2008-08-07 08:30:00 CEST
2008-08-07 08:30:01 CEST
REGULATED INFORMATION
Affecto Oyj - Interim report (Q1 and Q3)
AFFECTO PLC'S INTERIM REPORT 1-6/2008
AFFECTO PLC STOCK EXCHANGE RELEASE 7 AUGUST 2008 at 09:30
AFFECTO PLC'S INTERIM REPORT 1-6/2008
GROUP KEY FIGURES
MEUR 4-6/08 4-6/07 1-6/08 1-6/07 2007
Net sales 36.2 20.2 69.8 37.8 97.5
Operating result before 5.3 3.2 8.9 5.5 13.3
IFRS3 items
% of net sales 14.5 15.8 12.7 14.7 13.6
Operating result 4.5 2.9 7.4 4.9 10.8
% of net sales 12.5 14.5 10.7 13.0 11.0
Result before taxes 4.6 2.9 6.6 4.7 9.5
Result for the period 3.4 2.0 4.9 3.5 7.0
Equity ratio, % 44.4 49.9 44.4 49.9 41.9
Net gearing, % 53.7 31.0 53.7 31.0 53.9
Earnings per share, eur 0.16 0.12 0.23 0.20 0.38
Earnings per share
(diluted), eur 0.16 0.12 0.23 0.20 0.38
Equity per share, eur 2.98 2.39 2.98 2.39 2.93
CEO Pekka Eloholma comments the second quarter 2008:"The second quarter operating result 4.5 MEUR is the highest in the company's
history, even without the 0.6 MEUR capital gain included in the result. All
our segments experienced good profitability.""Organic growth continued strong in second quarter and was approx. 13%. Due to
last year's Component Software acquisition, the total growth in net sales was
79%, as net sales reached 36.2 MEUR. Also the profitability was good as EBIT
margin was 13% of net sales.""The order backlog remained at a strong level of almost 50 MEUR during the
quarter. This contributes to our belief in a positive development of our
business despite the growth of uncertainty in general economy.""Positive development is expected to continue for the rest of 2008, but the
effects of the global economic developments on Affecto's business environment
are hard to estimate. The company seeks to reach net sales of approx. 140 MEUR
in 2008. The profitability (EBIT margin) of the whole year 2008 is expected
not to materially change from 2007."
Additional information:
CEO Pekka Eloholma, +358 205 777 737
CFO Satu Kankare, +358 205 777 202
SVP, M&A, Hannu Nyman, +358 205 777 761
This report is unaudited. The amounts in this report have been rounded from
exact numbers.
INTERIM REPORT 1-6/2008
Affecto builds versatile IT solutions for companies and organisations to
improve their efficiency in business and to support the related decision-
making. With Affecto's Business Intelligence solutions organisations are able
to integrate strategic targets with their business management. Business
Intelligence solutions enable the further processing and utilisation of
information generated by ERP and other IT systems. The company also develops
operational solutions, such as Geographic Information Systems (GIS),
Enterprise Content Management (ECM) and versatile customer specific software
services. These solutions assist organisations in collecting, organising and
analysing available digital information in support of their business
processes. Affecto offers Business Intelligence solutions in its operating
areas in the Nordic and Baltic countries. In operational solutions, the
company has a presence in Finland, Norway and in the Baltic region.
Affecto is headquartered in Helsinki, Finland. The company has subsidiaries in
Finland, Sweden, Norway, Denmark, Estonia, Lithuania, Latvia and Poland.
NET SALES
Affecto's net sales in 1-6/2008 was 69.8 MEUR (1-6/2007: 37,8 MEUR). Net sales
in Finland was 23.4 MEUR (21.1 MEUR), in Baltic area 11.9 MEUR (10.2 MEUR),
12.4 MEUR in Sweden (6.5 MEUR) and 22.2 MEUR (0.0 MEUR) in Norway & Denmark.
Sales grew by 85%. The organic sales growth was approx. 15%.
In line with the normal annual cycle, the net sales in the second quarter was
somewhat higher than in the first quarter. Third-party license sales are
typically higher in the second quarter than in the first quarter. In addition,
Easter was in 2008 already in first quarter, which increased the available
workdays in second quarter compared with 2007.
Sales by geographical segments based on location of assets
Net sales, MEUR 4-6/08 4-6/07 1-6/08 1-6/07 2007
Finland 11.6 11.3 23.4 21.1 41.7
Baltic 6.4 5.6 11.9 10.2 22.9
Sweden 6.3 3.3 12.4 6.5 17.7
Norway & Denmark 11.9 - 22.2 - 15.2
Eliminations 0.0 0.0 0.0 0.0 0.0
Group total 36.2 20.2 69.8 37.8 97.5
The sales growth was based on good demand for services in all our business
areas. Net sales of BI segment in 1-6/2008 was 40.0 MEUR (15.8 MEUR),
Operational Solutions 23.6 MEUR (17.2 MEUR) and Geographic Information
Services 6.2 MEUR (4.8 MEUR). The acquisition done in 2007 has had impact
mostly on the BI segment and to some extent also to Operational solutions.
During early 2008 the BI segment experienced organic growth in all markets
except Sweden, mostly due to local capacity restraints.
PROFIT
Affecto's EBIT in 1-6/2008 was 7.4 MEUR (4.9 MEUR). EBIT in Finland was 3.3
MEUR (2.5 MEUR), Baltic EBIT was 2.8 MEUR (2.5 MEUR), EBIT in Sweden was 1.2
MEUR (0.7 MEUR) and EBIT in Norway & Denmark was 1.4 MEUR (0.0 MEUR).
Operating result by geographical segments based on location of assets
Operating result, MEUR 4-6/08 4-6/07 1-6/08 1-6/07 2007
Finland 1.3 1.6 3.3 2.5 4.4
Baltic 2.0 1.4 2.8 2.5 5.4
Sweden 0.8 0.3 1.2 0.7 1.5
Norway & Denmark 1.0 - 1.4 - 1.2
Group management -0.7 -0.4 -1.2 -0.7 -1.7
Group total 4.5 2.9 7.4 4.9 10.8
According to IFRS3 requirements, 1-6/2008 EBIT includes 1.4 MEUR (0.6 MEUR) of
amortization of intangible assets related to acquisitions. A significant part
of the amortization is related to Sweden and Norway & Denmark segments. In
year 2008 the IFRS3 amortization is estimated to total 2.9 MEUR and in 2009
approx. 2.8 MEUR.
The profitability in Finland remained at a good level. The already good
profitability in Baltic improved in second quarter. In addition, Affecto sold
its office in Vilnius, Lithuania at end of April for approx. 1.3 MEUR
resulting in a capital gain of approx. 0.6 MEUR in Baltic segment.
Profitability in Sweden and in Norway & Denmark improved in second quarter.
R&D costs totaled 1.0 MEUR (0.3 MEUR), i.e. 1.4% of net sales (0.7%). The
expenditure has been recognised in income statement, except in Contempus ECM
business, where 0.2 MEUR has been capitalized in balance sheet and
approzimately similar amount of earlier capitalizations has been amortized.
The financial costs have grown compared with 1-6/2007, as the interest bearing
net debt has grown due to the Component Software acquisition. Approx. half of
the bank loan has been converted to a fixed-rate loan through an interest
swap. The fluctuation in financial costs between quarters is explained to a
large extent by changes in the fair value of the interest swap taken, which
changes have no effect on actual cash flow. As the interest rates decreased in
Q1 and strongly rose in Q2, the change had a 0.2 MEUR cost impact in Q1 and
0.6 MEUR profit in Q2, i.e. net impact on profit was 0.4 MEUR in 1-6/2008.
Taxes for the period have been booked as taxes. Net profit for the period was
4.9 MEUR, while it was 3.5 MEUR last year.
Order backlog totaled 49.1 MEUR at the end of period (20.3 MEUR). Compared to
net sales, Baltic has longer order backlog than the other segments. Affecto
has a well diversified customer base. The ten largest customers generated
approx. 20% of group revenue in 2007.
FINANCE AND INVESTMENTS
At the end of the reporting period, Affecto's balance sheet totaled 154.7 MEUR
(Q2/2007: 84.3 MEUR). Significant part of the growth is due to the acquisition
of Component Software Group ASA in August 2007. Equity ratio was 44.4 (49.9%)
and net gearing was 53.7% (31.0%).
The additional consideration for Intellibis AB, acquired in 2006, was
determined to be 3.92 MEUR and it was paid during first quarter.
Affecto has sold its office in Vilnius, Lithuania at end of April for approx.
1.3 MEUR. The company has booked a capital gain of approx. 0.6 MEUR in second
quarter results in Baltic segment. Since 31 December 2007, the property had
been booked in the balance sheet under "Non-current assets held for sale".
After the sale Affecto does not own real estate property.
The financial loans were 45.4 MEUR as at 30 June 2008. The interest-bearing
net debt was 34.4 MEUR.
The company's cash and liquid assets were 11.0 MEUR (6.3 MEUR). Cash flow from
operating activities for the reported period was 6.6 MEUR (3.8 MEUR) and cash
flow from investments was -3.6 MEUR (-0.8 MEUR).
Investments in non-current assets excluding acquisitions were 1.3 MEUR (0.8
MEUR) during the period.
Affecto has distributed dividends of 3.4 MEUR (previous year 1.7 MEUR) from
the profit of the year 2007. Dividend was paid on 10 April 2008.
EMPLOYEES
The number of employees was 1175 persons at the end of the reporting period
(816). Approx. 380 employees were based in Finland, 150 in Sweden, 190 in
Norway & Denmark, and 450 in Baltic countries. The average number of employees
during the period was 1146 (784). The acquisition of Component Software last
year increased the personnel by over 200 employees.
BUSINESS REVIEW
During year 2008 Affecto has continued to implement its growth strategy. The
business has grown rather steadily, although the general economic outlook has
weakened.
The group's business is managed through four country units. Finland, Baltic,
Sweden and Norway & Denmark are also the primary IFRS segments.
Finland
In 4-6/2008 net sales in Finland was 11.6 MEUR (11.3 MEUR). EBIT was 1.3 MEUR
(1.6 MEUR). The business developed steadily during the period. The demand for
various services was reasonably good. Demand for BI services continued
versatile. The customers' interest for ECM solutions, part of Operational
solutions, seems to be growing. The unit prices of consultant work have risen
somewhat. The profitability of the Geographic Information Services (formerly
Cartographic solutions) was better than last year.
The growth of IT services market in Finland is rather moderate, but the growth
of our specialty segments like BI is expected to exceed the average market
growth rate. The customers' activity has continued to be good despite the
forecasts of slower economic growth. New orders were received from, among
others, Metso Automation, VR Group, City of Helsinki and KEVA Pension
Insurance.
Baltic (Lithuania, Latvia, Estonia, Poland)
The Baltic business mostly consists of projects related to large customer-
specific systems. Projects are typically larger and tender processes longer
than in Finland or in Nordic. The business is mostly classified as Operational
solutions, but also includes BI solutions. Public sector entities in Baltic
countries and insurance companies also outside Baltic area are significant
customer segments.
In 4-6/2008 the Baltic net sales grew was 6.4 MEUR (5.6 MEUR). Baltic EBIT was
was 2.0 MEUR (1.4 MEUR) including the capital gain of 0.6 MEUR related to sale
of Vilnius office. The subsidiary in Poland, being in build-up phase, made
minor loss and the profitability in Latvia was weaker than other countries.
The business has developed favorably, and the resource utilization rate was
high in all countries. The steady continuing work on large projects has helped
to keep the utilization rate very high during the whole period. The public
sector entities in Baltic have continued to invest in IT systems. General wage
inflation in the Baltic countries is estimated to be upto 15%, which also
contributes to cost pressure. The economic outlook in the Baltic countries has
weakened compared with last years' overheated situation. Affecto's management
estimates that the large share of public sector and insurance solutions of
sales may decrease the direct impact of slowed GDP growth.
The order backlog offers stable resource utilization in the near future. New
orders were received from e.g. Lithuanian state Tax inspectorate and insurance
company Lietuvos Draudimas
Sweden
In addition to Affecto's previous Swedish operations, the segment includes the
Swedish BI operations of Component Software since September 2007.
In 4-6/2008 the net sales in Sweden was 6.3 MEUR (3.3 MEUR) and EBIT 0.8 MEUR
(0.3 MEUR). The reported EBIT includes approx. 0.3 MEUR of IFRS3 amortization.
The Affecto name has been adopted in early 2008.
The business in Sweden has developed positively in 2008. The customers'
activity has remained good with the exception of continued weakness in the
finance sector. Demand for experienced workforce is tight. During the period
new orders were received from e.g. Apoteket, ICA and Upplysingscentralen.
The demand for general IT services in Sweden is expected to grow by some 5%,
while the BI services market is expected to grow faster. Demand for
experienced BI resources is high, which may increase personnel turnover in the
market. Affecto did not reach its net recruiting targets in second quarter and
the number of employees decreased, which may slow the growth.
Norway & Denmark
The net sales was 11.9 MEUR in 4-6/2008 and EBIT was 1.0 MEUR. The reported
EBIT was negatively affected by an IFRS3 amortization of 0.3 MEUR. Affecto did
not have operations in Norway and Denmark in 4-6/2007.
Business Intelligence business developed positively and especially the growth
of consulting services was good. The efforts to widen the service offering
scope continued. The price development has been positive thanks to good demand
for services. The number of employees has grown modestly. The Affecto name has
been adopted both in Denmark and Norway in early 2008. During the period, new
orders were received from e.g. Kommuneholding, Jyske Bank and EDB.
The Contempus business, an ECM business reported as part of Operational
Solutions, also developed steadily and grew compared to previous year. The
sales efforts were increasingly aimed outside Nordic countries and a sales
office has been established in UK.
Business review by secondary segments 4-6/2008
Business intelligence (BI) net sales grew by 146% to 20.7 MEUR (8.4 MEUR). The
growth is explained to large extent by the acquisition of Component Software
in late 2007, but also the organic growth has been good in all countries.
Customers' interest is increasingly focusing on larger solutions. Customers
see BI solutions as tools for improving their own efficiency and
controllability, which may maintain the interest to invest in BI solution also
during periods of weaker economic growth.
According to Gartner, the global BI license market growth is expected to
average over 8% until 2011. Affecto's management believes that as the BI
solutions get more complex, the growth in consultancy work will exceed the
growth in license market. The recent acquisitions where the largest global
software companies have acquired BI software producers (like SAP's acquisition
of Business Objects and IBM's acquisition of Cognos) highlight the general
interest for the BI sector. The acquisitions have increased the global market
share of the four large BI-software vendors (SAP/BO, IBM/Cognos,
Oracle/Hyperion and Microsoft) to 65% and their market share is estimated to
grow further. Affecto is expected to benefit from this trend as the largest
local implementer of these solutions.
Net sales of Operational Solutions grew by 38% and was 12.3 MEUR (8.9 MEUR).
There was growth especially Baltic, where large projects continued steadily.
The insurance solution projects in South Africa, Denmark and Poland continued.
In Finland, the demand for solutions was moderate and the utilization rate of
project resources was good. The demand for Norwegian Contempus solutions grew
moderately.
Net sales of the Geographic Information Services business was 3.2 MEUR (2.9
MEUR). The demand for digital geographic content and related services grew.
The profitability of the unit improved from last year's level.
ASSESSMENT OF RISKS AND UNCERTAINTIES
Affecto operates in markets that are directly affected by changes in the
general economic conditions and the operating environments of its customers. A
general economic downturn may lead to a decrease in overall customer demand
for services and to longer offer processes at customers. Affecto's order
backlog has traditionally been only for a few months, which decreases the
reliability of longer-term forecasts. Inflation has picked up in all Affecto's
countries, which increases the challenge of maintaining good profitability.
The Baltic countries have seen the highest rise, to over 10%. The competition
in the market tightens continuously. This could have a negative effect on the
business, operating results and financial condition of Affecto.
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's success depends also on good customer relationship. Affecto has a
well diversified customer base. The ten largest customers generated approx.
20% of group revenue in 2007.
Acquisition of Component Software in 2007 has increased the amount of (third
party) licenses sold and their relative share of Affecto's net sales. This
will increase the fluctuation in sales between quarters and will increase the
difficulty of accurately forecasting the quarters. In 2007 Component
Software's license sales totaled approx. 7 MEUR. Other parts of Affecto had
license sales of approx. 6 MEUR in 2007. The license sales have most impact on
the last month of each quarter and especially in the fourth quarter.
The damage risks of Affecto are normally related to personnel, property,
processes and data processing. The realization of these risks might lead to
injuries of personnel, property damages or interruption of business. In the
operations the target of Affecto is to prevent these risks to realize by
quality operations and anticipatory risk management actions. The realization
of such risks is mainly prevented by guidelines for occupational health, work
safety and information security as well as emergency plan. The damage risks,
which can not be prevented by own actions, are covered with adequate
insurances.
Currently, corporate tax rates in Latvia and Lithuania are below those of
several other member states of the European Union, and therefore Latvia and
Lithuania provide a favorable environment for commercial enterprises.
Furthermore, the income tax regulation of Latvia and Lithuania allow for local
businesses to structure their operations in a cost-efficient way. For example,
certain software development activities are treated as so-called creative
activities, which is cost beneficial for the enterprises. When joining the
European Union on 1 May 2004, Latvia and Lithuania committed to the ongoing
harmonization of the laws and regulations of the member states. At present,
the European Union leaves regulation relating to taxation to the discretion of
its member states. However, there can be no assurances that the European Union
will not impose requirements on its member states to harmonize their taxation
system which, in the case of Latvia and Lithuania, could result in an increase
in corporate tax rates and restrictions on the opportunities of local business
to structure their operations to the extent currently possible. Furthermore,
there can be no assurances that Latvia and Lithuania will not independently
decide to implement tax reforms or that the interpretation of current tax laws
by courts or fiscal authorities will not be changed retroactively with similar
effects. Harmonization imposed by the European Union or domestic tax reforms
or changes in the interpretation of current tax laws by courts or fiscal
authorities in Latvia and Lithuania could have a material adverse effect on
the business, operating results and financial condition of Affecto.
In seeking future growth, the strategy of Affecto is partially based on
expansion through acquisitions of other operators in the IT services market.
The inability to find new target companies or the lower than expected
profitability of acquisitions made, could have a material adverse effect on
the business, operating results and financial condition of Affecto.
The board of directors and the audit committee is responsible for Affecto's
internal control and risk management. Company's management is responsible for
and performs practically the internal control and risk management.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on March 31, 2008,
adopted the financial statements for 1.1.-31.12.2007 and discharged the
members of the Board of Directors and the CEO from liability. Approximately 31
percent of Affecto's shares and votes were represented in the Meeting. The
Annual General Meeting decided that a dividend of EUR 0.16 per share be
distributed for the year 2007.
Aaro Cantell, Pyry Lautsuo, Heikki Lehmusto, Esko Rytkönen and Haakon Skaarer
were re-elected as members of the Board of Directors. Immediately after the
Annual General Meeting the organization meeting of the Board of Directors was
held and Aaro Cantell was re-elected Chairman of the Board. The APA firm
PricewaterhouseCoopers Oy was re-elected auditor of the company with Merja
Lindh, APA, as auditor in charge.
The Annual General Meeting accepted the Board's proposals for issuing stock
options (Stock options 2008) and for changing the terms of the Stock options
2006. The Annual General Meeting accepted the Board's proposals for the
authorisations given to the Board of Directors.
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.
Mr. Darius Lazauskas has been appointed as a member of the group management
team as of 1 February 2008.
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 31 March 2008.
The complete contents of the new authorizations given by the Annual General
Meeting held on 31 March 2008 have been published in the stock exchange
release regarding the Meetings' decisions.
The Annual General Meeting decided to authorize the Board of Directors to
decide to issue new shares and to convey the company's own shares held by the
company in one or more tranches. The share issue may be carried out as a share
issue against payment or without consideration on terms to be determined by
the Board of Directors and in relation to a share issue against payment at a
price to be determined by the Board of Directors. A maximum of 4 200 000 new
shares may be issued. A maximum of 2 100 000 own shares held by the company
may be conveyed. In addition, the authorization includes the right to decide
on a share issue without consideration to the company itself so that the
amount of own shares held by the company after the share issue is a maximum of
one-tenth (1/10) of all shares in the company. The authorization shall be in
force until the next Annual General Meeting.
The Annual General Meeting decided to authorize the Board of Directors to
decide to acquire the company's own shares with distributable funds. A maximum
of 2 100 000 shares may be acquired. The authorization shall be in force until
the next Annual General Meeting.
The board has not used the authorizations by 30 June 2008.
SHARES AND TRADING
The company has only one share series, and all shares have similar rights. As
at 30 June 2008, Affecto Plc's share capital consisted of 21 516 468 shares.
The company owns 36 738 treasury shares, which corresponds to 0.2% of all
shares.
In 1-6/2008, the highest share price was 4.33 euro, lowest price 3.21 euro,
average price 3.75 euro and closing price 3.30 euro. Trading volume was 3.1
million shares, corresponding to 29% (annualized) of the number of shares at
the end of period. The market value of shares was 70.9 MEUR at the end of the
period.
SHAREHOLDERS
Arendals Fossekompani ASA flagged on 24 June 2008 that its direct holdings
will increase to approximately 5.53% due to subsidiary mergers. The total
ownership of Arendals Fossekompani group (5.53%) has not changed since the
flagging notice of 27 August 2007.
The company had a total of 1349 owners on 30 June 2008 and the foreign
ownership was 31%. The list of the largest owners can be viewed in the
company's web site. Information about ownership structure and option program
is included as a separate section in the financial statements. The ownership
of board members, CEO and their controlled corporations totaled approx. 6.0%
(5.7% shares and 0.3% options).
STRATEGIC OBJECTIVES
The company has two strong business lines: the strongest growth expectations
are focused on the growing Business Intelligence market but at the same time
the company wants to further strengthen its position in delivering demanding
and customer specific operational IT solutions.
The company aims to be the leading Business Intelligence solution provider in
the Nordic, Baltic and CEE regions. Furthermore, the company aims to be the
most competent and quality focused provider of geographic information systems
(GIS), enterprise content management (ECM) and other operational solutions in
selected industries and regions.
The growth target for the company for 2008-2009 is that net sales exceed 160
million euros in 2009. The growth target will be reached through organic
growth supplemented by acquisitions. At the same time the company seeks to be
one of the most profitable IT services companies within its market region.
FUTURE OUTLOOK
Positive development is expected to continue for the rest of 2008, but the
effects of the global economic developments on Affecto's business environment
are hard to estimate. The company seeks to reach net sales of approx. 140 MEUR
in 2008. The profitability (EBIT margin) of the whole year 2008 is expected
not to materially change from 2007.
However, as a normal seasonality effect, the summer vacations will weaken net
sales and profitability in the third quarter.
The company does not provide exact guidance for net sales or EBIT development,
as single projects and timing of license sales may have large impact on
quarterly sales and profit.
Affecto Plc
Board of Directors
It is possible to order Affecto's stock exchange releases to be delivered
automatically by e-mail. Please visit the Investors section of the company
website: www.affecto.com
A briefing for analysts and media will be arranged at 11:00 at Restaurant
Savoy, Eteläesplanadi 14, Helsinki.
www.affecto.com
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Financial information:
1. Income statement, balance sheet, cash flow statement and statement of
changes in shareholders' equity
2. Notes
3. Key figures
1. Income statement, balance sheet, cash flow statement and statement of
changes in shareholders' equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 4-6/08 4-6/07 1-6/08 1-6/07 2007
Net sales 36 187 20 227 69 785 37 803 97 474
Other operating income 640 61 843 61 80
Changes in inventories of 2 -27 68 146 109
finished goods and work in
progress
Materials and services -6 572 -4 023 -12 593 -6 712 -19 851
Personnel expenses -18 778 -9 615 -37 414 -19 133 -48 635
Other operating expenses -5 786 -3 122 -10 957 -6 022 -14 651
Other depreciation, amortization -440 -295 -854 -571 -1 231
and impairment charges
IFRS3 amortization -721 -280 -1 439 -639 -2 536
Operating result 4 532 2 926 7 439 4 932 10 758
Finance costs (net) 42 -70 -826 -217 -1 300
Result before income tax 4 574 2 856 6 614 4 715 9 458
Income tax -1 190 -843 -1 720 -1 264 -2 477
Result for the period 3 384 2 013 4 894 3 451 6 981
Attributable to:
Equity holders of the Company 3 384 2 013 4 894 3 451 6 981
Minority interest 0 0 0 0 0
Earnings per share for result
attributable to the equity
holders of the Company
(EUR per share)
Basic 0.16 0.12 0.23 0.20 0.38
Diluted 0.16 0.12 0.23 0.20 0.38
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 6/2008 6/2007 12/2007
Non-current assets
Tangible assets 2 268 2 351 1 939
Goodwill 83 734 45 847 84 196
Other intangible assets 16 779 6 796 18 249
Deferred tax assets 2 346 630 2 297
Available-for-sale financial assets 54 53 64
Other non-current receivables 168 47 190
105 349 55 724 106 936
Current assets
Inventories 1 805 2 640 1 792
Trade receivables 23 944 12 378 28 848
Other receivables 10 639 6 057 9 876
Current income tax receivables 828 944 166
Available-for-sale financial assets 106 108 106
Financial assets at fair value through 408 176 35
profit or loss
Restricted cash 582 225 659
Cash and cash equivalents 11 018 6 042 12 974
49 330 28 570 54 455
Non-current assets held for sale 0 0 679
Total assets 154 679 84 294 162 070
Equity attributable to equity holders
of the Company
Share capital 5 105 5 105 5 105
Share premium 25 404 25 404 25 404
Reserve of invested non-restricted 21 188 1 960 21 188
equity
Other reserves 172 32 108
Treasury shares -106 -106 -106
Retained earnings 12 303 8 203 11 265
64 066 40 598 62 964
Minority interest 0 0 0
Total shareholders' equity 64 066 40 598 62 964
Non-current liabilities
Borrowings 42 416 12 355 43 906
Deferred tax liabilities 4 822 1 836 5 159
Other long-term liabilities 681 226 532
47 919 14 417 49 597
Current liabilities
Borrowings 3 000 6 260 3 000
Trade payables 4 869 3 090 6 965
Other liabilities 31 478 18 682 38 138
Current income tax liabilities 3 347 1 247 1 407
42 694 29 279 49 510
Total liabilities 90 613 43 696 99 107
Total shareholders' equity and 154 679 84 294 162 070
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 1-6/2008 1-6/2007 2007
Cash flows from operating activities
Result for the period 4 894 3 451 6 981
Adjustments to profit for the period 4 175 2 789 7 842
9 069 6 240 14 823
Change in working capital -520 -1 020 -1 312
Interest and other finance cost paid -1 453 -440 -1 689
Interest and dividend received 298 87 364
Income taxes paid -810 -1 099 -1 751
Net cash generated by operating activities 6 584 3 768 10 434
Cash flows from investing activities
Acquisition of subsidiaries, net of cash -3 925 -107 -26 967
acquired
Purchases of tangible and intangible assets -1 268 -795 -1 410
Proceeds from sale of tangible and 1 591 22 35
intangible assets
Sale of business/subsidiaries 46 44 44
Net cash used in investing activities -3 556 -836 -28 299
Cash flow from financing activities
Issue of share capital 0 0 -777
Increase of interest-bearing liabilities 0 0 48 400
Repayments of interest-bearing liabilities -1 500 -432 -20 531
Dividends paid to company's shareholders -3 437 -1 698 -1 698
Net cash generated in financing activities -4 937 -2 130 25 394
(Decrease)/increase in cash and cash -1 908 802 7 530
equivalents
Cash and cash equivalents at the beginning 12 974 5 485 5 485
of the period
Foreign exchange effect on cash -47 -17 -42
Cash and cash equivalents at the end of the 11 018 6 271 12 974
period
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(1 000 EUR) Share Share Reserve of Other Trea- Ret. Mino- Total
capital premium invested reserve sury earn- rity equity
non- s shares ings & inte-
restricted trans- rest
equity lat.
diff.
Shareholders' 5 105 25 404 21 188 108 -106 11 265 0 62 964
equity 1
January 2008
Translation -418 -418
differences
Share options 64 64
Result for the 4 894 4 894
period
Dividends -3 437 -3 437
Shareholders' 5 105 25 404 21 188 172 -106 12 303 0 64 066
equity 30 June
2008
(1 000 EUR) Share Share Reserve of Other Trea- Ret. Mino- Total
capital premium invested reserve sury earn- rity equity
non- s shares ings & inte-
restricted trans- rest
equity lat.
diff.
Shareholders' 5 105 25 404 1 960 11 -106 6 717 0 39 092
equity 1
January 2007
Translation -267 -267
differences
Share options 26 26
Available-for- -5 -5
sale financial
assets
Result for the 3 451 3 451
period
Dividends -1 698 -1 698
Shareholders' 5 105 25 404 1 960 32 -106 8 203 0 40 598
equity 30 June
2007
2. Notes
2.1. Basis of preparation
This condensed interim financial information has been prepared in accordance
with IAS 34, Interim financial reporting. The condensed interim financial
report should be read in conjunction with the annual financial statements for
the year ended 31 December 2007. Forthcoming standards and interpretations are
presented in the accounting policies in Annual Report 2007.
The accounting for Component Software Group ASA, acquired in August 2007, has
been determined provisionally in this report. The allocation of purchase
consideration to identifiable assets and liabilities has not been completed.
2.2. Segment information
Primary reporting format - geographical segments based on location of assets
Segment result:
(1 000 EUR) 4-6/08 4-6/07 1-6/08 1-6/07 1-12/07
Total sales
Finland 11 623 11 326 23 372 21 080 41 707
Baltic countries 6 381 5 607 11 868 10 177 22 918
Sweden 6 299 3 297 12 389 6 547 17 654
Norway & Denmark 11 883 22 156 15 195
Eliminations - -3 - -1 -
Group total 36 187 20 227 69 785 37 803 97 474
Segment result (operating
result)
Finland 1 342 1 560 3 262 2 492 4 406
Baltic countries 2 049 1 424 2 783 2 470 5 390
Sweden 769 305 1 190 703 1 468
Norway & Denmark 1 025 1 425 1 199
Group management -654 -363 -1 220 -733 -1 705
Group total 4 532 2 926 7 439 4 932 10 758
Secondary reporting format - business segments
Segment revenue:
(1 000 EUR) 4-6/08 4-6/07 1-6/08 1-6/07 1-12/07
Total sales
BI 20 689 8 406 40 046 15 822 48 093
Operational Solutions 12 273 8 922 23 562 17 198 39 900
Geographic Information 3 224 2 903 6 177 4 785 9 481
Services
Other (incl. - -3 - -1 -
eliminations)
Group total 36 187 20 227 69 785 37 803 97 474
2.3. Changes in intangible and tangible assets
(1 000 EUR) 1-6/08 1-6/07 1-12/07
Carrying amount at the beginning of period 104 382 53 239 53 239
Acquisition of subsidiaries -75 2 406 54 974
Additions 1 268 795 1 410
Disposals -125 -9 -10
Depreciation and amortization for the period -2 291 -1 210 -3 768
Reclassification to non-current assets held - - -679
for sale
Translation differences -378 -227 -784
Carrying amount at the end of period 102 781 54 994 104 382
The office building classified as non-current assets held for sale on the
balance sheet as at 31 December 2007 has been sold in April 2008. A gain
amounting to 633 thousand euro has been recognized in the operating result for
the reporting period.
2.4. Share capital, share premium, reserve of invested non-restricted equity
and treasury shares
(1 000 EUR) Number of Share Share reserve of Treasury
shares capital premium invested shares
non-
restricted
equity
1 January 2007 16 979 783 5 105 25 404 1 960 -106
30 June 2007 16 979 783 5 105 25 404 1 960 -106
1 January 2008 21 479 730 5 105 25 404 21 188 -106
30 June 2008 21 479 730 5 105 25 404 21 188 -106
At the end of reporting period the company owned 36 738 treasury shares. The
amount of registered shares was 21 516 468 shares.
2.5. Interest-bearing liabilities
(1 000 EUR) 1-6/08 1-6/07 1-12/07
At the beginning of period 46 906 19 046 19 046
Increase of liabilities - - 48 400
Repayments of liabilities -1 500 -432 -20 531
Accrued expenses 10 - -9
At the end of period 45 416 18 615 46 906
2.6. Earnings per share
Calculation of earnings per share and diluted earnings per share is based on
the figures below.
4-6/08 4-6/07 1-6/08 1-6/07 1-12/07
Profit attributable to equity 3 384 2 013 4 894 3 451 6 981
holders of the company (1 000 EUR)
Weighted average number of
shares(1 000):
In calculation of earnings per share 21 480 16 980 21 480 16 980 18 533
Dilution effect of share options 0 0 0 0 0
In calculation of diluted earnings 21 480 16 980 21 480 16 980 18 533
per share
2.7. Contingencies and commitments
The court case in Latvia, explained in financial statements 2007, has been
finalized and the contingent asset did not materialize. The matter did not
have a material impact on profit.
The future aggregate minimum lease payments under non-cancelable operating
leases:
1 000 EUR 30.6.2008 31.12.2007
Not later than one (1) year 2 835 3 013
Later than one (1) year, but not later than 4 520 5 197
five (5) years
Later than five (5) years 29 0
Total 7 383 8 210
Guarantees:
1 000 EUR 30.6.2008 31.12.2007
Debt secured by a mortgage
Financial loans 45 500 47 000
The above-mentioned debts are secured by bearer bonds with capital value of
52.5 million euro. The bonds are held by Nordea Pankki Suomi Oyj and secured
by a mortgage on company assets of the group companies. In addition, the
shares in Affecto Finland Oy and Affecto Norway AS have been pledged to secure
the financial loans above.
Other securities given on own behalf: 30.6.2008 31.12.2007
Pledges 343 855
Other guarantees 62 55
Pledges given on own behalf consist of restricted cash of 0.1 MEUR and bonds
0.2 MEUR.
Derivative contracts
1 000 EUR 30.6.2008 31.12.2007
Interest rate swaps:
Nominal value 22 000 23 500
Fair value 408 35
2.8. Related party transactions
Key management compensation and remunerations to the board of directors
(1 000 EUR) 1-6/08 1-6/07 1-12/07
Salaries and other short-term employee 1 840 853 2 564
benefits
Post-employment benefits 237 129 327
Share-based payments 26 4 35
Total 2 104 986 2 926
The remuneration to a member of the board Haakon Skaarer, totalling to 12
thousand euro, has been paid to Norsk Vekst AS.
3. Key figures
4-6/08 4-6/07 1-6/08 1-6/07 2007
Net sales, 1 000 eur 36 187 20 227 69 785 37 803 97 474
EBITDA, 1 000 eur 5 692 3 501 9 732 6 143 14 525
Operating result before IFRS3 5 253 3 205 8 878 5 571 13 294
amortization, 1 000 eur
Operating result, 1 000 eur 4 532 2 926 7 439 4 932 10 758
Result before taxes, 1 000 eur 4 574 2 856 6 614 4 715 9 458
Net income for equity holders 3 384 2 012 4 894 3 451 6 981
of the parent company, 1 000
eur
EBITDA, % 15.7 % 17.3 % 13.9 % 16.2 % 14.9 %
Operating profit before IFRS3 14.5 % 15.8 % 12.7 % 14.7 % 13.6 %
depreciation, %
Operating result, % 12.5 % 14.5 % 10.7 % 13.0 % 11.0 %
Result before taxes, % 12.6 % 14.1 % 9.5 % 12.5 % 9.7 %
Net income for equity holders 9.4 % 10.0 % 7.0 % 9.1 % 7.2 %
of the parent company, %
Equity ratio, % 44.4 % 49.9 % 44.4 % 49.9 % 41.9 %
Net gearing, % 53.7 % 31.0 % 53.7 % 31.0 % 53.9 %
Interest-bearing net debt, 34 398 12 572 34 398 12 572 33 933
1 000 eur
Gross investment in non-current 508 423 1 268 795 1 410
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 1.4 % 2.1 % 1.8 % 2.1 % 1.4 %
Research and development costs, 415 117 982 274 910
1 000 eur
R&D -costs, % of sales 1.1 % 0.6 % 1.4 % 0.7 % 0.9 %
Order backlog, 1 000 eur 49 106 20 298 49 106 20 298 41 560
Average number of employees 1 162 802 1 146 784 897
Earnings per share, eur 0.16 0.12 0.23 0.20 0.38
Earnings per share (diluted), 0.16 0.12 0.23 0.20 0.38
eur
Equity per share, eur 2.98 2.39 2.98 2.39 2.93
Average number of shares, 1 000 21 480 16 980 21 480 16 980 18 533
shares
Number of shares at the end of 21 480 16 980 21 480 16 980 21 480
period, 1 000 shares
Calculation of key figures
EBITDA = Earnings before interest, taxes,
depreciation and amortization
Equity ratio, % = Shareholders' equity + minority *100
interest
________________________________
Total assets - advances received
Gearing, % = Interest-bearing liabilities - *100
cash, bank receivables and
securities held as financial asset
__________________________________
Shareholders' equity + minority
interest
Interest-bearing net debt = Interest-bearing liabilities - cash
and bank receivables
Earnings per share (EPS) = Result for the period to equity holders
of the Company
______________________________________
Adjusted average number of shares
during the period
Equity per share = Shareholders' equity
_______________________________________
Adjusted number of shares at the end of
the period
Market capitalization = Number of shares at the end of period
(excluding treasury shares) x share
price at closing date
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