BASWARE FINANCIAL STATEMENTS
Basware fourth quarter and full year 2010
Basware Corporation stock exchange release, January 25, 2011 at 09:00
SUMMARY (last year's corresponding period in parentheses, unless otherwise
stated)
Financial year 2010
- Net sales EUR 103 094 thousand (EUR 92 654 thousand) - growth 11.3
percent
- Operating profit EUR 13 487 thousand (EUR 11 824 thousand) - growth
14.1 percent
- Operating profit 13.1 percent of net sales (12.8 %)
- Operating profit includes EUR 314 thousand costs of unrealized M&A
- International operations accounted for 54.8 percent of net sales (54.2
%) - growth 12.6 percent
- Growth of Automation services 56.0 percent
- Cash flows from operating activities were EUR 12 523 thousand (EUR
14 732 thousand)
- Earnings per share EUR 0.90 (0.80) - growth 12.6 percent
- Dividend proposal for 2010: EUR 0.40 per share (2009: EUR 0.36)
October-December Q4
- Net sales EUR 30 149 thousand (EUR 26 600 thousand) - growth 13.3
percent
- Operating profit EUR 4 937 thousand (EUR 4 058 thousand) - growth 21.7
percent
- Operating profit 16.4 percent of net sales (15.3 %)
- Operating profit includes EUR 314 thousand costs of unrealized M&A
- International operations accounted for 56.8 percent of net sales (53.9
%) - growth 19.5 percent
- Growth of Automation services 63,2 percent
- Earnings per share EUR 0.34 (0.35) - decrease 4.2 percent
Basware outlook
- Basware expects its net sales in 2011 to grow over 10 percent from previous
year
- Operating profit (EBIT) for 2011 is expected to be over 13 percent of net
sales
This financial statement release has been prepared in accordance with IAS 34,
Interim Financial Reporting.
The amounts presented in the summary of financial statements and notes to the
financial statements are based on the company's audited financial statements.
The Auditor's Report was issued on January 24, 2011.
GROUP KEY FIGURES
10-12/ 10-12/ Change, 1-12/ 1-12/ Change,
EUR thousand 2010 2009 % 2010 2009 %
--------------------------------------------------------------------------------
Net sales 30 149 26 600 13.3 103 094 92 654 11.3
EBITDA 6 215 5 337 16.4 18 604 16 280 14.3
Operating profit before
IFRS-3 amortization 5 477 4 600 19.1 15 691 13 788 13.8
Operating profit 4 937 4 058 21.7 13 487 11 824 14.1
% of net sales 16.4 15.3 13.1 12.8
Profit before tax 4 839 4 038 19.8 13 325 11 590 15.0
Profit for the period 3 913 4 007 -2.4 10 331 9 074 13.9
Return on equity, % 24.2 29.4 16.7 17.2
Return on investment, % 29.7 25.3 20.1 18.8
Liquid assets* 13 822 12 210 13.2 13 822 12 210 13.2
Gearing, % -15.3 -5.3 -15.3 -5.3
Equity ratio, % 73.3 64.8 73.3 64.8
Earnings per share, EUR 0.34 0.35 -4.2 0.90 0.80 12.6
Earnings per share (diluted), EUR 0.34 0.35 -4.6 0.89 0.80 11.9
Equity per share, EUR 5.78 4.97 16.3 5.78 4.97 16.3
*) Includes cash, cash equivalents and financial assets at fair value through
profit or loss
Basware's business operations consist of License Sales. Maintenance.
Professional Services and Automation Services. The core of Basware's license
sales consists of the Basware Enterprise Purchase to Pay product suite and
local, only in Finland marketed financial management products. The Group's
reported market areas are Finland, Scandinavia, Europe and Other areas.
Record-high results in challenging market situation
Basware's CEO Ilkka Sihvo: "Our net sales exceeded EUR 100 million for the first
time in the company's history. Our company is quickly changing from an
international software company to an international service company. The fastest
growing area is Automation services including also e-invoicing, growing 56.0
percent in 2010.
During 2010 we closed several large international Automation services deals
which are proof of our strong competitiveness and provide solid basis for future
growth. Geographically all segments grew and profitability improved most in
Europe segment by 50.2 percent and in Scandinavia segment by 30.5 percent.
Operating profit for 2010 grew 14.1 percent being 13.1 percent of net sales.
Also the last quarter in 2010 was successful and operating profit grew by 21.7
percent to EUR 4 937 thousand. In addition to license sales also several
Software as a Service (SaaS) deals were closed having an impact on net sales in
the long run. Automation services grew 63.2 percent in the last quarter.
Profitability grew most in Scandinavia and Other segments.
The price of our share has also continued its steady development, increasing by
70.1 percent during the year. The company's market capitalization exceeded the
Mid-Cap threshold, and our share is quoted in the Mid-Cap category of NASDAQ OMX
since the beginning of 2011. Our up-dated strategy supports solid international
growth also in the future. Our strategic lines for organic growth and
acquisitions as well as our leading position on the markets/competitive
advantage enable strong international growth and positive development of
operating profit.
The long term target is to grow annually 15-30 percent in net sales and more
than 50 percent in Automation Services. The target for operating profit margin
is between 15% - 20% improving towards the end of the period."
REPORTING
Basware's reporting segment is based upon geography as follows: Finland,
Scandinavia, Europe and Other. Following the acquisition of former reseller TAG
Services on July 1, 2009. Basware has assets in Australia. Taking into account
the nature and extent of the business operations in North America and Australia,
these areas were merged into the Other segment as of Q3/2009. The Finland
segment includes the Finnish, Russian, and Asia-Pacific (excluding Australia)
business operations and corporate services.
In addition, the company reports revenue from products and services as follows:
License Sales, Professional Services, Maintenance and Automation Services.
Automation Services include Software as a Service (SaaS), e-invoicing and Scan
and Capture services.
The company also reports an estimate of revenue to be recognized for current
Automation Services agreements in production in the next twelve months.
Automation Services agreements are typically in force for a fixed period of
several years or until further notice.
FOURTH QUARTER OCTOBER 1 - DECEMBER 31, 2010
NET SALES OCTOBER-DECEMBER 2010
The geographical division of net sales by the location of assets:
+---------------------------------------------------------------------+
|Net sales 10-12/ 10-12 Change, 1-12/ 1-12/ Change, |
|(EUR thousand) 2010 2009 % 2010 2009 % |
+---------------------------------------------------------------------+
|Finland 16 011 15 271 4.8 53 606 50 486 6.2 |
| |
|Scandinavia 7 708 6 135 25.6 24 188 22 236 8.8 |
| |
|Europe 5 959 5 629 5.9 21 347 18 717 14.1 |
| |
|Other 3 898 2 897 34.5 12 101 9 201 31.5 |
| |
|Sales between segments -3 429 -3 333 -2.9 -8 149 -7 985 -2.0 |
+---------------------------------------------------------------------+
|Group total 30 149 26 600 13.3 103 094 92 654 11.3 |
+---------------------------------------------------------------------+
The geographical division of net sales by the location of customers:
+-------------------------------------------------------------------+
|Net sales 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, |
|(EUR thousand) 2010 2009 % 2010 2009 % |
+-------------------------------------------------------------------+
|Finland 13 015 12 267 6.1 46 550 42 449 9.7 |
| |
|Scandinavia 7 488 6 003 24.7 23 346 21 719 7.5 |
| |
|Europe 5 385 5 071 6.2 20 249 18 065 12.1 |
| |
|Other 4 261 3 258 30.8 12 949 10 421 24.3 |
+-------------------------------------------------------------------+
|Group total 30 149 26 600 13.3 103 094 92 654 11.3 |
+-------------------------------------------------------------------+
Basware Group's net sales increased by 13.3 percent in October-December and were
EUR 30 149 thousand (EUR 26 600 thousand).
In the fourth quarter, 27.0 percent (29.3 %) of net sales consisted of own
product sales and the product sales increased by 4.2 percent. License sales of
Basware's own products increased by 8.0 percent, and sales of third-party
scanning software decreased considerably while sales of outsourced scan and
capture services grew.
Maintenance revenue accounted for 29.0 percent (29.7 %) of net sales and grew by
10.6 percent. Professional Services represented 30.5 percent (31.5 %) of net
sales and increased by 9.6 percent.
During the fourth quarter, Automation Services (SaaS, e-invoicing, Scan and
Capture) grew by 63.2 percent and accounted for 13.5 percent (9.5%) of net
sales. The estimated revenue to be recognized for current Automation Services
agreements in production in the next twelve months is EUR 14.6 million (growth
of 21.3 percent compared to the estimate made at the end of the previous
quarter). The transaction volume processed by the Automation Services business
was 4.1 million during the reporting period.
Value added resellers provided a net share of 11.6 percent (11.1%) or EUR 942
thousand of product sales in October-December, corresponding to 5.5 percent
(6.1%) of international operations' total net sales.
The international share of Basware's net sales was 56.8 percent (53.9 %) in
October-December. International operations grew by 19.5 percent.
FINANCIAL PERFORMANCE OCTOBER-DECEMBER 2010
Basware Group's operating profit increased by 21.7 percent in October-December
and was EUR 4 937 thousand (EUR 4 058 thousand). Operating profit amounted to
16.4 percent of net sales.
The geographical division of operating profit by the location of assets:
+------------------------------------------------------------------------------+
|Operating profit 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, |
|(EUR thousand) 2010 2009 % 2010 2009 % |
+------------------------------------------------------------------------------+
|Finland 2 757 3 024 -8.9 7 703 7 714 -0.1 |
| |
|Scandinavia 1 557 1 041 49.6 4 136 3 169 30.5 |
| |
|Europe 743 902 -17,7 2 354 1 566 50.2 |
| |
|Other 284 -517 155.0 924 741 24.7 |
| |
|Operating profit between |
|segments -405 -393 -2.8 -1 629 -1 365 -19.3 |
+------------------------------------------------------------------------------+
|Group total 4 937 4 058 21.7 13 487 11 824 14.1 |
+------------------------------------------------------------------------------+
Operating profit includes EUR 314 thousand costs of unrealized M&A.
The company's fixed costs were EUR 22 216 thousand (EUR 19 660 thousand) in the
quarter, and have increased 13.0 percent on the corresponding period the
previous year. Personnel costs made up 74.2 percent (75.5 %) or EUR 16 491
thousand (EUR 14 841 thousand) of the fixed costs.
Research and development expenses totaled EUR 4 087 thousand (EUR 3 847
thousand), of which EUR 658 thousand (EUR 360 thousand) or 16.1 percent (9.4 %)
were capitalized during the period. Amortization of capitalized research and
development costs totaled EUR 484 thousand (EUR 429 thousand).
Profit before tax for the period was EUR 4 839 thousand (EUR 4 038 thousand) and
profit for the period was EUR 3 913 thousand (EUR 4 007 thousand). Undiluted
earnings per share were EUR 0.34 (EUR 0.35).
BUSINESS OPERATIONS OCTOBER-DECEMBER 2010
Finland
The Finland segment includes the business operations in Finland, Russia, Asia-
Pacific (excluding Australia) and the head office functions. Net sales for the
fourth quarter increased by 4.8 percent to EUR 16 011 thousand (EUR 15 271
thousand). The profitability of operations decreased by 8.9 percent and
operating profit was EUR 2 757 thousand (EUR 3 024 thousand).
Net sales of the Finnish and Russian operation increased by 6.5 percent during
the fourth quarter to EUR 13 179 thousand (EUR 12 373 thousand).
There are currently14 resellers in all in the area and the number of personnel
averaged 584 (460) during the fourth quarter.
Scandinavia
Basware's Nordic organization consists of a centrally directed Scandinavian
(Sweden, Denmark and Norway) unit.
Net sales of the area increased by 25.6 percent in the fourth quarter to EUR
7 708 thousand (EUR 6 135 thousand). The profitability of operations increased
by 49.6 percent and operating profit was EUR
1 557 thousand (EUR 1 041 thousand).
Business operations are mainly handled by the own organization and there were
124 (130) employees on average in the area.
Europe
Basware's European business operations consist of the units in Germany, France,
the Netherlands and the United Kingdom. Additionally, the reseller network
covers the eastern part of Central Europe.
Net sales of the Europe segment increased by 5.9 percent in the fourth quarter
and totaled EUR 5 959 thousand (EUR 5 629 thousand). The profitability of the
operations decreased by 17.7 percent and operating profit was EUR 743 thousand
(EUR 902 thousand).
There are 35 resellers in Europe, and Basware personnel averaged 131 (119)
during the fourth quarter.
Other
Business operations in North America and Australia are reported in this segment.
Net sales of the area increased by 34.5 percent in the fourth quarter to EUR
3 898 thousand (EUR 2 897 thousand). The profitability of the operations
increased by 155.0 percent and operating profit was EUR 284 thousand (EUR -517
thousand).
At the end of the period, there were 10 resellers in this segment. The number of
personnel averaged 61 (48) during the fourth quarter.
FINANCIAL PERIOD JANUARY 1 - DECEMBER 31, 2010
NET SALES
Basware Group's net sales increased by 11.3 percent during the period (January-
December) and were EUR 103 094 thousand (EUR 92 654 thousand).
During the period, 23.9 percent (25.6 %) of net sales consisted of own product
sales and the product sales grew by 3.9 percent. License sales of Basware's own
products increased by 10.2 percent, and sales of third-party scanning software
decreased considerably while sales of outsourced scan and capture services grew.
Maintenance revenue accounted for 32.3 percent (32.1 %) of net sales and grew by
11.8 percent. Professional Services revenue represented 31.7 percent (33.6 %) of
net sales and increased by 4.9 percent.
During the period, Automation Services (SaaS, e-invoicing, Scan and Capture)
grew 56.0 percent and accounted for 12.1 percent (8.7%) of net sales. The
estimated revenue to be recognized for current Automation Services agreements in
production in the next twelve months is EUR 14.6 million (growth of 21.3
percent compared to the estimate made at the end of the previous quarter). The
transaction volume processed by the Automation Services business was 13.6
million during the reporting period.
Value added resellers provided a net share of 10.3 percent (9.9%) or EUR 2 543
thousand of product sales in January-December, corresponding to 4.5 percent
(4.7%) of international operations' total net sales.
The international share of Basware's net sales was 54.8 percent (54.2 %) in
January-December. International operations grew by 12.6 percent.
The geographical division of net sales by the location of assets:
+---------------------------------------------------------------------+
|Net sales 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, |
|(EUR thousand) 2010 2009 % 2010 2009 % |
+---------------------------------------------------------------------+
|Finland 16 011 15 271 4.8 53 606 50 486 6.2 |
| |
|Scandinavia 7 708 6 135 25.6 24 188 22 236 8.8 |
| |
|Europe 5 959 5 629 5.9 21 347 18 717 14.1 |
| |
|Other 3 898 2 897 34.5 12 101 9 201 31.5 |
| |
|Sales between segments -3 429 -3 333 -2.9 -8 149 -7 985 -2.0 |
+---------------------------------------------------------------------+
|Group total 30 149 26 600 13.3 103 094 92 654 11.3 |
+---------------------------------------------------------------------+
The geographical division of net sales by the location of customers:
+-------------------------------------------------------------------+
|Net sales 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, |
|(EUR thousand) 2010 2009 % 2010 2009 % |
+-------------------------------------------------------------------+
|Finland 13 015 12 267 6.1 46 550 42 449 9.7 |
| |
|Scandinavia 7 488 6 003 24.7 23 346 21 719 7.5 |
| |
|Europe 5 385 5 071 6.2 20 249 18 065 12.1 |
| |
|Other 4 261 3 258 30.8 12 949 10 421 24.3 |
+-------------------------------------------------------------------+
|Group total 30 149 26 600 13.3 103 094 92 654 11.3 |
+-------------------------------------------------------------------+
FINANCIAL PERFORMANCE
Basware's operating profit for the period increased by 14.1 percent to 13 487
EUR thousand (EUR 11 824 thousand). Operating profit represented 13.1 percent
(12.8%) of net sales. Operating profit includes EUR 314 thousand costs of
unrealized M&A.
The geographical division of operating profit by the location of assets:
+------------------------------------------------------------------------------+
|Operating profit 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, |
|(EUR thousand) 2010 2009 % 2010 2009 % |
+------------------------------------------------------------------------------+
|Finland 2 757 3 024 -8.9 7 703 7 714 -0.1 |
| |
|Scandinavia 1 557 1 041 49.6 4 136 3 169 30.5 |
| |
|Europe 743 902 -17,7 2 354 1 566 50.2 |
| |
|Other 284 -517 155.0 924 741 24.7 |
| |
|Operating profit between |
|segments -405 -393 -2.8 -1 629 -1 365 -19.3 |
+------------------------------------------------------------------------------+
|Group total 4 937 4 058 21.7 13 487 11 824 14.1 |
+------------------------------------------------------------------------------+
The company's fixed costs were EUR 78 285 thousand (EUR 70 343 thousand) in the
period, up 11.3 percent on the corresponding period the previous year. Personnel
costs made up 73.2 percent (74.3 %) or EUR 57 337 thousand (EUR 52 294 thousand)
of the fixed costs. Bad debt and movement in bad debt accruals are included in
fixed costs. Bad debt reservations at the end of the fourth quarter amounted to
EUR 996 thousand (EUR 666 thousand).
Research and development expenses totaled EUR 14 883 thousand (EUR 14 781
thousand), of which EUR 1 696 thousand (EUR 1 454 thousand) or 11.4 percent (9.8
%) were capitalized during the period. Amortization of capitalized research and
development costs totaled EUR 1 883 thousand (EUR 1 624 thousand). Research and
development costs equaled 14.4 percent (16.0 %) of net sales. The costs
increased by 0.7 percent (decrease by 4.7 %) during the financial year.
The company's finance income and finance expenses were EUR -162 thousand (EUR
-234 thousand). The company's profit before tax was EUR 13 325 thousand (EUR
11 590 thousand). Taxes for the period totaled EUR 2 994 thousand (EUR 2 517
thousand). Profit for the period was 10.0 percent (9.8 %) of net sales, or EUR
10 331 thousand (EUR 9 074 thousand). Undiluted earnings per share were EUR
0.90 (EUR 0.80).
FINANCE AND INVESTMENTS
Basware Group's total assets on the balance sheet at the end of the financial
period were EUR 91 470 thousand (EUR 87 287 thousand). The company's cash and
liquid assets were EUR 13 822 thousand (EUR 12 210 thousand), of which cash and
cash equivalents were EUR 13 787 thousand (EUR 12 176 thousand) and financial
assets at fair value through profit or loss were EUR 35 thousand (EUR 34
thousand).
Cash flow from operating activities was EUR 12 523 thousand (EUR 14 732
thousand). Cash flow from investments was EUR -4 454 thousand (EUR -5 009
thousand).
Equity ratio was 73.3 percent (64.8%) and gearing was -15.3 percent (-5.3%). The
company's interest-bearing liabilities totaled EUR 3 582 thousand (EUR 9 230
thousand), of which current liabilities accounted for EUR 3 550 thousand (EUR
5 555 thousand). Return on investment was 20.1 percent (18.8%) and return on
equity 16.7 percent (17.2%).
Basware increased its shareholding in Basware Einvoices Oy to 100 percent on
January 30, 2009, by acquiring 12.55% of the company's shares and control from
the company's management. The purchase price paid on the date of the transaction
was approximately EUR 720 thousand and the additional purchase price to be paid
based on the business volume for 2009 in February 2010 was EUR 293 thousand.
Basware Einvoices Oy was merged into the parent company in 2009.
Basware AS purchased the Norwegian invoice automation solution business of
Itella Information AS on January 26, 2009. The purchase price was NOK 6.38
million (approximately EUR 0.72 million) and it was paid in cash on the day the
acquisition was completed, April 1, 2009. In addition, Basware AS paid an
additional purchase price of NOK 4 434 thousand (EUR 559 thousand) in February
2010, determined on the basis of the volume of the purchased operations' service
sales in 2009.
Basware Corporation acquired the entire share capital of TAG Services Pty Ltd in
Australia on July 1, 2009. The acquisition price was 2.1 million Australian
dollars (approximately EUR 1.2 million) and was paid in cash in two parts in
July and August 2009. In addition, an additional acquisition price that was
based on the company's net sales of the period from July 1, 2009 to June
30, 2010 was paid in August 2010. The additional acquisition price was 2.0
Australian dollars (EUR 1.4 million).
On October 5, 2010 Basware acquired TNT Post's Connectivity operations, which is
a part of TNT Post's electronic invoicing operations in the Netherlands. The
purchase price paid in connection with the transaction was EUR 50 thousand, and
an estimated additional purchase price of EUR 100 thousand will be paid in
January 2011 on the basis of the number of customers that have migrated to the
Basware e-invoicing environment. No other assets were transferred. Based upon
the preliminary purchase price allocation, the purchase price does not include
goodwill. EUR 200 thousand associated with customer relationships has been
allocated to intangible assets, taking deferred liabilities into consideration.
The acquisition would not have had a material impact on the Group's net sales or
operating profit had the consolidation taken place at the beginning of the
financial period. The acquisition has not had a material impact on the Group's
net sales and operating profit.
The company's capital expenditure, resulting from regular additional and
replacement investments required for growth, was EUR 970 thousand (EUR 2 047
thousand) in the period. Gross investments which include, in addition to those
mentioned above, the capitalized research and development costs and acquisitions
(TNT Post's Connectivity operations) totaled EUR 4 567 thousand (EUR 7 448
thousand).
Impairment tests indicate no impairments of assets. Amortization of intangible
assets totaled EUR 4 579 thousand (EUR 3 968 thousand), of which amortization
associated with business acquisitions amounted to EUR 2 233 thousand (EUR 2 020
thousand).
RESEARCH, DEVELOPMENT AND NEW PRODUCTS
Research and development expenses were EUR 14 883 thousand (EUR 14 781 thousand)
in the period, corresponding to 14.4 percent (16.0 %) of net sales. Research and
development costs increased by 0.7 percent (decrease by 4.7 %) compared with the
same period last year. Of the research and development costs, EUR 1 696 thousand
(EUR 1 454 thousand) or 11.4 percent (9.8 %) were capitalized during the period.
Amortization of capitalized research and development costs totaled EUR 1 883
thousand (EUR 1 624 thousand).
A total of 239 (195) people worked in Software Production at the end of 2010.
The Software Production unit is expanding in India, where there are currently
95 employees.
PERSONNEL
Basware employed 845 (747) people on average and 913 (761) people at the end of
the period. The number of personnel increased by 152 persons and by 20.0 percent
compared with the same period the previous year. The acquisition of TNT Post's
Connectivity operations increased the personnel by 2 people.
The share of personnel working in foreign units has increased compared with the
previous year. At the end of the period, 54.9 percent (47.4 %) of Basware
personnel worked outside of Finland and 45.1 percent (52.6 %) in Finland. 14.2
percent of the personnel work in sales and marketing, 51.6 in consulting and
services, 26.2 percent in Software Production, and 8.0 percent in
administration.
The average age of employees is 35.7 (36.6) years. Of the employees, 33.1
percent have a Master's degree and 34.9 percent have a Bachelor's degree. Women
account for 27.8 percent of employees, men for 72.2 percent.
For incentive purposes, the company has a bonus program that covers all
employees.
The Executive Team's remuneration consists of salary in money, fringe benefits,
a possible annual bonus based on performance, warrants and a share-based
incentive scheme. The compensation principles of the Executive Team members are
decided by the Board. A long-term incentive program was in place during
2006-2008. Based on the program, warrants could be granted to the members of the
top management, country managers and key personnel.
The members of the Basware Executive Team have a share-based incentive scheme as
of 2009. The possible reward of the system for the earning period 2009 is based
on Basware Corporation's earnings per share (EPS). Any reward for the earning
period 2009 will be paid in December 2011 partially as shares in the company and
partially in cash.
Geographical distribution of personnel:
+----------------------------------------------------------------------------+
| 10-12/ 10-12/ Change, 1-12/ 1-12/ Change, |
|Personnel (employed, on average) 2010 2009 % 2010 2009 % |
+----------------------------------------------------------------------------+
|Finland 584 460 26.8 539 454 18.8 |
| |
|Scandinavia 124 130 -4.1 124 135 -7.8 |
| |
|Europe 131 119 9.8 126 119 5.6 |
| |
|Other 61 48 26.2 55 39 41.4 |
+----------------------------------------------------------------------------+
|Group total 900 758 18.8 845 747 13.1 |
+----------------------------------------------------------------------------+
BUSINESS OPERATIONS
Finland
The Finland segment includes the business operations in Finland, Russia, Asia-
Pacific (excluding Australia) and the head office functions. Net sales for the
financial period increased by 6.2 percent to EUR 53 606 thousand (EUR 50 486
thousand). The profitability of the operations decreased by 0.1 percent and
operating profit was EUR 7 703 thousand (EUR 7 714 thousand).
Net sales of the Finnish and Russian operations increased by 8.7 percent during
the financial period to EUR 47 013 thousand (EUR 43 250 thousand).
There are currently 14 resellers in all in the area and the number of personnel
averaged 539 (454).
Scandinavia
Basware's Nordic organization consists of a centrally directed Scandinavian
(Sweden, Denmark and Norway) unit.
Net sales of the Scandinavian business operations increased by 8.8 percent to
EUR 24 188 thousand (EUR 22 236 thousand). The profitability of the operations
increased by 30.5 percent and operating profit was EUR 4 136 thousand (EUR
3 169 thousand).
Business operations are mainly handled by the own organization and there were
124 (135) employees on average in the area.
Europe
Basware's European business operations consist of the units in Germany, France,
the Netherlands and the United Kingdom. Additionally, the reseller network
covers the eastern part of Central Europe.
Net sales in the Europe segment increased by 14.1 percent in the financial
period and totaled EUR 21 347 thousand (EUR 18 717 thousand). The profitability
of the operations improved by 50.2 percent and operating profit was EUR 2 354
thousand (EUR 1 566 thousand).
There are 35 resellers in Europe, and Basware personnel averaged 126 (119)
during the period.
Other
Business operations in North America and Australia are reported in this segment.
Net sales of the area increased by 31.5 percent in the financial period to EUR
12 101 thousand (EUR 9 201 thousand). The profitability of the operations grew
by 24.7 percent and operating profit was EUR 924 thousand (EUR 741 thousand).
At the end of the period, there were 10 resellers in the segment. On average,
there were 55 (39) employees in the area.
OTHER EVENTS OF THE FINANCIAL PERIOD
Basware Board of Directors approved in its meeting on January 25, 2010 the
subscription of total of 11 500 shares subscribed for with Basware Warrant
Programs. The share subscriptions were based on the Warrant Program 2006 series
B.
Basware Board of Directors approved in its meeting on April 13, 2010 the
subscription of total of 130 100 shares subscribed for with Basware Warrant
Programs. The share subscriptions were based on the Warrant Program 2006 series
B warrants (56 400 shares) and Warrant Program 2007 series D warrants (73 700
shares).
Basware Board of Directors approved in its meeting on July 8, 2010 the
subscription of total of 79 200 shares subscribed for with Basware Warrant
Programs. The share subscriptions were based on the Warrant Program 2006 series
C warrants (39 000 shares) and Warrant Program 2007 series E warrants (40 200
shares).
Basware Board of Directors approved in its meeting on October 12, 2010 the
subscription of total of 1 100 shares subscribed for with Basware Warrant
Programs. The share subscriptions were based on the Warrant Program 2007 series
E warrants.
The subscription time for the last warrants of the Warrant Program 2006 series C
warrants and Warrant Program 2007 series E warrants will expire on March
31, 2011.
SHARE AND SHAREHOLDERS
Basware Corporation's share capital totaled EUR 3 507 007.20 at the end of the
period and the number of shares was 11 690 024.
Share price and trade
During the reporting period, the highest price of the share was EUR 24.80 (EUR
14.66), the lowest was EUR 15.00 (EUR 6.60) and the closing price was EUR 24.75
(EUR 14.52). The average price of the share was EUR 19.27 (EUR 10.79) during the
period.
A total of 2 131 071 (2 038 565) shares were traded during the financial period
which is the equivalent of 18.5 percent (17.9 %) of the average number of
shares. Market capitalization with the period's closing price on December
31, 2010 was EUR 287 093 169 (EUR 165 206 004).
Shareholders
Basware had 15 752 (16 480) shareholders on December 31 including nominee-
registered holdings (8). Nominee-registered holdings accounted for 10.8 percent
of the total number of shares.
The company holds 90 300 Basware Corporation shares, corresponding to
approximately 0.77% of all shares in the company.
Basware announced five notifications of change in ownership. On February
2, 2010 the total number of shares held by Nordea Rahastoyhtiö Suomi Oy
represented less than 5 % of Basware Corporation's share capital and voting
rights. On March 12, 2010 the total number of shares held by Nordea Rahastoyhtiö
Suomi Oy represented more than 5 % of Basware Corporation's share capital and
voting rights.
The total number of shares held by Ilmarinen Mutual Pension Insurance Company
represented over 5 % of Basware Corporation's share capital and voting rights on
April 16, 2010
On July 26, 2010 the total number of shares held by Nordea Rahastoyhtiö Suomi Oy
represented less than 5 % of Basware Corporation's share capital and voting
rights. On July 30, 2010 the total number of shares held by Nordea Rahastoyhtiö
Suomi Oy represented more than 5 % of Basware Corporation's share capital and
voting rights.
Shareholding of Management and Board
According to the shareholder register managed by Euroclear Finland Oy, on
December 31, 2010 CEO Ilkka Sihvo holds 1 081 800 Basware's shares, Olli
Hyppänen 500 shares and Esa Tihilä 500 shares. Other members of Basware
Executive Team do not hold Basware's shares.
According to the shareholder register managed by Euroclear Finland Oy, on
December 31, 2010 Hannu Vaajoensuu holds 962 100 Basware's shares, Pentti
Heikkinen 1 621, Ilkka Toivola 2 362, Sakari Perttunen 1 045 800, Matti Copeland
2 771 and Eeva Sipilä 605 shares.
GOVERNANCE
The Annual General Meeting of Shareholders on February 18, 2010, confirmed the
number of Board members as six. The Annual General Meeting resolved to agree on
the proposal and elected Matti Copeland, Pentti Heikkinen, Sakari Perttunen,
Eeva Sipilä, Ilkka Toivola and Hannu Vaajoensuu members of the Board of
Directors.
The Annual General Meeting further resolved to elect Ernst & Young Oy,
Authorized Public Accountants as the auditor, with APA Heikki Ilkka in charge
and APA Terhi Mäkinen as the deputy auditor.
A separate stock exchange release has been issued on the Board authorizations
and other resolutions of the Annual General Meeting of Shareholders on February
18, 2010.
This Corporate Governance Statement has been composed in accordance with
Recommendation 51 of the new Corporate Governance Code and Chapter 2, Section 6
of the Finnish Securities Market Act. The Corporate Governance Statement is
issued separately from the company's annual report.
Basware's Corporate Governance principles are available in full on the company's
website at
http://www.basware.com/Investors/corporate_governance/Pages/default.aspx
Share repurchase
On February 18, 2010 the AGM authorized the Board to resolve on the acquisition
of a maximum of 1 146 812 own shares, pursuant to the Chapter 15, section 5 of
the Companies Act.
The new shares are acquired with invested non-restricted equity on the market
price at the Helsinki Stock Exchange at the time of the acquisition. The shares
can either be held by the Company, nullified or conveyed further. The
authorization for acquisition is valid until March 31, 2011. The AGM decided to
approve Boards proposal to repurchase own shares in the proposed form.
SHORT-TERM RISKS AND RISK MANAGEMENT
In accordance with Basware's risk management policy, risks are divided into six
categories: risks related to business operations, products, personnel as well as
legal, financial and data security risks. Basware takes risks that are a natural
part of its strategy and objectives. These risks are managed and decreased in
various ways. Short-term risks are considered to be risks in the current
reporting year.
According to market estimates released at the end of 2010, the software market
is expected to grow at a slower rate in 2011 than previously forecasted. The
software market is expected to grow by 7.1 percent globally and by 8.4 percent
in the United States.
The IT services market is also expected to grow globally at a slower rate than
previously forecasted, at a rate of approximately 7.3 percent. The US IT market
growth estimate stands unchanged at 7.4 percent. Nevertheless, the Purchase to
Pay service market is expected to grow by more than 10 percent in 2011.
In previous economic downturns, the demand for the company's products and
services has remained more positive than the general economic market as a whole
as the company's software solutions generate cost savings.
Sales receivables are one part of operational business risks and accuracy of
financial reporting for this part is managed by reserving for bad debts. Basware
Corporation's sales receivable are calculated on a monthly basis in Basware's
centralized Financial Shared Service Center. The company will intensify its
management and collection of sales receivables. Business management regularly
monitors the payment of sales receivables as part of the management of customer
accounts.
The Group's main currency is Euro, accounting for approximately 60 percent of
net sales in 2010 (approximately 61% in 2009). The significance of exchange rate
fluctuations between the euro and other currencies will increase hand in hand
with the share of international operations. In addition to the euro area,
Basware operates in various areas, the most significant of them in 2010 being
Norway, the United Kingdom, the United States and Sweden. The company is exposed
to exchange rate risks in these countries through intra-company trade, exports
and imports as well as through the equity and funding of foreign subsidiaries.
The company did not realize hedging for exchange rate fluctuations during the
financial year as the foreign-currency-denominated cash flow in the subsidiaries
did not exceed the foreign-currency-specific limit for hedging measures in
accordance with the company's hedging policy.
Goodwill has been tested during the last quarter of 2010. In accordance with the
testing for impairment of assets, no depreciation of goodwill was made.
Basware's objective is to become the world's leading company in e-invoicing.
Automation services including e-invoicing and the supporting scan and capture
also target suppliers and buyers outside Basware's existing customer base, which
increases the customer potential. The company's long-term objective is annual
growth of more than 50 percent in Automation Services. SaaS and e-invoicing are
scalable business models with a high business potential. The realization of this
growth potential requires a new operating model as well as active and continuous
development of competencies because of the strong growth of the number of
customers and transaction volumes. These include sales and commissioning as
well as customer support and product development.
Basware has in accordance with its strategy carried out organic growth by
acquisitions. Acquisition projects are managed carefully and internal as well as
external expertise is utilized in planning phase (e.g. due diligence), take over
phase (e.g. immediate implementation of Basware's IT systems) and in integration
phase (e.g. implementation of HR processes).
In other respects, no significant changes have taken place in Basware's short-
term risks and uncertainties during the financial period.
ACQUISITIONS AND CHANGES IN GROUP STRUCTURE
The company has branch offices in Singapore, Russia and India.
Basware increased its shareholding in Basware Einvoices Oy to 100 percent on
January 30, 2009, by acquiring 12.55% of the company's shares and control from
the company's management. The purchase price paid on the date of the transaction
was approximately EUR 720 thousand and the additional purchase price to be paid
based on the business volume for 2009 in February 2010 was EUR 293 thousand.
Basware Einvoices Oy was merged into the parent company in 2009.
Basware AS purchased the Norwegian invoice automation solution business of
Itella Information AS on January 26, 2009. The purchase price was NOK 6.38
million (approximately EUR 0.72 million) and it was paid in cash on the day the
acquisition was completed, April 1, 2009. In addition, Basware AS paid an
additional purchase price of NOK 4 434 thousand (EUR 559 thousand) in February
2010, determined on the basis of the volume of the purchased operations' service
sales in 2009.
Basware Corporation acquired the entire share capital of TAG Services Pty Ltd in
Australia on July 1, 2009. The acquisition price was 2.1 million Australian
dollars (approximately EUR 1.2 million) and was paid in cash in two parts in
July and August 2009. In addition, an additional acquisition price that was
based on the company's net sales of the period from July 1, 2009 to June
30, 2010 was paid in August 2010. The additional acquisition price was 2.0
Australian dollars (EUR 1.4 million).
On October 5, 2010 Basware acquired TNT Post's Connectivity operations, which is
a part of TNT Post's electronic invoicing operations in the Netherlands. The
purchase price paid in connection with the transaction was EUR 50 thousand, and
an estimated additional purchase price of EUR 100 thousand will be paid in
January 2011 on the basis of the number of customers that have migrated to the
Basware e-invoicing environment. No other assets were transferred. Based upon
the preliminary purchase price allocation, the purchase price does not include
goodwill. EUR 200 thousand associated with customer relationships has been
allocated to intangible assets, taking deferred liabilities into consideration.
The acquisition would not have had a material impact on the Group's net sales or
operating profit had the consolidation taken place at the beginning of the
financial period. The acquisition has not had a material impact on the Group's
net sales and operating profit.
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY
Basware's corporate responsibility is driven by strong business ethics,
corporate values, and legislation. The company is committed to economic, social
and environmental responsibility in all operations.
Basware's software products reduce paper consumption in thousands of offices
around the world, leading the customer companies toward the paperless office,
which saves both the environment and money. Profitability and financial
stability are an integral part of Basware's responsibility. Stability and
trustworthiness yield added value to all stakeholders.
Basware has cooperated with the Plan Finland charity foundation since 2002, and
the company has 15 sponsored children around the world. In 2010 Basware has
participated World Wildlife Fund's Save the Baltic Sea project and supported
The Association of the Friends of the University Childrens' Hospital in Finland
(Lastenklinikan kummit ry).
Basware's head office in Espoo has held a Green Office certificate issued by the
World Wildlife Fund since 2003. The prerequisites for being issued the
certificate include a standing environmental program, waste sorting and
recycling, reduction of carbon dioxide emissions and endeavors to constantly
improve environmental issues.
STRATEGY
Basware's Board of Directors and company management have adjusted the company's
strategy and goals for the next 4-year period. The company will focus strongly
on international growth and therefore Basware is considering toraise additional
equity financing from the market.
Basware Automation Services, launched in 2009, grew 56.0 percent in 2010, and
have shown their unique competitiveness internationally. In order to utilize the
achieved competitive edge, the company will increase its efforts to support the
growth of Automation Services.
The company aims to be among the leading e-invoice companies worldwide.
Acquisitions will support the growth of the e-invoicing service. Its annual
volume in 2010 amounted to 13.6 million transactions. The e-invoicing market is
growing strongly, and Basware aims to reach the 100 million invoice mark by
2014.
In order to support international growth, Basware is developing its
organizational structure into stronger geographical regions. The country
specific organizations will be combined into regional structure. The regional
structure gives a boost to and enables additional investments in sales,
marketing, supplier activation services of Automation Services, and other
customer functionalities. At the same time, Basware is surveying opportunities
for rearranging its product and business portfolio in order to enhance the
international product and service business.
According to Basware's view, the significance of the service concept will
continue its solid growth in the future as well, which is the reason for
marketing the company's next-generation product concept strongly also as
services. The company's aim is to transfer the installations of existing
customers through product updates to Software as a Service (SaaS) model to a
considerable extent in the future. Service offering development will continue
vigorously. Basware will launch new Invoice Automation process outsourcing
offering for the global market during first half of 2011. Offering new and more
extensive service models to the customer will improve the company's
profitability and increase its constant net sales.
Basware has adjusted its pricing model to be very flexible according to customer
needs. From now on, software solutions will be available to customers with one-
time license fee, monthly subscription, and according to the SaaS model.
In order to consolidate international growth further, Basware is increasing the
focus on acquisitions in its strategy and organization. The company has been
active in mergers and acquisitions and is now further strengthening the activity
by establishing a new executive team-level M&A function with the aim of actively
engaging in potential mergers and acquisitions in support of the company's
strategy. In order to increase financial flexibility and preparedness to carry
out potential acquisitions Basware is considering to raise additional equity
financing from the market during the first quarter of 2011. Such additional
financing is planned to be raised by means of a directed share issue to
institutional investors. Nordea has been appointed as financial adviser to
Basware in relation to the potential share issue.
The role of offshoring operations will continue to grow in the company's
strategy. R&D and Automation Services operations at Basware's Indian office have
already succeeded in gaining a significant role. The company is surveying the
development of off-shoring in order to improve profitability also with regard to
new service business operations and internal support functions. The company is
also investigating the possibility of new geographical regions in expanding
offshoring.
Basware's long-term objectives were specified further. The new strategic
guidelines facilitate strong international growth and positive development of
operating profit margin. The long term target is to grow annually 15-30 percent
in net sales and more than 50 percent in Automation Services. The company's
long-term target for operating profit margin is 15-20 percent improving towards
the end of the period.
MANAGEMENT AND AUDITORS
In 2010, Ilkka Sihvo acted as the CEO of the company. The CEO is in charge of
the day-to-day management of the company in accordance with the instructions and
orders given by the Board. The Annual General Meeting of Shareholders on
February 18, 2010, confirmed the number of Board members as six. Matti Copeland,
Pentti Heikkinen, Sakari Perttunen, Eeva Sipilä, Ilkka Toivola and Hannu
Vaajoensuu were elected to the Board. In its first meeting, the Board elected
Hannu Vaajoensuu as Chairman of the Board and Sakari Perttunen as Vice Chairman.
Hannu Vaajoensuu, Chairman of the Board was employed by the company until
February 17, 2010. In addition to his role as a Chairman of the Board he
participated in the M&A project team and acted as an advisor in M&A projects. In
connection of the termination of the employment, only standard statutory
remuneration was paid.
The Annual General Meeting further resolved to elect Ernst & Young Oy,
Authorized Public Accountants as the auditor, with APA Heikki Ilkka in charge
and APA Terhi Mäkinen as the deputy auditor.
EVENTS AFTER THE FINANCIAL PERIOD
As of January 1, 2011, members of the Basware Executive Team are Ilkka Sihvo,
CEO; Mika Harjuaho, CFO; Mari Heusala, Vice President HR; Olli Hyppänen, Senior
Vice President Strategy and Global Operations; Jorma Kemppainen, Senior Vice
President Products; Pekka Lindfors, Senior Vice President Northeast; Steve
Muddiman, Senior Vice President Global Marketing; Matti Rusi, Senior Vice
President Europe; Ari J. Salonen, General Manager North America; Esa Tihilä,
Senior Vice President Automation Services and Jukka Virkkunen, Senior Vice
President Scandinavia. In addition, as of January 25, 2011 Matti Copeland,
Senior Vice President, M&A is a member of Basware Executive Team.
Matti Copeland resigned from the Board of Directors of Basware Corporation on
January 24, 2011.
Basware Board of Directors approved in its meeting on January 20, 2011 the
subscription of total of 30 805. The share subscriptions were based on the
Warrant Program 2006 series C warrants (21 605 shares) and Warrant Program 2007
series E warrants (9 200 shares).
FUTURE OUTLOOK
According to market estimates released at the end of 2010, the software market
is expected to grow at a slower rate in 2011 than previously forecasted. The
software market is expected to grow by 7.1 percent globally and by 8.4 percent
in the United States.
The IT services market is also expected to grow globally at a slower rate than
previously forecasted, at a rate of approximately 7.3 percent. The US IT market
growth estimate stands unchanged at 7.4 percent. Nevertheless, the Purchase to
Pay service market is expected to grow by more than 10 percent in 2011.
Western Europe and the United States combined account for approximately three
quarters of the enterprise software market. According to market research
companies the penetration rate of e-invoicing is still low between 5 and 20
percent depending on geographical location. In Scandinavia the rate is slightly
higher. The procurement management and electronic invoice processing markets
are heterogeneous in terms of the competitive situation. Growth could attract
more competitors to the market. The industry is consolidating, and this
development could go on in the future as well. Globally speaking, Basware is a
medium-sized software company in terms of net sales as well as number of
personnel.
Basware's direct competitors are mainly locally operating and often smaller
companies. In North America in particular, the company has also larger
competitors, especially in the field of procurement management. Developers of
document management, scanning and recycling systems compete with Basware,
particularly with regard to purchase invoice management solutions. Competing
solutions also include customized solutions integrated into ERP (Enterprise
Resource Planning) systems.
The software products still offer a competitive edge, thanks to the integrated
offering consisting of new added value products and the products. Automation
services, a new concept in the portfolio, will have a positive impact on the
competitiveness.
EPP Automation Services will bring more predictability and transparency over
Basware's revenue stream and profitability development. In 2011 Basware will
introduce next generation invoice automation solution improving the company's
competitiveness. Next generation versions of other solutions in the product
family will be introduced later. Automation services, which can also be offered
as a separate solution, will improve the company's competitiveness in the
starting strategy period. Automation services has been growing more than 50
percent annually.
Basware's objective is to become the world's leading company in e-invoicing. E-
invoicing and the supporting scan and capture also target suppliers and buyers
outside Basware's existing customer base, which increases the customer
potential. Long-term objective of Automation services is to grow more than 50
percent annually. Saas and e-invoicing are scalable solutions offering high
business potential.
The company's international growth is based on efforts of its own sales and
marketing activity as well as the reseller channel. In North America, the focus
will be on developing the company's own sales channel and strategic
partnerships. Development of own sales channel and profitable growth continues
in Europe. In Scandinavia, the focus is on profitability, and moderate growth is
supported by the company's expanded product portfolio and the development of the
service business. In Finland, the focus is on profitability, and moderate growth
will primarily be achieved from the fields of procurement management and
services.
In order to consolidate international growth further, Basware is increasing the
focus on acquisitions in its strategy and organization. The company has been
active in mergers and acquisitions and is now further strengthening the activity
by establishing a new executive team-level M&A function with the aim of actively
engaging in potential mergers and acquisitions in support of the company's
strategy. Matti Copeland has been appointed to Senior Vice President, M&A and
also to Member of Basware Executive Team as of January 25, 2011.
The role of off-shoring operations will continue to grow in the company's
strategy. R&D and Automation Services operations at Basware's Indian office have
already succeeded in gaining a significant role. The company is surveying the
development of off-shoring in order to improve profitability also with regard to
new service business operations and internal support functions. The company is
also investigating the possibility of new geographical regions in expanding off-
shoring.
Basware expects its net sales to grow over 10 percent in 2011. Operating profit
(EBIT) for 2011 is expected to be over 13 percent of net sales.
BOARD'S DIVIDEND PROPOSAL
Basware is a growth company that aims at increased market capitalization and
moderate dividend yield. When preparing the dividend proposal, the Board
considers the company's financial position, profitability and prospects in the
near future.
At the end of 2010, the Group parent company's distributable funds are EUR
68 491 345.99.
Basware's Board of Directors proposes to the Annual General Meeting that a
dividend of EUR 0.40 per share (2009: EUR 0.36) be paid for 2010.
Summary of financial statements and notes to the financial statements are
presented in a separate document.
Espoo, Finland, January 24, 2011
BASWARE CORPORATION
Board of Directors
For more information, please contact
CEO Ilkka Sihvo, Basware Corp.,
Tel. +358 9 8791 7251 or +358 40 501 8251
Analyst and Press Briefing
Basware arranges today, January 25, 2010 a briefing on the Interim Report for
the press and analysts at 11:00 a.m. in Hotel Kämp, Pohjoisesplanadi 29,
Helsinki, Finland. During this briefing CEO Ilkka Sihvo will comment the
operations and financial performance of the quarter. Welcome.
FINANCIAL REPORTING IN 2011
Basware's Annual Report 2010, including the audited Financial Statements, will
be published on the company's website during the week starting on February
8, 2011. The company will not publish the Annual Report in print.
Release dates for interim reports:
- Interim Report January-March 2011 (Q1) on Wednesday, April 13, 2011
- Interim Report January-June 2011 (Q2) on Friday, July 8, 2011
- Interim Report January-September 2011 (Q3) on Thursday, October 13, 2011
Basware Corporation's Annual General Meeting of Shareholders will be held on
Thursday, February 17, 2011 starting at 2:00 PM at Hotel Kämp, Pohjoisesplanadi
29 in Helsinki, Finland.
Distribution:
NASDAQ OMX Helsinki Ltd
Key media
www.basware.com
[HUG#1482083]
