2016-08-11 12:45:01 CEST
2016-08-11 12:45:01 CEST
REGULATED INFORMATION
Affecto Oyj - Half Year financial report
Affecto Plc's half year financial report 1-6/2016
AFFECTO PLC – HALF YEAR FINANCIAL REPORT – 11 AUGUST 2016 at 13:45
Affecto Plc's half year financial report 1-6/2016
Q2 at a Glance (April-June 2016)
-- Order intake decreased by 15% and was 27.8 MEUR (32.6 MEUR).
-- Order backlog increased by 6% and was 45.8 MEUR at the end of review period
(43.3 MEUR).
-- Revenue declined by 2% and was 30.1 MEUR (30.8 MEUR).
-- Operating profit declined to 2.3 MEUR (2.9 MEUR) and was 7.6% (9.4%) of
revenue.
-- Cash flow from operating activities was -0.9 MEUR (0.9 MEUR).
Review Period at a Glance (January-June 2016)
-- Order intake decreased by 2% and was 52.6 MEUR (53.6 MEUR).
-- Revenue declined by 4% and was 57.4 MEUR (59.9 MEUR).
-- Operating profit declined to 3.3 MEUR (5.0 MEUR) and was 5.7% (8.3%) of
revenue.
-- Cash flow from operating activities was -2.2 MEUR (1.4 MEUR).
-- The 2016 outlook remains unchanged.
Key Figures
MEUR 4-6/16 4-6/15 1-6/16 1-6/15 2015 last 12m
Revenue 30.1 30.8 57.4 59.9 116.0 113.6
Operational segment result 2.3 2.9 3.3 5.0 7.5 5.8
% of revenue 7.6 9.4 5.7 8.3 6.4 5.1
Operating profit 2.3 2.9 3.3 5.0 7.5 5.8
% of revenue 7.6 9.4 5.7 8.3 6.4 5.1
Profit before taxes 2.1 2.8 3.0 4.8 7.5 5.7
Profit for the period 1.6 2.4 2.3 3.8 5.9 4.4
Equity ratio, % 60.4 58.4 60.4 58.4 58.5 -
Net gearing, % 3.4 5.4 3.4 5.4 -6.2 -
Earnings per share, EUR 0.07 0.11 0.11 0.18 0.27 0.20
Earnings per share (diluted), 0.07 0.11 0.11 0.18 0.27 0.20
EUR
Equity per share, EUR 2.84 2.85 2.84 2.85 2.88 -
CEO Juko Hakala comments:
During the second quarter of 2016, our overall order intake was lower y-o-y for
the first time in 3 consecutive quarters. This was due to the Baltic y-o-y
performance, as expected, and Norway, which was weaker than expected. On the
other hand, Finland grew order intake for the 4th consecutive quarter and also
Denmark and Sweden developed favorably y-o-y. Our backlog remains up 6% y-o-y.
Our revenue and profit declined y-o-y. Main drivers for this were developments
in Finland and Baltics. Finland is transitioning with larger contracts and into
new demand areas. Baltic continued to be impacted by the successful completion
of key insurance sector projects in 2015. Sweden, Denmark and Norway improved
their profit performance much in line with the recent market developments,
larger sales successes and as an outcome of a more optimal resource mix.
Our evolution progresses as expressed at our Capital Markets Day in May 2016.
During Q2, for example, we closed essential new managed services contracts,
ramped up collaboration between our 18 offices with cross-Nordic engagements
and made key recruitments to underpin our progress. This, together with proven
customer business cases in our growth programs, B2C & Industrial, solidifies
our platform for moving into Q3.
2016 Outlook
Affecto expects its revenue to stay at the same level or grow slightly and its
operating profit to grow in 2016.
The company does not provide an exact quarterly guidance for revenue or
operating profit development, as single projects and timing of license sales
may have large impact on quarterly sales and profit.
Analyst and Press Conference
The Company will arrange a briefing for analysts and media 11 August 2016 at
15:00 at Glo Hotel Kluuvi, Kluuvikatu 4, FI-00100 Helsinki.
Additional information:
CEO Juko Hakala, + 358 205 777 450
CFO Martti Nurminen, +358 40 751 7194
This release is unaudited.
AFFECTO FINANCIALS
Order Intake
In 4-6/2016, Affecto’s order intake decreased by 15% and was 27.8 MEUR (32.6
MEUR). Order intake increased significantly in Finland and Denmark and
increased slightly in Sweden. Order intake decreased significantly in Norway
and in Baltic. The group order intake was affected especially by weak Norwegian
order intake.
In 1-6/2016, Affecto’s order intake decreased by 2% and was 52.6 MEUR (53.6
MEUR). Order intake increased significantly in Finland and Denmark. Order
intake increased slightly in Sweden. Order intake decreased significantly in
Norway and Baltic.
Order Backlog
The order backlog increased by 6% and was 45.8 MEUR (43.3 MEUR) at the end of
the reporting period. Order backlog increased significantly in Finland, Sweden
and Denmark. Order backlog decreased in Norway and Baltic.
Revenue
Revenue, MEUR 4-6/16 4-6/15 1-6/16 1-6/15 2015 last 12m
Finland 13.4 12.4 24.6 24.6 49.5 49.6
Norway 5.9 5.5 11.5 11.0 21.1 21.6
Sweden 5.0 5.5 9.6 10.1 18.2 17.8
Denmark 3.1 2.7 6.3 5.6 11.3 12.0
Baltic 4.1 5.6 8.3 10.7 20.1 17.7
Other -1.5 -1.1 -3.0 -2.1 -4.2 -5.1
--------------------------------------------------------------
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Group total 30.1 30.8 57.4 59.9 116.0 113.6
In 4-6/2016, Affecto’s revenue declined by 2% to 30.1 MEUR (30.8 MEUR). Revenue
increased in Finland, Norway and Denmark. Revenue decreased in Sweden. As
expected, revenue decreased significantly in Baltic and the overall group
revenue development year over year continued to be impacted by the successful
completion of the key insurance sector projects in Baltic in 2015.
In 1-6/2016, Affecto’s revenue declined by 4% to 57.4 MEUR (59.9 MEUR). Revenue
increased in Finland, Norway and Denmark. Revenue decreased significantly in
Baltic and decreased in Sweden.
Profitability
Operational segment result by reportable segments:
Operational segment 4-6/16 4-6/15 1-6/16 1-6/15 2015 last 12m
result, MEUR
Finland 0.9 1.3 1.0 1.9 3.5 2.6
Norway 0.6 0.5 0.9 1.0 1.5 1.3
Sweden 0.6 0.4 0.9 0.5 0.7 1.1
Denmark 0.3 -0.1 0.5 -0.0 0.4 0.9
Baltic 0.4 1.1 0.8 2.4 3.9 2.3
Other -0.5 -0.3 -0.8 -0.9 -2.5 -2.4
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Operational segment result 2.3 2.9 3.3 5.0 7.5 5.8
--------------------------------------------------------------------------
Operating profit 2.3 2.9 3.3 5.0 7.5 5.8
In 4-6/2016, Affecto's operating profit declined to 7.6% and was 2.3 MEUR (2.9
MEUR). The profitability increased in Norway, Sweden and Denmark and decreased
in Finland and Baltic. Net profit for the period was 1.6 MEUR while it was 2.4
MEUR last year. The group operating profit decline was driven by the expected
Baltic decrease following the successful completion of the key insurance sector
projects in 2015 and continued weak performance in Finland.
In 1-6/2016, Affecto's operating profit declined to 5.7% and was 3.3 MEUR (5.0
MEUR). The profitability improved in Sweden and Denmark, decreased in Norway
and decreased significantly in Finland and Baltic. Net profit for the period
was 2.3 MEUR while it was 3.8 MEUR last year.
Taxes corresponding to the profit have been entered as tax expense.
Business Performance by Segment
The group's business is managed through five reportable segments: Finland,
Norway, Sweden, Denmark and Baltic.
Finland
In 4-6/2016, the Finnish market was characterized by an increase in demand for
solutions with respect to the Traditional IT & Analytics market, especially in
the area of managed services. The Company expects this positive development to
continue. The development of the Business Technology & Analytics market was
also positive with continued piloting demand for solutions related to big data
and advanced analytics for core business processes.
In 4-6/2016, order intake increased significantly and the order backlog is
above last year's level. Revenue increased by 8% to 13.4 MEUR (12.4 MEUR).
Operational segment result was 0.9 MEUR (1.3 MEUR) or 6% (10%) of revenue. The
quarter was the fourth consecutive quarter with improved order intake
performance on a year-on-year basis, with one significant managed services
deal. This deal has an initial committed deal size of 1.5 MEUR.
Revenue growth in the quarter was mostly driven by software license revenue,
while also Professional Services revenue grew. Profitability decline was driven
by Finland transitioning with larger contracts and into new demand areas,
recruitment and onboarding of new technology-business hybrid roles and
seasonality in bonus accruals. The profitability recovered slightly towards the
end of the period. The Company is committed to drive profitability by further
boosting its capabilities in complex program management, by increasing focus
with selected customers and by integrating the core skills together with the
new technology roles for an impactful outcome.
In 1-6/2016, order intake increased significantly and the order backlog is
above last year’s level. Revenue remained flat at 24.6 MEUR (24.6 MEUR).
Operational segment result was 1.0 MEUR (1.9 MEUR) or 4% (8%) of revenue.
In 4-6/2016, revenue of Karttakeskus geographical information system (“GIS”)
business, reported as part of Finland, decreased by 14% to 2.9 MEUR (3.3 MEUR).
Karttakeskus lost large contracts in 2015 which continued to negatively affect
the revenue. The Company expects the effect of the lost deals to continue to
affect the revenue until the end of 2016. Business development actions for
strengthening the Company’s capabilities in digital content and services to
complement the traditional cartographic offerings are ongoing. In 1-6/2016,
revenue of Karttakeskus decreased by 15% to 5.3 MEUR (6.2 MEUR).
Norway
In 4-6/2016, the weak oil prices negatively affected the Norwegian economic
outlook. This general uncertainty had an effect on the customers’ willingness
to execute investment decisions. On the Traditional IT & Analytics market,
Affecto experienced a shift in demand towards improving the performance of the
customers’ traditional Business Intelligence and Information Management
solutions, combined with a willingness to explore managed services and
nearshoring based solutions. In the area of Business Technology & Analytics
market, buyers were more interested in self-service analytics in order to
increase their organizations’ broader use of data and analytics. Customers with
digitalization initiatives continued to view the management of customer and
product data, as well as customer analytics, as key enablers for their business
development. Managed services and digitalization initiatives increase potential
deal sizes.
In 4-6/2016, order intake decreased significantly and order backlog is below
last year's level. Revenue increased by 7% to 5.9 MEUR (5.5 MEUR). Operational
segment result was 0.6 MEUR (0.5 MEUR) or 10% (8%) of revenue. The negative
order intake performance was influenced by large deals being delayed, existing
customers prolonging ongoing engagements for a shorter time frame than in 2015
and sales execution issues. Further, the order intake year-over-year
performance was also impacted by a single large multi-year managed services and
development deal closed in Q2/2015. The key driver for revenue growth was
increased software license revenue. The positive software license revenue
development was driven by demand from the Business Technology & Analytics
market as business side users wish to enhance their abilities to analyze data
independently of IT organizations, as well as increased usage of traditional
Business Intelligence solutions. In addition to the increased software license
revenue, the profitability improvement was driven by increased nearshoring and
reduced labor cost. However, revenue and profit growth was negatively affected
by the weakened NOK. In constant currency, the revenue increased by 16%.
Additionally, the Company conducted recruitment to strengthen its focus on two
of the key customer industries, Financial Sector and Public to Citizen, and the
Company built experience in sales and delivery of managed services and
addressing big data.
In 1-6/2016, the order intake decreased significantly and order backlog is
below last year's level. Revenue increased by 5% to 11.5 MEUR (11.0 MEUR).
Operational segment result was 0.9 MEUR (1.0 MEUR) or 8% (9%) of revenue.
Sweden
In 4-6/2016, the Swedish economic growth continued. The growth increased market
demand and created shortage of resources in the market. In the area of
Traditional IT & Analytics market, the demand with respect to managed services
solutions increased as the customers wish to secure access to development
resources, improve quality and reduce costs. In the Business Technology and
Analytics market, customer digitalization initiatives increased as companies
showed interest in building analytical capabilities or digitizing internal
processes.
In 4-6/2016, order intake slightly increased and order backlog is above last
year's level. Revenue decreased by 9% and was 5.0 MEUR (5.5 MEUR). Operational
segment result was 0.6 MEUR (0.4 MEUR) or 11% (7%) of revenue. The order intake
was positively affected by Professional Services performance, e.g. the Company
managed to secure a major managed services deal with an international
industrial services company. Winning this deal, the usage of near-shoring
capabilities was a key success factor. However, the positive effect on total
order intake was offset by decreased software license orders as Q2/2015 was
characterized by a single large software license deal. The decreased software
license orders also affected the year-over-year revenue decline. Revenue from
Professional Services increased driven by new managed services deals and
increased demand from existing and new customers. People churn is down to
normal level and the Company is actively working to increase local capacity to
meet the market demand. Profitability was positively affected by increased
nearshoring and improved utilization rate. The profitability was also
positively impacted by a streamlined organizational set-up.
In 1-6/2016, order intake slightly increased and order backlog is above last
year's level. Revenue decreased by 5% and was 9.6 MEUR (10.1 MEUR). Operational
segment result was 0.9 MEUR (0.5 MEUR) or 9% (5%) of revenue.
Denmark
In 4-6/2016, within the Business Technology & Analytics market, the Company’s
focus on customers in Financial Sector and the Industrial & Energy sector
opened up more possibilities to build new Information Management platforms
enabling front-end customer facing digitalization and self-service analytics
initiatives. The Company was also able to improve the balance between
addressing customers within the Traditional IT & Analytics market and progress
in the area of Business Technology & Analytics market.
In 4-6/2016, order intake increased and order backlog is above last year's
level. Revenue increased by 14% and was 3.1 MEUR (2.7 MEUR). Operational
segment result was 0.3 MEUR (-0.1 MEUR) or 9% (-3%) of revenue. The order
intake growth was driven by Business Intelligence and data integration projects
within Professional Services area with key customers in focus industries,
particularly within the Financial Sector and Industrial & Energy sector. On the
other hand, software license order intake was lower than last year, which also
affected the revenue slightly negatively. However, overall revenue and
profitability improved, due to Professional Services business where utilization
and use of nearshoring increased. The increased use of nearshoring and
competencies from other Affecto offices helped broaden capabilities to serve
customers. Closer cooperation between offices in Malmö, Copenhagen and Århus is
targeted at serving customers in the region without being limited by country
borders. The Company also successfully developed its technology practices to
serve the Business Technology & Analytics market better, leading to acquisition
of new customers.
In 1-6/2016, order intake increased and order backlog is above last year's
level. Revenue increased by 13% and was 6.3 MEUR (5.6 MEUR). Operational
segment result was 0.5 MEUR (-0.0 MEUR) or 9% (0%) of revenue.
Baltic
In 4-6/2016, in the Lithuanian market, the Company saw revitalizing interest by
energy companies to invest into the area of Traditional IT & Analytics while
the public sector continued to invest modestly. In Estonia the public sector
invested into improvement of their processes and digital services for citizens
but the price competition is increasing. Across the segment, the private sector
was interested in investing into Traditional IT & Analytics, renewal projects
and solutions. The Company also saw that the decisiveness within insurance
customers for systems upgrades remained low. The demand for nearshore is
increasing as Nordic companies are increasingly investing into managed
services.
As expected, in 4-6/2016, the Baltic (Lithuania, Latvia, Estonia, Poland and
South Africa) order intake decreased significantly and order backlog is below
last year’s level. Revenue declined 27% and was 4.1 MEUR (5.6 MEUR).
Operational segment result was 0.4 MEUR (1.1 MEUR) or 10% (20%) of revenue.
Improved sales performance in Lithuania as well as growing demand for nearshore
from other Affecto countries contributed to order intake positively. However,
as expected, the successful completion of insurance sector projects in 2015 was
the main driver for the decrease of order intake, revenue and operational
result compared to 2015. Additionally, increased price competition in Estonia
influenced negatively the order intake, revenue and operational result
negatively.
As expected, in 1-6/2016, the Baltic (Lithuania, Latvia, Estonia, Poland, South
Africa) order intake decreased significantly and order backlog is below last
year’s level. Revenue declined 22% and was 8.3 MEUR (10.7 MEUR). Operational
segment result was 0.8 MEUR (2.4 MEUR) or 9% (23%) of revenue.
Affecto Evolution
Affecto has traditionally operated with a holding company model that consists
of independent and heterogeneous business segments. As the Company’s market has
shifted, Affecto has responded by defining its Strategic Direction and Choices
in February 2015 and in May 2016, as part of its Capital Markets Day (“CMD”).
Affecto is finalizing the first stage of its evolution as described in the CMD
glide path which describes the three stages of the Company’s evolution. In
4-6/2016, the evolution activities across Affecto’s 18 offices were for example
the following:
-- Continued successes in managed services order intake: building Affecto’s
recurring revenue base (estimated in the CMD as ~2/5 of Affecto’s revenue
based on 2015 revenue mix), the Company closed several important deals e.g.
with a Nordic telecom operator and with an international industrial
services company, and started successful deliveries in previously closed
important managed services engagements.
-- Continued recruitment for key positions within Company, growth initiative
and finance leadership. This enables and increases capacity for strategy
creation and execution with Affecto’s people.
-- Continued construction of cross-region operating model and co-operation:
Launch of closer co-operation between offices across Malmö, Copenhagen and
Århus, leverage of Estonian nearshore delivery capability to win an
important managed services deal, and significant contribution by Swedish
consultants within a Finnish consulting engagement, all building Company’s
Power Grid further
-- Successful pilot deliveries and business outcome validation in select
growth programs (see chapter Growth Programs)
-- Preparation for systems integration projects
Growth Programs
Industrial
In the Industrial growth program, Affecto continued implementations and
prototyping. During the second quarter, the Company designed and delivered
prototype instrumentations for several customer use cases to create digital
access points for interacting with physical phenomena. The Company also created
advanced designs for cloud based architecture for capturing and handling large
amounts of data. Furthermore, the Company implemented an advanced analytics
model suitable for power plants maintenance together with Empower Group’s
Industry division. Affecto sees a growing market for accessing, seizing and
analyzing data related to real processes in real-time. The revenue from the
growth program has been relatively low because of the piloting approach during
2016.
B2C
In the B2C growth program, Affecto Video Analytics solution customer projects
with real-time cloud analytics and reporting capabilities progressed during the
first quarter. During the second quarter, the Company validated the business
impact of the Affecto Video Analytics solution for example with Expert ASA,
where the piloted product categories experienced double digit revenue
increases. With Affecto’s partner FirstView Digital Signage, the Company also
signed two new customer pilots for the UK market, to be delivered during the
second half of 2016. The Company sees a growing market interest towards the
Affecto Video Analytics solution especially in Sweden and Finland. Due to the
piloting approach of the B2C growth program, revenue from the program has been
minor during 2016.
Financial Position and Cash Flow
At the end of the reporting period Affecto's balance sheet totaled 111.7 MEUR
(12/2015: 120.3 MEUR). Equity ratio was 60.4% (12/2015: 58.5%) and net gearing
was 3.4% (12/2015: -6.2%).
The financial loans were 18.5 MEUR (12/2015: 18.5 MEUR) at the end of reporting
period. The Company's cash and liquid assets were 16.4 MEUR (12/2015: 22.4
MEUR). The interest-bearing net debt was 2.1 MEUR (12/2015: -3.9 MEUR).
On 17 June 2016, the Company announced that it has entered into a new EUR 18.5
million term loan agreement with OP Corporate Bank plc. The new loan replaced
the previous loan of EUR 18.5 million that expired in the end of June 2016.
Affecto will repay the loan in semi-annual instalments of EUR 2 million
starting in December 2016.
In 4-6/2016, the cash flow from operating activities was -0.9 MEUR (0.9 MEUR)
and cash flow from investing activities was -0.2 MEUR (-0.1 MEUR). Investments
in tangible and intangible assets were 0.2 MEUR (0.1 MEUR). The weakened cash
flow from operating activities was driven by lower profitability and especially
by the negative change in working capital driven by the Finnish segment.
In 1-6/2016, the cash flow from operating activities was -2.2 MEUR (1.4 MEUR)
and cash flow from investing activities was -0.3 MEUR (-0.3 MEUR). Investments
in tangible and intangible assets were 0.3 MEUR (0.3 MEUR). The weakened cash
flow from operating activities was driven by lower profitability and especially
by the negative change in working capital driven by the Norwegian and Swedish
segments.
Personnel
The number of employees was 988 (1012) persons at the end of the reporting
period. 415 (425) employees were based in Finland, 102 (88) in Norway, 98 (115)
in Sweden, 67 (64) in Denmark and 306 (320) in the Baltic countries. The
average number of employees during the period was 980 (1014).
Corporate Governance
Affecto’s corporate governance practices comply with Finnish laws and
regulations, Affecto’s Articles of Association, the rules of NASDAQ Helsinki
and the Finnish Corporate Governance Code issued by the Securities Market
Association of Finland in 2015. The code is publicly available at
http://cgfinland.fi/en/. Affecto has published its corporate governance
statement for 2015 in the Financial Statements 2015 and on the Company website
www.affecto.com.
The Annual General Meeting
Annual General Meeting of Affecto Plc (“AGM”) was held on 8 April 2016. The AGM
adopted the financial statements and discharged the members of the Board of
Directors and the CEO from liability for the financial year 2015. The meeting
approved the Board of Directors’ proposal to pay a dividend of EUR 0.16 per
share and the dividend was paid on 19 April 2016.
Aaro Cantell, Magdalena Persson, Jukka Ruuska, Olof Sand, Tuija Soanjärvi and
Lars Wahlström were re-elected to the Board. The Board of Directors elected
from among its members Aaro Cantell as its Chairman and Olof Sand as
Vice-Chairman and the following members to the Committees:
Audit Committee: Tuija Soanjärvi (chairman), Lars Wahlström and Jukka Ruuska
People, Nomination and Compensation Committee: Magdalena Persson (chairman)
Aaro Cantell and Olof Sand
The AGM approved all proposals made by the Board as described in the invitation
published on 11 March 2016. The resolutions of the AGM were published as a
stock exchange release on 8 April 2016 and can be found on the Company’s
website www.affecto.com.
Shares and Shareholders
The Company has one share series and all shares have similar rights. At the end
of the review period Affecto Plc's share capital consisted of 22 450 745 shares
and the Company owned 846 235 treasury shares, approximately 3.8% of the total
amount of the shares. Additional information with respect to the shares,
shareholding and trading can be found on the Company’s website www.affecto.com.
Risks and Uncertainties
The markets where Affecto operates are going through change. Historically,
Affecto has concentrated on the traditional IT market solutions for a broad
customer space and mainly on moderate deal sizes and shapes. Affecto’s demand
is growing within larger and more complex deal sizes and shapes as well as
within the emerging business technology & analytics market. There is a risk as
well as an opportunity with respect to the speed of which Affecto is able to
develop and build capability in the new emerging areas in proportion to the
traditional areas.
Affecto’s success depends also on good customer relationships. Affecto has a
diverse customer base. In 2015, the largest customer generated approximately 2%
and the 10 largest customers together approximately 18% of Affecto’s revenue.
Although none of the customers is critically large for the whole group, there
are large customers in various countries that are significant for local
business in the relevant country. On the other hand, the diverse customer base
may decrease the effectiveness of the sales & delivery efforts and overall
agility of the company.
Affecto also needs to be seen as an interesting employer in order to recruit
and retain skilled employees. It is important for Affecto to be seen as an
employer our employees can be proud of. High people churn may create
inefficiencies in the business and temporarily decrease the utilization rate.
The changes in the general economic conditions and the operating environment of
customers have direct impact on Affecto’s markets. The uncertain economic
outlook may affect Affecto’s customers negatively. Slower IT investment
decision making and uncertainty on new investments with respect to new business
technology solutions may have negative impact on Affecto. Affecto’s order
backlog has traditionally been only a few months long. Slower decision making
of the customers decreases the predictability of the business and may decrease
the utilization rate. Specifically, in the short term, the Company experienced
a slowdown in customers' investment decisions within the traditional market
areas in Norway. However, the Company expects this to normalize in near-future.
Further, the insurance sector has been impacted by slower than expected
investments, mainly due to product cycle related issues, which may continue to
have an effect on the Company in Baltic. Finally, in 4-6/2016, the Company
experienced improved demand in Lithuania, especially in the public sector. The
Company expects that this trend will continue but recognizes that the
continuity of the trend is uncertain.
Affecto sells third party software licenses and maintenance as part of its
solutions. Typically, the license sales have the highest impact on the last
month of each quarter and especially in the fourth quarter. This increases the
fluctuation in revenue between quarters and increases the difficulty of
accurately forecasting the quarters. Additionally, the increase of cloud
services and other similar market trends may affect the license revenue
negatively. Affecto had license revenue of approximately 7 MEUR in 2015.
The Company recognizes that the risks of frauds and cyber security threats have
increased. The Company aims to mitigate the increased risks with internal
controls, IT-security, training, awareness and security minded culture.
The Company recognizes the disintegration of its IT systems and process. Given
the number of separate systems, there is low group wide transparency and risk
of suboptimal management of the respective businesses.
Approximately 35% of Affecto’s revenue is generated in Sweden and Norway, thus
the development of the currencies of these countries (SEK and NOK) may have an
impact on Affecto’s profitability. The main part of the companies’ income and
costs are within the same currency, which decreases the risks. In addition, the
Company also has business in South Africa and therefore the development of the
South African Rand (ZAR) may also affect the business environment in South
Africa and thus the Company’s business.
Brexit is estimated to have a minimal effect on Affecto or its business. Any
possible impacts are estimated to be caused by possible currency fluctuations
or elevated macroeconomic uncertainty.
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 the reported profit and value of
assets.
Events after the Review Period
On 4 July 2016, the Company announced that it has evaluated its disclosure
principles as part of its EU Market Abuse Regulation (MAR) implementation and
has decided to change the way it communicates orders and business contracts.
Previously, Affecto had a practise of announcing all orders and business
contracts over EUR 1 million as formal stock exchange releases. Going forward,
the announcement of each order and business contract is assessed individually.
At the same time, the Company starts regular press release communications of
material orders and business contracts that are not assessed to have an effect
on the financial instruments of the Company. Affecto believes that this change
enhances transparency and enables clearer and more coherent communications to
ensure that capital market participants have a clear picture of the Company and
its business operations.
On 11 August 2016, the Company announced that, it has appointed Iikka Lindroos
as deputy CEO and to the Affecto Leadership Team. Lindroos starts in his role
during the Autumn 2016.
2016 Outlook
Affecto expects its revenue to stay at the same level or grow slightly and its
operating profit to grow in 2016.
The company does not provide an exact quarterly guidance for revenue or
operating profit development, as single projects and timing of license sales
may have large impact on quarterly sales and profit.
Financial Calendar 2016
Affecto will publish the following interim reports during the course of the
year:
Interim Report 1 January – 30 September: 28 October 2016
Affecto Plc
Board of Directors
Financial information:
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in equity
2. Notes
3. Key figures
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 4-6/16 4-6/15 1-6/16 1-6/15 2015 last
12m
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Revenue 30 093 30 812 57 437 59 874 116 026 113 589
Other operating income 0 1 0 1 22 21
Changes in inventories of 85 69 126 110 -195 -179
finished
goods and work in progress
Materials and services -6 952 -6 611 -12 752 -11 467 -23 978 -25 263
Personnel expenses -16 275 -16 765 -32 793 -34 329 -64 957 -63 422
Other operating expenses -4 465 -4 354 -8 271 -8 653 -18 352 -17 970
Other depreciation and -209 -271 -457 -549 -1 089 -998
amortisation
Operating profit 2 278 2 881 3 290 4 988 7 475 5 778
Financial income and -171 -83 -296 -202 4 -90
expenses
Profit before income tax 2 107 2 798 2 994 4 785 7 479 5 688
Income tax -506 -446 -704 -993 -1 585 -1 296
Profit for the period 1 600 2 353 2 290 3 792 5 894 4 392
Profit for the period
attributable to:
Owners of the parent 1 600 2 353 2 290 3 792 5 894 4 392
company
Earnings per share
(EUR per share):
Basic 0.07 0.11 0.11 0.18 0.27 0.20
Diluted 0.07 0.11 0.11 0.18 0.27 0.20
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
(1 000 EUR) 4-6/16 4-6/15 1-6/16 1-6/15 2015 last
12m
-----------------------------------------------------
-----------------------------------------------------
Profit for the period 1 600 2 353 2 290 3 792 5 894 4 392
Other comprehensive income
Items that may be
reclassified subsequently
to the statement of
income:
Translation difference -64 -36 183 661 -649 -1 127
Total Comprehensive income 1 536 2 317 2 474 4 453 5 245 3 265
for the period
Total Comprehensive income
attributable to:
Owners of the parent 1 536 2 317 2 474 4 453 5 245 3 265
company
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 6/2016 6/2015 12/2015
-------------------------------------------------------------
-------------------------------------------------------------
Non-current assets
Property, plant and equipment 989 1 349 1 095
Goodwill 62 444 63 384 62 367
Other intangible assets 109 192 132
Deferred tax assets 725 1 061 976
Trade and other receivables 93 - 242
64 360 65 986 64 813
Current assets
Inventories 444 610 300
Trade and other receivables 29 244 32 040 32 067
Current income tax receivables 1 249 1 039 778
Cash and cash equivalents 16 400 17 161 22 375
47 337 50 849 55 520
-------------------------------------------------------------
-------------------------------------------------------------
Total assets 111 697 116 835 120 333
Equity attributable to owners
of the parent Company
Share capital 5 105 5 105 5 105
Reserve of invested non-restricted 47 731 47 718 47 731
equity
Other reserves 858 858 858
Treasury shares -2 056 -2 111 -2 056
Translation differences -4 735 -3 609 -4 919
Retained earnings 14 433 13 497 15 599
-------------------------------------------------------------
-------------------------------------------------------------
Total equity 61 336 61 459 62 319
Non-current liabilities
Loans and borrowings 14 482 - -
Deferred tax liabilities 29 95 177
14 510 95 177
Current liabilities
Loans and borrowings 4 000 20 468 18 484
Trade and other payables 31 124 33 709 38 476
Current income tax liabilities 398 706 420
Provisions 329 398 456
35 851 55 281 57 836
Total liabilities 50 361 55 376 58 013
-------------------------------------------------------------
-------------------------------------------------------------
Equity and liabilities 111 697 116 835 120 333
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 4-6/201 4-6/201 1-6/201 1-6/201 2015
6 5 6 5
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash flows from operating activities
Profit for the period 1 600 2 353 2 290 3 792 5 894
Adjustments to profit for the period 923 818 1 446 1 692 2 850
2 523 3 171 3 737 5 485 8 744
Change in working capital -2 689 -1 175 -4 761 -2 199 2 949
Interest and other financial cost -59 -90 -116 -169 -305
paid
Interest and other financial income 16 18 34 35 50
received
Income taxes paid -728 -984 -1 105 -1 768 -2 107
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net cash from operating activities -936 939 -2 211 1 384 9 332
Cash flows from investing activities
Acquisition of tangible and -172 -132 -326 -325 -566
intangible assets
Proceeds from sale of tangible and - - - - 6
intangible assets
--------------------------------------------------------------------------------
Net cash from investing activities -172 -132 -326 -325 -561
Cash flows from financing activities
Proceeds from non-current borrowings 18 482 - 18 482 - -
Repayments of non-current borrowings -18 500 -2 000 -18 500 -2 000 -4 000
Dividends paid to the owners -3 457 -3 453 -3 457 -3 453 -3 453
of the parent company
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net cash from financing activities -3 475 -5 453 -3 475 -5 453 -7 453
(Decrease)/increase in cash and cash -4 583 -4 647 -6 012 -4 395 1 318
equivalents
Cash and cash equivalents 21 044 21 914 22 375 21 380 21 380
at the beginning of the period
Foreign exchange effect on cash -61 -107 37 175 -324
Cash and cash equivalents 16 400 17 161 16 400 17 161 22 375
at the end of the period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to owners of the parent
company
-------------------------------------------------------------
-------------------------------------------------------------
(1 000 EUR) Share Reserve of Other Treasur Trans Ret. Total
capita invested reserve y lat. earnin equity
l non-restricted s shares diff. gs
equity
Equity at 1 5 105 47 731 858 -2 056 -4 919 15 599 62 319
January
2016
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Profit 2 290 2 290
Translation 183 183
difference
s
Total 183 2 290 2 474
compre-hen
sive income
Dividends -3 457 -3 457
paid
--------------------------------------------------------------------------------
Equity at 5 105 47 731 858 -2 056 -4 735 14 433 61 336
30 June
2016
Equity attributable to owners of the parent
company
-------------------------------------------------------------
-------------------------------------------------------------
(1 000 EUR) Share Reserve of Other Treasur Trans Ret. Total
capita invested reserve y lat. earnin equity
l non-restricted s shares diff. gs
equity
Equity at 1 5 105 47 718 835 -2 111 -4 269 13 159 60 437
January
2015
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Profit 3 792 3 792
Translation 661 661
difference
s
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total 661 3 792 4 453
compre-hen
sive income
Share-based 23 23
payments
Dividends -3 453 -3 453
paid
--------------------------------------------------------------------------------
Equity at 5 105 47 718 858 -2 111 -3 609 13 497 61 459
30 June
2015
2. Notes
2.1. Basis of preparation
This half year financial report has been prepared in accordance with the IFRS
recognition and measurement principles and in accordance with IAS 34, Interim
Financial reporting. The half year financial report should be read in
conjunction with the annual financial statements for the year ended 31 December
2015. In material respects, the same accounting policies have been applied as
in the 2015 annual consolidated financial statements. The amendments to and
interpretations of IFRS standards that entered into force on 1 January 2016 had
no material impact on this half year financial report.
2.2. Segment information
Affecto's reporting segments are based on geographical locations and are
Finland, Norway, Sweden, Denmark and Baltic.
Segment revenue and result
(1 000 EUR) 4-6/16 4-6/15 1-6/16 1-6/15 2015 last 12m
--------------------------------------------------
--------------------------------------------------
Total revenue
Finland 13 424 12 439 24 630 24 579 49 539 49 590
Norway 5 922 5 540 11 501 10 976 21 068 21 593
Sweden 5 010 5 526 9 646 10 114 18 219 17 751
Denmark 3 109 2 734 6 306 5 596 11 297 12 008
Baltic 4 139 5 639 8 331 10 727 20 128 17 732
Other -1 510 -1 067 -2 977 -2 118 -4 226 -5 085
-------- -------- ---------
--------------------------------------------------------------------------------
Group total 30 093 30 812 57 437 59 874 116 026 113 589
Operational segment result
Finland 871 1 281 975 1 920 3 528 2 582
Norway 608 455 904 1 040 1 451 1 315
Sweden 564 366 888 481 718 1 125
Denmark 279 -80 546 -21 355 923
Baltic 424 1 129 780 2 437 3 930 2 272
Other -468 -270 -802 -870 -2 507 -2 440
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total operational segment 2 278 2 881 3 290 4 988 7 475 5 778
result
--------------------------------------------------------------------------------
Operating profit 2 278 2 881 3 290 4 988 7 475 5 778
Financial income and expenses -171 -83 -296 -202 4 -90
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Profit before income tax 2 107 2 798 2 994 4 785 7 479 5 688
Revenue by business lines
(1 000 EUR) 4-6/16 4-6/15 1-6/16 1-6/15 2015 last 12m
--------------------------------------------------
--------------------------------------------------
Information Management 28 586 28 522 54 698 55 684 107 887 106 901
Solutions
Karttakeskus GIS business 2 868 3 338 5 281 6 214 12 201 11 267
Other -1 361 -1 048 -2 541 -2 024 -4 062 -4 579
------------------------------ -------- -----------------
--------------------------------------------------------------------------------
Group total 30 093 30 812 57 437 59 874 116 026 113 589
2.3. Changes in intangible and tangible assets
(1 000 EUR) 1-6/2016 1-6/2015 1-12/2015
------------------------------
------------------------------
Carrying amount at the beginning of period 63 594 64 573 64 573
Additions 326 325 566
Disposals 0 -2 -2
Depreciation and amortization for the period -457 -549 -1 089
Exchange rate differences 79 577 -454
---------------------------------------------------------------------------
Carrying amount at the end of period 63 542 64 926 63 594
2.4. Share capital, reserve of invested non-restricted equity and treasury
shares
(1 000 Number of shares Share Reserve of invested Treasury
EUR) outstanding capital non-restricted equity shares
---------------------------------------------------------------------
---------------------------------------------------------------------
1 January 21 583 526 5 105 47 718 -2 111
2015
30 June 21 583 526 5 105 47 718 -2 111
2015
1 January 21 604 510 5 105 47 731 -2 056
2016
30 June 21 604 510 5 105 47 731 -2 056
2016
Affecto Plc owns 846 235 treasury shares, which correspond to 3.8% of the total
amount of the shares. The amount of registered shares is 22 450 745 shares.
2.5. Interest-bearing liabilities
(1 000 EUR) 30.6.2016 31.12.2015
Interest-bearing non-current liabilities
Loans from financial institutions, 14 482 -
non-current portion
Loans from financial institutions, 4 000 18 484
current portion
---------------------------------------------------------------
---------------------------------------------------------------
18 482 18 484
On 17 June 2016, the Company announced that it has entered into a new EUR 18.5
million term loan agreement with OP Corporate Bank plc. The new loan replaced
the previous loan of EUR 18.5 million that expired in the end of June 2016.
Affecto will repay the loan in semi-annual instalments of EUR 2 million
starting in December 2016.
Affecto's loan facility agreement includes financial covenants, breach of which
might lead to an increase in cost of debt or cancellation of the facility
agreement. The covenants are based on total net debt to earnings before
interest, taxes, depreciation and amortization and total net debt to total
equity. The covenants will be measured quarterly, and these terms and
conditions of covenants were met at the end of the reporting period.
2.6. Contingencies and commitments
The future aggregate minimum lease payments under non-cancelable operating
leases:
(1 000 EUR) 30.6.2016 31.12.2015
Not later than one (1) year 3 234 3 167
Later than one (1) year, 3 617 1 911
but not later than five (5) years
Later than five (5) years - -
--------------------------------------------------------
Total 6 851 5 078
Guarantees given:
(1 000 EUR) 30.6.2016 31.12.2015
Liabilities secured by a mortgage
Financial loans - 18 500
On 17 June 2016, the Company announced that it has entered into a new EUR 18.5
million term loan agreement with OP Corporate Bank plc. The new loan replaced
the previous loan of EUR 18.5 million that expired in the end of June 2016. The
pledges that were used to secure the previous term loan were released. The
previous term loan were secured by bearer bonds with a nominal value of 52.5
million euro. In addition, the shares in Affecto Finland Oy and Affecto Norway
AS were pledged to secure the previous term loan.
Other securities given on own behalf:
(1 000 EUR) 30.6.2016 31.12.2015
Pledges 33 36
Other guarantees 836 1 925
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 and subsidiaries.
2.7. Related party transactions
Key management compensation and remunerations to the board of directors:
(1 000 EUR) 1-6/2016 1-6/2015 1-12/2015
Salaries and other short-term employee benefits 1 057 1 334 2 219
Post-employment benefits 127 162 268
Termination benefits 112 134 275
Share-based payments - 1 1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total 1 296 1 631 2 763
Purchases from related party:
(1 000 EUR) 1-6/20 1-6/20 1-12/2
16 15 015
Purchases from the entity that are controlled by key 13 63 289
management personnel of the group
Outstanding balance of purchases from the entity that - - 36
are controlled by key management personnel of the group
3. Key figures
4-6/16 4-6/15 1-6/16 1-6/15 2015 last 12m
--------------------------------------------------
--------------------------------------------------
Revenue, 1 000 eur 30 093 30 812 57 437 59 874 116 026 113 589
EBITDA, 1 000 eur 2 487 3 152 3 747 5 536 8 565 6 776
Operational segment result, 2 278 2 881 3 290 4 988 7 475 5 778
1 000 eur
Operating result, 1 000 eur 2 278 2 881 3 290 4 988 7 475 5 778
Result before taxes, 1 000 2 107 2 798 2 994 4 785 7 479 5 688
eur
Profit attributable to the 1 600 2 353 2 290 3 792 5 894 4 392
owners
of the parent company, 1 000
eur
EBITDA, % 8.3 % 10.2 % 6.5 % 9.2 % 7.4 % 6.0 %
Operational segment result, % 7.6 % 9.4 % 5.7 % 8.3 % 6.4 % 5.1 %
Operating result, % 7.6 % 9.4 % 5.7 % 8.3 % 6.4 % 5.1 %
Result before taxes, % 7.0 % 9.1 % 5.2 % 8.0 % 6.4 % 5.0 %
Net income for equity holders 5.3 % 7.6 % 4.0 % 6.3 % 5.1 % 3.9 %
of the parent company, %
Equity ratio, % 60.4 % 58.4 % 60.4 % 58.4 % 58.5 %
Net gearing, % 3.4 % 5.4 % 3.4 % 5.4 % -6.2 %
Interest-bearing net debt, 2 081 3 307 2 081 3 307 -3 891
1 000 eur
Gross investment in 172 132 326 325 566
non-current
assets (excl. acquisitions),
1 000 eur
Gross investments, % of 0.6 % 0.4 % 0.6 % 0.5 % 0.5 %
revenue
Order backlog, 1 000 eur 45 817 43 327 45 817 43 327 50 672
Average number of employees 976 1 010 980 1 014 1 010
Earnings per share, eur 0.07 0.11 0.11 0.18 0.27 0.20
Earnings per share (diluted), 0.07 0.11 0.11 0.18 0.27 0.20
eur
Equity per share, eur 2.84 2.85 2.84 2.85 2.88
Average number of shares, 21 605 21 584 21 605 21 584 21 592 21 602
1 000 shares
Number of shares at the end 21 605 21 584 21 605 21 584 21 605 21 602
of
period, 1 000 shares
Affecto has revised the terminology used in its financial reporting. Prior to
Q1-2016 release, the Company used the term ‘net sales’. In this report and
going forward, the term ‘net sales’ is replaced with ‘revenue’, however, the
meaning of the two terms is identical.
Calculation of key figures
EBITDA = Earnings before interest, taxes,
depreciation, amortization and impairment losses
Operational segment result = Operating profit before amortizations on
fair value adjustments due to business
combinations (IFRS3) and goodwill
impairments
Equity ratio, % = Total equity *100
________________________________
Total assets – advance payments
Gearing, % = Interest-bearing liabilities – cash *100
and cash equivalents
__________________________________
Total equity
Interest-bearing net debt = Interest-bearing liabilities – cash and
cash equivalents
Earnings per share (EPS) = Profit attributable to owners of the parent
company
______________________________________
Weighted average number of ordinary shares in
issue during the period
Equity per share = Total 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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