QPR Software
Interim report (Q1 and Q3)

QPR SOFTWARE’S NET SALES ROSE 25%, OPERATING PROFIT INCREASED 27%

QPR SOFTWARE PLC         STOCK EXCHANGE RELEASE APRIL 26, 2012 AT 9.45 AM

INTERIM REPORT JANUARY 1 – MARCH 31, 2012

QPR SOFTWARE’S NET SALES ROSE 25%, OPERATING PROFIT INCREASED 27%   

Summary

January - March 2012:

• Net sales EUR 2,212 thousand (January – March 2011: 1,768), growth 25%. Growth was due to accelerated organic business growth and the consolidation of Nobultec Ltd, acquired in 2011.
• Operating profit EUR 199 thousand (157), growth 27%.
• Operating margin 9.0% (8.9).
• Cash flow from operating activities was EUR 1,580 thousand (521), growth 203%. Strong growth was due to accelerated turnover of receivables and good development in software subscription sales.
• Profit before taxes EUR 197 thousand, growth 40%.
• Profit for the period EUR 149 thousand, growth 49%.
• Earnings per share EUR 0.01 (0.01).
• QPR filed patent applications in respect of five separate inventions in Finland and the USA.

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 in Euro 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 (software rentals), SAP consulting, process analysis business and enterprise architecture services.

In 2012, QPR aims to make significant investments in the development of its new software products QPR ProcessAnalyzer and QPR EnterpriseArchitect, as well as related services. This will, in short term, have a negative impact on profitability. The Company believes that these outlays are well justified, since these businesses have good growth prospects.

The Company focuses on recruiting new channel partners especially for its QPR ProcessAnalyzer and QPR EnterpriseArchitect software products and also increases significantly its personnel resources for service offering development in 2012. Through service offering development the Company aims to grow its local business in Finland,  and to accelerate its international software sales by offering complementary service concepts and solutions to its channel partners.

 KEY FIGURES

REPORTING

This interim report complies with requirements of IAS 34 ”Interim Financial Reporting”.  Starting from the beginning of the reporting period, the Group has applied certain new or revised IFRS standards and IFRIC interpretations as described in the Consolidated Financial Statements 2011. The implementation of these new and revised requirements have not materially impacted the reported figures. For all other parts, the accounting and valuation principles are the same as they were in the 2011 financial statements. This interim report is unaudited.

QPR Software´s business operations consist of software sales and professional services sales. The Company reports income for products and services as follows: Software license sales, Software maintenance services, Software rentals and Professional services.

QPR reports the following business segments, based on geographic location: Software sales International (software license and rental sales, maintenance and professional services sales outside of Finland) and Business Operations Finland (software license and rental sales, maintenance and professional services sales in Finland).

NET SALES

QPR Software´s consolidated net sales in the reporting period January – March were EUR 2,212 thousand (1,768) and grew 25.1% compared to the equivalent period in the previous year.

QPR Software´s net sales in Finland rose 61.1 %. Strong growth was due to organic growth in QPR´s software and professional services sales and the consolidation of Nobultec Ltd. Organic growth in Business Operations Finland was 29.6 %. Net sales were strong especially in software aimed at process and enterprise architecture development, and in related professional services.  QPR continued to strengthen its personnel resources in these businesses during the reporting period.

The Company delivered software and professional services in the reporting period, among others, to Certia, Finland´s Environmental Administration, The Finnish Communication Regulatory Authority, The Finnish Defence Forces, The Finnish Tax Administration, The Finnish National Board of Education, Metso Paper, Lassila & Tikanoja Group, Outotec Group, Public Sector ICT Unit at The Ministry of Finance,Rautaruukki Corporation, SOK, Tuko Logistics Cooperative and Vaisala Corporation

International net sales were down 3.6% compared to the equivalent period last year. International channel net sales rose from the previous year, but net sales in the Company´s Russian subsidiary decreased.

The Company delivered software, among others, to Highland Council in the UK, City of Istanbul in Turkey, Malaysian Administrative Modernisation and Management Planning Unit, City of Pessac and Pouey International in France, Pädagogische Hochschule PHBern and SVA Aargau Sozialversicherung AG in Switzerland, Vattenfall AB in Sweden, and United Chemical Company in Kazakhstan.

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

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

Software license sales were on the same level as in the previous year, but software subscription net sales (software rentals) showed very strong growth. The estimated revenue to be recognized for current subscription agreements in the next twelve months is EUR 1.1 million (0.5 million). Recurring revenue (including net sales from software maintenance services and software rentals) grew 10.1%.

Strong growth of professional services was due to organic growth and the consolidation of Nobultec Ltd, acquired in 2011.

PROFIT DEVELOPMENT

QPR Software’s consolidated operating profit in the first quarter grew by 26.8%, due to strong growth in net sales, and was EUR 199 thousand (157).

Expenses increased by 23.9%, which was mainly due to the consolidation of Nobultec Ltd and outlays in the Company´s growth areas. Personnel resources were increased in the reporting period mainly in enterprise architecture services, process analysis services and software product development. Marketing expenses were also increased compared to equivalent period in the previous year.

Depreciation and amortization grew to EUR 167 thousand (130), which was mainly due to the consolidation of Nobultec Ltd and increase in the amortization of capitalized product development expenses. 40% of the Group’s depreciation and amortization arise from corporate and business acquisitions made in 2008 – 2011.

Net financing expenses were EUR 2 thousand (16), of which net interest expenses were EUR 2 thousand (6). Profit before taxes was EUR 197 thousand (141).

Income taxes were EUR 48 thousand (41) and net profit for the period was EUR 149 thousand (100). Earnings per share were EUR 0.01 (0.01).

Operating profit by segment (EUR 1,000):

FINANCE AND INVESTMENTS

Cash flow from operating activities developed favorably in the reporting period and was EUR 1,580 thousand (521). Strong growth was due to accelerated turnover of receivables and good development in software subscription sales.

Cash and cash equivalents at the end of the reporting period were EUR 2,283 thousand (1,995).

The Group’s investments totaled EUR 175 thousand (92) in the reporting period. The majority of the investments were made in product development.

Equity ratio improved from last year and was 53.3% (48.7). Interest-bearing liabilities decreased and were EUR 452 thousand (680) at the end of the reporting period. The gearing ratio was -60.2% (-47.8). Return on investment rose to 22.6% (18.0).

Current liabilities include deferred revenue in total of EUR 1,938 thousand (1,299). At the end of the reporting period, quick ratio was 1.20 (2.16).

At the end of the reporting period, the consolidated shareholders’ equity stood at EUR 3,046 thousand (2,758).  Return on equity was 19.7% (14.6).

PERSONNEL

At the end of the reporting period, the Group employed a total of 73 persons (68). Average number of personnel in the reporting period was 74 (68).

PRODUCT AND SERVICE DEVELOPMENT

Product development expenses in the reporting period were EUR 403 thousand (347), representing 18.2% of consolidated net sales (19.6).

In the reporting period, product development expenses have been capitalized for a total amount of EUR 101 thousand (72).  The amortization period for capitalized product development expenses is four years. The amortization of capitalized product development expenses in the reporting period was EUR 67 thousand (41).

Product development employed 24 persons at the end of the reporting period, which corresponds to 32.9% of the total personnel (25).

In the reporting period, product development activities focused on the development of a new version of the QPR product family, planned to be released in the autumn 2012. Product development activities are especially focused on the QPR ProcessAnalyzer and QPR EnterpriseArchitect products.

In its new processs analysis business, the Company has adopted a more active IPR strategy than previously. As a result of this, QPR filed patent applications in respect of five separate inventions in Finland and the USA in the first quarter. The inventions relate to automated business process discovery based on processing event data.

The Company aims to significantly increase its personnel resources for service offering development in 2012. Through service offering development the Company aims to grow its local business in Finland, and to accelerate its international software sales by offering complementary service concepts and solutions to its channel partners.

SHARES AND TRADING IN THE COMPANY’S SHARES

INCENTIVE PLANS

QPR Software's has a share-based incentive plan for the Group's executive management team. The plan includes three one-year earning periods, which are the calendar years 2011, 2012 and 2013, In addition to this incentive plan, the Company has a separate bonus system that covers the whole personnel.  (More information in QPR Software Plc’s 2011 Annual Report: www.qpr.com --> Investors section).

OTHER EVENTS IN THE REPORTING PERIOD

QPR started the integration of Nobultec Ltd´s business into its Finnish business operations. In connection with the integration, the Group´s service offering, consulting and sales resources will be strengthened and a process driven operating model, suitable for the requirements of growing business, will be adopted. This development work advanced as planned in the reporting period and will be finalized in the current quarter.

GOVERNANCE

The Annual General Meeting held on March 22, 2012 approved the Board's proposal that a per-share dividend of EUR 0.03 (0.03), a total of EUR 367,314 (362,876), is paid for the financial year 2011. The dividend was paid to shareholders entered in the Company's shareholder register, maintained by Euroclear Finland Oy, on the record date of March 27, 2012. The dividend payment date was April 3, 2012.

The Annual General Meeting resolved that the Board of Directors consists of four (4) ordinary members. The Annual General Meeting elected the following members to the Board of Directors: Kirsi Eräkangas, Jyrki Kontio, Vesa-Pekka Leskinen and Topi Piela. In its first meeting immediately following the Annual General Meeting, the Board of Directors elected Vesa-Pekka Leskinen as Chairman of the Board.

KPMG Oy Ab, Authorized Public Accountants, continues as QPR Software Plc's  auditors.

The Annual General Meeting decided to authorize the Board of Directors to decide on an issue of new shares and acquisition of the Company’s own shares from the market.

The conditions of all authorizations of the Board and other decisions made by the Annual General Meeting are available in their entirety on the stock exchange release published by the Company on March 22, 2012 and available on the investors section of the Company's web site, www.qpr.com.   

SHORT-TERM RISKS 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 the continuity of its business.

QPR has identified the following four groups of risks related to its operations: risks related to business operations (country, customer, service delivery, personnel, legal and financial risks as well as risks related to the Company´s resellers), risks related to information and products (QPR products, IPR, data security), risks related to financing (foreign currency, bad debt), and risks related to new businesses (growth of new business, product development outlays in new business). The Company has an insurance policy for property, operational and liability risks. The Company 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. Management 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 reporting period. Risks related to the Company’s business are further described in the Annual Report 2011, page 16 onwards (www.qpr.com/annual-reports.html).

FUTURE OUTLOOK

Recent forecasts published by market research firms estimate that the value of global software sales will increase approximately 6% and global professional services sales will increase approximately 4% in 2012 compared to 2011.

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 in euros 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 (software rentals), SAP consulting, process analysis business and enterprise architecture services.

In 2012, QPR aims to make significant investments in the development of its new software products QPR ProcessAnalyzer and QPR EnterpriseArchitect, as well as related services. This will, in short term, have a negative impact on profitability. The Company believes that these outlays are well justified, since these businesses have good growth prospects.

The Company focuses on recruiting new channel partners especially for its QPR ProcessAnalyzer and QPR EnterpriseArchitect software products and also increases significantly its personnel resources for service offering development in 2012. Through service offering development the Company aims to grow its local business in Finland,  and to accelerate its international software sales by offering complementary service concepts and solutions to its channel partners.

The timing of large software deals can significantly affect net sales and profit for individual quarters.

FINANCIAL INFORMATION

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

• Interim Report Jan-June 2012: Wednesday, August 1, 2012
• Interim Report Jan-Sep 2012: Thursday, October 25, 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

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.

NOTES TO INTERIM FINANCIAL STATEMENTS

ACCOUNTING PRICIPLES

This interim report complies with requirements of IAS 34 ”Interim Financial Reporting”.  Starting from the beginning of the reporting period, the Group has applied certain new or revised IFRS standards and IFRIC interpretations as described in the Consolidated Financial Statements 2011. The implementation of these new and revised requirements have not materially impacted the reported figures. For all other parts, the accounting and valuation principles are the same as they were in the 2011 financial statements.

When preparing the consolidated financial statements, management is required to make estimates and assumptions regarding the future and to consider the appropriate application of accounting principles, which means that actual results may differ from those estimated.

All amounts presented in this interim report are consolidated figures, unless otherwise noted.

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