DGAP-News: QSC starts fiscal 2014 as planned and reiterates

DGAP-News: QSC AG / Key word(s): Quarter Results QSC starts fiscal 2014 as planned and reiterates guidance 12.05.2014 / 07:30 --------------------------------------------------------------------- QSC starts fiscal 2014 as planned and reiterates guidance - Revenues of EUR 109.1 million - EBITDA of EUR 13.4 million - Free cash flow of EUR 4.6 million - Optimized financing through promissory note loan nearing conclusion Cologne, May 12, 2014. QSC started fiscal 2014 as planned; rising revenues with ICT products and services were offset by market- and regulatory-induced declines in TC revenues in what is traditionally the rather weaker first quarter. Overall, the company generated revenues of EUR 109.1 million in the first quarter of 2014, in contrast to EUR 113.0 million for the same quarter the year before. Regulatory rulings by the German Federal Network Agency in November 2013, alone, are producing revenue shortfalls of some EUR 2 million per quarter and decreasing EBITDA by nearly EUR 1 million. Moreover, TC business was suffering from stiff pricing and shakeout competition, which, in addition to conventional voice telephony, is now increasingly reaching the ADSL2+ market. On the other hand, there was rising demand for ICT products and services, with order bookings for the quarter increasing by 16 percent year on year to EUR 27.3 million. In terms of profitability, the effect of higher investments in future fields of growth and the elimination of a deferred income item in the amount of some EUR 5 million per quarter did, as expected, leave their mark; through year-end 2013, this deferred income item had enabled QSC to return as income the payment received in connection with the premature termination of collaboration with TELE2 in network operating company Plusnet. Consequently, EBITDA stood at EUR 13.4 million in the first quarter of 2014, as opposed to EUR 18.9 million for the same quarter one year earlier; EBIT amounted to EUR 1.1 million, as opposed to EUR 6.3 million, and consolidated net income stood at EUR 0.3 million, in contrast to EUR 5.1 million. Since the return of the deferred income item did not impact liquidity, free cash flow totaled EUR 4.6 million in the first quarter of 2014, in contrast to EUR 5.1 million for the same period the year before. QSC doubling development budget QSC Chief Executive Officer Jürgen Hermann: "We are increasingly investing in future growth in 2014 and focusing on the development of innovative ICT and Cloud products." QSC will be doubling its development budget to around EUR 10 million during the current fiscal year, and will be accelerating the innovation process through the acquisition of smaller technology companies; in February, the company already acquired a majority stake in encryption specialist FTAPI. Hermann notes: "Our sales partners are showing a very positive response to the FTAPI products, which relate to the highly secure transfer and storage of enterprise-critical data. These easy-to-handle products are coming at just the right time and opening up a new growth market for QSC." The FTAPI team headed up by its two founders plans to ready further innovations for market during the coming quarters. QSC plans to increase free cash flow to between EUR 26 and EUR 32 million Now that fiscal 2014 has begun as planned, QSC is reiterating the guidance for the full fiscal year that it had announced on February 26, 2014. Depending upon the progress made in bringing innovative ICT products and services to market, QSC anticipates revenues of between EUR 450 and EUR 470 million, an EBITDA of between EUR 60 and EUR 70 million, as well as a free cash flow of between EUR 26 and EUR 32 million. Revenues are likely to continue to develop on a two-track basis: Rising ICT revenues will be offset by declining TC revenues as a result of market and regulatory effects. This decline, as well as heightened pricing competition, first and foremost in ADSL2+ business, are likely to impact EBITDA by nearly EUR 10 million in 2014. Moreover, in 2014 QSC will no longer be benefiting from the return as income of the deferred income item. QSC optimizing its financing and extending terms With a view to the sustained low level of interest rates, in late 2013 QSC had announced that it intended to optimize its outside financing this year and extend its terms. In all likelihood, the company will in the days to come be entering into a contract for a five- to seven-year EUR 150-million promissory note loan. Thereafter, the company would make significantly less use than before of a consortial credit facility of most recently EUR 140 million running through September 2016. The keen interest on the part of the banks would additionally enable QSC, contrary to what had been planned at the outset of the year, to redeem INFO AG's factoring in the amount of EUR 11 million, which had been in place prior to the acquisition of the majority interest in this company in 2011. This redemption would impact net debt during the further course of the year and would therefore be presented separately in calculating free cash flow, as it is based upon an obligation stemming from acquisitions and is merely a technical financial measure in which QSC is redeeming factoring liabilities through liabilities stemming from a promissory note loan. QSC Chief Executive Officer Hermann cites a further advantage of the new financing: "The promissory note loan will broaden our financing latitude for making targeted investments in future fields of growth and thus accelerate our profitable growth in ICT and Cloud business." <pre> In EUR million Q1 2014 Q1 2013 Revenues 109.1 113.0 EBITDA 13.4 18.9 EBIT 1.1 6.3 Consolidated net income 0.3 5.1 Free cash flow 4.6 5.1 Capital expenditures 4.7 9.8 Workforce 1,705 1,565 </pre> Notes: The 3-month report is available for download at www.qsc.de/en/qsc-ag/investor-relations.html. This corporate news contains forward-looking statements. These forward-looking statements are based on current expectations and forecasts of future events by the management of QSC AG. Due to risks or mistaken assumptions, actual results may deviate substantially from those made in such forward-looking statements. Queries to: QSC AG Arne Thull Head of Investor Relations Phone: +49 221 669-8724 Fax: +49 221 669-8009 E-mail: invest@qsc.de Internet: www.qsc.de End of Corporate News --------------------------------------------------------------------- 12.05.2014 Dissemination of a Corporate News, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: QSC AG Mathias-Brüggen-Straße 55 50829 Köln Germany Phone: +49-221-6698-724 Fax: +49-221-6698-009 E-mail: invest@qsc.de Internet: www.qsc.de ISIN: DE0005137004 WKN: 513700 Indices: TecDAX Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, Düsseldorf, Hamburg, Hannover, München, Stuttgart End of News DGAP News-Service --------------------------------------------------------------------- 267668 12.05.2014