2012-08-21 10:15:00 CEST
2012-08-21 10:15:11 CEST
REGULATED INFORMATION
Cencorp - Interim report (Q1 and Q3)
CENCORP CORPORATION’S INTERIM REPORT JANUARY – JUNE 2012
Cencorp Corporation Stock exchange release 21.8.2012 at 11.15
Finnish time
CENCORP CORPORATION'S INTERIM REPORT JANUARY - JUNE 2012
The net sales of Cencorp Corporation's (“Cencorp”) continuing operations for
the reporting period January - June 2012 was EUR 9.1 million (EUR 11.2 million
in 2011). The operating profit of continuing operations was EUR -1.1 million
(-2.3), profit for the period EUR -1.3 million (-3.3), earnings per share were
EUR -0.004 (-0.01) and EBITDA was EUR 0,01 million (-1.2).
GENERAL
Cencorp belongs to the Finnish Savcor Corporation (“Savcor”). Savcor Group
companies owned approximately 78,9 % of the Cencorp shares on 30 June 2012.
More information on principle activities and events during the reporting period
can be found in the stock exchange releases published on Cencorp's website at
www.cencorp.com.
The interim report has been drawn up in compliance with the IAS 34 Interim
Financial Reporting standard. In the interim report, Cencorp has applied the
same accounting principles as in the annual report 2011.The interim report has
not been audited.
From this interim report onwards Cencorp has changed the structure of its
interim reports in order to simplify and improve its investor communication.
FINANCIAL DEVELOPMENT
The two business segments Cencorp reports of are Laser and Automation
Applications, and Special Components. The Laser and Automation Applications
segment comprises Cencorp's former business and the Special Components segment
the business acquired through the Face (Telecom) transaction in 2010. Since the
Guangzhou plant closing announced in May the Special Components segment
comprises only special component production at the Beijing plant.
The figures in brackets are comparison figures for the corresponding period in
2011, unless stated otherwise.
29 May 2012 Cencorp announced that it exits from its unprofitable decoration
business and closes down its plant in Guangzhou, China, producing decoration
applications. In consequence of the closing down of the Guangzhou plant and the
exit from decoration business Cencorp reports the financial figures relating to
the Guangzhou plant's decoration business as discontinued operations from now
on. In Cencorp's financial reports the profit of discontinued operations is
reported on a separate line, apart from continued operations, thus, the income
statement, except the discontinued operations item, concern the company's
continued operations only.
April - June 2012 (continued operations)
- Cencorp Group's net sales decreased by 27.0 per cent to EUR4.7 million
(EUR6.4 million).
- EBITDA was EUR -1.0 million(EUR -0.3 million).
- Operating profit was EUR -1.5 million (EUR -0.9 million).
- The Group's profit before taxes was EUR -1.3 million (EUR -1.2 million).
- Profit for the period was EUR -1.3 million (EUR -1.3 million).
- Earnings per share were EUR -0.004 (EUR -0.004) and diluted earnings per
share EUR -0.004 (EUR -0.004).
- Net sales of the Laser and Automation Applications segment decreased by 40.3
per cent to EUR 3.2 million (EUR 5.4 million) and operating profit was EUR -0.7
million (EUR -0.1 million). The segment's EBITDA was EUR -0.6 million (EUR -0.2
million).
- Net sales of the Special Components segment increased by 37.7 per cent to EUR
1.5 million (EUR 1.1 million) and operating profit was EUR -0.8 million (EUR
-0.8 million). The segment's EBITDA was EUR -0.4 million (EUR -0.5 million).
January - June 2012 (continued operations)
- Cencorp Group's net sales decreased by 18.7 per cent to EUR 9.1 million (EUR
11.2 million).
- The order book at the end of June stood at ca. EUR 3.3 million (EUR 4.2
million).
- EBITDA was EUR 0.01 million (EUR -1.2 million).
- Operating profit was EUR -1.1 million (EUR -2.3 million).
- The EBITDA and the operating profit include a one-off profit of EUR 1.2
million from the sale of Beijing plant.
- The Group's profit before taxes was EUR -1.3 million (EUR -3.3 million).
- Profit for the period was EUR -1.3 million (EUR -3.3 million).
- Earning per share were EUR -0.004 (EUR -0.01) and
diluted earnings per share were EUR -0.004 (EUR -0.01).
- The equity ratio at the end of June was 33.2 per cent (54.5 %).
- Net sales of the Laser and Automation Applications segment decreased by 34.3
per cent to EUR 5.8 million (EUR 8.8 million) and operating profit was EUR -1.5
million (EUR -1.0 million). The segment accounted for 63.3 percent of the
Group's net sales. The segment's EBITDA was EUR -1.1 million (EUR -0.4)
million.
- Net sales of the Special Components segment increased by 35.3 per cent to 3.3
million (EUR 2.5 million) and operating profit was EUR 0.4 million (EUR -1.3
million). The segment accounted for 36.7 per cent of the Group's net sales. The
segment's EBITDA was EUR 1.1 million (EUR -0.7 million).
- The operating profit of the Special Components segment include a one-off
profit of EUR 1.2 million from the sale of the Beijing plant. The company
continues its operation in the same building as lessee.
MARKET OUTLOOK
Cencorp revised its market outlook on 21 August 2012. Cencorp announced that
the company had signed a Memorandum of Understanding (MOU) related to the
acquisition of Avery Dennison's Conductive Back Sheet (CBS) business and
related intellectual property rights. The MOU is non-binding.
Cencorp has previously emphasized in its strategy that the company's growth
will be based on new Cleantech solutions and especially applications for new
energies. If realized the transaction will change the company's cost structure
and the targets for the new future. As Cencorp is now in a strong transition
stage following the new strategy, Cencorp cannot assess how the Avery Dennison
transaction and change in company's business focus will impact the company,
due to which Cencorp has decided not to give any financial guidance for the
time being, as stated in the release of 21 August 2012.
Flexible circuit deliveries pursuant to the frame agreement signed with Avery
Dennison in January will be delayed due to the aforesaid transaction with Avery
Dennison and the targets set for the financial year 2012 will not be reached.
Decrease in the net sales and the EBITDA results partly from Cencorp
redirecting its business focus and human resources into new targets pursuant to
Cencorp's new strategy and into cleantech application development. Cencorp
estimates that the net sales of its former continuing businesses i.e. Laser and
Automation Applications segment and Special Components segment will be smaller
than EUR 21.6 million in 2012, as announced earlier this year, provided that no
essential change takes place in the operating environment or in the current
economic outlook, but increased costs originating from the new operations will
turn EBITDA negative during the financial year 2012.
Cencorp's future outlook will be highly dependent on the company's ability to
reach the targeted market position in the global photovoltaic module market.
Cencorp's goal is to reach strong market position as provider of locally
produced high-quality photovoltaic modules.
LONG-TERM OBJECTIVES FOR MANAGING DIRECTOR
Cencorp's Board of Directors has published its long-term financial and other
objectives for Managing Director as follows:
In January 2012 Cencorp announced it had signed a remarkable frame agreement on
delivering flexible circuits for renewable energy solutions for Avery Dennison.
At that time the company estimated that the value of the frame agreement may
exceed EUR 50 million in the course of three years. Based on this evaluation,
company's new strategy published in the spring 2012 and on the fact that the
Avery Dennison transaction, if realized, enables Cencorp providing its
customers with wider and multiple times of value offering related to the
photovoltaic modules and other renewable energy solutions, the Board of
Directors has set the following long-term objectives for the company's
Managing Director:
- Thorough but fast transition from a company manufacturing only production
automation applications and special components into a company that develops and
provides Cleantech applications with a strong market position as provider,
using laser and automation technology, of locally in different market areas
produced, high-quality photovoltaic modules.
- Cencorp's goal is to increase its shareholder value with growth and
profitability. Cencorp aims for growth in Cleantech business where the company
has good possibilities to achieve a strong global position and faster growth,
especially in solar PV modules and fuel cell applications.
- Laser and Automation Applications segment has its main focus is on the life
cycle management of systems and equipments with clear growth expectations for
service business.
- In long-term Cencorp is aiming for remarkable growth in its net sales with
net sales target of more than EUR 200 million for 2016, provided the company
has sufficient capital. The growth comes mainly from Cleantech operations and
especially from applications for fuel cells.
- The long term objectives set for the Managing Director involves also risks
and the long term objective should not be considered as the company's financial
guidance. Even though the objectives are based on market knowledge and
technical surveys, the risk are significant and it is not certain if the
Managing Director reaches all or part of the targets set for him.
MANAGING DIRECTOR'S REVIEW
Managing Director Iikka Savisalo:
The second quarter of the financial year 2012 started well. Cencorp had signed
one of the most remarkable agreements in its history on delivering new
generation photovoltaic module components. The company had also received
re-orders from end customers operating in the electronics industry.
Additionally Cencorp had signed an agreement with an American customer on
delivering the first of its kind new generation router. Also the volume of the
decoration business increased at the beginning of the quarter along with a new
customer. The order book was growing steadily.
As announced 19 April 2012 the company started restructuring its organization
and focusing its operations more on the development of automation for new
energy production applications and solutions and on the life cycle management
of its customers automation installations. Statutory negotiations necessary for
the change were started in April. Similarly, actions to fully outsource the
production of Cencorp's standard equipment were started. The statutory
negotiations were finished in June and actions agreed upon at the negotiations
are now being taken.
At the end of April - beginning of May the situation in the global financial
market with the Euro crises started effecting also Cencorp as a decrease in the
amount of orders. Additionally the growing decoration business in Guangzhou did
not reach profitability fast enough and the business continued to be
unprofitable. Investments would have been required to improve the profitability
and Cencorp decided to exit from the decorations business. The Guangzhou plant
was decided to be closed down in June.
As a result from the exit from decoration business and restructuring of
operations in Finland Cencorp made a provision of approximately EUR 1 million
and write-off of about EUR 5.7 million. The operation at the Beijing plant
continue normally. Cencorp is actively looking for an opportunity to sell the
already closed decoration business. Cencorp has also negotiated with many
potential partners but there is not yet any certainty or schedule for any
results.
The net sales of continued operations in April - June decreased by 27 % from
the the corresponding period in 2011 to EUR 4.7 million. Also the EBITDA
decreased to EUR -1.0 million. Decrease in the net sales and the EBITDA
resulted from decrease in received orders but also from Cencorp redirecting its
business focus and human resources into the new targets pursuant to the
company's new strategy and into Cleantech application development. Due to fast
change and differentiation of the mobile phone industry the size of orders for
Cencorp's traditional special component became smaller and the decreasing
volumes of orders from Cencorp's biggest customer reduced the profit per
produced unit.
The net sales of the first half of the year 2012 decreased by 18.7 % compared
to the correspondin period in 2011 to EUR 9.1 million. The EBITDA was slightly
positive including a one-off profit from the sale of the Beijing plant.
OPERATING ENVIRONMENT
Cencorp mainly operates in industries applying electronics and cleantech
technology. Its main geographical market areas are Europe, North America, South
America and Asia. Cencorp's key customers for laser and automation applications
operate globally and require local service. The global electronics industry,
including the manufacture of mobile phones, is mostly concentrated in Asia, the
domestic market area for the special components manufactured by Cencorp.
Among Cencorp's customers there seemed to be slight optimism in the first
quarter of 2012. However, it changed into uncertainty of global economy at the
end of the second quarter as the Euro crises was acute in many of Cencorp's
traditional market areas. The general uncertainty in Cencorp's operating
environment decreases the number of investments as well as delayes orders as
customers are very carefully considering their capacity needs. Limited
availability of capital for investments had a major influence in the operations
of all manufacturers of automation systems and the alternative to hand produce
products in low cost countries seemed to have been widely selected.
The life cycle management becomes more important for the company as the number
of new orders is declining. The organizational restructuring during the second
and partly the third quarter is carried out to increase capacity in the service
business and at the same time to reduce fixed costs by outsourcing the
production. The total annual savings from the restructuring is estimated to be
EUR 2.5 - 3 million.
Investments in the electronics industry are done in strong cycles following the
changes in economical environment, which seems to have prevented Cencorp
business to grow profitably, especially as Cencorp no more has any leading
customer. The actions commenced during the second quarter and the possible
transaction with Avery Dennison, on which Cencorp has signed a Memorandum of
Understanding, would clearly reduce the negative influence of economical cycles
in Cencorp's operations.
Special Components
Cencorp's Special Components business is also in the middle of big change.
Dependence on the telecom market continued to decline. The changes in the
mobile phone industry have influenced in the distribution of the market share
and caused a strong diversification in the market. The component streams are
now much smaller and forecasting which always has been difficult in the mobile
phone industry is getting more and more difficult. It is now critical for
Cencorp to be able to create new customer relationships in the special
components business. In order to get the special components business growing
again, Cencorp has to be able to find customers, especially among Chinese and
Korean mobile phone manufacturers.
The RFID market is expected to continue growing. The competition in the
industry is hard which will keep the margins low. However, Cencorp is able to
meet most of the challenges from the markets, with the company's highly
efficient and modern production resources. Cencorp is especially competitive in
copper HR (High Resolution) antennas that require extremely high accuracy.
Cencorp commenced deliveries of the new NFC (Near Field Communication) antennas
during the first half of the financial year. NFC antennas are expected to
become common in the coming years. At the moment only few expensive mobile
phone models have NFC function. However, Cencorp estimates that in couple of
years NFC will be a basic function also in cheaper mobile phones. NFC market is
expected to grow remarkably in the near future and Cencorp is prepared to
increase its component production, without any significant investments, to meet
the growing demand.
Cencorp believes that the operating environment in the special components
industry, excluding the NFC antennas, will continue being challenging.
Laser and Automation Applications
The demand for laser and automation applications has varied quite a lot during
the first half of the year. Despite the fact that general market trends are
showing increase in automation level in the electronics industry, investments,
made to transfer production from manual into automated processes in the low
cost countries, are very sensitive to economic fluctuations. As the global
economy is struggling with financial crisis, automation investments are often
postponed to wait for better times. On the other hand, high peaks in the demand
for capacity require automation companies such as Cencorp to commit themselves
to significant fixed costs.
Cencorp has now concluded its transformation from a plant organization with own
manufacturing to a project organization closely networking with its production
and development partners. This way the company is able to retain its capacity
and short delivery times without, most of the most, underutilized production
and engineering organization for delivering special equipment and heavily
decreasing the profitability. The cornerstone of Cencorp's traditional
business will be the life cycle management of production systems and equipment
in the electronics industry. Cencorp has delivered more than two thousand
installations, which will create a solid base for the lie cycle management
operations.
In accordance with Cencorp's Cleantech strategy future growth will be driven by
flexible circuits provided for the solar energy industry and photovoltaic
modules. The company also delivers special components for LED light
manufacturers.
CONDUCTIVE BACK SHEET (“CBS) AND OTHER APPLICATIONS FOR NEW ENERGY
Cencorp's most important new product is CBS which has been developed in
coopertion with Avery Dennison and which will be Cencorp's fully owned product
provided the aforesaid transaction will realize. CBS is used in new generation
back contact photovoltaic modules. The modules with Back Contact Sheet
technology are significantly more efficient compared to traditional modules.
This year the global solar photovoltaic market has faced remarkable changes.
Traditional photovoltaic modules have reached their maximum capacity to produce
energy. The market dominated by Chinese manufacturers is saturated with very
equal photovoltaic modules. There is clear overcapacity in the market and
fierce price competition. The US has already started protective measures to
restrict cheap imports from China and it is possible that same actions are
taken also by EU where 70 % of the world's photovoltaic modules are sold.
Even though the technology of new generation back contact modules is well known
in the market,none of the big panel manufacturers has started using the new
tehcnology in a large scale. The main reason for this is that the price of the
critical CBS component is high and on the other hand production capacity is
limited. In cooperation with Avery Dennison Cencorp has managed to develop
highly cost-effective product and applicable production technology during the
last two years. In the development work Cencorp has utilized its wide know-how
in automation and its experience in the highly competed telecom industry. The
company believes its product has head start over similar competing products.
Cencorp is aiming to commence CBS deliveries to one of the world's leading
solar panel manufacturer at the end of this year or during the first quarter of
2013.
The company has also made progress in developing fuel cell components and it
has been chosen to participate a certain joint European research and
development project. Cencorp believes it will commence commercial deliveries
for the fuel cells in the course of the next three years as the market is
developing.
FINANCING
Cash flow from business operations before investments in January - June was EUR
1.1 million (EUR -2.5 million). Trade receivables at the end of the reporting
period were EUR 3.5 million (EUR 5.7 million). Net financial items amounted to
EUR 0.2 million (EUR 1.0 million).
At the end of June, the equity ratio was 33.2 per cent (54.5 %) and equity per
share was EUR 0.02 (EUR 0.06). At the end of the reporting period, the Group's
liquid assets totaled EUR 0.4 million (EUR 1.0 million) unused export credit
limits, bank guarantee limits and factoring loans amounted to EUR 1.5 million
(EUR 1.1 million).
As previously announced, Cencorp's financial position has been tight. The
equipment sales slow down at the end of the second quarter and it was followed
by a decrease in order book, which will make the company's financial position
even tighter. In order to strengthen company's financial position Cencorp
announced 21 August 2012 that it will issue a convertible bond with the maximum
amount of EUR 1,500,000, to selected investors.
Cencorp also commences preparing a share issue. The objective of the share
issue is to finance establishing of photovoltaic module business plan. The
share issue is expected to carry out by the end of this year. Cencorp will
inform later on on the terms and schedule of the share issue.
Cencorp agreed with its financers on amendment of the financial agreements and
announced 29 June 2012 that :
- Sampo Pankki Oyj's financial facility agreement totalling EUR four million
was continued until 30 September 2012;
- the maturity date of a convertible bond of some EUR 1.2 million from Savcor
Group Oy was extended until 30 September 2012; and
- the maturity date of a loan of EUR one million from Savcor Invest BV (former
AC Invest BV), a daughter company of Savcor Group Oy, was extended until 30
September 2012, and additionally Savcor Group Oy renewed its commitment to
extend the loan period until April 2013 if Cencorp's financial position so
requires.
With these actions Cencorp believes that the company has secured sufficient
working capital for the next twelve months.
RESEARCH AND DEVELOPMENT
The Group's research and development costs during the January-June period
amounted to EUR 0.7 million (EUR 0.8 million) or 7.5 (6.7) per cent of net
sales.
INVESTMENTS
Gross investments during the January - June period amounted to EUR 0.9 million
(EUR 0.8 million). The largest investments were EUR 0.5 million in development
costs.
PERSONNEL
At the end of June the Group employed 193 (343) people, out of which 64 persons
worked in Finland, 118 persons in China and 11 persons in other countries.
During the reporting period, salaries and fees totalled EUR 2.9 million (EUR
2.7 million).
Mats Eriksson, Cencorp Corporations President and CEO, resigned from Cencorp at
the beginning of April. Iikka Savisalo, Cencorp's CFO, was appointed the new
President and CEO as of 3 April 2012. He also continues as a member of the
Board of Directors of Cencorp. Seija Kurki took over as the company's new CFO
and the member of the management team of Cencorp.
The statutory negotiations commenced at Cencorp in May 2012 were finished in
June. As a result of the negotiations the number of Cencorp's personnel in
Finland will decrease by 14 persons. Reduction will be carried out by
outsourcing and with notices of terminations. As stated in Cencorp's new
strategy published in April the company will outsource its in-house equipment
production including the support functions. At the same time product design
will be strengthened with strategic partnerships.
Restructuring of Cencorp Group's foreign units has been started. In North
America the number of employees is decreased by three persons. Cencorp's
purpose is to close down its non-operative subsidiaries in Hungary, Sweden and
UK by the end of 2012. Closing down subsidiaries has no influence in the number
of personnel.
These actions, including close down of the Guangzhou plant, will reduce the
number of Cencorp corporation's personnel at the time from 310 to 183 persons.
Restructuring is estimated to generate approximately EUR 3.5 - 4 million annual
savings in fixed and operative costs. Additionally, some cost flexibility
reflecting the fluctuations in demand will be gained through outsourcing.
SHARES AND SHAREHOLDERS
Cencorp's share capital amounts to EUR 3 425 059,10. The number of shares is
342 161 270. The company has one series of shares, which confer equal rights in
the company. Cencorp did not own any of its own shares at the end of the
financial year.
The company had a total of 4474 shareholder at the end of June, and 0.8 per
cent of the shares were owned by foreigners. The ten largest shareholders held
89.7 percent of the company's shares and voting rights on 30 June 2012.
The largest shareholders on 30 June 2012
Shares Votes
-----------------------------------------------------------
1. SAVCOR GROUP LIMITED 133 333 333 39,0
-----------------------------------------------------------
2. SAVCOR GROUP OY 119 235 078 34,8
-----------------------------------------------------------
3. SAVCOR INVEST BV 17 499 999 5,1
-----------------------------------------------------------
4. KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ETERA 16 394 735 4,8
-----------------------------------------------------------
5. GASELLI CAPITAL OY 11 000 000 3,2
-----------------------------------------------------------
6. PAASILA MATTI 2 777 777 0,8
-----------------------------------------------------------
7. GASELLI CAPITAL PARTNERS OY 2 050 000 0,6
-----------------------------------------------------------
8. JOKELA MARKKU 1 987 519 0,6
-----------------------------------------------------------
9. PARPOLA VILLE 1 478 759 0,4
-----------------------------------------------------------
10. FT CAPITAL OY 1 428 570 0,4
-----------------------------------------------------------
OTHERS 34 975 500 10,3
-----------------------------------------------------------
TOTAL 342 161 270 100,0
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Savcor Group Oy announced on 20 April 2012 that it has acquired AC Capital's
subsidiary AC Invest B.V. (currently Savcor Invest B.V.) who owned
approximately 5.1 percent of Cencorp Corporation's shares, resulting in Savcor
Group's ownership in Cencorp Corporation increasing into 78.9 percent.
The members of the Board of Directors and the President and CEO, either
directly or through companies under their control, held a total of 270 068 410
shares in the company on 30 June 2012, representing about 78.9 percent of the
company's shares and voting rights. Iikka Savisalo, Cencorp's Managing
Director, either directly or through companies under his control, held a total
of 270 068 410 shares in the company.
The price of Cencorp's share varied between EUR 0.05 and 0.12 during the
January - June period. The average price was EUR 0.09 the closing price at the
end of June EUR 0.05. A total of 12.1 million Cencorp shares were traded at a
value of EUR 1.1 million during the January - June period. The company's market
capitalization at the end of June stood at EUR 17.1 million.
No share options were granted to the company's management during the reporting
period. On 30 June 2012, the company had 8,931,000 options connected to bond
I/2010 with a subscription period ending on 25 May 2015. Savcor Group Oy holds
the options connected to bond I/2010. No 2006C series options have been
allocated and Cencorp Group continues to hold them.
EXEMPTION PERMIT FROM THE FINNISH FINANCIAL SUPERVISORY AUTHORITY
At the beginning of April, the Finnish Financial Supervisory Authority granted
Cencorp an exemption permit to deviate from the deadline of the disclosure of
the Financial Statement, Report of the Board of Directors and the Auditors
Report, pursuant to the Finnish Securities Market Act. The exemption permit is
related to the delay of the disclosure of the company's Auditors Report,
published on 30 March 2012.
On 4 April 2012, Cencorp received Auditor´s Report concerning its financial
statement, and published it at the same day, together with the Financial
Statement and Report of the Board of Directors. The Auditor´s Report
corresponds the draft version which was published on 29 March 2012. The
Auditors Report includes a so-called Emphasis of Matter, concerning the
company's financing position.
SHARE ISSUE AUTHORIZATIONS IN FORCE
1,069,000 shares remain under the authorization given by Cencorp's Annual
General Meeting on 28 April 2009 to issue 10,000,000 new shares in Cencorp.
Cencorp's Extraordinary General Meeting held on 30 January 2012 decided to
authorize the Board of Directors to issue 100,000,000 new shares.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH AVERY DENNISON
On 21 August Cencorp announced that the company and Avery Dennison Corporation
(”Avery Dennison”), a US based company, have signed a Memorandum of
Understanding (MOU) according to which Cencorp acquires Avery Dennison's
Conductive Back Sheet (CBS) business and related intellectual property rights.
The MOU is non-binding. The purchase price stated in the MOU is USD 500,000
cash and 6,711,409 Cencorp shares. Avery Dennison agrees not to sell its
Cencorp shares received as purchase price payment within 12 months from the
effective date of the definitive purchase agreement. Cencorp will separately
enter into agreements with the key persons that were involved with the business
being acquired to join Cencorp team. The transaction is expected to take place
by the end of 2012. The risks related to the non-binding MOU signed with Avery
Dennison have been handled in more detail in the item “Risk management, risks
and uncertainties” of this interim report.
MAIN TERMS OF THE CONVERTIBLE BOND
In order to secure the financing required to strengthen Cencorp's capital
structure the company issues convertible bond with the maximum amount of EUR
1,500,000 and simultaneously issues stock options with maximum amount of
21,428,571 free of charge. One (1) stock option is issued per each subscribed
loan capital amount of EUR 0.07. The convertible bond is issued in deviation
from the shareholders' pre-emptive subscription rights to those current Cencorp
shareholders who directly on the record day of 31 June 2012 own at least one
million (1,000,000) Cencorp's shares or who otherwise are approved by the Board
of Directors. Convertible bond can also be subscribed against a loan receivable
from Cencorp, undisbuted on the record day, by converting the loan's capital or
interest into convertible bond according to the terms of the convertible bond.
Loan period starts as of the payment of a loan to the company and ends on 7
September 2014 when the convertible bond will be due in its entirety pursuant
to the loan terms. The shareholders' pre-emptive subscription rights are being
deviated from as the stock options are issued to secure financing required to
strengthen Cencorp's capital structure cost effectively and considering the
size of the financing. Thus, there is, from the company's point of view, a
weighty financial reason to issue the stock options.
An annual interest of eight (8) % will be paid on the convertible bond from the
withdrawal of the bond. A holder of the bond has a right to subscribe an amount
of shares, equivalent to the bondholders shareholding percentage at the time,
in Cencorp's possible future share issues with subscription period ending
latest by 7 September 2014, at a subscription price that is 10 % lower than the
subscription price in the share issue in question.
The holder of the bond is entitled to converse the promissory note into the
shares of the Company. One (1) stock option pursuant to the promissory note
entitles the bond holder to subscribe for one (1) new share of the company.
Based on the subscriptions made pursuant to the stock options, the Company
shall issue in maximum of 21.428.571 new company shares. The Company has one
(1) class of shares.
RISK MANAGEMENT, RISKS AND UNCERTAINTIES
Cencorp's Board of Directors is responsible for the control of the company's
accounts and finances. The Board is responsible for internal control, while the
President and CEO handles the practical arrangement and monitors the efficiency
of internal control. Business management and control are taken care of using a
Group-wide reporting and forecasting system.
The purpose of risk management is to ensure that any significant business risks
are identified and monitored appropriately. The company's business and
financial risks are managed centrally by the Group's financial department, and
reports on risks are presented to the Board of Directors as necessary.
Due to the small size of the company and its business operations, Cencorp does
not have an internal auditing organization or an audit committee.
The sufficiency of the company's financing and working capital involve risks
that are handled in more detail in the item Financing of this financial
statement release. Realization of a convertible bond and a share issue, which
the company announced on 21 August 2012, involves risks. It is not secured that
the company will be able to collect EUR 1.5 million with the convertible bond
to strengthen its capital structure or with the share issue to finance the
establishing of photovoltaic module business plan.
As it is difficult to make forecasts in an industry that is dependent on
economic cycles, the biggest business risks are related to fluctuations in the
demand for products and to the adjustment of operations to meet demand.
In terms of profitability, the most essential risks are related to the
achievement of a sufficient invoicing volume in both business segments and the
success achieved with the programs underway at Cencorp to improve
profitability, such as improvements in productivity and business flexibility
through outsourcing production.
In terms of operations, the biggest risks are related to outsourcing in-house
equipment production to contract manufacturers, in particular to whether the
production chain efficiency targets are achieved as planned.
The execution of the non-binding Memorandum of Understanding signed with Avery
Dennison involves risks. The final terms of the transaction are still under
negotiations and realization of the acquisition is not yet certain.
Additionally, the transaction is still subject to several issues such as due
diligence and especially to Cencorp's short and long term financing required to
run the business being acquired. Thus, Cencorp is not yet able to estimate
possible realization, effective date, acquisition's influence in Cencorp nor
risks relating to the transaction. Cencorp will announce further information on
the matter as soon as the negotiations have been finished, which is expected to
take place before the end of 2012.
The long term objectives set for the Managing Director involves also risks and
the long term objective should not be considered as the company's financial
guidance. Even though the objectives are based on market knowledge and
technical surveys, the risk are significant and it is not certain if the
Managing Director reaches all or part of the targets set for him.
Other risks connected to Cencorp have been presented in more detail in the
Annual Report for 2011 and in the base prospectus and its notes published on 25
October 2010.
FLAGGING NOTIFICATION
On 24 April 2012, Cencorp Corporation gained knowledge of the disclosure
notification of Ahlström Capital Oy pursuant to Chapter 2, Section 9 of the
Finnish Securities Markets Act. In accordance with the disclosure notification,
the ownership of Ahlström Capital Oy in Cencorp has fallen below one-twentieth
of all shares of Cencorp as Ahlström Capital Oy has sold all shares in its
Dutch subsidiary, AC Invest B.V. (change of trade name pending), which held
Cencorp's shares, to Savcor Group Oy. After the sale Ahlström Capital Oy or
companies belonging to the same group of companies with it do not hold any
shares in Cencorp. The sale is not subject to any conditions.
The share of ownership of Ahlström Capital Oy in Cencorp's shares and attached
voting rights was 17,499,999 shares which was approximately 5.1 per cent of all
shares and attached voting rights in Cencorp.
Ahlström Capital Oy has notified that it has agreed in connection with the sale
of shares referred to above on such an arrangement for security that in the
event of breach of the payment terms, Ahlström Capital Oy has, among other
things and subject to certain conditions based on its own consideration, right
to notify of using the voting rights attached to the pledged Cencorp shares. In
such an event, Ahlström Capital Oy would, when necessary, make a separate
disclosure notification pursuant to the requirements of the Finnish Securities
Markets Act.
DECISIONS BY THE ANNUAL GENERAL MEETING
Cencorp Corporation's Annual General Meeting was held on 19 April 2012 in
Mikkeli, Finland. The AGM approved the 2011 financial statements and discharged
the members of the Board and the President and CEO from liability for the
financial year 2011.
According to the Board' proposal, it was decided that no dividend for the
financial year 2011 will be distributed. It was also decided that the loss for
the financial period that ended on 31 December 2011 will be entered in retained
earnings. The AGM elected Hannu Savisalo, Iikka Savisalo and Ismo Rautiainen
as the members of the Board of Directors of Cencorp Corporation. At its
organizing meeting following the AGM, Cencorp's Board of Directors elected
Hannu Savisalo as the Chairman and Ismo Rautiainen as the Vice Chairman of the
Board.
The Board of Directors decided, due to the scope of the company's business,
that it is not necessary to establish any separate Board committees. The Board
of Directors further stated that Ismo Rautiainen is independent of the company
and also of the company's significant shareholders. The AGM decided that an
annual remuneration of EUR 40,000 will be paid to the Chairman and to the Vice
Chairman of the Board, and EUR 30,000 to the members of the Board of Directors.
Ernst & Young Oy, Authorized Public Accounting Firm, continues as the company
auditor and Mikko Rytilahti, APA, as the responsible auditor.
In Mikkeli, 21 August 2012
Cencorp Corporation
BOARD OF DIRECTORS
Consolidated statement of comprehensive income
(unaudited)
1 000 EUR 4-6/2012 4-6/2011 1-6/2012 1-6/2011 1-12/2011
--------------------------------------------------------------------------------
Continuing operations
Net sales 4 698 6 434 9 084 11 168 21 608
Cost of sales -4 517 -5 616 -8 403 -10 392 -19 859
--------------------------------------------------------------------------------
Gross profit 181 819 681 776 1 748
Other operating income 82 25 1 309 50 130
Product development expenses -329 -386 -682 -750 -1 288
Sales and marketing expenses -553 -511 -965 -913 -1 987
Administrative expenses -867 -873 -1 394 -1 499 -2 717
Other operating expenses -30 -4 -49 -5 -157
Operating profit -1 516 -930 -1 099 -2 339 -4 271
Financial income 762 325 945 542 1 012
Financial expenses -505 -636 -1 142 -1 502 -1 583
Profit before taxes from -1 260 -1 241 -1 296 -3 299 -4 843
continuing operations
Income taxes 2 -43 26 -49 -6
Profit/loss for the period -1 258 -1 285 -1 270 -3 348 -4 848
from continuing operations
Discontinued operations
Profit/loss after tax for the -7 858 -570 -8 822 -1 465 -2 667
period from discontinued
operations
Profit/loss for the period -9 116 -1 854 -10 092 -4 813 -7 516
--------------------------------------------------------------------------------
Profit/loss attributable to:
Shareholders of the parent -9 116 -1 854 -10 092 -4 813 -7 516
company
Earnings/share (diluted), eur -0,03 -0,01 -0,03 -0,01 -0,02
Earnings/share (basic), eur -0,03 -0,01 -0,03 -0,01 -0,02
Continuing operations:
Earnings/share (diluted), eur -0,004 -0,004 -0,004 -0,010 -0,014
Earnings/share (basic), eur -0,004 -0,004 -0,004 -0,010 -0,014
Other comprehensive income
Translation difference 325 -4 65 -583 794
Other comprehensive income 0 0 0 0 0
Total comprehensive income -8 791 -1 858 -10 028 -5 396 -6 721
for the period
--------------------------------------------------------------------------------
Total comprehensive income
attributable to:
Shareholders of the parent -8 791 -1 858 -10 028 -5 396 -6 721
company
Consolidated statement of financial position
(unaudited)
1 000 EUR 30.6.2012 30.6.2011 31.12.2011
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment 7 469 15 558 16 305
Consolidated goodwill 2 967 2 967 2 967
Other intangible assets 2 915 3 271 3 337
Available-for-sale investment 10 10 10
Deferred tax assets 10 0 10
--------------------------------------------------------------------------------
Total non-current assets 13 370 21 806 22 629
Current assets
Inventories 3 358 4 854 4 184
Trade and other 4 343 7 589 7 402
non-interest-bearing
receivables
Cash and cash equivalents 412 1 010 317
--------------------------------------------------------------------------------
Total current assets 8 113 13 453 11 903
Assets classified as held for 1 851 0 0
sale
Total assets 23 334 35 258 34 532
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity attributable to shareholders of the parent
company
Share capital 3 425 3 425 3 425
Other reserves 43 344 43 344 43 344
Translation difference 649 -793 584
Retained earnings -39 827 -27 031 -29 735
--------------------------------------------------------------------------------
Total equity 7 591 18 944 17 618
Non-current liabilities
Non-current loans 0 2 676 0
Deferred tax liabilities 24 62 34
--------------------------------------------------------------------------------
Total non-current liabilities 24 2 738 34
Current liabilities
Current interest-bearing 4 827 6 017 8 475
liabilities
Trande and other payables 8 028 7 445 8 196
Current provisions 287 114 209
--------------------------------------------------------------------------------
Total current liabilities 13 142 13 576 16 880
Liabilities directly associated 2 578 0 0
with assets classified as held
for sale
Total liabilities 15 744 16 314 16 914
--------------------------------------------------------------------------------
Equity and liabilities total 23 334 35 258 34 532
--------------------------------------------------------------------------------
Consolidated statement of cash flows
(unaudited)
1 000 EUR 1-6/201 1-6/201 1-12/201
2 1 1
--------------------------------------------------------------------------------
Cash flow from operating activities
Income statement profit/loss from continuing -1 296 -3 299 -4 843
operations before taxes
Income statement profit/loss from discontinued -8 822 -1 465 -2 667
operations before taxes
---------------------------
Income statement profit/loss before taxes -10 118 -4 764 -7 510
Non-monetary items adjusted on income statement
--------------------------------------------------------------------------------
Depreciation and impairment + 7 459 1 825 3 949
Gains/losses on disposals of non-current +/- -1 154 0 88
assets
Unrealized exchange rate gains (-) and +/- -187 552 -507
losses (+)
Other non-cash transactions +/- 0 0 62
Financial income and expense + 441 477 1 003
Interest gains - 0 0 0
Taxes - 0 0 0
--------------------------------------------------------------------------------
Total cash flow before change in working -3 558 -1 910 -2 915
capital
Change in working capital
Increase (-) / decrease (+) in inventories 249 -99 520
Increase (-) / decrease (+) in trade and other 2 310 1 048 1 957
receivables
Increase (+) / decrease (-) in trade and 2 394 -941 -524
other payables
--------------------------------------------------------------------------------
Change in working capital 4 953 8 1 953
Adjustment of financial items and taxes to cash-based
accounting
Interest paid - -133 -244 -429
Interest received + 5 2 14
Other financial items - -141 -182 -397
Taxes paid - 15 -126 -120
--------------------------------------------------------------------------------
Financial items and taxes -254 -550 -932
NET CASH FLOW FROM BUSINESS OPERATIONS 1 140 -2 452 -1 894
CASH FLOW FROM INVESTING ACTIVITIES
Investments in tangible and intangible assets - -910 -1 083 -1 424
Proceeds on disposal of tangible and intangible + 3 640 0 70
assets
Loans given - 0 0 0
Repayment of loan receivables + 0 1 468 1 468
--------------------------------------------------------------------------------
NET CASH FLOW FROM INVESTMENTS 2 730 385 114
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from share issue + 0 903 862
Proceeds from current borrowings + 3 005 5 534 10 083
Repayment of current borrowings - -6 636 -4 936 -10 244
Dividends paid - 0 -4 -4
--------------------------------------------------------------------------------
NET CASH FLOW FROM FINANCING ACTIVITIES -3 631 1 497 697
INCREASE (+) OR DECREASE (-) IN CASH FLOW 239 -570 -1 083
Consolidated statement of changes in equity
(unaudited)
1 000 EUR Share Other Translati Distribu-table Retaine Total
capit reser on non-restricted d
al ves differen equity fund earnin
ce gs
--------------------------------------------------------------------------------
31.12.2011 3 425 4 908 584 38 436 -29 735 17 618
Directed issue - - - - - 0
Decrease from - - - - - 0
share issue
Direct entries in - - - - - 0
retained
earnings
Translation - - 65 - - 65
difference,
comprehensive
income
Profit/loss for - - - - -10 092 -10 092
the period
30.6.2012 3 425 4 908 649 38 436 -39 827 7 591
1 000 EUR Share Other Translati Distribu-table Retaine Total
capit reser on non-restricted d
al ves differen equity fund earnin
ce gs
--------------------------------------------------------------------------------
31.12.2010 3 425 4 908 -210 35 104 -22 082 21 145
Directed issue - - - 3 332 - 3 332
Decrease from - - - - -136 -136
share issue
Translation - - -583 - - -583
difference,
comprehensive
income
Profit/loss for - - - - -4 813 -4 813
the period
30.6.2011 3 425 4 908 -793 38 436 -27 031 18 944
Segment information
(unaudited)
The segment information for profit/loss numbers and balance sheet per 30 June
2012 include only continuing operations. Information regarding discontinued
operations is given in attachment "Discontinued operations".
The Group has two reporting segments: Laser and Automation Applications, and
Special Components. The Laser and Automation Applications segment comprises
Cencorp's former business and the Special Components segment the business
acquired through the Face transaction in 2010. The segment information
presented by the Group is based on the management's internal reporting and the
organisational structure.
1 000 EUR 1-6/2012 1-6/2011 1-12/2011
--------------------------------------------------------------------------------
Net sales
Laser and Automation Applications 5 756 8 754 15 079
Special Components 3 334 2 463 6 581
Eliminations -5 -49 -53
Total 9 084 11 168 21 608
Operating profit
Laser and Automation Applications -1 467 -1 032 -2 517
Special Components 370 -1 283 -1 706
Eliminations -2 -24 -49
Total -1 099 -2 339 -4 271
EBITDA
Laser and Automation Applications -1 125 -432 -1 283
Special Components 1 138 -716 -387
Eliminations -2 -24 -49
Total 10 -1 171 -1 718
Profit/loss for the period
Laser and Automation Applications -1 580 -1 573 -2 969
Special Components 295 -1 884 -1 978
Eliminations 15 109 99
Total -1 270 -3 348 -4 848
Assets
Laser and Automation Applications 29 671 31 352 30 611
Special Components 11 956 23 609 25 962
Assets classified as held for sale 1 851 - -
Eliminations -20 144 -19 702 -22 040
Total 23 334 35 258 34 532
Liabilities
Laser and Automation Applications 11 356 10 110 8 965
Special Components 7 516 13 160 15 174
Liabilities directly associated with 2 578 - -
assets held for sale
Eliminations -5 707 -6 956 -7 225
Total 15 744 16 314 16 914
Investments
Laser and Automation Applications 247 444 729
Special Components 602 372 463
Assets classified as held for sale 4 - -
Total 853 816 1 191
Depreciation
Laser and Automation Applications 342 591 977
Special Components 767 567 1 214
Total 1 109 1 158 2 192
Impairment
Laser and Automation Applications 0 10 257
Special Components 0 0 105
Total 0 10 361
Discontinued
operations
(unaudited)
29 May 2012 Cencorp announced that it exits from its unprofitable decoration
business and closes down its plant in Guangzhou, China, producing decoration
applications. In consequence of the closing down of the Guangzhou plant and the
exit from decoration business Cencorp reports the financial figures relating to
the Guangzhou plant's decoration business as discontinued operations from now
on.
The results and major classes of assets and liabilities of Savcor Face
(Guangzhou) Technolgies Co., are as follows:
1 000 EUR 1-6/2012 1-6/2011 1-12/2011
--------------------------------------------------------------------------------
Revenue 1 935 2 372 4 857
Expenses -5 352 -3 769 -7 608
Loss recognised on -5 412 0 0
the remeasurement
to fair value
------------------------------------------------------------
Operating profit -8 829 -1 397 -2 751
Finance costs 7 -68 84
------------------------------------------------------------
Profit/loss before -8 822 -1 465 -2 667
tax from
discontinued
operation
Income tax 0 0 0
------------------------------------------------------------
Profit/loss after -8 822 -1 465 -2 667
tax from
discontinued
operation
Assets
Property, plant and 839 - -
equipment
Inventories 199 - -
Trade and other 786 - -
non-interest-beari
ng receivables
Cash and cash 27 - -
equivalents
------------------------------------------------------------
Assets classified 1 851
as held for sale
Liabilities
Trande and other 2 478 - -
payables
Provisions 100 - - ------------------------------------------------------------
Liabilities 2 578
directly
associated with
assets classified
as held for sale
Net assets directly -727
associated with
disposal group
====================
Cumulative -2 603
translation
difference
Savcor Face
(Guangzhou)
Technolgies Co.,
Ltd:n net cash
flow:
1 000 EUR 1-6/2012 1-6/2011 1-12/2011
--------------------------------------------------------------------------------
Operating 3 -5 -35
Investing -20 -124 -179
Financing 0 -232 -236
------------------------------------------------------------
Net cash flow -17 -360 -450
Earnings/share -0,03
(basic), from
discontinued
operations
Earnings/share -0,03
(diluted) from
discontinued
operations
Key figures
(unaudited)
1 000 EUR 4-6/201 4-6/20 1-6/20 1-6/20 1-12/20
2 11 12 11 11
--------------------------------------------------------------------------------
Net sales 4 698 6 434 9 084 11 168 21 608
Operating profit -1 516 -930 -1 099 -2 339 -4 271
% of net sales -32,3 -14,5 -12,1 -20,9 -19,8
EBITDA -992 -333 10 -1 171 -1 718
% of net sales -21,1 -5,2 0,1 -10,5 -8,0
Profit before taxes -1 260 -1 241 -1 296 -3 299 -4 843
% of net sales -26,8 -19,3 -14,3 -29,5 -22,4
Balance Sheet value 23 334 35 258 23 334 35 258 34 532
Equity ratio, % 33,2 54,5 33,2 54,5 51,2
Net gearing, % 58,2 40,6 58,2 40,6 46,3
Gross investments 407 320 853 816 1 191
% of net sales 8,7 5,0 9,4 7,3 5,5
Research and development costs 329 386 682 750 1 288
% of net sales 7,0 6,0 7,5 6,7 6,0
Order book 3 257 4 228 3 257 4 228 2 793
Personnel on average 276 345 305 350 343
Personnel at the end of the period 193 343 193 343 328
Non-interest-bearing liabilities 8 028 7 445 8 028 7 445 8 196
Interest-bearing liabilities 4 827 8 693 4 827 8 693 8 475
Share key indicators
Earnings/share (basic) -0,03 -0,01 -0,03 -0,01 -0,02
Earnings/share (diluted) -0,03 -0,01 -0,03 -0,01 -0,02
Earnings/share (basic), from -0,004 -0,004 -0,004 -0,010 -0,014
continuing operations
Earnings/share (diluted) from -0,004 -0,004 -0,004 -0,010 -0,014
continuing operations
Equity/share 0,02 0,06 0,02 0,06 0,05
P/E ratio -1,88 -22,14 -1,70 -8,19 -4,02
Highest price 0,08 0,14 0,12 0,20 0,20
Lowest price 0,05 0,11 0,05 0,11 0,07
Average price 0,06 0,12 0,09 0,14 0,12
Closing price 0,05 0,12 0,05 0,12 0,09
Market capitalisation, at the end of 17,1 41,1 17,1 41,1 30,8
the period, MEUR
Calculation of Key Figures
EBITDA, %: Operating profit + depreciation +
impairment
-----------------------------------------
Net
sales
Equity ratio, %: Total equity x
100
-----------------------------------------
Total assets - advances received
Net gearing, %: Interest-bearing liabilities - cash and
cash equivalents
and marketable
securities x 100
-----------------------------------------
Shareholders' equity + minority
interest
Earnings/share (EPS): Profit/loss for the period to the owner
of the parent company
-----------------------------------------
Average number of shares adjusted for
share issue
at the end of the
financial year
Equity/share: Equity attributable to shareholders of
the parent company
-----------------------------------------
Undiluted number of shares on the
balance sheet date
P/E ratio: Price on the balance
sheet date
-----------------------------------------
Earnings per
share
Change in intangible and tangible assets
(unaudited)
1 000 EUR 30.6.2012 30.6.2011 31.12.2011
--------------------------------------------------------------------------------
Includes tangible assets, consolidated
goodwill and other intangible assets
Carrying amount, beginning of period 22 609 23 835 23 835
Depreciation and impairment -7 043 -1 825 -3 516
Additions 853 816 1 191
Disposals -2 546 0 -158
Discontinued operations -839 - -
Exchange rate difference 316 -1 030 1 256
Carrying amount, end of period 13 350 21 796 22 609
Commitments and contingent liabilities
(unaudited)
1 000 EUR 30.6.2012 30.6.2011 31.12.2011
------------------------------------------------------------------------
Loans from financial institutions 1 236 5 264 5 206
Promissory notes secured by pledge 12 691 12 691 12 691
Mortgages on real estate 0 4 727 5 413
Deposits 0 535 0
Factoring loan and export credit limit 1 165 998 833
Trade receivables 1 165 996 833
Promissory notes secured by pledge 12 691 12 691 12 691
Operating leases
Payable within one year 54 11 60
Payable over one year 62 3 83
Commitments
Payable within one year 908 243 206
Payable over one year 947 871 302
Commitments discontinued operations
Payable within one year 538 507 580
Payable over one year 3 501 3 691 4 017
For more information please contact:
Cencorp: Iikka Savisalo, President and CEO, tel. +358 40 521 6082,
iikka.savisalo@savcor.com
Cencorp Corporation's interim report for the January - September 2012 will be
published on Tuesday 13 November 2012.
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