H1 Interim Report per

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1 H1 Interim Report per Operating income (EBIT) increases by 46% compared to the same six month of the previous year. EUR 7.7 million sales (EUR 7.6 million in H1-2003) keur 558 EBIT (keur 382 in H1-2003)

2 Contents. keur 1,350 net income (keur 1,332 in H1-2003) EUR 0.11 earnings per share (EPS) (EUR 0.11 in H1-2003) Liquid funds amount to EUR 45.7 million after special distribution of 18.0 million (Corresponds to EUR 3.81 per share) Syzygy AG Sales Profit Cash Flow Liquid Assets Investments Employees Treasury Stocks Risk Management Outlook Notes I03 I03 I04 I05 I05 I06 I06 I06 I07 I07 I08 ission. Consolidated Income Statements To create value for Europe s leading organisations by connecting their people, customers, and systems in smarter ways using internet-related technologies. Consolidated Balance Sheets Consolidated Statements of Cash Flows Statements of Changes in Shareholders Equity Upcoming Dates 2004/2005 I08 I09 I10 I11 I12

3 Syzygy AG. Assets in keur Sales EBITDA EBIT Net income for the period EBITDA margin EBIT margin Earnings per share (in EUR) Number of employees (end of June) Revenue per employee (annual average) Liquid funds and securities Cash flow from operating activities Sales. 2nd Quarter Prev. Yr. January June Prev. Yr ,017 3, % 7,680 7, % % % % % % 1,350 1, % 11.3% 9.8% 1.5 pp 11.2% 9.4% 1.8 pp 7.5% 5.3% 2.2 pp 7.3% 5.0% 2.3 pp % % % % 45,678 60, % 45,678 60, % 1, % 2,257 1, % EBIT and sales development ( ) on a quarterly basis in keur 4,000 3,000 2,000 1, ,240 3,279 3,680 4,023 3, ,784 3,769 3,382 3,663 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q ,017 10% 5% 0% -5% -10% -15% -20% -25% -30% Revenue on a quarterly basis; current consolidation EBIT development in % Q2 Sales rose by 9.7% compared to the previous quarter and by 6.2% compared to the same quarter of the previous year. Compared to the first six months of 2003, this corresponds to a 1.2% increase in sales. The ten largest customers accounted for 90% of the total revenues of the Syzygy group. In addition to ongoing business with existing customers, projects were conducted with new customers. Sales per employee over the year amounted to keur 124 at 30 June 2004, leading to a 1.6% rise compared to the same period of the previous year (keur 122). Segment reporting The German subsidiary contributed 50% to total revenues of the Syzygy group compared to 48% during the same six months of the previous year. Accordingly, the UK subsidiary accounted for 50% of the overall revenues (52% in the same six months of the previous year). Syzygy Deutschland GmbH We succeeded in continuing the positive sales development seen in the first quarter Sales increased by 5.6% to keur 3,849 compared to the first six months of The accumulated EBIT stood at keur 531 for the period ending at 30 June 2004, compared to keur 506 in the same period of the previous year. The resulting EBIT margin for the period under review stands at 13.8% compared to 13.9% in the same period of the previous year. Syzygy UK Ltd. The UK subsidiary reported a very successful second quarter and proved of being capable of significantly increasing both its sales and its EBIT. Sales rose by 13.7% compared to the first quarter with sales totalled keur 3,831 in the first six months of the year, compared to keur 3,943 in the first six months of 2003 ( 2.7%). The company also succeeded in increasing the EBIT margin from 9.7% to 14.7% compared to the first quarter. Overall, the EBIT margin rose slightly 3

4 Sales. Profit. compared to the first six months of 2003 from 12.2% to 12.3%. Syzygy holding companies During the current quarter, Syzygy AG and mediopoly Ltd. once again succeeded in cutting costs further. Besides cost savings on service providers, the costs of human resources and materials were also reduced during the period under review. Syzygy AG provides the subsidiaries with services in the areas of strategy, controlling, accounting, IR&PR, and HR. mediopoly Ltd. is an intermediate holding company that held the shares in Syzygy UK Ltd. since Other explanatory notes on Mediopoly can be found in the Annual Report 2003 starting on page 28. Syzygy Group The EBIT for the first six months of 2004 stands at keur 558 and is thus 46% up on the operating result for the same period of the previous year (keur 382). The company was thus able to exceed the planned targets for the first six months. Through cost management, administration costs were reduced by 9% compared to the same period of the previous year. This contributed significantly to improving the EBIT. Fixed-asset depreciation during the period under review amounted to keur 300 and is thus approx. 9% below the figure for the same period of the previous year (keur 330). Financial income dropped year-on-year by keur 81 to keur 1,569. This is connected with the special distribution of dividends amounting to EUR 18.0 million at 13 April 2004, following which the company now has some 25% less liquid Sales allocation by vertical market (H1-2004) Sales allocation by country (H1-2004) in keur Sales United Kingdom 3,831 3,943 Germany 3,849 3,645 Holding Companies 0 0 Total Sales 7,680 7,588 EBIT United Kingdom Germany Holding Companies Automotive Telecommunications/IT Financial services Retail Others 65 % 16 % 5% 2% 12% Germany United Kingdom 50 % 50 % Total EBIT

5 Cash Flow. Liquid Assets. funds at its disposal. Taking taxes into consideration, net income therefore stands at keur 1,350. Cash flow The cash flow from operating activities stood at keur 2,257 at the end of the period under review. This is essentially attributable to the net income of keur 1,350, the allocation of provisions and liabilities totalling keur 525 as well as depreciations of keur 300. Part of the liquidity is bound up in trade accounts receivable, which have increased by keur 230. Liquidity reserves fell by EUR 16.4 million during the first six months of 2004 and stood at EUR 45.7 million at 30 June The drop is attributable to the special distribution amounting to EUR18.0 million. Allowing for this special item, the liquid funds have increased by EUR 1.6 million. This corresponds to a current cash portion of EUR 3.81 per share. Investment strategy A yield of approximately 5.7% was generated during the period under review. Liquid funds are currently invested in various risk categories as follows: 4% in fixed-term deposits, 7% in investment funds, 6% in government bonds, 30% in mortgage bonds, and 53% in corporate bonds. The average term to maturity of the corporate bonds and mortgage bonds is approximately 6 years. Sales and EBIT margin by region (H1-2004) Development of operating cash flows on a quarterly basis Portfolio structure of cash and marketable securities (as of ) in keur 4,000 3,849 3,831 25% in keur 4,577 3,000 2,000 1,000 GER UK 20% 15% 10% 5% 0% 82 Q Q2 Q3 Q4 1, ,325 1, ,317 Q1 Q2 Q3 Q4 Q1 Q Corporate bonds 53% Government bonds 6% consolidated sales in keur EBIT development in % Mortgage bonds Investment funds 30% 7% Fixed-term deposit 4% 5

6 Investments. Employees. Treasury Stocks. Investments totalled keur 407 during the period under review and are thus keur 259 up on the same period of the previous year. In this process, especially hardware and software was purchased. During the period under review Syzygy did not incur any expenses for research and development. At the end of June, Syzygy employed a total of 126 staff and thus two more than at 30 June During peak periods, up to 10 freelance employees were brought in at each subsidiary in order to optimise capacity utilisation. At present, 21 members of staff are employed in the design and information architecture departments. 48 employees are engaged in the field of software development and system integration, 27 employees work in project management and 9 in strategy consulting. 20 members of staff are employed in administration. Directors Holdings Directors Holdings refer to shareholdings and options of the Board of Management and the Supervisory Board. During the period under review, shares were purchased and sold by one officer. The shareholdings at 30 June 2004 are presented in the following table: Employees by function (as of ) Number of options Management Board: Marco Seiler (CEO) 611, ,745 Frank Wolfram (CTO) Supervisory Board: Michael Mädel (Chairman) John Hunt Adriaan Rietveld Technology Project management Design Administration Strategy/Consulting 39 % 21 % 17 % 16 % 7% 6

7 Risk Management. Outlook. Own shareholdings Syzygy AG held no shares of its own up to the reporting cut-off date. Due to non-availability of retained earnings, a repurchase of shares is at present not possible. No option rights were granted during the first six months of All existing options at 30 June 2004 are presented in the following table: The identification of individual risks is subdivided into various risk categories. Risks are identified, quantified, and qualitatively evaluated throughout the entire Group using an integrated management, planning and reporting system. The information currently available shows no indications of risks that would jeopardize the further existence of Syzygy AG and its subsidiaries as a going concern. Risk factors refer to overall economic trends, to the nature of the service sector as well as the speed with which the market for internet services is changing. The individual risks and risk factors are explained in greater detail in our annual report 2003 on pages 21 to 22. The order backlog stands on the level of the previous quarter. For the third quarter, the company therefore anticipates sales and operating income on the same level as in the second quarter. Owing to the positive profit development seen in the first six months of the year, the company is upping its forecast for the earnings per share from EUR 0.20 to EUR Number of options Management Board: Marco Seiler (CEO) 35,000 35,000 Frank Wolfram (CTO) 128, ,000 Supervisory Board: Michael Mädel (Chairman) John Hunt Adriaan Rietveld Number of options Employees Syzygy Group 413, ,514 7

8 Notes. Consolidated Income Statements. 1. Principles for the presentation of accounts The consolidated financial statements of Syzygy AG and the Syzygy Group have been prepared in accordance to the US Generally Accepted Accounting Principles ( US-GAAP ). 2. Consolidated entities The consolidated financial statements of Syzygy AG include all subsidiaries in which the parent company holds a direct or indirect majority of voting rights. No changes have occurred within the consolidated entities on 30 June 2004 respectively 31 December Significant accounting policies The significant accounting policies are presented in the 2003 annual report and are unchanged in their application. For this reason further reference is made to pages 28 to 33 of our annual report. in keur 2nd Quarter Prev. Yr. January June Prev. Yr Sales 4,017 3, % 7,680 7, % Cost of consultancy sold 2,524 2, % 4,830 4, % Sales & Marketing % % General and administrative expenses % 1,741 1, % Other operating income/expenses, net % % Operating income % % Financial income % 1,569 1, % Income before taxes 958 1, % 2,127 2, % Income taxes % % Net income % 1,350 1, % Earnings per share (basic in EUR) % % Earnings per share (diluted in EUR)* % % * Diluted earnings per share refers to a share number of 12,576,514 and implies that all granted options are exercised. 4. Special distribution The special distribution announced in the previous quarterly reports and amounting to EUR 1.50 per share took place at 13 April The distribution results in an outflow of funds amounting to EUR 18.0 million during the second quarter. This has resulted in a reduction of liquid funds and receivables of EUR 18.0 million in each case compared to the last quarterly report. 8

9 Consolidated Balance Sheets. Assets in keur 30 June 31 December Liabilities in keur 30 June 31 December Current assets Cash and cash equivalents Marketable securities Accounts receivable, net Prepaid expenses and other current assets Total current assets Non-current assets Fixed assets, net Other non-current assets Total non-current assets Total assets 1, ,127 43,974 59,985 60,986 2,939 3,031 2,709 3,515 3,331 3,396 52,131 66,693 68,218 1,178 1,121 1, ,357 1,297 1,250 53,488 67,990 69,468 Current liabilities Accounts payable Accrued expenses Customer advances Tax accruals and liabilities Other liabilities Total current liabilities Shareholders equity Common stock* Additional paid-in capital Accumulated other comprehensive income Retained earnings Total shareholders equity Total liabilities and shareholders equity ,514 1,322 1, ,304 1,330 1, ,222 3,702 3,473 21,357 12,000 12,000 12,000 36,013 54,526 35,401 1,037 1,935 1, , ,786 64,516 48,111 53,488 67,990 69,468 * Contingent Capital keur 1,200 (prior year: keur 1,200) 9

10 Consolidated Statements of Cash Flows. in keur Net income Adjustments of non-cash effects: Stock-based compensation expenses Depreciation and amortization Changes in assets and liabilities: Accounts receivable Prepaid expenses and other current assets Customer advances Accounts payable and accrued expenses Tax accruals and payables Other current liabilities Cash flows from operating activities Investments in fixed assets Changes in other non-current assets Purchases of marketable securities Proceeds from sale of marketable securities Cash flows used in investing activities Capital reduction Cash flows from financing activities Exchange rate differences Cash flows from discontinued operations Total Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the period 30 June ,350 1,332 2, , ,257 1,511 4, ,986 8,091 12,459 18,447 5,837 8,828 16,054 2,402 4,022 18, , ,127 1,237 1,237 1, ,127 10

11 Statements of Changes in Shareholders Equity. in keur 01 January 2003 Net income Exchange rate differences Sale of marketable securities Unrealized gains on marketable securities Other comprehensive income Comprehensive income Compensation expenses for the period Deferred taxes Reversal of direct costs of IPO 30 June 2003 No. of shares issued and outstanding Common stock Additional paid-in capital Comprehensive income 12,000 12,000 53,939 1,265 5,277 61,927 1,332 1,332 1, ,003 Accum. other comprehensive income Retained earnings Total equity ,000 12,000 54,526 1,935-3,945 64, January 2004 Net income Exchange rate differences Sale of marketable securities Unrealized gains on marketable securities Other comprehensive income Comprehensive income Compensation expenses for the period Deferred taxes 30 June ,000 12,000 35,401 1, ,111 1,350 1,350 1, , ,000 12,000 36,012 1, ,786 11

12 Syzygy AG Investor Relations Im Atzelnest Bad Homburg v. d. H. Germany Phone +49 (0) Fax +49 (0) ir@syzygy.net Upcoming Dates 2004/2005: Third Quarter 2004 Earnings Release (9-Months) 29 October 2004 Annual Report March 2005 First Quarter 2005 Earnings Release (3-Months) 29 April 2005

Interim Report per September 30, M06.

Interim Report per September 30, 2006 9M06 www.syzygy.net Financial Figures Fig. 1, page 1 Sales and EBIT development on a quarterly basis (2005-2006) Fig. 2, page 1 Sales allocation by vertical markets