Cencorp Corporation Stock exchange release 13.11.2012 at 09.00 Finnish time
CENCORP CORPORATION’S INTERIM REPORT JANUARY – SEPTEMBER 2012
The net sales of Cencorp Corporation’s (“Cencorp”) continuing operations for the reporting period January – September 2012 was EUR 12.1 million (EUR 16.5 million in 2011). The operating profit of continuing operations was EUR -2.4 million (-2.9), profit for the period EUR -2.9 million (-3.7), earnings per share were EUR -0.008 (-0.011) and EBITDA was EUR -0.8 million (-1.2).
GENERAL
Cencorp belongs to the Finnish Savcor Corporation (“Savcor”). Savcor Group companies owned approximately 78,9 % of the Cencorp shares on 30 September 2012.
More information on principle activities and events during the reporting period can be found in the stock exchange releases published on Cencorp’s website at www.cencorp.com.
The interim report has been drawn up in compliance with the IAS 34 Interim Financial Reporting standard. In the interim report, Cencorp has applied the same accounting principles as in the annual report 2011. The interim report has not been audited.
FINANCIAL DEVELOPMENT
The two business segments Cencorp reports of are Laser and Automation Applications, and Special Components. The Laser and Automation Applications segment comprises Cencorp’s operations preceded the Face (Telecom) transaction and the Special Components segment the business acquired through the Face (Telecom) transaction in 2010. Since the Guangzhou plant closing announced in May the Special Components segment comprises only special component production at the Beijing plant.
The figures in brackets are comparison figures for the corresponding period in 2011, unless stated otherwise. 29 May 2012 Cencorp announced that it exits from its unprofitable decoration business and closes down its plant in Guangzhou, China, producing decoration applications. In consequence of the closing down of the Guangzhou plant and the exit from decoration business Cencorp reports the financial figures relating to the Guangzhou plant’s decoration business as discontinued operations from now on. In Cencorp’s financial reports the profit of discontinued operations is reported on a separate line, apart from continued operations, thus, the income statement, except the discontinued operations item, concern the company’s continued operations only.
July – September 2012 (continued operations)
- Cencorp Group’s net sales decreased by 43.1 per cent to EUR 3.0 million (EUR 5.4 million).
- EBITDA was EUR -0.8 million(EUR -0.1 million).
- Operating profit was EUR -1.3 million (EUR -0.5 million).
- The Group’s profit before taxes was EUR -1.6 million (EUR -0.3 million).
- Profit for the period was EUR -1.6 million (EUR -0.3 million).
- Earnings per share were EUR -0.005 (EUR -0.001) and diluted earnings per share EUR -0.005 (EUR -0.001).
- Net sales of the Laser and Automation Applications segment decreased by 54.5 per cent to EUR 1.6 million (EUR 3.6 million) and operating profit was EUR -0.7 million (EUR -0.2 million). The segment’s EBITDA was EUR -0.5 million (EUR -0.0 million).
- Net sales of the Special Components segment decreased by 19.7 per cent to EUR 1.4 million (EUR 1.7 million) and operating profit was EUR -0.6 million (EUR -0.3 million). The segment’s EBITDA was EUR -0.3 million (EUR -0.0 million).
January – September 2012 (continued operations)
- Cencorp Group’s net sales decreased by 26.6 per cent to EUR 12.1 million (EUR 16.5 million).
- The order book at the end of September stood at ca. EUR 2.2 million (EUR 2.5 million).
- EBITDA was EUR -0.8 million (EUR -1.2 million).
- Operating profit was EUR -2.4 million (EUR -2.9 million).
- The EBITDA and the operating profit include a one-off profit of EUR 1.2 million from the sale of Beijing plant.
- The Group’s profit before taxes was EUR -2.9 million (EUR -3.6 million).
- Profit for the period was EUR -2.9 million (EUR -3.7 million).
- Earning per share were EUR -0.008 (EUR -0.011) and diluted earnings per share were EUR -0.008 (EUR -0.011).
- The equity ratio at the end of September was 27.3 per cent (54.2 %). Sharp drop in the equity ratio originates, among other things, from write-off of ca. EUR 5.7 million relating to the closing of the Guangzhou plant.
- Net sales of the Laser and Automation Applications segment decreased by 40.1 per cent to EUR 7.4 million (EUR 12.4 million) and operating profit was EUR -2.1 million (EUR -1.2 million). The segment accounted for 61.0 percent of the Group’s net sales. The segment’s EBITDA was EUR -1.6 million (EUR -0.4) million.
- Net sales of the Special Components segment increased by 12.6 per cent to 4.7 million (EUR 4.2 million) and operating profit was EUR -0.3 million (EUR -1.6 million). The segment accounted for 39.0 per cent of the Group’s net sales. The segment’s EBITDA was EUR 0.9 million (EUR -0.7 million).
- The operating profit of the Special Components segment include a one-off profit of EUR 1.2 million from the sale of the Beijing plant. The company continues its operation in the same building as lessee.
MARKET OUTLOOK
Cencorp revised its market outlook on 21 August 2012. That time Cencorp announced that the company has signed a Memorandum of Understanding (MOU) on acquiring Avery Dennison’s Conductive Back Sheet (CBS) business and related intellectual property rights. The MOU is non-binding.
On 1 October 2012 Cencorp announced that Cencorp and a Dutch company, Sunweb Solar Energy Holding B.V. (Sunweb Solar) have signed a Memorandum of Understanding (MOU), according to which Cencorp acquires Sunweb Solar's photovoltaic module business and related pilot production line, the Sunweb trademark as well as the patents and other intellectual property rights relating to the business. The Memorandum of Understanding is non-binding.
On 5 November 2012 Cencorp announced that it has signed a Memorandum of Understanding on delivering Conductive Back Sheets (CBS) to one of the leading Chinese photovoltaic module manufacturers. The value of the Memorandum of Understanding is expected to be at its minimum ca. EUR 20 million over the course of next three years. The Memorandum of Understanding is non-binding.
The aforesaid Memorandums of Understanding are expected to turn into binding contracts by the end of 2012. However, in regard to the Memorandum of Understanding on delivering CBS to the Chinese photovoltaic module manufacturer, the estimated minimum value of EUR 20 million for the next three years will probably stay non-binding even though the actual Memorandum of Understanding turns into a binding supply contract. In this business customers do not give binding order estimations.
Cencorp has previously emphasized in its strategy that the company’s growth will be based on new Cleantech solutions and especially applications for new energies. If realized the Avery Dennison and Sunweb Solar transactions will change the company’s cost structure and the targets for the new future. As Cencorp is now in a strong transition stage following the new strategy, Cencorp cannot assess how the Avery Dennison and Sunweb Solar transactions and change in company’s business focus will impact the company, due to which Cencorp has decided not to give any financial guidance for the time being, as stated in the release of 21 August 2012.
Cencorp’s future outlook will be highly dependent on the company’s ability to reach the targeted market position in the global photovoltaic module market as well as on the company’s long-term and short-term financing. Cencorp’s goal is to reach strong market position as provider of locally produced high-quality photovoltaic modules.
LONG-TERM OBJECTIVES FOR MANAGING DIRECTOR
On 21 August 2012 Cencorp’s Board of Directors published its long-term financial and other objectives for Managing Director as follows:
In January 2012 Cencorp announced it had signed a remarkable frame agreement on delivering flexible circuits for renewable energy solutions for Avery Dennison. At that time the company estimated that the value of the frame agreement may exceed EUR 50 million in the course of three years. Based on this evaluation, company’s new strategy published in the spring 2012 and on the fact that the Avery Dennison transaction, if realized, enables Cencorp providing its customers with wider and multiple times of value offering related to the photovoltaic modules and other renewable energy solutions, the Board of Directors has set the following long-term objectives for the company’s Managing Director:
- Thorough but fast transition from a company manufacturing only production automation applications and special components into a company that develops and provides Cleantech applications with a strong market position as provider, using laser and automation technology, of locally in different market areas produced, high-quality photovoltaic modules.
- Cencorp’s goal is to increase its shareholder value with growth and profitability. Cencorp aims for growth in Cleantech business where the company has good possibilities to achieve a strong global position and faster growth.
- Laser and Automation Applications segment has its main focus on the life cycle management of systems and equipments with growth expectations for service business.
- In the long run Cencorp is aiming for remarkable growth in its net sales with net sales target of more than EUR 200 million for 2016, provided the company has sufficient capital with growth coming mainly from Cleantech operations, especially from solar photovoltaic and fuel cell applications.
The Memorandum of Understanding with Sunweb Solar and the Memorandum of Understanding on delivering Conductive Back Sheets (CBS) to one of the leading Chinese photovoltaic module manufacturers have been signed after the long-term objectives for the company’s Managing Director were published.
The long-term objectives set for the Managing Director involve also risks and the long-term objectives should not be considered as the company’s financial guidance. Even though the objectives are based on market knowledge and technical surveys, the risks are significant and it is not certain if the Managing Director reaches all or part of the targets set for him.
MANAGING DIRECTOR’S REVIEW
The third quarter of the fiscal year started in difficult conditions. Cencorp had just started executing cost savings decided in the statutory negotiations. Economic slowdown, started in the second quarter, got worse in July and the sales of new machines almost stopped. However, there has been some improvement in August – September and order intake has risen close to normal level.
In the third quarter Cencorp had a strong focus on the Cleantech technology according to its strategy. The company is becoming more and more a technology provider for solar photovoltaic modules instead of being a provider of electronics automation. A concrete example is the Memorandum of Understanding, announced on 21 August 2012, on acquiring Avery Dennison’s Conductive Back Sheet (CBS) business. Since the reporting period was closed Cencorp has strengthen its position by signing the Memorandum of Understanding, announced on 1 October 2012, on acquiring a Dutch company’s, Sunweb Solar Energy Holding B.V., photovoltaic module business, related pilot production line and intellectual property rights.
Cencorp is targeting to take advantage of the technology transition stage going on in the global solar energy business and to bring new products and solutions using the latest photovoltaic technology on the further growing market.
As the first solar photovoltaic product Cencorp will introduce new generation Conductive Back Sheet, used in photovoltaic modules, on the market. Cencorp has also announced on 5 November 2012 that it has signed a Memorandum of Understanding with one of the leading Chinese photovoltaic module manufacturers on delivering Conductive Back Sheets. Deliveries and relating cash flow is expected to start during the first quarter of 2013.
In accordance with Cencorp’s Cleantech strategy future growth will be driven by flexible circuits provided for the solar energy industry and photovoltaic modules and by special components for fuel cells.
OPERATING ENVIRONMENT
Cencorp mainly operates in industries applying electronics and cleantech technology. Its main geographical market areas are Europe, North America, South America and Asia. Cencorp’s key customers for laser and automation applications operate globally and require local service. The global electronics industry, including the manufacture of mobile phones, is mostly concentrated in Asia, the domestic market area for the special components manufactured by Cencorp.
Special Components
In the near future the focus of Cencorp’s Special Components business will also be in component manufacturing for new generation photovoltaic modules. The investment at the Beijing plant to enable mass production of large roll-to-roll Conductive Back Sheets is almost finished. The Beijing plant will be one of the world’s most competitive plants of its kind. Cencorp’s Memorandum of Understanding with one of the leading photovoltaic module manufacturer, announced on 5 November 2012, is one proof of this.
Even though Cencorp’s growth expectations lie mainly on photovoltaic module components, the company also provides tens of millions of NFC, RFID, WIFI and other flexible circuits used in mobile devices. Cencorp believes it has become the leading manufacturer of NFC (Near Field Communication) antennas. Cencorp estimates that as NFC antennas become more commonly used in mobile phone, Cencorp’s own antenna production will also grow.
Laser and Automation Applications
Decrease in the demand for automation equipment, started in the second quarter, continued also in the third quarter, due to which Cencorp’s order book decreased substantially. In order to decrease the influence of strong cycles relating to automation applications deliveries business development will be gradually focused more and more in life cycle management. With its current structure and organization Cencorp can also better prepare itself to changes in demand than before. The demand for life cycle management services continued to be at reasonable level throughout the third quarter.
There has been a clear improvement in demand at the end of the third quarter and the order book is estimated to grow also to acceptable level in the near future. Cencorp’s laser and automation applications have been updated and the company finds no obstacle to growing demand, at least in terms of product portfolio.
Beside the traditional depaneling, laser materials processing and odd-form assembly Cencorp has started developing equipment used in photovoltaic module production. The company believes that due to the technology change there will be a remarkable increase in the demand for automation in the photovoltaic module business. Cencorp estimates that the first new automation applications designed for PV module production, will generate cash flow already in the fiscal year 2013.
FINANCING
Cash flow from business operations before investments in January – September was EUR 0.95 million (EUR -2.5 million). Trade receivables at the end of the reporting period were EUR 2.2 million (EUR 5.4 million). Net financial items amounted to EUR -0.5 million (EUR -0.8 million).
At the end of September, the equity ratio was 27.3 per cent (54.2 %) and equity per share was EUR 0.02 (EUR 0.06). At the end of the reporting period, the Group’s liquid assets totaled EUR 0.3 million (EUR 1.3 million) unused export credit limits, bank guarantee limits and factoring loans amounted to EUR 1.6 million (EUR 0.7 million). Sharp drop in the equity ratio originates, among other things, from write-off of ca. EUR 5.7 million relating to the closing of the Guangzhou plant.
As previously announced, Cencorp’s financial position has been tight. Slowdown in the equipment sales at the end of the second quarter followed by a decrease in order book, and investments in the development of photovoltaic module business have made the company’s financial position even tighter. In order to strengthen company’s financial position Cencorp announced 21 August 2012 that it will issue a convertible bond with the maximum amount of EUR 1,500,000, to selected investors. However, the realization of the convertible bond is delayed, which has also had a negative effect on the company’s financial position. The subscription period has been continued until 30 November 2012.
Cencorp has also commenced preparing a share issue. The objective of the share issue is to finance establishing of photovoltaic module business plan. The share issue is expected to be carried out by the end of this year. Cencorp will inform later on the terms and schedule of the share issue.
Cencorp agreed with its financers on amendment of the financial agreements and announced on 1 October 2012 that :
- Sampo Pankki Oyj’s financial facility agreement totaling EUR four million was continued until 30 November 2012;
- the maturity date of a convertible bond of some EUR 1.2 million from Savcor Group Oy was extended until 30 November 2012; and
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the maturity date of a loan of EUR one million from Savcor Invest BV (former AC Invest BV), a daughter company of Savcor Group Oy, was extended until 30 November 2012, and additionally Savcor Group Oy renewed its commitment to extend the loan period until April 2013 if Cencorp’s financial position so requires.
With these actions Cencorp believes that the company has secured sufficient working capital for the next twelve months.
RESEARCH AND DEVELOPMENT
The Group’s research and development costs during the January-September period amounted to EUR 1.0 million (EUR 1.0 million) or 8.1 (6.0) per cent of net sales.
INVESTMENTS
Gross investments during the January – September period amounted to EUR 1.2 million (EUR 1.0 million). The largest investments were EUR 0.7 million in development costs.
PERSONNEL
At the end of September the Group employed 177 (332) people, out of which 59 persons worked in Finland, 107 persons in China and 11 persons in other countries. During the reporting period, salaries and fees totalled EUR 3.9 million (EUR 3.9 million).
SHARES AND SHAREHOLDERS
Cencorp’s share capital amounts to EUR 3 425 059.10. The number of shares is 342 161 270. The company has one series of shares, which confer equal rights in the company. Cencorp did not own any of its own shares at the end of the financial year.
The company had a total of 4491 shareholder at the end of September, and 0.8 per cent of the shares were owned by foreigners. The ten largest shareholders held 89.7 percent of the company’s shares and voting rights on 30 September 2012.
The largest shareholders on 30 September 2012
| Shares | Votes | |
| 1. SAVCOR GROUP LIMITED | 133 333 333 | 39,0 |
| 2. SAVCOR GROUP OY | 119 235 078 | 34,8 |
| 3. SAVCOR INVEST BV | 17 499 999 | 5,1 |
| 4. KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ETERA | 16 389 735 | 4,8 |
| 5. GASELLI CAPITAL OY | 11 000 000 | 3,2 |
| 6. PAASILA MATTI | 2 660 578 | 0,8 |
| 7. GASELLI CAPITAL PARTNERS OY | 2 050 000 | 0,6 |
| 8. JOKELA MARKKU | 1 987 519 | 0,6 |
| 9. PARPOLA VILLE | 1 478 759 | 0,4 |
| 10. FT CAPITAL OY | 1 428 570 | 0,4 |
| Others | 35 097 699 | 10,3 |
| TOTAL | 342 161 270 | 100,0 |
Savcor Group Oy announced on 20 April 2012 that it has acquired AC Capital’s subsidiary AC Invest B.V. (currently Savcor Invest B.V.) who owned approximately 5.1 percent of Cencorp Corporation’s shares, resulting in Savcor Group’s ownership in Cencorp Corporation increasing into 78.9 percent.
The members of the Board of Directors and the President and CEO, either directly or through companies under their control, held a total of 270 068 410 shares in the company on 30 September 2012, representing about 78.9 percent of the company’s shares and voting rights. Iikka Savisalo, Cencorp’s Managing Director, either directly or through companies under his control, held a total of 270 068 410 shares in the company.
The price of Cencorp’s share varied between EUR 0.05 and 0.12 during the January – September period. The average price was EUR 0.09 and the closing price at the end of September EUR 0.05. A total of 13.3 million Cencorp shares were traded at a value of EUR 1.1 million during the January – September period. The company’s market capitalization at the end of September stood at EUR 17.1 million.
No share options were granted to the company’s management during the reporting period. On 30 September 2012, the company had 8,931,000 options connected to bond I/2010 with a subscription period ending on 25 May 2015. Savcor Group Oy holds the options connected to bond I/2010. No 2006C series options have been allocated and Cencorp Group continues to hold them.
SHARE ISSUE AUTHORIZATIONS IN FORCE
1,069,000 shares remain under the authorization given by Cencorp’s Annual General Meeting on 28 April 2009 to issue 10,000,000 new shares in Cencorp.
Cencorp’s Extraordinary General Meeting held on 30 January 2012 decided to authorize the Board of Directors to issue 100,000,000 new shares.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH AVERY DENNISON
On 21 August Cencorp announced that the company and Avery Dennison Corporation (”Avery Dennison”), a US based company, have signed a Memorandum of Understanding (MOU) according to which Cencorp acquires Avery Dennison’s Conductive Back Sheet (CBS) business and related intellectual property rights. The MOU is non-binding. The purchase price stated in the MOU is USD 500,000 cash and 6,711,409 Cencorp shares. Avery Dennison agrees not to sell its Cencorp shares received as purchase price payment within 12 months from the effective date of the definitive purchase agreement. Cencorp will separately enter into agreements with the key persons that were involved with the business being acquired to join Cencorp team. The transaction is expected to take place by the end of 2012. The risks related to the non-binding MOU signed with Avery Dennison have been handled in more detail in the item “Risk management, risks and uncertainties” of this interim report.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH SUNWEB SOLAR
Cencorp announced on 1 October 2012 that the company has signed a Memorandum of Understanding with a Dutch company, Sunweb Solar on acquiring Sunweb Solar's photovoltaic module business and related pilot production line, the Sunweb trademark as well as the patents and other intellectual property rights relating to the business. The Memorandum of Understanding is non-binding. The purchase price stated in the MOU amounts to about one million Euros which will be paid partly in cash and partly in Cencorp shares. Purchase price paid in Cencorp shares is 4,000,000 registered Cencorp shares, which are, as a part of the transaction, valued at the price of EUR 0.12 per share. Purchase price paid in cash amounts to EUR 450,000. Sunweb Solar agrees not to sell its Cencorp shares received as purchase price payment within 12 months from the directing of the shares to Sunweb Solar. The transaction is expected to take place by the end of 2012. The risks related to the non-binding MOU signed with Sunweb Solar have been handled in more detail in the item “Risk management, risks and uncertainties” of this interim report.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH A MAJOR CHINESE SOLAR PHOTOVOLTAIC (PV) MODULE MANUFACTURER ON DELIVERING CONDUCTIVE BACK SHEETS
On 5 November 2012 Cencorp announced that the company has signed a Memorandum of Understanding on delivering Conductive Back Sheets (CBS) to one of the leading Chinese PV (photovoltaic) module manufacturers. The value of the Memorandum of Understanding is expected to be at its minimum ca. EUR 20 million over the course of next three years. The Memorandum of Understanding is non-binding. As a result of the evaluation process the customer became convinced of Cencorp's technology and production capability and decided to sign with Cencorp a Memorandum of Understanding determining preliminary commercial terms between the companies for the next three years. In the Memorandum of Understanding the companies agreed for example on the following:
- Cencorp prepares to increase its capacity to meet the customer's growing demands.
- The customer commits itself to purchase the volumes together agreed upon. The customer's current capacity need corresponds to deliveries of ca. EUR 20 million in the course of next three years.
- The customer commits itself to run required certification for the CBS.
- Cencorp commits itself to further develop the product and its competitiveness.
- Besides the cooperation in manufacturing the parties agree to cooperate in product development and marketing as well as in new innovations to enhance the parties' competitiveness in solar modules and related production technologies.
CBS deliveries, based on the Memorandum of Understanding, and relating cash flow is expected to start during the first quarter of 2013. Supply contract negotiations are expected to be finished by the end of 2012. The risks related to the non-binding MOU signed with the Chinese solar photovoltaic module manufacturer have been handled in more detail in the item “Risk management, risks and uncertainties” of this interim report.
MAIN TERMS OF THE CONVERTIBLE BOND
In order to secure the financing required to strengthen Cencorp’s capital structure the company issues convertible bond with the maximum amount of EUR 1,500,000 and simultaneously issues stock options with maximum amount of 21,428,571 free of charge. One (1) stock option is issued per each subscribed loan capital amount of EUR 0.07. The convertible bond is issued in deviation from the shareholders' pre-emptive subscription rights to those current Cencorp shareholders who directly on the record day of 31 July 2012 own at least one million (1,000,000) Cencorp’s shares or who otherwise are approved by the Board of Directors. Convertible bond can also be subscribed against a loan receivable from Cencorp, undisbuted on the record day, by converting the loan’s capital or interest into convertible bond according to the terms of the convertible bond. Loan period starts as of the payment of a loan to the company and ends on 7 September 2014 when the convertible bond will be due in its entirety pursuant to the loan terms. The shareholders' pre-emptive subscription rights are being deviated from as the stock options are issued to secure financing required to strengthen Cencorp’s capital structure cost effectively and considering the size of the financing. Thus, there is, from the company’s point of view, a weighty financial reason to issue the stock options.
An annual interest of eight (8) % will be paid on the convertible bond from the withdrawal of the bond. A holder of the bond has a right to subscribe an amount of shares, equivalent to the bondholders shareholding percentage at the time, in Cencorp’s possible future share issues with subscription period ending latest by 7 September 2014, at a subscription price that is 10 % lower than the subscription price in the share issue in question. The holder of the bond is entitled to converse the promissory note into the shares of the Company. One (1) stock option pursuant to the promissory note entitles the bond holder to subscribe for one (1) new share of the company. Based on the subscriptions made pursuant to the stock options, the Company shall issue in maximum of 21.428.571 new company shares. The Company has one (1) class of shares.
RISK MANAGEMENT, RISKS AND UNCERTAINTIES
Cencorp’s Board of Directors is responsible for the control of the company’s accounts and finances. The Board is responsible for internal control, while the President and CEO handles the practical arrangement and monitors the efficiency of internal control. Business management and control are taken care of using a Group-wide reporting and forecasting system.
The purpose of risk management is to ensure that any significant business risks are identified and monitored appropriately. The company’s business and financial risks are managed centrally by the Group’s financial department, and reports on risks are presented to the Board of Directors as necessary.
Due to the small size of the company and its business operations, Cencorp does not have an internal auditing organization or an audit committee.
The sufficiency of the company’s financing and working capital involve risks that are handled in more detail in the item Financing of this financial statement release. Realization of a convertible bond and a share issue, which the company announced on 21 August 2012, involves risks. It is not secured that the company will be able to collect EUR 1.5 million with the convertible bond to strengthen its capital structure or with the share issue to finance the establishing of photovoltaic module business plan. If the convertible bond and the share issue don’t materialize as planned, there is a risk that the establishment of Cencorp’s Cleantech strategy will be postponed or even fail, as the Avery Dennison and Sunweb Solar transactions cannot be realized without the aforesaid financing.
As it is difficult to make forecasts in an industry that is dependent on economic cycles, the biggest business risks are related to fluctuations in the demand for products and to the adjustment of operations to meet demand.
In terms of profitability, the most essential risks are related to the achievement of a sufficient invoicing volume in both business segments and the success achieved with the programs underway at Cencorp to improve profitability, such as improvements in productivity and business flexibility through outsourcing production.
In terms of operations, the biggest risks are related to outsourcing in-house equipment production to contract manufacturers, in particular to whether the production chain efficiency targets are achieved as planned.
The execution of the non-binding Memorandum of Understanding signed with Avery Dennison involves risks. The final terms of the transaction are still under negotiations and realization of the acquisition is not yet certain. Additionally, the transaction is still subject to several issues such as due diligence and especially to Cencorp’s short and long-term financing required to run the business being acquired. Thus, Cencorp is not yet able to estimate possible realization, effective date neither acquisition’s influence in Cencorp nor risks relating to the transaction. Cencorp will announce further information on the matter as soon as the negotiations have been finished, which is expected to take place before the end of 2012.
The execution of the non-binding Memorandum of Understanding signed with Sunweb Solar involves risks. The final terms of the transaction are still under negotiations and realization of the acquisition is not yet certain. Additionally, the transaction is still subject to several issues such as due diligence and especially to Cencorp’s short and long-term financing required to run the business being acquired. Thus, Cencorp is not yet able to estimate possible realization, effective date neither acquisition’s influence in Cencorp nor risks relating to the transaction. Cencorp will announce further information on the matter as soon as the negotiations have been finished, which is expected to take place before the end of 2012.
The execution of the non-binding Memorandum of Understanding signed with a major Chinese photovoltaic module manufacturer involves risks. The final terms of an agreement are still under negotiations, thus execution of the agreement is not yet guaranteed. Additionally, the agreement is subject to Cencorp's short-term and long-term financing which is still under negotiation. Thus, Cencorp is not yet able to estimate the agreement's possible execution, effective date neither the agreement's impact in Cencorp nor the risks relating to it. Cencorp will announce further information as soon as the negotiations have been finished, which is expected to take place before the end of 2012. However, in regard to the Memorandum of Understanding on delivering CBS to the Chinese photovoltaic module manufacturer, the estimated minimum value of EUR 20 million for the next three years will probably stay non-binding even though the actual Memorandum of Understanding turns into a binding supply contract. In this business customers do not give binding order estimations.
The long-term objectives set for the Managing Director involves also risks and the long-term objective should not be considered as the company’s financial guidance. Even though the objectives are based on market knowledge and technical surveys, the risks are significant and it is not certain if the Managing Director reaches all or part of the targets set for him.
Other risks connected to Cencorp have been presented in more detail in the Annual Report for 2011 and in the base prospectus and its notes published on 25 October 2010.
In Mikkeli, 13 November 2012
Cencorp Corporation
BOARD OF DIRECTORS
| Consolidated statement of comprehensive income | ||||||
| (unaudited) | ||||||
| 1 000 EUR | 7-9/2012 | 7-9/2011 | 1-9/2012 | 1-9/2011 | 1-12/2011 | |
| Continuing operations | ||||||
| Net sales | 3 045 | 5 351 | 12 129 | 16 517 | 21 608 | |
| Cost of sales | -2 994 | -4 594 | -11 396 | -14 985 | -19 859 | |
| Gross profit | 52 | 757 | 733 | 1 532 | 1 748 | |
| Other operating income | 49 | 10 | 1 358 | 60 | 130 | |
| Product development expenses | -306 | -248 | -988 | -998 | -1 288 | |
| Sales and marketing expenses | -487 | -448 | -1 452 | -1 361 | -1 987 | |
| Administrative expenses | -614 | -595 | -2 007 | -2 093 | -2 717 | |
| Other operating expenses | -7 | -15 | -56 | -20 | -157 | |
| Operating profit | -1 314 | -539 | -2 412 | -2 880 | -4 271 | |
| Financial income | 309 | 227 | 1 255 | 769 | 1 012 | |
| Financial expenses | -605 | -26 | -1 747 | -1 528 | -1 583 | |
| Profit before taxes from continuing operations | -1 610 | -339 | -2 905 | -3 639 | -4 843 | |
| Income taxes | 1 | 6 | 27 | -43 | -6 | |
| Profit/loss for the period from continuing operations | -1 609 | -333 | -2 877 | -3 682 | -4 848 | |
| Discontinued operations | ||||||
| Profit/loss after tax for the period from discontinued operations | -255 | -481 | -9 079 | -1 945 | -2 667 | |
| Profit/loss for the period | -1 864 | -814 | -11 956 | -5 627 | -7 516 | |
| Profit/loss attributable to: | ||||||
| Shareholders of the parent company | -1 864 | -814 | -11 956 | -5 627 | -7 516 | |
| Earnings/share (diluted), eur | -0,01 | 0,00 | -0,03 | -0,02 | -0,02 | |
| Earnings/share (basic), eur | -0,01 | 0,00 | -0,03 | -0,02 | -0,02 | |
| Continuing operations: | ||||||
| Earnings/share (diluted), eur | -0,005 | -0,001 | -0,008 | -0,011 | -0,014 | |
| Earnings/share (basic), eur | -0,005 | -0,001 | -0,008 | -0,011 | -0,014 | |
| Other comprehensive income | ||||||
| Translation difference | -5 | 814 | 59 | 231 | 794 | |
| Other comprehensive income | 0 | 0 | 0 | 0 | 0 | |
| Total comprehensive income for the period | -1 870 | 1 | -11 897 | -5 396 | -6 721 | |
| Total comprehensive income attributable to: | ||||||
| Shareholders of the parent company | -1 870 | 1 | -11 897 | -5 396 | -6 721 | |
| Consolidated statement of financial position | ||||
| (unaudited) | ||||
| 1 000 EUR | 30.9.2012 | 30.9.2011 | 31.12.2011 | |
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 7 000 | 16 248 | 16 305 | |
| Consolidated goodwill | 2 967 | 2 967 | 2 967 | |
| Other intangible assets | 3 049 | 3 338 | 3 337 | |
| Available-for-sale investment | 10 | 10 | 10 | |
| Deferred tax assets | 9 | 0 | 10 | |
| Total non-current assets | 13 035 | 22 562 | 22 629 | |
| Current assets | ||||
| Inventories | 3 293 | 4 830 | 4 184 | |
| Trade and other non-interest-bearing receivables | 3 083 | 6 525 | 7 402 | |
| Cash and cash equivalents | 300 | 1 261 | 317 | |
| Total current assets | 6 676 | 12 616 | 11 903 | |
| Assets classified as held for sale | 1 284 | 0 | 0 | |
| Total assets | 20 996 | 35 178 | 34 532 | |
| EQUITY AND LIABILITIES | ||||
| Equity attributable to shareholders of the parent company | ||||
| Share capital | 3 425 | 3 425 | 3 425 | |
| Other reserves | 43 344 | 43 344 | 43 344 | |
| Translation difference | 643 | 21 | 584 | |
| Retained earnings | -41 692 | -27 845 | -29 735 | |
| Total equity | 5 721 | 18 945 | 17 618 | |
| Non-current liabilities | ||||
| Non-current loans | 519 | 2 900 | 0 | |
| Deferred tax liabilities | 22 | 54 | 34 | |
| Total non-current liabilities | 542 | 2 954 | 34 | |
| Current liabilities | ||||
| Current interest-bearing liabilities | 4 824 | 6 737 | 8 475 | |
| Trande and other payables | 7 426 | 6 409 | 8 196 | |
| Current provisions | 269 | 133 | 209 | |
| Total current liabilities | 12 519 | 13 279 | 16 880 | |
| Liabilities directly associated with assets classified as held for sale | 2 214 | 0 | 0 | |
| Total liabilities | 15 274 | 16 233 | 16 914 | |
| Equity and liabilities total | 20 995 | 35 178 | 34 532 | |
| Consolidated statement of cash flows | |||||
| (unaudited) | |||||
| 1 000 EUR | 1-9/2012 | 1-9/2011 | 1-12/2011 | ||
| Cash flow from operating activities | |||||
| Income statement profit/loss from continuing operations before taxes | -2 905 | -3 639 | -4 843 | ||
| Income statement profit/loss from discontinued operations before taxes | -9 079 | -1 945 | -2 667 | ||
| Income statement profit/loss before taxes | -11 984 | -5 584 | -7 510 | ||
| Non-monetary items adjusted on income statement | |||||
| Depreciation and impairment | + | 7 977 | 2 633 | 3 949 | |
| Gains/losses on disposals of non-current assets | +/- | -1 166 | 0 | 88 | |
| Unrealized exchange rate gains (-) and losses (+) | +/- | 57 | -91 | -507 | |
| Other non-cash transactions | +/- | 0 | 0 | 62 | |
| Financial income and expense | + | 545 | 742 | 1 003 | |
| Interest gains | - | 0 | 0 | 0 | |
| Taxes | - | 0 | 0 | 0 | |
| Total cash flow before change in working capital | -4 570 | -2 300 | -2 915 | ||
| Change in working capital | |||||
| Increase (-) / decrease (+) in inventories | 298 | 144 | 520 | ||
| Increase (-) / decrease (+) in trade and other receivables | 4 230 | 2 407 | 1 957 | ||
| Increase (+) / decrease (-) in trade and other payables | 1 285 | -2 000 | -524 | ||
| Change in working capital | 5 814 | 551 | 1 953 | ||
| Adjustment of financial items and taxes to cash-based accounting | |||||
| Interest paid | - | -182 | -339 | -429 | |
| Interest received | + | 8 | 3 | 14 | |
| Other financial items | - | -135 | -302 | -397 | |
| Taxes paid | - | 15 | -128 | -120 | |
| Financial items and taxes | -294 | -766 | -932 | ||
| NET CASH FLOW FROM BUSINESS OPERATIONS | 950 | -2 515 | -1 894 | ||
| CASH FLOW FROM INVESTING ACTIVITIES | |||||
| Investments in tangible and intangible assets | - | -1 240 | -1 276 | -1 424 | |
| Proceeds on disposal of tangible and intangible assets | + | 3 677 | 0 | 70 | |
| Loans given | - | 0 | 0 | 0 | |
| Repayment of loan receivables | + | 0 | 1 468 | 1 468 | |
| NET CASH FLOW FROM INVESTMENTS | 2 437 | 192 | 114 | ||
| CASH FLOW FROM FINANCING ACTIVITIES | |||||
| Proceeds from share issue | + | 0 | 862 | 862 | |
| Proceeds from current borrowings | + | 4 572 | 8 360 | 10 083 | |
| Repayment of current borrowings | - | -7 728 | -7 177 | -10 244 | |
| Dividends paid | - | 0 | -4 | -4 | |
| NET CASH FLOW FROM FINANCING ACTIVITIES | -3 155 | 2 041 | 697 | ||
| INCREASE (+) OR DECREASE (-) IN CASH FLOW | 231 | -282 | -1 083 | ||
| Consolidated statement of changes in equity | ||||||
| (unaudited) | ||||||
| 1 000 EUR | Share capital | Other reserves | Translation difference | Distribu-table non-restricted equity fund | Retained earnings | Total |
| 31.12.2011 | 3 425 | 4 908 | 584 | 38 436 | -29 735 | 17 618 |
| Directed issue | - | - | - | - | - | 0 |
| Decrease from share issue | - | - | - | - | - | 0 |
| Direct entries in retained earnings | - | - | - | - | - | 0 |
| Translation difference, comprehensive income | - | - | 59 | - | - | 59 |
| Profit/loss for the period | - | - | - | - | -11 956 | -11 956 |
| 30.9.2012 | 3 425 | 4 908 | 643 | 38 436 | -41 692 | 5 721 |
| 1 000 EUR | Share capital | Other reserves | Translation difference | Distribu-table non-restricted equity fund | Retained earnings | Total |
| 31.12.2010 | 3 425 | 4 908 | -210 | 35 104 | -22 082 | 21 145 |
| Directed issue | - | - | - | 3 332 | - | 3 332 |
| Decrease from share issue | - | - | - | - | -136 | -136 |
| Translation difference, comprehensive income | - | - | 231 | - | - | 231 |
| Profit/loss for the period | - | - | - | - | -5 627 | -5 627 |
| 30.9.2011 | 3 425 | 4 908 | 21 | 38 436 | -27 845 | 18 945 |
| Segment information | |||||
| (unaudited) | |||||
| The segment information for profit/loss numbers and balance sheet per 30 September 2012 include only continuing operations. Information regarding discontinued operations is given in attachment "Discontinued operations". | |||||
| The Group has two reporting segments: Laser and Automation Applications, and Special Components. The Laser and Automation Applications segment comprises Cencorp’s former business and the Special Components segment the business acquired through the Face transaction in 2010. The segment information presented by the Group is based on the management’s internal reporting and the organisational structure. | |||||
| 1 000 EUR | 1-9/2012 | 1-9/2011 | 1-12/2011 | ||
| Net sales | |||||
| Laser and Automation Applications | 7 400 | 12 365 | 15 079 | ||
| Special Components | 4 735 | 4 206 | 6 581 | ||
| Eliminations | -5 | -54 | -53 | ||
| Total | 12 129 | 16 517 | 21 608 | ||
| Operating profit | |||||
| Laser and Automation Applications | -2 143 | -1 236 | -2 517 | ||
| Special Components | -270 | -1 595 | -1 706 | ||
| Eliminations | 0 | -49 | -49 | ||
| Total | -2 412 | -2 880 | -4 271 | ||
| EBITDA | |||||
| Laser and Automation Applications | -1 636 | -439 | -1 283 | ||
| Special Components | 851 | -740 | -387 | ||
| Eliminations | 0 | -49 | -49 | ||
| Total | -785 | -1 228 | -1 718 | ||
| Profit/loss for the period | |||||
| Laser and Automation Applications | -2 375 | -1 771 | -2 969 | ||
| Special Components | -465 | -2 030 | -1 978 | ||
| Eliminations | -38 | 119 | 99 | ||
| Total | -2 877 | -3 682 | -4 848 | ||
| Assets | |||||
| Laser and Automation Applications | 28 530 | 30 308 | 30 611 | ||
| Special Components | 11 378 | 24 738 | 25 962 | ||
| Assets classified as held for sale | 1 284 | - | - | ||
| Eliminations | -20 196 | -19 868 | -22 040 | ||
| Total | 20 996 | 35 178 | 34 532 | ||
| Liabilities | |||||
| Laser and Automation Applications | 11 025 | 9 340 | 8 965 | ||
| Special Components | 7 755 | 13 961 | 15 174 | ||
| Liabilities directly associated with assets held for sale | 2 214 | - | - | ||
| Eliminations | -5 719 | -7 068 | -7 225 | ||
| Total | 15 275 | 16 233 | 16 914 | ||
| Investments | |||||
| Laser and Automation Applications | 412 | 605 | 729 | ||
| Special Components | 736 | 423 | 463 | ||
| Assets classified as held for sale | 4 | - | - | ||
| Total | 1 152 | 1 028 | 1 191 | ||
| Depreciation | |||||
| Laser and Automation Applications | 507 | 787 | 977 | ||
| Special Components | 1 121 | 855 | 1 214 | ||
| Total | 1 627 | 1 642 | 2 192 | ||
| Impairment | |||||
| Laser and Automation Applications | 0 | 10 | 257 | ||
| Special Components | 0 | 0 | 105 | ||
| Total | 0 | 10 | 361 | ||
| Discontinued operations | |||||
| (unaudited) | |||||
| 29 May 2012 Cencorp announced that it exits from its unprofitable decoration business and closes down its plant in Guangzhou, China, producing decoration applications. In consequence of the closing down of the Guangzhou plant and the exit from decoration business Cencorp reports the financial figures relating to the Guangzhou plant’s decoration business as discontinued operations from now on. | |||||
| The results and major classes of assets and liabilities of Savcor Face (Guangzhou) Technolgies Co., are as follows: | |||||
| 1 000 EUR | 1-9/2012 | 1-9/2011 | 1-12/2011 | ||
| Revenue | 1 876 | 3 395 | 4 857 | ||
| Expenses | -5 484 | -5 446 | -7 608 | ||
| Loss recognised on the remeasurement to fair value | -5 397 | 0 | 0 | ||
| Operating profit | -9 005 | -2 051 | -2 751 | ||
| Finance costs | -74 | 106 | 84 | ||
| Profit/loss before tax from discontinued operation | -9 079 | -1 945 | -2 667 | ||
| Income tax | 0 | 0 | 0 | ||
| Profit/loss after tax from discontinued operation | -9 079 | -1 945 | -2 667 | ||
| Assets | |||||
| Property, plant and equipment | 757 | - | - | ||
| Inventories | 184 | - | - | ||
| Trade and other non-interest-bearing receivables | 115 | - | - | ||
| Cash and cash equivalents | 228 | - | - | ||
| Assets classified as held for sale | 1 284 | ||||
| Liabilities | |||||
| Trande and other payables | 2 164 | - | - | ||
| Provisions | 50 | - | - | ||
| Liabilities directly associated with assets classified as held for sale | 2 214 | ||||
| Net assets directly associated with disposal group | -930 | ||||
| Cumulative translation difference | -2 315 | ||||
| Savcor Face (Guangzhou) Technolgies Co., Ltd:n net cash flow: | |||||
| 1 000 EUR | 1-9/2012 | 1-9/2011 | 1-12/2011 | ||
| Operating | 204 | 153 | -35 | ||
| Investing | -20 | -157 | -179 | ||
| Financing | 0 | -232 | -236 | ||
| Net cash flow | 184 | -236 | -450 | ||
| Earnings/share (basic), from discontinued operations | -0,03 | ||||
| Earnings/share (diluted) from discontinued operations | -0,03 | ||||
| Key figures | |||||
| (unaudited) | |||||
| 1 000 EUR | 7-9/2012 | 7-9/2011 | 1-9/2012 | 1-9/2011 | 1-12/2011 |
| Net sales | 3 045 | 5 351 | 12 129 | 16 517 | 21 608 |
| Operating profit | -1 314 | -539 | -2 412 | -2 880 | -4 271 |
| % of net sales | -43,1 | -10,1 | -19,9 | -17,4 | -19,8 |
| EBITDA | -796 | -55 | -785 | -1 227 | -1 718 |
| % of net sales | -26,1 | -1,0 | -6,5 | -7,4 | -8,0 |
| Profit before taxes | -1 610 | -339 | -2 905 | -3 639 | -4 843 |
| % of net sales | -52,9 | -6,3 | -23,9 | -22,0 | -22,4 |
| Balance Sheet value | 20 996 | 35 178 | 20 996 | 35 178 | 34 532 |
| Equity ratio, % | 27,3 | 54,2 | 27,3 | 54,2 | 51,2 |
| Net gearing, % | 88,1 | 44,2 | 88,1 | 44,2 | 46,3 |
| Gross investments | 298 | 212 | 1 152 | 1 028 | 1 191 |
| % of net sales | 9,8 | 4,0 | 9,5 | 6,2 | 5,5 |
| Research and development costs | 306 | 248 | 988 | 998 | 1 288 |
| % of net sales | 10,0 | 4,6 | 8,1 | 6,0 | 6,0 |
| Order book | 2 168 | 2 520 | 2 168 | 2 520 | 2 793 |
| Personnel on average | 182 | 334 | 264 | 345 | 343 |
| Personnel at the end of the period | 177 | 332 | 177 | 332 | 328 |
| Non-interest-bearing liabilities | 7 426 | 6 409 | 7 426 | 6 409 | 8 196 |
| Interest-bearing liabilities | 5 343 | 9 637 | 5 343 | 9 637 | 8 475 |
| Share key indicators | |||||
| Earnings/share (basic) | -0,01 | -0,002 | -0,03 | -0,02 | -0,02 |
| Earnings/share (diluted) | -0,01 | -0,002 | -0,03 | -0,02 | -0,02 |
| Earnings/share (basic), from continuing operations | -0,005 | -0,001 | -0,008 | -0,011 | -0,014 |
| Earnings/share (diluted) from continuing operations | -0,005 | -0,001 | -0,008 | -0,011 | -0,014 |
| Equity/share | 0,02 | 0,06 | 0,02 | 0,06 | 0,05 |
| P/E ratio | -9,18 | -37,85 | -1,43 | -5,33 | -4,02 |
| Highest price | 0,06 | 0,13 | 0,12 | 0,20 | 0,20 |
| Lowest price | 0,05 | 0,07 | 0,05 | 0,07 | 0,07 |
| Average price | 0,05 | 0,09 | 0,09 | 0,13 | 0,12 |
| Closing price | 0,05 | 0,09 | 0,05 | 0,09 | 0,09 |
| Market capitalisation, at the end of the period, MEUR | 17,1 | 30,8 | 17,1 | 30,8 | 30,8 |
| Calculation of Key Figures | |||||
| EBITDA, %: | Operating profit + depreciation + impairment | ||||
| Net sales | |||||
| Equity ratio, %: | Total equity x 100 | ||||
| Total assets - advances received | |||||
| Net gearing, %: | Interest-bearing liabilities - cash and cash equivalents | ||||
| and marketable securities x 100 | |||||
| Shareholders' equity + minority interest | |||||
| Earnings/share (EPS): | Profit/loss for the period to the owner of the parent company | ||||
| Average number of shares adjusted for share issue | |||||
| at the end of the financial year | |||||
| Equity/share: | Equity attributable to shareholders of the parent company | ||||
| Undiluted number of shares on the balance sheet date | |||||
| P/E ratio: | Price on the balance sheet date | ||||
| Earnings per share | |||||
| Change in intangible and tangible assets | |||
| (unaudited) | |||
| 1 000 EUR | 30.9.2012 | 30.9.2011 | 31.12.2011 |
| Includes tangible assets, consolidated goodwill and other intangible assets | |||
| Carrying amount, beginning of period | 22 609 | 23 835 | 23 835 |
| Depreciation and impairment | -7 557 | -2 633 | -3 516 |
| Additions | 1 152 | 1 028 | 1 191 |
| Disposals | -2 507 | 0 | -158 |
| Discontinued operations | -757 | - | - |
| Exchange rate difference | 76 | 322 | 1 256 |
| Carrying amount, end of period | 13 016 | 22 552 | 22 609 |
| Commitments and contingent liabilities | |||
| (unaudited) | |||
| 1 000 EUR | 30.9.2012 | 30.9.2011 | 31.12.2011 |
| Loans from financial institutions | 1 195 | 5 791 | 5 206 |
| Promissory notes secured by pledge | 12 691 | 12 691 | 12 691 |
| Mortgages on real estate | 0 | 5 123 | 5 413 |
| Deposits | 0 | 580 | 0 |
| Factoring loan and export credit limit | 1 235 | 1 418 | 833 |
| Trade receivables | 841 | 1 414 | 833 |
| Promissory notes secured by pledge | 12 691 | 12 691 | 12 691 |
| Operating leases | |||
| Payable within one year | 51 | 45 | 60 |
| Payable over one year | 49 | 46 | 83 |
| Commitments | |||
| Payable within one year | 897 | 172 | 206 |
| Payable over one year | 896 | 278 | 302 |
| Commitments discontinued operations | |||
| Payable within one year | 629 | 549 | 580 |
| Payable over one year | 3 348 | 3 901 | 4 017 |
For more information please contact:
Cencorp: Iikka Savisalo, President and CEO, tel. +358 40 521 6082, iikka.savisalo@savcor.com
Cencorp Corporation’s financial statement release for 2012 will be published on 26 March 2013.
Distribution:
NASDAQ OMX, Helsinki
Main media
www.cencorp.com