REVENIO GROUP CORPORATION INTERIM REPORT 1 January-30 September 2011

Revenio Group Corporation                       Stock Exchange Release October 26, 2011 at 9:00 a.m.

REVENIO GROUP CORPORATION INTERIM REPORT 1 January–30 September 2011: Very strong performance continues

1-9/2011

- Consolidated net sales grew by 43.9% to EUR 26.6 million (EUR 19.6 million) with continuing operations representing EUR 24.5 million (EUR 17.0 million)

- Consolidated operating profit EUR 5.1 million (EUR 0.2 million) with continuing operations representing EUR 3.4 million (EUR 0.1 million), or 14.0 (0.4)% of net sales

- Pre-tax profit, continuing and discontinued operations, EUR 5.0 million (EUR 0.1 million)

- Diluted and undiluted earnings per share EUR 0.054 (0.004)

- Cash flow from operating activities EUR 1.8 million (EUR 0.8 million)

- Net sales and operating profit in the Health Care segment showed sustained strong growth 

- The Systems and Safety segments improved their performance considerably

- Midas Touch's result turned positive during the period and operations stabilized

- Done Information was sold during the period and a non-recurring capital gain of EUR 1.6 million was recorded in the third quarter result  

- Financial guidance for 2011 remains unaffected: Net sales for 2011 are forecast to grow in comparison to 2010 figures, and consolidated operating profit/loss (EBIT) without non-recurring items is expected to be positive, with significant improvement seen on 2010’s figures.

7-9/2011

- Consolidated net sales from continuing operations came to EUR 8.2 million (EUR 5.7 million), up 43.2%

- Consolidated operating profit (EBIT) EUR 1.3 million (EUR 0.8 million), or 15.8 (13.2)% of net sales

Statement by President and CEO Olli-Pekka Salovaara:

“The Revenio Group has continued its exceptional performance: All segments made a profit during the period and several companies recorded excellent results. Our strongest performer is Icare Finland, which has been able to successfully build its sales worldwide and has gained a stronger position in its product niche.

The projects that Done Logistics won in summer 2010 have represented a challenge in terms of size and technical scope to a company that is renowned for its unrivalled competence. The projects have now reached their installation stage, and it has been a pleasure to see the company repeat its familiar pattern of excellent financial and operational performance in demanding deliveries.

Midas Touch improved its performance significantly. In the first half, the company was able to turn heavy losses into a profit and has been stabilizing its operations since. In addition to bringing its operations to a healthier level, the company shows good development potential and a competitive edge in the selected customer segments and business operations.

For Boomeranger Boats, the period was successful as the development efforts made in the past few years produced results and the company reached a good profitability level. At the same time, however, we are concerned with the purchasing power of the customer base consisting of public sector entities, as national economies will be under tight financial regimes in the foreseeable future.

For FLS Finland, the first half was disappointing but net sales and operating profit improved further into the reporting period. Active measures are being taken to develop the company to make it better equipped to achieve higher business volumes and a better operating result.

The performance of Done Software Solutions was stable throughout the period. Thanks to its efficient operations, the company has been able to retain its healthy profit level. 

Long-term group company Done Information was sold in July to the Swedish Semantix group as part of Revenio Group’s structural streamlining process. The capital gain from the divestment will enable further development measures in the future.

Based on the financial performance of group companies during the period, we can be satisfied with the group’s financial standing and the improvements in operational efficiency.”

MARKET SITUATION

On the whole, the market situation in the segments in which the Group operates was better than it was a year earlier, even though there is increased uncertainty over future economic cycle developments.

More centralized service production and a complete overhaul of production technology in Midas Touch operating in the Services segment has allowed for more efficient use of capacity and has improved the company’s operating conditions, particularly in the inbound markets, which are considered to be less vulnerable to business cycle risks than the outbound markets and to offer moderate growth potential.  

For the Health Care segment, the market situation is positive. The segment has several growing export markets and its products are highly competitive. Price competition in the markets is fierce from other equipment manufacturers providing technologies for intraocular pressure measurement.

In the Safety segment, several invitations to tender have been requested in both traditional and new markets. Impressive international references given to the company’s boats and their notable exposure have further boosted interest in the segment. In the short term, the market situation is adversely affected by the uncertain outlook for the national economies in the traditional European market areas and the resulting potential cuts in defense equipment acquisitions. 

Demand in the Technology segment continues to be sluggish, as customers are not currently implementing any extensive investment programs.

The market situation for the Systems segment remained unchanged, although the companies’ traditional customers are issuing slightly more invitations to tender than a year earlier. This segment is extremely sensitive to general economic fluctuations.

NET SALES, PROFITABILITY AND PROFIT

Done Information operating in the Services segment was sold during the period. This report presents net sales and profit information separately for continuing and divested (discontinued) operations in accordance with IFRS 5.

Consolidated net sales of Revenio Group’s continuing operations for the period from January 1 to September 30, 2011 were EUR 24.5 million (EUR 17.0 million), showing an increase of 43.9%. For Q3, consolidated net sales of continuing operations came to EUR 8.2 million (EUR 5.7 million), an increase of 43.2%.

In Q1-Q3, earnings before interest, taxes, depreciation and amortization (EBITDA) of continuing operations amounted to EUR 4.0 million (EUR 0.9 million), or 15.0 (5.1)% of net sales.  Consolidated operating profit (EBIT) of continuing operations was EUR 3.4 million (EUR 0.1 million), representing 14.0 (0.4)% of net sales. Pre-tax profit of continuing operations was EUR 3.3 million (EUR -0.0 million), or 13.5 (-0.1)% of net sales. For continuing operations, net profit for Q1-Q3/2011 was EUR 2.4 million (EUR 0.2 million) and EUR 1.0 million (EUR 0.7 million) for Q3/2011, representing 11.8 (12.0)% of net sales. The capital gain of EUR 0.6 million from selling the real estate of Done Logistics is icluded in the figures of 2010 comparison period.

For divested (discontinued) operations, Q1-Q3/2011 net profit was EUR 1.7 million (EUR 0.1 million). The divested operations are included in the consolidated results until June 30, 2011.

In Q1-Q3/2011, undiluted and diluted earnings per share came to EUR 0.032 (0.004) for continuing operations and EUR 0.022 (0.001) for divested (discontinued) operations. Equity per share was EUR 0.22 (EUR 0.20).

Net sales of the Group’s continuing operations grew from the comparison period a year earlier. Growth was mainly driven by the Health Care, Systems and Safety segments. The significant improvement in the Group’s profitability could be largely attributed to the favorable net sales and profit development in Health Care and Systems, as well as enhanced operations in Midas Touch, which was able to considerably lower its cost level from the reference period.

BALANCE SHEET, FINANCIAL POSITION AND INVESTMENTS

The consolidated balance sheet total on September 30, 2011 was EUR 24.7 million (EUR 25.7 million). Shareholders’ equity came to EUR 17.0 million (EUR 15.3 million). At the end of the period, interest-bearing net liabilities amounted to EUR -0.9 million (EUR 0.6 million) and gearing stood at -5.1 (3.7)%. The consolidated equity ratio was 69.0 (64.9)%. The Group’s liquid assets were EUR 2.6 million (EUR 2.7 million) at the end of the period.

The Group’s financial position remained stable in the period under review. In addition to its liquid assets, the Group has a EUR 2.0 million credit facility, from which no funds had been withdrawn at the end of the review period.

Cash flow from operating activities came to EUR 1.8 million (EUR 0.8 million) in Q1-Q3/2011 and EUR -0.3 million (EUR -0.4 million) in Q3/2011. In Q3, cash flow was reduced due to the working capital intensive stage of the Norwegian projects.

The Group’s purchases of PPE and intangible assets totaled EUR 0.5 million (EUR 0.6 million).

OPERATIONS BY BUSINESS SEGMENT

Revenio Group Corporation’s business operations are organized into five segments: Services (Midas Touch Oy), Systems (Done Logistics Oy and Done Software Solutions Oy), Health Care (Icare Finland Oy), Safety (Boomeranger Boats Oy), and Technology (FLS Finland). This structure is in line with the Group’s organization and internal reporting.

Services

The Service segment’s net sales in Q1-Q3 totaled EUR 3.6 million (EUR 5.3 million), down by 31.2 percent. The segment’s profit margin was EUR 0.2 million (EUR -1.0 million). For Q3, net sales amounted to EUR 1.2 million (EUR 1.5 million), while the profit margin was EUR 0.1 (-0.6) million.

On July 19, 2011, the company sold the share capital of its subsidiary Done Information, previously part of the Services segment, to Semantix Lingua Nordica Oy, part of the Swedish Semantix group, for EUR 2.5 million. Of the sale price, EUR 0.3 million will be paid out once the earn out conditions are met in 2012. Revenio Group received a capital gain of EUR 1.6 million from the divestment, which was recorded in full in the third quarter’s result as a non-recurring item. Following the transaction, the Services segment consists of Midas Touch, a provider of contact center services.

Midas Touch Oy’s net sales decreased from the previous year. However, as its costs simultaneously decreased, the company's EBIT improved significantly and turned positive. The cost reduction and better profit performance were driven by the adjustment and restructuring measures conducted in the fall of 2010, involving the centralization of operations into two offices and targeting its offering to more profitable customers and operations. The market situation also improved slightly. Furthermore, the company has been able to reduce the share of its business operations based on telemarketing campaigns with high-risk yield expectations.

Systems

The Systems segment comprises Done Logistics, which provides companies with materials handling systems associated with their internal logistics, and Done Software Solutions Oy, which provides information systems for internal logistics and inventory management, as well as the related services. Done Software Solutions Oy launched operations as an independent company on May 1, 2010, as a result of the partial demerger of Done Logistics. The reference information in this Interim Report is presented as if this arrangement had been effective throughout the period described by the reference information.

In Q1-Q3/2011, the Systems segment’s net sales amounted to EUR 9.6 million (EUR 3.7 million), up by 161.7%. The segment’s profit margin was EUR 1.1 million (EUR -0.2 million). For Q3, net sales amounted to EUR 3.9 million (EUR 1.7 million), while profit margin was EUR 0.7 (0.0) million.

Done Logistics was able to clearly improve its net sales and profitability year-on-year. The most important driver of this trend was orders received from Norway in 2010. The installation of the projects and financial aspects have developed as planned. During the period, the company also landed some other minor orders for 2011.

Done Software Solutions grew both its net sales and operating profit (EBIT) during the period. Thanks to sound cost-efficiency, its operations as an independent company were also clearly profitable in a challenging market situation. Invitations to tender are currently available in the segment for projects in which the company is considered competitive.

Health Care

The Health Care segment comprises Icare Finland, which specializes in the development, manufacture and sale of tonometers measuring intraocular pressure.

In Q1-Q3/2011, the Health Care segment’s net sales amounted to EUR 6.3 million (EUR 4.8 million), an increase of 30.9%. The segment’s profit margin was EUR 2.8 million (EUR 1.8 million). For Q3, net sales amounted to EUR 1.9 million (EUR 1.6 million), while profit margin was EUR 0.8 (0.8) million.

Demand for Icare Finland’s tonometers grew year-on-year and its market position improved compared with the same period a year earlier. Demand was strong in all major export markets and was mainly based on first-generation products. Efforts continue to obtain sales licenses for new products in the US markets, primarily for the Icare One self-tonometry device. Progress with the license process has been slower than anticipated due to amended regulations concerning the product area.

Safety

The Safety segment consists of Boomeranger Boats, which designs, manufactures, and sells Rigid Inflatable Boats (RIBs) of the highest quality, primarily for navy rescue units, authorities and defense forces of various countries.

In Q1-Q3/2011, the Safety segment’s net sales amounted to EUR 3.2 million (EUR 2.2 million), an increase of 45.5%. The segment’s profit margin was EUR 0.5 million (EUR -0.1 million). For Q3, net sales amounted to EUR 0.6 million (EUR 0.6 million), while the profit margin was EUR 0.1 (-0.1) million.

During the period, several new boat orders with relatively short delivery times were undertaken. Productivity in short production series was higher than before, which translated into notably higher profitability. Systematic efforts continued to further expand the customer base into new export markets. In new markets, it takes longer for projects to reach the order stage than in the traditional market areas. Boats ordered for use in the support operations of the Volvo Ocean Race have been successfully delivered to the customer and they will be shown to potential customers during the race tour.

Technology

Representing the Technology segment, FLS Finland (previously Finnish Led-Signs) is the largest supplier of LED price displays in the Nordic region and is Finland’s leading manufacturer of LED information displays and parking guidance systems.

The Technology segment’s net sales grew by 63.6% in Q1-Q3/2011 to EUR 1.8 million (EUR 1.1 million). The segment’s profit margin was EUR 0.2 million (EUR -0.1 million). Net sales for Q3/2011 amounted to EUR 0.7 million (0.4), while the margin was EUR 0.1 (0.0) million.

Although the segment’s net sales grew year-on-year, order volumes remained small. The period’s most important customer delivery was the expansion of the parking guidance system at Helsinki Airport. During the period, the company signed a two-year framework agreement for LED price displays with British Petroleum (BP) as an extension to the existing BP framework agreement, and a three-year delivery agreement with Neste Oil.   

Net sales, margin and profit by segment and by quarter for the Group’s continuing operations were as follows: 

HUMAN RESOURCES

During the period, the number of personnel employed by the Group averaged 244 (308) in continuing operations. At the end of the period, the number of employees was 242 (307) in continuing operations.

Average number of personnel employed by the Group in continuing operations during the period by segment: 

Wages, salaries and other remuneration paid in continuing operations during the period totaled EUR 6.3 million (EUR 7.0 million).

SHARES, SHARE CAPITAL AND MANAGEMENT HOLDINGS

On September 30, 2011, Revenio Group Corporation's fully paid share capital registered in the Trade Register was EUR 5,314,918.72 and the number of shares outstanding totaled 76,889,730. The company has one series of shares. All shares confer the same voting rights and an equal right to dividends and the company’s funds.

The number of shares was increased on July 20, 2011 by 50,000 as a result of share subscriptions made under 2007B options. Proceeds from the share subscription were booked in their entirety in invested unrestricted equity reserve.

On September 30, 2011, the Board of Directors and the President and CEO held 1.6% of the company’s shares, totaling 1,202,600 shares, and 18.6% of the option rights, for a total of 684,365 options.

CHANGES IN SHAREHOLDING

There were no significant changes in ownership to report during the review period.

CURRENT OPTION RIGHTS

On the basis of the share issue authorization approved by the Annual General Meeting on April 3, 2007, the Board of Revenio Group Corporation decided, on November 23, 2007, on a new corporate option plan, comprising a maximum of 3,684,365 option rights. Each option right entitles the holder to subscribe to one Revenio Group Corporation share. Against the total number of the company’s shares on September 30, 2011, the proportion of shares to be subscribed to on the basis of the option rights issued represents a maximum of 2.5% of the company’s shares and votes, once all new shares subscribed for with these option rights have been registered. Share subscriptions via the option program entitle the holder to a dividend from the subscription year onwards.

The option rights have been divided into three series: Series A (1,684,365 shares), Series B (1,000,000) and Series C (1,000,000). The subscription periods for options are as follows: for Series A, May 1, 2009–May 1, 2013; for Series B, November 1, 2010–November 1, 2014; and for Series C, May 1, 2012–May 1, 2016. The share subscription price will be the trade-weighted average price over the periods November 1–30, 2007 (EUR 0.64, Series A); April 1–30, 2009 (EUR 0.31, Series B); and November 1–30, 2010 (EUR 0.28, Series C).

A total of 148,122 Series 2007B option rights and 1,000,000 Series 2007C option rights were issued to personnel during the period. The Board of Directors decided to amend the incentive plan for the company’s President and CEO Olli-Pekka Salovaara, so that a total of 228,122 Series 2007A options held by the President and CEO were to be returned to the company and that, correspondingly, a total of 73,122 Series 2007B options and 155,000 Series 2007C options were to be allocated to the President and CEO. At the end of the period, the company’s key personnel held a total of 1,081,243 Series 2007A options, 908,122 Series 2007B options and 1,000,000 Series 2007C options.

On March 23, 2011, the company decided to apply for listing of its Series 2007B options on NASDAQ OMX Helsinki. As a result, a total of 1,000,000 option rights have been available for trading since March 30, 2011. During the period, no trading took place with these option rights.

TRADING ON THE NASDAQ OMX HELSINKI

During Q1-Q3/2011, Revenio Group Corporation’s turnover on the NASDAQ OMX Helsinki exchange totaled EUR 12.8 million (EUR 5.2 million), representing 29.9 (15.3) million shares or 38.9 (20.0)% of shares outstanding. The trading high was EUR 0.62 (0.38) and the low EUR 0.30 (0.28). At the end of the review period, the closing price was EUR 0.47 (EUR 0.32), and the average share price was EUR 0.43 (EUR 0.34). Revenio Group Corporation’s market value on September 30, 2011, was EUR 36.1 million (EUR 24.6 million).

ANNUAL GENERAL MEETING AND BOARD AUTHORIZATIONS IN EFFECT

The Annual General Meeting (AGM) held on March 31, 2011 approved the company’s financial statements and discharged the members of the Board of Directors and the President and CEO from liability for the financial year January 1-December 31, 2010.

The AGM selected the following persons as members of the Board of Directors: Timo Mänty, Pekka Tammela, Rolf Fryckman, Julia Ormio and Matti Hyytiäinen. The AGM decided that the Chairman of the Board should be entitled to an annual emolument of EUR 60,000 and the other Board members to an annual emolument of EUR 36,000, with the exception that any member who holds a stake of at least five percent in Revenio Group Corporation, either directly or through a company in which he or she has a minimum holding of 50%, should not be entitled to a separate emolument. In total, 40% of Board members’ emoluments will be settled in the form of shares in the company, while 60% will consist of monetary payment.

The AGM re-elected PricewaterhouseCoopers Oy, Authorized Public Accountants, as the company’s auditors with Juha Tuomala, Authorized Public Accountant, acting as the principal auditor. The AGM decided to compensate the auditors upon the presentation of an approved invoice.

The AGM decided to accept the Board’s proposal on profit distribution, according to which the profit for the financial period, EUR 243,391.03, will be added to retained earnings, and a dividend of EUR 0.02 per share will be paid, totaling EUR 1,536,794.60.

The AGM rescinded its earlier authorization to buy back 7,683,973 of the company’s own shares and authorized the Board to make the decision to buy back a maximum of 7,683,973 of the company’s own shares, in one or more installments, using the company’s unrestricted equity, in which case any buyback will reduce the amount of company distributable earnings.

The AGM decided to rescind the Board’s valid unexercised share-issue authorizations. The AGM authorized the Board of Directors to decide to issue a maximum of 30,000,000 shares or to grant special rights (including stock options) entitling to shares, as referred to in Section 1 of Chapter 10 of the Limited Liability Companies Act, in one or several tranches. This authorization was granted to be used to finance and implement any prospective corporate acquisitions or other transactions, to implement the company’s share-based incentive plans, or for other purposes determined by the Board. It was decided that the authorization also grants the Board the right to decide on all terms and conditions governing said share issue and the granting of special rights, including the subscribers or the grantees of said special rights and the payable consideration. Moreover, the authorization also includes the right to waive shareholders’ pre-emption rights, thus enabling the private placement of shares. The Board’s authorization covers both the issue of new shares and the transfer of any treasury shares possibly held by the company. This authorization will be valid until April 30, 2012.

BOARD OF DIRECTORS AND AUDITORS

Since March 31, 2011, Revenio Group Corporation’s Board of Directors has included Timo Mänty, M.Econ, Managing Director of Onninen Oy (Chairman of the Board), Pekka Tammela, M.Econ, Authorized Public Accountant, partner in Pajamaa Partners Oy and Rolf Fryckman, Chairman of Eyemaker’s Finland Oy; and as new members, Julia Ormio, qualified under an EEA aptitude test in law, Senior Legal Counsel at Outotec Oyj and Matti Hyytiäinen, Managing Director of Etteplan Oyj.

Until March 31, 2011, the members of the Board were Jyri Merivirta, Pekka Tammela, Rolf Fryckman and Timo Mänty.

PricewaterhouseCoopers Oy, Authorized Public Accountants, serves as the company’s auditor, with Juha Tuomala, Authorized Public Accountant, as the principal auditor.

MAJOR BUSINESS RISKS AND UNCERTAINTIES

The Group’s major business risks and uncertainties are presented in its financial statements bulletin of February 16, 2011. At the time this interim report is published, the company’s risks are estimated to be the same as those identified in the bulletin except that the economic cycle risk is estimated to be higher due to the current situation in the financial markets and the threat of a recession.

MAJOR EVENTS AFTER THE PERIOD

There have been no major events since the period ended.

OUTLOOK FOR 2011

Net sales for 2011 are forecast to grow in comparison to 2010 figures. Consolidated operating profit/loss (EBIT) without non-recurring items is forecast to be positive, with significant improvement seen from 2010.

The goal of Revenio Group Corporation is to continue growing by means of both corporate restructuring and expansion of current business operations.

The figures are unaudited.

Revenio Group Corporation

BOARD OF DIRECTORS

For further information, please contact:

Olli-Pekka Salovaara, President and CEO, mobile +358 (0)40 5675520

olli-pekka.salovaara@revenio.fi

http://www.reveniogroup.fi

DISTRIBUTION:

NASDAQ OMX Helsinki

Financial Supervisory Authority (FIN-FSA)

Key media

www.revenio.fi

Revenio Group Corporation, listed on the NASDAQ OMX Helsinki, is the parent company of the Finnish conglomerate Revenio Group. Revenio Group Corporation’s subsidiaries share a focus on Finnish specialist expertise and export-based operations.

Revenio Group consists of six independent subsidiaries in five business segments. These subsidiaries are Done Logistics Oy, Done Software Solutions Oy, Icare Finland Oy, Boomeranger Boats Oy, FLS Finland Oy and Midas Touch Oy.