Regulatory
Announcement
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RNS Number:5540S
SQS Software Quality Systems AG
08 March 2007
| Embargoed until 0700 | Thursday, 8 March 2007 |
SQS Software Quality Systems AG
(“SQS” or “the Group”)
Preliminary Results
For the year ended 31st December 2006
SQS Software Quality Systems AG (AIM:SQS.L), the leading independent pan-European provider of quality management and testing services for software development, today announces its preliminary results for the year ended 31st December 2006.
Financial Highlights:
- Turnover up by 44.2% to 78.9m (2005: €54.7m), including 18% organic and 26% acquisitive
- Profit before tax (adjusted) up 44.0% to €5.3m (2005: €3.7m)
- Adjusted earnings per share up 27.3% to €0.28 (2005: €0.22)
- Acquisition of Cresta Ltd. (“Cresta”) in the UK was successful and earnings enhancing in its initial six month period of ownership
- Strong financial position with good underlying cash flow
- Proposed dividend or return of capital of €0.08 per share
Operational Highlights:
- Achieved 18% organic top line growth, well ahead of European IT Services Market*
- Repeat revenues now 75% of turnover
- 400 active clients in 2006 with approximately 100 new clients won during the year
- Strengthened delivery capabilities following investment in more than 100 new consultants
- Increased offshore projects with first own offshore facility in South Africa and securing 7 long term contracts, the majority with offshore components
* European Information Technology Observatory (EITO) 2006 study
Commenting on the results, Rudolf van Megen, CEO, said:
"During the year, SQS further strengthened its position as the leading independent pan-European provider of quality management and testing services for software development. The Company again accelerated its organic growth rate well ahead of the European IT service market. As a result of an excellent year we propose to return to shareholders by way of dividend or other suitable means €0.08 per share.
In 2007, our focus will continue to be on both acquisitive and organic growth, focusing on expanding markets such as outsourcing and offshoring. Trading has been encouraging in the year to date and is ahead of the comparable period last year while the pipeline of new business remains strong."
For further information please contact:
SQS Software Quality Systems AG |
+49 (2203) 91 54 0 |
Altium |
020 7484 4040 |
Smithfield |
020 7360 4900 |
Print resolution images are available for the media to view and download from
www.vismedia.co.uk
Notes to Editors:
SQS is the largest independent European provider of software testing and quality management services. 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 operations across Europe and in South Africa with over 750 employees. SQS has a strong presence in Germany (Cologne, Munich, Frankfurt, Stuttgart and Hamburg) and in the UK (London, Woking, Birmingham, Manchester), Ireland, Netherlands, Switzerland, Austria and South Africa. SQS also has a minor stake in an operation in Portugal and a partnership operation in Spain.
In May 2006, SQS made its first acquisition after its AIM flotation, buying Cresta Group Ltd in the UK. The acquisition increased SQS' UK revenue threefold and secured its position as the largest independent software testing and quality management company in the UK.
With over 4,000 completed projects under its belt, SQS has a strong customer base including half of the DAX 30 companies and 30% of the STOXX-50. They include names like Lloyds TSB, Deutsche Telekom, Barclays, BP, Credit Suisse, Daimler Chrysler, and Airbus spread across the full range of industries.
SQS is the first German company with a primary listing on AIM and completed its IPO in September 2005, having raised £10.8m before expenses at an issue price of 190p. SQS is included in the Software and Computer Services sector (9530) within the Computer Services subsector (9533) and has a RIC code of SQS.L. SQS completed a secondary listing on the Deutsche Boerse in Frankfurt on 2nd December 2005. For further information, please visit www.sqs-uk.com.
About software testing:
Research conducted in December 2006 among 250 IT directors and project managers by Coleman Parkes showed that the outsourced software testing market is at the moment relatively untapped. 69% of respondents felt that testing should be independent of the production team while 77% stated that testing is an essential investment in software development. 10% of those asked isolated ‘poor’ testing as the single reason behind the failure to launch a product successfully first time. A large proportion of those interviewed felt that the industry also lacked a standardised testing ground with 39% suggesting that outsourcing created standardised testing formula.
Outsourcing software testing also seems to be regarded as a trustworthy way in which to conduct testing. 44% of those interviewed felt that outsourced testing would reduce the cost of testing and it was clear that they felt that there was not a loss of quality either in that 48% of those being asked felt that outsourced testing would provide access to highly educated staff.
Chief Executive's Statement
Introduction
I am pleased to report SQS's preliminary results for 2006. SQS had an excellent year, recording a 44% increase in both revenues and profit, demonstrating an underlying performance in our core businesses. At the time of our admission to AIM in September 2005 we indicated that it was our plan to double the size of our business within a two year period. As a result of the strong organic and acquisitive growth achieved last year, SQS is firmly on track to meet this target.
During the year we continued to invest in four growth markets:
- developing our long term software testing outsourcing business,
- increasing our presence in the software testing of embedded systems,
- adding our first offshore testing centre in South Africa, and
- having started an additional consulting practice in SQS business consulting.
Business within our existing client base was buoyant and we secured a record number of 100 additional new clients which will provide the platform for further growth in the current year.
Results
Turnover from continuing operations rose 44.2% to €78.9m (2005: €54.7m). On an unaudited proforma basis including Cresta, revenue for the whole year would have been €91.5m. EBITDA increased by 24% to €8.5m (2005: €6.8m) and underlying adjusted profit before tax increased by 44.0% to €5.3m (2005: €3.7m).
Gross margins edged up slightly overall in the second half of the year as a result of a better business mix while at the operating level they suffered slightly from stronger than expected price pressure mainly in the German market, falling from 8.2% to 7.2%. Utilisation of billable consultants remained strong throughout the Group at 185 billable days per consultant (2005: 185 billable days).
Turnover growth was highest in the United Kingdom, Ireland and South Africa (UKISA) where it grew by 159% across all three countries. This was primarily due to the acquisition of Cresta in July 2006 but also evidences continuing strong organic growth in these countries. In Switzerland turnover grew by 33.8%, and in Germany by 22.1% (purely organic). This confirms our strategy that having achieved the market leadership in our field in those regional markets we are able to drive revenue growth significantly above market growth rates.
Adjusted earnings per share (adjusted to add back deferred taxes and IFRS tax differences to actual taxes) of €0.28 rose by 27.3% (2005: €0.22).
The balance sheet has been considerably strengthened during the year reflecting the acquisition of Cresta and the retained profits in 2006. We reduced our borrowings by €0.9m to €5.8m (2005: to €6.7m). Cash balances and marketable securities at the year end stood at €2.6m (2005: €6.5m) reflecting an initial cash payment of € 4.6m for the Cresta acquisition.
Dividend and return of capital
Pursuant to these results, SQS proposes to return capital to shareholders. Under German law, the Company requires some limited reorganisation of its net asset base in order to pay a dividend to shareholders. Work on this reorganisation has already commenced and SQS will make a further announcement before the end of March regarding its progress. It is the Company’s intention to pay a dividend of 8 cents per share if the reorganisation process can be completed in time. If this is not possible then the Company will seek permission from shareholders at its Annual General Meeting in May to return €1.4 million (the amount equivalent to the proposed dividend) through alternative means. This is expected to be by way of a share buy back but a further announcement will be made in due course.
The Directors are confident that there will be no structural issue that will prevent the payment of a dividend to shareholders in respect of the 2007 and future financial years and, in respect of these years, SQS proposes to operate a dividend policy in line with earnings.
The Board
There were no changes to our management or supervisory boards.
Strategy
Our strategy is to strengthen our market position as the leading independent pan-European provider of quality management and testing services for software development. We aim to grow our business with long term outsourcing and offshoring contracts and investment in expanding markets such as embedded systems in the automotive industry. We intend to strengthen our position in a number of key European markets and will actively look for acquisitions to support and accelerate this strategy.
Employees
On behalf of the board, I would like to thank all our employees for their contribution, hard work, and excellent support and superior deliverables to projects during the last year. I am confident that we have the team in place to capitalise on the opportunities available and to enable us to deliver long term value to our shareholders.
Outlook
During the year, SQS further strengthened its position as the leading independent pan-European provider of quality management and testing services for software development. Once again the Group accelerated its organic growth rate well ahead of the European IT service market.
In 2007, our focus will continue to be on both acquisitive and organic growth, focusing on expanding markets such as outsourcing and offshoring. Trading has been encouraging in the year to date and ahead of the comparable period last year while the pipeline of new business remains strong.
Rudolf van Megen
Chief Executive Officer
8th March 2007
Review of Business
During 2006, we continued to strengthen our business establishing clear market leadership in three regional market segments (United Kingdom, Germany and Switzerland), with utilisation rates at a high level and by keeping overheads stable relative to turnover. We achieved this by increasing the number of projects staffed with international teams and by increasing the number of consultants by 225 through recruitment and the acquisition of Cresta. In line with our existing employee base, our new consultants predominantly have strong software engineering backgrounds as well as senior project management skills. Our 2006 year end number of employees stands at 733 (2005: 469) including 563 fee earning consultants (2005: 338). As a service company helping its clients to improve the quality of their software and IT systems, our commitment to quality is paramount.
Strategic Update
Market drivers
Software quality management and testing constitutes a segment of the IT services market and therefore growth in the IT services market closely correlates 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.In 2006, SQS’s organic growth rate was almost four times that rate and, in addition, SQS generated further growth from acquisitions.
Market research on the software testing market commissioned by SQS and conducted by Coleman Parkes Research mainly in the UK and Ireland in December 2006 revealed that 77% of all IT decision makers acknowledge that software testing is essential in IT product development, 69% consider the independence of the test team from the software development team 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). As well as these legislative and 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. In addition, 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.
Strategic Goals
The SQS Group strategy is centred on five strategic goals which all contribute to market leadership as a service company and resulting shareholder value. They are:
- to extend leadership in independent quality management and testing by delivering added value to our customers in order to achieve their goals,
- to grow the business significantly above the market growth rate for IT services,
- to remain the financially strongest independent quality service company in Europe,
- to extend and retain a strong base of highly motivated, skilled, and best performing employees, and
- to spot and anticipate trends in business and IT with respect to quality aspects and use them for the benefit of our clients.
Services and product lines
As the largest independent provider of software quality services we continuously develop our range of services and other products.
- IT professional services: within its broad range of software testing and quality management services, SQS has enhanced its offerings in the fields of business consulting (e.g. project and risk management), code quality management, and outsourcing/offshoring.
- Tools, licences, and maintenance: SQS's specialist range of software testing tools which work independently from and as add-ons to the tools available from competitors has been enhanced by successful market deployment of version 8.0 of our SQS-Test Professional product.
- IT training and IT events: the training business was extended. Two new certification schemes were 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.
The successful SQC conferences (Software and Systems Quality Conferences), held in Germany, the UK and for the first time in Switzerland in 2006, 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 in 2006. The total number of delegates attending increased to 1,470 (2005: 1,135); the number of exhibitors increased from 61 to 82 while the number of sponsors increased from 17 to 26.
Geographic review
Germany
Revenue in Germany, still our biggest market, was € 41.9m (2004: €34.3m) contributing 53% to the Group's total revenue compared with 63% in the prior year. This reflects an increase of 22.1% enabled by investment in new consultants as announced during the year. We secured key contract renewals with all our large clients and other major customers, all of which provide a solid base for the current year. We also increased the business base in embedded systems by securing new contracts with automotive and avionic clients. The high calibre sales managers hired about one year ago have enabled SQS to grow its business in line with organic growth rates in other Group regions. The EBIT rate of 6.1% was lower than 2005 (9.7%) mainly due to gross margins suffering from stronger than expected price pressure in Germany, while utilisation of billable consultants remained on a healthy level throughout the Group. We expect a recovery of prices in Germany in 2007, due to a general stronger demand for IT consultants, and have taken measures to improve price levels.
United Kingdom/Ireland/South Africa (“UKISA”)
The United Kingdom, the second largest regional segment and the largest European market for IT services in general, generated revenues of € 23.7m (2005: €9.2m), 30% of the Group's total. This represented a 159% increase year on year driven mainly by the acquisition of Cresta which was consolidated in the second half of the year. On an unaudited pro forma basis adding Cresta for the full year, revenue in UKISA would have been €36.3m. Integration of SQS UK and Cresta has been successful with 35 new client wins since the acquisition. EBIT margins, now at 10.4% compared with 4.2% in the previous are now the highest in the group.
The UK market continues to be very fragmented with a number of smaller sized pure play testing services companies serving this market alongside some of the larger consultancies. We continue to focus on further consolidation.
Switzerland
Revenue in Switzerland grew by 33.8% to €9.8m (2005: €7.3m), demonstrating the highest organic growth rate across the Group. This strong year on year increase resulted predominantly from repeat project business with major Swiss clients in financial services and telecommunications markets coupled with significant new wins with large clients. The average number of local employees, mainly consultants, doubled to 36 people.
Other European Countries (Austria, the Netherlands and other)
Austria and the Netherlands contributed an aggregate revenue of €3.5m (2005: €3.3m), other countries contributed no revenue (2005: €0.7m). Other European Countries represented 4.5% of the Group's total turnover overall. The year on year increase of 8% came from our Austrian business, while revenues in the Netherlands were slightly lower than in 2005. The gross margin in both markets reflects continuing price pressure. We have initiated measures to return this regional market segment to positive results in 2007.
Summary
We aim to grow organically by adding more consultants and offering a greater range of services to our existing client base. In particular, we will look to increase our market presence in test outsourcing, offshoring, and software testing of embedded systems. The existing client relationships, of which we have over 400, are the backbone to our future growth.
Where appropriate, we will also seek to consolidate other specialists in our field and pursue infill acquisitions to further establish or strengthen our market position in selected European countries.
Finance Director's Review
Results
Total revenue for the year grew by 44.2% to €78.9m (2005: €54.7m). IT Professional Services was the major contributor with revenue of €73.6m (2005: €50.7m), a 45% increase year on year. Revenue from tool licenses and maintenance was €2.5m (2005: €2.1m) a 20% increase year on year, with IT training and IT events contributing €2.75m (2005: €1.9m) a 45% increase.
EBITDA was up 24% to €8.5m (2005: €6.8m) while profit before tax was €5.1m (2005: €3.7m). Adjusted profit before tax (adjusted to add back IFRS statistical interests on future payment milestones to the Cresta sellers) was €5.3m (2005: €3.7m) up 44%. The improved result was based on slightly lower gross margins, unchanged overheads relative to sales and improved net interest. Adjusted* earnings per share improved to €0.28 (2005: €0.22).
*based on net income decreased by €(0.4)m (2005: €0.4m) on IFRS and other tax differences to actual tax payments and liabilities, increased by statistical interests under IFRS on future payments to Cresta sellers of €0.3m (2005: none) and no IFRS tax effects on IPO costs (2005: €0.7m) but including actual profit taxes of €0.8m (2005:€0.2m) payable under local GAAP
Costs
Administrative costs of €12.2m (2005: €8.5m) which represented 15.4% of turnover (2005: 15.5% of turnover), increased in absolute terms because of the Cresta consolidation in the second half of the year and improvement of local infrastructure in Switzerland and hiring costs. Sales & marketing costs of €5.7m (2005: €3.5m) increased relative to sales (to 7.2% from 6.4%), as we continued to invest in additional sales resources to support current and future organic growth of the business. Research and development costs of €3.4m (2005: €2.7m) fell marginally relative to sales (to 4.2% from 4.9%), reflecting amortisation of past capitalized expenditures for version 8.0 of the SQS-TEST Professional tool, the tool Test Strategist and course development for our training products.
Taxation
The Group tax charge of €0.4m (2005: €1.3m) has two components; one is tax on profits payable under local GAAP of €0.8m (2005:€0.2m), and the other is IFRS and other tax differences and deferred taxes that we are required to show under IFRS of €(0.4)m (2005: €1.1m).
Cash Flow and Financing
The group generated operating cash inflow of €1.6m (2005: €2.8m). Although operating profits have risen, operating cash flow was impacted by a €10.8m increase in receivables mainly due to strong growth of the business and slower collection of receivables in the United Kingdom. Cash flow from financing activities was €1.8m (2005: €5.1m) and includes a pay back of long term borrowings of €2.5m for previous acquisitions. Cash flow from investments was €(1.7)m (2005: €(8.5)m), including €(2.9)m (2005: €(2.7)m) for capitalised R&D for products and investments in intangible assets, €(4.5)m (2005: zero) cash part for the acquisition of the Cresta shares, and an additional €5.6m from sales of marketable securities (2005: €(5.6)m). In total, cash and marketable securities were €2.6m (2005: €6.5m) at the year end.
Foreign Exchange
Approximately 58% of Group turnover is generated in Euros. With the exception of SQS UK, SQS Ireland, the South African office and Software Quality Systems (Schweiz) AG, all subsidiaries of SQS are located in the currency area of the Euro. 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 31st December 2006 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 the changed IFRS accounting rules. On account of the high amortisation of these goodwill values in previous years, their book values today lie considerably below the original acquisition costs. No reductions in value were necessary by reason of the impairment tests carried out.
International Financial Reporting Standards (IFRS)
The Consolidated Financial Statements of SQS and its subsidiary companies ("SQS Group") are prepared in accordance with IFRS, as has been the case since 2001. SQS has applied standards of the Improvements Project of the IASB and other changed standards which are binding for the business year commencing 1 January 2006. The changes have led to some additional details but they did not have any effect on the accounting of assets and liabilities or their valuation.
The SQS Group Consolidated Financial Statements for the business year 2006 were prepared in accordance with uniform accounting and valuation principles in Euros.
Rene Gawron
Chief Financial Officer
8th March 2007
Consolidated Profit and Loss Account
As at 31 December 2006 (IFRS)
|
|
|
|
Year ended |
|
Year ended |
€’000 |
|
(Notes) |
|
(unaudited) |
|
(audited) |
Revenue |
|
|
|
78,933 |
|
54,737 |
Cost of sales |
|
(4) |
|
51,997 |
|
35,563 |
Gross profit |
|
|
|
26,936 |
|
19,174 |
General and administrative expenses |
|
(4) |
|
12,185 |
|
8,473 |
Sales and marketing expenses |
|
(4) |
|
5,666 |
|
3,525 |
Research and development expenses |
|
(4) |
|
3,351 |
|
2,690 |
Profit before tax and financing result (EBIT) |
|
|
|
5,734 |
|
4,486 |
Interest income |
|
(5) |
|
103 |
|
69 |
Finance costs |
|
(5) |
|
768 |
|
842 |
Net interest |
|
(5) |
|
-665 |
|
-773 |
Profit before taxes (PBT) |
|
|
|
5,069 |
|
3,713 |
Income tax |
|
(6) |
|
383 |
|
1,319 |
Profit for the year |
|
|
|
4,686 |
|
2,394 |
Attributable to: |
|
|
|
|
|
|
Equity shareholders |
|
|
|
4,686 |
|
2,394 |
Minority interests |
|
(14) |
|
0 |
|
0 |
Consolidated profit for the year |
|
|
|
4,686 |
|
2,394 |
Earnings per share, undiluted (€) |
|
(7) |
|
0.28 |
|
0.21 |
Earnings per share, diluted (€) |
|
(7) |
|
0.28 |
|
0.20 |
Earnings per share, adjusted (€) |
|
(7) |
|
0.28 |
|
0.22 |
Consolidated Balance Sheet
As at 31 December 2006 (IFRS)
|
|
|
|
31 December 2006 |
|
31 December 2005 |
€’000 |
|
(Notes) |
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
(10) |
|
2,565 |
|
839 |
Marketable securities |
|
(10) |
|
0 |
|
5,626 |
Trade receivables |
|
(11) |
|
22,231 |
|
11,433 |
Other receivables |
|
(11) |
|
1,058 |
|
518 |
Work in progress |
|
(12) |
|
314 |
|
135 |
Income tax receivables |
|
|
|
264 |
|
306 |
|
|
|
|
26,432 |
|
18,857 |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Intangible assets |
|
(8) |
|
3,356 |
|
2,395 |
Goodwill |
|
(8) |
|
28,313 |
|
11,589 |
Property, plant and equipment |
|
(9) |
|
1,057 |
|
756 |
Other non-current receivables |
|
(6) |
|
1,426 |
|
0 |
Deferred taxes |
|
(6) |
|
1,881 |
|
2,007 |
|
|
|
|
36,033 |
|
16,747 |
|
|
|
|
|
|
|
Total Assets |
|
|
|
62,465 |
|
35,604 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Bank loans and overdrafts |
|
(13) |
|
5,330 |
|
3,776 |
Trade creditors |
|
|
|
3,159 |
|
1,844 |
Other provisions |
|
(15) |
|
76 |
|
75 |
Tax accruals |
|
|
|
667 |
|
239 |
Tax liabilities |
|
|
|
2,745 |
|
1,957 |
Other Current liabilities |
|
(14) |
|
15,553 |
|
5,232 |
|
|
|
|
27,530 |
|
13,123 |
|
|
|
|
|
|
|
Non-Current liabilities |
|
|
|
|
|
|
Bank loans |
|
(13) |
|
465 |
|
2,971 |
Other provisions |
|
(15) |
|
112 |
|
151 |
Pension provisions |
|
(15) |
|
294 |
|
305 |
Deferred taxes |
|
(6) |
|
1,001 |
|
859 |
Other Non-Current liabilities |
|
(14) |
|
6,564 |
|
0 |
|
|
|
|
8,436 |
|
4,286 |
|
|
|
|
|
|
|
Total Liabilities |
|
|
|
35,966 |
|
17,409 |
|
|
|
|
|
|
|
Shareholders' equity |
|
(16) |
|
26,499 |
|
18,195 |
|
|
|
|
|
|
|
Minority interests |
|
(17) |
|
0 |
|
0 |
Total Equity |
|
|
|
26,499 |
|
18,195 |
|
|
|
|
|
|
|
Equity and Liabilities |
|
|
|
62,465 |
|
35,604 |
Consolidated Cash Flow Statement
As at 31 December 2006 (IFRS)
|
|
|
|
Year ended 31 December 2006 |
|
Year ended |
€’000 |
|
(Notes) |
|
(unaudited) |
|
(audited) |
|
|
|
|
|
|
|
Net cash flow from operating activities |
|
|
|
|
|
|
Profit before taxes |
|
|
|
5,069 |
|
3,713 |
Add back for |
|
|
|
|
|
|
Depreciation and amortisation |
|
|
|
2,772 |
|
2,361 |
Profit (Loss) on the sale of fixed assets |
|
|
|
-36 |
|
-33 |
Other non-cash income not affecting payments |
|
|
|
-1,356 |
|
-145 |
Net interest income |
|
|
|
705 |
|
766 |
Operating profit before changes in the net current assets |
|
|
|
7,154 |
|
6,662 |
Increase in trade receivables and |
|
|
|
|
|
|
receivables from partly completed contracts not yet billed |
|
|
|
-5,208 |
|
-2,629 |
Increase (Decrease) in work in progress, other assets |
|
|
|
|
|
|
and pre-paid expenses and deferred charges |
|
|
|
1,225 |
|
38 |
Increase (Decrease) in trade creditors |
|
|
|
325 |
|
-417 |
Increase in remaining accruals |
|
|
|
556 |
|
14 |
Decrease in pension accruals |
|
|
|
-11 |
|
-18 |
Decrease (Increase) in other liabilities and |
|
|
|
|
|
|
deferred income |
|
|
|
-1,043 |
|
456 |
|
|
|
|
2,998 |
|
4,106 |
Cash effect of foreign exchange rate movements |
|
|
|
-89 |
|
7 |
Interest payments |
|
(5) |
|
-492 |
|
-833 |
Tax payments |
|
|
|
-841 |
|
-509 |
Net cash flow from operating activities |
|
|
|
1,576 |
|
2,771 |
|
|
|
|
|
|
|
Cash flow from investment activities |
|
|
|
|
|
|
Purchase of intangible assets |
|
|
|
-2,874 |
|
-2,741 |
Purchase of tangible assets |
|
|
|
-325 |
|
-220 |
Proceeds from the disposal of subsidiaries |
|
|
|
221 |
|
|
Cashflows arising from business combinations |
|
|
|
-4,463 |
|
0 |
Proceeds from the sale of tangible assets |
|
|
|
60 |
|
35 |
Sale/(Purchase) of marketable securities available for sale |
|
(10) |
|
5,610 |
|
-5,632 |
Foreign currency result |
|
|
|
39 |
|
-7 |
Interest received |
|
(5) |
|
63 |
|
67 |
Net cash flow from investment activities |
|
|
|
-1,669 |
|
-8,498 |
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
Proceeds from the issue of share capital |
|
|
|
0 |
|
15,909 |
Costs for IPO |
|
|
|
0 |
|
-1,790 |
Repayment of convertible bonds |
|
|
|
0 |
|
-1,130 |
Repayment of finance loans |
|
(13) |
|
-2,506 |
|
-7,890 |
Increase of finance loans |
|
(13) |
|
4,325 |
|
0 |
Redemption / termination of leasing contracts |
|
|
|
0 |
|
-11 |
Net cash flow from financing activities |
|
|
|
1,819 |
|
5,088 |
|
|
|
|
|
|
|
Change in the level of funds affecting payments |
|
|
|
1,726 |
|
-639 |
Cash and cash equivalents at the beginning of the period |
|
|
|
839 |
|
1,478 |
Cash and cash equivalents at the end of the period |
|
|
|
2,565 |
|
839 |
Notes to the Financial Statements
2. Summary of Significant Accounting Policies
Basis of preparation
The Consolidated Financial Statements of SQS and its subsidiary companies ("SQS Group" or "SQS Konzern") are prepared in conformity with all IFRS Standards (International Financial Reporting Standards, formerly IAS = International Accounting Standards) and the Interpretations of the IASB (International Accounting Standards Board) adopted by the EU Commission and translated into the German language which are to be applied for those financial statements whose reporting period starts on or after 1 January 2006. The new and revised Standards and Interpretations of the IASB were not applied in the business year 2006 prior to the implementation date stipulated.
The Financial Information has been prepared on the historical cost basis. The Financial Information is presented in Euros and amounts are rounded to the nearest thousand (T€) 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.
First-time application of new standards, change in accounting policy and adjustment of figures from the previous year
SQS has applied the standards of the Improvements Project of the IASB and other changed standards which are binding for financial years commencing on or after 1 January 2006. The changes have led to some additional information in the notes but do not have any effect on the accounting treatment of assets and liabilities or their valuation.
SQS does not apply any further changed or newly passed standards prior to the implementation date stipulated. Further, according to the assessment of SQS, the application of these standards would not have any effect on the financial statements.
Basis of consolidation
The Financial Information comprises the financial statements of SQS Software Quality Systems AG and its subsidiaries as at 31 December each year. Subsidiary company financial statements are prepared on a basis consistent with those of other SQS Group companies. All companies in the SQS Group have the same accounting reference date of 31 December.
All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Subsidiaries are consolidated from the date on which control is transferred to the SQS Group and cease to be consolidated from the date on which control is transferred out of the SQS Group.
|
Country of incorporation |
31.12.2006 |
31.12.2005 |
||||
Share of |
Equity |
Result for the year |
Share of |
Equity |
Result for the year |
||
|
|
% |
€’000 |
€’000 |
% |
€’000 |
€’000 < |