QPR SOFTWARE PLC STOCK EXCHANGE RELEASE FEBRUARY 6, 2015 AT 9:00 AM
FINANCIAL STATEMENTS BULLETIN 2014
NET SALES GROWTH ACCELERATED TOWARDS THE END OF THE YEAR, PROFITABILITY ALMOST DOUBLED FROM THE PREVIOUS YEAR
Summary full year 2014
- Net sales EUR 9,541 thousand (2013: 8,688).
-
Net sales increased 10% mainly due to an increase in software net sales.
Software net sales grew 13%. - Recurring revenues (software rentals and maintenance services) increased 7% and were 52% of total net sales (54). Net sales from software rentals increased 15%.
- Operating profit EUR 1,095 thousand (578), operating margin 11.5% of net sales (6.7).
- Cash flow from operating activities EUR 1,617 thousand (1,661).
- Profit before taxes EUR 1,065 thousand (554).
- Profit for the year EUR 890 thousand (521).
- Earnings per share EUR 0.074 (0.043).
- The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.05 per share be paid to shareholders for the financial year 2014 (2013: 0.04)
Summary fourth quarter 2014
- Net sales EUR 2,685 thousand (2,310).
- Net sales increased 16% due to a significant increase in software license and consulting services net sales. Software net sales grew 18%.
- Recurring revenues (software rentals and maintenance services) increased 8% and were 47% of total net sales (51). Net sales from software rentals increased 15%.
- Operating profit EUR 417 thousand (217), operating margin 15.5% of net sales (9.4).
- Cash flow from operating activities EUR 445 thousand (410).
- Profit before taxes EUR 409 thousand (206).
- Profit for October-December EUR 341 thousand (225).
- Earnings per share EUR 0.028 (0.019).
Business operations
QPR Software focuses on providing organizations software and professional services for operational development. Our software and services are used in over 50 countries. The Company offers its customers insight to their business operations though modeling, analysis and performance monitoring. This insight enables customers to streamline and improve business operations and to execute their strategies swiftly and effectively. The Company´s product portfolio has been strongly renewed in recent years. The new software products offer customers innovative and efficient tools to model enterprise architecture, to automatically discover any processes based on actual event data and to analyze causes for potential performance problems.
OUTLOOK
Operating environment and market outlook
The leading market research companies estimate that global IT services market demand grows in 2015 by 2-3 %, compared to 2014. The Company estimates that in its relevant markets demand for enterprise architecture modeling, measurement and process analysis software as well as related services will develop faster than the global IT services market.
Outlook for 2015
The Company estimates its net sales and operating profit in euros to increase in 2015, compared to 2014.
The further strengthened position of the Company in its home market provides a good starting point to continue organic and profitable growth. In international markets, the Company’s goal is to significantly increase sales of its innovative software products.
In 2015, investments will be mainly made in international distribution of innovative enterprise architecture modeling and process analysis software products developed by the Company. In international markets, the Company operates mainly through its resellers and puts effort in recruiting new resellers.
KEY FIGURES
|
EUR in thousands, unless otherwise indicated |
Oct-Dec 2014 | Oct-Dec 2013 |
Change, % |
Jan-Dec 2014 | Jan-Dec 2013 | Change, % |
| Net sales | 2,685 | 2,310 | 16.2 | 9,541 | 8,688 | 9.8 |
| EBITDA | 615 | 395 | 55.7 | 1,857 | 1,285 | 44.5 |
| % of net sales | 22.9 | 17.1 | 19.5 | 14.8 | ||
| Operating profit | 417 | 217 | 92.2 | 1,095 | 578 | 89.4 |
| % of net sales | 15.5 | 9.4 | 11.5 | 6.7 | ||
| Profit before tax | 409 | 206 | 98.5 | 1,065 | 554 | 92.2 |
| Profit for the period | 341 | 225 | 51.6 | 890 | 521 | 70.8 |
| % of net sales | 12.7 | 9.7 | 9.3 | 6.0 | ||
| Earnings per share, EUR | 0.028 | 0.019 | 49.7 | 0.074 | 0.043 | 72.1 |
| Equity per share, EUR | 0.257 | 0.231 | 11.1 | 0.257 | 0.231 | 11.1 |
| Cash flow from operating activities | 445 | 410 | 8.5 | 1,617 | 1,661 | -2.6 |
| Cash and cash equivalents | 1,426 | 1,365 | 4.5 | 1,426 | 1,365 | 4.5 |
| Free cash flow | 129 | 170 | -24.1 | 702 | 815 | -13.9 |
| Net borrowings | -1,426 | -1,252 | 13.9 | -1,426 | -1,252 | 13.9 |
| Gearing, % | -44.6 | -43.6 | -44.6 | -43.6 | ||
| Equity ratio, % | 44.0 | 42.5 | 44.0 | 42.5 | ||
| Return on equity, % | 44.8 | 32.4 | 29.3 | 17.8 | ||
| Return on investment, % | 54.8 | 28.7 | 35.4 | 18.3 | ||
REPORTING
The notes of this Stock Exchange Release comply with the requirements of IAS 34 ”Interim Financial Reporting.” Starting from the beginning of 2014, the Group has applied certain new or revised IFRS standards and IFRIC interpretations as described in the Consolidated Financial Statements 2013. The implementation of these new and revised requirements have not impacted the reported figures. For all other parts, the accounting principles and methods are the same as they were in the 2013 financial statements. This Stock Exchange Release is unaudited.
QPR Software’s business operations consist of software and consulting services sales. The Company reports income for products and services as follows: software license sales, software maintenance services, software rentals, and consulting services.
The Company reports the following operating segments: Direct and OEM business (software license and rental sales, maintenance and consulting services sales to direct customers and OEM customers) and Resellers (software license and rental sales, maintenance and consulting services sales through resellers and the Russian subsidiary).
REVIEW BY THE CEO
In 2014, the Company’s software net sales growth accelerated towards the end of the year and reached 13% for the full year, despite the continued challenging market situation.
In the fourth quarter, net sales from both software licenses (+54%) and software rentals (+15%) grew significantly from the previous year, while net sales from maintenance services grew slightly (+4%). The strong growth in software license net sales was attributable to excellent new sales in international business. The development in software sales shows that QPR’s software for operational development is in great demand even at economically challenging times. In the tightening competitive environment, there is an increasing demand for tools to drive profitability and operational improvement initiatives.
Also the Company’s consulting business developed positively in the latter part of the year, and net sales grew by 12% in the last quarter. Our order backlog continued to increase and our market position strengthened during late 2014, especially in the public sector.
Our target is organic and profitable growth. Thanks to our new software products and strengthening service offering, we are in an excellent position to reach this target. The biggest opportunities for software sales growth lie outside the borders of our home market Finland, and thus we are strengthening our outlays for growth in the international sales channel. Our specific focus is to strengthen the distribution network for our process analysis, enterprise architecture and process modeling software.
In 2014, our operating profit nearly doubled compared to the previous year. In 2015, we estimate our net sales and operating profit to increase further. Also in the longer term, we aim for profitable growth. Our target is an approximately 15% annual organic and profitable growth, on the average, in 2015 – 2017.
The development of our software and service offering continued as planned in 2014. During the year, we released new versions of all our software products. Furthermore, we continued to invest in developing and productizing our operational development services based on enterprise architecture. The results were visible in the strong net sales growth of these services.
Jari Jaakkola
CEO
NET SALES
Net sales in 2014 were EUR 9,541 thousand (8,688) and increased 10% from the previous year. The main driver for this increase was software business, which showed strong growth especially in license sales. Growth also in consulting net sales accelerated towards the end of the year.
In the fourth quarter, net sales were EUR 2,685 thousand (2,310) and increased 16% from the corresponding period of the previous year. The fourth quarter net sales increased mainly due to the strong increase both in the software licenses and consulting net sales.
Net sales by product group
| EUR in thousands | Oct-Dec 2014 | Oct-Dec 2013 | Change, % | Jan-Dec 2014 | Jan-Dec 2013 | Change, % |
| Software licenses | 512 | 332 | 54 | 1,470 | 1,034 | 42 |
| Software maintenance services | 772 | 742 | 4 | 3,093 | 3,021 | 2 |
| Software rentals | 494 | 430 | 15 | 1,901 | 1,656 | 15 |
| Consulting | 907 | 807 | 12 | 3,077 | 2,977 | 3 |
| Total | 2,685 | 2,310 | 16 | 9,541 | 8,688 | 10 |
Net sales by segment
| EUR in thousands | Oct-Dec 2014 | Oct-Dec 2013 | Change, % | Jan-Dec 2014 | Jan-Dec 2013 | Change, % |
| Direct and OEM business | 1,817 | 1,508 | 20 | 6,193 | 5,574 | 11 |
| Resellers | 868 | 803 | 8 | 3,348 | 3,114 | 8 |
| Total | 2,685 | 2,310 | 16 | 9,541 | 8,687 | 10 |
The economic growth was weak in most markets. On the other hand, the downturn in economy initiated operational development projects in several organizations, increasing demand for modeling, analysis and measurement software as well as related services.
QPR’s market position was strengthened thanks to its broadened offering in the international software market and also in the domestic market for operational development services. Software license sales developed positively throughout the year (+42%) and in the fourth quarter (+54%). The development was positive especially in Sweden, Turkey, Indonesia and in the United Arab Emirates.
The software maintenance services relate to contract-based customer support and software updates. The international customers represent approximately 60% and the Finnish customers approximately 40% of software maintenance service net sales. The software maintenance service net sales increased slightly in the fourth quarter and in the entire year. The software maintenance service net sales were negatively impacted by the termination of a long-term agreement by the Company’s largest maintenance customer at the end of June 2014.
Rental net sales of the Company’s software have grown strongly already for several years. The growth continued also in 2014, although the company has moved the focus in the new sales from software rentals to software. The share of software rentals continues to be large in the Company’s home market Finland. The vast majority of software rentals is based on continuing agreements signed with the customers. Net sales from software rentals grew 15%, both in the fourth quarter and in 2014. In 2015, software rental net sales growth will be negatively impacted by a slightly over EUR 0.1 million decrease on the annual rental of a significant customer from the beginning of 2015, and due to focusing new sales - more than previously - on software license sales.
Total recurring revenues (net sales from software maintenance services and software rentals) grew 8% in the fourth quarter and 7% in 2014. The share of recurring revenues was 52% (54) of total net sales in 2014.
Consulting net sales developed positively in the latter part of the year after stagnant net sales in the first half. Consulting net sales growth accelerated to 12% in the fourth quarter, especially due to the good development in process analysis and enterprise architecture based operational development services sales.
Net sales of the Direct and OEM segment grew 20% in the fourth quarter and 11% in 2014, compared to the previous year. The growth was driven by the positive development of enterprise architecture modeling and process analysis software, as well as related consulting services sales both in the fourth quarter and in 2014.
Net sales of the Resellers segment grew 8% both in the fourth quarter and in 2014. This was mainly due to an increase in software license sales. The growth was slowed down by the unfavorable business development in Russia.
FINANCIAL PERFORMANCE
Operating profit
The Group’s operating profit increased 92% in the fourth quarter, and was EUR 417 thousand (217), or 15.5% of net sales (9.4). In 2014, operating profit increased 89% and was EUR 1,095 thousand (578), or 11.5% of net sales (6.7). The Group’s operating expenses increased at a lower rate than net sales both in the fourth quarter and in 2014.
Operating profit by segment
| EUR in thousands | Oct-Dec 2014 | Oct-Dec 2013 |
Change, % |
Jan-Dec 2014 | Jan-Dec 2013 |
Change, % |
| Direct and OEM business | 350 | 216 | 62 | 842 | 536 | 57 |
| Resellers | 166 | 87 | 91 | 621 | 385 | 61 |
| Unallocated | -99 | -86 | 15 | -368 | -343 | 7 |
| Total | 417 | 217 | 92 | 1,095 | 578 | 89 |
Operating profit in the Direct and OEM segment increased from the previous year, due to growth in net sales, both in the fourth quarter and in 2014.
Operating profit in the Resellers segment increased from the previous year, mainly due to higher net sales from software licenses, both in the fourth quarter and in 2014. Operating profit for the Resellers segment includes credit losses of EUR 26 thousand (17) in the fourth quarter and EUR 96 thousand (53) in 2014.
Other items in the comprehensive income statement
Net financial expenses were EUR 30 thousand (25) in 2014. The net financial expenses included foreign exchange losses of EUR 29 thousand (15) in 2014.
Profit before taxes was EUR 1,065 thousand (554) in 2014. Income taxes were EUR 175 thousand (33) in 2014. They were partly reduced by an additional tax deduction on research and development activities, valid for years 2013 – 2014 in Finland, which the Company estimates to be able to utilize in the 2014 taxation, in line with the previous year. The growth of EUR 142 thousand in income taxes was mainly due to higher taxable income than in the previous year and due to withholding taxes from previous years charged to expense in the Swedish subsidiary.
Profit for 2014 increased 71% and was EUR 890 thousand (521). Earnings per share for 2014 were EUR 0.074 (0.043).
FINANCE AND INVESTMENTS
In 2014, cash flow from operating activities declined slightly to EUR 1,617 thousand (1,661). The decline from the previous year was mainly due to an exceptional timing of invoicing in 2013. The cash flow from operating activities for the fourth quarter increased from the previous year and was EUR 445 thousand (410). Investments totaled EUR 915 thousand (849) in 2014. More than half of the investments were made in the development of software and consulting service products.
Net change in cash and cash equivalents was EUR 65 thousand (-35) in 2014 and EUR 129 thousand in the fourth quarter (118). Cash and cash equivalents at the end of the year were EUR 1,426 thousand (1,365).
At the end of 2014, the Company had no interest-bearing liabilities. At the end of 2013, interest-bearing liabilities were EUR 113 thousand. The gearing ratio was -45% (-44). Current liabilities include received advance payments in total of EUR 1,261 thousand (1,406). Return on investment was 35% (18) in 2014 and (per annum) 55% in the fourth quarter (29).
At the end of 2014, equity ratio was 44% (43) and the consolidated shareholders’ equity was EUR 3,196 thousand (2,871). Return on equity was 29% (18) in 2014 and (per annum) 45% in the fourth quarter (32).
PRODUCT DEVELOPMENT
Product development expenses in 2014 were EUR 1,847 thousand (1,683), equal to 19% of net sales (19). Product development expenses do not include amortization of capitalized product development expenses.
Product development expenses were capitalized for a total amount of EUR 683 thousand (507) in 2014. The amortization period for capitalized product development expenses is four years. The amortization of capitalized product development expenses was EUR 396 thousand (277).
Product development employed 27 persons (27) at the end of the year, equal to 34% of the total personnel (34).
The Company develops QPR Suite product family that consists of the following software products: QPR EnterpriseArchitect, QPR Metrics, and QPR ProcessDesigner. Furthermore, the Company develops QPR ProcessAnalyzer software product that is focused on process analysis and monitoring.
In January 2014, QPR Software released QPR Suite 2014, which includes the software tools for architecture based operational development, as well as the related supporting methodology. QPR Suite 2014 is available in over 20 languages.
In January 2014, QPR Software also released a new version of the QPR ProcessAnalyzer software. Release 2014.1 brings added efficiency to the process analysis with an integrated data extraction. In addition to the most common IT systems, data can now also be extracted directly from databases used by the companies. Automated notifications and process flow animation raise the control and visualization of the process performance to a totally new level.
By developing its consulting service products, the Company aims to grow its local business in Finland and to accelerate its international software sales by offering complementary service concepts and solutions to its reseller partners.
PERSONNEL
At the end of 2014, the Group employed a total of 78 persons (79). Average number of personnel in 2014 was 81 (82) and personnel expenses totaled EUR 6,092 thousand (5,703), equal to 64% of net sales (66).
For incentive purposes, the Company has a bonus program that covers all employees. Remuneration of the top management consists of salary, fringe benefits and a possible annual bonus based on net sales and operating profit performance. More information on incentive plans can be found in the Annual Report 2013 (www.qpr.com/investors/key-figures-and-reports.htm ).
SHARES AND SHAREHOLDERS
| Trading of shares | Jan-Dec 2014 | Jan-Dec 2013 | Change, % |
| Shares traded, pcs | 2,828,001 | 624,427 | 353 |
| Volume, EUR | 2,751,903 | 586,842 | 369 |
| % of shares | 22.7 | 5.0 | |
| Average trading price, EUR | 0.97 | 0.94 | 4 |
| Treasury shares acquired during the year, pcs | 37,400 | 133,722 | -72 |
| Shares and market capitalization | Dec 31, 2014 | Dec 31, 2013 | Change, % |
| Total number of shares, pcs | 12,444,863 | 12,444,863 | - |
| Treasury shares, pcs | 457,009 | 419,609 | 9 |
| Book counter value, EUR | 0.11 | 0.11 | - |
| Outstanding shares, pcs | 11,987,854 | 12,025,254 | 0 |
| Number of shareholders | 820 | 627 | 31 |
| Closing price, EUR | 1.01 | 0.93 | 9 |
| Market capitalization, EUR | 12,107,733 | 11,183,486 | 8 |
| Book counter value of all treasury shares, EUR | 50,271 | 46,157 | 9 |
| Total purchase value of all treasury shares, EUR | 439,307 | 395,134 | 11 |
| Treasury shares, % of all shares | 3.7 | 3.4 |
Trading of the QPR Software share grew more than five-fold in 2014, as compared to 2013. The number of shareholders increased 31% and was 820 (627) at the end of 2014.
The Annual General Meeting held on March 13, 2014 approved the Board's proposal that a per-share dividend of EUR 0.04 (0.04), a total of EUR 480 thousand (486), be paid for the financial year 2013. The dividend was paid to shareholders entered in the Company's shareholder register, maintained by Euroclear Finland Oy, on the record date of March 18, 2014. The dividend payment date was April 3, 2014.
The Annual General Meeting on March 13, 2014 authorized the Board of Directors to decide on issuing a maximum of 4,000,000 new shares, to decide on conveyance of a maximum of 700,000 own shares held by the Company, and to decide on acquiring a maximum of 250,000 own shares. The authorizations are in force until the next Annual General Meeting. For the time being, the Company has not used these authorizations.
OTHER EVENTS DURING THE REVIEW PERIOD
In February 2014, QPR Software announced that Gartner Inc., an international ICT research and consulting company, has ranked QPR Software in the best tier used in its report “MarketScope for Enterprise Business Process Analysis”, with the rating “Positive”. According to Gartner, the potential customers should consider vendors in this category as a viable choice for their strategic or tactical investments. Gartner evaluated the vendors on the following criteria: product/service, overall viability, market understanding, offering (product) strategy, business model, innovation, and customer experience, with the latter two having a highest weighting.
In March, QPR Software and Tieto, the largest Nordic IT services company, signed a cooperation agreement with the aim to offer customers business driven enterprise architecture services for gaining substantial business benefits. QPR Software provides Tieto with QPR EnterpriseArchitect software together with the methodology for business driven enterprise architecture. The agreement enables QPR Software, together with Tieto, to offer customers more comprehensive services, increasing the business benefits that can be gained from enterprise architecture work.
In March, QPR Software and Affecto Finland Oy signed a cooperation agreement, through which Affecto can offer its customers data driven approach for analysis and improvement of processes. QPR Software provides Affecto with the automated business process discovery (ABPD) software, QPR ProcessAnalyzer. The agreement enables QPR Software, together with Affecto, to offer customers a way to bring transparency to processes and see the process changes, and thereby be able to have a direct impact on their business performance.
In April, QPR Software’s corporate performance management tool QPR Metrics was rated as “Facilitators” in Nucleus Research Corporate Performance Management Technology Value Matrix. Nucleus Research defines Facilitators as companies offering an application that is intuitive and easy to use, driving rapid adoption with limited training requirements.
In June, QPR Software announced at the IRMUK Business Process Management Conference in London the release of its new enhanced 2014.1 template supporting QPR Software’s enterprise architecture based operational development methodology. The template contains a very pragmatic and business oriented framework linking strategy to business capabilities and their practical realization by organization, processes, and ICT.
In August, QPR Software announced that it will deliver a process intelligence solution to a leading European manufacturing group with operations in approximately 30 countries and production in almost ten countries. The solution, to be delivered as a cloud service, will enable the customer to analyze, improve and monitor their global order-to-cash process by using the data that exist in their enterprise resource planning system (SAP). The solution helps this customer to obtain economies of scale in production units - while facing a market that requires ever-increasing flexibility in deliveries. QPR Software estimates the value of the software and service deliveries to exceed EUR 0.2 million over the next three years.
In August, QPR Software announced that Erdemir Group, one of the largest steel producers in the world and one of the largest industrial enterprises in Turkey, has selected QPR Software and Ironman Consulting, QPR’s reseller in Turkey, as solution providers for its strategic and individual performance management. Ironman is one of the leading strategic management consulting firms in Turkey. The solution will be powered by QPR Metrics performance management software that enables fast implementation and offers a flexible web based environment for performance management. In December, QPR announced that Erdemir Group expands the use of the solution to all its office employees.
In September, QPR Software announced plans to transfer its Russian customer and reseller support functions from Moscow to Helsinki, from where the reseller support to all other countries is already centrally delivered. Russia represents approximately 2% of QPR Software’s net sales. The transfer became effective as of January 2015 and is expected to reduce costs slightly, but its impact on financial results is not significant.
In September, QPR Software announced the release of its enhanced template 2014.2 for enterprise architecture based operational development methodology. The new version has been enhanced with support for enterprise risk management, application portfolio management and human resource management functions, as well as reports helping the users to distill the relevant knowledge to business or function specific needs and situations. QPR Software’s operational development methodology (QPR ODM) already serves a broad range of customers with different needs and situations, such as mergers and acquisitions, business continuity, risk analysis, or technology renewal.
In October, Gartner Inc., the world’s leading IT research and consulting company, published its report “Magic Quadrant for Enterprise Architecture Tools”, featuring QPR Software as a new vendor. The decision to add QPR Software to the Magic Quadrant was based on Gartner’s evaluation of the QPR EnterpriseArchitect flagship product. In total the report evaluates 13 different providers.
In November, the Company announced that it has won the tender for the enterprise architecture training service for the Finnish public sector. The tender was organized by the Government ICT Center Valtori. QPR Software will train the public sector operational development specialists and enterprise architects until 2018.
In December, QPR Software announced that it has won the tender for the enterprise architecture consulting provider of the Finnish Transport Agency. The agreement period started on December 4, 2014 and runs until December 3, 2016. The estimated total value of this consultancy is approximately EUR 0.3 million.
In December, Finnish Senate Properties selected QPR as the provider for enterprise architecture consulting. The agreement period is six months, starting as of December 2014. After the first agreement period, the agreement can be renewed in six-month periods during 2015 – 2017. The estimated total value of this consultancy in 2014 – 2017 (initial agreement period+ possible renewals) is slightly over EUR 0.3 million.
A summary of the Company’s disclosure policy has been published on the Company’s web site, at www.qpr.com/investors/key-figures-and-reports.htm .
GOVERNANCE
The Annual General Meeting on March 13, 2014 resolved that the Board of Directors consists of four (4) ordinary members. The AGM re-elected the following members to the Board of Directors: Kirsi Eräkangas, Jyrki Kontio, Vesa-Pekka Leskinen and Topi Piela. In its meeting following the Annual General Meeting, the Board of Directors elected Vesa-Pekka Leskinen as Chairman of the Board.
The AGM elected KPMG Oy Ab, Authorized Public Accountants, to continue as QPR Software Plc's auditors, with Kirsi Jantunen, Authorized Public Accountant, acting as principal auditor.
The AGM authorized the Board to decide on issuing new shares, conveying own shares held by the Company, and repurchasing the Company’s own shares.
All authorizations of the Board and other decisions made by the Annual General Meeting are available in their entirety on the stock exchange release published by the Company on March 13, 2014 and available on the investors section of the Company's web site, www.qpr.com/investors/stock-exchange-releases.htm .
FINANCIAL TARGETS
As part of its annual planning process, QPR Software has updated its strategy and the financial targets for years 2015 – 2017. The Company continues to aim for an approximately 15% annual profitable growth by investing in the international distribution of its new software products (QPR EnterpriseArchitect and QPR ProcessAnalyzer) and in the expansion of its consulting business focused on operational development of the customer organizations in its home market in Finland.
SHORT-TERM RISKS AND UNCERTAINTIES
Internal control and risk management in QPR Software aims to ensure that the Company operates efficiently and effectively, distributes reliable information, complies with regulations and operational principles, reaches its strategic goals, reacts to changes in the market and operational environment, and ensures the continuity of its business.
QPR Software has identified the following four groups of risks related to its operations: risks related to business operations (country, customer, service delivery, personnel, legal and financial risks as well as risks related to the Company’s resellers), risks related to information and products (QPR products, IPR, data security), risks related to financing (foreign currency, bad debt), and risks related to new businesses (growth of new business, product development investments in new business). The Company has an insurance policy for property, operational and liability risks. The Company monitors country, customer, personnel and finance risks also in the Russian subsidiary OOO QPR Software.
Financial risks include reasonable credit risk concerning individual business partners, which is characteristic to any international business. QPR Software seeks to limit this credit risk by continuous monitoring of standard payment terms, receivables and credit limits. In 2014, EUR 96 thousand of credit losses were recorded (53). The amount of trade receivables over 60 days past due was 6% (5) of total trade receivables at the end of 2104.
Approximately 81% of Group’s trade receivables were in euro at the end of the year. At the end of 2014, the Company had not hedged its non-euro trade receivables.
No significant changes have taken place in the Company’s short-term risks and uncertainties during the year. Risks and risk management related to the Company’s business are further described in the Annual Report 2013, pages 13-15 (www.qpr.com/investors/key-figures-and-reports.htm ).
THE BOARD OF DIRECTORS’ PROPOSAL ON DIVIDEND
The Board of Directors proposes to the Annual General Meeting on March 12, 2015 that a dividend of EUR 0.05 per share be paid to shareholders for the financial year 2014, totaling EUR 599 thousand. The dividend shall be paid to a shareholder that has been entered into the Company’s shareholder register on the record date of the dividend payment on March 16, 2015. The Board of Directors proposes to the AGM that the dividend be paid on April 8, 2015.
The dividend proposed by the Board for the financial year 2014 represents 37% of the consolidated cash flow from operations in 2014.
The distributable funds of the parent company were EUR 1,282 thousand at December 31, 2014. No material changes have taken place in the Company’s financial position after the end of the financial year.
FINANCIAL INFORMATION
In 2015, QPR Software Plc will publish its financial information in Finnish and English as follows:
- Annual Report 2014: Thursday, February 19, 2015.
- Interim Report 1 – 3/2015: Thursday, April 23, 2015.
- Interim Report 1 – 6/2015: Thursday, July 30, 2015.
- Interim Report 1 – 9/2015: Thursday, October 22, 2015.
The Annual General Meeting will be held on Thursday, March 12, 2015.
QPR SOFTWARE PLC
BOARD OF DIRECTORS
Further information:
Jari Jaakkola, CEO
Tel. +358 (0) 40 5026 397
DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Main Media
Neither this press release nor any copy of it may be taken, transmitted or distributed, directly or indirectly, in or into the United States of America or its territories or possessions.
| CONSOLIDATED COMPREHENSIVE INCOME STATEMENT | ||||||
|
EUR in thousands, unless otherwise indicated |
Oct-Dec 2014 | Oct-Dec 2013 | Change, % | Jan-Dec 2014 | Jan-Sep 2013 | Change, % |
| Net sales | 2,685 | 2,310 | 16 | 9,541 | 8,688 | 10 |
| Other operating income | 0 | - | 26 | 32 | -19 | |
| Materials and services | 94 | 86 | 9 | 337 | 292 | 15 |
| Employee benefit expenses | 1,640 | 1,482 | 11 | 6,092 | 5,703 | 7 |
| Other operating expenses | 336 | 348 | -3 | 1,281 | 1,439 | -11 |
| EBITDA | 615 | 395 | 56 | 1,857 | 1,285 | 44 |
| Depreciation and amortization | 198 | 178 | 11 | 761 | 707 | 8 |
| Operating profit | 417 | 217 | 92 | 1,095 | 578 | 89 |
| Financial income and expenses | -8 | -11 | -30 | -25 | 20 | |
| Profit before tax | 409 | 206 | 99 | 1,065 | 554 | 92 |
| Income taxes | -68 | 19 | -175 | -33 | 430 | |
| Profit for the period | 341 | 225 | 52 | 890 | 521 | 71 |
| Earnings per share, EUR (basic and diluted) | 0.028 | 0.019 | 50 | 0.074 | 0.043 | 72 |
| Consolidated statement of comprehensive income: | ||||||
| Profit for the period | 341 | 225 | 890 | 521 | ||
| Other items in comprehensive income that | ||||||
| may be reclassified subsequently to | ||||||
| profit or loss: | ||||||
| Exchange differences on | ||||||
| translating foreign operations | -29 | -4 | -40 | -12 | ||
| Income tax relating to components of | ||||||
| other comprehensive income | - | - | - | - | ||
| Total comprehensive income | 312 | 221 | 850 | 509 | ||
| CONSOLIDATED BALANCE SHEET | |||
| EUR in thousands | Dec 31,2014 | Dec 31, 2013 | Change, % |
| Assets | |||
| Non-current assets: | |||
| Intangible assets | 1,815 | 1,628 | 11 |
| Goodwill | 513 | 513 | 0 |
| Tangible assets | 175 | 207 | -16 |
| Other non-current assets | 27 | 82 | -67 |
| Total non-current assets | 2,529 | 2,431 | 4 |
| Current assets: | |||
| Trade and other receivables | 4,572 | 4,365 | 5 |
| Cash and cash equivalents | 1,426 | 1,365 | 4 |
| Total current assets | 5,998 | 5,730 | 5 |
| Total assets | 8,527 | 8,161 | 4 |
| Equity and liabilities | |||
| Equity: | |||
| Share capital | 1,359 | 1,359 | 0 |
| Other funds | 21 | 21 | 0 |
| Treasury shares | -439 | -395 | 11 |
| Translation differences | -221 | -181 | 22 |
| Invested non-restricted equity fund | 5 | 5 | 0 |
| Retained earnings | 2,471 | 2,061 | 20 |
| Equity attributable to shareholders of the parent company | 3,196 | 2,871 | 11 |
| Non-current liabilities: | |||
| Non-interest-bearing liabilities | 25 | 42 | -40 |
| Total non-current liabilities | 25 | 42 | -40 |
| Current liabilities: | |||
| Borrowings | - | 113 | -100 |
| Advances received | 1,261 | 1,406 | -10 |
| Accrued expenses and prepaid income | 3,223 | 2,976 | 8 |
| Trade and other payables | 822 | 753 | 9 |
| Total current liabilities | 5,305 | 5,248 | 1 |
| Total liabilities | 5,331 | 5,290 | 1 |
| Total equity and liabilities | 8,527 | 8,161 | 4 |
| CONSOLIDATED CASH FLOW STATEMENT | ||||||
| EUR in thousands | Oct-Dec 2014 | Oct-Dec 2013 | Change, % | Jan-Dec 2014 | Jan-Dec 2013 | Change, % |
| Cash flow from operating activities: | ||||||
| Profit for the period | 338 | 225 | 50 | 887 | 521 | 70 |
| Adjustments to the profit | 173 | 161 | 7 | 725 | 700 | 4 |
| Working capital changes | -57 | -23 | 148 | 25 | 573 | -96 |
| Interest and other financial expenses paid | -2 | -4 | -50 | -13 | -30 | -57 |
| Interest and other financial income received | 1 | 1 | 0 | 3 | 8 | -63 |
| Income taxes paid | -8 | 50 | -10 | -111 | -91 | |
| Net cash from operating activities | 445 | 410 | 9 | 1,617 | 1,661 | -3 |
| Cash flow from investing activities: | ||||||
| Acquired subsidiaries | - | - | - | -3 | -100 | |
| Purchases of tangible and intangible assets | -316 | -240 | 32 | -915 | -846 | 8 |
| Net cash used in investing activities | -316 | -240 | 32 | -915 | -849 | 8 |
| Cash flow from financing activities: | ||||||
| Repayments of long-term borrowings | - | - | -113 | -226 | -50 | |
| Repurchase of shares | - | -52 | -100 | -44 | -134 | -67 |
| Dividends paid | - | - | -480 | -486 | -1 | |
| Net cash used in financing activities | 0 | -52 | -100 | -637 | -847 | -25 |
| Net change in cash and cash equivalents | 129 | 118 | 9 | 65 | -35 | |
| Cash and cash equivalents at the beginning of the period | 1,303 | 1,248 | 4 | 1,365 | 1,404 | -3 |
| Effects of exchange rate changes on cash and cash equivalents | -6 | -1 | -4 | -4 | ||
|
Cash and cash equivalents at the end of the period |
1,426 | 1,365 | 4 | 1,426 | 1,365 | 4 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||
| EUR in thousands | Share capital | Other funds | Translation differences | Treasury shares | Invested non-restricted equity fund | Retained earnings | Total |
| Equity Jan 1, 2013 | 1,359 | 21 | -169 | -261 | 5 | 2,026 | 2,981 |
| Dividends paid | -486 | -486 | |||||
| Repurchase of shares | -134 | -134 | |||||
| Comprehensive income | -12 | 521 | 509 | ||||
| Equity Dec 31, 2013 | 1,359 | 21 | -181 | -395 | 5 | 2,061 | 2,871 |
| Dividends paid | -480 | -480 | |||||
| Repurchase of shares | -44 | -44 | |||||
| Comprehensive income | -40 | 890 | 850 | ||||
| Equity Dec 31, 2014 | 1,359 | 21 | -221 | -439 | 5 | 2,471 | 3,196 |
NOTES TO INTERIM FINANCIAL STATEMENTS
ACCOUNTING PRICIPLES
The notes of this Stock Exchange Release comply with requirements of IAS 34 ”Interim Financial Reporting.” Starting from the beginning of 2014, the Group has applied certain new or revised IFRS standards and IFRIC interpretations as described in the Consolidated Financial Statements 2013. The implementation of these new and revised requirements have not impacted the reported figures. For all other parts, the accounting principles and methods are the same as they were in the 2013 financial statements.
When preparing the consolidated financial statements, management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated.
All amounts presented in this Stock Exchange Release are consolidated figures, unless otherwise noted. The amounts that are presented are rounded, so the sum of individual figures may differ from the sum reported. This Stock Exchange Release is unaudited.
During the review period, the Group did not have any financial instruments measured at fair value.
| INTANGIBLE AND TANGIBLE ASSETS | ||
| EUR in thousands | Jan-Dec ,2014 | Jan-Dec, 2013 |
| Increase in intangible assets: | ||
| Acquisition cost Jan 1 | 6,112 | 5,428 |
| Increase | 538 | 687 |
| Increase in tangible assets: | ||
| Acquisition cost Jan 1 | 1,351 | 1,234 |
| Increase | 74 | 159 |
| CHANGE IN INTEREST-BEARING LIABILITIES | ||
| EUR in thousands | Jan-Dec, 2014 | Jan-Dec,2013 |
| Interest-bearing liabilities Jan 1 | 113 | 339 |
| Repayments | -113 | -226 |
|
Interest-bearing liabilities Sep 30/ Dec 31 |
- | 113 |
| PLEDGES AND COMMITMENTS | |||
| EUR in thousands | Dec 31, 2014 | Dec 31, 2013 | Change, % |
| Business mortgages (held by the Company) | 1,391 | 1,394 | 0 |
| Minimum lease payments based on lease | |||
| agreements | |||
| Maturing in less than one year | 304 | 163 | 87 |
| Maturing in 1-5 years | 436 | 38 | 1047 |
| Total | 740 | 201 | 268 |
| Total pledges and commitments | 2,131 | 1,595 | 34 |
| CONSOLIDATED INCOME STATEMENT BY QUARTER | ||||||||
| EUR in thousands | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | Q2 2013 | Q1 2013 |
| Net sales | 2,685 | 2,167 | 2,465 | 2,225 | 2,310 | 1,961 | 2,335 | 2,082 |
| Other operating income | - | 1 | 10 | 15 | - | - | - | 32 |
| Materials and services | 94 | 66 | 92 | 85 | 86 | 72 | 73 | 61 |
| Employee benefit expenses | 1,640 | 1,370 | 1,557 | 1,525 | 1,482 | 1,209 | 1,484 | 1,528 |
| Other operating expenses | 336 | 316 | 304 | 325 | 348 | 327 | 382 | 383 |
| EBITDA | 615 | 416 | 522 | 305 | 395 | 353 | 396 | 142 |
| Depreciation and amortization | 198 | 189 | 178 | 197 | 178 | 183 | 174 | 173 |
| Operating profit | 417 | 227 | 344 | 107 | 217 | 171 | 222 | -31 |
| Financial income and | ||||||||
| expenses | -8 | -5 | -12 | -4 | -11 | -3 | 0 | -11 |
| Profit before tax | 409 | 222 | 332 | 103 | 206 | 167 | 222 | -42 |
| Income taxes | -68 | -54 | -43 | -10 | 19 | -25 | -33 | 6 |
| Profit for the period | 341 | 167 | 288 | 93 | 225 | 142 | 189 | -36 |
| SEGMENT INFORMATION | |||||||
| EUR in thousands | Oct-Dec 2014 | Oct-Dec 2013 | Change, % | Jan-Dec 2014 | Jan-Dec 2013 | Change, % | |
| Net sales | |||||||
| Direct and OEM business | 1,817 | 1,508 | 20 | 6,193 | 5,574 | 11 | |
| Resellers | 868 | 803 | 8 | 3,348 | 3,114 | 8 | |
| Total | 2,685 | 2,310 | 16 | 9,541 | 8,688 | 10 | |
| EBITDA | |||||||
| Direct and OEM business | 452 | 314 | 44 | 1,249 | 921 | 36 | |
| Resellers | 262 | 166 | 58 | 975 | 708 | 38 | |
| Unallocated | -99 | -86 | 15 | -368 | -343 | 7 | |
| Total | 615 | 395 | 56 | 1,857 | 1,285 | 44 | |
| Operating profit | |||||||
| Direct and OEM business | 350 | 216 | 62 | 842 | 536 | 57 | |
| Resellers | 166 | 87 | 91 | 621 | 385 | 61 | |
| Unallocated | -99 | -86 | 15 | -368 | -343 | 7 | |
| Total | 417 | 217 | 92 | 1,095 | 578 | 89 | |
| Financial income and expenses | -8 | -11 | -27 | -30 | -25 | 20 | |
| Income taxes | -68 | 19 | -175 | -33 | 430 | ||
| Profit for the period | 341 | 225 | 52 | 890 | 521 | 71 | |
| Other information: | |||||||
| Depreciation and amortization | |||||||
| Direct and OEM business | 102 | 98 | 4 | 407 | 384 | 6 | |
| Resellers | 96 | 80 | 20 | 354 | 323 | 10 | |
| Total | 198 | 178 | 11 | 761 | 707 | 8 | |
| GROUP KEY FIGURES | ||
|
EUR in thousands, unless otherwise indicated |
Jan-Dec or Dec 31, 2014 |
Jan-Dec or Dec 31, 2013 |
| Net sales | 9,541 | 8,688 |
| Net sales growth, % | 9.8 | -6.8 |
| EBITDA | 1,857 | 1,285 |
| % of net sales | 19.5 | 14.8 |
| Operating profit | 1,095 | 578 |
| % of net sales | 11.5 | 6.7 |
| Profit before tax | 1,065 | 554 |
| % of net sales | 11.2 | 6.4 |
| Profit for the period | 890 | 521 |
| % of net sales | 9.3 | 6.0 |
| Return on equity (per annum), % | 29.3 | 17.8 |
| Return on investment (per annum), % | 35.4 | 18.3 |
| Borrowings | - | 113 |
| Cash and cash equivalents | 1,426 | 1,365 |
| Free cash flow | 702 | 815 |
| Net borrowings | -1,426 | -1,252 |
| Equity | 3,196 | 2,871 |
| Gearing, % | -44.6 | -43.6 |
| Equity ratio, % | 44.0 | 42.5 |
| Total balance sheet | 8,527 | 8,161 |
| Investments in non-current assets | 915 | 846 |
| % of net sales | 9.6 | 9.7 |
| Product development expenses | 1,847 | 1,683 |
| % of net sales | 19.4 | 19.4 |
| Average number of personnel | 81 | 82 |
| Personnel at the beginning of period | 79 | 81 |
| Personnel at the end of period | 78 | 79 |
| Earnings per share, EUR | 0.074 | 0.043 |
| Equity per share, EUR | 0.257 | 0.231 |
QPR – Quality. Processes. Results.
QPR Software provides insight to business operations for successful strategy execution and operations improvement. QPR offers a comprehensive software suite and consulting services for modeling, analyzing, designing and measuring operations, supporting agile business transformation. We are a global thought leader in business driven enterprise architecture and in process intelligence. QPR Software Plc was founded in 1991 and has its headquarters in Helsinki, Finland. As a publicly listed company, our shares are quoted on the NASDAQ OMX Helsinki Ltd. www.qpr.com