Tecnomen's Interim Report 1 January - 31 March 2006
Tecnomen Corporation STOCK EXCHANGE RELEASE
26 April 2006 at 8.30 am
TECNOMENS INTERIM REPORT 1 JANUARY 31 MARCH 2006 (unaudited)
Net sales during the period rose 20.9 per cent to EUR 15.2 (12.6) million, the
result for the period was EUR -0.1 (-0,4) million and the cash flow EUR -5.3
(-1.7) million. The order book at the end of the period stood at EUR 21.3 (19.4)
million.
- Net sales EUR 15.2 (12.6) million
- Operating result EUR 0.4 (-0.3) million
- Order book EUR 21.3 (19.4) million
- Cash flow EUR -5.3 (-1.7) million
- Cash funds EUR 27.8 (29.1) million
- Equity ratio 84.1 per cent (87.3 %)
- Net gearing -36.0 per cent (-42.4 %)
KEY FIGURES 1-3/06 1-3/05 2005
Net sales, MEUR (* 15.2 12.6 69.0
Net sales, change % 20.9 -4.2 33.7
Operating result, MEUR 0.4 -0.3 9.6
% of net sales 2.6 -2.1 13.9
Profit before taxes, MEUR 0.3 -0.2 10.3
% of net sales 1.8 -1.7 14.9
Result for the period -0.1 -0.4 8.8
Personnel at end of period 387 350 373
Earnings per share, EUR -0.00 -0.01 0.15
Earnings per share, diluted, -0.00 -0.01 0.15
EUR
This interim report has been prepared in accordance with IFRS recognition and
measurement principles. Unless otherwise stated, all figures presented below
are for the review period 1-3/2006 and the figures for comparison are for the
corresponding period 1-3/2005.
*) As from the beginning of 2006 Tecnomen is entering the realised and
calculatory 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 would have
been used in fiscal year 2005 the net sales for 1-3/2005 would have been EUR
11.6 million and other operating expenses EUR 3.5 million. The net sales for
the 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
Tecnomens net sales in the review period rose 20.9 per cent to EUR 15.2 (12.6)
million.
EUR 11.8 million of the net sales in the review period has been recognised in
accordance with IAS 11 (Construction contracts) and EUR 3.4 million in
accordance with IAS 18 (Revenues).
Net sales by geographical area were: Americas 58.8 per cent (34.2%), EMEA 24.9
per cent (48.9%) and APAC 16.2 per cent (16.9%).
Net sales by product line were: Messaging 43.1 per cent (63.3%) and Charging
56.9 per cent (36.7%).
Sales through global partners totalled EUR 4.4 (2.9) million, or 28.8 per cent
(22.8%) of net sales.
Maintenance and service sales totalled EUR 2.3 million, or 15.3 per cent
(15.6%) of net sales.
The order book stood at EUR 21.3 (19.4) million at the end of the review
period. Americas accounted for 51.5 per cent of the order book, EMEA for 42.0
per cent and APAC for 6.5 per cent.
OPERATING RESULT
The operating result for the review period was EUR 0.4 (-0.3) million. The
costs of the largest customer project and the distribution of sales had an
impact on profitability.
The profit for the period before taxes was EUR 0.3 (-0.2) million.
Earnings per share were EUR -0.00 (-0.01). Equity per share at the end of the
period was EUR 1.30 (1.17).
FINANCING AND INVESTMENTS
Tecnomens financial position is strong. Liquid assets totalled EUR 27.8 (29.1)
million. The balance sheet total on 31 March 2006 stood at EUR 92.0 (78.5)
million. Interest bearing liabilities amounted to EUR 0.5 (0.5) million. The
debt to equity ratio (gearing) was 36.0 per cent (-42.4%). The balance sheet
structure remained strong and the equity ratio on 31 March 2006 was 84.1 per
cent (87.3%).
Tecnomens gross capital expenditure during the review period, excluding the
capitalisation of development costs, was EUR 0.6 (0.3) million, or 3.9 per cent
(2.3%) of net sales.
Financial income and expenses during the review period totalled EUR -0.1 (0.1)
million. The net effect of assessing foreign currency balance sheet items was
an expense of EUR 0.3 (0.0) million, profit from assessing the fair value of
funds was EUR 0.1 million, and other financial costs totalled EUR 0.1 (0.1)
million.
CHANGE IN WORKING CAPITAL, MEUR 1-3/06 1-3/05
Change in trade receivables and advances 0.3 -0.9
Change in other short-term receivables, non-interest -3.2 -0.7
bearing
Change in inventories -2.1 -1.2
Change in accounts payable and advances 2.2 1.0
Change in other current liabilities -1.0 0.4
CHANGE IN WORKING CAPITAL, TOTAL -3.8 -1.4
MARKETS
During the first quarter of the year investments by operators continued at a
high level in growing markets such as Latin America, Africa and the densely
populated countries of Asia. During this period Tecnomen started several
delivery projects for orders received in the previous year.
Demand for Next Generation Messaging (NGM) solutions continued to grow during
the review period as operators, especially in Western Europe and Asia, looked
to invest in next generation systems to increase revenues and profitability.
Demand for multimedia and SMS servers also remained stabile. Demand for prepaid
systems was in line with the continuing strong growth in subscriber numbers.
RESEARCH AND DEVELOPMENT
Research and development costs during the review period were EUR 3.2 (3.0)
million, corresponding to 21.2 per cent (23.9%) of net sales. EUR 1.8 (0.5)
million of development costs have been capitalised and will be amortised over 3-
5 years from the start of commercial use. R&D costs of EUR 0.1 (0.1) million
were amortised during the review period.
PERSONNEL
At the end of March 2006 Tecnomen employed 387 (350) persons, of whom 127 (129)
worked in Finland and 260 (221) outside Finland. The company employed on
average 379 (350) people during the review period. Personnel by geographical
area were as follows: Americas 65 (51), EMEA 297 (274) and APAC 25 (25).
TECNOMEN SHARES AND SHARE CAPITAL
At the end of March 2006 the shareholders equity of Tecnomen Corporation stood
at EUR 75.8 (67.5) million and the share capital was EUR 4,664,702.24, divided
into 58,308,778 shares. The equity per share was EUR 1.30 (1.17).
A total of 11,745,126 Tecnomen shares (EUR 32,083,327), representing 20.14 per
cent of the total number of shares, were traded on the Helsinki Exchanges
during the period 2 January 31 March 2006.
The highest share price quoted in the period was EUR 3.06 and the lowest EUR
2.46. The average quoted price was EUR 2.73 and the closing price on 31 March
2006 was EUR 2.97. The share stock had a market capitalisation of
EUR 173,177,071 at the end of the period.
ANNUAL GENERAL MEETING
The Annual General Meeting of Tecnomen Corporation held on 15 March 2006
approved the 2005 financial statements and discharged the Board of Directors
and President from liability for the 2005 financial year. The AGM resolved, in
accordance with the Board of Directors proposal, that a dividend of 0.02 euros
be distributed per share for the 2005 financial year.
Board of Directors
The Annual General Meeting did not bring any changes to the period of office or
members of Tecnomens Board of Directors. The period of office for Tecnomens
current Board of Directors will end in 2007. The Board members are Lauri Ratia,
Lars Hammarén, Carl-Johan Numelin, Keijo Olkkola, Christer Sumelius and Timo
Toivila. According to the decision taken at the preliminary meeting of the
Board, Lauri Ratia continues as Chairman and Carl-Johan Numelin as Vice
Chairman of the Board.
Auditors
KPMG Oy Ab, Authorised Public Accountants, will continue as the companys
auditors, with Sixten Nyman, APA, as responsible auditor, until the end of the
following Annual General Meeting of Shareholders.
REDUCTION IN SHARE PREMIUM FUND
The AGM resolved to reduce the Company's share premium fund by a maximum of EUR
66,177,792 such that from the aggregate amount of the reduction a minimum of
EUR 5,817,398 and a maximum of EUR 6,003,928 be distributed to the shareholders
as a refund of invested restricted capital in proportion to each shareholders
ownership in the Company, so that the shareholders receive a refund of EUR 0.10
per Company share. The part of the reduction in the share premium fund that is
not distributed to the shareholders as a refund of invested capital will be
transferred to a fund included in the Companys non-restricted equity.
The reduction in the share premium fund requires the permission of the National
Board of Patents and Registration, which is expected to be received within six
months of the decision by the Annual General Meeting. The Company will announce
the record and payment dates for the refund in a separate release after
permission has been received.
Board authorisations
The AGM authorised the Board of Directors to decide on the acquisition of a
maximum of 5,817,397 of the Companys own shares. The shares may be acquired
for the purpose of developing the capital structure of the Company, to be used
in financing corporate acquisitions or for other arrangements to develop the
business of the Company, to be used as part of the Company's incentive and
remuneration schemes, or to be otherwise disposed of or nullified to the extent
and in a manner decided by the Board of Directors. The shares may be acquired
at the prevailing price otherwise than in proportion to the ownership of the
shareholders in public trading arranged by the Helsinki Stock Exchange.
The AGM authorised the Board of Directors to decide to dispose of a maximum of
5,952,197 of the Company's own shares. The shares can be disposed of as
consideration in possible corporate acquisitions, used to carry out and finance
other arrangements and investments related to the development of the Companys
business, or used as part of the Company's incentive and remuneration schemes
to the extent and in a manner decided by the Board of Directors. The
authorisation includes the right to deviate from the shareholders' pre-emptive
subscription rights when disposing of the shares, provided that from the
viewpoint of the Company there is a valid economic reason for this, and the
right to determine the criteria for setting the selling price. The
authorisation does not include the right to dispose of shares for the benefit
of persons belonging to the Companys inner circle.
The AGM authorised the Board to decide on increasing the share capital by
issuing new shares and/or convertible bonds and/or stock options in one or more
issues, such that the total number of new shares may be at most 11,661,755
shares and the Company's share capital may rise by at most EUR 932,940.40. The
Board may deviate from the shareholders pre-emptive subscription rights if
there are valid economic reasons from the viewpoint of the Company. The
decision may not be made so that it benefits persons belonging to the Company's
inner circle.
The authorisations are effective for one year from the decision of the Annual
General Meeting.
STOCK OPTION PROGRAMMES
Tecnomens Annual General Meeting decided to approve the 2006 stock option
programme. A maximum of 2,001,000 stock options shall be issued, by the
decision of the Board of Directors, to key Tecnomen Corporation personnel,
which entitle the holders to subscribe a maximum of 2,001,000 Company shares.
Of the stock options, 667,000 shall be marked with the symbol 2006A, 667,000
with the symbol 2006B and 667,000 with the symbol 2006C.
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, 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. The
amount of dividends that are decided after the beginning of the period for
determining the subscription price but before share subscription shall be
deducted on each dividend record date from the subscription price for shares
with the stock options.
The share subscription periods are: for 2006A stock options, 1 April 2007 - 30
April 2010, for 2006B stock options, 1 April 2008 30 April 2011 and for 2006C
stock options, 1 April 2009 30 April 2012.
The company has a valid 2002 stock option programme that is divided into four
stock option series. The Board has taken the decision to cancel the remaining
stock options that have not been issued under the 2002 stock option programme.
The subscription periods are as follows: for the 2002A options: 1.4.2003-
30.4.2006, 2002B 1.4.200430.4.2007, 2002C 1.4.200530.4.2007 and 2002D
1.4.200630.4.2008. The share subscription price for stock options 2002A and
2002B is EUR 1.66, for stock option 2002C EUR 0.44 and for stock option 2002D
EUR 1.31. During the review period no shares were subscribed with the stock
options.
RISK MANAGEMENT
The greatest risks in Tecnomens 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
Service Business Unit
In response to the steady growth in service contracts and other additional
services, Tecnomen has established a Service Business Unit. The unit is led by
Vesa Niinistö, Director Services, who reports to Chief Operating Officer Vesa
Kemppainen.
PROSPECTS FOR 2006
The costs of the largest customer project will have an impact on the result for
the first half of the year, but despite this net sales and the operating result
are expected to improve from the previous year. During 2006 Tecnomens goals
are to increase net sales and to maintain a good level of profitability.
FINANCIAL INFORMATION
Tecnomen will publish its other interim reports as follows:
January June 2006 on Tuesday 15 August
January September 2006 on Tuesday 24 October
Tecnomen is holding a conference to announce its results for the first quarter
of 2006 at 10.00 am on 26 April 2006 in the Tapiola conference room at the
Scandic Hotel Simonkenttä. The material presented at the press conference will
be available at www.tecnomen.com/investors.
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
Helsinki Exchanges
Main media
CONSOLIDATED INCOME STATEMENT, 1-3/2006 1-3/2005 2005
MEUR
NET SALES 15.2 12.6 69.0
Other operating income 0.1 0.0
Materials and services -4.4 -2.0 -13.9
Employee benefit expenses -5.8 -5.8 -23.3
Depreciation -0.6 -0.6 -2.2
Other operating expenses -4.1 -4.5 -20.1
OPERATING RESULT 0.4 -0.3 9.6
Financial income 0.5 0.4 1.9
Financial expenses -0.6 -0.3 -1.1
RESULT BEFORE TAXES 0.3 -0.2 10.3
Income taxes -0.4 -0.1 -1.5
RESULT FOR THE PERIOD -0.1 -0.4 8.8
Earnings per share, undiluted, -0.00 -0.01 0.15
EUR
Earnings per share, diluted, EUR -0.00 -0.01 0.15
Equity per share, EUR 1.30 1.17 1.33
CONSOLIDATED BALANCE SHEET, 31.03.2006 31.03.2005 31.12.2005
MEUR
Long-term assets
Fixed assets 16.6 11.3 14.7
Other long-term assets 0.6 0.6 0.6
Current assets
Inventories 4.4 3.4 2.3
Trade receivables 21.9 13.8 22.1
Other receivables 20.7 20.3 17.5
Financial securities 21.8 26.6 22.3
Cash and bank balances 6.0 2.6 10.9
ASSETS 92.0 78.5 90.4
Shareholders equity 75.8 67.5 77.3
Long-term liabilities
Provisions 0.1
Interest-bearing liabilities 0.4 0.5 0.4
Non-interest bearing 0.3 0.3
liabilities
Deferred tax liabilities 1.9 0.7 1.5
Current liabilities
Interest-bearing liabilities 0.1
Non-interest bearing 13.5 9.7 10.9
liabilities
EQUITY AND LIABILITIES 92.0 78.5 90.4
CHANGE IN SHAREHOLDERS EQUITY, 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 -0.2 -0.2
translation
difference
Recognised 0.1 0.1
directly in
retained
earnings
Result for -0.1 -0.1
period
Dividend -1.2 -1.2
distribution
Shareholders 4.6 66.2 0.3 -0.1 0.0 4.8 75.8
equity
31 March 2006
MEUR Share Share Other Own Translation Retained Total
capital premium reserves shares difference earnings
fund
Shareholders 4.6 66.0 0.4 -0.3 0.0 -3.3 67.5
equity
1 Jan 2005
Change in 0.0 0.0
translation
difference
Recognised 0.3 0.3
directly in
retained
earnings
Result for the -0.4 -0.4
period
Shareholders 4.6 66.0 0.4 -0.3 0.0 -3.3 67.5
equity
31 March 2005
CONSOLIDATED CASH FLOW STATEMENT, MEUR 1-3/2006 1-3/2005 2005
Cash flow, business operations -2.9 -0.9 8.3
Cash flow from investments -2.5 -0.8 -5.7
Cash flow from financing 0.0 -0.0 -0.1
Increase (+) and decrease (-) in liquid -5.3 -1.7 2.5
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 31 March/ 31 Dec 27.8 29.1 33.2
Change -5.3 -1.7 2.5
GEOGRAPHICAL SEGMENTS (secondary 1-3/2006 1-3/2005 2005
segment information)
NET SALES, MEUR
Americas 8.9 4.3 38.8
EMEA 3.8 6.1 24.8
APAC 2.5 2.1 5.3
TOTAL 15.2 12.6 69.0
CONSOLIDATED KEY FINANCIAL FIGURES, 1-3/2006 1-3/2005 2005
MEUR
Return on investment, % 4.8 -1.0 15.7
Return on equity, % -0.7 -2.1 12.1
Equity ratio, % 84.1 87.3 86.9
Debt/equity ratio (gearing), % -36.0 -42.4 -42.4
Investments 0.6 0.3 2.0
% of net sales 3.9 2.3 3.0
Research and development 3.2 3.0 13.4
% of net sales 21.2 23.9 19.5
Order book 21.3 19.4 27.9
Personnel, average 379 350 355
Personnel, at end of period 387 350 373
CONSOLIDATED KEY FIGURES PER SHARE, 1-3/2006 1-3/2005 2005
MEUR
Earnings per share, undiluted, EUR -0.00 -0.01 0.15
Earnings per share, diluted, EUR -0.00 -0.01 0.15
Equity per share, EUR 1.30 1.17 1.33
Number of shares at end of period, x 58 309 58 093 58 309
1,000
Number of shares on average, x 1,000 58 309 58 093 58 147
Share price, EUR
Average price 2.73 1.38 1.86
Lowest price 2.46 1.28 1.28
Highest price 3.06 1.52 2.60
Share price at end of period 2.97 1.38 2.45
Market value of issued stock at end of 173.2 80.2 142.9
period, MEUR
Share turnover, million shares 11.7 10.5 42.8
Share turnover, % of total 20.1 18.0 73.4
Share turnover, MEUR 32.1 14.4 79.3
CONSOLIDATED CONTINGENT 1-3/2006 1-3/2005 2005
LIABILITIES, 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 2.8 2.4 3.3
DERIVATIVE FINANCIAL INSTRUMENTS
Currency forward contracts
Fair value 2.6 22.5 11.4
Value of underlying 2.7 22.5 10.9
instruments
KEY FIGURES PER QUARTER, MEUR Q1/06 4Q/05 3Q/05 2Q/05 1Q/05
Net sales, MEUR 15.2 17.9 19.5 19.1 12.6
Net sales, change % 20.9 44.7 66.9 32.0 -4.2
Operating result, MEUR 0.4 3.2 4.2 2.4 -0.3
% of net sales 2.6 17.9 21.4 12.8 -2.1
Result before taxes, MEUR 0.3 3.2 4.2 3.1 -0.2
Personnel at end of period 387 373 356 357 350
Earnings per share, undiluted, -0.00 0.05 0.06 0.04 -0.01
EUR
Earnings per share, diluted, -0.00 0.05 0.06 0.04 -0.01
EUR
Equity per share, EUR 1.30 1.33 1.28 1.21 1.17
Net interest-bearing -27.3 -32.8 -30.1 -30.7 -28.6
liabilities, MEUR
Order book, MEUR 21.3 27.9 19.1 15.1 19.4
SHAREHOLDERS
The companys ten largest shareholders, excluding nominee registrations, on
31 March 2006:
No. of shares % of shares and
votes
Sampo Life Insurance Co. Ltd /Mandatum 3 083 400 5.29
OP-Finland Small Firm Fund 2 412 162 4.14
Hammaren Lars-Olof 2 164 300 3.71
Sumelius Henning 2 022 300 3.47
Pohjola Finland Value Investment Fund 1 479 800 2.54
Kaleva Mutual Insurance Company 1 275 000 2.19
FIM Fenno Fund 1 246 600 2.14
Suupohjan Cooperative Bank 1 193 400 2.05
Sumelius Johanna Marina 1 122 400 1.92
Oy Investsum Ab 947 500 1.62
TOTAL 16 946 862 29.07
Ownership of Tecnomen shares, 31 March 2006
Shares Holders % Shares and votes %
1-100 523 9.00 31 312 0.05
101-500 2 381 40.97 614 113 1.05
501-1 000 1 023 17.61 824 507 1.41
1 001-5 000 1 254 21.58 3 043 343 5.22
5 001-10 000 270 4.65 2 049 103 3.51
10 001-50 000 234 4.03 5 558 241 9.53
50 001-100 000 42 0.72 3 042 138 5.22
100 001-500 000 66 1.14 14 232 072 24.41
500 001< 18 0.31 28 876 349 49.53
Joint account 37 600 0.06
Total 5 811 100.00 58 308 778 100.00
Ownership structure by sector, 31 March 2006
No. of shares %
Companies 4 158 881 7.13
Finance houses and insurance companies 20 384 457 34.96
Public sector 967 180 1.66
Non-profit making associations 2 908 463 4.99
Households and private persons 28 443 962 48.78
Foreign holders 1 408 235 2.42
TOTAL 58 271 178 99.94
Joint account 37 600 0.06
Share capital 58 308 778 100.00
Nominee registrations 7 956 376 13.65
