AFFECTO PLC STOCK EXCHANGE RELEASE 3 NOVEMBER 2008 at 09.30
AFFECTO PLC'S INTERIM REPORT 1-9/2008
GROUP KEY FIGURES
MEUR 7-9/08 7-9/07 1-9/08 1-9/07 2007
Net sales 29.3 21.8 99.1 59.6 97.5
Operating result before 3.0 2.8 11.9 8.4 13.3
IFRS3 amortization
% of net sales 10.4 13.0 12.0 14.1 13.6
Operating result 2.4 2.2 9.8 7.1 10.8
% of net sales 8.1 10.1 9.9 12.0 11.0
Result before taxes 1.6 1.6 8.2 6.3 9.5
Result for the period 1.8 1.3 6.7 4.7 7.0
Equity ratio, % 45.1 42.5 45.1 42.5 41.9
Net gearing, % 40.3 64.2 40.3 64.2 53.9
Earnings per share, eur 0.08 0.07 0.31 0.27 0.38
Earnings per share 0.08 0.07 0.31 0.27
(diluted), eur 0.38
Equity per share, eur 2.94 2.92 2.94 2.92 2.93
CEO Pekka Eloholma comments the third quarter 2008:
"The third quarter operating result 2.4 MEUR grew by 8% compared to last year
and was 8% of net sales. Profitability was good especially in Finland and
Norway & Denmark."
"Due to last year's Component Software acquisition, the total growth in net
sales was 35%, as net sales reached 29.3 MEUR. Organic growth in third quarter
was approx. 6%."
"At end of third quarter we focused our business by divesting the non-core
subsidiary Contempus. The divestment decreased our net debt by approx. 8 MEUR
and also lowered the amount of goodwill in our balance sheet. The sale did not
impact in significant capital gain or loss."
"The order backlog was approx. 41 MEUR at the end the quarter. The order
backlog decreased compared to previous quarter (49 MEUR), but is clearly
higher than year ago (25 MEUR). Divestment of Contempus contributed to the
decrease in the order backlog."
"The weakened economic climate is expected to impact investment decisions by
customers, which makes reliable forecasting more difficult. Due to the
Contempus divestment and the weakened general economy, the net sales in fourth
quarter are expected to remain below the level in Q4/2007 (38 MEUR). The
profitability (EBIT margin) of the whole year 2008 is expected to be close but
below the profitability in 2007."
Additional information:
CEO Pekka Eloholma, +358 205 777 737
CFO Satu Kankare, +358 205 777 202
SVP, M&A, Hannu Nyman, +358 205 777 761
This report is unaudited. The amounts in this report have been rounded from
exact numbers.
INTERIM REPORT 1-9/2008
Affecto builds versatile IT solutions for companies and organisations to
improve their efficiency in business and to support the related decision-
making. With Affecto's Business Intelligence solutions organisations are able
to integrate strategic targets with their business management. Business
Intelligence solutions enable the further processing and utilisation of
information generated by ERP and other IT systems. The company also develops
operational solutions, such as Geographic Information Systems (GIS),
Enterprise Content Management (ECM) and versatile customer specific software
services. These solutions assist organisations in collecting, organising and
analysing available digital information in support of their business
processes. Affecto offers Business Intelligence solutions in its operating
areas in the Nordic and Baltic countries. In operational solutions, the
company has a presence in Finland and in the Baltic region.
Affecto is headquartered in Helsinki, Finland. The company has subsidiaries in
Finland, Sweden, Norway, Denmark, Estonia, Lithuania, Latvia and Poland.
NET SALES
Affecto's net sales in 1-9/2008 was 99.1 MEUR (1-9/2007: 59.6 MEUR). Net sales
in Finland was 33.3 MEUR (30.1 MEUR), in Baltic area 17.8 MEUR (15.4 MEUR),
16.9 MEUR in Sweden (10.7 MEUR) and 31.0 MEUR (3.3 MEUR) in Norway & Denmark.
Net sales grew by 66%. The organic sales growth was approx. 12%.
The summer vacations are mainly held in third quarter, which lowered the
number of available workdays in quarter and thus the net sales generated from
consultant work.
Sales by geographical segments based on location of assets
Net sales, MEUR 7-9/08 7-9/07 1-9/08 1-9/07 2007
Finland 9.9 9.0 33.3 30.1 41.7
Baltic 6.0 5.3 17.8 15.4 22.9
Sweden 4.6 4.2 16.9 10.7 17.7
Norway & Denmark 8.8 3.3 31.0 3.3 15.2
Eliminations - - - - -
Group total 29.3 21.8 99.1 59.6 97.5
The sales growth was based on good demand for services in all our business
areas. Net sales of BI segment in 1-9/2008 was 55.8 MEUR (26.4 MEUR),
Operational Solutions 34.6 MEUR (26.0 MEUR) and Geographic Information
Services 8.7 MEUR (7.2 MEUR). The acquisition done in 2007 has had impact
mostly on the BI segment and to some extent also to Operational solutions.
During 2008 the BI segment has experienced organic growth in all markets
except Sweden, mostly due to local capacity restraints.
PROFIT
Affecto's EBIT in 1-9/2008 was 9.8 MEUR (7.1 MEUR). EBIT in Finland was 4.6
MEUR (3.1 MEUR), Baltic EBIT was 3.3 MEUR (3.9 MEUR), EBIT in Sweden was 1.3
MEUR (1.1 MEUR) and EBIT in Norway & Denmark was 2.4 MEUR (0.2 MEUR).
Operating result by geographical segments based on location of assets
Operating result, MEUR 7-9/08 7-9/07 1-9/08 1-9/07 2007
Finland 1.3 0.6 4.6 3.1 4.4
Baltic 0.5 1.4 3.3 3.9 5.4
Sweden 0.1 0.4 1.3 1.1 1.5
Norway & Denmark 0.9 0.2 2.4 0.2 1.2
Group management -0.5 -0.4 -1.8 -1.2 -1.7
Group total 2.4 2.2 9.8 7.1 10.8
According to IFRS3 requirements, 1-9/2008 EBIT includes 2.1 MEUR (1.2 MEUR) of
amortization of intangible assets related to acquisitions. A significant part
of the amortization is related to Sweden and Norway & Denmark segments. The
divestment of Contempus lowered the amount of immaterial assets in balance
sheet, which has decreased the estimated amortization by 0.4 MEUR per year in
forthcoming years. In year 2008 the IFRS3 amortization is estimated to total
2.7 MEUR and in 2009 approx. 2.3 MEUR.
The profitability in Finland and in Norway & Denmark remained at a good level.
The profitability in Baltic and Sweden weakened in third quarter. Affecto sold
its office in Vilnius, Lithuania at end of April for approx. 1.3 MEUR
resulting in a capital gain of approx. 0.6 MEUR in Baltic segment in Q2.
R&D costs totaled 1.4 MEUR (0.4 MEUR), i.e. 1.4% of net sales (0.8%). The
expenditure has been recognized in income statement, except in Contempus
business, where 0.3 MEUR has been capitalized in balance sheet and
approximately similar amount of earlier capitalizations has been amortized. As
Contempus was sold on 29 September 2008, the group balance sheet does not
contain capitalized R&D items at the end of the reporting period.
The financial costs have grown compared with 1-9/2007, as the interest bearing
net debt has grown due to the Component Software acquisition. Approx. half of
the bank loan has been converted to a fixed-rate loan through an interest
swap. The fluctuation in financial costs between quarters is explained to a
large extent by changes in the fair value of the interest swap taken, which
changes have no effect on actual cash flow. As the interest rates decreased in
Q1, rose in Q2 and decreased in Q3, the change had a 0.2 MEUR cost impact in
Q1, 0.6 MEUR profit in Q2 and 0.3 MEUR loss in Q3, i.e. net impact on profit
was 0.0 MEUR in period 1-9/2008.
Taxes for the period have been booked as taxes. In addition, related to the
divestment of Contempus a 0.6 MEUR positive tax item has been booked related
to deferred taxes on purchase price allocations. The item has no impact on
cash flow. Net profit for the period was 6.7 MEUR, while it was 4.7 MEUR last
year.
Order backlog totaled 40.9 MEUR at the end of period (25.0 MEUR). The order
backlog decreased compared to previous quarter (49 MEUR), but is clearly
higher than year ago (25 MEUR). Divestment of Contempus also affected the
order backlog. Compared to net sales, Baltic has longer order backlog than the
other segments. Affecto has a well diversified customer base. The ten largest
customers generated approx. 20% of group revenue in 2007.
FINANCE AND INVESTMENTS
At the end of the reporting period, Affecto's balance sheet totaled 147.3 MEUR
(Q3/2007: 152.4 MEUR). Equity ratio was 45.1 (42.5%) and net gearing was 40.3%
(64.2%).
The additional consideration for Intellibis AB, acquired in 2006, was
determined to be 3.92 MEUR and it was paid during first quarter.
Affecto has sold its office in Vilnius, Lithuania at end of April for approx.
1.3 MEUR. The company has booked a capital gain of approx. 0.6 MEUR in second
quarter results in Baltic segment. Since 31 December 2007, the property had
been booked in the balance sheet under "Non-current assets held for sale".
After the sale Affecto does not own real estate property.
Affecto sold Contempus AS to Basware on 29 September 2008. Contempus was part
of Affecto's operations in Norway and provided software solutions for
Enterprise Purchase to Payment and Enterprise Content Management solution
areas. Contempus had developed its own Contempus software product range and in
addition to the software sales it also implemented solutions based on that
software. The product business of Contempus was not core business for Affecto.
In Affecto's reporting, Contempus has been reported in the Operational
Solutions and Norway&Denmark segments. The consideration, paid in cash, was
approx. 10.0 MEUR. The divestment created a capital gain of 0.0 MEUR.
The financial loans were 45.4 MEUR as at 30 September 2008. The company's cash
and liquid assets were 20.0 MEUR (8.1 MEUR). The interest-bearing net debt was
25.4 MEUR.
Cash flow from operating activities for the reported period was 7.9 MEUR (2.3
MEUR) and cash flow from investments was +4.4 MEUR (-27.2 MEUR). Investments
in non-current assets excluding acquisitions were 1.6 MEUR (0.9 MEUR) during
the period.
Affecto has distributed dividends of 3.4 MEUR (previous year 1.7 MEUR) from
the profit of the year 2007. Dividend was paid on 10 April 2008.
EMPLOYEES
The number of employees was 1124 persons at the end of the reporting period
(1101). Approx. 380 employees were based in Finland, 120 in Sweden, 160 in
Norway & Denmark, and 460 in Baltic countries. The average number of employees
during the period was 1155 (835). The divestment of Contempus decreased the
personnel by approx. 55 employees in Norway and Sweden.
BUSINESS REVIEW
During year 2008 Affecto has continued to implement its growth strategy by
increasing the number of employees. Affecto focused its operations in
September by divesting Contempus, a non-core business. The business has grown
rather steadily, although the general economic outlook has weakened during the
autumn. The customers seem to make investment decisions slower than earlier,
which has impacted in lower order backlog.
The group's business is managed through four country units. Finland, Baltic,
Sweden and Norway & Denmark are also the primary IFRS segments.
Finland
In 7-9/2008 net sales in Finland was 9.9 MEUR (9.0 MEUR). EBIT was 1.3 MEUR
(0.6 MEUR). The business developed steadily during the period. The demand for
various services was reasonably good. Demand for BI services continued
versatile. The customers' interest for ECM solutions, part of Operational
solutions, seems have grown during the year especially in the public sector.
The profitability of the Geographic Information Services was better than last
year.
The growth of IT services market in Finland is rather moderate, but the growth
of our specialty segments like BI is expected to exceed the average market
growth rate. The customers' activity has so far continued to be relatively
good despite the forecasts of slower economic growth. New orders were received
from, among others, Nokia, City of Turku, Stora Enso and Ramirent.
Baltic (Lithuania, Latvia, Estonia, Poland)
The Baltic business mostly consists of projects related to large customer-
specific systems. Projects are typically larger and tender processes longer
than in Finland or in Nordic. The business is mostly classified as Operational
solutions, but also includes BI solutions. Public sector entities in Baltic
countries and insurance companies also outside Baltic area are significant
customer segments.
In 7-9/2008 the Baltic net sales was 6.0 MEUR (5.3 MEUR). Baltic EBIT was 0.5
MEUR (1.4 MEUR). The subsidiary in Poland, being in build-up phase, made minor
loss and the profitability in Latvia was weaker than other countries.
The business has developed favorably, and the resource utilization rate was
good in all countries. The public sector entities in Baltic have continued to
invest in IT systems. General wage inflation in the Baltic countries is
estimated to be up to 15%, which has also contributed to cost pressure. The
economic outlook in the Baltic countries has clearly weakened compared with
last years' overheated situation.
The order backlog offers mainly stable resource utilization for the next few
months, but the weakening of the bank and insurance sector may decrease their
IT investments, which may have negative impact on new project sales.
Sweden
In addition to Affecto's previous Swedish operations, the segment includes the
Swedish BI operations of Component Software since September 2007.
In 7-9/2008 the net sales in Sweden was 4.6 MEUR (4.2 MEUR) and EBIT 0.1 MEUR
(0.4 MEUR). The reported EBIT includes approx. 0.3 MEUR of IFRS3 amortization.
The Affecto name has been adopted in early 2008.
The business in Sweden has developed moderately good in 2008. The customers'
activity has remained moderately good with the exception of increased weakness
in the finance sector. Demand for experienced workforce has been tight, but
may ease when the economy weakens. During the period new orders were received
from e.g. Apoteket and Svenska Spel.
Demand for experienced BI resources is high, which has increased personnel
turnover. Number of employees decreased in third quarter, and in addition the
divestment of Contempus decreased headcount by 15.
Norway & Denmark
The net sales was 8.8 MEUR in 7-9/2008 and EBIT was 0.9 MEUR. The reported
EBIT was negatively affected by an IFRS3 amortization of 0.3 MEUR. Affecto had
operations in Norway and Denmark only since beginning of September 2007.
Business Intelligence business developed positively and especially the growth
of consulting services was good. The efforts to widen the service offering
scope have continued, especially regarding Microsoft and SAP technologies. A
new office will be opened in Bergen in Norway during the autumn. The number of
employees in BI business has grown modestly. The Affecto name has been adopted
both in Denmark and Norway in early 2008. During the period, new orders were
received from e.g. Telenor and Norwegian Directorate for Immigration.
The Contempus business, reported as part of Operational Solutions, also
developed steadily and grew compared to previous year. The sales efforts were
increasingly aimed outside Nordic countries and a sales office has been
established in UK. Contempus was sold to Basware in September.
Business review by secondary segments 7-9/2008
Business intelligence (BI) net sales grew by 49% to 15.8 MEUR (10.6 MEUR). The
growth is explained to large extent by the acquisition of Component Software
in late 2007, but also the organic growth has been good. The efforts to widen
the service offering scope have continued, especially regarding Microsoft and
SAP technologies in Norway.
Customers see BI solutions as tools for improving their own efficiency and
controllability, which may maintain the interest to invest in BI solution also
during periods of weaker economic growth. The estimates for global market
growth by market research companies do not feel quite realistic in the light
of the developments in general economy, as the weakness in general economy may
also slow growth in BI investments.
Net sales of Operational Solutions grew by 25% and was 11.0 MEUR (8.8 MEUR).
There was growth especially Baltic, where large projects continued. The
insurance solution projects in South Africa, Denmark and Poland continued. In
Finland, especially the demand for ECM solutions was good and the utilization
rate of project resources was good. The Norwegian Contempus subsidiary was
divested at end of September.
Net sales of the Geographic Information Services business was 2.5 MEUR (2.4
MEUR). The sale of digital geographic content and related services grew. Co-
operation negotiations with employees (applying to max. 20 employees) were
initiated in September for improving the efficiency of the unit.
CHANGES IN GROUP STRUCTURE
Affecto sold Contempus AS with its subsidiaries on 29 September 2008 to
Basware.
The group companies in Sweden were merged in September, and group companies in
Norway were merged in October. Currently Affecto has only one company in both
countries.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on March 31, 2008,
adopted the financial statements for 1.1.-31.12.2007 and discharged the
members of the Board of Directors and the CEO from liability. Approximately 31
percent of Affecto's shares and votes were represented in the Meeting. The
Annual General Meeting decided that a dividend of EUR 0.16 per share be
distributed for the year 2007.
Aaro Cantell, Pyry Lautsuo, Heikki Lehmusto, Esko Rytkönen and Haakon Skaarer
were re-elected as members of the Board of Directors. Immediately after the
Annual General Meeting the organization meeting of the Board of Directors was
held and Aaro Cantell was re-elected Chairman of the Board. The APA firm
PricewaterhouseCoopers Oy was re-elected auditor of the company with Merja
Lindh, APA, as auditor in charge.
The Annual General Meeting accepted the Board's proposals for issuing stock
options (Stock options 2008) and for changing the terms of the Stock options
2006. The Annual General Meeting accepted the Board's proposals for the
authorisations given to the Board of Directors.
According to the Articles of Association, the General Meeting of Shareholders
annually elects the Board of Directors by a majority decision. The term of
office of the board members expires at the end of the next Annual General
Meeting of Shareholders following their election. The Board appoints the CEO.
The Articles of Association do not contain any special rules for changing the
Articles of Association or for issuing new shares.
Mr. Darius Lazauskas has been appointed as a member of the group management
team as of 1 February 2008.
THE AUTHORIZATIONS GIVEN TO THE BOARD OF DIRECTORS
The Board did not use the authorizations given by the previous Annual General
Meeting. Those authorizations ended on 31 March 2008.
The complete contents of the new authorizations given by the Annual General
Meeting held on 31 March 2008 have been published in the stock exchange
release regarding the Meetings' decisions.
The Annual General Meeting decided to authorize the Board of Directors to
decide to issue new shares and to convey the company's own shares held by the
company in one or more tranches. The share issue may be carried out as a share
issue against payment or without consideration on terms to be determined by
the Board of Directors and in relation to a share issue against payment at a
price to be determined by the Board of Directors. A maximum of 4 200 000 new
shares may be issued. A maximum of 2 100 000 own shares held by the company
may be conveyed. In addition, the authorization includes the right to decide
on a share issue without consideration to the company itself so that the
amount of own shares held by the company after the share issue is a maximum of
one-tenth (1/10) of all shares in the company. The authorization shall be in
force until the next Annual General Meeting.
The Annual General Meeting decided to authorize the Board of Directors to
decide to acquire the company's own shares with distributable funds. A maximum
of 2 100 000 shares may be acquired. The authorization shall be in force until
the next Annual General Meeting.
The board has not used the authorizations by 30 September 2008.
SHARES AND TRADING
The company has only one share series, and all shares have similar rights. As
at 30 September 2008, Affecto Plc's share capital consisted of 21 516 468
shares. The company owns 36 738 treasury shares, which corresponds to 0.2% of
all shares.
In 1-9/2008, the highest share price was 4.33 euro, lowest price 2.94 euro,
average price 3.65 euro and closing price 3.20 euro. Trading volume was 5.8
million shares, corresponding to 35% (annualized) of the number of shares at
the end of period. The market value of shares was 68.7 MEUR at the end of the
period.
SHAREHOLDERS
Arendals Fossekompani ASA flagged on 24 June 2008 that its direct holdings
will increase to approximately 5.53% due to subsidiary mergers. The total
ownership of Arendals Fossekompani group (5.53%) has not changed since the
flagging notice of 27 August 2007.
Case Asset Management AB flagged on 11 September 2008 that the holdings of
funds managed by it, had exceeded 5%.
The company had a total of 1281 owners on 30 September 2008 and the foreign
ownership was 35%. 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).
ASSESSMENT OF RISKS AND UNCERTAINTIES
Affecto operates in markets that are directly affected by changes in the
general economic conditions and the operating environments of its customers.
The competition in the market tightens continuously. Inflation has picked up
in all Affecto's countries, which increases the challenge of maintaining good
profitability. This could have a negative effect on the business, operating
results and financial condition of Affecto.
A general economic downturn may lead to a decrease in overall customer demand
for services, lengthen offer processes at customers. Also the competitors'
eagerness to complain about public procurement decisions may increase, which
may cause delays in project starts or interrupt the project delivery work.
Affecto's order backlog has traditionally been only for a few months, which
decreases the reliability of longer-term forecasts. Slower investment decision
making, postponing or cancellation of customers' IT investments may have
negative impact on Affecto's profitability.
Approx a half of Affecto's business is in Sweden, Norway and Denmark, thus the
development of the currencies of these countries (SEK, NOK and DKK) may have
impact on Affecto's profitability.
Affecto's continued success is very much dependent on its management team and
personnel. The loss of the services of any member of its senior management or
other key employee could have a negative impact on Affecto's business and the
ability of the company to implement its strategy. In addition, Affecto's
success depends on its ability to hire, develop, train, motivate and retain
skilled professionals on its staff.
Affecto's success depends also on good customer relationship. Affecto has a
well diversified customer base. The ten largest customers generated approx.
20% of group revenue in 2007.
Acquisition of Component Software in 2007 has increased the amount of (third
party) licenses sold and their relative share of Affecto's net sales. This
will increase the fluctuation in sales between quarters and will increase the
difficulty of accurately forecasting the quarters. In 2007 Component
Software's license sales totaled approx. 7 MEUR. Other parts of Affecto had
license sales of approx. 6 MEUR in 2007. The license sales have most impact on
the last month of each quarter and especially in the fourth quarter.
The damage risks of Affecto are normally related to personnel, property,
processes and data processing. The realization of these risks might lead to
injuries of personnel, property damages or interruption of business. In the
operations the target of Affecto is to prevent these risks to realize by
quality operations and anticipatory risk management actions. The realization
of such risks is mainly prevented by guidelines for occupational health, work
safety and information security as well as emergency plan. The damage risks,
which can not be prevented by own actions, are covered with adequate
insurances.
Currently, corporate tax rates in Latvia and Lithuania are below those of
several other member states of the European Union, and therefore Latvia and
Lithuania provide a favorable environment for commercial enterprises.
Furthermore, the income tax regulation of Latvia and Lithuania allow for local
businesses to structure their operations in a cost-efficient way. For example,
certain software development activities are treated as so-called creative
activities, which is cost beneficial for the enterprises. When joining the
European Union on 1 May 2004, Latvia and Lithuania committed to the ongoing
harmonization of the laws and regulations of the member states. At present,
the European Union leaves regulation relating to taxation to the discretion of
its member states. However, there can be no assurances that the European Union
will not impose requirements on its member states to harmonize their taxation
system which, in the case of Latvia and Lithuania, could result in an increase
in corporate tax rates and restrictions on the opportunities of local business
to structure their operations to the extent currently possible. Furthermore,
there can be no assurances that Latvia and Lithuania will not independently
decide to implement tax reforms or that the interpretation of current tax laws
by courts or fiscal authorities will not be changed retroactively with similar
effects. Harmonization imposed by the European Union or domestic tax reforms
or changes in the interpretation of current tax laws by courts or fiscal
authorities in Latvia and Lithuania could have a material adverse effect on
the business, operating results and financial condition of Affecto.
In seeking future growth, the strategy of Affecto is partially based on
expansion through acquisitions of other operators in the IT services market.
The inability to find new target companies or the lower than expected
profitability of acquisitions made, could have a material adverse effect on
the business, operating results and financial condition of Affecto.
The board of directors and the audit committee is responsible for Affecto's
internal control and risk management. Company's management is responsible for
and performs practically the internal control and risk management.
EVENTS AFTER THE REVIEW PERIOD
Arendals Fossekompani ASA flagged on 23 October 2008 that it had completed the
subsidiary mergers announced in June, and that its direct ownership in Affecto
had risen to 5.53%.
Stig-Göran Sandberg was appointed as the manager responsible for Baltic
business in October. Kestutis Uzpalis and Darius Lazauskas will retire from
Affecto.
Affecto's executive management team was announced to comprise Pekka Eloholma,
Satu Kankare, Åge Lönning and Hannu Nyman.
FUTURE OUTLOOK
The weakened economic climate is expected to impact investment decisions by
customers, which makes reliable forecasting more difficult. Due to the
Contempus divestment and the weakened general economy, the net sales in fourth
quarter are expected to remain below the level in Q4/2007 (38 MEUR). The
profitability (EBIT margin) of the whole year 2008 is expected to be close but
below the profitability in 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 11:00 at Restaurant
Savoy, Eteläesplanadi 14, Helsinki.
www.affecto.com
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Financial information:
1. Income statement, balance sheet, cash flow statement and statement of
changes in shareholders' equity
2. Notes
3. Key figures
1. Income statement, balance sheet, cash flow statement and statement of
changes in shareholders' equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 7-9/08 7-9/07 1-9/08 1-9/07 2007
Net sales 29 288 21 763 99 073 59 567 97 474
Other operating income 1 7 844 68 80
Changes in inventories of -127 15 -59 161 109
finished goods and work in
progress
Materials and services -5 655 -4 569 -18 248 -11 281 -19 851
Personnel expenses -15 490 -11 069 -52 904 -30 202 -48 635
Other operating expenses -4 559 -3 039 -15 516 -9 062 -14 651
Other depreciation, amortization -417 -275 -1 271 -875 -1 231
and impairment charges
IFRS3 amortization -676 -638 -2 116 -1 248 -2 536
Operating result 2 363 2 195 9 803 7 127 10 758
Finance costs (net) -776 -594 -1 602 -811 -1 300
Result before income tax 1 587 1 601 8 201 6 316 9 458
Income tax 229 -318 -1 491 -1 583 -2 477
Result for the period 1 816 1 283 6 710 4 733 6 981
Attributable to:
Equity holders of the Company 1 816 1 283 6 710 4 733 6 981
Minority interest 0 0 0 0 0
Earnings per share for result
attributable to the equity
holders of the Company
(EUR per share)
Basic 0.08 0.07 0.31 0.27 0.38
Diluted 0.08 0.07 0.31 0.27 0.38
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 9/2008 9/2007 12/2007
Non-current assets
Tangible assets 2 059 2 584 1 939
Goodwill 75 978 84 594 84 196
Other intangible assets 12 802 19 336 18 249
Deferred tax assets 2 377 2 748 2 297
Available-for-sale financial assets 54 54 64
Other non-current receivables 150 137 190
93 419 110 453 106 936
Current assets
Inventories 1 672 2 004 1 792
Trade receivables 19 649 20 650 28 848
Other receivables 10 582 8 964 9 876
Current income tax receivables 1 360 1 392 166
Available-for-sale financial assets 102 108 106
Financial assets at fair value through 76 10 35
profit or loss
Restricted cash 419 649 659
Cash and cash equivalents 19 985 8 127 12 974
53 844 41 904 54 455
Non-current assets held for sale 0 0 679
Total assets 147 263 152 356 162 070
Equity attributable to equity holders
of the Company
Share capital 5 105 5 105 5 105
Share premium 25 404 25 404 25 404
Reserve of invested non-restricted 21 188 21 188 21 188
equity
Other reserves 204 66 108
Treasury shares -106 -106 -106
Retained earnings 11 292 11 035 11 265
63 087 62 693 62 964
Minority interest 0 0 0
Total shareholders' equity 63 087 62 693 62 964
Non-current liabilities
Borrowings 42 420 45 401 43 906
Deferred tax liabilities 3 799 5 335 5 159
Other long-term liabilities 788 265 532
47 007 51 002 49 597
Current liabilities
Borrowings 3 000 3 000 3 000
Trade payables 4 288 5 683 6 965
Other liabilities 25 678 28 006 38 138
Current income tax liabilities 4 204 1 973 1 407
37 170 38 662 49 510
Total liabilities 84 177 89 664 99 107
Total shareholders' equity and 147 263 152 356 162 070
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 1-9/2008 1-9/2007 2007
Cash flows from operating activities
Result for the period 6 710 4 733 6 981
Adjustments to profit for the period 6 027 4 621 7 842
12 737 9 354 14 823
Change in working capital -2 010 -4 894 -1 312
Interest and other finance cost paid -2 087 -1 006 -1 689
Interest and dividend received 380 121 364
Income taxes paid -1 144 -1 323 -1 751
Net cash generated by operating activities 7 876 2 252 10 434
Cash flows from investing activities
Acquisition of subsidiaries, net of cash -3 925 -26 329 -26 967
Purchases of tangible and intangible assets -1 595 -945 -1 410
Proceeds from sale of tangible and 1 632 26 35
intangible assets
Sale of business/subsidiaries, net of cash 8 312 44 44
Net cash used in investing activities 4 425 -27 205 -28 299
Cash flow from financing activities
Issue of share capital 0 -155 -777
Increase of interest-bearing liabilities 0 48 400 48 400
Repayments of interest-bearing liabilities -1 500 -19 031 -20 531
Dividends paid to company's shareholders -3 437 -1 698 -1 698
Net cash generated in financing activities -4 937 -27 516 25 394
(Decrease)/increase in cash and cash 7 364 2 563 7 530
equivalents
Cash and cash equivalents at the beginning 12 974 5 485 5 485
of the period
Foreign exchange effect on cash -352 -188 -42
Cash and cash equivalents at the end of the 19 985 8 236 12 974
period
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(1 000 EUR) Share Share Reserve of Other Trea- Ret. Mino- Total
capital premium invested reserve sury earn- rity equity
non- s shares ings & inte-
restricted trans- rest
equity lat.
diff.
Shareholders' 5 105 25 404 21 188 108 -106 11 265 0 62 964
equity 1
January 2008
Translation -3 245 -3 245
differences
Share options 96 96
Result for the 6 710 6 710
period
Dividends -3 437 -3 437
Shareholders' 5 105 25 404 21 188 204 -106 11 292 0 63 087
equity 30
September 2008
(1 000 EUR) Share Share Reserve of Other Trea- Ret. Mino- Total
capital premium invested reserve sury earn- rity equity
non- s shares ings & inte-
restricted trans- rest
equity lat.
diff.
Shareholders' 5 105 25 404 1 960 11 -106 6 717 0 39 092
equity 1
January 2007
Translation 1 283 1 283
differences
Share options 58 58
Available-for- -3 -3
sale financial
assets
Result for the 4 733 4 733
period
Dividends -1 698 -1 698
Share issue 19 228 19 228
Shareholders' 5 105 25 404 21 188 66 -106 11 035 0 62 693
equity 30
September 2007
2. Notes
2.1. Basis of preparation
This interim report has been prepared in accordance with the IFRS recognition
and measurement principles and applying the same accounting policies as in the
2007 annual consolidated financial statements. Forthcoming standards and
interpretations are presented in the accounting policies in Annual Report 2007
This interim report does not comply with all of the requirements of IAS 34
Interim Financial Reporting. The condensed interim financial report should be
read in conjunction with the annual financial statements for the year 2007.
The initial accounting for Component Software Group ASA, acquired in August
2007, has been completed during the review period. Completion of the initial
accounting did not change the allocation of the cost of business combination
to the assets and liabilities acquired and there was no change in the total
amount of goodwill reported provisionally.
2.2. Segment information
Primary reporting format - geographical segments based on location of assets
Segment result:
(1 000 EUR) 7-9/08 7-9/07 1-9/08 1-9/07 1-12/07
Total sales
Finland 9 940 9 015 33 312 30 095 41 707
Baltic countries 5 971 5 255 17 839 15 432 22 918
Sweden 4 558 4 201 16 947 10 748 17 654
Norway & Denmark 8 818 3 291 30 974 3 291 15 195
Eliminations - - - - -
Group total 29 288 21 763 99 073 59 567 97 474
Segment result (operating
result)
Finland 1 343 589 4 605 3 081 4 406
Baltic countries 546 1 400 3 329 3 870 5 390
Sweden 94 431 1 284 1 134 1 468
Norway & Denmark 925 195 2 350 195 1 199
Group management -545 -419 -1 765 -1 152 -1 705
Group total 2 363 2 195 9 803 7 128 10 758
Secondary reporting format - business segments
Segment revenue:
(1 000 EUR) 7-9/08 7-9/07 1-9/08 1-9/07 1-12/07
Total sales
BI 15 755 10 557 55 801 26 378 48 093
Operational Solutions 11 048 8 833 34 610 26 031 39 900
Geographic Information 2 485 2 372 8 662 7 157 9 481
Services
Other (incl. - - - - -
eliminations)
Group total 29 288 21 763 99 073 59 567 97 474
2.3. Contingencies and commitments
The court case in Latvia, explained in financial statements 2007, has been
finalized and the contingent asset did not materialize. The matter did not
have a material impact on profit.
The future aggregate minimum lease payments under non-cancelable operating
leases:
1 000 EUR 30.9.2008 31.12.2007
Not later than one (1) year 3 013 3 013
Later than one (1) year, but not later than 4 251 5 197
five (5) years
Later than five (5) years - -
Total 7 265 8 210
Guarantees:
1 000 EUR 30.9.2008 31.12.2007
Debt secured by a mortgage
Financial loans 45 500 47 000
The above-mentioned debts are secured by bearer bonds with capital value of
52.5 million euro. The bonds are held by Nordea Pankki Suomi Oyj and secured
by a mortgage on company assets of the group companies. In addition, the
shares in Affecto Finland Oy and Affecto Norway AS have been pledged to secure
the financial loans above.
Other securities given on own behalf: 30.9.2008 31.12.2007
Pledges 286 855
Other guarantees 151 55
Pledges given on own behalf consist of restricted cash of 0.1 MEUR and bonds
0.2 MEUR.
Derivative contracts
1 000 EUR 30.9.2008 31.12.2007
Interest rate swaps:
Nominal value 22 000 23 500
Fair value 76 35
3. Key figures
7-9/08 7-9/07 1-9/08 1-9/07 2007
Net sales, 1 000 eur 29 288 21 763 99 073 59 567 97 474
EBITDA, 1 000 eur 3 457 3 109 13 189 9 251 14 525
Operating result before IFRS3 3 040 2 834 11 918 8 375 13 294
amortization, 1 000 eur
Operating result, 1 000 eur 2 363 2 195 9 803 7 127 10 758
Result before taxes, 1 000 eur 1 587 1 601 8 201 6 316 9 458
Net income for equity holders 1 816 1 282 6 710 4 733 6 981
of the parent company, 1 000
eur
EBITDA, % 11.8 % 14.3 % 13.3 % 15.5 % 14.9 %
Operating profit before IFRS3 10.4 % 13.0 % 12.0 % 14.1 % 13.6 %
amortization, %
Operating result, % 8.1 % 10.1 % 9.9 % 12.0 % 11.0 %
Result before taxes, % 5.4 % 7.4 % 8.3 % 10.6 % 9.7 %
Net income for equity holders 6.2 % 5.9 % 6.8 % 7.9 % 7.2 %
of the parent company, %
Equity ratio, % 45.1 % 42.5 % 45.1 % 42.5 % 41.9 %
Net gearing, % 40.3 % 64.2 % 40.3 % 64.2 % 53.9 %
Interest-bearing net debt, 25 435 40 275 25 435 40 275 33 933
1 000 eur
Gross investment in non-current 327 150 1 595 945 1 410
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 1.1% 0.7 % 1.6 % 1.6 % 1.4 %
Research and development costs, 384 176 1 366 450 910
1 000 eur
R&D -costs, % of sales 1.3% 0.8 % 1.4 % 0.8 % 0.9 %
Order backlog, 1 000 eur 40 919 25 004 40 919 25 004 41 560
Average number of employees 1 174 936 1 155 835 897
Earnings per share, eur 0.08 0.07 0.31 0.27 0.38
Earnings per share (diluted), 0.08 0.07 0.31 0.27 0.38
eur
Equity per share, eur 2.94 2.92 2.94 2.92 2.93
Average number of shares, 1 000 21 480 18 643 21 480 17 540 18 533
shares
Number of shares at the end of 21 480 21 480 21 480 21 480 21 480
period, 1 000 shares
Calculation of key figures
EBITDA = Earnings before interest, taxes,
depreciation and amortization
Equity ratio, % = Shareholders' equity + minority *100
interest
________________________________
Total assets - advances received
Gearing, % = Interest-bearing liabilities - *100
cash, bank receivables and
securities held as financial asset
__________________________________
Shareholders' equity + minority
interest
Interest-bearing net debt = Interest-bearing liabilities - cash
and bank receivables
Earnings per share (EPS) = Result for the period to equity holders
of the Company
______________________________________
Adjusted average number of shares
during the period
Equity per share = Shareholders' equity
______________________________________
Adjusted number of shares at the end of
the period
Market capitalization = Number of shares at the end of period
(excluding treasury shares) x share
price at closing date
-----
