Interim Report per September 30, M06.

Transcription

1 Interim Report per September 30, M06

2 Financial Figures Fig. 1, page 1 Sales and EBIT development on a quarterly basis ( ) Fig. 2, page 1 Sales allocation by vertical markets (9M-2006) in keur 6,000 5,000 4,000 3,801 4,195 4,458 3,000 2,000 1, ,439 4,238 4,589 5,006 5,207 10% 8% 6% 4% 2% Q1 Q2 Q3 Q4 Q1 Q2 Q n n Sales in keur n n EBIT development in % n Automotive 60% n Telecommunikations/IT 18% n Financial services 6% n Retail 2% n Others 14% Fig. 5, page 2 Development of operating cash flows on a quarterly basis ( ) Fig. 6, page 2 Portfolio structure of cash and marketable securities as of 09/30/ ,111 Q1 Q2 Q Q4 Q1 Q Q3 n n Cash flows in keur n Corporate bonds 75% n Promissory notes 11% n Short-term deposits 7% n Government bonds 7%

3 Fig. 3, page 2 Sales and EBIT margin by region (9M-2006) Fig. 4, page 2 Sales and EBIT margin by region (9M-2005) 9,000 7,000 5,000 8,701 6,285 20% 15% 9,000 7,000 5,000 6,589 5,999 20% 15% 3,000 10% 3,000 10% 1,000 D UK 2006 n n Sales in keur n n EBIT margin in % 5% 1,000 D UK 2005 n n Sales in keur n n EBIT margin in % 5% Fig. 7, page 3 Employees by function (9M-2006) Fig. 8, page 10 Shareholders structure as of 09/30/2006 n Technology 30% n Design 22% n Project management 22% n Administration 12% n Online marketing 8% n Strategy/Consulting 6% n WPP 24.8% n Marco Seiler 5.1% n Own shares 2.9% n Freefloat 67.2%

4 Content 1 Business Development 2 Operating Income 2 Financial Income 2 Cash Flow 3 Investments 3 Employees 3 Risk Management 3 Outlook 4 Consolidated Balance Sheets 5 Consolidated Income Statements 6 Consolidated Statements of Cash Flows 7 Statements of Changes in Equity 8 Notes 12 Financial Calendar 12 Contact

5 Business Development 3rd quarter Jan.-Sept. prev. in keur year prev. year Sales 5,207 4, % 14,802 12, % EBITDA % 1,623 1, % EBIT % 1, % Financial income % 1,872 2, % Net income % 1,835 2, % EBITDA margin 10.7% 11.6% -0.9 pp 11.0% 10.8% 0.2 pp EBIT margin 7.0% 7.7% -0.7 pp 7.0% 7.0% 0.0 pp Earnings per share (in EUR) % % Number of employees (end of September) % % Liquid funds and securities 44,278 47, % 44,278 47, % Cash flow from operating activities % 1,246 2, % Sales growth of 19 per cent For the second time, Syzygy generated sales of more than EUR 5 million within one quarter (keur 5,207). The Company was able to get on with the successful development of the first half year. Total sales amounted to EUR 14.8 million (previous year: EUR 12.5 million) in the period under review, thereby achieving sales growth of 19 per cent as against the same period of the previous year. The growth rate compared to the second quarter of 2006 was 4 per cent. Fig. 1 Development of the operational subsidiaries In the first 9 months the positive order situation at Syzygy Deutschland GmbH resulted in dynamic growth of 32 per cent year-on-year. Within the last year, the German subsidiary was able to acquire a number of new clients. Activities with existing customers were extended, as well. As a result of the strong growth, the German segment now accounts for 59 per cent of sales within the Syzygy group. Therefore, the UK subsidiary generated 41 per cent of group sales. The first 9 months were closed with a sales growth of 5 per cent. The client focus at Syzygy is still the automotive sector, where around 60 per cent of sales were generated. Nevertheless, this figure is declining (previous year: 67 per cent) due to the fact that new clients are mostly attributable to other sectors. There was a slight increase in sales in the Telecommunications/IT sector, which were up 18 per cent after 17 per cent in the previous year. At around 6 per cent, financial services were about on the previous year s figure with 5 per cent. The retail industry accounted for 2 per cent of all sales and thus, remained unchanged. Sales that could not be attributed to any of these four core areas increased by 5 percentage points up to 14 per cent. Fig. 2

6 The addition of new clients further expanded the client base of Syzygy. The ten largest clients are now responsible for 81 per cent of total sales, whereas last year this figure stood at 88 per cent. Operating income increased by 19 per cent The operating income for the first 9 months amounted to keur 1,043 and was therefore significantly higher than in the previous year (keur 874). The growth rate of 19 per cent is equivalent to the sales growth in the period under review. As last year, the EBIT margin for this period was 7.0 per cent. Fig. 1 Syzygy Deutschland GmbH generated a return on sales of 14 per cent, while at Syzygy UK the EBIT margin of 6 per cent stayed slightly below last year s level. Fig. 3+4 Syzygy holding companies Syzygy AG acts as a service provider for its subsidiaries in the strategy, controlling, accounting, investor and public relations and personnel management areas. Mediopoly Ltd. is an interim holding company that has held shares in Syzygy UK Ltd. since Details on segment reporting can be found in the notes from page 9 onwards. Operating expenses and fixed-asset depreciation In the reporting period, cost of consultancy sold as a percentage of sales stayed with 65 per cent nearly on last year s level (64 per cent). Sales and marketing expenses amounted to 10 per cent and remained unchanged. General administrative costs went down from 20 to 18 per cent. Fixed-asset depreciation increased by keur 106 as against the previous year and amounted to keur 580. Financial income long-term investment strategy At keur 1,872, financial income was keur 643 below the figure of the previous year, due to the current development on the bond market. In recent years, declining returns have made it more difficult to reinvest freed funds, resulting in a slight decline of the financial income. Furthermore, ongoing increases of interest rates by the American and the European Central Bank for short-term transactions resulted in a rather flat yield curve. At around 6 per cent, the return on average available liquid assets was approx. one percentage point lower than in the previous year. The average residual maturity for all securities is around 6.9 years. As at the end of the period, the portfolio structure consisted of 75 per cent corporate bonds, 11 per cent promissory notes, 7 per cent short-term deposits (call money, commercial papers and money market funds) and 7 per cent government bonds. Fig. 5 Generally, a rise in long-term interest rates has a negative effect, while a decline has a positive impact on the price performance of securities. Syzygy minimises such default risks by selecting investments with an excellent credit rating and counters interest rate risks by investing in varying maturities. Net income, income taxes, earnings per share The operating income of keur 1,043 and financial income of keur 1,872 resulted in an income before taxes of keur 2,915. After income taxes of keur 1,080, net income amounted to keur 1,835 (previous year: keur 2,145). Based on 11,715 thousand shares, earnings per share equal EUR 0.16.

7 Operating cash flow, liquid assets In the period under review, the operating cash flow amounted to keur 1,246. The key influencing factors were the net income for the period of keur 1,835, depreciation of keur 580 as well as the increase of provisions and accounts payable by keur 446. On the other hand, capital employed increased due to higher sales that resulted in higher accounts receivable of keur 495. There was also a further reduction of prepayments received from clients (keur 337). Finally, payments of tax liabilities had a negative impact on the cash flow, resulting in a reduction of tax liabilities by keur 820. Fig. 6 On June 30, 2006, the Annnual General Meeting decided to distribute an ordinary dividend of EUR This resulted in an outflow of funds amounting to keur 2,803. Thus, liquidity reached keur 44,278 at the end of the reporting period. Investments, research & development Total investments in the first 3 quarters of 2006 decreased to keur 364 as compared to the previous year (keur 631). Investments primarily related to software and hardware for the optimisation of the company s internal infrastructure and expenses for providing equipment to employees. As a service provider that does not offer its own products, Syzygy reports no expenses for research and development. Employees As of the end of the period, Syzygy had 154 employees, 28 more people than at the same time of the previous year and 21 additional employees since the beginning of the year. Of these new employees 15 persons are attributable to Syzygy Deutschland GmbH, which employed 85 employees at the end of September. At the UK subsidiary, the number of employees had increased by 6 up to 61 since the beginning of the year. Syzygy AG still has 8 employees, as in the previous year. Revenue per employee amounted to keur 128 (previous year: keur 125). The focus of activities was on the technology segment, employing 30 per cent of all employees. Design accounted for 22 per cent of staff. Around 22 per cent of employees were employed in project management, 9 per cent in online marketing and 5 per cent in strategy consulting. Accordingly, around 12 per cent were accountable for administration. During peak periods, up to 20 freelance employees were brought in both operating companies in order to optimise capacity utilisation. These mainly worked in the design and technology departments. Fig. 7 Risk management The identification of individual risks is subdivided into various risk categories. Risks are identified, quantified and qualitatively evaluated throughout the entire group using a uniform management, planning and reporting system. The information currently available shows no indications of risks that would jeopardise the further existence of Syzygy AG and its subsidiaries as a going concern. Risk factors relate to overall economic trends, the nature of the service sector as well as to the speed with which the market for internet services is changing. More detailed notes on the individual risk factors can be found in the 2005 Annual Report from page 36 onwards. Outlook The order backlog for the coming quarter exceeds the level of last year s period. Therefore, Syzygy anticipates double-digit growth rates in sales and operating income for the 2006 financial year.

8 Consolidated Balance Sheets 30 September 31 December Assets in keur Non-current assets Fixed assets, net 1,063 1,189 1,279 Other non-current assets Total non-current assets 1,188 1,336 1,404 Deferred tax assets Current assets Cash and cash equivalents 2, ,560 Marketable securities 41,476 47,115 44,853 Accounts receivable, net 3,728 3,086 3,233 Prepaid expenses and other current assets 1,876 2,237 1,944 Total current assets 49,882 53,246 51,590 Total assets 51,134 54,638 53, September 31 December Liabilities in keur Equity Common stock* 12,059 12,015 12,021 Additional paid-in capital 19,043 35,862 37,034 Own shares -1, ,603 Accumulated other comprehensive income 77 1, Retained earnings 450 1,784 1,418 Total assets 30,026 49,782 49,280 Deferred tax liabilities Current liabilities Accounts payable and accrued expenses 1,941 1,979 1,495 Customer advances Tax accruals and liabilities 600 1,944 1,150 Other current liabilities 18, Total current liabilities 21,041 4,448 3,424 Total equity and liabilities 51,134 54,638 53,050 * Contingent capital keur 1,141 (prior year, keur 1,185)

9 Consolidated Income Statements 3rd quarter Jan.-Sept. prev. in keur year prev. year Revenues 5,207 4, % 14,802 12, % Cost of consultancy sold -3,448-2, % -9,678-7, % Sales and marketing expenses % -1,505-1, % General and administrative expenses % -2,643-2, % Other operating income, net % % Operating income % 1, % Financial income, net % 1,872 2, % Income before taxes 943 1, % 2,915 3, % Income taxes % -1,080-1, % Net income % 1,835 2, % Earnings per share from total operations (basic in EUR) Earnings per share from total operations (diluted in EUR)* % % % ,1% *Earnings per share fully diluted correnspond to a total number of shares of 11,747 thsd. (previous year: 11,949 shares).

10 Consolidated Statements of Cash Flows 30 September 31 December in keur Income from continuing operations 1,835 2,145 2,966 Adjustments to reconcile income from continuing operations to net cash provided by operating activities Stock-based compensation expense Depreciation and amortisation Changes in operating assets and liabilities Accounts receivable Prepaid expenses and other current assets Customer advances Accounts payable and accrued expenses Tax accruals and payables, deferred taxes Other current liabilities Cash flows provided by operating activities 1,246 2,517 2,572 Investments in fixed assets Changes in other non-current assets Purchases of marketable securities -4,200-4,507-10,949 Proceeds from sales of marketable securities 7,167 5,737 13,884 Cash flows used in investing activities 2, ,048 Capital increase from employee stock option plan Dividend -2,803-2,642-2,642 Purchases of own shares ,603 Cash flows from financing activities -2,668-3,544-4,206 Exchange rate differences Total 1, Cash and cash equivalents at the beginning of the year 1,560 1,386 1,386 Cash and cash equivalents at the end of the period 2, ,560

11 Statements of Changes in Equity in keur Number of shares Common stock Additional paid-in capital Treasury stocks Comprehensive income Accumulated other comprehensive income Retained earnings Total equity January 1, ,011 12,011 37,026 1,519 1,094 51,650 Net income 2,966 2,966 2,966 Foreign currency translation adjustment -240 Unrealised gains on marketable securities -869 Other comprehensive income -1,109-1,109-1,109 Comprehensive income 1,857 Stock-based compensation expense for the period Treasury stocks -1,603-1,603 Dividend -2,642-2,642 Capital increase from employee stock option plan December 31, ,021 12,021 37,034-1, ,418 49,280 January 1, ,021 12,021 37,034-1, ,418 49,280 Net income 1,835 1,835 1,835 Foreign currency translation adjustment 61 Unrealised gains on marketable securities -395 Other comprehensive income Comprehensive income 1,501 Stock-based compensation expense for the period 0 0 Capital reduction -18,088-18,088 Own shares 0 0 Dividend -2,803-2,803 Capital increase from employee stock option plan September 30, ,059 12,059 19,043-1, ,296

12 Notes to the Consolidated Financial Statements as per September 30, 2006 Principles of the interim report The unaudited consolidated financial statements of Syzygy AG for the first three quarters of 2006 have been prepared in accordance with the principles of the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The financial figures at hand shall be analysed together with the 2005 Annual Report. Business activity As an Internet service provider, Syzygy provides comprehensive consultancy services from its offices in Germany and the United Kingdom. The range of services pertaining to interactive marketing measures involves consultancy, project planning, design and technical implementation including the necessary processes up to market launch. The Company develops and implements strategies and solutions that enable its clients to communicate and interact with their business partners, employees and customers. Scope and principles of consolidation Syzygy AG holds 100 per cent stakes in three subsidiaries. The following companies were included in the consolidated financial statements of Syzygy AG and fully consolidated: n Mediopoly Limited, UK n Syzygy Deutschland GmbH, Germany n Syzygy UK Limited, UK Further details on the consolidation can be found in the 2005 Annual Report.

13 Segment reporting The Company s businesses operate in the European market. Accordingly, segments refer to the two operating companies in United Kingdom and Germany. These companies are managed locally and, to a major extent, operate in their local markets independently. Consequently, the Syzygy Group s segment reporting in accordance with IFRS 14 follows geographical criteria. The holding company (Syzygy AG) serves all operating entities and is therefore segregated. The tables below show important key figures of every segment. United Kingdom consolidates Syzygy UK Ltd. and Mediopoly Ltd., as these two companies are to be viewed as one entity. The different segments apply the same accounting principles as the consolidated entity. Transactions between segments have been eliminated. Segment information as per 09/30/2006 in keur Germany United Kingdom Central functions and consolidation Total Sales 8,701 6, ,802 Operating income (EBIT) 1, ,043 Financial income 3 5 1,864 1,872 Net income 1, ,835 Fixed assets ,063 Capital expenditures Depreciation Current assets 2,800 3,010 44,072 49,882 Segment information as per 09/30/2005 in keur Germany United Kingdom Central functions and consolidation Total Sales 6,589 5, ,454 Operating income (EBIT) 1, Financial income ,492 2,515 Net income 1, ,145 Fixed assets ,189 Capital expenditures Depreciation Current assets 1,935 2,825 48,542 53,302

14 Treasury stock In the fiscal year 2005, Syzygy acquired 344,240 treasury stock shares at an average price of EUR This equates to a 2.9 per cent share in the common stock. Syzygy is authorized to resell or call in treasury stock or to offer treasury stock to third parties in the course of acquiring companies. The treasury stock does not entitle the Company to any dividend or voting rights. The extent of the share buyback is shown as a separate item to be deducted from equity. Directors Dealings Transactions in securities by board members of listed companies with securities of the own organisation are called Directors Dealings. In the period under review 24,500 shares were sold by one management board member. Furthermore, members of the management board have acquired 30,500 shares by exercising some of their options. Options In the period under review 38,550 options were exercised, of which 30,500 options were formerly held by board members. No additional options were granted. Moreover, 3,000 options expired as a result of employees leaving the Company. Thus, the number of options held by employees reduced to 348,604, thereof 122,500 are held by the management board. Current holdings of shares and options by board members are shown in the tables on the next page. Shareholders structure The shareholders structure remained unchanged compared to the previous quarter. The WPP group holds 24.8 per cent and Marco Seiler 5.1 per cent of the outstanding shares. Consequently, the free float amounts to 67.2 per cent. The remaining 2.9 per cent refer to treasury stock. Fig. 8 10

15 Management Board Number of shares Marco Seiler Frank Wolfram Total as per December 31, ,779 5, ,779 Purchases 24,500 6,000 30,500 Sales -24, ,500 as per September 30, ,779 11, ,779 Management Board Number of options Marco Seiler Frank Wolfram Total as per December 31, , , ,000 Additions Disposals -24,500-6,000-30,500 as per September 30, , , ,500 Supervisory Board Number of shares Michael Mädel Adriaan Rietveld Wilfried Beeck Total as per December 31, , ,000 Purchases Sales as per September 30, , ,000 11

16 Financial Calendar 2006 November 9, 2006 German Technology Conference, Frankfurt Contact Syzygy AG Investor Relations Im Atzelnest 3 D Bad Homburg v. d. H. Phone +49 (0) Fax +49 (0) ir@syzygy.net 12

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