Quarterly Report • Feb 14, 2013
Quarterly Report
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TRAINERS' HOUSE GROUP'S FINANCIAL STATEMENTS BULLETIN FOR 1 JANUARY – 31 DECEMBER 2012
Trainers' House achieved reasonable profitability in a difficult market situation.
January–December 2012 in brief (the figures are figures for the company's continuing operations)
October – December 2012 in brief (the figures are figures for the company's continuing operations)
Key figures at the end of 2012
Trainers' House estimates that the 2013 net sales will fall below the 2012 level and that operating profit (EBIT) before non-recurring items and depreciation resulting from the allocation of acquisition cost will be at approximately the same level as in 2012.
"The necessary eventually becomes inevitable"
The core competencies of Trainers' House's business are on a steady footing, providing a good basis for building the company's next phase. The feedback received by the company for more than 300 client work quality audits is excellent. In the current transition phase of the training industry, particular demand exists for services that are connected with implementing successful change management processes for clients.
The market has been difficult for several years. The net sales for the year under review decreased compared with 2011. This was partly due to the restructuring measures implemented by the company in September, as a result of which the SaaS business was transferred to a new company. The restructuring is expected to improve the company's profitability in the future. As a result of the continued streamlining measures carried out in the company, the reduction in net sales did not have a significant effect on profitability.
Trainers' House will continue with the development and delivery of the Pulssi (Pulse) management tool and the Lähde (Source) system for the management of prospecting and initial customer contact. The company's task is to help people grow by supporting everyday leadership. This means analysing a client's current situation and on the basis of this analysis, clarifying the company's or organisation's business strategy, story, or a story that supports sales efforts. The company also helps its clients improve the effectiveness of different encounters, such as management or sales.
Trainers' House has created a simple methodology by making the necessary eventually inevitable. An example of this is the Pulssi management tool renewed by the company, which enables the monitoring of changes in activities almost in real time. A Trainers' House client using Pulssi knows whether the personnel started doing the agreed things and whether critical changes in behaviour take place in the daily work. The follow-up improves the quality of management and individuals receive meaningful feedback. Transparency allows people to learn from each other and the quality of activities improves faster.
There is a need for successful change management: measurable results and lasting changes in activities are business-oriented goals that Trainers' House is committed to.
For more information, please contact: Arto Heimonen, CEO, +358 40 412 3456 Mirkka Vikström, CFO, +358 50 376 1115
Market situation remained challenging during the year under review, which was reflected in the year's net sales and result. The volume of new orders decreased compared with 2011, but because of high quality redemption work and delivery reliability, the order flow remained steady nevertheless.
The starting point for the change projects is a situation prevailing in the customer organisation, which is used as a basis for setting realistic targets for the desired results and the changes in activities required by these. To support the change, an internal coach network is set up, when needed, to continue to anchor the change in the organisation.
The change projects executed by Trainers' House are usually connected with clarifying our customers' business strategies; marketing the strategies; and implementing them by spurring sales, by enhancing customer service (for example, through service design), and by developing the work of leaders and supervisors along with the skills of their subordinates. Managing work capacity through physical and mental coaching holds an important role in an increasing number of customer projects.
The results of client projects are verified by auditing clients' everyday work and by bringing in management systems to help monitor the activities and results.
During the third quarter of 2012, Trainers' House Plc's subsidiary Trainers' House Growth System Corporation signed an agreement concerning a transaction whereby the business operations connected with Trainers' House's management systems and the construction of online solutions were transferred to a new company. Trainers' House owns 19.9% of the new company. The remainder of the company is owned by the new company's key personnel.
The new company operates under the name Cloudriven. Five of Trainers' House Growth System Corporation's employees transferred to Cloudriven as part of the arrangement. The SaaS products connected with the training business remained with Trainers' House, and Trainers' House will continue with their development in cooperation with Cloudriven and other actors. In the same connection, the parties also signed a partnership agreement concerning the distribution of the products and deployment services.
Net sales development in the last quarter of the financial year was weaker than in previous year. However, operating profit before non-recurring items and depreciation resulting from the allocation of acquisition costs clearly improved year-on-year. Because of the weak operative result of the second and third quarters, profitability in the reporting period nevertheless remained at the previous year's level.
Net sales from continuing operations during the period under review came to EUR 13.3 million ((EUR 15.7 million). Operating profit from continuing operations before depreciation resulting from the allocation of the acquisition cost of Trainers' House Oy and non-recurring items was EUR 1.2 million, or 8.9% of net sales ((EUR 1.6 million, 10.1%). Profit for the period was EUR -0.2 million, or -1.8% of net sales (EUR -18.4 million, or -117.3%).
The comparative figures used for reporting on operating profit include the operating profit reported as well as operating profit before depreciation of allocated acquisition costs related to the acquisition of Trainers' House Oy and non-recurring items (i.e., operating profit, EBIT). According to the company's management, these figures provide a more accurate view of company productivity.
The following table itemises the Group's key figures (in thousands of euros unless otherwise noted):
| 2012 | 2011 | |
|---|---|---|
| Net sales | 13,302 | 15,658 |
| Expenses: | ||
| Personnel-related expenses | -6,696 | -7,399 |
| Other expenses | -5,101 | -6,174 |
| EBITDA | 1,506 | 2,086 |
|---|---|---|
| Depreciation of non-current assets | -324 | -507 |
| Operating profit before depreciation | ||
| of acquisition cost | 1,182 | 1,578 |
| % of net sales Depreciation of allocation of |
8.9 | 10.1 |
| acquisition cost *) Operating profit before non-recurring |
-1,365 | -1,638 |
| items | -183 | -60 |
| Non-recurring items **) |
92 | -16,671 |
| EBIT | -91 | -16,731 |
| % of net sales | -0.7 | -106.8 |
| Financial income and expenses | -303 | -833 |
| Profit/loss before tax | -394 | -17,564 |
| Tax ***) |
151 | -798 |
| Profit/loss for the period | -243 | -18,362 |
| % of net sales | -1.8 | -117.3 |
*) EUR 10.2 million of the acquisition cost of Trainers' House Oy in 2007 has been allocated in intangible assets with a limited useful life. This item has been wholly depreciated over a period of five years.
**) Non-recurring items in 2012 include capital gains from the SaaS divestment of EUR 0.1 million. Non-recurring items in 2011 include a write-down in the Group's goodwill in the amount of EUR 16.7 million.
***) The tax included in the profit and loss account is deferred. Taxes recognised in the income statement have no effect on cash flow. On 31 December 2012, the company's balance sheet included deferred tax assets from losses carried forward in the amount of EUR 0.4 million. Of the deferred tax assets, EUR 0.3 million will expire in 2019 and EUR 0.1 million in 2021.
The following table itemises distribution of net sales from continuing operations and shows the quarterly profit/loss from the start of 2011, in thousands of euros.
| Q111 | Q211 | Q311 | Q411 | 2011 | Q112 | Q212 | Q312 | Q412 | 2012 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | 4420 | 4636 | 2812 | 3790 | 15658 | 3901 | 3536 | 2485 | 3381 | 13302 |
| Operating profit before depreciation |
||||||||||
| of acquisition |
||||||||||
| cost *) |
653 | 884 | -124 | 165 | 1578 | 549 | 200 | -20 | 453 | 1182 |
| Operating | ||||||||||
| profit | 244 | 475 | -533 | -16915 | -16731 | 140 | -210 | -338 | 317 | -91 |
*) excluding non-recurring items
According to the financial statement as of 31 December 2012, the parent company's distributable assets amount to EUR -0.8 million. The Board of Directors will propose to the Annual General Meeting to be held on 19 March 2013 that the company's premium fund be decreased by EUR 0.8 million to offset the parent company's losses. Before the offsetting of losses, the parent company's premium fund amounts to EUR 5.4 million. The Board of Directors will propose to the Annual General Meeting that no dividend be paid for 2012.
The company's long-term objective is profitable growth.
In connection with the merger of Trainers' House Oy and Satama Interactive Plc, the company concluded a loan agreement in the amount of EUR 40 million. At the end of the reporting period, the company had loans related to this new loan agreement negotiated in late 2011 in an amount of EUR 4.9 million.
In May 2012, AtBusiness Oy repaid a loan in the amount of EUR 1.2 million invested by Trainers' House Growth System Corporation in a company incorporated in connection with the divestment in 2010 of the IT project business.
On 15 January 2010, Trainers' House Plc issued an EUR 5.0 million domestic hybrid bond. Interest of EUR 1.0 million related to the hybrid bond was recognised in shareholders' equity.
According to the terms of the hybrid bond, the company has the right to decide, subject to certain limitations specified in the terms, either to pay the interest on the hybrid bond annually or to postpone these payments. Interest in the amount of EUR 0.5 million has been paid to the subscribers on 21 January 2011 and EUR 0.5 million on 20 January 2012. The interest paid reduces the nonrestricted equity and is not recognised as income.
In accordance with its stock exchange release dated 17 December 2012, Trainers' House has decided to defer interest payments on the hybrid loan for the time being. The purpose of the deferment of interest payments is to strengthen the company's financial position and to ensure that the company fulfils the terms of its loan agreement. According to the terms of the hybrid bond, the company must pay the deferred interest and any interest accrued on it by the latest if, for example, the company pays dividends in excess of the minimum dividend stipulated in the Companies Act, or otherwise distributes equity to its shareholders. The company aims to refinance the hybrid bond in its entirety in the medium term.
Cash from operating activities before financial items totalled EUR 1.4 million (EUR 2.0 million) and after these, EUR 0.6 million (EUR 0.9 million).
Cash from investments totalled EUR 1.2 million in 2012 (there were no investments in 2011). Cash flow from financing came to EUR -3.5 million (EUR - 1.3 million).
Total cash flow amounted to EUR -1.8 million (EUR -0.4 million).
On 31 December 2012, the Group's liquid assets totalled EUR 1.5 million (EUR 3.3 million). The equity ratio was 62.0 % (53,6%). Net gearing was 22.5% (32,4%). At the end of the reporting period, the Group had interest-bearing liabilities in the amount of EUR 5.2 million (EUR 8.7 million).
Financial risks
Interest rate risk is managed by covering some of the risk with hedging agreements. A bad-debt provision, which is booked on the basis of ageing and case-specific risk analyses, covers risks to accounts receivable.
Risks in the company's operating environment have remained unchanged. On account of the project-based nature of the company's operations, the order life cycle is short, which makes it more difficult to estimate future developments. Because of the overall economic situation, long-term trends remain unclear.
Short-term risks
The Group's goodwill and deferred tax assets recognised in the balance sheet were re-tested for impairment at the end of the year. No goodwill write-downs were judged necessary from the results of this impairment testing.
If the company's profitability should fail to develop as predicted, or if external factors beyond the company's control, such as interest rates, should change significantly, there is a risk that some of the Group's goodwill may have to be written down. Such a write-down would not affect the company's cash flow.
At the end of the period under review, Trainers' House Plc's balance sheet included deferred tax assets from losses carried forward in the amount of EUR 0.4 million. Of the deferred tax assets, EUR 0.3 million will expire in 2019 and EUR 0.1 million in 2021.
The company's new loan agreement, under which there were loans in an amount of EUR 4.9 million at the end of the reporting period, includes standard covenants, including one concerning the ratio of net debt to EBITDA.
If the company's profitability should fail to develop as expected, there would be a risk of the company being unable to fulfil the covenants, which would increase financial expenses.
Risks are discussed in more detail in the annual report and on the company's Web site, at www.trainershouse.fi > Investors.
At the end of 2012, the Group employed 108 (125) people.
DECISIONS REACHED AT THE ANNUAL GENERAL MEETING
The Annual General Meeting of Trainers' House Plc was held on 21 March 2012 in Espoo.
The Annual General Meeting adopted the company's financial statements for 2011 and discharged the members of the Board of Directors and the CEO from liability for the period 1 January to 31 December 2011.
In accordance with the proposal of the Board of Directors, the Annual General Meeting decided that no dividend be paid for the 2011 financial year and that the company's premium fund be decreased by EUR 8,865,877.29 to cover the parent company's losses.
It was confirmed that the Board of Directors consists of five (5) members. Aarne Aktan, Jarmo Hyökyvaara, Tarja Jussila, Jari Sarasvuo and Kai Seikku were reelected as members of the Board of Directors. The Annual General Meeting decided on a monthly emolument for a Board member of EUR 1,500 and of EUR 3,500 for the chairman of the Board.
Authorized Public Accountants Ernst & Young Oy were elected as the company's auditors.
In accordance with the proposal of the Board of Directors, the Annual General Meeting decided on the granting of option‐rights to the key employees of the company and its subsidiaries. The number of option rights granted shall not exceed 5,000,000, and the option rights shall entitle their holders to subscribe for no more than 5,000,000 new shares or treasury shares in total.
In accordance with the proposal of the Board of Directors, the Annual General Meeting decided to authorise the Board of Directors to decide on a share issue, on transfer of own shares and on the granting of special rights entitling to shares, on one or several occasions. The number of shares to be granted or transferred on the basis of the authorisation may not exceed 13,000.000 shares. A share issue, transfer of own shares and the granting of other special rights entitling to shares may take place in deviation of the shareholders' pre-emptive subscription rights (a private placement). The authorisation is valid until 30 June 2015.
In its assembly meeting held after the AGM, the Board of Directors elected Aarne Aktan as the Chairman of the Board.
The shares of Trainers' House Plc are listed on NASDAQ OMX Helsinki Ltd under the symbol TRH1V.
At the end of the period under review, Trainers' House Plc had issued 68,016,704 shares and the company's registered share capital amounted to EUR 880,743.59. No changes took place in the share capital or number of shares during the period under review.
In the period under review, 5.9 million shares in total, or 8.7% of the average
number of all company shares (9.5 million shares, or 14.0%), were traded on the Helsinki stock exchange, for a value of EUR 0.8 million (EUR 2.6 million) The period's highest share quotation was EUR 0.22 (EUR 0.36), the lowest EUR 0.09 (EUR 0.17) and the closing price EUR 0.10 (EUR 0.18). The weighted average price was EUR 0.14 (EUR 0.27). With the closing price for 31 December 2012, the company's market capitalisation was EUR 6.8 million (EUR 12.2 million).
Trainers' House Plc has two option programmes for its personnel, included in the personnel's commitment and incentive scheme.
The Annual General Meeting held on 25 March 2010 decided to commence an employee option programme for key employees in Trainers' House and its subsidiaries.
The number of option rights granted shall not exceed 5,000,000, and the option rights shall entitle their holders to subscribe no more than 5,000,000 new shares or treasury shares in total. The subscription price for the 2010A warrant is EUR 0.46 and for the 2010B warrant, EUR 0.29. The subscription period for shares converted ‐under the warrant 2010A is from 1 September 2011 to 31 December 2012, and for shares converted under the 2010B warrant from 1 September 2012 to 31 December 2013. No shares have been subscribed under the warrants. The total number of warrants granted to the personnel is 1.8 million. A total cost of EUR 0.03 million has been expensed for the 2012 financial year.
The Annual General Meeting held on 21 March 2012 decided to initiate an employee option programme for key employees in Trainers' House and its subsidiaries.
The number of option rights granted shall not exceed 5,000,000, and the option rights shall entitle their holders to subscribe no more than 5,000,000 new shares or treasury shares in total. Of the warrants, 3,000,000 will be titled 2012A and 2,000,000 will be titled 2012B. The subscription price for the warrants is EUR 0.16. The subscription period for shares converted under the warrant 2012A is from 1 September 2013 to 31 December 2014, and for shares converted under the warrant 2012B from 1 September 2014 to 31 December 2015. The options have not yet been offered.
The interim report was compiled in accordance with the IAS 34 standard. This interim report has been prepared in accordance with the IFRS standards and interpretations adopted in the EU, valid on 31 December 2012.
In producing this interim report, Trainers' House has applied the same accounting principles for key figures as in its 2011 financial statements. The calculation of key figures is described on page 94 of the financial statements included in the Annual Report 2011.
The full-year figures given in the financial statements bulletin are audited.
INCOME STATEMENT, IFRS (kEUR)
| Group 01/10- 31/12/12 |
Group 01/10- 31/12/11 |
Group 01/01- 31/12/12 |
Group 01/01- 31/12/11 |
|
|---|---|---|---|---|
| CONTINUING OPERATIONS | ||||
| NET SALES | 3,381 | 3,790 | 13,302 | 15,658 |
| Other income from operations | 184 | 168 | 797 | 648 |
| Costs: | ||||
| Materials and services | 193 | 580 | 1,562 | 2,278 |
| Personnel-related expenses |
1,735 | 1,894 | 6,696 | 7,399 |
| Depreciation | 211 | 523 | 1,689 | 2,145 |
| Impairment | 16,671 | 16,671 | ||
| Other operating expenses | 1,109 | 1,206 | 4,244 | 4,544 |
| Operating profit/loss | 317 | -16,915 | -91 | -16,731 |
| Financial income and expenses | -192 | -480 | -303 | -833 |
| Profit/loss before tax | 125 | -17,395 | -394 | -17,564 |
| Tax *) | -20 | -803 | 151 | -798 |
| PROFIT/LOSS FOR THE PERIOD | 105 | -18,199 | -243 | -18,362 |
| Other comprehensive income: | ||||
| Cash flow hedges Income tax relating to components of other |
50 | 174 | ||
| comprehensive income | -13 | -45 | ||
| Other comprehensive income for the year, net of tax |
37 | 129 | ||
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR |
105 | -18,162 | -243 | -18,233 |
| Profit/loss attributable to: | ||||
| Owners of the parent company | 105 | -18,199 | -243 | -18,362 |
| Total comprehensive income attributable to: |
||||
| Owners of the parent company | 105 | -18,162 | -243 | -18,233 |
| Earnings per share, undiluted: | ||||
| EPS result for the period from continuing operations |
0.00 | -0.27 | -0.00 | -0.27 |
| EPS attributable to hybrid bond investors |
-0.01 | -0.00 | -0.01 | |
| EPS continuing operations | 0.00 | -0.27 | -0.00 | -0.28 |
| EPS attributable to equity | ||||
| holders of the parent company | 0.00 | -0.27 | -0.00 | -0.28 |
| EPS result for the period | 0.00 | -0.27 | -0.00 | -0.27 |
Diluted earnings per share are the same as undiluted earning per share.
*) The tax included in the income statement is deferred.
BALANCE SHEET IFRS (kEUR)
| Group 31/12/12 |
Group 31/12/11 |
|
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Property, plant and equipment | 380 | 594 |
| Goodwill | 9,135 | 9,135 |
| Other intangible assets | 9,710 | 11,107 |
| Other financial assets | 202 | 202 |
| Other receivables | 1,490 | 1,607 |
| Deferred tax receivables | 382 | 579 |
| Total non-current assets | 21,299 | 23,224 |
| Current assets | ||
| Inventories | 10 | 11 |
| Accounts receivables and other receivables |
3,776 | 4,510 |
| Cash and cash equivalents | 1,520 | 3,280 |
| Total current assets | 5,306 | 7,800 |
| TOTAL ASSETS | 26,605 | 31,025 |
| SHAREHOLDERS' EQUITY AND LIABILITIES |
||
| Equity attributable to equity holders of the parent company |
||
| Share capital | 881 | 881 |
| Premium fund | 5,077 | 13,943 |
| Distributable non-restricted | ||
| equity fund | 31,872 | 31,872 |
| Other equity fund | 4,962 | 4,962 |
| Retained earnings | -26,397 | -35,031 |
| Total shareholders' equity | 16,394 | 16,627 |
| Long-term liabilities | ||
| Deferred tax liabilities | 2,507 | 2,862 |
| Other long-term liabilities | 3,074 | 6,468 |
| Accounts payable and other liabilities |
4,629 | 5,068 |
| Total liabilities | 10,211 | 14,398 | |
|---|---|---|---|
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES |
26,605 | 31,025 | |
| CASH FLOW STATEMENT, IFRS (kEUR) | |||
| Group | Group | ||
| 01/01- | 01/01- | ||
| 31/12/12 | 31/12/11 | ||
| Profit/loss for the period | -243 | -18,362 | |
| Adjustments to profit/loss | |||
| for the period | 1,726 | 20,552 | |
| Change in working capital | -100 | -142 | |
| Financial items | -774 | -1,192 | |
| Cash flow from operations | 608 | 856 | |
| Investments in tangible and | |||
| intangible assets | -49 | ||
| Repayment of loan receivables | 1,200 | ||
| Cash flow from investments | 1,152 | ||
| Withdrawal of long-term loans | 9,300 | ||
| Repayment of long-term loans | -3,297 | -10,296 | |
| Repayment of finance lease liabilities |
-223 | -265 | |
| Cash flow from financing | -3,520 | -1,261 | |
| Change in cash and cash | |||
| equivalents Opening balance of cash and |
-1,760 | -405 | |
| cash equivalents | 3,280 | 3,686 | |
| Closing balance of cash and | |||
| cash equivalents | 1,520 | 3,280 | |
| CHANGE IN SHAREHOLDERS' EQUITY (kEUR) | |||
| Equity attributable to equity holders of the parent company | |||
| A. Share capital B. Premium fund |
|||
| C. Hedging reserve | |||
| D. Distributable non-restricted equity | |||
| E. Other equity fund | |||
| F. Retained earnings | |||
| G. Total |
| A. B. C. D. E. F. G. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| ---------------------------------------- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| Equity 01/01/2011 |
881 | 13,943 | -129 | 31,872 | 4,962 | -16,410 | 35,119 |
|---|---|---|---|---|---|---|---|
| Other comprehensive income |
129 | -18,362 | -18,233 | ||||
| Hybrid bond | -370 | -370 | |||||
| Sharebased payments |
111 | 111 | |||||
| Equity 31/12/2011 |
881 | 13,943 | 31,872 | 4,962 | -35,031 | 16,627 | |
| Equity 01/01/2012 |
881 | 13,943 | 31,872 | 4,962 | -35,031 | 16,627 | |
| Other comprehensive income |
-243 | -243 | |||||
| Hybrid bond | -23 | -23 | |||||
| Sharebased payments |
34 | 34 | |||||
| Decrease of share premium fund to cover losses |
-8,866 | 8,866 | 0 | ||||
| Equity 31/12/2012 |
881 | 5,077 | 31,872 | 4,962 | -26,397 | 16 394 |
| RESTRUCTURING PROVISION (kEUR) | Group 01/01- 31/12/12 |
Group 01/01- 31/12/11 |
|---|---|---|
| Provisions 1 January Provisions used Provisions 31 December |
258 -19 240 |
389 -130 258 |
| PERSONNEL | Group 01/01- 31/12/12 |
Group 01/01- 31/12/11 |
| Average number of personnel Personnel at the end of |
115 | 128 |
| the period | 108 | 125 |
| COMMITMENTS AND CONTINGENT | ||
| LIABILITIES (kEUR) | Group 31/12/12 |
Group 31/12/11 |
| Collaterals and contingent liabilities given for |
||
| own commitments | 10,716 | 11,906 |
| Interest rate swaps: | ||
|---|---|---|
| Fair value | 5,214 | |
| OTHER KEY FIGURES | Group 31/12/12 |
Group 31/12/11 |
| Equity-to-assets ratio (%) | 62.0 | 53.6 |
| Net gearing (%) | 22.5 | 32.4 |
| Shareholders' equity/share (EUR) | 0.24 | 0.24 |
| Return on equity (%) | -1.5 | -71.0 |
| Return on investment (%) | 0.9 | -46.8 |
Helsinki, 14 February 2013
TRAINERS' HOUSE PLC
BOARD OF DIRECTORS
For more information, please contact: Arto Heimonen, CEO, +358 40 412 3456 Mirkka Vikström, CFO +358 50 376 1115
DISTRIBUTION OMX Nordic Exchange, Helsinki Main media www.trainershouse.fi > Investors
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