QPR SOFTWARE PLC STOCK EXCHANGE RELEASE FEBRUARY 11, 2016 AT 09:30 AM
FINANCIAL STATEMENTS BULLETIN 2015
NET SALES ON PREVIOUS YEAR´S LEVEL, OPERATING PROFIT WEAKENED DUE TO INVESTMENTS IN SALES CHANNEL AND PRODUCT RENEWALS
Summary full year 2015
- Net sales EUR 9,436 thousand (2014: 9,541).
- Net sales decreased 1% due to a decrease in international software channel sales. Net sales growth in Finland, new international channel sales partnerships made in 2015 and increased international process mining software sales had a positive impact on net sales, but it did not fully compensate sales decline in QPR`s traditional reseller sales channel.
- Operating profit EUR 368 thousand (1,095), operating margin 3.9% of net sales (11.5). Operating profit decreased mainly due to increased expenses related to renewals in the Company´s sales channels and product portfolio. These expenses were personnel, subcontracting and marketing costs.
- Profit before taxes EUR 347 thousand (1,065).
- Profit for the year EUR 338 thousand (890).
- Earnings per share 0.028 euroa (0.074).
- The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.02 be paid to shareholders for the financial year 2015 (2014: 0.05) and furthermore the Board of Directors be authorized to decide, subject to its discretion, on payment of a special dividend of EUR 0.01 during 2016.
Summary fourth quarter 2015
- Net sales EUR 2,520 thousand (2,685).
- Net sales decreased 6% due to a decrease in international software channel sales. Net sales growth in Finland, new international channel sales partnerships made in 2015 and increased international process mining software sales had a positive impact on net sales, but it did not fully compensate sales decline in QPR`s traditional reseller sales channel.
- Operating profit EUR 78 thousand (417), operating margin 3.1% of net sales (15.5). Operating profit decreased mainly due to lower net sales, increased personnel costs, as well as marketing and product launch expenses related to sales channel renewal.
- Profit before taxes 48 thousand (409).
- Profit for October-December EUR 55 thousand (341).
- Earnings per share EUR 0.005 (0.028).
Business operations
QPR Software focuses on providing organizations software and professional services for operational development. Our software and services are used in over 50 countries. The Company offers its customers insight to their business operations through modeling, analysis and performance monitoring. This insight enables customers to streamline and improve operations and to execute their strategies swiftly and effectively. The Company´s product portfolio has been strongly renewed in recent years. The new software products offer customers innovative and efficient tools to model various dimensions in organizations, to automatically discover any processes based on actual event data and to analyze causes for potential performance problems.
OUTLOOK
Operating environment and market outlook
QPR estimates that process mining software market demand grows in its home market Finland, as well as in broader European market. This software product category is relatively new and, for the time being, its market size is still small. The market maturity varies strongly in different countries, but already last year market growth was strong in several European countries. This growth is expected to continue this year, and the Company believes its QPR ProcessAnalyzer product has a strong position in the market.
In developed markets, competition in process and enterprise architecture and modeling and performance management software is expected to continue to increase. In developing markets, especially in the Middle East and Africa, there is still growth potential for these software products.
Outlook for 2016
In process mining software and process analysis services, QPR continues its outlays in direct sales in Finland and international channel sales, and estimates that this business will continue to grow this year.
In process and enterprise architecture modeling and performance management software, the tightened competition is expected to continue to have a negative impact on sales in part of QPR´s reseller channel, especially in developed markets. To offset this impact, QPR seeks growth from new reseller partnerships initiated in 2015, especially from Middle East and Africa.
The Company believes that it will in its home market Finland maintain its leading position in process modeling and analysis software aimed at operational development in organizations, as well as its in recent years strengthened position in operational development consulting.
The Company estimates that its operating profit excluding special items will grow in 2016 compared to 2015.
KEY FIGURES
| EUR in thousands, unless otherwise indicated | Oct-Dec 2015 | Oct-Dec 2014 |
Change, % |
Jan-Dec 2015 | Jan-Dec 2014 |
Change, % |
| Net sales | 2,520 | 2,685 | -6.1 | 9,436 | 9,541 | -1.1 |
| EBITDA | 284 | 615 | -53.8 | 1,190 | 1,857 | -35.9 |
| % of net sales | 11.3 | 22.9 | 12.6 | 19.5 | ||
| Operating profit | 78 | 417 | -81.2 | 368 | 1,095 | -66.4 |
| % of net sales | 3.1 | 15.5 | 3.9 | 11.5 | ||
| Profit before tax | 48 | 409 | -88.2 | 347 | 1,065 | -67.4 |
| Profit for the period | 55 | 341 | -83.8 | 338 | 890 | -62.0 |
| % of net sales | 2.2 | 12.7 | 3.6 | 9.3 | ||
| Earnings per share, EUR | 0.005 | 0.028 | -83.8 | 0.028 | 0.074 | -61.9 |
| Equity per share, EUR | 0.234 | 0.257 | -8.7 | 0.234 | 0.257 | -8.7 |
|
Cash flow from operating activities |
-379 | 445 | -185.1 | 406 | 1,617 | -74.9 |
| Cash and cash equivalents | 585 | 1,426 | -59.0 | 585 | 1,426 | -59.0 |
| Free cash flow | -600 | 129 | -742 | 702 | ||
| Net borrowings | -85 | -1,426 | -94.0 | -85 | -1,426 | -94.0 |
| Gearing, % | -2.9 | -44.6 | -2.9 | -44.6 | ||
| Equity ratio, % | 42.7 | 44.0 | 42.7 | 44.0 | ||
| Return on equity, % | 7.7 | 44.8 | 11.1 | 29.3 | ||
| Return on investment, % | 10.9 | 54.8 | 12.0 | 35.4 |
REPORTING
This report complies with requirements of IAS 34 Interim Financial Reporting. Starting from the beginning of 2015, the Group has applied certain new or revised IFRS standards and IFRIC interpretations as described in the Consolidated Financial Statements 2014. The implementation of these new and revised requirements have not impacted the reported figures. For all other parts, the accounting principles and methods are the same as they were in the 2014 financial statements. This report is unaudited.
QPR Software innovates, develops, sells and delivers to international markets software and services aimed at operational development in organizations. QPR Software reports one operating segment: Operational development of organizations. In addition to this, the Company reports revenue from products and services as follows: Software license sales, Software maintenance services, Software rentals, and Consulting. Software rentals and Software maintenance services together form the recurring revenue reported by the Company. Recurring revenue is based on long-term contracts continuing for the time being or for a fixed period of several years. Typically rental and maintenance charges are invoiced annually in advance.
As geographic information QPR Software reports geographical areas Finland, rest of Europe including Russia and Turkey, and rest of the world. Net sales are reported by the customer´s location.
REVIEW BY THE CEO
The development of QPR Software´s business operations was twofold during 2015. The first quarter of the year was successful: net sales increased 13% and operating margin was over 10% of net sales. Subsequently, the tightened competition in process and enterprise architecture modeling and performance management software had a negative impact on sales in part of QPR´s reseller channel. This impact cannibalized sales growth from new products, services and resellers entirely, and group net sales remained at previous year´s level (-1%).
According to our strategy, we seek to grow especially our process mining, analytics and monitoring software sales in the international markets. In line with these targets, we continued the development of our software products and services, as well as the renewal of our international sales.
We increased investments in international distribution of our innovative software products. Reseller recruitment was successful, and the Company recruited 16 new resellers in 13 countries. In addition to these new partnerships, many partners in our traditional reseller network expanded their partnership and included QPR ProcessAnalyzer in their portfolio. We expanded distribution of this process mining software especially into developed European markets, such as Germany, Sweden, Belgium and the Netherlands. For performance management and process modeling software, we recruited many new resellers from Middle East, Africa and South America. As a result of these channel expansions, the amount and value of made offers grew significantly in the latter half of the year, and continues to be on a high level.
We invested in training of the new reseller partners, as well as in marketing and product launches in new markets. We believe these outlays will have a positive impact on net sales this year, but at the same time we estimate that the tightened competition will continue to have a negative impact on sales in part of QPR´s reseller channel. According to our published earnings outlook, we estimate that operating profit excluding special items will grow in 2016 compared to 2015.
The development of our software and service offering continued as planned in 2015. During the year, we released new versions of all our software products. Furthermore, we continued to invest in developing and productizing our operational development services aimed at organizations. This year one of the focus areas in product development is further improving user experience of our software in various terminal devices.
Jari Jaakkola
Chief Executive Officer
NET SALES
| NET SALES BY PRODUCT GROUP | ||||||
| EUR in thousands | Oct-Dec 2015 | Oct-Dec 2014 | Change, % | Jan-Dec 2015 | Jan-Dec 2014 | Change, % |
| Software licenses | 440 | 512 | -14 | 1,427 | 1,470 | -3 |
| Software maintenance services | 735 | 772 | -5 | 2,873 | 3,093 | -7 |
| Software rentals | 446 | 494 | -10 | 1,774 | 1,901 | -7 |
| Consulting | 899 | 907 | -1 | 3,362 | 3,077 | 9 |
| Total | 2,520 | 2,685 | -6 | 9,436 | 9,541 | -1 |
| NET SALES BY GEOGRAPHIC AREA | ||||||
| EUR in thousands | Oct-Dec 2015 | Oct-Dec 2014 | Change, % | Jan-Dec 2015 | Jan-Dec 2014 | Change, % |
| Finland | 1,813 | 1,734 | 5 | 6,499 | 6,193 | 5 |
| Europe incl. Russia and Turkey | 463 | 621 | -25 | 1,740 | 2,035 | -15 |
| Rest of the world | 243 | 330 | -26 | 1,197 | 1,313 | -9 |
| Total | 2,520 | 2,685 | -6 | 9,436 | 9,541 | -1 |
January-December 2015
Net sales 2015 was EUR 9,436 thousand (9,541) and decreased 1 %. Net sales growth in Finland, new international channel sales partnerships initiated in 2015 and increased international process mining software sales had a positive impact on net sales, but it did not fully compensate sales decline in QPR`s traditional international sales channel.
Software license net sales decreased 3% compared to previous year. Vast majority of license net sales was derived from international markets.
Software maintenance services net sales and software rental net sales decreased 7%. This was due to expiration of a few significant contracts, which was not fully compensated by new maintenance services and rental sales. Customer churn remained low, measured by the number of expired contracts, but among them there were more economically significant ones than usually. The share of recurring revenue was 49% (52) of total net sales.
Consulting net sales grew 9%, mainly due to very strong first quarter of the year. Net sales in operational development consulting and process analysis consulting increased, but decreased in technical SAP consulting.
Out of the Group net sales 69% (65) were derived from Finland, 18% (21) from the rest of Europe (including Russia and Turkey) and 13% (14) from the rest of the world.
October-December 2015
Net sales was EUR 2,520 thousand (2,685). Net sales decreased 6% compared to equivalent period in the previous year due to lower sales in QPR´s traditional international sales channel. Net sales in Finland and international process mining software net sales increased.
Software license net sales decreased 14% compared to October-December in the previous year. License sales in traditional international reseller channel decreased, but license sales and international process mining software license sales increased. In October-December there were no large software deals. The timing of large software deals can have a significant impact on net sales of an individual quarter.
Software maintenance services net sales (-5%) and software rental net sales (-10%) decreased. This was due to expiration of a few significant contracts, which was not fully compensated by new sales. Customer churn remained low, measured by the number of expired contracts, but among them there were more economically significant ones than usually. The share of recurring revenue was 47% (47) of total net sales.
Consulting net sales were on the same level as in October-December in the previous year. Net sales in operational development consulting and process analysis consulting increased, but decreased in technical SAP consulting.
Out of the Group net sales 72% (65) were derived from Finland, 18% (23) from rest of the Europe (including Russia and Turkey) and 10% (12) from the rest of the world.
FINANCIAL PERFORMANCE
January-December 2015
The Group operating profit in 2015 was EUR 368 thousand (1,095), or 3.9% of net sales (11.5). Operating profit decreased from the previous year primarily due to increased costs. Higher costs are mainly due to increases in international sales channel and product development costs. The majority of these outlays were increased personnel, sub-contracting and marketing costs.
The Group´s fixed costs were EUR 8,510 thousand (8,134) in the reporting period, and grew 4.6% compared to previous year. Personnel costs represented 76.1% (74.9) of fixed costs and were EUR 6,477 thousand (6,092). Credit losses, inclusive in fixed costs, totaled EUR 49 thousand (96).
Profit before taxes in the quarter was EUR 347 thousand (1,065) and profit for the period was EUR 338 thousand (890). Taxes recorded for the period were EUR 9 thousand (176). The low tax rate is primarily due to lower financial results and recorded taxes at source in QPR´s Swedish subsidiary concerning earlier years. Earnings per share (fully diluted) were EUR 0.028 (0.074).
October-December 2015
The Group operating profit was EUR 78 thousand (417), or 3.1% of net sales (15.5). Operating profit decreased from the previous year due to lower net sales, increased personnel costs and higher marketing and product launch costs related to reseller channel renewal.
The Group´s fixed costs were EUR 2,286 thousand (2,174) in the reporting period, and grew 5.1% compared to previous year. Personnel costs represented 75.9% (75.4%) of fixed costs and were EUR 1,734 thousand (1,640). Credit losses, inclusive in fixed costs, totaled EUR 28 thousand (27).
Profit before taxes in the quarter was EUR 48 thousand (409) and profit for the period was EUR 55 thousand (338). Earnings per share (fully diluted) were EUR 0.005 (0.028).
FINANCE AND INVESTMENTS
Cash flow from operating activities was EUR 406 thousand (1,617). Cash flow decreased due to lower profits, a change in invoicing rhythm and taxes paid. Cash flow from operating actitivities in the fourth quarter was EUR -379 thousand (445). Of the negative difference, approximately EUR 350 thousand was due to value added taxes paid already in 2015 for invoices that became due in 2016. A significant share of recurring revenue (recurring revenue in 2015: EUR 4,647 thousand) is invoiced at the end of accounting year, and become due early in the following year. This leads to strong cash flow from operating activities in January-March. Cash and cash equivalents at the end of the quarter were EUR 585 thousand (1,426).
Investments in January - December year totaled EUR 1,148 thousand (915) and consisted mainly of product development and ICT system investments and extension of the office facilities.
Net financial expenses were EUR 21 thousand (30). Financial items included foreign exchange currency losses of EUR 20 thousand (29). In October-December net financial expenses were EUR 30 thousand (8), and included EUR 29 thousand (7) foreign exchange currency losses (net).
At the end of the quarter, the Company had EUR 500 thousand of interest-bearing liabilities. The gearing ratio was -3% (-45). Current liabilities include deferred revenue in total of EUR 1,209 thousand (1,261). Annualized return on investment was 12% (35) in the reporting period and 11% (55) in October-December.
At the end of the quarter, equity ratio was 43% (44) and the consolidated shareholders’ equity was EUR 2,914 thousand (3,196). Annualized return on equity was 11% (29) in January – December and 8% (45) in October – December.
The Annual General Meeting on March 12, 2015 authorized the Board of Directors to decide on issuing a maximum of 4,000,000 new shares, to decide on conveyance of a maximum of 700,000 own shares held by the Company, and to decide on acquiring a maximum of 250,000 own shares. The authorizations are in force until the next Annual General Meeting.
PRODUCT DEVELOPMENT
QPR develops software and consulting service products to be used by its customers. Software product development costs in the reporting period January - September were approximately 91% of all product development costs. The Company published new versions of all of its software products in the reporting period. By developing its consulting service products, the Company aims to grow its local business in Finland, and to accelerate its international software sales by offering complementary service concepts and solutions to its software reseller partners.
In the reporting period, product development expenses were EUR 1,821 thousand (1,847), and represented 19% of net sales (19). Product development expenses do not include amortization of capitalized product development expenses. Product development expenses were capitalized for a total amount of EUR 782 thousand (683). The amortization of capitalized product development expenses in the quarter was EUR 462 thousand (396).
In October-December, product development expenses were EUR 466 thousand (464), and represented 18% of net sales (17). Product development expenses do not include amortization of capitalized product development expenses. Product development expenses were capitalized for a total amount of EUR 174 thousand (208). The amortization of capitalized product development expenses in the reporting period was EUR 116 thousand (114).
PERSONNEL
At the end of the reporting period, the Group employed a total of 83 persons (78). Average number of personnel in 2015 was 86 (81) and personnel costs were EUR 6,477 thousand (6,092), representing 69% of net sales (64).
For incentive purposes, the Company has a bonus program that covers all employees. Remuneration of the top management consists of salary, fringe benefits and a possible annual bonus based mainly on net sales development. In 2015, the maximum annual bonus of executive management team, including the CEO, is 30% of the annual base salary. A bonus totaling EUR 8 thousand is paid to the executive management team for 2015. More information on incentive plans can be found in the Annual Report 2014 (http://www.qpr.com/sites/default/files/QPRSoftwareAnnualReport2014.pdf).
QPR SOFTWARE´S STRATEGY 2016 – 2018
The Board of Directors has approved an updated strategy for QPR Software.
QPR Software innovates, develops and sells in international markets software aimed at analyzing, monitoring and modeling operations in organizations. Furthermore, the Company strengthens its consulting practice in its home market Finland and offers customers a variety of services for operational development planning and execution.
The Company´s strategy is to differentiate from its competitors by developing its software products to meet with the increasing challenges organizations face in leading and developing their operations in digitalizing world. Special focus areas for development are process analytics and operational performance monitoring. The Company believes that the relevant market for these focus areas grows significantly in the future, as companies collect more and more transaction and other event data from their operations. In software development, special focus is placed on processing and analyzing large amounts of data, as well as good user experience.
In the next three years, QPR seeks to grow especially its process mining software sales in the international markets. In order to reach this target, the Company has this year increased its investments in expanding and renewing its international software reseller channel. The Company maintains its middle term target at 15% annual net sales growth.
SHARES AND SHAREHOLDERS
| Trading of shares | Jan-Dec 2015 | Jan-Dec 2014 | Change, % |
| Shares traded, pcs | 4,558,065 | 2,828,001 | 61 |
| Volume, EUR | 6,350,859 | 2,751,903 | 131 |
| % of shares | 38.0 | 23.6 | 0.0 |
| Average trading price, EUR | 1.39 | 0.97 | 43 |
| Treasury shares acquired during the year, pcs | 0 | 37,400 | -100 |
| Shares and market capitalization | Dec 31, 2015 | Dec 31, 2014 | Change, % |
| Total number of shares, pcs | 12,444,863 | 12,444,863 | - |
| Treasury shares, pcs | 457,009 | 457,009 | - |
| Book counter value, EUR | 0.11 | 0.11 | - |
| Outstanding shares, pcs | 11,987,854 | 11,987,854 | - |
| Number of shareholders | 1,212 | 820 | 48 |
| Closing price, EUR | 1.20 | 1.01 | 19 |
| Market capitalization, EUR | 14,385,425 | 12,107,733 | 19 |
| Book counter value of all treasury shares, EUR | 50,271 | 50,271 | 0 |
| Total purchase value of all treasury shares, EUR | 439,307 | 439,307 | 0 |
| Treasury shares, % of all shares | 3.7 | 3.7 | - |
The Annual General Meeting held on March 12, 2015 approved the Board's proposal that a per-share dividend of EUR 0.05 (0.04), a total of EUR 599 thousand (480), be paid for the financial year 2014. The dividend was paid to shareholders entered in the Company's shareholder register, maintained by Euroclear Finland Oy, on the record date of March 16, 2015. The dividend payment date was April 8, 2015.
OTHER EVENTS DURING THE REPORTING PERIOD
In the beginning of 2015, QPR Software´s sales and deliveries were organized into four units: Operational Development Software, Operational Development Consulting, Process Intelligence and Channel Business.
Miika Nurminen was appointed Senior Vice President, Operational Development Consulting, and member of the Executive Management Team as of 1 January, 2015. Nurminen has previously held several leadership positions in QPR Software.
Sari Törmälä was appointed Senior Vice President, Operational Development Software, and member of the Executive Management Team as of February 23, 2015. Before QPR Törmälä worked in Kunnan Taitoa Oy, a service provider for the local government sector in Finland providing financial and personnel management services, where she as a member of the Executive Management Team was responsible for sales and customers. Sari Törmälä´s employment at QPR ended in June 2015. The business units Operational Development Consulting and Operational Development Software were combined as of July 1, and Miika Nurminen was appointed to lead the unit.
In February, QPR announced that it expands co-operation with a European public sector health care organization and delivers a project for the organization’s operational development purposes. The total value of the software and consulting services, delivered by QPR and thus recognizable during the first half of 2015, was around EUR 140 thousand. Target of the agreed project is to improve the customer’s operations, development and performance as well as project management. In addition, the project aims for better alignment between business and IT by linking the business area service layer with IT services.
In March, QPR announced that QPR Software is recognized in international research company Gartner Inc.´s Market Guide for Enterprise Business Process Analysis (EBPA) report. The Gartner EBPA Market Guide evaluated the Enterprise business process analysis marketplace and depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace. Gartner evaluated the EBPA vendors on the focus and importance of different use cases, as well as about the focus and importance of the different EBPA capabilities.
In April, QPR announced that The U.S. Patent and Trademark Office has granted a patent to a technology for analyzing and improving business processes with event instance date, developed by QPR Software. The patented technology utilizes event instance data obtained from information management systems, and helps organizations to analyze and develop their business processes. The patent supports the sale of QPR ProcessAnalyzer software and QPR process intelligence consulting as well as opens up new opportunities for OEM business.
In April, the Company also announced that the City of Helsinki, the capital of Finland, had decided to approve QPR Software´s offer for delivering process and enterprise architecture tool as a service. The value of the entire four year agreement period is EUR 1.5 million, out of which the share of revenue booked as software rentals is over 75%. QPR´s competitor appealed to the technical board of the City of Helsinki and to the Market Court and delivered a claim for correction against this purchase decision. The City decided to return the case for further preparation into its sourcing unit and made a new decision to approve QPR´s offer in July 2015. The terms and conditions of the new decision are the same to QPR as in the first decision in April.
QPR´s competitor again appealed both to the technical board of the City of Helsinki and to the Market Court, and provided a claim for correction also against this new purchase decision. The technical board of the City of Helsinki rejected the claim in September, but decision regarding the claim in the Market Court is still pending.
QPR Software´s Chief Financial Officer Päivi Martti´s employment ended at QPR in June 2015. Jaana Mattila, who worked in the Company as Business Controller since March 2015, was selected as the new Chief Financial Officer. Mattila has previously worked, among others, as Finance Director in Fazer Amica and as CFO in Biohit Oyj.
In November, QPR and Swedish IT Company Advania signed a partnership where Advania will sell and promote QPR ProcessAnalyzer software product. Advania is a leading Nordic IT company which offers diverse services and solutions, hosting and data center services.
In December, QPR announced that it had agreed to deliver QPR ProcessAnalyzer process mining software and process analysis consultancy to a leading European industrial corporation. The Customer will develop both its purchase to pay and order to cash processes with QPR process mining software and consulting. The value of at this stage agreed delivery is approximately MEUR 0.1. The customer operates globally and has operations in 40 countries.
The Group structure was altered by merging subsidiary Nobultec Oy with the parent company on December 31, 2015.
OTHER EVENTS AFTER THE REPORTING PERIOD
QPR and Swedish business and IT services company iStone announced in January 2016 that they had signed a reseller agreement for QPR ProcessAnalyzer software sales and delivery. The partnership creates new opportunities for mapping processes, identifying bottlenecks and optimizing process flows especially to customers using Infor M3 ERP.
GOVERNANCE
The Annual General Meeting on March 12, 2015 resolved that the Board of Directors consists of four (4) ordinary members. The AGM re-elected the following members to the Board of Directors: Kirsi Eräkangas, Vesa-Pekka Leskinen and Topi Piela. The AGM selected Juho Malmberg, as a new member, to join the Board of Directors. Juho Malmberg has previously held leadership positions, among others, in Accenture, KONE and Zenrobotics. In its meeting following the Annual General Meeting, the Board of Directors elected Vesa-Pekka Leskinen as Chairman of the Board.
The AGM elected KPMG Oy Ab, Authorized Public Accountants, to continue as QPR Software Plc's auditors, with Kirsi Jantunen, Authorized Public Accountant, acting as principal auditor.
The AGM authorized the Board to decide on issuing new shares, conveying own shares held by the Company, and repurchasing the Company’s own shares.
All authorizations of the Board and other decisions made by the Annual General Meeting are available in their entirety on the stock exchange release published by the Company on March 12, 2015 and available on the investors section of the Company's web site, http://www.qpr.com/investors/annual-general-meeting/annual-general-meeting-2015.
SHORT-TERM RISKS AND UNCERTAINTIES
Internal control and risk management in QPR Software aims to ensure that the Company operates efficiently and effectively, distributes reliable information, complies with regulations and operational principles, reaches its strategic goals, reacts to changes in the market and operational environment, and ensures the continuity of its business.
QPR has identified the following four groups of risks related to its operations: risks related to business operations (country, customer, service delivery, personnel, legal and financial risks as well as risks related to the Company’s resellers), risks related to information and products (QPR products, IPR, data security), risks related to financing (foreign currency, bad debt), and risks related to new businesses (growth of new business, product development investments in new business). The Company has an insurance policy for property, operational and liability risks.
Financial risks include reasonable credit risk concerning individual business partners, which is characteristic to any international business. QPR seeks to limit this credit risk by continuous monitoring of standard payment terms, receivables and credit limits. In 2015, EUR 49 thousand (96) of credit losses were recorded. The amount of trade receivables over 60 days past due was 6% (6) of total trade receivables at the end of the quarter.
Approximately 82 % of Group’s trade receivables were in euro at the end of the quarter (81). At the end of the quarter, the Company had not hedged its non-euro trade receivables.
No significant changes have taken place in the Company’s short-term risks and uncertainties during the quarter. Risks and risk management related to the Company’s business are further described in the Annual Report 2014, pages 12-14. (http://www.qpr.com/sites/default/files/QPRSoftwareAnnualReport2014.pdf).
THE BOARD OF DIRECTORS’ PROPOSAL ON DIVIDEND
The distributable funds of the parent company were EUR 704 thousand at December 31, 2015. The Board of Directors proposes to the Annual General Meeting on March 22, 2015 that a dividend of EUR 0.02 per share be paid to shareholders for the financial year 2015, totaling EUR 240 thousand. The dividend shall be paid to a shareholder that has been entered into the Company’s shareholder register on the record date of the dividend payment on March 24, 2015. The Board of Directors proposes to the AGM that the dividend be paid on April 5 2015.
Furthermore, the Board of Directors proposes to the AGM that Board of Directors be authorized to decide, subject to its discretion, on payment of a special dividend of EUR 0.01 during 2016. In its assessment on potential special dividend payment, the Board of Directors intends to evaluate especially the development of the Company´s operative environment, implementation of the Company´s strategy and economic situation.
No material changes have taken place in the Company’s financial position after the end of the financial year.
FINANCIAL INFORMATION
In 2016, QPR Software Plc will publish its financial information in Finnish and English as follows:
- Annual Report 2015: Monday, February 29, 2016.
- Interim Report 1 – 3/2015: Thursday, April 28, 2016.
- Interim Report 1 – 6/2015: Tuesday, August 2, 2016.
- Interim Report 1 – 9/2015: Thursday, October 27, 2016.
The Annual General Meeting will be held on Thursday, March 22, 2015.
COMPLIANCE WITH CORPORATE GOVERNANCE CODE 2015
QPR Software Plc complies with the Corporate Governance Code 2015, issued by the Finnish Securities Market Association, from the beginning of the financial year starting on January 1, 2016.
For the financial year 2015 the Company complies with the Corporate Governance Code 2010, which is the one preceding the new 2015 Code.
QPR SOFTWARE PLC
BOARD OF DIRECTORS
Further information:
Jari Jaakkola, CEO
Tel. +358 (0) 40 5026 397
DISTRIBUTION:
Nasdaq Helsinki
Main Media
www.qpr.com
Neither this press release nor any copy of it may be taken, transmitted or distributed, directly or indirectly, in or into the United States of America or its territories or possessions.
| CONSOLIDATED COMPREHENSIVE INCOME STATEMENT | ||||||
| EUR in thousands, unless otherwise indicated | Oct-Dec 2015 | Oct-Dec 2014 | Change, % | Jan-Dec 2015 | Jan-Dec 2014 | Change, % |
| Net sales | 2,520 | 2,685 | -6 | 9,436 | 9,541 | -1 |
| Other operating income | - | - | 1 | 26 | ||
| Materials and services | 156 | 94 | 66 | 558 | 337 | 66 |
| Employee benefit expenses | 1,734 | 1,640 | 6 | 6,477 | 6,092 | 6 |
| Other operating expenses | 346 | 336 | 3 | 1,211 | 1,281 | -5 |
| EBITDA | 284 | 615 | -54 | 1,190 | 1,857 | -36 |
| Depreciation and amortization | 206 | 198 | 4 | 822 | 761 | 8 |
| Operating profit | 78 | 417 | -81 | 368 | 1,095 | -66 |
| Financial income and expenses | -30 | -8 | -21 | -30 | ||
| Profit before tax | 48 | 409 | -88 | 347 | 1,065 | -67 |
| Income taxes | 7 | -68 | -110 | -9 | -175 | -95 |
| Profit for the period | 55 | 341 | -84 | 338 | 890 | -62 |
| Earnings per share, EUR | ||||||
| (basic and diluted) | 0.005 | 0.028 | -84 | 0.028 | 0.074 | -62 |
|
Consolidated statement of comprehensive income: |
||||||
| Profit for the period | 55 | 341 | 338 | 890 | ||
|
Other items in comprehensive income that may be reclassified subsequently to profit or loss: |
||||||
|
Exchange differences on translating foreign operations |
5 | -29 | -21 | -40 | ||
|
Income tax relating to components of other comprehensive income |
- | - | - | - | ||
| Total comprehensive income | 61 | 312 | 317 | 850 | ||
| CONSOLIDATED BALANCE SHEET | |||
| EUR in thousands |
December 31, 2015 |
December 31, 2014 |
Change, % |
| Assets | |||
| Non-current assets: | |||
| Intangible assets | 2,041 | 1,815 | 12 |
| Goodwill | 513 | 513 | 0 |
| Tangible assets | 274 | 174 | 58 |
| Other non-current assets | 27 | 27 | 1 |
| Total non-current assets | 2,855 | 2,529 | 13 |
| Current assets: | |||
| Trade and other receivables | 4,592 | 4,572 | 0 |
| Cash and cash equivalents | 585 | 1,426 | -59 |
| Total current assets | 5,177 | 5,998 | -14 |
| Total assets | 8,033 | 8,527 | -6 |
| Equity and liabilities | |||
| Equity: | |||
| Share capital | 1,359 | 1,359 | 0 |
| Other funds | 21 | 21 | 0 |
| Treasury shares | -439 | -439 | 0 |
| Translation differences | -242 | -221 | 10 |
| Invested non-restricted equity fund | 5 | 5 | 0 |
| Retained earnings | 2,210 | 2,471 | -11 |
| Equity attributable to shareholders of the parent company | 2,914 | 3,196 | -9 |
| Non-current liabilities: | |||
| Non-interest-bearing liabilities | 9 | 25 | -62 |
| Total non-current liabilities | 9 | 25 | -62 |
| Current liabilities: | |||
| Interest-bearing liabilities | 500 | - | |
| Advances received | 1,209 | 1,261 | -4 |
| Accrued expenses and prepaid income | 2,932 | 3,223 | -9 |
| Trade and other payables | 468 | 822 | -43 |
| Total current liabilities | 5,109 | 5,305 | -4 |
| Total liabilities | 5,119 | 5,331 | -4 |
| Total equity and liabilities | 8,033 | 8,527 | -6 |
| CONSOLIDATED CASH FLOW STATEMENT | ||||||
| EUR in thousands | Oct-Dec 2015 | Oct-Dec 2014 | Change, % | Jan-Dec 2015 | Jan-Dec 2014 | Change, % |
| Cash flow from operating activities: | ||||||
| Profit for the period | 55 | 338 | -84 | 338 | 887 | -62 |
| Adjustments to the profit | 198 | 173 | 14 | 850 | 725 | 17 |
| Working capital changes | -679 | -57 | 1,090 | -645 | 25 | -2,681 |
| Interest and other financial expenses paid | -7 | -2 | 270 | -38 | -13 | 190 |
| Interest and other financial income received | 3 | 1 | 12 | 3 | 294 | |
| Income taxes paid | 51 | -8 | -743 | -111 | -10 | 1,009 |
| Net cash from operating activities | -379 | 445 | -185 | 406 | 1,617 | -75 |
| Cash flow from investing activities: | ||||||
| Purchases of tangible and intangible assets | -221 | -316 | -29 | -1,148 | -915 | 25 |
| Net cash used in investing activities | -221 | -316 | -29 | -1,148 | -915 | 25 |
| Cash flow from financing activities: | ||||||
| Proceeds from short term borrowings | 500 | - | 500 | 0 | ||
|
Repayments of long-term borrowings |
- | - | - | -113 | ||
| Repurchase of shares | - | - | - | -44 | ||
| Dividends paid | - | - | -599 | -480 | 25 | |
| Net cash used in financing activities | 500 | 0 | -99.205 | -637 | -84 | |
|
Net change in cash and cash equivalents |
-100 | 129 | -177 | -841 | 65 | -1,394 |
| Cash and cash equivalents at the beginning of the period | 683 | 1,303 | -48 | 1,426 | 1,365 | 4 |
| Effects of exchange rate changes on cash and cash equivalents | 1 | -6 | -123 | 1 | -4 | -117 |
| Cash and cash equivalents at the end of the period | 585 | 1,426 | -59 | 585 | 1,426 | -59 |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||
| EUR in thousands | Share capital | Other funds | Translation differences | Treasury shares | Invested non-restricted equity fund | Retained earnings | Total |
| Equity Jan 1, 2014 | 1,359 | 21 | -181 | -395 | 5 | 2,061 | 2,871 |
| Dividends paid | -480 | -480 | |||||
| Repurchase of shares | -44 | -44 | |||||
| Comprehensive income | -40 | 890 | 850 | ||||
| Equity Dec 31, 2014 | 1,359 | 21 | -221 | -439 | 5 | 2,471 | 3,196 |
| Dividends paid | -599 | -599 | |||||
| Repurchase of shares | |||||||
| Comprehensive income | -21 | 338 | 317 | ||||
| Equity Dec 31, 2015 | 1,359 | 21 | -242 | -439 | 5 | 2,210 | 2,914 |
NOTES TO INTERIM FINANCIAL STATEMENTS
ACCOUNTING PRICIPLES
This report complies with requirements of IAS 34 ”Interim Financial Reporting”. Starting from the beginning of 2015, the Group has applied certain new or revised IFRS standards and IFRIC interpretations as described in the Consolidated Financial Statements 2014. The implementation of these new and revised requirements have not impacted the reported figures. For all other parts, the accounting principles and methods are the same as they were in the 2014 financial statements.
When preparing the consolidated financial statements, management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated.
All amounts presented in this report are consolidated figures, unless otherwise noted. The amounts presented in the report are rounded, so the sum of individual figures may differ from the sum reported. This report is unaudited.
During the reporting period, the Group did not have any financial instruments measured at fair value.
| INTANGIBLE AND TANGIBLE ASSETS | ||
| EUR in thousands | Jan-Dec 2015 | Jan-Dec 2014 |
| Increase in intangible assets: | ||
| Acquisition cost Jan 1 | 6,953 | 6,112 |
| Increase | 906 | 841 |
| Increase in tangible assets: | ||
| Acquisition cost Jan 1 | 1,425 | 1,351 |
| Increase | 242 | 74 |
| CHANGE IN INTEREST-BEARING LIABILITIES | ||
| EUR in thousands | Jan-Dec 2015 | Jan-Dec 2014 |
| Interest-bearing liabilities Jan 1 | - | 113 |
| Proceeds from short term borrowings | 500 | - |
| Repayments | - | -113 |
| Interest-bearing liabilities Sept 30/Dec 31 | 500 | - |
| PLEDGES AND COMMITMENTS | |||
| EUR in thousands | Dec 31, 2015 | Dec 31, 2014 | Change, % |
| Business mortgages (held by the Company) | 1,392 | 1,391 | 0 |
| Minimum lease payments based on lease | |||
| agreements | |||
| Maturing in less than one year | 357 | 304 | 18 |
| Maturing in 1-5 years | 89 | 436 | -80 |
| Total | 446 | 740 | -40 |
| Total pledges and commitments | 1,838 | 2,131 | -14 |
| CONSOLIDATED INCOME STATEMENT BY QUARTER | ||||||||
| EUR in thousands | Q4 2015 | Q3 2015 | Q2 2015 | Q1 2015 | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 |
| Net sales | 2,520 | 1,989 | 2,402 | 2,524 | 2,685 | 2,167 | 2,465 | 2,225 |
| Other operating income | - | - | 1 | - | - | 1 | 10 | 15 |
| Materials and services | 156 | 148 | 149 | 105 | 94 | 66 | 92 | 85 |
| Employee benefit expenses | 1,734 | 1,398 | 1,723 | 1,622 | 1,640 | 1,370 | 1,557 | 1,525 |
| Other operating expenses | 346 | 239 | 287 | 338 | 336 | 316 | 304 | 325 |
| EBITDA | 284 | 204 | 243 | 459 | 615 | 416 | 522 | 305 |
| Depreciation and amortization | 206 | 206 | 211 | 200 | 198 | 189 | 178 | 197 |
| Operating profit | 78 | -1 | 32 | 259 | 417 | 227 | 344 | 107 |
| Financial income and expenses | -30 | 11 | -16 | 14 | -8 | -5 | -12 | -4 |
| Profit before tax | 48 | 10 | 16 | 272 | 409 | 222 | 332 | 103 |
| Income taxes | 7 | 13 | 18 | -47 | -68 | -54 | -43 | -10 |
| Profit for the period | 55 | 23 | 35 | 225 | 341 | 167 | 288 | 93 |
| GROUP KEY FIGURES | ||
| EUR in thousands, unless otherwise indicated | Jan-Dec or Dec 31, 2015 | Jan-Dec or Dec 31, 2014 |
| Net sales | 9,436 | 9,541 |
| Net sales growth, % | -1.1 | 9.8 |
| EBITDA | 1,190 | 1,857 |
| % of net sales | 12.6 | 19.5 |
| Operating profit | 368 | 1,095 |
| % of net sales | 3.9 | 11.5 |
| Profit before tax | 347 | 1,065 |
| % of net sales | 3.7 | 11.2 |
| Profit for the period | 338 | 890 |
| % of net sales | 3.6 | 9.3 |
| Return on equity (per annum), % | 11.1 | 29.3 |
| Return on investment (per annum), % | 12.0 | 35.4 |
| Borrowings | 500 | - |
| Cash and cash equivalents | 585 | 1,426 |
| Free cash flow | -742 | 702 |
| Net borrowings | -85 | -1,426 |
| Equity | 2,914 | 3,196 |
| Gearing, % | -2.9 | -44.6 |
| Equity ratio, % | 42.7 | 44.0 |
| Total balance sheet | 8,033 | 8,527 |
| Investments in non-current assets | 1148 | 915 |
| % of net sales | 12.2 | 9.6 |
| Product development expenses | 1,821 | 1,847 |
| % of net sales | 19.3 | 19.4 |
| Average number of personnel | 86 | 81 |
| Personnel at the beginning of period | 78 | 79 |
| Personnel at the end of period | 83 | 78 |
| Earnings per share, EUR | 0.028 | 0.074 |
| Equity per share, EUR | 0.234 | 0.257 |