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2009-07-10 08:44:59 CEST 2009-07-10 08:45:41 CEST REGULATED INFORMATION BasWare - Interim report (Q1 and Q3)Basware Interim Report January 1 - June 30, 2009 (IFRS)BASWARE INTERIM REPORT JANUARY 1 - JUNE 30, 2009 (IFRS) SUMMARY January-June H1 - Net sales EUR 44 446 thousand (EUR 40 545 thousand) - growth 9.6 percent - Operating profit EUR 3 738 thousand (EUR 2 177 thousand) - growth 71.8 percent - Operating profit 8.4 percent of net sales (5.4%) - International operations accounted for 52.5 percent of net sales (50.4%) - growth 14.2 percent - Cash flows from operating activities were EUR 7995 thousand (EUR 4 579 thousand). - Earnings per share EUR 0.18 (EUR 0.11) April-June Q2 - Net sales EUR 22 729 thousand (EUR 22 312 thousand) - growth 1.9 percent - Operating profit EUR 2 146 thousand (EUR 2 431 thousand) - decrease 11.7 % - Operating profit 9.4 percent of net sales (10.9%) - International operations accounted for 52.6 percent of net sales (49.3%) - growth 8.6 percent - Cash flows from operating activities were EUR -428 thousand (EUR -2 306 thousand). - Earnings per share EUR 0.12 (EUR 0.16) Basware expects its net sales for 2009 to develop positively on the level of 2008. Operating profit (EBIT) for 2009 is expected to be from 10 to 15 percent of net sales. The figures are unaudited. GROUP KEY FIGURES 4-6/ 4-6/ Change, 1-6/ 1-6/ Change, 1-12/ EUR thousand 2009 2008 % 2009 2008 % 2008 Net sales 22 729 22 312 1.9% 44 446 40 545 9.6% 86 098 EBITDA 3 213 3 123 2.9% 5 809 3 540 64.1% 11 722 Operating profit before IFRS-3 amortization 2 559 2 627 -2.6% 4 592 2 569 78.7% 9 730 Operating profit 2 146 2 431 -11.7% 3 738 2 177 71.8% 8 679 % of net sales 9.4% 10.9% 8.4% 5.4% 10.1% Profit before tax 2 122 2 428 -12.6% 3 607 2 178 65.6% 8 410 Profit for the period 1 396 1 899 -26.5% 2 062 1 350 52.7% 6 585 Return on equity, % 11.5% 16.6% 8.4% 5.7% 13.7% Return on investment, % 11.9% 20.9% 11.9% 8.9% 16.6% Liquid assets* 9 516 5 771 64.9% 9 516 5 771 64.9% 8 777 Gearing, % 3.3% -7.8% 3.3% -7.8% 9.3% Equity ratio, % 58.2% 67.2% 58.2% 67.2% 59.5% Earnings per share, EUR 0.12 0.16 -26.0% 0.18 0.11 55.6% 0.56 Earnings per share (diluted), EUR 0.12 0.16 -26.0% 0.18 0.11 55.6% 0.56 Equity per share, EUR 4.25 4.06 4.9% 4.25 4.06 4.9% 4.23 *) Includes cash, cash equivalents and financial assets at fair value through profit or loss Basware's business operations consist of product sales, maintenance, consulting and Automation Services. The core of Basware's product sales consists of the Basware Enterprise Purchase to Pay product suite and the Basware Financial Management (FIMA) suite. The Group's reported market areas are Finland, Scandinavia, Europe and North America. Basware's CEO Ilkka Sihvo's comments in connection with the publishing of the Interim Report:"The company's results for the second quarter were at a good and anticipated level under extremely challenging financial market situation that has also seen prolonged sales cycles. Our six-month operating profit has increased by 72% on the previous year, which is a sufficient starting point also considering the achievement of the target for the rest of the year. During the first half of the year, the company's geographical segments fared well considering the circumstances. All areas continued their growth while also improving their profitability. During the reporting period, the proportion of services grew solidly, and Automation Services increased their share compared to product sales. Sales of the Basware Connectivity Services, launched at the beginning of the year, have seen excellent success. Supplier Activation, e-invoicing and Scan and Capture agreements have been sold successfully in Finland, Central Europe and North America among others. Automation Services agreements typically span several years, generating continuous income throughout the contract period. Automation Services net sales increased superbly by 61% during the first half of the year, by 73% during the second quarter and by 55% compared to the previous quarter." REPORTING As of January 1, 2009, the Group has applied the following new and revised standards: IFRS 8 Operating Segments and IAS 1 Presentation of Financial Statements. IFRS 8 has an effect on the segment information in the notes and IAS 1 has an effect on the presentation of the income statement. Basware's reporting segment is based upon geography as follows: Finland, Scandinavia, Europe and North America. In addition, the company reports revenue from products and services as follows: Product sales, Consulting, Maintenance and Automation Services. Automation Services include SaaS revenue and Connectivity Services, which include digitalization of paper invoices and exchange of e-invoices and purchase transactions. The company also reports the backlog of Automation service agreements not recognized as income. Automation Services agreements typically span several years. NET SALES The geographical division of net sales by the location of assets: Net sales 4-6/ 4-6/ 1-6/ 1-6/ Change, 1-12/ (EUR thousand) 2009 2008 Change, % 2009 2008 % 2008 Finland 12 406 13 091 -5.2 23 737 23 584 0.6 49 517 Scandinavia 6 278 4 628 35.6 11 595 8 827 31.4 18 805 Europe 4 318 4 469 -3.4 8 984 8 762 2.5 19 454 North America 1 128 1 446 -21.9 2 323 2 125 9.3 5 004 Sales between segments -1 402 -1 322 -6.0 -2 193 -2 752 20.3 -6 682 Group total 22 729 22 312 1.9 44 446 40 545 9.6 86 098 The geographical division of net sales by the location of customers: Net sales 4-6/ 4-6/ 1-6/ 1-6/ Change, 1-12/ (EUR thousand) 2009 2008 Change, % 2009 2008 % 2008 21 Finland 10 774 11 320 -4.8 098 20 100 5.0 41 514 10 Scandinavia 5 613 4 508 24.5 823 8 635 25.3 18 309 Europe 4 391 4 401 -0.2 9 073 8 749 3.7 19 191 Others 1 950 2 082 -6.3 3 453 3 061 12.8 7 083 44 Group total 22 729 22 312 1.9 446 40 545 9.6 86 098 Basware Group's net sales increased by 9.6 percent during the first two quarters to EUR 44 446 thousand (EUR 40 545 thousand). Net sales for the second quarter increased by 1.9 percent to EUR 22 729 thousand (EUR 22 312 thousand). The company's product sales decreased by 15.1 percent during the reporting period to 22.8 percent (29.5%) of net sales. Maintenance revenue increased by 22.3 percent in the reporting period and accounted for 32.5 percent (29.1%) of net sales. Consulting revenue increased by 11.7 percent and accounted for 36.6 percent (35.9%) of net sales. During the period, Automation Services grew 62.1 percent and accounted for 8.1 percent (5.5%) of net sales. The backlog of the Automation Services business not recognized as income was EUR 13 116 thousand (EUR 11 241 thousand) at the end of the period. A total of 976 customers had been connected to the service at the end of the reporting period. In April-June, 24.1 percent (33.2%) of net sales consisted of own product sales with product sales decreasing by 26.0 percent. Automation Services sales accounted for 9.6 percent (5.6%) of net sales in the second quarter, up 73.2 percent. Maintenance revenue accounted for 32.1 percent (27.2%) of net sales during the second quarter and grew by 20.3 percent. Consulting revenue represented 34.2 percent (34.0%) of net sales and grew by 2.5 percent. Value added resellers provided a net share of 11.3 percent (16.1%) or EUR 1 145 thousand (1 044 thousand) of product sales during the reporting period and 10.5 percent (11.9%) or EUR 577 thousand in April-June, accounting for 4.8 percent (8.0%) of the net sales from international operations. The international share of Basware's net sales was 52.5 percent (50.4%) in the reporting period. International operations grew by 14.2 percent. FINANCIAL PERFORMANCE Basware's operating profit for the period increased by 71.8 percent to EUR 3 738 thousand (EUR 2 177 thousand). Operating profit represented 8.4 percent (5.4%) of net sales. Operating profit decreased by 11.7 percent during the second quarter to EUR 2 146 thousand (EUR 2 431 thousand). Operating profit represented 9.4 percent of net sales. The geographical division of operating profit by the location of assets: Operating profit 4-6/ 4-6/ Change, 1-6/ 1-6/ 1-12/ (EUR thousand) 2009 2008 % 2009 2008 Change, % 2008 Finland 1 295 1 926 -32.8 2 144 1 834 16.9 7 898 Scandinavia 1 249 489 155.2 1 915 810 136.5 1 017 Europe -32 -123 73.7 199 -401 149.6 -74 North America -102 185 -155.2 35 27 28.7 289 Operating profit between segments -263 -47 -461.2 -555 -94 -492.2 -452 Group total 2 146 2 431 -11.7 3 738 2 177 71.8 8 679 The company's fixed costs were EUR 35 556 thousand (EUR 34 539 thousand) in the period, up 2.9 percent on the corresponding period the previous year. Personnel costs made up 74.1 percent (70.6%) or EUR 26 340 thousand (EUR 24 373 thousand) of the fixed costs. Fixedcosts for the second quarter amounted to EUR 17 957 thousand (EUR 17 865 thousand). Research and development costs totaled EUR 7 530 thousand (EUR 8 133 thousand), of which EUR 892 thousand (EUR 1 342 thousand) or 11.8 percent (16.5%) were capitalized during the period. Amortization of capitalized research and development costs totaled EUR 778 thousand (EUR 569 thousand). The company's finance income and finance expenses were EUR -132 thousand (EUR 1 thousand). Profit before tax was EUR 3 607 thousand (EUR 2 178 thousand) and profit for the period was EUR 2 062 thousand (EUR 1 350 thousand). Undiluted earnings per share were EUR 0.18 (EUR 0.11). FINANCE AND INVESTMENTS Basware Group's total assets on the balance sheet at the end of the period were EUR 84 060 thousand (EUR 69 627 thousand). The company's cash and liquid assets were EUR 9 516 thousand (EUR 5 771 thousand), of which cash and cash equivalents were EUR 9 484 thousand (EUR 5 739 thousand) and financial assets at fair value through profit or loss were EUR 32 thousand (EUR 32 thousand). Equity ratio was 58.2 percent (67.2%) and gearing was 3.3 percent (-7.8%). The company's interest-bearing liabilities totaled EUR 11 115 thousand (EUR 2 130 thousand), of which current liabilities accounted for EUR 5 563 thousand (EUR 2 111 thousand). Return on investment was 11.9 percent (8.9%) and return on equity 8.4 percent (5.7%). Cash flows from operating activities were EUR 7 995 thousand (EUR 4 579 thousand). Cash flows from investments were EUR -2 734 thousand (EUR -1 838 thousand). Basware AS purchased the Norwegian invoice automation solution business of Itella Information AS. The purchase price was NOK 6.38 million (approximately EUR 0.72 million) and it was paid in cash on the day the acquisition was completed, April 1, 2009. In addition, Basware may pay an additional purchase price of a maximum of NOK 7.0 million (EUR 0.77 million) in February 2010 at the latest, determined on the basis of the volume of the purchased operations' service sales in 2009. EUR 1 039 thousand associated with customer relationships has been allocated to intangible assets, taking deferred tax liabilities into consideration. The purchase price includes EUR 436 thousand of goodwill. The allocation of the acquisition purchase price is preliminary. The company's capital expenditure, resulting from regular additional and replacement investments required for growth, was EUR 481 thousand (EUR 368 thousand) in the period. Gross investments which include, in addition to those mentioned above, the capitalized research and development costs and acquisitions totaled EUR 2 598 thousand (EUR 1 823 thousand). Amortization of intangible assets totaled EUR 1 073 thousand (EUR 921 thousand). There are no indications of impairments of assets. RESEARCH, DEVELOPMENT AND NEW PRODUCTS Research and development costs were EUR 7 530 thousand (EUR 8 133 thousand) in the period, corresponding to 16.9 percent (20.1%) of net sales. Research and development costs decreased by 7.4 percent compared with the same period last year. Of the research and development costs, EUR 892 thousand (EUR 1 342 thousand) or 11.8 percent has been capitalized. Amortization of capitalized research and development costs totaled EUR 778 thousand (EUR 569 thousand). A total of 187 (161) people worked in Products at the end of June 2009. The Products unit is expanding in India, where there are currently 48 employees. At the beginning of 2009, Basware launched the Basware Connectivity solution, which aims at speeding up the migration to electronic exchange of documents. There has been obvious demand for the solution in the market, and it has been sold successfully in Europe as well as North America. Basware is now able to exchange all the documentation related to the Purchase to Pay process in a single solution. PERSONNEL Basware employed 738 (672) people on average during the first two quarters and 742 (686) at the end of the period. The number of personnel increased by 56 persons and by 8.2 percent compared with the same period the previous year. The Contempus acquisition during the last quarter of 2008 increased the number of personnel by 41 people. The share of personnel working in foreign units has increased compared with the previous year. At the end of the period, 46.1 percent (41.8%) of Basware personnel worked outside of Finland and 53.9 percent (58.2%) in Finland. 17.5 percent of the personnel work in sales and marketing, 48.5 percent in consulting and services, 25.2 percent in Products, and 8.8 percent in administration. The average age of employees is 36.1 (35.7) years. Of the employees, 35.6 percent have a Master's degree and 42.7 percent have a Bachelor's degree. Women account for 28.4 percent of employees, men for 71.6 percent. Geographical distribution of personnel: Personnel (employed, on 4-6/ 4-6/ 1-6/ 1-6/ Change, 1-12/ average) 2009 2008 Change, % 2009 2008 % 2008 Finland 458 421 8.8 449 418 7.3 421 Scandinavia 137 101 35.3 138 100 37.3 112 Europe 119 130 -8.5 121 129 -6.2 129 North America 31 26 19.5 31 25 24.3 26 Group total 744 678 9.8 738 672 9.8 689 BUSINESS OPERATIONS Finland The Finland segment includes the business operations in Finland, Russia, Asia and Australia and the head office functions. Net sales for the second quarter idecreased by 5.2 percent to EUR 12 406 thousand (EUR 13 091 thousand). Net sales of the Finnish and Russian business operations increased by 4.1 percent during the second quarter to EUR 11 333 thousand (EUR 10 887 thousand). All the Basware Enterprise Purchase to Pay and Financial Management products are sold in the region. Basware signed a partnership agreement with the Russian auditing and consulting company RSM Top Audit and the auditing and consulting company Baker Tilly Russaudit. As a result of the agreements, RSM Top Audit and Baker Tilly Russaudit will resell Basware's IFRS consolidation solutions in Russia. The company will deliver an extensive Basware Connectivity solution to a Finnish corporate group. The solution will be adopted throughout the group in approximately 20 countries. The value of the transaction totals approximately EUR 900 000. New customers included DNA, Metso, Empower Oy, Lindell Oy, RoboMec Oy, Voglia, HRAK Vocational Adult Education Centre, Aller Julkaisut and Globetel. There are 5 resellers in the Asia Pacific region. There are currently 10 resellers in all in the area and the number of personnel averaged 458 (421) during the second quarter. Scandinavia Basware's Nordic organization consists of a centrally directed Scandinavian (Sweden, Denmark and Norway) unit. All the Basware Enterprise Purchase to Pay and Financial Management products are sold in the Nordic countries, apart from the payment solutions. The Scandinavian business operations developed positively as a whole during the second quarter, and net sales of the area increased by 35.6 percent to EUR 6 278 thousand (EUR 5 317 thousand). The profitability of the operations has improved by 155.2 percent and operating profit was EUR 1 249 thousand (EUR 489 thousand). New customers include Danish Agency for Governmental Management, Danish Technical University, Alliance Boots, Heimdal Gruppen (HENT AS), LINK Singatur AS, Nordnet AB, Permobil AB, Landscape Services Sweden AB and LRF Konsult AB. Business operations are mainly handled by the own organization and there were 137 (101) employees on average in the area. Europe Basware's European business operations consist of the units in Germany, France, the Netherlands, United Kingdom and Southern Europe. Additionally, the reseller network covers the eastern part of Central Europe. All Enterprise Purchase to Pay products and services are sold in Europe, apart from the payment and travel & expense management solutions. Net sales in the Europe segment decreased by 3.4 percent in the second quarter and totaled EUR 4 318 thousand (EUR 4 469 thousand). The profitability of the operations has improved by 73.7 percent and operating profit was EUR -32 thousand (EUR -347 thousand). At the end of 2008, Basware UK initiated a rationalization program and reorganization of operations, facilitating profitable growth. The program has resulted in significant cost-savings and the utilization rate of consulting has increased, which improves the unit's profitability. New customers included SITA NEWS, Aggreko Plc, Malvern Instruments, Thon Hotels, Gibo Groep, Quadraam, Aviva Investors Luxemburg, Michael Page, PQ Europe and Nouvelles Frontières. There are 35 resellers in Europe, and Basware personnel averaged 119 (130). North America Basware's North American unit sells the Enterprise Purchase to Pay solutions in the United States and Canada. Net sales of the area decreased by 21.9 percent in the second quarter to EUR 1 128 thousand (EUR 1 446 thousand). The profitability of the operations has decreased by 155.2 percent and operating profit was EUR -102 thousand (EUR 185 thousand). Basware will deliver the Basware Enterprise Purchase to Pay solution and Scan and Capture services to HCR ManorCare, Inc. in North America. The value of the agreement is over EUR one million including product sales, consulting and Scan and Capture services. The sales and consulting revenue will be recognized mainly during the last quarters of 2009 and Connectivity services over the next three years. At the end of the period, there were 9 resellers in North America. On average, there were 31 (26) employees in the area. OTHER EVENTS OF THE PERIOD Basware AS purchased the Norwegian invoice automation solution business of Itella Information AS. The purchase price was NOK 6.38 million (approximately EUR 0.72 million) and it was paid in cash on the day the acquisition was completed, April 1, 2009. In addition, Basware may pay an additional purchase price of a maximum of NOK 7.0 million (EUR 0.77 million) in February 2010 at the latest, determined on the basis of the volume of the purchased operations' service sales in 2009. The acquisition is expected to increase Basware's Automation Services revenues for 2009 by approximately EUR 0.9 million instead of the previous estimate amounting to EUR 1.2 million. The decrease is based on the volume of service sales being below previous estimates. Basware Einvoices Oy merged into Basware Corporation on June 30, 2009, in accordance with the previously registered merger plan. The business operations of Basware Einvoices Oy will resume in Basware Corporation as a part of the Basware Automation Services business. The merger did not result in changes to Basware Corporation's organization structure. Contempus AS in Norway merged into Basware AS on June 30, 2009, in accordance with the previously registered merger plan. The business operations of Contempus AS will resume in Basware AS as a part of its normal business. The merger did not result in changes to Basware AS' organization structure. Strategy Basware has updated its strategy for the years 2009-2012. The long term net sales growth objective remains in the range of 20-40 percent with operating profit margin of 10-20 percent of net sales. Basware will expand the EPP (Enterprise Purchase to Pay) Automation Services concept during 2009. The concept targets Basware software license customers to achieve an even higher degree of automation. The Software as a Service (SaaS) model is predicted to see a remarkably higher growth than the software license market. The company's vision, mission and financial objectives for the years 2007-2010 announced on September 12, 2006, remain unchanged. SHARE AND SHAREHOLDERS Basware Corporation's share capital totaled EUR 3 440 437,20 at the end of the period and the number of shares was 11 468 124. A separate stock exchange release has been issued on the Board authorizations and other resolutions of the Annual General Meeting of Shareholders on February 12, 2009. Share price and trade During the reporting period, the highest price of the share was EUR 11.48 (EUR 10.45), the lowest was EUR 6.60 (EUR 6.14) and the closing price was EUR 11.40 (EUR 7.00). The average price of the share was EUR 8.57 (EUR 8.03) during the period. A total of 986 643 (1 039 454) shares were traded during the period which is the equivalent of 8.7 percent (9.1%) of the average number of shares. Market capitalization with the period's closing price on June 30, 2009 was EUR 129 707 194 (EUR 80 276 868). Shareholders Basware had 16 770 (17 301) shareholders on June 30 including nominee-registered holdings (7). Nominee-registered holdings accounted for 8.4 (11.4) percent of the total number of shares. Basware Corporation's share repurchases program that was resolved by the Board of Directors on October 14, 2008 ended on March 31, 2009. The program was based on the authorization granted by the Annual General Meeting on February 14, 2008. The purchases started on October 23, 2008 and ended according to the terms of the share repurchase program on March 31, 2009. On March 31, 2009 90.300 of shares were acquired and the company now holds a total number of 90.300 shares representing approximately 0.79 % of all Basware shares. The average price of the shares acquired during the repurchases program was 6.9475 euro. GOVERNANCE The Annual General Meeting of Shareholders on February 12, 2009, confirmed the number of Board members as five. The Annual General Meeting resolved to agree on the proposal and elected Matti Copeland, Sakari Perttunen, Pentti Heikkinen, Ilkka Toivola and Hannu Vaajoensuu members of the Board of Directors. In its first meeting held after the Annual General Meeting, the Board of Directors elected Hannu Vaajoensuu as chairman and Sakari Perttunen as vice chairman of the Board. The Annual General Meeting further resolved to elect Ernst & Young Oy, Authorized Public Accountants as the auditor, with APA Heikki Ilkka in charge and APA Terhi Mäkinen as the deputy auditor. The Board was authorized to resolve on share issue and share repurchase. A separate stock exchange release has been issued on the Board authorizations and other resolutions of the Annual General Meeting of Shareholders on February 12, 2009. SHORT-TERM RISKS AND UNCERTAINTY FACTORS In accordance with Basware's risk management policy, risks are divided into six categories: risks related to business operations, products, personnel as well as legal, financial and data security risks. Basware takes risks that are a natural part of its strategy and objectives. These risks are managed and decreased in various ways. Short-term risks are considered to be risks in the current reporting year. The global crisis of the finance market, general economic uncertainty and depression decrease companies' willingness to invest, which might have an unfavorable impact on the development of the company's net sales and profitability. In previous economic downturns, the demand for the company's products and services has remained more positive than the general economic market as a whole as the company's software solutions generate cost savings. The rapidly weakened global market situation does however cause uncertainty. The depression has generally increased companies' delinquency entries and the number of bankruptcies. Typically, companies may also prolong the times of payments in order to free up working capital. Basware has intensified its management of sales receivables, and business management regularly monitors the payment of sales receivables as part of the management of customer accounts. Goodwill has been tested during the last quarter of 2008. In accordance with the testing for impairment of assets, no impairment of assets has occurred. At the end of 2008, Basware UK implemented a rationalization program and reorganization of operations. The program has resulted in significant cost-savings and the utilization rate of consulting has increased, which improves the unit's profitability. If the unit's profitability does not improved as planned in the medium term despite the streamlining program, it is likely that the goodwill allocated to the unit will need to be impaired. In other respects, no significant changes have taken place in Basware's short-term risks and uncertainties during the financial period. EVENTS AFTER THE REPORTING PERIOD Basware acquired the entire share capital of TAG Services Pty Ltd in Australia on July 1, 2009. The acquisition price will be based on the company's net sales for its fiscal year ended June 30, 2009 and the company's net asset value on June 30, 2009, and is estimated to amount to AUD 2.25 Million (EUR 1.30 Million, using an exchange rate of EUR/AUD 1.7359 on June 30, 2009). The company's net asset value at June 30, 2009, is estimated to be AUD 0.53 million (EUR 0.31 Million). The acquisition price will be paid in cash in two parts in July and August 2009. In addition the deal includes an additional acquisition price element that is based on the growth of the company's net sales of the period from July 1, 2009 to June 30, 2010 and will be paid in August 2010 at the latest. TAG Services, a Basware's partner since 2001, offers Basware Enterprise Purchase to Pay solutions to its customers. As a result of the acquisition, Basware will obtain a strong foothold in the Australian market, be able to launch the Basware Connectivity Services solution also in this market area and offer 24/7 customer support to its global customers. TAG Services' net sales of the fiscal year ended June 30, 2009 was AUD 2.26 million (EUR 1.29 Million) excluding the resale share to be paid to Basware and the operating profit was positive. The above mentioned figures are unaudited. Basware employs 13 persons in Australia. FUTURE OUTLOOK Market forecasts published in March 2009 expected the entire IT market to decrease by 3.7 percent in 2009, while the corporate software market was forecast to increase by 5.4 percent on average annually until 2013. According to forecasts published in June 2009 the software markets are estimated to decrease by 8.2 percent and entire IT markets to decrease by 10.6 percent globally in 2009. According to analysts' estimates published in June 2009, both the entire IT market and service market are expected to increase by 4.0 percent in 2010, while the software market is forecast to increase by 5.6 percent globally. Western Europe and the United States combined account for approximately three quarters of the enterprise software market. In these markets, electronic invoice processing and procurement solutions are still in early maturity. The procurement management and electronic invoice processing markets are heterogeneous in terms of the competitive situation. Growth could attract more competitors to the market. The industry is consolidating, and this development could go on in the future as well. Globally speaking, Basware is a medium-sized software company in terms of net sales as well as number of personnel. Basware's direct competitors are primarily locally operating and often smaller companies. In North America in particular, the company has also larger competitors, especially in the field of procurement management. Developers of document management, scanning and recycling systems compete with Basware, particularly with regard to purchase invoice management solutions. Competing solutions also include customized solutions integrated into ERP (Enterprise Resource Planning) systems. The software still offers a competitive edge, thanks to the integrated offering consisting of new added value products and the products. Automation Services, a new concept in the portfolio, will have a positive impact on the competitiveness. Automation Services increase the predictability and transparency of a company's net sales and profitability. In 2008, revenue from continuous services (including maintenance) accounted for a third of the company's total revenue. Basware predicts that Automation Services revenue will increase significantly in the strategy period. The company's international growth is based on efforts of its own sales and marketing activity as well as the reseller channel. Development of the indirect distribution channel continues in Europe, Russia and Asia. In North America, the focus will be on developing the company's own sales channel for the time being. In Scandinavia, the focus is on profitability, and moderate growth is supported by the company's expanded product portfolio and the development of the service business. In Finland, the focus is on profitability, and moderate growth will primarily be achieved from the fields of procurement management and services. Basware has complemented its organic growth with acquisitions. The company will continue to review possible acquisition targets during 2009. The aim of the acquisitions is to expand the company's distribution channel and product portfolio in international markets. The Group increased its number of personnel mainly in India during the first two quarters. Research and development costs are not expected to substantially increase from the level of 2008. Growth-related investments will start earliest during the second half of the year if net sales and profitability are at the expected level. The cost savings resulting from the synergy benefits of the Contempus integration will materialize starting from the beginning of 2009 and they will be approximately EUR 3 million by the end of 2009. Approximately EUR 1 million will be amortized of the Contempus acquisition cost allocated to customer relationships and products in accordance with a straight-line depreciation plan of 4.25 years. Basware expects its net sales for 2009 to develop positively on the level of 2008. Operating profit (EBIT) for 2009 is expected to be from 10 to 15 percent of net sales. Espoo, Finland, July 10, 2009 BASWARE CORPORATION Board of Directors For more information, please contact CEO Ilkka Sihvo, Basware Corp., Tel. +358 9 8791 7251 or +358 40 501 8251 Analyst and Press Briefing Basware arranges today, July 10, 2009 a briefing on the Interim Report for the press and analysts at 11:00 a.m. in Hotel Kämp, Pohjoisesplanadi 29, Helsinki, Finland. During this briefing CEO Ilkka Sihvo and CFO Mika Harjuaho will comment the events and financial performance of the quarter. Welcome. Distribution: NASDAQ OMX Helsinki Ltd Key media www.basware.com The Interim Report has been prepared in accordance with the International Financial Reporting Standards (IFRS). As of January 1, 2009, the Group has applied the following new and revised standards: IFRS 8 Operating Segments and IAS 1 Presentation of Financial Statements. Otherwise the same Accounting Principles have been applied as in the 2008 Financial Statements. Key indicator calculations remain unchanged and have been presented in the 2008 Financial Statements. GROUP INCOME STATEMENT 1.4.- 1.4.- 1.1.- 1.1.- 1.1.- 30.6. 30.6. Change, 30.6. 30.6. Change, 31.12. EUR thousand 2009 2008 % 2009 2008 % 2008 NET SALES 22 729 22 312 1.9 44 446 40 545 9.6 86 098 Other operating income 52 62 -16.6 81 131 -37.8 250 Materials and services -1 611 -1 385 -16.3 -3 162 -2 596 21.8 -4 726 Employee benefit -12 -26 -24 expenses -13 444 608 6.6 340 373 8.1 -50 399 Depreciation and amortization -1 067 -693 54.0 -2 071 -1 364 51.8 -3 043 Other operating -10 expenses -4 513 -5 257 -14.1 -9216 166 -9.3 -19 500 Operating profit 2 146 2 431 -11.7 3 738 2 177 71.8 8 679 Finance income 30 18 71.0 155 57 170.4 734 Finance expenses -54 -21 159.9 -286 -56 413.2 -1 003 Profit before tax 2 122 2 428 -12.6 3 607 2 178 65.6 8 410 Income tax expense -727 -528 37.6 -1 545 -828 86.5 -1 825 PROFIT FOR THE PERIOD 1 396 1 899 -26.5 2 062 1 350 52.7 6 585 Other comprehensive income Exchange differences on translating foreign operations 594 -26 -2384.6 1 397 -210 -765.2 -4 383 Income tax relating to components of other comprehensive income 8 0 -44 0 0 Other comprehensive income, net of tax 602 -26 -2415.4 1 353 -210 -744.3 -4 383 TOTAL COMPREHENSIVE INCOME 1 998 1 873 6.6 3 415 1 140 199.6 2 201 Profit attributable to: Owners of the parent 1 370 1 865 -26.5 2 012 1 302 54.5 6 467 Minority interest 26 35 -25.3 50 48 5.2 118 1 396 1 899 -26.5 2 062 1 350 52.7 6 585 Total comprehensive income attributable to: Owners of the parent 1 973 1 839 7.3 3 365 1 092 208.2 2 084 Minority interest 26 35 25.3 50 48 5.2 118 1 998 1 873 6.6 3 415 1 140 199.6 2 201 Earnings per share (undiluted), EUR 0.12 0.16 -26.0 0.18 0.11 55.6 0.36 Earnings per share (diluted), EUR 0.12 0.16 -26.0 0.18 0.11 55.6 0.36 GROUP BALANCE SHEET EUR thousand 30.6.2009 30.6.2008 Change, % 31.12.2008 ASSETS NON-CURRENT ASSETS Intangible assets 17 678 12 589 40.4 17 022 Goodwill 30 389 25 726 18.4 29 212 Tangible assets 933 1 081 -13.7 991 Available-for-sale investments 38 38 38 Long-term trade and other receivables 208 12 1 614.1 536 Deferred tax assets 1 973 2 300 -14.2 2 208 Non-current assets 51 220 41 746 22.7 50 006 CURRENT ASSETS Inventories 45 37 23.5 48 Trade and other receivables 20 285 20 654 -1.8 20 737 Income tax receivables 2 993 1 420 110.8 2 341 Financial assets at fair value through profit or loss 32 32 3.1 31 Cash and cash equivalents 9 484 5 739 65.2 8 745 Current assets 32 840 27 881 17.8 31 902 TOTAL ASSETS 84 060 69 627 20.7 81 909 EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share capital 3 440 3 440 3 440 Share premium account 69 69 69 Own shares -629 -271 Fair value reserve and other reserves 33 598 33 598 33 598 Translation differences -3 818 229 -1 769.2 -3 991 Retained earnings 16 088 9 227 74.4 15 648 Minority interest 189 196 -3.5 224 Shareholders' equity 48 937 46 759 4.7 48 717 NON-CURRENT LIABILITIES Deferred tax liability 2 823 1 618 74.5 2 307 Interest-bearing liabilities 5 552 14 29 368.1 7 729 Non-interest-bearing liabilities 21 Non-current liabilities 8 396 1 632 412.9 10 036 CURRENT LIABILITIES Interest-bearing liabilities 5 563 2 111 163.5 5 555 Trade payables and other liabilities 20 664 18 870 9.5 16 683 Tax liability from income tax 500 255 96.6 918 Current liabilities 26 727 21 236 25.9 23 156 TOTAL EQUITY AND LIABILITIES 84 060 69 627 20.7 81 909 GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Inv. non- Share- Share restr. holders premium Own equity Other Transl Retained Minority EUR thousand equity account shares res. res. diff. earnings interest Total SHAREHOLDERS' 47 EQUITY 1.1.08 3 440 33 127 0 0 540 392 9 765 148 413 Comprehensive income -163 1 255 48 1 14 Dividend -1 distribution -1 720 720 Granted warrants 70 70 Changes in reporting period -143 -143 SHAREHOLDERS' EQUITY 46 30.6.08 3 440 33 127 0 0 540 229 9 227 196 759 Inv. non- Share- Share restr. holders premium Own equity Other Transl Retained Minority EUR thousand equity account shares res. res. diff. earnings interest Total SHAREHOLDERS' 48 EQUITY 1.1.09 3 440 69 -271 33 058 540 -3 991 15 648 224 717 Comprehensive income 173 3 192 50 3 415 Dividend -2 distribution -2 663 663 Granted warrants 378 378 Repurchase of own shares -358 -358 Changes in reporting period -467 -86 -553 SHAREHOLDERS' EQUITY 48 30.6.09 3 440 69 -629 33 058 540 -3 818 16 088 189 937 GROUP CASH FLOW STATEMENT 1.1.- 1.1.- EUR thousand 1.1.-30.6.2009 30.6.2008 12.2008 Net cash from operating activities Profit for the period 2 062 1 350 6 585 Adjustments for profit 3 748 2 191 5 243 Working capital changes 4 392 2 770 125 Interest paid -99 -51 -291 Interest received 29 56 154 Other financial items in operating activities -16 -6 -38 Income taxes paid -2 122 -1 730 -3 447 Net cash from operating activities 7 995 4 579 8 331 Cash flows from investing activities Purchase of tangible and intangible assets -2 010 -1 842 -3 631 Proceeds from sale of tangible and intangible assets 47 Acquired subsidiaries -724 -1 -8 728 Repayment of loan receivables 5 9 Net cash used in investing activities -2 734 -1 838 -12 303 Cash flows from financing activities Proceeds from short-term loans 2 000 2 000 Repayments of short-term loans -4 000 -4 000 Proceeds from long-term borrowings 10 650 Repayments of long-term borrowings -1 783 -200 -300 Share repurchase -358 -271 Repayments of financial lease liabilities -4 -1 Dividends paid -2 623 -1 720 -1 720 Net cash used in financing activities -4 763 -3 925 6 358 Net change in cash and cash equivalents according to cash flow statement 498 -1 184 2 386 Cash and cash equivalents at beginning of period 8 777 7 041 7 041 Effects of exchange rate changes on cash and cash equivalents 242 -86 -650 Cash and cash equivalents at end of period 9 516 5 771 8 777 GROUP QUARTERLY INCOME STATEMENT 1-3/ 1-3/ 4-6/ 4-6/ 7-9/ 10-12/ EUR thousand 2009 2008 2009 2008 2008 2008 NET SALES 21 717 18 233 22 729 22 312 19 259 26 294 Other operating income 30 69 52 62 58 62 Materials and services -1 552 -1 211 -1 611 -1 385 -797 -1 333 Employee benefit expenses -12 896 -11 765 -13 444 -12 608 -10 933 -15 093 Depreciation and amortization -1 004 -671 -1 067 -693 -690 -990 Other operating expenses -4 703 -4 910 -4 513 -5 257 -4 516 -4 818 Operating profit 1 592 -254 2 146 2 431 2 381 4 122 % 7.3% -1.4% 9.4% 10.9% 12.4% -15.7% Finance income 124 39 30 18 39 637 Finance expenses 232 -35 -54 -21 -50 -897 Profit before tax 1 484 -250 2 122 2 428 2 370 3 862 % 6.8% -1.4% 9.3% 10.9% 12.3% 14.7% Income tax expense -818 -300 -727 -528 -430 -567 PROFIT FOR THE PERIOD 666 -550 1 396 1 899 1 941 3 294 % 3.15 -3.0% 6.1% 8.5% 10.1% 12.5% Changes of ownership Basware increased its shareholding in Basware Einvoices Oy to 100 percent on January 30, 2009, by acquiring 12.55% of the company's shares and control from the company's management. The purchase price paid on the date of the transaction was approximately EUR 720 thousand and the additional purchase price to be paid based on the business volume for 2009 in February 2010 at the latest is expected to be approximately EUR 250 thousand. Basware Einvoices Oy will be merged with the parent company during the financial period underway. A situation such as the one presented above is currently not regulated by IFRS, so the company's management has compiled an accounting principle for the case in compliance with IAS 8. The change of ownership is recognized under shareholders' equity, and it will not have any effect on profit or goodwill. COMMITMENTS AND CONTINGENT LIABILITIES EUR thousand 30.6.2009 30.6.2008 31.12.2008 GUARANTEES ON BEHALF OF SUBSIDIARIES 1 098 1 075 1 096 Guarantees total 1 098 1 075 1 096 OWN GUARANTEES Lease liabilities Current lease liabilities 795 713 868 Lease liabilities maturing in 1-5 years 820 754 838 Total 1 615 1 468 1 706 Other rental liabilities Current rental liabilities 2 477 2 000 2 385 Rental liabilities maturing in 1-5 years 4 299 4 471 4 620 Rental liabilities maturing later 1 227 25 1 196 Total 8 003 6 496 8 201 Other own contingent liabilities, total 9 618 7 964 9 907 SEGMENT REPORTING Net sales by market area Net sales 4-6/ 4-6/ Change, 1-6/ 1-6/ Change, 1-12/ (EUR thousand) 2009 2008 % 2009 2008 % 2008 Finland 12 406 13 091 -5.2 23 737 23 584 0.6 49 517 Scandinavia 6 278 4 628 35.6 11 595 8 827 31.4 18 805 Europe 4 318 4 469 -3.4 8 984 8 762 2.5 19 454 North America 1 128 1 446 -21.9 2 323 2 125 9.3 5 004 Sales between segments -1 402 -1 322 -6.0 -2 193 -2 752 20.3 -6 682 Group total 22 729 22 312 1.9 44 446 40 545 9.6 86 098 Operating profit 4-6/ 4-6/ Change, 1-6/ 1-6/ Change, 1-12/ (EUR thousand) 2009 2008 % 2009 2008 % 2008 Finland 1 295 1 926 -32.8 2 144 1 834 16.9 7 898 Scandinavia 1 249 489 155.2 1 915 810 136.5 1 017 Europe -32 -123 73.7 199 -401 149.6 -74 North America -102 185 -155.2 35 27 28.7 289 Operating profit between segments -263 -47 -461.2 -555 -94 -492.2 -452 Group total 2 146 2 431 -11.7 3 738 2 177 71.8 8 679 Personnel (employed, on 4-6/ 4-6/ 1-6/ 1-6/ Change, 1-12/ average) 2009 2008 Change, % 2009 2008 % 2008 Finland 458 421 8.8 449 418 7.3 421 Scandinavia 137 101 35.3 138 100 37.3 112 Europe 119 130 -8.5 121 129 -6.2 129 North America 31 26 19.5 31 25 24.3 26 Group total 744 678 9.8 738 672 9.8 689 Net sales by business Net sales 4-6/ 4-6/ 1-6/ 1-6/ Change, 1-12/ (EUR thousand) 2009 2008 Change, % 2009 2008 % 2008 Product sales 5 475 7 400 -26.0 10 152 11 964 -15.1 25 859 Maintenance 7 301 6 071 20.3 14 439 11 809 22.3 25 068 Consulting 7 773 7 582 2.5 16 269 14 560 11.7 30 538 Automation services 2 179 1 258 73.2 3 585 2 212 62.1 4 633 Group total 22 729 22 312 1.9 44 446 40 545 9.6 86 098 Net sales by the location of customer: Net sales 4-6/ 4-6/ Change, 1-6/ 1-6/ Change, 1-12/ (EUR thousand) 2009 2008 % 2008 2008 % 2008 Finland 10 774 11 320 -4.8 21 098 20 100 5.0 41 514 Scandinavia 5 613 4 508 24.5 10 823 8 635 25.3 18 309 Europe 4 391 4 401 -0.2 9 073 8 749 3.7 19 191 Other 1 950 2 082 -6.3 3 453 3 061 12.8 7 083 Group total 22 729 22 312 1.9 44 446 40 545 9.6 86 098 GROUP KEY INDICATORS 1-6/ 1-6/ 1-6/ 1-12/ EUR thousand 2009 2008 2007 2008 Net sales 44 446 40 545 34 814 86 098 Growth of net sales, % 9.6 % 16.5% 15.7% 17.5% EBITDA 5 809 3 540 5 350 11 722 % of net sales 13.1% 8.7% 15.4% 13.6% Operating profit before IFRS3 amortization 4 592 2 569 4 512 9 730 % of net sales 10.3% 6.3% 13.0% 11.3% Operating profit 3 738 2 177 4 182 8 679 Growth of operating profit, % 71.8% -48.0% 10.7% 15.5% % of net sales 8.4% 5.4% 12.0% 10.1% Profit before tax 3 607 2 178 4 299 8 410 % of net sales 8.1 % 5.4% 12.3% 9.8% Profit for the period 2 062 1 350 2 468 6 585 % of net sales 4.6% 3.3% 7.1% 7.6% Return on equity, % 8.4% 5.7% 11.0% 13.7% Return on investment, % 12.8 % 8.9% 18.9% 16.6% Interest-bearing liabilities 11 115 2 130 552 13 283 Cash and liquid assets *) 9 516 5 771 14 683 8 777 Gearing, % 3.3% -7.8% -31.0% 9.3% Equity ratio, % 58.2 % 67.2% 71.6% 59.5% Total assets 84 060 69 627 63 593 81 909 Gross investments **) 2 598 1 823 1 649 12 476 % of net sales 5.8% 4.5% 4.7% 14.5% Capital expenditure 230 481 368 1 007 % of net sales 0.5% 1.2% 1.1% 1.2% Research and development costs 7 530 8 133 6 344 15 518 % of net sales 16.9% 20.1% 18.2% 18.0% R&D personnel at end of period 187 161 140 171 Personnel on average during the period 738 672 541 689 Personnel at end of period 742 686 559 731 Increase in personnel, % 8.2% 22.7% 10.3% 11.1% Earnings per share, EUR 0,18 0.11 0.22 0.56 Earnings per share (diluted), EUR 0,18 0.11 0.22 0.56 Equity per share, EUR 4,25 4.06 3.97 4.23 P/E ratio 64,54 61.67 56.46 11.68 Share price performance lowest share price 6,60 6.14 10.48 6.00 highest share price 11,48 10.45 14.00 10.45 average share price 8,57 8.03 12.19 7.53 closing share price 11,40 7.00 12.25 6.59 Market capitalization at 129 80 276 140 484 75 301 end of period 707194 868 519 011 2 298 Number of traded shares 986 643 1 039 454 1 597 569 467 % of average number of shares 8,7 % 9.1% 13.9% 20.1% Average number of shares 11 385 11 468 11 468 11 463 - undiluted 986 124 124 307 11 385 11 468 11 468 11 463 - diluted 986 124 124 307 *) Includes cash, cash equivalents and financial assets at fair value through profit or loss **) Includes capitalized R&D costs and acquisitions Major shareholders June 30, 2009 Shares Shareholders votes pcs % 1. Sihvo, Ilkka 1 065 800 9.3 Eräkangas, Kirsi (incl. children under 2. guardianship) 1 031 800 9.0 Vaajoensuu, Hannu (incl. a controlled company 3. and children under guardianship) 962 100 8.4 4. Perttunen, Sakari 830 400 7.2 Pöllänen, Antti (incl. children under 5. guardianship) 717 415 6.3 6. Nordea Nordic Small Cap Fund 552 217 4.8 7. Sampo Life Insurance Company Limited 550 000 4.8 8. Ilmarinen Mutual Pension Insurance Company 429 064 3.7 9. Ahonen, Asko 318 822 2.8 10. Royal Skandia Life Assurance Eib 17527-6 270 000 2.4 11. Kaleva Mutual Insurance Company 242 690 2.1 12. Pension insurance company Veritas 226 000 2.0 13. Perttunen, Meimi 215 400 1.9 14. Fondita Nordic Micro Cap Placeringsfond 200 000 1.7 15. Investment Fund Aktia Capital 133 213 1.2 16. Fondita Nordic Small Cap Fund 118 500 1.0 17. Basware Corporation 90 300 0.8 18. Vaajoensuu, Sara 83 700 0.7 19. Tietoklusteri Oy 77 000 0.7 20. Pavor Oy 75 052 0.7 Total of 20 largest shareholders 8 189 473 70.8 Total of nominee-registered 962 693 8.4 Others 2 315 958 20.8 Total 11 468 124 100.0 |
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