QPR SOFTWARE STOCK EXCHANGE RELEASE, October 27, 2020 AT 9.00 AM
Software license and maintenance net sales decreased, cloud services and consulting net sales increased
July - September 2020
- Net sales amounted to EUR 1,801 thousand (July-September 2019: 1,981).
- Net sales decreased 9 % due to a decline in software license and maintenance services sales. During the coronavirus pandemic, sales cycles for new software deals have been significantly longer than usually and have not yet been normalized.
- Cloud services and consulting net sales increased.
- EBITDA was EUR -109 thousand (188).
- Operating result (EBIT) amounted to EUR -413 thousand (-119). The decrease in operating result was due to decrease in net sales, as well as outlays in growth business areas.
- Result for the quarter EUR -345 thousand (-85).
January - September 2020
- Net sales amounted to EUR 6,630 thousand (January-September 2019: 7,015).
- Net sales decreased 5 % due to a decline in software license and maintenance services sales.
- Cloud services and consulting net sales increased.
- EBITDA was EUR 221 thousand (838).
- Operating result (EBIT) amounted to EUR -752 thousand (-90). The decrease in operating result was due to decrease in net sales, as well as outlays in growth business areas.
- Result for the quarter EUR -665 thousand (-42).
- Earnings per share EUR -0.055 (-0.004).
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 made significant investments in developing the Company´s process mining software, as well as in renewing the user interfaces of its software products. The Company estimates that the demand for process mining software and related services will continue to grow rapidly over the course of 2020.
In developed markets, we expect the competition for process and enterprise architecture modeling software, as well as for performance management software to remain tight. However, there is still growth potential for these products in emerging markets, especially for performance management software.
Outlook for 2020
QPR issued a profit warning on October 14th and revised its net sales forecast, which was issued in February 2020. After the update of outlook, the Company estimates its net sales to decrease compared to last year, when it earlier estimated net sales growth (2019: EUR 9,513 thousand).
Profit forecast remained intact and as previously published. Operating result (EBIT) is estimated to be negative (2019: -213 thousand) and EBITDA is expected to be positive (2019: EUR 1,036 thousand).
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, 2020 | Jul-Sep, 2019 | Change, % | Jan-Sep, 2020 | Jan-Sep, 2019 | Change, % | Jan-Dec, 2019 |
| Net sales | 1,801 | 1,981 | -9 | 6,630 | 7,015 | -5 | 9,513 |
| EBITDA | -109 | 188 | -158 | 221 | 838 | -74 | 1,036 |
| % of net sales | -6.1 | 9.5 | 3.3 | 11.9 | 10.9 | ||
| Operating result | -413 | -119 | -246 | -752 | -90 | -733 | -213 |
| % of net sales | -22.9 | -6.0 | -11.3 | -1.3 | -2.2 | ||
| Result before tax | -419 | -116 | -260 | -761 | -113 | -571 | -240 |
| Result for the period | -345 | -85 | -304 | -655 | -42 | -1,445 | -161 |
| % of net sales | -19.1 | -4.3 | -9.9 | -0.6 | -1.7 | ||
| Earnings per share, EUR (basic and diluted) | -0.029 | -0.007 | -304 | -0.055 | -0.004 | -1,445 | -0.013 |
| Equity per share, EUR | 0.173 | 0.227 | -24 | 0.173 | 0.227 | -24 | 0.222 |
| Cash flow from operating activities | -890 | -59 | -1,410 | 101 | 937 | -89 | 1,349 |
| Cash and cash equivalents | 317 | 470 | -33 | 317 | 470 | -33 | 1,035 |
| Net borrowings | 459 | -116 | -495 | 459 | -116 | -495 | -251 |
| Gearing, % | 21.4 | -4.1 | -619 | 21.4 | -4.1 | -619 | -9.1 |
| Equity ratio, % | 47.0 | 58.4 | -19 | 47.0 | 58.4 | -19 | 44.5 |
| Return on equity, % | -59.5 | -11.9 | -401 | -35.5 | -2.0 | -1,692 | -5.7 |
| Return on investment, % | -59.3 | -13.9 | -326 | -30.0 | -3.1 | -852 | -5.9 |
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.
REVIEW BY THE CEO
In July-September, the coronavirus pandemic continued to have a negative impact especially in our international software business. Net sales in Finland increased by 3%, but international net sales decreased by 20%. The value of offers to customers was in September clearly higher than in the previous year, but purchase processes are much longer than previously, due to uncertainties related to the coronavirus pandemic.
We have started to adjust costs to the current challenging market situation and are conducting co-determination negotiations regarding part-time lay-offs with our personnel in Finland. Since the business impact of the Covid 19 -situation is estimated to be temporary, redundancies are not considered in the negotiations.
To ensure long term growth we have during the spring and summer recruited new sales resources to our European key markets United Kingdom and France. We have also entered in several new partnerships in our process mining software sales. The functionality of the visual reporting tool in QPR ProcessAnalyzer software has been significantly enhanced in the two latest releases, and we now believe it to be one of the best and most versatile in visual reporting. Also performance in processing large amounts of data has been significantly improved, and the software is now localized in seven languages.
Jari Jaakkola
CEO
NET SALES DEVELOPMENT
July - September 2020
Net sales in the third quarter were EUR 1,801 thousand (1,981). The share of recurring revenue was 52% of net sales (61).
Software license net sales amounted to EUR 396 thousand (436) and decreased by 9 %, mainly due to a decrease in renewable software license net sales in Finland.
Software maintenance net sales decreased by 32% and were EUR 519 thousand (761). Part of existing customers moved to using our Cloud services and furthermore, currency exchange rates had a negative impact on maintenance net sales. In addition to reasons mentioned above, exceptionally strong decrease in maintenance net sales is explained by the high figure in the previous year. The previous year figure includes income from former periods, as a significant customer at that point returned to use maintenance services.
Cloud services net sales increased to EUR 284 thousand (269), despite temporary service pauses that were agreed with some customers that had to cope with the hardest negative impacts from the coronavirus pandemic.
Consulting net sales, including software deliveries, amounted to EUR 602 thousand (515). Net sales growth was achieved In Finland and Middle East market area. Consulting projects and agreed software deliveries proceeded also in the third quarter mainly as planned, despite the pandemic.
Net sales in Finland increased by 3% due to increase in consulting net sales. International net sales decreased by 20%, which was mainly due to a decrease in maintenance net sales in our international reseller channel.
Of the Group net sales, 54% (47) derived from Finland, 27% (30) from the rest of Europe (including Russia and Turkey) and 20% (23) from the rest of the world.
NET SALES BY PRODUCT GROUP
| EUR in thousands | Jul-Sep, 2020 | Jul-Sep, 2019 | Change, % | Jan-Sep, 2020 | Jan-Sep, 2019 | Change, % | Jan-Dec, 2019 |
| Software licenses | 271 | 261 | 4 | 937 | 1,093 | -14 | 1,552 |
| Renewable software licenses | 125 | 175 | -29 | 733 | 908 | -19 | 1,102 |
| Software maintenance services | 519 | 761 | -32 | 1,677 | 2,044 | -18 | 2,731 |
| Cloud services | 284 | 269 | 5 | 820 | 788 | 4 | 1,068 |
| Consulting | 602 | 515 | 17 | 2,463 | 2,182 | 13 | 3,061 |
| Total | 1,801 | 1,981 | -9 | 6,630 | 7,015 | -5 | 9,513 |
NET SALES BY GEOGRAPHIC AREA
| EUR in thousands | Jul-Sep, 2020 | Jul-Sep, 2019 | Change, % | Jan-Sep, 2020 | Jan-Sep, 2019 | Change, % | Jan-Dec, 2019 |
| Finland | 965 | 933 | 3 | 3,524 | 3,638 | -3 | 4,863 |
| Europe incl. Russia and Turkey | 480 | 598 | -20 | 1,758 | 2,248 | -22 | 2,965 |
| Rest of the world | 355 | 450 | -21 | 1,348 | 1,128 | 19 | 1,686 |
| Total | 1,801 | 1,981 | -9 | 6,630 | 7,015 | -5 | 9,513 |
January-September 2020
Net sales in January – September were EUR 6,630 thousand (7,015) and decreased by 5%. The share of recurring revenue was 49% of net sales (53).
Net sales in Finland decreased by 3%, which was mainly due to lower software net sales in process and enterprise architecture modeling. International net sales decreased by 8%, which was mostly due to a decline in maintenance net sales in international reseller channel.
Of the Group net sales, 53% (52) derived from Finland, 27% (32) from the rest of Europe (including Russia and Turkey) and 20% (16) from the rest of the world.
FINANCIAL PERFORMANCE
July - September 2020
The Group´s earnings before interest, tax, depreciation and amortization (EBITDA) were EUR -109 thousand (188) and operating result (EBIT) was EUR -413 thousand (-119). The decrease in operating result was due to a decrease in net sales, as well as outlays in growth business areas.
The Group´s fixed costs in July-September were EUR 2,009 thousand (1,858) and increased by 8% from the previous year. Employee expenses were 73% (74) of fixed costs. To adjust our costs to current market situation, we decided upon nine either part-time or full-time lay-offs, as a result from co-determination negotiations in our Operational Development Consulting unit.
Result before taxes was EUR -419 thousand (-116) and result for the period was EUR -345 thousand (-85). Earnings per share (basic and diluted) were EUR -0.029 (-0.007).
January - September 2020
The Group´s EBITDA was EUR 221 thousand (838) and operating result (EBIT) amounted to EUR -752 thousand (-90). The decrease in operating result was due to a decrease in net sales, as well as outlays in growth business areas.
The Group´s fixed costs were EUR 6,503 thousand (6,340) in the reporting period. Employee expenses were 76% (74) of fixed costs. Credit losses, included in fixed costs, were EUR 47 thousand (66).
Result before taxes was EUR -761 thousand (-113) and result for the period was EUR -655 thousand (-42). Earnings per share (basic and diluted) were EUR -0.055 (-0.004).
FINANCE AND INVESTMENTS
Cash flow from operating activities was EUR 101 thousand (937) in January - September. Lower cashflow from operating activities was due to weaker result and increase in operative working capital, originating mainly from longer payment times in international business.
The Group´s financial position is good. Cash and cash equivalents at the end of the reporting period were EUR 317 thousand (470), and in addition the Group has access to EUR 1.3 million other short-term financial instruments. At the end of the reporting period, the Group had a short-term bank loan of EUR 700 thousand and no long-term interest-bearing bank loans.
Net financial expenses in January – September were EUR 9 thousand (23) and included net currency exchange gains of EUR 1 thousand (currency exchange losses 18).
Investments in January - September totaled EUR 798 thousand (763). Investments were mainly related to product development expenditure.
The gearing ratio was 21% (-4). At the end of the quarter, the equity ratio was 47% (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 1,587 thousand (1,653). Product development expenses worth EUR 627 thousand (544) were capitalized. The amortization of capitalized product development expenses was EUR 629 thousand (613). The amortization period for capitalized product development expenses is four years.
QPR decided to start in June a new Digital delivery project that focuses on planning and developing a new digital business model. In this project, we are researching new models to fully deliver and deploy on-premise software digitally and remotely. This new digital business model is developed in the Middle Eastern market by creating a strategy monitoring software pilot. The pilot will include, among other things, digital workflows and approvals of strategy and performance management measures. Business Finland decided to grant this project EUR 100 thousand direct funding from their Covid-19 related program for business development in disruptive circumstances.
PERSONNEL
At the end of the reporting period, the Group employed a total of 85 persons (83). The average number of personnel during January - September was 86 (82).
The average age of employees is 42.0 (42.0) years. Women account for 20% (21) of employees, men for 80% (79). 19% (18) work in sales and marketing, 42% (42) in consulting and customer care, 31% (31) in product development, and 9% (9) 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. Furthermore, the Company launched a key employee stock option plan in 2019.
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 growth in international software sales. We foresee significant growth potential especially in the process mining business, where we aim for an annual growth of more than 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.
In the next few years, we seek growth especially in our international software sales. To reach this target, we will continue to increase our resources and investments in international marketing and sales.
We also actively seek strategic partnerships to strengthen our international software sales and product development.
SHARES AND SHAREHOLDERS
| Trading of shares | Jan-Sep, 2020 | Jan-Sep, 2019 | Change, % | Jan-Dec, 2019 |
| Shares traded, pcs | 714,500 | 902,160 | -21 | 1,091,153 |
| Volume, EUR | 1,462,356 | 1,797,056 | -19 | 2,229,163 |
| % of shares | 6.0 | 7.5 | 9.1 | |
| Average trading price, EUR | 2.05 | 1.99 | 3 | 2.04 |
| Shares and market capitalization | Sep 30, 2020 | Sep 30, 2019 | Change, % | Dec 31, 2019 |
| 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 | 1,179 | 1,147 | 3 | 1,146 |
| Closing price, EUR | 1.96 | 2.40 | -18 | 2.34 |
| Market capitalization, EUR | 23,496,194 | 28,770,850 | -18 | 28,051,578 |
| 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
A notice was given in February 2020 to the shareholders of QPR Software Plc that the Annual General Meeting will be held on Tuesday 7 April, 2020 starting at 1:00 p.m. at the Company's headquarters. Due to the coronavirus pandemic, the Board of Directors resolved in March to cancel this meeting and convene the Annual General Meeting at a later stage as soon as it is practically possible to organize the meeting.
In May 2020, the Board of Directors gave a notice to the shareholders of QPR Software Plc that the Annual General Meeting will be held on Monday June 8, 2020. The Board of Directors of the Company resolved on extraordinary measures pursuant to the temporary legislation approved by the Finnish Parliament on April 24, 2020. In order to prevent the spread of the Covid-19 pandemic, the Annual General Meeting was held without shareholders’ presence at the Meeting venue. Participation and exercise of shareholder rights in the Meeting was possible only by way of proxy representation, by submitting counterproposals and asking questions in advance.
The Annual General Meeting held on June 8, 2020 approved the Board's proposal that no dividend be paid for the financial year 2019. The Annual General Meeting made an advisory decision on the Remuneration Policy and decided to support the proposed Remuneration Policy.
The Annual General Meeting resolved that the number of Board Members is four (4) and re-elected Vesa-Pekka Leskinen, Topi Piela, Jarmo Rajala and Salla Vainio as members of the Company´s Board of Directors. 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 elected Authorized Public Accountants KPMG Oy Ab as QPR Software´s auditor with Miika Karkulahti, 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 June 8, 2020 on the investors section of the Company's web site, https://www.qpr.com/investors/stock-exchange-and-press-releases
EVENTS AFTER THE REVIEW PERIOD
After the end of the review period, on October 14th, QPR issued a profit warning and revised its net sales forecast for 2020. At the same time, the Company published preliminary financial information about its January – September 2020 results. According to revised net sales forecast, net sales are expected to be lower than in the previous year (2019: EUR 9,513 thousand).
Profit forecast remained intact and as previously published. Operating result (EBIT) is estimated to be negative (2019: -213 thousand) and EBITDA is expected to be positive (2019: EUR 1,036 thousand).
QPR also informed about the initiation of co-determination negotiations with part of our personnel in Finland. Approximately 65 employees are subject to the negotiations. Operational Development Consulting personnel is not part of the negotiations.
The aim of the negotiations is to adjust operations to the market situation, where COVID -19 is causing uncertainty among customers and prospects. The negotiations may lead to temporary part-time layoffs and reorganizing of work tasks for financial and production-related reasons.
Since the business impact of the Covid-19 -situation is estimated to be temporary, redundancies are not considered in the negotiations. Preliminary estimate of the amount of lay-offs is 65, at maximum. Negotiations commenced on October 20, 2020.
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 44% of Group’s trade receivables were in euro at the end of the reporting period (48). 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 2019, pages 24-25 (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, 2020 | Jul-Sep, 2019 | Change, % | Jan-Sep, 2020 | Jan-Sep, 2019 | Change, % | Jan-Dec, 2019 |
| Net sales | 1,801 | 1,981 | -9 | 6,630 | 7,015 | -5 | 9,513 |
| Other operating income | 75 | 100 | 0 | 0 | |||
| Materials and services | 279 | 243 | 15 | 979 | 765 | 28 | 1,143 |
| Employee benefit expenses | 1,474 | 1,375 | 7 | 4,970 | 4,712 | 5 | 6,455 |
| Other operating expenses | 232 | 175 | 32 | 560 | 700 | -20 | 878 |
| EBITDA | -109 | 188 | -158 | 221 | 838 | -74 | 1,036 |
| Depreciation and amortization | 304 | 307 | -1 | 972 | 928 | 5 | 1,250 |
| Operating result | -413 | -119 | -246 | -752 | -90 | -733 | -213 |
| Financial income and expenses | -6 | 3 | -287 | -9 | -23 | 61 | -26 |
| Result before tax | -419 | -116 | -260 | -761 | -113 | -571 | -240 |
| Income taxes | 74 | 31 | 140 | 106 | 71 | 49 | 78 |
| Result for the period | -345 | -85 | -304 | -655 | -42 | -1,445 | -161 |
| Earnings per share, EUR (basic and diluted) | -0.029 | -0.007 | -304 | -0.055 | -0.004 | -1,445 | -0.013 |
| Consolidated statement of comprehensive income: | |||||||
| Result for the period | -345 | -85 | -304 | -655 | -42 | -1,445 | -161 |
| Other items in comprehensive income that may be reclassified subsequently to profit or loss: | |||||||
| Exchange differences on translating foreign operations | -1 | -4 | -62 | -1 | -4 | -65 | -5 |
| Total comprehensive income | -346 | -89 | -289 | -656 | -46 | -1329 | -166 |
CONDENSED CONSOLIDATED BALANCE SHEET
| EUR in thousands | Sep 30, 2020 | Sep 30, 2019 | Change, % | Dec 31, 2019 |
| Assets | ||||
| Non-current assets: | ||||
| Intangible assets | 1,975 | 1,904 | 4 | 2,044 |
| Goodwill | 513 | 513 | 0 | 513 |
| Tangible assets | 265 | 440 | -40 | 371 |
| Other non-current assets | 263 | 87 | 201 | 141 |
| Total non-current assets | 3,016 | 2,944 | 2 | 3,068 |
| Current assets: | ||||
| Trade and other receivables | 1,949 | 2,272 | -14 | 2,904 |
| Cash and cash equivalents | 317 | 470 | -33 | 1,035 |
| Total current assets | 2,266 | 2,743 | -17 | 3,939 |
| Total assets | 5,282 | 5,687 | -7 | 7,007 |
| 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 | -67 | -64 | 4 | -66 |
| Invested non-restricted equity fund | 5 | 5 | 0 | 5 |
| Retained earnings | 1,270 | 1,945 | -35 | 1,882 |
| Equity attributable to shareholders of the parent company | 2,149 | 2,827 | -24 | 2,762 |
| Non-current liabilities: | ||||
| Interest-bearing liabilities | - | 71 | - | |
| Total non-current liabilities | - | 71 | - | |
| Current liabilities: | ||||
| Interest-bearing liabilities | 777 | 282 | 175 | 784 |
| Advances received | 708 | 844 | -16 | 800 |
| Accrued expenses and prepaid income | 1,267 | 1,237 | 2 | 2,083 |
| Trade and other payables | 381 | 426 | -10 | 579 |
| Total current liabilities | 3,133 | 2,788 | 12 | 4,245 |
| Total liabilities | 3,133 | 2,860 | 10 | 4,245 |
| Total equity and liabilities | 5,282 | 5,687 | -7 | 7,007 |
CONSOLIDATED CONDENCED CASH FLOW STATEMENT
| EUR in thousands | Jul-Sep, 2020 | Jul-Sep, 2019 | Change, % | Jan-Sep, 2020 | Jan-Sep, 2019 | Change, % | Jan-Dec, 2019 |
| Cash flow from operating activities: | |||||||
| Result for the period | -345 | -85 | -304 | -655 | -42 | -1,445 | -161 |
| Adjustments to the result | 263 | 268 | -2 | 930 | 877 | 6 | 1,250 |
| Working capital changes | -796 | -231 | -244 | -149 | 172 | -187 | 306 |
| Interest and other financial expenses paid | -7 | -8 | -12 | -34 | -42 | -19 | -51 |
| Interest and other financial income received | 1 | 11 | -91 | 25 | 19 | 32 | 25 |
| Income taxes paid | -6 | -14 | -57 | -16 | -47 | -67 | -18 |
| Net cash from operating activities | -890 | -59 | -1,410 | 101 | 937 | -89 | 1,349 |
| Cash flow from investing activities: | |||||||
| Purchases of tangible and intangible assets | -124 | -274 | -55 | -777 | -763 | 2 | -1,041 |
| Net cash used in investing activities | -124 | -274 | -55 | -777 | -763 | 2 | -1,041 |
| Cash flow from financing activities: | |||||||
| Proceeds from short term borrowings | 700 | - | 700 | - | 500 | ||
| Repayments of short term borrowings | -76 | -70 | 10 | -728 | -208 | 250 | -278 |
| Dividends paid | - | - | 0 | 0 | 0 | ||
| Net cash used in financing activities | 624 | -70 | 994 | -28 | -208 | -87 | 222 |
| Net change in cash and cash equivalents | -390 | -403 | -3 | -704 | -35 | -1,927 | 530 |
| Cash and cash equivalents at the beginning of the period | 722 | 871 | -17 | 1,035 | 505 | 105 | 505 |
| Effects of exchange rate changes on cash and cash equivalents | -14 | 2 | -913 | -14 | 0 | -3,171 | 0 |
| Cash and cash equivalents at the end of the period | 317 | 470 | -33 | 317 | 470 | -33 | 1,035 |
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, 2019 | 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 |
| Stock option scheme | 56 | 56 | |||||
| Comprehensive income | -1 | -119 | -121 | ||||
| Equity Dec 31, 2019 | 1,359 | 21 | -66 | -439 | 5 | 1,882 | 2,762 |
| Stock option scheme | 42 | 42 | |||||
| Comprehensive income | -1 | -655 | -656 | ||||
| Equity Sep 30, 2020 | 1,359 | 21 | -67 | -439 | 5 | 1,270 | 2,149 |
NOTES TO INTERIM FINANCIAL STATEMENTS
ACCOUNTING PRINCIPLES
This report complies with requirements of IAS 34 ”Interim Financial Reporting”. Starting from the beginning of 2020, the Group has applied certain new or revised IFRS standards and IFRIC interpretations, as described in the Consolidated Financial Statements 2019. The implementation of these 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 2019 financial statements.
When preparing the consolidated financial statements, management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated.
All amounts presented in this 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.
Definitions for key indicators can be found in the end of the latest annual report, on pages 64-65: https://www.qpr.com/investors/financial-information/annual-reports
INTANGIBLE AND TANGIBLE ASSETS
| EUR in thousands | Jan-Sep, 2020 | Jan-Sep, 2019 | Jan-Dec, 2019 |
| Increase in intangible assets: | |||
| Acquisition cost Jan 1 | 11,159 | 10,057 | 10,057 |
| Increase | 627 | 732 | 1,102 |
| Increase in tangible assets: | |||
| Acquisition cost Jan 1 | 2,487 | 2,433 | 2,433 |
| Increase | 171 | 31 | 54 |
CHANGE IN INTEREST-BEARING LIABILITIES
| EUR in thousands | Jan-Sep, 2020 | Jan-Sep, 2019 | Jan-Dec, 2019 |
| Interest-bearing liabilities Jan 1 | 784 | 562 | 562 |
| Proceeds from short term borrowings | 721 | - | 500 |
| Repayments | 728 | 208 | 278 |
| Interest-bearing liabilities Sep 30 | 777 | 354 | 784 |
PLEDGES AND COMMITMENTS
| EUR in thousands | Sep 30, 2020 | Sep 30, 2019 | Dec 31, 2019 | Change, % |
| Business mortgages (held by the Company) | 2,385 | 1,384 | 1,385 | 72 |
| Minimum lease payments based on lease agreements: | ||||
| Maturing in less than one year | 7 | 19 | 17 | -56 |
| Maturing in 1-5 years | 8 | 2 | 0 | |
| Total | 16 | 21 | 17 | -5 |
| Total pledges and commitments | 2,401 | 1,406 | 1,402 | 71 |
CONSOLIDATED INCOME STATEMENT BY QUARTER
| EUR in thousands | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
| Net sales | 1,801 | 2,041 | 2,789 | 2,499 | 1,981 | 2,285 | 2,748 |
| Other operating income | 75 | 25 | - | 0 | - | 0 | - |
| Materials and services | 279 | 260 | 440 | 379 | 243 | 260 | 263 |
| Employee benefit expenses | 1,474 | 1,757 | 1,739 | 1,743 | 1,375 | 1,644 | 1,693 |
| Other operating expenses | 232 | 109 | 220 | 178 | 175 | 228 | 296 |
| EBITDA | -109 | -60 | 390 | 199 | 188 | 153 | 497 |
| Depreciation and amortization | 304 | 324 | 345 | 322 | 307 | 310 | 310 |
| Operating result | -413 | -384 | 45 | -123 | -119 | -158 | 187 |
| Financial income and expenses | -6 | 6 | -9 | -3 | 3 | -6 | -20 |
| Result before tax | -419 | -378 | 36 | -126 | -116 | -164 | 167 |
| Income taxes | 74 | 57 | -25 | 7 | 31 | 66 | -26 |
| Result for the period | -345 | -321 | 11 | -119 | -85 | -98 | 141 |
GROUP KEY FIGURES
| EUR in thousands, unless otherwise indicated | Jan-Sep or Sep 30, 2020 | Jan-Sep or Sep 30, 2019 | Jan-Dec or Dec 31, 2019 |
| Net sales | 6,630 | 7,015 | 9,513 |
| Net sales growth, % | -5.5 | -4.9 | -5.3 |
| EBITDA | 221 | 838 | 1,036 |
| % of net sales | 3.3 | 11.9 | 10.9 |
| Operating result | -752 | -90 | -213 |
| % of net sales | -11.3 | -1.3 | -2.2 |
| Result before tax | -761 | -113 | -240 |
| % of net sales | -11.5 | -1.6 | -2.5 |
| Result for the period | -655 | -42 | -161 |
| % of net sales | -9.9 | -0.6 | -1.7 |
| Return on equity (per annum), % | -35.5 | -2.0 | -5.7 |
| Return on investment (per annum), % | -30.0 | -3.1 | -5.9 |
| Cash and cash equivalents | 317 | 470 | 1,035 |
| Net borrowings | 459 | -116 | -251 |
| Equity | 2,149 | 2,827 | 2,762 |
| Gearing, % | 21.4 | -4.1 | -9.1 |
| Equity ratio, % | 47.0 | 58.4 | 44.5 |
| Total balance sheet | 5,282 | 5,687 | 7,007 |
| Investments in non-current assets | 798 | 763 | 1,156 |
| % of net sales | 12.0 | 10.9 | 12.2 |
| Product development expenses | 1,587 | 1,653 | 2,293 |
| % of net sales | 23.9 | 23.6 | 24.1 |
| Average number of personnel | 86 | 82 | 82 |
| Personnel at the beginning of period | 83 | 84 | 84 |
| Personnel at the end of period | 85 | 83 | 83 |
| Earnings per share, EUR (basic and diluted) | -0.055 | -0.004 | -0.013 |
| Equity per share, EUR | 0.173 | 0.227 | 0.222 |