AFFECTO PLC INTERIM REPORT 5 MAY 2010 at 9.30
AFFECTO PLC'S INTERIM REPORT 1-3/2010
GROUP KEY FIGURES
MEUR 1-3/10 1-3/09 2009
Net sales 25.7 27.5 103.0
Operational segment result 0.1 -0.2 4.7
% of net sales 0.3 -0.7 4.6
Operating profit/loss -0.4 -6.9 -3.6
% of net sales -1.6 -25.2 -3.5
Profit/loss before taxes -1.1 -8.6 -6.3
Profit/loss for the period -0.9 -8.0 -7.1
Equity ratio, % 43.4 41.3 42.9
Net gearing, % 40.4 42.6 39.1
Earnings per share, eur -0.04 -0.37 -0.33
Earnings per share (diluted), -0.04 -0.37 -0.33
eur
Equity per share, eur 2.48 2.45 2.49
CEO Pekka Eloholma comments:
"First quarter was weak as expected. The operational segment result was
positive, but IFRS3 amortization pushed operating profit to loss. Finland,
Norway and Denmark were profitable, but Sweden and Baltic made a loss."
"Some new projects ramped up pretty slowly, and at the same time some large
projects in Finland progressed slower than normally. Although the general
market situation is improving, it was not yet realized as net sales."
"Positive development is highlighted by the growth of the order backlog to
approx. 43 MEUR, which is higher than in Q1/2009 (41.6 MEUR) or Q4/2009 (41.1
MEUR). The improved order backlog and the good level of customer activity
strengthen our belief in improving business conditions during the year. We
maintain the previous guidance regarding the whole year."
"The net sales are estimated to grow in year 2010. The year 2010 will be
clearly profitable and the profitability (EBIT margin) is estimated to improve
during the year."
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 release is unaudited. The amounts in this report have been rounded from
exact numbers.
INTERIM REPORT 1-3/2010
Affecto builds IT solutions that enable organisations to integrate strategic
targets with their business management. Our business intelligence solutions
utilise information generated by ERP and other IT systems and process it
further. Affecto also delivers operational solutions for improving and
simplifying processes at customer organizations and offers geographic
information services.
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 1-3/2010 were 25.7 MEUR (1-3/2009: 27.5 MEUR). Net
sales in Finland were 11.0 MEUR (11.8 MEUR), in Norway 5.9 MEUR (5.3 MEUR), in
Sweden 3.5 MEUR (4.1 MEUR), in Denmark 2.7 MEUR (3.2 MEUR) and 3.1 MEUR (3.8
MEUR) in Baltic. Net sales decreased in other areas except in Norway.
In the Nordic countries the first quarter began rather weakly, and especially
January was quiet. However, the business picked up during the quarter, but did
not have time to compensate effects of the weak January. Resource utilization
was low in the early part of the period.
The economic situation in the Baltic countries has remained weak. GDP
decreased 15-20% in the Baltic countries 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 1-3/10 1-3/09 2009
Finland 11.0 11.8 45.0
Norway 5.9 5.3 20.2
Sweden 3.5 4.1 15.8
Denmark 2.7 3.2 11.5
Baltic 3.1 3.8 12.2
Eliminations -0.5 -0.6 -1.6
Group total 25.7 27.5 103.0
Net sales of Information Management Solutions business (previously BI and
Operational solutions) in 1-3/2010 were 23.3 MEUR (25.3 MEUR) and net sales of
Geographic Information Services were 2.5 MEUR (2.3 MEUR).
PROFIT
Affecto's EBIT in 1-3/2010 was -0.4 MEUR (-6.9 MEUR) and the operational
segment result was 0.1 MEUR (-0.2 MEUR). Operational segment result was in
Finland 0.5 MEUR (1.7 MEUR), in Norway 0.4 MEUR (0.8 MEUR), in Sweden -0.4
MEUR (0.3 MEUR), in Denmark 0.2 MEUR (0.3 MEUR) and in Baltic -0.1 MEUR (-2.7
MEUR).
The businesses in Finland, Norway and Denmark made profit, but profitability
was not satifactory. Resource utilization was too low especially in January.
Some new projects ramped up slower than exptected, which decreased the
resource utilization. In addition, some ongoing projects progressed slower
than planned, which had negative impact on net sales and profitability.
Profitability weakened in Sweden. Profitability in Baltic improved thanks to
the restructuring actions taken earlier (1.7 MEUR provision for restructuring
costs was included in Q1/2009 results), but profitability still remained
slightly negative.
Operational segment result by reportable segments
Operational segment 1-3/10 1-3/09 2009
result, MEUR
Finland 0.5 1.7 5.1
Norway 0.4 0.8 2.3
Sweden -0.4 0.3 0.9
Denmark 0.2 0.3 0.9
Baltic -0.1 -2.7 -2.7
Other -0.6 -0.5 -1.8
Operational segment result 0.1 -0.2 4.7
IFRS3 Amortization -0.5 -0.5 -2.1
Impairment of Goodwill - -6.2 -6.2
Operating profit/loss -0.4 -6.9 -3.6
According to IFRS3 requirements, 1-3/2010 EBIT includes 0.5 MEUR (0.5 MEUR) of
amortization of intangible assets related to acquisitions. In year 2010 the
IFRS3 amortization is estimated to total 1.9 MEUR and in 2011 approx. 1.9
MEUR.
R&D costs 1-3/2010 totaled 0.3 MEUR (0.1 MEUR), i.e. 1.0% of net sales (0.3%).
The costs have been recognized as an expense in the income statement.
Taxes corresponding to the result for the review period have been entered as
tax expense. Net profit for the period was -0.9 MEUR, while it was -8.0 MEUR
last year.
The order backlog was approx. 43 MEUR at the end of the period, which is 2
MEUR higher than the previous quarter's backlog of 41 MEUR. Affecto has a well
diversified customer base. The ten largest customers generated approx. 20% of
group revenue in 2009 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 133.3 MEUR
(12/2009: 136.3 MEUR). Equity ratio was 43.4% (12/2009: 42.9%) and net gearing
was 40.4% (12/2009: 39.1%). Translation differences have increased the
consolidated equity by 1.9 MEUR during 1-3/2010 due to the strengthening of
the Norwegian and Swedish currencies.
The financial loans were 40.4 MEUR (12/2009: 40.4 MEUR) at the end of
reporting period. The company's cash and liquid assets were 18.9 MEUR
(12/2009: 19.5 MEUR). The interest-bearing net debt was 21.5 MEUR (12/2009:
20.9 MEUR). Affecto's bank loan has covenants based on net debt, result and
cash flow, and Affecto has received a waiver from the bank although Affecto
did not fulfill all the covenants on 31 March 2010.
Cash flow from operating activities for the reported period was -0.6 MEUR (-
2.0 MEUR) and cash flow from investments was -0.3 MEUR (-0.4 MEUR).
Investments in non-current assets excluding acquisitions were 0.3 MEUR (0.4
MEUR).
Based on decision by the Annual General Meeting held on 25 March 2010, Affecto
has distributed dividends of 1.3 MEUR (previous year 3.0 MEUR). The dividend
is presented as non-interest-bearing debt in the balance sheet of 31 March
2010. Dividend was paid on 13 April 2010.
EMPLOYEES
The number of employees was 911 persons at the end of the reporting period
(911). 381 employees were based in Finland, 103 in Sweden, 114 in Norway, 56
in Denmark, and 257 in the Baltic countries. The average number of employees
during the period was 911 (974).
Fredrik Prien was appointed as the country manager in Sweden and he started in
March.
BUSINESS REVIEW BY AREAS
The group's business is managed through five country units. Finland, Norway,
Sweden, Denmark and Baltic are also the reportable segments.
Finland
In 1-3/2010 net sales in Finland were 11.0 MEUR (11.8 MEUR). Operational
segment result was 0.5 MEUR (1.7 MEUR). The year started rather modestly. Some
new projects started slower than exptected, which decreased the resource
utilization. In addition, some ongoing projects progressed slower than
planned, which had negative impact on net sales and profitability. During the
period new projects were received e.g. from Bank of Finland, Elisa, Med-IT and
Metso.
The growth of IT services market in Finland is forecast to be approx. 2% in
2010 (Marketvisio's estimate, September 2009). However, Affecto's focus
segments are expected to experience a higher growth in software sales (BI 5%,
ECM 6%).
Norway
The net sales in 1-3/2010 were 5.9 MEUR (5.3 MEUR) and operational segment
result was 0.4 MEUR (0.8 MEUR). The growth in Euros was helped by the
strengthening of the Norwegian krone (NOK). The business developed rather
well, although profitability decreased. In general, the business conditions in
Norway have developed positively. Due to expected growth in demand, the
company has been active in hiring new employees. New projects were received
e.g. from Norway's Labour and welfare agency (NAV), Lindorff, Santander,
Statoil and Telenor.
Sweden
In 1-3/2010 the net sales in Sweden were 3.5 MEUR (4.1 MEUR) and operational
segment result -0.4 MEUR (0.3 MEUR). There are some signals about an improving
business environment, but the improvements take time. Customers' investment
decision making is still cautious and takes time. The business was loss-making
e.g. due to changes in personnel, and is estimated to continue at loss in the
second quarter. Fredrik Prien has been the new country manager since 1 March
2010. New projects were received e.g. from Pågen.
Denmark
The net sales in 1-3/2010 were 2.7 MEUR (3.2 MEUR) and operational segment
result was 0.2 MEUR (0.3 MEUR). Also in Denmark, the year started cautiously
and the first quarter was weak. However, the customers' activity is on high
level and the markets are expected to develop positively. New orders were
received e.g. from DONG, Velux and Copenhagen Region.
Baltic (Lithuania, Latvia, Estonia, Poland)
The Baltic business mostly consists of projects related to large customer-
specific systems. Public sector entities in the Baltic countries and insurance
companies also outside Baltic area are significant customer segments.
In 1-3/2010 the Baltic net sales were 3.1 MEUR (3.8 MEUR). Operational segment
result was -0.1 MEUR (-2.7 MEUR). Although the worst decline in GDP is over,
the market has not recovered much, yet. The price competition is tight in the
local markets in the Baltic countries. The IT investments from the public
sector have decreased due to government cost saving programs. The development
of the local business environment is very uncertain, and the EU has great
importance in financing both public and also private investments.
Some new projects were received during the period, mostly from public sector
entities, including Lithuanian Ministry of Social Security and Labour,
Lithuanian Statistics department and several municipalities.
Review by business lines
Information management solutions business contains the previously separately
reported Business intelligence (BI) and Operational Solutions businesses.
Reporting was changed to match the current management model. The net sales of
Information management solutions in 1-3/2010 were 23.3 MEUR (25.3 MEUR). The
slow start of the year affected most parts of the business and lowered the net
sales generated. Performance improved towards the end of the quarter.
The demand for Business intelligence (BI) solutions seems to recover along the
general economy. Customers' general activity level has grown and they are
restarting investments put on hold last year. Gartner has estimated the BI
solutions continue to be one of the key IT investment areas and average annual
global growth of BI and analytics software license markets to exceed 8% until
year 2013. Gartner has also forecast that the Nordic BI/DW services market
would annually grow 6-8% in 2010-2013.
The demand for ECM solutions in Finland was good, but some of the ongoing
projects progressed slowly. The net sales in Baltic decreased significantly,
as net sales decreased both for the local projects and for insurance sector
export projects.
Net sales of the Geographic Information Services business in 1-3/2010 were 2.5
MEUR (2.3 MEUR). The GIS services business developed well during the period.
The order intake grew and the demand for GIS solutions seems to have grown.
The customers are also interested in consulting services related to e.g.
developing GIS strategies. Also the publishing business developed favorably.
ANNUAL GENERAL MEETING AND GOVERNANCE
The Annual General Meeting of Affecto Plc, which was held on 25 March 2010,
adopted the financial statements for 1.1.-31.12.2009 and discharged the
members of the Board of Directors and the CEO from liability. Approximately 49
percent of Affecto's shares and votes were represented in the Meeting. The
Annual General Meeting decided that a dividend of EUR 0.06 per share will be
distributed for the year 2009.
In addition, the Meeting decided to amend Section "9 Notice of Meeting" of the
Articles of Association, and decided to lower the share premium reserve of the
parent company Affecto Plc by transferring the entire capital into the reserve
for invested unrestricted equity.
Aaro Cantell, Pyry Lautsuo, Heikki Lehmusto, Esko Rytkönen and Haakon Skaarer
were re-elected as members of the Board of Directors, and Jukka Ruuska was
elected as a new member. 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 and Jukka Ruuska as Vice-Chairman. The APA
firm KPMG Oy Ab was elected auditor of the company.
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 25 March 2010.
The complete contents of the new authorizations given by the Annual General
Meeting held on 25 March 2010 have been published in the stock exchange
release regarding the Meetings' decisions. The Board did not use the
authorizations by the end of the review period.
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 31 March 2010, 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 1-3/2010, the highest share price was 2.70 euro, lowest price 2.21 euro,
average price 2.47 euro and closing price 2.45 euro. Trading volume was 3.45
million shares, corresponding to 64% (annualized) of the number of shares at
the end of period. The market value of shares was 52.6 MEUR at the end of the
period.
SHAREHOLDERS
The company had a total of 2219 owners on 31 March 2010 and the foreign
ownership was 34%. 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. 9.9%
(9.3% shares and 0.6% options).
ASSESSMENT OF RISKS AND UNCERTAINTIES
The changes in the general economic conditions and the operating environments
of its customers have direct impact in Affecto's markets. The competition in
the markets also tightens continuously. This could have a negative effect on
the business, operating results and financial condition of Affecto.
The general economic downturn may decrease the 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 bank loan has covenants based on net debt, result and cash flow.
Breach of covenant may lead to higher financing costs or even the termination
of the loan. Affecto needs to refinance the loan latest in 2012, when the
current loan comes due. It is not certain that a new loan facility can be
received with the same or better conditions than the current loan.
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.
Approximately 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 sells third party software licenses as part of its solutions. The
license sales have most impact on the last month of each quarter and
especially in the fourth quarter. This increases the fluctuation in sales
between quarters and increases the difficulty of accurately forecasting the
quarters. Affecto had license sales of approx. 8 MEUR in 2009.
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.
EVENTS AFTER THE REVIEW PERIOD
Member of the executive management team, COO Åge Lönning left the company at
the end of April and the related costs are reported as part of Q2 results.
FUTURE OUTLOOK
The net sales are estimated to grow in year 2010. The year 2010 will be
clearly profitable and the profitability (EBIT margin) is estimated to improve
during the year.
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 11.30 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) 1-3/10 1-3/09 2009
Net sales 25 732 27 525 103 006
Other operating income 13 6 27
Changes in inventories of 50 -9 -351
finished goods and work in
progress
Materials and services -4 484 -4 733 -19 775
Personnel expenses -16 749 -17 642 -59 660
Other operating expenses -4 130 -4 961 -16 983
Other depreciation and -353 -385 -1 466
amortisation
IFRS3 amortisation -491 -516 -2 081
Impairment 0 -6 209 -6 304
Operating profit/loss -412 -6 925 -3 587
Finance costs (net) -664 -1 720 -2 684
Profit/loss before income tax -1 076 -8 644 -6 271
Income tax 134 631 -868
Profit/loss for the period -941 -8 013 -7 139
Profit/loss for the period
attributable to:
Equity holders of the Company -941 -8 013 -7 139
Earnings per share (EUR per share):
Basic -0.04 -0.37 -0.33
Diluted -0.04 -0.37 -0.33
CONSOLIDATED COMPREHENSIVE
INCOME STATEMENT
(1 000 EUR) 1-3/10 1-3/09 2009
Profit/loss for the period -941 -8 013 -7 139
Other comprehensive income:
Translation difference 1 852 2 014 5 001
Total Comprehensive income for 911 -5 999 -2 138
the period
Total Comprehensive income
attributable to:
Equity holders of the Company 911 -5 999 -2 138
CONSOLIDATED BALANCE SHEET
(1 000 EUR) 3/2010 3/2009 12/2009
Non-current assets
Property, plant and equipment 2 105 2 695 2 102
Goodwill 70 895 67 383 69 415
Other intangible assets 9 368 10 859 9 585
Deferred tax assets 2 061 2 285 1 648
Available-for-sale financial assets 54 54 54
Derivative financial instruments - 6 11
Trade and other receivables 171 166 175
84 654 83 448 82 992
Current assets
Inventories 739 1 114 685
Trade and other receivables 27 961 28 181 32 049
Current income tax receivables 978 1 138 1 047
Available-for-sale financial assets - 294 -
Restricted cash and cash equivalents - 1 260 -
Cash and cash equivalents 18 933 21 485 19 525
48 610 53 473 53 306
Total assets 133 264 136 921 136 298
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 314 205 264
Treasury shares -106 -106 -106
Translation differences -3 390 -8 229 -5 242
Retained earnings 4 726 9 088 6 955
Total shareholders' equity 53 240 52 655 53 568
Non-current liabilities
Borrowings 36 448 40 430 36 444
Derivative financial instruments 1 006 972 252
Deferred tax liabilities 2 983 3 263 3 011
Trade and other payables 786 577 733
41 224 45 241 40 440
Current liabilities
Borrowings 4 000 3 500 4 000
Trade and other payables 33 790 31 690 37 058
Current income tax liabilities 743 1 900 487
Derivative financial instruments - 235 408
Provisions 266 1 700 337
38 800 39 026 42 290
Total liabilities 80 024 84 267 82 730
Total shareholders' equity and 133 264 136 921 136 298
liabilities
CONSOLIDATED CASH FLOW STATEMENT
(1 000 EUR) 1-3/2010 1-3/2009 2009
Cash flows from operating activities
Result for the period -941 -8 013 -7 139
Adjustments to profit for the period 1 474 9 697 13 390
533 1 684 6 251
Change in working capital -736 -2 901 937
Interest and other finance cost paid -354 -557 -2 160
Interest and other finance income received 42 84 251
Income taxes paid -77 -340 -2 770
Net cash generated from operating -592 -2 031 2 509
activities
Cash flows from investing activities
Purchases of tangible and intangible assets -350 -390 -971
Proceeds from sale of tangible and 5 9 87
intangible assets
Net cash used in investing activities -345 -380 -884
Cash flow from financing activities
Repayments of borrowings - - -3 500
Dividends paid to the company's - - -3 007
shareholders
Net cash generated in financing activities - - -6 507
(Decrease)/increase in cash and cash -937 -2 411 -4 883
equivalents
Cash and cash equivalents at the beginning 19 525 23 554 23 554
of the period
Foreign exchange effect on cash 345 343 854
Cash and cash equivalents at the end of the 18 933 21 485 19 525
period
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(1 000 EUR) Share Share Reserve Other Trea- Trans- Ret. Total
capital premium of reserves sury lat. earn- equity
invested shares diff. ings *
non-
restrict
ed
equity
Shareholders' 5 105 25 404 21 188 264 -106 -5 242 6 955 53 568
equity 1
January 2010
Total 1 852 -941 911
comprehensive
income
Share options 50 50
Dividents paid -1 289 -1 289
Shareholders' 5 105 25 404 21 188 314 -106 -3 390 4 726 53 240
equity 31
March 2010
(1 000 EUR) Share Share Reserve Other Trea- Trans- Ret. Total
capital premium 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 2 014 -8 013 -5 999
comprehensive
income
Share options 29 29
Shareholders' 5 105 25 404 21 188 205 -106 -8 229 9 088 52 655
equity 31
March 2009
* Affecto has not had a minority share in 2009 or 2010.
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 2009.
The group has adopted the following new and revised standards starting from 1
January 2010: Revised IFRS 3 Business Combinations and amended IAS 27
Consolidated and Separate Financial Statements. In other material respects,
the same accounting policies have been applied as in the 2009 annual
consolidated financial statements.
2.2. Segment information
Affecto's reporting segments are based on geographical locations and are
Finland, Norway, Sweden, Denmark and Baltic.
Segment sales and result
(1 000 EUR) 1-3/10 1-3/09 2009
Total sales
Finland 10 985 11 756 45 003
Norway 5 912 5 256 20 152
Sweden 3 548 4 083 15 823
Denmark 2 673 3 175 11 494
Baltic 3 136 3 836 12 163
Eliminations -522 -580 -1 628
Group total 25 732 27 525 103 006
Operational segment result
Finland 549 1 682 5 096
Norway 425 763 2 286
Sweden -365 313 887
Denmark 162 275 886
Baltic -102 -2 699 -2 699
Other -589 -537 -1 754
Total operational segment 80 -203 4 702
result
IFRS amortisation -491 -516 -2 081
Impairment of Goodwill - -6 207 -6 207
Operating profit/loss -412 -6 925 -3 587
The impairment of Goodwill in 2009 was allocated to the assets of Baltic
segment. The operational segment result of Baltic segment for period Q1/2009
included a restructuring provision amounting to 1.7 MEUR. The result for year
2009 included 1.2 MEUR realised restructuring costs.
Business Intelligence and Operation Solutions business lines, previously
reported as separate business lines, have been combined to a Information
Management Solutions business line in the beginning of year 2010. Updated
reportable business lines are in line with the current management model of
Affecto Group.
Sales by business lines
(1 000 EUR) 1-3/10 1-3/09 2009
Information Management Solutions 23 335 25 268 93 147
Geographic Information Services 2 498 2 325 10 168
Eliminations -100 -68 -308
Group total 25 732 27 525 103 006
2.3. Borrowings
1 000 EUR 31.3.2010 31.12.2009
Interest-bearing non-current liabilities
Loans from financial institutions, non-current 36 448 36 444
portion
Loans from financial institutions, current 4 000 4 000
portion
40 448 40 444
The facility agreement of the group includes financial covenants based on net
debt, result and cash flow. Breach of covenants might lead to an increase in
cost of debt or cancellation of the facility agreement. As at 31 March 2010,
the group did not fulfil all the covenants. The group has received a waiver
from the bank already during the reporting period regarding the possible
breach of covenants as at 31 March 2010. Due to the waiver, the maturity of
the loan has been reported based on the facility agreement.
2.4. Contingencies and commitments
The future aggregate minimum lease payments under non-cancelable operating
leases:
1 000 EUR 31.3.2010 31.12.2009
Not later than one (1) year 2 963 3 013
Later than one (1) year, but not later than 1 833 2 310
five (5) years
Later than five (5) years - -
Total 4 796 5 323
Guarantees:
1 000 EUR 31.3.2010 31.12.2009
Debt secured by a mortgage
Financial loans 40 500 40 500
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: 31.3.2010 31.12.2009
Pledges 106 241
Other guarantees 2 263 67
Pledges consist of current receivables amounting to 103 TEUR and non-current
receivables 3 TEUR.
Other guarantees are mostly securities issued for customer projects. These
guarantees include both bank guarantees secured by parent company of the group
and guarantees issued by the parent company directly to the customer.
2.5. Derivative contracts
1 000 EUR 31.3.2010 31.12.2009
Interest rate swaps:
Nominal value 20 250 17 000
Fair value -1 006 -659
Interest rate cap:
Nominal value - 8 000
Fair value - 11
3. Key figures
1-3/10 1-3/09 2009
Net sales, 1 000 eur 25 732 27 525 103 006
EBITDA, 1 000 eur 433 186 6 265
Operational segment result, 80 -201 4 702
1 000 eur
Operating result, 1 000 eur -412 -6 925 -3 587
Result before taxes, 1 000 eur -1 076 -8 644 -6 271
Net income for equity holders -941 -8 013 -7 139
of the parent company,
1 000 eur
EBITDA, % 1.7 % 0.7 % 6.1 %
Operational segment result, % 0.3 % -0.7 % 4.6 %
Operating result, % -1.6 % -25.2 % -3.5 %
Result before taxes, % -4.2 % -31.4 % -6.1 %
Net income for equity holders -3.7 % -29.1 % -6.9 %
of the parent company, %
Equity ratio, % 43.4 % 41.3 % 42.9 %
Net gearing, % 40.4 % 42.6 % 39.1 %
Interest-bearing net debt, 21 516 22 445 20 919
1 000 eur
Gross investment in non-current 350 390 971
assets (excl. acquisitions),
1 000 eur
Gross investments, % of sales 1.4 % 1.4 % 0.9 %
Research and development costs, 264 76 433
1 000 eur
R&D -costs, % of sales 1.0 % 0.3 % 0.4 %
Order backlog, 1 000 eur 43 124 41 633 41 108
Average number of employees 911 1 057 974
Earnings per share, eur -0.04 -0.37 -0.33
Earnings per share (diluted), -0.04 -0.37 -0.33
eur
Equity per share, eur 2.48 2.45 2.49
Average number of shares, 21 480 21 480 21 480
1 000 shares
Number of shares at the end of 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 *100
________________________________
Total assets - advances received
Gearing, % = Interest-bearing liabilities - *100
cash, bank receivables and
securities held as financial asset
__________________________________
Shareholders' equity
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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