ELISA'S JANUARY-MARCH PRE-TAX PROFIT AMOUNTED TO EUR 39 MILLION
ELISA CORPORATION STOCK EXCHANGE RELEASE 25 April 2006 AT 8.30 am
ELISA'S JANUARY-MARCH PRE-TAX PROFIT AMOUNTED TO EUR 39 MILLION
January-March pre-tax profit amounted to EUR 39 million (39).
Revenue was EUR 348 million (333).
Excluding non-recurring items, the EBITDA for the period
under review improved from EUR 89 million to EUR 103 million.
Compared with the previous quarter, the churn in Elisa's
mobile communications decreased from 23 per cent to 19 per cent
and the market position continued unchanged
The sales of broadband subscriptions continued robustly; the
number of subscriptions increased by approximately 40,000 from the
beginning of the year
The financial position remained stable: at the end of March,
the equity ratio was 61.5 per cent (61.7 per cent at the end of
2005) and net debt at EUR 293 million (293 at the end of 2005)
In January-March, Elisa's key indicators were as follows:
Income statement 1-3/2006 1-3/2005 1-12/2005
EUR million
Revenue 348 333 1,337
EBITDA 99 1) 97 2) 446 3)
EBIT 43 45 233
Profit before taxes 39 39 212
Earnings per share, EUR 0.18 0.23 1.22
Capital expenditures 43 42 204
1) Comparable EBITDA EUR 103 million (restructuring provision
EUR -4 million)
2) Comparable EBITDA EUR 89 million
3) Comparable EBITDA EUR 346 million
Figures describing the financial position and cash flow:
Financial position 31.3.2006 31.3.2005 31.12.2005
Net debt 293 489 293
Equity ratio, % 61.5 49 61.7
Cash flow statement 1-3/2006 1-3/2005 1-12/2005
Cash flow after
investments 13 26 308
CEO Veli-Matti Mattila:
The 3G service bundles got off to a very strong start
Our telecommunications market is taking strong steps towards
service competition. The number of 3G handsets, which support
improved services, has already doubled during April.
3G service bundles, allowed since 1 April, make it easy to
implement and use new services. The packages enable such new
services as e.g. video calls, very fast data connections, data
lines and mobile TV.
The 3G service bundles sale is expected to improve profitability
in the long-term, but will initially strain the profitability
owing to e.g. increasing marketing investments.
The regional coverage of telecommunications services is important
in developing the information society. The authorities could speed
up the expansion of 3G coverage by enabling the use of 900 MHz
frequency for 3G services. The spreading of coverage would thus be
much more cost efficient.
The number of subscriptions to Elisa services continued to
increase in the first quarter. We strengthened our leading
position in the broadband market, achieving 40,000 new
subscriptions.
Besides the growth of the subscription base, another significant
factor was the decrease in the churn in mobile communications.
Within a year, the churn has dropped from over 30 per cent to less
than 20 per cent. This indicates that operators are focusing on
their existing customers and service-based competition. It is more
and more important that the product and service function
seamlessly together.
We determinedly continue to improve profitability and to offer
better services for our customers.
ELISA CORPORATION
Vesa Sahivirta
Director, IR and Financial Communication
Further information:
Mr Veli-Matti Mattila, President and CEO, tel. +358 10 262 2635
Mr Jari Kinnunen, CFO, tel. +358 10 262 9510
Mr Vesa Sahivirta, Director, IR and Financial Communication, tel.
+358 10 262 3036
Distribution:
Helsinki Stock Exchange
Principal media
Interim report for January-March 2006
This interim report has been prepared in accordance with the IFRS
recognition and measurement principles. The information presented
in this interim report is unaudited.
Market situation
Average minute prices continued to fall. However, in the mobile
communication business, competition is expanding from prices to
services. At the end of March, Elisa launched its new 3G service
packages, which make it easy to use new services. The number of
mobile network subscriptions continued its positive development,
and usage of subscriptions increased.
In the fixed network business, the number of broadband
subscriptions continued its strong growth. The number and usage of
traditional subscriptions decreased.
Revenue
EUR million 1-3/2006 1-3/2005 Change, %
Mobile communications 192 179 7
Fixed network 180 162 11
Other businesses 0 21 -100
Sales between segments -24 -29 -17
Total 348 333 5
Elisa's revenue for January-March was up 5 per cent compared with
the same period in 2005. Revenue in the mobile communication
business increased by 7 per cent and in the fixed network business
by 11 per cent. In the mobile communication business, revenue was
positively affected by the additional traffic generated by
Saunalahti, and in the fixed network business, the increase in the
number of broadband subscriptions.
Performance
EUR million 1-3/2006 1-3/2005 Change, %
Mobile communications
EBITDA 53 49 8
EBITDA, % 28% 27%
EBIT 30 27 11
Fixed network
EBITDA 46 40 15
EBITDA, % 26% 25%
EBIT 15 13 15
Other business and
corporate functions
EBITDA -1 8
EBIT -2 5
Group, total
EBITDA 99* 97** 2
EBITDA, % 28% 29%
EBIT 43 45 -4
* EBITDA includes a restructuring provision of EUR -4 million
** Comparable EBITDA EUR 89 million
Elisa's EBITDA showed growth of 2 per cent from the corresponding
period in 2005. This increase was attributable to improved
profitability and the additional revenue created by the
acquisition of Saunalahti.
The groups other financial income and expenses totalled EUR -4
million (-6). Reduced financial expenses were mainly due to a
decrease in net debt.
Income taxes in the income statement amounted to EUR -9 million
(-6).
The groups January-December result after taxes stood at EUR 30
million (33). The groups earnings per share (EPS) amounted to EUR
0.18 (0.23). At the end of March, the group shareholders' equity
per share was EUR 7.54 (8.06 at the end of 2005).
Changes in corporate structure
On 28 March 2006, Elisa deposited a security, as referred to in
Chapter 14, section 21 of the Companies Act, with regard to
Saunalahti Group Oyjs shares that are to be redeemed. As a
result, Elisa's ownership in Saunalahti increased to 100 per cent
and public quotation of Saunalahti shares terminated.
Elisa's wholly-owned subsidiaries, Tikka Communications Oy and
Jyväsviestintä Oy, have resolved to merge with Elisa. The mergers
are scheduled for the summer 2006.
Mobile communication business
Number of subscriptions 31.3.2006 31.3.2005 31.12.2005
Total number of subscriptions
(Finland and Estonia) 2,261,421 1,674,102 2,228,101
Number of subscriptions in
Finland * 1,983,921 1,438,452 1,962,101
Subscriptions in Estonia 277,500 235,650 266,000
* Elisa's network operator in Finland
Operative figures in Finland** 1-3/2006 1-3/2005 2005
Revenue/subscription**(ARPU), 28.0 34.6 32.5
Churn**, % 19.0 33.5 28.4
Usage, million minutes* 1,087 714 3,509
Usage, 187 158 172
min/subscription/month**
SMS, million msg* 265 162 827
SMS, msg/subscription/month** 46 36 38
Value-added services/revenue, % 16 15 16
* Elisa's network operator in Finland (the 2005 figures partly
exclude the Saunalahti subscriptions)
** Elisa's service operators in Finland (the 2005 figures exclude
the Saunalahti subscriptions)
Elisas network operator increased the number of its subscriptions
by some 545,500 subscriptions during the year, partially as the
result of Saunalahti shifting its subscriptions to Elisas
network. The first-quarter increase was approximately 22,000
subscriptions.
The call minutes per subscription of Elisa's own service operator
rose by approximately 18 per cent and the number of SMS messages
increased by approximately 28 per cent on the corresponding period
in 2005. The call minutes of the network operator rose by 52 per
cent and SMS messages by 64 per cent. The increase was
substantially affected by the additional traffic generated by
Saunalahti.
Revenue per subscription (ARPU) decreased by approximately 19 per
cent from the corresponding period. This was due to the price
erosion in consumer and interconnection fees in June 2005. The
increased usage per subscription failed to completely compensate
for the decrease due to price erosion.
The business operations of Elisa's subsidiary in Estonia continued
to grow rapidly, both in terms of revenue and number of
subscriptions. Revenue was up 17 per cent at EUR 22.3 million
(19.0) and the number of customers grew by 18 per cent to 277,500
(235,650). Profitability also improved: EBITDA was up 17 per cent,
amounting to EUR 6.8 million (5.8), and revenue increased by 26
per cent to EUR 4.4 million (3.5).
In March, Elisa introduced a new pricing model for wireless
subscriptions that is based on a monthly fee similar to broadband
connections.
Fixed network business
Number of subscriptions 31.3.2006 31.3.2005 31.12.2005
Broadband subscriptions 459,827 269,232 420,465
ISDN channels 121,169 149,339 128,665
Cable TV subscriptions 217,600 200,864 214,054
Analogue and other
subscriptions 557,859 626,740 578,002
Subscriptions, total 1,356,455 1,246,175 1,341,186
The demand for broadband subscriptions continued strong in the
first quarter. The number of subscriptions increased by
approximately 40,000 subscriptions from the beginning of the year.
Growth occurred somewhat more heavily in Elisa's own subscriber
network areas, but was also significant in external growth areas.
The number of traditional subscriptions continued to decrease
steadily as voice calls shifted to the mobile communication
network and data transfers to broadband subscriptions.
In March, Elisa initiated the renewal of its telecommunications
network, which comprises renewal of the technology and equipment
of Elisas whole broadband and backbone network. The network
renewal continues Elisas investments, thanks to which the
broadband connection speeds have increased continuously and the
availability of broadband connections has become more extensive
throughout Finland. Elisa is also updating its intelligent network
services targeted at corporate customers. This will allow
efficient use of new technologies and faster migration to IP-based
services.
Elisa's Annual General Meeting on 27 March 2006
Elisa's Annual General Meeting confirmed the financial statements
and discharged the members of the Board of Directors and the CEO
from liability for 2005. The Annual General Meeting also decided
to pay a dividend of EUR 0.70 per share for 2005.
The number of members of the Board of Directors was confirmed at
five (5), and the following members were re-elected for the term,
ending at the closing of the next Annual General Meeting: Mr Mika
Ihamuotila, Mr Pekka Ketonen, Mr Lasse Kurkilahti, Mr Matti Manner
and Mr Ossi Virolainen.
The Board of Directors elected by the Annual General Meeting held
its organising meeting on 27 March 2006, electing Mr Pekka Ketonen
as Chairman of the Board and Mr Mika Ihamuotila as Deputy
Chairman. Mr Pekka Ketonen (Chairman), Mr Mika Ihamuotila and Mr
Lasse Kurkilahti were appointed to the Committee for Remuneration
Evaluation and Appointments, and Mr Ossi Virolainen (Chairman) and
Mr Matti Manner were appointed to the Committee for Auditing.
KPMG Oy Ab, Authorised Public Accountants, with APA Pekka Pajamo
as the responsible auditor, was appointed to act as the companys
auditor.
The Annual General Meeting authorised the Board of Directors to
decide on increasing the company's share capital. The
authorisation is valid for one year. A maximum aggregate of 33.2
million of the companys shares can be issued, and the companys
share capital can be increased by a maximum of EUR 16,600,000 in
total.
The Annual General Meeting authorised the Board of Directors to
acquire and assign treasury shares. The authorisation applies to a
maximum of 16,000,000 treasury shares.
Personnel
During January-March, the average number of personnel at Elisa was
4,496 (an average of 4,989 in 2005).
31.3.2006 31.3.2005 31.12.2005
Mobile communications 1,506 1,604 1,629
Fixed network 2,816 2,924 3,001
Other business - 604 -
operations
Corporate functions 45 73 51
Total 4,367 5,205 4,681
Elisa continued its business reorganisation, transferring outbound
telemarketing services to Manpower Business Solutions Oy. In
connection with the business transfer, 134 employees transferred
to Manpower Business Solutions Oy. In addition, Elisa and
Henkilöstövuokraus Barona Oy agreed on the outsourcing of a part
of Elisa's order processing and invoicing functions to Barona. In
connection with the business transfer, a total 119 employees
transferred from Elisa to Barona.
In March, Elisa's Board of Directors approved a new share-based
incentive plan for the Elisa key personnel. The potential reward
from the plan will be based on the total shareholder return in
2006 2008. The reward will be partly paid in company shares and
partly as a cash payment in 2008 and 2010.
Investments
EUR million 1-3/2006 1-3/2005 1-12/2005
Capital expenditures, of which 43 42 204
- mobile communication business 15 13 86
- GSM leasing liability buy-backs 2 4 4
- fixed network business 26 24 112
- others 0 1 2
Shares 0 3 415
- of which achieved through an
exchange of shares 361
Total 43 45 619
Financial position
Elisa's financial position and liquidity remained stable. This was
particularly attributable to the positive performance. The group's
January-March cash flow after investments amounted to EUR 13
million (26).
Financial key indicators
EUR million 31.3.2006 31.3.2005 31.12.2005
Net debt 293 489 293
Gearing, % 23.2 55.0 21.7
Equity ratio, % 61.5 49.3 61.7
1-3/2006 1-3/2005 1-12/2005
Cash flow after investments 13 26 308
Valid financing arrangements
EUR million Maximum In use on
amount 31.3.2006
Committed credit line 170 0
Commercial paper
programme1) 150 0
EMTN programme2) 1,000 316
1) The programme is not committed
2) European Medium Term Note programme, not committed.
Long-term credit ratings
Credit rating agency Rating Outlook
Moodys Investor Services Baa2 Stable
Standard & Poors BBB Negative
Share
At the end of March, the company's total number of shares was
166,066,016. The companys market capitalisation on 31 March 2006
amounted to EUR 2,718 million.
In January-March, a total of 72.4 million shares were traded on
the Helsinki Stock Exchange for an aggregate of EUR 1,216.6
million. The exchange was 43.6 per cent of the number of
outstanding shares.
Treasury shares
The Annual General Meeting authorised the Board of Directors to
acquire and assign treasury shares. The authorisation has not been
used. On 31 March 2006, the companies consolidated in the Elisa
Group's financial statements held 125,000 Elisa Corporation
shares.
Significant legal issues
Since the publication of Elisa's Annual Report 2005, the following
legal developments concerning Elisa have taken place:
The Helsinki Court of Appeal issued a ruling in favour of Elisa
and dismissed the action for annulment of the decision made at the
former Oy Radiolinja Ab's Annual General Meeting in spring 2000.
If the Court gives its permission, the decision may be appealed to
the Supreme Court.
Events after the reporting period
Elisa has launched new service packages, which combine both
services and a phone into one package. As a result of the new
legislation, customers can now acquire a phone with a service
package connected to it.
In accordance with the terms of Elisa's Saunalahti deal as set by
the Finnish Competition Authority, Saunalahti sold the Saunaverkko
network required for the implementation of broadband services and
its customer contracts in the Tampere, Jyväskylä and Riihimäki
regions. Saunalahti also sold the Saunaverkko network without
customer contracts in the Helsinki region. The deals have no
substantial effect on Elisa's financial performance.
Elisa was the first company in the Nordic region to triple the
speed of mobile phone networks, introducing a maximum speed of 1
megabit (1 Mbit/s). This allows ever larger files to be downloaded
in the mobile phone network with speeds similar to fixed broadband
connections.
Elisa launched a service targeted at business customers which
includes a mobile communication terminal, accessories and
additional services subject to a monthly fee. For businesses the
service offers convenience and cost-efficiency as they can acquire
mobile phones and related services without having to make any
investments of their own.
Elisa's and Saunalahti's long distance networks will be
integrated, and Saunalahti's phone traffic will transfer to
Elisa's long distance network. The integration brings cost savings
relating to transit fees, transmission network costs and other
synergy benefits. The shared network will be available by the end
of 2006.
Outlook for 2006
Competition in the Finnish telecommunications market remains
challenging, while the focus is increasingly shifting to services.
The use of mobile communications and broadband products continues
to increase. Elisa's aim is to further reinforce its position as
the leading service supplier.
Elisa's revenue is expected to increase markedly on the previous
year. The growth will be partially attributable to an increase in
terminal device sales. EBITDA and EBIT excluding non-recurring
items are expected to improve on the previous year. This will be
due to, e.g. synergy benefits created by the acquisition of
Saunalahti and Elisa's rationalisation procedures.
Capital expenditures during the year are estimated to total 13-15
per cent of revenue, and cash flow will be clearly positive.
Certain non-recurring items related to IT and production system
reforms, which will support the "One Elisa" operational model, are
scheduled for 2006.
BOARD OF DIRECTORS
Figures are not audited.
CONSOLIDATED INCOME STATEMENT
EUR million
1-3 1-3 1-12
2006 2005 2005
Revenue 348,4 332,9 1337,3
Other operating income 2,8 11,2 113,9
Operating expenses -252,7 -247,0 -1005,1
EBITDA 98,5 97,1 446,1
Depreciation and amortisation -55,3 -52,4 -213,2
EBIT 43,2 44,7 232,9
Share of associated companies' profit 0,0 0,7 1,2
Financial income and expenses -4,3 -6,5 -22,2
Profit before tax 38,9 38,9 211,9
Income taxes -9,0 -5,9 -34,1
Profit for the period 29,9 33,0 177,8
Attributable to:
Equity holders of the parent 29,6 32,1 176,2
Minority interest 0,3 0,9 1,6
Profit for the period 29,9 33,0 177,8
Earnings per share (EUR)
Basic 0,18 0,23 1,22
Diluted 0,18 0,23 1,22
Average number of outstanding shares
(1000 shares)
Basic 165917 141778 144807
Diluted 165917 141778 144807
REVENUE BY BUSINESS SEGMENTS
EUR million
1-3 1-3 1-12
2006 2005 2005
Mobile 191,9 179,0 739,9
Fixed Network 179,9 161,5 670,9
Other Companies 20,9 38,2
Unallocated
Intra-segment sales elimination -23,4 -28,5 -111,7
Corporation total 348,4 332,9 1337,3
EBITDA BY BUSINESS SEGMENTS
EUR million 1-3 1-3 1-12
2006 2005 2005
Mobile 53,3 49,2 220,1
Fixed Network 46,4 39,6 159,6
Other Companies 10,4 55,8
Unallocated -1,2 -2,1 10,5
Corporation total 98,5 97,1 446,1
EBIT BY BUSINESS SEGMENTS
EUR million 1-3 1-3 1-12
2006 2005 2005
Mobile 30,2 26,7 129,9
Fixed Network 15,1 13,3 44,8
Other Companies 6,7 47,3
Unallocated -2,1 -2,0 10,9
Corporation total 43,2 44,7 232,9
CONSOLIDATED BALANCE SHEET
EUR million
31.3. 31.3. 31.12.
2006 2005 2005
Non-current assets
Property, plant and equipment 643,1 706,9 660,6
Goodwill 771,1 472,5 770,6
Other intangible assets 181,2 69,1 178,7
Investments in associated companies 0,4 12,4 0,4
Available-for-sale investments 44,6 9,8 44,2
Other receivables 10,3 50,4 10,6
Deferred tax receivable 44,2 42,3 42,5
1694,9 1363,4 1707,6
Current assets
Inventories 23,8 14,9 20,3
Trade and other receivables 254,3 328,7 261,8
Cash and cash equivalents 96,3 114,7 212,7
374,4 458,3 494,8
Total assets 2069,3 1821,7 2202,4
Equity attributable to equity holders
of the parent 1251,8 860,6 1337,3
Minority interest 12,7 28,9 12,4
Total equity 1264,5 889,5 1349,7
Non-current liabilities
Deferred tax liabilities 39,5 29,7 40,6
Provisions 8,8 24,0 9,4
Interest-bearing debt 370,1 468,8 393,7
Other non-current liabilities 12,2 9,9 12,7
430,6 532,4 456,4
Current liabilities
Current liabilities 349,2 263,5 280,5
Provisions 5,4 1,1 3,4
Interest-bearing debt 19,6 135,2 112,4
374,2 399,8 396,3
Total equity and liabilities 2069,3 1821,7 2202,4
STATEMENT OF CHANGES IN EQUITY
EUR million
Share
Share issue Treasury Other Retained Minority Total
capital premium shares reserves earnings interest equity
Total equity
at 31.12.2004 71,0 530,4 -3,1 34,5 250,8 31,0 914,5
Cash flow hedges
Gains/Losses
taken to equity -0,1
Other changes -0,1 3,6 0,6 4,1
Items recognised
directly in
equity -0,1 0,0 0,0 -0,1 3,6 0,6 4,1
Profit for
the period 32,1 0,9 33,0
Total recognised
income and
expenses for the
period -0,1 0,0 0,0 -0,1 35,7 1,5 37,0
Dividends -56,8 -3,6 -60,4
Purchase of
treasury shares -1,7 -1,7
Total equity
at 31.3.2005 70,9 530,4 -4,8 34,4 229,7 28,9 889,5
Total equity
at 31.12.2005 83,0 530,4 -2,5 418,9 307,5 12,4 1349,7
Available for
sale investments 1,1 1,1
Other changes -0,2 -0,6 -0,8
Items recognised
directly in
equity 0,0 0,9 -0,6 0,0 0,3
Profit for
the period 29,6 0,3 29,9
Total recognised
income and
expense for the
period 0,0 0,9 29,0 0,3 30,2
Dividends -116,2 -116,2
Sales of
treasury shares 0,8 0,8
Total equity
at 31.3.2006 83,0 530,4 -1,7 419,8 220,3 12,7 1264,5
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-3 1-3 1-12
2006 2005 2005
Cash flow from operating activities
Profit before tax 38,9 38,9 211,9
Depreciation and amortisation 55,3 52,4 213,9
Other adjustments to profit before tax 4,1 -0,9 -66,3
Change in working capital -39,4 -30,1 -23,7
Cash flow from operating activities 58,9 60,3 335,1
Received dividends and interests and
interest paid -6,2 -7,1 -20,5
Taxes paid -0,9 -0,6 -5,1
Net cash flow from operating activities 51,8 52,6 309,5
Cash flow from investments
Capital expenditure -43,1 -40,6 -194,9
Investments in shares and other investments -2,5 0,9 -4,1
Proceeds from asset disposal 6,8 13,0 197,5
Net cash used in investment -38,8 -26,7 -1,5
Cash flow after investments 13,0 25,9 308,0
Cash flow from financing
Proceeds from treasury shares 0,9 0,8
Change in interest-bearing receivables 0,8
Repayment of long-term debt -122,4 -15,0 -102,4
Change in short-term debt 0,5 -18,6
Repayment of financing leases -2,9 -4,4 -16,7
Dividends paid -5,0 -55,1 -122,0
Net cash used in financing -129,4 -74,0 -258,1
Change in cash and cash equivalents -116,4 -48,1 49,9
Cash and cash equivalents at beginning of
period 212,7 162,8 162,8
Cash and cash equivalents at end of period 96,3 114,7 212,7
LIABILITIES
EUR million
31.3. 31.3. 31.12.
2006 2005 2005
Mortgages, pledges and guarantees
Mortgages
For own and group companies 6,0 19,0 18,7
Pledges given
Pledges given as surety 0,9 0,9 0,9
Guarantees given
For others 3,5 3,1
Mortgages, pledges and guarantees total 10,4 19,9 22,6
Derivative contracts
Forward contracts and swap agreements
Nominal value of underlying instrument 11,8
Leasing contracts and
other commitments
Leasing commitments 13,9 17,3 14,3
Repurchase commitments 0,6 0,9 0,7
Real estate leases 62,8 73,1 63,3
Lease liabilities total 77,3 91,3 78,3
Other commitments
Lease-leaseback agreement (QTE facility)
Termination risk 20,2 21,4 23,5
Total value of the arrangement 167,2 156,6 171,5
Other commitments 0,6 5,2 0,6
KEY FIGURES
EUR million
1-3 1-3 1-12
2006 2005 2005
Shareholders' equity/share, EUR 7,54 6,07 8,06
Net debt 293,4 489,3 293,5
Gearing 23,2 % 55,0 % 21,7 %
Equity ratio 61,5 % 49,3 % 61,7 %
Gross investments in fixed assets 43,5 42,0 204,4
of which finance lease investments 0,3 1,4 9,5
Gross investments as % of revenue 12,5 % 12,6 % 15,3 %
Investments in shares, 2,9 414,8
of which paid in equity issue 361,2
Average number of personnel 4496 5426 4989
Formulae for financial indicators
Gearing %
Interest-bearing debt - cash and cash equivalents
--------------------------------------------------x 100
Total equity
Equity ratio %
Total equity
------------------------------------------------ x 100
Balance sheet total - advances received
Net debt
Interest-bearing debt - cash and cash equivalents
Shareholders' equity/share
Equity attributable to equity holders of the parent
--------------------------------------------------------
Number of shares outstanding at end of period
Earnings/share
Profit for the period attributable to equity holders of parent
--------------------------------------------------------------
Average number of outstanding shares
