AFFECTO PLC -- INTERIM REPORT -- 29 OCTOBER 2015 at 13:00
Affecto Plc's Interim Report 1-9/2015
Group key figures
| MEUR | 7-9/15 | 7-9/14 | 1-9/15 | 1-9/14 | 2014 | last 12m |
| Net sales | 24.8 | 25.7 | 84.7 | 89.9 | 122.7 | 117.5 |
| Operational segment result | -0.7 | 2.9 | 4.3 | 6.1 | 10.0 | 8.2 |
| % of net sales | -2.9 | 11.4 | 5.0 | 6.8 | 8.2 | 7.0 |
| Operating profit | -0.7 | 2.5 | 4.3 | 4.5 | 0.8 | 0.6 |
| % of net sales | -2.9 | 9.7 | 5.0 | 5.0 | 0.7 | 0.5 |
| Profit before taxes | -0.6 | 2.3 | 4.1 | 4.0 | 0.3 | 0.4 |
| Profit for the period | -0.5 | 1.8 | 3.3 | 3.1 | -1.6 | -1.4 |
| Equity ratio, % | 59.7 | 59.2 | 59.7 | 59.2 | 54.6 | - |
| Net gearing, % | 9.4 | 14.5 | 9.4 | 14.5 | 1.8 | - |
| Earnings per share, EUR | -0.02 | 0.08 | 0.15 | 0.15 | -0.07 | -0.06 |
| Earnings per share (diluted), EUR | -0.02 | 0.08 | 0.15 | 0.15 | -0.07 | -0.06 |
| Equity per share, EUR | 2.76 | 3.11 | 2.76 | 3.11 | 2.80 | - |
CEO Juko Hakala comments:
Our Q3 net sales decreased by 3% to 24.8 MEUR (25.7 MEUR). Baltic and Finland net sales grew by 3% but net sales declined in Sweden 15 %, in Norway by 13% and in Denmark by 4%. The decrease in net sales was mainly driven by weak sales performance during earlier quarters especially in our consulting business.
The Q3 operational segment result was -0.7 MEUR (2.9 MEUR). Profitability in Baltic was excellent 17% (19%), Norway 3% (12%), Denmark 2 % (6%), Finland -2% (15%) and in Sweden -9% (-2%).
The Q3 operational segment result was affected by two major expense items. Affecto became a target of a fraud during the third quarter. The losses caused by the fraud affected our results as a non-recurring item of 1.0 MEUR. Secondly, we also concluded the personnel negotiations in Finland which resulted into a reduction of 32 employees, in relation to which we made a restructuring expense provision of approximately 1.0 MEUR in Q3/15.
The market is experiencing growing interest in new business technology areas and on the other hand we continue to see a declining trend in new orders related to traditional IT market and related skills. We were able to secure essential contracts e.g. the maintenance and operation contract of the electricity billing and invoicing system in Lithuania and the continuation of the contract with respect to the maintenance and operation of the Land Parcel Identification System in Finland. Our order intake increased from a year ago and the order backlog of 39.4 MEUR is also lower than year ago (41.1 MEUR). We continue our renewal process and build capabilities to answer the market demand also in the growth areas. We will also increase cost control measures to sharpen our focus and to enable continuous investments to focus areas.
Year 2015 net sales are estimated to be below last year’s level. Operating profit is estimated to grow in 2015.
Additional information:
CEO Juko Hakala, +358 205 777 450
Interim CFO Sami Lehtinen, +358 40 377 5915
This release is unaudited. The amounts in this report have been rounded from exact numbers.
NET SALES
Affecto's net sales in 1-9/2015 were 84.7 MEUR (1-9/2014: 89.9 MEUR). Net sales in Finland were 35.3 MEUR (36.7 MEUR), in Norway 15.6 MEUR (18.5 MEUR), in Sweden 13.4 MEUR (15.2 MEUR), in Denmark 8.1 MEUR (9.2 MEUR) and 15.4 MEUR (13.4 MEUR) in Baltic.
Net sales by reportable segments
| Net sales, MEUR | 7-9/15 | 7-9/14 | 1-9/15 | 1-9/14 | 2014 | last 12m |
| Finland | 10.7 | 10.3 | 35.3 | 36.7 | 50.6 | 49.1 |
| Norway | 4.6 | 5.3 | 15.6 | 18.5 | 25.0 | 22.0 |
| Sweden | 3.3 | 3.9 | 13.4 | 15.2 | 20.0 | 18.3 |
| Denmark | 2.5 | 2.6 | 8.1 | 9.2 | 12.0 | 11.0 |
| Baltic | 4.7 | 4.5 | 15.4 | 13.4 | 19.0 | 21.1 |
| Other | -0.9 | -0.9 | -3.0 | -3.1 | -4.0 | -3.9 |
| Group total | 24.8 | 25.7 | 84.7 | 89.9 | 122.7 | 117.5 |
In the third quarter the net sales decreased by 3%. Net sales grew by 3 % in Baltic and Finland but decreased in Sweden by 15 %, Norway by 13%, in Denmark by 4%.
Net sales of Information Management Solutions business in 1-9/2015 were 78.9 MEUR (83.4 MEUR) and net sales of Karttakeskus GIS business were 8.7 MEUR (8.9 MEUR).
PROFIT
Affecto's operating profit in 1-9/2015 was 4.3 MEUR (4.5 MEUR) and the operational segment result was 4.3 MEUR (6.1 MEUR). Operational segment result was in Finland 1.7 MEUR (3.7 MEUR), in Norway 1.2 MEUR (1.0 MEUR), in Sweden 0.2 MEUR (-0.0 MEUR), in Denmark 0.0 MEUR (0.7 MEUR) and in Baltic 3.2 MEUR (1.6 MEUR).
Operational segment result by reportable segments
|
Operational segment result, MEUR |
7-9/15 | 7-9/14 | 1-9/15 | 1-9/14 | 2014 | last 12m |
| Finland | -0.3 | 1.5 | 1.7 | 3.7 | 5.4 | 3.4 |
| Norway | 0.1 | 0.6 | 1.2 | 1.0 | 2.0 | 2.1 |
| Sweden | -0.3 | -0.1 | 0.2 | -0.0 | 0.3 | 0.5 |
| Denmark | 0.1 | 0.2 | 0.0 | 0.7 | 0.9 | 0.2 |
| Baltic | 0.8 | 0.9 | 3.2 | 1.6 | 2.9 | 4.5 |
| Other | -1.2 | -0.2 | -2.0 | -1.0 | -1.5 | -2.6 |
| Operational segment result | -0.7 |
2.9 |
4.3 |
6.1 |
10.0 | 8.2 |
| IFRS3 Amortization | - | -0.4 | - | -1.5 | -1.8 | -0.2 |
| Impairment of goodwill | - | - | - | - | -7.4 | -7.4 |
| Operating profit | -0.7 | 2.5 | 4.3 | 4.5 | 0.8 | 0.6 |
In the third quarter the operational segment result was -0.7 MEUR (2.9 MEUR). Profitability in Baltic was excellent 17% (19%), Norway 3% (12%), Denmark 2 % (6%), Finland -2% (15%) and in Sweden -9% (-2%). In Finland the profitability was impacted by the restructuring expense provision of approximately 1.0 MEUR with respect to the conclusion of the personnel negotiations. Affecto’s results were also negatively affected by the non-recurring item of 1.0 MEUR related to the fraud incident presented in the Other segment. Affecto’s operating profit was -0.7 MEUR (2.5 MEUR).
Taxes corresponding to the profit of the period have been entered as tax expense. Net profit for the period was 3.3 MEUR, while it was 3.1 MEUR last year.
FINANCE AND INVESTMENTS
At the end of the reporting period Affecto's balance sheet totaled 108.8 MEUR (12/2014: 124.8 MEUR). Equity ratio was 59.7% (12/2014: 54.6%) and net gearing was 9.4% (12/2014: 1.8%).
The financial loans were 20.5 MEUR (12/2014: 22.5 MEUR) at the end of reporting period. According to the current terms, the loan from financial institution will be due in June 2016. The company's cash and liquid assets were 14.9 MEUR (12/2014: 21.4 MEUR). The interest-bearing net debt was 5.6 MEUR (12/2014: 1.1 MEUR).
Cash flow from operating activities for the reported period was -0.4 MEUR (-1.0 MEUR) and cash flow from investing activities was -0.4 MEUR (-0.6 MEUR). Investments in tangible and intangible assets were 0.4 MEUR (0.6 MEUR).
The annual general meeting held in April decided to distribute a dividend of 3.5 MEUR (3.6 MEUR).
EMPLOYEES
The number of employees was 1018 (1015) persons at the end of the reporting period. 425 (410) employees were based in Finland, 96 (95) in Norway, 112 (133) in Sweden, 63 (66) in Denmark and 322 (311) in the Baltic countries. The average number of employees during the period was 1012 (1047).
Affecto concluded personnel negotiations in Finland with respect to Karttakeskus Oy and Affecto Finland Oy during the third quarter. As a conclusion of the employee negotiations Affecto reduced 32 positions. In relation to the conclusion of the employee negotiations Affecto made restructuring expense provision of approximately 1.0 MEUR in Q3/2015. This was split between an approximately 0.8 MEUR provision related to the employee contracts’ termination period expenses and approximately 0.2 MEUR provision covering other restructuring expenses.
BUSINESS DEVELOPMENT ACTIONS
Affecto published in February an update to its strategic direction and defined five themes to guide the development actions. Context for the strategic direction is the current, digitally transforming world. Affecto will address this with a focus on increasing value for customers and for their customers. The company will also actively develop its core business, expand to emerging new business technology areas, and further develop its people to help customers succeed.
Actions have been taken during the Spring to convert the new direction into operational changes. Evolution meetings practice with employees has been implemented in order to activate and continually involve everyone for being part of the change in line with the strategic direction. Recruitment of people with new business-technology-hybrid skills has been performed both from inside and outside Affecto. The Company has received direct positive feedback from customers on the increased focus on industry knowledge and customer value oriented solutions created in Affecto’s day-to-day services. Development of capabilities in design, user interface and usability solutions have been intensified especially in the Nordic countries.
During the first quarter, Affecto launched the Affecto Industrial growth program, focusing on developing IoT and analytics capabilities for manufacturing, technology, energy and process industries. During the third quarter Affecto has established a team of highly skilled professionals in the field of advanced analytics. The Company has been able to use prototype service to concretize the applications of the Internet of Things and digitalization of the physical world in the Company’s customers’ product development and manufacturing processes and also as a part of their product range.
A new Affecto B2C growth program has been launched during the third quarter. As Affecto’s customers are increasingly investing into developing their consumer experiences, the Company has decided to invest into building technology, design, and analytics capabilities in order to help the customers in this area. Affecto is approaching this with prototypes aimed at validating the business value potential for Affecto’s customers.
BUSINESS REVIEW BY AREAS
The group's business is managed through five country units. Finland, Norway, Sweden, Denmark and Baltic are also the reportable segments.
In 7-9/2015 net sales in Finland increased by 3% to 10.7 MEUR (10.3 MEUR). This was mainly due to increased license sales. Operational segment result was -0.3 MEUR (1.5 MEUR) and profitability was -2% (15%). The order intake increased but the order backlog remains below last year's level. The operational segment result was affected by the restructuring expense provision of approximately 1.0 MEUR with respect to the conclusion of the personnel negotiations.
In 7-9/2015 net sales of Karttakeskus GIS business, reported as part of Finland, decreased by 4% to 2.5 MEUR (2.6 MEUR). Karttakeskus has lost important contracts during the second and the third quarters and its focus area is shifting more strongly to the location applications and to the digitalization of the traditional product business.
In Finland, the Company is experiencing a growing market interest in new business technology areas and customers are interested in utilizing advanced analytics in creating new business opportunities. However, the decision cycles of the customers in the new areas are long and the projects materialize mostly as experimental pilot programs. Affecto sees a declining sales trend and increased price competition in the traditional IT market due to more agile competitors increasing their market share by increased price competition or more evolved value proposal. Therefore Affecto is investing in growth capabilities, streamlining operations and restructuring its organization and personnel structure to align with market demand.
In 7-9/2015 net sales in Norway were 4.6 MEUR (5.3 MEUR) and operational segment result was 0.1 MEUR (0.6 MEUR). Net sales decreased by 13% and profitability was 3% (12%). The weakened net sales and profitability were caused by postponed customer projects and partly due to lack of consultancy resources, which led into lower consulting revenue. The license revenue increased. The order intake weakened but the order backlog remains above last year's level. Consultancy capacity was increased near the end of the quarter.
In 7-9/2015 net sales in Sweden were 3.3 MEUR (3.9 MEUR) and operational segment result -0.3 MEUR (-0.1 MEUR). Net sales decreased by 15%. The decrease was caused by sales challenges and people churn, which led into decreased consulting revenue. The same reasons affected the profitability that was -9% (-2%). Order intake and order backlog were at last year's level. Recovery activities have been commenced including activities to align the Swedish sales activities with Affecto’s focus industries and to recruit and develop new consultant capacities to meet market demand.
In 7-9/2015 net sales in Denmark were 2.5 MEUR (2.6 MEUR) and operational segment result was 0.1 MEUR (0.2 MEUR). Net sales decreased by 4%. The profitability was 2% (6%). Significant business recovery actions including alignment of customer and industry focus are progressing. The order intake was above and order backlog is below last year's level.
In 7-9/2015 net sales in Baltic (Lithuania, Latvia, Estonia, Poland, South Africa) were 4.7 MEUR (4.5 MEUR). Operational segment result was 0.8 MEUR (0.9 MEUR). The net sales increased by 3% and profitability was at excellent level 17% (19%). The effect of the large projects that affected positively on resource utilization and profit during the previous quarters of the year decreased. The insurance business and Estonia performed well. The slow preparation of new EU funded projects still negatively impacts the public sector IT market in Lithuania. Order intake was above and order backlog is below last year's level.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, held on 8 April 2015, adopted the financial statements for 1.1.-31.12.2014 and discharged the members of the Board of Directors and the CEO from liability. Approximately 48 percent of Affecto's shares and votes were represented at the Meeting. The Annual General Meeting decided on a dividend distribution of EUR 0.16 per share for the year 2014.
Aaro Cantell, Magdalena Persson, Jukka Ruuska, Olof Sand, Tuija Soanjärvi and Lars Wahlström were elected as members of the Board of Directors. The organization meeting of the Board of Directors elected Aaro Cantell as Chairman and Olof Sand as Vice-Chairman. Authorised Public Accountants Ernst & Young Oy was elected as the auditor of the company with Mikko Järventausta, APA, as auditor in charge.
The Meeting approved the Board's proposal for appointing a Nomination Committee to prepare proposals concerning members of the Board of Directors and their remunerations for the following Annual General Meeting. The Nomination Committee will consist of the representatives of the three largest shareholders and the Chairman of the Board of Directors, acting as an expert member, if he/she is not appointed representative of a shareholder. The members representing the shareholders will be appointed by the three shareholders whose share of ownership of the shares of the company is largest on 31 October preceding the Annual General Meeting.
According to the Articles of Association, the General Meeting of Shareholders annually elects the Board of Directors by a majority decision. The term of office of the board members expires at the end of the next Annual General Meeting of Shareholders following their election. The Board appoints the CEO. The Articles of Association do not contain any special rules for changing the Articles of Association or for issuing new shares.
THE AUTHORIZATIONS GIVEN TO THE BOARD OF DIRECTORS
The complete contents of the new authorizations given by the Annual General Meeting held on 8 April 2015 have been published by stock exchange release regarding the Meetings' decisions. Key facts about the authorizations:
The Annual General Meeting authorized the Board of Directors to decide to acquire the company's own shares with distributable funds. A maximum of 2 100 000 shares may be acquired. The authorization is in force until the next Annual General Meeting.
The Annual General Meeting authorized the Board of Directors to decide to issue new shares and to convey the company's own shares held by the company in one or more tranches. The share issue may be carried out as a share issue against consideration or without consideration on terms to be determined by the Board of Directors and in relation to a share issue against consideration at a price to be determined by the Board of Directors. A maximum of 4 200 000 new shares may be issued. A maximum of 2 100 000 own shares held by the company may be conveyed. In addition, the authorization includes the right to decide on a share issue without consideration to the company itself so that the amount of own shares held by the company after the share issue is a maximum of one-tenth (1/10) of all shares in the company. The authorization is force until the next Annual General Meeting.
SHARES AND TRADING
2013 options have been listed on NASDAQ Helsinki since 11 May 2015. During the review period no shares have been subscribed with the 2013 options.
On 13 August 2015 Affecto conducted a directed share issue of 20 984 shares to the board members. The directed share issue was conducted using the treasury shares and it was based on the resolution of the Annual General Meeting according to which 60 per cent of the annual Board remuneration will be paid in company shares during August 2015.
The company has one share series and all shares have similar rights. At the end of the review period Affecto the total number of shares was 22 450 745 shares. The company held 846 235 shares in the treasury which represents approximately 3.8% of the total amount of the shares.
During the review period 1-9/2015 the highest share price was 3.84 euro, the lowest price 2.74 euro, the average price 3.31 euro and the closing price 2.79 euro. The trading volume was 2.9 million shares, corresponding to 17% (annualised) of the number of shares at the end of the period. The market value of shares was 60.3 MEUR at the end of the period excluding the treasury shares.
SHAREHOLDERS
The company had a total of 3 465 owners on 30 September 2015 and the foreign ownership was 15%. The list of the largest owners can be found on the company's web site. Information about the ownership structure and option programs is included as a separate section in the financial statements. The ownership of the board members, CEO and their controlled corporations totaled approximately 10.7%.
ASSESSMENT OF RISKS AND UNCERTAINTIES
The changes in the general economic conditions and the operating environment of customers have direct impact on Affecto's markets. The uncertain economic outlook may affect Affecto's customers negatively. Slower IT investment decision making and uncertainty on new investments with respect to new business technology solutions may have negative impact on Affecto. Affecto's order backlog has traditionally been only a few months long. Slower decision making of the customers decreases the predictability of the business and may decrease the utilization rate.
Affecto’s balance sheet includes a material amount of goodwill. Goodwill has been allocated to cash generating units. Cash generating units, to which goodwill has been allocated, are tested for impairment both annually and whenever there is an indication that the unit may be impaired. Potential impairment losses may have material effect on the reported profit and value of assets.
Affecto's success depends also on good customer relationships. Affecto has a well-diversified customer base. In 2014, the largest customer generated approximately 3% and the 10 largest customers together approximately 17% of Affecto's net sales. Although none of the customers is critically large for the whole group, there are large customers in various countries that are significant for local business in the relevant country. On the other hand, the diverse customer base may decrease the effectiveness of the sales and delivery efforts.
Affecto also needs to be seen as an interesting employer in order to recruit skilled employees. If Affecto is not seen as progressive and modern enough, the ability to recruit right employees and future builders may decrease. High people churn may create inefficiencies in the business and temporarily decrease the utilization rate.
Affecto sells third party software licenses and maintenance as part of its solutions. Typically, the license sales have the highest impact on the last month of each quarter and especially in the fourth quarter. This increases the fluctuation in net sales between quarters and increases the difficulty of accurately forecasting the quarters. Additionally, the increase of cloud services and other similar market trends may affect the license sales negatively. Affecto had license sales of approximately 9 MEUR in 2014.
Approximately 35% of Affecto's net sales are generated in Sweden and Norway, thus the development of the currencies of these countries (SEK and NOK) may have an impact on Affecto's profitability. The main part of the companies' income and costs are within the same currency, which decreases the risks.
Historically, Affecto has concentrated on the traditional IT market solutions, demand for which has moderated. However, at the same time there is growing interest in new business technology areas. There is a risk with respect to the speed of which Affecto is able to develop the new emerging areas in proportion to the traditional areas.
OTHER EVENTS
On 21 August 2015, Affecto announced that it has become a target of a fraud. The perpetrators committed an identity theft and managed to induce Affecto’s subsidiary making an unwarranted payment of approximately 1.0 MEUR. The loss of 1.0 MEUR has been booked as a non-recurring item. The company is not able to reclaim the lost amount via its insurance coverage.
EVENTS AFTER THE REVIEW PERIOD
On 7 October 2015, Affecto announced that Håvard Ellefsen has been appointed as Managing Director, Scandinavia & Partners. Mr Ellefsen served before as the Country Managing Director of Affecto in Norway.
On 28 October 2015, Affecto announced that Martti Nurminen has been appointed as the Chief Financial Officer and member of the Executive Leadership Team. Nurminen will start in his new position in February 2016 at the latest. Nurminen has a wide international experience in various financial management positions of major international companies such as Johnson Controls and IBM.
FUTURE OUTLOOK
Year 2015 net sales are estimated to be below last year’s level. Operating profit is estimated to grow in 2015.
The company does not provide exact guidance for net sales or EBIT development, as single projects and timing of license sales may have large impact on quarterly sales and profit.
Affecto Plc
Board of Directors
A briefing for analysts and media will be arranged at 14:15 at Restaurant Savoy, Eteläesplanadi 14, Helsinki.
www.affecto.com
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Financial information:
1. Consolidated income statement, consolidated comprehensive income statement, balance sheet, cash flow statement and statement of changes in equity
2. Notes
3. Key figures
1. Consolidated income statement, consolidated comprehensive income statement, balance sheet, cash flow statement and statement of changes in equity
CONSOLIDATED INCOME STATEMENT
| (1 000 EUR) | 7-9/2015 | 7-9/2014 | 1-9/2015 | 1-9/2014 | 2014 | last 12m |
| Net sales | 24 847 | 25 664 | 84 720 | 89 869 | 122 693 | 117 544 |
| Other operating income | 0 | -10 | 1 | 13 | 27 | 15 |
|
Changes in inventories of finished goods and work in progress |
61 | -53 | 171 | -27 | -83 | 116 |
| Materials and services | -5 805 | -5 106 | -17 272 | -19 277 | -26 560 | -24 555 |
| Personnel expenses | -14 539 | -13 549 | -48 868 | -50 764 | -67 630 | -65 733 |
| Other operating expenses | -5 028 | -3 727 | -13 681 | -12 823 | -17 221 | -18 079 |
| Other depreciation and amortisation | -268 | -300 | -817 | -921 | -1 218 | -1 113 |
| IFRS3 amortisation | - | -439 | - | -1 536 | -1 753 | -216 |
| Impairment | - | - | - | - | -7 423 | -7 423 |
| Operating profit | -733 | 2 481 | 4 255 | 4 532 | 833 | 556 |
| Financial income and expenses | 90 | -139 | -112 | -502 | -563 | -173 |
| Profit before income tax | -643 | 2 342 | 4 143 | 4 030 | 270 | 382 |
| Income tax | 188 | -521 | -805 | -913 | -1 861 | -1 753 |
| Profit for the period | -455 | 1 821 | 3 338 | 3 118 | -1 591 | -1 371 |
|
Profit for the period attributable to: |
||||||
| Owners of the parent company | -455 | 1 821 | 3 338 | 3 118 | -1 591 | -1 371 |
|
Earnings per share (EUR per share): |
||||||
| Basic | -0.02 | 0.08 | 0.15 | 0.15 | -0.07 | -0.06 |
| Diluted | -0.02 | 0.08 | 0.15 | 0.15 | -0.07 | -0.06 |
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
||||||
| (1 000 EUR) | 7-9/2015 | 7-9/2014 | 1-9/2015 | 1-9/2014 | 2014 | last 12m |
| Profit for the period | -455 | 1 821 | 3 338 | 3 118 | -1 591 | -1 371 |
| Other comprehensive income | ||||||
| Items that may be reclassified subsequently to the statement of income: | ||||||
| Translation difference | -1 435 | 622 | -775 | -186 | -2 141 | -2 730 |
|
Total Comprehensive income for the period |
-1 890 | 2 444 | 2 563 | 2 932 | -3 732 | -4 100 |
|
Total Comprehensive income attributable to: |
||||||
| Owners of the parent company | -1 890 | 2 444 | 2 563 | 2 932 | -3 732 | -4 100 |
CONSOLIDATED BALANCE SHEET
| (1 000 EUR) | 9/2015 | 9/2014 | 12/2014 |
| Non-current assets | |||
| Property, plant and equipment | 1 227 | 1 665 | 1 505 |
| Goodwill | 62 161 | 71 917 | 62 814 |
| Other intangible assets | 155 | 506 | 254 |
| Deferred tax assets | 1 086 | 1 522 | 1 263 |
| Trade and other receivables | 190 | 2 | - |
| 64 819 | 75 612 | 65 836 | |
| Current assets | |||
| Inventories | 665 | 574 | 493 |
| Trade and other receivables | 27 166 | 29 873 | 36 736 |
| Current income tax receivables | 1 281 | 699 | 393 |
| Cash and cash equivalents | 14 877 | 14 739 | 21 380 |
| 43 989 | 45 884 | 59 002 | |
| Total assets | 108 808 | 121 496 | 124 838 |
|
Equity attributable to owners of the parent Company |
|||
| Share capital | 5 105 | 5 105 | 5 105 |
|
Reserve of invested non-restricted equity |
47 731 |
47 718 |
47 718 |
| Other reserves | 857 | 818 | 835 |
| Treasury shares | -2 056 | -2 111 | -2 111 |
| Translation differences | -5 044 | -2 315 | -4 269 |
| Retained earnings | 13 043 | 17 867 | 13 159 |
| Total equity | 59 637 | 67 083 | 60 437 |
| Non-current liabilities | |||
| Loans and borrowings | - | 20 444 | 18 452 |
| Deferred tax liabilities | 142 | 118 | 190 |
| 142 | 20 562 | 18 642 | |
| Current liabilities | |||
| Loans and borrowings | 20 476 | 4 000 | 4 000 |
| Trade and other payables | 27 626 | 27 702 | 40 254 |
| Current income tax liabilities | 423 | 1 661 | 927 |
| Provisions | 503 | 488 | 578 |
| 49 028 | 33 851 | 45 759 | |
| Total liabilities | 49 170 | 54 413 | 64 401 |
| Equity and liabilities | 108 808 | 121 496 | 124 838 |
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
| (1 000 EUR) | 1-9/2015 | 1-9/2014 | 2014 |
| Cash flows from operating activities | |||
| Profit for the period | 3 338 | 3 118 | -1 591 |
| Adjustments to profit for the period | 1 824 | 3 981 | 12 878 |
| 5 162 | 7 098 | 11 287 | |
| Change in working capital | -3 334 | -5 907 | 348 |
| Interest and other financial cost paid | -237 | -325 | -418 |
| Interest and other financial income received | 41 | 49 | 68 |
| Income taxes paid | -2 012 | -1 964 | -2 946 |
| Net cash from operating activities | -380 | -1 049 | 8 339 |
| Cash flows from investing activities | |||
| Acquisition of tangible and intangible assets |
-448 |
-611 |
-740 |
|
Proceeds from sale of tangible and intangible assets |
- |
1 |
1 |
| Net cash from investing activities | -448 | -611 | -739 |
| Cash flows from financing activities | |||
| Repayments of non-current borrowings | -2 000 | -2 000 | -4 000 |
| Proceeds from share options exercised | - | 262 | 262 |
|
Dividends paid to the owners of the parent company |
-3 453 | -3 434 | -3 434 |
| Net cash from financing activities | -5 453 | -5 172 | -7 172 |
| (Decrease)/increase in cash and cash equivalents | -6 282 | -6 831 | 429 |
|
Cash and cash equivalents at the beginning of the period |
21 380 | 21 469 | 21 469 |
| Foreign exchange effect on cash | -222 | 100 | -518 |
|
Cash and cash equivalents at the end of the period |
14 877 | 14 739 | 21 380 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
Equity attributable to owners of the parent company |
|||||||
| (1 000 EUR) | Share capital | Reserve of invested non-restricted equity | Other reserves | Treasury shares |
Trans lat. diff. |
Ret. earnings | Total equity |
| Equity at 1 January 2015 | 5 105 | 47 718 | 835 | -2 111 | -4 269 | 13 159 | 60 437 |
| Profit | 3 338 | 3 338 | |||||
| Translation differences | -775 | -775 | |||||
| Total compre-hensive income | -775 | 3 338 | 2 563 | ||||
| Share-based payments | 23 | 23 | |||||
| Treasury shares as compensation to the Board | 14 | 55 | 68 | ||||
| Dividends paid | -3 453 | -3 453 | |||||
| Equity at 30 September 2015 | 5 105 | 47 731 | 858 | -2 056 | -5 044 | 13 043 | 59 637 |
|
Equity attributable to owners of the parent company |
|||||||
| (1 000 EUR) | Share capital | Reserve of invested non-restricted equity | Other reserves | Treasury shares |
Trans lat. diff. |
Ret. earnings | Total equity |
| Equity at 1 January 2014 | 5 105 | 47 448 | 763 | -2 165 | -2 128 | 18 184 | 67 207 |
| Profit | 3 118 | 3 118 | |||||
| Translation differences | -186 | -186 | |||||
| Total compre-hensive income | -186 | 3 118 | 2 932 | ||||
| Share-based payments | 55 | 55 | |||||
| Exercise of share options | 262 | 262 | |||||
| Treasury shares as compensation to the Board | 8 | 54 | 62 | ||||
| Dividends paid | -3 434 | -3 434 | |||||
| Equity at 30 September 2014 | 5 105 | 47 718 | 818 | -2 111 | -2 315 | 17 867 | 67 083 |
2. Notes
2.1. Basis of preparation
This financial statement bulletin has been prepared in accordance with the IFRS recognition and measurement principles and in accordance with IAS 34, Interim Financial reporting. The interim report should be read in conjunction with the annual financial statements for the year ended 31 December 2014. In material respects, the same accounting policies have been applied as in the 2014 annual consolidated financial statements. The amendments to and interpretations of IFRS standards that entered into force on 1 January 2015 had no material impact on this interim report.
2.2. Segment information
Affecto's reporting segments are based on geographical locations and are Finland, Norway, Sweden, Denmark and Baltic.
Segment net sales and result
| (1 000 EUR) | 7-9/2015 | 7-9/2014 | 1-9/2015 | 1-9/2014 | 2014 | last 12m |
| Total net sales | ||||||
| Finland | 10 675 | 10 322 | 35 254 | 36 715 | 50 564 | 49 103 |
| Norway | 4 579 | 5 268 | 15 556 | 18 547 | 25 028 | 22 037 |
| Sweden | 3 310 | 3 874 | 13 424 | 15 152 | 19 985 | 18 257 |
| Denmark | 2 508 | 2 604 | 8 104 | 9 189 | 12 038 | 10 953 |
| Baltic | 4 679 | 4 532 | 15 405 | 13 363 | 19 032 | 21 074 |
| Other | -905 | -935 | -3 023 | -3 097 | -3 954 | -3 880 |
| Group total | 24 847 | 25 664 | 84 720 | 89 869 | 122 693 | 117 544 |
| Operational segment result | ||||||
| Finland | -266 | 1 515 | 1 654 | 3 735 | 5 441 | 3 360 |
| Norway | 145 | 610 | 1 185 | 1 031 | 1 966 | 2 120 |
| Sweden | -288 | -76 | 192 | -43 | 304 | 539 |
| Denmark | 62 | 168 | 41 | 722 | 865 | 185 |
| Baltic | 786 | 867 | 3 224 | 1 624 | 2 944 | 4 544 |
| Other | -1 172 | -165 | -2 042 | -1 000 | -1 511 | -2 554 |
| Total operational segment result | -733 | 2 919 | 4 255 | 6 069 | 10 009 | 8 195 |
| IFRS3 amortisation | - | -439 | - | -1 536 | -1 753 | -216 |
| Impairment of goodwill | - | - | - | - | -7 423 | -7 423 |
| Operating profit | -733 | 2 481 | 4 255 | 4 532 | 833 | 556 |
| Financial income and expenses | 90 | -139 | -112 | -502 | -563 | -173 |
| Profit before income tax | -643 | 2 342 | 4 143 | 4 030 | 270 | 382 |
In 2014, the impairment of goodwill allocated to assets of Sweden segment.
Net sales by business lines
| (1 000 EUR) | 7-9/2015 | 7-9/2014 | 1-9/2015 | 1-9/2014 | 2014 | last 12m |
| Information Management Solutions | 23 239 | 23 781 | 78 922 | 83 362 | 114 008 | 109 567 |
| Karttakeskus GIS business | 2 533 | 2 637 | 8 748 | 8 866 | 11 868 | 11 750 |
| Other | -925 | -754 | -2 950 | -2 359 | -3 183 | -3 773 |
| Group total | 24 847 | 25 664 | 84 720 | 89 869 | 122 693 | 117 544 |
2.3. Changes in intangible and tangible assets
| (1 000 EUR) | 1-9/2015 | 1-9/2014 | 1-12/2014 |
| Carrying amount at the beginning of period | 64 573 | 76 185 | 76 185 |
| Additions | 448 | 611 | 740 |
| Disposals | -2 | -1 | -1 |
| Depreciation and amortization for the period | -816 | -2 458 | -2 971 |
| Impairments | - | - | -7 423 |
| Exchange rate differences | -661 | -249 | -1 957 |
| Carrying amount at the end of period | 63 542 | 74 088 | 64 573 |
In 2014, an impairment of 7 423 thousand euro has been recognized on assets allocated to Sweden cash-generating unit. The impairment has been fully recognized on goodwill.
2.4. Share capital, reserve of invested non-restricted equity and treasury shares
| (1 000 EUR) | Number of shares outstanding | Share capital | Reserve of invested non-restricted equity |
Treasury shares |
| 1.1.2014 | 21 431 052 | 5 105 | 47 448 | -2 165 |
|
Exercise of share options Payment for share options |
132 141 - |
- - |
260 2 |
- - |
| Treasury shares of compensation to the Board of Directors | 20 333 | - |
8 |
54 |
| 30.9.2014 | 21 583 526 | 5 105 | 47 718 | -2 111 |
| 1.1.2015 | 21 583 526 | 5 105 | 47 718 | -2 111 |
| Treasury shares of compensation to the Board of Directors | 20 984 | - | 14 | 55 |
| 30.9.2015 | 21 604 510 | 5 105 | 47 731 | -2 056 |
Affecto Plc owns 846 235 treasury shares, which correspond to 3.8% of the total amount of the shares. The amount of registered shares is 22 450 745 shares.
2.5. Interest-bearing liabilities
| (1 000 EUR) | 30.9.2015 | 31.12.2014 |
| Interest-bearing non-current liabilities | ||
|
Loans from financial institutions, non-current portion |
- | 18 452 |
|
Loans from financial institutions, current portion |
20 476 | 4 000 |
| 20 476 | 22 452 |
Affecto's loan facility agreement includes financial covenants, breach of which might lead to an increase in cost of debt or cancellation of the facility agreement. The covenants are based on total net debt to earnings before interest, taxes, depreciation and amortization and total net debt to total equity. The covenants will be measured quarterly, and these terms and conditions of covenants were met at the end of the reporting period. According to the current terms, the loan from financial institution will be due in June 2016.
2.6. Contingencies and commitments
The future aggregate minimum lease payments under non-cancelable operating leases:
| (1 000 EUR) | 30.9.2015 | 31.12.2014 |
| Not later than one (1) year | 3 086 | 3 333 |
|
Later than one (1) year, but not later than five (5) years |
2 144 | 3 421 |
| Later than five (5) years | - | - |
| Total | 5 231 | 6 755 |
Guarantees given:
| (1 000 EUR) | 30.9.2015 | 31.12.2014 |
| Liabilities secured by a mortgage | ||
| Financial loans | 20 500 | 22 500 |
The above-mentioned liabilities are secured by bearer bonds with a nominal value of 52.5 million euro. The bonds are held by Nordea Pankki Suomi Oyj and secured by a mortgage on company assets of the group companies. In addition, the shares in Affecto Finland Oy and Affecto Norway AS have been pledged to secure the financial liabilities above.
Other securities given on own behalf:
| (1 000 EUR) | 30.9.2015 | 31.12.2014 |
| Pledges | 36 | 33 |
| Other guarantees | 1 953 | 2 118 |
Other guarantees are mostly securities issued for customer projects. These guarantees include both bank guarantees secured by parent company of the group and guarantees issued by the parent company and subsidiaries.
2.7. Related party transactions
Key management compensation and remunerations to the board of directors:
| (1 000 EUR) | 1-9/2015 | 1-9/2014 | 1-12/2014 |
| Salaries and other short-term employee benefits |
1 829 |
1 705 |
2 312 |
| Post-employment benefits | 227 | 203 | 283 |
| Termination benefits | 134 | 80 | 80 |
| Share-based payments | 1 | 2 | 3 |
| Total | 2 190 | 1 991 | 2 678 |
Purchases from related party:
| (1 000 EUR) | 1-9/2015 | 1-9/2014 | 1-12/2014 |
| Purchases from the entity that are controlled by key management personnel of the group |
189 |
- |
3 |
| Outstanding balance of purchases from the entity that are controlled by key management personnel of the group | 103 | - | - |
3. Key figures
| 7-9/2015 | 7-9/2014 | 1-9/2015 | 1-9/2014 | 2014 | last 12m | |
| Net sales, 1 000 eur | 24 847 | 25 664 | 84 720 | 89 869 | 122 693 | 117 544 |
| EBITDA, 1 000 eur | -465 | 3 219 | 5 071 | 6 990 | 11 227 | 9 308 |
|
Operational segment result, 1 000 eur |
-733 | 2 919 | 4 255 | 6 069 | 10 009 | 8 195 |
| Operating result, 1 000 eur | -733 | 2 481 | 4 255 | 4 532 | 833 | 556 |
| Result before taxes, 1 000 eur | -643 | 2 342 | 4 143 | 4 030 | 270 | 382 |
|
Profit attributable to the owners of the parent company, 1 000 eur |
-455 | 1 821 | 3 338 | 3 118 | -1 591 | -1 371 |
| EBITDA, % | -1.9 % | 12.5 % | 6.0 % | 7.8 % | 9.2 % | 7.9 % |
| Operational segment result, % | -2.9 % | 11.4 % | 5.0 % | 6.8 % | 8.2 % | 7.0 % |
| Operating result, % | -2.9 % | 9.7 % | 5.0 % | 5.0 % | 0.7 % | 0.5 % |
| Result before taxes, % | -2.6 % | 9.1 % | 4.9 % | 4.5 % | 0.2 % | 0.3 % |
|
Net income for equity holders of the parent company, % |
-1.8 % | 7.1 % | 3.9 % | 3.5 % | -1.3 % | -1.2 % |
| Equity ratio, % | 59.7 % | 59.2 % | 59.7 % | 59.2 % | 54.6 % | |
| Net gearing, % | 9.4 % | 14.5 % | 9.4 % | 14.5 % | 1.8 % | |
|
Interest-bearing net debt, 1 000 eur |
5 599 | 9 705 | 5 599 | 9 705 | 1 071 | |
|
Gross investment in non-current assets (excl. acquisitions), 1 000 eur |
123 | 170 | 448 | 611 | 740 | |
| Gross investments, % of net sales | 0.5 % | 0.7 % | 0.5 % | 0.7 % | 0.6 % | |
|
Order backlog, 1 000 eur |
39 423 | 41 073 | 39 423 | 41 073 | 49 645 | |
| Average number of employees | 1 008 | 1 021 | 1 012 | 1 047 | 1 041 | |
| Earnings per share, eur | -0.02 | 0.08 | 0.15 | 0.15 | -0.07 | -0.06 |
|
Earnings per share (diluted), eur |
-0.02 | 0.08 | 0.15 | 0.15 | -0.07 | -0.06 |
| Equity per share, eur | 2.76 | 3.11 | 2.76 | 3.11 | 2.80 | |
|
Average number of shares, 1 000 shares |
21 595 | 21 574 | 21 587 | 21 479 | 21 519 | 21 586 |
|
Number of shares at the end of period, 1 000 shares |
21 605 | 21 584 | 21 605 | 21 584 | 21 584 | 21 605 |
Calculation of key figures
| EBITDA | = |
Earnings before interest, taxes, depreciation, amortization and impairment losses |
|
| Operational segment result | = |
Operating profit before amortizations on fair value adjustments due to business combinations (IFRS3) and goodwill impairments |
|
| Equity ratio, % | = |
Total equity ________________________________ |
*100 |
| Total assets – advance payments | |||
| Gearing, % | = |
Interest-bearing liabilities – cash and cash equivalents __________________________________ |
*100 |
| Total equity | |||
| Interest-bearing net debt | = |
Interest-bearing liabilities – cash and cash equivalents |
|
| Earnings per share (EPS) | = |
Profit attributable to owners of the parent company ______________________________________ |
|
| Weighted average number of ordinary shares in issue during the period | |||
| Equity per share | = |
Total equity ______________________________________ |
|
|
Adjusted number of shares at the end of the period |
|||
| Market capitalization | = |
Number of shares at the end of period (excluding company’s own shares held by the company) x share price at closing date |
|
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