secunet AG: Q1-2006 lower than prior year - Investments for the future impact results

According to preliminary calculations secunet achieved during the first quarter 2006 sales in the amount of approximately Euro 6.6 million. This therefore represents a decline of 12% from the sales of the prior year’s Q1 (Euro 7.5 million). The reasons for this result are the seasonal fluctuations normal in the business: the first quarter was also in prior years always the weakest of the year. A further cause is that customers from the public sector have been hitherto reticent with regard to procurement this year, since they are operating on the basis of a preliminary budget. On the other hand, delays in the conclusion of projects as well as the preparation of large projects have had a major effect during the first quarter 2006. As a result, the conclusion of some projects in the sector of Secure Inter-Network Architecture SINA has been delayed to the second quarter.

According to provisional calculations and in parallel with sales, earnings before interest and taxes (EBIT) of the secunet Group declined from Euro 0.8 million in Q1-2005 to Euro -0.2 million during the first quarter of the current year. The reasons for this are the relatively low capacity utilisation, the sales mix (due to the delay of SINA projects profitable licence revenues are also postponed) as well as the expenditures for the future in the preparation of large projects.
During the first quarter 2006 the generation of orders for large projects was the major emphasis of the sales activities. For example, secunet was engaged intensively in the discussions concerning the technological infrastructure for the introduction of the electronic health card in Germany. Capacities were also utilised in the implementation of the sales agreement with Computacenter. Additional contracts are currently being prepared with resellers.

“High-level IT security is a project business subject to extreme seasonal impact. In addition, our specific customer structure is now resulting in a slowdown in view of the high share of public sector clients” according to Dr. Rainer Baumgart, the Chairman of the Board of Management of secunet Security Networks AG. “IT security remains a major current concern and secunet has a strong position in this market: we are therefore confident that we shall achieve for the full year our planned objective for double-digit growth in sales“.

The optimistic outlook for the future is supported by the development of incoming orders. As at the end of March 2006 the orders on hand of the secunet Group amounted to Euro 17.1 million, i.e. 16% more than at the end of the first quarter 2005 and 20% more than at December 31, 2005. This figure reflects both the delay in project conclusion (orders on hand have not been registered as sales) as well as the continuing strong flow of incoming orders.


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