Tecnomen Corporation STOCK EXCHANGE RELEASE
11 February 2004 at 8.30 am
TECNOMENS FINANCIAL STATEMENTS 1 JANUARY - 31 DECEMBER 2003
Tecnomens net sales in the final quarter of 2003 increased 59.9 per
cent from the corresponding period in the previous year to EUR 17.0
million. The largest sale in the review period was the EUR 7.2 million
messaging system expansion and upgrade supplied in the final quarter
to Chunghwa Telecom Co. Ltd in Taiwan.
The cash flow in the fourth quarter was EUR 1.8 (1.1) million, thanks
to the above mentioned delivery to Taiwan. The financial position
SUMMARY FOR 2003
- Net sales EUR 45.3 (39.9) million
- Operating result EUR -7.0 (-14.1) million
- Non-recurring items that reduced operating result EUR 2.0
- Order book EUR 10.0 (10.4) million
- Cash flow EUR 0.1 (-6.4) million
- Cash funds EUR 34.8 (34.7) million
- Equity ratio 85.2% (90.1%)
- Personnel at end of period 398 (457)
- Tecnomen appointed a new President and CEO, management board and
sales and marketing director
- Tecnomen acquired the share stock of Krocus Communications Oy
10-12/03 10-12/02 2003 2002
Net sales, MEUR 17.0 10.6 45.3 39.9
Net sales, change % 59.9 -44.2 13.6 -30.2
Operating result, MEUR -0.5 -2.9 -7.0 -14.1
% of net sales -2.7 -27.7 -15.6 -35.5
Result before -0.4 -2.6 -6.4 -14.6
% of net sales -2.3 -24.3 -14.2 -36.7
Personnel at end of 398 457 398 457
Earnings per share, EUR -0.02 -0.04 -0.13 -0.25
Equity per share, EUR 1.13 1.26 1.13 1.26
Net interest-bearing -34.1 -33.8 -34.1 -33.8
Unless otherwise stated, all figures presented below are for the
review period 1-12/2003 and the figures for comparison are from the
corresponding period 1-12/2002.
During 2003 the market remained difficult. Operator investments stayed
at a low level. Tecnomen won major new customers during the year and
continues its efforts to develop new products.
No major changes took place in the market in 2003 from the previous
year. Consolidation continued among Tecnomens customer companies.
Intensifying competition increased pressure on system prices.
Operators showed increasing interest in next generation messaging
(NGM) systems during 2003. Operators are trying to segment their user
groups and offer services to more precisely defined target groups,
which increases interest in NGM systems. More service operators are
also entering the market, offering mobile services to limited target
groups and taking advantage of established consumer brands.
The situation in Europe remained challenging; deliveries in 2003
consisted mainly of updates to the systems of existing customers and
supplying new features for them. The growth that has taken place in
Latin America is expected to continue in 2004. No major changes took
place in Asia; the largest sale towards the end of the year was the
delivery to the Taiwanese company Chungwa Telecom. The markets in the
Middle East and Africa region remained stable. European and some of
the Asian mobile operators have shown the greatest interest in NGM
Multimedia messaging systems
Growth in multimedia services (MMS) was slower than estimated in 2003.
The latest reports, however, indicate that multimedia traffic has been
growing especially in Western Europe. Several manufacturers launched
new colour display camera phones for the Christmas market at lower
prices, and this was the biggest factor in this positive development.
New MMS services have been introduced especially in the Middle East
and South America. During the final quarter, Tecnomen signed contracts
for multimedia messaging systems with CCT Boatphone in the British
Virgin Islands, Qtel in Qatar, and Luxcommunications in Luxembourg.
The systems will mainly be delivered at the beginning of 2004. In the
current year, the markets with greatest potential for Tecnomen are
still the Middle East, Africa and Latin America.
Developments in the main market areas for Tecnomens prepaid systems,
Latin America and the Caribbean, have been positive. Tecnomen has
reinforced its position in the region through its cooperation with the
América Móvil group. Operators are expected to invest in data systems
this year. The countries in the Latin American area mainly use TDMA
network technology. As GSM obtains a stronger position in the region,
this has an impact on the purchasing behaviour of operators, so system
suppliers must be able to support multiple protocol solutions.
Tecnomens prepaid and messaging systems support different protocols
simultaneously, making it possible to switch from TDMA to GSM or to
use both networks together.
Growth is likely to remain steady in Eastern Europe, the Far East and
Africa. The market is also showing small signs of picking up in
Investments in the next generation of public authority networks have
got off to a slow start. Even so, market interest in value-added
services has increased. In response to this demand, the Tecnomen
product unit specialising in paging systems makes its own products and
customises other Tecnomen products to meet public authority needs.
During 2003, Tecnomen developed some of its proven solutions, such as
the answering service, into offerings suitable for use by public
SALES AND NET SALES
Tecnomens net sales in the review period increased 13.6 per cent to
EUR 45.3 (39.9) million. The companys net sales in the fourth quarter
totalled EUR 17.0 (10.6) million, or 59.9 per cent higher than the
Net sales by region
MEUR % MEUR %
Europe 15.1 33 16.4 41
Latin America 12.6 28 11.4 29
East and South-East Asia 10.1 22 3.6 9
Middle East and Africa 7.5 17 8.5 21
TOTAL 45.3 100 39.9 100
Although the overall market continued to decline, during the final
quarter there were signs that the market was stabilising and
investments by operators were increasing. The growth of sales in Asia
was due to the delivery to Chunghwa Telecom Co. Ltd in Taiwan.
Net sales by product segment
MEUR % MEUR %
Messaging Solutions 27.9 61 24.1 61
Intelligent Network Systems 13.1 29 11.6 29
Paging Systems 4.3 10 4.2 10
TOTAL 45.3 100 39.9 100
Total net sales and their distribution among the different product
segments vary greatly from one quarter of the year to another, as a
result of the seasonality of the business and timing of project
Sales through global partners totalled some EUR 6.3 million or 13.8
per cent (18.0%) of net sales.
Maintenance and service sales accounted altogether for about 18.5 per
cent (20.4%) of net sales.
At the end of December the companys order book stood at EUR 10.0
As a result of the reductions in personnel and other cuts in costs
carried out, the companys losses declined. The operating result for
the review period was EUR -7.0 (-14.1) million.
EUR 1.0 million of the non-recurring costs for the whole review period
were caused by the reductions in personnel and EUR 1.7 million by
write-downs on trade receivables.
The operating result in the fourth quarter was EUR -0.5 (-2.9)
million. EUR 1.0 million of the non-recurring costs were recognised in
the fourth quarter.
Operative costs during the financial year decreased by EUR 8 million
from the previous year.
Intense competition on price reduced sales margins.
The result for the period before extraordinary items, appropriations
and taxes was EUR -6.4 (-14.6) million.
Earnings per share were EUR -0.13 (-0.25). Equity per share at the end
of the period was EUR 1.13 (1.26).
FINANCING AND INVESTMENTS
Tecnomens financial position is strong. Liquid assets were EUR 34.8
(34.7) million. The balance sheet total on 31 December 2003 stood at
EUR 77.5 (81.3) million. The cash flow in the period under review was
EUR 0.1 (-6.4) million. The cash flow in the fourth quarter was EUR
1.8 (1.1) million. Interest bearing liabilities amounted to EUR 0.7
(0.9) million. The debt to equity ratio (gearing) was -52.3 (-46.6%)
per cent. The balance sheet structure remained strong and the equity
ratio on 31 December 2003 was 85.2 (90.1%) per cent.
Financial income and expenses during the review period totalled EUR
0.6 (-0.5) million. Interest and investment income totalled EUR 0.9
(1.3) million. At the end of the year, 15 per cent of cash funds were
in money market funds, 32 per cent in commercial papers, and the
remainder either in deposits or bank certificates of deposit.
Tecnomens gross capital expenditure during the review period was EUR
1.9 (2.2) million. The most significant investment was the acquisition
of the entire share stock of Helsinki-based Krocus Communications Oy,
a developer of messaging system technology, on 23 April 2003. The
Boards of Directors of the companies signed a merger plan on 24 June
2003. According to the plan, Krocus Communications Oy, with its assets
and liabilities, was merged with its parent company Tecnomen
Corporation without merger consideration. In accordance with the plan,
the merger was entered in the trade register on 30 November 2003.
The goodwill arising from the acquisition of Krocus Oy stood at EUR
0.7 million in the consolidated balance sheet on 31 December 2003. The
goodwill will be written off on a straight line basis over five years.
RESEARCH AND DEVELOPMENT
In 2003 Tecnomen continued to invest in research and development. R&D
costs during the review period were EUR 9.4 (11.2) million,
corresponding to 20.8 (28.0%) per cent of net sales. R&D related costs
have been recorded directly as costs.
R&D efforts during 2003 focused on developing key products and on
bringing new system features on to the market. The company continued
development work on the next generation messaging (NGM) system
platform, MMSC (multimedia messaging centre) and prepaid systems.
Tecnomens next generation messaging solution, Tecnomen eZONER NGM,
enables user segmenting and tailored service packages for the special
needs of each customer segment. The new features it offers operators
are a centralised data bank, customer segmenting, terminal
independence, openness and user group support.
Following the changes to the organisational structure affecting the
entire Tecnomen Group, the number of Tecnomen personnel fell by 59
during 2003 and stood at 398 (457) at the end of the review period.
The company employed on average 440 (520) people during the review
Personnel by region
31.12.2003 % 31.12.2002 %
Finland 198 50 248 54
Ireland 110 27 118 26
Latin America 38 10 36 8
East and Southeast Asia 26 7 26 6
Continental Europe 15 3 18 4
Middle-East 11 3 11 2
TOTAL 398 100 457 100
TECNOMEN GROUP STRUCTURE
The process of changing the organisational structure, which started in
the third quarter and was completed in the final quarter, was part of
a programme of action affecting the entire Group that aimed to improve
the companys profitability and develop selected core business areas.
The new organisation comprises four product units: Messaging, Mobile
Multimedia (multimedia systems are reported as part of the Messaging
unit), Prepaid and Paging. The change in the organisation came into
force on 15 September 2003.
TECNOMEN SHARES AND SHARE CAPITAL
At the end of December 2003 the shareholders equity of Tecnomen
Corporation stood at EUR 65.2 million and the share capital was EUR
4,647,406.24, divided into 58,092,578 shares. The company held 400,000
of these shares, representing 0.69 per cent of the companys share
capital and votes. The nominal value of the shares held by the company
totalled EUR 32,000. During the review period the company did not
purchase the companys own shares. The equity per share was EUR 1.13.
A total of 32,393,430 Tecnomen shares (EUR 27,862,040) were traded on
the Helsinki Exchanges during the period 2 January - 31 December 2003,
or 55.76 per cent of the total number of shares.
The highest share price quoted in the period was EUR 1.59 and the
lowest was EUR 0.39. The average quoted price was EUR 0.86 and the
closing price on 31 December 2003 was EUR 1.37. The share stock has a
market value of EUR 79,586,832 at the closing price.
At the end of the review period Tecnomens Board of Directors held the
following current authorisations granted by the Annual General Meeting
on 25 March 2003:
1. Authorisation to decide to purchase the companys own shares such
that, including the shares already in the possession of the company,
the shares purchased shall have a total nominal value that represents
at most 5 per cent of all the companys current share capital and
associated voting rights, using funds available for the distribution
During the review period the company did not use the authorisation
to purchase its own shares.
2. Authorisation to decide to dispose of the companys own shares
already in the possession of the company and any acquired under the
authorisation given to the Board.
During the review period the Board did not dispose of the companys
3. Authorisation to decide to increase the share capital by issuing
new shares, convertible bonds and/or stock options in one or more
issues. The number of new shares through share issuance or
subscription of shares in exchange for convertible bonds or pursuant
to the stock options may be at most 7,518,515 shares, and the
company's share capital may rise by at most a total of
During the review period the Board did not use the authorisation to
raise the companys share capital by issuing new shares, convertible
bonds or stock options.
The authorisations given to the Board of Directors are effective for
one year from the decision of the Annual General Meeting of
The company has a current 2002 stock option programme approved by the
Annual General Meeting of Shareholders on 11 April 2002, which is
divided into four stock option series, the 2002A, 2002B, 2002C and
2002D stock options. A maximum of 4,100,000 stock options may be
issued that entitle holders to subscribe to a total of 4,100,000
Tecnomen Corporation shares. As a result of subscriptions with the
2002 stock options, the company's share capital can rise by a maximum
of EUR 328,000. The share subscription price for stock option 2002C
was set at 0.46 euros, the Tecnomen trade volume weighted average
share price on the Helsinki Exchanges between 1 March and 31 March
2003. The subscription period for the 2002A stock options started on
1 April 2003. During the review period no share subscriptions were
made with the 2002A stock options. The subscription period with the
other stock options has not started yet.
ADOPTION OF IFRS STANDARDS (IAS) IN FINANCIAL STATEMENTS
Tecnomen Corporation will adopt IFRS standards in preparing the
consolidated financial statements for 2005.
TECNOMENS MANAGEMENT AND AUDITORS
During the review year, Tecnomens Board of Directors contained seven
members: Lauri Ratia, Keijo Olkkola, Lars Hammarén, Carl-Johan
Numelin, Christer Sumelius, Timo Toivila and Hannu Turunen. Lauri
Ratia was Chairman of the Board and Keijo Olkkola was Vice Chairman.
Tecnomens President and CEO in the period 1999-2003 was Vesa
Helkkula. He relinquished this position on 1 August 2003, after which
date Ilpo Uotila, President of management and consultant services
providers Covar Oy, was appointed interim President and CEO. He acted
as President and CEO of Tecnomen until the appointment of a new
President and CEO, Jarmo Niemi. Niemi took up this appointment on 31
Eero Mertano was appointed Director of Global Sales and Marketing at
Tecnomen Corporation on 7 January. He started in this position on 19
January 2004. Mr Mertano reports to the President and CEO Mr Jarmo
Niemi and is a member of the companys Management Board.
Tecnomens Management Board contains seven members: Jarmo Niemi,
President and CEO; Riitta Järnstedt, CFO; Eero Mertano, Director,
Global Sales and Marketing; Timo Nykänen, Director, Messaging
Solutions; Miika Reinikka, Director, Mobile Multimedia; Timo Kangas,
Director, Intelligent Network Systems & Paging; and Vesa Kemppainen,
Director, Corporate Development.
Tecnomen Corporations auditors were KPMG Wideri Oy Ab and the
responsible auditor was Sixten Nyman, APA.
PROSPECTS FOR 2004
Forecasts for network markets remain cautious, even though the mood in
the market has improved. Large companies and several small companies
operate in the sector. In the short term competition on price will
Tecnomen expects the market to pick up gradually, which will enable
the company to achieve a positive financial performance.
During 2004 Tecnomens goal is to further improve its net sales and
PAYMENT OF DIVIDENDS
According to the balance sheet on 31 December 2003, the company has no
distributable funds for paying a dividend.
SCHEDULE FOR PUBLISHING FINANCIAL INFORMATION
During the 2004 financial year Tecnomen will publish three
- 1-3/2004 Wednesday 28 April
- 1-6/2004 Wednesday 11 August
- 1-9/2004 Wednesday 27 October
Board of Directors
Jarmo Niemi, President and CEO, tel. +358 (0)9 8047 8799
Riitta Järnstedt, CFO, tel. +358 (0)9 8047 8650
CONSOLIDATED INCOME STATEMENT
MEUR 2003 2002
Net sales 45.3 39.9
Operating expenses 49.3 50.6
Depreciation 3.0 3.4
Operating result -7.0 -14.1
% of net sales -15.6 -35.5
Financial income and 0.6 -0.5
Result before extraordinary -6.4 -14.6
Result before taxes and -6.4 -14.6
Taxes -0.8 0.3
Result for the period -7.3 -14.3
CONSOLIDATED BALANCE SHEET
MEUR 31.12.2003 31.12.2002
Fixed assets 10.1 11.4
Inventories 2.2 3.6
Trade receivables 27.0 27.7
Cash and bank balances 34.8 34.7
Other financial assets 3.4 3.9
Assets 77.5 81.3
Shareholders equity 65.2 72.5
Interest-bearing 0.7 0.9
Non-interest bearing 10.9 7.9
Deferred tax 0.1 0.0
Equity and liabilities 77.5 81.3
CONSOLIDATED CASH FLOW STATEMENT
MEUR 2003 2002
Cash flow, business operations 1.9 -3.8
Cash flow from investments -1.6 -2.2
Cash flow from financing -0.2 -0.4
Increase (+) and decrease (-) in 0.1 -6.4
Liquid funds on 1 Jan. 34.7 41.1
Liquid funds on 31 December 34.8 34.7
Change 0.1 -6.4
KEY FINANCIAL FIGURES
MEUR 2003 2002
Return on investment, % -9.1 -18.0
Return on equity, % -10.5 -17.9
Equity ratio, % 85.2 90.1
Debt/equity ratio -52.3 -46.6
Investments 1.9 2.2
% of net sales 4.2 5.5
Research and development 9.4 11.2
% of net sales 20.8 28.0
Order book 10.0 10.4
Personnel, average 440 520
Personnel, at end of period 398 457
KEY FIGURES PER SHARE
MEUR 2003 2002
Earnings per share, EUR -0.13 -0.25
Equity per share, EUR 1.13 1.26
Number of shares at end of 58,093 58,093
period, x 1,000
Number of shares on 58,093 58,093
average, x 1,000
Share price, EUR
Average price 0.86 0.97
Lowest price 0.39 0.49
Highest price 1.59 2.10
Share price at end of 1.37 0.51
Market value of issued 79.6 29.6
stock at end of period,
Share turnover, million 32.4 24.3
Share turnover, % of total 55.8 41.8
Share turnover, MEUR 27.9 23.6
MEUR 2003 2002
For own debts
Mortgages 0.7 0.7
Pledges given to cover
other own commitments
Mortgages 1.3 1.3
Chattel mortgages 0.2 0.2
Other own liabilities 2.7 2.6
Current forward contracts
Market value 15.7 11.0
Value of underlying 16.7 11.9
Market value 0.0 0.0
KEY FIGURES PER QUARTER
1Q/02 2Q/02 3Q/02 4Q/02 1Q/03 2Q/03 3Q/03 4Q/03
Net sales, MEUR 8.4 8.2 12.7 10.6 7.6 11.6 9.1 17.0
Net sales, -44.3 -18.6 -2.3 -44.2 -9.2 41.5 -28.0 59.9
Operating -5.4 -5.6 -0.3 -2.9 -3.8 -0.8 -1.9 -0.5
% of net -64.0 -67.9 -2.2 -27.7 -49.5 -7.6 -21.3 -2.7
Result before -5.3 -5.5 -1.3 -2.6 -3.7 -0.6 -1.7 -0.4
and taxes, MEUR
Personnel at 558 554 473 457 436 444 437 398
end of period
Earnings per -0.09 -0.10 -0.02 -0.04 -0.06 -0.01 -0.03 -0.02
Equity per 1.41 1.31 1.30 1.26 1.19 1.18 1.15 1.13
Net interest- -37.8 -33.7 -32.7 -33.8 -32.8 -32.8 -31.9 -34.1
Order book, 5.7 9.1 6.3 10.4 8.3 6.9 7.2 10.0
The financial figures in the balance sheet, income statement and key
indicators have been rounded up or down to the nearest million euro.
Calculations based on these rounded figures may not give exactly the
same results as those presented in this release, since the figures
shown here have been calculated using exact values.
The figures are not audited.
The companys ten largest shareholders, excluding nominee
registrations, on 31 December 2003:
No. of shares %
Sampo Life Insurance Co. Ltd 3,083,400 5.31
Hammaren Lars-Olof 2,164,300 3.73
Sumelius Henning 2,022,300 3.48
Oy Finvestock AB 2,003,600 3.45
Geveles AB 1,952,092 3.36
Fennogens Investments SA 1,535,000 2.64
Sumelius Johanna Marina 1,122,400 1.93
Oy Investsum AB 954,100 1.64
Estate of Suutarinen Helena 901,200 1.55
Gyllenberg Finlandia Fund 848,000 1.46
TOTAL 16,586,392 28.55
Ownership of Tecnomen shares, 31 December 2003
Shares Holders % Shares and %
1-500 3,389 50.88 757,588 1.30
501-1,000 1,109 16.65 868,296 1.49
1,001-5,000 1,471 22.08 3,537,593 6.09
5,001-10,000 299 4.49 2,241,877 3.86
10,001-50,000 247 3.71 5,604,082 9.65
50,001-100,000 45 0.68 3,374,369 5.81
100,001-500,000 84 1.26 18,858,578 32.46
500,001< 17 0.26 22,812,595 39.27
Joint account 37,600 0.06
Total 6,661 100.00 58,092,578 100.00
Ownership structure by sector, 31 December 2003
No. of shares %
Companies 10,906,296 18.77
Finance houses and insurance 13,236,483 22.79
Public sector 841,735 1.45
Non-profit making associations 968,397 1.67
Households and private persons 29,041,559 49.99
Foreign holders 3,060,508 5.27
TOTAL 58,054,978 99.94
Joint account 37,600 0.06
Share capital 58,092,578 100.00
Nominee registrations 2,704,181 4.65
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