QPR SOFTWARE STOCK EXCHANGE RELEASE, October 24, 2019 AT 9.00 AM
Strong growth in process mining continued
January – September 2019
- Net sales amounted to EUR 7,015 thousand (1-9 2018: 7,376).
- Process mining software QPR ProcessAnalyzer´s net sales grew by 42%, but group net sales decreased by 5% due to decline in modeling and performance management software net sales.
- Operating result EUR -90 thousand (391). The decrease in operating result was due to decrease in net sales, as well as outlays in growth business areas.
- Operating result -1% of net sales (5).
- Result before taxes EUR -113 thousand (207).
- Result for the reporting period EUR -42 thousand (131).
- Earnings per share EUR -0.004 (0.011).
July - September 2019
- Net sales amounted to EUR 1,981 thousand (Q3 2018: 2,222).
- Process mining software QPR ProcessAnalyzer´s net sales growth was strong, but group net sales decreased due to decline in performance management, modeling software and consulting net sales.
- Operating result EUR -119 thousand (109). The decrease in operating result was due to decline in net sales and outlays in growth business areas.
- Operating result -6% of net sales (5).
- Result before taxes EUR -116 thousand (113).
- Result for the quarter EUR -85 thousand (91).
Outlook and guidance for the year 2019 remains unchanged, in accordance with the stock exchange release published on 15 October, 2019.
Business operations
QPR Software´s mission is to make customers agile and efficient in their operations. We innovate, develop, and sell software aimed at analyzing, monitoring, and modeling operations in organizations. Furthermore, we offer customers a variety of consulting services.
OUTLOOK
Operating environment and market outlook
In recent years, QPR Software has invested heavily in developing the company´s process mining software, as well as renewing all user interfaces of its software products. We estimate that the demand for process mining software and related services will continue to grow rapidly over the course of 2019.
In developed markets, we expect the competition for process and enterprise architecture modeling and performance management software to remain tight.
Outlook for 2019
QPR estimates net sales to decrease in 2019 (2018: EUR 10,047 thousand), and operating result (EBIT) to be slightly negative (0 – 4% of net sales). Process mining business is expected to continue its strong growth in the last quarter of the year.
Mid-term financial targets
The Company´s mid-term target in 2020 – 2022 is to grow net sales by an average of 15 – 20% per annum. The target is mainly based on international net sales growth in process mining, where we target an annual growth of over 50%.
KEY FIGURES
| EUR in thousands, unless otherwise indicated | Jul-Sep, 2019 | Jul-Sep, 2018 | Change, % | Jan-Sep, 2019 | Jan-Sep, 2018 | Change, % | Jan-Dec, 2018 |
| Net sales | 1,981 | 2,222 | -11 | 7,015 | 7,376 | -5 | 10,047 |
| EBITDA | 188 | 348 | -46 | 838 | 1,109 | -24 | 1,470 |
| % of net sales | 9.5 | 15.7 | 11.9 | 15.0 | 14.6 | ||
| Operating result | -119 | 109 | -209 | -90 | 391 | -123 | 521 |
| % of net sales | -6.0 | 4.9 | -1.3 | 5.3 | 5.2 | ||
| Result before tax | -116 | 113 | -203 | -113 | 207 | -155 | 335 |
| Result for the period | -85 | 91 | -194 | -42 | 131 | -132 | 320 |
| % of net sales | -4.3 | 4.1 | -0.6 | 1.8 | 3.2 | ||
| Earnings per share, EUR (basic and diluted) | -0.007 | 0.008 | -194 | -0.004 | 0.011 | -132 | 0.027 |
| Equity per share, EUR | 0.227 | 0.216 | 5 | 0.227 | 0.216 | 5 | 0.231 |
| Cash flow from operating activities | -59 | -563 | 90 | 937 | 1,176 | -20 | 1,335 |
| Cash and cash equivalents | 470 | 534 | -12 | 470 | 534 | -12 | 505 |
| Net borrowings | -116 | -534 | -78 | -116 | -534 | -78 | -505 |
| Gearing,% | -4.1 | -19.9 | -79 | -4.1 | -19.9 | -79 | -17.6 |
| Equity ratio,% | 58.4 | 58.0 | 1 | 58.4 | 58.0 | 1 | 48.6 |
| Return on equity,% | -11.9 | 13.8 | -186 | -2.0 | 6.4 | -131 | 11.4 |
| Return on investment,% | -13.9 | 16.2 | -186 | -3.1 | 19.6 | -116 | 18.9 |
REPORTING
QPR Software innovates, develops, sells and delivers software and services in international markets aimed at facilitating operational development in organizations. QPR Software reports one operating segment: Operational development of organizations. In addition to this, the Company reports revenue from products and services as follows: Software licenses, Renewable software licenses, Software maintenance services, Cloud services and Consulting.
Recurring revenue reported by the Company consists of Software maintenance services and Cloud services. In addition, recurring revenue includes Renewable software licenses.
Software licenses are sold to customers for perpetual use or for an agreed, limited period. Renewable software licenses are sold to customers as a user right with an indefinite duration. These contracts are automatically renewed at the end of the agreed period, usually one year, unless the agreement is terminated within notice period. Renewable license revenue is recognized at one point in time, in the beginning of the invoicing period.
Geographical areas reported are Finland, the rest of Europe (including Russia and Turkey), and the rest of the world. Net sales are reported according to the customer´s headquarter location.
The figures in this interim report have been reported in accordance with the IFRS 16 Lease agreement standard, effective from January 1, 2019. Detailed description is included in Accounting Principles section of this interim financial report.
REVIEW BY THE CEO
The investments into our process mining software QPR ProcessAnalyzer were paying off also in the reported quarter, and international software net sales in this business area continued to grow. Process mining software net sales recorded 42% growth in January – September.
Process mining software is globally strengthening its position as an operational analytics tool, especially in large organizations segment. Analysis results are used, among others, for improving existing operations, process optimization and automatization as well as digital transformation.
Process mining software product development proceeded well in the reporting period. We added, among others, features that enable fast and accurate process performance measurement and support for process automation initiatives. Thanks to new features added to the product, customers can also perform conformance analyses and compare actual performance to designed processes and operating models. In addition to this, we introduced new features utilizing artificial intelligence, such as clustering and forecasting features.
The competition in process and enterprise architecture modeling software and performance management software markets remained tight, as expected. Our net sales were smaller than in the equivalent period last year, when net sales included several significant performance management software deals in developing markets. Net sales of our modeling software were negatively affected by the tightened competition and pricing change we implemented in the Finnish public sector modeling software cloud services. With this new pricing, we aim at significant increase in users of this software in the long term.
Jari Jaakkola
CEO
NET SALES DEVELOPMENT
July - September 2019
Net sales in the third quarter were EUR 1,981 thousand (2,222). The share of recurring revenue was 61% of net sales (58).
Software license net sales amounted to EUR 436 thousand (533) and decreased by 18%, due to decline in performance management software license net sales in the Middle East market area. Process mining software QPR ProcessAnalyzer´s net sales increased. Software maintenance net sales were EUR 761 thousand (768).
Cloud services net sales amounted to EUR 269 thousand (338). The decrease was due to a pricing change we implemented in the Finnish public sector modeling software cloud services. With this new pricing, we aim at significant increase in users of this software in the long term. Consulting net sales decreased to EUR 515 thousand (583), which was mainly due to decline in performance management consulting in the Middle East market area. Process mining consulting net sales increased.
Net sales in Finland decreased by 17%, which was mainly due net sales decrease in modeling software. This decrease was to a large extent attributable to the pricing change in the Finnish public sector, described earlier in this report. International net sales decreased by 5%, due to decline in performance management net sales.
Of the Group net sales, 47% (50) derived from Finland, 30% (26) from the rest of Europe (including Russia and Turkey) and 23% (23) from the rest of the world.
NET SALES BY PRODUCT GROUP
| EUR in thousands | Jul-Sep, 2019 | Jul-Sep, 2018 | Change, % | Jan-Sep, 2019 | Jan-Sep, 2018 | Change, % | Jan-Dec, 2018 |
| Software licenses | 261 | 355 | -26 | 1,093 | 1,125 | -3 | 1,559 |
| Renewable software licenses | 175 | 178 | -2 | 908 | 934 | -3 | 1,126 |
| Software maintenance services | 761 | 768 | -1 | 2,044 | 2,250 | -9 | 2,989 |
| Cloud services | 269 | 338 | -20 | 788 | 968 | -19 | 1,316 |
| Consulting | 515 | 583 | -12 | 2,182 | 2,098 | 4 | 3,057 |
| Total | 1,981 | 2,222 | -11 | 7,015 | 7,376 | -5 | 10,047 |
NET SALES BY GEOGRAPHIC AREA
| EUR in thousands | Jul-Sep, 2019 | Jul-Sep, 2018 | Change, % | Jan-Sep, 2019 | Jan-Sep, 2018 | Change, % | Jan-Dec, 2018 |
| Finland | 933 | 1,119 | -17 | 3,638 | 4,016 | -9 | 5,444 |
| Europe incl. Russia and Turkey | 598 | 584 | 2 | 2,248 | 1,967 | 14 | 2,817 |
| Rest of the world | 450 | 519 | -13 | 1,128 | 1,392 | -19 | 1,786 |
| Total | 1,981 | 2,222 | -11 | 7,015 | 7,376 | -5 | 10,047 |
January - September 2019
Net sales in January – September were EUR 7,015 thousand (7,376) and decreased by 5%. The share of recurring revenue was 53% of net sales (56).
Net sales in Finland decreased by 9%, which was mainly due to decline in modeling software net sales.
International net sales increased slightly (+1%). Process mining software net sales increased, but performance management software and consulting net sales decreased.
Of the Group net sales, 52% (54) derived from Finland, 32% (27) from the rest of Europe (including Russia and Turkey) and 16% (19) from the rest of the world.
FINANCIAL PERFORMANCE
July - September 2019
The Group´s operating result was EUR -119 thousand (109). The decrease in operating result was due to decrease in net sales and outlays in growth business areas.
The Group´s fixed costs were EUR 1,858 thousand (1,895) and decreased by 2% compared to the corresponding period in the previous year. Personnel expenses represented 74% (70) of the fixed costs.
Result before taxes was EUR -116 thousand (113) and result for the period was EUR -85 thousand (91). Earnings per share (basic and fully diluted) were EUR -0.007 (0.008).
January - September 2019
The Group´s operating result was EUR -90 thousand (391). The decrease in operating result was due to outlays in growth business areas, as well as due to a small decrease in net sales. Depreciation grew by 29% compared to the corresponding period in the previous year, which was mainly due to the adoption of the new IFRS 16 accounting standard.
The Group´s fixed costs were EUR 6,430 thousand (6,114). Personnel expenses represented 74% (73) of the fixed costs. Credit losses, included in fixed costs, were EUR 66 thousand (8).
Result before taxes was EUR -113 thousand (207) and result for the period was EUR -42 thousand (131). Earnings per share (basic and fully diluted) were EUR -0.004 (0.011).
FINANCE AND INVESTMENTS
Cash flow from operating activities was EUR 937 thousand (1,176) in January - September. Cash and cash equivalents at the end of the reporting period were EUR 470 thousand (534).
Net financial expenses in January – September were EUR 23 thousand (184) and included currency exchange losses of EUR 18 thousand (190). Exceptionally large currency exchange losses in the previous year were due to liquidation of the Group´s subsidiary in Russia.
Investments in January - September totaled EUR 763 thousand (601). Investments were mainly related to product development expenditure.
The Group´s financial position is strong. At the end of the quarter, the Company had no interest-bearing bank loans. The gearing ratio was -4% (-20). The change in gearing ratio is due to the adoption of the new IFRS 16 accounting standard in the beginning of this year. At the end of the quarter, the equity ratio was 58% (58).
PRODUCT DEVELOPMENT
QPR innovates and develops software products that analyze, measure and model operations in organizations. The Company develops the following software products: QPR ProcessAnalyzer, QPR EnterpriseArchitect, QPR ProcessDesigner, and QPR Metrics.
In January - September, product development expenses were EUR 1,653 thousand (1,438), or 24% of net sales (20). Product development expenses worth EUR 544 thousand (565) were capitalized. The amortization of capitalized product development expenses was EUR 613 thousand (571). The amortization period for capitalized product development expenses is four years.
PERSONNEL
At the end of the reporting period, the Group employed a total of 83 persons (82). The average number of personnel during the reporting period January - September was 82 (80).
The average age of employees is 42.0 (40.1) years. Women account for 25% (21) of employees, men for 75% (79). 18% (18) work in sales and marketing, 42% (43) in consulting and customer care, 31% (30) in product development, and 9% (8) in administration.
For incentive purposes, the Company has a bonus program that covers all employees. Short term remuneration of the top management consists of salary, fringe benefits, and a possible annual bonus based mainly on the Group and business unit net sales performance.
The Board of Directors of QPR Software Plc resolved in its meeting on January 29, 2019 to launch a new key employee stock option plan, based on an authorization granted by the Annual General Meeting. The purpose of the stock options is to encourage the key employees to work on a long-term basis to increase the shareholder value and to retain the key employees at the Company.
The maximum total number of stock options issued is 910,000 and they entitle their owners to subscribe for a maximum total of 910,000 new shares in the Company or existing shares held by the Company. The stock options are issued gratuitously. Of the stock options, 437,000 are marked with the symbol 2019A and 473,000 are marked with the symbol 2019B. The share subscription period, for stock options 2019A, will be January 1, 2022 – January 31, 2023, and for stock options 2019B, January 1, 2023 – January 31, 2024.
The number of shares subscribed by exercising stock options issued corresponds to a maximum total of 6.81% of all shares and votes of the shares in the Company after the potential share subscriptions, if new shares are issued in the share subscription. After the share subscriptions with stock options, the number of the Company’s shares may be increased by a maximum total of 910,000 shares, if new shares are issued in the share subscription. The share subscription price for stock options 2019A is EUR 1.70 per share, which corresponded to the market price of the Company’s share at the time of launching the option plan. The share subscription price for stock options 2019B is EUR 2.55 per share, which corresponds to the market price of the Company’s share with an addition of 50%.
STRATEGY
Our target is to grow our net sales by an average of 15 – 20% per annum over the next three years. The target is mainly based on international net sales growth in process mining, where we target annual growth of over 50%.
We innovate, develop and sell software and related services aimed at analyzing, measuring and modeling operations in organizations. Furthermore, we offer customers consulting services in operational development and digital business optimization.
We will further accelerate product development by increasing our resources in a controlled manner. In software development, we place special focus on excellent user experience.
We focus our product development to meet the challenges our client organizations face, especially in leading and developing their operations in a digitalizing world. A special focus area for development is process mining.
We also actively seek strategic partnerships to strengthen our international software sales and product development.
SHARES AND SHAREHOLDERS
| Trading of shares | Jan-Sep, 2019 | Jan-Sep, 2018 | Change, % | Jan-Dec, 2018 |
| Shares traded, pcs | 902,160 | 841,756 | 7 | 1,026,097 |
| Volume, EUR | 1,797,056 | 1,391,470 | 29 | 1,694,088 |
| % of shares | 7.5 | 7.0 | 8.6 | |
| Average trading price, EUR | 1.99 | 1.65 | 21 | 1.65 |
| Shares and market capitalization | Sep 30, 2019 | Sep 30, 2018 | Change, % | Dec 31, 2018 |
| Total number of shares, pcs | 12,444,863 | 12,444,863 | - | 12,444,863 |
| Treasury shares, pcs | 457,009 | 457,009 | - | 457,009 |
| Book counter value, EUR | 0.11 | 0.11 | - | 0.11 |
| Outstanding shares, pcs | 11,987,854 | 11,987,854 | - | 11,987,854 |
| Number of shareholders | 1,147 | 1,169 | -2 | 1,151 |
| Closing price, EUR | 2.40 | 1.75 | 37 | 1.63 |
| Market capitalization, EUR | 28,770,850 | 20,978,745 | 37 | 19,540,202 |
| Book counter value of all treasury shares, EUR | 50,271 | 50,271 | - | 50,271 |
| Total purchase value of all treasury shares, EUR | 439,307 | 439,307 | - | 439,307 |
| Treasury shares,% of all shares | 3.7 | 3.7 | - | 3.7 |
GOVERNANCE
The Annual General Meeting held on April 4, 2019 approved the Board's proposal that no dividend be paid for the financial year 2018.
The Annual General Meeting resolved that the number of Board Members is four (4) and re-elected Vesa-Pekka Leskinen and Topi Piela. as members of the Company´s Board of Directors. As new members of the Board of Directors, Jarmo Rajala and Salla Vainio were elected. The term of office of the members of the Board of Directors expires at the end of the next Annual General Meeting. At its organizing meeting, the Board of Directors elected Vesa-Pekka Leskinen as its Chairman.
The Annual General Meeting re-elected Authorized Public Accountants KPMG Oy Ab as QPR Software´s auditor with Kirsi Jantunen, Authorized Public Accountant, acting as principal auditor. The term of office of the auditor expires at the end of the next Annual General Meeting.
The Annual General Meeting decided to authorize the Board of Directors to decide on an issue of new shares and conveyance of the own shares held by the Company (share issue) either in one or in several occasions. The share issue can be carried out as a share issue against payment or without consideration on terms to be determined by the Board of Directors.
All authorizations of the Board and other decisions made by the Annual General Meeting are available in their entirety on the stock exchange release published by the Company on April 4, 2019, and available in the Investors section of the Company's website, https://www.qpr.com/investors/stock-exchange-and-press-releases.
EVENTS AFTER THE REVIEW PERIOD
After the review period, on October 15, QPR published a stock exchange release where the Company revised its estimate for full year results 2019, based on weaker outlook in modeling and performance management software and consulting businesses. The Company also published preliminary information about its January - September 2019 financial results.
SHORT-TERM RISKS AND UNCERTAINTIES
Internal control and risk management at QPR Software aims to ensure that the Company operates efficiently and effectively, distributes reliable information, complies with regulations and operational principles, reaches its strategic goals, reacts to changes in the market and operational environment, and ensures the continuity of its business.
QPR has identified the following three groups of risks related to its operations: risks related to business operations (country, customer, personnel, legal), risks related to information and products (QPR products, IPR, data security) and risks related to financing (foreign currency, short-term cash flow). The Company has an insurance policy covering property, operational and liability risks.
Financial risks include reasonable credit risk concerning individual business partners, which is characteristic to any international business. QPR seeks to limit this credit risk by continuous monitoring of standard payment terms, receivables and credit limits.
Approximately 48% of Group’s trade receivables were in euro at the end of the reporting period (54). At the end of the reporting period, the Company had not hedged its non-euro trade receivables.
Risks and risk management related to the Company’s business are further described in the Annual Report 2018, pages 21-22 (https://www.qpr.com/investors/financial-information/annual-reports).
QPR SOFTWARE PLC
BOARD OF DIRECTORS
Further information:
Jari Jaakkola, CEO
Tel. +358 (0) 40 5026 397
Distribution:
NASDAQ OMX Helsinki Ltd
Main Media
Neither this press release nor any copy of it may be taken, transmitted or distributed, directly or indirectly, in or into the United States of America or its territories or possessions.
INTERIM FINANCIAL STATEMENTS
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
| EUR in thousands, unless otherwise indicated | Jul-Sep, 2019 | Jul-Sep, 2018 | Change, % | Jan-Sep, 2019 | Jan-Sep, 2018 | Change, % | Jan-Dec, 2018 |
| Net sales | 1,981 | 2,222 | -11 | 7,015 | 7,376 | -5 | 10,047 |
| Other operating income | - | 0 | 0 | -10 | 102 | -10 | |
| Materials and services | 243 | 218 | 11 | 765 | 861 | -11 | 1,196 |
| Employee benefit expenses | 1,375 | 1,321 | 4 | 4,712 | 4,475 | 5 | 6,142 |
| Other operating expenses | 175 | 336 | -48 | 700 | 921 | -24 | 1,229 |
| EBITDA | 188 | 348 | -46 | 838 | 1,109 | -24 | 1,470 |
| Depreciation and amortization | 307 | 239 | 29 | 928 | 717 | 29 | 949 |
| Operating result | -119 | 109 | -209 | -90 | 391 | -123 | 521 |
| Financial income and expenses | 3 | 4 | -22 | -23 | -184 | 87 | -187 |
| Result before tax | -116 | 113 | -203 | -113 | 207 | -155 | 335 |
| Income taxes | 31 | -22 | 240 | 71 | -76 | 193 | -15 |
| Result for the period | -85 | 91 | -194 | -42 | 131 | -132 | 320 |
| Earnings per share, EUR (basic and diluted) | -0.007 | 0.008 | -194 | -0.004 | 0.011 | -132 | 0.027 |
| Consolidated statement of comprehensive income: | |||||||
| Result for the period | -85 | 91 | -194 | -42 | 131 | -132 | 320 |
| Other items in comprehensive income that may be reclassified subsequently to profit or loss: | |||||||
| Exchange differences on translating foreign operations | -4 | 0 | -4 | 179 | -102 | 179 | |
| Total comprehensive income | -89 | 91 | -198 | -46 | 310 | -115 | 499 |
CONDENSED CONSOLIDATED BALANCE SHEET
| EUR in thousands | Sep 30, 2019 | Sep 30, 2018 | Change, % | Dec 31, 2018 |
| Assets | ||||
| Non-current assets: | ||||
| Intangible assets | 1,904 | 1,870 | 2 | 1,831 |
| Goodwill | 513 | 513 | 0 | 513 |
| Tangible assets | 440 | 120 | 266 | 116 |
| Other non-current assets | 87 | 62 | 41 | 62 |
| Total non-current assets | 2,944 | 2,564 | 15 | 2,521 |
| Current assets: | ||||
| Trade and other receivables | 2,272 | 2,352 | -3 | 3,409 |
| Cash and cash equivalents | 470 | 534 | -12 | 505 |
| Total current assets | 2,743 | 2,886 | -5 | 3,915 |
| Total assets | 5,687 | 5,450 | 4 | 6,436 |
| Equity and liabilities | ||||
| Equity: | ||||
| Share capital | 1,359 | 1,359 | 0 | 1,359 |
| Other funds | 21 | 21 | 0 | 21 |
| Treasury shares | -439 | -439 | 0 | -439 |
| Translation differences | -64 | -61 | 6 | -61 |
| Invested non-restricted equity fund | 5 | 5 | 0 | 5 |
| Retained earnings | 1,945 | 1,798 | 8 | 1,987 |
| Equity attributable to shareholders of the parent company | 2,827 | 2,683 | 5 | 2,873 |
| Non-current liabilities: | ||||
| Interest-bearing liabilities | 71 | - | - | |
| Total non-current liabilities | 71 | - | - | |
| Current liabilities: | ||||
| Interest-bearing liabilities | 282 | - | - | |
| Advances received | 844 | 824 | 2 | 523 |
| Accrued expenses and prepaid income | 1,237 | 1,612 | -23 | 2,489 |
| Trade and other payables | 426 | 331 | 29 | 551 |
| Total current liabilities | 2,788 | 2,767 | 1 | 3,563 |
| Total liabilities | 2,860 | 2,767 | 3 | 3,563 |
| Total equity and liabilities | 5,687 | 5,450 | 4 | 6,436 |
CONSOLIDATED CASH FLOW STATEMENT
| EUR in thousands | Jul-Sep, 2019 | Jul-Sep, 2018 | Change, % | Jan-Sep, 2019 | Jan-Sep, 2018 | Change, % | Jan-Dec, 2018 |
| Cash flow from operating activities: | |||||||
| Result for the period | -85 | 91 | -194 | -42 | 131 | -132 | 320 |
| Adjustments to the result | 268 | 251 | 7 | 877 | 1,156 | -24 | 1,327 |
| Working capital changes | -231 | -889 | 74 | 172 | -76 | 327 | -267 |
| Interest and other financial expenses paid | -8 | -8 | 0 | -42 | -22 | -95 | -28 |
| Interest and other financial income received | 11 | -1 | 1,462 | 19 | 7 | 153 | 9 |
| Income taxes paid | -14 | -7 | -88 | -47 | -21 | -126 | -27 |
| Net cash from operating activities | -59 | -563 | 90 | 937 | 1,176 | -20 | 1,335 |
| Cash flow from investing activities: | |||||||
| Purchases of tangible and intangible assets | -274 | -148 | 86 | -763 | -601 | 27 | -790 |
| Net cash used in investing activities | -274 | -148 | 86 | -763 | -601 | 27 | -790 |
| Cash flow from financing activities: | |||||||
| Repayments of short term borrowings | -70 | - | -208 | - | - | ||
| Dividends paid | - | 0 | 0 | -360 | -360 | ||
| Net cash used in financing activities | -70 | 0 | -208 | -360 | -360 | ||
| Net change in cash and cash equivalents | -403 | -710 | 43 | -35 | 215 | -116 | 185 |
| Cash and cash equivalents at the beginning of the period | 871 | 1,238 | -30 | 505 | 318 | 59 | 318 |
| Effects of exchange rate changes on cash and cash equivalents | 2 | 6 | -72 | 0 | 1 | -140 | 2 |
| Cash and cash equivalents at the end of the period | 470 | 534 | -12 | 470 | 534 | -12 | 505 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| EUR in thousands | Share capital | Other funds | Translation differences | Treasury shares | Invested non- restricted equity fund | Retained earnings | Total |
| Equity Jan 1, 2018 | 1,359 | 21 | -240 | -439 | 5 | 2,027 | 2,733 |
| Dividends paid | -360 | -360 | |||||
| Comprehensive income | 179 | 131 | 310 | ||||
| Equity Sep 30, 2018 | 1,359 | 21 | -61 | -439 | 5 | 1,798 | 2,683 |
| Comprehensive income | 0 | 189 | 189 | ||||
| Equity Dec 31, 2018 | 1,359 | 21 | -61 | -439 | 5 | 1,987 | 2,873 |
| Comprehensive income | -4 | -42 | -46 | ||||
| Equity Sep 30, 2019 | 1,359 | 21 | -64 | -439 | 5 | 1,945 | 2,827 |
NOTES TO INTERIM FINANCIAL STATEMENTS
ACCOUNTING PRINCIPLES
This report complies with requirements of IAS 34 ”Interim Financial Reporting”. Starting from the beginning of 2019, the Group has applied certain new or revised IFRS standards and IFRIC interpretations, as described in the Consolidated Financial Statements 2018.
As of beginning of 2019, in accordance with the new IFRS 16 Leases -standard, leases are recognized in the balance sheet as a right-of-use asset and a corresponding financial liability at the date at which the lease asset is available for the use by the Group. Lease payments are allocated in liabilities and financial expenses. The financial expense is recognized in the income statement over the lease period. The right-of-use asset is depreciated on a straight-line basis over the asset’s useful life or the shorter lease term. The lease liabilities are discounted at the borrowing average rate of 2% as of January 1, 2019. The Group has adopted the new IFRS 16 standard using modified retrospective approach and the comparative information has not been restated.
The Group leases mainly offices to be used as working premises. Rental contracts are typically made for fixed periods with possible extension options, or for an indefinite period with a notice period of typically less than a year. The Group continues to treat leases of 12 months or less and leases of low-value assets as other leases. Until end of the year 2018 leases of property, plant and equipment were classified as operating leases. Payments made under operating leases were recognized in the income statement on a straight-line basis over the period of the lease.
The change in the accounting policy affected the balance sheet items of January 1, 2019, as follows:
- material assets increased with the right-of-use asset by approximately EUR 560 thousand
- non-current liabilities increased by approximately EUR 280 thousand
- current liabilities increased by approximately EUR 280 thousand
The implementation of other new and revised requirements has not impacted the reported figures. For all other parts, the accounting principles and methods are the same as they were in the 2018 financial statements.
When preparing the consolidated financial statements, the management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated.
All amounts presented in this report are consolidated figures, unless otherwise noted. The amounts presented in the report are rounded, so the sum of individual figures may differ from the sum reported. This report is unaudited.
During the reporting period, the Group did not have any financial instruments measured at fair value.
Definitions for key indicators can be found in the end of the latest annual report, on page 55: https://www.qpr.com/investors/financial-information/annual-reports
INTANGIBLE AND TANGIBLE ASSETS
| EUR in thousands | Jan-Sep, 2019 | Jan-Sep, 2018 | Jan-Dec, 2018 |
| Increase in intangible assets: | |||
| Acquisition cost Jan 1 | 10,057 | 9,318 | 9,318 |
| Increase | 732 | 566 | 739 |
| Increase in tangible assets: | |||
| Acquisition cost Jan 1 | 2,433 | 1,821 | 1,821 |
| Increase | 31 | 35 | 50 |
PLEDGES AND COMMITMENTS
| EUR in thousands | Sep 30, 2019 | Sep 30, 2018 | Dec 31, 2018 | Change, % |
| Business mortgages (held by the Company) | 1,384 | 1,386 | 1,386 | 0 |
| Minimum lease payments based on lease agreements: | ||||
| Maturing in less than one year | 19 | 166 | 267 | -93 |
| Maturing in 1-5 years | 2 | 0 | 254 | -99 |
| Total | 21 | 166 | 521 | -96 |
| Total pledges and commitments | 1,406 | 1,552 | 1,907 | -26 |
CHANGE IN INTEREST-BEARING LIABILITIES
| EUR in thousands | Jan-Sep, 2019 | Jan-Sep, 2018 | Jan-Dec, 2018 |
| Interest-bearing liabilities Jan 1 | 562 | - | - |
| Repayments | 208 | - | - |
| Interest-bearing liabilities Sep 30 | 354 | - | - |
RECONCILIATION OF LEASE LIABILITY
| EUR in thousands | |
| Minimum lease payments based on lease agreements as of Dec 31, 2018 | 521 |
| Relief option for short- term leases | -6 |
| Other incl. treatment of extension options | 59 |
| Effect of discounting* | -12 |
| Lease liability as of Jan 1, 2019 | 562 |
LEASES
Due to the adoption of the new IFRS 16 Leases -standard, the balance sheet as at September 30, 2019 and the income statement of the reporting period January-September include the following items in right-of-use assets of material assets, lease liabilities, depreciation and interest expense:
LEASES IN THE BALANCE SHEET
| EUR in thousands | Sep 30, 2019 |
| Asset | |
| Non-current assets | |
| Tangible assets | 351 |
| Total | 351 |
| Equity and liabilities | |
| Lease liabilities, non-current | 71 |
| Lease liabilities, current | 282 |
| Total | 354 |
LEASES IN THE INCOME STATEMENT
| EUR in thousands | Jan-Sep, 2019 |
| Other lease expenses | 0 |
| Depreciation of right-of-use assets | -211 |
| Interest expenses | -7 |
| Total | -218 |
CONSOLIDATED INCOME STATEMENT BY QUARTER
| EUR in thousands | Q3 2019 | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 |
| Net sales | 1,981 | 2,285 | 2,748 | 2,671 | 2,222 | 2,272 | 2,882 |
| Other operating income | - | 0 | - | 0 | 0 | -5 | -5 |
| Materials and services | 243 | 260 | 263 | 335 | 218 | 255 | 388 |
| Employee benefit expenses | 1,375 | 1,644 | 1,693 | 1,667 | 1,321 | 1,603 | 1,551 |
| Other operating expenses | 175 | 228 | 296 | 308 | 336 | 288 | 297 |
| EBITDA | 188 | 153 | 497 | 362 | 348 | 120 | 640 |
| Depreciation and amortization | 307 | 310 | 310 | 231 | 239 | 238 | 240 |
| Operating result | -119 | -158 | 187 | 130 | 109 | -118 | 400 |
| Financial income and expenses | 3 | -6 | -20 | -2 | 4 | 1 | -189 |
| Result before tax | -116 | -164 | 167 | 128 | 113 | -117 | 211 |
| Income taxes | 31 | 66 | -26 | 62 | -22 | 32 | -86 |
| Result for the period | -85 | -98 | 141 | 189 | 91 | -85 | 124 |
GROUP KEY FIGURES
| EUR in thousands, unless otherwise indicated | Jan-Sep or Sep 30, 2019 | Jan-Sep or Sep 30, 2018 | Jan-Dec or Dec 31, 2018 |
| Net sales | 7,015 | 7,376 | 10,047 |
| Net sales growth,% | -4.9 | 5.7 | 12.4 |
| EBITDA | 838 | 1,109 | 1,470 |
| % of net sales | 11.9 | 15.0 | 14.6 |
| Operating result | -90 | 391 | 521 |
| % of net sales | -1.3 | 5.3 | 5.2 |
| Result before tax | -113 | 207 | 335 |
| % of net sales | -1.6 | 2.8 | 3.3 |
| Result for the period | -42 | 131 | 320 |
| % of net sales | -0.6 | 1.8 | 3.2 |
| Return on equity (per annum),% | -2.0 | 6.4 | 11.4 |
| Return on investment (per annum),% | -3.1 | 19.6 | 18.9 |
| Cash and cash equivalents | 470 | 534 | 505 |
| Net borrowings | -116 | -534 | -505 |
| Equity | 2,827 | 2,683 | 2,873 |
| Gearing,% | -4.1 | -19.9 | -17.6 |
| Equity ratio,% | 58.4 | 58.0 | 48.6 |
| Total balance sheet | 5,687 | 5,450 | 6,436 |
| Investments in non-current assets | 763 | 601 | 790 |
| % of net sales | 10.9 | 8.2 | 7.9 |
| Product development expenses | 1,653 | 1,438 | 1,989 |
| % of net sales | 23.6 | 19.5 | 19.8 |
| Average number of personnel | 82 | 80 | 81 |
| Personnel at the beginning of period | 84 | 76 | 76 |
| Personnel at the end of period | 83 | 82 | 84 |
| Earnings per share, EUR (basic and diluted) | -0.004 | 0.011 | 0.027 |
| Equity per share, EUR | 0.227 | 0.216 | 0.231 |