PKC Group Oyj INTERIM REPORT 3 November 2011 11.15 a.m.
CORRECTION: PKC GROUP’S INTERIM REPORT 1-9/2011
PKC Group Oyj corrects its Interim Report published today at 8.15 am. The operating profit of the Wiring Harness business was stated incorrectly in the report. The operating profit for the July-September period amounts to EUR 7.1 million (EUR 6.8 million) equivalent to 8.4% (11.0%) of the segment's net sales. Previously published report stated the operating profit to be EUR 6.0 million. The operating profit for the January-September period amounts to EUR 26.7 million (EUR 15.8 million) equivalent to 10.6% (9.2%) of the segment's net sales. Previously published report stated the operating profit to be EUR 25.7 million. Enclosed herein is the corrected Interim Report in its entirety.
PKC GROUP’S INTERIM REPORT 1-9/2011
- Consolidated net sales grew 37.5% on the comparison period (1-9/2010), totalling EUR 308.2 million (EUR 224.1 million).
- Consolidated operating profit was EUR 25.7 million (EUR 19.9 million) i.e. 8.3% (8.9%) of net sales. Comparable operating profit without non-recurring items was EUR 29.6 million (EUR 21.6 million), 9.6% (9.6%) of net sales.
- Profit for the report period amounted to EUR 17.6 million (EUR 14.4 million).
- Diluted earnings per share were EUR 0.87 (EUR 0.81).
- Cash flows after investments were EUR 16.7 million negative (EUR 13.9 million).
- Gearing was 109.2% (22.9%).
- Equity ratio was 36.1% (50.2%)
- Net liabilities were EUR 140.0 million (EUR 20.9 million).
- PKC Group announced on 28 February 2011 that it had signed an agreement for the purchase of shares in the Segu companies. The requirements of closing have been fulfilled and the closing became effective on April 30, 2011.
- PKC Group announced on 9 August 2011 that it had signed an agreement for the purchase of shares in the AEES companies. The requirements of closing have been fulfilled and the closing became effective on 1 October 2011. On 30 September, the loan for the payment of preliminary cash purchase price of the AEES acquisition was withdrawn and was transferred as pre-payment to the sellers.
|
KEY FIGURES |
1-9/11 |
1-9/10 |
1-12/10 |
| Net sales, EUR 1,000 | 308,207 | 224,140 | 316,081 |
| Operating profit, EUR 1,000 | 25,711 | 19,913 | 29,689 |
| % of net sales | 8.3 | 8.9 | 9.4 |
| Profit for the report period, EUR 1,000 | 17,582 | 14,411 | 19,683 |
| Earnings per share (EPS), EUR | 0.87 | 0.81 | 1.09 |
| ROI,% | 19.3 | 27.3 | 25.8 |
| Net liabilities, EUR 1,000 | 140,036 | 20,942 | -2,068 |
| Gearing, % | 109.2 | 22.9 | -1.7 |
| Average number of personnel | 7,110 | 5,055 | 5,277 |
HARRI SUUTARI, PRESIDENT AND CEO:
“The manufacture of commercial vehicles, tractors and construction equipment increased during the first nine months of the year in our key market areas in Europe and Brazil in comparison with the same period the previous year,. The production of recreation vehicles also grew in Europe and North America. During the third quarter, the volume of orders received by our truck customers exceeded the volume of deliveries. The profitability of the Wiring Harnesses business fell in comparison with the level at the beginning of the year, as a result of an increase in manufacturing costs and a fall in product sales prices. Production transfers to lower cost factories will be continued according to plan.
The integration of Segu companies, acquired in order to improve the service network in Europe, continues successfully.
The fall in demand for the design and manufacturing services (ODM) of PKC’s Electronics business during the first nine months of the year resulted in a weakening of the whole segment’s turnover and profit in comparison with the previous year. However, profitability clearly improved during the third quarter from the level at the start of the year. We have launched a programme to improve profitability in the Electronics business.
After the end of the reporting period, we acquired the AEES companies, which produce and market wires, cables, components and wiring harnesses in North America, Brazil and Ireland. We have begun carefully prepared integration work in order to achieve synergy benefits. The long-term customers of both companies have been satisfied with the expansion of the service concept. The acquisition created the largest supplier of electrical systems for heavy-duty trucks in the western world. Through the acquisition, PKC also became a significant manufacturer of electrical systems for light vehicles in North America.
During the third quarter, AEES companies' EBITDA without non-recurring items increased to 7.3% from 5.8% of the first half of the year. The purchase of AEES companies is an excellent complement for our business, and offers a good foundation for the development of PKC ownership value in the future.
Non-recurring items in the first nine months amounted to EUR 3.9 million. Costs were mainly caused by the advisory services related to Segu and AEES acquisitions. In the fourth quarter, non-recurring items are forecast to total about EUR 4.0 million, and they will consist of advisory services related to AEES acquisition and rationalisation costs.”
OPERATING ENVIRONMENT
Wiring Harnesses business
The European truck markets strengthened during the report period. The registration of heavy-duty trucks increased in Europe (the EU countries, Switzerland and Norway) by 44% during the first nine months of the year over the comparison period. All in all, about 175,000 heavy-duty trucks were registered during the first nine months of the year. During the third quarter, a total of about 55,000 new heavy-duty trucks were registered. During the third quarter, the number of vehicle orders received by our customers exceeded 3% the number delivered to their customers. Deliveries for the full year are forecast to increase to about 240,000 vehicles. In Europe, the order books of our customers are forecast to be on a level equivalent to 2-3 months’ production. Some of our customers have reported that they will cut production volumes by 10-15% at the end of this year and the beginning of next year. In an uncertain market situation, estimates on the 2012 production volumes in Europe show a fall by about 10% in comparison with 2011. The industry has also released forecasts according to which demand in Europe will remain high next year.
In South America, our key customers’ heavy-duty truck deliveries increased by 20% during early 2011 over the comparison period. During the third quarter, the number of vehicle orders received by our customers exceeded 5% the number delivered to their customers. In 2010, about 110,000 heavy-duty trucks were registered in Brazil. The industry expects the number of registrations over the full year to increase to about 120,000. A change in exhaust gas emission regulations that will enter into force at the turn of the year may cause a temporary drop in sales at the start of 2012. It is believed, however, that as a result of the strong growth in the Brazilian economy, demand will rapidly recover, and the total number of registrations for 2012 is expected to be in the region of 110,000 heavy-duty trucks. Institutos Ilos, the Brazilian research institute for logistics, forecasts that in the coming years the country’s present truck production volume will not be able to satisfy the growing need for trucks. The institute says that the average delivery time for a truck is now about 12 months. Several truck manufacturers have reported significant new investments in the Brazilian truck industry.
The South America light vehicle market sales reached 467,254 units in September 2011, an increase of 8.7% over September 2010. The Brazilian government recently increased the IPI tax by 30 percentage points on cars that are not made with at least 65% local content, excluding those from companies that produce locally or in Mercosul partners, in an attempt to stop the growth in vehicle imports. Even with Brazil’s new tax on some imported vehicles, daily sales increased in September 2011 and reached 13,981 units compared to 13,383 units in August 2011. Year to date 2011 sales in South America are up 10.3% versus year to date 2010. It is anticipated that sales increases will be smaller in the remaining months of 2011 due to stabilisation in the Brazilian market and strong sales in the fourth quarter of 2010 in Brazil. South America sales forecast for full-year 2011 is forecast at 5 – 5.2 million units, an increase of 6.5% over full-year 2010.
Customer deliveries of heavy-duty trucks in North American increased during the first nine months of the year by about 55% over the corresponding period the previous year, to about 163,000 vehicles. Truck manufacturers’ combined order book was about 123,000 heavy-duty trucks at the end of September, which is about 137% more than a year earlier. This corresponds to about 5 months’ production at current production volumes. It is estimated that customer deliveries for the present year will total 210,000 vehicles. For 2012 the total market is expected to grow by about 20%. During the first three quarters of the year, production of heavy-duty trucks increased in North America by 64% over the comparison period. All in all, about 180,709 heavy-duty trucks were produced during the first three quarters of the year. During the third quarter, a total of 68,750 new heavy-duty trucks were produced. Production volumes for the full year are forecast to increase to 240,000 – 260,000 units. For 2012 the total production is expected to grow by about 15%.
North America medium-duty trucks’ markets continued to gain momentum during the report period. During the first three quarters of the year, production of medium-duty trucks increased in North America by 44% over the comparison period. Overall, about 122,609 medium-duty trucks were produced during the first three quarters of the year. Retail sales of medium-duty trucks in North America continue to be strong and have increased 41% over the first three quarters of 2010. At the current level of inventory and sales, the inventory to sales ratio stands at 2.9 months. This represents a 4 month decrease in the inventory to sales ratio when compared to this time last year. Given where the ratio has been the past several years, this reading represents solid progress. Production volumes for the full year are forecast to increase to 160,000 – 170,000 units. For 2012 the total production is expected to grow by about 10%.
North American Light Vehicle sales improved for the fourth consecutive month in September. Overall, September Light Vehicles sales in North America were up 8.7% for the month, following a 7.2% jump realised in August. North America Light Vehicle 2011 year to date sales were up 9.4% to 979,337 units over the comparison period. September’s seasonally adjusted selling rate was 13.2 million units which is the highest since April 2011 and reflects the expectations that pent-up demand, improving inventory levels and an aging fleet of vehicles needing replacement can build momentum even in the face of economic headwinds. North America Light Vehicle sales forecast for the full-year 2011 is forecast at 15.2 -15.7 million units, an increase of 6.5% over full-year 2010.
PKC’s delivery volumes for recreation vehicle wire harnesses increased in the first nine months of the year in North America by 20% over the corresponding period the previous year.
Sales of agricultural tractors in Europe increased during the first nine months of the year by 12% over the comparison period the previous year. Full year sales are forecast to grow by 10-15%. In 2010, about 141,000 agricultural tractors were sold in Europe.
Sales of construction equipment increased during the first eight months of the year by 36% in Europe and by 26% in South America over the comparison period the previous year. Full year sales are forecast to grow by 20-25% in Europe and by 15-20% in South America.
Production volumes of forestry equipment in Europe increased during the first nine months of the year by 35% over the comparison period the previous year.
Electronics business
Demand for the products of PKC’s key industrial electronics customers increased in the first half of the current year, but started to fall during the third quarter in both Europe and China. The weakening was a result of economic uncertainty in Europe and a reduction in wind power investments in China. New regulations introduced in China concerning wind power have temporarily reduced wind power investments.
As a result of a change in product strategy by a customer manufacturing telecommunications equipment, demand for design and contract manufacturing services (ODM) in PKC’s Electronics business fell during the third quarter in comparison with the corresponding previous in previous year, but improved from the weak position of the start of the year.
NET SALES AND FINANCIAL PERFORMANCE
July-September 2011
Consolidated net sales from July-September amounted to EUR 102.0 million (EUR 82.3 million), up 24.0% on the same period a year earlier. Consolidated operating profit totalled EUR 9.0 million (EUR 9.5 million), accounting for 8.8% of net sales (11.5%). During the report period were reported EUR 1.7 million (EUR 1.0 million) in non-recurring items. Depreciation amounted to EUR 3.3 million (EUR 2.7 million). Financial items were EUR 4.4 million negative (EUR 3.9 million). Financial items contain EUR 1.0 million interest expenses and exchange rate loss totalling EUR 3.4 million net. Profit before taxes was EUR 4.6 million (EUR 13.4 million). Profit for the report period totalled EUR 3.7 million (EUR 10.0 million). Diluted earnings per share were EUR 0.19 (EUR 0.56).
Net sales generated by the Wiring Harness business in the report period amounted to EUR 84.3 million (EUR 61.8 million), or 36.4% more than in the comparison period. The segment’s share of the consolidated net sales was 82.6% (75.1%). Wiring Harness business generated an operating profit of EUR 7.1 million (EUR 6.8 million), equivalent to 8.4% of the segment’s net sales (11.0%). During the report period no non-recurring items were recorded. During the comparison period were reported EUR 1.0 million in non-recurring items. The decline of operating profit is primarily due to the price decreases given in conjunction with the renewal of certain customer agreements, the corresponding cost savings of which haven’t been reached in full during the report period. The improvement of operations is continued in order to reach the corresponding cost savings.
Net sales generated by the Electronics business decreased by 13.7% to EUR 17.7 million (EUR 20.5 million). The segment’s share of the consolidated net sales was 17.4% (24.9%). Electronics business generated an operating profit of EUR 1.7 million (EUR 3.3 million), equivalent to 9.8% of the segment’s net sales (15.9%). During the report and comparison period no non-recurring items were recorded. The decline of operating profit is due to decreased demand of design and manufacturing services (ODM) of production and service devices. Decrease in demand was due to change of main customer’s product strategy. Electronics segment’s result was further burdened by costs related to production transfers from Finland to more competitive production facilities.
January-September 2011
Consolidated net sales from January-September amounted to EUR 308.2 million (EUR 224.1 million), up 37.5% on the same period a year earlier. Consolidated operating profit totalled EUR 25.7 million (EUR 19.9 million), accounting for 8.3% of net sales (8.9%). During the report period were reported EUR 3.8 million (EUR 1.6 million) in non-recurring items. Depreciation amounted to EUR 9.3 million (EUR 8.2 million). Financial items were EUR 4.0 million negative (EUR 1.5 million negative). Financial items contain EUR 2.1 million interest expenses, EUR 0.4 million interest income and exchange rate loss totalling EUR 2.3 million net. Profit before taxes was EUR 21.7 million (EUR 18.4 million). Profit for the report period totalled EUR 17.6 million (EUR 14.4 million). Diluted earnings per share were EUR 0.87 (EUR 0.81).
Net sales generated by the Wiring Harness business in the report period amounted to EUR 252.7 million (EUR 171.6 million), or 47.3% more than in the comparison period. The segment’s share of the consolidated net sales was 82.0% (76.6%). Wiring Harness business generated an operating profit of EUR 26.7 million (EUR 15.8 million), equivalent to 10.6% of the segment’s net sales (9.2%). During the report period were reported EUR 0.1 million (EUR 1.6 million) in non-recurring items. The improvement of operating profit is due to increased production volumes and improved cost base.
Net sales generated by the Electronics business increased by 5.7% to EUR 55.5 million (EUR 52.5 million). The segment’s share of the consolidated net sales was 18.0% (23.4%). Electronics business generated an operating profit of EUR 2.6 million (EUR 5.7 million), equivalent to 4.6% of the segment’s net sales (10.8%). During the report period were reported EUR 0.2 million in non-recurring expenses. During the comparison period no non-recurring items were recorded. The decline of operating profit is due to decreased demand of design and manufacturing services (ODM) of production and service devices. Decrease in demand was due to change of main customer’s product strategy. Electronics segment’s result was further burdened by costs related to production transfers from Finland to more competitive production facilities.
FINANCIAL POSITION AND CASH FLOW
At the end of the report period, a reorganisation of loans was started as a part of the long term credit facility agreement related to AEES acquisition. Agreement replaces the previous financing and credit facilities. On 30 September, withdrawal of part of the loan for the payment of preliminary cash was made and transferred as pre-payment to the sellers. Pre-payment of the AEES shares has been recorded to current receivables. Ownership and control of the AEES companies transferred to PKC on Saturday on 1 October 2011, when payment of the purchase price wouldn’t have been possible.
Consolidated total assets at 30 September 2011 amounted to EUR 355.0 million (EUR 182.4 million). Interest-bearing liabilities totalled EUR 157.9 million at the close of the report period (EUR 36.9 million). The Group’s equity ratio was 36.1% (50.2%). Net liabilities totalled EUR 140.0 million (EUR 20.9 million) and the gearing was 109.2% (22.9%).
Inventories amounted to EUR 73.0 million (EUR 51.5 million). Current receivables totalled EUR 188.6 million (EUR 52.2 million). Cash flows after investments during the report period were EUR 16.7 million negative (EUR 13.9 million). Cash and cash equivalents amounted to EUR 17.9 million (EUR 15.9 million).
CAPITAL EXPENDITURE
During the report period, the Group’s gross capital expenditure totalled EUR 21.4 million (EUR 4.7 million), representing 7.0% of net sales (2.1%). The capital expenditure consisted, in addition to the acquisition of Segu companies, mostly of acquisition of production machinery and equipment. At the end of the report period, an amount corresponding to the cash purchase price of the AEES acquisition was transferred to the sellers as pre-payment. Ownership and control of the AEES companies transferred to PKC on 1 October 2011.
RESEARCH & DEVELOPMENT
Research and development costs totalled EUR 4.8 million (EUR 4.1 million), representing 1.6% (1.8%) of the consolidated net sales. At the end of the report period, 133 (116) people worked in product development.
PERSONNEL
During the report period, the Group had an average payroll of 7,110 employees (5,055). At the end of the report period, the Group’s personnel numbered 7,937 employees (5,701), of whom 7,549 (5,198) worked abroad and 388 (503) in Finland. In addition the Group had at the end of the report period 681 rented employees.
After the report period as a result of the co-determination negotiations concluded in October, it was decided to lay off a total of 77 persons from PKC Electronics Oy. Rationalisation measures lead to approximately EUR 1.1 million in non-recurring expenses for the last quarter on this year.
QUALITY AND THE ENVIRONMENT
All of the Group’s factories are certified in accordance with requirements of the ISO/TS16949 quality standard for the automotive industry. In addition all of the Group’s factories, except factories in Sosnowiec (Poland) and Mukachevo (Ukraine) are certified in accordance with the ISO9001 quality standard and with the ISO14001 environmental standard. Production unit in Curitiba (Brazil) has also certification in accordance with the OHSAS18001 occupational health and safety management system standard.
The Sosnowiec and Mukachevo factories have started to build a system in accordance with ISO14001 environmental standard with the aim to certify it in the first quarter of 2012. Occupational health and safety management system in accordance with OHSAS18001 standard will be implemented to all Electronics units during the first quarter of 2012.
MANAGEMENT
The Annual General Meeting held on 30 March 2011, re-elected Matti Hyytiäinen, Outi Lampela, Endel Palla, Olli Pohjanvirta, Matti Ruotsala and Jyrki Tähtinen as Board members. In the Board’s organisation meeting, Matti Ruotsala was elected as Chairman of the Board with Jyrki Tähtinen as Vice-Chairman.
Outi Lampela was elected as chairman of the Audit Committee with Matti Hyytiäinen and Olli Pohjanvirta as its members. The Board of Directors also elected Matti Ruotsala as chairman of the Nomination Committee and Endel Palla and Jyrki Tähtinen as members.
Authorised public accounting firm KPMG Oy Ab, which has announced Virpi Halonen, APA, to be the Auditor with principal responsibility, was selected as auditor.
The Group’s Executive Board consists of the following persons: Harri Suutari, Chairman (President and CEO); Harri Ojala (President, Wiring Harnesses); Jarmo Rajala (President, Electronics); Sanna Raatikainen (General Counsel); Marja Sarajärvi (CFO); and Jarkko Kariniemi (Director, HR and Risk Management).
The Board of Directors of PKC Group Oyj has after the report period appointed Mr. Matti Hyytiäinen (b. 1960), M.Sc. Economics, new President and CEO of PKC Group Oyj as of the date of the next AGM, currently estimated to take place on 4 April 2012. Matti Hyytiäinen will follow Harri Suutari, who will continue as President and CEO until Hyytiäinen takes over the position.
Following the proposal of the nomination committee, the Board of Directors has decided to propose to the next Annual General Meeting that Harri Suutari be elected to Board of Directors.
DIVIDEND FOR 2010
The annual general meeting held on 30 March 2011 resolved to pay a dividend of EUR 0.55 per share: i.e. a total of EUR 10.9 million. The dividend was paid out on 11 April 2011.
SHARE TURNOVER AND SHAREHOLDERS
PKC Group Oyj’s share turnover on NASDAQ OMX Helsinki Ltd from 1 January to 30 September 2011 was 9,320,886 shares (8,025,407 shares), representing 47.1% of the average number of shares (45.1%). Shares were traded to a total value of EUR 130.1 million (EUR 79.7 million). The lowest share value during the report period was EUR 8.60 (EUR 6.55) and the highest EUR 18.36 (EUR 12.43). The closing price on the last trading day of the report period was EUR 10.38 (EUR 11.29) and the average price during the period was EUR 14.00 (EUR 9.98). The company’s market capitalisation at 30 September 2011 was EUR 206.6 million (EUR 200.8 million).
Flaggins
The share of votes and share capital in PKC Group Oyj held by Ilmarinen Mutual Pension Insurance Company (0107638-1) exceeded the limit of 10% on 30 August 2011. Following the transaction Ilmarinen Mutual Pension Insurance Company owned 2,017,955 PKC Group Oyj shares i.e. 10.14% of the shares and votes.
The shares held by Board members, their closely associated persons and corporations in which they have a controlling interest accounted for 0.7% (0.8%) of the total number of shares at the end of the report period. PKC Group Oyj had a total of 9,016 shareholders (6,820) at the end of the report period. The shares held by foreigners and through nominee registrations at the close of the report period totalled 24.5% of the share capital (16.1%).
SHARES AND SHARE CAPITAL
PKC Group Oyj’s shares and share capital has changed during the third quarter as follows:
- A total of 1,414 PKC Group Oyj’s shares have been subscribed for with 2006 options (950 with 2006B options and 464 with 2006C options). The new shares and the corresponding increase in the share capital, EUR 480.76, have been entered into the Trade Register on 30 August 2011. The new shares were traded on the main list of the NASDAQ OMX Helsinki Ltd together with the old shares as of 31 August 2011. After the increase the Company’s registered share capital is EUR 6,103,061.52, divided into 19,905,856 shares.
- PKC Group Oyj’s Board of Directors has, on the basis of the authorisation granted by the shareholders’ meeting on 30 March 2011, resolved on a directed share issue without payment of 1,250,000 new shares to company’s wholly owned subsidiary PKC Group USA Inc for the payment of purchase price for the shares in the AEES-companies. After the increase the Company’s registered share capital is EUR 6,103,061.52, divided into 21,155,856 shares. The new shares will be listed on the main list of the NASDAQ OMX Helsinki Ltd together with the old shares within 180 days after the closing date of AEES acquisition. The shares were held by the Group on 30 September 2011.
THE BOARD'S AUTHORISATIONS
Authorisation to the Board of Directors to decide on share issue
The Board of Directors was granted authorisation by the Annual General Meeting on 30 March 2011 to decide on share issue and granting of special rights defined in Chapter 10, Section 1 of the Companies Act and all the terms and conditions thereof. A maximum total of 6,000,000 shares may be issued or subscribed for on the basis of authorisation. The authorisation includes the right to decide on directed share issue. The authorisation is in force for five years from the date of the General Meeting's decision. At Board of Directors' discretion the authorisation may be used e.g. in financing possible corporate acquisitions, inter-company co-operation or similar arrangement, or strengthening company's financial or capital structure etc. PKC Group Oyj’s Board of Directors has, on the basis of the authorisation granted by the shareholders’ meeting on 30 March 2011, resolved on a directed share issue without payment of 1,250,000 new shares to company’s wholly owned subsidiary PKC Group USA Inc for the payment of the purchase price for the shares in the AEES-companies. After this share issue, a maximum total of 4,750,000 shares may be issued or subscribed for on the basis of authorisation.
The Board of Directors does not possess a valid authorisation to acquire company’s own shares, and the company does not have any own shares (treasury shares) in its possession with the exception of the 1,250,000 shares held for the payment of the purchase price for the shares in the AEES companies and which were transferred to the sellers 1 October 2011.
Donations to good causes
The Annual General Meeting granted on 30 March 2011 to the Board of Directors an authorisation to decide on a donation of no more than EUR 150,000 to Finnish universities either directly by the company or through its subsidiaries. According to the decision of the Board of Directors PKC Electronics Oy donated EUR 100,000 to the University of Oulu and EUR 50,000 to the University of Vaasa
STOCK OPTION SCHEMES
2006 options
The stock option scheme initiated in 2006, comprises a total of 697,500 options divided into A, B and C warrants. At the close of report period, the outstanding options and options held by key personnel totals 129,930 2006B warrants and 209,386 2006C warrants.
The share subscription price for the 2006 stock options is the volume-weighted average price of the PKC Group Oyj share on NASDAQ OMX Helsinki, with dividend adjustments, as defined in the stock option terms (at present, EUR 9.54 for the 2006B and 2006C warrants). Through the exercise of the 2006 stock options, the share capital of PKC Group Oyj may be increased by a maximum total of 697,500 new shares and EUR 237,150. After the registration of subscription to be made on 12 May 2011, the Company’s share capital can increase by a maximum of 340,966 shares i.e. EUR 115,928.44 as a result of the exercise of the remaining outstanding option rights. The share subscription period is for 2006B warrants 1 April 2010 – 30 April 2012, and for 2006C warrants 1 April 2011 – 30 April 2013. The 2006 stock options are subject to a share ownership plan. Key personnel are obliged to subscribe for or purchase the company’s shares with 20% of the gross income earned from stock options and to own these shares for two years. The company’s President and CEO is obliged to own these shares for the duration of his managerial contract.
The share subscription period for 2006A warrants has ended 30 April 2011. During the share subscription period a total 200,300 shares were subscribed and 2,200 warrants remained unused.
2009 options
The Annual General Meeting held on 27 March 2009 decided to issue stock options to key personnel in the company and its subsidiaries. The maximum total number of stock options issued is 600,000 and they are divided into A, B and C warrants. At the close of the report period, the outstanding options and options held by key personnel totals 195,500 2009A and 190,000 2009B warrants. In addition, a decision to grant 140,000 2009C warrants has been made.
The subscription price for shares through the exercise of the 2009 stock options is the volume-weighted average price of the PKC Group Oyj share on NASDAQ OMX Helsinki for April 2009, 2010 and 2011 + 20% with dividend adjustments, (at present, EUR 2.90 for the 2009A warrants, EUR 12,71 for the 2009B warrants and EUR 18.58 for the 2009C warrants). The subscription price for shares will be recorded in the invested non-restricted equity fund. The stock options entitle their owners to subscribe for a maximum total of 600,000 new shares in the company or existing shares held by the company. The share subscription period for 2009A warrants is 1 April 2012 — 30 April 2014, for 2009B warrants 1 April 2013 — 30 April 2015 and for 2009C warrants 1 April 2014 — 30 April 2016. The 2009 stock options are subject to a share ownership plan. Key personnel are obliged to subscribe for or purchase the company’s shares with 20% of the gross income earned from stock options and to own these shares for two years. The company’s President and CEO is obliged to own these shares for the duration of his managerial contract.
BUSINESS COMBINATIONS
PKC Group announced on 28 February 2011 that it had signed an agreement to purchase 100% of the shares in SEGU companies. Under the share purchase agreement, PKC Group’s subsidiaries shall purchase all shares in SEGU Systemelektrik GmbH (Germany), SEGU Polska Sp. z o.o. (Poland) and TZOV HBM Kabel Corp (Ukraine). The closing of the acquisition was subject to fulfillment of customary terms including Ukrainian competition authority approval. The requirements of closing have been fulfilled and PKC gained control of the acquired companies on April 30, 2011, which is also the day of consolidation. SEGU companies and PKC’s Polish unit will form a business unit servicing the Central European markets with annual sales of about hundred million and about 2,800 employees. In addition to access to interesting new OEMs, the acquisition of SEGU companies will bring a strategically important footprint in Germany as well as benefit of scale and increased credibility for PKC.
EVENTS AFTER THE REPORT PERIOD
Purchase of AEES companies
PKC Group has on 9 August 2011 signed an agreement for the purchase of AEES companies from funds controlled by Platinum Equity. AEES is one of the leading North American wiring harness manufacturers for heavy and medium duty trucks and it also has a significant position in light vehicle wiring harnesses. In addition, AEES provides components and wires to other contract manufacturers. AEES’ largest customer accounts within the truck industry are e.g. Daimler Trucks North America, Navistar and PACCAR. Major light vehicle customers include i.a. Continental, Ford, General Motors, Harley Davidson and Lear. In 2010, AEES generated net sales of EUR 454.0 million. AEES has operations in USA, Mexico, Brazil and Ireland and had about 14,248 employees at the end of September 2011. The closing became effective and ownership and control were transferred on 1 October 2011.
The key combined financials of AEES for fiscal year 1-12/2010 (audited) and interim period 1-9/2011 (unaudited) were (based on US GAAP):
| EUR Million | 7-9/2011 | 1-9/2011 | 1-12/2010 | |
| 3 mon. | 9 mon. | 12 mon. | ||
| Profit and loss | ||||
| Net Sales | 131.9 | 397.6 | 454.0 | |
| EBITDA (excl. rationalisation and advisor fees) | 9.6 | 23.0 | 14.7 | |
| EBITDA | 2.9 | 8.0 | -4.8 | |
| Balance Sheet | ||||
| Fixed Assets | 25.6 | 25.6 | 25.7 | |
| Net Working Capital | 48.5 | 48.5 | 37.4 | |
The share of votes and share capital in PKC Group Oyj held by PEA Escrow, LLC (X00832908), an entity controlled by Platinum Equity Advisors, LLC, exceeded the limit of 5% on 1 October 2011 after the closing of the agreement between PKC Wiring Systems Oy and PKC Group USA Inc. (as buyers) and PKC Group Oyj (as guarantor) and the funds controlled by Platinum Equity (as sellers) signed on 9 August 2011 for the purchase of AEES-companies. As part of the purchase price payable for the shares in the AEES-companies, PEA Escrow received on behalf of the funds controlled by Platinum Equity 1,250,000 PKC Group Oyj’s shares corresponding to 5.9% of shares and votes. The shares will be listed on the main list of the NASDAQ OMX Helsinki Ltd together with the old shares within 180 days after the closing. Until the shares are listed they are subject to lock-up.
SHORT-TERM RISKS AND UNCERTAINTIES
The public deficit and high indebtedness of many European countries and the United States may weaken economic growth and availability of financing for investment goods and increase uncertainty in the markets.
A potential weakening of the euro against the Polish zloty and the Russian rouble as well as the potential weakening of the USD against the Mexican peso may increase PKC’s processing costs.
The principles, objectives and organisation of the company’s risk management as well as key risk areas are described in the risk management section of the Corporate Governance guidelines, which are available on the company's website at www.pkcgroup.com.
OUTLOOK FOR THE FUTURE
During the first nine months of the year, the customers of PKC’s Wiring Harnesses segment received more new orders than during the comparison period and, therefore, PKC expects that the net sales of the Wiring Harnesses business will grow organically in comparison with the previous year. In addition, the acquired Segu and AEES companies will increase the net sales of the Wiring Harnesses business in comparison with the previous year.
During the first nine months of the year, sales of PKC’s industrial electronics customers (EMS services) increased over the level of previous year’s comparison period. During the first nine months of the year, demand for PKC’s electronics design and manufacturing services (ODM services) has been lower than in the comparison period in 2010. PKC expects that the net sales of the Electronics business will grow in comparison with the previous year.
PKC expects that its net sales and comparable operating profit in 2011 will be greater than the level in 2010. Net sales in 2010 amounted to EUR 316.1 million and operating profit without non-recurring items was EUR 31.5 million.
The text section of this release focuses on the interim report. Comparisons in accordance with IFRS standards have been made to the figures of the corresponding period in 2010, unless otherwise mentioned. The figures presented in the tables are independently rounded figures.
TABLES
The quarterly figures have not been audited. This interim report has been prepared in accordance with IAS 34 (Interim Financial Reporting) standard. The interim report has been prepared in accordance with the same principles as the annual financial statements for 2010. The year 2011 IFRS standard changes have not had any effect.
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR 1,000) | 7-9/11 3 mon. | 7-9/10 3 mon. | 1-9/11 6 mon. | 1-9/10 6 mon. | 1-12/10 12 mon. |
| NET SALES | 102,014 | 82,301 | 308,207 | 224,140 | 316,081 |
| Other operating income | 846 | 1,832 | 3,258 | 3,458 | 4,597 |
| Increase (+) / decrease (-) in stocks of finished goods and work in progress | -568 | 2,096 | 539 | 2,344 | 5,983 |
| Production for own use | 51 | 0 | 125 | 0 | 0 |
| Materials and services | 59,589 | 51,159 | 187,268 | 134,250 | 190,940 |
| Employee benefit expenses | 19,573 | 16,088 | 59,947 | 47,232 | 66,442 |
| Depreciation | 3,261 | 2,741 | 9,317 | 8,201 | 10,684 |
| Other operating expenses | 10,953 | 6,743 | 29,885 | 20,347 | 28,906 |
| OPERATING PROFIT | 8,967 | 9,498 | 25,711 | 19,913 | 29,689 |
| Interest expenses | -986 | -403 | -2,115 | -1,222 | -1,964 |
| Other financial income | 7 | 49 | 413 | 91 | 132 |
| Other financial expenses | -3,383 | 4,220 | -2,329 | -392 | -2,829 |
| PROFIT BEFORE TAXES | 4,605 | 13,365 | 21,681 | 18,390 | 25,029 |
| Income tax | -876 | -3,392 | -4,098 | -3,979 | -5,346 |
| PROFIT FOR THE REPORT PERIOD | 3,728 | 9,973 | 17,582 | 14,410 | 19,683 |
| Other comprehensive income: | |||||
| Foreign currency translation differences - foreign operations | -3,091 | -6,571 | -6,420 | 5,258 | 10,499 |
| Total comprehensive income for the period | 638 | 3,402 | 11,163 | 19,669 | 30,182 |
| Attributable to equity holders of the parent company: | |||||
| Basic earnings per share (EPS), EUR | 0.19 | 0.56 | 0.89 | 0.81 | 1.09 |
| Diluted earnings per share (EPS), EUR | 0.19 | 0.56 | 0.87 | 0.81 | 1.09 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR 1,000) | 9/11 | 9/10 | 12/10 |
| ASSETS | |||
| NON-CURRENT ASSETS | |||
| Goodwill | 13,704 | 15,396 | 15,662 |
| Other intangible assets | 9,916 | 9,894 | 9,196 |
| Property, plant and equipment | 46,595 | 34,562 | 36,232 |
| Deferred tax assets | 5,214 | 2,965 | 4,794 |
| Other receivables | 28 | 54 | 38 |
| Total non-current assets | 75,458 | 62,871 | 65,923 |
| CURRENT ASSETS | |||
| Inventories | 73,034 | 51,448 | 58,127 |
| Receivables | |||
| Trade receivables | 56,637 | 42,411 | 45,797 |
| Other receivables | 131,950 | 9,801 | 12,005 |
| Total receivables | 188,586 | 52,212 | 57,803 |
| Cash and cash equivalents | 17,893 | 15,909 | 37,104 |
| Total current assets | 279,514 | 119,568 | 153,034 |
| Total assets | 354,971 | 182,440 | 218,956 |
| EQUITY AND LIABILITIES | |||
| EQUITY | |||
| Share capital | 6,103 | 5,983 | 5,983 |
| Share premium account | 8,242 | 4,846 | 4,850 |
| Invested non-restricted equity fund | 22,010 | 166 | 21,852 |
| Translation reserve | 697 | -315 | 958 |
| Share-based payments | 2,156 | 1,499 | 1,663 |
| Retained earnings | 71,405 | 64,933 | 68,789 |
| Profit for the report period | 17,582 | 14,411 | 19,683 |
| Total equity | 128,197 | 91,522 | 123,776 |
| LIABILITIES | |||
| Non-current liabilities | |||
| Interest-bearing liabilities | 141,445 | 28,339 | 26,097 |
| Non-interest-bearing liabilities | |||
| Provisions | 899 | 444 | 472 |
| Deferred tax liabilities | 6,598 | 2,769 | 4,804 |
| Total non-current liabilities | 148,942 | 31,551 | 31,373 |
| Current liabilities | |||
| Interest-bearing liabilities | 16,484 | 8,512 | 8,939 |
| Trade payables | 31,626 | 31,631 | 33,291 |
| Other non-interest-bearing liabilities | 29,723 | 19,223 | 21,577 |
| Total current liabilities | 77,833 | 59,366 | 63,807 |
| Total liabilities | 226,775 | 90,917 | 95,180 |
| TOTAL EQUITY AND LIABILITIES | 354,971 | 182,440 | 218,956 |
| CONSOLIDATED STATEMENT OF CASH FLOWS (EUR 1,000) | 1-9/11 6 mon. | 1-9/10 6 mon. | 1-12/10 12 mon. |
| Cash flows from operating activities | |||
| Cash receipts from customers | 301,898 | 218,716 | 305,662 |
| Cash receipts from other operating activities | 3,493 | 2,225 | 4,625 |
| Cash paid to suppliers and employees | -295,886 | -199,990 | -284,392 |
| Cash flows from operations before financial income and expenses and taxes | 9,506 | 20,952 | 25,895 |
| Interest paid | -2,103 | -1,113 | -1,915 |
| Translation difference | -1,393 | 1,144 | 857 |
| Interest received and other financial income | 629 | 0 | 342 |
| Income taxes paid | -2,270 | -3,052 | -2,244 |
| Net cash from operating activities (A) | 4,369 | 17,930 | 22,935 |
| Cash flows from investing activities | |||
| Acquisition of property and equipment and intangible assets | -7,825 | -4,692 | -8,542 |
| Proceeds from sale of property and equipment and intangible assets | 445 | 632 | 466 |
| Acquisitions of subsidiaries | -13,224 | 0 | 0 |
| Loans granted | -512 | -1 | -1 |
| Proceeds from repayments of loans | 16 | 1 | 17 |
| Dividends received | 0 | 1 | 0 |
| Net cash used in investment activities (B) | -21,100 | -4,059 | -8,060 |
| Cash flows after investments | -16,732 | 13,872 | 14,875 |
| Prepayment of subsidiary shares | -112,318 | 0 | 0 |
| Cash flows from financing activities | |||
| Drawing of credits and use of financing and credit facilities | 138,705 | 0 | 0 |
| Share issue | 3,513 | 0 | 21,708 |
| Repayment of short-term/long-term borrowings | -21,183 | -6,872 | -8,697 |
| Dividends paid | -10,891 | -7,113 | -7,113 |
| Net cash used in financing activities (C) | -2,173 | -13,984 | 5,898 |
| Net increase (+) or decrease (-) in cash and equivalents (A+B+C) | -18,904 | -113 | 20,774 |
| Cash and cash equivalents in the beginning of the period | 37,104 | 15,378 | 15,326 |
| Effect of exchange rate fluctuations | -179 | 644 | 1,004 |
| Cash and cash equivalents in the end of the period | 17,893 | 15,909 | 37,104 |
| KEY FINANCIAL INDICATORS | 1-9/11 6 mon. | 1-9/10 6 mon. | 1-12/10 12 mon. |
| Net sales, EUR 1,000 | 308,207 | 224,140 | 316,081 |
| Operating profit, EUR 1,000 | 25,711 | 19,913 | 29,689 |
| % of net sales | 8.3 | 8.9 | 9.4 |
| Profit before taxes, EUR 1,000 | 21,681 | 18,390 | 25,029 |
| % of net sales | 7.0 | 8.2 | 7.9 |
| Net profit for the period, EUR 1,000 | 17,582 | 14,411 | 19,683 |
| % of net sales | 5.7 | 6.4 | 6.2 |
| Return on equity (ROE), % | 18.6 | 22.6 | 19.4 |
| Return on investments (ROI), % | 19.3 | 27.3 | 25.8 |
| Net liabilities, EUR 1,000 | 140,036 | 20,942 | -2,068 |
| Gearing, % | 109.2 | 22.9 | -1.7 |
| Equity ratio, % | 36.1 | 50.2 | 56.5 |
| Current ratio | 3.6 | 2.0 | 2.4 |
| Gross capital expenditure, EUR 1,000 | 21,443 | 4,703 | 8,575 |
| % of net sales | 7.0 | 2.1 | 2.7 |
| R&D expenditures, EUR 1,000 | 4,813 | 4,103 | 5,692 |
| % of net sales | 1.6 | 1.8 | 1.8 |
| Personnel average | 7,110 | 5,055 | 5,277 |
| PER-SHARE KEY INDICATORS | 1-9/11 6 mon. | 1-9/10 6 mon. | 1-12/10 12 mon. |
| Earnings per share (EPS), EUR | 0.89 | 0.81 | 1.09 |
| Earnings per share (EPS),diluted, EUR | 0.87 | 0.81 | 1.09 |
| Equity per share, EUR | 6.44 | 5.15 | 6.33 |
| Share price at close of period, EUR | 10.38 | 11.29 | 15.40 |
| Lowest share price, EUR | 8.60 | 6.55 | 6.55 |
| Highest share price, EUR | 18.36 | 12.43 | 15.58 |
| Average share price, EUR | 14.00 | 9.98 | 10.72 |
| Turnover in shares, 1,000 shares | 9,321 | 8,025 | 10,173 |
| Turnover in shares per (share issue adjusted) share capital, % | 47.1 | 45.1 | 56.5 |
| Average number of shares, 1,000 shares | 19,786 | 17,782 | 17,990 |
| Average number of shares, diluted, 1,000 shares | 20,132 | 17,883 | 18,054 |
| Shares at end of period, 1,000 shares | 19,906 | 17,782 | 19,552 |
| Shares held by the Group at the end of period, 1,000 shares | 1,250 | 0 | 0 |
| Market capitalisation, EUR 1,000 | 206,623 | 200,753 | 301,100 |
| 1. SEGMENT INFORMATION | ||||
| 1.1.-30.9.2011 (EUR 1,000) | Wiring Harness | Electronics | Unallocated amounts and eliminations | Group Total |
| Sales to external customers | 252,678 | 55,529 | 0 | 308,207 |
| Sales to other segments | 553 | 101 | -654 | 0 |
| Net sales | 253,230 | 55,630 | 0 | 308,207 |
| Operating profit before non-recurring items | 26,816 | 2,724 | 14 | 29,554 |
| % of net sales | 10.6 | 4.9 | 9.6 | |
| Donations to the universities | 0 | 150 | 0 | 150 |
| Advisor fees | 410 | 0 | 3,600 | 4,010 |
| Cancellation of the write-down of inventories | -317 | 0 | 0 | -317 |
| Total non-recurring other operating items | 93 | 150 | 3,600 | 3,843 |
| Operating profit | 26,723 | 2,574 | -3,586 | 25,711 |
| % of net sales | 10.6 | 4.6 | 0 | 8.3 |
| Segment's assets | 199,973 | 49,745 | 0 | 249,718 |
| Unallocated assets *) | 3,605 | 754 | 100,894 | 105,253 |
| Total assets | 203,578 | 50,499 | 100,894 | 354,971 |
| *) Segment's assets do not include deferred taxes | ||||
| 1.1.-30.9.2010 (EUR 1,000) | Wiring Harness | Electronics | Unallocated amounts and eliminations | Group Total |
| Sales to external customers | 171,593 | 52,547 | 0 | 224,140 |
| Sales to other segments | 806 | 185 | -990 | 0 |
| Net sales | 172,399 | 52,732 | -990 | 224,140 |
| Operating profit before non-recurring expenses | 17,409 | 5,671 | -1,521 | 21,559 |
| % of net sales | 10.1 | 10.8 | 0 | 9.6 |
| Non-recurring employee benefit expenses | 1,210 | 0 | 0 | 1,210 |
| Non-recurring write-down of inventories | 436 | 0 | 0 | 436 |
| Total non-recurring expenses | 1,646 | 0 | 0 | 1,646 |
| Operating profit | 15,763 | 5,671 | -1,521 | 19,913 |
| % of net sales | 9.2 | 10.8 | 0 | 8.9 |
| Segment's assets | 118,532 | 52,598 | 8,343 | 179,474 |
| Unallocated assets *) | 0 | 0 | 2,965 | 2,965 |
| Total assets | 118,532 | 52,598 | 11,309 | 182,440 |
| *) Segment's assets do not include deferred taxes | ||||
| 1.1.-31.12.2010 (EUR 1,000) | Wiring Harness | Electronics | Unallocated amounts and eliminations | Group Total |
| Sales to external customers | 242,384 | 73,697 | 0 | 316,081 |
| Sales to other segments | 411 | 243 | -654 | 0 |
| Net sales | 242,795 | 73,940 | -654 | 316,081 |
| Operating profit before non-recurring expenses | 26,260 | 7,691 | -2,452 | 31,499 |
| % of net sales | 10.8 | 10.4 | 0 | 10.0 |
| Non-recurring employee benefit expenses | 1,363 | 0 | 0 | 1,363 |
| Non-recurring other operating expenses | 447 | 0 | 0 | 447 |
| Total non-recurring expenses | 1,810 | 0 | 0 | 1,810 |
| Operating profit | 24,450 | 7,691 | -2,452 | 29,689 |
| % of net sales | 10.1 | 10.4 | 0 | 9.4 |
| Segment's assets | 151,634 | 52,348 | 10,181 | 214,162 |
| Unallocated assets *) | 0 | 0 | 4,794 | 4,794 |
| Total assets | 151,634 | 52,348 | 14,975 | 218,956 |
| *) Segment's assets do not include deferred taxes | ||||
| NET SALES BY GEOGRAPHICAL LOCATIONS (EUR 1,000) | 7-9/11 3 mon. | 7-9/10 3 mon. | 1-9/11 6 mon. | 1-9/10 6 mon. | 1-12/10 12 mon. |
| Finland | 14,731 | 14,220 | 46,837 | 38,208 | 53,720 |
| Other Europe | 58,639 | 43,683 | 176,254 | 111,402 | 154,588 |
| North America | 6,068 | 5,756 | 19,351 | 16,560 | 20,732 |
| South America | 17,590 | 15,960 | 50,701 | 42,550 | 56,958 |
| Other countries | 4,986 | 2,682 | 15,063 | 15,420 | 30,083 |
| Total | 102,014 | 82,301 | 308,207 | 224,140 | 316,081 |
| 2. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR MILLION) | ||||||
| A = Share Capital | ||||||
| B = Share premium account | ||||||
| C = Invested non-restricted equity fund | ||||||
| D = Translation difference | ||||||
| E = Retained earnings | ||||||
| F = Total equity | ||||||
| A | B | C | D | E | F | |
| Equity at 1.1.2010 | 6.0 | 4.9 | 0.4 | -2.9 | 70.3 | 78.6 |
| Dividends | 0.0 | 0.0 | 0.0 | 0.0 | -7.1 | -7.1 |
| Share-based payments | 0.0 | 0.0 | 0.0 | 0.0 | 0.4 | 0.4 |
| Comprehensive income for the period | 0.0 | 0.0 | 0.0 | 5.3 | 14.4 | 19.7 |
| Other changes | 0.0 | 0.0 | -0.2 | 0.0 | 0.0 | -0.2 |
| Equity at 30.9.2010 | 6.0 | 4.9 | 0.2 | 2.4 | 78.0 | 91.5 |
| Equity at 1.1.2011 | 6.0 | 4.9 | 21.8 | 7.6 | 83.5 | 123.7 |
| Dividends | 0.0 | 0.0 | 0.0 | 0.0 | -10.7 | -10.7 |
| Share-based payments | 0.0 | 0.0 | 0.0 | 0.5 | 0.0 | 0.5 |
| Subscription of shares | 0.2 | 3.3 | 0.0 | 0.0 | 0.0 | 3.5 |
| Comprehensive income for the period | 0.0 | 0.0 | 0.0 | -6.4 | 17.6 | 11.2 |
| Other changes | 0.0 | 0.0 | 0.2 | -0.3 | 0.0 | -0.1 |
| Equity 30.9.2011 | 6.2 | 8.2 | 22.0 | 1.4 | 90.4 | 128.2 |
3. BUSINESS COMBINATIONS
Segu
PKC Group signed on 28 February 2011 an agreement for the purchase of shares in the Segu companies. The ownership and control have been transferred to PKC Group on 30 April 2011, which is also the date of consolidation.
The acquisition cost is calculated on the basis of the Segu companies’ preliminary balance sheet as per 30 April 2010 prepared, essentially, in accordance with IFRS and the PKC Group's accounting principles.
The preliminary goodwill of EUR 0.1 million arising from the acquisition is mainly attributable to the acquired workforce and economies of scale and synergies expected from combining the operations of Segu and PKC Group. None of the goodwill recognized for the Segu companies is tax deductible.
The following table summarizes the consideration paid for Segu companies and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date. The below mentioned acquisition consideration and the fair values at 30 September 2011 are preliminary as the finalisation of the acquisition cost calculation is still on-going.
| Consideration at 30 April 2011 (EUR million) | |
| Cash | 13.7 |
| Total consideration transferred | 13.7 |
| Consideration paid in cash | 13,7 |
| Acquired cash and cash equivalents | -0,5 |
| Cash flow effect | 13,2 |
| The assets and liabilities arising from the acquisition are as follows | |
| (EUR million) | |
| Property, plant and equipment | 12.0 |
| Intangible assets | 2.8 |
| Inventories | 8.0 |
| Trade and other receivables | 6.1 |
| Cash and cash equivalents | 0.5 |
| Total assets | 29.4 |
| Provisions | 0.2 |
| Retirement benefit obligation | 0.3 |
| Interest-bearing liabilities | 5.7 |
| Trade and other liabilities | 8.8 |
| Deferred tax liabilities | 0.8 |
| Total liabilities | 15.8 |
| Total identifiable net assets | 13.6 |
| Goodwill | 0.1 |
The fair value of the acquired identifiable intangible assets of EUR 2.8 million (including customer relationships and software) is preliminary pending receipt of the final valuations for those assets.
The fair value of current trade receivables and other receivables is EUR 6.1 million and includes trade receivables with a fair value of EUR 2.7 million. The fair value of trade receivables does not include any significant risk.
The total acquisition-related costs totalled to approximate EUR 0.8 million. Acquisition-related cost included in other operating expenses in the consolidated statement of comprehensive income amount to EUR 0.4 million for the year ended 31 December 2010 and EUR 0.4 million for the 9 months ended 30 September 2011.
The net sales included in the consolidated statement of comprehensive income since 30 April 2011 contributed by Segu companies was EUR 18.8 million. Segu companies also contributed profit of EUR 0.9 million over the same period.
Had the Segu companies been consolidated from 1 January 2011, the consolidated statement of comprehensive income would show net sales of EUR 322.7 million and profit of EUR 18.3 million.
AEES
PKC Group announced on 9 August 2011 that it had signed an agreement for the purchase of shares in the AEES companies. The closing became effective and the ownership and control transferred to PKC on 1 October 2011. Thus, the date of consolidation will be 1 October 2011. The preliminary debt-free purchase price of AEES companies is EUR 131.4 million, of which the cash portion was paid on 30 September 2011 to the funds controlled by Platinum Equity. A total of 1,250,000 PKC Group Oyj:s shares, with the value EUR 13.0 million, were transferred to the sellers as part of the purchase price. The acquisition cost will be specified after the balance sheet as of October 1, 2011 is finished, approximately during the last quarter of 2011.
The interim report 1-9/2011 contains EUR 3.6 million acquisition-related costs, which are in other operating expenses in the consolidated statement of comprehensive income.
In the interim report 1-9/2011 the purchase price paid is presented in the consolidated statement of financial position as prepayment in other receivables and in the consolidated statement of financial cash flows as a separate item in the cash flow of investing activities.
The financial figures of AEES companies are presented in the following table. Information is presented according to US GAAP.
| EUR Million | 7-9/2011 | 1-9/2011 | 1-12/2010 | |
| 3 mon. | 9 mon. | 12 mon. | ||
| Profit and loss | ||||
| Net Sales | 131.9 | 397.6 | 454.0 | |
| EBITDA (excl. rationalisation and advisor fees) | 9.6 | 23.0 | 14.7 | |
| EBITDA | 2.9 | 8.0 | -4.8 | |
| Balance Sheet | ||||
| Fixed Assets | 25.6 | 25.6 | 25.7 | |
| Net Working Capital | 48.5 | 48.5 | 37.4 | |
Had the AEES companies been consolidated from 1 January 2011, the consolidated statement of comprehensive income would show net sales of EUR 705.8 million. As the acquisition cost calculation remains unfinished during the release time and, thus, there is uncertainty with the allocation of acquisition cost and its impact on profit, profit is not presented in this context.
| 4. PROPERTY, PLANT AND EQUIPMENT (EUR 1,000) | 9/11 | 9/10 |
| Acquisition cost 1.1. | 76,969 | 73,772 |
| +/- Translation difference 1.1. | -458 | 954 |
| + Additions | 10,904 | 4,095 |
| + Acquisitions | 12,000 | 0 |
| - Disposals | -946 | -5,674 |
| Acquisition cost 30.9. | 98,469 | 73,147 |
| Accumulated depreciation 1.1. | 40,737 | 39,395 |
| +/- Translation difference 1.1. | -232 | -742 |
| - Accumulated depreciation on disposals | 4,775 | -5,426 |
| + Depreciation | 6,593 | 5,358 |
| Depreciation 30.9. | 51,874 | 38,585 |
| Carrying amount 30.9. | 46,595 | 34,562 |
| 5. OTHER INTANGIBLE ASSETS (EUR 1,000) | 9/11 | 9/10 |
| Acquisition cost 1.1. | 39,636 | 37,167 |
| +/- Translation difference 1.1. | -390 | 1,008 |
| + Additions | 860 | 608 |
| + Acquisitions | 2,818 | 0 |
| - Disposals | 0 | -3,360 |
| Acquisition cost 30.9. | 42,924 | 35,423 |
| Accumulated depreciation 1.1. | 13,516 | 11,418 |
| +/- Translation difference 1.1. | 2,967 | 81 |
| - Accumulated depreciation on disposals | 97 | -4,053 |
| + Depreciation | 2,723 | 2,688 |
| Depreciation 30.9. | 19,303 | 10,134 |
| Carrying amount 30.9. | 23,621 | 25,290 |
| 6. CONTINGENT LIABILITIES AT END OF PERIOD (EUR 1,000) | 9/11 | 9/10 | 12/10 | |
| Leasing liabilities | 2,127 | 3,049 | 2,982 | |
| Liabilities for derivative instruments | ||||
| Nominal values | ||||
| Currency derivatives | ||||
| Forward contracts | 694 | 371 | 0 | |
| Copper derivatives | ||||
| Forward contracts | 2,612 | 1,718 | 2,010 | |
| Total | 3,306 | 2,089 | 2,010 | |
| Fair values | ||||
| Currency derivatives | ||||
| Forward contracts | 48 | -5 | 0 | |
| Copper derivatives | ||||
| Forward contracts | -535 | 0 | 307 | |
| Total | -487 | -5 | 307 | |
| Currency and copper derivatives are used only in hedging currency and copper risks. PKC Group does not apply hedge accounting to derivative instruments in accordance with IAS 39. Fair values of the derivatives are entered directly in the income statement. | ||||
| 7. QUARTERLY KEY INDICATORS, CONSOLIDATED | 4-6/10 3 mon. | 7-9/10 3 mon. | 10-12/10 3 mon. | 1-3/10 3 mon. | 4-6/11 3 mon. | 7-9/11 3 mon. |
| Net sales, EUR million | 81.0 | 82.3 | 91.9 | 96.9 | 109.3 | 102.0 |
| Operating profit, EUR million | 7.6 | 9.5 | 9.8 | 9.7 | 7.1 | 9.0 |
| % of net sales | 9.4 | 11.5 | 10.6 | 10.0 | 6.5 | 8.8 |
| Profit before taxes, EUR million | 4.7 | 13.4 | 6.6 | 9.4 | 7.7 | 4.6 |
| % of net sales | 5.8 | 16.2 | 7.2 | 9.7 | 7.0 | 4.5 |
| Equity ratio, % | 47.7 | 50.2 | 56.5 | 52.4 | 54.3 | 36.1 |
| Earnings per share (EPS), diluted (EUR) | 0.24 | 0.56 | 0.29 | 0.38 | 0.31 | 0.19 |
| Equity per share, EUR | 4.95 | 5.15 | 6.33 | 6.09 | 6.38 | 6.44 |
| QUARTERLY KEY INDICATORS, WIRING HARNESS | ||||||
| Net sales, EUR million | 64.1 | 61.8 | 70.8 | 78.2 | 90.2 | 84.3 |
| Operating profit, EUR million | 7.0 | 6.8 | 8.7 | 10.1 | 9.6 | 7.1 |
| % of net sales | 10.9 | 11.0 | 12.3 | 12.9 | 10.6 | 8.4 |
| QUARTERLY KEY INDICATORS, ELECTRONICS | ||||||
| Net sales, EUR million | 16.9 | 20.5 | 21.1 | 18.7 | 19.1 | 17.7 |
| Operating profit, EUR million | 1.1 | 3.3 | 2.0 | 0.4 | 0.4 | 1.7 |
| % of net sales | 6.5 | 15.9 | 9.6 | 2.4 | 2.1 | 9.8 |
CALCULATION OF INDICATORS
Return on equity (ROE), %
= 100 x (Profit/loss) / Shareholders’ equity (average)
Return on investments (ROI), %
= 100 x (Profit before taxes + financial expenses) / Shareholders’ equity + interest-bearing liabilities (average)
Gearing, %
= 100 x (Interest-bearing liabilities – cash and cash equivalents and investments) / Shareholders’ equity + non-controlling interests
Equity ratio, %
= 100 x (Shareholders’ equity + non-controlling interests) / Total of statement of financial position – advance payments received
Quick ratio
= Receivables and cash and cash equivalents / Current liabilities – advance payments received
Current ratio
= Receivables and cash and cash equivalents + inventories / Current liabilities
Earnings per share (EPS), EUR
= Profit/loss +/- non-controlling interests / Average share issue-adjusted number of shares
Shareholders’ equity per share, EUR
= Shareholders’ equity / Share issue-adjusted number of shares at the date of the statement of financial position
Market capitalisation
= Number of shares at the end of the financial period x the last trading price of the financial period
All the future estimates and forecasts presented in this stock exchange release are based on the best current knowledge of the company’s management. The estimates and forecasts contain certain elements of risk and uncertainty which, if they materialise, may lead to results that differ from present estimates. The main factors of uncertainty are related, among other things, to the general economic situation, the trend in the operating environment and the sector as well as the success of the Group’s strategy.
PKC GROUP OYJ
Board of Directors
Harri Suutari
President and CEO
For additional information, contact:
Harri Suutari, President & CEO, PKC Group Oyj, +358 400 384 937
PRESS CONFERENCE
A press conference on the interim report will be arranged for analysts and investors today, 3 September 2011, at 10.00 a.m., at the address World Trade Center, Aleksanterinkatu 17, meeting room 2, 2nd floor, Helsinki. Link to audiocast may be found in PKC’s website at the front page and Investor Information pages.
DISTRIBUTION
NASDAQ OMX
Main media
The PKC Group offers design and contract manufacturing services for wiring harnesses, cabling and electronics. The Group has production facilities in, Brazil, China, Estonia, Finland, Germany, Ireland, Mexico, Poland, Russia, Ukraine and the USA. The Group's net sales in 2010 totalled EUR 316.1 million. PKC Group Oyj is listed on NASDAQ OMX Helsinki Ltd.
