Tecnotree Corporation Financial Report 1 January – 31 December 2014 (unaudited)
30th January, 2015 at 08.30 am EET
Tecnotree is a global supplier of telecom IT solutions, providing products and services for charging, billing, customer care, and messaging and content services. The company’s product portfolio comprises virtually the full range of business management systems for telecom operators, with standard solutions for fixed networks, mobile services and broad band and for managing subscriptions, services and cash flows for prepaid and post-paid customers. Tecnotree has a strong footing especially in developing markets.
Fourth quarter in line with expectations
- Fourth quarter net sales were EUR 24.2 (20.0) million.
- The adjusted operating result for the quarter was EUR 5.1 (3.6) million and the operating result EUR 4.7 (3.6) million.
- The adjusted result for the quarter was EUR 0.5 (-0.2) million and result EUR 0.5 (0.5) million.
- The order book at the end of the period stood at EUR 38.9 (31 December 2013: 45.0) million.
- Fourth quarter cash flow after investments was EUR 2.7 (0.1) million.
- Earnings per share were EUR 0.00 (0.00).
Full year 2014
- Net sales for the review period were EUR 74.0 (73.9) million.
- The adjusted operating result was EUR 3.7 (3.3) million and the operating result was EUR 3.3 (1.6) million.
- The adjusted result for the period was EUR -6.4 (-7.0) million and the result EUR -9.3 (-2.5) million.
- Cash flow after investments for the review period was EUR -1.8 (-4.6) million and the company’s cash and cash equivalents were EUR 2.5 (31 December 2013: 6.6) million. The company’s cash situations continued to be tight.
- Earnings per share were EUR -0.08 (-0.02).
|KEY FIGURES|| 10-12/ |
| 10-12/ |
| 1-12/ |
| 1-12/ |
|Net sales, MEUR||24.2||20.0||74.0||73.9|
|Adjusted operating result, MEUR 1||5.1||3.6||3.7||3.3|
|Operating result, MEUR||4.7||3.6||3.3||1.6|
|Result before taxes, MEUR||4.0||3.7||-2.4||4.1|
|Adjusted result for the period, MEUR 2||0.5||-0.2||-6.4||-7.0|
|Result for the period||0.5||0.5||-9.3||-2.5|
|Earnings per share, basic, EUR||0.00||0.00||-0.08||-0.02|
|Order book, MEUR||38.9||45.0|
|Cash flow after investments, MEUR||2.7||0.1||-1.8||-4.6|
|Change in cash and cash equivalents, MEUR||0.5||-0.3||-4.2||-3.8|
|Cash and cash equivalents, MEUR||2.5||6.6|
|Equity ratio %||22.5||30.3|
|Net gearing %||172.7||113.4|
|Personnel at end of period||993||1,059|
1 Adjusted operating result = operating result before R & D capitalisation, amortisation of this and one-time costs. Details of these are given in the section “Result analysis”.
2 Adjusted result for the period = result for the period without exchange rate gains and losses, included in financial items, on intra-group balances being typically receivables due to subsidiaries from the parent company.
Unless otherwise stated, all figures presented below are for the review period 1-12/2014 and the figures for comparison are for the corresponding period 1-12/2013.
CEO Ilkka Raiskinen:
“The company’s fourth quarter net sales and adjusted operating result set new records. The cash flow from operations was also positive, so 2014 ended well. The order book for Africa and the Middle East increased considerably during 2014 and the business outlook in the region is encouraging. Progress has been made in the large projects in Latin America; it has been agreed to carry out one of the projects in several projects in separate phases, which in future will reduce the amount of working capital tied up and improve cash flow.
Despite the encouraging final part of the year, the result for the whole year remained a loss, so the company’s situation is still challenging. In 2015 efforts to raise efficiency will focus particularly on raising the degree of productisation, which will reduce the company’s costs and speed up project deliveries.
Tecnotree operates in markets that are growing strongly. Teleoperators in these markets provide consumers not only with conventional telecoms services but also with Internet and content services, and the billing and charging services for these require new solutions. Tecnotree has a strong position in its key markets, and for this reason the company believes that the growth in the market will also be reflected in Tecnotree’s business. Tecnotree’s operating result is expected to continue to increase during 2015.”
The income and costs recorded for Tecnotree’s business operations vary considerably from one quarter to another. For this reason it is important to base an examination of the profitability of the company on the result for more than one quarter.
Tecnotree reports its operating result as follows:
|INCOME STATEMENT, KEY FIGURES, MEUR|| 10-12/ |
| 10-12/ |
| 1-12/ |
| 1-12/ |
|Other operating income||0.0||0.0||0.1||0.1|
|Operating costs excluding product development capitalisation and one-time costs||-19.1||-16.5||-70.4||-70.6|
|Adjusted operating result||5.1||3.6||3.7||3.3|
|Product development capitalisation||0.0||0.0||0.0||0.0|
|Product development amortisation||-0.0||-1.7|
|Financial items without foreign currency differences||-0.7||-0.5||-2.8||-2.0|
|Adjusted result for the period||0.5||-0.2||-6.4||-7.0|
|Foreign currency differences included in financial items||0.0||0.6||-2.9||4.5|
|RESULT FOR THE PERIOD||0.5||0.5||-9.3||-2.5|
The foreign currency differences included in financial items are mainly due to the impact of intra-group balance sheet items, when for example a subsidiary records an exchange rate gain or loss on a euro denominated receivable from the parent company. These intra-group items are large, so the exchange rates have a significant impact. It is important to examine Tecnotree’s operative result without the impact of exchange rates, which is why they are shown separately.
The 2014 costs include one-time costs of EUR 0.4 million arising from redundancies.
Net sales in 2014 were EUR 0.1 million more than in the previous year. Quarterly net sales varied considerably and were as follows (million euros): 14.4 (Q1), 11.7 (Q2), 23.7 (Q3) and 24.2 (Q4). Second quarter net sales were significantly lower than normal as most of the customer orders and net sales accrued in the second half of the year. The strengthening of the US dollar had a positive impact on net sales in the second half of the year.
The operating result for the year improved by EUR 1.3 million on the previous year. Amortisation was EUR 2.4 million less. Of this, EUR 1.7 million was because Tecnotree no longer had any amortisation of R&D capitalisation. Amortisation declined by a further EUR 0.5 million from the previous year with the ending of the amortisation of assets recognized at the purchase of the company in India, since five years had passed since the acquisition. The costs for materials and services increased EUR 1.3 million in particular because of larger equipment deliveries included in projects.
Financial income and expenses (net) during the review period totalled a net loss of EUR 5.7 million (net gain of EUR 2.5 million). As stated above, the exchange rate gains and losses included in financial items mainly comprise exchange rate differences on intra-group balance sheet items. These balance sheet items are typically receivables due to subsidiaries from the parent company. Exchange rate differences have no direct impact on the Group’s cash flow.
Parent company’s equity less than half of share capital
The shareholders’ equity of the parent company on 31 December 2014 was EUR 2,193,142.25, or 46.5 % of the share capital. So the parent company shareholders’ equity has fallen below half of the share capital. According to section 23 of chapter 20 of the Limited Liability Companies Act, if a public company’s shareholders’ equity according to the balance sheet is less than half of its share capital, the Board of Directors shall without delay call a general meeting of shareholders to decide on any measures to restore the company to a sounder financial position. The general meeting of shareholders shall be held no later than three months after the financial statements have been completed. The Annual General Meeting of Tecnotree Corporation will be held at 5.00 pm on 25 March 2015 at the Marina Congress Center in Helsinki, where measures to put the company back on a healthy financial standing will also be discussed. The Board will publish a separate invitation to the AGM at a later date, but no later than 4 March 2015.
Events after the end of period
Tecnotree reached agreement with an operator group in Latin America to split delivery of the USD 30.5 million contract announced on 20 December 2011 into two delivery projects. The first phase is valued at USD 13.2 million and this includes delivery of a charging system for prepaid customers and a subscription management system. This first phase is being completed and will come to an end during the first half of 2015.
Phasing the project as agreed has reduced Tecnotree’s order book at the end of year 2014 by USD 17.3 million, since the USD 30.5 million contract signed on 20 December 2011 has been split into two projects and commercial negotiations on the second part are still in progress. Phasing the project clarifies the overall project and releases USD 5.6 million in working capital, since under the terms of the original agreement Tecnotree’s right to invoice depended on progress in delivery of the entire system. Under the phasing agreed now, Tecnotree has the right to invoice after completion of partial deliveries.
As part of the phasing, the parties have agreed on the delivery of the Tecnotree Agility TM Converging Charging Solution as the mobile data charging platform in three countries. Tecnotree will also provide expert services to ensure the smooth integration of the solution with existing network operations and business support systems. The precise commercial value of the second phase will be determined during negotiations, and deliveries will be spread over 2015 and 2016.
Prospects in 2015
Tecnotree estimates that its operating result will improve from 2014. Variations in the quarterly figures will be considerable.
Proposal concerning the result
The Board of Directors proposes to the Annual General Meeting, that no dividend be paid for the financial year ended 31 December 2014, and that the parent company’s loss for the financial year, EUR 5,519,009.82, be covered by non-restricted equity reserves of EUR 2,131,259.02 and the rest EUR 3,387,750.80 by reducing share capital.
Tecnotree is holding a conference for analysts, investors and the media to present its financial report on Friday, 30 January 2015 at 10.00 am in the Tapiola conference room at the Scandic Simonkenttä Hotel, Simonkatu 9, Helsinki. The financial report will be presented by CEO Ilkka Raiskinen and the conference will be held in Finnish. The material to be presented at the press conference will be available at www.tecnotree.com.
Board of Directors
Ilkka Raiskinen, CEO, tel. +358 (0)45 311 3113
Tuomas Wegelius, CFO, tel. +358 400 433 228
NASDAQ OMX Helsinki Ltd.
Tecnotree is a global provider of telecom IT solutions for the management of products, customers and revenue. Tecnotree helps communications service providers to transform their business towards a marketplace of digital services. Tecnotree empowers service providers to monetise on service bundles, provide personalised user experiences and augment value throughout the customer lifecycle. With over 1000 telecom experts, Tecnotree serves more than 100 service providers in over 70 countries. Tecnotree is listed on the main list of NASDAQ OMX Helsinki with the trading code TEM1V. For more information on Tecnotree, please visit www.tecnotree.com