QPR Software
Financial Statement Release

QPR SOFTWARE’S NET SALES ROSE CLOSE TO 9% IN 2011, OPERATING MARGIN 10% OF NET SALES

QPR SOFTWARE PLC  STOCK EXCHANGE RELEASE 16 FEBRUARY, 2012 AT 9.15 AM

UNAUDITED FINANCIAL RESULTS 2011

QPR SOFTWARE’S NET SALES ROSE CLOSE TO 9% IN 2011, OPERATING MARGIN 10% OF NET SALES

Summary

Year 2011:

• Net sales EUR 7,539 thousand (2010: 6,937), growth 8.7%
• Operating profit EUR 755 thousand (752), growth 0.4%
• Operating profit margin 10.0% (10.8) of consolidated net sales
• Cash flow from operating activities was EUR 1,261 thousand (864), growth 45.9%
• Earnings per share EUR 0.04 (0.04)
• The Board of Directors proposes to the Shareholders' Meeting that the company would pay dividend for the financial year 2011, EUR 0.03 per share.

October - December 2011:

• Net sales EUR 2,215 thousand (October - December 2010: 1,920), growth 15.4%
• Operating profit EUR 267 thousand (273), decrease 2.2%
• Operating profit margin 12.1% (14.2) of consolidated net sales
• Cash flow from operating activities was EUR 215 thousand (102), growth 110.8%
• Earnings per share EUR 0.01 (0.02)

Net sales and operating profit showed a positive development towards the end of the year. Quarterly net sales were highest in the fourth quarter which led operating margin to reach 12.1%. Despite the growth in net sales, the Company´s operating profit was on the same level as last year, which was mainly due to increase in personnel costs and outlays in development of new software product QPR ProcessAnalyzer.

Net sales in Finland grew 29.5% in 2011 due to good development in software sales and professional service business, as well as consolidation of Nobultec Ltd into QPR Software Group as of 1 August 2011. The growth in operating profit in Business Operations Finland was also strong. The majority of new software sales in Finland was subscription sales. This year the revenue to be recognized for software subscription agreements made in 2011 is significant (approximately EUR 0.6 million), which forms a solid foundation for net sales growth in Finland.

The Group´s international net sales in 2011 decreased 5.9%, which was mainly due to a decrease in software license sales. This, in turn, was partly influenced by gradual initiation of subscription based software sales in QPR´s international sales channel. This has a negative impact on revenue recognition from the new contracts, but on the other hand will provide a steady increase in net sales in the future. As a result of lower net sales, operating profit from international operations decreased, but remained clearly profitable.

The Board of Directors proposes to the Shareholders' Meeting on 22 March, 2012 that the company would pay a EUR 0.03 per share dividend for the financial year 2011. The dividend shall be paid to a shareholder that has been entered into the company's shareholders' register on the record date of the dividend payment on 27 March, 2012. The Board of Directors proposes that the dividend shall be paid on 3 April, 2012.

Outlook 2012:

QPR Software estimates the consolidated net sales 2012 to show significantly faster growth than in the previous year (growth in year 2011: 8.7%) and operating profit to remain on the same level as in the previous year, or to improve slightly. The Company expects significant growth especially in software subscription net sales, SAP consulting, process analysis business and enterprise architecture services sales.

In 2012, QPR aims to place significant investments in the development of its new software product QPR ProcessAnalyzer and related services. This will, in short term, have a negative impact on profitability. The Company believes that these outlays are well justified, since the QPR ProcessAnalyzer business, launched in February 2011, has started well and the leading market analysts are forecasting strong demand growth for process analysis products and services. QPR aims at strong international software sales growth and significant market share in this new category.

KEY FIGURES

REPORTING

This report complies with accounting and valuation principles of IFRS, but in preparations not all the requirements of IAS 34 standard have been considered. The accounting and valuation principles are the same as they were in 2010 financial statements. This report is not audited.

QPR Software´s business consists of software license and subscription sales, software maintenance sales and professional services.

As of January 1, 2011 QPR Software has two segments; Software Sales International (software license and subscription sales, maintenance and professional services sales outside of Finland) and Business Operations Finland (software license and subscription sales, maintenance and professional services sales in Finland).

NET SALES

QPR Software Group´s net sales in 2011 were EUR 7,539 thousand (6,937) and grew 8.7% compared to the previous year. The growth was mainly attributable to good performance in professional service net sales and consolidation of Nobultec Ltd into QPR Software Group as of 1 August 2011. Business Operations Finland represented 49.1% and international operations 50.9% of net sales.

The growth in net sales accelerated towards the end of the year. In October – December net sales rose to EUR 2,215 thousand (1,920), which represents a growth of 15.4%.

Consolidated net sales by business segments, (EUR 1,000):

Consolidated net sales by product categories (EUR 1,000):

Net sales in Finland grew 29.5% in 2011 and were EUR 3,703 thousand (2,860). Organic growth was 16.2%. Net sales growth in Finland was due to good performance in both software sales and professional service business. The growth in professional service business was due to service business expansion to enterprise architecture consulting and process analysis consulting, as well as due to consolidation of Nobultec Ltd into QPR Software Group.

The majority of new software sales in Finland was subscription sales. This year the revenue to be recognized for software subscription agreements made in 2011 is significant (approximately EUR 0.6 million), which forms a solid foundation for net sales growth in Finland.

In October – December net sales in Finland grew 40.9%, thanks to consolidation of Nobultec and strong organic growth. The Finnish Ministry of Finance decided in November to acquire the public sector enterprise architecture and process modeling service from QPR Software. Acquisition period is 2011 - 2014. The decision includes options for increasing the number of users as well as scope of services and to expand the acquisition to cover also years 2015 and 2016. The value of the acquisition is at minimum EUR 780,000 in 2011-2014, and including the both option years at minimum EUR 1,030,000.

International net sales were EUR 3,836 thousand (4,077). The decrease in net sales (-5.9%) was due to lower software license sales than in the previous year. This, in turn, was partly influenced by gradual initiation of subscription based software sales in QPR´s international sales channel. This has a negative impact on revenue recognition from the new contracts, but on the other hand will provide a steady increase in net sales in the future. Furthermore, the reflections of the increased uncertainty in general economic situation extended the sales cycles in several markets.

International net sales showed a positive development towards the end of the year and quarterly net sales were highest in the fourth quarter. However, net sales in October – December decreased 3.2% compared to the equivalent period last year.

In Finland, the Company delivered software and professional services in the reporting period, among others, to Carea, Certia, Central Finland Healthcare District, City of Espoo, City of Helsinki, City of Imatra, CRH Finland, DNA Oyj, Elisa Corporation, Helsinki University, Kemira Corporation, Kesko Corporation, Lassila & Tikanoja, Medbit, Metso Paper, The Finnish National Board of Education, Nordic Investment Bank, Onninen Group, Outotec Corporation, Patria Corporation, Rautaruukki Corporation, Realia Group, SATO Corporation, SOK, SRV, Tekla Corporation, Teollisuuden Voima, Tuko, Terveystalo, Vacon, City of Varkaus, Vaisala Corporation, Oy Woikoski Ab, the Ministry of Finance and the Ministry of Education.

The largest markets outside Finland in the reporting period were Russia, South Africa, Sweden, Belgium, Japan and Great Britain. The Company delivered software, among others, to Abu Dhabi Sewerage Services Company in United Arab Emirates, Anglo Platinum and Real People in South Africa, The Bosch Group in Korea, City of Antwerp and Sibelco in Belgium, City of Malmö in Sweden, City of Moscow, IRKUT, OGUP Pharmacies, TNK-BP and Sibur in Russia, The Ministry of Health in Lithuania, The Ministry of Justice in Lithuania, Millard Filters in Spain, Millennium Bank in Romania, United Chemical Company in Kazakhstan, Vattenfall in Sweden and to Aramark in the United States of America.

PROFIT DEVELOPMENT

QPR Software’s consolidated operating profit in 2011 was EUR 755 thousand (752). Operating profit in Finland business operations increased due to increased net sales, but decrease in channel net sales had an adverse impact on profitability in international operations.

Despite the growth in net sales, the Company´s operating profit was on the same level as last year, which was mainly due to increase in personnel costs and outlays in development of new software product QPR ProcessAnalyzer. Operating margin reached 10.0% (10.8).  Operating profit includes a contribution of EUR 79 thousand (44) from Finnish Funding Agency for Technology and Innovation for the development of the new QPR ProcessAnalyzer software. Depreciation and amortization grew slightly to EUR 572 thousand (532). EUR 221 thousand of this is amortization of acquisition cost of companies or businesses.

QPR Software’s consolidated operating profit October - December was also on previous year´s level and EUR 267 thousand (273). Costs rose 14.9% from the previous year. Majority of this increase is due to consolidation of Nobultec into QPR Software Group and personnel increase in process analysis business. Depreciation and amortization grew to EUR 151 thousand (101). The figures show strong growth, but it is mainly attributable to the impact a correction made in the fourth quarter 2010 has in the comparison figure.

Operating profit by segments (EUR 1,000):

Profit before taxes for the year was EUR 705 thousand (707). Net financial costs were EUR 50 thousand (45). Profit after taxes was EUR 521 thousand (527) and earnings per share were EUR 0.04 (0.04).

Profit before taxes in October - December was EUR 243 thousand (307). Net financial costs were EUR 24 thousand (income 34). Profit after taxes was EUR 161 thousand (241) and earnings per share were EUR 0.01 (0.02).

FINANCE AND INVESTMENTS

Cash flow from operating activities in the reporting period was EUR 1,261 thousand (864).  Strong growth in software subscription sales in the reporting period had a positive effect in cash flow from operating activities.

Cash and cash equivalents at the end of reporting period were EUR 1,020 thousand (1,703).

The Group’s investments totaled to EUR 1,478 thousand (350). The largest investment was acquisition of Nobultec Ltd. The total acquisition cost (including transaction costs and provisional purchase price, subject to reaching targets set for financial results in 2011 and 2012) was EUR 979 thousand. The targets set for 2011 were not reached, which lowered the acquisition cost to EUR 904 thousand. EUR 402 thousand of the total acquisition cost was allocated into Nobultec´s customer relationships and will be amortized in 5 years. A goodwill of EUR 512 thousand arising on the acquisition will be regularly tested.

Furthermore, investments include payments of a total of EUR 165 thousand  for business operations bought from QPR´s Russian resellers in November 2009. The purchase price for these operations was set at EUR 272 thousand, including transaction costs. The price was set according to the terms agreed in purchase agreement and the financial results of the acquired operations between 1 March 2010 and 28 February 2011. The price is compensation for business operations that were transferred into QPR CIS Oy. As part of the purchase price, the sellers received also 20 % share ownership in QPR CIS Oy.  For this 20% shareholding, a call option for QPR and put option for the sellers, have been agreed. These options can be exercised in January 2014, the earliest.

The Group´s interest bearing liabilities decreased and were EUR 566 thousand (793) at the end of reporting period. The gearing ratio was –15.3% (-33.8). Return on capital employed was 21.5% (21.0).

Current liabilities include deferred revenue in total of EUR 1,046 thousand (918). At the end of the reporting period, quick ratio was 1.20 (1.87).

At the end of the reporting period, consolidated shareholders’ equity stood at EUR 2,973 thousand (2,694) and equity to assets ratio was 44.2% (42.6).  Return on equity was 18.4% (20.0).

As the end of the reporting period, the remaining amount of deferred tax assets in consolidated balance sheet was EUR 38 thousand (233) and the amount of deferred tax liabilities was EUR 90 thousand (0).

PERSONNEL

At the end of the reporting period, the Group employed a total of 73 persons (65). Out of them 8 were employed by Group’s Russian subsidiary. Average number of personnel in the reporting period was 72 (63).

PRODUCT AND SERVICE DEVELOPMENT

The amount of product development expenses in the reporting period were EUR 1,313 thousand (1, 278), representing 17.4% (18.4) of consolidated net sales. Product development expenses do not include amortization of capitalized expenses.

In the reporting period, product development expenses have been activated as assets for a total amount of EUR 356 thousand (278).  The amortization period for capitalized product development expenses is 4 years. Amortization of product development expenses in the reporting period was EUR 203 thousand (190). At the end of reporting period the asset value was EUR 710 thousands (557).

Product development employed 16 persons at the end of reporting period, which corresponds to 21.9% of the total personnel.

Product development activities in the reporting period were focused on the development of a new QPR Suite 2012 product family, released at the end of 2011. The released product family also includes a new version of QPR ProcessAnalyzer software product. The software executes automatically visual process analysis from depository data in business applications.

Additional resources were allocated into the development of QPR ProcessAnalyzer software, published in February 2011. In the review period, QPR developed a new process analysis solution aimed at efficiency increases in SAP systems, especially in order-to-cash processes. Several large enterprises and public organizations are users of this solution. In November 2011, the Company published a cloud-based version of QPR ProcessAnalyzer. The software is based on technologies that utilize Microsoft´s cloud services. It has been used in streamlining of order-to-cash processes in SAP systems, in improvement of sales processes supported by CRM systems and in analysing call center activities.

In early 2011, QPR introduced a solution for public sector enterprise architecture, based on Finnish public sector JHS 179 recommendation. Several project deliveries based on this solution were made in the review period.

SHARES AND TRADING WITH COMPANY’S SHARES

The Company does not have active option schemes.

OTHER EVENTS IN THE REPORTING PERIOD

QPR Software Plc’s Management System received ISO 9001:2008 quality certification covering the Company’s all actions in January.

Sami Tähtinen was appointed as Vice President, Products and Technology and Member of Executive Management Team at QPR Software Plc in January 24, 2011. He moved to QPR from CCC Corporation Ltd. Prior to this Mr. Tähtinen worked as Chief Technology Officer in Frends Technology from 2002 to 2009. Sami Tähtinen holds Master’s degree in Engineering.

Maija Erkheikki, M.Sc.(Eng), was appointed in July as Vice President for Software Sales International as of 15 August, 2011. Her latest position in QPR was Vice President, Service & Solutions.

Mikko Mäki-Rahkola, M.Sc (Econ), M.Sc (Tech) was appointed in July a Member of the Executive Management Team as of 15 August, 2011. Mikko Mäki-Rahkola is Nobultec Oy´s Managing Director.

As of 15 August 2011, QPR Software´s Executive Management Teams consists of Chief Executive Officer Jari Jaakkola (chairman); Vice President, Software Sales International Maija Erkheikki; Vice President, Business Operations Finland Matti Erkheikki;  Vice President, Communications and Marketing Jyrki Karasvirta; Vice President, Business Development Teemu Lehto; Chief Financial Officer Päivi Martti; Nobultec´s Managing Director Mikko Mäki-Rahkola and Vice President, Products and Technology Sami Tähtinen. 

QPR Software Plc announced on 28 July its acquisition of all of the issued shares of its co-operation partner Nobultec Oy. The transaction took place on August 1, 2011. Nobultec Oy is a service company that specializes in business process development in SAP system environments. As the transaction took place, Nobultec became QPR Software Plc’s 100% owned subsidiary. QPR has paid the base consideration, EUR 840 thousand, to the sellers in August and September. The payments were made in cash and QPR Software Plc´s shares.

QPR Software's Board of Directors approved in March a new share-based incentive plan for the Group's executive management team. The plan aims to align the objectives of shareholders and key employees to increase shareholder value, to commit key employees to the company and to offer them a competitive reward plan based on ownership of shares in the company.

The plan includes three one-year earning periods, which are the calendar years 2011, 2012 and 2013. The company's Board of Directors will decide on the earning criteria and the targets to be established for them at the beginning of each earning period. Bonus for the earning period 2011 was  based on QPR Software's consolidated net sales growth and operating profit targets. The earnings criteria were not met in 2011 and thus no bonuses for the year will be paid.

The integration of QPR´s and Nobultec´s service offering and transition to process organization in Finland business operations were initiated in December. The new operating model is planned to be operational in the summer.

GOVERNANCE

The Annual Shareholders' Meeting held on 18 March, 2011 approved the Board's proposal that a per-share dividend of EUR 0.03 (0.02), a total of EUR 362,876 (243,737), is paid for the financial year 2010. The dividend was paid to shareholders entered in the Company's shareholder register, maintained by Euroclear Finland Oy, on the record date of 23 March, 2011. The dividend payment date was 1 April, 2011.

The Annual Shareholders' Meeting resolved that the Board of Directors consists of four (4) ordinary members. The Annual Shareholders' Meeting elected the following members to the Board of Directors: Aino-Maija Gerdt, Jyrki Kontio, Vesa-Pekka Leskinen and Asko Piekkola. In its first meeting immediately following the Annual Shareholders' Meeting, the Board of Directors elected Vesa-Pekka Leskinen as Chairman of the Board.

KPMG Oy Ab, Authorized Public Accountants, continued as QPR Software Plc's Auditors.

The Annual Shareholders' Meeting decided to authorize the Board of Directors to decide on an issue of new shares and acquisition of its own shares from the market.

The conditions of all authorizations of the Board and other decisions made by the Annual Shareholders' Meeting are available in their entirety on the stock exchange release published by the Company on 18 March, 2011 and available on the investors section of the company's web site, www.qpr.com.   

SHORT-TEM RISK AND UNCERTAINTIES

Internal control and risk management in QPR Software Plc aims to ensure that the Company operates efficiently and effectively, distributes reliable information, complies with regulations and operational principles, reaches its strategic goals and ensures continuity of its business.

QPR has identified the following three groups of risks related to its operations: risks related to business operations (country, customer, net sales forecasting process, personnel, legal, financial and related to  business acquisitions), risks related to information and products (QPR products, IPR, data security) and risks related to financing (foreign currency, bad debt). Property, operational and liability risks are covered by insurance. QPR monitors country, customer, personnel and finance risks also in the Russian subsidiary OOO QPR Software.

Financial risks include reasonable credit risk concerning individual business partners, which is characteristic to any international business. QPR seeks to limit this credit risk by continuous monitoring of standard payment terms, receivables and credit limits. The management of QPR estimates that the company´s credit loss risk is on a customary and reasonable level.            

At the end of the reporting period, the Company had not hedged its foreign currency (non-Euro) trade receivables.

No significant changes have taken place in QPR's short-term risks and uncertainties during the financial period. Risks related to QPR Software´s business are further described in the Annual Report 2010, page 15 onwards (www.qpr.com/annual-reports.html).

EVENTS AFTER THE REPORTING PERIOD

The Board of Directors decided on 16 February 2012 to commence preparations for merging StrongDocs Oy, QPR Software Plc´s subsidiary, into the parent company. The merger does not have any effect on consolidated results or balance sheet in 2012.

FUTURE OUTLOOK

Market forecasts published in the beginning of 2012 estimate that the value of global software sales will increase approximately 6% and global professional services sales will increase approximately 3% in 2012 compared to 2011.

QPR Software estimates the consolidated net sales in 2012 to show significantly faster growth than in the previous year (growth in year 2011: 8.7%) and operating profit in Euro to remain on the same level as in the previous year, or to improve slightly. The Company estimates that especially software subscription net sales, SAP consulting net sales, process analysis net sales and enterprise architecture service net sales to grow significantly from the previous year.

In 2012, QPR aims to place significant investments in the development of its new software product QPR ProcessAnalyzer and related services. This will, in short term, have a negative impact on profitability. The Company believes that these outlays are well justified, since the QPR ProcessAnalyzer business, launched in February 2011, has started well and the leading market analysts are forecasting strong demand growth for process analysis products and services. QPR aims at strong international software sales growth and significant market share in this new category.

The Company also aims to recruit new channel partners especially for its QPR ProcessAnalyzer and QPR EnterpriseArchitect software products and to develop replicable solutions for its present channel partners.

Seasonality of large software deals can affect significantly net sales and profit of one individual quarter.

FINANCIAL INFORMATION

In 2012, QPR Software publishes Annual Report and three interim reports in English and Finnish on the following dates:

• Annual Report 2011: Thursday, 1 March 2012
• Interim Report 1-3/2012: Thursday, 26 April 2012
• Interim Report 1-6/2012: Wednesday, 1 August 2012
• Interim Report 1-9/2012: Thursday, 25 October 2012

Annual General Meeting takes place on Thursday, 22 March 2012.

QPR SOFWARE PLC

BOARD OF DIRECTORS

Further information:

Jari Jaakkola, CEO
Tel. +358 (0)40 5026 397
www.qpr.com

DISTRIBUTION:

NASDAQ OMX Helsinki Ltd
Main Media
www.qpr.com

Neither this press release nor any copy of it may be taken, transmitted into or distributed in the United States of America or its territories or possessions.

CONSOLIDATED BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

JANUARY 1 – DECEMBER 31, 2011

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY  

JANUARY 1 – DECEMBER 31, 2010

APPENDIX

ACCOUNTING PRICIPLES OF CONSOLIDATED FINANCIAL STATEMENTS

This report complies with accounting and valuation principles of IFRS, but in preparations not all the requirements of IAS 34-standard have been considered. The accounting and valuation principles are the same as they were in 2010 financial statements. This report is not audited.

Upon closing of consolidated financial statements, the Group makes estimates and assumptions regarding the future and makes considerations on the adoption of accounting principles, which means that the actual results may differ from those reported.

The amounts presented in the income statement and balance sheet are consolidated figures.

The amounts presented in the report are rounded, so the sum of individual figures may differ from the sum reported.

GROUP COMMITMENTS AND CONTIGENT LIABILTIIES

GROUP INTANGIBLE AND TANGIBLE ASSETS

CHANGE IN GROUP’S INTEREST BEARING LIABILITIES

CONSOLIDATED INCOME STATEMENT PER QUARTER

CONSOLIDATED INCOME STATEMENT BY SEGMENT

GROUP KEY FIGURES

CALCULATION OF KEY INDICATORS