SCANFIL PLC INTERIM REPORT 26 APRIL 2010 8.30 a.m.
SCANFIL PLC'S INTERIM REPORT 1 JANUARY - 31 MARCH 2010
- Turnover for the first quarter of 2010 totalled EUR 40.8 million
(49.6 in the corresponding period 2009)
- Operating profit was EUR 1.5 (4.2) million, which is 3.6 (8.5) % of
turnover.
- Profit for the review period was EUR 2.0 (1.3) million
- Earnings per share were EUR 0.03 (0.02)
President Harri Takanen:
“Scanfil plc continuously investigates industrial investment opportunities and
invests its cash reserves in various financial instruments. Gains from the
company's investment activity have continued to be very satisfactory.
The first quarter of 2010 was weak in terms of sales for Scanfil EMS Oy's
contract manufacturing operations. The demand did, however, pick up towards the
end of the period. Customers in the industrial electronics sector continue to
increase their manufacturing in Asia, which provides Scanfil with an opportunity
to increase its operations in China. Examples of this include Heidelberger
Druckmaschinen AG and Kemppi Oy, for whom Scanfil has started manufacturing at
its Suzhou and Hangzhou plants.
The strengthening of the demand during March supports Scanfil's view that the
market will partially recover during 2010, and the company has manufacturing
capacity to meet even fast growth of demand.”
BUSINESS TRENDS
Scanfil plc
No new strategic investments have been made during the review period, but
several potential investment opportunities are currently being examined. The
focus of investment activities is to find strategic investments that suit the
group entity, especially just now as very few interesting long-term investment
opportunities can be found in the share market. On the other hand, small, often
non-listed companies still have potential for reasonably priced arrangements.
The development of Lännen Tehtaat plc's business operations has been encouraging
during the fourth quarter of 2009. However, the implementation of an active
shareholder role was unsuccessful for the time being, and in spite of efforts,
the desired seat on the Board of Directors was not acquired. As for the locking
company iLOQ Ltd, business operations have developed as planned and the outlook
is promising. In the review period, cash assets were, among other things,
invested in bonds, credit linked notes and ETF and equity investments. In
particular, the share of high-yield investments has been increased in the
overall allocation and will be increased further in the near future. As a whole,
the investment activity has reached the set targets and investments have
developed favourably.
Scanfil EMS Subgroup
The demand decreased considerably during the first quarter of the year compared
to the corresponding period the previous year, particularly in the market for
telecommunications products. However, the demand picked up clearly at the end of
March. The growth of demand was somewhat faster in the market for
telecommunications products. The start-up of collaboration with new customers,
including Heidelberger Druckmaschinen AG and Kemppi Oy, has proceeded according
to plans. The company will continue its active efforts to acquire new clients
with the aim of decreasing customer- and industry-specific risks. Industrial
electronics customers accounted for 49% of total sales in January-March (44%
during the corresponding period in 2009) and telecommunications customers for
51% (56%).
Production method development measures and restructuring of production
activities at the European plants continued according to plans. In order to
renew the surface mounting machines and increase assembly capacity at the
Estonian and Chinese Suzhou plants, the company agreed on the acquisition of ten
used electronics component surface-mounting units and accessories during the
review period. The purchase price of the equipment is only a fraction of the
price of similar new machines.
Scanfil EMS Oy's subsidiary in Suzhou is investigating the possibility of
purchasing a property for its premises. The aim is to move to proprietary
premises before the end of the year. The plan is to make the purchase using cash
assets.
The company carried out statutory employer-employee negotiations at its Vantaa
plant in Finland during the review period. The cause of the negotiations was the
temporary decrease in the demand for the Vantaa plant. The negotiations resulted
in agreeing that in addition to work hours and annual leave schemes, 27
employees will be temporarily laid off for a maximum of 40 work days per person
during April-May.
FINANCIAL DEVELOPMENT
Scanfil Group
The Group's turnover for January-March was EUR 40.8 (49.6) million, down 17.7%
year-on-year. Distribution of turnover based on the location of customers was as
follows: Finland 34% (49%), rest of Europe 27% (18%), Asia 37% (32%), USA 1%
(0%) and the others 1% (1%).
The Chinese subsidiaries' sales accounted for 39% (37%) of the Group's sales
during the review period including deliveries to the Group's other plants.
Operating profit of the Group during the review period was EUR 1.5 (4.2)
million, representing 3.6% (8.5%) of turnover. Earnings for the review period
amounted to EUR 2.0 (1.3) million. Earnings per share were EUR 0.03 (0.02) and
return on investment was 7.1% (9.1%).
Scanfil EMS Subgroup
The turnover of contract manufacturing operations amounted to EUR 40.8 (49.6)
million in January-March. Operating profit for the review period was EUR 1.2
(4.1) million, or 3.0% (8.2%) of turnover. The result amounted to EUR 0.7 (1.7)
million, or 1.6% (3.3%) of turnover. The decrease in profitability is mainly due
to the low level of sales in January-February 2010. Problems in the availability
of materials have also had some effect.
Return on investment was 5.0% (13.8%), equity ratio was 43.9% (71.7%) and
gearing 7.9% (-29.9%).
Investment activities
The gains and losses from investment activities carried out by the Group's
parent company, Scanfil plc, are recognised under financial income and expenses
in the income statement. In January-March, recognised interest income and
capital gains amounted to EUR 0.6 (0.6) million and value changes of financial
assets at fair value through profit or loss amounted to EUR 0.6 (-1.3) million,
resulting in a total recorded value of EUR 1.3 (-0.7) million. Change in the
value of strategic investments in January-March 2010, EUR 0.7 million, is
recognised in the fair value reserve under equity.
FINANCING AND CAPITAL EXPENDITURE
The Group enjoys a very strong financial position.
The consolidated balance sheet totalled EUR 190.8 (197.7) million. Liabilities
amounted to EUR 34.8 (56.5) million, EUR 34.8 (44.5) million of which were
non-interest-bearing and EUR 0.0 (12.0) million interest-bearing. The equity
ration was 81.8% (71.4%) and gearing -47.9% (-46.4%).
Financial assets amounted to EUR 74.8 million (77.5 million). EUR 35.7 million
(41.0 million) of financial assets were deposited in bank accounts and as time
deposits with less than three months' maturity. An additional EUR 39.0 million
(36.5 million) were in financial instruments, mainly in bonds, credit linked
notes and structured financial instruments, as well as in ETF and equity
investments; of these, EUR 20.3 million (28.7 million) is totally liquid or will
mature in less than a year. These are secondary market investments. In
compliance with the IFRS, the investments have been recognised at fair value. A
total of EUR 0.6 million in increases in the value of investments was recognised
for January-March 2010.
Cash flow from operations was positive in the accounting period, at EUR 2.3
million (9.9 million). The change in the working capital in the accounting
period was EUR 1.5 million (6.1 million). Cash flow from investments was
EUR -7.2 million (-14.2 million), which consist mainly of the parent company's
investments in financial instruments. The cash flow from financing was EUR
-12.0 million (-0.2 million). The Estonian subsidiary has repaid the loan in EEK
equivalent to EUR 12.0 million. The purpose of the loan was to hedge against a
possible decline in the value of the currency.
Gross investments in fixed assets totalled EUR 0.4 (0.4) million, which is 1.0%
(0.8%) of turnover. Depreciations were EUR 1.3 (1.3) million.
DECISIONS BY THE ANNUAL GENERAL MEETING AND BOARD OF DIRECTORS' AUTHORISATION
Scanfil plc's Annual General Meeting held on 8 April 2010 confirmed the
Financial Statements for 2009 and discharged the Board of Directors and the
President from liability.
According to Board of Directors' proposal The Annual General Meeting decided to
distribute a dividend total of EUR 0.12 per share on the market or a total of
EUR 6.9 million. The record date for the payment of dividend was 13 April 2010
and the date of payment of the dividend was 20 April 2010.
The Meeting resolved that the Board of Directors consists of five members. Jorma
J. Takanen, Asa-Matti Lyytinen, Reijo Pöllä, Jarkko Takanen and Tuomo Lähdesmäki
were re-elected as members of the Board of Directors. In it's meeting, held
after the General Meeting, the Board of Directors elected Jorma J. Takanen as
the Chairman of the Board of Directors and Asa-Matti Lyytinen as Vice Chairman
of the Board of Directors.
The Meeting approved the Board of Directors' proposal to amend the Articles of
Association.
The Meeting decided 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 and to decide on the issuance of shares.
The Board of Directors' proposals to the Annual General Meeting are available on
the company website at www.scanfil.com.
OWN SHARES
On 31 March 2010, the company owned a total of 2,983,831 of its own shares which
represented 4.9% of the company's share capital and votes.
During the review period, the company disposed of 4,522 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 3.14 and the lowest
EUR 2.77, the closing price for the period standing at EUR 3.01. A total of
1,197,827 shares were traded during the period, corresponding to 2.0% of the
total number of shares. The market value of the shares on 31 March 2010 was EUR
182.7 million.
PERSONNEL
Scanfil Group's personnel averaged 2,038 (2,035) employees during the review
period and the company employed 2,056 (2,032) employees at the end of the review
period, of whom 1,570 (1,487) were employed in the company's foreign plants. The
employees of the foreign subsidiaries constituted 76% (73%) of the Group's total
personnel on 31 March 2010.
FUTURE PROSPECTS
Scanfil plc
The company is active in the market, looking for new strategic industrial
investments in its current and new lines of business in order to ensure a good
return on its investments. In the current economic situation, the available
investment assets offer a good opportunity for acquisitions conforming to the
investment strategy, aiming to obtain a stake in select companies that
facilitates active influence on their operations.
The Group will also continue to invest its cash reserves in accordance with its
investment policy.
Scanfil EMS Subgroup
Scanfil expects its turnover in 2010 to slightly increase from the level of
2009. The operating profit for the full year is estimated to reach a
satisfactory level. However, market predictability is still too poor for
trustworthy forecasts on the market development of the contract manufacturing
business.
The Company's good financial standing provides an opportunity to actively seek
various means and arrangements that will place Scanfil's operations back on the
growth track.
OPERATIONAL RISKS AND UNCERTAINTIES
The most significant short-term risks associated with investment activities can
materialise if the global economy recovers at a rate slower than expected and
investment demand decreases further globally. On the other hand, if the recovery
is faster than expected, the resulting increasing inflation expectations and
tightening monetary policy might result in a rapid increase of interest rates
and accelerating inflation. Both alternatives would have immediate impacts on
the stock market and be visible as increasing market volatility. Scanfil plc's
investment strategy has aimed to take both outlooks into account. The portfolio
is also well hedged against increasing inflation. The average duration of the
structured instruments in the investment portfolio is below three years, and
more than 55% of the portfolio consists of investments with a low risk
classification.
The poor demand predictability of contract manufacturing clients continues to
constitute an operational risk in the short term that is hard to estimate. In
spite of the increase in demand towards the end of the review period, no rapid
recovery of the market is in sight, and it is possible that the demand for
investment commodities will not experience any significant positive change in
the course of 2010. Both the Scanfil EMS subgroup and its customers have had
problems with the availability of some components. The low level of investments
and problems with the availability of components might have an impact on the
operations of the Scanfil EMS subgroup and some of its customers, thereby
influencing Scanfil's sales and profitability.
In other respects, the risks facing Scanfil's business have remained essentially
the same. Risks and risk management are described in greater detail on the
company's website under Corporate Governance and in the notes to the
consolidated financial statements.
ACCOUNTING PRINCIPLES
The interim report has been prepared in accordance with the IAS 34 Interim
Financial Reporting standard, applying the following accounting policies with
the financial statements for 2009.
The Group has adopted the revised standard IFRS 3 Business Combinations and the
revised standard IAS 27 Consolidated and Separate Financial Statements as from
the beginning of 2010. They have not had an impact on the interim report.
Individual figures and grand totals of tables have been rounded to the nearest
million euros, so they will not always add up. The figures are unaudited.
CONSOLIDATED INCOME STATEMENT
EUR million
2010 2009 2009
1 - 3 1 - 3 1 - 12
TURNOVER 40.8 49.6 197.3
Changes in inventories of finished
goods and work in progress 0.4 - 0.6 - 4.1
Other operating income 0.3 0.2 1.2
Expenses - 38.8 - 43.7 - 173.4
Depreciation - 1.3 - 1.3 - 5.1
OPERATING PROFIT 1.5 4.2 16.0
Financial income and expenses 1.3 - 1.9 5.1
PROFIT BEFORE TAXES 2.8 2.3 21.1
Income taxes - 0.8 - 1.0 - 6.7
NET PROFIT FOR THE PERIOD 2.0 1.3 14.3
Attributable to:
Equity holders of the parent 2.0 1.3 14.3
Earnings/share (EPS), EUR 0.03 0.02 0.25
The company does not have items that might dilute the earnings per share.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR million
2010 2009 2009
1 - 3 1 - 3 1 - 12
NET PROFIT FOR THE PERIOD 2.0 1.3 14.3
Other comprehensive income
Translation differences 3.0 0.8 - 1.9
Available-for-sale investments 0.5 0.3
Other comprehensive income, net of tax 3.5 0.8 - 1.6
TOTAL COMPREHENSIVE INCOME 5.5 2.1 12.8
Attributable to:
Equity holders of the parent 5.5 2.1 12.8
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
EUR million 31.3. 31.3. 31.12.
2010 2009 2009
ASSETS
Non-current assets
Property, plant and equipment 31.0 32.2 31.1
Goodwill 2.4 2.1 2.4
Other intangible assets 1.1 1.4 1.1
Available-for-sale investments 11.4 0.0 10.6
Financial assets at fair value
through profit or loss 18.8 7.8 14.5
Receivables 0.0 0.2 0.0
Deferred tax assets 0.1 1.3 0.1
Total non-current assets 64.7 45.0 59.9
Current assets
Inventories 27.6 28.7 24.7
Trade and other receivables 37.4 49.6 43.4
Advance payments 0.1 0.1 0.1
Financial assets at fair value
through profit or loss 20.3 17.1 16.1
Available-for-sale investments, liquid assets 0.0 11.7 0.5
Available-for-sale investments,
cash equivalents 17.0 29.9 20.4
Cash and cash equivalents 18.7 11.1 30.8
Total current assets 121.2 148.1 135.9
Non-current assets held for sale 4.9 4.6 4.9
TOTAL ASSETS 190.8 197.7 200.7
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity
Share capital 15.2 15.2 15.2
Share premium account 16.1 16.1 16.1
Treasury shares - 8.9 - 7.6 - 8.9
Translation differences 3.1 2.8 0.1
Other reserves 5.2 4.0 4.7
Retained earnings 125.3 110.7 123.3
Total equity 156.0 141.2 150.5
Non-current assets
Deferred tax liabilities 1.8 1.0 1.5
Provisions 5.3 5.7 5.4
Total non-current liabilities 7.1 6.8 6.9
Current liabilities
Trade and other liabilities 26.9 36.4 30.1
Current tax 0.8 1.3 1.2
Interest bearing liabilities 12.0 12.0
Total current liabilities 27.7 49.7 43.3
Total liabilities 34.8 56.5 50.2
TOTAL SHAREHOLDERS' EQUITY
AND LIABILITIES 190.8 197.7 200.7
CALCULATION OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
EUR million
A = Share capital
B = Share premium account
C = Treasury shares
D = Translation differences
E = Other reserves
F = Retained earnings
G = Equity total
SHAREHOLDER'S EQUITY A B C D E F G
1.1.2010 15.2 16.1 - 8.9 0.1 4.7 123.3 150.5
TOTAL COMPREHENSIVE INCOME 3.0 0.5 2.0 5.5
Distribution of treasury shares 0.0 0.0
SHAREHOLDER' EQUITY
31.3.2010 15.2 16.1 - 8.9 3.1 5.2 125.3 156.0
SHAREHOLDER'S EQUITY A B C D E F G
1.1.2009 15.2 16.1 - 7.4 2.0 3.6 116.9 146.2
TOTAL COMPREHENSIVE INCOME 0.8 1.3 2.1
Payment of dividends - 7.0 - 7.0
Transfer to funds 0.4 - 0.4 0
Distribution of treasury shares 0.0 0.0
Acquisition of treasury shares - 0.1 - 0.1
SHAREHOLDER' EQUITY
31.3.2009 15.2 16.1 - 7.6 2.8 4.0 110.7 141.2
CONSOLIDATED CASH FLOW STATEMENT
EUR million
2010 2009 2009
1 - 3 1 - 3 1 - 12
Cash flow from operating activities
Net profit 2.0 1.3 14.3
Adjustments for the net profit 0.3 3.4 6.0
Change in net working capital 1.5 6.1 16.3
Paid interests and other financial expenses - 0.3 - 0.2 - 0.9
Interests received 0.1 0.3 0.7
Taxes paid - 1.4 - 0.9 - 5.5
Net cash from operating activities 2.3 9.9 30.9
Cash flow from investing activities
Investments in tangible and
intangible assets - 0.4 - 0.4 - 3.4
Sale of tangible and intangible assets 0.0 0.0 0.2
Purchase of investments - 12.5 - 20.6 - 88.3
Proceeds from sale of investments 5.4 6.0 74.1
Interest received from investments 0.3 0.7 1.9
Net cash from investing activities - 7.2 - 14.2 - 15.4
Cash flow from financing activities
Purchase of treasury shares - 0.2 - 1.5
Repayment of short term loans - 12.0
Dividends paid - 7.0
Net cash from financing activities - 12.0 - 0.2 - 8.5
Net decrease in cash and
cash equivalents - 16.9 - 4.5 7.1
Cash and cash equivalents
at beginning of period 51.2 45.1 45.1
Changes in exchange rates 1.4 0.4 - 0.9
Cash and cash equivalents
at end of period 35.7 41.0 51.2
KEY FINANCIAL INDICATORS 2010 2009 2009
1 - 3 1 - 3 1 - 12
Return on equity, % 5.3 3.6 9.7
Return on investment, % 7.1 9.1 13.9
Interest bearing liabilities, EUR million 12.0 12.0
Gearing, % - 47.9 - 46.4 - 46.7
Equity ratio, % 81.8 71.4 75.0
Gross investments in fixed assets, EUR million 0.4 0.4 3.1
% of turnover 1.0 0.8 1.6
Personnel, average 2 038 2 035 2 064
Earnings per share, EUR 0.03 0.02 0.25
Equity per share, EUR 2.70 2.42 2.61
Number of shares at end of
period, 000's 60 714 60 714 60 714
- not counting own shares 57 730 58 377 57 726
- weighted average 57 730 58 408 57 992
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.
SEGMENT INFORMATION
EUR million
2010 2009 2009
1 - 3 1 - 3 1 - 12
TURNOVER
Europe 25.3 33.7 113.5
Asia 16.8 19.0 93.2
Turnover between segments - 1.2 - 3.2 - 9.4
Total 40.8 49.6 197.3
OPERATING PROFIT
Europe 0.1 0.8 2.6
Asia 1.4 3.4 13.4
Total 1.5 4.2 16.0
ASSETS
Europe 68.9 101.2 68.4
Asia 58.9 49.6 60.4
Goodwill 2.4 2.0 2.4
Financial assets 60.6 45.0 69.6
Total 190.8 197.7 200.7
The financial assets of investment activities comprise all of Scanfil plc's
financial assets, strategic investments and all deposits by subsidiaries with a
maturity exceeding three months, classified as investment assets. The result of
investment activities before tax was EUR 1.3 million (EUR -0.7 million in 2009).
CHANGES IN TANGIBLE NON CURRENT ASSETS
EUR million
2010 2009 2009
1 - 3 1 - 3 1 - 12
Book value at the beginning of the period 31.1 33.7 33.7
Additions 0.4 0.4 2.9
Deductions - 0.0 - 0.0 - 0.4
Depreciations - 1.1 - 1.2 - 4.7
Exchange rate differences 0.6 - 0.6 - 0.4
Book value at the end of the period 31.0 32.2 31.1
CONTINGENT LIABILITIES
EUR million 2010 2009 2009
1 - 3 1 - 3 1 - 12
Given real estate mortgages 3.4 3.4 3.4
Given business mortgages 18.8 18.8 18.8
Pledged guarantees 0.1 0.1 0.1
Rental liabilities 0.2 0.4 0.2
Scanfil plc has arranged a EUR 5.2 million bank guarantee to secure the payment
of contributions related to Scanfil NV's restructuring. Scanfil NV's balance
sheet includes a corresponding provision.
KEY INDICATORS QUARTERLY
Q1/10 Q4/09 Q3/09 Q2/09 Q1/09 Q4/08 Q3/08 Q2/08
Turnover, MEUR 40.8 48.1 49.6 49.9 49.6 54.2 56.0 58.7
Operating profit, MEUR 1.5 2.6 4.2 5.0 4.2 4.5 5.2 6.6
Operating profit, % 3.6 5.3 8.5 10.0 8.5 8.3 9.3 11.3
Net income, MEUR 2.0 2.7 3.8 6.6 1.3 2.3 3.5 6.2
EPS, EUR 0.03 0.05 0.06 0.11 0.02 0.04 0.06 0.11
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.
