TECNOMEN?S INTERIM REPORT 1 JANUARY ? 30 SEPTEMBER 2006 (unaudited)
Tecnomen Corporation STOCK EXCHANGE RELEASE
24 October 2006 at 8.30 am
TECNOMENS INTERIM REPORT 1 JANUARY 30 SEPTEMBER 2006 (unaudited)
Net sales in the review period totalled EUR 51.7 (51.1) million and the result
was EUR 3.7 (6.0) million. Third-quarter net sales were EUR 16.9 (19.5) million
and the operating result, excluding EUR 0.3 million one-time costs, was EUR
1.2 (4.2) million. Cash flow in the third quarter, excluding the EUR 5.9
million capital repayment, was EUR +1.8 (0.6) million. The order book stood at
the close of the period at EUR 18.5 (19.1) million.
- Net sales EUR 51.7 (51.1) million
- Operating result, excluding one-time items, EUR 4.6 (6.4) million
- Operating result EUR 4.3 (6.4) million.
- Order book EUR 18.5 (19.1) million
- Cash flow, excluding capital repayment, EUR 3.8 (-0.3) million
- Cash flow EUR -9.7 (-0.3) million
- Cash funds EUR 23.5 (30.6) million
- Equity ratio 85.3 per cent (83.3 %)
- Gearing -31.4 per cent (-40.5 %)
KEY FIGURES 7-9/06 7-9/05 1-9/06 1-9/05 2005
Net sales, MEUR *) 16.9 19.5 51.7 51.1 69.0
Net sales, change % -13.2 66.9 1.2 30.3 33.7
Operating result, excl. one- 1.2 4.2 4.6 6.4 9.6
time items, MEUR
Operating result, MEUR 0.9 4.2 4.3 6.4 9.6
% of net sales 5.3 21.4 8.3 12.4 13.9
Profit before taxes, MEUR 1.7 4.2 4.8 7.1 10.3
% of net sales 10.2 21.6 9.2 13.9 14.9
Result for the period 1.4 3.8 3.7 6.0 8.8
Personnel at end of period 395 356 395 356 373
Earnings per share, basic, 0.02 0.06 0.06 0.10 0.15
EUR
Earnings per share, diluted, 0.02 0.06 0.06 0.10 0.15
EUR
The 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 1-9/2006 and the figures for comparison are for the
corresponding period 1-9/2005.
*) From the beginning of 2006 Tecnomen has entered 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 recognition principle had been used in
fiscal year 2005, net sales for 1-9/2005 would have been EUR 48.4 million and
other operating expenses EUR 12.5 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
Tecnomens net sales in the review period increased 1.2 per cent from the
corresponding period in 2005 to EUR 51.7 (51.1) million.
EUR 39.7 million of the net sales in the review period has been recognised in
accordance with IAS 11 (Construction contracts) and EUR 12.0 million in
accordance with IAS 18 (Revenues).
Net sales by geographical area were: Americas 62.7 per cent (56.3 %), EMEA 27.0
per cent (36.7 %) and APAC 10.3 per cent (7.0 %).
Net sales by product line were: Messaging 37.7 per cent (46.3 %) and Charging
62.3 per cent (53.7 %).
Sales through global partners totalled EUR 10.6 (9.5) million or 20.4 per cent
(18.6 %) of net sales.
Maintenance and service sales totalled EUR 7.6 million or 14.7 per cent (11.5
%) of net sales.
The order book stood at EUR 18.5 (19.1) million at the end of the review
period. Americas accounted for 57.4 per cent of the order book, EMEA 33.7 per
cent and APAC 8.9 per cent.
OPERATING RESULT
The operating result for the review period was EUR 4.3 (6.4) million.
The profit for the period before taxes was EUR 4.8 (7.1) million.
Earnings per share were EUR 0.06 (0.10). Equity per share at the end of the
period was EUR 1.27 (1.28).
In September Tecnomen started a programme of remedial action aimed at reducing
the volume of subcontracting and the number of employees in Europe by 29
people. The statutory personnel negotiations concerning the personnel
reductions were completed during September. These measures will result in
annual savings of more than EUR 4 million from the beginning of 2007. The third-
quarter result was depressed by EUR 0.3 million in one-time costs related to
the personnel reductions. The fourth quarter will be burdened by similar one-
time costs in the order of EUR 0.7 million.
FINANCING AND INVESTMENTS
Tecnomens financial position is strong. Liquid assets totalled EUR 23.5 (30.6)
million. The balance sheet total on 30 September 2006 stood at EUR 88.2 (91.2)
million. Interest-bearing liabilities amounted to EUR 0.0 (0.5) million. The
debt to equity ratio (gearing) was 31.4 per cent (-40.5 %). The balance sheet
structure remained strong and the equity ratio on 30 September 2006 was
85.3 per cent (83.3 %).
Tecnomens gross capital expenditure during the review period, excluding the
capitalisation of development costs, was EUR 2.0 (1.3) million or 3.8 per cent
(2.5 %) of net sales.
The cash flow in the review period was EUR 9.7 million; the dividend payment
accounted for EUR -1.0 million of this , the payment of interest-bearing
liabilities in the year-end balance sheet for EUR -0.5 million, and the capital
repayment to shareholders for EUR 5.9 million (reduction of share premium
fund).
Financial income and expenses during the review period totalled EUR 0.5 (0.7)
million. The net effect of assessing foreign currency balance sheet items was a
profit EUR 0.0 (0.4) million, profit from assessing the fair value of reserves
was EUR 0.2 million, and other financial income totalled EUR 0.3 (0.3) million.
CHANGE IN WORKING CAPITAL, MEUR (increase - / 1-9/06 1-9/05
decrease +)
Change in accounts receivable and advances 4.7 -6.4
Change in other short-term receivables, non- -7.1 -3.6
interest bearing
Change in inventories -1.7 -1.1
Change in accounts payable and advances -0.3 2.0
Change in other current liabilities, non-interest 1.9 4.8
bearing
CHANGE IN WORKING CAPITAL, TOTAL -2.5 -4.2
MARKETS
During the review period, operators continued to make investments in line with
expectations in both growing markets such as Latin America, the Middle East and
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 is
investing in a new-generation messaging system (NGM) that meets these operator
requirements. Demand for NGM has increased, especially in Asia, the Middle East
and most recently in Africa.
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 Tecnomens
Convergent Charging product especially in Latin America.
RESEARCH AND DEVELOPMENT
Research and development costs during the review period were EUR 9.4 (9.4)
million, corresponding to 18.1 per cent (18.5 %) of net sales. EUR 4.5 (2.6)
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 0.6 million (0.3) were amortised during the review period.
PERSONNEL
At the end of September 2006 Tecnomen employed 395 (356) persons, of whom 128
(118) worked in Finland and 267 (238) elsewhere. The company employed on
average 389 (352) people during the review period. Personnel by geographical
area were as follows: Americas 66 (61) persons, EMEA 306 (270) and APAC 23
(25).
TECNOMEN SHARES AND SHARE CAPITAL
At the end of September 2006 the shareholders equity of Tecnomen Corporation
stood at EUR 74.7 (74.2) 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 companys share capital and votes. The shares
held by the company have an aggregate nominal value of EUR 10,784. Equity per
share was EUR 1.27 (1.28).
A total of 48,991,164 Tecnomen shares (EUR 105,407,850) were traded on the
Helsinki Exchanges during the period 2 January 30 September 2006,
representing 83.07 per cent of the total number of shares.
The highest share price quoted in the period was EUR 3.06 and the lowest
EUR 1.38. The average quoted price was EUR 2.13 and the closing price on
30 September 2006 was EUR 1.52. The market capitalisation of the share stock at
the end of the period was EUR 89,635,279.
Tecnomens Annual General Meeting, held on 15 March 2006, approved the proposal
of the Board of Directors to reduce the share premium fund by at most EUR
66,177,792 and to distribute part of the amount reduced to the shareholders;
under the proposal, this would be done by making a capital repayment, from the
aggregate amount of the reduction, of EUR 0.10 per share to the shareholders in
proportion to their holdings. The permission for this granted by the National
Board of Patents and Registration was registered on 23 August 2006.
Shareholders registered on 6 September 2006 in the companys shareholder
register maintained by the Finnish Central Securities Depository Ltd were
entitled to the capital repayment. The payment date was 11 September 2006. The
payment was made on altogether 58,835,778 shares, giving an aggregate total
payment of EUR 5,883,577.80. The capital repayment was not made on the shares
in the companys own possession (134,800 shares). The remainder of the share
premium fund, EUR 60,294,214.20, was transferred to a fund belonging to the
companys non-restricted equity.
CURRENT AUTHORISATIONS
The Annual General Meeting held on 15 March 2006 authorised the Board of
Directors to dispose of the companys 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 currently has a 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 1.56, for stock option 2002C EUR 0.34 and for stock
option 2002D EUR 1.21. The subscription prices have been reduced by the
dividend paid per share (EUR 0.02) and the amount of capital repayment per
share (EUR 0.10). No stock options were exercised during the period to
subscribe for Tecnomen shares.
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 for altogether 2,001,000 Tecnomen shares.
The companys share capital can rise by a maximum of EUR 160,080 as a result of
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. Tecnomens Board of Directors has issued 436,000 2006A
stock options to key personnel of 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 Tecnomens operations are related to major customer and
partner relationships and to the correct timing and success of its 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 THE PERIOD
Tecnomen introduced a new organisation on 1 October 2006 based on two business
units: Charging and Messaging, and Finance and Administration. The purpose of
the change is to simplify the organisational structure and to ensure more
effective use of resources. Tecnomens management board comprises the President
and CEO and three other members: Eero Mertano, Vice President / Charging
business unit, Miika Reinikka, Vice President / Messaging business unit, and
Tuomas Wegelius, CFO / Finance and Administration, all of whom report to the
President and CEO.
From the beginning of 2007 Tecnomen will report as its primary segment its
Charging and Messaging businesses. Currently, Tecnomen reports the entire
company as its primary segment.
PROSPECTS FOR 2006
Net sales in 2006 are expected to reach at least the same level as in 2005 and
the operating result in the fourth quarter to be clearly positive.
FINANCIAL INFORMATION
Tecnomen is holding a conference to announce its third-quarter results at 10.00
am on 24 October 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/investors.
TECNOMEN CORPORATION
Board of Directors
FURTHER INFORMATION
Mr Jarmo Niemi, President and CEO, tel. +358 (0)9 8047 8799
Mr Tuomas Wegelius, CFO, tel. +358 (0)9 8047 8650
DISTRIBUTION
Helsinki Exchanges
Main media
CONSOLIDATED INCOME STATEMENT, 1-9/06 1-9/05 2005
MEUR
NET SALES 51.7 51.1 69.0
Other operating income 0.3
Materials and services -13.4 -11.0 -13.9
Employee benefit expenses -18.6 -17.0 -23.3
Depreciation -2.1 -1.6 -2.2
Other operating expenses -13.6 -15.2 -20.1
OPERATING RESULT 4.3 6.4 9.6
Financial income 1.5 1.1 1.9
Financial expenses -1.0 -0.4 -1.1
RESULT BEFORE TAXES 4.8 7.1 10.3
Income taxes -1.1 -1.1 -1.5
RESULT FOR THE PERIOD 3.7 6.0 8.8
Earnings per share, basic, EUR 0.06 0.10 0.15
Earnings per share, diluted, EUR 0.06 0.10 0.15
Equity per share, EUR 1.27 1.28 1.33
CONSOLIDATED BALANCE SHEET, 30.9.2006 30.9.2005 31.12.2005
MEUR
Long-term assets
Fixed assets 19.1 13.4 14.7
Other long-term assets 0.5 0.5 0.6
Current assets
Inventories 4.0 3.3 2.3
Account receivables 16.6 20.2 22.1
Other financial assets 24.6 23.2 17.5
Financial securities 13.2 21.0 22.3
Cash and bank balances 10.2 9.6 10.9
ASSETS 88.2 91.2 90.4
Shareholders equity 74.7 74.2 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 1.2 1.5
Current liabilities
Non-interest bearing 11.1 15.3 10.9
liabilities
EQUITY AND LIABILITIES 88.2 91.2 90.4
CHANGE IN SHAREHOLDERS EQUITY, MEUR
MEUR Share Share Other Own Translation Retained Total
capital premiu reserve shares difference earnings
m fund s
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
Transfer of -60.3 60.3 0.0
share premium
fund to fund
in non-
restricted
equity
Result for 3.7 3.7
the period
Dividend -1.2 -1.2
declared
Options 0.1 0.8 0.9
exercised
Capital -5.9 -5.9
repayment
Shareholders 4.7 0.8 0.3 -0.1 0.0 69.0 74.6
equity
30 September
2006
MEUR Share Share Other Own Translation Retained Total
capital premiu reserve shares difference earnings
m fund s
Shareholders 4.6 66.0 0.3 -0.3 0.0 -3.2 67.5
equity
1 Jan. 2005
Change in 0.5 0.5
translation
difference
Recognised 0.4 0.4
directly in
retained
earnings
Deferred -0.1 -0.1
taxes share
Result for 6.0 6.0
the period
Shareholders 4.6 66.0 0.3 -0.3 0.5 3.1 74.2
equity
30 September
2005
CONSOLIDATED CASH FLOW STATEMENT, MEUR 1-9/06 1-9/05 2005
Cash flow, business operations 4.1 3.5 8.3
Cash flow from investments -6.4 -3.8 -5.7
Cash flow from financing -7.4 -0.1 -0.1
Increase (+) and decrease (-) in liquid -9.7 -0.3 2.5
funds
Liquid funds on 1 Jan. 33.2 30.8 30.8
Impact of changes in exchange rates 0.0 0.0 0.2
Change in fair value of investments 0.0 0.1 -0.2
Liquid funds on 30 September / 31 23.5 30.6 33.2
December
Change -9.7 -0.3 2.5
GEOGRAPHICAL SEGMENTS (secondary 1-9/06 1-9/05 2005
segment information), NET SALES,
MEUR
Americas 32.4 28.8 38.8
EMEA 13.9 18.7 24.8
APAC 5.3 3.6 5.3
TOTAL 51.7 51.1 69.0
CONSOLIDATED KEY FINANCIAL FIGURES, 1-9/06 1-9/05 2005
MEUR
Return on investment, % 10.1 13.9 15.7
Return on equity, % 6.5 11.3 12.1
Equity ratio, % 85.3 83.3 86.9
Debt/equity ratio (gearing), % -31.4 -40.5 -42.4
Investments 2.0 1.3 2.0
% of net sales 3.8 2.5 3.0
Research and development 9.4 9.4 13.4
% of net sales 18.1 18.5 19.5
Order book 18.5 19.1 27.9
Personnel, average 389 352 355
Personnel, at end of period 395 356 373
CONSOLIDATED KEY FIGURES PER SHARE, 1-9/06 1-9/05 2005
MEUR
Earnings per share, basic, EUR 0.06 0.10 0.15
Earnings per share, diluted, EUR 0.06 0.10 0.15
Equity per share, EUR 1.27 1.28 1.33
Number of shares at end of period, x 58,971 58,187 58,309
1,000
Number of shares on average, x 1,000 58,752 58,108 58,147
Share price, EUR
Average price 2.13 1.70 1.86
Lowest price 1.38 1.28 1.28
Highest price 3.06 2,57 2.60
Share price at end of period 1.52 2,34 2.45
Market capitalisation of issued stock 89.6 136.2 142.9
at end of period, MEUR
Share turnover, million shares 49.0 32.8 42.8
Share turnover, % of total 83.1 56.4 73.4
Share turnover, MEUR 105.4 55.7 79.3
CONSOLIDATED CONTINGENT LIABILITIES, 1-9/06 1-9/05 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 2.2 3.0 3.3
DERIVATIVE FINANCIAL INSTRUMENTS, MEUR
Currency forward contracts
Fair value 4.4 14.8 11.4
Value of underlying instruments 4.5 13.9 10.9
KEY FIGURES PER QUARTER, MEUR 3Q/06 2Q/06 1Q/06 4Q/05 3Q/05 2Q/05
Net sales, MEUR 16.9 19.6 15.2 17.9 19.5 19.1
Net sales, change % -13.2 2.9 20.9 44.7 66.9 32.0
Operating result, MEUR 0.9 3.0 0.4 3.2 4.2 2.4
% of net sales 5.3 15.2 2.6 17.9 21.4 12.8
Result before taxes, MEUR 1.7 2.8 0.3 3.2 4.2 3.1
Personnel at end of period 395 393 387 373 356 357
Earnings per share, basic, EUR 0.02 0.01 -0.00 0.05 0.06 0.04
Earnings per share, diluted, 0.02 0.01 -0.00 0.05 0.06 0.04
EUR
Equity per share, EUR 1.27 1.35 1.30 1.33 1.28 1.21
Net interest-bearing -23.5 -27.5 -27.3 -32.8 -30.1 -30.7
liabilities, MEUR
Order book, MEUR 18.5 16.0 21.3 27.9 19.1 15.1
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 companys ten largest shareholders, excluding nominee registrations, on 30
September 2006:
No. of shares %
Sampo Life Insurance Co. Ltd 3,083,400 5.23
Hammaren Lars-Olof 2,164,300 3.67
Sumelius Henning 2,022,300 3.43
FIM Fenno Fund 1,466,600 2.49
Suupohja Cooperative Bank 1,419,300 2.41
Kaleva Mutual Insurance Company 1,300,000 2.20
Sumelius Johanna Maria 1,122,400 1.90
Varma, Mutual Employee pension 1,100,000
insurance company 1.87
Investsum Oy 947,500 1.61
Estate of Suutarinen Helena 901,200 1.53
TOTAL 15,527,000 26.34
Ownership of Tecnomen shares, 30 September 2006
Shares Holders % Shares and votes %
1-500 2,977 42.92 685,971 1.16
501-1,000 1,225 17.65 996,176 1.69
1,001-5,000 1,837 26.48 4,656,858 7.90
5,001-10,000 427 6.15 3,237,761 5.49
10,001-50,000 334 4.82 7,482,728 12.69
50,001-100,000 54 0.78 3,961,285 6.72
100,001-500,000 63 0.91 13,289,525 22.54
500,001< 20 0.29 24,622,674 41.75
Joint account 37,600 0.06
Total 6,937 100.00 58,970,578 100.00
Ownership structure by sector, 30 September 2006
No. of shares %
Companies 5,826,497 9.88
Finance houses and insurance companies 13,719,319 23.27
Public sector 1,716,300 2.91
Non-profit making associations 2,680,443 4.55
Households and private persons 33,229,738 56.35
Foreign holders 1,760,681 2.99
TOTAL 58,932,978 99.94
Joint account 37,600 0.06
Share capital 58,970,578 100.00
Nominee registrations 4,221,532 7.16
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