Plenum AG

Interim / Quarterly Report • Aug 31, 2005

Quarterly Report 2/2005

according to US-GAAP up to June 30, 2005

Overview

plenum Group – key figures (US-GAAP) in € thousands	Jan. 1 – June 30, 2005	Jan. 1 – June 30, 2004
Revenues	16,599	21,659
Gross profit	1,585	3,277
EBITDA	–1,336	102
EBIT	–1,694	–336
Group net income/loss	–1,605	–211
Earnings per share (in €; undiluted/diluted)	– 0.17	– 0.02
Shares outstanding (basic; undiluted/diluted in thousands)	9,577	9,577
Equity ratio as at June 30, 2005 / Dec. 31, 2004	40%	43 %
Net liquidity1 as at June 30, 2005 / Dec. 31, 2004 (in € thousands)	5,211	6,434
Average number of employees as at June 30, 2005 / Dec. 31, 2004	231	256
Employees as at June 30, 2005 / Dec. 31, 2004	226	242

Revenue development (in € million) Revenues structure after six months

1 Liquid funds less short term bank liabilities and advance payments received

Letter to Shareholders

Dear ladies and gentlemen, dear shareholders and business partners,

At our Shareholders' meeting on June, 30th I presented the key figures for our refocusing strategy. Refocusing means that we will again be concentrating on the more consulting oriented operation areas.

Why did we make this far reaching decision?

The market for simple programming activities (implementation business) has come under heavy pressure as a result of excess capacities in Germany and cheap competition from Eastern Europe. That has also meant that we cannot develop follow up business from the large Phoenics project which is coming to an end. If we had let ourselves be drawn into a destructive price war, we would even have jeopardised the "plenum" image of almost the last twenty years as quality leader in the market.

Therefore we have withdrawn from the low price segment of programming and the volume business of large projects and are focusing on consulting and the realisation of strategic tasks for our clients. These strategic tasks require excellent knowledge and targeted deployment of innovation from the areas of IT, business processes and market communications. We are strong here and can differentiate ourselves significantly from our competitors.

In our core business "Consulting" plenum Management Consulting and plenum Systems are focusing on the high growth areas of IT-strategy, IT-efficiencies, IT-architecture and eBusiness. Proven competence in project and change management means that our clients can realise our solutions in a sustained way.

Our core agency business is focused with the plenum stoll & fischbach brand on the area "Integrated brand communication" and with the DOM Digital Online Media brand on the area "Interactive marketing". Embedded in international partnerships and networks and supported by the strategy competence of plenum Management Consulting the agency is perfectly equipped to address strategic market communication tasks for the client.

A strategic change like this refocusing has an impact on the entire company and can only be successful if existing human resources from consultants to management can be mobilised to realise the mutual goal. Over the last nine months we have built the basis together for this new direction. But the reorganisation of the company and the investment in core competences will still be very demanding for us over the next two years.

If we consider that the Phoenics alone at EUR 17.0 million brought us more than 40 % of the total revenue of EUR 40 million in 2004 and that this share will fall to around 25 % in the current financial year 2005, it becomes clear which challenges we are facing. Furthermore, we have to take into consideration that revenue from simple programming activities (implementation business) will be decreasing.

Against this background we are projecting total revenues of EUR 28.5 million for the financial year 2005, which represents a decline of around 30 % relative to the previous year, and a further decline in 2006 to EUR 24 million. But our mid term planning for the strategic business areas already shows growth of around 12 % in core business (consultancy and agency) for 2006. In 2007 this revenue will further increase by 15 %.

We will continue to compete successfully with the leading consulting companies and agencies in this way. But this requires focused investment in the future of the company. Alongside the "conversion costs" there is also a need for investment in our strategic business areas. For the current financial year we are therefore expecting a deficit of EUR 3.4 million and in 2006 losses of EUR 1.9 million. In 2007 we will return to a positive result. The funding of the refocusing strategy from within is secured due to the current solid cash flow of EUR 6.9 million.

Dear ladies and gentlemen, dear shareholders and business partners, I am absolutely convinced that this strategy will lead our company into a highly successful future and would therefore ask that you support these developments as much as you can.

I would like to thank my colleagues for their excellent dedication of the last few months where it has been crucial to energetically direct the company towards the new strategy.

Wiesbaden, August 2005

Hartmut Skubch Chairman of the Managing Board

Interim Management Report

Economic environment

After the – in the opinion of analysts oversubscribed – but nevertheless significant recovery in the first quarter of 2005 (BIP: +0.8 %) the gross domestic product remained unchanged in the second quarter. Compared to the second quarter of the previous year there was however an increase of 1.5 %.

Although domestic demand could slightly recover by 0.3 % in the second quarter after several quarters of stagnation, this impulse was not sufficient. Domestic growth was compensated by the disproportionately high increase in import levels (+2.3 %) against only a slight increase in exports (+1.3 %) and therefore lead to an unchanged level in the economic situation. Experts' expectations again see slight economic growth for the entire year of between 0.7 % and 1.2 %. Firstly for the year 2006 there is a more significant recovery of the total economy projected with growth of between 1.3 % and 1.9 %.

The growth expectations presented at the beginning of the year by the industry associations were not changed in the first half of 2005 in relation to the expected economic development for the IT services segment and for the advertising market. The percentage growth will in accordance be in the lower single digit range on an annual basis in the industry segments.

Business Development Revenue and Booked Business

Against the background of the refocusing strategy the revenue development in the first half of the year was in accordance with the mid term planning at EUR 16.6 million. Relative to the previous year (EUR 21.7 million) revenues reduced by 23 %, this decline in revenue is largely attributed to the Phoenics project which is running down. After revenue in the first quarter 2005 was further reduced against the previous quarter by 13 % to EUR 8.4 million, it remained virtually unchanged in the second quarter at EUR 8.2 million.

The value creation (share of own business in revenue) remained for this reason on total under the previous year's level in the first half of the year. In the second quarter the value creation increased in comparison with the first three months of the financial year.

Booked business was in total at around EUR 12.3 million for the first half below the value of the revenues. If the share of the major Phoenics project is taken into account (Booked business: EUR 1.8 million; Revenue: EUR 5.9 million) there are signs of a positive trend: In the segments Management Consulting and Systems (without Phoenics) the volume of booked business in the first half was around 4 % above revenues. Booked business in the agency business (Communication segment) was around 9 % below revenue in the first half, but had already increased by almost 25 % in the second quarter relative to the first three months.

	Order	Booked	Sales	Order	Lifespan of
	backlog	Business	revenue		backlog order backlog
in € thousands	(31. 12.)	1st. HY	1st. HY	(30. 6.)	in months
Management Consulting	830	3,445	3,115	1,160	3
Systems total	6,544	3,981	8,179	2,346	2
of which Phoenics	4,968	1,773	5,886	855	1
Communication	2,204	4,824	5,305	1,723	2
Total	9,578	12,250	16,599	5,229	2

Gross profit and cost development

The positive trend in value creation could also be seen in the development of the gross profit in the quarter: It rose from TEUR 492 in the fourth quarter of 2004 over TEUR 674 in the first quarter (previous year: TEUR 1,330) to TEUR 911 in the second quarter of 2005 (previous year: TEUR 1,947). However, the gross profit at 10 % of revenue in the first half was 5 percentage points below the gross profit margins of 15 %, which were achieved in financial year 2004.

With around EUR – 1.7 million the operating income has significantly worsened in comparison with the previous year (EUR – 0,3 million). This is largely attributed to – alongside the reduction in gross margins – costs associated with staff reduction and the change into the Atlantis building in Herrenberg, which led to a significant increase in general and administration costs. These are also influenced by a seasonal increase. Selling and marketing expenses were again reduced in the second quarter relative to the previous quarter by around TEUR 220. Expenses for research and development were extended within the refocusing strategy in the second quarter.

In total there were group net losses for the first half 2005 of EUR 1.6 million. A latent tax return of around TEUR 191 had a positive impact on the group income for the second quarter 2005 of EUR – 0,8 million. This largely resulted from the project delimitation according to the "percentage of completion"-method.

Net assets and financial position

The stock of cash and cash equivalents at the end of the first half had reduced relative to the first quarter 2005 by TEUR 2,578 to TEUR 5,585. Compared to the 31st. December 2004 there is a reduction of TEUR 1,047. The fluctuations in stock are largely attributable to project related payments. That is also reflected in the development of receiveables: Contrary to cash and cash equivalents flow these increased within the second quarter by around EUR 1.3 million. The receiveables trend was additionally influenced by the accounting for the projects' work in progress according to the "percentage of completion" method, particularly after the processing of the Specified Services Contracts (Werkverträge) of the Phoenics project in the second quarter 2005. For this there were no more unbilled debts assigned.

Segment information thousands (Jan. 1 – June 30, 2005) in €		Consulting	Systems	Communi cation	Total
Net sales	CY	3,115	8,179	5,305	16,599
	PY	2,775	12,309	6,575	21,659
Intercompany sales	CY	596	675	118	1,389
	PY	831	227	122	1,180
Gross sales	CY	3,711	8,854	5,423	17,988
	PY	3,606	12,536	6,697	22,839
Segment costs	CY	– 3,838	– 9,402	– 5,984	– 19,224
	PY	– 3,494	– 12,631	– 6,478	– 22,603
Internal Operating Profit (IOP)	CY	– 127	–548	– 561	– 1,236
Margin		–3%	– 6%	– 10%	–7%
	PY	112	–95	219	236
		3%	–1%	3 %	–1%
Segment assets	CY	1,548	5,761	2,317	9,626
	PY	1,162	7,409	2,593	11,164

CY = Current year, PY = Prior year

Reconciliation of operating segment results in € thousands	Jan. 1 – June 30, 2005	Jan. 1 – June 30, 2004
IOP	–1,236	236
Group wide costs and
consolidation effects	– 100	– 133
EBITDA	–1,336	103
Depreciation	– 358	– 438
Financial results and income tax	96	124
Loss from discontinued operations	– 7	0
Group net income	– 1,605	–211

Reconciliation of group assets in € thousands	June 30, 2005	Dec. 31, 2004
Segment assets	9,626	11,164
Non operating assets	1,428	1,516
Liquid assets	5,581	6,630
Group assets	16,635	19,310

The settling of outstanding invoices had also contributed to the reduction in cash flow. As a result reserves for outstanding invoices were reduced in comparison with the previous year by TEUR 1,210 which mainly led to the reduction in short term liabilities by TEUR 1,078 to TEUR 8,273.

Sonstige Erläuterungen

The equity ratio has dropped since Dec. 31, 2004 from 43 % to around 40 %. Company capital was further reduced in the second quarter due to the deficits for the period and corresponds with EUR 6.7 million to around 70 % of subscribed capital.

Outlook

In accordance with the planning for the financial year 2005 we anticipate a reduction in gross profit to around EUR 28.5 million. As, in addition to investments in strengthening the core business in the current financial year, costs arise for the restructuring of the company, we are expecting a deficit of around EUR 3.4 million in 2005. The funding of the refocusing strategy is secured from today's perspective from company own funds.

Segments

plenum Management Consulting

The gross revenues of the segment were able to grow in the second quarter 2005 after a stable development in the first three months. With this development it is continuing the trend of the last five quarters which has been generally positive. It is slightly above the value of the comparable period in the previous year at TEUR 3,711 (previous year: TEUR 3,606) and with TEUR 1,926 in the second quarter at around 8 % of the value of the previous quarter (TEUR 1,785). The consulting segments share of total gross revenue is therefore 21 % compared to 16 % in the same period of the previous year.

Due to the 10% increase in segment costs Internal Operating Profit (IOP) reduced in the first half from TEUR 112 to TEUR – 127. The deployment of employees of plenum Systems in management consulting projects lead to higher costs of revenues. After these still led to a negative result in the first quarter of TEUR – 205 a positive IOP of TEUR 78 was achieved thanks to increased revenues and lower sales costs in the second quarter 2005.

The volume of booked business in the first half of the year was around 10 % above the gross profit achieved for the same period, emphasising the increasing demand for qualified consulting services. Subjects such as IT strategy and sourcing strategies for IT services are becoming increasingly valued. But also the task of increasing efficiencies in IT continues to remain an important area for our clients: Consulting had been supporting a large insurance group since the beginning of

the year in the design of a new organisational structure and the concept of a new process structure. Impressed by the quality of the previous services and the realisation competence of the consultants, the client has contracted plenum with the further design and introduction of the new processes.

plenum Systems

The development of gross revenue for the Systems segment in 2005 continues to be strongly influenced by the running down of the Phoenics project by which plenum Systems was able to achieve gross profits of around EUR 17 million in 2004 as a whole. Since in 2005 there will be considerably less revenue from the Phoenics project, gross revenues were reduced in the first half of 2005 as expected relative to the previous year at TEUR 12,536 by around 29 % to TEUR 8,854. In the quarterly comparison gross revenues reduced only slightly in the second quarter by around 2 % to TEUR 4,388. With a 49 % share of revenue (previous year: 55 %) the Systems segment remains the revenue leader of the group.

The IOP has slightly dropped in the second quarter by TEUR 60 to TEUR – 304 after improving in the previous quarter by TEUR 494 to TEUR – 244. In total plenum Systems thus achieved a negative IOP of TEUR – 548 in the first half.

The redevelopment and maintenance activities within the Phoenics project were still highly significant for plenum Systems business after completion of the tasks according to the works contract: With a share of more than 65 % of the total revenue for Systems, Phoenics was the most important client in the first half of the year. Since the planning for the second half shows projections of a significant reduction in Phoenics gross revenue, the extension or continuation of contracts with numerous other clients from existing projects was highly important for the further development of the segment. Stronger networking with Management Consulting from a subject matter or organisational perspective has proved to have a positive impact.

plenum Communication

At TEUR 5,423 gross profit for the Communication segment in the first half of the year was TEUR 1,274 below the value for the first half of the previous year. In comparison to the first quarter gross profits dropped by around 6 % in the second quarter to TEUR 2,624. The revenue share had increased slightly from 29 % to 30 %.

The positive IOP in the first half of the previous year of TEUR 219 could no longer be achieved. A significant negative impact on the results arose through the change into the Atlantis building in Herrenberg, in total an IOP of TEUR – 561 was reached in 2005.

A highlight of the first six months was communication campaign started by plenum Communication for the French cheese exporter Lactalis, primarily known for the brands Président and Roquefort Société, with the slogan "Es ist nicht alles Käse in Deutschland". With this initiative plenum set a clear signal together with its client and numerous renowned partners. For this particularly innovative campaign plenum stoll & fischbach was awarded the prize for innovation "Ei des Columbus" as first and only agency. The "Stiftung Innovation" praised that "the initiative made an unusual contribution to the improvement of the mood and therefore performance in Germany".

Association to group income

The change in group wide costs of TEUR 100 in the first half, which dropped 25 % (previous year: costs of TEUR 133) results largely from savings measures in the centrally managed functions of the AG.

Sonstige Erläuterungen

Other disclosures

Employees

In comparison to the end of the financial year 2005 the number of employees was reduced on the June, 30th 2005 from 242 to 226. The average number of employees is therefore – after six months in the current financial year – at 231 in comparison to the average of 256 employees in the previous financial year.

At the end of May redundancies were made in the Wiesbaden location for the adaptation of the personnel structures to the new strategic direction of the company. The workforce reductions involved around 10 % of jobs. The trend in the number of employees at the end of the first half does not fully reflect this adjustment as a result of various notice periods. By the end of the year the number of employees in the company will thus be reduced to around 210.

Changes in the Managing Board

With effect from May 23, 2005 plenum AG has extended the Managing Board.

Michael Rohde took over the responsibility from Klaus Gröne for the Consulting segment and in addition assumed responsibility for the newly created Business Management area.

Andreas Janssen adopted from Hartmut Skubch the resorts finance, personnel administration, legislation and investor relations.

Investments

The company made no significant investments in the first three months of 2005.

Risk development

There have been no material changes in the risk situation of plenum AG and its affiliates compared to the detailed description presented in the Annual Report 2004.

Subsequent events

There were no significant events requiring disclosure after the close of the reporting period.

Interim dividend

plenum AG did not pay and does not propose to pay any interim dividend or make any other distributions for the period under review, January 1 to June 30, 2005.

The plenum Share

plenum Share

Up until the middle of the year the Prime market at Frankfurt Stock Exchange showed a stable sidewards trend without significantly leaving the level at the start of the year. Since June however all share market indicators show a stable upwards trend and share prices were able to increase by round 10 % – 15 % within the last three months.

The price trend for the plenum share showed similar phases: After a very good start at the beginning of the year the price came heavily under pressure in the spring. After a trough in May/June there has been an intact upward trend since the middle of the year. Since June the share price has gained around 25 % in value and was therefore able to reach again the level at the start of the year. The market capitalisation was at around EUR 13.1 million to 13.9 million during August.

Share price performance vs. TecDAX (indexed)

Shareholders´ Meeting

On June 30, 2005 the 7th Regular Shareholders' Meeting of plenum AG took place on the premises of the Casino-Gesellschaft Wiesbaden. The presence represented around 45 % of the share capital (previous year: 40 %). The Managing Board and Supervisory Board were approved, the resolutions to all further points which needed to be voted upon were recorded with an overwhelming majority in accordance with the suggestions of the administration.

Treasury shares and subscription rights

As of June 30, 2005 plenum AG or other companies as defined by section 160 (1) clause 2 of the Aktiengesetz (AktG – German Public Companies Act) continued to hold 16,790 treasury shares of plenum AG. No convertible bonds or similar securities as defined by section 160 (1) clause 5 of the AktG had been issued as of June 30, 2005.

As of June 30, 2005, 313,650 subscription rights had been issued in accordance with section 192 (2) clause 3 of the AktG. 99,500 of these related to the executive bodies of plenum AG. The increase of 17,800 options compared to the first quarter resulted for the extension of the management board in May 2005, the allocation was carried out within the options programme in previous years.

No subscription rights were granted in the current fiscal year.

Shareholder structure (directors' holdings)

plenum AG's registered capital was unchanged at 9,577,068 no-par value shares as of June 30, 2005.

Shares, Managing Board members	Hartmut Skubch	Klaus Gröne	Heinz Stoll*	Andreas Janssen	Michael Rohde	Gesamt
	Number of	Number of	Number of	Number of	Number of	Number of
	Shares	Shares	Shares	Shares	Shares	Shares
Dec. 31, 2004	1,891,253	20,453	431,500	0	0	2,343,206
June 30, 2005	1,891,253	20,453	431,500	0	0	2,343,206

*Indirect shareholding

Subscription rights, Managing Board members	Hartmut Skubch	Klaus Gröne	Heinz Stoll	Andreas Janssen	Michael Rohde	Gesamt
	Number of	Number of	Number of	Number of	Number of	Number of
	Shares	Shares	Shares	Shares	Shares	Shares
Dec. 31, 2004	56,500	25,200	0	0	0	81,700
June 30, 2005	56,500	25,200	0	7,800	10,000	99,500

Shares, Supervisory Board members	Michael Bauer*	Dr. Wolfgang Händel*	Norbert Rohrig	Total
	Number of	Number of	Number of	Number of
	shares	shares	shares	shares
Dec. 31, 2004	370,360	3,500	700	374,560
June 30, 2005	370,360	3,500	700	374,560

*Indirect shareholding

The Supervisory Board members of plenum AG do not hold any subscription rights for shares of plenum AG.

Income Statement

€ thousands	Q2-2005	Q2-2004	Jan. 1– June 30, 2005	Jan. 1– June 30, 2004
Revenues	8,194	10,918	16,599	21,659
Cost of revenues	– 7,283	– 8,971	– 15,014	– 18,382
Gross profit	911	1,947	1,585	3,277
Selling and marketing expenses	–755	– 1,224	– 1,730	– 2,487
General and administrative expenses	– 1,206	– 820	– 1,619	– 1,244
Research and development expenses	– 108	– 113	– 123	– 222
Other operating income and expenses	126	245	193	340
Operating income	–1,032	35	–1,694	–336
Financial result	34	26	65	70
Result before income taxes	–998	61	–1,629	–266
Income taxes	191	56	31	55
Loss from discontiunues operations, net of tax	–3	0	–7	0
Net income / loss	–810	117	–1,605	–211
Earnings per share (in €; diluted/undiluted)	–0.09	0.01	–0.17	–0.02
Weighted average shares outstanding (in thousands, diluted/undiluted)	9,577	9,577	9,577	9,577

Consolidated Balance Sheet

Liabilities and shareholders' equity € thousands	June 30, 2005	Dec. 31, 2004
Short term debt and current portion
of long-term debt	8	18
Trade accounts payable	1,827	1,863
Advance payments received	366	180
Accrued expenses	5,281	6,186
Deferred taxes	10	29
Other current liabilities	781	1,075
Total current liabilities	8,273	9,351
Long-term debt, less current portion	62	62
Deferred taxes	855	855
Pension accruals	729	721
Total non current liabilities	1,646	1,638
Share Capital	9,577	9,577
Additional paid-in capital	14,151	14,151
Treasury Stock	– 83	– 83
Accumulated deficit	– 16,929	– 15,324
	6,716	8,321
Total Shareholders' equity
Total Liabilities and Shareholders' equity	16,635	19,310

Cash Flow Statement

€ thousands	Jan. 1 – June 30, 2005	Jan. 1 – June 30, 2004
Net income / loss	–1,605	–211
Adjustments:
Depreciation and Amortization	358	438
Net results from disposal of intangible assets
and property, plant and equipment	6	– 8
Other non-cash expenditure and income	– 25	– 25
Changes in assets & liabilities:
Changes in inventories	80	–99
Changes in receivables	1,605	–1,617
Changes in prepaid expenses and
other current assets	– 176	765
Changes in trade accounts payable	– 36	809
Changes in other liabilities	– 108	36
Changes in accrued expenses	– 897	421
Changes in other assets and liabilities	–33	– 36
Net cash from operating activities	–831	473
Proceeds from the disposal of intangible assets,
property, plant and equipment	1	8
Payments for purchase of intangible assets,
property, plant and equipment	– 207	–159
Net cash from investing activities	– 206	– 151
Changes in debt	–10	– 46
Net cash from financing activities	–10	– 46
Decrease in cash & cash equivalents	–1,047	276
Cash & cash equivalents at beginning of period	6,632	8,103
Cash & cash equivalents at end of period	5,585	8,379

Net inflows from interest: TEUR 41 ( 2004: TEUR 84) Net inflows from income tax TEUR 1 ( 2004: TEUR 87)

	Number	Net		Share Additional Treasury				Other Accumu- Total Share
	of shares	Income/	capital	paid-in		stock Comprehen-	lated	holders'
€ thousands	in thous.	Net loss		capital		sive Income	deficit	equity
Jan. 1, 2004	9,577		9,577	14,151	–83	0	– 13,671	9,974
Net loss		– 211					– 211	– 211
June 30, 2004	9,577		9,577	14,151	–83	0	– 13,882	9,763
Jan. 1, 2005	9,577		9,577	14,151	–83	0	– 15,324	8,321
Net loss		– 1,605					– 1,605	– 1,605
June 30, 2005	9,577		9,577	14,151	–83	0	– 16,929	6,716

General information

Statement of Changes in Shareholders' Equity

This consolidated interim report of plenum AG was prepared in accordance with the United States Generally Accepted Accounting Principles ( US-GAAP ) for interim reporting and has not been audited. Certain detailed information and disclosures in the notes, included in the US-GAAP consolidated financial statements, have been summarized or omitted here.

This consolidated interim report should be read in conjunction with the audited consolidated financial statements of plenum AG as of December 31, 2004 and the disclosures in the notes contained therein. The notes contained therein also apply to this interim report and are only cited where there are explicit changes.

It is the opinion of the management board of plenum AG that this consolidated interim report takes into account all the current transactions and deferrals necessary to guarantee a true and fair view of the interim results.

10 Interim Report 2/2005 | Cash Flow Statement

plenum AG

Investor Relations Hagenauer Straße 53 D-65203 Wiesbaden Phone +49. (0)611. 9882-0 Fax +49. (0)611. 9882-150 aktie@plenum.de www.plenum.de

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German securities Code-No. (WKN) 690 100/ISIN DE000690100 Tickersymbol: PLEG.F, PLE GR