secunet Security Networks AG

Quarterly Report • Nov 6, 2013

9-Month Report 2013

• • Revenue at the previous-year level after nine months
• • EBIT slightly negative; clear decrease compared with previous year
• • Order book reduced compared with previous year
• • Outlook for 2013 as a whole corrected: revenue of approximately Euro 64m, EBIT around Euro 4m
• • Medium to long-term outlook remains positive

Overview of the key figures for the first nine months

	9M 2013	9M 2012	Change
Revenue (kEuro)	41,266	41,391	-0.3%
EBIT (kEuro)	-37	760	-/-
EBT (kEuro)	-102	779	-/-
Profit / loss for the period (kEuro)	-109	371	-/-
Earnings per share for the period (Euro)	-0.02	0.06	-/-
Cash flow from operating activities (kEuro)	-7,828	-6,344	-/-
Capital expenditure (kEuro)	1,040	713	+46%
Order book, German Commercial Code (Handelsgesetzbuch, HGB) (Euro m, as at 30 September)	45.2	50.9	-11%
Order book, IFRS (Euro m, as at 30 September)	39.9	44.0	-9%
Employees (as at 30 September)	336	298	+13%

	30 Sep 2013	31 Dec 2012	Change
Cash and cash equivalents (kEuro)	15,112	24,025	-37%
Equity (kEuro)	30,292	30,405	-0.4%
Equity ratio (in %)	65%	55%	+10 percentage points
Loans (kEuro)	0.0	0.0	-/-

Overview of the key figures for the third quarter

	Q3 2013	Q3 2012	Change
Revenue (kEuro)	13,944	16,084	-13%
EBIT (kEuro)	267	1,479	-82%
EBT (kEuro)	242	1,464	-84%
Profit / loss for the period (kEuro)	149	714	-79%
Earnings per share for the period (Euro)	0.02	0.11	-79%

The secunet share

Reuters	YSNG.DE
Bloomberg	YSN
WKN	727650
ISIN	DE0007276503

	30 Sep 2013	30 Sep 2012
Price (Euro)	15.30	10.05
Number of shares	6,500,000	6,500,000
Market capitalisation (Euro)	99,450,000	65,325,000
52W high / low (Euro)	H: 16.70 / L: 10.30	H: 11.75 / L: 9.45
	9M 2013	9M 2012

Average daily trading volume (Xetra)	762	1,400
--------------------------------------	-----	-------

Interim Group Management Report as at 30 September 2013

Revenue performance

In the period from January to September 2013, the secunet Group achieved revenue of Euro 41.3m. This corresponds to a slightly negative deviation (-0.3% or Euro 0.1m) from the previous-year level (Euro 41.4m).

Up to the midway point of 2013, revenue still grew compared with the previous year. In the third quarter of 2013, the secunet Group generated revenue of Euro 13.9m and was therefore unable to achieve the record results of the third quarter of the previous year (Euro 16.1m). This development is mainly due to a decline in product business (SINA): this has caused a reduction of earnings in the areas of hardware, software / licences and support. In addition, unplanned additional expenditure as part of major projects has also reduced revenue.

Earnings performance

The earnings before interest and taxes (EBIT) of the secunet Group for the first nine months of 2013 totalled Euro -0.04m. The decline in the cost of sales had a positive impact on the development of EBIT. This was, however, more than offset by the increase in distribution and administrative costs, meaning that after nine months, EBIT has experienced a significant negative deviation from the previous year's figure of Euro 0.8m. The comparison of the earnings trend in the first nine months of 2012 and of 2013 should however be put into perspective in this respect, since 2012 had a particularly strong (record) third quarter. Furthermore, the fact that the fourth quarter traditionally makes a particularly large impact on the annual result should be taken into account in the assessment with regard to the forecast for the year as a whole.

The following individual developments occurred:

The cost of sales fell compared with the first nine months of 2012 by Euro 1.4m or 4% from Euro 34.2m to Euro 32.8m. The reason for this is primarily the reduced procurement of merchandise as a result of the decline in product business.

Compared with the period from January to September 2012, distribution costs rose by 44% from Euro 4.2m to Euro 6.0m. As in the previous quarters of the current year, the reason for the significant increase is the implementation of the restructuring of the internal organisation of secunet, effective since January 2013. This optimisation of the organisation is targeted at strengthening the activities associated with product business (portfolio management and distribution). The increased employee numbers in the areas of distribution and product and portfolio management due to internal restructuring and new appointments leads to higher expenses.

In the first nine months of 2013, the general administrative costs were Euro 2.5m, thus up 9% from the previous year's level (Euro 2.3m). This development was the result of increased personnel expenditure.

Compared with the previous year, the financial result fell from kEuro 19 to kEuro -64, mainly due to lower interest income as well as greater interest expenses from the allocation for pension provision. Earnings before tax totalled Euro -0.1m in the first nine months of 2013; in the first nine months of the previous year this was Euro 0.8m. In the current reporting period, the tax expense was kEuro 7, following kEuro 407 in the previous year.

Earnings for the period after tax therefore totalled Euro -0.1m for the period from January to September 2013, compared with Euro 0.4m in the same period of the previous year. Earnings per share for the first nine months of the year were Euro -0.02, compared with Euro 0.06 in the previous year.

Segment reporting

Since the beginning of 2013, secunet has optimised its target group-oriented organisation. Supervision of authorities, other public customers and international organisations is dealt with by the Public Sector business unit, while the Business Sector business unit addresses the IT security issues affecting companies in the private sector. Within the two new business units, the former High Security and Government business units (Public Sector) and the Business Security and Automotive Security business units (Business Sector) have been merged. Furthermore, the Support department which was located in the former Business Sector business unit has been affiliated to the Public Sector.

In the Public Sector business unit, revenue decreased by 4% from Euro 31.9m in the first nine months of 2012 to Euro 30.6m in the current reporting period. The product portfolio in the Public Sector includes the High Security solutions based on the SINA product range, as well as IT security solutions and consulting for eGovernment, authorities and international organisations. The portfolio also includes biometric identification systems for ID and Border Control, among other purposes. The Public Sector contributed 74% of the Group revenue in the first nine months of 2013, compared with 77% in the previous year. The EBIT in the Public Sector business unit totalled kEuro -478 (previous year kEuro 557).

The Business Sector business unit provides IT security consulting and solutions for companies in the private sector. The Business Sector business unit increased revenue by 12% from Euro 9.5m in the period from January to September 2012 to Euro 10.7m in the current reporting period. The proportion of the Group revenue rose from 23% in the first nine months of 2012 to 26% in the current reporting period. The Business Sector business unit generated an EBIT in the amount of kEuro 441 in the first nine months of 2013, compared with kEuro 135 in the same period of the previous year.

Assets and financial position

The following items on the balance sheet show a significant change compared to the figure as at 31 December 2012:

• Other provisions decreased by 45% or Euro 3.1m. The main reason for this is the payment of the variable salary components to the employees of secunet Security Networks AG in the first quarter of 2013.
• The trade receivables declined by Euro 3.6m or 19%. Compared to the state of affairs at the end of 2012, a large proportion of invoices have been settled. The decline in sales in the third quarter also has an effect here.
• Trade payables also fell, by Euro 3.7m or 50%, as did other short-term liabilities, by Euro 3.5m or 81%. Just like the receivables, there was a considerable backlog of supplier invoices at the end of the year, which were paid.
• The inventories increased by Euro 1.4m or 61%. The reason for this lies in minimum purchase amounts among suppliers for individual products and the securing of delivery capacity for the anticipated year-end business.
• As a result of these changes, the amount of cash was reduced by Euro 8.9m or 37%.

secunet has not taken out any loans and has an unchanged debt / equity ratio of 0%.

Cash flow

Cash flow from operating activities was Euro -7.8m in the first nine months of 2013 compared with Euro -6.3m in the previous year. This higher negative cash flow was caused essentially by the following factors: compared to the first nine months of 2012, Group profit before tax fell (effect: Euro -0.9m), more receivables were settled by customers and more materials were stocked (effect: Euro +4.2m), a higher level of provisions was dissolved (effect: Euro -3.2m) and more liabilities were settled (effect: Euro -2.2m). In addition, lower tax prepayments were made (effect: Euro +0.5m).

Funds amounting to Euro 1.1m were spent on investment activity in the first nine months of 2013. This corresponds to an increase of Euro 0.3m compared to the period of January to September 2012.

This results in a total decrease in financial funds of Euro 8.9m in the first nine months of 2013. Liquid funds as at 30 September 2013 were therefore Euro 15.1m.

Investments

In the first nine months of 2013, secunet invested a total of Euro 1.0m. This is an increase of 46% compared to the same period in the previous year (Euro 0.7m). secunet invested primarily in new acquisitions and the replacement of hardware, software and other operating equipment.

Employees

As at 30 September 2013, the number of secunet Group employees totalled 336. Compared to the figure on the same reporting date of the previous year, this means an increase in employee numbers of 38 individuals or 13%. The appointments were made primarily in the areas of consulting, development and distribution.

Order book

The secunet Security Networks AG order book measured according to the HGB totalled Euro 45.2m as at 30 September 2013 and stood 11% below the value for the same reporting date of the previous year (Euro 50.9m). The order book according to IFRS totalled Euro 39.9m at the end of the first nine months of 2013, compared with Euro 44.0m in the previous year, therefore decreasing by 9%. The difference between HGB and IFRS reporting results from the fact that, according to the IFRS provisions on realising revenue, any consultancy services not yet charged but already provided must be included in revenue. Call-off orders that are expected to result from existing framework agreements are not recorded in the order book.

Outlook

Compared with the preparation phase of the 2012 Annual Financial Statements (March 2013), the medium to long-term estimates concerning demand and sales potentials made by the Management Board of secunet Security Networks AG are unchanged. The current discussion about information security confirms the relevance of the portfolio of solutions and services that secunet has been offering to both authorities and private companies for a number of years. The demand for IT security and high security looks set to rise. In addition, with its enhanced product portfolio, secunet is also experiencing success in associated areas (e. g. border control). The medium to long-term outlook for the business performance of the secunet Group therefore remains good.

The fourth quarter is traditionally the strongest of the year at secunet in terms of revenue and results and so makes a significant contribution towards the annual result. However, major orders planned for the coming fourth quarter of 2013 have been postponed by customers. The Management Board therefore corrected the forecast for 2013: revenue of approximately Euro 64m with EBIT of around Euro 4m is now anticipated.

Forward-looking statements

This 9-Month Report contains statements regarding the future performance of secunet Security Networks AG and economic and political developments. These statements are opinions that we have formed based on the information currently available to us. Should the assumptions on which these statements are based not be applicable or should further risks arise, the actual results may deviate from the results currently expected. We cannot therefore offer any guarantee as to the accuracy of these statements.

Essen, 5 November 2013

Dr Rainer Baumgart Willem Bulthuis Thomas Pleines

Condensed consolidated interim financial statements for the first 9 months of 2013

OF SECUNET SECURITY NETWORKS Aktiengesellschaft

Consolidated balance sheet

(IFRS) as at 30 September 2013

Assets in Euro	30 Sep 2013	31 Dec 2012
Current assets
Cash and cash equivalents	15,112,318.49	24,024,789.75
Trade receivables	15,849,853.65	19,476,300.11
Intercompany financial assets	2,023,389.88	1,326,982.95
Inventories	3,766,694.52	2,333,899.73
Other current assets	513,560.70	401,237.54
Income tax receivables	946,808.33	0.00
Total current assets	38,212,625.57	47,563,210.08
Non-current assets
Property, plant and equipment	1,944,695.04	1,743,094.00
Intangible assets	118,759.00	101,154.00
Goodwill	2,950,000.00	2,950,000.00
Other financial assets	2,515,508.85	2,436,754.41
Deferred taxes	813,368.36	774,323.92
Total non-current assets	8,342,331.25	8,005,326.33
Total assets	46,554,956.82	55,568,536.41

Liabilities in Euro	30 Sep 2013	31 Dec 2012
Current liabilities
Trade accounts payable	3,635,516.12	7,329,061.86
Intercompany payables	0.00	137,296.30
Other provisions	3,738,463.12	6,840,866.10
Income tax liabilities	371,124.56	371,098.56
Other current liabilities	814,860.42	4,287,715.55
Deferred income	3,018,490.65	1,796,008.52
Total current liabilities	11,578,454.87	20,762,046.89
Non-current liabilities
Deferred taxes	486,664.90	440,891.55
Provisions for pensions	4,100,073.00	3,862,617.00
Other provisions	97,353.00	97,353.00
Total non-current liabilities	4,684,090.90	4,400,861.55
Equity
Share capital	6,500,000.00	6,500,000.00
Capital reserves	21,922,005.80	21,922,005.80
Treasury shares	-103,739.83	-103,739.83
Group profit / loss carryforward	2,953,060.90	-734,266.79
Group profit / loss	-108,608.82	3,687,327.69
Accumulated other comprehensive income / loss	-870,307.00	-865,698.90
Total equity	30,292,411.05	30,405,627.97
Total liabilities	46,554,956.82	55,568,536.41

Consolidated income statement

(IFRS) for the period 1 January 2013 to 30 September 2013

1 Jul – 30 Sep 2013	1 Jul – 30 Sep 2012 adjusted	1 Jan– 30 Sep 2013	1 Jan– 30 Sep 2012 adjusted
13,944,469.51	16,084,253.58	41,266,328.39	41,390,908.52
-11,021,879.96	-12,749,266.12	-32,808,199.81	-34,176,801.94
2,922,589.55	3,334,987.46	8,458,128.58	7,214,106.58
-1,851,863.76	-1,291,487.32	-5,984,116.94	-4,156,625.44
466.66	0.00	1,706.13	0.00
-804,258.85	-564,338.97	-2,514,864.09	-2,297,970.26
0.00	0.00	1,768.98	0.00
266,933.60	1,479,161.17	-37,377.34	759,510.88
266,933.60	1,479,161.17	-37,377.34	759,510.88
7,020.32	8,297.92	31,143.10	88,892.72
-32,303.14	-23,143.53	-95,361.13	-69,774.29
241,650.78	1,464,315.56	-101,595.37	778,629.31
-93,075.06	-750,417.27	-7,013.45	-407,338.96
148,575.72	713,898.29	-108,608.82	371,290.35
0.02	0.11	-0.02	0.06
6,469,502	6,469,502	6,469,502	6,469,502

Consolidated statement of comprehensive income

(IFRS) for the period 1 January 2013 to 30 September 2013

1 Jul – 30 Sep 2013	1 Jul – 30 Sep 2012	1 Jan– 30 Sep 2013	1 Jan– 30 Sep 2012
148,575.72	713,898.29	-108,608.82	371,290.35
1,918.45	2,818.06	-4,608.10	4,743.20
150,494.17	716,716.35	-113,216.92	376,033.55

Consolidated cash flow statement

(IFRS) for the period 1 January 2013 to 30 September 2013

in Euro	1 Jan– 30 Sep 2013	1 Jan– 30 Sep 2012 adjusted
Cash flow from operating activities
Group earnings before tax (EBT) for the period	-101,595.37	778,629.31
Depreciation and amortisation of tangible and intangible fixed assets	810,883.58	798,922.75
Change in provisions	-2,956,512.98	206,374.99
Book gains / losses (net) on the sale of intangible assets and of property, plant and equipment	-1,768.98	0.00
Interest result	64,218.03	-19,118.43
Change in receivables, other assets and prepaid expenses	1,384,890.70	-2,837,812.95
Change in payables and deferred income	-6,081,245.92	-3,841,513.19
Tax paid	-947,092.87	-1,429,766.74
Cash from operating activities	-7,828,223.81	-6,344,284.26
Cash flow from investing activities
Purchase of intangible assets and of property, plant and equipment	-1,040,048.62	-713,110.75
Proceeds from the sale of intangible assets and of property, plant and equipment	11,727.98	0.00
Purchase of financial assets	-78,754.44	-78,754.44
Cash from investment activities	-1,107,075.08	-791,865.19
Cash flow from financing activities
Interest received	31,143.10	88,892.72
Interest paid	-3,795.13	-2,187.29
Cash generated from financing activities	27,347.97	86,705.43
Effects of exchange rate changes on cash and cash equivalents	-4,520.34	4,279.94
Changes in cash and cash equivalents	-8,912,471.26	-7,045,164.08
Cash and cash equivalents at the beginning of the period	24,024,789.75	17,636,344.27
Cash and cash equivalents at the end of the period	15,112,318.49	10,591,180.19

Consolidated statement of changes in equity

(IFRS) for the period from 1 January 2012 to 30 September 2013

						Accumulated other comprehensive income/loss
					Items that cannot be transferred to the income statement		Items that can be transferred to the income statement
in Euro	Share capital	Capital reserves	Treasury shares	Net accumulated profit and losses	Actuarial gains and losses	Deferred taxes	Miscel laneous	Total
Equity at 31 Dec 2011	6,500,000.00	21,922,005.80	-103,739.83	-734,266.79	86,877.00	-28,043.89	-8,113.04	27,634,719.25
Group loss 1 Jan – 30 Sep 2012				371,290.35	0.00	0.00	0.00	371,290.35
Other comprehensive income / loss 1 Jan – 30 Sep 2012				0.00	0.00	0.00	4,743.20	4,743.20
Equity at 30 Sep 2012	6,500,000.00	21,922,005.80	-103,739.83	-362,976.44	86,877.00	-28,043.89	-3,369.84	28,010,752.80
Group profit 1 Oct – 31 Dec 2012				3,316,037.34	0.00	0.00	0.00	3,316,037.34
Other comprehensive income / loss 1 Oct – 31 Dec 2012				0.00	-1,360,490.00	439,166.17	161.66	-921,162.17
Equity at 31 Dec 2012	6,500,000.00	21,922,005.80	-103,739.83	2,953,060.90	-1,273,613.00	411,122.28	-3,208.18	30,405,627.97
Group loss 1 Jan – 30 Sep 2013				-108,608.82	0.00	0.00	0.00	-108,608.82
Other comprehensive income / loss 1 Jan – 30 Sep 2013				0.00	0.00	0.00	-4,608.10	-4,608.10
Equity at 30 Sep 2013	6,500,000.00	21,922,005.80	-103,739.83	2,844,452.08	-1,273,613.00	411,122.28	-7,816.28	30,292,411.05

Explanatory report

secunet Security Networks' 9-Month Report for the period ending 30 September 2013 was compiled in accordance with the International Accounting Standard (IAS) 34 "Interim Financial Reporting". This 9-Month Report is condensed. It is to be read in conjunction with the IFRS Consolidated Financial Statements dated 31 December 2012 (Consolidated Financial Statements). This 9-Month Report was approved by the Management Board of secunet Security Networks AG on 5 November 2013.

Accounting principles

The consolidation principles and currency translation method for the period from 1 January to 30 September 2013 were in accordance with those in the Company's Consolidated Financial Statements for the 2012 financial year. The accounting and valuation methods were retained. The Consolidated Financial Statements of secunet Security Networks AG as at 31 December 2012 were produced on the basis of Articles 315 and 315a of the German Commercial Code (HGB) and in accordance with the International Financial Reporting Standards (IFRS) as they are to be applied in the European Union.

The figures shown in the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of changes in equity correspond to the normal course of business at secunet and do not include any extraordinary items.

A tax rate of 32.28% applies to the calculation of income taxes for national companies. Calculation of tax payable on income for foreign companies is based on the relevant rates of tax for those countries.

The preparation of the 9-Month Report requires a series of assumptions and estimates on the part of the management. As a result, it is possible that the figures reported in the interim report deviate from the actual figures.

Consolidated group

In addition to secunet Security Networks, all subsidiaries whose financial and operating policies secunet has the power to govern are included in the Consolidated Financial Statements. In the reporting period and in the 2012 financial year, there were no minority interests in equity or in the (annual) profit or loss for the respective period.

Compared with 31 December 2012, the consolidated group was unchanged as at 30 September 2013. The two consolidated subsidiaries secunet s.r.o., Prague, Czech Republic, and secunet SwissIT AG, Solothurn, Switzerland, are in liquidation.

Recently implemented accounting announcements

On 31 December 2012 secunet adopted IAS 19 revised 2011 early, which had been issued by the IASB in June 2011. The amendment was adopted into European law by the EU in June 2012. Earlier adoption is permissible.

In applying IAS 19 revised 2011, the Company is primarily changing the recognition of actuarial gains and losses. Up to the 2011 financial year, actuarial gains or losses were charged to the income statement if they exceeded 10% of the defined benefit obligation at the beginning of the period. On adopting the amendments specified by AS 19 revised 2011, the Company now includes all actuarial gains and losses in the accumulated other consolidated result from the time of their creation without affecting the income statement.

in Euro	1 Jan 2012 reported	Amendment	1 Jan 2012 amended	30 Sep 2012 reported	Amendment	30 Sep 2012 amended
Total assets	46,235,191.31	33,711.62	46,268,902.93	43,371,438.79	33,711.62	43,405,150.41
of which deferred tax	308,218.16	33,711.62	341,929.78	394,900.00	33,711.62	428,611.62
Total liabilities and provisions	18,529,748.68	104,435.00	18,634,183.68	15,289,962.61	104,435.00	15,394,397.61
of which pension provisions	2,097,460.00	104,435.00	2,201,895.00	2,279,377.00	104,435.00	2,383,812.00
Total equity	27,705,442.63	-70,723.38	27,634,719.25	28,081,476.18	-70,723.38	28,010,752.80
of which Group loss carryforward	-3,309,090.15	-129,556.49	-3,438,646.64	-604,710.30	-129,556.49	-734,266.79
of which accumulated other comprehensive income / loss	-8,113.04	58,833.11	50,720.07	-3,369.84	58,833.11	55,463.27

The amendments to IAS 19 Employee benefits must be applied retroactively. Accordingly, the adjusted previous year values and the balances carried forward as at 1 January 2012 were amended as follows:

In the context of adopting IAS 19 revised 2011, the recognition of interest expense from the pension provision was also amended. Previously, this was recorded in the operative result under expenses for employee benefits. From the 2012 financial year, this expense will be shown under the financial result. This provides a better presentation. The figures from the comparison period for the previous year have been adjusted.

	1 Jan– 30 Sep 2012		1 Jan– 30 Sep 2012
in Euro	reported	Amendment	amended
Revenue	41,390,908.52	0.00	41,390,908.52
Cost of sales	-34,214,899.94	38,098.00	-34,176,801.94
Gross profit on sales	7,176,008.58	38,098.00	7,214,106.58
Selling expenses	-4,171,611.44	14,986.00	-4,156,625.44
General administrative costs	-2,312,473.26	14,503.00	-2,297,970.26
Earnings from operating activities	691,923.88	67,587.00	759,510.88
Earnings before interest and income tax	691,923.88	67,587.00	759,510.88
Interest income	88,892.72	0.00	88,892.72
Interest expenses	-2,187.29	-67,587.00	-69,774.29
Earnings before tax	778,629.31	0.00	778,629.31

Treasury shares

As at 30 September 2013 the Company held 30,498 treasury shares, the same figure as at 31 December 2012; this equates to 0.5% of its share capital.

Segment reporting

At the beginning of the 2013 financial year, the secunet Group carried out an organisational restructuring and since then has been divided into two business units, Public Sector and Business Sector. Both business units are shown separately for the purposes of segment reporting, as they meet at least one of the quantitative thresholds defined in IFRS 8.13.

The Public Sector business unit has emerged from the consolidation of the former High Security and Government business units. Furthermore, the Support department which was located in the former Business Sector business unit has been affiliated to the Public Sector.

The Public Sector addresses the highly complex security requirements of authorities, the military and international organisations. The focus of its offering is High Security solutions and products based on the Secure Inter-Network Architecture, SINA, developed in conjunction with the German Federal Office for Information Security (Bundesamt für Sicherheit in der Informationstechnik, BSI). The Public Sector also supports authorities in Germany and abroad in all areas relating to eGovernment and IT security. These include, among other things, biometric solutions and electronic ID (eID) documents, the electronic health system (eHealth), security awareness and secure web solutions. This business unit also operates a BSI-certified evaluation laboratory for IT conformity.

The former Business Security and Automotive Security business units are consolidated into the Business Sector business unit. In the Business Sector the focus is on security issues affecting companies in the private sector. Its product line includes identity management systems, qualified mass signature solutions for electronic invoicing, Public Key Infrastructures, mobile security and network security. In all areas, analyses, consulting and complete solutions are tailored to each customer's specific requirements. In addition, solutions to the specific IT security issues affecting the automotive industry are also supplied here.

In conjunction with this restructuring process, the redistribution of the goodwill acquired was carried out applying IAS 36.87 according to a relative value. It is distributed across the two business units as follows:

In kEuro
Public Sector	2,668
Business Sector	282
	2,950

Goodwill was allocated to the cash-generating units in accordance with the Group's management structure. These cashgenerating units represent the lowest reporting level in the Group at which goodwill can be monitored by the management for internal management purposes. Cash-generating units correspond to segments.

An impairment test was carried out on the new structure on 1 January 2013 in accordance with IAS 36.

In testing goodwill for impairment in accordance with IAS 36, the recoverable amount of the individual cash-generating unit is determined by its value in use. A unit's value in use is calculated from the present value of its future cash flows. Cash flows are determined based on the EBIT determined as part of annual planning. This is forwarded to Noplat (netoperating-profit less adjusted taxes) and adjusted for depreciation and investments. A discount rate (WACC) of 10.8% was used for this calculation (31 December 2012: 10.8%). A risk-free interest rate of 4.00% (31 December 2012: 4.00%), a risk premium of 5.00% (31 December 2012: 5.00%) and a beta factor of 1.36 (31 December 2012: 1.36) are used to calculate the discount rate. Since the Company largely operates in the European Economic Area, only one consistent discount rate is used for all cash-generating units. The underlying projections employed for the test are based on the new structure of business units and portray a period of three years. They take into account past experience and the management's expectations regarding the future development of the market, while also considering growth in the detailed planning period. Projections further into the future are made by extrapolating cash flows in perpetuity while factoring in a growth rate of 0.5% (31 December 2012: without growth rate) for value in use.

As the present value of future cash flows exceeded the carrying amounts of the goodwill, no impairment of goodwill was necessary. As part of a sensitivity analysis, the discount premium was increased by 1% and flat-rate discounts of 10% were applied to the expected cash flows from the individual cash-generating units. Even under these conditions there was no need for impairment with regard to any of the goodwill allocated to the cash-generating units.

Segment report 9M 2013 in kEuro	Public Sector	Business Sector	secunet 9M 2013
Segment revenue	30,604	10,663	41,267
Cost of sales	-25,051	-7,756	-32,807
Selling expenses	-4,138	-1,846	-5,984
Research and development costs	2	0	2
Administrative costs	-1,895	-620	-2,515
Segment result (EBIT)	-478	441	-37
Interest result			-64
Group profit before tax			-101
Goodwill	2,668	282	2,950

Segment report 9M 2012 in kEuro	Public Sector	Business Sector	secunet 9M 2012
Segment revenue	31,878	9,513	41,391
Cost of sales	-26,514	-7,701	-34,215
Selling expenses	-3,119	-1,052	-4,171
Research and development costs	0	0	0
Administrative costs	-1,688	-625	-2,313
Segment result (EBIT)	557	135	692
Interest result			42
Group profit before tax			734
Goodwill	2,668	282	2,950

The previous year's figures have been adapted to the modified segmentation.

The transfer prices are essentially in line with the prices for third-party transactions.

The accounting principles for the segments are identical to those used for the Consolidated Financial Statements. Using apportionments, expenses (e.g. overhead costs) that are not directly allocable to the reportable segments are allocated to the reportable segments. The segments are managed on the basis of the segment result.

With the exception of non-essential components, the segments' assets are focused on the domestic market. There were no significant changes to the segment assets as at the reporting date.

Related party disclosures

The consolidated companies within the secunet Group have an association with their main shareholder, Giesecke & Devrient GmbH, Munich, in the course of their normal business activities. All transactions are conducted in accordance with normal market practice.

In the first nine months of 2013, no Management Board members were promised or granted any benefits by a third party in respect of their activity as members of the Management Board. In the first nine months of 2013, the members of the Supervisory Board did not receive any other remuneration (over and above the Supervisory Board remuneration as regulated in the Articles of Association of secunet Security Networks) or benefits for services provided personally, in particular consulting and agency services. Neither the members of the Management Board nor the members of the Supervisory Board received any loans from the Company.

Events after the end of the interim reporting period

There were no significant events after the reporting date.

Essen, 5 November 2013

Dr Rainer Baumgart Willem Bulthuis Thomas Pleines

Financial Calendar

2013

6 November	9-Month Report 2013
2014
23 January	Preliminary figures for financial year 2013
25 March	Annual Report 2013
26 March	Analysts' Conference
07 May	3-Month Report 2014
14 May	Annual General Meeting
06 August	Half-year Financial Report 2014
05 November	9-Month Report 2014

Imprint

Issued by secunet Security Networks AG Kronprinzenstraße 30 45128 Essen / Germany

Contact

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