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Digia Oyj — Interim / Quarterly Report 2011
Oct 28, 2011
3261_rns_2011-10-28_266285d9-6e50-48e1-acf0-ab803e01277c.html
Interim / Quarterly Report
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THIRD QUARTER 2011: NET SALES MEET TARGETS, ENTERPRISE SOLUTIONS' PROFITABILITY EXCEEDS EXPECTATIONS
THIRD QUARTER 2011: NET SALES MEET TARGETS, ENTERPRISE SOLUTIONS' PROFITABILITY EXCEEDS EXPECTATIONS
Helsinki, 2011-10-28 08:00 CEST (GLOBE NEWSWIRE) -- DIGIA PLC INTERIM REPORT,
28 October 2011, 9:00am
THIRD QUARTER 2011: NET SALES MEET TARGETS, ENTERPRISE SOLUTIONS' PROFITABILITY
EXCEEDS EXPECTATIONS
SUMMARY
January-September
- Consolidated net sales: EUR 91.7 (94.8) million, down 3.2 per cent
- Operating profit before extraordinary items: EUR 5.6 (12.4) million, down
54.8 per cent - Among extraordinary items, a restructuring provision of EUR 3.8 million and a
writedown of EUR 25.4 million for customer relationships and goodwill - Operating profit after extraordinary items: EUR -23.6 (12.4) million, down
290.2 per cent - Profitability (EBIT %): 6.1 (13.1) per cent before extraordinary items
and -25.7 (13.1) per cent after extraordinary items - Product business accounting for 19.6 (15.6) per cent of EBIT
- Earnings per share: EUR 0.21 (0.40) before extraordinary items and
EUR -1.14 (0.40) after extraordinary items
July-September
- Consolidated net sales: EUR 26.0 (27.0) million, down 3.4 per cent
- Operating profit before extraordinary items: EUR 2.7 (2.9) million, down 7.2
per cent - Extraordinary items that include a restructuring provision of EUR 0.6 million
related to personnel negotiations concluded in the third quarter - Operating profit after extraordinary items: EUR -2.1 (2.9) million, down 29.2
per cent - Profitability (EBIT %): 10.4 (10.9) per cent before extraordinary items and
8.0 (10.9) per cent after extraordinary items - Product business accounting for 23.4 (15.5) per cent of the latter
- Earnings per share: EUR 0.09 (0.10) before extraordinary items and EUR 0.06
(0.10) after extraordinary items
The net sales of the Enterprise Solutions segment grew organically in the
review period, in line with the overall development of the IT market. Taking
into account the Qt business acquired in March, the segment's growth rate
exceeded market growth. Operational profitability improved continuously toward
the end of the period. Profitability in the third quarter was 14.9 per cent,
not including the Qt business.
Realigned technology-platform strategies and changes in the competitive
situation for phone manufacturers markedly changed the business environment for
the Mobile Solutions segment. As a consequence, the segment experienced a
significant reduction in net sales and operating profit, in comparison to the
equivalent period last year.
The negative impact of the change in the business environment became gradually
stronger as the review period progressed. For this reason, the company
conducted three rounds of personnel negotiations during the period, resulting
in the decision to close down the Pori and Lappeenranta units and to lay off,
at maximum, 414 employees, mainly from the Mobile Solutions segment, by
year-end 2011. These actions caused non-recurrent costs totalling around EUR
3.8 million during the review period, of which items of approximately EUR 0.6
million were incurred in the third quarter.
On 29 September 2011, the company initiated a fourth round of personnel
negotiations, with the aim of adapting its entire organisation, its cost
structure, and all operations to the new market situation and to the company's
long-term strategic objectives. The company expects these negotiations, which
apply to all Finnish functions, to lead to a maximum staff reduction of 80
employees.
As a consequence of the permanent change in the operating environment of the
Mobile Solutions segment, and of the downward revision of long-term profit
expectations for mobile operations in general, the company made a one-off
writedown of EUR 25.4 million in relation to the segment's customer relations
and goodwill.
For the fourth quarter, the company expects the net sales and operating profit
of Mobile Solutions to decrease slightly from the results of the third quarter.
For 2012 the company predicts a further significant reduction in the segment's
net sales and operating profit. Continued uncertainty surrounding the Mobile
Solutions segment is hampering reliable business forecasting.
As for Enterprise Solutions, the company expects the organic growth in net
sales to level out in the fourth quarter and in the first half of 2012, to a
level roughly equivalent to the previous year's figures. While operational
profitability exceeded expectations in the third quarter of 2011, the company
predicts that it will decrease somewhat but still remain sound.
GROUP KEY FIGURES AND RATIOS
7-9/20 7-9/20 Change 1-9/201 1-9/20 Change, 2010
11 10 , % 1 10 %
Net sales 26,027 26,951 -3.4% 91,743 94,800 -3.2% 130,825
Operating profit 2,716 2,927 -7.2% 5,602 12,384 -54.8% 17,164
before extraordinary
items
- % of net sales 10.4% 10.9% 6.1% 13.1% 13.1%
Operating profit 2,073 2,927 -29.2% -23,554 12,384 -290.2% 17,164
- % of net sales 8.0% 10.9% -25.7% 13.1% 13.1%
Net profit 1,146 2,065 -44.5% -23,669 8,200 -388.6% 11,474
- % of net sales 4.4% 7.7% -25.8% 8.7% 8.8%
Return on equity, % 12.1% 13.1% -59.7% 17.9% 18.3%
Return on capital 14.8% 13.7% -41.2% 18.9% 19.3%
invested, %
Interest-bearing 21,934 23,321 -5.9% 21,934 23,321 -5.9% 23,316
liabilities
Cash and cash 2,925 3,677 -20.4% 2,925 3,677 -20.4% 9,682
equivalents
Net gearing, % 49.6% 30.7% 49.6% 30.7% 20.2%
Equity ratio, % 47.4% 58.7% 47.4% 58.7% 58.8%
Earnings per share, 0.06 0.10 -44.7% -1.14 0.40 -385.9% 0.56
EUR, undiluted
Earnings per share, 0.06 0.10 -44.7% -1.14 0.40 -385.9% 0.56
EUR, diluted
The figures for 2011 include extraordinary items comprising a writedown for
customer relationships and goodwill of EUR 25.4 million, as well as a
restructuring provision of EUR 3.8 million.
MARKETS AND DIGIA'S BUSINESS
On 29 September 2011, the company initiated personnel negotiations with the aim
of adapting the company's organisation, cost structure, and operations to the
new market situation. This comes as a result of the radical change in the
operating conditions of the Mobile Solutions segment, caused by realignment of
technology‑platform strategies and changes in the competition playing field
among phone manufacturers, which indirectly affects the whole company's
operations. The negotiations concern around 770 Digia employees. The company
estimates that the need to downsize staffing will affect, at most, 80 people,
to whom the company cannot assign any work in line with the planned new
organisation.
Earlier in the review period, the company conducted three rounds of personnel
negotiations, resulting in the decision to close down the Pori and Lappeenranta
units and to lay off, at maximum, 414 employees, mainly from the Mobile
Solutions segment, by year end 2011. These actions caused non-recurring costs
of around EUR 3.8 million during the review period, of which costs of
approximately EUR 0.6 million were incurred in the third quarter.
Digia's Chinese unit generates product development and maintenance services.
This enables the company to serve customers at various points in their product
development cycle. The unit's capacity is utilised both in projects within
China and for global customer relationships. The reduction in demand for
Symbian and MeeGo services resulting from the changes in the business
environment also affect the operations of the Chinese unit.
The Russian unit operates as a near-shore resource for Digia's Finnish
customers. It also sells services directly to local customers, an operation
that Digia is working actively to develop and increase. During the review
period, the Russian unit's operations progressed as expected.
ENTERPRISE SOLUTIONS:
Demand for ERP systems, e-business, and customer experience management
solutions remained at a reasonable level during the review period. The company
delivered its first SmartStore systems.
Purchased in March, the Qt commercial licensing and services business was
launched as planned. With this new business taken into account, the Enterprise
Solutions business grew more rapidly than the IT market average.
During the review period, the company continued productising its multichannel
and wireless solutions. In addition, the company invested in the development
and international sale of a licence-based toolkit for user experience
development.
Digia considers its competencies in smartphone application development and
enterprise applications a huge asset for strengthening its position as a
provider of multichannel and wireless system solutions.
MOBILE SOLUTIONS:
In view of the radical changes in the business environment, the company
re‑evaluated the operations and related long-term expectations of Mobile
Solutions. This led to a writedown of EUR 25.4 million related to the segment's
customer relationships and goodwill.
NET SALES
During the reporting period, Digia's consolidated net sales totalled EUR 91.7
(94.8) million, down 3.2 per cent from the same period in 2010.
The Enterprise Solutions segment's net sales for the period totalled EUR 59.7
(54.9) million, up 8.7 per cent. The Mobile Solutions segment posted net sales
of EUR 32.0 (39.9) million, down 19.7 per cent. The lower-than-expected growth
in Enterprise Solutions net sales was due to lower licence sales, reflected in
the volume of work invoicing. However, from the second quarter onwards, the Qt
business boosted the net sales of the Enterprise Solutions segment by, in
total, EUR 3.2 million. In Mobile Solutions, net sales fell because of a sudden
and considerable decline in demand for services, following a change in the
business environment.
During the reporting period, the product business accounted for EUR 18.0
million (EUR 14.8 million) or 19.6 per cent (15.6 per cent) of consolidated net
sales.
International operations accounted for EUR 9.6 (8.0) million, or 10.4 (8.5) per
cent of consolidated net sales.
For the third quarter, Digia's consolidated net sales came to EUR 26.0 (27.0)
million, down 3.4 per cent in year-on-year terms.
Third-quarter net sales for the Enterprise Solutions segment totalled EUR 18.6
(15.6) million, up 18.7 per cent. The Qt business accounted for EUR 2.1
million. Third-quarter net sales for Mobile Solutions totalled EUR 7.5 (11.3)
million, down 34 per cent.
During the quarter, the product business accounted for EUR 6.1 (4.2) million of
consolidated net sales, or 23.4 (15.5) per cent.
International operations accounted for EUR 3.9 (2.1) million of the
consolidated net sales, or 14.9 (7.7) per cent.
PROFIT PERFORMANCE AND PROFITABILITY
During the reporting period, extraordinary items had a significant impact on
Digia's consolidated profit performance and profitability. These items
comprised a EUR 3.2 million restructuring provision related to the closure of
sites and a EUR 25.4 million writedown for customer relationships and goodwill,
both in the second quarter, as well as a EUR 0.6 million restructuring
provision in the third quarter. The extraordinary items were entirely
attributable to the Mobile Solutions segment. The operating profit before
extraordinary items is an indicator of the company's operational profitability.
Digia's consolidated operating profit for the reporting period was EUR 5.6
(12.4) million, down 54.8 per cent in year-on-year terms. Profitability (EBIT
%) before extraordinary items was 6.1 (13.1) per cent.
During the reporting period, Digia's consolidated operating profit after
extraordinary items came to EUR -23.6 (12.4) million, down 290.2 per cent year
on year. Profitability (EBIT %) after extraordinary items was -25.7 (13.1) per
cent.
During the period under review, the operating profit of the Enterprise
Solutions segment was EUR 6.1 (8.2) million, down 26.4 per cent, while
profitability (EBIT %) came to 10.1 per cent. Excluding its Qt business, the
Enterprise Solutions segment's operating profit totalled EUR 6.2 million and
profitability stood at (EBIT %) 11.0 per cent. The decrease in the Enterprise
Solutions segment's net sales was caused by lower-than-expected Finnish licence
sales and, at the same time, higher operating expenses. In addition to the
launch expenses for the Qt business, the period saw the cost structure
particularly burdened by personnel turnover and recruitment, subcontracting,
and training expenses related to resolution of resource shortages in certain
areas of competence.
For the Mobile Solutions segment, operating profit totalled EUR -0.5 (4.2)
million, down 110.8 per cent, with profitability (EBIT %) being -1.4 per cent.
The lower profitability for the Mobile Solutions segment was due to recruitment
carried out in late 2010 and early 2011 to meet earlier growth targets. In
consequence of the sudden and significant decrease in service demand, Digia has
been unable to provide enough work for all of the new employees, and the
increased salary costs were a financial burden.
Digia's consolidated third-quarter operating profit before extraordinary items
was EUR 2.7 (2.9) million, representing a year-on-year decrease of 7.2 per
cent. Profitability (EBIT %) was 10.4 (10.9) per cent.
After extraordinary items, Digia's consolidated operating profit for the
quarter came to EUR 2.1 (2.9) million, down 29.2 per cent in year-on-year
terms. Profitability (EBIT %) was 8.0 (10.9) per cent.
Third-quarter operating profit for the Enterprise Solutions segment totalled
EUR 2.6 (2.4) million, up 8.0 per cent. Profitability (EBIT %) was 14.0 per
cent. Not including the Qt business, the segment's operating profit was EUR 2.5
million and its profitability (EBIT %) was 14.9 per cent.
The operating profit of the Mobile Solutions segment was EUR 0.1 (0.5) million,
down 77.6 per cent, and profitability (EBIT %) was 1.6 per cent.
Consolidated earnings before tax for the period totalled EUR -24.2 (11.2)
million, and net profit was EUR -23.7 (8.2) million. Consolidated earnings
before tax for the third quarter were EUR 2.0 (2.6) million, and net profit
totalled EUR 1.1 (2.1) million.
Consolidated earnings per share for the period came to EUR -1.14 (0.40) after
extraordinary items and 0.21 (0.40) before extraordinary items. For the third
quarter, consolidated earnings per share were EUR 0.06 (0.10) after
extraordinary items and 0.09 (0.10) before extraordinary items.
The Group's net financial expenses for the reporting period were EUR 0.6 (1.2)
million and for the third quarter EUR 0.1 (0.4) million.
FINANCIAL POSITION AND EXPENDITURE
At the end of the reporting period, the Digia Group's consolidated balance
sheet total stood at EUR 84.8 million (12/2010: EUR 115.4 million) and the
equity ratio was 47.4 (12/2010: 58.8) per cent. Net gearing was 49.6 (12/2010:
20.2) per cent. The period-end cash and cash equivalents totalled EUR 2.9
(12/2010: 9.7) million.
Interest-bearing liabilities amounted to EUR 21.9 (12/2010: 23.3) million.
These consisted of EUR 20.0 million in loans from financial institutions and
EUR 1.9 million in financial leasing liabilities.
The Group's cash flow from operations for the period was positive by EUR 3.2
(4.2) million, cash flow from investments was negative by EUR 2.4 (1.1)
million, and cash flow from financing was negative by EUR 7.6 (9.9) million.
Cash flow from financing was negatively affected by the repayment of loans for
a total sum of EUR 2.0 million, as well as the payment of EUR 5.6 million in
dividends.
The Group's investments in fixed assets during the review period totalled EUR
2.1 (1.1) million. Acquisitions of tangible fixed assets totalled EUR 1.8 (0.9)
million. The main differences in tangible fixed assets from the equivalent
period in the previous year arose from finance lease agreements and purchases
of equipment and furnishings.
Return on investment (ROI) for the period was -41.2 (18.9) per cent, and return
on equity (ROE) was -59.7 (17.9) per cent.
The Group carries out quarterly impairment testing of goodwill and intangible
assets with an indefinite useful life. The table below shows, by business
segment, the goodwill and values subject to testing at the end of the reporting
period:
EUR 1,000 Specified Amortisations Goodwi Other Total value
intangible during the ll items subject to
assets reporting period testing
Mobile 0 4,941 1,299 3,183 4,482
Solutions
Enterprise 3,781 673 43,244 7,073 54,097
Solutions
Group total 3,781 5,614 44,543 10,256 58,580
In the second quarter, the company recorded a EUR 25.4 million goodwill
writedown for its Mobile Solution segment's customer relationships and
goodwill. This writedown was based on the company's revision of the segment's
long-term income expectations, as the applicable legislation requires. The
revised expectation is due to a sudden and radical transition in the business
environment for contract engineering services. In the company's view, this has
markedly and permanently reduced demand for Symbian and MeeGo services. In
future, the Mobile Solutions business will focus on technologies and services
for which the company can maintain at least a reasonable level of
profitability.
Present values for the Enterprise Solutions segment were calculated for the
forecast period on the following assumptions: net sales for 2011 in line with
the latest forecast, after which annual growth of three per cent; operating
profit for 2011 in accordance with the latest forecast and after that 10 per
cent, with discount rates of 11.2 per cent. Cash flows beyond the forecast
period are estimated through extrapolation applying the assumptions given
above.
The amount of goodwill for Enterprise Solutions requires average annual growth
of two per cent for business operations and five-per-cent profitability. The
management sees no risk of goodwill impairment for Enterprise Solutions.
Present values for the Mobile Solutions segment were calculated for the
forecast period on the following assumptions: 2011 and 2012 net sales that are
in line with the latest forecast, after which annual growth of two per cent;
operating profit for 2011 in accordance with the latest forecast and then 11
per cent, with discount rates of 14.7 per cent. Cash flows after the forecast
period are estimated by means of cash-flow extrapolation that applies the
assumptions given above. The management does not expect there to be any need
for further goodwill impairment in the Mobile Solutions segment, after the
writedowns of the second quarter.
HUMAN RESOURCES, MANAGEMENT, AND ADMINISTRATION
At the end of the period, the total number of Group personnel was 1,388,
representing a decrease by 170 employees, or 10.9 per cent, since the end of
2010 (when there were 1,558). During the reporting period, the number of
employees averaged 1,519, an increase of 11 employees, or 0.7 per cent, from
the 2010 average (1,508).
Employees, by function, at the end of the period:
Enterprise Solutions 61%
Mobile Solutions 36%
Administration and management 3%
As of the end of the period, 191 employees were working abroad (12/2010: 196).
The Digia Plc Annual General Meeting of 16 March 2011 re-elected Robert Ingman,
Kari Karvinen, Pertti Kyttälä, Martti Mehtälä, Pekka Sivonen, Tommi Uhari, and
Marjatta Virtanen as members of the Board. At the organisational meeting of the
Board, Kyttälä was elected Chairman of the Board and Mehtälä as Vice Chairman.
Juha Varelius has been Digia Plc President and CEO since 1 January 2008.
Ernst & Young Oy, authorised public accountants, are the Group's auditors, with
Authorised Public Accountant Heikki Ilkka as the principal auditor.
RISKS AND UNCERTAINTIES
The company's short-term business risks and uncertainties were described in the
2010 Financial Statements. These are mainly unchanged. The business risk
associated with the mobile market was realised during the period, fundamentally
changing the operating environment. Forecasting developments in the mobile
market remains subject to pronounced uncertainty and risks.
In addition, the euro-area debt crisis has deepened and the risk of economic
recession has grown, which may affect the company's customers' investment
decisions and liquidity, and thereby the company's sales and profits. There
have already been signs of the effect of increased uncertainty on customers'
investment decisions, and some planned projects have been delayed.
PROSPECTS
The company is conducting a reorganisation. With the changes, it aims to adapt
its organisation, cost structure, and operations to the new market situation
and to its long-term strategic objectives. The purpose of the reform is to
ensure the continuity of the company's current, sound core business while also
promoting the development of the scalable product business into an integral
part of the company's offerings. Digia will also continue to develop its
international operations, particularly in Russia.
The company expects the IT market to continue growing moderately from 2010
levels. However, risks associated with the euro-area debt crisis and general
inflation may affect demand for IT services and the development of business
profitability. Therefore, there is somewhat increased uncertainty as to the
prospects for the rest of 2011 and, particularly, for 2012.
The company expects the net sales and operating profit of Mobile Solutions to
decrease slightly in the fourth quarter from the Q3 results. For 2012, the
company predicts a further significant reduction in the segment's net sales and
operating profit. Continued uncertainty surrounding the Mobile Solutions
segment is hampering reliable business forecasting.
As for Enterprise Solutions, the company expects the organic growth in net
sales to level out in the fourth quarter and in the first half of 2012, to a
level roughly equivalent to the previous year's figures. While operational
profitability exceeded expectations in the third quarter of 2011, the company
predicts that it will decrease somewhat but still remain sound. Union
negotiations have indicated pressure to increase salaries and personnel costs,
which may affect the company's future profitability. On the other hand, the Qt
commercial licensing and service business that Digia acquired in spring 2011 is
expected to have a favourable impact on the company's net sales and
profitability.
The long-term cornerstones of Digia's success will be strengthening organic
growth and maintaining good cash flows and profitability.
OTHER EVENTS DURING THE REVIEW PERIOD
Convening on 16 March 2011, the Digia Plc Annual General Meeting (AGM) approved
the financial statements for 2010, released the Board members and the CEO from
liability, determined Board emoluments, resolved to raise the number of Board
members to seven, and elected the Board of Directors for a new term.
With regard to profit distribution for 2010, the AGM approved the Board's
proposal to pay a dividend of EUR 0.27 per share to all shareholders listed on
the shareholder list maintained by Euroclear Finland Ltd on the reconciliation
date of 21 March 2011. The dividend payment date was 28 March 2011.
The AGM granted the following authorisations to the Board:
Authorisation of the Board of Directors to decide on buying back own shares
and/or accepting them as collateral
The AGM authorised the Board to decide on the buyback and/or acceptance as
collateral of not more than 2,000,000 shares in the company. This buyback can
only be executed by means of the company's unrestricted equity. The Board shall
decide on how these shares are to be bought. Own shares may be bought back in
disproportion to the holdings of the shareholders. The authorisation also
includes acquisition of shares through public trading organised by NASDAQ OMX
Helsinki Oy in accordance with the rules and instructions of NASDAQ OMX
Helsinki and Euroclear Finland Ltd, or through offers made to shareholders.
Shares may be acquired in order to improve the company's capital structure, to
fund acquisitions or other business transactions, for offering share-based
incentive schemes, to sell on, or to be annulled. The shares must be acquired
at the market price in public trading. This authorisation replaces the
authorisation granted by the Shareholders' Meeting on 3 March 2010 and is valid
for 18 months - i.e., until 16 September 2012.
Authorising the Board of Directors to decide on a share issue and granting of
special rights
The AGM authorised the Board to decide on an ordinary or bonus issue of shares
and the granting of special rights (as defined in Section 1, Chapter 10 of the
Limited Liability Companies Act) in one or more instalments, as follows: The
issue may total, at maximum, 4,000,000 shares. The authorisation applies both
to new shares and to treasury shares held by the company. By virtue of the
authorisation, the Board has the right to decide on share issues and the
granting of special rights, in deviation from the pre-emptive subscription
rights of the shareholders (a directed issue). The authorisation may be used to
fund or complete acquisitions or other business transactions, for offering
share-based incentive schemes, to develop the company's capital structure, or
for other purposes. The Board was authorised to decide on all terms related to
the share issue or special rights, including the subscription price, its
payment in cash or (partly or wholly) in capital contributed in kind or its
being written off against the subscriber's receivables, and its recognition in
the company's balance sheet. This authorisation supersedes that granted by the
Shareholders' Meeting on 3 March 2010 and is valid for 18 months - i.e., until
16 September 2012.
SHARE CAPITAL AND SHARES
On 30 September 2011, the total number of Digia Plc shares was 20,875,645.
At the end of the period, according to Finnish Central Securities Depository
Ltd, Digia had 6,473 shareholders.
The 10 biggest shareholders were:
Shareholder Shares and votes
Ingman Group Oy Ab 15.3%
Pekka Sivonen 12.6%
Jyrki Hallikainen 10.2%
Kari Karvinen 6.5%
Matti Savolainen 6.1%
Varma Mutual Pension Insurance Company 3.6%
Nordea Bank Finland Plc (nominee-registered) 1.7%
Etola Oy 1.0%
OMXBS / Skandinaviska Enskilda Banken (nominee‑registered) 0.9%
Olli Ahonen 0.9%
Distribution of holdings, by number of shares held on 30 September 2011:
Number of shares Shareholders Shares and votes
1-100 21.9% 0.5%
101-1,000 59.3% 8.5%
1,001-10,000 17.4% 14.9%
10,001-100,000 1.0% 9.1%
100,001-1,000,000 0.3% 16.3%
1,000,001- 0.1% 50.7%
Shareholding by sector on 30 September 2011:
Shareholders Shares
Non-financial corporations 4.6% 20.6%
Financial and insurance corporations 0.2% 3.5%
General government 0.0% 3.6%
Not-for-profit institutions serving households 0.2% 0.5%
Households 94.4% 70.5%
Rest of the world 0.4% 1.1%
The weighted average number of shares during the reporting period, adjusted for
share issues, came to 20,696,845 in total. The number of outstanding shares
came to 20,716,069 in total at the end of the review period.
The company held, in total, 159,576 treasury shares at period end. The
accounting counter value of these treasure shares is EUR 0.10 per share. In
relation to the company's performance-based incentive system, Digia has
financed the acquisition of 300,000 own shares. At the end of the review
period, some of these shares remained undistributed and Evli Alexander
Management Ltd held 29,612 shares. The company held about 0.8 per cent of the
capital stock as of 30 September 2011.
REPORTED SHARE PERFORMANCE ON THE HELSINKI STOCK EXCHANGE
Digia Plc shares are listed on the Nordic Exchange under ‘Information
Technology IT Services'. The company's short name is DIG1V. The lowest reported
share quotation was EUR 2.30 and the highest was EUR 5.79. The value of a share
officially closed at EUR 2.56 on the last day of trading. The trade-weighted
average was EUR 4.24. The Group's market capitalisation totalled EUR 53,441,651
at the end of the period.
The company received the following flagging notifications during the reporting
period:
-The Ingman Group announced on 16 August 2011 that the total holding of said
group and entities under its control had grown to exceed the 15% flagging
threshold and was 15.15% of the company's shares and votes.
STOCK OPTION SCHEMES
Digia Plc had no outstanding options.
Helsinki, 28 October 2011
Digia Plc
Board of Directors
BRIEFING FOR ANALYSTS
Digia will hold a briefing on its financial statement for analysts and the
media on Friday, 28 October 2011, at 11am, at WTC Sodexo, in the Marski cabinet
of the World Trade Center, Aleksanterinkatu 17, 00100 Helsinki, Finland. All
are welcome.
SOURCES OF FURTHER INFORMATION
President and CEO Juha Varelius, mobile number +358 400 855 849, e-mail address
[email protected]
The Interim Report and access to the related live briefing for the media and
analysts (in Finnish) will be available via www.digia.fi, in the ‘Investors'
section, from 11am.
DISTRIBUTION
NASDAQ OMX Helsinki
Key media
ABBREVIATED FINANCIAL STATEMENTS AND ATTACHMENTS
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Shareholders' Equity
Notes to the Accounts
The interim report has been prepared in compliance with IFRS and the IAS 34
standard.
This interim report is based on unaudited figures.
CONSOLIDATED INCOME STATEMENT, EUR 1,000
7-9/2011 7-9/2010 Change, 1-9/2011 1-9/2010 Change, 2 010
% %
NET 26,027.5 26,951.0 -3.4% 91,742.5 94,799.8 -3.2% 130,825.2
SALES
Other 47.0 184.8 -74.6% 99.7 285.2 -65.0% 317.5
opera
ting
incom
e
Materi -1,761.9 -1,689.6 4.3% -8,152.1 -7,407.9 10.0% -10,156.9
als
and
servi
ces
Deprec -858.1 -922.8 -7.0% -28,172.1 -2,764.5 919.1% -3,719.1
iation
,
amort
isatio
n, and
impai
rment
Other -21,381.8 -21,596.0 -1.0% -79,072.1 -72,529.0 9.0% -100,102.3
opera
ting
expen
ses
Operat 2,072.7 2,927.5 -29.2% -23,554.0 12,383.6 -290.2% 17,164.4
ing
profi
t
Financ -116.6 -350.1 -66.7% -644.9 -1,152.3 -44.0% -1,438.8
ial
expen
ses
(net)
Earnin 1,956.2 2,577.4 -24.1% -24,198.8 11,231.3 -315.5% 15,725.7
gs
befor
e tax
Income -810.5 -512.1 58.3% 529.7 -3,031.0 -117.5% -4,251.3
taxes
NET 1,145.6 2,065.3 -44.5% -23,669.1 8,200.3 -388.6% 11,474.3
PROFI
T
Other
compr
ehensi
ve
incom
e:
Exchan -110.4 114.4 -196.5% -111.0 294.4 -137.7% 292.3
ge
diffe
rences
on
trans
lation
of
forei
gn
opera
tions
TOTAL 1,035.2 2,179.7 -52.5% -23,780.1 8,494.7 -379.9% 11,766.6
COMPR
EHENSI
VE
INCOM
E
Distri
bution
of
net
profi
t:
Parent 1,145.6 2,065.3 -44.5% -23,669.1 8,200.3 -388.6% 11,474.3
-compa
ny
share
holder
s
Minori 0.0 0.0 0.0 0.0 0.0
ty
inter
est
Distri
bution
of
total
compr
ehensi
ve
incom
e:
Parent 1,035.2 2,179.7 -52.5% -23,780.1 8,494.7 -379.9% 11,766.6
-compa
ny
share
holder
s
Minori 0.0 0.0 0.0 0.0 0.0
ty
inter
est
Earnin 0.06 0.10 -44.7% -1.14 0.40 -385.9% 0.56
gs per
share
, EUR
Earnin 0.06 0.10 -44.7% -1.14 0.40 -385.9% 0.56
gs per
share
(dilu
ted),
EUR
CONSOLIDATED BALANCE SHEET, EUR 1,000
Assets 30/9/2011 31/12/2010 Change, %
Non-current assets
Intangible assets 48,901.3 74,514.2 -34.4%
Tangible assets 3,592.3 2,925.9 22.8%
Financial assets 640.8 628.0 2.0%
Long-term receivables 0.0 14.0 -100.0%
Deferred tax assets 1,220.1 875.7 39.3%
Total non-current assets 54,354.5 78,957.8 -31.2%
Current assets
Current receivables 27,495.8 26,798.9 2.6%
Available-for-sale financial assets 304.2 299.6 1.5%
Cash and cash equivalents 2,620.8 9,382.1 -72.1%
Total current assets 30,420.9 36,480.5 -16.6%
Total assets 84,775.3 115,438.3 -26.6%
Shareholders' equity and liabilities 30/9/2011 31/12/2010 Change, %
Share capital 2,087.6 2,086.5 0.1%
Rights issue 0.0 39.7
Issue premium fund 7,899.5 7,899.5 0.0%
Other reserves 5,203.8 5,203.8 0.0%
Unrestricted invested shareholders' equity 35,525.0 35,486.4 0.1%
Translation difference 55.3 166.3 -66.7%
Retained earnings 11,225.4 5,054.4 122.1%
Net profit -23,669.1 11,474.3 -306.3%
Equity attributable to parent-company 38,327.5 67,411.0 -43.1%
shareholders
Minority interest 0.0 0.0
Total shareholders' equity 38,327.5 67,411.0 -43.1%
Liabilities
Long-term interest-bearing liabilities 2,078.5 16,609.4 -87.5%
Other long-term liabilities 611.3
Deferred tax liabilities 896.9 2,177.6 -58.8%
Total long-term liabilities 3,586.6 18,786.9 -80.9%
Short-term interest-bearing liabilities 19,855.8 6,706.2 196.1%
Other short-term liabilities 23,005.4 22,534.1 2.1%
Total short-term liabilities 42,861.2 29,240.4 46.6%
Total liabilities 46,447.8 48,027.3 -3.3%
Shareholders' equity and liabilities 84,775.3 115,438.3 -26.6%
CONSOLIDATED CASH FLOW STATEMENT, EUR 1,000
1/1/2011-30/9/ 1/1/2010-30/9/ 1/1/2010-31/12
2011 2010 /2010
Cash flow from operations:
Net profit -23,669 8,200 11,474
Adjustments to net profit 32,043 6,947 9,409
Change in working capital 544 -7,640 -5,828
Interest paid -505 -582 -703
Interest income 27 6 21
Taxes paid -5,203 -2,700 -3,306
Net cash flow from operations 3,237 4,233 11,066
Cash flow from investments:
Purchases of tangible and -2,373 -1,116 -1,965
intangible assets
Cash flow from investments -2,373 -1,116 -1,965
Cash flow from financing:
Proceeds from share issue 0 40 79
Acquisition of own shares 0 0 0
Repayment of current loans -2,044 -6,063 -6,082
Repayments of non-current loans 0 -1,000 -1,000
Withdrawals of current loans 0 0 0
Withdrawals of non-current loans 0 0 0
Dividends paid and other profit -5,577 -2,885 -2,885
distribution
Cash flow from financing -7,621 -9,908 -9,887
Change in liquid assets -6,757 -6,792 -786
Liquid assets at beginning of 9,682 10,469 10,469
period
Change in fair value
Change in liquid assets -6,757 -6,792 -786
Liquid assets at end of period 2,925 3,677 9,682
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, EUR 1,000
2010 a) b) c) d) e) f) g) h)
Shareholders' equity, 1 2,085 0 7,899 35,448 5,204 -126 7,673 58,184
January 2010
Net profit 8,200 8,200
Other comprehensive 294 294
income
Dividends -2,885 -2,885
Share-based payments 40 197 236
recognised against
equity
Shareholders' equity, 30 2,125 0 7,899 35,448 5,204 168 13,185 64,029
September 2010
2011 a) b) c) d) e) f) g) h)
Shareholders' equity, 2,086 40 7,899 35,486 5,204 166 16,529 67,411
1 January 2011
Net profit -23,669 -23,669
Other comprehensive -111 -111
income
Dividends -5,577 -5,577
Share-based payments 1 -40 39 273 273
recognised against
equity
Shareholders' equity, 2,088 0 7,899 35,525 5,204 55 -12,444 38,327
30 September 2011
a = share capital
b = rights issue
c = share premium
d = unrestricted invested shareholders' equity
e = other reserves
f = currency translation differences
g = retained earnings
h = total shareholders' equity
NOTES TO THE ACCOUNTS
Accounting principles:
The interim report has been drafted in line with IFRS, applying the same
accounting principles as in the 2010 financial statements. The accounting
principles and formulae for the calculation of key figures and ratios are
unchanged and are presented in the 2010 financial statements.
Seasonal nature of business:
The Group's business is affected by the number of workdays each month as well
as by holiday seasons.
Dividends paid:
Dividends paid during the reporting period totalled EUR 5,576,834.34.
Related-party transactions:
The Digia Group's related parties include the CEO and the members of the Board
of Directors and Group Management Team. The Digia Group had no significant
transactions with related parties during the reporting period.
M&A transactions completed:
On 7 March 2011, Digia concluded an agreement with Nokia Plc for the
acquisition of its commercial Qt business. The acquisition came into effect on
22 March 2011. This transaction included a right to sell commercial software
licences for Qt technology, as exclusive supplier for the first three years.
The purchase price for the business acquired includes fixed and variable
components. Fixed components amount to EUR 150,000, which was paid with the
company's cash reserves. In addition to fixed components, the seller is
entitled to an additional annually payable purchase price in the event that the
sales targets agreed upon for said business for 2011-2013 are met. The
estimated additional purchase price for year 2011 is EUR 0,7 million, to be
paid in cash as realised.
On the basis of the initial purchase price allocation, the majority of the
acquisition price (EUR 0.8 million) is related to the exclusive sales rights
and customer relationships acquired. The transaction carried no goodwill.
Segment information:
Digia's business operations are divided into two main business segments:
Enterprise Solutions and Mobile Solutions. Enterprise Solutions is divided into
ERP and Financial Administration, Digital Services, and Integration Solutions.
The Mobile Solutions segment is divided into Contract Engineering Services and
User Experience Services.
NET SALES, EUR 7-9/201 7-9/201 Change, 1-9/201 1-9/201 Change, 2010
1,000 1 0 % 1 0 %
Enterprise 18,563 15,641 18.7% 59,728 54,929 8.7% 75,674
Solutions
Mobile Solutions 7,464 11,310 -34.0% 32,014 39,870 -19.7% 55,152
Digia Group 26,027 26,951 -3.4% 91,743 94,800 -3.2% 130,825
OPERATING PROFIT BEFORE 7-9/20 7-9/20 Change 1-9/20 1-9/20 Change, 2010
EXTRAORDINARY ITEMS, 11 10 , % 11 10 %
EUR 1,000
Enterprise Solutions 2,599 2,407 8.0% 6,052 8,219 -26.4% 11,001
Mobile Solutions 117 520 -77.6% -450 4,165 -110.8% 6,164
Digia Group 2,716 2,927 -7.2% 5,602 12,384 -54.8% 17,164
OPERATING PROFIT, 7-9/201 7-9/201 Change, 1-9/201 1-9/201 Change, 2010
EUR 1,000 1 0 % 1 0 %
Enterprise 2,599 2,409 7,9% 6,052 8,219 -26,4% 11,001
Solutions
Mobile Solutions -526 520 -201,2% -29,606 4,165 -810,8% 6,164
Digia Group 2,073 2,929 -29,2% -23,554 12,384 -290,2% 17,164
ASSETS, EUR 1,000 30/9/2011 31/12/2010
Enterprise Solutions 69,526 63,762
Mobile Solutions 10,464 40,491
Unallocated 4,786 11,185
Digia Group 84,775 115,438
Consolidated income statement by quarter:
EUR 1,000 7-9/2011 4-6/2011 1-3/2011 10-12/201 7-9/2010
0
Net sales 26,027.5 32,358.3 33,356.7 36,025.4 26,951.0
Other operating income 47.0 28.5 24.2 32.3 184.8
Materials and services -1,761.9 -3,906.6 -2,483.6 -2,749.0 -1,689.6
Depreciation, -858.1 -26,387.2 -926.8 -954.6 -922.8
amortisation, and
impairment
Other operating expenses -21,381.8 -29,979.1 -27,711.1 -27,573.3 -21,596.0
Operating profit 2,072.7 -27,886.1 2,259.5 4,780.9 2,927.5
Financial expenses (net) -116.6 -185.6 -342.7 -286.5 -350.1
Earnings before tax 1,956.2 -28,071.8 1,916.8 4,494.3 2,577.4
Income taxes -810.5 1,809.2 -468.9 -1,220.3 -512.1
Net profit 1,145.6 -26,262.6 1,447.9 3,274.1 2,065.3
Allocation:
Parent-company 1,145.6 -26,262.6 1,447.9 3,274.1 2,065.3
shareholders
Minority interest 0 0 0
Earnings per share, EUR 0.06 -1.27 0.07 0.16 0.10
Earnings per share 0.06 -1.27 0.07 0.16 0.10
(diluted), EUR
Group key figures and ratios:
1-9/2011 1-9/2010 2 010
Extent of business:
Net sales 91,743 94,800 130,825
- change from previous year -3.2% 8.8% 8.7%
Average capital invested 75,494 87,981 89,700
Personnel at period end 1,388 1,514 1,558
Average number of personnel 1,519 1,496 1,508
Profitability:
Operating profit before extraordinary items and 5,602 12,384 17,164
impairment
- % of net sales 6.1% 13.1% 13.1%
Operating profit -23,554 12,384 17,164
- % of net sales -25.7% 13.1% 13.1%
Earnings before tax -24,199 11,231 15,726
- % of net sales -26.4% 11.8% 12.0%
Net profit -23,669 8,200 11,474
% of net sales -25.8% 8.7% 8.8%
Return on equity, % -59.7% 17.9% 18.3%
Return on investment, % -41.2% 18.9% 19.3%
Financing and financial standing:
Interest-bearing liabilities 21,934 23,321 23,316
Short-term investments, and cash and bank 2,925 3,677 9,682
receivables
Net gearing 49.6% 30.7% 20.2%
Equity ratio 47.4% 58.7% 58.8%
Net cash flow from operations 3,237 4,233 11,066
Earnings per share, undiluted (EUR) -1.14 0.40 0.56
Earnings per share, diluted (EUR) -1.14 0.40 0.56
Equity per share 1.84 3.07 3.23
Lowest share price 2.30 3.36 3.36
Highest share price 5.79 5.89 5.89
Average share price 4.24 4.96 5.01
Market capitalisation 53,442 112,818 104,949
Formulae for key figures and ratios are presented in the 2010 financial
statements. These formulae remained unchanged during the reporting period.
Attachments: