ROPOHOLD OYJ HALF-YEAR FINANCIAL REPORT JANUARY-JUNE 2018

Transcription

1 Half-year financial report January-June 2018

2 / 18 ROPOHOLD OYJ HALF-YEAR FINANCIAL REPORT JANUARY-JUNE 2018 January-June 2018 in brief Non-comparable growth in net sales was 28% and EBITDA increased by 85%. The completion, early in the year, of the lifecycle services deployment project begun in 2017 boosted the group's customer service volume to a new level. The new telephone service centre established in Kuopio in February began operating as planned. Life cycle service deployments had a positive impact on the Group's second-quarter net sales and operating profit. - Net sales amounted to EUR 22.3 million (17.5): growth of 28%. - EBITDA totalled EUR 5.3 million (2.8): growth of 85%. - Operating profit was EUR 3.1 million (1.0): growth of 227%. - Net profit came to EUR 1.1 million (-0.06): growth of 1,922%. - The equity ratio was 2 per cent (32%). April-June 2018 in brief The company's second-quarter net sales increased by 14% and operating profit by 60% compared to the same period in Net sales and profitability improved due to the completion, early in the year, of invoice lifecycle service deployment projects for a few big customers. The number of deployment projects remained high in the second quarter. Due to the increase in the volume of life cycle services, new employees were recruited by the Group's technology department and service organisation, and the administrative team was strengthened. The Group had a total of 165 employees on 30 June 2018, compared to 149 on 31 March Net sales amounted to EUR 11.3 million (9.9): growth of 14%. - EBITDA totalled EUR 2.9 million (2.2): growth of 31%. - Operating profit was EUR 1.8 million (1.1): growth of 60%. - Net profit came to EUR 0.8 million (0.7): growth of 18%.

3 / 18 KEY FIGURES Key figures EUR, thousands 4-6/ / / / Net Turnover , , , , ,3 EBITDA 2 900, , , , ,2 EBITDA % 26 % 22 % 24 % 16 % 20 % EBIT 1 817, , ,5 950, ,0 EBIT % 16 % 11 % 14 % 5 % 9 % Profit before taxes 810,1 688, ,0-62, ,3 Profit 642,8 362,4 899,9-126,1 687,6 Employees Equity ratio 2 % 32 % 2 % 32 % 17 % Return on equity 43 % 2 % 60 % -1 % 5 % ARTTI AURASMAA, CEO In January-June 2018, the Group's net sales grew by 28 % compared to January-June Net sales for the beginning of the year totalled EUR 22.3 million (EUR 17.5 million 1-6/2017), with operating profit developing positively at EUR 3.1 million 1-6/2018 (EUR 1.0 million 1-6/2017). During the first half of the year, the RopoHold Group's business operations developed in line with the planned strategy. The combination of the Group's range of services information logistics, receivables management, and payment control and debt collection services into an invoice lifecycle service has created significant demand among customers. In line with its objectives, the Group succeeded in shifting its operational customer accounts to the invoice lifecycle model and concluding new agreements on the introduction of lifecycle services. The completion of invoice lifecycle service deployment projects early in the year is expected to have a positive impact on the consolidated profit for the end of the year. Financial services for invoice receivables are complemented by the Group's invoicing services. The Group's financed receivables increased to approximately EUR 7 million (31 December 2017, 5.7million), while credit losses remained moderate. As regards net sales, the Group's income from payment control continued to grow. The price competition intensified for information logistics services, but this had no significant impact on the group's operational net sales during the first half. With respect to financial income, the increase in loan receivables is also reflected in growth in net sales.

4 / 18 EUR, thousands 04-06/ / / / /2017 Income from collection activities 4 009, , , , ,8 Information and operation services 157,0 565,9 242, , ,9 Financing 270,1 179,9 515,7 319,8 726,8 Total , , , , ,3 The Group's operating expenses have developed as planned, despite the rapid growth in business operations. The highest growth in costs was related to personnel expenses. The Group's interest expenses on the bond issued in December 2017 have increased its financial expenses as planned. SIGNIFICANT EVENTS DURING THE PERIOD In February 2018, the Group's parent company raised its share capital to EUR 80,000 and became a public limited liability company. The Group published its first IFRS financial statements at the end of April. In June, the Group s invoice lifecycle services were granted an ISO 9001 certificate, in recognition of their quality system s compliance with the lifecycle services standard. SIGNIFICANT EVENTS AFTER THE REVIEW PERIOD The Group signed a major customer agreement in August 2018, which is expected to have a positive effect on the company's net sales and operating profit in the first half of In addition, in December 2017 the company prepared for the listing of its bond loan on the list maintained by NASDAQ Helsinki Stock Exchange during the third quarter. BALANCE SHEET AND FINANCIAL POSITION In May, an extraordinary general meeting of the Group's parent company decided on the repayment of EUR 12.0 million in capital in accordance with the terms of the bond issued by the equity financer in December 2017, which weakened the company's equity ratio. In the management's view, the capital repayment does not jeopardise the company's solvency or future strategic plans. We forecast that the Group's operating profit will remain positive.

5 / 18 EMPLOYEES The Group had a total of 35 employees in its technology department on 30 June Four new employees were recruited into the technology department in the first half of the year, to meet the need for additional resources due to the lifecycle services deployment projects. During the early part of the year, a total of 35 lifecycle service deployment projects were finalised by the Group. The recruitment situation among technology professionals is reasonably good in the Kuopio region and the company has recruited new professionals in accordance with its plans. However, competition for skilled workers seems to have intensified in the region, alongside favourable general economic trends. Due to the growth in the invoice lifecycle service model, the Group established a new customer service centre in Kuopio in February, when it also recruited 12 new customer service employees for the centre. The Kuopio customer service centre complements the Group's service organisations in Porvoo and Kuopio, which had a total of 56 employees by the end of the first half of The total number of employees in the group grew from 124 to 165 between the end of 2017 and 30 June Recruitment has continued since the end of the quarter, particularly in the technology and customer service department and the Group's number of employees is expected to continue growing in the second half of the year. BOARD OF DIRECTORS AND MANAGEMENT TEAM The members of the Board of Directors of RopoHold Oyj are as follows: Pentti Tuunala (Chairman of the Board), Johan Wenzel, Petri Tukiainen, Mikko Isotalo and Mika Ruokonen. Reeti Saarinen is a deputy member of the Board. The Group's Management Team is chaired by Managing Director Artti Aurasmaa. Its members are Chief Commercial Officer Sami Levy, Chief Technology Officer Ilkka Sammelvuo, Service Operations Director Sami Pyylampi and Chief Financial Officer Toni Rönkkö.

6 / 18 DECISIONS OF ANNUAL GENERAL MEETING 2018 At the beginning of the financial year, RopoHold Oyj held two shareholders meetings resulting in unanimous decisions. The company was converted into a public limited liability company, the share capital was increased by EUR 77,500, and the articles of association were updated to reflect these changes. Mika Ruokonen was elected as a new member of the Board of Directors. The annual general meeting of RopoHold Oyj was held on 24 April RopoHold confirmed the financial statements of the parent company and Group and discharged the members of the Board of Directors and the CEO from liability. In accordance with the proposal of the Board of Directors, the AGM decided on the distribution of a dividend of EUR per share for series B shares, totalling EUR 68,250, for the financial period 1 January to 31 December The Annual General Meeting decided to retain the services of the authorised public accountants Ernst & Young Oy as the auditor, and Elina Laitinen as the principal auditor. At the extraordinary general meeting held on 30 May 2018, the decision was taken to return EUR 12.0 million in capital from the unrestricted equity fund. SHARES AND SHAREHOLDERS The share capital of RopoHold Oyj was EUR 80,000 at the end of the second quarter and the number of shares in the company was 19,992,743. Shares in the company are divided into series A and B shares. At the end of the second quarter, series A shares totalled 18,042,743, and Series B shares amounted to 1,950,000. The company had 19 (11) shareholders on 30 June The company does not hold any own shares. MAJOR RISKS AND UNCERTAINTY FACTORS The main risks for the Group involve strategic risks, such as the choice of business activities and markets in which the group operates or seeks growth, as well as choices related to its own service offerings. In addition, the operational risks related to its operations may be significant and result in notable financial losses for Group companies, if realised.

7 / 18 Risks identified regarding the customer base include concentration risks. Risks associated with the concentration of the customer base may arise as a result of consolidations within industries, with new individual customers constituting major risk concentrations among Ropo s clientele. On the other hand, the emergence of larger customer concentrations would also provide significant opportunities for Ropo to increase its market share through successful, individual customer acquisitions. Partnerships in the production process enable the Group to adapt to changes in the competition and market. Internal control tools are used to try and minimise the risks arising from partnerships. Actions among competitors, such as price competition, could negatively impact on Ropo s acquisition of new customers, the loyalty of current customers, and the business s profitability. In particular, risks posed by the regulatory environment concern the debt collection sector and associated operations. The company's profitability may be negatively affected if such risks are realised. Other changes in the operating environment, such as changes in the general economic situation, could affect the company's activities indirectly, by reducing the availability of financing, for example. Other changes in the operating environment may arise for reasons such as the rapid digitalisation of payment methods, which would change the generally applicable payment method standards. Financial risks include the development of significant factors affecting the profitability of the business, such as trends in general costs and the unit cost of production, and risks associated with the Group's financial position, such as interest, liquidity and credit risks. Ropo s corporate governance statement is available on the company's investor website at FINANCIAL INFORMATION 2018 RopoHold Oyj will publish its financial statements bulletin for the financial year 2018 timetable during the autumn of Financial statements, half-year and quarterly reports are available on the company's investor website at

8 / 18 ROPOHOLD OYJ -GROUP CONSOLIDATED STATEMENT OF PROFIT OR LOSS Income Statement, IFRS EUR, thousand 04-06/ / / / /2017 Net Sales , , , , ,3 Other operating income 168,6 81,3 325,1 159,6 445,9 Purchases during the period -16,9-34,0-46,4-47,8-89,5 Changes in inventory 0,0 0,0 0,0 0,0 2,2 External services , , ,5-893, ,0 Employee benefit expenses , , , , ,1 Depreciation , , , , ,2 Other operating expenses ,2-818, , , ,7 Operating profit 1 817, , ,5 950, ,0 Financial income 16,8 3,3 24,1 4,3 15,9 Financial expenses ,7-447, , , ,5 Profit before taxes 810,1 688, ,0-62, ,3 Appropriations 0,0 0,2 0,0 0,5 0,0 Income taxes -167,3-326,6-230,0-64,6-381,7 Profit for the period 642,8 399,8 899,9-126,1 687,6

9 / 18 CONSOLIDATED BALANCE SHEET Balance Sheet EUR, thousands ASSETS Non-current assets Goodwill , , ,9 Other intangible assets , , ,0 Property, plant and equipment 1 063, , ,2 Other receivables 22,2 22,2 22,2 Deffered tax assets 811,3 369,6 421,0 Current assets Inventories 5,0 2,8 5,0 Trade and other receivables , , ,0 Shares and equity 0,0 200,0 197,4 Deferred tax assets 59,6 0,0 59,6 Tax receivables based on income for the financi 118,3 11,3 118,3 Cash and cash equivalents 2 345, , ,6 Total assets , , ,3 EQUITY AND LIABILITIES Equity Share capital 80,0 2,5 2,5 Reserve for invested unrestricted equity 825, , ,6 Retained earnings 592, ,4-186,2 Total equity 1 498, , ,8 Non-current liabilities Financial liabilities , , ,3 Accounts payable and other liabilities 0,0 18,8 9,8 Deferred tax liabilities 4 082, , ,8 Provisions 7,0 7,0 7,0 Other liabilities 0, ,0 0,0 Current liabilities Financial liabilities 434, ,3 405,7 Accounts payable and other liabilities 3 450, , ,4 Current tax liabilities 0,0 6,7 0,0 Tax liabilities based on income for the financial 4 694, , ,2 Other liabilities 1 176,0 958,9 710,3 Total liabilities , , ,5 Total equity and liabilities , , ,3

10 / 18 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Reserve for invested Shareholders unrestricted Other Retained EUR, thousand equity equity changes earnings Total Equity on , ,6-52,8-133, ,8 Comprehensive income Profit/loss for the period 899,9 899,9 Total comprehensive income 766, ,8 Transactions with owners Distribution of dividends -68,3-68,3 Share issue 77,5-77,5 0,0 Repayment of capital , ,0 Transactions with owners, total 77, ,5-68, ,3 Equity on ,0 773,1-52,8 698, ,5 Equity on , ,5 0,0-821, ,0 Comprehensive income Profit/loss for the period -126,1-126,1 Total comprehensive income -947, ,9 Transactions with owners Distribution of dividends -52,5-52,5 Retained earnings, acquisition -247,7-247,7 Reserve for invested unrestricted equity, acquisition , ,4 Transactions with owners, total ,4-300, ,2 Equity on , ,9 0, , ,1

11 / 18 CONSOLIDATED STATEMENT OF CASH FLOWS Cash flow statement EUR, thousands 04-06/ / / /2017 Profit(loss) before appropriations and taxes 810,1 688, ,0-62,0 Adjustments 2 147, , , ,3 Net working capital change 630,6 689, , ,5 Paid and received interests ,9-444, , ,6 Income taxes paid -73,9-142,8-857,0-158,2 Cash flow from operating activities 2 507, , , ,0 Purchase of tangible and intangible assets -118,7-452,6-146, ,9 Loans granted ,2-762, , ,4 Cash flow from investing activities , , , ,4 Changes in equity, net ,0 0, ,0 0,0 Retained earnings, acquisition 0,0 385,0 0, ,7 Net change in external loans 0,0 409,7 0, ,9 Interests and other financing expences paid 0,0 117,5 0,0 154,6 Dividends and other distribution of profit -68,3-52,5-68,3-52,5 Cash flow from financing activities ,3 859, , ,7 Net increase (+)/decrease (-) in cash and cash equivalent , , ,9-432,6 Cash and cash equivalents at beginning of period , , , ,7 Cash and cash equivalents at end of period 2 345, , , ,1

12 / 18 NOTES TO THE HALF-YEAR FINANCIAL STATEMENTS ACCOUNTING PRINCIPLES OF THE HALF-YEAR FINANCIAL STATEMENTS The half-year financial statements were prepared in accordance with standard IAS34 on Interim Financial Reporting. The accounting principles of the half-year financial statements are the same as those of the consolidated financial statements (IFRS) 2017, published by the company. The consolidated financial statements are available on the company's investor website at The Group complied with the IFRS9, IFRS15 and IFRS16 standards in its annual financial statements for 1 January to 31 December 2017, prior to their compulsory entry into force (1 January 2018). The figures in the half-year financial statements are unaudited. The company presents commonly used alternative key figures to describe the financial development of its business activities and to improve comparability between different reporting periods. Alternative key figures, i.e. those not based on the International Financial Reporting Standards (IFRS), provide important additional information for the company's management, investors and other parties. Alternative key figures should not be considered substitutes for the key figures defined in the IFRS accounting standards. The alternative key figures used by the company are EBITDA, EBITDA %, EBIT, EBIT %, Equity ratio and Return on equity. The calculation formulas are presented in the calculation formulas section below. OPERATIONAL SEGMENTS Reportable segments The Group s financial situation has historically been evaluated as one entity, which is the basis for the Group s reporting model and governance structure. For this reason, the Group has only one reportable operating segment, whose figures and information are congruent with the figures and data of the Group. Thus, the income of the operating segment comprises income from the life cycle management of receivables. The Group s main decision-making body is the CEO together with the parent company s Board of Directors. They assess the operating segment monthly. Profitability assessment is based on the segment s EBITDA. TRADE AND OTHER RECEIVABLES

13 / 18 Trade receivables and other receivables EUR, thousands 01-06/ / /2017 Trade receivables 3 548, , ,8 Financial invoices 6 971, , ,7 Deferred taxes 59,6 0,0 59,6 Other receivables 164,7 253,3 77,8 Accrued income 409,4 274,3 494,1 Total , , ,9 The method defined in IFRS 9, according to which a provision is made for an amount equal to the lifetime expected credit losses for the receivable, is applied to impairment provisions related to trade receivables and financed invoice receivables. Statistical methods with which the expected credit losses for receivables can be forecast are utilized to estimate the expected amount of credit losses. As the average maturity of the Group s receivables is short, the time value of money does not have a significant effect on the estimated amount of expected credit losses. In addition, factors that may influence the amount of expected credit losses are considered. Such factors may include, for example, macroeconomics such as recession or problems in financial markets, which could be expected to be reflected in the solvency of customers. The Group's credit losses from sales receivables total of EUR 29,434, for the financial period 1 January to 30 June 2018 (EUR 9,588 in 2017). Credit losses are presented in other expenses in the income statement. CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES Classification and fair values The table presents the carrying amounts and fair values of financial assets and liabilities, as well as their level in the fair value hierarchy. The table does not present the fair values of those financial assets and liabilities that are not valued at fair value if the carrying amount is a reasonable estimate of their fair value. Classification of financial assets and liabilities is carried out based on the classification included in IFRS 9.

14 / 18 Classification of financial assets and liabilities Carrying amount Fair value Financial assets EUR, thousands and liabilities valued at fair value through profit and loss Financial assets and liabilities recognised at amotised cost Total Level 1 Level 2 Level 3 Total Financial assets valued at fair value Shares and equity 0,0 0,0 0,0 0,0 Total 0,0 0,0 0,0 0,0 0,0 0,0 0,0 Financial assets not valued at fair value Trade receivables and other receivables 3 735, , , ,3 Cash and cash equivalents 2 345, , , ,2 Total 0, , ,4 0,0 0, , ,4 Financial liabilities valued at fair value Derivative instruments 129,5 129,5 129,5 129,5 Total 129,5 0,0 129,5 0,0 129,5 0,0 129,5 Financiel assets not valued at fair value Bond , , , ,5 Lease payable 919,9 919,9 919,9 919,9 Accounts payable 3 450, , , ,3 Other liabilities 1 176, , , ,0 Total 0, , ,6 0,0 0, , ,6 Classification of financial assets and liabilities Carrying amount Fair value Financial assets EUR, thousands and liabilities valued at fair value through profit and loss Financial assets and liabilities recognised at amotised cost Total Level 1 Level 2 Level 3 Total Financial assets valued at fair value Shares and equity 200,0 200,0 200,0 200,0 Total 200,0 0,0 200,0 200,0 0,0 0,0 200,0 Financial assets not valued at fair value Trade receivables and other receivables 4 044, , , ,5 Cash and cash equivalents 6 749, , , ,1 Total 0, , ,6 0,0 0, , ,6 Financial liabilities valued at fair value Derivative instruments 33,9 33,9 33,9 33,9 Total 33,9 0,0 33,9 0,0 33,9 0,0 33,9 Financiel assets not valued at fair value Bond 0,0 0,0 0,0 0,0 Financial loans , , , ,7 Lease payable 1 173, , , ,0 Accounts payable 2 709, , , ,6 Other liabilities 958,9 958,9 958,9 958,9 Total 0, , ,2 0,0 0, , ,2

15 / 18 Fair value measurement Fair value is the price that would be received for selling an asset or the price paid for transferring a liability in an orderly transaction between market participants on the measurement date. The company s management estimates that the carrying amounts of trade receivables, other receivables, financial assets, accounts payable, accrued expenses and other borrowings do not materially differ from their fair value when considering the short maturity periods of these instruments. Financial instruments valued at fair value Mutual fund units Financial assets available for sale are mutual fund units, and their fair values are based on the quoted values on the statement of financial position date. Derivative instruments The fair values of derivatives are determined based on public market prices. Measurement is carried out based on the market prices available for similar derivatives. Lease liabilities Fair value is estimated by discounting future cash flows with an interest rate that corresponds to the interest rate for similar lease agreements on the reporting date. Definition of levels Level 1 = quoted (unadjusted) fair values in active markets for identical assets or liabilities. Level 2 = inputs other than quoted market prices included within level 1 that are observable for the asset or liability, either directly (such as prices) or indirectly (derived from prices). Level 3 = is not based on observable market input.

16 / 18 Transfers between the levels No transfers between the hierarchy levels took place during the financial years 2018 and Level 1 fair values The table presents a reconciliation of the level 1 fair value balances at the beginning and end of the financial period. Items valued at fair value through EUR, thousands profit and loss At the beginging of the financial period ,0 Purchases 0,0 Sales ,0 At the end of the financial period ,0 At the beginging of the financial period ,4 Purchases 0,0 Sales -197,4 At the end of the financial period ,0 COMMITMENTS AND CONTINGENT LIABILITIES EUR, thousands Mortgages , ,0 Lease agreement liabilities 541,5 695,4 Hire-purchase liabilities 0,0 18,8 Pooled accounts 8 306, ,6 Other * 7 000,0 0,0 Total , ,8 *Other contingent liabilities are related to the available, unused overdraft limit, company credit cards, rent securities and VAT review responsibilities concerning property investments.

17 / 18 Litigation On 30 June 2018, the Group had no material pending litigation cases. RELATED PARTY TRANSACTIONS A related party is a person or entity that is related to the entity that is preparing the financial statements. Parties are related parties if one party has control or joint control over the decision-making of the other party or significant influence over it. The Group s related parties include the parent company s subsidiary and the subsidiaries in its subgroup. The Group s ultimate parent company is Sentica Buyout IV Ky ( ). The company owns 54.99% of the RopoHold Oyj A shares which are entitled to vote. The Group and the parent company own the following caompanies Group's share of ownership Home country (%) RopoHold Oyj Finland Oy Finland 100 % Ropo Invest Oy Finland 100 % Ropo Finance Oy Finland 100 % Ropo Baltics Ou Estonia 100 % In addition to the Group companies, the related parties include the members of the Board of Directors and the management team, the largest shareholders and close family members of the persons listed above. All related party transactions that have not been eliminated in the consolidated financial statements are presented as related party transactions. The terms and conditions for purchase transactions carried out with related parties are equivalent to those applicable to transactions between independent parties. Transactions with related parties and related party assets and liabilities EUR,thousands The Group's highest parent company Interests for loans to shareholders 0,0 371,9 Liabilities 0,0 8147,8 Transactions with related party companies that are not part of the Group Interests for loans to shareholders 0,0 124,0 Liabilities 0,0 2817,8

18 / 18 THE CALCULATION FORMULAS The calculation formulas EBITDA = Operating profit + Depreciations and amortisation EBITDA EBITDA % = x 100 Net sales EBIT = Net sales + Other operating income - Materials and supplies -Staff expences - Depreciations and amortisation EBIT % = Equity ratio = EBIT Net sales Equity + Minority interest Total assets - Advances received x 100 x 100 Return on equity = x 100 Profit before appropriations - Taxes Equity + Minority interest In Kuopio 23 August 2018 The Board of Directors of RopoHold Oyj