Regulatory
Announcement
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SQS Software Quality Systems AG
Interim results for the six months ended 30 June 2007
SQS Software Quality Systems AG (AIM:SQS.L) the global leader in independent software testing and quality management services, today announces its interim results for the six months ended 30th June 2007.
Financial Highlights:
- Turnover up by 78.5% to 56.2m (H1 2006: 31.5m)
- Strong organic growth of nearly 25% is almost five times higher than growth in the European IT Services market (1).
- First-time H1 impact of Cresta added nearly 54% to Group revenues
- Gross profit up 91.0% to 19.4m (HY1 2006: 10.2m) with gross margins improving to 34.5% (H1 2006: 32.3%)
- Adjusted (2) profit before tax up 168.9% to 4.6m (H1 2006: 1.7m)
- Adjusted (3) earnings per share up 90.0% to 0.19 (H1 2006: 0.10)
- Cash inflow from operating activities improved to 3.8m compared with an outflow of 0.05m in the same period last year
(1) IDC/European Information Technology Observatory (EITO) study, 2007: WWW.EITO.COM
(2) adjusted to add back pro forma interests required to be shown under IFRS of 0.3m on future payment milestones to the Cresta sellers
(3) based on net income increased by 0.5m on IFRS tax differences and 0.3m of pro forma interests but including actual profit taxes of 0.9m payable under local GAAP
Operational Highlights:
- Margins outpacing revenue growth due to higher pricing in the UK and Germany, as well as continuing high levels of consultant utilisation
- Investment in 130 new staff mostly consultants to support current strong demand for SQS services and future organic growth of the business
- 64 new client wins (about 15% of the total number of clients) against 100 for the whole of 2006
- Long-term contracts doubled to 14, many with offshore delivery
- Strong performance in energy, financial services and automotive sectors
- Acquisition of Triton after period end will immediately increase earnings and enhance the position of SQS in the Insurance market
Commenting on the results, Rudolf van Megen, CEO, said:
"In the first six months of 2007, SQS made a giant leap forward to strengthen its position as the global leader in independent software testing and quality management services, with a strong focus on the European markets.
Our market leadership is reflected in the high number of new client wins we achieved in the first half, helping SQS to achieve a growth rate almost five times that of the overall European IT services market.
Furthermore, our recent acquisition of Triton will enhance earnings in 2007 and open up new cross-selling opportunities for our testing and consulting services.
The second half of 2007 has begun strongly and with our new-business pipeline looking very healthy, we expect to achieve full year results comfortably ahead of current market expectations.
For further information please contact:
SQS Software Quality Systems AG |
On the day Thereafter |
Altium Securities |
+44 (0)20 7484 4040 |
College Hill Associates Ltd |
+44 (0) 20 7457 2020 |
Print resolution images are available for the media to view and download from www.vismedia.co.uk
Notes to Editors:
SQS is the global leader in independent software testing and quality management services having most of its business in Europe. SQS consultants design and oversee quality management processes during software and IT systems development, and test the resulting products for errors and omissions.
Headquartered in Cologne, Germany, SQS now has 860 employees across Europe and in South Africa. The Group has a strong presence in Germany (Cologne, Munich, Frankfurt, Stuttgart and Hamburg) and in the UK (London, Woking, Birmingham, Manchester, Belfast), Ireland, Netherlands, Switzerland, Austria and South Africa. SQS also has a minor stake in an operation in Portugal and a partnership operation in Spain.
With more than 4,000 completed projects under its belt, SQS has a strong customer base including 36 FTSE-100 companies, half of the DAX 30 and nearly a third of the STOXX-50. It supports clients in a wide range of industries, including major corporations such as Zurich Group, Deutsche Telekom, Barclays, BP, Boots, Credit Suisse, Volkswagen, and DaimlerChrysler.
Chief Executive's Statement
Introduction
I am pleased to present strong interim results for the first half of 2007, in which SQS achieved material improvements in revenues, margins and profits across the Group.
Turnover from operations rose by 78.5% to 56.2m (HY1 2006: 31.5m) while underlying adjusted profit before tax increased by 168.9% to 4.6m (HY1 2006: 1.7m).
These improvements resulted from strong organic growth of nearly 25% and acquisitive growth of nearly 54% from the first-time impact of Cresta Group Ltd., which was consolidated in the second half of 2006.
A favourable market environment, particularly in Germany and the UK, has allowed pricing increases in excess of volume growth resulting in profits growth at twice the rate of sales.
We have continued to strengthen our client base and improve our revenues from repeat business. The total number of clients now stands at more than 400, following 64 new account wins in the period compared with 100 across the whole of 2006. We have secured additional long term contracts in key verticals such as financial services, telecommunications and logistics, with a number of contracts involving significant offshore delivery components.
We have continued to invest in growth, increasing the number of staff mainly consultants by 130 to a total of 860. Although hiring new consultants has impacted our G&A costs with agency fees in the first half of the year, the impact of the new consultants initial training costs on gross margins could be more than offset by improved pricing. Utilisation rates have remained stable, which with improved pricing, has helped to reinforce the gross margin.
Dividend
No dividend will be paid in respect of the 2007 interim results, but as previously announced, the Company proposes to pay an enhanced dividend for its 2007 financial year which will incorporate both the return of capital for its 2006 financial year and the dividend which the directors currently expect to be able to pay for the Companys 2007 financial year. Measures to reorganise the net asset base to enable dividend payments have now been passed and the enhanced dividend will be paid following the announcement of its preliminary results for the year ended 31 December 2007 and the AGM planned for May 2008.
Business strategy
Our strategy is to build upon our market position as the global leader in independent software testing and quality management services, with a major focus on the European market. We aim to grow our business with long-term outsourcing contracts and further investment into expanding markets such as management consulting and embedded systems. Furthermore we intend to strengthen our position in a number of key European markets and will continue to look actively for acquisitions to support and accelerate this strategy.
The SQS Group strategy is centred on five strategic business areas, all of which all contribute to market leadership as a service company and the resulting improvements in shareholder value. They are:
- Market Leadership: Extend leadership in independent quality management and testing by delivering added value to our customers in order to help them achieve their goals
- Growth: Increase Group revenues significantly above the market growth rate for IT services
- Financial strength: Remain the strongest independent software testing and quality-management services company in Europe
- Employment: Extend and retain a strong base of skilled and highly motivated employees
- Technology Leadership: Spot and anticipate trends in business and IT with respect to software quality management and utilise what we learn for the benefit of our clients and shareholders
Services and product lines
As the largest independent provider of software quality management services we continuously develop our range of offerings. They are:
- Professional services for business and IT: within its broad range of software testing and quality management services, SQS has enhanced its offerings in the fields of management consulting for the business side (e.g. project and risk management), code quality management, and outsourcing/offshoring
- Tools, licences, and maintenance: SQS's specialist range of software testing tools has been enhanced by successful market deployment of version 8.0 of our SQS-Test Professional product, which works independently or alongside products developed by other testing tool companies
- IT training: the training business has been extended with two new certification schemes being established (INTCCM for Configuration Management and IREB for Requirements Management); this will result in additional courses including certification. ISTQB and ISEB courses were updated for the new versions of the syllabus
- Conferences and events: The successful SQC conferences (Software and Systems Quality Conferences), held in Germany, the UK and in Switzerland, are the largest quality management and software testing events in Europe. We plan to expand these into Ireland in 2008. The media partnership with IDG, which was started in 2006, has resulted in a higher number of delegates, exhibitors, and sponsors attending our conferences during the year
Market drivers
Software quality management and testing is a specialised segment of the IT services market and therefore growth in the IT services market correlates closely with growth in software quality management and testing. Research conducted by the European Information Technology Observatory ("EITO") showed the European growth rate for IT services to be 5.3% in 2006, with 5.4% expected for 2007.
Market research on the software testing market commissioned by SQS and conducted by Coleman Parkes Research and PAC in the SQS countries in early 2007 revealed that 77% of all IT decision makers acknowledge that software testing is an essential part of IT product development. Around 69% consider the independence of the test team from the software development team to be as important and 57% agree that compliance and regulation is driving the need for more rigorous software testing.
Current regulatory market drivers include higher demands imposed on IT systems by directives such as Basel II, SEPA (Single European Payment Area) or MiFID (Markets in Financial Instruments Directive).
In addition to these regulatory developments, a high number of IT projects either fail or run out of budget and/or time. This further demonstrates the importance of independent software testing. Continuing return on investment (ROI) pressures, coupled with increasing "industrialisation" of the software engineering process has led to an increased demand for outsourced software testing as well as better quality management of embedded systems.
The Board
There have been no changes to our supervisory board and management board in the last six months period.
Employees
On behalf of the board, I would like to thank all our employees for their contribution, hard work, and excellent support during the year. I also welcome the many new employees who have joined our company and bring their rich and varied talents to help our company grow. I am confident that we have the best team in place to capitalise on the opportunities available and to enable us to deliver long term shareholder value.
A stock option programme started in 2006 will be continued in the second half of this year in order to help SQS retain key employees and attract quality individuals into the business.
Outlook
During the year, SQS significantly strengthened its position as the worlds largest independent provider of quality management and testing services for software development and once again accelerated its growth rate, which now stands at close to five times the rate of growth in the European IT services market (1).
In the second half of 2007, we will continue to grow the business organically, focusing on expanding growth markets such as outsourcing, offshoring and embedded systems, whilst consolidating our most recent acquisition with Triton in the field of insurance management consulting. This acquisition enables SQS to lever its expertise into project management and consulting, at the same time opening up a number of cross-selling opportunities for our core testing and quality-management services. We expect the Triton acquisition to be earnings enhancing in 2007.
Trading has been encouraging in the first two months of the second half and as expected, growth is well ahead of the comparable period last year. The new business pipeline remains strong and at this stage we expect to achieve full year results comfortably ahead of current market expectations.
Rudolf van Megen
Chief Executive Officer
6th September 2007
Financial Review
Summary
Geographically, we saw the strongest turnover growth in the United Kingdom, Ireland and South African business, where the top line grew by 406.7%, mainly due to the first time consolidation of Cresta Group Ltd. which was acquired shortly after the first half-year period ended in 2006.
Germany also performed strongly with 29.0% of pure organic revenue growth and Switzerland with a top-line growth rate of 19.4%.
Germany
Revenue in Germany was €26.1m (HY 2006: €20.3m), an increase of 29.0%. This represented 46% of the Group's total revenue compared with 64% in the prior period. We intensified our recruitment search in the first half of 2007 in order to grow the local business in Germany significantly in the current year. Profits have increased due to significant price improvements with utilisation remaining at a high level. During the first half, we secured key contract renewals with all our large clients.
United Kingdom/Ireland/South Africa
Markets and pricing in our UK based businesses continued to be strong. UK-based revenues were 22.5m (HY1 2006: 4.4m), an increase of 407% representing around 40% of the total Group revenues. Organic growth in this region was strong at nearly 25%, but revenue growth in the first half was flattered by the first-time consolidation of Cresta Group Ltd., which resulted in a like for like rate of growth that we will obviously not continue to enjoy in the second half of 2007.
Switzerland
In Switzerland, revenues were 6.0m (HY1 2006: 5.0m), an increase of 19% and representing 11% of the Groups total revenue. While a significant proportion of revenues were achieved using consultants from other SQS entities in 2006, the first half of 2007 marked the first period in which the majority of revenues were billed by locally-employed consultants.
SQS won additional clients in banking, insurance and established a new vertical in telecommunications in Switzerland. Furthermore, we continued to build our recently-launched "SQS Group Management Consulting" arm, which focuses on bridging the gap between customers' business and IT departments with our own project and risk management services. The recent acquisition of Triton, an Austrian company active in this field, will enhance our reputation and offering in this arena.
Other European Countries
Our businesses in Austria and the Netherlands generated 1.7m (HY1 2006: 1.8m) which was a decrease of 8.0%, mainly due to increased usage of consultants in other SQS regions.
Margins and profitability
Gross profit improved by 91.0% to 19.4 m (HY1 2006: 10.2m). Adjusted profit before tax (adjusted to add back pro forma interests required to be shown under IFRS of 0.3m on future payment milestones to the Cresta sellers) was 4.6m (HY1 2006: 1.7m), up 168.9%. Profit in the first half was positively impacted by the first time consolidation of Cresta Group Ltd. and strongly improved gross margins from better price levels in the UK and Germany.
Adjusted earnings per share improved to 0.19 (HY1 2006: 0.10) (based on net income increased by 0.5m on IFRS tax differences and 0.3m of pro forma interests but including actual profit taxes of 0.9m payable under local GAAP).
Costs
Administrative costs totalled 8.9m (HY1 2006: 4.7m) and represented 15.9% of sales (HY1 2006: 15.0%). A small reduction in costs through centralising administration was offset by higher agency fees for recruitment, mainly in Switzerland, leading to a small increase in costs as a percentage of sales.
Sales & marketing costs were 3.9m and also increased relative to turnover (from 6.7% to 7.0%) as SQS continues to invest in additional sales resources to support current and future organic growth. Research and development costs of 1.8m fell as a proportion of turnover (to 3.2% from 4.5%), as our investment in tool and course development for our training products remains stable in absolute terms, irrespective of the overall revenue growth. In total, overhead costs relative to sales were reduced to 26.1% from 26.2% in HY1 2006.
Taxation
The Group tax charge of 1.4m has two components: one is tax on profits payable under local GAAP of 0.9m; the other is the deferred tax and tax differences that SQS is required to show under IFRS of 0.5m. Due to tax breaks in Germany under local GAAP, SQS will pay only negligible taxes on profits in Germany, Austria and the Netherlands.
For the full year, we expect an actual tax rate of 25% and a rate of 29% in 2008.
Cash Flow and Financing
Cash flow from operating activities improved significantly to 3.8m compared with an outflow of 0.05m in the same period last year, mainly due to a reduction of debtor days from 75 at the year end 2006 to 69 at the end of June 2007.
Cash flow from financing activities was neutral and included proceeds of 4.8m from the issue of share capital, which was offset by repayment of borrowings. Cash outflow from investment activities of 2.4m was mainly due to ongoing investments in capitalized R&D for testing tools and training (1.4m), with a further amount accounted for by the purchase of money market funds, which are a cash equivalent.
Foreign Exchange
Approximately 49% of the Group's turnover is generated in Euros. For the conversion of the local currency into Euros, the official fixed exchange rate was chosen. For the conversion of the balance sheet items from foreign currency into Euros, the official mean rate as at 30th June 2007 was used.
The Group's exposure to foreign exchange risks is negligible as more than 90% of the business is billed and served locally.
Amortisation
Amortisation of goodwill is no longer carried out due to changes in IFRS accounting rules. On account of the high amortisation of goodwill values in previous years, their book values today lie considerably below the original acquisition costs. As a result, no reduction in value was necessary as a result of the impairment tests carried out in accordance with IAS 36.
Balance sheet
The balance sheet strengthened considerably during the period reflecting the positive net income in the first half of the year and the 4.8m fund raising we made in April this year. We further reduced our borrowings by 5.3m to 1.1m (HY1 2006: 6.4m) resulting in a net cash (including marketable securities) position of 3.5m (HY1 2007: -6.1m net debt). Cash balances (including marketable securities) at the six months period end stood at 4.6m (HY1 2006: cash 0.3m).
International Financial Reporting Standards (IFRS)
The Interim Consolidated Financial Statements of SQS and its subsidiary companies ("SQS Group") are prepared in conformity with all IFRS Standards (International Financial Reporting Standards, formerly International Accounting Standards) and Interpretations of the IASB (International Accounting Standards Board) which are mandatory at 30 June 2007, whereas the interim reports are published in an abbreviated form according to IAS 34. The same accounting and valuation method used for the 2006 annual Consolidated Financial Statements was applied. The Interim Consolidated Financial Statements have neither been audited nor reviewed.
The SQS Group Consolidated Financial Statements for the six month period ended June 30th 2007 were prepared in accordance with uniform accounting and valuation principles in Euros.
Rene Gawron
Chief Financial Officer
6th September 2007
Consolidated Profit and Loss Account
Six months ended 30 June 2007
|
|
Six months ended 30 June 2007 |
Six months ended 30 June 2006 |
Year ended 31 December 2006 |
€ ‘000 |
(Notes) |
(unaudited) |
(unaudited) |
(audited) |
Revenue |
|
56,214 |
31,499 |
78,933 |
Cost of sales |
(3) |
36,801 |
21,337 |
51,997 |
Gross profit |
|
19,413 |
10,162 |
26,936 |
General and administrative expenses |
(3) |
8,943 |
4,719 |
12,185 |
Sales and marketing expenses |
(3) |
3,931 |
2,115 |
5,666 |
Research and development expenses |
(3) |
1,811 |
1,428 |
3,351 |
Profit before tax and financing result (EBIT) |
|
4,728 |
1,900 |
5,734 |
Finance income |
|
201 |
|
103 |
Finance costs |
|
636 |
|
768 |
Net interest |
(4) |
(435) |
(199) |
(665) |
Profit before taxes (PBT) |
|
4,293 |
1,701 |
5,069 |
Income tax |
(5) |
1,369 |
604 |
383 |
Profit for the year |
|
2,924 |
1,097 |
4,686 |
Attributable to: |
|
|
|
|
Equity shareholders |
|
2,924 |
1,097 |
4,686 |
Minority interests |
(14) |
0 |
0 |
0 |
Consolidated profit for the year |
|
2,924 |
1,097 |
4,686 |
Earnings per share, undiluted (€) |
(6) |
0.16 |
0.07 |
0.28 |
Earnings per share, diluted (€) |
(6) |
0.16 |
0.07 |
0.28 |
Adjusted earnings per share (€), |
(6) |
0.19 |
0.10 |
0.28 |
Consolidated Balance Sheet
As at 30 June 2007 (IFRS)
|
|
30 June 2007 |
30 June 2006 |
31 December 2006 |
|
€ ‘000 |
(Notes) |
(unaudited) |
(unaudited) |
(audited) |
|
Current assets |
|
|
|
|
|
Cash and cash equivalents |
(9) |
3,578 |
265 |
2,565 |
|
Marketable securities |
(9) |
1,020 |
0 |
0 |
|
Trade receivables |
|
25,785 |
13,976 |
22,231 |
|
Other receivables |
|
1,290 |
5,228 |
1,058 |
|
Work in progress |
|
36 |
406 |
314 |
|
Income tax receivables |
|
94 |
330 |
264 |
|
|
|
31,803 |
20,205 |
26,432 |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets |
(7) |
3,153 |
2,544 |
3,356 |
|
Goodwill |
(7) |
28,313 |
11,589 |
28,313 |
|
Property, plant and equipment |
(8) |
1,202 |
721 |
1,057 |
|
Income tax receivable |
|
1,464 |
0 |
1,426 |
|
Deferred taxes |
|
1,435 |
1,653 |
1,881 |
|
|
|
35,567 |
16,507 |
36,033 |
|
|
|
|
|
|
|
Total Assets |
|
67,370 |
36,712 |
62,465 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Bank loans and overdrafts |
(10) |
989 |
4,578 |
5,330 |
|
Trade creditors |
|
3,250 |
2,492 |
3,159 |
|
Other provisions |
(12) |
109 |
75 |
76 |
|
Tax accruals |
|
1,385 |
380 |
667 |
|
Tax liabilities |
|
3,110 |
1,421 |
2,745 |
|
Other current liabilities |
(11) |
16,270 |
5,260 |
15,553 |
|
|
|
25,113 |
14,206 |
27,530 |
|
Non-Current liabilities |
|
|
|
|
|
Bank loans |
(10) |
109 |
1,822 |
465 |
|
Other provisions |
(12) |
112 |
126 |
112 |
|
Pension provisions |
|
316 |
325 |
294 |
|
Deferred taxes |
|
989 |
938 |
1,001 |
|
Other non-current liabilities |
|
6,575 |
0 |
6,564 |
|
|
|
8,101 |
3,211 |
8,436 |
|
|
|
|
|
|
|
Total Liabilities |
|
33,214 |
17,417 |
35,966 |
|
Shareholders' equity |
(13) |
|
|
|
|
Share capital |
|
18,691 |
15,763 |
17,191 |
|
Share premium |
|
16,692 |
10,936 |
13,322 |
|
Statutory reserves |
|
53 |
53 |
53 |
|
Other reserves |
|
(1,243) |
(905) |
(1,105) |
|
Retained earnings |
|
(37) |
(6,552) |
(2,962) |
|
34,156 |
19,295 |
26,499 |
|||
|
|
|
|
|
|
Minority interests |
(14) |
0 |
0 |
0 |
|
Total Equity |
|
34,156 |
19,295 |
26,499 |
|
|
|
|
|
|
|
Equity and Liabilities |
|
67,370 |
36,712 |
62,465 |
|
Consolidated Cash Flow Statement
Six months ended 30 June 2007 (IFRS)
|
|
Six months |
Six months ended 30 June 2006 |
Year ended 31 December 2006 |
€ ‘000 |
(Notes) |
(unaudited) |
(unaudited) |
(audited) |
|
|
|
|
|
Net cash flow from operating activities |
|
|
|
|
Profit before taxes |
|
4,292 |
1,701 |
5,069 |
Add back for |
|
|
|
|
Depreciation and amortisation |
|
1,474 |
1,017 |
2,772 |
Profit (Loss) on the sale of fixed assets |
|
0 |
25 |
-36 |
Other non-cash income not affecting payments |
|
(100) |
3 |
(1,356) |
Net interest income |
|
449 |
96 |
705 |
Operating profit before changes in the net current assets |
|
6,115 |
2,842 |
7,154 |
Increase in trade receivables and |
|
|
|
|
receivables from partly completed contracts not yet billed |
|
(3,555) |
(2,543) |
(5,208) |
Increase (Decrease) in work in progress, other assets |
|
|
|
|
and pre-paid expenses and deferred charges |
|
47 |
-615 |
1,225 |
Increase in trade creditors |
|
91 |
648 |
325 |
Increase in remaining accruals |
|
1,116 |
116 |
556 |
Increase (Decrease) in pension accruals |
|
22 |
20 |
(11) |
Decrease (Increase) in other liabilities and |
|
|
|
|
deferred income |
|
(77) |
(509) |
(1,043) |
Cash flow from operating activities |
|
3,759 |
(41) |
2,998 |
Cash effect of foreign exchange rate movements |
|
(14) |
103 |
(89) |
Interest payments |
(4) |
(216) |
(174) |
(492) |
Tax payments |
|
(138) |
(194) |
(841) |
Net cash flow from current business activities |
|
3,391 |
-306 |
1,576 |
|
|
|
|
|
Cash flow from investment activities |
|
|
|
|
Purchase of intangible assets |
|
(1,009) |
(1,039) |
(2,874) |
Purchase of tangible assets |
|
(409) |
(117) |
(325) |
Proceeds from the disposal of subsidiaries |
|
0 |
0 |
221 |
Cashflows arising from business combinations |
|
0 |
0 |
(4,463) |
Transfer into an notary trust account to purchase of shares |
|
0 |
(4,366) |
0 |
Proceeds from the sale of tangible assets |
|
0 |
0 |
60 |
Sale/(Purchase) of marketable securities available for sale |
|
(1,020) |
5,626 |
5,610 |
Foreign currency result |
|
(1) |
(103) |
39 |
Interest received |
(4) |
28 |
78 |
63 |
Net cash flow from investment activities |
|
(2,411) |
79 |
(1,669) |
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
Proceeds from the issue of share capital |
|
4,817 |
0 |
0 |
Costs for IPO |
|
(98) |
0 |
0 |
Repayment of finance loans |
(10) |
(4,686) |
(347) |
(2,506) |
Increase of finance loans |
(15) |
0 |
0 |
4,325 |
Redemption / termination of leasing contracts |
|
0 |
0 |
0 |
Net cash flow from financing activities |
|
33 |
-347 |
1,819 |
|
|
|
|
|
Change in the level of funds affecting payments |
|
1,013 |
-574 |
1,726 |
Cash and cash equivalents |
|
|
|
|
at the beginning of the period |
|
2,565 |
839 |
839 |
Cash and cash equivalents |
|
|
|
|
at the end of the period |
|
3,578 |
265 |
2,565 |
|
|
|
|
|
1. Summary of Significant Accounting Policies
Basis of preparation
The Interim Consolidated Financial Statements of SQS and its subsidiary companies ("SQS Group") are prepared in conformity with all IFRS Standards (International Financial Reporting Standards, formerly IAS = International Accounting Standards) and Interpretations of the IASB (International Accounting Standards Board) which are mandatory at 30 June 2007, whereas the interim reports are published in an abbreviated form according to IAS 34. The same accounting and valuation method used for the 2006 annual Consolidated Financial Statements was applied. The Interim Consolidated Financial Statements have neither been audited nor reviewed.
The Financial Information has been prepared on the historical cost basis. Further information about the Groups accounting principles and policies is contained in the SQS Consolidated Financial Statement at 31st December 2006. The Financial Information is presented in Euros and amounts are rounded to the nearest thousand ( 000) except when otherwise indicated.
Statement of compliance
The Financial Information of SQS and its subsidiaries (together the SQS Group) has been prepared in accordance with IFRS as adopted for use in the EU.
Basis of consolidation
As at 30 June, the Company held interests in the share capital of more than 20 % of the following undertakings:
Consolidated companies |
Country of incorporation |
Six month ended 30 June 2007 |
Six month ended 30 June 2006 |
Year ended 31 December 2006 |
Share of capital |
Share of capital |
Share of capital |
||
|
|
% |
% |
% |
SQS Group (UK) Limited |
UK |
100.0 |
100.0 |
100.0 |
SQS Group Limited (formely Cresta Group Limited), London, since 1 July 2006 |
UK |
100.0 |
- |
100.0 |
SQS Software Quality Systems (Ireland) Ltd., since 1 July 2006 |
Ireland |
100.0 |
- |
100.0 |
SQS Nederland BV, Zaltbommel |
The Netherlands |
90.5 |
90.5 |
90.5 |
SQS GesmbH, Vienna |
Austria |
100.0 |
100.0 |
100.0 |
SQS Software Quality Systems (Schweiz) AG, Zug |
Switzerland |
97.0 |
97.0 |
97.0 |
Use of estimates
The preparation of the Interim Financial Statements in compliance with the International Financial Reporting Standards requires the disclosure of assumptions and estimates made by the management, which have an effect on the amount and the presentation of the assets and liabilities shown in the balance sheet, the income and expenditure as well as any contingent items. The actual results may deviate from these estimates.
The main estimates and judgements of the management of SQS refer to:
- the useful life of intangible assets and property, plant and equipment,
- the valuation of the liability from the Cresta purchase
- deferred taxes on losses carried forward,
- the valuation of pension assets and liabilities.
2. Segmental reporting
The following tables present revenue and profit information regarding the SQS Group’s business segments for the interim period ended 30 June 2007 and 30 June 2006 and for the year ended 31 December 2006.
Six month ended 30 June 2007 (unaudited) |
Germany |
|
UK |
|
Switzerland |
|
Other |
|
Total |
|
€ ‘000 |
|
€ ‘000 |
|
€ ‘000 |
|
€ ‘000 |
|
€ ‘000 |
Sales |
|
|
|
|
|
|
|
|
|
External sales |
26,132 |
|
22,461 |
|
5,951 |
|
1,670 |
|
56,214 |
Internal sales between the |
1,209 |
|
161 |
|
200 |
|
230 |
|
1,800 |
Result |
|
|
|
|
|
|
|
|
|
Segment result |
2,064 |
|
2,235 |
|
466 |
|
(37) |
|
4,728 |
Financial result |
|
|
|
|
|
|
|
|
(435) |
Taxes on income |
|
|
|
|
|
|
|
|
(1,369) |
Result for the period |
|
|
|
|
|
|
|
|
2,924 |
Profit share of minority shareholders |
|
|
|
|
|
|
|
|
0 |
Result of the Group for the period |
|
|
|
|
|
|
|
|
2,924 |
Six month ended 30 June 2006 (unaudited) |
Germany |
|
UK |
|
Switzerland |
|
Other |
|
Total |
|
€ ‘000 |
|
€ ‘000 |
|
€ ‘000 |
|
€ ‘000 |
|
€ ‘000 |
Sales |
|
|
|
|
|
|
|
|
|
External sales |
20,265 |
|
4,433 |
|
4,985 |
|
1,816 |
|
31,499 |
Internal sales between the segments |
1,566 |
|
535 |
|
69 |
|
30 |