secunet, annual accounts 2006: Decline from 2005, positive outlook

Following the excellent financial year 2005, the first half of 2006 in particular was dominated by the fact that secunet’s government clients exercised restraint in their procurement activities: The Federal budget was not passed before June 2006. This delay caused a slump in demand and a loss of turnover that secunet could not compensate in the second half of the year. As in the previous year, SINA, the Secure Inter-Network Architecture, generated a large share of secunet’s turnover. The decline in public procurement is also reflected in the turnover distribution. The share of secunet products sold predominantly to government agencies (consisting mainly of SINA) declined from 52 % in the previous year to 47 % in 2006. At the same time, the share of consulting services rose from 41 % (2005) to 49 % (2006). The company recorded a very positive turnover trend throughout the year. Turnover rose substantially from quarter to quarter (Q2/Q1: + 26 %, Q3/Q2: + 13 %, Q4/Q3: + 24 %).

Despite the decline in revenues, secunet ended the year with positive earnings before interest and taxes (EBIT) amounting to Euro 2.2 million. This was predominantly due to the cost development within the secunet group. All cost items declined compared to the previous year. The cost of material declined in line with turnover, in particular the turnover generated by SINA projects, which involve hardware deliveries. Despite a rise in the number of staff (228 compared to 216), personnel expenses declined by 6 % from Euro 17.6 million to Euro 16.6 million. This development is owing to the decrease in the variable remuneration components. Depreciations dropped by 7 %. Due to the large share of fixed cost components, the decline in other operating expenses was slight (1 %). The annual net profit of the secunet group came to Euro 2.2 million in financial year 2006 following Euro 4.3 million in the previous year. The undiluted earnings per share declined from Euro 0.66 to Euro 0.34. 

“2006 did not bring the expected results – unfortunately”, says Dr. Rainer Baumgart, CEO of secunet Security Networks AG. “However, the rising trend throughout the year and the company’s overall profitability confirms the soundness of our business model.”

In 2006, the company intensified its distribution activities: as per 31 December 2006, the order backlog had risen by 2 % over the previous year to Euro 14.5 million. “Our efforts in the distribution field are bearing fruit”, says Dr. Rainer Baumgart. “At the end of the second quarter 2007, the order backlog will increase further. Given the fact that contracts for several major projects in which secunet is involved have not yet been awarded, we are very confident about the financial year 2007”.

The secunet group’s investment spending in financial year 2006 came to around Euro 1.3 million, a 19 % increase over the previous year. Due to the lower annual net profit compared to the previous year, the outflow of funds caused by the payment of the variable remuneration components for the excellent year 2005 and the increase in accounts receivable compared to the previous year, the cash flow from operating activities was negative. Including investment financing, the total outflow of funds amounted to Euro 4.4 million which reduced the group’s liquid funds by the same amount.

The balance sheet total recorded by the secunet group rose from Euro 28.1 million as per 31 December 2005 to Euro 28.3 million as per 31 December 2006. The equity ratio increased from 60 % to 67 %. secunet has not taken out any loans; the company’s debt ratio is still 0 %.

In its meeting on 28 March 2007, the supervisory board of secunet Security Networks AG approved the annual accounts. The management board of secunet Security Networks AG will present the results in Frankfurt on 29 March 2007 in the context of an analyst conference. secunet will simultaneously publish its annual report for the year 2006. The first quarter results will be published on 3 May 2007.

 

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