17.10.2014

    SOLTEQ PLC’S INTERIM REPORT 1.1.–30.9.2014 (IFRS)

    Solteq Plc Stock Exchange Bulletin 17.10.2014 at 9.00 am.

    - Revenue totalled 28,7 million euros (28,3 million euros).

    - The operating result for the review period was 1.581 thousand euros (1.712 thousand euros).

    - The company’s operating margin was 5,5 % (6,0 %).

    - Solteq Group’s equity ratio was 47,4 per cent (41,7 %).

    - Earnings per share was 0,08 euros (0,08 euros).

     

    KEY FIGURES
    Turnover by operation:

    % 1-9/14 1-9/13 1-12/13
    Softwareservices 64 67 66
    Licences 28 27 27
    Hardware 8 6 7

    CEO Repe Harmanen:

    “This year has generally progressed as planned, but demand did not increase evenly in all the business sectors in the third quarter. Despite the overall growth, we did not quite reach the expected net sales level. However, the change in the third quarter was not significant. Our financial performance was the same as in 2013, but we find it necessary to make structural stages at this stage.

    In our previous Interim Report in July we already stated that we had taken measures to ensure and improve profitability in the units in which the financial performance had not met our expectations. In early October, towards the end of the review period, we also started cooperation negotiations in the company, with the aim of restructuring our business operations and thereby improving our financial performance in the medium and long term. We will continue our cost efficiency improvement programs, and we will also make new decisions to convert our fixed cost into variable costs for the years to come. These measures will also enable us to grow in our new strategic technology areas.

    We will continue evaluating how the demand for our solutions will develop in the next few years, and we will speed up the implementation of our strategy. As to older technologies, we expect to see decreased demand and postponed investment decisions. On the other hand, we have managed to strengthen our position in our new strategic areas and anticipate growth in demand in them.

    Even if we have seen projects being postponed, market demand has not changed radically since the early part of the year. We also expect that, due to the efficiency improvement needs of our client organizations, demand will pick up as expected especially in the area of new technologies during the last few months of the year.

    In our opinion, our business will develop at the same pace in the last quarter of the year as in the first six months. The implementation of structural changes may cause non-recurring expenses, but we do not expect them to affect our profit forecast for this year.

    In the last few months of the year, we will speed up our measures to improve cost flexibility and growth. We will maintain our net sales and profit forecast for the whole year at the previous level.

    I wish our stakeholders and interest groups all the best for the rest of the year.”

    BUSINESS ENVIRONMENT AND BUSINESS DEVELOPMENT

    Solteq is a leading retail and service industry software service company. We offer long-term partnership and the markets’ widest range of retail and service industry software services, from the optimisation of the entire supply chain to the management of consumer-customer information. Our technology-independent solutions help our customers to guide their business operations as efficiently and profitably as possible.

    Solteq Plc has three reported segments. Segmentation is based on the customer segments of the company. The aim of the segmentation is to respond to customer demand as a field total supplier and therefore to improve the availability of services and ease for our customers.

    Solteq’s turnover totalled 28.715 thousand euros in which contains increase of 1,5 per cent compared to corresponding period in 2013. Solteq’s operating result decreased to 1.581 thousand euros from 1.712 thousand euros that was the operating result in the corresponding period 2013. The company’s operating margin was 5,5 % (6,0 % in 2013).

    Grocery and Special Retail, HoReCa

    Solteq’s Grocery and Special Retail Segment provides its clients with total solutions that they can utilise to improve efficiency in terms of logistics, store operations, customer service, point of sale operations, as well as loyal customer management.

    The grocery and special retail solutions help optimise the management of the product selection, space, deliveries, logistics and customer satisfaction while increasing sales and improving the result. The solutions speed up the basic operations, improve delivery reliability, reduce storage value, increase stock turnover and enhance predict­ability. The store always has the right products in the right place, at the right time, and at the right price

    During the review period the revenue of the Grocery and Special Retail segment totalled 15,0 million euros and the operating result was 0,7 million euros.

    Wholesale, Logistics and Services

    Solteq’s Wholesale, Logistics and Services Segment provides its clients with ERP and financial management systems, as well as optimisation, integration and reporting solutions that support these systems.

    Solteq’s solutions help clients manage their operations and enhance purchases, sales, stock management and reporting. The systems can be utilised to improve delivery reliability, reduce storage value, increase stock turnover and enhance predictability. Materials flow management ensures that the right goods reach the right customers at the right time, packed in an optimal manner.

    Solteq’s wholesale, logistics and services systems improve the effectiveness of operations and enable more flexible and versatile customer service. At the same time, automated data management enhances the company’s internal operations. Solteq’s solutions are used daily by a large number of clients representing various industries and sectors, such as wholesale, retail and public administration.

    During the review period the revenue of the Wholesale, Logistics and Services segment totalled 9,8 million euros and the operating result was 0,2 million euros.

    Enterprise Asset & Service Business Management

    Solteq’s Enterprise Asset & Service Business Management Segment provides its clients with ERP and master data management solutions.

    The enterprise resource planning solutions developed for the optimisation of service processes help clients manage their operations in many ways, for instance enhance production plant reliability, task and resources manage­ment, field work, sales and customer service, partner network management and materials management. The solutions are utilised by a large number of clients representing various industries and sectors, such as energy produc­tion, maintenance services, life cycle services, engineering and technical services of cities and municipalities, property management services, and home and care services.

    The Enterprise Asset & Service Business Management Segment also provides client companies with services and products related to business critical data (master data) in the form of master data improvement projects, data maintenance services outsourced to master data service centers, software technologies for master data management, and consultation services. The aim of these services is to ensure that the data in the systems that support the clients’ enterprise resource planning and decision making processes are of high quality, compatible and up-to-date. Solteq’s master data manage­ment solutions are used by clients across industries and sectors.

    During the review period the revenue of the Enterprise Asset & Service Business Manage­ment segment totalled 3,9 million euros and the operating result was 0,7 million euros.

    REVENUE AND RESULT

    Revenue totalled 28.715 thousand euros (28.303 thousand euros 2013).

    Revenue consists of several individual customerships. At the most, one client cor­responds to less than ten percentages of the revenue.

    The operating result for the review period was 1.581 thousand euros (1.712 thousand euros), result before taxes was 1.453 thousand euros (1.572 thousand euros) and result for the review period 1.155 thousand euros (1.192 thousand euros).

    The company has started directed cost saving actions in those segments where the profit development has been unsatisfactory.

    Previously in the latest Financial Statements reported financial risks in a single major project in Wholesale, Trade and Logistics segment, were limited during the first quarter of the year. According to Solteq’s view the project will no longer have negative impact on result during this financial year.

    BALANCE SHEET AND FINANCE

    The total assets amounted to 24.555 thou­sand euros (25.686 thou­sand euros). Liquid assets totalled 1.527 thousand euros (2.390 thousand euros). In addition to liquid assets, the company has unused bank account limits amounting to a total of 1.500 thousand euros in the end of the reporting period.

    The Group’s interest-bearing liabilities were 4.588 thousand euros (5.688 thousand euros).

    Solteq Group’s equity ratio was 47,4 per cent (41,7 %).

    INVESTMENTS, RESEARCH AND DEVELOPMENT

    Gross investment during the review period was 704 thousand euros (713 thousand euros). The investments of the review period and the corresponding period in 2013 are mainly replacement investments.

    Research and development

    Solteq’s research and development costs consist mainly of personnel costs. When developing basic products, it is Solteq’s strategy to cooperate with global actors such as SAP, Symphony EYC and Microsoft and utilize their resources and distribution chan­nels. Own development efforts are focused on added value products and developing tailored service concepts.

    During the review period product develop­ment costs were not amortized (none in the corresponding review period, either).

    PERSONNEL

    The number of permanent employees at the end of the review period was 278 (287). The average number of personnel during the review period was 280 (290). In the end of the review period the number of personnel could be divided as follows: Grocery and special retail, HoReCa segment 108 people, Wholesale, Logistics and Services: 80 people, Enterprise Asset & Service Business Management: 40 people and 50 people in shared functions.

    RELATED PARTY TRANSACTIONS

    Solteq’s related parties include the board of directors, managing director, the manage­ment team and the companies owned by the management.

    SHARES, SHAREHOLDERS AND TREASURY SHARES

    Solteq Plc’s equity on 30.9.2014 was 1.009.154,17 euros which was represented by 14.998.061 shares. The shares have no nominal value.

    At the end of the review period, the amount of treasury shares in Solteq Plc and the group companies Solteq Management Oy’s and Solteq Management Team Oy’s possessions were 827.489 shares. The amount of treasury shares represented 5,5 of the total amount of shares and votes at the end of the review period. The equivalent value of acquired shares was 55.678 euros.

    During the review period, 3.1.2014 one flagging announcement was made. The Mutual Insurance Company Pension Fennia and LocalTapiola Mutual Pension Insurance Company formed a new Pension Company starting from 1.1.2014. The merger led to a situation where the new company Elo Mutual Pension Insurance Company owned more than 10 % of the shares and votes in Solteq Plc on 3.1.2014.

    Exchange and rate

    During the review period, the exchange of Solteq’s shares in the Helsinki Stock Exchange was 0,5 million shares (0,6 million shares) and 0,8 million euros (1,0 million euros). Highest rate during the review period was 1,59 euros and lowest rate 1,35 euros. Weighted average rate of the share was 1,46 euros and end rate 1,51 euros. The market value of the company’s shares in the end of the review period totalled 22,6 million euros (23,2 million euros).

    Ownership

    In the end of the review period, Solteq had a total of 1.720 shareholders (1.759 shareholders). Solteq’s 10 largest shareholders owned 11.270 thousand shares i.e. they owned 75,1 per cent of the company’s shares and votes. Solteq Plc’s members of the board owned a total of 5.574 thousand shares which equals 37,2 per cent of the company’s shares and votes.

    ANNUAL GENERAL MEETING

    At Solteq Plc’s Annual General Meeting on 17 March 2014 the 2013 financial statements were adopted and the members of the board and the managing director were discharged from liability for the 2013 review period.

    In the meeting was accepted the proposal by the board that for the financial year 2013, there will be paid a dividend of 0.03 euros per each share on the market. In addition to this, the annual general meeting authorized the board to decide on a distribution of dividend, or other distribution of funds from the equity trust, for an amount of maximum 0.05 euros. The board is also allowed to decide on the timing and other details of this. The authorization is valid until the beginning of the next Annual General Meeting.

    The Annual General Meeting authorized the board to acquire or pledge the company’s own shares in such a way that the amount of own shares can be at any time maximum 10 per cent of the whole amount of company shares. With this authorization, shares can be acquired or pledged in order to develop the equity structure; or to be used as part of the personnel incentive system; or as a funding or for the realization of acquisitions of another company; or for other business arrangements; or they can be disclosed or invalidated. These shares can be acquired also in other ratios than the shareowners ownership ratio. The shares should be acquired from the public stock exchange. The board can decide on the other conditions for this procedure. This authorization is valid until next annual general meeting.

    The Annual General Meeting authorized the board to decide on an issue of shares for a maximum amount of 3 000 000 new or existing shares, owned by the company, in one or several lots. The issue of shares should be implemented as a directed issue, on the contrary to shareowners subscription rights. With this authorization the board decides on all other conditions for the share issue. This authorization is valid until next Annual General Meeting.

    BOARD OF DIRECTORS AND AUDITORS

    Seven members were elected to the Board of Directors. Ali Saadetdin, Seppo Aalto, Markku Pietilä, Sirpa Sara-aho, Jukka Sonninen and Matti Roininen continued as members of the board. Olli Välimäki was elected as a new member of the board. The Board elected Ali Saadetdin to act as the Chairman of the Board.

    KPMG Oy Ab, Authorized Public Account­ants, was re-elected as Solteq’s auditors. Lotta Nurminen, APA, acted as the chief auditor.

    EVENTS AFTER THE REVIEW PERIOD

    According to the stock exchange bulletin announced on 2.10.2014 Solteq Plc aims to adjust its production and cost structure on the segments in which the need of man-work has decreased due to technological improvement and changes in market demand.

    In consequence company started co-operation negotiations concerning the termination of 20 employments at the most and temporary layoffs maximum of 20 persons on production and economic basis. The co-operation negotiations involve about one third of company’s personnel.

    RISKS AND UNCERTAINTIES

    The key uncertainties and risks in short term are related to the timing and pricing of business deals that are the basis for revenue, changes in the level of costs and the com­pany’s ability to manage extensive contract agreements and deliveries.

    The key business risks and uncertainties of the company are monitored constantly as a part of the board of directors’ and manage­ment team’s duties. The company has not organized a separate internal audit organiza­tion or committee.

    PROSPECTS

    Both revenue and operating result are expected to grow compared to financial year 2013.

    Financial reporting

    This Interim Report has been prepared in accordance with IAS 34 Interim Financial Reporting –standard and using the same accounting policies as the financial statements 2013.

    The financial result is reported through three business areas. Grocery and special retail, HoReCa segment, Wholesale, Logistics and Services and Enterprise Asset & Service Business Management. The most essential product and service types of the Solteq group of companies are software services, licenses and hardware sales.

    All forecasts and estimates presented in the bulletin are based on the current views of management on the economic environment and outlook. Because of this, the results can differ as a result of, among other factors, changes in economy, markets and competitive conditions, changes in the regulatory environment and other government actions.

    The interim report is unaudited.

    FINANCIAL INFORMATION    
               
    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME    
    (TEUR)          
      1.7.- 1.7.- 1.1.- 1.1.- 1.1.-
      30.9.2014 30.9.2013 30.9.2014 30.9.2013 31.12.2013
               
               
    REVENUE 8 326 8 587 28 715 28 303 38 124
               
               
    Other income 0 4 0 12 50
               
    Materials and          
    services -2 375 -2 335 -7 840 -6 623 -9 151
               
    Employee benefit          
    expenses -3 945 -3 944 -13 871 -14 283 -19 386
               
    Depreciation and impairments -337 -309 -976 -918 -1 228
               
               
    Other expenses -1 225 -1 370 -4 447 -4 778 -6 268
               
    OPERATING RESULT 444 632 1 581 1 712 2 141
               
    Financial income and          
    expenses -33 -33 -128 -140 -214
               
    RESULT BEFORE TAXES 411 599 1 453 1 572 1 927
               
    Income tax expences -95 -152 -298 -380 -306
               
    RESULT FOR THE PERIOD
      316 447 1 155 1 192 1 621
               
    OTHER COMPREHENSIVE INCOME        
    TO BE RECLASSIFIED TO PROFIT        
    OR LOSS IN SUBSEQUENT PERIODS        
    Cash flow hedges 6 13 6 33 27
    Taxes related to          
    cash flow hedge -1 -2 -1 -7 -6
    Other comprehensive income,        
    net of tax 5 11 5 26 21
               
             
    TOTAL COMPREHENSIVE INCOME 321 458 1 160 1 218 1 642
               
    Total profit for the period attributable to        
    owners of the parent 316 447 1 155 1 192 1 621
               
    Total comprehensive income attributable to        
    owners of the parent 321 458 1 160 1 218 1 642
               
    Earnings/share,          
    e (undiluted) 0,02 0,03 0,08 0,08 0,11
    Earnings/share,          
    e (diluted) 0,02 0,03 0,08 0,08 0,11
               
    Taxes corresponding to the result have been presented as taxes for the period.
    CONSOLIDATED BALANCE 30.9.2014 30.9.2013 31.12.2013
    SHEET (TEUR)      
           
    ASSETS      
           
    NON-CURRENT ASSETS      
           
    Tangible assets 1 566 1 290 1 399
           
    Intangible assets      
       Goodwill 12 730 12 730 12 730
       Other intangible rights 2 409 3 036 2 853
           
    Available-for-sale      
    financial assets 551 546 546
           
    Trade and other receivables 17 63 32
           
    Total      
    non-current assets 17 273 17 665 17 560
           
    CURRENT ASSETS      
           
    Inventories 133 131 156
           
    Trade and other receivables 5 622 5 500 5 303
           
    Cash and cash equivalents 1 527 2 390 2 367
           
    Total      
    current assets 7 282 8 021 7 826
           
    TOTAL ASSETS 24 555 25 686 25 386
           
           
    EQUITY AND LIABILITIES      
           
    EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE  
    PARENT  
    Share capital 1 009 1 009 1 009
       Share premium reserve 74 74 75
       Hedging reserve -23 -23 -28
       Reserve for own shares -1 012 -933 -933
       Distributable equity    
       reserve 6 392 6 392 6 392
       Retained earnings 5 037 4 196 4 331
           
    Total equity 11 477 10 715 10 846
           
    Non-current liabilities      
    Deferred tax liabilities 551 1 217 593
    Financial liabilities 2 707 3 974 3 695
           
    Current liabilities 9 820 9 780 10 252
           
    Total liabilities 13 078 14 971 14 540
           
    TOTAL EQUITY      
    AND LIABILITIES 24 555 25 686 25 386

    CASH FLOW STATEMENT (MEUR)

      1-9/2014 1-9/2013 1-12/2013
           
    Cash flow from      
    business operations 1,36 3,19 3,83
    Cash flow from capital      
    expenditure -0,70 -0,72 -0,96
    Cash flow from financing activities      
       Own shares -0,08 0,00 0,00
       Dividend distribution -0,45 -0,60 -0,90
       Loan agreements -0,97 -0,72 -0,85
    Cash flow from financing      
    activities -1,50 -1,32 -1,75
           
    Change in cash and cash equivalents -0,84 1,15 1,12

    STATEMENT OF CHANGES IN GROUP EQUITY (TEUR)

             
    A=Share capital        
    B=Reserve for own shares        
    C=Share premium account    
    D=Hedging reserve      
    E=Distributable equity reserve      
    F=Retained earnings        
    G=Total        
      A B C D E F G
                   
    EQUITY 1.1.2013 1 009 -933 75 -49 6 368 3 607 10 077
                   
    Total comprehensive income     26   1 192 1 218
                   
    Directed issue         24   24
    Dividend distribution           -603 -603
                   
    EQUITY 30.9.2013 1 009 -933 75 -23 6 392 4 196 10 715
                   
                   
    EQUITY 1.1.2014 1 009 -933 75 -28 6 392 4 331 10 846
                   
    Total comprehensive income     5   1 155 1 160
                   
    Acquiring of own shares -79         -79
    Dividend distribution           -449 -449
                   
    EQUITY 30.9.2014 1 009 -1 012 75 -23 6 392 5 037 11 477

    SEGMENT INFORMATION

           
             
    Turnover by segment:    
             
    Me   1-9/14 1-9/13 Change
             
    Grocery and special retail, HoReCa 15,0 13,2 +1,8
    Wholesale, Logistics and Services 9,8 11,2 -1,4
    Enterprise Asset & Service Business Management 3,9 3,9 0
    Total   28,7 28,3 +0,4
             
    Operating result by segment:    
             
    Me   1-9/14 1-9/13 Change
             
    Grocery and special retail, HoReCa 0,7 0,8 -0,1
    Wholesale, Logistics and Services 0,2 0,2 0
    Enterprise Asset & Service Business Management 0,7 0,7 0
    Total   1,6 1,7 -0,1

    QUARTERLY KEY INDICATORS (MEUR)

      4Q/12 1Q/13 2Q/13 3Q/13
    Net turnover 11,21 9,99 9,73 8,59
    Operating result 0,88 0,54 0,54 0,63
    Result before taxes 0,84 0,48 0,49 0,60
             
      4Q/13 1Q/14 2Q/14 3Q/14
    Net turnover 9,82 9,87 10,52 8,33
    Operating result 0,43 0,59 0,55 0,44
    Result before taxes 0,36 0,51 0,54 0,41

    TOTAL INVESTMENTS (TEUR)

      1-9/2014 1-9/2013 1-12/2013
    Continuing operations,      
    group total 704 713 957
           
           
    LIABILITIES (MEUR) 30.9.2014 30.9.2013 31.12.2013
           
    Business mortgages 10,00 10,00 10,00
    Other lease liabilities 2,89 3,56 3,53
           
           
    RELATED PARTY TRANSACTIONS (TEUR) 30.9.2014 30.9.2013 31.12.2013
    Renting arrangements 62 62 83
    Outsourcing expenses 0 2 2

    Transactions with the insiders have been done at market price and are part of the company’s normal software service business.                                                      

    FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES                              

    The fair values of the financial assets and liabilities are mainly the same as the book values. Hence they are not presented in table form in the bulletin.

    MAJOR SHAREHOLDERS 30.9.2014    
           
        Shares and votes
        Number %
    1. Saadetdin Ali   3 481 383 23,2
    2. Keskinäinen Työeläkevakuutusyhtiö Elo 2 000 000 13,3
    3. Profiz Business Solution Oyj 1 756 180 11,7
    4. Aalto Seppo   1 662 206 11,1
    5. Keskinäinen Työeläkevakuutusyhtiö Varma 644 917 4,3
    6. Roininen Matti   410 000 2,7
    7. Pirhonen Jalo   408 480 2,7
    8. Solteq Management Oy 400 000 2,7
    9. Solteq Management Team Oy 350 000 2,3
    10. Saadetdin Katiye   156 600 1,0
    10 largest shareholders total 11 269 766 75,1
    Total of nominee-registered 128 298 0,9
    Others   3 599 997 24,0
    Total   14 998 061 100,0

    FINANCIAL PERFORMANCE

         
    INDICATORS (IFRS) 1-9/2014 1-9/2013 1-12/2013
           
    Net turnover MEUR 28,7 28,3 38,1
    Change in net turnover 1,5 % 1,8 % -2,3 %
    Operating result MEUR 1,6 1,7 2,1
    % of turnover 5,5 % 6,0 % 5,6 %
    Result      
    before taxes MEUR 1,5 1,6 1,9
    % of turnover 5,1 % 5,6 % 5,1 %
    Equity ratio, % 47,4 41,7 43,5
    Gearing, % 26,7 % 30,8 % 29,4 %
    Gross investments in      
    non current assets MEUR 0,7 0,7 1,0
    Return on equity, % 13,9 % 15,8 % 15,5 %
    Return on investment, % 13,4 % 14,5 % 13,2 %
    Personnel at the end of      
    period  278 287 277
    Personnel average      
    for period  280 290 287
           
    KEY INDICATORS PER SHARE
           
    Earnings/share, e 0,08 0,08 0,11
    Earnings/share,      
    e(diluted) 0,08 0,08 0,11
    Equity/share, e 0,77 0,72 0,72

    CALCULATION OF FINANCIAL RATIOS

           
               
               
    Solvency ratio, in percentage:        
      equity        
      ----------------------------------   x 100
      balance sheet total - advances received    
               
    Gearing:          
      interest bearing liabilities – cash, bank balancies and securities      
      ------------------------------------------- X 100
      equity        
               
    Return on equity (ROE) in percentage:        
      profit or loss before taxation – taxes        
      ----------------------------------------   x 100
      equity    
               
    Profit from invested equity in percentage:        
      profit or loss before taxation +    
      interest expenses and other financing expenses        
      ----------------------------------------   x 100
      balance sheet total- non-interest bearing liabilities    
      (keskim. kauden aikana)      
               
    Earnings per share:          
      pre-tax result – taxes +/- minority interest
      ------------------------------------    
      diluted average share issue corrected number of shares    
               
    Diluted earnings per share:        
      diluted profit before taxation - taxes -/+ minority interest
      -----------------------------------------------  
      diluted average share issue  
      corrected number of shares      
               
    Equity per share:        
      equity        
      -----------------------      
      number of shares      

    Financial reporting

    Solteq Plc estimates to publish the financial statements bulletin from the financial year 2014 February 13, 2015 at 9.00 am.

    More investor information is available from Solteq’s website at www.solteq.com.

    Additional information:

    CEO, Repe Harmanen

    Tel +358 400 467 717

    E-mail repe.harmanen@solteq.com

    CFO, Antti Kärkkäinen

    Tel +358 40 8444 393

    E-mail antti.karkkainen@solteq.com

    Distribution:

    NASDAQ OMX Helsinki

    Key media

    www.solteq.com

    2014