Half-Year Report 1 January – 30 June 2019
Qt Group Plc Stock Exchange Release 9 August 2019 at 8:00 a.m.
Second quarter:
Net sales grew by 4.6 percent from the exceptionally strong comparison period of the previous year
April–June 2019
• Net sales increased by 4.6 per cent year-on-year to EUR 13,995 thousand (13,376)*. The effect of exchange rates on the comparison period's net sales was 434 thousand euros and at comparable exchange rates, net sales increased by 1.3 per cent.
• The operating result was EUR 714 thousand (1,321).
• The operating margin (EBIT %) was 5.1 per cent (9.9%).
• Earnings per share were EUR 0.03 (0.05).
January–June 2019
• Net sales increased by 12.9 per cent to EUR 26,766 thousand (23,704). The effect of exchange rates on the comparison period's net sales was 1,013 thousand euros and at comparable exchange rates, net sales increased by 8.3 per cent.
• The operating result was EUR 195 thousand (375).
• The operating margin (EBIT %) was 0.7 per cent (1.6 %).
• Earnings per share were EUR 0.00 (0.01).
* the figures in brackets refer to the comparison period, i.e. the corresponding period in the previous year.
Business Report
Financial performance:
Qt Group Plc’s net sales for the second quarter amounted to EUR 13,995 thousand (EUR 13,376 thousand), up 4.6 percent. License sales and consulting declined by 1.5 percent, while maintenance increased by 21.3 percent. The effect of exchange rates on the comparison period’s net sales was EUR 434 thousand and at comparable exchange rates, net sales increased by 1.3 percent.
In the first half of the year, Qt's net sales was EUR 26,766 thousand (EUR 23,704 thousand), an increase of 12.9 percent. License sales and consultancy grew by 8.9 percent and maintenance sales grew by 22.5 percent. The effect of exchange rates on the comparison period's net sales was EUR 1,013 thousand and net sales in comparable currencies thus increased by 8.3%.
Qt Group’s operating result for the second quarter was EUR 714 thousand (EUR 1,321 thousand). Operating result for the first half of 2019 was 195 thousand euros (375). Qt Group has made investments in growth and recruited new personnel in line with its growth strategy. The Group had 331 employees at the end of the first half of 2019, compared to 296 a year earlier. The increase in the number of employees has been strongest in the Asian and US sales and consulting organizations.
Juha Varelius, President and CEO:
Qt Group continued to grow in the second quarter of 2019. Growth was moderate as expected due to a very strong comparison period last year when the Group recorded an exceptionally large number of significant licensing deals. Typically, the net sales and growth of Qt’s individual quarters fluctuate significantly also in the future due to the timing of large deals. In particular, the growth of customers in the Asian industrial automation and automotive industry continued to be strong. The increase in net sales was boosted by the strengthening of the US dollar against the euro. About two-thirds of the sales of Qt are USD-based.
The operating result was profitable for both the second quarter and the first half of the year. Growth investments and new recruits have been continued in line with the growth strategy, particularly focusing on increasing the global sales and consulting network.
During the second quarter of the year, we have further deepened our cooperation with significant customers. Our cooperation with LG widened, and together we offer webOS as the most comprehensive platform for Automotive, Robotics & Smart Homes. Qt provides LG with a development environment to deliver innovative user experiences for next generation embedded devices. webOS will officially become a reference operating system of Qt.
Planmeca, the world’s leading manufacturer of dental care equipment, has chosen Qt’s software development framework as a platform to create digital displays and user interfaces for its imaging and dental care equipment.
In the beginning of the year, we also released that Neusoft Corporation, an IT-enabled solution and service provider from China, selected Qt’s software development framework as one of the foundations for Neusoft’s automotive digital instrument clusters.
Our most important customer segments are the automation industry, the pharmaceutical industry and the automotive industry. We continue enhancing the performance and resource efficiency of Qt applications in addition to offering targeted applications to our most important customer segments. Products programmed on Qt can be used during free time, at work, at home and in vehicles. Qt is used, for example, in airplane entertainment systems, as a platform for digital televisions, in automotive digital cockpits, in the user interfaces of medical devices and small household electronics.
Our performance in the first half means we are well positioned to achieve our goals for 2019 and continue the implementation of our growth strategy.
Future Outlook
Operating environment and market outlook
The company estimates the growth prospects for its business in the next few years as very promising.
The Group’s business development efforts will particularly focus on desktop applications as well as embedded systems in the automotive, medical devices and industrial automation sectors. Product development efforts will also focus on the value-added features and tools needed in the creation of embedded systems.
Sales growth associated with embedded systems will also reflect on the earnings logic. Volume-based distribution license revenue from these sales accumulates over the long term. The company estimates that the growth of volume-based distribution license revenue from the sales of embedded systems will accelerate to a more significant degree starting from 2020.
Outlook 2019
We expect net sales growth to accelerate in the second half of the year. In comparable currencies, net sales in 2019 is estimated to increase by over 15 per cent year-on-year.
The company’s operating result is expected still in 2019 to show a loss due to growth investments.
Financial reporting
Net sales and profit performance
Qt’s net sales for the second quarter amounted to EUR 13,995 thousand (EUR 13,376 thousand), up 4.6 per cent. License sales and consulting grew by 1.5 per cent and support and maintenance by 21.3 per cent. The effect of exchange rates on the comparison period’s net sales was EUR 434 thousand and the net sales thus increased by 1.3 per cent at comparable exchange rates.
Qt’s net sales for the first half of the year amounted to EUR 26,766 thousand (EUR 23,704 thousand), up 12.9 per cent. License sales and consulting grew by 8.9 per cent and support and maintenance by 22.5 per cent. The effect of exchange rates on the comparison period’s net sales was EUR 1,013 thousand and the net sales thus increased by 8.3 per cent at comparable exchange rates.
Qt’s operating result in the second quarter was EUR 714 thousand (EUR 1,321 thousand). The operating result for the first half of the year was EUR 195 thousand (EUR 375 thousand).
The other operating income includes tax-free research and development investment grants received by the company in Norway, totalling approximately EUR 351 thousand (EUR 436 thousand). The grants concern the applicable personnel expenses related to the research and development activities of Qt’s Norwegian company, and they will be paid to the company in the second half of 2019.
The Group’s operating expenses, including materials and services, personnel expenses, depreciation and other operating expenses, amounted to EUR 27,115 thousand (EUR 23,903 thousand) in the first half of the year, up 13.4 per cent year-on-year. Personnel expenses accounted for 67.9 per cent (70%) of operating expenses, or EUR 18,411 thousand (EUR 16,730 thousand).
Qt’s earnings before tax for the first half of the year totalled EUR 124 thousand (EUR 229 thousand) and the result was EUR 47 thousand (EUR 296 thousand). Taxes for the first half of the year amounted to EUR 77 thousand (EUR 67 thousand positive).
Earnings per share were EUR 0.00 in the first half of the year (EUR 0.01).
Financing and investments
Cash flow from operating activities was EUR 1,845 thousand (EUR 219 thousand) in the first half of the year due to the operating result and partly also due to reporting according to IFRS 16 Leases Standard.
Qt’s cash and cash equivalents totalled EUR 10,096 thousand (EUR 11,481 thousand) at the end of the first half of the year.
Qt Group’s consolidated balance sheet total at the end of the first half of the year stood at EUR 46,508 thousand (EUR 41,141 thousand). Net cash flow from investments in the first half of the year was EUR -256 thousand (EUR -549 thousand).
The equity ratio stood at 58.5 per cent (70.9%) and gearing was -28.2 per cent (-51.6%). Interest-bearing liabilities amounted to EUR 4,943 thousand (EUR 727 thousand), of which short-term loans accounted for EUR 2,195 thousand (EUR 391 thousand). Material changes in the amounts of loans are due to the IFRS 16 Leases Standard, applicable from January 1st 2019, when new assets and liabilities are recognized in the balance sheet, mainly for leases of premises and cars.
In the first half of the year, return on investment was 0.9 per cent (1.8%) and return on equity was 0.3 per cent (1.4%).
Personnel
The number of Qt’s personnel was 323 (289) on average during the first half of the year and 331 (296) at the end of the quarter. At the end of the review period, international personnel represented 71 per cent (68%) of the total.
Other events in the review period
Governance
Qt Group Plc's general meeting held on March 14, 2019, adopted the company’s annual accounts, including the consolidated annual accounts for the accounting period January 1‒December 31, 2018, and discharged the Members of the Board and the Chief Executive Officer from liability. The general meeting resolved, in accordance with the Board’s proposal, that no dividend will be paid based on the balance sheet adopted for the accounting period that ended on December 31, 2018.
The general meeting resolved on the remuneration of the company’s Board of Directors and auditors, decided that the number of members on the Board of Directors would be five (5) and elected the company’s Board of Directors. Robert Ingman, Jaakko Koppinen, Mikko Marsio, Leena Saarinen and Tommi Uhari were re-elected as members of Qt Group Plc’s Board of Directors. At its organizing meeting held after the general meeting, the Board of Directors elected Robert Ingman as its Chairman and Tommi Uhari as the Vice Chairman.
The general meeting granted the following authorizations to the Board of Directors of Qt Group Plc:
Authorizing the Board of Directors to decide on repurchasing the company’s own shares and/or accepting them as collateral
The general meeting authorized the Board of Directors to decide on the repurchase and/or acceptance as collateral of a maximum of 2,000,000 of the company’s own shares by using funds in the unrestricted equity.
According to the authorization, the Board will decide on how these shares are to be purchased. The shares may be repurchased in a proportion other than that of the shares held by the current shareholders. The authorization also includes the acquisition of shares through public trading organized by Nasdaq Helsinki Ltd in accordance with its and Euroclear Finland Ltd’s rules and instructions, or through offers made to shareholders.
Shares may be acquired in order to improve the company’s capital structure, to finance or carry out acquisitions or other arrangements, to implement share-based incentive schemes, to be transferred for other purposes, or to be cancelled.
The shares shall be repurchased for a price based on the fair value quoted in public trading. The authorization is valid for 18 months from the issue date of the authorization, i.e. until September 14, 2020, and it replaces any earlier authorizations on the repurchase and/or acceptance as collateral of the company's own shares.
Authorizing the Board of Directors to decide on a share issue and the granting of special rights entitling to shares
The general meeting authorized the Board to decide on a share issue and the granting of special rights pursuant to Chapter 10, Section 1, of the Limited Liability Companies Act, subject to or free of charge, in one or several tranches on the following terms.
The maximum total number of shares to be issued by virtue of the authorization is 2,000,000. The authorization concerns both the issuance of new shares and the transfer of shares held by the company. By virtue of the authorization, the Board of Directors is entitled to decide on share issues and the granting of special rights waiving the pre-emptive subscription rights of the shareholders (directed issue).
The authorization may be used in order to finance or carry out acquisitions or other arrangements, to carry out the company’s share-based incentive schemes and to improve the capital structure of the company, or for other purposes decided by the Board of Directors.
The authorization includes the Board of Directors' right to decide on all terms relating to the share issue and granting of special rights including the subscription price, its payment and its entry into the company's balance sheet.
The authorization is valid for 18 months from the issue date of the authorization, i.e. until September 14, 2020, and it replaces any earlier authorizations on the granting of shares or special rights entitling to shares.
By virtue of the authorization granted to it by the general meeting, the Board of Directors of Qt Group Plc resolved at its meeting on February 14, 2019, on the program for keypersons’ share rewards. Within this program, a reward corresponding to the value of 530,000 shares of the company at the most can be granted to keypersons in the company or its group companies. The governance, security and execution of the incentive scheme has been outsourced to Evli AwardsManagement Oy. According to the outsourcing arrangement, the company shall fund the acquisition of shares required for paying out rewards in the manner permitted by Chapter 13, Section 10, Clause 2 of the Limited Liability Companies Act, and Evli AwardsManagement shall independently perform the acquisition of such shares in the stock market.
Events after the review period
The company had no other significant events deviating from normal business operations after the end of the review period.
Risks and uncertainties
The company’s short-term risks and uncertainties are related to potential significant changes in the company’s business operations as well as the retention and recruitment of the personnel required for business development.
Exchange rate fluctuations, particularly between the US dollar and euro, may have a large impact on the development of the company’s net sales. Another factor contributing to considerable fluctuation in quarterly net sales and profitability in particular is contract turnaround times which, in the major customer segment, are very long at up to 18 months.
The company’s business risks and preparations for them are also described on the company website at www.qt.io.
Helsinki, August 9, 2019
Qt Group Plc
Board of Directors
Communications
Qt Group will hold a briefing on this half-year report for analysts on Friday, 9 August 2019 at 11:00 am, in the Eino Leino cabinet of Hotel Kämp, Pohjoisesplanadi 29, 00100 Helsinki, Finland. Welcome!
The half-year report and CEO’s presentation will be available in the Investors section at www.qt.io from 11:00 am on 9 August 2019.
Further information
Juha Varelius, CEO, tel. +358 9 8861 8040
DISTRIBUTION
NASDAQ Helsinki
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