Q U R I U S A N N U A L R E P O R T

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3 Contents Introduction 4 Five-year financial summary 7 Profile 8 Supervisory Board report 9 Executive Board report Developments in Notes to the key activities in Watermark transaction 16 Results Business lines 17 Countries 19 Employees 20 Financial position 20 Management and supervision 21 Corporate governance 21 Risk management and control 22 Risks 22 Mission and vision 25 Market 26 Strategy 30 Objectives and outlook 33 Corporate governance report 35 Annual accounts 2006 Consolidated balance sheet 40 Consolidated profit and loss account 41 Consolidation changes in group equity 42 Consolidated cash flow statement 43 Accounting principles 44 Notes to the consolidated balance sheet 54 Notes to the consolidated profit and loss account 60 Company balance sheet 64 Company profit and loss account 65 Notes to the company balance sheet and profit and loss account 66 Other information Auditors report 70 Statutory rules regarding profit appropriation 72 Profit appropriation 72 Shareholder information Share capital 73 Biographies 76 Glossary 78 Addresses 81 Contents 3

4 > Introduction Introduction 2006 was dominated by strengthening our position in the market of Microsoft solutions and services and building the Qurius brand. For the third year in a row, the strategic direction chosen in 2003 proved its value, as revenues increased to 41.9 million euro (2005: 33.9 million euro), an operating income (EBIT) of 4.7 million euro (2005: 2.7 million euro) and with net profit of 3.2 million euro (2005: 1.7 million euro). In March 2006 we announced our full focus on the Microsoft platform and consequently changed the name Magnus Holding in Qurius. The activities of Magnus Management Consultants have been sold, the company profile has been accentuated, new Microsoft solutions and services have been developed, important steps have been taken towards European expansion and the financial position has been reinforced. Watermark As of 18 December 2006, Qurius merged with Watermark. Since both parties had the same objective - offering a completer portfolio of solutions and services and accelerate European expansion - the transaction went smoothly. The merger increased the visibility of Qurius on the stock market, as well as enhanced the attraction of the share to private and institutional investors. Moreover geographical diversification leads to a more balanced risk profile. Combining our brands under one common Qurius label will increase the visibility for customers and employees, and lay the foundation for productive cooperation of our departments. End 2006 Qurius employed 725 people and had offices in Belgium, Denmark, Germany, Italy, the Netherlands, Norway, Spain and Sweden and the United Kingdom. With over customers we are entitled to call ourselves Europe s largest Microsoft Dynamics partner. This offers a unique point of departure to benefit of the developments in the European market for Microsoft solutions and services and play an active role in the consolidation process in this market. Business model We want to intensify our customer relation into the position of preferred supplier of Microsoft solutions and services, who demonstrable and fast delivers enduring added value. To underline this we use the slogan Imagine. Integrate. Innovate. This stands for the inventiveness to carry out the correct improvements and innovations in order to bundle our customers business processes, people and systems to powerful, flexible (network) organisations. To this end we provide integrated applications in which the processing of structured data increasingly goes hand in hand with unstructured data (text, sound and images). Also we help companies to innovate: realise improvements by pragmatically applying the latest technologies. 4 Q U R I U S A N N U A L R E P O R T

5 Qurius belongs to a very select group of specialists who cover the complete Microsoft platform. Our clear focus - in combination with our partner relations, knowledge, expertise and focus on results - also offers our customers continuity and flexibility. Our business model, which is based on a well-considered portfolio of Microsoft solutions and services with competence driven business lines and industry specific business units, is an important distinguishing factor. Dimensions for growth Our focus on the Microsoft platform underlines our ambition to fully exploit the growth potential in this market. In 2006 the three dimensions for growth became more and more visible: business lines, verticals and European countries. The business lines are our core competences: advanced solutions, business solutions, learning solutions, infrastructure solutions and managed services. Verticals are those specific market segments, in which we have bundled knowledge and experience like waste management and recycling, construction, chemicals, pharmaceuticals, fashion, field service, food, wholesale, ICT, industrial equipment, logistics, production/ dimensions, retail, floriculture, rental services, professional services and healthcare. Introduction Strategy and ambitions In the Dutch Qurius organisation two dimensions of our business model - business lines and verticals - are already strongly represented. The next step is reaching a leading position in all chosen verticals. Depending on the size of the vertical we can roll out this model on the third dimension: European countries. Naturally we continue to steer on financial performance. Given the possibilities to generate growth alongside these dimensions we are confident about our future. At this moment the outlook for our business lines and countries is good and the order portfolios are favourable. As Europe s largest Microsoft Dynamics partner we are determined to reach similar positions in adjacent competence areas. In order to further develop into a one stop shop supplier on the complete Microsoft platform we must grow in size and quality in an endurable way. Continue investing in recruitment and improving staff retention, and in our portfolio of Microsoft solutions and services is of great importance. Also we actively search for acquisition candidates who can contribute to the realisation of our strategic goals. People Qurius wants to operate as a partner in improving business applications and innovation for customers. Essential in such co operations is knowledge of the markets and activities of our customers and the ability to apply technologies in such a way that organisations become more efficient and more productive. Eventually it all comes down to our employees and their commitment to create added value for 5

6 > Introduction our customers and shareholders. The good results of 2006 are especially due to the commitment and enthusiasm of all Qurius employees. It is their knowledge, creativity and energy which have enabled the transformation of our company. We are well aware of the size of the faced challenges and the necessity to make clear choices and keep to main priorities. More hereof you can read in this annual report, in which also our performance over the past year is summarized. A special word of thanks goes to the Supervisory Board for its views and advice. On behalf of the Executive Board, I wish to express my sincere gratitude to our shareholders, customers and business partners for their commitment and their continuing trust in our company. Fred Hermans Chief Executive Officer 6 Q U R I U S A N N U A L R E P O R T

7 Five-year financial summary In euro x 1,000 IFRS IFRS IFRS NL GAAP NL GAAP NL GAAP ) ) ) pro forma Results Net sales 41,859 33,855 19,932 13,626 15,701 4) EBITDA 5,150 4,234 1, ) EBIT 4,675 2,705 1, ) Net sales 5) 25,741 18,921 EBITDA 5) ,856 EBIT 5) -2,131-3,029 Net result 3,201 1, ,340-9,945 Result per share (in euro) Capital base Total assets 87,767 22,246 15,958 11,607 13,413 10,047 Shareholders equity 33,483 11,348 6,621 4,188 3,988 3,985 Shareholders equity per share 2) (in euro) Solvency as % of total assets Current ratio Five-year financial summary Employees Number of employees at year-end Average number of employees Share price information (in euro) Highest Lowest Year-end ) Adjusted to IFRS principles. 2) Pro forma consolidated figures to reflect the merger of Magnus Holding and Qurius in ) Derived from the financial statements of Magnus Holding N.V. (now named Qurius N.V.). 4) Due tot the restructuring of Magnus Holding N.V. (now named Qurius N.V.) in 2002, only current activities are presented. 5) Including the international activities sold in

8 > Profile Profile Qurius was founded in 1990 and has been listed on Euronext Amsterdam 1 since Qurius provides design, realisation and systems management of business solutions and IT infrastructures. These solutions are based on Microsoft s standard and platform software. Business lines Qurius is organised in five business lines: Business line Qurius Advanced Solutions Qurius Business Solutions Qurius Infrastructure Solutions Qurius Learning Solutions Qurius Managed Services Activities Business intelligence Customer relationship management Custom.NET software development Portals & integration Implementation of Microsoft Dynamics AX and NAV based integrated industry solutions Development Sales Infrastructure solutions for core applications Information Worker solutions Mobility Customer learning solutions Partner learning solutions Hosting services Managed advanced solutions Managed business solutions Managed infrastructures Service desk & service level agreements Verticals Key words at Qurius are integrated innovation and industry focus. Integrated innovation represents our general Microsoft focus which enables us to deliver integrated business solutions through Qurius Advanced Solutions and Qurius Business Solutions. Furthermore, Qurius concentrates its activities on a selected number of industry segments or verticals, including waste management & recycling, pharmaceuticals & chemistry, food, wholesale, ICT, logistics and retail, manufacturing/dimensions, floriculture, rental, professional service organisations and care. Countries Qurius serves over 1,700 clients from its offices in Belgium, Denmark, Germany, Italy, the Netherlands, Norway, Spain, Sweden and the United Kingdom. Qurius is market leader in the Netherlands and Spain. To deliver optimum value and integrated innovation to international clients, Qurius teams with the FAQT Group and the Global Alliance. Qurius has 725 staff members; its headquarters are based in the Netherlands 8 Q U R I U S A N N U A L R E P O R T Until 1 May 2006 under the name Magnus Holding.

9 Supervisory Board report The Supervisory Board supervises over the policies adopted by the Executive Board and over the general conduct of Qurius and its related companies. The Supervisory Board advises the Executive Board on management issues. In exercising its functions, the Supervisory Board acts in the interest of the company and its associated companies and considers the relevant interests of its various stakeholders. The supervision includes the realisation of the objectives of the company, its strategy and the risks associated with the company s activities. Composition The composition of the Supervisory Board is such that it corresponds to the nature, activities, and scope of the company and its stock exchange listing. The Supervisory Board consists of at least two members. They are appointed for a fixed term of a maximum of four years and may be re-appointed for two additional terms of four years. On page 77 of this annual report you will find the biographies of the Supervisory Board members. Supervisory Board report As a result of Qurius profile accentuation as specialist in Microsoft solutions and services, the Supervisory Board in consultation with the Executive Board adapted and approved the Supervisory Board profile on 19 October The Supervisory Board profile is published on the website of Qurius; it states that the composition of the board shall be such that it consists of persons with a relevant network plus knowledge and experience in areas including management processes and internal risk control systems, finance, investor relations, information technology, legal matters, personnel management, strategy, sales and marketing and the activities of the company: IT consulting, (ERP) software, infrastructures and IT services. Furthermore, the Board as a whole must have sufficient financial and economic expertise, and it must have the capability to assess questions in the areas of solvency and mergers and acquisitions. At the General Shareholders Meeting of 21 April 2006 Mr. Lucas Brentjens was appointed to the Supervisory Board. The appointment of Mr. Brentjens strengthened the expertise of the Supervisory Board in several relevant areas, including software development and sales and the management of a listed company. Also the shareholders meeting approved the increase of the remuneration of the Supervisory board from 15,000,- to 20,000,- euro for the chairman and from 10,000,- to 15,000,- euro for its members. At the General Shareholders Meeting on 27 April 2007 Mr. Erik Westerink will be nominated as member of the Supervisory Board. Mr. Westerink was an associate of Morgan Stanley s Investment Banking Department in London, head of the M&A department of Philips Electronics and CEO of Philips Lighting Electronics. Since 2006 he is managing director of Parcom Ventures. The appointment of Mr. Westerink to the Supervisory Board will strengthen the expertise of the Supervisory Board in the area 9

10 > Supervisory Board report of finance and mergers and acquisitions. After approval of this appointment by the General Shareholders Meeting on 27 April 2007 the Supervisory Board will be composed as follows: Resignation rota First appointment End of term Re-appointment Jan van Rijt (chairman) 20 June GSM 21 April 2006 Fred Geerts 22 April GSM - Lucas Brentjens 21 April GSM - Erik Westerink 27 April GSM Independence statement In the two-tier structure prescribed by Dutch law, the Supervisory Board is a separate body that operates independently from the Executive Board. The independence is expressed in the requirement that members of the Supervisory Board may not be Executive Board members or employees of the company. Mr. van Rijt was one of the co-founders of Qurius NC B.V. and at year-end 2005 held 4.3% of the shares in the company through the acquisition of Qurius Holding B.V. in At year-end 2006 his share ownership was 2.8%%. In December 2006 Parcom Ventures, subsidiary of ING, has acquired a shareholding of approximately 21% in Qurius. Parcom has taken over the B- shares which ABN AMRO and Prime Technology Ventures received out of the Qurius-Watermark merger. Therefore Mr. Westerink cannot be considered independent as described in best practice provision II.2.2 of the Dutch Corporate Governance code. Mr. van Rijt is considered independent, since he at that time had no operational responsibilities within Qurius. After the appointment of Mr. Westerink the Supervisory Board as a whole still complies with best practice provision III.2.1 because its members, with the exception of one, are independent. Meetings In 2006 the Supervisory Board met eleven times with the full Executive Board. In nine meetings the full Supervisory Board was present. No member of the Supervisory Board was frequently absent at the meetings. It met once without the Executive Board to discuss matters including the composition, remuneration and functioning of the Supervisory Board and the Executive Board. During the year the Executive Board informed and consulted the Supervisory Board on matters including the overall policy, acquisitions, major decisions and strategy of the company. The larger parts of the meetings held in February, March, July and October were dedicated to the financial results of Qurius. Moreover in 2006 the Supervisory Board has given special attention to the merger with Watermark and the development of the remuneration policy. In 2006 the Supervisory Board regularly reviewed topics relating to corporate governance, internal control and risk management. In addition to the scheduled meetings, the Chairman of the Supervisory Board had regular contact with individual Executive Board members. 10 Q U R I U S A N N U A L R E P O R T

11 Executive Board and remuneration policy In accordance with the Dutch Corporate Governance code the remuneration policy is presented by the Supervisory Board and approved by the General Shareholders Meeting. The Supervisory Board has selected one member from the board to propose the remuneration policy, the remuneration of the individual members of the Executive Board and the remuneration report. The remuneration policy is applicable to the Executive Board. In accordance with the policy the remuneration (salary and other terms of employment) of the members of the Executive Board is determined by the Supervisory Board. The Executive Board decides which managers qualify for the remuneration standards. The remuneration report of the Executive Board members can be found on page 62. In 2005 the Supervisory Board started the project remuneration policy Executive Board. Overall this project is finished in Due to the merger with Watermark the remuneration policy will continue to be an agenda item in The remuneration policy will be presented to the General Shareholders Meeting of 27 April The remuneration of the members of the Executive Board and managing directors of business lines and/or countries comprises a basic salary and a performance related component in the form of a short term cash bonus and a long-term incentive program. The following principles apply: The basic salary has such a compensation level that it can be absorbed as a fixed cost by the company without threatening the continuity of the company or the individual. The short term variable income component is a direct short term reward for the performance of the own area of responsibility of the manager involved and should be based on direct impressionable measurable criteria. The long-term incentive serves a long term compensation for the overall result of the company in order to stimulate co operation between business lines, profit centres and countries. The variable income component is based on hard formulas and subjectivity should be eliminated as much as possible. At any moment in time the individual must be able to relate the performance of the profit centre (business line or country) under his responsibility and the impact on variable income component. When granting the variable income component a positive appraisal on the functioning of the managing director from the upward feedback system is conditional. This to prevent behaviour aimed at personal-interest only. Shareholders gain return on their investment in the form of value increase of shares and dividend. The remuneration of the management must thus be seen in the context of shareholder value creation. To this end the remuneration of the management must be maximized at a certain level, so an acceptable EBIT(DA) and net profit, according to market and industry standards, remains to the deposition of shareholders. Supervisory Board report 11

12 > Supervisory Board report Basic salary - This is the fixed annual amount that is paid as a compensation for the work of an individual board member, irrespective of the performance of the board member or the company. The annual basic salary is twelve times the gross monthly salary. Differentiation is based on the scope of the responsibilities of the individuals. The agreements on the size and range of the area of responsibility are made by the Supervisory Board (for the Executive Board) and by the Executive Board (for the remaining directors). Variable income - This variable income is stipulated by both the performance of the individual as the overall performance of the company. The level is determined once per year by the Executive Board and approved by the Supervisory Board. Differentiation is defined by the performance of the business line, country or profit centre. The variable income amounts up to 30% of the basic salary, where a distinction is made between on target performance (15%) and overachievement (30%). The variable income is agreed on annually - after approval of the budget for the coming year - taking into account the added value, the absolute value of the EBIT and other measurable criteria such as turnover of labour and customer satisfaction. Long term incentive (LTI) - This variable income component is based on the long term value increase of the company. The LTI is related to the profit development per share and amounts up to 35% of the basic salary. Granting the LTI is related to the degree in which management is able to create shareholder value and is based on profit (increase) per share. The LTI is paid after three years, under the condition that the manager is still employed by Qurius. In consultation with the Executive Board the Supervisory Board determines the participants of the LTI program. The level of LTI dotation is presented by the Executive Board and approved by the Supervisory Board. It depends on the profit increase per share (after LTI dotation) and the absolute and relative value of the EBIT in respect to the added value (after LTI dotation). The objective of the LTI program is linking the shareholders interests and the interest of managers, the stimulation of one-company-thinking and achieving a long term commitment of the management. Corporate governance The Supervisory Board and the Executive Board together are responsible for the corporate governance structure of Qurius. Since 2005 a separate chapter in the annual report is dedicated to compliance with the Dutch Corporate Governance code (see pages 35 up to 37). At least once per year the Supervisory Board assesses the corporate governance rules applicable to the company and advises on possible modifications. Also, corporate governance is placed on the agenda of the General Shareholders Meeting and is discussed at the meeting. Annual accounts, profit appropriation and audit The annual accounts of Qurius N.V. for 2006 have been prepared by the Executive Board and audited by the external auditors of BDO CampsObers Audit & Assurance B.V. For their auditors report we refer to pages 70 and 71 in this report. 12 Q U R I U S A N N U A L R E P O R T

13 The annual accounts have been reviewed by the Supervisory Board. The external accountant attended the meeting of the Supervisory Board in which the annual accounts were discussed. We propose that the shareholders adopt the financial statements as presented in the annual report for the year 2006 at the meeting of April 27, The external auditor will be present at the General Shareholders Meeting. In line with the pursued policy we propose to add the net profit of 3.2 million euro in its whole to the other reserves. The profit appropriation as proposed can be found on page 72 of this annual report. After assessing the performance of the external auditors, the Supervisory Board recommends that the General Shareholders Meeting re-appoints BDO CampsObers Audit & Assurance B.V. as external auditor for another one-year term. We also recommend, at the General Shareholders Meeting, granting discharge to the Executive Board for the management it conducted and to the Supervisory Board for the supervision it exercised in Considering the strong competitive position of the company and the positive developments of the past financial year, we are confident about Qurius future. This reflects the efforts of the Executive Board, the management teams and the employees of the operating companies. We value their commitment and contribution. We also wish to express our gratitude to the shareholders and customers for their trust in Qurius. Supervisory Board report Zaltbommel, 5 April 2007 The Supervisory Board Jan van Rijt Fred Geerts Lucas Brentjens 13

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15 Executive Board report Important developments in 2006 Revenue increase of 24% to 41.9 million euros (2005: 33.9 million euros). Operating result (EBIT) increase of 52% to 4.7 million euros (2005: 2.7 million euros) and a net profit increase of 53% to 3.2 million euros (2005: 1.7 million euros). Earnings per share amounted to 0.06 euros (2005: 0.03 euros). Transition to unambiguous positioning with the name Qurius as the label for all activities related to the design, realisation and systems management of the standard and platform software of Microsoft-based business applications and infrastructures. Within this scope, the name Magnus Holding N.V. was changed to Qurius N.V. in May and the name FAQT Group Belgium was changed to Qurius Belgium. Preparation of the launch of Qurius Managed Services as the fourth business line. Sale of Magnus Management Consultants in June 2006 and withdrawal of Willem Hulshof from the Executive Board. Appointment as Microsoft Gold Certified Partner in the area of Network Infrastructure Solutions, Advanced Infrastructure Solutions, Data Management Solutions, Custom Development Solutions and Learning Solutions. At the end of 2006, a total of eight Microsoft Gold Partner certifications were registered under the name of Qurius. Membership - for the second consecutive year - of Microsoft s Inner Circle, the elite of the Microsoft Business Solutions worldwide partner network and of the Microsoft Business Solutions President s Club. Merger with Watermark, effective 18 December 2006, into Europe s largest Microsoft Dynamics partner with 725 employees, 1,700 customers and Qurius Learning Solutions as the fifth business line. Reinforcement of the Supervisory Board with Lucas Brentjens and the Executive Board with Tom Stolk and Frank van der Woude. Executive Board report Notes to the key activities in 2006 The past financial year was dominated by reinforcing our position in the market for Microsoft business solutions and services, and further expanding the Qurius brand. In March 2006, we announced that the focus would switch completely to Microsoft technology and that the name Magnus Holding would consequently be changed to Qurius. The activities of Magnus Management Consultants were then sold, market positioning was fine-tuned, new Microsoft solutions and services were developed, and our financial position strengthened. A good start has also been made in terms of achieving the envisaged level of growth in Europe. The financial results underscore the value of the strategic course set in In the year under review, the main strategic goals were as follows: study and possibly introduce Qurius Managed Services as the fourth business line; European growth by means of Qurius Business Solutions; organic growth of this business line in the Benelux; vigorous growth of Qurius Advanced Solutions and Qurius Infrastructure Solutions; hiving off or sale of Magnus Management Consultants; 15

16 > Executive Board report acquisitions of appropriate Microsoft or ICT infrastructure specialists in the Netherlands, Belgium or other European countries to strengthen the core portfolio; increasing our human capital both qualitatively and quantitatively. Progress has been achieved in virtually all areas. With the addition of Qurius Managed Services the portfolio has been expanded to include a management concept for Microsoft- based ICT applications and infrastructures. In so doing, we can now support the complete life cycle of Microsoft platforms: from implementation, upgrades and expansions involving new solutions to complete systems management and training. For example, Qurius can also respond to the demand for application outsourcing and application hosting. Qurius Business Solutions, Qurius Advanced Solutions and Qurius Infrastructure Solutions generated organic growth in revenue of 22%, 78% and 55% respectively. On 15 June 2006, the contract was signed for the management buy-out of Magnus Management Consultants. The sales price is set at an initial amount of 1.2 million euros plus 50% of the EBIT of Magnus Management Consultants over 2006, 2007 and In the competitive international environment in which Qurius operates, the competitive power of a company - coupled with its ability to differentiate itself in the market - is based largely on the quality and enthusiasm of its workforce. For this reason, Qurius continued to train specialists itself in In 2007, the new Qurius Learning Solutions business line will reinforce this initiative. The foundations of HRM have also been further strengthened and investments have been made in the quality of the professionals, sales and marketing employees, and management. Bundling our various brands under the joint Qurius label means greater transparency for customers, partners and the labour market, and establishes a basis for constructive cooperation between all business components. At the end of 2006, Qurius employed a workforce of 725 employees, serving more than 1,700 customers in Belgium, Germany, Denmark, the United Kingdom, Italy, the Netherlands, Norway, Spain and Sweden. Watermark transaction In order to expand beyond the domestic market and to create shareholder value, the top priorities are to generate economies of scale and reinforce the range of solutions and services offered. The merger with Watermark - a European market leader in the sale and implementation of Microsoft Dynamics solutions - on 18 December represents an important milestone. This merger supports the growth strategy pursued by both companies to expand products and services portfolio, reinforce their market position and strengthen the foundations for European expansion. In 2006, Watermark generated a revenue of 55.4 million euros (2005: 53.5 million). After-tax earnings totalled 1.8 million euros (2005: 0.9 million euros). 16 Q U R I U S A N N U A L R E P O R T

17 In a nutshell, the transaction was as follows: Qurius received 100% of the Watermark shares cash and debt free in exchange for 18 million euros in cash, 18.6 million in newly issued (non-listed) B shares and a share loan of 2 million in newly issued listed shares. Issuing B shares was a temporary solution to expedite the transaction: by 1 May 2007, these 18.6 million B shares will be converted into listed shares. The following considerations played a role in relation to the transaction: opportunities arising as a result of combining mutual operations; the expected positive impact of the combination on Qurius revenue, operations, financial conditions and business prospects; the degree to which Qurius and Watermark complement each other in terms of geographic presence and vertical market segments; the potential expedition of Qurius expansion in Europe; the reinforcement of Qurius range of products and services; the decisive clout in terms of acquisitions as a pan-european Microsoft Dynamics player; the significance for international customers, prospects and Microsoft of a number one position in Europe for Microsoft-related products and services. Executive Board report Results 2006 Qurius figures reflect consolidation of Magnus Management Consultants up to 1 July 2006 and Watermark as at 31 December In 2006, Qurius generated a revenue of 41.9 million euros (2005: 33.9 million), including Magnus Management Consultants contribution of 3.2 million euros (2005: 6.7 million). Operating results (EBIT) totalled 4.7 million euros (2005: 2.7 million) and net profit amounted to 3.2 million euros (2005: 1.7 million). Earnings per share amounted to 0.06 euros (2005: 0.03 euros). Total operating costs amounted to 23.8 million euros (2005: 21.4 million). These included holding company expenses of 1.2 million euros (2005: 0.8 million). After-tax earnings totalled 3.2 million euros (2005: 1.7 million). Cash flow from operating activities amounted to 2.8 million euros (2005: 2.2 million). Business lines Qurius Business Solutions Qurius Business Solutions supplies and implements Microsoft Dynamics AX and NAV platforms that integrally support administrative business processes. Qurius Business Solutions also develops and supplies industry-specific business solutions or add-ons available as standard software. Major assignments carried out in 2006 include: implementation of Q-WMR environmental solution at Teeuwissen sewerage cleaning company; implementation of Q-Pharma at Tramedico pharmaceutical wholesaler; Q-Zorg orders at Land van Horne, Fokus, Zorgspectrum, Vijverhof and Pepijn Paulus; 17

18 > Executive Board report implementation of Q-SPI, the industry module based on Microsoft Dynamics NAV for semi-process companies at Naturado, Coldec and Cobar; implementation of Q-SMS and development of software at pot plant growers association Plantform; implementation of Q-TMS at Kuehne + Nagel transport organisation; implementation of Microsoft Dynamics AX at G4S, an organisation providing valuable goods transport and security services. The revenue generated by Qurius Business Solutions in 2006 rose to 24.7 million euros (2005: 19.8 million). The gross margin (revenue less procurement of software, maintenance costs and externally purchased staff hours) was 19.4 million euros (2005: 15.1 million). EBIT was 3.6 million euros (2005: 2.0 million). Improvement of the EBIT ratio in relation to revenue can be attributed to cost control, increased chargeability per FTE and continuity in terms of the vertical marketing approach. Activities in the area of Microsoft Dynamics AX displayed particularly strong growth in Qurius Advanced Solutions Since 1997, Qurius Advanced Solutions has developed into a specialist in professional software development using the Microsoft platform. This business line focuses largely on portals and integration, Microsoft.NET software development, business intelligence, information workers and customer relationship management (CRM). Building a portal for KPN Outsourcing Services to serve large-scale KPN business customers was an important project in The Wegener publishing house remains an important customer: Qurius Advanced Solutions carries responsibility for the maintenance and innovation of the Jobtrack vacancies site and the Kleintjesmarkt advertisement site. The revenue generated by Qurius Advanced Solutions in 2006 rose to 5 million euros (2005: 2.8 million euros). The added value was 3.4 million (2005: 2.6 million). The yield remained high with an EBIT of 22% of the added value (2005: 17%). Expectations are that in 2007 Qurius Advanced Solutions will achieve further growth in the Netherlands and will establish an operational base in other Qurius countries in Europe. Qurius Infrastructure Solutions Qurius Infrastructure Solutions focuses on providing advice, as well as implementing and managing business-critical ICT infrastructure solutions. Major assignments carried out in 2006 include: the multi-year contract to provide infrastructure solutions for the medical division of an international group in Europe; implementation of virtualisation and consolidation solutions at the municipality of Oegstgeest; advising the European derivatives house IMC and catering company Albron about Microsoft enterprise agreements; 18 Q U R I U S A N N U A L R E P O R T

19 a three-year contract to manage the ICT environment for the Zurel Group, a flower and plant exporting business; improving the infrastructure of Coldec, market leader in the production of colour flakes. In 2006, Qurius Infrastructure Solutions generated a revenue of 9 million euros (2005: 4.7 million, calculated from 1 April). EBIT was 0.6 million euros (2005: 0.4 million, calculated from 1 April). Expectations are that these activities will expand further in the Netherlands and Belgium in Contract customers (infrastructure services) will be served by the new Qurius Managed Services business line. Additionally, investments will be made to increase opportunities for these activities in other Qurius countries in Europe. Qurius Managed Services In 2006, a business plan was drafted to establish and initiate Qurius Managed Services. With effect from 1 January 2007, the application management activities of Qurius Business Solutions and the infrastructure management activities of Qurius Infrastructure Solutions will be clustered under this new business line. Executive Board report Countries The Netherlands In the Dutch market, Qurius Business Solutions and Watermark operated as independent players in the area of Microsoft Dynamics. Their joint market share is approximately 25%. In the Netherlands, an increase of scale of this order makes Qurius a potential strategic Microsoft partner for large-scale companies too. The implementation of a new information system at the Allied Unions (FNV Bondgenoten) with Microsoft Dynamics AX for the financial administration and handling of legal affairs, Microsoft SharePoint for document and knowledge management, and Microsoft CRM for membership administration and supporting contact with the membership base was an important assignment involving all the business lines. This was a typical integrated innovation project for Microsoft and Qurius. Integrated innovation is one of the key elements in the strategy pursued by both companies, standing for innovative applications where the different Microsoft tools and applications are linked and integrated into a single solution. Belgium Qurius Belgium was exceptionally successful in 2006 as a result of new, long-term Microsoft Dynamics NAV implementations, especially in the food, pharmaceutical & chemical sectors and waste processing. Organic growth in revenue is expected for 2007, generated in part by new products and services such as Microsoft Dynamics CRM, infrastructure solutions and training programmes. Integrating Watermark Belgium now makes it possible to offer more industry-specific solutions. 19

20 > Executive Board report New projects were realised by Herto, Boost Nutrition and Euryza, TWZ, IDEWE and Foresco. Detergent, soap and chemical producer Christeyns carried out an important assignment related to the image of its establishments in seven European countries by implementing an integrated business information system. Employees On 31 December 2006, Qurius employed a 725-strong workforce (31 December 2005: 333, including 79 at Magnus Management Consultants) of whom 386 in the Netherlands: 185 at Qurius Business Solutions (end 2005: 177), 39 at Qurius Advanced Solutions (end 2005: 34), 33 at Qurius Infrastructure Solutions (end 2005: 28) and 129 at Watermark Nederland. Some 328 employees were engaged at its establishments abroad: 37 in Belgium (end 2005: 13), 43 in Germany, 10 in Denmark, 21 in the United Kingdom, 27 in Italy, 35 in Norway, 123 in Spain and 32 in Sweden. As a result of the merger, the number of employees engaged at the holding company expanded to 11 (end 2005: 2). Salaries, pensions and social security charges amounted to 16.7 million euros in 2006 (2005: 15.2 million). Financial position Balance sheet and solvency The balance sheet as at 31 December 2006 includes the acquisition of Watermark. Shareholders equity amounted to 33.5 million euros against 11.3 million euros as at 31 December In part, this increase ties in with the acquisition of Watermark and consequent issue of shares valued at 18 million euros, secondary placement of the company s own shares for 0.7 million euros and after-tax earnings of 3.2 million 20 Q U R I U S A N N U A L R E P O R T

21 euros. Solvency as a percentage of total assets amounted to 38% at the end of 2006 (end 2005: 51%). The current ratio amounted to 0.8 at the end of 2006 (end 2005: 1.16). Cash flow and funding Net cash flow rose to 2.4 million euros (2005: 1.3 million). Cash flow from operating activities amounted to 2.8 million euros (2005: 2.2 million). Cash flow from investing activities amounted to minus 32.2 million euros (2005: minus 3.7 million). This was chiefly caused by the takeover of Watermark. Cash flow from financing activities amounted to 31.8 million euros (2005: 2.8 million). This ties in with the issue of shares for the acquisition of Watermark for 18 million euros, new financing for the acquisition of Watermark for 14.8 million euros, the secondary placement of shares for 0.5 million euros, the share loan provided of 2 million euros and other movements for 0.4 million euros. Management and supervision The Executive Board of Qurius consists of Fred Hermans (CEO & board chairman, appointed on 16 September 2002), Mark van Kemenade (appointed on 20 June 2003), Tom Stolk and Frank van der Woude (both appointed on 18 December 2006). Willem Hulshof formally resigned from the Executive Board at the shareholders meeting on 21 April 2006, as a result of the management buyout of Magnus Management Consultants, the company he leads. We are grateful to him for his contribution and vision. Executive Board report With effect from 1 February 2007, the Executive Board divided its tasks as follows: Fred Hermans - corporate governance, investor relations, finance, IT and Qurius Belgium; Tom Stolk - international operations (except for Belgium), Qurius Learning Solutions, Microsoft alliance and corporate marketing; Mark van Kemenade - mergers and acquisitions; Frank van der Woude - Qurius Nederland and corporate delivery. The Supervisory Board monitors the policy of the Executive Board and general progress within the company and its associated companies, and provides the directors with advice and assistance. The Supervisory Board consists of Jan van Rijt (chairman, reappointed on 21 April 2006), Fred Geerts (appointed on 22 April 2005) and Lucas Brentjens (appointed on 21 April 2006). At the shareholders meeting on 27 April 2007, Erik Westerink, managing director of Parcom Ventures and former CEO of Philips Lighting Electronics, will be proposed as the fourth member of the Supervisory Board. Corporate governance The Executive Board and the Supervisory Board are responsible for the corporate governance structure of the company. Barring deviations indicated in documentation 21

22 > Executive Board report on implementation of the code available on our website under De invulling van de Corporate Governance code door Qurius, Qurius applies the principles and best practice provisions of the Dutch Corporate Governance code. At the annual meeting on 22 April 2005, the shareholders formally approved the way in which Qurius applies the aforementioned code. Explicit approval was also granted for deviations from the code that mainly relate to the company s size. Adjustments and improvements are put forward to the shareholders meeting on an annual basis and are described in a separate section of the annual report (see pages 35 to 37). Risk management and control Qurius applies various mechanisms in order to limit risks: a uniform cycle for annual planning and reporting, comprising a strategic threeyear plan, annual plans at a business line and country level, the annual budget, and monthly and quarterly financial and pipeline reports and reviews; monthly discussions by the Executive Board and country and business line boards of matters including the financial results and operational status of each business line, (potential) cross-business-line assignments and matters such as IT, marketing and human resources; monthly discussion by the Executive Board regarding progress of the strategic plan, mergers and acquisitions, investor relations, new initiatives, and business risks and measures to minimise these; an annual external audit; uniform financial procedures and uniform policy including the Supervisory Board regulations, regulations directed at preventing the misuse of inside knowledge, the disclosure policy, the KGI rules for handling price-sensitive information and the whistleblowers procedure. Risks Financial reporting risks The Executive Board, under supervision of the Supervisory Board, is responsible for guaranteeing that effective systems of risk management and internal control are in place. These should provide reasonable guarantees for achieving the defined objectives. Qurius risk management and control systems are intended to provide a reasonable assurance that the financial reporting does not contain any material misstatements. In the year under review, the risk management and control systems functioned adequately; there is no indication that this will not be the case for the current financial year as well. However, the risk management and control systems cannot provide absolute certainty in relation to achieving our objectives or about the reliability of financial reporting. The same applies for preventing material inaccuracies, losses, fraud and infringements of the relevant legislation and regulations. Other risks As an international provider of Microsoft solutions and services, Qurius is also confronted by various other risks. These risks could influence the operations of 22 Q U R I U S A N N U A L R E P O R T

23 Qurius, as well as its revenue, net profit and financial position, leading to a situation in which the objectives may not be achieved. The Executive Board is responsible for identifying such risks, taking appropriate measures to combat these and to generally guarantee that there is an effective system of risk management and internal control in relation to these risks. This section provides insight into the most important risks identified by Qurius and how it manages them. For the sake of completeness, we state that there may be risks that Qurius is unaware of or that are currently considered non-material. Economic conditions and fluctuations of quarterly results Economic conditions significantly influence companies readiness to invest in ICT products and services. Additionally, Qurius services and products relate mainly to Microsoft technology. Quarterly results are difficult to predict and fluctuate from quarter to quarter. This is because of various factors such as the pricing policy of the partners and competitors of Qurius and aspects related to timing software and hardware sales. Qurius endeavours to spread risk by apportioning its core activities across several countries, industries and customers. Executive Board report Qurius brand and reputation Every event that could damage the confidence of customers or the continuity of our services or the reputation of Qurius can adversely impact the enterprise. Qurius aims consistently to comply with high quality standards in relation to the business solutions and services it supplies, and continues to build on the Qurius brand by adopting its own quality oriented working methods and certifying and training its employees. Stagnating innovation Quirus growth is partly dependent on its capacity to continually develop and implement improvements of relevance to the customer. The contribution of innovations is affected by the budget available for this and the skills of highly qualified software developers at both Microsoft and Qurius. Both Microsoft and Qurius invest heavily in software innovations that help customers to optimise ICT infrastructures with systems that reduce costs and complexity, facilitate rapid implementation and raise end-user productivity. In so doing, Qurius also hopes to stimulate growth as far as possible. Labour market Shortages in the labour market are seen as the greatest obstacle to the further expansion of the IT sector. It is becoming increasingly difficult to find the right people for job vacancies. This is especially true for software developers, project managers, ERP specialists and specialised account managers. In addition, the loss of certain key specialists and project managers can have an adverse effect on the results of Qurius. In 2007, Qurius will once again devote a great deal of attention to the recruitment and retention of talented and experienced professionals. Qurius is also considering near shoring software development activities to European countries where wages are lower. 23

24 > Executive Board report Partner relations Microsoft supplies the market with its products solely through indirect channels. Partly as a result of the merger with Watermark, the existing partnership with Microsoft gained significance and intensified in The disruption of the relationship with Microsoft or other important partners such as IBM and Infor, or the loss of customers in specific industriess could have an adverse effect on the activities and results of Qurius. In order to avoid this, responsibility for managing these relations has been clearly assigned within the Supervisory Board and the Executive Board. Customer relations Retaining customer relations and sourcing new customers is essential for the continuity of Qurius. Promoting confidence, commitment and the quality of customer relations is therefore awarded continuous attention at Qurius. The CRM system used by Qurius to achieve this streamlines the processes and efforts in relation to customer relationship management, sales, after sales care and marketing. In so doing, Qurius makes every effort to optimally manage customer relations. Mergers and acquisitions Qurius has taken over various companies in recent years and recently merged through a management buyout. This produces risks associated with integrating the companies, realising expected synergies, deviations in relation to forecasts on which basis the merger or acquisition was decided, the withdrawal of key employees, and developments that could not reasonably have been expected by the company at the time of the transaction. Acquisition candidates must meet strict selection criteria including sound financial performance, and good quality management, employees, customer relations and products. Qurius also pays careful attention to the cultural fit. Additionally, the Executive Board also pays a great deal of attention to integration and responsibilities in this area are clearly defined within the Executive Board. Liability/insurance risk The liability/insurance risk is the risk that Qurius is held liable for possible damage caused. Quirus policy involves assigning risks related to statutory liability to insurers. Foreign exchange risk Qurius generates most of its revenue within the Eurozone and reports in euros. However, since 18 December, Qurius also has companies in the United Kingdom, Sweden and Denmark and activities in China for which net assets are subject to the consequences of exchange-rate fluctuations between the local currencies and the euro. For the time being, foreign exchange risk is deemed limited. Interest rate risk At the end of 2006, Qurius had interest-bearing loans valued at 24.8 million euros. The company does everything possible to limit the ensuing interest rate risk. 24 Q U R I U S A N N U A L R E P O R T