2014-04-25 08:30:02 CEST
2014-04-25 08:30:06 CEST
REGULATED INFORMATION
Ixonos - Interim report (Q1 and Q3)
IXONOS: INTERIM REPORT FOR THE PERIOD 1 JANUARY - 31 MARCH 2014
Helsinki, Finland, 2014-04-25 08:30 CEST (GLOBE NEWSWIRE) -- Ixonos Plc
Stock Exchange Release 25 April 2014 at 9:30
Interim report for the period 1 January - 31 March 2014
Q1 LOSS-MAKING, PROFITABILITY IS EXCEPTED TO IMPROVE DURING THE REST OF THE YEAR
The financial period in brief (last year's reference figures inside brackets):
-- Turnover for the financial period was EUR 6.1 million (2013: EUR 10.8
million), a change of −43.9 per cent.
-- Earnings before interest, taxes, depreciation and amortization
(EBITDA) were EUR -2.3 million, -38.2
percent of turnover
, (2013: EUR -1.2 million, -10.9
percent of turnover
).
-- Operating profit before non-recurring items was EUR −2.5 million, −41.9 per
cent of turnover (2013: EUR -1.9 million, - 17.7 per cent of turnover).
-- EBITDA for reporting period was burdened by non-recurring items of EUR 0.4
million related to lay-offs in Denmark and Slovakia.
-- Operating profit was EUR −2.9 million (2013: EUR -1.9 million, -17.7 per
cent of turnover), −48.1 per cent of turnover.
-- Net profit was EUR −2.8 million (2013: EUR -1.6 million, -15.1 per cent of
turnover), −46.0 per cent of turnover.
-- Earnings per share were EUR -0.04
(2013: EUR -0.12).
-- Net cash flow from operating activities was EUR −1.7 million (2013: EUR
-3.1 million).
-- Directed share issue and convertible bond strengthened the financial
position and balance sheet.
-- New remarkable owner to Ixonos
Future prospects in brief
-- The turnover for the 2014 is expected to be in a range of EUR 26 - 34
million and EBITDA is expected to be positive.
Esa Harju, President and CEO:"The first quarter of 2014 has taken us forward in our renewal process. Our
monthly revenue levels have started to stabilize, although Q1 was still lower
than the previous quarter. As stated earlier, we expect our revenue levels to
start to grow again during 2014.
We continued to streamline our operations and costs, which will result in
further cost savings during 2014. These actions brought some additional
non-recurring costs into Q1.
We have structured our financing and strengthened our balance sheet with
convertible bond and having directed share issue, as described in the
announcements on 7 March and 31 March. With these actions we have improved our
cash position, as well as brought in a new significant shareholder to our
company.
As per our renewed strategy, we help our customer companies embrace
digitalisation, Internet and mobility for productivity and unique user
experiences for competitive advantage. Our renewed ixonos. com web pages also
reflect this new focus and direction now.
We have closed several new deals during Q1 with important new customers. Many
are delivering revenue already, and will have notable impact on our full-year
development. We believe that our results will improve during the year."
OPERATIONS
Ixonos is a design-led technology company that provides creative digital
solutions and services for customer companies in selected target industries. We
help our customer companies embrace digitalisation, Internet and mobility for
productivity and unique user experiences for competitive advantage.
Our core strength and unique differentiator is our ability to combine our
world-class design capability with strong technical implementation skills,
hence offering total end-to-end solutions that deliver strategic value to our
customers.
Ixonos' design services cover digital, mobile, web design as well as service
and industrial design. These holistic design services consist of design
strategy, design and user research, design innovation and workshops, visual and
interaction design, and prototyping for various connected devices and services
and ranging to complete cross-platform design.
We excel in creative software development, both in embedded SW as well as in
online SW. We utilise open standard technologies (e.g. Linux, Android). We
combine the SW development capabilities with our world-leading technology
knowledge and our deep understanding of user interface design and usability and
excellent project management capabilities. This enables us to provide solutions
for our customers with quality and agility. Our technology competences cover
e.g. wireless connectivity, RF, audio, imaging and video technologies.
As per our sharpened strategy in October 2013 our focus business areas are:
- Industrial Internet: Providing embedded and creative digital solutions for
the Industrial Internet. We help industrial companies to transform from
proprietary technologies into standard open source technologies enabling
increased productivity and value for their customers. We provide digital
innovations that help them in their transformation to new digitally connected
service business. Ixonos partners with leading chipset manufacturers, providing
state-of the art platforms for our solutions. Our clientele in this segment
consists of companies such as Kone, Outotec, Cargotec, Grundfos and Metso.
- Media: Helping TV broadcasters, studios, production companies and operators
to offer increasingly interactive and personalised viewing experiences, as well
as new business models, through innovations such as Ixonos TV Compass™ 2nd
screen solution. Our clientele in this segment consists of companies such as
Fox, ESPN, MBC Group, Warner Brothers and Turner Entertainment.
- Retail & brands: Helping consumer-facing retail and service brands to embrace
Internet-based digital and mobile solutions for excelling in omni-channel
retailing, customer experience, productivity and service innovation. Our
clientele in this segment consists of companies such as Stockmann and Iittala.
- Enterprise IT and ISVs: Providing secure and robust cloud and managed hosting
services with Ixonos Elastic Cloud™ solution. Ixonos virtual private cloud has
been designed for demanding enterprise use. It combines the security of a
private cloud with the scalability of the public clouds. Information is secured
and stored in our machine rooms in Finland. Ixonos Elastic Cloud™ is also used
as an operating platform for several end-to-end solutions. Our clientele in
this segment consists of companies such as Fonecta, eZ Systems, Improlity,
Efecte, Nokia and Propentus.
We continue to serve our customers also in other market segments, including:
- Smart Device OEMs, where our customers include Samsung, Huawei and Nokia.
- Automotive and Transportation, where our customers include Marcopolo,
Luminator, AvMap and tier 1 car manufacturers.
- Finnish Public Sector, where our customers include Finland's Ministry of
Finance, Finland's Ministry of Social Affairs and Health as well as Tiera.
- Defence & Security, where our customers include Cassidian and Savox
Communications.
- Mobile Operators, where our customers include Orange, Vodafone and
TeliaSonera.
Organisation
Our organisation consists of:
- Sales & Marketing function in charge of customer relationships, sales
pipeline, order intake and profitable revenue generation.
- Solution Creation function in charge of customer project management and
profitable delivery, as well as offering portfolio management and R&D.
- Design function in charge of the design capabilities that are a unique
differentiator in our Dream Design Deliver approach.
- The whole organisation's operations are supported by support functions:
Finance & Control and Human Resources.
Locations
Our offices are in Finland, Denmark, Great Britain, Slovakia, and the United
States. Additionally we have employees in Estonia and Germany. The ramp down of
locations in Denmark and South Korea is expected to be concluded during the
spring 2014.
- Our Solution Creation sites are located in Finland and Slovakia.
- Our Design Studios are located in Finland, Great Britain, the United States
and Slovakia.
- Our Sales offices are located in Finland, Great Britain, Germany and the
United States.
SEGMENT REPORTING
Ixonos reports its operations as a single segment. According to the new
strategy and organisational structure, Ixonos is seen to be one cash generating
unit and segment.
TURNOVER
Turnover in the first quarter was EUR 6.1 million (2013: EUR 10.8 million),
43.9 per cent less than in the previous year.
During the review period, no single customer generated a dominating share of
the turnover, or exceeded more than one fourth of the total turnover.
FINANCIAL RESULT
Operating profit for the first quarter was EUR −2.9 million (2013: EUR -1.9
million) and profit before tax was EUR −3.2 million (2013: EUR −2.0 million).
Profit for the first quarter was EUR −2.8 million (2013: EUR −1.6 million).
First -quarter earnings per share were EUR −0.04 (2013: EUR −0.12). Cash flow
from operating activities per share in the first quarter was EUR -0.02 (2013:
EUR -0.23).
RETURN ON CAPITAL
Consolidated return on equity (ROE) was −225.5 per cent (2012: -75.0 per cent)
and return on investment (ROI) was −88.7 per cent (2012: -33.6 per cent).
INVESTMENTS
Investments during the review period totalled EUR 0.3 million (2013: EUR 0.2
million). Investments consist mainly of capitalisation of R&D expenditure.
BALANCE SHEET AND FINANCING
The balance sheet total was EUR 26.8 million (2013: EUR 32.1 million).
Shareholders' equity was EUR 2.7 million (2013: EUR 9.9 million). The equity
ratio was 10.0 per cent (2013: 30.8 per cent). The group's liquid assets at the
end of the review period amounted to EUR 0.4 million (2013: EUR 0.7 million).
Non-controlling interest of the equity was EUR 0.2 million.
At the end of the review period, the balance sheet showed EUR 10.9 million
(2013: EUR 10.2 million) in bank loans. This amount includes overdraft in use.
In the arrangement, the financiers party to the Company's main financing
agreement accepted a period free of instalments of the loans until 15 March
2015. Company announced its financial structuring on 7 March 2014.
The bank loans have covenants attached to them. These covenants are based on
the equity ratio and on the proportion of interest-bearing bank loans to the
12-month rolling EBITDA. At 31 March 2014, the company did not meet the terms
of the covenants. The company's non-current borrowings are therefore presented
as current liabilities, in accordance with IFRS. Bank loans under the covenants
were at 31 March 2014 EUR 6.4 million (2013: EUR 7.6 million).
The company has EUR 3.5 million of long-term convertible bond and EUR 1,0
million of conventional long-term loan from Turret Oy Ab. The terms of the
convertible bond were announced on 7 March 2014.
GOODWILL
On 31 March 2014, the consolidated balance sheet included EUR 10.8 million in
goodwill. This is EUR 1.6 million less than at the same time in 2013. The
amount of goodwill has been reduced due to impairment recognized in September
2013.
The following parameters were used in the goodwill impairment testing:
-- The review period of 4 years (instead of former 5 years).
-- WACC discount rate 12% (remained).
-- 1% growth estimate used for terminal value calculation (remained).
Due to the increased speed of development in technology the review period has
been reduced to 4 years. The reduction of the review period led to the goodwill
impairment recognized in September. The company made an impairment test on 31st
March 2014. The present value of future cash flows exceeded the carrying value
of assets by EUR 0.9 million and no impairment was recognized.
CASH FLOW
Consolidated cash flow from operating activities during the review period was
EUR −1.7 million (2013: EUR -3.1 million). By 31 March 2014, the company had
sold EUR 0.8 million (2013: EUR 2.2 million) in accounts receivable to reduce
their turnaround time.
PERSONNEL
The number of personnel averaged 409 (2013: 568) during the review period. At
the end of the period, the company had 378 (2013: 557) employees. Staff
decreased in Finland as well as abroad. At the end of the review period, the
Group had 268 employees (2013: 396) in Finnish companies, while Group companies
in other countries employed 110 (2013: 161). During review period the number of
employees decreased by 62.
SHARES AND SHARE CAPITAL
Share turnover and price
Share related indicators have been adjusted by share issues and de-splitt in
2013. During the financial period, the share issue adjusted highest price of
the company's share was EUR 0.16 (2013: EUR 0.47) and the lowest price was EUR
0.08 (2013: EUR 0.20). The closing price on 31 March 2014 was EUR 0.11 (2013:
EUR 0.21). The weighted average time and de-split adjusted price was EUR 0.12
(2013: EUR 0.28). The number of shares traded during the review period was
19.437.517 (2013: 4.240.625), which corresponds to 25.6 per cent (2013: 12.0
percent) of the total number of shares at the end of the review period. The
number of shares has been affected by rights issue in February 2013, de-split
in November 2013 and second rights issue in 2013. According to the closing
price 31 March 2014, the market value of the company's shares was EUR 8.344.419
(2013: EUR 10.571.739).
Company decided to issue in a directed share issue 15.255.177 new shares to be
subscribed for by Holdix Oy. The subscription price of the shares in the share
issue was EUR 0.12 per share amounting. The shares were registered on 4 April
2014. The new shares are estimated to be in trading approximately on 16 May
2014.
Share capital
At the beginning of the review period, the company's registered share capital
was EUR 585,394.16 and the number of shares was 75,858,359. At the end of the
review period, registered share capital was EUR 585,394.16 and the number of
shares was 75,858,359. After the registration of directed share issue on 4
April 2014, the number of shares is 91.113.536.
Option plans 2011 and 2014
2011 plan
The Board of Directors of Ixonos Plc decided on 30 November 2011 to grant new
options. This decision was based on the authorisation given by the Annual
General Meeting on 29 March 2011.
The options were issued by 31 December 2011, free of charge, to a subsidiary
wholly owned by Ixonos Plc. This subsidiary will distribute the options, as the
Board decides, to employees of Ixonos Plc and other companies in the Ixonos
Group, to increase their commitment and motivation. Options will not be issued
to members of the Board of Directors of Ixonos Plc or to the Ixonos Group's
senior management (Ixonos Management Invest Oy shareholders).
The options will be marked IV/A, IV/B and IV/C. A total of 600,000 options will
be issued. According to the terms of the options, the Board of Directors
decides how the options will be divided between option series and, if needed,
how undistributed options will be converted from one series to another.
Each option entitles its holder to subscribe for one new or treasury share in
Ixonos Plc. The shares that can be subscribed for with options comprise 3.82
per cent of all Ixonos Plc shares and votes on a fully diluted basis.
The exercise period for the IV/A options will begin on 1 October 2014, for the
IV/B options on 1 October 2015 and for the IV/C options on 1 October 2016. The
exercise periods for all options will end on 31 December 2018. The exercise
price for each option series is a trade volume weighted average price at NASDAQ
OMX Helsinki. The exercise prices will be reduced by the amount of dividends,
and they can also be adjusted under other circumstances specified in the option
terms.
In order to ensure the equal treatment of shareholders and the 2011 stock
option holders and taking into account the adjustment made on 30 October 2013
following the consolidation of the company's shares, the Board of Directors of
Ixonos has due to the Rights Offering adjusted the subscription ratio and the
subscription price of the 2011 stock options in accordance with the terms and
conditions of the 2011 stock options. As regards stock options IV/A, the
subscription ratio shall be amended to 5.022 and the subscription price shall
be amended to EUR 0.291 per share. As regards stock options IV/C, the
subscription ratio shall be amended to 5.022 and the subscription price shall
be amended to EUR 0.208 per share. The option plan's IV/B options have been
cancelled.
The total amount of shares is rounded down to full shares in connection with
subscription of the shares and the total subscription price is calculated using
the rounded amount of shares and rounded to the closest cent. Due to the above
adjustments concerning stock options IV/A, the adjusted maximum total number of
shares to be subscribed for based on the 2011 stock options shall be 3.013.313.
2014 plan
The Board of Directors of Ixonos Plc decided to issue stock options on 18
February 2014, on the basis of the authorization granted by the Extraordinary
General Meeting held on 30 October 2013.
The stock options will be offered to the global management team and certain key
personnel of Ixonos Plc and its subsidiaries for the purpose of improving
commitment and motivation. The stock options will be marked as series 2014A,
2014B and 2014C. The aggregate number of stock options is 5.000.000. The Board
of Directors will, in accordance the terms and conditions of the stock options,
decide on the allocation of the stock options between different series and, if
necessary, on the conversion of stock options that has not been allocated into
another series of stock options.
Each option entitles its holder to subscribe for one new or treasury share in
Ixonos Plc. On 18 February 2014, the shares that can be subscribed for with
options comprise 5.96 per cent of all Ixonos Plc shares and votes on a fully
diluted basis.
The share subscription period with 2014A stock options starts on 1 March 2016,
with 2014B stock options on 1 March 2017 and with 2014C stock options on 1
March 2018. The share subscription period ends with all stock options on 31
December 2018. The share subscription price for each series is the volume
weighted average price of the company's share on the Helsinki Exchanges during
the period 1 March to 31 May 2014 for 2014A, 1 January to 31 March 2015 for
2014B and 1 January to 31 March 2016 for 2014C. The subscription price may be
decreased with e.g. the amount of dividends paid and may also otherwise be
subject to change in accordance with the terms and conditions of the stock
options.
Shareholders
On 31 March 2014, the company had 4.161 shareholders (2013: 3.348). Private
persons owned 53.0 per cent (2013: 51.8 per cent) and institutions 47.0 per
cent (2013: 48.2 per cent) of the shares. Foreign ownership was 4.0 per cent
(2013: 9.0 per cent) of all shares.
Related-party transactions
The company has converted EUR 3.5 million short-term loans into long-term
convertible loan and raised EUR 1.0 million long-term conventional interest
bearing loan from Turret Oy Ab. As collateral for the conventional loan of 1.0
million the company has put up corporate mortgage bonds.
OTHER EVENTS DURING THE FINANCIAL PERIOD
Market events in the review period
Ixonos presented its capabilities in several leading industry events, including
the Mobile World Congress in Barcelona, the CES in Las Vegas, and the 2nd
Screen Summits in Las Vegas and Barcelona.
We organized the official opening of the San Francisco design studio in early
February, and our focus towards the US and European markets has been clear in
our activities. The demand for our services among the selected business areas
is good and our value promise remains strongly relevant. Especially the market
around the Industrial Internet in the Nordics has evolved to the level of clear
customer solution demands.
To accompany the sharpened focus on sales activities, the company's website and
brand identity has been renewed. The launch of the new www.ixonos.com has
gained positive feedback from many stakeholders.
2014 option plan
Ixonos has published stock exchange release of new option plan on 18th of
February 2014. The terms of option plan has been published in stock exchange
release.
Financing arrangements in March 2014
The board of directors of Ixonos Plc has, by virtue of the authority granted by
the general meeting on 30 October 2013, decided to direct a convertible capital
loan with a capital of 3.5 million euro and attached option rights or other
special rights referred to in Chapter 10 Section 1(2) of the Finnish Limited
Liability Companies Act (624/2006 as amended) to Turret Oy Ab for subscription
in deviation from the pre-emptive subscription right of the shareholders of the
Company. The Special Rights entitle Turret or the holder of the Special Rights
to subscribe new shares of Ixonos in accordance with the terms and conditions
concerning the Loan and the Special Rights.
The Loan and related Special Rights have been issued in order to strengthen the
Company's position of liquid assets, self-sufficiency and working capital and
to optimize the capital structure. Hence, there are weighty financial reasons
for taking the Loan and granting the Special Rights. The Loan's issuing price
and conversion price have been defined on market terms.
The main terms of the Terms and Conditions of the Loan and the Special Rights
are the following:
-- The amount of the Loan is EUR 3.5 million.
-- A fixed annual interest of 6.75 per cent is paid on the principal of the
Loan.
-- The right of conversion attached to the Loan entitles to a maximum amount
21.875.000 of the Company's new shares.
-- The rate of conversion is fixed at EUR 0.16, and it shall be revised as set
out in the Terms and Conditions.
-- The term of the Loan is 7 March 2014 - 7 March 2018.
-- The Loan is a capital loan, described in Chapter 12 Section 1 of the
Limited Liability Companies Act, the principal, interest and other
reimbursement of which are subordinate to all other debts upon dissolving
of the Company and bankruptcy of the Company.
The Loan and directing the attached Special Rights to Turret for subscription
are related to the Company's plan, reported on on 8 October 2013, to gather, in
addition to the capital received from the share issue between 19 November and 3
December 2013, a maximum of EUR 3.5 million by issuing shares or option rights
or other special rights entitling to shares, defined in Chapter 10 Section 1 in
the Limited Liability Companies Act, in a share issue not based on the
pre-emptive subscription right of shareholders.
In connection with the share issue on 7 November 2013, Turret gave the Company
an undertaking according to which Turret will at the earliest on 31 December
2014 require the Company to repay the short-terms loan granted by Turret,
altogether around EUR 3.5 million, as the conditions of the Undertaking were
otherwise met. According to the Undertaking accepted by the Company, Turret has
the right, if they so demand, to convert the Debt in question in full or in
part into share capital, a hybrid loan or another equity instrument pursuant to
IFRS that is issued by Ixonos on arms' length terms. The instrument may include
share subscription rights in the form of convertible capital loan or warrants
or in other forms. In the event that the Debts remain fully or partially unpaid
after 31 December 2013, Ixonos undertakes to also negotiate on the conditions
of the Debt in order to make them market-based if Turret so requests.
Turret has subscribed the Loan and associated Special Rights on 7 March 2014
and the board of directors of the Company has accepted Turret's subscription.
Turret has paid the Loan to the Company in full by setting off the principal of
the Debts to Turret, amounting to altogether EUR 3.5 million.
The Company's board of directors has also decided to conclude a loan agreement
on long-term complementary financing in borrowed capital terms of EUR 1.0
million and given some of the Company's business mortgages as collateral.
In the arrangement, the financiers party to the Company's main financing
agreement accepted a period free of instalments of the loans of the year 2014
until 15 March 2015 in such a way that the instalment falling due during the
period free of instalments are transferred to the end of the term of the loan
into one bullet repayment without otherwise extending the term of the loan.
New working capital statement on 7 March 2014
The Company estimates that is has sufficient working capital for its operations
for the next 12 months from the end of the financial reporting period, provided
that sufficient measures are taken to strengthen the balance sheet and
financial forecasts for year 2014 will materialize.
As part of this, the Company made certain agreements on 7 March 2014 with its
creditors to strengthen the working capital position of the company, as
announced above. The company will continue to take measures to strengthen its
balance sheet and cash position and to streamline its costs and operational
structures.
Measures which are at the Company's disposal to strengthen its balance sheet
include: (i) additional financing, (ii) Board of Directors' authorization to
issue new shares or similar stock issuance rights and mechanisms, (iii) actions
around restructuring company operations for further efficiency, (iv)
postponement of planned investments, (v) divestment of company assets or
functions, or (vi) combinations of the above.
Directed share issue in March 2014
The Board of Directors of Ixonos Plc decided to issue in a directed share issue
15.255.177 new shares to be subscribed for by Holdix Oy in derogation from the
pre-emptive subscription right of the shareholders on the authorisation of the
Annual General Meeting on 24 April 2013 and the Extraordinary General Meeting
on 30 October 2013. The subscription price of the Shares in the Share Issue was
EUR 0.12 per Share. The subscription price has been defined as the mean price
weighted with the trading amounts of the last three (3) months rounded to the
nearest cent. The funds derived from the Share Issue will be used to
strengthen the balance sheet and financial standing of the group and the
Company, so there are weighty financial reasons for the Share Issue and for
deviating from the pre-emptive right of the shareholders as described in the
Finnish Limited Liability Companies Act.
Holdix Oy subscribed for the Share Issue in full on 31 March 2014. The Board of
Directors of the Company has accepted Holdix Oy's share subscription. According
to what was stated to the Company, the investment of Holdix Oy in the Company
is meant to be a long-term investment. The Shares issued and subscribed for in
the Share Issue are equivalent to approximately 16.74 per cent of all of the
Company's shares and votes after the Share Issue.
EVENTS AFTER THE FINANCIAL PERIOD
Company held annual general meeting on 2 April 2014. The minutes of annual
general meeting and decisions are presented in Company's internet page
www.ixonos.com .
RISK MANAGEMENT AND NEAR-FUTURE UNCERTAINTY FACTORS
Ixonos Plc's risk management aims to ensure undisturbed continuity and
development of the company's operations, support attainment of the commercial
targets set by the company and promote increasing company value. Details on the
risk management organisation and process as well as on recognised risks are
presented on the company's website at www.ixonos.com.
Changes in key customer accounts may have adverse effects on Ixonos'
operations, earning power and financial position. Should a major customer
switch its purchases from Ixonos to its competitors or make forceful changes to
its own operating model, Ixonos would have limited ability to acquire, in the
short term, new customer volume to compensate for such changes.
Part of the company's business operations is based on fixed-price project
deliveries. Fixed-price projects may include risks related to their duration
and content. These risks are being managed by means of contract management as
well as project management.
The reduction and rationalisation of the company's operations causes one-time
expenses, such as redundancy payments in various countries. This increases the
company's need for short-term financing. The company manages this need by
creating, together with financiers, adequate buffers to ensure sufficient funds
as well as by facilitating the circulation of working capital.
The company's balance sheet also includes a significant amount of goodwill,
which may still be impaired should internal or external factors reduce the
profit expectations of the company's cash flow. Goodwill is tested during the
final quarter of each year and, if necessary, at other times.
Deferred tax assets in company's balance sheet are subject to future profit
expectations. There is risk of impairment related to deferred tax assets if the
profit expectations are not materialized.
The company's financial agreements have covenants attached to them. A covenant
breach may increase the company's financial expenses or lead to a call for
swift partial or full repayment of non-equity loans. The main risks related to
covenant breaches are associated with EBITDA fluctuation due to the market
situation and with a potential need to increase the company's working capital
through non-equity funding. The company manages these risks by negotiating with
financiers and by maintaining readiness for various financing methods.
Although the company considers that it will be able to cover its need for
working capital over the next twelve months through various means, there is no
guarantee that the company will be able to ensure sufficient working capital
under all circumstances. A shortage of working capital may have a substantial
adverse effect on the company's operations, result and financial position.
LONG-TERM GOALS AND STRATEGY
In the long term, Ixonos aims to achieve an operating profit of at least 10 per
cent. To reach its long-term goals, Ixonos focuses its strategy on deepening
the company's product, solution and service operations as well as on new
accounts in selected industries.
In accordance with its strategy, Ixonos continues to strengthen and expand its
customer base by focusing on offering products, solutions and services in
particular for industrial companies, media companies, retailers and brands,
organisation IT and ISVs, and to other customers in Finland as well as
internationally.
FUTURE PROSPECTS
-The turnover for the 2014 is expected to be in a range of EUR 26 - 34 million
and EBITDA is
expected to be positive.
NEXT REPORTS
The interim report for the period 1 January - 30 June 2014 will be published on
Wednesday 30 July 2014.
IXONOS PLC
Board of Directors
For more information, please contact:
Ixonos Plc
- Esa Harju, President and CEO, tel. +358 40 844 3367, esa.harju@ixonos.com
- Teppo Talvinko, CFO, tel. +358 40 715 3660, teppo.talvinko@ixonos.com
Distribution:
NASDAQ OMX Helsinki
Main media
THE IXONOS GROUP
ABBREVIATED FINANCIAL STATEMENTS 1 January - 31 March 2014
Accounting policies
This interim report has been prepared in accordance with IAS 34 (Interim
Financial Reporting) and the accounting policies for the annual financial
statement of 31 December 2013. The IFRS amendments and interpretations that
entered into force on 1 January 2014 have not affected the consolidated
financial statements.
Preparing interim reports in accordance with IFRS requires Ixonos' management
to make estimates and assumptions that affect the amounts of assets and
liabilities on the balance sheet date as well as the amounts of income and
expenses for the financial period. In addition, judgement must be used in
applying the accounting policies. As the estimates and assumptions are based on
views prevailing at the time of releasing the interim report, they involve
risks and uncertainty factors. Actual results may differ from estimates and
assumptions.
The figures in the income statement and balance sheet are consolidated. The
consolidated balance sheet includes all group companies as well as Ixonos
Management Invest Oy, a company owned by members of Ixonos' management. The
original interim report is in Finnish. The interim report in English is a
translation of the original report.
As the figures in the report have been rounded, sums of individual figures may
differ from the sums presented. The interim report is unaudited.
Going Concern
This interim report has been made according to the going concern principle
taking into account the planned financial arrangements, new strategy and
financial estimations made up to the end of year 2014. The estimations take
into consideration probable or foreseeable changes in future expectations in
revenues as well as costs. There have been significant challenges after the
company's most significant client changed its strategy during years 2011-2012.
The profitability has been negative, even though the company has adopted its
operations to meet significantly lower cost level and gained new customers. The
company has further re-scoped its costs and this will continue. The company has
taken and takes also further actions to reduce the level of fixed costs like
site and office related costs. The ongoing cost saving actions will improve the
cost structure and profitability during the 2014. The company has renewed its
strategy during the 2013 and selected the customer focus segments where mobile
internet technology is seen to change the earning fundamentals of Ixonos'
target customer segments. The company views, that Ixonos' core competence has a
great growth potential in the selected segments.
The Company estimates that is has sufficient working capital for its operations
for the next 12 months from the end of the financial reporting period, provided
that sufficient measures are taken to strengthen the balance sheet and
financial forecasts for year 2014 will materialize. As part of this, the
Company made certain agreements on 7 March 2014 with its creditors to
strengthen the working capital position of the company, as announced. The
company will continue to take measures to strengthen its balance sheet and cash
position and to streamline its costs and operational structures.
If the above measures do not occur as planned, this may result a shortage of
working capital, premature payback of loans with covenants and difficulties to
continue company's operations during the following 12 months.
Deferred tax assets
The company has deferred tax assets EUR 4.9 million of which EUR 4.3 million
arises from Finnish companies from two previous years. According to the current
tax regulations in Finland, Ixonos has time to utilize tax assets up to 2023.
The company views that it is going concern and it has sufficient possibilities
with normal business assumptions to utilize the tax assets in the future.
The subsidiary in United Kingdom carries EUR 0.6 million deferred tax assets.
The subsidiary was established in October 2011. The subsidiary in UK is part of
Ixonos' new, design oriented strategy. The validity of deferred tax assets in
UK has no time limit. Ixonos views that the subsidiary has probable
possibilities to utilize tax assets during the time.
CONSOLIDATED INCOME STATEMENT, EUR 1.000
1.1.-31.3. 1.1.-31.3. Change, per 1.1.-31.12.
2014 2013 cent 2013
--------------------------------------------------------------------------------
Turnover 6 055 10 799 -43.9 % 33 397
--------------------------------------------------------------------------------
Operating expenses -8 965 -12 715 -29.5 % -45 197
--------------------------------------------------------------------------------
OPERATING PROFIT BEFORE -2 910 -1 916 -51.9 % -11 799
GOODWILL IMPAIRMENT
--------------------------------------------------------------------------------
Goodwill impairment 0 0 -1 600
--------------------------------------------------------------------------------
OPERATING PROFIT -2 910 -1 916 -51.9 % -13 399
--------------------------------------------------------------------------------
Financial income and expenses -259 -99 -161.6 % -890
--------------------------------------------------------------------------------
Profit before tax -3 165 -2 015 -57.1 % -14 289
--------------------------------------------------------------------------------
Income tax 376 386 -2.6 % 1 854
--------------------------------------------------------------------------------
PROFIT FOR THE PERIOD -2 790 -1 629 -71.3 % -12 435
--------------------------------------------------------------------------------
Attributable to:
--------------------------------------------------------------------------------
Equity holders of the parent -2 786 -1 711 -62.8 % -12 511
--------------------------------------------------------------------------------
Non-controlling interests -3 82 -103.7 % 75
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, EUR 1.000
1.1.-31.3.2 1.1.-31.3.2 Change, per 1.1.-31.12.2
014 013 cent 013
--------------------------------------------------------------------------------
Profit for the period -2 790 -1 629 -71.3 % -12 435
--------------------------------------------------------------------------------
Other comprehensive income
--------------------------------------------------------------------------------
Change in translation -14 78 -117.9 % -5
difference
--------------------------------------------------------------------------------
COMPREHENSIVE INCOME FOR -2 804 -1 551 -80.8 % -12 441
THE PERIOD
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION, EUR 1.000
ASSETS 31.3.2014 31.3.2013 31.12.2013
--------------------------------------------------------------------------------
NON-CURRENT ASSETS
--------------------------------------------------------------------------------
Goodwill 10 847 12 447 10 847
--------------------------------------------------------------------------------
Other intangible assets 1 647 2 367 1 584
--------------------------------------------------------------------------------
Property, plant and equipment 1 767 3 093 2 106
--------------------------------------------------------------------------------
Deferred tax assets 4 945 3 207 4 517
--------------------------------------------------------------------------------
Available-for-sale investments 14 19 14
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 19 220 21 133 19 069
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------------------------------
Trade and other receivables 7 185 10 257 6 278
--------------------------------------------------------------------------------
Cash and cash equivalents 411 674 496
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 7 595 10 931 6 774
--------------------------------------------------------------------------------
TOTAL ASSETS 26 815 32 064 25 843
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 31.3.2014 31.3.2013 31.12.2013
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
Share capital 585 585 585
--------------------------------------------------------------------------------
Share premium reserve 219 219 219
--------------------------------------------------------------------------------
Invested non-restricted equity fund 30 580 24 171 28 794
--------------------------------------------------------------------------------
Retained earnings -26 172 -13 633 -13 664
--------------------------------------------------------------------------------
Profit for the period -2 786 -1 711 -12 511
--------------------------------------------------------------------------------
Equity attributable to equity holders of the 2 426 9 631 3 423
parent
--------------------------------------------------------------------------------
Non-controlling interests 244 254 247
--------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2 669 9 885 3 670
--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Non-current liabilities 4 883 1 273 546
--------------------------------------------------------------------------------
Current liabilities 19 263 20 906 21 626
--------------------------------------------------------------------------------
TOTAL LIABILITIES 24 146 22 179 22 173
--------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 26 815 32 064 25 843
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY, EUR 1.000
A: Share capital
B: Share premium reserve
C: Share IssueD: Invested non-restricted equity fund
E: Translation difference
F: Retained earnings
G: Total equity attributable to equity holders of the parent
H: Non-controlling interests
I: Total equity
A B C D E F G H I
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 0 20 247 75 -13 810 7 317 172 7 489
1 January 2013
--------------------------------------------------------------------------------
Profit for the period -1 711 -1 711 82 -1 629
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in translation 78 78 78
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Share issue 4 229 4 229 4 229
--------------------------------------------------------------------------------
Expenses for equity -305 -305 -305
procurement
--------------------------------------------------------------------------------
Share-based remuneration 23 23 23
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 0 24 171 153 -15 498 9 631 254 9 885
31 March 2013
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 0 28 794 70 -26 246 3 423 247 3 670
1 January 2014
--------------------------------------------------------------------------------
Profit for the period -2 786 -2 786 -3 -2 789
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in translation -14 -14 -14
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Share issue 1 831 1 831 1 831
--------------------------------------------------------------------------------
Expenses for equity -44 -44 -44
procurement
--------------------------------------------------------------------------------
Share-based remuneration 17 17 17
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 30 581 56 -29 016 2 426 244 2 669
31 March 2014
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT, EUR 1.000
1.1.- 1.1.- 1.1.-
31.3.2014 31.3.2013 31.12.2013
--------------------------------------------------------------------------------
Cash flow from operating activities
--------------------------------------------------------------------------------
Profit for the period -2 790 -1 629 -12 435
--------------------------------------------------------------------------------
Adjustments to cash flow from operating
activities
--------------------------------------------------------------------------------
Income tax -376 -386 -1 854
--------------------------------------------------------------------------------
Depreciation and impairment 594 736 4 385
--------------------------------------------------------------------------------
Financial income and expenses 259 99 890
--------------------------------------------------------------------------------
Other adjustments 23 -62 -78
--------------------------------------------------------------------------------
Change in provisions 258 -545 -979
--------------------------------------------------------------------------------
Cash flow from operating activities before -2 031 -1 786 -10 071
change in working capital
--------------------------------------------------------------------------------
Change in working capital 496 -1 217 782
--------------------------------------------------------------------------------
Interest received 35 116 288
--------------------------------------------------------------------------------
Interest paid -221 -219 -1 004
--------------------------------------------------------------------------------
Tax paid 0 -34 326
--------------------------------------------------------------------------------
Net cash flow from operating activities -1 721 -3 140 -9 680
--------------------------------------------------------------------------------
Cash flow from investing activities
--------------------------------------------------------------------------------
Investments in tangible and intangible -314 29 -461
assets
--------------------------------------------------------------------------------
Dividends received 0 0 0
--------------------------------------------------------------------------------
Net cash flow from investing activities -314 29 -461
--------------------------------------------------------------------------------
Net cash flow before financing -2 035 -3 111 -10 141
--------------------------------------------------------------------------------
Cash flow from financing activities
--------------------------------------------------------------------------------
Increase in long-term borrowings 4 500 0 0
--------------------------------------------------------------------------------
Repayment of long-term borrowings 0 0 -800
--------------------------------------------------------------------------------
Increase in short-term borrowings 0 0 5 500
--------------------------------------------------------------------------------
Repayment of short-term borrowings -2 506 -630 -3 002
--------------------------------------------------------------------------------
Proceeds from share issue 0 4 229 9 045
--------------------------------------------------------------------------------
Expenses for equity procurement -45 -305 -584
--------------------------------------------------------------------------------
Net cash flow from financing activities 1 950 3 294 10 160
--------------------------------------------------------------------------------
Change in cash and cash equivalents -85 196 19
--------------------------------------------------------------------------------
Liquid assets at the beginning of the 496 477 477
period
--------------------------------------------------------------------------------
Liquid assets at the end of the period 411 673 496
--------------------------------------------------------------------------------
Notes
Goodwill impairment
Ixonos made impairment test for goodwill as at 31 March 2014. Impairment test
showed surplus of EUR 0.9 million in discounted cash flow compared to tested
amount and no impairment was recognized. The carrying amount of goodwill is EUR
10.8 million. In the impairment test carried out in September 2013, the company
recognized an impairment loss of EUR 1.6 million. The company has shortened the
forecasting period used in value in use calculation from five to four years in
2013. This is due to a point of view that the space of change has increased in
the business environment of Ixonos. The company has initiated a strategy
process during the year 2013 to re-evaluate its business model. In the old
business model use in 31 December 2012 there were two cash generating units,
Online Solutions and Connected Devices. The old business model was based on
services provided. In the new business model implemented in 2013 the Company
has been reorganised into one cash generating unit. Based on new strategy the
Company has one common Sales & Marketing function and common production and
product development functions. These functions will serve all chosen customers.
The company prepares its budgets and forecasts as one cash generating unit.
The impairment test of the Company is based on value in use. The forecasting
period used in impairment testing as at 31 March 2014 included forecasted years
Q2 2014 - Q1 2018. The impairment test is done by comparing the carrying value
of assets to present value of future cash flow taking into consideration
forecasted cash flows during the forecast period, discount factor and growth
rate used in calculating terminal value. The discount factor used is 12 per
cent p.a. and growth rate use in calculating terminal value is 1 per cent p.a.
These are the same as use in goodwill impairment testing for year-end 2013. The
impairment test is the most sensitive to growth rate used when calculating the
terminal value and discount factor. If the growth rate had been lowered to 0.0
per cent instead of 1 per cent, it would have resulted in equal value of
discounted cash flows and tested amount. If the discount factor had been 13 per
cent instead of 12 per cent, the discounted cash flows have shoved deficit of
EUR 0.3 million.
Loan covenants
In the arrangement, the financiers party to the Company's main financing
agreement accepted a period free of instalments of the loans until 15 March
2015. EBITDA will be used as a covenant during the moratorium. Company
announced its financial structuring on 7 March 2014.
Loans granted in 2012 by the company's financiers have covenants attached.
Should the company not be within the limits of a covenant, the financiers are
entitled to call in the loans to which that covenant applies. The covenant
levels are adjusted semi-annually on a rolling twelve-month basis.
Depending on the point in time, the equity ratio must be at least 35 per cent.
For some loans, the ratio of interest-bearing liabilities (i.e.
interest-bearing liabilities in the balance sheet, including leasing
liabilities) to EBITDA may not exceed 2.5 on 30 June 2013 onward. The ratios of
interest-bearing liabilities to EBITDA as well as the ratio of interest-bearing
net liabilities to EBITDA are calculated based on IFRS principles.
The amount of those financing loans that included covenants had a capital of
EUR 6.4 million on 31 March 2014 (31 March 2013: EUR 7.6 million). On 31 March
2014 the company's equity ratio was 10.0 percent (2013: 30.8 percent) and the
ratio of interest-bearing liabilities and the EBITDA
was negative (2013: negative). Thus, the company does not fulfil the covenant
terms on 31 March 2014 and the loans under covenant agreements are presented as
short-term current liabilities. However, the company has received releasing
covenant statements from its financiers until 31 December 2014.
Instalment scheme for borrowings under covenants
Period Amount of instalment EUR 1.000
01.01. - 31.12.2014 353
01.01. - 31.12.2015 1.621
01.01. - 31.12.2016 1.621
01.01. - 31.12.2017 2.850
CONSOLIDATED INCOME STATEMENT, QUARTERLY, EUR 1.000
Q1/2014 Q4/2013 Q3/2013 Q2/2013 Q1/2013
1.1.-31.3.1 1.10.-31.12. 1.7.-30 1.4.-30 1.1.-31
4 13 .9.13 .6.13 .3.13
--------------------------------------------------------------------------------
Turnover 6 055 7 009 5 477 10 112 10 799
--------------------------------------------------------------------------------
Operating expenses 9 -9 537 -11 972 -10 973 -12 715
--------------------------------------------------------------------------------
OPERATING PROFIT BEFORE -2 910 -2 528 -6 494 -861 -1 916
GOODWILL IMPAIRMENT
--------------------------------------------------------------------------------
Goodwill impairment 0 0 -1 600 0 0
--------------------------------------------------------------------------------
OPERATING PROFIT -2 910 -2 528 -8 094 -861 -1 916
--------------------------------------------------------------------------------
Financial income and -259 -286 -248 -257 -99
expenses
--------------------------------------------------------------------------------
Profit before tax -3 165 -2 814 -8 343 -1 117 -2 015
--------------------------------------------------------------------------------
Income tax 376 -266 1 550 183 386
--------------------------------------------------------------------------------
PROFIT FOR THE PERIOD -2 790 -3 080 -6 793 -934 -1 629
--------------------------------------------------------------------------------
CHANGES IN FIXED ASSETS, EUR 1.000
Goodwi Intangible Property, plant Available-for-sa Total
ll assets and equipment le investments
--------------------------------------------------------------------------------
Carrying amount 12 447 2 646 3 410 19 18 522
at 1 January
2013
--------------------------------------------------------------------------------
Additions 17 149 166
--------------------------------------------------------------------------------
Changes in -1 -1
exchange rates
--------------------------------------------------------------------------------
Disposals and -24 -24
transfers
--------------------------------------------------------------------------------
Impairment 0
--------------------------------------------------------------------------------
Depreciation for -296 -440 -736
the period
--------------------------------------------------------------------------------
Carrying amount 12 447 2 367 3 094 19 17 927
at 31 March 2013
--------------------------------------------------------------------------------
Carrying amount 10 847 1 585 2 106 14 14 551
at 1 January
2014
--------------------------------------------------------------------------------
Additions 316 316
--------------------------------------------------------------------------------
Changes in 2 2
exchange rates
--------------------------------------------------------------------------------
Disposals and
transfers
--------------------------------------------------------------------------------
Impairment
--------------------------------------------------------------------------------
Depreciation for -254 -341 -595
the period
--------------------------------------------------------------------------------
Carrying amount 10 847 1 647 1 767 14 14 275
at 31 March 2014
--------------------------------------------------------------------------------
FINANCIAL RATIOS
1.1.-31.3.2 1.1.-31.3.2 1.1.-31.12.
014 013 2013
--------------------------------------------------------------------------------
Earnings per share, diluted, EUR -0.03 -0.08 -0.51
--------------------------------------------------------------------------------
Earnings per share, EUR -0.04 -0.12 -0.65
--------------------------------------------------------------------------------
Equity per share, EUR 0.03 0.27 0.05
--------------------------------------------------------------------------------
Operating cash flow per share, diluted, -0.02 -0.16 -0.39
EUR
--------------------------------------------------------------------------------
Operating cash flow per share, EUR -0.02 -0.23 -0.51
--------------------------------------------------------------------------------
Return on investment, per cent -88.7 -33.6 -70.2
--------------------------------------------------------------------------------
Return on equity, per cent -225.5 -75.0 -231.6
--------------------------------------------------------------------------------
Operating profit ∕ turnover, per cent -48.1 -17.7 -40.1
--------------------------------------------------------------------------------
Net gearing from total equity, per cent 593.7 116.0 375.1
--------------------------------------------------------------------------------
Equity ratio, per cent 10.0 30.8 14.2
--------------------------------------------------------------------------------
Equity ratio, per cent, excluding 9.0 30.0 13.2
non-controlling interest
--------------------------------------------------------------------------------
EBITDA, 1000 EUR -2 315 -1 180 -9 014
--------------------------------------------------------------------------------
OTHER INFORMATION
1.1.- 1.1.- 1.1.-
31.3.2014 31.3.2013 31.12.2013
--------------------------------------------------------------------------------
PERSONNEL 409 568 505
Employees, average
--------------------------------------------------------------------------------
Employees, at the end of the period 378 557 442
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMITMENTS, EUR 1,000
--------------------------------------------------------------------------------
Collateral for own commitments
--------------------------------------------------------------------------------
Corporate mortgages 23 300 19 800 23 300
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Leasing and other rental
commitments
--------------------------------------------------------------------------------
Falling due within 1 year 1 769 2 382 2 277
--------------------------------------------------------------------------------
Falling due within 1-5 years 2 640 3 698 3 293
--------------------------------------------------------------------------------
Falling due after 5 years 97 0
--------------------------------------------------------------------------------
Total 4 409 6 177 5 570
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nominal value of interest rate swap
agreement
--------------------------------------------------------------------------------
Falling due within 1 year 0 0
--------------------------------------------------------------------------------
Falling due within 1-5 years 4 941 5 270 4 941
--------------------------------------------------------------------------------
Falling due after 5 years 0 0
--------------------------------------------------------------------------------
Total 4 941 5 270 4 941
--------------------------------------------------------------------------------
Fair value -46 -67 -47
--------------------------------------------------------------------------------
CALCULATION OF KEY FIGURES
Diluted earnings per share = profit for the period ∕ number of shares, adjusted
for issues and dilution, average
Earnings per share = profit for the period ∕ number of shares, adjusted for
issues, average
Shareholders' equity per share = shareholders' equity ∕ number of shares,
undiluted, on the closing date
Cash flow from operating activities, per share, diluted = net cash flow from
operating activities ∕ number of shares, adjusted for issues and dilution,
average
Return on investment = (profit before taxes + interest expenses + other
financial expenses) ∕ (balance sheet total − non-interest-bearing liabilities,
average) × 100
Return on equity = net profit ∕ shareholders' equity, average × 100
Net gearing from total equity= (interest-bearing liabilities - liquid assets) /
shareholders' equity × 100
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