ELISA?S JULY-SEPTEMBER PRE-TAX PROFIT AM
ELISA CORPORATION STOCK EXCHANGE RELEASE
28 OCTOBER 2003 AT 8:00 a.m.
ELISAS JULY-SEPTEMBER PRE-TAX PROFIT AMOUNTED TO EUR 17 MILLION
The improvement of the Groups performance continued:
profitability improved, cash flow remained positive and net debt
was reduced.
In July-September the Groups key figures were as follows:
· revenue EUR 385 million(388)
· EBITDA EUR 107 million (51, exclusive of non-recurring items
the figure is 84)
· EBIT EUR 26 million (-43, exclusive of non-recurring items
the figure is 6)
· EBIT exclusive of amortisation of Group goodwill EUR 40
million (-29, exclusive of non-recurring items the figure is
20)
· result before extraordinary items and taxes EUR 17 million
(-56, exclusive of non-recurring items the figure is -7).
Operative investments in fixed assets during July-September were
EUR 42 million (45), investments in shares amounted to EUR 22
million (5) and GSM leasing liability buy-backs to EUR 3 million
(5).
The January-September cash flow for the consolidated cash flow
statement was EUR 36 million, and EUR 21 million during the third
quarter. Stable performance development and a moderate investment
level had a positive impact on the operative cash flow. The
financial position remained stable.
At the end of the review period
· net debt amounted to EUR 722 million (757 at the end of
2002),
· the Groups equity ratio stood at 40.4 per cent (38.3 at the
end of 2002).
Information in this interim report is not audited.
ELISA CORPORATION
Velipekka Nummikoski
Vice President, Corporate Communications
Additional information:
Mr Veli-Matti Mattila, President and CEO, tel. +358 10 262 2635
Mr Jukka Heikkilä, acting CFO, tel. +358 10 262 9781
Mr Vesa Sahivirta, Vice President, IR, tel. +358 10 262 3036
Appendix:
Elisa Corporations Interim Report, July-September 2003
Distribution:
Helsinki Exchanges
Major media
ELISA CORPORATIONS INTERIM REPORT FOR JULY-SEPTEMBER 2003
Revenue
The demand for new telecom products has continued brisk and
volumes have grown. However, intensified competition has caused
price erosion. The demand for traditional analogue products and
their volumes have also decreased.
The Groups July-September revenue amounted to EUR 385 million
(388). Revenue decreased by 0.7 per cent compared with the
corresponding period last year.
Performance
The improvement of the Groups profit continued. This favourable
trend was largely affected by the improved results of Elisa Mobile
and Comptel, as well as the reduction of losses in Germany-based
Business.
The Groups July-September EBIT was EUR 26 million (-43, exclusive
of non-recurring items the figure is 6). Without amortisation on
consolidated goodwill the July-September EBIT was EUR 40 million
(-29, exclusive of non-recurring items the figure is 20). The Q3
result does not include any substantial non-recurring items.
Planned depreciation and value adjustments on fixed assets
totalled EUR 67 million (80, exclusive of non-recurring items the
figure is 64). The shortening of depreciation time for mobile
networks in early 2003 and buy-backs of mobile networks that
Radiolinja previously leased were reflected in an increased
depreciation.
EUR 14 million (14) amortisation was booked on consolidated
goodwill. The Groups goodwill resulting from the acquisition of
subsidiaries amounted to EUR 560 million at the end of the period
under review (583 at the end of 2002).
The July-September taxes were EUR -14 million (+1). The taxes for
the comparison year included EUR 22 million deferred tax assets
from a non-recurring expense booking on the GSM network.
July-September performance:
· result before extraordinary items and taxes amounted to EUR
17 million (-56, exclusive of non-recurring items the figure
is -7)
· result after taxes and minority interests amounted to EUR 2
million (-49)
The Groups July-September earnings per share stood at EUR 0.01
(-0.36).
Elisa Mobile business area
Mobile number portability, which was initiated during the review
period, increased customer churn and intensified competition.
The Elisa Mobile business area's July-September results were:
revenue EUR 195 million (188)
EBITDA EUR 58 million (-28, exclusive of non-recurring items
the figure is 50)
EBIT EUR 25 million (-74, exclusive of non-recurring items
the figure is 15)
EBITA exclusive of amortisation on Group goodwill EUR 34
million (-64, exclusive of non-recurring items the figure is
25).
Owing to an increase in the number of subscriptions, the revenue
rose by EUR 6 million over to the previous years Q3 results.
However, revenue growth was slowed down by intensified
competition, which was reflected in considerable increase of
discounts.
The improved profitability of EUR 86 million was due to an expense
booking on GSM network leasing liability (EUR 77 million) carried
out in the third quarter of 2002, as well as reduced fixed costs
achieved through streamlining of operations and increased revenue.
On the other hand, higher interconnection traffic expenses have
hampered the growth of profitability.
The EBIT, at EUR 25 million (-74), was EUR 99 million higher
compared to the corresponding period in 2002. In addition to non-
recurring value adjustments and expense bookings (EUR 89 million
in total), the increased EBIT was also due to improved EBITDA.
At the end of September 2003, Radiolinja's network in Finland had
1 374 847 subscriptions (1 301 621).
Subscriptions of Radiolinja's service operator in Finland:
annualised churn for the review period was 24.2 per cent
(14.0)
average monthly use per customer totalled 151 minutes (139),
and customers sent an average of 28 (27) SMS messages per
month
average revenue per subscription (ARPU) amounted to EUR 42.5
(43.0).
Radiolinja customers increased their use of mobile phones during
the third quarter. The number of customer-specific call minutes
grew by 9 per cent and the number of SMS messages by 5 per cent
compared to the previous year. However, owing to lower customer
tariffs in the Finnish mobile market, revenue per subscription
(ARPU) was at a more modest level compared to the corresponding
period in 2002.
Radiolinjas number of subscriptions rose by almost 18 000
subscriptions compared with those of Q2. This was due to GSM
number portability, effective from the beginning of July, and
Radiolinjas exclusive customer programme, launched during the
review period. Number portability and intensive sales campaigns
were also reflected in the increased churn rate.
At the end of September, Radiolinja Eesti, Radiolinja's Estonian
subsidiary had 163 160 subscriptions (151 200).
Radiolinja Eesti reported the following figures for July-
September:
revenue EUR 16 million (15)
EBITDA EUR 5 million (5)
EBIT EUR 2 million (2).
The July-September investments of the Elisa Mobile business area
amounted to EUR 22 million (16). The investments include GSM
leasing liability buy-backs from telcos of EUR 3 million (5).
Fixed Network Business (ElisaCom and Elisa Networks business
areas)
Sales of fixed-priced broadband subscriptions have increased. As
voice shifts to mobile products the number of traditional voice
and subscription products has decreased. Outsourcing of
companies call center services continued lively.
Fixed network business' results for July-September were:
· revenue EUR 163 million (177)
· EBITDA amounted to EUR 50 million (93, exclusive of non-
recurring items the figure is 57)
· EBIT totalled EUR 21 million (64, exclusive of non-recurring
items the figure is 28).
The comparable figures of 2002 included one-time sales profits on
the disposal of shares and business operations of EUR 36 million.
At the end of September, the Group with its associated companies
had 1.18 million fixed subscriptions (1.14) in total.
The number of broadband subscriptions was approximately 107 900
(59 000). There were 179 900 TV cable subscriptions (165 000) at
the end of September.
K-Alliances customer loyalty scheme, Plussa, was acquired for
ElisaCom to manage. In this context, 20 client advisers of K-Plus
Oy were transferred into Elisas employment.
Germany-based Business (Elisa Kommunikation business area)
Revenue of Germany-based business grew despite the economic slump
in Germany and the weak market outlook.
Operations in Germany reported for July-September:
· revenue EUR 34 million (31)
· EBITDA EUR 1 million (-9)
· EBIT EUR -12 million (-19), and exclusive of amortisation on
Group goodwill EUR -9 million (-16).
Improvement of EBITDA and reduction of losses were due to
increased revenue, streamlining operations and labour cost saving
measures. Owing to the cost savings programme, the number of
personnel has decreased by approximately 200 people during this
year.
Focusing on business customers in accordance with strategy has
increased the market share and also improved profitability. Since
early 2003, the number of business customers has grown by
approximately 33 per cent, amounting to 20 000 (15 500 at the
beginning of 2003).
Other companies
Comptel Corporation disclosed its July-September interim report
on 22 October 2003. Yomi Plc disclosed its interim report on 27
October 2003. The key figures of these listed companies in the
July-September reports were:
Comptel Group
· revenue EUR 12.0 million (12.1)
· EBITDA EUR 3.7 million (-1.1)
· EBIT EUR 3.0 million (-2.1).
Estera Oy
· revenue EUR 4.5 million
· EBITDA EUR 0.4 million
· EBIT EUR 0.2 million.
In line with corporate strategy, these companies are financial
investments.
Yomi Group
· revenue EUR 13.5 million (14.0)
· EBITDA EUR 2.8 million (12.4, includes EUR 8.4 million of non-
recurring items)
· EBIT EUR 0.1 million (5.7, includes EUR 4.0 million of non-
recurring items).
Yomi´s subsidiaries Kestel Oy and Kesnet Oy operations are
associated with the fixed line business.
Investments
The Group's gross investments in fixed assets in July-September
amounted to EUR 45 million (50), of which operative investments
accounted for EUR 42 million (45) and acquisition of shares EUR 22
million (5).
Investments in fixed assets amounted to:
· EUR 22 million in Radiolinja
· EUR 12 million in the fixed network business, and
· EUR 7 million in Germany-based business.
Radiolinja's investments include GSM leasing liability buy-backs
from telcos for the amount of EUR 3 million (5).
Financial position
The Group's financial position and liquidity improved according to
the plan. Net debt amounted to EUR 722 million at the end of
review period. The Groups gearing was 87.9 per cent (94.8 per
cent at the end of 2002) and its equity ratio stood at 40.4 per
cent (38.3 per cent at the end of 2002). The January-September
cash flow after investments in accordance with the consolidated
cash flow statement was EUR 36 million, and EUR 21 million in the
third quarter.
Shares
Elisa Corporations A share closed at EUR 8.19 on 30 September
2003. The highest quotation in July-September was EUR 9.49 and the
lowest EUR 7.25. The average rate was EUR 8.38.
The company's number of shares was 138 011 757, all of which were
A Shares. On 30 September 2003, their market capitalisation stood
at EUR 1 124 million.
During the period from 1 July 2003 to 30 September 2003, a total
of 19.6 million A Shares of the company were traded on the
Helsinki Exchanges for a total of EUR 164.4 million. The exchange
was 14.3 per cent of the number of A Shares on the market.
The number of Elisa Corporation's A options for the year 2000 is
3 600 000. Between 1 July 2003 - 30 September 2003, the total
number of A options traded on the Helsinki Exchanges was 45 800
at a total price of EUR 3 323 and their average rate was EUR
0.07. The highest quotation of the A options in the July-
September period was EUR 0.10, and the lowest EUR 0.03. The
closing rate of the A option was EUR 0.06.
Quotations of Elisa Corporations B options for the year 2000
started on the Helsinki Exchanges on 2 May 2003. The number of B
options is 3 600 000. Between 1 July 2003 - 30 September 2003,
the total number of B options traded on the Helsinki Exchanges
was 31 650 at a total price of EUR 7 287 and their average rate
was EUR 0.23. The highest quotation of the B options was EUR
0.30, and the lowest EUR 0.20. The closing rate of the B option
was EUR 0.25.
The total number of Elisa Corporation's A Shares owned by the
subsidiaries was 781 563 (781 563 at the end of 2002). The par
value of the shares totalled EUR 390 781.50, and their proportion
of the share capital and voting rights was 0.57 per cent. The
book value of these company shares has been deducted from the
distributable assets of the Group.
Moreover, the Groups pension funds own 1 236 963 A shares.
Major legal issues
The following changes have taken place in the legal processes
referred to in the company's annual report of 2002 and the interim
reports published thereafter:
Elisa Corporation had proposed a redemption claim in accordance
with Section 14 Paragraph 19 of the Companies Act to redeem the
minority shareholders of Riihimäen Puhelin Oy at the price of EUR
1 525 per share. On 28 August 2003, the Court of Arbitration
confirmed the incontestability of the right of redemption and the
interest payable on the redemption price to be 5.0 per cent. Elisa
gave the EUR 2.8 million security set by the Court of Arbitration
on 3 September 2003, and, therefore, it has a 100 per cent holding
in Riihimäen Puhelin Oy. After the period under review, on 6
October 2003, the Court of Arbitration set a EUR 2 077 redemption
price per share. There are approximately 780 shares to be redeemed
by Elisa.
On 11 December 2001, the Finnish Competition Council ruled that
Radiolinja and Sonera have no joint dominant market position in
the network market of mobile communications. Telia Mobile Ab
appealed against the decision in the Supreme Administrative
Court. In its decision announced on 16 September 2003, the
Supreme Administrative Court concluded the appeal. Thus, the
ruling by the Finnish Competition Council will remain in force.
Authorities are investigating whether Radiolinja acted
appropriately in campaigns targeted at Telia customers in 2002.
Personnel
Personnel negotiations concerning certain Corporate Staff
functions and Major Account Sales at the Elisa Group were
initiated in August. The negotiations were completed on 6 October
2003, and, as a consequence, the number of permanent staff will
decrease by 115 people.
Management groups reporting to the members of the Corporate
Executive Board have been renewed and strengthened mainly by
internal rotation.
Changes in Group structure
Proceeding with restructuring of its non-core business operations,
Elisa Corporation sold a 50 per cent stake in EPStar Ltd, a
network design and telecom consultancy company, to the firms
other principal owner Jaakko Pöyry Group Oyj. Elisa will still
retain a 17.5 per cent holding in EPStar and continue as an
important customer of the company.
Münster's electricity utility used its right to sell its 4.95 per
cent stake in Tropolys GmbH to Elisa Corporation's German
subsidiary Elisa Kommunikation GmbH for EUR 19 million. Through
this transaction, Elisa Kommunikation's holding in Tropolys rose
to 70.85 per cent.
Events after the review period
Telenor Ab and ElisaCom signed a Preferred Partner cooperation
agreement. The cooperation agreement will significantly enhance
both companies' capacity to serve Nordic customers.
On 28 October 2003, the Elisa Group is going to announce an
extensive reorganisation programme, which aims to increase the
Groups customer-centricness and efficiency as well as streamline
the corporate structure and operations. The personnel negotiations
to be initiated within the Group are based on productivity and
restructuring grounds.
Future outlook
The Groups revenue for 2003 is estimated to remain slightly less
than in 2002. EBITDA and the result adjusted for non-recurring
items will grow moderately compared with the previous year.
Owing to improved profitability and the moderate investment level
the Group's cash flow will remain positive and net debt will be
further reduced. Operative investments in the fourth quarter are
restricted to 15 per cent of the revenue at the maximum.
Restructuring of non-core businesses will continue.
EBITDA of the Group's Germany-based business area is estimated to
be positive in 2003.
THE BOARD OF DIRECTORS
ELISA CORPORATION
INTERIM REPORT 1 JANUARY-30 SEPTEMBER 2003
(Figures in this interim report are not audited)
Jul- Jul- Jan- Jan- Jan-
CONSOLIDATED INCOME Sep Sep Sep- Sep Dec
STATEMENT, EUR million 2003 2002 2003 2002 2002
Revenue 385 388 1 147 1 178 1 563
Other operating income 8 46 21 54 92
Operating expenses -286 -383 -879 -1 017 -1 322
Depreciation and value
adjustments:
On fixed assets -67 -80 -198 -255 -322
On Corporation's goodwill -14 -14 -42 -47 -59
EBIT 26 -43 49 -87 -48
Financial income and expenses:
Share of associated companies'
profit 1 -1 0 -4 -5
Other financial income and
expenses -10 -13 -29 -38 -50
Profit before extraordinary
items 17 -56 20 -129 -103
Extraordinary items 3 3
Profit after extraordinary
items 17 -56 20 -126 -100
Income taxes -14 1 13 0 3
Minority interest -2 6 -2 20 26
Net profit 2 -49 30 -106 -71
CONSOLIDATED BALANCE SHEET 30.9 30.9 31.12.
EUR million 2003 2002 2002
Fixed assets
Intangible assets 70 80 77
Consolidated goodwill 560 624 583
Tangible assets 870 944 962
Share in associated companies 21 18 21
Other investments 12 16 13
1 533 1 682 1 656
Current assets
Inventories 17 21 21
Deferred tax receivable 54 42 14
Receivables 385 382 334
Marketable securities 7 3 2
Cash in hand and in banks 50 77 71
513 525 442
Total assets 2 046 2 207 2 098
Shareholders' equity
Share capital 69 69 69
Share premium account 517 517 517
Contingency fund 3 3 3
Retained earnings 127 181 198
Net profit 30 -106 -71
746 664 716
Minority interests 76 111 83
Provisions for liabilities and charges 44 79 71
Liabilities
Long-term creditors 710 600 715
Short-term creditors 470 753 513
1 180 1 353 1 228
Total shareholders' equity and liabilities 2 046 2 207 2 098
Deviating from the year 2002 interim reports,
the Tropolys subgroup has applied an IAS-
compliant procedure for the acquisition of
subsidiaries, which has affected the
Corporation's goodwill and minority interest,
since the financial statements of 31 December
2002.
Income taxes refer to taxes based incurred
during the period.
CONSOLIDATED CASH FLOW STATEMENT Jan- Jan- Jan-
Sep Sep Dec
EUR million 2003 2002 2002
Cash inflow from operating activities
Net profit for the financial period 30 -106 -71
Adjustments:
Depreciation and value adjustments 239 303 381
Reduction in value of investments 1
Sales profits from business operations 0 -31 -48
Sales profits from the disposal of
fixed assets and shares -1 -2 -5
Expense booking for GSM leasing liability 77 70
Other adjustments 2 -15 -21
Change in deferred tax liability/receivable -40 -61 -34
Change in working capital and other items -56 41 32
144 312 376
Cash inflow from operating activities 174 206 305
Cash flow in investments
Investments in fixed assets -131 -188 -268
Disposal of fixed assets 1 4 6
Investments in shares -24 -5 -7
Disposal of shares and business operations 16 33 53
Other investments 0 -2 0
Cash flow in investments -138 -158 -216
Cash flow after investments 36 48 89
Cash flow in financing
Change in long-term loans 3 -38 75
Change in short-term loans -55 -30 -209
Dividends paid -1 -4 -4
Sale of own shares 18
Cash flow in financing -53 -72 -120
Change in financial assets -17 -24 -31
Financial assets at the end of the
financial period 57 80 74
Jul- Jul- Jan- Jan- Jan-
Sep Sep Sep Sep Dec
2003 2002 2003 2002 2002
KEY FIGURES
Earnings/share (EPS), EUR 0,01 -0,36 0,22 -0,80 -0,54
Shareholders' equity/share,
EUR 5,44 4,89 5,21
Gross investments in fixed
assets 45 50 131 188 269
Gross investments as % of
revenue 11,7 12,9 11,4 16,0 17,2
Purchase of shares 22 5 24 11 16
Non-interest-bearing debt 401 456 396
Average number of personnel 7 285 8 531 8 115
LIABILITIES
Jan- Jan- Jan-
Sep Sep Dec
2003 2002 2002
Mortgages
For own 75 70 67
Pledges given
Pledges given as surety 9 19 10
Guarantees given
For others 11 11 11
Leasing commitments 73 74 72
Repurchase commitments 4 5 3
Lease-leaseback agreement commitment
(QTE facility) 174 206 194
Other commitments 25 79 52
Total liabilities 371 464 409
GSM and data network lease agreement
liabilities outside the Corporation on 30
September 2003 amounted to approximately EUR
229 million (EUR 216 million at the end of
2002). For the future redemption of the
relevant GSM network financial agreements,
an obligatory reserve has been entered in the
balance sheet, which covers around EUR 43
million of the remaining lease agreement
liability.
Derivative contracts
Forward contracts
Market value of underlying security 15 6 13
Market value 1 0 1
Interest and currency swaps
Market value of underlying security 8 0
Market value 0 0
ADJUSTED GROUP Jul- Jul- Jan- Jan- Jan-
KEY FIGURES Sep Sep Sep Sep Dec
(exclusive of non- 2003 2002 2003 2002 2002
recurring items)
Revenue 385 388 1 147 1 178 1 563
EBITDA 107 84 289 255 342
EBITDA, % 27,8 21,7 25,2 21,6 21,9
EBIT 26 6 49 23 32
EBIT, % 6,8 1,6 4,3 2,0 2,0
Profit before extraordinary
items 17 -7 20 -19 -23
Adjusted key figures have been calculated without the
following non-recurring items:
Sales profits 44 44 73
Expense booking for GSM network
leasing liability -77 -77 -77
Writedowns of the GSM network -12 -51 -51
Writedowns of Cityphone and
submarine cable networks -6 -8
Other writedowns in Finland -4 -4 -4
Rundown costs of Mäkitorppa GmbH -10 -8
Other writedowns in Germany -6 -5
Non-recurring items, total -49 -110 -80
Impact on EBITDA -33 -40 -9
Impact on EBIT -49 -110 -80
Impact on profit before extraordinary
items -49 -110 -80
Items presented in the interim report
tables for each row have been rounded.
THE CORPORATION'S REVENUE, EBITDA AND EBIT BY B
1 JANUARY - 30 SEPTEMBER 2003 *)
EUR million
Revenue EBITDA EBIT
1-9/03 1-9/02 1-9/03 1-9/02 1-9/03 1-9/02
Fixed Network
Services 470 518 22 32 -8 -4
Network 216 237 130 162 77 107
Intra-BA sales -178 -194
Corporation bookings -2 -3
Total 508 561 152 194 67 100
Elisa Mobile
Radiolinja 559 554 149 80 72 -43
Corporation bookings -29 -29
Total 559 554 149 80 43 -72
Germany
Carrier business 101 84 2 -21 -23 -42
Mäkitorppa GmbH 2 -7 -10
Corporation bookings -8 -13
Total 101 86 2 -28 -31 -65
Other Companies
Comptel 41 37 7 -2 5 -5
Other companies **) 36 31 -3 0 -6 -7
Intra-BA sales -5
Corporation bookings -3 -2
Total 72 68 4 -2 -4 -14
Corporate functions 26 26 -18 -29 -26 -36
Corporation, total 1147 1178 289 215 49 -87
REVENUE, EBITDA AND
EBIT BY BUSINESS AREA
(EXCLUSIVE OF NON-
RECURRING ITEMS)
Business Area (BA) Revenue EBITDA EBIT
(Adjusted) (Adjusted) (Adjusted)
1-9/03 1-9/02 1-9/03 1-9/02 1-9/03 1-9/02
Fixed Network 508 561 152 158 67 70
Elisa Mobile 559 554 149 157 43 56
Germany 101 86 2 -21 -31 -49
Other Companies 98 94 -14 -39 -30 -54
Intra-BA sales -119 -117
Corporation Total,
(adjusted) 1147 1178 289 255 49 23
*) Owing to structural changes in the fixed networks, the figures
are not fully comparable with the previous year.
**)Includes Yomi IT companies and the parent company of
Yomi Group
FINANCIAL SITUATION AS AT 30 SEPTEMBER 2003
EUR million 30.9.03 30.6.03 31.3.03 31.12.02 30.9.02
Long term loans
Bonds and notes 572 572 572 572 472
Loans from the Pension funds 80 80 80 80 83
Loans from financial
institutions 57 55 48 54 38
Total 709 707 700 706 593
Short-term loas
Bonds and notes 52 52
Loans from financial
institutions 7 2 2 2 34
Committed credit line 1) 40
Commercial papers 2) 37 81 124 44 128
Others 27 3) 26 27 28 50
Total 71 109 153 126 304
Interest-bearing debt, total 779 816 853 831 897
Securities 7 12 1 3 3
Cash and bank 50 62 85 71 77
Interest-bearing receivables 57 74 86 74 80
Net debt 4) 722 742 767 757 817
1) The committed credit line is a joint EUR 170 million revolving
credit facility with eight banks, which Elisa Corporation
may flexibly use on agreed pricing. The loan arrangement is
valid until 16 June 2008.
2) Elisa Corporation has agreed on a joint programme with six
banks on issuing commercial papers. The arrangement is not
committed. The maximum amount of the arrangement is EUR 150
million.
3) Redemption liability for minority shareholders in Radiolinja
(EUR 16m) and Riihimäen Puhelin(EUR 2m) and deposits in the
Financial Services Office (EUR 9m).
4) Net debt is interest-bearing debt less interest-bearing
receivables.
Key financial indicators 30.9.03 30.6.03 31.3.03 31.12.02 30.9.02
Gearing 88 % 91 % 97 % 95 % 105 %
Equity ratio 40 % 40 % 38 % 38 % 35 %
