PERLOS CORPORATION STOCK EXCHANGE RELEASE FEBRUARY 6,
2007 AT 8.00 A.M.
FINANCIAL STATEMENT BULLETIN 2006:
PERLOS CONTINUED RESTRUCTURING ITS OPERATIONS IN 2006
Perlos adjusted its financial reporting as from the
Interim Report released on 26 October 2006 due to the
divestment of the Healthcare Customer Group. In this
financial statement bulletin, the Healthcare Customer
Group has been treated as discontinued operations, and
its result is presented separately from those of
continuing operations. Information on Perlos or the
Groups result refer to continuing operations, i.e. the
former Telecommunications and Electronics Customer Group.
October-December 2006:
- The Groups net sales totalled EUR 143.9 million (EUR
200.5 million in 10-12/2005).
- The operating result was EUR 4.3 million (EUR 8.3
million).
- The result for the review period was EUR 3.9 million
(EUR 7.9 million).
- Earnings per share (diluted) were 0.07 EUR (EUR
0.15).
- Net cash flow from operations was EUR 43.2 million (EUR
26.2 million).
- Gross investments amounted to 9.5% (11.7%) of net
sales.
Year 2006:
- The Groups net sales totalled EUR 673.6 million (EUR
614.0 million in 2005).
- The operating result exclusive of non-recurring items
was EUR 10.7 million (EUR 21.2 million).
- The operating result was EUR 32.9 million (EUR 8.9
million).
- The result for the report year was EUR 43.6 million
(EUR 6.4 million).
- Earnings per share (diluted) were EUR 0.82 (EUR 0.12).
- Net cash flow from operations was EUR 65.5 million (EUR
19.4 million).
- Gross investments amounted to 8.7% (16.2%) of net
sales.
Dividend:
- Perlos Board of Directors will propose to the Annual
General Meeting that no dividend be paid for the 2006
financial year.
MATTI VIRTANEN, PRESIDENT AND CEO OF PERLOS:
- Since taking over my task as the President and CEO of
Perlos in December 2006, I have been pleased to find out
that the starting points for developing the company are
good. Perlos has a healthy and competitive core business,
a good clientele, competent personnel, excellent
technological expertise and a modern manufacturing
capacity. The decisions made on e.g. increasing the
manufacturing capacity on the growing markets have been
correct, and will enable us to make Perlos the most
competitive company it its field.
- The biggest challenge currently facing Perlos is its
weak profitability, due primarily to the fact that the
companys cost structure is too heavy in relation to its
current level of net sales. Even though Perlos net sales
in 2006 grew by 10% to approximately EUR 673.6 million,
the operating result for the financial year was EUR 43.6
million negative. The operating result exclusive of non-
recurring items was EUR 10.7 million, and including non-
recurring items EUR 32.9 million.
- In 2007, we will primarily focus on improving Perlos
profitability. We launched a large-scale profitability
improvement programme in January with the objective of
significantly improving operating result of Perlos'
continuing operations exclusive of non-recurring items,
compared with 2006. The programme is progressing
according to plan, the cost structure has begun to
decrease, personnel reductions abroad have been started
and co-determination negotiations are already underway in
Finland.
NET SALES AND RESULT
October-December 2006
Perlos net sales in October-December 2006 amounted to
EUR 143.9 million (EUR 200.5 million in 10-12/2005). Of
the Groups net sales, 37% came from Asia (26%), 49% from
Europe (44%) and 14% from North and South America (30%).
The operating result was EUR 4.3 million (EUR 8.3
million). The result for the review period was EUR 3.9
million (EUR 7.9 million) and earnings per share amounted
to EUR 0.07 (EUR 0.16). The result includes a pre-tax
capital gain of EUR 24.4 million from the divestment of
the Healthcare Customer Group.
Net cash flow from operations totalled EUR 43.2 million
(EUR 26.2 million) and cash flow after investments was
EUR 79.3 million (EUR 4.4 million).
Year 2006
Perlos net sales in 2006 amounted to EUR 673.6 million
(EUR 614,0 million in 2005) of which 35% came from Asia
(22%), 44% from Europe (51%) and 21% from North and South
America (27%).
Operating profit exclusive of non-recurring items was EUR
10.7 million (EUR 21.2 million), and including non-
recurring items EUR 32.9 million (EUR 8.9 million). The
significant non-recurring items, totalling EUR 43.6
million, are connected with the accounts receivable and
inventories of BenQ Mobile as well as the rationalisation
of Perlos operations in Finland.
The result for the report year was EUR 43.6 million (EUR
6.4 million) and earnings per share amounted to EUR 0.82
(EUR 0.12). The result includes a capital gain of EUR
24.4 million on the divestment of the Healthcare Customer
Group.
Net cash flow from operations totalled EUR 65.5 million
(EUR 19.4 million) and cash flow after investments was
EUR 55.7 million (EUR 84.0 million).
Discontinued operations
The result of the divested Healthcare Customer Group
totalled EUR 18.3 million (EUR 1.9 million in 2005). The
result includes the capital gain on the divestment of the
healthcare business.
INVESTMENTS
The Groups gross investments in 2006 amounted to EUR
60.4 million (EUR 99.7 million in 2005), representing
8.7% (16.2%) of net sales. In 2006, Perlos focused on
scaling up its capacity on the growth markets. The major
investments in 2006 comprised the costs of completing the
new plants in Reynosa and Beijing and starting the
construction of the new plants in Guangzhou and Chennai.
Additional investments were made during the year
especially in the Shenzhen plants mould manufacturing
capacity and in new production technologies.
The Groups investment in research and development
activities represented about 1% of net sales in 2006.
FINANCING
The Groups liquid assets at the end of the report period
amounted to EUR 28.1 million (EUR 26.4 million in 2005)
and unused committed credit limits to EUR 173.1 million
(EUR 148.1 million). The Groups net gearing ratio was
0.72 (0.87) and its equity ratio was 37.3% (34.7%).
Interest-bearing liabilities amounted to EUR 140.9
million (EUR 189.2 million), of which short-term
liabilities accounted for EUR 89.8 million (EUR 108.2
million) and long-term liabilities for EUR 51.1 million
(EUR 81.0 million). The net interest-bearing liabilities
were EUR 112.8 million (EUR 162.8 million) and the
interest cover ratio was 3.3 (8.4) in the report period.
PERSONNEL
In 2006, the Perlos Group had 13,320 employees on average
including temporary workers (9,632 employees in 2005).
At the end of the year, the number of personnel inclusive
of temporary workers was 12,944 (12,323). Of the total
payroll, 4,207 employees (4,729 employees) worked in
Europe, 7,612 employees (5,500 employees) in Asia and
1,125 employees (2,094 employees) in North and South
America.
BOARD OF DIRECTORS
Perlos Corporations Annual General Meeting held on 28
March 2006 elected Timo Leinilä, Heikki Mairinoja, Jukka
Rinnevaara, Kari O. Sohlberg, Andreas Tallberg, Kari
Vuorialho and Petteri Walldén as members of the Board of
Directors. Kari O. Sohlberg was elected as the Chairman
of the Board. At the Boards organisation meeting, which
was held after the Annual General Meeting, Andreas
Tallberg was elected as Vice Chairman of the Board and
Jukka Rinnevaara, Kari O. Sohlberg and Kari Vuorialho
were appointed to the Boards Audit Committee.
BOARD AUTHORISATIONS
In accordance with the resolutions of the Annual General
Meeting held on 28 March 2006, Perlos Board of Directors
is authorised to decide on increasing the companys share
capital by a maximum of EUR 6,352,457.40 through a rights
issue or by taking out a convertible loan, and (a) decide
on the acquisition of a maximum of 5,293,714 own shares,
and (b) decide on the conveyance of a maximum of
5,293,714 own shares in the companys possession. The
authorisations are in force until the next Annual General
Meeting.
CHANGES IN THE GROUP STRUCTURE
During the report period, Perlos established a new
subsidiary in Chennai, India. The company opened an
office in Chennai during the spring and started the
construction of a production facility with about 20,000
square metres in floor space.
On 17 July 2006, Perlos announced the signing of a
Memorandum of Understanding for the sale of its
Healthcare Customer Group to the Swedish private equity
investment company Ratos AB. The sale was concluded on 8
November 2006 after the approval of the competition
authorities had been received and other terms and
conditions of the transaction had been fulfilled.
According to the deal, all of the business operations of
Perlos Healthcare Customer Group were sold to Medifiq
Healthcare Corporation, which is owned by Ratos AB,
Perlos Corporation and the management of the new company.
CHANGES IN MANAGEMENT
On 16 November 2006, Matti Virtanen, M.Sc. (Eng.), born
1958, was appointed as the President and CEO of Perlos
Corporation as from 1 December 2006. The position was
previously held by Isto Hantila, M.Sc. (Eng.), who was
President and CEO of Perlos until 16 November 2006.
Vesa Vähämöttönen, Lic.Sc. (Tech.), born 1966, was
appointed to Perlos Executive Board as Senior Vice
President, Global Sales & Marketing, as from 7 August
2006. He has also been in charge of Perlos Nokia account
as from 7 November 2006, after the previous Head of the
Nokia Account, Jarmo Paakkunainen, M.Sc. (Eng.), resigned
from Perlos employ.
SHARE AND OPTIONS
Perlos has one series of shares, and each share entitles
its holder to one vote at a general meeting of
shareholders. Perlos share is listed on the Nordic List
of the Helsinki Stock Exchange.
Perlos Corporations share capital at 31 December 2006
was EUR 31,762,288.80 and the number of shares in issue
was 52,937,148. The company did not hold any own shares
(treasury shares).
At 31 December 2006, Perlos Corporation had two share
option programmes. A total of 750,000 shares can be
subscribed for on the basis of the 2002 share option
programme and 1,000,000 shares on the basis of the 2005
share option programme. The A and B warrants attached to
the 2002 share option programme are listed on the Main
List of the Helsinki Stock Exchange. No shares have been
subscribed for on the basis of the 2002 and 2005
warrants.
DECREASE OF THE SHARE PREMIUM FUND
On 17 July 2006, the National Board of Patents and
Registration of Finland approved the decrease of the
share premium fund in accordance with the resolution of
the Annual General Meeting on 28 March 2006. The cash in
the premium fund, a total of EUR 48,781,395.24, was
therefore transferred in its entirety to a fund belonging
to the companys non-restricted equity, which is
administered by the Annual General Meeting.
EVENTS AFTER THE BALANCE SHEET DATE
On 15 January 2007, Perlos announced a profitability
improvement programme with the objective of significantly
improving the operating result of Perlos continuing
operations, exclusive of non-recurring items, compared
with 2006. Perlos intends to achieve this objective by
boosting the efficiency of its operations and by reducing
annual expenses by more than EUR 100 million by the end
of 2007. The profitability improvement programme concerns
all of the companys operations in Europe, Asia and North
and South America.
Crucial measures for changing Perlos cost structure
include boosting the efficiency of production processes,
purchasing activities and subcontracting as well as
cutting costs related to quality by improving the quality
of all operations. The entire companys organisation will
also be streamlined and production in Finland will be
adjusted to match demand. As a result of these measures,
it is estimated that, by the end of 2007, the Perlos
Group will require 4,000 fewer employees than at present.
On 22 January 2007, as a part of its profitability
improvement programme, Perlos started co-determination
negotiations concerning all personnel in Finland for
reasons connected with production, finances and the
restructuring of operations. The negotiations concern
approximately 1,400 people. The aim of the negotiations
is to actively find different ways to improve
profitability and one of the options to be discussed at
the negotiations is the discontinuation of production
operations in Finland altogether. According to a
preliminary estimate, the company will need to cut
approximately 1,200 full-time jobs.
If a decision to discontinue production operations in
Finland were to be made, it is estimated that this would
incur non-recurring expenses of EUR 35-40 million. The
majority of the expenses would result from write-downs of
property, plant and equipment, with no effects on cash
flows.
OUTLOOK FOR 2007
As a result of the profitability improvement programme
initiated in January, Perlos expects the full-year
operating result of its continuing operations, exclusive
of non-recurring items, to be significantly stronger than
in 2006. Development measures are expected to improve the
result during the second half of the year. However,
profitability is predicted to be weak early in the year,
and the first-quarter operating result exclusive of non-
recurring items is estimated to be negative.
Due to the change in the BenQ customer relationship and
the foreseeable decrease in demand in Finland, full-year
net sales are expected to fall short of the 2006 figure
by about a quarter. Net sales in January-March are
forecast to fall by about a third from the previous year.
DIVIDENDS
Perlos Board of Directors will propose to the Annual
General Meeting that no dividend be paid out for 2006.
CONSOLIDATED INCOME STATEMENT, IFRS
EUR million 10- 10- Change, 1- 1-
12/2006 12/2005 % 12/2006 12/2005
Continuing
operations:
Net sales 143,9 200,5 -28 % 673,6 614,0
Operating expenses -148,2 -192,2 -23 % -706,5 605,1
Operating -4,3 8,3 -32,9 8,9
profit/loss
Profit/loss after -7,3 5,3 -43,6 2,6
financial items
Income tax -3,4 -2,6 0,0 -3,8
Profit/loss from -3,9 7,9 -43,6 6,4
continuing
operations
Discontinued
operations:
Profit/loss from 18,9 0,7 18,3 2,0
discontinued
operations
Profit/loss for 15,0 8,6 -25,3 8,4
the period
Income tax has been calculated on the profit for the review
period as a proportion of the estimated tax for the whole
financial year.
Geographical diversity of net sales from continuing
operations, %
10- 10- 1- 1-
12/2006 12/2005 12/200612/2005
Europe 49 % 44 % 44 % 51 %
Americas 14 % 30 % 21 % 27 %
Asia 37 % 26 % 35 % 22 %
CONSOLIDATED BALANCE SHEET,
IFRS
EUR million
Assets 12/2006 12/2005
Goodwill 11,6 12,1
Other intangible assets 13,0 16,2
Tangible assets and 222,3 247,1
investments
Deferred tax assets 7,0 6,5
Inventories 65,6 117,7
Account and other receivables 75,9 135,1
Cash and cash equivalents 28,1 26,4
Total assets 423,6 561,1
Equity and liabilities 12/2006 12/2005
Shareholders´ equity 155,7 188,2
Defered tax liabilities 0,2 0,7
Interest-bearing long-term 51,1 81,0
liabilities
Provisions 5,7 12,5
Interest-bearing short-term 89,8 108,2
liabilities
Account payables and other 121,0 170,6
liabilities
Total equity and liabilities 423,6 561,1
SOURCE AND APPLICATION OF FUNDS, IFRS
EUR million 1-12/2006 1-12/2005
Cash flow from operating
activities
Operating profit/loss -7,8 13,3
Adjustments 53,2 56,7
Change in working capital 40,7 -37,0
Financial income and expenses -10,8 -7,1
Income taxes paid -9,9 -6,5
Net cash flow from operations 65,5 19,4
Cash flows from investing
activities
Investments in subsidiaries 0,0 -3,2
Investments in associated -7,8 0,0
companies
Purchase of tangible and -60,4 -101,8
intangible assets
Proceeds from tangible and 2,4 1,6
intanbigle assets
Proceeds from divested 56,0 0,0
operations, net of cash
Net cash used in investing -9,8 -103,4
activities
55,7 -84,0
Cash flow from financing
activities
Change in loans -48,7 67,8
Change in interest-bearing 0,0 1,1
receivables
Dividends paid -5,3 -10,6
Net cash generated from -54,0 58,3
financing activities
Translation difference -3,4 -0,2
Change in cash and cash 5,1 -25,5
equivalents
Cash and cash equivalents 26,4 52,1
1.1.
Cash and cash equivalents at 28,1 26,4
end of period
Due to acquisitions and sales of subsidiaries and
translation differences during the year the
amounts in the cash flow statement are not
directly reconcilable with the balance sheet
figures.
COMMITMENTS, IFRS
EUR million 1-12/2006 1-12/2005
The future aggregate minimum
lease payments
under non-cancellable operating 18,3 22,4
leases
Guarantees on behalf of third
parties as
collateral on other commitments 1,4 4,7
Guarantees on behalf of 5,6 0,0
associated companies
Nominal values of derivate
financial instruments
Foreing exchange forwards
- related to transaction risk 4,1 7,8
- related to financing 46,3 90,9
Interest rate swaps 25,0 40,0
Commodity derivates 0,4 0,3
Total nominal values 75,8 139,0
The nominal amounts are
presented as gross values.
Fair values of derivates
financial instruments
Instruments having a positive
fair value
- Foreign exchange forwards
-- related to transaction risk 0,0 0,1
-- related to financing 0,2 0,4
- Commodity derivatives 0,0 0,0
Instruments having a negative
fair value
- Foreign exchange forwards
-- related to transaction risk -0,1 0,0
-- related to financing -0,2 -2,5
- Interest rate swaps 0,0 -0,6
- Commodity derivatives 0,0 0,0
Total fair values -0,1 -2,6
The fair values are based on
quoted market prices.
Fair value represents the amount
that would be realised, if the
derivative contracts were closed
on the balance sheet date.
All derivative financial
instruments are fair valued
through the income statement at
each balance sheet date.
KEY FIGURES, IFRS
10- 10- 1- 1-
12/2006 12/2005 12/2006 12/2005
Continuing operations 13,6 23,4 60,4 99,7
gross investments in
fixed assets, EUR
million
EBITDA *) from 3,0 20,5 8,4 50,3
continuing operations,
EUR million
EBITDA *) from 2,1 10,2 1,2 8,2
continuing operations,
%
EBIT from continuing -4,3 8,3 -32,9 8,9
operations, EUR million
EBIT from continuing -3,0 4,1 -4,9 1,5
operations, %
Net sales from 143,9 200,5 673,6 614,0
continuing operations,
EUR million
Net sales from 3,1 14,5 42,7 52,8
discontinued
operations, EUR million
Equity ratio, % 37,3 34,7 37,3 34,7
Gearing 0,72 0,87 0,72 0,87
Interest-bearing net 112,8 162,8 112,8 162,8
liabilities, EUR
million
ROE, % p.a. 40,5 18,7 -14,7 4,6
ROI, % p.a. 32,7 16,7 5,3 8,0
Interest cover ratio 9,2 7,2 3,3 8,4
Earnings per share, EUR 0,28 0,16 -0,48 0,16
Earnings per share, 0,28 0,16 -0,48 0,16
diluted, EUR
Earnings per share from -0,07 0,15 -0,82 0,12
continuing operations,
EUR
Earnings per share from 0,36 0,13 0,35 0,04
discontinued
operations, EUR
Shareholders´ equity 2,94 3,55 2,94 3,55
per share, EUR
Shareholders´ equity 2,94 3,55 2,94 3,55
per share, diluted, EUR
Personnel of continuing
operations
- average for the 7 473 7 864 7 746 6 705
period
- end of period 7 229 7 679 7 229 7 140
- average including 13 616 13 062 13 320 9 632
workforce
- end of period 12 944 12 889 12 944 12 323
including workforce
*) Earnings before interest, taxes, depreciation and
amortisation
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, IFRS
EUR million
Change in Sha Shar Hedg Othe Tran Reta Total Min Total
shareholders' re e ing r slat ined ori
equity 1- cap issu rese rese ion earn ty
12/2005 ita e rve rves diff ings Int
l prem eren ere
ium cies st
SHAREHOLDERS' 31,8 48,7 -0,4 0,7 -1,6 96,2 175,4 0,0 175,4
EQUITY
31.12.2004
Cash flow
hedging
- Increase 0,1 0,1 0,1
- Profit/loss
of fair value
revaluation
- Deferred 0,1 0,1 0,1
taxes's share
of period
movements
Change in 6,1 4,4 10,5 10,5
translation
difference
Other changes 2,2 0,2 2,4 2,4
Net 0,0 0,0 0,2 2,2 6,1 4,5 13,0 13,0
profit/loss
recoqnised
directly to
shareholders'
equity
Profit/loss 8,8 8,8 0,4 9,2
for the period
Total profits 0,0 0,0 0,2 2,2 6,1 13,3 21,8 0,4 22,2
and losses
Dividend - -10,6 -10,6
distribution 10,6
Share premium 0,1 1,0 1,1 1,1
SHAREHOLDERS' 31,8 48,8 -0,2 2,9 4,5 100, 187,8 0,4 188,2
EQUITY TOTAL 0
31.12.2005
Change in Sha Shar Hedg Othe Tran Reta Total Min Total
shareholders' re e ing r slat ined ori
equity 1- cap issu rese rese ion earn ty
12/2006 ita e rve rves diff ings Int
l prem eren ere
ium cies st
SHAREHOLDERS' 31,8 48,8 -0,2 2,9 4,5 100, 187,8 0,4 188,2
EQUITY 0
31.12.2005
Cash flow
hedging
- Increase
- Profit/loss 0,2 0,2 0,2
of fair value
revaluation
- Deferred
taxes's share
of period
movements
Change in -3,5 -3,5 0,0 -3,5
translation
difference
Other changes - 50,2 1,4 1,4
48,8
Net 0,0 - 0,2 50,2 -3,5 0,0 -1,9 0,0 -1,9
profit/loss 48,8
recoqnised
directly to
shareholders'
equity
Profit/loss - -25,1 - -25,3
for the period 25,1 0,2
Total profits 0,0 - 0,2 50,2 -3,5 - -27,0 - -27,2
and losses 48,8 25,1 0,2
Dividend -5,3 -5,3 -5,3
distribution
Share premium
SHAREHOLDERS' 31,8 0,0 0,0 53,1 1,0 69,6 155,5 0,2 155,7
EQUITY TOTAL
31.12.2006
The Interim Report for January-March 2007 will be
published on April 26, 2007.
Vantaa, February 5, 2007
PERLOS CORPORATON
Board of Directors
ADDITIONAL INFORMATION:
- A news conference for analysts and media will be held
today, February 6, 2007 at 9:30 in Restaurant G.W.
Sundmans, Eteläranta 16, Helsinki. Welcome.
- President and CEO Matti Virtanen, tel. +358 9 2500 7200
is available today, February 6 at 14:00 15:00 Finnish
time.
- Perlos will arrange a conference call and web
presentation for analysts, media and investors today,
February 6, at 8.30 A.M. US Eastern time / 1.30 P.M. UK
time / 3.30 P.M. Finnish time. You can participate over
the telephone or through Perlos Internet site. The
results will be presented by Mr. Matti Virtanen,
President and CEO. The conference call and presentation
will be held in English. To participate in the conference
call, please dial +44 (0)20 7162 0125, using the code
Perlos, a few minutes before the beginning of the
conference.
PERLOS IN BRIEF
Perlos Corporation is a global design and manufacturing
partner for the telecommunications and electronics
industry. The service offering covers the whole product
life cycle from industrial design to manufacturing,
logistics and new product versions. The production
facilities are located in Asia, Europe and the Americas
and the company is headquartered in Finland. Perlos
Corporation's net sales amounted to EUR 673,6 million in
2006. The company employs approximately 13,000 people
worldwide. Perlos share (POS1V) is traded on the Helsinki
Stock Exchange.
DISTRIBUTION
Helsinki Stock Exchange
Media
www.perlos.com
FINANCIAL STATEMENT BULLETIN 2006: PERLOS CONTINUED RESTRUCTURING ITS OPERATIONS IN 2006
| Source: Perlos