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COST RATIONALISING SHOWS IN RESULT - SIGNIFICANT IMPROVEMENT IN ADJUSTED OPERATING PROFITABILITY
Fourth quarter 2017
1 Adjusted operating result = operating result before one-time items.
2 Adjusted result for the period = result before one-time items.
Unless otherwise stated, all figures presented below are for the financial period 1-12/2017 and the figures for comparison are for the corresponding period in 2016.CEO PADMA RAVICHANDER:
“For Tecnotree, 2017 was a year of consolidation and stabilization. The journey we commenced in 2016 towards transforming the company into a full-fledged product company continued in 2017. We attained greater velocity and are clearly in the right path to reaching our goals.
We delivered successfully our full digital BSS stack and our BSS suite products to many of our customers and renewed contracts towards support and maintenance services for 2018. Even though we did not add new customers, we made complete significant deliveries successfully from our order backlog of prior years to our key customers, and we expect these deliveries to help initiate new orders in 2018.
The overall revenue for 2017 was EUR 55.1 million being 8% less than in 2016. The decrease of USD by more than 15% had a negative impact on the revenue. The revenue in Latin America region amounted to about EUR 22 million, staying at the same level as in 2016. The European region witnessed a small increase of revenue with its EUR 2.6 million compared to EUR 1.9 million in 2016. Lower revenue figures were seen in both MEA (from EUR 32 million to EUR 30 million in 2017) and APAC region (from EUR 3 million to EUR 1 million in 2017).
The order backlog showed a positive trend year-on-year and stood at the end of 2017 at EUR 26.2 million compared with EUR 24.8 million a year before.
The company was included in the Magic Quadrant for “Integrated Revenue and Customer Management for CSPs” published by Gartner, and Tecnotree was placed among the Niche Players quadrant.
In 2017, we continued to consolidate our operations across regions, optimized our headcounts and minimized overall costs and other expenses.
We successfully achieved the cost reductions of EUR 5 million, in accordance with our promise given in March of 2017. All these actions along with enhanced cash collections resulted in the company delivering a strong adjusted operating result of EUR 9.8 million compared with the EUR 1.2 million in 2016. While achieving this we at the same time successfully ensured that all delivery commitments to our customers were met and that our overall customer satisfaction remained excellent.
Our liquidity and cash position remained extremely challenging and we did not succeed in realizing the needed financing arrangement.
Focus and outlook in 2018
In 2018, we will focus on profitable growth and realization of financing arrangement.
We continue to emphasize our role as a product company, driving the digital transformation of our customers with our enriched and differentiated BSS product portfolio. We will go to market with improved execution, quality and agility and innovative business models.
We continue with cost optimization and other measures for increased efficiency. We develop our current structures and processes further to minimize currency exchange risks and withholding taxes. We continue with increased focus on ensuring timely collections of receivables by further improving the quality and timeliness of our deliveries.
One of our most important tasks is to realize a financing arrangement so that we can ensure the company’s stable operations and further development. We continue investigating and evaluating different options to find a durable solution for financing.”
RISKS AND SHORT-TERM UNCERTAINTY FACTORS
Tecnotree’s risks and uncertainties in the near future relate to financing, projects, to their timing, to trade receivables and receivables from construction contracts and to changes in foreign exchange rates. Having sufficient cash funds and the development of net sales are the most significant single risks.
The liquidity of the company has been tight for a long period and the amount of overdue trade payables (EUR 2.9 million) is significant. The company’s ability as going concern is dependent on the successful completion of getting new financing. The company is currently negotiating with financiers for new financing. Negotiations are on-going and will be continued.
Critical financial situation causes uncertainty in acquiring new customers and receiving new orders coming from the existing customers.
The company has sales in several countries where the country’s central bank has a shortage of foreign currencies. This may cause extra delays in payments, costs and even risks of not receiving payment at all.
EVENTS AFTER THE END OF THE PERIOD
In January 2018, Tecnotree repatriated net EUR 9.3 million of receivables from its customer in Latin America, out of which EUR 4.2 million related to maintenance and support services for second and third quarters of 2018.
Tecnotree announced on 26 February 2018 that it will in the financial statements for 2017 write down the goodwill of approximately EUR 16.7 million in its consolidated balance sheet. The goodwill in the balance sheet was mainly related to the business transaction implemented in 2009, and a write-down of EUR 1.2 million was already made in 2012. The write-down is made now, because the business development in Middle East, Africa and Americas has not met with expectations. The delay of financial arrangements has also contributed to hindering the growth of business volumes. The write-down has been recorded as a one-time item having no impact on cash flow.
In the same announcement, based on the preliminary financial statements, the company estimated that the Group’s revenue for 2017 will be approximately EUR 55 million and the operating result without the write-down described amounts to approximately EUR 7.5 – 8.5 million.
OUTLOOK FOR 2018
The company strengthened and stabilised its operations in 2017 and will in 2018 focus on profitable growth. The company continues with the efforts to improve its financial position and with the search for new financing.
The company estimates that its revenue in 2018 will be at the same level than in 2017 and that the operational profitability (Operating result) will be better than the adjusted operating result in 2017. In 2017 the company’s revenue amounted to EUR 55.1 million and the adjusted operating result to EUR 9.8 million.
PROPOSAL CONCERNING THE RESULT
The Board of Directors proposes to the Annual General Meeting that no dividend be paid for the financial period ended 31 December 2017, and that the parent company’s profit for the financial period, EUR 1,862,707.61, be in retained earnings.
Board of Directors
FURTHER INFORMATION Padma Ravichander, CEO, tel. +97 15 641 414 20 Kirsti Parvi, CFO, tel. +358 (0)505 174 569 DISTRIBUTION NASDAQ Helsinki Main Media www.tecnotree.com