SYNERGON Group Consolidated Financial Statements (IFRS) for Q2 2012

Transcription

1 SYNERGON Group Consolidated Financial Statements (IFRS) for Q Published: 30 August 2012

2 Successful strategy change: more efficient organisation, growing profitability The quarterly figures are non-audited data. The parts of this report are based on the consolidated balance sheet and profit and loss statements compiled on the basis of the IFRS. On June 30, 2012 the Company Group prepared its reports in Hungarian forint (HUF), thus all analyses have been made on a HUF basis. The accounting policy applied in the reporting period is identical with the latest principles, presented and applied in the audited annual report. The data presentation structure included in the flash report contains changes compared to former periods, which were developed in an effort to comply with the current IFRS regulation, to ensure transparency. In order to ensure comparison, we provide the base figures of the flash reports in a breakdown corresponding to the structure applied in the actual period. The accounts carry non-audited data for Q2 and H and for Unless otherwise indicated, the figures in these accounts are in thousand HUF. SYNERGON Information Systems Plc. Consolidated Financial Summary The improving tendency started in Q continued in Between January and June, the profitability of the Group significantly improved although the financial framework of the centralised open procurement procedure for information technology was made available in Q2, and in that quarter, investors started to draw their orders in very moderate steps. This shortfall has a major impact on revenues but affects contribution margins less, and is expected to be corrected as the facilities are drawn at an accelerating rate. The increase in net contribution margins is a positive indicator, as both Hungarian and Czech subsidiaries have increased their margins. The increase in contribution margins amounted to 408 million HUF (21%) on a y/y basis. The Company continuously monitors any market tendencies with a potentially negative impact on contribution margins, to avoid which it has developed effective solutions. The increase in net contribution margins is the result of multiple factors. Expected or realised added value is derived from leveraging the reserves identified in on-going projects e.g. by minimising costs or renegotiating contractor agreements, and with newly launched projects, from consistent project, customer and contractor management that is based on previous project experience. The rationalisation of operating costs coupled with an increase in contribution margins has also created an optimal balance in the financial results of the Company. Owing to employees existing knowledge and the development of professional skills, the operating result remained level. In order to ensure close and continuous cost control, operating costs are reviewed and adjusted as required on a quarterly basis. As a result, the rather inflexible volume of operating costs becomes increasingly dependent on the level of contribution margins achieved by the Company. Report on the SYNERGON Group s performance in the first half of /25

3 EBITDA is a positive 212 million HUF, comprised of the positive values of both the Hungarian and the Czech subsidiaries. Dr. Zoltán Jeszenszky, Chairman of the Board of Directors of SYNERGON Information Systems Plc. explained, In Q2, the Hungarian infocommunications sector continued to wait out. IT companies are living off existing orders from large corporations, and are waiting for the launch of the central tenders announced by government. The financial framework of the centralised open procurement procedure for information technology, made available as of Q2, resulted in only limited market activity. In a mostly disoriented market, SYNERGON Group has been able to improve its profitability further, a result of the strategy announced previously and implemented consistently by management. In Q2 this year, SYNERGON Group outperformed all expectations. Thanks to the continuous, cost-sensitive adjustment of its operating structure, the Company managed to improve its profitability in the face of a pessimistic market and lost sales. Q1 financial management data already gave a clear indication of SYNERGON Group s new momentum in terms of profitability, which continued to build up in Q2 as well. As spin-offs of SYNERGON System Integrator Ltd. enter the market in Q3, competition within the Group is bound to be intensified. Now independent entities under SYNERGON Group s umbrella, the five subsidiaries started operations to leverage synergies in Q3. The profitability of the new subsidiaries, including spin-offs and new establishments, is expected to be seen only at the end of the year; however, their contribution to the profitability of the Group was felt in Q2 already through the positive impacts of restructuring. Report on the SYNERGON Group s performance in the first half of /25

4 Zoltán Jutasi, CEO of SYNERGON Information Systems Plc. and a member of the Board of Directors, explains: We are not surprised at the profitability of Q2, as the often quoted strategy, adjusted to changing market needs, has proved us right even in the short term. Over the past months, SYNERGON Group has undergone changes in operations, and has also been renewed and transformed at management level. As part of creating the holding structure in Q3, leaders were appointed to SYNERGON and its subsidiaries with extensive knowledge and management experience, who excelled in their own fields already in Q2. The strength of SYNERGON Group comes from the fact that employees and management think in terms of a common SYNERGON Team. The highly experienced management acted fast and efficiently in carrying out the tasks related to the establishment of the holding structure. SYNERGON Group has become much more structured both in terms of operations and size, which allows it to meet customers demands more easily and efficiently. SYNERGON Group s previous orientation has been retailored and adjusted to market needs. In the course of spin-offs and the establishment of subsidiaries, the Company made efforts to listen to the needs of its partners and customers, and incorporate those needs into its strategy. As a result of due diligence and needs assessment, operations that had not generated revenues were discontinued, and we shifted our focus to other fields of business with a potential to drive sales. In designing SYNERGON Group s operations, management aimed to create a profitsensitive holding in which profit is based on various elements of the infocommunications market, allowing each subsidiary to leverage group synergies to improve its own performance. Q3 and Q will be spent closing the first phase of the restructuring strategy, as a result of which the Company is being transformed into an investment and asset management holding. Report on the SYNERGON Group s performance in the first half of /25

5 SYNERGON Group s profit analysis as at 30 June 2012 As a parent company, SYNERGON Information Systems Plc. included the following companies in its consolidated statements as at 30 June 2012: SYNERGON System Integrator Ltd., SYNERGON Retail Systems Ltd., Fibex Kft., Infinity a.s., Infinity a.s. Infinity Slovakia, Infinity Data, Infinity IT Service a.s., Infinity Data, Infinity IT Service a.s., Syergon Invest Bulgaria EOOD. The involved companies have been consolidated together with their entire balance sheets and profit and loss statements; the company separates the earnings parts on minority holdings from the after-tax profit. In the first half of 2012, SYNERGON Group generated a sales revenue of 5,052 million HUF. Sales at Group level dropped primarily because of licence sales remaining unrealised and the rescheduling of the FUTÁR project. Infinity a.s. increased its market share by more than 30%. In 2011, the frameworks of public procurement were available as early as in Q1, allowing customers and suppliers to realise individual supply contracts at the beginning of the year. By contrast, in 2012 the relevant central public procurement frameworks were made available only in Q2, and specific supply agreements are currently being developed, which will be followed by sales at a later stage. Sales by sector in H were as follows: industry, trade and services, 53%, government and public sector 26%, Budapest Transport Company and other major projects 9%, other sales not elsewhere classified 12%. In H1 2012, the services sector increased its share of the sales volume by 12%. The Company increased its contribution margin by 21% and net contribution margins by 12%. Report on the SYNERGON Group s performance in the first half of /25

6 The rationalisation of operating costs started in 2011; in 2012, costs have been cut by 15% on a quarterly basis. The Hungarian companies contributed 742 million HUF to the Group s cost cut worth 403 million HUF in H1, taking an important part in the Group s positive operating result. In the case of the Czech subsidiaries of the Group, the increase in operating costs was a result of the costs of IT Systems, acquired in 2011, which were not incurred in the base period and were fully incurred in the reporting period. In 2012, the positive operating result and EBITDA improved further, amounting to 212 million in H Report on the SYNERGON Group s performance in the first half of /25

7 Earnings of Hungarian Companies This includes SYNERGON Information Systems Plc. and its subsidiaries presented in a consolidated manner, SYNERGON System Integrator Ltd., SYNERGON Retail Systems Ltd. and Fibex Kft. SYNERGON Information Systems Plc. is the Hungarian company of SYNERGON Group, legally it functions as the main shareholder of the rest of the member companies in the group. SYNERGON System Integrator Ltd. is a company engaged in IT system integration, system management and surveillance. SYNERGON Retail Systems Ltd. sells core activity systems to retail service providers. Fibex Kft. is a subsidiary of SYNERGON in 2009 it has minimized its operating activities. In H1 2012, the companies in Hungary generated 3,208 million HUF worth of sales, down 51% from the volume of sales in H Sales figures for the reporting period do not include licences sold in public procurement. The shortfall in licence sales will continue to adjust sales in coming periods as a result of the deferred sales of licences. The FUTÁR project for the Budapest Transport Company generated 300 million HUF worth of sales in the reporting period, a significant difference from the 1.4 billion HUF of the base period. In both Q1 and Q2 2012, the amount of contribution margins was higher than in Compared with 2011, the amount of contribution margins was up 8% on average in six months, and up 23% in Q2. The consolidated ratio of contribution margins exceeded 40%. The contribution margin of licence sales not realised in H1 was low; therefore, in accordance with the high service content of realised sales, contribution margin was 48% in Q Report on the SYNERGON Group s performance in the first half of /25

8 In respect of its projects, the Company calculates the overall impact of results. On that basis and in accordance with the relevant IFRS rules, profits and losses for the period concerned are recognised immediately based on fulfilment. In the FUTÁR project for the Budapest Transport Company, SYNERGON accounted for profits and sales for the entire term in accordance with international accounting rules. In Q1 2012, the Company carried a significant volume of performance from previous procurements to be taken into account for valuation purposes. Of those, certain items previously used as part of performance were replaced during the quarter as part of contractor and supplier changes in order to ensure successful project implementation. Items associated with partner changes (620 million HUF worth of revenues and an equivalent amount of material costs) were reposted to inventories. As at the cut-off date, assets are carried in the balance sheet as inventories and liabilities. Inventories have been removed prior to the date of publication. Such purchased and returned materials were not taken into account for the purposes of performance accounts as at 30 June The agreement with the new contractor is being negotiated. The derecognised revenue will be recovered in the result as a supply from the new contractor. The contribution margin and sales belonging to the recognised costs are accounted for in profits on a cost-related basis. Overall in the calculation prepared on publication of the accounts, in view of the agreement with the principal of the FUTÁR project and renegotiated contracts with suppliers, the result of the project was approximately 100 million HUF higher than in 2011, an improvement presented in the contribution margin for Q Project losses recognised against profits in 2011 were reduced in Q By restructuring the 10-year BKV (Budapest Transport Company) Outsource project and renegotiating contractor and supplier agreements, the Company supported the improved profitability of the contract in the long term. The result of the reporting period had a positive impact on accounting for the project s percent complete. Restructuring implemented as a result of several months of due diligence carried out in 2011 is quantified as a 742 million HUF cut in operating costs in H The drastic cut in operating costs and their continuous control served to align the revenues and costs of the Company. The structure of cost cutting ensures that H1 cuts remain sustainable in the rest of the year, and that it remains adjustable as contribution margins change. Cost cutting comprised three main elements. No depreciation was recognised for the new premises, while the Company achieved major savings on headcount changes and reductions in experts fees. In H1 2012, the net result of financial operations was a profit of 179 million HUF. Treasury shares futures yielded a gain of 12 million HUF, exchange rate gain amounted to 197 million HUF, and 29 million HUF was paid in interest. The Company recognised deferred a tax liability against the profits of SYNERGON System Integrator Ltd. The Hungarian companies had 20 million HUF in net cash, obtained as the difference of liquid assets and the used part of credit facilities. The companies had used 699 million HUF out of their credit facilities. The company has access to bank capital for the purpose of financing the largest contracts. A need for bank financing is expected during the 10-year support for the Budapest Transport Company and the FUTÁR project. The Company took the financing expenses accompanying the foreign liabilities into consideration in recognising the 10-year profit expectations for the BKV support project as well. The interest cost of investments to be financed (carried at 10%) was deducted from the estimated return on the project. Report on the SYNERGON Group s performance in the first half of /25

9 Earnings of the subsidiary in the Czech Republic (Infinity a.s.) Infinity a.s. is the Czech subsidiary of majority shareholder SYNERGON Information Systems Plc. The first acquisition step in 2001 was followed by more steps until 2007, these were minor steps intended to increase influence. Following the capital increase of September 2007, SYNERGON Information Systems Plc. controlled 99% of the subsidiary. With the acquisition of the remaining minority holding in 2012, the Group has gained control of 100% of Infinity a.s. Completed in 2011, the impact of the acquisition of IT Systems a.s. is reflected with full capacity in the 2012 increase of sales, contribution margins and services. The integration of the acquired company has been successful, with synergies quantified in the business portfolios of both the parent and the subsidiary continuously from quarter to quarter, in line with expectations. In H1 2012, the sales revenue of Infinity a.s. was up 32% to 1,845 million HUF. Sales in the fields of system management, hardware and licences continue to grow at a steady rate. The volume of net contribution margins, calculated by deducting the direct material cost, product cost and subcontractors cost from sales, was 973 million HUF in H The growth of contribution margin was 48%. Licences and services played a dominant role in the increase in sales. The contribution margin rose to 53%, up 6% from H The increase in contribution margin was supported by contribution-intensive Oracle based sales by IT Systems a.s., acquired in In H1 2012, the operating result amounted to 99 million HUF, with an EBITDA of 147 million HUF. Report on the SYNERGON Group s performance in the first half of /25

10 Earnings of SYNERGON Invest Bulgaria EOOD (Bulgarian subsidiary) Established in 2012, SYNERGON Invest Bulgaria EOOD is a Bulgarian subsidiary of sole shareholder SYNERGON Information Systems Plc. In H1 2012, in order to win contracts outside Hungary and to accelerate potential acquisitions abroad, in line with the directions of its strategy, SYNERGON Information Systems Plc. embarked on the establishment of its Bulgarian subsidiary. SYNERGON expects the new subsidiary SYNERGON Invest Bulgaria EOOD to customize the Company s community transportation solutions, outsourcing and Cloud services to local dimensions and demands and to become profitable quickly with those core competencies. As a tender called for local suppliers in a country offers better chances for a company operating in the country concerned, we consider running a low-cost project company an investment with adequate returns. Report on the SYNERGON Group s performance in the first half of /25

11 Changes in SYNERGON Group s Balance Sheet The consolidated balance sheet total of the Group was 11,109 million HUF on 30 June 2012, down 2% from the same day in Report on the SYNERGON Group s performance in the first half of /25

12 Below is a summary of major changes in the balance sheet. Reclassification of tangibles and leased assets. In a leaseback scheme, the Company sold 230 million HUF worth of assets, then entered into a financing agreement secured by leased assets as collateral. Inventories carry items of the BKV FUTÁR project in a significant volume of 1.4 billion HUF. In connection with the BKV FUTÁR project, inventories include items purchased for vehicle assembly, which have not been used and are scheduled to be returned. While the accounts were prepared, inventories were returned as part of partner changes and new inventories are expected to be purchased in H The impact of those changes on profits have been explained in the profit analysis. Under inventories, the Group carries software licences at 2,769,399 EUR (861,643,000 HUF) for 2012, which government authorities and institutional customers are expected to order and pay in the next quarter as part of the public procurement framework for IT licences made available in Q2. The Company is in continuous contact with institutions ordering as part of the framework; however, deliveries started in Q3, slower and in smaller quantities than previously. By the end of Q2 2012, the Hungarian companies drew 699 million HUF from the overdraft facility committed to the Group, whereas Infinity a.s. and its subsidiaries used a total of 108 million HUF from their facilities. The Hungarian companies used the facility for the implementation of the projects in progress, and to finance professional work and equipment. Accounts payable include the licences presented in inventories as well as asset acquisitions for the BKV FUTÁR project. Report on the SYNERGON Group s performance in the first half of /25

13 SYNERGON Group s Cash flow As at 30 June 2012, the Company had 78 million HUF worth of net cash. In the reporting period the changes resulted in the accumulation of 149 million HUF in cash and cash equivalents. Report on the SYNERGON Group s performance in the first half of /25

14 Changes in the shareholders equity of SYNERGON Group Changes in shareholders equity between the initial and closing cut-off dates of the base period and the reporting period are presented as at 30 June 2012 by type of change. Report on the SYNERGON Group s performance in the first half of /25

15 Earnings per share Shareholders equity value representing voting rights in SYNERGON Information Systems Plc. Report on the SYNERGON Group s performance in the first half of /25

16 Business Report on the business activity of companies and the determining economic influences and risks As part of its 2012 strategy, SYNERGON Information Systems Plc. started to establish subsidiaries to reutilise Hungarian resources and experiences, following the successes of its Czech subsidiary. The objective during the first phase was to set up a subsidiary in Sofia and to strengthen Bulgarian relations through said subsidiary as there seems to be great interest for services and solutions supplied by SYNERGON in the emerging countries of the Balkans. Established under the name SYNERGON Invest Bulgaria EOOD, the company will primary be responsible for extensively selling the Group s existing competences and building partnerships in Bulgaria. In accordance with its previous announcement, at its 09 May 2012 press conference the Company announced that, as important part of the changes, certain organisational units of SYNERGON System Integrator Ltd., the wholly-owned subsidiary of SYNERGON Information Systems Plc, will be organised into companies with independent legal personalities also owned by SYNERGON Information Systems Plc. As part of the strategy prepared and for the most part implemented in 2011, in the first half of 2012 the SYNERGON Group was expanded with five independent companies. By setting up further subsidiaries, SYNERGON Information Systems Plc. strengthens the holding company s asset management activities. As of 31 July 2012, the Court of Registration of the Metropolitan Court of Budapest ordered the 5 new companies split-off from SYNERGON System Integrator Ltd. SYNERGON Outsource Ltd., SYNERGON Infosource Ltd., SYNERGON Backoffice Ltd., SYNERGON Inforend Ltd., and SYNERGON SoftCon Ltd. to be taken into registration. The companies thus established are wholly-owned subsidiaries of SYNERGON Information Systems Plc. The SYNERGON Group aims to make the newly established companies (professional competence centres) strengthen the asset management holding structure through their operation and, at the same time, assume independent roles in the successful implementation of the Group s strategy. As an important element of these changes, at the request of SYNERGON System Integrator Ltd. the Court of Registration of the Metropolitan Court of Budapest ordered the name of SYNERGON System Integrator Ltd. to be changed to SYNERGON Integrator Ltd. The change was registered as of 27 July The activities of the subsidiary will continue to focus on planning and implementing IT projects. In recent years, the demand for delivering IT and telecommunication investments in a single integrated system has increased. Constantly accelerating data transmission solutions and services, as well as radio-technology and GIS systems have allowed SYNERGON to offer complex solutions to its clients. For this reason, the management of SYNERGON, in unison with the Board of Directors, has decided to set up an independent company to perform info-communication tasks. The new subsidiary is called SYNERGON InfoCom Ltd. and is a wholly-owned subsidiary of SYNERGON Information Systems Plc. delivering info-communication system solutions. The goal of the establishment of SYNERGON InfoCom Ltd. is to serve as a competent, complex infocommunication service provider within the SYNERGON Group for Hungary and the whole of the Central-Eastern European region. Report on the SYNERGON Group s performance in the first half of /25

17 According to CEO Zoltán Jutasi s plans formulated in 2011, the future will see the parent company become a strategic investment company. It will be tasked with managing the specialised companies of the Group and to seek out further investment opportunities in Hungary and the entire region alike. Trade The performance of the supply agreement concluded in Q with the National Office for the Judiciary for Delivering software products required for the introduction of information technology system, IT developments and related services continued in Q2. In the second quarter, the implementation of functional specification and system planning tasks was finished. This brought the project to 70% completion. The next step is the implementation of system development tasks. The performance of tasks stipulated in the agreement concluded with Tigáz Zrt. and renewed in 2011 advanced-level availability for the company s data transfer (LAN-WAN) network is in progress; as are the network expansion works for the ELMŰ-ÉMÁSZ Group, where SYNERGON provides its services as part of framework agreements. In Q2 of 2012 besides previously concluded agreements, SYNERGON entered into another two agreements with the Public Procurement and Supply Directorate. SYNERGON System Integrator Ltd. entered into framework agreements for two partial deliveries for the Delivery of computer systems and performance of related services as a result of the open centralised public procurement procedure that commenced with the publication of the announcement. In the case of both partial deliveries, the Company entered into agreement with the same consortium group (Invigor Informatika Kft Informatika Kft. - Compliance Data Systems Kft. - SYNERGON Retail Systems Ltd.). The early performance of the three-year framework agreement for the Procurement of software licenses and performance of related services as concluded in 2009 did not allow obligated an voluntarily joining institutions to procure licenses as part of centralised public procurement. Following the execution of the new Microsoft or equivalent institutional public administration license arrangements framework agreement, SYNERGON System Integrator Ltd. therefore had the opportunity to participate in several calls for applications in order to provide services to clients. Pursuant to the framework agreement, the conclusion of the first agreements is in progress. With the help of the one-year LAR partnership tender awarded by Microsoft, SYNERGON is able to provide these more favourable terms and conditions to its consortium partners as well. As several public administration institutions extended their product subscriptions with the support of SYNERGON System Integrator Ltd., they all joined Microsoft s Municipal License programme. The tender announced close to six months ago to expand MÁV Zrt s data network and integrate it under the existing management system in order to ensure the data-transfer infrastructural operating conditions of the Rail Transport Information System (FOR3 data network expansion project) was also awarded to SYNERGON. The works will be implemented in Budapest, Debrecen- Záhony, Miskolc, Pécs, Szeged and Szombathely at multiple sites. The total value of the project is close to HUF 400 million. Report on the SYNERGON Group s performance in the first half of /25

18 Outsource In Q2 of 2012, the Outsource business line concluded a successful agreement with MALÉV GH, pursuant to which the Company performs operating tasks. The outsource field strived to decrease costs and at the same time increase service quality through the further optimisation of internal workforce. At the service management level, besides the consolidation of the existing project portfolio, the processes of support project management also became more transparent. The rise of service quality is well reflected by the acceleration of the reaction times related to the various reports. Transport information Over recent years, the SYNERGON Group made considerable efforts in order to make the BKV- FUTÁR Project one of Hungary s largest and most successful modern community transport service systems. Solutions such as FUTÁR have practically never been implemented anywhere in Europe, and as such it is crucial for SYNERGON as well as its client, BKV-BKK (Budapest Transport Company-Centre for Budapest Transport) that the system is put into operation in line with expectations and the system of requirements following implementation. In Q2 of 2012, SYNERGON, in agreement with both the Client and the sub-contractor, with respect to unforeseen circumstances and events, decided to terminate the subcontract in mutual agreement prior to the completion of the FUTÁR project. At the same time as the termination of the GMV agreement in the interest of the successful completion of the project SYNERGON entered into agreement with IVU Traffic Technologies Italia S.r.l. (the wholly-owned subsidiary of IVU Traffic Technologies AG) to supply missing onboard instruments and technological completion. Works are currently progressing according to the new schedule. As of May 2012, Dr. Miklós Csillag took over management of the transport information business. Amongst other things, his task is to coordinate business development and expansion tasks that are based on already acquired references and market positions, in both Hungary and internationally. System integration In Q2 of 2012, a new associate joined the ranks of the systems integration team of the Infrastructure business line, in order to reinforce existing VMware and Microsoft skills and expertise therein. In April, the business line successfully renewed its Microsoft Gold Partner certification in two competencies (mailing and management). SYNERGON also successfully completed the updating of the Budapest Transport Company s central directory and mailing service. The three new associates who joined the networking field of the organisational unit at the end of the previous quarter successfully integrated into the organisation, and in the second quarter of 2012 the staff here increased by one more person. The new associate in question performs service engineering tasks. The business line continued the MÁV FOR3 project which commenced in Q1, and as part of a new project, successfully moved Omnicom Media Group s network devices to a new location. Software development, records management systems An amendment request must be submitted to MAG Zrt due to the business line s splitting off and becoming an independent company SYNERGON SoftCon Ltd. in connection with winning the Report on the SYNERGON Group s performance in the first half of /25

19 R+D project at MAG Zrt in Q4 of 2011 for the development of Syrius electronic records management modules development of 4 new records management modules for the existing Syrius system. Depending on the amendment, either the project scope will change or the performance deadline will be extended. In July 2012, SYNERGON was awarded a tender to introduce the Syrius Standard Records Management System at the Hungarian Investment and Trade Agency. The current agreement concerns license sale and introduction, and in case of the successful performance of said agreement, SYNERGON has an opportunity to conclude a product support agreement. The portal development tender announced by the National Office for the Judiciary was completed on time by the business line to the satisfaction of the client. The tender announced by the National Directorate General for Disaster Management for the enhancement of the Syrius Standard Records Management System and 1-year product support was also awarded to SYNERGON and the project, pursuant to the agreement, was ordered in August. SYNERGON Retail Systems Ltd. (Retail and special systems) SYNERGON Retail Systems Ltd. operates in the retail and wholesale sector. The company installs and operates sector-specific systems, has a nationwide repair network, and offers businessoriented data communication solutions as a premium EDI service provider in Hungary. The company closed Q2 of 2012 according to expectations. It has performed its non-stop, 24/7 repair service and system support activities in the field of repairs in accordance with current agreements. It continued to provide repair support activities to its priority clients, such as Magyar Posta (Hungarian Post Office), MÁV, Budapest Transport Company, KiK, SPAR, and the ALDI network. The foreign business chains expanding throughout the year commenced opening up new stores. In accordance with the present economic situation, investor expectations this year are more moderate, and as such, their expansion plans for the year are modest. In spite of this fact, Camaieu, Aldi, KiK and Claire s networks are planning to open further stores in Hungary as well as abroad, the installing and asset procurement of which has been successfully managed by SYNERGON Retail Systems Ltd. in the past and these works are set to continue during this year. SYNERGON Retail Systems Ltd. has also successfully conducted the system handover between BKV-BKK (Budapest Transport Company-Centre for Budapest Transport), with which the Client was very satisfied. The consortium comprising SYNERGON Retail Systems Ltd. and Creativ Bartex Solution Kft. was announced the winner of the bidding public procurement procedure announced by the Municipality of the 1st District for the Enhancement, expansion and 3-year maintenance of the multi-zone vehicle entry and parking system implemented in the protected area of the Buda Castle, in accordance with the terms and conditions defined in the bid documentation and finalised during negotiations where SYNERGON System Integrator Ltd. also participates as a subcontractor. The project s goal is to modernise the vehicle entry and parking system of Buda Castle in order to establish an autonomous parking system that is worthy of the Castle district in terms of quality, technology and manageability. The new entry system will be in line with modern demands and will be worthy of the Castle district s rank. Through cameras (license plate readers and public video surveillance), parking meters, proximity card-readers, remote supervision, and serious statistical Report on the SYNERGON Group s performance in the first half of /25

20 modules the system can be operated in a fail-safe manner in the long-term. Implementation commenced in the month of May. Our ECOD EDI service is used by several multinational FMCG companies in Hungary. Auchan Hungary Ltd., one of the leaders in this field, also relies on the services of SYNERGON. The negotiations on renewing the agreement and maintaining the exclusive service provider position have been concluded by the end of the quarter and the preparation of the renewed agreement for another three years has commenced. In Q2, an outstanding number of suppliers converted to electronic invoicing as part of the ECOD service. The PKI-based invoicing developed alongside the EDI service has been operating without problems at Auchan since 2011; the company uses this new system to send invoices to more than 1500 of its partners. This solution in the field of electronic invoicing has become highly popular, with significant projects launched at the following clients: Friesland, Mars, Wunderlich, Whitelake, Gift Sweet, Heineken, etc. The system allows for numerous new suppliers to join the ECOD-EDOC24 system in Beyond the introduction of the successfully realised PKI system, further priority projects will be realised with Friesland Campina Hungaria Zrt. Besides Auchan, negotiations are also underway with Metro regarding the automatisation of receiving PKI-based invoices. Report on the SYNERGON Group s performance in the first half of /25

21 Infinity a.s. Infinity a.s. is the Czech subsidiary of the SYNERGON Group. The Czech company employs 157 persons and deals with high added value projects in close cooperation with supplier partners, such as Microsoft, HP, Cisco. Its clients are financially sound industrial and trading companies. Infinity provides HP repair services to 60% of the Czech Republic. Thanks to its four regional sites, the Company is able to adapt very well to economical requirements. The Company was awarded the following awards and recognitions in 2012: Thanks to the business successes of the previous fiscal year, Infinity was given the Microsoft Dynamics President s Club 2012 award. Very few only 5% of Microsoft partners are awarded this prestigious recognition. By winning this award, Infinity has joined a select and high ranking group. Of the 3 finalists Microsoft partners of the Central-Eastern European region, in 2012 Infinity also won the Microsoft Dynamics reseller award. This award was the result of the exceptional business success, within which Infinity offers innovative solutions to clients by optimising Microsoft Dynamics that surpass all previous expectations. Significant value license sales of Infinity a.s. in Q2 of 2012: To Czech Republic prisons, Microsoft Dynamics NAV BREP, in a value of CZK 1.8 million To South-Bohemia Trade Fairs, Microsoft Dynamics AX, in a value of CZK 2.5 million To the health insurance provider of the military of the Czech Republic, Microsoft classic licenses, in a value of CZK 4 million To Hella Corporate Center Central & Eastern Europe, Microsoft classic licenses, in a value of CZK 4.9 million To Deutsche Amphibolin-Werke, Microsoft Dynamics AX BREP, in a value of CZK 1.1 million Significant value hardware sales of Infinity a.s. in Q2 of 2012: To Ware Point, HP servers and storage, in a value of CZK 3.5 million The Company will realise the following significant implementation projects in Q2 2012: Aperam Stainless Services & Solution Tubes Report on the SYNERGON Group s performance in the first half of /25

22 Aperam Stainless Services & Solution Tubes is part of the multinational ArcelorMittal group, with the primary activity of manufacturing and selling stainless steel tubes for the automotive industry. The company is responsible for 27% of the turnover in stainless steel manufacturing and sales in Europe and Brazil. Aperam also holds a leading manufacturing position in the field of high added value special products, such as electric steel and nickel alloys. Infinity is performing Microsoft Dynamics AX2009 implementation for the company. A7B Bohemia A7B Bohemia a.s. primarily deals with the wholesale and import of dairy products. Infinity is performing Microsoft Dynamics AX2009 implementation for the company. Lyckeby Culinar a.s. Komárno-based Lyckeby Culinar a.s. deals with the import and wholesale of food additives (natural and modified starch, spices, dextrins and maltodextrins, etc.). Infinity is performing Microsoft Dynamics AX2009 implementation for the company. Lyckeby Amylex a.s. Lyckeby Amylex a.s., is the largest food industry company specialising in producing potato starch in the Czech Republic. Infinity is performing Microsoft Dynamics AX2009 implementation for the company. Report on the SYNERGON Group s performance in the first half of /25

23 Controlled subsidiaries involved in the consolidation In January 2012, SYNERGON Information Systems Plc acquired the minority stakes in Infinity a.s. and paid HUF 17 million for the 1.2% stake. Following the split-offs and the establishment of the Bulgarian subsidiary, the subsidiaries of the SYNERGON Group are as follows: SYNERGON Backoffice Ltd. deals with all activities that are not related to information technology. Strategic companies: SYNERGON Integrator Ltd. SYNERGON Outsource Ltd. SYNERGON Infosource Ltd. SYNERGON InfoCom Ltd. Investment companies: SYNERGON Retail Systems Ltd. SYNERGON SoftCon Ltd. SYNERGON SYNERGON Inforend Ltd. SYNERGON Foreign Companies: Infinity a.s. (Infinity) SYNERGON Invest Bulgaria EOOD (SYNERGON Bulgaria) Report on the SYNERGON Group s performance in the first half of /25

24 Headcount figures for the SYNERGON Group excluding passive staff The closing headcount of the Group at the end of H is 371 people, which is a 9% decrease compared to the closing value of the corresponding period of The decrease was 11% in Hungary and 5% in the Czech Republic. The rationalisation and adapting to market size of Hungarian companies was completed in the second half of 2011, which measure decreased the number of active employees at the Hungarian companies by 86 people. Ownership structure Report on the SYNERGON Group s performance in the first half of /25

25 Corporate events Board of Directors On 6 August 2012, the Board of Directors reached a decision to establish a company delivering info-communication system solutions, SYNERGON InfoCom Ltd. Acceptance of liability declarations The progress report of SYNERGON Information Systems Plc. joint-stock company compiled its present progress report presenting its business activities for the 6-month period from 1 January 2012 to 30 June 2012 in compliance with Act CXX of 2001 on the capital markets and the regulation of the Budapest Stock Exchange Plc. on Introduction and Quotation Rules. These statements have been elaborated according to our best knowledge in conformity with International Financial and Reporting Standards, they contain non-audited data and statements, and they do not ignore any such facts that are material from the aspect of evaluating the situation of the Company. This report gives a true and reliable description of the assets, liabilities, financial situation of the consolidated company, and also on its profit and loss figures, and it give a reliable description of the situation, development, performance of the presented consolidated company, explaining the major risks and uncertainty factors. Budapest, 30th August 2012 Levente Sipos Chief Financial Officer Zoltán Jutasi Member of the Board of Directors, CEO SYNERGON Information Systems Plc. Further information: SYNERGON Information Systems Plc Budapest, Vak Bottyán u. 75. A-C. II. emelet Phone: +36 (1) Fax: +36 (1) [email protected] Report on the SYNERGON Group s performance in the first half of /25