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secunet AG: 3-Month Report 2006 - Positive Outlook Despite Seasonal Decline in Earnings

• 11% decline in sales to Euro 6.7 million• High fixed-cost share: EBIT Euro –0.1 million• Strong market position due to investments in future business• 16 % increase in volume of orders on hand to Euro 17.1 million• Positive outlook for the full year 2006[Essen, 4 May 2006] Despite a decline in first quarter earnings due to seasonal effects, secunet Security Networks AG, leading European supplier of products and services in the IT high security field, has closed the first three months of 2006 with an optimistic outlook for the full year 2006. This expectation is bolstered by a strong market position, extensive future investments and a large, continuously growing volume of orders.

In the first quarter of fiscal year 2006, the secunet Group generated sales of approx. Euro 6.7 million. Compared with the first quarter of the previous year, in which sales of some Euro 7.5 million were generated, this is a drop of 11%.

This development was due to normal sector-specific and seasonal fluctuations which were essentially caused by shifts in the timing of project phases, in most cases requested by customers, and the fact that the public sector, which is still working on the basis of a provisional budget, has been reticent in the placing of orders.

“Due to our specific business model and customer structure, secunet’s sales pattern has always been dominated by seasonal fluctuations”, says Dr. Rainer Baumgart, CEO of secunet Security Networks AG. “Irrespective of these effects, we would have been hard pushed to surpass last year's record results."

secunet’s income is dominated by a high fixed-cost share on the expenses side. The main items personnel, depreciation and other operating expenses have not changed much compared to the first quarter 2005 (Q1 2006 total: approx. Euro 6.0 million, previous year: Euro 5.8 million). Only the cost of material has declined substantially from Euro 2.0 million in the previous year to Euro 1.6 million in the current fiscal year. This is a direct effect of the temporary decline in sales generated from SINA projects.

The decline in sales revenues combined with a steady cost level has led to a proportional reduction in earnings before interest and taxes: the first quarter 2006 EBIT amounts to Euro –0.1 million compared to Euro 0.8 million in the previous year. As of the end of the first quarter, the net result for the period amounted to Euro –0.03 million. Hence, the earnings per share amounted to Euro 0.00 compared to Euro 0.06 in the first quarter 2005.

Owing to the negative result generated in the first quarter and the payment of variable salary components for the year 2005, the first quarter cash flow amounted to –Euro 4.0 million (previous year –Euro 1.2 million).

secunet has taken advantage of the first quarter to make extensive future investments and consolidate its market position. The company made great efforts to qualify for major IT infrastructure projects, including specifically the introduction of an electronic health card infrastructure in Germany. Furthermore, the signing of a reseller agreement with Computacenter has increased the company’s potential sales capacity for SINA in Germany. In addition, secunet aims to expand its range of products and has achieved a first success in this area with its secunet Tridentity product.

Public authorities, international organisations and companies all have a continuous need for IT high security. The substantial demand for secunet’s products and services is reflected in the company’s order volume, which amounted to approx. Euro 17.1 million as per 31 March 2006 (+16% compared to Q1 2005 and +20% compared to 31 December 2005).

“As a high-security specialist, we have a strong competitive position in the fast-growing IT security market”, says Dr. Baumgart. “This fact combined with our high order volume makes us feel confident that we will fulfil our expectations for the full year 2006.”



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