Helsinki, Finland, 2014-07-30 08:30 CEST (GLOBE NEWSWIRE) --
Ixonos Plc Stock Exchange Release 30 July 2014 at 09:30
Interim report for the period 1 January – 30 June 2014
TURNOVER AND PROFITABILITY EXCEPTED TO IMPROVE DURING THE REST OF THE YEAR
Q2 2014 in brief:
Review period in brief (last year's reference figures inside brackets):
Future prospects in brief
The company estimates 2014 revenue to be in the range of EUR 23-29 million and that EBITDA for the full year will be negative.
For the second half of the year EBITDA is expected to be positive, due to the strengthened order book for second half of the year and lowered costs.
Esa Harju, President and CEO:
“Ixonos business is developing to the right direction, despite the fact that slower-than-expected sales development and certain restructuring one-off items resulted in a unsatisfactory revenue and profitability levels for the first half of the year. We believe that from the third quarter onwards our quarterly revenue will start to show growth, and our profitability will improve.
The renewal of our customer base has been proceeding well during the second quarter. We have secured new contracts and orders in our selected focus segments, and have had new openings particularly in our target markets USA and the UK. We have also received important continuation orders from our largest existing customers. All these have had a positive impact on our order book, which is now at a much higher level than earlier this year. As a result of these, we expect our revenue for the second half of the year to be higher than the first half.
We have been working for some time to streamline our cost levels. These actions will positively impact our profitability during the second half of the year, in line with our guidance. The biggest impact is expected to come from reduction of fixed costs, increased focus on project-level profitability, as well as higher efficiency in our service business.
We continue to focus our activities on to our key markets Finland, USA and the UK. In these markets we will ensure strong local presence of our sales people, design studios and key technical architects. Most of our software development resources will in the future be based in Finland, and we are currently actively recruiting in Finland.
Our Design-led approach, where we offer end-to-end solutions to our customers from initial user experience design to full solution implementation and maintenance, has proven to work very well, and in many cases is giving us a significant competitive advantage. We trust that after a long restructuring period, we are now proceeding to the right direction as a company.”
Ixonos is a design-led technology company that provides creative digital solutions and services for customer companies in selected target industries. We help our customer companies embrace digitalisation, Internet and mobility for productivity and unique user experiences for competitive advantage.
Our core strength and unique differentiator is our ability to combine our world-class design capability with strong technical implementation skills, hence offering total end-to-end solutions that deliver strategic value to our customers.
Ixonos’ design services cover digital, mobile, web design as well as service and industrial design. These holistic design services consist of design strategy, design and user research, design innovation and workshops, visual and interaction design, and prototyping for various connected devices and services and ranging to complete cross-platform design.
We excel in creative software development, both in embedded SW as well as in online SW. We utilise open standard technologies (e.g. Linux, Android). We combine the SW development capabilities with our world-leading technology knowledge and our deep understanding of user interface design and usability and excellent project management capabilities. This enables us to provide solutions for our customers with quality and agility. Our technology competences cover e.g. wireless connectivity, RF, audio, imaging and video technologies.
As per our sharpened strategy in October 2013 our focus business areas are:
- Industrial Internet: Providing embedded and creative digital solutions for the Industrial Internet. We help industrial companies to transform from proprietary technologies into standard open source technologies enabling increased productivity and value for their customers. We provide digital innovations that help them in their transformation to new digitally connected service business. Ixonos partners with leading chipset manufacturers, providing state-of the art platforms for our solutions. Our clientele in this segment consists of companies such as Kone, Outotec, Cargotec, Kemppi and Metso.
- Media: Helping TV broadcasters, studios, production companies and operators to offer increasingly interactive and personalised viewing experiences, as well as new business models, through innovations such as Ixonos TV Compass™ 2nd screen solution. Our clientele in this segment consists of companies such as Fox, MBC Group and Al Jazeera (US).
- Retail & brands: Helping consumer-facing retail and service brands to embrace Internet-based digital and mobile solutions for excelling in omni-channel retailing, customer experience, productivity and service innovation. Our clientele in this segment consists of companies such as Stockmann and Viking Line.
- Enterprise IT and ISVs: Providing secure and robust cloud and managed hosting services with Ixonos Elastic Cloud™ solution. Ixonos virtual private cloud has been designed for demanding enterprise use. It combines the security of a private cloud with the scalability of the public clouds. Information is secured and stored in our machine rooms in Finland. Ixonos Elastic Cloud™ is also used as an operating platform for several end-to-end solutions. Our clientele in this segment consists of companies such as Microsoft, Fonecta and eZ Systems.
We continue to serve our customers also in other market segments, including:
- Smart Device OEMs, where our customers include HP and Samsung. Demand in this area is clearly growing.
- Automotive and Transportation, where our customers include Marcopolo, VW and Honda.
- Finnish Public Sector, where our customers include Finland’s Ministry of Finance, Finland's Ministry of Social Affairs and Health as well as Tiera.
- Defence & Security, where our customers include Cassidian and Savox Communications.
Our organisation consists of:
- Sales & Marketing function in charge of customer relationships, sales pipeline, order intake and profitable revenue generation.
- Solution Creation function in charge of customer project management and profitable delivery, as well as offering portfolio management and R&D.
- Design function in charge of the design capabilities that are a unique differentiator in our Dream Design Deliver approach.
- The whole organisation’s operations are supported by support functions: Finance & Control and Human Resources.
Our offices are situated in our main markets Finland, the United States and Great Britain. Additionally the company has employees in Estonia and Germany.
- Our Solution Creation sites are mainly located in Finland. The company has decided to centralize its program development primarily to Finland and intends to close its site in Slovakia during this year. With a few minor exceptions the costs related to the change have already been taken in the second quarter.
- Our Design Studios are located in Finland, Great Britain and the United States.
- Our Sales offices are located in Finland, Great Britain and the United States.
Ixonos reports its operations as a single segment. According to the new strategy and organisational structure, Ixonos is seen to be one cash generating unit and segment.
Turnover in the Second quarter was EUR 5.6 million (2013: EUR 10.1 million), 44.2 per cent less than in the previous year.
Consolidated turnover for the review period was EUR 11.7 million (2013: EUR 20.9 million), which is 44.0 per cent less than in the previous year. The main reason for the decrease in turnover was a change in strategy of the company's single biggest customer
During the review period, no single customer generated a dominating share of the turnover, or exceeded more than one fourth of the total turnover.
The turnover is expected to turn into growth during the reminder of the year as a result of the strengthened order book and new customer relations.
Operating profit for the second quarter was EUR −2.1 million (2013: EUR -0.9 million) and profit before tax was EUR −2.3 million (2013: EUR −1.1 million). Profit for the second quarter was EUR −2.1 million (2013: EUR −0.9 million). Second -quarter earnings per share were EUR −0.02 (2013: EUR −0.06). Cash flow from operating activities per share in the first quarter was EUR -0.03 (2013: EUR -0.09).
The company's consolidated operating profit was EUR -5.0 million (2013: EUR -2.8 million) and profit before tax was EUR -5.5 million (2013: EUR -3.1 million). Profit for the period was EUR -4.9 million (2013: EUR -2.6 million). Earnings per share was EUR -0.06 (2013: EUR -0.17). Cash flow per share from operating activities was EUR -0.06 (2013: EUR -0.31).
RETURN ON CAPITAL
Consolidated return on equity (ROE) was −311.6 per cent (2013: -110.0 per cent) and return on investment (ROI) was −75.3 per cent (2013: -63.9 per cent).
Investments during the review period totalled EUR 0.7 million (2013: EUR 0.2 million). Investments consisted mainly of capitalised R&D expenses.
BALANCE SHEET AND FINANCING
The balance sheet total was EUR 24.6 million (2013: EUR 31.0 million). Shareholders’ equity was EUR 2.3 million (2013: EUR 9.0 million). The equity ratio was 9.3 per cent (2013: 28.8 per cent). The group’s liquid assets at the end of the review period amounted to EUR 0.3 million (2013: EUR 0.8 million). Non-controlling interest of the equity was EUR 0.2 million. The share issues executed during the review period are described in Shares and Share capital.
At the end of the review period, the balance sheet showed EUR 10.8 million (2013: EUR 12.2 million) in bank loans. This amount includes overdraft in use.
The Company has agreed with its main financiers an instalment free period for the loans until 15 March 2015. The Company announced its financial restructuring on 7 March 2014.
During the instalment free period the bank loans have covenants attached to them. These covenants are based on quarterly EBITDA levels. On June 30th 2014, the company did not meet the terms of the covenants. However, the company has received releasing covenant statements from its financers. The company’s non-current borrowings are still presented as current liabilities, in accordance with IFRS. Bank loans under the covenants were June 30th 2014 EUR 6.1 million (2013: EUR 7.2 million).
The company has EUR 3.5 million of long-term convertible bond as well as EUR 0.5 million long term and EUR 0.5 million short term conventional loan from Turret Oy Ab. The terms of the convertible bond were announced on 7 March 2014.
On 30 June 2014, the consolidated balance sheet included EUR 10.8 million in goodwill. This is EUR 1.6 million less than at the same time in 2013. The amount of goodwill has been reduced due to impairment recognized in September 2013.
The following parameters were used in the goodwill impairment testing:
The company made an impairment test on June 30th 2014. The present value of future cash flows exceeded the carrying value of assets by EUR 5.2 million.
Consolidated cash flow from operating activities during the review period was EUR −4.9 million (2013: EUR -4.7 million). By 30 June 2014, the company had sold EUR 1.6 million (2013: EUR 3.2 million) in accounts receivable to reduce their turnaround time.
The number of personnel averaged 366 (2013: 542) during the review period. At the end of the period, the company had 291 (2013: 502) employees. Staff decreased in Finland as well as abroad. At the end of the review period, the Group had 251 employees (2013: 371) in Finnish companies, while Group companies in other countries employed 40 (2013: 131). During review period the number of employees decreased by 149. The main changes were related to shutdowns of Ixonos Denmark Aps and Ixonos Slovakia s.r.o.
SHARES AND SHARE CAPITAL
Share turnover and price
Share related indicators have been adjusted by share issues and de-split in 2013. During the financial period, the share issue adjusted highest price of the company’s share was EUR 0.16 (2013: EUR 0.47) and the lowest price was EUR 0.08 (2013: EUR 0.15). The closing price on 30 June 2014 was EUR 0.11 (2013: EUR 0.19). The weighted average time and de-split adjusted price was EUR 0.12 (2013: EUR 0.24). The number of shares traded during the review period was 27.773.161 (2013: 8.941.212), which corresponds to 26.1 per cent (2013: 25.4 percent) of the total number of shares at the end of the review period. The number of shares has been affected by a rights issue in February 2013, a de-split in November 2013, a second rights issue in 2013 and the directed share issues decided on by the board on march 31st and April 30th 2014. According to the closing price 30 June 2014, the market value of the company’s shares was EUR 11.694.486 (2013: EUR 9.866.956).
The company executed several directed share issues during the review period. In March 15.255.177 shares were subscribed by Holdix Oy at a subscription price of EUR 0.12 per share amounting to a total of appr. EUR 1.83 million.
In May Holdix Oy and InfoSec Global (Schweiz) AG both subscribed 4 166 667 shares and in June Turret Oy Ab subscribed 6 866 666 shares. The subscription price was Eur 0.12 per share amounting to a total of appr. EUR 1.82 million. The shares issued in the share Issues in total are equivalent to approximately 40.15 per cent of all of the Company's shares and votes before the share issues and approximately 28.65 per cent in total of all of the Company's shares and votes after the share issues.
At the beginning of the review period, the company’s registered share capital was EUR 585,394.16 and the number of shares was 75,858,359. At the end of the review period, registered share capital was EUR 585,394.16 and the number of shares was 106,313,536.
The company has not paid any dividends or returned any equity during the review period.
Option plans 2011 and 2014
The Board of Directors of Ixonos Plc decided on 30 November 2011 to grant new options. This decision was based on the authorisation given by the Annual General Meeting on 29 March 2011.
The options were issued by 31 December 2011, free of charge, to a subsidiary wholly owned by Ixonos Plc. This subsidiary will distribute the options, as the Board decides, to employees of Ixonos Plc and other companies in the Ixonos Group, to increase their commitment and motivation. Options will not be issued to members of the Board of Directors of Ixonos Plc or to the Ixonos Group’s senior management (Ixonos Management Invest Oy shareholders).
The options will be marked IV/A, IV/B and IV/C. A total of 600,000 options will be issued. According to the terms of the options, the Board of Directors decides how the options will be divided between option series and, if needed, how undistributed options will be converted from one series to another.
Each option entitles its holder to subscribe for one new or treasury share in Ixonos Plc. The shares that can be subscribed for with options comprise 3.82 per cent of all Ixonos Plc shares and votes on a fully diluted basis.
The exercise period for the IV/A options will begin on 1 October 2014, for the IV/B options on 1 October 2015 and for the IV/C options on 1 October 2016. The exercise periods for all options will end on 31 December 2018. The exercise price for each option series is a trade volume weighted average price at NASDAQ OMX Helsinki. The exercise prices will be reduced by the amount of dividends, and they can also be adjusted under other circumstances specified in the option terms.
In order to ensure the equal treatment of shareholders and the 2011 stock option holders and taking into account the adjustment made on 30 October 2013 following the consolidation of the company's shares, the Board of Directors of Ixonos has due to the Rights Offering adjusted the subscription ratio and the subscription price of the 2011 stock options in accordance with the terms and conditions of the 2011 stock options. As regards stock options IV/A, the subscription ratio shall be amended to 5.022 and the subscription price shall be amended to EUR 0.291 per share. As regards stock options IV/C, the subscription ratio shall be amended to 5.022 and the subscription price shall be amended to EUR 0.208 per share. The option plan's IV/B options have been cancelled.
The total amount of shares is rounded down to full shares in connection with subscription of the shares and the total subscription price is calculated using the rounded amount of shares and rounded to the closest cent. Due to the above adjustments concerning stock options IV/A, the adjusted maximum total number of shares to be subscribed for based on the 2011 stock options shall be 3.013.313.
The Board of Directors of Ixonos Plc decided to issue stock options on 18 February 2014, on the basis of the authorization granted by the Extraordinary General Meeting held on 30 October 2013.
The stock options will be offered to the global management team and certain key personnel of Ixonos Plc and its subsidiaries for the purpose of improving commitment and motivation. The stock options will be marked as series 2014A, 2014B and 2014C. The aggregate number of stock options is 5.000.000. The Board of Directors will, in accordance the terms and conditions of the stock options, decide on the allocation of the stock options between different series and, if necessary, on the conversion of stock options that has not been allocated into another series of stock options.
Each option entitles its holder to subscribe for one new or treasury share in Ixonos Plc. On 18 February 2014, the shares that can be subscribed for with options comprise 5.96 per cent of all Ixonos Plc shares and votes on a fully diluted basis.
The share subscription period with 2014A stock options starts on 1 March 2016, with 2014B stock options on 1 March 2017 and with 2014C stock options on 1 March 2018. The share subscription period ends with all stock options on 31 December 2018. The share subscription price for each series is the volume weighted average price of the company's share on the Helsinki Exchanges during the period 1 March to 31 May 2014 for 2014A, 1 January to 31 March 2015 for 2014B and 1 January to 31 March 2016 for 2014C. The subscription price may be decreased with e.g. the amount of dividends paid and may also otherwise be subject to change in accordance with the terms and conditions of the stock options.The 2014A subscription price is Euro 0.11.
On June 30th 2014, the company had 4.140 shareholders (2013: 3.456). Private persons owned 38.2 per cent (2013: 53.2 per cent) and institutions 61.8 per cent (2013: 46.8 per cent) of the shares. Foreign ownership was 6.7 per cent (2013: 8.8 per cent) of all shares.
In March the company converted a total of EUR 3.5 million short-term loans into a long-term convertible loan and raised a EUR 1.0 million long-term conventional interest bearing loan from Turret Oy Ab. The convertible loan has no collateral. As collateral for the conventional loan of 1.0 million the company has put up corporate mortgage bonds.
In the share issue decided upon on April 30th 2014 Turret Oy Ab subscribed 6 866 666 shares at a price of Euro 0.12 per share totaling Euro 824 thousand. In conjunction with this transaction the payback plan of the Euro 1 million loan from Turret Oy Ab was changed so that the loan now in its entirety will be paid back by November 30th 2015.
OTHER EVENTS DURING THE FINANCIAL PERIOD
Annual General Meeting
The Company held its annual general meeting on 2 April 2014. The minutes and the decisions of the annual general meeting are presented in Company’s internet pages www.ixonos.com .
Ixonos presented its capabilities in several leading industry events, including the Mobile World Congress in Barcelona, the CES in Las Vegas, and the 2nd Screen Summits in Las Vegas and Barcelona.
We organized the official opening of the San Francisco design studio in early February, and our focus towards the US and European markets has been clear in our activities. The demand for our services among the selected business areas is good and our value promise remains strongly relevant. Especially the market around the Industrial Internet in the Nordics has evolved to the level of clear customer solution demands.
In May Ixonos published a load balancing system for its Elastic Cloud ™ cloudservices which enables managing even larger datavolumes than before. In this area Ixonos is a technical leader in the world.
In June Ixonos joined the advisory board of Second Screen Society as a part of its investement in the Media business and innovation.
On June 25th 2014 Ixonos published that it had been awarded a 4 million USD order by a large US technology corporation, for the delivery of design and software services. The order covers UX/UI Design and Development, Visual Design, Technical Architecting, Software Development and Quality Assurance. The service delivery will start immediately and is planned to be completed by the end of 2014.
As part of the transfer of the Nokia mobile phone business to Microsoft in May the customer relationship was transferred unchanged to the new customer.
Ixonos published new market guidance on June 25th 2014. Ixonos forecasts its revenue and EBITDA for 2014 to be lower than in earlier guidance, but estimates that its EBITDA will be positive for the second half of the year.
The company now estimates 2014 revenue to be in the range of EUR 23-29 million and that EBITDA for the full year will be negative.
For the second half of the year EBITDA is expected to be positive, due to the strengthened order book for second half of the year and lowered costs.
Previous guidance for the 2014 revenue was in the range of EUR 26 - 34 million and EBITDA for the full year was expected to be positive.
The reason for the changed guidance is slower than expected sales development and certain one-off costs related to the restructuring of the company.
2014 option plan
Ixonos has published stock exchange release of new option plan on 18th of February 2014. The terms of option plan has been published in stock exchange release.
Financing arrangements in March 2014
The board of directors of Ixonos Plc has, by virtue of the authority granted by the general meeting on 30 October 2013, decided to direct a convertible capital loan with a capital of 3.5 million euro and attached option rights or other special rights referred to in Chapter 10 Section 1(2) of the Finnish Limited Liability Companies Act (624/2006 as amended) to Turret Oy Ab for subscription in deviation from the pre-emptive subscription right of the shareholders of the Company. The Special Rights entitle Turret or the holder of the Special Rights to subscribe new shares of Ixonos in accordance with the terms and conditions concerning the Loan and the Special Rights.
The Loan and related Special Rights have been issued in order to strengthen the Company's position of liquid assets, self-sufficiency and working capital and to optimize the capital structure. Hence, there are weighty financial reasons for taking the Loan and granting the Special Rights. The Loan's issuing price and conversion price have been defined on market terms.
The main terms of the Terms and Conditions of the Loan and the Special Rights are the following:
The Loan and directing the attached Special Rights to Turret for subscription are related to the Company's plan, reported on on 8 October 2013, to gather, in addition to the capital received from the share issue between 19 November and 3 December 2013, a maximum of EUR 3.5 million by issuing shares or option rights or other special rights entitling to shares, defined in Chapter 10 Section 1 in the Limited Liability Companies Act, in a share issue not based on the pre-emptive subscription right of shareholders.
In connection with the share issue on 7 November 2013, Turret gave the Company an undertaking according to which Turret will at the earliest on 31 December 2014 require the Company to repay the short-terms loan granted by Turret, altogether around EUR 3.5 million, as the conditions of the Undertaking were otherwise met. According to the Undertaking accepted by the Company, Turret has the right, if they so demand, to convert the Debt in question in full or in part into share capital, a hybrid loan or another equity instrument pursuant to IFRS that is issued by Ixonos on arms' length terms. The instrument may include share subscription rights in the form of convertible capital loan or warrants or in other forms. In the event that the Debts remain fully or partially unpaid after 31 December 2014, Ixonos undertakes to also negotiate on the conditions of the Debt in order to make them market-based if Turret so requests.
Turret has subscribed the Loan and associated Special Rights on 7 March 2014 and the board of directors of the Company has accepted Turret's subscription. Turret has paid the Loan to the Company in full by setting off the principal of the Debts to Turret, amounting to altogether EUR 3.5 million.
The Company's board of directors has also decided to conclude a loan agreement on long-term complementary financing in borrowed capital terms of EUR 1.0 million and given some of the Company's business mortgages as collateral.
In the arrangement, the financiers party to the Company's main financing agreement accepted a period free of instalments of the loans of the year 2014 until 15 March 2015 in such a way that the instalment falling due during the period free of instalments are transferred to the end of the term of the loan into one bullet repayment without otherwise extending the term of the loan.
Directed share issue in March 2014
The Board of Directors of Ixonos Plc decided to issue in a directed share issue 15.255.177 new shares to be subscribed for by Holdix Oy in derogation from the pre-emptive subscription right of the shareholders on the authorisation of the Annual General Meeting on 24 April 2013 and the Extraordinary General Meeting on 30 October 2013. The subscription price of the Shares in the Share Issue was EUR 0.12 per Share. The subscription price has been defined as the mean price weighted with the trading amounts of the last three (3) months rounded to the nearest cent. The funds derived from the Share Issue will be used to strengthen the balance sheet and financial standing of the group and the Company, so there are weighty financial reasons for the Share Issue and for deviating from the pre-emptive right of the shareholders as described in the Finnish Limited Liability Companies Act.
Holdix Oy subscribed for the Share Issue in full on 31 March 2014. According to what was stated to the Company, the investment of Holdix Oy in the Company is meant to be a long-term investment. The Shares issued and subscribed for in the Share Issue was equivalent to approximately 16.74 per cent of all of the Company's shares and votes after the Share Issue.
Directed share issues in April 2014
The Board of Directors of Ixonos Plc decided based on the authorization of the Annual General Meeting on April 2nd 2014 to issue in directed share issues for up to 15,200,000 new shares in total in derogation from the pre-emptive subscription right of the shareholders to be subscribed for by Holdix Oy, InfoSec Global (Schweiz) AG and Turret Oy Ab. Holdix Oy and InfoSec Global (Schweiz) AG both subsribed 4 166 667 Shares and Turret Oy Ab subscribed 6 866 666 Shares The subscription price of the Shares in the Share Issues was EUR 0.12 per Share. The Subscription Price has been defined as the mean price weighted with the trading amounts of the period between 1 January 2014 and 28 April 2014 rounded up to the nearest cent. The funds derived from the Share Issue, EURO 1,824 million, will be used to maintain and improve the solvency of the group, so there are weighty financial reasons for the Share Issue and for deviating from the pre-emptive right of the shareholders as described in the Finnish Limited Liability Companies Act.
The Shares issued in the Share Issues in total are equivalent to approximately 16.68 per cent of all of the Company's shares and votes before the Share Issues and approximately 14.30 per cent in total of all of the Company's shares and votes after the Share Issues.
New registration document and securities note
Ixonos published on 16 May 2014, , Ixonos Plc's registration document, prepared pursuant to the Finnish Securities Market Act and the securities note related to the Company's directed share issues announced on 31 March 2014 and 30 April 2014. The registration document was approved by the Finnish Financial Supervisory Authority on 16 May 2014. An updated version of the registration document approved by the Finnish Financial Supervisory Authority was published on June 12th 2014. The registration document contains information on the Company and its financial position. The registration document is valid for 12 months after its approval. The Securities Note contains a summary and information on the share issues.
Changes in the Management Team
During the review period the following changes have taken place:
EVENTS AFTER THE REVIEW PERIOD
There were no major events after the review period
RISK MANAGEMENT AND NEAR-FUTURE UNCERTAINTY FACTORS
Ixonos Plc’s risk management aims to ensure undisturbed continuity and development of the company’s operations, support attainment of the commercial targets set by the company and promote increasing company value. Details on the risk management organisation and process as well as on recognised risks are presented on the company’s website at www.ixonos.com.
Changes in key customer accounts may have adverse effects on Ixonos’ operations, earning power and financial position. Should a major customer switch its purchases from Ixonos to its competitors or make forceful changes to its own operating model, Ixonos would have limited ability to acquire, in the short term, new customer volume to compensate for such changes.
Part of the company’s business operations is based on fixed-price project deliveries. Fixed-price projects may include risks related to their duration and content. These risks are being managed by means of contract management as well as project management.
The company manages its need for working capital by creating, together with financiers, adequate buffers to ensure sufficient funds as well as by speeding up the circulation of working capital.
The company’s balance sheet also includes a significant amount of goodwill, which may still be impaired should internal or external factors reduce the profit expectations of the company’s cash flow. Goodwill is tested each quarter and, if necessary, at other times.
Deferred tax assets in company’s balance sheet are subject to future profit expectations. There is risk of impairment related to deferred tax assets if the profit expectations are not materialized.
The company’s financial agreements have covenants attached to them. A covenant breach may increase the company’s financial expenses or lead to a call for swift partial or full repayment of non-equity loans. The main risks related to covenant breaches are associated with EBITDA fluctuation due to the market situation and with a potential need to increase the company’s working capital through non-equity funding. The company manages these risks by negotiating with financiers and by maintaining readiness for various financing methods.
Although the company considers that it will be able to cover its need for working capital over the next twelve months through various means, there is no guarantee that the company will be able to ensure sufficient working capital under all circumstances. A shortage of working capital may have a substantial adverse effect on the company’s operations, result and financial position.
LONG-TERM GOALS AND STRATEGY
In the long term, Ixonos aims to achieve an operating profit of at least 10 per cent. To reach its long-term goals, Ixonos focuses its strategy on deepening the company’s product, solution and service operations as well as on new accounts in selected industries.
In accordance with its strategy, Ixonos continues to strengthen and expand its customer base by focusing on offering products, solutions and services in particular for industrial companies, media companies, retailers and brands, organisation IT and ISVs, and to other customers in Finland as well as internationally.
The company estimates 2014 revenue to be in the range of EUR 23-29 million and that EBITDA for the full year will be negative.
For the second half of the year EBITDA is expected to be positive, due to the strengthened order book for second half of the year and lowered costs.
The interim report for the period 1 January – 30 September 2014 will be published on Thursday 30 October 2014.
Board of Directors
For more information, please contact:
- Esa Harju, President and CEO, tel. +358 40 844 3367, email@example.com
- Mikael Nyberg, CFO, tel. +358 40 501 4401, firstname.lastname@example.org
NASDAQ OMX Helsinki
THE IXONOS GROUP
ABBREVIATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES 1 January – 30 June 2014
This interim report has been prepared in accordance with IAS 34 (Interim Financial Reporting) and the accounting policies for the annual financial statement of 31 December 2013. The IFRS amendments and interpretations that entered into force on 1 January 2014 have not affected the consolidated financial statements.
Preparing interim reports in accordance with IFRS requires Ixonos’ management to make estimates and assumptions that affect the amounts of assets and liabilities on the balance sheet date as well as the amounts of income and expenses for the financial period. In addition, judgement must be used in applying the accounting policies. As the estimates and assumptions are based on views prevailing at the time of releasing the interim report, they involve risks and uncertainty factors. Actual results may differ from estimates and assumptions.
The figures in the income statement and balance sheet are consolidated. The consolidated balance sheet includes all group companies as well as Ixonos Management Invest Oy, a company owned by members of Ixonos’ management. The original interim report is in Finnish. The interim report in English is a translation of the original report.
As the figures in the report have been rounded, sums of individual figures may differ from the sums presented. The interim report is unaudited.
This interim report has been made according to the going concern principle taking into account the executed financial arrangements, new strategy and financial estimations made up to the end of year 2014. The estimations take into consideration probable or foreseeable changes in future expectations in revenues as well as costs. There have been significant challenges after the company's most significant client changed its strategy during years 2011-2012. The profitability has been negative, even though the company has adopted its operations to meet significantly lower cost level and gained new customers. The company has further re-scoped its costs and this will continue. The company has taken and takes also further actions to reduce the level of fixed costs like site and office related costs. The ongoing cost saving actions will improve the cost structure and profitability during the 2014. The company has renewed its strategy during the 2013 and selected the customer focus segments where mobile internet technology is seen to change the earning fundamentals of Ixonos' target customer segments. The company views, that Ixonos' core competence has a great growth potential in the selected segments.
The Company estimates that is has sufficient working capital for its operations for the next 12 months from the end of the financial reporting period, provided that financial forecasts for year 2014 will materialize. The company will continue to take measures to strengthen its balance sheet and cash position and to streamline its costs and operational structures.
If the above measures do not occur as planned, this may result a shortage of working capital, premature payback of loans with covenants and difficulties to continue company's operations during the following 12 months.
Deferred tax assets
The company has deferred tax assets EUR 5.4 million of which EUR 4.8 million arises from Finnish companies from two previous years. According to the current tax regulations in Finland, Ixonos has time to utilize tax assets up to 2023. The company views that it is going concern and it has sufficient possibilities with normal business assumptions to utilize the tax assets in the future.
The subsidiary in United Kingdom carries EUR 0.5 million deferred tax assets. The subsidiary was established in October 2011. The subsidiary in UK is part of Ixonos' new, design oriented strategy. The validity of deferred tax assets in UK has no time limit. Ixonos views that the subsidiary has probable possibilities to utilize tax assets during the time.
CONDENSED CONSOLIDATED INCOME STATEMENT, EUR 1.000
||1.1.–30.6.2014||1.1.–30.6.2013||Change, per cent||1.1.–31.12.2013|
|Turnover||11 701||20 911||-44.0 %||33 397|
|Operating expenses||-16 695||-23 688||-29.5 %||-45 197|
|OPERATING PROFIT BEFORE GOODWILL IMPAIRMENT||-4 994||-2 777||-79.8 %||-11 799|
|Goodwill impairment||0||0||-1 600|
|OPERATING PROFIT||-4994||-2 777||-79.8 %||-13 399|
|Financial income and expenses||-517||-356||-45.2 %||-890|
|Profit before tax||-5 507||-3 132||-75.8 %||-14 289|
|Income tax||617||570||8.2 %||1 854|
|PROFIT FOR THE PERIOD||-4 890||-2 563||-90.8 %||-12 435|
|Equity holders of the parent||-4899||-2 641||-85.5 %||-12 511|
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, EUR 1.000
|1.1.–30.6.2014||1.1.–30.6.2013||Change, per cent||1.1.–31.12.2013|
|Profit for the period||-4 890||-2 563||-90.8 %||-12 435|
|Other comprehensive income|
|Change in translation difference||-95||61||-255.7 %||-5|
|COMPREHENSIVE INCOME FOR THE PERIOD||-4 985||-2 502||
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION, EUR 1.000
|Goodwill||10 847||12 447||10 847|
|Other intangible assets||1 682||2 078||1 584|
|Property, plant and equipment||1 388||2 735||2 106|
|Deferred tax assets||5 352||3 383||4 517|
|TOTAL NON-CURRENT ASSETS||19 271||20 656||19 069|
|Trade and other receivables||5 027||9 495||6 278|
|Cash and cash equivalents||345||840||496|
|TOTAL CURRENT ASSETS||5 372||10 334||6 774|
|TOTAL ASSETS||24 644||30 991||25 843|
|EQUITY AND LIABILITIES||30.6.2014||30.6.2013||31.12.2013|
|Share premium reserve||219||219||219|
|Invested non-restricted equity fund||32 363||24 171||28 794|
|Retained earnings||-27 166||-14 574||-13 664|
|Profit for the period||-4 881||-2 641||-12 511|
|Equity attributable to equity holders of the parent||2 066||8 703||3 423|
|TOTAL SHAREHOLDERS’ EQUITY||2 304||8 953||3 670|
|Non-current liabilities||4 439||1 033||546|
|Current liabilities||17 900||21 004||21 626|
|TOTAL LIABILITIES||22 339||22 038||22 173|
|TOTAL EQUITY AND LIABILITIES||24 644||30 991||25 843|
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY, EUR 1.000
A: Share capital
B: Share premium reserve
C: Share Issue
D: Invested non-restricted equity fund
E: Translation difference
F: Retained earnings
G: Total equity attributable to equity holders of the parent
H: Non-controlling interests
I: Total equity
|Shareholders’ equity at 1 January 2013||585||219||0||20 247||75||-13 810||7 317||172||7 489|
|Profit for the period||-2 641||-2 641||78||-2 563|
|Other comprehensive income:|
|Change in translation difference||61||61||61|
|Transactions with shareholders:|
|Share issue||4 229||4 229||4 229|
|Expenses for equity procurement||-305||-305||-305|
|Shareholders’ equity at 30 June 2013||585||219||0||24 171||136||-16 409||8 703||250||8 953|
|Shareholders’ equity at 1 January 2014||585||219||0||28 794||70||-26 246||3 423||247||3 670|
|Profit for the period||-4 881||-4 881||-9||-4 890|
|Other comprehensive income:|
|Change in translation difference||-95||-95||-95|
|Transactions with shareholders:||
|Share issue||3 655||3 655||3 655|
|Expenses for equity procurement||-86||-86||-86|
|Shareholders’ equity at 30 June 2014||585||219||32 363||-25||-31 077||2 065||238||2 304|
CONSOLIDATED CASH FLOW STATEMENT, EUR 1.000
||1.1.- 30.6.2014||1.1.- 30.6.2013||1.1.- 31.12.2013|
|Cash flow from operating activities|
|Profit for the period||-4 890||-2 563||-12 435|
|Adjustments to cash flow from operating activities|
|Income tax||-617||-570||-1 854|
|Depreciation and impairment||1 235||1 455||4 385|
|Financial income and expenses||517||356||890|
|Change in provisions||-67||-855||-979|
|Cash flow from operating activities before change in working capital||-3 699||-2 196||-10 071|
|Change in working capital||-727||-2 329||782|
|Interest paid||-500||-445||-1 004|
|Net cash flow from operating activities||-4 883||-4 680||-9 680|
|Cash flow from investing activities|
|Investments in tangible and intangible assets||-605||46||-461|
|Net cash flow from investing activities||-605||46||-461|
|Net cash flow before financing||-5 488||-4 634||-10 141|
|Cash flow from financing activities|
|Increase in long-term borrowings||4 500||0||0|
|Repayment of long-term borrowings||0||-400||-800|
|Increase in short-term borrowings||0||2 203||5 500|
|Repayment of short-term borrowings||-2 729||-733||-3 002|
|Proceeds from share issue||3 655||4 229||9 045|
|Expenses for equity procurement||-88||-305||-584|
|Net cash flow from financing activities||5 338||4 994||10 160|
|Change in cash and cash equivalents||-151||363||19|
|Liquid assets at the beginning of the period||496||477||477|
|Liquid assets at the end of the period||345||840||496|
Ixonos made impairment test for goodwill as at 30 June 2014. Impairment test showed surplus of EUR 5.2 million in discounted cash flow compared to tested amount and no impairment was recognized. The carrying amount of goodwill is EUR 10.8 million. In the impairment test carried out in September 2013, the company recognized an impairment loss of EUR 1.6 million. The company has shortened the forecasting period used in value in use calculation from five to four years in 2013. This is due to a point of view that the space of change has increased in the business environment of Ixonos. The Company has one common Sales & Marketing function and common production and product development functions. These functions will serve all chosen customers. The company prepares its budgets and forecasts as one cash generating unit.
The impairment test of the Company is based on value in use. The forecasting period used in impairment testing as at 30 June 2014 included forecasted years Q3 2014 – Q2 2018. The impairment test is done by comparing the carrying value of assets to present value of future cash flow taking into consideration forecasted cash flows during the forecast period, discount factor and growth rate used in calculating terminal value. The discount factor used is 12 per cent p.a. and growth rate use in calculating terminal value is 1 per cent p.a. These are the same as use in goodwill impairment testing for year-end 2013. The impairment test is the most sensitive to growth rate used when calculating the terminal value and discount factor. If the growth rate had been lowered to 0.0 per cent instead of 1 per cent, the calculation would have showed a surplus of EUR 4.1 million. If the discount factor had been 13 per cent instead of 12 per cent, the discounted cash flows would have shoved a surplus of EUR 3.7 million.
The Company has agreed with its main financiers an instalment free period for the loans until 15 March 2015. The Company announced its financial restructuring on 7 March 2014. During the instalment free period the bank loans have covenants attached to them. These covenants are based on quarterly EBITDA levels. On June 30th 2014, the company did not meet the terms of the covenants. However, the company has received releasing covenant statements from its financiers.
Loans granted in 2012 by the company's financiers have covenants attached. Should the company not be within the limits of a covenant, the financiers are entitled to call in the loans to which that covenant applies. The covenant levels are adjusted semi-annually on a rolling twelve-month basis.
Depending on the point in time, the equity ratio must be at least 35 per cent. For some loans, the ratio of interest-bearing liabilities (i.e. interest-bearing liabilities in the balance sheet, including leasing liabilities) to EBITDA may not exceed 2.5 on 30 June 2013 onward. The ratios of interest-bearing liabilities to EBITDA as well as the ratio of interest-bearing net liabilities to EBITDA are calculated based on IFRS principles.
The amount of those financing loans that included covenants had a capital of EUR 6.1 million on 30 June 2014 (30 June 2013: EUR 7.0 million). On 30 June 2014 the company's equity ratio was 9.3 percent (2013: 28.8 percent) and the ratio of interest-bearing liabilities and the EBITDA
was negative (2013: negative). Thus, the company does not fulfil the covenant terms on 30 June 2014 and the loans under covenant agreements are presented as short-term current liabilities. However, the company has received releasing covenant statements from its financiers for these base covenants until 31 December 2014.
Instalment scheme for borrowings under covenants
Period Amount of instalment EUR 1.000
01.07. - 31.12.2014 0
01.01. - 31.12.2015 1.621
01.01. - 31.12.2016 1.621
01.01. - 31.12.2017 2.850
CONSOLIDATED INCOME STATEMENT, QUARTERLY, EUR 1.000
|Q2/2014 1.4.–30.6.14||Q1/2014 1.1.–31.3.14||
|Turnover||5 646||6 055||7 009||5 477||10 112|
|Operating expenses||-7 730||-8 965||-9 537||-11 972||-10 973|
|OPERATING PROFIT BEFORE GOODWILL IMPAIRMENT||-2 084||-2 910||-2 528||-6 494||-861|
|Goodwill impairment||0||0||0||-1 600||0|
|OPERATING PROFIT||-2 084||-2 910||-2 528||-8 094||-861|
|Financial income and expenses||-258||-259||-286||-248||-257|
|Profit before tax||-2 342||-3 165||-2 814||-8 343||-1 117|
|Income tax||241||376||-266||1 550||183|
|PROFIT FOR THE PERIOD||-2 101||-2 790||-3 080||-6 793||-934|
CHANGES IN FIXED ASSETS, EUR 1.000
|Goodwill||Intangible assets||Property, plant and equipment||Available-for-sale investments||Total|
|Carrying amount at 1 January 2013||12 447||2 646||3 410||19||18 522|
|Changes in exchange rates||-1||-1|
|Disposals and transfers||-25||-5||-30|
|Depreciation for the period||-587||-868||-1 455|
|Carrying amount at 30 June 2013||12 447||2 078||2 735||14||17 273|
|Carrying amount at 1 January 2014||10 847||1 585||2 106||14||14 551|
|Changes in exchange rates||2||2|
|Disposals and transfers||-3||-48||-51|
|Depreciation for the period||-536||-699||-1 235|
|Carrying amount at 30 June 2014||10 847||1 682||1 388||2||13 918|
|Earnings per share, diluted, EUR||-0.06||-0.17||-0.51|
|Earnings per share, EUR||-0.06||-0.17||-0.65|
|Equity per share, EUR||0.02||0.25||0.05|
|Operating cash flow per share, diluted, EUR||-0.06||-0.31||-0.39|
|Operating cash flow per share, EUR||-0.06||-0.31||-0.51|
|Return on investment, per cent||-75.3||-63.9||-70.2|
|Return on equity, per cent||-311.6||-110.0||-231.6|
|Operating profit ∕ turnover, per cent||-42.7||-13.3||-40.1|
|Net gearing from total equity, per cent||683.9||146.5||375.1|
|Equity ratio, per cent||9.3||28.8||14.2|
|Equity ratio, per cent, excluding non-controlling interest||8.4||28.1||13.2|
|EBITDA, 1000 EUR||-3 759||-1 322||-9 014|
||1.1.– 30.6.2014||1.1.– 30.6.2013||1.1.– 31.12.2013|
|Employees, at the end of the period||291||502||442|
COMMITMENTS, EUR 1,000
|Collateral for own commitments|
|Corporate mortgages||23 300||19 800||23 300|
|Leasing and other rental commitments|
|Falling due within 1 year||1 790||2 759||2 277|
|Falling due within 1–5 years||3 296||4 775||3 293|
|Falling due after 5 years||0||0|
|Total||5 086||7 534||5 570|
|Nominal value of interest rate swap agreement|
|Falling due within 1 year||0||0|
|Falling due within 1–5 years||4 941||5 270||4 941|
|Falling due after 5 years||0||0|
|Total||4 941||5 270||4 941|
CALCULATION OF KEY FIGURES
Diluted earnings per share = profit for the period ∕ number of shares, adjusted for issues and dilution, average
Earnings per share = profit for the period ∕ number of shares, adjusted for issues, average
Shareholders’ equity per share = shareholders’ equity ∕ number of shares, undiluted, on the closing date
Cash flow from operating activities, per share, diluted = net cash flow from operating activities ∕ number of shares, adjusted for issues and dilution, average
Return on investment (rolling 12 months) = (profit before taxes + interest expenses + other financial expenses) ∕ (balance sheet total − non-interest-bearing liabilities, average) × 100
Return on equity (rolling 12 months) = net profit ∕ shareholders’ equity, average × 100
Net gearing from total equity= (interest-bearing liabilities – liquid assets) / shareholder