AFFECTO PLC INTERIM REPORT 4 AUGUST 2009 at 9.30
AFFECTO PLC'S INTERIM REPORT 1-6/2009
GROUP KEY FIGURES
MEUR 4-6/09 4-6/08 1-6/09 1-6/08 2008
Net sales 26.2 36.2 53.7 69.8 131.6
Operational segment 2.0 5.3 1.8 8.9 14.5
result
% of net sales 7.8 14.5 3.4 12.7 11.0
Operating profit 1.5 4.5 -5.4 7.4 11.8
% of net sales 5.7 12.5 -10.1 10.7 9.0
Result before taxes 1.2 4.6 -7.4 6.6 10.5
Result for the period 0.8 3.4 -7.2 4.9 8.5
Equity ratio, % 41.7 44.4 41.7 44.4 43.0
Net gearing, % 50.7 53.7 50.7 53.7 34.7
Earnings per share, eur 0.04 0.16 -0.33 0.23 0.40
Earnings per share 0.04 0.16 -0.33 0.23 0.40
(diluted), eur
Equity per share, eur 2.37 2.98 2.37 2.98 2.73
CEO Pekka Eloholma comments:
"During second quarter 2009, the business of the Nordic units developed rather
steadily, although the effects of the recession can be seen to some extent
both in sales and profit. The Baltic economies continued their rapid decline."
"Net sales decreased by 28% to 26.2 MEUR (36.2 MEUR). The main reasons, in
addition to the economic recession, were the Contempus divestment in 2008,
strong devaluation of the Norwegian and Swedish currencies (NOK, SEK), the
weak development in Baltic and having Easter in April. Organic decrease in net
sales was approx. -22% and would have been -19% with fixed currency rates."
"The second quarter operating profit was approx 1.5 MEUR i.e. 6% of net sales.
Profitability was good in Finland (12%), and reasonable in Norway (6%), Sweden
(9%) and Denmark (8%). In Baltic, the restructuring actions announced in April
enabled the profitability to return positive by the end of the quarter."
"The order backlog was approx. 38 MEUR at the end of the period, which is a
bit lower than the previous-quarter figure of 42 MEUR. The customers' activity
has continued to be good, but decision making has slowed."
"The weakened economic environment makes reliable forecasting more difficult.
Due to the Contempus divestment and the weakened general economy, the net
sales in year 2009 will remain below the level in 2008. The profitability
(EBIT margin) of the whole year 2009 will be clearly below the profitability
in 2008."
Additional information:
CEO Pekka Eloholma, +358 205 777 737
CFO Satu Kankare, +358 205 777 202
SVP, M&A, IR, Hannu Nyman, +358 205 777 761
This report is unaudited. The amounts in this report have been rounded from
exact numbers.
INTERIM REPORT 1-6/2009
Affecto builds versatile IT solutions for companies and organisations to
improve their efficiency in business and to support the related decision-
making. With Affecto's Business Intelligence solutions organisations are able
to integrate strategic targets with their business management. Business
Intelligence solutions enable the further processing and utilisation of
information generated by ERP and other IT systems. The company also delivers
operational solutions, such as Enterprise Content Management (ECM), for
improving and simplifying processes at customer organisations. Affecto offers
Business Intelligence solutions in its operating areas in the Nordic and
Baltic countries. In Operational solutions, the company has a presence in
Finland and in the Baltic region.
Affecto is headquartered in Helsinki, Finland. The company has subsidiaries in
Finland, Sweden, Norway, Denmark, Estonia, Lithuania, Latvia and Poland.
NET SALES
Affecto's net sales in 1-6/2009 were 53.7 MEUR (1-6/2008: 69.8 MEUR). Net
sales in Finland were 23.2 MEUR (23.4 MEUR), in Norway 10.3 MEUR (16.8 MEUR),
in Sweden 8.3 MEUR (12.6 MEUR), in Denmark 6.2 MEUR (5.6 MEUR) and 6.9 MEUR
(12.3 MEUR) in Baltic. Net sales decreased by 23% especially due to weak
development in Baltic, the currency rates and also the divestment of
Contempus. The organic change in sales was approx. -17%, and -13% when
assessed using fixed currency rates.
The second quarter was impacted by the weakened general economy, which
affected especially Baltic area. In addition, the strong devaluation of the
Norwegian and Swedish currencies (NOK, SEK) at the end of 2008 and later, has
clearly lowered the figures in euros compared to the same period last year. In
addition, the Easter holidays were in April this year, decreasing the Q2 net
sales compared to last year's Q2.
In general the Q2 was like Q1 to a large extent. The customers continue to
have interest for Affecto's solutions, but decision making has slowed and
price pressures have grown.
Economic situation has weakened rapidly in the Baltic countries, which has
negatively affected Affecto's business. The preliminary GDP information and
forecasts for Baltic countries suggests 15-20% decrease in GDP in Q2. The
strong weakening of the Baltic economies combined with public sector's
sizeable cost saving programs has clearly decreased the demand for IT
services.
Net sales by reportable segments
Net sales, MEUR 4-6/09 4-6/08 1-6/09 1-6/08 2008
Finland 11.4 11.7 23.2 23.4 46.4
Norway 5.1 9.0 10.3 16.8 29.6
Sweden 4.2 6.4 8.3 12.6 22.6
Denmark 3.0 3.1 6.2 5.6 10.6
Baltic 3.0 6.6 6.9 12.3 24.3
Eliminations -0.6 -0.5 -1.2 -1.0 -1.9
Group total 26.2 36.2 53.7 69.8 131.6
Net sales of BI business in 1-6/2009 were 35.1 MEUR (41.0 MEUR), Operational
Solutions 14.3 MEUR (23.8 MEUR) and Geographic Information Services 4.9 MEUR
(6.2 MEUR). The BI business has experienced organic growth (measured in local
currency) in Finland and Denmark, been flat in Norway and contracted in
Sweden.
Operational solutions business continued to grow in Finland especially
regarding ECM solutions, but decreased significantly in Baltic. The Contempus
divestment in September 2008 also contributed to the decrease in net sales, as
after the divestment Affecto has Operational solutions only in Finland and
Baltic.
PROFIT
Affecto's EBIT in 1-6/2009 was -5.4 MEUR (7.4 MEUR). Operational segment
result was in Finland 3.0 MEUR (3.4 MEUR), in Norway 1.1 MEUR (1.5 MEUR), in
Sweden 0.7 MEUR (1.8 MEUR), in Denmark 0.5 MEUR (0.6 MEUR) and in Baltic -2.6
MEUR (2.8 MEUR). The result in Baltic includes 1.4 MEUR expenses related to
restructuring.
Operational segment result by reportable segments
Operational segment 4-6/09 4-6/08 1-6/09 1-6/08 2008
result, MEUR
Finland 1.3 1.4 3.0 3.4 6.9
Norway 0.3 1.0 1.1 1.5 2.9
Sweden 0.4 1.1 0.7 1.8 2.9
Denmark 0.2 0.4 0.5 0.6 1.2
Baltic 0.1 2.1 -2.6 2.8 3.2
Other -0.3 -0.7 -0.8 -1.2 -2.5
Operational segment result 2.0 5.3 1.8 8.9 14.5
IFRS3 Amortization -0.5 -0.7 -1.0 -1.4 -2.7
Impairment of Goodwill - - -6.2 - -
Operating profit 1.5 4.5 -5.4 7.4 11.8
The restructuring costs 1.4 MEUR in Baltic are included in the operational
segment result of the Baltic segment (-1.7 MEUR in Q1, +0.3 MEUR in Q2). The
goodwill impairment of 6.2 MEUR is shown separately.
According to IFRS3 requirements, 1-6/2009 EBIT includes 1.0 MEUR (1.4 MEUR) of
amortization of intangible assets related to acquisitions. A significant part
of the amortization is related to Sweden, Norway and Denmark segments. In year
2009 the IFRS3 amortization is estimated to total 2.1 MEUR and in 2010 approx.
1.9 MEUR based on currency exchange rates on the end of reporting period.
The profitability in Finland was at a good level. Profit was reasonable in
Norway, Sweden and Denmark. The Baltic segment returned to profit by the end
of the quarter.
R&D costs totaled 0.1 MEUR (1.0 MEUR), i.e. 0.3% of net sales (1.4%). The
expenditure has been recognized as cost in income statement.
The fluctuation in financial costs between quarters is explained to a large
extent by changes in the fair value of the interest swap taken, which changes
have no effect on actual cash flow. The interest rate changes have caused -0.3
MEUR cost impact in Q1 and +0.2 MEUR profit in Q2, totaling net -0.1 MEUR in 1-
6/2009. In addition, due to intra-group loans the first quarter result
includes a foreign exchange loss of 0.9 MEUR, as the Norwegian krone (NOK)
strengthened from the year-end's bottom level.
Taxes for the period have been booked as taxes. Net profit for the period was
-7.2 MEUR, while it was 4.9 MEUR last year.
Order backlog totaled 38.1 MEUR at the end of period. The order backlog
decreased compared both to the previous quarter (41.6 MEUR) and to the same
quarter in previous year (49.1 MEUR including backlog of Contempus). Affecto
has a well diversified customer base. The ten largest customers generated
approx. 20% of group revenue in 2008 and the largest customer corresponded to
4% of net sales.
FINANCE AND INVESTMENTS
At the end of the reporting period, Affecto's balance sheet totaled 130.2 MEUR
(12/2008: 146.6 MEUR). Equity ratio was 41.7% (12/2008: 43.0%) and net gearing
was 50.7% (12/2008: 34.7%). Translation differences have increased the
consolidated equity by 2.3 MEUR during 1-6/2009 mainly due to the
strengthening of the Norwegian krone (NOK).
The financial loans were 42.4 MEUR (12/2008: 43.9 MEUR) as at 30 June 2009.
The company's cash and liquid assets were 16.7 MEUR (12/2008: 23.6 MEUR). The
interest-bearing net debt was 25.8 MEUR (12/2008: 20.4 MEUR).
Cash flow from operating activities for the reported period was -2.2 MEUR (6.6
MEUR) and cash flow from investments was -0.5 MEUR (-3.6 MEUR). Investments in
non-current assets excluding acquisitions were 0.6 MEUR (1.3 MEUR) during the
period.
Based on decision by the Annual General Meeting held on 3 April 2009, Affecto
has distributed dividends of 3.0 MEUR (previous year 3.4 MEUR) from the profit
of the year 2008. Dividend was paid on 21 April 2009.
EMPLOYEES
The number of employees was 944 persons at the end of the reporting period
(1175). Approx. 380 employees were based in Finland, 120 in Sweden, 100 in
Norway, 60 in Denmark, and 280 in the Baltic countries. The average number of
employees during the period was 1 023 (1 146).
Jukka Nortio was appointed in June as Affecto's Marketing and communications
director.
BUSINESS REVIEW BY AREAS
The business in Nordic countries has mainly developed rather steadily,
although the general economic outlook has weakened during the period. The
Baltic area is clearly the most weakened area.
The group's business is managed through five country units. Finland, Norway,
Sweden, Denmark and Baltic are also the reportable IFRS segments.
Finland
In 4-6/2009 net sales in Finland were 11.4 MEUR (11.7 MEUR). Operational
segment result was 1.3 MEUR (1.4 MEUR). The business developed rather steadily
during the period and the demand for various services was reasonably good.
Both BI and Operational solutions business grew, but the Geographic
information services business contracted.
The customers' activity has so far continued to be relatively good despite the
recession. However, the decision making has slowed down and the price pressure
has grown. The public sector seems to be active especially regarding ECM
solutions.
The growth of IT services market in Finland is forecast to be rather moderate
in 2009: only 1% according to Marketvisio's estimate in the June 2009.
However, Affecto's focus segments like BI and ECM are expected to experience a
growth of 5-6% in software sales.
Norway
The net sales in 4-6/2009 were 5.1 MEUR (9.0 MEUR) and operational segment
result was 0.3 MEUR (1.0 MEUR). The decrease in net sales in euros was mainly
caused by the divestment of Contempus and the devaluation of the Norwegian
krone (NOK) at end of 2008. The BI business in Norway decreased by 11% if
measured in local currency.
The business developed steadily and the demand for project services continued.
The impact of the weakening economy has some impact on sales and profit: e.g
the sales of third party licenses remained below targets.
Sweden
In 4-6/2009 the net sales in Sweden were 4.2 MEUR (6.4 MEUR) and operational
segment result 0.4 MEUR (1.1 MEUR). The strong devaluation of the Swedish
krona (SEK) has had a major impact on euro-denominated figures.
There have been no major changes in business in Sweden during the period. The
customers' activity has remained reasonable. Investment decision making is
slower and IT budgets are smaller. The growing price pressure increases
uncertainty regarding customer relationships.
Denmark
The net sales in 4-6/2009 were 3.0 MEUR (3.1 MEUR) and operational segment
result was 0.2 MEUR (0.4 MEUR).
Net sales remained at last year's level, but the profit weakened. The business
has developed along the weakening general economy: the customers' decision
making is slowing down and price pressure is growing.
Baltic (Lithuania, Latvia, Estonia, Poland)
The Baltic business mostly consists of projects related to large customer-
specific systems. Projects may be larger and tender processes longer than in
Finland or the other Nordic countries. The business is mostly classified as
Operational solutions, but also includes BI solutions. Public sector entities
in the Baltic countries and insurance companies also outside Baltic area are
significant customer segments.
In 4-6/2009 the Baltic net sales were 3.0 MEUR (6.6 MEUR). Operational segment
result was 0.1 MEUR (2.1 MEUR).
The Baltic economies have developed extremely weakly during the economic
crisis. The IT investments from the public sector are expected to decrease due
to government cost saving programs and already decided projects have been
selectively postponed.
Affecto published in April a goal to reduce the personnel in Baltic countries
by some 130 employees. The business in Latvia and Poland was to be cut
significantly, and to some extent also in Lithuania. For the costs of the
actions a reserve of 1.7 MEUR was recognized in the first quarter results. The
planned actions have mostly been carried out during the second quarter. As one
part of the actions, a part of Latvian business planned to be terminated was
divested to Tieto in June. It is currently estimated that the total
restructuring costs will be approx. 1.4 MEUR and the unused amount of reserve
has been reversed during Q2.
We estimate that the already taken actions enable profitable business in
Baltic, assuming that the national economies continue at the current level.
However, the development of the local business environment is very uncertain.
Review by business lines
Business intelligence (BI) net sales decreased by 19% to 17.3 MEUR (21.2 MEUR)
in 4-6/2009. The weakened general economy has not yet affected the BI business
very significantly, except in Sweden. However, the sales of third party
software licenses have been lower than earlier. Slower investment decisions
and smaller IT budgets have led to growing price pressure from customers.
Customers see BI solutions as tools for improving their own efficiency and
controllability, which may maintain the interest to invest in BI solutions
also during periods of weaker economic growth. However, the weakness in
general economy may also affect the BI investments. Gartner estimated in
January 2009 the BI solutions to be one of the key investment areas and annual
global BI license market average growth to exceed 7% until year 2012.
Net sales of Operational Solutions in 4-6/2009 decreased by 49% to 6,3 MEUR
(12.4 MEUR). The Norwegian Contempus subsidiary was divested in September
2008, which has contributed to the decrease. In Finland, the business grew by
12% and especially the demand for ECM solutions was good and the utilization
rate of project resources was good. The net sales in Baltic decreased
significantly, as sales decreased both for the local market services and for
insurance sector export projects.
Net sales of the Geographic Information Services business were 2.6 MEUR (3.2
MEUR) in 4-6/2009. The development of the digital geographic content and
outsourcing services businesses was better than the development of map and
other publishing business. During the period a new long-term outsourcing
contract was signed with Destia.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on 3 April 2009,
adopted the financial statements for 1.1.-31.12.2008 and discharged the
members of the Board of Directors and the CEO from liability. Approximately 27
percent of Affecto's shares and votes were represented in the Meeting. The
Annual General Meeting decided that a dividend of EUR 0.14 per share be
distributed for the year 2008.
Aaro Cantell, Pyry Lautsuo, Heikki Lehmusto, Esko Rytkönen and Haakon Skaarer
were re-elected as members of the Board of Directors. Immediately after the
Annual General Meeting the organization meeting of the Board of Directors was
held and Aaro Cantell was re-elected Chairman of the Board. The APA firm KPMG
Oy Ab was elected auditor of the company with Reino Tikkanen, APA, as auditor
in charge.
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 Board did not use the authorizations given by the previous Annual General
Meeting. Those authorizations ended on 3 April 2009.
The complete contents of the new authorizations given by the Annual General
Meeting held on 3 April 2009 have been published in the stock exchange release
regarding the Meetings' decisions.
The Annual General Meeting decided to authorize 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 payment or without consideration on terms to be determined by
the Board of Directors and in relation to a share issue against payment 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 shall be in
force until the next Annual General Meeting.
The Annual General Meeting decided to authorize 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 shall be in force until
the next Annual General Meeting.
SHARES AND TRADING
The company has only one share series, and all shares have similar rights. As
at 30 June 2009, Affecto Plc's share capital consisted of 21 516 468 shares.
The company owns 36 738 treasury shares, which corresponds to 0.2% of all
shares.
In 1-6/2009, the highest share price was 2.67 euro, lowest price 1.82 euro,
average price 2.15 euro and closing price 2.10 euro. Trading volume was 3.7
million shares, corresponding to 35% (annualized) of the number of shares at
the end of period. The market value of shares was 45.1 MEUR at the end of the
period.
OPTIONS
During the review period, 306 132 options 2006C have been given to key
personnel.
SHAREHOLDERS
The company had a total of 1838 owners on 30 June 2009 and the foreign
ownership was 30%. The list of the largest owners can be viewed in the
company's web site. Information about ownership structure and option program
is included as a separate section in the financial statements. The ownership
of board members, CEO and their controlled corporations totaled approx. 6.0%
(5.7% shares and 0.3% options).
ASSESSMENT OF RISKS AND UNCERTAINTIES
Affecto operates in markets that are directly affected by changes in the
general economic conditions and the operating environments of its customers.
The competition in the market tightens continuously. This could have a
negative effect on the business, operating results and financial condition of
Affecto.
The general economic downturn may lead to a decrease in overall customer
demand for services, increase price pressure from customers and lengthen offer
processes at customers. Also the competitors' eagerness to complain about
public procurement decisions may increase, which may cause delays in projects
or interrupt the project delivery work. The continuing downturn may lead into
decrease in utilization rate of consultants.
The economic downturn may weaken customers' liquidity, also in the public
sector. The risks related to receivables have grown especially in the Baltic
countries.
Affecto's success depends also on good customer relationships. Affecto has a
well diversified customer base. Although none of the customers is critically
large for the whole group, there are large customers in various countries who
are significant for local business in the country.
Affecto's order backlog has traditionally been only for a few months, which
decreases the reliability of longer-term forecasts. Slower investment decision
making, postponing or cancellation of customers' IT investments may have
negative impact on Affecto's profitability.
Approx a half of Affecto's business is in Sweden, Norway and Denmark, thus the
development of the currencies of these countries (SEK, NOK and DKK) may have
impact on Affecto's profitability.
Affecto's continued success is very much dependent on its management team and
personnel. The loss of the services of any member of its senior management or
other key employee could have a negative impact on Affecto's business and the
ability of the company to implement its strategy. In addition, Affecto's
success depends on its ability to hire, develop, train, motivate and retain
skilled professionals on its staff.
Acquisition of Component Software in 2007 has increased the amount of (third
party) licenses sold and their relative share of Affecto's net sales. This
will increase the fluctuation in sales between quarters and will increase the
difficulty of accurately forecasting the quarters. Affecto had license sales
of approx. 12 MEUR in 2008. The license sales have most impact on the last
month of each quarter and especially in the fourth quarter.
The damage risks of Affecto are normally related to personnel, property,
processes and data processing. The realization of these risks might lead to
injuries of personnel, property damages or interruption of business. In the
operations the target of Affecto is to prevent these risks to realize by
quality operations and anticipatory risk management actions. The realization
of such risks is mainly prevented by guidelines for occupational health, work
safety and information security as well as emergency plan. The damage risks,
which cannot be prevented by own actions, are covered with adequate
insurances.
Currently, corporate tax rates in Latvia and Lithuania are below those of
several other member states of the European Union, and therefore Latvia and
Lithuania provide a favorable environment for commercial enterprises.
Furthermore, the income tax regulation of Latvia and Lithuania allow for local
businesses to structure their operations in a cost-efficient way. For example,
certain software development activities are treated as so-called creative
activities, which is cost beneficial for the enterprises. When joining the
European Union on 1 May 2004, Latvia and Lithuania committed to the ongoing
harmonization of the laws and regulations of the member states. At present,
the European Union leaves regulation relating to taxation to the discretion of
its member states. However, there can be no assurances that the European Union
will not impose requirements on its member states to harmonize their taxation
system which, in the case of Latvia and Lithuania, could result in an increase
in corporate tax rates and restrictions on the opportunities of local business
to structure their operations to the extent currently possible. Furthermore,
there can be no assurances that Latvia and Lithuania will not independently
decide to implement tax reforms or that the interpretation of current tax laws
by courts or fiscal authorities will not be changed retroactively with similar
effects. Harmonization imposed by the European Union or domestic tax reforms
or changes in the interpretation of current tax laws by courts or fiscal
authorities in Latvia and Lithuania could have a material adverse effect on
the business, operating results and financial condition of Affecto.
In seeking future growth, the strategy of Affecto is partially based on
expansion through acquisitions of other operators in the IT services market.
The inability to find new target companies or the lower than expected
profitability of acquisitions made, could have a material adverse effect on
the business, operating results and financial condition of Affecto.
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 reported profit and value of
assets.
The board of directors and the audit committee is responsible for Affecto's
internal control and risk management. Company's management is responsible for
and performs practically the internal control and risk management.
FUTURE OUTLOOK
The weakened economic environment makes reliable forecasting more difficult.
Due to the Contempus divestment and the weakened general economy, the net
sales in year 2009 will remain below the level in 2008. The profitability
(EBIT margin) of the whole year 2009 will be clearly below the profitability
in 2008.
As a normal seasonality effect, the summer vacations will weaken net sales and
profitability in the third quarter.
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
It is possible to order Affecto's stock exchange releases to be delivered
automatically by e-mail. Please visit the Investors section of the company
website: www.affecto.com
A briefing for analysts and media will be arranged at 11:00 at Restaurant
Savoy, Eteläesplanadi 14, Helsinki.
www.affecto.com
-----
Financial information:
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in shareholders'
equity
2. Notes
3. Key figures
1. Consolidated income statement, other comprehensive income, balance sheet,
cash flow statement and statement of changes in shareholders' equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 4-6/09 4-6/08 1-6/09 1-6/08 2008
Net sales 26 174 36 187 53 700 69 785 131 565
Other operating income 10 640 15 843 902
Changes in inventories of -81 2 -89 68 -287
finished goods and work in
progress
Materials and services -4 657 -6 572 -9 389 -12 593 -25 317
Personnel expenses -14 940 -18 778 -32 582 -37 414 -69 818
Other operating expenses -4 093 -5 786 -9 055 -10 957 -20 962
Other depreciation and -382 -440 -768 -854 -1 620
amortisation
IFRS3 amortisation -527 -721 -1 044 -1 439 -2 653
Impairment - - -6 208 - -
Operating profit 1 504 4 532 -5 421 7 439 11 808
Finance costs (net) -285 42 -2 005 -826 -1 341
Result before income tax 1 219 4 574 -7 425 6 614 10 467
Income tax -374 -1 190 257 -1 720 -1 963
Result for the period 845 3 384 -7 168 4 894 8 503
Result attributable to:
Equity holders of the Company 845 3 384 -7 168 4 894 8 503
Minority interest 0 0 0 0 0
Earnings per share (EUR per share):
Basic 0.04 0.16 -0.33 0.23 0.40
Diluted 0.04 0.16 -0.33 0.23 0.40
CONSOLIDATED COMPREHENSIVE
INCOME STATEMENT
(1 000 EUR) 4-6/09 4-6/08 1-6/09 1-6/08 2008
Result for the period 845 3 384 -7 168 4 894 8 503
Other comprehensive income:
Translation difference 291 125 2 305 -418 -9 472
Total Comprehensive income for 1 136 3 509 -4 863 4 476 -969
the period
Total Comprehensive income
attributable to:
Equity holders of the Company 1 136 3 509 -4 863 4 476 -969
Minority interest 0 0 0 0 0
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 6/2009 6/2008 12/2008
Non-current assets
Property, plant and equipment 2 503 2 268 2 715
Goodwill 67 413 83 734 72 614
Other intangible assets 10 269 16 779 11 093
Deferred tax assets 2 260 2 346 2 031
Available-for-sale financial assets 54 54 54
Derivative financial instruments 16 408 20
Trade and other receivables 162 168 220
82 677 105 757 88 747
Current assets
Inventories 1 034 1 805 1 148
Trade and other receivables 28 318 34 583 32 166
Current income tax receivables 1 069 828 206
Available-for-sale financial assets 92 106 295
Restricted cash and cash equivalents 325 582 518
Cash and cash equivalents 16 660 11 018 23 554
47 499 48 922 57 886
Total assets 130 176 154 679 146 633
Equity attributable to equity holders
of the Company
Share capital 5 105 5 105 5 105
Share premium 25 404 25 404 25 404
Reserve of invested non-restricted 21 188 21 188 21 188
equity
Other reserves 243 172 176
Treasury shares -106 -106 -106
Translation differences -7 938 -1 189 -10 243
Retained earnings 6 926 13 492 17 101
50 822 64 066 58 625
Minority interest - - -
Total shareholders' equity 50 822 64 066 58 625
Non-current liabilities
Borrowings 38 434 42 416 40 424
Derivative financial instruments 852 - 715
Deferred tax liabilities 3 082 4 822 3 388
Trade and other payables 629 681 803
42 997 47 919 45 330
Current liabilities
Borrowings 4 000 3 000 3 500
Trade and other payables 30 551 36 347 37 556
Current income tax liabilities 1 184 3 347 1 442
Derivative financial instruments 177 - 179
Provisions 446 - -
36 358 42 694 42 677
Total liabilities 79 354 90 613 88 007
Total shareholders' equity and 130 176 154 679 146 633
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 1-6/2009 1-6/2008 2008
Cash flows from operating activities
Result for the period -7 168 4 894 8 503
Adjustments to profit for the period 10 142 4 175 7 077
2 975 9 069 15 581
Change in working capital -2 770 -520 4 198
Interest and other finance cost paid -1 170 -1 453 -2 812
Interest and other finance income received 223 298 651
Income taxes paid -1 420 -810 -2 968
Net cash generated from operating -2 163 6 584 14 651
activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash - -3 925 -3 925
Purchases of tangible and intangible assets -623 -1 268 -2 741
Proceeds from sale of tangible and 77 1 591 1 665
intangible assets
Sale of business/subsidiaries, net of cash - 46 8 346
Net cash used in investing activities -546 -3 556 3 345
Cash flow from financing activities
Repayments of borrowings -1 500 -1 500 -3 000
Dividends paid to the company's -3 007 -3 437 -3 437
shareholders
Net cash generated in financing activities -4 507 -4 937 -6 437
(Decrease)/increase in cash and cash -7 216 -1 908 11 559
equivalents
Cash and cash equivalents at the beginning 23 554 12 974 12 974
of the period
Foreign exchange effect on cash 322 -47 -979
Cash and cash equivalents at the end of the 16 660 11 018 23 554
period
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(1 000 EUR) Share Share Reserve Other Trea- Trans- Ret. Total
capitalpremium of reserves sury lat. earn- equity
invested shares diff. ings *
non-
restrict
ed
equity
Shareholders' 5 105 25 404 21 188 176 -106 -10 243 17 101 58 625
equity 1
January 2009
Total 2 305 -7 168 -4 863
comprehensive
income
Share options 66 66
Dividents paid -3 007 -3 007
Shareholders' 5 105 25 404 21 188 243 -106 -7 938 6 926 50 822
equity 30 June
2009
(1 000 EUR) Share Share Reserve Other Trea- Trans- Ret. Total
capitalpremium of reserves sury lat. earn- equity
invested shares diff. ings *
non-
restrict
ed
equity
Shareholders' 5 105 25 404 21 188 108 -106 -771 12 035 62 964
equity 1
January 2008
Total -418 4 894 4 476
comprehensive
income
Share options 64 64
Dividents paid -3 437 -3 437
Shareholders' 5 105 25 404 21 188 172 -106 -1 189 13 492 64 066
equity 30 June
2008
* Affecto has not had a minority share in 2008 or 2009.
2. Notes
2.1. Basis of preparation
This condensed interim financial information has been prepared in accordance
with IAS 34, Interim financial reporting. The condensed interim financial
report should be read in conjunction with the annual financial statements for
the year ended 31 December 2008.
The group has adopted the following new and revised standards starting from 1
January 2009: IFRS 8 Operating Segments and IAS 1 Presentation of Financial
Statements. In other respect, the same accounting policies have been applied
as in the 2008 annual consolidated financial statements. Forthcoming standards
and interpretations are presented in the accounting policies in Annual Report
2008.
2.2. Segment information
Affecto has changed its internal reporting. Since the beginning of 2009
Affecto's reporting segments are based on geographical locations and are
Finland, Norway, Sweden, Denmark and Baltic. Corresponding information for
prior periods disclosed in this report has been restated.
Segment sales and result
(1 000 EUR) 4-6/09 4-6/08 1-6/09 1-6/08 2008
Total sales
Finland 11 411 11 662 23 167 23 433 46 432
Norway 5 075 8 983 10 331 16 816 29 597
Sweden 4 198 6 407 8 281 12 603 22 573
Denmark 3 028 3 093 6 203 5 610 10 564
Baltic 3 038 6 561 6 874 12 303 24 289
Eliminations -576 -520 -1 156 -982 -1 890
Group total 26 174 36 187 53 700 69 785 131 565
Operational segment result
Finland 1 323 1 421 3 005 3 419 6 886
Norway 298 964 1 061 1 502 2 877
Sweden 384 1 054 697 1 758 2 890
Denmark 243 403 518 607 1 157
Baltic 76 2 064 -2 623 2 812 3 151
Other -291 -654 -828 -1 220 -2 500
Total operational segment 2 031 5 252 1 830 8 878 14 461
result
IFRS amortisation -527 -721 -1 043 -1 439 -2 653
Impairment of Goodwill - - -6 207 - -
Operating profit 1 504 4 532 -5 421 7 439 11 808
The impairment of Goodwill is allocated to assets of Baltic segment.
The operational segment result in Baltic includes 1.4 MEUR restructuring
costs.
Segment assets
(1 000 EUR) 6/2009 12/2008
Finland 38 321 39 806
Norway 21 035 24 027
Sweden 24 221 23 634
Denmark 15 815 14 785
Baltic 10 503 18 091
Total segment assets 109 895 120 343
Unallocated assets 20 281 26 291
Total assets 130 176 146 633
Sales by business lines
(1 000 EUR) 4-6/09 4-6/08 1-6/09 1-6/08 2008
BI 17 274 21 219 35 083 40 990 77 584
Operational Solutions 6 289 12 359 14 277 23 767 44 613
Geographic Information 2 626 3 224 4 940 6 177 11 774
Services
Eliminations -14 -615 -600 -1 148 -2 406
Group total 26 174 36 187 53 700 69 785 131 565
2.3. Changes in intangible and tangible assets
(1 000 EUR) 1-6/09 1-6/08 1-12/08
Carrying amount at the beginning of period 86 422 104 382 104 382
Acquisition of subsidiaries - -75 -
Additions 623 1 268 2 740
Disposals -113 -125 -148
- - -8 695
-6 208 - -7
Depreciation and amortization for the period -1 810 -2 291 -4 268
Exchange rate differences 1 271 -378 -7 581
Carrying amount at the end of period 80 185 102 781 86 422
2.4. Share capital, share premium, reserve of invested non-restricted equity
and treasury shares
(1 000 EUR) Number of Share Share reserve of Treasury
shares capital premium invested shares
non-
restricted
equity
1 January 2008 21 479 730 5 105 25 404 21 188 -106
30 June 2008 21 479 730 5 105 25 404 21 188 -106
1 January 2009 21 479 730 5 105 25 404 21 188 -106
30 June 2009 21 479 730 5 105 25 404 21 188 -106
At the end of reporting period the company owned 36 738 treasury shares. The
amount of registered shares was 21 516 468 shares.
2.5. Interest-bearing liabilities
(1 000 EUR) 1-6/09 1-6/08 1-12/08
At the beginning of period 43 924 46 906 46 906
Increase of liabilities 0 0 0
Repayments of liabilities -1 500 -1 500 -3 000
Accrued expenses 10 10 18
At the end of period 42 434 45 416 43 924
2.6. Earnings per share
Calculation of earnings per share and diluted earnings per share is based on
the figures below.
4-6/09 4-6/08 1-6/09 1-6/08 1-12/08
Profit attributable to equity holders 845 3 384 -7 168 4 894 8 503
of the company (1 000 EUR)
Weighted average number of shares
(1 000):
In calculation of earnings per share 21 480 21 480 21 480 21 480 21 480
Dilution effect of share options 0 0 0 0 0
In calculation of diluted earnings 21 480 21 480 21 480 21 480 21 480
per share
Earnings per share (EUR per share)
Basic 0.04 0.16 -0.33 0.23 0.40
Diluted 0.04 0.16 -0.33 0.23 0.40
2.7. Contingencies and commitments
The future aggregate minimum lease payments under non-cancelable operating
leases:
1 000 EUR 30.6.2009 31.12.2008
Not later than one (1) year 2 543 2 832
Later than one (1) year, but not later than 2 558 3 552
five (5) years
Later than five (5) years - -
Total 5 101 6 384
Guarantees:
1 000 EUR 30.6.2009 31.12.2008
Debt secured by a mortgage
Financial loans 42 500 44 000
The above-mentioned debts are secured by bearer bonds with capital 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 loans above.
Other securities given on own behalf: 30.6.2009 31.12.2008
Pledges 72 432
Other guarantees 56 56
Pledges consist of long-term receivables.
2.8. Derivative contracts
1 000 EUR 30.6.2009 31.12.2008
Interest rate swaps:
Nominal value 32 500 34 000
Fair value -1 028 -894
Interest rate cap:
Nominal value 8 000 8 000
Fair value 16 20
2.9. Related party transactions
Key management compensation and remunerations to the board of directors
(1 000 EUR) 1-6/09 1-6/08 1-12/08
Salaries and other short-term employee 1 463 1 840 3 519
benefits
Post-employment benefits 156 237 421
Share-based payments 23 26 36
Total 1 642 2 104 3 976
3. Key figures
4-6/09 4-6/08 1-6/09 1-6/08 2008
Net sales, 1 000 eur 26 174 36 187 53 700 69 785 131 565
EBITDA, 1 000 eur 2 413 5 692 2 599 9 732 16 081
Operational segment result, 1 000 2 031 5 253 1 830 8 878 14 461
eur
Operating result, 1 000 eur 1 504 4 532 -5 421 7 439 11 808
Result before taxes, 1 000 eur 1 219 4 547 -7 425 6 614 10 467
Net income for equity holders of 845 3 384 -7 168 4 894 8 503
the parent company, 1 000 eur
EBITDA, % 9.2 % 15.7 % 4.8 % 13.9 % 12.2 %
Operational segment result, % 7.8 % 14.5 % 3.4 % 12.7 % 11.0 %
Operating result, % 5.7 % 12.5 % -10.1 % 10.7 % 9.0 %
Result before taxes, % 4.7 % 12.6 % -13.8 % 9.5 % 8.0 %
Net income for equity holders of 3.2 % 9.4 % -13.3 % 7.0 % 6.5 %
the parent company, %
Equity ratio, % 41.7 % 44.4 % 41.7 % 44.4 % 43.0 %
Net gearing, % 50.7 % 53.7 % 50.7 % 53.7 % 34.7 %
Interest-bearing net debt, 25 774 34 398 25 774 34 398 20 371
1 000 eur
Gross investment in non-current 233 508 623 1 268 2 741
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 0.9 % 1.4 % 1.2 % 1.8 % 2.1 %
Research and development costs, 58 415 134 982 1 468
1 000 eur
R&D -costs, % of sales 0.2 % 1.1 % 0.3 % 1.4 % 1.1 %
Order backlog, 1 000 eur 38 090 49 106 38 090 49 106 44 467
Average number of employees 989 1 162 1 023 1 146 1 136
Earnings per share, eur 0.04 0.16 -0.33 0.23 0.40
Earnings per share (diluted), eur 0.04 0.16 -0.33 0.23 0.40
Equity per share, eur 2.37 2.98 2.37 2.98 2.73
Average number of shares, 1 000 21 480 21 480 21 480 21 480 21 480
shares
Number of shares at the end of 21 480 21 480 21 480 21 480 21 480
period, 1 000 shares
Calculation of key figures
EBITDA = Earnings before interest, taxes,
depreciation and amortization
Operational segment result = Operating profit before amortisations on
fair value adjustments due to business
combinations (IFRS3) and Goodwill
impairments
Equity ratio, % = Shareholders' equity + minority *100
interest
________________________________
Total assets - advances received
Gearing, % = Interest-bearing liabilities - *100
cash, bank receivables and
securities held as financial asset
__________________________________
Shareholders' equity + minority
interest
Interest-bearing net debt = Interest-bearing liabilities - cash
and bank receivables
Earnings per share (EPS) = Result for the period to equity holders
of the Company
______________________________________
Adjusted average number of shares
during the period
Equity per share = Shareholders' equity
______________________________________
Adjusted number of shares at the end of
the period
Market capitalization = Number of shares at the end of period
(excluding treasury shares) x share
price at closing date
-----
