Financial statement release for the period 1 January – 31 December 2011

Helsinki, Finland, 2012-02-07 12:00 CET (GLOBE NEWSWIRE) -- Ixonos Plc          Financial statement release          7 February 2012 at 13.00


Financial statement release for the period 1 January – 31 December 2011

IXONOS’ TURNOVER AND OPERATING PROFIT MATCH FORECAST

The financial period in brief

- Turnover for the financial period was EUR 81.4 million (2010: EUR 84.9 million), a change of −4.2 per cent.
- Operating profit was EUR 1.9 million (2010: EUR 5.3 million), 2.4 per cent of turnover.
- Net profit was EUR 0.9 million (2010: EUR 3.3 million), 1.1 per cent of turnover.
- Earnings per share were EUR 0.06 (2010: EUR 0.25).
- Net cash flow from operating activities was EUR 5.1 million (2010: EUR 4.7 million).

Q4/2011 in brief 

- Turnover for the fourth quarter was EUR 19.5 million (2010: EUR 23.2 million), a change of −15.6 per cent.
- Operating profit was EUR 3 thousand (2010: EUR 1.9 million).
- Net profit was EUR −0.1 million (2010: EUR 1.2 million), −0.7 per cent of turnover.
- Earnings per share were EUR −0.01 (2010: EUR 0.08).

Future prospects in brief

- Turnover for 2012 is expected to decrease clearly from 2011 but exceed EUR 60 million, and operating profit is forecast to be positive.
- Operation profit for the first quarter is expected to be clearly negative.

Kari Happonen, President and CEO:

Ixonos’ operating environment changed as Nokia Corporation, one of Ixonos’ key customers, announced its new smartphone strategy in February 2011. This shift affected the entire financial period 2011. The strong growth of 2010 began to decline in the first quarter of the review period, and despite our strongly intensified acquisition of new customers, business volume decreased in the final quarter. This downturn occurred because the demand for Symbian and MeeGo R&D and software development services decreased during the last part of the year. Despite the changes, we have successfully defended our market share in regard to other aspects of the Nokia account while simultaneously gaining new customers in Finland as well as internationally.

To adjust our cost structure to this situation, we have reorganised our operations as well as reduced expenditure throughout the Ixonos Group. In the second quarter, we held cooperation negotiations with our staff in Finland, aiming in particular to improve the efficiency of our administrative and support functions. During 2011, we have also restructured our operations in Denmark, the United States and China. Further saving measures will be continued in 2012.

The changes in our operating environment have required strong investments in the development of products and solutions with higher added value as well as in international sales. In May, we unveiled Ixonos Elastic Cloud, a Red Hat certified open and secure enterprise cloud platform that is already used to create and maintain the apps of several dozen new customers. A month later, we launched Ixonos App Agency, a development service for mobile strategy and apps. More than a hundred mobile apps for Finnish and international brands have been created using this service. Our newest product, Ixonos Experience Store, was released in December. Ixonos Experience Store is a digital marketing and distribution channel that enables our client organisations to promote their brand, build customer loyalty and monetise mobile apps. We will continue to roll out new products and product platforms; as an example, in February, at Mobile World Congress in Barcelona, we will introduce a reference platform for mobile devices based on Qualcomm technology and the Android operating system.

In addition to developing products and solutions for our Connected Devices and Online Solutions service areas, we have invested heavily in the development of our User Experience Design services during 2011. Mobile technologies and the resultant wireless connectivity to ubiquitous multi-channel cloud services and apps are expanding into new industries. They will find increasing use beyond the traditional mobile and smartphone sector, such as in the automotive industry as well as in consumer electronics and domestic appliances. Our User Experience Design services help our customers develop concepts for, and implement, unique user experiences that encompass devices as well as services. Over the course of 2011, we expanded our Helsinki user experience design studio, opened up its satellite design studio in Kosice, as well as opened new studios in London and Beijing.

Our number of customers has grown significantly in 2011, and it will continue to increase this year. We believe that the market developments and our productised solutions will bring us excellent opportunities to grow our new accounts, creating new growth in the coming years.

I would like to thank our customers, old and new, for their confidence in us and for their fine cooperation, as well as our staff of top-class experts and professionals for their committed, assiduous work in these times of substantial change.

OPERATIONS

Ixonos provides solutions and services for the development of wireless technologies, software, devices, multi-channel cloud services and mobile apps. Together with our corporate customers, we create products and services that allow consumers to enjoy inspiring digital experiences regardless of time and place.

We improve the competitiveness of client organisations by enabling cost-efficient development, a short time-to-market and superior user experiences for their devices and services. We aim to position ourselves as a strategic partner to the industry’s leading innovators and pioneers.

Our Finnish subsidiary Ixonos Business Solutions Ltd. provides development solutions and services for e-business and e-government.

We have offices in Finland, China, Denmark, Estonia, Germany, Great Britain, Slovakia, South Korea and the United States.

SEGMENTS

Ixonos reports its business operations as two segments: Mobile Solutions and Business Solutions.

Mobile Solutions

The Mobile Solutions business area comprises development solutions and services for wireless technologies, devices and software. The area’s clientele includes wireless technology suppliers, mobile device manufacturers, telecommunications companies and entertainment electronics manufacturers operating on the international market as well as other companies taking advantage of the new business opportunities that wireless communication enables. The Mobile Solutions segment’s clientele include for example Bang & Olufsen, Cassidian, Elisa, IMC, Intel, Kone, LazyTown, Nokia, NSN, Polycom, Samsung, TeliaSonera, Vodafone and Wolfson.

Ixonos’ Device Creation Centre provides comprehensive R&D services for next-generation wireless devices. In addition to software development, these solutions also cover mechanical engineering and electronics design. The unit develops smartphones and other wireless devices based on new, powerful chipsets from the world’s leading technology suppliers and on several different operating systems.

The User Experience Design unit provides user experience solutions that support the customer’s brand and helps Ixonos provide productised services and customised user interface solutions to the company’s international clientele. The services of the unit range from user experience strategy and concept development to product- and service-specific design work and solution implementation.

Ixonos’ Managed Services Centre provides cloud services for business-critical multi-channel services as well as life-cycle-spanning solutions ranging from requirements analysis to design, development, maintenance and further development. The unit develops and maintains for example solutions for media and content delivery, for information management and for mobile advertising and e-commerce, as well as social network services.

During the financial period, the turnover of the Mobile Solutions business area decreased by 3.2 per cent to EUR 68.9 million (2010: EUR 71.2 million). Operating profit decreased by 40.0 per cent to EUR 5.3 million (2010: EUR 8.9 million), 7.7 per cent of turnover.

Business Solutions

Ixonos’ Business Solutions area provides innovative e-business solutions to meet the challenges of tomorrow’s service operations. The Business Solutions area provides development solutions and services for e-business and e-government. The segment’s clientele consists mainly of Finnish telecommunications and finance companies and public administration organisations. The Business Solutions segment’s clientele include for example Elisa, Fonecta, Kuntien Tiera, OP-Pohjola, the City of Oulu, the City of Tampere, Telia-Sonera, SanomaPro and the Ministry of Finance. The first customers of the Ixonos App Agency service that was launched in 2011, include also for example BBC, eBay India, Evri, Groupon, Hotels.com, Procter & Gamble and Time Out.

The business area offers e-business and e-government services focusing on business process development, architecture services, portal solutions, content and document management solutions and business intelligence solutions. The unit also provides R&D services, helping client organisations use agile development methods to create innovative new web services. With this offering, Business Solutions aims to improve the internal and external customer service of its clients.

The solutions developed by the unit utilise product platforms of chosen technology partners as well as open source solutions.

The turnover of the Business Solutions segment decreased by 6.9 per cent to EUR 14.4 million (2010: EUR 15.5 million) during the financial period. Operating profit remained negative, EUR −0.5 million, although the losses were lower than in the previous year (2010: EUR −0.8 million).

Changes in service offering during the financial period

In the third quarter of last year, Ixonos streamlined its global service offering as well as operational organisation. Under the new organisation, the Connected Devices services include software development solutions of wireless devices, the Device Creation solutions, testing services for mobile software and devices as well as wireless solutions for the automotive industry. The User Experience Design services include comprehensive user experience design for apps, cloud services and devices. The Online Solutions services include digital content delivery and store solutions, app-development services, cloud and hosting services as well as e-business solutions and services.

TURNOVER

Consolidated turnover for the financial period was EUR 81.4 million (2010: EUR 84.9 million), which is 4.2 per cent less than in the previous year. Of the total turnover of all segments, before elimination of inter-segment revenue, the Mobile Solutions segment accrued 82.7 per cent (2010: 82.1 per cent) and the Business Solutions segment accrued 17.3 per cent (2010: 17.9 per cent).

Turnover in the fourth quarter was EUR 19.5 million (2010: EUR 23.2 million), 15.6 per cent less than in the previous year.

Turnover by segment: 

FINANCIAL RESULT

Consolidated operating profit was EUR 1.9 million (2010: EUR 5.3 million). Profit before taxes was EUR 1.4 million (2010: EUR 4.5 million). Profit for the financial period was EUR 0.9 million (2010: EUR 3.3 million). Earnings per share were EUR 0.06 (2010: EUR 0.25). Cash flow from operating activities was EUR 0.34 per share (2010: EUR 0.36). The company incurred one-off expenses of some EUR 0.6 million because of its operational restructuring and the closedown of international offices. These expenses affect the result for the financial period.

Operating profit for the fourth quarter was EUR 3 thousand (2010: EUR 1.9 million). Profit before taxes was EUR −0.1 million (2010: EUR 1.7 million). Profit for the fourth quarter was EUR −0.1 million (2010: EUR 1.2 million). This amount includes EUR 0.2 million in one-off expenses arising from the closedown of the site in Chengdu. Fourth-quarter diluted earnings per share were EUR −0.01 (2010: EUR 0.08). Diluted cash flow from operating activities in the fourth quarter was EUR 0.22 per share (2010: EUR 0.26).

Operating profit by segment:

RETURN ON CAPITAL

Consolidated return on equity was 3.2 per cent (2010: 13.7 per cent) and return on investment was 5.4 per cent (2010: 14.1 per cent).

BALANCE SHEET AND FINANCING

The balance sheet total was EUR 53.0 million (2010: EUR 56.7 million). Shareholders’ equity was EUR 29.4 million (2010: EUR 28.5 million). The equity ratio was 55.6 per cent (2010: 50.2 per cent). The Group’s liquid assets at the end of the financial period amounted to EUR 1.5 million (2010: EUR 1.2 million).

At the end of the financial period, the company’s balance sheet showed EUR 7.3 million (2010: EUR 8.6 million) in bank loans. This amount includes overdraft in use. The bank loans have covenants attached to them. These covenants are based on the company’s equity ratio and on the proportion of interest-bearing bank loans to the 12-month rolling operating profit.

GOODWILL

On 31 December 2011, the consolidated balance sheet included EUR 23.6 million in goodwill. At the end of the financial period, the company performed impairment testing of goodwill in all cash generating units and concluded that no goodwill impairment is required in connection with the units. The company views the risk of goodwill depreciation as increased and the Board of Directors has decided to test goodwill on a quarterly basis. A rationalisation programme seeking to achieve some EUR 1 million in monthly savings is underway in the company. Should the realisation of this programme be delayed, or should the company’s assumptions regarding turnover differ significantly from the forecast for 2012, goodwill would be depreciated even if long-term demand for the company’s services would remain substantially unchanged.

CASH FLOW

Consolidated cash flow from operating activities was EUR 5.1 million (2010: EUR 4.7 million) during the financial period. By 31 December 2011, the company had sold EUR 3.0 million (2010: EUR 2.0 million) in accounts receivable so as to reduce their turnaround time.

PERSONNEL

The number of personnel averaged 1,118 (2010: 1,120) during the financial period. At the end of the period, the company had 1,031 (2010: 1,138) employees. The company’s workforce decreased in the Finnish units and grew abroad. At the end of the financial period, the Group had 609 employees (2010: 722) in Finnish companies, while Group companies in other countries employed 422 (2010: 416). The company has compensated for its reduced staff in Finland by increasing subcontracting as necessary.

SHARES AND SHARE CAPITAL

Share turnover and price

During the financial period, the highest price of the company’s share was EUR 2.79 (2010: EUR 2.99) and the lowest EUR 0.66 (2010: EUR 1.84). The closing price on 31 December 2011 was EUR 0.80 (2010: EUR 2.53). The average price over the financial period was EUR 1.30 (2010: EUR 2.37). The number of shares traded during the financial period was 7,065,258 (2010: 2,947,349), which corresponds to 46.8 per cent (2010: 19.5 per cent) of the total number of shares at the end of the period. Based on the closing price at 31 December 2011, the market value of the company’s shares was EUR 12,081,987 (2010: EUR 38,209,285).

Share capital

At the beginning as well as the end of the financial period, the company’s registered share capital was EUR 585,394.16 and the number of shares was 15,102,484.

Option plan 2006

The exercise period for Ixonos’ option plan 2006 ended on 31 December 2011. A total of 366,500 options remained unexercised. They would have entitled their holders to subscribe for 575,045 shares. The unexercised options expired after the exercise period.

Option plan 2011

The Board of Directors of Ixonos Plc decided on 30 November 2011 to grant new options. The 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. At 30 November 2011, 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 period 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 period during which this average price is determined is 1 September – 30 November 2011 for the IV/A options (resulting in an exercise price of EUR 0.86), 1 June – 31 August 2012 for the IV/B options and 1 June – 31 August 2013 for the IV/C options. The exercise prices will be reduced by the amount of dividends and can also be adjusted under the other circumstances specified in the option terms.

Shareholders

On 31 December 2011, the company had 3,201 shareholders (2010: 2,863). Private persons owned 56.6 per cent (2010: 50.8 per cent) and institutions 43.4 per cent (2010: 49.2 per cent) of the shares. Foreign ownership was 7.2 per cent (2010: 8.5 per cent) of all shares.

Board authorisations

On 29 March 2011, Ixonos Plc’s Annual General Meeting authorised the Board of Directors to decide on a rights issue as well as on issuing stock options and other special rights entitling to shares as referred to in chapter 10, section 1 of the Limited Liability Companies Act (624/2006), under the following terms:

The number of shares to be issued under the authorisation may not exceed 1,500,000, which is equivalent to approximately 10 per cent of all company shares at the time of convening the Annual General Meeting.

The Board of Directors was granted authority to decide, within the limits of the authorisation, on all terms of the share issue as well as on those of the issue of special rights entitling to shares.

The Board of Directors was also granted authority to decide on crediting the subscription price to the share capital or, in whole or in part, to the invested non-restricted equity fund.

Shares as well as special rights entitling to shares may also be issued in a way that deviates from the pre-emptive rights of shareholders, if a weighty financial reason for this exists as laid out in the Limited Liability Companies Act. In such a case, the authorisation may be used to finance corporate acquisitions or other investments associated with the company’s operations, to maintain and improve the Group’s solvency or as part of the company’s incentive plan.

The authorisation is effective until the Annual General Meeting 2012.

On the closing date, a 600,000-share proportion of the authorisation had been used to establish the option plan for key employees; authorisation to issue 900,000 shares remained available.

OTHER EVENTS DURING THE FINANCIAL PERIOD 2011

New base prospectus

On 28 December 2011, the Financial Supervisory Authority approved the base prospectus for Ixonos Plc. Base prospectuses are prescribed in the Securities Markets Act (495/1989). Ixonos Plc’s base prospectus contains information on the company, its business operations and its financial standing. The prospectus is valid for 12 months after publication.

Restructuring of operations in China

During 2011, Ixonos took various measures to adapt its cost structure to the decreased business volume as well as to ensure the best possible profitability in the changed international operating environment. To improve efficiency, Ixonos restructured its operations in China and announced on 30 November 2011 that local software production would be concentrated in Beijing. Ixonos’ service centre in Chengdu was closed down gradually by the end of 2011.

Rationalisation of international operations; adjusted first-half-year profit forecast

In its first interim report for the financial period, Ixonos announced that the Group’s turnover and operating profit for the first half-year were expected to be at the same level as in the previous year. Due to changes in the operating environment, the company announced on 29 June 2011 that it would close its office in Boston and focus its U.S. sales activities on the West Coast, closer to its corporate customers developing mobile technology as well as to media and other companies providing mobile content and services. At the same time, the company announced that it would close its office in Copenhagen and concentrate its Danish operations in Aalborg, where development work based particularly on the Android operating system is carried out.

In connection with the rationalisation of international operations and with the cooperation negotiations that were held in Finland from April to June, the company recognised non-recurring expenses of EUR 0.4 million in the second quarter. The rationalisation is expected to create yearly savings of approximately EUR 2.5 million from the third quarter onwards.

Cooperation negotiations

On 19 April 2011, the company commenced cooperation negotiations for reasons relating to finances, production and reorganisation. The negotiations applied to all Ixonos Group employees in Finland except for those employed by Ixonos Business Solutions Ltd. The goal of the negotiations was to adapt the company’s cost structure to the decelerated growth as well as to improve the company’s ability to maintain the best possible profitability.

The completion of the negotiations was announced on 1 June 2011 and as a result 8 employees in the administration and support functions of the Ixonos Group were dismissed. As an additional rationalisation measure, no new employees are hired to replace those who leave of their own accord such as by giving notice or taking family leave.

The company also announced that it would phase out its mobile-device software development services in Salo and Turku by the end of 2011. The reductions in these offices included 21 employees in total. Of the affected employees, 14 have transferred to other duties within the Ixonos Group.

Qualcomm chipsets added to Ixonos’ technology base

In June, Ixonos licensed Qualcomm’s chipset technology, which enables a variety of Android devices to be delivered to Ixonos’ global clientele as turnkey development projects. Qualcomm’s technology enables fast and efficient development of connected devices for the large and growing market.

New strategic partnerships

In June 2011, Ixonos joined Car Connectivity Consortium (CCC) to develop sophisticated in-vehicle connectivity solutions. In October, Ixonos’ testing unit became Europe’s first CCC authorised test laboratory for products based on the MirrorLink technology.

Ixonos became a member of Linux Foundation, a non-profit consortium dedicated to fostering the growth of Linux, in May 2011, and has played an active role in the development of mobile Linux since 2006.

New branch office in Seoul

In June, the company opened a branch office in Seoul, South Korea. The office serves as a customer interface, sales office and technical support outlet for the company’s existing and new customers in that region. The opening of the new office is in line with Ixonos’ strategic efforts to expand its business globally and supports the company’s heightened sales efforts towards international companies operating in the domain of mobile devices. The Korean office is part of Ixonos’ operations in the APAC region.

New product releases

Ixonos has launched several new products during 2011: Ixonos Experience Store enables companies to improve brand awareness, build customer loyalty and monetise mobile apps using a single application store platform and online marketing and delivery channel; TV Compass, a socially enabled mobile TV solution, provides a consistent viewing experience throughout televisions, smartphones and tablets; Ixonos App Agency covers all services related to development of mobile apps, from consulting to production, deployment, maintenance and analysis; and Ixonos Elastic Cloud, an open, secure, Red Hat certified enterprise cloud solution has been designed to be especially suitable as a platform for R&D as well as cloud services.

New reporting segments

Since the beginning of 2011, Ixonos reports its business operations as two segments: Mobile Solutions and Business Solutions. The new reporting segments were announced on 21 April 2011.

Ixonos Plc’s Annual General Meeting, 29 March 2011

Ixonos Plc held its Annual General Meeting on 29 March 2011. The meeting adopted the company’s financial statements, including the consolidated financial statements, for the financial period 1 January – 31 December 2010 and discharged from liability the members of the Board of Directors as well as the President and CEO.

The Annual General Meeting decided that no dividend would be paid for the financial period. The meeting also decided that six ordinary members, rather than eight as previously, would be elected to the Board of Directors. Paul Ehrnrooth, Pertti Ervi, Matti Järvinen and Kirsi-Marja Kuivalainen were re-elected as Board members, and Matti Heikkonen and Samu Konttinen were elected as new Board members.

At its meeting following the Annual General Meeting, the Board of Directors elected Pertti Ervi as Chairman of the Board and Paul Ehrnrooth as Deputy Chairman of the Board. The Board also appointed the members of its committees: Pertti Ervi was elected as Chairman of the Audit Committee; Paul Ehrnrooth and Matti Järvinen were elected as Audit Committee members; Pertti Ervi was elected as Chairman of the Remuneration Committee; Paul Ehrnrooth and Kirsi-Marja Kuivalainen were elected as Remuneration Committee members; and Paul Ehrnrooth and Pertti Ervi were elected as Nomination Committee members.

The Annual General Meeting decided to keep unchanged the fees of the Board members: the Chairman of the Board will be paid EUR 40,000 per year and EUR 500 per meeting, the Vice Chairman of the Board EUR 30,000 per year and EUR 250 per meeting and other Board members EUR 20,000 per year and EUR 250 per meeting. The meeting also decided to pay a fee of EUR 500 per meeting to the chairpersons of the Board’s committees and EUR 250 per meeting to committee members.

Authorized Public Accountant firm PricewaterhouseCoopers Oy continues as auditor. The new principal auditor is Markku Katajisto, Authorized Public Accountant. The Annual General Meeting decided that a reasonable auditor’s fee would be paid in accordance with the auditor’s invoice.

The Annual General Meeting also approved the Board’s proposal to repeal section 9 (on the obligation to redeem shares) of the company’s articles of association.

Elaboration on prospects

On 14 February 2011, Ixonos announced that the new smartphone strategy of its major customer Nokia Corporation might have a significant effect on the Ixonos Group’s Mobile Terminals & Software and Media & Communities business areas and thereby on the operations, earning power and financial status of the entire group of companies. Based on information Nokia had published, Ixonos estimated that should Nokia quickly and substantially reduce its service purchases in 2011, the increases in turnover and operating profit that Ixonos had forecast in its financial statement release on 10 February 2011 would be unlikely to occur.

On 22 March 2011, in a stock exchange release based on additional information Ixonos had received, the company predicted that Nokia’s new strategy would have a minor effect on Ixonos’ turnover and operating profit during the first half of the year. However, Ixonos’ sales of software development services to R&D projects based on Nokia’s MeeGo and Symbian software platforms were estimated to decrease in the second half of the year. Because of this, the business volume of Ixonos’ Mobile Terminals & Software business area was expected to decline, at least temporarily.

Changes in Ixonos’ Management Team

Teppo Kuisma, Vice President and Sami Paihonen, Vice President were appointed as members of the Ixonos Group’s Management Team from 1 October 2011. Teppo Kuisma, who has been Managing Director of Ixonos Business Solutions Ltd. since the beginning of 2010, is now responsible for the company’s Online Solutions services. Sami Paihonen joined Ixonos in June 2010 and is responsible for the company’s User Experience Design services.

Management Team member Pasi Iljin, Vice President, Technology, resigned as of 1 September 2011 to join another company.

On 13 June 2011, Management Team member Timo Kaisla, Senior Vice President, began a 6–12 month sabbatical for family reasons.

On 10 February 2012, Ixonos announced that after negotiations with personnel representatives, Ixonos’ employees in Finland would be represented in the company’s administration through a new employees’ council. The council includes key persons from the Ixonos Group companies and functions in Finland as well as the Group’s shop stewards and an occupational safety and health representative. Due to the establishment of the new council, the Board of Directors of Ixonos Plc revised the company’s corporate governance model in that the Chief Shop Steward of the Ixonos Group no longer participates in the work of the Management Team.

The Management Team of the Ixonos Group presently comprises Kari Happonen, President and CEO; Timo Leinonen, Senior Vice President, Finance; Kari Liuska, Senior Vice President, Connected Devices; Teppo Kuisma, Vice President, Online Solutions; Sami Paihonen, Vice President, User Experience Design; and Taina Makkonen, Vice President, Human Resources.

EVENTS AFTER THE FINANCIAL PERIOD

The streamlining of Finnish operations continues

On 3 January 2012, Ixonos announced the commencement of cooperation negotiations due to reasons related to finances, production and reorganisation. The negotiations apply to the company’s employees in Finland. Demand for the Symbian and MeeGo R&D and software development services Ixonos has provided to Nokia Corporation has declined significantly, and it is not expected to return to its previous level. The goal of the cooperation negotiations is to adjust the company’s cost structure to the new situation, thus safeguarding the company’s competitiveness.

The negotiations apply to all personnel in Finland, who are employed by Ixonos Plc or the Group's subsidiaries, as well as to employees in foreign offices who are employed by Finnish companies or their foreign branch offices. The actions are estimated to impact 150 people at the most.

RISK MANAGEMENT AND NEAR-FUTURE UNCERTAINTY FACTORS

Ixonos Plc’s risk management aims to ensure undisturbed continuity and development of the company’s operations, to support attainment of the commercial targets set by the company and to 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 status. 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.

Ixonos’ corporate acquisitions in 2006–2008, its rapid growth in 2010 and the prolonged turnaround time of accounts receivable have increased the company’s need for working capital. The company manages this need by creating, together with financiers, adequate buffers to ensure sufficient funds as well as by facilitating the circulation of working capital. The company’s balance sheet also includes a significant amount of goodwill, which may be impaired should internal or external factors reduce the profit expectations of the company or any of its cash generating units. Goodwill is tested during the final quarter of each year and, if necessary, at other times. The rapid changes the company’s clientele is undergoing have led to decreased demand in the short term, increasing the risk of goodwill impairment. During 2012, the company will assess on a quarterly basis the need for such impairment.

The company’s financial agreements have covenants attached to them. A covenant violation 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 violations are associated with operating profit 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. Ixonos has in use the cash funds its normal operations require.

LONG-TERM GOALS AND STRATEGY

Ixonos aims to achieve in long-term an operating profit of at least 10 per cent. Due to the ongoing change process, the company will expand its prospects on its goals for long-term growth later this year.

To achieve the long-term goals, Ixonos focuses its strategy on expanding the company’s product, solution and service operations into new accounts and industries.

Mobile technologies and wireless connectivity will be used not only by the mobile and smartphone industry and in computers but also by the automotive industry, in home entertainment electronics and in domestic appliances. These connected devices will be interlinked with the Internet and each other. The R&D service market for such devices is expected to grow intensely in the next few years.

The proliferation of connected devices will generate a growing market for cloud services and mobile apps, based on high-quality user experiences. The always-on wireless connectivity of the devices will enable cloud services and apps to be used regardless of time and place. Services and apps will extend the feature set of devices as well as create new services and functionality for consumers, businesses and authorities alike. These services and apps must be designed to be as user-friendly as possible in multi-channel environments, ensuring that they work on countless different devices irrespective of technology and software, user interface and the way the device is used.

Ixonos positions itself as a globally significant enabler of the connected life. We create wireless technologies and connected devices as well as multi-channel cloud services and mobile apps. We aim to improve the competitiveness of our client organisations by enabling top-class usability, cost-efficient development and a short time-to-market for their devices.

Ixonos’ customer promise and competitive edge are founded on user experience innovations that support the customer’s brand as well as on product-based, customisable technology solutions. Productised device and software platforms and the utilisation of open source technologies enable customer devices, services and apps to be developed in a cost-effective manner and rolled out rapidly.

In the connected-device market, we work with smartphone manufacturers as well as with technology suppliers, telecommunications companies, consumer electronics manufacturers, the automotive industry, the domestic appliance industry and defence & security industry players.

In the market for cloud services and apps, we collaborate with media companies, telecommunications companies, the service sector, public
administration and global consumer brands.

Ixonos’ key strengths are:
- user experience and user interface design encompassing devices and services;
- technology platform and operating system independent creation of wireless technologies and mobile software;
- electronics design and mechanical engineering for mobile devices;
- a top-class mobile laboratory and extensive testing services;
- open source based systems development and cloud services;
- a global network of service centres and sales offices.

FUTURE PROSPECTS

According to Gartner research, the global market in R&D services for mobile phones, smartphones and other mobile devices is expected to continue its intense growth, and wireless connectivity is anticipated to extend into new use areas and fields. The expansion of wireless connectivity is expected to increase demand for the services of design houses such as Ixonos. Market-Visio indicates that the Finnish ICT market will grow at the rate of some 4 per cent per year, which is near the long-term average.

In accordance with strategy, Ixonos continues its activities to expand its clientele by boosting sales of products, solutions and services to technology suppliers, mobile device manufacturers, consumer electronics manufacturers, the automotive industry and other customers in Finland as well as internationally. By rationalising its operations, the company strives to maintain positive cash flow and the best possible profitability.

Despite the intensified efforts to secure new customers and sales to new customers, the volume of the company’s business is expected to decline this year, as the demand for MeeGo and Symbian software development services decreases significantly. The company’s turnover for 2012 is expected to decrease clearly from the previous year but exceed EUR 60 million. Operating profit is forecast to be positive, before possible one-off expenses. The company will expand its prospects during the year, when a better view of the remainder of the year is available. Operation profit for the first quarter is expected to be clearly negative.

NEXT REPORTS

Ixonos will publish its interim report for the period 1 January – 31 March 2012 on 27 April 2012.

IXONOS PLC
Board of Directors

For more information, please contact:
Ixonos Plc
Kari Happonen, President and CEO, tel. +358 400 700 761, kari.happonen@ixonos.com
Timo Leinonen, CFO, tel. +358 400 793 073, timo.leinonen@ixonos.com

Distribution
NASDAQ OMX Helsinki
Main media


THE IXONOS GROUP

ABBREVIATED FINANCIAL STATEMENTS 1 January – 31 December 2011

Accounting policies

This financial statement bulletin has been prepared in accordance with IAS 34 (Interim Financial Reporting) and the accounting policies for the annual financial statement of 31 December 2010. The IFRS amendments and interpretations that took effect on 1 January 2011 have not affected the consolidated financial statements.

Preparing the financial statements 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, judgment must be used in applying the accounting policies. As the estimates and assumptions are based on views prevailing at the time of releasing the financial statement bulletin, 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 financial statement bulletin is in Finnish. The English financial statement bulletin is a translation.

As the figures in the report have been rounded, sums of individual figures may differ from the sums presented. The financial statement bulletin is unaudited.

CONSOLIDATED INCOME STATEMENT, EUR 1,000

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, EUR 1,000

CONSOLIDATED STATEMENT OF FINANCIAL POSITION, EUR 1,000

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY, EUR 1,000

A: Share capital
B: Share premium reserve
C: Invested non-restricted equity fund
D: Treasury shares
E: Translation difference
F: Retained earnings
G: Total equity attributable to equity holders of the parent
H: Non-controlling interests
I:  Total equity

CONSOLIDATED CASH FLOW STATEMENT, EUR 1,000

CONSOLIDATED INCOME STATEMENT, QUARTERLY, EUR 1,000

SEGMENT REPORTING

CHANGES IN FIXED ASSETS, EUR 1,000

FINANCIAL RATIOS

OTHER INFORMATION

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 = (profit before taxes + interest + other financial expenses) / (balance sheet total − non-interest-bearing liabilities, average) x 100

Return on equity = net profit / shareholders’ equity, average x 100

Gearing = (interest-bearing liabilities – liquid assets) / shareholders’ equity x 100