TECNOMEN?S INTERIM REPORT 1 JANUARY - 31
Tecnomen Corporation STOCK EXCHANGE RELEASE
28 April 2004 at 8.30 am
TECNOMENS INTERIM REPORT 1 JANUARY - 31 MARCH 2004
Tecnomens net sales in the first quarter of 2004 increased 53.8 per
cent from the corresponding period in the previous year to EUR 11.7
(7.6) million. The largest sale in the review period was the supply of
a EUR 4.7 million messaging solution and prepaid system for Brasil
Telecom.
The order book was 102% higher than at the same time in the previous
year. At the end of March the companys order book stood at EUR 16.7
(8.3) million.
- Net sales EUR 11.7 (7.6) million
- Operating result EUR -0.8 (-3.8) million
- Cash flow EUR -4.6 (-1.0) million
- Cash funds EUR 30.2 (33.7) million
- Tecnomen outsourced to Accenture Service Oy a major part of the
software development and maintenance for its current voice messaging
system.
- Prospects for the second quarter of 2004 are encouraging.
KEY FIGURES
1-3/04 1-3/03 2003
Net sales, MEUR 11.7 7.6 45.3
Net sales, change % 53.8 -9.2 13.6
Operating result, MEUR -0.8 -3.8 -7.0
% of net sales -7.2 -49.5 -15.6
Result before -0.7 -3.7 -6.4
extraordinary items,
appropriations and
taxes, MEUR
% of net sales -5.8 -49.0 -14.2
Result for the period -0.8 -3.7 -7.3
Personnel at end of 343 436 398
period
Earnings per share, EUR -0.01 -0.06 -0.13
Equity per share, EUR 1.12 1.19 1.13
Net interest-bearing -29.5 -32.8 -34.1
liabilities, MEUR
Unless otherwise stated, all figures presented below are for the
review period 1-3/2004 and the figures for comparison are for the
corresponding period 1-3/2003.
ADOPTION OF IFRS STANDARDS AND REPORTING ON SEGMENTS
Tecnomen will adopt IFRS standards in its financial reporting in 2005.
The planned date for publishing figures for comparison and the 2004
financial statements is March 2005.
During 2004 the company will carry out parallel IFRS accounting and
prepare figures for comparison for 2005. In Tecnomens internal
accounting it has been decided to report from the beginning of 2004 on
the product lines as the primary segment and the geographical areas as
the secondary segment. The product line segments are Messaging,
Prepaid and PMR Messaging (formerly Paging) and the geographical areas
are the Americas (North, Central and South America), EMEA (Europe,
Middle East and Africa) and APAC (Asia Pacific).
MARKETS
The situation in the market remained challenging during the first
quarter of 2004. Operators continued with the system updates that
started in late autumn in the previous year, but pressure on prices
intensified especially for maintenance agreements and new investments.
Interest in NGM (Next Generation Messaging) systems increased
significantly, but it is still unclear when major replacement
investments will start up. Among Tecnomens market areas, investments
by operators grew most strongly in Latin America.
Messaging
No great changes took place in the markets at the start of the year.
The NGM Video Mail product has aroused particular interest among
leading European and Asian operators. The introduction of 3G networks
further supports growth in the Video Mail market. Usage of multimedia
services (MMS) has increased relatively slowly. Most of the phones on
sale support multimedia services, and sales of camera phones in
particular have increased. Activating MMS services and increasing
usage of the services has, however, proved more difficult than
expected.
Net sales of the Messaging product line in the first quarter increased
42 per cent to EUR 6.4 million. Some of the major new agreements
during the review period were the voice mail and multimedia messaging
systems supplied to Brasil Telecom and the voice mail system supplied
to Finnet Networks Ltd in Finland. The messaging system markets in
Europe and parts of Asia are showing signs of tentative growth. The
MMS markets with the most potential during the current year for
Tecnomen remain the Middle East, Africa and Latin America.
Prepaid
Net sales for the Prepaid product line in the first quarter rose 135
per cent to EUR 4.7 million. Operator investments have remained at a
high level in Tecnomens main prepaid market areas in Latin America
and the Caribbean. The contract signed with Brasil Telecom during the
review period included a prepaid system. Several operators in Latin
American have expanded or are expanding their systems. Signs of an
increase in buying intentions are also visible in other areas such as
Asia, even if these have not yet turned into sales. Data solutions
such as real-time MMS billing will grow in importance.
PMR Messaging
Net sales of the PMR Messaging product line in the first quarter fell
42 per cent to EUR 0.6 million. Modernising messaging solutions for
public authority usage has got off to a relatively slow start.
Preparatory projects are underway in many countries and the amounts
allocated in national budgets for this purpose have increased. In
Sweden for example, the decision was taken recently to build the
public authority network using TETRA technology. The PMR Messaging
product line continues to tailor Tecnomen messaging products to meet
public authority needs. Value-added services enable public authority
operators to offer their clients a wider range of reliable services
and at the same time improve network usage.
SALES AND NET SALES
Tecnomens net sales in the review period increased 53.8 per cent to
EUR 11.7 (7.6) million. Total net sales and their distribution among
the different product lines and geographical regions vary greatly from
one quarter of the year to another, due to the seasonal nature of the
business and the timing of project deliveries.
Net sales by product line
1-3/2004 1-3/2003
MEUR % MEUR %
Messaging (includes Mobile 6.4 55 4.5 59
Multimedia)
Prepaid 4.7 40 2.0 26
PMR Messaging (formerly 0.6 5 1.1 15
Paging)
TOTAL 11.7 100 7.6 100
Net sales by region
1-3/2004 1-3/2003
MEUR % MEUR %
Americas (North, Middle and 5.9 51 1.6 21
South America)
EMEA (Europe, Middle East 5.6 47 5.4 72
and Africa)
APAC (Asia Pacific) 0.2 2 0.6 7
TOTAL 11.7 100 7.6 100
There were great differences between the different geographical
regions. The biggest change during the review period took place in
South America, where sales grew strongly, due to the delivery with a
tight schedule of a EUR 4.7 million messaging solution and prepaid
system to Brasil Telecom. Sales declined in Asia Pacific.
Sales through global partners totalled some EUR 0.9 (0.5) million or
7.9 per cent (6.7%) of net sales. The cooperation with Siemens
continued at a strong level.
Maintenance and service sales together accounted for some 13.6 per
cent (30.4%) of net sales.
The order book increased 102 per cent and stood at EUR 16.7 (8.3)
million at the end of the review period. The order book grew
encouragingly especially in Latin America, which accounted for 58 per
cent of the order book.
OPERATING RESULT
The operating result for the review period was EUR -0.8 (-3.8)
million.
The gross margin in the first quarter declined slightly from the
corresponding period in the previous year. Factors affecting the gross
margin in the review period were the large proportion of equipment in
deliveries and slightly lower prices. When comparing the costs for the
periods, note should be taken of the voluntary salary reductions of
EUR 0.6 million implemented in the period for comparison.
Write-downs of EUR 0.2 million were made on trade receivables during
the review period.
The result for the period before extraordinary items, appropriations
and taxes was EUR -0.7 (-3.7) million.
Earnings per share were EUR -0.01 (-0.06). Equity per share at the end
of the period was EUR 1.12 (1.19).
FINANCING AND INVESTMENTS
Tecnomens financial position is strong. Liquid assets were EUR 30.2
(33.7) million. The balance sheet total on 31 March 2004 stood at EUR
77.4 (76.9) million. The cash flow in the first quarter was EUR -4.6
(1.0) million. Interest bearing liabilities amounted to EUR 0.7 (0.8)
million. The debt to equity ratio (gearing) was -45.7 per cent
(-47.8%). The balance sheet structure remained strong and the equity
ratio on 31 March 2004 was 84.3 per cent (89.9%).
The trade receivables for the review period of EUR 32.8 (27.0) million
by region were as follows: EMEA 44 per cent, Americas 39 per cent and
Asia 17 per cent.
Tecnomens gross capital expenditure during the review period was EUR
0.4 (0.1) million. Investments mainly focused on the NGM product.
Financial income and expenses during the review period totalled EUR
0.2 (0.0) million and included EUR 0.05 (-0.2) million in exchange
rate differences from valuing foreign currency balance sheet items and
interest income of EUR 0.1 (0.2) million.
Change in working capital
1-3/04 1-3/03
Trade receivables and advances, incr. (-)/ -5.0 2.1
decr. (+)
Other short-term receivables, non-interest 0.1 0.0
bearing, incr. (-)/ decr. (+)
Inventories, incr. (-)/ decr. (+) -0.5 0.1
Accounts payable and advances, incr. (+)/ 0.4 -0.5
decr. (-)
Other current liabilities, non-interest 0.5 0.4
bearing, inc. (+)/ decr. (-)
CHANGE IN WORKING CAPITAL, TOTAL -4.5 2.1
OUTSOURCING AGREEMENT
Tecnomen outsourced a major part of its software development and
maintenance for voice messaging systems to Accenture Service Oy.
Accenture is also providing its services in joint product development
with Tecnomen for the next generation messaging system (NGM). Since in
the long term the NGM markets have good growth prospects, with this
arrangement Tecnomen can increase its product development efforts for
the NGM messaging system quickly.
The companies have also started discussions about cooperation in
marketing, selling and supplying messaging systems to operator
customers worldwide.
RESEARCH AND DEVELOPMENT
R&D costs during the review period were EUR 2.9 (2.5) million,
corresponding to 24.6 per cent (32.5%) of net sales. R&D related costs
have been recorded directly as costs.
Tecnomens MMSC product obtained interoperability approval from Nortel
Networks. Interoperability of Tecnomens MMSC solution with Nortel
Networks GSM/GPRS infrastructure creates new opportunities for
operators to provide high performance MMS.
Product launches
Tecnomen launched its NGM Video Mail service at the 3GSM World
Congress in February. This service allows video callers to leave video
messages for one another when the recipient is busy, does not reply or
is unavailable.
PERSONNEL
At the end of the first quarter of 2004, Tecnomen employed 343 (436)
people worldwide. The company employed on average 378 (438) people
during the review period.
Tecnomen had 59 people working in the business operations that were
outsourced to Accenture Service Oy, and they transferred to the
employment of Accenture, retaining their existing employee status.
They continue to work in Tecnomens premises in Espoo. Following this
outsourcing, Tecnomen has approximately 140 employees in Finland, or
41 per cent of the Groups total personnel.
TECNOMEN SHARES AND SHARE CAPITAL
At the end of March 2004 the shareholders equity of Tecnomen
Corporation stood at EUR 64.5 million and the share capital was EUR
4,647,406.24, divided into 58,092,578 shares. The company held 400,000
of these shares, representing 0.69 per cent of the companys share
capital and votes. The nominal value of the shares held by the company
totalled EUR 32,000. The equity per share was EUR 1.12 (1.19).
A total of 14,862,903 Tecnomen shares (EUR 21,579,839) were traded on
the Helsinki Exchanges during the period 2 January - 31 March 2004, or
25.58 per cent of the total number of shares.
The highest share price quoted in the period was EUR 1.82 and the
lowest was EUR 1.21. The average quoted price was EUR 1.45 and the
closing price on 31 March 2004 was EUR 1.27. The share stock has a
market value of EUR 73,777,574 at the closing price.
NOTIFICATION UNDER CHAPTER 2, SECTION 9 OF THE MARKET SECURITIES ACT
Tecnomen Corporation announced on 20 February 2004 that it had
received notification of a change in share ownership under section 9
of chapter 2 of the Finnish Securities Market Act. The holding of
Fennogens Investments S.A. in Tecnomen Corporation had fallen to
1,535,000 shares and the holding of its fully owned subsidiary Geveles
Oy to 1,311,755 shares. This meant that the combined holding on 20
February 2004 of Fennogens Investments S.A. and its fully owned
subsidiary Geveles Oy in Tecnomen Corporation was 2,846,755 shares,
corresponding to 4.9 per cent or less than one twentieth of Tecnomen
Corporations sharestock.
CURRENT AUTHORISATIONS
At the end of the review period Tecnomens Board of Directors held the
following current authorisations granted by the Annual General Meeting
on 24 March 2004:
1. Authorisation to decide to dispose of the companys own shares
already in the possession of the company and any acquired under
the authorisation given to the Board.
2. Authorisation to decide to increase the share capital by issuing
new shares, convertible bonds and/or stock options in one or more
issues. The number of new shares through share issuance or
subscription of shares in exchange for convertible bonds or
pursuant to the stock options may be at most 7,518,515 shares,
and the company's share capital may rise by at most a total of
EUR 601,481.20.
The authorisations given to the Board of Directors are effective for
one year from the decision of the Annual General Meeting of
Shareholders.
STOCK PROGRAMME
The company has a current 2002 stock option programme approved by the
Annual General Meeting of Shareholders on 11 April 2002, which is
divided into four stock option series, the 2002A, 2002B, 2002C and
2002D stock options. A maximum of 4,100,000 stock options may be
issued that entitle holders to subscribe to a total of 4,100,000
Tecnomen Corporation shares. As a result of subscriptions with the
2002 stock options, the company's share capital can rise by a maximum
of EUR 328,000. The share subscription price for stock option 2002D
was set at 1.33 euros, the Tecnomen trade volume weighted average
share price on the Helsinki Exchanges between 1 March and 31 March
2004. The subscription period for the 2002A stock options started on 1
April 2003. During the review period no share subscriptions were made
with the 2002A stock options. The subscription period with the other
stock options had not started in the review period.
TECNOMENS MANAGEMENT AND AUDITOR
Eero Mertano was appointed Director of Global Sales and Marketing. He
started in this position on 19 January 2004. Mr Mertano reports to the
President and CEO Mr Jarmo Niemi and is a member of the companys
Management Board.
The period of office for all seven members of Tecnomen's Board of
Directors ended at the Annual General Meeting held on 24 March 2004.
The AGM confirmed that the Board of Tecnomen Corporation will have six
members and that their period of office will terminate at the end of
the third AGM after their election. The following were elected as
Board members: Lauri Ratia, Keijo Olkkola, Lars Hammarén, Carl-Johan
Numelin, Christer Sumelius and Timo Toivila. At the preliminary
meeting of the Board, Lauri Ratia was elected Chairman and Carl-Johan
Numelin Vice Chairman of the Board.
KPMG Wideri Oy Ab, Authorised Public Accountants, will continue as the
company's auditors, with Sixten Nyman, APA, as responsible auditor,
until the end of the following Annual General Meeting of Shareholders.
EVENTS AFTER END OF REVIEW PERIOD
Tecnomen and Nokia announced on 22 April 2004 a cooperation agreement
aimed at promoting video mail services to the 3G telecoms market.
According to this co-marketing agreement, Nokia and Tecnomen will
ensure the compatibility of Tecnomen's Video Mail solution and Nokia's
3G Core system.
PROSPECTS FOR 2004
On the basis of the strong order book, second quarter net sales and
operating result are expected to be higher than in the second quarter
of last year and the first quarter of this year.
Net sales and operating result for 2004 are expected to be better than
last year.
SCHEDULE FOR PUBLISHING FINANCIAL INFORMATION
During the second half of the 2004 financial year, Tecnomen will
publish two interim reports:
- 1-6/2004 Wednesday 11 August
- 1-9/2004 Wednesday 27 October
TECNOMEN CORPORATION
Board of Directors
FURTHER INFORMATION
Mr Jarmo Niemi, President and CEO, tel. +358 (0)9 8047 8799
Ms Riitta Järnstedt, CFO, tel. +358 (0)9 8047 8650
DISTRIBUTION
HEX Helsinki Exchanges
Main media
CONSOLIDATED INCOME STATEMENT
MEUR 1-3/04 1-3/03 2003
Net sales 11.7 7.6 45.3
Operating expenses 11.9 10.5 49.3
Depreciation 0.6 0.8 3.0
Operating result -0.8 -3.8 -7.0
% of net sales -7.2 -49.5 -15.6
Financial income and expenses 0.2 0.0 0.6
Result before extraordinary -0.7 -3.7 -6.4
items
Result before taxes and -0.7 -3.7 -6.4
minority interest
Taxes -0.2 0.0 -0.8
Result for the period -0.8 -3.7 -7.3
CONSOLIDATED BALANCE SHEET
MEUR 31.3.04 31.3.03 31.12.2003
Fixed assets 9.9 10.7 10.1
Current assets
Inventories 2.7 3.5 2.2
Trade receivables 32.8 25.3 27.0
Cash and bank balances 30.2 33.7 34.8
Other financial assets 1.8 3.7 3.4
Assets 77.4 76.9 77.5
Shareholders equity 64.5 68.7 65.2
Provisions 0.6 0.0 0.6
Liabilities
Interest-bearing 0.7 0.8 0.7
liabilities
Non-interest bearing 11.5 7.4 10.9
liabilities
Deferred tax 0.1 0.0 0.1
liabilities
Equity and liabilities 77.4 76.9 77.5
CONSOLIDATED CASH FLOW STATEMENT
MEUR 1-3/04 1-3/03 2003
Cash flow, business operations -4.6 -0.9 1.9
Cash flow from investments -0.0 -0.1 -1.6
Cash flow from financing -0.0 -0.1 -0.2
Increase (+) and decrease (-) in -4.6 -1.0 0.1
liquid funds
Liquid funds on 1 Jan. 34.8 34.7 34.7
Liquid funds on 31 March/ 31 30.2 33.7 34.8
December
Change -4.6 -1.0 0.1
KEY FINANCIAL FIGURES
MEUR 1-3/04 1-3/03 2003
Return on investment, % -3.5 -20.8 -9.1
Return on equity, % -5.2 -21.1 -10.5
Equity ratio, % 84.3 89.9 85.2
Debt/equity ratio (gearing), % -45.7 -47.8 -52.3
Investments 0.4 0.1 1.9
% of net sales 3.5 1.4 4.2
Research and development 2.9 2.5 9.4
% of net sales 24.6 32.5 20.8
Order book 16.7 8.3 10.0
Personnel, average 378 438 440
Personnel, at end of period 343 436 398
KEY FIGURES PER SHARE
MEUR 1-3/04 1-3/03 2003
Earnings per share, EUR -0.01 -0.06 -0.13
Equity per share, EUR 1.12 1.19 1.13
Number of shares at end of 58,093 58,093 58,093
period, x 1,000
Number of shares on average, x 58,093 58,093 58,093
1,000
Share price, EUR
Average price 1.45 0.47 0.86
Lowest price 1.21 0.42 0.39
Highest price 1.82 0.58 1.59
Share price at end of period 1.27 0.43 1.37
Market value of issued stock 73.8 25.0 79.6
at end of period, MEUR
Share turnover, million shares 14.9 5.1 32.4
Share turnover, % of total 25.6 8.9 55.8
Share turnover, MEUR 21.6 2.4 27.9
CONTINGENT LIABILITIES
MEUR 1-3/04 1-3/03 2003
Pledges 1.0 1.0
For own debts
Mortgages 0.7 0.7 0.7
Pledges given to cover other
own commitments
Mortgages 1.3 1.3 1.3
Chattel mortgages 0.2 0.2 0.2
Other own liabilities 2.4 2.6 2.6
Derivative contracts
Current forward contracts
Market value 23.8 11.0 15.7
Value of underlying 23.5 11.9 16.7
instrument
Currency options
Market value 0.0 0.0 0.0
KEY FIGURES PER QUARTER
1Q/03 2Q/03 3Q/03 4Q/03 1Q/04
Net sales, MEUR 7.6 11.6 9.1 17.0 11.7
Net sales, change % -9.2 41.5 -28.0 59.9 53.8
Operating result, MEUR -3.8 -0.8 -1.9 -0.5 -0.8
% of net sales -49.5 -7.6 -21.3 -2.7 -7.2
Result before -3.7 -0.6 -1.7 -0.4 -0.7
extraordinary items,
appropriations and taxes,
MEUR
Personnel at end of 436 444 437 398 343
period
Earnings per share, EUR -0.06 -0.01 -0.03 -0.02 -0.01
Equity per share, EUR 1.19 1.18 1.15 1.13 1.12
Net interest-bearing -32.8 -32.8 -31.9 -34.1 -29.5
liabilities, MEUR
Order book, MEUR 8.3 6.9 7.2 10.0 16.7
The financial figures in the balance sheet, income statement and key
indicators have been rounded up or down to the nearest million euro.
The figures shown here have been calculated using exact values.
The figures are not audited.
SHAREHOLDERS
The companys ten largest shareholders, excluding nominee
registrations, on 31 March 2004:
No. of shares %
Henki-Sampo Insurance Fund 3,083,400 5.31
Hammaren Lars-Olof 2,164,300 3.73
Sumelius Henning 2,022,300 3.48
Sumelius Johanna Marina 1,122,400 1.93
Placeringsfonden Gyllenberg 1,100,000
Finland 1.89
FIM Fenno Fund 1,085,000 1.87
Oy Investsum AB 954,100 1.64
Estate of Suutarinen Helena 901,200 1.55
Sumelius Maria 790,600 1.36
Kyro Corporation 715,362 1.23
TOTAL 13,938,662 23.99
Ownership of Tecnomen shares, 31 March 2004
Shares Holders % Shares and %
votes
1-500 3,410 47.32 774,079 1.33
501-1,000 1,230 17.07 978,695 1.68
1,001-5,000 1,750 24.29 4,389,482 7.56
5,001-10,000 377 5.23 2,866,793 4.93
10,001-50,000 291 4.04 6,407,309 11.03
50,001-100,000 52 0.72 3,919,364 6.75
100,001-500,000 77 1.07 17,408,596 29.97
500,001< 19 0.26 21,310,660 36.68
Joint account 37,600 0.06
Total 7,206 100.00 58,092,578 100.00
Ownership structure by sector, 31 March 2004
No. of shares %
Companies 6,964,405 11.99
Finance houses and insurance 14,112,622 24.29
companies
Public sector 1,216,735 2.09
Non-profit making associations 2,569,097 4.42
Households and private persons 31,216,459 53.74
Foreign holders 1,975,660 3.40
TOTAL 58,054,978 99.94
Joint account 37,600 0.06
Share capital 58,092,578 100.00
Nominee registrations 3,086,363 5.31
