Stock Exchange Release
SUMMARY
January-September
- Net sales EUR 59 804 thousand (EUR 50 082 thousand) - growth
19.4 percent
- Operating profit EUR 4 557 thousand (EUR 5 588 thousand) -
decrease by 18.4 percent
- Operating profit 7.6 percent of net sales (11.2%)
- International operations' share 51.9 percent of net sales
(45.9%) - growth 35.1 percent
- Backlog of SaaS orders not recognized as income EUR 11 130
thousand (EUR 11 241 thousand) at the end of the period
- Earnings per share EUR 0.28 (EUR 0.26)
July-September Q3
- Net sales EUR 19 259 thousand (EUR 15 268 thousand) - growth
26.1 percent
- Operating profit EUR 2 381 thousand (EUR 1 406 thousand) -
growth 69.3%
- Operating profit 12.4 percent of net sales (9.2%)
- International operations' share 55.1 percent of net sales
(48.0%) - growth 44.8 percent
- Earnings per share EUR 0.17 (EUR 0.05)
Outlook for 2008: Basware expects the growth of net sales for the
financial year to be from 15 to 25 percent compared with the Group's
net sales in the previous year. Operating profit (EBIT) is expected
to be from 10 to 15 percent of net sales before the one-off items
related to the Contempus reorganization. Contempus' financial result
is slightly positive before one-off items that total approximately
EUR 1 million.
The figures are unaudited.
GROUP KEY FIGURES
7-9/ 7-9/ Change, 1-9/ 1-9/ Change, 1-12/
EUR thousand 2008 2007 % 2008 2007 % 2007
Net sales 19 259 15 268 26.1% 59 804 50 082 19.4% 73 270
Operating profit 2 381 1 406 69.3% 4 557 5 588 -18.4% 7 512
% of net sales 12.4 9.2% 7.6% 11.2% 10.3%
Profit before tax 2 370 1 516 56.3% 4 548 5 816 -21.8% 7 704
Profit for the
period 1 941 531 265.3% 3 290 2 999 9.7% 4 112
Return on equity,
% 16.3% 4.6% 9.2% 8.8% 8.9%
Return on
investment, % 17.6% 12.7% 11.0% 16.2% 16.2%
Cash and cash
equivalents*) 8 680 9 644 -10.0% 8 680 9 644 -10.0% 7 041
Gearing, % 8.3% -10.9% 8.3% -10.9% -5.7%
Equity ratio, % 60.0% 68.7% 60.0% 68.7% 70.0%
Earnings per
share, EUR 0.17 0.05 253.1% 0.28 0.26 6.1% 0.36
Earnings per share
(diluted), EUR 0.17 0.05 253.1% 0.28 0.26 6.1% 0.36
Equity per share,
EUR 4.19 4.04 3.9% 4.19 4.04 3.9% 4.12
*) Includes cash, cash equivalents and financial assets at fair value
through profit or loss
Basware's business operations consist of product sales, maintenance
and support, consulting and services, Software as a Service (SaaS)
sales and other operations. The core of Basware's product sales
consists of Basware Enterprise Purchase to Pay product suite and
Basware Basware Financial Management suite. The Group's reported
market areas are Finland, Scandinavia, Europe and North America.
Basware's CEO Ilkka Sihvo comments in conjunction with the Interim
Report:"Strong growth and profitability describe the third quarter of the
year. Our net sales grew by over 26 percent and profitability nearly
70 percent compared with the same quarter last year. The company grew
in all market areas, with the growth being strongest in North America
and Europe. Product sales grew strongly, by 35.4 percent. Consulting
revenue grew by 27.7 percent and Software as a Service by 29.9
percent. Basware has succeeded well in acquiring and managing large
international accounts, especially in North America and Europe.
The acquisition of Contempus AS strengthens our market position in
Norway, Sweden and United Kingdom and enables us to extend our
distribution network in the United States and Benelux countries,
thanks to the Contempus sales channel. The acquisition supports our
internationalization strategy and more than 55 percent of the net
sales in the third quarter come from operations outside of Finland.
The company continues to be positioned highly in international
research reports and was among five largest eProcurement solution
vendors globally.
The general economic uncertainty has increased significantly. The
demand for Basware's software has remained steady so far. In previous
economic downturns, the demand for the company's products and
services has also remained more positive than the general economic
climate. This is because the company's software solutions generate
cost savings. The rapidly declining global market situation does
however create uncertainty.
For the remainder of the year, the prospects for consulting and
maintenance look promising but given the current climate, more
challenging for license sales. The costs for the latter part of the
year will remain on the same level as in the first half of the year,
excluding the Contempus acquisition."
REPORTING
Basware's primary reporting segment is based upon geography as
follows: Finland, Scandinavia, Europe and North America.
Basware reports it Software as a Service (SaaS) revenue separately in
the second segment. Software as a Service revenue includes license,
maintenance and services revenue that are invoiced monthly based on
an agreement. Software as a Service agreements typically span several
years. The Group also reports the backlog of orders not recognized as
income. The Company's SaaS sales are growing and this dilutes net
sales growth in short term.
As of January 1, 2008, the capital structure of Basware Oyj's
foreign subsidiaries has been changed to the extent that majority of
the long-outstanding intercompany trade receivables in the parent
company have been converted to a long-term net investment in a
foreign operation. Purpose of the loan arrangement is to fund a
long-term strategic investment. Foreign currency gains and losses
from a net investment in a foreign operation are recorded in a
separate component of equity in the consolidated financial
statements.
Basware Corp. acquired the entire share capital of Contempus AS from
Affecto. Contempus will be combined to the Basware Group as of
October 1, 2008. The preliminary balance sheet of Contempus Group is
included on the Basware Group balance sheet because the acquisition
took place on September 30, 2008.
NET SALES
Basware Group's net sales grew by 19.4 percent in January-September
and were EUR 59 804 thousand (EUR 50 082 thousand). During the third
quarter, net sales grew by 26.1 percent and were EUR 19 259 thousand
(EUR 15 268 thousand).
The Company's product sales decreased by 2.3 percent in the period
and were 27.1 percent (33.1%) of net sales Due to the adjusted
revenue recognition principles for product sales, some of the
agreements signed at the end of 2006 were recognized in the first
quarter of 2007. The value of these agreements amounts to over EUR 3
million. The growth of product sales without these components would
have been 22.8 percent.
Maintenance revenue and support services related to maintenance grew
by 17.5 percent in the period and represented 30.2 percent (30.7%) of
net sales. Consulting and services revenue grew by 40.8 percent and
represented 40.6 percent (34.4%) of net sales. SaaS sales grew by
43.7 percent in the period and represented 2.1 percent (1.8%) of net
sales. The backlog of SaaS orders not recognized as income was EUR
11 130 thousand (EUR 11 241 thousand) thousand at the end of the
period.
In July-September, 27.8 percent (25.9%) of net sales came from own
product sales, with product sales increasing by 35.4 percent. SaaS
sales represented 2.3 percent (2.2%) of net sales in the third
quarter and grew by 29.9 percent. In the third quarter, maintenance
revenue represented 32.3 percent (34.7%) of net sales and grew by
17.4 percent. Consulting and service revenue represented 37.6 percent
(37.2%) of net sales and grew by 27.7 percent.
Value added resellers provided a net share of 16.8 percent (15.3%) or
EUR 2 721 thousand of product sales in January-September. In
July-September, value added resellers provided a net share of 17.0
percent (15.7%) or EUR 907 thousand of product sales which represents
8.5 percent (8.5%) of international operations' total net sales.
The international share of Basware's net sales was 51.9 percent
(45.9%) in the period. International operations grew by 35.1 percent.
The international share of Basware's net sales was 55.1 percent
(48.0%) in the third quarter and it grew by 44.8 percent.
The geographical division of net sales by the location of assets
(primary segment):
Net sales 7-9/ 7-9/ 1-9/ 1-9/ Change, 1-12/
(EUR thousand) 2008 2007 Change, % 2008 2007 % 2007
Finland 10 604 10 238 3.6 34 188 34 571 -1.1 48 849
Scandinavia 3 352 3 126 7.2 12 179 11 015 10.6 16 797
Europe 5 428 3 477 56.1 14 189 9 429 50.5 15 081
North America 1 567 757 107.1 3 692 2 429 52.0 3 460
Sales between -10
segments -1 692 -2 329 27.4 -4 444 -7 362 39.6 917
Group total 19 259 15 268 26.1 59 804 50 082 19.4 73 270
The geographical division of net sales by the location of customers:
Net sales 7-9/ 7-9/ 1-9/ 1-9/ 1-12/
(EUR thousand) 2008 2007 Change, % 2008 2007 Change, % 2007
Finland 8 645 7 939 8.9 28 745 27 118 6.0 37 969
Scandinavia 3 262 2 819 15.7 11 898 10 362 14.8 15 911
Europe 5 299 3 371 57.2 14 048 9 364 50.0 14 785
Other 2 052 1 139 80.2 5 113 3 239 57.9 4 604
Group total 19 259 15 268 26.1 59 804 50 082 19.4 73 270
FINANCIAL PERFORMANCE
Basware's operating profit decreased by 18.4 percent in the period
and totaled EUR 4 557 thousand (EUR 5 588 thousand). Operating profit
represented 7.6 percent (11.2%) of net sales. Operating profit grew
by 69.3% in the third quarter and totaled EUR 2 381 thousand (EUR 1
406 thousand).
In the third quarter, Basware's operating profit totaled EUR 2 381
thousand (EUR 1 406 thousand). In the third quarter, operating profit
represented 12.4 percent of net sales.
The division of operating profit geographically by the location of
assets (primary segment):
Operating profit
(EUR 7-9/ 7-9/ Change, 1-9/ 1-9/ Change,
thousand) 2008 2007 % 2008 2007 % 1-12/2007
10
Finland 1 679 3 219 -47.8 3 513 371 -66.1 12 706
Scandinavia 229 -104 319.8 1 038 -540 292.4 333
-1 -2
Europe 375 058 135.5 -26 584 99.0 -3 662
-1
North America 144 -614 123.5 171 591 110.8 -1 751
Operating profit
between segments -47 -37 -27.5 -140 -67 -108.2 -114
5
Group total 2 381 1 406 69.3 4 557 588 -18.4 7 512
The Company's fixed costs were EUR 49 988 thousand (EUR 40 996
thousand) in the period and have grown by 21.9 percent compared with
the same period last year. Personnel costs made up 70.6 percent
(65.9%) or EUR 35 306 thousand (EUR 27 031 thousand) of the fixed
costs. In the third quarter, fixed costs totaled EUR 15 449 thousand
(EUR 12 247 thousand).
Research and development costs totaled EUR 11 134 thousand (EUR 8 640
thousand), of which EUR 1 892 thousand (EUR 1 843 thousand) or 17.0
percent (21.3%) were capitalized during the period. Amortization of
capitalized research and development costs totaled EUR 871 thousand
(EUR 719 thousand).
The Company's finance income and finance expenses were EUR -9
thousand (EUR 227 thousand). The Company's profit before tax was
EUR 4 548 thousand (EUR 5 816 thousand) and profit for the period was
EUR
3 290 thousand (EUR 2 999 thousand). Undiluted earnings per share
were EUR 0.28 (EUR 0.26).
FINANCE AND INVESTMENTS
Basware Group's total assets on the balance sheet at the end of the
financial period were EUR 80 537 thousand (EUR 67 555 thousand). The
Company's cash and liquid assets were EUR 8 680 thousand (EUR 9 644
thousand), of which cash and cash equivalents were EUR 8 648 thousand
(EUR 9 217 thousand) and financial assets at fair value through
profit or loss were EUR 32 thousand (EUR 427 thousand).
During the period under review, the Company withdrew a 3-year loan of
EUR 10.65 million to finance the acquisition of Contempus AS. The
loan is hedged by a 2-year interest cap agreement, setting a cap of
5.4% for the base rate of interest.
Cash flows from operating activities were EUR 6 205 thousand (EUR 5
918 thousand). Cash flows from investments were EUR -11 039 thousand
(EUR -7 373 thousand).
Equity ratio was 60.0 percent (68.7%) and gearing was 8.3 percent
(-10.9%). The Company had a total of EUR
12 679 thousand (EUR 4 597 thousand) interest-bearing liabilities, of
which current liabilities accounted for EUR 5 561 thousand (EUR 4 418
thousand). Return on investment was 11.0 percent and return on equity
9.2 percent.
The acquisition price of Contempus AS was NOK 83.6 million
(approximately EUR 10.1 million). In the financial statements for the
third quarter, the difference between purchase price and book value
of acquiree's assets has been allocated fully to intangible assets.
This allocation of the acquisition price is preliminary.
The Company's capital expenditure, resulting from regular, additional
and replacement, investments resulting from growth, was EUR 684
thousand (EUR 581 thousand) in the period. Gross investments which
include, in addition to the previously mentioned, the capitalized
research and development costs and acquisitions (Contempus 2008 and
Digital Vision 2007) totaled EUR 11 262 thousand (EUR 11 109
thousand).
Amortizations of intangible assets were EUR 1 621 thousand (EUR 1 448
thousand). There are no indications of impairments of assets.
RESEARCH, DEVELOPMENT AND NEW PRODUCTS
Basware's research and development costs were EUR 11 134 thousand
(EUR 8 640 thousand) in the period and made up 18.6 percent (17.3%)
of net sales. Research and development costs grew by 28.9 percent
(13.1%) compared with the same period last year. Of the research and
development costs, EUR 1 892 thousand (EUR
1 843 thousand) or 17.0 percent (21.3%) were capitalized during the
period. Amortization of capitalized research and development costs
totaled EUR 871 thousand (EUR 719 thousand).
Altogether 162 (144) people worked in Software Production at the end
of September 2008. The Software Production unit expands to India
where there are currently 21 employees.
Basware's product portfolio was developed according to plan in the
third quarter. New versions of Basware Contract Lifecycle Management
and Basware RFx Management applications were launched during the
second quarter. With Basware Contract Lifecycle Management, users can
maintain and leverage all business agreements. With the Basware RFx
Management sourcing solution, tenders can be managed and prepared
electronically. A new version of Basware Travel & Expense Management
was also launched during the quarter.
PERSONNEL
The figures do not include the Contempus AS personnel which totaled
55 people on September 30, 2008.
Basware employed 675 (557) people in average in the third quarter and
686 (630) people at the end of the period. The number of personnel
grew by 56 persons and by 8.9 percent compared with the same period
last year.
The share of personnel working in foreign units has increased
compared with the same period last year. At the end of the period,
42.6 percent (41.0%) of the Basware personnel worked outside of
Finland and 57.4 percent (59.0%) in Finland. 19.4 percent of the
personnel work in sales and marketing, 48.1 in consulting and
services, 23.6 percent in Software Production, and 8.9 percent in
administration.
The average age of the employees is 35.9 (35.8) years. 32.4 percent
of them hold a Master's degree and 45.8 percent a Bachelor's degree.
27.6 percent of the personnel are women and 72.4 percent men.
Geographical distribution of personnel (primary segment):
Personnel
(employed, in 7-9/ 7-9/ 1-9/ 1-9/ Change, 1-12/
average) 2008 2007 Change, % 2008 2007 % 2007
Finland 422 369 14.5 420 361 16.3 367
Scandinavia 103 98 5.5 101 96 5.7 96
Europe 130 94 37.9 129 76 69.5 93
North America 28 28 0.0 26 24 6.5 25
Group total 682 588 16.0 675 557 21.3 580
BUSINESS OPERATIONS
Finland
The Finland segment includes the business operations of Finland,
Russia, Asia and Australia as well as the Financial Management
business unit. Net sales increased by 3.6 percent EUR 10 604 in the
third quarter and totaled EUR 10 604 thousand (EUR 10 238 thousand).
Net sales of the Finnish Enterprise Purchase to Pay unit grew by 5.9
percent in third quarter. Net sales of the Financial Management
operations (Basware FIMA Oy) increased by 14.1 percent and
represented 10.0 percent (11.1%) of Basware Group's business
operations.
In July-September, a total of 2 million invoices were transmitted
through the eInvoicing service of Basware Einvoices Oy. The invoice
volume grew by approximately 20 percent during the third quarter
compared with the same quarter last year. A total of 34 new customer
agreements were signed during the period. Of the agreements, 30 were
international agreements. The e-invoicing service was extended to
Germany. A total of 10 new partner agreements were signed during the
period. During the quarter, Basware Einvoices Oy launched new
functionality to the e-invoicing service, enabling the transmission
of purchase messages, such as orders and order confirmations, between
buyers and suppliers.
The Enterprise Purchase to Pay and Financial Management solutions are
sold in Russia. Currently there are five resellers in the area.
There are six resellers in the Asia Pacific region. New customers in
the quarter include Flinders University and BGC Contracting Pty Ltd.
In the Finland segment, new customers include Hollming Oy, Huhtamäki
Oyj, Icecapital Pankkiiriliike Oy, Tiimari, Mawell, Ateriamestarit
and Masinotrading.
There are currently 15 resellers in the area and the number of
personnel was 422 (369) on average in the period.
Scandinavia
Basware's Nordic organization consists of centrally directed
Scandinavian (Sweden, Denmark and Norway) unit. All the Basware
Enterprise Purchase to Pay and Financial Management products are sold
in the Nordic countries, apart from the payment solutions which are
currently sold only in Finland.
Net sales of the area grew by 7.2 percent in the third quarter and
totaled EUR 3 352 thousand (EUR 3 126 thousand). The profitability
of the operations has improved by 319.8 percent and operating profit
was EUR 229 thousand (EUR -104 thousand).
New customers include SKTF, HSB Umeå, Villa Organic, GS-Hydro Norge
AS,Terra Gruppen AS and Apokjeden AS.
Business operations are mainly handled by the own organization and
there were 103 (98) employees on average in the area.
Europe
Basware's European business operations consist of the units in
Germany, France, The Netherlands, United Kingdom and Southern Europe.
Additionally, the reseller network covers the eastern part of Central
Europe. All Enterprise Purchase to Pay solutions are sold in Europe,
apart from the payment and travel & expense management solutions.
Net sales of the Europe segment grew by 56.1 percent in the third
quarter and totaled EUR 5 428 thousand (EUR
3 477 thousand). The profitability of the operations has improved by
135.5 percent and operating profit was EUR 375 thousand (EUR -1 058
thousand).
The UK data capture operations developed according to plan and were
profitable.
New customers include Hertel, ENCI, ERAM, Prinovis Liverpool Ltd,
Barmenia, Autoliv, Friesland Hungaria zRt., Contitrade Ireland and
CHEP.
At the end of the second quarter, there were 27 resellers and 130
(94) employees on average in Europe.
North America
Basware's North American unit sells the Enterprise Purchase to Pay
solutions in the United States and Canada.
Net sales of the area increased 107.1 percent in third quarter and
totaled EUR 1 567 thousand (EUR 757 thousand). The profitability of
the operations has improved by 123.5 percent and operating profit was
EUR 144 thousand (EUR -614 thousand).
Basware delivers an extensive invoice automation solution to a
US-based engineering, construction and technical services
organization. The value of the agreement exceeds EUR 500 thousand and
the solution is planned to be implemented by the end of 2008. Other
new customers in the area include Allied Tube & Conduit Corporation,
Howard Hughes Medical Institute and Protection One Alarm Monitoring
Inc.
At the end of the third quarter, there were 10 resellers and 28 (28)
employees on average in North America.
OTHER EVENTS OF THE FINANCIAL PERIOD
Basware Corp. acquired the entire share capital of Contempus AS from
Affecto. The acquisition price was NOK 83.6 million (approximately
EUR 10.1 million, exchange rate EUR/NOK 8.27). Contempus was part of
Affecto's operations in Norway and produces software solutions for
procurement, invoice and document management.
The acquisition strengthens Basware's market position in Norway,
Sweden and the UK as well as brings valuable expertise to Basware to
improve competitiveness. In addition Basware can extend its
distribution channel through existing Contempus' sales channel in the
United States and Benelux countries. Synergy benefits can be reached
by unifying the businesses as well as by transferring to common
infrastructure and common offices in Oslo, Stockholm and Manchester.
Cost savings will be realized starting from the beginning of 2009 and
they will be approximately EUR 3 million by the end of 2009.
One-off-items are approximately EUR 1 million and they will all be
realized in the fiscal year of 2008. The financial figures of
Contempus will be integrated into Basware as of October 1, 2008 and
the profit of Contempus will be positive before one-off-items.
The Basware Executive Team has extended as a result of organizational
changes in the Software Production unit. Pekka Rehn has been
nominated to lead the new Products unit. Olli Hyppänen who used to
lead the Software Production unit has been nominated Senior Vice
President, Strategy and Development, to lead the new Strategy and
Development unit that was founded on October 1. Additionally, Steve
Muddiman has been nominated as Senior Vice President, Global
Marketing. Ari Salonen started as the General Manager, North America
for Basware's North American operations on September 1, 2008.
SHARE AND SHAREHOLDERS
Basware Corporation's share capital totaled EUR 3 440 437.20 at the
end of the period and the number of shares was 11 468 124.
Share price and trade
In the third quarter, the highest price of the share was EUR 10.45
(EUR 14.00), lowest price was EUR 6.14 (EUR 10.11) and closing price
was EUR 7.00 (EUR 12.95). The average price of the share was EUR 7.70
(EUR 12.13).
A total of 1 808 869 (2 216 534) shares were traded during the
financial period which is the equivalent of 15.8 percent (19.3%) of
the average number of shares. Market capitalization with the period's
closing price on September 30, 2008 was EUR 80 276 868 (EUR 148 512
206).
Shareholders
Basware had 17 301 (18 459) shareholders on September 30, 2008
including nominee-registered holdings (9). Nominee-registered
holdings accounted for 11.41 percent of the total number of shares.
The Company did not receive any notice of change in ownership during
the financial period.
GOVERNANCE
At the Annual General Meeting of Shareholders on February 14, 2008,
the number of Board members was confirmed to be five. The Annual
General Meeting resolved to agree on the proposal and elected Matti
Copeland, Sakari Perttunen, Ossi Pohjola, Ilkka Toivola and Hannu
Vaajoensuu to the Board of Directors.
The Annual General Meeting further resolved to elect Ernst & Young
Oy, Authorized Public Accountants as the auditor, with APA Heikki
Ilkka in charge and APA Terhi Mäkinen as the deputy auditor.
The Board was authorized to resolve on share issue and on a free
issue to the Company itself.
A separate stock exchange release has been issued February 14, 2008
on the Board authorizations and other resolutions of the Annual
General Meeting of Shareholders.
Decision on the Decrease of Share Premium
The AGM authorized the company share premium to be decreased by EUR
33 057 787.45 for the purpose of transferring the decreased amount to
the company's distributable equity. According to the resolution of
the National Board of Patents and Registration of Finland on June 24,
2008, the decrease has been done.
THE COMPANY'S NEAR FUTURE RISKS AND BUSINESS UNCERTAINTIES
According to the Company's risk management model, the risks are
divided into six categories: risks related to business operations,
products, personnel as well as legal, financial and data security
risks. Basware takes risks that are a natural part of the strategy
and objectives. These risks are managed and diminished in various
ways. Short risks are considered to be risks in current reporting
year.
As part of Basware's risks and business uncertainties in the near
future, Software as a Service (SaaS) based services instead of
license agreements may affect the Company's short term net sales
growth.
The general economic uncertainty has increased significantly. The
demand for Basware's software has remained steady so far. In previous
economic downturns, the demand for the company's products and
services has also remained more positive than the general economic
climate. This is because the company's software solutions generate
cost savings. The rapidly declining global market situation does
however create uncertainty.
The company operates in several areas outside the Euro zone, the most
significant of which being Sweden, Norway, United Kingdom and United
States. The company is exposed to exchange rate risks in these
countries through intra-company trade, exports and imports as well as
through funding of foreign units and currency denominated equities.
The company manages liquid assets through centralized cash management
and payment. The main cooperation bank globally is Nordea.
EVENTS AFTER THE FINANCIAL PERIOD
Basware Corporation starts share repurchases
Basware Corporation's Board of Directors has resolved to start
repurchases of the company's own shares. A maximum of 400 000 shares
will be acquired which represents approximately 3.49% of all Basware
shares. The decision is based on the authorization granted by the
Annual General Meeting on February 14, 2008 to purchase a maximum of
1 146 812 shares. The purchases will start on October 23, 2008 at the
earliest, and they will end by March 31, 2009.
The shares may be repurchased in order to finance or carry out
acquisitions or other business transactions, in order to develop the
Company's capital structure, to improve the liquidity of the
Company's shares, to be disposed for other purposes, or to be
cancelled. Basware will use its free liquid to purchase the shares,
which will decrease the amount of distributable funds.
The repurchases will be carried out through public trading on the
Nasdaq OMX Helsinki, whereby the shares will be purchased in
accordance with the rules and regulations of the Nasdaq OMX Helsinki
and the Finnish Central Securities Depository.
FUTURE OUTLOOK
General economic uncertainty has significantly increased. Basware
solutions generate cost savings and therefore the demand is not
heavily dependent on the economic situation.
Western Europe and the United States represent approximately three
quarters of overall demand for enterprise software. Invoice
processing and procurement software remain at the beginning of their
lifecycles in these regions. The purchase management and invoice
processing software markets are relatively heterogeneous with regards
to the competitive situation. However, strong growth may attract more
competitors to the market. The industry is consolidating rapidly and
this development is expected to continue in the future. Basware is a
medium sized software company on a global scale, in terms of sales
and number of personnel.
Basware's direct competitors are mainly smaller companies that
operate locally. In North America, the company has also bigger
competitors, especially in procurement. Document management, scanning
and workflow solution developers compete with Basware especially in
invoice processing. Competing solutions also include tailored
software solutions that complement Enterprise Resource Planning (ERP)
systems and require extensive client-specific project work.
The competitiveness of the software is still good due to new value
added products and the integrated concept that the products form.
The Company's international growth is based on the Company's own
sales and marketing efforts as well as on reseller operations. The
development of the indirect channel continues especially in Europe
and North America and in Russia and Asia. In Scandinavia, the focus
is on profitability, supported by the extending product portfolio. In
Finland, the focus is on profitability and the moderate growth comes
mainly from the procurement area and services.
The profitability of the regions outside the Nordic countries
continues to be improved in all of the Group's country units which
decreases the Group's tax rate in the long term.
Of the Company's EUR 11 130 thousand backlog of SaaS orders,
approximately EUR 200 thousand will be recognized as income in 2008.
Basware has complemented its organic growth with acquisitions. The
Company continues to review possible acquisition targets during 2009.
With the acquisitions, the Company can extend the sales channel in
international markets.
Fixed costs in the second half of the year are estimated to be at the
same level as the fixed costs in the first half of the year without
the effect of the Contempus acquisition.
In 2008, Basware expects the growth of net sales for the financial
year to be from 15 to 25 percent compared with the Group's net sales
in the previous year. Operating profit (EBIT) is expected to be from
10 to 15 percent of net sales before the one-off items related to the
Contempus reorganization. Contempus' financial result is slightly
positive before one-off items that total approximately EUR 1 million.
In Espoo, Finland, October 14, 2008
BASWARE CORPORATION
Board of Directors
For more information, please contact
CEO Ilkka Sihvo, Basware Corp.,
Tel. +358 9 8791 7251 or +358 40 501 8251
Analyst and Press Briefing
Basware arranges today, October 14, 2008 a briefing on the Interim
Report for the press and analysts at 11:00 in Hotel Kämp,
Pohjoisesplanadi 29, Helsinki, Finland. During this briefing CEO
Ilkka Sihvo will comment the operations and financial performance of
the quarter. Welcome.
Distribution
Helsinki Stock Exchange
Key media
www.basware.com
SUMMARY OF FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS
The Interim Report has been prepared according to the International
Financial Reporting Standards (IFRS). Same Accounting Principles have
been applied as in the 2007 Financial Statements. Key indicator
calculations remain unchanged and have been presented in the 2007
Financial Statements.
GROUP INCOME STATEMENT
1.7.- 1.7.- 1.1.- 1.1.- 1.1.-
30.9. 30.9. Change, 30.9. 30.9. Change, 31.12.
EUR thousand 2008 2007 % 2008 2007 % 2007
NET SALES 19 259 15 268 26.1 59 804 50 082 19.4 73 270
Other operating
income 58 23 152.1 189 790 -76.1 834
Materials andservices -797 -981 -18.7 -3 394 -2 463 37.8 -4 459
Employee
benefits
-27
expenses -10 933 -7 827 39.7 -35 306 031 30.6 -40 600
Depreciation
and
amortization -690 -657 4.9 -2 053 -1 825 12.5 -2 590
Other operating -13
expenses -4 516 -4 419 2.2 -14 682 966 5.1 -18 943
Operating
profit 2 381 1 406 69.3 4 557 5 588 -18.4 7 512
Finance Income 39 130 -69.9 96 270 -64.3 344
Finance
Expenses -50 -20 146.9 -106 -43 146.1 -152
Profit before
tax 2 370 1 516 56.3 4 548 5 816 -21.8 7 704
Income tax - 2
expense -430 -985 -56.4 -1 258 816 -55.3 -3 591
PROFIT FOR THE
PERIOD 1 941 531 265.3 3 290 2 999 9.7 4 112
EPS
(undiluted),
EUR
EPS (diluted),
EUR 0.17 0.05 253.1 0.28 0.26 6.1 0.36
Average share
number 0.17 0.05 253.1 0.28 0.26 6.1 0.36
GROUP BALANCE SHEET
EUR thousand 30.9.2008 30.9.2007 Change, % 31.12.2007
ASSETS
NON-CURRENT ASSETS
Intangible assets 20 953 11 873 76.5 12 210
Goodwill 25 821 25 816 25 702
Tangible assets 1 148 1 003 14.4 1 009
Available-for-sale
investments 38 38 38
Long-term trade and other
receivables 12 12 12
Deferred tax assets 2 199 2 752 -20.1 2 489
Non-current assets 50 171 41 495 20.9 41 460
CURRENT ASSETS
Inventories 57 28 102.2 42
Trade and other receivables 19 579 16 158 21.2 18 704
Income tax receivables 2 051 230 791.3 476
Financial assets at fair
value through profit or loss 32 427 -92.5 31
Cash and cash equivalents 8 648 9 217 -6.2 7 010
Current assets 30 367 26 060 16.5 26 263
TOTAL ASSETS 80 537 67 555 19.2 67 722
EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital 3 440 3 440 3 440
Share premium account 69 33 127 -99.8 33 127
Fair value reserve and other
reserves 33 598 540 6 121.4 540
Translation differences -237 550 -143.1 392
Retained earnings 11 235 8 629 30.2 9 765
Minority interest 223 98 128.4 148
Shareholders' equity 48 328 46 383 4.2 47 413
NON-CURRENT LIABILITIES
Deferred tax liability 1 648 1 649 1 643
Interest-bearing liabilities 7 118 179 3 871.3 20
Non-current liabilities 8 766 1 828 379.4 1 663
CURRENT LIABILITIES
Interest-bearing liabilities 5 561 4 418 25.9 4 314
Trade payables and other
liabilities 17 138 13 774 24.4 14 000
Tax liability from income
tax 744 1 152 -35.4 333
Current liabilities 23 444 19 343 21.2 18 647
TOTAL EQUITY AND LIABILITIES 80 537 67 555 19.2 67 722
GROUP STATEMENT OF CHANGES IN EQUITY
Invested
Share non- Ot- Trans- Ret- Mino-
Share- pre- re- her lation ained rity Share-
holders' mium stricted re- dif- earn- inte- holders'
EUR thousand equity account equity serves ference ings rest equity
SHARE-HOLDERS' 3 440 33 127 0 540 235 7 176 88 44 606
EQUITY 1.1.2007
Change in
translation
difference 120 120
Granted
warrants 69 69
Other changes 1 1
Net profit/loss
recognized
directly
in
shareholders'
equity 120 71 190
Profit for the
period 2 488 -20 2 468
Total profits
and losses 120 2 559 -20 2 658
Share premium -1 720 -1 720
SHARE-HOLDERS'
EQUITY
30.9.2007 3 440 33 127 0 540 355 8 015 68 45 545
Invested
Share non- Ot- Trans- Ret- Mino-
Share- pre- re- her lation ained rity Share-
holders' mium stricted re- dif- earn- inte- holders'
EUR thousand equity account equity serves ference ings rest equity
SHARE-HOLDERS'
EQUITY 1.1.2008 3 440 33 127 0 540 392 9 765 148 47 413
Change in
translation
difference -629 -141 -770
Granted
warrants 106 106
Transfers -
between items 33 058 33 058 0
Net profit/loss
recognized
directly
in
shareholders' -33
equity 058 33 058 -629 -35 -664
Profit for the
period 3 215 75 3 290
Total profits
and losses -629 3 180 75 2 626
Dividend
distribution -1 711 -1 711
SHARE-HOLDERS'
EQUITY
30.9.2008 3 440 69 33 058 540 -237 11 235 223 48 328
GROUP CASH FLOW STATEMENT
EUR thousand 1.1.-30.9.08 1.1.-30.9.07 1.1.-31.12.07
Cash flows from operating
activities
Profit for the period 3 290 2 999 4 112
Adjustments for profit 3 294 4 110 5 732
Working capital changes 2 200 739 -1 812
Interest paid -83 -47 -124
Dividends received 83 55 287
Interest received -8 35 -7
Other financial items in
operating activities -2 572 -1 975 -3 801
Net cash from operating
activities 6 205 5 918 4 387
Cash flows from investing
activities
Purchase of tangible and
intangible assets -2 515 -2 402 -2 869
Proceeds from sale of
tangible
and intangible assets 36 25 48
Acquired subsidiaries -8 567 -8 018 -8 180
Proceeds from other
investments 3 013 3 013
Repayments of loan
receivables 7 8 20
Net cash used in investing
activities -11 039 -7 373 -7 969
Cash flows from financing
activities
Minority's capital investment 40 40
Proceeds from short-term
loans 5 550 4 000 4 000
Repayments of short-term
borrowings -4 000
Withdrawals of non-current
loans 7 100
Repayments of long-term
borrowings -300 -307 -562
Repayments of financial lease
liabilities -5 -12 -10
Dividends paid -1 711 -1 720 -1 720
Net cash used in financing
activities 6 634 2 000 1 749
Net change in cash and cash
equivalents according to cash
flow statement 1 800 545 -1 833
Cash and cash equivalents at
beginning of period 7 041 8 975 8 975
Effects of exchange rate
changes on cash
and cash equivalents -161 -39 -101
Effects of fair value
implementation 164
Cash and cash equivalents at
end of period 8 680 9 644 7 041
GROUP QUARTERLY INCOME STATEMENT
1-3/ 1-3/ 4-6/ 4-6/ 7-9/ 7-9/ 10-12/
EUR thousand 2008 2007 2008 2007 2008 2007 2007
NET SALES 18 233 17 038 22 312 17 776 19 259 15 268 23 187
Other operating
income 69 15 62 752 58 23 44
Materials and
services -1 211 -819 -1 385 -662 -797 -981 -1 996
Employee
benefits
expenses -11 765 -9 243 -12 608 -9 961 -10 933 -7 827 -13 569
Depreciation and
amortization -671 -571 -693 -597 -690 -657 -765
Other operating
expenses -4 910 -5 010 -5 257 -4 536 -4 516 -4 419 -4 977
Operating profit -254 1 409 2 431 2 773 2 381 1 406 1 924
% -1.4% 8.3% 10.9% 15.6% 12.4% 9.2% 8.3%
Finance income 39 61 18 79 39 130 73
Finance expenses -35 -11 -21 -12 -50 -20 -109
Profit before
tax -250 1 459 2 428 2 840 2 370 1 516 1 888
% -1.4% 8.6% 10.9% 16.0% 12.3% 9.9% 8.1%
Tax on income
from operations -300 -575 -528 -1 256 -430 -985 -775
PROFIT FOR
THE PERIOD -550 884 1 899 1 584 1 941 531 1 113
% -3.0% 5.2% 8.5% 8.9% 10.1% 3.5% 4.8%
Material changes in loans
During the period under review, the Company withdrew a 3-year loan of
EUR 10.65 million to finance the acquisition of Contempus AS. The
loan is hedged by a 2-year interest cap agreement, setting a cap of
5.4% for the base rate of interest.
Accounting for business combination
The acquisition of Contempus AS was endorsed on September 30, 2008.
Provisional fair values are assigned to the assets and liabilities of
Contempus in the consolidated financial statements of the Company.
COMMITMENTS AND CONTINGENT LIABILITIES
Significant changes in liabilities
During the period, the Company withdrew a 3-year loan of EUR 10.65
million to finance the acquisition of Contempus AS. The loan is
hedged by a 2-year interest cap agreement, setting a cap of 5.4% for
the base rate of interest.
Combining new acquisitions
The acquisition of Contempus AS:n was realized on September 30, 2008.
The acquired assets and liabilities have been recognized to the
preliminary fair value through profit or loss on the balance sheet.
EUR thousand 30.9.08 30.9.07 31.12.07
GUARANTEES ON BEHALF OF SUBSIDIARIES
1 101 1 097 1 103
Guarantees total 1 101 1 097 1 103
OTHER OWN CONTINGENT LIABILITIES
Lease liabilities:
Current lease liabilities 781 553 601
Lease liabilities maturing in 1-5 years 969 598 685
Total 1 750 1 151 1 286
Other rental liabilities:
Current rental liabilities 2 033 1 675 1 827
Rental liabilities maturing in 1-5 years 4 056 4 152 3 957
Rental liabilities maturing later 246 172
Total 6 183 6 074 5 956
Other own contingent liabilities, total 7 934 7 225 7 242
SEGMENT REPORTING
Geographical segments (primary segment)
Net sales
(EUR Change,
thousand) 7-9/08 7-9/07 Change, % 1-9/08 1-9/07 % 1-12/07
Finland 10 604 10 238 3.6 34 188 34 571 -1.1 48 849
Scandinavia 3 352 3 126 7.2 12 179 11 015 10.6 16 797
Europe 5 428 3 477 56.1 14 189 9 429 50.5 15 081
North America 1 567 757 107.1 3 692 2 429 52.0 3 460
Sales between
segments -1 692 -2 329 27.4 -4 444 -7 362 39.6 -10 917
Group total 19 259 15 268 26.1 59 804 50 082 19.4 73 270
Operating profit
(EUR Change, Change,
thousand) 7-9/08 7-9/07 % 1-9/08 1-9/07 % 1-12/07
Finland 1 679 3 219 -47.8 3 513 10 371 -66.1 12 706
Scandinavia 229 -104 319.8 1 038 -540 292.4 333
Europe 375 -1 058 135.5 -26 -2 584 99.0 -3 662
North America 144 -614 123.5 171 -1 591 110.8 -1 751
Operating profit
between segments -47 -37 -27.5 -140 -67 -108.2 -114
Group total 2 381 1 406 69.3 4 557 5 588 -18.4 7 512
Personnel
(employed, in Change,
average) 7-9/08 7-9/07 Change, % 1-9/08 1-9/07 % 1-12/07
Finland 422 369 14.5 420 361 16.3 367
Scandinavia 103 98 5.5 101 96 5.7 96
Europe 130 94 37.9 129 76 69.5 93
North America 28 28 0.0 26 24 6.5 25
Group total 682 588 16.0 675 557 21.3 580
Business segments (secondary segment)
Net sales Change,
(EUR thousand) 7-9/08 7-9/07 Change, % 1-9/08 1-9/07 % 1-12/07
Product sales 5 801 4 019 44.4 16 637 16 637 0.0 24 117
Maintenance and
support 5 989 5 369 11.5 17 246 15 468 11.5 22 100
Consulting and
services 6 334 4 987 27.0 22 287 15 523 43.6 23 342
SaaS 442 340 29.9 1 266 881 43.7 1 250
Other
operations 693 553 25.4 2 368 1 573 50.5 2 461
Group total 19 259 15 268 26.1 59 804 50 082 19.4 73 270
Geographical division of net sales by the location of customer
Net sales (EUR Change,
thousand) 7-9/08 7-9/07 Change, % 1-9/08 1-9/07 % 1-12/07
Finland 8 645 7 939 8.9 28 745 27 118 6.0 37 969
Scandinavia 3 262 2 819 15.7 11 898 10 362 14.8 15 911
Europe 5 299 3 371 57.2 14 048 9 364 50.0 14 785
Other 2 052 1 139 80.2 5 113 3 239 57.9 4 604
Group total 19 259 15 268 26.1 59 804 50 082 19.4 73 270
GROUP KEY INDICATORS
EUR thousand 1-9/08 1-9/07 1-9/06 1-12/07
Net sales 59 804 50 082 43 446 73 270
Growth of net sales, % 19.4% 15.3% 22.2%
Operating profit 4 557 5 588 6 271 7 512
Growth of operating
profit, % -18.4% -10.9% -7.0%
% of net sales 7.6% 11.2% 14.4% 10.3%
Profit before tax 4 548 5 816 6 457 7 704
% of net sales 7.6% 11.6% 14.9% 10.5%
Profit for the period 3 290 2 999 4 460 4 112
% of net sales 5.5% 6.0% 10.3% 5.6%
Return on equity. % 9.2% 8.8% 27.1% 8.9%
Return on investment,
% 11.0% 16.2% 38.8% 16.2%
Interest bearing
liabilities 12 679 4 597 870 4 334
Cash and liquid assets
*) 8 680 9 644 9 909 7 041
Gearing, % 8.3% -10.9% -20.6% -5.7%
Equity ratio, % 60.0% 68.7% 76.6% 70.0%
Total assets 80 537 67 555 57 293 67 722
Gross investments **) 11 262 11 109 24 492 12 220
% of net sales 18.8% 22.2% 56.4% 16.7%
Capital expenditure 684 581 510 817
% of net sales 1.1% 1.2% 1.2% 1.1%
Research and
development costs 11 134 8 640 7 640 13 172
% of net sales 18.6% 17.3% 17.6% 18.0%
R&D personnel at end
of period 162 144 138 152
Personnel average for
period 675 557 510 580
Personnel at end of
period 686 630 517 658
Growth of personnel, % 8.9% 21.8% 34.4% 24.6%
Earnings per share,
EUR 0.28 0.26 0.40 0.36
Earnings per share,
EUR (diluted) 0.28 0.26 0.40 0.36
Equity per share, EUR 4.19 4.04 3.83 4.12
Dividend per profit, % 42.0%
P/E ratio 24.97 49.02 29.55 28.02
Share price
performance
lowest share price 6.14 10.11 11.21 9.50
highest share price 10.45 14.00 15.25 14.00
average share price 7.70 12.13 13.22 12.03
closing share price 7.00 12.95 11.90 10.00
Market value at end of
period 80 276 868 148 512 206 136 470 676 114 681 240
Number of traded
shares 1 808 869 2 216 534 4 708 382 2 761 995
% of average share
number 15.8% 19.3% 42.5% 24.1%
Average share number:
- during the period 11 468 124 11 468 124 11 074 109 11 468 124
- during the period,
diluted 11 468 124 11 468 124 11 138 694 11 468 124
*) Includes cash, cash equivalents and financial assets at fair value
through profit or loss
**) Includes capitalized R&D costs and acquisitions
MAJOR SHAREHOLDERS, SEPTEMBER 30, 2008
Shares Votes
pcs %
1. Sihvo, Ilkka 1 065 800 9.3
2. Vaajoensuu, Hannu (incl. a controlled
company and children under guardianship) 1 045 800 9.1
3. Eräkangas, Kirsi (incl. children under
guardianship) 1 031 800 9.0
4. Perttunen, Sakari 830 400 7.2
5. Pöllänen, Antti (incl. children under
guardianship) 740 900 6.5
6. Nordea Nordic Small Cap Fund 555 734 4.8
7. Henki-Sampo Pension Insurance Company 550 000 4.8
8. Ahonen, Asko 318 822 2.8
9. Royal Skandia Life Assurance 270 000 2.4
10. Veritas Pension Insurance Company 266 000 2.3
11. Kaleva Mutual Insurance Company 242 690 2.1
12. Perttunen, Meimi 215 400 1.9
13. Fondita Nordic Micro Cap Fund 200 000 1.7
14. Evli Pankki Oyj 120 297 1.0
15. Aktia Capital Fund 108 213 0.9
16. Fondita Nordic Small Cap Fund 106 000 0.9
17. Pavor Oy 75 052 0.7
18. Sinkonen, Raija 70 000 0.6
19. Sarvala, Vesa 65 241 0.6
20. Sr Eq Finland Small companies 61 443 0.5
20 largest shareholders total 7 939 592 69.2
Nominee registered shares 1 059 925 9.2
Others 2 468 607 21.5
Total 11 468 124 100.0
