Financial Statements Bulletin, January 1 – December 31, 2023
We decided on two very significant company matters in the last quarter. Due to the changed circumstances, the treatment of product development costs was updated and aligned with the new operational logic. We ceased product development cost activations during the quarter and fully wrote off the activated product development costs of EUR 7.5 million from the balance sheet. Additionally, we concluded the change negotiations for the Utilities segment, resulting in an annual cost reduction of approximately EUR 3.8 million. Both implemented matters positively affect the company's business, but particularly the change in product development cost treatment practices complicates the comparison of the quarter to the corresponding quarter of the previous financial year.
The comparable revenue of Solteq Plc was EUR 14.2 million, remaining at the comparison period’s level. The comparable revenue decreased by 1.4 percent in Retail & Commerce and increased by 4.3 percent in Utilities.
During the review period, the company announced a change in its product development practices. Developing its software products had become an integral part of continuous services and standard operations, and the costs related to product development no longer met the requirements for activating them. During the fourth quarter, the company treated the product development expenses of its existing software products as cost items in the income statement, as part of normal business operations, and ceased product development cost activations. This change affects the comparability of EBITDA and operating result of the fourth quarter to the corresponding quarter in 2022.
During the review period, the Group’s comparable EBITDA was EUR -0.3 million, and product development activations amounted to EUR 0.1 million. In the fourth quarter of 2022, the comparable EBITDA was EUR 0.3 million, and product development activations amounted to EUR 0.9 million. Excluding the impact of activations, the Group's comparable EBITDA was EUR 0.2 million better than in the comparison period.
The Group’s comparable operating result was EUR -1.0 million in the review period. Still, EUR 0.1 million in depreciations related to product development activations were conducted. In the fourth quarter of 2022, the comparable operating result was EUR -1.0 million, and depreciations related to product development activations accounted for EUR 0.5 million. Excluding the impact of activations and depreciations, the company’s comparable operating result was EUR 0.4 million better than in the comparison period.
Additionally, in December 2023, the company assessed the product development investment activations on the balance sheet and the expected returns. As a result of the assessment, the company made a EUR 7.5 million write-off, issued a profit warning, and updated its profit guidance.
During the review period, the revenue and business result of the Utilities segment developed positively. This was due to the completed change negotiations, the restructuring of operations, and the development of the product business. The change negotiations, initiated to improve profitability and operational efficiency, were completed on October 10, 2023. As a result of the negotiations and implemented efficiency and cost-saving measures, the company expects to achieve approximately EUR 3.8 million in cost savings annually. These savings are anticipated to be fully realized during the fiscal year 2024, although optimizing cost structure during the review period has enhanced the segment's profitability already. The change negotiations resulted in a one-time cost of approximately EUR 300 thousand, which is included in the segment's personnel costs. The Utilities segment's long-term market outlook is expected to remain good, providing opportunities for profitable growth.
The performance of the Retail & Commerce segment was hindered by the continued volatility of the global economy and its impact on demand. Customer organizations were cautious regarding investments, which led to delays in decision-making and scale-downs of scopes in project deliveries. The long-term market outlook for the Retail & Commerce segment is expected to remain moderate, with demand anticipated to recover as the markets stabilize.
CEO Aarne Aktan