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GK Software SE Interim / Quarterly Report 2019
184_10-q_2019-06-17_180d8726-65a7-40b3-84e3-5739b6725359.pdf
Interim / Quarterly Report
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Summary of Consolidated Results
| Change | ||||
|---|---|---|---|---|
| 31.3.2019 | 31.3.2018 | (2018/2019) | ||
| Sales | EUR K | 24,555 | 23,669 | 3.7 % |
| Operating performance | EUR K | 24,555 | 23,669 | 3.7 % |
| Total operating revenue | EUR K | 25,133 | 24,508 | 2.6 % |
| EBIT | EUR K | (2,813) | 221 | <(250) % |
| EBIT margin (on sales) | % | (11.5) | 0.9 | - |
| EBIT margin (on total operating revenue) | % | (11.2) | 0.9 | - |
| EBITDA | EUR K | (639) | 1,344 | (147.5) % |
| EBT | EUR K | (3,201) | (79) | |
| Net loss for the period | EUR K | (3,609) | (527) | <(250) % |
| Earnings per share (weighted) | EUR | (1.87) | (0.28) | - |
| Earnings per share (diluted) | EUR | (1.87) | (0.27) | - |
| Equity ratio | % | 31.1 | 34.7 | - |
| Net debt | EUR K | 8,709 | (14,722) | - |
| Employees | 1,223 | 1,026 | 19.2 % |
First quarter of 2019: Turnover increases, EBIT still below expectations
Dear shareholders,
GK Software was able to continue its growth course during the first quarter of 2019, even if the increase in turnover of just 3.7 percent compared to the same period in the previous year must be described as modest by our standards. The comparison with the previous year is largely dominated by the sales success stores in the same quarter in the previous year and developments in the IT Services segment, which are already known: While it was still possible to generate EUR 4.87 million for licences during the 1st quarter in 2018, turnover here in 2019 only reached a figure of EUR 2.38 million. However, we should point out that the first quarter in 2018 was an unusually strong first quarter. Developments in the IT Services segment have negatively affected the level of dynamism in turnover because our business with a major hardware maintenance customer was significantly cut in April 2018 and therefore fell by almost EUR 1 million compared to the figure in the previous year. The Group's turnover therefore grew by 3.7 percent compared to the same reporting period in the previous year and amounted to EUR 24.56 million (2018: EUR 23.67 million). The EBITDA figure was therefore EUR (0.64) million (Q1 2018: EUR 1.34 million) in line with expectations and was also lower than the previous year's figure, but was also affected by increased amortisation (EUR 2.17 million compared to EUR 1.12 million in 2018). The operating results (EBIT) reached a figure of EUR (2.81) million (Q1 2018: EUR 0.22 million).
As already announced in the last financial statement, the Management Board and Supervisory Board have launched a programme to secure earnings, which is designed to significantly increase the Company's earnings power by tapping into potential throughout the organisation. The Management Board is expecting the first results from this programme during the third quarter of this financial year.
We were able to gain two more customers in the USA during the first quarter of 2019 and therefore continue our successful activities in this market. We will therefore equip another 1,500 US stores with OmniPOS. Another existing customer in the USA has also decided to make use of our petrol station solution and it will go live during the third quarter of 2019. We were also able to gain a Colombian retailer, which has opted for a subscription agreement, and this will increase the share of our cloud turnover.
We were also able to successfully hand over the first solution based on artificial intelligence to SAP in April 2019. SAP will now sell the solution for automated pricing, which is based on our new AIR platform (Artificial Intelligence for Retail), using the SAP Dynamic Pricing by GK name. We have also launched a new subsidiary in conjunction with fiscalisation in Germany, which has to be completed by 1 January 2020. It will make available a cloud solution for implementing the legal requirements to the retail sector and other providers of checkout systems too, in conjunction with Bundesdruckerei (the Federal Printing Office).
In terms of our project business, the first quarter of 2019 was marked by several complete country rollouts and productive launches of our new OmniPOS cloud solution. Our solution went into productive use for the first time in Japan, Hong Kong, Singapore and Australia, for example. The ongoing development of our range of solutions primarily concentrated on the topics of petrol, hospitality and cloud services during this period.
We are expecting further success stories, both through our direct sales and also through our partner sales, during the 2019 financial year and beyond. Our sales pipeline continues to be very well filled and we believe that we are in an excellent position in several ongoing tender procedures.
Market environment
The prospects for the retail sector continue to be excellent in 2019 too. This is reflected, among other things, in the forecast provided by the German Retail Federation (HDE), which is once again expecting nominal growth of 2.0 percent with sales rising to a figure of EUR 535.5 billion during the current year. The HDE believes that the basis for ongoing growth lies in the continuing positive economic conditions and the dynamic growth of the online retail business. The HDE forecast for 2019 is also supported by the prospects across Europe. The positive developments in the retail trade seems to be continuing in most markets where GK Software is active. A current study by GfK Geomarketing, for example, is also expecting growth of 2.0 percent in the 27 EU countries (without the UK) - and the rate could be even higher in some countries in Eastern Europe (study entitled "Einzelhandel in Europa 2019").
Employees
After GK Software had employed 1,205 members of staff at the end of the year, it currently has 1,223 employees (the figure on 31 March 2019; the previous year's figure was 1,026); this therefore represents an increase of 206 over the number employed at the end of the same reporting period in the previous year.
Segment results
During the first quarter, the GK/Retail core business segment once again registered growth (+8.7%) despite the licence turnover, which remained lower than in the previous year, while the IT Services business unit fell short of the figures for the previous year, as expected. If we examine the makeup of the turnover according to different types of work, it is clear that this growth in the GK/Retail business segment primarily took place in software development (+36.7 percent). Maintenance work may have increased for GK/Retail (+11.6 percent), but fell significantly at IT Services due to the loss of a significant hardware maintenance customer during the first half of 2018.
Turnover in the IT Services segment therefore declined by 48.3 percent to a figure of EUR 1.92 million in comparison with the same period in the previous year. The software development business was the only segment that improved its performance over the previous year. The decision to stop selling the SQRS solutions in future has not changed.
As regards to the relation between types of turnover to each other, the licence revenues at 9.7 percent were significantly lower than in the previous year, while the software development turnover (60.6 percent) stood out particularly prominently. Maintenance turnover remained stable at just under 30 percent of total turnover, as in the previous year.
The exchange of services between the segments is governed by servicing contracts, which are geared towards the normal revenues of the segments in their outside markets. Supply contracts are used as a basis to calculate the administrative services according to the estimated time required to provide these, based on experience.
Assets and financial situation
The Group's assets and financial situation only changed slightly in comparison with the last published declaration in the financial statement for the year 2018. The Group's cash and cash equivalents fell by EUR 1.16 million, for example, while the current and non-current bank liabilities together fell by EUR 2.06 million. There was no change in the Company's opportunities and risks.
Financial forecast and outlook
The mid-term forecast, as published in the financial statement for the year 2018 and which we are repeating here in abbreviated form, is being continued without any changes, provided that the general economic and political conditions remain as they are.
That means: the Management Board at GK Software is continuing to stand by its medium-term forecast published in the 2017 annual accounts for the 2020 financial year; according to this, turnover should achieve fifty percent growth by 2020 (compared to 2017) and the earnings rate in the core segment should reach 15 percent again (EBIT margin on operating performance).
If we follow the estimates outlined at the beginning about the development of the economy in general and the retail sector, it is probable that GK/Retail's turnover will continue to grow considerably again in 2019. On our way to the profitability goal that we are seeking for the year 2020, we are assuming that we will be able to take an intermediate step and significantly exceed the figures for the past year. However, even short-term delays in major customer projects can have a considerable impact on the Company's earnings situation.
We are therefore maintaining our proviso that the expenditure for tapping into new markets, which continues to be a high priority, the postponement of customer projects with fairly large volumes or a deterioration in the overall economic situation could impair the achievement of this goal.
Schöneck, 29 May 2019
The Management Board
Rainer Gläss Chief Executive Officer
André Hergert Chief Financial Officer and Head of Human Resources
Consolidated Balance Sheet on 31 March 2019
Assets
| EUR K | 31.3.2019 | 31.12.2018 |
|---|---|---|
| Property, plant and equipment ¹ | 32,926 | 22,746 |
| Intangible assets | 29,665 | 30,019 |
| Financial assets | 34 | 34 |
| Active deferred taxes | 6,106 | 4,034 |
| Total non-current assets | 68,731 | 56,833 |
| Goods | 386 | 387 |
| Auxiliary materials and supplies | 128 | 99 |
| Initial payments made | 12 | 35 |
| Trade accounts receivable | 22,998 | 26,030 |
| Trade accounts receivable from ongoing work | 12,044 | 10,289 |
| Income tax claims | 892 | 1,045 |
| Other accounts receivable and assets | 4,664 | 4,674 |
| Cash and cash equivalents | 10,629 | 11,790 |
| Total current assets | 51,753 | 54,349 |
| Balance sheet total | 120,484 | 111,182 |
Liabilities
| EUR K | 31.3.2019 | 31.12.2018 |
|---|---|---|
| Subscribed capital | 1,929 | 1,926 |
| Capital reserves | 21,636 | 21,429 |
| Retained earnings | 31 | 31 |
| Other reserves (OCI from introducing IAS 19 2011, IAS 21) | (228) | (881) |
| Profit brought forward | 16,682 | 15,758 |
| Shortfall for period minorities interests | (3,640) | 924 |
| Equity attributable to GK Software SE stockholders | 36,410 | 39,187 |
| Equity attributable to noncontrolling interest | 1,068 | 1,069 |
| Total equity | 37,478 | 40,256 |
| Provisions for pensions | 1,558 | 1,558 |
| Non-current bank liabilities | 8,403 | 9,141 |
| Convertible bond | 13,418 | 13,418 |
| Deferred government grants | 849 | 861 |
| Deferred tax liabilities | 5,999 | 3,370 |
| Total non-current liabilities | 30,227 | 28,348 |
| Current provisions | 1,226 | 1,231 |
| Current bank liabilities | 10,935 | 12,260 |
| Liabilities from trade payables | 179 | 2,365 |
| Initial payments received | 1,565 | 1,509 |
| Income tax liabilities | 351 | 283 |
| Other current liabilities ¹ | 38,523 | 24,930 |
| Total current liabilities | 52,779 | 42,578 |
| Balance sheet total | 120,484 | 111,182 |
1 – According to the simplified transitional method used by IFRS 16, no adjustment of previous periods has been made to the new accounting and assessment methods. You can find details on this thing in the section entitled Changes in accounting and assessment methods.
Group Overall Results Statement from 1 January to 31 March 2019
| Other results after income taxes | |||
|---|---|---|---|
| of which attributable to GK Software SE stockholders | (3,608) | (517) | 925 |
| of which attributable to noncontrolling interest | (1) | (9) | (2) |
| Consolidated surplus/ shortfall for the period | (3,609) | (526) | 923 |
| Income tax results | (3,201) | (79) | 171 |
| Financial income | 11 | 46 | 138 |
| Operating results | (2,813) | 221 | 1,596 |
| Total operating expenses | (27,946) | (24,287) | (108,172) |
| Financial expenditure ¹ | (399) | (346) | (1,563) |
| Financial results | (388) | (300) | (1,425) |
| Income taxes | (408) | (447) | 752 |
| Items, which will be reclassified in the consolidated | |||
| profit and loss statement in future under certain | |||
| conditions | |||
| Differences in exchange rates from recalculating for | |||
| eign business operations | 654 | (1,201) | (124) |
| Items, which will not be reclassified in the consolidated | |||
| profit and loss statement in future | |||
| Actuarial gains/ losses from defined benefit pension | |||
| plans | 0 | 0 | (53) |
| Overall results | (2,955) | (1,727) | 746 |
| of which attributable to noncontrolling interest | (1) | (9) | (2) |
| of which attributable to GK Software SE stockholders | (2,954) | (1,718) | 748 |
| Earnings per share (EUR/ share) from the | |||
| consolidated surplus/ shortfall - undiluted | (1.87) | (0.28) | 0.48 |
| Earnings per share (EUR/ share) from the | |||
| consolidated surplus/ shortfall - diluted | (1.87) | (0.28) | 0.48 |
1 – According to the simplified transitional method used by IFRS 16, no adjustment of previous periods has been made to the new accounting and assessment methods. You can find details on this thing in the section entitled Changes in accounting and assessment methods.
Consolidated Cash Flow Statement from 1 January to 31 March 2019
| EUR K | 3M 2019 | 3M 2018 |
|---|---|---|
| Cash flows from operating business | ||
| Surplus/ shortfall for period | (3,609) | (527) |
| Share option scheme (non-cash expenditure) | 112 | |
| Income taxes affecting results | 408 | |
| Interest expenditure affecting results | 399 | |
| Interest income/ expenses affecting results | (11) | |
| Profit/ loss from the sale or disposal of property, plant and equipment | (2) | |
| Reversals of deferred public sector subsidies | (12) | |
| Write-downs recognised for receivables | 255 | |
| Write-ups recognised for receivables | (11) | |
| Depreciation and amortisation | 2,175 | 1,156 |
| Actuarial gains/ losses | - | |
| Net foreign currency losses /gains | 447 | (786) |
| Net profits from financial tools assessed at their fair value | 129 | |
| Other non-cash revenues and expenditure | (2) | |
| Cash flow from operating business | 278 | |
| Changes in net current assets | ||
| Changes in trade accounts receivable and other receivables | 915 | 3,457 |
| Changes in inventories | (4) | |
| Changes in trade accounts payable and other liabilities | (70) | 2,010 |
| Changes in initial payments received | 55 | (135) |
| Changes in provisions | (4) | (228) |
| Interest paid | (128) | (108) |
| Income taxes paid | 1,465 | (428) |
Cash flows from investment and financing activities, loans and cash and cash equivalents
| EUR K | 3M 2019 | 3M 2018 |
|---|---|---|
| Amount carried forward Net inflow of funds from operating activities |
2,507 | 5,290 |
| Cash flow from investment activities | ||
| Payments for property, plant and equipment and non-current assets | (1,016) | (2,340) |
| Proceeds from disposals of fixed assets | 2 | |
| Incoming payments as part of the company acquisition | - | |
| Disbursement as part of a company acquisition | - | |
| Interest payments received | 11 | |
| Proceeds from the repayment of loans | - | |
| Net cash outflow for investment activities | (1,003) | (2,294) |
| Cash flow from financing activities | ||
| Taking out equity | 97 | |
| Taking out loans | 7 | |
| Repayment of loans | (738) | (711) |
| Issue of convertible bond | (699) | |
| Net inflow (previous year: net outflow) in cash from financing | ||
| activities | (1,333) | |
| Net outflow of cash and cash equivalents | 171 | 2,974 |
| Cash and cash equivalents at the beginning of the financial year | 6,151 | 27,958 |
| Cash and cash equivalents at the end of the financial year | 6,385 | 30,892 |
| Impact of changes in exchange rates on cash and cash equivalents | - 63 |
|
| Limited available funds |
Summary of cash and cash equivalents
T.06
| Cash and cash equivalents at the end of the financial year | 6,385 | 30,892 |
|---|---|---|
| Utilisation of current account credit/ credit card/ exchange rate | (4,244) | (3,705) |
| Liquid assets | 10,629 | 34,597 |
| EUR K | 3M 2019 | 3M 2018 |
1 – According to the simplified transitional method used by IFRS 16, no adjustment of previous periods has been made to the new accounting and assessment methods. You can find details on this thing in the section entitled Changes in accounting and assessment methods.
Changes in accounting and assessment methods
GK Software changed its accounting and assessment methods on 1 January 2019 as part of using IFRS 16 (Leases) for the first time. No adjustment has been made to previous periods in line with the transitional method in IFRS 16, which we have selected. As a result, there are changes to profits, assets, liabilities and the cash flow in 2019 when making comparisons with the previous year.
The change in the accounting and assessment methods created the following transitional effects on 1 January 2019:
- – As a result of capitalising usage rights, fixed assets increased by EUR 10,778 K.
- – Other current liabilities rose on account of entering leasing liabilities by EUR 10,778 K.
In our Group's overall results accounts, we entered EUR 730 K in expenditure for the amortisation of usage rights and EUR 35 K for interest expenditure on leasing liabilities for the first quarter of 2019.
This also had an effect on the Group's cash flow statement. The cash flow from operating activities increased by EUR 734 K and the cash flow from funding activities fell by EUR 734 K.
You can obtain additional information on the changes in the accounting and assessment methods resulting from the use of IFRS 16 from Section 1.2 Principles of presentation in the 2018 financial statement.
Financial Calendar
20 June 2019 Annual shareholders' meeting 2019 in Schöneck/V.
29 August 2019 Interim report as of 30 June 2019
25 – 27 November 2019 Analyst conference in Frankfurt/M.
26 November 2019 Interim statement as of 30 September 2019
29 April 2020 Annual report as of 31 December 2019
28 May 2020 Interim statement as of 31 March 2020
18 June 2020 Annual shareholders' meeting 2020 in Schöneck/V.
27 August 2020 Interim report as of 30 June 2020
November 2020 Analyst conference in Frankfurt/M.
26 November 2020 Interim statement as of 30 September 2020
Imprint/Notes
Imprint
Publisher:
GK Software SE Waldstraße 7 08261 Schöneck
P: +49 37464 84-0 F: +49 37464 84-15
www.gk-software.com [email protected]
Chairman of the Supervisory Board:
Dipl.-Volkswirt Uwe Ludwig
Management board:
Dipl.-Ing. Rainer Gläß, CEO Dipl.-Kfm. André Hergert, CFO
Commercial Register Chemnitz HRB 31501
USt.-ID. DE 141 093 347
Photos:
Image archive GK Software SE, Title: iStockphoto
Contact Investor Relations
GK Software SE Dr. René Schiller Friedrichstr. 204 10117 Berlin
P: +49 37464 84-264 F: +49 37464 84-15
Notes
Note to the statement
This interim statement is the English translation of the original German version. In case of deviations between these two the German version prevails. This interim statement can be downloaded in both languages at https://investor.gk-software.com.
Note regarding the rounding of figures
Due to the commercial rounding of figures and percentages small deviations may occur.
Disclaimer
This interim statement includes statements concerning the future, which are subject to risks and uncertainties. They are estimations of the Board of Management of GK Software SE and reflect their current views with regard to future events. Such expressions concerning forecasts can be recognised with terms such as "expect", "estimate", "intend", "can", "will" and similar terms relating to the Company. Factors, which can have an effect or influence are, for example (without all being included): the development of the retail and IT market, competitive influences including price changes, regulatory measures and risks with the integration of newly acquired companies and participations. Should these or other risks and uncertainty factors take effect or should the assumptions underlying the forecasts prove to be incorrect, the results of GK Software SE could vary from those, which are expressed or implied in these forecasts. The Company assumes no obligation to update such expressions or forecasts.
