2014-10-30 08:30:00 CET
2014-10-30 08:30:04 CET
REGULATED INFORMATION
Ixonos - Interim report (Q1 and Q3)
TURNOVER GROWTH AND SIGNIFICANTLY IMPROVED RESULT IN Q3
Helsinki, Finland, 2014-10-30 08:30 CET (GLOBE NEWSWIRE) -- Ixonos Plc
Stock Exchange Release 30 October 2014 at 09:30
Interim Report for the period January 1 - September 30, 2014
TURNOVER GROWTH AND SIGNIFICANTLY IMPROVED RESULT IN Q3
Q3 2014 in brief (last year's reference figures inside brackets):
-- Turnover was EUR 6.4 million (2013: 5.5 million) a change of 16.2 per cent.
-- Earnings before interest, taxes, depreciation and amortization
(EBITDA) were EUR -0.1 million, -1.1
per cent of turnover
, (2013: EUR -5.8 million, -105.9
per cent of turnover
).
-- Operating profit was EUR -0.6 million, (2013: EUR -8.1 million), -9.6
per cent of turnover
-- Net profit was EUR -0.6 million (2013: EUR -6.8 million), -9.2
per cent of turnover.
-- Earnings per share were EUR -0.01 (2013: EUR -0.20).
In turnover EUR 2.3 million write-off and EUR 1.5 million loss provision and
EUR 1.6 million goodwill impairment due to changes in calculation mechanism
burdened year 2013 reference figures.
Review period in brief (last year's reference figures inside brackets):
-- Turnover for the financial period was EUR 18.1 million (2013: EUR 26.4
million), a change of -31.5 per cent.
-- Earnings before interest, taxes, depreciation and amortization
(EBITDA) were EUR -3.8 million, -21.2
per cent of turnover
, (2013: EUR -7.1 million, -27.0
per cent of turnover
).
-- Operating profit was EUR -5.6 million, -31.0 per cent of turnover (2013:
EUR -10.9 million, -41.2 per cent of turnover).
-- Net profit was EUR -5.5 million, −30.3 per cent of turnover (2013: EUR -9.4
million, -35.7 per cent of turnover),
-- Earnings per share were EUR -0.06
(2013: EUR -0.28).
-- Net cash flow from operating activities was EUR -6.1 million (2013: EUR
-6,7million).
-- Directed share issues and a convertible bond strengthened the financial
position and balance sheet during the first half of the year, as well as a
short term loan in September.
-- Ixonos got two new significant owners during the first half of the year
Future prospects in brief
The company updates its future outlook as follows:
The company estimates 2014 revenue to be in the range of EUR 24-26 million and
that EBITDA for the full year will be negative.
For the second half of the year EBITDA is expected to be positive.
Esa Harju, President and CEO:
“We are pleased that we have been able to improve our quarterly revenue intake
and profitability, both sequently and year-on-year. Our turnover grew
particularly outside Finland, and we are focusing our operations geographically
towards our key markets Finland, the USA and the UK, in line with our strategy.
During this year we have been able to grow our revenue levels, and to close
many important new customer contracts. In parallel our cost structure has been
significantly reduced, which has helped us to improve our profitability. The
necessary preconditions for profitable operations have now been established.
Despite the positive achievements during the year, our visibility to the
near-term business levels remains challenging. Our customer contracts are
typically relatively short-term in duration, and especially the Finnish market
remains slow and unpredictable, with cautiousness delaying business decisions
in many cases. Due to this our view for Q4 has slightly weakened and therefore
we are adjusting our personnel costs with temporary measures for the upcoming
months, in line with the expected market demand.
We will continue to focus our operations geographically towards our key
markets. In these markets we ensure our strong local presence with our Sales,
Design Studios and key technical architects. We have already consolidated our
software development mainly to Finland.
We will continue to implement our strategy as a consultative end-to-end
supplier of digital solutions, with strong emphasis on unique user experience.
We believe that the positive trend in our business continues despite the market
uncertainty.”
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 primary
geographical markets are Finland, the US and the UK, where our Design Studios
are located. The software development is primarily located in Finland.
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, iOS,
Windows). 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.
Our primary 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. Our clientele in this segment consists of companies such as
Kone, Outotec, Cargotec, Kemppi 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
Al-Jazeera, Discovery and MBC Group.
- 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 Viking
Line.
- Cloud Solutions: 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 Microsoft, Fonecta and eZ Systems.
- Smart Devices & Platforms, where our customers include HP and Samsung.
We continue to serve our customers also in other market segments, including:
- Automotive and Transportation, where our customers include Marcopolo, VW and
Honda.
- 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.
TURNOVER AND FINANCIAL RESULT
Turnover in the third quarter was EUR 6.4 million (2013: EUR 5.5 million), 16.2
per cent more than in the previous year.
Consolidated turnover for the review period was EUR 18.1 million (2013: EUR
24.6 million), which is 31.5 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.
The turnover growth during the second half of the year comes mainly from USA
and UK.
Operating profit for the third quarter was EUR -0.6 million (2013: EUR -8.1
million) and profit before tax was EUR -0.8 million (2013: EUR −8.3 million).
Profit for the third quarter was EUR -0.6 million (2013: EUR −6.8 million).
Third quarter earnings per share were EUR -0.01 (2013: EUR −0.20). Cash flow
from operating activities per share in the third quarter was EUR -0.01 (2013:
EUR -0.06).
The company's consolidated operating profit for the review period was EUR -5.6
million (2013: EUR -10.9 million) and profit before tax was EUR -6.3 million
(2013: EUR -11.5 million). Profit for the period was EUR -5.5 million (2013:
EUR -9.4 million). Earnings per share was EUR -0.6 (2013: EUR -0.28). Cash flow
per share from operating activities was EUR 0.03 (2013: EUR -1.0).
The relative improvement of the financial results are due to both turnover
growth and adjusting costs to the volume. The company has concentrated its
software development primarily to Finland.
RETURN ON CAPITAL
Consolidated return on equity (ROE) during the review period was -465.3 per
cent (2013: -196.4 per cent) and return on investment (ROI) was -49.8 per cent
(2013: -81.2 per cent).
INVESTMENTS
During the third quarter the investments where EUR 0.2 million (2013: EUR 0
million).
Investments during the review period totalled EUR 0.8 million (2013: EUR 0.4
million). Investments consisted mainly of capitalised R&D expenses. The most
significant investments where done in the cloud business.
BALANCE SHEET AND FINANCING
The balance sheet total was EUR 25.3 million (2013: EUR 28.2 million).
Shareholders' equity was EUR 1.6 million (2013: EUR 2.1 million). The equity
ratio was 6.2 per cent (2013: 7.5 per cent). The Group's liquid assets at the
end of the review period amounted to EUR 0.2 million (2013: EUR 0.5 million).
Non-controlling interest of the equity was EUR 0.2 million (2013: EUR 0.2
million). The share issues executed during the review period are described in
Shares and Share capital
At the end of the review period, the balance sheet showed EUR 10.7 million
(2013: EUR 11.9 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 March 15,
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. The Group announced
these financing arrangements on March 7, 2014.
During the instalment free period the bank loans have covenants attached to
them. These covenants are based on the Group's quarterly EBITDA levels. On
September 30, 2014, the Group did not meet the terms of the covenants. However,
the company has received releasing covenant statements from its financers. The
company's non-current borrowings are therefore presented as current
liabilities, in accordance with IFRS. Bank loans under the covenants were
September 30, 2014 EUR 6.1 (2013: EUR 7.2 million).
The board of directors of Ixonos Plc has, by virtue of the authority granted by
the general meeting on October 30, 2013, decided to direct a convertible
capital loan with a capital of EUR 3.5 million 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 March 7, 2014 - March 7, 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 October 8, 2013, to gather, in
addition to the capital received from the share issue between November 19 and
December 3, 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.
Turret has subscribed the Loan and associated Special Rights on March 7, 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 Group's board of directors also decided at the same time 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.
The maturity of the loan was changed in June 2014. On September 30, 2014 EUR
0.25 million is long term and EUR 0.75 million is short term, interest bearing
loan.
The Group has raised a short-term loan with Turret Oy, which is a related party
to the company. The loan amount is EUR 1.3 million and the loan is as per the
terms of the arrangement due in November 2014.
The Group sells most of its Finnish receivables to finance companies.
CASH FLOW
The Group's cash flow during the third quarter was EUR -1.3 million (2013 EUR
-2.1 million).
As the financial situation remains challenging the Board and management are
investigating financing options.
Consolidated cash flow from operating activities during the review period was
EUR 6.1 million (2013: EUR -6.7 million). By September 30, 2014, the Group had
sold EUR 1.5 million (2013: EUR 2.9 million) in accounts receivable during the
reporting period to reduce their turnaround time.
GOODWILL
On September 30, 2014, the consolidated balance sheet included EUR 10.8 million
in goodwill (2013: EUR 10.8 million).
The following parameters were used in the goodwill impairment testing:
-- The review period of 4 years (same as Q4/2013 - Q1/2014).
-- WACC discount rate 12 per cent (same as Q4/2013 - Q1/2014).
-- 1 per cent growth estimate used for terminal value calculation (same as
Q4/2013 - Q2/2014).
The company made an impairment test on September 30, 2014 confirming there is
no need for a write-down. The present value of future cash flows exceeded the
carrying value of assets by EUR 4.8 million.
PERSONNEL
The number of personnel during the third quarter averaged 277 (2013: 487).
The number of personnel averaged 337 (2013: 523) during the review period. At
the end of the period, the company had 276 (2013: 481) employees. Staff
decreased in Finland as well as abroad. At the end of the review period, the
Group had 248 employees (2013: 351) in Finnish companies, while Group companies
in other countries employed 28 (2013: 130). During review period the number of
employees decreased by 166. The main changes were related to shutdowns of
Ixonos Denmark Aps and Ixonos Slovakia s.r.o. during the first half of the
year.
SHARES AND SHARE CAPITAL
Share turnover and price
Share related indicators have been adjusted by share issues and de-split in
2013. During the financial period, the share issue adjusted highest price of
the company's share was EUR 0.16 (2013: EUR 0.68) and the lowest price was EUR
0.08 (2013: EUR 0.22). The closing price on September 30, 2014 was EUR 0.10
(2013: EUR 0.24). The weighted average time and de-split adjusted price was EUR
0.11 (2013: EUR 0.33). The number of shares traded during the review period was
35,204,000 (2013: 19,980,840), which corresponds to 33.1 per cent (2013: 39.7
per cent) of the total number of shares at the end of the review period. The
number of shares has been affected by a rights issue in February 2013, a
de-split in November 2013, a second rights issue in 2013 and the directed share
issues decided on by the board on March 31, and April 30, 2014. According to
the closing price September 30, 2014, the market value of the company's shares
was EUR 10,950,294 (2013: EUR 8,457,391).
The company executed several directed share issues during the first half of the
year. In March 15,255,177 shares were subscribed by Holdix Oy at a subscription
price of EUR 0.12 per share amounting to a total of appr. EUR 1.83 million.
In May Holdix Oy and InfoSec Global (Schweiz) AG both subscribed 4 166 667
shares and in June Turret Oy Ab subscribed 6,866,666 shares. The subscription
price was EUR 0.12 per share amounting to a total of appr. EUR 1.82 million.
The shares issued in the share Issues in total are equivalent to approximately
40.15 per cent of all of the Company's shares and votes before the share issues
and approximately 28.65 per cent in total of all of the Company's shares and
votes after the share issues.
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 106,313,536.
The company has not paid any dividends or returned any equity during the review
period.
Option plans 2011 and 2014
2011 plan
The plan is described in the Financial Statements for 2013. There have been no
changes since then.
2014 plan
The plan is described in the Interim Report Q2/2014. There have been no changes
since then.
Shareholders
On September 30, 2014, the company had 4,163 shareholders (2013: 3,445).
Private persons owned 40.1 per cent (2013: 51.3 per cent) and institutions 52.8
per cent (2013: 48.7 per cent) of the shares. Foreign ownership was 1.8 per
cent (2013: 8.4 per cent) of all shares.
Related-party transactions
In March the Group converted a total of EUR 3.5 million short-term loans into a
long-term convertible loan and raised a EUR 1.0 million long-term interest
bearing loan from Turret Oy Ab. The convertible loan has no collateral. As
collateral for the loan of EUR 1.0 million the Group has put up corporate
mortgage bonds.
In the share issue decided upon on April 30, 2014 Turret Oy Ab subscribed
6,866,666 shares at a price of EUR 0.12 per share totaling EUR 824 thousand. In
conjunction with this transaction the payback plan of the EUR 1.0 million loan
from Turret Oy Ab was changed so that the loan now in its entirety will be paid
back by November 30, 2015.
In order to finance its increasing foreign sales, Ixonos has on September 20,
2014 agreed on a short-term, interest bearing loan with Turret Oy, which is a
related party to the Group. The loan amount is EUR 1.3 million.
OTHER EVENTS DURING THE REPORTING PERIOD
Market events
Ixonos announced new customer references, including in-car digital content
store for Honda, new generation digital media channel platform for Al Jazeera,
and design and technology services for Forbidden Technologies.
Ixonos participated in many marketing events, as described at ixonos.com. In
Finland we arranged again a seminar around Industrial Internet business
opportunities for our customers and stakeholders.
In September we announced Windows Server support to Ixonos Cloud™ in addition
to the existing selection of supported operating systems.
In our Blog pages we presented selected Design innovations from our Studios, as
well as shared further examples of our customer solutions.
Financing arrangement in September 2014
Due to increasing foreign sales, Ixonos has agreed on a short-term loan with
Turret Oy, which is a related party to the company. The loan amount is EUR 1.3
million.
Changes in the Management Team
During the review period the Group's Management team has been change, HR
Director Satu Roininen left from the company on August 31, 2014.
EVENTS AFTER THE REPORTING PERIOD
Ixonos has started co-operational negotiations with its personnel in Finland.
The negotiations concern the whole personnel in Finland.
The goal of the co-operational negotiations is to adjust the personnel costs
through temporary measures in order to align them with the market demand. An
additional goal is to enhance the efficiency of the company's operation.
It is estimated that the negotiations will result in temporary lay-offs for a
maximum of 90 days for part of the personnel and in job terminations for a
maximum of 9 persons.
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.
The group's turnover consists primarily of relatively short term customer
contracts. Forecasting the starting dates and scope is from time to time
challenging. At the same time the cost structure is fairly rigid. This may
result in unexpected in fluctuation in turnover and profitability.
A significant part of the group's turnover is invoiced in foreign currency.
Risks related to currency fluctuation are managed through different means.
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 company manages its need for working capital by creating, together with
financiers, adequate buffers to ensure sufficient funds as well as by speeding
up 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 each quarter
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 company updates its future outlook as follows:
The company estimates 2014 revenue to be in the range of EUR 24-26 million and
that EBITDA for the full year will be negative.
For the second half of the year EBITDA is expected to be positive.
NEXT REPORT
The interim report for the period January 1 - December 31, 2014 will be
published on Friday, February 27, 2015.
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
- Mikael Nyberg, CFO, tel. +358 40 501 4401, mikael.nyberg@ixonos.com
Distribution:
NASDAQ OMX Helsinki
Main media
THE IXONOS GROUP
ABBREVIATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES January 1 - September
30, 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 December 31, 2013. The IFRS amendments and interpretations that
entered into force on January 1, 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.
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 executed financial arrangements, the new strategic
direction and financial estimations made for end of year 2014 and the year
2015. The estimations take into consideration probable or foreseeable changes
in future expectations in revenues as well as costs.
There have been significant challenges as almost the whole customer base and
the business have changed over the past 2-3 years. The profitability has been
negative, even though the company has adopted its operations to meet
significantly lower cost level and gained new customers. The executed cost
savings and structural changes together with the new strategic focus have
resulted in significantly improvements in profitability during 2014. The
company is looking for growth particularly in the Unites States and in the
United Kingdom, where the macro economics allow larger investments than in
Finland.
The Group 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 that sufficient measures are taken to strengthen the balance sheet and
financial forecasts materialize. 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 Group has deferred tax assets EUR 5.6 million of which EUR 5.0 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 0.5 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.
Activated R&D costs
Ixonos has activated research and development costs during 2014 primarily
linked to the cloud business but also linked to it's industrial internet
activities. The activated costs are mainly personnel costs.
CONDENSED CONSOLIDATED INCOME STATEMENT, EUR 1.000
1.1.-30.9. 1.1.-30.9. Change, per 1.1.-31.12.
2014 2013 cent 2013
--------------------------------------------------------------------------------
Turnover 18 063 26 388 -31,5 33 397
--------------------------------------------------------------------------------
Operating expenses -23 666 -35 660 -33,6 -45 197
--------------------------------------------------------------------------------
OPERATING PROFIT BEFORE -5 603 -9 271 -39,6 -11 799
GOODWILL IMPAIRMENT
--------------------------------------------------------------------------------
Goodwill impairment 0 -1 600 -100,0 -1 600
--------------------------------------------------------------------------------
OPERATING PROFIT -5 603 -10 871 -48,5 -13 399
--------------------------------------------------------------------------------
Financial income and expenses -740 -604 22,5 -890
--------------------------------------------------------------------------------
Result before tax -6 343 -11 475 -44,7 -14 289
--------------------------------------------------------------------------------
Income tax 866 2 120 -59,2 1 854
--------------------------------------------------------------------------------
RESULT FOR THE PERIOD -5 476 -9 356 -41,4 -12 435
--------------------------------------------------------------------------------
Attributable to:
--------------------------------------------------------------------------------
Equity holders of the parent -5 466 -9 430 -42,0 -12 511
--------------------------------------------------------------------------------
Non-controlling interests -10 75 -113,3 75
--------------------------------------------------------------------------------
Earnings per share
--------------------------------------------------------------------------------
undiluted, EUR -0,06 -0,28 -78,6 -0,65
--------------------------------------------------------------------------------
diluted, EUR -0,06 -0,28 -78,6 -0,51
--------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, EUR 1.000
1.1.-30 1.1.-30 Change, 1.1.-31.
.9.2014 .9.2013 per 12.2013
cent
--------------------------------------------------------------------------------
Result for the period -5 476 -9 356 -41,5 -12 435
--------------------------------------------------------------------------------
Other comprehensive income
--------------------------------------------------------------------------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods:
--------------------------------------------------------------------------------
Change in translation difference -148 6 -2 566,7 -5
--------------------------------------------------------------------------------
COMPREHENSIVE INCOME FOR THE PERIOD -5 624 -9 350 -39,9 -12 441
--------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION, EUR 1.000
ASSETS 30.9.2014 30.9.2013 31.12.2013
--------------------------------------------------------------------------------
NON-CURRENT ASSETS
--------------------------------------------------------------------------------
Goodwill 10 847 10 847 10 847
--------------------------------------------------------------------------------
Other intangible assets 1 548 1 841 1 584
--------------------------------------------------------------------------------
Property, plant and equipment 1 194 2 384 2 106
--------------------------------------------------------------------------------
Deferred tax assets 5 574 4 780 4 517
--------------------------------------------------------------------------------
Available-for-sale investments 3 14 14
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 19 165 19 866 19 069
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------------------------------
Trade and other receivables 5 952 7 804 6 278
--------------------------------------------------------------------------------
Cash and cash equivalents 182 508 496
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 6 135 8 312 6 774
--------------------------------------------------------------------------------
TOTAL ASSETS 25 300 28 178 25 843
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES 30.9.2014 30.9.2013 31.12.2013
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------
Share capital 585 585 585
--------------------------------------------------------------------------------
Share premium reserve 219 219 219
--------------------------------------------------------------------------------
Invested non-restricted equity fund 32 358 24 157 28 794
--------------------------------------------------------------------------------
Retained earnings -26 367 -13 670 -13 664
--------------------------------------------------------------------------------
Profit for the period -5 466 -9 430 -12 511
--------------------------------------------------------------------------------
Equity attributable to equity holders of the 1 329 1 861 3 423
parent
--------------------------------------------------------------------------------
Non-controlling interests 237 246 247
--------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1 566 2 108 3 670
--------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------
Non-current liabilities 4 086 770 546
--------------------------------------------------------------------------------
Current liabilities 19 647 25 300 21 626
--------------------------------------------------------------------------------
TOTAL LIABILITIES 23 734 26 070 22 173
--------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 25 300 28 178 25 843
--------------------------------------------------------------------------------
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 at 585 219 0 20 247 75 -13 810 7 317 172 7 489
January 1, 2013
--------------------------------------------------------------------------------
Result for the period -9 430 -9 430 75 -9 355
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in translation 6 6 6
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Share issue 4 229 4 229 4 229
--------------------------------------------------------------------------------
Expenses for equity -319 -319 -319
procurement
--------------------------------------------------------------------------------
Share-based remuneration 59 59 59
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 0 24 157 81 -23 181 1 861 246 2 108
September 30, 2013
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 0 28 794 70 -26 246 3 423 247 3 670
January 1, 2014
--------------------------------------------------------------------------------
Result for the period -5 466 - 5 -10 -5 476
466
--------------------------------------------------------------------------------
Other comprehensive
income:
--------------------------------------------------------------------------------
Change in translation -62 -86 -148 -148
difference
--------------------------------------------------------------------------------
Transactions with
shareholders:
--------------------------------------------------------------------------------
Share issue 3 655 3 655 3 655
--------------------------------------------------------------------------------
Expenses for equity -91 -91 -91
procurement
--------------------------------------------------------------------------------
Share-based remuneration -44 -44 -44
--------------------------------------------------------------------------------
Shareholders' equity at 585 219 0 32 358 8 -31 842 1 329 237 1 566
September 30, 2014
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT, EUR 1.000
1.1.- 30.9.2014 1.1.- 30.9.2013 1.1.- 31.12.2013
--------------------------------------------------------------------------------
Cash flow from operating
activities
--------------------------------------------------------------------------------
Result for the period -5 476 -9 356 -12 435
--------------------------------------------------------------------------------
Adjustments to cash flow
from operating activities
--------------------------------------------------------------------------------
Income tax -866 -2 120 -1 854
--------------------------------------------------------------------------------
Depreciation and impairment 1 778 3 750 4 385
--------------------------------------------------------------------------------
Financial income and 740 604 890
expenses
--------------------------------------------------------------------------------
Other adjustments 200 -26 -78
--------------------------------------------------------------------------------
Change in provisions -67 -936 -979
--------------------------------------------------------------------------------
Cash flow from operating -3 692 -8 083 -10 071
activities before change in
working capital
--------------------------------------------------------------------------------
Change in working capital -1 803 1 781 782
--------------------------------------------------------------------------------
Interest received 45 166 288
--------------------------------------------------------------------------------
Interest paid -697 -693 -1 004
--------------------------------------------------------------------------------
Tax paid 0 140 326
--------------------------------------------------------------------------------
Net cash flow from operating -6 146 -6 690 -9 680
activities
--------------------------------------------------------------------------------
Cash flow from investing
activities
--------------------------------------------------------------------------------
Investments in tangible and -807 -42 -461
intangible assets
--------------------------------------------------------------------------------
Dividends received 0 0 0
--------------------------------------------------------------------------------
Net cash flow from investing -807 -42 -461
activities
--------------------------------------------------------------------------------
Net cash flow before -6 953 -6 732 -10 141
financing
--------------------------------------------------------------------------------
Cash flow from financing
activities
--------------------------------------------------------------------------------
Increase in long-term 4 500 0 0
borrowings
--------------------------------------------------------------------------------
Repayment of long-term -964 -400 -800
borrowings
--------------------------------------------------------------------------------
Increase in short-term 3 506 4 500 5 500
borrowings
--------------------------------------------------------------------------------
Repayment of short-term -3 875 -1241 -3 002
borrowings
--------------------------------------------------------------------------------
Proceeds from share issue 3 655 4 229 9 045
--------------------------------------------------------------------------------
Expenses for equity -181 -319 -584
procurement
--------------------------------------------------------------------------------
Net cash flow from financing 6 640 6 769 10 160
activities
--------------------------------------------------------------------------------
Change in cash and cash -314 31 19
equivalents
--------------------------------------------------------------------------------
Liquid assets at the 496 477 477
beginning of the period
--------------------------------------------------------------------------------
Liquid assets at the end of 182 508 496
the period
--------------------------------------------------------------------------------
Notes
Goodwill impairment
Ixonos made impairment test for goodwill as at September 30, 2014. Impairment
test showed surplus of EUR 4.8 million in discounted cash flow compared to
tested amount and no impairment was recognized. The carrying amount of goodwill
is EUR 10.8 million. 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 September 30, 2014 included forecasted
years Q4 2014 - Q3 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 used in goodwill impairment testing for year-end 2013 and
in previous interim reports in 2014. The impairment test is the most sensitive
to growth rate used when calculating the terminal value and discount factor. If
the growth rate -5.2 per cent had been used instead of 1 per cent, the tested
value would have been equal to the discounted cash flow. If the discount factor
had been 16 per cent instead of 12 per cent, the tested value would have been
equal to the discounted cash flow.
Loan covenants
The Company has agreed with its main financiers an instalment free period for
the loans until March 15, 2015. These covenants are based on quarterly EBITDA
levels. On September 30, 2014, the company did not meet the terms of the
covenants. However, the company has received releasing covenant statements from
its financiers.
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.
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 June 30, 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 6.1 million on September 30, 2014 (September 30, 2013: EUR 7.4 million). On
September 30, 2014 the company's equity ratio was 6.2 per cent (2013: 7.5 per
cent) and the ratio of interest-bearing liabilities and the EBITDA was negative
(2013: negative). Thus, the company does not fulfil the covenant terms on
September 30, 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 for these base covenants until December
31, 2014.
Instalment scheme for borrowings under covenants
Period Amount of instalment EUR 1.000
01.10. - 31.12.2014 0
01.01. - 31.12.2015 1,608
01.01. - 31.12.2016 1,621
01.01. - 31.12.2017 2,797
01.01. - 31.12.2018 54
CONSOLIDATED INCOME STATEMENT, QUARTERLY, EUR 1.000
Q3/2014 Q2/2014 Q1/2014 Q4/2013 Q3/2013
1.7.-30.9.14 1.4.-30.6.1 1.1.-31 1.10.-31. 1.7.-30
4 .3.14 12.13 .9.13
--------------------------------------------------------------------------------
Turnover 6 362 5 646 6 055 7 009 5 477
--------------------------------------------------------------------------------
Operating expenses -5 749 -7 726 -8 965 -9 537 -11 972
--------------------------------------------------------------------------------
OPERATING PROFIT BEFORE -613 -2 080 -2 910 -2 528 -6 494
GOODWILL IMPAIRMENT
--------------------------------------------------------------------------------
Goodwill impairment 0 0 0 0 -1 600
--------------------------------------------------------------------------------
OPERATING RESULT -613 - 2 080 -2 910 -2 528 -8 094
--------------------------------------------------------------------------------
Financial income and -223 -258 -259 -286 -248
expenses
--------------------------------------------------------------------------------
Result before tax -836 - 2 338 -3 165 -2 814 -8 343
--------------------------------------------------------------------------------
Income tax 250 241 376 -266 1 550
--------------------------------------------------------------------------------
RESULT FOR THE PERIOD -586 -2 097 -2 790 -3 080 -6 793
--------------------------------------------------------------------------------
CHANGES IN FIXED ASSETS, EUR 1.000
Good-w Intangibl Property, plant Available-for-s Total
ill e assets and equipment ale investments
--------------------------------------------------------------------------------
Carrying amount at 12 447 2 646 3 410 19 18 522
January 1, 2013
--------------------------------------------------------------------------------
Additions 61 295 356
--------------------------------------------------------------------------------
Changes in exchange -1 -1
rates
--------------------------------------------------------------------------------
Disposals and -37 -5 -42
transfers
--------------------------------------------------------------------------------
Impairment -1 600 -1 600
--------------------------------------------------------------------------------
Depreciation for -866 -1 284 -2 150 the period
--------------------------------------------------------------------------------
Carrying amount at 10 847 1841 2 384 14 15 086
September 30, 2013
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Carrying amount at 10 847 1 585 2 106 14 14 552
January 1, 2014
--------------------------------------------------------------------------------
Additions 802 72 1 875
--------------------------------------------------------------------------------
Changes in exchange 7 7
rates
--------------------------------------------------------------------------------
Disposals and -3 -49 -52
transfers
--------------------------------------------------------------------------------
Impairment -12 -12
--------------------------------------------------------------------------------
Depreciation for -836 -942 -1 778
the period
--------------------------------------------------------------------------------
Carrying amount at 10 847 1 548 1 194 3 13 591
September 30, 2014
--------------------------------------------------------------------------------
FINANCIAL RATIOS
1.1.-30.9.2 1.1.-30.9.2 1.1.-31.12.
014 013 2013
--------------------------------------------------------------------------------
Earnings per share, diluted, EUR -0.06 - 0.28 -0.51
--------------------------------------------------------------------------------
Earnings per share, EUR -0.06 -0.28 -0.65
--------------------------------------------------------------------------------
Equity per share, EUR 0.01 0.06 0.05
--------------------------------------------------------------------------------
Operating cash flow per share, diluted, 0.01 -0.20 -0.39
EUR
--------------------------------------------------------------------------------
Operating cash flow per share, EUR -0.06 -0.28 -0.51
--------------------------------------------------------------------------------
Return on investment, per cent -49.8 -84.2 -81.3
--------------------------------------------------------------------------------
Return on equity, per cent -465.3 -196.4 -224.2
--------------------------------------------------------------------------------
Operating profit ∕ turnover, per cent -31.0 - 41.2 -40.1
--------------------------------------------------------------------------------
Net gearing, per cent 1 079.6 605.6 375.1
--------------------------------------------------------------------------------
Equity ratio, per cent 6.2 7.5 14.2
--------------------------------------------------------------------------------
Equity ratio, per cent, excluding 5.3 6.5 13.2
non-controlling interest
--------------------------------------------------------------------------------
EBITDA, 1000 EUR -3 829 -7 121 - 9 014
--------------------------------------------------------------------------------
OTHER INFORMATION
1.1.- 1.1.- 1.1.-
30.9.2014 30.9.2013 31.12.2013
--------------------------------------------------------------------------------
PERSONNEL 337 523 505
Employees, average
--------------------------------------------------------------------------------
Employees, at the end of the period 276 481 442
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMITMENTS, EUR 1,000
--------------------------------------------------------------------------------
Collateral for own commitments
--------------------------------------------------------------------------------
Corporate mortgages 23 300 22 300 23 300
--------------------------------------------------------------------------------
Financial bonds *) 427 357 350
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Leasing and other rental
commitments
--------------------------------------------------------------------------------
Falling due within 1 year 2 097 2 661 2 092
--------------------------------------------------------------------------------
Falling due within 1-5 years 3 426 4 163 3 128
--------------------------------------------------------------------------------
Falling due after 5 years 0 0 0
--------------------------------------------------------------------------------
Total 5 523 6 824 5 220
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Nominal value of interest rate swap
agreement
--------------------------------------------------------------------------------
Falling due within 1 year 0 0 0
--------------------------------------------------------------------------------
Falling due within 1-5 years 4 941 5 270 4 941
--------------------------------------------------------------------------------
Falling due after 5 years 0 0 0
--------------------------------------------------------------------------------
Total 4 941 5 270 4 941
--------------------------------------------------------------------------------
Fair value -68 -47 -47
--------------------------------------------------------------------------------
*) Financial bonds have previously been stated in other rental commitments
CALCULATION OF KEY FIGURES
EBITDA = Earnings before Interest, Taxes, Depreciation and Amortization
Diluted earnings per share = result for the period ∕ number of shares, adjusted
for issues and dilution, average
Earnings per share = result 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 (rolling 12 months) = (result before taxes + interest
expenses + other financial expenses) ∕ (balance sheet total −
non-interest-bearing liabilities, average) × 100
Return on equity (rolling 12 months) = net result ∕ shareholders' equity,
average × 100
Net gearing from total equity= (interest-bearing liabilities - liquid assets) /
shareholders' equity × 100
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