2016-11-04 08:00:02 CET
2016-11-04 08:00:02 CET
REGULATED INFORMATION
Ixonos - Interim report (Q1 and Q3)
Interim report release for the period 1 January – 30 September, 2016
Helsinki, Finland, 2016-11-04 08:00 CET (GLOBE NEWSWIRE) -- Ixonos Plc
Stock Exchange Release 04 November 2016 at 09:00
Interim report release for the period 1 January – 30 September, 2016
CONFIRMED ORDERS INCREASED, RESTRUCTURING NEARING COMPLETION
The third quarter in brief (previous-year figures in brackets):
· Confirmed orders: EUR 4.7 million (EUR 1.6 million), 202.6% growth.
· Turnover was EUR 3.0 million (EUR 3.5 million), 14.3% decline.
· Earnings before interest, taxes, depreciation, and amortisation
(EBITDA) were EUR -1.9 million, -62.4% of turnover (EUR -2.3 million, -64.6% of
turnover)
· Operating result was EUR –2.0 million, -66.3% of turnover (EUR -2.5
million, -71.0% of turnover).
· Net result was EUR -2.5 million, -82.7% of turnover (EUR -3.0 million,
-85.3% of turnover).
· Earnings per share were EUR -0.01 (2015: EUR -0.03).
· Net cash flow from operating activities was EUR -1.8 million (EUR
-3.9 million).
The review period in brief (previous-year figures in brackets):
· Confirmed orders: EUR 15.2 million (EUR 9.2 million), 65.6% growth.
· Turnover was EUR 10.8 million (EUR 12.7 million), -15.1% decline.
· Earnings before interest, taxes, depreciation, and amortisation
(EBITDA) were EUR -6.3 million -58.4% of turnover (EUR -5.5 million, -43.7% of
turnover).
· Operating result was EUR -6.7 million, -61.8% of turnover (EUR -6.4
million, -50.6% of turnover).
· Net result was EUR –8.2 million, 76.5% of turnover (EUR -12.1 million,
-95.5% of turnover , including write-off of deferred tax assets EUR -4.9
million ).
· Earnings per share were EUR -0.02 (EUR -0.10).
· Net cash flow from operating activities was EUR -5.2 million (EUR -7.4
million).
Future prospects
Ixonos’ operating profit is expected to improve as compared to its performance
in 2015.
CEO’s Review
“The business developed positively during the past quarter. We completed
streamlining costs to support profitability improvement in the future. At the
same time, the amount of confirmed orders increased over 202 % compared to the
same time last year. This increase is more than in previous respective review
quarters this year. Deliveries of these orders, are spread over a longer time,
so the impact of turnover on the following quarter is limited. On the other
hand, the spread of deliveries over a longer period provides longer customer
relationships that can be developed further. A great example of this is the
frame agreement with the City of Vantaa. Together with the City of Vantaa we
are forerunners in the digitalisation of the municipal sector and we create
future services for citizens.
We have determinedly worked to renew the contents of our income while focusing
on building stronger customer relationships. The effect of this change starts
is showing and now we, together with our customers, build the next deliveries
and help them to choose competitive and sustainable digital solutions. The core
of the business is a successful initial customer delivery that gains our
customers’ trust in realizing how our Discover, Design, Deliver (DDD) service
offering can be tailormade to their true needs.
During the review quarter, we continued to develop our design-oriented service
offering (”DDD-as-a-Service”). One example of this is Discovery-as-a-Service
that we develop as a foundation for building new ideas, innovation and business
development in line with our customers’ strategy. The benefits of the services
that Ixonos provides are based on flexibility, accuracy and speed. We aim to
always provide our customers with the knowledge they need at the right time. We
have a transparent way of working, and it corresponds to what has been designed
and concepted in the beginning. Additionally, our efforts are efficient in
terms of timing, ensuring that the service or product is ready when the
customer wants it to be. For example, with Provision, we developed a 3D-based
motion-camera control for their products that was ready when they needed it.
Ixonos serves customers around the world as a global player and we are
improving our position among the international competition. In September, we
opened a new subsidiary in Vancouver, BA, Canada. With this, we aim for growth
on the North American market, and Vancouver is a very good location for this
both in terms of market and availability of skilled personnel. Together with
our subsidiaries in San Francisco and New York, this collaboration forms Ixonos
North America through which we can serve more customers.
Despite of the challenging quarter we are going in the right direction as a
company. In domestic market we have shapen our operations and now the focus is
on the controlled growth. In terms of international activities we continue to
develop the operation model in order to reach the targeted level. After this we
focus on the international growth.
We are determined to continue developing our company into one of the
internationally leading actors by combining user research, design and
technology.
// CEO Sami Paihonen
OPERATIONS
Ixonos is a service company that combines design and technology in a versatile
way. We offer creative and versatile digital solutions along with consulting
services for several customer segments. The most important part of our services
is our deep understanding and extensive knowledge of our customer’s digital
challenges, such as utilising digitalisation in their businesses and
operations.
We create new digital solutions for our customers. These services are based on
the latest technologies and trends that affect their businesses. Premium user
experience requires design and technology to work seamlessly together, and
Ixonos strives to be the leading expert for our growing clientele.
Our Vision Discover-Design-Deliver contains user research in the initial phases
of strategic design and defining feasible, sustainable technology services. The
basic idea is to find the right components that are needed to build into
customer order delivery, in order to ensure a premium user experience.
Our operations are centralised in Finland, USA, Canada and United Kingdom. Our
software development activities are mostly based in Finland, but these
activities have been strengthened in our other locations. Design functions
currently operate in all locations.
Our Design services consist of digital, mobile, and web design, as well as
service and industrial design. We offer design services all the way from design
strategy and user research to designing visuals and interaction. Our design
services extend further to development workshops, designing prototypes, and
usability testing. All our design innovations are implemented on different
devices and platforms, as we are always striving for the best possible
implementation that can be done within the time frames requested by our
customers.
As a technology company, we have extensive knowledge in developing creative
software solutions for embedded systems and software. We use open standardised
technologies (e.g. Java,Linux, Android, iOS, Net) and cooperate with our
technology partners (Eg., IBM, Gigya, Redhat, Salesforce, Maxicaster, gimbal,
and Brightcove) . We combine knowledge in software development with world-class
technology competence and expert-level knowledge in user interface and
usability design with first-class project management skills. Our technology
expertise comprises, for example, Software and Hardware, mobile , wireless
connectivity and Online services and devices.
The Consulting Services Unit is responsible for Strategic customers and
developing end-to-end solutions to meet our customer’s challenges.
Concurrently, we help our customers to understand new types of business models
and competition and how these can be met on the long term in a digitalising
world. The target of our consulting services is to build long-term partnerships
with customers.
Organisation
Our organization is composed of international sales and has the following units
relating to our services:
· Design: Involving holistic design capabilities that generate strategic
service design, a deep understanding of users and innovative design of user
interfaces, and product design.
· Technology: Comprised of the implementation of technical solutions,
software development and customer projects, and delivering them in the most
cost-efficient ways.
· Consulting Services: Focusing on the specifications of end-to-end
projects and steering them as consultative services.
Service Units and Marketing reports directly to the CEO, while Sales is managed
by COO.
The entire operations of the organization supports Group Services consisting
Finance, HR, IT and legal functions.
Locations
Our offices are situated in our main markets: Finland, United States, Canada
and Great Britain. All other sites expect just opened Canada site has both
technical and design personnel as well as local sales persons. The Canadian
organisation is in the development phase. The goal is that USA and Canada
together form a strong competence entity.
SEGMENT REPORTING
Ixonos reports its operations as a single segment.
CONFIRMED ORDERS
Confirmed orders during the review period were EUR 15.2 million (2015: EUR 9.2
million), which represents a 65.6 % increase compared to the corresponding
period. Our customers increasingly commit themselves to collaborate with us for
longer periods of time, which affects the formation of orders confirmed and
turnover at different times.
TURNOVER
Turnover in the third quarter was EUR 3.0 million (EUR 3.5 million), which is
14.3% lower compared to the corresponding period.
Turnover in the review period was EUR 10.8 million (EUR 12.7 million), which is
15.1% lower compared to the corresponding period.The main reason for the
decline is the divestment of the company's data center business ( decline 1.7
million compared to the corresponding period) and the United States declined
turnover (decline 1.6 million compared to the corresponding period). The focus
area turnover grew 1.4 million compared to the corresponding period. In
particular, the company's Finnish clients have invested heavily with digital
technology.
During the review period, no single customer generated a dominating share of
the turnover or exceeded 10.0 % of the total turnover.
RESULT
The operating result (EBIT) for the third quarter was EUR -2.0 million (EUR
-2.5 million), and the result before taxes was EUR -2.5 million (EUR -3.0
million). The net result for the third quarter was EUR -2.5 million (EUR -3.0
million), earnings per share were EUR -0.01 (EUR -0.03), and cash flow from
operating activities per share in the first quarter was EUR -0.01 (EUR -0.02).
During the review period the operating result (EBIT) was EUR -6.7 million (EUR
-6.4 million) mainly due the decrease in turnover , and the result before
taxes was EUR -8.2 million (EUR -12.1 million). The net result for the was EUR
-8,2 million (EUR -12.1 million), Earnings per share were EUR -0.02 (EUR
-0.10), and cash flow from operating activities per share was EUR -0.01 (EUR
-0.06). Previous year net result included write-off of deferred tax assets EUR
-4.9 million.
Financial expenses were higher than a year ago at EUR 1.6 million (EUR 0.7
million), due to increased interest expenses and unrealized foreign exchange
losses.
Ixonos did not capitalise the deferred tax assets during the period.
RETURN ON CAPITAL
The Group's equity was negative EUR -2.7 million.The Group's equity was
negative, therefore key figure Return on equity (ROE) has not been calculated.
Negativity on equity related only to the Group and the parent company.
Return of investments (ROI) was -49.0 % (2015: -51.0%).
INVESTMENTS
Gross investments during the review period totalled to EUR 0.1 million (EUR 0.3
million). All R&D costs are included in the Group's profit for the review
period, and nothing is capitalised in the balance sheet.
BALANCE SHEET AND FINANCING
The balance sheet totalled EUR 16.5 million (EUR 17.7 million). Shareholders’
equity was EUR -2.7 million (EUR -7.1 million). The equity to total assets
ratio was -16.4% (EUR -40.1) The Group’s liquid assets at the end of the review
period amounted to EUR 0.9 million (EUR 0.6 million). Non-controlling interest
of the equity was EUR 0.0 million (EUR 0.2 million).
The change in shareholders’ equity during the review period was due to both a
negative result and a positive impact on convertible bonds of 2.1 million.
At the end of the review period, the balance sheet included EUR 2.9 million
(EUR 14.9 million) in loans. This amount covers the overdrafts in use.
Loan agreements with Related party companies are described in detail in
'related party transactions'
CASH FLOW
Consolidated cash flow from operating activities during the review period was
EUR -5.2 million (EUR -7.4 million), showing an improvement of 30.2%.
The Group sells most of its Finnish account receivables to reduce the
turnaround time of its receivables. During the review period, EUR 4.2 million
(EUR 8.5 million) trade receivables were sold.
GOODWILL
On 30 September 2016, the consolidated balance sheet included EUR 11.5 million
in goodwill (EUR 12.2 million).
The following parameters were used in the goodwill impairment testing:
· The review period of 4 years
· WACC discount rate of 10%
· 1% growth estimate used for terminal value calculation
Ixonos conducted an impairment test on 30 September 2016, confirming that there
is no need for an any other impairment. The present value of future cash flows
exceeded the carrying value of assets by EUR 22.0 million.
The present value of the cash flow calculation of EUR 33.6 million is lower
than the sum of the Company's financial liabilities (i.e. EUR 12.7 million) and
the market price of the shares (i.e. EUR 31.8 million) as of 30 September 2016.
PERSONNEL
The average number of employees during the review period was 192 (222), and at
the end of the period, there were 174 (209) employees. At the end of the review
period, the Group had 141 employees (170) stationed in Finnish companies, while
Group companies in other countries employed 33 (39). During the review period,
the number of employees decreased by 27.
SHARES AND SHARE CAPITAL
Share turnover and price
During the financial period, the highest price of the Ixonos’ share was EUR
0.11 (EUR 0.12) and the lowest price was EUR 0.06 (EUR 0.05). The closing price
on 30 September 2016 was EUR 0.09 (EUR 0.10). The weighted average price was
EUR 0.07 (EUR 0.07). The number of shares traded during the review period was
16,656,497 (40,240,359), which corresponds to 4.71% (19.2%) of the total number
of shares at the end of the review period. The market value of the share
capital was EUR 31,820,841 (EUR 20,382,260) at closing on 30 September 2016.
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 353.564.898. At the end of the
review period, the registered share capital was EUR 585.394.16, and the number
of shares was 353.564.898.
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 at 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.
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 will
decide 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 exercise period for the IV/A options began on 1 October 2014. The option
plans for IV/B options have been cancelled, and for the IV/C options, the
exercise period will begin 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. 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 holders of 2011
stock options, the Board of Directors of Ixonos has, due to the Rights Offering
December 2015, adjusted the subscription ratios and the subscription prices of
the Option Rights 2011 in accordance with the terms and conditions of the
aforementioned option rights as follows:
The subscription ratio of stock options IV/A shall be amended to 8.287 and the
subscription price shall be amended to EUR 0.2 per share. As regards stock
options IV/C, the subscription ratio shall be amended to 8.287 and the
subscription price shall be amended to EUR 0.1497 per share.
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 mentioned 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 4,971,966.
2014 plan
The Board of Directors of Ixonos Plc decided to issue stock options on 18
February 2014 on the basis of the authorisation 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 with 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. 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 Ixonos’ share on the Helsinki Exchange
during the period of 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 the amount of dividends paid and may also be
otherwise subject to change in accordance with the terms and conditions of the
stock options among others.
In order to ensure the equal treatment of shareholders and the holders of 2011
stock options, the Board of Directors of Ixonos has, due to the Rights Offering
December 2015, adjusted the subscription ratios and the subscription prices of
the Option Rights 2014 in accordance with the terms and conditions of the
aforementioned option rights as follows:
As regards stock options 2014A, the subscription ratio shall be amended to 1.65
and the subscription price shall be amended to EUR 0.0903 per share. As regards
stock options 2014B, the subscription ratio shall be amended to 1.65 and the
subscription price shall be amended to EUR 0.06 per share.
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 the Option Rights 2014, the adjusted maximum total
number of shares to be subscribed for based on the Option Rights 2014 shall be
8,250,000.
Shareholders
On 30 September 2016, Ixonos had 3,142 shareholders (2,992). Private persons
owned 12.6% (17.0%), institutions owned 86.8% (80.2%), foreigners owned 0.5%
(0.6%), and nominee-registered ownership was 1.8% (2.2%) of all shares.
Tremoko Oy Ab, a related party, owns 82.17% of the Company’s shares. Options
held by Tremoko increases their ownership to 82.29%.
Related-party transactions
On 14 March 2016, the Company entered a loan agreement with Tremoko Oy Ab. The
new loan enabled additional financing of 1.5 million Euros.
On 8 April 2016, Tremoko Oy Ab (“Tremoko”) subscribed to a convertible bond in
full with a capital of EUR 9,200,000.95 (“Loan”) and attached an option or
other special rights referred to in Chapter 10 Section 1(2) of the Limited
Liability Companies Act (“Special Rights”), which were directed to be
subscribed to by Tremoko as a result of decision-making in the Ixonos Plc
(“Company”) General Meeting that took place on on 7 April 2016. The Board of
Directors of our Company has accepted Tremoko’s subscription.
The Loan and attached Special Rights have been issued in order to strengthen
the Company’s working capital and reorganise the capital structure as well as
lower financing costs. 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 according to market terms.
The main specifications of the Terms of the Loan and the Special Rights are as
follows:
· The amount of the Loan is EUR 9,200,000.95.
· A annual interest of Euribor 6 months (at least ≥ 0 %) + 4.0 per cent
is paid on the principal of the Loan.
· The conversion option attached to the Loan entitles Tremoko to a
maximum amount of 131,428,585 of new Company’s shares.
· The rate of conversion is fixed at EUR 0.07, and it shall be revised
as set out in the Terms.
· The loan period is 8 April 2016–8 April 2020, so that as of 8 April
2016, altogether EUR 1,700,000.05 of the loan will be paid biannually in five
tranches of EUR 340,000.01. Additionally on 8 April 2020, the remaining loan,
altogether EUR 7,500,000.90, will be paid in a one-off payment.
Tremoko has paid the Loan and attached Special Rights in full by setting off
receivables it has from the Company, amounting altogether to EUR 9,200,000.95.
On 28 April 2016, Turret Oy Ab and Holdix Oy Ab were granted a directly
enforceable guarantee (“Guarantee”) with the total amount of EUR 1,2 million to
Nordea Bank Finland Plc on behalf of Ixonos Plc’s (“Ixonos”) and Ixonos Finland
Ltd’s commitments. The Guarantee was given as a substitute to former guarantee
given by Finnvera Plc. Turret Oy Ab and Holdix Oy Ab are the owners of Tremoko
Oy Ab, which is the main owner of Ixonos.
On 13 May 2016, Ixonos Plc’s (“Ixonos”), together with Ixonos Finland Ltd, did
give countersecurity to Turret Oy Ab and Holdix Oy Ab in which, inter alia,
they have undertaken to pay guarantee commission. The countersecurity has been
given related to financial arrangements announced on 28 April 2016. The rate of
the guarantee commission has been defined in market terms. Turret Oy Ab and
Holdix Oy Ab have granted a directly enforceable guarantee with the total
amount of EUR 1.2 million to Nordea Bank Finland Plc as collateral for Ixonos
and Ixonos Finland Ltd’s commitments. Turret Oy Ab and Holdix Oy Ab are the
owners of Tremoko Oy Ab, which is the main owner of Ixonos.
On 20 June 2016, Ixonos Plc (“Ixonos”) and Savox Communications Oy Ab Ltd
(“Savox”) concluded a framework agreement concerning product development.
Ixonos had, for the duration of the Agreement, undertaken to provide Savox with
research, design and/or product development services ordered separately later
by Savox.
The Agreement will remain in force for a minimum of one year. The parties have
non-bindingly estimated the potential value of the services provided by Ixonos
to Savox to amount to EUR 1–2 million.
Savox Communications Oy Ab (Ltd) is part of the Savox Communications Group,
which is one of the world’s most notable suppliers of communication systems for
professional use in demanding and dangerous circumstances. The Savox
Communications Group has over three decades of experience in serving police and
security, fire and rescue, military, maritime and industrial sectors. The Savox
Communications Group is part of the Savox Group, into which Turret Oy Ab, one
of the owners of Ixonos’ main owner Tremoko Oy Ab, also belongs.
On 17 August 2016 The Company entered a loan agreement with Tremoko Oy Ab
with. The loan agreement enables additional financing for a maximum of 2.5
million Euros until August 18, 2018.
OTHER EVENTS DURING THE REPORTING PERIOD
On 2 August 2016 Ixonos started co-operation negotiations with its personnel in
Finland in order to adjust personnel costs mainly temporary measures and in
order to enhance the effiency of the company's operation. Outcome of the
negotiations was temporary lay-offs (maximum 90 days) for part of the personnel
and job terminations for 8 persons.
On 30 August 2016 Ixonos Plc and the City of Vantaa concluded a framework
agreement concerning development of digital services. Ixonos has, for the
duration of the Agreement, undertaken to provide the City of Vantaa with
service design and graphic user interface design services. The Agreement will
remain in force for until year 2020. The value of the services provided by
Ixonos to the City of Vantaa amount to EUR 1.878 million.
On 29 September 2016 the Company set up a subsidiary in Vancouver Canada in
order to expand the company’s reach in North America. The new subsidiary is not
expected to have a significant impact on the company’s result in 2016.
Market events in the review
During the period, a notable amount of Augmented Reality (AR) and Virtual
Reality (VR) solutions were designed. Courage to take on both AR- and
VR-projects are seen within the consumer, industrial- and service sectors.
Transformation projects are increasing the importance of user experience and
successful service design, and there is intent for new openings in these
markets.
Within Digital Transformation and Smart Data IoT—focus areas with the most
visible action—we organised the IoT Business Lab event together with IoT Lab.
Within these areas, several speeches were given in industry forums globally.
Within InVenue and Smart Devices—areas in which the Company published an
ISA-partnership with Intel within IoT—all our customer projects continued with
further appreciating of the customer experience.
Annual General Meeting on 7 April 2016
The Company held its Annual General Meeting on 7 April 2014. The minutes of
Annual General Meeting and decisions are presented on the Company’s internet
page, www.ixonos.com.
Stock Exchange releases during the period are available on company’s
websitewww.ixonos.com/investors/releases
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
risk management organisation and process, as well as on recognised risks, are
presented on the Company’s website at www.ixonos.com.
Despite efficiency actions taken, Ixonos Plc results have been negative during
recent years, which has directly impacted Ixonos’ sufficiency of working
capital. The risk related to sufficient working capital is managed by
maintaining readiness for various financing methods.
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 the Company 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.
The Group’s turnover consists primarily of relatively short-term customer
contracts. Forecasting the starting dates and scope is from time to time is
challenging; yet at the same time, the cost structure is fairly rigid. This may
result in unexpected fluctuations in turnover and profitability.
The structure and content of the Ixonos’ turnover has changed. 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.
A significant part of the Group’s turnover is invoiced in foreign currency.
Risks related to currency fluctuation are managed through different means.
The Company’s balance sheet 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 each quarter and,
if necessary, at other times.
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. Ixonos manages these risks by negotiating with
financiers and by maintaining readiness for various financing methods.
NEXT REPORTS
The financial statement for the period of 1 January – 31 December 2016 will be
published on Friday, 3 March 2017
IXONOS PLC
Board of Directors
For more information, please contact:
Ixonos Plc
Sami Paihonen, President and CEO
Telephone: +358 50 502 1111
Email: sami.paihonen@ixonos.com
Kristiina Simola, CFO
Telephone: +358 40 756 3132
Email: kristiina.simola@ixonos.com
Distribution:
NASDAQ OMX Helsinki
Main media
THE IXONOS GROUP
SUMMARY OF FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS 1 January
– 30 September, 2016
CONSOLIDATED INCOME STATEMENT, EUR 1,000
1.7.-30. 1.7.-30. Change 1.1.-30. 1.1.-30 Change 1.1.-31.
9.16 9.15 % 9.16 .9.15 % 12.15
--------------------------------------------------------------------------------
Turnover 3,037 3,545 -14.3 10,767 12,686 -15.1 17,001
--------------------------------------------------------------------------------
Operating -5,050 -6,061 16.7 -17,420 -19,103 8.8 -25,703
expenses
--------------------------------------------------------------------------------
OPERATING -2,014 -2,516 -20.0 -6,653 -6,419 -3.6 - 8,702
RESULT
--------------------------------------------------------------------------------
Financial -496 -476 -274.5 -1,581 -732 -116.0 3,047
income and
expenses
--------------------------------------------------------------------------------
Result before -2,510 -2,992 -4.3 -8,234 -7,151 -15.1 -5,655
tax
--------------------------------------------------------------------------------
Income tax 0 -30 100 -1 -4,938 100.0 -4,956
--------------------------------------------------------------------------------
RESULT FOR THE -2,510 -3,023 17.0 -8,235 -12,119 32.0 -10,612
PERIOD
--------------------------------------------------------------------------------
Attributable to
--------------------------------------------------------------------------------
Equity holders -2,510 -3,020 16.9 -8,233 -12,109 32.0 -10,599
of the parent
--------------------------------------------------------------------------------
Non-controlling 0 -3 99,8 -2 -10 78.4 -12
interests
--------------------------------------------------------------------------------
Earnings per
share
--------------------------------------------------------------------------------
Undiluted, EUR -0.01 -0.03 73.0 -0.02 -0,10 78.0 -0.05
--------------------------------------------------------------------------------
Diluted, EUR -0.01 -0.03 73.,0 -0.02 -0,10 78.0 -0.05
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, EUR 1,000
1.7.-30. 1.7.-30. Change 1.1.-30 1.1.-30 Change 1.1-31.
9.16 9.15 % .9.16 .915 % 12.15
--------------------------------------------------------------------------------
Result for the -2,510 -3,023 17.0 -8,235 -12,119 32.0 -10,612
period
--------------------------------------------------------------------------------
Other
comprehensive
income
--------------------------------------------------------------------------------
Change in 203 127 60.0 733 -157 567 -187
translation
difference
--------------------------------------------------------------------------------
COMPREHENSIVE -2,307 -2,896 20.3 -7,502 -12,276 -38.9 -10,799
RESULT FOR THE
PERIOD
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION, EUR 1,000
ASSETS 30.9.2016 30.9.2015 31.12.2015
--------------------------------------------------------------------------------
NON-CURRENT ASSETS
--------------------------------------------------------------------------------
Goodwill 11,543 12,182 12,043
--------------------------------------------------------------------------------
Other intangible assets 339 894 548
--------------------------------------------------------------------------------
Property, plant and equipment 336 444 372
--------------------------------------------------------------------------------
Deferred tax assets 0 0 0
--------------------------------------------------------------------------------
Available-for-sale investments 8 23 23
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 12,225 13,543 12,987
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------------------------------
Trade and other receivables 3,369 3,608 3,459
--------------------------------------------------------------------------------
Cash and cash equivalents 872 559 1,901
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,241 4,168 5,360
--------------------------------------------------------------------------------
TOTAL ASSETS 16,466 17,710 18,347
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 30.9.2016 30.9.2015 31.12.2015
--------------------------------------------------------------------------------
SHAREHOLDERS’ EQUITY
--------------------------------------------------------------------------------
Share capital 585 585 585
--------------------------------------------------------------------------------
Share premium reserve 219 219 219
--------------------------------------------------------------------------------
Invested non-restricted equity fund 47,189 38,659 46,994
--------------------------------------------------------------------------------
Retained earnings -42,462 -34,683 -34,712
--------------------------------------------------------------------------------
Result for the period -8,233 -12,109 -10,599
--------------------------------------------------------------------------------
Equity attributable to equity holders of the -2,701 -7,329 2,486
parent
--------------------------------------------------------------------------------
Non-controlling interests 0 224 221
--------------------------------------------------------------------------------
TOTAL SHAREHOLDERS’ EQUITY -2,701 -7,105 2,708
--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Non-current liabilities 9,992 4,227 8,095
--------------------------------------------------------------------------------
Current liabilities 9,176 20,588 7,544
--------------------------------------------------------------------------------
TOTAL LIABILITIES 19,167 24,815 15,639
--------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 16,466 17,710 18,347
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY, EUR 1,000
A: Share capital
B: Share premium reserve
C: Share Issue
D: 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 585 219 0 32,345 -71 -34,524 -1,446 229 -1,217
on 1 January 2015
--------------------------------------------------------------------------------
Result for the -12,109 -12,109 -5 -12,114
period
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in -157 -157 -157
translation
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Share issue 6,300 6,300 6,300
--------------------------------------------------------------------------------
Expenses for equity 14 20 34 34
procurement
--------------------------------------------------------------------------------
Share-based 49 49 49
remuneration
--------------------------------------------------------------------------------
Shareholders’ equity 585 219 0 38,659 -228 -46,565 -7,330 224 -7,105
on 30 June 2015
--------------------------------------------------------------------------------
Shareholders’ equity 585 219 0 46,994 -258 -45,054 2,487 221 2,708
on 1 January 2016
--------------------------------------------------------------------------------
Other changes 219 219 -219 0
--------------------------------------------------------------------------------
Result for the -8,233 -8,233 -2 -8,235
period
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in 733 733 733
translation
difference
--------------------------------------------------------------------------------
Transactions with
shareholders
--------------------------------------------------------------------------------
Equity share of 2,114 2,114 2,114
convertible loan
--------------------------------------------------------------------------------
Expenses for equity -25 -25 -25
procurement
--------------------------------------------------------------------------------
Share-based 2 2 2
remuneration
--------------------------------------------------------------------------------
Shareholders’ equity 585 219 0 47,189 475 -51,170 -2,701 0 -2,701
on 30 June 2016
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT, EUR 1,000
30.9.2016 30.9.2015 31.12.2015
--------------------------------------------------------------------------------
Cash flow from operating activities
--------------------------------------------------------------------------------
Result for the period -8,235 -12,119 -10,588
--------------------------------------------------------------------------------
Adjustments to cash flow from operating
activities
--------------------------------------------------------------------------------
Income tax 1 4,968 4,956
--------------------------------------------------------------------------------
Other income and expenses with no payment 0 0 -4,047
relation
--------------------------------------------------------------------------------
Depreciation and impairment 862 873 1,310
--------------------------------------------------------------------------------
Financial income and expenses 1,344 732 871
--------------------------------------------------------------------------------
Other adjustments -654 -129 -272
--------------------------------------------------------------------------------
Cash flow from operating activities before -6,682 -5,675 -7,769
change in working capital
--------------------------------------------------------------------------------
Change in working capital 1,724 -561 -2,339
--------------------------------------------------------------------------------
Interest received 3 64 122
--------------------------------------------------------------------------------
Interest paid -234 -1,247 -1,524
--------------------------------------------------------------------------------
Tax paid -1 -17 -7
--------------------------------------------------------------------------------
Net cash flow from operating activities -5,190 -7,436 -11,517
--------------------------------------------------------------------------------
Cash flow from investing activities 400 0 0
--------------------------------------------------------------------------------
Acquisition of subsidiaries, net of cash 0 -139 -125
acquired
--------------------------------------------------------------------------------
Investments in tangible and intangible assets -125 -357 -164
--------------------------------------------------------------------------------
Net cash flow from investing activities 275 -496 -288
--------------------------------------------------------------------------------
Net cash flow before financing -4,915 -7 932 -11,805
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash flow from financing activities
--------------------------------------------------------------------------------
Increase in long-term borrowings 4,394 3,866 10,794
--------------------------------------------------------------------------------
Repayment of long-term borrowings 0 -3,500 -4,000
--------------------------------------------------------------------------------
Increase in short-term borrowings 46 5,884 7,500
--------------------------------------------------------------------------------
Repayment of short-term borrowings -190 -3,601 -5,784
--------------------------------------------------------------------------------
Proceeds from share issue 0 5,800 5,793
--------------------------------------------------------------------------------
Expenses for equity procurement 26 75 -386
--------------------------------------------------------------------------------
Financial leasing payments -391 -289 -466
--------------------------------------------------------------------------------
Net cash flow from financing activities 3,886 8,236 13,451
--------------------------------------------------------------------------------
Change in cash and cash equivalents -1,029 304 1,646
--------------------------------------------------------------------------------
Liquid assets at the beginning of the period 1,901 255 255
--------------------------------------------------------------------------------
Liquid assets at the end of the period 872 559 1,901
--------------------------------------------------------------------------------
Accounting principles
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 2015. The IFRS amendments and interpretations that
entered into force on 1 January 2016 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. The estimates and assumptions are based on
views prevailing at the time of releasing the interim report, which involves
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 annual report is unaudited.
Going concern
This interim report has been prepared according to the current principle, which
takes into account the financial arrangements during the financial year
2015–2016 and financial estimations made up to the end of year 2016. The
estimations take into consideration probable or foreseeable changes in future
expectations of revenues and costs.
The Company estimates that its net working capital is expected to be sufficient
to fund its operations over the next 12 months .
Ixonos loan agreements’ related arrangement includes covenants regarding equity
ratio, EBITDA, and net debts/EBITDA, which will be considered for the first
time on 31 December 2016.Value of loans under covenants is EUR 0.6 million.
Goodwill impairment
Ixonos conducted an impairment testing for the goodwill value on the balance
sheet on 30 September 2016. The goodwill is attributed to the one
cash-generating unit (CGU), starting from 1 November 2013.
The impairment test showed a surplus of EUR 10.8 million, based on discounted
cash flow valuation compared to the tested amount, and no impairment was
recognised. The carrying amount of goodwill is EUR 11.5 million. Given the
present value of the cash flows calculated, EUR 22.3 million is lower than the
sum of the Company's financial liabilities (EUR 12.7 million) and the market
price of the shares (EUR 31.8 million) on 30 September 2016.
The impairment test of the Company is based on operative Company value. The
forecasting period used in impairment testing on 30 September 2016 was Q4 2016
to Q3 2020.
In the forecast, the year 2016 is a year of stabilisation with relatively small
growth. The Company expects to reach stronger growth for the years of
2017–2020, on average of 13.0%, as digitalisation will impact an ever-growing
part of the business community. The forecasted EBIT level is assumed to
increase to an estimated average of 10%.
The impairment test is conducted by comparing the carrying value of assets to
the 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 10% p.a. and growth
rate used in calculating terminal value is 1% p.a. When calculating the
terminal value, the weighted average EBIT % level for the period was used.
The impairment test is most sensitive to the following two factors: the cash
flow forecast itself (and the assumptions behind it) and the growth rate used
(when calculating the terminal value and to the discount factor). If any of the
following conditions applied, then the tested value would have been equal to
the discounted cash flow: (1) the growth rate of -11% had been used instead of
1%; (2) the discount factor had been 31% instead of 10%; or (3) the EBIT % used
had been 3.7% instead of 13%.
Loan covenants
Ixonos has a total of EUR 12.7 million in loans as of 30 September 2016. The
amount of the financing loans that included covenants had a capital of EUR 0.6
million on 30 September 2016 (2015: EUR 5.8 million). The amount of the
financing loans that include covenants are after the financial period changed,
so the actual value is 0.6 million.
Loan agreements include covenants regarding equity ratio, EBITDA, and net
debts/EBITDA, all of which will be considered for the first time on 31 December
2016. Should the Company not be within the limits of a covenant, the creditors
are entitled to call in the loans to which each covenant applies. The covenant
levels are reviewed semi-annually on a rolling twelve-month basis. Depending on
the point in time, the equity ratio must be 15–35%. The rolling 12 past months’
EBITDA may not exceed EUR -1.0 million on 31 December 2016. Depending on the
point in time, the ratio of interest-bearing liabilities (i.e. interest-bearing
liabilities in the balance sheet, including leasing liabilities) to EBITDA may
not exceed 3.0–1.0 from 30 June 2017 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.
On 30 September 2016, the Company's equity ratio was -16.4% (2015: -40.1 %),
EBITDA was -6.3 MEUR (2014: -5.5 MEUR), and the ratio of interest-bearing
liabilities to the EBITDA was negative (2015: negative). Loans under covenants
are all described in detail in short-term liabilities.
Instalment scheme for loans under covenants:
Period Amount of instalment EUR 1,000
01.10. - 31.12.2016 63
01.01. - 31.12.2017 253
01.01. - 31.12.2018 253
01.01. - 31.12.2019 0
01.01. - 31.12.2020 0
01.01. - 31.12.2021 0
CONSOLIDATED INCOME STATEMENT, QUARTERLY, EUR 1,000
Q3/2016 Q2/2016 Q1/2016 Q4/2015 Q3/2015 Q2/2015
1.7.-30.9.16 1.4.-30. 1.1.-31. 1.10.-31 1.7.-30. 1.4.-30.
6.16 3.16 .12.15 9.15 6.15
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Turnover 3,037 3,830 3,901 4,315 3,545 4,557
--------------------------------------------------------------------------------
Operating -5,050 -6,229 -6,141 -6,597 -6,061 -6,486
expenses
--------------------------------------------------------------------------------
OPERATING -2,014 -2,400 -2,240 -2,283 -2,516 -1,929
RESULTS
--------------------------------------------------------------------------------
Financial income -496 -506 -578 3,778 -476 -135
and expenses
--------------------------------------------------------------------------------
Results before -2,510 -2,905 -2,818 1,495 -2,992 -2,064
tax
--------------------------------------------------------------------------------
Income tax 0 -1 -0.3 12 -30 -4,938
--------------------------------------------------------------------------------
RESULTS FOR THE -2,510 -2,906 -2,819 1,507 -3,023 -7,002
PERIOD
--------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS, 1000 EUR
Q3/2016 Q2/2016 Q1/2016 Q4/2015 Q3/2015 Q2/2015
1.7.-30. 1.4.-30. 1.1.-31. 1.10.-31. 1.7.-30. 1.4.-30.
9.16 6.16 3.16 12.15 9.15 6.15
--------------------------------------------------------------------------------
Turnover 352 258 213 109 4 0
--------------------------------------------------------------------------------
Financial income 0 0 0 0 3 8
and expenses
--------------------------------------------------------------------------------
30.9.201 30.6.201 31.3.201 31.12.201 30.9.201 30.6.201
6 6 6 5 5 5
--------------------------------------------------------------------------------
Sold trade 0 0 0 0 0,2 0,5
receivables
--------------------------------------------------------------------------------
Liabilities 1,066 1,000 0 0 0 0
--------------------------------------------------------------------------------
CHANGES IN FIXED ASSETS, EUR 1,000
Goodwi Intangible Property, plant Available-for-s Total
ll assets and equipment ale investments
--------------------------------------------------------------------------------
Carrying amount on 10,847 1,254 697 3 12,801
1 January 2015
--------------------------------------------------------------------------------
Additions 1,335 126 131 20 1,612
--------------------------------------------------------------------------------
Changes in 6 6
exchange rates
--------------------------------------------------------------------------------
Disposals and
transfers
--------------------------------------------------------------------------------
Impairment -2 -2
--------------------------------------------------------------------------------
Depreciation for -486 -388 -874
the period
--------------------------------------------------------------------------------
Carrying amount on 12,182 894 444 23 13,543
30 September 2016
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Carrying amount on 12,043 548 372 23 12,986
1 January 2016
--------------------------------------------------------------------------------
Additions 24 88 112
--------------------------------------------------------------------------------
Changes in -2 -2
exchange rates
--------------------------------------------------------------------------------
Disposals and -15 -15
transfers
--------------------------------------------------------------------------------
Impairment -6 -6
--------------------------------------------------------------------------------
Business sales -500 -500
--------------------------------------------------------------------------------
Depreciation for -233 -129 -362
the period
--------------------------------------------------------------------------------
Carrying amount on 11,543 338 335 8 12,225
30 September 2016
--------------------------------------------------------------------------------
FINANCIAL RATIOS
1.1.-30.9.2016 1.1.-30.9.2015 1.1.-31.12.2015
--------------------------------------------------------------------------------
Earnings per share, diluted, -0.02 -0.10 -0.05
EUR
--------------------------------------------------------------------------------
Earnings per share, EUR -0.02 -0.10 -0.05
--------------------------------------------------------------------------------
Equity per share, EUR -0.08 -0.03 0.01
--------------------------------------------------------------------------------
Operating cash flow per share, -0.01 -0.06 -0.06
diluted, EUR
--------------------------------------------------------------------------------
Operating cash flow per share, -0.01 -0.04 -0.03
EUR
--------------------------------------------------------------------------------
Return on investment, per cent -49.0 -51.0 -29.9
--------------------------------------------------------------------------------
Return on equity, per cent N/A N/A -1,421.9
--------------------------------------------------------------------------------
Operating result ∕ turnover, -61.8 -50.6 -51.2
per cent
--------------------------------------------------------------------------------
Net gearing from total equity, -439.7 -267.4 324.4
per cent
--------------------------------------------------------------------------------
Equity ratio, per cent -16.4 -40.1 14.8
--------------------------------------------------------------------------------
Equity ratio, per cent, -16.4 -41.4 13.6
excluding non-controlling
interest
--------------------------------------------------------------------------------
EBITDA, 1,000 EUR -6,291 -5.544 -7,392
--------------------------------------------------------------------------------
OTHER INFORMATION
1.1.-30.6.2016 1.1.- 30.6.2015 1.1.-31.12.2015
--------------------------------------------------------------------------------
PERSONNEL
--------------------------------------------------------------------------------
Employees, average 192 222 217
--------------------------------------------------------------------------------
Employees, at the end of the 174 209 200
period
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMITMENTS, EUR 1,000
--------------------------------------------------------------------------------
Collateral for own commitments
--------------------------------------------------------------------------------
Corporate mortgages 23,500 23,500 23,500
--------------------------------------------------------------------------------
Financial bonds 0 71 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Leasing and other rental
commitments
--------------------------------------------------------------------------------
Falling due within 1 year 892 1,785 1,646
--------------------------------------------------------------------------------
Falling due within 1–5 years 708 2,176 1,632
--------------------------------------------------------------------------------
Falling due after 5 years 0 0 0
--------------------------------------------------------------------------------
Total 1,600 3,961 3,278
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nominal value of interest rate
swap agreement
--------------------------------------------------------------------------------
Falling due within 1 year 253 0 253
--------------------------------------------------------------------------------
Falling due within 1–5 years 316 3,953 506
--------------------------------------------------------------------------------
Falling due after 5 years 0 3,000 0
--------------------------------------------------------------------------------
Total 569 3,953 759
--------------------------------------------------------------------------------
Fair value -9 -59 -13
--------------------------------------------------------------------------------
CALCULATION DEFINITIONS OF KEY FIGURES
EBITDA = Earnings before Interest, Taxes, Depreciation and Amortisation
Diluted earnings per share = Result for the period ∕ number of shares, adjusted
for issues and dilution, on average
Earnings per share = Result for the period ∕ number of shares, adjusted for
issues, on 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, on
average
Return on investment = (Result before taxes + interest expenses + other
financial expenses) ∕ (balance sheet total - non-interest-bearing liabilities,
on average) × 100
Return on equity = Net result ∕ shareholders’ equity, on average × 100
Net gearing from total equity= (Interest-bearing liabilities - liquid assets) /
shareholders’ equity × 100
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