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Investor Relations |
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November to July in brief (November 1, 2004 -July 31, 2005): - Net sales EUR 55.7 million (EUR 51.5 million), an increase of 8.0% on the same period in the previous fiscal year. - Operating profit EUR -1.3 million (EUR 5.2 million). - Profit before extraordinary items EUR -0.9 million (EUR 4.6 million) - Net profit EUR -2.7 million (EUR 4.0 million). - Earnings per share EUR -0.03 (EUR 0.11). - Return on investment (ROI) -2.2% (19.4%). - Return on equity (ROE) -4.4% (18.1%). - Solvency ratio 66.9% (74.5%). - Cash flow from business operations EUR 3.2 million (EUR 0.5 million). - Gearing -42.3 % (-49.1%). Interest-bearing cash reserves exceeded interest-bearing liabilities by EUR 16.2 million. Third quarter in brief (May 1, 2005 - July 31, 2005): - Net sales EUR 20.3 million (EUR 16.6 million), an increase of 22.1% on the same quarter in the previous fiscal year. - Operating profit EUR 0.5 million (EUR 1.2 million). - Net profit EUR 0.5 million (EUR 1.2 million). NET SALES AND FINANCIAL PERFORMANCE Net sales for the period under review rose to EUR 55.7 million (EUR 51.5 million), with growth from the same period of the previous fiscal year amounting to 8.0%. Net sales for the first six months of the period fell short of the goals at the beginning of the fiscal year. The original target growth rate was reached only in the third quarter when volume deliveries of new products began and new customer relationships had been established. Sales during the period were divided as follows: telecommunications 70.1% (74.7%), engineering 16.3% (13.2%), industrial automation 7.9% (8.9%) and health-care electronics 5.7% (3.2%). Geographically, sales were split up as follows: Europe 60.4% (58,2%), the Americas 28.0% (34.0%) and Asia 11.6% (7.8%). There was an operating profit of EUR -1.3 million (EUR 5.2 million) for the period under review. Modest growth in sales for the first half of the fiscal year and start-ups of new high-volume products contributed to the loss. Expenses also increased due to growth in production at the plants in Estonia and China throughout the period and to reduced productivity in Finland's operations occasioned by the restructuring there. The operating result for the period under review was further eroded by one-off expenses linked to the quality of certain products and by an unfavorable trend in material prices, caused in the main by the shift to lead-free components and to components that are compatible with the requirements of the RoHS (Restriction of Hazardous Substances) directive. The operating result for the period under review was further eroded by price erosion due to the competition within power supplies sector which is expected to continue also in the future. The profit before extraordinary items came to EUR -0.9 million (EUR 4.6 million) and there was a net profit of EUR -2.7 million (EUR 4.0 million). Net earnings were affected by a one-off expense of EUR 1.3 million entered during the second quarter of the fiscal year; it includes costs of EUR 1.1 million related to restructuring of Group production and EUR 0.2 million due to a write-down on shares and loan receivables of the affiliate company Power Innovation GmbH. BUSINESS OPERATIONS Efore continued to strength its market position and expand its customer base during the period under review by beginning the manufacture of new products. Moreover, agreements on new products were negotiated and concluded during the period, especially for new customers. The Group's product development centers in Finland, the United States, and China focused their efforts on custom-designed power supplies and other electronic products. Many of the new products were linked with new product families for 2.5G and 3G base stations and to fixed telecommunication networks. Numerous product development projects related to health-care equipment were also undertaken. Product development also continued on new power-supply technology platforms and lead-free and other products conforming to the RoHS directive. Volume deliveries of the first products in conformance with the RoHS directive will begin during the final quarter of the fiscal year. During the period under review, new products and technological solutions were developed with a total of EUR 3.6 million (EUR 3.4 million). Personnel in product development and auxiliary functions rose during the period by 14 and totaled 103 at the end of the period. The shift in priority of Efore's production to plants with a more favorable cost level in Estonia and China continued. Thanks to expanded production in Estonia and increases of volume production in China, 47.2% (31.7%) of Efore's production was already located in countries with a more favorable cost level at the end of the period under review. Development of cost-effective production will remain one of the Efore Group's principal efforts in the future. For example, a new production facility in Estonia approximately four times the size of the present plant will become operational during the first quarter of fiscal year 2006. Improvement of cost-effectiveness also continued in material functions. At the outset of the third quarter of the fiscal year the new Strategic Sourcing unit, which serves the entire Group, started operations in China. INVESTMENT Investment in fixed assets during the period under review rose to EUR 4.0 million (EUR 3.5 million), of which capitalization of product development accounted for EUR 1.5 million (EUR 1.0 million). Investment in equipment related to increases in production contributed to the growth in investment, particularly in China and Estonia. Moreover, outlays for equipment used in testing and the automation of production were made in the United States. The goal for the next few years will remain unchanged; investment is not to exceed planned depreciation. FINANCIAL POSITION The Group's financial position during the period was good. Consolidated net financial yields totaled EUR 0.4 million (EUR -0.6 million). The Group's solvency ratio at the end of the period was 66.9% (74.5%) and its gearing was -42.3 % (-49.1%). Consolidated net interest-bearing liabilities totaled EUR -16.2 million (EUR -20.4 million). Hence, consolidated interest-bearing cash reserves exceeded interest-bearing liabilities by EUR 16.2 million. The cash flow from business operations was EUR 3.2 million (EUR 0.5 million), and the change in the cash flow showed a decrease of EUR 6.3 million (an increase of EUR 15.6 million). Cash flow after investment amounted to EUR -1,0 million (EUR -3.2 million). The cash flow of EUR -5.3 million from financing activities comprises a total of EUR 1.0 million from share subscriptions with options, EUR 6.0 million in dividend payments, and EUR 0.4 million in long-term loan installments. Liquid assets excluding undrawn credit facilities totaled EUR 17.8 million (EUR 22.8 million) at the end of the period. The balance sheet total was EUR 57.2 million (EUR 56.2 million). Consolidated working capital in relation to net sales was 11.4% (13.9%) of net sales in the past 12-month period. The Group's aim is to ensure that this percentage remains below 10% during the next few years. TAXATION Consolidated taxes include the taxes payable on each separate company's taxable income for the period reviewed. The Group's tax rate for 2005 and the following fiscal years is expected to remain well below the Finnish tax rate, partly because of the low tax rates for the Chinese and Estonian subsidiaries. PERSONNEL The number of Group personnel averaged 647 (506) during the period under review and totaled 728 (543) at the end of it. The number of personnel increased by 161 during the period. The number of employees was increased by the growth of production in Estonia and China and the increased use of temporary workers in Finland's operation during the holiday season. In addition to its own personnel, the Group's contract staff numbered 172 at the end of the period under review, an increase of 51 during the period. The geographical distribution of Efore's personnel at the end of the fiscal year was as follows: Europe 442 (370), the Americas 151 (101), and Asia 307 (148), making a total of 900 (619). These figures include contract personnel. GROUP STRUCTURE AND ORGANIZATION Efore Group consists of the parent company Efore Plc, and its wholly owned subsidiaries Efore (UK) Ltd, Efore (USA) Inc., Efore (Suzhou) Electronics Co. Ltd., Efore (SIP) Technologies Co. Ltd., Efore Ltda, Efore AS and FI-Systems Oy. In addition, Efore Plc has a 25% holding in the German power electronics company Power Innovation GmbH. SHARES AND SHAREHOLDERS The total number of Efore Plc shares at the end of the period under review, on July 31, 2005, was 40,529,648 and Efore's registered share capital was EUR 34,450,200.80. The highest split-adjusted share price during the period under review was EUR 3.65 and the lowest price was EUR 1.60. The average price during the period was EUR 2.74 and the closing price was EUR 1.91. The market capitalization calculated at the final trading price of the shares in the period under review was EUR 77.4 million. The total number of Efore Plc shares traded on the Helsinki Stock Exchange during the period under review was 43.6 million and their turnover value was EUR 119.6 million. This accounted for 107.6% of the total number of shares at the end of the period under review. The number of shareholders totaled 4,734 at the end of the quarter. TRANSITION TO IFRS STANDARDS Efore's first financial statements based on IFRS will be for the fiscal year beginning on November 1, 2005. The reference will be the fiscal year beginning on November 1, 2004. A preliminary study of the effects of the changes to the accounting principles was made in 2002-2003, under the direction of an outside expert. The IFRS project itself was begun in 2004. As the project progresses, the differences between the current accounting principles and the accounting principles for financial statements under the IFRS standards will be analyzed and new IFRS-compatible accounting principles will be determined for the consolidated financial statements. The project also includes an analysis of the effects of the changes to accounting practice on the reference year balance sheet starting on November 1, 2004, and on the key figures and ratios. The work is divided among different working groups which have been given specific matters and standards to examine. To support the changeover process, the company has also acquired a new information management system, which was introduced in autumn 2004. The preliminary study concluded that the most important changes caused by conversion to the IFRS standards compared with Efore's current reporting practices will be related primarily to the treatment of unrealized exchange rate differences on long-term loan receivables and financial leasing agreements, adjustments to depreciations of capitalized product-development costs and to segment reporting. OUTLOOK Net sales during the final quarter are expected to be substantially greater than those for the third quarter. Net sales for the entire year are also expected to increase on those of the previous year. Thanks to growth in sales and to partial implementation of restructuring, profitability is expected to further increase during the final quarter from the third quarter of the current fiscal year. As a result of weak performance during the first half of the fiscal year, operating profit and earnings per share for the entire year (12 months) are expected to remain substantially below those of the previous year. In addition to expanding its existing business, Efore is investigating the potential for taking an active part in the consolidation process within the power supplies sector. CONSOLIDATED PROFIT AND LOSS STATEMENT, CONSOLIDATED BALANCE SHEET, AND CASH FLOW STATEMENT CONSOLIDATED PROFIT AND LOSS Nov./04- Nov./03- change Nov./03- STATEMENT Jul./05 Jul./04 Oct./04 EUR million 9 months 9 months % 12 months Net sales 55,7 51,5 8,0 73,2 Change in stocks of finished -0,3 2,0 -114,0 1,2 and unfinished goods Other operating income 0,2 0,2 6,1 0,3 Other operating expenses -54,5 -46,6 16,8 -64,2 Depreciation and reductions in -2,4 -1,8 30,1 -2,5 value Share of loss of associated 0,0 -0,1 -100,0 0,0 companies OPERATING PROFIT (-LOSS) -1,3 5,2 -125,1 8,0 % net sales -2,3 10,0 10,9 Financial income and expenses 0,4 -0,6 171,4 -0,2 (net) PROFIT (-LOSS) BEFORE -0,9 4,6 -119,0 7,8 EXTRAORDINARY ITEMS Extraordinary items -1,3 0,0 0,5 PROFIT (-LOSS) BEFORE -2,2 4,6 -148,3 8,3 APPROPRIATIONS AND TAXES % net sales -3,9 9,0 11,3 Income taxes -0,5 -0,6 -20,1 -0,8 PROFIT (-LOSS) FOR THE PERIOD -2,7 4,0 -167,5 7,5 CONSOLIDATED BALANCE SHEET Jul. 31, Jul. 31, change Oct. 31, 2004 2005 2004 EUR million % ASSETS NON-CURRENT ASSETS Intangible assets 3,8 2,9 31,9 3,0 Group goodwill 0,0 0,0 -37,5 0,0 Tangible assets 7,6 6,3 20,9 6,7 Financial assets 0,0 0,1 -81,1 0,2 CURRENT ASSETS Stocks 13,0 12,8 1,6 11,0 Non-current receivables 2,0 1,1 78,5 2,0 Current receivables 12,9 10,2 26,7 13,0 Investments 10,7 16,1 -33,3 1,5 Cash in hand and at banks 7,1 6,7 5,8 22,9 TOTAL ASSETS 57,2 56,2 1,7 60,3 LIABILITIES Shareholders' equity 38,3 42,0 -8,9 45,4 Statutory Provisions 0,2 0,0 CREDITORS Non-current creditors 0,5 1,1 -53,0 0,9 Current creditors 18,2 13,2 38,1 14,0 TOTAL LIABILITIES 57,2 56,2 1,7 60,3 CASH FLOW STATEMENT EUR million Nov./04- Nov./03- change Nov./03- Jul./05 Jul./04 Oct./04 % Cash flow from business operations before financing items ans 4,2 2,4 6,2 taxes Financing items and taxes -1,0 -1,9 -2,6 Cash flow from business 3,2 0,5 511,5 3,6 operations (A) Investments -4,2 -3,7 -5,3 Cash flow from investments (B) -4,2 -3,7 13,4 -5,3 Directed share issue and 1,0 23,2 23,5 subscription of shares with warrants Change in liabilities -0,4 -1,4 -1,5 Dividends paid -6,0 -3,0 -3,0 Cash flow from financing (C) -5,3 18,8 -128,3 19,1 Change in cash flow (A+B+C), increase (+), decrease (-) -6,3 15,6 -140,2 17,4 EFORE GROUP KEY FIGURES Earnings per share, - -0,03 0,11 -127,3 0,20 Shareholders' equity per 0,94 1,05 -10,5 1,13 share, - Solvency ratio, % 66,9 74,5 -10,2 75,1 Gross investments, M- 4,0 3,5 14,3 5,0 as percentage of net sales 7,1 6,8 6,8 Average personnel 647 506 27,9 512 Return on equity-% (ROE) -4,4 18,1 -124,3 22,6 Return on investment-% (ROI) -2,2 19,4 -111,3 23,2 Gearing, % -42,3 -49,1 -13,8 -49,6 Net interest-bearing debt -16,2 -20,4 -20,6 -22,3 GROUP CONTINGENT LIABILITIES Jul. 31, Jul. 31, change Oct. 31, 2004 2005 2004 Contingent liabilities, EUR % million On own behalf - Corporate mortgages 0,0 6,7 -100,0 6,7 - Pledges given 0,1 0,1 1,7 0,1 -Other contingent liabilities 0,2 0,2 7,9 0,1 - Rent and leasing commitments 7,1 4,9 46,0 4,8 Derivative contracts -Forward currency contracts Market value 2,2 1,3 68,0 1,6 Value of underlying 2,2 1,3 63,0 1,6 Instruments Percentage changes calculated on basis of exact figures. EFORE PLC Board of Directors For additional information contact Markku Hangasjärvi, President and CEO, tel. +358 40 731 0114 DISTRIBUTION Helsinki Stock Exchange Principal media Efore Group The Efore electronics group is an international company providing services for the telecommunications, industrial automation, health-care and engineering industries. Its operations comprise custom-designed power supplies, DC power systems and electronics design and manufacturing services (EDMS). Efore's domicile is Espoo, Finland. In Finland the company also has operations in Saarijärvi and Tampere. Its other product development and production operations are located in the USA and China. The Group also has production in Estonia and Brazil and an affiliate company in Germany. In the fiscal year ending in October 2004, consolidated net sales were some EUR 73.2 million and the personnel numbered 567. The parent company Efore Plc is quoted on the Main List of the Helsinki Stock Exchange. |