1 January 30 June 2018

Transcription

1 The company has published a stock exchange release on 14th of August, 2018 and this is a translation of it. In case of any discrepancies between the Finnish text and the English translation, the Finnish text shall prevail. HALF-YEAR REPORT 1 January 30 June 2018 (unaudited) SIILI S REVENUE INCREASED BY 17% DURING THE FIRST HALF OF THE YEAR Siili Solutions Plc, half-year report, 14 August 2018, 8:45 a.m. January June 2018: - Revenue was EUR 34,179 (1 6/: 23,865) thousand an increase of 17.4% - EBITDA was EUR 2,287 (2,480) thousand a change of -7.8% - EBITDA was 6.7% (8.5%) of revenue - Operating profit (EBIT) was EUR 1,722 (2,140) thousand a change of -19.5% - The profit for the period was EUR 1,345 (1,664) thousand a change of -19.2% - Earnings per share were EUR 0.19 (0.24) a change of -20.1% - Cash flow from operations amounted to EUR -1,897 (1,698) thousand a change of % - The statement of financial position totalled EUR 32,504 (32,864) thousand - The company updated its strategy and management system in June - An employee share savings plan and a related option plan were introduced in April Outlook for 2018 The company repeats the guidance issued in connection with the publication of the financial statements bulletin on 27 February 2018: Revenue for 2018 is expected to be EUR million, and EBITDA is expected to be EUR million. Consolidated key figures Key figures * 1 January 30 June January 30 June 1 January 31 December Revenue, 34,179 29,113 57,972 EBITDA, 2,287 2,480 5,932 EBITDA, % of revenue 6.7% 8.5% 10.2% Operating profit (EBIT), 1,722 2,140 5,171 EBIT, % of revenue 5.0% 7.4% 8.9% Profit for the period, 1,345 1,664 4,130 Profit for the period, % of revenue 3.9% 5.7% 7.1% Equity ratio, % 59.9% 55.8% 62.4% Gearing ** -17.5% -39.8% -39.4% Earnings per share (EPS), EUR EPS adjusted for dilution, EUR Average number of employees during the period *** Number of employees at the end of the period *) The comparison figures for have been adjusted due to the adoption of IFRS 15. **) Gearing does not include the contingent consideration related to acquisitions. ***) The average of the number at the beginning and the number at the end of the review period. Siili Solutions Plc takes into account the Alternative Performance Measures Guidelines published by the European Securities and Markets Authority (ESMA) on 3 July The company uses EBITDA as a guideline

2 for reviewing its profit for the period. EBITDA is calculated by adding depreciation to the operating profit. Gearing does not take into account the contingent considerations related to the earn-outs for the company s acquisitions. The consolidated statement of financial position did not include contingent considerations on 30 June 2018 (: EUR 1,380 thousand). TIMO LUHTANIEMI, CEO: STRONG ORGANIC GROWTH CONTINUED When I took up my post as Siili s CEO at the start of the year, I set three goals for myself for this year: 1. Strengthening Siili s original mission as the home base of the most talented professionals in the software industry; 2. Achieving the financial targets for the current year without making significant changes to the existing strategy and business plan; 3. Launching a strategic development project to ensure the organisation s capacity to maintain strong and profitable growth in the coming years. In the first half of 2018, our revenue amounted to EUR 34,179 thousand, up 17.4% year-on-year, and our EBITDA was EUR 2,287 (: 2,480) thousand. Our revenue growth during the review period was completely organic. I am particularly pleased by the fact that the share of revenue represented by international business grew by 43% year-on-year. The offices we opened in Szczecin in Poland and Detroit in the United States have grown quickly in terms of the number of employees. Profitability was weaker than in the comparison period due to planned non-recurring development expenses as well as internal productivity challenges. The company s centralised matrix organisation was no longer effective in serving Siili s growing, increasingly diverse and internationalised business operations. Nonrecurring expenses in the first half of the year arose from the deployment of the company s new ERP and financial management system as well as the planning and launch of the employee share savings plan. The company s underpinning Siili (Hedgehog) concept means focusing on businesses and competencies in which we can become the best in the world, which we are passionate about and which create value for the customer. At the start of the year, we launched a strategy project to choose our growth areas for the coming years in line with the Siili concept, define strategic development projects to achieve our goals and create a structure that moves decision-making from our management to our employees and closer to our customers. On 19 June 2018, we announced our new structure, which divides the company into several independent business areas and support functions. The new structure is aimed at organising the company in accordance with the updated strategy and improving profitability starting from the second half of the year. The key driver of our growth is the number of experts we have and the competence they possess. I am happy to say that we have been able to recruit new employees in line with our targets and the relative turnover of employees has decreased year-on-year. At the end of June, there were 636 of us, which represents an increase of 73 people compared to the end of last year. Just under a third of Siili s personnel, or 183 employees, further strengthened their bond with the company by participating in the employee share savings plan. On 1 August 2018, we acquired 60 per cent of the share capital of VALA Group Oy. Our software automation and robotics expertise has seen strong demand in Finland for a long time now, and this year we have acquired our first international customers in this segment. With this acquisition, our pool of automation experts grows further to exceed 100 people. VALA Group will also give us access to new customers as well as synergies in internationalisation and the development of open source robotic process automation solutions. VALA will continue to operate as an independent unit as part of the Siili Group, which represents a good fit with Siili s organisational structure under its updated strategy. In spite of this, the aim is to engage in close cooperation and maximise synergies with other Siili units.

3 The changes we have begun to implement and, to a large extent, have already put in place are significant steps in Siili s story. The changes stem from the need to simplify and enhance operations and manage different types of businesses as their own entities and as smaller, independent units without unnecessary bureaucracy. This ensures the continued development of our workplace atmosphere and culture to create even more value for our customers. The market climate is favourable and the measures we are implementing are aimed at achieving faster growth and improved profitability from 2019 onwards. We will discuss Siili s strategy and objectives in more detail at our Capital Markets Day later this year. Changes in the organisation On 19 June 2018, the company announced changes to its strategy and management system. As a result of the changes, Siili s previous matrix organisation is divided into several independent business areas: Key Accounts, Automotive, New Solutions, Expert Agency and Cloud Managed Services. In its meeting on 13 August 2018, the company s Board of Directors decided on changes in the responsibilities of the members of the Management Team to reflect the new structure. Effective from 1 September 2018, Pasi Ropponen will be responsible for sales in Finland and the Key Accounts business area, Kari Pirttikangas will be responsible for the Expert Agency business area and Väinö Leskinen will be responsible for the Automotive business and international sales. The recruitment of leaders for the Cloud Managed Services and New Solutions business areas is underway. REVENUE AND PERFORMANCE During the first half of 2018, the Group s revenue increased by 17.4% (22.0%) year-on-year. Revenue grew by EUR 5,066 thousand and amounted to EUR 34,179 (29,113) thousand. The subcontracting costs arising from the use of external services totalled EUR 6,171 (4,975) thousand, or 18.1% (17.1%) of revenue. Employee benefit expenses for the period totalled EUR 21,041 (18,298) thousand, or 61.1% (62.9%) of revenue. The total number of employees at the end of the period was 636 (535), representing a year-on-year increase of 18.9% (30.5%). The total costs arising from subcontracting and employee benefits represented 79.6% (79.9%) of revenue, down slightly compared to the corresponding period last year. Other operating expenses amounted to EUR 6,952 (5,464) thousand, or 14.1% (11.6%) of revenue. The Group s EBITDA for the review period was EUR 2,287 (2,480) thousand, or 6.7% (8.5%) of revenue. EBITDA was weighed down by non-recurring expenses arising from Siili s reorganisation, strategy process, launch of the share savings plan and the deployment of a new ERP and financial management system. Operating profit (EBIT) was EUR 1,722 (2,140) thousand. Net financial expenses amounted to EUR 33 (12) thousand. The profit before taxes was EUR 1,690 (2,128) thousand and earnings per share were EUR 0.19 (0.24). FINANCING AND CAPITAL EXPENDITURE The Group s statement of financial position totalled EUR 32,504 (32,864) thousand at the end of the review period. The company s equity ratio was 59.9% (55.8%), the annualised return on investment (ROI) was 13.4% (21.7%) and gearing was -17.5% (-39.8%). During the first half of the year, the Group s cash flow from operations was EUR -1,897 (1,698) thousand. Cash flow from operations declined by EUR 3,595 thousand year-on-year. The decline was mainly due to a delay in the delivery of the ERP system, which meant that sales invoicing for May was not completed on schedule and trade receivables were not fully collected by the due date at the end of June. Trade receivables were fully collected after the end of the review period.

4 Capital expenditure during the review period amounted to EUR 510 (1,022) thousand and was primarily allocated to the implementation of the new ERP system. Cash flow from investments also included the payment of a contingent consideration of EUR 30 thousand related to the Stormbit acquisition. The contingent consideration was determined by the growth and profitability of the acquired business in. Cash flow from financing activities was EUR -2,567 (-2,159) thousand, mainly consisting of dividends paid in the amount of EUR -2,730 (-2,076) thousand. At the end of the review period, the Group s cash and cash equivalents totalled EUR 3,975 (8,240) thousand and the company had EUR 1,500 thousand in unused credit facilities. At the end of the review period, cash and cash equivalents were 51.8% lower than in the comparison period. This was due to the previously mentioned temporary delay in the collection of trade receivables for May. The company s interest-bearing liabilities totalled EUR 585 (972) thousand at the end of the review period, including EUR 390 (390) thousand in current interest-bearing liabilities. ACQUISITIONS AND DIRECTED SHARE ISSUES No new acquisitions or directed share issues were carried out during the review period. During the review period, on 18 May, the company paid a contingent consideration of EUR 30 thousand related to the Stormbit acquisition. The contingent consideration was determined by the growth and profitability of the acquired business in. EMPLOYEES, MANAGEMENT AND GOVERNANCE The total number of employees at the end of June was 636 (535), representing an increase of 101 employees, or 18.9% year-on-year. The average number of employees during the first half of the year was 600 (538). The Annual General Meeting held on 26 March 2018 confirmed the number of members of the Board of Directors as four (4). Harry Brade, Anu Nissinen and Kati Hagros were re-elected to the Board and Patrik Sallner was elected as a new member. Harry Brade was elected as Chair of the Board and Anu Nissinen as the Vice Chair at the constitutive meeting of the Board of Directors, held immediately after the Annual General Meeting. The Board of Directors decided to change the Board s Nomination and Remuneration Committee to the HR Committee, which will focus more broadly on HR-related themes. Harry Brade (Chair) and Anu Nissinen were elected as members of the HR Committee. Anu Nissinen (Chair), Kati Hagros and Patrik Sallner were elected as members of the Audit Committee. The election of the members of the Board s HR Committee deviated from Recommendation 15 of the Corporate Governance Code 2015, with only two members being elected to the HR Committee due to the small number of members on the Board of Directors. At the end of the review period, the company s Management Team consisted of the following members: Timo Luhtaniemi (CEO), Kari Pirttikangas (COO), Pasi Ropponen (Sales Director), Erkka Niemi (CTO, service development), Kristiina Burtsoff (CHRO), Väinö Leskinen (Head of International Operations) and Tiina Mutanen (Group Controller, acting CFO). During the review period, Samuli Siljamäki (CFO) left the Management Team on 30 April 2018 after seeking employment elsewhere. Aleksi Kankainen was appointed as the company s new CFO during the review period. He will take up his post on 1 October 2018 at the latest. The company s accounts are audited by KPMG Oy Ab (Business ID: ), Authorised Public Accountants, with Toni Aaltonen, APA, as the responsible auditor. RISKS AND UNCERTAINTY FACTORS There are several different uncertainty factors that may affect Siili Solutions Plc s business, revenue and profitability. It is the company s understanding that no essential changes have occurred in near-term risks, and

5 the company has described risks related to the operating environment, business operations, economy and financing in more detail in its annual report and financial statements bulletin. OUTLOOK FOR 2018 AND LONG-TERM TARGET Revenue for 2018 is expected to be EUR million, and EBITDA is expected to be EUR million. In the long term, the company is aiming for an annual growth rate of 20% on average while also maintaining a good level of profitability (EBITDA more than 10% on average). GENERAL MEETING Annual General Meeting Siili Solutions Plc s Annual General Meeting was held in Helsinki on 26 March The Annual General Meeting adopted the financial statements and consolidated financial statements for the financial year, discharged the CEO and the members of the Board of Directors from liability and decided to distribute a dividend of EUR 0.39 per share. The record date of dividend payment was 28 March 2018 and the dividend was paid on 6 April The Annual General Meeting resolved to authorise the Board of Directors to decide on the acquisition and/or acceptance as collateral of a maximum of 480,000 own shares using the company s non-restricted equity. The shares are to be acquired in a manner other than in proportion to the existing holdings of shareholders in public trading organised by Nasdaq Helsinki Ltd at the market price at the time of acquisition. The Board will decide on other terms and conditions related to the acquisition and/or acceptance as collateral of own shares. The authorisation will be valid until the end of the next Annual General Meeting, but not beyond 30 June This authorisation revokes earlier unused acquisition authorisations. The Annual General Meeting resolved to authorise the Board of Directors to decide on an issue of shares and on an issue of special rights entitling their holders to shares in accordance with Chapter 10, Section 1 of the Limited Liability Companies Act, in one or more tranches and either with or without payment. The maximum total number of shares issued, including shares issued on the basis of special rights, is 750,000. The Board of Directors may decide to issue new shares or to transfer any treasury shares held by the company. The authorisation entitles the Board of Directors to decide on all terms and conditions for an issue of shares and an issue of special rights entitling their holders to shares, including the right to deviate from the shareholders pre-emptive subscription right. The authorisation may be used for strengthening the company s statement of financial position, for paying transaction prices related to acquisitions, in incentive plans or for other purposes decided by the Board of Directors. The authorisation will be valid until the end of the next Annual General Meeting, but not beyond 30 June This authorisation revokes earlier unused authorisations related to an issue of shares or an issue of stock options or other special rights entitling their holders to shares. SHARE AND SHARE-BASED INCENTIVE PLANS The company has one series of shares, and all of its shares entitle their holders to equal rights. On 30 June 2018, the total number of shares in Siili Solutions Plc in the Trade Register was 7,000,316. The company had a total of 4,339 shareholders on 30 June A list of the largest shareholders is available on the company website at The company or its subsidiaries did not hold any treasury shares at the end of the review period. On 30 June 2018, the members of the company s Board of Directors and Management Team owned a total of 870,073 shares in the company, either directly or through related parties. In addition, an entity under the control of a Board member owns 481,240 shares. At the end of the review period, the members of the Management Team held 90,000 stock options.

6 No new shares were issued during the review period (: 81,949 new shares issued). During the first half of the year, the highest price of the company s share was EUR 12.85, the lowest price was EUR and the average price was EUR The closing price of the share at the end of the review period was EUR The company s market capitalisation grew by 7.8% from the end of, totalling EUR 83.3 million on 30 June 2018 (30 June : 83.7 million). The company has two valid option plans: a share-based incentive plan for key employees and an option plan included in the share savings plan offered to all employees. The company s Board of Directors decided on the share-based incentive plan for key employees on 8 June In the option plan, it has been decided that the maximum total number of stock options issued is 337,000, and they entitle their holders to subscribe for a maximum total of 337,000 new shares in the company or existing shares held by the company. The share subscription period for stock options will be 30 September December However, the subscription period for shares subscribed for with stock options will not be implemented unless the 60-day volume-weighted average trading price of the share on the Nasdaq Helsinki is at least EUR between 1 January 2019 and 30 June The subscription price for shares subscribed for on the basis of stock options is EUR 7.50 per share. The subscription price is based on the fair value of the share, which corresponds to the volume-weighted average trading price of the company s share on the Nasdaq Helsinki between 9 May 2016 and 3 June For the members of the Group s Management Team and the CEO of the Polish subsidiary, the prerequisite for receiving any 2016 stock options is that they own or acquire the company s shares up to the number determined by the Board of Directors. The shares must be held until the option plan ends on 31 December As part of the option plan, the company s Board of Directors decided to provide the key employees required to own shares with an opportunity to fund their share acquisitions with an interest-bearing loan granted by the company. The loan offered by the company for funding share acquisitions matures on 31 December On 20 April 2018, the Board of Directors of Siili Solutions Plc decided, based on the authorisation granted by the Annual General Meeting on 26 March 2018, to issue stock options to the employees of Siili Solutions Plc and its subsidiaries. The stock options are issued as part of the share savings plan introduced by the company, corresponding to shares in the company purchased by the participants using their savings. More than 180 employees signed up for the first savings period under Siili Solutions Plc s share savings plan. The share subscription price for the 2018A stock options is the volume-weighted average trading price on Nasdaq Helsinki Ltd in May 2018, or EUR per share. Dividends and capital repayments paid annually will be deducted from the subscription price. The 2018A stock options can be used to subscribe for a maximum total of 50,000 new Siili Solutions Plc shares or existing shares held by the company. The share subscription period for the stock options will be 1 August January However, the subscription period will only commence if the release criterion set by the Board of Directors and based on the company s share price development has been fulfilled by 31 January 2021 at the latest. The total number of the 2018A stock options is 50,000. The theoretical market value of one 2018A stock option is approximately EUR 0.18 and the total theoretical market value of the 2018A stock options is approximately EUR 9,000. The theoretical market value of the stock options has been determined by using the Binomial Options Pricing Model with the following input factors: share price EUR 11.60, share subscription price EUR 11.60, risk-free interest rate 0%, validity of stock options approximately 3.5 years and volatility 26%. The theoretical market value of the stock options has been adjusted downward for the probability of not fulfilling the targets established for the release criterion. EVENTS AFTER THE END OF THE REVIEW PERIOD By an agreement signed on 1 August 2018, Siili Solutions Plc acquired 60 per cent of the shares in VALA Group Oy, a company specialising in software automation. The company s revenue for the financial year

7 was EUR 5.8 million and its EBITDA was EUR 1.4 million. VALA Group has approximately 80 employees. The parties that sold the shares will continue as employees and minority owners. The acquisition is not estimated to affect Siili s guidance for The total transaction price for the VALA Group Oy shares acquired by Siili Solutions Plc is EUR 7.2 million, which consists of the debt-free purchase price of EUR 6 million for the company s business operations and EUR 1.2 million in compensation for VALA Group s net cash assets. The transaction price is paid by cash and financed partly by a loan and partly by Siili s cash assets. VALA Group will be reported as part of Siili Group from 1 August 2018 onwards and it will continue to operate independently under its own brand. This operating model is in line with Siili s new strategy, which involves the company organising itself into smaller independent units. Both Siili and the parties that sold the shares have the right to execute a trade for the remaining 40 per cent of VALA Group s shares. However, this right only takes effect at the beginning of The transaction price for the shares to be potentially acquired later will be determined by VALA Group s future revenue growth and profitability. ACCOUNTING PRINCIPLES This half-year report was prepared in accordance with IAS 34 (Interim Financial Reporting) and applies the same accounting principles and calculation methods as in the previous financial statements. The figures have been rounded off from the exact figures. The figures included in this report have not been audited. The company has adopted IFRS 15 Revenue from Contracts with Customers effective from 1 January 2018 and applies the standard in full with retroactive effect. The comparison figures for have been adjusted to reflect the adoption of IFRS 15. The standard s effect on the comparison figures for was not substantial: the retained earnings on the opening statement of financial position for were reduced by EUR 208 thousand, revenue and profitability for the first half of the year increased by EUR 126 thousand, and revenue and profitability for the full financial year increased by a total of EUR 161 thousand as a result of the retroactive adjustments to comparison figures. As indicated in the company s financial statements bulletin, the adoption of IFRS 15 affected the timing of the recognition of revenue from licence sales, maintenance and other services, which caused the changes to the comparison figures. The company adopted IFRS 9 Financial Instruments effective from 1 January The adoption of IFRS 9 affected the timing of the recognition of credit losses. The company does not apply the standard retroactively. The company recognised an adjustment of EUR 0 thousand to retained earnings on 1 January 2018 as a result of the adoption of the standard. The change does not have a substantial effect on the company s result for the financial year and it has no cash flow effect. The company will adopt IFRS 16 Leases when it enters into effect on 1 January The adoption of the standard will shift off-balance sheet liabilities to assets and liabilities on the statement of financial position, resulting in an increase in fixed assets and liabilities. The minimum amount of lease expenses payable on the basis of non-cancellable leases reported as off-balance sheet liabilities on 30 June 2018 was EUR 1,385 thousand, the majority of which will be recognised on the statement of financial position effective from 1 January As the concept of contracts treated as off-balance sheet liabilities and the concept of leases pursuant to IFRS 16 deviate from each other, off-balance sheet liabilities and leases recognised on the statement of financial position pursuant to IFRS 16 may also deviate from each other. The leases to be recognised on the company s statement of financial position effective from 1 January 2019 are primarily related to the rental of business premises. FINANCIAL CALENDAR FOR 2018

8 In line with the stock exchange release published on 30 July 2018, Siili Solutions will hold a results announcement event for analysts, portfolio managers and the media on 14 August 2018 at 9:00 a.m. The presentation materials will be published on the company website after the event. The financial statements bulletin for 2018 will be published on 27 February The schedule for the publication of other financial releases in 2019 will be announced by the end of 2018.

9 Consolidated income statement, IFRS 1 January 30 June January 30 June 1 January 31 December REVENUE 34,179 29,113 57,972 Other operating income Materials and services -6,171-4,975-10,097 Employee benefit expenses -21,041-18,298-35,149 Depreciation and amortisation Other operating expenses -4,832-3,388-6,953 OPERATING PROFIT (LOSS) 1,722 2,140 5,171 Financial income Financial expenses PROFIT BEFORE TAXES 1,690 2,128 5,153 Income taxes ,023 PROFIT FOR THE PERIOD 1,345 1,664 4,130 Attributable to Shareholders of the parent company 100% 1,345 1,664 4,130 Non-controlling interest 0% Earnings per share based on the profit attributable to shareholders of the parent company: Undiluted earnings per share (EUR), profit for the period Earnings per share adjusted for dilution (EUR), profit for the period Consolidated statement of comprehensive income 1 January 30 June January 30 June 1 January 31 December PROFIT FOR THE PERIOD 1,345 1,664 4,130 Other comprehensive income Items that may later be recognised through profit or loss Translation differences TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,298 1,700 4,157 Distribution of total comprehensive income for the period Shareholders of the parent company 100% 1,298 1,700 4,157 Non-controlling interest 0%

10 Consolidated statement of financial position, IFRS 30 Jun Jun 31 Dec ASSETS assets Fixed assets 1,194 1,087 1,222 Goodwill 11,593 11,083 11,593 Other intangible assets 1,920 2,042 1,890 Receivables Total non-current assets 15,111 14,975 15,468 Current assets Trade receivables 11,731 8,554 7,920 Other receivables 1,634 1,094 1,471 Tax assets based on the taxable income for the period Cash and cash equivalents 3,975 8,240 8,954 Total current assets 17,392 17,889 18,345 0 TOTAL ASSETS 32,504 32,864 33,813 SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity Share capital Reserve of invested non-restricted equity 12,874 12,874 12,874 Translation differences Retained earnings 6,403 5,279 7,759 Total shareholders equity 19,345 18,277 20,747 liabilities Financial liabilities Deferred tax liabilities 388 2, Total non-current liabilities 582 1, Current liabilities Financial liabilities 390 1, Trade and other payables 12,136 10,903 11,529 Tax liabilities based on the taxable income for the period Provisions Total current liabilities 12,577 13,558 12,255 Total liabilities 13,159 14,587 13,066 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 32,504 32,864 33,813

11 Consolidated cash flow statement, IFRS 1 January 30 June January 30 June 1 January 31 December Cash flows from operations Profit for the period 1,345 1,664 4,130 Adjustments: Non-cash transactions and other adjustments Interest expenses and other financial expenses Interest income Taxes ,023 Changes in working capital: Change in sales and other receivables -3, Change in trade and other payables Interest paid Interest received Taxes paid ,300 Net cash flow from operations -1,897 1,698 4,856 Cash flows from investing activities Acquisition of subsidiaries ,068 Proceeds from the sale of tangible and intangible assets 8 Investment in fixed assets , Investment in intangible assets Net cash flow from investing activities ,022-3,271 Cash flows from financing activities Loans granted Repayments of loan receivables Loan withdrawals Loan repayments Share issue Dividend paid -2,730-2,076-2,076 Net cash flow from financing activities -2,567-2,159-2,354 Change in cash and cash equivalents -4,974-1, Cash and cash equivalents at the beginning of the period 8,954 9,718 9,718 Effect of changes in currency exchange rates Cash and cash equivalents at the end of the period 3,975 8,240 8,954

12 Changes in consolidated equity, IFRS Equity attributable to shareholders of the parent company Share capital Reserve of invested nonrestricted equity Other funds Translation differences Retained earnings Total shareholders equity Shareholders equity on 1 Jan Comprehensive income Profit for the period Other comprehensive income (adjusted for tax effects) , ,675 17,797 1,664 1,664 Translation differences Total comprehensive income for the period ,664 1,700 Transactions with owners Distribution of dividends Share issues Share-based bonus scheme Other changes Total transactions with owners Shareholders equity on 30 June Shareholders equity on 1 Jan 2018 Comprehensive income Profit for the period Other comprehensive income (adjusted for tax effects) -2,076-2, ,061-1, , ,279 18, , ,759 20, ,345 1,345 Translation differences Total comprehensive income for the period ,345 1,298 Transactions with owners Distribution of dividends Share issues Share-based bonus scheme Other changes Total transactions with owners Shareholders equity on 30 Jun ,730-2, ,701-2, , ,403 19,345 NOTES TO THE HALF-YEAR REPORT Changes in fixed assets 1 6/ / 1 12/ Book value at the beginning of the period 1, Increases Exchange differences Amortisation and impairment

13 Book value at the end of the period 1,194 1,087 1,222 Changes in intangible assets 1 6/ / 1 12/ Book value at the beginning of the period 13,483 10,275 10,275 Increases 238 3,017 3,570 Decreases Exchange differences 0 Amortisation and impairment Book value at the end of the period 13,513 13,124 13,483 Provisions and contingent liabilities Provisions Loss-making agreements Warranty provisions Total 1 Jan Increases Provisions used Unused provision cancellations Jun Loss-making agreements Warranty provisions Total 1 Jan Increases Provisions used -4-4 Unused provision cancellations Jun Loss-making agreements Warranty provisions Total 1 Jan Increases Provisions used Unused provision cancellations Dec A warranty provision is recorded when a product or service containing a warranty clause is sold and the size of the potential warranty provision can be predicted accurately enough. A provision is recorded for loss-making agreements when the expenses required for fulfilling the obligations exceed the profit yielded by the agreement. The Group has provided a 12-month warranty for certain projects. During the warranty, the company is committed to correcting defects that occur during the warranty period, without delay and free of charge. On 30 June 2018, the total amount of warranty provisions was EUR 13 (22) thousand. A warranty provision is determined according to the best estimate of future expenses and is based on the company s earlier

14 experience in similar projects. On 30 June 2018, the Group had no provisions for loss-making agreements (: EUR 206 thousand). On 30 June 2018, the Group had no contingent considerations on earn-outs related to acquisitions (: EUR 1,380 thousand). Fair values of financial assets and liabilities 30 Jun 2018 Book value Fair value Fair value hierarchy Financial assets Loans and other receivables Receivables Current Trade receivables 11,731 11,731 2 Other receivables 1,634 1,634 2 Cash and cash equivalents 3,975 3,975 2 Total financial assets 17,745 17,745 Financial liabilities Measured at amortised acquisition cost Bank loans* Current Bank loans* Trade and other payables 6,502 6,502 Recognised at fair value through profit or loss Contingent consideration* 3 Current Contingent consideration* 3 Total financial liabilities 7,087 7,087 *Included in the statement of financial position item Financial liabilities. 30 Jun Book value Fair value Fair value hierarchy Financial assets Loans and other receivables Receivables Current Trade receivables 8,554 8,554 2 Other receivables 1,094 1,094 2 Cash and cash equivalents 8,240 8,240 2 Total financial assets 18,651 18,651 Financial liabilities Measured at amortised acquisition cost Bank loans* Current 0 Bank loans*

15 Trade and other payables 6,466 6,466 Recognised at fair value through profit or loss Contingent consideration* 3 Current Contingent consideration* 1,380 1,380 3 Total financial liabilities 8,818 8,818 *Included in the statement of financial position item Financial liabilities. 31 Dec Book value Fair value Fair value hierarchy Financial assets Loans and other receivables Receivables Current Trade receivables 7,921 7,921 2 Other receivables 1,471 1,471 2 Cash and cash equivalents 8,954 8,954 2 Total financial assets 19,156 19,156 Financial liabilities Measured at amortised acquisition cost Bank loans* Current Bank loans* Trade and other payables 5,198 5,198 Recognised at fair value through profit or loss Contingent consideration* 3 Current Contingent consideration* Total financial liabilities 6,006 6,006 *Included in the statement of financial position item Financial liabilities. Fair value hierarchy levels During the review period, no instruments were transferred from one fair value hierarchy level to another. Level 1 The fair values of the hierarchy level 1 are based on the quoted (unadjusted) prices of identical assets or liabilities in active markets. Level 2 The fair values of the level 2 instruments are based, to a significant extent, on inputs other than quoted prices but still on information that is observable for the asset or liability in question, either directly or indirectly. Level 3 The fair values of the level 3 instruments are based on inputs about the asset or liability that are not based on observable market information but instead, to a significant extent, on estimates by the management and their utilisation in generally accepted valuation models.

16 Reconciliation of financial liabilities measured according to level 3 Contingent consideration 30 Jun 2018 At the beginning of the period Jun 31 Dec Increase from business acquisition 1,380 1,608 Effect of the unwinding of discounting* Realisations -30-1,578 Unrealised fair value change At the end of the period 1,380 30

17 Financial liabilities, collateral and contingent liabilities Financial liabilities 30 Jun Jun 31 Dec Financial liabilities measured at amortised acquisition cost Contingent consideration measured at fair value Total Current 30 Jun Jun 31 Dec Financial liabilities measured at amortised acquisition cost Contingent consideration measured at fair value 1, Total 390 1, The Group has one bank loan, which was withdrawn in September The loan has a variable interest rate: 1.5% + three-month Euribor (minimum interest rate: 0%). The loan has a maturity of five years and is repaid in equal instalments every six months. Siili s bank loans include covenants that entitle the financial institution to terminate the loan agreement if the covenants are not met. The covenants are based on the company s interest-bearing liabilities in relation to its EBITDA and on its equity ratio. These key figures are examined every six months and the covenants were met at the time of examination. Commitments The Group s lease agreements mainly concern office facilities occupied by Group companies. In addition to office facilities, the Group has leased IT and office equipment and vehicles. The durations of the facility lease agreements mainly vary between three and four years. Some of the lease agreements on office facilities include an index clause. Minimum lease payments based on non-cancellable other lease agreements: 30 Jun Jun 31 Dec Within one year 1,207 1,297 1,068 In one to five years In more than five years Total 1,385 2,144 1,647 The company did not have lease agreements classified as financial leases during the review period. Collateral On own behalf 30 Jun Jun 31 Dec Collateral for leases Corporate mortgages* 3,600 3,600 3,600 Corporate cards Lease guarantees *) A total of EUR 3.6 million was put up in corporate mortgages as collateral for a credit facility and a bank loan.

18 The bearer bonds are with Nordea Bank Finland Plc. Related-party transactions There were no significant changes involving relationships or transactions with related parties during the review period. The salaries and fees paid to the company s Board of Directors and Management Team are published annually in connection with the annual financial statements. Helsinki, 14 August 2018 Board of Directors, Siili Solutions Plc More information: Timo Luhtaniemi, CEO Tel Siili Solutions in brief: Siili Solutions Plc is a leading software integrator and digital service partner that provides leading Finnish and global companies with technology-independent IT expert services that cover their entire information systems. Siili has offices in Finland, Germany, Poland and the United States. Siili Solutions Plc shares are listed on Nasdaq Helsinki. Siili has grown rapidly and profitably since its establishment in