Helsinki, Finland -
February 4, 2004
Financial Statements Bulletin for January 1 - December 31, 2003
- SSHs operating results turned positive and were EUR 5.3 million
(EUR -14.1 million), i.e. 38.2 percent (-83.7 percent) of net sales.
- The OEM business divestment to SafeNet, Inc. for approx. EUR 12
million increased the results for 2003 by approx. EUR 10.5 million.
- Reported net sales fell by 17.6 percent, to EUR 13.9 million (EUR
16.8 million in 2002), due to the OEM business divestment.
- In the fourth quarter the revenue of SSH Tectia(TM) Enterprise
Security Products targeted at end-user companies increased about 37
percent compared to the third quarter.
- The companys fixed expenses decreased as planned during 2003, by
about EUR 9.8 million, or by 36 percent. Gross margin for the fourth
quarter rose to nearly 100 percent as the royalties paid to F-Secure
Oyj were terminated.
- In October, SSH introduced two significant new products for its SSH
Tectia solution. SSH Tectia Manager and SSH Tectia Connector
complement the solution and strengthen SSHs position as the worlds
leading supplier of Managed Security Middleware solutions.
KEY FIGURES
10-12/ 10-12/ 2003 2002
2003 2002
Net sales, EUR million 2.9* 4.4 13.9* 16.8
Net sales, change % -35.2 -9.3 -17.6 -15.4
Operating profit/loss, 9.3 -2.2 5.3 -14.1
EUR million
% of net sales 326.9 -48.8 38.2 -83.7
Operating profit/loss, 524.0 7.7 137.6 -109.3
change %
Profit/loss before 9.6 -1.7 5.6 -13.6
extraordinary items and
taxes, EUR million
% of net sales 336.6 -38.2 40.8 -80.6
Number of employees, 104 147 104 147
period-end
Earnings/share, EUR 0.20 -0.49
Equity/share, EUR 1.49 1.30
* = Due to the OEM business divestment, completed on November 18,
2003, net sales for 2003 are not fully comparable with those for 2002.
NET SALES
SSHs consolidated net sales decreased by 17.6 percent from the
previous year, to EUR 13.9 million (EUR 16.8 million in 2002). Net
sales for the last quarter fell by 15 percent from EUR 3.3 million in
the third quarter, ending up at EUR 2.9 million (EUR 4.4 million), the
underlying reason for the fall being the OEM business divestment to
the American company SafeNet, Inc. in the last quarter of 2003. The
net sales of the OEM business were transferred at the conclusion of
the sale to the new owner. The sold OEM business accounted for approx.
35 percent of SSHs net sales in 2003. Parent company net sales fell
by 22.8 percent, amounting to EUR 8.6 million for the fiscal year (EUR
11.1 million).
The SSH Tectia product concept launched in the final quarter was well
received by the markets. SSH also achieved the first sale and delivery
of SSH Tectia Manager product to a major US financial institution.
However, due to the long sales process and the timing of the product
launches that are part of the concept, the new products did not have a
significant influence on net sales for the last quarter.
Consolidated net sales for 2003 were also substantially affected by
the weaker US dollar against the euro. The average rate of US dollar
during 2003 fell by 19.7 percent compared to its average rate during
the previous year. The majority of SSHs invoicing is based on US
dollars.
RESULTS AND EXPENSES
SSHs consolidated operating profit for the fiscal year reached EUR
5.3 million (EUR -14.1 million), while net profit for the same period
amounted to EUR 5.6 million (EUR -13.6 million). Parent-company
operating profit came to EUR 5.6 (EUR -7.7 million) and net profit for
totaled EUR 6.6 million (EUR -8.0 million). Fourth quarter
consolidated operating profit amounted to EUR 9.3 million (EUR -2.2
million), while net profit for the period was EUR 9.6 million (EUR 1.7
million).
Due to the OEM business divestment, the Groups financial position
improved during 2003, with consolidated cashflow at EUR +4.4 million
and that of the parent company at EUR +4.9 million.
The effects of the companys adjustment measures initiated in 2002
were reflected in SSH Groups profitability improvements in 2003. The
company was successful in its aim to trim its costs to correspond to
the changed market situation. The companys reported fixed expenses
amounted to EUR 17.4 million, compared to EUR 27.2 million in the
previous year, showing a year-on-year fall of 36.0 percent.
When comparing with the figures from 2002, it is important to note
that SSH Groups results in 2002 were burdened by write-downs and
certain non-recurring expenses. These non-recurring expenses entered
in 2002 totaled EUR 5.1 million.
R&D expenses totaled EUR 5.2 million in 2003 (EUR 8.2 million), while
amounting to EUR 1.2 million (EUR 1.7 million) in the fourth quarter.
During the fiscal year as a whole, R&D spending accounted for
approximately 37 percent of net sales.
Sales and marketing expenses for the period came to EUR 9.6 million
(EUR 14.7 million), while administrative expenses amounted to EUR 2.6
million (EUR 4.3 million).
Fourth-quarter sales and marketing expenses came to EUR 2.7 million
(EUR 3.2 million), while administrative expenses for the same period
amounted to EUR 0.4 million (EUR 0.8 million).
Return on investment (ROI) was 16.6 percent (-30.6 percent) and return
on equity (ROE) came to 14.6 percent (-31.7 percent). Earnings per
share (EPS) were EUR 0.20 (EUR -0.49) and equity per share amounted to
EUR 1.49 (EUR 1.30).
BALANCE SHEET AND FINANCIAL POSITION
The consolidated balance sheet total on December 31, 2003 stood at EUR
43.9 million (EUR 42.0 million), of which liquid assets accounted for
EUR 36.7 million (EUR 34.7 million), or 83.6 percent of the balance
sheet total. The parent-company balance sheet total on December 31,
2003 was EUR 50.1 million (EUR 45.1 million). Except for the
subordinated loan of EUR 0.2 million in shareholders equity granted
by the National Technology Agency (TEKES), the company has no other
long-term liabilities.
Gearing, or the ratio of net liabilities to shareholders equity,
remained at the previous years level almost throughout the financial
year, standing at -88.5 percent (-95.8 percent) at the end of
December. The Group has no other interest-bearing liabilities except
for the above-mentioned subordinated loan. Equity-to-assets ratio on
December 31, 2003 was 94.7 percent (88.7 percent).
Reported gross capital expenditure totaled EUR 0.8 million (EUR 0.4
million), comprising mainly parent-company investments in machinery
and software. Reported financial income consisted of interest income.
Financial income and expenses totaled EUR +0.4 million, compared to
EUR +0.5 million in the previous year. Interest income for 2003
amounted to EUR +1.1 million, but the financial income was affected by
exchange rate losses. The parent company recorded financial income and
expenses of EUR +0.8 million, compared to the previous years EUR -0.4
million.
A total of EUR 10.5 million of capital gains on the divestment of the
OEM business was entered in other income from business operations.
A total of EUR 0.8 million of product development funding, granted by
the National Technology Agency (TEKES), was entered in other income
from business operations. The Group had two TEKES projects under way
during the report period.
MARKET DEVELOPMENTS
SSHs customers pursued a cautious investment policy throughout 2003.
Larger IT investments were often split into smaller orders and
implemented stage by stage over the course of several quarters.
Customers also tended to postpone their investment decisions. Hardware
and software manufactures, too, tended to shy away from the launch of
R&D projects.
During the first half of 2003, the market situation remained extremely
challenging. During the third quarter, markets began to show their
first signs of slight recovery, the mildly favorable trend also
continuing during the fourth quarter. In North America, the companys
main market area, growing IT budgets of large corporations, financial
institutions and the US government sector initiated increasing IT
allocations to data security. As customers tend to be very careful
with analyzing the costs and benefits of investments, the
opportunities provided by the centrally-managed SSH Tectia solution
for cutting costs and managing risks more efficiently were well
received by the markets.
The interest of potential European customers in the SSH Tectia
solution increased steadily during the last quarter. SSH succeeded in
strengthening its position especially on SSH Tectia product markets
based on the Public Key Infrastructure (PKI) in Great Britain and
Finland. During 2003, Great Britain, Germany, Switzerland and
Austria, as well as the Nordic countries, consolidated their positions
as the most interesting individual markets in Europe from the
companys point of view.
SSH is confident that the SSH Tectia solution will strengthen its
competitive position in the markets for major companies, financial
institutions and public-sector organizations. As the worlds leading
supplier of Managed Security Middleware solutions, SSHs market
position is unique, and there are no direct competitors on the end-
user company markets for the SSH Tectia solution.
SALES PERFORMANCE
SSHS NET SALES
EUR million 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 1-12/
2003 2003 2003 2003 2002 2002
BY SEGMENT
AMER 1.6 1.2 1.8 2.0 2.0 7.1
APAC 0.5 0.7 0.7 0.3 0.8 2.2
EROW 0.8 1.4 1.6 1.3 1.6 7.5
SSH Group total 2.9 3.3 4.1 3.6 4.4 16.8
BY PRODUCT*
Enterprise Security 2.5 1.8 3.0 2.0 3.2 10.4
Products
OEM products 0.4** 1.5 1.1 1.6 1.2 6.4
SSH Group total 2.9 3.3 4.1 3.6 4.4 16.8
* Due to changes in the product portfolio, the figures for 2002 are
not completely comparable with those for 2003.
** Due to the OEM business divestment to SafeNet, Inc., the net sales
for OEM products were entered in the fourth quarter until November 18,
2003.
By focusing on large corporations, financial institutions and public
sector organizations, SSH succeeded in increasing the average size of
potential customer contracts during the report period. However, due to
the changes in size and nature of the contracts, the sales process has
become longer. The delay of the product development of some products
within the SSH Tectia solution postponed the final investment decision
of a few customers until the beginning of 2004.
The Americas, Asia Pacific, and Europe and Rest of the World accounted
for 47.3 percent (42.2 percent), 15.5 percent (12.9 percent) and 37.2
percent (44.9 percent) of reported net sales, respectively. The USA
remained SSHs main market area during the report period, and its
share grew over the previous quarter, mainly due to the fact that some
of the deals transferred from the third quarter were implemented
during the fourth quarter. The decrease in Asia Pacifics net sales in
comparison with the previous quarter was due to the fact that the
divested OEM business had formed the main part of the areas sales in
the previous quarters. The drop in Europes share was due to the
postponement of some major deals for 2004.
In line with its strategy, SSH focused its sales on Enterprise
Security Products targeted at end-user companies, their share of the
companys net sales showing a year-on-year growth. Accounting for 66.4
percent (61.7 percent) of reported net sales, Enterprise Security
Products incorporate the SSH Tectia solution, consisting of the end-
user versions of the former SSH Secure Shell product family, the SSH
Certifier product family and IPVia hardware technology license fees.
In the fourth quarter the revenue of SSH Tectia Enterprise Security
Products targeted at end-user companies increased about 37 percent
compared to the third quarter. OEM products for hardware and software
manufacturers accounted for 33.6 percent (38.3 percent) of reported
net sales. This product group includes Toolkit and SSH Sentinel
products.
During the report period, SSH concluded 18 customer agreements, each
worth more than EUR 100,000, 5 of which during the last quarter. SSHs
ten largest customers accounted for 29.5 percent of reported net
sales. However, none of the customers represents over 10 percent of
net sales, in other words, the company does not depend on a single
customer.
During 2003, SSH reinforced considerably its global partner network.
During the second and third quarters, the company concluded major
distributor agreements of its products with the US companies iGov.com
and Lyme Computer Systems, both providing the US government sector in
particular with a broad range of SSHs products.
In Europe, SSH intensified cooperation with its partners, above all in
the sales of PKI products. SSH was also in close cooperation with both
Siemens Oy and Fujitsu Invia concerning the SSH Tectia Certifier
product.
PRODUCTS AND MARKETING
During 2003, SSH continued to develop its product range according to
strategy and introduced several significant product innovations onto
the market. The company also increasingly focused its R&D resources on
projects in line with its strategy, the aim of which is to strengthen
SSHs leading position as a provider of Managed Security Middleware.
During the third quarter, SSH launched the SSH Tectia solution, which
is based on innovative data security architecture. The development of
SSH Tectia, which falls into the new Managed Security Middleware
product category, is part of the strategic decision previously
announced by SSH to meet the increasing data security needs of large
corporations.
During the fourth quarter, SSH launched two major new products for its
SSH Tectia solution: SSH Tectia Manager and SSH Tectia Connector. SSH
Tectia Manager enables centralized implementation and administration
of the SSH Tectia data security solution located at the middleware
level, while reducing the large companies total data security
expenses. SSH Tectia Connector is an invisible workstation application
for the end-user, responsible for the protection of the connection
between the workstation and the server without separate configuration
of individual business applications.
During 2003, SSH also launched new versions of most of its products
already on the market. The company continued to revise its product
range by discontinuing the manufacture, sale and marketing of the SSH
Secure Shell for Handhelds, designed for wireless terminals, as well
as integrating the SSH Accession(TM) product as part of the SSH Tectia
solution. Furthermore, SSH signed a licensing agreement with a major
Japanese hardware manufacturer for licensing its VPN hardware
technology.
SSH was also successful in international product reviews. During the
first quarter of 2003, it received the "NSS Approved" certification
for its SSH Certifier™ product, awarded by an independent
international testing organization. The SSH Secure Shell product
(currently the SSH Tectia Client/Server), designed for secure remote
connections, received the data security award from the international
Information Security magazine and, for the third time in a row, it won
the highly recognized "Best Communications Security Solution" award
from SC Magazine.
At the end of the last quarter, SSH received the FIPS 140-2
certification from NIST (National Institute of Standards Technology)
for the crypto module used in many of its products, which is expected
to support SSHs marketing and sales efforts in its selected customer
segments.
RESEARCH AND DEVELOPMENT
SSH continued its research and development spending in 2003, reported
R&D expenses totaling EUR 5.2 million (EUR 8.2 million), which
accounts for 37.4 percent of net sales (49.0). During the third and
fourth quarters, the company put dedicated efforts into the
development of products within the SSH Tectia solution.
Since the beginning of 2003, SSH has adopted an accounting principle
complying with the IAS standard for its R&D expenditure, according to
which it will capitalize only product development expenses caused by
the commercialization of new products at the end of R&D processes.
Such R&D expenses incurred during 2003 totaled EUR 0.2 million,
resulting from the commercialization of the new SSH Tectia Manager
solution. SSH will continue to expense the majority of its R&D
expenses.
In connection with the divestment of the OEM business, SSH sold some
of the patents belonging to the OEM business to SafeNet, Inc. SSH
still holds several major patents related to data security as well as
easy product installation and manageability. At the end of December,
SSH held 7 patents while 19 were pending.
At the end of 2003, SSH appointed Jorma Kemppinen, M.Sc.
(Engineering), 38, Vice President of R&D and Technical Services, and
member of the Executive Management Team. He is responsible for SSHs
R&D resources, operations and technical services.
During 2004, R&D at SSH will pay particular attention to the easy
installation and manageability of its products.
HUMAN RESOURCES AND ORGANIZATION
At the end of the report period, SSH Group had 104 employees on its
payroll. The number of employees decreased by 43 over the previous
year, or by 41.3 percent. At the end of the period, 39.4 percent of
the personnel worked in R&D, 42.3 percent in sales and marketing, and
18.3 percent in administration.
During the first quarter of 2003, SSH deployed all of its R&D
operations to its office in Helsinki. As a result of the Information
and Consultation Procedures relating to the closure of the Kuopio
office, the number of employees decreased by 11.
During 2004, the company will moderately increase the number of
employees in R&D, customer support and sales.
BOARD AND AUDITORS
Until the Annual General Meeting (AGM) on April 29, 2003, SSH
Communications Security Corps Board of Directors consisted of Bo
Harald, Tapio Kallioja, Tomi Laamanen and Tatu Ylönen. The AGM elected
the following Board members: Tapio Kallioja, Tomi Laamanen, Timo
Ritakallio and Tatu Ylönen. Tomi Laamanen was re-elected as Chairman.
PricewaterhouseCoopers Oy, Authorized Public Accountant, was re-
elected as the companys auditors, with Henrik Sormunen, Authorized
Public Accountant, acting as the principal auditor.
SHARES AND SHAREHOLDING
The reported trading volume of SSH Communications Security Corp shares
for the financial year totaled 7,625,766 shares (valued at EUR
9,986,848.57), i.e. 27.5 percent of the shares changed hands. The
highest quotation for the year was EUR 2.36 and the lowest was EUR
0.61. The trade-weighted average price for the year was EUR 1.31, and
the companys share closed at EUR 1.70 on the final trading day of the
year (December 31, 2003). Fourth-quarter trading volume totaled
2,339,100 shares (valued at EUR 3,992,135.50), i.e. 8.4 percent of the
shares changed hands at a low of EUR 1.55 and a high of EUR 2.05.
There were no substantial changes in SSH Communications Security
Corps shareholding during the financial year. The period-end number
of shareholders totaled 7,174 (7,571). On December 31, 2003, the ten
largest shareholders accounted for 76.2 percent (74.7 percent) of the
companys shares and voting rights. Applied Computing Research Ltd
(ACR) still holds 61.1 percent of the companys shares. Foreign
shareholding accounted for 0.9 percent.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The companys registered share capital on December 31, 2003 came to
EUR 832,074.30, consisting of 27,735,810 shares. SSH increased its
share capital three times during 2003, based on share subscriptions
according to SSHs stock options. The number of shares subscribed on
the basis of the 1999 stock options totaled 21,875, increasing the
companys share capital by EUR 656.25.
The companys AGM authorized the Board to decide by 29 April 2004 to
increase the companys share capital through a rights issue and/or
granting stock options or issuing bonds with warrants, or convertible
bonds, in such a way that the resultant share capital may increase by
a maximum of EUR 120,000. The Board did not exercise this
authorization by the end of the report period.
The AGM approved SSHs new stock-option schemes. On the basis of the
stock-option scheme I/2003, the company may offer its personnel a
maximum of 625,000 stock options. Each stock option entitles the
holder to subscribe for one SSH Communications Security Corp share, at
a nominal value of 3 cents. Depending on the type of warrant, the
subscription period will begin in several tranches, on May 1, 2004,
May 1, 2005 or May 1, 2006, and end on May 1, 2009, for all stock
options. The share subscription price is the closing price of SSH
shares, as quoted in continuous trading on the Helsinki Exchanges on
May 6, 2003, plus 10 percent, and rounded upwards to the nearest ten
cents (EUR 0.87). As a result of the subscriptions, the companys
share capital may rise by a maximum of EUR 18,750.
On the basis of the II/2003 stock-option scheme, SSH may offer its
personnel in the USA a maximum total of 75,000 stock options. Each
stock option entitles the holder to subscribe for one SSH
Communications Security Corp share, at a nominal value of 3 cents.
Depending on the type of warrant, the subscription period will begin
in several tranches, on May 1, 2004, May 1, 2005, May 1, 2006 or May
1, 2007, and end on April 29, 2013, for all stock options. The share
subscription price is the closing price of SSH shares, as quoted in
continuous trading on the Helsinki Exchanges on May 6, 2003, plus 10
percent, and rounded upwards to the nearest cent (EUR 0.87). As a
result of these subscriptions, the companys share capital may rise by
a maximum of EUR 2,250.
ADOPTION OF IAS-BASED ACCOUNTING PRINCIPLES
SSH has progressed as planned in the adoption of the IFRS accounting
principles. Since the beginning of 2002, the Group has adopted revenue
recognition principles complying with the IFRS standards. During the
project the company has prepared itself for adopting the existing IFRS
standards and the related financial reporting procedures. The company
has also made preparations for the adoption of those IFRS standards
that will be published in 2004.
The company is preparing the balancing calculations related to
shareholders equity and profit, and their announcements, as specified
by IFRS1 governing the transitional period. The differences in these
balancing calculations governing the transfer period are not
significant for the SSH Group, i.e. the transitional period will not
have a great impact on the Groups shareholders equity.
SSH will publish its first IFRS-based Interim Report for Q1/2004 and
the first IFRS-based Annual Report the financial year 2004.
PROSPECTS FOR 2004
In 2003, in line with its strategy, SSH completed its transformation
from a technology supplier to a supplier of complete data security
solutions for end-user companies. A crucial step in this process was
the divestment of the OEM business in the fall of 2003, related to the
companys hardware and software manufacturers.
The basis for this divestment was strategic, especially the need to
invest in the growing SSH Tectia business. Withdrawing from the OEM
products releases SSHs management, sales, marketing and R&D
capacities to the business focusing on system-level products for end-
users, providing the company with significantly greater opportunities
for long-term growth and profitability. The company will focus on
serving selected end-user segments, i.e. large corporations, banks,
other financial institutions and public-sector organizations.
In 2004, SSH will place particular emphasis on the development of its
sales organization, R&D and technical services. The re-focused
technology range offers excellent possibilities in this respect, and
the company can focus more efficaciously on the increase of its SSH
Tectia solution business. SSH will also continue to develop new forms
of cooperation with its current customers. Ready to strengthen its
position across all markets, SSH is geared up for sharp competition.
Despite the cautiously positive signs during the last two quarters of
2003, the market situation will remain challenging in 2004. Customers
remaining very careful with their investment decisions, they will tend
to split their larger IT investments into smaller wholes. However, as
the market revival continues and customer companies put their
investments into action, SSH will retain a sound basis for increasing
its net sales.
In light of current developments, it is estimated that SSH Group's
net sales for 2004 will be between EUR 14 million and EUR 16 million.
The companys management expects that the SSH Tectia solution,
including the new products SSH Tectia Manager and SSH Tectia
Connector, which were launched and well received during the last
quarter in 2003, will increase the average size of contracts while
contributing to net sales.
The companys management estimates that the SSH Group will show an
operating profit for the fiscal year 2004.
The predicted net sales and operating profit depend on how well the
SSH Tectia solution will sell and how SSH will succeed in expanding
its sales organization.
The aim of the company is to be the leading supplier of Managed
Security Middleware used in internal data security for large
corporations, financial institutions and public-sector organizations.
BOARD PROPOSAL TO THE ANNUAL GENERAL MEETING
The Board proposes that no dividend be paid for the fiscal year 2003
and that the net profit of EUR 6,487,849.73 reported for the period be
entered in the shareholders equity.
FINANCIAL STATEMENTS
CONSOLIDATED INCOME
STATEMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2003 2002 2003 2002
Net sales 2.9 4.4 13.9 16.8
Materials and services 0.0 -1.1 -2.5 -4.6
Gross margin 2.8 3.3 11.3 12.2
Expenses
R&D -1.2 -1.6 -5.2 -8.2
Sales and marketing -2.7 -3.3 -9.6 -14.7
Administration -0.4 -0.8 -2.6 -4.3
Other operating income 10.8 0.2 11.3 0.9
Operating profit/loss 9.3 -2.2 5.3 -14.1
Financial income and 0.3 0.4 0.4 0.5
expenses
Profit/loss before 9.6 -1.7 5.6 -13.6
extraordinary items and
taxes
Profit/loss before taxes 9.6 -1.7 5.6 -13.6
Taxes* 0.0 0.0 0.0 0.0
Net profit/loss for the 9.6 -1.7 5.6 -13.6
period
* Taxes are proportionate to the net profit for the period.
1-12/ 1-12/
2003 2002
Earnings per share, EUR 0.20 -0.49
Earnings per share 0.20 -0.48
(diluted), EUR
CONSOLIDATED BALANCE SHEET
EUR million Dec. 31, Dec. 31,
2003 2002
ASSETS
Fixed and other non-
current assets
Intangible assets 1.6 1.0
Tangible assets 0.3 0.6
Inventories and current
assets
Inventories 0.0 0.8
Short-term receivables 5.4 4.9
Short-term investments 29.2 20.4
Cash in hand and at bank 7.6 14.3
Total assets 43.9 42.0
LIABILITIES AND
SHAREHOLDERS EQUITY
Shareholders equity 41.5 36.2
Obligatory provisions 0.0 1.5
Liabilities 2.4 4.3
Total liabilities and 43.9 42.0
shareholders equity
CONSOLIDATED CASHFLOW STATEMENT
EUR million 1-12/ 1-12/
2003 2002
Cashflow from business 5.5 -9.5
operations
Cashflow from investments -1.1 -0.4
Cashflow from financing 0.0 0.0
Change in liquid assets/increase 4.4 -9.9
(+), decrease (-)
Liquid assets at period-start 34.7 44.6
Liquid assets at period-end* 39.1 34.7
* Liquid assets consist of cash in company's bank accounts, as well as
other securities.
SSH Communications Security Corp has neither long-term receivables nor
liabilities. The subordinated loan of EUR 245,218, at the base rate
determined by the Bank of Finland plus one percentage point, and with
a maturity of eight years, was granted by the National Technology
Agency.
SHARE-
HOLDERS
EQUITY
EUR million Share Issue Retained Net Subord Total
capital premium profit profit inated
fund /loss /loss loan
for
the
period
Shareholders 0.8 54.6 -5.5 0.0 0.2 50.1
equity
January 1,
2002
Shareholders 0.8 54.6 -5.9 -13.6 0.2 36.2
equity
December 31,
2002
Shareholders 0.8 41.0* -6.2* 5.6 0.2 41.5
equity
December 31,
2003
* According to the decision made by the Annual General Meeting on
April 29, 2003, the parent companys loss shown in the balance sheet
has been covered by reducing the issue premium fund.
NET SALES BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2003 2002 2003 2002
AMER 1.6 2.0 6.5 7.1
APAC 0.5 0.8 2.2 2.2
EROW 0.8 1.6 5.1 7.5
SSH Group total 2.9 4.4 13.8 16.8
OPERATING PROFIT/LOSS
BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2003 2002 2003 2002
AMER 0.9 -0.3 12.5 -6.6
APAC 0.1 0.4 0.1 -0.9
EROW 8.8 -0.3 -0.2 2.8
Common Group Expenses* -0.6 -2.0 -7.2 -9.4
SSH Group total 9.3 -2.2 5.3 -14.1
* Common Group Expenses include Groups administration expenses (e.g.
Management, Finance) and headquarters Product Management and R&D
expenses.
KEY FIGURES
1-12/ 1-12/
2003 2002
Net sales, EUR million 13.9 16.8
Operating profit/loss, EUR 5.3 -14.1
million
Operating profit/loss, % of net 38.2 -83.7
sales
Profit/loss before extraordinary 5.6 -13.6
items and taxes, EUR million
Profit/loss before extraordinary 40.8 -81.0
items and taxes, % of net sales
Profit/loss before taxes, EUR 5.6 -13.6
million
Profit/loss before taxes, 40.8 -81.0
% of net sales
Return on investment, % 16.6 -30.0
Return on equity, % 14.6 -31.7
Interest-bearing net -36.5 -34.5
liabilities, EUR million
Equity ratio, % 94.7 88.7
Net gearing, % -88.5 -95.8
Gross capital expenditure, 0.8 0.4
EUR million
% of net sales 6.2 2.6
R&D expenses, EUR million 5.2 8.2
% of net sales 37.4 49.0
Personnel, on average 131 166
Personnel, period-end 104 147
From the industrys point of view, the orderbook is not a significant
Note to the Accounts.
PER-SHARE DATA
1-12/ 1-12/
2003 2002
Earnings/share, EUR (undiluted) 0.20 -0.49
Earnings per share, EUR (diluted) 0.20 -0.48
Equity/share, EUR 1.50 1.30
Volume of shares, period-end, 1000 27 736 27 714
Share performance, in EUR
Average price 1.31 1.66
Low 0.61 0.60
High 2.36 3.70
Share price, period-end 1.70 0.75
Market capitalization, period-end, 47.2 20.8
EUR million
Volume of shares traded, 7.6 4.3
million
Volume of shares traded, 27.5 15.5
% of total
Value of shares traded, EUR 10.0 7.1
million
Price-earnings ratio (P/E) 8.3 -1.6
CONTINGENT LIABILITIES
EUR million Dec. 31, Dec. 31,
2003 2002
Assets pledged
Rental liabilities 0.2 0.8
Leasing liabilities 0.2 0.3
Other liabilities 2.3 0.0
Derivatives
The company has hedged its US dollar based receivables. The hedged
amount is USD 2.0 million.
The social overheads based on stock options exercised during the
financial period have been entered as expenses in the profit and loss
account. The social overhead expenses based on stock options
exercisable in the future would be EUR 17,430, calculated using the
closing price of the companys share (EUR 1.70) on the last day of the
financial period. Any social overhead expenses based on stock options
exercisable in the next few years have not been presented in the
income statement or the consolidated balance sheet.
The figures are unaudited.
SHAREHOLDERS
The companys 10 largest shareholders, including nominee-registered
shares, were as follows on December 31, 2003:
Applied Computing Research (ACR) Oy 61.1%
Ylönen Tatu 3.7%
Assetman Oy 1.8%
Promotion Capital I Ky 1.7%
Nixu Oy 1.7%
Ilmarinen Mutual Pension Insurance Company 1.6%
Grahn Juha 1.5%
Kaukonen Kalle 1.3%
Markula Jussi 0.9%
Kaleva Mutual Pension Insurance Company 0.8%
Total 76.2%
Nominee-registered shares 0.5%
FINANCIAL REPORTING
A briefing on the financial statements for analysts and the media will
be held in the auditorium on the 1st floor of SSHs head office at
Fredrikinkatu 42, Helsinki, Wednesday, on February 4, 2004, starting
at 11:00 a.m. Entrance from the corner of Fredrikinkatu and
Malminkatu.
SSH Communications Security Corp will release its interim reports for
2004 as follows:
Interim Report for Q1/2004 April 20, 2004
Interim Report for H1/2004 July 21, 2004
Interim Report for Q1-Q3/2004 October 20, 2004
Helsinki, February 4, 2004
SSH COMMUNICATIONS SECURITY CORP
Board of Directors
Arto Vainio
CEO
CEO
Arto Vainio
Tel: +358 20 500 7400
Investor Relations/CFO
Mika Peuranen
Tel: +358 20 500 7419
E-mail: 
© 2004 SSH Communications Security Corp. All rights reserved. ssh® is a registered trademark of SSH Communications Security Corp in the United States and in certain other jurisdictions. All other names and marks are property of their respective owners.