SUPPLEMENT TO FINANCIAL STATEMENT REPORT 27.2.2008
EIRIKUVA DIGITAL IMAGE OYJ ABP FINANCIAL STATEMENT REPORT, JANUARY 1 - DECEMBER
31, 2007
The net sales of Eirikuva Digital Image Oyj (“Eirikuva”) for 2007 amounted to
6.4 million euros, remaining at the 2006 level. In photo production, 48% of the
net sales came from the growing digital image product division. In 2006, digital
image products accounted for 34% of the net sales in photo production. The
EBITDA figure was -609,000 euros (in 2006: 302,000 euros for the parent
company).
Earnings per share came to -3.97 euros (earnings calculated per average number
of shares in 2007). Earnings after taxes were -1.45 million euros. The loss is
partially due to costs resulting from the company's issue of shares and First
North listing, which were larger than expected and incurred in the fourth
quarter. Introducing Eirikuva to a new market required significant investments
as well. In addition, Eirikuva invested in production and service concept
development.
MAIN EVENTS IN 2007
Eirikuva was made a public company, and sales company Eirikuva Nordic AB was
established in Sweden. The company's share capital was increased to 1,408,000
euros, and the total number of shares is now 3,520,000. Also, some of Eirikuva's
long-term loans were converted into share capital and placed in the invested
unrestricted shareholders' equity fund (922,000 euros). Eiri Kehys Oy Ab's
shares were acquired from Amago Capital. Eirikuva was listed with First North on
December 3, 2007.
In Sweden, Eirikuva has achieved a significant market share in less than a year.
MAIN EVENTS IN THE FOURTH QUARTER
Net sales: 1,530,000 euros (in 2006: 1,676,000 euros for the parent company)
EBITDA: -294,000 euros (in 2006: 170,000 euros for the parent company)
Earnings in the fourth quarter: -819,000 euros (in 2006: 100,000 euros for the
parent company)
Earnings per share: -0.63 euros
COMMENTS FROM THE MANAGING DIRECTOR
In the fourth quarter, our operations were strongly focused on service concept
development. The new photo order software proved viable. Demand for value-added
products is increasing heavily. Eirikuva's products have received great
attention and positive feedback on account of their quality. Eirikuva has
introduced new products - Canvas pictures and the Pro album - and expanded the
photo card product family. The Eirikuva kiosk concept has increased the
recognition of the Eirikuva brand in busy marketplaces. Photo orders made via
the kiosks are sent to the photo lab's automatic production system over the
Internet.
In Finland, Eirikuva has concentrated on developing its service concept in
cooperation with its customers. Consumers have discovered Eirikuva kiosk order
stations, whose utilization rate is increasing steadily at, for example,
Eirikuva specialty stores and the Anttila and Stockmann department stores.
Eirikuva has strengthened its market position in Sweden. Eirikuva's photo
services are available from OnOff, Euronics, and ICA Maxi Special stores, as
well as a number of specialty stores all over Sweden.
In late 2007, Eirikuva began cooperation with the Swedish NetOnNet and Svenska
Fotogruppen.
FINANCIAL REVIEW
ACCOUNTING PRINCIPLES FOR FINANCIAL STATEMENTS
This review was prepared in accordance with the FAS model, which meets the
requirements of the Finnish Accounting Act. The calculation principles are the
same as for the 2006 financial statement.
PROFITS AND EARNINGS
Since the industry is still in the throes of the transitional period from analog
to digital image production, Eirikuva Group's earnings in the fourth quarter
came to -819,000 euros (in 2006: 100,000 euros for the parent company).
Earnings before interest, taxes, depreciation, and amortization (EBITDA) in the
fourth quarter amounted to -294,000 euros (in 2006: 170,000 euros for the parent
company). Digital photo products accounted for 48% of the net sales from photos
(34% in 2006).
Building the Eirikuva service concept in new markets has required significant
investments. Most of the investments had to do with design and implementation of
the sales organization, logistics services, and photo order software.
Costs of logistics and raw materials increased from the previous year's levels.
The company has initiated a significant program to cut these costs.
With the machinery investments made in 2007, depreciation increased to 338,000
euros (in 2006: 166,000 euros for the parent company).
ASSETS AND INVESTMENTS
Total assets at the end of the period under review amounted to 3,461,000 euros
(in 2006: 3,351,000 euros for the parent company). The company's equity ratio
was 20% at the end of the period. Investments in capital assets entered on the
consolidated balance sheet totaled 615,000 euros (in 2006: 121,000 euros for the
parent company). Eirikuva Digital Image Oyj Abp's most significant investment in
2007 was for a digital printer, 412,000 euros. Other investments included the
Eirikuva kiosk concept and photo order software.
PERSONNEL
Eirikuva Digital Image Oyj Abp's personnel numbered 63 at the end of the period
under review and averaged 71 over the period. The number of employees in Sweden
was 3. In 2006, the number of personnel of the parent company and subsidiary
Eiri Kehys averaged 87.
GROUP STRUCTURE
Eirikuva Group consists of the parent company Eirikuva Digital Image Oyj Abp and
two subsidiaries, Eiri Kehys Oy Ab (Finland) and Eirikuva Nordic AB (Sweden), of
which the Group gained complete ownership in June 2007.
Eirikuva Digital Image Oyj Abp was established on February 16, 2006, and the
2007 fiscal year was its second.
The consolidated financial statements were prepared using the acquisition cost
method. The Group's internal transactions, receivables, and liabilities were
eliminated.
SHARES AND SHAREHOLDERS
Ten largest shareholders, as of December 31, 2007:
Amago Capital AB (publ.) 2,020,000
Oy Herttaässä Ab 455,500
Possidentes Oy 341,625
Jonas Nordlund 135,875
Blue White Capital Oy 113,875
Troll Capital Oy 112,875
Merja Ailama-Mäkitalo 57,438
Kargol Oy Ab 56,938
Markku Hietamäki 56,938
Juha Kojonen 16,400
PROSPECTS
Eirikuva believes that markets for its special products will grow in 2008. The
company continues to concentrate on the development of its service concept, with
a special focus on new value-added products, the kiosk concept, and easy-to-use
and consumer-friendly photo order software.
Eirikuva has begun an extensive cost savings program, which has included
co-determination negotiations with the personnel. The company's main goals for
2008 are to increase cost-efficiency and optimize internal delivery times.
SHORT-TERM RISKS AND UNCERTAINTIES
The greatest challenges for Eirikuva's operations are changes in general
consumer demand and the competitive environment. The company seeks growth
through, e.g., an increase in the number of customers and the number of
purchases per customer, as well as development of new products and international
operations. Growth management requires investments in production,
administration, internationalization, and recruitment of new personnel.
Developing the service concept and launching new, innovative products quickly
enough is one of the key challenges in the field.
The company's operations are strongly cyclical in nature, and seasonal
fluctuations have a considerable effect on the management of the operations.
This report has been reviewed by the company's auditors.
In Lahti on February 11, 2008
Merja Ailama-Mäkitalo For more information, please contact:
Managing director Merja Ailama-Mäkitalo
Eirikuva Digital Image Oyj Abp Managing director
Business ID: 2018481-2 tel. +358 40 545 3357
Heinolan Vanhatie 25 e-mail: merja.ailama-makitalo@eirikuva.fi
FI-15170 Lahti, Finland www.eirikuva.fi
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| INCOME STATEMENT | Eirikuva | Eirikuva | Eirikuva | Eirikuva |
| | | | Digital | Digital |
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| (x 1,000 euros) | Group | Group | Image Oy Ab | Image Oy Ab |
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| | October 1 | January 1 | October 1 | February 16 |
| | -December | -December | -December | -December |
| | 31, 2007 | 31, 2007 | 31, 2006 | 31, 2006 |
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| NET SALES | 1,530 | 6,438 | 1,676 | 6,468 |
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| Other operating | 11 | 37 | 70 | 142 |
| income | | | | |
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| Materials and | -582 | -2,755 | -607 | -2,539 |
| services | | | | |
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| Personnel costs | -686 | -2,173 | -621 | -2,106 |
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| Depreciation | -97 | -338 | -6 | -166 |
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| Other operating | -567 | -2,156 | -348 | -1,663 |
| expenses | | | | |
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| OPERATING RESULT | -391 | -947 | 164 | 136 |
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| Financing income and | -426 | -504 | -64 | -135 |
| costs | | | | |
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| EARNINGS BEFORE | -817 | -1,451 | 100 | 1 |
| EXTRAORDINARY ITEMS | | | | |
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| Extraordinary items | 0 | 0 | 0 | 0 |
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| EARNINGS BEFORE | | | | |
| APPROPRIATIONS | | | | |
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| AND TAXES | -817 | -1,451 | 100 | 1 |
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| Income tax | -2 | 0 | 0 | -1 |
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| EARNINGS FOR THE | -819 | -1,451 | 100 | 0 |
| PERIOD | | | | |
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| BALANCE SHEET | | | Eirikuva | Eirikuva |
| | | | | Digital |
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| (x 1,000 euros) | | | Group | Image Oy Ab |
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| | | | December | December |
| | | | 31, 2007 | 31, 2006 |
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| Assets | | | | |
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| FIXED ASSETS | | | | |
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| Goodwill | | | 194 | 207 |
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| Other intangible | | | 37 | 8 |
| assets | | | | |
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| Property, plants, and equipment | | 1,387 | 1,056 |
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| Receivables | | | 6 | 0 |
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| TOTAL FIXED ASSETS | | 1,624 | 1,271 |
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| CURRENT ASSETS | | | | |
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| Inventories | | | 700 | 679 |
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| Trade receivables | | | 646 | 667 |
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| Other receivables | | | 9 | 35 |
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| Cash and cash | | | 482 | 699 |
| equivalents | | | | |
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| TOTAL CURRENT ASSETS | | 1,837 | 2,080 |
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| TOTAL ASSETS | | | 3,461 | 3,351 |
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| | | | Eirikuva | Eirikuva |
| | | | | Digital |
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| | | | Group | Image Oy Ab |
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| Shareholders' equity | | | December | December |
| and liabilities | | | 31, 2007 | 31, 2006 |
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| SHAREHOLDERS' EQUITY | | | | |
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| Share capital | | | 1,408 | 8 |
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| Issue of shares | | | 0 | 0 |
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| Invested unrestricted | | 722 | 0 |
| shareholders' equity fund | | | |
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| Profit and loss | | | 0 | 0 |
| account | | | | |
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| Earnings for the | | | -1,452 | 0 |
| period | | | | |
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| TOTAL SHAREHOLDERS' | | | 678 | 8 |
| EQUITY | | | | |
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| LIABILITIES | | | | |
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| Long-term liabilities | | | 1,419 | 1,661 |
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| Short-term | | | 1,364 | 1,682 |
| liabilities | | | | |
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| TOTAL LIABILITIES | | | 2,783 | 3,343 |
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| TOTAL SHAREHOLDERS' EQUITY AND | | 3,461 | 3,351 |
| LIABILITIES | | | |
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| Cash flow statement regarding Eirikuva group | | |
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| EUR | | |
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| Cash flows from operating activities | | |
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| Operating income | -950 | 135 |
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| Adjustments for operating income | 224 | 126 |
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| Change in working capital | 46 | -809 |
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| Interest and expenses paid | 0 | -4 |
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| Interest received | 2 | 1 |
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| Income taxes paid | -2 | -3 |
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| Cash generated from operations | -680 | -554 |
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| Cash flows from investing activities | | |
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| Purchase of tangible and intangible assets | -615 | -1453 |
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| Proceeds from sale of tangible and | 0 | 16 |
| intangible assets | | |
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| Loans granted | -6 | 0 |
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| Net cash used in investing activies | -621 | -1437 |
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| | | |
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| Cash flows from financing activities | | |
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| Issue | 1392 | 0 |
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| Costs of the issue | -420 | 0 |
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| New emissio | 0 | 8 |
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| Changes in short-term liabilities | 399 | 281 |
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| Proceeds from long-term liabilities | 593 | 2460 |
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| Changes in the long-term liabilities | -904 | -59 |
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| Net cash used in financing activities | 1061 | 2690 |
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| Cash and cash equivalents at the beginning | -240 | 670 |
| of the period | | |
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| Cash and cash equivalents at the end of the | 722 | 0 |
| period | | |
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| Net increase (+)/decrease (-) in cash and | 482 | 670 |
| cash equivalents | | |
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| Change in working capital: | | |
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| Increase (-) or decrease (+) in trade and | 17 | -670 |
| other receivables | | |
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| Increase (-) or decrease (+) in inventories | 94 | -679 |
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| Increase (-) or decrease (+) in trade | -65 | 539 |
| payables | | |
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| | 46 | -809 |
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| BUSINESS INDICATORS | Eirikuva | Eirikuva | Eirikuva | |
| | | | Digital | |
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| | Group | Group | Image Oy Ab | |
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| | October 1 | January 1.- | February 16 | |
| | -December | December | - December | |
| | 31, 2007 | 31, 2007 | 31, 2006 | |
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| Net sales | 1,530 | 6,438 | 6,468 | |
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| Operating result | -391 | -947 | 136 | |
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| % of net sales | -26% | -15% | 2% | |
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| Earnings before | -817 | -1,451 | 1 | |
| extraordinary items | | | | |
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| % of net sales | -53% | -23% | 0% | |
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| Earnings for the | -819 | -1,451 | 0 | |
| period | | | | |
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| % of net sales | -54% | -23% | 0% | |
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| Equity ratio | 20% | 20% | 0% | |
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| (Shareholders' equity | | | | |
| * 100) / | | | | |
| total assets | | | | |
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| Earnings per share | -0.63 | -3.97 | 0 | |
| (in euros) | | | | |
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| Earnings for the | | | | |
| period / average | | | | |
| number of shares | | | | |
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| Average number of | 1,306,667 | 365,611 | 100 | |
| shares | | | | |
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| Number of shares | | | | |
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| at the end of the | 3,520,000 | 3,520,000 | 100 | |
| period | | | | |
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