Exhibit 99.01
TEKLA PLC
CONSOLIDATED FINANCIAL STATEMENTS
Audited consolidated financial statements for Tekla Plc as of and for the fiscal year ended December 31, 2010
and the unaudited interim financial statements as of and for the six months ended June 30, 2010 and 2011.
Report of Independent Auditors
The Board of Directors and Shareholders of Tekla Plc Limited
We have audited the accompanying consolidated balance sheet of Tekla Plc (“the Company”) as of December 31, 2010, and the related consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
International Financial Reporting Standards require that financial statements be presented with comparative financial information. These consolidated financial statements have been prepared solely for the purpose of meeting the requirements of Rule 3-05 of Regulation S-X. Accordingly no comparative financial information is presented.
In our opinion, except for the omission of comparative financial information as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tekla Plc at December 31, 2010, and the consolidated results of its operations and its cash flows for the year then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Ernst & Young Oy
Helsinki, Finland
September 16, 2011
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TEKLA PLC
Consolidated income statement
For the year ended December 31, 2010
(Amounts expressed in Euro, 000s)
Note | 1/1 - 12/31/2010 | |||||||
Net sales | 1, 3 | 57,834 | ||||||
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Other operating income | 4 | 581 | ||||||
Change in inventories of finished goods and in work in progress | -52 | |||||||
Raw materials and consumables used | -2,079 | |||||||
Employee compensation and benefit expense | 5 | -32,059 | ||||||
Depreciation | 6 | -1,712 | ||||||
Other operating expenses | 7 | -12,539 | ||||||
Share of results in associated companies | 14 | 86 | ||||||
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Operating profit | 10,060 | |||||||
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Financial income | 9 | 1,811 | ||||||
Financial expenses | 9 | -1,115 | ||||||
Profit before taxes | 10,756 | |||||||
Income taxes | 10 | -2,574 | ||||||
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Net profit for the year | 8,182 | |||||||
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Attributable to Equity holders of the parent company | 8,182 | |||||||
Earnings per share calculated from the profits attributable to equity holders of the parent company: | ||||||||
Earnings per share (EUR) | 0.36 | |||||||
Earnings are not diluted. | ||||||||
Consolidated statement of comprehensive income | ||||||||
(Amounts expressed in Euro, 000s) | ||||||||
1/1- 12/31/2010 | ||||||||
Profit for the year | 8,182 | |||||||
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Other comprehensive income, net of tax: | 9, 10 | |||||||
Available-for-sale financial assets | -55 | |||||||
Translation differences | -179 | |||||||
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Total | -234 | |||||||
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Total comprehensive income for the year | 7,948 | |||||||
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Attributable to Equity holders of the parent company | 7,948 |
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TEKLA PLC
Consolidated balance sheet
As of December 31, 2010
(Amounts expressed in Euro, 000s)
Note | 12/31/2010 | |||||
Assets | ||||||
Non-current assets | ||||||
Property, plant and equipment | 12 | 1,336 | ||||
Goodwill | 13 | 143 | ||||
Intangible assets | 13 | 2,689 | ||||
Investments in associated companies | 14 | 1,356 | ||||
Other financial assets | 15, 16 | 125 | ||||
Receivables | 15, 19 | 362 | ||||
Deferred tax assets | 17 | 638 | ||||
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6,649 | ||||||
Current assets | ||||||
Inventories | 18 | 56 | ||||
Trade and other receivables | 15, 19 | 11,234 | ||||
Current income tax assets | 15 | 51 | ||||
Other financial assets | 15, 16 | 21,343 | ||||
Cash and cash equivalents | 15, 20 | 8,179 | ||||
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40,863 | ||||||
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Assets total | 47,512 | |||||
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Equity and liabilities | ||||||
Capital and reserves attributable to equity holders of the parent company | ||||||
Share capital | 21 | 678 | ||||
Reserve fund | 21 | 1,325 | ||||
Treasury shares | 21 | -652 | ||||
Translation differences | 21 | 200 | ||||
Fair value reserve | 21 | 34 | ||||
Invested non-restricted equity fund | 21 | 9,160 | ||||
Retained earnings | 23,126 | |||||
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33,871 | ||||||
Non-current liabilities | ||||||
Deferred tax liabilities | 17 | 67 | ||||
Financial liabilities | 15, 24 | 46 | ||||
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113 | ||||||
Current liabilities | ||||||
Trade and other payables | 15, 25 | 13,038 | ||||
Current income tax liabilities | 15 | 413 | ||||
Financial liabilities | 15, 24 | 77 | ||||
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13,528 | ||||||
Liabilities total | 13,641 | |||||
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Equity and liabilities total | 47,512 | |||||
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TEKLA PLC
Consolidated cash flow statement
For the year ended December 31, 2010
(Amounts expressed in Euro, 000s)
Note | 1/1-12/31/2010 | |||||||
Cash flows from operating activities | ||||||||
Profit before income taxes | 10,756 | |||||||
Adjustments; transactions with no associated payment: | ||||||||
Depreciation | 1,712 | |||||||
Financial income and expenses | -691 | |||||||
Other adjustments | 241 | |||||||
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Cash flow before working capital changes | 12,018 | |||||||
Changes in working capital: | ||||||||
Change in trade and other current receivables | -1,941 | |||||||
Change in inventories | 52 | |||||||
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Change in trade and other payables | 2,019 | |||||||
Net cash from operating activities | 12,148 | |||||||
Interest paid | -36 | |||||||
Interest received | 24 | |||||||
Other financial expenses | -101 | |||||||
Income taxes paid | -2,298 | |||||||
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Net cash flows from operating activities | 9,737 | |||||||
Cash flows from investing activities | ||||||||
Investments in tangible and intangible assets | -2,334 | |||||||
Proceeds from sale of property, plant and equipment | 65 | |||||||
Acquisition of associated companies | 2 | -400 | ||||||
Net investments in available-for-sale financial assets | -1,551 | |||||||
Interests received from available-for-sale financial assets | 377 | |||||||
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Net cash flows from investing activities | -3,843 | |||||||
Cash flows from financing activities | ||||||||
Payment of finance lease liabilities | -47 | |||||||
Payment of dividend | -4,483 | |||||||
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Net cash used in financing activities | -4,530 | |||||||
Change in cash and cash equivalents | 1,364 | |||||||
Cash and cash equivalents at beginning of the period | 7,125 | |||||||
Cash and cash equivalents at end of the period | 8,489 | |||||||
Reconciliation of cash and cash equivalents in the balance sheet and cash flow statement | ||||||||
Cash and cash equivalents according to balance sheet at beginning of the period | 5,129 | |||||||
Available-for-sale financial assets, cash equivalents | 1,996 | |||||||
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Cash and cash equivalents according to cash flow statement at beginning of the period | 7,125 | |||||||
Cash and cash equivalents according to balance sheet at end of the period | 8,179 | |||||||
Available-for-sale financial assets, cash equivalents | 310 | |||||||
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Cash and cash equivalents according to cash flow statement at end of the period | 8,489 |
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TEKLA PLC
Consolidated statement of changes in equity
For the year ended December 31, 2010
(Amounts expressed in Euro, 000s)
Equity attributable to equity holders of the parent | ||||||||||||||||||||||||||||||||||||
Share capital | Share premium account | Reserve fund | Treasury shares | Accumulated Translation difference | Fair value reserves | Invested non-restricted equity fund | Retained earnings | Total | ||||||||||||||||||||||||||||
Equity Jan 1, 2010 | 678 | 8,893 | 1,325 | -898 | 379 | 89 | 19,427 | 29,893 | ||||||||||||||||||||||||||||
Payment of dividend | -4,483 | -4,483 | ||||||||||||||||||||||||||||||||||
Transfer of treasury shares May 7 | 246 | 267 | 513 | |||||||||||||||||||||||||||||||||
Reduction of share premium account | -8,893 | 8,893 | 0 | |||||||||||||||||||||||||||||||||
Total comprehensive income for the year | -179 | -55 | 8,182 | 7,948 | ||||||||||||||||||||||||||||||||
Equity Dec 31, 2010 | 678 | 0 | 1,325 | -652 | 200 | 34 | 9,160 | 23,126 | 33,871 |
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Notes to the consolidated financial statements
GENERAL
Tekla Plc (the parent company) is a Finnish public limited company, domiciled in Espoo, and its registered address is Metsänpojankuja 1, 02130 Espoo, Finland.
Tekla is an international software product company whose model-based software products make customers’ core processes more effective in building and construction, energy distribution, infrastructure management and water supply. Tekla has customers in 100 countries.
These financial statements have been authorized for issue in accordance with a resolution of directors on September 16, 2011.
BASIS OF PREPARATION
Except for the omission of comparative information as discussed below, the consolidated financial statements have been prepared in accordance the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. IAS 1 requires that the financial statements are presented with comparative financial information. These financial statements have been prepared solely for the purposes of meeting the requirements of Rule 3-05 of Regulation S-X. Accordingly no comparative information is presented.
The financial statements have been prepared based on historical cost conventions, excluding available-for-sale investments and derivative instruments, which are measured at fair value.
The financial statements are presented in thousands of euros, unless otherwise stated.
The Group has adopted certain new standards, amendments and interpretations to existing standards, which have been published and which are mandatory for accounting periods beginning on January 1, 2010:
• | IFRS 3 (Revised), Business Combinations. The revised standard continues to apply the acquisition method to business combinations, but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the income statement. The amendments to the standard have an effect on the amount of goodwill recognized for acquisitions and sales results of the business functions. The amendments also have an effect on items recognized through profit or loss both during the financial period of acquisition and those financial periods during which an additional purchase price is paid or additional acquisitions are performed. In accordance with the transition requirements of the standard, business combinations where the date of acquisition precedes the mandatory implementation of the standard are not adjusted. The changes of the revised standard may affect the Group’s financial statements in future financial periods. |
• | IAS 27 (Amendment), Consolidated and Separate Financial Statements. The amended standard requires that the effects arising from changes in the ownership of a subsidiary be recognized directly under the group’s shareholders’ equity when the parent company’s control is retained. If control in the subsidiary is lost, any remaining investment is measured at fair value through profit or loss. The respective accounting standard is in the future applied also to IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. The amended IAS 27 has no impact on the current period, as no subsidiary ownership changes have occurred during the period. |
• | IFRS 2 (Amendment), Share-based Payment. Group cash-settled share-based payment transactions. The Group estimates that the amendment has not had a significant effect on the Group’s financial statements. |
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• | Annual improvements to IFRS standards in 2009. The amendments concern a total of 12 standards, and their impacts vary by standard. The Group estimates that the amendments have not had a significant effect on the Group’s financial statements. |
The following new interpretations or amendments to existing standards are mandatory for accounting periods beginning on January 1, 2010, but they are not currently relevant to the Group’s operations:
• | IAS 39 (Amendment), Financial Instruments: Recognition and Measurement – Eligible Hedged Items. The amendments apply to hedge accounting. The interpretation has had no impact in the Group’s financial statements. |
• | IFRIC 12, Service Concession Arrangements |
• | IFRIC 15, Agreements for the Construction of Real Estate |
• | IFRIC 16, Hedges of a Net Investment in a Foreign Operation |
• | IFRIC 17, Distributions of Non-cash Assets to Owners |
• | IFRIC 18, Transfers of Assets from Customers. |
The following amendments and interpretations to existing standards have been published and they are mandatory for accounting periods beginning on or after January 1, 2011. They are not expected to be relevant to the Group’s operations.
• | IAS 32 (Amendment), Financial Instruments: Presentation – Classification of Rights Issues. The amendment particularly applies to the classification of rights issues offered for a fixed amount of foreign currency. |
• | IAS 24 (Revised), Related Party Disclosures. The amendment is to clarify and simplify the definition of a related party, especially with regard to significant influence or joint control. |
• | IFRIC 14, IAS 19 (Amendment), The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction. |
• | IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments. |
• | Annual improvements to IFRS standards. |
USE OF ESTIMATES
When preparing the financial statements, the Group’s management is required to make estimates and assumptions influencing the content of the financial statements, and it must exercise its judgment regarding the application of accounting policies. These estimates are based on the management’s best knowledge, but it is possible that actual results may ultimately differ from the estimates used in the financial statements. Tax losses carried forward are recognized as deferred tax assets only to the extent that it is probable that future taxable profits will be available against which unused tax losses can be utilized. Actual results could differ from those estimates. Assessment of meeting the capitalization criteria of research and development includes management estimates of the future potential of the products. Impairment testing of goodwill includes management estimates of future cash flows and the determination of risk.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the parent company Tekla Plc and the subsidiaries in which the parent company holds directly or indirectly more than half of the votes or in which the parent company directly or indirectly has the right to decide on the principles of the company’s finances and business activity. Subsidiaries acquired during the financial year are included in the financial statements from the date of acquisition, and divested subsidiaries up to the date when control has been relinquished.
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Acquired subsidiaries are included in the financial statements using the acquisition method of accounting, i.e. the assets, liabilities and contingent liabilities are measured at fair value at the time of acquisition. The acquisition cost less the fair value of specifiable assets, liabilities and contingent liabilities constitutes goodwill. In accordance with the IFRS 1 standard, business acquisitions preceding the IFRS transition date are not adjusted to the IFRS principles; they remain in the pre-transition date values based on the Finnish Accounting Standards.
All intragroup transactions, unrealized margins of internal deliveries, internal liabilities and receivables, and internal profit distribution are eliminated.
Intragroup holding is eliminated using the acquisition method of accounting. The exchange differences arising from elimination of intragroup holdings are recognized in other comprehensive income.
Associates are companies in which the Group has considerable influence but not control, generally accompanying a shareholding of between 20 – 50 percent of the voting rights. Investments in associated companies are accounted for in the consolidated financial statements under the equity method, and are initially recognized at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income statement as a separate item before the operating profit. The Group’s investments in the associated companies upon the date of acquisition, adjusted for changes in the associated companies’ equity after the date of acquisition, are shown in the consolidated balance sheet under “Investments in associated companies”.
FOREIGN CURRENCY TRANSACTIONS
The figures on Group units’ results and financial standing are measured in the currency that is the currency of the primary operating environment of each unit (“functional currency”). The consolidated financial statements are presented in euros, which is the parent company’s functional and presentation currency.
Transactions in foreign currencies are recorded at the exchange rate on the date of transaction. At the end of the financial period, foreign currency monetary items are translated to the functional currency using the exchange rate at the balance sheet date. Non-monetary items are carried at the exchange rate at the date of the transaction.
All foreign exchange gains and losses from operational and financial items are entered as exchange rate differences in the income statement under financial income and expenses. Exchange differences arising from a monetary item that forms a part of the company’s net investment in a foreign operation is recognized in other comprehensive income.
In the consolidated financial statements, the income statements of foreign subsidiaries are translated into euros using the weighted average rate for the year and balance sheets at the exchange rate of the balance sheet date. A translation difference resulting from translation of the income statement and balance sheet at different rates are recognized in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in the income statement. A translation difference resulting from the translation of a subsidiary’s equity in the consolidation is recognized in other comprehensive income. On disposal of a foreign operation, that particular component is recognized in the income statement.
FINANCIAL ASSETS AND LIABILITIES
The Group’s financial assets are classified as follows: financial assets at fair value through profit or loss, loans and other receivables, and available-for-sale financial assets. The categorization is based on the purpose of the acquisition of the financial assets, and it is performed in connection with the original acquisition. The classification is always re-evaluated at the balance sheet date.
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Transaction costs are included in the original book value of the financial assets, when the item in question is not recognized as income at fair value. The financial assets measured at fair value are originally recognized at fair value, and the transaction costs are entered in the income statement. All purchases and sales of financial assets are recorded on the date of the transaction.
Derecognition of a financial asset is done when the Group has lost its contractual right to cash flow or when it has, for a significant extent, transferred risks and rewards to outside the Group.
Financial assets and liabilities at fair value through profit or loss
Derivatives that do not meet the requirements of hedge accounting, are categorized as held for trading and they are measured at fair value through profit or loss. Profit and loss, both realized and unrealized, from fair value changes is recognized in the income statement for the period during which they arise.
Loans and other receivables
Loans and other receivables are non-derivative financial assets, with fixed or determinable payments, which are not traded in an active market and not held for trading. They are measured at amortized cost. They are recognized in the balance sheet’s Trade and other receivables group as current or non-current assets based on their nature; non-current, if they mature after 12 months.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets specifically designated to this group or not classified otherwise. Available-for-sale financial assets are measured at fair value, using quoted market prices. The unlisted securities whose fair value cannot be reliably determined are measured at cost with impaired losses. Fair value changes on available-for-sale financial assets are recognized in other comprehensive income. When such an asset is sold, the cumulative fair value changes are recognized in profit or loss.
Available-for-sale financial assets are included in non-current assets excluding those that are meant to be held for less than 12 months after the balance sheet date, in which case they are included in current assets. As available-for-sale financial assets are measured at their fair value, interest income related to these is not accrued.
Cash and cash equivalents
Cash and cash equivalents are reported at cost in the balance sheet. Cash and cash equivalents include cash and bank deposits that can be withdrawn on demand. In the cash flow statement, cash and cash equivalents also contain the liquid investments whose remaining maturity at date of purchase is at the most 3 months. Such investments are originally recognized in accounting as belonging to available-for-sale financial assets.
Financial liabilities
Financial liabilities are initially recognized at fair value based on the consideration received or paid in a transaction. Subsequently, (interest-bearing) loans are measured at amortized cost using the effective interest method. The amount of financial liabilities that is to be settled within 12 months of the balance sheet date is presented as a current liability. Other liabilities are presented as non-current liabilities.
DERIVATIVE CONTRACTS AND HEDGE ACCOUNTING
The Group uses derivative contracts to hedge against the exchange rate risks of prospective sales agreements. Hedge accounting as defined in IAS 39 is not in use in the Group.
Derivatives are initially recognized at cost, corresponding to their fair value. After this, derivatives are measured at fair value. All fair value changes of derivatives are recognized directly in financial income and expenses. In the balance sheet, the fair value of derivatives is presented in non-current receivables or liabilities, based on whether their fair value is positive or negative.
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The fair value of foreign exchange forward contracts is calculated by valuing the forward contract at the forward rate on the balance sheet date and by comparing it with the equivalent value calculated through the forward rate when the forward contract was entered into.
REVENUE RECOGNITION
Revenue from the sale of products and services is presented as net sales at fair value less indirect sales taxes and discounts.
Revenue is recognized when significant risks, rewards and control connected with the ownership of the goods have been transferred to the buyer. Usually, the revenue is recognized upon delivery.
Revenue from out-of-the-box software is comprised of license fees.License salesconsist of the permanent right to use the product version sold. License payment is recognized as income once the software and a password have been delivered to the customer.Recurring sales include maintenance income and subscriptions, and they are periodized to the months defined in the maintenance or rental agreement over time.Service sales refer to implementation support, training and consultation. Service sales are invoiced and recognized as income when the service has been carried out, arranged or the customer has received the service performed.Other sales are comprised of customer- or customer group-specific product projects.
Revenue from projects (generally lasting more than 6 months) is recognized on the percentage of completion method. The percentage of completion is defined as the proportion of costs incurred for work performed to date compared to the total estimated project costs. When it is likely that the total costs required for completing the project exceed the total revenue from the project, the expected loss is recognized as an expense immediately.
When the outcome of a long-term project cannot be reliably estimated, project-related costs are recognized as an expense in the period in which they are incurred, and revenue from the project is recognized only to the extent of recoverable expenses. Loss on the project is recognized as an expense immediately.
Should the estimates on the outcome of the project change, recognized sales and profit will be adjusted in the period in which the change first becomes known and can be estimated.
INCOME TAXES
The Group income statement includes current taxes of Group companies based on taxable profit for the financial period according to local tax regulations as well as adjustments to prior year taxes and changes in deferred taxes.
Deferred tax assets and liabilities are recognized for all temporary differences arising from the difference between the tax basis of assets and liabilities and their book values in financial reporting. In the determination of deferred income tax the enacted tax rate is used. Principal temporary differences arise from property, plant and equipment, provisions, tax losses carried forward and financial instruments. A deferred tax asset is recognized only to the extent that it is probable that it can be utilized for future taxable income.
GOODWILL AND OTHER INTANGIBLE ASSETS
In calculating goodwill, the net fair value of the acquiree’s assets, liabilities and contingent liabilities is deducted from the cost of the transaction. Goodwill is not amortized.
Instead, goodwill is tested for impairment at least annually or whenever there is an indication of impairment.
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Other intangible rights comprise trademarks and patents, other intangible assets software licenses, for instance. Patents and software licenses are recognized in the balance sheet at cost. Software licenses are amortized on a straight-line basis during an expected useful life of from two to six years. Trademarks and patents are amortized over ten years.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are expensed in the period in which they are incurred. Development costs of new products and new product versions and technologies with significant enhancements are carried forward when they are technically feasible and their future recoverability can reasonably be regarded as assured. Capitalized direct expenses contain personnel, subcontracting and testing expenses directly caused by completing the software ready for use. Development expenses are amortized over the useful life of 4 – 8 years. Amortization starts once the product version is launched. Unfinished development projects are tested for impairment at the balance sheet date.
DISPOSED OPERATIONS
Held-for-sale non-current assets and assets associated with discontinued operations are classified as held for sale and measured at the lower of book value and fair value less costs to sell, if their amount corresponding to the book value will mostly be recovered through the sale of the asset instead of continued use. Depreciation of these assets is discontinued upon classification.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Property, plant and equipment are depreciated using the straight-line method over their useful lives. The depreciation period of machinery and equipment is 2 to 5 years. The useful life of an asset is reviewed at each financial year-end and, if necessary, any change in expectations for financial benefit reflected as an adjustment to the estimated useful life.
Property, plant and equipment are stated in the Notes at cost less accumulated depreciation and impairment loss. Cost includes only the commodities for which the acquisition cost has not yet been depreciated in full according to plan. Sales gains and losses on machinery and equipment are included in other operating income and expenses.
GOVERNMENT GRANTS
The Group receives government grants, intended to, e.g., promote the companies’ research and development activity. Such grants are reported as other income and recognized in proportion with the costs incurred in each project subject to the grant. Grants to capitalized research and development expenses are recognized as decrease of intangible assets.
Grants relating to acquisition of assets (property, plant and equipment) are presented by deducting the grant from the tangible asset’s carrying amount. Grants are recognized in the income statement through smaller depreciations over the useful life of the asset. So far, Tekla has not received government grants related to the acquisition of tangible assets.
IMPAIRMENT OF ASSETS
With regard to assets subject to depreciation, it is reviewed whether there are indications that an asset’s value may be impaired. If there are indications, the recoverable amount of the item is estimated based on its net selling price or a higher value in use. The need for impairment is assessed at the level of cash generating units, i.e. at the lowest possible level largely independent of others, the independent cash flows of which can be separated from other units. If the carrying amount exceeds the recoverable amount, the difference is recognized in the income statement as an impairment loss.
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Goodwill is not amortized. Instead, it is tested for impairment annually or whenever there is an indication of impairment.
A previously recognized impairment is reversed, if the assumptions used in estimating the recoverable amount change. The extent of impairment loss to be reversed should not be more than what the asset’s carrying amount would have been if the impairment had not been recognized. Impairment loss for goodwill is not reversed.
According to IAS 39, all financial assets are assessed at each balance sheet date by examining whether there is any objective evidence of impairment of the value of item or item group in the financial assets. Impairment losses recognized as income relating to investments in available-for-sale equity instruments are not reversed. If, in a subsequent period, the fair value of a debt instrument carried as available-for-sale increases due to an event occurring after the impairment was originally recognized, the previously recognized impairment loss is reversed through profit and loss.
LEASES
Leases on property, plant and equipment are classified as finance leases if they transfer a substantial portion of the risks and rewards incident to ownership. Finance leases are recognized in the balance sheet as assets and liabilities at the lower of the fair value of the leased asset and the present value of the minimum lease payments at the inception of the lease. Assets held under finance leases are depreciated over the shorter of the useful life of the asset or the lease term. Finance lease payments are apportioned between finance charges and reductions of outstanding liability.
Leases where substantially all the risks and rewards of ownership are retained by the lessor are classified as other rental contracts. Other rental expenses based on a lease are recognized as expenses in the income statement on a straight-line basis over the lease term. Lease commitments are presented as off-balance sheet commitments in the Notes.
INVENTORIES
Inventories are measured at the lower of cost or net realizable value. Cost is determined using the FIFO method. Cost of finished goods and work in progress includes direct production related wages, other direct production expenses and the share of general production costs. Net realizable value is the estimated selling price in the ordinary course of business, less estimated cost of completion and the estimated costs necessary to make the sale.
TRADE RECEIVABLES
Trade receivables are measured at their expected net present value, which is the original invoice amount less expected impairment. A trade receivable is impaired when it is justifiably probable that the Group will not collect all amounts due on the original terms. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default in payments are considered as indicators that a trade receivable is impaired. The impairment amount is classified as other operating expense.
SHARE CAPITAL AND TREASURY SHARES
The entire share capital consists of ordinary shares. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds, net of tax.
When purchasing Tekla Plc’s own shares, equity is deducted by the consideration paid for the shares including transaction costs. When treasury shares are sold, retained earnings are increased by the consideration received for the shares less direct costs, taking taxes into account. The share exceeding the acquisition cost of transferred treasury shares will be included in the invested non-restricted equity fund.
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PENSION BENEFITS
The pension arrangements of the Group companies comply with local regulations and practices. Pension plans are classified as defined contribution plans.
Contributions for defined contribution plans are recognized as expenses in the balance sheet for the period for which they are contributed.
PROVISIONS
A provision is recognized in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that fulfilling the obligation requires payment or induces financial loss and the amount of the loss can be estimated reliably. Provisions can be related to restructuring, loss-making contracts and tax-related risks.
Provisions are measured at the present value of the expenditure required in order to cover the obligation.
SHARE – BASED PAYMENT
Tekla Plc has no valid share option programs.
DIVIDENDS
Dividends distributed by the Group are recognized during the period in which shareholders have approved the dividend to be distributed. No dividend or repayment of equity is paid on treasury shares held by the company.
EARNINGS PER SHARE
Basic earnings per share are computed by dividing net profit or loss by the weighted average number of shares outstanding during the period.
Tekla has no options, so there is no need to compute the dilution effect of options.
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Notes to the Financial Statements
(In 1,000 euros unless otherwise noted)
1. | Segment information |
The Group has two segments, which are the Group’s strategic business areas. Segments have been defined based on reports the Group Management Team uses in the strategic decision making. The business segments are based on internal organizational structure and internal financial reporting. Item ‘Unallocated’ is comprised of the Technology unit and the support units of the Group.
Building & Constructiondevelops and markets the Tekla Structures software for the construction industry. The software is used in structural engineering, design and production of steel structures and precast units, reinforced concrete detailing as well as site and construction management.
Infra & Energyfocuses on the development and sales of model-based software solutions that support customers’ core processes. Its key customer industries are energy distribution, public administration, as well as civil engineering and water.
The Group Management Team assesses the results of the segments based on the operating profit figure. Net sales from external customers reported to the Group Management Team are measured in a manner consistent with that in the income statement. Interest income or expenses are not allocated to segments, because the Financial Administration responsible for financing also manages the funds of the Group.
Segments’ investments consist of additions in property, plant and equipment as well as in intangible assets, which are used over more than one period. Segments’ assets and liabilities are not presented, because they are not reported to the Group Management Team.
Net sales are divided into license, recurring, service and other sales. License sales consist of a permanent right to use the sold product version. Recurring sales include maintenance income (annual product versions and customer support), subscriptions and net sales of SaaS. Service sales refer to implementation support, training and consultation. Other sales comprise of customer- or customer group-specific product projects.
Business segments | Building & Construction | Infra & Energy | Unallocated | Eliminations | Total | |||||||||||||||
External sales | ||||||||||||||||||||
Licenses | 21,775 | 2,381 | 24,156 | |||||||||||||||||
Recurring | 19,553 | 7,855 | 27,408 | |||||||||||||||||
Services | 1,599 | 2,442 | 4,041 | |||||||||||||||||
Other | 93 | 2,135 | 1 | 2,229 | ||||||||||||||||
External sales | 43,020 | 14,813 | 1 | 0 | 57,834 | |||||||||||||||
Internal sales | 60 | -60 | 0 | |||||||||||||||||
Net sales total | 43,080 | 14,813 | 1 | -60 | 57,834 | |||||||||||||||
Operating profit | 8,227 | 1,915 | -82 | 10,060 | ||||||||||||||||
Unallocated items | -1,878 | |||||||||||||||||||
Profit (loss) for the year | 8,182 |
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Building & Construction | Infra & Energy | Unallocated segments | Total | |||||||||||||
Segment depreciation | 827 | 301 | 584 | 1,712 | ||||||||||||
Segment investment | 2,708 | 219 | 726 | 3,653 |
Information related to geographical areas
The Group operates in four geographical areas: Finland, other Europe, North America and Asia. Net sales of the geographical areas are presented based on the location of the customers or the resellers. Assets are presented based on the location of the assets. Net sales from external customers are measured in a manner consistent with that in the income statement.
Finland | Other Europe | North America | Asia | Others | Total | |||||||||||||||||||
Net sales | 11,996 | 20,781 | 8,977 | 12,838 | 3,242 | 57,834 | ||||||||||||||||||
Non-current assets | 4,738 | 912 | 77 | 160 | 5,887 |
2. | Acquired businesses |
Tekla Plc reinforced its collaboration with the Dutch reseller Construsoft Groep BV by acquiring 20% of its shares on May 3, 2010. Construsoft has been a reseller of Tekla products in several countries for 15 years.
Of the purchase price, 0.40 million euros was paid in cash. As part of the purchase price, 73,000 treasury shares were transferred at a price of 7.03 euros per share according to the market value on May 7, 2010, for a total price of 0.51 million euros. Tekla is obliged to pay an additional purchase price depending on the result development of the acquired business in 2009 – 2011. The additional purchase price estimated in the financial statements is 0.36 million euros, and any resulting liability will be due in 2012.
Acquired net assests and goodwill | ||||
Consideration paid in cash | 400 | |||
Transferred treasury shares | 513 | |||
Additional purchase price | 357 | |||
Total | 1,270 |
Consolidated result of the associated company and equity adjustment to the investment is 0.09 million euros. Had Construsoft Groep BV’s figures been consolidated as from the beginning of the financial period, Tekla’s result would have been approximately 0.01 million euros higher.
Of the purchase price, 0.16 million euros was allocated to goodwill and 0.61 million euros to customer relationships in intangible assets, which are included in the balance sheet value of the associated company according to the one-line principle.
3. Long-term projects
Income recorded | 1,197 | |||
Not recorded | 341 | |||
Revenues recorded prior to billings, incl. in receivables | 561 | |||
Advances received | -177 | |||
Receivables/liabilities from long-term contracts | 384 |
In 2010 the long-term projects consisted of three Tekla Xpower projects, six Tekla Xcity projects, two Tekla Xpipe projects, and one Tekla Xstreet project in the Infra & Energy business area.
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4. | Other operating income |
Sales gains from property, plant and equipment | 3 | |||
Product development grants | 539 | |||
Others | 39 | |||
Total | 581 |
Tekla Plc’s product development grants have been given by Tekes (the Finnish Funding Agency for Technology and Innovation). The grants are meant to promote companies’ research and development activities and share their risks, encourage commercializing the outcome of the projects, increase networking and make use of international collaboration.
5. | Employee benefits expense |
Salaries | 26,752 | |||
Pension expenses, defined contribution plans | 3,303 | |||
Other personnel expenses | 2,004 | |||
Total | 32,059 | |||
Group headcount: | ||||
Personnel, on average | 461 | |||
Personnel, end of period | 490 | |||
of whom part-time | 25 |
Information on the executive compensation and benefits is presented in Note 28. Related party transactions.
6. | Depreciation and amortization |
Intangible assets | ||||
Intangible rights | 97 | |||
Other intangible assets | 732 | |||
Tangible assets | ||||
Machinery and equipment | 883 | |||
Total | 1,712 |
7. | Other operating expenses |
Rental expenses | 1,823 | |||
Travel expenses | 2,121 | |||
IT expenses | 1,305 | |||
Marketing expenses | 2,262 | |||
Other | 5,028 | |||
Total | 12,539 |
Rental expenses consist mainly of lease payments for the Group’s offices.
The item “other” consists of a number of expenses connected with administration and maintenance, which are not significant individually.
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8. | Research and development expenses |
The income statement includes 15.25 million euros of research and development expenses recognized as expense in 2010.
The research and development expenses are primarily comprised of expenses allocated to the development of Tekla’s own software. 70 percent of these expenses are personnel related.
In accordance with accounting regulations, 0.89 million euros of R&D expenses have been capitalized during the period under review in connection with longer-term development of new technology and clearly novel customer offering. No corresponding projects have taken place previously.
9. | Financial income and expenses |
Financial income | ||||
Interest income | ||||
From available-for-sale investments | 383 | |||
From loans and other receivables | 24 | |||
Foreign exchange gains from loans and other receivables | 1,400 | |||
Foreign exchange forward contract value changes | 4 | |||
1,811 |
The Group’s interest income derives mainly from the parent company’s investments in commercial papers, municipal bonds, certificates of deposit and other negotiable debt instruments (Note 16. Available-for-sale financial assets).
Financial expenses | ||||
Interest expenses from liabilities measured at amortized cost | -61 | |||
Foreign exchange losses from loans and other receivables | -881 | |||
Foreign exchange forward contract value changes | -68 | |||
Other financial expenses | -105 | |||
-1,115 | ||||
Exchange rate differences, total | 455 |
Components of other comprehensive income
Items recognized in other comprehensive income related to financial instruments and reclassification adjustments.
10. | Income taxes |
Current tax | -2,955 | |||
Taxes for previous years | 169 | |||
Deferred taxes | 212 | |||
Total | -2,574 |
Income taxes relating to components of other comprehensive income | Before tax | After tax | ||||||
Available-for-sale financial assets | -74 | -55 | ||||||
Translation differences | -179 | -179 | ||||||
Total | -253 | -234 |
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Reconciliation of the tax expense in the income statement and the taxes calculated based on the tax rate of the Group’s domicile:
Profit before income taxes | 10,756 | |||
Taxes calculated with the domicile’s tax rate | -2,796 | |||
Utilization of previously unrecognized tax losses | 172 | |||
Deferred tax asset recognized on previous years’ losses | 309 | |||
Tax losses for which no deferred tax asset was recognized | -140 | |||
Effect of differing foreign tax rates | -97 | |||
Share of result in associated companies | -45 | |||
Effect of non-deductible expenses/non-taxable income | 15 | |||
Other | 8 | |||
Income taxes in the income statement | -2,574 | |||
Effective tax rate | 24 | % |
11. | Earnings per share |
Earnings per share are computed by dividing the profits attributable to equity holders of the parent company by the weighted average number of shares outstanding during the period.
Profits attributable to equity holders of the parent company | 8,182 | |||
Weighted average number of shares outstanding during the period | 22,464,400 | |||
Earnings per share for profit attributable to equity holders of the Company (EUR) | 0.36 | |||
There was no dilution effect on the company’s equity during the period. |
12. | Property, plant and equipment |
Machinery and equipment | ||||
Cost January 1 | 8,296 | |||
Translation differences | 231 | |||
Additions | 863 | |||
Disposals | -817 | |||
Cost December 31 | 8,573 | |||
Accumulated depreciation January 1 | 6,880 | |||
Translation differences | 172 | |||
Accumulated depreciation on disposals | -698 | |||
Depreciation for the year | 883 | |||
Accumulated depreciation December 31 | 7,237 | |||
Net book amount December 31 | 1,336 | |||
Property, plant and equipment include the following assets held under finance leases: | ||||
Cost December 31 | 207 | |||
Accumulated depreciation December 31 | -72 | |||
Net book amount December 31 | 135 |
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13. | Goodwill and intangible assets |
Goodwill | ||||
Cost January 1 | 588 | |||
Translation differences | 13 | |||
Disposals | -65 | |||
Cost December 31 | 536 | |||
Accumulated amortization January 1 | 393 | |||
Accumulated amortization December 31 | 393 | |||
Net book amount December 31 | 143 |
The goodwill (in total 100 thousand euros) originates in the acquisition of the Group’s French subsidiary. The goodwill (in total 43 thousand euros) comprises of the acquired customer base and opportunities to leverage OakTree Software AB’s expertise. Goodwill is allocated to these items in connection with impairment testing.
In connection with the acquisition of OakTree Software AB, an estimated additional purchase price of 74 thousand euros was booked in September 2008. In the financial statements of December 31, 2010, the management assesses that the additional purchase price will not be realized in any part. Thus the acquisition cost has been adjusted by additional purchase price in goodwill, intangible rights and deferred taxes.
The cash flow projections used for the test for impairment are based on value in use regarding on budgeted sales approved by the management, covering a period of five years, during which the profit margin ratio as well as market position are expected to remain at the current level. Cash flows after this period have been extrapolated without a growth factor. The pre-tax discount rate used in the calculations is 12%. The management estimates that no reasonably foreseeable change of any of the key variables used in the calculations would lead to a situation where the recoverable amount of the subsidiary would be below its carrying amount.
Intangible assets | Intangible rights | Other intan- gible assets | Unfinished Projects | Total | ||||||||||||
Cost January 1, 2010 | 673 | 3,810 | 72 | 4,555 | ||||||||||||
Translation differences | 34 | 15 | 49 | |||||||||||||
Additions | 13 | 575 | 933 | 1,521 | ||||||||||||
Disposals | -33 | 434 | -1 | 400 | ||||||||||||
Reclassifications | 24 | 42 | -66 | 0 | ||||||||||||
Cost December 31, 2010 | 711 | 4,876 | 938 | 6,525 | ||||||||||||
Accumulated amortization January 1, 2010 | 263 | 2,259 | 2,522 | |||||||||||||
Translation differences | 12 | 12 | 24 | |||||||||||||
Accumulated amortization on disposals | 461 | 461 | ||||||||||||||
Amortization for the year | 97 | 732 | 829 | |||||||||||||
Accumulated amortization December 31, 2010 | 372 | 3,464 | 0 | 3,836 | ||||||||||||
Net book amount December 31, 2010 | 339 | 1,412 | 938 | 2,689 |
Additions to unfinished development projects include 0.89 million euros of product development capitalizations in 2010.
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14. | Investments in associated companies |
Balance sheet value, January 1 | ||||
Share of result in associated companies after taxes | 86 | |||
Acquisitions | 1,270 | |||
Balance sheet value, December 31 | 1,356 |
The balance sheet value includes 0.16 million euros of goodwill at the end of the period.
The balance sheet of the associated company totaled 8.46 million euros and the equity 3.86 million euros. Its net sales were 9.55 million euros and profit for the period was 0.71 million euros in January 1 – December 31, 2010. The associated company has been accounted for in the consolidated financial statements under the equity method as of the date of acquisition, on May 3, 2010.
Receivables and liabilities of the associated companies | ||||
Receivables from associated companies | ||||
Trade receivables | 72 | |||
Total | 72 | |||
Liabilities to associated companies | ||||
Trade payables | 102 | |||
Accrued liabilities and deferred income | 16 | |||
Total | 118 |
15. | Carrying amounts of financial assets and liabilities by valuation category |
Balance sheet item Dec 31, 2010 | Financial assets/ liabilities at fair value through profit and loss | Loans and other receivables | Available- for-sale financial assets | Financial liabilities measured at amortized cost | Balance sheet item book amounts | Fair value | ||||||||||||||||||
Non-current financial assets | ||||||||||||||||||||||||
Other financial assets | 125 | 125 | 125 | |||||||||||||||||||||
Receivables | 362 | 362 | 362 | |||||||||||||||||||||
Current financial assets | ||||||||||||||||||||||||
Trade and other receivables | 11,179 | 11,179 | 11,179 | |||||||||||||||||||||
Derivative contracts | 54 | 54 | 54 | |||||||||||||||||||||
Current income tax assets | 51 | 51 | 51 | |||||||||||||||||||||
Other financial assets | 21,343 | 21,343 | 21,343 | |||||||||||||||||||||
Cash and cash equivalents | 8,179 | 8,179 | 8,179 | |||||||||||||||||||||
Carrying amount by category | 54 | 19,771 | 21,468 | 0 | 41,293 | 41,293 | ||||||||||||||||||
Non-current financial liabilities | ||||||||||||||||||||||||
Financial liabilities | 46 | 46 | 46 | |||||||||||||||||||||
Current financial liabilities | ||||||||||||||||||||||||
Trade and other payables | 13,038 | 13,038 | 13,038 | |||||||||||||||||||||
Current income tax liabilities | 413 | 413 | 413 | |||||||||||||||||||||
Financial liabilities | 77 | 77 | 77 | |||||||||||||||||||||
Carrying amount by category | 0 | 0 | 0 | 13,574 | 13,574 | 13,574 |
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16. | Other financial assets |
Available-for-sale financial assets
Available-for-sale financial assets are mainly comprised of the parent’s investments in commercial papers, municipal bonds, certificates of deposit and other negotiable debt instruments, which are measured at fair value.
A total of 382,910 euros of interest income and sales gains were recognized for these investments in 2010.
In March 2009 Tekla Plc became a minority shareholder in Rym-Shok Oy (1.1%). These minority shareholdings make up the Group’s long-term shareholding. Unlisted equity investments are measured at cost, since there is no market price defined by a functioning market and estimated changes in fair value are immaterial.
Changes in the value of available-for-sale investments recorded in the fair value reserve have been specified in the statement of changes in the group’s equity.
Long-term | ||||
Measured at cost | ||||
Shareholdings | 125 | |||
Total | 125 | |||
Short-term | ||||
Measured at fair value | ||||
Bonds | 21,312 | |||
Other shares | 31 | |||
Total | 21,343 |
17. | Deferred tax assets and liabilities |
Changes in deferred taxes in 2010:
31.12.2009 | Recognized in the income statement | Recognized directly in equity | Translation Differences | 31.12.2010 | ||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||
Tax losses | 417 | 210 | 627 | |||||||||||||||||
Available-for-sale financial assets measured at fair value | 4 | 4 | ||||||||||||||||||
Other items | 15 | -10 | 1 | 6 | ||||||||||||||||
Total | 436 | 200 | 0 | 1 | 637 | |||||||||||||||
Deferred tax liabilities: | ||||||||||||||||||||
Intangible assets identified in acquisitions | -30 | 12 | 9 | -4 | -13 | |||||||||||||||
Accumulated depreciation difference | -37 | -37 | ||||||||||||||||||
Available-for-sale financial assets measured at fair value | -36 | 19 | -17 | |||||||||||||||||
Total | -103 | 12 | 28 | -4 | -67 | |||||||||||||||
Deferred tax assets, net | 333 | 212 | 28 | -3 | 570 |
The Group companies had a total of 4.57 million euros of tax losses on December 31, 2010 for which no tax asset is recognized as the Group is not certain enough to accumulate taxable income against which the losses could be used before the losses in question expire. The majority of these unrecognized deferred tax assets relate to tax losses in subsidiaries in Germany and Japan. 2.25 million euros of these tax losses will expire within the next six years and the rest 2.3 million euros are indefinite.
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The balance sheet on December 31, 2010 includes 0.63 million euros deferred tax assets in companies who made a loss in the current period or previous financial periods. Recognition of these deferred tax assets is based on profit estimates that show that it is probable that the losses in question can be utilized. The management estimates that most of the deferred tax assets recorded will be used during the following financial period, i.e. the nature of the asset is mostly short term.
18. | Inventories |
Work in progress | 36 | |||
Finished goods | 20 | |||
Total | 56 |
19. | Receivables |
Current receivables | ||||
Trade receivables | 8,359 | |||
Other receivables | 1,081 | |||
Prepaid expenses and accrued income | 1,794 | |||
Total | 11,234 | |||
Prepaid expenses and accrued income | ||||
Product development and other grants | 313 | |||
Receivables from long-term contracts | 384 | |||
Accrued sales income | 271 | |||
Financial assets at fair value through profit or loss | 54 | |||
Other prepaid expenses and accrued income | 772 | |||
Total | 1,794 | |||
Non-current receivables | ||||
Trade receivables | 110 | |||
Other receivables | 252 | |||
Total | 362 |
The non-current trade receivable consisted of a customer receivable in the Building & Construction business area.
The current receivables do not bear any interest. | ||||
Analysis of trade receivables by age | ||||
Undue trade receivables | 5,616 | |||
Trade receivables 1 – 60 days overdue | 1,535 | |||
Trade receivables 61 – 180 days overdue | 487 | |||
Trade receivables more than 180 days overdue | 831 | |||
Total | 8,469 | |||
Trade receivables are denominated in the following currencies: | ||||
CNY | 17 | |||
EUR | 4,067 | |||
GBP | 983 | |||
INR | 548 | |||
JPY | 306 | |||
MYR | 29 | |||
SEK | 1,248 | |||
SGD | 264 | |||
USD | 1,007 | |||
Total | 8,469 |
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20. | Cash and cash equivalents |
Cash at bank and in hand | 8,179 |
21. | Notes concerning shareholders’ equity |
Number of shares | Share capital | Share pre- mium account | Reserve fund | Treasury shares | Invested non- restr. equity fund | |||||||||||||||||||
December 31, 2009 | 22,586,200 | 678 | 8,893 | 1,325 | -898 | 0 | ||||||||||||||||||
Transfer of treasury shares | ||||||||||||||||||||||||
May 7 | 246 | 267 | ||||||||||||||||||||||
Reduction of share premium account | -8,893 | 8,893 | ||||||||||||||||||||||
December 31, 2010 | 22,586,200 | 678 | 0 | 1,325 | -652 | 9,160 |
The number of shares is 22,586,200. The total book countervalue of the share is 0.03 euros per share, and the Group share capital is 678 thousand euros. All issued shares have been fully paid. The maximum share capital of the Group is 1.80 million euros.
Share premium account
Share premiums from the subscription price of shares exceeding the nominal value in share issues that took place before the new Companies Act came into force (September 1, 2006) are recognized in the share premium account. Share premium was entered in Tekla’s share premium account for the first time in 1999. The share premium account increased significantly in connection with the listing in spring 2000.
The share premium account was reduced in 2003-2005 in order to cover retained losses in the balance sheet. In November 2005, the share premium account was reduced by 12.38 million euros due to return of capital to shareholders.
Based on the decision by the AGM held on April 8, 2010 the share premium account was reduced by 8.89 million euros by transferring all the funds to the invested non-restricted equity fund in September.
Reserve fund
The portion of equity transferred based on the decision of the General Meeting has been entered in the reserve fund. The reserve fund is restricted equity, and the conversion of it into unrestricted equity is subject to same public notification and approval process as the conversion of the share premium fund into unrestricted equity.
Treasury shares
Treasury shares include the acquisition cost of the 96,600 treasury shares held by the parent company. The cost of the shares was 652 thousand euros, which is presented as a deduction from equity.
Tekla Plc reinforced its collaboration with the Dutch reseller Construsoft Groep BV by acquiring 20% of its shares on May 3, 2010. As part of the purchase price, 73,000 treasury shares were transferred at a price of 7.03 euros per share according to the market value on May 7, 2010, for a total price of 513 thousands euros.
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Translation differences
The translation differences include translation differences from the translation of foreign units’ financial statements, and translation differences from the parent company’s long-term receivables from the Group’s foreign subsidiaries, when those are accounted for as part of the net investment to the subsidiary.
Fair value reserve
The fair value reserve includes fair value adjustments of available-for-sale investments.
Invested non-restricted equity fund
When using the option rights and issuing new shares the share of issuing price that exceeds the book counter value is booked in the invested non-restricted equity fund.
The fund includes the transfer from the share premium account amounting to 8.89 million euros, and the exceeding share of the acquisition cost of the treasury shares of 267 thousand euros transferred on May 7, 2010.
22. | Share – based payment |
Tekla has no outstanding share option programs.
23. | Pension benefit liabilities |
In December 2004, the Ministry of Social Affairs and Health approved changes to the calculation principles of disability pension liabilities in the Finnish employment pension system (TEL), which took effect on January 1, 2006. According to this practice, the disability pension part of TyEL is classified as a defined contribution plan in IFRS financial statements.
In the Tekla Group’s foreign subsidiaries, pensions are arranged in accordance with local, defined contribution pension plans.
After the aforementioned calculation principle change took effect as of the beginning of 2006, the Group’s pension plans are classified as defined contribution plans.
24. | Financial liabilities |
The Group’s financial liabilities consist of finance lease liabilities to financial companies. The book amounts of the liabilities correspond to their fair values.
Non-current | ||||
Finance lease liabilities | 46 | |||
Current | ||||
Finance lease liabilities | 77 | |||
Total | 123 | |||
The non-current liabilities mature as follows: | ||||
2011 | ||||
2012 | 23 | |||
2013 | 23 | |||
Total | 46 | |||
The currency mix of the non-current liabilities is as follows: | ||||
SEK | 46 |
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The currency mix of the current liabilities is as follows: | ||||
SEK | 77 | |||
The weighted average of the effective rates of interest of the non-current liabilities were: | ||||
Finance lease liabilities | 4.32 | % | ||
The weighted average of the effective rates of interest of the current liabilities were: | ||||
Finance lease liabilities | 6.31 | % | ||
The finance lease liabilities will mature as follows: | ||||
Finance lease liabilities – total amount of minimum lease payments | ||||
In one year | 81 | |||
1–5 years | 48 | |||
Total | 129 | |||
Finance lease liabilities – present value of minimum lease payments | ||||
In one year | 77 | |||
1–5 years | 46 | |||
Total | 123 | |||
Future finance charges | 6 |
25. | Trade and other payables |
Advances received | 517 | |||
Trade payables | 1,043 | |||
Other liabilities | 2,503 | |||
Accrued liabilities and deferred income: | ||||
Accrued salaries and social expenses | 4,333 | |||
Accrued sales income | 3,988 | |||
Other items | 654 | |||
Total | 8,975 | |||
Total | 13,038 |
The item “Other liabilities” consists of payroll withholding tax, value added tax and other non-interest-bearing current liabilities.
26. | Other lease agreements |
The Group as lessee
Minimum lease payments due to non-cancellable other lease agreements:
Premises | ||||
In one year | 1,907 | |||
1–5 years | 5,063 | |||
Total | 6,970 | |||
Others | ||||
In one year | 255 | |||
1–5 years | 113 | |||
Total | 368 |
Tekla Plc has extended its current office lease by 5 years until 31.12.2015. The lease of extension in Metsänpojankuja premises has been added to the lease agreement.
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Most of the lease commitments under “Others” derive from car leasing contracts.
The income statement for 2010 includes rental expenses paid based on other lease agreements in the amount of 2.47 million euros.
27. | Contingent liabilities |
Collaterals given for own commitments | ||||
Business mortgages (as collateral for bank guarantee limit) | 505 | |||
Pledged funds | 258 | |||
Other contingent liabilities | ||||
Guarantees | 12 | |||
Total | 775 |
A repayment liability is connected with the product development grants from Tekes, according to which the grants have to be returned only if they have been received in error, in excess or on apparently erroneous grounds, or if they have been used for a purpose significantly different from the one intended for.
Derivative contracts | ||||
Forward foreign exchange contracts | ||||
Fair value | 54 | |||
Nominal values of underlying securities | 2,376 |
The forward agreements mainly mature within the next 12 months.
28. | Related party transactions |
The Group’s subsidiary and parent company relationships
Company | Domicile | Ownership (%) | Share of votes (%) | |||||||
Parent company of the Tekla Group | ||||||||||
Tekla Plc | Finland | — | — | |||||||
Subsidiaries of the Tekla Group: | ||||||||||
Tekla GmbH | Germany | 100 | 100 | |||||||
Tekla Inc. | USA | 100 | 100 | |||||||
Tekla India Private Limited | India | 100 | 100 | |||||||
Tekla K.K. | Japan | 100 | 100 | |||||||
Tekla (M) Sdn Bhd | Malaysia | 100 | 100 | |||||||
Tekla OakTree AB | Sweden | 100 | 100 | |||||||
Tekla Sarl | France | 100 | 100 | |||||||
Tekla (SEA) Pte. Ltd. | Singapore | 100 | 100 | |||||||
Tekla Software AB | Sweden | 100 | 100 | |||||||
Tekla (UK) Limited | United Kingdom | 100 | 100 | |||||||
Tekla Software (Shanghai) Co. Ltd. | China | 100 | 100 | |||||||
Tekla Plc’s largest shareholder is Gerako Oy. |
On December 31, 2010, Gerako Oy held 38.06% of Tekla Plc, and it is domiciled in Finland.
Tekla Plc’s largest shareholder is Gerako Oy.
On December 31, 2010, Gerako Oy held 38.06% of Tekla Plc, and it is domiciled in Finland. On July 8, 2011, Trimble through its wholly owned subsidiary Trimble Finland Oy (“Trimble Finland”), owned 22,368,148 shares, which is about 99.46% of shares and votes included in the tender offer, and 99.03% including own shares held by Tekla (according to Trimble’s flagging announcement published on July 7, 2011).
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Associated companies
Company | Domicile | Ownership (%) | ||||||
Construsoft Groep BV | the Netherlands | 20 |
The associated company has been accounted for in the consolidated financial statements under the equity method.
Transactions with related parties | Sales | Purchases | Receivables | Liabilities | ||||||||||||
2010 | ||||||||||||||||
Gerako Oy | 18 | 270 | 3 | 23 | ||||||||||||
Associated companies | 3,835 | 150 | 72 | 118 |
The receivables and liabilities of associated companies have been specified in Note 14. Investments in associated companies.
Management remuneration * | ||||
Salaries and other short-term employee benefits | 1,087 | |||
Termination benefits | 192 | |||
Post-employment benefits | 305 |
* | Management herein refers to members of the Tekla Plc Management Team. |
29. | Financial risk management |
Tekla Group faces normal financial risks associated with international operations. In relation to this, the objective of risk management is to supervise and, if necessary, limit risks. The Group’s financial risks are centrally managed and administered by the Group Treasury which reports to the Board of Directors on a regular basis in accordance with the Company’s policies and guidelines.
Currency risk
Currency risks due to the Group’s international business are managed by hedging net payment flow in US dollars. Even though the hedge ratios meet the effective hedging requirements of the Group’s risk management policy, they do not fully meet the hedging requirements of IAS 39. The Group uses forward foreign exchange contracts to hedge against the exchange rate risks of prospective sales agreements. Gains and losses of forward foreign exchange contracts are recognized in the income statement at the end of each reporting period. In general, the maximum tenor of the forward contracts is 12 months.
Foreign exchange risk arising from investments in foreign operations is not hedged, and it is included in the Group’s net foreign currency position in accordance with the Group risk management policy.
28
Sensitivity to market risks arising from financial instruments as required by IFRS 7
The following sensitivity analysis is intended to illustrate the sensitivity of the Group’s profit for the year and equity to changes in the EUR/USD exchange rate resulting from financial instruments: financial assets and liabilities included in the balance sheet on December 31, 2010. Financial instruments affected by the above market risks include working capital items, such as trade and other receivables and trade and other payables, deposits, cash and cash equivalents, and derivative financial instruments. The following assumptions were made when calculating the sensitivity to changes in the EUR/USD foreign exchange rates:
• | the variation in EUR/USD rate is assumed to be +/- 10% |
• | the position includes USD-denominated financial assets and liabilities, i.e. deposits, trade and other receivables, trade and other payables, cash and cash equivalents, as well as derivative financial instruments |
• | the position excludes USD-denominated future cash flows. |
The sensitivity analysis does not take into account future cash flows, which the Group hedges in significant volumes, it only reflects the change in fair value of hedging instruments.
Net position | -834 | |||
Effect on net profit | -62/+62 | |||
Effect on shareholders’ equity | 0 |
Liquidity risk
Liquidity risk refers to the impact on the Company’s profit and cash flow arising if it cannot ensure sufficient financing for its operations. The Group’s main source of financing is cash flow from operating activities.
Investing the liquid assets of the Group takes place according to principles decided by the Board in certificates of deposit, bonds and similar securities where the risks are almost nonexistent. Liquid assets are invested in bonds, commercial papers and other instruments issued by large-cap and mid-cap companies listed on the NASDAQ OMX Helsinki Ltd. Other potential investment objects include bonds issued by banks, the state, municipalities and the European Central Bank. The Group’s investments in bonds are staggered so that only bonds issued by the State of Finland and the European Central Bank have no upper limits in euros.
The maximum allowed remaining term to maturity of an individual financial instrument is 18 months. The average term to maturity of bonds may be a maximum of 12 months measured by duration.
Due to the Group’s rather large amount of liquid assets, the liquidity risk is very low.
Maturities of financial liabilities on December 31,2010: | ||||||||||||||||
2011 | 2012-2013 | 2014- | Total | |||||||||||||
Fx forward contracts, outflow | -2,321 | -2,321 | ||||||||||||||
Fx forward contracts, inflow | 2,375 | 2,375 | ||||||||||||||
Derivatives, net | 54 | 0 | 0 | 54 | ||||||||||||
Accounts payable and other liabilities | -13,451 | -13,451 | ||||||||||||||
Finance leases, repayments | -77 | -45 | -122 | |||||||||||||
Finance leases, financial expenses | -4 | -2 | -6 | |||||||||||||
Total | -13,478 | -47 | 0 | -13,525 |
Repayments for 2011 are disclosed under current liabilities in the balance sheet. The financial expenses mainly comprise of interest expenses.
Credit risk
Credit risks related to trade and other receivables are minimized with short terms of payment, efficient methods of collecting and by considering the contracting party’s credit rating. The credit quality of the customer takes into account its financial position, past experience and other factors. The Company does not have significant concentrations of credit risk associated
29
with receivables, as the Company’s customer base is large and geographically dispersed across the globe. The largest individual customer account receivable accounts for less than 5% of trade receivables. Credit losses and net change in provision recognized in the income statement were 494 thousand euros in aggregate.
Changes in impairment of trade receivables were:
Impairment January 1 | 331 | |||
Translation differences | 32 | |||
Increase in provision | 504 | |||
Credit losses charged against provision | -423 | |||
Impairment December 31 | 444 |
The credit risk related to investments and derivative contract parties is low, as the contracting party’s credit rating has to be high according to the Group’s risk management policy.
Interest rate risk
The Group does not have significant liabilities. The interest rate risk of available-for-sale investments is low as well, since their time to maturity is generally rather short. The Group can raise both fixed and variable rate loans.
Due to the balance sheet structure of the Group, the management of interest rate risk is focused on investments. The Group’s profit and cash flow from operating activities are essentially independent of market interest rate fluctuations.
Capital structure management
The goal of capital structure management is to secure the continuity of operations, support the Company’s growth targets and ensure increase in shareholder value. The structure can be managed through decisions on, e.g., distribution of dividends, acquisition of the Company’s own shares and share issues.
The Company monitors the development of its capital structure through equity ratio and net gearing. The purpose is to maintain a solid equity ratio and moderate net gearing. At the end of 2010, the Company’s equity ratio was 72.1%. Net gearing in 2010 amounted to -86.7%.
Fair value estimation
The fair value of financial instruments traded in active markets, such as trading and available-for-sale securities, is based on quoted market prices at the balance sheet date.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. The fair value of foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar instruments.
30
Effective 1 January 2009, the Group has adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
• | Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). |
• | Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). |
• | Inputs for the assets or liability that are not based on observable market data (that is, unobservable inputs) (level 3). |
Fair value measurement hierarchy of financial assets and liabilities measured at fair value on December 31, 2010
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets at fair value through profit or loss Derivative contracts | 54 | 54 | ||||||||||||||
Available-for-sale financial assets | ||||||||||||||||
Bonds | 4,015 | 17,297 | 21,312 | |||||||||||||
Other shares | 156 | 156 | ||||||||||||||
Total | 4,015 | 17,351 | 156 | 21,522 |
In the fair value measurement hierarchy of financial assets or liabilities occurred no movements to the hierarchy level 3 during the accounting period. The management assesses that changing the input for one or more of the financial instruments valued at level 3 would not significantly alter the fair value of the financial instruments at level 3.
Changes in level 3 instruments
Available-for-sale financial assets | ||||
Opening balance | 157 | |||
Purchases | ||||
Disposals/sales | -1 | |||
Gains and losses recognized in profit or loss | ||||
Closing balance | 156 |
30. | Events after the balance sheet date |
The Company’s management is not aware of any significant events after the balance sheet date that would have affected the financial statements as of December 31, 2010. In May 2011, Trimble, through its wholly owned subsidiary, Trimble Finland, made a public offer to acquire all of the shares of Tekla. On July 8, 2011 Trimble Finland completed the acquisition and Tekla became a subsidiary of Trimble. Tekla declared dividends on June 28, 2011, to its shareholders of 17,991,680 euros, which were paid prior to the completion of the acquisition.
31
TEKLA PLC
CONSOLIDATED INCOME STATEMENT (unaudited)
For the six months ended June 30, 2010 and 2011
(Amounts expressed in Euro, 000s)
1/1-6/30/2011 | 1/1-6/30/2010 | |||||||
Net sales | 32,460 | 27,320 | ||||||
Other operating income | 290 | 250 | ||||||
Change in inventories of finished goods and in work in progress | 40 | -20 | ||||||
Raw materials and consumables used | -950 | -1,000 | ||||||
Employee compensation and benefit expense | -17,530 | -15,870 | ||||||
Depreciation | -900 | -860 | ||||||
Other operating expenses | -7,190 | -6,270 | ||||||
Share of results in associated companies | 0 | 30 | ||||||
|
|
|
| |||||
Operating result | 6,220 | 3,580 | ||||||
% of net sales | 19.2 | % | 13.1 | % | ||||
Financial income | 530 | 1,470 | ||||||
Financial expenses | (800 | ) | (750 | ) | ||||
Profit (loss) before taxes | 5,950 | 4,300 | ||||||
|
|
|
| |||||
% of net sales | 18.3 | % | 15.7 | % | ||||
Income taxes | (1,500 | ) | (910 | ) | ||||
Result for the period | 4,450 | 3,390 | ||||||
Attributable to: | ||||||||
Owners of the parent | 4,450 | 3,390 | ||||||
Earnings per share for profit attributable to the owners of the parent (EUR) | 0.20 | 0.15 | ||||||
Earnings are not diluted. | ||||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited) For the six months ended June 30, 2010 and 2011 (Amounts expressed in Euro, 000s) |
| |||||||
1/1-6/30/2011 | 1/1-6/30/2010 | |||||||
Result for the period Other comprehensive income for the period, net of tax: | 4,450 | 3,390 | ||||||
Transl. differences | 100 | (240 | ) | |||||
Changes in available-for-sale investments | (10 | ) | (30 | ) | ||||
Total | 90 | (270 | ) | |||||
|
|
|
| |||||
Total comprehensive income for the period | 4,540 | 3,120 | ||||||
Attributable to: | ||||||||
|
|
|
| |||||
Owners of the parent | 4,540 | 3,120 | ||||||
|
|
|
|
32
CONDENSED BALANCE SHEET (unaudited)
As of June 30, 2010, and 2011
(Amounts expressed in Euro, 000s)
6/30/2011 | 6/30/2010 | |||||||
Assets | ||||||||
Non-current assets | ||||||||
Property, plant and equipment | 1,740 | 1,440 | ||||||
Goodwill | 140 | 200 | ||||||
Intangible assets | 3,360 | 2,100 | ||||||
Investments in associated companies | 1,320 | 1,300 | ||||||
Other financial assets | 30 | 1,130 | ||||||
Receivables | 360 | 540 | ||||||
Deferred tax assets | 780 | 740 | ||||||
|
|
|
| |||||
Non-current assets, total | 7,730 | 7,450 | ||||||
Current assets | ||||||||
Inventories | 100 | 90 | ||||||
Trade and other current receivables | 15,160 | 12,190 | ||||||
Tax receivables | 50 | 140 | ||||||
Other financial assets | 15,300 | 23,450 | ||||||
Cash and cash equivalents | 8,520 | 5,980 | ||||||
|
|
|
| |||||
Current assets, total | 39,130 | 41,850 | ||||||
|
|
|
| |||||
Assets total | 46,860 | 49,300 | ||||||
|
|
|
| |||||
Equity and liabilities | ||||||||
Equity | ||||||||
Share capital | 680 | 680 | ||||||
Share premium account | 0 | 8,890 | ||||||
Invested non-restricted equity fund | 1,290 | 0 | ||||||
Other own capital | 1,650 | 1,800 | ||||||
Retained earnings | 3,310 | 17,680 | ||||||
|
|
|
| |||||
Equity total | 6,930 | 29,050 | ||||||
Non-current liabilities | ||||||||
Deferred tax liabilities | 60 | 90 | ||||||
Interest-bearing liabilities | 20 | 30 | ||||||
|
|
|
| |||||
Non-current liabilities total | 80 | 120 | ||||||
Current liabilities Trade and other payables | 39,110 | 20,000 | ||||||
Tax liabilities | 680 | 40 | ||||||
Current interest-bearing liabilities | 60 | 90 | ||||||
|
|
|
| |||||
Current liabilities total | 39,850 | 20,130 | ||||||
|
|
|
| |||||
Liabilities total | 39,930 | 20,250 | ||||||
|
|
|
| |||||
Equity and liabilities total | 46,860 | 49,300 | ||||||
|
|
|
|
33
TEKLA PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended June 30, 2010 and 2011
(Amounts expressed in Euro, 000s)
Attributable to the owners of the parent
Share capital | Share premium account | Other funds | Fair value reserve | Accum. translation difference | Invested. non- restricted. equity fund | Retained earnings | Total | |||||||||||||||||||||||||
Equity January 1, 2010 | 680 | 8,890 | 1,330 | 90 | 380 | 18,530 | 29,900 | |||||||||||||||||||||||||
Payment of dividend | (4,480 | ) | (4,480 | ) | ||||||||||||||||||||||||||||
Transfer of treasury shares 7-May | 270 | 240 | 510 | |||||||||||||||||||||||||||||
Decrease of share premium account | ||||||||||||||||||||||||||||||||
Total comprehensive income for the period | (30 | ) | (240 | ) | 3,390 | 3,120 | ||||||||||||||||||||||||||
Equity June 30, 2010 | 680 | 8,890 | 1,600 | 60 | 140 | 17,680 | 29,050 | |||||||||||||||||||||||||
Attributable to the owners of the parent | ||||||||||||||||||||||||||||||||
Share capital | Share premium account | Other funds | Fair value reserve | Accum. translation difference | Invested. non- restricted. equity fund | Retained earnings | Total | |||||||||||||||||||||||||
Equity January 1, 2011 | 680 | — | 1,330 | 30 | 200 | 9,160 | 22,470 | 33,870 | ||||||||||||||||||||||||
Payment of dividend Dividend declared |
| (5,620 (17,990 | ) ) |
| (5,620 (17,990 | ) ) | ||||||||||||||||||||||||||
Repayment of equity | (7,870 | ) | (7,870 | ) | ||||||||||||||||||||||||||||
Total comprehensive income for the period | (10 | ) | 100 | 4,450 | 4,540 | |||||||||||||||||||||||||||
Equity June 30, 2011 | 680 | — | 1,330 | 20 | 300 | 1,290 | 3,310 | 6,930 |
34
TEKLA PLC
CONDENSED CASH FLOW STATEMENT (unaudited)
For the six months ended June 30, 2010 and 2011
(Amounts expressed in Euro, 000s)
1/1-6/30/2011 | 1/1-6/30/2010 | |||||||
Net cash flows from operating activities | 9,520 | 9,470 | ||||||
Cash flows from investing activities: | ||||||||
Investments | (2,010 | ) | (940 | ) | ||||
Sale of intangible assets and property, plant and equipment | 150 | |||||||
Acquisition of associated companies | (400 | ) | ||||||
Investments in available-for-sale financial assets | (5,720 | ) | (4,440 | ) | ||||
Interests received from available-for-sale financial assets | 160 | 160 | ||||||
Net cash used in/from investing activities | 4,020 | (5,620 | ) | |||||
Cash flows from financing activities: | ||||||||
Payment of dividend | (5,620 | ) | (4,480 | ) | ||||
Repayment of equity | (7,870 | ) | ||||||
Payments of finance lease liabilities | (20 | ) | (20 | ) | ||||
|
|
|
| |||||
Net cash used in financing activities | (13,510 | ) | (4,500 | ) | ||||
Net decrease/increase in cash and cash equivalents | 30 | (650 | ) | |||||
Cash and cash equivalents at beginning of the period | 8,490 | 7,120 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of the period | 8,520 | 6,470 | ||||||
|
|
|
| |||||
The cash and cash equivalents in the cash flow statement include: | ||||||||
Cash and cash equivalents | 8,520 | 5,980 | ||||||
Available-for-sale financial assets, cash equivalents | 490 |
35
NOTES TO THE INTERIM REPORT
The notes are presented in millions of Euros, unless otherwise stated.
This interim report has been prepared in accordance with the IAS 34 (Interim Financial Reporting) standard. The same accounting and valuation policies and methods of computation have been followed in the interim financial statements as in the annual financial statements for 2010. The amendments and interpretations to published standards as well as new standards, effective January 1, 2011, are presented in detail in the financial statements for 2010.
The figures presented in the Interim Report are unaudited.
Use of estimates
When preparing the interim report, the Group’s management is required to make estimates and assumptions influencing the content of the interim report, and it must exercise its judgment regarding the application of accounting policies. Although these estimates are based on the management’s best knowledge, actual results may ultimately differ from the estimates used in the interim report. Tax losses carried forward are recognized as deferred tax assets only to the extent that it is probable that future taxable profits will be available against which unused tax losses can be utilized. Actual results could differ from those estimates.
Segment information
Net sales by business area | ||||||||
(Euro, 000’s) | 1/1-6/30/2011 | 1/1-6/30/2010 | ||||||
Building & Construction | 25,430 | 20,190 | ||||||
Infra & Energy | 7,060 | 7,160 | ||||||
Net sales between segments | (30 | ) | (30 | ) | ||||
|
|
|
| |||||
Total | 32,460 | 27,320 | ||||||
Operating result by business area | ||||||||
(Euro, 000’s) | 1/1-6/30/2011 | 1/1-6/30/2010 | ||||||
Building & Construction | 6,270 | 2,920 | ||||||
Infra & Energy | -50 | 660 | ||||||
Others | 0 | 0 | ||||||
|
|
|
| |||||
Total | 6,220 | 3,580 | ||||||
Financial indicators | ||||||||
1/1-6/30/2011 | 1/1-6/30/2010 | |||||||
Earnings per share (EPS), EUR | 0.20 | 0.15 | ||||||
Equity/share, EUR | 0.31 | 1.29 | ||||||
Interest-bearing liabilities | 0.08 | 0.12 | ||||||
Equity ratio % | 15.0 | % | 59.4 | % | ||||
Net gearing % | -342.3 | % | -100.8 | % | ||||
Return on investment % | 59.2 | % | 29.6 | % | ||||
Return on equity % | 43.6 | % | 23.0 | % | ||||
Number of shares, at end of the period | 22,489,600 | 22,489,600 | ||||||
Number of shares, on average | 22,489,600 | 22,438,782 | ||||||
Gross investments, MEUR | 2.01 | 2.21 | ||||||
% of net sales | 6.2 | % | 8.1 | % | ||||
Personnel, on average | 486 | 452 |
36
Consolidated income statement for three months ended June 30, 2011 and 2010 | ||||||||
(Euro, 000’s) | Q2 2011 | Q2 2010 | ||||||
Net sales | 16,670 | 15,790 | ||||||
Other operating income | 180 | 110 | ||||||
Change in inventories of finished goods and in work in progress | 60 | -20 | ||||||
Raw materials and consumables used | -460 | -490 | ||||||
Employee compensation and benefit expense | -9,050 | -8,480 | ||||||
Depreciation | -470 | -430 | ||||||
Other operating expenses | -3,690 | -3,500 | ||||||
Share of results in associated companies | -20 | 20 | ||||||
Operating result | 3,220 | 3,000 | ||||||
% of net sales | 19.3 | % | 19.0 | % | ||||
Financial income | 280 | 250 | ||||||
Financial expenses | -190 | -610 | ||||||
Profit (loss) before taxes | 3,310 | 2,640 | ||||||
% of net sales | 19.9 | % | 16.7 | % | ||||
Income taxes | -990 | -510 | ||||||
|
|
|
| |||||
Result for the period | 2,320 | 2,130 | ||||||
|
|
|
| |||||
Income taxes | ||||||||
(Euro, 000’s) | 1/1-6/30/2011 | 1/1-6/30/2010 | ||||||
Taxes for the financial period and prior periods | (1,640 | ) | (1,220 | ) | ||||
Deferred taxes | 140 | 310 | ||||||
|
|
|
| |||||
Total | (1,500 | ) | (910 | ) | ||||
Property, plant and equipment | ||||||||
6/30/2011 | 6/30/2010 | |||||||
Cost at the beginning of the period | 8,570 | 8,300 | ||||||
Translation differences | (80 | ) | 240 | |||||
Additions | 890 | 440 | ||||||
Disposals | (60 | ) | (580 | ) | ||||
|
|
|
| |||||
Cost at the end of the period | 9,320 | 8,400 | ||||||
Accumulated depreciation at the beginning of the period | 7,230 | 6,880 | ||||||
Translation differences | (70 | ) | 190 | |||||
Accumulated depreciation on disposals | (40 | ) | (560 | ) | ||||
Depreciation for the financial period | 460 | 450 | ||||||
|
|
|
| |||||
Accumulated depreciation at the end of the period | 7,580 | 6,960 | ||||||
|
|
|
| |||||
Net book amount at the end of the period | 1,740 | 1,440 | ||||||
|
|
|
|
37
The investments consisted of normal acquisitions of hardware, software, and equipment.
In accordance with accounting regulations, 0.89 million euros of R&D expenses have been capitalized during the period under review in connection with longer-term development of new technology and clearly novel customer offering.
Provisions
The Group had no provisions in the reporting or comparison period.
Collaterals. contingent liabilities and other commitments | ||||||||
6/30/2011 | 6/30/2010 | |||||||
Collaterals for own commitments | ||||||||
Business mortgages (as collateral for bank guarantee limit) | 500 | 500 | ||||||
Pledged funds | 220 | 80 | ||||||
Leasing and rental agreement commitments | ||||||||
Premises | 6,240 | 3,990 | ||||||
Others | 360 | 430 | ||||||
|
|
|
| |||||
Total | 6,600 | 4,420 | ||||||
Derivative contracts | ||||||||
Currency forward contracts: | ||||||||
Fair value | 80 | -200 | ||||||
Nominal value of underlying instruments | 1,680 | 2,080 |
The Group makes derivative contracts to hedge against the exchange rate risks of prospective sales agreements. Derivative contracts are stated at fair value, and related foreign exchange gains and losses are recognized in the income statement. The derivative contracts hedge sales in US dollars in accordance with the Group policy.
Related party transactions | ||||||||
6/30/2011 | 6/30/2010 | |||||||
Gerako Oy Purchases | 160 | 150 | ||||||
Construsoft Groep BV Sales | 1,970 | 0 | ||||||
Purchases | 20 | 0 | ||||||
Receivables | 290 | 0 | ||||||
Liabilities | 1,100 | 0 | ||||||
Management remuneration Salaries and post-employment benefits | 670 | 590 |
Management herein refers to members of the Tekla Management Team.
38