Growing Together with Customers
Each year, Teleste’s management and personnel come up with a theme, which encapsulates our common goal. For 2011, we chose the theme of “Growing Together with the Customer”. Demand picked up following the slightly sluggish beginning of the year whereas the second half was downright action-packed. With the strengthening of the market demand we also believe to have increased our market share. Now, after the turn of the year I can proudly say that we managed to exceed our growth target while clearly improved our profitability. Our net sales increased by 9.4% to EUR 183.6 million and our operating profit reached EUR 9.4 million, an increase of no less than 26.2%.
The net sales increased in both of our business areas. The operator clientele of Video and Broadband Solutions continued to improve the capacity of their networks as well as to invest in new services. For Network Services, operations involving network design developed favorably with the customer relations becoming increasingly closer. We also made progress in strengthening our position in new markets such as Russia. In the past year, we entered into a number of significant framework agreements that do not appear in the order backlog. Nevertheless, at the year-end our order backlog was about 25% higher that of the reference year.
This clear improvement in our operating profit is based on increased net sales, efficient production and successful project deliveries. Streamlining of our operations proceeded almost as planned and as a part of it, we concentrated most of the R&D taking place in Finland and the whole production over to the premises in Littoinen. Instead, in the services business, results from the development program launched at an earlier stage were not yet fully realized in 2011. As to project deliveries, deliveries involving particularly optical product solutions and video surveillance materialized better than forecast.
The Changing Operating Environment
Our operating environment is undergoing a constant and massive change as the electronic data transfer breaks into new areas. Video and broadband technologies are developing fast and new technologies will enable increasingly higher quality video. Also, the needs of our customers and, in particular, those of the end-users, are becoming greater. End-users want a diverse and high-quality content anytime, anywhere. At the same time, the range of terminal equipment is widening. Responding to the wishes expressed by the users of the Internet and TV requires increasingly broader bands and higher speeds, in other words, more efficient network capacity. Similarly, video technology is increasingly needed for safety applications. As the number of various threats increases, they are controlled more cost-effectively by means of video surveillance in areas such as traffic and guarding the borders.
Enabling Digital Evolution
When it comes to the supply of video processing and transfer technology, Teleste is one the industry-leading companies in the world, and in Europe it is the market leader in subscriber network solutions (HFC). For its part, our offering enables an ever higher quality and faster electronic transmission of data. So we are enabling the digital evolution. Teleste’s strongest expertise includes hybrid fiber-COAX technology (HFC), the use of which will be stepped up in the future. We are also highly proficient in fiber optic technology, the share of which is set to rise. In addition to our technological know-how, we have a strong understanding of our customers’ needs, which is why we have succeeded in creating a strong working relationship with our customer base and, thus, have compelling evidence of successful deliveries.
In 2011, we went through an extensive strategy process, in which we examined prospects for our markets and gauged the possible trends. As a result of this process we renewed our strategy. Based on the obtained information we concluded that the foundation of our competitiveness will continue to include both the HFC technology solutions and the fiber optic solutions.
Future success will require continuous development of our own operations and our production quality, but also that of the technologies we use. New, innovative product solutions will provide us with competitive advantage. Very often we engage in development work together with our clients putting their needs
as our starting point. Therefore, our investments in product development were significant accounting for 12.9% of Video and Broadband Solutions’ product business.
Forward with Optimism
Thanks to the strong second half and our good order backlog, the year 2012 has started with an upbeat tone. Our goal is to continue on our growth path while enhancing our profitability. In addition to our current markets we are also seeking growth in new market areas. However, our main market is in Europe, the economic impact of which on the demand for our products and services can not be underestimated. A potential increase in financial costs would reduce our operator customers’ willingness to invest.
I would like to express my warm thanks to everyone at Teleste for good cooperation and high-quality work even in the busy months. I want to thank our customers, partners and shareholders for their confidence in Teleste.
Teleste Corporation
Jukka Rinnevaara
CEO