2010-11-03 08:30:00 CET
2010-11-03 08:30:04 CET
REGULATED INFORMATION
Affecto Oyj - Interim report (Q1 and Q3)
AFFECTO PLC'S INTERIM REPORT 1-9/2010
AFFECTO PLC INTERIM REPORT 3 NOVEMBER 2010 at 9.30
AFFECTO PLC'S INTERIM REPORT 1-9/2010
GROUP KEY FIGURES
MEUR 7-9/10 7-9/09 1-9/10 1-9/09 2009
Net sales 23.9 21.6 78.0 75.3 103.0
Operational segment result 1.6 0.8 2.3 2.6 4.7
% of net sales 6.9 3.5 3.0 3.4 4.6
Operating profit/loss 1.1 0.2 0.9 -5.2 -3.6
% of net sales 4.8 1.0 1.1 -6.9 -3.5
Profit/loss before taxes 0.8 -0.2 -0.5 -7.7 -6.3
Profit/loss for the period 0.6 -0.3 -0.4 -7.4 -7.1
Equity ratio, % 45.4 43.5 45.4 43.5 42.9
Net gearing, % 54.0 46.4 54.0 46.4 39.1
Earnings per share, eur 0.03 -0.01 -0.02 -0.35 -0.33
Earnings per share (diluted), 0.03 -0.01 -0.02 -0.35 -0.33
eur
Equity per share, eur 2.59 2.45 2.59 2.45 2.49
CEO Pekka Eloholma comments:"Third quarter net sales continued on a clear growth path. Net sales grew 11%
during the quarter, and there was growth in all areas except Sweden. The
growth in Norway and Baltic was over 30%.""The profitability improved substantially compared to the previous year.
Despite the holiday period, the result also improved compared to the previous
quarters this year. Profitability was excellent in Finland (16%), moderately
good in Norway, Denmark and Baltic, but we still made a loss in Sweden.""Affecto's order backlog was 43.6 MEUR, which is 24% higher than in Q3/2009
(35.2 MEUR) and is also higher than in Q3/2008 (40.9 MEUR). The order backlog
and the good level of customer activity strengthen our belief in continuing
positive development of business conditions.""The net sales are estimated to grow in year 2010. The year 2010 will be
clearly profitable and the profitability (EBIT margin) is estimated to improve
during the year. The last quarter is expected to be the best both regarding
the net sales and profitability."
Additional information:
CEO Pekka Eloholma, +358 205 777 737
CFO Satu Kankare, +358 205 777 202
SVP, M&A, IR, Hannu Nyman, +358 205 777 761
This release is unaudited. The amounts in this report have been rounded from
exact numbers.
INTERIM REPORT 1-9/2010
Affecto builds IT solutions that enable organisations to integrate strategic
targets with their business management. Our business intelligence solutions
utilise information generated by ERP and other IT systems and process it
further. Affecto also delivers operational solutions for improving and
simplifying processes at customer organizations and offers geographic
information services.
Affecto is headquartered in Helsinki, Finland. The company has subsidiaries in
Finland, Sweden, Norway, Denmark, Estonia, Lithuania, Latvia and Poland.
NET SALES
Affecto's net sales in 1-9/2010 were 78.0 MEUR (1-9/2009: 75.3 MEUR). Net
sales in Finland were 33.4 MEUR (32.6 MEUR), in Norway 17.8 MEUR (14.4 MEUR),
in Sweden 10.5 MEUR (11.7 MEUR), in Denmark 8.7 MEUR (8.8 MEUR) and 9.8 MEUR
(9.0 MEUR) in Baltic.
During the third quarter the net sales increased clearly in all other areas
except Sweden. The summer holidays decreased the net sales in the third
quarter according to the normal seasonality. For the whole nine months, net
sales have increased in Norway and Baltic, have been about flat on Finland and
Denmark and have decreased in Sweden.
In the Nordic countries the business developed normally during the third
quarter, and the market situation improved along the developments in the
general economy. The Nordic BI market strengthened during the period.
The economic situation in the Baltic countries is stabilizing, but the local
IT market has not yet recovered from the effects of the financial crisis,
although the activity levels have improved.
Net sales by reportable segments
Net sales, MEUR 7-9/10 7-9/09 1-9/10 1-9/09 2009
Finland 10.5 9.4 33.4 32.6 45.0
Norway 5.6 4.1 17.8 14.4 20.2
Sweden 2.8 3.4 10.5 11.7 15.8
Denmark 2.8 2.6 8.7 8.8 11.5
Baltic 2.8 2.1 9.8 9.0 12.2
Eliminations -0.7 -0.1 -2.0 -1.2 -1.6
Group total 23.9 21.6 78.0 75.3 103.0
Net sales of Information Management Solutions business (previously BI and
Operational solutions) in 1-9/2010 were 70.3 MEUR (68.7 MEUR) and net sales of
Geographic Information Services were 8.0 MEUR (7.4 MEUR).
PROFIT
Affecto's EBIT in 1-9/2010 was 0.9 MEUR (-5.2 MEUR) and the operational
segment result was 2.3 MEUR (2.6 MEUR). Operational segment result was in
Finland 3.3 MEUR (3.6 MEUR), in Norway 1.3 MEUR (1.6 MEUR), in Sweden -1.1
MEUR (0.8 MEUR), in Denmark 0.7 MEUR (0.5 MEUR) and in Baltic 0.2 MEUR (-2.9
MEUR).
Profitability in the third quarter was excellent in Finland (16%), moderately
good in Norway, Denmark and Baltic, but we still made a loss in Sweden.
Operational segment result by reportable segments
Operational segment 7-9/10 7-9/09 1-9/10 1-9/09 2009
result, MEUR
Finland 1.7 0.6 3.3 3.6 5.1
Norway 0.6 0.5 1.3 1.6 2.3
Sweden -0.5 0.1 -1.1 0.8 0.9
Denmark 0.2 0.0 0.7 0.5 0.9
Baltic 0.3 -0.3 0.2 -2.9 -2.7
Other -0.6 -0.2 -2.0 -1.0 -1.8
Operational segment result 1.6 0.8 2.3 2.6 4.7
IFRS3 Amortization -0.5 -0.5 -1.5 -1.6 -2.1
Impairment of Goodwill - - - -6.2 -6.2
Operating profit/loss 1.1 0.2 0.9 -5.2 -3.6
According to IFRS3 requirements, 1-9/2010 EBIT includes 1.5 MEUR (1.6 MEUR) of
amortization of intangible assets related to acquisitions. In year 2010 the
IFRS3 amortization is estimated to total 2.0 MEUR and in 2011 approx. 2.0
MEUR. The second quarter EBIT included an approx. 0.6 MEUR non-recurring
expense related to some changes in personnel.
R&D costs 1-9/2010 totaled 0.8 MEUR (0.3 MEUR), i.e. 1.0% of net sales (0.3%).
The costs have been recognized as an expense in the income statement.
Taxes corresponding to the result for the review period have been entered as
tax expense. Net profit for the period was -0.4 MEUR, while it was -7.4 MEUR
last year.
The order backlog was approx. 44 MEUR at the end of the period, which is 2
MEUR lower than the previous quarter's backlog, but 8 MEUR higher than the
Q3/2009 order backlog. Affecto has a well diversified customer base. The ten
largest customers generated approx. 20% of group revenue in 2009 and the
largest customer corresponded to 4% of net sales.
FINANCE AND INVESTMENTS
At the end of the reporting period, Affecto's balance sheet totaled 127.2 MEUR
(12/2009: 136.3 MEUR). Equity ratio was 45.4% (12/2009: 42.9%) and net gearing
was 54.0% (12/2009: 39.1%). Translation differences have increased the
consolidated equity by 3.4 MEUR during 1-9/2010 due to the strengthening of
the Norwegian and Swedish currencies.
The financial loans were 38.5 MEUR (12/2009: 40.4 MEUR) at the end of
reporting period. The company's cash and liquid assets were 9.4 MEUR (12/2009:
19.5 MEUR). The interest-bearing net debt was 29.1 MEUR (12/2009: 20.9 MEUR).
Affecto's bank loan has covenants based on net debt, result and cash flow.
Loan covenants concerning the ratio of net debt and cash flow were breached
due to negative changes in cash and working capital. Affecto has agreed with
the bank about changes to the covenants and the bank has confirmed that they
will not cancel the loan facility agreement. This arrangement will slightly
increase finance costs in the last quarter.
Cash flow from operating activities for the reported period was -5.0 MEUR (-
1.0 MEUR) and cash flow from investments was -1.0 MEUR (-0.7 MEUR).
Investments in non-current assets excluding acquisitions were 1.1 MEUR (0.8
MEUR). Negative change in working capital is mainly caused by the positive
growth in the net revenue and the growth of projects for public administration
entities, which has impact to the receivables.
Based on decision by the Annual General Meeting held on 25 March 2010, Affecto
has distributed dividends of 1.3 MEUR (previous year 3.0 MEUR). Dividend was
paid on 13 April 2010.
EMPLOYEES
The number of employees was 934 persons at the end of the reporting period
(928). 382 employees were based in Finland, 130 in Norway, 100 in Sweden, 59
in Denmark and 263 in the Baltic countries. The average number of employees
during the period was 912 (993).
Fredrik Prien was appointed as the country manager in Sweden and he started in
March. Member of the executive management team, COO Åge Lönning left the
company at the end of April. The Nordic country managers and the Baltic area
manager joined the management team. The executive team comprises currently
Pekka Eloholma, Satu Kankare, Jukka Nortio, Hilkka Remes-Hyvärinen, Stig-Göran
Sandberg, Ray Byman, Håvard Ellefsen, Claus Kruse, Rene Lykkeskov and Fredrik
Prien. Jukka Nortio will leave Affecto group during the fourth quarter.
BUSINESS REVIEW BY AREAS
The group's business is managed through five country units. Finland, Norway,
Sweden, Denmark and Baltic are also the reportable segments.
Finland
In 7-9/2010 net sales in Finland were 10.5 MEUR (9.4 MEUR). Operational
segment result was 1.7 MEUR (0.6 MEUR). The business developed positively and
net sales grew by 12% compared to previous year. Customers' activity level
continued to improve. During the period new orders were received e.g. from
Forest-Tapio, Nokia and Vaasa hospital district.
The growth of IT services market in Finland is forecast to be approx. 2% in
2010 (Marketvisio's estimate, April 2010). However, Affecto's focus segments
are expected to experience a higher growth in software sales (BI 7%, ECM 6%).
Norway
The net sales in 7-9/2010 were 5.6 MEUR (4.1 MEUR) and operational segment
result was 0.6 MEUR (0.5 MEUR). The business developed well in Norway and grew
by 37%. The growth in Euros was helped by the strengthening of the Norwegian
krone (NOK), but also the organic growth was good. The business conditions in
Norway have continued to develop positively. Due to expected growth in demand,
the company has been active in hiring new employees, which has lowered
profitability. New orders were received e.g. from Statoil, SEB Kort and
Elkjöp.
Sweden
In 7-9/2010 the net sales in Sweden were 2.8 MEUR (3.4 MEUR) and operational
segment result -0.5 MEUR (0.1 MEUR). Fredrik Prien started as the new country
manager in March and the local organization has been under development during
the summer. The business was loss-making e.g. due to changes in personnel. Due
to recruitments made, the amount of billable consultants is expected to return
in a few months to the levels at early 2010. As a positive signal,
Dataföreningen (Swedish Information Processing Society) gave Affecto the
annual "Diamanten" award for the "IT company, who best understands the
customer needs". New orders were received e.g. from Volvo Cars and Cardo.
Denmark
The net sales in 7-9/2010 were 2.8 MEUR (2.6 MEUR) and operational segment
result was 0.2 MEUR (0.0 MEUR). In Denmark, the net sales grew by 8% and the
profitability improved clearly. The customers' activity remained on a good
level and the market is expected to continue developing positively. New orders
were received e.g. from Dong and Kombit.
Baltic (Lithuania, Latvia, Estonia, Poland)
The Baltic business mostly consists of projects related to large customer-
specific systems. Public sector entities in the Baltic countries and insurance
companies also outside Baltic area are significant customer segments.
In 7-9/2010 the Baltic net sales were 2.8 MEUR (2.1 MEUR). Operational segment
result was 0.3 MEUR (-0.3 MEUR). Net sales grew by 31%. Kestutis Naujokaitis
was appointed in August as the country manager for Lithuania. The local IT
market in the Baltic countries has not yet recovered from the effects of the
financial crisis, although the activity levels have improved. The price
competition is tight. The development of the local business environment is
uncertain, and the EU has great importance in financing both public and also
private investments. GDP is estimated to slightly grow in most of the Baltic
countries in 2010.
Some new projects were received during the period, mostly from public sector
entities, including Lithuanian Ministry of Health Care.
Review by business lines
Information management solutions business contains the previously separately
reported Business intelligence (BI) and Operational Solutions businesses.
Reporting was changed in 2010 to match the current management model. The net
sales of Information management solutions in 7-9/2010 were 21.4 MEUR (19.3
MEUR). The business developed positively during the period.
The demand for Business intelligence (BI) solutions develops positively along
the general economy. Gartner has estimated the BI solutions continue to be one
of the key IT investment areas and average annual global growth of BI and
analytics software license markets to exceed 8% until year 2013. Gartner has
also forecast that the Nordic BI/DW services market would annually grow 6-8%
in 2010-2013.
The demand for ECM solutions in Finland was good. The net sales in Baltic
increased clearly, as the business is recovering from the crisis in the
previous year.
Net sales of the Geographic Information Services business in 7-9/2010 were 2.6
MEUR (2.5 MEUR). The GIS services business continued to develop favorably.
Affecto has decided to form a separate subsidiary company Karttakeskus Oy for
conducting the Geographic Information Services (GIS) business in Finland.
There will be a partial de-merger, where the current GIS services business is
separated from Affecto Finland Ltd. Both Affecto Finland Ltd and the new
Karttakeskus Oy will be wholly owned subsidiaries of the parent company
Affecto Plc. The partial de-merger is expected to be completed in January
2011.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on 25 March 2010,
adopted the financial statements for 1.1.-31.12.2009 and discharged the
members of the Board of Directors and the CEO from liability. Approximately 49
percent of Affecto's shares and votes were represented in the Meeting. The
Annual General Meeting decided that a dividend of EUR 0.06 per share will be
distributed for the year 2009.
In addition, the Meeting decided to amend Section "9 Notice of Meeting" of the
Articles of Association, and decided to lower the share premium reserve of the
parent company Affecto Plc by transferring the entire capital into the reserve
of invested unrestricted equity. The lowering was implemented on 27 July 2010.
Aaro Cantell, Pyry Lautsuo, Heikki Lehmusto, Esko Rytkönen and Haakon Skaarer
were re-elected as members of the Board of Directors, and Jukka Ruuska was
elected as a new member. Immediately after the Annual General Meeting the
organization meeting of the Board of Directors was held and Aaro Cantell was
re-elected Chairman of the Board and Jukka Ruuska as Vice-Chairman. The APA
firm KPMG Oy Ab was elected auditor of the company.
According to the Articles of Association, the General Meeting of Shareholders
annually elects the Board of Directors by a majority decision. The term of
office of the board members expires at the end of the next Annual General
Meeting of Shareholders following their election. The Board appoints the CEO.
The Articles of Association do not contain any special rules for changing the
Articles of Association or for issuing new shares.
THE AUTHORIZATIONS GIVEN TO THE BOARD OF DIRECTORS
The Board did not use the authorizations given by the previous Annual General
Meeting. Those authorizations ended on 25 March 2010.
The complete contents of the new authorizations given by the Annual General
Meeting held on 25 March 2010 have been published in the stock exchange
release regarding the Meetings' decisions.
The Annual General Meeting decided to authorize the Board of Directors to
decide to acquire the company's own shares with distributable funds. A maximum
of 2 100 000 shares may be acquired. The authorization shall be in force until
the next Annual General Meeting. Based on the authorization the company has
acquired 26 474 own shares by 30 September 2010.
The Annual General Meeting decided to authorize the Board of Directors to
decide to issue new shares and to convey the company's own shares held by the
company in one or more tranches. The share issue may be carried out as a share
issue against payment or without consideration on terms to be determined by
the Board of Directors and in relation to a share issue against payment at a
price to be determined by the Board of Directors. A maximum of 4 200 000 new
shares may be issued. A maximum of 2 100 000 own shares held by the company
may be conveyed. In addition, the authorization includes the right to decide
on a share issue without consideration to the company itself so that the
amount of own shares held by the company after the share issue is a maximum of
one-tenth (1/10) of all shares in the company. The authorization shall be in
force until the next Annual General Meeting. Based on the authorization, the
company has conveyed all own shares held by the company, 63 212 shares, to
Affecto Management Oy in August.
SHARES AND TRADING
The company has only one share series, and all shares have similar rights. As
at 30 September 2010, Affecto Plc's share capital consisted of 21 516 468
shares including the shares owned by Affecto Management Oy. The company does
not own treasury shares. Affecto Management Oy owns 823 000 shares.
In 1-9/2010, the highest share price was 2.70 euro, lowest price 2.02 euro,
average price 2.41 euro and closing price 2.40 euro. Trading volume was 6.3
million shares, corresponding to 39% (annualized) of the number of shares at
the end of period. The market value of shares was 51.6 MEUR at the end of the
period.
SHAREHOLDERS
The company had a total of 1997 owners on 30 September 2010 and the foreign
ownership was 33%. The list of the largest owners can be viewed in the
company's web site. Information about ownership structure and option programs
is included as a separate section in the financial statements. The ownership
of board members, CEO and their controlled corporations totaled approx. 13.7%
(13.1% shares and 0.6% options).
SHARE BASED INCENTIVE PLANS
The key personnel in Affecto received 377 500 series 2008C options during the
review period.
The Board of Directors of Affecto decided in June to establish a new share-
based incentive plan, when the company's management invests in Affecto shares
through Affecto Management Oy, owned by the management. The purpose of the
plan is to commit the Participants to the Company by encouraging them to
acquire and hold the Company's shares, and this way increase the Company's
shareholder value in the long run. The number of shares to be acquired is a
maximum total of 870 000 shares. Affecto Management Oy will finance the
acquisition by the managers' own capital investments and by a max. 1.6 MEUR
interest-bearing loan provided by Affecto. The plan will be valid until the
announcement of the Affecto's Q3/2013 interim report. By 30 September 2010,
Affecto Management Oy has acquired 823 000 shares. Affecto Management Oy has
been consolidated to the group balance sheet.
ASSESSMENT OF RISKS AND UNCERTAINTIES
Affecto's bank loan has covenants based on net debt, result and cash flow.
Breach of covenant may lead to higher financing costs or even the termination
of the loan. Affecto needs to refinance the loan latest in 2012, when the
current loan comes due. It is not certain that a new loan facility can be
received with the same or better conditions than the current loan.
The changes in the general economic conditions and the operating environments
of its customers have direct impact in Affecto's markets. The competition in
the markets also tightens continuously. This could have a negative effect on
the business, operating results and financial condition of Affecto.
The general economic downturn may decrease the overall customer demand for
services, increase price pressure from customers and lengthen offer processes
at customers. Also the competitors' eagerness to complain about public
procurement decisions may increase, which may cause delays in projects or
interrupt the project delivery work. The continuing downturn may lead into
decrease in utilization rate of consultants.
The economic downturn may weaken customers' liquidity, also in the public
sector. The risks related to receivables have remained high especially in the
Baltic countries.
Affecto's balance sheet includes a material amount of goodwill. Goodwill has
been allocated to cash generating units. Cash generating units, to which
goodwill has been allocated, are tested for impairment both annually and
whenever there is an indication that the unit may be impaired. Potential
impairment losses may have material effect on reported profit and value of
assets.
Affecto's success depends also on good customer relationships. Affecto has a
well diversified customer base. Although none of the customers is critically
large for the whole group, there are large customers in various countries who
are significant for local business in the country.
Affecto's order backlog has traditionally been only for a few months, which
decreases the reliability of longer-term forecasts. Slower investment decision
making, postponing or cancellation of customers' IT investments may have
negative impact on Affecto's profitability.
Approximately a half of Affecto's business is in Sweden, Norway and Denmark,
thus the development of the currencies of these countries (SEK, NOK and DKK)
may have impact on Affecto's profitability.
Affecto's continued success is very much dependent on its management team and
personnel. The loss of the services of any member of its senior management or
other key employee could have a negative impact on Affecto's business and the
ability of the company to implement its strategy. In addition, Affecto's
success depends on its ability to hire, develop, train, motivate and retain
skilled professionals on its staff.
Affecto sells third party software licenses as part of its solutions. The
license sales have most impact on the last month of each quarter and
especially in the fourth quarter. This increases the fluctuation in sales
between quarters and increases the difficulty of accurately forecasting the
quarters. Affecto had license sales of approx. 8 MEUR in 2009.
Currently, corporate tax rates in Latvia and Lithuania are below those of
several other member states of the European Union, and therefore Latvia and
Lithuania provide a favorable environment for commercial enterprises.
Furthermore, the income tax regulation of Latvia and Lithuania allow for local
businesses to structure their operations in a cost-efficient way. For example,
certain software development activities are treated as so-called creative
activities, which is cost beneficial for the enterprises. When joining the
European Union on 1 May 2004, Latvia and Lithuania committed to the ongoing
harmonization of the laws and regulations of the member states. At present,
the European Union leaves regulation relating to taxation to the discretion of
its member states. However, there can be no assurances that the European Union
will not impose requirements on its member states to harmonize their taxation
system which, in the case of Latvia and Lithuania, could result in an increase
in corporate tax rates and restrictions on the opportunities of local business
to structure their operations to the extent currently possible. Furthermore,
there can be no assurances that Latvia and Lithuania will not independently
decide to implement tax reforms or that the interpretation of current tax laws
by courts or fiscal authorities will not be changed retroactively with similar
effects. Harmonization imposed by the European Union or domestic tax reforms
or changes in the interpretation of current tax laws by courts or fiscal
authorities in Latvia and Lithuania could have a material adverse effect on
the business, operating results and financial condition of Affecto.
In seeking future growth, the strategy of Affecto is partially based on
expansion through acquisitions of other operators in the IT services market.
The inability to find new target companies or the lower than expected
profitability of acquisitions made, could have a material adverse effect on
the business, operating results and financial condition of Affecto.
FUTURE OUTLOOK
The net sales are estimated to grow in year 2010. The year 2010 will be
clearly profitable and the profitability (EBIT margin) is estimated to improve
during the year. The last quarter is expected to be the best both regarding
the net sales and profitability.
The company does not provide exact guidance for net sales or EBIT development,
as single projects and timing of license sales may have large impact on
quarterly sales and profit.
Affecto Plc
Board of Directors
It is possible to order Affecto's stock exchange releases to be delivered
automatically by e-mail. Please visit the Investors section of the company
website: www.affecto.com
A briefing for analysts and media will be arranged at 11.30 at Restaurant
Savoy, Eteläesplanadi 14, Helsinki.
www.affecto.com
-----
Financial information:
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in shareholders'
equity
2. Notes
3. Key figures
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in shareholders'
equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 7-9/10 7-9/09 1-9/10 1-9/09 2009
Net sales 23 877 21 570 78 032 75 270 103 006
Other operating income 9 0 23 16 27
Changes in inventories of -116 -135 -163 -225 -351
finished goods and work in
progress
Materials and services -4 621 -4 107 -15 082 -13 496 -19 775
Personnel expenses -13 274 -12 715 -46 969 -45 298 -59 660
Other operating expenses -3 901 -3 496 -12 471 -12 551 -16 983
Other depreciation and -332 -360 -1 026 -1 129 -1 466
amortisation
IFRS3 amortisation -499 -533 -1 489 -1 577 -2 081
Impairment - -2 - -6 210 -6 304
Operating profit/loss 1 143 221 853 -5 200 -3 587
Finance costs (net) -295 -452 -1 357 -2 457 -2 684
Profit/loss before income tax 848 -231 -504 -7 657 -6 271
Income tax -207 -20 88 237 -868
Profit/loss for the period 642 -251 -415 -7 419 -7 139
Profit/loss for the period
attributable to:
Equity holders of the Company 650 -251 -406 -7 419 -7 139
Non-controlling interest -8 - -10 - -
Earnings per share
(EUR per share):
Basic 0.03 -0.01 -0.02 -0.35 -0.33
Diluted 0.03 -0.01 -0.02 -0.35 -0.33
CONSOLIDATED COMPREHENSIVE
INCOME STATEMENT
(1 000 EUR) 7-9/10 7-9/09 1-9/10 1-9/09 2009
Profit/loss for the period 642 -251 -415 -7 419 -7 139
Other comprehensive income:
Translation difference 1 034 2 158 3 427 4 463 5 001
Total Comprehensive income for 1 676 1 907 3 012 -2 956 -2 138
the period
Total Comprehensive income
attributable to:
Equity holders of the Company 1 684 1 907 3 021 -2 956 -2 138
Non-controlling interest -8 - -10 - -
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 9/2010 9/2009 12/2009
Non-current assets
Property, plant and equipment 2 058 2 362 2 102
Goodwill 72 169 69 058 69 415
Other intangible assets 8 498 10 026 9 585
Deferred tax assets 2 111 2 287 1 648
Available-for-sale financial assets 19 54 54
Derivative financial instruments - 16 11
Trade and other receivables 86 178 175
84 941 83 982 82 992
Current assets
Inventories 505 870 685
Trade and other receivables 31 279 24 686 32 049
Current income tax receivables 1 080 1 212 1 047
Available-for-sale financial assets - - -
Restricted cash and cash equivalents - 376 -
Cash and cash equivalents 9 377 17 999 19 525
42 242 45 144 53 306
Total assets 127 183 129 125 136 298
Equity attributable to equity holders
of the Company
Share capital 5 105 5 105 5 105
Share premium - 25 404 25 404
Reserve of invested non-restricted 46 591 21 188 21 188
equity
Other reserves 379 213 264
Treasury shares -1 996 -106 -106
Translation differences -1 815 -5 780 -5 242
Retained earnings 5 244 6 674 6 955
53 509 52 699 53 568
Non-controlling interest 393 - -
Total shareholders' equity 53 902 52 699 53 568
Non-current liabilities
Borrowings - 38 439 36 444
Derivative financial instruments 879 811 252
Deferred tax liabilities 2 798 3 057 3 011
Trade and other payables 786 681 733
4 463 42 987 40 440
Current liabilities
Borrowings 38 458 4 000 4 000
Trade and other payables 28 705 28 118 37 058
Current income tax liabilities 1 139 890 487
Derivative financial instruments - 99 408
Provisions 516 332 337
68 818 33 439 42 290
Total liabilities 73 281 76 427 82 730
Total shareholders' equity and 127 183 129 125 136 298
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 1-9/2010 1-9/2009 2009
Cash flows from operating activities
Result for the period -415 -7 419 -7 139
Adjustments to profit for the period 3 873 11 315 13 390
3 457 3 896 6 251
Change in working capital -7 265 -1 477 937
Interest and other finance cost paid -1 152 -1 581 -2 160
Interest and other finance income received 104 146 251
Income taxes paid -138 -2 021 -2 770
Net cash generated from operating -4 993 -1 037 2 509
activities
Cash flows from investing activities
Purchases of tangible and intangible assets -1 055 -810 -971
Proceeds from sale of tangible and 6 80 87
intangible assets
Proceeds from sale of Available-for-sale 42 - -
financial assets
Net cash used in investing activities -1 006 -731 -884
Cash flow from financing activities
Share issue of Affecto Management Oy* 400 - -
Repayments of borrowings -2 000 -1 500 -3 500
Purchase and disposal of treasury shares** - 1 799 - -
Dividends paid to the company's -1 289 -3 007 -3 007
shareholders
Net cash generated in financing activities -4 688 -4 507 -6 507
(Decrease)/increase in cash and cash -10 688 -6 275 -4 883
equivalents
Cash and cash equivalents at the beginning 19 525 23 554 23 554
of the period
Foreign exchange effect on cash 541 720 854
Cash and cash equivalents at the end of the 9 377 17 999 19 525
period
* Affecto Group management's investment to incentive arrangement
** Includes shares in Affecto Plc acquired by Affecto Management Oy.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Equity attributable to equity holders of the
Company
(1 000 EUR) Share Share ReserveOther Trea- Trans- Ret. Minor Total
capi- premium of reserv sury lat. earn- ity equity
tal investe es shares diff. ings inter
d non- est
restric
ted
equity
Shareholders' 5 105 25 404 21 188 264 -106 -5 242 6 955 - 53 568
equity 1
January 2010
Total compre- 3 427 -406 -10 3 012
hensive
income
Share options 115 115
Purchase and 106 -16 90
disposal of
treasury
shares
Decrease of -25 404 25 404 -
share premium
account
Dividends -1 289 -1 289
paid
Management -1 996 402 -1 594
incentive
plan*
Shareholders' 5 105 - 46 591 378 -1 996 -1 815 5 244 393 53 902
equity 30
September
2010
Equity attributable to equity holders of the
Company
(1 000 EUR) Share Share Reserv Other Trea- Trans- Ret. Minor Total
capi- premium e of reserv sury lat. earn- ity equity
tal invest es shares diff. ings inter
ed non- est
restri
cted
equity
Shareholders' 5 105 25 404 21 188 176 -106 -10 243 17 101 - 58 625
equity 1
January 2009
Total compre- 4 463 -7 419 -2 956
hensive
income
Share options 37 37
Dividends -3 007 -3 007
paid
Shareholders' 5 105 25 404 21 188 213 -106 -5 780 6 674 - 52 699
equity 30
September
2009
* Group management's incentive plan (Affecto Management Oy).
2. Notes
2.1. Basis of preparation
This report has been prepared in accordance with the IFRS recognition and
measurement principles. This report does not comply with all of the
requirements of IAS 34 Interim Financial Reporting. The report should be read
in conjunction with the annual financial statements for the year 2009. The non-
controlling interest has been presented separately after net profit for the
period and in total equity.
The group has adopted the following new and revised standards starting from 1
January 2010: Revised IFRS 3 Business Combinations and amended IAS 27
Consolidated and Separate Financial Statements. In other material respects,
the same accounting policies have been applied as in the 2009 annual
consolidated financial statements.
2.2. Segment information
Affecto's reporting segments are based on geographical locations and are
Finland, Norway, Sweden, Denmark and Baltic.
Segment sales and result
(1 000 EUR) 7-9/10 7-9/09 1-9/10 1-9/09 2009
Total sales
Finland 10 529 9 401 33 353 32 568 45 003
Norway 5 636 4 118 17 765 14 449 20 152
Sweden 2 845 3 398 10 462 11 679 15 823
Denmark 2 788 2 575 8 679 8 778 11 494
Baltic 2 822 2 149 9 791 9 023 12 163
Eliminations -744 -71 -2 019 -1 227 -1 628
Group total 23 877 21 570 78 032 75 270 103 006
Operational segment result
Finland 1 729 575 3 314 3 580 5 096
Norway 552 520 1 321 1 581 2 286
Sweden -544 77 -1 092 774 887
Denmark 243 26 673 544 886
Baltic 268 -266 158 -2 889 -2 699
Other -606 -178 -2 031 -1 006 -1 754
Total operational segment 1 642 754 2 343 2 584 4 702
result
IFRS amortisation -499 -533 -1 489 -1 577 -2 081
Impairment of Goodwill - - - -6 207 -6 207
Operating profit/loss 1 143 221 853 -5 200 -3 587
The impairment of Goodwill in 2009 was allocated to the assets of Baltic
segment. The operational segment result of Baltic segment for period 1-9/2009
included a restructuring provision amounting to 1.4 MEUR. The result for year
2009 included 1.2 MEUR realized restructuring costs.
Business Intelligence and Operation Solutions business lines, previously
reported as separate business lines, have been combined to a Information
Management Solutions business line in the beginning of year 2010. Updated
reportable business lines are in line with the current management model of
Affecto Group.
Sales by business lines
(1 000 EUR) 7-9/10 7-9/09 1-9/10 1-9/09 2009
Information Management Solutions 21 402 19 287 70 315 68 745 93 147
Geographic Information Services 2 569 2 508 8 034 7 448 10 168
Eliminations -94 -224 -316 -923 -308
Group total 23 877 21 570 78 032 75 270 103 006
2.3. Interest-bearing liabilities
1 000 EUR 30.9.2010 31.12.2009
Interest-bearing non-current liabilities
Loans from financial institutions, non-current - 36 444
portion
Loans from financial institutions, current 38 458 4 000
portion
38 458 40 444
The facility agreement of the group includes financial covenants based on net
debt, result and cash flow. Breach of covenants might lead to an increase in
cost of debt or cancellation of the facility agreement. Loan covenants
concerning the ratio of net debt and cash flow were breached due to negative
changes in cash and working capital. The overall debt position has transferred
in accordance with IFRS standards from long-term to short-term liabilities.
Affecto has agreed with the bank about changes to the covenants and the bank
has confirmed that they will not cancel the loan facility agreement. This
arrangement will slightly increase finance costs in the last quarter. The
covenants based on net debt and result will be measured quarterly, the
covenant based on cash flow will be measured next time on June 2011. The
inability to comply financial covenants did not result liquidity issue to the
group and the interim report is prepared on a going concern basis.
2.4. Contingencies and commitments
The future aggregate minimum lease payments under non-cancelable operating
leases:
1 000 EUR 30.9.2010 31.12.2009
Not later than one (1) year 2 793 3 013
Later than one (1) year, but not later than 1 993 2 310
five (5) years
Total 4 726 5 323
Guarantees:
1 000 EUR 30.9.2010 31.12.2009
Debt secured by a mortgage
Financial loans 38 500 40 500
The above-mentioned debts are secured by bearer bonds with capital value of
52.5 million euro. The bonds are held by Nordea Pankki Suomi Oyj and secured
by a mortgage on company assets of the group companies. In addition, the
shares in Affecto Finland Oy and Affecto Norway AS have been pledged to secure
the financial loans above.
Other securities given on own behalf: 30.9.2010 31.12.2009
Pledges 83 241
Other guarantees 1 525 67
Pledges consist of current receivables.
Other guarantees are mostly securities issued for customer projects. These
guarantees include both bank guarantees secured by parent company of the group
and guarantees issued by the parent company directly to the customer.
2.5. Derivative contracts
1 000 EUR 30.9.2010 31.12.2009
Interest rate swaps:
Nominal value 20 250 17 000
Fair value -879 -659
Interest rate cap:
Nominal value - 8 000
Fair value - 11
3. Key figures
7-9/10 7-9/09 1-9/10 1-9/09 2009
Net sales, 1 000 eur 23 877 21 570 78 032 75 270 103 006
EBITDA, 1 000 eur 1 975 1 116 3 369 3 716 6 265
Operational segment result, 1 642 754 2 343 2 584 4 702
1 000 eur
Operating result, 1 000 eur 1 143 221 853 -5 200 -3 587
Result before taxes, 1 000 eur 848 -231 -504 -7 657 -6 271
Net income for equity holders of 650 -251 -406 -7 419 -7 139
the parent company,
1 000 eur
EBITDA, % 8,3 % 5,2 % 4,3 % 4,9 % 6.1 %
Operational segment result, % 6,9 % 3,5 % 3,0 % 3,4 % 4.6 %
Operating result, % 4,8 % 1,0 % 1,1 % -6,9 % -3.5 %
Result before taxes, % 3,6 % -1,1 % -0,6 % -10,2 % -6.1 %
Net income for equity holders of 2,7 % -1,2 % -0,5 % -9,9 % -6.9 %
the parent company, %
Equity ratio, % 45,4 % 43,5 % 45,4 % 43,5 % 42.9 %
Net gearing, % 54,0 % 46,4 % 54,0 % 46,4 % 39.1 %
Interest-bearing net debt, 29 081 24 440 29 081 24 440 20 919
1 000 eur
Gross investment in non-current 469 188 1 055 810 971
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 2,0 % 0,9 % 1,4 % 1,1 % 0.9 %
Research and development costs, 279 118 816 252 433
1 000 eur
R&D -costs, % of sales 1,2 % 0,5 % 1,0 % 0,3 % 0.4 %
Order backlog, 1 000 eur 43 638 35 228 43 638 35 228 41 108
Average number of employees 917 933 912 993 974
Earnings per share, eur 0,03 -0,01 -0,02 -0,35 -0.33
Earnings per share (diluted), eur 0,03 -0,01 -0,02 -0,35 -0.33
Equity per share, eur 2,59 2,45 2,59 2,45 2.49
Average number of shares, 20 948 21 480 21 298 21 480 21 480
1 000 shares
Number of shares at the end of 20 693 21 480 20 693 21 480 21 480
period, 1 000 shares
Calculation of key figures
EBITDA = Earnings before interest, taxes,
depreciation, amortization and impairment
Operational segment result = Operating profit before amortisations on
fair value adjustments due to business
combinations (IFRS3) and Goodwill
impairments
Equity ratio, % = Shareholders' equity *100
________________________________
Total assets - advances received
Gearing, % = Interest-bearing liabilities - *100
cash, bank receivables and
securities held as financial asset
__________________________________
Shareholders' equity
Interest-bearing net debt = Interest-bearing liabilities - cash
and bank receivables
Earnings per share (EPS) = Result for the period to equity holders
of the Company
______________________________________
Adjusted average number of shares
during the period
Equity per share = Shareholders' equity
______________________________________
Adjusted number of shares at the end of
the period
Market capitalization = Number of shares at the end of period
(excluding company's own shares held by
the company) x share price at closing date
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