QT GROUP PLC HALF-YEAR REPORT 1 JANUARY 2017–30 JUNE 2017
Qt Group Plc Stock Exchange Release, 10 August 2017 at 8:00 a.m.
Second quarter: Business proceeded as planned, full-year outlook unchanged
- Net sales decreased by 1.6 per cent to EUR 8,788 thousand (8,935)*. The most significant reason for the decrease in net sales was an exceptionally large license sale recorded in the corresponding period last year
- The operating result was EUR -188 thousand (-783).
- The operating margin (EBIT %) was -2.1 per cent (-8.8%).
- Earnings per share were EUR -0.02 (-0.04)
- Net sales increased by 8.4 per cent to EUR 17,434 thousand (16,084)
- The operating result was EUR -1,204 thousand (-530)
- The operating margin (EBIT %) was -6.9 per cent (-3.3%).
- Earnings per share were EUR -0.06 (-0.04)
* the figures in brackets refer to the comparison period, i.e. the corresponding period in the previous year.
Juha Varelius, President and CEO:
Qt Group’s net sales in the second quarter amounted to EUR 8.8 million, which represents a year-on-year decrease of 1.6 per cent. The most significant reason for the decrease in net sales in the second quarter was an exceptionally large license sale recorded in the corresponding period last year. License sales and consulting decreased by 12.5 per cent combined, while support and maintenance revenue grew by 23.2 per cent. The growth of license sales was in line with our plans, but the net sales of consulting services fell short of our target.
Net sales for the first half of the year amounted to EUR 17.4 million, up 8.4 per cent year-on-year. License sales and consulting grew by 2.7 per cent and support and maintenance by 19.6 per cent.
As expected, the operating result for the first half of the year showed a loss. Investments required for growth have been pursued systematically during the beginning of the year and accelerated after the successfully completed rights issue. Qt had 256 employees at the end of the review period, compared to 220 at the end of 2016 and 239 at the end of the first quarter. New employees have been recruited particularly in sales as part of the planned growth of the sales network. During the first half of the year, we also invested in product management and product development, and we have particularly strengthened our product offering aimed at the automotive industry.
The automotive industry offers high future growth potential and it has adopted Qt as one of its basic technologies for implementing digital in-vehicle entertainment and control software. Qt engages in business and development activities with many of the world’s leading car manufacturers.
In spite of our moderate growth in the first half of the year, we still estimate that our full-year net sales in 2017 will increase by 15–20 per cent year-on-year. Continued strong demand provides a solid foundation for the second half of the year and supports the achievement of our growth targets for the full year. Due to investments in line with our growth strategy, the company’s operating result will show a substantial loss in 2017.
Qt’s net sales in the second quarter amounted to EUR 8,788 thousand (EUR 8,935 thousand), down 1.6 per cent. License sales and consulting decreased by 12.5 per cent, while support and maintenance revenue grew by 23.2 per cent.
Qt’s net sales for the first half of the year amounted to EUR 17,434 thousand (EUR 16,084 thousand), up 8.4 per cent. License sales and consulting grew by 2.7 per cent and support and maintenance by 19.6 per cent.
Qt’s operating result in the second quarter was EUR -188 thousand (EUR -783 thousand). The operating result for the first half of the year was EUR -1,204 thousand (EUR -530 thousand).
The other operating income includes tax-free research and development investment grants received by the company in Norway, totalling approximately EUR 389 thousand. The grants concern the applicable personnel expenses related to the research and development activities of Qt’s Norwegian company, and they will be paid to the company in the second half of 2017.
The Group’s operating expenses, including materials and services, personnel expenses, depreciation and other operating expenses, amounted to EUR 19,096 thousand (EUR 16,666 thousand) in the first half of the year, up 14.6 per cent year-on-year. Personnel expenses accounted for 66.6 per cent (68.6%) of operating expenses, or EUR 12,711 thousand (EUR 11,438 thousand).
Qt’s earnings before tax for the first half of the year totalled EUR -1,447 thousand (EUR -817 thousand) and the result was EUR -1,322 thousand (EUR -837 thousand). Taxes for the first half of the year amounted to EUR 125 thousand (EUR -19 thousand).
Earnings per share were EUR -0.06 in the first half of the year (EUR -0.04).
Financing and investments
Cash flow from operating activities was EUR 1,675 thousand (EUR -2,050 thousand) in the first half of the year due to the operating result and cash being tied up in working capital.
The subscription period for the rights offering resolved on by the Board of Directors of Qt Group Plc on 14 March 2017 ended on 5 April 2017, and the company announced the final result of the offering in a stock exchange release on 12 April 2017. The company raised gross proceeds of approximately EUR 15.3 million from the rights offering.
Qt’s cash and cash equivalents totalled EUR 13,362 thousand (EUR 5,693 thousand) at the end of the first half of the year. A loan of EUR 6.0 million, granted by Ilmarinen Mutual Pension Insurance Company, was repaid in full in May 2017.
Qt Group’s consolidated balance sheet total at the end of the first half of the year stood at EUR 38,010 thousand (EUR 29,653 thousand). Net cash flow from investments in the first half of the year was EUR -123 thousand (EUR -283 thousand).
The equity ratio stood at 77.6 per cent (41.5%) and gearing was -59.7 per cent (6.8%). Interest-bearing liabilities amounted to EUR 161 thousand (EUR 6,302 thousand), of which short-term loans accounted for EUR 108 thousand (EUR 194 thousand).
In the first half of the year, return on investment was -8.1 per cent (-3.5%) and return on equity was -6.0 per cent (-9.3%).
The number of Qt’s personnel was 240 (207) on average during the review period and 256 (214) at the end of the review period. At the end of the review period, international personnel represented 67 per cent (69%) of the total.
Other events in the review period
Qt Group Plc's Annual General Meeting (AGM) held on 14 March 2017 adopted the company’s annual accounts, including the consolidated annual accounts for the accounting period 1 January‒31 December 2016, and discharged the members of the Board of Directors and the Chief Executive Officer from liability. The AGM resolved, in accordance with the Board’s proposal, that no dividend will be paid based on the balance sheet adopted for the accounting period that ended on 31 December 2016.
The AGM resolved on the remuneration of the company’s Board of Directors and auditors, decided that the number of members on the Board of Directors would be five (5) and elected the company’s Board of Directors. Robert Ingman, Matti Rossi, Leena Saarinen, Tommi Uhari and Kai Öistämö were re-elected as members of Qt Group Plc’s Board of Directors. At its organising meeting held after the AGM, the Board of Directors elected Robert Ingman as its Chairman and Tommi Uhari as the Vice Chairman.
The Annual General Meeting granted the following authorisations to the Board of Directors of Qt Group Plc:
Authorising the Board of Directors to decide on repurchasing the company’s own shares and/or accepting them as collateral
The AGM authorised the Board of Directors to decide on the repurchase and/or acceptance as collateral of a maximum of 2,000,000 of the company’s own shares by using funds in the unrestricted equity.
According to the authorisation, the Board will decide on how these shares are to be purchased. The shares may be repurchased in a proportion other than that of the shares held by the current shareholders. The authorisation also includes the acquisition of shares through public trading organised by Nasdaq Helsinki Ltd in accordance with its and Euroclear Finland Ltd’s rules and instructions, or through offers made to shareholders.
Shares may be acquired in order to improve the company’s capital structure, to finance or carry out acquisitions or other arrangements, to implement share-based incentive schemes, to be transferred for other purposes, or to be cancelled.
The shares shall be repurchased for a price based on the fair value quoted in public trading. The authorisation is valid for 18 months from the issue date of the authorisation, i.e. until 14 September 2018, and it replaces any earlier authorisations on the repurchase and/or acceptance as collateral of the company's own shares.
Authorising the Board of Directors to decide on a rights issue
The AGM authorised the Board to decide on the issuance of a maximum total of 4,500,000 new shares or treasury shares in one or several rights issues pursuant to the pre-emptive subscription rights of the shareholders.
The authorisation is valid until 31 December 2017. The authorisation does not replace any earlier authorisations on share issues and the granting of special rights.
The authorisation includes the Board of Directors’ right to decide on all terms relating to the share issue(s).
Authorising the Board of Directors to decide on a share issue and the granting of special rights entitling to shares
The AGM authorised the Board to decide on a share issue and the granting of special rights pursuant to Chapter 10, Section 1, of the Companies Act, subject to or free of charge, in one or several tranches on the following terms.
The maximum total number of shares to be issued by virtue of the authorisation is 2,000,000. The authorisation concerns both the issuance of new shares as well as the transfer of treasury shares. By virtue of the authorisation, the Board of Directors is entitled to decide on share issues and the granting of special rights waiving the pre-emptive subscription rights of the shareholders (directed issue).
The authorisation may be used in order to finance or carry out acquisitions or other arrangements, to carry out the company’s share-based incentive schemes and to improve the capital structure of the company, or for other purposes decided by the Board of Directors.
The authorisation includes the Board of Directors' right to decide on all terms relating to the share issue and granting of special rights including the subscription price, its payment and its entry into the company's balance sheet.
The authorisation is valid for 18 months from the issue date of the authorisation, i.e. until 14 September 2018, and it does not replace any earlier authorisations on share issues and the granting of special rights. The authorisation does not replace any earlier authorisations on share issues and the granting of special rights.
Based on the authorisation granted by the AGM, the Board of Directors of Qt Group Plc resolved on 14 March 2017 on a rights offering of a maximum of EUR 15.3 million. In the rights offering, the company offered a maximum of 2,974,039 new shares to its shareholders for subscription in proportion to their current shareholding in the company. The subscription price for the offered shares was EUR 5.15 per share.
The company announced the final result of the rights offering in a stock exchange release published on 12 April 2017. A total of 3,431,175 shares were subscribed for in the rights offering. The Board of Directors accepted all primary subscriptions and secondary subscriptions in accordance with the terms and conditions of the offering, with a total of 2,974,039 new shares issued in the rights offering and registered with the Trade Register maintained by the Finnish Patent and Registration Office on 13 April 2017. As a result of the rights offering, the total number of shares in the company increased to 23,792,312.
Events after the review period
The company had no other significant events deviating from normal business operations after the end of the review period.
Risks and uncertainties
The company’s short-term risks and uncertainties are related to potential significant changes in the company’s business operations as well as the retention and recruitment of the personnel required for business development.
Exchange rate fluctuations, particularly between the US dollar and euro, may have a large impact on the development of company’s net sales. Another factor contributing to considerable fluctuation in quarterly net sales and profitability in particular is contract turnaround times which, in the major customer segment, are very long at up to 18 months.
The company’s business risks and preparations for them are also described on the company website at www.qt.io.
Operating environment and market outlook
The company estimates the growth prospects for its business in the next few years as very promising.
The Group’s business development efforts will particularly focus on embedded systems in the automotive sector, digital TV and industrial automation. Areas targeted in product development include value-added features and tools required for building embedded systems.
Sales growth associated with embedded systems will also reflect on the earnings logic. Volume-based license revenue from these sales accumulates over the long term. Consequently, the company anticipates no major impact from embedded systems sales growth on consolidated net sales in 2017.
The company will invest significantly in developing its operations and increasing its sales resources in line with its strategy. The company estimates that its net sales in 2017 will increase by 15–20 per cent year-on-year. Continued strong demand provides a solid foundation for the second half of the year and supports the achievement of our growth targets for the full year. Due to investments in growth, the company’s operating result will show a substantial loss in 2017.
Helsinki, 9 August 2017
Qt Group Plc
Board of Directors
Qt Group will hold a briefing on this half-year report for analysts on Thursday, 10 August 2017 at 11:00 am, in the Eino Leino cabinet of Hotel Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland. Welcome.
The half-year report and CEO’s presentation will be available in the Investors section at www.qt.io from
11:00 am on 10 August 2017.
Juha Varelius, CEO, tel. +358 9 8861 8040