AFFECTO PLC INTERIM REPORT 29 OCTOBER 2009 at 9.30
AFFECTO PLC'S INTERIM REPORT 1-9/2009
GROUP KEY FIGURES
MEUR 7-9/09 7-9/08 1-9/09 1-9/08 2008
Net sales 21.6 29.3 75.3 99.1 131.6
Operational segment 0.8 3.0 2.6 11.9 14.5
result
% of net sales 3.5 10.4 3.4 12.0 11.0
Operating profit 0.2 2.4 -5.2 9.8 11.8
% of net sales 1.0 8.1 -6.9 9.9 9.0
Result before taxes -0,2 1.6 -7.7 8.2 10.5
Result for the period -0,3 1.8 -7.4 6.7 8.5
Equity ratio, % 43.5 45.1 43.5 45.1 43.0
Net gearing, % 46.4 40.3 46.4 40.3 34.7
Earnings per share, eur -0.01 0.08 -0.35 0.31 0.40
Earnings per share -0.01 0.08 -0.35 0.31 0.40
(diluted), eur
Equity per share, eur 2.45 2.94 2.45 2.94 2.73
CEO Pekka Eloholma comments:
"Third quarter was characterized by the summer vacations, like every year.
After summer vacations, the business activity returned to the normal level
more slowly than usually. However, the customers' activity seems to have grown
during Q3, and this might be seen in the order backlog in the next few
months."
"Net sales decreased by 26% to 21.6 MEUR (29.3 MEUR). The main reasons, in
addition to the economic recession, were the Contempus divestment in 2008, the
weak development in Baltic, and the devaluation of the Norwegian and Swedish
currencies (NOK, SEK). Organic decrease in net sales was approx. -21% and
would have been -18% with fixed currency rates (NOK, SEK)."
"The third quarter operating profit was approx 0.2 MEUR i.e. 1% of net sales.
Profitability was weakened by the vacation season. Business in Baltic made
loss, but all other areas made profit."
"The order backlog was approx. 35 MEUR at the end of the period, compared to
38 MEUR at end of Q2."
"The weakened economic environment makes reliable forecasting more difficult.
The net sales in year 2009 will remain below the level in 2008. The
profitability (EBIT margin) of the whole year 2009 will be clearly below the
profitability in 2008."
Additional information:
CEO Pekka Eloholma, +358 205 777 737
CFO Satu Kankare, +358 205 777 202
SVP, M&A, IR, Hannu Nyman, +358 205 777 761
This report is unaudited. The amounts in this report have been rounded from
exact numbers.
INTERIM REPORT 1-9/2009
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 delivers
operational solutions, such as Enterprise Content Management (ECM), for
improving and simplifying processes at customer organisations. 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 1-9/2009 were 75.3 MEUR (1-9/2008: 99.1 MEUR). Net
sales in Finland were 32.6 MEUR (33.4 MEUR), in Norway 14.4 MEUR (23.5 MEUR),
in Sweden 11.7 MEUR (17.2 MEUR), in Denmark 8.8 MEUR (7.9 MEUR) and 9.0 MEUR
(18.4 MEUR) in Baltic. Net sales decreased by 24% especially due to weak
development in Baltic and Sweden, the currency rates and also the divestment
of Contempus. The organic change in sales was approx. -18%, and -14% when
assessed using fixed currency rates (NOK, SEK). The summer vacations have
decreased the net sales in the third quarter, as usual.
In the Nordic countries the Q3 was rather similar as Q1 and Q2. The customers
continue to have interest in Affecto's solutions, but decision making has
slowed down and price pressure has grown. After summer vacations, the business
activity returned to the normal level more slowly than usually.
The economic situation has weakened significantly in the Baltic countries,
which has negatively affected Affecto's business. The preliminary GDP
information and forecasts for the Baltic countries suggest 15-20% decrease in
GDP in 2009. The significant weakening of the Baltic economies combined with
public sector's sizeable cost saving programs has clearly decreased the demand
for IT services.
Net sales by reportable segments
Net sales, MEUR 7-9/09 7-9/08 1-9/09 1-9/08 2008
Finland 9.4 10.0 32.6 33.4 46.4
Norway 4.1 6.7 14.4 23.5 29.6
Sweden 3.4 4.6 11.7 17.2 22.6
Denmark 2.6 2.3 8.8 7.9 10.6
Baltic 2.1 6.1 9.0 18.4 24.3
Eliminations -0.1 -0.3 -1.2 -1.3 -1.9
Group total 21.6 29.3 75.3 99.1 131.6
Net sales of BI business in 1-9/2009 were 48.8 MEUR (57.2 MEUR), Operational
Solutions 20.4 MEUR (34.9 MEUR) and Geographic Information Services 7.5 MEUR
(8.8 MEUR). The BI business has experienced organic growth (measured in local
currency) in Denmark and to some extent also in Norway, contracted somewhat in
Finland, and contracted substantially in Sweden.
Operational solutions business continued to grow in Finland especially
regarding ECM solutions, but decreased significantly in Baltic. The Contempus
divestment in September 2008 has also contributed to decrease in net sales.
After the divestment Affecto has Operational solutions business only in
Finland and Baltic.
PROFIT
Affecto's EBIT in 1-9/2009 was -5.2 MEUR (9.8 MEUR). Operational segment
result was in Finland 3.6 MEUR (4.8 MEUR), in Norway 1.6 MEUR (2.6 MEUR), in
Sweden 0.8 MEUR (2.1 MEUR), in Denmark 0.5 MEUR (0.8 MEUR) and in Baltic -2.9
MEUR (3.4 MEUR). The result in Baltic includes 1.4 MEUR expenses related to
restructuring.
Operational segment result by reportable segments
Operational segment 7-9/09 7-9/08 1-9/09 1-9/08 2008
result, MEUR
Finland 0.6 1.4 3.6 4.8 6.9
Norway 0.5 1.1 1.6 2.6 2.9
Sweden 0.1 0.4 0.8 2.1 2.9
Denmark 0.0 0.2 0.5 0.8 1.2
Baltic -0.3 0.6 -2.9 3.4 3.2
Other -0.2 -0.5 -1.0 -1.8 -2.5
Operational segment result 0.8 3.0 2.6 11.9 14.5
IFRS3 Amortization -0.5 -0.7 -1.6 -2.1 -2.7
Impairment of Goodwill - - -6.2 - -
Operating profit 0.2 2.4 -5.2 9.8 11.8
The restructuring costs 1.4 MEUR in Baltic are included in the operational
segment result of the Baltic segment (-1.7 MEUR in Q1, +0.3 MEUR in Q2). The
goodwill impairment of 6.2 MEUR is reported separately.
According to IFRS3 requirements, 1-9/2009 EBIT includes 1.6 MEUR (2.1 MEUR) of
amortization of intangible assets related to acquisitions. A significant part
of the amortization is related to Sweden, Norway and Denmark segments. In year
2009 the IFRS3 amortization is estimated to total 2.1 MEUR and in 2010 approx.
1.9 MEUR based on currency exchange rates at the end of reporting period.
The summer vacation period weakened profitability in all areas. The Baltic
segment remained slightly loss-making.
R&D costs totaled 0.3 MEUR (1.4 MEUR), i.e. 0.3% of net sales (1.4%). The
costs have been recognized as an expense in income statement.
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. The interest rate changes have caused -0.3
MEUR cost impact in Q1, +0.2 MEUR profit in Q2 and +0.1 MEUR profit in Q3,
totaling net -0.0 MEUR in 1-9/2009. In addition, due to intra-group loans the
first quarter result includes a foreign exchange loss of 0.9 MEUR, as the
Norwegian krone (NOK) strengthened from the year-end's bottom level.
Taxes for the period have been booked as taxes. Net profit for the period was
-7.4 MEUR, while it was 6.7 MEUR last year.
Order backlog totaled 35.2 MEUR at the end of period. The order backlog
decreased compared both to the previous quarter (38.1 MEUR) and to the same
quarter in previous year (40.9 MEUR). Affecto has a well diversified customer
base. The ten largest customers generated approx. 20% of group revenue in 2008
and the largest customer corresponded to 4% of net sales.
FINANCE AND INVESTMENTS
At the end of the reporting period, Affecto's balance sheet totaled 129.1 MEUR
(12/2008: 146.6 MEUR). Equity ratio was 43.5% (12/2008: 43.0%) and net gearing
was 46.4% (12/2008: 34.7%). Translation differences have increased the
consolidated equity by 4.5 MEUR during 1-9/2009 mainly due to the
strengthening of the Norwegian krone (NOK).
The financial loans were 42.4 MEUR (12/2008: 43.9 MEUR) as at 30 September
2009. The company's cash and liquid assets were 18.0 MEUR (12/2008: 23.6
MEUR). The interest-bearing net debt was 24.4 MEUR (12/2008: 20.4 MEUR).
Cash flow from operating activities for the reported period was -1.0 MEUR (7.9
MEUR) and cash flow from investments was -0.7 MEUR (4.4 MEUR). Investments in
non-current assets excluding acquisitions were 0.8 MEUR (1.6 MEUR) during the
period.
Based on decision by the Annual General Meeting held on 3 April 2009, Affecto
has distributed dividends of 3.0 MEUR (previous year 3.4 MEUR) from the profit
of the year 2008. Dividend was paid on 21 April 2009.
EMPLOYEES
The number of employees was 928 persons at the end of the reporting period
(1124). Approx. 370 employees were based in Finland, 120 in Sweden, 110 in
Norway, 60 in Denmark, and 270 in the Baltic countries. The average number of
employees during the period was 993 (1 155).
Jukka Nortio was appointed in June as Affecto's Senior Vice President,
Marketing & Communications. Åge Lönning, COO for Business Intelligence
business, was appointed in September as the acting managing director of
Affecto's Swedish subsidiary.
BUSINESS REVIEW BY AREAS
The business in Nordic countries has mainly developed rather steadily,
although the general economic outlook has remained weak. The Baltic area is
clearly the most weakened area.
The group's business is managed through five country units. Finland, Norway,
Sweden, Denmark and Baltic are also the reportable IFRS segments.
Finland
In 7-9/2009 net sales in Finland were 9.4 MEUR (10.0 MEUR). Operational
segment result was 0.6 MEUR (1.4 MEUR). After summer vacations, the business
activity returned to the normal level more slowly than usually. Net sales of
Operational solutions remained at last year's level, but sales of BI and GIS
services decreased.
The customers' activity is estimated to have grown during the autumn. However,
the decision making is still rather slow. The public sector seems to be active
especially regarding ECM solutions. Affecto will build an IT system for the
Academy of Finland by 2011 and the total value of the project is approx. 1.7
MEUR.
The growth of IT services market in Finland is forecast to be 0% in 2009
(Marketvisio's estimate, September 2009). However, Affecto's focus segments
are expected to experience a higher growth in software sales (BI 4%, ECM 6%).
Norway
The net sales in 7-9/2009 were 4.1 MEUR (6.7 MEUR) and operational segment
result was 0.5 MEUR (1.1 MEUR). The decrease in net sales in euro was
significantly impacted by the divestment of Contempus and the devaluation of
the Norwegian krone (NOK). The BI business in Norway decreased by 3% if
measured in local currency.
The business has mainly developed steadily. The general economy has had some
impact on sales and profit: e.g. the sales of third party licenses have been
below targets.
Sweden
In 7-9/2009 the net sales in Sweden were 3.4 MEUR (4.6 MEUR) and operational
segment result 0.1 MEUR (0.4 MEUR). The strong devaluation of the Swedish
krona (SEK) has had a major impact on euro-denominated figures.
The local management in Sweden was changed in September and Åge Lönning was
appointed as the acting managing director of Affecto Sweden. There have been
no major changes in business environment during the period. One large customer
relationship is ending. Investment decision making is slower and IT budgets
are smaller. The growing price pressure increases uncertainty regarding
customer relationships.
Denmark
The net sales in 7-9/2009 were 2.6 MEUR (2.3 MEUR) and operational segment
result was 0.0 MEUR (0.2 MEUR).
Net sales grew compared to last year, but the profit weakened. The business
has developed along the weakening general economy: the customers' decision
making is slowing down and price pressure is growing.
Baltic (Lithuania, Latvia, Estonia, Poland)
The Baltic business mostly consists of projects related to large customer-
specific systems. Projects may be larger and tender processes longer than in
Finland or the other Nordic countries. The business is mostly classified as
Operational solutions, but also includes BI solutions. Public sector entities
in the Baltic countries and insurance companies also outside Baltic area are
significant customer segments.
In 7-9/2009 the Baltic net sales were 2.1 MEUR (6.1 MEUR). Operational segment
result was -0.3 MEUR (0.6 MEUR). The summer vacations and increased price
competition pushed the business to loss in Q3. We estimate that the price
competition has increased in the Baltic countries.
The Baltic economies have suffered a lot from the economic crisis. The IT
investments from the public sector are expected to decrease due to government
cost saving programs.
Affecto published in April a goal to reduce the personnel in Baltic countries
by some 130 employees. The business in Latvia and Poland was to be cut
significantly, and to some extent also in Lithuania. For the costs of the
actions a reserve of 1.7 MEUR was recognized in the first quarter result. The
planned actions have mostly been carried out during the second quarter. As one
part of the actions, a part of Latvian business planned to be terminated was
divested to Tieto in June. It is currently estimated that the total
restructuring costs will be approx. 1.4 MEUR and the unused amount of reserve
has been reversed during Q2.
We estimate that the already taken actions enable profitable business in
Baltic, assuming that the national economies continue at the current or
improved level. However, the development of the local business environment is
very uncertain.
Review by business lines
Business intelligence (BI) net sales decreased by 15% to 13.7 MEUR (16.2 MEUR)
in 7-9/2009. The weakened general economy has had limited impact on the BI
business so far, and the effects been largest in Sweden. However, the sales of
third party software licenses have been lower than earlier. Slower investment
decisions and smaller IT budgets have led to growing price pressure from
customers.
Customers see BI solutions as tools for improving their own efficiency and
controllability, which may maintain the interest to invest in BI solutions
also during periods of weaker economic growth. However, the weakness in
general economy may also affect the BI investments. Gartner has estimated the
BI solutions continue to be one of the key IT investment areas and annual
global BI license market average growth to exceed 7% until year 2012, but the
growth in 2009 is estimated to be only 2% (August 2009).
Net sales of Operational Solutions in 7-9/2009 decreased by 45% to 6.1 MEUR
(11.2 MEUR). The net sales in Baltic decreased significantly, as sales
decreased both for the local market services and for insurance sector export
projects. The Norwegian Contempus subsidiary was divested in September 2008,
which has contributed to the decrease. In Finland, the business was at last
year's level and especially the demand for ECM solutions was good.
Net sales of the Geographic Information Services business were 2.5 MEUR (2.6
MEUR) in 7-9/2009. The development of the digital geographic content and
outsourcing services businesses was better than the development of map and
other publishing businesses. Profitability remained good.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on 3 April 2009,
adopted the financial statements for 1.1.-31.12.2008 and discharged the
members of the Board of Directors and the CEO from liability. Approximately 27
percent of Affecto's shares and votes were represented in the Meeting. The
Annual General Meeting decided that a dividend of EUR 0.14 per share be
distributed for the year 2008.
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 KPMG
Oy Ab was elected auditor of the company with Reino Tikkanen, APA, as auditor
in charge.
According to the Articles of Association, the General Meeting of Shareholders
annually elects the Board of Directors by a majority decision. The term of
office of the board members expires at the end of the next Annual General
Meeting of Shareholders following their election. The Board appoints the CEO.
The Articles of Association do not contain any special rules for changing the
Articles of Association or for issuing new shares.
THE AUTHORIZATIONS GIVEN TO THE BOARD OF DIRECTORS
The Board did not use the authorizations given by the previous Annual General
Meeting. Those authorizations ended on 3 April 2009.
The complete contents of the new authorizations given by the Annual General
Meeting held on 3 April 2009 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.
SHARES AND TRADING
The company has only one share series, and all shares have similar rights. As
at 30 September 2009, 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 1-9/2009, the highest share price was 2.67 euro, lowest price 1.82 euro,
average price 2.14 euro and closing price 2.23 euro. Trading volume was 6.4
million shares, corresponding to 40% (annualized) of the number of shares at
the end of period. The market value of shares was 47.9 MEUR at the end of the
period.
OPTIONS
During the review period, 306 132 options 2006C, 291 428 options 2008A and
340 000 options 2008B have been given to key personnel.
SHAREHOLDERS
The company had a total of 2256 owners on 30 September 2009 and the foreign
ownership was 27%. The list of the largest owners can be viewed in the
company's web site. Information about ownership structure and option programs
is included as a separate section in the financial statements. The ownership
of board members, CEO and their controlled corporations totaled approx. 6.3%
(5.7% shares and 0.6% 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. This could have a
negative effect on the business, operating results and financial condition of
Affecto.
The general economic downturn may lead to a decrease in overall customer
demand for services, increase price pressure from customers and lengthen offer
processes at customers. Also the competitors' eagerness to complain about
public procurement decisions may increase, which may cause delays in projects
or interrupt the project delivery work. The continuing downturn may lead into
decrease in utilization rate of consultants.
The economic downturn may weaken customers' liquidity, also in the public
sector. The risks related to receivables have grown especially in the Baltic
countries.
Affecto's balance sheet includes a material amount of goodwill. Goodwill has
been allocated to cash generating units. Cash generating units, to which
goodwill has been allocated, are tested for impairment both annually and
whenever there is an indication that the unit may be impaired. Potential
impairment losses may have material effect on reported profit and value of
assets.
Affecto's success depends also on good customer relationships. Affecto has a
well diversified customer base. Although none of the customers is critically
large for the whole group, there are large customers in various countries who
are significant for local business in the country.
Affecto's order backlog has traditionally been only for a few months, which
decreases the reliability of longer-term forecasts. Slower investment decision
making, postponing or cancellation of customers' IT investments may have
negative impact on Affecto's profitability.
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.
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. Affecto had license sales
of approx. 12 MEUR in 2008. 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 cannot 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
UB Rahastoyhtiö Oy flagged on 13 October that its ownership in Affecto had
exceeded 5%. Case Asset Management AB flagged on 13 October that its ownership
in Affecto had decreased below 5%.
Ray Byman was appointed as the country manager for Finland at the end of
October.
FUTURE OUTLOOK
The weakened economic environment makes reliable forecasting more difficult.
The net sales in year 2009 will remain below the level in 2008. The
profitability (EBIT margin) of the whole year 2009 will be clearly below the
profitability in 2008.
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
-----
Financial information:
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in shareholders'
equity
2. Notes
3. Key figures
1. Consolidated income statement, consolidated comprehensive income statement,
balance sheet, cash flow statement and statement of changes in shareholders'
equity
CONSOLIDATED INCOME STATEMENT
(1 000 EUR) 7-9/09 7-9/08 1-9/09 1-9/08 2008
Net sales 21 570 29 288 75 270 99 073 131 565
Other operating income 0 1 16 844 902
Changes in inventories of -135 -127 -225 -59 -287
finished goods and work in
progress
Materials and services -4 107 -5 655 -13 496 -18 248 -25 317
Personnel expenses -12 715 -15 490 -45 298 -52 904 -69 818
Other operating expenses -3 496 -4 559 -12 551 -15 516 -20 962
Other depreciation and -360 -417 -1 129 -1 271 -1 620
amortisation
IFRS3 amortisation -533 -676 -1 577 -2 116 -2 653
Impairment -2 - -6 210 - -
Operating profit 221 2 363 -5 200 9 803 11 808
Finance costs (net) -452 -776 -2 457 -1 602 -1 341
Result before income tax -231 1 587 -7 657 8 201 10 467
Income tax -20 229 237 -1 491 -1 963
Result for the period -251 1 816 -7 419 6 710 8 503
Result attributable to:
Equity holders of the Company -251 1 816 -7 419 6 710 8 503
Minority interest - - - - -
Earnings per share (EUR per share):
Basic -0.01 0.08 -0.35 0.31 0.40
Diluted -0.01 0.08 -0.35 0.31 0.40
CONSOLIDATED COMPREHENSIVE
INCOME STATEMENT
(1 000 EUR) 7-9/09 7-9/08 1-9/09 1-9/08 2008
Result for the period -251 1 816 -7 419 6 710 8 503
Other comprehensive income:
Translation difference 2 158 -2 827 4 463 -3 245 -9 472
Total Comprehensive income for 1 907 -1 011 -2 956 3 465 -969
the period
Total Comprehensive income
attributable to:
Equity holders of the Company 1 907 -1 011 -2 956 3 465 -969
Minority interest - - - - -
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 9/2009 9/2008 12/2008
Non-current assets
Property, plant and equipment 2 362 2 059 2 715
Goodwill 69 058 75 978 72 614
Other intangible assets 10 026 12 802 11 093
Deferred tax assets 2 287 2 377 2 031
Available-for-sale financial assets 54 54 54
Derivative financial instruments 16 76 20
Trade and other receivables 178 150 220
83 982 93 496 88 747
Current assets
Inventories 870 1 672 1 148
Trade and other receivables 24 686 30 231 32 166
Current income tax receivables 1 212 1 360 206
Available-for-sale financial assets - 102 295
Restricted cash and cash equivalents 376 419 518
Cash and cash equivalents 17 999 19 985 23 554
45 144 53 768 57 886
Total assets 129 125 147 263 146 633
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 213 204 176
Treasury shares -106 -106 -106
Translation differences -5 780 -4 016 -10 243
Retained earnings 6 674 15 308 17 101
52 699 63 087 58 625
Minority interest - - -
Total shareholders' equity 52 699 63 087 58 625
Non-current liabilities
Borrowings 38 439 42 420 40 424
Derivative financial instruments 811 - 715
Deferred tax liabilities 3 057 3 799 3 388
Trade and other payables 681 788 803
42 987 47 007 45 330
Current liabilities
Borrowings 4 000 3 000 3 500
Trade and other payables 28 118 29 966 37 556
Current income tax liabilities 890 4 204 1 442
Derivative financial instruments 99 - 179
Provisions 332 - -
33 439 37 170 42 677
Total liabilities 76 427 84 177 88 007
Total shareholders' equity and 129 125 147 263 146 633
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 1-9/2009 1-9/2008 2008
Cash flows from operating activities
Result for the period -7 419 6 710 8 503
Adjustments to profit for the period 11 315 6 027 7 077
3 896 12 737 15 581
Change in working capital -1 477 -2 010 4 198
Interest and other finance cost paid -1 581 -2 087 -2 812
Interest and other finance income received 146 380 651
Income taxes paid -2 021 -1 144 -2 968
Net cash generated from operating -1 037 7 876 14 651
activities
Cash flows from investing activities
Acquisition of subsidiaries, net of cash - -3 925 -3 925
Purchases of tangible and intangible assets -810 -1 595 -2 741
Proceeds from sale of tangible and 80 1 632 1 665
intangible assets
Sale of business/subsidiaries, net of cash - 8 312 8 346
Net cash used in investing activities -731 4 425 3 345
Cash flow from financing activities
Repayments of borrowings -1 500 -1 500 -3 000
Dividends paid to the company's -3 007 -3 437 -3 437
shareholders
Net cash generated in financing activities -4 507 -4 937 -6 437
(Decrease)/increase in cash and cash -6 275 7 364 11 559
equivalents
Cash and cash equivalents at the beginning 23 554 12 974 12 974
of the period
Foreign exchange effect on cash 720 -352 -979
Cash and cash equivalents at the end of the 17 999 19 985 23 554
period
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(1 000 EUR) Share Share Reserve Other Trea- Trans- Ret. Total
capitalpremium of reserves sury lat. earn- equity
invested shares diff. ings *
non-
restrict
ed
equity
Shareholders' 5 105 25 404 21 188 176 -106 -10 243 17 101 58 625
equity 1
January 2009
Total 4 463 -7 419 -2 956
comprehensive
income
Share options 37 37
Dividents paid -3 007 -3 007
Shareholders' 5 105 25 404 21 188 213 -106 -5 780 6 674 52 699
equity 30
September 2009
(1 000 EUR) Share Share Reserve Other Trea- Trans- Ret. Total
capitalpremium of reserves sury lat. earn- equity
invested shares diff. ings *
non-
restrict
ed
equity
Shareholders' 5 105 25 404 21 188 108 -106 -771 12 035 62 964
equity 1
January 2008
Total -3 245 6 710 3 465
comprehensive
income
Share options 96 96
Dividents paid -3 437 -3 437
Shareholders' 5 105 25 404 21 188 204 -106 -4 016 15 308 63 087
equity 30
September 2008
* Affecto has not had a minority share in 2008 or 2009.
2. Notes
2.1. Basis of preparation
This report has been prepared in accordance with the IFRS recognition and
measurement principles. This report does not comply with all of the
requirements of IAS 34 Interim Financial Reporting. The report should be read
in conjunction with the annual financial statements for the year 2008.
The group has adopted the following new and revised standards starting from 1
January 2009: IFRS 8 Operating Segments and IAS 1 Presentation of Financial
Statements. In other respect, the same accounting policies have been applied
as in the 2008 annual consolidated financial statements. Forthcoming standards
and interpretations are presented in the accounting policies in Annual Report
2008.
2.2. Segment information
Affecto has changed its internal reporting. Since the beginning of 2009
Affecto's reporting segments are based on geographical locations and are
Finland, Norway, Sweden, Denmark and Baltic. Corresponding information for
prior periods disclosed in this report has been restated.
Segment sales and result
(1 000 EUR) 7-9/09 7-9/08 1-9/09 1-9/08 2008
Total sales
Finland 9 401 10 000 32 568 33 432 46 432
Norway 4 118 6 699 14 449 23 516 29 597
Sweden 3 398 4 598 11 679 17 201 22 573
Denmark 2 575 2 267 8 778 7 877 10 564
Baltic 2 149 6 072 9 023 18 375 24 289
Eliminations -71 -346 -1 227 -1 328 -1 890
Group total 21 570 29 288 75 270 99 073 131 565
Operational segment result
Finland 575 1 422 3 580 4 841 6 886
Norway 520 1 070 1 581 2 572 2 877
Sweden 77 375 774 2 133 2 890
Denmark 26 157 544 764 1 157
Baltic -266 562 -2 889 3 374 3 151
Other -178 -545 -1 006 -1 765 -2 500
Total operational segment 754 3 040 2 584 11 918 14 461
result
IFRS amortisation -533 -676 -1 577 -2 116 -2 653
Impairment of Goodwill - - -6 207 - -
Operating profit 221 2 363 -5 200 9 803 11 808
The impairment of Goodwill is allocated to assets of Baltic segment.
The operational segment result in Baltic includes 1.4 MEUR restructuring
costs.
Segment assets
(1 000 EUR) 9/2009 12/2008
Finland 37 061 39 806
Norway 20 529 24 027
Sweden 25 563 23 634
Denmark 14 976 14 785
Baltic 9 624 18 091
Total segment assets 107 753 120 343
Unallocated assets 21 372 26 291
Total assets 129 125 146 633
Sales by business lines
(1 000 EUR) 7-9/09 7-9/08 1-9/09 1-9/08 2008
BI 13 700 16 179 48 783 57 169 77 584
Operational Solutions 6 094 11 156 20 371 34 923 44 613
Geographic Information 2 534 2 614 7 474 8 791 11 774
Services
Eliminations -758 -662 -1 358 -1 810 -2 406
Group total 21 570 29 288 75 270 99 073 131 565
2.3. Contingencies and commitments
The future aggregate minimum lease payments under non-cancelable operating
leases:
1 000 EUR 30.9.2009 31.12.2008
Not later than one (1) year 2 952 2 832
Later than one (1) year, but not later than 2 639 3 552
five (5) years
Later than five (5) years - -
Total 5 591 6 384
Guarantees:
1 000 EUR 30.9.2009 31.12.2008
Debt secured by a mortgage
Financial loans 42 500 44 000
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: 30.9.2009 31.12.2008
Pledges 173 432
Other guarantees 203 56
Pledges consist of current receivables amounting to 98 TEUR and non-current
receivables 75 TEUR.
2.4. Derivative contracts
1 000 EUR 30.9.2009 31.12.2008
Interest rate swaps:
Nominal value 32 500 34 000
Fair value -910 -894
Interest rate cap:
Nominal value 8 000 8 000
Fair value 16 20
3. Key figures
7-9/09 7-9/08 1-9/09 1-9/08 2008
Net sales, 1 000 eur 21 570 29 288 75 270 99 073 131 565
EBITDA, 1 000 eur 1 116 3 457 3 716 13 189 16 081
Operational segment result, 754 3 040 2 584 11 918 14 461
1 000 eur
Operating result, 1 000 eur 221 2 363 -5 200 9 803 11 808
Result before taxes, 1 000 eur -231 1 587 -7 657 8 201 10 467
Net income for equity holders of -251 1 816 -7 419 6 710 8 503
the parent company,
1 000 eur
EBITDA, % 5.2 % 11.8 % 4.9 % 13.3 % 12.2 %
Operational segment result, % 3.5 % 10.4 % 3.4 % 12.0 % 11.0 %
Operating result, % 1.0 % 8.1 % -6.9 % 9.9 % 9.0 %
Result before taxes, % -1.1 % 5.4 % -10.2 % 8.3 % 8.0 %
Net income for equity holders of -1.2 % 6.2 % -9.9 % 6.8 % 6.5 %
the parent company, %
Equity ratio, % 43.5 % 45.1 % 43.5 % 45.1 % 43.0 %
Net gearing, % 46.4 % 40.3 % 46.4 % 40.3 % 34.7 %
Interest-bearing net debt, 24 440 25 435 24 440 25 435 20 371
1 000 eur
Gross investment in non-current 188 327 810 1 595 2 741
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 0.9 % 1.1% 1.1 % 1.6 % 2.1 %
Research and development costs, 118 384 252 1 366 1 468
1 000 eur
R&D -costs, % of sales 0.5 % 1.3% 0.3 % 1.4 % 1.1 %
Order backlog, 1 000 eur 35 228 40 919 35 228 40 919 44 467
Average number of employees 933 1 174 993 1 155 1 136
Earnings per share, eur -0.01 0.08 -0.35 0.31 0.40
Earnings per share (diluted), eur -0.01 0.08 -0.35 0.31 0.40
Equity per share, eur 2.45 2.94 2.45 2.94 2.73
Average number of shares, 21 480 21 480 21 480 21 480 21 480
1 000 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, amortization and impairment
Operational segment result = Operating profit before amortisations on
fair value adjustments due to business
combinations (IFRS3) and Goodwill
impairments
Equity ratio, % = Shareholders' equity + 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
-----
