SCANFIL PLC INTERIM REPORT 24 OCTOBER 2008 8.30 a.m.
SCANFIL GROUP'S INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2008
January - September
- Turnover for the first nine months of 2008 totalled EUR 164.7 million
(170.2 in the corresponding period 2007)
- Operating profit was EUR 16.6 (13.1) million, which is 10.1 (7.7) % of
turnover.
- Profit for the review period was EUR 13.4 (10.7) million
- Earnings per share were EUR 0.23 (0.18)
July - September
- Turnover for the third quarter totalled EUR 56.0 million (59.1 in the
corresponding period in 2007)
- Operating profit was EUR 5.2 (5.6) million representing 9,3 (9.4)% of
turnover
- Earnings per share amounted EUR 0.06 (0.08)
DEVELOPMENT OF OPERATIONS
Scanfil plc
Harri Takanen, President:
“The Scanfil Group's choice to focus on the company's cost-effectiveness and in
this way boost its liquid assets, financial position and solvency has proved to
be an ideal solution in the current market situation. Scanfil EMS Oy is a stable
supplier that is committed to long-term development of its operations. I believe
that this is extremely important in today's economic situation. Furthermore,
Scanfil plc will continue to actively investigate profitable ways to invest the
company's assets. We will also be looking for different ways to participate in
new business areas."
Scanfil EMS Group
No significant changes took place in the markets of Scanfil's industrial
electronics customers in the review period. The international megatrends related
to, for example, climate change and energy use had a positive impact on demand.
The production volumes of industrial electronics products were at a good level
in the review period. Scanfil has focused on the development of its customer
relations in industrial electronics and on the acquisition of new customers.
The slight decline in the Group's turnover resulted from overall demand in the
market for telecommunications products being lower than that in the previous
year. Telecommunications customers accounted for approximately 62 (70%) and
industrial electronics customers for approximately 38 (30%) of the review
period's turnover.
The subsidiaries in China accounted for 36 (39%) of the Group's overall sales,
including deliveries to the Group's other plants. An expansion of more than
5,400 square metres was launched at the Hangzhou production facilities in the
third quarter. The Chinese subsidiaries employ 52 (53%) of the Group's
personnel. In all, 74 (74%) of the Group's personnel were employed by
subsidiaries outside Finland on 30 September 2008.
FINANCIAL DEVELOPMENT
The Group's turnover in January - September was EUR 164.7 (170.2) million,
showing a decrease of 3% over the previous year. Distribution of turnover based
on the location of customers was as follows: Finland 50 (42)%, rest of Europe 18
(26)%, Asia 30 (30)%, USA 1 (1)% and the others 1 (1)%.
Scanfil's measures to develop its operations in line with the principles of
continuous improvement have seen good progress. Good results have been achieved
in turnaround times, the reliability of deliveries and quality development,
especially in the Chinese subsidiaries. Successfully implemented operating
models will be applied in all of the Group's plants. The profitability during
the review period was good and operating profit amounted to EUR 16.6 (13.1)
million, representing 10.1 (7.7)% of turnover. The result for the review period
was EUR 13.4 (10.7) million. Earnings per share were EUR 0.23 (0.18), and return
on investment was 16.8 (13.3)%.
Turnover in July - September was EUR 56.0 (59.1) million. Operating profit in
the third quarter totalled EUR 5.2 (5.6) million, representing 9,3 (9.4)% of
turnover. Earnings per share were EUR 0.06 (0.08).
Owing to the business structure, fluctuations in exchange rates have had only a
minor impact on performance. The weaker US dollar had a slight positive impact
on the financial performance in Europe in the early part of the year. Should the
dollar strengthen, it would, in turn, have a slightly weakening effect on
performance.
FINANCING, INVESTMENTS AND CAPITAL EXPENDITURE
The Group enjoys a strong financial position.
The consolidated balance sheet totalled EUR 198.7 (179.2) million. Liabilities
amounted to EUR 54.5 (48.5) million, EUR 42.5 (41.0) million of which were
non-interest-bearing and EUR 12.0 (7.5) million interest-bearing. The equity
ration was 72.6 (73.0)% and gearing -36.2 (-26.4)%.
Liquid cash assets totalled EUR 64.3 (42.0) million, of which EUR 38.9 million
has been deposited in bank accounts and in time deposits with a maturity of
three months or less. An additional EUR 22.4 (0) million has been invested in
financial instruments, mainly in bonds, credit linked notes and FX carry notes,
EUR 12.6 million of which will mature in less than a year. These are secondary
market investments. In compliance with the IFRS, the investments have been
measured at fair value, and due to the recent market uncertainty, an impairment
loss of EUR 1.0 million was recorded on the investments on 30 September 2008. In
conjunction with the initial recognition, the Group has classified as assets
recognised at fair value through profit or loss such investments that it has
made during the accounting period in instruments that include a component that
generates a fixed interest rate and a component linked to, for example, a share
index or credit liability. The latter component is a linked derivative that
changes considerably the cash flow of the main instrument. Consequently, the
instrument as a whole has been measured at fair value through profit or loss.
However, the Group's net financial items are in January-September still EUR 0.7
million positive.
In line with the Group's investment policy, half of the cash assets are in
risk-free interest rate investments and around one third in low-risk capital
guaranteed investments, while around one fifth can be invested in non-capital
guaranteed moderate risk investments.
No direct share investments or strategic investments were made in the accounting
period.
Cash flow from operating activities in the review period was positive at EUR
18.8 (13.6) million. The change in working capital was EUR 1.9 (-0.0) million. A
total of EUR 7.0 (5.9) million was paid in dividend. The parent company's
long-term loan of EUR 7.5 million has been repaid in full. To hedge against a
possible decline in the value of the Estonian kroon, the Estonian subsidiary has
taken out a loan in EEK equivalent to EUR 12.0 million.
Gross investments in fixed assets totalled EUR 3.0 (1.2) million, which is 1.8
(0.7)% of turnover. Depreciations were EUR 4.8 (5.6) million.
BOARD OF DIRECTORS' AUTHORISATION
The Annual General Meeting decided on 3 April 2008 according to the Board of
Directors' proposal to authorize the Board of Directors to decide on the
acquisition of the Company's own shares with distributable assets. The
authorization has not been exercised.
The Board of Directors has no existing share issue authorisations or
authorisations to issue convertible bonds with warrants.
OWN SHARES
On 30 September 2008, the company owned a total of 1,993,146 of its own shares,
the counter-book value of which totalled EUR 498,287 and which represented 3.3%
of the company's share capital and votes.
During the review period, the company disposed of 5,303 of its own shares in
conjunction with the share-based profit-sharing scheme of the Group's Management
Team.
SHARE TRADING AND SHARE PERFORMANCE
The highest trading price during the review period was EUR 2.45 and the lowest
EUR 1.76, the closing price for the period standing at EUR 2.07. A total of
4,830,709 shares were traded during the period, corresponding to 8.0% of the
total number of shares. The market value of the shares on 30 September 2008 was
EUR 125,7 million.
PERSONNEL
Scanfil Group's personnel averaged 2,135 (2,116) employees during the review
period and the company employed 2,209 (2,142) employees at the end of the review
period, of whom 1,641 (1,583) were employed in the company's foreign plants.
CHANGES IN THE GROUP STRUCTURE
A business transfer carried out on 1 May 2008 split Scanfil Group's parent
company, Scanfil plc, into Scanfil plc (Finland), an investment company, and its
fully-owned subgroup Scanfil EMS Oy (Finland), which engages in contract
manufacturing. Scanfil N.V. (Hoboken), located in Belgium and owned 100% by
Scanfil plc, has not had any production activities since 2006.
The Scanfil EMS Group consists of parent company Scanfil EMS Oy (Finland),
Scanfil (Suzhou) Co., Ltd. and Scanfil (Hangzhou) Co., Ltd. in China, Scanfil
Kft. (Budapest) in Hungary and Scanfil Oü (Pärnu) in Estonia. The Scanfil EMS
Group holds the entire share capital in all of its subsidiaries.
On 17 September 2008, the Hungarian subsidiary, Scanfil Kft., split into a
company engaged in manufacturing, Scanfil Kft. and into a real-estate company
called Rozália Invest Kft. The change does not affect the Group's financial
performance.
EVENTS AFTER THE REVIEW PERIOD
On 10 October 2008, the company signed a rental agreement on part of the Oulu
plant facilities with Nokia Siemens Networks. Nokia Siemens Networks will rent
6,749 square metres of the facilities. Scanfil will continue to actively search
for ways to rent out the remaining more than 11,000 square metres or to sell the
facilities.
FUTURE PROSPECTS
It has become more difficult to estimate the development of demand. Customer
forecasts remain at the predicted level, but we cannot rule out a decline in
demand in Scanfil's customer markets, caused by the financial crisis.
Scanfil still stands by its former estimate of turnover in 2008 remaining at the
previous year's level. We expect profitability and operating profit to remain
very satisfactory if demand continues at a normal level. A possible decline in
demand may have a downward effect on the operating profit level. It is extremely
difficult to predict market development. Fierce price competition, the price
development of materials and components, as well as fluctuations in demand may
affect performance in the last quarter.
Scanfil's strong financial position gives the company a good relative
competitive position on the market. The company can continue to develop its
operations in the long term irrespective of uncertainties in the financial
markets. The company management strongly believes in the contract manufacturing
market expanding as ODM manufacturers continue their outsourcing projects. In
the long term, this offers excellent business opportunities to a solvent and
cost-effective company. Scanfil is a reliable and long-term partner to both its
existing and new customers.
OPERATIONAL RISKS AND UNCERTAINTIES
It is difficult to estimate how the uncertain development of global markets and
especially the sudden changes recently seen in the financial markets will affect
Scanfil's customer sectors. The uncertainty experienced in the international
economy may weaken the markets of Scanfil's customers and consequently Scanfil's
sales.
In other respects, the risks facing Scanfil's business have remained essentially
the same. Risks and risk management are described in greater detail in the
financial statements bulletin, on the company's website under Corporate
Governance and in the notes to the consolidated financial statements.
APPENDICES:
Appendix 1: Consolidated profit and loss statements and balance sheet
Appendix 2: Consolidated cash flow statement
Appendix 3: Key indicators
Appendix 4: Calculation of changes in shareholders' equity
Appendix 5: Segment information
Appendix 6: Changes in tangible current assets
Appendix 7: Consolidated contingent liabilities
Appendix 8: Key indicators quarterly
This interim report has been prepared according to IFRS 34-standard.
The accounting policies and methods for calculating key indicators are the same
as those published in the financial statements for 2007.
Individual figures and grand totals have been rounded to the nearest million
euros, so they will not always add up. The figures are unaudited.
APPENDIX 1
CONSOLIDATED PROFIT AND LOSS STATEMENT
EUR million
2008 2007 2008 2007 2007
7 - 9 7 - 9 1 - 9 1 - 9 1 - 12
NET SALES 56.0 59.1 164.7 170.2 224.6
Increase or decrease of inventory
of finished products 0.9 0.0 0.9 - 1.6 - 0.6
Other operating income 0.2 0.5 0.5 2.1 2.1
Expenses - 50.2 - 52.3 -144.6 -152.0 - 200.3
Depreciation - 1.6 - 1.8 - 4.8 - 5.6 - 7.2
OPERATING PROFIT 5.2 5.6 16.6 13.1 18.6
Financial income and expenses - 0.6 - 0.0 0.7 0.2 0.4
PROFIT BEFORE TAXES 4.6 5.5 17.3 13.3 19.0
Direct tax - 1.0 - 1.1 - 3.9 - 2.6 - 4.9
NET PROFIT FOR THE PERIOD 3.5 4.5 13.4 10.7 14.1
Attributable to:
Equity holders of the parent 3.5 4.5 13.4 10.7 14.1
Earnings/share (EPS), EUR 0.06 0.08 0.23 0.18 0.24
The company does not have items that might dilute the earnings per share.
CONSOLIDATED BALANCE SHEET
EUR million 30.9. 30.9. 31.12.
2008 2007 2007
ASSETS
Non-current assets
Property, plant and equipment 35.4 38.3 36.5
Goodwill 2.6 2.5 2.5
Other intangible assets 1.4 1.1 1.1
Available-for-sale investments 0.0 0.0 0.0
Financial assets with result
impact entered at current value 9.8
Receivables 0.2 0.2 0.2
Deferred tax assets 0.4 0.3 0.4
Total non-current assets 49.8 42.5 40.8
Current assets
Inventories 35.9 33.3 33.6
Trade and other receivables 53.7 54.9 52.3
Advance payments 0.1 0.1 0.1
Financial assets with result
impact entered at current value 12.6 1.8
Available-for-sale investments, liquid assets 3.0
Available-for-sale investments, cash equivalents 19.5 20.1 29.6
Cash and cash equivalents 19.4 20.1 20.4
Total current assets 144.2 130.2 136.1
Non current assets held for sale 4.6 6.5 4.6
TOTAL ASSETS 198.7 179.2 181.5
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity
Share capital 15.2 15.2 15.2
Share premium account 16.1 16.1 16.1
Own shares - 6.9 - 6.9 - 6.9
Other reserves 3.5 2.5 2.6
Translation differences 1.6 - 2.1 - 2.6
Retained earnings 114.6 105.9 109.3
Total equity 144.2 130.7 133.6
Non-current liabilities
Deferred tax liabilities 1.0 1.1 2.3
Reserves 6.2 7.1 7.0
Interest bearing liabilities 12.0
Total non-current liabilities 19.2 8.2 9.3
Current liabilities
Trade and other payables 34.1 32.0 30.4
Current tax 1.2 0.8 0.7
Interest bearing liabilities 7.5 7.5
Total current liabilities 35.2 40.3 38.6
Total liabilities 54.5 48.5 47.9
TOTAL SHAREHOLDERS' EQUITY AND
LIABILITIES 198.7 179.2 181.5
APPENDIX 2
CONSOLIDATED CASH FLOW STATEMENT 2008 2007 2007
EUR million 1 - 9 1 - 9 1 - 12
Cash flow from operations
Net profit 13.4 10.7 14.1
Adjustment for the net profit of the period 7.4 5.4 8.7
Change in net working capital 1.9 - 0.0 0.4
Interests paid and other financial expenses - 0.6 - 0.4 - 0.4
Interests received 1.4 0.6 1.3
Taxes paid - 4.7 - 2.7 - 4.0
Net cash flow from operations 18.8 13.6 20.2
Cash flow from investments
Investments in tangible and
intangible assets - 2.7 - 1.5 - 1.7
Proceeds from sale of tangible
and intangible assets 0.4 4.3 6.3
Investments in other investments - 26.3
Proceeds from other investments 0.2
Net cash flow from investments - 28.6 2.8 4.9
Cash flow from funding
Raising of long-term loans 12.0
Repayment of long-term loans - 7.5
Dividends paid - 7.0 - 5.9 - 5.9
Net cash flow from funding - 2.5 - 5.9 - 5.9
Change in assets - 12.4 10.6 19.2
Liquid assets at the beginning
of the period 50.0 31.8 31.8
Effect of changes in currency exchange rates 1.3 - 0.4 - 0.6
Effect of changes in the fair value of investments 0.0 - 0.3
Liquid assets at the end of the period 38.9 42.0 50.0
APPENDIX 3
KEY INDICATORS 2008 2007 2007
1 - 9 1 - 9 1 - 12
Return on equity, % 12.8 11.1 10.8
Return on investment, % 16.8 13.3 14.1
Interest bearing liabilities,
EUR million 12.0 7.5 7.5
Gearing, % - 36.2 - 26.4 - 31.8
Equity ratio, % 72.6 73.0 73.6
Gross investments in fixed
assets, EUR million 3.0 1.2 1.4
% of net turnover 1.8 0.7 0.6
Personnel, average 2 135 2 116 2 105
Earnings per share, EUR 0.23 0.18 0.24
Shareholders' equity per share, EUR 2.46 2.23 2.27
Number of shares at
the end of period, 000's 60 714 60 714 60 714
- not counting own shares 58 721 58 716 58 716
- weighted average 58 720 58 716 58 716
The company does not have any liabilities resulting from derivative instruments.
Owing to the nature of the sector, the company's order book covers only a short
period of time and does not give an accurate picture of future development.
APPENDIX 4
CALCULATION OF CHANGES IN SHAREHOLDERS' EQUITY
EUR million
A = Share capital
B = Premium fund
C = Own shares
D = Other reserves
E = Translation differences
F = Fair value reserve
G = Retained earnings
H = Total
I = Shareholder's equity total
SHAREHODER'S A B C D E F G H I
EQUITY
1.1.2007 15.2 16.1 -6.9 1.9 - 0.7 0.1 101.7 127.4 127.4
Change in value - 0.1 - 0.1 - 0.1
Translation difference - 1.4 - 1.4 - 1.4
NET INCOME RECOGNIZED
DIRECTLY IN EQUITY - 1.4 - 0.1 - 1.5 - 1.5
Net profit for the period 10.7 10.7 10.7
TOTAL RECOGNIZED INCOME
AND EXPENCE - 1.4 - 0.1 10.7 9.2 9.2
Payment of dividend - 5.9 - 5.9 - 5.9
Transfer to reserves 0.7 - 0.7
Distribution of own shares 0.0 0.0 0.0
SHAREHOLDER'S EQUITY
30.9.2007 15.2 16.1 - 6.9 2.5 - 2.1 0 105.9 130.7 130.7
SHAREHOLDER'S EQUITY
1.1.2008 15.2 16.1 - 6.9 2.6 - 2.6 0 109.3 133.6 133.6
Translation difference 4.3 4.3 4.3
NET INCOME RECOGNIZED
DIRECTLY IN EQUITY 4.3 4.3 4.3
Net profit for the period 13.4 13.4 13.4
TOTAL RECOGNIZED INCOME
AND EXPENCE 4.3 13.4 17.6 17.6
Payment of dividend - 7.0 - 7.0 - 7.0
Transfers to reserves 1.0 - 1.0 0 0
Distribution of own shares 0.0 0.0 0.0
SHAREHOLDER'S EQUITY
30.9.2008 15.2 16.1 - 6.9 3.5 1.6 0 114.6 144.2 144.2
APPENDIX 5
SEGMENT INFORMATION ACCORDING GEOGRAPHICAL AREA
EUR million 2008 2007 2007
1 - 9 1 - 9 1 - 12
TURNOVER
Europe 115.9 113.1 150.2
Asia 66.6 70.3 92.4
Turnover between segments - 17.8 - 13.2 - 18.0
Total 164.7 170.2 224.6
OPERATING PROFIT
Europe 8.3 5.1 7.5
Asia 8.3 8.0 11.1
Total 16.6 13.1 18.6
The Group operates in single sector.
APPENDIX 6
CHANGES IN TANGIBLE NON CURRENT ASSETS
EUR million 2008 2007 2007
1 - 9 1 - 9 1 - 12
Book value at the beginning of the period 36.5 43.1 43.1
Additions 2.5 1.0 0.9
Deductions - 0.1 - 0.3 - 0.2
Depreciations - 4.6 - 5.2 - 6.9
Translation differences 1.1 - 0.3 - 0.5
Book value at the end of the period 35.4 38.3 36.5
APPENDIX 7
CONSOLIDATED CONTINGENT LIABILITIES
EUR million 2008 2007 2007
1 - 9 1 - 9 1 - 12
Real estate mortgages 3.4 2.5
Business mortgages 28.4 16.4 16.4
Guarantees pledged 0.1 0.7 0.7
Rental liabilities 0.6 0.8 0.7
The parent company has given a EUR 6.9 million bank guarantee to secure the
payment of contributions related to Scanfil NV's restructuring. Scanfil NV's
balance sheet includes a corresponding provision.
APPENDIX 8
KEY INDICATORS QUARTERLY
EUR million
Q3/08 Q2/08 Q1/08 Q4/07 Q3/07 Q2/07 Q1/07 Q4/06
Turnover, MEUR 56.0 58.7 50.0 54.4 59.1 58.9 52.2 51.5
Operating
Profit, MEUR 5.2 6.6 4.7 5.5 5.6 4.0 3.6 2.7
Operating profit, % 9.3 11.3 9.5 10.2 9.4 6.7 6.8 5.2
Net income, MEUR 3.5 6.2 3.6 3.4 4.5 3.2 3.1 3.0
EPS, EUR 0.06 0.11 0.06 0.06 0.08 0.05 0.05 0.05
SCANFIL PLC
Harri Takanen
President
Additional information:
President Harri Takanen
Tel +358 8 4882 111
Distribution NASDAQ OMX Helsinki
Major Media
www.scanfil.com
Scanfil plc is a global contract manufacturer and systems supplier for
communication and industrial electronics with over 30 years experience in
demanding contract manufacturing
Scanfil offers contract-manufacturing services as a systems supplier to the
telecommunication industry, mainly to wireless communication sector, as well as
to the industrial electronics industry. Main telecommunication products are
among others integrated enclosure systems for mobile phone and ADSL networks and
assembly and testing of modules related to enclosure systems. Examples of
industrial electronics products include box-built tested devices, various
electronic modules, backplanes and assembled circuit boards as well as cable
assemblies. Production plants are situated in China, Hungary, Estonia and
Finland.
Not for release over US newswire services. Forward looking statements: certain
statements in this stock exchange release may constitute "forward-looking"
statements which involve known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements of Scanfil
Oyj to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. When used
in this stock exchange release, such statements use such words as "may," "will,"
"expect," "anticipate," "project," "believe," "plan" and other similar
terminology. New risk factors may arise from time to time and it is not possible
for management to predict all of those risk factors or the extent to which any
factor or combination of factors may cause actual results, performance and
achievements of Scanfil Oyj to be materially different from those contained in
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction of
actual results. The forward-looking information contained in this stock exchange
release is current only as of the date of this stock exchange release. There
should not be an expectation that such information will in all circumstances be
updated, supplemented or revised, except as provided by the law or obligatory
regulations, whether as a result of new information, changing circumstances,
future events or otherwise.