Efore Plc Financial Statements Release February 14, 2018 at 09:00 a.m.
Financial Statements Release January 1, 2017 - December 31, 2017
This release is a summary of Efore's Financial Statements report January-December 2017. The full report is a PDF file attachment to this stock exchange release and is available on the company's website at the address www.efore.com.
July – December 2017 in brief:
- Net sales totalled EUR 30.5 million (EUR 35.9 million), down 15 % compared to the corresponding period last year
- Operating result was EUR -0.9 million (EUR -6.7 million)
- Adjusted operating result was EUR -0.9 million (EUR -2,2 million)
- Earnings per share were EUR -0,01 (EUR -0.16)
Financial year 2017 in brief:
- Net sales totalled EUR 69.9 million (EUR 75.4 million), down 7.3 % compared to the corresponding period last year
- Operating result was EUR -0.2 million (EUR -9,7 million)
- Adjusted operating result was EUR -0.2 million (EUR -4.8 million)
- Earnings per share were EUR -0,01 (EUR -0.22)
- The Board of Directors proposes that no dividend will be distributed.
| 7-12/17 | 7-12/16 | Change | 1-12/17 | 1-12/16 | Change | |
| Key indicators, EUR million | 6 mo | 6 mo | % | 12 mo | 12 mo | % |
| Net Sales | 30,5 | 35,9 | -15,0 | 69,9 | 75,4 | -7,3 |
| Telecommunication sector | 12,2 | 16,2 | -24,5 | 31,7 | 34,2 | -7,2 |
| Industrial sector | 18,3 | 19,7 | -7,2 | 38,2 | 41,2 | -7,3 |
| Adjusted operating result* | -0,9 | -2,2 | -0,2 | -4,8 | ||
| Operating result | -0,9 | -6,7 | -0,2 | -9,7 | ||
| Result before taxes | -1,3 | -7,3 | -1,0 | -10,4 | ||
| Net result | -0,6 | -8,1 | -0,6 | -11,4 | ||
| Earnings per share, EUR | -0,01 | -0,16 | -0,01 | -0,22 | ||
| Equity ratio, % | 17,9 | 15,7 | 14,0 | 17,9 | 15,7 | 14,0 |
| Gearing, % | 115,6 | 99,5 | 115,6 | 99,5 | ||
| Cash flow from business operations | 2,2 | -2,3 | 4,6 | -1,1 | ||
| Key indicators Half year, EUR million | H2/2017 | H1/2017 | H2/2016 | H1/2016 | ||
| Net Sales | 30,5 | 39,4 | 35,9 | 39,5 | ||
| Telecommunication sector | 12,2 | 19,4 | 16,2 | 18,0 | ||
| Industrial sector | 18,3 | 19,9 | 19,7 | 21,5 | ||
| Adjusted operating result* | -0,9 | 0,7 | -2,2 | -2,6 | ||
| Operating result | -0,9 | 0,7 | -6,7 | -3,0 |
*Adjustments include items such as costs due to changes in organizational structure, impairments and impact from the sale of businesses or assets.
Financial estimate for 2018
Due to the financial situation of the Group and especially uncertainty related to the development of the telecommunications sector giving earnings guidance is exceptionally challenging Due to this reason the company does not give earnings guidance for 2018. Efore investigates different structural alternatives to secure the long-term profitability of the telecom business.
Jorma Wiitakorpi, Efore’s President and CEO:
Efore had a challenging year 2017 especially in the telecommunications sector. The net sales of the telecommunications sector totalled EUR 31.7 million, with a year-on-year decrease of 7.2 %. The main reason for the weak development in net sales was the sales decline of macro base stations of our key telecom customers.
The net sales of the industrial sector totalled EUR 38.2 million, with a year-on-year decrease of 7.3 %. Due to the outsourcing of manufacturing in China two considerable EMS-customers started to use services of other companies. This had a negative impact on the net sales development of the industrial sector compared to the corresponding period of the last year.
The operating result for the full year 2017 was slightly negative due to weaker than estimated sales development during the latter part of the year. The net sales of certain product groups did not develop as expected, especially in October – December. However, the adjusted operating result of the second half of the year EUR -0.9 million was clearly better than the adjusted operating result compared to the corresponding periods in 2016 (EUR -2.2 million ) and 2015 (EUR -2.3 million).
During the latter part of the year we continued to develop the joint operating model with Wuxi Hodgen Technology in order to improve the effectiveness and flexibility of the production.
The production output of Tunisia plant increased by almost 40 % from 2016. We are planning needed investments to develop Tunisia operations also in 2018 and 2019.
As a part of the development of Group operations we have decided to renew Efore’s organization structure. At the beginning of 2018 we implemented a new business line based organization. We have also moved to new premises in China, Italy and Finland to increase the efficiency of the operations and reduce costs.
As a result of the actions implemented, the annual fixed costs of the Group have decreased about EUR 7 million from the first half of 2016 level and the balance sheet has lighten. We will further continue actions to reduce the fixed costs and to develop the efficiency of the company.”
July – December net sales and result
July – December net sales totalled EUR 30.5 million (EUR 35.9 million).
The net sales of telecommunications sector totalled EUR 12.2 million (EUR 16.2 million), with a year-on-year decrease of 24,5 %. The main reason for the weak development of the net sales was the sales decline of macro base stations of the key telecom customers. Furthermore, the deliveries of certain new system projects were moved to 2018.
The net sales of the industrial sector totalled EUR 18.3 (EUR 19.7 million) million, with a year-on-year decrease of 7.2 %. Due to the outsourcing of manufacturing in China two considerable EMS-customers started to use services of other companies. This had a negative impact on the net sales development of the industrial sector compared to the corresponding period of the last year.
Operating result in July – December improved significantly compared to the previous year and it was EUR -0.9 million (EUR -6.7 million). Adjusted operating result for the second half of the year was EUR -0,9 million (EUR -2.2 million). Main reasons for the positive result development were active measures to decrease the fixed costs and improved productivity. There were no one-time costs in July-December 2017.
Net sales and result of the full year
Net sales totalled EUR 69.9million (EUR 75.4 million).
The net sales of the telecommunications sector totalled EUR 31.7 million (EUR 34.2 million), with a year-on-year decrease of 7.2 %. The main reason for the weak development of the net sales was the sales decline of macro base stations of the key telecom customers.
The net sales of the telecommunications sector includes EUR 2 million sales of inventory to Wuxi Hodgen Technology with no margin.
Net sales of the industrial sector totalled EUR 38.2 million (EUR 41.2 million) with a year-on-year decrease of 7.3 %. Due to the outsourcing of manufacturing in China two EMS-customers started to use services of other companies. This had a negative impact on the net sales development of the industrial sector compared to the corresponding period of the last year.
The operating result for 2017 improved significantly compared to the corresponding period of the last year totalling EUR -0.2 million (EUR -9.7 million). The adjusted operating result was EU -0.2 million (EUR -4.8 million). Main reasons for the positive result development were especially active measures to decrease the fixed costs and improved productivity. There were no one-time costs in 2017.
Business development
The telecom market is transforming, which sets new requirements for the operators in the business. Most of Efore’s telecom products are traditionally designed for macro base stations but demand for them has decreased and shifted towards smaller base stations. Efore further continues R&D investments to widen the technology portfolio in power supply technology for new smaller cell products. The products based on the 5G technology are in a key role in future network expansions.
Efore has expanded the product portfolio in the industrial sector. Digital Power product portfolio has been expanded to include new solutions e.g. for test & measurement and digital displays. New standard medium-high power platform was commercialized in the latter part of the year. In Digital Light area the company continues to increase the current portfolio with innovative high density smart LED drivers focus especially e.g. on architectural and outdoor applications.
Introduction of system level solutions for telecom and industrial market will play an even more significant role in the future product portfolio. In this context, systems level solutions refer to wider systems including Efore’s current products and e.g. mechanics and cables. In these products Efore can utilize its existing expertise and skillsets from the DC-system business. Efore continues the development projects concerning larger system level solutions for the telecom market and the first complete solutions are estimated to be delivered during 2018.
Technology platform based on bi-directional technology is part of Efore’s vision for future industrial and systems applications where more versatile and higher power solutions are needed. Efore’s R&D project that focuses on bi-directional technology has progressed on the phase where new applications are being sought especially for energy stores and Smart Grid applications.
Due to overall semi-conductor market situation component lead-times have increased and the availability of the components has been occasionally challenging. The Group continues actions to secure the component availability.
Outsourcing of manufacturing in China was finalized in June 2017 and the related support functions were relocated to the manufacturing partner, Hodgen Technology Ltd’s site in Wuxi. In the future, this creates possibility to develop the effectiveness and flexibility of the production of the telecommunications sector.
The production volume increased significantly at Tunisia plant as a result of expansion of production range. The company continued investments in production equipment and quality assurance in order to improve operations at Tunisia plant.
The company further continued the development of Group operations. As a part of this process the decision was made to renew the organization structure. At the beginning of 2018 a new business line based organization was implemented. With the new organization structure Efore can be more customer-oriented and further develop operative efficiency as well as the ability to utilize new business opportunities.
Furthermore, the company moved to new premises in China, Italy and Finland in order to increase the efficiency of the operations and reduce costs.
As a result of the actions implemented, the annual fixed costs of the Group have decreased about EUR 7 million from the first half of 2016. Active measures to lighten the group balance sheet also contributed to the result. Actions to reduce the fixed costs and to develop the efficiency of the company will continue.”
Market outlook
Due to the volatility and wide product offerings in telecom market predicting the future is challenging. Efore’s customers are now shifting their development focus more and more into 5G technology. Efore’s new product releases are supporting both existing technology and future 5G network technology.
In the industrial sector power supplies for LED lighting, instrumentation, medical equipment and infrastructure offer still several growth opportunities. Efore focuses on customer segments where high reliability and long product life cycles are the key success factors.
Short-term risks and factors of uncertainty
The most significant business risks are related to the market success of key customer products. Progress of Efore’s product development projects depends partly on the customers’ own project schedules. Furthermore, demand fluctuations typical in the market cause rapid changes in Efore’s business.
Expanding the Group’s product range to standard products in industrial sector may mean increased product liability risk.
Overall economic development may have an effect on Efore’s business environment.
Due to our weakened financing situation there are some risks related to the current undrawn credit facilities and adequate financing. The company is aming to minimize the risks by active planning and implementation of different options.
The Group actively monitors possible impacts of risks on both financing and liquidity.
A more comprehensive report on risk management is presented on the Group's web-sites and in the Annual Report for 2016.
Board of Directors’ proposal to the Annual General Meeting
The Board of Directors will propose to the Annual General Meeting on April 12, 2018 that no dividend will be distributed.
Events after the end of the Financial year
The company further continued the development of Group operations. A new business line based organization was implemented at the beginning of 2018.
The company has started loan extension negotiations with the main financier. The management of the company believes that the result of the negotiations will be positive.
Efore published on January 12, 2018 the proposals of the Shareholders' Nomination Board of Efore Plc to the AGM to be held on April 12, 2018 as follows:
- The Nomination Board proposes to the AGM that five (5) members shall be elected to the Board of Directors.
- The nomination Board proposes that Marjo Miettinen, Tuomo Lähdesmäki, Jarmo Simola and Antti Sivula will be re-elected as members of the Board. The Nomination Board proposes further that Taru Narvanmaa is elected as a new member of the Board. The term of the members begins from the closing of the General Meeting at which he or she has been elected and expires at the closing of the Annual General Meeting 2019.
- The Shareholders' Nomination Board will also propose that the remuneration paid to the Board of Directors for the term beginning at the end of the Annual General Meeting and ending at the end of the Annual General Meeting 2019 should remain unchanged and be as follows: Chairman of the Board of Directors 3,500 euro per month and Other members of the Board of Directors 1,750 euro per month. Travel and accommodation expenses are payable against receipt.
Efore Plc has received a waiver on February 13, 2018 concerning the breach of its loan covenant at the end of December 2017.
EFORE PLC
Board of Directors
For further information please contact Mr. Jorma Wiitakorpi, President and CEO, on February 14, 2018 at 10.30-11.30 a.m., tel. +358 40 175 8510
DISTRIBUTION
Nasdaq Helsinki Oy
Principal media
Efore Group
Efore is an international Group which develops and produces demanding power products. Efore's head office is based in Finland and its R&D functions are located in Finland, Sweden, Italy and China. Sales and marketing operations are located in Europe, United States and China. In the financial year ending in December 2017, consolidated net sales totalled EUR 69,9 million and the Group's personnel averaged 432. The parent company's share is quoted on the Nasdaq OMX Helsinki Ltd. www.efore.com
ENCL Efore’s Financial Statements Release 2017
http://prlibrary-eu.nasdaq.com/Resource/Download/2c9e758a-2d75-4a53-9acc-47e50e0b37e4
