SSH COMMUNICATIONS SECURITY CORP STOCK EXCHANGE RELEASE February 13, 2007, at 9:00 a.m.
SSH´S FINANCIAL STATEMENT BULLETIN, 1 JANUARY - 31 DECEMBER 2006
- Net sales for 2006 totaled EUR 9.5 million, up 1.7 percent year on year (EUR
9.3 million in 2005).
- Operating loss for 2006 amounted to EUR -0.9 million (EUR -2.6 million in
2005), loss EUR -0.2 million (EUR -2.0 million).
- Fourth-quarter operating profit was EUR 0.5 million and net profit was EUR 0.7
million.
- The largest license orders were won from two leading finance sector companies
and a US retail chain, among the largest in the world. The new retail sector
customer has also issued a new significant expansion order of 0.9 MEUR in early
2007.
KEY FIGURES
10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
Net sales (MEUR) 3.3 4.1 9.5 9.3
Net sales, change % -19.2 115.8 1.7 13.0
Operating profit/loss (MEUR) 0.5 1.0 -0.9 -2.6
% of net sales 15.2 25.3 -9.7 -28.5
Operating profit/loss, -51.5 160.7 65.2 58.7
change %
Profit/loss 0.7 1.0 -0.2 -2.0
% of net sales 20.4 24.8 -2.4 -21.7
Number of employees 80 75 80 75
at period end
Earnings per share (EUR) -0.01 -0.07
Shareholders' equity per 0.64 0.90
share (EUR)
SSH Communications Security is a world-leading provider of enterprise security
solutions and end-to-end communications security, and the original developer of
the Secure Shell protocol. The company's SSH Tectia solution addresses the most
critical needs of large enterprises, financial institutions and government
agencies.
NET SALES
Consolidated net sales for 2006 totaled EUR 9.5 million (EUR 9.3 million), up by
1.7 percent, year on year. Net sales for the fourth quarter totaled EUR 3.3
million.
The majority of SSH's invoicing is based on the U.S. dollar. During the reporting
period, the U.S. dollar's average exchange rate was approximately 0.9 percent
weaker than during the same period for 2005.
RESULTS AND EXPENSES
Operating loss for 2006 amounted to EUR -0.9 million (2005: a loss of EUR -2.6
million), with net loss totaling EUR -0.2 million (a loss of EUR -2.0 million).
Operating profit for the fourth quarter totaled EUR 0.5 million (a profit of EUR
1.0 million), with net profit amounting to EUR 0.7 million (a profit of EUR 1.0
million).
SSH's fixed costs reported for the period continued their year-on-year decline,
as evidenced by the reduction of approximately EUR 1.4 million in fixed costs
from the January-December 2005 level. Payroll costs were cut by 11 percent and
other operating expenses by 13 percent.
Research and development expenses for the report period totaled EUR 3.4 million
(EUR 3.4 million), while sales and marketing expenses came to EUR 5.7 million
(EUR 6.7 million) and administrative expenses EUR 1.6 million (EUR 1.9 million).
BALANCE SHEET AND FINANCIAL POSITION
The financial position of SSH remained at a healthy level during the report
period even after the EUR 7.1 million return of capital to the shareholders. The
consolidated balance sheet total on December 31, 2006 stood at EUR 21.3 million
(EUR 29.1 million), of which liquid assets accounted for EUR 16.7 million (EUR
22.5 million), or 78.3 percent of the balance sheet total. The company has no
long-term liabilities.
On December 31, 2006, gearing, or the ratio of net liabilities to shareholders'
equity, was -92.9 (-88.4) and the equity ratio stood at 92.5 percent (92.8
percent).
The reported gross capital expenditure for the period totaled EUR 0.1 million
(EUR 0.1 million). Reported financial income came mainly from capital gains on
fund shares. Financial income and expenses totaled EUR +0.7 million, compared to
EUR +0.6 million a year ago.
During 2006, SSH reported a positive cash flow of EUR 0.9 million from business
operations, and investments showed a cash flow of EUR 6.5 million. Cash flow from
financing comprises the return of capital to the shareholders and totaled EUR
-7.0 million. Cash flow from operations, investments and financing resulted in
the company showing a positive total cash flow of EUR 0.4 million during the
period.
MARKET DEVELOPMENTS
Legislative reforms concerning data confidentiality and secure data communication
continue causing positive near- and long-term effects in the markets of our
products in the United States, Japan and Europe. New and existing data security
risks, continuously evolving regulations, security standards and models continue
to create new needs, to which we can respond with our versatile product
offerings.
Such regulations include, for instance, the Sarbanes-Oxley Act (SOX), Gramm-Leach-
Bliley Act, HIPAA, as well as the PCI standards of the major credit card
companies. These regulations drive our customers to implement security upgrade
projects in their IT infrastructure against internal and external threats. In
practice this means audit rounds that trigger technical projects, with execution
in phases over a long time.
The new tighter data security regulations now cause customers to re-assess the
risks and hidden costs of deploying non-commercial software for security, driving
many customers to start and/or increase phase-by-phase migration programs to
deploy fully commercially supported products, such as SSH Tectia.
SSH is confident that legislative reforms, new data security standards, as well
as many industry and company level data security development programs will
continue to drive demand favorably for SSH Tectia.
SALES PERFORMANCE
SSH'S NET SALES
EUR million 10-12/ 7-9/ 4-6/ 1-3/ 1-12/ 10-12/ 1-12/
2006 2006 2006 2006 2006 2005 2005
BY SEGMENT
AMER 2.0 1.1 1.4 1.2 5.7 3.3 6.8
APAC 0.2 0.3 0.3 0.2 0.9 0.1 0.7
EROW 1.2 0.4 0.6 0.6 2.8 0.7 1.8
SSH Group total 3.3 1.8 2.3 2.0 9.5 4.1 9.3
BY OPERATION
License Sales 2.4 0.8 1.4 1.2 5.8 3.5 6.9
Maintenance 0.9 0.9 0.9 0.9 3.6 0.6 2.4
Total 3.3 1.8 2.3 2.0 9.5 4.1 9.3
For a system-level IT product, such as SSH Tectia, the sales process is often
long. With major customers, the timing of large orders will cause fluctuations in
sales from quarter to quarter.
The Americas, the Asia Pacific region, and the 'Europe and Rest of the World'
market area accounted for 61 percent (73 percent), 10 percent (8 percent) and 30
percent (19 percent) of reported net sales, respectively.
During the report period, SSH concluded 8 new license agreements that were worth
more than EUR 100,000 each. The ten largest customers accounted for 34 percent of
reported net sales, with the largest single customer accounting for approximately
6 percent.
PRODUCTS AND MARKETING
During the report period, SSH focused its sales and marketing efforts on large
enterprises, financial institutions, and government agencies in the U.S., Europe,
and Asia, in line with its long-term strategy. The company continued also
developing its partner network in the same focus markets.
The main themes of marketing were the company's new Tectia product for the IBM
mainframe environment, and the new expanded uses of SSH Tectia for secure,
automated file transfers in large organization's internal networks. The company
continued the development of the new third generation architecture-based
products. The company also made further development of the productisation to
provide higher value, new features and expanded uses, as well as enabling easier
purchasing for the customers.
New applications, support of all essential enterprise OS platforms including IBM
mainframes, versatile integration capabilities, and centralized management have
made SSH Tectia the most extensive integrated end-to-end communications security
solution in the market.
RESEARCH AND DEVELOPMENT
Research and development expenses for January-December totaled EUR 3.4 million
(EUR 3.4 million), the equivalent of 35.6 percent of net sales (36.8 percent). No
research and development expenses have been capitalized.
At the end of December, the company held 11 patents, and 12 were pending.
HUMAN RESOURCES AND ORGANIZATION
At the end of December the Group had 80 employees on its payroll, up by 5 persons
from the previous year, an increase of 6.7 percent.
At the end of the period, 48.8 percent of the employees worked in R&D, 37.5
percent in sales and marketing, and 13.8 percent in corporate administration.
BOARD AND AUDITORS
The Annual General Meeting (AGM) on March 21, 2006, re-elected Tapio Kallioja,
Tomi Laamanen, Timo Ritakallio and Tatu Ylönen to SSH Communications Security
Corp.'s Board of Directors, with Laamanen re-elected as chairman.
The AGM again elected to have PricewaterhouseCoopers Oy, authorized public
accountants, as the company's auditor, with Henrik Sormunen, authorized public
accountant, acting as the principal auditor.
SHARES, SHAREHOLDING AND CHANGES IN GROUP STRUCTURE
The reported trading volume of SSH Communications Security Corp. shares totaled
13,858,965 (valued at EUR 19,911,632.67). The highest quotation was EUR 2.40 and
the lowest EUR 0.88. The trade-weighted average share price for the period was
EUR 1.43, and the share closed at EUR 1.15 (December 29, 2006).
In March SSH Communications Security Corp received a notification in accordance
with the Securities Market Act 2:9, according to which the total of Assetman Oy's
(business code 0748885-4) shares in SSH Communications Security Corp has on March
17, 2006 risen above one twentieth part (1/20) of the total of all shares and
related voting rights. Assetman OY held 6.3 percent of the company´s shares at
the end of the period. There were no other substantial changes in SSH
Communications Security Corp.'s shareholding during the report period. Tatu
Ylönen and Tero Kivinen are the largest shareholders. The former holds, directly
and through his company, Tatu Ylönen Oy, 53.1 percent of the company's shares,
and Kivinen holds 6.5 percent. More information about the shareholding can be
obtained from the company´s Web site.
There were no changes in the group structure during the period.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The company's registered share capital on December 31, 2006 was EUR 852,716.85,
consisting of 28,423,895 shares. During the report period,
SSH increased its share capital three times. In total, 9,250 new
SSH shares were subscribed to under the I/1999 stock-option plan and
145,832 shares under the I/2003 stock-option plan, respectively. With these
subscriptions the company's share capital was increased by EUR
4,652.46.
The SSH Annual General Meeting of March 21, 2006 authorized the Board of
Directors to decide by March 21, 2007, to increase the share capital through a
rights issue and/or convertible bonds and/or issue share options, in such a way
that the resultant share capital may increase by a maximum of EUR 165,000. The
Board has not exercised this authorization.
The Annual General Meeting also authorized the decrease of the company's share
premium fund and the partial distribution of the funds to the shareholders, as
proposed by the Board of Directors. The payment date was July 21, 2006. The
amount distributed was EUR 0.25 per share, totaling EUR 7,073,286.50.
CORPORATE GOVERNANCE
The company complies with the corporate governance recommendations for listed
companies issued by HEX Ltd., the Central Chamber of Commerce of Finland, and the
Confederation of Finnish Industry and Employers. More information on corporate
governance is available on the company's Web site (www.ssh.com).
EVENTS AFTER THE BALANCE SHEET DATE
The company has won a significant additional order from a leading US retail
chain. The value of the new order is 0.9 MEUR and it is based on the frame
agreement signed at the end of the year.
PROSPECTS
As new data security regulations and risks continue driving our customers to
increase their investments for better data security, we expect to see new and
continued growth of the demand in all markets.
Our target markets are in different phases according to geography and industry,
enabling a good growth base for our company. We are set both technically and in
timing to a good position to utilize the trend of internal enterprise data
security, spreading from the USA and creating growing demand for our products
also in Europe and Asia. In the same way we can leverage the experience we have
gained in the finance and government sectors, when the new practices and
requirements spread to other industries.
We believe in a phased diversification of our customer base so that parallel to
strong finance sector customers, for instance, we will see new major customers in
the retail, pharmaceutical, and high technology sectors. Continuously expanding
use of the products will also generate growing software maintenance revenue for
us.
Thanks to high volume of tenders, broad customer base, and new products, the
company is in a good position to continue improving its financial results by
growing sales and profitability. In 2007 SSH aims to be a profitable company.
Due to the large size of individual orders and depending on timing of customer
projects, variation of the quarterly revenue may occur.
PROPOSAL OF THE BOARD OF DIRECTORS CONCERNING MEASURES RELATING TO THE LOSS
The board of directors proposes to the annual general meeting that no dividend be
distributed. It is proposed that the loss of the financial year shall be entered
to the shareholders' equity.
INCOME STATEMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
Net sales 3.3 4.1 9.5 9.3
Purchasing and production costs 0.0 0.0 -0.1 -0.1
Gross profit 3.3 4.1 9.4 9.2
Other operating income 0.1 0.1 0.4 0.2
Expenses
Product development -0.9 -0.8 -3.4 -3.4
Sales and -1.6 -1.9 -5.7 -6.7
marketing
Administration -0.4 -0.4 -1.6 -1.9
Operating profit/loss 0.5 1.0 -0.9 -2.6
Financial income and expenses 0.2 0.0 0.7 0.6
Profit/loss before taxes 0.7 1.0 -0.2 -2.0
Taxes 0.0 0.0 0.0 0.0
Net profit/loss for the period 0.7 1.0 -0.2 -2.0
EARNINGS PER SHARE 1-12/ 1-12/
2006 2005
Earnings per share (EUR) -0.01 -0.07
Earnings per share, diluted (EUR) -0.01 -0.07
BALANCE SHEET
EUR million 12/31/ 12/31/
2006 2005
ASSETS
Fixed and other non-current
assets
Tangible assets 0.1 0.2
Intangible assets 0.3 0.6
Deferred tax assets 0.3 0.2
Total fixed and other 0.7 1.0
non-current assets
Inventories and current assets
Short-term receivables 3.9 5.6
Short-term investments 15.0 21.1
Cash and cash equivalents 1.7 1.4
Total inventories and current 20.7 28.1
assets
Total assets 21.3 29.1
LIABILITIES AND SHAREHOLDERS'
EQUITY
Shareholders' equity 18.0 25.4
Long-term liabilities
Provisions 0.0 0.1
Long-term financial 0.0 0.0
liabilities
Total long-term liabilities 0.1 0.2
Short-term liabilities 3.3 3.5
Total liabilities and 21.3 29.1
shareholders' equity
CASH FLOW STATEMENT
EUR million 1-12/ 1-12/
2006 2005
Cash flow from business operations 0.9 -3.5
Cash flow from investments 6.5 10.9
Cash flow from financing -7.0 -8.4
Increase(+) / decrease (-) in liquid 0.4 -1.0
assets
Liquid assets at period start 1.4 2.4
Adjustment for translation difference -0.1 0.1
Liquid assets at period end 1.7 1.4
STATEMENT ON CHANGES IN
SHAREHOLDERS' EQUITY
EUR million Share Issue Fair value Transla Retained Total
capital premium reserves tion earnings
fund differe and free
nce reserves
Shareholders' 0.8 24.4 0.1 -0.8 10.8 35.4
equity
Jan. 1, 2005
Change 0.0 0.0 0.1 0.1 -10.2
Shareholders' 0.8 24.4 0.2 -0.7 0.6 25.4
equity
Dec. 31, 2005
Shareholders´ 0.8 24.4 0.2 -0.7 0.6 25.4
equity
Jan. 1, 2006
Change 0.0 -13.0 -0.1 -0.1 5.9
Net loss -0.2
Shareholders' 0.8 11.5 0.2 -0.8 6.3 18.0
equity
Dec. 31, 2006
NET SALES BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
AMER 2.0 3.3 5.7 6.8
APAC 0.2 0.1 0.9 0.7
EROW 1.2 0.7 2.8 1.8
SSH Group total 3.3 4.1 9.5 9.3
OPERATING PROFIT/LOSS BY
SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
AMER 1.2 2.2 2.9 3.5
APAC 0.0 0.1 0.4 0.2
EROW 0.6 -0.1 0.6 -0.8
Common Group expenses* -1.3 -1.2 -4.8 -5.5
SSH Group total 0.5 1.0 -0.9 -2.6
* Common Group expenses include Group administration expenses (e.g., management
and finance) and product management and R&D expenses for corporate headquarters.
KEY FIGURES AND RATIOS
1-12/ 1-12/
2006 2005
Net sales (MEUR) 9.5 9.3
Operating profit/loss (MEUR) -0.9 -2.6
Operating profit/loss, as % of net -9.7 -28.5
sales
Profit/loss before extraordinary -0.2 -2.0
items and taxes (MEUR)
Profit/loss before extraordinary -2.4 -21.8
items and taxes, as % of net sales
Profit/loss before taxes (MEUR) -0.2 -2.0
Profit/loss before taxes, as -2.4 -21.8
% of net sales
Return on investment (%) -1.0 -6.4
Return on equity (%) -1.0 -6.6
Interest-bearing net liabilities -16.7 -22.5
(MEUR)
Equity ratio (%) 92.5 92.8
Gearing (%) -92.9 -88.4
Gross capital expenditure (MEUR) 0.1 0.1
% of net sales 1.2 0.9
R&D expenses (MEUR) 3.4 3.4
% of net sales 35.6 36.8
Personnel, period average 81 83
Personnel, period end 80 75
PER-SHARE DATA
1-12/ 1-12/
2006 2005
Earnings per share, undiluted -0.01 -0.07
(EUR)
Earnings per share, diluted (EUR) -0.01 -0.07
Equity per share (EUR) 0.64 0.90
No. of shares at period end 28 424 28 269
(thousands)
Share performance (EUR)
Average price 1.43 1.23
Low 0.88 0.91
High 2.40 1.78
Share price, period end 1.15 1.23
Market capitalization, period end 32.7 34.8
(MEUR)
Volume of shares traded 13.9 11.4
(in millions)
Volume of shares traded, as 48.8 40.5
% of total
Value of shares traded, in millions 19.9 14.0
of euros
Price-to-earnings ratio (P/E) - -
CONTINGENT LIABILITIES
EUR million 12/31 12/31
2006 2005
Rental liabilities 0.2 0.2
Other contingent liabilities 0.0 0.7
Leasing commitments outside
the balance sheet
Maturing within 1 year 0.8 0.9
Maturing between 1 and 5 1.3 2.0
years
Currency derivatives (not
included in hedge accounting)
Fair value -0.0 0.0
Nominal value 0.7 6.0
FINANCIAL REPORTING
The company will hold a briefing on its interim report for equity analysts and
the media in Hotel Scandic Marski´s Neptun-cabinet, 2nd floor, address
Mannerheimintie 10, 00100 Helsinki on Tuesday, February 13, 2007, starting at
11:00 a.m.
SSH Communications Security Corp will release its next interim report and
financial statements for January 1-March 31, 2007 on April 25, 2007. Further
information will be available on the company's website in due course.
Helsinki, on February 13, 2007
SSH COMMUNICATIONS SECURITY CORP
Board of Directors
Arto Vainio
CEO
For further information, please contact:
Arto Vainio, CEO tel. +358 (0)20 500 7400
Mika Peuranen, CFO tel. +358 (0)20 500 7419
Distribution:
Helsinki Stock Exchange
The Main Media
SSH´S FINANCIAL STATEMENT BULLETIN, 1 JANUARY - 31 DECEMBER 2006
| Source: SSH Communications Security Oyj