BASWARE FINANCIAL STATEMENTS
(Thomson Reuters ONE) - Basware fourth quarter and full year 2009SUMMARY (last year's corresponding period in parentheses, unless otherwisestated)Financial year 2009 * Net sales EUR 92 654 thousand (EUR 86 098 thousand) - growth 7.6 percent * Operating profit EUR 11 824 thousand (EUR 8 679 thousand) - growth 36.2 percent * Operating profit 12.8 percent of net sales (10.1%) * International operations accounted for 54.2 percent of net sales (51.8%) - growth 12.6 percent * Cash flows from operating activities were EUR 14 732 thousand (EUR 8 331 thousand) * Earnings per share EUR 0.80 (0.56) - growth 41.3 percent * Dividendproposal for 2009: EUR 0.36 per share (2008: EUR 0.23)October-December Q4 * Net sales EUR 26 600 thousand (EUR 26 294 thousand) - growth 1.2 percent * Operating profit EUR 4 058 thousand (EUR 4 122 thousand) - decrease 1.6 percent * Operating profit 15.3 percent of net sales (15.7%) * International operations accounted for 53.9 percent of net sales (51.4%) - growth 6.0 percent * Earnings per share EUR 0.35 (0.28) - growth 24.0 percentBasware expects its net sales in 2010 to develop positively on the level of2009. Operating profit (EBIT) for 2010 is expected to be from 10 to 15 percentof net sales.The Financial Statements have been prepared according to International FinancialReporting Standards (IFRS).GROUP KEY FIGURES+--------------------------------+------+-------+-------+------+------+-------++|EUR thousand |10-12/|10-12/ |Change,| 1-12/|1-12/ |Change,||| | 2009| 2008| %| 2009| 2008| %||+--------------------------------+------+-------+-------+------+------+-------+++--------------------------------+------+-------+-------+------+------+-------++|Net sales |26 600| 26 294| 1.2%|92 654|86 098| 7.6%||+--------------------------------+------+-------+-------+------+------+-------++|EBITDA | 5 337| 5 111| 4.4%|16 280|11 722| 38.9%||+--------------------------------+------+-------+-------+------+------+-------++|Operating profit before | | | | | | ||+--------------------------------+------+-------+-------+------+------+-------++|IFRS-3 amortization | 4 600| 4 583| 0.4%|13 788| 9 730| 41.7%||+--------------------------------+------+-------+-------+------+------+-------++|Operating profit | 4 058| 4 122| -1.6%|11 824| 8 679| 36.2%||+--------------------------------+------+-------+-------+------+------+-------++|% of net sales | 15.3%| 15.7%| | 12.8%| 10.1%| ||+--------------------------------+------+-------+-------+------+------+-------++|Profit before tax | 4 038| 3 862| 4.6%|11 590| 8 410| 37.8%||+--------------------------------+------+-------+-------+------+------+-------++|Profit for the period | 4 007| 3 294| 21.6%| 9 074| 6 585| 37.8%||+--------------------------------+------+-------+-------+------+------+-------+++--------------------------------+------+-------+-------+------+------+-------++|Return on equity, % | 29.4%| 27.2%| | 17.2%| 13.7%| ||+--------------------------------+------+-------+-------+------+------+-------++|Return on investment, % | 25.3%| 31.0%| | 18.8%| 16.6%| ||+--------------------------------+------+-------+-------+------+------+-------++|Liquid assets* |12 210| 8 777| 39.1%|12 210| 8 777| 39.1%||+--------------------------------+------+-------+-------+------+------+-------++|Gearing, % | -5.3%| 9.3%| | -5.3%| 9.3%| ||+--------------------------------+------+-------+-------+------+------+-------++|Equity ratio, % | 64.8%| 59.5%| | 64.8%| 59.5%| ||+--------------------------------+------+-------+-------+------+------+-------+++--------------------------------+------+-------+-------+------+------+-------++|Earnings per share, EUR | 0.35| 0.28| 24.0%| 0.80| 0.56| 41.3%||+--------------------------------+------+-------+-------+------+------+-------++|Earnings per share (diluted), | 0.35| 0.28| 24.0%| 0.80| 0.56| 41.3%|||EUR | | | | | | ||+--------------------------------+------+-------+-------+------+------+-------++|Equity per share, EUR | 4.93| 4.23| 16.7%| 4.93| 4.23| 16.7%||+--------------------------------+------+-------+-------+------+------+-------++*) Includes cash, cash equivalents and financial assets at fair value throughprofit or lossBasware's business operations consist of Product Sales, Maintenance,Professional Services and Automation Services. The core of Basware's productsales consists of the Basware Enterprise Purchase to Pay product suite and theBasware Financial Management (FIMA) suite. The Group's reported market areas areFinland, Scandinavia, Europe and other areas.Record-high results in challenging market situationBasware's CEO Ilkka Sihvo: "Operating profit for the full year was record-highand grew by 36.2 percent, which is an extraordinary performance in recession.Our operating profit was 11.8 million euros and accounted for 12.8 percent ofour net sales. Net sales grew by 7.6 percent. Automation Services was mostsuccessful and grew as much as 72.0 percent. Automation Services have improvedour competitiveness and we have made agreements with large internationalcompanies on different continents. During 2009 the order backlog of AutomationServices has clearly grown.The last quarter of the year succeeded according to the plan. Operating profitremained at the level of the previous year and was over 15 percent of net sales.During the last quarter Automation Services accelerated its growth to 162.3percent being an excellent recession performance. We also succeeded in closinglarge deals during the last quarter in North America."REPORTINGAs of January 1, 2009, the Group has applied the following new and revisedstandards: IFRS 8 Operating Segments and IAS 1 Presentation of FinancialStatements. IFRS 8 has an effect on the segment information in the notes and IAS1 has an effect on the presentation of the income statement.Basware's reporting segment is based upon geography as follows: Finland,Scandinavia, Europe and Other. Following the TAG Services acquisition on July1, 2009, Basware has assets in Australia. Taking into account the nature andextent of the business operations in North America and Australia, these areaswill be merged into the Other segment as of Q3/2009. The Finland segmentincludes the Finnish, Russian, Asia-Pacific (excluding Australia) and FinancialManagement business operations.In addition, the company reports revenue from products and services as follows:License Sales, Professional Services, Maintenance, and Automation Services.Automation Services include SaaS revenue and Connectivity Services, whichinclude digitalization of paper invoices and exchange of e-invoices and purchasetransactions.The company also reports the backlog of Automation Services agreements notrecognized as income. Automation Services agreements typically span severalyears.FOURTH QUARTER OCTOBER 1 - DECEMBER 31, 2009NET SALES OCTOBER-DECEMBER 2009The geographical division of net sales by the location of assets:+----------------------+------+------+--------+------+------+--------++|Net sales |10-12/| 10-12|Change, |1-12/ |1-12/ |Change, |||(EUR thousand) | 2009| 2008| %| 2009| 2008| %||+----------------------+------+------+--------+------+------+--------++|Finland |15 271|15 329| -0.4|50 486|49 517| 2.0||+----------------------+------+------+--------+------+------+--------++|Scandinavia | 6 135| 6 627| -7.4|22 236|18 805| 18.2||+----------------------+------+------+--------+------+------+--------++|Europe | 5 629| 5 264| 6.9|18 717|19 454| -3.8||+----------------------+------+------+--------+------+------+--------++|Other | 2 897| 1 311| 120.9| 9 201| 5 004| 83.9||+----------------------+------+------+--------+------+------+--------++|Sales between segments|-3 333|-2 238| -49.0|-7 985|-6 682| -19.7||+----------------------+------+------+--------+------+------+--------++|Group total |26 600|26 294| 1.2|92 654|86 098| 7.6||+----------------------+------+------+--------+------+------+--------++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)| 2009| 2008| %| 2009| 2008| %||+--------------+------+------+-------+------+------+--------++|Finland |12 267|12 769| -3.9|42 449|41 514| 2.3||+--------------+------+------+-------+------+------+--------++|Scandinavia | 6 003| 6 411| -6.4|21 719|18 309| 18.6||+--------------+------+------+-------+------+------+--------++|Europe | 5 071| 5 143| -1.4|18 065|19 191| -5.9||+--------------+------+------+-------+------+------+--------++|Other | 3 258| 1 971| 65.3 |10 421| 7 083| 47.1 ||+--------------+------+------+-------+------+------+--------++|Group total |26 600|26 294| 1.2|92 654|86 098| 7.6||+--------------+------+------+-------+------+------+--------++Basware Group's net sales increased by 1.2 percent in October-December and wereEUR 26 600 thousand (EUR 26 294 thousand).In the fourth quarter, 29.3 percent (30.9%) of net sales consisted of ownproduct sales and the product sales declined by 4.1 percent. Maintenance revenueaccounted for 29.7 percent (26.6%) of net sales and grew by 13.3 percent.Consulting and services revenue represented 31.5 percent (38.9%) of net salesand decreased by 18.0 percent.During the period, Automation Services (SaaS, e-invoicing, Scan and Capture)grew by 162.3 percent and accounted for 9.5 percent (3.6%) of net sales.Value added resellers provided a net share of 11.1 percent (14.9%) or EUR 869thousand of product sales in October-December, corresponding to 6.1 percent(8.9%) of international operations' total net sales.The international share of Basware's net sales was 53.9 percent (51.4%) inOctober-December. International operations grew by 6.0 percent.FINANCIAL PERFORMANCE OCTOBER-DECEMBER 2009Basware Group's operating profit decreased by 1.6 percent in October-Decemberand was EUR 4 058 thousand (EUR 4 122 thousand). Operating profit amounted to15.3 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) | 2009| 2008| %| 2009| 2008| %||+-------------------------------+------+-------+--------+------+-----+--------++|Finland | 3 024| 4 385| -31.0| 7 714|7 898| -2.3||+-------------------------------+------+-------+--------+------+-----+--------++|Scandinavia | 1 041| -21|5 068.2 | 3 169|1 017| 211.4||+-------------------------------+------+-------+--------+------+-----+--------++|Europe | 902| -48|1 974.6 | 1 566| -74|2 224.8 ||+-------------------------------+------+-------+--------+------+-----+--------++|Other | -517| 118| -537.7| 741| 289| 155.9||+-------------------------------+------+-------+--------+------+-----+--------++|Operating profit between | -393| -312| -26.0|-1 365| -452| -201.8 |||segments | | | | | | ||+-------------------------------+------+-------+--------+------+-----+--------++|Group total | 4 058| 4 122| -1.6|11 824|8 679| 36.2||+-------------------------------+------+-------+--------+------+-----+--------++The company's fixed costs were EUR 19 660 thousand (EUR 19 911 thousand) in thequarter, and have decreased 1.3 percent on the corresponding period the previousyear. Personnel costs made up 75.5 percent (75.8%) or EUR 14 841 thousand (EUR15 093 thousand) of the fixed costs.Research and development expenses totaled EUR 3 847 thousand (EUR 4 385thousand), of which EUR 360 thousand (EUR 846 thousand) or 9.4 percent (19.3%)were capitalized during the period. Amortization of capitalized research anddevelopment costs totaled EUR 429 thousand (EUR 312 thousand).Profit before tax for the period was EUR 4 038 thousand (EUR 3 862 thousand) andprofit for the period was EUR 4 007 thousand (EUR 3 294 thousand). Undilutedearnings per share were EUR 0.35 (EUR 0.28).BUSINESS OPERATIONS OCTOBER-DECEMBER 2009FinlandThe Finland segment includes the business operations in Finland, Russia,Asia-Pacific (excluding Australia) and the head office functions. Net sales forthe fourth quarter decreased by 0.4 percent to EUR 15 271 thousand (EUR 15 329thousand).Net sales of the Finnish and Russian business operations increased by 1.3percent during the fourth quarter. All the Basware Enterprise Purchase to Payand Financial Management products are sold in the region.There are currently 14 resellers in all in the area and the number of personnelaveraged 460 (426) during the fourth quarter.ScandinaviaBasware's Nordic organization consists of a centrally directed Scandinavian(Sweden, Denmark and Norway) unit. All the Basware Enterprise Purchase to Paysolutions are sold in Scandinavia.Net sales of the area decreased by 7.4 percent in the fourth quarter to EUR6 135 thousand (EUR 6 627 thousand). The profitability of operations increasedby 5 068.2 percent and operating profit was EUR 1 041 thousand (EUR -21thousand).Business operations are mainly handled by the own organization and there were130 (146) employees on average in the area.EuropeBasware's European business operations consist of the units in Germany, France,the Netherlands and the United Kingdom. Additionally, the reseller networkcovers the eastern part of Central Europe. All Enterprise Purchase to Paysolutions are sold in Europe.Net sales of the Europe segment increased by 6.9 percent in the fourth quarterand totaled EUR 5 629 thousand (EUR 5 264 thousand). The profitability of theoperations improved by 1 974.6 percent and operating profit was EUR 902 thousand(EUR -48 thousand).During 2009 Basware UK implemented a rationalization program and reorganizationof operations, facilitating profitable growth in the unit. Significant costsavings have been achieved and the utilization rate of consulting has beenincreased with the program, which will improve the unit's profitability.There are 35 resellers in Europe, and Basware personnel averaged 119 (127)during the fourth quarter.OtherBusiness operations in North America and Australia are reported in this segment.Net sales of the area increased by 120.9 percent in the fourth quarter to EUR2 897 thousand (EUR 1 311 thousand). The profitability of the operationsdecreased by 537.7 percent and operating profit was EUR -517 thousand (EUR 118thousand). The business operations in Australia are reported in the Othersegment as of July 1, 2009. Cumulative adjustments related to the transferpricing principle followed by the Group companies have been recorded in thereview period.Basware's North American unit sells the Enterprise Purchase to Pay solutions inthe United States and Canada.At the end of the period, there were 10 resellers in this segment. The number ofpersonnel averaged 48 (29) during the fourth quarter.FINANCIAL PERIOD JANUARY 1 - DECEMBER 31, 2009NET SALESBasware Group's net sales increased by 7.6 percent during the period(January-December) and were EUR 92 654 thousand (EUR 86 098 thousand). Pro formanet sales for the financial period would have been EUR 93 217 thousand had theTAG Services Pty Ltd net sales been consolidated for the entire period.The company's product sales decreased by 8.1 percent during the period to 25.6percent (30.0%) of net sales.Maintenance revenue increased by 18.7 percent in the reporting period andaccounted for 32.1 percent (29.1%) of net sales. Professional Services revenueincreased by 2.1 percent and accounted for 33.6 percent (35.5%) of net sales.During the period, Automation Services (SaaS, e-invoicing, Scan and Capture)grew by 72.0 percent and accounted for 8.7 percent (5.4%) of net sales. Thebacklog of the Automation Services business not recognized as income was EUR14 630 thousand (EUR 10 519 thousand) at the end of the period.Value added resellers provided a net share of 9.9 percent (15.7%) or EUR 2 343thousand of Product Sales' net sales during the reporting period, accounting for4.7 percent (9.1%) of the net sales from international operations.The international share of Basware's net sales was 54.2 percent (51.8%) in thereporting period. 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) | 2009| 2008| %| 2009| 2008| %||+----------------------+------+------+--------+------+------+--------++|Finland |15 271|15 329| -0.4|50 486|49 517| 2.0||+----------------------+------+------+--------+------+------+--------++|Scandinavia | 6 135| 6 627| -7.4|22 236|18 805| 18.2||+----------------------+------+------+--------+------+------+--------++|Europe | 5 629| 5 264| 6.9|18 717|19 454| -3.8||+----------------------+------+------+--------+------+------+--------++|Other | 2 897| 1 311| 120.9| 9 201| 5 004| 83.9||+----------------------+------+------+--------+------+------+--------++|Sales between segments|-3 333|-2 238| -49.0|-7 985|-6 682| -19.7||+----------------------+------+------+--------+------+------+--------++|Group total |26 600|26 294| 1.2|92 654|86 098| 7.6||+----------------------+------+------+--------+------+------+--------++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)| 2009| 2008| %| 2009| 2008| %||+--------------+------+------+-------+------+------+-------++|Finland |12 267|12 769| -3.9|42 449|41 514| 2.3||+--------------+------+------+-------+------+------+-------++|Scandinavia | 6 003| 6 411| -6.4|21 719|18 309| 18.6||+--------------+------+------+-------+------+------+-------++|Europe | 5 071| 5 143| -1.4|18 065|19 191| -5.9||+--------------+------+------+-------+------+------+-------++|Other | 3 258| 1 971| 65.3 |10 421| 7 083| 47.1 ||+--------------+------+------+-------+------+------+-------++|Group total |26 600|26 294| 1.2|92 654|86 098| 7.6||+--------------+------+------+-------+------+------+-------++FINANCIAL PERFORMANCEBasware's operating profit for the period increased by 36.2 percent to 11 824EUR thousand (EUR 8 679 thousand). Operating profit represented 12.8 percent(10.1%) of net sales. Pro forma operating profit for the financial period wouldhave been EUR 11 806 thousand had the TAG Services Pty Ltd operating profitsales been consolidated for the entire period.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) | 2009| 2008| %| 2009| 2008| %||+-------------------------------+------+------+--------+------+------+--------++|Finland | 3 024| 4 385| -31.0| 7 714| 7 898| -2.3||+-------------------------------+------+------+--------+------+------+--------++|Scandinavia | 1 041| -21|5 068.2 | 3 169| 1 017| 211.4||+-------------------------------+------+------+--------+------+------+--------++|Europe | 902| -48|1 974.6 | 1 566| -74|2 224.8 ||+-------------------------------+------+------+--------+------+------+--------++|Other | -517| 118| -537.7| 741| 289| 155.9||+-------------------------------+------+------+--------+------+------+--------++|Operating profit between | -393| -312| -26.0|-1 365| -452| -201.8 |||segments | | | | | | ||+-------------------------------+------+------+--------+------+------+--------++|Group total | 4 058| 4 122| -1.6|11 824| 8 679| 36.2||+-------------------------------+------+------+--------+------+------+--------++The company's fixed costs were EUR 70 343 thousand (EUR 69 900 thousand) in theperiod, up 0.6 percent on the corresponding period the previous year. Personnelcosts made up 74.3 percent (72.1%) or EUR 52 294 thousand (EUR 50 399 thousand)of the fixed costs. Bad debt and movement in bad debt accruals are included infixed costs. Bad debt reservations at the end of the fourth quarter amounted toEUR 666 thousand (EUR 845 thousand).Research and development expenses totaled EUR 14 781 thousand (EUR 15 518thousand), of which EUR 1 454 thousand (EUR 2 739 thousand) or 9.8 percent(17.6%) were capitalized during the period. Amortization of capitalized researchand development costs totaled EUR 1 624 thousand (EUR 1 183 thousand). Researchand development costs equaled 16.0 percent (18.0%) of net sales. The costsdecreased by 4.7 percent (17.8%) during the financial year.The company's finance income and finance expenses were EUR -234 thousand (EUR-269 thousand). The company's profit before tax was EUR 11 590 thousand (EUR8 410 thousand). Taxes for the period totaled EUR 2 517 thousand (EUR 1 825thousand). Profit for the period was 9.8 percent (7.6%) of net sales, or EUR9 074 thousand (EUR 6 585 thousand). Undiluted earnings per share were EUR 0.80(EUR 0.56).FINANCE AND INVESTMENTSBasware Group's total assets on the balance sheet at the end of the financialperiod were EUR 87 287 thousand (EUR 81 909 thousand). The company's cash andliquid assets were EUR 12 210 thousand (EUR 8 777 thousand), of which cash andcash equivalents were EUR 12 176 thousand (EUR 8 745 thousand) and financialassets at fair value through profit or loss were EUR 34 thousand (EUR 31thousand).Cash flow from operating activities was EUR 14 732 thousand (EUR 8 331thousand). Cash flow from investments was EUR -5 009 thousand (EUR -12 303thousand).Equity ratio was 64.8 percent (59.5%) and gearing was -5.3 percent (9.3%). Thecompany's interest-bearing liabilities totaled EUR 9 230 thousand (EUR 13 283thousand), of which current liabilities accounted for EUR 5 555 thousand (EUR5 555 thousand). Return on investment was 18.8 percent (16.6%) and return onequity 17.2 percent (13.7%).Basware AS purchased the Norwegian invoice automation solution business ofItella Information AS on January 26, 2009. The purchase price was NOK 6.38million (approximately EUR 0.72 million) and it was paid in cash on the day theacquisition was completed, April 1, 2009. In addition, Basware may pay anadditional purchase price of a maximum of NOK 7.0 million (EUR 0.77 million) inFebruary 2010 at the latest, determined on the basis of the volume of thepurchased operations' service sales in 2009. The estimated additional purchaseis circa NOK 4.4 million (around EUR 0.55 million). EUR 761 thousand associatedwith customer relationships has been allocated to intangible assets, takingdeferred tax liabilities into consideration. The purchase price includes EUR436 thousand of goodwill. The allocation of the acquisition purchase price ispreliminary.Basware Corporation acquired the entire share capital of TAG Services Pty Ltd inAustralia on July 1, 2009. The acquisition price was 2.1 million Australiandollars (approximately EUR 1.2 million) and was paid in cash in two parts inJuly and August 2009. In addition the deal includes an additional acquisitionprice element that is based on the company's net sales of the period from July1, 2009 to June 30, 2010 and will be paid in August 2010 at the latest. 4.2million Australian dollars (approximately EUR 2.4 million) associated withcustomer relationships has been allocated to intangible assets, taking deferredtax liabilities into consideration. The allocation of the acquisition purchaseprice is preliminary.The company's capital expenditure, resulting from regular additional andreplacement investments required for growth, was EUR 2 047 thousand (EUR 1 007thousand) in the period. Gross investments which include, in addition to thosementioned above, the capitalized research and development costs and acquisitions(TAG Services Pty Ltd and Itella Information AS's invoice automation solutionbusiness) totaled EUR 7 448 thousand (EUR 12 476 thousand).Impairment tests indicate no impairments of assets. Amortization of intangibleassets totaled EUR 3 968 thousand (EUR 2 398 thousand), of which amortizationassociated with business acquisitions amounted to EUR 2 020 thousand (EUR 993thousand).RESEARCH, DEVELOPMENT AND NEW PRODUCTSResearch and development expenses were EUR 14 781 thousand (EUR 15 518 thousand)in the period, corresponding to 16.0 percent (18.0%) of net sales. Research anddevelopment costs decreased by 4.7 percent (increase by 17.8%) compared with thesame period last year. Of the research and development costs, EUR 1 454 thousand(EUR 2 739 thousand) or 9.8 percent (17.6%) were capitalized during the period.Amortization of capitalized research and development costs totaled EUR 1 624thousand(EUR 1 183 thousand).A total of 195 (171) people worked in Software Production at the end of 2009.The Software Production unit is expanding in India, where there are currently55 employees.At the beginning of 2009, Basware launched the Basware Connectivity solution,which aims at speeding up the migration to electronic exchange of documents.There has been obvious demand for the solution in the market, and it has beensold successfully in Europe as well as North America. Basware is now able toexchange all the documentation related to the Purchase to Pay process in asingle solution, including the exchange of e-invoices and procurement messages,e-invoice and scanning services and supplier activation.PERSONNELBasware employed 747 (689) people on average and 761 (731) people at the end ofthe period. The number of personnel increased by 30 persons and by 4.1 percentcompared with the same period the previous year. The acquisition of TAG ServicesPty Ltd increased the number of personnel by 13 people and the acquisition ofItella Information AS's invoice automation business by 5 people.The share of personnel working in foreign units has increased compared with theprevious year. At the end of the period, 47.4 percent (46.1%) of Baswarepersonnel worked outside of Finland and 52.6 percent (53.9%) in Finland. 16.8percent of the personnel work in sales and marketing, 48.0 in consulting andservices, 25.6 percent in Software Production, and 9.6 percent inadministration.The average age of employees is 36.6 (35.9) years. Of the employees, 35.0percent have a Master's degree and 43.2 percent have a Bachelor's degree. Womenaccount for 28.1 percent of employees, men for 71.9 percent.For incentive purposes, the company has a bonus program that covers allemployees.The Executive Team's remuneration consists of salary in money, fringe benefits,a possible annual bonus based on performance, warrants and a share-basedincentive scheme. The compensation principles of the Executive Team members aredecided by the Board. A long-term incentive program was in place during2006-2008. Based on the program, warrants could be granted to the members of thetop management, country managers and key personnel.The members of the Basware Executive Team have a share-based incentive scheme asof 2009. The possible reward of the system for the earning period 2009 is basedon Basware Corporation's earnings per share (EPS). Any reward for the earningperiod 2009 will be paid in December 2011 partially as shares in the company andpartially in cash.Geographical distribution of personnel:+--------------------------------+------+------+--------+-----+------+-------++|Personnel (employed, on average)|10-12/|10-12/|Change, |1-12/|1-12/ |Change,||| | 2009| 2008| %| 2009| 2008| %||+--------------------------------+------+------+--------+-----+------+-------++|Finland | 460| 426| 8.0| 454| 421| 7.8||+--------------------------------+------+------+--------+-----+------+-------++|Scandinavia | 130| 146| -11.4| 135| 112| 20.0||+--------------------------------+------+------+--------+-----+------+-------++|Europe | 119| 127| -6.3| 119| 129| -7.3||+--------------------------------+------+------+--------+-----+------+-------++|Other | 48| 29| 68.6| 39| 26| 47.0||+--------------------------------+------+------+--------+-----+------+-------++|Group total | 758| 729| 4.0| 747| 689| 8.5||+--------------------------------+------+------+--------+-----+------+-------++BUSINESS OPERATIONSFinlandThe Finland segment includes operations in Finland, Russia, Asia (excludingAustralia) and the Financial Management business. Net sales for the financialperiod increased by 2.0 percent to EUR 50 486 thousand (EUR 49 517 thousand).Net sales of the Finnish and Russian business operations increased by 9.0percent during the financial period to EUR 43 250 thousand (EUR 39 671thousand). All the Basware Enterprise Purchase to Pay and Financial Managementproducts are sold in the region.There are currently 14 resellers in all in the area and the number of personnelaveraged 454 (421).ScandinaviaBasware's Nordic organization consists of a centrally directed Scandinavian(Sweden, Denmark and Norway) unit. All the Basware Enterprise Purchase to Paysolutions are sold in the Nordic countries.Net sales of the Scandinavian business operations increased by 18.2 percent toEUR 22 236 thousand (EUR 18 805 thousand). The profitability of the operationsincreased by 211.4 percent and operating profit was EUR 3 169 thousand (EUR1 017 thousand).Business operations are mainly handled by the own organization and there were135 (112) employees on average in the area.EuropeBasware's European business operations consist of the units in Germany, France,the Netherlands and the United Kingdom. Additionally, the reseller networkcovers the eastern part of Central Europe. All Enterprise Purchase to Paysolutions are sold in Europe.Net sales in the Europe segment decreased by 3.8 percent in the financial periodand totaled EUR 18 717 thousand (EUR 19 454 thousand). The profitability of theoperations improved by 2 224.8 percent and operating profit was EUR 1 566thousand (EUR -74 thousand).During 2009 Basware UK implemented a rationalization program and reorganizationof operations. Significant cost savings have been achieved and the utilizationrate of consulting has been increased with the program, which will improve theunit's profitability.There are 35 resellers in Europe, and Basware personnel averaged 119 (129)during the third quarter.OtherBusiness operations in North America and Australia are reported in this segment.Net sales of the area increased by 83.9 percent in the financial period to EUR9 201 thousand (EUR 5 004 thousand). The profitability of the operations grew by155.9 percent and operating profit was EUR 741 thousand (EUR 289 thousand). Thebusiness operations in Australia are reported in the Other segment as of July1, 2009.At the end of the period, there were 10 resellers in the segment. On average,there were 39 (29) employees in the area.OTHER EVENTS OF THE FINANCIAL PERIODBasware launched an entirely new successful business concept during 2009:Basware Automation Services, which is based on making the processing of thecustomer organization's paper invoices completely electronic. Basware AutomationServices include Software as a Service (SaaS), e-invoicing and Scan and Capture.The company has closed several major automation service deals with multinationalcompanies.The company made one of its largest deals ever with the State of South Australiain September 2009.Jorma Kemppainen was appointed as a member of the Basware Executive Team andhead of the Products unit (SVP, Products) on December 1, 2009.SHARE AND SHAREHOLDERSBasware Corporation's share capital totaled EUR 3 440 437.20 at the end of theperiod and the number of shares was 11 468 124.Share price and tradeDuring the reporting period, the highest price of the share was EUR 14.66 (EUR10.45), the lowest was EUR 6.60 (EUR 6.00) and the closing price was EUR 14.52(EUR 6.59). The average price of the share was EUR 10.79 (EUR 7.53) during theperiod.A total of 2 038 565 (2 298 467) shares were traded during the financial periodwhich is the equivalent of 17.9 percent (20.1%) of the average number of shares.Market capitalization with the period's closing price on December 31, 2009 wasEUR 165 206 004 (EUR 75 301 011).ShareholdersBasware had 16 480 (17 120) shareholders on December 31 includingnominee-registered holdings (8). Nominee-registered holdings accounted for 9.6percent of the total number of shares.Basware announced three notifications of change in ownership when the totalnumber of shares held by Nordea Rahastoyhti?omi Oy fell below 5% of BaswareCorporation's share capital on February 23, 2009 and when the total number ofshares held by Antti P?nen personally fell below 5% of Basware Corporation'sshare capital on September 10, 2009. Shares held by Antti P?nen together withpersons under guardianship still exceed 5% of Basware Corporation's sharecapital. In addition, Basware announced a notice of change in ownership when thetotal number of shares held by Nordea Rahastoyhti?omi Oy was above 5% ofBasware Corporation's share capital on November 27, 2009.Shareholding of Management and BoardAccording to the shareholder register managed by Euroclear Finland Oy, onDecember 31, 2009 CEO Ilkka Sihvo holds 1 065 800 Basware's shares and EsaTihil?00 shares. Other members of Basware Executive Team do not hold Basware'sshares.According to the shareholder register managed by Euroclear Finland Oy, onDecember 31, 2009 Hannu Vaajoensuu holds 962 100 Basware's shares, PenttiHeikkinen 1 016, Ilkka Toivola 2 166, Sakari Perttunen 1 045 800 and MattiCopeland 2 166 shares.GOVERNANCEThe Annual General Meeting of Shareholders on February 12, 2009, confirmed thenumber of Board members as five. The Annual General Meeting resolved to agree onthe proposal and elected Matti Copeland, Pentti Heikkinen, Sakari Perttunen,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 chargeand APA Terhi M?nen as the deputy auditor.A separate stock exchange release has been issued on the Board authorizationsand other resolutions of the Annual General Meeting of Shareholders on February12, 2009.This Corporate Governance Statement has been composed in accordance withRecommendation 51 of the new Corporate Governance Code and Chapter 2, Section 6of the Finnish Securities Market Act. The Corporate Governance Statement isissued separately from the company's annual report.Basware's Corporate Governance principles are available in full on the company'swebsite athttp://www.basware.com/Investors/corporate_governance/Pages/default.aspxShare repurchaseBasware Corporation's share repurchases program that was resolved by the Boardof Directors on October 14, 2008 ended on March 31, 2009. The program was basedon the authorization granted by the Annual General Meeting on February14, 2008. The purchases started on October 23, 2008 and ended according to theterms of the share repurchase program on March 31, 2009. By March 31, 2009, thecompany had acquired 90 300 shares and the total number of shares held by thecompany amounted to 90 300, representing approximately 0.79 % of all Baswareshares. The average price of the shares acquired during the repurchases programwas 6.9475 euro.The AGM on February 12, 2009 authorized the Board to resolve on the acquisitionof a maximum of 1 146 812 own shares, pursuant to the Chapter 15, section 5 ofthe Companies Act. The new shares are acquired with invested non-restrictedequity on the market price at the NASDAQ OMX Helsinki Ltd at the time of theacquisition. The shares can either be held by the Company, nullified or conveyedfurther. The authorization for acquisition is valid until March 31, 2010.SHORT-TERM RISKS AND RISK MANAGEMENTIn accordance with Basware's risk management policy, risks are divided into sixcategories: risks related to business operations, products, personnel as well aslegal, financial and data security risks. Basware takes risks that are a naturalpart of its strategy and objectives. These risks are managed and decreased invarious ways. Short-term risks are considered to be risks in the currentreporting year.The global economic uncertainty continues, which might decrease companies'willingness in the future as well. This might have an unfavorable impact on thedevelopment of the company's net sales and profitability. However, the entire ITmarket is expected to grow by 6.6 percent in the United States and by 4.0percent in Western and Central Europe in 2010.In previous economic downturns, the demand for the company's products andservices has remained more positive than the general economic market as a wholeas the company's software solutions generate cost savings.The depression has generally increased companies' delinquency entries and thenumber of bankruptcies. Typically, companies may also prolong the times ofpayments in order to free up working capital. Basware has intensified itsmanagement of sales receivables, and business management regularly monitors thepayment of sales receivables as part of the management of customer accounts.The Group's main currency is Euro, accounting for approximately 61 percent ofnet sales in 2009 (approximately 67% in 2008). The significance of exchange ratefluctuations between the euro and other currencies will increase hand in handwith the share of international operations. In addition to the euro area,Basware operates in various areas, the most significant of them in 2009 beingNorway, the United Kingdom, the United States and Sweden. The company is exposedto exchange rate risks in these countries through intra-company trade, exportsand imports as well as through the equity and funding of foreign subsidiaries.The company did not realize hedging for exchange rate fluctuations during thefinancial year as the foreign-currency-denominated cash flow in the subsidiariesdid not exceed the foreign-currency-specific limit for hedging measures inaccordance with the company's hedging policy.Goodwill has been tested during the last quarter of 2009. In accordance with thetesting for impairment of assets, no depreciation of goodwill was made. During2009 Basware UK implemented a rationalization program and reorganization ofoperations, facilitating profitable growth in the unit. Significant cost savingshave been achieved and the utilization rate of consulting has been increasedwith the program, which will improve the unit's profitability. If the unit'sprofitability does not improve as planned in the medium term despite thestreamlining program, it is likely that the goodwill allocated to the unit willneed to be impaired.Basware's objective is to become the world's leading company in e-invoicing.E-invoicing and the supporting Connectivity also target suppliers and buyersoutside Basware's existing customer base, which increases the customerpotential. The company's long-term objective is annual growth of more than 50percent in SaaS, Basware Connectivity and e-invoicing business. SaaS, BaswareConnectivity and e-invoicing are scalable business models with a high businesspotential. The realization of this growth potential requires a new operatingmodel as well as active and continuous development of competencies because ofthe strong growth of the number of customers and transaction volumes. Theseinclude sales and commissioning as well as customer support and productdevelopment.In other respects, no significant changes have taken place in Basware'sshort-term risks and uncertainties during the financial period.ACQUISITIONS AND CHANGES IN GROUP STRUCTUREThe company has branch offices in Singapore, Russia and India.Basware AS purchased the Norwegian invoice automation solution business ofItella Information AS on January 26, 2009. The purchase price was NOK 6.38million (approximately EUR 0.72 million) and it was paid in cash on the day theacquisition was completed, April 1, 2009. In addition, Basware may pay anadditional purchase price of a maximum of NOK 7.0 million (EUR 0.77 million) inFebruary 2010 at the latest, determined on the basis of the volume of thepurchased operations' service sales in 2009. The estimated additional purchaseis circa NOK 4.4 million (around EUR 0.55 million). The acquisition increasedthe net sales of Basware Automation Services for 2009 by approximately EUR 0.9million instead of the previously estimated EUR 1.2 million due to thelower-than-expected volume of service sales.Basware Corporation acquired the entire share capital of its Australian resellerTAG Services Pty Ltd. The acquisition price was based on the company's net salesfor its fiscal year 2008-2009 ended June 30, 2009 and the company's net assetvalue on June 30, 2009. The acquisition price was 2.1 million Australian dollars(approximately EUR 1.2 million, using exchange rate of EUR/AUD 1.7359 on June30, 2009). The company's net asset value at June 30 was 0.42 million Australiandollars (approximately EUR 0.24 million). The acquisition price was paid in cashin two parts in July and August 2009. In addition the deal includes anadditional acquisition price element that is based on the growth of thecompany's net sales during the period from July 1, 2009 to June 30, 2010 andwill be paid in August 2010 at the latest.Basware increased its shareholding in Basware Einvoices Oy to 100 percent onJanuary 30, 2009, by acquiring 12.55% of the company's shares and control fromthe company's management. The purchase price paid on the date of the transactionwas approximately EUR 720 thousand and the additional purchase price to be paidbased on the business volume for 2009 in February 2010 at the latest is expectedto be approximately EUR 250 thousand. Basware increased its shareholding inBasware FIMA Oy to 100 percent on August 21, 2009, by acquiring 4.04% of thecompany's shares and control from the company's management. A situation such asthe one presented above is currently not regulated by IFRS, so the company'smanagement has compiled an accounting principle for the case in compliance withIAS 8. The change of ownership is recognized under shareholders' equity, and itwill not have any effect on profit or goodwill.Basware Einvoices Oy merged with Basware Corporation in accordance with thepreviously registered merger plan on July 13, 2009. Basware Einvoices Oy'sbusiness operations will continue in Basware Corporation as a part of Basware'sAutomation Services business. The merger did not result in any changes toBasware Corporation's organization structure.In Norway, Contempus AS merged into Basware AS on June 30, 2009, in accordancewith the previously registered merger plan. The business operations of ContempusAS will resume in Basware AS as a part of its normal business. The merger didnot result in changes to the organization structure of Basware AS.In Sweden, Contempus AB merged into Basware AB on December 30, 2009, inaccordance with the previously registered merger plan. The business operationsof Contempus AB will resume in Basware AB as a part of its normal business. Themerger did not result in changes to the organization structure of Basware AB.ENVIRONMENTAL AND SOCIAL RESPONSIBILITYBasware's corporate responsibility is driven by strong business ethics,corporate values, and legislation. The company is committed to economic, socialand environmental responsibility in all operations.Basware's software products reduce paper consumption in thousands of officesaround the world, leading the customer companies toward the paperless office,which saves both the environment and money. Profitability and financialstability are an integral part of Basware's responsibility. Stability andtrustworthiness yield added value to all stakeholders.Basware has cooperated with the Plan Finland charity foundation since 2002, andthe company has 15 sponsored children around the world.Basware's head office in Espoo has held a Green Office certificate issued by theWorld Wildlife Fund since 2003. The prerequisites for being issued thecertificate include a standing environmental program, waste sorting andrecycling, reduction of carbon dioxide emissions and endeavors to constantlyimprove environmental issues.STRATEGYBasware has updated its strategy for 2010-2012. The Basware Responsive Strategyframework allows the company to act with agility and sensitivity based on thecompany's situation, market trends and other changes. The Responsive Strategyframework includes follow-up and analysis of internal and external trends aswell as the company's vision, mission and operating principles. Basware'soperating principles comprise of the company's values, corporate governance andresponsibility.The implementation of Basware's strategy was guided by separately named strategyprojects (Must-Win Battles). In line with the revised strategy, the previousstrategy projects will be replaced with growth projects, strategy projects andother changing corporate-level projects. The Responsive Strategy framework alsoincludes follow-up and analysis of internal and external trends as well as thecompany's vision, mission and operating principles. The operating principles arecomprised of the company values, Corporate Governance and responsibility.The company aims at maintaining its position as a leading global supplier ofinvoice automation and procurement solutions. Invoice automation growth isstrongly supported by a new mid-market SaaS (Software as a Service) "pay as yougo" offering to selected high potential markets.Basware aims also to become a leading company in e-invoicing worldwide.E-invoicing and supporting Connectivity Services are now targeted to connectsuppliers and buyers also outside of Basware's existing software customer baseleading into a higher potential.The company's long-term target is to grow annually more than 50% in SaaS,Connectivity Services and e-invoicing. SaaS, Connectivity Services ande-invoicing are scalable models and offer an increasing profit potential in thelong run. The company's long-term target is to grow annually more than 10% inLicense Sales, Maintenance and Professional Services. The target for operatingprofit margin is between 10% - 20%.MANAGEMENT AND AUDITORSIn 2009, Ilkka Sihvo acted as the CEO of the company. The CEO is in charge ofthe day-to-day management of the company in accordance with the instructions andorders given by the Board. The Annual General Meeting of Shareholders onFebruary 12, 2009, confirmed the number of Board members as five. MattiCopeland, Pentti Heikkinen, Sakari Perttunen, Ilkka Toivola and Hannu Vaajoensuuwere elected to the Board. In its first meeting, the Board elected HannuVaajoensuu as Chairman of the Board and Sakari Perttunen as Vice Chairman.As of 2009 the duties of Hannu Vaajoensuu , the Chairman of the Board, wereredefined. In addition to the chairman's standard duties, Hannu Vaajoensuu willcontinue as a member of the M&A Team and have an advisory role in major M&Aprojects. He will also carry out networking and industry influencer activities.The Annual General Meeting further resolved to elect Ernst & Young Oy,Authorized Public Accountants as the auditor, with APA Heikki Ilkka in chargeand APA Terhi M?nen as the deputy auditor.EVENTS AFTER THE FINANCIAL PERIODAs of January 1, 2010, members of the Basware Executive Team are Ilkka Sihvo,CEO; Mika Harjuaho, CFO; Olli Hypp?n, Strategy and Development; JormaKemppainen, Senior Vice President, Products; Steve Muddiman, Senior VicePresident, Global Marketing; Matti Rusi, Senior Vice President, Europe; AriSalonen, General Manager, North America; Esa Tihil?Senior Vice President,Global Operations; Odd Roar Trapnes, Senior Vice President Scandinavia; andJukka Virkkunen, Senior Vice President NorthEast.Matti Rusi, Senior Vice President, Europe was employed by Basware as of January4, 2010.Basware will centralize its product development units and therefore theactivities of the small Norwegian unit will be moved to the Finnish and Indianlocations during the first half of the year 2010.The chairman of the Board of Directors, Hannu Vaajoensuu, has been employed bythe company since 1985. In addition to the standard duties of the chairman ofthe Board, he has most recently worked as a member of the M&A Team and had anadvisory role in M&A projects. The company and Vaajoensuu have agreed on January25, 2010 that his employment will be terminated on February 17, 2010. Inconnection with the termination of employment, only ordinary and statutoryemployment-related compensation will be paid.FUTURE OUTLOOKMarket forecasts updated towards the end of 2009 expect the software market toincrease by 9.2 percent in 2010 in the United States and by 5.5 percent inWestern and Central Europe.The entire IT market is expected to grow by 6.6 percent in the United States andby 4.0 percent in Western and Central Europe in 2010.Western Europe and the United States combined account for approximately threequarters of the enterprise software market. In these markets, electronic invoiceprocessing and procurement solutions are still in their infancy. The procurementmanagement and electronic invoice processing markets are heterogeneous in termsof the competitive situation. Growth could attract more competitors to themarket. The industry is consolidating, and this development could go on in thefuture as well. Globally speaking, Basware is a medium-sized software company interms of net sales as well as number of personnel.Basware's direct competitors are mainly locally operating and often smallercompanies. In North America in particular, the company has also largercompetitors, especially in the field of procurement management. Developers ofdocument management, scanning and recycling systems compete with Basware,particularly with regard to purchase invoice management solutions. Competingsolutions also include customized solutions integrated into ERP (EnterpriseResource Planning) systems.The software products still offer a competitive edge, thanks to the integratedoffering consisting of new added value products and the products. Automationservices, a new concept in the portfolio, will have a positive impact on thecompetitiveness.EPP Automation Services will bring more predictability and transparency overBasware's revenue stream and profitability development. In 2009, revenue fromcontinuous services (including maintenance) accounted for approximately 40percent of the total revenue. Basware predicts that EPP Automation Servicesrevenue will increase significantly in the strategy period.The company's long-term target is to grow annually more than 50% in SaaS,Connectivity Services and e-invoicing. SaaS and e-invoicing are scalable modelsand offer an increasing profit potential in the long run. A program to investin the growth of Basware Automation Services (SaaS, e-invoicing service and Scanand Capture) has been initiated as of the beginning of 2010, which is expectedto promote the favorable development of operations and order backlog.The company's international growth is based on efforts of its own sales andmarketing activity as well as the reseller channel. Development of the indirectdistribution channel continues in Europe, Russia and Asia. In North America, thefocus will be on developing the company's own sales channel for the time being.In Scandinavia, the focus is on profitability, and moderate growth is supportedby the company's expanded product portfolio and the development of the servicebusiness. In Finland, the focus is on profitability, and moderate growth willprimarily be achieved from the fields of procurement management and services.Basware has complemented its organic growth with acquisitions. The company willcontinue to review possible acquisition targets during 2010. The aim of theacquisitions is to expand the company's Automation Services, distributionchannel and product portfolio in international markets.The number of the Group's personnel will increase mainly in Automation Servicesand R&D activities during the year. The number of personnel will increase themost in India, which will enable growth with a more moderate increase in costs.Additional investments required by growth will be moderately realized, providedthat net sales and profitability have realized in accordance with expectations.Basware expects its net sales to develop positively on the level of 2009.Operating profit (EBIT) for 2010 is expected to be from 10 to 15 percent of netsales.BOARD'S DIVIDEND PROPOSALBasware is a growth company that aims at increased market capitalization andmoderate dividend yield. When preparing the dividend proposal, the Boardconsiders the company's financial position, profitability and prospects in thenear future.At the end of 2009, the Group parent company's distributable funds are EUR61 575 776.74.Basware's Board of Directors proposes to the Annual General Meeting that adividend of EUR 0.36 per share (2008: EUR 0.23) be paid for 2009.Espoo, Finland, January 25, 2010BASWARE CORPORATIONBoard of DirectorsFor more information, please contactCEO Ilkka Sihvo, Basware Corp.,Tel. +358 9 8791 7251 or +358 40 501 8251Analyst and Press BriefingBasware arranges today, January 26, 2009 a briefing on the Interim Report forthe press and analysts at 11:00 a.m. in Hotel K?, Pohjoisesplanadi 29,Helsinki, Finland. During this briefing CEO Ilkka Sihvo will comment theoperations and financial performance of the quarter. Welcome.FINANCIAL REPORTING IN 2010Basware's Annual Report 2009, including the audited Financial Statements, willbe published on the company's website during the week starting on February8, 2010. The company will not publish the Annual Report in print.Release dates for interim reports:- Interim Report January-March 2010 (Q1) on Thursday, April 15, 2010- Interim Report January-June 2010 (Q2) on Monday, July 12, 2010- Interim Report January-September 2010 (Q3) on Thursday, October 14, 2010Basware Corporation's Annual General Meeting of Shareholders will be held onThursday, February 18, 2010 starting at 2:00 PM at the Diana auditorium(Erottajankatu 5) in Helsinki, Finland.Distribution:NASDAQ OMX Helsinki LtdKey mediawww.basware.com
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