Teleste Interim Report 1-9/2017: Net sales and result decreased, orders received increased

TELESTE CORPORATION  INTERIM REPORT  9 NOVEMBER 2017   AT 08:30   

TELESTE CORPORATION INTERIM REPORT 1 JANUARY TO 30 SEPTEMBER 2017

 

NET SALES AND RESULT DECREASED, ORDERS RECEIVED INCREASED

July–September 2017

– Net sales amounted to EUR 56.2 (62.9) million, a decrease of 10.5%
– Operating result stood at EUR 1.2 (4.8) million, a decrease of 74.2%
– Undiluted result per share was EUR 0.04 (0.20), a decrease of 80.3%
– Orders received totalled EUR 58.0 (53.2) million, an increase of 9.1%
– Cash flow from operations was EUR -1.4 (6.3) million, a decrease of 122.5% 

 

January–September 2017 

– Net sales amounted to EUR 175.9 (191.0) million, a decrease of 7.9%
– Operating result stood at EUR -7.8 (11.3) million, a decrease of 169.0%
– Excluding the restructuring expenses and the goodwill impairment for the services business in Germany, the operating result was EUR 1.5 (11.3) million, a decrease of 86.7%.
– Undiluted result per share was EUR -0.49 (0.45), a decrease of 210.4%.
– Undiluted result per share excluding the restructuring expenses and the goodwill impairment for the services business in Germany was EUR 0.02 (0.45) million, a decrease of 95.4%.
Orders received totalled EUR 196.2 (179.7), an increase of 9.2%.
Cash flow from operations was EUR 12.9 (8.3) million, an increase of 55.2%. 

 

Outlook for 2017 

We estimate that net sales for 2017 will remain below the reference period and that the operating result for 2017 will remain clearly below the reference period level. The operating result for the second half of 2017 is expected to be considerably better than in the first half.

    

Comments by CEO Jukka Rinnevaara: 

“Orders received and order backlog increased in the third quarter year-on-year. Net sales were down year-on-year in both business areas. Operating result decreased year-on-year, mainly because of lower net sales. 

Orders received by Video and Broadband Solutions increased year-on-year. Demand for video security and information solutions continued to be favourable during the quarter, with France, Spain and Finland as the growth markets. The need to increase access network capacity continued. However, operators’ investment decisions may be delayed, partially due to plans to introduce next generation distributed architecture. 

The order backlog increased, but a significant proportion of video security and information solutions deliveries will take place over the coming financial periods. Net sales decreased both in access network products and in video security and information solutions. Operating result decreased year-on-year, mainly because of lower net sales. Despite the low net sales, we continued our product development and marketing investments in the US cable operator market, as well as our product development investments, in order to ensure our capacity to deliver the increased order backlog for passenger information solutions. 

Net sales of Network Services decreased in England as a result of changes in customer projects. The business area improved its operating result year-on-year, but it remained negative. Measures to improve profitability were continued in Germany, and a restructuring program was started. The program  will progress in stages and continue into 2018. In addition, we are currently negotiating with a customer on extending a significant frame agreement. We also launched projects for new customers and continued to invite subcontractors to tender for contracts. 

Business area trends and the market outlook are still favourable, but operational problems in services business and the scheduling of the order backlog for passenger information solutions reduced profitability in this quarter and the entire year so far. The investments in new US markets and new advanced video security and information solutions will still burden our profitability in 2018 to some extent. However, we believe that these investments will create significant growth opportunities for us within the next few years.” 

 

Group Operations, July–September 2017 

Key figures (M€) Jul–Sep 2017 Jul–Sep 2016 Change
Orders received 58.0 53.2 +9.1%
Net sales 56.2 62.9 -10.5%
Operating result 1.2 4.8 -74.2%
Operating result % of net sales 2.2% 7.7%  
Result for the financial period 0.7 3.6 -80.3%
       
Earnings per share, EUR 0.04 0.20 -80.3%
Cash flow from operations -1.4 6.3 -122.5%

Orders received by the Group in the third quarter totalled EUR 58.0 (53.2) million, an increase of 9.1% year-on-year. Order backlog increased by 52.9% to EUR 47.2 (30.9) million. 

Net sales decreased by 10.5% to EUR 56.2 (62.9) million. Net sales decreased particularly in Video and Broadband Solutions. Operating result decreased by 74.2% year-on-year to EUR 1.2 (4.8) million, representing 2.2% (7.7%) of net sales. Operating result decreased in Video and Broadband Solutions, mainly due to lower net sales. Personnel expenses amounted to EUR 15.2 (16.7) million and were down by 9.1% year-on-year. Expenses for material and manufacturing services decreased by 6.5% to EUR 31.3 (33.5) million. Net financial expenses amounted to EUR 0.2 (0.2) million, an increase of 28.8% year-on-year. Undiluted result per share was EUR 0.04 (0.20), a decrease of 80.3% year-on-year. 

Cash flow from operations was EUR -1.4 (6.3) million, a decrease of 122.5% Cash flow from operations fell as a result of changes in operational performance and working capital.

 

Group Operations, January–September 2017 

Key figures (M€) Jan–Sep 2017 Jan–Sep 2016 Change, % Jan–Dec 2016
Orders received 196.2 179.7 +9.2% 244.3
Net sales 175.9 191.0 -7.9% 259.5
Operating result -7.8 11.3 -169.0% 15.6
Operating result, % -4.4% 5.9%   6.0%
Result for the financial period -8.9 8.1 -210.4% 11.8
         
Earnings per share, EUR -0.49 0.45 -210.4% 0.65
Cash flow from operations 12.9 8.3 +55.2% 8.8
Net gearing, % 24.6% 25.6%   25.0%
Equity ratio, % 47.7% 50.5%   52.5%
Personnel at period-end 1,468 1,505 -2.5% 1,511

Orders received by the Group increased by 9.2% to EUR 196.2 (179.7) million. Net sales decreased by 7.9%, amounting to EUR 175.9 (191.0) million. 

Operating result was in the red by EUR 7.8 million. Operating result in the comparative period was EUR 11.3 million. Operating result represented -4.4% (5.9%) of net sales. The loss was mainly generated by the goodwill impairment of EUR 7.7 million related to the services business in Germany and the restructuring provision of EUR 1.6 million for improving the profitability of the services business in Germany. Excluding the goodwill impairment of the services business in Germany and the restructuring provision, the operating result was EUR 1.5 million. The operating result was also decreased by the lower net sales in Video and Broadband Solutions. Personnel expenses amounted to EUR 51.6 (53.4) million and were down by 3.4%. Expenses for material and manufacturing services decreased by 3.2% to EUR 97.0 (100.3) million. Net financial expenses were EUR 0.7 (0.8) million, down by 11.6%. Taxes for the Group amounted to EUR 0.4 (2.4) million. Undiluted result per share was EUR -0.49 (0.45). 

Cash flow from operations was EUR 12.9 (8.3) million. Cash flow was improved by changes in the working capital and particularly by new, shorter payment terms for clients obtained with a supplier financing programme. 

 

Video and Broadband Solutions, July–September 2017 

Key figures (EUR 1,000) Jul–Sep 2017 Jul–Sep 2016 Change
Orders received 36,264 30,601 +18.5%
Net sales 34,469 40,273 -14.4%
Operating result 1,534 5,545 -72.3%
Operating result, % 4.5% 13.8%  

Orders received totalled EUR 36.3 (30.6) million, an increase of 18.5% on the reference period. Order backlog increased by 52.9% to EUR 47.2 (30.9) million. Order backlog increased in passenger information solutions and access network products. Most of the order backlog for passenger information solutions will be delivered in 2018 or later. Net sales decreased by 14.4% to EUR 34.5 (40.3) million. Net sales decreased both in video security and information solutions and in access network products. Operating result decreased by 72.3% to EUR 1.5 (5.5) million, representing 4.5% (13.8%) of net sales. The decrease in operating result was mainly due to lower net sales. 

R&D expenses in the business area amounted to EUR 3.0 (2.4) million, representing 8.7% (5.8%) of net sales. Product development projects focused on network products designed for the US market, distributed access architecture, video security and information solutions, and customer-specific projects. Capitalised R&D expenses amounted to EUR 0.6 (0.6) million. Depreciation on R&D expenses was EUR 0.3 (0.3) million.

Video and Broadband Solutions, January–September 2017 

Key figures (EUR 1,000) Jan–Sep 2017 Jan–Sep 2016 Change Jan–Dec 2016
Orders received 126,935 109,463 +16.0% 149,011
Net sales 106,654 120,735 -11.7% 164,231
Operating result 4,408 11,173 -60.5% 16,482
Operating result, % 4.1% 9.3%   10.0%

Orders received increased by 16.0% to EUR 126.9 (109.5) million.

Net sales decreased by 11.7% to EUR 106.7 (120.7) million. Operating result decreased by 60.5%, amounting to EUR 4.4 (11.2) million. Operating result percentage was 4.1% (9.3%). The decrease in operating result was mainly due to lower net sales. 

R&D expenses amounted to EUR 8.9 (8.1) million, representing 8.3% (6.7%) of net sales. Product development projects focused on distributed access architecture, network products complying with the DOCSIS 3.1 standard (including solutions designed for the US market) video security and information solutions, and customer-specific projects. Capitalised R&D expenses amounted to EUR 2.4 (1.5) million, and depreciation on capitalised R&D expenses to EUR 1.1 (0.8) million. 

 

Network Services, July–September 2017 

Key figures (EUR 1,000) Jul–Sep 2017 Jul–Sep 2016 Change
Orders received 21,779 22,589 -3.6%
Net sales 21,779 22,589 -3.6%
Operating result -288 -717  
Operating result, % -1.3% -3.2%  

Net sales for the third quarter stood at EUR 21.8 (22.6) million, down by 3.6% year-on-year. Net sales decreased in England. Operating result improved by EUR 0.4 million year-on-year but remained negative at EUR -0.3 million. Operating result represented -1.3% (-3.2%) of net sales. Measures to improve profitability were continued in Germany, and a restructuring program was started. 

Network Services January–September 2017 

Key figures (EUR 1,000) Jan–Sep 2017 Jan–Sep 2016 Change Jan–Dec 2016
Orders received 69,234 70,231 -1.4% 95,297
Net sales 69,234 70,231 -1.4% 95,297
Operating result -12,211 128 -9,613% -847
Operating result, % -17.6% 0.2%   -0.9%

Net sales decreased by 1.4% to EUR 69.2 (70.2) million. Net sales decreased in England. Operating result was negative by EUR 12.2 million, while operating result in the comparative period was EUR 0.1 million. The principal reasons for the negative operating result were operational problems in Germany, the goodwill impairment of EUR 7.7 million related to the services business in Germany and the provision of EUR 1.6 million for a restructuring program that will progress in stages and continue into 2018.

 

Personnel and organisation, January–September 2017 

In the period under review, the average number of people employed by the Group was 1,506 (1,515/2016, 1,485/2015). Of these, 766 (745) were employed by Video and Broadband Solutions and 740 (770) by Network Services. At the end of the review period, the Group employed 1,468 people (1,505/2016, 1,496/2015). Of these, 753 (743) were employed by Video and Broadband Solutions and 715 (763) by Network Services. At the end of the review period, 65% (66%/2016, 68%/2015) of the employees were stationed abroad. Approximately 2% of the Group’s employees were working outside Europe. 

Personnel expenses amounted to EUR 51.6  million (53.4/2016, 52.4/2015). The decrease in personnel expenses was due to a lower number of employees year-on-year. 

Investments and product development, January–September 2017 

Investments by the Group totalled EUR 4.0 (3.7) million, equal to 2.3% (2.0%) of net sales. Investments in product development amounted to EUR 2.4 (1.5) million. Of the investments, EUR 0.4 (0.5) million were carried out under financial lease arrangements. 

Product development projects focused on distributed access architecture, network products complying with the DOCSIS 3.1 standard (including solutions designed for the US market) video security and information solutions, and customer-specific projects. 

Financing and Capital Structure, January–September 2017 

Cash flow from operations was EUR 12.9 (8.3) million. Cash flow was improved by changes in the working capital and particularly by new, shorter payment terms for clients obtained with a supplier financing programme. 

In August, Teleste Corporation signed new credit and loan facilities with a total value of EUR 50.0 million. The new financing agreements replaced the previous ones. The financing agreements include a five-year loan of EUR 30.0 million and a three-year credit facility of EUR 20.0 million. The credit facility involves a 1+1-year extension option. At the end of the period under review, the amount of unused binding credit facilities was EUR 20.0 (15.0) million. On 30 September 2017, the Group’s interest-bearing debt stood at EUR 33.6 (35.4) million. 

The Group's equity ratio was 47.7% (50.5%) and net gearing ratio was 24.6% (25.6%). 

Key Risks Faced by the Business Areas 

Founded in 1954, Teleste is a technology and services company consisting of two business areas: Video and Broadband Solutions and Network Services. With Europe as the main market area, our customers include cable operators, public transport operators, train manufacturers and specified organisations in the public sector. 

In Video and Broadband Solutions, customer-specific and integrated deliveries of solutions create favourable conditions for growth. On the other hand, the allocation of resources to the deliveries and the technical implementation are demanding tasks, which is why there are also risks involved. In particular, deliveries of integrated safety and information systems for passenger transport may be large in size, setting high demands for the project quotation calculation and management and, consequently, involving risks. Our customers' network investments vary depending on their need to upgrade and their financial structure. 

Many competitors in the business area come from the USA, which is why the exchange rate of the euro against the US dollar has an effect on our competitiveness. The development of the exchange rates of the US dollar and the Chinese renminbi against the euro influences our product costs. The company hedges against short-term currency exposure by means of forward exchange contracts. The modest economic growth and the challenges faced by the European public sector may slow down the implementation of customers’ investment plans. Furthermore, a reduction in consumer purchasing power in Europe may slow down the cable operators’ network investments. Increased competition created by the new service providers (OTT) may undermine the cable operators’ ability to invest. The consequences of natural phenomena or accidents, such as fire, may reduce the availability of components in the order-delivery chain of the electronics industry or suspend our own manufacturing operations. Correct technological choices and their timing are vital to our success. Various technologies are used in our products and solutions, and the intellectual property rights associated with the application of these technologies can be interpreted in different ways by different parties. Such difficulties of interpretation may lead to costly investigations or court proceedings. Regardless of careful planning and quality assurance, complex products may fail in the customer’s network and lead to expensive repair obligations.  

Net sales of Network Services come mainly from a small number of large European customers. Therefore, a significant change in the demand for our services by any one of them is reflected in the actual deliveries and profitability. The improvement of customer satisfaction and productivity requires efficient service process management, as well as innovative process, product and logistics solutions to ensure the quality and cost-efficiency of services. The smooth functioning of cable networks requires efficient technical management of the networks and suitable equipment solutions in accordance with contractual obligations. This, in turn, requires continuous and goal-directed development of the skills and knowledge of our personnel and subcontractors. In addition, the sufficiency and usage rates of our personnel and subcontractor network influence the company’s delivery capacity and profitability. In larger projects with overall responsibility, tender calculation and project management are complex tasks that involve risks. Severe weather conditions may affect our ability to deliver products and services. 

Teleste’s strategy involves risks and uncertainties: new business opportunities may fail to be identified or successfully exploited. The business areas must take into account market movements, such as consolidations among our customers and competitors. Intensified competition may decrease the prices of products and solutions faster than we are able to reduce our products’ manufacturing and delivery costs. Various information systems are critical to the development, manufacture and supply of products to our customers. The maintenance of information systems and deployment of new systems involve risks that may affect our ability to deliver products and services. Information systems may also be exposed to external threats and we need to protect them. Recruiting and maintaining skilled personnel requires encouragement, development and recruitment efforts, which can fail. 

The Board of Directors annually reviews essential business risks and their management. Risk management constitutes an integral part of the strategic and operational activities of the business areas. Risks are reported to the Board on a regular basis. 

On 23 December 2016, a competitor of Teleste filed two complaints against Teleste Limited, demanding damages from the company for the infringement of two patents. Teleste denies patent infringement in both cases. According to the assessment by Teleste’s management, the results of these litigations are not expected to have material effect on Teleste’s financial position. 

Group Structure 

The parent company has branch offices in Australia and the Netherlands and subsidiaries in 14 countries outside Finland. 

Shares and Changes in Share Capital 

On 30 September 2017, Tianta Oy was the largest single shareholder with a holding of 23.2%. 

In the period under review, the lowest company share price was EUR 7.15 (7.29) and the highest was EUR 9.62 (9.89). The closing price on 30 September 2017 stood at EUR 7.53 (9.43). According to Euroclear Finland Ltd, the number of shareholders at the end of the period under review was 5,741 (5,903). Foreign and nominee-registered holdings accounted for 6.6% (7.2%) of the holdings. The value of Teleste’s shares traded on the Nasdaq Helsinki from 1 January to 30 September 2017 was EUR 13.4 (21.0) million. In the period under review, 1.6 (2.4) million Teleste shares were traded on the stock exchange. 

On 30 September 2017, the Group held 863,953 of its own shares, all held by the parent company Teleste Corporation. At the end of the period, the Group's holding of the total number of shares amounted to 4.6% (4.6%). 

On 30 September 2017, the company’s registered share capital stood at EUR 6,966,932.80, divided into 18,985,588 shares. 

Valid authorisations at the end of the review period:

- The Board of Directors may acquire 1,200,000 own shares of the company otherwise than in proportion to the holdings of the shareholders with unrestricted equity through trading on the regulated market organised by Nasdaq Helsinki at the market price of the time of the purchase.

- The Board of Directors may decide on issuing new shares and/or transferring the company’s own shares held by the company, so that the maximum total number of shares issued and/or transferred is 2,000,000.

- The total number of new shares to subscribe for under the special rights granted by the Company and own shares held by the Company to be transferred may not exceed 1,000,000 shares, which number is included in the above maximum number concerning new shares and the Group's own shares held by the Company.

- These authorisations are valid until 6 October 2018. 

Decisions by the Annual General Meeting 

The Annual General Meeting (AGM) of Teleste Corporation held on 6 April 2017 adopted the financial statements for 2016 and discharged the Board of Directors and the CEO from liability for the financial period 2016. The AGM confirmed the dividend of EUR 0.25 per share as proposed by the Board. The dividend was paid on 19 April 2017 on shares other than own shares held by the Company. 

The AGM decided that the Board of Directors shall consist of five members. Pertti Ervi, Jannica Fagerholm, Timo Miettinen, Timo Luukkainen and Kai Telanne were re-elected as members of Teleste Corporation’s Board of Directors. Timo Miettinen was elected Chair of the Board in the organising meeting held after the AGM. 

The AGM decided to choose one auditor for Teleste Corporation. Authorised public accountant firm KPMG Oy Ab was chosen as the Company’s auditor. The auditor has appointed Petri Kettunen, APA, as the auditor in charge. 

The Annual General Meeting decided to authorise the Board to decide on the purchase of the company’s own shares. According to the authorisation, the Board of Directors may acquire 1,200,000 own shares of the company otherwise than in proportion to the holdings of the shareholders with unrestricted equity through trading on the regulated market organised by Nasdaq Helsinki Ltd at the market price of the time of the purchase. This authorisation is valid for 18 months from the date of the AGM’s decision. The authorisation overrides any previous authorisations to purchase the company’s own shares. 

The Annual General Meeting decided to authorise the Board of Directors to decide on issuing new shares and/or transferring the Company’s own shares held by the Company and/or granting special rights referred to in Chapter 10, section 1 of the Limited Liability Companies Act in accordance with the Board’s proposal. Under the authorisation, the Board of Directors has the right to decide on issuing new shares and/or transferring the Company’s own shares held by the Company, so that the maximum total number of shares issued and/or transferred is 2,000,000. The total number of new shares to subscribe for under the special rights granted by the Company and own shares held by the Company to be transferred may not exceed 1,000,000 shares, which number is included in the above maximum number concerning new shares and the Group's own shares held by the Company. 

The authorisations are valid for 18 months from the date of the AGM’s decision. 

Events after the end of the review period 

– In its meeting held on 4 October 2017, Teleste’s Board of Directors elected Pertti Ervi as the new Chair of the Board. Timo Miettinen continues as a member of the company’s Board of Directors. 

– Teleste acquired iqu Systems GmbH, the German company specialised in intelligent passenger information systems and software. Through the acquisition, Teleste will complement its offering of passenger information solutions for public transport, one of the company’s key areas. In 2017, net sales of the acquired company are estimated to reach over EUR 2 million, but the acquisition will not have any significant impact on Teleste’s financial figures in the current year. iqu Systems employs about 20 people and it will be a part of Teleste’s Video Security and Information business unit. 

 

Outlook for 2017 

The business objective of Video and Broadband Solutions is to maintain its strong market position in Europe and to strengthen this market position in selected new markets outside Europe. 

Network capacity will continue to grow, with operators responding to consumers’ new and expanding broadband and video service needs. We estimate the demand for access network products in Europe to continue on a par with 2016. Teleste’s entire access network product portfolio has been renewed in accordance with the DOCSIS 3.1 standard, and our offering allows cable operators to increase their network capacity competitively. Our customers are becoming consolidated and our competitors are introducing their own DOCSIS 3.1 products to the market, resulting in pressure on the pricing of products. The American markets in particular are growing strongly, providing significant growth opportunities for Teleste’s access network products. In 2017, we have invested in access network products suitable for new markets and also established a subsidiary to promote the sales of broadband network products to cable network operators in North America. The objective of these investments is the long-term increase in sales. 

Demand for video security solutions for public spaces continues worldwide, but some investment decisions may be delayed by the economic situation. Teleste’s video security solution for public space introduced in Paris provides new opportunities for other major cities of the world. The added value in the ecosystem has increasingly shifted to software and intelligence, and price erosion in the traditional video security equipment market continues. New innovations and solutions are also changing the rail industry passenger information solution business. It is necessary to improve the productivity and cost-efficiency of traditional business. The improvement of competitiveness requires R&D investments in new intelligent solutions. Although the orders received in the first half of 2017 for video security and information solutions clearly exceeded the previous year’s level, the weight of deliveries is on the coming years.  

As to Network Services, our business objective is to further develop operational efficiency and increase the share of those services that provide our customers with higher added value. Subcontracting costs of the services business in Germany have risen significantly, contributing to the loss made by the business, while the results of the profitability improvement programme have been delayed. For these reasons, there was an impairment in the goodwill of the German services business, and restructuring efforts aimed at improving profitability were launched. We estimate the demand for all-inclusive network services in our key target markets to continue at least at the level of the previous year. 

We estimate that net sales for 2017 will remain below the reference period and that the operating result for 2017 will remain clearly below the reference period level. The operating result for the second half of 2017 is expected to be considerably better than in the first half.

    

8 November 2017 

 

Teleste Corporation           Jukka Rinnevaara
Board of Directors            President and CEO 

 

This interim report has been compiled in compliance with IAS 34, as it is accepted within EU, using the recognition and valuation principles with those used in the Annual Report. Teleste has prepared this report applying the same accounting principles as those described in detail in its the consolidated financial statements. The data stated in this report is unaudited.

 

STATEMENT OF COMPREHENSIVE INCOME (tEUR) 7-9/
2017
7-9/
2016
Change % 1-12/
2016
           
Net Sales 56,248 62,862 -10.5 % 259,528
  Other operating income 500 736 -32.0 % 3,372
  Materials and services -31,275 -33,464 -6.5 % -137,078
  Personnel expenses -15,182 -16,702 -9.1 % -72,566
  Depreciation -1,295 -1,233 5.0 % -4,934
  Other operating expenses -7,751 -7,372 5.1 % -32,687
Operating profit 1,246 4,828 -74.2 % 15,635
           
  Financial income and expenses -245 -190 28.8 % -814
Profit after financial items 1,000 4,637 -78.4 % 14,821
           
           
Profit before taxes 1,000 4,637 -78.4 % 14,821
           
  Taxes -299 -1,083 -72.4 % -3,001
           
Net profit 702 3,554 -80.3 % 11,820
           
Attributable to:        
  Equity holders of the parent 702 3,554 -80.3 % 11,820
           
Earnings per share for result of the year attributable to the equity holders of the parent
(expressed in € per share)        
  Basic 0.04 0.20 -80.3 % 0.65
  Diluted 0.04 0.20 -80.4 % 0.65
           
Total comprehensive income for the period (tEUR)
Net profit 702 3,554 -80.3 % 11,820
Possible items with future net profit effect        
Translation differences -216 -286 -24.5 % -879
Fair value reserve -11 -3 266.7 % -135
Total comprehensive income for the period 475 3,265 -85.5 % 10,806
           
Attributable to:        
  Equity holders of the parent 475 3,265 -85.5 % 10,806
           
STATEMENT OF COMPREHENSIVE INCOME (tEUR) 1-9/
2017
1-9/
2016
Change % 1-12/
2016
           
Net Sales 175,888 190,966 -7.9 % 259,528
  Other operating income 1,058 1,458 -27.4 % 3,372
  Materials and services -97,047 -100,289 -3.2 % -137,078
  Personnel expenses -51,634 -53,428 -3.4 % -72,566
  Depreciation -3,950 -3,640 8.5 % -4,934
  Impairment loss -7,705 0 n/a 0
  Other operating expenses -24,413 -23,766 2.7 % -32,687
Operating profit -7,803 11,301 -169.0 % 15,635
           
  Financial income and expenses -713 -807 -11.6 % -814
Profit after financial items -8,516 10,494 -181.2 % 14,821
           
           
Profit before taxes -8,516 10,494 -181.2 % 14,821
           
  Taxes -417 -2,403 -82.7 % -3,001
           
Net profit -8,933 8,090 -210.4 % 11,820
           
Attributable to:        
  Equity holders of the parent -8,933 8,090 -210.4 % 11,820
           
Earnings per share for result of the year attributable to the equity holders of the parent
(expressed in € per share)        
  Basic -0.49 0.45 -210.4 % 0.65
  Diluted -0.49 0.45 -209.9 % 0.65
           
Total comprehensive income for the period (tEUR)
Net profit -8,933 8,090 -210.4 % 11,820
Possible items with future net profit effect        
Translation differences -233 -884 -73.6 % -879
Fair value reserve 41 -206 n/a -135
Total comprehensive income for the period -9,125 7,000 -230.3 % 10,806
           
Attributable to:        
  Equity holders of the parent -9,125 7,000 -230.3 % 10,806

 

 

STATEMENT OF FINANCIAL POSITION  (tEUR) 30/09/
2017
30/09/
2016
Change % 31/12/
2016
Non-current assets        
  Intangible assets 8,633 6,763 27.6 % 7,171
  Goodwill 29,482 37,366 -21.1 % 37,374
  Tangible assets 9,871 11,333 -12.9 % 11,325
  Deferred tax asset 2,955 1,682 75.7 % 1,833
  Available-for-sale investments 693 693 0.0 % 693
    51,635 57,838 -10.7 % 58,396
Current assets        
  Inventories 34,036 34,873 -2.4 % 33,544
  Trade and other receivables 47,788 55,041 -13.2 % 60,676
  Cash and cash equivalents 16,145 14,723 9.7 % 9,496
    97,969 104,638 -6.4 % 103,715
           
Total assets 149,603 162,475 -7.9 % 162,112
           
Shareholder's equity and liabilities        
  Share capital 6,967 6,967 0.0 % 6,967
  Other equity 63,978 73,546 -13.0 % 77,455
    70,944 80,513 -11.9 % 84,422
           
Non-current liabilities        
  Deferred tax liability 1,405 1,694 -17.0 % 1,630
  Non-current liabilities, interest-bearing 31,667 33,145 -4.5 % 28,036
  Non-current interest-free liabilities 94 206 -54.2 % 135
  Non-current provisions 855 971 -11.9 % 1,081
    34,022 36,015 -5.5 % 30,882
Current liabilities        
  Current interest-bearing liabilities 1,927 2,240 -14.0 % 2,573
  Trade Payables and Other Liabilities 40,624 41,941 -3.1 % 41,900
  Tax liability, income tax 1,280 1,226 4.4 % 1,477
  Current provisions 805 541 49.0 % 858
    44,637 45,948 -2.9 % 46,808
           
Total shareholder's equity and liabilities 149,603 162,476 -7.9 % 162,113

  

CONSOLIDATED CASH FLOW STATEMENT (tEUR) 1-9/
2017
1-9/
2016
Change %  1-12/
2016
Cash flows from operating activities
  Profit for the period -8,933 8,090 -210.4 % 11,820
  Adjustments 12,784 6,851 86.6 % 6,737
  Interest and other financial expenses and incomes -713 -807 -11.6 % -814
  Paid Taxes -1,718 -2,239 -23.3 % -3,151
  Change in working capital 11,479 -3,581 -420.6 % -5,827
Cash flow from operating activities 12,899 8,314 55.2 % 8,765
Cash flow from investing activities        
  A conditional supplementary contract price for prior subsidiary acquisitions 0 -485 n/a -485
  Purchases of property, plant and equipment (PPE) -1,732 -1,100 57.5 % -1,410
  Proceeds from sales of PPE 11 31 -64.5 % 43
  Purchases of intangible assets -2,271 -1,523 49.1 % -2,507
Net cash used in investing activities -3,992 -3,077 29.7 % -4,359
Cash flow from financing activities        
  Proceeds from borrowings 4,000 4,170 -4.1 % 4,170
  Payments of borrowings -1,495 -2,308 -35.2 % -6,710
  Dividends paid -4,530 -4,168 8.7 % -4,168
Net cash used in financing activities -2,025 -2,306 -12.2 % -6,708
           
Change in cash        
  Cash in the beginning 9,496 12,677 -25.1 % 12,677
  Change in cash during period 6,882 2,931 134.8 % -2,302
  Effect of currency changes -233 -884 -73.6% -879
  Cash at the end 16,145 14,724 9.7 % 9,496

 

 

KEY FIGURES 1-9/
2017
1-9/
2016
Change %  1-12/
2016
  Earnings per share, EUR -0.49 0.45 -210.4 % 0.65
  Earnings per share fully diluted, EUR -0.49 0.45 -209.8 % 0.65
  Shareholders' equity per share, EUR 3.91 4.44 -11.8 % 4.66
           
  Return on equity -15.1 % 13.6 % -210.7 % 14.6 %
  Return on capital employed -9.1 % 13.8 % -166.4 % 14.8 %
  Equity ratio 47.7 % 50.5 % -5.3 % 52.5 %
  Gearing 24.6 % 25.6 % -4.1 % 25.0 %
           
  Investments, tEUR 4,003 3,730 7.3 % 5,488
  Investments % of net sales 2.3 % 2.0 % 16.5 % 2.1 %
  Order backlog, tEUR 47,211 30,878 52.9 % 26,930
  Personnel, average 1,506 1,515 -0.6 % 1,514
           
  Number of shares (thousands) 18,986 18,986 0.0 % 18,986
    including own shares        
  Highest share price, EUR 9.62 9.89 -2.7 % 10.24
  Lowest share price, EUR 7.15 7.29 -1.9 % 7.29
  Average share price, EUR 8.44 8.61 -1.9 % 8.69
           
  Turnover, in million shares 1.6 2.4 -34.7 % 3.5
  Turnover, in MEUR 13.4 21.0 -35.9 % 30.6
           
Treasury shares        
    Number
of shares
  % of
shares
% of
votes
           
  Possession of company's own shares 30.9.2017 863,953   4.55% 4.55%
           
Contingent liabilities and pledged assets (tEUR)
           
Leasing and rent liabilities 7,592 9,158 -17.1 % 9,144
           
Derivative instruments (tEUR)        
  Value of underlying forward contracts 22,210 25,172 -11.8 % 22,550
  Market value of forward contracts -463 616 n/a 334
  Interest rate swap 10,000 10,000 0.0 % 10,000
  Market value of interest swap -94 -206 -54.4 % -135
           
Taxes are computed on the basis of the tax on the profit for the period.

 

OPERATING SEGMENTS (tEUR)  1-9/
2017
 1-9/
2016
Change %  1-12/
2016
           
Video and Broadband Solutions        
  Orders received 126,935 109,463 16.0 % 149,011
  Net sales 106,654 120,735 -11.7 % 164,231
  EBIT 4,408 11,173 -60.5 % 16,482
  EBIT% 4.1 % 9.3 %   10.0 %
Network Services        
  Orders received 69,234 70,231 -1.4 % 95,297
  Net sales 69,234 70,231 -1.4 % 95,297
  EBIT -12,211 128 -9613.0 % -847
  EBIT% -17.6 % 0.2 %   -0.9 %
Total
  Orders received 196,169 179,694 9.2 % 244,308
  Net sales 175,888 190,966 -7.9 % 259,528
  EBIT -7,803 11,301 -169.0 % 15,635
  EBIT% -4.4 % 5.9 %   6.0 %
  Financial items -713 -807 -11.6 % -814
  Operating segments net profit before taxes -8,516 10,494 -181.2 % 14,821

 

 

Information per quarter (tEUR)  7-9/17  4-6/17  1-3/17  10-12/16  7-9/16  10/2016-
  9/2017
               
Video and Broadband Solutions
  Orders received 36,264 42,555 48,116 39,548 30,601 166,483
  Net sales 34,469 36,782 35,403 43,496 40,273 150,149
  EBIT 1,534 2,057 817 5,309 5,545 9,717
  EBIT % 4.5 % 5.6 % 2.3 % 12.2 % 13.8 % 6.5 %
               
Network Services            
  Orders received 21,779 21,924 25,531 25,066 22,589 94,300
  Net sales 21,779 21,924 25,531 25,066 22,589 94,300
  EBIT -288 -11,316 -606 -975 -717 -13,186
  EBIT % -1.3 % -51.6 % -2.4 % -3.9 % -3.2 % -14.0 %
               
Total
  Orders received 58,044 64,478 73,647 64,614 53,190 260,783
  Net sales 56,248 58,706 60,934 68,562 62,862 244,449
  EBIT 1,246 -9,259 211 4,334 4,828 -3,469
  EBIT % 2.2 % -15.8 % 0.3 % 6.3 % 7.7 % -1.4 %

  

Attributable to equity holders of the parent (tEUR)
A Share capital
B Share premium
C Translation differences
D Retained earnings
E Invested free capital
F Other funds
G Total
  A B C D E F G
Shareholder's equity 1.1.2017 6,967 1,504 -978 73,922 3,140 -135 84,420
  Total comprehensive income for the period     -233 -8,933 0 41 -9,125
  Paid dividend       -4,530     -4,530
  Equity-settled share-based payments       182     182
Shareholder's equity 30.9.2017 6,967 1,504 -1,211 60,641 3,140 -94 70,944
                 
Shareholder's equity 1.1.2016 6,967 1,504 -99 66,034 3,140 0 77,547
  Total comprehensive income for the period     -885 8,091 0 -206 7,000
  Paid dividend       -4,168     -4,168
  Equity-settled share-based payments       136     136
Shareholder's equity 30.9.2016 6,967 1,504 -984 70,093 3,140 -206 80,513

 


CALCULATION OF KEY FIGURES            

 

Return on equity: Profit/loss for the financial period
------------------------------   * 100
Shareholders’ equity (average)
Return on capital employed: Profit/loss for the period after financial items + financing charges
------------------------------   * 100
Total assets - non-interest-bearing
liabilities (average)
Equity ratio: Shareholders' equity
-----------------------------   * 100
Total assets - advances received
Gearing: Interest bearing liabilities - cash in hand and in bank - interest bearing assets
-----------------------------   * 100
Shareholders' equity
Earnings per share: Profit for the period attributable to equity holder of the parent
----------------------------------------------
Weighted average number of ordinary shares outstanding during the period
Earnings per share, diluted: Profit for the period attributable to equity holder of the parent (diluted)
----------------------------------------------- Average number of shares - own shares + number of options at the period-end

 

 

Major shareholders by number of shares
September 30, 2017
Number of shares % of shares
Tianta Oy 4,409,712 23.23
Mandatum Life Insurance Company Limited 1,679,200 8.84
Ilmarinen Mutual Pension Insurance Company 1,084,475 5.71
Teleste Oyj 863,953 4.55
Kaleva Mutual Insurance Company 824,641 4.34
Varma Mutual Pension Insurance Company 521,150 2.74
The State Pension Fund 500,000 2.63
Nieminen Jorma Juhani 250,000 1.32
Sijoitusrahasto Taaleritehdas Mikro Markka 238,109 1.25
Ingman Finance Oy Ab 235,000 1.24

 

 

Shareholders by sector
September 30, 2017
Number of shareholders % of Owners Shares % of shares
Households 5,384 93.78 4,656,180 24.52
Public sector institutions 4 0.07 2,115,725 11.14
Financial and insurance institutions 20 0.35 4,484,290 23.62
Corporations 262 4.56 7,535,835 39.69
Non-profit institutions 26 0.45 80,085 0.42
Foreign 45 0.78 113,473 0.60
         
Total 5,741 100.00 18,985,588 100.00
Of which nominee registered 9 0.16 1,133,959 5.97

 

 

Number of shares
Septmeber 30, 2017
Number of shareholders % of shareholders Number of shares % of shares
1-100 1,531 26.67 93,187 0.49
101-500 2,467 42.97 664,656 3.50
501-1,000 805 14.02 646,701 3.41
1,001-5,000 756 13.17 1,670,372 8.80
5,001-10,000 83 1.45 603,142 3.18
10,001-50,000 69 1.20 1,369,761 7.21
50,001-100,000 9 0.16 610,183 3.21
100,001-500,000 13 0.23 2,851,623 15.02
500,001-& above 8 0.14 10,475,963 55.18
         
Total 5,741 100.00 18,985,588 100.00
of which nominee registered 9 0.16 1,133,959 5.97

 


ADDITIONAL INFORMATION:
CEO Jukka Rinnevaara, phone +358 2 2605 611 or +358 400 747 488

DISTRIBUTION:
Nasdaq Helsinki
Main Media
www.teleste.com