Helsinki, Finland -
April 20, 2004
SSH's interim report for January 1 - March 31, 2004
- Net sales for January-March totaled EUR 1.7 million, down 53 percent
year on year (EUR 3.6 million in Q1/2003).
- Compared to the net sales of products belonging to the SSH
Tectia(TM) solution net sales fell by 14 per cent year on year.
- Due to the slower than expected progress of customer projects SSH
lowers its revenue estimation for the whole year 2004 to be between
EUR 10 million and EUR 12 million.
- The merger of Applied Computing Research (ACR) Oy, the parent
company, with SSH will streamline SSHs corporate structure.
- Since the beginning of 2004, SSH has applied the International
Financial Reporting Standards (IFRS), instead of the Finnish
Accounting Standards. The adoption of IFRS has had no material effect
on SSH Groups financial information.
KEY FIGURES
1-3/ 1-3/ 1-12/
2004 2003 2003
Net sales, EUR million 1.7 3.6 13.9
Net sales, change % -53.4 -18.2 -17.6
Operating profit/loss, 5.2
EUR million -2.1 -1.9
% of net sales -126.8 -54.7 37.5
Operating profit/loss, 136.9
change % -8.0 -30.4
Profit/loss before 5.5
extraordinary items and
taxes, EUR million -2.0 -2.1
% of net sales -123.0 -59.7 40.0
Number of employees 104
at period-end 106 140
Earnings per share, EUR -0.07 -0.08 0.20
Equity per share, EUR 1.40 1.23 1.48
NET SALES
Consolidated net sales for January-March totaled EUR 1.7 million (EUR
3.6 million). Compared to the net sales of products belonging to the
SSH Tectia solution net sales fell by about 14 per cent year on year.
This change in the first-quarter net sales was due to the slower than
expected progress of large customer projects. Also customer deliveries
of the new versions of the SSH Tectia Manager and SSH Tectia Connector
products, integral to the SSH Tectia solution, did not take place
until the end of February. A number of customers postponed their
launch of product tests, which rescheduled the conclusion of
agreements until a later date.
RESULTS AND EXPENSES
SSH reported an operating loss of EUR -2.1 (a loss of EUR 1.9 million)
for the first quarter, which is more or less at the previous years
level, while showing a net loss of EUR -2.0 million (a loss of EUR 1.9
million). The companys first-quarter cost structure did not include
any exceptional non-recurring expenses or any other changes due to
seasonal fluctuations.
SSHs reported fixed costs continued their decline year on year. The
first-quarter results for 2003 were still burdened by the costs
resulting from the Kuopio office and its closure, as well as those
stemming from the OEM business. Year on year, fixed costs for the
first quarter decreased by around EUR 1.2 million, half of this figure
coming from payroll expenses and half from other operating expenses.
Compared with Q4/2003, fixed costs dropped by around EUR 0.6 million.
Research and development expenses for the period totaled EUR 1.0
million (EUR 1.7 million), while sales and marketing expenses came to
EUR 2.0 million (EUR 2.5 million) and administrative expenses amounted
to EUR 0.7 million (EUR 0.9 million).
BALANCE SHEET AND FINANCIAL POSITION
The consolidated balance sheet total on March 31, 2004 stood at EUR
41.6 million (EUR 38.0 million), of which liquid assets accounted for
EUR 34.9 million (EUR 31.1 million), or 83.9 percent of the balance
sheet total. The Group has no long-term liabilities other than the
subordinated loan of EUR 0.2 million granted by the National
Technology Agency (Tekes).
Gearing, or the ratio of net liabilities to shareholders equity, was
-88.1 (-90.6) at the end of the first quarter. Equity ratio on March
31, 2004 stood at 96.0 percent (92.9 percent).
Reported gross capital expenditure totaled EUR 0.1 million (EUR 0.2
million), consisting mainly of software investments. Reported
financial income consisted of interest income. Financial income and
expenses totaled EUR 0.1 million, whereas a year ago they amounted to
EUR -0.2 million.
Since SSH, under IAS 39, classifies financial assets and other similar
assets as available-for-sale assets, it recognizes changes in their
value under shareholders equity. Only after the sale of an asset, the
company recognizes interest income in the income statement. During the
report period, the company recognized an increase of EUR 0.2 million
in the value of its financial assets.
Business operations for the period showed a negative cash flow of
around EUR 1.9 million, resulting in a negative total cash flow of
approximately EUR 1.8 million. Since cash flow from investments and
financing has only a minor impact on total cash flow, cash flow from
business operations must turn positive so that the companys total
cash flow also turns positive.
MARKET DEVELOPMENTS
During the period, there were signs of a cautious recovery in IT
investments, especially when it came to the number of projects
pending. SSHs customers became more active in submitting tenders and
launching SSH Tectia product tests, although the conclusion of actual
contracts was a slow process.
The SSH Tectia solutions customers include large enterprises,
financial institutions, and government agencies. The sales process of
a system-level product for major customers has lengthened as expected,
while the average size of contracts has grown.
The number of companies actively testing new data security solutions
increased in North America, SSHs main market area, the demand being
mainly focused on the solutions for secure remote management of
network servers and various kinds of data communication equipment.
Currently being tested by more than 30 customers, the new SSH Tectia
Manager product, which enables centralized management, was well
received in the market. First two customers have already signed the
licensing agreements.
European customers continued to show increasing interest in user
authentication solutions, based on Public Key Infrastructure (PKI),
during the first quarter. Government agencies, in particular, showed
increasing interest in SSH Tectia during the report period. For SSH,
the most interesting markets in Europe include Germany, Great Britain
and the Nordic countries.
SSHs Asian customers were primarily interested in the secure remote
management of traditional network servers and various kinds of data
communication equipment.
Both in the US and Europe, markets for secure remote management
solutions were occasionally characterized by bitter price competition.
SSH is the worlds leading supplier of Managed Security Middleware
solutions and SSH's new, centrally managed SSH Tectia solution
provides the company with a strong competitive position particularly
among large enterprises, financial institutions, and government
agencies.
SALES PERFORMANCE
NET SALES
EUR million 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 1-12/
2004 2003 2003 2003 2003 2003
BY SEGMENT *
AMER 1.0 1.6 1.2 1.8 2.0 6.5
APAC 0.2 0.5 0.7 0.7 0.3 2.2
EROW 0.5 0.8 1.4 1.6 1.3 5.1
SSH Group total 1.7 2.9 3.3 4.1 3.6 13.9
SSH TECTIA BUSINESS
Net sales** 1.7 2.3 1.6 2.5 1.9 8.3
* The figures for 2003 by segment are not fully comparable with those
for 2004 because they also include the OEM business divested in
Q4/2003.
** SSH Tectia solution was launched during the last quarter in 2003.
The net sales figures of previous quarters includes the net sales of
those products that were integrated as part of the SSH Tectia
solution.
Americas, Asia Pacific, and Europe and Rest of the World accounted for
59.1 percent (54.8 percent), 9.2 percent (8.7 percent) and 31.7
percent (36.5 percent) of reported net sales, respectively. The US
continued to strengthen its position as SSHs main market area during
the report period.
Asia Pacific and Europe and Rest of the World experienced a decrease
in their share of net sales year on year, as a result of the
divestment of the OEM business. SSH is currently taking measures to
reshape and reinforce its sales organization for SSH Tectia in these
market areas.
Net sales generated by the products belonging to the SSH Tectia
solution fell slightly from the levels reported for Q4/2003 and
Q1/2003. During the first quarter, SSH concluded one customer
agreement worth over EUR 100,000. SSHs ten largest customers
accounted for 39.1 percent of reported net sales. The share of the
largest customer was about 12 percent from the net sales, so the
company does not depend on one single customer.
PRODUCTS AND MARKETING
In line with its long-term strategy, SSH continued to focus its sales
and marketing efforts with regard to serving large enterprises,
financial institutions, and government agencies in the US, Europe and
Asia.
Its first-quarter marketing focus was on special SSH Tectia workshops
for potential customers in the USA, Great Britain and Finland,
organized by SSH alone or together with its partners. In addition, the
company exhibited at major trade fairs in both the US and Europe.
The third consecutive data security workshop organized by SSH, F-
Secure and Stonesoft in February, was attended by approximately 800
industry decision-makers and experts. This annual workshop has emerged
as one of the largest data security events held in Finland, with this
years partners including Elisa, Finnet, Fujitsu, IBM, Microsoft,
Netsol, Nixu, TeliaSonera and TietoEnator.
In February, SSH announced that it had joined the Entrust
TrustedPartner Program, launched by Entrust, Inc., a US company.
Through this strategic relationship with Entrust, Inc., the SSH Tectia
product family will be reviewed for compatibility and interoperability
with the Entrust PKI-based solutions, paving the way for SSH Tectias
more effective sales and marketing using Entrusts broad customer
base.
From SSH's point of view the relevant data security markets can be
roughly divided into three application areas - encryption of data
communications, secure remote management, and public key
infrastructure. According to SSH's estimation, the size of the market
where SSH operates, is about EUR 250 million in 2004. The estimation
is based on the reports of international market research agencies and
SSH's own estimations.
RESEARCH AND DEVELOPMENT
January-March R&D expenses came to EUR 1.0 million (EUR 1.7 million),
accounting for 62.8 percent of net sales (47.3 percent). The main
reason for this substantial decline was due to the divestment of the
OEM business in October 2003. The fact that the company closed its
Kuopio office and concentrated its product development resources on
its Helsinki site in Q1/2003 also had an effect on lower R&D expenses.
In accordance with IAS, SSH capitalizes only product development
expenses caused by the commercialization of new products at the end of
R&D processes. Such R&D expenses incurred in Q1/2004 totaled EUR 0.05
million. These capitalized expenses related to the commercialization
of the new SSH Tectia Manager solution. SSH will continue to charge
the majority of its R&D as expenses.
At the end of March, the company held nine patents while 18 were
pending.
HUMAN RESOURCES AND ORGANIZATION
During the first quarter, SSH reinforced its sales organizations in
the US west and east coasts, and Great Britain.
At the end of March, the Group had 106 employees on its payroll. The
number of employees decreased by 34 over the previous year
(-24.3 percent).
At the end of the period, 44.4 percent of the personnel worked in R&D,
37.8 percent in sales and marketing, and 17.8 percent in
administration.
SHARES, SHAREHOLDING AND CHANGES IN THE GROUP STRUCTURE
The reported trading volume of SSH Communications Security Corp shares
for the period totaled 3,764,650 (valued at EUR 8,534,607.49), i.e.
13.4 percent of the shares changed hands. The highest quotation for
the period was EUR 2.69 and the lowest EUR 1.69. The trade-weighted
average price for the period amounted to EUR 2.27, and the share
closed at EUR 1.90 (on March 31, 2004).
There were no substantial changes in SSH Communications Security
Corps shareholding during the report period. Applied Computing
Research (ACR) Oy holds 60.4 percent of the companys shares.
In March, the company announced that the Board of Directors of SSH and
Applied Computing Research (ACR) had signed a merger agreement whereby
ACR would merge with SSH. With implementation of the merger, SSH shall
issue for the current shareholders of ACR Mr. Tatu Ylönen and Mr. Tero
Kivinen 16,942,487 new shares of SSH as a consideration of the merger.
The amount of these shares equals to the amount of shares of SSH
currently owned by ACR. The assets and liabilities of the company
being acquired are transferred in the merger without liquidation
procedure to the acquiring company. The Board of Directors of SSH has
decided to propose to the Annual General Meeting of shareholders that
these shares shall be nullified.
The key objective of this merger is to streamline the corporate
structure and enhance the transparency of SSHs shareholding. The plan
is to implement the merger on October 31, 2004.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The companys registered share capital on March 31, 2004 came to EUR
841,974.30, consisting of 28,065,810 shares. The report period saw
share capital increase, based on the subscription of the new shares
under SSHs stock-option scheme. On the basis of the 1999 stock-option
scheme, a total of 330,000 new SSH shares were subscribed, with the
result that the companys share capital increased by EUR 9,900.
SSHs Annual General Meeting of April 29, 2003 authorized the Board to
decide by April 29, 2004 to increase share capital through a rights
issue and/or grant stock options or issue 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 authorization has not been
used.
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, 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 cent
(EUR 0.87). As a result of these subscriptions, the companys share
capital may increase 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 and 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. As a result of these
subscriptions, the companys share capital may increase by a maximum
of EUR 2,250.
PROSPECTS
During 2004, SSH will place particular emphasis on expanding its SSH
Tectia business and catering for the needs of the companys selected
customer segments: large enterprises, financial institutions, and
government agencies.
It will reinforce its sales organizations in its key markets in the US
east coast, Great Britain and Germany. It will also upgrade product
development and customer service in Finland.
The company will continue to develop new forms of cooperation with its
current customers. Ready to strengthen its position in all of its
markets, SSH is geared up for sharp competition.
Despite the subtle signs of optimism, markets are still looking
challenging for 2004. Customers will remain very careful with their
investment decisions, and will tend to split their larger IT
investments into smaller sub-projects. However, as markets continue to
perk up and customer companies put their investments into action, SSH
will retain a sound basis for increasing its net sales.
Due to the slower than expected progress of customer projects SSH
lowers its revenue estimation for the whole year 2004 to be between
EUR 10 million and EUR 12 million (previous estimation was 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 well received by the markets,
will make it possible to increase the average size of contracts while
contributing to reaching the new revenue target.
The amount that the net sales and operating results fell behind the
estimations during Q1/2004 cannot be recovered during the remainder of
the year. Thus the companys management estimates that the operating
results for the full fiscal year 2004 will be negative.
The predicted net sales and operating results depend on how well the
SSH Tectia solution will sell and how SSH will succeed in reinforcing
its sales organization.
The company aims to be the leading supplier of Managed Security
Middleware for large enterprises, financial institutions, and
government agencies.
ACCOUNTING PRINCIPLES
This interim report is based on accounting principles and policies
under IAS 34 (Interim Reports). Key accounting principles and their
changes, and their effects on comparatives later in this section will
describe the effects of the adoption of IFRS.
INCOME STATEMENT
EUR million 1-3/ 1-3/ 1-12/
2004 2003 2003
Net sales 1.7 3.6 13.9
Purchasing and production 0.0 -0.7 -2.5
costs
Gross profit 1.6 2.9 11.3
Other operating income 0.0 0.2 11.3
Expenses
Product development -1.0 -1.7 -5.2
Sales and -2.0 -2.5 -9.6
marketing
Administration -0.7 -0.9 -2.6
Operating profit/loss -2.1 -1.9 5.2
Financial income and expenses 0.1 -0.2 0.4
Profit/loss before taxes -2.0 -2.1 5.5
a Taxes* 0.0 0.0 0.0
Net profit/loss for the 5.5
period -2.0 -2.1
* Taxes are proportionate to the net profit/loss for the period, and
no deferred tax assets are recorded for the accrued loss during the
period.
1-3/ 1-3/ 1-12/
2004 2003 2003
Earnings per share, EUR -0.07 -0.08 0.20
Earnings per share (diluted), 0.20
EUR -0.07 -0.09
BALANCE SHEET
EUR million 31.3. 31.3. 31.12.
2004 2003 2003
ASSETS
Fixed and other non-current
assets
Intangible 1.2 0.6 1.2
assets
Tangible 0.5 0.9 0.5
assets
Deferred tax assets 0.2 0.2 0.2
Inventories 0.0 0.8 0.0
Current assets
Accounts receivable 5.2
and other receivables 4.7 4.4
b Short-term investments 33.4 27.0 33.8
Cash and cash equivalents 1.5 4.1 2.9
Total assets 41.6 38.0 43.8
LIABILITIES AND SHAREHOLDERS
EQUITY
Shareholders equity 39.4 34.0 41.1
Long-term liabilities 0.3 0.2 0.2
Short-term liabilities 1.8 3.8 2.4
Deferred tax liability 0.1 0.0 0.0
Total liabilities and 43.8
shareholders equity 41.6 38.0
STATEMENT ON CHANGES IN
SHAREHOLDERS EQUITY
EUR million Share Issue Revalu Transl Retained Tot.
capit premium ation ation earnings
al fund fund differ
ence
Shareholders 0.8 53.0 0.0 -0.3 -17.5 36.0
equity Jan.
1, 2003
Change 0.0 0.0 0.2 0.0 -2.1
Shareholders 0.8 53.0 0.2 -0.3 -19.6 34.0
equity March
31, 2003
Change 0.0 -13.6* 0.0 -0.1 21.0*
Shareholders 0.8 39.4 0.0 -0.4 1.4 41.2
equity Dec.
31, 2003
Change 0.0 0.0 0.2 0.0 0.0
Net profit -2.0
Shareholders 0.8 39.4 0.2 -0.4 -0.6 39.4
equity March
31, 2004
* Share premium fund has been lowered by the transfer to the retained
loss.
CASH FLOW STATEMENT
EUR million 1-3/ 1-3/ 1-12/
2004 2003 2003
Cash flow from business operations -1.9 -3.7 3.2
Cash flow from investments 0.0 -0.2 -1.1
Cash flow from financing 0.1 0.0 0.0
Change/increase(+), decrease (-) -1.8 -3.8 2.2
in liquid assets
Liquid assets at period-start 36.7 34.7 34.7
c Liquid assets at period-end 34.9 31.0 36.7
c) Liquid assets consist of cash and cash equivalents, as well as
other marketable securities.
NET SALES BY SEGMENT
EUR million 1-3/ 1-3/ 1-12/
2004 2003 2003
AMER 1.0 2.0 6.5
APAC 0.2 0.3 2.2
EROW 0.5 1.3 5.1
SSH Group total 1.7 3.6 13.9
OPERATING PROFIT/LOSS
BY SEGMENT
EUR million 1-3/ 1-3/ 1-12/
2004 2003 2003
AMER 0.1 0.3 1.0
APAC 0.1 -0.1 0.7
EROW -0.2 0.4 11.3
Common Group expenses* -2.1 -2.5 -7.8
SSH Group total -2.1 -1.9 5.2
* Common Group expenses include the Groups administration expenses
(e.g. Management, Finance) and the headquarters Product Management
and R&D expenses. The profit from the sale of the OEM business has
been divided into the segments.
KEY FIGURES AND RATIOS
1-3/ 1-3/ 1-12/
2004 2003 2003
Net sales, MEUR 1.7 3.6 13.9
Operating profit/loss, MEUR -2.1 -1.9 5.2
Operating profit/loss, % of net -126.8 -54.7 37.5
sales
Profit/loss before extraordinary -2.0 -2.1 5.5
items
and taxes, MEUR
Profit before extraordinary -123.0 -59.7 40.0
items
and taxes, % of net sales
Profit/loss before taxes, MEUR -2.0 -2.1 5.5
Profit/loss before taxes, -123.0 -59.7 40.0
% of net sales
Return on investment, % 15.0
Return on equity, % 14.4
Interest-bearing net -34.7 -30.6 -36.5
liabilities, MEUR
Equity ratio, % 96.0 92.9 94.7
Gearing, % -88.1 -90.6 -88.7
Gross capital expenditure, MEUR 0.1 0.2 0.8
% of net sales 4.0 4.5 6.2
R&D expenses, MEUR 1.0 1.7 5.2
% of net sales 62.8 47.3 37.4
Personnel, on average 106 144 131
Personnel, period-end 106 140 104
PER-SHARE DATA
1-3/ 1-3/ 1-12/
2004 2003 2003
Earnings per share -0.07 -0.08 0.20
EUR (undiluted)
Earnings per share, EUR -0.07 -0.09 0.19
(diluted)
Equity/share, EUR 1.40 1.23 1.48
No. of shares at period-end, 28 066 27 726 27 736
1,000
Share performance, EUR
Average price 2.27 0.74 1.31
Low 1.69 0.61 0.61
High 2.69 0.93 2.36
Share price at period-end 1.90 0.69 1.70
Market capitalization at period- 53.3 19.1 47.2
end, MEUR
Volume of shares traded, 3.8 1.3 7.6
million
Volume of shares traded, 13.4 4.7 27.5
% of total
Value of shares traded, MEUR 8.5 1.0 10.0
Price-earnings ratio (P/E) 8.35
CONTINGENT LIABILITIES
EUR million 31.3./ 31.3./ 31.12./
2004 2003 2003
Rental liabilities 0.2 0.8 0.2
Leasing liabilities 0.2 0.3 0.2
Other contingent liabilities 2.4 2.4
Currency derivatives (not 2.0 2.0
included in the hedging
calculations)
The data are based on unaudited figures.
KEY ACCOUNTING PRINCIPLES AND THEIR CHANGES, AND THEIR EFFECTS ON
COMPARATIVES (FINNISH ACCOUNTINGS STANDARDS VS. IFRS)
1. RECONCILIATION OF
NET PROFIT/LOSS
EUR million FAS CHANG IFRS FAS CHANG IFRS
1-3/ E 1-3/ 1-12/ E 1-12/
2003 2003 2003 2003
Net sales 3.6 3.6 13.9 13.9
Purchasing and -0.7 -0.7 -2.5 -2.5
production costs
Gross profit 2.9 2.9 11.3 11.3
Other operating income 0.2 0.2 11.3 11.3
Operating expenses -5.0 -5.0 -17.3 -0.1 -17.4
Operating profit/loss -1.9 -1.9 5.3 -0.1 5.2
Financial income and -0.2 -0.2 0.3 0.3
expenses total
Net profit for the -2.1 -2.1 5.6 -0.1 5.5
period
Earnings per share, -0.08 -0.08 0.20 0.20
EUR
Earnings per share -0.08 -0.01 -0.09 0.20 -0.01 0.19
(diluted), EUR
2. DATA BY SEGMENT
The adoption of IFRS did not change the Groups market division by
segment. SSH has defined these market segments - North and South
America, Europe and Rest of World, and Asia Pacific - as the primary
segments to be applied in IFRS. SSH Group currently operates through
one business segment - data security solutions. Net sales reported for
the periods in 2003, based on the Finnish Accounting Standards,
correspond to net sales by segment based on IFRS. Similarly, the
transition to IFRS has had no material effect on operating profit/loss
by segment.
3. RECONCILIATION OF BALANCE SHEET
EUR million FAS CHAN IFRS FAS CHAN IFRS
31.3. GE 31.3. 31.12. GE 31.12.
2003 2003 2003 2003
Long-term assets
a Intangible assets 1.1 -0.5 0.6 1.6 -0.4 1.2
a Tangible assets 0.4 0.5 0.9 0.2 0.3 0.5
b Deferred tax assets 0.2 0.2 0.2 0.2
Long-term assets total 1.5 0.2 1.8 1.8 0.1 1.9
Sort-term assets
b Deferred tax assets 0.2 -0.2 0.2 -0.2
Inventories 0.8 0.8 0.0 0.0
Accounts receivable 4.4 4.4 5.2 5.2
and other
receivables
c Available-for-sale 0.0 0.0 32.2 32.2
assets
c Trading assets 26.8 0.2 27.0 1.6 1.6
Cash and cash 4.1 4.1 3.0 3.0
equivalents
Short-term assets 36.3 36.3 42.2 -0.2 42.0
total
Assets total 37.8 0.2 38.0 44.0 -0.1 43.9
Share capital 0.8 0.8 0.8 0.8
d Issue premium fund 54.6 -1.6 53.0 41.0 -1.6 39.4
Fair value reserve 0.2 0.0
d Retained earnings/loss -21.7 1.7 -20.0 -0.6 1.5 0.9
c Subordinated loan 0.2 -0.2 0.2 -0.2
Shareholders equity 34.0 34.0 41.4 -0.3 41.1
total
c Interest-bearing 0.2 0.2 0.2 0.2
liabilities
Long-term liabilities 34.0 0.2 34.2 41.4 0.2 0.2
total
e Pensions 0.1 0.1
Accounts payable and 3.8 3.8 2.5 2.5
other payables
Short-term liabilities 3.8 3.8 2.6 2.6
total
Liabilities total 37.8 0.2 38.0 44.0 -0.1 43.9
The Stock Exchange Release of March 18, 2004 presents the
reconciliation of equity between the Finnish Accounting Standards and
IFRS for the date of transition to IFRS on January 1, 2003 (IFRS
opening balance sheet).
a) Intangible and tangible assets (IAS 38 and IAS 16)
Capitalized expenses resulting from the leasehold improvements on
rented premises in the USA were transferred from intangible assets to
tangible assets, in accordance with IAS 16 (Property, Plant and
Equipment). Regarding the intangible assets, the items that have not
fulfilled the recognition criteria of IAS 38 (Intangible Assets), are
recognized as expenses.
b) Income taxes (IAS 12)
In accordance with the Finnish Accounting Standards, deferred tax
assets, based on confirmed losses for taxation, were recognized in
2003 only to the amount of payable taxes, complying with special
prudence. Based on IAS 12 (Income Taxes) criteria, SSH considers that
this amount, recognized in the balance sheet in accordance with the
Finnish Accounting Standards and by exercising special prudence,
currently corresponds to the amount, for which there is convincing
evidence required by the standard that the tax assets can be utilized.
Deferred tax assets are presented under non-current assets, in
accordance with IAS 12.
c) Financial instruments (IAS 39)
IAS 39 classifies financial instruments into trading assets, held-to-
maturity investments, available-for-sale assets, and originated loans
and receivables. Group investments in financial instruments are
classified as available-for-sale assets and measured at fair value.
Changes in their fair value are recognized in revaluation reserve
under shareholders equity until they are sold or otherwise disposed
of, in which case gains and losses arising from the changes in fair
value are included in the income statement. Any resulting impairment
loss will be included in the income statement. Instead of applying
hedge accounting under IAS 39, the Group recognizes currency
derivatives at fair value in the income statement.
Subordinated loan, as provided by the Finnish Companies Act, was
transferred to long-term liabilities, in accordance with IAS 39
criteria.
d) Adjustments to retained earnings
Retained earnings adjustments on December 31, 2003 totaled EUR 1.5
million, resulting from the transfer of the companys private-
placement and listing expenses to the issue premium fund (EUR 1.6
million), in accordance with the interpretation of SIC 17, and
adjustments of EUR -0.1 million affecting the 2003 results.
e) Employee benefits (IAS 19)
The Group applies both defined benefit and defined contribution
pension plans, as classified under IAS 19 (Employee Benefits).
Contributions under the defined contribution plan are recognized as
pension expenses for the accounting period to which such contributions
relate. Disability pension obligation under the Finnish Employees
Pension Act (TEL) is interpreted as a defined benefit according to IAS
19, i.e. pension expenses under the defined benefit plan are
recognized as expenses for the period of employment, based on
calculations performed by authorized actuaries. The application of
defined benefit accounting has not had any material effect on the
previously recorded pension liability or expense under the Finnish
Accounting Standards.
4. OTHER MAJOR IFRS PRINCIPLES
Impairment (IAS 36)
Non-financial assets carrying amounts are tested for impairment
whenever there is an indication of impairment. Where an indicator of
impairment exists, the asset must be tested for impairment in such a
way that its carrying value is compared with its recoverable amount.
An assets recoverable amount is the higher of the assets net selling
price and its value in use. Where the assets carrying amount exceeds
its recoverable amount, it is impaired. The Group has not detected any
indicators of impairment.
Lease liabilities (IAS 17)
IAS 17 classifies lease liabilities into finance leases and operating
leases. This classification is based on the idea that a substantial
share of risks and rewards incident to ownership is transferred to the
lessee. Assets under finance leases are capitalized in the balance
sheet and depreciated according to the depreciation plan applied to
tangible assets. The Group holds exclusively lease liabilities
classified as financing leases.
Share-based compensation (IFRS 2)
The Group must apply the new IFRS 2 as of early 2005. Stock options,
under the scope of the said standard, must be charged as expenses at
fair value.
5. REPORT ON MAJOR ADJUSTMENTS IN CASH FLOW STATEMENT
There are no major differences between the IFRS-compliant cash flow
statement (cash flow from business operations, investments, financing)
and the cash flow statement based on the Finnish Accounting Standards.
SHAREHOLDERS
On March 31, 2004, the companys 10 largest shareholders, excluding
nominee-registered shares, were as follows:
Applied Computing Research (ACR) Oy 60.4%
Assetman Oy 3.6%
Tatu Ylönen Oy 2.3%
Ilmarinen Mutual Pension Insurance Company 1.7%
Promotion Capital I Ky 1.7%
Nixu Oy 1.7%
Grahn Juha 1.6%
Ylönen Tatu 1.3%
Kaukonen Kalle 1.2%
Adams George 1.2%
Total 76.7%
FINANCIAL REPORTING
A briefing on SSHs financial performance for Q1/2004 for analysts and
the media will be held in the auditorium on the 1st floor of SSHs
head office at Fredrikinkatu 42, Helsinki, Tuesday, on April 20, 2004,
starting at 11:00 a.m.
The entrance is on the corner of Fredrikinkatu and Malminkatu.
SSH Communications Security Corp will release its next interim report
for H1/2004 on July 21, 2004.
Helsinki, April 20, 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.