2008-02-14 10:00:00 CET
2008-02-14 10:00:02 CET
REGULATED INFORMATION
Affecto Oyj - Financial Statement Release
AFFECTO PLC'S FINANCIAL STATEMENTS BULLETIN 2007
AFFECTO PLC STOCK EXCHANGE RELEASE 14 FEBRUARY 2008
AFFECTO PLC'S FINANCIAL STATEMENTS BULLETIN 2007
GROUP KEY FIGURES
MEUR 10-12/2007 10-12/2006 2007 2006
Net sales 37.9 16.6 97.5 50.2
Operating result before 4.9 1.9 13.3 4.1
IFRS3 items
% of net sales 13.0 11.5 13.6 8.1
Operating result 3.6 1.7 10.8 3.6
% of net sales 9.6 10.5 11.0 7.3
Result before taxes 3.1 1.7 9.5 3.5
Result for the period 2.2 1.4 7.0 2.6
Equity ratio, % 41.9 52.0 41.9 52.0
Net gearing, % 53.9 35.2 53.9 35.2
Earnings per share, eur 0.10 0.09 0.38 0.16
Earnings per share
(diluted), eur 0.10 0.09 0.38 0.16
Equity per share, eur 2.93 2.30 2.93 2.30
Dividend proposal, eur 0.16 0.10
CEO Pekka Eloholma comments the fourth quarter and the whole year 2007:"The last quarter was the highest in company history both regarding the net
sales 37.9 MEUR (growth 129%) and EBIT 3.6 MEUR (10% of net sales).""During year 2007 our net sales grew by 94% to 97.5 MEUR. The net sales grew
both in Finland (by 15%) and especially in the Baltic (by 75%). The organic
growth in Sweden is estimated to have been over 20%. The group EBIT was 10.8
MEUR (11% of net sales). The order backlog grew strongly during the year to an
all-time-high level of 41.6 MEUR.""For Affecto, year 2007 was a year of strong growth and internationalization.
The Component Software acquisition combined to Affecto's Swedish business
turned Affecto into a truly Nordic wide service provider. Had Component
Software been part of Affecto for the whole year, our pro forma net sales
would have been approx. 127 MEUR.""Strong growth in Baltic continued and the business was expanded to Poland.""Positive development is expected to continue during year 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 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.
BUSINESS DEVELOPMENT DURING 10-12/2007
Affecto's net sales in 10-12/2007 was 37.9 MEUR (10-12/2006 16.6 MEUR). Net
sales in Finland was 11.6 MEUR (11.1 MEUR), in Baltic area 7.5 MEUR (4.6
MEUR), 6.9 MEUR in Sweden (0.9 MEUR) and 11.9 MEUR (0.0 MEUR) in Norway &
Denmark. Net sales grew by 129%. In Finland growth was 5% and in Baltic it was
62%.
In line with the normal annual cycle, the fourth quarter was the largest by
net sales, mainly due to the license sales concentration to the quarter.
Sales of geographical segments based on location of assets
Net sales, MEUR 10-12/2007 10-12/2006 2007 2006
Finland 11.6 11.1 41.7 36.3
Baltic 7.5 4.6 22.9 13.1
Sweden 6.9 0.9 17.7 0.9
Norway & Denmark 11.9 0.0 15.2 0.0
Eliminations 0.0 0.0 0.0 0.0
Group total 37.9 16.6 97.5 50.2
In 10-12/2007 net sales of BI segment was 21.7 MEUR (4.7 MEUR), Operational
solutions 13.9 MEUR (9.4 MEUR) and Cartographic solutions 2.3 MEUR (2.5 MEUR).
The acquisitions done in 2006 and 2007 have had impact mostly on the BI
segment.
Affecto's EBIT was 3.6 MEUR (1.7 MEUR). EBIT in Finland was 1.3 MEUR (1.6
MEUR), Baltic EBIT was 1.5 MEUR (0.7 MEUR), EBIT in Sweden was 0.3 MEUR and
EBIT in Norway & Denmark was 1.0 MEUR.
Operating result of geographical segments based on location of assets
Operating result, MEUR 10-12/2007 10-12/2006 2007 2006
Finland 1.3 1.6 4.4 4.6
Baltic 1.5 0.7 5.4 0.5
Sweden 0.3 0.0 1.5 0.0
Norway & Denmark 1.0 0.0 1.2 0.0
Group management -0.6 -0.5 -1.7 -1.5
Group total 3.6 1.7 10.8 3.6
According to IFRS3 requirements, 10-12/2007 EBIT includes 1.3 MEUR (0.2 MEUR)
of depreciation of intangible assets related to acquisitions. A significant
part of the depreciation is related to Sweden and Norway & Denmark segments.
In whole year such depreciation amounted to 2.5 MEUR (0.4 MEUR).
Fourth quarter was reasonably good in Finland, and business developed
steadily. During the quarter, new orders were received e.g. from Alko,
Wärtsilä and the Finnish Agency for Rural Affairs. The profit decreased in
Finland due to the investments in growth and the weak profitability in
cartographic solutions.
The net sales and profit in Baltic improved significantly compared to Q4/2006
thanks to good resource utilization rate due to continuing large projects. In
the insurance sector, the projects in South Africa and Poland continued. New
orders were received e.g. from Lithuanian Ministry of Education and Lithuanian
National Paying Agency. A few large license deals were done during the
quarter, total impact on net sales 1.9 MEUR.
During the quarter, the Component Software business in Sweden was integrated
to Affecto Sweden, which integration work somewhat decreased the number of
workdays available to customers. New orders were received from eg. Vin&Spirit,
Ecophone and ICA.
Norway & Denmark segment's development was positive and prices were
increasing. The business was developed by recruiting new consultants and by
founding a Microsoft BI unit. New orders were received from e.g.
Kredittillsynet (Financial Supervisory Authority of Norway) and Agder Energi.
YEAR 2007
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 countries 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
Sweden, Norway, Denmark, Estonia, Lithuania, Latvia and Poland.
NET SALES
The most significant event in 2007 was the acquisition of Component Software
Group ASA through a public tender offer in August 2007. Component Software has
been included in Affecto's consolidated accounts since 1 September 2007.
During the year 2007, the Affecto name and new corporate visual identity were
implemented.
Affecto's net sales in 2007 was 97.5 MEUR (2006: 50.2 MEUR). Net sales in
Finland was 41.7 MEUR (36.3 MEUR), in Baltic area 22.9 MEUR (13.1 MEUR), 17.7
MEUR in Sweden (0.9 MEUR) and 15.2 MEUR (0.0 MEUR) in Norway & Denmark. Sales
growth was 94%. In Finland growth was 15% and in Baltic it was 75%.
The sales growth was based on good demand for services in all our market
areas. Especially the Baltic business developed very positively compared to
year 2006.
Intellibis, acquired in December 2006, and the Swedish operations of Component
Software, acquired in August 2007, form the Swedish segment. Component
Software's business in Norway and Denmark forms the Norway & Denmark segment.
In 2007 net sales of BI segment was 48.1 MEUR (11.9 MEUR), Operational
solutions 39.9 MEUR (28.7 MEUR) and Cartographic solutions 9.5 MEUR (9.7
MEUR). The acquisitions done in 2006 and 2007 have had impact mostly on the BI
segment.
PROFIT
Affecto's EBIT was 10.8 MEUR (3.6 MEUR). EBIT in Finland was 4.4 MEUR (4.6
MEUR), Baltic EBIT was 5.4 MEUR (0.5 MEUR), EBIT in Sweden was 1.5 MEUR (0.0
MEUR) and EBIT in Norway & Denmark was 1.2 MEUR (0.0 MEUR).
According to IFRS3 requirements, 2007 EBIT includes 2.5 MEUR (0.4 MEUR) of
depreciation of intangible assets related to acquisitions. A significant part
of the depreciation is related to Sweden and Norway & Denmark segments. In
year 2008 the IFRS3 depreciation is estimated to total 2.9 MEUR and in 2009
approx 2.8 MEUR.
The profit in Baltic improved significantly thanks to good resource
utilization rate due to ongoing large customer projects. The profit decreased
in Finland due to the weak profitability in cartographic solutions.
R&D expenditure in 2007 totaled 0.9 MEUR (0.5 MEUR), i.e. 0.9% of net sales
(0.9%). The expenditure has been booked as costs, except in Component
software's ECM business, where 0.1 MEUR has been capitalized in balance sheet.
Taxes for the period have been booked as taxes. Net profit for the period was
7.0 MEUR, while it was 2.6 MEUR last year.
Order backlog totaled 41.6 MEUR at the end of period (24.2 MEUR). Affecto has
a well diversified customer base. 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 162.1 MEUR
(2006: 78.7 MEUR). Significant part of the growth is due to the acquisition of
Component Software Group ASA in August 2007. Equity ratio was 41.9 (52.0%) and
net gearing was 53.9% (35.2%).
The additional consideration for ZenPark, acquired in 2006, was determined to
be 0.67 MEUR and it was paid during third quarter.
The financial loans were 46.9 MEUR as at 31 December 2007. The interest-
bearing net debt was 33.9 MEUR. For the Component Software acquisition, the
company negotiated a financing package, which also included the rearrangement
of the previous debts.
The company's cash and liquid assets were 13.0 MEUR (5.5 MEUR). Cash flow from
operating activities for the reported period was 10.4 MEUR (2.6 MEUR) and cash
flow from investments was -28.3 MEUR (-14.2 MEUR).
The acquisition cost of Component Software ASA, acquired in August 2007, has
been determined provisionally in the end of the year. The estimated
acquisition cost totals to 52.5 MEUR and it had 26.2 MEUR effect on cash flow.
Of the amount, allocations have been made to intangible assets in respect of
customer relationships, technology and order backlog totaling 9.5 MEUR, net of
deferred taxes. 38.6 MEUR has been recorded as goodwill.
Investments in non-current assets excluding acquisitions were 1.4 MEUR (1.1
MEUR) during the period.
EMPLOYEES
The number of employees was 1129 persons at the end of the reporting period
(745 persons). Approx. 370 persons were based in Finland, 165 in Sweden, 165
in Norway & Denmark, and 420 in Baltic states. The average number of employees
during the period was 897 persons (605). The growth of personnel was
significantly impacted by the acquisition of Component Software, which
increased the personnel by over 200 employees. The number of employees has
also grown organically, especially in Baltic, where the number has grown by
approx. 35% during the year.
The company announced on 2 October 2007 that it starts co-operation procedure
in Finland due to financial and productional reasons in its HR solutions
business belonging to company's Operational solutions segment and in
Karttakeskus unit belonging to company's Cartographic segment. As the result
of the negotiations the employment of four persons ended.
BUSINESS REVIEW
During year 2007 Affecto has continued to implement its growth strategy. The
most significant act was the acquisition of Component Software through a
public tender offer. The acquisition strengthened Affecto's position in Sweden
and opened business in Norway and Denmark.
The group's business is managed through four country units. Finland, Baltic,
Sweden and Norway & Denmark are also the primary IFRS segments.
Finland
In 2007 net sales in Finland was 41.7 MEUR (36.3 MEUR) and it grew by 15%.
EBIT was 4.4 MEUR (4.6 MEUR). The business developed steadily during the year.
The demand for various services was reasonably good and was increasing
especially regarding BI services. The unit prices of consultant work have
remained stable or even risen somewhat. The profitability of the cartographic
solutions was weak, which was the main cause in the decrease in EBIT.
The growth of IT services market in Finland is rather slow, but the growth of
our specialty segments like BI is expected to exceed the average market
growth. The customers' activity has continued to be good. New orders were
received from, among others, Nokia, Church of Finland, Alko, Aurinkomatkat and
various ministries.
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 to Operational
solutions, but also includes BI solutions.
In 2007 the Baltic net sales grew by 75% and was 22.9 MEUR (13.1 MEUR). Baltic
EBIT was 5.4 MEUR (0.5 MEUR). The business has developed very favorably
compared to last year, and the resource utilization rate and profitability is
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. The order
backlog offers stable resource utilization for near future. During the year,
new orders were received e.g. from the insurance company Commercial Union
Polska, Latvian Social Insurance Institution, Lithuanian Ministry of Education
and Estonian Ministry of Economy.
The company is actively recruiting more employees. During the year, the number
of employees in Baltic grew by over 100 persons. The Baltic countries enjoy a
high demand for competent workforce, which is predicted to increase salary
levels. EITO (European Information Technology Observatory) forecasts that the
IT services will grow by over 13% p.a. in the next few years in all three
Baltic countries.
Affecto has founded a new subsidiary in Poland, where the insurance and
utilities sectors are initially targeted as the customers. The plan is to grow
the number of employees to approx. 15 in initial phase during the next few
quarters.
Sweden
Affecto has expanded its business to the Sweden by acquiring Intellibis AB in
December 2006. In addition, the segment includes the Swedish BI operations of
Component Software for September-December 2007.
In 2007 the net sales in Sweden was 17.7 MEUR (0.9 MEUR) and EBIT 1.5 MEUR
(0.0 MEUR). Year ago, Affecto had business in Sweden only in December. The
reported EBIT includes approx. 1.2 MEUR IFRS3 depreciation. The integration of
Swedish operations is estimated to have caused approx 0.3 MEUR costs in Q4.
The business in Sweden has developed positively during year 2007 and combining
the Component Software operations to Affecto has further strengthened the
position as a leading BI solution provider. The business is estimated to have
grown by over 20%. The price development has been positive and the utilization
rate has remained high. The demand for general IT services in Sweden is
expected to grow by some 5%, while the BI services are expected to grow
faster.
Norway & Denmark
The segment comprises Component Software's, acquired at the end of August,
operations in Norway and Denmark. Only the business in September-December has
been reported as part of Affecto.
The net sales was 15.2 MEUR in September-December and EBIT was 1.2 MEUR. The
reported EBIT was negatively affected by an IFRS3 depreciation of 0.9 MEUR.
Business Intelligence business developed positively and especially the growth
of consulting services was good. BI service offering has been enlarged e.g. by
increasing the offering of Oracle and Microsoft technologies. The price
development has been positive thanks to good demand for services. During the
year, new orders were received from e.g. The Norwegian Labour and Welfare
Administration (NAV), Agder Energi and Forca.
The Contempus business, an ECM business reported as part of Operational
Solutions, also developed steadily. The sales efforts were increasingly aimed
outside Nordic countries.
Business review by secondary segments 2007
Business intelligence (BI) net sales was 48.1 MEUR (11.9 MEUR). The growth is
largely explained by the acquisitions of ZenPark and Intellibis in late 2006
and of Component Software since September 2007, but also the organic growth
has been good. Customers' interest is increasingly focusing on larger
solutions and continuous service. During year 2007 Affecto has further widened
its solution offering e.g. by increasing the number of SAP BI consultants, by
strengthening CPM/planning and Microsoft resources.
According to Datamonitor's recent research, the global BI solution market is
expected to grow annually by over 12% and to double in size by 2012. The
recent acquisitions where the largest global software companies have acquired
BI software producers highlight the interest for the sector. The most recent
examples are the SAP's acquisition of Business Objects and IBM's acquisition
of Cognos.
Net sales of Operational Solutions grew by 39% and was 39.9 MEUR (28.7 MEUR).
The growth is to a large extent explained by the strong growth of the Baltic
operations, where large projects continued steadily. The insurance solution
project in South Africa continued and may lead to a new project to the same
client, the project in Sweden ended and the project in Poland was ramped up.
Affecto has established a subsidiary in Poland in order to be able to offer
its insurance sector related services also there. In Finland, the demand for
solutions was good and the utilization rate of project resources was good. The
demand for Norwegian Contempus solutions grew moderately.
Cartographic Solutions businesses net sales was 9.5 MEUR (9.7 MEUR). The
demand for digital geographic content and related services grew. Affecto
continues to operate the Finnish land parcel identification system for the
next three years. The sales of maps and other printed products remained at
last year's level, but the profitability of the unit was weak.
ASSESSMENT OF RISKS AND UNCERTAINTIES
Affecto operates in the market that is 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. The competition in market tightens continuously. This could have
a negative effect on the business, operating results and financial condition
of Affecto.
Affecto's continued success depends to a significant extent 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. Ten largest customers generated approx. 20% of
group revenue in 2007.
Acquisition of Component Software 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 whole year 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
mostly impact on the last month of each quarter and especially on 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. For the damage
risks, which can not be prevent 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.
CHANGES IN GROUP STRUCTURE
The Annual General Meeting held on 28 March 2007 decided to change the name of
the parent company to Affecto Plc.
The wholly owned subsidiary ZenPark Oy has merged to Affecto Finland Oy at 30
June 2007. Zenpark Media Oy has been liquidated on 20.6.2007.
In August 2007, Affecto has acquired Component Software Group ASA from Norway.
The acquisition of Component Software is described more closely in"ACQUISITION OF COMPONENT SOFTWARE GROUP ASA".
Affecto has founded a subsidiary in Poland.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on March 28, 2007,
adopted the financial statements for 1.1.-31.12.2006 and discharged the
members of the Board of Directors and the CEO from liability. The Annual
General Meeting decided that a dividend of EUR 0.10 per share be distributed
for the year 2006.
Aaro Cantell, Heikki Lehmusto, Pasi Mäenpää, Jukka Norokorpi and Esko Rytkönen
were re-elected and Pyry Lautsuo was elected as members of the Board of
Directors. The Board re-elected Aaro Cantell as Chairman. 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 proposal for changing the
company name and Articles of Association. The changes were registered at the
Finnish trade register on 2 April 2007.
The Annual General Meeting accepted the Board's proposals for the
authorizations 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.
The group management team was modified at the end of November. The group
management team comprises of the following persons since 1 December 2007:
Pekka Eloholma, Åge Lönning, Satu Kankare, Hannu Nyman, Hilkka Remes-
Hyvärinen, Tuula Wäyrynen, Kestutis Uzpalis, Martin Hultqvist, Håvard
Ellefsen, Claus Kruse, Stig-Göran Sandberg and Ray Byman. Eloholma, Lönning,
Uzpalis and Hultqvist form the executive team.
EXTRAORDINARY GENERAL MEETING
The Extraordinary General Meeting held on 10 July 2007 authorized the Board to
decide on the directed share issue (max. 4 800 000 shares) needed for the
acquisition of Component Software, and elected Mr. Haakon Skaarer as a board
member conditional to the completion of the Component Software acquisition.
Mr. Skaarer is a board member since 28 August 2007.
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 28 March 2007.
The complete contents of the new authorizations given by the Annual General
Meeting held on 28 March 2007 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 3 400 000 new
shares may be issued. A maximum of 1 700 000 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 1 700 000 shares may be acquired. The authorization shall be in force until
the next Annual General Meeting.
In addition, the Extraordinary General Meeting held after the review period on
10 July 2007 authorized the Board to decide on the directed share issue (max.
4 800 000 shares) needed for the acquisition of Component Software. Based on
this authorization, 4 499 947 new shares were issued to shareholders of
Component Software. The share issue was registered at the trade register on 28
August 2007.
SHARES AND TRADING
The company has only one share series, and all shares have similar rights. As
at 31 December 2007, 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 2007, the highest share price was 5.18 euro, lowest price 2.90 euro,
average price 4.09 euro and closing price 4.23 euro. Trading volume was 23.5
million shares, corresponding to 109 % of the number of shares at the end of
period. The market value of shares was 90.9 MEUR at the end of the period.
SHAREHOLDERS
The following flagging announcements have been given during 2007:
10 April 2007: Ownership of Mika Laine exceeded 5%
27 August 2007 related to Component Software acquisition: Ownership of Eqvitec
funds decreased below 15%, ownership of Fenno Rahasto decreased below 10%,
ownership of Mika Laine decreased below 5% and ownership of Arendals
Fossekompani group exceeded 5%
2 October 2007: Ownership of Eqvitec funds decreased to 0%, ownership of Fenno
Rahasto decreased to 0% and ownership of Mika Laine exceeded 5%
18 December 2007: Ownership of Aaro Cantell exceeded 5%
The company had total of 1 321 owners on December 31, 2007 and the foreign
ownership was 32%. 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).
ACQUISITION OF COMPONENT SOFTWARE GROUP ASA
Affecto published on 11 June 2007 that the company had made a combination
agreement with Component Software and had intention to make a public tender
offer for Component Software's shareholders.
Oslo Börs approved the Offer document and the Finnish Financial Supervision
approved the prospectus on 20 July 2007. The public tender offer period began
on 25 July 2007 and ended on 22 August 2007. Affecto's board of directors
decided on 27 August 2007 to complete the tender offer.
As a consequence of the tender offer, the number of Component Software shares
transferred to Affecto at completion of the tender offer was 5 551 442 shares
representing about 95.3% of all issued shares in Component Software. In
accordance with the terms and conditions of the public tender offer, the
consideration for one Component Software share was NOK 40.03 in cash and
0.81063 new Affecto shares.
A total of 4 499 947 new Affecto shares were issued. Affecto's new shares were
registered in the trade register on 28 August 2007 and the trading of new
shares together with Affecto's old shares started on 28 August 2007 at OMX
Nordic Exchange Helsinki Oy. The new shares give the same shareholders' rights
as Affecto's old shares.
Oslo Börs approved the offer document related to the mandatory offer and the
compulsory acquisition on 19 September 2007. The mandatory offer period began
on 19 September 2007 and ended on 17 October 2007. The trading with the share
in Oslo Börs ended on 19 September 2007, when all shares were transferred to
Affecto. Component Software's listing officially ended 24 October 2007.
The name of Component Software Group has been changed to Affecto Norway AS.
If Component Software had been part of Affecto the whole year 2007, the pro
forma net sales would have been approx. 126.8 MEUR, operating profit before
IFRS3 depreciation approx. 15.1 MEUR and EBIT approx. 11.4 MEUR.
EVENTS AFTER THE REVIEW PERIOD
In January 2008, Affecto has published information about new projects in
Finland, Lithuania and Latvia. Affecto will deliver a new case management
solution to the Finnish Ministry of Education, an IT solution to Lithuanian
Ministry of Education to improve processes of education institutions and an
EMCS system to Latvian State Revenue Service.
Mr. Darius Lazauskas has been appointed as a member of the group management
team as of 1 February 2008.
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 2007-2009 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 company within its market region.
DIVIDEND PROPOSAL
Distributable funds of the parent company of the group on 31 December 2007 are
25 356 088.63 euros. Board of Directors proposes that from the financial year
2007 a dividend of 0.16 euros per share will be paid, a total of 3 436 756.80
euros with the outstanding number of shares at the end of the financial
period, and the rest is carried forward to the retained earnings account. No
material changes have taken place in respect of the company's financial
position after the balance sheet date. The liquidity of the company is good
and in the opinion of the Board of Directors proposed distribution of profit
does not risk the liquidity of the company.
FUTURE OUTLOOK
Positive development is expected to continue during year 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 of the whole year 2008 is expected not to materially change
from 2007.
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 12:30 at Restaurant
Savoy, Eteläesplanadi 14, Helsinki.
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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
4. Calculation of key figures
1. Income statement, balance sheet, cash flow statement and statement of
changes in shareholders' equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 10-12/07 10-12/06 2007 2006
Net sales 37 907 16 566 97 474 50 194
Other operating income 11 28 80 138
Changes in inventories of -51 -107 109 287
finished goods and work in
progress
Materials and services -8 571 -3 668 -19 851 -13 177
Personnel expenses -18 433 -7 847 -48 635 -23 996
IFRS3 depreciation -1 288 -175 -2 536 -409
Other depreciation, amortization -355 -340 -1 231 -963
and impairment charges
Other operating expenses -5 590 -2 723 -14 651 -8 432
Operating result 3 630 1 736 10 758 3 642
Finance costs (net) -489 -26 -1 300 -184
Result before income tax 3 141 1 710 9 458 3 458
Income tax -894 -307 -2 477 -824
Result for the period 2 248 1 403 6 981 2 633
Attributable to:
Equity holders of the Company 2 248 1 403 6 981 2 633
Minority interest 0 0 0 0
Earnings per share for result
attributable to the equity
holders of the Company
(EUR per share)
Basic 0.10 0.09 0.38 0.16
Diluted 0.10 0.09 0.38 0.16
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 12/2007 12/2006
Non-current assets
Tangible assets 1 939 2 110
Goodwill 84 196 43 579
Other intangible assets 18 249 7 550
Deferred tax assets 2 297 594
Available-for-sale financial assets 64 57
Other non-current receivables 190 93
106 936 53 983
Current assets
Inventories 1 792 2 095
Trade receivables 28 848 11 508
Other receivables 9 876 4 230
Current income tax receivables 166 1 036
Available-for-sale financial assets 106 578
Financial assets at fair value through 35 24
profit or loss
Restricted cash 659 381
Cash and cash equivalents 12 974 4 906
54 455 24 758
Assets held for sale 679 0
Total assets 162 070 78 741
Equity attributable to equity holders
of the Company
Share capital 5 105 5 105
Share premium 25 404 25 404
Reserve of invested non-restricted 21 188 1 960
equity
Other reserves 108 11
Treasury shares -106 -106
Retained earnings 11 265 6 717
62 964 39 092
Minority interest 0 0
Total shareholders' equity 62 964 39 092
Non-current liabilities
Borrowings 43 906 14 014
Deferred tax liabilities 5 159 2 007
Other long-term liabilities 532 2 232
49 597 18 252
Current liabilities
Borrowings 3 000 5 032
Trade payables 6 965 2 627
Other liabilities 38 138 12 580
Current income tax liabilities 1 407 1 158
49 510 21 397
Total liabilities 99 107 39 649
Total shareholders' equity and 162 070 78 741
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 2007 2006
Cash flows from operating activities
Result for the period 6 981 2 633
Adjustments to profit for the period 7 842 2 442
14 823 5 076
Change in working capital
Decrease (+) / increase (-) in trade and -15 826 -1 814
other receivables
Decrease (+) / increase (-) in inventories 303 30
Decrease (-) / increase (+) in trade and 14 211 475
other payables
Change in working capital -1 312 -1 309
Interest and other finance cost paid -1 689 -429
Interest and dividend received 364 289
Income taxes paid -1 751 -1 024
Net cash generated by operating activities 10 434 2 604
Cash flows from investing activities
Acquisition of subsidiaries, net of cash -26 967 -13 262
acquired
Purchases of tangible and intangible assets -1 410 -1 118
Proceeds from sale of tangible assets 35 41
Sale of business/subsidiaries 44 45
Proceeds from sale of financial assets 0 39
Increase of other non-current 0 30
receivables/liabilities
Net cash used in investing activities -28 299 -14 225
Cash flow from financing activities
Issue of share capital -777 2
Increase of interest-bearing liabilities 48 400 12 447
Repayments of interest-bearing liabilities -20 531 -5 938
Purchase of treasury shares 0 -509
Dividends paid to company's shareholders -1 698 -1 540
Net cash generated in financing activities 25 394 4 462
(Decrease)/increase in cash and cash 7 530 -7 159
equivalents
Cash and cash equivalents at the beginning 5 485 12 639
of the period
Translation adjustment -42 -1
Change in fair value of financial assets 0 6
Cash and cash equivalents at the end of the 12 974 5 485
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 1 960 11 -106 6 717 0 39 092
equity 1
January 2007
Translation -736 -736
differences
Share options 88 88
Available-for- 9 9
sale financial
assets
Result for the 6 981 6 981
period
Dividends -1 698 -1 698
Share issue 19 228 19 228
Shareholders' 5 105 25 404 21 188 108 -106 11 264 0 62 964
equity 31
December 2007
(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' 4 619 22 856 0 55 0 6 023 20 33 573
equity 1
January 2006
Translation 5 5
differences
Share options -48 55 7
Available-for- 4 4
sale financial
assets
Result for the 2 633 2 633
period
Dividends -1 540 -1 540
Purchase of -509 -509
treasury shares
Sell of 476 403 -403 476
treasure shares
Share issues 486 2 548 1 485 4 519
Put/Call -56 -56
treatment
Acquisition of -20 -20
minority
Shareholders' 5 105 25 404 1 960 11 -106 6 717 0 39 092
equity 31
December 2006
2. Notes
2.1. Basis of preparation
This financial statements bulletin has been prepared in accordance with the
IFRS recognition and measurement principles and applying the same accounting
policies as in the 2006 annual consolidated financial statements. This interim
report does not comply with all of the requirements of IAS 34 Interim
Financial Reporting.
The group has adopted the following standards and interpretations from the
beginning of 2007: IFRS 7 Financial instruments - Disclosures, and Amendment
to IAS 1 - Capital disclosures. The adoption of IFRS 7 and the amendment to
IAS 1 will expand disclosures presented in the annual financial statements.
2.2. Segment information
Primary reporting format - geographical segments based on location of assets
Segment result:
(1 000 EUR) 10-12/07 10-12/06 1-12/07 1-12/06
Total sales
Finland 11 612 11 073 41 707 36 267
Baltic countries 7 486 4 628 22 918 13 083
Sweden 6 906 881 17 654 881
Norway & Denmark 11 904 0 15 195 0
Eliminations 0 -16 0 -36
Group total 37 907 16 566 97 474 50 194
Segment result (operating
result)
Finland 1 325 1 612 4 406 4 641
Baltic countries 1 520 673 5 390 497
Sweden 334 -22 1 468 -22
Norway & Denmark 1 004 0 1 199 0
Group management -553 -527 -1 705 -1 474
Group total 3 630 1 736 10 758 3 642
Secondary reporting format - business segments
Segment revenue:
(1 000 EUR) 10-12/07 10-12/06 1-12/07 1-12/06
Total sales
BI 21 715 4 737 48 093 11 863
Operational Solutions 13 869 9 362 39 900 28 715
Cartographic Solutions 2 324 2 483 9 481 9 652
Other (incl. 0 -16 0 -36
eliminations)
Group total 37 907 16 566 97 474 50 194
2.3. Contingencies and commitments
The group has a contingent asset of 87 thousand Latvian lats (EUR 123
thousand) relating to a court case in Latvia. Riga Regional Court published a
judgement, according to which adverse party was sentenced to pay 87 thousand
Latvian lats to a group company of Affecto (Mebius IT). The adverse party has
appealed to the Supreme court of the Republic of Latvia and demanded to change
the decision.
In respect of the acquisitions of Intellibis AB, additional consideration of
up to 4.0 MEUR is payable in 2008. At the end of the reporting period an
additional consideration has been estimated to amount to 4.0 MEUR, which has
been recorded as non-interest-bearing liability.
The future aggregate minimum lease payments under non-cancelable operating
leases as of 31 December 2007:
1 000 EUR 31.12.2007 31.12.2006
Not later than one (1) year 3 013 2 346
Later than one (1) year, but not later than 5 197 3 792
five (5) years
Later than five (5) years 0 0
8 210 6 138
Guarantees:
1 000 EUR 31.12.2007 31.12.2006
Debt secured by a mortgage
Financial loans 47 000 19 031
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:
Pledges 855 696
Pledges given on own behalf consist of restricted cash of 0.3 MEUR (0.4 MEUR),
time deposits of 0.3 MEUR (0.0 MEUR) and short term receivables at an amount
of 0.3 MEUR (0.3 MEUR).
Derivative contracts
1 000 EUR 31.12.2007 31.12.2006
Interest rate swaps:
Nominal value 23 500 5 000
Fair value 35 24
3. Key figures
10-12/07 10-12/06 2007 2006
Net sales, 1 000 eur 37 907 16 566 97 474 50 194
EBITDA, 1 000 eur 5 274 2 251 14 525 5 014
Operating result before IFRS3 4 918 1 911 13 294 4 051
depreciation, 1 000 eur
Operating result, 1 000 eur 3 630 1 736 10 758 3 642
Result before taxes, 1 000 eur 3 141 1 710 9 458 3 458
Net income for equity holders 2 248 1 403 6 981 2 633
of the parent company, 1 000
eur
EBITDA, % 13.9 % 13.6 % 14.9 % 10.0 %
Operating profit before IFRS3 13.0 % 11.5 % 13.6 % 8.1 %
depreciation, %
Operating result, % 9.6 % 10.5 % 11.0 % 7.3 %
Result before taxes, % 8.3 % 10.3 % 9.7 % 6.9 %
Net income for equity holders 5.9 % 8.5 % 7.2 % 5.2 %
of the parent company, %
Equity ratio, % 41.9 % 52.0 % 41.9 % 52.0 %
Net gearing, % 53.9 % 35.2 % 53.9 % 35.2 %
Interest-bearing net debt, 33 933 13 743 33 933 13 743
1 000 eur
Gross investment in non-current 465 322 1 410 1 118
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 1.2 % 1.9 % 1.4 % 2.2 %
Research and development costs, 460 123 910 476
1 000 eur
R&D -costs, % of sales 1.2 % 0.7 % 0.9 % 0.9 %
Order backlog, 1 000 eur 41 560 24 167 41 560 24 167
Average number of employees 1 119 688 897 605
Earnings per share, eur 0.10 0.09 0.38 0.16
Earnings per share (diluted), 0.10 0.09 0.38 0.16
eur
Equity per share, eur 2.93 2.30 2.93 2.30
Average number of shares, 1 000 21 480 16 430 18 533 16 058
shares
Number of shares at the end of 21 480 16 980 21 480 16 980
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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