Helsinki, Finland -
February 9, 2005
Financial Statements Bulletin January 1-December 31, 2004
- Reported net sales fell by 40.6 percent, to EUR 8.2 million (EUR
13.9 million in 2003). 2004 net sales are not comparable with the 2003
figure, due to the divestment of the OEM business.
- The SSH Tectia business grew by 3.1 percent on the previous year.
- In the companys main market area, the US, sales in US dollars from
the Tectia business increased by 29.8 percent compared with 2003.
- Operating loss for the fiscal year amounted to EUR -6.4 million (EUR
+5.2 million in 2003).
- SSH completed several exceptionally large development projects in
sales, marketing and product development, to help ensure future growth
and profitability.
- In 2004, the company concluded 12 customer agreements, each worth
over EUR 100,000, three of which were signed during the fourth
quarter.
- SSH was able to increase the size of its contracts in line with its
strategy, and signed its largest ever contract with an American
systems integrator during the second quarter.
- As of the beginning of the year, SSH has applied the International
Financial Reporting Standards (IFRS), instead of the Finnish
Accounting Standards. More detailed information on the adoption of
IFRS was given in a stock exchange release dated March 18, 2004.
KEY FIGURES
10-12/ 10-12/ 1-12/ 1-12/
2004 2003 2004 2003*
Net sales, EUR million * 1.9 2.9 8.2 13.9
Net sales, change % -33.12 -35.2 -40.6 -17.6
Operating profit/loss, -1.7 9.3 -6.4 5.2
EUR million
% of net sales -89.4 324.3 -77.2 37.5
Operating profit/loss, -118.4 524.0 -222.4 136.9
change %
Profit/loss before -1.7 9.5 -5.8 5.5
extraordinary items and
taxes, EUR million
% of net sales -87.4 334.0 -70.7 40.0
Number of employees 105 104 105 104
at period-end
Earnings per share, EUR -0.21 0.20
Shareholders 1.26 1.48
equity/share, EUR
* = Due to the OEM business divestment, completed on November 18,
2003, net sales for 2003 are not comparable with those for 2004.
NET SALES
Consolidated net sales for the period totaled EUR 8.2 million (EUR
13.9 million), down by 40.6 percent, year on year. The 2004 net sales
are not comparable with those reported for the same period a year ago,
due to the divestment of the OEM business in 2003 based on an
agreement signed by SSH and SafeNet Inc, a US company, in October
2003. The divested OEM business accounted for 40.1 percent of SSHs
net sales in 2003.
Net sales from products based on the SSH Tectia solution grew by 3.1
percent, year on year, generating almost all of the companys sales in
2004. A small fraction of net sales came from the SSH Certifier
product whose further development SSH licensed to Instasec Oy in
November 2004.
During the fourth quarter, SSH continued the systematic implementation
of its strategy based on its Tectia solution, primary target customer
groups including large enterprises, financial institutions, and
government agencies, almost all of its Q4 sales stemming from these
customer segments.
The 2004 fourth-quarter net sales came to EUR 1.9 million, showing a
year-on-year fall of 33.2 percent (EUR 2.9 million).
The US dollars depreciation against the euro had a major effect on
consolidated net sales for the report period i.e., the US dollar
average rate dropped by 8 percent from the previous year. Almost 80
percent of SSHs invoicing is based on US dollars.
Parent company net sales for the period came to EUR 4.4 million,
showing a year-on-year fall of 49.1 percent (EUR 8.6 million).
RESULTS AND EXPENSES
Losses for the period were EUR -6.4 million (EUR +5.2 million), while
showing a net loss of EUR -5.8 million (EUR +5.5 million). Fourth-
quarter operating loss came to EUR -1.7 million (EUR +9.3 million)
while the same period showed a net loss of EUR -1.7 million (EUR +9.5
million).
For future earnings and cost structure, major investments in
development programs attached to SSH Tectias sales, marketing and
product development were particularly important in 2004, alongside a
number of measures to enhance the companys future cost structure.
In 2004, the companys cost structure included exceptional non-
recurring expenses arising from the establishment of new offices in
Germany and the UK as well as recruiting and training key staff for
these offices.
In July, the company recorded a provision for an unprofitable lease
agreement. At the end of December, the provision came to EUR 0.1
million. SSHs US subsidiary moved to smaller and significantly lower
cost premises. At the same time, the subsidiary subleased its Palo
Alto office, but this rental income does not fully cover rental
expenses.
Problems related to incorrectly reported and paid royalties between F-
Secure Corporation and Nokia Corporation may incur costs to SSH. SSH
has had no possibility whatsoever to verify this. F-Secure claims
excess royalties paid to SSH for 2001-2004. SSH has entered the
royalties for 2004 as net sales adjustments. The total amount under
dispute of the royalty repayment claim is approximately EUR 180,000,
for which SSH has recorded a provision of EUR 90,000 at the end of
December. SSH will continue talks with F-Secure on the amount and
fairness of the royalty repayment.
SSHs US subsidiary, SSH Communications Security, Inc., received a
claim for recovery from the bankruptcy estate of its US customer,
Global Crossing Ltd, on the refund of USD 50,000 concerning a license
fee from 2002. The company entered into negotiations over an amicable
settlement with Global Crossing Ltds bankruptcy estate during 2004
and, offered to pay USD 30,000 to the bankruptcy estate. The company
expensed this amount in December 2004.
Research and development expenses for the period totaled EUR 3.8
million (EUR 5.2 million), while sales and marketing expenses came to
EUR 8.6 million (EUR 9.7 million). Administrative expenses were EUR
2.4 million (EUR 2.6 million).
Fourth-quarter R&D expenses totaled EUR 0.9 million, while a year ago
they were EUR 1.2 million. Sales and marketing expenses for the same
period amounted to EUR 2.2 million (EUR 2.8 million) while
administrative expenses totaled EUR 0.6 million (EUR 0.5 million).
Parent-company operating loss came to EUR -5.7 million (EUR +5.6
million) and net loss totaled EUR -5.3 million (EUR +6.5 million). In
the 2003 results, the divestment of the OEM business was recorded
almost entirely in the parent companys accounts.
SSH signed a new lease on its Finnish premises in December 2004. The
new lease will substantially reduce the companys lease expenses in
Finland as of May 1, 2005.
BALANCE SHEET AND FINANCIAL POSITION
SSHs financial position remained at a healthy level during the report
period. Consolidated balance sheet total on December 31, 2004 stood at
EUR 38.0 million (EUR 43.8 million), of which the liquid assets
accounted for EUR 33.9 million (EUR 36.8 million), or 89.1 percent of
the balance sheet total. Except for the subordinated loan of EUR 0.2
million 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, was
-94.8 (-88.7 percent) at the end of the financial year. Equity ratio
on December 31, 2004 stood at 94.8 percent (94.7 percent).
The reported gross capital expenditure for the period totaled EUR 0.5
million (EUR 0.8 million), consisting mainly of software investments.
Reported financial income consisted of interest income and capital
gains on fund units. Financial income and expenses totaled EUR 0.5
million, whereas a year ago they were EUR 0.3 million.
Since SSH, under IAS 39, classifies financial assets and other
marketable securities as available-for-sale assets, it recognizes any
unrealized changes in their value under shareholders equity. Only
after the sale of an asset does the company recognize interest income
in the income statement. During the report period, SSH recognized an
increase of value of EUR 0.07 million under shareholders equity.
In connection with the sale of the OEM business in November 2003, part
of the sales price, USD 2.8 million, was transferred to an escrow
account for 12 months. SSH has received the balance in full to the
extent that USD 0.8 million remained in the escrow account at the end
of December. Since this amount was transferred to SSHs account at the
very beginning of January, it was stated under other receivables on
the balance sheet.
SSHs business operations and investments showed a negative cash flow
of EUR -2.6 million and EUR -0.4 million, respectively. Cash flow from
financing, EUR 0.1 million, was generated by share subscriptions based
on the employee stock-option scheme. The company showed a negative
total cash flow of EUR -2.8 million during the period.
MARKET DEVELOPMENTS
In 2004, the number of invitations to tender, and projects pending
among SSHs customers showed a marked upward trend. Project
negotiation times until the final delivery stage continued to take a
relatively long time. Data security remained high on the agenda of
companies and public-sector organizations IT investments.
Major legislative reforms on data confidentiality and secure data
communication are taking place both in the US and Europe. Customers
are facing an ever-greater challenge in terms of information security
management due to deperimeterization, or the gradual disappearance of
boundaries between companies internal and external information
networks, with recent surveys suggesting that large corporations are
finding it more difficult to protect their intranets and businesses
from sophisticated worms and back doors. The SSH Tectia solutions
features align well with this trend, and SSH is confident that reforms
will have favorable effects in terms of customers planning secure
remote management of their information systems and solutions for
protecting their business applications.
The number of companies actively testing new SSH Tectia data security
solutions increased in significantly North America, SSHs main market
area, with demand mainly focusing on solutions for secure remote
management of network servers and various kinds of data communication
equipment. Currently, SSH Tectia Manager is included in practically
all major SSH Tectia installations.
In Europe, the SSH Tectia solution attracted growing interest,
especially among financial institutions and government organizations.
Customers interest in securing their business applications grew
slightly towards the end of the year. For SSH, the most interesting
markets in Europe include Germany, the UK and the Nordic countries,
with SSH taking a major step forward in the UK during the third
quarter when a major UK bank selected the SSH Tectia solution for
secure remote management.
In Asia, financial institutions continued to constitute the most
important customer segment for SHH during the report year. Asian
customers were primarily interested in the secure remote management of
traditional network servers and various data communication equipment,
as evidenced by an international bank, based in China (Hong Kong),
selecting SSH Tectia for secure remote management.
Competition in the market for secure remote management solutions took
a new form in the third quarter when F-Secure, a Finnish company,
entered into a strategic partnership with WRQ, a US firm, which became
the global, exclusive distributor of F-Secures SSH products. This
change is expected to continue the fierce price competition in the US,
Europe and Asia.
SALES PERFORMANCE
SSHS NET SALES
EUR million 10-12/ 7-9/ 4-6/ 1-12/ 10-12/ 1-12/
2004 2004 2004 2004 2003 2003
BY SEGMENT*
AMER 1.4 1.4 2.0 5.7 1.6 6.5
APAC 0.2 0.1 0.1 0.6 0.5 2.2
EROW 0.3 0.6 0.5 2.0 0.8 5.1
SSH Group total 1.9 2.1 2.6 8.2 2.9 13.9
SSH TECTIA BUSINESS
Net sales**/*** 1.9 2.1 2.6 8.2 2.3 8.3
* The figures for 2003 by segment are not fully comparable with those
for 2004 because they include the OEM business divested in Q4/2003.
** The SSH Tectia solution was launched during the last quarter of
2003. Net sales for previous quarters include net sales of earlier
versions of SSH products now enhanced and integrated as part of the
SSH Tectia solution.
*** The net sales of SSH Tectia solution business for the fiscal year
2004 is not fully comparable with that for 2003, when SSH Certifier
product was still included in SSH Tectia solution. Net sales from
products based on the SSH Tectia generated almost all of the companys
sales in 2004. A tiny fraction of net sales for the period came from
the SSH Certifier product.
Most of SSHs net sales for 2004 came from the US, with the US
Government, large banks, and large enterprises as SSHs major
customers. Sales of SSH Tectia in US dollars grew by almost 30 percent
in its main market while the US dollar continued to weaken against the
euro. Net sales on products based on the SSH Tectia solution showed a
global growth of 3.1 percent year-on-year.
During the fourth quarter, net sales were not at satisfactory levels.
Sales were particularly affected by the fact that several customers
SSH had predicted would buy at the end of 2004 postponed their
purchases, with end-of-year budgetary decisions. Although the sales
process of a system-level product for major customers continues to be
a long one, average customer invoicing continued to grow in line with
SSHs long-term strategy during the last quarter.
The Americas, Asia Pacific, Europe and Rest of the World accounted for
69.1 percent (47.3 percent), 7.0 percent (15.5 percent) and 23.9
percent (37.2 percent) of reported net sales, respectively.
Asia Pacific and Europe and Rest of the World saw a decrease in their
year-on-year share of net sales, as a result of the divestment of the
OEM business. SSHs measures to reinforce and train its sales
organization to sell the SSH Tectia solution in these market areas
have proceeded more slowly than expected.
During the report period, SSH concluded 12 customer agreements each
worth more than EUR 100,000, three of which were signed during the
fourth quarter. SSHs ten largest customers accounted for 39.8 percent
of reported net sales, with the largest single customer accounting for
14.6 percent.
PRODUCTS AND MARKETING
During the report period, SSH focused its sales and marketing efforts
on large corporations, financial institutions and government agencies
in the US, Europe and Asia, in line with its long-term strategy.
The company strengthened its sales organization by reinforcing its
partner network complementing the SSH Tectia solution. In addition, it
was involved in major trade fairs and customer workshops in the US,
Europe and Asia, while embarking on the launch of active, targeted
marketing campaigns promoting secure remote management solutions.
In February, SSH announced that it had joined the Entrust
TrustedPartner Program, launched by Entrust, Inc., a US company.
Through this strategic partnership 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 current broad
customer base.
In April, Swisscom Eurospot announced that the SSH Tectia
client/server products had passed their compatibility tests along with
Check Point and Nortel Networks products.
In June, SSH announced that it had concluded a contract on sales and
marketing cooperation with SAS Institute, a major supplier of business
intelligence solutions in Finland. During the first contract period,
product marketing cooperation will begin.
During the second quarter, SSH also launched a new version of the SSH
Tectia data security solution. Based on award-winning SSH Secure Shell
technology, SSH Tectia is a data security solution for large
enterprises. The new version is much easier to integrate with various
user data management systems. The SSH Tectia solution enables
companies to replace conventional, insufficient authentication methods
easily and cost-effectively with electronic certificates and strong
two-factor authentication.
In August, SSH joined HPs partnership program and entered into a VAR
(Value Added Reseller) partnership with SiegeWorks, a US company.
In September, SSH announced that it had concluded an OEM licensing
agreement with Cryptico A/S, enabling SSH to incorporate Crypticos
encryption software into its SSH Tectia solution. High-performance
cryptographic algorithms pave the way for new uses for SSH Tectia
managed security middleware solution.
The third quarter saw several update projects for SSH Tectia and the
extension of operating system support into HP Itanium. At the same
time, SSH sharpened its product strategy in such a way that the
management of certificates will be integrated seamlessly with SSH
Tectia.
In October, SSH licensed the SSH Certifier PKI platform to Instasec
Oy. This OEM licensing includes the transfer of existing SSH Certifier
customer relationships to Instasec Oy. Furthermore, SSH introduced two
new modules for its SSH Tectia solution, the new versions of the SSH
Tectia Server software enabling powerful, visible encryption for
business applications, while protecting application server remote
management. In addition, the company has adopted a new pricing model
for its SSH Tectia solution designed to make powerful enterprise
security more cost-effective for entry-level customers.
For SSHs business, the relevant data security markets can be roughly
divided into two application areas: data communications encryption and
secure remote administration. SSH estimates that the size of its
target market in 2004 is worth around EUR 180 million, this figure
excluding the traditional PKI infrastructure market, which is no
longer high on SSHs agenda. This estimate is based on reports by
international market research firms and SSHs own analyses.
RESEARCH AND DEVELOPMENT
January-December R&D expenses totaled EUR 3.8 million (EUR 5.2
million), accounting for 46.4 percent of net sales (37.4 percent).
This fall was due mainly to the divestment of the OEM business in
October 2003.
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 during the report period
totaled EUR 0.3 million, with these expenses to be capitalized as part
of the commercialization of the new SSH Tectia Manager solution. SSH
will continue to expense the majority of its R&D expenses.
At the end of the report period, the company held nine patents with 18
pending.
HUMAN RESOURCES AND ORGANIZATION
During the report period, SSH reinforced its sales organization in
particular, with the UK and German sales teams in Europe recruiting
more staff, in addition to selected key new sales positions in the US.
SSH reorganized its operations in December by bringing its product
management, product marketing, product development and customer
support under one organization. This new organization ensures that any
views and further development proposals coming from the customer
interface are conveyed to product management and development as soon
as possible to be taken into the right new features for the next
product versions.
At the end of December, the Group had 105 employees on its payroll,
one person more than a year earlier, when the headcount was 104.
At the end of the period, 40.0 percent of the personnel worked in R&D,
44.0 percent in sales and marketing, and 16.0 percent in
administration, with most of the staff changes affecting sales and
marketing and administration. At the end of 2004, sales and marketing
staff was 4 percent higher than a year earlier, whereas administrative
staff was 2 per cent lower than at the end of 2003.
In early October, SSH appointed Timo Rinne, M.Sc. (CS), Chief
Technology Officer responsible for the companys technology strategy
and its application to product development and the SSH Tectia
products. His predecessor, Tatu Ylönen, continued as a member of SSHs
Board of Directors.
BOARD AND AUDITORS
Until the Annual General Meeting on April 27, 2004, SSH Communications
Security Corps Board of Directors consisted of Tapio Kallioja, Tomi
Laamanen, Timo Ritakallio and Tatu Ylönen, who were all re-elected as
Board members, with Tomi Laamanen re-elected as Chairman.
The AGM re-elected PricewaterhouseCoopers Oy, an authorized public
accountants firm, as the companys auditor, with Henrik Sormunen, an
authorized public accountant, acting as the principal auditor.
SHARES, SHAREHOLDING AND CHANGES IN THE GROUP STRUCTURE
The reported trading volume of SSH Communications Security Corp shares
totaled 9,344,794 (valued at EUR 15,834,404), i.e. 33.3 percent of the
shares changed hands. The highest quotation was EUR 2.69 and the
lowest EUR 1.18. The trade weighted average share price for the period
amounted to EUR 1.69, and the share closed at EUR 1.28 on the last
banking day (on December 30, 2004), when the trading was arranged in
the period.
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. Through the implementation of the merger,
SSH would issue 16,942,487 new shares for ACRs shareholders, Mr.
Ylönen and Mr. Kivinen, as a consideration of the merger. The number
of these shares equals that of SSH shares then held by ACR. The shares
held by ACR will be transferred to SSHs ownership.
The Annual General Meeting on April 27, 2004 approved the ACRs and
SSHs merger plan, the increase of share capital related to the merger
consideration, and the merger of ACR with SSH, as proposed by the
Board of Directors. The AGM also decided on the conditional
cancellation of the SSH shares held by ACR to be transferred to SSH as
a result of the merger, and on the reduction of shareholders equity.
The key objective of the merger was to streamline the corporate
structure and enhance the transparency of SSHs shareholding, in
addition to observing the Corporate Governance recommendation for
listed companies, issued by HEX Helsinki Exchanges.
SSH applied for the shares to be issued as merger consideration to be
admitted for public trading on the main list of the Helsinki Stock
Exchange as of November 1, 2004, under the same class of shares as its
existing shares. In connection with this application, SSH published a
prospectus on 25 October 2004.
The merger was implemented according to plan on October 31, 2004,
leading to changes in holdings as referred to in the Securities
Markets Act (Chapter 2, Section 10), thus causing a significant change
in SSHs ownership. As a result, Tatu Ylönen held 53.77 percent and
Tero Kivinen 9.25 percent of the company.
In addition, the AGM decided to reduce the companys share premium
fund by transferring a total of EUR 15,000,000 to unrestricted equity.
This transfer required the approval of the Trade Register.
On 27 August, 2004, the Trade Register gave the green light for the
reduction of the share premium fund by EUR 15,000,000.
SHARE CAPITAL AND BOARD AUTHORIZATIONS
The companys registered share capital on December 31, 2004 came to
EUR 843,046.26, consisting of 28,101,542 shares. During the report
period, SSH increased its share capital four times, based on the
subscription of the new shares under SSHs stock-option scheme. A
total of 334,750 and 30,982 new SSH shares were subscribed under the
1999 and 2003 stock-option schemes, respectively, with the result that
the companys share capital increased by EUR 10,971.96.
SSHs Annual General Meeting of April 27, 2004 authorized the Board to
decide by April 27, 2005 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 165,000. The Board did not exercise this
authorization by December 31, 2004.
EVENTS AFTER THE REPORT PERIOD
At the beginning of January 2005, SSH revised its net sales estimate
for 2004 because a number of contracts and related income recognition
predicted for the fourth quarter of 2004 had been postponed. SSH
received and delivered four of these orders in early 2005.
In January, the company launched a major new SSH Tectia data security
solution, SSH Tectia Server, which is the first Secure Shell product
for IBM mainframe environment. The new product introduces the Secure
Shell data security protocol developed by SSH to IBMs z/OS operating
system. According to market reports, more than 90 percent of Fortune
1,000 companies use such mainframe environments for their business
applications, and more than 70 percent of business data is stored on
mainframe computers.
PROSPECTS FOR 2005
SSH has concluded a period of reorganization and major development
investments, which took over two years. The companys management
expects to reach a major turning point during 2005, both in terms of
sales and profitability.
SSHs sales will grow by 10-30 percent during 2005, thanks to several
legislative changes underway both in the US and Europe as well as the
new sales offices SSH launched in Germany and the UK in 2004. In 2004,
the company also expanded its partner network, expecting this new co-
operation to increase the recognition of SSH Tectia solutions.
Continuous development of the SSH Tectia solution and new product
applications will expand the target market both from the viewpoint of
current and new customers.
SSHs management is confident that these factors will have a favorable
effect on demand for the SSH Tectia solution.
SSHs net sales forecast for 2005 is EUR 9-11 million. The companys
management expects the SSH Tectia solution, including the SSH Tectia
Manager and SSH Tectia Connector products, which met with a favorable
reception in the market, will increase the average size of contracts
while contributing to the achievement of the companys net sales
target. The management estimates that SSH will have a possibility to
reach profitability in 2005.
BOARD PROPOSAL TO THE ANNUAL GENERAL MEETING
SSHs total profit from sold of its OEM business during 2003 was over
EUR 10 million. SSH Group's distributable assets total of EUR
8,189,362 (parent company EUR 16,147,696).
The Board of Directors proposes to the Annual General Meeting of
Shareholders that a dividend of EUR 0.29 per share be paid for 2004,
which total about EUR 8,149,930.
INCOME STATEMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2004 2003 2004 2003
Net sales 1.9 2.9 8.2 13.9
Purchasing and production -0.1 0.0 -0.1 -2.5
costs
Gross profit 1.9 2.8 8.1 11.3
Other operating income 0.1 10.8 0.3 11.3
Expenses
Product development -0.9 -1.2 -3.8 -5.2
Sales and marketing -2.2 -2.8 -8.5 -9.7
Administration -0.6 -0.5 -2.4 -2.6
Operating profit/loss -1.7 9.3 -6.4 5.2
Financial income and expenses 0.0 0.3 0.5 0.4
Profit/loss before taxes -1.7 9.5 -5.8 5.5
a Taxes 0.0 0.0 0.0 0.0
Net profit/loss for the -1.7 9.5 -5.8 5.5
period
a)Taxes are proportionate to the net profit for the period, and no
deferred tax assets are recorded for the accrued loss.
1-12/ 1-12/
2004 2003
Earnings per share, EUR -0.21 0.20
Earnings per share (diluted), -0.21 0.19
EUR
BALANCE SHEET
EUR million 31 Dec. 31 Dec.
2004 2003
ASSETS
Fixed and non-current assets
Tangible assets 0.4 0.5
Intangible assets 0.9 1.2
Deferred tax assets 0.2 0.2
Fixed and non-current assets 1.6 2.0
total
Inventories and current
assets
Inventories 0.0 0.0
Short-term receivables 2.6 5.2
Short-term investments 32.3 33.8
Cash and cash equivalents 1.5 2.9
Total inventories and current 36.4 41.9
assets
Total assets 38.0 43.8
LIABILITIES AND SHAREHOLDERS
EQUITY
Shareholders equity 35.4 41.1
Long-term liabilities
Provisions 0.2 0.0
Long-term financial 0.3 0.2
liabilities
Total long-term liabilities 0.6 0.3
Short-term liabilities 2.0 2.4
Total liabilities and 38.0 43.8
shareholders equity
STATEMENT ON CHANGES IN
SHAREHOLDERS EQUITY
EUR million Share Issue Revalua Transl Retained Total
capital premium tion ation earnings
fund* and differ
other ence
funds
Shareholders 0.8 53.0 0.0 -0.3 -17.5 36.0
equity Jan.
1, 2003
Change 0.0 -13.6 0.0 -0.4 19.2
Shareholders 0.8 39.3 0.0 -0.7 1.7 41.1
equity Dec.
31, 2003
Shareholders 0.8 39.3 0.0 -0.7 1.7 41.1
equity Jan.
1, 2004
Change 0.0 -14.9 15.1 -0.1
Net loss -5.8
Shareholders 0.8 24.4 15.1 -0.8 -4.2 35.4
equity Dec.
31, 2004
* Transfer to the retained loss account has resulted in a reduction in
the share premium fund.
CASH FLOW STATEMENT
EUR million 1-12/ 1-12/
2004 2003
Cash flow from business operations -2.6 3.3
Cash flow from investments -0.4 -1.0
Cash flow from financing 0.1 0.0
Change/increase(+), decrease (-) -2.8 2.3
in liquid assets
Liquid assets at period-start 36.7 34.7
Adjustment for translation 0.0 -0.2
difference
b Liquid assets at period-end 33.9 36.7
b)Liquid assets consist of cash and cash equivalents, as well as other
marketable securities.
NET SALES BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2004 2003 2004 2003
AMER 1.4 1.6 5.7 6.5
APAC 0.2 0.5 0.6 2.2
EROW 0.3 0.8 2.0 5.1
SSH Group total 1.9 2.9 8.2 13.8
OPERATING PROFIT/LOSS
BY SEGMENT
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2004 2003 2004 2003
AMER 0.7 1.0 2.1 1.0
APAC 0.1 0.3 0.2 0.7
EROW -1.5 9.8 -1.6 11.3
Common Group Expenses* -0.9 -1.8 -7.1 -7.8
SSH Group total -1.7 9.3 -6.4 5.2
* Common Group Expenses include Groups administration expenses (e.g.
Management, Finance) and headquarters Product Management and R&D
expenses. Capital gains on the OEM business divestment have been
divided among these segments.
KEY FIGURES AND RATIOS
1-12/ 1-12/
2004 2003
Net sales, MEUR 8.2 13.9
Operating profit/loss, MEUR -6.4 5.2
Operating profit/loss, % of net -77.2 37.5
sales
Profit/loss before extraordinary -5.8 5.5
items and taxes, MEUR
Profit/loss before extraordinary -70.7 40.0
items and taxes, % of net sales
Profit/loss before taxes, MEUR -5.8 5.5
Profit/loss before taxes, -70.7 40.0
% of net sales
Return on investment, % -13.5 16.6
Return on equity, % -15.1 14.6
Interest-bearing net -33.5 -36.5
liabilities, MEUR
Equity ratio, % 94.8 94.7
Gearing,% -94.8 -88.7
Gross capital expenditure, MEUR 0.5 0.8
% of net sales 5.6 6.2
R&D expenses, MEUR 3.8 5.2
% of net sales 46.4 37.4
Personnel, on average 105 131
Personnel, period-end 105 104
For the companys line of business, the value of outstanding orders is
not a significant reference stated in the notes to the accounts.
PER-SHARE DATA
1-12/ 1-12/
2004 2003
Earnings per share, -0,21 0.20
EUR (undiluted)
Earnings per share, EUR -0,21 0.19
(diluted)
Equity/share, EUR 1,26 1.48
No. of shares at period-end, 28 102 27,736
1,000
Share performance, EUR
Average price 1,69 1.31
Low 1,18 0.61
High 2,69 2.36
Share price, period-end 1,28 1.70
Market capitalization, period- 36,0 47.2
end, MEUR
Volume of shares traded, 9,3 7.6
million
Volume of shares traded, 33,3 27.5
% of total
Value of shares traded, MEUR 15,8 10.0
Price-earnings ratio (P/E) 8.4
CONTINGENT LIABILITIES
EUR million 31 Dec. 31 Dec.
2004 2003
Rental liabilities 0.1 0.2
Leasing liabilities 0.1 0.2
Other contingent liabilities 0.6 2.3
Currency derivatives (not 0.7 2.0
included in the hedging
calculations)
These data are based on unaudited figures.
NOTES TO THE CONSOLIDATED ACCOUNTS
1. ACCOUNTING PRINCIPLES
This financial statements bulletin has been prepared in accordance
with the IAS 34 standard (Interim Reports).
2. RECONCILIATION OF NET
PROFIT/LOSS
EUR million FAS CHANGE IFRS FAS CHANGE IFRS
10-12/ 10-12/ 1-12/ 1-12/
2003 2003 2003 2003
Net sales 2.9 2.9 13.9 13.9
Purchasing and 0.0 0.0 -2.5 -2.5
production costs
Gross profit 2.8 2.8 11.3 11.3
Other operating income 10.8 10.8 11.3 11.3
Operating expenses -4.3 -0.1 -4.4 -17.4 -0.1 -17.5
Operating profit/loss 9.3 -0.1 9.3 5.3 -0.1 5.2
Total financial income 0.3 0.3 0.4 0.4
and expenses
Net profit/loss for 9.6 -0.1 9.5 5.6 -0.1 5.5
the period
Earnings per share, 0.0 0.20 0.20
EUR
Earnings per share 0.0 0.20 0.19
(diluted), EUR
The reconciliation of net profit/loss for the entire fiscal year 2003
is presented in the interim report for the first quarter of 2004,
dated April 20, 2004.
3. RECONCILIATION OF BALANCE SHEET
EUR million FAS CHANGE IFRS
31 Dec. 31 Dec.
2003 2003
Long-term assets
Tangible assets 0.3 0.3 0.5
Intangible assets 1.6 -0.4 1.2
Deferred tax assets 0.0 0.2 0.2
Total long-term assets 1.8 2.0
Short-term assets
Deferred tax assets 0.2 -0.2 0.0
Inventories 0.0 0.0
Short-term receivables 5.2 5.2
Available-for-sale 32.2 32.2
assets
4.6 4.6
Liquid assets 42.1 41.9
Total short-term assets 0.2 -0.2 0.0
Total assets 43.9 43.8
LIABILITIES AND
SHAREHOLDERS EQUITY
Shareholders equity
Share capital 0.8 0.8
Share premium fund 41.0 -1.6 39.3
Revaluation reserve 0.0
Retained profit/loss -0.6 1.5 1.0
Subordinated loan 0.2 -0.2
Shareholders equity 41.5 -0.3 41.1
total
Long-term liabilities
Long-term financial 0.0 0.2 0.2
liabilities
Total long-term 0.0 0.3
liabilities
Short-term liabilities 2.4 2.4
Total liabilities 43.9 43.8
More detailed information on the transition can be found in a press
release dated March 18, 2004.
SHAREHOLDERS
On December 31, 2004, the companys 10 largest shareholders, excluding
nominee-registered shares, were as follows:
Ylönen Tatu Juhani 52.4%
Kivinen Tero Tapani 8.6%
Assetman Oy 5.0%
Jaakonsaari Markus 1.8%
Ilmarinen Mutual Pension Insurance Company 1.7%
Promotion Capital I Ky 1.7%
Tatu Ylönen Oy 1.3%
Grahn Juha Kalevi 1.3%
Pohjola Finland 1.3%
Kaukonen Kalle 1.0%
Total 76.1%
FINANCIAL REPORTING
A briefing on the financial statements for analysts and the media will
be held in SSHs head office on the 7th floor at Fredrikinkatu 42,
Helsinki, on Wednesday, February 9, 2005, starting at 11:00 a.m.
SSH Communications Security Corp will release its next interim report
for January 1-March 31, 2005 on April 19, 2005. Further information on
the companys financial reporting is available on the companys
website (http://www.ssh.com).
Helsinki, February 9, 2005
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: 
© 2005 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.