Efore Plc Financial Statements Release February 25, 2020 at 8:30 a.m.
Financial Statements Release January 1, 2019 - December 31, 2019
This release is a summary of Efore's Financial Statements report January-December 2019. 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 2019 in brief, Continuing operations:
- Net sales totalled EUR 20,3 million (EUR 17,2 million)
- Operating profit was EUR -1,5 million (EUR -2,1 million)
- Adjusted operating profit was EUR -1,5 million (EUR -1,6 million)
- Earnings per share (cont.operations) were EUR 0,0 (EUR -0,04)
- Earnings per share EUR -0,01 (EUR -0,06)
Financial year 2019 in brief, Continuing operations:
- Net sales totalled EUR 43,3 million (EUR 33,7 million)
- Operating profit was EUR -2,6 million (EUR -3,8 million)
- Adjusted operating profit was EUR -2,4 million (EUR -3,3 million)
- Earnings per share (cont.operations) were EUR -0,01 (EUR -0,08)
- Earnings per share was EUR -0,01 (EUR -0,14)
- The Board of Directors proposes that no dividend will be distributed
Efore has adopted the new IFRS 16 standard effective January 1, 2019 using the modified retrospective approach and the comparative figures have not been restated. More information of the adoption of IFRS 16 is presented in accounting policies.
| 7-12/19 | 7-12/18 | 1-12/19 | 1-12/18 | |
| Key indicators, EUR million | 6 mo | 6 mo | 12 mo | 12 mo |
| Continuing operations | ||||
| Net Sales | 20,3 | 17,2 | 43,3 | 33,7 |
| Adjusted EBITDA | 0,2 | -0,2 | 1,2 | -0,6 |
| EBITDA | 0,2 | -0,7 | 1,1 | -1,1 |
| Adjusted operating profit/loss | -1,5 | -1,6 | -2,4 | -3,3 |
| Operating profit/loss | -1,5 | -2,1 | -2,6 | -3,8 |
| Profit/loss before taxes | -1,7 | -2,8 | -2,7 | -4,8 |
| Profit/loss for the period | -1,6 | -2,3 | -2,6 | -4,1 |
| Earnings per share, EUR | -0,01 | -0,06 | -0,01 | -0,14 |
| Earnings per share (cont.operations), EUR | 0,00 | -0,04 | -0,01 | -0,08 |
| Solvency ratio, % | 11,5 | 20,6 | 11,5 | 20,6 |
| Gearing, % | 342,1 | 100,6 | 342,1 | 100,6 |
| Cash flow from operating activities | -2,6 | 2,5 | -0,5 | -2,8 |
| | ||||
| Key indicators Half year, EUR million | 7-12/19 6mo | 1-6/19 6 mo | 7-12/18 6 mo | 1-6/18 6 mo |
| Continuing operations | ||||
| Net Sales | 20,3 | 23,0 | 17,2 | 16,5 |
| Adjusted EBITDA | 0,2 | 1,0 | -0,2 | -0,4 |
| EBITDA | 0,2 | 0,9 | -0,7 | -0,4 |
| Adjusted operating profit/loss | -1,5 | -0,9 | -1,6 | -1,7 |
| Operating profit/loss | -1,5 | -1,1 | -2,1 | -1,7 |
| Continuing operations | 7-12/19 | 7-12/18 | 1-12/19 | 1-12/18 |
| ADJUSTED OPERATING PROFIT/LOSS, EUR million | 6 mo | 6 mo | 12 mo | 12 mo |
| Operating profit/loss | -1,5 | -2,1 | -2,6 | -3,8 |
| Adjustments in operating profit/loss | ||||
| Transaction costs related to the acquisition of Powernet International | 0,3 | 0,3 | ||
| Advisory fees related to unrealized projects | 0,1 | 0,1 | ||
| Resctructuring costs related to personnel | 0,1 | 0,1 | 0,1 | |
| Production re-organisation | 0,2 | 0,2 | ||
| Provision relase relating to a claim | -0,2 | -0,2 | ||
| Efore 2.0 planning related expenses | 0,1 | 0,1 | ||
| Adjustments in operating profit/loss Total | 0,0 | 0,5 | 0,2 | 0,5 |
| Adjusted operating profit/loss Total | -1,5 | -1,6 | -2,4 | -3,3 |
| Continuing operations | 7-12/19 | 7-12/18 | 1-12/19 | 1-12/18 |
| ADJUSTED EBITDA, EUR million | 6 mo | 6 mo | 12 mo | 12 mo |
| EBITDA | 0,2 | -0,7 | 1,1 | -1,1 |
| Adjustments in EBITDA | ||||
| Transaction costs related to the acquisition of Powernet International | 0,3 | 0,3 | ||
| Advisory fees related to unrealized projects | 0,1 | 0,1 | ||
| Resctructuring costs related to personnel | 0,1 | 0,1 | 0,1 | |
| Production re-organisation | 0,2 | 0,2 | ||
| Provision relase relating to a claim | -0,2 | -0,2 | ||
| Efore 2.0 planning related expenses | 0,1 | 0,1 | ||
| Adjustments in EBITDA Total | 0,0 | 0,5 | 0,2 | 0,5 |
| Adjusted EBITDA Total | 0,2 | -0,2 | 1,2 | -0,6 |
Estimate of financial development in 2020 and 2021 financial period
Company estimates that continuing operations net sales, operating profit (adjusted for items affecting comparability) and EBITDA (adjusted for items affecting comparability) improve from 2019. However operating profit is estimated to be still negative in 2020. The 2021 profit for the period is estimated to be positive.
Medium term financial targets
We expect net sales to increase also from 2021 onwards and annual EBITDA (adjusted for items affecting comparability) increase to a level of 8 to 10% of net sales and operating profit (adjusted for items affecting comparability) to be 2 to 5% of net sales.
Vesa Leino, CEO:
“Second half continuing operations net sales was EUR 20,3 million with growth of 3,1 million euros from comparison period but decline of 2,6 million euros from the first half of 2019. Net sales increase from the comparison period year ago is driven partly by the acquisition of Powernet completed in the end of 2018.
Continuing operations second half net sales was behind of our own expectations. This was impacted especially the challenges in Tunis plant delivery capability, delivery challenges due to re-organisation of Systems production and a slower than expected recovery in the rail business during the second half.
During the fall 2019 we started the consolidation of Systems module production from Tunis plant to a contract manufacturer in Estonia. The target of the transfer is to focus Tunis production solely products of Italy, bring Systems products production closer to main markets and prepare for the growth in net sales and production expected in 2020.
Profit for the period in the second half was still negative. For the full year we reached the market guidance however net sales was in the lower range of the guidance. EBITDA (adjusted for items affecting comparability) was clearly positive however remained below our own expectations.
Efore group cash flow from operations was -2,6 million euros of which -2,7 million euros was related to discontinued operations. Negative cash flow was impacted especially the prolonging of the Telecom deal completion until end of the year, challenges in continuing operations product delivery capability and slow recovery in the rail business demand.
The demand for other products than rail continued on a good level in the second half however we could not fully respond to this demand. Delivery capability in Tunis was improved in the end of the year with corrective measures relating to production planning and management.
Especially the new generation product MHE (MHE, Modular High Efficiency) and Systems solutions based on MHE and high efficiency LED driver (DLD1500) demand in the second half was good. Production of MHE that was launched in the end of 2018 started production in Tunis during the first half. DLD1500 product sales started in the beginning of 2019 and its demand and customer interest has increased positively. Both of these products will be an important part of the net sales development in 2020.
Rail products demand picked up from the first half however slower than expected. In order to facilitate a change and increase the speed of growth we made corrective measures by engaging a partner focused purely on central Europe rail customers. The demand has showed clear signs of improvement in the end of the year and similar development has continued during the beginning of 2020. The orders and expectations for new orders seem promising at the moment.
The long re-structuring work of the Telecom business was finished when Efore’s board accepted the sale of the Telecom business to Shenzhen Kexin Communication Technologies Co. Ltd on 31st of July 2019. The transaction was completed on 28th November 2019.
The year 2019 was as a whole very eventful. The target of re-organization made during the year is to build foundation for the future to which we have referred as a work name “Efore 2.0”. The know-how of the personnel, new products and customer interest towards those new products give good premises for the year 2020. Efore 2.0 future focusing fully on industrial business looks promising.”
Continuing opearations July - December net sales, EBIT and adjusted EBIT
The net sales in July – December totalled EUR 20,3 million (EUR 17,2 million).
July-December operating profit declined from the first half being EUR -1,5 million however was better than in 2018 (EUR -2,1 million). Improvement in operating profit was due to higher net sales and reduced operating expenses. Adjusted operating profit was EUR -1,5 million (EUR -1,6 euros million).
Continuing operations full year net sales, operating profit and adjusted operating profit
Net sales totalled EUR 43,3 million (EUR 33,7 million). New products and especially high power led drivers and Powernet acquisition in December 2018 contributed positively to growth. On the other hand weakened delivery capability in the second half weakened the net sales growth.
Operating profit for the year was EUR -2,6 million (EUR -3,8 million). The improvement in operating profit was due to increase net sales and reduced fixed expenses. The adjusted operating profit was EUR -2,4 million (EUR -3,3 million). Operating profit includes an impairment of EUR 0,2 million development capitalization.
Industrial business development
At the end of 2018, the Digital Power & Light product range was expanded with new product launches and sales started well in 2019. The new 1500W led driver, launched in 2018, increased sales very well. These products are used e.g. in the lighting of sports stadiums and airports. There has been a clear increase in interest in higher efficiency products, which supports the strategy and creates the basis for net sales growth. Deliveries of the Strato EVO product line started well in 2019. The Strato EVO products, especially designed for interior, architectural and outdoor lighting, are a continuation of the successful Strato family, which was developed earlier.
Demand for the next generation Modular High Efficiency (MHE) rectifier product was good during the second half of the year. MHE product launched in the end of 2018 production started in Tunisia during the first half of the year. However, the transfer of module production of Systems products from the Tunis plant to a contract manufacturer in Estonia during the second half of the year caused temporary delivery challenges.
Demand for rail solutions that came with the acquisition of Powernet was a slight disappointment at the beginning of the year. However, the outlook for this business picked up after early spring and we received new orders, signaling a turnaround in demand.
Market outlook
In the industrial business, power supplies for LED lighting, measuring devices, healthcare equipment and infrastructure continue to provide many opportunities for growth. The company invests in customer segments where high reliability and long product life cycles are the determining factors.
Short-term risks and factors of uncertainty
The general economic development may affect the company's business environment. Due to the nature of the business, Efore is subject to reclamations of which the final outcome cannot be predicted. Based on the information currently available, these reclamations are not expected to have a material impact on the financial position of the Group. The company is in the process of negotiating a sale price adjustment related to the divestment of its Telecommunications business.
The most significant business risks are related to the success of key customer products in the market. The progress of Efore's product development projects depends in part on the customer's own project schedules. In addition, the typical fluctuations in demand in the market cause rapid changes in Efore's business.
The delivery times for the components the company requires are partly long and there may be occasional difficulties in the availability of certain components, which may affect the delivery capability. The impact of the coronavirus on the supply chains of component manufacturers used by the company is not yet known, but this may have a temporary impact, especially on the availability of components and products to be purchased in the first half of the year. However, the company no longer has its own production facilities in China.
Advancing to system products in industrial business may mean increasing product liability risk.
The adequacy of financing involves risks that the company seeks to manage by actively planning and implementing various alternatives.
Telecom divestment
Efore's Board of Directors approved the offer by Shenzhen Kexin Communication Technologies Co. Ltd to acquire Efore's telecommunications business on July 31st, 2019. The acceptance of the offer ended Efore's ongoing negotiations to establish a joint venture with another Chinese power supply partner. The transaction was closed in 28.11.2019.
The target of the transaction was Efore's entire telecommunications business, including products supplied to customers and the Efore brand and name. As a result of the transaction 73 Efore employees in Finland, China and Sweden transferred to the new owner as existing employees. After the transaction, the telecommunications business will continue in Wuxi and Suzhou, China, as well as in Efore's offices in Espoo and Tampere with all rental leases transferred to the buyer.
The debt-free purchase price (Enterprise value) of the divested business was EUR 6.0 million and the estimated purchase price of the shares was EUR 3.5 million. The purchase price paid in cash of the purchase price of the shares was EUR 3.1 million. The parties also agreed on an escrow purchase price arrangement placing EUR 0.4 million on the escrow account for one year after the transaction. A non-recurring loss of EUR 0.6 million was recognized of the transaction, including the related transaction expenses. The notes to the financial statements release provide additional information about the impact of discontinued operations on the result for the period and cash flow.
Board of Directors’ proposal for the distribution of dividend
The Board of Directors will propose to the Annual General Meeting on April 24th, 2020 that no dividend will be distributed.
Events after the end of the Financial year
Efore Plc has called an Extraordinary General Meeting on 3rd of February 2020 to decide on a reverse share split, company name and domicile as well as on the reduction of the share capital. The extraordinary General Meeting shall be held on Tuesday, 25th of February 2020.
EFORE PLC
Board of Directors
For further information please contact Mr. Vesa Leino, CEO, tel. +358 40 759 8956,
on 25th February 2020 at 14:00-15:00.
DISTRIBUTION
Nasdaq Helsinki Oy
Principalmedia
Efore Group
Efore is an international Group which develops and produces demanding power products. Efore's head office is based in Finland and its sales, marketing and R&D functions are located in Finland, Italy and the United States of America. In the financial year ended on December 2019, consolidated net sales of continuing operations totalled EUR 43.3 million and the Group's personnel averaged 388. The parent company's share is quoted on the Nasdaq Helsinki Ltd.
Investor calendar
The Annual Report 2019 will be published during the week 13/2020.
The Annual General Meeting will be held on April 24, 2020. The notice to convene the Annual General Meeting will be given later on by the Board of Directors.
Half-year report (January 1 – June 30, 2020) will be published on August 13, 2020
www.efore.com
Attachment
