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Tecnotree Corporation Interim Report 1 January – 30 June 2015 (unaudited)

Tecnotree Corporation
Interim Report
13 August, 2015 at 08.30 am EEST

Tecnotree is a global supplier of telecom IT solutions, providing products and services for charging, billing, customer care, and messaging and content services. The company’s product portfolio comprises virtually the full range of business management systems for telecom operators, with standard solutions for fixed networks, mobile services and broad band and for managing subscriptions, services and cash flows for prepaid and post-paid customers. Tecnotree has a strong footing especially in developing markets.

Positive cash flow

Second quarter

• Second quarter net sales were EUR 17.1 (11.7) million.
• The operating result for the quarter was EUR 1.5 (-4.3) million.
• The adjusted result for the quarter was EUR -2.9 (-5.8) million and result EUR -1.7 (-6.2) million.
• The order book at the end of the period stood at EUR 37.4 (31 December 2014: 38.9) million.
• Second quarter cash flow after investments was EUR 2.8 (-0.5) million.

• Earnings per share were EUR -0.01 (-0.05).

   

January – June 2015

• Net sales for the review period were EUR 34.2 (26.1) million.
• The operating result was EUR 2.5 (-6.1) million.
• The adjusted result for the period was EUR -3.3 (-9.3) million and the result EUR -5.0 (‑11.0) million.
• Cash flow after investments for the review period was EUR 3.6 (-3.8) million and the company’s cash and cash equivalents were EUR 5.6 (31 December 2014: 2.5) million.
• Earnings per share were EUR -0.04 (-0.09).

¹ Adjusted operating result = operating result before one-time costs. Details of these are given in the section “Result analysis”.
² Adjusted result for the period = result for the period without exchange rate gains and losses, included in financial items, on intra-group balances being typically receivables due to subsidiaries from the parent company.

Unless otherwise stated, all figures presented below are for the review period 1-6/2015 and the figures for comparison are for the corresponding period 1-6/2014.

CEO Ilkka Raiskinen

“The company’s performance during the second quarter of the year was encouraging in many areas: profitability and cash flow developed positively and demand for new products remained good. The measures to improve productisation have brought results: the costs of business operations have declined and the operating profit has clearly improved from the previous year.

The restructuring proceedings have not had a significant impact on the company’s business operations, and the company has been able to continue its investment in new products and new customers according to plan.

The company has continued its activities aiming to have an impact on costs outside the operating profit, in particular on the management of withholding tax. ”

RESTRUCTURING PROCEEDINGS

On 5 March 2015 Tecnotree Corporation filed an application with the district court of Espoo for debt restructuring proceedings. The court decided on 9 March 2015 to commence the corporate restructuring proceedings. The extraordinary meeting of shareholders of Tecnotree Corporation held on 27 March 2015 decided to approve the application made by the Board of Directors and to continue with the restructuring proceedings.

Tecnotree Corporation’s business operations have been loss-making for several years, the cash situation remained tight during 2014, and on 31 December 2014 the shareholders’ equity of the parent company fell below half of the share capital. The Company has actively searched for a solution to improve its financial standing and carefully studied different options for solving the situation. As the result, the Company came to the conclusion that it would be in the best interest of the Company and its shareholders for the Company to apply for restructuring proceedings in accordance with the Act on Restructuring of Enterprises. The Company considers that its difficulties are temporary in nature, and that the restructuring proceedings would in the Company’s assessment make it possible to remedy the Company’s financing and equity structure and thus secure the long-term continuation of the Company’s business operations. If it takes place, the restructuring will ease the debt liability of the Company and consequently will also improve the shareholders’ equity.

On 9 March 2015 the district court appointed Mr. Jari Salminen, Attorney-at-Law, from JB Eversheds Oy as the administrator in respect of the restructuring process. Creditors must state their claims (receivables) in writing to the administrator by 7 April 2015, if the amounts differ from the ones announced by the debtor. The administrator must send a statement on the financial status of the debtor to the interested parties by 5 May 2015. The administrator must prepare and deliver his proposed restructuring programme to the district court of Espoo by 30 September 2015. Tecnotree Corporation has to comply with the restructuring programme to be confirmed through court proceedings. This requires a sufficient cash inflow, in other words payments by customers.

Filing the application for restructuring has no direct impact on Tecnotree’s business operations, and the Company is continuing to carry out agreed customer projects and to serve its customers as usual.

RISKS AND UNCERTAINTY FACTORS

The risks and uncertainty factors for Tecnotree are explained in the 2014 Board of Directors’ Report and in the notes to the Financial Statements.

Risks and uncertainties in the near future

Tecnotree’s risks and uncertainties in the near future relate to projects, to their timing, to receivables from the recognition of partial deliveries and for sales, to changes in foreign exchange rates and to financing. Having sufficient cash funds is the biggest single risk. The financing agreement contains covenants that create risk. More details are given in the section “Financing, cash flow and balance sheet” above.

The company has sales in several countries where the country’s central bank has a shortage of foreign currency. This causes additional delays in payments, costs and even the risk of not receiving payment at all.

On 30 June 2015 the Group’s shareholders’ equity of stood at EUR 14.7 million. However, the shareholders’ equity of the parent company was EUR 1.1 million negative.

Restructuring proceedings

Tecnotree Corporation filed an application for debt restructuring proceedings with the district court of Espoo on 5 March 2015. The court decided on 9 March 2015 to commence the corporate restructuring proceedings. The district court appointed Mr. Jari Salminen, Attorney-at-Law, from JB Eversheds Oy as the administrator in respect of the restructuring process. Creditors must state their claims (receivables) in writing to the administrator by 7 April 2015, if the amounts differ from those stated by the debtor. The administrator must send a statement on the financial status of the debtor to the interested parties by 5 May 2015. The administrator must prepare and deliver his proposed restructuring programme to the district court of Espoo by 30 September 2015. Tecnotree Corporation has to comply with the programme approved by the court. This involves risk. Tecnotree is responsible for all its liabilities in full after the date of application for restructuring proceedings. This requires a sufficient cash inflow, in other words payments by customers.

After filing its application for restructuring proceedings, Tecnotree has had problems in individual cases, in particular with companies from which Tecnotree has made purchases. Customers may also be afraid of the risks relating to Tecnotree, which may have some impact on future orders.

Events after the end of the period

Postponing of the draft restructuring program for Tecnotree Corporation

The district court of Espoo decided on 9 March 2015 to commence the corporate restructuring proceedings concerning Tecnotree Corporation in accordance with the Act on Restructuring of Enterprises. The district court appointed Mr. Jari Salminen, Attorney-at-Law, from JB Eversheds Oy as the administrator in respect of the restructuring process. The court decided that a draft restructuring program should be submitted to the district court of Espoo by 6 July 2015.

The district court of Espoo decided on 3 July 2015 at the request of the administrator to postpone the deadline for submitting the draft restructuring program till 30 September 2015. The contents of the request were as follows:

“The administrator appointed in respect of the restructuring process requests that the district court postpones the deadline for submitting the draft restructuring program till 30 September 2015.

It is not possible to compile a draft restructuring program by the 6 July 2015 deadline because:

• the company is doing business in several continents causing the evaluations to take mote time;
• the definition of the amount of secured debt is pending; and
• the financial statements for the financial year ended 31 Marc 2015 of Tecnotree Convergence Private Limited, a subsiadiary in India, have not been completed, yet. Tecnotree Convergence Private Limited forms an integral part of the group activities.

Compiling of the draft restructuring program has progressed and no obstacles for creating an implementable restructuring program and reorganization of the business have come up in the evaluations during the restructuring process. “

Prospects in 2015

Tecnotree estimates that its operating result will improve from 2014. Variations in the quarterly figures will be considerable.

Financial information

Tecnotree is holding a conference for analysts, investors and the media to present its interim report on Thursday, 13 August 2015 at 10.00 am in the Tapiola conference room at the Scandic Simonkenttä Hotel , Simonkatu 9, Helsinki. The interim report will be presented by CEO Ilkka Raiskinen and the conference will be held in Finnish. The material to be presented at the press conference will be available at www.tecnotree.com.

TECNOTREE CORPORATION

Board of Directors

FURTHER INFORMATION
Ilkka Raiskinen, CEO, tel. +358 (0)45 311 3113
Tuomas Wegelius, CFO, tel. +358 400 433 228

DISTRIBUTION
NASDAQ OMX Helsinki Ltd.
Main media
www.tecnotree.com

About Tecnotree
Tecnotree is a global provider of telecom IT solutions for the management of products, customers and revenue. Tecnotree helps communications service providers to transform their business towards a marketplace of digital services. Tecnotree empowers service providers to monetise on service bundles, provide personalised user experiences and augment value throughout the customer lifecycle. With around 1000 telecom experts, Tecnotree serves more than 100 service providers in over 70 countries. Tecnotree is listed on the main list of NASDAQ OMX Helsinki with the trading code TEM1V. For more information on Tecnotree, please visit  www.tecnotree.com