CANCOM SE — Interim / Quarterly Report 2017

Nov 9, 2017

QUARTERLY STATEMENT AS AT SEPTEMBER 30, 2017

Group key figures

Q3 AT A GLANCE

in € million	Jul. 1 - Sep. 30, 2017	Jul. 1 - Sep. 30, 2016	Changes
Sales revenues	273.1	225.5	21.1%
Gross profit	78.0	69.9	11.6%
EBITDA	20.1	17.2	16.9%
EBITDA margin in %	7.4%	7.6%	-0.2%
EBITA	16.5	13.8	19.6%
EBIT	13.7	11.7	17.1%

9 MONATE

in € million	Jan. 1 - Sep. 30, 2017	Jan. 1 - Sep. 30, 2016	Changes
Sales revenues	809.0	717.7	12.7%
Gross profit	228.4	212.7	7.4%
EBITDA	55.5	50.2	10.6%
EBITDA margin in %	6.9%	7.0%	-0.1%
EBITA	44.6	40.4	10.4%
EBIT	38.8	34.3	13.1%
EBT	36.9	33.2	11.1%
Earnings per share (basic) in €	1.49	1.42	4.9%
Average number of shares (in 1,000) (basic)	16,443	16,025	2.6%
Employees as at Sep 30	2,905	2,825	2,8%
in € million	Sept. 30, 2017	Dec. 31, 2016	Changes
Balance sheet	570.1	537.8	6.0%
Equity	338.9	285.1	18.9%
Equity ratio in %	59.4%	53.0%	6.4%

	Revenue CANCOM Group Jan. 1 - Sep. 30, 2016 and Jan. 1 - Sep. 30, 2017 (in € million)		Gross profit CANCOM Group Jan. 1 - Sep. 30, 2016 and Jan. 1 - Sep. 30, 2017 (in € million)
2016	717.7	2016	212.7
2017	809.0	2017	228.4
	EBITDA CANCOM Group		Earnings per share CANCOM Group
	Jan. 1 - Sep. 30, 2016 and Jan. 1 - Sep. 30, 2017 (in € million)		Jan. 1 - Sep. 30, 2016 and Jan. 1 - Sep. 30, 2017 (in Euro)

2016	50.2	2016	1.42
2017	55.5	2017	1.49

Table of contents

2 Key figures

3	Table of contents
4	Preface
5 - 11	Consolidated Interim Management Report Q3 1) Fundamental information about the Group 2) Economic report 3) Earnings, financial and assets position of the CANCOM Group 4) Stock ownership of the Boards as at September 30, 2017 5) Risks of future development 6) Opportunities for future develpoment 7) Forecast	5 - 6 6 - 7 7 - 8 9 9 9 9 - 10
12 - 13	Balance Sheet
14 - 15	Consolidated statement of income
16	Consolidated statement of comprehensive income
17	Statement of cash flows
18 - 19	Segment information

20 - 27 Notes to the consolidated accounts

Dear Stockholders:

CANCOM is approaching the end of 2017 with great strides. We are already looking ahead eagerly to the numerous challenges that lie before us, not only in the coming year. Digital transformation is bringing with it great changes in all fields and sectors. I am optimistic that we will face these with an ambitious approach and with the right structure in the Group, and be able to accelerate our growth.

The right structure involves, first of all, our comprehensive portfolio – both in the integrated IT systems business and in the cloud and managed services environment. We intend to expand the latter in a consistent, focused way, as enterprises are increasingly showing a preference for 'IT as a service' models, and this business guarantees CANCOM recurring, more sustainable revenue in areas of business with high market growth. Nevertheless, in our view there is still a high demand for innovative IT infrastructure solutions – for instance in the data center business – especially in a networked, digitized world. We therefore see great potential for growth and income in both our IT solutions segment and our cloud solutions segment.

Second, by its recent appointment of Executive Vice Presidents to the extended Executive Committee and the addition of two further Executive Board members, CANCOM has created a strong structure in order to pursue rigorously the ambitious growth targets set for the coming years, and progress the transformation of its business model towards cloud and managed services. In addition to the appointments at senior management level, we have gained a number of highly qualified new staff members, some of whom came to CANCOM through company acquisitions.

Finally, therefore, another element of the Group's well-functioning structure mentioned above is that we have the right setting for staff retention. This includes making CANCOM attractive to specialist staff or high potentials by applying modern workplace concepts and working models, or providing high-performance systems and facilities for our future growth by the introduction of SAP and the extension of our Service Factory. This is why we have invested in these areas and will continue to do so where necessary.

We are happy to have the support of our stockholders and investors on CANCOM's continuing journey, and appreciate your confidence in us.

Sincerely yours

Klaus Weinmann CEO

Consolidated interim management report

1. Overview of the Group

The CANCOM Group is one of the leading providers of information technology (IT) infrastructure and services in Germany and Austria. With its decentralized distribution and services structure, as well as central services in areas such as finance, purchasing, warehousing, logistics, marketing, product management and human resources, the Group is well placed for sustainable, profitable growth. The Group has locations in Germany, Austria, Switzerland and the U.S.A. in addition to a representative office in Brussels, Belgium.

Structure of the CANCOM Group

CANCOM SE (also referred to as CANCOM), 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 operating segment of the CANCOM Group offers comprehensive support for IT infrastructure and 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, in addition to professional IT services and support.

The cloud solutions operating segment comprises the CANCOM Group's cloud and shared managed services business, including sales revenues from cloud hardware, software and services allocated to the projects. The service offer includes analysis, advice, delivery, implementation and services, thus offering clients the necessary orientation and support for their conversion from corporate IT systems to cloud computing. As part of its range of services, the CANCOM Group can provide scalable cloud and managed services – in particular shared managed services – to run entire IT departments, or parts of them, for its clients. Distribution costs allocated to cloud distribution are included in the segment. The cloud business also benefits from synergies with CANCOM's central sales and marketing department, the costs of which are allocated to the IT solutions reportable segment.

Some items in the segments were reclassified as at the reporting date of December 31, 2016. The merger of two Group companies during the year necessitated structural adjustments and reorganization in terms of the companies and regions included in the segments. This resulted in changes in the areas of responsibility and the splitting of entire departments, which required a reallocation of the new structure to the segments. The interim figures for the fiscal year 2016 were adjusted to reflect these changes.

Focus of activities and sales markets

CANCOM is one of the largest independent integrated IT systems providers in Germany. It provides IT architecture, systems integration and managed services. As a provider of integrated services, it mainly focuses on IT services, in addition to distributing hardware and software. The IT services offered include IT consulting, the design of IT architectures and landscapes, and the design, integration and operation of IT infrastructure and systems. CANCOM can manage individual partial assignments or run a company's entire IT systems.

The CANCOM's client base therefore mainly includes commercial end-users, from small and medium sized enterprises to large companies and groups, as well as public-sector clients. Geographically, the CANCOM Group operates primarily in Germany and Austria as well as in the U.S.A.

Explanation of the control system used within the Group

To control and monitor the performance of the individual subsidiaries and the reporting segments, CANCOM SE analyzes their monthly figures for, among other things, sales revenues, gross profit, operating expenditure and operating profit, and compares the actual figures with the targets. The key performance indicators are gross profit, EBITDA and operating profit (EBIT). The latter offers a detailed picture of the performance of the enterprise as a whole, as it enables management to draw conclusions about the operational business performance and make transparent comparisons, particularly over a period of time. Any significant deviations identified in the key figures call for the preparation of a forecast. For the purpose of management control, the company also regularly looks at external indicators such as inflation and interest rates, and IT sector and general economic performance and forecasts. It also takes into account any early warning data or indicators generated by the Group-wide risk management system. Further details can be found in the risks and opportunities report.

Research and development activities

Innovation is very important for economic momentum and growth. As it is a service and trading enterprise, CANCOM does not conduct any research activities. Its development work focuses mainly on software solutions, applications or architecture in IT growth segments such as cloud, mobility, collaboration, IT security and governance, IoT and analytics, and shared managed services. Development work is limited in scope and is mainly used for the Group's own purposes. Cloud computing benefits the entire enterprise, as it offers huge advantages for the IT departments, management and staff. Above all, users benefit from the central provision of applications and being able to access company data at all times, in any location and on any device. During the period under review, further development work was carried out on the Group's own IT architecture platform, CANCOM AHP Enterprise Cloud, in addition to customization of in-house software used by the company, mainly in connection with the Group-wide introduction of the enterprise resource planning (ERP) system of SAP.

2. Economic report

The general economic situation and the performance of the IT sector

The Deutsche Bundesbank believes the German economy is capable of a strong third quarter. According to its monthly report, published on October 23, the economy is still in a phase of strong growth, and in the third quarter of 2017 it may have sustained the fast pace of expansion seen in the first half of the year. The growth is probably driven by industry, which benefited from the strong international demand for goods with the 'Made in Germany' label. The German IT market is also likely to have benefited from this positive development. According to the August sector barometer from BITKOM, Germany's digital association, four out of five companies expect sales revenues in the second half of the year to be higher than in the second half of 2016.

Impact on the CANCOM Group's business performance

On the back of continued strong demand from its clients, CANCOM SE's figures for the first nine months of the current fiscal year are positive. The growth extends to all areas and is thus visible in the Group as a whole as well as in both operating segments.

Significant events in the third quarter and after the end of the reporting period

On September 5, 2017, CANCOM SE notified bondholders of its irrevocable decision to redeem early all outstanding convertible bonds (issued in March 2014) in accordance with section 5 (b) of the issuing conditions. Every holder of a convertible bond who had not exercised the conversion right in accordance with section 8 of the issuing conditions by September 29, 2017 was repaid the specified nominal amount in addition to all interest accrued up to (but not including) October 6, 2017 (the call redemption date).

In order to rigorously pursue its ambitious growth targets for the next few years, and to progress the transformation of its business model towards cloud and managed services, CANCOM is adding to its top management. From November 1, 2017, Thomas Volk will join the Executive Board of CANCOM SE as President and General Manager. The current Chief Financial Officer, Thomas Stark, will also officially become a member of the Executive Board.

Employees

As at September 30, 2017, the CANCOM Group employed 2,905 people (2016: 2,825).

The employees worked in the following areas (as at September 30):

Professional services 1,851 Sales and distribution 600 Central services 454

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

	Jan. 1.-Sep. 30, 2017 €'000	Jan. 1.-Sep. 30, 2016 €'000
Wages and salaries	121,445	113,773
Social security contributions	19,485	18,450
Pension provisions	327	253
Total	141,257	132,476

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

a) Earnings position

The CANCOM Group recorded a growth in its sales revenues and profits in the first nine months of 2017 in comparison with the same period of 2016. Consolidated sales revenues were up 12.7 percent, from € 717.7 million to € 809.0 million.

In Germany, sales revenues were up by 12.6 percent, from € 640.6 million to € 721.1 million. In international business, the Group's sales revenues increased by 14.0 percent, from € 77.1 million to € 87.9 million.

In the IT solutions segment, sales revenues were up by 13.4 percent, from 603.4 million in the previous year to € 684.1 million in 2017. In the cloud solutions segment, sales revenues also charted growth of 9.3 percent, from € 114.2 million to € 124.8 million.

The gross profit of the CANCOM Group for the first nine months of 2017 was 7.4 percent higher than in the same period of the previous year. It rose from € 212.7 million to € 228.4 million. The gross profit margin was 28.2 percent in comparison with 29.6 percent in the same period of 2016.

Staff expenses increased from € 132.5 million at the end of the first nine months of 2016 to € 141.3 million as at September 30, 2017. This reflects the stepping-up of Group activities in the areas of high-level consulting and services.

At € 55.5 million, consolidated EBITDA for the first nine months of the fiscal year 2017 was up on the figure recorded for the same period of the previous year (€ 50.2 million). This resulted in an EBITDA margin of 6.9 percent compared to 7.0 percent in the first nine months of 2016.

	CANCOM Group EBITDA
	year-on-year comparison of figures
	for the first nine months of the year (in € million)
2016	50.2
2017	55.5

Consolidated earnings before interest and tax (EBIT) increased by 13.1 percent from € 34.3 million in the first nine months of 2016 to € 38.8 million in the period under review.

	CANCOM Group EBIT year-on-year comparison of figures for the first nine months of the year (in € million)
2016	34.3
2017	38.8

The profit of the first three quarters after taxes and deduction of minority interests was € 24.6 million, up from € 22.8 million at the end of the first nine months of 2016. Earnings per share for the period January to September 2017 therefore amounted to € 1.49, compared to € 1.42 in the same period of 2016.

Order position

In the cloud solutions segment, and large parts of the IT solutions segment, orders are often placed over long periods. For this reason the reporting date figures do not give a good indication of the order situation, and they are therefore not published. At the time this management report was written, capacity utilization among our consultants was good in both business segments.

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 to the capital structure

On the assets side of the balance sheet, there was a decrease in current assets from € 370.8 million to € 325.6 million between December 31, 2016 and September 30, 2017. Cash and cash equivalents rose from € 63.6 million to € 67.7 million in the same period. Trade accounts receivable increased from € 182.4 million to € 200.0 million. Inventories rose from € 22.5 million to € 34.8 million.

At € 244.6 million as at September 30, 2017, non-current assets increased in comparison with € 167.0 million as at December 31, 2016. Property plant and equipment (tangible assets) went up from € 44.1 million to € 56.8 million on account of the structural expansions to the logistics and services factory at the company's location in Jettingen-Scheppach, Germany.

On the liabilities side of the balance sheet, there was an increase in current liabilities from € 188.5 million as at December 31, 2016 to € 198.3 million at the end of the first nine months of 2017. Trade accounts payable were up from € 127.0 million to € 132.1 million. Furthermore the current portion of the convertible bond issue stood at € 14.2 million.

Non-current liabilities, consisting of debt with a residual term of at least one year, also decreased. They fell from € 64.2 million as at December 31, 2016 to € 32.9 million as at September 30, 2017 due to the partly conversion of convertible bonds.

Nominal equity increased to € 338.9 million, compared to € 285.1 million as at December 31, 2016. The equity ratio stood at 59.4 percent as at September 30, 2017 (December, 31, 2016: 53.0 percent). Total assets were € 570.1 million as at the end of the first nine months of the current year and € 537.8 million as at December 31, 2016.

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

A positive cash flow from ordinary activities of € 14.0 million was recorded as at September 30, 2017, mainly owing to a change in working capital. The cash flow recorded in the same period of the previous year stood at € 8.5 million.

There was a positive cash flow of € 2.8 million from investing activities, in comparison with a negative cash flow of € 96.8 million in the same period of 2016.

As at September 30, 2017, a negative cash flow of € 10.8 million was recorded from financing activities. At the end of the first nine months of 2016, there was a positive cash flow of € 55.2 million.

In total, this resulted in cash and cash equivalents of € 67.7 million in the first nine months of the year, compared to € 52.5 million in the same period of the year before.

4. Stock ownership of the Boards as at September 30, 2017

Total number of shares	17,264,318	100 percent
(Total of voting rights announced on September 29, 2017)
Executive Board
Klaus Weinmann	10,000	0.1 percent
Supervisory Board
Dominik Eberle	10,000	0.1 percent

5. 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 2016, starting on page 30. The annual report can be downloaded from https://www.cancom.com/investors/reports/ or obtained in printed form, free of charge, from the company.

6. 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 2016, starting on page 39. The annual report can be downloaded from https://www.cancom.com/investors/reports/ or obtained free of charge from the company.

7. Forecast

The German economy is continuing to grow, according to the Federal Ministry of Economics. Presenting the federal government's latest estimate of economic growth on October 11, the Minister for Economics said that Germany is in a steady and broad-based recovery, which is underpinned by high-spending consumers and higher investments by enterprises. The forecast for the year 2017 was accordingly raised from 1.5 to 2.0 percent.

The IT market will continue to be shaped by strong growth and innovation. The complexity and variety of solutions, and thus also the demands placed on company IT departments, will continue to increase – driven, among other things, by changed work and usage patterns.

The digitization of nearly all sectors and the resulting comprehensive networking – along with the Internet of Things – are increasingly driving the development of business models, production processes and products, across all sizes of organization and in all areas of the economy. Against this background, a rise in the demand for innovative and intelligent IT solutions can be expected.

This is also reflected in the BITKOM forecast for 2017, which the digital association last updated in October this year. Accordingly the German IT market should grow by 3.4 percent to around € 86.0 billion in 2017. With 6.3 percent the software segment should see the strongest growth. Sales revenues from IT hardware are expected to increase by 2.6 percent. IT services revenues should rise by 2.3 percent.

Anticipated performance of the CANCOM Group

Thanks to its proven expertise and outstanding market position in the IT growth areas referred to above – cloud computing, big data & analytics, mobility, security and shared managed services – CANCOM aims to continue growing its two operating segments, both organically and through acquisitions, at a faster rate than the German IT market, so continuously expanding its market share. To achieve this objective, CANCOM decided at an early stage to gear its business policy to the IT growth areas, designing its sales and services structure around them while focusing on the expansion of the higher-end services and consulting business. With its integrated portfolio of services across all areas of IT, and its flexibility in providing individually tailored packages for its clients, CANCOM has major client advantages to enable it to penetrate the market even further and more comprehensively. In addition, the increasing complexity of IT is stretching smaller integrated systems providers to the limits of their capabilities and as such could result in the CANCOM Group gaining new clients and orders – with positive impacts on the IT solutions and cloud solutions business.

In the past year, the Executive Board set the course for further growth and good performance in the future. CANCOM focuses on profitable business in the traditional IT environment and withdraws without hesitation from low-growth, declining areas or those that the Executive Board considers not to be sustainable. The IT solutions and cloud solutions operating segments benefit from each other's business, due to the interactions between the CANCOM units across the Group and the fact that the provision of integrated solutions for clients usually requires input from both areas.

CANCOM has significantly expanded its market presence and improved its client proximity in the German-speaking area. The Group is represented all over Germany and Austria by its many service and consulting locations. It also has subsidiaries in Switzerland and the U.S.A. as well as a representative office in Brussels, Belgium. CANCOM intends to continue strengthening its market position, partly through selective acquisitions, while taking advantage of market and cost synergies. The highly fragmented service provider landscape, particularly in the IT environment in the German-speaking area, continues to offer favorable conditions for CANCOM to act as a market consolidator.

The CANCOM is planning to implement the SAP ERP system throughout the Group. Owing to the complexity and scale of the project, there may be delays in implementing the project. Additionally, the changeover to the new system may have a negative impact on business performance in the short term if, for instance, business organization and governance are affected, processes do not take place correctly, resources are misused or sales activities are held in check. To avoid negative impacts, particularly on the traditionally strong year-end business, the system changeover planned for 2017 has been postponed until the fiscal year 2018.

In the fiscal year 2017, significant investments will be made in the construction of extensions to the logistics and services factory at the company's location in Jettingen-Scheppach, Germany.

Against the background of the Group's positive performance in fiscal 2016 and in view of its favorable positioning in the growing markets of cloud computing and associated trends in the IT market as a whole, the Executive Board expects further growth and an improvement in sales revenues and profits if the demand for IT products remains steady.

Currently unforeseen events could influence the anticipated performance of both the Group as a whole and of the reportable segments, IT solutions and cloud solutions. Even foreseeable events such as the Group-wide implementation of the SAP ERP system and the connected system migrations could have negative impacts.

The Executive Board currently expects a further increase in the sales revenues and gross profit of the Group as a whole in the fiscal year 2017. The growth of the CANCOM Group should continue to exceed the growth of the German IT market. The Executive Board expects the CANCOM Group's EBITDA to increase further in the fiscal year 2017, in line with the organic growth. For information concerning the anticipated performance of the Group and its operating segments in 2017, please see the forecast section of the annual report for 2016, starting on page 50.

Munich, Germany, November 2017

CANCOM SE

The Executive Board

Disclaimer regarding forward-looking statements

This document has not been audited. It contains statements relating to our future business and financial performance and to future events or developments affecting CANCOM that may constitute forward-looking statements. These statements are based on the current expectations, assumptions and estimates of the Executive Board and other information currently available to the management, of which many are beyond CANCOM's control. These statements can be identified by phrases and words such as 'expect', 'want', 'assume', 'believe', 'endeavor', 'estimate', 'presume', 'calculate', 'intend', 'could', 'plan', 'should', 'will', 'forecast' or similar words.

All statements with the exception of facts regarding the past are forward-looking statements. Such statements include expectations regarding the availability of products and services, the financial and earnings position, the business strategy and the Executive Board's plans for future operating activities, economic performance and all statements regarding assumptions. Although we take the greatest of care when making these statements, 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 technologies; changes in the investment behavior of target client groups etc. and changes to the business strategy. If one or more of these risks or uncertainties should materialize, or if the underlying expectations are not fulfilled or assumptions prove incorrect, the actual results, performance or achievements of CANCOM may (either negatively or positively) deviate substantially from those described either explicitly or implicitly in the relevant forward-looking statement. CANCOM cannot guarantee the pertinence, accuracy, completeness or correctness of the information or opinions in this document.

CANCOM does not make any commitment to update its forwardlooking statements, nor does it intend to update them or correct them if developments differ from those anticipated. Due to rounding, some of the numbers presented in this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures they refer to.

Consolidated balance sheet (IFRS)

ASSETS

(in € 000)	Notes	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Current assets
Cash and cash equivalents		67,736	63,590	52,461
Assets held for sale		360	360	0
Trade accounts receivable		199,957	182,433	142,771
Other current financial assets	B.1.	15,396	96,062	78,254
Inventories		34,787	22,524	28,102
Contracts in progress		904	417	833
Prepaid expenses and other current assets	B.2.	6,420	5,377	5,748
Total current assets		325,560	370,763	308,169
Non-current assets
Property, plant and equipment (tangible assets)		56,805	44,147	42,313
Intangible assets		55,388	28,307	27,547
Goodwill		113,915	73,230	72,443
Long-term financial assets		5,385	795	165
Investments accounted for using the equity method		589	501	523
Loans		1,309	1,912	2,306
Other non-current financial assets		6,505	12,716	6,279
Deferred taxes arising from temporary differences	B.3.	2,663	2,665	2,138
Deferred taxes arising from tax loss carryforward	B.3.	655	1,605	1,995
Other assets		1,372	1,157	1,256
Total non-current assets		244,586	167,035	156,965
Total assets		570,146	537,798	465,134

EQUITY AND LIABILITIES

(in € 000)	Notes	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Current liabilties
Short-term loans and current portion of long-term loans		1,038	1,922	2,449
Convertible bonds	B.7.	14,180	0	0
Profit-participation capital and subordinated loans - short-term portion		1,557	633	619
Trade accounts payable		132,115	127,047	76,685
Prepayments received		4,729	5,349	4,332
Other current financial liabilities	B.4.	6,328	6,425	6,712
Provisions	B.5.	3,248	4,883	5,720
Deferred income		4,400	3,946	3,006
Income tax liabilities		8,715	10,244	6,950
Other current liabilities	B.6.	21,233	27,294	20,627
Liabilities in connection with assets held for sale		770	772	0
Total current liabilties		198,313	188,515	127,100
Non-current liabilities
Long-term loans		1,533	2,081	2,279
Convertible bonds	B.7.	0	41,778	41,438
Profit-participation rights and subordinated loans		3,548	4,457	4,534
Deferred income		2,518	2,316	3,000
Deferred taxes arising from temporary differences	B.8.	13,676	7,550	7,063
Pension provisions		2,012	1,942	1,807
Other non-current financial liabilities	B.9.	664	629	732
Other non-current liabilities	B.5.	8,968	3,451	3,258
Total non-current liabilities		32,919	64,204	64,111
Equity
Capital stock		17,264	16,368	16,368
Capital reserves		212,052	173,935	173,936
Net retained profit/net accumulated loss (incl. revenue reserves)		107,611	91,263	80,804
Equity capital difference due to currency translation and exchange rate differences		-42	1,571	882
Non-controlling interests		2,029	1,942	1,933
Total equity		338,914	285,079	273,923
Total equity and liabilities		570,146	537,798	465,134

CONSOLIDATED STATEMENT OF INCOME

			Q3		9 months
(in € 000)	Notes	Jul. 1 - Sep. 30, 2017	Jul. 1 - Sep. 30, 2016	Jan. 1 - Sep. 30, 2017	Jan. 1 - Sep. 30, 2016
Sales revenues		273,059	225,530	808,978	717,715
Other operating income	D.1.	463	1,220	1,492	2,263
Other own work capitalized		678	446	1,532	1,483
Total revenue		274,200	227,196	812,002	721,461
Cost of purchased materials and services		-196,163	-157,332	-583,623	-508,730
Gross profit		78,037	69,864	228,379	212,731
Human resources expenses	D.2.	-46,845	-42,924	-141,257	-132,476
Amortization and write-downs of intangible assets,
and depreciation and write-downs of tangible assets		-6,427	-5,453	-16,680	-15,986
Other operating expenses	D.3.	-11,100	-9,786	-31,615	-30,013
Operating result		13,665	11,701	38,827	34,256
Interest and similar income		94	141	472	456
Interest and other expenses		-611	-872	-2,147	-2,504
Other financial result: income		-2	1,343	52	1,343
Other financial result: expenses		-371	-1	-373	-232
Share of profit/loss from associated companies accounted for using the equity method		0	-5	98	72
Currency translation gains/losses		-8	-16	-9	-170
Earnings before taxes		12,767	12,291	36,920	33,221
Income taxes	D.4.	-4,681	-3,322	-12,234	-10,160
Earnings after taxes from continuing operations		8,086	8,969	24,686	23,061
Earnings from discontinued operations		0	-7	-3	-7
Net income/(loss) for the period		8,086	8,962	24,683	23,054
thereof attributable to the stockholders of the parent		8,070	8,911	24,550	22,794
thereof attributable to non-controlling interests	D.5.	16	51	133	260
Average number of shares outstanding (basic)		16,480,224	16,367,531	16,443,072	16,025,410
Average number of shares outstanding (diluted)		17,492,049	17,423,041	17,469,299	17,080,920
Earnings per share from continuing operations (basic) in €		0.49	0.54	1.49	1.42
Earnings per share from continuing operations (diluted) in €		0.49	0.51	1.47	1.33
Earnings per share from discontinued operations (basic) in €		0.00	-0.00	-0.00	-0.00
Earnings per share from discontinued operations (diluted) in €		0.00	-0.00	-0.00	-0.00
Earnings per share attributable to stockholders of the parent from net income/loss for the period (basic) in €		0.49	0.54	1.49	1.42
Earnings per share attributable to stockholders of the parent from net income/loss for the period (diluted) in €		0.49	0.51	1.47	1.33

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Q3		9 months
(in € 000)	Jul. 1 - Sep. 30, 2017	Jul. 1 - Sep. 30, 2016	Jan. 1 - Sep. 30, 2017	Jan. 1 - Sep. 30, 2016
Net income/loss for the period	8,086	8,962	24,683	23,054
Other comprehensive income
Items possibly to be reclassified in profit or loss in subsequent periods
Currency translation difference	-656	-75	-2,340	-304
Exchange price differences - securities	0	0	0	0
Income taxes	203	23	727	94
Items not to be reclassified in profit or loss
Change in actuarial gains/losses from pensions	-2	0	1	0
Deferred taxes from change in actuarial gains/losses from pensions	1	0	0	0
Other comprehensive income for the period (after taxes)	-454	-52	-1,612	-210
Comprehensive income for the period	7,632	8,910	23,071	22,844
thereof attributable to stockholders of the parent	7,616	8,859	22,938	22,584
thereof attributable to non-controlling interests	16	51	133	260

CONSOLIDATED CASH FLOW STATEMENT

(in € 000)	Jan. 1 - Sep. 30, 2017	Jan. 1 - Sep. 30, 2016
Cash flow from ordinary activities
Profit for the year before tax and minority interest	36,920	33,221
Adjustments
+ Amortization and write-downs of intangible fixed assets, and depreciation and
write-downs of tangible fixed assets	16,680	15,986
+ Interest result and other financial result	1,996	937
+/- Changes in long-term provisions	365	139
+/- Changes in short-term provisions	-108	-462
+/- Result from the sale of intangible assets, tangible assets and financial assets	-249	-748
+/- Changes in inventories	-11,762	-168
+/- Changes in accounts receivable from purchases and services, as well as other receivables	-9,741	4,764
+/- Changes in accounts payable from purchases and services, as well as other payable	-4,884	-39,309
- Interest paid	-189	-132
+/- Income tax paid and refunded	-14,895	-5,106
+/- Non-cash expenses and income	-98	-664
+/- Cash inflow/outflow from discontinued operations	-3	-8
Net cash from operating activities	14,032	8,450
Cash flow from investing activities +/- Acquisition of subsidiaries and equity instruments of other companies	-52,604	-11,782
+/- Cash from acquisitions	3,591	0
- Acquisition of long-term financial assets	-4,519	-101
- Purchase of available-for-sale current financial assets	0	-70,000
- Payments for additions to intangible assets and tangible assets	-29,345	-16,826
+ Income from disposal of intangible assets, tangible assets and financial assets	1,619	1,893
+ Disposal of available-for-sale financial assets	84,000	0
+ Interest received	57	45
+ Dividends from companies accounted for using the equity method Net cash used in investing activities	10 2,809	0 -96,771
Cash flow from financing activities
+/- Income from the issue of subscribed capital	0	66,214
+/- Capital increase costs	-43	-1,429
- Repayment of long-term debt (incl. short-term portion)	-819	-631
+/- Changes in short-term financial liabilities	-1,118	1,065
- Interest paid	-646	-726
- Dividends paid	-8,213	-8,274
+/- Receipts and payments for finance lease	88	-980
Net cash used in financing activities	-10,751	55,239
Net increase/decrease in cash and cash equivalents	6,090	-33,082
+/- Changes in value resulting from foreign currency exchange	-1,944	-259
+/- Cash and cash equivalents at the beginning of the period	63,590	85,802
Cash and cash equivalents at the end of the period	67,736	52,461
Structure:
Cash	67,736	52,461
Cash from discontinued operations	0	0
	67,736	52,461

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Shares	Capital stock	Capital reserves	Revenue reserves	Currency translation reserves	Exchange rate price difference reserves	Reserves for changes in actuarial gains/ losses from pensions	Revaluation reserve	Net retained profits	Total investors of parent company	Minority interests	Total equity
	units'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000	in €'000
Januar 1, 2016	14,880	14,880	110,197	38,067	1,090	2	-217	-153	34,837	198,703	5,584	204,287
Net income/(loss) for the period									33,365	33,365	286	33,651
Other comprehensive income					479	0	-129			350	0	350
Comprehensive income					479	0	-129		33,365	33,715	286	34,001
Capital increase	1,488	1,488	64,726							66,214		66,214
Changes in reserves: Capital increase costs			-988							-988		-988
Transfer of net retained profit/net accumulated loss/revenue reserves				22,455					-22,455	0		0
Distribution in fiscal year									-8,184	-8,184	-90	-8,274
Changes due to acquisition of non-controlling interests				-6,323						-6,323	-3,838	-10,161
December 31, 2016	16,368	16,368	173,935	54,199	1,569	2	-346	-153	37,563	283,137	1,942	285,079
Other comprehensive income									24,550	24,550	133	24,683
Comprehensive income					-1,613	0	1			-1,612	0	-1,612
Capital increase					-1,613	0	1		24,550	22,938	133	23,071
Capital increase	896	896	38,147							39,043		39,043
Changes in reserves: Capital increase costs			-30							-30		-30
Transfer of net retained profit/net accumulated loss/revenue reserves				19,060					-19,060	0		0
Distribution in fiscal year									-8,184	-8,184	-30	-8,214
Changes due to acquisition of non-controlling interests				-19						-19	-16	-35
September 30, 2017	17,264	17,264	212,052	73,240	-44	2	-345	-153	34,869	336,885	2,029	338,914

Segment information – IFRS

Segment information		Cloud Solutions		IT Solutions
	Jan. 1 - Sep. 30, 2017 €'000	Jan. 1 - Sep. 30, 2016 €'000	Jan. 1 - Sep. 30, 2017 €'000	Jan. 1 - Sep. 30, 2016 €'000
Sales revenues
- External sales	124,819	114,249	684,101	603,429
- Intersegment sales	2,292	873	4,117	3,454
- Total sales revenues	127,111	115,122	688,218	606,883
- Cost of purchased materials and services	-63,957	-63,634	-525,680	-448,902
- Human resources costs	-27,562	-24,569	-108,218	-102,497
- Other income and expenses	-7,372	-5,349	-19,887	-20,156
EBITDA	28,220	21,570	34,433	35,328
- Depreciation and amortization	-6,156	-4,716	-10,355	-11,059
Operating result (EBIT)	22,064	16,854	24,078	24,269
- Interest income	236	212	211	231
- Interest expenses	-37	-2	-2,091	-1,749
- Other financial income	0	0	52	1,343
- Other financial expenses	0	0	0	-227
- Share in profit or loss of associated companies accounted for by using the equity method	98	72	0	0
Result from ordinary activities	22,361	17,136	22,250	23,867
- Foreign currency exchange differences
Earnings before taxes	22,361	17,136	22,250	23,867
- Income taxes
- Discontinued operations	-3	-7	0	0
Consolidated net income for the year
thereof attributable to stockholders of the parent
thereof attributable to non-controlling interests

	Consolidated		Reconciliation	Other entities		Totals
Jan. 1 - Sep. 30, 2016 €'000	Jan. 1 - Sep. 30, 2017 €'000	Jan. 1 - Sep. 30, 2016 €'000	Jan. 1 - Sep. 30, 2017 €'000	Jan. 1 - Sep. 30, 2016 €'000	Jan. 1 - Sep. 30, 2017 €'000	Jan. 1 - Sep. 30, 2016 €'000	Jan. 1 - Sep. 30, 2017 €'000
				37	58	717,678	808,920
		-4,328	-6,409	1	0	4,327	6,409
717,715	808,978	-4,328	-6,409	38	58	722,005	815,329
-508,730	-583,623	3,806	6,014	0	0	-512,536	-589,637
-132,476	-141,257	0	0	-5,410	-5,477	-127,066	-135,780
-26,267	-28,591	522	395	-1,284	-1,727	-25,505	-27,259
50.242	55,507	0	0	-6,656	-7,146	56,898	62,653
-15,986	-16,680	0	0	-211	-169	-15,775	-16,511
34,256	38,827	0	0	-6,867	-7,315	41,123	46,142
456	472	-922	-1,473	935	1,498	443	447
-2,504	-2,147	922	1,473	-1,675	-1,492	-1,751	-2,128
1,343	52	0	0	0	0	1,343	52
-232	-373	0	0	-5	-373	-227	0
	98	0	0	0	0	72	98
33,391	36,929	0	0	-7,612	-7,682	41,003	44,611
	-9	-170	-9
33,221	36,920	-170	-9	-7,612	-7,682	41,003	44,611
-10,160	-12,234	-10,160	-12,234
	-3	0	0	0	0	-7	-3
23,054	24,683
22,794	24,550
	133

A. 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') were drawn up according to the International Financial Reporting Standards (IFRS) and/or the International Accounting Standards (IAS) in the fiscal year 2017.

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 indications may not exactly match the aggregate values shown or total 100 percent.

This consolidated interim financial report is presented in a condensed form 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 2016, which can be downloaded from our website (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.

Acquisitions in the period January 1 to September 30, 2017

With a contract for purchase and transfer of shares dated May 30, 2017, CANCOM SE acquired the entirety of shares (10,000) of Antauris-Aktiengesellschaft with registered office in Hamburg, Germany. The nominal value of the shares amounted to € 500,000 and the purchase price was € 6,000,000. Incidental acquisition costs of € 136 thousand were incurred in the first nine months of the current year and recognized under other operating expenses in the statement of income.

Antauris-Aktiengesellschaft operates Germany-wide as an integrated IT service provider and consulting company, service partner and vendor of system-level enterprise applications in the area of data center solutions. This company possesses specialized know and has many years of experience in such areas as IT security, managed services, storage and network management, as well as data center structures and virtualization. The company has 100 staff members and achieved revenues of approximately € 38 million in 2016.

The company was first included in the consolidated financial statements on July 1, 2017.

Change in reporting entity in 2017:

Name and registered office of company	Date from which first included in the con solidated financial statements	Stock holding (in percent)	Voting rights (in percent)
Antauris-Aktiengesellschaft, Hamburg, Germany	July 1, 2017	100	100

The preliminary figures in the table below show the impact on the consolidated financial statements of the change in the reporting entity as at July 1, 2017, the date from which Antauris-Aktiengesellschaft was included in the consolidated financial statements.

	Fair value	Carrying amount
	€'000	€'000
Cash and cash equivalents	510	510
Trade accounts receivable	3,850	3,850
Other current financial assets	303	303
Inventories	546	546
Contracts in progress	160	160
Prepaid expenses and other current assets	378	378
Current assets	5,747	5,747
Property, plant and equipment (tangible assets)	171	171
Intangible assets	2,031	20
Long-term financial assets	73	73
Other financial assets	21	21
Deferred taxes arising from temporary
differences	91	0
Other assets	71	71
Non-current assets	2,458	356
Total assets	8,205	6,103
Short-term loans and current portion
of long-term loans	19	19
Trade accounts payable	3,773	3,773
Prepayments received	404	404
Other current financial liabilities	22	22
Deferred income	663	663
Income tax liabilities	21	21
Other current liabilities	414	414
Current liabilities	5,316	5,316
Long-term loans	52	52
Deferred taxes	646	0
Pension provisions	3	3
Other non-current liabilities	7	7
Non-current liabilities	708	62
Total liabilities
	6,024	5,378
Net assets acquired	2,181	725

The acquisition of the company resulted in goodwill of € 3,820 thousand (preliminary figure), which is not tax-deductible. The main reasons for the acquisition itself and the recognition of goodwill derive from the expansion of business activities in northern Germany.

The sales revenues of Antauris-Aktiengesellschaft included in the consolidated sales revenues since the date of acquisition amount to € 7,351 thousand, and the loss included in the consolidated profit amounts to € 148 thousand.

With a contract for purchase and transfer of shares dated June 22, 2017, CANCOM SE acquired 81.47 percent of the shares of Synaix Gesellschaft für angewandte Informations-Technologien mbH, nominally valued at € 407,350, and all shares in synaix Service GmbH, nominally valued at € 25 thousand. The companies have their registered offices in Aachen, Germany. The acquisition price for synaix Service GmbH is € 34 thousand, and the consideration due for Synaix Gesellschaft für angewandte Informations-Technologien mbH comprises a fixed cash price component of € 43,966 thousand and a variable earn-out component of € 5.991 thousand (preliminary fair value figure). With a contract for contribution and assignment dated June 22, 2017, CANCOM SE acquired 18.53 percent of the shares of Synaix Gesellschaft für angewandte Informations-Technologien mbH based in Aachen. The nominal value of the shares amounts to € 92,650. The purchase price of € 10,000 thousand is paid by issuing new no-par value shares to the seller as a contribution in kind from the authorized capital of CANCOM SE. The new shares are admitted to trading at the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse, FWB). A total of 185,714 no-par value shares at a price of € 53.846 each will be issued. Incidental acquisition costs of € 202 thousand were incurred in

the first nine months of the year and recognized under other operating expenses in the statement of income.

The Synaix Group is an IT service provider with an integrated portfolio of solutions for digital transformation services. In the service areas of standard IT, managed IT and digital process hosting, the Synaix Group operates the digital core processes of clients in a variety of industries, based on the 'as a service' model, and performs IT services in its own or external data centers. The Synaix Group currently employs 80 persons, and, in fiscal 2016, the Group generated sales revenues of € 13.7 million and a profit margin in the mid double digits.

The company was first included in the consolidated financial statements on July 21, 2017.

Change in the reporting entity in 2017:

Name and registered office of company	Date from which first included in the con solidated financial statements	Stock holding (in percent)	Voting rights (in percent)
Synaix Gesellschaft für angewandte Informations Technologien mbH, Aachen	July 21, 2017	100	100
synaix Service GmbH, Aachen	July 21, 2017	100	100

The preliminary figures in the table below show the impact on the consolidated financial statements of the change in the reporting entity as at July 21, 2017, the date from which the Synaix group was included in the consolidated financial statements.

	Fair value	Carrying amount
	€'000	€'000
Cash and cash equivalents	3,081	3,081
Trade accounts receivable	2,607	2,607
Other current financial assets	4	4
Prepaid expenses and other current assets	226	226
Current assets	5,918	5,918
Property, plant and equipment (tangible assets)	628	628
Intangible assets	25,134	31
Other financial assets	5	5
Other assets	54	54
Non-current assets	25,821	718
Total assets	31,739	6,636
Trade accounts payable	268	268
Other current financial liabilities	86	86
Provisions	152	152
Deferred income	17	17
Income tax liabilities	618	618
Other current liabilities	644	644
Current liabilities	1,785	1,785
Deferred taxes	8,148	0
Non-current liabilities	8,148	0
Total liabilities	9,933	1,785
Net assets acquired	21,806	4,851

The acquisition of the company resulted in goodwill of 38,185 thousand (preliminary figure), which is not tax-deductible. The main reasons for the acquisition itself and the recognition of a goodwill value derive from a broader client base in connection with the 'IT as a service' business along with cloud and managed services as well as further expansion of our positioning as a digital transformation partner.

The sales revenues of the Synaix group included in the consolidated sales revenues since the date of acquisition amount to € 2,568 thousand, and the profit included in the consolidated profit amounts to € 206 thousand.

CANCOM SE has taken over selected portions of the company assets (the client list, orders in hand, and property, plant and equipment/tangible assets) as well as the staff of forwerts GmbH through its subsidiary CANCOM GmbH. The takeover is documented in a contract of sale dated July 31, 2017, and became effective on August 8, 2017. A purchase price of € 330 thousand was agreed.

Incidental acquisition costs of € 11 thousand were incurred in connection with the asset deal. These are disclosed under other operating expenses.

The following assets were acquired under the asset deal (taking into account deferred taxes):

	Fair value €'000
Property, plant and equipment (tangible assets)	23
Intangible assets	104
Deferred taxes resulting from temporary differences	34
Non-current assets	161
Total assets	161
Deferred taxes	30
Non-current liabilities	30
Total liabilities	30
Net assets acquired	131

The acquisition gave rise to goodwill of € 199 thousand. The main reason for the acquisition itself, and for recognizing goodwill, was to strengthen CANCOM's expertise in the digitization of business processes – especially in the Microsoft environment – in the area of Stuttgart and entire southwestern region of Germany.

Mergers in the period from January 1 to September 30, 2017

Verioplan GmbH has been merged into CANCOM VVM GmbH. The merger is documented in a contract dated April 26, 2017. The merger was recorded in the commercial register of CANCOM VVM GmbH on May 2, 2017.

Antauris-Aktiengesellschaft has been merged into CANCOM GmbH. The merger is documented in a contract dated August 7, 2017. The merger was recorded in the commercial register of CANCOM GmbH on September 1, 2017.

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 2016.

B. Notes to the consolidated balance sheet

1. Other current financial assets

This item mainly includes bonuses due from suppliers (€ 5,294 thousand), claims to the payment of a purchase price relating to lease projects (€ 4,590 thousand), receivables from banks (€ 4,000 thousand), marketing revenue (€ 934 thousand), creditors with a debit balance (€ 225 thousand), claims to the payment of a purchase price from the disposal of companies (€ 200 thousand), and receivables from staff (€ 151 thousand).

2. Prepaid expenses and other current assets

This item mainly consists of other current assets such as tax refunds (€ 1,012 thousand), commission income (€ 270 thousand), insurance refunds (€ 215 thousand) and receivables from social insurance institutions (€ 114 thousand).

Prepaid expenses (€ 4,644 thousand) include deferred insurance premiums and expenses paid in advance.

3. Deferred tax assets

Deferred tax assets are as follows:

Deferred taxes from	temporary differences €'000	tax losses carryforwards €'000
As at January 1, 2017	2,665	1,605
Addition owing to recognition due to initial consolidation	34	91
Addition owing to recognition of acturial losses from pension provisions, directly in equity*	1	0
Tax income/expense acc. to profit and loss statement	-18	-1,041
Currency exchange gains/losses *	-19	0
As at September 30, 2017	2,663	655

* directly recognized in equity

As at September 30, 2017, the CANCOM Group had tax loss carryovers of € 1.3 million and trade tax loss carryovers of € 2.7 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 mainly the result of divergences in intangible assets (€ 611 thousand), property, plant and equipment/tangible assets (€ 566 thousand), pension provisions (€ 470 thousand), other financial liabilities (€ 371 thousand), other provisions (€ 219 thousand), intragroup payables (€ 202 thousand) and other liabilities (€ 201 thousand).

4. Other current financial liabilities

Other current financial liabilities include liabilities to former affiliated companies (€ 2,778 thousand), debtors with a credit balance (€ 2,349 thousand), outstanding bills of charge (€ 578 thousand), leasing purchase price liabilities (€ 325 thousand), Supervisory Board remuneration (€ 211 thousand) and rent obligations (€ 87 thousand).

5. Other provisions

Provisions mainly include the variable component of the purchase price for shares in affiliated entities (€ 6,873 thousand), guarantees and warranties (€ 1,904 thousand), copyright fees (€ 1,198 thousand), interest expenses (€ 534 thousand), anniversaries (€ 384 thousand), contingent risks (€ 354 thousand), termination payments (€ 238 thousand), financial statement costs (€ 165 thousand), decommissioning and restoration liabilities (€ 137 thousand), legal costs (€ 243 thousand), archiving costs (€ 100 thousand).

Total provisions comprise long-term provisions of € 8,968 thousand, which are recognized under other non-current liabilities. These are mainly for contingent purchase price provisions (€ 6,138 thousand), copyright fees (€ 1,198 thousand), guarantees and warranties (€ 981 thousand), anniversaries (€ 384 thousand), termination payments, for which a provision is legally mandatory in Austria (€ 154 thousand) and archiving costs (€ 80 thousand).

6. Other current liabilities

Other current liabilities mainly include staff bonus payments (€ 8,199 thousand), holiday and overtime entitlements (€ 4,881 thousand), sales tax (€ 3,741 thousand), tax on salaries and church tax (€ 2,585 thousand), employers' liability insurance association (€ 574 thousand), wages and salaries (€ 519 thousand), compensation levy for non-employment of the severely handicapped (€ 223 thousand), interest liabilities (€ 198 thousand) and social security contributions (€ 150 thousand).

7. Convertible bonds

CANCOM SE issued a convertible bond for a total nominal amount of € 45,000 thousand in March 2014. The bond matures in March 2019 and can be converted into a total of up to 1,055,510 new nopar value bearer shares in CANCOM SE. The denomination per unit is € 100,000. The initial conversion price was € 42.6334 per share. The conversion ratio was therefore 2,345.5788 shares per bond at the relevant nominal amount of € 100,000. The conversion right for the bonds can be exercised throughout its term to maturity.

CANCOM SE was entitled to call in the convertible bond in accordance with section 5 (b) of the issuing conditions dated March 20, 2014 by notification to the bondholders, giving notice of at least 30 and at most 60 calendar days before the call redemption date stated in the notification. This was conditional upon the stock price (the volume-weighted average price in Xetra / Xetra closing price, in accordance with section 1 of the issuing conditions) amounting to at least 130 percent of the conversion price applicable on these trading days (since June 21, 2017: € 42.3297) on at least 20 trading days within a period of 30 consecutive trading days, ending not earlier than five trading days before publication of the notification. In the event that the convertible bond was called in, CANCOM SE had to repay the bondholders on the call redemption date. The bondholders have conversion rights. The exercising of the conversion right and the conversion period are set out in the issuing conditions.

The bond has a coupon of 0.875 percent. Interest was paid annually on March 27, starting on March 27, 2015.

For accounting reasons, the convertible bond is split into an equity component and a liability component.

CANCOM SE called in all the convertible bonds on September 5, 2017, and announced that they would be paid off on October 6, 2017 (the call redemption date). The last day on which holders of the convertible bond could exercise their conversion right was September 29, 2017. The 711,073 CANCOM shares delivered by September 30, 2017 resulted in an increase in the capital stock of € 711,073 as at the reporting date. After the expiry of the conversion period, holders of 410 convertible bonds with a nominal value of € 100,000 each converted their bonds into 968,574 CANCOM shares.

With regard to the remaining CANCOM shares not delivered until October (257,501 shares) and the convertible bonds not converted (40 at a nominal value of € 100,000 each), the carrying amounts of the liability component as at the reporting date amounted to € 14,180 thousand. The value of the equity component is € 1,968 thousand, which is recognized under capital reserves.

The convertible bonds not converted (40 bonds with a nominal value of € 100,000 each) were paid off by CANCOM SE on October 6, 2017.

An effective interest expense of € 1,183 thousand was recognized for the bond in the period from January 1 to September 30, 2017, and the nominal interest payments amounted to € 394 thousand.

8. Deferred tax liabilities

The deferred tax liabilities are as follows:

	€'000
As at January 1, 2017	7,550
Addition owing to recognition as a liability directly in equity, due to first inclusion in consolidated financial statements	8,824
Reversal due to conversion of convertible bonds, directly in equity*	-55
Tax income according to profit and loss statement	-1,998
Currency exchange gains/losses *	-645
As at September 30, 2017	13,676

* directly recognized in equity

The deferred tax liabilities arise from deviations from the tax balance sheets. They are the result of the recognition and revaluation of intangible assets (€ 11,350 thousand), other financial assets (€ 629 thousand), software development costs (€ 599 thousand), goodwill (€ 445 thousand), property, plant and equipment/tangible assets (€ 364 thousand), loans to affiliated companies (€ 137 thousand), other financial liabilities (€ 45 thousand), prepaid expenses (€ 44 thousand), convertible bonds (€ 27 thousand), other provisions (€ 13 thousand), other current liabilities (€ 8 thousand), equity-accounted investments (€ 7 thousand), contracts in progress (€ 7 thousand), and long-term investments (€ 1 thousand).

Recognition is based on an individual tax rate of between 25 percent (Austrian subsidiary) and 39.83 percent (U.S. subsidiary).

9. Other non-current financial liabilities

Other non-current financial liabilities include rent obligations of € 348 thousand and purchase price liabilities of € 316 thousand.

C. Segment information

Segment information is disclosed according to IFRS 8 Operating Segments. The segment information is based on the segmentation used for internal control purposes (management approach). The Group reports on two operating segments: cloud solutions and IT solutions.

Description of the segments subject to mandatory reporting

The cloud solutions operating segment comprises CANCOM Pironet AG & Co. KG (former PIRONET Datacenter AG & Co. KG), PIRONET Enterprise Solutions GmbH, Pironet AG, Synaix Gesellschaft für angewandte Informations-Technologien mbH, synaix Service GmbH, and the divisions of CANCOM GmbH allocated to the cloud solutions segment. This operating segment comprises the CANCOM Group's cloud and shared managed services business, including project-related cloud hardware, software and services business. The product and service portfolio comprises analysis, consulting, delivery, implementation and services, thus providing clients with the necessary orientation and support for transformation of their 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. The cloud business also benefits from synergies with CANCOM's general sales and marketing service, the costs of which are allocated to the IT solutions reportable segment.

The IT solutions operating segment comprises CANCOM GmbH, CANCOM Computersysteme GmbH, CANCOM a + d IT solutions GmbH, CANCOM (Switzerland) AG, NSG ICT Service GmbH, CANCOM SCS GmbH, CANCOM ICP GmbH, CANCOM on line GmbH, Cancom on line B.V.B.A., CANCOM physical infrastructure GmbH, CANCOM, Inc., and HPM Incorporated, with the exception of the division of CANCOM GmbH allocated to the cloud solutions and other companies segment. This operating segment of the CANCOM Group offers comprehensive support for IT infrastructure and 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, in addition to professional IT services and support.

The 'other companies' are CANCOM SE, CANCOM VVM GmbH, CANCOM Financial Services GmbH in addition to the divisions of CANCOM GmbH allocated to the 'other companies' segment. CANCOM SE and the division of CANCOM GmbH allocated to this segment perform the staff and/or management functions for the Group. As such, they provide a range of services for the subsidiaries. The costs of central management of the Group and its 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 segments, and the income tax expense.

The income tax expense is not a component of the profit 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 revenue according to client location		Sales revenue according to entity location
	Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000	Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000
Germany	685,372	593,945	721,052	640,629
Outside Germany	123,606	123,770	87,926	77,086
Group	808,978	717,715	808,978	717,715
				Non-current assets
			Sep. 30, 2017 €'000	Sep. 30, 2016 €'000
Germany			219,175	120,499
Outside Germany			16,602	32,168
Group			235,777	152,667

Non-current assets include property, plant and equipment (tangible assets), intangible assets, goodwill, 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

Other operating income is broken down as follows:

Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000
7	1
790	1,161
0	593
464	436
155	4
76	68
1,492	2,263

2. Human resources expenses

The human resources expenses consist of the following:

	Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000
Wages and salaries	121,445	113,773
Social security contributions	19,485	18,450
Pension expenses	327	253
Total	141,257	132,476

3. Other operating expenses

The other operating expenses consist of the following items:

	Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000
Premises costs	7,878	7,839
Insurance and other charges	889	928
Motor vehicle costs	2,457	3,288
Advertising costs	1,658	1,747
Stock exchange and entertainment costs	245	315
Hospitality and traveling expenses	4,426	3,575
Delivery costs	2,654	2,384
Third-patry services	2,421	1,574
Repairs, maintenance, leasing	2,641	2,049
Communication and office costs	2,036	1,840
Professional development and training costs	1,137	1,180
Legal and consultancy costs	1,737	1,366
Fees and charges; costs of money transactions	254	619
Other operating expenses	1,182	1,309
Total	31,615	30,013

4. Income taxes

The rate of income tax for the German companies was 31.06 percent (2016: 30.95 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 to Sep. 30, 2017	Jan. 1 to Sep. 30, 2016
Profit before income taxes	€'000 36,920	€'000 33,221
Expected tax expense at rate for German companies (31.06 percent; 2016: 30.95 percent)	11,467	10,282
- Difference from tax paid outside Germany	155	108
- Change in value adjustment of deferred tax assets on loss carryforwards	-117	0
- Tax-exempt income/ non tax-relevant losses on disposals	32	10
- Actual income tax not relating to the period	211	46
- Permanent differences	-14	-419
- Non-deductible operating expenses as well as trade tax additions and deductions	481	55
- Effects of tax rate changes	-27	38
- Miscellaneous	46	40
Total Group income tax expenses	12,234	10,160

The actual tax rate is calculated as follows:

	Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000
Profit before tax	36,920	33,221
Income tax	12,234	10,160
Actual tax expense rate	33.14%	30.58%

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

	Jan. 1 to Sep. 30, 2017 €'000	Jan. 1 to Sep. 30, 2016 €'000
Actual income tax expense	13,159	10,515
Deferred taxes:
Assets	1,059	1,248
Liabilities	-1.998	-2,045
	-939	-797
Deferred taxes recognized directly in equity	14	442
Group income tax	12,234	10,160

5. Non-controlling interests

Minority interests account for 5.08 percent as at the beginning of the year and 5.04 percent as at the reporting date of the income for the period of Pironet AG subgroup (€ 133 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 as an Executive Board member of 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 persons under IAS 24.9 b are:

• AL-KO SE and its subsidiaries;
• ABCON Holding GmbH and its subsidiaries;
• ABCON Vermögensverwaltung GmbH and its subsidiaries;
• DV Immobilien Management GmbH;
• Elber GmbH;
• Athanor Gesellschaft für Beratung und Beteiligungen mbH and its subsidiaries;
• Wild Consult LLC;
• Electronic Online Services GmbH; and
• Spacelab Invest GmbH.

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

The transaction volumes of goods sold and services provided to related parties under IAS 24 in the first nine months of 2017 were as follows: AL-KO Kober SE and its subsidiaries purchased goods/ services amounting to € 1,472 thousand (gross), of which € 123 thousand was outstanding at the balance sheet date.

No goods and services were purchased from related parties under IAS 24.

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

An overview of the stockholders is shown on page 9 of this interim report.

3. Stockholdings in the company as defined in Section 20 IV of the German Stock Corporation 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 nine months of 2017.

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 Germany Phone +49 89 54054–5193 Fax +49 8225 996–45193 ir@cancom.de www.cancom.de