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ComTel SpA Annual Report 2015
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COMPTEL ANNUAL REPORT 2015
comptel
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CONTENTS
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COMPTEL IN 2015 ... 4
This is Comptel ... 4
Key Figures ... 5
CEO's Review ... 6 -
BOARD OF DIRECTORS' REPORT ... 8
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FINANCIAL STATEMENTS ... 14
Consolidated Statement of Comprehensive Income ... 14
Consolidated Statement of Financial Position ... 15
Consolidated Statement of Cash Flows ... 16
Consolidated Statement of Changes in Equity ... 17
Notes to the Consolidated Financial Statements ... 18
Key figures ... 55
Definitions of key figures ... 57
Parent Company Income Statement, FAS ... 58
Parent Company Balance Sheet, FAS ... 58
Parent Company Statement of Cash Flows, FAS ... 59
Notes to the Financial Statements of the Parent Company, FAS ... 60
Shares and shareholders ... 71
The Board of Directors' proposal for the distribution of parent company profit ... 74
Auditor's Report ... 75 -
CORPORATE GOVERNANCE ... 76
Corporate governance statement 2015 ... 76
Board of Directors ... 80
Executive Board ... 81 -
SHAREHOLDER INFORMATION ... 82
Comptel presence ... 83
Comptel in 2015
THIS IS COMPTEL
OUR VISION AND MISSION
LIFE IS DIGITAL MOMENTS. We believe that the quality and success in life, private or business, is increasingly dependent on the quality of digital moments we live in. From early morning to late evening people communicate, co-create, collaborate with others and consume digital content and services. In addition, the connected “things and machines” set the tone and pace for everyday life.
PERFECTING DIGITAL MOMENTS. We at Comptel are on a mission to perfect the digital moments. Firstly, perfection means getting digital content in the right context, delivered right the 1st time. For service providers, perfection means gaining more revenue, serving happy customers and facing fewer risks in the business of digital moments.
OUR STRATEGY
COMPTEL’S STRATEGIC TARGET is to establish itself as a leading software vendor for connecting digital demand and supply.
Our strategy focuses on providing software and services for digital service and communications providers in two major areas – Intelligent Data and Service Orchestration. The Intelligent Data business area delivers solutions and services to customers for monetizing new data opportunities and turning big data into intelligent automated actions. The growth of the Intelligent Data business area is driven by the increasing importance of monetizing the exploding data volumes. The Service Orchestration business area provides solutions and services for business flow orchestration and mastering digital buying experience. Growth is driven by the inevitable transformation caused by cloud services and network virtualization.
COMPTEL TODAY
Today Comptel is at the core of delivering digital and communication services to more than 1 billion people and businesses. Every day, we take care of more than 20% of the world’s mobile usage data. Over the years, almost 300 digital service and communications providers in 90 countries have trusted us to manage complexity and reduce friction in their most critical processes.
OUR FINANCIAL TARGETS
Our long term financial goals are to grow annually over 10% in revenue and deliver an EBIT of 10-15%. In 2015 we reached our topline target with the 14% revenue growth. Relative profitability was 8.7%, impacted by our investments for future growth.
Comptel Annual Report 2015
Comptel in 2015
KEY FIGURES
NET SALES AND ORDER BACKLOG
EARNINGS PER SHARE AND DIVIDEND
| 2015 | 2014 | 2013 | |
|---|---|---|---|
| Net sales, MEUR | 97.7 | 85.7 | 82.7 |
| Operating profit, MEUR | 8.5 | 8.3 | 7.3 |
| Operating profit, % of net sales | 8.7 | 9.7 | 8.8 |
| R&D expenditure, MEUR | 20.3 | 16.8 | 17.8 |
| Order backlog, MEUR | 66.3 | 55.2 | 40.8 |
| Return on investment, % | 18.3 | 19.5 | 16.1 |
| Equity ratio, % | 52.4 | 52.4 | 50.5 |
| Earnings per share, EUR | 0.04 | 0.05 | 0.02 |
| Dividend per share, EUR | |||
| (for the financial period) | 0.03* | 0.02 | 0.01 |
| Number of employees | |||
| (average) | 723 | 665 | 684 |
- Board of Directors' proposal
NET SALES AND ORDER BACKLOG
R&D EXPENDITURE
Comptel Annual Report 2015
Comptel in 2015
CEO'S REVIEW
A RECORD YEAR FOR COMPTEL
Operation Nexterday continued successfully in 2015. Our revenue growth was double digit, 14%, which is the highest since I joined Comptel. Our revenue was also at an all-time high in the history of the company.
In 2015 we updated our strategy. Our long term financial goals are to grow annually over 10% in revenue and deliver an EBIT of 10-15%. We managed to reach our topline goal already in 2015 with the 14% revenue growth. Our relative profit did not quite make it yet, for good reasons. At the end of 2014 we re-organized the company and set up an internal product startup team. This product development effort was a significant investment in 2015 and lowered our relative profitability for 2015. The results were promising, however, as the startup delivered a new solution within 12 months: a digital sales channel named FWD. It is already in commercial use with a customer. We also continued to invest significantly in our current product portfolio, which will secure our competitiveness and growth potential in the future. Our R&D amounted to as high as 20.8 per cent of revenue in 2015.
Geographically, our region, Europe was the star performer; our revenue for 2015 was at an all-time high level. Our engagement especially with global customers in Europe is on solid ground and forms a good foundation for the future. Our revenue continued to grow significantly also in APAC.
Our net profit was negatively impacted by changes in the deductibility of withholding taxes. Some of the deductions allowed in 2014 were reversed in 2015 by the taxation authorities and resulted in an additional adjustment in 2015 which also related to 2014. Our net profit was lower than in the previous year and the tax adjustments had a significant impact on this change. Our effective tax rate was 40.5 per cent for 2015 and 26.6 per cent for 2014.
In 2015 we re-organized the company into two business units for increased focus and operational efficiency. After one year, the operating model is clearly proving its merits. Both business units, Intelligent Data as well as Service Orchestration, grew last year.
As part of the strategy update in early 2015 we identified six strategic objectives: solutions with unique value, thought leadership,
Comptel Annual Report 2015
Comptel in 2015
customer excellence, new markets, leverage by partners and inspired people. I can proudly say that the Comptel team executed and delivered on high level on all of these goals in 2015. The financial results of 2015 are further proof that our strategy is working.
Our earlier choice to focus on selected segments in the Telecom market has proven to be a good one. We are currently operating in market segments that have higher growth and demand than the overall Telecom market. Our product portfolio is competitive and we have good and long-standing customer relationships that we benefit from. Our hard work in previous years to transform the company is now visible in the financial results as well.
These are exciting times for Comptel, and there is more to come. We are part of a new wave of transformation in the Telecom industry.
> “WE ARE VERY PLEASED WITH OUR GROWTH FOR 2015. DURING 2015 WE INVESTED SIGNIFICANTLY IN DEVELOPING THE NEW FWD SOFTWARE-AS-A-SERVICE, INCREASED DELIVERY CAPACITY, SALES AND MARKETING AND IN OUR CURRENT PORTFOLIO. THIS ALL IS TO STRENGTHEN OUR FUTURE GROWTH.”
There are a lot of disruption opportunities ahead where I believe we can make a big difference with our unique offering. As part of our thought leadership work, we have shared our thinking on how the industry will evolve, and that seems to resonate very well with customers. We are committed to maintaining high customer excellence and we will continue our work in new markets.
I want to thank the Comptel team for staying committed and dedicated to our values: passion, respect, united and make it happen. My goal is to ensure we have continuously inspired people. This is what will ultimately make Comptel successful.
I also wish to warmly thank our customers and partners. I am looking forward to continuing our joint efforts to perfect the digital moments.
I would also like to take this opportunity to thank all of our new and old shareholders for your support. Thank you for staying on the Operation Nexterday journey with us. I am confident this will continue to create shareholder value.
Helsinki, March 2016
Juhani Hintikka
President and CEO
Comptel Annual Report 2015
Board of Directors' Report
BOARD OF DIRECTORS' REPORT 2015
BUSINESS OUTLOOK AND MARKETS
It is more and more evident that both the business environment and technology in telecommunications business are entering a new disruption point. New competition from global technology giants like Facebook, Google and Apple is challenging operators in their core business and forcing them to adapt to the new business models and look for cost-efficiency and flexibility in their operations. We expect this trend to continue also during the next few years and to bring Comptel considerable opportunity by connecting to this new demand.
Currently key operator investments are driven by the vastly increasing data demand and targeted to increase the network bandwidth. Roll-outs of 4G and fibre networks are going on worldwide and operators have a strong need to harvest this capacity also with new money-generating services. The importance of customer experience and fierce competition both inside the telecoms industry and against the disruptors requires that operators improve their business processes continuously and pay special attention to the cost structure.
Traditionally the role of Comptel's software has been in the management of services and assigning network capacity to end users. The on-going shift of networks towards new cloud-based software technologies and the resulting tighter integration of network and business layers will mean that the significance and value of the management software will increase. This is expected to bring new and more extensive business opportunities for Comptel service orchestration and intelligent data solutions.
In search of new revenue sources operators need more flexibility in integration towards other business domains. To open up these new channels they need to introduce more sophisticated sales, order management and charging systems. The customers in this market position require both more high value services and new project deliveries that will create opportunity for business growth.
NET SALES AND PROFITABILITY
Comptel group's 2015 net sales increased by 14.0 per cent (3.7) and were EUR 97.7 million (2014: 85.7; 2013: 82.7). Growth was generated by both business units for the year. Service Orchestration grew by 20.1 per cent and Intelligent Data grew by 7.1 per cent.
Operating profit was EUR 8.5 million (2014: 8.3; 2013: 7.3), which amounts to 8.7 per cent (9.7) of net sales. The relative lower profitability was due to investments in the development of the FWD solution (2.6M), investments in delivery capacity as well as in current product portfolio.
Profit before taxes was EUR 7.6 million (7.4), which amounts to 7.8 per cent (8.7) of net sales. The company's net profit was EUR 4.5 million (5.5). Earnings per share for the financial year was EUR 0.04 (2014: 0.05; 2013: 0.02).
The consolidated effective tax rate in 2015 was 40.5 per cent (26.6). In the latest tax decision, the tax authorities changed the interpretation on withholding taxes for certain countries. Due to this decision a onetime adjustment for 2014 taxes was made in 2015 which had a 4.2 per cent negative impact on the effective tax rate. The new decision also increased the 2015 effective tax rate by 3.3 per cent.
The tax expense for the financial year was EUR 3.1 million (2.0), including EUR 1.2 million of withholding taxes (1.0).
The Group's order backlog grew by 20.2 per cent from the previous year and was EUR 66.3 million (2014: 55.2; 2013: 40.8).
BUSINESS AREAS
Business areas are defined by geography. Comptel has four business areas; Europe, Asia-Pacific, Middle East and Africa, and the Americas. The operating profit of the segments includes cost of sales and customer service. The Group R&D and general and administration costs are not allocated to the segments.
In 2015, Comptel received 29 significant orders (26): Service Orchestration received 16 orders (11 for the FlowOne Fulfillment solution, five for FlowOne Provisioning and Activation) and Intelligent Data received six orders (four for Data Refinery, one for Fastermind and one for the Monetizer solution). Seven orders were multi-solution orders across business units. As significant orders Comptel reports sold projects and licenses with a minimum value of EUR 0.5 million.
Europe net sales were EUR 40.1 million (35.4). Europe net sales grew significantly
Comptel Annual Report 2015
Board of Directors' Report
across the region, especially with large Tier 1 global groups. The Group's operating profit for the segment was EUR 27.5 million (19.5), representing 68.6 per cent of net sales (55.3). Comptel won one new customer in this region. Some of the most significant customers were operators belonging to the Telefonica and Vodafone group.
The net sales of Asia-Pacific were EUR 29.6 million (24.8). The Group's operating profit for the segment was EUR 15.5 million (14.5), representing 52.3 per cent of net sales (58.7). Comptel won three new customers in this region. Some of the most significant customers were NBNCo, IBM and PT Indosat.
The net sales of Middle East and Africa were EUR 16.8 million (16.8). The Group's operating profit for the segment was EUR 5.6 million (7.3), representing 33.3 per cent of net sales (43.2). Some of the most significant customers were Saudi Telecom, Ooredoo and Etisalat group companies.
Americas net sales were EUR 11.2 million (8.8). The Group's operating profit was EUR 5.6 million (4.0), representing 50.1 per cent of net sales (45.5). Some of the most significant customers were operators belonging to the Telefonica and American Moviles group and T-Mobile in US.
Comptel's net sales are comprised of selling project & license business, and selling recurring business. Project & License business sales grew 21.4 per cent from previous year and were EUR 63.3 million (52.1). Recurring business sales grew 2.5 per cent from the previous year and were EUR 34.4 million (33.6)
Comptel's net sales are comprised also of Service Orchestration and Intelligent Data. Service Orchestration grew 20.1 per cent from the previous year and was EUR 55.2 million (46.0). Intelligent Data grew 7.1 per cent from the previous year and was EUR 42.5 million (39.7).
INVESTMENTS
During 2015 gross investments in intangible and tangible assets amounted to EUR 0.6 million (0.7) and comprised of investments in devices, software and furnishing. The investments were funded through liquid assets and cash flow from operations.
RESEARCH AND DEVELOPMENT
Comptel's direct R&D expenditure and investments were EUR 20.3 million (2014: 16.8; 2013: 17.8). This corresponds to 20.8 per cent (2014: 19.6; 2013: 21.5) of net sales.
The focus of Comptel's R&D expenditure was in the further development of solutions in the main product areas, Service Orchestration and Intelligent Data. Development is targeted both to secure the recurring revenue with competitive products and to win new markets by giving customers unique value with new innovations. Service Orchestration's FlowOne Fulfillment solution is developed as a suite of orchestration elements that manage the service and business flows from ground to cloud. Intelligent Data's Data Refinery captures data-in-motion and uses embedded intelligence to refine it for automated, in-the-moment decisions and actions. Monetizer is the business policy and charging tool that allows the rapid innovation and design of rich communication and data service offers. Data Fastermind embeds artificial intelligence, prediction and machine learning capabilities into all solutions.
In these areas Comptel seeks global thought leadership in solving the business challenges of operators and digital communications service providers. Additionally Comptel has started to invest in new products around the digital buying experience.
During 2015, Comptel continued to develop its current offering, and twelve major software releases were launched in these respective product areas.
The company filed 4 new patent applications in 2015 (2). During the year Comptel was granted 4 new patents (8). At the end of the year, Comptel had 41 (37) granted patents and 40 (39) pending patent applications to protect its main products and solutions.
The Comptel® trademark is the registered trademark of Comptel Corporation in several countries.
FINANCIAL POSITION
The balance sheet total on 31 December 2015 was EUR 86.4 million (77.6), of which liquid assets amounted to EUR 3.0 million (9.4). Operating cash flow for the full year
Comptel Annual Report 2015
Board of Directors' Report
was EUR 0.6 million (10.0). For the fourth quarter the operating cash flow was EUR -0.2 million (3.5). Cashflow was lower in 2015 due to the investments during the year.
Trade receivables were EUR 40.5 million (27.7) at the end of the period. The trade receivables increased significantly at the end of the year due to strong net sales in later part of the year. Accrued income was EUR 10.0 million (10.9). Deferred income related to partial debiting was EUR 3.3 million (4.4).
Comptel has a EUR 25 million credit facility arrangement consisting of EUR 20 million revolving credit facility and EUR 5 million overdraft capacity on current bank account. Out of this arrangement Comptel had EUR 5 million of the revolving credit facility and EUR 2.0 million of the overdraft capacity outstanding at the end of the period. The credit facility is valid until the end of July 2018.
The equity ratio was 52.4 per cent (52.4) and the gearing ratio was 11.1 per cent (-5.4).
COMPANY STRUCTURE
At the end of 2015, the Comptel group comprised of the parent company Comptel Oyj and the wholly owned subsidiaries Comptel Communications Oy, Comptel Communications AS, Comptel Communications EOOD, Comptel Communications Sdn Bhd, Comptel Communications Brasil Ltda, Comptel Communications Inc., Comptel Communications India Private Limited, Comptel Communications S.r.l., Xtract Oy and Comptel Palvelut Philippines Inc.. In addition, the Group included the wholly owned subsidiary of Comptel Communications Holdings and its wholly owned subsidiary Comptel Communications Ltd. The group also included an Irish associated company Tango Telecom Ltd (share of ownership 20.0 percent)
Comptel Group has registered representative and branch offices in Australia, Egypt, India, Russia, United Arab Emirates, The Netherlands, Sweden, Germany, Singapore, Hong Kong, Indonesia, New Zealand and Turkey.
PERSONNEL
At the beginning of the year Comptel had 660 employees and at the end of the year
- The Group employed an average of 723 persons in 2015 (2014: 665; 2013: 684).
At the end of the period, 29.5 per cent (30.2) of the personnel were located in Finland, 25.5 per cent (28.8) in Malaysia, 11.3 per cent (7.1) in India, 10.2 per cent (10.9) in Bulgaria, and 23.5 per cent (23.0) in other countries where Comptel operates.
Of the group personnel, 47.1 per cent (44.1) worked in customer services, 36.5 per cent (38.3) in research, product development and product management, 10.0 per cent (11.8) in sales and marketing and 6.2 per cent (5.8) in administration and internal support services at the end of the financial year.
At the end of the year the Group had 722 (650) regular workers and 20 (10) non-permanent employees. Of the employees, 712 (639) were full-time and 30 (21) part-time.
Average personnel attrition in 2015 was 17.1 (19.7). The average years of service was 5.0 (4.9). The average age of employees at the end of the year was 37 (37). At the end of the year 73 per cent (71) of the employees were men and 27 per cent (29) women.
Wages and salaries totaled EUR 38.4 million (2014: 34.6; 2013: 34.2). Salaries and compensation paid to the management are described in the note to the consolidated financial statements.
Of the personnel, 88 per cent had a university degree, 4 per cent had a polytechnic diploma, 4 per cent a vocational college diploma and 4 percent other education.
In the financial year, the amount of sick leave from active working hours was 1.4 percent (1.5).
CORPORATE GOVERNANCE
The Annual General Meeting (AGM), held on 9 April 2015, elected the following members to the Board of Directors: Pertti Ervi, Hannu Vaajoensuu, Eriikka Söderström, Antti Vasara and Heikki Mäkijärvi. In its meeting held after the AGM, the Board of Directors elected Pertti Ervi as chairman and Hannu Vaajoensuu as vice chairman. The board did not have any committees.
In the end of the financial year guarantees given on behalf of the related parties amounted to EUR 29 thousand. Related party transactions are described in more
10 | Comptel Annual Report 2015
Board of Directors' Report
detail in the note 31 to the consolidated financial statements.
A separate Corporate Governance Statement has been given as part of the annual report.
AUDITORS
Comptel's auditors was Ernst & Young Mikko Järventausta, APA, as the auditor with principal responsibility.
COMPTEL'S SHARE AND SHAREHOLDERS' EQUITY
Comptel has one share type. Each share constitutes one (1) vote. The company's capital stock on 31 December 2015 was EUR 2,141,096.20 and the total number of votes was 108,395,409.
The total exchange of Comptel's shares in 2015 was 41.2 million shares (27.8) which is 38.0 per cent (25.9) of the total number of shares. The closing price was EUR 1.83 (0.99). Comptel's market value at the end of the year was EUR 198.1 million (105.8).
During the year, Comptel Corporation allotted 64,950 shares to the members of the Board of Directors as part of their annual compensation and 133,333 shares to the President and CEO as per 2012 share-based incentive scheme.
The President and CEO of Comptel Corporation have a share-based incentive plan. The aim of the plan is to combine the objectives of the shareholders and the CEO of Comptel Corporation in order to increase the value of the company and to commit the CEO to the company. The prerequisite for the participation in the plan and receipt of reward from the performance period is that the CEO owns company's shares or acquires them up to the number predetermined by the Board of Directors, which is 230,000 shares. The ownership requirement was valid until 31 December 2015. All the shares of the plan were transferred and rewards paid.
The Board of Directors decided on the 9.9.2015, based on the authorization received from the Annual General Meeting held on 9 April 2015, to grant in total 3,478,260 options for a new incentive program to the CEO. The options give the right to subscribe for, in total, 3,478,260 company shares.
Out of the subscription rights 1,739,130 are marked with symbol 2015A and 1,739,130 are marked with symbol 2015B. According to the rules of the incentive plan, the share subscription price is EUR 0.92, which is the volume-weighted average price of the company's share in NASDAQ OMX Helsinki during 12. August 2015 - 8. September 2015 deducted with 20%.
Members of the Board of Directors and the CEO held at 31 December 2015 a total of 1.306 per cent of company's outstanding shares and share options.
The company held 118,507 of its own shares at the end of the financial year, which is 0.11 percent of the total number of its shares. The total counter-book value of the shares held by the company was EUR 2,341.
The Annual General Meeting, held on 9 April 2015, approved the proposal of the Board of Directors that dividend of 0.02 EUR per share was paid.
The AGM authorised the Board of Directors to decide on share issues amounting to a maximum of 21,400,000 new shares and/or special rights entitling to shares and on repurchase or conveying of the company's own shares up to a maximum number of 10,700,000 shares. The authorisations are valid until 30 of June 2016. However, the authorisation to implement the company's share-based incentive programs is valid until five years from the AGM resolution.
A separate stock exchange release about the resolutions of the Annual General Meeting including authorisations given to the Board of Directors was issued on 9 April 2015.
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 resources 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 the Comptel's business strategy.
11 | Comptel Annual Report 2015
Board of Directors' Report
Below is a description of the most important factors outside of 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 operation support system may vary significantly by region.
Comptel develops dynamic end-to-end solutions for leading operators globally in the telecom field. This requires that Comptel understands correctly the changing trends in its business environment and the needs of its customers and resellers in each region. Failure to identify market conditions, address customers' needs and develop products in a timely fashion may significantly undermine the growth of Comptel's business and profitability.
Comptel has invested significantly into new product areas, in analytics and automation of customers' delivery processes. Failure in the development or launch in these product areas can have a significant impact on the company's growth and profitability.
The timing of a single major deal and variations in the customer purchase behavior cause significant quarterly variations in sales and profit, and are typical of Comptel's field of industry.
The OSS market is highly competitive. The sector is undergoing consolidation between the market players, which is reflected in the duration and pricing agreements. If Comptel does not manage to adapt its operations and address the changes taking place in its competitive environment, the market development may greatly impair the company's business and operating results.
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 situation is unstable. Deterioration of the situation in these areas may hinder Comptel's business and undermine its profitability.
Comptel's business consists of delivering large productised IT systems, and the value of a single project may be several million euros. Therefore, the financial loss or credit risk associated with a single project or an individual customer may be significant. There are also risks, associated to the deliveries, that projects are not completed
timely or in agreed time schedule, quality and cost risk. To projects is also associated liquidate damage risk. Furthermore, some of Comptel's customers operate in countries where the political or financial climate can be unstable which in part may increase credit risk.
Comptel operates globally and is exposed to risks arising from currency fluctuations. The exchange rate changes between the Euro, which is the company's reporting currency, and the US Dollar, UK Pound Sterling, Indian Rupee and Malaysian Ringgit affect the company's net sales, expenses and net profit.
The application process where Comptel seeks to avoid double taxation is still pending with the Ministry of Finance in Finland. However, the legal process between the states is very slow and the results are difficult to foresee. The interpretation of tax treaties may result in different views between the countries in question. This could mean that the double taxation will persist. Comptel has also applications for return of withholding taxes in other countries but they are subject to local legal processes, which take time to get completed
The company's financial risks are described more in detail in the note 27 of the consolidated financial statements.
EVENTS AFTER THE REPORTING PERIOD
There were no significant events after the reporting period.
CHANGES IN REPORTING
The company will be changing its segment reporting from 2016 onwards. The new segments will be Business Units: Intelligent Data and Service Orchestration. Comparable numbers for 2015 will be published in March 2016.
OUTLOOK
Comptel expects the 2016 net sales to continue to grow and operating profit to be in the range of $8 - 14\%$ of revenue.
12 | Comptel Annual Report 2015
Board of Directors' Report
Characteristically a significant part of Comptel's operating profit and net sales is generated in the second half of the year.
BOARD OF DIRECTORS' PROPOSAL FOR THE DISPOSAL OF PROFITS
The Group parent company's distributable equity on 31 December 2015 was EUR 7,692,598 (6,740,529).
The Board of Directors proposes to the Annual General Meeting that dividend of 0.03 EUR per share will be paid for 2015.
Helsinki, 17 February 2016
Comptel Corporation
Board of Directors
13 | Comptel Annual Report 2015
Financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR 1,000 | NOTES | 1 JAN - 31 DEC 2015 | 1 JAN - 31 DEC 2014 |
|---|---|---|---|
| Net sales | 2 | 97,728 | 85,714 |
| Other operating income | 5 | 63 | 282 |
| Materials and services | 6 | -5,546 | -3,905 |
| Employee benefits | 7 | -46,764 | -41,294 |
| Depreciation, amortisation and impairment charges | 8 | -6,756 | -6,263 |
| Other operating expenses | 9 | -30,251 | -26,225 |
| -89,317 | -77,686 | ||
| Operating profit/loss | 8,474 | 8,311 | |
| Financial income | 11 | 1,392 | 1,478 |
| Financial expenses | 11 | -2,541 | -2,398 |
| Share of result of associated companies | 287 | 45 | |
| Profit/loss before income taxes | 7,612 | 7,436 | |
| Income taxes | 12 | -3,085 | -1,975 |
| Profit/loss for the period | 4,527 | 5,461 | |
| EUR 1,000 | NOTES | 1 JAN - 31 DEC 2015 | 1 JAN - 31 DEC 2014 |
| --- | --- | --- | --- |
| Other comprehensive income | |||
| Other comprehensive income to be reclassified to profit or loss in subsequent periods | |||
| Cash flow hedges | 14 | -227 | |
| Translation differences | 189 | 522 | |
| Income tax relating to components of other comprehensive income | 12 | -3 | 45 |
| Total comprehensive income for the period | 4,728 | 5,802 | |
| - | - | ||
| Profit/loss attributable to: | |||
| Equity holders of the parent company | 4,527 | 5,461 | |
| Non-controlling interest | - | - | |
| Total comprehensive income attributable to: | |||
| Equity holders of the parent company | 4,728 | 5,802 | |
| Non-controlling interest | - | - | |
| Shareholders of the parent company | 13 | ||
| Earnings per share, EUR | 0.04 | 0.05 | |
| Earnings per share, diluted, EUR | 0.04 | 0.05 |
14 | Comptel Annual Report 2015
Financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR 1,000 | NOTES | 31 DEC 2015 | 31 DEC 2014 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 15 | 2,646 | 2,646 |
| Other intangible assets | 15 | 12,837 | 13,435 |
| Tangible assets | 14 | 1,152 | 1,595 |
| Investments in associates | 16 | 960 | 673 |
| Available-for-sale financial assets | 87 | 87 | |
| Deferred tax assets | 17 | 7,685 | 5,880 |
| Other non-current receivables | 646 | 613 | |
| 26,013 | 24,929 | ||
| Current assets | |||
| Trade and other receivables | 18 | 56,930 | 43,043 |
| Current tax assets | 18 | 403 | 315 |
| Cash and cash equivalents | 19 | 3,030 | 9,352 |
| 60,363 | 52,710 | ||
| TOTAL ASSETS | 86,376 | 77,639 | |
| EUR 1,000 | NOTES | 31 DEC 2015 | 31 DEC 2014 |
| --- | --- | --- | --- |
| EQUITY AND LIABILITIES | |||
| Equity attributable to equity holders of the parent company | |||
| Share capital | 20 | 2,141 | 2,141 |
| Fund of invested non-restricted equity | 20 | 1,698 | 401 |
| Fair value reserve | 20 | -170 | -182 |
| Translation difference | 20 | -510 | -699 |
| Retained earnings | 34,165 | 31,685 | |
| 37,324 | 33,346 | ||
| Total equity | 37,324 | 33,346 | |
| Non-current liabilities | |||
| Deferred tax liabilities | 17 | 2,572 | 2,669 |
| Non-current liabilities financial liabilities | 24 | 92 | 1,257 |
| 2,664 | 3,926 | ||
| Current liabilities | |||
| Provisions | |||
| Current financial liabilities | 23 | 1,090 | 1,325 |
| Trade and other current liabilities | 24 | 7,075 | 6,305 |
| Current tax liabilities | 25 | 37,816 | 32,713 |
| 407 | 24 | ||
| 46,388 | 40,367 | ||
| Total liabilities | 49,052 | 44,293 | |
| TOTAL EQUITY AND LIABILITIES | 86,376 | 77,639 |
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CONSOLIDATED STATEMENT OF CASH FLOWS
| EUR 1,000 | NOTES | 31 DEC 2015 | 31 DEC 2014 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit/loss for the period | 4,527 | 5,461 | |
| Adjustments: | |||
| Non-cash transactions or items that are not part of cash flows from operating activities | 28 | 7,834 | 6,095 |
| Interest and other financial expenses | 273 | 620 | |
| Interest income | -88 | -16 | |
| Income taxes | 3,069 | 1,996 | |
| Change in working capital: | |||
| Change in trade and other receivables | -14,240 | -6,573 | |
| Change in trade and other current liabilities | 5,031 | 6,744 | |
| Change in provisions | -277 | -262 | |
| Interest paid | -273 | -295 | |
| Interest received | 12 | 40 | |
| Income taxes paid and tax returns received | -5,245 | -3,789 | |
| Net cash from operating activities | 623 | 10,021 | |
| Cash flows from investing activities | |||
| Sale of business operations | - | 300 | |
| Investments in tangible assets | -456 | -734 | |
| Investments in intangible assets | -102 | - | |
| Investments in development projects | -5,176 | -4,720 | |
| Proceeds from sale of tangible and intangible assets | 7 | 39 | |
| Change in other non-current receivables | -3 | -82 | |
| Net cash used in investing activities | -5,730 | -5,199 | |
| EUR 1,000 | NOTES | 31 DEC 2015 | 31 DEC 2014 |
| --- | --- | --- | --- |
| Cash flows from financing activities | |||
| Dividends paid | -2,139 | -1,073 | |
| Acquisition of own shares | - | -312 | |
| Proceeds from new shares | 497 | - | |
| Proceeds from share option | 800 | - | |
| Proceeds from borrowings | 27,935 | 8,500 | |
| Repayment of borrowings | -28,063 | -9,544 | |
| Lease payments | -243 | -180 | |
| Net cash used in financing activities | -1,213 | -2,609 | |
| Net change in cash and cash equivalents | -6,319 | 2,213 | |
| Cash and cash equivalents at the beginning of the period | 9,352 | 6,542 | |
| Cash and cash equivalents at the end of the period | 3,030 | 9,352 | |
| Change | -6,322 | 2,810 | |
| Effects of changes in foreign exchange rates | -2 | 596 |
16 | Comptel Annual Report 2015
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY
| EUR 1,000 | SHARE CAPITAL | OTHER RESERVES | TRANSLATION DIFFERENCES | FAIR VALUE RESERVE | RETAINED EARNINGS | TOTAL |
|---|---|---|---|---|---|---|
| Equity at 31 Dec 2013 | 2,141 | 401 | -1,219 | 0 | 27,600 | 28,924 |
| Acquisition of Corporation's own shares | -311 | -311 | ||||
| Dividends paid | -1,073 | -1,073 | ||||
| Share-based compensation | 263 | 263 | ||||
| Prior year corrections *) | -256 | -256 | ||||
| Total comprehensive income for the period | 521 | -182 | 5,461 | 5,800 | ||
| Equity at 31 Dec 2014 | 2,141 | 401 | -698 | -182 | 31,684 | 33,346 |
| Shares issued | 497 | 497 | ||||
| Dividends paid | -2,139 | -2,139 | ||||
| Share-based compensation | 800 | 428 | 1,228 | |||
| Dissolution of subsidiaries | 7 | 7 | ||||
| Prior year corrections *) | -342 | -342 | ||||
| Total comprehensive income for the period | 188 | 12 | 4,527 | 4,727 | ||
| Equity at 31 Dec 2015 | 2,141 | 1,698 | -510 | -170 | 34,165 | 37,324 |
*) Prior year expense adjustments were posted into retained earnings during the fiscal year.
17 | Comptel Annual Report 2015
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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 telecom software and services in convergent mediation and charging, predictive analytics and service fulfillment. 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.
On 17th February 2016, the Board of Directors of Comptel Corporation has authorised the publication of the consolidated financial statements of Comptel Corporation for the year 2014. According to the Finnish Companies Act, the Annual General Meeting can confirm or reject the consolidated financial statements after the publication. The Annual General Meeting may decide to change the financial statements.
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 2014 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 2015, the Group adopted the following new and amended standards and interpretations endorsed by the EU and that are applicable to Comptel:
Amendment to IAS 19. Employee Benefits. The standard outlines the accounting and disclosure requirements for the employee benefits.
Annual Improvements to IFSRs 2010-2012 and Annual Improvements to IFSRs 2011-2013.
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.
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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.
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 when Comptel is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
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 revalued.
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.
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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 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
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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.
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.
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
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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. The calculation for pension obligations is carried out by qualified actuaries. The amount of the obligation is based on the projected unit credit method.
The revised standard includes several amendments to harmonize the recognition of defined benefit pension plans and to improve comparability. In addition, the amendments to presentation will improve the comparability of financial statements and provide a clearer view of the financial commitments related to defined benefit plans.
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.
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.
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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, paid withholding taxes, which Comptel estimates to be able to deduct from the future income taxes 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.
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
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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.
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
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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.
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.
From 1 October 2014 onwards Comptel has applied hedge accounting in accordance with IAS 39.
Comptel formally designates and documents the hedge relationship as well as the Group's risk management objective and strategy
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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. The changes in the fair values of the derivatives hedging trade receivables are booked against sales revenues.
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. 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.
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 uncertain
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 16. 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
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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 4. Revenue recognition using percentage of completion method.
TAXES
Management needs to assess the treatment of withholding taxes as well as the possibility to utilise deferred tax assets. 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.
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:
IFRS 9 Financial Instruments. Standard will be issued in three phases, it will replace the existing IAS 39 Financial instruments: Recognition and Measurement:
The amendments resulting from the first phase address the classification, measurement and recognition of financial assets and financial liabilities. Different ways of measurement for financial assets have been retained, but simplified. Based on measurement, financial assets are classified into two main groups: financial assets at amortised cost and financial assets at fair value. Classification depends on a company's business model and the characteristics of contractual cash flows. For financial liabilities, the standard retains most of the IAS 39 requirements. Comptel Group is yet to assess the full impact of the amendments. The standard has not been endorsed for use in the EU yet.
IFRS 10, IFRS 12 and IAS 28 Investment entities. The new standard is not expected to have an impact on Comptel's consolidated financial statements.
IFRS 11 Joint Arrangements. The amendment to the standard requires that for the acquisition of an interest in a joint operation, in which the activity constitutes a business, the principles for business combinations accounting are applied. The amendment is estimated not to have significant effects on the consolidated financial statements.
IFRS 14 Regulatory Deferral Accounts. The standard allows rate-regulated entities to continue reporting regulatory deferral account balances in connection with the first-time adoption of IFRS. The standard is not estimated to have an effect on the Group's financial statements.
IFRS 15 Revenue from Contracts with customers. The standard includes a five-step model for revenue recognition. The recognition model includes clearly more detailed instructions than the currently valid standards. Comptel is evaluating the impact of the standard and will implement it according to the schedule.
IFRS 16 Leases. The standard specifies how the lease agreements will be recognized, measured, presented and disclosed. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term
Comptel Annual Report 2015
Financial statements
is 12 months or less or the underlying asset has a low value. The standard is estimated to have an impact on Comptel's consolidated financial statements.
IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortization. The amendment rebuts the revenue-based method of depreciating tangible assets and allows, to a limited extent, the application of revenue-based method of depreciating for intangible assets. The amendments are not estimated to have an impact on Comptel's consolidated financial statements.
IAS 16 and IAS 41 Agriculture. IAS 16 to be applied to plants meeting the criteria instead of IAS 41 Agriculture. The amendments will not have an impact on Comptel's consolidated financial statements.
IAS 1 Disclosure Initiative. The amendment encourages entities to assess the notes disclosed and their classification. The amendment is not estimated to have an effect on Comptel's consolidated statements.
Annual Improvements to IFSRs 2010-2012 and Annual Improvements to IFSRs 2011-2013 and Annual Improvements to IFSRs 2012-2014. Minor and less urgent amendments to the standards are collected and implemented once a year. The effects of the amendments vary by standard, but the amendments are not estimated to have a significant effect on Comptel's consolidated statements.
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Financial statements
2. SEGMENT REPORTING
Comptel Group has five reportable segments which are based on geographical areas. Comptel operates globally in all geographical market areas. 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.
| 2015, EUR 1,000 | EUROPE | ASIA-PACIFIC | MIDDLE EAST AND AFRICA | AMERICAS | SEGMENTS TOTAL |
|---|---|---|---|---|---|
| Net sales | 40,096 | 29,607 | 16,794 | 11,231 | 97,728 |
| Segment share of operating result | 27,515 | 15,483 | 5,600 | 5,631 | 54,229 |
| Depreciation and amortisation | 13 | 40 | 9 | 31 | 93 |
| Trade receivables | 16,127 | 10,741 | 7,982 | 5,608 | 40,458 |
| 2014, EUR 1,000 | EUROPE | ASIA-PACIFIC | MIDDLE EAST AND AFRICA | AMERICAS | SEGMENTS TOTAL |
| --- | --- | --- | --- | --- | --- |
| Net sales | 35,358 | 24,752 | 16,814 | 8,790 | 85,714 |
| Segment share of operating result | 19,538 | 14,526 | 7,272 | 3,998 | 45,334 |
| Depreciation and amortisation | 18 | 119 | 2 | 43 | 182 |
| Trade receivables | 11,503 | 4,130 | 7,536 | 6,476 | 29,645 |
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RECONCILIATIONS
RESULT
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Segment share of operating result | 54,229 | 45,334 |
| Unallocated expenses | -45,755 | -37,023 |
| Financial income and expenses | -1,149 | -920 |
| Share of result of associated companies | 287 | 45 |
| Group profit/loss before income taxes | 7,612 | 7,436 |
DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Segment depreciation and amortisation | 93 | 182 |
| Unallocated depreciation, amortisation and impairment charges | 6,663 | 6,081 |
| Total depreciation, amortisation and impairment charges | 6,756 | 6,263 |
ASSETS
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Segment assets | 40,458 | 29,645 |
| Unallocated assets | 44,272 | 47,993 |
| Total assets | 84,730 | 77,638 |
INFORMATION ABOUT PRODUCTS AND SERVICES
REVENUES FROM EXTERNAL CUSTOMERS
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Project & License business | 63,289 | 52,115 |
| Recurring business | 34,439 | 33,599 |
| Total | 97,728 | 85,714 |
GEOGRAPHICAL INFORMATION
REVENUES FROM EXTERNAL CUSTOMERS
The geographical split of net sales is based on the customer domicile.
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Germany | 12,433 | 7,907 |
| India | 9,280 | 7,696 |
| Saudi Arabia | 7,687 | 6,572 |
| Australia | 7,337 | 7,358 |
| Argentina | 5,187 | 4,010 |
| Great Britain | 3,305 | 1,691 |
| Other countries | 52,499 | 50,480 |
| Total | 97,728 | 85,714 |
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 | 2015 | 2014 |
|---|---|---|
| Finland | 13,401 | 13,950 |
| Other countries | 1,274 | 1,691 |
| Investments in associates | 960 | 673 |
| Unallocated assets | 2,693 | 2,735 |
| Total | 18,328 | 19,049 |
INFORMATION ABOUT MAJOR CUSTOMERS
In 2015 and 2014 revenues from a single customer did not exceed 10% of the total Comptel group net sales.
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3. BUSINESS COMBINATIONS
No new business combinations were acquired during the year 2015 or 2014.
4. REVENUE RECOGNITION USING PERCENTAGE OF COMPLETION METHOD
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Net sales recognised as revenue according to percentage of completion | 22,193 | 16,401 |
| Amount recognised as revenue during the financial year and previous years for long-term projects in progress | 13,336 | 12,042 |
| Total costs of incomplete long-term projects | 6,843 | 8,332 |
| Backlog of orders of long-term projects according to percentage of completion | 19,696 | 14,053 |
| Prepayments and accrued income recognised on the basis of percentage of completion | 2,845 | 2,821 |
| Deferred income and accruals recognised on the basis of percentage of completion | 3,270 | 4,409 |
5. OTHER OPERATING INCOME
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Gains on disposal of tangible assets | 3 | 2 |
| Sale of business operations | - | 300 |
| Other income items | 60 | -20 |
| Total | 63 | 282 |
6. MATERIALS AND SERVICES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Purchases | -87 | 82 |
| External services | 5,633 | 3,823 |
| Total | 5,546 | 3,905 |
7. EMPLOYEE BENEFITS
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Wages and salaries | 38,373 | 34,623 |
| Pension expenses - defined contribution plans | 4,364 | 3,690 |
| Pension expenses - defined benefit plans | 328 | 188 |
| Share options granted | 322 | 122 |
| Expenses related to share-based incentive program | 647 | 410 |
| Other social security costs | 2,730 | 2,260 |
| Total | 46,764 | 41,293 |
| THE AVERAGE NUMBER OF EMPLOYEES IN THE GROUP DURING THE FINANCIAL YEAR | 2015 | 2014 |
| --- | --- | --- |
| Europe | 361 | 348 |
| Asia-Pacific | 298 | 257 |
| Middle East and Africa | 57 | 54 |
| Americas | 7 | 6 |
| Total | 723 | 665 |
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An additional contribution pension plan has been agreed on for the President and CEO of the parent company. The retirement age is based on the Finnish Statutory Employment Pension Scheme (TyEL). CEO's pension costs were totally 209,310.00 euros in 2015 (123,574.00 euros in 2014), of which the additional pension plan's portion was 85,595.00 euros (56,859.00 euros in 2014).
Information on the remuneration of the Group management is presented in note 31. Related party transactions.
Information on the options granted and on the management's share in the share-based incentive plan is presented in note 21. Share-based payments.
8. DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Depreciation and amortisation by asset type | ||
| Intangible assets | ||
| Patents and trademarks | 77 | 77 |
| Capitalised development costs | 5,520 | 4,993 |
| Other intangible assets | 405 | 456 |
| Total | 6,002 | 5,526 |
| Tangible assets | ||
| Machinery and equipment | 754 | 737 |
| Total | 754 | 737 |
| Total depreciation, amortisation and impairment charges | 6,756 | 6,263 |
9. OTHER OPERATING EXPENSES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Lease payments | 3,035 | 3,435 |
| Travel expenses | 6,814 | 5,285 |
| Marketing expenses | 2,151 | 1,163 |
| Other operating expenses | 18,251 | 16,342 |
| Total | 30,251 | 26,225 |
THE AUDITORS' FEES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Ernst & Young | ||
| Audit | 282 | 189 |
| Tax consultation | 81 | 55 |
| Other services | 21 | 12 |
| Total | 384 | 256 |
Audit fees include the fees of the statutory auditors of each Group company.
10. RESEARCH AND DEVELOPMENT COSTS
The research and development costs recognised as expenses in the statement of comprehensive income amounted to EUR 12,752 thousand in 2015 (EUR 12,071 thousand in 2014).
The capitalised development expenditure totalled EUR 5,176 thousand (EUR 4,720 thousand in 2014). The amortisation of the capitalised development costs amounted to EUR 5,520 thousand (EUR 4,923 thousand in 2014).
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11. FINANCIAL INCOME AND EXPENSES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Interest income from cash and cash equivalents | 8 | 4 |
| Interest income from other receivables | 80 | 36 |
| Financial assets/liabilities measured at fair value through profit or loss: | ||
| Forward exchange contracts not in hedge accounting | 1,305 | - |
| Foreign exchange gains from other receivables and other liabilities | 142 | 1,438 |
| Interest expenses from financial liabilities measured at amortised cost | -189 | -125 |
| Interest expenses from other liabilities | -84 | -18 |
| Forward exchange contracts | - | -356 |
| Foreign exchange losses from other receivables and other liabilities | -2,410 | -1,763 |
| Other financial expenses | - | -136 |
| Total | -1,148 | -920 |
STATEMENT OF COMPREHENSIVE INCOME ITEMS INCLUDE FOREIGN EXCHANGE DIFFERENCES AS FOLLOWS:
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Net sales | ||
| Change in fair value of forward exchange contracts | -584 | 46 |
| Foreign exchange differences, net | 179 | 126 |
| Other operating expenses | ||
| Change in fair value of forward exchange contracts | - | -17 |
| Foreign exchange differences, net | -106 | -111 |
| Financial income | ||
| Change in fair value of forward exchange contracts | -25 | - |
| Foreign exchange profits | 1,330 | 1,463 |
| Financial expenses | ||
| Change in fair value of forward exchange contracts | -1,099 | -1,150 |
| Foreign exchange losses | -1,311 | -1,041 |
| Total | -1,616 | -684 |
Comptel is applying hedge accounting in accordance with IAS 39 effect from 1.10.2014.
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12. INCOME TAXES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Current tax expense | 1,199 | 775 |
| Adjustments for previous years' taxes | 161 | 84 |
| Deferred taxes | -1,829 | -1,793 |
| Withholding taxes | 3,510 | 2,909 |
| Other direct taxes | 45 | - |
| Total | 3,086 | 1,975 |
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 3,510 thousand in 2014. The total withholding taxes expensed between 2004 and 2015 amount to EUR 12,179 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 application process to prevent Comptel's double taxation is still pending with the Ministry of Finance in Finland. However, the process between the states is very slow and the timing of a change is hard to forecast. The interpretation of tax treaties may result in different views between the countries in questions. This could mean that the double taxation will prevail.
There are confirmed losses in taxation for the group company Xtract Oy, totally 13,851 thousand euros (11,404 thousand euros in 2014). Deferred taxes from the losses were not booked, because of the uncertainty of the possibilities to utilize the losses.
INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME
| 2015 EUR 1,000 | BEFORE TAX | TAX EXPENCE (-)/ BENEFIT (+) | NET OF TAX |
|---|---|---|---|
| Cash flow hedges | 14 | -3 | 11 |
| Translation differences | 189 | - | 189 |
| Total | 203 | -3 | 200 |
| 2014 EUR 1,000 | BEFORE TAX | TAX EXPENCE (-)/ BENEFIT (+) | NET OF TAX |
| Cash flow hedges | -227 | 45 | -182 |
| Translation differences | 522 | - | 522 |
| Total | 295 | 45 | 340 |
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 20%:
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Profit before taxes | 7,612 | 7,436 |
| Income tax calculated using the domestic corporation tax rate | 1,522 | 1,487 |
| Effect of tax rates in foreign jurisdictions | 370 | -71 |
| Non-deductible expenses | - | 30 |
| R&D additional tax credit | - | -80 |
| Non-deductible depreciations, amortisations and impairment charges | 114 | 51 |
| Withholding taxes, net | 926 | 593 |
| Current year losses for which no deferred tax assets was recognised | - | -34 |
| Taxes for previous years | 161 | 34 |
| Other items | -8 | -35 |
| Income taxes in the consolidated statement of comprehensive income | 3,085 | 1,975 |
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13. 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.
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 2014 and 2014, the options did not have a material dilutive effect on earnings per share.
| 2015 | 2014 | |
|---|---|---|
| Number of outstanding shares during the financial period, weighted average | 107 370 551 | 107 284 900 |
| Options | - | 1 400 000 |
| Weighted average number of shares for calculation of diluted earnings per share | 109 640 245 | 107 625 526 |
| Profit/loss for the year attributable to equity holders of the parent (EUR 1,000) | 4,527 | 5,461 |
| Number of outstanding shares during the financial period, weighted average | 107 370 551 | 107 284 900 |
| Basic earnings per share (euro) | 0.04 | 0.05 |
| Profit/loss for the year attributable to equity holders of the parent (EUR 1,000) | 4,527 | 5,461 |
| Weighted average number of shares for calculation of diluted earnings per share | 109 640 245 | 107 625 526 |
| Diluted earnings per share (euro) | 0.04 | 0.05 |
14. TANGIBLE ASSETS
| EUR 1,000 | MACHINERY AND EQUIPMENT |
|---|---|
| Cost at 1 Jan 2015 | 9,218 |
| Additions | 456 |
| Disposals | -150 |
| Exchange difference | -250 |
| Cost at 31 Dec 2015 | 9,274 |
| Accumulated depreciation at 1 Jan 2015 | -7,623 |
| Depreciation | -847 |
| Disposals | 146 |
| Exchange difference | 202 |
| Accumulated depreciation at 31 Dec 2015 | -8,122 |
| Book value at 1 Jan 2015 | 1,595 |
| Book value at 31 Dec 2015 | 1,152 |
The net book value of the tangible assets leased finance lease is EUR 92 thousands.
| EUR 1,000 | MACHINERY AND EQUIPMENT |
|---|---|
| Cost at 1 Jan 2014 | 9,685 |
| Additions | 739 |
| Disposals | -1,456 |
| Exchange difference | 250 |
| Cost at 31 Dec 2014 | 9,218 |
| Accumulated depreciation at 1 Jan 2014 | -8,056 |
| Depreciation | -834 |
| Disposals | 1,446 |
| Exchange difference | -179 |
| Accumulated depreciation at 31 Dec 2014 | -7,623 |
| Book value at 1 Jan 2014 | 1,629 |
| Book value at 31 Dec 2014 | 1,595 |
The net book value of the tangible assets under finance lease is EUR 179 thousands.
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15. INTANGIBLE ASSETS
| EUR 1,000 | GOODWILL | PATENTS AND TRADEMARKS | DEVELOPMENT COSTS | OTHER INTANGIBLE ASSETS | TOTAL |
|---|---|---|---|---|---|
| Cost at 1 Jan 2015 | 22,198 | 1,227 | 43,479 | 15,531 | 82,435 |
| Additions | 102 | 5,176 | 5,278 | ||
| Disposals | 0 | ||||
| Exchange difference | 46 | 46 | |||
| Cost at 31 Dec 2015 | 22,198 | 1,329 | 48,655 | 15,577 | 87,759 |
| Accumulated amortisation at 1 Jan 2015 | -19,552 | -649 | -31,092 | -15,061 | -66,354 |
| Amortisation | -78 | -5,520 | -311 | -5 909 | |
| Exchange difference | -13 | -13 | |||
| Accumulated amortisation at 31 Dec 2015 | -19,552 | -727 | -36,612 | -15,385 | -72,276 |
| Book value at 1 Jan 2015 | 2,646 | 577 | 12,387 | 470 | 16,080 |
| Book value at 31 Dec 2015 | 2,646 | 602 | 12,043 | 192 | 15,483 |
| EUR 1,000 | GOODWILL | PATENTS AND TRADEMARKS | DEVELOPMENT COSTS | OTHER INTANGIBLE ASSETS | TOTAL |
| --- | --- | --- | --- | --- | --- |
| Cost at 1 Jan 2014 | 21,559 | 1,227 | 38,758 | 15,514 | 77,058 |
| Additions | 4,721 | 4,721 | |||
| Disposals | -32 | -32 | |||
| Exchange difference | 639 | 49 | 688 | ||
| Cost at 31 Dec 2014 | 22,198 | 1,227 | 43,479 | 15,531 | 82,435 |
| Accumulated amortisation at 1 Jan 2014 | -18,913 | -572 | -26,099 | -14,654 | -60,239 |
| Amortisation | -77 | -4,993 | -359 | -5,429 | |
| Exchange difference | -639 | -48 | -687 | ||
| Accumulated amortisation at 31 Dec 2014 | -19,552 | -649 | -31,092 | -15,061 | -66,354 |
| Book value at 1 Jan 2014 | 2,646 | 654 | 12,659 | 860 | 16,819 |
| Book value at 31 Dec 2014 | 2,646 | 577 | 12,387 | 470 | 16,080 |
37 | Comptel Annual Report 2015
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ALLOCATION OF GOODWILL
Goodwill has been allocated to two different product business units which form separate cash generating units. These product business units do not relate directly to geographic segments reported by Comptel. Future cash flows can be generated from all geographical market areas. Consequently, goodwill cannot be allocated to a specific geographical segment. Goodwill has been allocated to two cash generating units which are Inventory unit and Fastermind unit. The latter was formed as a result of the Xtract acquisition in 2012. EUR 653 thousand (EUR 653 thousand in 2014) of goodwill has been allocated to Inventory unit and EUR 1,993 thousand (EUR 1,993 thousand in 2014) to Fastermind unit.
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 17.2% (17.3% in 2014).
The cash flows after the five-year period for the Inventory unit have been forecasted by estimating net sales to decrease with rate of -20%. Net sales is mainly generated from existing support and maintenance contracts as well as change requests to the existing systems. Based on these facts, management view is that there is a reasonable justification to use lower growth projection than the long-term economic growth estimate. Another key factor impacting the cash flows is operating expenses. Based on the impairment tests there is no need to recognise an impairment loss.
The cash flows after the five-year period for the Fastermind unit have been forecasted by estimating the future growth rate of net sales to be 1%. The global growth of communications services providers' net sales and investments was approximately 2-3% in 2015. In spite of somewhat weak economic outlook the growth rate was higher than the GDP growth in general. Consequently, using a 1% growth rate is justified. Analytics software is one of the fastest growing sectors in the telecommunications software space. Net sales growth is the key factor impacting the valuation of the unit due to the significant growth expectation set for the unit. 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 in the Inventory unit would require the long-term EBITDA level to be more than 134% lower than the management's estimate at the end of reporting period or that the discount rate was over 105%.
The realisation of an impairment loss in the Intelligent Customer Interaction unit would require the long-term EBITDA level to be more than 22% lower than the management's estimate at the end of reporting period or that the discount rate was over 102%.
Comptel Annual Report 2015
Financial statements
16. INVESTMENTS IN ASSOCIATES
Group has an associated company in Limerick, Ireland. Tango Telecom Ltd employed an average of 69 employees in the year 2015 (65 in 2014).
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Carrying amount at 1 Jan | 706 | 661 |
| Share of results | 254 | 45 |
| Carrying amount at 31 Dec | 960 | 706 |
The impairment in the investment value was realised during the year 2013, which brought up the value of the investment to correspond the corporate portion of the equity. The accounts of the associate do not include goodwill at 31.12.2015.
Summary financial information for the Group's investments in the associate - assets, liabilities, net sales and profit / loss (EUR 1,000):
| 2015 | ASSETS | LIABILITIES | NET SALES | PROFIT / LOSS | OWNERSHIP % |
|---|---|---|---|---|---|
| Tango Telecom Ltd. Group | 6,810 | 2,068 | 9,189 | 1,428 | 20 |
| 2014 | ASSETS | LIABILITIES | NET SALES | PROFIT / LOSS | OWNERSHIP % |
| --- | --- | --- | --- | --- | --- |
| Tango Telecom Ltd. Group | 5,612 | 2,247 | 7,172 | 223 | 20 |
17. DEFERRED TAX ASSETS AND LIABILITIES
CHANGES IN DEFERRED TAX ASSETS AND LIABILITIES DURING 2015:
| EUR 1,000 | 31 DEC 2014 | RECOGNISED IN PROFIT OR LOSS | 31 DEC 2015 |
|---|---|---|---|
| Deferred tax assets | |||
| Reversal of depreciation and amortisation in taxation | 162 | 9 | 171 |
| Loss for the period | 301 | -301 | - |
| Withholding taxes | 5,235 | 1,624 | 6,859 |
| Share options | 86 | 33 | 119 |
| Bad Debt reserve | - | 267 | 267 |
| Other tax deductible temporary differences | 96 | 173 | 269 |
| Total | 5,880 | 1,805 | 7,685 |
| EUR 1,000 | 31 DEC 2014 | RECOGNISED IN PROFIT OR LOSS | 31 DEC 2015 |
| --- | --- | --- | --- |
| Deferred tax liabilities | |||
| Capitalisation of intangible assets | 2,491 | -84 | 2,407 |
| Capitalisation of and amortisation on technology in acquired business operations | 19 | -9 | 10 |
| Impact of goodwill amortisation in taxation | 131 | - | 131 |
| Cumulative depreciation difference | 20 | - | 20 |
| Other taxable temporary differences | 9 | -4 | 5 |
| Total | 2,669 | -97 | 2,572 |
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18. TRADE RECEIVABLES AND OTHER CURRENT RECEIVABLES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Trade receivables | 40,458 | 27,731 |
| Prepayments | 59 | 42 |
| Accruals from long-term projects | 6,968 | 8,554 |
| Other prepayments and accrued income | 3,121 | 2,407 |
| Other receivables | 6,726 | 4,624 |
| Total | 57,332 | 43,358 |
Comptel recognised EUR 83 thousand credit losses on trade receivables in 2015 (2014: no recognision). 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 services and user charges and rent accruals.
AGEING ANALYSIS OF TRADE RECEIVABLES
| EUR 1,000 | GROSS 2015 | IMPAIRED | NET 2015 |
|---|---|---|---|
| Not past due | 29,508 | 29,508 | |
| 1-30 days past due | 3,540 | 3,540 | |
| 31-90 days past due | 3,124 | 3,124 | |
| 91-180 days past due | 2,822 | 2,822 | |
| 181-360 days past due | 1,238 | 1,238 | |
| Over 360 days past due | 1,872 | -1,646 | 226 |
| Total | 42,104 | -1,646 | 40,458 |
| EUR 1,000 | GROSS 2014 | IMPAIRED | NET 2014 |
| --- | --- | --- | --- |
| Not past due | 20,773 | 20,773 | |
| 1-30 days past due | 1,926 | 1,926 | |
| 31-90 days past due | 1,011 | 1,011 | |
| 91-180 days past due | 3,158 | 3,158 | |
| 181-360 days past due | 581 | 581 | |
| Over 360 days past due | 1,466 | -1,184 | 282 |
| Total | 28,915 | -1,184 | 27,731 |
19. CASH AND CASH EQUIVALENTS
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Cash at bank and in hand | 3,030 | 9,352 |
| Total | 3,030 | 9,352 |
40 | Comptel Annual Report 2015
Financial statements
20. CAPITAL AND RESERVES
Comptel has one class of shares, articles of association do not limit the maximum number of shares. The shares do not carry a nominal value.
All shares issued are fully paid.
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 2014 | 107,260,051 | 2,141 | 401 | -383 | 2,159 |
| Transfer of treasury shares | 0 | 0 | |||
| Return of treasury shares | 196,480 | 66 | 66 | ||
| Emission of new share | 500,000 | -312 | -312 | ||
| At 31 Dec 2014 | 106,956,531 | 2,141 | 401 | -629 | 1,913 |
| Emission of new share | 346,232 | 494 | 494 | ||
| Transfer of treasury shares | 0 | 0 | |||
| Return of treasury shares | 974,139 | 497 | 428 | 925 | |
| At 31 Dec 2015 | 108,276,902 | 2,141 | 898 | 293 | 3,332 |
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.
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. Comptel
started to apply hedge accounting in accordance with IAS 39.
TREASURY SHARES
Treasury shares reserve includes the acquisition cost of treasury shares held by the Group. During the financial year 2015 the company allotted 281,282 shares to its employees based on the terms of the share-based incentive plan 2012 and 64,950 shares to members of the Board of Directors as part of their annual compensation (2014: 121,480 shares). At the end of the financial year the company held 118,507 treasury shares (464,739 treasury shares at 31 Dec 2014).
DIVIDENDS
The Board of Directors proposes to the Annual General Meeting that the Board would be authorised to decide a dividend pay-out for 2015. The maximum dividend payment would be EUR 0.03 per share and the authorisation would be effective until the date of the next Annual General Meeting.
Comptel Annual Report 2015
Financial statements
21. SHARE-BASED PAYMENTS
SHARE OPTIONS
The Group has had five 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.
| 2015 | 2009C | 2014A | 2014B | 2015A | 2015B |
|---|---|---|---|---|---|
| Grant date | 14.04.2011 | 13.02.2014 | 16.03.2015 | 09.09.2015 | 09.09.2015 |
| Subscription period | 1.11.13 -30.11.15 | 1.2.16 -31.1.18 | 1.2.17 -31.1.19 | 15.8.18 -15.9.19 | 15.8.19 -15.9.19 |
| Subscription value date | 14.04.2011 | 13.02.2014 | 16.03.2015 | 08.09.2015 | 08.09.2015 |
| Inputs to the value model: | |||||
| Share price at grant date | 0.54 | 0.55 | 0.97 | 1.15 | 1.15 |
| Excercise price | 0.51 | 0.51 | 0.91 | 0.92 | 0.92 |
| Expected volatility | - | 33 % | 35 % | 25 % | 25 % |
| Expected life of share options | - | 2.1 | 3.1 | 3.7 | 3.7 |
| Risk free interest | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Fair value of the share option at the grant date | 0.06 | 0.54 | 0.28 | 0.11 | 0.11 |
| Granted share options | 0 | 2,100,000 | 950,000 | 1,739,130 | 1,739,130 |
| 2014 | 2009B | 2009C | 2014A | ||
| --- | --- | --- | --- | ||
| Grant date | 26.05.2010 | 14.04.2011 | 13.02.2014 | ||
| Subscription period | 1.11.12 -30.11.14 | 1.11.13 -30.11.15 | 1.2.16 -31.1.18 | ||
| Subscription value date | 21.04.2010 | 14.04.2011 | 13.02.2014 | ||
| Inputs to the value model: | |||||
| Share price at grant date | 0.78 | 0.58 | 0.55 | ||
| Excercise price | 0.69 | 0.54 | 0.53 | ||
| Expected volatility | 39 % | 41 % | 33 % | ||
| Expected life of share options | - | 0.9 | 3.1 | ||
| Risk free interest | 0.09% | 0.24% | 0.60% | ||
| Fair value of the share option at the grant date | 0.02 | 0.06 | 0.54 | ||
| Granted share options | 0 | 975.000 | 2,120,000 |
Comptel Annual Report 2015
Financial statements
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 members of the Executive Board were not included in 2009 option program.
The Annual General Meeting of Shareholders has on 12 March 2014 decided on the issue of the share options to the Comptel Group key personnel as part of the incentive and commitment program. The total number of share options issued is 4,200,000. The share subscription period for options 2014A (2,200,000 options) is 1.2.2016 - 31.1.2018, the share subscription period for the options 2014B (1,000,000 options) is 1.2.2017 - 31.1.2019 and the share subscription period for the options 2014C (1,000,000 options) is 1.2.2018 - 31.1.2020.
Based on the authorisation given by the Annual General Meeting, the Board of Directors has on 9 September 2015 decided on the issue of the share options to the CEO of the company as part of the remuneration, incentive and commitment program. The total number of share options issued is 3,478,260. The share subscription period for options 2015A (1,739,130 options) is 15.8.2018 - 15.9.2019, the share subscription period for the options 2015B (1,739,130 options) is 15.8.2019 - 15.9.2019.
Changes in the number of the outstanding share options and weighted average exercise prices during the period were as follows:
| 2015 | 2009C | 2014A | 2014B | 2015A | 2015B |
|---|---|---|---|---|---|
| Outstanding at the beginning of the year | 974,000 | 2,120,000 | |||
| Granted during the year | 80,000 | 970,000 | 1,739,130 | 1,739,130 | |
| Exercised during the year | 973,139 | ||||
| Forfeited during the year | -100,000 | -20,000 | |||
| Expired during the year | 861 | ||||
| Outstanding at the end of the year | 2,100,000 | 950,000 | 1,739,130 | 1,739,130 | |
| Exercisable at the end of the year | |||||
| Weighted average exercise price (euro) | 0.51 | 0.51 | 0.91 | 0.92 | 0.92 |
| 2014 | 2009B | 2009C | 2012A | 2012B | 2014A |
| --- | --- | --- | --- | --- | --- |
| Outstanding at the beginning of the year | 1,125,000 | 975,000 | 1,523,824 | 1,523,824 | |
| Granted during the year | 2,140,000 | ||||
| Exercised during the year | |||||
| Forfeited during the year | 275,000 | 1,523,824 | 1,523,824 | 20,000 | |
| Expired during the year | 1,400,000 | ||||
| Outstanding at the end of the year | 974,000 | 2,120,000 | |||
| Exercisable at the end of the year | 974,000 | ||||
| Weighted average exercise price (euro) | 0.00 | 0.53 | 0.00 | 0.00 | 0.53 |
43 | Comptel Annual Report 2015
Financial statements
The number and average exercise prices of the share options outstanding at the end of the period:
| 2015 | 2014 | |||
|---|---|---|---|---|
| YEAR OF EXPIRATION | AVERAGE EXERCISE PRICE, EUR/SHARE | NUMBER OF OPTIONS | AVERAGE EXERCISE PRICE, EUR/SHARE | NUMBER OF OPTIONS |
| 2015 | 0.51 | 974,000 | ||
| 2018 | 0.51 | 2,120,000 | 0.53 | 974,000 |
| 2019 | 0.92 | 4,428,260 | 0.53 | 2,120,000 |
The expected volatility has been determined based on the historical volatility for a period equalling to the option vesting period.
In 2015 the expense recognised in respect of the option schemes amounted to EUR 304 thousand (2014: EUR 122 thousand).
SHARE-BASED INCENTIVE PLAN
In 2015, there is no expense for the share based incentive plan of the President and CEO (EUR 40 thousand in 2014, of which EUR 19 thousand was the portion paid in cash).
The Board of Directors of Comptel Corporation approved a new share-based incentive plan for the Group key personnel in February 2012.
The aim of the new plan is to combine the objectives of the shareholders and the target group of employees in order to increase the value of the company, commit the target group to the company and to offer them a competitive reward plan based on long-term shareholding in the company.
The Matching Share Plan includes two performance periods, both beginning on 2 May 2012. The performance periods will end on 2 May 2015 and on 2 May 2016. The pre-requisite for participation to the plan and the receipt of reward from the performance periods requires that a target person owns the company's shares or acquires them up to a number pre-determined by the Board of Directors. Furthermore, the potential reward from the plan is tied to the validity of the target person's employment or service or contractual relation.
Rewards from the Plan will be paid partly in the form of company's shares and partly in cash in 2015 and 2016.
The cost of the program is recognised under employee benefit expenses over the vesting period. In 2015 EUR 223 thousand was expensed of which EUR 164 thousand is the portion to be paid in cash (in 2014, EUR 360 thousand of which 288 thousand in cash).
The outstanding option schemes and share-based incentive programs are described in more detail in Section Shares and shareholders.
44 | Comptel Annual Report 2015
Financial statements
22. 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.
23. PROVISIONS
Movements in provisions during 2015:
| EUR 1,000 | PROVISION FOR WARRANTY | LEASE PROVISION | TOTAL |
|---|---|---|---|
| Balance at 1 Jan 2015 | 270 | 1,055 | 1,325 |
| Provisions made during the year | -161 | -74 | -235 |
| Provisions used during the year | - | - | - |
| Exchange difference | - | - | - |
| Balance at 31 Dec 2015 | 109 | 981 | 1,090 |
| EUR 1,000 | 2015 | 2014 | |
| --- | --- | --- | |
| Non-current provisions | - | - | |
| Current provisions | 1,090 | 1,325 | |
| Total | 1,090 | 1,325 |
PROVISION FOR WARRANTY
A provision for warranties is recognised when the underlying product including a warranty is sold. The provision is based on management estimates on warranty costs which will materialise.
This item includes the provisions made for unoccupied leased facilities.
24. FINANCIAL LIABILITIES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Non-current financial liabilities measured at amortised cost | ||
| Loans from financial institutions | 33 | 1,078 |
| Finance lease liabilities | 58 | 179 |
| Total | 91 | 1,257 |
| Current financial liabilities measured at amortised cost | ||
| Loans from financial institutions | 6,963 | 5,984 |
| Finance lease liabilities | 112 | 259 |
| Other interest-bearing liabilities | - | 62 |
| Total | 7,075 | 6,305 |
The fair values of liabilities are presented in note 27. Financial risk management.
Comptel had bank loans amounting to EUR 5,000 thousand at 31 December 2015 (EUR 7,000 thousand at 31 December 2014) and EUR 1,979 thousand of the overdraft limit (in 2014 there was no overdraft limit outstanding). Comptel has a credit facility consisting of EUR 20 million Revolving Credit Facility and EUR 5 million overdraft capacity. The facility is valid until 31 July 2018. Comptel's subsidiary has a loan in the amount of EUR 78 thousand from Finnvera with fixed amortisation schedule. The last instalment will be paid on 15 August 2017.
The interest rate of the Facility is floating and determined based on prevailing IBOR. The weighted average interest rate is 0.7 % (2014: 1.3 %). The interest of the loan from Finnvera is determined based on 6 months euribor. At 31 December 2015 the interest rate was 3.7 %.
45 | Comptel Annual Report 2015
Financial statements
MATURITY ANALYSIS OF FINANCE LEASE LIABILITIES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Finance lease liabilities - minimum lease payments | ||
| Less than one year | 126 | 270 |
| Between one and five years | 62 | 184 |
| Total | 188 | 454 |
| Finance lease liabilities - present value of minimum lease payments | ||
| Less than one year | 112 | 258 |
| Between one and five years | 57 | 179 |
| Total | 170 | 437 |
| Future financial charges | 7 | 16 |
25. TRADE AND OTHER CURRENT LIABILITIES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Trade payables | 2,116 | 1,094 |
| Advances received from long-term contracts | 3,270 | 4,409 |
| Accrued expenses and deferred income | 26,034 | 22,646 |
| Other liabilities | 6,802 | 4,564 |
| Total | 38,222 | 32,713 |
The accrued expenses and deferred income mainly comprise of accruals related to deferred revenue, accrued employee benefits and accrued operating expenses.
26. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Fair value hierarchy for financial instruments measured at fair value.
| EUR 1,000 | FAIR VALUE AT 31.12.2015 | ||
|---|---|---|---|
| LEVEL 1 | LEVEL 2 | LEVEL 3 | |
| Forward contracts measured at fair value through profit or loss | |||
| Liabilities | 138 | ||
| Forward contracts measured at fair value recognised in other comprehensive income | |||
| Liabilities | 214 | ||
| Financial assets available-for-sale | |||
| Other shares | 87 | ||
| EUR 1,000 | FAIR VALUE AT 31.12.2014 | ||
| --- | --- | --- | --- |
| LEVEL 1 | LEVEL 2 | LEVEL 3 | |
| Forward contracts measured at fair value through profit or loss | |||
| Assets | 25 | ||
| Liabilities | 847 | ||
| Forward contracts measured at fair value recognised in other comprehensive income | |||
| Liabilities | 227 | ||
| Financial assets available-for-sale | |||
| Other shares | 87 |
Comptel's derivative contracts at fair value through the profit or loss accounts and contracts under the hedge accounting are determined using quoted market price and valuation methods.
46 | Comptel Annual Report 2015
Financial statements
27. 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. Other currency instruments may be used based on a resolution of the Board of Directors.
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). An other significant currency is UK Pound Sterling (GBP).
Comptel hedges open foreign currency positions. The currency position is monitored on a 12-month rolling period twice a month. Comptel started to apply hedge accounting in accordance with IAS 39 from 1.10.2014. The changes in the fair value of the hedging instruments for the financial assets and liabilities are recognised through profit and loss accounts.
The hedging instruments are forward contracts entered into with banks. The hedging forward contract is 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.
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.
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 2015 totalled EUR 7,167 thousand (2013: EUR 7,562 thousand). Comptel had bank loans amounting to EUR 6,963 thousand at 31 December 2015 (EUR 7,000 thousand at 31 December 2014). Comptel has a loan facility, which consists of EUR 20 million revolving credit facility and EUR 5 million overdraft capacity on current bank account. The ending date for the facility is 31 July 2018. At 31 December 2015 the amount available under the Revolving Credit Facility was EUR 15 million. Comptel's subsidiary has a loan in the amount of EUR 78 thousand from Finnvera with fixed amortisation schedule. The last instalment will be paid on 15 August 2017.
The interest rate of the loan facility is floating and determined based on prevailing IBOR. The weighted average interest rate is 0.7%. The interest of the loan from Finnvera is determined based on 6 months euribor. At 31 December 2015 the interest rate was 3.7.
Corporate did not have interest rate swap contracts at the end of the Fiscal Year
Possible short-term investments in financial securities give 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 and cash and cash equivalents.
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
Comptel Annual Report 2015
Financial statements
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.
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. Comptel recognised credit losses in the statement of comprehensive income 83 thousand euros in the financial year 2015 (there were no credit losses in 2014). The ageing analysis of trade receivables is presented in note 18. 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 daily basis.
At 31 December 2015 the Group's cash and cash equivalents totalled EUR 3,030 thousand (EUR 9,352 thousand at 31 December 2014). At 31 December 2015 Comptel's interest-bearing liabilities totalled EUR 7,166 thousand (EUR 7,562 thousand in 2014). Under the Revolving Credit Facility in place until 2018 there is still EUR
15 million available for draw-down. The Facility contains a covenant whereby Group equity ratio must be at least 35%. At 31 December 2015 Comptel's equity ratio was 52.4% (2014: 52.4%). In addition, the arrangement contains a covenant, according to which the net debt to the Group's EBITDA must be equivalent or less than 2.75. At 31 December the the net debt to EBITDA was 0.27 (31 December 2014 -0.12). The covenants are reported every three months. Furthermore, Comptel has an option for TyEL (earnings-related pension) premium loan amounting to EUR 13,4 million.
Comptel Annual Report 2015
Financial statements
The following table sets forth maturity analysis based on contractual cash flows. Cash flow includes both loan repayments and interest payments.
| 2015, EUR 1,000 | CARRYING AMOUNT | CONTRACTUAL CASH FLOW | 1-6 MONTHS | 7-12 MONTHS | 1-2 YEARS | 3-5 YEARS |
|---|---|---|---|---|---|---|
| Non-derivative financial liabilities | ||||||
| Loans from financial institutions | 6,996 | 7,007 | 6,950 | 23 | 34 | - |
| Finance lease liabilities | 170 | 177 | 67 | 46 | 64 | - |
| Trade payables | 2,116 | 2,116 | 2,116 | - | - | - |
| Derivative financial liabilities | ||||||
| Forward exchange contracts under hedge accounting | ||||||
| Outflow | 138 | 138 | 135 | 3 | - | - |
| 2014, EUR 1,000 | CARRYING AMOUNT | CONTRACTUAL CASH FLOW | 1-6 MONTHS | 7-12 MONTHS | 1-2 YEARS | 3-5 YEARS |
| --- | --- | --- | --- | --- | --- | --- |
| Non-derivative financial liabilities | ||||||
| Loans from financial liabilities | 7,062 | 7,176 | 5,057 | 1,038 | 1,081 | - |
| Hire purchase liabilities | 63 | 63 | 32 | 31 | - | - |
| Finance lease liabilities | 437 | 454 | 135 | 135 | 102 | 82 |
| Trade payables | 1,094 | 1,094 | 1,094 | - | - | - |
| Derivative financial liabilities | ||||||
| Forward exchange contracts under hedge accounting | ||||||
| Inflow | -25 | -25 | -25 | - | - | - |
| Outflow | 1,074 | 1,074 | 978 | 95 | - | - |
| Interest swap - not in hedge accounting | ||||||
| Net cash flow | 19 | 19 | - | - | 19 | - |
49 | Comptel Annual Report 2015
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FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
| EUR 1,000 | BOOK VALUE 31.12.15 | FAIR VALUE 31.12.15 | BOOK VALUE 31.12.14 | FAIR VALUE 31.12.14 |
|---|---|---|---|---|
| Financial assets | ||||
| Financial assets at fair value through profit or loss | ||||
| Forward contracts (level 2) | - | - | 25 | 25 |
| Available-for-sale financial assets (level 3) | 87 | 87 | 87 | 87 |
| Non-current trade receivables | 1,872 | 1,872 | 1,466 | 1,466 |
| Current trade receivables | 40,232 | 40,232 | 27,449 | 27,449 |
| Other current receivables | 7,133 | 7,133 | 4,624 | 4,624 |
| Cash and cash equivalents | 3,030 | 3,030 | 9,352 | 9,352 |
| Financial liabilities | ||||
| Financial liabilities at fair value through profit or loss | ||||
| Forward contracts (level 2) | 138 | 138 | 847 | 847 |
| Trade payables and other liabilities | 38,020 | 38,020 | 32,713 | 32,713 |
| Non-current loans from financial institutions | 33 | 33 | 1,078 | 1,081 |
| Non-current finance lease liabilities | 58 | 58 | 179 | 179 |
| Current loans from financial institutions | 5,044 | 5,056 | 5,984 | 6,095 |
| Current bank overdraft facility | 1,918 | 1,918 | - | - |
| Current finance lease liabilities | 112 | 112 | 259 | 259 |
| Other current liabilities | - | - | 63 | 63 |
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. Comptel's profit distribution is typically 30 to 60 per cent of the net income for the previous financial year. The amount of dividends paid may vary according to the near-term economic outlook as well as Comptel's financial position.
Gearing in 2015 and 2014 was as follows:
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Interest-bearing liabilities | 7,167 | 7,562 |
| Cash and cash equivalents | -3,030 | -9,352 |
| Interest-bearing net liabilities | 4,137 | -1,790 |
| Total equity | 37,324 | 33,346 |
| Gearing | 11,1 % | -5.4 % |
Comptel Annual Report 2015
Financial statements
EXPOSURE TO CURRENCY RISK
| EUR 1,000 | 2015 | 2014 | ||
|---|---|---|---|---|
| USD | GBP | USD | GBP | |
| Loan receivables | 404 | - | 362 | - |
| Trade receivables | 10,259 | 1,709 | 10,066 | 90 |
| Cash and cash equivalents | 6 | 4 | 1,179 | 221 |
| Trade payables | -430 | -7,584 | -208 | -6,190 |
| Net statement of financial position exposure | 10,239 | -5,871 | 11,399 | -5,879 |
| Order backlog (12 months) | 20,887 | 4,680 | 21,938 | 1,460 |
| Hedging | ||||
| Forward contracts (12 months) | -26,207 | 6,142 | -12,527 | 5,398 |
| Total net exposure | 4,919 | 4,951 | 20,810 | 979 |
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:
| 2015 EUR 1,000 | EQUITY | RESULT |
|---|---|---|
| USD | -1 390/1 390 | -90/90 |
| GBP | -2 530/2 530 | -300/300 |
| 2014 EUR 1,000 | EQUITY | RESULT |
| --- | --- | --- |
| USD | -31/31 | -69/69 |
| GBP | -2 239/2 239 | -6/6 |
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. loans, trade receivables, cash and cash equivalents, trade payables and derivative instruments. This applies to companies operating in currency which is different from the currency subject to the sensitivity analysis.
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
The carrying amount of the loans is EUR 7,166 thousand and the fair value is EUR 7,184 thousand. For other 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.
Derivative instruments measured at fair value:
| 2015 EUR 1,000 | POSITIVE FAIR VALUE (CARRY-ING AMOUNT) | NEGATIVE FAIR VALUE (CARRY-ING AMOUNT) | NOMINAL VALUE OF UNDERLYING INSTRUMENT |
|---|---|---|---|
| Forward contracts - all | - | 351 | 39,046 |
| Forward contracts - under hedge accounting | - | 213 | - |
| 2014 EUR 1,000 | POSITIVE FAIR VALUE (CARRY-ING AMOUNT) | NEGATIVE FAIR VALUE (CARRY-ING AMOUNT) | NOMINAL VALUE OF UNDERLYING INSTRUMENT |
| --- | --- | --- | --- |
| Forward contracts - all | 25 | 1,074 | 17,203 |
| Forward contracts - under hedge accounting | - | 227 | - |
| Interest swap - not under hedge accounting | - | 19 | - |
51 | Comptel Annual Report 2015
Financial statements
28. 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 | 2015 | 2014 |
|---|---|---|
| Other operating income | -62 | -300 |
| Depreciation, amortisation and impairment charges | 6,756 | 6,263 |
| Exchange differences | 994 | 325 |
| Share of result of associates | -287 | -45 |
| Share-based payments | 428 | 263 |
| Other adjustments | 5 | -411 |
| Total | 7,834 | 6,095 |
29. OPERATING LEASES
Minimum lease payments on non-cancellable office facilities leases and other operating leases are payable as follows:
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Less than one year | 2,161 | 2,428 |
| Between one and five years | 1,218 | 2,962 |
| Total | 3,379 | 5,390 |
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 2015 includes lease expenses for the office premises amounting to EUR 3,035 thousand (2014: EUR 2,978 thousand).
30. COMMITMENTS AND CONTINGENCIES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Bank guarantees, short term | 2,286 | 2,595 |
| Bank guarantees, long term | 441 | 285 |
| Total | 2,727 | 2,880 |
| Corporate mortgages | 200 | 200 |
| Collaterals given on behalf of others | ||
| Guarantees | 29 | 34 |
Comptel Annual Report 2015
Financial statements
31. RELATED PARTY TRANSACTIONS
The Comptel Group companies are as follows:
| COMPANY | DOMICILE | 2015 | 2014 | ||
|---|---|---|---|---|---|
| GROUP HOLDING (%) | GROUP VOTING (%) | GROUP HOLDING (%) | GROUP VOTING (%) | ||
| Comptel Corporation | Finland | ||||
| Comptel Communications Holdings Ltd. | UK | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications Ltd. | UK | 100.00 | 100.00 | 100.00 | 100.00 |
| Business Tools Oy | Finland | 0.00 | 0.00 | 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 | 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 | 0.00 | 0.00 | 100.00 | 100.00 |
| Comptel Ltd | UK | 0.00 | 0.00 | 100.00 | 100.00 |
| Viewgate Networks Ltd. | UK | 0.00 | 0.00 | 100.00 | 100.00 |
| Xtract Oy | Finland | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications India Private Ltd. | India | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Communications S.r.l. | Italy | 100.00 | 100.00 | 100.00 | 100.00 |
| Comptel Palvelut Philippines, Inc. | Philippines | 100.00 | 100.00 | 0.00 | 0.00 |
The Comptel Group has a related party relationship with its associates, the Board of Directors, President and CEO, the Executive Board and also with people and companies under Comptel management's influence. More information about the investments in associates is given in the note number 16.
53 | Comptel Annual Report 2015
Financial statements
Transactions, which have been entered into with related parties, are as follows:
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Other operating income | ||
| Associates | - | 1 |
| Interest revenue | ||
| Associates | 8 | 8 |
| Non-current receivables | ||
| Associates | 121 | 113 |
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 President and CEO, the members of the Board of Directors and the members of the Executive Board.
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Salaries and other short-term employee benefits | 2,169 | 2,131 |
| Share-based payments | 725 | 131 |
| Total | 2,894 | 2,262 |
The employee benefits of the President and CEO and the members of the Board of Directors of the parent company:
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| President and CEO | 868 | 585 |
| Board of Directors at 31 Dec 2013 | ||
| Ervi Pertti | 59 | 61 |
| Mäkijärvi Heikki | 31 | 31 |
| Söderström Eriikka | 31 | 32 |
| Vaajoensuu Hannu | 39 | 40 |
| Vasara Antti | 31 | 33 |
| Former Board members | ||
| Walldén Petteri | - | 2 |
| Total | 191 | 199 |
| GUARANTEES AND OTHER CONTINGENT LIABILITIES | 2015 | 2014 |
| --- | --- | --- |
| Guarantees | 29 | 34 |
An additional defined contribution pension plan has been agreed on for the President and CEO of the parent company. Yearly pension expense is 15% of salary. The retirement age is based on the Finnish Statutory Employment Pension Scheme (TyEL).
New options were granted to the former and current members of the Executive Board in 2015, total number of the share options was 480,000 (In 2014 2.140.000). 3.618.260 share options were granted to the President and CEO in 2015 (In 2014 400.000). At 31 December 2014 the management had 5,448,260 share options, which were not exercisable (2014: 3,094,000 share options, of which 975,000 were 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 management of the Group had no loans referred to in the Companies Act, chapter 8, article 6.
Comptel Annual Report 2015
Financial statements
KEY FIGURES
| FINANCIAL SUMMARY | 2011^{1)} | 2012 | 2013 | 2014 | 2015 |
|---|---|---|---|---|---|
| Net sales, EUR 1,000 | 76,751 | 82,428 | 82,668 | 85,714 | 97,728 |
| Net sales, change % | -1.5 | 7.4 | 0.3 | 3.7 | 14.0 |
| Operating profit/loss, EUR 1,000 | 11,902 | -13,517 | 7,308 | 8,311 | 8,474 |
| Operating profit/loss, change % | 31.3 | 213.6 | 154.1 | 13.7 | 2.0 |
| Operating profit/loss, as % of net sales | 15.5 | -16.4 | 8.8 | 9.7 | 8.7 |
| Profit/loss before taxes, EUR 1,000 | 10,963 | -13,955 | 5,554 | 7,436 | 7,612 |
| Profit/loss before taxes, as % of net sales | 14.3 | -16.9 | 6.7 | 8.7 | 7.8 |
| Return on equity, % | 16.7 | -37.2 | 9.3 | 17.5 | 12.8 |
| Return on investment, % | 23.6 | -36.3 | 16.1 | 19.5 | 18.3 |
| Equity ratio, % | 66.5 | 46.8 | 50.5 | 52.4 | 52.4 |
| Gross investments in tangible and intangible assets, EUR 1,000^{1)} | 1,037 | 4,484 | 551 | 740 | 558 |
| Gross investments in tangible and intangible assets, as % of net sales^{1)} | 1.4 | 5.4 | 0.7 | 0.9 | 0.6 |
| Research and development expenditure, EUR 1,000 | 15,419 | 18,581 | 17,790 | 16,791 | 20,299 |
| Research and development expenditure, as % of net sales | 20.1 | 22.5 | 21.5 | 19.6 | 20.8 |
| Order backlog, EUR 1,000 | 47,217 | 48,368 | 40,756 | 55,213 | 66,344 |
| Average number of employees during the financial period | 623 | 700 | 684 | 665 | 723 |
| Interest-bearing net liabilities, EUR 1,000 | -9,334 | 3,541 | 2,228 | -1,789 | 4,137 |
| Gearing ratio, % | -22.3 | 13.1 | 7.7 | -5.4 | 11.1 |
| Debt-equity ratio% | 0.2 | 31.0 | 30.3 | 22.7 | 19.2 |
1) The figure does not include investments in development projects. Includes the acquisition of Xtract in 2012. The gross capital investments excluding the acquisition amounted EUR 1,678 thousand, which is 2.0% of net sales.
55 | Comptel Annual Report 2015
Financial statements
| PER SHARE DATA | 2011*) | 2012 | 2013 | 2014 | 2015 |
|---|---|---|---|---|---|
| EPS, EUR | 0.07 | -0.12 | 0.02 | 0.05 | 0.04 |
| Diluted EPS, EUR | 0.07 | -0.12 | 0.02 | 0.05 | 0.04 |
| Equity per share, EUR | 0.39 | 0.25 | 0.27 | 0.31 | 0.34 |
| Dividend per share, EUR 2) | 0.03 | - | 0.01 | 0.02 | 0.03 |
| Dividend per earnings, % 2) | 42.2 | - | 41.20 | 39.54 | 72.65 |
| Effective dividend yield, % 2) | 6.1 | - | 2.10 | 2.00 | 1.60 |
| P/E ratio | 6.9 | -3.3 | 19.8 | 19.4 | 43.40 |
| Highest share price | 0.79 | 0.63 | 0.59 | 1.00 | 1.93 |
| Lowest share price | 0.42 | 0.37 | 0.38 | 0.48 | 0.84 |
| Yearly average share price (VWAP) | 0.63 | 0.47 | 0.46 | 0.60 | 1.20 |
| Market value at year-end, million EUR | 52.3 | 42.8 | 51,5 | 105,8 | 198.1 |
| Trading volume | 32 836 546 | 26 734 489 | 18,358,693 | 27,778,321 | 41,222,529 |
| Development of exchange of shares % | 30.7 | 25.0 | 17.1 | 25.9 | 38.0 |
| Adjusted number of shares at the end of period | 107,054,810 | 107,054,810 | 107,421,270 | 107,421,270 | 108,395,409 |
| of which the number of treasury shares | 292,685 | 161,219 | 161,219 | 464,739 | 118,507 |
| Outstanding shares at the end of period | 106,762,125 | 106,893,591 | 107,260,051 | 106,956,531 | 108,276,902 |
| Adjusted average number of shares during the period | 106,775,223 | 106,863,518 | 106,893,591 | 107,284,900 | 107,370,551 |
| Average number of shares, dilution included | 106,775,223 | 107,650,327 | 106,893,591 | 107,625,526 | 109,640,245 |
2) The Board's proposal
*) Year 2011 error has been corrected.
56 | Comptel Annual Report 2015
Financial statements
DEFINITIONS OF KEY FIGURES
| Operating margin % = | Operating profit/loss
Net sales | x 100 | Earnings per share (EPS) = | Profit/loss for the financial year attributable to equity shareholders
Average number of outstanding shares for the financial year |
| --- | --- | --- | --- | --- |
| Profit margin
(before income taxes) % | Profit/loss before taxes
Net sales | x 100 | Equity per share = | Equity attributable to the equity holders of the parent company
Adjusted number of shares at end of period |
| Return on equity % (ROE) = | Profit/loss
Total equity (average during year)) | x 100 | Dividend per share = | Dividend
Adjusted number of shares at end of period |
| Return on investment % (ROI) = | Profit/loss before taxes + financial expenses
Total equity + interest bearing liabilities (average during year) | x 100 | Dividend per earnings % = | Dividend per share
Earnings per share (EPS) x 100 |
| Equity ratio % = | Total equity
Statement of financial position total – advances received | x 100 | Effective dividend yield % = | Dividend per share
Share closing price at end of period x 100 |
| Gross investments in tangible
and intangible assets, as %
of net sales | Gross investments in tangible and intangible assets
Net sales | x 100 | P/E-ratio = | Share closing price at end of period
Earnings per share (EPS) |
| Research and development
expenditure, as % of net sales | Research and development expenditure
Net sales | x 100 | Development of exchange of
shares % = | Volume of exchange of shares
Adjusted number of shares at the end of period |
| Gearing ratio % = | Interest-bearing liabilities - cash and cash equivalents
Total equity | x 100 | | |
| Debt-equity ratio % = | Interest-bearing liabilities
Total equity | x 100 | | |
57 | Comptel Annual Report 2015
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PARENT COMPANY INCOME STATEMENT, FAS
| EUR 1,000 | NOTES | 1 JAN - 31 DEC 2015 | 1 JAN - 31 DEC 2014 |
|---|---|---|---|
| Net sales | 2 | 93,137 | 82,580 |
| Other operating income | 3 | 54 | 314 |
| Materials and services | 4 | -3,896 | -3,021 |
| Personnel expenses | 5 | -18,083 | -16,284 |
| Depreciation and amortisation | 6 | -310 | -345 |
| Other operating expenses | 7 | -65,440 | -57,599 |
| -87,730 | -77,249 | ||
| Operating profit/loss | 5,462 | 5,645 | |
| Financial income | 8 | 703 | 2,319 |
| Financial expenses | 9 | -1,490 | -1,116 |
| Profit/loss before appropriations and income taxes | 4,675 | 6,848 | |
| Extraordinary income | 550 | - | |
| Profit/loss before income taxes | 5,225 | 6,848 | |
| Income taxes | 10 | -3,496 | -2,896 |
| Profit/loss for the period | 1,729 | 3,952 |
PARENT COMPANY BALANCE SHEET, FAS
| EUR 1,000 | NOTES | 31 DEC 2015 | 31 DEC 2014 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | 11 | ||
| Other intangible assets | 246 | 379 | |
| Tangible assets | 96 | 61 | |
| Investments | 3,180 | 3,279 | |
| 3,522 | 3,719 | ||
| Current assets | |||
| Non-current receivables | 12 | 4,140 | 3,583 |
| Current receivables | 13 | 52,547 | 43,525 |
| Cash and cash equivalents | 193 | 6,609 | |
| 52,740 | 50,133 | ||
| TOTAL ASSETS | 60,402 | 57,435 | |
| EQUITY AND LIABILITIES | |||
| Capital and reserves | 14 | ||
| Share capital | 2,141 | 2,141 | |
| Fund of invested non-restricted equity | 1,698 | 401 | |
| Retained earnings | 4,266 | 2,388 | |
| Profit/loss for the period | 1,729 | 3,952 | |
| 9,834 | 8,882 | ||
| Provisions | 15 | 109 | 270 |
| Liabilities | |||
| Non-current liabilities | 16 | - | 1 272 |
| Current liabilities | 17 | 50,459 | 47,012 |
| TOTAL EQUITY AND LIABILITIES | 60,402 | 57,435 |
58 | Comptel Annual Report 2015
Financial statements
PARENT COMPANY STATEMENT OF CASH FLOWS, FAS
EUR 1,000
| 1 JAN - 31 DEC 2015 | 1 JAN - 31 DEC 2014 | |
|---|---|---|
| Cash flows from operating activities | ||
| Profit/loss before appropriations and income taxes | 4,675 | 6,848 |
| Adjustments: | ||
| Depreciation, amortisation and impairment charges | 310 | 345 |
| Financial income and expenses | 176 | -1,475 |
| Other adjustments | 12 | 37 |
| Change in working capital: | ||
| Change in trade and other current receivables | -8,662 | -6,175 |
| Change in trade and other current liabilities | 2,599 | 8,267 |
| Change in provisions | -161 | -7 |
| Interest paid | -256 | -187 |
| Interest received | 5 | 3 |
| Taxes paid and tax returns received | -3,496 | -2,896 |
| Net cash from operating activities | -4,798 | 4,760 |
| Cash flows from investing activities | ||
| Sale of business operations | - | 300 |
| Investments in subsidiaries | -180 | - |
| Investments in tangible and intangible assets | -212 | -43 |
| Proceeds from sale of tangible and intangible assets | - | 1 |
| Proceeds from repayments of loans | 243 | - |
| Loans granted | -543 | -423 |
| Net cash used in investing activities | -692 | -165 |
EUR 1,000
| 1 JAN - 31 DEC 2015 | 1 JAN - 31 DEC 2014 | |
|---|---|---|
| Cash flows from financing activities | ||
| Dividends paid | -2,139 | -1,073 |
| Acquisition of own shares | - | -312 |
| Proceeds from new shares | 497 | - |
| Proceeds from share options | 800 | - |
| Proceeds from borrowings | 27,979 | 8,500 |
| Repayment of borrowings | -28,063 | -9,600 |
| Net cash used in financing activities | -926 | -2 484 |
| Change in cash and cash equivalents | -6,416 | 2,111 |
| Cash and cash equivalents at the beginning of period | 6,609 | 4,498 |
| Cash and cash equivalents at the end of period | 193 | 6,609 |
| Change | -6,416 | 2,111 |
59 | Comptel Annual Report 2015
Financial statements
NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY, FAS
1. ACCOUNTING PRINCIPLES FOR THE FINANCIAL STATEMENTS
COMPANY PROFILE
ComptelCorporation 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 telecom software and services in convergent mediation and charging, predictive analytics and service fulfillment. 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).
PRESENTATION OF FINANCIAL INFORMATION
All financial information presented in euro has been rounded to the nearest thousand and consequently the sum of the individual figures can deviate from the total figure.
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 and capitalized patent expenses. Leased assets are amortised over the shorter of the period of five years and the lease term. Capitalized patent expenses are depreciated within ten years. 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
Comptel Annual Report 2015
Financial statements
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.
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
Comptel Annual Report 2015
Financial statements
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 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.
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Financial statements
2. NET SALES
| 1000 EUROA | 2015 | 2014 |
|---|---|---|
| By geographical area | ||
| Europe | 39,831 | 34,821 |
| Asia-Pacific | 25,791 | 22,951 |
| Middle East and Africa | 16,791 | 16,698 |
| Americas | 10,725 | 8,110 |
| Total | 93,137 | 82,580 |
Net sales figures have been calculated based on the area, where the work was delivered to.
REVENUE RECOGNITION USING PERCENTAGE OF COMPLETION METHOD
| 1000 EUROA | 2015 | 2014 |
|---|---|---|
| Net sales recognised as revenue according to percentage of completion | 21,731 | 15,841 |
| Amount recognised as revenue during the financial year and previous years for long-term projects in progress | 12,932 | 11,541 |
| Total costs of incomplete long-term projects | 5,775 | 7,541 |
| Backlog of orders of long-term projects according to percentage of completion | 18,371 | 13,543 |
| Prepayments and accrued income recognised on the basis of percentage of completion | 2,845 | 2,768 |
| Deferred income and accruals recognised on the basis of percentage of completion | 2,477 | 4,409 |
3. OTHER OPERATING INCOME
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Gain on sale of tangible and intangible assets | 0 | 1 |
| Other | 54 | 313 |
| Total | 54 | 314 |
4. MATERIALS AND SERVICES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Purchases | -88 | 79 |
| External services | 3,984 | 2,942 |
| Total | 3,896 | 3,021 |
5. PERSONNEL EXPENSES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Wages and salaries | 14,479 | 13,539 |
| Pension expenses | 2,814 | 2,120 |
| Other social security costs | 791 | 625 |
| Total | 18,083 | 16,284 |
| MANAGEMENT SALARIES AND OTHER COMPENSATION | 2015 | 2014 |
| --- | --- | --- |
| Members of the Board of Directors | 191 | 200 |
Information on the remuneration of the Group management is presented in more detail in note 31. Related party transactions to the consolidated financial statements.
| 2015 | 2014 | |
|---|---|---|
| Average number of personnel | 208 | 188 |
PENSION COMMITMENTS IN RESPECT OF MEMBERS OF THE BOARD OF DIRECTORS AND THE PRESIDENT AND CEO
An additional defined contribution pension plan has been agreed on for the President and CEO. The retirement age is based on the Finnish Statutory Employment Pension Scheme (TyEL)
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Financial statements
6. DEPRECIATION, AMORTISATION AND IMPAIRMENT CHARGES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Depreciation and amortisation | ||
| Intangible rights | 268 | 311 |
| Machinery and equipment | 42 | 34 |
| Total | 310 | 345 |
7. OTHER OPERATING EXPENSES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Lease payments | 1,420 | 1,361 |
| Travel expenses | 1,593 | 1,415 |
| Marketing expenses | 2,066 | 1,062 |
| Software expenses | 3,493 | 3,412 |
| Consulting expenses | 3,409 | 3,245 |
| Group charges | 49,137 | 43,990 |
| Other operating expenses | 4,323 | 3,114 |
| Total | 65,440 | 57,599 |
| AUDITOR'S FEES | 2015 | 2014 |
| --- | --- | --- |
| Ernst & Young | ||
| Audit | 233 | 105 |
| Tax consultation | 79 | 55 |
| Other services | 5 | 12 |
| Total | 317 | 172 |
8. FINANCIAL INCOME
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Interest income | ||
| From Group companies | 13 | 120 |
| From others | 67 | 33 |
| Income from dividends | ||
| From Group companies | 204 | 1 524 |
| Exchange gains | ||
| From others | 418 | 642 |
| Total | 703 | 2,319 |
9. FINANCIAL EXPENSES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Interest expenses | ||
| To others | 93 | 97 |
| Other financial expenses | ||
| To others | 162 | 105 |
| Exchange losses | ||
| To others | 1,234 | 914 |
| Total | 1,490 | 1,116 |
64 | Comptel Annual Report 2015
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10. INCOME TAXES
| EUR 1,000 | 2014 | 2013 |
|---|---|---|
| Withholding taxes | 3,420 | 2,819 |
| Taxes from previous years | 31 | 77 |
| Taxes from previous years | 45 | 0 |
| Total | 3,496 | 2,896 |
11. NON-CURRENT ASSETS
| INTANGIBLE ASSETS | |||
|---|---|---|---|
| EUR 1,000 | INTANGIBLE RIGHTS | OTHER LONG-TERM EXPENDITURE | TOTAL |
| Cost at 1 Jan 2015 | 11,022 | 417 | 11,439 |
| Additions | 103 | 32 | 135 |
| Cost at 31 Dec 2015 | 11,125 | 450 | 11,574 |
| Accumulated amortisation at 1 Jan 2015 | 10,643 | 417 | 11,060 |
| Amortisation | 265 | 3 | 268 |
| Accumulated amortisation at 31 Dec 2015 | 10,908 | 421 | 11,328 |
| Book value at 31 Dec 2015 | 217 | 29 | 246 |
| INTANGIBLE ASSETS | |||
| --- | --- | --- | --- |
| EUR 1,000 | INTANGIBLE RIGHTS | OTHER LONG-TERM EXPENDITURE | TOTAL |
| Cost at 1 Jan 2014 | 11,022 | 417 | 11,439 |
| Additions | 0 | 0 | 0 |
| Cost at 31 Dec 2014 | 11,022 | 417 | 11,439 |
| Accumulated amortisation at 1 Jan 2014 | 10,332 | 417 | 10,749 |
| Amortisation | 311 | 0 | 311 |
| Accumulated amortisation at 31 Dec 2014 | 10,643 | 417 | 11,060 |
| Book value at 31 Dec 2014 | 379 | 0 | 379 |
65 | Comptel Annual Report 2015
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| TANGIBLE ASSETS
EUR 1,000 | MACHINERY AND
EQUIPMENT |
| --- | --- |
| Cost at 1 Jan 2015 | 3,900 |
| Additions | 77 |
| Cost at 31 Dec 2015 | 3,977 |
| | |
| Accumulated depreciation at 1 Jan 2015 | 3,840 |
| Depreciation | 42 |
| Accumulated depreciation at 31 Dec 2015 | 3,881 |
| Book value at 31 Dec 2015 | 96 |
| TANGIBLE ASSETS
EUR 1,000 | MACHINERY AND
EQUIPMENT |
| --- | --- |
| Cost at 1 Jan 2014 | 3,857 |
| Additions | 43 |
| Cost at 31 Dec 2014 | 3,900 |
| | |
| Accumulated depreciation at 1 Jan 2014 | 3,805 |
| Depreciation | 34 |
| Accumulated depreciation at 31 Dec 2014 | 3,840 |
| Book value at 31 Dec 2014 | 61 |
| INVESTMENTS | SHARES IN
GROUP COMPANIES | SHARES IN ASSOCIATED
COMPANIES | SHARES IN OTHER
INVESTMENTS | TOTAL |
| --- | --- | --- | --- | --- |
| Cost at 1 Jan 2015 | 2,792 | 400 | 87 | 3,279 |
| Additions | 180 | - | - | 180 |
| Decreases | -280 | - | - | -280 |
| Cost at 31 Dec 2015 | 2,692 | 400 | 87 | 3,180 |
| | | | | |
| Book value at 31 Dec 2015 | 2,692 | 400 | 87 | 3,180 |
| INVESTMENTS | SHARES IN
GROUP COMPANIES | SHARES IN ASSOCIATED
COMPANIES | SHARES IN OTHER
INVESTMENTS | TOTAL |
| --- | --- | --- | --- | --- |
| Cost at 1 Jan 2014 | 2,792 | 400 | 87 | 3,279 |
| Additions | - | - | - | - |
| Cost at 31 Dec 2014 | 2,792 | 400 | 87 | 3,279 |
| | | | | |
| Book value at 31 Dec 2014 | 2,792 | 400 | 87 | 3,279 |
Additions in Group companies in 2012: Xtract Oy EUR 2,253 thousand (ownership 100%), Comptel Communications S.r.l. EUR 10 thousand (ownership 100%), Comptel Communications India Private Ltd EUR 0 thousand (ownership 1%), total EUR 2,263 thousand.
66 | Comptel Annual Report 2015
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12. NON-CURRENT RECEIVABLES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Receivables from Group companies | ||
| Loan receivables | 3,470 | 3,470 |
| Total | 3,470 | 3,470 |
| Receivables from associated companies | ||
| Loan receivables | 75 | 75 |
| Prepayments and accrued income | 596 | 38 |
| Total | 671 | 113 |
| Non-current receivables total | 4,141 | 3,583 |
Capital loans of EUR 3,470 thousand have been granted to the subsidiary Xtract Oy in accordance with the Companies Act chapter 12, constituting a non-current loan receivable. The interest of the loan is the base rate set by the Ministry of Finance +1.55%. The accrued interest balance is 117,462.60 euros.
Pitkäaikaisista siirtosaamisista 550 000,00 euroa on emoyhtiön tytäryhtiöltään Comptel Communications Oy:ltä saama konserniavustus.
13. CURRENT RECEIVABLES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Receivables from Group companies | ||
| Trade receivables | 2,671 | 2,342 |
| Loan receivables | 868 | 569 |
| Other receivables | 572 | 2,011 |
| Total | 4,111 | 4,921 |
| Receivables from others | ||
| Prepayments | 1 | 61 |
| Trade receivables | 33,457 | 25,115 |
| Other receivables | 6,326 | 4,263 |
| Prepayments and accrued income | 8,653 | 9,164 |
| Total | 48,437 | 38,604 |
| Current receivables total | 52,547 | 43,525 |
| Specification of prepayments and accrued income | ||
| Accrued income capitalised according to degree of completion | 2,845 | 2,768 |
| Other prepayments | 5,808 | 6,396 |
| Total | 8,653 | 9,164 |
67 | Comptel Annual Report 2015
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14. EQUITY
| RESTRICTED EQUITY
EUR 1,000 | 2015 | 2014 |
| --- | --- | --- |
| Share capital at 1 Jan | 2,141 | 2,141 |
| Share capital at 31 Dec | 2,141 | 2,141 |
| NON-RESTRICTED EQUITY
EUR 1,000 | 2015 | 2014 |
| --- | --- | --- |
| Fund of invested non-restricted equity at 1 Jan | 401 | 401 |
| New shares | 497 | 0 |
| Share based compensation | 800 | 0 |
| Fund of invested non-restricted equity at 31 Dec | 1,698 | 401 |
| Retained earnings at 1 Jan | 6,340 | 3,706 |
| Acquisition of Corporation's own shares | 0 | -312 |
| Transfer of treasury shares | 66 | 66 |
| Dividends paid | -2,139 | -1,073 |
| Retained earnings at 31 Dec | 4,266 | 2,388 |
| Profit/loss for the financial year | 1,729 | 3,952 |
| Equity, total | 9,834 | 8,882 |
| BREAKDOWN OF DISTRIBUTABLE FUNDS
EUR 1,000 | 2015 | 2014 |
| --- | --- | --- |
| Fund of invested non-restricted equity | 1,698 | 401 |
| Retained earnings | 4,266 | 2,388 |
| Profit/loss for the financial year | 1,729 | 3,952 |
| Total | 7,693 | 6,741 |
15. PROVISIONS
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Provisions at 1 Jan | 270 | 277 |
| Provisions made during the financial year | 109 | 270 |
| Provisions used during the financial year | -270 | -277 |
| Provisions at 31 Dec | 109 | 270 |
The provisions consist of a warranty provision. In 2012 the provisions include also a provision recognised for unoccupied leased office facilities and a cost reserve for fulfilling obligations pertaining to customer projects.
16. NON-CURRENT LIABILITIES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Liabilities to Group companies | ||
| Other liabilities | 0 | 272 |
| Liabilities to others | ||
| Loans | 0 | 1,000 |
| Total non-current liabilities | 0 | 1,272 |
68 | Comptel Annual Report 2015
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17. CURRENT LIABILITIES
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Liabilities to Group companies | ||
| Trade payables | 24,427 | 19,724 |
| Other liabilities | 21 | 925 |
| Total | 24,448 | 20,649 |
| Liabilities to others | ||
| Trade payables | 1,745 | 944 |
| Loans | 6,979 | 6,000 |
| Other liabilities | 525 | 1,296 |
| Accrued expenses and deferred income | 16,762 | 18,123 |
| Total | 26,011 | 26,363 |
| Current liabilities total | 50,459 | 47,012 |
| Specification of accrued expenses and deferred income | ||
| Personnel expenses | 4,195 | 4,383 |
| Items recognised on the basis of percentage of completion method | 2,477 | 4,409 |
| Other accrued expenses and deferred income items related to revenue recognition | 9,074 | 8,446 |
| Other accrued expenses and deferred income items | 1,016 | 885 |
| Total | 16,762 | 18,123 |
18. DEFERRED TAX ASSETS
| EUR 1,000 | 2015 | 2014 |
|---|---|---|
| Deferred tax assets, which have not been booked in the balance sheet: | ||
| Reversal of depreciation and amortisation in taxation | 171 | 165 |
| Loss for the period | 0 | 301 |
| Impairment loss on trade receivables | 6,860 | 5,236 |
| Total | 7,032 | 5,702 |
69 | Comptel Annual Report 2015
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19. COLLATERALS, COMMITMENTS AND OTHER CONTINGENT LIABILITIES
| LEASE COMMITMENTS | 2015 | 2014 |
|---|---|---|
| Amounts payable during the next financial year | 152 | 198 |
| Amounts payable later | 102 | 191 |
| Total | 253 | 389 |
The leases the company has entered into generally run for a period of three years and contain no redemption commitments.
| RENTAL COMMITMENTS | 2015 | 2014 |
|---|---|---|
| Amounts payable during the next financial year | 1,324 | 1,323 |
| Amounts payable later | 657 | 1,971 |
| Total | 1,981 | 3,295 |
| GUARANTEES | 2015 | 2014 |
| --- | --- | --- |
| Bank guarantees due within one year | 2,286 | 2,600 |
| Bank guarantees due later | 441 | 0 |
| Total | 2,728 | 2,600 |
| COLLATERALS GIVEN ON BEHALF OF OTHERS | 2015 | 2014 |
| --- | --- | --- |
| Guarantees | 29 | 34 |
CONTINGENT LIABILITIES ASSUMED ON BEHALF OF GROUP COMPANIES
In 2008 Comptel Corporation has given a performance guarantee on behalf of its subsidiary, still valid on 31.12.2012. The total value of this agreement is USD 4 million. Comptel gave a guarantee of GBP 700 thousand for its subsidiary in 2009.
| DERIVATIVE INSTRUMENTS | 2014 | 2013 |
|---|---|---|
| Forward exchange contracts | ||
| Market value | -351 | -1,049 |
| Value of underlying instrument | 39,046 | 17,203 |
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 2015 the parent company's distributable funds were EUR 7,692,598.27.
The Board of Directors proposes to the Annual General Meeting that the dividend for the year 2015 would be EUR 0.03 per share.
70 | Comptel Annual Report 2015
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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 financial year ended. The company's share capital on 31 December 2015 amounted to 2,141,096.20 euros, and the total number of shares was 108,395,409.
AUTHORISATIONS TO THE BOARD OF DIRECTORS
The annual General meeting on 9 April 2015 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 on the special rights.
The authorisations are valid until 30 June 2016. However, the authorisation to implement the company's share-based incentive programs is valid until five years from the AGM resolution.
A separate stock release regarding the authorisations to the Board of Directors has been given on 9 April 2015.
SHARE OPTION SCHEMES
Comptel has currently two share option schemes.
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 remaining number of share options with the symbol C is 975,000. The share options may be exercised to subscribe to a maximum of 975,000 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 0.09 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 2010 and April 2011. The current share subscription price for Comptel share option 2009C is EUR 0.51 per share, which corresponds to the trade volume weighted average quotation of the share on the NASDAQ OMX Helsinki during 1 April - 30 April 2011 deducted by the dividends and capital repayment paid.
Comptel's 2009C share options were listed on NASDAQ OMX Helsinki commencing from 1 November 2013. The trading code is CTL1VEW309 and ISIN code is FI4000048772. In 2015, 788,359 options were traded and the closing price was EUR 0.63.
SHARE OPTION SCHEME 2014
Based on the authorization given by the Annual General Meeting, the Board of Directors of Comptel Corporation has decided on 5.2.2014 to issue stock options to the key personnel of the Comptel Group.
The maximum total number of stock options issued is 4.200.000, and they entitle their holders to subscribe each one share for maximum total of 4.200.000 new shares in the Company or existing shares held by the Company. The new option scheme replaces the share option scheme 2012.
Of the stock options, 2.200.000 are marked with the symbol 2014A,
Comptel Annual Report 2015
Financial statements
1.000.000 are marked with the symbol 2014B and 1.000.000 are marked with the symbol 2014C.
The subscription price for stock option 2014A is EUR 0.51 per share, which is the trade volume weighted average quotation of the share on NASDAQ OMX Helsinki Ltd during 15.2.-15.3.2014 deducted by the dividends and capital repayment paid. The subscription prices for stock options 2014B is EUR 0.91 per share, which is the trade volume weighted average quotation of the share on NASDAQ OMX Helsinki Ltd during 15.2.-15.3.2015. The subscription prices for stock options 2014C shall be the trade volume weighted average quotation of the share on NASDAQ OMX Helsinki Ltd during 15.2.-15.3.2016.
The share subscription periods for the options will be: 2014A 1.2.2016-31.1.2018, 2014B 1.2.2017-31.1.2019 and 2014C 1.2.2018-31.1.2020.
The share subscriptions may result in increase of the number of the company shares, maximum of 4,200,000 shares.
SHARE OPTION SCHEME 2015
Based on the authorization given by the Annual General Meeting held on 9 April 2015, the Board of Directors has decided on 9.9.2015 to issue stock options to the President and CEO of Comptel Group. The maximum total number of stock options issued is 3,478,260, and they entitle the holder to subscribe each one share for maximum total of 3,478,260 new or existing shares held by the company.
Out of the subscription rights 1,739,130 options are marked by 2015A and 1,739,130 options by 2015B.
The subscription price is the trade volume weighted average quotation of the share in NASDAQ OMX Helsinki during 12 August 2015 – 8 September 2015 deducted by 20%.
The share subscription periods for the options will be: 2015A 15.8.2018-15.9.2019, 2015B 15.8.2019-15.9.2019.
The share subscriptions may result in increase of the number of the company shares, maximum of 3,478,260 shares.
SHARE-BASED INCENTIVE PLANS
CEO PERFORMANCE SHARE PLAN 2011-2013
The CEO has had a share-based incentive plan. The aim of the plan is to combine the objectives of the shareholders and the CEO of Comptel Corporation in order to increase the value of the company and to commit the CEO to the company. The prerequisite for participation in the plan and receipt of reward from the performance periods is that the CEO owns company's shares or acquires them up to the number predetermined by the Board of Directors which is 230,000 shares. The ownership requirement is valid until 31 December 2015. Furthermore, the potential reward from the plan is tied to the validity of the CEO's service contract.
At the end of the financial year 2014 all shares of the plan were transferred and rewards paid.
MATCHING SHARE PLAN 2012
The Board of Directors of Comptel Corporation has approved on 27 February 2012 a share-based incentive plan for the Group key personnel.
The aim of the plan is to combine the objectives of the shareholders and the target people in order to increase the value of the company, to commit the target people to the company, and to offer
Comptel Annual Report 2015
Financial statements
them a competitive reward plan based on long-term shareholding in the company.
The Matching Share Plan includes two performance periods, both beginning on 2 May 2012. The performance periods will end on 2 May 2015 and on 2 May 2016. The prerequisite for participation in the plan and receipt of reward from the performance periods provides that a target person owns the company's shares or acquires them up to the number predetermined by the Board of Directors. Furthermore, the potential reward from the plan is tied to the validity of the target person's employment or service or contractual relation. No reward will generally be paid if a target person's employment or service ends before the reward payment.
Rewards from the Plan will be paid partly in the company's shares and partly in cash in 2015 and in 2016. The cash proportion is intended to cover taxes and tax-related costs arising from the reward to a target person. The total outstanding amount of rewards to be paid on the basis of the Plan is an approximate maximum of 525,000 Comptel Corporation shares and a cash payment corresponding to the value of the shares, multiplied by 1.5, in the maximum. There were 22 persons in the plan at the end of the year 2015.
Comptel Annual Report 2015
Financial statements
BOARD OF DIRECTORS' PROPOSAL FOR THE DISPOSAL OF PROFITS
The Group parent company's distributable equity on 31 December 2015 was EUR 7,692,598 (6,740,529).
The Board of Directors proposes to the Annual General Meeting that dividend of 0.03 EUR per share will be paid for 2015.
Helsinki, 17 February 2016
Pertti Ervi
Hannu Vaajoensuu
Eriikka Söderström
Antti Vasara
Heikki Mäkijärvi
Juhani Hintikka
President and CEO
74 | Comptel Annual Report 2015
Financial statements
AUDITOR'S REPORT
TO THE ANNUAL GENERAL MEETING OF COMPTEL CORPORATION
We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Comptel Corporation for the year ended 31 December, 2015. The financial statements comprise the consolidated statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows, and notes to the consolidated financial statements, as well as the parent company's balance sheet, income statement, cash flow statement and notes to the financial statements.
RESPONSIBILITY OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.
AUDITOR'S RESPONSIBILITY
Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the Managing Director are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS
In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
Opinion on the company's financial statements and the report of the Board of Directors
In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements.
Helsinki, 17 February 2016
Ernst & Young Oy, Authorized Public Accountant Firm
Mikko Järventausta, Authorized Public Accountant
Comptel Annual Report 2015
Corporate governance
CORPORATE GOVERNANCE STATEMENT 2015
This Corporate Governance Statement for 2015 has been issued according to the Finnish Corporate Governance Code 2010 and is published together with the Financial Statements and the Board of Directors' Report for 2015.
GOVERNING PRINCIPLES
Comptel Corporation is a Finnish public limited company which duties and responsibilities of the executive bodies are defined according to the Finnish law. Comptel Corporation complies with the Finnish Limited Liability Companies Act, other regulations concerning publicly traded companies, Comptel Corporation's Articles of Association and the rules of NASDAQ OMX Helsinki Ltd.
In addition, Comptel complies with the Finnish Corporate Governance Code issued by the Securities Market Association which entered into force on 1 October 2010. The Corporate Governance Code is available at www.cgfinland.fi.
DUTIES AND RESPONSIBILITIES OF EXECUTIVE BODIES
The highest decision making bodies in Comptel Corporation the General Meeting of the shareholders, the Board of Directors and the President and CEO of the Group.
GENERAL MEETING
The highest decision-making power in Comptel Corporation is vested in the General Meeting. In the General Meeting shareholders decide on the adoption of the financial statements, the use of the profit shown on the balance sheet, the discharge from liability of the Board members as well as the President and CEO, the number of Board members and the remuneration paid to the Board members and auditors. The General Meeting elects the members of the Board of Directors and the Auditor. In addition, any other business mentioned in the notice of the meeting is dealt with during the General Meeting.
The General Meeting of Comptel Corporation is summoned by the company's Board of Directors. According to the company's Articles of Association, the Annual General Meeting must be held each year before the end of June, on a date set by the Board of Directors.
Comptel Corporation's Annual General Meeting for 2015 was held on 9 April 2015. The documents concerning the Annual Meeting are available at http://www.comptel.com/investors/eng/governance/annual-general-meeting.
BOARD OF DIRECTORS
The duties and responsibilities of the Board of Directors are primarily defined by the Finnish Limited Liability Companies Act and the Articles of Association of Comptel Corporation. The Board of Directors controls and supervises the operational management of the company. The Board of Directors is responsible for ensuring that the company's financial accounting and financial management are properly organised.
The Board of Directors' Rules of Procedure specifies the Board's duties, business to be handled, meeting practices and the decision-making processes. According to the Rules of Procedure, the Board of Directors handles and decides on all matters that are financially, commercially or fundamentally significant to the Group's operations.
The Board of Directors confirms the Group's strategy, budget, corporate structure, major corporate arrangements and investments. Furthermore, the Board of Directors approves and confirms the principles of risk management, appoints and discharges the President and CEO, and decides on the terms and conditions of employment for the President and CEO. The Board confirms also the terms and conditions of employment of the members of the Executive Board.
Comptel Annual Report 2015
Corporate governance
The Board of Directors regularly evaluates its own operations and working practices. The Board also carries out a self-assessment in relation to its operations and working practices once a year.
As specified in the Articles of Association, the General Meeting elects a minimum of three and a maximum of six Board members. The Board members are elected for one year at a time so that the term of office for all Board members ends at the close of the following year's Annual General Meeting. The Board of Directors elects a Chairman and a Vice Chairman from among its members.
The Annual General Meeting for 2015 elected the following five Board members: Mr. Pertti Ervi (Chairman), Mr. Hannu Vaajoensuu (Vice Chairman), Mr. Heikki Mäkijärvi, Ms. Eriikka Söderström and Mr. Antti Vasara.
All members of the Board are independent of the company and the company's significant shareholders.
The biographical details and the information on the holdings of the members of the Board of Directors are available at http://www.comptel.com/investors/eng/governance/board-of-directors.
Ms. Tiina Sarhimaa, General Counsel, Head of Legal, serves as the secretary for the Board of Directors.
In 2015 the Board of Directors convened 19 times (2014:17). The average attendance of the members was 96% (2014: 89%).
BOARD COMMITTEES
In its first meeting held on 9 April 2015 the Board of Directors decided not to set up committees. The decision was made taking into account the company's size, a clear structure and a small number of Board members, due to which the Board considered that it is more effective to act without separate committees. The Board sees it useful to get in its entirety acquainted with the respective issues and therefore the tasks of an Audit Committee specified in the Finnish Corporate Governance Code are taken care by the Board in its full composition.
Whenever needed, the Board may also set up temporary working committees to prepare matters for the Board. Working committees were not set up by the Board in 2015.
PRESIDENT AND CEO
The President and CEO is responsible for ensuring that the company's accounting is legally arranged and that the company's financial management is reliably organised.
The President and CEO is responsible for ensuring that the objectives, strategies, future plans, outlines and goals set by the Board of Directors are implemented and achieved by the Comptel Group. The President and CEO prepares the matters to be decided by the Board of Directors and executes the decisions made.
The President and CEO is appointed by the Board of Directors. The Board of Directors decides on the terms and conditions of President and CEO's employment, including the salary, other compensations and fringe benefits that are defined in the CEO's employment contract.
Mr. Juhani Hintikka has acted as the President and CEO of Comptel Corporation since 2011. The biographical details and information on the holdings of the President and CEO are available at http://www.comptel.com/investors/eng/governance/executive-board.
EXECUTIVE BOARD
The duty of Comptel's Executive Board is to assist the President and CEO. The Executive Board consists of the directors of the business units and the units supporting business operations.
The Executive Board is responsible for integrating the activities of the Group and its parts into an operating plan associated with the annual budget to implement Comptel Group's strategies. During the year the results of the operations in relation to the budget and operating plan are handled in the Executive Board monthly.
77 | Comptel Annual Report 2015
Corporate governance
In 2015 the members of the Executive Board were, in addition to President and CEO, Mr. Antti Koskela (EVP SO), Mr. Kari Onniselkä (EVP ID), Mr. Tom Jansson (CFO), Mr. Mauro Carobene (CCO), Ms. Niina Pesonen (SVP HR), Mr. Ari Vänttinen (SVP Marketing) and Mr. Jussi Himanen (SVP Strategy).
The biographical details and information on the holdings of the members of the Executive Board are available at http://www.comptel.com/investors/eng/governance/executive-board.
In 2015 the Executive Board convened 11 times (2014: 13).
REMUNERATION
Comptel Group's remuneration schemes have been designed to promote competitiveness and long-term financial success of the company and to contribute to the favorable development of shareholder value. Remuneration schemes are based on predetermined and measurable performance and result criteria. Comptel has long-term and short-term performance based remuneration schemes.
The General Meeting decides on the remuneration payable to the Board of Directors. The Board of Directors decides on the remuneration and other compensation payable to the President and CEO.
The complete information on the remuneration of the members of the Board of Directors, President and CEO and the main principles of the remuneration (Remuneration Statement) are available at http://www.comptel.com/investors/eng/governance/remuneration.
AUDITING
According to the Finnish Auditing Act, statutory audits comprise the auditing of the accounts, financial statements, Board's report and administration. The General Meeting must be provided with an Auditor's Report including an opinion on whether the financial statements give correct and sufficient information about the Group's result and financial position at the close of the financial year. The Auditors report to the Board of Directors on their work and observations. The auditor verifies and reports also to the Board of Directors in an ongoing manner about observations concerning Comptel's administration and operations.
The Annual General Meeting 2015 elected Ernst & Young Oy as the Auditor of Comptel. Mr. Mikko Järventausta (APA) has acted as Principal Auditor during the financial year 2015.
The fees paid to the Auditor for the auditing services as well as for any other services, if any, are specified in the financial statements for the year 2015.
INSIDER ADMINISTRATION
Comptel complies with the insider guidelines of NASDAQ OMX Helsinki Ltd. In accordance with the Securities Market Act, Comptel maintains a register containing information on the so called insiders with the duty to declare, in the SIRE system of Euroclear Finland Ltd. Insiders comprise permanent insiders and project-specific insiders.
At the end of 2015, there were 20 insiders with the duty to declare (19) and 63 company-specific permanent insiders (58). The insiders with the duty to declare include the members of the Board of Directors, CEO, Executive Board members and the principal Auditor.
Comptel's insiders are obliged to comply with the so called closed window period during which no trading with the company's shares or securities entitling to shares is allowed. Comptel's closed window starts 14 days before the end of the each quarter. The closed window ends 24 hours after the publication of the respective Interim Report or Financial Statements.
An updated list of the insiders with the duty to declare, their connections and their holdings is available at http://www.comptel.com/investors/eng/share-shareholders/insiders.
Comptel Annual Report 2015
Corporate governance
INTERNAL CONTROL AND RISK MANAGEMENT
INTERNAL CONTROL
Internal control comprises of processes that provide reasonable assurance regarding the achievement of the company's objectives in the efficiency of operations, cost effective use of resources, reliability of financial reporting and compliance with the laws and regulations as well as the internal practices. Comptel's Board of Directors and management take part in internal control processes.
The objective of Comptel's internal control is to ensure that:
- company's operations are efficient and profitable
- financial and operational information is reliable
- entire Group complies with the regulations and policies
Internal control is not a separate process, but part of company's day-to-day operations. Internal control covers Comptel processes, policies and organisational structures that help to ensure that the company is achieving its objectives, the business conduct is ethical, the assets are managed responsibly and that financial reporting is organised properly.
Internal control includes, for example, monthly management reporting, revenue recognition management, HR management policies, processes defined by the quality system, Group's approval policy delegation of authority and monitoring the compliance with regulations, policies and practices.
The Group's financial administration monitors internal and external accounting and reconciles and investigates the possible differences between the two. The financial reporting process is monitored by the Board of Directors. In connection with the statutory audit, the Auditor reviews the control environment of the financial reporting as part of auditing the administration.
RISK MANAGEMENT
Risk management is an integral part of Comptel's internal control. Risk management and internal control are integrated at the process level. Risk management refers to a systematic process to identify, evaluate and control risks due to external factors as well as risks arising from the Group's own activity.
The Board of Directors has ratified the principles of risk management defining the risk management objectives and general practices, and also the tasks and responsibilities connected with risk management.
The Chief Financial Officer is in charge of coordinating risk management within the Group. The business units have the primary responsibility for identification and management of any and all risks that have an impact on their operations. Risk evaluation and management is an important part of the Group's annual business planning and strategy process, budgeting, as well as the preparatory and decision making processes connected with commercial offers, agreements and investments and other operative activities.
Comptel's business is subject to various risks and uncertainties. Comptel evaluates key risks related to its business continuously and up to date information on the business and other risks related to Comptel are disclosed periodically in the annual and interim reports available at http://www.comptel.com/investors/eng/governance/risk-management.
INTERNAL AUDIT
The purpose of the internal audit is to ensure that the business processes, financial processes and administrative processes of the company are performed in compliance with corporate governance principles. Activities are controlled to ensure profitable business operations.
Internal audit at Comptel is part of the financial administration. Internal audit is conducted according to in advance prepared plan on case by case bases, if a need for an audit is detected. Whenever necessary, external experts are used to complement the audit activities. Where appropriate, the results of internal audits are reported to the Board of Directors.
Comptel Annual Report 2015
Corporate governance
BOARD OF DIRECTORS 31 DECEMBER 2015
PERTTI ERVI
Born 1957, B.Sc. (Electronics)
Chairman of the Board since 2012
Main career history
Computer 2000 AG, Co-President 1995–2000
Computer 2000 Finland Oy, Managing Director –1995
Main board memberships
Chairman of the Board in Efecte Oy
Member of the Board in F-Secure Corporation, Ixonos Plc and Teleste Corporation
Comptel shares 171,247
HANNU VAAJOENSUU
Born 1961, M.Sc. (Economics)
Vice Chairman of the Board since 2005
Main career history
Basware Corporation, Full-time Chairman of the Board 2005–2010, CEO 1999–2004, Partner, Executive Director 1991–1999
Main board memberships
Chairman of the Board in Basware Corporation, Sparklike Oy and Solita Oy
Member of the Board in Movenium Oy, Efecte Oy, The Federation of Finnish Technology Industries
Comptel shares 177,226
ERIKKA SÖDERSTRÖM
Born 1968, M.Sc. (Economics)
Member of the Board since 2012
Main career history
Kone Corporation, CFO 2014–
Kone Corporation, Corporate Controller 2013–2014
Vacon Plc, Chief Financial Officer 2009–2013
Oy Nautor Ab, Chief Financial Officer 2008
Nokia Siemens Networks, Corporate Controller 2007
Nokia Networks, various finance and control roles 1994–2006
Comptel shares 77,215
ANTTI VASARA
Born 1965, Doctor of Technology (Technical Physics)
Member of the Board since 2012
Main career history
VTT Technical Research Center of Finland, President & CEO 2015–
Tieto Corporation, Executive Vice President, Product Development Services 2012–2015
Nokia, Senior Vice President, Mobile Phones Product Development 2010–2012
Nokia, Senior Vice President, various leading positions in product programs and hardware development, corporate strategy and software sales & marketing 2003–2010
SmartTrust Ab, CEO 2000–2003
McKinsey & Company, Senior Engagement Manager 1993–2000
Main board memberships
Nexeon Ltd (UK)
Comptel shares 73,215
HEIKKI MÄKIJÄRVI
Born 1959, M.Sc. (Engineering)
Member of the Board since 2014
Main career history
Deutsche Telekom AG, Senior Vice President, 2011–2014
Openwave, Senior Vice President 2009–2011
Accel Partners, Venture Partner 2002–2009
Comptel shares 29,556
80 | Comptel Annual Report 2015
Corporate governance
EXECUTIVE BOARD MEMBERS 31 DECEMBER 2015
JUHANI HINTIKKA, PRESIDENT AND CEO
Born 1966, M.Sc. (Engineering)
Joined Comptel in 2011. Has held several general management and executive positions in research and development, operations and sales at Nokia and Nokia Siemens Networks since 1999, latest the global Head of Operations Support Solutions Business Line at NSN. Has previously worked in Konecranes Group and in KONE Group. Member of the Board of Directors of Comptel Corporation during 2007–2008.
Comptel shares: 886,666
Share options 2014A: 420,000; 2014B: 120,000; 2015A: 1,739,130; 2015B: 1,739,130
TOM JANSSON, CFO
Born 1968, M.Sc. (Econ.)
Joined Comptel 2013, has previously held several senior finance and control positions during his long tenure at Tellabs, latest Director of Finance International in Tellabs Corporation.
Comptel shares: 0
Share options 2014A: 200,000; 2014B: 60,000
JUSSI HIMANEN, SENIOR VICE PRESIDENT, CORPORATE DEVELOPMENT
Born 1972, M.Sc. (Industrial Engineering)
Joined Comptel in 2012, member of the Executive Board since 2015. Has previously held various strategy and product management positions in Nokia Siemens Networks and Nokia since 1998. Prior to that worked in Sonera during 1997–1998.
Comptel shares: 31,250
Share options 2014A: 50,000; 2014B: 60,000
ANTTI KOSKELA, EXECUTIVE VICE PRESIDENT, SERVICE ORCHESTRATION
Born 1971, M.Sc. (Engineering)
Joined Comptel in 2011, member of the Executive Board since 2011. Has previously held several management positions in Nokia Siemens Networks since 1999, latest Head of the Communication & Entertainment Solutions Business Line. Prior to that, worked in Ericsson during 1994–1999.
Comptel shares: 57,250
Share options 2014A: 150,000; 2014B: 60,000
KARI ONNISELKÄ, EXECUTIVE VICE PRESIDENT, INTELLIGENT DATA
Born 1967, M.Sc. (Economics)
Joined Comptel in 2011, member of the Executive Board since 2011. Acted earlier as Managing Director of Talent Partners since 2006. Prior to that, held several management positions at Nokia in 2000–2006.
Comptel shares: 50,000
Share options 2014A: 200,000; 2014B: 60,000
NIINA PESONEN, SENIOR VICE PRESIDENT, HUMAN RESOURCES
Born 1965, M.Sc. (Social and Behavioral)
Joined Comptel in 2007, member of the Executive Board since 2007. Has previously held several HR management and development positions in Nokia since 1992. Her latest positions were Business HR Director for the Delivery Operations of Nokia Networks and HR Head for North East Region in Nokia Siemens Networks.
Comptel shares: 104,166
Share options 2014A: 200,000; 2014B: 60,000
ARI VÄNTTINEN, CMO
Born 1969, M.Sc. (Economics)
Joined Comptel in 2014, member of Executive Board since 2014. Has previously held various marketing executive and management roles at McAFee and Stonesoft Plc since 2010. Before that management consultant at Talent Partners 2007–2010 and marketing management and business development roles at Nokia Networks 2004–2007.
Comptel shares: 0
Share options 2014A: 60,000; 2014B: 60,000
MAURO CAROBENE, CHIEF COMMERCIAL OFFICER
Born 1970, M.Sc. (Electronic Engineering)
Joined Comptel in 2011, member of the Executive Board since 2011. Has previously held various senior solution management and sales positions in Nokia Siemens Networks and Nokia since 1998, most recently responsible for OSS consulting and systems integration business globally at NSN.
Comptel shares: 154,166; nominee registered shares 15,000
Share options 2014A: 150,000; 2014B: 60,000
Comptel Annual Report 2015
Shareholder information
SHAREHOLDER INFORMATION
ANNUAL GENERAL MEETING
The Annual General Meeting of Comptel shareholders to be held at Messukeskus, meeting room 208, at the address Messuaukio 1, 00520 Helsinki, Finland at 16.30 on Wednesday April 6th, 2016.
A shareholder, who wants to participate in the Annual General Meeting, shall register for the Meeting no later than 10:00 AM (Finnish time) on April 1st, 2016 by giving a prior notice of participation to the Company. Such notice can be given:
a) by notice at Company's website: www.comptel.com;
b) by telephone at +358 20 770 6877, from 9:00 AM to 4:00 PM (Finnish time) Monday to Friday;
c) by telefax at +358 9 70011 224
d) by regular mail to Comptel Corporation, P.O. Box 1000, FI-00181 Helsinki, Finland (envelopes should be marked "Annual General Meeting")
Each shareholder, who is registered on March 23rd, 2016 in the shareholders' register of the Company held by Euroclear Finland Ltd, has the right to participate in the Annual General Meeting. A shareholder, whose shares are registered on his/her personal Finnish book-entry account, is registered in the shareholders' register of the Company.
DIVIDEND AND FINANCIAL STATEMENTS
The Board of Directors has decided to propose to the Annual General Meeting that dividend of 0.03 EUR per share will be paid for 2015. The dividend will be paid to a shareholder, who has been registered to shareholders' register maintained by Euroclear Finland Oy on 8 April 2016. Board of Directors proposes that the dividend will be paid on 19 April 2016.
The proposals of the Board of Directors are available on Comptel Corporation's website at www.comptel.com. The annual report is available on the above-mentioned website no later than March 16, 2016. The Proposal of the Board of Directors and the annual accounts documents are also available at the meeting.
CHANGES OF NAME AND ADDRESS
Shareholders should notify the book-entry securities register where their book-entries are registered of any changes in name and/or address.
PUBLICATION OF INTERIM REPORTS
In 2016, Comptel Corporation will publish interim reports as follows:
Q1 for January – March on Thursday 21 April 2016
Q2 for January – June on Tuesday 9 August 2016
Q3 for January – September on Thursday 20 October 2016
Comptel publishes its Interim Reports, Financial Statements Bulletin and Annual Reports in English and Finnish. The financial reports are available on Comptel's website at www.comptel.com under Investors. Documents may also be ordered by email [email protected] or by phone +358 700 1131.
INVESTOR CONTACTS
Mr Tom Jansson, CFO
Tel. +358 9 700 1131, fax +358 9 700 113
[email protected]
Comptel Annual Report 2015
Shareholder information
COMPTEL PRESENCE
EUROPE
- Helsinki Finland
- Düsseldorf Germany
- The Hague The Netherlands
- Istanbul Turkey
- Milan Italy
- Moscow Russia
- Oslo Norway
- Reading UK
- Sofia Bulgaria
- Stockholm Sweden
AMERICAS
- Buenos Aires Argentina
- DF Mexico Mexico
- São Paulo Brazil
- Dallas USA
ASIA PACIFIC
- Kuala Lumpur Malaysia
- Hong Kong China
- Jakarta Indonesia
- New Delhi India
- Sydney Australia
- Singapore Singapore
- Makati City Philippines
- Wellington New Zealand
MIDDLE EAST AND AFRICA
- Dubai United Arab Emirates
- Kairo Egypt
83 | Comptel Annual Report 2015
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comptel
SALMISAARENAUKIO 1,
P.O. BOX 1000 FI-00181 HELSINKI
TEL. +358 9 7001131
WWW.COMPTEL.COM