NET SALES AND OPERATING RESULT OF 2012 GREW CLEARLY FROM THE PREVIOUS YEAR
EB reports its 2012 financial results, as provided by the IFRS5 standard, divided between Continuing and Discontinuing Operations. Test Tools product business, sold after the reporting period on January 31, 2013, is classified as Discontinuing Operations in this financial statement. Summary of Continuing and Discontinuing Operations is presented under section “Summary of Continuing and Discontinuing Operations”.
SUMMARY OCTOBER – DECEMBER 2012, CONTINUING OPERATIONS
- The fourth quarter financial figures include non-recurring items of approximately EUR 4 million in total, booked as result of the financial challenges faced by a Wireless Business Segment’s US based customer of EB’s subsidiary, Elektrobit Inc.
- Net sales of the fourth quarter from continuing operations grew to EUR 52.6 million (EUR 44.1 million, 4Q 2011), representing an increase of 19.1 % year-on-year. Net sales of Automotive Business Segment grew to EUR 36.2 million (EUR 28.0 million, 4Q 2011), representing a 29.2 % growth year-on-year. The Wireless Business Segment’s net sales from continuing operations grew by 1.6 % to EUR 16.4 million (EUR 16.1 million, 4Q 2011).
- Operating profit from continuing operations was EUR 0.2 million including the above mentioned non-recurring items of approximately EUR 4 million in total (EUR 2.2 million including EUR 0.7 million non-recurring costs related to collecting the receivables from TerreStar companies, 4Q 2011). Operating profit from continuing operations without the above mentioned non-recurring items was EUR 4.3 million (EUR 2.9 million, 4Q 2011).
- Operating profit of the Automotive Business Segment was EUR 3.3 million (EUR 2.1 million, 4Q 2011).
- Operating loss from continuing operations of the Wireless Business Segment’s was EUR -3.2 million including the above mentioned non-recurring items of approximately EUR 4 million in total (operating profit of EUR 0.1 million including EUR 0.7 million non-recurring costs related to the reorganization cases of TerreStar companies, 4Q 2011).
- Operating profit from continuing operations of Wireless Business Segment without the above mentioned non-recurring items was EUR 0.9 million (EUR 0.8 million, 4Q 2011).
- EBITDA from continuing operations was EUR 2.3 million (EUR 3.8 million, 4Q 2011). Automotive Business Segment’s EBITDA was EUR 4.5 million (EUR 3.1 million, 4Q 2011) and Wireless Business Segment’s EBITDA from continuing operations was EUR -2.3 million (EUR 0.7 million, 4Q 2011).
- Cash flow from operating activities was EUR 6.0 million (EUR 7.1 million, 4Q 2011). Net cash flow was EUR -2.8 million (EUR 2.7 million, 4Q 2011). Both cash flows include continuing and discontinuing operations.
- Earnings per share from continuing operations were EUR 0.00 (EUR 0.01, 4Q 2011).
On October 26, 2012 EB announced that Elektrobit Automotive GmbH, a subsidiary of Elektrobit Corporation and Audi Electronics Venture GmbH (AEV), a subsidiary of AUDI AG, have decided to expand their joint venture activities from infotainment software to provide systems integration and systems engineering services to AUDI AG and other VW Group companies for their future connected infotainment solutions. To build the required engineering competences and capacity, the joint venture has established a new site in Ulm, Germany and plans to hire up to 100 R&D engineers by end of 2013 leveraging the existing knowledge base and competency in systems integration and software development in Ulm area.
SUMMARY JANUARY – DECEMBER 2012, CONTINUING OPERATIONS
- The figures of the 2012 include following non-recurring items totaling approximately EUR 4 million: non-recurring costs of EUR 1.2 million related collecting the receivables from TerreStar Companies and non-recurring income of EUR 1.2 million and a positive cash flow impact of EUR 10.8 million resulting from the settlement payment of USD 13.5 million received in the reorganization case of TerreStar Corporation in the third quarter; and non-recurring items of approximately EUR 4 million in total, booked in the fourth quarter of 2012, as result of the financial challenges faced by a US based customer of EB’s subsidiary, Elektrobit Inc.
- Net sales from continuing operations in the reporting period was EUR 185.4 million (EUR 148.0 million in 2011), representing an increase of 25.3 % year-on-year. Net sales of Automotive Business Segment grew to EUR 122.1 million (EUR 98.3 million in 2011), representing a 24.3 % growth year-on-year. The Wireless Business Segment’s net sales from continuing operations grew by 27.7 %, to EUR 63.5 million (EUR 49.8 million in 2011).
- Operating profit from continuing operations was EUR 2.5 million including the above mentioned non-recurring items of approximately EUR 4 million in total (operating loss of EUR -5.5 million, including EUR 0.9 million non-recurring costs related to collecting the receivables from TerreStar Companies in 2011). Operating profit from continuing operations without these above mentioned non-recurring items was EUR 6.5 million (operating loss of EUR -4.6 million in 2011).
- Operating profit of the Automotive Business Segment was EUR 4.7 million (EUR 0.8 million in 2011). The Wireless Business Segment’s operating loss from continuing operations was EUR -2.2 million including the above mentioned non-recurring items of approximately EUR 4 million in total (EUR -6.2 million, including EUR 0.9 million non-recurring costs related to collecting the receivables from TerreStar Companies in 2011). Wireless Business Segment’s operating profit from continuing operations without these above mentioned non-recurring items was EUR 1.8 million (operating loss of EUR -5.3 million in 2011).
- EBITDA from continuing operations was EUR 9.8 million (EUR 3.0 million in 2011). Automotive Business Segment’s EBITDA was EUR 9.0 million (EUR 6.0 million in 2011) and Wireless Business Segment’s EBITDA from continuing operations was EUR 0.7 million (EUR -3.3 million in 2011).
- Cash flow from operating activities was EUR 8.1 million (EUR 5.3 million in 2011) including an approximately EUR 10.8 million positive cash flow effect resulting from the settlement payment in the reorganization cases of TerreStar Corporation in the third quarter of 2012. Net cash flow was EUR 5.5 million (EUR -10.6 million in 2011). Both cash flows include continuing and discontinuing operations. Cash and other liquid assets totaled EUR 15.5 million at the end of the reporting period (EUR 10.0 million in 2011). Equity ratio was 54.7% (62.8% in 2011).
- Earnings per share from continuing operations were EUR 0.01 (EUR -0.05 in 2011). The Board of Directors proposes that the Annual General Meeting to be held on April 11, 2013 resolve to pay EUR 0.01 per share, i.e. in total EUR 1,294,126.90, as dividend based on the adopted balance sheet for the financial period of January 1, 2012 – December 31, 2012.
EB’S CEO JUKKA HARJU:
“During the last quarter of 2012 EB’s net sales continued its strong growth. Operating result from continuing operations was only slightly positive because of the EUR 4.0 million non-recurring items that we had to book due to the financial challenges of our Wireless Business Segment’s US based customer. The growth of Automotive Business Segment’s net sales and operating profit were both according to our plans. The net sales of Wireless Business Segment from continuing operations grew slightly year-on-year but the operating result was negative due to the non-recurring items mentioned above. With the exception of these non-recurring items, net sales and operating result of Wireless Business Segment developed as planned.
At the end of January 2013 EB sold its Test Tools product business to Anite for EUR 31.0 million. For EB, this transaction gives good cash consideration for the business, a significant non-recurring profit and cash increase, and it further strengthens EB’s financial position. After this divestiture, our Wireless Business Segment is more focused in the markets which offer EB larger long term growth potential.
EB’s net sales from continuing operations during the whole year 2012 grew strongly by approximately 25 per cent due to the growth of the both Business Segments. Automotive Business Segment continued its strong growth that has lasted for several years in the automotive software markets. It was especially delightful that the Wireless Business Segment turned to growth, which growth came from defence and public safety markets, as well as from the R&D services markets for mobile infrastructure and wireless connectivity.
EB’s operating result in 2012 improved clearly year-on-year and was EUR 2.5 million positive. Operating result was less than targeted due to the non-recurring items and higher than expected costs in some projects. Operating result without non-recurring items was EUR 6.5 million.
The settlement made with TerreStar Corporation in August, and the related settlement payment of USD 13.5 million for our receivables concluded our 1.5 years long process of collecting the receivables from TerreStar Corporation in its reorganization cases in the USA. The reorganization case of TerreStar Networks is still ongoing.
The demand for EB’s products and services is expected to remain good during 2013 and our main target is to increase the operating profit from the previous year.
OUTLOOK FOR 2013
EB will apply the new IFRS10 and IFRS11 standards from the beginning of 2013 and will consolidate e.solutions GmbH, the jointly owned company with Audi, applying the proportionate consolidation method. EB holds a 51% stake in e.solutions GmbH, Audi holding the remaining 49%. Previously e.solutions GmbH has been included in EB’s consolidated financial statements as subsidiary and it has been consolidated in full. As a result of the change in the method of consolidation, the proportion of net sales and operating result of e.solutions GmbH to be consolidated into EB’s consolidated financial statements will decrease. The change in the method of consolidation as presented above has been taken into account in the 2013 outlook for net sales and operating result presented below and the 2012 net sales and operating result, presented for comparison, are pro forma figures, assuming that proportionate consolidation method would have been applied already in 2012. More information about this has been presented in the stock exchange release announced today on February 19, 2013 and in this financial statement bulletin in the section “Change in the consolidation of the jointly owned company of EB and AUDI as of January 1, 2013”.
Carmakers continue to invest in software for new car models and the market for automotive software products and services is estimated to continue growing. However the growth rate of the global automotive industry is estimated to be less than in the previous year due to the financial uncertainties in Europe. Despite these uncertainties, many carmakers have continued good financial performance also during the end of 2012 and slowing down of the markets affects different car makers in different ways. In the Wireless Business Segment the demand growth will be driven especially by the increasing use of the LTE technology that increases the performance of mobile networks, and the authorities’ needs for new communication solutions that use commercial technologies of smart phones and mobile networks, as well as the growing need of companies to provide wireless connectivity of their devices, targeted to consumers and for professional use, to broader solutions. General cost saving measures of the public sector reflects the demand in the public safety markets in Europe.
EB expects for the year 2013 that net sales will grow and operating result to be at the same level as it was in 2012 without non-recurring items (pro forma net sales of EUR 173.8 million, and pro forma operating profit without non-recurring items of EUR 5.1 million, in 2012). Operating result is expected to be clearly better in the second half than in the first half of 2013 due to higher product license sales in the Automotive Business Segment during the latter half of the year and other seasonality factors, and due to the planned cost saving measures in the first half in the Wireless Business Segment. The background to the cost saving measures in the Wireless Business Segment are the planned sale of the products and services to a US based customer will not materialize due to the customer’s financial challenges, and part of the common cost base of the Wireless Business Segment that was previously allocated to the sold Test Tools product business, was not included in the transaction.
More specific market outlook is presented under the “Business Segments’ development during October – December 2012 and Market Outlook” section.
The profit outlook for the year 2013 does not include the non-recurring net profit of about EUR 23 million in the first quarter of 2013 resulting from the sale of the Test Tools product business.
In addition, the profit outlook for the year 2013 does not include possible non-recurring income or costs related to the reorganization cases of TerreStar Networks Inc. More information about the reorganization cases of TerreStar Networks and the amount of the receivables and collecting the receivables as well as other uncertainties regarding the outlook is presented under “Risks and Uncertainties” section.
