Half Year Financial Report
11 August 2017 at 08:30 am
TECNOTREE CORPORATION HALF YEAR REPORT 1 JAN – 30 JUNE 2017 (UNAUDITED)
Tecnotree is a global provider of IT solutions for the management of services, products, customers and revenue for Communications Service Providers. Tecnotree helps customers to monetise and transform their business towards a marketplace of digital services. Together with its customers, Tecnotree empowers people to self-serve, engage and take control of their own digital life.
OPERATING RESULT SIGNIFICANTLY IMPROVED COMPARED TO LAST YEAR ALTHOUGH NET SALES IS LOWER
- Second quarter net sales were EUR 15.1 (16.2) million.
- Financial situation and liquidity remain critical.
- The adjusted operating result for the quarter was EUR 3.6 (1.0) million and operating result EUR 3.1 (1.0) million.
- The adjusted result for the quarter was EUR 1.2 (-2.6) million and result EUR 0.7 (-2.6) million.
- The order book at the end of the period stood at EUR 30.4 (31 December 2016: 24.9) million.
- Second quarter cash flow after investments was EUR 0.6 (-0.4) million.
- Earnings per share were EUR 0.01 (-0.02).
- The company signed maintenance and support contract with a leading operator group valued at over EUR 14 million and three-year Managed Services agreement with a leading Middle Eastern Operator valued at EUR 8.2 million.
- Net sales for the review period were EUR 27.3 (29.2) million.
- The adjusted operating result was EUR 3.7 (-1.4) and the operating result EUR 2.9 (-1.4) million.
- The adjusted result for the period was EUR -0.7 (-7.1) million and the result EUR -1.5 (‑7.1) million.
- Cash flow after investments for the review period was EUR 3.2 (-2.3) million and the company’s cash and cash equivalents were EUR 1.1 (31 December 2016: 3.5) million.
- Earnings per share were EUR -0.01 (-0.06).
- The company announced about EUR 5 million further cost cuts in March 2017
|Net sales, MEUR||15.1||16.2||27.3||29.2||60.1|
|Adjusted operating result, MEUR 1||3.6||1.0||3.7||-1.4||1.2|
|Operating result, MEUR||3.1||1.0||2.9||-1.4||-10.1|
|Result before taxes, MEUR||2.2||-1.4||0.9||-5.1||-5.6|
|Adjusted result for the period, MEUR 2||1.2||-2.6||-0.7||-7.1||-4.2|
|Result for the period, MEUR||0.7||-2.6||-1.5||-7.1||-6.3|
|Earnings per share, basic, EUR||0.01||-0.02||-0.01||-0.06||-0.05|
|Order book, MEUR||30.4||29.8||24.9|
|Cash flow after investments, MEUR||0.6||-0.4||3.2||-2.3||-0.9|
|Change in cash and cash equivalents, MEUR||-0.1||-0.3||-2.2||-3.3||-3.0|
|Cash and cash equivalents, MEUR||1.1||3.1||3.5|
|Equity ratio %||17.4||13.1||17.9|
|Net gearing %||202.5||323.7||195.6|
|Personnel at end of period||719||926||818|
1 Adjusted operating result = operating result before one-time costs. Details are given in the section “Result analysis”.
2 Adjusted result for the period = result for the period without restructuring gains in financial items in Q4 2016 and one-time costs in operating costs.
With reference to the new guidelines on alternative performance measures issued by the European Securities and Markets Authority (ESMA), Tecnotree uses the alternative performance measures “adjusted operating result” and “adjusted result for the period”. These measures are defined in the footnote to the above table, and in the table “Income statement, Key figures” under the section “Result analysis”.
Unless otherwise stated, all figures presented below are for the review period 1-6/2017 and the figures for comparison are for the corresponding period 1-6/2016.
CEO Padma Ravichander:
The results for Q2 2017, truly reflect that the path undertaken by the company, in the last few quarters is in the right direction. The cost optimization, which was the most important initiative, the company undertook in Q3 2016, and continue this year, has started yielding positive outcomes, and it has reflected in the result. The company also prudently ensured that the cost reduction activities did not adversely affect the revenues for this quarter.
Some of the major orders obtained in this quarter include Support & Maintenance for existing customers in at LATAM and the Middle East. Also during this period two customers, Mauritius Telecom and Nepal Telecom went live on the Tecnotree BSS Stack and Tecnotree Whole Sale Billing platforms respectively.
While the financial performance in the review period is moderate, the trend is positive. The revenue has slightly decreased, but the cost level is further reducing. However, given the vagaries of the Business, company intends further optimize the costs in the coming quarters as previously announced in Q1 2017.
We are certainly encouraged by the progressively positive results of the second quarter compared to previous quarter and previous year same quarter. In the next half of 2017, from a business perspective, Tecnotree will continue to focus on the internal transformation of the company in the following areas:
- Further reducing operating expenses
- Consolidating and rationalizing product portfolio,
- Building greater level of productisation and re-use
Thus improving overall quality, profitability and attractiveness of our products.
RISKS AND UNCERTAINTY FACTORS
The risks and uncertainty factors for Tecnotree are explained in the 2016 Board of Directors’ Report and in the notes to the Financial Statements.
Risks and uncertainties in the near future
Tecnotree’s risks and uncertainties in the near future relate to financial risk, availability of funding and sufficiency, projects, to their timing, to trade receivables and receivables from construction contracts and to changes in foreign exchange rates. Having sufficient cash funds and the development of net sales are the most significant single risks.
The liquidity of the company continues to remain tight and hence the financial situation of the company remains critical. At the group level, the amount of overdue trade payables have remained unchanged, but in the parent company they have increased. The company continues to be engaged aggressively to collect its receivables from the key customers and negotiating with financiers to secure some short term financing for additional liquidity. In addition, the company has been seeking long-term external funding through investors, which could be implemented through company or restructuring arrangements. The company’s ability as going concern is dependent on the successful completion of the financing transactions that are currently under negotiations and its ability to continue to execute payments according to debt restructuring payment programme. The company has agreed on postponing the payments scheduled on 30 June 2017 until 31 August 2017 with its two biggest creditors.
The stringent financial situation and uncertainty of sufficient funding create uncertainty about obtaining new customers.
The company has sales in several countries where the country’s central bank has a shortage of foreign currency. This causes additional delays in payments, costs and even the risk of not receiving payment at all.
At the end of June 2017, the Group’s shareholders’ equity of stood at EUR 8.6 million. However, the shareholders’ equity of the parent company was EUR 5.4 million negative.
EVENTS AFTER THE END OF THE PERIOD
Tecnotree announced in July to start co-operation negotiations in Finland regarding the reduction of maximum twenty positions on financial and productive grounds.
PROSPECTS IN 2017
The company estimates that its net sales will be less than in the previous year, but the operating result will improve.
In the tight financial situation, Tecnotree will continue to implement additional cuts of operating expenses approximately EUR 5 million announced previously in March 2017. Mostly, the cost savings will realize in 2018.
As in previous years, variations in the quarterly figures are to be expected.
Tecnotree is holding a conference for analysts, investors and the media to present its half year financial report on 11 August 2017 at 10.00 am in the Tapiola conference room at the Scandic Hotel Simonkenttä, Simonkatu 9, Helsinki. The result will be presented by CEO Padma Ravichander and the conference will be held in English. The material to be presented at the press conference will be available at www.tecnotree.com.
Board of Directors
Mrs. Padma Ravichander, CEO, tel. +97156414 1420
Ms. Kirsti Parvi, CFO, tel. +358 (0)50517 4569