Tecnotree Corporation Interim Report 1 January – 30 September 2015 (unaudited)
Tecnotree Corporation
Interim Report
29 October, 2015 at 08.30 am EET
Tecnotree is a global supplier of telecom IT solutions, providing products and services for charging, billing, customer care, and messaging and content services. The company’s product portfolio comprises virtually the full range of business management systems for telecom operators, with standard solutions for fixed networks, mobile services and broad band and for managing subscriptions, services and cash flows for prepaid and post-paid customers. Tecnotree has a strong footing especially in developing markets.
PROFITABILITY IMPROVED IN THE REVIEW PERIOD
Third quarter
- Third quarter net sales were EUR 17.7 (23.7) million.
- The operating result for the quarter was EUR 2.7 (4.7) million.
- The adjusted result for the quarter was EUR -0.0 (2.4) million and result EUR 1.9 (1.2) million.
- The order book at the end of the period stood at EUR 33.7 (31 December 2014: 38.9) million.
- Second quarter cash flow after investments was EUR -1.7 (-0.7) million.
- Earnings per share were EUR 0.02 (0.01).
January – September 2015
- Net sales for the review period were EUR 51.9 (49.8) million.
- The operating result was EUR 5.3 (-1.4) million.
- The adjusted result for the period was EUR -3.4 (-6.9) million and the result EUR ‑3.1 (‑9.8) million.
- Cash flow after investments for the review period was EUR 1.9 (-4.5) million and the company’s cash and cash equivalents were EUR 3.2 (31 December 2014: 2.5) million.
- Earnings per share were EUR -0.03 (-0.08).
| KEY FIGURES | 7-9/ 2015 | 7-9/ 2014 | 1-9/ 2015 | 1-9/ 2014 | 1-12/ 2014 |
| Net sales, MEUR | 17.7 | 23.7 | 51.9 | 49.8 | 74.0 |
| Adjusted operating result, MEUR 1 | 2.7 | 4.7 | 5.6 | -1.4 | 3.7 |
| Operating result, MEUR | 2.7 | 4.7 | 5.3 | -1.4 | 3.3 |
| Result before taxes, MEUR | 3.8 | 2.8 | 2.4 | -6.4 | -2.4 |
| Adjusted result for the period, MEUR 2 | 0.0 | 2.4 | -3.4 | -6.9 | -6.4 |
| Result for the period, MEUR | 1.9 | 1.2 | -3.1 | -9.8 | -9.3 |
| Earnings per share, basic, EUR | 0.02 | 0.01 | -0.03 | -0.08 | -0.08 |
| Order book, MEUR | 33.7 | 52.7 | 38.9 | ||
| Cash flow after investments, MEUR | -1.7 | -0.7 | 1.9 | -4.5 | -1.8 |
| Change in cash and cash equivalents, MEUR | -2.3 | -1.3 | 0.7 | -4.7 | -4.2 |
| Cash and cash equivalents, MEUR | 3.2 | 2.0 | 2.5 | ||
| Equity ratio % | 18.8 | 20.8 | 22.5 | ||
| Net gearing % | 204.7 | 196.0 | 172.7 | ||
| Personnel at end of period | 932 | 1,059 | 993 |
1 Adjusted operating result = operating result before one-time costs. Details of these are given in the section “Result analysis”.
2 Adjusted result for the period = result for the period without exchange rate gains and losses that are included in financial items and mainly arise on receivables due to subsidiaries from the parent company.
Unless otherwise stated, all figures presented below are for the review period 1-9/2015 and the figures for comparison are for the corresponding period 1-9/2014.
CEO Ilkka Raiskinen
“The year is going according to plan
Developments in profitability have been encouraging. Compared to the previous year sales have clearly focused more on Tecnotree’s own products – one particular aspect worth mentioning is that hardware deliveries were significantly down on the previous year. Net sales no longer include income recognised from two projects in Latin America begun in 2012 that originally had a total value of USD 54.7 million. As a result, profitability has improved.
Cash flow from operations in the nine month period was positive but in the third quarter was negative, mainly due to seasonal fluctuation, and cash flow remains one of the biggest challenges facing the company. Development of operations continues, and this will also improve the cash flow.
We expect to complete the corporate restructuring proceedings during the fourth quarter, which will clarify the company’s situation.”
POSTPONING OF THE DRAFT RESTRUCTURING PROGRAM OF TECNOTREE CORPORATION
The district court of Espoo decided on 9 March 2015 to commence the corporate restructuring proceedings concerning Tecnotree Corporation in accordance with the Act on Restructuring of Enterprises. The district court appointed Mr. Jari Salminen, Attorney-at-Law, from Eversheds Attorneys Ltd. as the administrator in respect of the restructuring process.
The district court of Espoo has decided on 28 September 2015, at the request of the administrator, to postpone the deadline so that the draft restructuring program shall be submitted latest on 31 December 2015. According to the former order of the court, the draft restructuring program was to be submitted latest on 30 September 2015. The contents of the request were as follows:
“Due to the wide international business conducted by the company, the evaluations needed and the compiling of the draft restructuring program are pending, and the administrator does not consider it to be possible to submit a draft restructuring program by 30 September 2015.
Compiling the most meaningful restructuring program for the benefit of the creditors requires that the consequences of a possible debt arrangement, e.g. to the status of the foreign subsidiaries in their home countries, will be carefully evaluated.
In the evaluations made during the restructuring proceedings so far, no obstacles for creating an implementable restructuring program and reorganization of the business have come up.“
RISKS AND UNCERTAINTY FACTORS
The risks and uncertainty factors for Tecnotree are explained in the 2014 Board of Directors’ Report and in the notes to the Financial Statements.
Risks and uncertainties in the near future
Tecnotree’s risks and uncertainties in the near future relate to projects, to their timing, to receivables from the recognition of partial deliveries and for sales, to changes in foreign exchange rates and to financing. Having sufficient cash funds is the biggest single risk. The financing agreement contains covenants that create risk. More details are given in the section “Financing, cash flow and balance sheet” in the interim report.
The company has sales in several countries where the country’s central bank has a shortage of foreign currency. This causes additional delays in payments, costs and even the risk of not receiving payment at all.
On 30 September 2015 the Group’s shareholders’ equity of stood at EUR 14.0 million. However, the shareholders’ equity of the parent company was EUR 1.0 million negative.
Restructuring proceedings
Tecnotree Corporation filed an application for debt restructuring proceedings with the district court of Espoo on 5 March 2015. The court decided on 9 March 2015 to commence the corporate restructuring proceedings. The district court appointed Mr. Jari Salminen, Attorney-at-Law, from Eversheds Attorneys Ltd as the administrator in respect of the restructuring process. The administrator must prepare and deliver his proposed restructuring programme to the district court of Espoo by 31 December 2015. Tecnotree Corporation has to comply with the programme approved by the court. This involves risk. Tecnotree is responsible for all its liabilities in full after the date of application for restructuring proceedings. This requires that cash inflow, in other words payments by customers, is sufficient for paying of expenses.
After filing its application for restructuring proceedings, Tecnotree has had problems in individual cases, in particular with companies from which Tecnotree has made purchases. Customers may also be afraid of the risks relating to Tecnotree, which may have some impact on future orders.
EVENTS AFTER THE END OF THE PERIOD
No significant events have occurred after the end of the period.
PROSPECTS IN 2015
Tecnotree estimates that its operating result will improve from 2014. Variations in the quarterly figures will be considerable.
FINANCIAL INFORMATION
Tecnotree is holding a conference for analysts, investors and the media to present its interim report on Thursday, 29 October 2015 at 10.00 am in the Tapiola conference room at the Scandic Simonkenttä Hotel , Simonkatu 9, Helsinki. The interim report will be presented by CEO Ilkka Raiskinen and the conference will be held in Finnish. The material to be presented at the press conference will be available at www.tecnotree.com.
TECNOTREE CORPORATION
Board of Directors
FURTHER INFORMATION
Ilkka Raiskinen, CEO, tel. +358 (0)45 311 3113
Tuomas Wegelius, CFO, tel. +358 400 433 228
DISTRIBUTION
NASDAQ OMX Helsinki Ltd.
Main media
www.tecnotree.com
About Tecnotree
Tecnotree is a global provider of telecom IT solutions for the management of products, customers and revenue. Tecnotree helps communications service providers to transform their business towards a marketplace of digital services. Tecnotree empowers service providers to monetise on service bundles, provide personalised user experiences and augment value throughout the customer lifecycle. With around 1000 telecom experts, Tecnotree serves around 90 service providers in around 70 countries. Tecnotree is listed on the main list of NASDAQ OMX Helsinki with the trading code TEM1V. For more information on Tecnotree, please visit www.tecnotree.com