Teleste´s Financial Statements 2017: Net sales and result decreased in 2017, record-level order backlog

TELESTE CORPORATION    FINANCIAL STATEMENTS  8.2.2018  AT 08:30 (a.m. EET)                                                         

 

FINANCIAL STATEMENTS OF TELESTE CORPORATION 1 JANUARY TO 31 DECEMBER 2017

NET SALES AND RESULT DECREASED IN 2017, RECORD-LEVEL ORDER BACKLOG

 

Fourth quarter of 2017

– Net sales amounted to EUR 58.7 (68.6) million, a decrease of 14.4%
– Operating result stood at EUR 0.3 (4.3) million, a decrease of 94.1%. The operating result includes a personnel reduction-related restructuring provision of EUR 0.8 million.
– Undiluted earnings per share were EUR -0.01 (0.21), a decrease of 104.6
– Orders received totalled EUR 66.7 (64.6) million, an increase of 3.2%
– Cash flow from operations was EUR 6.4 (0.5) million, an increase of 1,309%

 

January–December 2017

– Net sales amounted to EUR 234.6 (259.5) million, a decrease of 9.6%
– Operating result stood at EUR -7.5 (15.6) million, a decrease of 148.3%. The operating result includes restructuring provisions and the goodwill impairment for the services business in Germany in total of EUR 10.1 million.
– Undiluted earnings per share were EUR -0.50 (0.65), a decrease of 177.0%.
– Orders received totalled EUR 262.9 (244.3) million, an increase of 7.6%.
– Cash flow from operations was EUR 19.3 (8.8) million, an increase of 119.7%

 

The Board of Directors proposes a dividend of EUR 0.10 (0.25) per outstanding share.

 

Outlook for 2018

Teleste expects the company’s net sales to increase in 2018 compared with 2017 (EUR 234.6 million). Operating result is expected to be clearly positive. However, due to the ongoing investments, it will not yet reach the record level of 2016 (EUR 15.6 million).

 

Comments by CEO Jukka Rinnevaara:

‘Orders received increased in the fourth quarter year-on-year. Order backlog increased, reaching the highest level in Teleste’s history. Net sales were down year-on-year in both business areas. Operating result remained below the reference period level. This was mainly because of lower net sales in Video and Broadband Solutions and restructuring provisions related to reduction of personnel.

Orders received by Video and Broadband Solutions increased year-on-year for video security and information solutions, with France, Spain and Poland as the growth markets. Order backlog increased and reached the highest level in Teleste’s history. However, one third of the deliveries will take place after 2018. Net sales decreased in access network products and, in particular, in video security and information solutions. However, new orders for video security and information solutions started to increase strongly during the year. In addition, we enhanced our offering by acquiring iqu Systems GmbH, the German company specialising in intelligent passenger information systems. Operating result decreased year-on-year, mainly because of lower net sales and the restructuring provision for decreasing labour costs. Teleste carried out co-determination negotiations in order to reduce costs and secure profitable growth. As a result of the negotiations, it was decided to reduce the number of employees in Finland by 24 persons. Despite the lower net sales, we continued our product development investments, as well as marketing investments in the US cable operator market.

Net sales of Network Services decreased in Germany and England as a result of changes in customer projects. The business area improved its operating result year-on-year, but it remained negative. The restructuring programme in Germany continued, progressing in stages. It will also continue in the first half of 2018. Negotiations with a customer to renew an important frame agreement progressed. We aim to complete the negotiations during the first quarter of 2018. The outcome of the negotiations will have a significant effect on the profitability of our services business.

The year 2017 was exceptionally difficult for Teleste. Our main challenges were related to the low net sales in video security and information solutions and the low profitability of the services business in Germany. We were forced to reduce personnel in order to cut costs and improve the efficiency of our business. Business area trends and the market outlook are still favourable, which is why we will continue investing in new advanced video security and information solutions, product development in distributed access architecture and winning new clients in the US cable operator market. The objective of the restructuring of our services business in Germany is to achieve a positive operating result in 2018 and renew the most important frame agreements. We start the year 2018 with a considerably higher order backlog than a year ago, which provides a good foundation for achieving our annual targets.

The company has the following three main objectives for the next few years: Achieving positive performance in the services business in Germany, successful launch of sales in the US cable operator market and significant growth and improved performance in video security and information solutions. We expect these three areas to have a significant effect on the company’s future development.’

 

Group Operations in October–December 2017

Key figures (M€) 10–12/2017 10–12/2016 Change
       
Orders received 66.7 64.6 +3.2%
Net sales 58.7 68.6 -14.4%
EBIT 0.3 4.3 -94.1%
EBIT, % 0.4% 6.3%  
Result for the period -0.2 3.7 -105.7%
       
Other important key figures      
Earnings per share, EUR -0.01 0.21 -104.6%
Cash flow from operations, M€ 6.4 0.5 +1,309%

Orders received by the Group in the fourth quarter increased by 3.2% to EUR 66.7 (64.6) million. Order backlog increased during the quarter by 21.5% to EUR 57.4 (26.9) million, which is the highest order backlog in Teleste’s history. Net sales decreased by 14.4% to EUR 58.7 (68.6) million.

Expenses for material and production services decreased by 16.8% to EUR 30.6 (36.8) million. Personnel expenses decreased by 7.1% and were EUR 17.8 (19.1) million. The 4.0 per cent reduction in personnel, the amount of performance-based bonuses paid out and the restructuring provision contributed to the change in personnel expenses. The cost effect of the restructuring provision was EUR 0.8 million. Depreciation, amortisation and other operating expenses increased by 3.0% to EUR 10.5 (10.2) million. Operating result decreased by 94.1% to EUR 0.3 (4.3) million, representing 0.4% (6.3%) of net sales. The result of the reference period was improved by a reversed provision of EUR 1.3 million for earn-out related to a prior acquisition, recognised in other income. Net financial expenses amounted to EUR 0.2 (0.0) million. Taxes were EUR 0.3 (0.6) million. Undiluted earnings per share were EUR -0.01 (0.21). Cash flow from operations was EUR 6.4 (0.5) million, an increase of 1,309% resulting from changes in net working capital.

 

Group Operations in January–December 2017

Key figures (M€) 1–12/2017 1–12/2016 Change
       
Orders received 262.9 244.3 +7.6%
Net sales 234.6 259.5 -9.6%
EBIT -7.5 15.6 -148.3%
EBIT, % -3.2% 6.0%  
Result for the period -9.1 11.8 -177.4%
       
Other important key figures      
Earnings per share, EUR -0.50 0.65 -177.0%
Cash flow from operations, M€ 19.3 8.8 +119.7%
Net gearing, % 16.8% 25.0%  
Equity ratio, % 48.3% 52.5%  
Personnel at period-end 1,446 1,511 -4.3%

Orders received by the Group increased by 7.6% to EUR 262.9 (244.3) million, the highest level in Teleste’s history. Net sales decreased by 9.6%, amounting to EUR 234.6 (259.5) million.

Operating result was in the red by EUR 7.5 million. Operating result in the reference period was EUR 15.6 million. Operating result represented -3.2% (6.0%) of net sales. A significant proportion of the decrease in result was generated by the goodwill impairment of EUR 7.7 million related to the services business in Germany and the restructuring provisions of EUR 2.4 million in Germany and Finland. The operating result was also decreased by the lower net sales in Video and Broadband Solutions. Expenses for material and production services decreased by 6.9% to EUR 127.7 (137.1) million. Personnel expenses decreased by 4.4% and were EUR 69.4 (72.6) million. The 1.4 per cent reduction in personnel, the amount of performance-based bonuses paid out and the restructuring expenses contributed to the reduction in personnel expenses. Depreciation, amortisation and other operating expenses increased by 3.4% to EUR 38.9 (37.6) million. Taxes for the Group amounted to EUR 0.7 (3.0) million. Undiluted earnings per share were EUR -0.50 (0.65). Cash flow from operations was EUR 19.3 (8.8) million. Cash flow was improved by changes in the working capital and, particularly, by new, shorter payment terms for clients, obtained through a supplier financing programme.

 

Video and Broadband Solutions in October–December 2017

EUR 1,000  10–12/2017  10–12/2016 Change
Orders received 43,424 39,548 +9.8%
Net sales 35,429 43,496 -18.5%
EBIT 480 5,309 -91.0%
Operating result, % 1.4% 12.2%  

Orders received increased by 9.8% year-on-year to EUR 43.4 (39.5) million. Orders received increased the most in video security and information solutions. Order backlog increased during the quarter by 21.5% and was EUR 57.4 (26.9) million at quarter-end. Net sales decreased by 18.5% to EUR 35.4 (43.5) million. Operating result decreased by 91.0% and was EUR 0.5 (5.3) million, representing 1.4% (12.2%) of net sales. The operating result was decreased by the lower net sales in video security and information solutions and the EUR 0.8 million restructuring provision related to the reduction of personnel. The operating result for the reference period included EUR 1.3 million of other income resulting from reversed provision for earn-out related to a prior acquisition.

R&D expenses amounted to EUR 3.2 (3.0) million, representing 9.0% (7.0%) of net sales in the business area. 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 0.8 (0.9) million, and depreciation on capitalised R&D expenses to EUR 0.5 (0.3) million.

Video and Broadband Solutions in January–December 2017

EUR 1,000 1–12/2017 1–12/2016 Change
Orders received 170,359 149,011 +14.3%
Net sales 142,082 164,231 -13.5%
EBIT 4,888 16,482 -70.3%
EBIT, % 3.4% 10.0%  

Orders received increased by 14.3% year-on-year to EUR 170.4 (149.0) million. The increase in orders received was seen in video security and information solutions. Net sales decreased by 13.5% to EUR 142.1 (164.2) million. Net sales decreased the most in video security and information solutions. Operating result decreased by 70.3% and was EUR 4.9 (16.5) million, representing 3.4% (10.0%) of net sales. The operating result was decreased by the lower net sales and the EUR 0.8 million restructuring provision related to the reduction of personnel. The operating result for the reference period included EUR 2.3 million of other income resulting from reversed provision for earn-out related to a prior acquisition.

R&D expenses amounted to EUR 12.1 (11.1) million, representing 8.5% (6.8%) 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 3.5 (2.5) million and depreciation on capitalised R&D expenses to EUR 1.5 (1.2) million.

 

Network Services in October–December 2017

EUR 1,000 10–12/2017 10–12/2016 Change
Orders received 23,273 25,066 -7.2%
Net sales 23,273 25,066 -7.2%
EBIT -226 -975  
EBIT, % -1.0% -3.9%  

Orders received and net sales decreased by 7.2% year-on-year, amounting to EUR 23.3 (25.1) million. Net sales decreased the most in Germany and England. Operating result improved by EUR 0.7 million year-on-year but remained negative at EUR -0.2 million. Operating result represented -1.0% (-3.9%) of net sales. In Germany, the measures to improve profitability and the restructuring programme continued. They will continue to progress in stages also in the first half of 2018. Negotiations with a customer to renew an important frame agreement progressed. Deliveries for projects with new customers started.

Network Services in January–December 2017

EUR 1,000  1–12/2017  1–12/2016 Change
Orders received 92,507 95,297 -2.9%
Net sales 92,507 95,297 -2.9%
EBIT -12.437 -847  
EBIT, % -13.4% -0.9%  

Orders received and net sales decreased by 2.9% to EUR 92.5 (95.3) million. Net sales decreased in Germany and England. Operating result was negative by EUR 12.4 million, while operating result in the reference period was negative by EUR 0.8 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 programme that is progressing in stages and which will continue in the first half of 2018.

 

Personnel and organisation in January–December 2017

In the period under review, the average number of people employed by the Group was 1,492 (1,514/2016, 1,485/2015); of these, 763 (747) were employed by Video and Broadband Solutions and 729 (767) by Network Services. At the end of the review period, the Group employed 1,446 people (1,511/2016, 1,506/2015), of whom 65% (66%/2016, 68%/2015) were stationed abroad. Approximately 2% of the Group’s employees were working outside Europe.

Personnel expenses decreased by 4.4% year-on-year and were EUR 69.4 (72.6/2016, 70.5/2015) million. The decrease in personnel expenses was due to a lower number of personnel and lower amount of performance-based bonuses paid out. The average number of personnel decreased by 1.4%. The number of personnel decreased in the Network Services business area.

Investments in January–December 2017

Investments by the Group totalled EUR 7.5 (5.5) million, equal to 3.2% (2.1%) of net sales. Of the investments, EUR 3.5 (2.5) million were made in product development and EUR 2.1 (0.0) million in an acquisition. Other investments involved information systems, machinery and equipment. Of the investments, EUR 0.4 (0.6) 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 in January–December 2017

Cash flow from operations was EUR 19.3 (8.8) million. Cash flow was improved by decreased working capital and, particularly, by new, shorter payment terms for clients through 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 (19.0) million. On 31 December 2017, the Group’s interest-bearing debt stood at EUR 33.2 (30.6) million.

The Group's equity ratio was 48.3% (52.5%) and net gearing 16.8% (25.0%).

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 and business area, the company is also expanding its business outside Europe. Teleste’s 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. Our operator customers' network investments vary according to the development of technology, customers’ need to upgrade and their financial structure. End-to-end deliveries of video security and information solution systems may be large in size, setting high demands for the project quotation calculation and management and, consequently, involving risks. Increased competition created by the new service providers may undermine the cable operators’ ability to invest. Correct technological choices, product development 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. Customers have very demanding requirements for the performance of products, their durability in challenging conditions and their compatibility with other components of integrated systems. Regardless of careful planning and quality assurance, complex products may fail in the customer’s network and lead to expensive repair obligations. 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. 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. 

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. Subcontractors’ costs may increase faster than it is possible for Teleste to increase the prices of its services to its own customers. 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 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. Periods of technological transition, such as operators migrating to distributed access architecture, may significantly change the competitive positions of the current suppliers and attract new competitors to the market. 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 has denied the patent infringements. The litigation is still pending. 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.

On 30 October 2017, Teleste acquired iqu Systems GmbH, the German company specialising 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. Iqu Systems employs approximately 20 people. It has been included as part of Teleste’s Video Security and Information business unit. Net sales of the acquired company from 30 October to 31 December 2017 amounted to EUR 0.7 million, and its balance sheet total was EUR 1.0 million. Teleste Group recognised a goodwill of EUR 1.5 million on the balance sheet.

Shares and Changes in Share Capital

On 31 December 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 6.51 (7.29) and the highest was EUR 9.62 (10.24). Closing price on 31 December 2017 stood at EUR 6.68 (8.86). According to Euroclear Finland Ltd, the number of shareholders at the end of the period under review was 5,618 (5,923). Foreign and nominee-registered holdings accounted for 6.6% (5.2%) of the holdings. The value of Teleste’s shares traded on the Nasdaq Helsinki from 1 January to 31 December 2017 was EUR 16.8 (30.6) million. In the period under review, 2.0 (3.5) million Teleste shares were traded on the stock exchange. Teleste’s share is quoted on Nasdaq Helsinki, the Mid-Cap segment.

On 31 December 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 31 December 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 on 6 April 2017 after the AGM. 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 continued as a member of the company’s Board of Directors. 

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.

 

Outlook for 2018

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. In particular, investments in the North American market will continue in 2018.

Network capacity will continue to grow, with operators responding to consumers’ new and expanding broadband and video service needs. 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. In 2018, two network upgrade projects will be completed that are significant on the European scale. Operators will launch new upgrade projects. However, there is uncertainty associated with the timing of these projects, as operators are already considering next-generation distributed access architecture solutions. We expect that new investment projects that are based on distributed access architecture will be launched in Europe and, in particular, in North America in 2018. The change in access network technology also has an effect on suppliers’ competitive position. Teleste continues investing in distributed access architecture technology and access network products that are suitable for new markets. In addition, the target of the subsidiary established in the US is to promote the sales of broadband network products to the cable network operators in North America. The objective of these investments is the long-term increase in sales. We estimate that net sales from access network products in 2018 will reach the level of 2017.

The improvement of safety in city environments, the increase of public transport services, and the increasing popularity of smart systems for a smoother life provide a foundation for new business opportunities. Demand for video security solutions for public spaces continues worldwide, but competition in the industry has increased considerably and price erosion in the traditional video security equipment market continues. Video security solutions are becoming increasingly smart, including pattern recognition and artificial intelligence. Furthermore, a need is arising in the market for more comprehensive situation awareness systems that include management of other censor-level data flows in addition to video image. New innovations and solutions are also changing the public transport passenger information solution business. Supply of real-time information for passengers is essential for safe and flexible public transport. 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 2017 for video security and information solutions increased, a significant portion of the deliveries is scheduled for the coming years. We estimate that net sales for 2018 will increase clearly from the previous year.

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. The programme to improve profitability of the services business in Germany will be continued in 2018, and we expect the measures taken to show results during the first half of 2018. In addition, we are engaging in negotiations to renew an important frame agreement with a customer. We estimate that net sales for 2018 will increase from the previous year.

Teleste expects the company’s net sales to increase in 2018 compared with 2017 (EUR 234.6 million). Operating result is expected to be clearly positive. However, due to the ongoing investments, it will not yet reach the record level of 2016 (EUR 15.6 million).

 

 

7 February 2018

 

Teleste Corporation           Jukka Rinnevaara
Board of Directors            President and CEO

 

Teleste's Annual Report for 2017, which includes the audited financial statements, will be published no later than week 11 2018. The Company will issue a statement of its corporate governance as a separate report, which will be published together with the Annual Report, and will be simultaneously available on the Company's web site.

 

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. The data stated in this report is audited.
 

STATEMENT OF COMPREHENSIVE INCOME, 1000 euros
   10-12/2017  10-12/2016 Change %
       
Net sales 58,702 68,562 -14.4 %
       
Other operating income 474 1,914 -75.3 %
Raw material and consumables used -30,626 -36,789 -16.8 %
Employee benefits expense -17,772 -19,138 -7.1 %
Depreciations -1,313 -1,294 1.5 %
Other operating expenses -9,210 -8,921 3.2 %
Operating profit 254 4,334 -94.1 %
       
Financial income 123 835 n/a
Financial expenses -331 -841 -60.7 %
Profit before taxes 46 4,328 -98.9 %
       
Taxes -259 -598 -56.8 %
       
Profit for the period -213 3,729 -105.7 %
       
Profit attributable to:      
Owners of the parent company -173 3,729 -104.6 %
Non-controlling interests -40 0 0
  -213 3,729 -105.7 %
       
Earnings per share for profit of the year attributable to the equity holders of the parent
Basic (expressed in euro per share) -0.01 0.21 -104.6 %
Diluted (expressed in euro per share) -0.01 0.20 -104.6 %
       
Total comprehensive income for the period, 1000 euros
Net profit -213 3,729 -105.7 %
Items that may be reclassified to profit or loss:      
Translation differences -56 5 -1216.3 %
Fair value reserve 58 71 -18.8 %
Total comprehensive income for the period -211 3,805 -105.5 %
       
Total comprehensive income attributable to:
Owners of the parent company -133 3,805 -103.5 %
Non-controlling interests -78 0  
  -211 3,805 -105.5 %
       
STATEMENT OF COMPREHENSIVE INCOME, 1000 euros  1-12/2017  1-12/2016 Change %
       
Net sales 234,589 259,528 -9.6 %
       
Other operating income 1,531 3,372 -54.6 %
Raw material and consumables used -127,673 -137,078 -6.9 %
Employee benefits expense -69,406 -72,566 -4.4 %
Depreciation -5,263 -4,934 6.7 %
Impairment on goodwill -7,705 0 n/a
Other operating expenses -33,623 -32,687 2.9 %
Operating profit -7,549 15,635 -148.3 %
       
Financial income 537 1,224 -56.1 %
Financial expenses -1,458 -2,038 -28.4 %
Profit before taxes -8,470 14,821 -157.1 %
       
Taxes -675 -3,001 -77.5 %
       
Profit for the period -9,145 11,820 -177.4 %
       
Profit attributable to:      
Owners of the parent company -9,106 11,820 -177.0 %
Non-controlling interests -40 0 0.0 %
  -9,145 11,820 -177.4 %
       
Earnings per share for profit of the year attributable to the equity holders of the parent
Basic (expressed in euro per share) -0.50 0.65 -177.0 %
Diluted (expressed in euro per share) -0.50 0.65 -176.9 %
       
Total comprehensive income for the period (tEUR)      
Net profit -9,145 11,820 -177.4 %
Items that may be reclassified to profit or loss:
Translation differences -423 -879 n/a
Fair value reserve 58 -135 n/a
Total comprehensive income for the period -9,511 10,806 -188.0 %
       
Total comprehensive income attributable to:
Owners of the parent company -9,432 10,806 -187.3 %
Non-controlling interests -78 0  
  -9,511 10,806 -188.0 %

 

STATEMENT OF FINANCIAL POSITION, 1000 euros
       
   31.12.2017  31.12.2016 Change %
Non-current assets      
Property, plant and equipment 9,637 11,325 -14.9 %
Goodwill 30,814 37,374 -17.6 %
Other intangible assets 9,469 7,171 32.0 %
Available-for-sale investments 693 693 0.0 %
Deferred tax assets 2,061 1,833 12.5 %
Total 52,674 58,396 -9.8 %
       
Current assets      
Inventories 33,689 33,544 0.4 %
Trade and other receivables 45,520 60,269 -24.5 %
Income tax receivables 362 407 -11.1 %
Cash 21,230 9,496 123.6 %
Total 100,801 103,716 -2.8 %
       
Total assets 153,475 162,112 -5.3 %
       
Equity and liabilities      
Equity attributable to equity holders of the parent      
Share capital 6,967 6,967 0.0 %
Share premium 1,504 1,504 0.0 %
Translation differences -1,404 -978 43.6 %
Invested non restricted equity 3,062 3,004 1.9 %
Retained profits 60,593 73,924 -18.0 %
Non-controlling interests 630 0 n/a
Total 71,352 84,422 -15.5 %
       
Non-current liabilities      
Interest-bearing liabilities 28,394 28,036 1.3 %
Other liabilities 1,159 135 755.6 %
Deferred tax liabilities 1,429 1,630 -12.3 %
Provisions 619 1,081 -42.8 %
Total 31,601 30,882 2.3 %
       
Current liabilities      
Trade and other liabilities 43,763 41,900 4.4 %
Current tax payable 719 1,477 -51.3 %
Provisions 1,186 858 38.3 %
Interest-bearing liabilities 4,853 2,573 88.6 %
Total 50,522 46,808 7.9 %
       
Total liabilities 82,123 77,691 5.7 %
       
Equity and liabilities total 153,475 162,112 -5.3 %


 

CONSOLIDATED CASH FLOW STATEMENT, 1000 euros
  1.1.-31.12. 1.1.-31.12. Change %
  2017 2016  
Cash flows from operating activities      
Profit for the period -9,145 11,820 -177.4 %
Adjustments for:      
Non-cash transactions 13,233 2,924 352.6 %
Interest and other financial expenses 1,458 2,038 -28.4 %
Interest income and other financial income 727 -1,224 -159.4 %
Dividends -6 -2 200.0 %
Taxes 675 3,001 -77.5 %
Change in working capital      
Increase/decrease in trade and other receivables 14,749 -110 -13509.2 %
Increase/decrease in inventories -145 -884 -83.6 %
Increase/decrease in trade and other payables 260 -4,810 n/a
Increase/decrease in provisions 134 -24 n/a
Paid interests and other financial expenses -1,458 -2,038 -28.4 %
Received interests and dividends 537 1,224 -56.1 %
Paid taxes -1,765 -3,151 -44.0 %
       
Cash flow from operating activities 19,254 8,765 119.7 %
       
Cash flow from investing activities      
A conditional supplementary contract price for prior subsidiary acquisition 0 -485 -100.0 %
Purchases of property, plant and equipment (PPE) -1,975 -1,410 40.1 %
Proceeds from sales of PPE 210 43 388.4 %
Purchases of intangible assets -3,123 -2,507 24.6 %
Acquisition of subsidiary, net of cash acquired -996 0 n/a
Net cash used in investing activities -5,884 -4,359 35.0 %
       
Cash flow from financing activities      
Proceeds from borrowings 4,000 4,170 -4.1 %
Payments of borrowings -1,138 -6,099 -81.3 %
Payment of finance lease liabilities -638 -611 4.4 %
Dividends paid -4,530 -4,168 8.7 %
Capital investment by non-controlling interests 708 0 n/a
Net cash used in financing activities -1,598 -6,708 n/a
       
Change in cash      
Cash and cash equivalents 1.1. 9,496 12,677 -25.1 %
Effect of currency changes -38 -879 n/a
Cash and cash equivalents 31.12. 21,230 9,496 123.6 %

 

Consolidated statement of changes in equity,1000 euros
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
H Share of non-controlling interest
I Total equity
  A B C D E F G H I
Equity 31.12.2016 6,967 1,504 -978 73,922 3,140 -135 84,420 0 84,422
Total comprehensive income for the period 0 0 -427 -9,065 0 58 -9,435 -77 -9,511
Dividends 0 0 0 -4,530 0 0 -4,530 0 -4,530
Equity-settled share-based payments       265     265 0 265
Changes in ownership interests in subsidiaries                  
Changes of non-controlling interests without change in control 0 0 0   0   0 707 707
Equity 31.12.2017 6,967 1,504 -1,404 60,592 3,140 -77 70,722 630 71,352

 

Business segments 2017, 1000 euros Video and
Broadband
Solutios
Network
Services
Group
External sales      
Services 7,567 92,507 100,074
Goods 134,515 0 134,515
External sales total 142,082 92,507 234,589
Operating profit of segments 4,888 -12,437 -7,549
Financial items     -921
Profit before taxes     -8,470
       
Business segments 2016, 1000 euros Video and
Broadband
Solutions
Network
Services
Group
External sales      
Services 6,813 95,297 102,110
Goods 157,418 0 157,418
External sales total 164,231 95,297 259,528
Operating profits of the segments 16,482 -847 15,635
Financial items     -814
Profit before taxes     14,821


 

Geographical segments 2017, 1000 euros Nordic countries Other Europe Finland Others Group
Sales by origin 28,634 179,884 13,296 12,774 234,589
Assets 154 6,398 43,806 255 50,613
Capital expenditure for the period 80 3,101 4,168 134 7,482
           
           
Geographical segments 2016, 1000 euros Nordic countries Other Europe Finland Others Group
           
Sales by origin 22,483 202,063 17,398 17,584 259,528
Assets 97 13,679 42,570 217 56,563
Capital expenditure for the period 37 1,312 4,122 17 5,488


 

Information per quarter, 1000 euros 10-12/
2017
7-9/
2017
 4-6/
2017
1-3/
2017
10-12/
2016
1-12/
2017
1-12/
2016
 
Video and Broadband Solutions
Order intake 43,424 36,264 42,555 48,116 39,548 170,359 149,011
Net sales 35,429 34,469 36,782 35,403 43,496 142,082 164,231
EBIT 480 1,534 2,057 817 5,309 4,888 16,482
EBIT % 1.4 % 4.5 % 5.6 % 2.3 % 12.2 % 3.4 % 10.0 %
 
Network Services
Order intake 23,273 21,779 21,924 25,531 25,066 92,507 95,297
Net sales 23,273 21,779 21,924 25,531 25,066 92,507 95,297
EBIT -226 -288 -11,316 -606 -975 -12,437 -847
EBIT % -1.0 % -1.3 % -51.6 % -2.4 % -3.9 % -13.4 % -0.9 %
 
Total
Order intake 66,697 58,044 64,478 73,647 64,614 262,866 244,308
Net sales 58,702 56,248 58,706 60,934 68,562 234,589 259,528
EBIT 254 1,246 -9,259 211 4,334 -7,549 15,635
EBIT % 0.4 % 2.2 % -15.8 % 0.3 % 6.3 % -3.2 % 6.0 %

 

Commitments and contingencies, 1000 euros 2017 2016 Change %
Rental liabilities 3,699 3,971 -6.9 %
Lease liabilities 4,656 5,173 -10.0 %
Value of underlying forward contracts 23,169 22,550 2.7 %
Market value of forward contracts -204 334 n/a
Interest rate swap 10,000 10,000 0.0 %
Market value of interest swap -78 -135 n/a
Guarantees 4,479 5,275 -15.1 %
       
The number of employees broken down by following categories 31.12. 2017 2016 Change %
Research and development 150 149 0.7 %
Production and material management 1,026 1,090 -5.9 %
Sales and marketing 194 198 -2.0 %
Administration 76 74 2.7 %
Total 1,446 1,511 -4.3 %

 

  IFRS IFRS IFRS IFRS IFRS
Key figures 2017 2016 2015 2014 2013
Profit and loss account, balance sheet          
Net sales, Meur 234.6 259.5 247.8 197.2 192.8
Change % -9.6 % 4.8 % 25.7 % 2.3 % -0.6 %
Sales outside Finland, % 94.3 % 93.3 % 95.1 % 92.5 % 93.2 %
Operating profit, Meur -7.5 15.6 14.3 11.1 11.0
% of net sales -3.2 % 6.0 % 5.8 % 5.6 % 5.7 %
Profit after financial items, Meur -8.5 14.8 13.9 10.8 10.7
% of net sales -3.6 % 5.7 % 5.6 % 5.5 % 5.5 %
Profit before taxes, Meur -8.5 14.8 13.9 10.8 10.7
% of net sales -3.6 % 5.7 % 5.6 % 5.5 % 5.5 %
Profit for the financial period, Meur -9.1 11.8 11.0 8.5 8.1
 % of net sales -3.9 % 4.6 % 4.4 % 4.3 % 4.2 %
R&D expenditure, Meur 12.1 11.1 11.0 10.3 10.0
% of net sales 5.1 % 4.3 % 4.4 % 5.2 % 5.2 %
Gross investments, Meur 7.5 5.5 16.9 3.7 6.3
% of net sales 3.2 % 2.1 % 6.8 % 1.9 % 3.3 %
Interest bearing liabilities, Meur 33.2 30.6 33.0 24.4 24.3
Shareholder's equity, Meur 71.4 84.4 77.5 70.7 65.6
Total assets, Meur 153.5 162.1 164.5 132.5 124.3
           
Personnel and orders          
Average personnel 1,492 1,514 1,485 1,302 1,306
Order backlog at year end, Meur 57.4 26.9 42.2 15.2 13.1
Orders received, Meur 262.9 244.3 251.3 199.3 188.9
           
Key metrics          
Return on equity, % -11.7 % 14.6 % 14.9 % 12.5 % 12.9 %
Return on capital employed, % -6.6 % 14.8 % 14.2 % 12.2 % 13.0 %
Equity ratio, % 48.3 % 52.5 % 48.3 % 53.4 % 52.7 %
Net gearing, % 16.8 % 25.0 % 26.3 % 9.5 % 13.8 %
Earnings per share, euro -0.50 0.65 0.61 0.48 0.47
Earnings per share fully diluted, euro -0.50 0.65 0.61 0.48 0.46
Shareholders equity per share, euro 3.94 4.66 4.28 3.94 3.73
           
Teleste share          
Highest price, euro 9.62 10.24 9.88 5.29 4.47
Lowest price, euro 6.51 7.29 5.32 4.25 3.78
Closing price, euro 6.68 8.86 9.80 5.27 4.25
Average price, euro 8.19 8.69 7.42 4.67 4.17
Price per earnings -13.3 13.6 16.1 11.0 9.1
Market capitalization, Meur 126.8 160.6 177.6 98.7 79.6
Stock turnover, Meur 16.8 30.6 24.6 10.9 9.2
Turnover, number in millions 2.0 3.5 3.3 2.3 2.2
Turnover, % of share capital 10.8 % 18.5 % 17.5 % 12.5 % 11.7 %
Average number of shares 18985588 18985588 18985588 18918869 18743507
Number of shares at the year-end 18985588 18985588 18985588 18985588 18816691
Average number of shares, diluted w/o own shares 18202396 18169002 18036667 17729215 17513799
Number of shares at the year-end, diluted w/o own shares 18172350 18216369 18121635 17795934 17838599
Paid dividend, Meur 1.8 4.5 4.2 3.6 3.3
Dividend per share, euro 0.10*  0.25 0.23 0.2 0.19
Dividend per net result, % neg. 38.3 % 37.7 % 41.7 % 40.8 %
Effective dividend yield, % 1.5 % 2.8 % 2.3 % 3.8 % 4.5 %

 

* The Board's proposal to the AGM

 

Treasury shares Number of
shares
% of shares % of votes
Teleste companies own shares 31.12.2017 863,953 4.55% 4.55%

 

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 31.12.2017 Number of shares % of share capital
     
Tianta Oy 4,409,712 23.2
Mandatum Life Insurance Company Limited 1,679,200 8.8
Ilmarinen Mutual Pension Insurance Company 1,084,475 5.7
Teleste Oyj 863,953 4.6
Kaleva Mutual Insurance Company 824,641 4.3
Varma Mutual Pension Insurance Company 521,150 2.7
The State Pension Fund 500,000 2.6
Sijoitusrahasto Taaleritehdas Mikro Markka 238,109 1.3
Ingman Finance Oy Ab 235,000 1.2
Mariatorp Oy 225,000 1.2

 

Shareholders by sector Number of shareholders % of Owners Number of shares % of shares
         
Households 5,267 93.8 4,572,771 24.1
Public sector institutions 4 0.1 2,115,725 11.1
Financial and insurance institutions 20 0.4 4,551,632 24.0
Corporations 259 4.6 7,545,734 39.7
Non-profit institutions 26 0.5 82,385 0.4
Foreign and nominee registered owners 42 0.7 117,341 0.6
Total 5,618 100.0 18,985,588 100.0
Of which nominee registered 9 0.2 1,137,630 6.0
         
Number of shares Number of shareholders % of share-holders Number of shares % of shares
         
1 - 100 1,509 26.9 91,554 0.5
101 - 500 2,400 42.7 643,713 3.4
501 – 1,000 766 13.6 616,911 3.2
1,001 – 5,000 756 13.5 1,660,943 8.7
5,001 – 10,000 83 1.5 604,724 3.2
10,001 – 50,000 74 1.3 1,476,509 7.8
50,001 – 100,000 9 0.2 657,755 3.5
100,001 – 500,000 13 0.2 2,750,333 14.5
500,001 - 8 0.1 10,483,146 55.2
Total 5,618 100.0 18,985,588 100.0
of which nominee registered  9 0.2 1,137,630 6.0

 

The following assets are liabilities were preliminary recognised in the acquisition IQU Systems GmbH:
1 000 € Recognised fair values on acquisition
Fair values used in consolidation  
Trade marks (inc. in intangible assets) 82
Customer relationship  (inc. in intangible assets) 146
Technology  (inc. in intangible assets) 216
Inventories 267
Trade receivables 376
Book values used in consolidation  
Tangible assets 107
Intangible assets 5
Other receivables 8
Cash and cash equivalents 4
Total assets 1,211
   
Book values used in consolidation  
Interest-bearing liabilities 243
Trade payables 271
Deferred tax liabilites 89
   
Other liabilities 17
Total liabilities 620
   
Net identifiable assets and liabilities 591
   
Total consideration 2,050
Goodwill on acquisition 1,459
   
Consideration paid in cash -1,000
Cash and cash equivalents in acquired subsidiary 4
Total net cash outflow on the acquisition -996

 

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


DISTRIBUTION:
Nasdaq Helsinki
Main Media

www.teleste.com