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QSC's revenues and profitability up sharply / Preliminary numbers for 2005

  • Revenues grow by 33 percent to € 194.4 million
  • Gross profit up by 62 percent to € 50.5 million
  • Positive EBITDA advances by 81 percent to € 5.8 million
  • Revenue growth to over € 240 million planned for 2006
  • Net income breakeven threshold to be crossed by year-end 2006

Cologne, March 1, 2006. Cologne-based QSC AG sustained its strong and profitable growth in 2005, as shown by the company's consolidated financial statements, which were reported for the first time under IFRS rules. According to preliminary results, revenues for the past fiscal year rose by 33 percent to € 194.4 million, as opposed to € 145.9 million in 2004. High-margin business with Large Accounts again was responsible for particularly strong growth, with revenues rising by 55 percent to € 51.5 million according to preliminary results, as opposed to € 33.2 million the year before. Business with resellers was characterized by even stronger growth: Revenues in the Wholesale/Resellers segment were up by 65 percent to € 30.2 million in 2005, as opposed to € 18.3 million in 2004.

All segments benefited from QSC's demand-driven expansion and upgrade of its infrastructure in 2005: The company upgraded its network to a Next Generation network that is Voice over IP-capable throughout, expanded its DSL network into 40 further cities, and thus reaches a total of more than 110 cities, and began upgrading this network with ADSL2+ technology. In spite of the related expenses and higher up-front expenditures in the fast-growing Large Accounts segment, QSC succeeded again in growing its gross profit in 2005: According to preliminary results, gross profit was up significantly by 62 percent to € 50.5 million, as opposed to € 31.2 million the year before. The company's preliminary EBITDA improved by 81 percent to € 5.8 million, as opposed to € 3.2 million in the year 2004, hitting almost exactly the middle of the target corridor of between € 4 and 8 million that had been forecast in February 2005. According to preliminary results, the net loss declined in 2005 to € -18.2 million, as opposed to € -21.6 million one year earlier.

Capital investments rose by € 4.7 million to € 19.4 million in 2005 in connection with the network expansion and upgrade as well as the higher level of up-front expenditures for orders from  Large Accounts. In the same period, QSC's net liquid assets rose by € 11.8 million to € 52.1 million, as of December 31, 2005.

QSC intends to continue its strong and profitable growth in the current fiscal year. The company anticipates revenue growth to over € 240 million and an EBITDA of between € 15 and 20 million. QSC also plans to cross the profitability threshold from a net loss to a net profit by year-end. At the same time, in 2006 the company will also be pushing its demand-driven network expansion and upgrade, connecting further cities to its DSL network on the basis of existing and potential customer demand, and working together with its Wholesale partners in accelerating the upgrade of this network with ADSL2+ technology. Since the company additionally continues to anticipate strong growth in business with Large Accounts and a corresponding rise in contract-related upfront expenses, QSC is budgeting for total capital expenditures of between € 20 and 25 million in 2006.

Preliminary numbers in millions of euros20052004
Net revenues194.4145.9
Network expenses*143.9114.7
Gross profit50.531.2
Other operating expenses*44.728.0
EBITDA+5.8+3.2
Net loss-18.2-21.6
Net liquid assets on December 3152.140.3


* Exclusive of depreciation and non-cash compensation


The full annual report will be available on March 30, 2006, at www.qsc.de/en/investor_relations/index.html


Queries to:
QSC AG
Arne Thull
Investor Relations
T: +49(0)221-6698-724
F: +49(0)221-6698-009
E: invest@qsc.de


Notes:

This corporate news contains forward-looking statements pursuant to the US "Private Securities Litigation Act" of 1995. These forward-looking statements are based on current expectations and forecasts of future events by the management of QSC AG. Due to risks or mistaken assumptions, actual results may deviate substantially from those made in such forward-looking statements. The assumptions that may involve material deviations due to unforeseeable developments include, but are not limited to, the demand for our products and services, the competitive situation, the development, dissemination and technical performance of DSL technology and its prices, the development and dissemination of alternative broadband technologies and their respective prices, changes in respect of telecommunications regulation, legislation and adjudication, prices and timely availability of essential third-party services and products, the timely development of additional marketable value-added services, the ability to maintain and enlarge upon marketing and distribution agreements and to conclude new marketing and distribution agreements, the ability to obtain additional financing in the event that management´s planning targets are not attained, the punctual and full payment of outstanding debts by sales partners and resellers of QSC AG, and the availability of sufficient skilled personnel.


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