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Vitec Software Group B — Interim / Quarterly Report 2015
May 6, 2015
2988_10-q_2015-05-06_5c58d5ef-84d3-4420-b92b-431c4be6c067.pdf
Interim / Quarterly Report
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INTERIM REPORT JANUARY-MARCH 2015
EARNINGS PER SHARE UP 85 %
SUMMARY FOR JANUARY-MARCH 2015
- Net sales SEK 143,4 M (101,0)
- Profit before tax SEK 21,6 M (12,0)
- Operating margin 16 % (12)
- Earnings per share before dilution SEK 2,93 (1,58)
- Cash flow from operations SEK 73,5 M (64,3)
- Acquisition of Norwegian Fox Publish AS
CEO´S COMMENTS - VITEC 30 YEARS
"Hey, man," Olov said as we stood in line at Snabben, the lunch place at Universum in Umeå, "I've got an idea." Is that so, I thought, my mind mostly on which variation of beef stew was on the menu this fall day of 1984. "Yeah," he continued. "You can program, of course, and I can come up with the money for one of those new PCs! Then you can teach me programming, and at the same time maybe we can put together some program that somebody will want to buy."
No sooner said than done. I needed a hobby aside from research and the same went for Olov. Pretty soon a beige Ericsson PC stood on my desktop at home and another the following week at Olov's. We developed in Turbo Pascal – the world's fastest development environment crammed into an inconceivable 39 kB on a floppy disk.
The program we developed stemmed from Olov's idea about property owners' need for a better way to check on their energy consumption and the fact that modern tools were needed for this. The mission was clear as day! By programming at the hobbyist level in Turbo Pascal, we'd save Sweden from the energy crisis that arose in the aftermath of the 1970's oil crisis. Yep!
The hobby project proceeded at turbo speed, and in the spring of 1985 there was interest out in the market to "do business" with us and, in fact, to buy the revolutionary system that we'd developed. Several screenshots were ready, though the functionality behind them was a little iffy. Most of the buttons you clicked on caused the data to freeze. But it looked nice – and surely you had to allow for some bugs and teething problems, right? In any case, we needed to start a company so that we could get out the program and save Sweden from the energy crisis.
That's how Vitec was started in May 1985, and it's the reason we are celebrating our 30th anniversary today, with cake for all of our colleagues and stockholders coming to the annual meeting. You are most welcome!
If you want to know the results of our first quarter in 2015, you'll find them in the 23 pages that follow!
After these personal reflections, the Letter from the CEO will revert to the usual format with the next report.
Lars Stenlund, CEO
January-March 2015
The Vitec Group proceeded with its conversion to a business model characterized by a greater percentage of recurring contractual income (78 % for the first quarter of 2015). The deliberate transition at the mature units was reinforced by newly acquired businesses with a high percentage of recurring software as a service (SaaS) income. The combination of cost savings and an increased percentage of contractual income continued to boost operating profit, which topped the group's annual target in the first quarter alone.
As the result of streamlining efforts and a successful rollout of the industry's most advanced system, both sales and earnings at the Real Estate Broker business unit were better than the first quarter of 2014. The unit's offering of online products, OnBroker (Norway) and Express (Sweden), was in great demand. The number of Swedish users of the online Vitec Express system rose rapidly to 1,960. Many brokers who have switched to Vitec Express report that the new offering both facilitates and streamlines the work they do.
Operating profit at the Property Management business unit shot up by 106 % from the first quarter of 2014, while organic growth was 8 %. The improvement stemmed from successful sales of renewable contracts along with a rapid rollout of the unit's SaaS offering. Sales to new customers were robust, accounting for almost one-third of systems delivered. Recurring income rose further to more than 57 % of the total. The unit is focusing on ongoing sales of its new real estate offering, its order book at the end of the quarter was stronger than ever.
Due primarily to high nonrecurring license sales in the first quarter of 2014, income at the Media business unit was lower this year. Demand by existing customers was vigorous while recurring income rose to 36 % of the total, helping to generate a 32 % operating margin.
Even though two major user meetings were planned and held during the quarter, organic sales increased by 10% and operating profit by 140 % at the Energy business unit. Recurring income was stable at a high level. The organization will be strengthened by the addition of sales reps and a product specialist this coming fall. Owing to greater demand for product-related hourly assistance, service income was somewhat higher than 2014.
The Health business unit is in an intensive development and delivery phase involving a large upgrade project of its standard software for the Finnish Student Health Service. Recurring income at the business unit accounted for 73 % of the total. Considering that earnings are now affected by depreciation and intra-group expenses, the 11 % operating margin for the first quarter was in line with previous years.
The Auto (Norway) business unit, which sells business systems for spare parts and accessories to the automotive industry, reported sales of SEK 10.3 million and an operating margin of 7 %. Because the business unit was consolidated as of April 24, 2014, no comparative figures are available. Income, which is directly linked to customer activity and is 94 % recurring, is subject to seasonal variations such that the third and fourth quarters are normally the strongest.
Sales rose substantially at the Finance and Insurance business unit now that it includes Vitec Aloc A/S in Denmark. The Swedish business concentrated on partial deliveries of the new insurance application to Länsförsäkringar Alliance during the first quarter. The Danish business carried out a major technology upgrade of its product platform, which borrowed capacity available for services. The operating margin was 10 %.
FINANCIAL INFORMATION
Sales and results
January-March 2015
Revenues
Net sales for the period amounted to SEK 143,4 million (101,0), which represents an increase of 42 %. License revenue declined 45 % from the previous year and amounted to SEK 4,6 million (8,4). Recurring revenue for the period increased by 59 % from the previous year and amounted to SEK 111,2 million (69,9), corresponding to 78 % (69) of net sales. Service revenues increased by 21 % from the previous year and amounted to SEK 26,3 M (21,8). Fox Publish AS and ADservice Scandinavia AB were consolidated from March 2 and contributed during the period with net sales of SEK 2,8 million.
Results
Operating profit amounted to SEK 23,1 million (12,5) with an operating margin of 16 % (12). Profit after tax amounted to SEK 17,2 million (8,4). Earnings per share before dilution were SEK 2,93 (1,58).
Liquidity and financial status
The Group's cash and cash equivalents, including short-term investments, at end of period amounted to SEK 85,8 million (74,0). In addition to these cash and cash equivalents, was a bank overdraft facility of SEK 20 million. Cash flow from operating activities was SEK 73,5 million (64,3). Investments totaled SEK 17,6 million in intangible assets including capitalized work and SEK 2,6 million in tangible assets. Through the acquisition of Fox Publish AS and ADservice Scandinavia AB SEK 27,4 million was added in product rights, trademarks, customer contracts and goodwill.
Total interest-bearing liabilities amounted on March 31, 2015 to SEK 191.3 million (121,3) distributed on long term debt SEK 140,6 million (93,1) and short-term interest-bearing liabilities SEK 50,7 million (28,2). 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.
Equity attributable to Vitec's shareholders amounted to SEK 250,3 million (180,0). The equity ratio was 33 % (32). The proposed dividend amounts to SEK 3,35 kronor per share, totaling SEK 19,7 million.
SIGNIFICANT EVENTS DURING THE FIRST QUARTER
January 26: Vitec reduces dilution by redeemed convertible
Vitec redeems the convertible debenture as Norrlandsfonden signed in 2008. The loan amounted to SEK 10 million, fixed rate of 3.9 % and a conversion price of SEK 35. Upon full conversion it would have resulted in a dilution of approximately 4.6 % of the capital and approximately 2.1 % of the votes in Vitec. Vitec now pays 37.1 million in cash on redemption. Norrlandsfonden has also granted a loan of SEK 25 million which runs for six years with straight-line amortization that will partly finance the repurchase.
February 2: Vitec signs multiannual contract with Länsförsäkringar
Vitec has signed an agreement with Länsförsäkringar Fondliv for the supply and maintenance of a new pension and insurance schemes. The contract is worth approximately SEK 8.5 million during the first three years. The new software includes functions for calculations of retirement, disability and survivor benefits. In addition to Sweden's public pension system is also supports a dozen occupational pension agreements.
February 2: Vitec launches electronic signing of lease agreements
Vitec Business Area Property launches as the first supplier of software for facility management systems electronic signing of lease. The first application offered in collaboration with Scrive enables tenants to sign and terminate contracts online.
March 2: Vitec acquires Norwegian Fox Publish AS
Vitec Software Group AB (publ) has on March 2 agreed to acquire 100% stake in the software company Fox Publish AS and its Swedish sister company ADservice Scandinavia AB. The two companies offer a publishing system for real estate agents. Together they had sales in 2014 of approximately SEK 28 million with a common result of approximately SEK 4 million. The Norwegian market accounts for about 80 percent of sales. Payment is in cash by MNOK 14,2 at completion. A maximum additional purchase price of approximately MNOK 8 may apply. Vitec will take possession immediately. The acquisition is expected to directly result in an increase in earnings per share of Vitec.
March 26: Notice of Annual General Meeting
Shareholders of Vitec Software Group AB (publ) are hereby invited to attend the Annual General Meeting on Wednesday, 6 May 2015, at 5:30 p.m., at Väven (Norra entrén), Storgatan 46A, in Umeå. The meeting will be held in Swedish. After the AGM, a buffet will be served.
March 30: New Daily Leader for Business Estate Agents in Norway
Svein Roger Westengen, current director of the Vitec Business Auto in Norway will from April, also be head of the Vitec Business Estate Agents in Norway. Svein Roger succeeds Erik Hansen.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD
April 15: Vitec annual report for 2014 has been published
Vitec today publishes the annual report for 2014 in Swedish on www.vitecsoftware.com , with information about the Group's development. The annual report describes how Vitec during the year grew further and, with increased sales, improved operating margins and increased earnings per share the full year 2014 was Vitec strongest year so far.
April 17: Residential Cluster are connected to Boplats Sverige
In a unique partnership, eight major housing companies in the north-west of Skåne in Sweden invests in connecting to the nationwide marketplace Boplats Sverige which started in 2014 on the initiative of Vitec. With a common marketplace housing companies can both simplify and speed up the search process for available rental apartments.
April 22: Cost-cutting program in Estate Agents Division
As a consequence of Swedbank Fastighetsbyrå AB having announced its successive transition to a proprietary estate agent system, Vitec is adjusting its organization. A cost-cutting program has been initiated affecting the Estate Agents Sweden Division. Fully implemented, the program will reduce annual costs by approximately SEK 15 million, and is expected to have its full effect from the fourth quarter 2015. The ongoing rollout of the SaaS-based estate agents system Vitec Express continues as planned.
OPERATIONS
Result overview for segments, TSEK
Vitec Group operations are controlled and organized in seven business units. For more information on each business unit, refer to www.vitecsoftware.com. The business units are; Estate Agent, Real Estate, Media, Energy, Health, Auto and Finance & Insurance.
Segment Mäklare (BU Estate Agent):
The segment consists of Vitec Mäklarsystem AB, Capitex AB, Vitec IT-Makeriet AS, the Group Vitec Midas AS and from March 2 Fox Publish AS and ADservice Scandinavia AB. The business unit provides software for real estate agents.
Segment Fastighet (BU Real Estate):
The segment consists of Vitec Fastighetssystem AB, Vitec Förvaltningssystem AB and Vitec Capifast AB. The business unit offers software applications for building owners, construction and management companies, property managers and real estate developers.
Segment Media (BU Media):
The segment consists of 3L Media AB, Vitec Veriba AB and Retail i Linköping AB. The business unit offers software for newspaper companies and a few managed solutions for distribution and retail.
Segment Energi (BU Energy):
The segment consists of Vitec Energy AB. The business unit 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 (BU Health):
The segment consists of the Group AcuVitec FDS Oy and IMHO Holding Oy. The business unit offers software for electronic medical records used for health care in Finland. The companies were acquired February 28 2014.
Segment Auto (BU Auto):
The segment consists of Vitec AutoData Norge AS. The business area offers industry specific business applications for the Norwegian 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. The company was acquired April 24 2014.
Segment Finans & Försäkring (BU 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. The group Aloc A/S was acquired June 30 2014.
Segment reporting*
| PROFIT BEFORE ACQUISITION | ||||||
|---|---|---|---|---|---|---|
| SEGMENT | NET SALES (SEK THOUSENDS) | RELATED COSTS (SEK | ||||
| BU Estate Agent | ||||||
| BU Real Estate | ||||||
| BU Media | ||||||
| BU Energy | ||||||
| BU Health | ||||||
| BU Auto | ||||||
| BU Finance & Insurance | ||||||
| Shared | ||||||
| Vitec Group | ||||||
| Acqusition-related costs | ||||||
| Operating profit after acquisition | ||||||
| related costs | ||||||
| Net financial income/expence | ||||||
| Profit before tax |
Non-recurring acquisition-related costs makes progress in the business areas difficult to follow. For this reason, the operating profit has been divided into operating profit before and after acquisition-related expenses.
Sales by per geography
The table below shows the Group's net sales translated to SEK based on the customer's location.
| MARKET | NET SALES (MSEK) | |||||
|---|---|---|---|---|---|---|
| Sweden | ||||||
| Norway | ||||||
| Finland | ||||||
| Denmark | ||||||
| Other Europé | ||||||
| Rest of world | ||||||
| SUM |
& Ins.
Business Area Estate Agent, January-March 2015 Total revenues amounted to SEK 49,2 million (44,9), an increase of 10 %. License revenues were unchanged and amounted to SEK 0,6 million. Recurring revenue increased by 16 % to SEK 46,1 million. Service revenue declined 45 % to SEK 2,5 million. Recurring revenue as a percentage of net sales was 94 % (88). Operating margin improved to 17 % (13). As of March 2 operations in Fox Publish AS and ADservice Scandinavia AB were consolidated in the business area.
* before acquisition-related costs
Business Area Real Estate, January-March 2015
Total revenues amounted to SEK 34,8 million (32,2), an increase of 8 %. License revenues declined by 16 % and amounted to SEK 2,2 million. Recurring revenue increased 8 % to SEK 19,8 million. Services revenue increased by 14 % to SEK 12,8 million. Recurring revenue as a percentage of net sales was 57% (57). Operating margin increased to 19 % (10).
Business Area Media, January-March 2015
The total revenue amounted to SEK 3,4 million (10,6), a decrease of 68%. License revenue declined 89 % to SEK 0,6 million. The comparative period includes a one-time sale of a software license to Eniro. Recurring revenue declined 42 % to SEK 1,3 million. Services revenue declined 54 % to SEK 1,3 million. Recurring revenue as a percentage of net sales was 36 % (20). Operating margin increased and amounted to 32 % (13).
Business Area Energy, January-March 2015
The total revenue amounted to SEK 6,2 million (5,6), an increase of 10 %. Recurring revenue increased 9 % to SEK 4,2 million. Service revenue increased 6 % to SEK 1,9 million. Recurring revenue as a percentage of net sales was 68 % (69). Operating margin increased to 37 % (17).
Business Area Health, January-March 2015
Total revenues for the period amounted to SEK 15,5 million. License revenues amounted to SEK 0.1 million. Recurring revenue amounted to SEK 11,3 million and services to SEK 3,8 million. Comparative figures are not available. Recurring revenue as a percentage of net sales was 73 %. The operating margin was 11 %.
Business Area Auto, January-March 2014
The total revenues amounted to SEK 10,3 million. Comparative figures are not available. Recurring revenue amounted to SEK 9,6 million, services to SEK 0,3 million and other SEK 0,4 million. Recurring revenue as a percentage of net sales was 94 %. Operating margin was 7 %.
Business Area Finance & Insurance, January-March 2015
The total income amounted to SEK 23,9 million (3,5), an increase of 586 %. License revenues increased 100 % to SEK 1,2 million. Recurring revenue increased by 644 % to SEK 19,0 million. Service revenues increased by 271 % to SEK 3,5
million. Recurring revenue as a percentage of net sales was 79 % (73). Operating margin decreased to 10 % (22). 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 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 22,4 million (11,7) and consisted primarily of sales to subsidiaries for services rendered. Profit after tax amounted to SEK 3,9 million SEK (-0,7). The Parent Company is exposed to the same risks and uncertainties that 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) | jan-mar | jan-mar | jan-dec |
|---|---|---|---|
| 2015 | 2014 | 2014 | |
| OPERATING REVENUE | |||
| License revenues | |||
| Recurring revenues | |||
| Service revenues | |||
| Other revenues | |||
| NET SALES | |||
| Capitalized development costs | |||
| Other operating income | |||
| Sum | |||
| OPERATING EXPENSES | |||
| Goods for resale | |||
| Subcontractors and subscriptions | |||
| Other external expenses | |||
| Staff costs | |||
| Depreciation/amortisation and impairment of tangible | |||
| and intangible assets | |||
| Other operating expenses | |||
| TOTAL COSTS | |||
| OPERATING PROFIT BEFORE ACQUSITION-RELATED | |||
| COSTS | |||
| Acqusition-related costs | |||
| OPERATING PROFIT AFTER ACQUSITION-RELATED COSTS | |||
| Income from financial investments | |||
| Financial income | |||
| Financial expense | |||
| TOTAL FINANCIAL ITEMS | |||
| PROFIT BEFORE TAX | |||
| Tax | |||
| NET PROFIT | |||
| OTHER COMPREHENSIVE INCOME, ITEMS THAT MAY BE | |||
| RECLASSIFIED TO PROFIT OR LOSS | |||
| Currency translation differences | |||
| TOTAL OTHER COMPREHENSIVE INCOM FOR THE PERIOD | |||
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | |||
| PROFIT FOR THE PERIOD ATTRIBUTABLE TO | |||
| -Shareholders of the Parent Company | |||
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | |||
| ATTRIBUTABLE TO | |||
| -Shareholders of the Parent Company | |||
| EARNING PER SHARE | |||
| -Before dilution (SEK) | |||
| -After dilution (SEK) | |||
| Average number of shares | |||
| Number of shares after dilution |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| SEK (thousends) | ||
|---|---|---|
| ASSETS | ||
| FIXED ASSETS | ||
| Intangible assets | ||
| Goodwill | ||
| Capitalized development costs | ||
| Software | ||
| Brands | ||
| Product rights | ||
| Customer agreements | ||
| Tangible fixed assets | ||
| Buildings | ||
| Equipment | ||
| Finansiella anläggningstillgångar | ||
| Other long-term receivables | ||
| Deferred tax | ||
| TOTAL FIXED ASSETS | ||
| CURRENT ASSETS | ||
| Inventories | ||
| Receivables | ||
| Short-term investments | ||
| Cash and equivalents | ||
| TOTAL CURRENT ASSETS | ||
| TOTAL ASSETS | ||
| EQUITY AND LIABILITIES | ||
| EQUITY | ||
| LONG-TERM LIABILITIES, INTEREST BEARING | ||
| LONG-TERM LIABILITIES, NON-INTEREST BEARING | ||
| SHORT-TERM LIABILITIES, INTEREST BEARING | ||
| SHORT-TERM LIABILITIES, NON-INTEREST BEARING | ||
| TOTAL EQUITY AND LIABILITIES |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| SEK (thousands) | |||
|---|---|---|---|
| EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT COMPANY |
|||
| At beginning of period | 260 130 | 169 607 | 169 607 |
| Option element convertible bond | - | - | 865 |
| Conversion bonds | - | - | 8 035 |
| Redemption bonds | -27 145 | - | - |
| Issue of new shares after issue costs* | - | - | 45 832 |
| Dividend | - | - | -14 598 |
| Total comprehensive income for the period | 17 350 | 10 376 | 50 389 |
| At end of period | 250 335 | 179 983 | 260 130 |
* The issue expenses amounted to SEK 1 418 thousand.
CONSOLIDATED STATEMENT OF CASH FLOWS
| SEK (thousands) | ||
|---|---|---|
| OPERATING ACTIVITIES | ||
| Operating profit | ||
| Adjustments for items not included in cash flow | ||
| Depreciation/amortisation and impairment | ||
| Interest received | ||
| Interest paid | ||
| Tax paid | ||
| CASH FLOW FROM OPERATING ACTIVITIES BEFORE | ||
| CHANGES IN WORKING CAPITAL | ||
| Changes in working capital | ||
| Change in inventories | ||
| Change in operating receivables | ||
| Change in operating liabilities | ||
| CASH FLOW FROM CURRENT OPERATIONS | ||
| Investment activities | ||
| Increase in long-term receivables | ||
| Acquisition of subsidiaries, net | ||
| Acquisition of intangible assets and capitalized development costs | ||
| Acqusition of tangible assets | ||
| CASH FLOW FROM INVESTMENT ACTIVITIES | ||
| FINANCING ACTIVITIES | ||
| Dividend | ||
| Redemption convertible loan | ||
| New loans | ||
| Amortisation of loans | ||
| Issue of new shares | ||
| CASH FLOW FROM FINANCING ACTIVITIES | ||
| CASH FLOW FOR THE PERIOD | ||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | ||
| EXCHANGE-RATE DIFFERENCES IN CASH AND CASH | ||
| EQUIVALENTS | ||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
* Payment for acquisition of subsidiaries in 2015 consisted of proceeds for Fox Publish AS and ADservice Scandinavia AB.
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) | ||
|---|---|---|
| NETE SALES | ||
| Operating costs | ||
| OPERATING RESULT | ||
| RESULT FROM FINANCIAL INVESTMENTS | ||
| Income from shares in group companies | ||
| Financial income | ||
| Financial expense | ||
| PROFIT AFTER FINANCIAL NET | ||
| Appropriations | ||
| PROFIT BEFORE TAX | ||
| Tax | ||
| NET PROFIT |
BALANCE SHEET, PARENT COMPANY
| SEK (thousands) | ||
|---|---|---|
| ASSETS | ||
| FIXED ASSETS | ||
| Intangible assets | ||
| Tangible assets | ||
| Financial assets | ||
| TOTAL FIXED ASSEST | ||
| CURRENT ASSETS | ||
| Receivables | ||
| Kortfristiga placeringar | ||
| Cash and equivalents | ||
| TOTAL CURRENT ASSETS | ||
| TOTAL ASSETS | ||
| EQUITY AND LIABILITIES | ||
| EQUITY | ||
| UNTAXED RESERVES | ||
| LONG-TERM LIABILITIES | ||
| SHORT-TERM LIABILITIES | ||
| TOTAL EQUITY AND LIABILITIES |
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 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 2014, 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 report's headline division has changed in two points since March 31. In the consolidated statement of income, operating income is given before and after acquisition-related expenses. In the consolidated balance sheet, noncurrent and current liabilities are divided into interest-bearing and non-interest-bearing liabilities. In presenting segments the profit is given before acquisition-related expenses. Comparable figures are restated in the same way.
Financial instruments - fair value
The fair value regarding most financial assets and liabilities is close to the reported book values. However there is som difference in two cases regarding additional purchase price.
- The additional purchase price in the acquisition of AcuVitec Oy is deemed to have a fair value of SEK 45 494 thousand on March 31, 2015, compared with the liability's carrying value as at the same date amounted to SEK 45 801 thousand.
- The additional purchase price in the acquisition of Fox Publish AS is deemed to have a fair value of SEK 8 431 thousand on March 31, 2015, compared with the liability's carrying value as at the same date amounted to SEK 8 544 thousand.
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 NOK 13,8 million respectively SEK 400 thousand. 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 deductible for tax purposes 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 maximum purchase price is NOK 21,8 million. The acquisition-related expenses amounted March 31 to SEK 114 thousand and are reported as other external costs of comprehensive income. From the acquisition date until March 31 the revenues amounts to SEK 2,8 million. If consolidation occurred at the beginning of the year, the companies had brought the Group an additional approximately 5.0 million in revenue. The following purchase price allocation is preliminary.
| Fair value | Fair value recognized in the | ||
|---|---|---|---|
| Preliminary purchase price allocation (SEK thousands) | Fox Publish AS | adjustment | Group |
| Brands | - | 434 | 434 |
| Product Rights | - | 11 120 | 11 120 |
| Customer Agreement | - | 6 875 | 6 875 |
| Intangible fixt 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 aditional purchase price | 8 682 | ||
| Cash acquired | 983 | ||
| Net cash outflow | -14 392 |
NOTE 2 INVESTMENTS
Investments amounted to SEK 17,4 million in intangible assets, including capitalised work and SEK 2,6 million in tangible assets. Through the acquisition of Fox Publish AS and ADservice Scandinavia AB SEK 27,4 million was added in product rights, trademarks, customer contracts and goodwill.
NOTE 3 LONG-TERM DEBT
Long-term interest-bearing debt consists of bank loans SEK 122 334 thousands, a convertible loan SEK 13 275 thousands and a vendor note regarding Aloc A / S SEK 4 974 thousands. Long-term non-interest bearing liabilities consist of deferred taxes SEK 77 180 thousands, pension liability SEK 12 422 thousands, a non-current portion of additional purchase price Fox Publish 4 272 thousands and other long-term liabilities SEK 301 thousands.
NOTE 4 CONVERTIBLE DEBENTURE
Convertible debentures are included in long-term interest bearing liabilities:
Loan 1501 (long-term debt interest bearing liabilities, staff). SEK 13 275 thousand . Duration of the loan is January 1, 2015 - December 31, 2017. The interest rate is Stibor 180. The conversion price is SEK 159 SEK. 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 is registered by the Swedish Companies Registration Office February 11, 2015.
NOTE 5 EQUITY
Consolidated shareholders' equity as of March 31, 2015 was SEK 250 335 thousands. The registered shares amounted to 800 000 A-shares with voting rights 10 (ten) and 5 079 338 Series B-shares with voting rights 1 (one).
SIGNATURES
Umeå, May 6 2015,
Lars Stenlund (CEO)
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 May 6, 2015 at 13:00 CET.
Contact
Lars Stenlund, CEO, +46 70-659 49 39, [email protected] Maria Kröger, CFO, Mobile: +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-post: [email protected] Financial information is published on www.vitecsoftware.com immediately after publication.
Financial calendar
| 2015-07-13 | Interim Report January-June 2015 (≈08:30 CET) |
|---|---|
| 2015-10-21 | Interim Report January-September 2015 (≈08:30 CET) |
This 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.
DIAGRAMS
50 % 60 % 70 % 80 % 90 % 100 % 0 MSEK 20 MSEK 40 MSEK 60 MSEK 80 MSEK 100 MSEK 120 MSEK 140 MSEK Q1-12 Q1-13 Q1-14 Q1-15 Net sales (MSEK) Recurring part (%)
Distribution Net Sales Jan-Mar 2015
JEK per share (SEK)
Profit per share (SEK/share)
Distriburion Profit Jan-Mar 2015
Cash flow per share (SEK)
Net sales (MSEK)
VITEC INTERIM REPORT JANUARY-MARCH 2015 19
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 575 million SEK and has approximately 400 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 55 % of Sweden, 19 % in Denmark, 14 % in Norway, 11 % 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 evaluates 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 fast to our strategy to operate within specialized software niches to create sustainable and profitable growth.
KEY FIGURES
| 2015 | 2014 | 2014 | ||
|---|---|---|---|---|
| jan-mar | jan-mar | jan-dec | ||
| Net sales | (TSEK) | 143 413 | 100 974 | 491 956 |
| Business Area Estate Agent | (TSEK) | 49 223 | 44 924 | 185 750 |
| Business Area Real Estate | (TSEK) | 34 806 | 32 182 | 134 315 |
| Business Area Energy | (TSEK) | 6 181 | 5 614 | 22 672 |
| Business Area Media | (TSEK) | 3 438 | 10 601 | 21 759 |
| Business Area Health | (TSEK) | 15 536 | 3 978 | 43 627 |
| Business Area Auto | (TSEK) | 10 292 | - | 28 302 |
| Business Area Finance & Insurance | (TSEK) | 23 905 | 3 483 | 55 004 |
| Shared | (TSEK) | 32 | 192 | 527 |
| Growth | (%) | 42% | 7 % |
32% |
| Profit after financial items | (TSEK) | 21 620 | 11 964 | 64 545 |
| Profit after tax | (TSEK) | 17 245 | 8 377 | 49 065 |
| Profit after tax attributable to owners of the parent | (TSEK) | 17 245 | 8 377 | 49 065 |
| Profit growth attributable to owners of the parent | (%) | 106% | 39% | 62% |
| Profit margin | (%) | 12% | 8 % |
10% |
| Operating margin | (%) | 16% | 12% | 14% |
| Total assets | (tkr) | 770 198 | 562 087 | 772 901 |
| Solidity | (%) | 33% | 32% | 34% |
| Equity ratio after full conversion | (%) | 34% | 35% | 37% |
| Degree of indebtedness | (times) | 2,10 | 1,72 | 1,7 |
| Return on capital employed | (%) | 22% | 20% | 18% |
| Return on equity | (%) | 27% | 20% | 23% |
| Sales per employee | (TSEK) | 362 | 378 | 1 430 |
| Value added per employee | (TSEK) | 306 | 274 | 1 164 |
| Personnel expenses per employee | (TSEK) | 209 | 217 | 801 |
| Average numbers of employees | (number) | 397 | 267 | 344 |
| Adjusted shareholders' equity per share (JEK) | (SEK) | 42,58 | 33,91 | 44,24 |
| Earnings per share | (SEK) | 2,93 | 1,58 | 8,76 |
| Earnings per share after dilution | (SEK) | 2,92 | 1,48 | 8,39 |
| Paid dividends per share* | (SEK) | - | - | 2,75 |
| Cash flow per share | (SEK) | 5,50 | 5,80 | 22,00 |
| P/E | 19,7 | 14,4 | 15,1 | |
| P/JEK | 4,56 | 2,6 | 3,0 | |
| P/S | 2,13 | 1,24 | 1,51 | |
| Calculation bases: | ||||
| Results used for the calculation of earnings per share | (TSEK) | 17 245 | 8 377 | 49 065 |
| Cash flow for the calculation of cash flow per share | (TSEK) | 32 364 | 30 794 | 123 220 |
| Average number of shares (weighted average) | (psc) | 5 879 338 5 308 327 | 5 600 681 | |
| The number of shares after dilution | (psc) | 5 927 490 5 715 086 | 5 886 395 | |
| The number of shares issued on the closing date | (psc) | 5 879 338 5 308 327 | 5 879 338 | |
| Share price at end of period | (SEK) | 194,00 | 88,25 | 132,50 |
* Proposed dividend amounts to SEK 3.35 per share
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