Tecnotree Oyj - Interim report (Q1 and Q3)

Tecnotree Corporation Interim Report 1 January – 31 March 2015 (unaudited)

Tecnotree Corporation
Interim Report
29th April, 2015 at 08.30 am EEST


Tecnotree is a global supplier of telecom IT solutions, providing products and
services for charging, billing, customer care, and messaging and content
services. The company's product portfolio comprises virtually the full range of
business management systems for telecom operators, with standard solutions for
fixed networks, mobile services and broad band and for managing subscriptions,
services and cash flows for prepaid and post-paid customers. Tecnotree has a
strong footing especially in developing markets. 

A quarter full of changes

First quarter

  -- First quarter net sales were EUR 17.1 (14.4) million. 
  -- The adjusted operating result for the quarter was EUR 1.4 (-1.8) million
     and the operating result EUR 1.1 (-1.8) million.
  -- The adjusted result for the quarter was EUR -0.4 (-3.5) million and result
     EUR -3.3 (-4.8) million.
  -- The order book at the end of the period stood at EUR 48.1 (31 December
     2014: 38.9) million.
  -- First quarter cash flow after investments was EUR 0.8 (-3.2) million.
  -- Earnings per share were EUR -0.03 (-0.04).
  -- Tecnotree filed for restructuring proceedings on 5 March 2015.



KEY FIGURES                                 1-3/   1-3/  1-12/
                                            2015   2014   2014
Net sales, MEUR                             17.1   14.4   74.0
Adjusted operating result, MEUR 1            1.4   -1.8    3.7
Operating result, MEUR                       1.1   -1.8    3.3
Result before taxes, MEUR                   -2.4   -3.7   -2.4
Adjusted result for the period, MEUR 2      -0.4   -3.5   -6.4
Result for the period                       -3.3   -4.8   -9.3
Earnings per share, basic, EUR             -0.03  -0.04  -0.08
Order book, MEUR                            48.1   49.1   38.9
Cash flow after investments, MEUR            0.8   -3.2   -1.8
Change in cash and cash equivalents, MEUR    0.7   -3.7   -4.2
Cash and cash equivalents, MEUR              3.4    2.9    2.5
Equity ratio %                              24.5   26.1   22.5
Net gearing %                              149.0  154.5  172.7
Personnel at end of period                   970  1,042    993

1 Adjusted operating result = operating result before one-time costs. Details
of these are given in the section “Result analysis”. 
2 Adjusted result for the period = result for the period without exchange rate
gains and losses, included in financial items, on intra-group balances being
typically receivables due to subsidiaries from the parent company. 

Unless otherwise stated, all figures presented below are for the review period
1-3/2015 and the figures for comparison are for the corresponding period
1-3/2014. 

CEO Ilkka Raiskinen

“The first quarter of the year was once again a very eventful period for the
company. Exchange rates had a positive impact on net sales and thanks to the
strong order book the quarter continued Tecnotree's improving financial
performance - the review period was in terms of net sales and operating result
the best ever start to the year for the company. The tight cash situation cast
a shadow over the quarter, however, and influenced in the company filing for
restructuring proceedings. The company's cash flow has improved and its
operations have stabilised: the net cash flow for the Group's business
operations was EUR 0.8 million positive. 

The remainder of the year looks encouraging and customers especially in Africa
and the Middle East are continuing to make investments, which is expected to
have a positive impact on Tecnotree's financial performance. ” 

Restructuring proceedings

On 5 March 2015 Tecnotree Corporation filed an application with the district
court of Espoo for debt restructuring proceedings. The court decided on 9 March
2015 to commence the corporate restructuring proceedings. The extraordinary
meeting of shareholders of Tecnotree Corporation held on 27 March 2015 decided
to approve the application made by the Board of Directors and to continue with
the restructuring proceedings. 

Tecnotree Corporation's business operations have been loss-making for several
years, the cash situation remained tight during 2014, and on 31 December 2014
the shareholders' equity of the parent company fell below half of the share
capital. The Company has actively searched for a solution to improve its
financial standing and carefully studied different options for solving the
situation. As the result, the Company came to the conclusion that it would be
in the best interest of the Company and its stakeholders for the Company to
apply for restructuring proceedings in accordance with the Act on Restructuring
of Enterprises. The Company considers that its difficulties are temporary in
nature, and that the restructuring proceedings would in the Company's
assessment make it possible to remedy the Company's financing and equity
structure and thus secure the long-term continuation of the Company's business
operations. If it takes place, the restructuring will ease the debt liability
of the Company and consequently will also improve the shareholders' equity. 

On 9 March 2015 the district court appointed Mr. Jari Salminen,
Attorney-at-Law, from JB Eversheds Oy as the administrator in respect of the
restructuring process. Creditors must state their claims (receivables) in
writing to the administrator by 7 April 2015, if the amounts differ from the
ones announced by the debtor. The administrator must send a statement on the
financial status of the debtor to the interested parties by 5 May 2015. The
administrator must prepare and deliver his proposed restructuring programme to
the district court of Espoo by 6 July 2015. Tecnotree Corporation has to comply
with the restructuring programme to be confirmed through court proceedings.
This requires a sufficient cash inflow, in other words payments by customers. 

Filing the application for restructuring has no direct impact on Tecnotree's
business operations, and the Company is continuing to carry out agreed customer
projects and to serve its customers as usual 

Risks and uncertainty factors

The risks and uncertainty factors for Tecnotree are explained in the 2014 Board
of Directors' Report and in the notes to the Financial Statements. 

Risks and uncertainties in the near future
Tecnotree's risks and uncertainties in the near future relate to projects, to
their timing, to receivables from the recognition of partial deliveries and for
sales, to changes in foreign exchange rates and to financing. Having sufficient
cash funds is the biggest single risk. The financing agreement contains
covenants that create risk. The next major review of the covenants will take
place on 30 June 2015. Tecnotree estimates that all the covenants will not
comply with the terms stated in the financial agreement, so the Company will
propose to the bank a similar agreement on this matter as in 2014. Under the
terms of the financing agreement, failure to meet the requirements of the
covenants entitles the bank to demand payment of the loan. 

The company has sales to a client in Argentina. The Argentine government is
having difficulties in connection with old foreign debt, which may have a
negative impact on payments due from Argentina. There are similar risks in
several other countries where Tecnotree has customers and sales. 

At the end of 2014 the Group's shareholders' equity of stood at EUR 16.9
million. However, the shareholders' equity of the parent company was only EUR
2.2 million while its share capital stood at EUR 4.7 million. So the
shareholders' equity of the parent company had fallen below half of the share
capital. This matter was dealt with as stipulated in section 23 of chapter 20
of the Limited Liability Companies Act at the Annual General Meeting on 14
April 2015. The AGM decided to reduce the share capital to EUR 1.3 million. The
shareholders' equity of the parent company stood at EUR 2.3 million on 31 March
2015. 

Restructuring proceedings
Tecnotree Corporation filed an application for debt restructuring proceedings
with the district court of Espoo on 5 March 2015. The court decided on 9 March
2015 to commence the corporate restructuring proceedings. The district court
appointed Mr. Jari Salminen, Attorney-at-Law, from JB Eversheds Oy as the
administrator in respect of the restructuring process. Creditors must state
their claims (receivables) in writing to the administrator by 7 April 2015, if
the amounts differ from those stated by the debtor. The administrator must send
a statement on the financial status of the debtor to the interest parties by 5
May 2015. The administrator must prepare and deliver his proposed restructuring
programme to the district court of Espoo by 6 July 2015. Tecnotree Corporation
has to comply with the programme approved by the court. This involves risk.
Tecnotree is responsible for all its liabilities in full after the date of
application for restructuring proceedings. This requires a sufficient cash
inflow, in other words payments by customers. 

After filing its application for restructuring proceedings, Tecnotree has had
problems in individual cases, in particular with companies from which Tecnotree
has made purchases. Customers may also be afraid of the risks relating to
Tecnotree, which may have some impact on future orders. 

Prospects in 2015

Tecnotree estimates that its operating result will improve from 2014.
Variations in the quarterly figures will be considerable. 

Financial information

Tecnotree is holding a conference for analysts, investors and the media to
present its first quarter results on Wednesday, 29 April 2015 at 10.00 am in
the Tapiola conference room at the Scandic Simonkenttä Hotel , Simonkatu 9,
Helsinki. The interim report will be presented by CEO Ilkka Raiskinen and the
conference will be held in Finnish. The material to be presented at the press
conference will be available at www.tecnotree.com. 

TECNOTREE CORPORATION

Board of Directors

FURTHER INFORMATION
Ilkka Raiskinen, CEO, tel. +358 (0)45 311 3113
Tuomas Wegelius, CFO, tel. +358 400 433 228

DISTRIBUTION
NASDAQ OMX Helsinki Ltd.
Main media
www.tecnotree.com

About Tecnotree
Tecnotree is a global provider of telecom IT solutions for the management of
products, customers and revenue. Tecnotree helps communications service
providers to transform their business towards a marketplace of digital
services. Tecnotree empowers service providers to monetise on service bundles,
provide personalised user experiences and augment value throughout the customer
lifecycle. With about 1000 telecom experts, Tecnotree serves more than 100
service providers in over 70 countries. Tecnotree is listed on the main list of
NASDAQ OMX Helsinki with the trading code TEM1V. For more information on
Tecnotree, please visit www.tecnotree.com

Attachments:

Tecnotree Interim Report Q1 2015.pdf

Tecnotree Interim Report Q1 2015 Presentation.pdf