PERSMEDEDELING Contactpersonen:
Johan Volckaerts, CEO Tel.: + 32 2 647 80 70 Alain Pronost, CFO Tel: + 33 6 62 60 56 51
RESULTATEN GLOBAL GRAPHICS TWEEDE KWARTAAL EN EERSTE SEMESTER 2006. Pompey, (Frankrijk), 27 juli 2006 – GLOBAL GRAPHICS SA (Euronext: GLOG), expert in de ontwikkeling van technologie voor open document en drukoplossingen, maakt de financiële resultaten bekend voor het kwartaal en het semester eindigend op 30 juni 2006. De vergelijking van het tweede kwartaal 2006 met het zelfde kwartaal in 2005 omvat: Een kwartaalomzet van 4,0 miljoen euro (4,1 miljoen euro aan de wisselkoers van het 2e kwartaal 2005), vergeleken met 5,2 miljoen euro in het tweede kwartaal 2005. De EBITA marge bedroeg dit kwartaal 0,6 miljoen euro, vergeleken met 2,0 miljoen euro in het tweede kwartaal 2005. De pro forma winst vóór belastingen bedroeg 1,0 miljoen euro dit kwartaal tegenover 1,9 miljoen euro in het tweede kwartaal 2005. De pro forma winst vóór belastingen per aandeel bedroeg dit kwartaal 0,10 euro tegenover 0,19 euro voor het tweede kwartaal. De pro forma netto winst bedroeg dit kwartaal 0,1 miljoen euro tegenover 2,7 miljoen euro in in het tweede kwartaal 2005. Jim Freidah, Chief Operating Officer, gaf de volgende toelichting bij de resultaten: “De terugval van de resultaten is vooral te wijten aan de overgangsperiode waar we ons nog steeds in bevinden. Printerfabrikanten bereiden zich voor om XPS compatibele producten op de markt te brengen ter gelegenheid van de lancering van Microsoft’s nieuwe besturingssysteem Vista, voorzien voor eind 2006. Dit leidt tot een hiaat in de bestellingen voor nieuwe digitale druk contracten. “Ondanks dat ben ik verheugd om mede te delen dat we op dit ogenblik in ver gevorderde onderhandelingen zijn met een aantal vooraanstaande printerfabrikanten die onze XPS technologie willen implementeren in hun gamma van drukkers. Wij hopen de onderhandelingen te kunnen afronden in de volgende drie maanden. “Wij hadden vroeger al aangegeven dat wij, voor digitale druk en XPS, onze focus leggen op contracten van middellange tot lange termijn en dat die focus een neerwaartse druk zou uitoefenen op onze bestaande business. De reden is dat Global Graphics zijn verkoops- en ontwikkelingsinspanningen, die nu gericht zijn op lange termijn groei i.p.v. op korte termijnwinst, nog vergroot. Daarbij komt dat de inkomsten uit ons traditionele segment in het tweede kwartaal
terugliepen, hoewel we verwachten dat dit segment naar het einde van 2006 toe terug zal hernemen.” Prestaties voor het tweede kwartaal De kwartaalomzet bedroeg 4,0 miljoen euro tegenover 5,2 miljoen euro in het tweede kwartaal 2005, of een daling van 22,4% tegen huidige wisselkoersen. Tijdens het voorbije kwartaal werd ongeveer 74,5% van de omzet uitgedrukt in US dollar (tegen een gemiddelde wisselkoers van 1,256 USD voor 1 euro). De wisselkoersschommelingen met de euro bleven een weerslag hebben op de omzet van de Onderneming en haar bedrijfsresultaten. Indien de kwartaalomzet werd omgewisseld tegen de gemiddelde dollarkoers die van toepassing was in het tweede kwartaal van 2005 (1,260 USD voor 1 euro), dan zou de omzet nagenoeg 4,1 miljoen euro hebben bedragen, een daling met 21,6%, bij constante wisselkoersen, t.o.v. de omzet die over het tweede kwartaal 2005 werd gerapporteerd. De bedrijfskosten voor dit kwartaal (exclusief kosten van verkopen, afschrijvingen van immateriële activa, uitgaven voor aandeelvergoeding en het netto effect van de kapitalisatie van ontwikkelingskosten) bedroegen 3,3 miljoen euro, ten opzichte van 3,1 miljoen euro tijdens dezelfde periode van 2005, of een stijging met 0,2 miljoen euro. Die stijging is voor het grootste deel toe te schrijven aan de kosten van een dubieuze vordering die wij dit kwartaal hebben opgelopen als gevolg van het faillissement van een van onze Amerikaanse klanten. De EBITA (pro forma bedrijfswinst zoals in onderstaande tabellen gedefinieerd) bedroeg dit kwartaal 0,6 miljoen euro, ten opzichte van 2,0 miljoen euro in het tweede kwartaal 2005. Bijgevolg verminderde de EBITA marge tot 15,5% van de kwartaalomzet in vergelijking met de 38,0% marge die we in het tweede kwartaal 2005 behaalden. De pro forma winst vóór belasting (zoals in onderstaande tabellen gedefinieerd) bedroeg dit kwartaal 1,0 miljoen euro (net als in het eerste kwartaal 2006), ten opzichte van 1,9 miljoen euro voor dezelfde periode van 2005 en bevatte een wisselkoerswinst van 0,4 miljoen euro die het resultaat is van de vreemde valuta hedgingstrategie die de onderneming de afgelopen twaalf maanden heeft toegepast. Bijgevolg verminderde de pro forma winst vóór belasting per aandeel van 0,19 euro in het tweede kwartaal 2005 naar 0,10 euro in dit kwartaal. De pro forma netto winst (zoals in onderstaande tabellen gedefinieerd) bedroeg voor het huidige kwartaal 0,1 miljoen euro (na de verwerking van een uitgestelde belastingkost van 1,0 miljoen euro) tegenover 2,7 miljoen euro voor dezelfde periode van 2005 (na de verwerking van een uitgesteld belastingvoordeel van 0,9 miljoen euro). Bijgevolg daalde de pro forma winst per aandeel van 0,27 euro in het tweede kwartaal 2005 naar 0,01 euro in dit kwartaal. Resultaten eerste semester 2006 De omzet voor het eerste halfjaar van 2006 bedroeg 8,4 miljoen euro tegen 10,2 miljoen euro in dezelfde periode van 2005, of een daling met 17,4% tegen de huidige wisselkoersen. In het eerste semester werd ongeveer 79,5% van de omzet van de Onderneming uitgedrukt in US dollar (tegen een gemiddelde wisselkoers van 1,227 USD voor 1 euro). Indien de semesteromzet zou omgerekend worden tegen de gemiddelde dollarkoers die van toepassing was in het eerste semester van 2005 (een gemiddelde wisselkoers van 1,287 USD voor 1 euro), dan zou de semesteromzet nagenoeg 8,2 miljoen euro hebben bedragen, of een daling met 20,0% t.o.v. 2005, bij gelijkblijvende wisselkoersen.
De semesteromzet in de traditionele grafische markt daalde, bij gelijkblijvende wisselkoersen, met 5,3% (of een daling met 2,7% tegen huidige wisselkoersen) t.o.v. dezelfde periode van 2005. De omzet in de nieuwe marktsegmenten, met name digitale druk en elektronische documenten, daalde met 30,5%, bij gelijkblijvende wisselkoersen (of met 28,9% bij huidige wisselkoersen), t.o.v. het eerste semester van 2005 en nam 48,4% van de totale semesteromzet voor zijn rekening t.o.v. 56,1% in het eerste semester van 2005. De EBITA voor het eerste semester bedroeg 1,6 miljoen euro, ofwel 19,0% van de semesteromzet, tegenover 4,0 miljoen euro of 38,6% van de semesteromzet voor dezelfde periode van 2005. De pro forma winst vóór belasting voor het eerste halfjaar 2006 bedroeg 2,0 miljoen euro, ofwel 0,19 euro per aandeel, tegenover 3,8 miljoen euro of 0,38 euro per aandeel voor het eerste halfjaar van 2005. De pro forma nettowinst voor het eerste halfjaar 2006 bedroeg 1,0 miljoen euro, of 0,09 euro per aandeel (na de verwerking van een uitgestelde belastingkost van 1,1 miljoen euro) tegenover 4,8 miljoen euro of 0,48 euro per aandeel (na de verwerking van een uitgesteld belastingvoordeel van 1,1 miljoen euro) voor dezelfde periode van 2005. Herziene vooruitzichten In zijn toelichting over de omzet van 2006 voegde Jim Freidah nog toe: “Er zijn een aantal factoren die ons ertoe aanzetten te geloven dat de omzet voor 2006 lager zal zijn dan wij zes maanden geleden hebben aangegeven, toen wij een jaaromzet verwachtten van ca. 20,0 miljoen euro tegen een wisselkoers van 1,232 USD voor 1 euro en 1,811 USD voor 1 GBP. “Wij hebben al gemeld dat onze huidige activiteiten beïnvloed worden door onze focus op middellange en lange termijn contracten voor digitale druk. De omzetdaling in ons traditionele segment tijdens het tweede kwartaal, in combinatie met het feit dat het derde kwartaal een typisch kalme periode is omwille van de zomer, zet ons er toe aan een meer conservatieve benadering aan te houden voor de rest van het jaar voor dit segment. Wij verwachten ca. 0,6 tot 0,8 miljoen euro minder omzet voor dit jaar t.ov. het cijfer opgenomen in onze vorige resultaatvooruitzichten. Daarbij komt dat de bestaande projecten voor digitale druk hun maturiteitsfase vroeger dan verwacht bereikten waardoor de jaaromzet voor digitale druk ca. 1,2 tot 1,3 miljoen euro lager zal liggen. Wij weten nu eveneens dat de omzet die we verwachtten uit engineering werk voor XPS langzamer op gang komt dan verwacht waardoor de omzet hieruit ca. 0,6 tot 0,7 miljoen euro lager zal liggen dan aangegeven in onze vorige resultaatvooruitzichten. Bijgevolg stellen wij onze verwachte omzet voor 2006 bij tot een omzet tussen 17,0 miljoen en 17,5 miljoen euro. Wij verwachten dat onze EBITA marge zal liggen tussen 21% en 23% van de omzet en dat de pro forma winst vóór belasting per aandeel zal liggen tussen 0,38 en 0,42 euro. Deze indicatie is gebaseerd op wisselkoersen van 1,260 USD voor 1 euro en 1,840 USD voor 1 GBP. “Voor wat de toekomstige omzet betreft, hebben wij dank zij onze gesprekken met de vele bedrijven in ons XPS Early Adopter Program, een beter inzicht ontwikkeld in de verschillende stadia van de XPS overgangsperiode en in het bijzonder voor wat de implementatiekalender van de fabrikanten betreft. De meeste fabrikanten voorzien om host-based systemen in de loop van 2007 op de markt te brengen en de nieuwe XPS-compatibele toestellen (met ingebouwde technologie) te lanceren tussen 2008 en 2009. Host-based systemen zullen lagere licentierechten opleveren dan ingebouwde producten. Daarom denken wij dat onze omzetgroei in digitale druk in 2008 sterker zal zijn dan in 2007.
Inlichtingen over de conference call m.b.t. de resultaten van het tweede kwartaal 2006 Global Graphics houdt vandaag, 27 juli 2006, om 10h00 CET een conference call in het Engels. Deelnemers kunnen telefoneren naar +44 20 7162 0025 en zich melden met “Global Graphics quarterly results conference call”. Het gesprek is daarna nog gedurende 7 werkdagen te beluisteren door te bellen naar +44 20 7031 4064, toegangscode 713303. Bekendmaking van de resultaten van het derde kwartaal 2006 Global Graphics verwacht de resultaten voor het derde kwartaal en de periode van negen maanden eindigend op 30 september 2006, bekend te maken op donderdag 19 oktober 2006 vóór beurstijd. Over Global Graphics Global Graphics (http://www.globalgraphics.com) is een toonaangevende ontwikkelaar van open document technologie en drukoplossingen. Het levert krachtige en gesofistikeerde softwarecomponenten voor de grafische en commerciële drukindustrie, voor de markt van digitale druk en voor PDF (Portable Document Format) software toepassingen. Global Graphics verkoopt zijn RIP, PDF, workflow en kleurentoepassingen aan een klantenkring die hoofdzakelijk bestaat uit apparatuurproducenten (OEMs), integratoren, softwareontwikkelaars en distributeurs. Deze partners omvatten de meeste belangrijke spelers in de digitale pre-press wereld, breedformaatkleurenprinters, kleurproefystemen, digitale kopieerapparaten, printers voor de kantoor- en SOHO-markt en een brede waaier van toonaangevende softwaretoepassingen. Toekomstgerichte verklaringen Dit persbericht bevat, naast historische informatie, toekomstgerichte verklaringen die risico’s en onzekerheden inhouden. Dit omvat verklaringen aangaande de groei- en expansieplannen van de onderneming, haar financiering en de verwachte resultaten voor toekomstige perioden. Dergelijke verklaringen steunen op de huidige verwachtingen van het management en zijn onderhevig aan een aantal onzekerheden en risico’s die ertoe zouden kunnen leiden dat de feitelijke resultaten materieel verschillen van die beschreven in de toekomstgerichte verklaringen. Hoewel het management ervan overtuigd is dar zijn verwachtingen die in de toekomstgerichte verklaringen naar voren komen redelijk zijn, gebaseerd op de thans beschikbare informatie, kan het aan niemand garanderen dat de verwachtingen juist zullen blijken. Dienovereenkomstig is het aangewezen dat lezers niet louter en alleen op deze toekomstgerichte verklaringen vertrouwen. In ieder geval zijn deze verklaringen van toepassing op de datum van deze persmededeling. De vennootschap neemt geen enkele verplichting op zich om de hier geuite verklaringen te herzien of te actualiseren teneinde gebeurtenissen of omstandigheden van na de datum van deze mededeling of nieuwe informatie of het voorkomen van onvoorziene gebeurtenissen te reflecteren.
GLOBAL GRAPHICS SA AND SUBSIDIARIES STATUTORY AUDITORS’ REPORT ON REVIEW OF THE 2006 INTERIM FINANCIAL INFORMATION For the six-month period ended 30 June 2006
Dear Sirs, We have reviewed the accompanying consolidated balance sheet of Global Graphics SA and subsidiaries as of 30 June 2006, and the related consolidated statements of income, changes in equity and cash flows for the six-month period then ended. Management is responsible for the preparation and presentation of this consolidated condensed interim financial information in accordance with the International Financial Reporting Standards. Our responsibility is to express a conclusion on this interim financial information based on our review. We conducted our review in accordance with International Standard on Review Engagements 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial information is not prepared, in all material respects, in accordance with the International Financial Reporting Standards as adopted by the European Union. Villers-les-Nancy and Nancy, 26 July 2006 The auditors
KPMG Audit A division of KPMG SA
Secef
Christophe Bernard Partner
Thierry Baillet Partner
GLOBAL GRAPHICS SA AND SUBSIDIARIES CONSOLIDATED INTERIM INCOME STATEMENT In thousands of Euro, except share data in Euro Quarters Six months ended 30 June to 30 June 2006 2005 2006 2005 Unaudited and Unaudited figures unreviewed figures Sales (note 5) Cost of sales Amortization of intangible assets GROSS PROFIT
4,037 (107) (17) 3,913
5,202 (174) (898) 4,130
8,442 (229) (34) 8,179
10,226 (331) (1,519) 8,376
Selling, general & administrative expenses (1,652) Research and development expenses (1,437) Share compensation expenses (48) Amortization of intangible assets (19) Other operating income (expenses) 0 OPERATING PROFIT 757
(1,355) (1,632) (108) (780) 0 255
(3,126) (3,111) (111) (38) 0 1,793
(2,564) (3,316) (212) (1,217) 0 1,067
7 (60) (34) 168
51 (79) 382 2,147
10 (128) (14) 935
Interest income Interest expenses Foreign exchange gains (losses), net PROFIT BEFORE INCOME TAX
37 (40) 367 1,121
Income tax expense (benefit) (note 6)
907
(1,386)
1,099
(1,575)
NET PROFIT
214
1,554
1,048
2,510
0.02 0.02
0.15 0.15
0.10 0.10
0.25 0.25
EARNINGS PER SHARE (note 7) Basic net profit per share Diluted net profit per share
The accompanying selected explanatory notes consolidated interim financial statements.
are
an
See accompanying statutory auditors’ report on review.
integral
part
of
these
GLOBAL GRAPHICS SA AND SUBSIDIARIES CONSOLIDATED INTERIM BALANCE SHEET In thousands of Euro ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Goodwill Other non-current assets Deferred tax assets (note 4) TOTAL NON-CURRENT ASSETS
30 June 2006 Unaudited figures
31 Dec. 2005
326 1,094 8,244 10 4,533 14,207
308 782 8,331 372 5,737 15,530
91 3,551 537 357 477 4,668 9,681
170 3,599 92 34 438 4,548 8,881
TOTAL ASSETS
23,888
24,411
LIABILITIES & SHAREHOLDERS' EQUITY SHAREHOLDERS' EQUITY Share capital (note 8) Share premium (note 8) Share options outstanding Accumulated deficit Foreign currency translation adjustment TOTAL SHAREHOLDERS' EQUITY
4,079 28,492 2,045 (9,087) (7,056) 18,473
CURRENT ASSETS Inventories Trade receivables Current tax receivables Other current assets Prepaid expenses Cash TOTAL CURRENT ASSETS
LIABILITIES NON-CURRENT LIABILITIES Borrowings Other non-current liabilities TOTAL NON-CURRENT LIABILITIES
4,063 28,362 1,934 (10,135) (6,648) 17,576
0 2 2
240 2 242
CURRENT LIABILITIES Borrowings Bank overdrafts Trade payables Other payables Customer advances and deferred revenue TOTAL CURRENT LIABILITIES
2,664 230 475 710 1,334 5,413
4,200 321 526 624 922 6,593
TOTAL LIABILITIES
5,415
6,835
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
23,888
24,411
The accompanying selected explanatory notes consolidated interim financial statements.
are
an
See accompanying statutory auditors’ report on review.
integral
part
of
these
GLOBAL GRAPHICS SA AND SUBSIDIARIES CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS In thousands of Euro Unaudited figures CASH FLOWS FROM OPERATING ACTIVITIES * Profit before income tax * Adjustments for: - Depreciation on property, plant and equipment - Amortisation of intangible assets - Amortisation of capitalised development expenses - Share compensation expenses - Interest expenses (interest income) - Foreign currency exchange losses (gains) - Expenses offset against the share premium (note 8) - Other items * Change in value of operating assets and liabilities - Inventories - Trade receivables - Current tax receivables - Other current assets - Prepaid expenses - Trade payables - Other payables - Customer advances and deferred revenue * Interest received * Interest paid * Income tax paid NET CASH PROVIDED BY OPERATING ACTIVITIES
Six months to 30 June 2006 2005 2,147
935
94 72 27 111 28 (382) (8) 803
89 2,736 0 212 118 14 (8) 749
79 48 (445) (323) (39) (51) 86 412 34 (78) (49) 2,566
(61) (908) (154) (363) (122) 87 (635) 359 5 (135) (71) 2,847
(111) (401) (512)
(115) (182) (297)
CASH FLOWS FROM FINANCING ACTIVITIES * Proceeds from the exercise of share options (note 8) 154 * Repayment of bank overdrafts (91) * Repayment of borrowings (1,776) NET CASH USED IN FINANCING ACTIVITIES (1,713)
106 (157) (1,800) (1,851)
CASH FLOWS FROM INVESTING ACTIVITIES * Acquisition of property, plant and equipment * Acquisition of intangible assets NET CASH USED IN INVESTING ACTIVITIES
NET INCREASE (DECREASE) IN CASH CASH AT 1 JANUARY EFFECT OF EXCHANGE RATE FLUCTUATIONS ON CASH HELD AT 1 JANUARY CASH AT 30 JUNE
341
699
4,548
2,640
(221) 4,668
282 3,621
The accompanying selected explanatory notes are an integral part of these consolidated interim financial statements. See accompanying statutory auditors’ report on review.
GLOBAL GRAPHICS SA AND SUBSIDIARIES CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY In thousands of Euro Unaudited figures Six months to 30 June 2006 2005 Shareholders’ equity at 1 January
17,576
* Recognized income for the period: - Net profit for the period 1,048 - Change in foreign currency translation adjustment (408) Total recognized income for the period 640 * Effect of share option schemes: - Value of services rendered during the period - Net proceeds from shares issued in the period Total effect of share option schemes Shareholders’ equity at 30 June
9,699 2,510 1,214 3,724
111 146 257
212 98 310
18,473
13,733
The accompanying selected explanatory notes are an integral part of these consolidated interim financial statements. See accompanying statutory auditors’ report on review.
GLOBAL GRAPHICS SA AND SUBSIDIARIES SELECTED EXPLANATORY NOTES TO THE 30 JUNE 2006 CONSOLIDATED INTERIM FINANCIAL STATEMENTS NOTE 1: REPORTING ENTITY These consolidated interim financial statements as at and for the six months to 30 June 2006 comprise Global Graphics SA, a French-based company, and its subsidiaries (together referred to as ‘the Company’). They were approved for issue by the Board of Directors on 26 July 2006.
NOTE 2: STATEMENT OF COMPLIANCE These consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting (IAS 34), and other applicable International Financial Reporting Standards (IFRSs) and related interpretations issued by the International Accounting Standards Board and as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the Company’s consolidated financial statements as at and for the year ended 31 December 2005.
NOTE 3: ACCOUNTING POLICIES AND METHODS (a) Basis of preparation These consolidated interim financial statements as at and for the six months to 30 June 2006 have been prepared under the historical cost convention, except for the revaluation of financial assets and financial liabilities (including derivative instruments as appropriate) at fair value through the income statement. Non-current assets are stated at the lower of amortized cost and fair value less disposal costs, when applicable. (b) Accounting policies and methods The accounting policies and methods used for the preparation of the Company’s consolidated interim financial statements as at and for the six months to 30 June 2006 are the same as those used for the preparation of the Company’s consolidated financial statements as at and for the year ended 31 December 2005, which are set out in note 2 to the Company’s consolidated financial statements for that year.
NOTE 4: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of financial statements in accordance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Company’s accounting policies, and to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making management’s judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period and future periods if the revision affects both current and future periods. Estimates and judgements made by management in the application of IFRSs that involve a higher degree of complexity, have a significant effect on the consolidated interim financial statements as at and for the six months to 30 June 2006, or have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next twelve months, are discussed hereafter. (a) Impairment of goodwill and other intangible assets IAS 34 requires that the Company applies the same impairment testing, recognition and reversal criteria (as applicable) at an interim date as it would at the end of its financial year, i.e. at 31 December. In accordance with paragraph 36 of appendix B of IAS 34, the Company did not perform a detailed impairment calculation as at 30 June 2006, but reviewed to determine if there were any indications of significant impairment of goodwill and other intangible assets since 31 December 2005. Based on the result of this review, no impairment charge was recognized in respect of this impairment test in the six months to 30 June 2006 (no impairment charge either in the six months to 30 June 2005). (b) Capitalisation of computer software development costs As stated in note 2i to the Company’s consolidated financial statements for the year ended 31 December 2005, costs associated with developing or maintaining existing computer software technology and programmes are recognised as an expense when incurred. As required by IAS 38, Intangible assets (IAS 38), costs that are directly associated with the production of identifiable and unique software products over which the Company has proprietary rights, that can be measured reliably, and that will probably generate economic benefits over more than one year, are recognised as intangible assets. Such costs consist solely of direct costs, and include the software development employee costs as well as an appropriate portion of relevant overheads. Computer software development costs recognized as intangible assets are then amortised over their estimated useful lives, which do not exceed three years, starting from the completion date of the corresponding development project. At 30 June 2005, the Company considered that it could demonstrate that it met all of the above-mentioned recognition criteria for one specific project. Accordingly, a total of Euro 63,000 was capitalized and recognized as an intangible asset at that date. As the corresponding development project was not completed at that date, no amortization charge was recorded in that respect in the six months to 30 June 2005. At 30 June 2006, the Company considered it could demonstrate that it met all of these recognition criteria for two specific development projects. Capitalized development expenses corresponding to the first project, which was completed and was commercially launched in September 2005, amounted to Euro 96,000 at 30 June 2006. These expenses are amortized from completion date over the expected useful life of the asset, expected to end on 30 June 2007; the corresponding amortization charge which was recognized in the quarter and sixmonth period ended 30 June 2006 with regards to this first project amounted to Euro 13,000, and Euro 27,000, respectively.
Capitalized development expenses corresponding to the second project amounted to Euro 648,000 at 30 June 2006, following the capitalization of additional development expenses of Euro 230,000 and Euro 401,000 in the quarter and the six-month period ended 30 June 2006, respectively. As the development of this project was not completed at 30 June 2006, no amortization charge was recognized in the quarter and the six-month period ended 30 June 2006 with regards to this project. (c) Income tax (i) Current income tax The Company is subject to income tax in France and in all jurisdictions where it has subsidiaries (notably in the UK and the US). Significant judgement is required in determining the provision for income taxes, as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax provisions in the period in which such determination is made. A non-recurring, current income tax benefit of Euro 528,000 was recorded in the quarter and the six-month period ended 30 June 2005 in this respect (see note 6 for further details). (ii) Deferred income tax The Company recognises deferred tax assets as stated in note 2w to the Company’s consolidated financial statements for the year ended 31 December 2005. In evaluating whether it is probable or not that a deferred tax asset recognised in a specific jurisdiction may be utilised against future taxable profits to be recognised in that jurisdiction, the Company uses estimates of future taxable profits over an appropriate period of time from the balance sheet date, based on growth and profit assumptions considered to be appropriate by management. Deferred tax assets are predominantly attributable to capital allowances available to the UK subsidiary as the result of the acquisitions made by the Company in the years ended 31 December 1999 and 2000. Although such allowances may be used without any deadline, they can only be used in a given year up to 25% of the outstanding balance at the beginning of that year. At 31 December 2005, considering both the recent history of tax profits made by the UK subsidiary in the years ended 31 December 2003 to 2005 inclusively, and the projected tax profits to be made in the coming years, management considered it was appropriate to recognize a deferred tax asset corresponding to the amount of capital allowances the Company projected to use over the next four years: this resulted in the recognition of a deferred tax asset amounting to a total of Euro 5,695,000 at that date. At 30 June 2006, the recognition of a deferred tax asset corresponding to the amount of capital allowances the Company projected to use over the period ending 30 June 2010 to offset taxable profit to be made by its UK-based subsidiary resulted in the recognition of a deferred tax asset amounting to a total of Euro 4,681,000 at 30 June 2006, and a corresponding deferred tax charge amounting to Euro 973,000 in the six-month period ended 30 June 2006.
NOTE 5: SEGMENT REPORTING (a) Primary reporting format – by business segment The Company is engaged in only one segment of business. It is therefore not required to provide information in this respect. (b) Secondary reporting format – by geographical area The Company operates in four main geographical areas, even though the Company is managed on a worldwide basis, which are as follows: Continental Europe (including France, which is the home country of the Company), the UK, North America (USA and Canada) and Asia (notably Japan). The allocation of sales made in these geographical areas during the quarters and six-month periods ended 30 June 2006 and 2005, respectively, is as follows: Quarters ended 30 June 2006 2005
Six months to 30 June 2006 2005
Continental Europe United Kingdom North America Asia (including Japan) Other countries
595 406 2,083 954 (1)
948 358 2,765 1,118 13
1,242 888 4,536 1,754 22
1,581 734 5,804 2,066 41
Total sales
4,037
5,202
8,442
10,226
NOTE 6: INCOME TAX EXPENSE (BENEFIT) (a) Current income tax The Company recorded a current income tax benefit amounting to Euro 54,000 in the quarter ended 30 June 2006 (a benefit of Euro 527,000 in the quarter ended 30 June 2005), resulting in a current income tax benefit of Euro 26,000 in the six months to 30 June 2006 (a benefit of Euro 430,000 in the six months to 30 June 2005). The current income tax benefit recorded in the quarter ended 30 June 2005 principally related to the write-back of the balance of a provision which was recorded at the time of the acquisition of the assets and business of the Harlequin group of companies. (b) Deferred income tax The Company recorded a deferred income tax charge amounting to Euro 961,000 in the quarter ended 30 June 2006 (a benefit of Euro 859,000 in the quarter ended 30 June 2005), resulting in a deferred income tax charge of Euro 1,125,000 in the six months to 30 June 2006 (a benefit of Euro 1,145,000 in the six months to 30 June 2005). As indicated in note 4c, this deferred tax charge principally arises from the decrease in the amount of the deferred tax assets attributable to the capital allowances which the Company expects to use to offset projected taxable profit made by its UK subsidiary over a four-year period from 30 June 2006: such assets amounted to an aggregate of Euro 4,681,000 at 30 June 2006 compared with Euro 5,695,000 at 31 December 2005.
NOTE 7: EARNINGS PER SHARE (a) Basic earnings per share Basic earnings per share are calculated by dividing the profit attributable to shareholders for a period by the weighted average number of ordinary shares outstanding during that period. (i) Computation for the quarters ended 30 June
2006
2005
10,175,375 0 0 7,330
10,045,950 3,253 513 0
Weighted average number of ordinary shares for the quarters ended 30 June
10,182,705
10,049,716
(ii) Computation for the six months to 30 June
2006
2005
10,157,209 0 0 0 0 2,591 7,779 3,685
10,028,752 3,315 8,481 1,635 258 0 0 0
10,171,264
10,042,441
Issued Effect Effect Effect
Issued Effect Effect Effect Effect Effect Effect Effect
ordinary shares as at 1 April of the 8,000 shares issued on 25 May 2005 of the 6,666 shares issued on 24 June 2005 of the 23,000 shares issued on 2 June 2006
ordinary shares as at 1 January of the 4,616 shares issued on 21 February 2005 of the 12,582 shares issued on 1 March 2005 of the 8,000 shares issued on 25 May 2005 of the 6,666 shares issued on 24 June 2005 of the 3,500 shares issued on 17 February 2006 of the 14,666 shares issued on 27 March 2006 of the 23,000 shares issued on 2 June 2006
Weighted average number of ordinary shares for the six months to 30 June
(b) Diluted earnings per share Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares: share options. The calculation is performed for the share options to determine the number of shares that could have been acquired at fair value (determined as the average market price of the Company’s shares over the period for which the computation is performed) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. (i) Computation for the quarters ended 30 June
2006
2005
Weighted average number of ordinary shares for the quarters ended 30 June Adjustment for outstanding share options
10,182,705
10,049,716
80,936
134,301
10,263,641
10,184,017
Weighted average number of ordinary shares for diluted EPS computation for the quarters ended 30 June
(ii) Computation for the six months to 30 June
2006
2005
Weighted average number of ordinary shares for the six months to 30 June Adjustment for outstanding share options
10,171,264
10,042,441
91,851
135,229
10,263,115
10,177,670
Weighted average number of ordinary shares for diluted EPS computation for the six months to 30 June
NOTE 8: SHARE CAPITAL AND SHARE PREMIUM (a) Share capital A total of 41,166 share options were exercised during the six months to 30 June 2006 (see note 7 for further details). As a result, the total number of outstanding, fully paid, ordinary shares of the Company, each of par value of Euro 0.40, is 10,198,375 as at 30 June 2006. (b) Share premium The share premium amount increased by Euro 130,000 during the six months to 30 June 2006 through the net proceeds of the 41,166 share options exercised during that period (an increase of Euro 86,000 during the six months to 30 June 2005), i.e. after deduction of Euro 8,000 for operating expenses incurred in relation with the Company’s share option plans in the six months to 30 June 2006 (a deduction of Euro 8,000 also for similar expenses in the six months to 30 June 2005).
NOTE 9: CHANGE IN THE COMPOSITION OF THE COMPANY (a) Incorporation of Global Graphics Software (India) Private Limited The Company announced on 9 February 2006 its intention to set up a wholly-owned, test and quality assurance subsidiary in India and to hire approximately 20 people in the course of the current year. The incorporation process was completed in the course of June 2006 and a total of 5 people (of which 4 developers) joined the Indian subsidiary in the six months to 30 June 2006. There was no material effect on the Company’s consolidated interim financial statements for the quarter and the six-month period ended 30 June 2006 as a result of the decision to incorporate Global Graphics Software (India) Private Limited. (b) Liquidation of Global Graphics Management SA in March 2005 On 23 March 2005, the Company decided to undertake the liquidation of its wholly owned, Belgium-based subsidiary, Global Graphics Management SA. There was no material effect on the Company’s consolidated interim financial statements for the quarter and the six-month period ended 30 June 2005 as a result of this decision. Accordingly, there is no adjustment to be made to results reported for the quarter and the six-month period ended 30 June 2005 to allow a proper comparison with the results reported for the quarter and the six-month period ended 30 June 2006.
GLOBAL GRAPHICS SA AND SUBSIDIARIES PRO FORMA OPERATING PROFIT (EBITA) COMPUTATION In thousands of Euro Unaudited figures Quarters ended 30 June 2006 2005 Reported operating profit Add back (deduct): * Amortization of intangible assets - recorded in cost of sales - recorded in operating expenses * Share compensation expenses * Capitalization of development expenses as required by IAS 38 (note 4) * Amortization of capitalized development expenses (note 4)
Six months to 30 June 2006 2005
757
255
1,793
1,067
17 19 48
898 780 108
34 38 111
1,519 1,217 212
(230) 13
(63)
(401)
(63)
0
27
0
Total adjustments to reported operating profit
(133)
1,723
Pro forma operating profit Pro forma operating profit in % of sales
624 15.5%
1,978 38.0%
(191) 1,602 19.0%
2,885 3,952 38.6%
The Company provides information prepared in accordance with and required by IFRSs, but it believes that evaluating its ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures. Accordingly, the Company uses pro forma financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes. The Company’s management does not itself, nor does it suggest that investors should, consider such pro forma financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs. The Company presents such pro forma financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s results in a manner that focuses on what the Company believes to be its ongoing business operations. The Company’s management believes that the inclusion of pro forma financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company’s industry, many of which present the same or similar pro forma financial measures to investors. When the Company uses such a pro forma financial measure, it provides a reconciliation of the pro forma financial measure to the most closely applicable financial measure required by IFRSs. Investors are encouraged to review the related IFRS financial measures and the reconciliation of these pro forma financial measures to the most directly comparable IFRS financial measures as detailed above.
GLOBAL GRAPHICS SA AND SUBSIDIARIES PRO FORMA PRE-TAX PROFIT COMPUTATION In thousands of Euro, except share data in Euro Unaudited figures Quarters ended 30 June 2006 2005 Reported profit before income tax Add back (deduct): * Amortization of intangible assets - recorded in cost of sales - recorded in operating expenses * Share compensation expenses * Capitalization of development expenses as required by IAS 38 (note 4) * Amortization of capitalized development expenses (note 4) * Change in the fair value of carry-back tax assets
Six months to 30 June 2006 2005
1,121
168
2,147
935
17 19 48
898 780 108
34 38 111
1,519 1,217 212
(230) 13 (3)
(63)
(401)
(63)
0
27
0
(5)
Total adjustments to reported profit before income tax
(136)
1,718
Pro forma pre-tax profit Pro forma pre-tax profit per share
985 0.10
1,886 0.19
(6) (197) 1,950 0.19
(5) 2,880 3,815 0.38
(*) Pro forma pre-tax profit per share is computed using the weighted average number of ordinary shares outstanding during the respective periods, i.e. 10,182,705 shares and 10,049,716 shares for the quarters ended 30 June 2006 and 2005, and 10,171,264 shares and 10,042,441 shares for the six months to 30 June 2006 and 2005, respectively. The Company provides information prepared in accordance with and required by IFRSs, but it believes that evaluating its ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures. Accordingly, the Company uses pro forma financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes. The Company’s management does not itself, nor does it suggest that investors should, consider such pro forma financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs. The Company presents such pro forma financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s results in a manner that focuses on what the Company believes to be its ongoing business operations. The Company’s management believes that the inclusion of pro forma financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company’s industry, many of which present the same or similar pro forma financial measures to investors. When the Company uses such a pro forma financial measure, it provides a reconciliation of the pro forma financial measure to the most closely applicable financial measure required by IFRSs. Investors are encouraged to review the related IFRS financial measures and the reconciliation of these pro forma financial measures to the most directly comparable IFRS financial measures as detailed above.
GLOBAL GRAPHICS SA AND SUBSIDIARIES PRO FORMA NET PROFIT COMPUTATION In thousands of Euro, except share data in Euro Unaudited figures Quarters ended 30 June 2006 2005 Reported net profit Add back (deduct): * Amortization of intangible assets - recorded in cost of sales - recorded in operating expenses * Share compensation expenses * Net effect of the capitalization of development expenses (note 4) * Change in the fair value of carry-back tax assets * Tax effect of abovementioned adjustments * Non-recurring tax benefit (see note 6) Total adjustments to reported net profit Pro forma net profit Pro forma net profit per share
Six months to 30 June 2006 2005
214
1,554
1,048
2,510
17 19 48
898 780 108
34 38 111
1,519 1,217 212
(217)
(63)
(374)
(63)
(3) 66 0
(5) (17) (528)
(6) 114 0
(5) (17) (528)
(70) 144 0.01
1,173 2,727 0.27
(83) 965 0.09
2,335 4,845 0.48
(*) Pro forma pre-tax profit per share is computed using the weighted average number of ordinary shares outstanding during the respective periods, i.e. 10,182,705 shares and 10,049,716 shares for the quarters ended 30 June 2006 and 2005, and 10,171,264 shares and 10,042,441 shares for the six months to 30 June 2006 and 2005, respectively. The Company provides information prepared in accordance with and required by IFRSs, but it believes that evaluating its ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures. Accordingly, the Company uses pro forma financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes. The Company’s management does not itself, nor does it suggest that investors should, consider such pro forma financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs. The Company presents such pro forma financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company’s results in a manner that focuses on what the Company believes to be its ongoing business operations. The Company’s management believes that the inclusion of pro forma financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company’s industry, many of which present the same or similar pro forma financial measures to investors. When the Company uses such a pro forma financial measure, it provides a reconciliation of the pro forma financial measure to the most closely applicable financial measure required by IFRSs. Investors are encouraged to review the related IFRS financial measures and the reconciliation of these pro forma financial measures to the most directly comparable IFRS financial measures as detailed above.
GLOBAL GRAPHICS SA AND SUBSIDIARIES INFORMATION ON SHARE AND SHARE OPTION NUMBERS, VOTING RIGHTS AND SIGNIFICANT SHAREHOLDINGS AS AT 30 JUNE 2006 Unaudited figures SHARE AND SHARE OPTION NUMBERS * SHARE NUMBER - Shares outstanding at 1 January 2006 - Shares issued in the six months to 30 June 2006 - Shares outstanding at 30 June 2006 * SHARE OPTIONS NUMBER - Options outstanding at 1 January 2006 - Options granted in the six months to 30 June 2006 - Options that were cancelled in the six months to 30 June 2006 - Options that expired in the six months to 30 June 2006 - Options that were exercised in the six months to 30 June 2006 - Options outstanding at 30 June 2006 of which: Vested options, i.e. immediately exercisable at 30 June 2006
VOTING RIGHTS (*) * Shares with a double voting right (**) * Shares with a single voting right * Total number of voting rights attached to the Company’s shares outstanding at 30 June 2006
10,157,209 41,166 10,198,375 246,976 0 0 (6,250) (41,166) 199,560 120,564
2,999,279 7,199,096 13,197,654
SIGNIFICANT SHAREHOLDINGS * Stichting Andlinger & Co. Euro-Foundation - Number of shares held 2,959,801 - % of total outstanding issued shares 29.02% - Number of voting rights held 5,670,536 - % of total voting rights (*) 42.96% * Other shareholders - In excess of 5% of outstanding issued shares (i.e. 509,919 shares) none - In excess of 5% of outstanding voting rights (i.e. 659,883 rights) none
Notes: (*) The information on voting rights is provided with regards to voting rights relating to outstanding ordinary shares of the Company only, i.e. 10,198,375 shares at 30 June 2006. (**) The introduction of a double voting right was voted by the Company’s shareholders at their meeting held on 21 June 2002. It applied with immediate effect to any fully paid-up share held in nominative form with the Company’s share registrar for a minimum of two consecutive years, as allowed by article L.225-123 of the French Commercial Code.
