digitalist.global Financial statements

Transcription

1 digitalist.global Financial statements 2017

2 Financial statements Placeholder section name

3 Financial statements Table of Contents Table of contents Report of the Board of Directors 4 Key figures 10 Calculation of key figures 11 Information about shares, shareholders and options 12 Consolidated financial statements, IFRS Consolidated comprehensive income statement 14 Consolidated balance sheet 15 Consolidated cash flow statement 16 Consolidated statement of changes in shareholders equity 17 Accompanying notes to the consolidated financial statements 18 Parent company financial statements, FAS Parent company income statement 48 Parent company balance sheet 49 Parent company cash flow statement 51 Parent company statement of changes in shareholders equity 52 Accompanying notes to the parent company financial statements 53 Signatures to the financial statements and to the report of the Board of Directors 58 Auditor s Report 59

4 Financial statements Accounting period summary Accounting period summary Accounting period 2017 (comparative figures for the year 2016 in brackets): Turnover EUR 20.0 million (EUR 15.3 million), growth 31.1%. Earnings before interest, taxes, depreciation and amortization (EBITDA) EUR -4.0 million. (EUR -7.2 million),-19.9% of net sales (-47.4%). Operating result EUR -4.9 million (EUR -7.7 million), -24.5% of net sales (-50.7%) Net result EUR -6.9 million (EUR -9.6 million), -34.7% of net sales (-62.6%). Earnings per share (diluted and undiluted) EUR -0,02 (EUR -0.03). Cash flow from operating activities EUR -5.6 million (EUR -5.5 million). Business operations Digitalist Group is a service provider that strives to grow internationally and profitably by means of designing new thinking, services and technological solutions for digitalising industries. These industries include the technology industry, energy industry, transport and logistics, as well as consumer services in the private and public sector. In addition to knowledge-based services and development services, the enterprise produces contents, events, workshops, and various encounters with toptier professionals in different industries. The aim is to create new ways of developing new business activity and design service, and to create technology in an agile way. The Company envisages that a network-based operating model will stimulate and speed up the building of new services for customers. The company has significant business operations in the United States (San Francisco), Canada (Vancouver), England (London), Sweden (Stockholm) and Finland (several offices). Year 2017 The year 2017 was for Digitalist Group a year of reforming and investing in growth. The main measures were connected with continuation of reforming the Company s business operations and with corporate acquisitions. The first year of Digitalist Group, which was formed in May 2017, was a year of growth, changes, focusing, and development. Digitalist Group was formed, when Ixonos Plc s, Rome Advisors Digitalist business operations, Interquest Oy s, Wunderkraut Sweden s, and Cresense s business operations were united into Digitalist Group. The aim of the acquisitions has been to strengthen the Company s position as the overall supplier of user study, service design and technology. The Company changed its name from Ixonos Plc to Digitalist Group Plc during the second quarter of the year. The new name and reformed Company has been well received by the Company s customers, partners and especially the staff. The Company believes in considerable growth in solutions for user study, service design and intelligent technology in the next years. Factors affecting growth include new types of terminal devices, artificial intelligence, internet of things, and platform economy. Use of network services will change from traditional publication systems to an experience which is controlled by speech or a new kind of intelligent device, e.g. a watch, and increases demand for expertise in and solution of user-oriented experiences. We aim to serve international clientele and increase expertise and the number of experts especially in Finland and Sweden. During the operating year, Digitalist Group employed on average 203 experts. Digitalist Group s turnover grew during the year both organically and through corporate acquisitions. The increase in turnover was 31% for the accounting period and 47% for the fourth quarter. As concerns the development of the profitability, the trend remained correct, though the accounting year on the whole showed a loss. The result was weakened by investments in the Company s reform and continuing development, and by expenses caused by corporate acquisitions and the name change. Digitalist Group aims at profitable growth by concentrating on user study, design and technology consultation to clients. Acquired business In March 2017, the Company signed an agreement to acquire the entire stock of Interquest Ltd. The transaction took place in the second quarter of the year. With the acquisition, the Group continues to strengthen its global position as a leading provider of comprehensive digital transformation services and enables to provide a wider, deeper and faster service globally to its customers. After the acquisition, the Group became the largest User Insight company in the Nordic countries, which governs the research in modern user experience. In April 2017, the Company acquired the #Digitalist business operations of the Finnish company Rome Advisors Ltd and the associated assets and rights. The business arrangement supports the implementation of the company strategy, and the renewed company will act as a leader in mobilising the competence in digitalisation within various industries. In August 2017, the Company expanded its operations to Sweden and significantly strengthened its website design and development services by acquiring the entire stock of Wunderkraut Sweden AB s parent company, NodeOne Group AB. Digitalist Group brings the full range of its Discover - Design - Deliver services to the Swedish market through which customers get all the digitalisation services they need from one place. Wunderkraut Sweden has a strong reputation as a leading company in digital and website development in Sweden, its customer satisfaction is at a very high level, and its world-class team has on-going commitments and projects. Further information on the Group companies can be found in the notes to the consolidated financial statements.

5 Financial statements Year 2017 Annual general meeting on 29 March 2017 and the authorizations of the Board of directors The Annual General Meeting of Digitalist Group Plc held on 29 March 2017 verified the financial statements for the accounting period closed on 31 December 2016 and gave discharge to the members of the Board of Directors and the Chief Executive Officers for the accounting period closed on 31 December The Annual General Meeting decided in accordance with the suggestion of the Board of Directors that no dividends are paid for The Annual General Meeting decided that the Board of Directors includes seven individuals. The selected members of the Board of Directors were Paul Ehrnrooth, Bo-Erik Ekström, Pekka Eloholma, Peter Eriksson, Samu Konttinen, Päivi Marttila, and Pekka Pylkäs. The Annual General Meeting decided that the members of the Board of Directors are paid as follows: the Chair of the Board of Directors EUR 40,000/year and EUR 500/meeting, Deputy Chair EUR 30,000/year and EUR 250/meeting, other members of the Board of Directors EUR 20,000/year and EUR 250/meeting. The payment for the meetings of the Board of Directors Committees is EUR 500/meeting for the Chair and EUR 250/meeting for members. KPMG Ltd, Authorized Public Accountants were chosen to act as the company s auditor. Their appointed principal auditor is Esa Kailiala, an authorized public accountant. The auditor is paid a fee in accordance with a reasonable invoice presented for the audit work. The Annual General Meeting authorized the Board of Directors to deal with the issue of shares for cash as well as option rights and granting other special rights connected to shares mentioned in Chapter 10, Section 1 of the Limited Liability Companies Acts or combinations of all or some of the aforementioned in one or several instalments under the following conditions: The maximum number of new shares to be issued under the authorization can be up to 90,000,000 shares, equivalent to approximately per cent of the company s total shares at the time of the notice of the Annual General Meeting. The Board of Directors is authorized to decide on all of the terms and conditions of the share issue and the special rights entitling to shares under the aforementioned authorization. The Board of Directors is entitled to decide on the marking of the subscription price either as an increase in share capital or fully or partially in the invested unrestricted equity fund. The issuance of shares and the issuance of special rights entitling to shares may also be made in a direct manner, in deviation from the shareholders pre-emptive right, if there is a weighty financial reason concerning the company in accordance with the Limited Liability Companies Act. The authorization may then be used to finance acquisitions or other investments included in the company s business operations, and to maintain and grow the Group s financial solidity and to implement the incentive plan. The authorization is proposed to be in force until the Annual General Meeting in 2018, but no longer than 30 June Authorization of the Board of Directors to decide on the purchase of own shares: The Annual General Meeting authorized the Board of Directors to decide on the surety or acquisition of a maximum of 35,356,488 of its own shares with the company s distributable funds, which corresponds to about 10 per cent of the company s total shares at the time of the notice of the Annual General Meeting. The acquisition can take place in one or more instalments. The acquisition price of the shares is at the most the maximum price paid for the share in public trading at the time of acquisition. The implementation of purchasing own shares may include ordinary derivative, share lending or other agreements in the capital market within the scope of the law and regulations. The authorization entitles the Board of Directors to decide on acquisition other than in proportion to the shares held by the shareholders (directed acquisition). Shares may be acquired for the purpose of undertaking acquisitions or other arrangements included in the company s business operations, to improve the company s financial structure or otherwise to be supplied onward or cancelled. The authorization includes the Board of Directors right to decide on all other matters related to the acquisition of shares. The authorization is valid until the Annual General Meeting in 2018, but no longer than 30 June The meeting minutes and decisions of the General Annual Meeting can be found on the company s website Extraordinary general meeting 19 May 2017 The Extraordinary General Meeting of Digitalist Group Plc held on 19 May 2017 decided to alter the section 1 Corporate name and place of business of the corporate by-laws as follows: Corporate name is Digitalist Group Oyj, in Swedish Digitalist Group Abp and in English Digitalist Group Plc. The place of business is Helsinki. The meeting minutes and decisions of the Extraordinary General Meeting can be found on the company s website Offices Our offices are located in our main markets in Finland, Sweden, the United States, Canada and the UK. All offices have both technology and design experts as well as a local sales organization. Segments Digitalist Group reports on its business operations in one segment.

6 Financial statements Result Turnover The Group s turnover for the accounting period was EUR 20.0 million (2016: 15.3, 2015: 17.0), which exceeded the preceding year s turnover by 31.1%. Of the turnover for the accounting period, the share of the businesses acquired during the accounting period was EUR 3.4 million. During the accounting period, the Company expanded its operations to Sweden and considerably strengthened its supply of website design and development services through the Wunderkraut Sweden AB transaction. During the accounting period, clients belonging to related parties accounted for 12.8% of the turnover. Result Operating result for the accounting period was EUR -4.9 million (2016: -7.7, 2015: -8.7) and result before taxes EUR -7.2 million (2016: -9.5, 2015: -5.7). With the growth, the operating result improved by EUR 2.8 million (+36.7%), but remained at a loss due to investments in the Company s reforms and continuing development, and to expenses caused by corporate acquisitions and the name change. Net result for the accounting period was EUR -6.9 million (2016: -9.6, 2015: -10.6). The net result was affected by the accounting period s net financial expenses amounting to EUR -2.3 million (2016: -1.8, 2015: 3.0) and by deferred tax entries dissolved during the fiscal year, totalling EUR 0.2 million. Further, in the result has been taken into account the computational exchange rate change totalling EUR -0.7 million (2016: -0.6, 2015: 0,01), caused by the Company s internal receivable and debt items during the accounting period, appearing as increase in financial expenses. The result for the accounting period includes expenses relating to corporate restructuring, totalling EUR -0.6 million. Earnings per share were EUR (2016: -0.03, 2015: -0.05) and cash flow per share from operating activities EUR (2016: -0.01, 2015: -0.03). Investments During the accounting period, investments amounted to EUR 7.0 million (2016: 0.7, 2015: 1,5). The investments consisted mainly of corporate acquisitions and asset deals concluded during the fiscal year by means of share exchange. All research and development expenditure is included in the Group s result, and no research and development expenditure has been activated in the balance sheet during the fiscal year. The total amount of research and development expenditure was in the accounting period 2017 EUR 0.1 million (2016: 0.3, 2015: 1.8) Balance sheet and financing The balance sheet total was EUR 25.0 million (2016: 16.1, 2015: 18.3). The shareholders equity was EUR 5.5 million (2016: -4.2, 2015: 2.7). The equity ratio was 21.9% (2016: -26.1; 2015: 14.8). The Group s liquid assets were EUR 1.4 million at the end of the review period (2016: 0.4, 2015: 1.9). Non-controlling interests of equity was EUR 0.0 million. (2016: 0.0, 2015: 0.2). Return on equity (ROE) is not presented because it is negative. Return on investment (ROI) was -36.5% (2016: -70.1, 2015: -29.9). The main reasons affecting the change in the shareholders equity of the Company during the accounting period were the negative result, totalling approx. EUR -6.9 million, the share issues implemented in connection with the corporate restructurings, totalling approx. EUR 8.1 million, and the conversion of the convertible bond loan in December 2017 approx. EUR 7.9 million. At the end of the accounting period, the Group s balance included loans from financial institutions to the amount of EUR 3.2 million (2016: 2.9 million, 2015: 3.0), including the available bank account limits. Some of the financial loan agreements contain covenant conditions concerning the Company s self-sufficiency, and they were analysed for the first time on In addition to this, the Company has received loans from its main owner. On , the interest-bearing debts amounted to EUR 11.5 million (2016: 12.5, 2015: 10.7), of which loans from related companies accounted for EUR 8.1 million (2016: 9.6, 2015: 7.2). Loan agreements concluded with related companies during the fiscal year are presented in the report section: Related party transactions. Cash flow During the fiscal year, the Group s cash flow from operating activities was EUR -5.6 million (2016: -5.5, 2015: -11.5), the change was -3.0%. The weakening of the cash flow from operating activities was mainly due to the change in the working capital. The main reasons affecting the change in the working capital were the changes in sales receivables. To decrease the days sales outstanding, the Group sells part of its Finnish sales receivables. During the accounting period, sales receivables were sold for EUR 6.8 million (2016: 3.6, 2015: 10.2). Goodwill On 31 December 2017, the Group s balance sheet had goodwill of EUR 12.8 million. (EUR 11.5 million). The following parameters have been used for the goodwill testing: - The length of the review period of 4 years - WACC discount rate of 10 per cent. - Growth assumption ( Terminal value ) of 1 per cent. In goodwill testing on , no need for write-down was established. The use value of the tested assets exceeded the tested amount by EUR 16.0 million. The calculated current value of cash flows, EUR 33.5 million, falls below the sum of the Company s financial liabilities amounting to EUR 11.5 million and the shares market price amounting to EUR 38.8 million on

7 Financial statements Shares and share capital Personnel The average number of personnel during the accounting period was 203 (2016: 188, 2015: 217) and at the end of the period 240 (2016: 174, 2015: 200). At the end of the accounting period,158 people (2016: 132, 2015: 161) of the Group s personnel were employed by the Finnish companies and 82 people (2016: 42, 2015: 39) by the Group s foreign companies. During the accounting period, the number of employees increased by 66 people. Personnel expenses were in the accounting period EUR 15.4 million (2016: 14.7, 2015: 15.8). Shares and share capital Exchange and rates During the accounting period, the highest share price was EUR 0.16 (0.11), the lowest was 0.07 (0.06) and the closing price on 31 December 2017 was EUR 0.07 (0.10). The average price for the accounting period was EUR 0.11 (0.08). During the accounting period, 44,747,638 (24,568,296) shares were traded, representing 8.08 (6.95) per cent of the number of shares at the end of the accounting period. The market value of the stock at the end of the accounting period on 30 December 2017 was EUR 38,767, (EUR 35,356,489.80). Share capital The company s registered share capital at the beginning of the review period was EUR 585, and the number of shares was 353,564,898. At the end of the period, the share capital was EUR 585, and the number of shares was 553,824,346. During the accounting period, the number of shares increased by 200,259,448, out of which 131,428,585 consists of the conversion of the convertible bond into shares and 68,830,863 consists of the issuance of shares related to business acquisitions. The company has one series of shares and the company does not possess its own shares at the end of the accounting period. Stock options for 2011, 2014 and 2016 Digitalist Group Plc has three option schemes: the 2011, 2014 and 2016 schemes, according to which new shares of the Company can be subscribed for to the total maximum amount of 42,018,526 shares. Descriptions of the option schemes are on view on the Company s website Shareholders The number of shareholders on 31 December 2017 was 3,906 (3,262). Private individuals owned 9.75 (12.72) per cent, corporations (86.74) and foreigners 0.35 (0.54) per cent, of which nominee registered formed 5.63 (1.54) per cent of the shares. The ownership share of Tremoko Oy Ab, which is a party related to the Company, is per cent. Through options, the ownership share can be increased to per cent. Related party transactions On 03 February 2017, the Company agreed with Tremoko Oy Ab on additional debt financing of working capital. If necessary, the loan agreement to be concluded allows for additional financing amounting to a maximum of EUR 1.0 million. On 03 March 2017, the Company accepted the binding offer of its main owner Tremoko Oy Ab for a debt financing arrangement ( Financing Arrangement ) amounting to a maximum of EUR 2.0 million. With the Financing Arrangement shall be consolidated the EUR 1.0 million additional financing arrangement which was implemented earlier between Digitalist Group Plc and Tremoko Oy and reported on Consequently, if necessary, the Financing Arrangement which is now to be implemented allows for additional financing to Digitalist Group Plc to an amount exceeding the previous by EUR 1.0 million. Additional financing according to the Financing Arrangement becomes due and payable at the latest on On 23 May 2017, the Company agreed with its main owner Tremoko Oy Ab on raising the current financing limit (reported on ) from EUR 2.0 million to EUR 4.6 million ( Financing Arrangement ). Consequently, if necessary, the Financing Arrangement which is now to be implemented allows for additional financing to Digitalist Group Plc to an amount exceeding the previous by EUR 2.6 million. Additional financing according to the Financing Arrangement become due and payable at the latest on On 27 September 2017, based on the authorisation for share issue given to the Board of Directors by the General Meeting on , the Company s Board of Directors took a decision on directed rights issue, by which a maximum total amount of 12,500,000 new shares of Digitalist Group was issued to be subscribed for by Tremoko Oy Ab. The subscription price for the shares to be issued was EUR Tremoko Oy Ab subscribed for all the new shares of Digitalist Group which were offered to it in the share issue, a total of 12,500,000 shares. The subscription price of the shares totals EUR 1,500,000, which Tremoko Oy Ab has paid in connection with the subscription. On 05 December 2017, the Company received on from Tremoko a conversion notice complying with the Conditions of Convertible Loan, in which Tremoko notifies that it uses its conversion right based on the Conditions, and notifies that it converts the Convertible Loan Bonds subscribed for by Tremoko and issued by Digitalist Group for subscription, to the total capital amount of EUR 9,200,000.95, in accordance with the Conditions to full extent into a total of 131,428,585 Shares. Tremoko has on also notified the Company that it has decided to forgive without consideration all interest receivables from Digitalist Group, which are based on the Convertible Loan and have not been paid by the Company by , totalling EUR 201, The remission enters into force on

8 Financial statements Events after reporting period On 22 December 2017, the Company has jointly with Digitalist Finland Ltd issued to Turret Oy Ab and Holdix Oy Ab a guarantee counter obligation, in which the Company has, inter alia, undertaken to pay market-based guarantee commission. Turret Oy Ab and Holdix Oy Ab have given on behalf of the liabilities of the Company and its subsidiaries to Nordea Bank Finland Plc, Finnish Branch, and to Nordea Finance Finland Ltd, suretyships totalling EUR 4.5 million for the part of the guarantees as agreed on separately. Turret Oy Ab and Holdix Oy Ab are the owners of the Digitalist Group s main owner Tremoko Oy Ab. The Company has accepted the binding offer of its main owner Tremoko Oy Ab for a debt financing arrangement ( Financing Arrangement ) amounting to a maximum of EUR 1.0 million. If necessary, the Financing Arrangement allows for additional financing to Digitalist Group to an amount exceeding the previous by EUR 1.0 million. Additional financing according to the Financing Arrangement becomes due and payable at the latest on Events after reporting period On 30 January 2018, the Company agreed with Nordea Bank Finland Plc, Finnish Branch, on raising the financing limit to EUR 1 million. The guarantee for the financing limit is the suretyship (reported on ) given by Turret Oy Ab and Holdix Oy Ab on behalf of the liabilities of the Company and its subsidiaries, inter alia, to Nordea Bank Finland Plc, Finnish Branch. Turret Oy Ab and Holdix Oy Ab are the owners of Digitalist Group s main owner Tremoko Oy Ab. On 07 February 2018, Digitalist Finland Ltd, a subsidiary of Digitalist Group Plc ( Company ), started cooperation negotiations with its personnel in Finland. In two long-time customer relationships of the Company, demand is predicted to clearly decrease, and the Company considers reducing staff in the Kemi and Jyväskylä units and increasing the efficiency and centralisation of operations in other units. The negotiations do not concern the employees of the programming area of expertise in Digitalist Finland Ltd s Helsinki unit, nor the employees of the Tampere and Oulu units. In addition to cost savings, the purpose of the planned restructuring is to increase the efficiency of the organisation and to channel operations to the strategically most important sub-areas in the Company s business activity. According to preliminary estimate, the cooperation negotiations will result in changes to part-time employment, layoffs, changes in the conditions of employment relationships, and dismissals. The preliminary estimate is that the planned changes can make it necessary to reduce the staff by up to 25 persons. The cooperation negotiations and other saving measures considered by the Company are aimed at making Digitalist Group s cost structure lighter so that it corresponds to the market situation, and improving its profitability in order to create better operating preconditions. The Company aims at annual EUR million cost savings at the Group level. On 21 February 2018, Digitalist Group Plc has agreed with its main owner Tremoko Oy Ab on raising the additional debt financing reported on from EUR 2.5 million to EUR 3.0 million. The additional financing becomes due and payable at the latest on On 27 February 2018 Digitalist Group Plc has extended its provision of services to City Cruises Public Limited Company for the supply of a booking platform and the development of digital services. Digitalist Group Plc will for the next five years be the customer experience partner of the City Cruises, providing them services within design and technology. The agreement will remain in force until year City Cruises is the largest UK provider of Sightseeing Cruises and carries four million passengers on the Thames every year, with additional locations in York and Poole. The deal is in line with Digitalist Group Plc s strategy for expanding its solution and service operations in travel and transportation. Risk management and near future uncertainties The aim of Digitalist Group Plc s risk management is to ensure undisturbed continuity and development of the Company s operations and to support implementation of business objectives set by the Company and increasing the Company s value. More detailed information on the organisation of risk management, the process, and the recognised risks is available on the Company s website The Company s result has lately been negative in spite of measures taken to increase efficiency. Negative result has immediate effect on the sufficiency of the Company s working capital. Risk is managed by maintaining readiness for different financing solutions. At the beginning of 2018, the company has agreed on additional funding of EUR 1.5 million and started streamlining measures to ease the cost structure and to improve profitability. At the time of announcing the financial statements, the company estimated, that its working capital is enough for the next 12 months. Changes in key customer relationships can have harmful effect on Digitalist Group s operation, profit-making ability and financial standing. If any one of the biggest customers would transfer its purchases from Digitalist Group to its competitors or significantly change its operating model, chances of finding replacing customer volume in a short period of time would be limited. The Group s business activity consists mainly of single customer agreements which are often concluded for a fairly short term. It is sometimes challenging to predict the starting time and extent of new projects, while the cost structure is to large extent fixed. The above circumstances can cause unpredicted fluctuation in turnover, and through that, in profitability. Part of the Group s business activity consists of fixed-price project deliveries. Fixed-price project deliveries involve a risk relating to time and content. The aim is to keep this risk under control by means of contract and project management. Part of the Group s turnover is invoiced in other currency than euros. Risk relating to changes in currency exchange rates is

9 Financial statements Risk management and near future uncertainties kept under control through various measures, e.g., by means of net positions and currency hedge agreements. In the accounting periods 2016 and 2017 there were no hedge agreements. The Group has a subsidiary in England. Brexit s effect on the subsidiary s business has been estimated, and the effect is estimated to be small. The Group has in its balance sheet a considerable amount of goodwill, which is subject to a write-down risk, if yields from the Group s cash flows are expected to diminish in the future due to internal or external factors. Goodwill is tested quarterly, and, if necessary, also at other times. For part of the Group s bank loans (EUR 0.3 million), there are covenants, the breach of which may lead either to an increase in the Company s financing expenses or to a demand that the bank debts be either partly or fully repaid in a short time. The biggest risks of breach of the covenants are associated with fluctuation of the operating margin due to market situation, or with potential need for increasing the Company s working capital by means of debt financing. The risk is managed by means of negotiations and maintaining readiness for different financing solutions. Corporate governance and fees were EUR 0.8 million (EUR 1.0 million), pension expenses EUR 0.1 million (EUR 0.1 million) and other indirect personnel costs EUR 0.0 million (EUR 0.0 million). Personnel expenses totalled EUR 0.9 million (EUR 1.2 million), accounting for approximately 42.6% of the operating expenses (35.5%). Cash flow from operating activities was EUR -5.7 million during the accounting period (EUR -1.2 million). Prospects for the future Increase in turnover is expected to continue and the operating result to improve in Proposal of the board of directors to the general meeting The Board of Directors of Digitalist Group Plc proposes to the General Meeting that the distributable funds be left in the shareholders equity and no dividend be distributed to the shareholders for the accounting period On , the parent company s distributable funds were EUR 28,721,230. The Annual General Meeting of Digitalist Group Plc will be held in Helsinki on Tuesday Digitalist Group Plc is governed in compliance with the Finnish Limited Liability Companies Act, the Securities Markets Act, the rules and regulations issued by Nasdaq Helsinki Ltd for listed companies, and the corporate by-laws of Digitalist Group Plc. In addition, the company observes in its governance the rules of NASDAQ OMX Helsinki Ltd and the Finnish Corporate Governance Code 2015 issued by the Securities Market Association on 1 October 2015 with regard to those recommendations that entered into force on 1 January The Corporate Governance Statement required by the Corporate Governance Code of listed companies has been issued separately from the Board of Directors report and published on 28 February The report is available on the company s website. The Insider Guidelines in accordance with the Market Abuse Regulation (EU) No. 596/2014 (MAR) has been issued separately from the Board of Directors report on 27 June The report is available on the company s website. Parent company The parent company, Digitalist Group Plc, had no turnover in 2017 and The operating result was EUR -1.3 million. (EUR -2.2 million). The net result was negative EUR -5.1 million (EUR -2.9 million). The net result was affected by a write-down of the UK subsidiary s receivables totaling EUR 3 million. The balance sheet total was EUR 40.7 million (EUR 34.4 million). Shareholders equity was EUR 29.5 million (EUR 17.3 million). The equity ratio was 72.6% (50.1%). The parent company s liquid assets at the end of the accounting period were EUR 0.9 million (EUR 0.2 million). The average number of personnel during the accounting period was 3 (5) and at the end of the period 4 (4). Wages, salaries

10 Financial statements Consolidated key figures Consolidated key figures IFRS IFRS IFRS IFRS IFRS Turnover, EUR 1000 Turnover, Increase percentage ,1% ,3% ,0% ,3% ,3% EBITDA (*, EUR 1000 Percentage of turnover ,9% ,4% ,5% ,4% ,0% Operating Profit, EUR 1000 Percentage of turnover ,5% ,7% ,2% ,0% ,1% Profit before Tax, EUR 1000 Percentage of turnover ,9% ,6% ,3% ,4% ,8% Balance Sheet Total, EUR Return on Equity, per cent neg neg neg neg neg Return on Investment, per cent -36,5% -70,1% -29,9% -46,4% -75,4% Interest-bearing Liabilities, EUR Financial Assets, Cash and Cash Equivalents, EUR Net Gearing (* 184,8% -288,0% 324,4% -1397,7% 375,1% Equity Ratio (* 21,9% -26,1% 14,8% -5,6% 14,2% Investments, EUR 1000 Percentage of turnover ,2% 657 4,3% ,7% ,8% 459 1,4% Average Number of Staff Average Number of Staff at the End of the Period Key figures on shares Earnings Per Share, Diluted, EUR (** -0,02-0,03-0,05-0,09-0,65 Earnings Per Share, Undiluted, EUR -0,02-0,03-0,05-0,09-0,65 P/E Ratio (** -3,50-26,90 9,03-2,08-0,12 Share Price at the End of the Period, EUR 0,07 0,10 0,07 0,06 0,08 Number of Shares, Adjusted for Issue, Average (** Number of Shares, at the End of the Period (** Number of Shares, Adjusted for Option Dilution and Issue, Average (** Dividend per Earnings, per cent 0,00% 0,00% 0,00% 0,00% 0,00% Dividend per Share, EUR 0,00 0,00 0,00 0,00 0,00 Effective Dividend Yield, per cent 0,00% 0,00% 0,00% 0,00% 0,00% Equity per Share, EUR 0,01-0,01 0,01-0,01 0,05 *) Digitalist Group presents alternative performance measures in order to supplement its consolidated financial statements compiled in accordance with IFRS standards. The purpose of these performance measures is to gauge growth and to describe the economic performance of the enterprise s operation. The Group has applied the European Securities and Markets Authority (ESMA) s Guidelines on Alternative Performance Measures, in force since 3rd July **) The number of shares adjusted for option dilution in 2016 has been affected by a convertible loan in April and new option plan in November.

11 Financial statements Return on investment, per cent Return on investment, per cent Profit before tax Financial expenses Balance Sheet total Balance Sheet total Balance Sheet total Non-interest-bearing liabilities Non-interest-bearing liabilities Non-interest-bearing liabilities Return on Investment, per cent -36,5% -70,1% Calculation of key figures Operating Profit/EBITDA = Return on Equity = Return on Investment = Equity Ratio, per cent = Net Gearing = Diluted Earnings per Share = Earnings before interest, taxes depreciation and amortization Profit for the Period Equity (average) (Profit before tax + financial expenses)) Balance sheet total - non-interest-bearing liabilities (average) Shareholder s equity Balance-sheet total - advances received Interest-bearing liabilities - interest-bearing assets Shareholder s equity Profit for the period, attributable to equity holders of the parent Number of shares, adjusted for issues and for option dilution, average x100 x100 x100 Equity per Share = Dividend/Earnings P/E Ratio = Effective Dividend Share = Dilution = Equity attributable to equity holders of the parent Amount of shares on the closing date Dividends for the period Profit for the period Share price at the end of the period Diluted earnings per share Dividend/share Share price at the end of the period Number of shares plus allocated options - Number of shares obtainable with the exercise price for options according to the turnover-weighted average price x100

12 Financial statements Information about shares, shareholders and options Information about shares, shareholders and options Shares Share capital and shares The share capital of Digitalist Group Plc at 31 December 2017 was EUR 585, The total number of shares at 31 December 2017 was 553,824,346 shares. Stock exchange information Digitalist Group Plc is listed at Nasdaq OMX Helsinki. The company has one listed series of shares: DIGIGR Share subscrition price at listing on 1 October ,75 EUR 5,75 EUR Highest share price during the period 0,16 EUR 0,11 EUR Lowest share price during the period 0,07 EUR 0,06 EUR Closing price on 31 December 0,07 EUR 0,10 EUR Market value on 31 December EUR EUR Turnover of shares EUR EUR Average price, 1 January - 31 December (* 0,11 EUR 0,08 EUR Share turnover, percentage of number of shares on 31 December (* 8,1% 7,0% Number of shares, adjusted for issues on 31 December (* shares shares Number of shares, adjusted for dilution and issues on 31 December (* shares shares Number of shares on 31 December shares shares *) The number of shares adjusted for option dilution and related key performance indicators of year 2017 have been affected by the acquisition of Interquest Oy and NodeOne AB, conversion of convertible bonds and directed rights issue. Distribution of the shares Shares, pcs Percentage of shares Owners, pcs Private persons ,75% Corporations ,25% 139 Total (* ,00% Corporations Companies ,84% Financial and insurance institutions ,47% Public institutions ,30% Non-profit organisations 2 0,00% Foreign holdings ,39% Total (* ,00% from which administrative registered ,63%

13 Financial statements Information about shares, shareholders and options Major shareholders Shares, pcs Percentage of shares Tremoko Oy Ab ,48% Rome Advisors Oy ,90% Nordea Bank Ab, Suomen sivuliike ,83% Österlund Jori Ville ,82% Karisma-Invest Oy ,47% Gripenberg Jarl Dödsbo ,36% Lombard International Assurance S.A ,33% Mäki Tuomas Petteri ,30% Sjöblom Katri ,29% Keskinäinen Työeläkevakuutusyhtiö Elo ,27% 4Capes oy ,27% Rapeli Marko Teo ,25% Suihkonen Raisa Maria ,25% Hämäläinen Kari Heikki ,23% Ritanen Eero Juhani ,23% Laaksonen Lars ,22% Dreadnaught Finance Oy ,22% Thomcapital Oy ,14% Sjöblom Kari ,14% Jouhki Eeva ,14% Other ,86% Total (* ,00% Distribution of the shares Shares Percentage of Shares Shares Percentage of shares shares ,02% ,01% shares ,88% ,10% shares ,48% ,15% shares ,44% ,95% shares 65 1,66% ,46% More than 1,000,000 shares 20 0,51% ,34% Total (* ,00% ,00% Share holdings and option rights of the management Ownership 2017 Percentage of shares Ownership 2016 Shareholdings of the CEO and Board of Directors ,99% 0 Option rights of the CEO and Board of Directors ,06%

14 Financial statements Consolidated statement of comprehensive income (IFRS) Consolidated statement of comprehensive Income (IFRS) 1000 EUR Notes Turnover 2, Other operating income Materials and services Employee benefit costs Depreciation and amortisation Impairment of goodwill Other operating expenses Total expenses Operating profit Financial income Financial expenses Total financial income and statements Profit before tax Income tax Profit for the period Attributable to Equity holders of the parent Earnings per share, undiluted, EUR 25-0,02-0,03 Number of shares, undiluted, on 31 December Number of shares, undiluted, on 31 December 25-0,02-0,03 Number of shares, adjusted for dilution and issues, on 31 December Statement of comprehensive income (IFRS) 1000 EUR Profit for the period Other comprehensive income Change in translation difference Total comprehensive income for the period Total comprehensive income attributable to Equity holders of the parent

15 Financial statements Consolidated statement of financial position (IFRS) Consolidated statement of financial position (IFRS) EUR 1000 Notes Assets Non-current assets Goodwill Other intangible assets Tangible assets Available-for-sale investments Accounts receivable 4, Total non-current assets Current assets Trade receivables 4, Other receivables Cash and cash equivalents Total current assets Total current assets EUR 1000 Notes Equity and Liabilities Shareholders equity Equity attributable to equity holders of the parent Share capital Share premium reserve Invested non-restricted equity fund Retained earnings Result for the period Total equity attributable to equity holders of the parent Total equity Non-current liabilities Financial liabilities 20, Deferred tax liabilities 15, Total non-current liabilities Current liabilities Trade payables Current financial liabilities 20,21, Tax liabilities based on taxable income for the financial year Other liabilities Total current liabilities Total Equity and Liabilities

16 Financial statements Consolidated statement of cash flows Consolidated statement of cash flows EUR 1000 Notes Cash flow from operating activities Profit for the period Adjustment to cash flow from operating activities Income taxes Other income and expenses, no cash transactions Depreciation and amortisation Other adjustments Financial income and expenses Net cash generated before working capital changes, interests and tax Change in working capital Interest received Interest paid Income taxes paid Net cash flow from operating activities Cash flow from investing activities Transactions for business Acquisition of subsidiaries, net of cash acquired Investment in property, plant and equipment and intangible assets 13, Tangible fixed assets sales Net cash flow from investment activities Cash flow before financing Cash flow from financing activities Increase in long-term borrowings 20, Repayment of long-term borrowings 20, Increase in short-term borrowings Repayment of short-term borrowings Expenses for equity procurement Proceeds from rights issues Financial lease payments Net cash flow from financing activities Change in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

17 Financial statements Consolidated statement of changes in equity Consolidated statement of changes in equity EUR 1000 Share Capital Share premium reserve Invested non-restricted equity fund Retained earnings Total Translation difference Non-controlling interest Total equity Shareholders equity at 1 January Other changes Comprehensive income for the period Translation difference Total comprehensive income for the period Transactions with shareholders Equity part of the convertible bond Rights issue Expenses for equity procurement Share-based remuneration Shareholders equity at 31 December EUR 1000 Share Capital Share premium reserve Invested non-restricted equity fund Retained earnings Total Translation difference Non-controlling interest Total equity Shareholders equity at 1 January Other changes Comprehensive income for the period Translation difference Total comprehensive income for the period Transactions with shareholders Equity part of the convertible bond Conversion of the convertible bond Rights issue Expenses for equity procurement Share-based remuneration Shareholders equity at 31 December

18 Financial statements Accounting policies for the consolidated financial statements 1. Accounting policies for the consolidated financial statements Basic information on the group Digitalist Group Plc is a Finnish public limited company, founded in accordance with the laws of Finland, with domicile in Helsinki. Shares of the parent company Digitalist Group Plc have been listed at NASDAQ OMX Helsinki since The consolidated financial statements are available at the internet address and in the head office of the Group s parent company at the address Arkadiankatu 2, Helsinki. Digitalist Group is a service house aiming at international and profitable growth by designing new thinking, services and technological solutions for digitalising industries. These industries include the technology industry, energy industry, transport and logistics, as well as consumer services in the private and public sector. The company builds a network-based operating model with client enterprises and business partners. In addition to knowledge-based services and development services, the company produces contents, events, workshops, and various encounters with high-flyers in different industries. The aim is to create new ways of developing new business activity and design service, and to create technology in an agile way. Company s units are located on our main markets in Finland, Sweden, the United States, Canada, and Great Britain. All units have both technology and design experts and a local sales organisation. The board approval The Board of Directors has approved the financial statements to be published on According to the Finnish Limited Liability Companies Act, shareholders have the opportunity to approve or reject the financial statements at the annual general meeting held after their publication. The annual general meeting has also the right for making a decision on changing the financial statement. Basis of preparation The consolidated financial statements of Digitalist Group have been prepared in accordance with International Financial Reporting Standards (IFRS), observing the IAS and IFRS standards current at , and the SIC and IFRIC interpretations. International standards refer to standards and interpretations of standards, approved by the Finnish Accounting Act and the statutes based on it, for application in the EU in accordance with the procedure laid down by the EU regulation (EC) No. 1606/2002. Notes to the consolidated financial statements also comply with the Finnish provisions of the accounting and corporate legislation supplementing the IFRS regulations. Going concern This interim report has been drawn up in line with the principle of going concern, taking into account the financing arrangements executed by the company in the 2017 financial period and at the start of 2018, and the business forecast for The forecasts take into consideration probable or foreseeable changes in future expectations for revenues and costs. At the time of the publication of the interim report, the company estimates that its net working capital will be sufficient for the needs of the following 12 months. Some of the company s bank loans include covenants that are reviewed for the next time on 31 March The Group s accounting data are presented with an accuracy of a thousand euro and the parent company s accounting data with an accuracy of one euro, unless stated otherwise. The figures are based on the initial acquisition costs, with the exception of financial assets recorded at the current value according to result effect. New and amended standards applied during the ended accounting period From the start of 2017, Digitalist Group has observed the following new and amended standards currently in force: Amendments to IAS 7 Disclosure Initiative (to be applied in accounting periods starting or after that). The aim of the amendments is that those who use the financial statements could estimatte changes in debts arising from financing activities and affecting or not affecting the cash flow. The amendment to the standard does not affect significantly to the notes of the consolidated financial statements of Digitalist Group Plc. Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses (to be applied in accounting periods starting or after that). The amendments clarify that existence of deductible temporary difference only depends on comparison of the property item and its tax value at the moment of closing the accounts, and is not affected by possible future changes in the book value of the property item or in the way in which the amount corresponding to the book value will accrue in the future. The amendment to the standard does not affect Digitalist Group Plc s consolidated financial statements. Amendments to IFRS 12, Annual Improvements to IFRS Standards*, collection of amendments (to be applied in accounting periods starting or after that). Minor non-urgent amendments made through the Annual Improvements procedure are combined into one entity and implemented once a year. The amendment to the standard does not affect Digitalist Group Plc s consolidated financial statements. Amendment IAS 1: Presentation of Financial Statements. The aim is to clarify the notes to the financial statements and their grouping. The amendment had no significant effect on the Group s financial statements.