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Vitec Software Group B Earnings Release 2015

Feb 17, 2016

2988_10-k_2016-02-17_5c37d029-8cdd-43d9-86bd-4fba7c557c82.pdf

Earnings Release

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YEAR-END REPORT JANUARY-DECEMBER 2015

EARNINGS PER SHARE UP 65 %

SUMMARY FOR JANUARY-DECEMBER 2015

  • Net sales SEK 618,4 M (492,0)
  • Profit before tax SEK 94,7 M (64,5)
  • Operating margin 16 % (14)
  • Earnings per share before dilution SEK 2,66 (1,75)
  • Cash flow from operations SEK 140,3 M (129,3)
  • The board proposes an increased dividend of SEK 0,90 (0,67) per share

SUMMARY FOR OCTOBER-DECEMBER 2015

  • Net sales SEK 170,1 M (141,5)
  • Profit before tax SEK 26,9 M (22,1)
  • Operating margin 17 % (16)
  • Earnings per share before dilution SEK 0,86 (0,65)
  • Cash flow from operations SEK 33,9 M (38,2)
  • Acquisition of Nice AS and share split 5-for-1

CEO´S COMMENTS

2015 was a consistently strong year in which all business areas delivered a higher operating profit than the previous year and a consolidated operating profit of SEK 100 million was reported for the first time. The operating margin for the full year amounted to 16.3 percent, which is the strongest to date. The proposed dividends from the Board of Directors also mean that dividends will have risen for the thirteenth year in a row.

The companies acquired during 2015 have delivered sales and earnings in accordance with expectations and have been rapidly integrated into the group. These acquisitions have also helped to increase our geographical spread, so that Sweden now accounts for less than 50 percent of total revenues. Vitec's financial position and preparedness for future acquisitions is good. We intend to continue to grow through acquisitions and focusing on the Nordic countries, we currently have about a 100 interesting vertical software companies on our prospect list. We thus have good prospects for further acquisitions.

Our business model with its aim of achieving a high proportion of recurring revenue, continues to produce results. Recurring revenue accounted for 78 percent (76) for the full year in 2015. This high portion of recurring revenue gives us the capability to operate with a long-term perspective and consistency, while also providing excellent conditions for absorbing temporary downturns in individual business areas. Long-term, we can achieve a higher proportion of recurring revenue but in the short term, the services production share of revenue will increase, since a large stock of unfilled orders in primarily BA Property Management will require more integration, configuration and training services. At the same time there will be a gradual reduction in recurring revenue during 2016 in the Swedish part of the BA Estate Agents, since Fastighetsbyrån and Svensk fastighetsförmedling have announced that they will be leaving us.

With a clear shift from traditional licensing to a subscription model (SaaS), the proportion of recurring revenue and the operating margin will increase at the same time. Together with our employees' tremendous capacity for renewal and integrating acquisitions, this provides an excellent footing for long-term development throughout our entire organization. With acquisitions of well-established companies and a growing proportion of recurring revenue, Vitec will continue along its fixed path: to operate in a number of independent and specialized niche markets in order to achieve sustainable and profitable growth.

Lars Stenlund, CEO

January - December 2015

The Group's focus on increasing repetitive revenues and improving efficiency in the businesses continues to produce positive effects. In 2015, all business areas have made profit improvements and we have also acquired and integrated four new companies. The latest acquisition was made in the fourth quarter.

Business Area Estate Agent

The successes continued for Vitec Express. In November, a three-year agreement was signed with Länsförsäkringar Fastighetsförmedling and Bjurfors, and Vitec Express experienced a very positive response at the estate agent fair. We have started a modernization initiative of our estate agent system in Norway. The system, which is entirely cloudbased, builds further on the Norwegian platform and Vitec Express. Development takes place in Norway and Sweden.

Business Area Real Estate

Orders reached a new all-time high during the fourth quarter, and we enter the New Year with strong order stock. More and more customers choose our cloud-based delivery model, which has a positive effect on repetitive revenues. Service revenues are also growing as new sales and upgrades are generating a large number of implementation projects.

Business Area Media

During the period we signed an agreement with a new customer for our Balans business system. We continue to see stable demand for our services among existing customers. The development of new web-based modules is proceeding according to plan.

Business Area Energy

Continued, focused targeting of the European market with regard to wind and energy forecasts. We signed agreements on trial installations during the period for potential customers in Croatia, Bulgaria, Germany and the UK. We hope that many of these will be converted into customers during the first half of 2016.

Business Area Health

During the fourth quarter we signed the biggest-ever deal in the Health business area. The agreement relates to our Acute patient data system and is a three-year agreement with the Finnish healthcare company Diacor. When in full use, the system covers approximately 1,000 users. The system will be introduced in phases, with final delivery in December 2016. In the second half of the year we launched a new text message service that provides doctors with an opportunity to notify their patients more effectively.

Business Area Auto

Integration of the two latest acquisitions Datamann (DK) and Infoeasy (NO) is proceeding according to plan. Renewal of our Norwegian solution for vehicle testing (PKK) has now been completed.

Business Area Finance and Insurance

Finance & Insurance Sweden will complete the final delivery of Capitex Pension to Länsförsäkringar Fondliv during the first quarter of 2016. It has been an extensive roll-out that have been executed according to plan. The rollout of the latest version of the Portman portfolio management system continues in Denmark. Around 65% of our customers have now started using our new version. In December we acquired the Norwegian software company Nice, whose product is an industry-specific program for insurance companies. Nice reinforces the Finance & Insurance business area and complements our offering.

FINANCIAL INFORMATION

Sales and results

October-December 2015

Revenues

Net sales for the period amounted to SEK 170,1 million (141,5), which represents an increase of 20 %. License revenue increased 2 % from the previous year and amounted to SEK 7,9 million (8,1). Recurring revenue for the period increased by 15 % from the previous year and amounted to SEK 125,4 million (109,3), corresponding to 74 % (77) of net sales. Service revenues increased by 43 % from the previous year and amounted to SEK 32,4 M (22,6). Fox Publish AS and ADservice Scandinavia AB were consolidated from March 2 and contributed during the period with net sales of SEK 4,4 million. Datamann A/S was consolidated from July 1 and contributed with net sales of SEK 9,5 million. Infoeasy AS was consolidated from July 2 and contributed with net sales of SEK 5,3 million. Nice AS was consolidated from December 7 and contributed with net sales of SEK 3,0 million.

Results

Operating profit amounted to SEK 28,4 million (23,3) with an operating margin of 17 % (16). Profit after tax amounted to SEK 25,2 million (18,8). Earnings per share before dilution were SEK 0,86 (0,65). The Group´s pension liability for defined benefit pensions have decreased by SEK 3,1 million due to a reduced number of employees covered by the agreement. Personnel costs have decreased by a corresponding amount.

January-December 2015

Revenues

Net sales for the period amounted to SEK 618,4 million (492,0), which represents an increase of 26 %. License revenue declined 7 % from the previous year and amounted to SEK 23,1 million (24,9). Recurring revenue for the period increased by 29 % from the previous year and amounted to SEK 480,6 million (372,8), corresponding to 78 % (76) of net sales. Service revenues increased by 21 % from the previous year and amounted to SEK 106,2 M (88,0). Fox Publish AS and ADservice Scandinavia AB were consolidated from March 2 and contributed during the period with net sales of SEK 19,9 million. Datamann A/S was consolidated from July 1 and contributed with net sales of SEK 19,4 million. Infoeasy AS was consolidated from July 2 and contributed with net sales of SEK 10,4 million. Nice AS was consolidated from December 7 and contributed with net sales of SEK 3,0 million.

Results

Operating profit amounted to SEK 100,6 million (68,6) with an operating margin of 16 % (14). Profit after tax amounted to SEK 78,2 million (49,1). Earnings per share before dilution were SEK 2,66 (1,75).

Liquidity and financial status

The Group's cash and cash equivalents, including short-term investments, at end of period amounted to SEK 60,3 million (71,1). In addition to these cash and cash equivalents, was a bank overdraft facility of SEK 20 million, and SEK 172,1 million in an unused credit facility of SEK 250 million. Cash flow from operating activities was SEK 140,3 million (129,3). Investments totaled SEK 70,2 million in intangible assets including capitalized work and SEK 11,8 million in tangible assets. Through the acquisitions of Fox Publish AS, ADservice Scandinavia AB, Datamann A/S, Infoeasy AS and Nice AS SEK 123,7 million was invested in product rights, brands, customer contracts and goodwill.

Total interest-bearing liabilities amounted on December 31, 2015 to SEK 241,1 million (191,9) distributed on long term debt SEK 207,2 million (132,6) and short-term interest-bearing liabilities SEK 33,9 million (59,3). During the period one new loan from Norrlandsfonden was signed totaling SEK 25,0 million. In connection to the new loan a convertible loan from Norrlandsfonden was resolved to the amount of SEK 36,8 million. In connection with the acquisition of Datamann A/S SEK 54,9 millon was used from the credit facility. In connection with the acquisition of Nice AS SEK 23,0 millon was used from the credit facility.

Vitec has during the last quarter conducted a share split 5-for-1, which means that each previous share is split into five shares of the same class. After the split, the total number of shares has increased from 5 879 338 shares to 29 396 690 shares. The number of A shares has increased from 800 000 shares to 4 000 000 shares and the number of B shares from 5 079 338 to 25 396 690 shares. The A shares have a voting right of 10 (ten) and the B shares have a voting right of 1 (one).

Equity attributable to Vitec's shareholders amounted to SEK 271,6 million (260,1). The equity ratio was 31 % (34). The payment of dividend after the Annual General Meeting in May amounted to SEK 0,67 per share, totaling SEK 19,7 million.

SIGNIFICANT EVENTS DURING THE FOURTH QUARTER

November: Vitec supplies Acute to Diacor

Vitec and the Finnish healthcare company Diacor have signed a contract for using the Acute electronic medical record system. The SaaS-contract runs for 36 month.

December: Vitec acquires Norwegian Insurance Computer Environment AS (Nice AS)

Vitec Software Group AB (publ) has on December 7 agreed to acquire 100 % of the Norwegian software company Nice AS, whose product is an industry-specific software for insurance companies in Norway, Denmark and Sweden. Nice AS has since 1987 focused on the development, implementation and operation of fully integrated system solutions for insurance companies. The acquisition adds 13 new employees to the Vitec Group.

December: Vitec carries out a share split 5-for-1

The Extraordinary General Meeting of Vitec Software Group AB (publ) held on December 9 2015 resolved in a share split 5-for-1, meaning that each share is divided into five shares of the same class. The first trading day after the split was Tuesday December 22 2015. The last trading day for trading in shares before the split was Monday December 21 2015. After the split, the total number of shares increased from 5,879,338 shares to 29,396,690 shares. The number of A shares has increased from 800,000 shares to 4,000,000 shares and the number of B shares from 5,079,338 shares to 25,396,690 shares.

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD

February: New Head of Business Area Real Estate

Magnus Persson is from February 1 the new head of Business Area Real Estate. Magnus, former Director of Sales in the business area is succeeding Johan Kull who after almost four years leaves for a new position within the parent company, Vitec Software Group AB (publ).

OPERATIONS

Vitec Group operations are controlled and organized in seven business areas. For more information on each business area, refer to www.vitecsoftware.com. The business areas are; Estate Agent, Real Estate, Media, Energy, Health, Auto and Finance & Insurance.

Segment Mäklare (BA Estate Agent):

The segment consists of Vitec Mäklarsystem AB, Capitex AB, Vitec IT-Makeriet AS, the Group Vitec Midas AS, Fox Publish AS and ADservice Scandinavia AB. The business area provides software for real estate agents.

Segment Fastighet (BA Real Estate):

The segment consists of Vitec Fastighetssystem AB, Vitec Förvaltningssystem AB, Vitec Capifast AB and Vitec Software AB. The business area offers software applications for property owners, construction and management companies, property managers and real estate developers.

Segment Media (BA Media):

The segment consists of 3L Media AB, Vitec Veriba AB and Retail i Linköping AB. The business area offers software for newspaper companies and a few managed solutions for distribution and retail.

Segment Energi (BA Energy):

The segment consists of Vitec Energy AB. The business area offers a forecasting software system of electricity and heat demand, wind power, and software supporting the technical management and maintenance of the energy distribution networks.

Segment Hälsa (BA Health):

The segment consists of the Group Acuvitec Oy. The business area offers software for electronic medical records used for health care in Finland.

Segment Auto (BA Auto):

The segment consists of Vitec AutoData Norge AS and Infoeasy AS in Norway and Datamann A/S in Denmark. The business area offers industry specific business applications for the automotive sector with support for sales, purchasing, inventory control, billing, accounting and salary. Its customers include importers, wholesalers, retailers, distributors and retailers but also workshops.

Segment Finans & Försäkring (BA Finance & Insurance):

The segment consists of Vitec Capitex AB and the Group Aloc A / S. The business area offers systems for tax calculations, pension calculations and housing calculations and operational systems for the Nordic financial and insurance sector. From December 7 2015 the business area also includes Nice AS.

Result overview for segments, Million SEK*

PROFIT BEFORE ACQUISITION_RELATED COSTS
SEGMENT NET SALES (MSEK) (MSEK)
2015 2014 2015 2014 2015 2014 2015 2014
Oct-Dec Oct-Dec Jan-Dec Jan-Dec Oct-Dec Oct-Dec Jan-Dec Jan-Dec
BA Estate Agent 51,5 45,0 207,0 185,8 8,6 5,6 33,2 29,4
BA Real Estate 41,0 37,4 142,6 134,3 6,8 7,2 24,9 20,5
BA Media 2,3 3,8 10,5 21,8 0,2 1,3 2,4 1,7
BA Energy 6,8 5,6 24,1 22,7 3,0 2,0 8,8 7,0
BA Health 15,4 14,1 61,5 43,6 -0,2 -0,4 5,7 3,8
BA Auto 26,1 10,2 71,1 28,3 7,8 1,6 14,9 3,9
BA Finance & Insurance 26,9 25,4 101,2 55,0 3,1 6,1 13,9 6,3
Shared 0,0 0,1 0,4 0,5 - - - -
Vitec Group 170,1 141,5 618,4 492,0 29,2 23,3 103,9 72,7
Acquisition-related costs -0,8 0,0 -3,2 -4,1
Operating profit after acquisition
related costs 28,4 23,3 100,6 68,6
Net financial income/expence -1,5 -1,2 -5,9 -4,0
Profit before tax 26,9 22,1 94,7 64,5

Due to non-recurring acquisition-related costs, progress in the business areas are difficult to follow. For this reason, the operating profit has been split into operating profit before and after acquisition-related costs.

Sales by geography

The table below shows the Group's net sales translated to MSEK based on the customer's location.

MARKET NET SALES (MSEK)
2015 2014
Jan-Dec % Jan-Dec %
Sweden 308,1 49,8% 298,2 60,6%
Norway 142,1 23,0% 106,1 21,6%
Finland 64,1 10,4% 46,9 9,5%
Denmark 99,8 16,1% 37,3 7,6%
Rest of Europe 4,1 0,7% 2,9 0,6%
Rest of world 0,1 0,0% 0,6 0,1%
SUM 618,4 100,0% 492,0 100,0%

Business Area Estate Agent, January-December 2015

Total revenues amounted to SEK 207,0 million (185,8) an increase of 11 %. License revenues decreased and amounted to SEK 5,6 million (2,8). Recurring revenue increased by 13 % to SEK 191,1 million. Service revenue declined 26 % to SEK 9,2 million. Recurring revenue as a percentage of net sales was 92 % (91). Operating margin was unchanged at 16 % (16). As of March 2, operations in Fox Publish AS and ADservice Scandinavia AB were consolidated in the business area.

Business Area Real Estate, January-December 2015

Total revenues amounted to SEK 142,6 million (134,3), an increase of 6 %. License revenues declined by 27 % and amounted to SEK 9,2 million. Recurring revenue increased 9 % to SEK 82,0 million. Services revenue increased by 12 % to SEK 49,3 million. Recurring revenue as a percentage of net sales was 58 % (56). Operating margin increased to 17 % (15).

Business Area Media, January-December 2015

The total revenues amounted to SEK 10,5 million (21,8), a decrease of 52 %. License revenue declined 84 % to SEK 0,8 million. The comparative period includes a one-time sale of a software license to Eniro. Recurring revenue declined 38 % to SEK 4,6 million. Service revenues declined 44 % to SEK 5,2 million. Recurring revenue as a percentage of net sales was 44 % (34). Operating margin increased and amounted to 23 % (8).

Business Area Energy, January-December 2015

The total revenues amounted to SEK 24,1 million (22,7), an increase of 6 %. Recurring revenue increased 8 % to SEK 17,3 million. Service revenues increased 4 % to SEK 6,6 million. Recurring revenue as a percentage of net sales was 72 % (71). Operating margin increased to 37 % (31).

Business Area Health, January-December 2015

Total revenues for the period amounted to SEK 61,5 million. License revenues amounted to SEK 0,3 million. Recurring revenue amounted to SEK 48,3 million and services to SEK 12,1 million. Comparative figures are not available. Recurring revenue as a percentage of net sales was 79 %. The operating margin was 9 %.

Business Area Auto, January-December 2015

The total revenues amounted to SEK 71,1 million. Recurring revenue amounted to SEK 60,0 million, services to SEK 7,1 million and other SEK 3,4 million. Comparative figures are not available. Recurring revenue as a percentage of net sales was 84 %. Operating margin was 21 %. As of July, operations in Datamann A/S and Infoeasy AS were consolidated in the business area.

Business Area Finance & Insurance, January-December 2015

The total revenue amounted to SEK 101,2 million (55,0), an increase of 84 %. License revenues increased 73 % to SEK 6,8 million. Recurring revenue increased by 83 % to SEK 77,2 million. Service revenues increased by 95 % to SEK 16,5 million. Recurring revenue as a percentage of net sales was 76 % (77). Operating margin increased to 14 % (11). Operations in Aloc A / S was consolidated in the business area as of June 30 2014, and is the reason for the strong growth.

Risks and uncertainties

Vitec's significant risks and uncertainties are described in the Directors' Report in the Annual Report for 2014 under the heading "Risks and Uncertainties" on pages 36-37, note 1 under "Assumptions and estimates" on page 54 and Note 20, "Financial risks and their management "on pages 67-68. No significant changes have occurred since then.

The Parent Company

Net sales amounted to SEK 100,4 million (57,3) and consisted primarily of sales to subsidiaries for services rendered. Profit after tax amounted to SEK 54,4 million (31,5). The Parent Company is exposed to the same risks and uncertainties as the group in general, see above under section Risks and uncertainties.

Transactions with related parties

No significant related party transactions have occurred in the Group and Parent Company during the period.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SEK (thousends) 2015 2014 2015 2014
Oct-Dec Oct-Dec Jan-Dec Jan-Dec
OPERATING REVENUE
Recurring revenues
License revenues
125 395
7 890
109 253
8 090
480 552
23 098
372 838
24 928
Service revenues 32 392 22 601 106 191 87 997
Other revenues 4 390 1 569 8 544 6 193
NET SALES
Capitalized development costs
170 067
15 072
141 513
17 648
618 385
62 108
491 956
46 261
Unrealized exchange gains 10 430 1 753 25 718 2 809
Reversal of aditional purchase price - - 11 213 -
SUM 195 569 160 914 717 424 541 026
OPERATING EXPENSES
Goods for resale -2 088 -1 020 -6 835 -2 786
Subcontractors and subscriptions -20 989 -21 700 -82 890 -66 546
Other external expenses -24 531 -16 273 -81 542 -63 983
Staff costs -88 839 -82 087 -336 133 -275 665
Depreciation of tangible and intangible assets -23 331 -15 612 -74 625 -56 319
Impairment of Goodwill - - -11 213 -
Unrealized exchange losses -6 577 -924 -20 335 -3 077
TOTAL COSTS -166 355 -137 616 -613 573 -468 376
OPERATING PROFIT BEFORE ACQUSITION-RELATED COSTS 29 214 23 298 103 851 72 650
Acquisition-related costs -841 - -3 244 -4 058
OPERATING PROFIT AFTER ACQUISITION-RELATED COSTS 28 373 23 298 100 607 68 592
Income from financial investments
Financial income 535 924 826 1 547
Financial expense -1 999 -2 076 -6 747 -5 594
TOTAL FINANCIAL ITEMS -1 464 -1 152 -5 921 -4 047
PROFIT BEFORE TAX 26 909 22 146 94 686 64 545
Tax -1 728 -3 326 -16 495 -15 480
NET PROFIT 25 181 18 820 78 192 49 065
OTHER COMPREHENSIVE INCOME, ITEMS THAT MAY BE
RECLASSIFIED TO PROFIT OR LOSS
Currency translation differences -10 355 -4 634 -19 942 1 324
TOTAL OTHER COMPREHENSIVE INCOME FOR THE PERIOD -10 355 -4 634 -19 942 1 324
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 14 826 14 186 58 250 50 389
PROFIT FOR THE PERIOD ATTRIBUTABLE TO
-Shareholders of the Parent Company 25 181 18 820 78 191 49 065
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE
TO
-Shareholders of the Parent Company 14 826 14 186 58 249 50 389
EARNINGS PER SHARE
-Before dilution (SEK) 0,86 0,65 2,66 1,75
-After dilution (SEK) 0,84 0,62 2,64 1,68
Average number of shares 29 396 690 29 119 315 29 396 690 28 003 405
Number of shares after dilution 29 838 900 30 547 885 29 788 016 29 431 975

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

SEK (thousends)
ASSETS 2015-12-31 2014-12-31
FIXED ASSETS
Intangibles assets
Goodwill 202 103 190 902
Capitalized development costs 109 171 76 562
Software 3 860 3 226
Brands 8 793 7 752
Product rights 229 079 197 815
Customer agreements 62 321 47 884
Tangible fixed assets
Buildings 9 034 9 115
Equipment 20 343 19 674
Finacial assets
Other long-term receivables 835 -
Deferred tax 5 952 6 001
TOTAL FIXED ASSETS 651 491 558 931
CURRENT ASSETS
Inventories 399 339
Receivables 159 861 142 517
Cash and equivalents 60 268 71 114
TOTAL CURRENT ASSETS 220 528 213 970
TOTAL ASSETS 872 019 772 901
EQUITY AND LIABILITIES
EQUITY 271 538 260 130
LONG-TERM LIABILITIES, INTEREST BEARING 207 222 132 593
LONG-TERM LIABILITIES, NON-INTEREST BEARING 102 559 108 428
SHORT-TERM LIABILITIES, INTEREST BEARING 33 845 59 284
SHORT-TERM LIABILITIES, NON-INTEREST BEARING 256 855 212 466
TOTAL EQUITY AND LIABILITIES 872 019 772 901

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEK (thousands) 2015 2014 2015 2014
Oct-Dec Oct-Dec Jan-Dec Jan-Dec
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT COMPANY
At beginning of period 256 713 239 777 260 130 169 607
Option element convertible bond - 865 - 865
Conversion bonds - 5 302 -27 145 8 035
Issue of new shares after issue costs* - - - 45 832
Dividend - - -19 696 -14 598
Total comprehensive income for the period 14 826 14 186 58 249 50 389
At end of period 271 540 260 130 271 538 260 130

CONSOLIDATED STATEMENT OF CASH FLOWS

SEK (thousands) 2015
Oct-Dec
2014
Oct-Dec
2015
Jan-Dec
2014
Jan-Dec
OPERATING ACTIVITIES
Operating profit 28 373 23 298 100 607 68 592
Adjustments for items not included in cash flow
Depreciation/amortisation and impairment 23 331 15 612 74 625 56 319
51 704 38 910 175 232 124 911
Interest received 535 924 826 1 547
Interest pais -1 999 -2 076 -6 747 -5 594
Tax paid 1 070 2 060 -14 177 2 356
CASH FLOW FROM OPERATING ACTIVITIES BEFORE
CHANGES IN WORKING CAPITAL 51 310 39 818 155 134 123 220
Changes in working capital
Change in inventories -41 -54 51 -59
Change in operating receivables -53 819 -60 756 -4 281 -28 653
Change in operating liabilities 36 471 59 220 -10 611 34 820
CASH FLOW FROM CURRENT OPERATIONS 33 921 38 228 140 293 129 328
INVESTMENT ACTIVITIES
Change in long-term receivables 23 - -501 -
Acquisition of subsidiaries, net* -18 183 - -85 580 -148 522
Acquisition of intangible assets and capitalized development costs -21 680 -17 426 -70 174 -49 815
Acquisition of tangible assets -3 616 -3 227 -11 821 -10 783
CASH FLOW FROM INVESTMENT ACTIVITIES -43 456 -20 653 -168 076 -209 120
FINANCING ACTIVITIES
Dividend - - -19 696 -14 598
Redemption convertible loan - - -36 781 -
New loans 21 762 14 070 102 901 162 224
Amortisation of loans -9 130 -11 093 -34 478 -63 907
Issue of new share - - - 45 832
CASH FLOW FROM FINANCIAL ACTIVITIES 12 632 2 977 11 946 129 551
CASH FLOW FOR THE PERIOD 3 097 20 552 -15 837 49 759
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
PERIOD 55 416 51 888 71 114 21 319
EXCHANGE-RATE DIFFERENCES IN CASH AND CASH
EQUIVALENTS 1 755 -1 326 4 991 36
CASH AND CASH EQUIVALENTS AT END OF PERIOD 60 268 71 114 60 268 71 114

* Payment for acquisition of subsidiaries in 2015 consisted of proceeds for Fox Publish AS, ADservice Scandinavia AB, Datamann A/S, Infoeasy AS and Nice AS. Payment amounted to SEK 80,6 million. All acquisitions related to the entire outstanding share capital and meant that control was obtained in all companies. During the period an additional payment was made for the acquisition of Aloc A/S SEK 4,9 million. The payment did not result in any changes in share capital or control.

Payment for acquisition of subsidiaries in 2014 consisted of proceeds for Acute, Autodata and Aloc. All acquisitions related to the entire outstanding share capital and meant that control was obtained in all companies.

INCOME STATEMENT, PARENT COMPANY

SEK (thousands) 2015 2014 2015 2014
Oct-Dec Oct-Dec Jan-Dec Jan-Dec
NET SALES 32 249 17 289 100 426 57 334
Operating costs -20 846 -19 269 -75 494 -61 673
OPERATING RESULT 11 403 -1 980 24 932 -4 339
RESULT FROM FINANCIAL INVESTMENTS
Income from shares in group companies 39 907 31 459 39 907 31 459
Financial income -161 490 516 912
Financial expense -1 718 -1 548 -6 235 -4 991
PROFIT AFTER FINANCIAL NET 49 431 28 421 59 120 23 041
Appropriations -822 8 309 -822 8 309
PROFIT BEFORE TAX 48 609 36 730 58 298 31 350
Tax -1 737 143 -3 869 143
NET PROFIT 46 872 36 873 54 429 31 493

The results of the period are consistent with the total comprehensive income.

BALANCE SHEET, PARENT COMPANY

SEK (thousands) 2015-12-31 2014-12-31
ASSETS
FIXED ASSETS
Intangible assets 3 827 3 699
Tangible assets 13 179 13 660
Financial assets 694 898 583 045
TOTAL FIXED ASSETS 711 904 600 404
CURRENT ASSETS
Receivables 43 394 44 056
Cash and equivalents 45 306 65 839
TOTAL CURRENT ASSETS 88 700 109 895
TOTAL ASSETS 800 604 710 299
EQUITY AND LIABILITIES
EQUITY 271 240 263 652
UNTAXED RESERVES 2 222 2 500
LONG-TERM LIABILITIES 212 001 153 644
SHORT-TERM LIABILITIES 315 141 290 503
TOTAL EQUITY AND LIABILITIES 800 604 710 299

ANNOTATIONS

ANN 1 ACCOUNTING AND VALUATION PRINCIPLES AND OTHER COMMENTS

This report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, IFRS, as adopted by the EU and the Swedish Annual Accounts Act. The parent company's financial statements have been prepared in accordance with the Annual Accounts Act and recommendation RFR 2 Accounting for Legal Entities. The new standards, amendments and interpretations to existing standards that have entered into force in 2015, has had no impact on the consolidated financial position or financial reports. The accounting policies and calculation methods are unchanged from the one described in the Annual Report for 2014.

The additional purchase price for Acuvitec OY has during the third quarter been written down by SEK 11,2 million. The correction has been recognized as revenue and as impairment of goodwill in accordance with IFRS 3:58. The correction has no effect on reported profit.

ANN 2 TAXES

Tax for the year amounted to SEK 22,4 million. Deferred tax amounted to SEK -5,9 million. SEK -3,9 million of deferred tax relates to changes in tax rates in Norway and Denmark

ANN 3 INVESTMENTS

Investments amounted to SEK 70,2 million in intangible assets, including capitalized work and SEK 11.8 million in tangible assets. Through the acquisition of Fox Publish AS, ADservice Scandinavia AB, Datamann A/S, Infoeasy AS and Nice AS SEK 123,7 million was added in product rights, brands, customer contracts and goodwill.

ANN 4 LONG-TERM DEBT

Long-term interest-bearing debt consists of bank loans SEK 193,7 million and a convertible loan SEK 13.5 million. Long-term non-interest bearing liabilities consist of deferred taxes SEK 89,7 million, pension liability SEK 8,0 million, a non-current portion of additional purchase price Fox Publish 2,9 million and a promissory note signed in connection with the acquisition of Nice AS SEK 1,9 million.

ANN 5 CONVERTIBLE DEBENTURE

Convertible debentures are included in long-term interest bearing liabilities:

Loan 1501 (long-term debt interest bearing liabilities, staff). SEK 13,4 million. Duration of the loan is January 1, 2015 - December 31, 2017. The interest rate is Stibor 180. The conversion price is SEK 31,80. Conversion may be requested 1 November to 30 November 2017. The share capital may upon conversion increase by a maximum of 44 221 SEK. At full conversion the dilution of about 1.5% of the share capital and 0.7% of the votes. The convertible program was registered by the Swedish Companies Registration Office February 11, 2015.

ANN 6 EQUITY

Consolidated shareholders' equity as of December 31, 2015 was SEK 271,6 million.

During the last quarter Vitec has conducted a share split 5-for-1, which means that each previous share is split into five shares of the same class. After the split, the total number of shares has increased from 5 879 338 shares to 29 396 690 shares. The number of A shares has increased from 800 000 shares to 4 000 000 shares and the number of B shares from 5 079 338 to 25 396 690 shares. The A shares have a voting right of 10 (ten) and the B shares have a voting right of 1 (one).

ANN 7 ACQUISITION ANALYSIS

Acquisition Fox Publish AS and ADservice Scandinavia AB

On March 2, 2015 Vitec acquired all the shares in Fox Publish AS and ADservice Scandinavia AB for a cash payment of SEK 15,0 million respectively SEK 0,4 million. The company develops and provides a publication system for real estate agents. Adservice Scandinavia is a sales company for the Swedish market. The companies are consolidated as of the acquisition date. The goodwill is not tax deductible and is considered to be attributable to the expected profitability, complementary expertise and synergies expected in the form of joint development of the Group's products. The acquisition increases Vitec's presence on the Norwegian and Swedish software market. Additional purchase price of SEK 1,0 million has been paid in 2015. The remaining debt in additional purchase price amounts to SEK 6,7 million and is dependent on discrete events within a maximum period of 36 months following the acquisition date. SEK 2,9 million had been recognized as short-term debt as of December 31, 2015.The maximum purchase price is SEK 24,1 million. The acquisition-related expenses amounted to SEK 0,1 million on December 31 and are reported as other external costs of comprehensive income. From the acquisition date until December 31 the revenues amounts to SEK 19,9 million. If consolidation had occurred at the beginning of the year, the companies would have brought the Group an additional approximately 5,0 million in revenue. The following purchase price allocation is preliminary until twelve months have passed since acquisition.

Preliminary purchase price allocation Fox Publish AS and ADservice Fair value Fair value recognized
(SEK thousands) Scandinavia AB adjustment in the Group
Brands - 434 434
Product Rights - 11 120 11 120
Customer Agreement - 6 875 6 875
Intangible fixed assets 123 - 123
Tangible fixed assets 366 - 366
Financial fixed assets 5 - 5
Current receivables 4 887 - 4 887
Cash and cash equivalents 983 - 983
Deferred tax liabilities - -4 966 -4 966
Current liabilities -4 706 - -4 7060
Net identifiable assets and liabilities 1 658 13 463 15 121
Goodwill on consolidation 8 936
Total 24 057
The Group´s acquisition value 24 057
Calculation of net cash outflow Fair value
Group´s acqcuisition value -24 057
Debt additional purchase price 7 689
Cash acquired 983
Net cash outflow -15 385

Acquisition of Datamann A/S

On July 1, 2015 Vitec acquired all the shares in Datamann A/S for a cash payment of SEK 54,9 million. The company's main product is a software for the Danish automotive sector.

The company is consolidated as of the acquisition date. The goodwill is not tax deductible and is considered to be attributable to the expected profitability, complementary expertise and synergies expected in the form of joint development of the Group's products. The acquisition increases Vitec's presence on the Danish software market and provide access to new markets. The acquisition-related expenses amounted to SEK 1,8 million December 31 and are reported as other external costs of comprehensive income. From the acquisition date until December 31 the revenues amounts to SEK 19,4 million. If consolidation had occurred at the beginning of the year, the company would have brought the Group an additional approximately 19,2 million in revenue. The following purchase price allocation is preliminary until twelve months have passed since acquisition.

Preliminary purchase price allocation Fair value
Fair value recognized
(SEK thousands) Datamann A/S adjustment in the Group
Brands - 1 835 1 835
Product Rights - 30 589 30 589
Customer Agreement - 11 472 11 472
Tangible fixed assets 1 069 - 1 069
Inventories 111 - 111
Current receivables 4 665 - 4 665
Cash and cash equivalents 15 235 - 15 235
Deferred tax liabilities -65 -10 316 -10 380
Current liabilities -12 003 - -12 0030
Net identifiable assets and liabilities 9 013 33 580 42 593
Goodwill on consolidation 12 308
Total 54 901
The Group´s acquisition value 54 901
Calculation of net cash outflow Fair value
Group´s acqcuisition value -54 901
Cash acquired 15 235
Net cash outflow -39 666

Acquisition of Infoeasy AS

On July 2, 2015 Vitec acquired all the shares in Infoeasy AS for a cash payment of SEK 16,3 million. The company's main product is a software for the Norwegian automotive sector.

The company is consolidated as of the acquisition date. The goodwill is not tax deductible and is considered to be attributable to the expected profitability, complementary expertise and synergies expected in the form of joint development of the Group's products. The acquisition increases Vitec's presence on the Norwegian software market and provide access to new markets. The acquisition-related expenses amounted to SEK 0,5 million on December 31 and are reported as other external costs of comprehensive income. From the acquisition date until December 31 the revenues amounts to SEK 10,4 million. If consolidation had occurred at the beginning of the year, the company would have brought the Group an additional approximately 12,2 million in revenue. The following purchase price allocation is preliminary until twelve months have passed since acquisition.

Preliminary purchase price allocation Fair value
Fair value recognized
(SEK thousands) Infoeasy AS adjustment in the Group
Brands - 282 282
Product Rights - 10 739 10 739
Customer Agreement - 1 378 1 378
Intangible fixed assets 896 - 896
Tangible fixed assets 24 - 24
Financial fixed assets 334 - 334
Current receivables 2 530 - 2 530
Cash and cash equivalents 4 274 - 4 274
Deferred tax liabilities - -3 348 -3 348
Long-term liabilities -1 241 - -1 241
Current liabilities -3 663 - -3 6630
Net identifiable assets and liabilities 3 156 9 051 12 208
Goodwill on consolidation 4 166
Total 16 373
The Group´s acquisition value 16 373
Calculation of net cash outflow Fair value
Group´s acqcuisition value -16 373
Cash acquired 4 274
Net cash outflow -12 099

Acquisition of Nice AS

On December 7, 2015 Vitec acquired all the shares in Norwegian Insurance Computer Environment AS for a cash payment of SEK 25,2 million. The company's main product is an industry-specific software for insurance companies in Norway, Denmark and Sweden.

The company is consolidated as of the acquisition date. The goodwill is not tax deductible for and is considered to be attributable to the expected profitability, complementary expertise and synergies expected in the form of joint development of the Group's products. The acquisition increases Vitec's presence on the Norwegian software market. The acquisition-related expenses amounted to SEK 0,8 million on December 31 and are reported as other external costs of comprehensive income. From the acquisition date until December 31 the revenues amounts to SEK 3,0 million. If consolidation had occurred at the beginning of the year, the company would have brought the Group an additional approximately 18,1 million in revenue. The following purchase price allocation is preliminary until twelve months have passed since acquisition.

Preliminary purchase price allocation Fair value
Fair value recognized
(SEK thousands) Nice AS adjustment in the Group
Brands - 403 403
Product Rights - 15 019 15 019
Customer Agreement - 4 435 4 435
Intangible fixed assets 72 - 72
Current receivables 981 - 981
Cash and cash equivalents 9 691 - 9 691
Deferred tax liabilities - -5 362 -5 362
Long-term liabilities -756 - -756
Current liabilities -3 013 - -3 0130
Net identifiable assets and liabilities 6 975 14 495 21 470
Goodwill on consolidation 3 730
Total 25 200
The Group´s acquisition value 25 200
Calculation of net cash outflow Fair value
Group´s acqcuisition value -25 200
Debt additional purchase price 2 016
Cash acquired 9 691
Net cash outflow -13 493

SIGNATURES

ASSURANCE OF THE BOARD

The Board of Directors and President hereby assure that the year-end report provides a fair and true view of the company´s and the Group's operation, financial position and earnings, and describes the significant risks and uncertainties facing the company and the companies included in the Group.

_____________________________ _____________________________

_____________________________ _____________________________

_____________________________ _____________________________

Umeå, February 17 2016.

Crister Stjernfelt (Chairman) Kaj Sandart

Birgitta Johansson-Hedberg Jan Friedman

Anna Valtonen Lars Stenlund (CEO)

The Board: Jan Friedman, Kaj Sandart, Birgitta Johansson-Hedberg, Crister Stjernfelt (Chairman) and Anna Valtonen.

INFORMATION

Publication

The information in this report is such that Vitec Software Group AB (publ.) is obliged to publish under the Securities Market Act and/or the Financial Instruments Trading Act. The information was released for publication on February 17, 2016 at 08:30 CET.

Contact

CEO Lars Stenlund, +46 70 659 49 39, [email protected]

CFO Maria Kröger, +46 70 324 66 58, [email protected]

Financial information

Can be ordered from: Vitec Software Group AB (publ), Investor Relations, PO-Box 7965, S-907 19 Umeå, Sweden Phone: +46 90-15 49 00 E-mail: [email protected] Financial information is published on www.vitecsoftware.com immediately after publication.

Financial calendar

2016-05-11 Interim Report January - March 2016 (≈13:00 CET)
2016-05-11 AGM 2015 (≈17:30 CET)
2016-07-14 Interim Report January-June 2016 ((≈08:30 CET)

This English version of the year-end report is a translation of the original Swedish version; in the event of variances, the Swedish version shall take precedence over the English translation.

The report has not been audited by the auditors.

Corporate registration

Vitec Software Group AB (publ.). Org.no. 556258-4804

KEY FIGURE DEFINITIONS

Return on capital employed

Operating profit as a percentage of average capital employed attributable to parent company shareholders.

Return on equity

Profit/loss for the period, attributable to parent company shareholders, as a percentage of average shareholders' equity, attributable to parent company shareholders.

Value added per employee

Operating income plus depreciation and staff costs relative to the average number of employees.

Adjusted equity per share

Equity attributable to shareholders in proportion to the number of shares issued at the closing-day.

Cash flow from operating activities per share

Cash flow from operating activities divided by the average number of shares on the market during the period.

Sales per employee

Net revenue, including other operating income in relation to average number of employees.

P/E ratio

Share price at year-end divided by earnings per share.

P/JEK

The share price at the balance sheet date multiplied by the number of shares issued on the closing date in relation to the equity attributable to the parent company's shareholders.

P/S

The share price at the balance sheet date multiplied by the average number of shares in relation to net sales.

Earnings per share

Profit/loss for the period, attributable to parent company shareholders, divided by the average number of shares on the market attributable to parent company shareholders.

Operating profit

Operating profit as a percentage of net sales.

Solidity

Shareholders' equity, including equity attributable to non-controlling interests in relation to total assets.

Debt ratio

Average liabilities in relation to average shareholders' equity and non-controlling interests.

Profit margin

Net profit after tax through the net turnover.

GRAPHS

Distribution Net Sales Jan-Dec 2015

Profit per share (SEK/share)

Distribution Profit Jan-Dec 2015

A SOFTWARE COMPANY IN GROWTH

VERTICAL MARKET SOFTWARE

Vitec is a software company that offers industry specific business solutions to the Nordic market. The company, with operations in Sweden, Norway, Finland and Denmark is growing in the mature part of the software industry by consolidating vertical software segments. Its clients include property management companies, construction and real estate companies, banks and insurance companies, energy companies, health companies, companies dealing with car parts and newspaper companies. Group turnover has an annual capacity of 670 million SEK and has approximately 440 employees. Vitec Software Group AB (publ.) is listed on Nasdaq OMX Stockholm.

Our mission is to provide industry-specific business solutions where our strategy is to focus on niches where there are needs that not as cost-effective can be met by general ERP-systems. In these niches we strive for a leading position. Our offer includes:

  • proprietary software
  • SaaS (Software as a Service), support and maintenance
  • specialist services

The current market is made up to 50 % of Sweden, 23 % of Norway, 16 % of Denmark and 10 % of Finland.

LONG CUSTOMER RELATIONSHIPS

Vitec formed in 1985 and has since 1998 been a public company based on software solutions. With our products and related services, we act in the long term, build trust and create confidence among our customers. We create value for customers through a customer-focused approach and a well-tailored program offering that supports, develops and increases the profitability of our customers' daily work processes.

BUSINESS MODEL WITH RECURRING REVENUE

Recurring contract revenues are a central part of the Vitecs business model. Recurring contract revenue includes recurring revenues for the use of our software, access to our customer service and new refined versions of our software. Technology trend today is for a more modern model in which the functionality of the software is delivered over the Internet. This movement means that our offer is extended to include the operation of the software and the data storage. This increases the proportion of recurring revenue contracts, which gives us a stable, predictable and recurring revenue volume while providing our customers with a secure overall offering. A business model with a high proportion of recurring revenue also gives us a good annual operating capital and reduces sensitivity to economic downturns. High proportion of recurring revenue contracts also provide strong cash flows, which is an important prerequisite for continued growth.

PROFITABLE GROWTH

Vitec has a pronounced growth strategy with a combination of acquisitions and organic growth. Growth is important because it gives us energy and creates new opportunities. Acquisitions are also important to achieve cost and volume advantages and are also strategically important for the expansion to new markets and niches. Our acquisitions were initially made in Sweden in the niches in which we first appeared, but has gradually expanded to include new niches and new markets. Today we are a software company that offers specific business throughout the Nordic market and our business is established in Sweden, Norway, Finland and Denmark. We identify and evaluate acquisition targets in all Nordic countries. During our long history, we have been in constant growth and every year improved our results. We have, however, held on to our strategy to operate within specialized software niches to create sustainable and profitable growth.

KEY FIGURES

2015 2014 2013 2012* 2011* 2010*
Net sales (TSEK) 618 385 491 956 371 631 389 200 359 598 313 410
Business Area Estate Agent (TSEK) 207 011 185 750 181 152 168 785 135 306 82 588
Business Area Real Estate (TSEK) 142 557 134 315 130 718 120 086 120 140 108 118
Business Area Energy (TSEK) 24 114 22 672 19 849 21 327 19 286 17 844
Business Area Media (TSEK) 10 547 21 759 26 128 65 233 70 583 97 338
Business Area Health (TSEK) 61 492 43 627 - - - -
Business Area Auto (TSEK) 71 082 28 302 - - - -
Business Area Finance & Insurance (TSEK) 101 219 55 004 13 704 12 950 14 208 7 522
Shared (TSEK) 363 527 80 819 75 -
Growth (%) 26% 32% -5% 8% 15% 117%
Profit after financial items (TSEK) 94 686 64 545 38 069 40 130 35 693 20 440
Profit after tax (TSEK) 78 191 49 065 30 229 31 984 26 061 14 245
Profit after tax attributable to owners of the parent (TSEK) 78 191 49 065 30 229 31 183 24 654 14 089
Profit growth attributable to owners of the parent (%) 59% 62% -3% 26% 75% 5%
Profit margin (%) 13% 10% 8% 8% 7% 5%
Operating margin (%) 16% 14% 11% 11% 11% 7%
Total assets (tkr) 872 019 772 901 387 981 429 133 327 743 293 308
Solidity (%) 31% 34% 44% 36% 40% 37%
Equity ratio after full conversion (%) 33% 37% 48% 41% 49% 44%
Degree of indebtedness (times) 2,09 1,70 1,53 1,66 1,60 1,69
Return on capital employed (%) 21% 18% 16% 20% 21% 11%
Return on equity (%) 29% 23% 19% 24% 25% 19%
Sales per employee (TSEK) 1 465 1 430 1 332 1 297 1 236 1 269
Value added per employee (TSEK) 1 212 1164 1052 985 915 892
Personnel expenses per employee (TSEK) 797 801 793 732 706 728
Average numbers of employees (number) 422 344 279 300 291 247
Adjusted shareholders' equity per share (JEK) (SEK) 9,24 8,85 6,39 5,92 5,36 4,35
Earnings per share (SEK) 2,66 1,75 1,16 1,30 1,21 0,71
Earnings per share after dilution (SEK) 2,64 1,68 1,09 1,16 1,04 0,63
Paid dividends per share (SEK) 0,67 0,55 0,50 0,40 0,25 0,20
Cash flow per share (SEK) 5,28 4,40 1,97 2,25 2,17 1,38
P/E 28,2 15,1 15,3 10,9 9,8 13,6
P/JEK 8,12 2,99 2,77 2,33 2,08 2,21
P/S 3,57 1,58 1,26 0,91 0,68 0,65
Calculation bases:
Results used for the calculation of earnings per share (TSEK) 78 191 49 065 30 229 31 183 24 654 14 089
Cash flow for the calculation of cash flow per share (TSEK) 155 134 123 220 51 505 55 243 46 787 27 532
Average number of shares (weighted average) (psc) 29 396 690 28 003 405 26 141 635 24 604 375 21 546 315 19 936 940
The number of shares after dilution (psc) 29 788 016 29 431 975 28 175 425 27 338 170 24 172 025 23 041 270
The number of shares issued on the closing date
Number of shares after full conversion
(psc) (st) 29 396 6900 29 396 6900 26 541 6350 25 741 6350 21 835 3750 21 257 2500
Share price at end of period (SEK) 75,00 26,50 17,70 13,80 11,16 9,62

* Values for rolling 12 months.

* Key figures for 2010-2012 have been recalculated due to a correction of deffered tax.

** Number of shares and key figures related to shares have been recalculated due to split.

Vitec Software Group is a software company that offers industry specific business applications on the Nordic market. The Company, with operations in Sweden, Norway, Finland and Denmark is growing in the mature part of the software industry by consolidating vertical software segments. Clients include facility management companies, construction and real estate companies, banks and insurance companies, utilities and energy traders, healthcare companies, car spare part dealers and newspaper companies. Vitec is listed on Nasdaq OMX Stockholm.

Contact: Lars Stenlund, CEO Mob: +46 70 659 49 39