BASWARE FOURTH QUARTER AND YEAR 2007
Summary (last year's corresponding period in parenthesis, unless otherwise
stated.)
Financial Year 2007:
•Net sales EUR 73 270 thousand (59 954 thousand) - growth 22 percent
•Operating profit EUR 7 512 thousand (EUR 8 078 thousand) - decrease by 7
percent
•Operating profit 10 percent (13%) of net sales
•International business operations' share of net sales 48 percent (46%) -
growth 29 percent
•Backlog of SaaS orders not recognized as income EUR 11 112 thousand at the end
of the year
•Earnings per share EUR 0.36 (EUR 0.45)
October-December (Q4):
•Net sales EUR 23 187 thousand (EUR 16 508 thousand) - growth 41 percent
•Operating profit EUR 1 924 thousand (EUR 1 807 thousand) - growth 7 percent
•Operating profit 8 percent of net sales (11%)
•Share of international operations 53 percent of net sales (50%) - growth 48
percent
•Earnings per share EUR 0.10 (EUR 0.05)
Outlook for 2008: Basware expects the growth of net sales for the financial
year to be from 15 to 25 percent compared with the Group's net sales in the
previous year. The first quarter of the year is milder in growth resulting from
the high level of the restated comparative figures for the first quarter of
2007. Operating profit (EBIT) is expected to be from 10 to 15 percent of net
sales.
The Financial Statements have been prepared according to International
Financial Reporting Standards (IFRS).
GROUP KEY FIGURES
10-12/ 10-12/ Change, 1-12/ 1-12/ Change,
EUR thousand 2007 2006 % 2007 2006 %
Net sales 23 187 16 508 40.5% 73 270 59 954 22.2%
Operating profit 1 924 1 807 6.5% 7 512 8 078 -7.0%
% of net sales 8.3% 10.9% 10.3 % 13.5%
Profit before tax 1 888 1 831 3.1% 7 704 8 287 -7.0%
Profit for the period 1 113 526 111.4% 4 112 4 986 -17.5%
Return on equity, % 9.5% 4.8% 8.9 % 15.1%
Return on investment, % 15.6% 16.6% 16.2 % 24.7%
Cash and cash equivalents 7 041 8 975 -21.5% 7 041 8 975 -21.5%
Gearing, % -5.7% -18.4% -5.7 % -18.4%
Equity ratio, % 70.0% 77.5% 70.0 % 77.5%
Earnings per share, EUR 0.10 0.05 111.4% 0.36 0.45 -19.7%
Earnings per share (diluted), EUR 0.10 0.05 111.4% 0.36 0.44 -19.3%
Equity per share, EUR 4.12 3.88 6.2% 4.12 3.88 6.2%
Basware's business operations consist of product sales, maintenance and
support, consulting and services, Software as a Service (SaaS) sales and other
operations. The core of Basware's product sales consists of Basware Enterprise
Purchase to Pay product suite and Basware Basware Financial Management suite.
The Group's reported market areas are Finland, Scandinavia, Europe and other
areas.
Basware's CEO Ilkka Sihvo comments: ”The last quarter of 2007 succeeded well as
a whole. The Finnish Enterprise Purchase to Pay unit as well as the
Scandinavian unit exceeded their objectives and the Financial Management unit
met its objective. Both the product sales as well as service revenue grew well
in the last quarter. During the quarter, we signed several significant
agreements all over the world for both Basware Invoice Processing and Basware
Purchase Management solutions. The operating profit for the whole Group has
developed positively.”
“In 2007, Basware met the financial objectives for net sales growth. The
development of profit was affected by our investments in international growth.
Operating profit fell behind the objective but was still within the guidance.
The Finnish Enterprise Purchase to Pay unit as well as the Scandinavian and
European units exceeded their objectives and the Financial Management unit met
its objectives for the whole year. Of the 2007 net sales, 48% came from outside
of Finland and the growth of international net sales was 29%. Product sales for
the whole year grew strongly, by 24%. We have succeeded in entering into
agreements with even larger organizations, and in 2007 the competitive
situation of our procurement solution improved.”
REPORTING
In conjunction with the 2006 Financial Statements, Basware Group adjusted the
revenue recognition principles regarding license sales as well as the valuation
principles regarding accounts receivables. The company published the restated
figures for 2005 and 2006 on February 1, 2007. The audited Financial Statements
prepared according to the adjusted accounting principles were published on
February 8, 2007. Basware assesses that the adjusted accounting principles have
no effect on the Group's financial performance in the future.
Basware acquired Digital Vision Technologies Ltd on September 10, 2007. Digital
Vision's financial statements are consolidated in the Group financial
statements as of September 1, 2007. This interim report also presents unaudited
pro forma comparative figures for net sales and operating profit in 2007. The
data has been prepared to demonstrate what would have been the Group net sales
and operating profit had the Digital Vision financial statements been
incorporated for the whole financial period.
In the first quarter, a formal bad debt reservation of EUR 1.3 million was
realized in sales receivables. The debt reservation amounts to EUR 789 thousand
(EUR 781 thousand) at the end of the fourth quarter.
Basware reports it Software as a Service (SaaS) revenue separately in the
secondary segment. Software as a Service revenue includes license, maintenance
and services revenue that are invoiced monthly based on an agreement. Software
as a Service agreements typically span several years. The Group also reports
the backlog of SaaS orders not recognized as income. The Company's SaaS sales
are growing and this dilutes net sales growth in short term.
FOURTH QUARTER OCTOBER 1 - DECEMBER 31, 2007
NET SALES OCTOBER-DECEMBER 2007
Basware Group's net sales grew by 41 percent in October-December and were EUR
23 187 thousand (EUR 16 508 thousand).
In the fourth quarter, 32 percent (32%) of net sales consisted of own software
product sales and the product sales grew by 43 percent. SaaS sales represented
2 percent of net sales in the fourth quarter. Maintenance revenue represented
29 percent (32%) of net sales and grew by 27 percent. Consulting and services
revenue represented 37 percent (36%) of net sales and grew by 44 percent.
Value added resellers provided a net share of 14 percent (24%) or EUR 1 046
thousand of product sales in October-December which represents 9 percent (15%)
of international operations' total net sales.
The international share of Basware's net sales was 53 percent (50%) in
October-December. International operations grew by 48 percent.
FINANCIAL PERFORMANCE OCTOBER-DECEMBER 2007
Basware Group's operating profit grew by 7 percent in October-December and was
EUR 1 924 thousand (EUR 1 807 thousand). Operating profit represented 8 percent
(11%) of net sales.
The Company's fixed costs were EUR 18 546 thousand (EUR 13 521 thousand) in the
quarter. The costs have grown by 37 percent compared with the previous year and
by 51 percent compared with the previous quarter. The increase in costs was
mainly attributable to the growth of personnel resulting from the acquisition.
The parent company has outstanding sales receivables from companies belonging
to Basware Group. The elimination of these intercompany transactions causes
foreign exchange difference that is reported in the Group profit and loss
statement. Foreign exchange differences for the Group reported in cost of sales
totaled EUR -656 thousand (EUR -139 thousand). Majority of this was reported in
the last quarter.
The Financial Statements include a total of EUR 233 thousand of non-recurring
expenses related to the Digital Vision integration. These consist of write-off
of capitalized research and development expenses (EUR 85 thousand), of doubtful
receivables related to the discontinuation of third party product sales (EUR
84 thousand) and of a periodised integration bonus (EUR 64 thousand).
In the fourth quarter, product development costs were EUR 4 532 thousand (EUR 3
284 thousand), of which EUR 1 217 thousand or 27 percent have been capitalized.
The amortization on development costs was EUR 264 thousand (EUR 170 thousand).
The Company's profit before taxes was EUR 1 888 thousand (EUR 1 831 thousand)
in the quarter and profit for the period was EUR 1 113 thousand (EUR 526
thousand). Earnings per share were EUR 0.10 (EUR 0.05).
BUSINESS OPERATIONS OCTOBER-DECEMBER 2007
General economic situation in the main market areas of Basware remains
relatively good. Research institutions predict that the annual growth of the IT
market will be approximately 5-7 percent in the Nordic countries, Western
Europe and United States. The competitiveness of the Basware software is
estimated to have slightly improved. Basware is named strong newcomer in the
international eProcurement solutions market in a report by the independent
research firm Forrester Research, Inc. and ranked among five leading vendors
globally. According to Forrester, Basware is a leading electronic invoice
presentment and payment (EIPP) vendor with the most revenues and largest
installed base.
Basware Enterprise Purchase to Pay operations grew by 41 percent in the quarter
and represent 90 percent (90%) of total net sales. The Company estimates that
the demand for procurement solutions is increasing. The demand for automated
invoice processing solutions and travel and expense management solutions has
remained steady.
In Enterprise Purchase to Pay units, new customers include Landesmesse
Stuttgart GmbH in Germany, Heineken Poland, Elcoteq Corporation, SKF in Sweden,
Leiras, The University of Antwerp, Det Norske Veritas, Romande Energie in
France, Heatcraft Australia Pty Ltd, Kerry Ingredients Australia and a large
international industrial and services company in the United Kingdom.
Approximately 2 million invoices were transmitted through the eInvoicing
service of Basware Einvoices Ltd, operating in the Nordic countries. The
invoice volume grew by 31 percent during the quarter compared with the same
period last year. A total of 58 new customer agreements were signed during the
quarter, of which international operations represented 22 percent. Basware
Einvoices Oy signed five new e-Invoice operator agreements with Nordic and
European operators. In addition to these agreements, Basware Einvoices Oy
signed an operator agreement with German operator Crossgate, which strengthens
the company's role in international e-invoicing markets, especially in Central
Europe. Net sales of Basware Einvoices Oy are included in the Enterprise
Purchase to Pay net sales.
The Financial Management operations (Basware FIMA Oy) grew by 38 percent in the
quarter and represented 10 percent (10%) of net sales. The demand for Financial
Management software has been moderate especially for the planning and analyzing
solutions. The unit's new customers in Finland include The City of Espoo,
A-Katsastus, Lindström, Seutukeskus Oy Häme and Folkhälsan. Additionally, the
Financial Management unit signed an agreement with Russia-based LSR for the
delivery of Basware IFRS Consolidation solution.
Reseller Channel and Partners
Reseller operations through business partners are an important part of
international operations. The focus of partner activities in the third quarter
was on the execution of actions defined in the partner plans. The aim is to
identify the most potential companies among the partners and increase their
expertise and commitment to the Basware solutions.
Eight new reseller agreements were signed during the third quarter of which
Velocity, Doxtek and MinMax Technologies in the United States, Dimo Gestion,
Teampartners and Linkvest in France as well as Wola Info in Poland and Addcon
IT in Sweden. Basware had a total of 70 international resellers at the end of
the quarter, operating in 33 countries. Outside the Nordic countries, Basware
has 41 partners in Europe. Basware also has an extensive reseller network in
Finland.
Value added resellers provided a net share of 14 percent (24%) or EUR 1 046
thousand of product sales in October-December.
Nordic
Basware's Nordic organization includes the Enterprise Purchase to Pay and
Financial Management units in Finland, as part of the parent company, as well
as the Scandinavian (Sweden, Denmark and Norway) unit. All the Basware
Enterprise Purchase to Pay and Financial Management products are sold in the
Nordic countries, apart from the payment solutions which are currently sold
only in Finland. Russian operations are included in the Finland segment.
Sales and other business operations are mainly handled by the own organization.
There are altogether 28 resellers and 17 application service providers selling
payment solutions in Finland. There are four Enterprise Purchase to Pay
business partners in Sweden and one in Iceland. In Russia, there is one
Financial Management business partner and two Enterprise Purchase to Pay
partners.
As a whole, Basware's Nordic operations grew steadily during the last quarter
and exceeded the objectives. The Finnish unit exceeded its objective and the
Financial Management unit met its objective. The growth of net sales in the
Finland segment was 31 percent and 33 percent in the Scandinavia segment.
Europe
Outside of Scandinavia, Basware has European subsidiaries in the Netherlands,
Germany, the United Kingdom and France. In addition, there are partner
operations in 10 other countries. There are altogether 41 resellers in the
area.
As a whole, the European business area met the objective for the quarter. The
net sales of the area grew by 108 percent in October-December compared with the
same quarter last year. The sales consisted mainly of the Basware Invoice
Processing solution. The units in United Kingdom and France exceeded their
objectives for the quarter. The Dutch unit met their objective and the German
unit fell slightly behind their objective. The Data Capture business operations
met the EUR 2 million net sales objective for the four consolidated months.
Other Areas
Outside of Europe, Basware has a US subsidiary which focuses on the sales of
the Enterprise Purchase to Pay solutions in the United States and Canada. In
addition, there are eight resellers in the area. New partner agreements were
signed with Velocity, Minmax Technologies and Doxtek during the fourth quarter.
The operations of Basware, Inc. fell behind the objective for the quarter.
Other areas segment decreased in October-December by 8 percent compared with
the same quarter last year.
The sales in other areas outside Europe, mainly in Australia, are handled
through value added resellers. Their net sales are entered as a part of the
Finnish parent company's sales in segment reporting. There are four resellers
in the Asia Pacific region. The region's net sales exceeded the objective for
the period.
FINANCIAL PERIOD JANUARY 1 - DECEMBER 31, 2007
NET SALES
Basware Group's net sales grew by 22 percent during the financial year and were
EUR 73 270 thousand
(EUR 59 954 thousand). The pro forma net sales for the financial period would
have been EUR 77 754 thousand had the Digital Vision net sales been
incorporated for the whole financial period.
The Company's product sales grew by 24 percent in the period and were 33
percent (32%) of net sales. Maintenance revenue and support services related to
maintenance grew by 17 percent and represented 30 percent (31%) of net sales.
Consulting and services revenue grew by 19 percent and represented 35 percent
(37%) of net sales. In the financial period SaaS sales represented 2% percent
of net sales. The backlog of SaaS orders not recognized as income was EUR 11
112 thousand.
Value added resellers provided a net share of 15 percent (18%) or EUR 3 579
thousand (EUR 3 465 thousand ) of total product sales in the financial year,
which represents 10 percent (13%) of international operations' total net sales.
The international share of Basware's net sales was 48 percent (46%).
International operations grew by 29 percent. Domestic operations grew by 17
percent.
The geographical division of net sales (primary segment by the location of
assets):
Net sales
(EUR thousand) 10-12/ 2007 10-12/ 2006 Change, % 1-12/ 2007 1-12/
2006 Change, %
Finland 14 278 10 918 30.8 48 849 41 028 19.1
Scandinavia 5 782 4 354 32.8 16 797 14 698 14.3
Europe 5 652 2 714 108.3 15 081 8 985 67.8
Other 1 030 1 119 -7.9 3 460 3 512 -1.5
Sales between segments -3 554 -2 598 -36.8 -10 917 -8 269 -32.0
Group total 23 187 16 508 40.5 73 270 59 954 22.2
The geographical division of net sales by the location of customers:
Net sales
(EUR thousand) 10-12/ 2007 10-12/ 2006 Change, % 1-12/ 2007 1-12/
2006 Change, %
Finland 10 851 8 147 33.2 37 969 32 557 16.6
Scandinavia 5 549 4 415 25.7 15 911 14 129 12.6
Europe 5 422 2 705 100.4 14 785 9 421 56.9
Other 1 366 1 241 10.0 4 604 3 848 19.7
Group total 23 187 16 508 40.5 73 270 59 954 22.2
FINANCIAL PERFORMANCE
Basware's operating profit decreased by 7 percent in the financial year and
totaled EUR 7 512 thousand (EUR 8 078 thousand). Operating profit represented
10 percent (13%) of net sales. The pro forma operating profit for the financial
year would have been EUR 7 737 thousand had the Digital Vision operating profit
been incorporated for the whole financial year.
The Company's fixed costs were EUR 59 543 thousand (EUR 47 427 thousand) in the
financial year. Growth compared with the previous year was 26 percent.
Personnel costs made up 68 percent or EUR 40 600 thousand (EUR 32 953 thousand)
of the fixed costs. The increase of personnel expenses resulting from the
acquisition of Digital Vision totaled EUR 909 thousand. Fixed costs include the
bad debt reservation of EUR 789 thousand (EUR 781 thousand) realized in sales
receivables.
Research and development costs totaled EUR 13 172 thousand (EUR 10 925
thousand) in the financial year, of which EUR 3 061 thousand or 23 percent
(23%) were capitalized during the period. The amortization on development costs
was EUR 983 thousand (EUR 461 thousand). Research and development costs made 18
percent (18%) of net sales. Costs grew by 21 percent (76%) during the financial
year.
The division of operating profit geographically (primary segment by the
location of assets):
Operating profit
(EUR thousand) 10-12/ 2007 10-12/ 2006 Change, % 1-12/ 2007 1-12/ 2006 Change, %
Finland 2 335 3 243 -28.0 12 706 12 314 3.2
Scandinavia 873 20 4 360.0 333 -45 832.0
Europe -1 078 -910 -18.5 -3 662 -2 831 -29.3
Other areas -160 -531 69.9 -1 751 -1 297 -35.0
Operating profit between segments -47 -15 -210.9 -114 -62 -84.2
Group total 1 924 1 807 6.5 7 512 8 078 -7.0
The Company's finance income and finance expenses were EUR +191 thousand (EUR
+209 thousand). The Company's profit before tax was EUR 7 704 thousand (EUR 8
287 thousand). Taxes for the period totaled EUR 3 591 thousand (EUR 3 301
thousand). Profit for the period was 6 percent (8%) or EUR 4 112 thousand (EUR
4 986 thousand) of net sales. Earnings per share were EUR 0.36 (EUR 0.45).
FINANCE AND INVESTMENTS
Basware Group's total assets on the balance sheet at the end of the financial
period were EUR 67 722 thousand (EUR 57 558 thousand). The Company's cash and
liquid assets were EUR 7 041 thousand (EUR 8 975 thousand), of which cash and
cash equivalents were EUR 7 010 thousand (EUR 3 012 thousand) and financial
assets at fair value through profit or loss were EUR 31 thousand (EUR 5 963
thousand).
During the period, a short-term loan totaling EUR 4 million was withdrawn to
in part finance the Digital Vision acquisition.
Cash flows from operating activities were EUR 4 387 thousand (EUR 5 657
thousand) in the period. Cash flows from investments were EUR -7 969 thousand
(EUR -6 114 thousand).
Equity ratio was 70.0 percent (77.5%) and gearing was -5.7 percent (-18.4%).
The Company had a total of EUR 4 334 thousand (EUR 758 thousand),
interest-bearing liabilities, of which current liabilities accounted for EUR 4
314 thousand (EUR 428 thousand). Return on investment was 16.2 percent (24.7%)
and return on equity 8.9 percent (15.1%).
The acquisition cost of Digital Vision, acquired in September 2007, totaled EUR
9 232 thousand. Of the amount, a total of EUR 923 thousand, including deferred
tax liabilities, has been allocated to intangible assets in respect of customer
relationships and products. EUR 7 147 thousand has been recorded as goodwill.
The Company's capital expenditure, resulting from regular, additional and
replacement, investments resulting from growth, was EUR 817 thousand (EUR 597
thousand) in the period. Gross investments which include, in addition to the
previously mentioned, the capitalized research and development costs and the
acquisition of Digital Vision, totaled EUR 12 220 thousand (EUR 25 315
thousand).
The premises acquired in conjunction with the acquisition of Analyste in 2006
were sold during the financial period. The sales of the business premises had a
EUR 439 thousand one off improvement on the full year result of Basware
Corporation.
As a result of impairment testing, there are no indications of impairments of
assets. Amortizations of intangible assets were EUR 2 050 thousand (EUR 1 466
thousand), of which amortizations related to acquisitions totaled EUR 712
thousand (EUR 659 thousand).
RESEARCH, DEVELOPMENT AND NEW PRODUCTS
Basware's research and development units are located in Finland, Norway and
India. Altogether 152 people (138) or 23 percent of the personnel worked at the
units in the end of 2007. As a result of the acquisition of Digital Vision,
Basware's research and development operations extended to the city of Shimla in
India, employing currently 13 people.
Basware's research and development costs were EUR 13 172 thousand (EUR 10 925
thousand) in the period and made up 18 percent (18%) of net sales. Research and
development costs grew by 21 percent (76%) compared with the same period last
year.
In 2007, Basware was the first in the world to introduce a mobile solution,
Basware Mobile Client, for controlling the purchase to pay process. With the
solution, it is possible to approve purchase invoices and purchase requisitions
with a mobile device.
During 2007, the Enterprise Purchase to Pay suite was complemented with new,
innovative solutions especially for procurement. The Company developed a
sourcing solution, Basware RFx Management, which was piloted among the existing
customer base. The new solution helps customer control their sourcing projects
and enables electronic bidding processes. Basware Contract Lifecycle Management
was also piloted as a new solution. These new solutions automate and support
the efficiency of the entire purchase to pay process. Moreover, they ensure the
compliance of the bidding process and help customers benefit from agreement
terms. Both solutions integrate seamlessly with Basware Invoice Processing and
Basware Purchase Management.
For the Financial Management solutions, new versions of Basware Group
Consolidation and the related Basware IFRS Package were launched. Demand for
the new, international version of the IFRS package has been the strongest in
Russia where the solution is sold under the name of Basware IFRS Consolidation.
New versions were also launched of Basware Cash Flow, Basware Business Planning
and Basware Transparent Reporting. A new version of the public sector reporting
package, related to the Basware Group Consolidation solution, was launched
during the year. The new version enables e.g. automated calculation of key
figures.
In 2007, Basware launched Unicode support for all its Enterprise Purchase to
Pay solutions. The standard unifies different encoding systems, enabling the
use of several different character sets in one database installation. This is a
significant feature for international companies operating for example in Asia
or Russia.
PERSONNEL
Basware employed 580 (513) people in average in the period and 658 (528) people
at the end of the period. The number of personnel grew by 25 percent compared
with the same period last year and grew by 4 percent compared with the previous
quarter of the year. The acquisition of Digital Vision increased the number of
personnel by 52 people.
The share of personnel working in foreign units has increased compared with
last year. At the end of the period, 41 percent (34%) of the Basware personnel
worked outside of Finland and 59 percent (66%) in Finland.
The average age of the employees is 35.6 (35.4) years. 32 percent of them hold
a Master's degree and 43 percent a Bachelor's degree. 29 percent of the
personnel are women and 71 percent men.
For incentive purposes, the Company has a bonus program that covers the whole
personnel. During the financial period, the Company also had two on-going
warrant programs for the Group's key personnel.
Geographical distribution of personnel:
Personnel
(employed, in average) 10-12/ 2007 10-12/ 2006 Change, % 1-12/ 2007 1-12/
2006 Change, %
Finland 383 345 11.2 367 346 6.0
Scandinavia 98 93 5.8 96 89 8.5
Europe 142 66 114.1 93 62 48.8
Other areas 28 21 33.9 25 17 50.2
Group total 651 524 24.2 580 513 13.1
BUSINESS OPERATIONS
General economic situation in the main market areas of Basware remains
relatively good. Research institutions predict that the annual growth of the IT
market will be approximately 5-7 percent in the Nordic countries, Western
Europe and United States. The competitiveness of the Basware software is
estimated to have slightly improved. Basware is named strong newcomer in the
international eProcurement solutions market in a report by the independent
research firm Forrester Research, Inc. and ranked among five leading vendors
globally. According to Forrester, Basware is a leading electronic invoice
presentment and payment (EIPP) vendor with the most revenues and largest
installed base.
International share of Basware Group's net sales was 48 percent (46%) and
international operations grew by 29 percent. In the end of the period the
Company had software installations in over 50 countries.
Enterprise Purchase to Pay operations grew by 23 percent during the year and
represented 89 percent (88%) of total net sales. A total of 54 percent (51%) of
net sales came from outside of Finland. The Company estimates that the demand
for procurement solutions continues to increase. The demand for automated
invoice processing solutions and travel and expense management solutions has
remained steady.
In Enterprise Purchase to Pay units, new customers include Elcoteq Corporation,
The City of Espoo, Suomen Terveystalo Oyj, Tapiola Bank, Leiras, Sato Oyj,
Toyota Material Handling Finland and Maxit Oy Ab, DW Beton GmbH and Keramag -
Keramische Werke AG in Germany, Martinair in the Netherlands, Rolls-Royce
Marine AS in Norway, SKF in Sweden, Gannett Co. in the United States, BNP
Paribas SA in France, Continental AG, C. Steinweg Handelsveem, Scottish &
Newcastle in the United Kingdom, Ernst & Young in France, ING Direct Spain,
Nykredit A/S in Denmark, Fairwinds Credit Union in the United States, the
University of Antwerp, Det Norske Veritas, Romande Energie in France, Heatcraft
Australia Pty Ltd and Kerry Ingredients Australiassa.
Several new Software as a Service (SaaS) agreements were signed during the last
quarter, the most significant agreements being the Finnish State Treasury and
the City of Oulu region in Finland for Basware Purchase Management solution. At
the State Treasury, the Basware solution will be used by the entire Finnish
state administration. In addition to Basware Purchase Management, the City of
Oulu region will also implement the new sourcing solution, Basware RFx
Management.
During the period, a total of 6.9 million invoices were transmitted through the
eInvoicing service of Basware Einvoices Oy operating in the Nordic countries.
The invoice volume grew by 37 percent (37%). A total of 322 new customer
agreements were signed during the period, of which international operations
represented 20 percent. Basware Einvoices Oy signed ten new e-Invoice operator
agreements with Nordic operators during the period. In addition to these
agreements, Basware Einvoices Oy became a member of the HUB Alliance
e-Invoicing community, operating in the United Kingdom. This strengthens the
company's role in international e-Invoicing markets, especially in Central
Europe and in the United States. Net sales of Basware Einvoices Oy are included
in the Enterprise Purchase to Pay net sales.
The Financial Management operations (Basware FIMA Oy) grew by 18 percent in the
period and represented 11 percent (12%) of the Group's net sales. The demand
for Financial Management software has been moderate especially for the planning
and analyzing solutions. The unit's new customers in Finland include The City
of Espoo, A-Katsastus, Lindström, Seutukeskus Oy Häme, Folkhälsan, Lännen
Tehtaat Oyj, Fastems Oy Ab, Incap Oyj and Lemminkäinen Oyj. During the period,
the Financial Management unit signed an agreement with Russia-based IES Holding
and LSR for the delivery of Basware IFRS Consolidation solution.
Reseller Channel and Partners
Reseller operations through business partners are an important part of
international operations. The focus of partner activities in 2007 was on the
execution of actions defined in the partner plans.
The aim is to identify the most potential companies among the partners and
increase their expertise and commitment to the Basware solutions. The Group
has altogether 70 partners globally, operating in 33 different countries.
In June 207, Basware signed an international reseller agreement with DICOM
Group, a leading provider of data capture solutions. As a result of the
cooperation, Basware's product portfolio was complemented by DICOM Group's
Ascent® Capture sekä Ascent®Xtrata Pro solutions. Basware is thus able to offer
its customers a more extensive solution for invoice processing.
In 2007, Basware focused on operating with selected technology providers
(DICOM, Microsoft, Oracle) in specific geographic areas. An extensive partner
program was prepared during 2007, to be launched in January 2008. In addition,
channel responsibilities were changed to better serve focused partner
operations.
In 2007, a net share of 15 percent (18%) of product sales has been achieved
through the partner network which represents 10 percent (13%) of international
operations' net sales.
Nordic
Basware's Nordic organization includes the Enterprise Purchase to Pay and
Financial Management units in Finland, as part of the parent company, as well
as the Scandinavian (Sweden, Denmark and Norway) unit. All the Basware
Enterprise Purchase to Pay and Financial Management products are sold in the
Nordic countries, apart from the payment solutions which are currently sold
only in Finland. Russian operations are included in the Finland segment.
Sales and other business operations are mainly handled by the own organization.
There are altogether 28 resellers and 17 application service providers selling
payment solutions in Finland. There are four Enterprise Purchase to Pay
business partners in Sweden and one in Iceland. In Russia, there is one
Financial Management business partner and two Enterprise Purchase to Pay
partners.
As a whole, Basware's business units in Finland and Scandinavia exceeded the
sales objective for the financial year. The Finnish Enterprise Purchase to Pay
unit and Scandinavian units both exceeded their objectives. The Financial
Management unit met its objective. The growth of net sales in the Finland
segment was 19 percent. The growth of net sales in the Scandinavia segment was
14 percent.
Europe
Outside of Scandinavia, Basware has European subsidiaries in the Netherlands,
Germany, the United Kingdom and France. In addition, there are partner
operations in 10 other countries. There are altogether 41 resellers in the
area.
As a whole, the European business area met the objective for the financial
year. The net sales of the area grew by 68 percent in the financial year
compared with the same period last year. The sales consisted mainly of the
Basware Invoice Processing solution. The units in the Netherlands and France
clearly exceeded the objectives the financial year. The unit in United Kingdom
met its objective and the German unit fell slightly behind its objective.
Other Areas
Outside of Europe, Basware has a US subsidiary which focuses on the sales of
the Enterprise Purchase to Pay solutions in the United States and Canada. In
addition, there are eight resellers in the area; Tallega, Xerox USA, Xerox
Canada, RPIC, Kofax, Velocity, Minmax Technologies and Doxtek. The operations
of Basware, Inc. fell behind the objective for the financial year.
Other areas segment decreased in the financial period by 1 percent compared
with the same period last year.
The sales in other areas outside Europe, mainly in Australia, are handled
through value added resellers. Their net sales are entered as a part of the
Finnish parent company's sales in segment reporting. There are four resellers
in the Asia Pacific region. The region's net sales fell slightly behind the
objective for the financial year.
NEAR FUTURE RISKS AND RISK MANAGEMENT
According to Basware's risk management model, Basware has divided the risks
into six categories: risks related to business operations, products, personnel
as well as legal, financial and data security risks. Basware takes risks that
are a natural part of the strategy and objectives. These risks are managed and
reduced in various ways.
As part of Basware's risks and business uncertainties in the near future,
Software as a Service (SaaS) based services instead of license agreements may
affect the Company's short term net sales growth.
General economic uncertainty has increased. According to research institutions,
the global enterprise software market continues to grow. The market growth in
Asia Pacific and Europe is estimated to compensate the decline of the US
market.
The company operates in several areas outside the Euro zone, the most
significant of which being Sweden, Norway, United Kingdom and United States.
The company is exposed to exchange rate risks in these countries through
intra-company trade, exports and imports as well as through funding of foreign
units and currency denominated equities. The Group did not realize hedging for
currency changes during the financial year as the currency risks were not
considered significant.
There have been no other significant changes in Basware's risks and
uncertainties during the financial period.
Risk management at Basware is guided by legal requirements, business
requirements set by the owners of the company as well as expectations of the
customers, personnel and other important interest groups. The goal of risk
management is to systematically and extensively identify and acknowledge the
risk involved in the operations as well as to make sure that the risks are
appropriately managed when making business decisions. The company's risk
management supports the attainment of strategic goals and ensures the
continuity of business operations. Basware takes risks that are a natural part
of the strategy and objectives. The Company is not ready to take risks that
might endanger the continuity of operations or that are uncontrollable or would
significantly harm the Company's operations.
In the process of risk management, the goal is to identify and evaluate the
risks, after which a risk-specific plan is drawn up and concrete action is
taken. These actions may include, for example, avoidance of the risk,
diminishment of the risk by different means or transference of the risk by
insurance or agreements. According to the Company's risk management process,
the Board of Directors receives annually a report of the most significant risks
discovered during risk mapping. The Board reviews the risks from the
shareholder value's perspective. Risk management does not have a separate
organization within the Company but its responsibilities follow the
distribution of liability throughout the organization and operations. Basware
has divided the risks into six categories: risks related to business
operations, products, personnel as well as legal, financial and data security
risks. Each group has a designated person in charge. The essential risks have
been recognized and measures for preparing for them undertaken.
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
Basware announced on September 10, 2007 that is has acquired the entire share
capital of Digital Vision Technologies Ltd:n ('Digital Vision'). Acquisition
price amounted to EUR 9.2 million. The acquired company was owned by local
investors and the current management of the company that continued to be
employed by the company. The acquisition increased Basware's net sales by EUR 2
million in 2007.
The Company established a branch in Singapore in September 2007 to strengthen
the reseller network in Asia Pacific region.
Basware incorporated its Financial Management unit on August 1, 2007. The new
company is called Basware FIMA Oy. The company develops and provides off the
shelf software solutions as well as consulting services for business planning,
reporting and group consolidation. The aim is to strengthen the market
leadership in Finland and gain significant market share in the countries where
the transition to IFRS reporting is about to take place.
ENVIRONMENT AND CORPORATE RESPONSIBILITY
The direct environmental impacts of Basware's operations are fairly minimal.
Basware's solutions promote paperless operations and financial management in
the customer organizations which in part can contribute to the decrease of
office waste. The corporate headquarters in Espoo, Finland, follow an
environmental management system that has been granted a WWF Green Office
Certificate. The Green Office system aims at supporting everyday actions that
save energy and raw material. Within the framework of the system, energy
consumption and material consumption of the office is measured. The Company
continued its cooperation with Plan Finland as part of its social
responsibility program. Initiated in 2002, Basware supports the living
conditions and education of 14 children in developing countries. Additionally
the Company has supported two development projects through the Plan's
specialized development programs.
OTHER EVENTS OF THE FINANCIAL PERIOD
Basware Corporation's Annual General Meeting (AGM) on February 26, 2007 adopted
the Financial Statements of 2006 and discharged the members of the Board of
Directors and the CEO from liability. The AGM resolved, according to the
Board's proposition, to distribute a dividend of EUR 0.15 per share, a total of
EUR 1 720 218.60 for 2006.
Strategy
Basware's strategic objectives in 2007-2010 are 20-40 percent annual growth in
net sales and a profit margin of 10-20 percent. Basware seeks rapid and
profitable growth from is strategic market areas, new markets, through new
distribution channels and from new products. Basware's business operations in
2007-2010 are profitable. Business operations are profitable in the mid-term
also in the Company's strategic markets, in the United States, United Kingdom
and France. Basware focuses on Enterprise Purchase to Pay operations.
Vision
Basware's vision is that by 2010 the company is recognized as the leading
software company for Enterprise Purchase to Pay software solution suite in all
of its key markets. Basware is known for high customer satisfaction and
innovativeness as well as being a credible and secure business partner for the
customers. Basware has a focused and unique Enterprise Purchase to Pay
software solution suite for the global marketplace. Its packaged software
products are easy to use and fast to implement and have one million end users
in fifty countries by 2010. Basware's presence covers all major markets
worldwide with more than ten subsidiaries and 150 reseller partners.
Strategic Projects
Basware reviewed its growth strategy and introduced five strategic projects
that were approved by the Board of Directors in October 2007. The strategic
projects aim at reaching the Company's targets and set the direction for
operations. Through these five strategic projects, Basware proceeds towards its
2010 vision.
Dominating the US
Basware aims at reaching a dominating position in the US purchase to pay
markets. Basware seeks strong growth in the United States that holds excellent
growth potential for the Company. The United States is globally the most
significant market area for enterprise software solutions but electronic
invoice processing and procurement solutions are still in the beginning of
their lifecycle. Basware invests heavily in building the sales organization as
well as the reseller network in the United States.
Conquer the base
Basware continues on a steady growth path in its more mature markets where
customer satisfaction is improved through an extensive service concept and the
development of value-added modules that better meet customer requirements
continues. The service concept will first be implemented in the Nordic markets
after which it will be implemented also in other market areas.
Must-have brand and thought leadership
Basware invests heavily in improving the Company's image and brand in its
strategic markets. The Company will reach a global opinion-leader status in the
purchase to pay arena. Thought leadership is based on Basware's ground-breaking
product development and on the leading purchase to pay product suite. Basware
has the most extensive, easy-to-use and fast to implement product suite in the
market.
Five global giants
The Company seeks rapid and profitable growth by cooperating with large,
international corporations. Large corporations hold significant growth
potential in the purchase to pay market. In 2007, Basware signed more
agreements with international corporations than in previous years. Basware aims
at increasing its solutions' performance so that they fit the needs of large
organizations. Basware's competitive advantage lies in an extensive,
easy-to-use product family. The Company's aim is to sign customer agreements
with at least five major international organizations annually.
Joint forces
As a mid-sized, international software company, Basware seeks rapid growth from
strategic and new markets through a reseller network. Basware deepens the
cooperation with resellers in all its market areas. The cooperation is
continuously developed and partners are offered high quality training. At the
same time, the reseller channel is strengthened significantly. The company had
resellers in over 30 countries at the end of 2007.
MANAGEMENT AND AUDITOR
Ilkka Sihvo acted as the CEO of the Company in 2007. The CEO is in charge of
the day-to-day management of the Company in accordance with the instructions
and orders given by the Board, as well as by the Companies Act. The Annual
General Meeting on February 26, 2007 elected six members to the Board of
Directors. Kirsi Eräkangas, Ossi Pohjola, Antti Pöllänen and Hannu Vaajoensuu
were re-elected to the Board. No new members were elected to the Board. In its
first meeting on February 26, 2007, the Board elected Hannu Vaajoensuu as
Chairman of the Board and Kirsi Eräkangas as Vice Chairman. In 2007, the
auditor of Basware was Deloitte & Touche, Authorized Public Accountants, with
APA Mikael Paul in charge and APA Teppo Rantanen as his deputy.
SHARE AND SHARE CAPITAL
There were no changes to the Company's share capital during the financial
period. At the end of 2007, the Company's share capital was EUR 3 440 437.20
and the number of shares 11 468 124.
Warrant Programs
Basware has currently two valid warrant programs.
Warrant Program 2006
The Annual General Meeting on February 15, 2006 approved the new warrant
program. Based on the program, a maximum of 300 000 warrants can be granted to
the key personnel of Basware Group, each warrant entitling to subscribe one
Basware share. The warrants of Warrant Program 2006 are divided into three
series, each having an own subscription period as follows: April 1, 2008-March
31, 2009,April 1, 2009-March 31, 2010 and April 1,2010-March 31, 2011.. The
subscription prices of the shares correspond to the volume-weighted average
share price of the Company in January-March of 2006, 2007 and 2008. The terms
and conditions of the Warrant Program 2007 were published as a stock exchange
release on April 10, 2006.
Warrant Program 2007
The Annual General Meeting on February 26, 2007 approved the new warrant
program. Based on the program, a maximum of 200 000 warrants can be granted to
the key personnel of Basware Group, each warrant entitling to subscribe one
Basware share. The warrants of Warrant Program 2007 are divided into two
series, each having an own subscription period as follows: April 1, 2009-March
31, 2010 and April 1, 2010-March 31, 2011. The subscription prices of the
shares correspond to the volume-weighted average share price of the Company in
January-March of 2007 and 2008. The terms and conditions of the Warrant Program
2007 were published as a stock exchange release on February 26, 2007.
Authorization to resolve on share issue
The Annual General Meeting authorized the Board to resolve on the issuance of a
maximum of
2 293 624 shares and on the conveying of a maximum of 1 146 812 shares in
possession of the Company in one or more installments, either against pay or
free of charge.
The new shares can be issued and the Company's own shares conveyed either
against payment or for free to the Company's shareholders in proportion to
their holding or by means of a directed issue, deviating from the pre-emptive
rights of the shareholders provided that from the Company's perspective there
are important financial grounds for it, such as enabling business arrangements
and company acquisitions, company's capital management, personnel incentive
program or other reasons for developing the Company's business activities.
The authorization also includes the right to grant warrants and other special
rights to receive new shares in the company or Basware shares held by the
company against payment such that either the share subscription price will be
paid in cash or the subscriber's receivables will be offset against the
subscription price.
The authorization also includes the right to resolve on a free issue to the
Company itself. The amount of the shares issued to the Company can be a maximum
of 1 146 812 shares, including shares acquired based on the authorization or
the previously acquired own shares of the Company.
The subscription prices of new shares and the sum paid for the own shares will
be recorded in the fund for invested non-restricted equity.
The authorization is valid until March 31, 2008.
Authorization to resolve on acquiring the Company's own shares
The Board is authorized to resolve on the acquisition of a maximum of 1 146 812
own shares. The new shares are acquired at the Helsinki Stock Exchange and can
either be held by the Company, nullified or conveyed further. The authorization
for acquisition is valid until March 31, 2008.
Authorization to resolve on an extraordinary dividend distribution
The Board is authorized to resolve on an extraordinary dividend distribution
totaling a maximum of EUR 1 000 000, distributed from the Company's
distributable funds.
The authorization is in effect until the start of the following Annual General
Meeting.
Shareholders
Basware had 17 535 (19 759) shareholders at the end of the year.
Nominee-registered holdings accounted for 12.3 percent of the total number of
shares. The Company received one notice of change in ownership during the
financial period. The Company applies the Guidelines for Insiders issued by the
Board of Directors of the Helsinki Stock Exchange on January 1, 2006 as well as
the Recommendation on Corporate Governance with the exceptions mentioned in the
Company's Corporate Governance Statement. The statement can be found in the
Investors section of the Company's website.
Share price and trade
During 2007, the highest price of the share on the Nordic Exchange Helsniki was
EUR 14.00 (EUR 15.25) and the lowest price EUR 9.50 (EUR 11.21). On the last
day of trading in 2007, Basware's closing rate was EUR 10.00 (EUR 13.05). The
average price of the share in 2007 was EUR 12.03 (EUR 13.09). Market
capitalization with the period's closing price was EUR 114 681 240 (EUR 149
659 018). A total number of 2 761 995 shares were traded during 2007 (5 534 522
in 2006) which is the equivalent of 24 prosenttia (50%) of the number of shares
at the end of 2007.
EVENTS AFTER THE FINANCIAL PERIOD
The Company is to provide a data capture solution for UK-based portfolio
management company James Hay. James Hay is owned by of one of the world's
largest banks, Grupo Santander. The value of the agreement is estimated to be
EUR 585 000. Implementation is expected to start in March 2008.
FUTURE OUTLOOK
General economic uncertainty has increased. However, according to research
institutions, the global enterprise software market continues to grow. The
market growth in Asia Pacific and Europe is estimated to compensate the decline
of the US market. Basware operates in the electronic procurement and purchase
invoice area, which is expected to grow more rapidly than the average for
enterprise software. Basware solutions generate cost savings and therefore the
demand is not heavily dependent on the economic situation.
Western Europe and the United States represent approximately three quarters of
overall demand for enterprise software. Invoice processing and procurement
software remain at the beginning of their lifecycles in these regions. The
purchase management and invoice processing software markets are relatively
heterogeneous with regards to the competitive situation. However, strong growth
may attract more competitors to the market. The industry is consolidating
rapidly and this development is expected to continue in the future. Basware is
a medium sized software company on a global scale, in terms of sales and number
of personnel.
Basware's direct competitors are mainly smaller companies that operate locally.
Document management, scanning and workflow solution developers compete with
Basware especially in invoice processing. Competing solutions also include
tailored software solutions that complement Enterprise Resource Planning (ERP)
systems and require extensive client-specific project work.
The competitiveness of the software is still good due to new value added
products and the integrated concept that the products form.
The Company's international growth is based on the Company's own sales and
marketing efforts as well as on reseller operations. The development of the
indirect channel continues especially in Europe and North America and in Russia
and Asia. In Scandinavia, the focus is on profitability, supported by the
extending product portfolio. In Finland, the focus is on profitability and the
moderate growth comes mainly from the purchase management area.
The profitability of the regions outside the Nordic countries continues to be
improved in all of the Group's country units which decreases the Group's tax
rate in the long term.
As a result of the acquisition of Digital Vision, the Company gained a foothold
in the Indian market. The Company extends it research and development unit to
India which in the future results in a decrease of the research and development
costs' share of the Company's net sales.
Of the Company's EUR 1.1 million backlog of SaaS orders, approximately EUR 1
million will be recognized as income in 2008.
Basware has complemented its organic growth with acquisitions. The Company
continues to review possible acquisition targets especially in the United
States and Europe during 2008. With the acquisitions, the Company can extend
the sales channel in international markets.
In 2008, Basware expects the growth of net sales for the financial year to be
from 15 to 25 percent compared with the Group's net sales in the previous year.
The first quarter of the year is milder in growth resulting from the high level
of the restated comparative figures for the first quarter of 2007. Operating
profit (EBIT) is expected to be from 10 to 15 percent of net sales.
BOARD'S DIVIDEND PROPOSAL
Basware is a growth company that aims for increasing the value of shareholders'
investments and for moderate dividend distribution. When preparing the dividend
proposal, the Board takes into notice the Company's financial position,
profitability and prospects in the near future.
At the end of 2007, the Group's the parent company's distributable funds are
EUR 25 468 838.49.
Basware's Board of Directors proposes to the Annual General Meeting that from
the financial year 2007, a dividend of EUR 0.15 per share (2006: EUR 0.15) be
paid, a total of EUR 1 720 218.60 with the number of shares at the end of the
financial period.
In Espoo, Finland, January 24, 2008
BASWARE CORPORATION
Board of Directors
For more information, please contact
CEO Ilkka Sihvo, Basware Corp.,
Tel. +358 9 8791 7251 or +358 40 501 8251
Analyst and Press Briefing
Basware arranges a briefing today, January 24, 2008, on the Financial
Statements for the press and analysts at 11:00 at Restaurant BANK, Unioninkatu
20, Helsinki, Finland.
During this briefing CEO Ilkka Sihvo and CFO Mika Harjuaho will comment the
operations and financial performance of the year 2007 as well as discuss the
outlook for 2008. Welcome.
FINANCIAL REPORTING IN 2008
Basware's Annual Report 2007, including the audited Financial Statements, will
be published on the Company's website on week 6 in February 2007. The Company
publishes the Annual Report also in print.
Publishing dates of the interim reports
- Interim Report 1-3/2008 (Q1) on Tuesday, April 15, 2008
- Interim Report 1-6/2008 (Q2) on Thursday, July 10, 2008
- Interim Report 1-9/2008 (Q3) on Tuesday, October 14, 2008
Annual General Meeting of Shareholders will be held on Thursday, February 14,
2008 starting at 2.00 PM at Kansallissali (Aleksanterinkatu 44) in Helsinki,
Finland.
For further information, please contact:
Ilkka Sihvo, CEO, Basware Corp.
Tel. +358 9 8791 7251 or +358 40 501 8251
Distribution:
Nordic Exchange Helsinki
Principal media
www.Basware.com
GROUP INCOME STATEMENT
1.10.- 1.10.- 1.1.- 1.1.-
31.12. 31.12. Change, 31.12. 31.12 Change,
EUR thousand 2007 2006 % 2007 2006 %
NET SALES 23 187 16 508 40.5 73 270 59 954 22.2
Other operating income 44 50 -11.9 834 177 370.9
Materials and services -1 996 -658 203.5 -4 459 -2 593 72.0
Employee benefits
expenses -13 569 -9 042 50.1 -40 600 -32 953 23.2
Depreciation and amortization -765 -572 33.7 -2 590 -2 033 27.4
Other operating expenses -4 977 -4 479 11.1 -18 943 -14 474 30.9
Operating profit 1 924 1 807 6.5 7 512 8 078 -7.0
Finance Income 73 66 10.3 344 308 11.4
Finance Expenses -109 -43 156.4 -152 -99 53.1
Profit before tax 1 888 1 831 3.1 7 704 8 287 -7.0
Income tax expense -775 -1 304 -40.6 -3 591 -3 301 8.8
PROFIT FOR THE PERIOD 1 113 526 111.4 4 112 4 986 -17.5
EPS (undiluted),
EUR 0.10 0.05 111.4% 0.36 0.45 -19.7%
EPS (diluted),
EUR 0.10 0.05 111.4% 0.36 0.44 -19.3%
Average share number:
- undiluted 11 468 124 11 468 124 11 468 124 11 172 612
- diluted 11 468 124 11 468 124 11 468 124 11 221 052
GROUP BALANCE SHEET
EUR thousand 31.12.2007 31.12.2006 Change, %
ASSETS
NON-CURRENT ASSETS
Intangible assets 12 210 9 980 22.3
Goodwill 25 702 18 477 39.1
Tangible assets 1 009 784 28.7
Available-for-sale investments 38 2 612 -98.6
Long-term trade and other receivables 12
Deferred tax assets 2 489 3 501 -28.9
Non-current assets 41 460 35 354 17.3
CURRENT ASSETS
Inventories 42 20 112.2
Trade and other receivables 18 704 13 018 43.7
Income tax receivables 476 192 148.2
Financial assets at fair value through profit or loss 31 5 963 -99.5
Cash and cash equivalents 7 010 3 012 132.7
Current assets 26 263 22 204 18.3
TOTAL ASSETS 67 722 57 558 17.7
EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital 3 440 3 440
Share premium account 33 127 33 127
Fair value reserve and other reserves 540 540
Translation differences 392 235 66.9
Retained earnings 9 765 7 176 36.1
Minority interest 148 88 67.7
Shareholders' equity 47 413 44 606 6.3
NON-CURRENT LIABILITIES
Deferred tax liability 1 643 1 462 12.4
Interest-bearing liabilities 20 329 -94.0
Non-current liabilities 1 663 1 791 -7.2
CURRENT LIABILITIES
Interest-bearing liabilities 4 314 428 907.1
Trade payables and other liabilities 14 000 9 957 40.6
Tax liability from income tax 333 775 -57.1
Current liabilities 18 647 11 160 67.1
TOTAL EQUITY AND LIABILITIES 67 722 57 558 17.7
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
EUR thousand Shareholders' equity Share premium account Fair value
reserve Translation differences Retained earnings Minority
interest Shareholders' equity
SHAREHOLDERS'
EQUITY 1.1.2006 2 963 15 010 -203 3 527 21 296
Change in translation difference 438 -198 240
Granted warrants -108 -108
Myönnetyt optiot 32 32
Other changes 540 540
Net profit/loss recognized directly in shareholders' equity
540 438 -274 704
Profit for the period 4 993 -7 4 986
Total profits and losses 540 438 4 719 -7 5 690
Dividend distribution -1 070 -1 070
Rights issue 439 439
Warrants used 38 912 950
Share premium 17 211 17 211
Transaction costs for equity - 6 -6
Business transfer 95 95
SHAREHOLDERS'
EQUITY 31.12.2006 3 440 33 127 540 235 7 176 88 44 606
EUR thousand Shareholders' equity Share premium account Fair value
reserve Translation differences Retained earnings Minority
interest Shareholders' equity
SHAREHOLDERS'
EQUITY 1.1.2007 3 440 33 127 540 235 7 176 88 44 606
Change in translation difference 157 13 168
Granted warrants 204 204
Net profit/loss recognized directly in shareholders' equity 157 217 374
Profit for the period 4 092 20 4 112
Total profits and losses 157 4 310 20 4 486
Dividend distribution -1 720 -1 720
Rights issue 40 40
SHAREHOLDERS'
EQUITY 31.12.2007 3 440 33 127 540 392 9 765 148 47 413
GROUP CASH FLOW STATEMENT
EUR thousand 1.1.-31.12.2007 1.1.-31.12.2006
Cash flows from operating activities
Profit for the period 4 112 4 986
Adjustments for profit 5 732 5 235
Working capital changes -1 812 -902
Interest paid -124 -41
Dividends received -8
Interest received 287 70
Other financial items in operating activities -7 65
Income taxes paid -3 801 -3 750
Net cash from operating activities 4 387 5 657
Cash flows from investing activities
Purchase of tangible and intangible assets -2 869 -3 021
Proceeds from sale of tangible and intangible assets 48 64
Acquired subsidiaries -8 180 -3 660
Disposal of associated companies 23
Proceeds from other investments 3 013 457
Granted loans -1
Repayments of loan receivables 20 24
Net cash used in investing activities -7 969 -6 114
Cash flows from financing activities
Proceeds from issuance of share capital 760
Minority's capital investment 40 95
Proceeds from short-term loans 4 000
Repayments of long-term borrowings -562 -400
Repayments of financial lease liabilities -10 -75
Dividends paid -1 720 -1 070
Net cash used in financing activities 1 749 -689
Net change in cash and cash equivalents according to cash flow statement -1
833 -1 146
Cash and cash equivalents at beginning of period 8 975 9 987
Effects of exchange rate changes on cash
and cash equivalents -101 -19
Effects of fair value implementation 152
Cash and cash equivalents at end of period 7 041 8 975
GROUP QUARTERLY INCOME STATEMENT
1-3/ 1-3/ 4-6/ 4-6/ 7-9/ 7-9/ 10-12/ 10-12/
EUR thousand 2007 2006 2007 2006 2007 2006 2007 2006
NET SALES 17 038 15 432 17 776 14 651 15 268 13 363 23 187 16 508
Other operating income 15 41 752 61 23 25 44 50
Materials and services -819 -778 -662 -689 -981 -468 -1 996 -658
Employee benefits
expenses -9 243 -8 259 -9 961 -8 710 -7 827 -6 942 -13 569 -9 042
Depreciation and amortization -571 -453 -597 -488 -657 -520 -765 -572
Other operating expenses -5 010 -3 454 -4 536 -3 578 -4 419 -2 963 -4 977 -4
479
Operating profit 1 409 2 529 2 773 1 247 1 406 2 495 1 924 1 807
% 8.3% 16.4% 15.6% 8.5% 9.2% 18.7% 8.3% 10.9%
Finance income 61 138 79 48 130 56 73 66
Finance expenses -11 -60 -12 -8 -20 12 -109 -43
Profit before tax 1 459 2 606 2 840 1 287 1 516 2 563 1 888 1 831
% 8.6% 16.9% 16.0% 8.8% 9.9% 19.2% 8.1 % 11.1%
Tax on income from operations -575 -613 -1 256 -486 -985 -898 -775 -1 304
PROFIT FOR THE PERIOD 884 1 994 1 584 801 531 1 665 1 113 526
% 5.2% 12.9% 8.9% 5.5% 3.5% 12.5% 4.8% 3.2%
COMMITMENTS AND CONTINGENT LIABILITIES
EUR thousand 31.12.2007 31.12.2006
Own guarantees
Business mortgage of own debt 1 200 1 200
Guarantees on behalf of subsidiaries and other group companies
Guarantees 1 103 986
Other own contingent liabilities
Lease liabilities:
Current lease liabilities 601 544
Lease liabilities maturing in 1-5 years 685 567
Total 1 286 1 111
Other rental liabilities:
Current rental liabilities 1 827 1 334
Rental liabilities maturing in 1-5 years 3 957 3 193
Rental liabilities maturing later 172
Total 5 956 4 527
Other own contingent liabilities, total 8 442 6 838
SEGMENT REPORTING
Geographical segments (primary segment)
Net sales
(EUR thousand) 10-12/2007 10-12/2006 Change, % 1-12/2007 1-12/2006 Change, %
Finland 14 278 10 918 30.8 48 849 41 028 19.1
Scandinavia 5 782 4 354 32.8 16 797 14 698 14.3
Europe 5 652 2 714 108.3 15 081 8 985 67.8
Other areas 1 030 1 119 -7.9 3 460 3 512 -1.5
Sales between segments -3 554 -2 598 -36.8 -10 917 -8 269 -32.0
Group total 23 187 16 508 40.5 73 270 59 954 22.2
Operating profit
(EUR thousand) 10-12/2007 10-12/2006 Change,
% 1-12/2007 1-12/2006 Change, %
Finland 2 335 3 243 -28.0 12 706 12 314 3.2
Scandinavia 873 20 4 360.0 333 -45 832.0
Europe -1 078 -910 -18.5 -3 662 -2 831 -29.3
Other areas -160 -531 69.9 -1 751 -1 297 -35.0
Operating profit between segments -47 -15 -210.9 -114 -62 -84.2
Group total 1 924 1 807 6.5 7 512 8 078 -7.0
Personnel
(employed, in average) 10-12/2007 10-12/2006 Change,
% 1-12/2007 1-12/2006 Change, %
Finland 383 345 11.2 367 346 6.0
Scandinavia 98 93 5.8 96 89 8.5
Europe 142 66 114.1 93 62 48.8
Other areas 28 21 33.9 25 17 50.2
Group total 651 524 24.2 580 513 13.1
Business segments (secondary segment)
Net sales
(EUR thousand) 10-12/2007 10-12/2006 Change, % 1-12/2007 1-12/2006 Change, %
Product sales 7 480 4 109 82.0 24 117 19 374 24.5
Maintenance and support 6 632 6 005 10.4 22 100 18 776 17.7
Consulting and services 7 819 5 754 35.9 23 342 20 106 16.1
SaaS 369 1 250
Other operations 888 639 38.9 2 461 1 698 44.9
Group total 23 187 16 508 40.5 73 270 59 954 22.2
Geographical division of net sales by the location of customer
Net sales (EUR thousand) 10-12/2007 10-12/2006 Change,
% 1-12/2007 1-12/2006 Change, %
Finland 10 851 8 147 33.2 37 969 32 557 16.6
Scandinavia 5 549 4 415 25.7 15 911 14 129 12.6
Europe 5 422 2 705 100.4 14 785 9 421 56.9
Other areas 1 366 1 241 10.0 4 604 3 848 19.7
Group total 23 187 16 508 40.5 73 270 59 954 22.2
GROUP KEY INDICATORS
EUR thousand 1-12/2007 1-12/2006
Net sales 73 270 59 954
Growth of net sales, % 22.2% 43.9%
Operating profit 7 512 8 078
Growth of operating profit, % -7.0% 123.7%
% of net sales 10.3% 13.5%
Profit before tax 7 704 8 287
% of net sales 10.5% 13.8%
Profit for the period 4 112 4 986
% of net sales 5.6% 8.3%
Return on equity, % 8.9% 15.1%
Return on investment, % 16.2% 24.7%
Interest bearing liabilities 4 334 758
Cash and liquid assets *) 7 041 8 975
Gearing, % -5.7% -18.4%
Equity ratio, % 70.0% 77.5%
Total assets 67 722 57 558
Gross investments **) 12 599 25 315
% of net sales 17.2% 42.2%
Capital expenditure 928 597
% of net sales 1.3% 1.0%
Research and development costs 13 172 10 925
% of net sales 18.0% 18.2%
R&D personnel at end of period 152 138
Personnel average for period 580 513
Personnel at end of period 658 528
Growth of personnel, % 24.6% 33.7%
Earnings per share, EUR 0.36 0.45
Earnings per share, EUR (diluted) 0.36 0.44
Equity per share, EUR 4.12 3.88
Average share number:
- undiluted 11 468 124 11 172 612
- diluted 11 468 124 11 221 052
*) Includes cash, cash equivalents and financial assets at fair value through
profit or loss
**) Includes capitalized R&D costs and acquisitions
Distribution by number of shares December 31, 2007
Number of Shares and votes
Number of shares shareholders % Number
1 - 100 14 608 2.91 333 623
101 - 1 000 2 577 6.90 791 179
1 001 - 10 000 301 6.73 771 442
10 001 - 100 000 30 11.68 1 339 699
100 001 + 19 71.78 8 232 181
Total 17 535 100 11 468 124
MAJOR SHAREHOLDERS
December 31, 2007 Shares and votes
Number %
1. Sihvo, Ilkka 1 065 800 9.3
2. Vaajoensuu, Hannu (incl. a controlled company and children under
guardianship) 1 045 800 9.1
3. Eräkangas, Kirsi (incl. children under guardianship) 1 031 800 9.0
4. Perttunen, Sakari 830 400 7.2
5. Pöllänen, Antti (incl. children under guardianship) 800 900 7.0
6. Nordea Nordic Small Cap Fund 462 882 4.0
7. Ahonen, Asko 318 822 2.8
8. Fondita Nordic Small Cap Fund 261 000 2.3
9. Veritas Pension Insurance Company 216 000 1.9
10. Perttunen, Meimi 215 400 1.9
11. Royal Skandia Life Assurance 210 000 1.8
12. Henki-Sampo Insurance Company 155 000 1.4
13. Evli Bank 111 927 1.0
14. OP Finland Small Firm Fund 106 000 0.9
15. Sr Eq Small Firm Fund 99 617 0.9
16. Fondita Nordic Micro Cap Fund 95 000 0.8
17. Kaleva Mutual Insurance Company 93 800 0.8
18. Sr Eq Technology 86 823 0.8
19. Nordea Fennia Plus Fund 80 000 0.7
20. Evli Nordic Tmt 68 424 0.6
20 largest shareholders total 7 355 395 64.1
Nominee-registered shares total 1 705 791 14.9
Others 2 406 938 21.0
Total 11 468 124 100
