DIGIA’s FOURTH QUARTER 2011: BUSINESS READJUSTMENT AND REORGANISATION FINALISED

DIGIA PLC FINANCIAL STATEMENT RELEASE, 3 FEBRUARY 2012 at 09:35

DIGIA’s FOURTH QUARTER 2011: BUSINESS READJUSTMENT AND REORGANISATION FINALISED

SUMMARY

January-December

- Consolidated net sales: EUR 121.9 (130.8) million, down 6.8 per cent

- Operating profit before extraordinary items: EUR 8.1 (17.2) million, down 52.9 per cent

- Extraordinary items include a restructuring provision of EUR 4.9 million and a writedown of EUR 25.4 million for customer relationships and goodwill

- Operating profit after extraordinary items: EUR -22.2 (17.2) million

- Profitability (EBIT%): 6.6 (13.1) per cent before extraordinary items and -18.2 (13.1) per cent after extraordinary items

- Product business accounted for 21.0 (15.1) per cent

- Earnings per share: EUR 0.32 (0.56) before extraordinary items and EUR -1.08 (0.56) after extraordinary items

- Board proposes a capital return of EUR 0.10 per share to be paid

 October-December

 - Consolidated net sales: EUR 30.2 (36.0) million, down 16.2 per cent

- Operating profit before extraordinary items: EUR 2.5 (4.8) million, down 48.1 per cent

- Extraordinary items include a restructuring provision of EUR 1.1 million related to personnel negotiations concluded in the quarter

- Operating profit after extraordinary items: EUR 1.4 (4.8) million, down 71.0 per cent

- Profitability (EBIT%): 8.2 (13.3) per cent before extraordinary items and 4.6 (13.3) per cent after extraordinary items

- Product business accounted for 25.3 (13.8) per cent

- Earnings per share: EUR 0.11 (0.16) before extraordinary items and EUR 0.06 (0.16) after extraordinary items

Net sales for Enterprise Solutions segment grew slightly in the review period. Taking into account the Qt business acquired in March, the segment’s growth rate exceeded market growth. Operational profitability also increased towards the end of the period, flattening out at the high level previously encountered. The fourth quarter’s profitability (EBIT-%), not including the Qt business or the non-recurrent expenses related to the personnel negotiations, was 10.8 per cent.

Realigned technology-platform strategies and changes in the competitive situation for phone manufacturers markedly changed the business environment for the Mobile Solutions segment. As a result of these changes and the ensuing reduction in contract engineering business, the Mobile Solutions segment’s consolidated net sales and profitability fell significantly throughout the review period. This had a major negative impact on the whole company’s consolidated net sales and operating profit compared to the previous year.

This negative impact strengthened as the period progressed. For this reason, the company conducted four rounds of personnel negotiations during the period, leading to the closure of the Pori and Lappeenranta offices and the dismissal of 344 employees.

As a consequence of the change in the operating environment of the Mobile Solutions segment, and of the downward revision of long-term profit expectations for mobile operations in general, the company made a one-off writedown of EUR 25.4 million in relation to the segment’s customer relations and goodwill.

At the end of the review period, the company carried out a reorganisation with the aim of ensuring the continuity of its solid core business and promoting the development of its scalable product business as part of its overall product selection. The new organisation took effect at the beginning of 2012. From that time, the company will transfer to single-segment reporting. 

The company predicts that demand for contract engineering services will continue to fall in the first quarter of 2012, reducing consolidated net sales compared to the fourth quarter of 2011. This reduction in net sales and the start-up of the new organisation will also tax the company’s profitability, which is also expected to fall temporarily from the fourth quarter’s level.

The new organisation is expected to begin impacting on efficiency from the second quarter of 2012. By then, it should have a positive impact on the company’s net sales and profitability. 

The company expects its commercial Qt licensing and service business to grow in 2012 compared to the previous year, while maintaining a good profitability level. Digia’s Russian operations are also expected to develop favourably, with an even greater impact on the positive development of consolidated net sales and profitability during 2012.

On the whole, the company predicts an improvement in operational profitability as the year progresses, reaching a good level in the second half of 2012.

Proposal for Dividend Distribution

The unrestricted equity in the balance sheet of the Company as per December 31, 2011 amounted to EUR 35 142 569,13 of which the net result for the financial year amounts to EUR -1 409 098,31. The Board proposes to the Annual General Meeting that based on the balance sheet to be adopted for the accounting period ended December 31, 2011 a capital return of EUR 0,10 per share will be paid from the parent company’s invested unrestricted equity fund. The capital return will be paid to shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd on the record date March 16, 2012. The capital return will be paid on March 23, 2012.

The company’s loan covenants were changed under the new loan arrangements. In future, this means that the company can distribute a maximum of 50 per cent (previously 30%) of the Group’s net profit for the year without separate agreement. This does not affect 2012, when a maximum of EUR 3 million can be distributed.

GROUP KEY FIGURES AND RATIOS 

 The figures for 2011 include extraordinary items comprising

a writedown for customer relationships and goodwill of the Mobile Solutions segment of EUR 25.4 million, as well as a restructuring provision of EUR 4.9 million.

MARKETS AND DIGIA’S BUSINESS 

The company conducted four rounds of personnel negotiations during the period, leading to the closure of the Pori and Lappeenranta offices and the dismissal of 344 employees. This was due to the radical change in the operating conditions of the Mobile Solutions segment. In turn, this change was caused by the realignment of technology platform strategies and changes in the competitive scenario among phone manufacturers. These negatively affected the entire company’s contract engineering operations.

The last round of personnel negotiations ended on 3 November 2011. They reflected the company’s aim of adapting its organisation, cost structure and operations to the new market situation and to its long-term strategic objectives.

The personnel negotiations caused non-recurrent costs totalling around EUR 4.9 million during the review period. Of these, approximately EUR 1.1 million were incurred in the fourth quarter. 

Digia’s Chinese unit generates product development and maintenance services. This enables the company to serve customers at various points in their product development cycle. The unit’s capacity is utilised both in projects within China and for global customer relationships. Demand for contract engineering services fell sharply due to changes in the operating environment, which will also affect the Chinese unit. The company aims to realign its Chinese operations to correspond better to local sales and international delivery contracts.

The Russian unit operates as a near-shore resource for Digia's Finnish customers. It also sells services directly to local customers, an operation that Digia is working actively to develop and enhance. During the review period, the Russian unit’s operations progressed as expected.

 ENTERPRISE SOLUTIONS:

Demand for ERP systems continued at a moderate level during the period. Demand for e-business and financial sector systems was lower than expected. 

The start-up and development of the Qt licensing and service business acquired in March went according to plan. Taking into account the Qt business, the Enterprise Solutions segment is growing faster than the IT market in general.

During the review period, the company continued to focus on developing international sales and licence-based business.

MOBILE SOLUTIONS:

 Due to major changes in the operating environment, the Mobile Solutions segment’s contract engineering business shrank significantly compared to the previous year. Because the effect of the changes was permanent, during the period the company revised the entire segment and its long-term profit expectations. The result was a writedown of EUR 25.4 million in relation to the segment’s customer relations and goodwill. 

In the future the company aims to expand its clientele by leveraging its wireless systems competencies within the area of multichannel business solutions.

NET SALES 

During the reporting period, Digia’s consolidated net sales totalled EUR 121.9 (130.8) million, down 6.8 per cent from the same period in 2010.

The Enterprise Solutions segment’s net sales for the period totalled EUR 82.7 (75.7) million, up 9.2 per cent. The Mobile Solutions segment posted net sales of EUR 39.3 (55.2) million, down 28.8 per cent. The segment’s growth in net sales was mainly thanks to the Qt business, which accumulated EUR 6.0 million in net sales starting in the second quarter. Total net sales were negatively affected, especially at the beginning of the period, by lower licence sales than expected, which had an impact on billing. In Mobile Solutions, net sales fell because of a sudden and considerable decline in demand for services, following a change in the business environment.

During the reporting period, the product business accounted for EUR 25.7 (19.7) million or 21.0 (15.1) per cent of consolidated net sales.

International operations accounted for EUR 14.7 (10.6) million, or 12.1 (8.1) per cent of consolidated net sales.

For the fourth quarter, Digia’s consolidated net sales came to EUR 30.2 (36.0) million, down 16.2 per cent year on year.

Fourth-quarter net sales for the Enterprise Solutions segment totalled EUR 22.9 (20.7) million, up 10.5 per cent. The Qt business accounted for EUR 2.7 million of this. Fourth-quarter net sales for Mobile Solutions totalled EUR 7.3 (15.3) million, down 52.4 per cent.

During the fourth quarter, the product business accounted for EUR 7.6 (5.0) million of consolidated net sales, or 25.3 (13.8) per cent. 

International operations accounted for EUR 5.1 (2.6) million of consolidated net sales in the fourth quarter, or 17.0 (7.3) per cent.

PROFIT PERFORMANCE AND PROFITABILITY

 Major non-recurrent extraordinary items had a major impact on Digia Group’s result and profitability during the review period. These extraordinary items included a restructuring provision of EUR 4.9 million and a writedown of EUR 25.4 million for customer relationships and goodwill. Such items were related to the Mobile Solutions segment, except for a EUR 0.5 million expense incurred by Enterprise Solutions in the fourth quarter, in relation to personnel negotiations. Operating profit before extraordinary items is an indicator of the company’s operational profitability.

 Digia’s consolidated operating profit before extraordinary items for the reporting period was EUR 8.1 (17.2) million, down 52.9 per cent in year-on-year terms. The reduction was mainly due to the negative development in net sales of Mobile Solutions. Profitability (EBIT%) before extraordinary items was 6.6 (13.1) per cent.  

During the reporting period, Digia’s consolidated operating profit after extraordinary items came to EUR -22.2 (17.2) million, down 229.2 per cent year on year. Profitability (EBIT%) after extraordinary items was -18.2 (13.1) per cent.

 During the period, the operating profit of the Enterprise Solutions segment was EUR 8.3 (11.0) million, down 24.0 per cent, while profitability (EBIT%) came to 10.1 per cent. Excluding the Qt business, the Enterprise Solutions segment’s operating profit totalled EUR 8.4 million and profitability (EBIT%) stood at 11.0 per cent. The decrease in the Enterprise Solutions segment’s net sales was caused by lower-than-expected Finnish licence sales, combined with higher operating expenses. During the period, the cost structure was particularly burdened by personnel turnover. Recruitment, subcontracting and training expenses related to resolving resource shortages in certain competence areas, and the launch expenses for the QT business, were also major costs.

For the Mobile Solutions segment, operating profit before extraordinary items totalled EUR -0.3 (6.2) million, down 104.5 per cent, with profitability (EBIT%) being -0.7 per cent. Lower profitability in the Mobile Solutions segment was due to a sudden, major and unpredicted change in the operating environment at the beginning of the review period. As a consequence of this change, throughout the period the segment had excess personnel in relation to the continuously falling demand for its services. The cost of keeping employees without work caused a financial strain. 

 Digia’s consolidated fourth-quarter operating profit before extraordinary items was EUR 2.5 (4.8) million, representing a year-on-year decrease of 48.1 per cent. Profitability (EBIT%) was 8.2 (13.3) per cent. 

After extraordinary items, Digia’s consolidated operating profit for the quarter came to EUR 1.4 (4.8) million, down 71.0 per cent year on year. Profitability (EBIT%) was 4.6 (13.3) per cent. 

During the period, the operating profit of the Enterprise Solutions segment was EUR 2.3 (2.8) million, down 16.9 per cent, while profitability (EBIT%) came to 10.1 per cent. Not including the Qt business, the segment’s operating profit in the fourth quarter was EUR 2.2 million and its profitability (EBIT%) 10.8 per cent. The operating profit before extraordinary items of the Mobile Solutions segment was EUR 0.2 (2.0) million, down 91.5 per cent, and profitability (EBIT%) was 2.3 per cent. 

Consolidated earnings before tax for the period totalled EUR -23.1 (15.7) million, and net profit was EUR -22.5 (11.5) million. Consolidated earnings before tax for the fourth quarter were EUR 1.1 (4.5) million, and net profit totalled EUR 1.2 (3.3) million. 

Consolidated earnings per share for the period came to EUR -1.08 (0.56) after extraordinary items and 0.32 (0.56) before extraordinary items. For the fourth quarter, consolidated earnings per share were EUR 0.06 (0.16) after extraordinary items and EUR 0.11 (0.16) before extraordinary items. 

The Group’s net financial expenses for the reporting period were EUR 1.0 (1.4) million and for the fourth quarter EUR 0.3 (0.3) million.

FINANCIAL POSITION AND EXPENDITURE  

At the end of the reporting period, Digia Group’s consolidated balance sheet total stood at EUR 87.8 million (12/2010: EUR 115.4 million) and the equity ratio was 47.8 (12/2010: 58.8) per cent. Net gearing was 34.5 (12/2010: 20.2) per cent. Period-end cash and cash equivalents totalled EUR 8.2 (12/2010: 9.7) million. 

Interest-bearing liabilities amounted to EUR 21.9 (12/2010: 23.3) million. These consisted of EUR 20.0 million in loans from financial institutions and EUR 1.9 million in financial leasing liabilities. 

On 31 October 2011, Digia revised its three-year loan arrangements, replacing the company’s old loan portfolio totalling EUR 17 million. The loan agreement is financed by Pohjola Bank and Nordea Bank. The total sum of the new loan was EUR 22 million, of which the company withdrew EUR 17 million. As part of the financing package, the company committed to covenants concerning the maintenance of the company’s financial standing and liquidity, which were similar to the previous package. One difference lies in the fact that the company can now distribute a maximum of 50 per cent (previously 30%) of the Group’s net profit for the year, without separate agreement. 

The Group’s cash flow from operations for the period was positive by EUR 8.8 (11.1) million, cash flow from investments was negative by EUR 2.7 (2.0) million, and cash flow from financing was negative by EUR 7.6 (9.9) million. Cash flow from financing was negatively affected by the repayment of loans for a total sum of EUR 2.0 million, as well as the payment of EUR 5.6 million in dividends. 

The Group’s investments in fixed assets during the review period totalled EUR 2.7 (2.3) million. Acquisitions of tangible fixed assets totalled EUR 2.3 (2.0) million.  

Return on investment (ROI) for the period was -28.7 (19.3) per cent, and return on equity (ROE) was -41.9 (18.3) per cent. 

The Group carries out quarterly impairment testing of goodwill and intangible assets with an indefinite useful life. The table below shows, by business segment, the goodwill and values subject to testing at the end of the reporting period:

In the second quarter, the company recorded a EUR 25.4 million

goodwill writedown for its Mobile Solution segment’s customer relationships and goodwill. This writedown was based on the company’s revision of the segment’s long-term income expectations, as the applicable legislation requires. The revised expectation is due to a sudden and radical transition in the business environment for contract engineering services. In the company’s view, this has markedly and permanently reduced demand for Symbian and MeeGo services. 

Present values for the Enterprise Solutions segment were calculated for the forecast period on the following assumptions: net sales for 2012 according to the latest estimate, after which annual growth of 3 per cent; operating profit for 2012 in accordance with the latest estimate and after that 10 per cent, with discount rates of 8.9 per cent. Cash flows after the forecast period are estimated by means of cash-flow extrapolation that applies the assumptions given above.

According to the sensibility test the amount of goodwill for Enterprise Solutions requires average annual growth of 0.9 per cent for business operations and 4.0 per cent profitability. The management sees no need of goodwill impairment for Enterprise Solutions.

Present values for the Mobile Solutions segment were calculated for the forecast period on the following assumptions: net sales for 2012 according to the latest estimate, after which annual growth of 2 per cent; operating profit for 2012 in accordance with the latest estimate and after that 10 per cent, with discount rates of 10.9 per cent. Cash flows after the forecast period are estimated by means of cash-flow extrapolation that applies the assumptions given above.

According to the sensibility test the amount of goodwill for Mobile Solutions requires the net sales to remain at level of 2012 and 3.7 per cent profitability. The management sees no need of goodwill impairment for Mobile Solutions.

HUMAN RESOURCES, MANAGEMENT, AND ADMINISTRATION

At the end of the period, the total number of Group personnel was 1,175, representing a decrease of 383 employees, or 24.6 per cent, since the end of 2010 (when there were 1,558). During the reporting period, the number of employees averaged 1,453, a decrease of 55 employees or 3.6 per cent from the 2010 average (1,508).

Employees, by function, at the end of the period:

 As of the end of the period, 161 employees were working abroad (12/2010: 196).

The Digia Plc Annual General Meeting of 16 March 2011 re-elected Robert Ingman, Kari Karvinen, Pertti Kyttälä, Martti Mehtälä, Pekka Sivonen, Tommi Uhari, and Marjatta Virtanen as members of the Board. At the organisational meeting of the Board, Kyttälä was elected Chairman of the Board and Mehtälä as Vice Chairman.

Juha Varelius has been Digia Plc President and CEO since 1 January 2008. 

Ernst & Young Oy, authorised public accountants, are the Group’s auditors, with Authorised Public Accountant Heikki Ilkka as the principal auditor.

RISKS AND UNCERTAINTIES

Short-term uncertainties are related to any major changes occurring in the company’s core business areas. 

The business risk associated with the mobile market was realised during the period, fundamentally changing the operating environment. However, this mostly eliminated the company’s business risk associated with the mobile market.

 In addition, the Eurozone debt crisis has deepened and the risk of economic recession has grown, which may affect customers’ investment decisions and liquidity, and thereby the company’s sales and profits. There have already been signs that the greater uncertainty is affecting customers’ investment decisions, and some planned projects have been delayed. However, these signs have not assumed alarming proportions in recent weeks.  

Furthermore, the growth in customer project sizes increases the risks related to projects and their profitability.            

Risks and their management are described on the company’s website at www.digia.com.

 FUTURE PROSPECTS

The main objective for 2012 is to grow the scalable product business’s share of the overall product selection. This will mainly be achieved organically, but carefully planned strategic acquisitions are also possible. Digia will continue developing its international operations, particularly in Russia. The main cornerstone of the company’s operations remains the maintenance of high profitability and a positive cash flow.

 The company expects the IT market to remain at roughly the previous year’s level in 2012. However, risks associated with the Eurozone debt crisis and general inflation may affect demand for IT services and the development of business profitability. Slightly greater uncertainty is therefore related to the economic prospects for 2012.

With regard to its own operations, the company expects demand for contract engineering services to continue falling in the first quarter of 2012. This will cause the company’s first-quarter net sales to fall from the level of the last quarter of 2011. The reduction in net sales and the start-up of the new organisation will also tax the company’s profitability, which is expected to fall temporarily from the fourth quarter’s level. 

The company expects the new organisation to begin impacting on efficiency from the second quarter of 2012, upon which it will have a positive impact on the company’s net sales and profitability. 

The company expects its commercial Qt licensing and service business to grow in 2012 compared to the previous year, while maintaining a good profitability level. The Russian functions are also expected to develop favourably and to have an even greater impact on positive development of consolidated net sales and profitability during 2012.

On the whole, the company predicts that its operational profitability will improve as the year progresses, reaching a good level in the second half of 2012.

OTHER EVENTS DURING THE REVIEW PERIOD

Convening on 16 March 2011, the Digia Plc Annual General Meeting (AGM) approved the financial statements for 2010, released the Board members and the CEO from liability, determined Board emoluments, resolved to raise the number of Board members to seven, and elected the Board of Directors for a new term.

With regard to profit distribution for 2010, the AGM approved the Board’s proposal to pay a dividend of EUR 0.27 per share to all shareholders listed on the shareholder list maintained by Euroclear Finland Ltd on the reconciliation date of 21 March 2011. The dividend payment date was 28 March 2011.

The AGM granted the following authorisations to the Board:

Authorisation of the Board of Directors to decide on buying back own shares and/or accepting them as collateral

The AGM authorised the Board to decide on the buyback and/or acceptance as collateral of not more than 2,000,000 shares in the company. This buyback can only be executed by means of the company’s unrestricted equity. The Board shall decide on how these shares are to be bought. Own shares may be bought back in disproportion to the holdings of the shareholders. The authorisation also includes acquisition of shares through public trading organised by NASDAQ OMX Helsinki Oy in accordance with the rules and instructions of NASDAQ OMX Helsinki and Euroclear Finland Ltd, or through offers made to shareholders. Shares may be acquired in order to improve the company’s capital structure, to fund acquisitions or other business transactions, for offering share-based incentive schemes, to sell on, or to be annulled. The shares must be acquired at the market price in public trading. This authorisation supersedes that granted by the Shareholders’ Meeting on 3 March 2010 and is valid for 18 months – i.e., until 16 September 2012.

Authorising the Board of Directors to decide on a share issue and granting of special rights

The AGM authorised the Board to decide on an ordinary or bonus issue of shares and the granting of special rights (as defined in Section 1, Chapter 10 of the Limited Liability Companies Act) in one or more instalments, as follows: The issue may total, at a maximum, 4,000,000 shares. The authorisation applies both to new shares and to treasury shares held by the company. By virtue of the authorisation, the Board has the right to decide on share issues and the granting of special rights, in deviation from the pre-emptive subscription rights of the shareholders (a directed issue). The authorisation may be used to fund or complete acquisitions or other business transactions, for offering share-based incentive schemes, to develop the company’s capital structure, or for other purposes. The Board was authorised to decide on all terms related to the share issue or special rights, including the subscription price, its payment in cash or (partly or wholly) in capital contributed in kind or its being written off against the subscriber’s receivables, and its recognition in the company's balance sheet. This authorisation supersedes that granted by the Shareholders’ Meeting on 3 March 2010 and is valid for 18 months – i.e., until 16 September 2012.

SHARE CAPITAL AND SHARES

On 31 December 2011, the total number of Digia Plc shares was 20,875,645.

At the end of the period, according to Finnish Central Securities Depository Ltd, Digia had 6,296 shareholders. 

The 10 biggest shareholders were:

 Distribution of holdings by number of shares held on 31 December 2011

 Shareholding by sector on 31 December 2011

 The weighted average number of shares during the reporting period, adjusted for share issues, came to 20,701,877. The number of outstanding shares came to 20,716,069 in total at the end of the review period. 

The company held, in total, 159,576 treasury shares at period end. The accounting counter value of these treasure shares is EUR 0.10 per share. In relation to the company’s performance-based incentive system, Digia has financed the acquisition of 300,000 own shares. At the end of the review period, some of these shares remained undistributed and Evli Alexander Management Ltd held 29,612 shares. The company held about 0.8 per cent of the capital stock as of 30 December 2011.

 REPORTED SHARE PERFORMANCE ON THE HELSINKI STOCK EXCHANGE

Digia Plc shares are listed on the Nordic Exchange under ‘Information Technology IT Services’. The company's short name is DIG1V. The lowest reported share quotation was EUR 2.30 and the highest was EUR 5.79. The share officially closed at EUR 2.42 on the last trading day. The trade-weighted average was EUR 3.88. The Group’s market capitalisation totalled EUR 50,519,061 at the end of the period.

 The company received the following flagging notifications during the reporting period:

The Ingman Group announced on 16 August 2011 that the total holding of said group and entities under its control had grown to exceed the 15% flagging threshold and was 15.15% of the company’s shares and votes. 

Pekka Päiviö Sivonen announced on 19 December 2011 that his holding in the company had fallen below the 10% flagging threshold and amounted to 8.77% of the company’s shares and votes.

 STOCK OPTION SCHEMES 

Digia Plc had no outstanding options.

Helsinki, 3 February 2012  

Digia Plc

Board of Directors

BRIEFING FOR ANALYSTS

Digia will hold a briefing on its Financial Statement Bulletin for analysts on Friday 3 February 2012 at 11 am, at WTC Sodexo in the Marski cabinet of the World Trade Center, Aleksanterinkatu 17, 00100 Helsinki, Finland. All are welcome.

SOURCES OF FURTHER INFORMATION
President and CEO Juha Varelius, mobile number +358 400 855 849, e-mail address juha.varelius@digia.com

The Financial Statement Bulletin and the presentation material will be available via www.digia.com, in the ‘Investors’ section, from 11 am.

DISTRIBUTION

NASDAQ OMX Helsinki

Key media

ABBREVIATED FINANCIAL STATEMENTS AND ATTACHMENTS

Consolidated Income Statement

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes In Shareholders’ Equity

Notes to the Accounts

The interim report was prepared in compliance with IFRS and the IAS 34 standard.

The financial statement release is unaudited but the figures herein are drawn from audited financial statements.

CONSOLIDATED INCOME STATEMENT, EUR 1,000

CONSOLIDATED BALANCE SHEET, EUR 1,000

CONSOLIDATED CASH FLOW STATEMENT, EUR 1,000

 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY, EUR 1,000

a = share capital

b = rights issue

c = share premium

d = unrestricted invested shareholders’ equity

e = other reserves

f = currency translation differences

g = retained earnings

h = total shareholders’ equity

NOTES TO THE ACCOUNTS

Accounting principles:

The interim report has been drawn up in line with IFRS, applying the same accounting principles as in the 2010 financial statements. The accounting principles and formulae for the calculation of key figures and ratios are unchanged and are presented in the 2010 financial statements.

Seasonal nature of business:

The Group's business is affected by the number of workdays each month, as well as by holiday seasons.

Dividends paid:

Dividends paid during the reporting period totalled EUR 5,576,834.34.

Related-party transactions:

Digia Group’s related parties include the CEO and the members of the Board of Directors and Group Management Team. Digia Group had no significant transactions with related parties during the reporting period. 

M&A transactions completed:

On 7 March 2011, Digia concluded an agreement with Nokia Plc for the acquisition of its commercial Qt business. The acquisition came into effect on 22 March 2011. This transaction included a right to sell commercial software licences for Qt technology, as exclusive supplier for the first three years.

The purchase price for the business acquired includes fixed and variable components. Fixed components amount to EUR 150,000, which was paid with the company’s cash reserves. In addition to fixed components, the seller is entitled to an additional purchase price in the event that the sales targets agreed upon for said business for 2011–2013 are met. For 2011 the additional purchase price came to EUR 1.0 million, which is EUR 0.8 million higher than the original estimate. The additional price will be paid in cash as agreed. Due to the higher-than-expected sales of 2011, the additional purchase price is now estimated to total EUR 1.5 million.  

On the basis of the initial purchase price allocation, the majority of the acquisition price (EUR 0.8 million) is related to the exclusive sales rights and customer relationships acquired. The transaction carried no goodwill.

Segment information:

Digia’s business operations are divided into two main business segments: Enterprise Solutions and Mobile Solutions. Enterprise Solutions is divided into ERP and Financial Administration, Digital Services, and Integration Solutions. The Mobile Solutions segment is divided into Contract Engineering Services and User Experience Services.

 Consolidated income statement by quarter:

Group key figures and ratios:

Formulae for key figures and ratios are presented in the 2010 financial statements. These formulae remained unchanged during the reporting period.