April 23, 2008
SSH Interim report for January 1 – March 31, 2008
- Net sales for January-March totaled EUR 1.9 million, down 28 percent
year on year (EUR 2.6 million in Q1/2007).
- Operating loss for January–March amounted to EUR -0.8 million (a
loss of 0.0 million in Q1/2007), resulting in a loss of EUR -0.6
million (profit 0.1 million).
- There were no major license deliveries during Q1/2008.
KEY FIGURES
1-3/2008 1-3/2007 1-12/2007
Net sales (MEUR) 1.9 2.6 14.1
Net sales, change % -28.0 26.4 49.4
Operating profit/loss -0.8 0.0 2.2
(MEUR)
% of net sales -45.8 -1.5 15.3
Operating profit/loss, 93.9 343.4
change % -2 048.7
Profit/loss (MEUR) -0.6 0.1 3.0
% of net sales -34.4 4.8 21.5
Number of employees 82 79 83
at period end
Earnings per share (EUR) -0.02 0.00 0.11
Shareholders’ equity 0.71 0.64 0.73
per share (EUR)
SSH Communications Security is a world-leading provider of easy-to-use
and centrally managed enterprise security solutions. SSH Tectia
software products secure the critical data communications of numerous
large enterprises, financial institutions and government agencies
NET SALES
Consolidated net sales for January-March totaled EUR 1.9 million (EUR
2.6 million) down by 28 percent year on year.
The majority of SSH’s invoicing is based on the U.S. dollar. During
the reporting period, the U.S. dollar’s average exchange rate was
approximately 14 percent weaker than during the same period for 2007.
RESULTS AND EXPENSES
Operating loss for January–March amounted to EUR –0.8 million
(Q1/2007: EUR 0.0 million), with net loss totaling EUR
-0.6 million (a profit of EUR 0.1 million).
The fixed costs increased by approximately 3 % from January-March
2007. Research and development expenses for the report period totaled
EUR 1.0 million (EUR 0.9 million), while sales and marketing expenses
came to EUR 1.3 million (EUR 1.3 million) and administrative expenses
were EUR 0.5 million (EUR 0.5 million).
BALANCE SHEET AND FINANCIAL POSITION
The financial position of SSH remained at a healthy level during the
report period. The consolidated balance sheet total on 31 March 2008
was EUR 23.7 million (EUR 20.9 million), of which liquid assets
accounted for EUR 21.5 million (EUR 17.1 million) and 90.7 percent of
the balance sheet total. The company has no long-term liabilities. On
31 March 2008, gearing, or the ratio of net liabilities to
shareholders’ equity was –106.5% (-94.8%) and the equity ratio was
93.7 percent (93.7 percent).
The Annual General Meeting decided to renounce the share premium
reserve after transferring all its funds to the invested unrestricted
equity fund of the company. The decreasing of the share premium
reserve still requires the procedure of protecting the creditors as
defined in Chapter 14 of the Finnish Companies Act.
The reported gross capital expenditure for the period totaled EUR 0.0
million (EUR 0.0 million). The reported financial income consisted
mainly of interest on fixed-term deposits. Financial income and
expenses totaled EUR 0.2 million (EUR 0.2 million).
During January-March, SSH reported a negative cash flow of EUR -0.7
million (EUR 0.3 million positive) from business operations, and
investments showed a cash flow of EUR 1.0 million (EUR 0.0 million).
Cash flow from financing totaled EUR 0.0 million (EUR 0.0 million).
Cash flow from operations, investments and financing resulted in the
company showing a positive total cash flow of EUR 0.35 million (EUR
0.3 million) during the period.
MARKET DEVELOPMENTS
Large enterprises, financial, and public sector organizations have a
growing need for improved data security. New and existing data
security risks, continuously evolving regulations, and the increasing
security standards and models continue to create new customer needs,
to which we can respond with our versatile product offering.
In large listed companies and government agencies, the demand for
products and services for improving their internal information
security has been strong in the USA, and we expect it to spread to our
target markets in Europe and Asia.
Regulations that currently influence the demand of our products are,
for instance, the Sarbanes-Oxley 404 Act (SOX), the credit card
industry PCI DSS, the health care industry HIPAA. These regulations
demand data security audits, which drive our customers to implement
long-term security upgrade programs in the IT infrastructure against
internal and external threats.
SSH is confident that legislative reforms, new data security
standards, as well as many industry and company level data security
development programs will continue to drive the demand favorably for
SSH Tectia. In the short term, however, demand in the US and financial
services sectors contain uncertainty.
SALES PERFORMANCE
SSH’S NET SALES
EUR million 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 1-12/
2008 2007 2007 2007 2007 2007
BY SEGMENT
AMER 1.3 1.4 7.3 1.0 1.8 11.5
APAC 0.2 0.2 0.2 0.2 0.2 0.8
EROW 0.4 0.6 0.3 0.3 0.5 1.8
SSH Group total 1.9 2.2 7.8 1.5 2.6 14.1
BY OPERATION
License sales 0.7 1.1 6.8 0.6 1.6 10.1
Maintenance 1.1 1.1 1.0 0.9 0.9 4.0
Total 1.9 2.2 7.8 1.5 2.6 14.1
The Americas market area accounted for 71 percent (72 percent) of
reported net sales, while 10 percent (8 percent) came from the Asia
Pacific region, and 19 percent (20 percent) from the ‘Europe and the
Rest of the World’ markets.
During the reporting period, SSH concluded one new license agreement
that was worth more than EUR 100.000. The ten largest customers
accounted for 37 percent of reported net sales, with the largest
single customer accounting for approximately 6 percent.
PRODUCTS AND MARKETING
During the report period, SSH focused its sales and marketing efforts
on large enterprises, financial institutions, and government agencies
in the USA, Europe, and Asia, in line with its long-term strategy. The
company continued also developing its partner network in the same
focus markets.
The main themes of marketing were the company’s SSH Tectia product for
the IBM mainframe environment and the new expanded uses of SSH Tectia
for secure, automated file transfers in large organization’s internal
networks. The company also made further development of the
productisation to provide higher value, new features and expanded
uses, as well as enabling easier purchasing for the customers.
New applications, support for a wide range of enterprise operating
systems, versatile integration capabilities, and centralized
management have made SSH Tectia the most extensive integrated Secure
Shell-based end-to-end communications security solution in the market.
RESEARCH AND DEVELOPMENT
Research and development expenses for January-March totaled EUR 1.0
million (EUR 0.9 million), the equivalent of 54.8 percent of net sales
(34.9 percent). During the report period SSH didn’t capitalize any
research and development expenses.
HUMAN RESOURCES AND ORGANIZATION
At the end of March, the Group had 82 employees on its payroll, up by
3 persons from the previous year, an increase of 3.8 percent.
At the end of the period, 52.4 percent of the employees worked in R&D,
35.4 percent in sales and marketing, and 12.2 percent in corporate
administration.
BOARD AND AUDITORS
The Annual General Meeting (AGM) on 27 March 2008 re-elected Tomi
Laamanen, Timo Ritakallio and Tatu Ylönen to SSH Communications
Security Corp’s Board of Directors. Pyry Lautsuo and Juha Mikkonen
were elected as new members. Mr. Laamanen was re-elected as chairman.
The AGM again elected to have PricewaterhouseCoopers Oy, authorized
public accountants, as the company’s auditor with Henrik Sormunen,
authorized public accountant, acting as the principal auditor.
SHARES, SHAREHOLDING AND CHANGES IN GROUP STRUCTURE
The reported trading volume of SSH Communications Security Corp.
shares totaled 1,468,785 (valued at EUR 2,203,622). The highest
quotation was EUR 1.69 and the lowest EUR 1.37. The trade-weighted
average share price for the period was EUR 1.50, and the share closed
at EUR 1.52 (31 March 2008).
During the report period, the ownership structure of the company did
not change essentially. Tatu Ylönen holds, directly and through his
company, Tatu Ylönen Oy, 52.9 percent of the company’s shares,
Assetman Oy holds 14.7 % and Tero Kivinen holds 5.2 percent. More
information about the shareholding can be obtained from the company´s
web site.
Towards the end of the report period, the Group decided to have the
Japanese subsidiary SSH Communications Security K.K go into voluntary
liquidation. This is a fully owned subsidiary of SSH. This arrangement
is a part of the re-structuring of company’s Asian sales organization,
with a goal to sharpen the geographical sales focus, to increase the
role of resellers and to decrease costs.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The company’s registered share capital on March 31, 2008 was EUR
856,148.34, consisting of 28,538,278 shares. During the reporting
period SSH increased its share capital once based on subscription to
new shares under SSH’s stock option plans. In total, 750 new
SSH shares were subscribed under the I/1999 stock option plan and
1,416 shares under the I/2003 stock option plan respectively. With
these subscriptions the company’s share capital was increased by EUR
64.98.
The Annual General Meeting 27 March 2008 decided, in accordance with
the proposal made by the Board of Directors, to authorize the Board of
Directors to decide on issuing the maximum of 5,500,000 shares in one
or more new share issues or on issuing special rights to share
subscription as defined in the Finnish Companies Act Chapter 10,
section 1, with or without subscription rights to shareholders.
This authorization is effective until the next Annual General
Meeting, but will expire 30 June 2009, at the latest. The Board has
not exercised this authorization.
The Annual General Meeting also authorized the Board of Directors to
decide on dividend distribution and/or on distribution of assets from
the invested unrestricted equity fund. By virtue of the authorization,
the distributed assets can be a maximum of 0.15 euro per share and EUR
4,350,000.00 in total. The authorization is valid until 31 December
2008. Further, the Board of Directors was authorized to lower the
subscription price of shares that can be subscribed on the grounds of
the stock option plans released by the Company between years 2000 and
2003, at an amount which equates the distribution of assets. On 2
April 2008, after the end of the report period, the Board of Directors
decided to distribute 0.15 euro per share from the invested
unrestricted equity fund to the shareholders, and to lower the
subscription price of the 2000 – 2003 stock option plans by the same
amount. The date of payment was 15 April, 2008.
CORPORATE GOVERNANCE
The company complies with the corporate governance recommendations for
listed companies issued by the Helsinki Stock Exchange, the Central
Chamber of Commerce of Finland, and the Confederation of Finnish
Industry and Employers. More information on corporate governance is
available on the company’s Web site (www.ssh.com).
PROSPECTS
The US dollar exchange rate and speculations about the US economy
contain some factors of uncertainty that are hard to estimate. Our
active sales prospect base is at a historically high level, especially
in the US markets. However, time needed for completing the sales has
grown longer.
In spite of the 1st quarter negative results, the company expects the
full year results to be profitable.
Due to the large size of individual orders and depending on the timing
of customer projects, significant variation of the quarterly revenue
may occur.
INCOME STATEMENT
EUR million 1-3/ 1-3/ 1-12/
2008 2007 2007
Net sales 1.9 2.6 14.1
Purchasing and production 0.0 0.0 0.0
costs
Gross profit 1.8 2.6 14.1
Other operating income 0.0 0.1 0.1
Expenses
Product development -1.0 -0.9 -3.7
Sales and marketing -1.3 -1.3 -6.5
Administration -0.5 -0.5 -1.9
Operating profit/loss -0.8 0.0 2.2
Financial income and expenses 0.2 0.2 0.9
Profit/loss before taxes -0.6 0.1 3.0
Taxes 0.0 0.0 0.0
Net profit/loss for the -0.6 0.1 3.0
period
EARNINGS PER SHARE 1-
1- 3/2007 1-
3/2008 12/2007
Earnings per share (EUR) -0.02 0.00 0.11
Earnings per share, diluted -0.02 0.00 0.11
(EUR)
BALANCE SHEET
EUR million 31 Mar 31 Mar 31 Dec
2008 2007 2007
ASSETS
Fixed and other non-current
assets
Tangible assets 0.2 0.1 0.1
Intangible assets 0.1 0.2 0.1
Deferred tax assets 0.2 0.2 0.2
Total fixed and other 0.5 0.6 0.5
non-current assets
Inventories and current
assets
Short-term receivables 1.8 3.1 3.0
Short-term investments 19.5 15.2 20.3
Cash and cash equivalents 2.0 2.0 1.7
Total inventories and current 23.3 20.3 25.1
assets
Total assets 23.7 20.9 25.5
LIABILITIES AND SHAREHOLDERS’
EQUITY
Shareholders’ equity 20.2 18.1 20.8
Long-term liabilities
Provisions 0.2 0.0 0.2
Long-term financial 0.0 0.0 0.0
Liabilities
Total long-term liabilities 0.2 0.0 0.2
Short-term liabilities 3.3 2.8 4.5
Total liabilities and 23.7 20.9 25.5
shareholders’ equity
CASH FLOW STATEMENT
EUR million 1-3/ 1-3/ 1-12/
2008 2007 2007
Cash flow from business operations -0.7 0.3 4.8
Cash flow from investments 1.0 0.0 -4.8
Cash flow from financing 0.0 0.0 0.0
Change in liquid assets 0.4 0.3 0.1
Liquid assets at period start 1.7 1.7 1.7
Adjustment for translation 0.0 0.0 -0.1
difference
Liquid assets at period end 2.0 2.0 1.7
STATEMENT ON CHANGES IN
SHAREHOLDERS’ EQUITY
EUR million Share Share Fair Trans- Unrest- Total
capital premium value lation ricted
fund reserves diff. equity
funds
and
retained
earnings
Shareholders’ 0.9 11.5 0.1 -0.8 6.3 18.0
equity
1 Jan 2007
Change 0.0 0.0 0.0 0.0
0.1
Shareholders’ 0.9 11.5 0.1 -0.8 6.4 18.1
equity
31 Mar 2007
Change 0.0 0.0 0.0 -0.3
3.0
Shareholders´ 0.9 11.5 0.1 -1.1 9.4 20.8
equity
31 Dec 2007
Change 0.0 0.0 0.0 0.0
Net profit -0.6
Shareholders’ 0.9 11.5 0.1 -1.0 8.7 20.2
equity
31 Mar 2008
NET SALES BY SEGMENT
EUR million 1-3/ 1-3/ 1-12/
2008 2007 2007
AMER 1.3 1.8 11.5
APAC 0.2 0.2 0.8
EROW 0.4 0.5 1.8
SSH Group total 1.9 2.6 14.1
OPERATING PROFIT/LOSS
BY SEGMENT
EUR million 1-3/ 1-3/ 1-12/
2008 2007 2007
AMER 0.5 1.1 7.6
APAC 0.1 0.1 0.3
EROW -0.1 0.1 -0.1
Common Group expenses* -1.4 -1.3 -5.6
SSH Group total -0.8 0.0 2.2
* Common Group expenses include Group administration expenses (e.g.
management and finance) and product management and R&D expenses for
corporate headquarters.
KEY FIGURES AND RATIOS
1-3/ 1-3/ 1-12/
2008 2007 2007
Net sales (MEUR) 1.9 2.6 14.1
Operating profit/loss (MEUR) -0.8 0.0 2.2
Operating profit/loss, % of net -45.8 -1.5 15.3
sales
Profit/loss before extraordinary -0.6 0.1 3.0
items and taxes (MEUR)
Profit/loss before extraordinary -34.4 4.8 21.5
items and taxes, % of net sales
Profit/loss before taxes (MEUR) -0.6 0.1 3.0
Profit/loss before taxes, -34.4 4.8 21.5
% of net sales
Return on investment (%) -11.8 0.7 15.1
Return on equity (%) -12.5 0.7 15.6
Interest-bearing net liabilities -21.5 -17.1 -22.0
(MEUR)
Equity ratio (%) 93.7 93.7 91.4
Gearing (%) -106.5 -94.8 -105.8
Gross capital expenditure (MEUR) 0.0 0.0 0.1
% of net sales 0.2 0.3 0.8
R&D expenses (MEUR) 1.0 0.9 3.7
% of net sales 54.8 34.9 26.0
Personnel, period average 80 80 81
Personnel, period end 82 79 83
PER-SHARE DATA
1-3/ 2008 1-3/ 1-12/
2007 2007
Earnings per share, undiluted -0.02 0.00 0.11
(EUR)
Earnings per share, diluted -0.02 0.00 0.11
(EUR)
Equity per share (EUR) 0.71 0.64 0.73
No. of shares at period end 28 538 28 424 28 536
(thousands)
Share performance (EUR)
Average price 1.50 1.52 1.63
Low 1.37 1.15 1.12
High 1.69 1.75 2.39
Share price, period end 1.52 1.30 1.61
Market capitalization, period 43.4 37.0 45.9
end (MEUR)
Volume of shares traded 1.5 7.3 15.0
(in millions)
Volume of shares traded, % of 5.1 25.5 52.6
total
Value of shares traded (MEUR) 2.2 11.0 24.5
Price-to-earnings ratio (P/E) - 299.9 15.2
CONTINGENT LIABILITIES
EUR million 31 Mar 31 Mar 31 Dec
2008 2007 2007
Rental and lease liabilities –
minimum lease payments
Maturing within 1 year 0.7 0.7 0.7
Maturing between 1 and 5 1.1 1.1 1.1
years
Currency derivatives (not
included in hedge accounting)
Fair value 0.0 0.0 0.0
Nominal value 0.0 0.9 0.0
This interim report has been compiled observing IAS 34 (Interim
Financial Reporting) accounting standard. The same accounting
principles have been used in the interim report as in the financial
statement for 2006. These data are based on unaudited figures.
DISCLAIMER
The content in this report is provided by SSH Communications Security
Corp (“SSH”) and its third party content providers for your personal
information only, and does not constitute an offer or invitation to
purchase any securities. Nor does it provide any form of advice
(investment, tax, legal) amounting to investment advice, or make any
recommendations regarding particular investments or products. SSH does
not provide investment advice or recommendations to buy or sell its
shares or the shares of others. If you are interested in investing in
SSH, please contact your financial adviser for further details and
information. Past performance of SSH shares is not indicative of
future results. EXCEPT AS PROVIDED BY APPLICABLE COMPULSORY LAW SSH
EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE
AVAILABILITY, ACCURACY OR RELIABILITY OF ANY OF THE CONTENT PROVIDED,
OR AS TO THE FITNESS OF THE INFORMATION FOR ANY PURPOSE.
FINANCIAL REPORTING
The company will hold a briefing on its interim report for equity
analysts and the media in Hotel Scandic Simonkenttä, 1st floor,
Cabinet Lönkka; at address Simonkatu 9, 00100 Helsinki on Wednesday,
23 April 2008, starting at 11:00 a.m.
SSH Communications Security Corp will release its next interim report
and financial statements for 1 January – 30 June 2008 on 23 July 2008.
Further information will be available on the company’s web site in due
course.
Helsinki, 23 April 2008
SSH COMMUNICATIONS SECURITY CORP
Board of Directors
Arto Vainio
CEO
Investor Relations/CFO
Mika Peuranen
Tel: +358 20 500 7419
E-mail: 