Financial statement release for the period 1 January – 31 December 2011
2/7/2012 6:00 AM EST
Ixonos
Financial Statement Release
Financial statement release for the period 1 January – 31 December 2011
Helsinki, Finland, 2012-02-07 12:00 CET (GLOBE NEWSWIRE) -- Ixonos Plc
Financial statement release 7 February 2012 at 13.00
Financial statement release for the period 1 January – 31 December 2011
IXONOS’ TURNOVER AND OPERATING PROFIT MATCH FORECAST
The financial period in brief
- Turnover for the financial period was EUR 81.4 million (2010: EUR 84.9
million), a change of -4.2 per cent.
- Operating profit was EUR 1.9 million (2010: EUR 5.3 million), 2.4 per cent of
turnover.
- Net profit was EUR 0.9 million (2010: EUR 3.3 million), 1.1 per cent of
turnover.
- Earnings per share were EUR 0.06 (2010: EUR 0.25).
- Net cash flow from operating activities was EUR 5.1 million (2010: EUR 4.7
million).
Q4/2011 in brief
- Turnover for the fourth quarter was EUR 19.5 million (2010: EUR 23.2
million), a change of -15.6 per cent.
- Operating profit was EUR 3 thousand (2010: EUR 1.9 million).
- Net profit was EUR -0.1 million (2010: EUR 1.2 million), -0.7 per cent of
turnover.
- Earnings per share were EUR -0.01 (2010: EUR 0.08).
Future prospects in brief
- Turnover for 2012 is expected to decrease clearly from 2011 but exceed EUR 60
million, and operating profit is forecast to be positive.
- Operation profit for the first quarter is expected to be clearly negative.
Kari Happonen, President and CEO:
Ixonos’ operating environment changed as Nokia Corporation, one of Ixonos’ key
customers, announced its new smartphone strategy in February 2011. This shift
affected the entire financial period 2011. The strong growth of 2010 began to
decline in the first quarter of the review period, and despite our strongly
intensified acquisition of new customers, business volume decreased in the
final quarter. This downturn occurred because the demand for Symbian and MeeGo
R&D and software development services decreased during the last part of the
year. Despite the changes, we have successfully defended our market share in
regard to other aspects of the Nokia account while simultaneously gaining new
customers in Finland as well as internationally.
To adjust our cost structure to this situation, we have reorganised our
operations as well as reduced expenditure throughout the Ixonos Group. In the
second quarter, we held cooperation negotiations with our staff in Finland,
aiming in particular to improve the efficiency of our administrative and
support functions. During 2011, we have also restructured our operations in
Denmark, the United States and China. Further saving measures will be continued
in 2012.
The changes in our operating environment have required strong investments in
the development of products and solutions with higher added value as well as in
international sales. In May, we unveiled Ixonos Elastic Cloud, a Red Hat
certified open and secure enterprise cloud platform that is already used to
create and maintain the apps of several dozen new customers. A month later, we
launched Ixonos App Agency, a development service for mobile strategy and apps.
More than a hundred mobile apps for Finnish and international brands have been
created using this service. Our newest product, Ixonos Experience Store, was
released in December. Ixonos Experience Store is a digital marketing and
distribution channel that enables our client organisations to promote their
brand, build customer loyalty and monetise mobile apps. We will continue to
roll out new products and product platforms; as an example, in February, at
Mobile World Congress in Barcelona, we will introduce a reference platform for
mobile devices based on Qualcomm technology and the Android operating system.
In addition to developing products and solutions for our Connected Devices and
Online Solutions service areas, we have invested heavily in the development of
our User Experience Design services during 2011. Mobile technologies and the
resultant wireless connectivity to ubiquitous multi-channel cloud services and
apps are expanding into new industries. They will find increasing use beyond
the traditional mobile and smartphone sector, such as in the automotive
industry as well as in consumer electronics and domestic appliances. Our User
Experience Design services help our customers develop concepts for, and
implement, unique user experiences that encompass devices as well as services.
Over the course of 2011, we expanded our Helsinki user experience design
studio, opened up its satellite design studio in Kosice, as well as opened new
studios in London and Beijing.
Our number of customers has grown significantly in 2011, and it will continue
to increase this year. We believe that the market developments and our
productised solutions will bring us excellent opportunities to grow our new
accounts, creating new growth in the coming years.
I would like to thank our customers, old and new, for their confidence in us
and for their fine cooperation, as well as our staff of top-class experts and
professionals for their committed, assiduous work in these times of substantial
change.
OPERATIONS
Ixonos provides solutions and services for the development of wireless
technologies, software, devices, multi-channel cloud services and mobile apps.
Together with our corporate customers, we create products and services that
allow consumers to enjoy inspiring digital experiences regardless of time and
place.
We improve the competitiveness of client organisations by enabling
cost-efficient development, a short time-to-market and superior user
experiences for their devices and services. We aim to position ourselves as a
strategic partner to the industry’s leading innovators and pioneers.
Our Finnish subsidiary Ixonos Business Solutions Ltd. provides development
solutions and services for e-business and e-government.
We have offices in Finland, China, Denmark, Estonia, Germany, Great Britain,
Slovakia, South Korea and the United States.
SEGMENTS
Ixonos reports its business operations as two segments: Mobile Solutions and
Business Solutions.
Mobile Solutions
The Mobile Solutions business area comprises development solutions and services
for wireless technologies, devices and software. The area’s clientele includes
wireless technology suppliers, mobile device manufacturers, telecommunications
companies and entertainment electronics manufacturers operating on the
international market as well as other companies taking advantage of the new
business opportunities that wireless communication enables. The Mobile
Solutions segment’s clientele include for example Bang & Olufsen, Cassidian,
Elisa, IMC, Intel, Kone, LazyTown, Nokia, NSN, Polycom, Samsung, TeliaSonera,
Vodafone and Wolfson.
Ixonos’ Device Creation Centre provides comprehensive R&D services for
next-generation wireless devices. In addition to software development, these
solutions also cover mechanical engineering and electronics design. The unit
develops smartphones and other wireless devices based on new, powerful chipsets
from the world’s leading technology suppliers and on several different
operating systems.
The User Experience Design unit provides user experience solutions that support
the customer’s brand and helps Ixonos provide productised services and
customised user interface solutions to the company’s international clientele.
The services of the unit range from user experience strategy and concept
development to product- and service-specific design work and solution
implementation.
Ixonos’ Managed Services Centre provides cloud services for business-critical
multi-channel services as well as life-cycle-spanning solutions ranging from
requirements analysis to design, development, maintenance and further
development. The unit develops and maintains for example solutions for media
and content delivery, for information management and for mobile advertising and
e-commerce, as well as social network services.
During the financial period, the turnover of the Mobile Solutions business area
decreased by 3.2 per cent to EUR 68.9 million (2010: EUR 71.2 million).
Operating profit decreased by 40.0 per cent to EUR 5.3 million (2010: EUR 8.9
million), 7.7 per cent of turnover.
Business Solutions
Ixonos’ Business Solutions area provides innovative e-business solutions to
meet the challenges of tomorrow’s service operations. The Business Solutions
area provides development solutions and services for e-business and
e-government. The segment’s clientele consists mainly of Finnish
telecommunications and finance companies and public administration
organisations. The Business Solutions segment’s clientele include for example
Elisa, Fonecta, Kuntien Tiera, OP-Pohjola, the City of Oulu, the City of
Tampere, Telia-Sonera, SanomaPro and the Ministry of Finance. The first
customers of the Ixonos App Agency service that was launched in 2011, include
also for example BBC, eBay India, Evri, Groupon, Hotels.com, Procter & Gamble
and Time Out.
The business area offers e-business and e-government services focusing on
business process development, architecture services, portal solutions, content
and document management solutions and business intelligence solutions. The unit
also provides R&D services, helping client organisations use agile development
methods to create innovative new web services. With this offering, Business
Solutions aims to improve the internal and external customer service of its
clients.
The solutions developed by the unit utilise product platforms of chosen
technology partners as well as open source solutions.
The turnover of the Business Solutions segment decreased by 6.9 per cent to EUR
14.4 million (2010: EUR 15.5 million) during the financial period. Operating
profit remained negative, EUR -0.5 million, although the losses were lower than
in the previous year (2010: EUR -0.8 million).
Changes in service offering during the financial period
In the third quarter of last year, Ixonos streamlined its global service
offering as well as operational organisation. Under the new organisation, the
Connected Devices services include software development solutions of wireless
devices, the Device Creation solutions, testing services for mobile software
and devices as well as wireless solutions for the automotive industry. The User
Experience Design services include comprehensive user experience design for
apps, cloud services and devices. The Online Solutions services include digital
content delivery and store solutions, app-development services, cloud and
hosting services as well as e-business solutions and services.
TURNOVER
Consolidated turnover for the financial period was EUR 81.4 million (2010: EUR
84.9 million), which is 4.2 per cent less than in the previous year. Of the
total turnover of all segments, before elimination of inter-segment revenue,
the Mobile Solutions segment accrued 82.7 per cent (2010: 82.1 per cent) and
the Business Solutions segment accrued 17.3 per cent (2010: 17.9 per cent).
Turnover in the fourth quarter was EUR 19.5 million (2010: EUR 23.2 million),
15.6 per cent less than in the previous year.
Turnover by segment:
EUR 1,000 1–12 2011 1–12 2010
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Mobile Solutions 68,881 71,160
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Business Solutions 14,410 15,475
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Eliminations -1,882 -1,691
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Group total 81,408 84,944
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FINANCIAL RESULT
Consolidated operating profit was EUR 1.9 million (2010: EUR 5.3 million).
Profit before taxes was EUR 1.4 million (2010: EUR 4.5 million). Profit for the
financial period was EUR 0.9 million (2010: EUR 3.3 million). Earnings per
share were EUR 0.06 (2010: EUR 0.25). Cash flow from operating activities was
EUR 0.34 per share (2010: EUR 0.36). The company incurred one-off expenses of
some EUR 0.6 million because of its operational restructuring and the closedown
of international offices. These expenses affect the result for the financial
period.
Operating profit for the fourth quarter was EUR 3 thousand (2010: EUR 1.9
million). Profit before taxes was EUR -0.1 million (2010: EUR 1.7 million).
Profit for the fourth quarter was EUR -0.1 million (2010: EUR 1.2 million).
This amount includes EUR 0.2 million in one-off expenses arising from the
closedown of the site in Chengdu. Fourth-quarter diluted earnings per share
were EUR -0.01 (2010: EUR 0.08). Diluted cash flow from operating activities in
the fourth quarter was EUR 0.22 per share (2010: EUR 0.26).
Operating profit by segment:
EUR 1,000 1–12 2011 1–12 2010
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Mobile Solutions 5,333 8,891
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Business Solutions -501 -838
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Group administration expenses -2,895 -2,722
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Group total 1,937 5,331
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RETURN ON CAPITAL
Consolidated return on equity was 3.2 per cent (2010: 13.7 per cent) and return
on investment was 5.4 per cent (2010: 14.1 per cent).
BALANCE SHEET AND FINANCING
The balance sheet total was EUR 53.0 million (2010: EUR 56.7 million).
Shareholders’ equity was EUR 29.4 million (2010: EUR 28.5 million). The equity
ratio was 55.6 per cent (2010: 50.2 per cent). The Group’s liquid assets at the
end of the financial period amounted to EUR 1.5 million (2010: EUR 1.2
million).
At the end of the financial period, the company’s balance sheet showed EUR 7.3
million (2010: EUR 8.6 million) in bank loans. This amount includes overdraft
in use. The bank loans have covenants attached to them. These covenants are
based on the company’s equity ratio and on the proportion of interest-bearing
bank loans to the 12-month rolling operating profit.
GOODWILL
On 31 December 2011, the consolidated balance sheet included EUR 23.6 million
in goodwill. At the end of the financial period, the company performed
impairment testing of goodwill in all cash generating units and concluded that
no goodwill impairment is required in connection with the units. The company
views the risk of goodwill depreciation as increased and the Board of Directors
has decided to test goodwill on a quarterly basis. A rationalisation programme
seeking to achieve some EUR 1 million in monthly savings is underway in the
company. Should the realisation of this programme be delayed, or should the
company’s assumptions regarding turnover differ significantly from the forecast
for 2012, goodwill would be depreciated even if long-term demand for the
company’s services would remain substantially unchanged.
CASH FLOW
Consolidated cash flow from operating activities was EUR 5.1 million (2010: EUR
4.7 million) during the financial period. By 31 December 2011, the company had
sold EUR 3.0 million (2010: EUR 2.0 million) in accounts receivable so as to
reduce their turnaround time.
PERSONNEL
The number of personnel averaged 1,118 (2010: 1,120) during the financial
period. At the end of the period, the company had 1,031 (2010: 1,138)
employees. The company’s workforce decreased in the Finnish units and grew
abroad. At the end of the financial period, the Group had 609 employees (2010:
722) in Finnish companies, while Group companies in other countries employed
422 (2010: 416). The company has compensated for its reduced staff in Finland
by increasing subcontracting as necessary.
SHARES AND SHARE CAPITAL
Share turnover and price
During the financial period, the highest price of the company’s share was EUR
2.79 (2010: EUR 2.99) and the lowest EUR 0.66 (2010: EUR 1.84). The closing
price on 31 December 2011 was EUR 0.80 (2010: EUR 2.53). The average price over
the financial period was EUR 1.30 (2010: EUR 2.37). The number of shares traded
during the financial period was 7,065,258 (2010: 2,947,349), which corresponds
to 46.8 per cent (2010: 19.5 per cent) of the total number of shares at the end
of the period. Based on the closing price at 31 December 2011, the market value
of the company’s shares was EUR 12,081,987 (2010: EUR 38,209,285).
Share capital
At the beginning as well as the end of the financial period, the company’s
registered share capital was EUR 585,394.16 and the number of shares was
15,102,484.
Option plan 2006
The exercise period for Ixonos’ option plan 2006 ended on 31 December 2011. A
total of 366,500 options remained unexercised. They would have entitled their
holders to subscribe for 575,045 shares. The unexercised options expired after
the exercise period.
Option plan 2011
The Board of Directors of Ixonos Plc decided on 30 November 2011 to grant new
options. The decision was based on the authorisation given by the Annual
General Meeting on 29 March 2011.
The options were issued by 31 December 2011, free of charge, to a subsidiary
wholly owned by Ixonos Plc. This subsidiary will distribute the options, as the
Board decides, to employees of Ixonos Plc and other companies in the Ixonos
Group, to increase their commitment and motivation. Options will not be issued
to members of the Board of Directors of Ixonos Plc or to the Ixonos Group’s
senior management (Ixonos Management Invest Oy shareholders).
The options will be marked IV/A, IV/B and IV/C. A total of 600,000 options will
be issued. According to the terms of the options, the Board of Directors
decides how the options will be divided between option series and, if needed,
how undistributed options will be converted from one series to another.
Each option entitles its holder to subscribe for one new or treasury share in
Ixonos Plc. At 30 November 2011, the shares that can be subscribed for with
options comprise 3.82 per cent of all Ixonos Plc shares and votes on a fully
diluted basis.
The exercise period for the IV/A options will begin on 1 October 2014, for the
IV/B options on 1 October 2015 and for the IV/C options on 1 October 2016. The
exercise period for all options will end on 31 December 2018. The exercise
price for each option series is a trade volume weighted average price at NASDAQ
OMX Helsinki. The period during which this average price is determined is 1
September – 30 November 2011 for the IV/A options (resulting in an exercise
price of EUR 0.86), 1 June – 31 August 2012 for the IV/B options and 1 June –
31 August 2013 for the IV/C options. The exercise prices will be reduced by the
amount of dividends and can also be adjusted under the other circumstances
specified in the option terms.
Shareholders
On 31 December 2011, the company had 3,201 shareholders (2010: 2,863). Private
persons owned 56.6 per cent (2010: 50.8 per cent) and institutions 43.4 per
cent (2010: 49.2 per cent) of the shares. Foreign ownership was 7.2 per cent
(2010: 8.5 per cent) of all shares.
Board authorisations
On 29 March 2011, Ixonos Plc’s Annual General Meeting authorised the Board of
Directors to decide on a rights issue as well as on issuing stock options and
other special rights entitling to shares as referred to in chapter 10, section
1 of the Limited Liability Companies Act (624/2006), under the following terms:
The number of shares to be issued under the authorisation may not exceed
1,500,000, which is equivalent to approximately 10 per cent of all company
shares at the time of convening the Annual General Meeting.
The Board of Directors was granted authority to decide, within the limits of
the authorisation, on all terms of the share issue as well as on those of the
issue of special rights entitling to shares.
The Board of Directors was also granted authority to decide on crediting the
subscription price to the share capital or, in whole or in part, to the
invested non-restricted equity fund.
Shares as well as special rights entitling to shares may also be issued in a
way that deviates from the pre-emptive rights of shareholders, if a weighty
financial reason for this exists as laid out in the Limited Liability Companies
Act. In such a case, the authorisation may be used to finance corporate
acquisitions or other investments associated with the company’s operations, to
maintain and improve the Group’s solvency or as part of the company’s incentive
plan.
The authorisation is effective until the Annual General Meeting 2012.
On the closing date, a 600,000-share proportion of the authorisation had been
used to establish the option plan for key employees; authorisation to issue
900,000 shares remained available.
OTHER EVENTS DURING THE FINANCIAL PERIOD 2011
New base prospectus
On 28 December 2011, the Financial Supervisory Authority approved the base
prospectus for Ixonos Plc. Base prospectuses are prescribed in the Securities
Markets Act (495/1989). Ixonos Plc’s base prospectus contains information on
the company, its business operations and its financial standing. The prospectus
is valid for 12 months after publication.
Restructuring of operations in China
During 2011, Ixonos took various measures to adapt its cost structure to the
decreased business volume as well as to ensure the best possible profitability
in the changed international operating environment. To improve efficiency,
Ixonos restructured its operations in China and announced on 30 November 2011
that local software production would be concentrated in Beijing. Ixonos’
service centre in Chengdu was closed down gradually by the end of 2011.
Rationalisation of international operations; adjusted first-half-year profit
forecast
In its first interim report for the financial period, Ixonos announced that the
Group’s turnover and operating profit for the first half-year were expected to
be at the same level as in the previous year. Due to changes in the operating
environment, the company announced on 29 June 2011 that it would close its
office in Boston and focus its U.S. sales activities on the West Coast, closer
to its corporate customers developing mobile technology as well as to media and
other companies providing mobile content and services. At the same time, the
company announced that it would close its office in Copenhagen and concentrate
its Danish operations in Aalborg, where development work based particularly on
the Android operating system is carried out.
In connection with the rationalisation of international operations and with the
cooperation negotiations that were held in Finland from April to June, the
company recognised non-recurring expenses of EUR 0.4 million in the second
quarter. The rationalisation is expected to create yearly savings of
approximately EUR 2.5 million from the third quarter onwards.
Cooperation negotiations
On 19 April 2011, the company commenced cooperation negotiations for reasons
relating to finances, production and reorganisation. The negotiations applied
to all Ixonos Group employees in Finland except for those employed by Ixonos
Business Solutions Ltd. The goal of the negotiations was to adapt the company’s
cost structure to the decelerated growth as well as to improve the company’s
ability to maintain the best possible profitability.
The completion of the negotiations was announced on 1 June 2011 and as a result
8 employees in the administration and support functions of the Ixonos Group
were dismissed. As an additional rationalisation measure, no new employees are
hired to replace those who leave of their own accord such as by giving notice
or taking family leave.
The company also announced that it would phase out its mobile-device software
development services in Salo and Turku by the end of 2011. The reductions in
these offices included 21 employees in total. Of the affected employees, 14
have transferred to other duties within the Ixonos Group.
Qualcomm chipsets added to Ixonos’ technology base
In June, Ixonos licensed Qualcomm’s chipset technology, which enables a variety
of Android devices to be delivered to Ixonos’ global clientele as turnkey
development projects. Qualcomm’s technology enables fast and efficient
development of connected devices for the large and growing market.
New strategic partnerships
In June 2011, Ixonos joined Car Connectivity Consortium (CCC) to develop
sophisticated in-vehicle connectivity solutions. In October, Ixonos’ testing
unit became Europe’s first CCC authorised test laboratory for products based on
the MirrorLink technology.
Ixonos became a member of Linux Foundation, a non-profit consortium dedicated
to fostering the growth of Linux, in May 2011, and has played an active role in
the development of mobile Linux since 2006.
New branch office in Seoul
In June, the company opened a branch office in Seoul, South Korea. The office
serves as a customer interface, sales office and technical support outlet for
the company’s existing and new customers in that region. The opening of the new
office is in line with Ixonos’ strategic efforts to expand its business
globally and supports the company’s heightened sales efforts towards
international companies operating in the domain of mobile devices. The Korean
office is part of Ixonos’ operations in the APAC region.
New product releases
Ixonos has launched several new products during 2011: Ixonos Experience Store
enables companies to improve brand awareness, build customer loyalty and
monetise mobile apps using a single application store platform and online
marketing and delivery channel; TV Compass, a socially enabled mobile TV
solution, provides a consistent viewing experience throughout televisions,
smartphones and tablets; Ixonos App Agency covers all services related to
development of mobile apps, from consulting to production, deployment,
maintenance and analysis; and Ixonos Elastic Cloud, an open, secure, Red Hat
certified enterprise cloud solution has been designed to be especially suitable
as a platform for R&D as well as cloud services.
New reporting segments
Since the beginning of 2011, Ixonos reports its business operations as two
segments: Mobile Solutions and Business Solutions. The new reporting segments
were announced on 21 April 2011.
Ixonos Plc’s Annual General Meeting, 29 March 2011
Ixonos Plc held its Annual General Meeting on 29 March 2011. The meeting
adopted the company’s financial statements, including the consolidated
financial statements, for the financial period 1 January – 31 December 2010 and
discharged from liability the members of the Board of Directors as well as the
President and CEO.
The Annual General Meeting decided that no dividend would be paid for the
financial period. The meeting also decided that six ordinary members, rather
than eight as previously, would be elected to the Board of Directors. Paul
Ehrnrooth, Pertti Ervi, Matti Järvinen and Kirsi-Marja Kuivalainen were
re-elected as Board members, and Matti Heikkonen and Samu Konttinen were
elected as new Board members.
At its meeting following the Annual General Meeting, the Board of Directors
elected Pertti Ervi as Chairman of the Board and Paul Ehrnrooth as Deputy
Chairman of the Board. The Board also appointed the members of its committees:
Pertti Ervi was elected as Chairman of the Audit Committee; Paul Ehrnrooth and
Matti Järvinen were elected as Audit Committee members; Pertti Ervi was elected
as Chairman of the Remuneration Committee; Paul Ehrnrooth and Kirsi-Marja
Kuivalainen were elected as Remuneration Committee members; and Paul Ehrnrooth
and Pertti Ervi were elected as Nomination Committee members.
The Annual General Meeting decided to keep unchanged the fees of the Board
members: the Chairman of the Board will be paid EUR 40,000 per year and EUR 500
per meeting, the Vice Chairman of the Board EUR 30,000 per year and EUR 250 per
meeting and other Board members EUR 20,000 per year and EUR 250 per meeting.
The meeting also decided to pay a fee of EUR 500 per meeting to the
chairpersons of the Board’s committees and EUR 250 per meeting to committee
members.
Authorized Public Accountant firm PricewaterhouseCoopers Oy continues as
auditor. The new principal auditor is Markku Katajisto, Authorized Public
Accountant. The Annual General Meeting decided that a reasonable auditor’s fee
would be paid in accordance with the auditor’s invoice.
The Annual General Meeting also approved the Board’s proposal to repeal section
9 (on the obligation to redeem shares) of the company’s articles of
association.
Elaboration on prospects
On 14 February 2011, Ixonos announced that the new smartphone strategy of its
major customer Nokia Corporation might have a significant effect on the Ixonos
Group’s Mobile Terminals & Software and Media & Communities business areas and
thereby on the operations, earning power and financial status of the entire
group of companies. Based on information Nokia had published, Ixonos estimated
that should Nokia quickly and substantially reduce its service purchases in
2011, the increases in turnover and operating profit that Ixonos had forecast
in its financial statement release on 10 February 2011 would be unlikely to
occur.
On 22 March 2011, in a stock exchange release based on additional information
Ixonos had received, the company predicted that Nokia’s new strategy would have
a minor effect on Ixonos’ turnover and operating profit during the first half
of the year. However, Ixonos’ sales of software development services to R&D
projects based on Nokia’s MeeGo and Symbian software platforms were estimated
to decrease in the second half of the year. Because of this, the business
volume of Ixonos’ Mobile Terminals & Software business area was expected to
decline, at least temporarily.
Changes in Ixonos’ Management Team
Teppo Kuisma, Vice President and Sami Paihonen, Vice President were appointed
as members of the Ixonos Group’s Management Team from 1 October 2011. Teppo
Kuisma, who has been Managing Director of Ixonos Business Solutions Ltd. since
the beginning of 2010, is now responsible for the company’s Online Solutions
services. Sami Paihonen joined Ixonos in June 2010 and is responsible for the
company’s User Experience Design services.
Management Team member Pasi Iljin, Vice President, Technology, resigned as of 1
September 2011 to join another company.
On 13 June 2011, Management Team member Timo Kaisla, Senior Vice President,
began a 6–12 month sabbatical for family reasons.
On 10 February 2012, Ixonos announced that after negotiations with personnel
representatives, Ixonos’ employees in Finland would be represented in the
company’s administration through a new employees’ council. The council includes
key persons from the Ixonos Group companies and functions in Finland as well as
the Group’s shop stewards and an occupational safety and health representative.
Due to the establishment of the new council, the Board of Directors of Ixonos
Plc revised the company’s corporate governance model in that the Chief Shop
Steward of the Ixonos Group no longer participates in the work of the
Management Team.
The Management Team of the Ixonos Group presently comprises Kari Happonen,
President and CEO; Timo Leinonen, Senior Vice President, Finance; Kari Liuska,
Senior Vice President, Connected Devices; Teppo Kuisma, Vice President, Online
Solutions; Sami Paihonen, Vice President, User Experience Design; and Taina
Makkonen, Vice President, Human Resources.
EVENTS AFTER THE FINANCIAL PERIOD
The streamlining of Finnish operations continues
On 3 January 2012, Ixonos announced the commencement of cooperation
negotiations due to reasons related to finances, production and reorganisation.
The negotiations apply to the company’s employees in Finland. Demand for the
Symbian and MeeGo R&D and software development services Ixonos has provided to
Nokia Corporation has declined significantly, and it is not expected to return
to its previous level. The goal of the cooperation negotiations is to adjust
the company’s cost structure to the new situation, thus safeguarding the
company’s competitiveness.
The negotiations apply to all personnel in Finland, who are employed by Ixonos
Plc or the Group's subsidiaries, as well as to employees in foreign offices who
are employed by Finnish companies or their foreign branch offices. The actions
are estimated to impact 150 people at the most.
RISK MANAGEMENT AND NEAR-FUTURE UNCERTAINTY FACTORS
Ixonos Plc’s risk management aims to ensure undisturbed continuity and
development of the company’s operations, to support attainment of the
commercial targets set by the company and to promote increasing company value.
Details on the risk management organisation and process as well as on
recognised risks are presented on the company’s website at www.ixonos.com.
Changes in key customer accounts may have adverse effects on Ixonos’
operations, earning power and financial status. Should a major customer switch
its purchases from Ixonos to its competitors or make forceful changes to its
own operating model, Ixonos would have limited ability to acquire, in the short
term, new customer volume to compensate for such changes.
Ixonos’ corporate acquisitions in 2006–2008, its rapid growth in 2010 and the
prolonged turnaround time of accounts receivable have increased the company’s
need for working capital. The company manages this need by creating, together
with financiers, adequate buffers to ensure sufficient funds as well as by
facilitating the circulation of working capital. The company’s balance sheet
also includes a significant amount of goodwill, which may be impaired should
internal or external factors reduce the profit expectations of the company or
any of its cash generating units. Goodwill is tested during the final quarter
of each year and, if necessary, at other times. The rapid changes the company’s
clientele is undergoing have led to decreased demand in the short term,
increasing the risk of goodwill impairment. During 2012, the company will
assess on a quarterly basis the need for such impairment.
The company’s financial agreements have covenants attached to them. A covenant
violation may increase the company’s financial expenses or lead to a call for
swift partial or full repayment of non-equity loans. The main risks related to
covenant violations are associated with operating profit fluctuation due to the
market situation and with a potential need to increase the company’s working
capital through non-equity funding. The company manages these risks by
negotiating with financiers and by maintaining readiness for various financing
methods. Ixonos has in use the cash funds its normal operations require.
LONG-TERM GOALS AND STRATEGY
Ixonos aims to achieve in long-term an operating profit of at least 10 per
cent. Due to the ongoing change process, the company will expand its prospects
on its goals for long-term growth later this year.
To achieve the long-term goals, Ixonos focuses its strategy on expanding the
company’s product, solution and service operations into new accounts and
industries.
Mobile technologies and wireless connectivity will be used not only by the
mobile and smartphone industry and in computers but also by the automotive
industry, in home entertainment electronics and in domestic appliances. These
connected devices will be interlinked with the Internet and each other. The R&D
service market for such devices is expected to grow intensely in the next few
years.
The proliferation of connected devices will generate a growing market for cloud
services and mobile apps, based on high-quality user experiences. The always-on
wireless connectivity of the devices will enable cloud services and apps to be
used regardless of time and place. Services and apps will extend the feature
set of devices as well as create new services and functionality for consumers,
businesses and authorities alike. These services and apps must be designed to
be as user-friendly as possible in multi-channel environments, ensuring that
they work on countless different devices irrespective of technology and
software, user interface and the way the device is used.
Ixonos positions itself as a globally significant enabler of the connected
life. We create wireless technologies and connected devices as well as
multi-channel cloud services and mobile apps. We aim to improve the
competitiveness of our client organisations by enabling top-class usability,
cost-efficient development and a short time-to-market for their devices.
Ixonos’ customer promise and competitive edge are founded on user experience
innovations that support the customer’s brand as well as on product-based,
customisable technology solutions. Productised device and software platforms
and the utilisation of open source technologies enable customer devices,
services and apps to be developed in a cost-effective manner and rolled out
rapidly.
In the connected-device market, we work with smartphone manufacturers as well
as with technology suppliers, telecommunications companies, consumer
electronics manufacturers, the automotive industry, the domestic appliance
industry and defence & security industry players.
In the market for cloud services and apps, we collaborate with media companies,
telecommunications companies, the service sector, public
administration and global consumer brands.
Ixonos’ key strengths are:
- user experience and user interface design encompassing devices and services;
- technology platform and operating system independent creation of wireless
technologies and mobile software;
- electronics design and mechanical engineering for mobile devices;
- a top-class mobile laboratory and extensive testing services;
- open source based systems development and cloud services;
- a global network of service centres and sales offices.
FUTURE PROSPECTS
According to Gartner research, the global market in R&D services for mobile
phones, smartphones and other mobile devices is expected to continue its
intense growth, and wireless connectivity is anticipated to extend into new use
areas and fields. The expansion of wireless connectivity is expected to
increase demand for the services of design houses such as Ixonos. Market-Visio
indicates that the Finnish ICT market will grow at the rate of some 4 per cent
per year, which is near the long-term average.
In accordance with strategy, Ixonos continues its activities to expand its
clientele by boosting sales of products, solutions and services to technology
suppliers, mobile device manufacturers, consumer electronics manufacturers, the
automotive industry and other customers in Finland as well as internationally.
By rationalising its operations, the company strives to maintain positive cash
flow and the best possible profitability.
Despite the intensified efforts to secure new customers and sales to new
customers, the volume of the company’s business is expected to decline this
year, as the demand for MeeGo and Symbian software development services
decreases significantly. The company’s turnover for 2012 is expected to
decrease clearly from the previous year but exceed EUR 60 million. Operating
profit is forecast to be positive, before possible one-off expenses. The
company will expand its prospects during the year, when a better view of the
remainder of the year is available. Operation profit for the first quarter is
expected to be clearly negative.
NEXT REPORTS
Ixonos will publish its interim report for the period 1 January – 31 March 2012
on 27 April 2012.
IXONOS PLC
Board of Directors
For more information, please contact:
Ixonos Plc
Kari Happonen, President and CEO, tel. +358 400 700 761,
Timo Leinonen, CFO, tel. +358 400 793 073,
Distribution
NASDAQ OMX Helsinki
Main media
THE IXONOS GROUP
ABBREVIATED FINANCIAL STATEMENTS 1 January – 31 December 2011
Accounting policies
This financial statement bulletin has been prepared in accordance with IAS 34
(Interim Financial Reporting) and the accounting policies for the annual
financial statement of 31 December 2010. The IFRS amendments and
interpretations that took effect on 1 January 2011 have not affected the
consolidated financial statements.
Preparing the financial statements in accordance with IFRS requires Ixonos’
management to make estimates and assumptions that affect the amounts of assets
and liabilities on the balance sheet date as well as the amounts of income and
expenses for the financial period. In addition, judgment must be used in
applying the accounting policies. As the estimates and assumptions are based on
views prevailing at the time of releasing the financial statement bulletin,
they involve risks and uncertainty factors. Actual results may differ from
estimates and assumptions.
The figures in the income statement and balance sheet are consolidated. The
consolidated balance sheet includes all Group companies as well as Ixonos
Management Invest Oy, a company owned by members of Ixonos’ management. The
original financial statement bulletin is in Finnish. The English financial
statement bulletin is a translation.
As the figures in the report have been rounded, sums of individual figures may
differ from the sums presented. The financial statement bulletin is unaudited.
CONSOLIDATED INCOME STATEMENT, EUR 1,000
1.1.–31.12 1.1.–31.12 Change, 1.10.–31.12 1.10.–31.12
.2011 .2010 per cent .2011 .2010
--------------------------------------------------------------------------------
Turnover 81,408 84,944 -4.2 19,537 23,157
--------------------------------------------------------------------------------
Operating expenses -79,472 -79,613 -0.2 -19,535 -21,288
--------------------------------------------------------------------------------
OPERATING PROFIT 1,937 5,331 -63.7 3 1,869
--------------------------------------------------------------------------------
Financial income -528 -781 -32.4 -152 -153
and expenses
--------------------------------------------------------------------------------
Profit before tax 1,409 4,550 -69.0 -149 1,716
--------------------------------------------------------------------------------
Income tax -478 -1,292 -63.0 21 -498
--------------------------------------------------------------------------------
PROFIT FOR THE 931 3,258 -71.4 -128 1,218
PERIOD
--------------------------------------------------------------------------------
Attributable to:
--------------------------------------------------------------------------------
Equity holders of 955 3,262 -70.7
the parent
--------------------------------------------------------------------------------
Non-controlling -24 -4 -455.9
interests
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, EUR 1,000
Profit for the period 931 3,258 -71.4 -128 1,218
-------------------------------------------------------------------
Other comprehensive income
-------------------------------------------------------------------
Change in translation difference 58 40 44.0 33 29
-------------------------------------------------------------------
COMPREHENSIVE INCOME FOR THE PERIOD 988 3,298 -70.0 -95 1,247
-------------------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION, EUR 1,000
ASSETS 31.12.2011 31.12.2010
---------------------------------------------------------------------------
NON-CURRENT ASSETS
---------------------------------------------------------------------------
Goodwill 23,647 23,647
---------------------------------------------------------------------------
Other intangible assets 5,138 5,580
---------------------------------------------------------------------------
Property, plant and equipment 3,391 4,210
---------------------------------------------------------------------------
Deferred tax assets 27 108
---------------------------------------------------------------------------
Available-for-sale investments 110 110
---------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 32,314 33,655
---------------------------------------------------------------------------
CURRENT ASSETS
---------------------------------------------------------------------------
Trade and other receivables 19,190 21,811
---------------------------------------------------------------------------
Cash and cash equivalents 1,466 1,226
---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 20,657 23,037
---------------------------------------------------------------------------
TOTAL ASSETS 52,970 56,693
---------------------------------------------------------------------------
---------------------------------------------------------------------------
EQUITY AND LIABILITIES 31.12.2011 31.12.2010
---------------------------------------------------------------------------
SHAREHOLDERS’ EQUITY
---------------------------------------------------------------------------
Share capital 585 585
---------------------------------------------------------------------------
Share premium reserve 219 219
---------------------------------------------------------------------------
Invested non-restricted equity fund 20,313 20,343
---------------------------------------------------------------------------
Retained earnings 7,177 3,824
---------------------------------------------------------------------------
Profit for the period 955 3,262
---------------------------------------------------------------------------
Equity attributable to equity holders of the parent 29,248 28,234
---------------------------------------------------------------------------
Non-controlling interests 200 224
---------------------------------------------------------------------------
TOTAL SHAREHOLDERS’ EQUITY 29,448 28,457
---------------------------------------------------------------------------
LIABILITIES
---------------------------------------------------------------------------
Non-current liabilities 4,400 7,934
---------------------------------------------------------------------------
Current liabilities 19,122 20,301
---------------------------------------------------------------------------
TOTAL LIABILITIES 23,522 28,235
---------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 52,970 56,693
---------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY, EUR 1,000
A: Share capital
B: Share premium reserve
C: Invested non-restricted equity fund
D: Treasury shares
E: Translation difference
F: Retained earnings
G: Total equity attributable to equity holders of the parent
H: Non-controlling interests
I: Total equity
A B C D E F G H I
--------------------------------------------------------------------------------
Shareholders’ equity 373 219 14,808 0 -11 3,789 19,177 19,177
at 1 January 2010
--------------------------------------------------------------------------------
Profit for the period 3,262 3,262 -4 3,258
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in translation 40 40 40
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Rights issue 213 5,534 1,141 6,888 6,888
--------------------------------------------------------------------------------
Share-based 7 7 7
remuneration
--------------------------------------------------------------------------------
Management incentive -1,141 -1,141 228 -913
plan
--------------------------------------------------------------------------------
Shareholders’ equity 585 219 20,343 29 7,058 28,234 224 28,457
at 31 December 2010
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders’ equity 585 219 20,343 0 29 7,058 28,234 224 28,457
at 1 January 2011
--------------------------------------------------------------------------------
Profit for the period 955 955 -24 931
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in translation 58 58 58
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Expenses for equity -30 -30 -30
procurement
--------------------------------------------------------------------------------
Share-based 33 33 33
remuneration
--------------------------------------------------------------------------------
Shareholders’ equity 585 219 20,313 86 7,090 29,248 200 29,448
at 31 December 2011
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT, EUR 1,000
1.1.–31.12.2 1.1.–31.12.2
011 010
--------------------------------------------------------------------------------
Cash flow from operating activities
--------------------------------------------------------------------------------
Profit for the period 931 3,258
--------------------------------------------------------------------------------
Adjustments to cash flow from operating activities
--------------------------------------------------------------------------------
Income tax 478 1,292
--------------------------------------------------------------------------------
Depreciation and impairment 4,209 3,407
--------------------------------------------------------------------------------
Financial income and expenses 528 781
--------------------------------------------------------------------------------
Other adjustments -36 -14
--------------------------------------------------------------------------------
Cash flow from operating activities before change in 6,110 8,724
working capital
--------------------------------------------------------------------------------
Change in working capital 196 -2,077
--------------------------------------------------------------------------------
Interest received 10 4
--------------------------------------------------------------------------------
Interest paid -599 -875
--------------------------------------------------------------------------------
Tax paid -606 -1,076
--------------------------------------------------------------------------------
Net cash flow from operating activities 5,110 4,700
--------------------------------------------------------------------------------
Cash flow from investing activities
--------------------------------------------------------------------------------
Investments in tangible and intangible assets -2,207 -2,545
--------------------------------------------------------------------------------
Dividends received 8 4
--------------------------------------------------------------------------------
Acquisition of subsidiaries 0 -1,052
--------------------------------------------------------------------------------
Net cash flow from investment activities -2,199 -3,594
--------------------------------------------------------------------------------
Net cash flow before financing 2,911 1,106
--------------------------------------------------------------------------------
Cash flow from financing activities
--------------------------------------------------------------------------------
Repayment of long-term borrowings -2,825 -2,872
--------------------------------------------------------------------------------
Increase in short-term borrowings 1,548 223
--------------------------------------------------------------------------------
Repayment of short-term borrowings -1,391 -5,353
--------------------------------------------------------------------------------
Proceeds from share issues 0 5,845
--------------------------------------------------------------------------------
Expenses for equity procurement -30 0
--------------------------------------------------------------------------------
Net cash flow from financing activities -2,699 -2,158
--------------------------------------------------------------------------------
Change in cash and cash equivalents 240 -1,052
--------------------------------------------------------------------------------
Liquid assets at the beginning of the period 1,226 2,278
--------------------------------------------------------------------------------
Liquid assets at the end of the period 1,466 1,226
--------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT, QUARTERLY, EUR 1,000
Q4/2011 Q3/2011 Q2/2011 Q1/2011 Q4/2010
1.10.–31 1.7.– 1.4.– 1.1.– 1.10.–
.12.11 30.9.11 30.6.11 31.3.11 31.12.10
--------------------------------------------------------------------------------
Turnover 19,537 18,916 21,817 21,138 23,157
--------------------------------------------------------------------------------
Operating -19,535 -18,088 -21,179 20,768 -21,288
expenses
--------------------------------------------------------------------------------
OPERATING PROFIT 3 829 638 369 1,869
--------------------------------------------------------------------------------
Financial income -152 -167 -157 -52 -153
and expenses
--------------------------------------------------------------------------------
Profit before -149 661 481 318 1,716
tax
--------------------------------------------------------------------------------
Income tax 21 407 -140 -107 -498
--------------------------------------------------------------------------------
PROFIT FOR THE -128 414 340 211 1,218
PERIOD
--------------------------------------------------------------------------------
SEGMENT REPORTING
1.1.– 31.12.2011 1.1.–31.12.2010
-------------------------------------------------------------------------
Turnover by segment
-------------------------------------------------------------------------
Mobile Solutions 68,881 71,160
-------------------------------------------------------------------------
Business Solutions 14,410 15,475
-------------------------------------------------------------------------
Eliminations -1,882 -1,691
-------------------------------------------------------------------------
Total turnover 81,408 84,944
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Operating profit by segment
-------------------------------------------------------------------------
Mobile Solutions 5,333 8,891
-------------------------------------------------------------------------
Business Solutions -501 -838
-------------------------------------------------------------------------
Group administration expenses -2,895 -2,722
-------------------------------------------------------------------------
Total operating profit 1,937 5,331
-------------------------------------------------------------------------
Operating profit, per cent of turnover 2.4 6.3
-------------------------------------------------------------------------
Financial income and expenses -528 -781
-------------------------------------------------------------------------
Profit before tax 1,409 4,550
-------------------------------------------------------------------------
Income tax -478 -1,292
-------------------------------------------------------------------------
PROFIT FOR THE FINANCIAL PERIOD 931 3,258
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Assets by segment
-------------------------------------------------------------------------
Mobile Solutions 34,122 36,589
-------------------------------------------------------------------------
Business Solutions 13,229 13,252
-------------------------------------------------------------------------
Others 5,619 6,851
-------------------------------------------------------------------------
Total assets 52,970 56,693
-------------------------------------------------------------------------
CHANGES IN FIXED ASSETS, EUR 1,000
Goodwi Intangibl Property, plant Available-for-s Total
ll e assets and equipment ale investments
--------------------------------------------------------------------------------
Carrying amount at 22,826 5,061 3,942 110 31,939
1 January 2010
--------------------------------------------------------------------------------
Additions 2,518 1,688 4,205
--------------------------------------------------------------------------------
Additions from 821 821
corporate
acquisitions
--------------------------------------------------------------------------------
Disposals -11 -11
--------------------------------------------------------------------------------
Depreciation for -1,998 -1,409 -3,407
the period
--------------------------------------------------------------------------------
Carrying amount at 23,647 5,580 4,210 110 33,547
31 December 2010
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Carrying amount at 23,647 5,580 4,210 110 33,547
1 January 2011
--------------------------------------------------------------------------------
Additions 2,267 672 2,940
--------------------------------------------------------------------------------
Changes in exchange 6 20 25
rates
--------------------------------------------------------------------------------
Disposals and -74 57 -17
transfers
--------------------------------------------------------------------------------
Depreciation for -2,640 -1,569 -4,209
the period
--------------------------------------------------------------------------------
Carrying amount at 23,647 5,138 3,391 110 32,286
31 December 2011
--------------------------------------------------------------------------------
FINANCIAL RATIOS
1.1.–31.12.2011 1.1.–31.12.2010
-----------------------------------------------------------------------------
Earnings per share, diluted, EUR 0.06 0.25
-----------------------------------------------------------------------------
Earnings per share, EUR 0.06 0.25
-----------------------------------------------------------------------------
Equity per share, EUR 1.94 1.87
-----------------------------------------------------------------------------
Operating cash flow per share, diluted, EUR 0.34 0.36
-----------------------------------------------------------------------------
Return on investment, per cent 5.4 14.1
-----------------------------------------------------------------------------
Return on equity, per cent 3.2 13.7
-----------------------------------------------------------------------------
Operating profit / turnover, per cent 2.4 6.3
-----------------------------------------------------------------------------
Net gearing, per cent 27.5 36.6
-----------------------------------------------------------------------------
Equity ratio, per cent 55.6 50.2
-----------------------------------------------------------------------------
OTHER INFORMATION
1.1.–31.12.2011 1.1.–31.12.2010
-------------------------------------------------------------------------------
PERSONNEL 1,118 1,120
Number of employees, average
-------------------------------------------------------------------------------
Number of employees, at the end of the period 1,031 1,138
-------------------------------------------------------------------------------
COMMITMENTS, EUR 1,000 31.12.2011 31.12.2010
-------------------------------------------------------------------------------
Collateral for own commitments
-------------------------------------------------------------------------------
Corporate mortgages 19,900 9,900
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Leasing and other rental commitments
-------------------------------------------------------------------------------
Falling due within 1 year 5,665 4,620
-------------------------------------------------------------------------------
Falling due within 1–5 years 3,403 5,690
-------------------------------------------------------------------------------
Falling due after 5 years 0 0
-------------------------------------------------------------------------------
Total 9,068 10,310
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Nominal value of interest rate swap agreement
-------------------------------------------------------------------------------
Falling due within 1 year 2,000 0
-------------------------------------------------------------------------------
Falling due within 1–5 years 2,986 4,893
-------------------------------------------------------------------------------
Falling due after 5 years 0 0
-------------------------------------------------------------------------------
Total 4,986 4,893
-------------------------------------------------------------------------------
Fair value -23 -54
-------------------------------------------------------------------------------
CALCULATION OF KEY FIGURES
Diluted earnings per share = profit for the period / number of shares, adjusted
for issues and dilution, average
Earnings per share = profit for the period / number of shares, adjusted for
issues, average
Shareholders’ equity per share = shareholders’ equity / number of shares,
undiluted, on the closing date
Cash flow from operating activities, per share, diluted = net cash flow from
operating activities / number of shares, adjusted for issues and dilution,
average
Return on investment = (profit before taxes + interest + other financial
expenses) / (balance sheet total - non-interest-bearing liabilities, average) x
100
Return on equity = net profit / shareholders’ equity, average x 100
Gearing = (interest-bearing liabilities – liquid assets) / shareholders’ equity
x 100