STOCK EXCHANGE RELEASE
Free for publication on August 8, 2012, at 8.00 a.m. (CEST+1)
EB, ELEKTROBIT CORPORATION, INTERIM REPORT JANUARY-JUNE 2012
NET SALES AND OPERATING RESULT IN 1H 2012 GREW CLEARLY FROM PREVIOUS YEAR
SUMMARY 2Q 2012
* Net sales of the period grew to EUR 48.0 million (EUR 39.7 million,
2Q 2011), representing an increase of 21.1 % year-on-year. Net sales of
Automotive Business Segment grew to EUR 27.0 million (EUR 22.7 million,
2Q 2011), representing an 18.9 % growth year-on-year. The Wireless Business
Segment's net sales grew by 22.8 % to EUR 21.0 million (EUR 17.1 million,
2Q 2011).
* Operating loss was EUR -0.4 million (EUR -0.5 million, 2Q 2011), including
EUR 0.9 million non-recurring costs related to collecting the receivables
from TerreStar Companies (EUR 0.0 million, 2Q 2011). Operating profit
without these non-recurring costs was EUR 0.6 million (operating loss of EUR
-0.5 million, 2Q 2011).
* Operating profit of the Automotive Business Segment was EUR 0.2 million
(operating loss of EUR -0.5 million, 2Q 2011). The Wireless Business
Segment's operating loss was EUR -0.6 million (operating profit of EUR 0.1
million, 2Q 2011), including EUR 0.9 million non-recurring costs related to
collecting the receivables from TerreStar Companies (EUR 0.0 million,
2Q 2011). Wireless Business Segment's operating profit without these non-
recurring costs was EUR 0.4 million (EUR 0.1 million, 2Q 2011).
* EBITDA was EUR 1.5 million (EUR 2.2 million, 2Q 2011). Automotive Business
Segment's EBITDA was EUR 1.3 million and Wireless Business Segment's EBITDA
was EUR 0.2 million.
* Cash flow from operating activities was EUR 0.8 million (EUR 3.4 million,
2Q 2011). Net cash flow was EUR 1.3 million (EUR -0.3 million, 2Q 2011).
* Earnings per share were EUR -0.00 (EUR -0.01, 2Q 2011).
* On May 11, 2012 EB announced to have signed committed credit facility
agreements with Nordea Bank Finland plc. According to the agreements, the
EUR 10 million credit facility agreement, valid until June 30, 2012, was
extended and, in addition, a new EUR 10 million revolving credit facility
agreement was signed. These facilities, intended for general financing
purposes, are valid until June 30, 2014.
* On June 21, 2012 EB lowered its operating result guidance for the first half
of 2012 and gave more precise guidance for the whole year 2012 so that EB
expected the operating result of the second quarter of 2012 to stay below
the level of the first quarter 2012 (EUR 0.9 million, 1Q 2012), and that EB
expected for the first half of 2012 that net sales will grow clearly from
the previous year (EUR 76.1 million in 1H 2011), and the operating result
will be close to zero level (operating loss of EUR -4.4 million, 1H 2011).
EB announced that due to the lowered operating result outlook for the first
half of 2012 also the outlook for the whole year 2012 was lowered, however,
EB still expects for the year 2012, that the net sales and operating result
will grow clearly from the previous year (net sales of EUR 162.2 million,
and operating loss of EUR -4.0 million in 2011). The reason for the changed
operating result outlook was, that the company booked a provision of EUR
0.8 million due to the estimated costs related to collecting the receivables
from TerreStar Companies, and in addition, it became obvious, that the
operating profit in both Automotive and Wireless Business Segments during
the second quarter of 2012 will remain somewhat lower than planned mainly
due to the higher than estimated project costs. Regarding the company's net
sales, the outlook was not changed.
SUMMARY 1H 2012
* Net sales of the period grew to EUR 96.6 million (EUR 76.1 million,
1H 2011), representing an increase of 26.9 % year-on-year. Net sales of
Automotive Business Segment grew to EUR 55.7 million (EUR 46.3 million,
1H 2011), representing a 20.2 % growth year-on-year. The Wireless Business
Segment's net sales grew by 37.6 %, to EUR 41.1 million (EUR 29.8 million,
1H 2011).
* Operating profit was EUR 0.5 million (operating loss of EUR -4.4 million,
1H 2011), including EUR 1.2 million non-recurring costs related to
collecting the receivables from TerreStar Companies (EUR 0.0 million,
1H 2011). Operating profit without these non-recurring costs was EUR 1.7
million (operating loss of EUR -4.4 million, 1H 2011).
* Operating profit of the Automotive Business Segment was EUR 1.2 million (EUR
0.1 million, 1H 2011). The Wireless Business Segment's operating loss was
EUR -0.6 million (EUR -4.5 million, 1H 2011), including EUR 1.2 million non-
recurring costs related to collecting the receivables from TerreStar
Companies (EUR 0.0 million, 1H 2011). Wireless Business Segment's operating
profit without these non-recurring costs was EUR 0.6 million (operating loss
of EUR -4.5 million, 1H 2011).
* EBITDA was EUR 4.1 million (EUR 0.6 million, 1H 2011). Automotive Business
Segment's EBITDA was EUR 3.2 million and Wireless Business Segment's EBITDA
was EUR 0.9 million.
* Cash flow from operating activities was EUR -0.1 million (EUR 4.8 million,
1H 2011). Net cash flow was EUR -1.3 million (EUR -2.7 million, 1H 2011).
* Cash and other liquid assets totaled EUR 8.6 million (EUR 17.8 million,
1H 2011).
* Equity ratio was 58.1% (64.7%, 1H 2011).
* Earnings per share were EUR -0.00 (EUR -0.04, 1H 2011).
EB'S CEO JUKKA HARJU:
"EB's net sales and operating result during the first half grew clearly from
previous year. Both Business Segments increased their net sales and improved
their operating result compared to corresponding period of the last year. The
operating result from the first half of 2012 was slightly positive and somewhat
below our targets due to the costs related to collecting the receivables from
TerreStar Companies, and due to the bigger than estimated project costs in both
Business Segments.
Our joint venture with Audi, e.solutions GmbH, made great progress in developing
its new infotainment software, and Audi announced to use it in the new A3 model
high-end infotainment system. The product includes also EB's navigation software
and speech dialogue technology. EB continued its R&D investments and broadened
its product portfolio by announcing new version of EB GUIDE software that is
used in automotive user interface development, as well as product updates in
Wireless Business Segment to the Tough VoIP products targeted to defence sector,
and to EB Propsim radio channel test product family.
In the beginning of August we entered into a conditional settlement agreement
with TerreStar Corporation, which, if materialized as planned, would conclude
our legal proceedings with TerreStar Corporation, which has been ongoing already
for 1.5 years, would generate a positive cash flow approximately USD 13 million
after estimated tax effects, and would result a non-recurring positive effect of
approximately USD 1.6 million on our operating result. In addition, we expect to
receive a substantially smaller payment from TerreStar Networks chapter 11 case,
which remains pending and is not included in the settlement.
In order to strengthen its financial position, EB signed committed credit
facility agreements according to which, the EUR 10 million credit facility
agreement, valid until June 30, 2012, was extended and, in addition, a new EUR
10 million revolving credit facility agreement was signed. These facilities are
valid until June 30, 2014. The outlook for net sales growth compared to previous
year is good also in the second half of the year and improving the profitability
continues to be our most important target."
OUTLOOK FOR 2012
Compared to the previous year, the demand for EB's products and services is
estimated to grow year-on-year during 2012 in both Automotive and Wireless
Business Segments. Carmakers continue to invest in software for new car models
and the market for automotive software products and services is estimated to
continue growing. In Wireless Business Segment the demand growth will be driven
by especially the increasing use of the LTE technology that increases the
performance of mobile networks, and the authorities' needs for new communication
solutions that use commercial technologies of smart phones and mobile networks.
EB expects for the year 2012 that net sales and operating result will grow
clearly from the previous year (net sales of EUR 162.2 million, and operating
loss of EUR -4.0 million in 2011). For the second half of 2012 EB expects that
the net sales will grow clearly (EUR 86.1 million in 2H 2011) and operating
result to be clearly positive (EUR 0.4 million in 2H 2011). Due to the seasonal
nature of the EB's business and due to the holiday period during the third
quarter, the net sales and operating result in the third quarter are expected to
be lower than in the fourth quarter of 2012.
The profit outlook for the year 2012 is based on the assumption that there will
be no further bookings of impairments of EB's accounts receivable or non-
recurring income from TerreStar Networks Inc. and TerreStar Corporation. After
the reporting period, on August 2, 2012 Elektrobit Inc., EB's subsidiary and
TerreStar Corporation and certain of its preferred shareholders entered into a
conditional agreement of settlement of the various disputes between the parties.
According to the Settlement, if conditions to its effectiveness are fulfilled,
the Settlement Payment in the TerreStar Corporation Chapter 11 cases alone
(without any further distribution from the TerreStar Networks Chapter 11 cases)
would result a non-recurring positive effect of approximately USD 1.6 million
(EUR 1.3 million as per exchange rate of August 7, 2012) on EB's operating
result and would generate a positive cash flow of approximately USD 13 million
(EUR 10.4 million as per exchange rate of August 7, 2012) after estimated tax
effects. More about the agreement is presented under "Events after Reporting
Period" section. It is possible that, based on later information related to
reorganizations of TerreStar Networks Inc. and TerreStar Corporation, this view
may need to be reconsidered. Due to the uncertainties related to the outcome of
reorganization processes of TerreStar Networks Inc. and TerreStar Corporation,
also the credit risk may still grow during 2012. More specific market outlook
is presented under the "Business Segments' development during April-June 2012
and market outlook" section, and uncertainties regarding reorganization of
TerreStar Networks Inc. and TerreStar Corporation, the amount of the receivables
and collecting the receivables as well as other uncertainties regarding the
outlook under "Risks and Uncertainties" section.
Information on TerreStar Networks Inc.'s and TerreStar Corporation's
reorganizations are presented in the October 20 and 25, November 20 and December
30, 2010, February 17, 2011, November 18, 2011, June 21, 2012 and August
3, 2012 stock exchange releases as well as in EB's interim reports and financial
statement at www.elektrobit.com.
INVITATION TO A PRESS CONFERENCE
EB will hold a press conference on the Interim Report 2Q 2012 for media,
analysts and institutional investors in Finland, Oulu, Tutkijantie 8, meeting
room 1 on Wednesday, August 8, 2012, at 11.00 a.m. (CEST+1). The conference will
also be held as a conference call and the presentation will be shown
simultaneously in the Internet through WebEx. The conference will be held in
English. For more information please go to www.elektrobit.com/investors.
EB, Elektrobit Corporation
EB creates advanced technology and turns it into enriching end-user experiences.
EB is specialized in demanding embedded software and hardware solutions for
wireless and automotive industries. The net sales for the year 2011 totaled MEUR
162.2. Elektrobit Corporation is listed on NASDAQ OMX Helsinki.
www.elektrobit.com
EB, ELEKTROBIT CORPORATION, INTERIM REPORT JANUARY-JUNE 2012
FINANCIAL PERFORMANCE DURING JANUARY-JUNE 2012
(Corresponding figures are for January-June 2011 unless otherwise indicated)
EB's net sales during January-June 2012 grew strongly by 26.9 per cent year-on-
year to EUR 96.6 million (EUR 76.1 million). Operating profit was EUR 0.5
million (operating loss of EUR -4.4 million), including EUR 1.2 million non-
recurring costs related to collecting the receivables from TerreStar Companies
(EUR 0.0 million). Operating profit without non-recurring costs was EUR 1.7
million (operating loss of EUR -4.4 million).
Net sales of the Automotive Business Segment grew in January-June 2012 to EUR
55.7 million (EUR 46.3 million), representing 20.2 per cent growth year-on-year.
The operating profit was EUR 1.2 million (EUR 0.1 million).
The Wireless Business Segment's net sales in January-June 2012 grew strongly,
37.6 per cent year-on-year, to EUR 41.1 million (EUR 29.8 million). The net
sales grew in the defence and public safety markets, in the mobile
infrastructure markets and in the test tool market. The operating loss of the
Wireless Business Segment in January-June 2012 was EUR -0.6 million (EUR -4.5
million) including EUR 1.2 million non-recurring costs related to collecting the
receivables from TerreStar Companies (EUR 0.0 million, 1H 2011). Wireless
Business Segment's operating profit without non-recurring costs was EUR 0.6
million (operating loss of EUR -4.5 million, 1H 2011).
+----------------------------------------------------------+--------+--------+
|CONSOLIDATED INCOME STATEMENT (MEUR) |1-6 2012|1-6 2011|
+----------------------------------------------------------+--------+--------+
| |6 months|6 months|
+----------------------------------------------------------+--------+--------+
|NET SALES | 96.6| 76.1|
+----------------------------------------------------------+--------+--------+
|OPERATING PROFIT (LOSS) | 0.5| -4.4|
+----------------------------------------------------------+--------+--------+
|Financial income and expenses | 0.0| -0.7|
+----------------------------------------------------------+--------+--------+
|RESULT BEFORE TAX | 0.5| -5.1|
+----------------------------------------------------------+--------+--------+
|RESULT FOR THE PERIOD FROM CONTINUING OPERATIONS | 0.2| -5.1|
+----------------------------------------------------------+--------+--------+
|TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 0.2| -5.2|
+----------------------------------------------------------+--------+--------+
| | | |
+----------------------------------------------------------+--------+--------+
|Result for the period attributable to: | | |
+----------------------------------------------------------+--------+--------+
| Equity holders of the parent | -0.1| -5.3|
+----------------------------------------------------------+--------+--------+
| Non-controlling interests | 0.3| 0.1|
+----------------------------------------------------------+--------+--------+
|Total comprehensive income for the period attributable to:| | |
+----------------------------------------------------------+--------+--------+
| Equity holder of the parent | -0.1| -5.3|
+----------------------------------------------------------+--------+--------+
| Non-controlling interests | 0.3| 0.1|
+----------------------------------------------------------+--------+--------+
| | | |
+----------------------------------------------------------+--------+--------+
|Earnings per share from continuing operations, EUR | -0.00| -0.04|
+----------------------------------------------------------+--------+--------+
- Cash flow from operating activities was EUR -0.1 million (EUR 4.8 million).
- Equity ratio was 58.1% (64.7%).
- Net gearing was 8.5% (-10.5%).
QUARTERLY FIGURES
Elektrobit Group's net sales and operating result, MEUR:
+------------------------------------------------+-----+-----+-----+-----+-----+
| |2Q 12|1Q 12|4Q 11|3Q 11|2Q 11|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Net sales | 48.0| 48.6| 49.0| 37.0| 39.7|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Operating profit (loss) | -0.4| 0.9| 3.5| -3.1| -0.5|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Operating profit (loss) without non-recurring | 0.6| 1.2| 4.2| -2.9| -0.5|
|costs | | | | | |
+------------------------------------------------+-----+-----+-----+-----+-----+
|Result before taxes | 0.1| 0.5| 3.8| -3.1| -0.8|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Result for the period | -0.1| 0.3| 3.2| -3.1| -0.8|
+------------------------------------------------+-----+-----+-----+-----+-----+
Non-recurring items are exceptional gains and costs that are not related to
normal business operations and occur only seldom. These items include capital
gains or losses, significant changes in asset values such as write-downs or
reversals of write-downs, significant restructuring costs, or other items that
the management considers to be non-recurring. When evaluating a non-recurring
item, the euro translation value of the item is considered, and in case of a
change in an asset value, it is measured against the total value of the asset.
Non-recurring items, presented in the table above, are costs related to
collecting the receivables from TerreStar Companies. During 2011 and 2012 EB has
not reported these costs as non-recurring, since the amount has not been that
significant. However, in June 2012 it has become obvious that the legal
proceedings with TerreStar Companies will continue and it was estimated that
further costs related to the process will be approximately EUR 0.8 million, due
to which EB booked a provision of EUR 0.8 million. Along with this provision,
the cumulative costs resulting from collecting the receivables are of such
significance, that the Company sees it necessary to present the operating result
also without those costs.
Costs related to collecting the receivables from TerreStar Companies are
reported as a part of the Wireless Business Segment's operating result. In the
table below, Wireless Business Segment's operating result is also presented
without the non-recurring costs related to collecting the receivables from
TerreStar Companies.
Wireless Business Segment, net sales and operating result, MEUR
+------------------------------------------------+-----+-----+-----+-----+-----+
| |2Q 12|1Q 12|4Q 11|3Q 11|2Q 11|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Net sales | 21.0| 20.0| 21.0| 13.0| 17.1|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Operating profit (loss) | -0.6| -0.0| 1.4| -1.7| 0.1|
+------------------------------------------------+-----+-----+-----+-----+-----+
|Operating profit (loss) without non-recurring | 0.4| 0.3| 2.1| -1.4| 0.1|
|items | | | | | |
+------------------------------------------------+-----+-----+-----+-----+-----+
The distribution of net sales by Business Segments, MEUR:
+-----------------+-----+-----+-----+-----+-----+
| |2Q 12|1Q 12|4Q 11|3Q 11|2Q 11|
+-----------------+-----+-----+-----+-----+-----+
|Automotive | 27.0| 28.7| 28.0| 23.9| 22.7|
+-----------------+-----+-----+-----+-----+-----+
|Wireless | 21.0| 20.0| 21.0| 13.0| 17.1|
+-----------------+-----+-----+-----+-----+-----+
|Corporation total| 48.0| 48.6| 49.0| 37.0| 39.7|
+-----------------+-----+-----+-----+-----+-----+
The distribution of net sales by market areas, MEUR and %:
+--------+-----+-----+-----+-----+-----+
| |2Q 12|1Q 12|4Q 11|3Q 11|2Q 11|
+--------+-----+-----+-----+-----+-----+
|Asia | 2.2| 3.5| 5.5| 3.3| 4.0|
| | 4.6%| 7.3%|11.2%| 8.8%|10.2%|
+--------+-----+-----+-----+-----+-----+
|Americas| 8.2| 7.6| 7.6| 4.9| 5.5|
| |17.1%|15.6%|15.5%|13.4%|14.0%|
+--------+-----+-----+-----+-----+-----+
|Europe | 37.6| 37.4| 36.0| 28.8| 30.1|
| |78.4%|77.1%|73.3%|77.8%|75.9%|
+--------+-----+-----+-----+-----+-----+
Net sales and operating profit development by Business Segments and other
businesses, MEUR:
+-------------------------------+-----+-----+-----+-----+-----+
| |2Q 12|1Q 12|4Q 11|3Q 11|2Q 11|
+-------------------------------+-----+-----+-----+-----+-----+
|Automotive | | | | | |
|Net sales to external customers| 27.0| 28.7| 28.0| 23.9| 22.7|
|Net sales to other segments | 0.0| 0.0| 0.0| 0.0| 0.0|
|Operating profit (loss) | 0.2| 0.9| 2.1| -1.4| -0.5|
+-------------------------------+-----+-----+-----+-----+-----+
|Wireless | | | | | |
|Net sales to external customers| 21.0| 19.9| 21.1| 12.9| 16.9|
|Net sales to other segments | 0.0| 0.2| 0.1| 0.1| 0.2|
|Operating profit (loss) | -0.6| -0.0| 1.4| -1.7| 0.1|
+-------------------------------+-----+-----+-----+-----+-----+
|Other businesses | | | | | |
|Net sales to external customers| 0.0| 0.0| 0.0| 0.2| 0.0|
|Operating profit (loss) | -0.0| -0.0| 0.0| -0.1| -0.1|
+-------------------------------+-----+-----+-----+-----+-----+
|Total | | | | | |
|Net sales | 48.0| 48.6| 49.0| 37.0| 39.7|
|Operating profit (loss) | -0.4| 0.9| 3.5| -3.1| -0.5|
+-------------------------------+-----+-----+-----+-----+-----+
BUSINESS SEGMENTS' DEVELOPMENT DURING APRIL-JUNE 2012 AND MARKET OUTLOOK
(Corresponding figures are for April-June 2011 unless otherwise indicated)
EB's reporting is based on two segments which are the Automotive and Wireless
Business Segments.
AUTOMOTIVE
In Automotive Business Segment EB offers software products and R&D services for
carmakers, car electronics suppliers and for other suppliers to the automotive
industry. The offering includes in-car infotainment solutions, such as
navigation and human machine interfaces (HMI), as well as software for
electronic control units (ECU) and driver assistance. By combining its software
products and R&D services, EB is creating unique, customized solutions for the
automotive industry. EB and Audi's subsidiary, Audi Electronics Venture GmbH
(AEV), have the joint venture e.solutions GmbH that is currently developing
infotainment software for VW Group's car models. EB owns 51% of e.solutions GmbH
and AEV 49%. The joint venture has more than 100 employees, and its head office
is in Ingolstadt, Germany. EB also delivers products and R&D services to the
joint venture.
During the second quarter of 2012 the net sales of the Automotive Business
Segment amounted to EUR 27.0 million (EUR 22.7 million), representing a growth
of 18.9 % year-on-year. The operating profit was EUR 0.2 million (operating loss
of EUR -0.5 million).
EB's automotive business continued to grow in the infotainment, driver
assistance and ECU (Electronic Control Unit) software markets. Our joint venture
with Audi, e.solutions GmbH, has progressed well and according to its targets in
developing the new infotainment system and Audi announced that it will be used
in the new A3 model's high-end infotainment system. The software from
e.solutions also includes EB street director navigation software as well as EB
GUIDE STF system speech dialogue technology. EB launched a new version of its
user interface development tool, EB GUIDE 5.3, which includes inter alia new
rich multi-touch display features and performance enhancements.
Automotive Market Outlook
The demand for EB's products and services is estimated to develop positively
year-on-year during 2012 in Automotive Business Segment. Carmakers continue to
invest in automotive software for new car models and the market for automotive
software products and services is estimated to continue growing. In the labor
market, particularly in Germany, the competition of talented engineers has
tightened and is slightly slowing down the growth of personnel and thereby
impacting the growth of the services business.
The move to greater electronic content in cars has been underway for several
years and has been responsible for such major innovations as security systems,
anti-lock brakes, engine control units, driver assistance, and infotainment.
These features have become so enormously popular that they are now widely
available, in both low-end and high-end vehicles, demonstrating that consumers
are willing to pay for technology that enhances their driving experience. As a
result from this and the reduced costs as production volumes ramp up, carmakers
have been steadily integrating more electronic components into vehicles. A
Roland Berger study estimates the share of electronics in cars will grow from
23 per cent in 2010 to 33 per cent until 2020.
The increasingly sophisticated and networked features and growing performance
foster the complexity of automotive electronics. At the same time consumers
expect the same richness of features and user experience they know from the
internet and mobile devices also within the car. These development trends are
driving the industry towards gradual separation of software and hardware in
electronics solutions in order to manage the architectural software layer
appropriately and to aim for efficiency in innovation and implementation. The
use of standard software solutions is expected to increase in the automotive
industry. This enables faster innovation, improves quality and development
efficiency and reduces complexity related to deployment of software.
The fundamental industry migration and consequent growth of the automotive
software market will continue. Cost pressures of the automotive industry are
expected to accelerate the need for productized and efficient software solutions
EB is offering. The estimated annual automotive software market growth rate
until 2018 is expected to exceed the growth rate of passenger car production
volume that is estimated to be 5.6% CAGR (LMC Automotive's Q4 2011 Forecast).
EB's net sales cumulating from the automotive industry is currently primarily
driven by the development of software and software platforms for new cars and by
sales of software licenses needed in product development. Hence the dependency
of EB's net sales on car production volumes is currently limited; however, the
direct dependency on production volumes is expected to increase as a result of
the EB's transition towards software product business models over the
forthcoming years.
WIRELESS
The Wireless Business Segment offers development services and customized
solutions for wireless communications markets, radio channel emulator products
for industries and authorities utilizing wireless technologies, and products and
product platforms for defence and public safety markets.
Net sales of the Wireless Business Segment during the second quarter of 2012
grew 22.8 % year-on-year to EUR 21.0 million (EUR 17.1 million). The net sales
grew in the defence and public safety markets, in the mobile infrastructure
markets and in the test tool market. Operating loss was EUR -0.6 million
(operating profit of EUR 0.1 million), including EUR 0.9 million non-recurring
costs related to collecting the receivables from TerreStar Companies (EUR 0.0
million). Wireless Business Segment's operating profit without these non-
recurring costs was EUR 0.4 million (EUR 0.1 million).
EB continued its R&D investments in radio channel emulation products and
products and product platforms targeted for the defence and public safety
markets. EB announced updates to its Tough-VoIP product family with new versions
of the Field and Desktop phone. EB also announced the EB Propsim F32, a new
radio channel emulator product with the highest emulation capacity in the
market.
In April EB concluded personnel negotiations and closed its Wireless Business
Segment site in Espoo in order to rationalize its operations and improve the
cost structure. The site closure concerned 25 employees, and all were offered a
position at Company's other sites. 14 employees continued at other EB sites, six
employees were dismissed and the rest were employed outside EB.
Wireless Market Outlook
Compared to the previous year, the demand for EB's products and services is
estimated to grow year-on-year during 2012 in the Wireless Business Segment.
In the mobile infrastructure market the use of LTE standard, which improves the
performance of mobile networks, is expected to continue to gain strength. EB's
business driven by LTE is expected to increase. Mastering of multi-radio
technologies and end-to-end system architectures covering both terminals and
networks has gained importance in the complex wireless technology industry. Fast
implementation of LTE technology and wide radio spectrum bandwidth needed have
increased the demand for EB's service business, and the demand is expected to
stay at the current level.
The demand in the smart phone services R&D market remains low. Changes in the
business ecosystem of smart phone manufacturers have led to a shift in demand
towards device platform development for chipset manufacturers. Companies outside
traditional wireless markets have a growing interest towards connectivity
solutions creating value for their own products, which is expected to create
demand for R&D services.
The market for communications, jamming and intelligence solutions targeted for
defence and public safety is estimated to remain stable. EB's competence and
long experience in software radio based solutions is expected to bring new
business opportunities. The trend of adopting new commercial technologies, such
as LTE and smart phone related software applications, is expected to continue in
special verticals such as public safety. The networks used by public authorities
often utilize dedicated spectrum blocks outside the commercial frequency bands,
which generates the need for special user terminal variants for these networks.
In the mobile satellite communication industry the demand for terminals for new
data and mobile communications services is expected to slowly increase during
the next few years.
LTE technology is based on multi-antenna technologies which create demand for
advanced radio channel emulation tools when introducing LTE technologies. The
growth of demand in the test tool market is shifting from the performance
testing of LTE base stations to LTE terminals, where increasingly the over-the-
air (OTA) technology will be widely used. EB provides world leading radio
channel emulation tools for the development of MIMO based LTE, LTE-Advanced and
other advanced radio technologies.
RESEARCH AND DEVELOPMENT
EB continued its investments in R&D in the automotive software products and
tools in Automotive Business Segment, and in radio channel emulation products
and products and product platforms for the defence and public safety markets in
Wireless Business Segment.
The total R&D investments during January-June 2012 were EUR 12.3 million (EUR
12.3 million, 1H 2011), equaling 12.7% of the net sales (16.1%, 1H 2011). The
share of R&D investments in Automotive Business Segment was EUR 9.1 million (EUR
8.7 million, 1H 2011) and in Wireless Business Segment EUR 3.2 million (EUR 3.5
million, 1H 2011).
EUR 2.8 million of R&D investments of the reporting period were capitalized (EUR
3.2 million, 1H 2011). Depreciations of R&D investments were EUR 0.4 million
during the reporting period (EUR 0.9 million, 1H 2011). The amount of
capitalized R&D investments at the end of June 2012 was EUR 13.9 million. A
significant part of these capitalizations is related to customer agreements of
Automotive Business Segment, where future license fees, based on the actual car
delivery volumes, are expected to accumulate in the coming years.
OUTLOOK FOR 2012
Compared to the previous year, the demand for EB's products and services is
estimated to grow year-on-year during 2012 in both Automotive and Wireless
Business Segments. Carmakers continue to invest in software for new car models
and the market for automotive software products and services is estimated to
continue growing. In Wireless Business Segment the demand growth will be driven
by especially the increasing use of the LTE technology that increases the
performance of mobile networks, and the authorities' needs for new communication
solutions that use commercial technologies of smart phones and mobile networks.
EB expects for the year 2012 that net sales and operating result will grow
clearly from the previous year (net sales of EUR 162.2 million, and operating
loss of EUR -4.0 million in 2011). For the second half of 2012 EB expects that
the net sales will grow clearly (EUR 86.1 million in 2H 2011) and operating
result to be clearly positive (EUR 0.4 million in 2H 2011). Due to the seasonal
nature of the EB's business and due to the holiday period during the third
quarter, the net sales and operating result in the third quarter are expected to
be lower than in the fourth quarter of 2012.
The profit outlook for the year 2012 is based on the assumption that there will
be no further bookings of impairments of EB's accounts receivable or non-
recurring income from TerreStar Networks Inc. and TerreStar Corporation. After
the reporting period, on August 2, 2012 Elektrobit Inc., EB's subsidiary and
TerreStar Corporation and certain of its preferred shareholders entered into a
conditional agreement of settlement of the various disputes between the parties.
According to the Settlement, if conditions to its effectiveness are fulfilled,
the Settlement Payment in the TerreStar Corporation Chapter 11 cases alone
(without any further distribution from the TerreStar Networks Chapter 11 cases)
would result a non-recurring positive effect of approximately USD 1.6 million
(EUR 1.3 million as per exchange rate of August 7, 2012) on EB's operating
result and would generate a positive cash flow of approximately USD 13 million
(EUR 10.4 million as per exchange rate of August 7, 2012) after estimated tax
effects. More about the agreement is presented under "Events after Reporting
Period" section. It is possible that, based on later information related to
reorganizations of TerreStar Networks Inc. and TerreStar Corporation, this view
may need to be reconsidered. Due to the uncertainties related to the outcome of
reorganization processes of TerreStar Networks Inc. and TerreStar Corporation,
also the credit risk may still grow during 2012. More specific market outlook
is presented under the "Business Segments' development during April-June 2012
and market outlook" section, and uncertainties regarding reorganization of
TerreStar Networks Inc. and TerreStar Corporation, the amount of the receivables
and collecting the receivables as well as other uncertainties regarding the
outlook under "Risks and Uncertainties" section.
Information on TerreStar Networks Inc.'s and TerreStar Corporation's
reorganizations are presented in the October 20 and 25, November 20 and December
30, 2010, February 17, 2011, November 18, 2011, June 21, 2012 and August
3, 2012 stock exchange releases as well as in EB's interim reports and financial
statement at www.elektrobit.com.
RISKS AND UNCERTAINTIES
EB has identified a number of business, market and finance related risk factors
and uncertainties that can affect the level of sales and profits.
Market risks
On the ongoing financial period the global economic uncertainty may affect the
demand for EB's services, solutions and products and provide pressure on e.g.
pricing. On a short term it may affect, in particular, the utilization and
chargeability levels and average hourly prices of R&D services.
As EB's customer base consists mainly of companies operating in the fields of
automotive and telecommunications and defense and public safety authorities, the
company is exposed to market changes in these industries. EB believes that
expanding the customer base will reduce dependence on individual companies and
that the company will thereby be mainly affected by the general business climate
in automotive and telecommunication industries. The more specific market outlook
is presented under the "Business Segments' development during the second quarter
2012 and market outlook" section.
Business related risks
EB's operative business risks are mainly related to following items:
uncertainties and short visibility on customers' product program decisions,
their make or buy decisions and on the other hand, their decisions to continue,
downsize or terminate current product programs, execution and management of
large customer projects, ramping up and down project resources, availability of
personnel in labour markets (in particular in Germany), timing and on the other
hand successful utilization of the most important technologies and components,
competitive situation and potential delays in the markets, timely closing of
customer and supplier contracts with reasonable commercial terms, delays in R&D
projects, realization of expected return on capitalized R&D investments,
obsolescence of inventories and technology risks in product development causing
higher than planned R&D costs. Revenues expected to come from either existing or
new products and customers include normal timing risks. EB has certain
significant customer projects and deviation in their expected continuation could
result also significant deviations in the Company's outlook. In addition there
are typical industry warranty and liability risks involved in selling EB's
services, solutions and products.
Product delivery business model includes such risks as high dependency on actual
product volumes and development of the cost of materials. The above-mentioned
risks may manifest themselves as lower amounts product delivery or higher cost
of production, and ultimately, as lower profit.
Some of EB's businesses operate in the industries that are heavily patented and
therefore include risks related to management of intellectual property rights,
on the one hand related to accessibility on commercially acceptable terms of
certain technologies in the EB's products and services, and on the other hand
related to an ability to protect technologies, which EB develops or licenses
from others, from claims that third parties' intellectual property rights are
infringed. Also parties outside of the industries operate actively in order to
protect and commercialize their patents and therefore in their part increase the
risks related to the management of intellectual property rights. At worst,
claims that third parties' intellectual property rights are infringed, could
lead to substantial liabilities for damages. Also EB has been formally requested
by one of its customer for indemnification that is unspecified both in terms of
the grounds and the amount. While the analysis of the situation is pending,
based on preliminary information available it does not seem likely that the
claim would result to a significant liability on a short term. It is possible
that based on later information, the above views may need to be reconsidered.
Financing risks
Global economic uncertainty may lead to payment delays and increase the risk for
credit losses and on the other hand weaken the availability and terms of
financing. To fund its operations, EB relies mainly on income from its operative
business and may from time to time seek additional financing from selected
financial institutions. EB has a committed overdraft credit facility agreement
of EUR 10 million and committed revolving credit facility agreement of EUR 10
million, valid until June 30, 2014. The credit facility agreements include
financial covenants related to group's equity ratio and earnings before
interests and taxes (EBITDA), to be reviewed semiannually. There is no assurance
that additional financing will not be needed in case of clearly weaker than
expected development of the EB's businesses.
Some parts of EB's business are more sensitive to customer dependency than
others. Respectively, this may translate as accumulation of risk with respect to
outstanding receivables and ultimately with respect to credit losses. EB has
claimed its receivables in the amount of approximately USD 25.8 million (EUR
20.8 million as per exchange rate of August 7, 2012), in the Chapter 11 cases of
its customers, both TerreStar Networks Inc. and its parent company TerreStar
Corporation. In addition to the booked receivables, EB has also claimed
additional costs in the amount of approximately USD 2.1 million (EUR 1.7 million
as per exchange rate of August 7, 2012) and resulting mainly from the ramp down
of the business operations between the parties. Thus, EB has asserted claims
against each of the TerreStar entities in amounts totaling USD 27.9 million (EUR
22.5 million as per exchange rate of August 7, 2012). Due to uncertainties
related to the accounts receivable, EB booked an impairment of the accounts
receivable in the amount of EUR 8.3 million during the second half of 2010.
On October 19, 2010, TerreStar Networks and certain other affiliates of
TerreStar Corporation and on February 16, 2011, the parent company TerreStar
Corporation filed voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code to strengthen their financial position.
Generally in a Chapter 11 case, any distribution of cash or other assets by a
debtor to satisfy pre-bankruptcy claims of its creditors must be made under a
Chapter 11 plan of reorganization or liquidation. Such plans must be approved by
the United States Bankruptcy Court and (with limited exceptions) an affirmative
vote of all classes of creditors whose claims will not be paid fully and
immediately after the plan is approved by the court and becomes effective by its
terms. Recoveries by holders of claims against TerreStar Networks and TerreStar
Corporation have been or are to be funded by separate pools or streams of
assets.
Following the sale of substantially all assets of TerreStar Networks' assets to
Gamma Acquisition L.L.C., an acquisition subsidiary formed by Dish Network
Corporation for about USD 1.375 billion, Terre Star Networks confirmed a plan of
liquidation, which became effective on March 29, 2012. On that date, EB
received a USD 650,890 distribution on the priority portion of its claim from
TerreStar Networks. Based upon information contained in the debtors' disclosure
statement accompanying the plan, the reorganized debtors' first post-
confirmation status report, or otherwise available to EB, EB estimates that its
pro rata total distribution under the plan may be in the range of 8-10% of the
face amount of its claim. However, this estimate is subject to various
assumptions, and therefore the amount and timing of EB's distribution on the
remaining portion of its claim cannot be predicted with certainty at this time.
As part of the process of reconciling accounts in preparation for making
distributions under a plan, Chapter 11 debtors often challenge the amount or
validity of some creditor claims. To date neither TerreStar Networks nor the
liquidating trustee of The TerreStar Networks, Inc. Liquidating Trust (the trust
having been formed in connection with confirmation of the Chapter 11 plan of
TerreStar Networks) has asserted an objection to the amount or validity of EB's
claims in its bankruptcy proceeding, and EB is not aware that any such objection
is contemplated. Further, as part of the Chapter 11 process, debtors often seek
to recover payments previously made to creditors pursuant to various provisions
of the Bankruptcy Code. The risk that the TerreStar debtors may attempt to
recover payments from EB, or that such recovery actions, if attempted, may be
successful, likewise cannot be ruled out at this time.
On July 22, 2011, TerreStar Corporation filed a plan of reorganization, which
was thereafter amended on December 27, 2011, January 12, 2012 and June
28, 2012. The third amended plan proposes that unsecured claims (such as EB's),
if allowed by the Bankruptcy Court, will be exchanged for new notes to be issued
by a reorganized TerreStar Corporation in the face amount of the claim. The
notes are to be issued as unsecured notes in a total aggregate principal amount
not to exceed USD 35 million, with a three-year maturity (with an option for the
reorganized debtors to extend the term of the notes for a fourth year), bearing
interest at the rate of 10.5% per annum (increasing to 12.5% per annum in the
fourth year if the term is so extended). Such interest is to be "paid in kind",
meaning that it will accrue over the term of the notes and be payable only at
maturity. Payment of the note obligations is to be funded by future revenues
and profits of reorganized TerreStar Corporation. It is premature to speculate
regarding distributions to creditors under this plan because the plan TerreStar
Corporation filed may or may not obtain the necessary approvals, and the terms
of the plan may change through negotiation with creditors. EB filed a
preliminary objection to an earlier version of the plan, asserting that it
failed to satisfy applicable provisions of the Bankruptcy Code and therefore
could not be confirmed, and voted against the second amended plan.
On November 16, 2011, after EB filed its preliminary objection to the proposed
Chapter 11 plan of TerreStar Corporation, two objections to EB's claim were
filed, one by TerreStar Corporation and its affiliated debtors (not including
TerreStar Networks) and a joint objection by a group of holders of TerreStar
Corporation preferred stock that support the proposed plan. The preferred
stockholders alleged, among other things, that EB's guaranty claim in the amount
of approximately USD 24.8 million (at least) should be disallowed pursuant to
various legal theories. TerreStar Corporation joined in the preferred
stockholders' argument that TerreStar Corporation has no liability to EB under
its guaranty. On December 12, 2011, EB filed a sworn opposition to both
objections, stating that the objections are flawed as a matter of law and wholly
without evidentiary support, and maintaining its right to payment in the full
amount claimed.
Subsequent to the reporting period on August 2, 2012, Elektrobit Inc., a
subsidiary of EB, and TerreStar Corporation and certain of its preferred
shareholders, entered into a conditional agreement of settlement of the various
disputes between them in TerreStar Corporation Chapter 11 reorganization cases.
Simultaneously TerreStar Corporation filed a motion seeking approval from the
United States Bankruptcy Court for the terms and conditions set forth for the
settlement and authorization to TerreStar Corporation to enter into the
settlement. Additionally, TerreStar Corporation filed a motion seeking an
approval for new financing to enable TerreStar Corporation to satisfy its
obligations under the proposed settlement. According to the settlement, if
conditions to its effectiveness are fulfilled, TerreStar Corporation shall be
obligated to pay to Elektrobit Inc., an immediate cash payment of USD 13.5
million (EUR 10.9 million as per exchange rate of August 7, 2012) in full and
final satisfaction of its claim against TerreStar Corporation and in resolution
of all disputes between EB and the other parties in the TerreStar Corporation
reorganization cases. The settlement does not include the TerreStar Networks
Chapter 11 cases, which remain pending, and does not include any distribution
there from that may be available for EB. The settlement is described in more
detail under "Events after the review period" section.
At this time there is no assurance that the motions for the above mentioned
settlement and new financing will be approved by the Court and that the agreed
funding is received by TerreStar Corporation. In the event that these
contingencies are not fulfilled, nothing contained in the settlement motion
shall be deemed to be a waiver of any claims or an admission of liability by any
party thereto and, in such event, all rights and remedies of the parties shall
be preserved. In case the settlement will not become effective EB intends to
file a further objection to the proposed Chapter 11 plan of TerreStar
Corporation and vigorously contest confirmation of the plan at a hearing to be
held by the Bankruptcy Court on a date to be announced (perhaps to occur in
October 2012). Further EB intends to vigorously defend the objections to its
claims in a trial on the merits of EB's claim and the objections on a date to be
announced. Speculation regarding the likely outcome of these contested matters
is premature at this time.
Based on EB's current understanding, there is no reason to believe that there
would be further impairment losses on EB's account receivable from TerreStar
Networks and TerreStar Corporation. In case the abovementioned settlement with
TerreStar Corporation will not become effective, EB aims to collect the amounts
owed to it in full through the Chapter 11 cases of TerreStar Networks and
TerreStar Corporation, and/or for example through selling of the earlier
mentioned accounts receivable. It is possible that based on later information
related to the TerreStar Networks' and TerreStar Corporation's Chapter 11 cases,
the above views may need to be reconsidered. Despite the TerreStar companies'
efforts to reorganize, it is possible that the credit risk may still grow during
2012. Should the accounts receivable not be collected at all, either from
TerreStar Networks or TerreStar Corporation, an impairment loss and costs
related to the collection process would additionally lower EB's operating result
on a non-recurring basis by approximately EUR 10 million, at maximum (USD-
nominated items as per exchange rate of August 7, 2012). However, this would not
have any significant negative effect on the EB's cash flow.
More information on the risks and uncertainties affecting EB can be found on the
Company's website at www.elektrobit.com.
STATEMENT OF FINANCIAL POSITION AND FINANCING
The figures presented in the statement of financial position of June 30, 2012,
are compared with the statement of the financial position of December 31, 2011
(MEUR). The figures for the period under review contain provision of EUR 1.8
million.
6/2012 12/2011
Non-current assets 47.0 44.1
Current assets 79.1 71.0
Total assets 126.2 115.1
Share capital 12.9 12.9
Other equity 52.6 52.6
Non-controlling interests 1.8 1.5
Total shareholders' equity 67.4 67.0
Non-current liabilities 7.6 6.9
Current liabilities 51.2 41.3
Total shareholders' equity and liabilities 126.2 115.1
Net cash flow from operations during the period under review:
+ net profit +/- adjustment of accrual basis items EUR +5.1 million
+/- change in net working capital EUR -4.4 million
- interest, taxes and dividends EUR -0.8 million
= cash generated from operations EUR -0.1 million
- net cash used in investment activities EUR -4.6 million
- net cash used in financing EUR +3.4 million
= net change in cash and cash equivalents EUR -1.3 million
The reason to increase in the net working capital during the reporting period is
EB has customer projects which have longer payment periods than earlier.
The amount of accounts and other receivables, booked in current receivables, was
EUR 68.0 million (EUR 59.3 million on December 31, 2011). Accounts and other
payables, booked in interest-free current liabilities, were EUR 41.8 million
(EUR 36.3 million on December 31, 2011). The amount of non-depreciated
consolidation goodwill at the end of the period under review was EUR 19.3
million (EUR 19.3 million on December 31, 2011).
The amount of gross investments in the period under review was EUR 6.8 million
including R&D capitalizations of EUR 2.8 million. Net investments for the
reporting period totaled EUR 6.5 million. The total amount of depreciation
during the period under review was EUR 3.6 million, including EUR 0.5 million of
depreciation owing to business acquisitions.
The amount of interest-bearing debt at the end of the reporting period was EUR
14.3 million. The distribution of net financing expenses on the income statement
was as follows:
interest dividend and other financial income EUR 0.0 million
interest expenses and other financial expenses EUR -0.3 million
foreign exchange gains and losses EUR 0.3 million
EB's equity ratio at the end of the period was 58.1% (62.8% at the end of 2011).
Cash and other liquid assets at the end of the reporting period were EUR 8.6
million. EB has from Nordea Bank plc a committed credit facility agreement and a
revolving credit facility agreement of altogether EUR 20 million, valid until
June 30, 2014. EUR 4.4 million of these facilities was used at the end of the
reporting period.
EB follows a hedging strategy, the objective of which is to ensure the margins
of business operations in changing market circumstances by minimizing the
influence of exchange rates. In accordance with the hedging strategy, the agreed
customer commitments net cash flow of the currency in question is hedged. The
net cash flow is determined on the basis of sales receivables, payables, the
order book and the budgeted net currency cash flow. The hedged foreign currency
exposure at the end of the review period was equivalent to EUR 9.0 million.
PERSONNEL
EB employed an average of 1659 people between January and June 2012. At the end
of March, EB had 1711 employees (1607 at the end of 2011). A significant part of
EB's personnel are product development engineers.
FLAGGING NOTIFICATIONS
There were no changes in ownership during the period under review that would
have caused flagging notifications which are obligations for disclosure in
accordance with Chapter 2, section 9 of the Securities Market Act.
EVENTS AFTER THE REVIEW PERIOD
On August 2, 2012 United States time, Elektrobit Inc., a subsidiary of EB and
TerreStar Corporation and certain of its preferred shareholders, entered into a
conditional agreement of settlement (the "Settlement") of the various disputes
between them in TerreStar Corporation Chapter 11 reorganization cases. At the
same time TerreStar Corporation filed a motion seeking approval from the United
States Bankruptcy Court for the terms and conditions set forth for the
Settlement and authorization to TerreStar Corporation to enter into the
Settlement. Additionally, TerreStar Corporation filed a motion seeking an
approval for new financing to enable TerreStar Corporation to satisfy its
obligations under the proposed Settlement. According to the Settlement, if
conditions to its effectiveness are fulfilled, TerreStar Corporation shall be
obligated to pay to Elektrobit Inc., an immediate cash payment of USD 13.5
million (EUR 10.9 million as per exchange rate of August 7, 2012) (the
"Settlement Payment") in full and final satisfaction of its claim against
TerreStar Corporation and in resolution of all disputes between EB and the other
parties in the TerreStar Corporation reorganization cases. The Settlement does
not include the TerreStar Networks Chapter 11 cases, which remain pending, and
does not include any distribution therefrom that may be available for EB.
The implications of the TerreStar Corporation and TerreStar Networks Chapter 11
cases on EB's profit, financial position and outlook can be finally determined
only when the outcome of both Chapter 11 cases is known, including all costs
related to collecting the receivables, and e.g. confirmed tax treatment. If
approved by the Bankruptcy Court and funded by TerreStar Corporation, the
Settlement Payment in the TerreStar Corporation Chapter 11 cases alone, and
without any further distribution from the TerreStar Networks Chapter 11 cases,
would result a positive effect of approximately USD 1.6 million (EUR 1.3
million as per exchange rate of August 7, 2012) on EB's operating result and a
positive effect on EB's cash flow of approximately USD 13 million (EUR 10.4
million as per exchange rate of August 7, 2012) after estimated tax effects. If
the Settlement is approved by the Bankruptcy Court and TerreStar Corporation
receives the requested new financing, the Settlement Payment would be paid
within two business days after the Settlement becomes effective by its terms,
i.e. during the third year quarter of 2012.
Uncertainties regarding reorganization of TerreStar Networks Inc. and TerreStar
Corporation, the amount of the receivables and collecting the receivables as
well as other uncertainties regarding the outlook under "Risks and
Uncertainties" section.
Oulu, August 8, 2012
EB, Elektrobit Corporation
The Board of Directors
Further Information:
Jukka Harju
CEO
Tel. +358 40 344 5466
Distribution:
NASDAQ OMX Helsinki
Major media
EB, ELEKTROBIT CORPORATION,
CONDENSED FINANCIAL STATEMENTS AND NOTES JANUARY- JUNE 2012
(unaudited)
The Interim Report has been prepared in accordance with IAS 34 Interim Financial
Reporting.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 1-6/2012 1-6/2011 1-12/2011
(MEUR)
6 months 6 months 12 months
NET SALES 96.6 76.1 162.2
Other operating income 1.3 1.6 2.8
Change in work in progress and finished goods -0.1 0.3 0.0
Work performed by the undertaking for its own
purpose
and capitalized 0.0 0.1 0.4
Raw materials -7.3 -5.8 -11.7
Personnel expenses -53.0 -47.6 -95.2
Depreciation -3.6 -5.0 -8.7
Other operating expenses -33.6 -24.1 -53.8
OPERATING PROFIT (LOSS) 0.5 -4.4 -4.0
Financial income and expenses 0.0 -0.7 -0.4
RESULT BEFORE TAXES 0.5 -5.1 -4.5
Income taxes -0.3 -0.0 -0.6
RESULT FOR THE PERIOD FROM CONTINUING
OPERATIONS 0.2 -5.1 -5.1
Other comprehensive income:
Exchange differences on translating foreign
operations 0.0 -0.1 -0.2
Other comprehensive income for the period total 0.0 -0.1 -0.2
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 0.2 -5.2 -5.2
Result for the period attributable to
Equity holders of the parent -0.1 -5.3 -5.3
Non-controlling interests 0.3 0.1 0.2
Total comprehensive income attributable to
Equity holders of the parent -0.1 -5.3 -5.5
Non-controlling interests 0.3 0.1 0.2
Earnings per share EUR continuing operations
Basic earnings per share -0.00 -0.04 -0.04
Diluted earnings per share -0.00 -0.04 -0.04
Average number of shares, 1000 pcs 129 413 129 413 129 413
Average number of shares, diluted, 1000 pcs 130 230 130 187 130 051
CONSOLIDATED STATEMENT OF FINANCIAL POSITION June 30, June 30, Dec. 31,
(MEUR) 2012 2011 2011
ASSETS
Non-current assets
Property, plant and equipment 9.7 9.2 9.0
Goodwill 19.3 18.5 19.3
Intangible assets 17.8 13.4 15.7
Other financial assets 0.1 0.1 0.1
Deferred tax assets 0.1 0.1 0.1
Non-current assets total 47.0 41.3 44.1
Current assets
Inventories 2.5 2.2 1.8
Trade and other receivables 68.0 47.0 59.3
Financial assets at fair value through profit or
loss 0.0
Cash and short term deposits 8.6 17.8 10.0
Current assets total 79.1 67.0 71.0
TOTAL ASSETS 126.2 108.3 115.1
EQUITY AND LIABILITIES
Equity attributable to equity holders of the
parent
Share capital 12.9 12.9 12.9
Invested non-restricted equity fund 38.7 38.7 38.7
Translation difference 0.4 0.5 0.4
Retained earnings 13.4 12.3 13.4
Non-controlling interests 1.8 1.4 1.5
Total equity 67.4 65.9 67.0
Non-current liabilities
Deferred tax liabilities 0.9 1.2 1.0
Pension obligations 1.3 1.2 1.3
Provisions 0.5 0.8 0.5
Interest-bearing liabilities 4,9 5.9 4.0
Non-current liabilities total 7,6 9.1 6.9
Current liabilities
Trade and other payables 40.3 27.6 34.9
Financial liabilities at fair value through
profit or loss 0.1 0.3
Provisions 1.4 0.7 1.0
Interest-bearing loans and borrowings 9,4 5.0 5.0
Current liabilities total 51,2 33.3 41.3
Total liabilities 58.8 42.4 48.1
TOTAL EQUITY AND LIABILITIES 126.2 108.3 115.1
CONSOLIDATED STATEMENT OF CASH FLOWS (MEUR) 1-6/2012 1-6/2011 1-12/2011
6 months 6 months 12 months
CASH FLOW FROM OPERATING ACTIVITIES
Result for the period 0.2 -5.1 -5.1
Adjustment of accrual basis items 4.9 2.8 7.1
Change in net working capital -4.4 4.4 0.6
Interest paid on operating activities -0.6 -0.8 -0.4
Interest received from operating activities 0.0 0.1 0.3
Other financial income and expenses, net received 0.0 0.0 0.0
Income taxes paid -0.3 3.4 2.6
NET CASH FROM OPERATING ACTIVITIES -0.1 4.8 5.3
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of business unit, net of cash acquired -0.8 -0.8
Purchase of property, plant and equipment -1.3 -1.0 -1.9
Purchase of intangible assets -3.6 -3.5 -8.5
Purchase of other investments -0.0 -0.0
Sale of property, plant and equipment 0.3 0.1 0.1
Sale of intangible assets 0.0 0.1
Proceeds from sale of investments 0.0 0.0
NET CASH FROM INVESTING ACTIVITIES -4.6 -5.1 -11.1
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowing 5.9 0.2 0.2
Repayment of borrowing -1.2 -1.2 -2.2
Payment of finance liabilities -1.4 -1.5 -2.8
NET CASH FROM FINANCING ACTIVITIES 3.4 -2.4 -4.7
NET CHANGE IN CASH AND CASH EQUIVALENTS -1.3 -2.7 -10.6
Cash and cash equivalents at beginning of period 10.0 20.5 20.5
Cash and cash equivalents at end of period 8.6 17.8 10.0
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY (MEUR)
A = Share capital
B = Invested non-restricted equity fund
C = Retained earnings
D = Non-controlling interests
E = Total equity
A B C D E
Equity on January 1, 2011 12.9 38.7 18.9 1.3 71.8
Share-related compensation 0.2 0.2
Total comprehensive income for the period -5.3 0.1 -5.2
Other items -0.8 -0.8
Equity on June 30, 2011 12.9 38.7 12.9 1.4 65.9
Equity on January 1, 2012 12.9 38.7 13.9 1.5 67.0
Share-related compensation 0.2 0.2
Total comprehensive income for the period -0.1 0.3 0.2
Other items -0.1 -0.1
Equity on June 30, 2012 12.9 38.7 13.9 1.8 67.4
NOTES TO THE INTERIM FINANCIAL REPORTING
Accounting principles for the interim financial reporting:
The same accounting policies and methods of computation are followed in the
interim financial reporting as compared with annual financial statements.
Explanatory comments about the seasonality or cyclicality of reporting period
operations:
The Company operates in business areas which are subject to seasonal
fluctuations.
Payment of dividend:
The General Meeting held on March 26, 2012 decided in accordance with the
proposal of the Board of Directors that no dividend shall be distributed.
SEGMENT INFORMATION (MEUR)
OPERATING SEGMENTS 1-6/2012 1-6/2011 1-12/2011
6 months 6 months 12 months
Automotive
Net sales to external customers 55.7 46.3 98.3
Net sales to other segments 0.0 0.0 0.0
Net sales total 55.7 46.3 98.3
Operating profit (loss) 1.2 0.1 0.8
Wireless
Net sales to external customers 40.9 29.6 63.6
Net sales to other segments 0.2 0.2 0.4
Net sales total 41.1 29.8 63.9
Operating profit (loss) -0.6 -4.5 -4.7
OTHER ITEMS
Other items
Net sales to external customers 0.0 0.1 0.4
Operating profit (loss) -0.0 -0.0 -0.1
Eliminations
Net sales to other segments -0.2 -0.2 -0.4
Operating profit (loss) 0.0 0.0 0.0
Group total
Net sales to external customers 96.6 76.1 162.2
Operating profit (loss) 0.5 -4.4 -4.0
Net sales of geographical areas (MEUR) 1-6/2012 1-6/2011 1-12/2011
6 months 6 months 12 months
Net sales
Europe 75.1 58.8 123.5
Americas 15.8 10.6 23.2
Asia 5.7 6.7 15.5
Net sales total 96.6 76.1 162.2
Material events subsequent to the end of the interim period not reflected in the
financial statements for the interim period:
On August 2, 2012, Elektrobit Inc., a subsidiary of EB and TerreStar Corporation
and certain of its preferred shareholders, entered into a conditional agreement
of settlement of the various disputes between them in TerreStar Corporation
Chapter 11 reorganization cases. According to the settlement, if conditions to
its effectiveness are fulfilled, TerreStar Corporation shall be obligated to pay
to Elektrobit Inc., an immediate cash payment of USD 13.5 million (EUR 10.9
million as per exchange rate of August 7, 2012) in full and final satisfaction
of its claim against TerreStar Corporation and in resolution of all disputes
between EB and the other parties in the TerreStar Corporation reorganization
cases. The settlement does not include the TerreStar Networks Chapter 11 cases,
which remain pending, and does not include any distribution therefrom that may
be available for EB.
If approved by the Bankruptcy Court and funded by TerreStar Corporation, the
Settlement Payment in the TerreStar Corporation Chapter 11 cases alone, and
without any further distribution from the TerreStar Networks Chapter 11 cases,
would result a positive effect of approximately USD 1.6 million (EUR 1.3
million as per exchange rate of August 7, 2012) on EB's operating result and a
positive effect on EB's cash flow of approximately USD 13 million (EUR 10.4
million as per exchange rate of August 7, 2012) after estimated tax effects. If
the Settlement is approved by the Bankruptcy Court and TerreStar Corporation
receives the requested new financing, the Settlement Payment would be paid
within two business days after the Settlement becomes effective by its terms,
i.e. during the third year quarter of 2012.
Effects by the settlement to the operating result or to the cash flow have not
been reflected to the interim report calculations.
Related party transactions: 1-6/2012 1-6/2011 1-12/2011
6 months 6 months 12 months
Employee benefits for key management and stock
option expenses total 0.7 0.9 1.6
CONSOLIDATED STATEMENT OF 4-6/ 1-3/ 10-12/ 7-9/ 4-6/
COMPREHENSIVE INCOME 2012 2012 2011 2011 2011
BY QUARTER (MEUR) 3 months 3 months 3 months 3 months 3 months
NET SALES 48.0 48.6 49.0 37.0 39.7
Other operating income 0.7 0.6 0.8 0.5 0.9
Change in work in progress and
finished goods 0.1 -0.2 -0.3 0.1 0.1
Work performed by the
undertaking
for its own purpose and
capitalized 0.0 0.0 0.4 0.0 0.0
Raw materials -4.0 -3.2 -3.1 -2.9 -3.0
Personnel expenses -25.8 -27.1 -25.2 -22.5 -23.3
Depreciation -1.9 -1.7 -1.8 -1.9 -2.7
Other operating expenses -17.4 -16.1 -16.3 -13.4 -12.2
OPERATING PROFIT (LOSS) -0.4 0.9 3.5 -3.1 -0.5
Financial income and expenses 0.4 -0.4 0.3 0.0 -0.3
RESULT BEFORE TAXES 0.1 0.5 3.8 -3.1 -0.8
Income taxes -0.2 -0.1 -0.6 0.0 -0.0
RESULT FOR THE PERIOD FROM
CONTINUING OPERATIONS -0.1 0.3 3.2 -3.1 -0.8
Other comprehensive income
for the period total -0.0 0.0 0.0 -0.1 -0.0
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD -0.2 0.3 3.2 -3.2 -0.9
Result for the period
attributable to:
Equity holders of the parent -0.3 0.2 3.1 -3.1 -0.8
Non-controlling interests 0.2 0.2 0.1 0.0 0.0
Total comprehensive income
for the period attributable to:
Equity holders of the parent -0.3 0.2 3.1 -3.2 -0.9
Non-controlling interests 0.2 0.2 0.1 0.0 0.0
CONSOLIDATED STATEMENT OF June 30, March 31, Dec. 31, Sept. 30, June 30,
FINANCIAL POSITION (MEUR) 2012 2012 2011 2011 2011
ASSETS
Non-current assets
Property, plant and equipment 9.7 9.3 9.0 8.4 9.2
Goodwill 19.3 19.3 19.3 19.2 18.5
Intangible assets 17.8 17.2 15.7 14.3 13.4
Other financial assets 0.1 0.1 0.1 0.1 0.1
Receivables
Deferred tax assets 0.1 0.1 0.1 0.1 0.1
Non-current assets total 47.0 46.0 44.1 42.1 41.3
Current assets
Inventories 2.5 2.0 1.8 2.1 2.2
Trade and other receivables 68.0 62.1 59.3 54.7 47.0
Financial assets at fair
value
through profit or loss 0.1 0.0
Cash and short term deposits 8.6 7.3 10.0 7.2 17.8
Current assets total 79.1 71.4 71.0 64.0 67.0
TOTAL ASSETS 126.2 117.4 115.1 106.1 108.3
EQUITY AND LIABILITIES
Equity attributable to equity
holders
of the parent
Share capital 12.9 12.9 12.9 12.9 12.9
Invested non-restricted
equity fund 38.7 38.7 38.7 38.7 38.7
Translation difference 0.4 0.5 0.4 0.4 0.5
Retained earnings 13.4 13.7 13.4 10.2 12.3
Non-controlling interests 1.8 1.7 1.5 1.4 1.4
Total equity 67.4 67.5 67.0 63.6 65.9
Non-current liabilities
Deferred tax liabilities 0.9 0.9 1.0 1.1 1.2
Pension obligations 1.3 1.3 1.3 1.3 1.2
Provisions 0.5 0.7 0.5 0.6 0.8
Interest-bearing liabilities 4,9 3.7 4.0 4.3 5.9
Non-current liabilities total 7,6 6.7 6.9 7.3 9.1
Current liabilities
Trade and other payables 40.3 35.5 34.9 29.1 27.6
Financial liabilities at fair
value
through profit or loss 0.1 0.3 0.5
Provisions 1.4 0.7 1.0 0.7 0.7
Interest-bearing loans and
borrowings (non-current) 9,4 7.1 5.0 4.9 5.0
Current liabilities total 51,2 43.2 41.3 35.2 33.3
Total liabilities 58.8 49.9 48.1 42.5 42.4
TOTAL EQUITY AND LIABILITIES 126.2 117.4 115.1 106.1 108.3
4-6/ 1-3/ 10-12/ 7-9/ 4-6/
CONSOLIDATED STATEMENT
OF CASH FLOWS BY QUARTER 2012 2012 2011 2011 2011
3 months 3 months 3 months 3 months 3 months
Net cash from operating
activities 0.8 -0.9 7.1 -6.6 3.4
Net cash from investing
activities -2.1 -2.5 -3.7 -2.3 -2.8
Net cash from financing
activities 2.6 0.7 -0.6 -1.7 -0.8
Net change in cash and cash
equivalents 1.3 -2.7 2.7 -10.6 -0.3
FINANCIAL PERFORMANCE RELATED RATIOS 1-6/2012 1-6/2011 1-12/2011
6 months 6 months 12 months
STATEMENT OF COMPREHENSIVE INCOME (MEUR)
Net sales 96.6 76.1 162.2
Operating profit (loss) 0.5 -4.4 -4.0
Operating profit (loss), % of net sales 0.5 -5.8 -2.5
Result before taxes 0.5 -5.1 -4.5
Result before taxes, % of net sales 0.6 -6.7 -2.8
Result for the period 0.2 -5.1 -5.1
PROFITABILITY AND OTHER KEY FIGURES
Interest-bearing net liabilities, (MEUR) 5.7 -6.9 -0.9
Net gearing, -% 8.5 -10.5 -1.4
Equity ratio, % 58.1 64.7 62.8
Gross investments, (MEUR) 6.8 5.7 12.4
Average personnel during the period 1659 1539 1553
Personnel at the period end 1711 1525 1607
AMOUNT OF SHARE ISSUE ADJUSTMENT June 30, June 30, Dec. 31,
(1,000 pcs) 2012 2011 2011
At the end of period 129 413 129 413 129 413
Average for the period 129 413 129 413 129 413
Average for the period diluted with stock options 130 230 130 187 130 051
1-6/2012 1-6/2011 1-12/2011
STOCK-RELATED FINANCIAL RATIOS (EUR)
6 months 6 months 12 months
Basic earnings per share -0.00 -0.04 -0.04
Diluted earnings per share -0.00 -0.04 -0.04
Equity *) per share 0.51 0.50 0.51
*) Equity attributable to equity holders of the
parent
MARKET VALUES OF SHARES (EUR) 1-6/2012 1-6/2011 1-12/2011
6 months 6 months 12 months
Highest 0.79 0.76 0.76
Lowest 0.38 0.50 0.36
Average 0.63 0.66 0.55
At the end of period 0.62 0.50 0.38
Market value of the stock, (MEUR) 80.2 64.7 49.2
Trading value of shares, (MEUR) 5.1 2.4 5.0
Number of shares traded, (1,000 pcs) 8 222 3 585 9 169
Related to average number of shares % 6.4 2.8 7.1
SECURITIES AND CONTINGENT LIABILITIES June 30, June 30, Dec. 31,
(MEUR) 2012 2011 2011
AGAINST OWN LIABILITIES
Floating charges 18.1 8.1 11.4
Guarantees 23.5 15.0 22.7
Rental liabilities
Falling due in the next year 6.8 4.3 6.9
Falling due after one year 16.6 15.9 17.9
Other contractual liabilities
Falling due in the next year 2.3 3.2 2.5
Falling due after one year 1.8
Mortgages are pledged for liabilities totalled 9.7 5.4 4.3
NOMINAL VALUE OF CURRENCY DERIVATIVES June 30, June 30, Dec. 31,
(MEUR) 2012 2011 2011
Foreign exchange forward contracts
Market value 0.0 0.0 -0.3
Nominal value 4.0 14.5 5.5
Purchased currency options
Market value 0.0 0.1
Nominal value 5.0 4.3
Sold currency options
Market value -0.2 -0.1
Nominal value 10.0 8.6
[HUG#1632493]
