Half year financial report January 1, – June 30, 2017

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 11.August 2017

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 Half Year financial report

Espoo, Finland, 2017-08-11 08:00 CEST (GLOBE NEWSWIRE) --  

 

Efore Plc     Half Year Financial Report  August 11, 2017    at 09:00 a.m.


Half year financial report January 1,  –  June 30, 2017

This release is a summary of Efore's Half year financial report January – June 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.

January - June 2017 in brief: 
- Net sales totalled EUR 39,4 million (EUR 39,5 million), down 0,3 % compared with the corresponding period last year
- Operating result was EUR 0,7 million (EUR -3,0 million)
- Adjusted operating result 0,7 million (EUR -2,6 million)
- Earnings per share were EUR 0,00 (EUR -0,06)

- The outsourcing of manufacturing in China was finalized and the support functions related to manufacturing, procurement, R&D and sales in Suzhou facility were relocated to the manufacturing partner site in Wuxi.
 

 1-6/171-6/16Change1-12/16
Key indicators, EUR million6 mo6 mo%12 mo
         
Net Sales39,439,5-0,375,4
  Telecommunication sector19,418,07,834,2
  Industrial sector19,921,5-7,441,2
Adjusted operating result*0,7-2,6  -4,8
Operating result0,7-3,0  -9,7
Result before taxes0,3-3,1  -10,4
Net result0,0-3,3  -11,4
         
Earnings per share, EUR0,00-0,06  -0,22
Solvency ratio, %18,728,3-33,915,7
Gearing, %97,532,1  99,5
Cash flow from business operations2,41,2  -1,1

 

Key indicators Half year, EUR millionH1/2017H2/2016H1/2016
       
Net Sales39,435,939,5
  Telecommunication sector19,416,218,0
  Industrial sector19,919,721,5
Adjusted operating result*0,7-2,2-2,6
Operating result0,7-6,7-3,0


*Adjustments in 2016 include items such as costs due to changes in organizational structure, impairments and impact from the sale of businesses

Jorma Wiitakorpi, Efore’s CEO

“During the latter part of 2016 we initiated measures to reduce the fixed costs and improve our productivity. These measures had a positive effect on the result development and the operating result of the first half year 2017 was more than EUR 3,7 million better than a year ago.

The actions to lighten our balance sheet have progressed. The most remarkable results were achieved in China and in the inventory values. These actions had a clear positive effect in improving our cash flow during the period under review. 

Efore’s total net sales were almost at the same level as a year ago.

The industrial sector net sales decreased by 7,4 % compared with the corresponding period of last year and amounted to EUR 19,9 million. Two significant EMS customers in the industrial sector started to use services of other companies as a result of Efore’s decision to outsource manufacturing in China. On the other hand, the net sales of our core business related to both Digital Power and Digital Light products increased more than industry average.

During the period under review Efore’s excellent customer satisfaction was witnessed with the prestigious award we received when National Instruments once again selected Efore as the “Supplier of the Year” for 2016. Efore previously achieved the same honor in 2014, making this the first time the same supplier has achieved this recognition in multiple years.

The net sales of telecommunications sector increased 7,8 % compared with last year and amounted to EUR 19,4 million. The development of net sales in the telecommunications sector slowed down towards the end of the reporting period which was mainly due to delay in some new product introductions and customers’ request for rescheduled shipments.

The outsourcing of manufacturing in China was finalized and the support functions related to manufacturing, procurement, R&D and sales in Suzhou facility were relocated to the manufacturing partner site in Wuxi. This arrangement has a significant role by enabling Efore to focus on its core competency in the future, which is developing demanding power solutions for its customers. The outsourcing also reduced the fixed costs as well as lightened the balance sheet in the Group.

In order to improve our cost efficiency we have moved to new premises in Finland and China. The relocation in Italy has been delayed until the 3rd quarter of 2017 thus the desired effect in decreasing costs related to this will not be fully realized until the beginning of next year.

Telecom operators have postponed their investments. The peak of the 4G investments have been achieved and extensive network projects based on 5G-technology will not be realized until 2019 – 2020 thus a slight decline is expected in the telecommunications market. Efore’s new product introduction aims to mitigate market decline.

In the industrial sector the consistent demand on current products both in Digital Power and Digital Light is expected to continue, supported by introductions of new products.

We will continue actions to reduce the fixed costs and to lighten the balance sheet in order to ensure positive result development.”

Net sales and result development January -June

Efore’s net sales totalled EUR 39,4 million (EUR 39,5 million).

The net sales of the telecommunications sector increased by 7,8 % compared with  last year and amounted to EUR 19,4 million. (EUR 18.0 million).The net sales of the telecommunications sector included EUR 2 million sales of inventory to Hodgen Technology with no margin. The development of net sales slowed down towards the end of the reporting period which was mainly due to delay in some new product introductions and customers’ request for rescheduled shipments.

The industrial sector net sales decreased by 7,4 % compared with the corresponding period of last year and amounted to EUR 19,9 million (EUR 21,5 million). Two significant EMS customers in the industrial sector started to use services of other companies as a result of Efore’s decision to outsource manufacturing in China and this had a negative impact in the development of net sales. On the other hand, the net sales of our core business related to both Digital Power and Digital Light products increased more than industry average.

The operating result increased clearly compared with the corresponding period a year ago resulting EUR 0,7 million (EUR -3,0 million) and the adjusted operating result was EUR 0,7 million (EUR -2,6 million). Main reasons for the positive result development were especially the improvement of Efore's productivity and the reduction of fixed costs. There are no one-time costs during the period under review.

Business development

The telecom market is transforming, which sets new requirements for the operators in the business. Most of Efore’s telecom products are designed for macro base stations but demand for them has decreased and shifted towards small base stations. Efore further continues R&D investments by widening the technology portfolio into power supply technology for new small cell products. The products based on the 5G technology are in a key role in future network expansions.

During the period under review Efore has been focusing on developing products for telecom 5G applications and the first products will be ready in the latter part of 2017.

Efore’s product portfolio in the industrial sector has expanded. In Digital Power area, some custom designs have been completed and a new standard medium-high power platform will be 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 that will be launched in the latter part of 2017.

Efore has started its first development projects concerning larger system level solutions for the telecom market. Introduction of system level solutions for telecom and industrial market will play an even more significant role in the future. In these products Efore can utilize its existing expertise and skillsets from the DC-system business. The first complete energy solutions will be delivered in the latter part of 2017.

In 2016 Efore started an R&D project that focused on development of bi-directional technology for regenerative and power back-up solutions.  The project has now passed field tests and is ready for product implementation together with the customers. This technology platform is one part of Efore’s vision for future industrial and systems applications where more versatile and efficient power solutions are needed.

Component market is showing a continuing lead-time increase and the Group is taking actions to mitigate possible challenges in demand fulfillment.

Short-term risks and factors of uncertainty

The market typical fluctuation in demand can still cause rapid changes in Efore’s business. Business risks are related to the success of key customers in their markets. 

The progress in Efore’s product development projects depends partly on the project schedules of our customers. 

The expansion of the Group’s product range in to system level solutions in the industrial sector may increase product liability risk.

Global economic development may have a negative effect on Efore’s business environment.

The equity ratio covenant was breached at the end of the period under review. Efore has negotiated with the financier and the company received a waiver regarding the breach on August 2, 2017.  If the covenant is breached at the end of 2017 there is a risk that the waiver will not be granted.

Due to the weak financing situation there are some risks related to the current undrawn credit facilities and adequate financing. Efore is minimizing the risks by actively planning and implementing different options. However, the situation is better than in December 2016.

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.

Market outlook

Telecom market is characterized by high volatility combined with high level of product variance making future outlook predictions challenging. Efore’s customers are now shifting their development focus more and more into 5G technology. Efore is releasing new products that are supporting both existing technology and future roll-out of 5G sites.

In the industrial market a slight increase is expected in medical, transportation and defence segments and a slight decrease in old established segments like consumer products.

Factors of uncertainty have been presented in the section “Short-term risks and factors of uncertainty”.

Financial estimate for 2017

Due to the financial situation of the Group and the structural changes currently taking place, giving earnings guidance is exceptionally challenging but the  operating result and the cash flow from operating activities for 2017 are estimated to be positive. Efore is not for the time being making forecasts about its long term development.

Events after the end of the Period under review

Efore Plc received a waiver on August 2, 2017 to depart from the loan covenant that was breached at the end of June 2017.

Martin Raznovich, current CFO will leave the company on September 15, 2017.  Mr Vesa Leino, M.Sc.(Econ), born 1969 will be act as interim CFO and a member of the Executive Management Team of Efore Plc from September 1, 2017.

EFORE PLC
Board of Directors


Further information

For further information please contact  Mr. Jorma Wiitakorpi, President and CEO, on August 11, 2017 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 2016, consolidated net sales totalled EUR 75.4 million and the Group's personnel averaged 679. The parent company's share is quoted on the Nasdaq  Helsinki Ltd.www.efore.com

 

ENCL_Efore H1_2017 financial report_110817_FINAL.pdf

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