Solteq Plc’s Interim Report January 1 – March 31, 2020

Solteq Plc, Stock Exchange Bulletin, April 30, 2020 at 8.00 am

The company’s comparable revenue grew clearly

January–March

• Revenue totaled EUR 15,674 thousand (14,930).

• EBITDA was EUR 1,875 thousand (2,455).

• Operating profit was EUR 716 thousand (1,530) and comparable operating profit EUR 880 thousand (1,206).

• Earnings per share was EUR 0.00 (0.04).

• Solteq Group’s equity ratio was 31.5 percent (31.1).

• Net cash flow from operating activities was EUR 3,414 thousand (890).

• The revenue was 5.0 percent higher than in the comparison period, while the comparable revenue grew by 11.6 percent.

• The company invested strongly in future growth by focusing on the development of our own cloud-based software products and services. During the review period the product development investments amounted to EUR 1.0 million (1.0). Product development during the entire financial year is expected to be less than EUR 3.0 million.

Key figures

CEO Olli Väätäinen: The company’s comparable revenue grew clearly

Solteq Group’s first-quarter revenue was EUR 15.7 million, up by 5.0 percent. The increase in comparable revenue – factoring in the absence of the SAP ERP business – is 11.6 percent. Revenue growth concentrated in the Solteq Digital segment. Around a quarter of the revenue was derived from outside Finland. The revenue growth of the foreign subsidiaries continued to be significant. The company’s business developed as expected during the first quarter.

The review period’s comparable EBITDA was EUR 2.0 million and comparable operating profit EUR 0.9 million, down by 0.3 million year-on-year. The first-quarter operating profit was in line with the company’s expectations. Comparable operating profit was reduced by higher product development depreciation at around EUR 0.2 million, and the revenue recognition of long-term projects. In addition, the company prepared for the direct and indirect business impacts of the COVID-19 pandemic, by increasing balance sheet provisions for credit losses and extra expenses by EUR 0.2 million.

On April 3, 2020, the company cancelled its guidance for 2020 due to the uncertainty on the markets caused by the COVID-19 pandemic. The pandemic did not affect customer deliveries significantly during the first quarter, but the company expects a negative impact on revenue and profits during the second quarter. The company’s customers in the travel, restaurant and leisure sectors are suffering from the impact of the pandemic. However, customer deliveries have continued without interruptions in the company’s key business areas (eCommerce, information management and Utilities), and the outlooks of these business areas are expected to remain unchanged. The above areas account for approximately 2/3 of the company’s revenue.

The company reorganized itself according to the new business segments reported earlier. As part of the new division of segments, the company reorganized the Group’s services and considerably lightened its cost structure. The company continues to streamline its operations and expects to reach savings of more than EUR 1.0 million annually. A good cash position at the end of the review period combined with the streamlining measures and healthy order status have created a strong foundation for recovery from the business uncertainty caused by the COVID-19 pandemic during the current financial year. Cash flow stood at EUR 3.4 million, and unused account facilities at EUR 5.0 million in the first quarter.

The company has taken measures in order to reduce the financial impact of the COVID-19 pandemic, secure its employees’ health and safety, and ensure that projects and services for customer companies continue uninterrupted. The company’s customer projects have proceeded according to plans and the infrastructure enabling remote working has functioned impeccably.

On April 21, 2020, the company initiated a written procedure concerning a change in the terms of an unsecured, senior bond with fixed interest and a nominal value of EUR 27.0 million (with maturity date July 1, 2020), requesting that the loan period be extended by 12 months. On the Q1 reporting date, the company’s bond liability is EUR 24.5 million.

Profit guidance 2020

Solteq Plc released a Stock Exchange Bulletin on April 3, 2020 and announced that for the time being, Solteq will cancel its guidance for the 2020 financial year due to the uncertainty on the markets caused by the COVID-19 pandemic. The company will provide guidance for 2020 once the conditions are more favorable for predicting market developments. The company's long-term financial goals remain unchanged.

Going concern principle

On April 21, 2020, the company initiated a written procedure concerning a change in the terms of an unsecured, senior bond with fixed interest and a nominal value of EUR 27.0 million (with maturity date July 1, 2020), requesting that the loan period be extended by 12 months. On the Q1 reporting date, the company’s bond liability is EUR 24.5 million. The prerequisite of going concern is to rearrange financing before the original maturity date of the current bond.

The company is confident that the written procedure will have a favorable outcome. The company’s operations are on a solid foundation, and according to the management’s view the company has the capacity to overcome the COVID-19 pandemic’s negative impacts on its business operations. On this basis, the management expects operations to continue, with only a low risk of inadequate funding.

This interim report was drawn up under the going concern principle, taking into account the executed or pending financial restructuring.

Attachments

Solteq Plc Interim Report January 1 – March 31, 2020

Distribution:

NASDAQ OMX Helsinki
Key media
www.solteq.com

Further information:

CEO Olli Väätäinen
Tel: +358 50 557 8111
E-mail: olli.vaatainen@solteq.com

CFO Kari Lehtosalo
Tel: +358 40 701 0338
E-mail: kari.lehtosalo@solteq.com

About Solteq:

Solteq is a Nordic provider of IT services and software solutions specializing in the digitalization of business and industry-specific software. The key sectors in which the company has long term experience include retail, industry, energy and services. The company operates in Finland, Sweden, Norway, Denmark, Poland and the UK and employs 600 professionals.