2011-04-27 07:30:00 CEST
2011-04-27 07:30:09 CEST
REGULATED INFORMATION
Teleste - Interim report (Q1 and Q3)
TELESTE CORPORATION INTERIM REPORT 1 JANUARY TO 31 MARCH 2011
Turku, Finland, 2011-04-27 07:30 CEST (GLOBE NEWSWIRE) -- TELESTE CORPORATION
INTERIM REPORT 27.4.2011 AT 08:30
TELESTE CORPORATION INTERIM REPORT 1 JANUARY TO 31 MARCH 2011
First quarter of 2011
- Net sales grew by 5.7% amounting to EUR 41.3 (39.1) million
- Operating profit fell by 34.4% equaling EUR 0.5 (0.8) million
- Undiluted result per share equaled EUR 0.02 (EUR 0.03)
- Orders received improved by 7.3% standing at EUR 40.2 (37.5) million
- Orders received by Video and Broadband Solutions decreased by 5.9% over the
period of comparison (Q1/2010) and stood at EUR 17.5 (18.6) million
- Orders received by Network Services increased by 20.2% over the period of
comparison and amounted to EUR 22.8 (18.9) million
- Operating cash flow stood at EUR -1.0 (2.4) million.
Outlook for 2011
We estimate net sales for the entire 2011 to increase slightly and the
operating profit to improve somewhat over the 2010 level. Improvement in the
operating profit depends on the scheduled execution of the development program
for the German services operations.
Comments on Q1 by CEO Jukka Rinnevaara:
Net sales of Video and Broadband Solutions and the operating profit fell
slightly, as expected, over the period of comparison Q1/2010 due to
postponement by a few main customers in cable network upgrades and video
surveillance project deliveries. We estimate that the cable operator market
will pick up in the second half of this year.
Deliveries by Network Services business area grew by 13.6% over the period of
comparison. Profitability was impaired by larger-than-expected investments made
in the development of German services operations, the cold early winter and the
limited availability of subcontractor resources. Network design services in the
UK were on the increase. We expect the ongoing development programs, such as
the resource management and the development of labor productivity, to improve
the business area's profitability in the second half.
The decrease over the period of comparison of EUR 3.5 million in the cash flow
from the Group operations was caused by a change in a payment term carried out
by the German main customer of the Network Services business area in late 2010.
Market situation and net sales in the first quarter of 2011
Orders received in Q1 stood at EUR 40.2 (37.5) million, an increase of 7.3%
over the reference period. This growth in orders received was due to improved
demand for services by Network Services in Germany. Orders received by Video
and Broadband Solutions fell from the period of comparison due to delays in
network upgrades by a few main customers.
The net sales in Q1 of 2011 equaled EUR 41.3 (39.1) million, which is 5.7%
above the figure for the period of comparison.
The Group's order backlog amounted to EUR 15.0 (31.2) million. The order
backlog of the reference period includes an order received from India of EUR
12.0 million, which was written off from the backlog in Q2 of 2010.
Financial position and result in the first quarter of 2011
Operating profit stood at EUR 0.5 (0.8) million making 1.3% (2.1%) of the net
sales. Undiluted result per share for Q1 was EUR 0.02 (0.03).
Operating cash flow stood at EUR -1.0 (2.4) million. At the end of the period
under review, the amount of unused binding stand-by credits amounted to EUR
13.5 (18.5) million. The current binding stand-by credits of EUR 40.0 million
run till November 2013. The Group's equity ratio equaled 43.9% (44.5%) and net
gearing 30.6% (18.6%). Interest bearing debt on 31 March 2011 stood at EUR 27.6
(23.2) million.
Video and Broadband Solutions in Q1
Net sales amounted to EUR 18.6 (19.1) million, a decrease of 2.7% over the
period of comparison. The primary reason for this fall in net sales was
postponements in network upgrades by some of our main clients. Deliveries of
Luminato video headend exceeded those of the reference period.
Operating profit stood at EUR 0.4 (0.6) million making 2.2% (2.9%) of the net
sales. This drop in the operating profit can be attributed to decreased net
sales.
Orders received totaled EUR 17.5 (18.6) million. Order backlog stood at EUR
15.0 (comparable figure 16.3) million.
R&D expenses for the business area amounted to EUR 2.8 (2.6) million making
15.2% (13.6%) of the area's net sales. Some 60% (60%) of product development
expenses involved further development and maintenance of product platforms
currently in production as well as customer-specific product applications.
Capitalized development expenses amounted to EUR 0.5 (0.3) million, involving
Luminato video processing system, video surveillance transfer system compliant
with H.264 standard as well as network devices enabling cost-effective
segmentation of HFC networks. Depreciation on activated R&D expenses amounted
to EUR 0.5 (0.6) million.
Network Services in Q1
Net sales amounted to EUR 22.8 (20.0) million, an increase of 13.6% over the
reference period. Deliveries to our key customer in Germany were about 5%
higher than in the period of comparison.
Operating profit stood at EUR 0.1 (0.3) million making 0.6% (1.3%) of the net
sales. In Germany, the on-going efficiency measures, cold early winter and the
limited availability of subcontracting capacity led to the operating result
ending up below the reference period.
Orders received in Q1 stood at EUR 22.8 (18.9) million. Deliveries by the
business area are carried out mainly on the basis of frame agreements, so there
is no backlog.
Investments
Investments by the Group for the period under review totaled EUR 1.6 (0.8)
million accounting for 4.0% (1.9%) of net sales. Out of these investments EUR
0.7 (0.3) million was attributable to the extension of premises in Finland.
Product development investments totaled EUR 0.5 (0.3) million. Other
investments involved equipment and information systems for the services
business. As to investments for the period, EUR 0.1 (0.1) million was carried
out by means of financial leasing.
Personnel and Organisation
In the period under review, the Group employed on average 1,252 persons
(1,221/2010, 1,001/2009), out of which 558 (563) worked for Video and Broadband
Solutions and 694 (658) for Network Services. At the end of the review period,
the figure totaled 1,266 (1,223/2010, 1,001/2009) out of which 70% (68%/2010,
55%/2009) were stationed overseas. Employees stationed outside Europe accounted
for less than 5% of the Group's personnel. Expenditure on employee benefits
amounted to EUR 12.5 (12.3/January-March 2010, 10.0/January-March 2009)
million. In the reference period, wages and salaries were affected by the
rotating layoff of the Finland-based personnel.
Essential Operational Risks of the Business Areas
Founded in 1954, Teleste is a technology and service provider consisting of two
business areas: Video and Broadband Solutions and Network Services. With Europe
as the main market area, our most significant clients include European cable
operators and specified organizations in the public sector.
Concerning Video and Broadband Solutions, integrated deliveries of solutions
create favorable conditions for growth, even if the involved resource
allocation and technical implementation pose a challenge involving, therefore,
also reasonable risks. The still ongoing difficult market situation may delay
the implementation of investment plans among our clientele. Network investments
carried out by the clients vary based on their need for upgrading and their
capital structure. Much of Teleste's competition comes from the USA so the
exchange rate of euro up against the US dollar affects our competitiveness.
Teleste hedges against short-term currency exposure by means of forward
contracts. Correct technological choices and their timing are vital for our
success.
Net sales for Network Services comes, for the most part, from a small number of
large European customers, so a change in the demand for services by any one of
them is reflected in the actual deliveries. The services provided by this
business area include planning, new construction and maintenance of cable
networks. Implementation and scope of the relevant services vary by client
ranging from standalone applications to integrated turnkey deliveries. Most
deliveries are based on frame agreements. The services also include Teleste's
own product solutions. Our know-how in services covers all the sectors related
to the cable network technology from installation and maintenance of headends
to upgrading of house networks. Services will also be implemented through a
network of subcontracting, so the sufficiency of our subcontractor network
capacity may limit our ability to deliver. To ensure quality of services and
cost-efficiency, along with an efficient services process management, customer
satisfaction requires innovative solutions in terms of processes, products and
logistics. As far as technical management of the networks and functional
product solutions are concerned, ensuring smooth operation of the cable
operators' networks requires constant focus on the development of
qualifications of Teleste's own and its suppliers' personnel.
For our business areas it is equally important to take into account any
developments in the market such as consolidations taking place among the
clientele and competition. Weather conditions in our target markets affect the
delivery conditions of products and services of our business areas.
The Board of Directors annually reviews any essential risks related to
Teleste's operations and the management thereof. Risk management has been
integrated into the strategic and operative practices of our business areas.Risks and their probability are reported to the Board with regular monthly
reports. The company has covered risks involving damage to operative functions
of the business areas mainly by means of insurance policies. These insurances
do not include credit loss risks. In the period under review, no such risks
materialized, and no legal proceedings or judicial procedures were pending that
would have had any essential significance for the Group operation.
Group Structure
Parent company Teleste has branch offices in Australia, the Netherlands, China
and Denmark with subsidiaries in 12 countries outside Finland. Teleste
Management Oy, founded in March 2010, has been consolidated in the Teleste
Group figures on account of financial arrangements.
Decisions by the Annual General Meeting
The Annual General Meeting (AGM) of Teleste Corporation on 8 April 2011
confirmed the financial statements for 2010 and discharged the Board of
Directors and the CEO from liability for the financial period. The AGM
confirmed the Board's proposed dividend of EUR 0.12 per share. The dividend was
paid out on 20 April 2011.
The AGM elected Marjo Miettinen, Pertti Ervi, Tero Laaksonen, Pertti
Raatikainen, Kai Telanne and Petteri Walldén members of the Board. Marjo
Miettinen was elected Chair of the Board in the organizational meeting held
immediately after the AGM.
Authorised Public Accountants KPMG Oy Ab continue as the auditor until the next
AGM. Accountant authorised by the Central Chamber of Commerce of Finland Esa
Kailiala was chosen auditor-in-charge.
The AGM authorised the Board to acquire the maximum of 1,400,000 of the
company's own shares and to convey the maximum of 1,779,985 company's own
shares. The AGM also authorised the company Board to issue 5,000,000 new
shares. Pursuant to the special rights provided by the company, the maximum
number of significant shares is 2,500,000; these special rights are included in
the authorisation to issue 5,000,000 new shares.
Shares and Changes in Share Capital
On 31 March 2011, EM Group Oy was the largest single shareholder with a holding
of 21.02%.
In the period under review, the lowest company share price was EUR 4.02 (3.63)
and the highest was EUR 4.82 (4.90). On 31 March 2011, the closing price stood
at EUR 4.41 (4.75). According to the Finnish Central Security Depository, the
number of shareholders at the end of the period under review was 5,232 (5,441).
Foreign ownership accounted for 8.1% (9.3%). From 1 January to 31 March 2011,
trading with Teleste share at NASDAQ OMX Helsinki amounted to EUR 2.2 (4.7)
million. In the period under review, 0.7 (1.2) million Teleste shares were
traded on the stock exchange.
At the end of March 2011, the number of own shares in the Group possession
stood at 760,985 (760,985) out of which parent company Teleste Corporation had
none (0) while other Group or controlled companies had 760,985 shares,
respectively. At the end of the period, the Group's holding of the total amount
of shares amounted to 4.18% (4.18%).
On 31 March 2011, the registered share capital of Teleste stood at EUR
6,966,932.80 divided in 18,186,590 shares.
Outlook
In 2011, deliveries of equipment and solutions by Video and Broadband Solutions
to its customer base of operators in our target markets will at least achieve
the level of 2010. European telecom operators are about to launch their
investments into the TV distribution infrastructure, and we believe that our
video headend and optical network products will be competitive in this new
emerging market. Deliveries related to security and traffic control may remain
at the reference year's level due to postponements in a number of medium-sized
projects.
On the annual basis, demand by our current clientele for the services provided
by Network Services will remain relatively stable. We expect that in Germany,
the main market, profitability will improve from the 2010 level with the
gradual introduction of the development program. In our estimation, most of the
improvement in profitability will be seen on the second half of the year.
We estimate net sales for the entire 2011 to increase slightly and the
operating profit to improve somewhat over the 2010 level. Improvement in the
operating profit depends on the scheduled execution of the development program
for the German services operations.
26 April 2011
Teleste Corporation Jukka Rinnevaara
Board of Directors CEO
This interim report has been compiled in compliance with IAS 34, as it is
accepted within EU, using the recognition and valuation principles with those
used in the Annual Report. The data stated in this report is unaudited.
STATEMENT OF COMPREHENSIVE INCOME 1-3/2011 1-3/2010 Change 1-12/2010
(TEUR) %
Net Sales 41,310 39,094 5.7 % 167,836
Other operating income 412 357 15.4 % 1,460
Materials and services -21,791 -19,412 12.3 % -82,054
Personnel expenses -12,486 -12,279 1.7 % -50,824
Other operating expenses -5,555 -5,419 2.5 % -23,090
Depreciation -1,348 -1,515 -11.0 % -5,896
Operating profit 542 826 -34.4 % 7,432
Financial income and expenses -155 -148 4.7 % -689
Profit after financial items 387 678 -42.9 % 6,743
Profit before taxes 387 678 -42.9 % 6,743
Taxes -108 -183 -40.9 % -1,959
Net profit 279 495 -43.7 % 4,784
Attributable to:
Equity holders of the parent 279 495 -43.7 % 4,784
Earnings per share for result of the year attributable to the equity holders of
the parent
(expressed in € per share)
Basic 0.02 0.03 -43.7 % 0.27
Diluted 0.02 0.03 -43.7 % 0.27
Total comprehensive income for the period (tEUR)
Net profit 279 495 -43.7 % 4,784
Translation differences -84 180 n/a 277
Fair value reserve 108 -92 n/a -70
Total comprehensive income for the 303 583 -48.0 % 4,991
period
Attributable to:
Equity holders of the parent 303 583 -48.0% 4,991
STATEMENT OF FINANCIAL POSITION 31.03.2011 31.03.2010 Change 31.12.2010
(tEUR) %
Non-current assets
Property,plant,equipment 9,512 9,770 -2.6 % 8,836
Goodwill 30,959 31,657 -2.2 % 30,959
Intangible assets 6,301 6,898 -8.7 % 6,709
Investments 713 894 -20.2 % 713
47,485 49,219 -3.5 % 47,217
Current assets
Inventories 19,170 21,420 -10.5 % 21,000
Other current assets 37,579 24,853 51.2 % 32,819
Liquid funds 12,023 14,376 -16.4 % 15,203
68,772 60,649 13.4 % 69,022
Total assets 116,257 109,868 5.8 % 116,239
Shareholder's equity and
liabilities
Share capital 6,967 6,967 0.0 % 6,967
Other equity 43,500 40,398 7.7 % 43,143
Non-controlling interest 292 289 1.0 % 292
50,759 47,654 6.5 % 50,402
Non-current liabilities
Provisions 511 513 -0.4 % 511
Non interest bearing liabilities 4,436 7,073 -37.3 % 4,522
Interest bearing liabilities 11,847 12,237 -3.2 % 11,847 16,794 19,823 -15.3 % 16,880
Short-term liabilities
Trade payables and other s-t 31,686 30,359 4.4 % 31,401
liabilities
Provisions 1,313 1,042 26.0 % 1,313
S-t interest bearing liabilities 15,705 10,990 42.9 % 16,243
48,704 42,391 14.9 % 48,957
Total shareholder's equity and 116,257 109,868 5.8 % 116,239
liabilities
CONSOLIDATED CASH FLOW STATEMENT 1-3/2011 1-3/2010 Change 1-12/2010
(tEUR) %
Cash flows from operating
activities
Profit for the period 279 495 -43.7 % 4,784
Adjustments 1,665 1,959 -15.0 % 6,143
Interest and other financial -155 -148 4.7 % -481
expenses and incomes
Paid Taxes -1,050 0 n/a -786
Change in working capital -1,755 140 n/a -4,248
Cash flow from operating activities -1,016 2,446 n/a 5,412
Cash flow from investing activities
Acquisition of subsidiary, net 0 0 n/a -3,643
of cash acquired
Purchases of property, plant and -991 -673 47.3 % -716
equipment (PPE)
Purchases of intangible assets -551 -145 280.0 % -1,499
Net cash used in investing -1,542 -818 88.5 % -5,858
activities
Cash flow from financing activities
Proceeds from borrowings 0 0 n/a 5,520
Payments of borrowings -538 -239 125.1 % -1,562
Dividends paid 0 0 n/a -1,394
Proceeds from issuance of 0 289 n/a 289
ordinary shares
Net cash used in financing -538 50 n/a 2,853
activities
Change in cash
Cash in the beginning 15,203 12,518 21.4 % 12,518
Effect of currency changes -84 180 n/a 277
Cash at the end 12,023 14,376 -16.4 % 15,203
KEY FIGURES 1-3/2011 1-3/2010 Change 1-12/2010
%
Earnings per share, EUR 0.02 0.03 -43.7 % 0.27
Earnings per share fully 0.02 0.03 -43.7 % 0.27
diluted, EUR
Shareholders' equity per share, 2.91 2.73 6.7 % 2.90
EUR
Return on equity 2.2 % 4.2 % -47.6 % 9.9 %
Return on capital employed 2.8 % 4.9 % -43.9 % 10.2 %
Equity ratio 43.9 % 44.5 % -1.4 % 43.6 %
Gearing 30.6 % 18.6 % 64.5 % 25.5 %
Investments, tEUR 1,643 756 117.3 % 3,765
Investments % of net sales 4.0 % 1.9 % 105.7 % 2.2 %
Order backlog, tEUR 15,009 31,210 -51.9 % 17,000
Personnel, average 1,252 1,221 2.5 % 1,215
Number of shares (thousands) 18,187 17,810 2.1 % 18,094
including own shares
Highest share price, EUR 4.82 4.90 -1.6 % 5.33
Lowest share price, EUR 4.02 3.63 10.7 % 3.64
Average share price, EUR 4.54 4.02 12.9 % 4.49
Turnover, in million shares 0.5 1.2 -59.1 % 3.2
Turnover, in MEUR 2.2 4.7 -53.8 % 14.2
Treasury shares
Number % of % of
of shares shares votes
Teleste companies own shares 760,985 4.18 % 4.18 %
31.3.2011
Contingent liabilities and pledged assets (tEUR)
For own debt
Other securities 640 120 433.3 % 640
Leasing and rent liabilities 6,949 5,839 19.0 % 6,481
7,589 5,959 27.4 % 7,121
Derivative instruments (tEUR)
Value of underlying forward 4,709 7,152 -34.2 % 8,283
contracts
Market value of forward -239 -356 -32.9 % -293
contracts
Interest rate swap 11,500 11,500 0.0 % 11,500
Market value of interest swap -116 -282 -58.9 % -256
Taxes are computed on the basis of the tax on the profit for the period.
OPERATING SEGMENTS (TEUR) 1-3/2011 1-3/2010 Change 1-12/2010
%
Video and Broadband Solutions
Order intake 17,473 18,578 -5.9 % 86,530
Net sales 18,554 19,062 -2.7 % 82,007
EBIT 406 562 -27.8 % 6,345
EBIT% 2.2 % 2.9 % -25.8 % 7.7 %
Network Services
Order intake 22,756 18,926 20.2 % 80,675
Net sales 22,756 20,032 13.6 % 85,829
EBIT 136 264 -48.5 % 1,087
EBIT% 0.6 % 1.3 % -54.7 % 1.3 %
Total
Order intake 40,229 37,504 7.3 % 167,205
Net sales 41,310 39,094 5.7 % 167,836
EBIT 542 826 -34.4 % 7,432
EBIT% 1.3 % 2.1 % -37.9 % 4.4 %
Financial items -155 -148 4.7 % -689
Operating segments net profit 387 678 -42.9 % 6,743
before taxes
Information per quarter 1-3/11 10-12/10 7-9/10 4-6/10 1-3/10 4/2010-
(tEUR) 3/2011
Video and Broadband Solutions
Order intake 17,473 27,080 21,170 19,702 18,578 85,425
Net sales 18,554 22,882 19,915 20,148 19,062 81,499
EBIT 406 2,365 1,955 1,463 562 6,189
EBIT % 2.2 % 10.3 % 9.8 % 7.3 % 2.9 % 7.6 %
Network Services
Order intake 22,756 23,761 18,710 19,278 18,926 84,505
Net sales 22,756 23,761 18,710 23,326 20,032 88,553
EBIT 136 603 28 192 264 959
EBIT % 0.6 % 2.5 % 0.2 % 0.8 % 1.3 % 1.1 %
Total
Order intake 40,229 50,841 39,880 38,980 37,504 169,930
Net sales 41,310 46,643 38,625 43,474 39,094 170,052
EBIT 542 2,968 1,984 1,655 826 7,149
EBIT % 1.3 % 6.4 % 5.1 % 3.8 % 2.1 % 4.2 %
Attributable to equity holders of the parent (tEUR)
Share Share Trans- Retain Invest Other Total Share Total
capita premiu lation ed ed funds of equity
l m diff-e earnin free non-c
rences gs capita ont-ro
l lling
intere
st
Share-hol 6,967 1,504 -95 39,183 2,737 -186 50,110 292 50,402
der's
equity
1.1.2011
Total -84 279 108 303 0 303
compre-h
ensive
income
for the
period
Equity-se 54 0 0 54 0 54
ttled
share-ba
sed
payments
Share-hol 6,967 1,504 -179 39,516 2,737 -78 50,467 292 50,759
der's
equity
31.3.201
1
Share-hol 6,967 1,504 -372 35,949 2,737 -116 46,669 0 46,669
der's
equity
1.1.2010
Profit of 180 495 -92 583 0 583
the
period
Share 289 289
issue
Equity-se 113 0 0 113 0 113
ttled
share-ba
sed
payments
Share-hol 6,967 1,504 -192 36,557 2,737 -208 47,365 289 47,654
der's
equity
31.3.201
0
CALCULATION OF KEY FIGURES
Return on equity: Profit/loss for the financial period
------------------------------ * 100
Shareholders' equity (average)
Return on capital Profit/loss for the period after financial items +
employed: financing charges
------------------------------ * 100
Total assets - non-interest-bearing
liabilities (average)
Equity ratio: Shareholders' equity
----------------------------- * 100
Total assets - advances received
Gearing: Interest bearing liabilities - cash in hand and in bank -
interest bearing assets
----------------------------- * 100
Shareholders' equity
Earnings per share: Profit for the period attributable to equity holder of
the parent
----------------------------------------------
Weighted average number of ordinary shares outstanding during the period
Earnings per share, Profit for the period attributable to equity holder of
diluted: the parent (diluted)
-----------------------------------------------
Average number of shares - own shares + number of options
at the period-end
MAJOR SHAREHOLDERS 31.3.2011 Shares %
EM Group Oy 3,822,813 21.02
Mandatum Life 1,679,200 9.23
Ilmarinen Mutual Pension InsuranceCompany 936,776 5.15
Kaleva Mutual Pension Insurance Company 824,641 4.53
Op-Suomi Small Cap 545,925 3.00
Varma Mutual Pension Insurance Company 521,150 2.87
State Pension Fund 500,000 2.75
Aktia Capital Mutual Fund 450,000 2.47
Skagen Vekst Verdipapierfond 437,000 2.40
Teleste Management Oy 381,000 2.09
SECTOR DISPERSION 31.3.2011 Shares %
Corporations 5,830,998 32.06
Financial and insurance corporations 3,768,250 20.71
Public institutions 2,326,976 12.79
Non-profit institutions 385,111 2.11
Households 4,402,997 24.21
Foreign countries and nominee registered 1,472,258 8.09
Total 18,186,590 100.00
HOLDING DISPERSION 31.3.2011
Number of shares Shareholders % Shares %
0 - 100 1,151 21.99 79,910 0.43
101 - 1 000 3,079 58.84 1,285,724 7.06
1 001 - 10 000 908 17.35 2,539,535 13.96
10 001 - 100 000 75 1.43 1,836,775 10.09
100 001 - 1 000 000 17 0.32 6,942,633 38.17
1 000 001 - 2 0.03 5,502,013 30.25
Total 5,232 100.00 18,186,590 100.00
ADDITIONAL INFORMATION:
CEO Jukka Rinnevaara, tel +358 2 2605 866 or +358 400 747 488
DISTRIBUTION:
NASDAQ OMX Helsinki
Media
www.teleste.com
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