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QSC doubles free cash flow and quadruples consolidated net income in 2010

Preliminary numbers for 2010

  • Successful transformation process: IP-based revenues rise by 11%
  • Greater profitability: Consolidated net income rises to € 24.2 million
  • Stronger financial position: Free cash flow rises to € 27.7 million

Forecast for 2011

  • Free cash flow of € 35 to € 45 million planned
  • First distribution of a dividend planned for the current fiscal year

Cologne, February 28, 2011. The development of business at Cologne-based QSC AG continued to be driven in 2010 by the company's transformation process from a network operator to a provider of ICT services. As a result of its focus on higher-margin IP-based revenues, QSC was able to significantly improve its financial position and profitability, thus enabling it to fully achieve its expectations for the 2010 fiscal year as announced throughout the year.

Revenues rose to € 422.1 million in 2010 from € 420.5 million the year before. While revenues with the classical products of a network operator, such as Call by Call and ADSL2+, declined by € 26.1 million to € 133.2 million in 2010, revenues with IP-based products and services advanced by a total of € 27.7 million to € 288.9 million. This means that in 2010 QSC was already generating 68 percent of its revenues in these forward-looking lines of business. The advances the company has made in its transformation process are illustrated by the quarter-to-quarter development of business: The share of IP-based revenues rose from 65 percent in the first quarter of 2010 to 72 percent in the fourth quarter.

The transformation into an ICT service provider as well as sustained strict cost discipline enabled QSC to further increase its EBITDA to € 78.1 million in 2010 from € 76.9 million the year before; this raised the EBITDA margin to 19 percent. As anticipated, declining depreciation expense played a major role in enabling QSC to more than double its operating profit - its EBIT - during the same period; this metric rose to € 20.9 million, compared to € 9.7 million the year before; the EBIT margin increased to 5 percent. Given its sustained and growing profitability, in 2010 the company recognized deferred taxes on losses carried forward, in accordance with IFRS, which had a positive effect of € 5.3 million on taxes. This increased net consolidated income after taxes to € 24.2 million, compared to € 5.5 million the year before; earnings per share rose to € 0.18, compared to € 0.04 in 2009.

Net liquidity stands at € 28.4 million

The company's significantly higher profitability in 2010 led to significantly higher cash flows. QSC was able to more than double free cash flow to € 27.7 million during the past fiscal year from € 12.9 million the year before. Related to this, liquid assets rose by € 5.2 million to € 46.5 million as of December 31, 2010. At the same time, QSC reduced its interest-bearing liabilities by € 22.5 million to € 18.1 million. This renewed significant reduction in debt enabled net liquidity to rise to € 28.4 million, compared to € 0.7 million as of December 31, 2009.

As a provider of ICT services, QSC was able to significantly reduce its capital expenditures during the past fiscal year: Totaling € 29.2 million, they were some 30 percent lower than the previous year's level of € 42.2 million. The share of total revenues accounted for by capital expenditures declined from 10 percent to 7 percent.

Stronger financial position and greater profitability

During the current fiscal year, QSC will continue its transformation process into an ICT services provider, and expects that this will further strengthen its profitability and financial position. The company plans to increase free cash flow to € 35 to € 45 million. In addition, QSC plans to distribute its first ever dividend for this fiscal year.

QSC Chief Executive Officer Dr. Bernd Schlobohm explains: "2010 was a successful year for QSC, as we made great progress in the transformation process. And in 2011 the focus will continue to be on evolving the company into a provider of ICT services and thus on concentrating on higher-margin IP-based revenues. Medium-term, we will be able to tap into attractive growth and profitability potential through new offerings such as Housing and Hosting, as well as an innovative Cloud Computing platform."

In € millions 2010 2009
Revenues 422.1 420.5
- IP-based 288.9 261.2
EBITDA 78.1 76.9
EBIT 20.9 9.7
Consolidated net income 24.2 5.5
Free cash flow 27.7 12.9
Net liquidity* 28.4 0.7
Liquid assets* 46.5 41.3
Capital expenditures 29.2 42.2
Workforce* 608 664

*As of December 31

Further information is available from:

QSC AG
Claudia Isringhaus
Head of Corporate Communications
Mathias-Brüggen-Str. 55
D-50829 Cologne
Fon: 0221 6698-235
Fax: 0221 6698-289
E-Mail: presse@qsc.de

Notes:
The annual report will be available for download at www.qsc.de/en/qsc-ag/investor-relations.html at March 31, 2011. This corporate news contains forward-looking statements. These forward-looking statements are based on current expectations and forecasts of future events by the management of QSC AG. Due to risks or mistaken assumptions, actual results may deviate substantially from those made in such forward-looking statements. 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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