Tecnotree Corporation Half Year Financial Report 1 January – 30 June 2016 (unaudited)
Half Year Financial Report
12 August, 2016 at 08.30 am EEST
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.
NET SALES IN SOUTH AMERICA HAVE DECLINED AND TECNOTREE HAS INITIATED A COST SAVINGS PLAN
- Second quarter net sales were EUR 16.2 (17.1) million.
- The operating result for the quarter was EUR 1.0 (1.5) million.
- The adjusted result for the quarter was EUR -1.1 (-2.9) million and result EUR -2.6 (-1.7) million.
- The order book at the end of the period stood at EUR 29.8 (31 December 2015: 26.8) million.
- Second quarter cash flow after investments was EUR -0.4 (2.8) million.
- Earnings per share were EUR -0.02 (-0.01).
January - June 2016
- Net sales for the review period were EUR 29.2 (34.2) million.
- The operating result was EUR -1.4 (2.5) million.
- The adjusted result for the period was EUR -6.2 (-3.3) million and the result EUR -7.1 (‑5.0) million.
- Cash flow after investments for the review period was EUR -2.3 (3.6) million and the company’s cash and cash equivalents were EUR 3.1 (31 December 2015: 6.4) million.
- Earnings per share were EUR -0.06 (-0.04).
- Tecnotree has decided to start a cost savings plan with the target to reduce personnel costs by 5.0 million euros on an annual level, representing 100 man years.
|KEY FIGURES|| 4-6/ |
| 4-6/ |
| 1-6/ |
| 1-6/ |
| 1-12/ |
|Net sales, MEUR||16.2||17.1||29.2||34.2||76.5|
|Adjusted operating result, MEUR 1||1.0||1.5||-1.4||2.8||12.0|
|Operating result, MEUR||1.0||1.5||-1.4||2.5||11.7|
|Result before taxes, MEUR||-1.4||1.0||-5.1||-1.4||7.8|
|Adjusted result for the period, MEUR 2||-1.1||-2.9||-6.2||-3.3||0.6|
|Result for the period||-2.6||-1.7||-7.1||-5.0||0.2|
|Earnings per share, basic, EUR||-0.02||-0.01||-0.06||-0.04||0.00|
|Order book, MEUR||29.8||37.4||26.8|
|Cash flow after investments, MEUR||-0.4||2.8||-2.3||3.6||6.3|
|Change in cash and cash equivalents, MEUR||-0.3||2.4||-3.3||3.0||4.2|
|Cash and cash equivalents, MEUR||3.1||5.6||6.4|
|Equity ratio %||13.1||19.6||23.9|
|Net gearing %||323.7||181.3||145.2|
|Personnel at end of period||926||939||934|
1 Adjusted operating result = operating result before 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 that are included in financial items and mainly arise on receivables due to subsidiaries from the parent company.
With reference to the new guidelines on alternative performance measures issued by the European Securities and Markets Authority (ESMA), Tecnotree uses the alternative performance measures “adjusted operating result” and “adjusted result for the period”. These measures are defined in the footnote to the above table, and in the table “Income statement, Key figures” under the section “Result analysis”.
Unless otherwise stated, all figures presented below are for the review period 1-6/2016 and the figures for comparison are for the corresponding period 1-6/2015.
CEO Padma Ravichander
“Net sales of the second quarter of 2016 were 3.2 million euros higher than in the first quarter. Since the net sales of the first quarter were 4.1 million euros lower than last year, net sales in the first half of 2016 were EUR 5.0 million down on the previous year. Last year at this time currency exchange gains totalling EUR 1.9 million were recorded in net sales and the result, mainly due to the strengthening of the US dollar. This year the corresponding figure for currency exchange was a loss of EUR 0.5 million, so these figures had an impact of EUR 2.4 million when comparing the results. Net sales otherwise fell EUR 2.6 million, with the weak state of the South American market being a particular factor in this decline.
Tecnotree has had EUR 0.8 million euros lower costs in the first half of the year than last year. In addition, the company will implement a cost savings plan by the end of the third quarter. The target is to reduce the personnel costs in the entire Group on an annual level by 5.0 million euros, representing 100 man years.
Tecnotree obtained two major new orders during the second quarter. Tecnotree won a contract to supply the Tecnotree Agility TM Mediation and Interconnect system to Nepal Telecom. Tecnotree also obtained an order to supply the operator EMTEL Mauritius, part of Airtel Group, with expansions to the operator’s reachability and content management platforms.”
On 5 March 2015 Tecnotree Corporation filed an application with the district court of Espoo for debt restructuring proceedings. The court decided on 9 March 2015 to commence the corporate restructuring proceedings.
On 9 March 2015 the district court appointed Mr. Jari Salminen, Attorney-at-Law, from Eversheds Attorneys Ltd as the administrator in respect of the restructuring process. The administrator delivered his proposed restructuring programme to the district court of Espoo on 30 March 2016. The District Court of Espoo has on 10.6.2016 by a decision prolonged the deadline for the filing of the modified restructuring programme until 30.9.2016. Tecnotree Corporation has to comply with the restructuring programme to be confirmed through court proceedings. This requires a sufficient cash inflow, in other words payments by customers.
Content of the draft restructuring programme of Tecnotree Corporation
The Administrator of the corporate restructuring of Tecnotree Corporation filed the draft restructuring programme to the District Court of Espoo on 30 March 2016. The Administrator considers that the draft restructuring programme will result in a more favourable outcome for the creditors compared to bankruptcy. The Administrator's view is that if implemented, the draft restructuring programme would lead to the Company's operations being rehabilitated. The essential content of the draft restructuring programme is as follows:
- At the moment, the total amount of the restructuring debts to be taken into ac-count in the restructuring proceedings is approximately 73.9 million euros. The Company has intragroup restructuring debts approximately 36.7 million euros. According to the Administrator’s draft programme the intragroup restructuring debts will be fully cut. In addition, the Company has 11.1 million euros unsecured debt. The total amount of the restructuring debts includes also approximately 26.1 million euros secured debts out of which approximately 8.9 million euros is secured by business mortgage. The Administrator is proposing that the unsecured restructuring debts be cut by 50% which would leave 50% of the amount of such debt to be repaid.
- The draft restructuring programme does include a provision on a duty to make supplementary payments on restructuring debts with no priority if the Company's actual cash flow exceeds the projected cash flow during the payment programme.
- Payments under the restructuring programme will end on 31 December 2020.
- The draft restructuring programme contains obligations concerning the sale of the Company’s property. The sales proceeds will be used to fund some of the payments to secured creditors and to creditors holding a business mortgage as security for their claims.
If the draft restructuring programme is approved, the group will record a one-off positive income effect of approximately 5.6 million euros as a result of debt rearrangement.
The approval and entry into force of the draft programme are conditional upon Tecnotree Corporation's General Meeting approving the draft programme.
RISKS AND UNCERTAINTY FACTORS
The risks and uncertainty factors for Tecnotree are explained in the 2015 Board of Directors’ Report and in the notes to the Financial Statements.
Risks and uncertainties in the near future
Tecnotree’s risks and uncertainties in the near future relate to financing, projects, to their timing, to trade receivables and receivables from construction contracts and to changes in foreign exchange rates. Having sufficient cash funds is the biggest single risk.
The company has sales in several countries where the country’s central bank has a shortage of foreign currency. This causes additional delays in payments, costs and even the risk of not receiving payment at all.
Tecnotree Corporation’s restructuring proceedings are still in progress. The administrator delivered his proposed restructuring program to the district court of Espoo on 30 March 2016. The deadline for the filing of the modified restructuring programme is 30 September 2016. The draft restructuring programme contains obligations concerning the sale of the Company’s property. The court will take the decision on this matter later. In case an acceptable restructuring plan does not come into force, the company will have to pay its creditors in full for its debts in the restructuring process. The Company is also obliged to fulfil the terms of the restructuring programme, which includes risk.
At the end of June 2016, the Group’s shareholders’ equity of stood at EUR 9.2 million. However, the shareholders’ equity of the parent company was EUR 12.4 million negative.
EVENTS AFTER THE END OF THE PERIOD
Tecnotree has decided to start a cost savings plan covering the entire Group to be implemented by the end of the third quarter. In connection with this, Tecnotree has the target to reduce personnel costs by 5.0 million euros on an annual level, representing 100 man years. A part of the savings will be implemented in 2016 when one-time costs of approximately 1.9 million euros are estimated to happen. The savings will have a full impact in 2017.
PROSPECTS IN 2016
The company estimates that its net sales and operating result will be lower than in the previous year. The weak state of the market in Latin America is a particular factor in this decline. Tecnotree has decided to start a cost savings plan with the target to reduce personnel costs by 5.0 million euros, representing 100 man years. A part of the savings will happen in 2016 when one-time costs for these action will also happen. The savings will have a full impact in 2017.
As in previous years, variations in the quarterly figures are estimated to be considerable.
Tecnotree is holding a conference for analysts, investors and the media to present its half year financial report on 12 August 2016 at 10.00 am in the Tapiola conference room at the Scandic Hotel Simonkenttä, Simonkatu 9, Helsinki. The result will be presented by CEO Padma Ravichander and the conference will be held in English. The material to be presented at the press conference will be available at www.tecnotree.com.
Board of Directors
Mrs. Padma Ravichander, CEO, tel. +97 156 414 1420
Mr. Tuomas Wegelius, CFO, tel. +358 (0)400 433 228
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 around 900 telecom experts, Tecnotree serves around 90 service providers in around 70 countries. Tecnotree is listed on the main list of NASDAQ Helsinki with the trading code TEM1V. For more information on Tecnotree, please visit www.tecnotree.com