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ComTel SpA Annual Report 2010
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Annual Report
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COMPTEL CORPORATION
Financial Statements and Report of Board of Directors
1 January - 31 December 2010
Business ID 0621455-2
Domicile Helsinki, Finland
Address Salmisaarenaukio 1
00180 Helsinki
Table of contents
| Section | page |
|---|---|
| Report of Board of Directors | 1 |
| Consolidated Statement of Comprehensive Income | 8 |
| Consolidated Statement of Financial Position | 9 |
| Consolidated Statement of Cash Flows | 10 |
| Consolidated Statement of Changes in Equity | 11 |
| Notes to the Consolidated Statements | 12 |
| Key Figures | 47 |
| Definitions to Key Figures | 48 |
| Parent Company Income Statement, FAS | 49 |
| Parent Company Balance Sheet, FAS | 50 |
| Parent Company Statement of Cash Flows, FAS | 51 |
| Notes to the Financial Statements of the Parent Company, FAS | 52 |
| Proposal for the Distribution of Parent Company Profit | 62 |
| Shares and Shareholders | 63 |
| Date and signature of the Board of Directors report and the financial statements | 68 |
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Report of the Board of Directors for 2010
Market development
Comptel operates globally in the telecom OSS (Operations Support System) markets.
In 2010, telecom operator investments turned to a slight increase globally. In developed markets, growth was generated by the rapidly increasing use of mobile broadband resulting from booming smartphone adoption. In Asia, the effects of the economic slowdown were minor as the market still has substantial room for growth. In addition, new technologies and lower prices for end-user devices enabled new services to be offered to new customer groups in the region.
In developed markets, the focus of investment shifted strongly to expanding and developing mobile broadband networks and services. As a result, many existing 3G networks were expanded and their performance was increased. In addition, 4G and LTE networks are being deployed faster than anticipated. At the same time, there is a need to invest in systems that enable flexible service packaging, selling of 3rd party services, and diverse pricing models.
New networks have also created a need to consolidate the management of networks and business systems to reduce the cost of running multiple systems in parallel as well as simplify the delivery of services to all customer segments. Alternatively, these management systems can be implemented as cloud services.
Net sales and profitability
The net sales of Comptel Group grew by 4.0 per cent compared to the previous year and were EUR 77.9 million (2009: 74.9; 2008: 84.8). The growth was generated by improved license sales.
The Group’s operating profit was EUR 8.9 million (2009: 1.0; 2008: 11.4), representing 11.4 per cent of net sales (1.4). The growth of net sales and a lower cost base improved the profitability. Decreased personnel and subcontracting expenses lowered the costs from the previous year.
In 2010, net financial items were EUR -0.7 million (-0.7). Profit before taxes was EUR 8.5 million (0.4), which corresponds 10.9 per cent (0.5) of net sales. Net profit was EUR 4.7 million (-2.1). Earnings per share for the financial year were EUR 0.04 (2009: -0.02; 2008: 0.06).
Tax expense for the financial year was EUR 3.8 million (2.5). The Finnish tax authority credited a total of EUR 0.8 million for the withholding taxes Comptel has paid in Brazil and China and which had been collected again in Finland. Including these withholding taxes credited during the first half of the year, the net amount of withholding taxes due to double taxation was EUR 0.2 million. The cumulative amount of outstanding double withholding taxes payment since 2004 is EUR 6.5 million.
Return on equity was 9.9 per cent (2009: -4.4; 2008: 12.8).
The Group’s order backlog was EUR 34.0 million (2009: 37.6; 2008: 38.8) at the end of the financial year. Maintenance agreements represent EUR 20.5 million (22.6) and other order backlog EUR 13.6 million (15.0) of the total.
Key figures, per share data and the definition of key figures are presented in more detail in notes to the financial statements.
Business areas
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Comptel's principal business segments are the four geographical market areas: Europe, Asia-Pacific, Middle East and Africa, and the Americas. The operating profit of the segments includes the cost of sales and customer services. Group R&D and general costs are not allocated to the segments.
In 2010, Comptel sold 16 (19) new core licenses: three Comptel Fulfillment, Comptel Convergent Mediation, Comptel Interconnect Billing, and Comptel Provisioning and Activation, two Comptel Policy Control, and one Comptel Catalog and Comptel Dynamic SIM Management. Six licenses were sold in the Middle East and Africa, five in Europe, three in the Americas and two in Asia-Pacific. Comptel reports as new core licenses the software license deliveries which value exceeds EUR 100,000.
Europe was clearly the most significant region. Net sales in the area totalled EUR 37.1 million (33.3). Improved license sales increased the net sales from the previous year. The Group's operating profit for European business was EUR 19.8 million (15.4), representing 53.4 per cent of the European net sales (46.1). During the financial year, Comptel sold five core licenses to its European customers. Some of the most significant customers were Elisa and Telenor, operators belonging to the Telefónica O2, Deutsche Telekom, Vodafone, KPN and Cosmote groups, and TDC. Comptel and Telenor Norway concluded a five year long agreement on the license upgrades and maintenance of Comptel's major OSS products. At the same time, the maintenance of Telenor Norway's old IT systems was removed from Comptel.
The net sales of Asia-Pacific were EUR 23.1 million (20.5). Significant license upgrades increased the net sales. The Group's operating profit from the Asia-Pacific business was EUR 13.1 million (11.5), representing 56.6 per cent (56.3) of the segment's net sales. Comptel sold two core licenses to its Asia-Pacific customers in 2010. The most significant customers in the region were Bharti Airtel and Idea in India, Vodafone and IBM in India and Australia, Indosat in Indonesia, DiGi in Malaysia, FET in Taiwan and DTAC in Thailand.
The net sales of the Middle East and Africa decreased to EUR 9.8 million (16.1). Compared to the previous year, not as many significant deals were signed and delivery projects started slower than anticipated. The Group's operating profit from the region totalled EUR 2.5 million (8.3), representing 25.3 per cent (51.6) of the segment's net sales. During the financial year, Comptel sold six core licenses to its customers in the region. Many of the biggest operators in the Middle East are Comptel's customers. Among the most significant were operators belonging to the Orascom, Q-Tel and Zain groups and Saudi Telecom.
The net sales from the Americas grew significantly and were EUR 7.8 million (5.1). Increasing demand improved the license sales in the region. The Group's operating profit from the American business grew to EUR 4.2 million (0.3), representing 53.5 per cent (5.4) of the segment's net sales. Comptel sold three core licenses to its American customers in 2010. The most significant customers in the Americas were operators belonging to the América Móvil and Telefónica groups, and Axtel, Oi and T-Mobile US.
Comptel's net sales are comprised of selling software licenses and license upgrades, and selling the services and maintenance supporting its solutions. License sales grew significantly from the previous year and were EUR 26.2 million (19.7). Services represented EUR 18.3 million (22.8) and maintenance agreements EUR 33.4 million (32.4) of net sales.
Comptel sells and delivers its products and solutions both directly through its own sales organisation and through its partners. The most significant partners are system integrators such as IBM, Logica, Tech Mahindra and Capgemini, and network equipment vendors like Alcatel-Lucent and Cisco. In addition to its global partners, Comptel cooperates with a number of local partners that are significant in their own region, such as T-Systems in Germany. In line with Comptel's strategy, partner sales grew significantly in the financial year: the net sales through partners and resellers were EUR 29.2 million (23.1) and from direct sales EUR 48.7 million (51.7).
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Investments
In 2010, gross investments in tangible and intangible assets were EUR 1.1 million (0.7) and comprised of investments in devices, software and furnishings. The investments were funded through cash flow from operations.
Research and development
Comptel’s direct R&D expenditures and investments were EUR 13.4 million (2009: 15.6; 2008: 14.0). This corresponds to 17.2 per cent (2009: 20.8; 2008: 16.5) of net sales. In the first half of the financial year, the number of R&D personnel was lower than in the previous year, which resulted as a decreased R&D expenditure for the full year.
Comptel’s R&D expenditure and investments were mainly targeted at developing dynamic end-to-end solutions, which enable service providers to shorten time-to-market for new services and to charge for them.
Comptel Control and Charge solution was launched in the mediation and charging solution area. This solution combines the previously launched Comptel Charging and Comptel Policy Control solutions. It enables operators to manage their services and create new business models, in particular for mobile broadband, by allowing dynamic management of pricing models and quality levels for subscribers. It also allows roaming cost control, bandwidth management and the optimising of resource usage.
In fulfillment, the development of an integrated platform was continued. The focus was in developing of end-to-end solutions suite for service fulfillment automation of broadband networks. Another important development area was catalog solutions allowing the commercial and technical management of services as an integrated part of the platform. In addition, a new solution for managing the provisioning process and number resources related to SIM cards activation in a lean way was launched. This Comptel Dynamic SIM Management solution allows operators to achieve savings in the SIM card delivery process and create differentiation in their offering.
Comptel participated actively with its partners in solution demonstration and research work for managing Cloud services.
Comptel extended 13 previously filed patent applications in 2010 (12). The company did not file new patent applications (2). During the year Comptel was granted five patents (2) related to real-time mediation of usage data and charging of subscribers in an online mediation environment, and managing data traffic in telecom network. At the end of the year, Comptel had 17 (12) granted patents and 77 (70) pending patent applications to protect its main products and solutions.
The Comptel® trademark is a registered trademark of Comptel Corporation in several countries.
Financial position
Statement of financial position total on 31 December 2010 was EUR 76.4 million (82.6), of which liquid assets amounted to EUR 7.0 million (6.7).
During the financial year, net operating cash flow was EUR 16.6 million (6.3), paid dividends were EUR 3.2 million (4.3) and net investments were EUR 5.1 million (4.1).
The trade receivables were EUR 24.3 million (23.6) at the end of the year. Accrued income was EUR 7.6 million (13.5). Deferred income related to partial debiting was EUR 1.9 million (1.6).
During the financial year, the Group amortised its interest-bearing debt by EUR 8.0 million and at the date of financial statements the Group had EUR 0.1 million (8.0) of interest-bearing debt. Comptel
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Corporation has fully available a revolving credit facility of EUR 15.0 million maturing in the year 2013. Equity ratio was 71.6 per cent (62.6) and the gearing ratio was 14.1 per cent negative (2.8).
Company structure
At the end of 2010, Comptel Group comprised of the parent company Comptel Corporation and the fully owned subsidiaries Comptel Communications Oy, Comptel Communications AS, Comptel Communications EOOD, Comptel Communications Sdn Bhd, Comptel Communications Brasil Ltda, Comptel Communications Inc., Comptel Ltd., Comptel Passage Oy and Business Tools Oy. In addition the Group included the fully owned subsidiary Axiom Systems Holdings Ltd. and its fully owned subsidiaries Axiom Systems Ltd., Viewgate Networks Limited and Axiom Systems OSS (Asia Pacific) Pte. The Group also included an Irish associated company Tango Telecom Ltd. (share of ownership 20.0 per cent).
Comptel Group has registered representative and branch offices in Australia, China, India, Italy, Russia, and in the United Arab Emirates.
Personnel
At the beginning of the year Comptel had 587 employees, and at the end of the year 589. The Group employed an average of 586 persons in 2010 (2009: 613; 2008: 606).
The customer service centre in Bulgaria and its 26 employees were transferred to Comptel Group as of 1 April. As part of removing the maintenance of Telenor Norway's old IT systems from Comptel, 16 employees were transferred to Telenor as of 1 July.
Of the Group personnel, 61.8 per cent (65.2) were located in Europe, 30.2 per cent (26.6) in the Asia-Pacific area, 5.1 per cent (3.9) in the Middle East and Africa, and 2.9 per cent (4.3) in the Americas at the end of the financial year.
Of the Group personnel, 46.7 per cent (40.4) worked in customer services, 29.7 per cent (31.3) in research, product development and product management, 14.1 per cent (19.1) in sales and marketing and 9.5 per cent (9.2) in administration and internal support services at the end of the financial year.
At the end of the year the Group had 583 (580) regular workers and 6 (7) non-permanent employees. Of the employees, 560 (559) were full-time and 29 (28) part-time.
Average personnel turnover in 2010 was 13.8 per cent (16.9). The average years of service was 5.8 (6.2). The average age of the employees at the end of the year was 37 years (37). At the end of the year 72 per cent (72) of the employees were men and 28 per cent (28) women.
Salaries and commissions totalled EUR 29.2 million in 2010 (2009: 32.0; 2008: 32.0).
Salaries and compensations paid to the management are described in attachment 29 Related party transactions of the financial statements.
Of the personnel, 72 per cent had a university degree, 15 per cent had a polytechnic diploma, 7 per cent a vocational college diploma and 6 per cent other education.
The Group continued Comptel University programme for personnel competence development. An average of EUR 815 per person was spent on training (1,047). The number of training days per person was 5.2 (4.9).
In the financial year, the amount of sick leave from active working hours was 1.5 per cent (1.6).
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Corporate governance
The Annual General Meeting (AGM), held on 22 March 2010, elected the following members for the Board of Directors: Mr Olli Riikkala, Mr Hannu Vaajoensuu, Mr Timo Kotilainen, Mr Juhani Lassila, Mr Petteri Walldén and Mr Henri Österlund. In its meeting held after the AGM, the Board of Directors re-elected Mr Olli Riikkala as chairman and Mr Hannu Vaajoensuu as vice chairman. Mr Juhani Lassila continued as chairman of the audit committee and Mr Petteri Walldén and Mr Henri Österlund were elected as members. Mr Olli Riikkala continued as chairman of the compensation committee and Mr Timo Kotilainen and Mr Hannu Vaajoensuu were elected as members.
Mr Sami Erviö was President and CEO of Comptel Corporation until 25 October 2010, after which Mr Simo Sääskilahti was the Acting President and CEO until 2 January 2011.
On 26 October 2010, the Board of Directors of Comptel Corporation appointed Mr Juhani Hintikka, M.Sc. (Eng.), as the new President and CEO of the company as of 3 January 2011. He joined Comptel from Nokia Siemens Networks where his most recent position was the global Head of Operations Support Solutions (OSS) Business Line.
In 2010, the Corporate Executives were, in addition to the President and CEO, the business area leaders Mr Timo Koistinen (Europe), Mr Mika Korpinen (Asia-Pacific), Mr Youssef Kermoury (Middle East and Africa), Ms Arnhild Schia responsible for Global Alliances and Strategic Marketing, Mr Simo Sääskilahti responsible for Products and Solutions, Mr Gareth Senior (CTO), Mr Markku Pirskanen (CFO), Ms Niina Pesonen responsible for Human Resources, and Mr Markku Järvenpää responsible for Global Operations Support.
Mr Mikko Hytönen, M.Sc. (Eng.), was appointed as the new Chief Financial Officer, effective as of 1 March 2011, when Mr Markku Pirskanen will join another employer. Mr Hytönen acted earlier as Group Controller for Comptel.
A separate Corporate Governance Statement has been given as a part of the annual report.
Auditors
Comptel’s authorised public accountant was KPMG Oy Ab.
Comptel's share and shareholders' equity
Comptel has one share type. Each share constitutes one (1) vote at the Annual General Meeting. The company's capital stock on 31 December 2010 was EUR 2,141,096.20 and the total number of votes was 107,054,810.
The total exchange of Comptel’s shares in 2010 was 38.3 million shares (35.8), which is 35.8 per cent (33.5) of the total number of shares. The closing price was EUR 0.69 (0.78). Comptel’s market value at the end of the year was EUR 73.5 million (83.3).
Comptel’s shareholders by sector and size, the largest holders and the figures on shares traded and share quotations are presented in the section Shares and shareholders in the financial statements.
During the financial year, a total of 1,250,000 share options 2009B have been distributed to the key personnel of the Group. The current share subscription price for option 2009B is EUR 0.87, which corresponds to the trade volume weighted average quotation of the Comptel share on the NASDAQ OMX Helsinki during 1 April - 30 April 2010.
Share options 2006C were listed on NASDAQ OMX Helsinki commencing from 1 November 2010. The trading code is CTL1VEW306 and ISIN code is FI0009652416. The current share subscription price for option 2006C is EUR 1.41 which corresponds to the trade volume weighted average
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quotation of the Comptel share on the Helsinki stock exchange during 1 April - 30 April 2008 deducted by the dividends paid.
The share subscription period of 2006A share options expired on 30 November 2010. During the subscription period no shares were subscribed.
During the year, Comptel Corporation allotted 202,042 shares as part of share-based incentives to persons involved in the program and 84,447 shares to the members of the Board of Directors as part of their annual compensation.
Members of the Board of Directors and the Acting President and CEO owned a total of 0.37 per cent of the company's shares and votes and 0.29 per cent of the company's share options at the end of the financial year. A total of 20,000 shares can be subscribed with the above options.
A total of 7,000,000 Comptel Corporation shares can be subscribed with the company's outstanding share options.
In April, the company completed its share buy-back programme for the Board's compensation and share-based incentive plan. With the programme a number of 791,081 own shares were purchased through public trading on NASDAQ OMX Helsinki. The average price per share was approximately EUR 0.79 and the total purchase price approximately EUR 627,885.
The company held 599,905 of its own shares at the end of the financial year, which is 0.56 per cent of the total number of its shares. The total counter-book value of the shares held by the company was EUR 11,998.
The AGM held on 22 March 2010 approved the Board of Directors' proposal for a dividend, according to which a dividend of EUR 0.03 per share was paid for 2009. The AGM authorised the Board of Directors to decide on share issues amounting to a maximum of 21,400,000 new shares and on repurchase of the company's own shares up to a maximum number of 10,700,000 shares. The authorisations are valid until 30 June 2011.
Business risks
Comptel's business risks are regularly estimated as part of the annual operative planning and strategy process, of the process of preparing and deciding on commercial offers and agreements and investments and other resource allocations, and of other operative actions. Strategic risks are considered the most significant. Strategic risks are further divided into market risks and risks related to Comptel's business strategy.
Below is a description of the most important factors outside the Group or generated by its operation, which may be of significance to Comptel's business, operating result and share price in the future.
The demand in the operations support system markets may vary significantly by region.
Comptel develops dynamic end-to-end solutions for leading operators in the telecom field. This requires Comptel to understand correctly the trends taking place in its business environment and the needs of its customers and resellers by each region. Failure to identify market conditions, address customers' needs and develop its products in a timely way may significantly undermine Comptel's business and profitability.
Characteristics for Comptel's field of industry are significant variations of net sales and profit, which are related to customers' purchasing behaviour and the timing of major single deals.
Competition in the OSS market is keen. The sector is undergoing consolidation between actors, which is reflected in the duration and pricing of agreements. If Comptel does not manage to adapt its
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operations and address the changes taking place in its competition environment, the market development may greatly impair the company's business and operating result.
Comptel has initiated the execution of customer and partner intimate business model which requires getting competent resources closer to key customers and partners in certain growth markets.
The Middle East, Africa and Asia are increasingly important market areas for Comptel. The company is operating in several countries where the political and social situation is unstable. Deterioration of the situation in these areas may hinder Comptel's business and undermine its profitability. The value of a single delivery project can well be several million euros. Thus a single delivery project or customer may involve a significant risk.
Comptel operates globally so it is exposed to risks arising from different currency positions. Exchange rate changes between the Euro, which is the company's reporting currency, and the US Dollar, UK Pound Sterling and Norwegian Krone affect the company's net sales, expenses and net profit.
The application submitted by Comptel to prevent double taxation is still pending with the Ministry of Finance in Finland. The company believes the treatment of its withholding taxation will be changed also concerning the countries where the issue is still unsolved.
The risks and uncertainties of Comptel are described more in detail in attachment 25 of the financial statements.
Subsequent events
On 10 January 2011, Comptel announced to accelerate its customer and partner intimate business model by placing more resources closer to key customers and partners in certain growth markets. At the same time, Comptel started statutory cooperation negotiations to address the potential personnel impacts in Finland due to restructuring of the European and MEA business units. It is estimated that the maximum reduction need is 30 persons. The negotiation process is expected to be completed during February 2011. Due to the investments in the other markets the total Group headcount is not expected to decrease.
Outlook for 2011
Comptel net sales are estimated to grow moderately in 2011. During this year, the company will invest in further development of its sales channels, and as a result the operating profit is estimated to remain at the previous year's level.
Board of Directors' proposal for the disposal of profits
The Group parent company's distributable equity on 31 December 2010 was EUR 24,980,408.87 (29,167,506.81).
The Board of Directors proposes to the General Meeting that a dividend of EUR 0.04 (0.03) per share be paid, totalling EUR 4,258,196.20 (3,197,119.68).
Significant changes have not taken place in the company's financial position after the end of the financial year. The company's liquidity is good. The Board of Directors' view is that the proposed distribution of profits does not undermine the company's solvency.
Helsinki, 9 February 2011
Comptel Corporation
Board of Directors
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Consolidated Statement of Comprehensive Income
| EUR 1,000 | Notes | 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 |
|---|---|---|---|
| Net sales | 2 | 77,888 | 74,896 |
| Other operating income | 4 | 426 | 102 |
| Materials and services | 5 | -2,607 | -5,828 |
| Employee benefits | 6 | -35,522 | -38,231 |
| Depreciation, amortisation and impairment charges | 7 | -5,941 | -5,654 |
| Other operating expenses | 8 | -25,337 | -24,268 |
| -69,407 | -73,980 | ||
| Operating profit/loss | 8,908 | 1,018 | |
| Financial income | 10 | 864 | 1,156 |
| Financial expenses | 10 | -1,574 | -1,825 |
| Share of result of associated companies | 314 | 40 | |
| Profit/loss before income taxes | 8,512 | 388 | |
| Income taxes | 11 | -3,811 | -2,526 |
| Profit/loss for the period | 4,702 | -2,138 | |
| Other comprehensive income | |||
| Cash flow hedges | 8 | -176 | |
| Translation differences | 900 | 743 | |
| Income tax relating to components of other comprehensive income | 11 | -2 | 46 |
| Total comprehensive income for the period | 5,607 | -1,525 | |
| Profit/loss attributable to: | |||
| Equity holders of the parent company | 4,702 | -2,138 | |
| Non-controlling interest | - | - | |
| Total comprehensive income attributable to: | |||
| Equity holders of the parent company | 5,607 | -1,525 | |
| Non-controlling interest | - | - | |
| Shareholders of the parent company: | 12 | ||
| Earnings per share, EUR | 0.04 | -0.02 | |
| Earnings per share, diluted, EUR | 0.04 | -0.02 |
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Consolidated Statement of Financial Position
| EUR 1,000 | Notes | 31 Dec 2010 | 31 Dec 2009 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 14 | 19,626 | 19,355 |
| Other intangible assets | 14 | 10,948 | 11,806 |
| Tangible assets | 13 | 1,842 | 1,589 |
| Investments in associates | 15 | 1,003 | 689 |
| Available-for-sale financial assets | 87 | 87 | |
| Deferred tax assets | 16 | 783 | 1,243 |
| Other non-current receivables | 432 | 346 | |
| 34,721 | 35,116 | ||
| Current assets | |||
| Trade and other receivables | 17 | 34,580 | 38,668 |
| Current tax assets | 36 | 2,093 | |
| Cash and cash equivalents | 18 | 7,028 | 6,730 |
| 41,644 | 47,491 | ||
| TOTAL ASSETS | 76,365 | 82,607 | |
| EQUITY AND LIABILITIES | |||
| Equity attributable to equity holders of the parent company | |||
| Share capital | 19 | 2,141 | 2,141 |
| Fund of invested non-restricted equity | 19 | 7,575 | 7,499 |
| Translation difference | 19 | -858 | -1,757 |
| Retained earnings | 40,287 | 38,416 | |
| 49,146 | 46,299 | ||
| Total equity | 49,146 | 46,299 | |
| Non-current liabilities | |||
| Deferred tax liabilities | 16 | 5,762 | 5,458 |
| Provisions | 22 | 1,954 | 2,541 |
| Non-current financial liabilities | 23 | 68 | - |
| Other non-current liabilities | 1 | 1 | |
| 7,784 | 8,000 | ||
| Current liabilities | |||
| Trade and other current liabilities | 24 | 18,819 | 20,117 |
| Current tax liabilities | 579 | 179 | |
| Current financial liabilities | 23 | 36 | 8,012 |
| 19,435 | 28,308 | ||
| Total liabilities | 27,219 | 36,308 | |
| TOTAL EQUITY AND LIABILITIES | 76,365 | 82,607 |
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Consolidated Statement of Cash Flows
| EUR 1,000 | Notes | 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit/loss for the period | 4,702 | -2,138 | |
| Adjustments: | |||
| Non-cash transactions or items that are not part of cash flows from operating activities | 26 | 7,111 | 6,840 |
| Interest and other financial expenses | 139 | 336 | |
| Interest income | -37 | -64 | |
| Income taxes | 3,811 | 2,526 | |
| Change in working capital: | |||
| Change in trade and other receivables | 4,082 | 273 | |
| Change in trade and other current liabilities | -1,711 | 1,648 | |
| Change in provisions | -587 | -396 | |
| Interest paid | -163 | -315 | |
| Interest received | 29 | 108 | |
| Income taxes paid and tax returns received | -820 | -2,517 | |
| Net cash from operating activities | 16,556 | 6,301 | |
| Cash flows from investing activities | |||
| Purchase price adjustments | - | 268 | |
| Investments in tangible assets | -1,085 | -458 | |
| Investments in intangible assets | -39 | -228 | |
| Investments in development projects | -3,932 | -3,906 | |
| Proceeds from sale of tangible and intangible assets | - | 341 | |
| Loans granted | - | -75 | |
| Change in other non-current receivables | -3 | 5 | |
| Net cash used in investing activities | -5,059 | -4,053 | |
| Cash flows from financing activities | |||
| Dividends paid | -3,191 | -4,278 | |
| Acquisition of Corporation's own shares | -468 | -295 | |
| Proceeds from borrowings | 6,000 | 8,000 | |
| Repayment of borrowings | -14,000 | -5,000 | |
| Change in other non-current liabilities | - | -11 | |
| Net cash used in financing activities | -11,659 | -1,585 | |
| Net change in cash and cash equivalents | -163 | 663 | |
| Cash and cash equivalents at the beginning of the period | 18 | 6,730 | 6,135 |
| Cash and cash equivalents at the end of the period | 18 | 7,028 | 6,730 |
| Change | 298 | 595 | |
| Effects of changes in foreign exchange rates | 461 | -68 |
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Consolidated Statement of Changes in Equity
| Equity attributable to equity holders of the parent company | Non-controlling interest | Equity Total | |||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR 1,000 | Share capital | Other reserves | Translation differences | Fair value reserve | Treasury shares | Retained earnings | Total | ||
| Equity at 31 Dec 2008 | 2,141 | 7,433 | -2,500 | 85 | -125 | 44,541 | 51,576 | - | 51,576 |
| Dividends | -4,278 | -4,278 | -4,278 | ||||||
| Acquisition of Corporation's own shares | -336 | -336 | -336 | ||||||
| Transfer of treasury shares | 67 | 174 | -174 | 67 | 67 | ||||
| Share-based compensation | 797 | 797 | 797 | ||||||
| Total comprehensive income for the period | 743 | -130 | -2,138 | -1,525 | -1,525 | ||||
| Equity at 31 Dec 2009 | 2,141 | 7,499 | -1,757 | -45 | -287 | 38,748 | 46,299 | - | 46,299 |
| Dividends | -3,191 | -3,191 | -3,191 | ||||||
| Acquisition of Corporation's own shares | -468 | -468 | -468 | ||||||
| Transfer of treasury shares | 155 | -155 | 76 | 76 | |||||
| Share-based compensation | 76 | 824 | 824 | 824 | |||||
| Total comprehensive income for the period | 900 | 6 | 4,702 | 5,607 | 5,607 | ||||
| Equity at 31 Dec 2010 | 2,141 | 7,575 | -858 | -40 | -600 | 40,927 | 49,146 | - | 49,146 |
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Notes to the Consolidated Financial Statements
1. Accounting principles for the consolidated financial statements
Company profile
Comptel Corporation is a Finnish public limited liability company organised under the laws of Finland. Founded in 1986, Comptel Corporation is one of the leading providers of productised telecom software in convergent fulfillment, mediation and charging. Comptel Corporation is listed on NASDAQ OMX Helsinki (CTL1V). The parent company of the Comptel Group, Comptel Corporation, is domiciled in Helsinki and its registered address is Salmisaarenaukio 1, 00180 Helsinki.
A copy of the consolidated financial statements can be obtained either from Comptel's website (www.comptel.com) or from the parent company's head office, the address of which is mentioned above.
Basis of preparation
Comptel's consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) in force as at 31 December 2010 including the IAS and IFRS standards as well as the SIC and IFRIC interpretations. IFRSs referred to in the Finnish Accounting Act and in ordinances issued based on the provisions of this Act, refer to the standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the EU. The notes to the consolidated financial statements also conform to the Finnish accounting and company legislation.
The consolidated financial statements are prepared under the historical cost convention except for available-for-sale assets, derivative financial instruments and hedged items under fair value hedging. Share-based payments are recognised at fair value at the grant date.
All financial information presented in euros has been rounded to the nearest thousand and consequently the sum of the individual figures can deviate from the sum figure.
Comptel first adopted the IFRS in 2005 and applied IFRS 1 First-time adoption of IFRS in the transition. The transition date was 1 January 2004.
On 1 January 2010 the Group adopted the following new and amended standards and interpretations endorsed by the EU and that are applicable to Comptel:
Revised IFRS 3 Business Combinations (effective for financial periods beginning on or after 1 July 2009). The scope of the revised IFRS 3 is broader than before. Several significant amendments have been made to the standard. The amendments impact the amount of goodwill to be recognised on business combinations and sales results of businesses. The amendments also have an effect on the amounts to be recognised in profit or loss both on the financial year when the business combination is effected and in those financial years when contingent consideration is paid or further acquisitions are made. Under the transitional provisions of the standard those business combinations where control is transferred prior to
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the effective date of the revised standard are not adjusted to comply with the new rules. The revised standard did not have impact on the consolidated financial statements since Comptel did not acquire any companies during the financial year.
Amended IAS 27 Consolidated and Separate Financial Statements (effective for financial periods beginning on or after 1 July 2009). If the parent company retains control, the amended standard requires impacts from changes in ownership in a subsidiary be recognised directly in Group’s equity. When control is lost, the remaining interest is measured at fair value through profit or loss. A similar accounting treatment will be extended to investments in associated companies (IAS 28) and interests in joint ventures (IAS 31) in the future. Resulting from the amendments losses of a subsidiary may be allocated to non-controlling interest (minority) also when they exceed the value of the non-controlling shareholders’ investment. The amended standard did not impact the consolidated financial statements since there were no changes in Comptel Group structure.
Amendment to IAS 39 Financial Instruments: Recognition and Measurement (Eligible Hedged Items) (effective for financial periods beginning on or after 1 July 2009). The amendment deals with hedge accounting and relate to designation of a one-sided risk in a hedged item and designation of inflation in a financial hedged item. The amendment did not have any impact on the consolidated financial statements.
IFRIC 17 Distributions of Non-Cash Assets to Owners (effective for financial periods beginning on or after 1 July 2009). The interpretation gives guidelines to a situation when owners receive dividends in other forms than cash or the owners have the possibility to select whether they will receive non-cash assets or cash. IFRIC 17 did not have any impact on the consolidated financial statements.
Improvements to IFRSs (April 2009) (mainly effective for financial periods beginning on or after 1 January 2010). Under this procedure minor and non-urgent amendments are grouped together and carried out through a single document annually. The related amendments deal with 12 standards. Impacts vary by standard but the amendments did not have a significant impact on the consolidated financial statements.
The preparation of financial statements in conformity with IFRS requires management to make estimates as well as use judgement when applying accounting principles. Actual results may differ from these estimates. The chapter “Accounting policies requiring management’s judgement and key sources of estimation uncertainty” discusses judgements made by management when applying the accounting principles adopted by the Group and those financial statement items on which judgements have the most significant effect.
Principles of consolidation
The consolidated financial statements incorporate the financial statements of the parent company Comptel Corporation and all those subsidiaries in which it has, directly or indirectly, control (together referred to as “Group” or “Comptel”). Associates included in the consolidated financial statements are those entities in which the parent company Comptel Corporation has, directly or indirectly, significant influence, but not control, over the financial and operating policies.
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Subsidiaries
Subsidiaries are entities controlled by Comptel. Control means that the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control exists, among other, when the voting rights attached to the shares owned by Comptel amount to 50 per cent or more of the total voting rights. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.
Acquisitions of subsidiaries are accounted for using the purchase method of accounting. The consideration transferred and the identifiable assets acquired and the liabilities assumed have been recognised at fair value at the acquisition date. The acquisition costs, excluding the costs to issue debt or equity securities, have been recognised as a cost. The consideration transferred exclude business operations treated separately from the acquisition. The impact is recognised in profit or loss when the acquisition takes place. Possible contingent consideration has been recognised at fair value at the acquisition date and has been classified as liability or equity. Contingent consideration classified as liability is recognised at fair value at the end of each reporting period and the resulting gain or loss is recognised in profit or loss or other comprehensive income. Contingent consideration classified as equity shall not be remeasured.
The subsidiaries acquired have been consolidated from the date of acquisition, when control commenced. The subsidiaries disposed of are included in the consolidated financial statements until the control ceases. All inter-company income and expenses, receivables, liabilities and unrealised profits arising from inter-company transactions, as well as distribution of profits within the Group are eliminated as part of the consolidation process. Unrealised losses are eliminated only to the extent that there is no evidence of impairment.
The allocation of the profit or loss and the distribution of the comprehensive income for the period attributable to equity holders of the parent company and non-controlling interest are presented in connection with the consolidated statement of comprehensive income. Possible non-controlling interest is recognised at fair value or amount corresponding to its proportional share of the net identifiable assets acquired and liabilities assumed. Valuation method is defined separately for each acquisition. Comprehensive income is attributed to equity holders of the parent company and non-controlling interest even if share of non-controlling interest was negative. The share of equity attributable to non-controlling interest is presented separately as part of equity in the statement of financial position. If parent company ownership change in a subsidiary and does not result in loss of controlling interest it is recognised in equity.
If a business combination is achieved in stages the previously held equity interest is recognised at fair value and the resulting gain or loss is reflected in profit or loss. If the Group no longer has a controlling stake in a subsidiary, the remaining asset is recognised at fair value at such date when the transaction takes place and the resulting gain or loss is recognised in profit or loss.
Accounting treatment for acquisitions prior to 1 January 2010 has followed the prevailing standards at the end of the reporting period.
Associates
Associates are those entities in which Comptel has significant influence. Significant influence generally arises when Comptel holds voting rights less than 50 per cent but over 20 per cent or when the Group otherwise has significant influence over the financial and operating
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policies, but not control. Holdings in associates are incorporated in these financial statements using the equity method from the date that significant influence commences until the date that significant influence ceases. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. When Comptel's share in an associate's losses exceeds its interest in the associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate or made payments on behalf of the associate. The Group's proportionate share of associates' profit for the period is presented as a separate line item in the consolidated statement of comprehensive income.
Foreign currency transactions
The result and financial position of a Group entity are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in euros, which is the functional and presentation currency of the parent company.
Transactions in foreign currencies are translated at the exchange rates prevailing on the dates of the transactions. Foreign currency monetary balances are translated at the exchange rate at the end of reporting period. Non-monetary items measured at fair value in a foreign currency are translated at the exchange rate at the end of reporting period. Gains and losses resulting from transactions in foreign currencies and translation of monetary items are recognised in profit or loss.
Financial statements of foreign subsidiaries
Statements of comprehensive income and cash flows of foreign subsidiaries are translated into euros at the average exchange rate during the financial period. Their statements of financial position are translated using the exchange rate at the end of reporting period. The translation differences arising from the translation of the profit for the period by using the average and closing rates are recognised in other comprehensive income and presented as a separate item in equity. The translation differences arising from the use of the purchase method and after the date of acquisition as well as the result of the hedge of a net investment in a foreign operation are recognised in other comprehensive income and presented within equity. If a subsidiary is disposed of, related cumulative translation differences deferred in equity are recognised in profit or loss as part of the gain or loss on sale. From the transition date onwards translation differences arising on the consolidation are presented as a separate component of equity.
Goodwill and fair value adjustments to assets and liabilities that arose on an acquisition of a foreign entity occurred prior to 1 January 2004 are translated into euros using the rate that prevailed on the date of the acquisition. Goodwill and fair value adjustments arisen on an acquisition after 1 January 2004 are treated as part of the assets and liabilities of the acquired entity and are translated at the closing rate.
Tangible assets
Tangible assets are measured at historical cost less cumulative depreciation and any impairment losses. Where parts of an item of tangible assets have different economic useful lives, they are accounted for as separate items of tangible assets. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of tangible assets. The depreciation period for machinery and equipment is four years.
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Maintenance, repairs and renewals are generally expensed during the period in which they are incurred except for substantial renovation expenditure relating to leased premises that are capitalised under tangible assets. Such costs are depreciated over the shorter of five years and the lease term.
Residual values of tangible assets and expected useful lives are reassessed at each reporting date and where necessary are adjusted to reflect the changes in the expected future economic benefits.
Tangible assets classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are not depreciated after the classification as held for sale.
Gains and losses on sales and disposals of tangible assets are included in operating income and in operating expenses, respectively.
According to IAS 23 borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are to be capitalised.
Intangible assets
Goodwill
Goodwill resulting from business combinations subsequent to 1 January 2010 is recognised at the value at which the consideration transferred the amount of non-controlling interest and previously held assets together exceed the Group's share of the amount of the net of the acquisition-date fair values of the identifiable assets acquired and liabilities assumed.
Acquisitions that have taken place between 1 January 2004 and 31 December 2009 have been recognised based on the previous IFRS standards. Goodwill arisen from the business combinations occurred prior to the IFRS transition date has been accounted for in accordance with FAS and has been taken as a deemed cost.
In accordance with IAS 36 Impairment of Assets goodwill is not amortised but tested for impairment annually. Goodwill is stated at cost less any cumulative impairment losses.
Research and development costs
In accordance with IAS 38 Intangible Assets expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs that arise from design of new or improved products are capitalised as intangible assets in the statement of financial position when the product is technically and commercially feasible and it will generate future economic benefits. Amortisation of such an asset is commenced when it is available for use. Unfinished assets are tested annually for impairment.
Comptel capitalises development costs and costs related to internal system projects meeting the requirements under IAS 38. Capitalised development costs are amortised on a straight-line basis over three years and the costs related to internal system projects over four years.
Government grants that compensate the Group for the development costs are either deducted from the carrying amount of the asset or from the related expenses in profit or loss.
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Other intangible assets
Patents and licenses acquired as well as costs incurred from patent applications with a finite useful life are capitalised and amortised on a straight-line basis over their useful lives. Amortisation is calculated based on the original cost and allocated over the useful life.
The capitalised patent costs are generally amortised over ten years and licenses over four years.
The expected amortisation periods are reviewed at each reporting date and if they differ from previous estimates, the amortisation period is changed accordingly.
Identifiable intangible assets acquired on a business combination are measured at fair value. Such intangible assets relate for example to client relationships and technologies received in an asset acquisition and they are amortised over three to five years.
Leases
Comptel as lessee
IAS 17 Leases divides leases into finance and operating leases. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the typical risks and rewards of ownership to the lessee.
At the commencement of the lease term an asset acquired under a finance lease is recognised in the statement of financial position at an amount equal to the lower of its fair value and the present value of the minimum lease payments. An asset acquired under a finance lease is depreciated over the shorter of the lease term and its useful life. Lease payments are apportioned between the finance charge and the reduction of the outstanding lease liability so as to achieve a constant periodic rate of interest on the liability balance outstanding. Lease liabilities are included in financial liabilities.
If the lease does not meet the requirements of a finance lease, it is always classified as an operating lease. In such a case the lessee has the right to use the asset for a limited time and the risks and rewards incidental to ownership are not transferred to the lessee.
The leases of Comptel are mainly treated as operating leases. Payments made thereunder are recognised in profit or loss as rental expenses on a straight-line basis over the lease term.
Impairment
Tangible and intangible assets
Comptel assesses at each reporting date whether there is any indication of impairment of assets. If there are such indications, the asset’s recoverable amount is estimated. In addition, the recoverable amount is estimated annually for the following assets regardless of there being any indications of impairment: goodwill and unfinished intangible assets. The need for impairment is reviewed at the level of cash-generating units which is the lowest level for which there are separately identifiable, mainly independent cash flows.
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The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. The value in use represents the discounted future net cash flows expected to be derived from an asset or a cash-generating unit. The discount rate used is the pre-tax rate that reflects the market’s view on the time value of money and the specific risks related to the asset.
An impairment loss is recognised if the carrying amount of an asset or a cash-generating unit is higher than the recoverable amount. Impairment losses are recognised in profit or loss. If an impairment loss is allocated to a cash-generating unit, it is first allocated to decrease the goodwill allocated to this cash-generating unit and subsequently to decrease pro-rata other assets of the cash-generating unit. An impairment loss is reversed if there are any indications that the conditions and the recoverable amount have changed since the impairment loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised. An impairment loss recognised for goodwill is never reversed.
Pension obligations
Under IAS 19 Employee Benefits pension plans are classified as either defined contribution plans or defined benefit plans based on the company’s obligations. In a defined contribution plan the company pays fixed contributions to a separate entity and has no further obligations. The pension plans of Comptel are arranged in accordance with the local legislation. Contributions of the defined contribution plans based on the regularly reviewed actuarial calculations prepared by the local pension insurance companies are recognised as an expense in profit or loss in the year to which they relate. Other plans are classified as defined benefit plans.
In a defined benefit plan the liability to be recognised in the statement of financial position is the net amount of the net present value of the pension obligation and the plan assets measured at fair value at the year-end, adjusted with both unrecognised actuarial gains and losses as well as with unrecognised past service cost. The calculation for pension obligations is carried out by qualified actuaries. The amount of the obligation is based on the projected unit credit method. Pension expenses are recognised in profit or loss over the expected working lives of the employees participating in the plan.
Share-based payments
Comptel has several option schemes and they are paid out as equity instruments. Equity-settled share-based schemes are measured at fair value at the grant date and expensed in profit or loss on a straight-line basis over the vesting period. The expense determined at the grant date is based on the Group’s estimate on the number of those options that eventually vest at the end of the vesting period. The fair value is determined using the Black-Scholes option pricing model.
Comptel has also share-based incentive programs. The share-based incentive programs provide the key personnel of the Comptel Group with a possibility to receive shares of the company as compensation. The compensation paid based on the share-based incentive programs is paid as a combination of company shares and cash after the vesting period has expired. Costs incurred from the share-based incentive programs are recognised as employee benefit expenses over the commitment period.
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Provisions
IAS 37 Provisions, Contingent Liabilities and Contingent Assets prescribes the recognition criteria for a provision. A provision is based on an existing obligation and it is recognised in the statement of financial position when an entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amounts recognised as provisions shall be the best estimate at the end of the reporting period and if the best estimates change the provisions are adjusted. Changes in the provision are recognised similarly in profit or loss as the original provision.
A warranty provision is recognised when a product that embodies a warranty is sold or delivered. The amount of the warranty provision is based on experience-based information about the materialisation of warranty costs.
A restructuring provision is recognised when Comptel has prepared a detailed plan for restructuring, commenced the implementation of the plan and announced about the plan. A restructuring plan includes at least the following information: the business concerned, the principal locations affected, the location, function and approximate number of employees who will be compensated for terminating their services, the expenditures that will be undertaken and when the plan will be implemented. No provision is recognised for the expenditure arising from the Group’s continuing operations.
A provision is recognised when the expected economic benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.
Income taxes
The income taxes in the consolidated statement of comprehensive income consist of current tax and the change in the deferred tax assets and liabilities. Current tax is calculated on the taxable profit for the period determined in accordance with local tax rules and is adjusted with the tax for previous years. The deferred tax amount attributable to other comprehensive income or equity is reflected in other comprehensive income or equity, accordingly.
Deferred tax assets and liabilities are provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The enacted or substantially enacted tax rate at the reporting date is used as the tax rate. In Comptel the main temporary differences arise from the depreciation of tangible assets not deducted in taxation, the fair value measurement of derivatives, capitalisation of development costs and the reversal of goodwill amortisation on Group level.
Deferred tax liabilities are recognised at their full amounts in the statement of financial position, and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised.
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Revenue recognition and net sales
Revenue from the sale of goods is recognised when significant risks and rewards of ownership have been transferred to the buyer. Revenue from services is recognised when the service has been performed. License revenue that includes no work performance is recognised when the license is delivered. The number of subscribers at a client is reviewed continuously. If their number exceeds the number agreed on in the terms of the license, the client can be charged for the increased number of subscribers. This license upgrade revenue is recognised upon invoicing. Maintenance revenue is recognised as income on a straight-line basis over the maintenance term.
Long-term projects
Revenue and expenses from long-term projects are recognised using the percentage-of-completion method, when the outcome of a long-term project can be estimated reliably. The revenue from a long-term project comprises license income and work. The outcome of a long-term project can be estimated reliably when the revenue and expenses expected as well as the progress made towards completing a particular project can be measured reliably and when it is probable that the economic benefits associated with the project will flow to the Group. In Comptel the degree of completion of a long-term project is determined by the relation of accrued work hours to estimated overall work hours. If it is probable that total project costs will exceed total project revenue, the expected loss is recognised as an expense immediately.
Net sales is adjusted for discounts granted, sales-related indirect taxes and effects of the translation differences arisen on the translation of the trade receivables denominated in foreign currencies.
A separate warranty provision is recognised to cover costs under warranty periods following the completion of the projects. The total estimated margin of onerous projects is recognised as an expense and a provision.
Earnings per share
The calculation of earnings per share is based on the profit attributable to ordinary shareholders that is divided by the weighted average number of ordinary shares outstanding during the year. Treasury shares owned by the Group are excluded when calculating the weighted average number of ordinary shares. For the purpose of calculating diluted earnings per share using the treasury stock method, the Group assumes the following: the exercise of dilutive warrants and options occurred at the beginning of the financial period, the exercise of dilutive warrants and options granted during the period followed at their grant date and the proceeds from their exercise was spent by acquiring treasury shares at the average market price during the period. The denominator includes the weighted average number of ordinary shares and the shares to be issued following the exercise of warrants and options.
The assumptions of the exercise of options is excluded when calculating diluted earnings per share if the exercise price of the warrants and options exceeds the average share market price during the period. The options and warrants have a dilutive effect only if the average share market price during the period is higher than the subscription price of an option and a warrant.
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Financial assets and liabilities
Financial assets
In accordance with IAS 39 Financial Instruments: Recognition and Measurement the financial assets of the Group are classified to following groups: financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables and available-for-sale financial assets. Classification is based on the nature of the item and it is made at initial recognition.
An item is classified as financial asset at fair value through profit or loss when it is held for trading or classified at initial recognition as financial asset at fair value through profit or loss. The latter group comprises such investments that are managed based on their fair value or an investment which contains one or more embedded derivative which changes the cash flows of the contract significantly in which case the entire compound instrument is measured at fair value. Financial assets held for trading have been mainly acquired to generate profits from short-term changes in market prices. Derivative instruments which do not meet the criteria for hedge accounting defined in IAS 39 have been classified as held for trading. Derivatives held for trading as well as financial assets maturing within 12 months are included in current assets. These assets have been measured at fair value. Unrealised and realised gains and losses arisen from fair value measurement are recognised in profit or loss in the period in which they occur.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity. Held-to-maturity investments are measured at amortised cost and they are included in non-current assets. Comptel had no such financial assets during the financial year ended 31 December 2009.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group does not hold them for trading purposes either. They are included in current assets, except for maturities greater than 12 months after the reporting date. Trade receivables are recognised based on the original amount charged from a client less any impairment losses.
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date, in which case they are classified as current. Available-for-sale financial assets may include shares (equity securities) and interest-bearing investments. They are measured at fair value, or when the fair value can not be reliably determined, at cost.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks and other short-term, highly liquid investments with original maturities of three months or less. Any bank overdrafts are included within current liabilities.
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Financial liabilities
Financial liabilities are initially recognised at fair value, net of transaction costs. Subsequently financial liabilities are measured at amortised cost using the effective interest rate method. Financial liabilities are both non-current and current. A financial liability is classified as current when the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Borrowing costs are recognised in profit or loss as incurred. Fees paid on the establishment of loan facilities are recorded as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. When the draw-down occurs, the fees paid on the establishment of loan facilities are recognised as part of transaction costs. To the extent it is probable that some or all of the facility will not be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
Derivative financial instruments and hedge accounting
Derivatives are initially recognised in the statement of financial position at cost, equivalent to their fair value and are subsequently measured to fair value. Gains and losses arising from the fair value measurement are accounted for in accordance with the purpose of the derivative in the financial statements. Those derivatives that are used for hedging purposes and are effective hedges are presented consistently with the hedged item in profit or loss. When Comptel enters into a derivative contract, it is accounted for either as a fair value hedge of assets, liabilities or a firm commitment or, in respect of currency risk as a cash flow hedge, a hedge of a highly probable forecast transaction or as a derivative that does not meet the conditions of hedge accounting under IAS 39.
At the inception of a hedge relationship, Comptel formally designates and documents the hedge relationship as well as the Group's risk management objective and strategy for undertaking the hedge. Comptel documents and assesses, at the inception of a hedge relationship and at least at each reporting date, the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value or cash flows attributable to the hedged risk. The changes in the fair values of those derivatives meeting the criteria of a fair value hedge are recognised in profit or loss together with the fair value changes of the hedged asset or liability attributable to the hedged risk.
If a derivative meets the conditions of a cash flow hedge, the change in the fair value of the effective portion of the hedging instrument is recognised in other comprehensive income and presented in equity in the hedging reserve. The accumulated gains or losses in equity are reclassified into profit or loss in the same period during which the hedged item affects profit or loss. Those gains and losses resulting from the instruments hedging the expected sales denominated in foreign currency are adjusted against sales revenues. If the hedged forecast transaction subsequently results in the recognition of a non-financial asset, the associated gains and losses are removed from equity and are included in the cost of the asset. When a hedging instrument designated as a cash flow hedge expires or is sold or the hedge no longer meets the criteria for hedge accounting, the cumulative gain or loss on the hedging instrument remains in equity until the forecast transaction occurs. However, if the forecast transaction is no longer expected to occur, any related cumulative gain or loss in equity is recognised immediately in profit or loss.
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Dividends
The dividend proposed by the board of directors is not recognised until approved by a general meeting of shareholders.
Accounting policies requiring management’s judgment and key sources of estimation uncertainty
The preparation of financial statements calls for the management to make future-related estimates and assumptions which may differ from the actual results. In addition, judgment is required when applying accounting principles. The estimates are based on management’s best view at the reporting date. Possible changes in estimates and assumptions are recognised in that period when an assumption or estimate is corrected as well as in all subsequent periods.
In Comptel those key assumptions concerning the future and those key sources of estimation uncertainty at reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are the following:
Impairment testing
Goodwill, patenting costs and development costs capitalised under unfinished intangible assets are tested annually for impairment. Assets are reviewed for impairment in accordance with the principles set out above. Estimates are required in preparing these calculations.
Additional information about the sensitivity of the recoverable amount to changes in the assumptions used is presented in note 14. Intangible assets.
Revenue recognition
As described above under the heading Revenue recognition principles revenue and expenses from long-term projects are recognised using the percentage of completion method when the outcome of a long-term project can be estimated reliably. The percentage of completion method is based on estimates of total expected project revenue and costs, as well as on reliable measurement of the progress made towards completing a particular project. The recognition of project revenue and project costs in profit or loss is changed if the estimate of the outcome of a project deviates from the plan, in the period in which the change is identified for the first time and it can be estimated reliably. An expected loss on a long-term project is recognised in profit or loss immediately when it is identified and can be estimated reliably. Additional information about the long-term contracts is presented in note 3. Revenue recognition using percentage of completion method.
Application of new or amended standards and interpretations
The below described standards, interpretations or their amendments have been published but are not yet effective and Comptel has not adopted them prior to the mandatory application date. Comptel will adopt the following amended or new standards and interpretations issued by the IASB as soon as they are effective if the effective dated is the same as the beginning of the financial year, or if the effective date is different, they will be adopted as from the beginning of the following financial year:
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Revised IAS 24 Related Party Disclosures (effective for financial periods beginning on or after 1 January 2011). The amendment simplifies and clarifies the definition of a related party and relaxes the disclosure requirements of business operations between public enterprises.
IFRS 9 Financial Instruments (effective for financial periods beginning on or after 1 January 2013). IFRS 9 is the first step in replacing IAS 39. The standard deals with classification and valuation of financial assets. The standard has not been endorsed for use in the EU yet.
Improvements to IFRSs (May 2010) (mainly effective for financial periods beginning on or after 1 July 2010). Under this procedure minor and non-urgent amendments are grouped together and carried out through a single document annually. The amended standards have not been endorsed for use in the EU.
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2. Segment reporting
Comptel Group has four reportable segments which are based on geographical areas. Comptel operates globally in all these market areas. Geographical market areas differ from each other in terms of price level, competitive position and Comptel's own resource allocation. The segment division is based on the geographical location of customers. Geographical segments are Europe, Asia-Pacific, Middle East and Africa and Americas. All segments generate revenue from sales of software licenses, services and support and maintenance associated with the software licenses.
Comptel Group's operating segment reporting is conforming to IFRS standards.
The assessment of the operating results and resource allocation is based on the operating result of the segment in Comptel Group. The President and CEO of Comptel Group is ultimately responsible for these decisions.
Total net sales from the operating segments consolidate to Group external net sales. Segment expenses include sales and customer service expenses. Unallocated expenses relate to product management, research and development as well as administration units. Segment assets include trade receivables.
| 2010, EUR 1,000 | Europe | Asia-Pacific | Middle East and Africa | Americas | Segments total |
|---|---|---|---|---|---|
| Net sales | 37,127 | 23,118 | 9,810 | 7,832 | 77,888 |
| Segment share of operating result | 19,810 | 13,076 | 2,482 | 4,189 | 39,556 |
| Depreciation and amortisation | 528 | 72 | 13 | 9 | 622 |
| Trade receivables | 7,773 | 6,758 | 6,309 | 3,456 | 24,295 |
| Europe | Asia-Pacific | Middle East and Africa | Americas | Segments total | |
| 2009, EUR 1,000 | |||||
| Net sales | 33,296 | 20,455 | 16,078 | 5,067 | 74,896 |
| Segment share of operating result | 15,359 | 11,517 | 8,301 | 275 | 35,453 |
| Depreciation and amortisation | 671 | 49 | 17 | 15 | 752 |
| Trade receivables | 7,228 | 3,023 | 9,188 | 2,733 | 22,172 |
| Reconciliations | |||||
| Result | |||||
| EUR 1,000 | 2010 | 2009 | |||
| Segment share of operating result | 39,556 | 35,453 | |||
| Unallocated expenses | -30,649 | -34,436 | |||
| Financial income and expenses | -710 | -670 | |||
| Share of result of associated companies | 314 | 40 | |||
| Group profit/loss before income taxes | 8,512 | 388 |
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Depreciation, amortisation and impairment charges
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Segment depreciation and amortisation | 622 | 752 |
| Unallocated depreciation, amortisation and impairment charges | 5,319 | 4,901 |
| Total depreciation, amortisation and impairment charges | 5,941 | 5,654 |
Assets
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Segment assets | 24,295 | 22,172 |
| Unallocated assets | 52,070 | 60,435 |
| Total assets | 76,365 | 82,607 |
Information about products and services
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Licenses | 26,237 | 19,663 |
| Services | 18,283 | 22,812 |
| Maintenance agreements | 33,368 | 32,421 |
| Total | 77,888 | 74,896 |
Geographical information
Revenues from external customers
The geographical split of net sales is based on the customer domicile.
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| India | 12,488 | 9,007 |
| Norway | 8,188 | 5,699 |
| Finland | 6,646 | 6,435 |
| Saudi Arabia | 3,248 | 3,523 |
| Other countries | 47,318 | 50,233 |
| Total | 77,888 | 74,896 |
Non-current assets
The geographical split of non-current assets is based on the location of such assets. Non-current assets are presented without deferred tax assets and post-employment benefit assets.
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Finland | 10,491 | 10,813 |
| Other countries | 1,367 | 1,160 |
| Investments in associates | 1,003 | 689 |
| Unallocated assets | 20,982 | 21,184 |
| Total | 33,843 | 33,847 |
Information about major customers
Revenues of approximately EUR 9,512 thousand are derived from a single customer (EUR 6,958 thousand in 2009). This represents 12% (9%) of Comptel's net sales and is attributable to the segment Asia-Pacific.
27
3. Revenue recognition using percentage of completion method
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Net sales recognised as revenue according to percentage of completion | 10,114 | 13,953 |
| Amount recognised as revenue during the financial year and previous years for long-term projects in progress | 14,066 | 20,382 |
| Total costs of incomplete long-term projects | 10,160 | 10,736 |
| Backlog of orders of long-term projects according to percentage of completion | 8,055 | 6,905 |
| Prepayments and accrued income recognised on the basis of percentage of completion | 5,421 | 7,772 |
| Deferred income and accruals recognised on the basis of percentage of completion | 1,929 | 1,582 |
4. Other operating income
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Gains on disposal of tangible assets | 7 | 2 |
| Business transfer | 400 | - |
| Indemnity | - | 70 |
| Other income items | 19 | 29 |
| Total | 426 | 102 |
5. Materials and services
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Purchases | 563 | 1,395 |
| External services | 2,044 | 4,433 |
| Total | 2,607 | 5,828 |
6. Employee benefits
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Wages and salaries | 28,228 | 31,058 |
| Pension expenses - defined contribution plans | 3,728 | 2,925 |
| Pension expenses - defined benefit plans | -2 | 46 |
| Share options granted | 562 | 572 |
| Expenses related to share-based incentive program | 427 | 327 |
| Other social security costs | 2,579 | 3,303 |
| Total | 35,522 | 38,231 |
28
| The average number of employees in the Group during the financial year | 2010 | 2009 |
|---|---|---|
| Europe | 364 | 422 |
| Asia-Pacific | 178 | 142 |
| Middle East and Africa | 30 | 23 |
| Americas | 17 | 26 |
| Total | 589 | 613 |
Information on the remuneration of the Group management is presented in note 29. Related party transactions.
Information on the options granted and on the management's share in the share-based incentive plan is presented in note 20. Share-based payments.
7. Depreciation, amortisation and impairment charges
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Depreciation and amortisation by asset type | ||
| Intangible assets | ||
| Patents and trademarks | 64 | 50 |
| Capitalised development costs | 3,014 | 2,629 |
| Other intangible assets | 1,273 | 1,480 |
| Total | 4,350 | 4,160 |
| Tangible assets | ||
| Machinery and equipment | 1,024 | 1,153 |
| Total | 1,024 | 1,153 |
| Impairment charges by asset type | ||
| Capitalised development costs | 567 | 340 |
| Total | 567 | 340 |
| Total depreciation, amortisation and impairment charges | 5,941 | 5,654 |
8. Other operating expenses
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Lease payments | 5,505 | 5,233 |
| Travel expenses | 3,695 | 4,968 |
| Marketing expenses | 1,333 | 1,890 |
| Other operating expenses | 14,803 | 12,177 |
| Total | 25,337 | 24,268 |
29
The auditors' fees
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| KPMG | ||
| Audit | 120 | 108 |
| Tax consultation | 79 | 60 |
| Other services | 19 | 57 |
| Total | 219 | 226 |
| Pricewaterhouse Coopers | ||
| Audit | 24 | -16 |
| Tax consultation | 10 | 7 |
| Total | 34 | -9 |
| Other | ||
| Audit | 4 | 6 |
| Tax consultation | 1 | - |
| Total | 5 | 6 |
| Total auditors' fees | 258 | 223 |
Audit fees include the fees of the statutory auditors of each Group company.
9. Research and development costs
The research and development costs recognised as expenses in the statement of comprehensive income amounted to EUR 9,482 thousand in 2010 (EUR 11,676 thousand in 2009).
The capitalised development expenditure totalled EUR 3,932 thousand (EUR 3,906 thousand in 2009). The amortisation of the capitalised development costs amounted to EUR 3,078 thousand (EUR 2,680 thousand in 2009). A write-down of EUR 567 thousand was made on the capitalised development costs in 2010 (EUR 340 thousand in 2009).
10. Financial income and expenses
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Interest income from cash and cash equivalents | 12 | 31 |
| Interest income from other receivables | 25 | 33 |
| Foreign exchange gains from other receivables and other liabilities | 827 | 1,092 |
| Interest expenses from financial liabilities measured at amortised cost | -66 | -251 |
| Interest expenses from other liabilities | -4 | -68 |
| Foreign exchange losses from other receivables and other liabilities | -1,444 | -1,490 |
| Other financial expenses | -59 | -17 |
| Total | -710 | -670 |
Other statement of comprehensive income items include foreign exchange differences as follows:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Net sales | -881 | -291 |
| Materials and services | -9 | 2 |
30
11. Income taxes
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Current tax expense | 2,985 | 449 |
| Adjustments for previous years' taxes | -215 | 252 |
| Deferred taxes | 730 | 545 |
| Withholding taxes | 201 | 1,280 |
| Other direct taxes | 110 | - |
| Total | 3,811 | 2,526 |
In November 2006 Comptel Corporation received a refusal from the Board of Adjustment of the Tax Office for Major Corporations concerning the crediting of taxes withheld at source in taxation of 2004. The claim for adjustment concerns the crediting of taxes withheld at source the company has paid in 2004 to avoid double taxation.
Comptel Corporation recognised and paid these taxes withheld at source for 2004 in 2005. According to the Board of Adjustment's decision currently in force, Comptel Corporation has expensed taxes withheld at source amounting to EUR 1,006 thousand in 2010. The total withholding taxes expensed between 2004 and 2010 amount to EUR 6,481 thousand.
Comptel Corporation has received license revenue from the countries with which Finland has a tax treaty. The purpose of the tax treaties is to avoid double taxation. Taxes have been withheld from the payments made to Comptel Corporation, in accordance with the royalty article of the related tax treaty, in the source country of the revenue. If the taxes withheld at source paid by Comptel Corporation will not be credited in Finland, the revenue from the customers located in the tax treaty countries will be subject to double taxation.
The Ministry of Finance has announced that it has reached an agreement with Greece and Romania. In respect of these countries a tax receivable amounting to EUR 595 thousand has been recognised based on the double tax treatment for the years 2004-2008. The refund process pertaining to these countries is still pending with the relevant tax authorities. Comptel is pursuing the negotiations with the Ministry of Finance and other countries that have withheld tax at source to avoid double taxation. The company believes the treatment of its withholding taxation will be changed.
In June 2010, the Finnish tax authority credited EUR 844 thousand for the withholding taxes Comptel had paid in Brazil and China and for which a tax credit had not been allowed in Finland.
Income tax recognised in other comprehensive income
| EUR 1,000 | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|
| Before tax | Tax expense (-)/ benefit (+) | Net of tax | Before tax | Tax expense (-)/ benefit (+) | Net of tax | |
| Cash flow hedges | 8 | -2 | 6 | -176 | 46 | -130 |
| Translation differences | 900 | 900 | 743 | - | 743 | |
| Total | 907 | -2 | 905 | 567 | 46 | 613 |
Reconciliation between the income tax expense recognised in the statement of comprehensive income and the taxes calculated using the Group's domestic corporate tax rate 26%:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Profit before taxes | 8,512 | 388 |
| Income tax calculated using the domestic corporation tax rate | 2,213 | 101 |
| Effect of tax rates in foreign jurisdictions | -41 | -41 |
| Withholding taxes, net | 201 | 1,280 |
| Current year losses for which no deferred tax assets was recognised | 675 | 795 |
| Taxes for previous years | -64 | 252 |
| Other items | 827 | 139 |
| Income taxes in the consolidated statement of comprehensive income | 3,811 | 2,526 |
31
12. Earnings per share
The basic earnings per share is calculated by dividing the profit/loss for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year.
| 2010 | 2009 | |
|---|---|---|
| Profit/loss for the year attributable to equity holders of the parent (EUR 1,000) | 4,702 | -2,138 |
| Number of outstanding shares during the financial period, weighted average | 106,477,113 | 106,953,918 |
| Basic earnings per share (euro) | 0.04 | -0.02 |
In calculating the diluted earnings per share, the weighted average number of shares is adjusted by the effect of the conversion into shares of all dilutive potential ordinary shares. Comptel has share options, which have a diluting effect, when the exercise price of the share options is lower than the fair value of the share. The fair value of the share is based on the average price of the shares during the financial period. In 2010 and 2009, the options did not have a material dilutive effect on earnings per share.
| 2010 | 2009 | |
|---|---|---|
| Profit/loss for the year attributable to equity holders of the parent (EUR 1,000) | 4,702 | -2,138 |
| Weighted average number of shares for calculation of diluted earnings per share | 107,398,488 | 107,078,252 |
| Diluted earnings per share (euro) | 0.04 | -0.02 |
13. Tangible assets
| EUR 1,000 | Machinery and equipment |
|---|---|
| Cost at 1 Jan 2010 | 8,589 |
| Additions | 1,189 |
| Disposals | -4,069 |
| Exchange difference | 433 |
| Cost at 31 Dec 2010 | 6,142 |
| Accumulated depreciation at 1 Jan 2010 | -6,999 |
| Depreciation | -1,024 |
| Disposals | 4,030 |
| Exchange difference | -307 |
| Accumulated depreciation at 31 Dec 2010 | -4,300 |
| Book value at 1 Jan 2010 | 1,589 |
| Book value at 31 Dec 2010 | 1,842 |
| EUR 1,000 | Machinery and equipment |
| --- | --- |
| Cost at 1 Jan 2009 | 8,794 |
| Additions | 458 |
| Disposals | -877 |
| Exchange difference | 214 |
| Cost at 31 Dec 2009 | 8,589 |
| Accumulated depreciation at 1 Jan 2009 | -6,199 |
| Depreciation | -1,153 |
| Disposals | 534 |
| Exchange difference | -181 |
| Accumulated depreciation at 31 Dec 2009 | -6,999 |
| Book value at 1 Jan 2009 | 2,595 |
| Book value at 31 Dec 2009 | 1,589 |
Additions to tangible assets include an item acquired through finance lease arrangement amounting to EUR 105 thousand (nil in 2009).
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14. Intangible assets
| EUR 1,000 | Goodwill | Patents and Trademarks | Development costs | Other intangible assets | Total |
|---|---|---|---|---|---|
| Cost at 1 Jan 2010 | 19,355 | 949 | 19,459 | 11,499 | 51,263 |
| Additions | 132 | 3,800 | 39 | 3,971 | |
| Exchange difference | 270 | 132 | 402 | ||
| Cost at 31 Dec 2010 | 19,626 | 1,081 | 23,259 | 11,670 | 55,636 |
| Accumulated amortisation at 1 Jan 2010 | - | -278 | -11,070 | -8,753 | -20,102 |
| Amortisation | -64 | -3,014 | -1,273 | -4,350 | |
| Impairment loss | -567 | -567 | |||
| Exchange difference | -44 | -44 | |||
| Accumulated amortisation at 31 Dec 2010 | - | -342 | -14,651 | -10,070 | -25,063 |
| Book value at 1 Jan 2010 | 19,355 | 671 | 8,389 | 2,746 | 31,161 |
| Book value at 31 Dec 2010 | 19,626 | 739 | 8,608 | 1,600 | 30,573 |
| EUR 1,000 | Goodwill | Patents and Trademarks | Development costs | Other intangible assets | Total |
| --- | --- | --- | --- | --- | --- |
| Cost at 1 Jan 2009 | 19,027 | 851 | 15,650 | 11,028 | 46,556 |
| Additions | 98 | 3,808 | 228 | 4,134 | |
| Decreases | -268 | -268 | |||
| Exchange difference | 597 | 243 | 840 | ||
| Cost at 31 Dec 2009 | 19,355 | 949 | 19,459 | 11,499 | 51,263 |
| Accumulated amortisation at 1 Jan 2009 | - | -228 | -8,100 | -7,223 | -15,551 |
| Amortisation | -50 | -2,629 | -1,480 | -4,160 | |
| Impairment loss | -340 | -340 | |||
| Exchange difference | -50 | -50 | |||
| Accumulated amortisation at 31 Dec 2009 | - | -278 | -11,070 | -8,753 | -20,102 |
| Book value at 1 Jan 2009 | 19,027 | 624 | 7,550 | 3,805 | 31,005 |
| Book value at 31 Dec 2009 | 19,355 | 671 | 8,389 | 2,746 | 31,161 |
Allocation of goodwill
Of the goodwill EUR 10,832 thousand (EUR 10,832 thousand in 2009) relates to know-how and market knowledge of the personnel and to the development potential of technology transferred from EDP Partners in connection of the business acquisition. EUR 8,793 thousand (EUR 8,523 thousand in 2009) is attributable to the acquisition of Axiom Systems. According to Comptel management, the goodwill is mainly based on the fact that solutions for IP services complement Comptel's product portfolio, the combined sales network enables cross-selling to Axiom's and Comptel's customers, and the combined R&D strengthens the operations. The professionally skilled workforce is also part of the goodwill. The expected future cash flows may be generated from all market areas, therefore goodwill can not be specifically allocated to any of the geographical segments alone.
Impairment testing
The recoverable amount of goodwill is determined based on value in use calculations. The value in use is computed based on discounted forecast cash flows. The cash flow forecasts rely on the plans approved by the Board of Directors and management concerning in particular profitability and the growth rate of net sales. The plans cover a five-year period taking into account the recent development of the business. The used pre-tax rate discount rate is 16.8% (16.9% in 2009).
The cash flows after the five-year period have been forecast by estimating the future growth rate of net sales to be 3% (3% in 2009). Based on the impairment tests there is no need to recognise an impairment loss.
The use of the testing model requires making estimates and assumptions concerning investments, market growth and general interest rate level.
Sensitivity analysis of impairment testing
The realisation of an impairment loss would require the actual operating profit (EBIT) level to be 67% lower than the management's estimate at the end of reporting period (77% in 2009), or that the discount rate was over 27% (29% in 2009).
33
15. Investments in associates
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Carrying amount at 1 Jan | 689 | 649 |
| Share of results | 314 | 40 |
| Carrying amount at 31 Dec | 1,003 | 689 |
The carrying amount of goodwill included in the carrying amount of the investment in the associate amounted to EUR 400 thousand at 31 December 2010 (31 December 2009: EUR 400 thousand).
Summary financial information for the Group’s investments in the associate - assets, liabilities, net sales and profit / loss (EUR 1,000):
| 2010 | Assets | Liabilities | Net sales | Profit / loss | Ownership % |
|---|---|---|---|---|---|
| Tango Telecom Ltd. | 5,519 | 1,249 | 8,070 | 1,571 | 20 |
| 2009 | |||||
| Tango Telecom Ltd. | 3,523 | 868 | 5,250 | 200 | 20 |
16. Deferred tax assets and liabilities
Changes in deferred tax assets and liabilities during 2010:
| EUR 1,000 | 31 Dec 2009 | Recognised in profit or loss | Recognised in other comprehensive income | Exchange differences | 31 Dec 2010 |
|---|---|---|---|---|---|
| Deferred tax assets | |||||
| Provisions | 84 | 5 | 2 | 91 | |
| Reversal of depreciation and amortisation in taxation | 478 | -92 | 5 | 390 | |
| Impairment loss on trade receivables | 241 | -52 | 188 | ||
| Loss for the period | 152 | -152 | - | ||
| Business combinations | 248 | -246 | -2 | - | |
| Forward contracts hedging backlog of orders | 16 | -2 | 14 | ||
| Other tax deductible temporary differences | 25 | 74 | 99 | ||
| Total | 1,243 | -464 | -2 | 5 | 783 |
| EUR 1,000 | 31 Dec 2009 | Recognised in profit or loss | Exchange differences | 31 Dec 2010 | |
| Deferred tax liabilities | |||||
| Capitalisation of intangible assets | 2,357 | 75 | 2,432 | ||
| Capitalisation of and amortisation on technology in acquired business operations | 549 | -142 | 407 | ||
| Impact of goodwill amortisation in taxation | 2,394 | 423 | 2,817 | ||
| Cumulative depreciation difference | 104 | -19 | 22 | 107 | |
| Other taxable temporary differences | 55 | -55 | - | ||
| Total | 5,458 | 282 | 22 | 5,762 |
34
Changes in deferred tax assets and liabilities during 2009:
| EUR 1,000 | 31 Dec 2008 | Recognised in profit or loss | Recognised in other comprehensive income | Exchange differences | 31 Dec 2009 |
|---|---|---|---|---|---|
| Deferred tax assets | |||||
| Provisions | 127 | -43 | 84 | ||
| Reversal of depreciation and amortisation in taxation | 475 | 3 | 478 | ||
| Impairment loss on trade receivables | 273 | -33 | 241 | ||
| Loss for the period | - | 152 | 152 | ||
| Business combinations | 196 | -35 | 86 | 248 | |
| Amortisation on technology in acquired business operations | 101 | -101 | - | ||
| Forward contracts hedging backlog of orders | - | 16 | 16 | ||
| Other tax deductible temporary differences | -20 | 45 | 25 | ||
| Total | 1,153 | -12 | 16 | 86 | 1,243 |
| EUR 1,000 | 31 Dec 2008 | Recognised in profit or loss | Recognised in other comprehensive income | Exchange differences | 31 Dec 2009 |
| Deferred tax liabilities | |||||
| Capitalisation of intangible assets | 2,127 | 230 | 2,357 | ||
| Capitalisation of and amortisation on technology in acquired business operations | 757 | -263 | 55 | 549 | |
| Impact of goodwill amortisation in taxation | 1,831 | 563 | 2,394 | ||
| Cumulative depreciation difference | 71 | 35 | -2 | 104 | |
| Forward contracts hedging backlog of orders | 30 | -30 | - | ||
| Other taxable temporary differences | 88 | -33 | 55 | ||
| Total | 4,902 | 532 | -30 | 53 | 5,458 |
| 17. Trade receivables and other current receivables | |||||
| EUR 1,000 | 2010 | 2009 | |||
| Trade receivables | 24,295 | 23,578 | |||
| Receivables from associates | - | 1 | |||
| Prepayments | 49 | 84 | |||
| Accruals from long-term projects | 5,421 | 7,772 | |||
| Other prepayments and accrued income | 2,128 | 3,592 | |||
| Other receivables | 2,686 | 3,641 | |||
| Total | 34,580 | 38,668 |
35
Comptel has recognised credit losses on trade receivables totalling EUR 909 thousand in 2010 (2009: EUR 429 thousand). Credit losses recognised arose from several small receivables past due over a year. The carrying amounts of the trade receivables and other receivables equal the related maximum exposure to credit risk. Other prepayments and accrued income mainly consist of accruals related to software service and user charges and rent accruals.
Ageing analysis of trade receivables
| EUR 1,000 | |||
|---|---|---|---|
| Gross 2010 | Impaired | Net 2010 | |
| Not past due | 17,463 | 17,463 | |
| 1-30 days past due | 1,133 | 1,133 | |
| 31-90 days past due | 2,273 | 2,273 | |
| 91-180 days past due | 1,261 | 1,261 | |
| 181-360 days past due | 1,184 | -270 | 914 |
| Over 360 days past due | 1,817 | -567 | 1,250 |
| Total | 25,132 | -837 | 24,295 |
| EUR 1,000 | |||
| Gross 2009 | Impaired | Net 2009 | |
| Not past due | 12,563 | 12,563 | |
| 1-30 days past due | 3,001 | 3,001 | |
| 31-90 days past due | 3,189 | 3,189 | |
| 91-180 days past due | 736 | 736 | |
| 181-360 days past due | 3,430 | -13 | 3,418 |
| Over 360 days past due | 2,087 | -1,415 | 672 |
| Total | 25,007 | -1,428 | 23,578 |
18. Cash and cash equivalents
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Cash at bank and in hand | 7,028 | 6,730 |
| Total | 7,028 | 6,730 |
19. Capital and reserves
The impacts of movement in the number of shares are as follows:
| EUR 1,000 | Number of shares | Share capital | Fund of invested non restricted equity | Treasury shares | Total |
|---|---|---|---|---|---|
| At 1 Jan 2009 | 106,962,156 | 2,141 | 7,433 | -125 | 9,449 |
| Acquisition of Corporation's own shares | -480,698 | -336 | -336 | ||
| Transfer of treasury shares | 269,348 | 67 | 174 | 241 | |
| At 31 Dec 2009 | 106,750,806 | 2,141 | 7,499 | -287 | 9,353 |
| Acquisition of Corporation's own shares | -579,731 | -468 | -468 | ||
| Transfer of treasury shares | 286,489 | 76 | 155 | 231 | |
| Return of treasury shares | -2,659 | - | |||
| At 31 Dec 2010 | 106,454,905 | 2,141 | 7,575 | -600 | 9,116 |
The maximum number of Comptel Corporation shares is 500 million at 31 December 2010 (31 December 2009: 500 million). The counter-book value of a share is EUR 0.02 per share and the maximum share capital amounts to EUR 8,400,000.00 (31 December 2009: EUR 8,400,000.00). All shares issued have been fully paid.
The descriptions of the reserves under equity are as follows:
Fund of invested non-restricted equity
The fund of invested non-restricted equity includes other investments of equity nature and subscription prices of shares to the extent that it is specifically not to be credited to share capital.
36
Translation reserve
The translation reserve comprises the translation differences arising from the translation of the financial statements of the foreign subsidiaries.
Fair value reserve
The fair value reserve comprises the hedging reserve including the effective portion of the cumulative net change in the fair value of cash flow hedging instruments.
Treasury shares
Treasury shares reserve includes the cost of treasury shares held by the Group. Comptel bought 269,348 shares in 2009 out of which 168,426 shares were transferred to persons under the share-based incentive plan and 100,922 shares to the members of the Board of Directors as part of their annual compensation. During 9 December 2009 - 30 April 2010 Comptel purchased 791,081 own shares. In 2010 Comptel Corporation allotted 202,042 shares as part of share-based incentives to persons involved in the program and 84,447 shares to the members of the Board of Directors as part of their annual compensation. At the end of the financial year the company had 599,905 treasury shares (304,004 treasury shares at 31 Dec 2009).
Dividends
After 31 December 2010 the Board of Directors has proposed a dividend to be paid EUR 0.04 per share.
20. Share-based payments
Share options
The Group has had two share option schemes during the financial year. The options in question have been granted to the key personnel as well as to a subsidiary fully owned by Comptel Corporation. For the option scheme approved in 2006, the total number of share options issued was 4,200,000. The share subscription period is for option 2006B, 1 November 2009-30 November 2011 and for option 2006C, 1 November 2010-30 November 2012. The subscription period of the 2006A option expired on 30 November 2010. During the subscription period no shares were subscribed. For the option scheme approved in 2009, the total number of share options issued is 4,200,000. The share options may be exercised to subscribe a maximum of 4,200,000 Comptel Corporation shares in total. The share subscription period is for option 2009A, 1 November 2011-30 November 2013, for option 2009B, 1 November 2012-30 November 2014 and for option 2009C, 1 November 2013-30 November 2015. The corporate executives are not included in 2009 option program.
Changes in the number of the outstanding share options and weighted average exercise prices during the period were as follows:
| 2010 | 2009 | |||
|---|---|---|---|---|
| Weighted average exercise price, EUR/share | Number of options | Weighted average exercise price, EUR/share | Number of options | |
| Outstanding at the beginning of the year | 1.39 | 4,640,000 | 1.71 | 3,530,000 |
| Granted during the year | 0.87 | 1,250,000 | 0.71 | 1,350,000 |
| Forfeited during the year | 1.06 | -238,000 | 1.68 | -240,000 |
| Expired during the year | 1.66 | -1,090,000 | - | - |
| Outstanding at the end of the year | 1.17 | 4,562,000 | 1.39 | 4,640,000 |
| Exercisable at the end of the year | 1.64 | 2,182,000 | 1.79 | 2,210,000 |
37
The number and average exercise prices of the share options outstanding at the end of the period:
| Year of expiration | 2010 | 2009 | ||
|---|---|---|---|---|
| Average exercise price, EUR/share | Number of options | Average exercise price, EUR/share | Number of options | |
| 2010 | - | - | 1.69 | 1,090,000 |
| 2011 | 1.86 | 1,114,000 | 1.89 | 1,120,000 |
| 2012 | 1.41 | 1,068,000 | 1.44 | 1,180,000 |
| 2013 | 0.60 | 1,170,000 | 0.63 | 1,250,000 |
| 2014 | 0.87 | 1,210,000 | - | - |
The fair value of the share options 2009B granted during the financial year was EUR 0.78 (2009A EUR 0.37 and 2006A EUR 0.33 in 2009), determined using the Black-Scholes option pricing model. The inputs used in the Black-Scholes formula were as follows:
| 2010 | 2009 | 2006A | |
|---|---|---|---|
| 2009B | 2009A | ||
| Weighted average share price (euro) | 0.78 | 0.82 | 1.53 |
| Exercise price (euro) | 0.87 | 0.63 | 1.73 |
| Expected volatility | 39% | 38% | 35% |
| Expected option life (years) | 4.5 | 4.5 | 2.6 |
| Risk-free interest rate | 2.05% | 2.71% | 4.20% |
The expected volatility has been determined based on the historical volatility for a period equalling to the option vesting period.
In 2010 the expense recognised in respect of the option schemes amounted to EUR 562 thousand (2009: EUR 572 thousand).
Share-based incentive plan
The key personnel of the Group has had a share-based incentive program since 2006. The last vesting period of Comptel Corporation Share Ownership Plan 2006-2008 ended on 31 December 2008. The compensation based on the share based incentive program has been paid as a combination of company shares and cash after the vesting period has expired. A participant has to possess the shares paid as compensation at least for two years after the end of the vesting period.
In the beginning of 2009 the Board of Directors of Comptel Corporation approved a new share-based incentive plan for the Comptel Group key personnel. The aim of the plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the company, to commit the key personnel to the company, and to offer them a competitive reward plan based on holding the company shares.
The plan includes three vesting periods, calendar years 2009, 2010 and 2011. The Board of Directors will decide on the earnings criteria for each vesting period at the beginning of each vesting period. A two-year restriction period will follow each vesting period, during which shares cannot be transferred. Should a key person's employment or service end during the restriction period, must he/she gratuitously return the shares paid as reward to the company. The reward from the plan for vesting period 2010 is based on the Comptel Group's revenue growth and operating profit margin. The reward from the vesting period 2010 will be paid partly as the Company's shares and partly in cash in 2011. The proportion of cash will cover taxes and tax-related costs arising from the reward.
The cost of the program is recognised under employee benefit expenses over the commitment period. In 2010, EUR 427 thousand was expensed (2009: EUR 327 thousand), of which EUR 179 thousand is the portion to be paid in cash (2009: EUR 166 thousand).
The outstanding option schemes and share-based incentive programs are described in more detail in section Shares and shareholders.
38
21. Pension obligations
Comptel has pension plans in various countries that are based on the local legislation and well-established practices. In Finland the pension arrangement is mainly managed through the Finnish Statutory Employment Pension Scheme (TyEL) which is a defined contribution plan. In addition, Comptel has a voluntary additional pension plan to certain employees in Finland and this arrangement has been accounted for as a defined benefit plan.
The difference between the net liability and unrecognised actuarial gains and losses is included in other non-current receivables.
Liability/receivable for defined benefit obligations in statement of financial position:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Present value of obligations | 272 | 209 |
| Fair value of plan assets | -267 | -198 |
| Net liability | 6 | 11 |
| Unrecognised actuarial gains (+) and losses (-) | -101 | -37 |
| Liability (+)/receivable (-) in statement of financial position | -95 | -26 |
Defined benefit expense recognised in the statement of comprehensive income:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Current service cost | 54 | 41 |
| Interest expense | 13 | 10 |
| Expected return on plan assets | -7 | -5 |
| Actuarial gains (-) and losses (+) | 1 | 0 |
| Curtailment | -63 | - |
| Total | -2 | 46 |
Movements in the present value of the obligation:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Obligation at the beginning of the period | 209 | 139 |
| Current service cost | 54 | 41 |
| Interest expense | 13 | 10 |
| Actuarial gains (-) and losses (+) | 96 | 19 |
| Curtailment | -100 | - |
| Obligation at the end of the period | 272 | 209 |
Movements in the fair value of plan assets:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Fair value of plan assets at the beginning of the period | 198 | 135 |
| Expected return on plan assets | 7 | 5 |
| Actuarial gains (+) and losses (-) | -6 | -4 |
| Contributions into the plan paid by the employer | 67 | 61 |
| Fair value of plan assets at the end of the period | 267 | 198 |
Principal actuarial assumptions at 31 December:
| 2010 | 2009 | |
|---|---|---|
| Discount rate | 4.00% | 5.00% |
| Expected return on plan assets | 3.50% | 3.40% |
| Future salary increases | 2.00% | 2.50% |
| EUR 1,000 | 2010 | 2009 |
| --- | --- | --- |
| Actual return on plan assets | 2 | 1 |
| EUR 1,000 | 2010 | 2009 |
| --- | --- | --- |
| Present value of the obligation | 272 | 209 |
| Fair value of plan assets | -267 | -198 |
| Surplus (-) / Deficit (+) | 6 | 11 |
| Experience adjustments arising on plan assets | -6 | -4 |
| --- | --- | --- |
| Experience adjustments arising on plan liabilities | -35 | -26 |
The expected contributions to the defined benefit pension plans for the year 2011 are EUR 73 thousand.
39
22. Provisions
Movements in provisions during 2010:
| EUR 1,000 | Provision for warranty | Lease provision | Total |
|---|---|---|---|
| Balance at 1 Jan 2010 | 391 | 2,150 | 2,541 |
| Provisions made during the year | 349 | 349 | |
| Provisions used during the year | -144 | -850 | -994 |
| Exchange difference | 59 | 59 | |
| Balance at 31 Dec 2010 | 247 | 1,708 | 1,954 |
Movements in provisions during 2009:
| EUR 1,000 | Provision for warranty | Lease provision | Other provisions | Total |
|---|---|---|---|---|
| Balance at 1 Jan 2009 | 428 | 2,386 | 124 | 2,937 |
| Provisions made during the year | 302 | 302 | ||
| Provisions used during the year | -37 | -687 | -124 | -847 |
| Exchange difference | 149 | 149 | ||
| Balance at 31 Dec 2009 | 391 | 2,150 | - | 2,541 |
Provision for warranty
A provision for warranties is recognised when the underlying product including a warranty is sold. The provision is based on historical warranty data.
Lease provision
This item includes the provisions made for unoccupied leased facilities.
Other provisions
Other provisions include a provision recognised for employment benefit expenses.
40
23. Financial liabilities
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Non-current financial liabilities measured at amortised cost | ||
| Finance lease liabilities | 68 | - |
| Total | 68 | - |
| Current financial liabilities measured at amortised cost | ||
| Loans from financial institutions | - | 8,000 |
| Finance lease liabilities | 36 | 12 |
| Total | 36 | 8,012 |
The fair values of liabilities are presented in note 25. Financial risk management.
Comptel did not have any bank loans at 31 December 2010 (EUR 8,000 thousand at 31 December 2009). Comptel has a EUR 15 million Revolving Credit Facility arrangement in place until 2013. At 31 December 2010 the amount available under the said facility was EUR 15 million.
Maturity analysis of finance lease liabilities
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Finance lease liabilities - minimum lease payments | ||
| Less than one year | 41 | 12 |
| Between one and five years | 72 | - |
| Total | 113 | 12 |
| Finance lease liabilities - present value of minimum lease payments | ||
| Less than one year | 36 | 12 |
| Between one and five years | 68 | - |
| Total | 105 | 12 |
| Future financial charges | 8 | 0 |
24. Trade and other current liabilities
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Trade payables | 2,120 | 1,412 |
| Advances received from long-term contracts | 1,929 | 1,582 |
| Accrued expenses and deferred income | 11,783 | 13,868 |
| Other liabilities | 2,987 | 3,255 |
| Total | 18,819 | 20,117 |
The accrued expenses and deferred income mainly comprise accruals related to employee benefits.
41
25. Financial risk management
Comptel is exposed to financial risks in its ordinary business operations. The objective of Comptel's risk management is to minimise the adverse effects arising from fluctuations of financial markets on the Group's cash flows, result and equity. Comptel's general risk management principles are approved by the Board of Directors and their implementation is the responsibility of the Chief Financial Officer (CFO) together with the business units. Comptel's financial policy is risk-adverse. The main financial risks for the Group are currency risk and credit risk. Financial management identifies and assesses risks and acquires the instruments needed to hedge against risks together with operating units. Hedging transactions are carried out in accordance with the written risk management principles approved by the Board of Directors. Comptel uses foreign currency forwards in its currency risk management.
Currency risk
Comptel operates globally and is therefore exposed to currency risks arising from various currency positions. In Comptel's business operations the major currencies are Euro and US Dollar (USD). Other significant currencies are UK Pound Sterling (GBP) and Norwegian Krona (NOK).
Comptel hedges open positions in foreign currency and applies hedge accounting for the definition of these positions. The currency position is monitored on a 12-month rolling period.
The hedging instruments are forward contracts entered into with banks. The hedging forward contract is always denominated in the same currency as the underlying item resulting the value of the hedging instrument to change in the opposite way compared to the underlying item and consequently the hedge is effective. The potential ineffectiveness may result from a possible overhedging or underhedging.
The invoicing of sales orders follows the progress of projects, which causes timely uncertainty. Moreover, the realised turnover of trade receivables exceeds the terms in the client agreements. The hedging of the future cash flows is timed taking these facts into account. The ineffective portion of a hedge is recognised in the statement of comprehensive income.
Interest rate risk
Interest rate risk is the risk that cash flows or the result will fluctuate because of changes in market interest rates. Comptel's interest-bearing liabilities at 31 December 2010 totalled EUR 105 thousand, which constituted of finance lease liability with fixed interest (EUR 8,012 thousand, of which EUR 8,000 thousand was a bank loan in 2009). Comptel did not have any bank loans at 31 December 2010. Comptel has a Revolving Credit Facility of EUR 15 million valid until 2013 and the undrawn funds amounted to EUR 15 million. The interest rate is determined based on prevailing IBOR. Possible short-term investments in financial securities gives rise to interest rate risk but the impact of such risk is not significant. Comptel's revenues and operating cash flows are mainly independent of the fluctuations of market rates.
Credit risk
Credit risk is the risk that one party will cause a financial loss for the Group by failing to discharge an obligation. In Comptel credit risk mainly arises from trade receivables related to customers, derivatives, cash and cash equivalents and money market investments.
Credit risk management principles are defined in Comptel's documented procedures (Risk Management Principles, Currency hedging in Comptel Corporation and General principles of liquidity management). Credit risk management in respect of derivatives and investments is centralised to the Group accounting department, in respect of clients and credit control to the business area organisation.
Comptel's customers are mainly mid-size or large teleoperators. The Group's clientele is large and geographically widely dispersed, which decreases the customer risk of the Group.
Comptel's business consists of deliveries of large productised IT system and the value of a single project may be several million euro. Therefore the risk associated with a single project or an individual client may be significant. Furthermore some of Comptel's clients operate in countries that are or have been war zone areas, which in part increases credit risk.
Comptel has no significant credit risk concentrations, since no individual customer or customer group represents a material risk. In delivery projects partial advance invoicing is generally used. Furthermore credit risk is reduced by progress payments invoiced based on percentage of completion. In some countries letter of credits are used.
42
Comptel has a policy for writing off trade receivables. According to the policy a bad debt provision of 50% of the total value is generally booked if the receivable is overdue more than 360 days and a provision of 100% is impacted when the receivable is overdue more than 540 days. The amount of credit losses recognised in the statement of comprehensive income in the financial year 2010 was EUR 909 thousand (EUR 429 thousand in 2009). Credit losses recognised arose from several small receivables past due over a year. The maximum amount of Comptel's credit risk equals the carrying amount of financial assets at the end of the financial year. The ageing analysis of trade receivables is presented in note 17. Trade receivables and other current receivables.
Liquidity risk
Liquidity risk means insufficient financing or higher than normal financing expenses when business environment deteriorates and financing is needed. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that financing of business operations is available when needed quickly enough. Part of the Group's liquid funds are invested in mutual funds based on the principles approved by the Board of Directors. Comptel's main source of financing has been the operating cash flow. Cash levels are monitored on a weekly basis.
At 31 December 2010 the Group's cash and cash equivalents totalled EUR 7,028 thousand (EUR 6,730 thousand at 31 December 2009). At 31 December 2010 Comptel's interest-bearing liabilities totalled EUR 105 thousand (EUR 8,012 thousand in 2009). Under the Revolving Credit Facility in place until 2013 there is still EUR 15 million available for down-draw. The Facility contains a covenant whereby Group equity ratio must be at least 35%. At 31 December 2010 Comptel's equity ratio was 71.6% (2009: 62.6%). Furthermore, Comptel has an option for TyEL (earnings-related pension) premium loan amounting to EUR 10.6 million.
The following table sets forth maturity analysis based on contractual cash flows. Cash flow includes both loan repayments and interest payments.
| 2010, EUR 1,000 | Carrying amount | Contractual cash flow | 1-6 months | 7-12 months | 1-2 years |
|---|---|---|---|---|---|
| Non-derivative financial liabilities | |||||
| Finance lease liabilities | 105 | 113 | 21 | 21 | 72 |
| Trade payables | 2,120 | 2,120 | 2,120 | ||
| Derivative financial liabilities | |||||
| Forward exchange contracts used for hedging | |||||
| Inflow | 54 | -54 | 2 | -57 | |
| Outflow | -210 | 210 | 230 | -20 | |
| 2009, EUR 1,000 | Carrying amount | Contractual cash flow | 1-6 months | 7-12 months | |
| Non-derivative financial liabilities | |||||
| Loans from financial institutions | 8,000 | 8,070 | 8,070 | ||
| Finance lease liabilities | 12 | 12 | 12 | ||
| Trade payables | 1,412 | 1,412 | 1,412 | ||
| Derivative financial liabilities | |||||
| Forward exchange contracts used for hedging | |||||
| Inflow | 220 | -220 | -219 | -1 |
Capital structure management
The purpose of Comptel capital structure management is to support the business operations by securing normal operational demands and grow shareholder value in the long term. Comptel aims at continuing profitable business by investing in R&D and enhancing its presence on the global market place. The amount of dividends paid to the shareholders may vary in order for the Group to reduce debt or increase cash in hand which would result in increased opportunities to focused acquisitions also in the future.
43
Gearing in 2010 and 2009 was as follows:
| EUR 1,000 | 2010 | 2009 | |
|---|---|---|---|
| Interest-bearing liabilities | 105 | 8,012 | |
| Cash and cash equivalents | -7,028 | -6,730 | |
| Interest-bearing net liabilities | -6,923 | 1,282 | |
| Total equity | 49,146 | 46,299 | |
| Gearing | -14.1% | 2.8% |
Exposure to currency risk
| EUR 1,000 | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|
| USD | NOK | GBP | USD | NOK | GBP | |
| Trade receivables | 13,552 | 172 | 508 | 8,088 | 1,666 | 768 |
| Cash and cash equivalents | 1,115 | 15 | 39 | 3,101 | 85 | 446 |
| Trade payables | -63 | -13 | -31 | -125 | -47 | |
| Net statement of financial position exposure | 14,604 | 174 | 516 | 11,063 | 1,751 | 1,167 |
| Order backlog (12 months) | 11,140 | 188 | 926 | 11,101 | 2,833 | 32 |
| Hedging | ||||||
| Forward contracts (12 months) | -16,465 | -8,677 | ||||
| Total net exposure | 9,280 | 362 | 1,442 | 13,487 | 4,583 | 1,199 |
Sensitivity to foreign exchange rates
A 10 % weakening/strengthening of the euro against the currencies below at 31 December would have affected equity and result after taxes as follows:
EUR 1,000
| 2010 | Equity | Result |
|---|---|---|
| USD | -138/138 | 610/-610 |
| NOK | 13/-13 | 13/-13 |
| GBP | 38/-38 | 38/-38 |
| 2009 | Equity | Result |
| USD | 177/-177 | 485/-485 |
| NOK | 130/-130 | 130/-130 |
| GBP | 86/-86 | 86/-86 |
In calculating the sensitivity related to exchange rate changes the following assumptions were used:
- a +/- 10 % exchange rate change
- the position comprises foreign currency financial assets and financial liabilities, i.e. trade receivables, cash and cash equivalents, trade payables and derivatives
- the position excludes future foreign currency cash flows
Fair values of financial assets and liabilities
For financial assets and liabilities their carrying amounts equal their fair values as the discounting has no material effect considering the short maturity of these items.
44
Derivative instruments measured at fair value:
| 2010
EUR 1,000 | Positive fair value
(carrying amount) | Negative fair value
(carrying amount) | Nominal value of underlying instrument |
| --- | --- | --- | --- |
| Cash flow hedges
Recognised in other comprehensive income | | 54 | 10,103 |
| Fair value hedges
Recognised in profit or loss | 210 | | 15,656 |
Currency forward contracts presented in equity will be recognised in profit or loss during 2011.
| 2009
EUR 1,000 | Positive fair value
(carrying amount) | Negative fair value
(carrying amount) | Nominal value of underlying instrument |
| --- | --- | --- | --- |
| Cash flow hedges
Recognised in other comprehensive income | | 62 | 4,165 |
| Fair value hedges
Recognised in profit or loss | | 158 | 11,831 |
Fair value hierarchy for financial instruments measured at fair value
| EUR 1,000 | 31 Dec 2010 | Level 2 | 31 Dec 2009 | Level 2 |
|---|---|---|---|---|
| Liabilities measured at fair value | ||||
| Financial liabilities measured at fair value through profit or loss | ||||
| Forward contracts | 156 | 156 | -220 | -220 |
| of which cash flow hedges | -54 | -54 | -62 | -62 |
| Total | 156 | 156 | -220 | -220 |
According to IFRS 7 financial instruments carried at fair value must be classified according to a three level hierarchy.
Level 1: fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: fair values are based on inputs other than quoted prices included within level 1. However, the fair values are based on information that is observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair values are based on significantly different information than the input data and is not based on observable market data (unobservable inputs). The fair values are based on management estimates and application of those in generally accepted valuation models.
26. Adjustments to cash flows from operating activities
Non-cash transactions or items that are not part of cash flows from operating activities:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Depreciation, amortisation and impairment charges | 5,941 | 5,654 |
| Exchange differences | 607 | 398 |
| Share of result of associates | -314 | -40 |
| Share-based payments | 870 | 779 |
| Other adjustments | 7 | 50 |
| Total | 7,111 | 6,840 |
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27. Operating leases
Minimum lease payments on non-cancellable office facilities leases and other operating leases are payable as follows:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Less than one year | 3,597 | 3,904 |
| Between one and five years | 11,226 | 12,783 |
| More than five years | 751 | 2,248 |
| Total | 15,574 | 18,935 |
Comptel has leased the office premises it uses. These leases typically run for a period from one to ten years, and normally with an option to renew the lease after that date. The index, renewal and other terms of the agreements are diverse.
The statement of comprehensive income for the year 2010 includes lease expenses for the office premises amounting to EUR 4,976 thousand (2009: EUR 4,554 thousand).
28. Commitments and contingencies
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Bank guarantees | 2,061 | 1,616 |
29. Related party transactions
The Comptel Group companies are as follows:
| Company | Domicile | 2010 Group holding (%) | 2009 Group voting (%) | Group holding (%) | Group voting (%) |
|---|---|---|---|---|---|
| Comptel Corporation | Finland | ||||
| Axiom Systems Holdings Ltd. | UK | 100.00 | 100.00 | 100.00 | 100.00 |
| Axiom Systems Ltd. | UK | 100.00 | 100.00 | 100.00 | 100.00 |
| Axiom Systems OSS (Asia-Pacific) Pte | Singapore | 100.00 | 100.00 | 100.00 | 100.00 |
| Business Tools Oy | Finland | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications AS | Norway | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications Brasil Ltda | Brazil | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications EOOD | Bulgaria | 100.00 | 100.00 | - | - |
| Comptel Communications Inc. | USA | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications Oy | Finland | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications Sdn Bhd | Malaysia | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Passage Oy | Finland | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Ltd | UK | 100.00 | 100.00 | 100.00 | 100.00 |
| Viewgate Networks Ltd. | UK | 100.00 | 100.00 | 100.00 | 100.00 |
The Comptel Group has a related party relationship with its associates, the Board of Directors, CEO, deputy CEO, the Corporate Executives and also with people and companies under Comptel management's influence.
Transactions, which have been entered into with related parties, are as follows:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Purchases of goods and services | ||
| Associates | 100 | 635 |
| Companies under management's influence | 43 | 35 |
| Interest revenue | ||
| Associates | 7 | 4 |
| Receivables | ||
| Associates | 83 | 76 |
| Liabilities | ||
| Companies under management's influence | 1 | 1 |
46
Contingent liabilities assumed on behalf of Group companies
In 2008 Comptel Corporation gave a performance guarantee, still in force, on behalf of its subsidiary. The total value of this agreement is USD 4 million. Comptel gave a guarantee of GBP 700 thousand for its subsidiary in 2009.
Key management compensation
The key management personnel compensation includes the employee benefits of the CEO, deputy CEO, the members of the Board of Directors and the Corporate Executives.
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| Salaries and other short-term employee benefits | 2,560 | 2,249 |
| Share-based payments | 519 | 409 |
| Total | 3,078 | 2,657 |
The employee benefits of the CEO and the members of the Board of Directors of the parent company:
| EUR 1,000 | 2010 | 2009 |
|---|---|---|
| CEO | 978 | 486 |
The employee benefits in 2010 include all amounts as defined in the CEO employment contract for the termination of the employment.
Board of Directors at 31 Dec 2010
| Kotilainen Timo | 33 | 34 |
|---|---|---|
| Lassila Juhani | 33 | 34 |
| Riikkala Olli | 59 | 60 |
| Vaajoensuu Hannu | 39 | 41 |
| Waildén Petteri | 33 | 25 |
| Österlund Henri | 26 | - |
| Former members of the Board of Directors | ||
| Mustaniemi Matti | - | 8 |
| Total | 222 | 202 |
In 2010 no options were granted to the management of the company (2009: 100,000). At 31 December 2010 management had 290,000 share options, of which 290,000 were exercisable (2009: 510,000 share options, of which 362,000 exercisable).
The compensation to the members of the Board of Directors has been paid by giving shares in Comptel Corporation with 40% of the annual gross compensation.
The related parties of the Group had no loans referred to in the Companies Act, chapter 8, article 6.
47
KEY FIGURES
| Financial summary | 2006 | 2007 | 2008 | 2009 | 2010 |
|---|---|---|---|---|---|
| Net sales, EUR 1,000 | 80,439 | 82,399 | 84,849 | 74,896 | 77,888 |
| Net sales, change % | 21.8 | 2.4 | 3.0 | -11.7 | 4.0 |
| Operating profit/loss, EUR 1,000 | 11,232 | 16,518 | 11,383 | 1,018 | 8,908 |
| Operating profit/loss, change % | 6.8 | 47.1 | -31.1 | -91.1 | 775.2 |
| Operating profit/loss, as % of net sales | 14.0 | 20.0 | 13.4 | 1.4 | 11.4 |
| Profit/loss before taxes, EUR 1,000 | 11,206 | 16,396 | 10,597 | 388 | 8,512 |
| Profit/loss before taxes, as % of net sales | 13.9 | 19.9 | 12.5 | 0.5 | 10.9 |
| Return on equity, % | 12.7 | 21.9 | 12.8 | -4.4 | 9.9 |
| Return on investment, % | 25.3 | 32.9 | 19.1 | 1.1 | 16.3 |
| Equity ratio, %^{1)} | 74.6 | 77.6 | 67.4 | 62.6 | 71.6 |
| Gross investments in tangible and intangible assets, EUR 1,000^{2)} | 1,477 | 1,908 | 10,919 | 686 | 1,124 |
| Gross investments in tangible and intangible assets, as % of net sales^{2)} | 1.8 | 2.3 | 12.9 | 0.9 | 1.4 |
| Research and development expenditure, EUR 1,000 | 11,079 | 10,333 | 14,007 | 15,582 | 13,414 |
| Research and development expenditure, as % of net sales | 13.8 | 12.5 | 16.5 | 20.8 | 17.2 |
| Order backlog, EUR 1,000 | 29,483 | 35,051 | 38,846 | 37,554 | 34,049 |
| Average number of employees during the financial period | 561 | 555 | 606 | 613 | 586 |
| Interest-bearing net liabilities, EUR 1,000 | -12,934 | -14,708 | -1,083 | 1,282 | -6,923 |
| Gearing ratio, % | -27.7 | -28.2 | -2.1 | 2.8 | -14.1 |
1) When calculating the equity ratio for 2007, those deferred income items recognised on the basis of the percentage of completion method as well as deferred income arising from sales accruals have been accounted for as advances received. The comparative information has been restated.
2) The figure does not include investments in development projects. Includes the acquisition of Axiom Systems in 2008. The aggregate gross capital expenditure excluding this acquisition amounted to 1,461 thousand euro, which was 1.7% of the net sales.
| Per share data | 2006 | 2007 | 2008 | 2009 | 2010 |
|---|---|---|---|---|---|
| EPS, EUR | 0.05 | 0.10 | 0.06 | -0.02 | 0.04 |
| Diluted EPS, EUR | 0.05 | 0.10 | 0.06 | -0.02 | 0.04 |
| Equity per share, EUR | 0.44 | 0.49 | 0.48 | 0.43 | 0.46 |
| Dividend per share, EUR^{3)} | 0.05 | 0.06 | 0.04 | 0.03 | 0.04 |
| Dividend per earnings, %^{3)} | 92.8 | 59.1 | 64.6 | -150.1 | 90.6 |
| Effective dividend yield, %^{3)} | 2.8 | 4.2 | 5.8 | 3.8 | 5.8 |
| P/E ratio | 33.4 | 14.0 | 11.1 | -39.0 | 15.6 |
| Highest share price | 1.58 | 0.96 | 0.95 | ||
| Lowest share price | 0.60 | 0.57 | 0.68 | ||
| Market value at year-end, million EUR | 73.8 | 83.3 | 73.5 | ||
| Adjusted number of shares at the end of period | 107,054,810 | 107,054,810 | 107,054,810 | 107,054,810 | 107,054,810 |
| of which the number of treasury shares | 240,341 | 92,654 | 304,004 | 599,905 | |
| Outstanding shares at the end of period | 107,054,810 | 106,814,469 | 106,962,156 | 106,750,806 | 106,454,905 |
| Adjusted average number of shares during the period | 107,054,810 | 106,848,199 | 106,938,539 | 106,953,918 | 106,477,113 |
| Average number of shares, dilution included | 107,054,810 | 106,848,199 | 106,938,539 | 107,078,252 | 107,398,488 |
3) The Board's proposal
48
Definitions of Key Figures
| Operating margin % | = $\frac{\text{Operating profit/loss}}{\text{Net sales}}$ x 100 |
|---|---|
| Profit margin (before income taxes) % | = $\frac{\text{Profit/loss before taxes}}{\text{Net sales}}$ x 100 |
| Return on equity % (ROE) | = $\frac{\text{Profit/loss}}{\text{Total equity (average during year)}}$ x 100 |
| Return on investment % (ROI) | = $\frac{\text{Profit/loss before taxes} + \text{financial expenses}}{\text{Total equity} + \text{interest bearing liabilities (average during year)}}$ x 100 |
| Equity ratio % | = $\frac{\text{Total equity}}{\text{Statement of financial position total} - \text{advances received}}$ x 100 |
| Gross investments in tangible and intangible assets, as % of net sales | = $\frac{\text{Gross investments in tangible and intangible assets}}{\text{Net sales}}$ x 100 |
| Reasearch and development expenditure, as % of net sales | = $\frac{\text{Research and development expenditure}}{\text{Net sales}}$ x 100 |
| Gearing ratio % | = $\frac{\text{Interest-bearing liabilities} - \text{cash and cash equivalents}}{\text{Total equity}}$ x 100 |
| Earnings per share (EPS) | = $\frac{\text{Profit/loss for the financial year attributable to equity shareholders}}{\text{Average number of outstanding shares for the financial year}}$ |
| Equity per share | = $\frac{\text{Equity attributable to the equity holders of the parent company}}{\text{Adjusted number of shares at end of period}}$ |
| Dividend per share | = $\frac{\text{Dividend}}{\text{Adjusted number of shares at end of period}}$ |
| Dividend per earnings % | = $\frac{\text{Dividend per share}}{\text{Earnings per share (EPS)}}$ x 100 |
| Effective dividend yield % | = $\frac{\text{Dividend per share}}{\text{Share closing price at end of period}}$ x 100 |
| P/E-ratio | = $\frac{\text{Share closing price at end of period}}{\text{Earnings per share (EPS)}}$ |
49
Parent Company Income Statement, FAS
| Notes | 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|---|
| Net sales | 2 | 75,004,026.17 | 67,881,466.19 |
| Other operating income | 3 | 19,745.75 | 93,881.30 |
| Materials and services | 4 | -1,783,449.79 | -5,444,537.66 |
| Personnel expenses | 5 | -17,422,481.76 | -18,626,683.61 |
| Depreciation and amortisation | 6 | -2,790,660.64 | -3,696,305.48 |
| Impairment charges on non-current assets | 6 | -9,304,311.76 | 0.00 |
| Other operating expenses | 7 | -43,595,221.87 | -40,177,818.52 |
| -74,869,125.82 | -67,945,345.27 | ||
| Operating profit/loss | 127,646.10 | 30,002.22 | |
| Financial income | 8 | 2,445,231.22 | 788,924.49 |
| Financial expenses | 9 | -810,497.39 | -1,064,220.24 |
| Profit/loss before appropriations and income taxes | 1,762,379.93 | -245,293.53 | |
| Change in accumulated depreciation | 0.00 | 59,466.50 | |
| Profit/loss before income taxes | 1,762,379.93 | -185,827.03 | |
| Income taxes | 10 | -2,366,063.79 | -1,424,463.97 |
| Profit/loss for the period | -603,683.86 | -1,610,291.00 |
50
| Parent Company Balance Sheet, FAS | |||
|---|---|---|---|
| Notes | 31 Dec 2010 | 31 Dec 2009 | |
| ASSETS | |||
| Non-current assets | 11 | ||
| Goodwill | 0.00 | 1,627,857.92 | |
| Other intangible assets | 283,155.92 | 922,388.27 | |
| Tangible assets | 541,297.46 | 603,136.86 | |
| Investments | 1,015,688.43 | 10,317,435.19 | |
| 1,840,141.81 | 13,470,818.24 | ||
| Current assets | |||
| Non-current receivables | 12 | 11,417,751.49 | 8,962,557.39 |
| Current receivables | 13 | 32,259,558.12 | 35,950,931.15 |
| Cash and cash equivalents | 4,280,820.05 | 4,579,991.51 | |
| 36,540,378.17 | 40,530,922.66 | ||
| TOTAL ASSETS | 49,798,271.47 | 62,964,298.29 | |
| EQUITY AND LIABILITIES | |||
| Capital and reserves | 14 | ||
| Share capital | 2,141,096.20 | 2,141,096.20 | |
| Fund of invested non-restricted equity | 7,575,093.75 | 7,499,093.75 | |
| Retained earnings | 18,008,998.98 | 23,278,704.06 | |
| Profit/loss for the period | -603,683.86 | -1,610,291.00 | |
| 27,121,505.07 | 31,308,603.01 | ||
| Provisions | 15 | 595,696.16 | 693,701.97 |
| Liabilities | |||
| Non-current liabilities | 16 | 272,538.77 | 272,538.77 |
| Current liabilities | 17 | 21,808,531.47 | 30,689,454.54 |
| TOTAL EQUITY AND LIABILITIES | 49,798,271.47 | 62,964,298.29 |
51
| EUR 1,000 | 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 |
| --- | --- | --- |
| Cash flows from operating activities | | |
| Profit/loss before appropriations and income taxes | 1,762 | -245 |
| Adjustments: | | |
| Depreciation, amortisation and impairment charges | 12,095 | 3,696 |
| Financial income and expenses | -1,836 | -181 |
| Other adjustments | 76 | 66 |
| Change in working capital: | | |
| Change in trade and other current receivables | 1,679 | 112 |
| Change in trade and other current liabilities | -1,098 | 2,397 |
| Change in provisions | -98 | -190 |
| Interest paid | -143 | -246 |
| Interest received | 32 | 99 |
| Taxes paid and tax returns received | -112 | -1,510 |
| Net cash from operating activities | 12,357 | 3,998 |
| Cash flows from investing activities | | |
| Acquisition of subsidiaries | -3 | - |
| Purchase price adjustments | - | 268 |
| Investments in tangible and intangible assets | -462 | -267 |
| Proceeds from sale of tangible and intangible assets | - | 341 |
| Loans granted | -2,094 | -3,069 |
| Dividends received from investments | 1,561 | - |
| Net cash used in investing activities | -997 | -2,726 |
| Cash flows from financing activities | | |
| Dividends paid | -3,191 | -4,278 |
| Acquisition of Corporation's own shares | -468 | -295 |
| Proceeds from borrowings | 6,000 | 8,000 |
| Repayment of borrowings | -14,000 | -5,000 |
| Net cash used in financing activities | -11,659 | -1,574 |
| Change in cash and cash equivalents | -299 | -302 |
| Cash and cash equivalents at the beginning of period | 4,580 | 4,882 |
| Cash and cash equivalents at the end of period | 4,281 | 4,580 |
| Change | -299 | -302 |
52
Notes to the Financial Statements of the Parent Company, FAS
1. Accounting principles for the financial statements
Company profile
Comptel Corporation is a Finnish public limited liability company organised under the laws of Finland. Founded in 1986, Comptel Corporation is one of the leading providers of productised telecom software in convergent fulfillment, mediation and charging. Comptel Corporation is listed on NASDAQ OMX Helsinki (CTL1V). The parent company of the Comptel Group, Comptel Corporation, is domiciled in Helsinki and its registered address is Salmisaarenaukio 1, 00180 Helsinki.
Comptel Corporation’s separate financial statements are prepared in accordance with Finnish Accounting Standards (FAS).
Foreign currency transactions
Transactions denominated in foreign currencies are translated at the exchange rates prevailing on the dates of the transactions. Foreign currency monetary balances are translated at the closing rate at the balance sheet date. Non-monetary items measured at fair value in a foreign currency are translated at the closing rate at the balance sheet date. Gains and losses resulting from transactions in foreign currencies and translation of monetary items are recognised on the income statement.
Tangible assets, intangible assets and other long-term expenditure
Tangible assets, intangible assets and other long-term expenditure are stated at historical cost less cumulative depreciation and amortisation and any impairment losses. Where parts of an item of tangible assets, an intangible asset or parts of other long-term expenditure have different useful lives, they are accounted for as separate items of tangible assets, intangible assets or other long-term expenditure. Maintenance, repairs and renewals are generally expensed during the financial period in which they are incurred except for large renovation expenditure relating to leased premises that are capitalised under other long-term expenditure.
Depreciation and amortisation is charged to the income statement on a straight-line basis over the estimated useful life of an asset. The depreciation/amortisation period for all assets is four years, with the exception of the basic refurbishment of leased premises, which are amortised over the shorter of the period of five years and the lease term. The amortisation period for goodwill is five years.
Gains and losses on sales and disposals of the abovementioned assets are included in operating income and in operating expenses, respectively.
The difference between the annual depreciation according to plan and the depreciation made in taxation is shown as a separate item under appropriations in the income statement. The accumulated depreciation difference is shown under appropriations between the shareholders’ equity and liabilities in the balance sheet.
53
Research and development costs
Research and development costs are expensed during the period in which they occur. Government grants that compensate the company for the development costs are deducted from the related expenses in the income statement.
Leases
Lease payments are expensed during the financial period in which they occur.
Pension obligations
The pension plans of the parent company are arranged in accordance with the Finnish legislation. Contributions based on the regularly reviewed actuarial calculations prepared by the pension insurance company are recognised as an expense in the income statement in the year to which they relate.
Provisions
A provision is based on an existing obligation and it is recognised on the balance sheet when an entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
A provision for onerous contracts is recognised when the expected benefits to be derived by the company from a contract are lower than the unavoidable cost of meeting its obligations under the contract.
Income taxes
The income taxes in the income statement consist of income tax based on taxable profit for the financial period, adjustments to prior year taxes and withholding taxes treated as non-deductible.
Revenue recognition and net sales
Revenue from the sale of goods is recognised when significant risks and rewards of ownership have been transferred to the buyer. Revenue from services is recognised when the service has been performed. License revenue that includes no work performance is recognised when the licence is delivered. The number of subscribers at a client is reviewed continuously. If their number exceeds the number agreed on in the terms of the licence, the client is charged for the increased number of subscribers. This licence upgrade revenue is recognised upon invoicing. Maintenance revenue is recognised on a straight-line basis over the maintenance term.
Long-term projects
Revenue and expenses from a long-term project are recognised using the percentage of completion method, when the outcome of a long-term project can be estimated reliably. The revenue from a long-term project comprises licence income and work. The outcome of a long-term project can be estimated reliably when the revenue and expenses expected as well as the progress made towards completing a particular project can be measured reliably and when it is probable that the economic benefits associated with the project will
54
flow to the company. In Comptel the percentage of completion of a long-term project is determined by the relation of accrued work hours to estimated overall work hours. When it is probable that total project costs will exceed total project revenue, the expected loss is recognised as an expense immediately.
Net sales are adjusted for sales-related indirect taxes and other adjusting items.
A separate warranty provision is recognised to cover costs under warranty periods following the completion of the projects. The total estimated margin of onerous projects is recognised as an expense and a provision.
Trade receivables
Trade receivables are recognised at the original invoice amount to customers and stated at their cost less impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash, bank balances and other short-term highly liquid investments with original maturities of three months or less from the date of acquisition. Bank overdrafts, if any, are included within current liabilities.
Derivative financial instruments
Principles
Receivables, debt and cash flow in foreign currencies can be hedged. Cash flows are hedged against currency fluctuations in respect of those projects for which revenue is recognised based on the percentage of completion method and invoices issued in a currency other than euro.
Recognition and measurement
The company uses currency forward contracts. The changes in the values of the currency forward contracts entered into to hedge currency risks are recognised so that the interest rate difference, if material, is allocated over the term of the contract and the accrued portion is recognised in interest income or expenses. Exchange rate gains and losses are recognised as adjustments to sales or in exchange rate gains and losses under financial items, depending on the nature of the underlying item.
Any open currency forward contracts are measured at the average exchange rate at the balance sheet date and the resulting changes in value are recognised in the income statement. The exception applies to currency forward contracts relating to the company's cash flow from sales, as their changes in value are recognised in the income statement as the cash flow is realized. The nominal values and market values (closing cost) of all unexpired currency forward contracts are presented in the notes to the financial statements under the heading Collaterals, commitments and other contingent liabilities, irrespective of whether their changes in value have been recognised in the income statement.
55
2. Net sales
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| By geographical area | ||
| Europe | 34,677,653.71 | 30,196,496.22 |
| Asia-Pacific | 9,761,479.00 | 16,759,699.76 |
| Middle East and Africa | 22,972,074.55 | 16,065,586.45 |
| Americas | 7,592,818.91 | 4,859,683.76 |
| Total | 75,004,026.17 | 67,881,466.19 |
Net sales figures have been calculated based on the area, where the work was delivered to.
Revenue recognition using percentage of completion method
| EUR 1,000 | 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 |
|---|---|---|
| Net sales recognised as revenue according to percentage of completion | 11,704 | 12,883 |
| Amount recognised as revenue during the financial year and previous years for long-term projects in progress | 13,827 | 18,959 |
| Total costs of incomplete long-term projects | 8,717 | 10,736 |
| Backlog of orders of long-term projects according to percentage of completion | 7,756 | 4,589 |
| Prepayments and accrued income recognised on the basis of percentage of completion | 5,182 | 6,349 |
| Deferred income and accruals recognised on the basis of percentage of completion | 1,893 | 1,582 |
3. Other operating income
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Gains on disposal of tangible and intangible assets | 2,995.75 | 2,327.87 |
| Indemnity | 0.00 | 70,000.00 |
| Other | 16,750.00 | 21,553.43 |
| Total | 19,745.75 | 93,881.30 |
4. Materials and services
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Purchases | 561,266.59 | 1,395,277.41 |
| External services | 1,222,183.20 | 4,049,260.25 |
| Total | 1,783,449.79 | 5,444,537.66 |
56
5. Personnel expenses
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Wages and salaries | 13,775,712.96 | 15,321,796.95 |
| Pension expenses | 2,934,071.95 | 2,292,321.18 |
| Other social security costs | 712,696.85 | 1,012,565.48 |
| Total | 17,422,481.76 | 18,626,683.61 |
Management salaries and other compensation
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Members of the Board of Directors | 222,100.00 | 202,100.00 |
Information on the remuneration of the Group management is presented in more detail in note 29. Related party transactions to the consolidated financial statements.
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Average number of personnel | 230 | 268 |
6. Depreciation, amortisation and impairment charges
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Depreciation and amortisation | ||
| Intangible rights | 633,371.95 | 850,154.69 |
| Other long-term expenditure | 42,010.40 | 42,010.40 |
| Machinery and equipment | 487,420.37 | 637,667.17 |
| Goodwill | 1,627,857.92 | 2,166,473.22 |
| Total | 2,790,660.64 | 3,696,305.48 |
Impairment charges on non-current assets
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Investments | 9,304,311.76 | 0.00 |
| Total | 9,304,311.76 | 0.00 |
7. Other operating expenses
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Lease payments | 2,920,837.17 | 2,789,970.30 |
| Travel expenses | 1,472,863.21 | 2,012,540.29 |
| Marketing expenses | 1,183,909.75 | 1,398,989.58 |
| Other operating expenses | 38,017,611.74 | 33,976,318.35 |
| Total | 43,595,221.87 | 40,177,818.52 |
Auditor's fees
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Audit | 39,620.00 | 48,112.50 |
| Tax consultation | 20,529.47 | 31,157.11 |
| Other services | 17,543.55 | 56,604.36 |
| Total | 77,693.02 | 135,873.97 |
57
- Financial income
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Interest income | ||
| From Group companies | 168,954.96 | 27,078.54 |
| From others | 32,215.36 | 58,851.66 |
| Income from dividends | ||
| From Group companies | 1,561,005.29 | 0.00 |
| Exchange gains | ||
| From others | 683,055.61 | 702,994.29 |
| Total | 2,445,231.22 | 788,924.49 |
- Financial expenses
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Interest expenses | ||
| To others | 66,425.27 | 254,985.25 |
| Other financial expenses | ||
| To others | 52,412.25 | 11,722.59 |
| Exchange losses | ||
| To others | 691,659.87 | 797,512.40 |
| Total | 810,497.39 | 1,064,220.24 |
- Income taxes
| 1 Jan - 31 Dec 2010 | 1 Jan - 31 Dec 2009 | |
|---|---|---|
| Current tax expense | 2,396,920.76 | 0.00 |
| Withholding taxes | 201,045.94 | 1,234,057.91 |
| Taxes from previous years | -231,902.91 | 190,406.06 |
| Total | 2,366,063.79 | 1,424,463.97 |
58
11. Non-current assets
| Intangible assets | ||||
|---|---|---|---|---|
| Intangible rights | Goodwill | Other long-term expenditure | Total | |
| Cost at 1 Jan 2010 | 8,027,491.63 | 11,132,366.14 | 417,364.34 | 19,577,222.11 |
| Additions | 36,150.00 | 0.00 | 0.00 | 36,150.00 |
| Cost at 31 Dec 2010 | 8,063,641.63 | 11,132,366.14 | 417,364.34 | 19,613,372.11 |
| Accumulated amortisation at 1 Jan 2010 | 7,213,630.23 | 9,504,508.22 | 308,837.47 | 17,026,975.92 |
| Amortisation | 633,371.95 | 1,627,857.92 | 42,010.40 | 2,303,240.27 |
| Accumulated amortisation at 31 Dec 2010 | 7,847,002.18 | 11,132,366.14 | 350,847.87 | 19,330,216.19 |
| Book value at 31 Dec 2010 | 216,639.45 | 0.00 | 66,516.47 | 283,155.92 |
| Intangible rights | Goodwill | Other long-term expenditure | Total | |
| Cost at 1 Jan 2009 | 7,803,536.80 | 11,132,366.14 | 417,364.34 | 19,353,267.28 |
| Additions | 223,954.83 | 0.00 | 0.00 | 223,954.83 |
| Cost at 31 Dec 2009 | 8,027,491.63 | 11,132,366.14 | 417,364.34 | 19,577,222.11 |
| Accumulated amortisation at 1 Jan 2009 | 6,363,475.54 | 7,338,035.00 | 266,827.07 | 13,968,337.61 |
| Amortisation | 850,154.69 | 2,166,473.22 | 42,010.40 | 3,058,638.31 |
| Accumulated amortisation at 31 Dec 2009 | 7,213,630.23 | 9,504,508.22 | 308,837.47 | 17,026,975.92 |
| Book value at 31 Dec 2009 | 813,861.40 | 1,627,857.92 | 108,526.87 | 2,550,246.19 |
| Tangible assets | Machinery and equipment | |||
| Cost at 1 Jan 2010 | 4,378,643.80 | |||
| Additions | 425,580.97 | |||
| Disposals | -3,376,551.67 | |||
| Cost at 31 Dec 2010 | 1,427,673.10 | |||
| Accumulated depreciation at 1 Jan 2010 | 3,775,506.94 | |||
| Depreciation | 487,420.37 | |||
| Accumulated depreciations on disposals | -3,376,551.67 | |||
| Accumulated depreciation at 31 Dec 2010 | 886,375.64 | |||
| Book value at 31 Dec 2010 | 541,297.46 | |||
| Machinery and equipment | ||||
| Cost at 1 Jan 2009 | 4,993,423.18 | |||
| Additions | 42,861.64 | |||
| Disposals | -657,641.02 | |||
| Cost at 31 Dec 2009 | 4,378,643.80 | |||
| Accumulated depreciation at 1 Jan 2009 | 3,454,258.73 | |||
| Depreciation | 637,667.17 | |||
| Accumulated depreciations on disposals | -316,418.96 | |||
| Accumulated depreciation at 31 Dec 2009 | 3,775,506.94 | |||
| Book value at 31 Dec 2009 | 603,136.86 |
59
| Investments | Shares in Group companies | Shares in associated companies | Total |
|---|---|---|---|
| Cost at 1 Jan 2010 | 9,917,435.19 | 400,000.00 | 10,317,435.19 |
| Additions | 2,565.00 | 0.00 | 2,565.00 |
| Impairment | -9,304,311.76 | 0.00 | -9,304,311.76 |
| Cost at 31 Dec 2010 | 615,688.43 | 400,000.00 | 1,015,688.43 |
| Book value at 31 Dec 2010 | 615,688.43 | 400,000.00 | 1,015,688.43 |
| Investments | Shares in Group companies | Shares in associated companies | Total |
| Cost at 1 Jan 2009 | 10,185,670.60 | 400,000.00 | 10,585,670.60 |
| Decreases | -268,235.41 | 0.00 | -268,235.41 |
| Cost at 31 Dec 2009 | 9,917,435.19 | 400,000.00 | 10,317,435.19 |
| Book value at 31 Dec 2009 | 9,917,435.19 | 400,000.00 | 10,317,435.19 |
An impairment loss of EUR 9,304,311.76 was recognised for the acquisition cost of shares in Axiom Systems Holdings Limited in 2010.
12. Non-current receivables
| 31 Dec 2010 | 31 Dec 2009 | |
|---|---|---|
| Receivables from Group companies | ||
| Loan receivables | 11,156,389.37 | 8,868,850.76 |
| Prepayments and accrued income | 178,060.72 | 17,884.71 |
| Total | 11,334,450.09 | 8,886,735.47 |
| Receivables from associated companies | ||
| Loan receivables | 75,000.00 | 75,000.00 |
| Prepayments and accrued income | 8,301.40 | 821.92 |
| Total | 83,301.40 | 75,821.92 |
| Non-current receivables total | 11,417,751.49 | 8,962,557.39 |
A capital loan of EUR 1,500,000 has been granted to the subsidiary Comptel Communications Oy in accordance with the Companies Act chapter 12, constituting a non-current loan receivable. The loan is interest-free.
Comptel Corporation has given its subsidiary Axiom Systems Limited a capital loan amounting to GBP 8,306,012.81. The interest on the loan is based on 12 month Euribor and may be adjusted annually.
60
| 13. Current receivables | ||
|---|---|---|
| 31 Dec 2010 | 31 Dec 2009 | |
| Receivables from Group companies | ||
| Trade receivables | 1,033,065.40 | 905,593.42 |
| Other receivables | 144.17 | 391,565.76 |
| Prepayments and accrued income | 116,776.00 | 51,444.44 |
| Total | 1,149,985.57 | 1,348,603.62 |
| Receivables from others | ||
| Prepayments | 4,518.30 | 13,301.87 |
| Trade receivables | 22,107,601.52 | 20,728,242.36 |
| Other receivables | 2,544,088.79 | 2,941,566.68 |
| Prepayments and accrued income | 6,453,363.94 | 10,919,216.62 |
| Total | 31,109,572.55 | 34,602,327.53 |
| Current receivables total | 32,259,558.12 | 35,950,931.15 |
| Specification of prepayments and accrued income | ||
| Accrued income capitalised according to degree of completion | 5,182,172.94 | 6,348,905.14 |
| Tax accrual | 0.00 | 2,012,623.61 |
| Other prepayments | 1,271,191.00 | 2,557,687.87 |
| Total | 6,453,363.94 | 10,919,216.62 |
| 14. Equity | ||
| 2010 | 2009 | |
| Restricted equity | ||
| Share capital at 1 Jan | 2,141,096.20 | 2,141,096.20 |
| Share capital at 31 Dec | 2,141,096.20 | 2,141,096.20 |
| Non-restricted equity | ||
| Fund of invested non-restricted equity at 1 Jan | 7,499,093.75 | 7,433,494.45 |
| Treasury shares given to the members of the Board of | 76,000.00 | 65,599.30 |
| Fund of invested non-restricted equity at 31 Dec | 7,575,093.75 | 7,499,093.75 |
| Retained earnings at 1 Jan | 21,668,413.06 | 27,893,483.17 |
| Dividends paid | -3,191,123.25 | -4,278,486.24 |
| Acquisition of Corporation's own shares | -468,290.83 | -336,292.87 |
| Retained earnings at 31 Dec | 18,008,998.98 | 23,278,704.06 |
| Profit/loss for the financial year | -603,683.86 | -1,610,291.00 |
| Equity, total | 27,121,505.07 | 31,308,603.01 |
| Breakdown of distributable funds | 31 Dec 2010 | 31 Dec 2009 |
| Fund of invested non-restricted equity | 7,575,093.75 | 7,499,093.75 |
| Retained earnings | 18,008,998.98 | 23,278,704.06 |
| Profit/loss for the financial year | -603,683.86 | -1,610,291.00 |
| Total | 24,980,408.87 | 29,167,506.81 |
61
15. Provisions
| 2010 | 2009 | |
|---|---|---|
| Provisions at 1 Jan | 693,701.97 | 883,788.33 |
| Provisions made during the financial year | 115,668.00 | 0.00 |
| Provisions used during the financial year | -213,673.81 | -190,086.36 |
| Provisions at 31 Dec | 595,696.16 | 693,701.97 |
The provisions include a provision recognised for unoccupied leased office facilities and a warranty provision.
16. Non-current liabilities
| 31 Dec 2010 | 31 Dec 2009 | |
|---|---|---|
| Liabilities to Group companies | ||
| Other liabilities | 272,019.95 | 272,019.95 |
| Liabilities to others | ||
| Other liabilities | 518.82 | 518.82 |
| Total | 272,538.77 | 272,538.77 |
17. Current liabilities
| 31 Dec 2010 | 31 Dec 2009 | |
|---|---|---|
| Liabilities to Group companies | ||
| Trade payables | 1,777,348.30 | 2,587,536.37 |
| Other liabilities | 8,515,867.12 | 7,670,104.52 |
| Accruals and deferred income | 89,459.56 | 0.00 |
| Total | 10,382,674.98 | 10,257,640.89 |
Liabilities to others
| 31 Dec 2010 | 31 Dec 2009 | |
|---|---|---|
| Loans from financial institutions | 0.00 | 8,000,000.00 |
| Trade payables | 1,502,358.01 | 866,714.26 |
| Other liabilities | 338,839.53 | 540,921.32 |
| Accrued expenses and deferred income | 9,584,658.95 | 11,024,178.07 |
| Total | 11,425,856.49 | 20,431,813.65 |
Current liabilities total
| 31 Dec 2010 | 31 Dec 2009 | |
|---|---|---|
| Specification of accrued expenses and deferred income | 31 Dec 2010 | 31 Dec 2009 |
| Personnel expenses | 2,449,749.95 | 3,036,227.26 |
| Items recognised on the basis of percentage of completion method | 1,893,045.88 | 1,582,128.47 |
| Other accrued expenses and deferred income items related to revenue | 4,343,881.82 | 5,852,801.30 |
| Other accrued expenses and deferred income items | 897,981.30 | 553,021.04 |
| Total | 9,584,658.95 | 11,024,178.07 |
18. Deferred tax assets
| 31 Dec 2010 | 31 Dec 2009 | |
|---|---|---|
| Deferred tax assets, which have not been booked in the balance sheet: | ||
| Provisions | 90,690.54 | 78,631.40 |
| Reversal of depreciation and amortisation in taxation | 343,349.45 | 441,839.79 |
| Impairment loss on trade receivables | 188,412.03 | 240,847.85 |
| Loss for the period | 0.00 | 151,531.22 |
| Total | 622,452.01 | 912,850.27 |
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19. Collaterals, commitments and other contingent liabilities
| Lease commitments | 31 Dec 2010 | 31 Dec 2009 |
|---|---|---|
| Amounts payable during the next financial year | 218,050.64 | 261,242.86 |
| Amounts payable later | 234,488.08 | 129,011.92 |
| Total | 452,538.72 | 390,254.78 |
The leases the company has entered into generally run for a period of three years and contain no redemption commitments.
| Rental commitments | 31 Dec 2010 | 31 Dec 2009 |
|---|---|---|
| Amounts payable during the next financial year | 2,070,260.83 | 2,248,048.13 |
| Amounts payable later | 9,521,195.21 | 11,952,232.14 |
| Total | 11,591,456.04 | 14,200,280.27 |
| Guarantees | 31 Dec 2010 | 31 Dec 2009 |
| Bank guarantees due within one year | 1,202,859.06 | 606,551.03 |
| Bank guarantees due later | 173,361.30 | 157,341.85 |
| Total | 1,376,220.36 | 763,892.88 |
Contingent liabilities assumed on behalf of Group companies
In 2008 Comptel Corporation has given a performance guarantee on behalf of its subsidiary. The total value of this agreement is USD 4 million. Comptel gave a guarantee of GBP 700,000 for its subsidiary in 2009.
| Derivative instruments | 31 Dec 2010 | 31 Dec 2009 |
|---|---|---|
| Forward exchange contracts | ||
| Market value | 155,510.47 | -220,204.67 |
| Value of underlying instrument | 25,758,821.27 | 15,995,935.77 |
Forward exchange contracts are used for hedging purposes.
The Board of Directors' proposal for the distribution of parent company profit
According to the parent company balance sheet at 31 December 2010 the parent company's distributable funds were EUR 24,980,408.87.
The Board of Directors proposes to the Annual General Meeting the distributable funds be used as follows:
- dividend of EUR 0.04 per share on the 106,454,905 shares outstanding which makes in total EUR 4,258,196.20
- to be left in equity EUR 20,722,212.67
There have not occurred significant changes in the company's financial position after the end of the financial year. The company's liquidity is good and in the Board of Directors' view the proposed disposal of profits does not undermine the company's solvency.
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Shares and Shareholders
The share of Comptel Corporation is listed in the NASDAQ OMX Helsinki under the code CTL1V.
Comptel has one series of shares. Each share equals to one (1) vote at the Shareholders’ General Meeting.
The share capital of the company has not changed during the year ended. The company’s share capital on 31 December 2010 amounted to 2,141,096.20 euros, and the total number of shares was 107,054,810.
Authorisations to the Board of Directors
Authorisation to decide on share issues
The Annual General Meeting on 22 March 2010 granted to the Board of Directors an authorisation to decide on share issues and granting special rights entitling to shares. A maximum of 21,400,000 shares can be issued. A maximum of 10,700,000 of the company's treasury shares held by the company can be conveyed and/or received on basis of the special rights.
New shares may be issued and the company's treasury shares held by the company may be conveyed to the company's shareholders in proportion to their present shareholdings in the company; or waiving the pre-emptive rights of the shareholders, through a directed share issue if the company has a weighty financial reason to do so, such as using the shares to develop the company's capital structure, as financing or in implementing acquisitions or other arrangements or in implementing the company's share-based incentive program.
The Board of Directors was authorised to grant option rights and other special rights referred to in Chapter 10, Section 1 of the Companies Act, which carry the right to receive, against payment, new shares of the company or the company's treasury shares held by the company in such a manner that the subscription price of the shares is paid in cash or by using the subscriber's receivable to set off the subscription price.
The subscription price of the new shares and the consideration payable for the company's own shares shall be recognised under the invested non-restricted equity fund.
The authorisation to share issues is valid until 30 June 2011.
Authorisation to repurchase company's own shares
The Annual General Meeting granted the Board of Directors an authorisation to repurchase a maximum of 10,700,000 of the company's own shares for developing the company's capital structure, to be used in financing or implementing acquisitions or other arrangements, for implementing the company's share-based incentive programs or to be conveyed by other means or to be cancelled.
Based on this authorisation, a number of 34,042 own shares were disposed to the persons involved in the share-based incentive plan in 2010.
The authorisation to repurchase the own shares is valid until 30 June 2011.
Share option schemes
Comptel has currently two share option schemes.
Share option scheme 2006
The Annual General Meeting decided on 13 March 2006 to issue share options to the key personnel of Comptel Group, as well as to a wholly owned subsidiary of Comptel Corporation. It was decided to disapply the pre-
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emptive rights of existing shareholders, since the share options are intended as part of an incentive and commitment program for the key personnel.
The share subscription period of 2006 share options A expired on 30 November 2010. During the subscription period no shares were subscribed. The number of remaining share options is 2,800,000 of which 1,400,000 are marked with the symbol 2006B and 1,400,000 with the symbol 2006C. The share options may be exercised to subscribe to a maximum of 2,800,000 Comptel shares in total.
The share subscription price for option 2006A was EUR 1.66 which corresponded to the trade volume weighted average quotation of the Comptel share on the Helsinki stock exchange during 1 April - 30 April 2006 deducted by the dividends paid. The current share subscription price for option 2006B is EUR 1.86 which corresponds to the trade volume weighted average quotation of the Comptel share on the Helsinki stock exchange during 1 April - 30 April 2007 deducted by the dividends paid, and for option 2006C EUR 1.41 which corresponds to the trade volume weighted average quotation of the Comptel share on the Helsinki stock exchange during 1 April - 30 April 2008 deducted by the dividends paid.
The share subscription period for option 2006A was 1 November 2008 - 30 November 2010. The share subscription period for option 2006B is 1 November 2009 - 30 November 2011, and for option 2006C 1 November 2010 - 30 November 2012.
As a result of the subscriptions, the share capital of Comptel Corporation may be increased by a maximum of 2,800,000 new shares or by a total of 56,000 euros. At the end of the financial year, 2,800,000 share options were distributed and these can be exercised to subscribe 2,800,000 shares of Comptel. A number of 618,000 of these share options were granted to Comptel's subsidiary Comptel Communications.
Comptel's 2006A share options were listed on Helsinki stock exchange commencing from 3 November 2008. The trading code is CTL1VEW106 and ISIN code is FI0009652390. In 2010, a number of 59,281 options A were traded and the closing price was EUR 0.01.
Comptel's 2006B share options were listed on NASDAQ OMX Helsinki commencing from 2 November 2009. The trading code is CTL1VEW206 and ISIN code is FI4000005335. In 2010, a number of 40,000 options B were traded and the closing price was EUR 0.04.
Comptel's 2006C share options were listed on NASDAQ OMX Helsinki commencing from 1 November 2010. The trading code is CTL1VEW306 and ISIN code is FI0009652416. No C options were traded in 2010.
Share option scheme 2009
The Annual General Meeting decided on 16 March 2009 to issue share options to the key personnel of the Comptel Group as a part of the incentive and commitment program.
The total number of share options issued is 4,200,000. Of the share options, 1,400,000 are marked with the symbol A, 1,400,000 are marked with the symbol B and 1,400,000 are marked with the symbol C. The share options may be exercised to subscribe to a maximum of 4,200,000 new shares in the company or existing shares held by the company. The issued share options can be exchanged for shares constituting a maximum total of 3.8 per cent of the company's shares and votes of the shares, after the potential share subscription, if new shares are issued in the share subscription.
The share subscription price will be based on the prevailing market price of the Comptel share on the NASDAQ OMX Helsinki Ltd in April 2009, April 2010 and April 2011. The current share subscription price for Comptel share option 2009A is EUR 0.60 per share, which corresponds to the trade volume weighted average quotation of the share on the NASDAQ OMX Helsinki during 1 April - 30 April 2009 deducted by the dividend paid. The current share subscription price for Comptel share option 2009B is EUR 0.87 per share, which corresponds to
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the trade volume weighted average quotation of the share on the NASDAQ OMX Helsinki during 1 April - 30 April 2010.
The share subscription period for stock options 2009A will be 1 November 2011 - 30 November 2013, for stock options 2009B 1 November 2012 - 30 November 2014, and for stock options 2009C 1 November 2013 - 30 November 2015.
The Board of Directors decides on the distribution of share options during the second quarters of 2009, 2010 and 2011. A total of 1,250,000 share options 2009A have been distributed in 2009 and a total of 1,250,000 share options 2009B have been distributed in 2010 to the key personnel of Comptel Group. The rest of the 2009 share options have been granted to Comptel Communications Oy to be further distributed.
The Corporate Executives and other key persons belonging to the target group of the share based incentive plan 2009 - 2011 are not included in the share option scheme 2009.
Share-based incentive plans
The Board of Directors approved a share-based incentive plan in January 2009. The aim of the plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the company and to commit the key personnel to the company. The plan includes three earning periods, years 2009, 2010 and 2011. The Board of Directors decides on the earnings criteria at the beginning of each period. A two-year restriction period will follow each earning period, during which shares cannot be transferred. Should a key person's employment or service end during the restriction period, he/she must gratuitously return the shares paid as reward to the company.
The reward from the earning period 2009 was based on the continuance of employment or service of a key person and on the Comptel Group's operating profit margin. There were 13 persons in the plan at the end of 2009. The reward for 2009 was paid in 2010 by disposing gratuitously 202,042 company shares and in cash, amounting to EUR 136,000. The potential reward from the plan for the earning period 2010 will be based on the growth of net sales and the operating profit margin of the Comptel Group. There were 11 persons in the plan at the end of 2010.
Shareholding of the Board and Acting CEO
Members of the Board of Directors and the Acting President and CEO held at 31 December 2010:
- A total of 0.366 per cent of the company's outstanding shares and share options
- 0.372 per cent of the votes and share capital
- The share options can provide them with 0.018 per cent of the votes and share capital
| Share trading data | 1 Jan - 31 Dec 2008 | 1 Jan - 31 Dec 2009 | 1 Jan -31 Dec 2010 |
|---|---|---|---|
| Closing price, EUR | 0.69 | 0.78 | 0.69 |
| Highest price, EUR | 1.58 | 0.96 | 0.95 |
| Lowest price, EUR | 0.60 | 0.57 | 0.68 |
| Weighted average trading price, EUR | 1.28 | 0.69 | 0.80 |
| Shares traded, 1,000 shares | 30,480 | 35,838 | 38,301 |
| Shares traded, EUR million | 39.7 | 24.3 | 29.0 |
| Market capitalisation at the year end, EUR million | 73.8 | 83.3 | 73.5 |
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Share quotations 2006 - 2010
Weighted weekly average, EUR
- Comptel
- OMX Helsinki (all shares)
- OMX Helsinki Information Technology
Shares traded 2006 - 2010
Thousand shares/month
Shareholding by owner group on 31 Dec 2010
| Shares | % of total shares | |
|---|---|---|
| Companies | 22,161,261 | 20.7 |
| Financial and insurance companies | 40,442,122 | 37.8 |
| Public sector | 10,637,666 | 9.9 |
| Non-profit making entities | 355,882 | 0.3 |
| Private households | 26,428,217 | 24.7 |
| Foreign holding and nominee registered | 7,029,662 | 6.6 |
| Total number of shares | 107,054,810 | 100.0 |
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Shareholding by number of shares on 31 Dec 2010
| Number of shares | Number of shareholders | % of shareholders | Number of shares | % of total shares |
|---|---|---|---|---|
| 1 - 100 | 2,053 | 10.9 | 128,390 | 0.1 |
| 101 - 500 | 11,216 | 59.3 | 2,077,764 | 1.9 |
| 501 - 1000 | 1,794 | 9.5 | 1,500,282 | 1.4 |
| 1001 - 5000 | 2,787 | 14.7 | 6,923,544 | 6.5 |
| 5001 - 10000 | 526 | 2.8 | 4,036,854 | 3.8 |
| 10001 - 50000 | 418 | 2.2 | 8,595,985 | 8.0 |
| 50001 - 100000 | 54 | 0.3 | 3,863,824 | 3.6 |
| 100001 - 500000 | 30 | 0.2 | 5,701,399 | 5.3 |
| 500001 - | 23 | 0.1 | 74,226,758 | 69.3 |
| Total | 18,901 | 100.0 | 107,054,810 | 100.0 |
Largest shareholders on 31 Dec 2010
| Shares | % of shares and votes | |
|---|---|---|
| 1. Mandatum Life Insurance Company Limited | 20,124,925 | 18.80 |
| 2. Saunalahti Group Oyj | 14,304,000 | 13.36 |
| 3. Kaleva Mutual Insurance Company Group | 7,816,875 | 7.30 |
| 4. OP Funds | 6,297,504 | 5.88 |
| OP-Finland Small Cap Fund | 5,297,504 | 4.95 |
| OP-Delta Fund | 1,000,000 | 0.93 |
| 5. Varma Mutual Pension Insurance Company | 5,144,825 | 4.81 |
| 6. The State Pension Fund | 2,600,000 | 2.43 |
| 7. ABN AMRO funds | 2,351,960 | 2.20 |
| ABN AMRO Finland | 1,815,363 | 1.70 |
| ABN AMRO Optimal Fund | 536,597 | 0.50 |
| 8. Aktia funds | 1,867,437 | 1.74 |
| Investment Fund Aktia Capital | 1,100,000 | 1.03 |
| Aktia Secura Fund | 517,437 | 0.48 |
| Fund Aktia Solida | 250,000 | 0.23 |
| 9. Etera Mutual Pension Insurance Company | 1,169,996 | 1.09 |
| 10. Fourton Fokus Fund Finland | 1,145,961 | 1.07 |
| 11. Rakshit Tommi | 809,000 | 0.76 |
| 12. Mutual Fund Evli Select | 762,700 | 0.71 |
| 13. Ilmarinen Mutual Pension Insurance Company | 683,591 | 0.64 |
| 14. SEB Gyllenberg Small Firm Fund | 682,793 | 0.64 |
| 15. Comptel Corporation | 599,905 | 0.56 |
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Date and signature of the Board of Directors report and the financial statements
Helsinki, 9 February 2011
Olli Riikkala, Chairman of the Board
Timo Kotilainen, Member of the Board
Juhani Lassila, Member of the Board
Hannu Vaajoensuu, Member of the Board
Petteri Walldén, Member of the Board
Henri Österlund, Member of the Board
Juhani Hintikka, President and CEO
Auditor's entry
The auditor's report of the audit carried out by us has been submitted today.
Helsinki, 9 February 2011
KPMG Oy Ab
Pekka Pajamo, APA