Tecnotree Oyj - Interim report (Q1 and Q3)

Tecnotree Corporation Interim Report 1 January – 30 June 2015 (unaudited)

Tecnotree Corporation
Interim Report
13 August, 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. 

Positive cash flow

Second quarter

  -- Second quarter net sales were EUR 17.1 (11.7) million. 
  -- The operating result for the quarter was EUR 1.5 (-4.3) million.
  -- The adjusted result for the quarter was EUR -2.9 (-5.8) million and result
     EUR -1.7 (-6.2) million.
  -- The order book at the end of the period stood at EUR 37.4 (31 December
     2014: 38.9) million.
  -- Second quarter cash flow after investments was EUR 2.8 (-0.5) million.
  -- Earnings per share were EUR -0.01 (-0.05).

January - June 2015

  -- Net sales for the review period were EUR 34.2 (26.1) million. 
  -- The operating result was EUR 2.5 (-6.1) million.
  -- The adjusted result for the period was EUR -3.3 (-9.3) million and the
     result EUR -5.0 (‑11.0) million.
  -- Cash flow after investments for the review period was EUR 3.6 (-3.8)
     million and the company's cash and cash equivalents were EUR 5.6 (31
     December 2014: 2.5) million.
  -- Earnings per share were EUR -0.04 (-0.09).



KEY FIGURES                                 4-6/   4-6/   1-6/   1-6/  1-12/
                                            2015   2014   2015   2014   2014
Net sales, MEUR                             17.1   11.7   34.2   26.1   74.0
Adjusted operating result, MEUR 1            1.5   -4.3    2.8   -6.1    3.7
Operating result, MEUR                       1.5   -4.3    2.5   -6.1    3.3
Result before taxes, MEUR                    1.0   -5.5   -1.4   -9.2   -2.4
Adjusted result for the period, MEUR 2      -2.9   -5.8   -3.3   -9.3   -6.4
Result for the period                       -1.7   -6.2   -5.0  -11.0   -9.3
Earnings per share, basic, EUR             -0.01  -0.05  -0.04  -0.09  -0.08
Order book, MEUR                                          37.4   46.7   38.9
Cash flow after investments, MEUR            2.8   -0.5    3.6   -3.8   -1.8
Change in cash and cash equivalents, MEUR    2.4    0.2    3.0   -3.5   -4.2
Cash and cash equivalents, MEUR                            5.6    3.1    2.5
Equity ratio %                                            19.6   18.9   22.5
Net gearing %                                            181.3  238.8  172.7
Personnel at end of period                                 939  1,052    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
1-6/2015 and the figures for comparison are for the corresponding period
1-6/2014. 

CEO Ilkka Raiskinen

“The company's performance during the second quarter of the year was
encouraging in many areas: profitability and cash flow developed positively and
demand for new products remained good. The measures to improve productisation
have brought results: the costs of business operations have declined and the
operating profit has clearly improved from the previous year. 

The restructuring proceedings have not had a significant impact on the
company's business operations, and the company has been able to continue its
investment in new products and new customers according to plan. 

The company has continued its activities aiming to have an impact on costs
outside the operating profit, in particular on the management of withholding
tax. ” 

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 shareholders 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 30 September 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. More details are given in the section “Financing,
cash flow and balance sheet” above. 

The company has sales in several countries where the country's central bank has
a shortage of foreign currency. This causes additional delays in payments,
costs and even the risk of not receiving payment at all. 

On 30 June 2015 the Group's shareholders' equity of stood at EUR 14.7 million.
However, the shareholders' equity of the parent company was EUR 1.1 million
negative. 

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 interested parties by
5 May 2015. The administrator must prepare and deliver his proposed
restructuring programme to the district court of Espoo by 30 September 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. 

Events after the end of the period

Postponing of the draft restructuring program for Tecnotree Corporation

The district court of Espoo decided on 9 March 2015 to commence the corporate
restructuring proceedings concerning Tecnotree Corporation in accordance with
the Act on Restructuring of Enterprises. The district court appointed Mr. Jari
Salminen, Attorney-at-Law, from JB Eversheds Oy as the administrator in respect
of the restructuring process. The court decided that a draft restructuring
program should be submitted to the district court of Espoo by 6 July 2015. 

The district court of Espoo decided on 3 July 2015 at the request of the
administrator to postpone the deadline for submitting the draft restructuring
program till 30 September 2015. The contents of the request were as follows: 

“The administrator appointed in respect of the restructuring process requests
that the district court postpones the deadline for submitting the draft
restructuring program till 30 September 2015. 


It is not possible to compile a draft restructuring program by the 6 July 2015
deadline because: 

  -- the company is doing business in several continents causing the evaluations
     to take mote time;
  -- the definition of the amount of secured debt is pending; and
  -- the financial statements for the financial year ended 31 Marc 2015 of
     Tecnotree Convergence Private Limited, a subsiadiary in India, have not
     been completed, yet. Tecnotree Convergence Private Limited forms an
     integral part of the group activities.

Compiling of the draft restructuring program has progressed and no obstacles
for creating an implementable restructuring program and reorganization of the
business have come up in the evaluations during the restructuring process. “ 

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 interim report on Thursday, 13 August 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 around 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 Q2 2015.pdf

Tecnotree Interim Report Q2 2015 Presentation.pdf