office of the company	Date from which included in the consolidated financial statements	Stockholding (in percent)	Voting rights (in percent)
CANCOM, Inc. and subsidiary · HPM Incorporated	March 1, 2014	100	100

The table below shows the present impact on the consolidated financial statements of the change in the reporting entity as at March 1, 2014, the date from which HPM Incorporated was included in the consolidated financial statements:

Fair value €'000	Carrying amount €'000
381	381
2,822	2,822
3	3
247	247
20	20
3,473	3,473
1,027	1,027
8,525	0
22	22
9,574	1,049
13,047	4,522
	462
2,339	2,339
43	43
2	2
270	270
124	124
3,240	3,240
3,653	0
3,653	0
6,893	3,240
6,154	1,282
	462

The acquisition of the company resulted in goodwill of € 10,341 thousand, which is not tax-deductible. The main reason for the acquisition itself, and for recognizing goodwill, was to position CANCOM's business cloud portfolio and to expand the IT solutions portfolio in the U.S. market with a view to selling to clients of HPM Incorporated and potential new clients as well as to extend the regional presence.

CANCOM SE has acquired all the stocks of DIDAS Business Services GmbH – today CANCOM DIDAS GmbH – based in Langenfeld, Germany, for the nominal sum of € 1,000 thousand. The acquisition is documented in a purchase and contribution agreement dated April 10, 2014. The purchase price was € 10,000 thousand and was paid by issuing new no-par-value stocks to the seller as a contribution in kind from the authorized capital of CANCOM SE. The stocks are admitted to the FWB Frankfurt Stock Exchange and are eligible for trading; 263,783 stocks were issued at € 37.91 per stock. Incidental acquisition costs of € 65 thousand arising in the first half of 2014 are shown in the statement of income under other operating expenditure.

CANCOM DIDAS GmbH is an integrated IT systems provider with eight locations in Germany. The company employs 238 people and it generated EBITDA of € 2.0 million and sales revenues of around € 56 million in 2013.

The company was included in the consolidated financial statements with effect from July 1, 2014.

Change in the reporting entity in 2014:

Name and registered office of the company	Date from which included in the consolidated financial statements	Stockholding (in percent)	Voting rights (in percent)
CANCOM DIDAS GmbH, Langenfeld, Germany	July 1, 2014	100	100

The goodwill resulting from the acquisition, which cannot yet be determined, is not tax-deductible. The main reason for the acquisition itself, and for recognizing goodwill, was to gain access to the company's clients, and to expand the IT solutions portfolio and the cloud portfolio of CANCOM DIDAS GmbH as well as to extend the regional presence.

The disclosures required under IFRS 3.59 (b) in conjunction with IFRS 3 B66 and IFRS 3 B64 (h to n) regarding assets acquired and liabilities assumed cannot yet be made, as the acquisition date was too close to the date on which the publication of the financial statements for the first half of 2014 was approved.

3. Accounting and valuation policies

The consolidated interim financial report is compiled using basically the same accounting and valuation methods as those used for the consolidated financial statements for the fiscal year 2013.

B. Notes to the consolidated balance sheet

1. Other current financial assets

This item includes bonuses due from suppliers (€ 2,157 thousand), a purchase price receivable (€ 1,405 thousand), marketing revenue (€ 694 thousand), creditors with a debit balance (€ 354 thousand), receivables from employees (€ 168 thousand), purchase price for the sale of affiliated companies (€ 142 thousand) and receivables from former stockholders (€ 7 thousand).

2. Prepaid expenses and other current assets

This item mainly consists of other current assets such as tax refunds (€ 2,339 thousand), commission income (€ 131 thousand), compensation for damages (€ 115 thousand), receivables from social insurance institutions (€ 18 thousand) and rent receivables (€ 12 thousand).

The prepaid expenses (€ 2,408 thousand) include deferred insurance premiums and other costs paid in advance.

3. Deferred tax assets

The deferred tax assets are as follows:

Deferred tax from	Temporary differences €'000	Tax loss carryforwards €'000
As at January 1, 2014	1,571	196
Addition from recognition of assets directly in equity owing to first-time inclusion in consolidated financial statements	817	4,753
Tax revenue from profit and loss calculation	123	-61
As at June 30, 2014	2,511	4,888

As at June 30, 2014, the CANCOM Group had corporate tax loss carryovers of € 16.9 million and trade tax loss carryovers of € 16.2 million. The unused corporate tax losses for which no deferred tax claim was recognized in the balance sheet amounted to € 1.9 million. The trade tax loss carryovers for which no deferred tax claim was recognized amounted to € 1.5 million. On the basis of the planned tax results, it is expected that the capitalized deferred tax advantages from loss carryovers will be realized.

The deferred taxes from temporary differences are the result of differences in intangible assets (€ 865 thousand), property, plant and equipment (€ 600 thousand), provisions (€ 543 thousand), other liabilities (€ 446 thousand), goodwill (€ 33 thousand) and pension provisions (€ 24 thousand).

4. Other current financial liabilities

This item includes debtors with a credit balance (€ 878 thousand), outstanding bills of charges (€ 415 thousand), purchase price liabilities (€ 210 thousand) Supervisory Board remuneration (€ 114 thousand) rent (€ 88 thousand) and liabilities to stockholders (€ 13 thousand).

5. Other provisions

The provisions mainly include the variable purchase price of stocks in affiliated companies (€ 11,908 thousand), guarantees and warranties (€ 1,494 thousand), severance payments (€ 842 thousand), salaries (€ 246 thousand) archiving costs (€ 123 thousand), additional leasing costs (€ 121 thousand), financial statement costs (€ 110 thousand) and contingent risks (€ 101 thousand).

The total provisions include non-current provisions of € 10,505 thousand, which are disclosed under other non-current liabilities. These provisions are for the variable purchase price of the stocks in HPM Incorporated, on line Datensysteme GmbH – today CANCOM on line GmbH – and CANCOM Unicorner GmbH (€ 9,148 thousand), the severance payments legally mandatory in Austria (€ 544 thousand), guarantees and warranties (€ 583 thousand), anniversaries (€ 175 thousand), additional leasing costs (€ 37 thousand) and part-time work for older employees (€ 18 thousand).

6. Other current liabilities

Other current liabilities mainly include vacation and overtime entitlements (€ 5,110 thousand) bonus payments to Executive Board members and employees (€ 5,074 thousand), sales tax (€ 3,927 thousand), tax on salaries and church tax (€ 2,599 thousand), trade association payments (€ 286 thousand), social security contributions (€ 261 thousand) and wages and salaries (€ 259 thousand).

7. Convertible bonds

In March 2014, CANCOM SE issued a convertible bond for a total nominal amount of € 45,000 thousand. The bond matures in March 2019. The denomination per unit is € 100,000, and holders are entitled to convert the bond into up to 1,055,510 new no-parvalue bearer stocks in CANCOM SE. The initial conversion price is € 42.6334 per stock. The conversion ratio is therefore 2,345.5788 stocks per convertible bond in the nominal amount of € 100,000. The conversion right for the convertible bond can be exercised throughout its term to maturity. The bond has a coupon of 0.875 percent per annum. Interest payments will be made annually on March 27, starting on March 27, 2015.

On the balance sheet, the convertible bond will be split into an equity component and a debt component. The market value of the debt component to be recognized is € 39,000 thousand, taking into account the issuing costs. This value was calculated using the binomial model. The resulting value of the equity component is € 6,000 thousand. This takes into account deferred taxes in the capital reserves. An interest expense of € 127 thousand was recognized for the bond in the first half of 2014.

8. Deferred tax liabilities

The deferred tax liabilities are as follows:

	€'000
As at January 1, 2014	5,210
Addition from recognition of tax liabilities directly in equity owing to first-time inclusion of tax revenue in consolidated financial statements	8,813
Revenue from profit and loss calculation	-1,186
As at June 30, 2014	12,837

The deferred tax liabilities arise from deviations from the tax balance sheets. They are the result of the recognition and revaluation of intangible assets (€ 9,858 thousand), software development costs (€ 1,640 thousand), other financial assets (€ 698 thousand), convertible bonds (€ 222 thousand), orders in process (€ 205 thousand), property, plant and equipment (€ 86 thousand), provisions (€ 69 thousand), trade accounts receivable (€ 47 thousand), profit participation capital and subordinated loans (€ 7 thousand), stocks in associated companies (€ 3 thousand) and other assets (€ 2 thousand).

The deferred tax liabilities are recognized at an individual tax rate of between 25 percent (for the Austrian subsidiary) and 42.84 percent (for the U.S. subsidiary).

9. Other non-current financial liabilities

Other non-current financial liabilities mainly include debtors with a credit balance, amounting to € 631 thousand, rent of € 631 thousand and purchase price liabilities of € 483 thousand.

C. Segment information

Description of segments subject to mandatory reporting

The cloud solutions business segment comprises PIRONET NDH Datacenter AG & Co. KG, PIRONET NDH EDI-Services GmbH and PIRONET NDH Enterprise Solutions GmbH, in addition to the cost centers of CANCOM GmbH allocated to the cloud solutions segment. This business segment includes the CANCOM Group's cloud and shared managed services business, including sales revenues from cloud hardware allocated to the projects. The segment's activities range from analysis and consulting to delivery, implementation and services. This means it offers clients the necessary orientation and support for their transformation from traditional corporate IT systems to cloud computing. As part of its range of services, the CANCOM Group is able to run parts of, or entire, IT departments for its clients, using scalable cloud and managed services – especially shared managed services. Distribution costs allocated to cloud distribution are included in the segment; in addition, the cloud business benefits from synergies with the normal CANCOM distribution system.

The IT solutions business segment comprises CANCOM GmbH, CANCOM Computersysteme GmbH, CANCOM a + d IT solutions GmbH, CANCOM (Switzerland) AG, CANCOM NSG GmbH, CANCOM NSG GIS GmbH, CANCOM NSG SCS GmbH, CANCOM NSG ICP GmbH, CANCOM on line GmbH, Imperia AG, CANCOM physical infrastructure GmbH, acentrix GmbH, Glanzkinder GmbH, CANCOM GES Gesellschaft für elektronische Systeme mbH, CANCOM, Inc., HPM Incorporated and Verioplan GmbH less the cost centers of CANCOM GmbH allocated to the cloud solutions segment. This business segment of the CANCOM Group offers comprehensive support for IT infrastructure and IT applications. The range of services offered includes IT strategy consulting, project planning and implementation, system integration, IT procurement via e-procurement services or as part of a project, as well as professional IT services and support.

The other companies are CANCOM SE, Pironet NDH AG, CANCOM VVM GmbH and CANCOM Financial Services GmbH. CANCOM SE and Pironet NDH AG perform the staff and/or management function. As such, they provide a range of services for their subsidiaries. The costs of central management of the Group and investments in internal Group projects also fall within this segment.

Reconciliation

Reconciliation shows items not directly connected with the operating segments and the other companies. They include sales within the business segments, and the income tax expense.

The income tax expense is not a component of the profits of the operating segments. Since the tax expense is allocated to the parent company where the parent company is the taxable entity, the allocation of the income tax does not exactly correspond to the structure of the segments.

Information on geographical regions

		Sales revenues according to customer location		Sales revenues according to company location
	Jan. 1 - Jun. 30, 2014 €'000	Jan. 1 - Jun. 30, 2013 €'000	Jan. 1 - Jun. 30, 2014 €'000	Jan. 1 - Jun. 30, 2013 €'000
Germany	328,243	254,570	342,560	263,055
Outside Germany	46,501	20,559	32,184	12,074
Group	374,744	275,129	374,744	275,129

		Non-current assets
	March 31, 2014 €'000	March 31, 2013 €'000
Germany	125,730	60,267
Outside Germany	20,727	1,907
Group	146,457	62,174

Non-current assets include property, plant and equipment, intangible assets, goodwill, shares in associated companies, and other non-current assets. Financial instruments and deferred tax claims are not included.

D. Notes to the consolidated statement of income

1. Other operating income

The other operating income is made up of the following:

	Jan 1 - Jun 30, 2014	Jan 1 - Jun 30, 2013
	€'000	€'000
Rent	3	20
Income not relating to the period	199	107
Government grants	234	215
Other operating income	15	60
Total	451	402

2. Personnel expenses

The personnel expenses consist of the following:

	Jan 1 - Jun 30, 2014 €'000	Jan 1 - Jun 30, 2013 €'000
Wages and salaries	71,130	52,265
Social security contributions	11,733	9,054
Pension expenses	117	119
Total	82,980	61,438

3. Other operating expenses

The other operating expenses consist of the following items:

	Jan. 1 - Jun. 30, 2014 €'000	Jan. 1 - Jun. 30, 2013 €'000
Office space costs	4,387	3,311
Insurance and other charges	542	335
Motor vehicle costs	2,578	2,203
Marketing costs	1,460	555
Stock exchange and entertainment costs	202	227
Hospitality and traveling expenses	2,499	1,645
Delivery costs	1,225	927
Third-party services	1,113	1,006
Repairs, maintenance, leasing	804	440
Communication and office expense	1,181	957
Professional development and training costs	682	669
Legal and consultancy expenses	1,310	401
Fees and charges, costs of money transactions	584	144
Adjustments on receivables	0	0
Other operating expenses	900	530
Total	19,467	13,350

4. Income tax

The rate of income tax for the German companies was 30.63 percent (2013: 30.57 percent). This is made up of corporate tax, trade tax and solidarity surcharge.

The divergence between the tax expenses reported and those at the tax rate of CANCOM SE is shown below:

	Jan. 1 - Jun. 30, 2014 €'000	Jan. 1 - Jun. 30, 2013 €'000
Earnings before tax	9,458	9,844
Expected tax expense at rate for German companies (30.63 percent; 2013: 30.57 percent)	2,897	3,009
- Difference from tax paid outside Germany	-75	23
- Tax-exempt income / non tax-relevant losses on disposals	40	0
- Actual income tax not relating to the period	-44	-106
- Permanent differences: non-deductible operating expenses as well as additions and reductions in
relation to trade tax	247	70
- Other	-14	-31
Total group income tax	3,051	2,965

The actual tax rate is calculated as follows:

	€'000
Income before tax	9,458
Income tax	3,051
Actual tax expense rate	32.26%

Income tax comprises the income tax paid or owed in the individual countries, and the deferred taxes:

	Jan. 1 -Jun. 30, 2014 €'000	Jan. 1 - Jun. 30, 2013 €'000
Actual income tax paid	4,264	3,542
Deferred taxes:
Assets	-62	-523
Liabilities	-1,186	-54
	-1,248	-577
Deferred tax from items directly recognized in equity	35	0
Group income tax	3,051	2,965

5. Minority interests

Minority interests account for 49 percent of acentrix GmbH's net loss (€ 101 thousand), 51 percent of Glanzkinder GmbH's net loss (€ 60 thousand) and 25.14 percent (for the period January 1 to February 28), 22.93 percent (for the period March 1 to 31), 24.76 percent (for the period April 1 to May 31) and 22.08 percent (for the period June 1 to 30) of the net income of the Pironet NDH AG sub-group (€ 51 thousand).

E. Other disclosures

1. Related party disclosures

For the purposes of IAS 24, Klaus Weinmann can be considered a related party who can exercise a significant influence on the CANCOM Group, both as an Executive Board member and as a shareholder in CANCOM SE. Rudolf Hotter, the other Executive Board member, is also a related party for the purposes of IAS 24, as are the members of the Supervisory Board. Other related parties under IAS 24.9 b are:

• AL-KO Kober SE and its subsidiaries;
• WFO Vermögensverwaltung GmbH;
• AURIGA Corporate Finance GmbH; and
• Dr. Vielberth Verwaltungsgesellschaft mbH.

Transactions with related parties were settled in the same way as arm's length transactions, and the payment terms were net 10 to 30 days.

The transaction volume of goods sold and services provided to related parties under IAS 24 in the first half of 2014 was as follows: € 1,658 thousand (gross) in relation to goods/services purchased by AL-KO Kober SE and its subsidiaries, of which € 184 thousand was still outstanding at the balance sheet date; € 1 thousand in relation to goods/services purchased by Walter von Szczytnicki, which had been paid for in full by the balance sheet date.

The transaction volume of goods and services purchased from related parties under IAS 24 was € 4 thousand (gross), which had been paid in full by the balance sheet date. This amount relates to goods/services purchased from AL-KO Kober SE and its subsidiaries.

2. Stocks held by members of the Executive and Supervisory Boards (at the balance sheet date)

A list of stockholdings can be found on page 9 of this interim report.

3. Equity interests in the company as defined in Section 20 IV of the German Stock Companies Act (Aktiengesetz, AktG)

CANCOM SE did not receive written notice from any stockholder disclosing a majority stockholding as defined in Section 20 of the above Act in the first half of 2014.

This is a translation of CANCOM SE's interim report. Only the German version of the report is legally binding. Every effort was made to ensure the accuracy of the translation, however, no warranty is made as to the accuracy of the translation and the company assumes no liability with respect thereto. The company cannot be held responsible for any misunderstandings or misinterpretation arising from this translation.

CANCOM SE

Investor Relations Erika-Mann-Straße 69 80636 München Phone +49 89 54054–5193 Fax +49 8225 996–45193 ir@cancom.de www.cancom.de