Report by the Board of Directors

2013 in Brief

From the beginning of 2013 EB has applied the new IFRS 10 and IFRS 11 standards. As a result, the proportion of net sales and operating result of e.solutions GmbH, a jointly owned company of EB and AUDI, to be consolidated into Elektrobit groupīs consolidated financial statements has changed. For comparability, all 2012 figures presented for comparison are restated assuming that the proportionate consolidation method would have been applied already in 2012.

EBīs figures are divided between Continuing and Discontinuing Operations as provided by the IFRS 5 standard. In this Financial Statement Bulletin, Test Tools product business, sold on January 31, 2013, is classified as Discontinuing Operations.

EBīs net sales from Continuing Operations during January-December 2013 grew by 14.6 per cent year-on-year to EUR 199.3 million (restated net sales of EUR 173.9 million, 1–12 2012). Operating profit from Continuing Operations was EUR 8.1 million including the non-recurring cost of approximately EUR 0.8 million resulting from the cost saving measures in the Wireless Business Segment during the first quarter of 2013 (restated operating profit of EUR 1.1 million, 1–12 2012 including non-recurring items of approximately EUR 4 million weakening the Wireless Business Segmentīs operating result). Operating profit from Continuing Operations without these non-recurring costs was EUR 9.0 million (restated operating profit of EUR 5.1 million, 1–12 2012).

Net sales of the Automotive Business Segment in January-December 2013 grew to EUR 138.3 million (restated net sales of EUR 110.6 million, 1–12 2012), representing 25.0 per cent growth year-on-year. Operating profit was EUR 8.5 million (restated operating profit of EUR 3.3 million, 1–12 2012). The Wireless Business Segmentīs net sales from Continuing Operations in January-December 2013 decreased by 3.7 per cent year-on-year, to EUR 61.2 million (EUR 63.5 million, 1–12 2012). The operating loss from Continuing Operations of the Wireless Business Segment in January-December 2013 was EUR -0.5 million including the non-recurring cost of approximately EUR 0.8 million resulting from the cost saving measures in the first quarter of 2013 (operating loss of EUR -2.2 million including non-recurring items of approximately EUR 4 million weakening operating result, 1–12 2012). Operating result of the Wireless Business Segment in January-December 2013 without nonrecurring costs was EUR 0.4 million (EUR 1.8 million, 1–12 2012).

EB and Anite plc signed an agreement on January 28, 2013, under the terms of which EB agreed to sell its Test Tools product business to Anite (“the Transactionī). The Transaction comprised the sale of the shares of EBīs subsidiary Elektrobit System Test Ltd., a company based in Oulu, Finland, and certain related other assets in the USA and China. The cash consideration paid by Anite to EB as a result of the Transaction was EUR 31.0 million. Transaction resulted in a non-recurring net profit of about EUR 23 million and non-recurring net cash flow of about EUR 28 million in the first quarter of 2013. The cash consideration paid for EBīs Test Tools product business has been adjusted by EUR 0.9 million based upon the level of net working capital and cash and debt in the Test Tools product business at the date of the transaction on January 31, 2013. Adjustment improves EBīs operating result from Discontinuing Operations in the reporting period and cash flow of the fourth quarter 2013 with EUR 0.9 million. In the aggregate, the sale of the Test Tools product business resulted in a non-recurring net profit of about EUR 24 million and a non-recurring net cash flow of about EUR 28 million in 2013.

The Extraordinary General Meeting of Elektrobit Corporation held on December 4, 2013 resolved in accordance with the proposal of the Board of Directors that on the basis of the financial statements adopted for the financial period ended on December 31, 2012, funds from the invested non-restricted equity fund be distributed to shareholders as a repayment of capital, with the capital repayment amounting to EUR 0.11 per share. The aggregate amount of the distribution based on the number of shares as of the date of the General Meeting amounted to EUR 14,311,096.25. The repayment of capital was paid to shareholders recorded in the companyīs register of shareholders maintained by Euroclear Finland Ltd. on the record date of the capital repayment, December 10, 2013. The repayment of capital was made on December 17, 2013.

Net cash flow in 2013 was EUR 28.7 million including non-recurring net cash flow of about EUR 28 million resulting from the sale of the Test Tools product business (EUR 5.1 million, 2012) and repayment of capital of EUR 14.3 million, distributed in December.

Earnings per share from Continuing Operations were EUR 0.051 (EUR 0.008, 2012) and earnings per share from Continuing and Discontinuing Operations were EUR 0.238 (EUR 0.017, 2012). Pursuant to series 2008A-B stock options a total of 688,185 new shares were subscribed for during 2013. The share subscription prices were recorded in the Companyīs invested non-restricted equity fund. After the registration of the new shares, the number of shares in Elektrobit Corporationīs totaled 130,100,875.

Financial performance during January-December 2013, Continuing Operations
CONSOLIDATED INCOME STATEMENT (MEUR)
1-12/2013
12 MONTHS
 
1-12/2012
12 MONTHS
CONTINUING OPERATIONS  
   Net sales 199,3 173,9
   Operating profit / loss 8,1 1,1
   Financial income and expenses -0,9 -0,5
   Result before tax 7,2 0,6
Result for the year from Continuing Operations 6,7 1,1
Result for the year from Discontinuing Operations 24,3 1,2
Result for the year 30,9 2,3
Total comprehensive income for the year 30,9 1,6
 
Result for the year attributable to:
   Equity holders of the parent 30,9 2,3
   Non-controlling interests
Total comprehensive income for the year attributable to
   Equity holder of the parent 30,9 1,6
   Non-controlling interests
 
Earnings per share from Continuing Operations, EUR 0,051 0,008
  • Cash flow from operating activities was EUR 34.7 million (EUR 6.8 million, 1–12 2012).
  • Net cash flow was EUR 28.7 million including non-recurring net cash flow of about EUR 28 million resulting from the sale of the Test Tools product business (EUR 5.1 million, 1–12 2012).
  • Equity ratio was 65.1% (54.5%, 1–12 2012).
  • Net gearing was -46.1% (6.1%, 1–12 2012).
Quarterly figures, Continuing Operations
ELEKTROBIT GROUPīS NET SALES AND OPERATING RESULT, CONTINUING OPERATIONS, MEUR:
4Q 13     3Q 13        2Q 13        1Q 13       4Q 12 
restated
Net sales 59,5 45,7 47,9 46,2 48,2
Operating profit (loss) 5,7 1,0 0,7 0,7 -0,5
Operating profit (loss) without non-recurring costs 5,7 1,0 0,7 1,5 3,6
Result before taxes 5,5 0,9 0,2 0,6 -0,9
Result for the period 5,0 0,8 0,2 0,6 -0,1

Non-recurring items are exceptional gains and costs that are not related to normal business operations and occur only seldom. These items include capital gains or losses, significant changes in asset values such as write-downs or reversals of write-downs, significant restructuring costs, or other items that the management considers to be non-recurring. When evaluating a non-recurring item, the euro translation value of the item is considered,and in case of a change in an asset value, it is measured against the total value of the asset.

Non-recurring items during 2012 and 2013 in the Wireless Business Segment were as follows:

  • Non-recurring costs related to collecting the receivables from TerreStar Companies of EUR 1.2 million, during 2012
  • Non-recurring income of USD 13.5 million resulting from the settlement payment in the reorganization cases of TerreStar Corporation, and non-recurring positive cash flow effect of approximately EUR 10.8 million in the third quarter of 2012
  • 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 EBīs subsidiary, Elektrobit Inc., and
  • Non-recurring cost of approximately EUR 0.8 million resulting from the cost saving measures in the Wireless Business Segment in the first quarter of 2013.
NET SALES AND OPERATING PROFIT DEVELOPMENT BY BUSINESS SEGMENTS AND OTHER BUSINESSES, CONTINUING OPERATIONS, MEUR 4Q 13     3Q 13        2Q 13        1Q 13       4Q 12 
restated
Automotive Business Segment
Net sales to external customers 41,1 34,1 32,5 30,5 31,8
Net sales to other segments 0,0 0,0 0,1 0,0 0,0
Operating profit (loss) 5,4 1,9 0,1 1,1 2,6
Wireless Business Segment
Net sales to external customers 18,3 11,5 15,4 15,8 16,4
Net sales to other segments 0,0 0,0 0,0 0,0 0,0
Operating profit (loss) 0,3 -0,9 0,6 -0,4 -3,2
Other businesses
Net sales to external customers 0,0 0,0 0,0 0,0 0,0
Operating profit (loss) 0,0 0,0 0,1 -0,0 0,1
Total
Net sales 59,5 45,7 47,9 46,2 48,2
Operating profit (loss) 5,7 1,0 0,7 0,7 -0,5

THE DISTRIBUTION OF NET SALES BY MARKET AREAS, CONTINUING OPERATIONS, MEUR AND % 4Q 13     3Q 13        2Q 13        1Q 13       4Q 12 
restated
Aasia 2,3
3,9%
1,9
4,3%
1,7
3,6%
1,9
4,2%
2,4
4,9%
Americas 8,0
13,4%
6,0
13,2%
6,4
13,4%
6,2
13,3%
6,4
13,2%
Europe 49,2
82,7%
37,7
82,5%
39,7
83,0%
38,1
82,5%
39,5
81,9%