TECNOMEN'S INTERIM REPORT 1 JANUARY - 30 JUNE 2006 (unaudited)
Tecnomen Corporation STOCK EXCHANGE RELEASE
15 August 2006 at 8.30 am
TECNOMEN'S INTERIM REPORT 1 JANUARY - 30 JUNE 2006 (unaudited)
Net sales in the first half of the year increased 10.1 per cent to EUR 34.8
(31.6) million. The result for the period was EUR 2.2 (2.2) million and cash flow
EUR -5.6 (0.3) million. The order book stood at EUR 16.0 (15.1) million at the
end of the review period.
- Net sales EUR 34.8 (31.6) million
- Operating result EUR 3.4 (2.2) million
- Order book EUR 16.0 (15.1) million
- Cash flow EUR -5.6 (0.3) million
- Cash funds at end of period EUR 27.5 (31.2) million
- Equity ratio 87.2 per cent (84.7 %)
- Net gearing -34.8 per cent (-43.6 %)
KEY FIGURES 4-6/06 4-6/05 1-6/06 1-6/05 2005
Net sales, MEUR *) 19.6 19.1 34.8 31.6 69.0
Net sales, change % 2.9 32.0 10.1 14.8 33.7
Operating result, MEUR 3.0 2.4 3.4 2.2 9.6
% of net sales 15.2 12.8 9.7 6.9 13.9
Profit before taxes, MEUR 2.8 3.1 3.0 2.9 10.3
% of net sales 14.0 16.2 8.7 9.1 14.9
Result for the period 2.4 2.6 2.2 2.2 8.8
Personnel at end of period 393 357 393 357 373
Earnings per share, 0.01 0.04 0.04 0.04 0.15
undiluted, EUR
Earnings per share, diluted, 0.01 0.04 0.04 0.04 0.15
EUR
The interim report has been prepared in accordance with the principles and
measurements of IFRS standards. Unless otherwise stated, all figures presented
below are for the review period 1-6/2006 and the figures for comparison are for
the corresponding period 1-6/2005.
*) As from the beginning of 2006 Tecnomen is entering realised and imputed
changes in the fair value of cash flow hedging for foreign currency sales under
adjustments to net sales; under previous practice they were entered under other
operating income or expenses. If this way of recognising had been used in fiscal
year 2005, net sales for 1-6/2005 would have been EUR 28.7 million and other
operating expenses EUR 8.3 million. Net sales for 2005 would have totalled EUR
66.4 million and other operating expenses EUR 17.5 million. The change in
recording practice does not affect the operating result.
SALES AND NET SALES
Tecnomen's net sales in the review period increased 10.1 per cent from the
corresponding period in 2005 to EUR 34.8 (31.6) million.
EUR 26.4 million of the net sales in the review period has been recognised in
accordance with IAS 11 (Construction contracts) and EUR 8.4 million in accordance
with IAS 18 (Revenues).
Net sales by geographical area were: Americas 60.9 per cent (51.4 %), EMEA 26.7
per cent (40.2 %) and APAC 12.4 per cent (8.4 %).
Net sales by product line were: Messaging 36.7 per cent (47.8 %) and Charging
63.3 per cent (52.2 %).
Sales through global partners totalled EUR 8.3 (6.7) million or 23.9 per cent
(21.2%) of net sales.
Maintenance and service sales totalled EUR 5.3 million or 15.1 per cent (12.1 %)
of net sales.
The order book stood at EUR 16.0 (15.1) million at the end of the review period.
Americas accounted for 48.2 per cent of the order book, EMEA 48.3 per cent and
APAC 3.5 per cent.
OPERATING RESULT
The operating result for the review period was EUR 3.4 (2.2) million.
The profit for the period before taxes was EUR 3.0 (2.9) million.
Earnings per share were EUR 0.04 (0.04). Equity per share at the end of the
period was EUR 1.35 (1.21).
FINANCING AND INVESTMENTS
Tecnomen's financial position is strong. Liquid assets totalled EUR 27.5 (31.2)
million. The balance sheet total on 30 June 2006 stood at EUR 91.0 (84.8)
million. Interest bearing liabilities amounted to EUR 0.0 (0.5) million. The debt
to equity ratio (gearing) was -34.8 per cent (-43.6 %). The balance sheet
structure remained strong and the equity ratio on 30 June 2006 was 87.2 per cent
(84.8 %).
Tecnomen's gross capital expenditure during the review period, excluding the
capitalisation of development costs, was EUR 1.5 (0.5) million or 4.4 per cent
(1.7 %) of net sales.
The cash flow in the review period was EUR -5.6 million; the dividend payment
accounted for EUR -1.0 million of this and the payment of interest-bearing
liabilities in the year-end balance sheet for EUR -0.5 million.
Financial income and expenses during the review period totalled EUR -0.3 (0.7)
million. The net effect of assessing foreign currency balance sheet items was a
loss EUR -0.6 (0.5) million, profit from assessing the fair value of reserves was
EUR 0.1 million, and other financial income totalled EUR 0.1 (0.2) million.
CHANGE IN WORKING CAPITAL, MEUR 1-6/06 1-6/05
Change in trade receivables and advances -0.7 0.4
Change in other short-term receivables, -2.0 -5.0
non-interest bearing
Change in inventories -1.1 -1.0
Change in accounts payable and advances -0.6 0.4
Change in other current liabilities, -0.9 3.9
non-interest bearing
CHANGE IN WORKING CAPITAL, TOTAL -5.3 -1.2
MARKETS
During the first quarter of the year, operators continued to make investments in
line with expectations in both growing markets such as Latin America, the Middle
East, Africa and the densely populated countries of Asia.
In the messaging solutions market, operators are looking for a competitive
advantage and cost benefits by implementing open messaging systems based on IP
architecture, replacing older, non-standard closed systems. Tecnomen has invested
in a new generation messaging system (NGM) that meets these operator
requirements. However, operators have started up these replacement investments
more slowly than expected, especially in mature markets such as Europe. On the
other hand, the need for new services that has come with the introduction of 3G
and video services has increased demand for NGM, especially in Asia.
Demand for prepaid systems was in line with the continuing strong growth in
subscriber numbers. In addition, operator needs for combined voice and data
invoicing systems increased considerably, which raised demand for Tecnomen's
Convergent Charging product especially in Latin America.
RESEARCH AND DEVELOPMENT
Research and development costs during the review period were EUR 6.5 (6.5)
million, corresponding to 18.7 per cent (20.5 %) of net sales. EUR 3.6 (1.3)
million of development costs have been capitalised during the review period and
will be amortised over 3-5 years from the start of commercial use. R&D costs of
EUR 0.2 million (0.2) were amortised during the review period.
PERSONNEL
At the end of June 2006 Tecnomen employed 393 (357) persons, of whom 120 (129)
worked in Finland and 273 (228) elsewhere. The company employed on average 386
(352) people during the review period. Personnel by geographical area were as
follows: Americas 66 (55) persons, EMEA 300 (276) and APAC 27 (26).
TECNOMEN SHARES AND SHARE CAPITAL
At the end of June 2006 the shareholders' equity of Tecnomen Corporation stood at
EUR 79.2 (70.3) million and the share capital was EUR 4,717,646.24, divided into
58,970,578 shares. The company held 134,800 of these shares, which represents
0.23 per cent of the company's share capital and votes. The shares held by the
company have a nominal value of EUR 10,784. The equity per share was EUR 1.35
(1.21).
A total of 27,646,400 Tecnomen shares (EUR 69,582,936) were traded on the
Helsinki Exchanges during the period 2 January - 30 June 2006, representing 46.88
per cent of the total number of shares.
The highest share price quoted in the period was EUR 3.06 and the lowest EUR
1.81. The average quoted price was EUR 2.50 and the closing price on 30 June 2006
was EUR 2.07. The share stock had a market value of EUR 122,069,096 at the end of
the period.
In accordance with the decision of the Annual General Meeting of Shareholders,
the company has applied to the National Board of Patents and Registration for
permission to reduce the share premium fund by at most EUR 66,177,792. The
decision will come fully into force on the date when the National Board of
Patents and Registration gives its permission. The Board will meet as soon as
possible after obtaining permission and is authorised to decide on the amount of
the funds to be paid to shareholders as well as the record date and payment date
for the funds.
CURRENT AUTHORISATIONS
The Annual General Meeting held on 15 March 2006 authorised the Board of
Directors to dispose of the company's own shares and increase the share capital.
The Board had not exercised these authorisations by the date of publication of
this Interim Report.
STOCK OPTION PROGRAMME
The company has a valid 2002 stock option programme approved by the AGM on 11
April 2002 and a 2006 stock option programme approved by the AGM on 15 March
2006.
The subscription period for the 2002B stock option is 1 April 2004 - 30 April
2007, for the 2002C stock option 1 April 2005 - 30 April 2007 and for the 2002D
stock option 1 April 2006 - 30 April 2008. The share subscription price for stock
option 2002B is EUR 1.66, for stock option 2002C EUR 0.44 and for stock option
2002D EUR 1.31. The dividend paid per share has been deducted from the
subscription prices. During the review period a total of 240,800 Tecnomen shares
were subscribed with the 2002A stock options, 78,000 shares with the 2002B stock
options, 90,500 shares with the 2002C stock options and 252,500 shares with the
2002D stock options, and these raised the share capital by EUR 52,944. The
subscription period for the 2002A stock options ended on 30 April 2006.
Tecnomen's Board of Directors has cancelled a total of 2,019,500 stock options
from the 2002 stock option programme that were held by Tecnomen's fully owned
subsidiary Tecnomen Japan Oy. Following the cancellation of these stock options,
Tecnomen's share capital can rise by a maximum of EUR 85,800 from share
subscriptions made with the 2002 stock options.
The 2006 stock option programme is divided into three series, the 2006A, 2006B
and 2006C stock options. A maximum of 2,001,000 stock options may be issued,
which entitle holders to subscribe to altogether 2,001,000 Tecnomen shares. The
company's share capital can rise by a maximum of EUR 160,080 from share
subscriptions made with these stock options. The subscription period for the
2006A stock option is 1 April 2007 - 30 April 2010, for the 2006B stock option 1
April 2008 - 30 April 2011 and for the 2006C stock option 1 April 2009 - 30 April
2012. The share subscription price for 2006A stock options shall be the trade-
weighted average price of the Company share on the Helsinki Exchanges during 1
January - 31 March 2006, ie. EUR 2.71, for 2006B stock options the trade-weighted
average price of the Company share on the Helsinki Exchanges during 1 January -
31 March 2007, and for 2006C stock options the trade-weighted average price of
the Company share on the Helsinki Exchanges during 1 January - 31 March 2008.
Tecnomen's Board of Directors has issued 436,000 2006A stock options to key
personnel at Tecnomen Group. The remaining 2006 stock options have been issued to
Tecnomen Japan Oy, a wholly owned Tecnomen subsidiary, for issuing at a later
date to current or future key Group personnel.
RISK MANAGEMENT
The greatest risks in Tecnomen's operations are related to major customer and
partner relationships and to the correct timing and success of product
development.
The objective of the hedging policy is to hedge at most the currency denominated
net position for a maximum period of 12 months. The change in the fair value of
currency hedging is recognised in the income statement.
Liquid funds are invested, avoiding credit and liquidity risks, in money-market
deposits and short-term interest funds with a good credit rating.
The payment record of customers is continually monitored. The credit rating of
customers and the situation concerning receivables from projects previously
supplied to the customer are examined as part of the sales process.
EVENTS AFTER THE END OF PERIOD
Tecnomen has received USD 12.2 million order from PORTA (Conecel - Consorcio
Ecuatoriano de Telecomunicaciones), América Móvil's subsidiary in Ecuador on 10
July 2006. This is not included in the order book of the review period.
Tuomas Wegelius, MSc (Econ.), has been appointed Chief Financial Officer of
Tecnomen Corporation and a member of the Group's Management Board as from 14
August 2006.
The previous CFO, Riitta Järnstedt, MSc (Econ.), has been appointed Vice
President, Risk Management and Internal Audit, from the same date. In her new
position she will continue to report to the President and CEO and remains a
member of the Management Board.
PROSPECTS FOR 2006
Net sales are still expected to continue to grow in Latin America as subscriber
numbers increase. Similarly, demand for Next Generation Messaging (NGM) products,
especially in Asia, is rising. Demand for Messaging solutions in Europe is weaker
than expected. Net sales in the second half of 2006 are expected to be slightly
lower than last year. Ebit is forecast to remain at a clearly positive level.
FINANCIAL INFORMATION
Tecnomen will publish its third quarter interim report as follows:
January - September 2006 on Tuesday 24 October.
Tecnomen is holding a conference to announce its half-year results at 10.00 am on
15 August 2006 in the Tapiola conference room at the Scandic Hotel Simonkenttä,
Helsinki. The material presented at the press conference will be available at
www.tecnomen.com/investor.
TECNOMEN CORPORATION
Board of Directors
FURTHER INFORMATION
Mr Jarmo Niemi, President and CEO, tel. +358 (0)9 8047 8799
DISTRIBUTION
Helsinki Exchanges
Main media
1-6/06 1-6/05 2005
CONSOLIDATED INCOME STATEMENT,
MEUR
NET SALES 34.8 31.6 69.0
Other operating income 0.2 0.3
Materials and services -9.5 -6.3 -13.9
Employee benefit expenses -12.2 -11.1 -23.3
Depreciation -1.2 -1.1 -2.2
Other operating expenses -8.8 -11.2 -20.1
OPERATING RESULT 3.4 2.2 9.6
Financial income 0.6 1.8 1.9
Financial expenses -1.0 -1.1 -1.1
RESULT BEFORE TAXES 3.0 2.9 10.3
Income taxes -0.8 -0.7 -1.5
RESULT FOR THE PERIOD 2.2 2.2 8.8
Earnings per share, undiluted, 0.04 0.04 0.15
EUR
Earnings per share, diluted, 0.04 0.04 0.15
EUR
Equity per share, EUR 1.35 1.21 1.33
CONSOLIDATED BALANCE SHEET, 30.6.2006 30.6.2005 31.12.2005
MEUR
Long-term assets
Fixed assets 18.6 11.9 14.7
Other long-term assets 0.5 0.6 0.6
Current assets
Inventories 3.4 3.2 2.3
Trade receivables 21.4 13.2 22.1
Other financial assets 19.6 24.6 17.5
Financial securities 19.4 25.4 22.3
Cash and bank balances 8.1 5.8 10.9
ASSETS 91.0 84.8 90.4
Shareholders' equity 79.2 70.3 77.3
Long-term liabilities
Interest-bearing liabilities 0.5 0.4
Non-interest bearing 0.1 0.3
liabilities
Deferred tax liabilities 2.3 1.0 1.5
Current liabilities
Non-interest bearing 9.4 13.0 10.9
liabilities
EQUITY AND LIABILITIES 91.0 84.8 90.4
CHANGE IN SHAREHOLDERS' EQUITY, MEUR
MEUR Share Share Other Own Translation Retained Total
capital premium reserves shares difference earnings
fund
Shareholders' 4.6 66.2 0.3 -0.1 0.2 6.0 77.3
equity
1 Jan. 2006
Change in 0.0 0.0
translation
difference
Recognised 0.1 0.1
directly in
retained
earnings
Result for 2.2 2.2
the period
Dividend -1.2 -1.2
declared
Options 0.1 0.8 0.9
excercised
Shareholders' 4.7 67.0 0.3 -0.1 0.2 7.1 79.2
equity
30 June 2006
MEUR Share Share Other Own Translation Retained Total
capital premium reserves shares difference earnngs
fund
Shareholders' 4.6 66.0 0.3 -0.3 0.0 -3.2 67.5
equity
1 Jan. 2005
Change in 0.3 0.3
translation
difference
Recognised 0.4 0.4
directly in
retained
earnings
Result for 2.2 2.2
the period
Shareholders' 4.6 66.0 0.3 -0.3 0.3 -0.6 70.3
equity
30 June 2005
CONSOLIDATED CASH FLOW STATEMENT, 1-6/06 1-6/05 2005
MEUR
Cash flow, business operations 0.9 2.2 8.3
Cash flow from investments -5.0 -1.9 -5.7
Cash flow from financing -1.5 -0.0 -0.1
Increase (+) and decrease (-) in -5.6 0.3 2.5
liquid funds
Liquid funds on 1 Jan. 33.2 30.8 30.8
Impact of changes in exchange rates -0.1 0.0 0.2
Change in fair value of investments 0.0 0.1 -0.2
Liquid funds on 30 June / 31 December 27.5 31.2 33.2
Change -5.6 0.3 2.5
GEOGRAPHICAL SEGMENTS (secondary 1-6/06 1-6/05 2005
segment information), NET SALES,
MEUR
Americas 21.2 16.2 38.8
EMEA 9.3 12.7 24.8
APAC 4.3 2.7 5.3
TOTAL 34.8 31.6 69.0
CONSOLIDATED KEY FINANCIAL 1-6/06 1-6/05 2005
FIGURES, MEUR
Return on investment, % 10.2 8.4 15.7
Return on equity, % 5.7 6.5 12.1
Equity ratio, % 87.2 84.7 86.9
Debt/equity ratio (gearing), % -34.8 -43.6 -42.4
Investments 1.5 0.5 2.0
% of net sales 4.4 1.7 3.0
Research and development 6.5 6.5 13.4
% of net sales 18.7 20.5 19.5
Order book 16.0 15.1 27.9
Personnel, average 386 352 355
Personnel, at end of period 393 357 373
CONSOLIDATED KEY FIGURES PER SHARE, 1-6/06 1-6/05 2005
MEUR
Earnings per share, undiluted, EUR 0.04 0.04 0.15
Earnings per share, diluted, EUR 0.04 0.04 0.15
Equity per share, EUR 1.35 1.21 1.33
Number of shares at end of period, x 58,971 58,104 58,309
1,000
Number of shares on average, x 1,000 58,642 58,095 58,147
Share price, EUR
Average price 2.50 1.42 1.86
Lowest price 1.81 1.28 1.28
Highest price 3.06 1.62 2.60
Share price at end of period 2.07 1.56 2.45
Market value of issued stock at end 122.1 90.6 142.9
of period, MEUR
Share turnover, million shares 27.6 16.8 42.8
Share turnover, % of total 46.9 28.9 73.4
Share turnover, MEUR 69.6 23.8 79.3
CONSOLIDATED CONTINGENT LIABILITIES, 1-6/06 1-6/05 2005
MEUR
Pledges given 0.6 0.8 0.7
For own debts
Mortgages 0.7 0.7
For other own commitments
Mortgages 1.3 1.3 1.3
Chattel mortgages 0.2 0.2 0.2
Other own liabilities 2.3 3.0 3.3
DERIVATIVE FINANCIAL INSTRUMENTS,
MEUR
Currency forward contracts
Fair value 7.5 25.6 11.4
Value of underlying instruments 7.9 24.1 10.9
KEY FIGURES PER QUARTER, MEUR 2Q/06 1Q/06 4Q/05 3Q/05 2Q/05 1Q/05
Net sales, MEUR 19.6 15.2 17.9 19.5 19.1 12.6
Net sales, change % 2.9 20.9 44.7 66.9 32.0 -4.2
Operating result, MEUR 3.0 0.4 3.2 4.2 2.4 -0.3
% of net sales 15.2 2.6 17.9 21.4 12.8 -2.1
Result before taxes, MEUR 2.8 0.3 3.2 4.2 3.1 -0.2
Personnel at end of period 393 387 373 356 357 350
Earnings per share, 0.01 -0.00 0.05 0.06 0.04 -0.01
undiluted, EUR
Earnings per share, diluted, 0.01 -0.00 0.05 0.06 0.04 -0.01
EUR
Equity per share, EUR 1.35 1.30 1.33 1.28 1.21 1.17
Net interest-bearing -27.5 -27.3 -32.8 -30.1 -30.7 -28.6
liabilities, MEUR
Order book, MEUR 16.0 21.3 27.9 19.1 15.1 19.4
The financial figures in income statement, the balance sheet and key indicators
have been rounded up or down to the nearest million euro. The figures shown here
have been calculated using exact values.
SHAREHOLDERS
The company's ten largest shareholders, excluding nominee registrations, on 30
June 2006:
No. of shares %
Sampo Life Insurance Co. Ltd 3,033,400 5.14
Hammaren Lars-Olof 2,164,300 3.67
Sumelius Henning 2,022,300 3.43
OP-Finland Small Firm Fund 2,005,162 3.40
FIM Fenno Fund 1,466,600 2.49
Suupohja Cooperative Bank 1,340,100 2.27
Kaleva Mutual Insurance Company 1,300,000 2.20
Sumelius Johanna Maria 1,122,400 1.90
Varma, Mutual Employee pension 1,040,000
insurance company 1.73
Investsum Oy 947,500 1.61
TOTAL 16,441,762 27.84
Ownership of Tecnomen shares, 30 June 2006
Shares Holders % Shares and votes %
1-500 2,951 46.41 671,570 1.14
501-1,000 1,127 17.73 913,384 1.55
1,001-5,000 1,531 24.08 3,815,159 6.47
5,001-10,000 342 5.38 2,591,558 4.40
10,001-50,000 273 4.29 6,212,689 10.54
50,001-100,000 50 0.79 3,766,971 6.39
100,001-500,000 62 0.98 12,856,041 21,80
500,001< 22 0.35 28,105,606 47.66
Joint account 37,600 0.06
Total 6,358 100.00 58,970,578 100.00
Ownership structure by sector, 30 June 2006
No. of shares %
Companies 4,472,033 7.58
Finance houses and insurance companies 17,164,025 29.11
Public sector 2,220,180 3.77
Non-profit making associations 3,291,019 5.58
Households and private persons 29,954,840 50.80
Foreign holders 1,830,881 3.11
TOTAL 58,932,978 99.94
Joint account 37,600 0.06
Share capital 58,970,578 100.00
Nominee registrations 5,076,752 8.61
