Annual Report • Oct 6, 2008
Annual Report
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Advancement of data transfer is shaping both work and leisure perhaps even more than we image at the moment. A good case in point is the rapid spread of video on the Internet.
Often the available network technology poses the only bottleneck for new services distributed over the network. is is precisely the type of challenge where the special expertise and new technology by Teleste comes into view. Our vision is to be the leading provider of Broadband Video Technology and the related services.
We pave the way towards the new, more interactive world of media by making available today video quality and data transfer rates of the future.
We do our bit by contributing to public safety and functionality by developing new generation network solutions for professional video surveillance applications. Teleste stands for intelligent network solutions.
CUSTOMER CENTRICITY We will monitor our business environment and operate proactively. We will understand the customer's overall needs and meet them together. We will be close to the customer – now and in the future. Customer centricity also involves the understanding and appreciation of internal customer relationships.
RESPECT We will respect people and treat them with equal human dignity. We will give recognition, listen and be fair and just. We will communicate openly and give constructive feedback. We will encourage trust and an open, relaxed atmosphere.
RELIABILITY We will do what we promise and follow jointly established procedures. We proceed in a responsible manner. We are all responsible for Teleste's success and each employee is entitled to good leadership.
RESULT ORIENTATION We will set challenging goals, communicate them clearly and complete tasks we set out to accomplish. We act promptly. We are open to change. We will renew and develop ourselves in order to grow profi tably.
For Teleste, 2007 will go in history as a record-breaking year in many respects. Economically, in terms of net sales and operating profi t, it was the best year on record for the current company structure. Production-wise, we got up to a record speed once the capacity constraints in the beginning of the year were put behind us. One more time, Teleste succeeded in its objective of profi table growth. We are on the right track approaching our vision of becoming the leading provider of broadband video technology and the related services to the operators.
For Teleste, year 2007 was a time of rapid development and growth. Net sales increased by 22.9% amounting to EUR 125.1 (101.8) million. At the same time, operating profi t grew by 35.1% standing at EUR 13.2 (9.8) million. Earnings per share was EUR 0.55 (0.41). e trend with orders received followed the same pattern being up by 10.5% and amounting to EUR 118.5 (107.2) million. Value of order backlog ended up with EUR 21.5 (28.1) million; return on capital employed was 27.1% (24.3%) while return on equity amounted to 22.2% (19.7%).
We can be satisfi ed with these results for a good reason, and I believe this positive development will continue in 2008. e need for, and use of, broadband video are increasing strongly. In our key markets we have reached a solid position with regard to both our established and new products and services.
Our main business Broadband Cable Networks (BCN) includes two business units: HFC Networks and Services (HFCNS) and Digital Video and Broadband Solutions (DVBS). e main clients of the business include cable operators but other players such as integrators and telecommunications companies are in a signifi cant role. As to the HFC technology, Teleste is the leading supplier in Europe in terms of market share and know-how. e demand for fi bre-optical and amplifi er solutions will also continue to be strong. Moreover, service business involving network maintenance, repair and upgrades provides a promising potential for growth. On the other hand, in addition to the headend systems for analogue, digital and IP based solutions the product portfolio of our business unit DVBS includes data transmission technologies with outstanding potential such as EttH (Ethernet to the Home) and FttH (Fiber to the Home).
e market of BCN continued to develop favourably in 2007. Consumers required broadband connections with higher capacity, video transferred over network increased and IP technology gained ground. In the developed markets competition between cable, telephone and satellite operators became tougher resulting in increased demand for broadband services such as Tripleplay, Quadplay, HDTV, OnDemand and IPTV. is all, in turn, provided the force driving the upgrading of the existing cable networks into full duplex while making them ever faster. Operators were increasingly focused on the development of their service off ering, outsourcing their technical services and trusting them to reliable partners like Teleste.
e key deliveries of the year went to France, South Korea and Belgium. Teleste supplied the Altice Group with amplifi ers and fi bre-optical solutions, Hanaro Telecom with telecommunications connections based on the EttH 100 Mb/s and a major Belgian operator with a comprehensive range of upgraded amplifi ers. Our recent substantial successes include order placed by Kabel Deutschland on amplifi ers in compliance with the BK Standard, network planning order to the UK from Virgin Media and a headend order to India placed by Digicable Networks.
Net sales of Broadband Cable Networks grew by 26.5% (27.3%) standing at EUR 108.2 (85.6) million. Simultanously, operating profi t went up by no less than 41.7% (22.9%) totalling EUR 12.8 (9.1) million.
Video Networks, the other of Teleste's business areas, supplies high-quality integrated video surveillance solutions mainly to clients representing the public sector and, selectively, to industrial enterprises. is is a growth sector with a signifi cant potential. We are about to see tangible synergic advantages once Teleste's business areas are able to draw on their shared basis of expertise and technology.
In 2007, global need for security and the general acceptance for video surveillance continued to grow. More and more, Teleste's clients are looking for comprehensive, integrated video surveillance solutions to avoid problems related to interfaces between diff erent systems. Equally, the management systems and recording solutions of the surveillance networks require an increasing degree of automation and intelligence. Furthermore, IP applications and digitalisation gain ground.
In the period under review Video Networks completed the sizeable project involving the management system of one of the world's largest integrated video surveillance networks delivered to the French National Railroad Authority. e assignment also produced additional orders and extensions can be expected in 2008. Another signifi cant point is the frame agreement made with France Telecom concerning city monitoring. A noteworthy opening gambit was also made in Australia as Teleste won competitive bidding for the digital video surveillance solutions delivered to the Queensland Government Police Service. New customerships were made in several Eastern European countries, too.
Net sales of Video Networks grew by 4.3% (5.3%) standing at EUR 16.9 (16.2) million. Operating profi t amounted to EUR 0.3 (0.7) million. At the year-end, order backlog increased to EUR 1.8 (1.5) million.
Teleste's production capacity was developed determinedly the entire year. In the beginning of the year, a new SMT line turning out advanced amplifi er solutions was completed in Nousiainen. Our operations in Suzhou were strengthened, and consequently, manufacturing of the so-called volume products has now been shifted
to China. All-time records were broken in terms of sheer production volumes for amplifi ers and co-operation with contract manufacturers was tightened. Additional improvements were made in procurements, where the search for cost-eff ective and economical solutions and their implementation succeeded as planned.
As to Teleste's internal development projects, strategically the most important was the one involving product creation process. For a company like Teleste, operating in fl uctuating markets, the ability to commercialise technological innovations at top speed is of primary importance. Another priority involved is the improvement of production quality. One of the core development areas involved enhancements made to our customer-oriented approach as Teleste put its CRM system into active use.
For a technology-driven company like Teleste, R&D is of obvious importance. Competitive edge in our business areas requires wide-ranging expertise in data transmission technology, electronics and not least in software programming, an area continuously gaining in signifi cance. Competence of our in-house product development personnel covers the core areas of our operation. With an increase in the degree of complexity related to the used technologies and systems Teleste has teamed up with some professional technology partners. Part of our way of operation starting from customer requirements involves direct R&D projects implemented jointly with our key customers.
Our extensive service network close to the customer is of our vital assets. Teleste runs a network of almost 40 sales offi ces around the world. To complement our own network in selected market areas we have established ties with partners who are experts in the fi eld. In 2007, this network was complemented by an offi ce set up in Brisbane, Australia, and a network planning company started in the United Kingdom employing personnel of approximately 40 professionals in the fi eld.
Our strategy is based on organic growth in the promising business areas. Since 2003 this organic growth has been supported by annual acquisitions in line with our corporate strategy. In the period under review, Belgian DINH Telecom was acquired to complement Teleste's local provision of services and to expand our profi ciency in products and technologies. DINH Telecom specialises in in-house networks, an area for which signifi cant increase in demand is expected in the next few years in Europe.
One thing goes without saying – there would be no chance for growth or profi table business without committed personnel. For a technology-driven company like Teleste, with respect to maintaining competitive edge, there is no substitute for competent personnel. is is why we want to make sure that top professionals of all the various fi elds recognise our inspiring work climate.
With us, motivation is ensured by challenging tasks, giving credit to where it's due and through incentive schemes. erefore, I wish to thank our personnel for their great contribution in 2007. What has been required in almost every segment of our operation is considerable eff ort, stretching and pushing through a number of reforms. I also wish to express my heartfelt thanks to our customers, partners and our owners for the successful co-operation.
Regardless of instability in the general economic situation and the high exchange rate of euro against the dollar, we believe the market and our position to develop favourably for both of our business units in 2008. From the operators' standpoint, the rapid growth of digital video transferred across networks and competition for customers necessitate new services and investments to develop their available network capacity. What we will see in the broadband markets is cross-branch competition over and above traditional division between operators from the cable, telecommunication and energy businesses. All this provides new opportunities for high-speed data transfer solutions such as those based on the EttH 100 Mb/s and FttH technologies developed by Teleste. For reasons related to the universal increase in the need for surveillance and the ever increasing traffi c, demand for the high-quality expertise of our Video Networks business will continue to grow. Moreover, there are certain lines of industry that provide promising opportunities for Video Networks.
In 2008 Teleste will have to increase its product and cost leadership in the traditional European HFC market. Our off ering of services will be expanded by making available new solutions for system integration, network planning services and solutions for in-house networks. Launching of the new digital Luminato headend and starting the volume deliveries are equally important. e new IP-based headend video centre will be the key product among Teleste's IPTV system deliveries. Furthermore, strategic priorities for the current year include active marketing of our EttH system to selected target groups and expansion of our FttH business starting from the Nordic countries.
We will press on determinedly with our R&D eff orts, cut down on cycletimes, boost the marketing, delivery logistics and the service business. In view of these priorities and market outlook I fi rmly believe that Teleste will continue in its path of profi table growth also in 2008.
Jukka Rinnevaara
| Year 2007 in Brief | |||
|---|---|---|---|
| 2007 | 2006 | Change, % | |
| Orders received, Meur | 118.5 | 107.4 | 10.3 |
| Net sales, Meur | 125.1 | 101.8 | 22.9 |
| Operating profi t, Meur | 13.2 | 9.8 | 34,7 |
| Profi t for the fi nancial period, Meur | 9.4 | 6.9 | 36.2 |
| Earnings per share, eur | 0.55 | 0.41 | 34.4 |
| Shareholder's equity per share, eur | 2.69 | 2.22 | 21.2 |
| Return on capital employed, % | 27.1 | 24.3 | 11.5 |
| Turnover of capital stock, % | 40.5 | 81.4 | –50.2 |
Teleste Corporation's Annual General Meeting will be held on 1 April 2008, commencing at 3 p.m., at Finlandia Hall in Helsinki, Mannerheimintie 13 e. Registration begins at 2 p.m.
Shareholders wishing to attend the Annual General Meeting must be registered on the list of shareholders kept by the Finnish Central Securities Depository Ltd no later than ursday, 20 March 2008.
Shareholders wishing to attend the Annual General Meeting must inform the company by 4 p.m. on 26 March 2008 at the latest.
Post: Tiina Vuorinen, Teleste Corporation, P.O. Box 323, FI-20101 Turku, Finland. E-mail: [email protected] Telephone: +358 (02) 2605 611
Attendance information must be delivered before the deadline specifi ed above. Please indicate any use of proxy upon the registration procedure. In such event, the relevant document should be delivered to the company before expiry of the registration period.
Teleste intends to be an interesting investee corporation in which the investment's increase in value and the dividend yield form a competitive combination. e annual proposal for the dividend is validated by the Board in consideration of profi tability, fi nancial situation and needs for investment necessitated by profi table growth.
e Board of Directors proposes that a dividend of EUR 0.24 per share for the fi nancial year 2007 will be paid to free-fl oating shares. e dividend will be paid to shareholders who are registered on the record date of 20 March 2008 on the company's Shareholder List, which is kept by the Finnish Central Securities Depository Ltd.
| Annual General Meeting 1.4.2008 |
|---|
| Dividend ex date 2.4.2008 |
| Dividend record date 4.4.2008 |
| Dividend payment date 15.4.2008 |
| 1999 2000 2001 2002 2003 2004 2005 2006 2007* | ||||||||
|---|---|---|---|---|---|---|---|---|
| 0,10 | 0,12 | 0,16 | 0,08 | 0,08 | 0,12 | 0,16 | 0,20 | 0,24 |
* Board proposal
For more information on Annual General Meeting see page 28.
Annually, Teleste releases the Financial Statement bulletin, Annual Report and three Interim Reports. ese publications including the stock exchange releases are available in Finnish and English on the corporate Website under Investors. You can also subscribe to the Interim Reports and the stock exchange releases on the Teleste Website under Investors by accessing News Service under Stock Exchange Releases.
| Interim Report January–March 22.4.2008 | |
|---|---|
| Interim Report January–June 15.7.2008 | |
| Interim Report January–September 21.10.2008 | |
| Financial Statements 2008 3.2.2009 |
Printed Annual Report will be delivered to all the shareholders registered with their relevant contact information included in the Finnish Central Securities Depository.
Teleste exercises a Silent Period of two weeks preceding publication of the Financial Statements and Interim Reports. During these periods Teleste will not participate in any meetings with investors or analysts and Group representatives are not allowed to comment upon company results.
Shareholder postings are conducted based on the information in the shareholder's register kept by the Finnish Central Securities Depository Ltd.
Shareholders are kindly requested to inform the custodian of their book-entry account of any changes in contact details.
In the event the account operator is the Finnish Central Securities Depository, any changes should be addressed to: Finnish Central Securities Depository, P.O. BOX 1110, FI-00101 Helsinki, Finland.
CEO, Mr. Jukka Rinnevaara is in charge of dissemination of corporate information. In addition to the CEO, the top management of the company is committed to serving various parties of the capital market.
In its corporate communication Teleste aspires openness while wishing to be approachable to its investor community. Our key guidelines involve truthfulness, simultaneity, consistency, timeliness and balanced approach.
For all events any referred information involving corporate strategy and development is based on previously published data.
Jukka Rinnevaara, CEO
Telephone: +358 (0)2 2605 611, fax: +358 (0)2 2605 812
Tiina Vuorinen, Investors Relations and Press Offi ce Telephone: +358 (0)2 2605 609, fax: +358 (0)2 2605 812 E-mail: [email protected]
Teleste Corporation is listed on the OMX Nordic Exchange Helsinki in the Information Technology sector. In 2007, the company was included in the Mid Cap segment. For the fi rst half of 2008, the company is included in the Small Cap segment.
Teleste has one series of shares. In the Annual General Meeting each share has one vote with equal dividend. Regulation concerning nominal value of the share was deleted from the Articles of Association in compliance with decision taken by the Annual General Meeting on 3 April 2007.
e company shares have been included in the book-entry securities system.
| Listed on 30.3.1999 | |
|---|---|
| ISIN codeFI0009007728 | |
| Trading code TLT1V | |
| Reuters ticket symbol TLT1V.HE | |
| Bloomberg ticket symbol TLT1V FH | |
| 12 months high 12.34 | |
| 12 months low 6.47 | |
| All time high (7 September 2000) eur 39.00 | |
| All time low (24 September 2002) eur 2.21 |
As to the company share price in 2007 the low was EUR 6.47 (6.46) and the high EUR 12.34 (12.75). Closing price at the end of the year stood at EUR 6.71 (11.63). In 2007, 7.2 (14.2) million shares standing for 40.5% (81.4%) of the share capital were traded on the Nordic Exchange Helsinki.
Market capitalization at the year-end stood at EUR 118,574,457 (2006: 202,237,582).
e agreement made in August 2005 between Teleste Corporation and Kaupthing Bank on the Liquidity Providing (LP) involving Teleste Corporation's share has been extended. According to this agreement, Kaupthing Bank will provide Teleste Corporation's share with bids and off ers so that the maximum diff erence between a bid and off er price is 2% of the bid. Quotes will be issued for the minimum of 500 shares. Liquidity providing is designed to increase liquidity of the share and reduce volatility in the relevant price stability and, by so means, facilitate trading by private investors.
According to our information, analysts listed below monitor Teleste's performance on their own volition (the list may be incomplete). Teleste takes no responsibility for opinions or for forecasts presented by them.
Carnegie Investment Bank Ab, Janne Rantanen Enskilda Securities, Antti Karessuo eQ Pankki Ltd, TBA Evli Bank Plc, Mikko Ervasti Glitnir, Teemu Saari Handelsbanken Capital Markets, Karri Rinta Kaupthing Bank, Mika Metsälä Danske Markets Equities, Ilkka Rauvola Nordea Markets, Martti Larjo OKO Pankki Pic, Hannu Rauhala
| Option subscriptions in 2007 | |||
|---|---|---|---|
| Date of registration | Stock option | Number of new shares | New total number of shares |
| 6.2.2007 | 2002B | 5 668 | 17 394 970 |
| 21.3.2007 | 2002A | 7 307 | |
| 2002B | 15 055 | 17 417 332 | |
| 7.5.2007 | 2002A | 1 850 | 17 419 182 |
| 21.6.2007 | 2002A | 17 646 | |
| 2002B | 27 440 | 17 464 268 | |
| 22.8.2007 | 2002A | 15 898 | |
| 2002B | 3 100 | 17 483 266 | |
| 18.10.2007 | 2002A | 179 264 | |
| 2002B | 2 500 | 17 665 030 | |
| 21.12.2007 | 2002B | 6 275 | 17 671 305 |
Subscription period of Teleste's 2002A stock option expired 1 October 2007.
Trading with Teleste's 2002B stock options started on 1 February 2006.
Shares can be subscriped with stock options 2002B until 1 October 2008.
e share subscription price for subscribing to a Teleste's share with a stock option 2002B was EUR 2.09 per share on 31 December 2007.
Trading with Teleste's 2004A stock options started on 24 August 2008.
Shares can be subscriped with stock options 2004A until 30 April 2009.
e share subscription price for subscribing to a Teleste's share with a stock option 2004A was EUR 5.50 per share on 31 December 2007.
Annually payable cash dividends will be deducted from the subscription prices on the dividend record date following the Annual General Meeting.
On 3 April 2007, the Annual General Meeting authorised the Board to acquire the maximum of 1,290,000 of the company's own shares and to convey the maximum of 1,730,000 company's own shares.
e Annual General Meeting also authorised the company to issue 4,500,000 new shares. e maximum number of signifi cant shares accommodated by the special rights granted by the company equals 1,730,000. ese authorisations will be valid until the Annual General Meeting due to be held in 2008.
e Board of Directors was authorized to grant special rights referred to in Chapter 10, Section 1 of the Companies Act, which carry the right to receive, against payment, new shares of the Company or the Company's own shares held by the Company. e right may also be granted to the Company's creditor in such a manner that the right is granted on a condition that the creditor's receivable is used to set off the subscription price. e maximum number of shares that may be subscribed with the special rights granted by the Company is 1,730,000 shares. No special rights were drawn upon.
At the balance sheet date, the company's registered share capital amounted to EUR 6,966,932.80. e number of shares was 17,671,305; out of these, the company was holding 352,482 shares. At the balance sheet date, when put against the total amount of shares and votes, the shares in company possession equalled 1.99%.
In the period, 221,965 new shares were subscribed using 2002A options and 60,038 using 2002B options.
In the fi nancial period, authorisations granted by the Annual General Meeting were used by conveying 0.53% of the number of shares, i.e. 92,338 own shares, for acquisition of the capital stock of DINH Telecom.
10,180 shares, in other words 0.06% of the number of shares, were conveyed for payment of the share bonus of the Management Group. Other authorisations were not used.
Teleste's system of payroll and incentives is designed to support the corporate business strategy. Incentive schemes are designed to promote performance within the company, in general, as well as individually. Incentives used by Teleste include bonus pay, payment by results and share option schemes.
e Annual General Meeting accepted a share option plan involving key personnel. According to this, 840,000 new shares may be subscribed; the option plan's possible dilution eff ect was 4.6%.
In 2007, part of the payment by objectives system involving the Corporate Management Group included a share bonus scheme.
In 2007, Management of Teleste received 40,000 share options. As to the involved terms, the Management share options are identical with those of other personnel options except for Teleste 2004 and 2007 options, which require subscription of company shares by 20% of their gross return. is obligation to subscribe ceases when the portfolio contains company shares worth one's gross annual income. On 31 December 2007, the Management was in possession of 149,500 shares out of which 69,500 were realisable.
On the balance sheet day, the Parent Company Management had a holding of 118,525 parent company shares (0.67%).
| Option Programs | |||||
|---|---|---|---|---|---|
| Date of Annual General Meeting |
Share option program |
Number of shares |
Subscription period | Subscription price 31.12.2007 |
Period of subscription price |
| 8.4.2002 | 2002B | 275 000 | 1.2.2006–1.10.2008 | 2.09 | 1.–30.4.2003 |
| 16.3.2004 | 2004A | 300 000 | 1.4.2007–30.4.2009 | 5.50 | 1.–30.4.2004 |
| 2004B1 | 150 000 | 1.4.2008–30.4.2010 | 6.11 | 1.–30.4.2005 | |
| 2004B2 | 150 000 | 1.4.2008–30.4.2010 | 6.11 | 1.–30.4.2005 | |
| 3.4.2007 | 2007A | 280 000 | 1.4.2010–30.4.2012 | 12.69 | 1.–30.4.2007 |
* 2004B2 share subscription period started on 31 December 2007.
Terms and subscription forms for share option plans with valid subscription period are available at Teleste Website.
As from 1 March, 2000 the company has complied with the insider regulations approved by Nordic Exchanges' Board of Directors (revised on January 1, 2006). To support these regulations the company has introduced a set of internal guidelines.
Membership in the Teleste permanent inner circle is based on position. us, the group consists of members of the Board of Directors, the CEO and the auditors. Furthermore, the extended inner register includes members of the Management Group and the CEO's assistant.
Moreover, insider rules and regulations include provisions concerning temporary commercial activities. Project-specifi c insider register includes personnel who, based on their position, have access to companyrelated information, which upon publication may aff ect the value formation of the company's share. e CEO will assess, on a case-by-case basis, whether an issue or arrangement under preparation will be defi ned as a project.
It is recommendable for those included in the insider register to time any intended trading involving company shares and derivatives in such a manner that optimum information aff ecting the value of the shares is available in the market at the time. Permanent members of Teleste's insider register are obliged by the so-called Silent Period during which trading on company shares is banned completely for 14 days preceding publication of
Interim Reports and the Financial Statements. During the specifi ed period Teleste will not engage in any meetings with investors or analysts and Group representatives are not allowed to comment upon company results.
e company insider administration is included inthe SIRE system of the Finnish Central Securities Depository.
| Public Insider Register with Share Holding and Rights of Options on 31 December 2007 | |||||
|---|---|---|---|---|---|
| Basis | Shares | Options | |||
e Board of Directors |
|||||
| Hintikka Tapio | Chairman of the Board | 11 443 | - | ||
| Laaksonen Tero | Member of the Board | 21 333 | - | ||
| Raatikainen Pertti | Member of the Board | 5 724 | - | ||
| Toivila Timo | Member of the Board | 52 474 | - | ||
| Vennamo Pekka | Member of the Board | 10 555 | - | ||
| Total | 101 529 | ||||
| Management Group | |||||
| Rinnevaara Jukka | President and CEO | 16 996 | 149 500 | ||
| Järvenreuna Juha | Other criteria for disclosure requirement | 1 133 | 55 000 | ||
| Kinnunen Esa | Other criteria for disclosure requirement | 417 | 15 000 | ||
| Myllylä Esko | Other criteria for disclosure requirement | 3 653 | 32 000 | ||
| Narjus Hanno | Other criteria for disclosure requirement | - | 15 000 | ||
| Saarikoski Erja | Other criteria for disclosure requirement | 4 662 | 45 000 | ||
| Slotte Johan | Other criteria for disclosure requirement | 2 621 | 55 000 | ||
| Vuorinen Tiina | Other criteria for disclosure requirement | 330 | 500 | ||
| Total | 29 812 | 367 000 | |||
| Auditors | |||||
| Nyman Sixten | Chief auditor | - | - | ||
| Kailiala Esa | Deputy auditor | - | - |
For presentation of the Members of the Board of Directors see page 31. For presentation of the company Management Group see page 29.
At year-end 2007, the number of Teleste shareholders totalled 5,270, the comparable fi gure for 2006 being 5,601. At the same time, foreign and nominee-registered accounted for 20.51%, as the corresponding fi gure for the year 2006 was 20.53%.
| Sector Dispersion on 31 December 2007 | |||||
|---|---|---|---|---|---|
| Shareholders | Number of shareholders |
Percentage of shareholders |
Number of shares |
Percentage of shares |
|
| Corporations | 326 | 6.19 | 1 818 473 | 10.29 | |
| Financial and insurance institutions | 30 | 0.57 | 5 350 876 | 30.28 | |
| Public institutions | 7 | 0.13 | 2 318 476 | 13.12 | |
| Non-profi t organisations | 58 | 1.10 | 1 072 319 | 6.07 | |
| Households | 4 798 | 91.04 | 3 485 893 | 19.73 | |
| Foreign and nominee register accounts | 51 | 0.97 | 3 625 268 | 20.51 | |
| Total | 5 270 | 100.00 | 17 671 305 | 100.00 | |
| Holding Dispersion | |||||
| Number of shares | Number of shareholders |
Percentage of shares |
Shares | Percentage of shares |
|
| 1–100 | 1 263 | 24.01 | 90 689 | 0.51 | |
| 101–1 000 | 3 146 | 59.81 | 1 280 667 | 7.25 | |
| 1 001–10 000 | 757 | 14.39 | 2 212 740 | 12.52 | |
| 10 001–100 000 | 69 | 1.31 | 1 864 801 | 10.55 | |
| 100 001– | 25 | 0.48 | 9 533 197 | 53.95 | |
| Total | 5 260 | 100.00 | 14 982 094 | 84.78 | |
| Nominee registration | 2 689 211 | 15.22 | |||
| Total | 17 671 305 | 100.00 |
In 2007, no changes requiring fl agging notifi cations took place in the holding of Teleste shares.
| Largest Shareholders on 31 December 2007 | |||||||
|---|---|---|---|---|---|---|---|
| Shares | Percentage of shares | ||||||
| 1. | Sampo Life Insurance Company Ltd | 1 624 200 | 9.19 | ||||
| 2. | Ilmarinen Mutual Pension Insurance Company | 894 776 | 5.06 | ||||
| 3. | Kaleva Mutual Insurance Company | 798 541 | 4.52 | ||||
| 4. | FIM Fenno Mutual Fund | 603 868 | 3.42 | ||||
| 5. | e State Pension Fund |
500 000 | 2.83 | ||||
| 6. | Varma Mutual Pension Insurance Company | 498 650 | 2.82 | ||||
| 7. | Aktia Capital Mutual Fund | 487 200 | 2.76 | ||||
| 8. | Op-Suomi Pienyhtiöt | 461 016 | 2.61 | ||||
| 9. | Skagen Vekst Verdipapierfond | 437 000 | 2.47 | ||||
| 10. | Fondita Nordic Small Cap Placfond | 375 000 | 2.12 | ||||
| 11. | Teleste Corporation | 352 482 | 1.99 | ||||
| 12. | Nordea Nordic Small Cap Mutual Fund | 302 156 | 1.71 | ||||
| 13. | Odin Finland | 284 050 | 1.61 | ||||
| 14. | Mutual Insurance Company Pension-Fennia | 220 000 | 1.24 | ||||
| 15. | FIM Forte Mutual Fund | 200 240 | 1.13 | ||||
| 16. | Evli Bank Plc | 190 219 | 1.08 | ||||
| 17. | Mandatum Suomi Kasvuosake Mutual Fund | 189 999 | 1.08 | ||||
| 18. | Pension Insurance Company Veritas | 175 000 | 0.99 | ||||
| 19. | Sijoitusrahasto Carnegie Osake | 170 136 | 0.96 | ||||
| 20. | Aktia Secura Mutual Fund | 146 150 | 0.83 |
e provided data is based on the company shareholders' register kept by the Finnish Central Securities Depository.
Teleste Corporation's Articles of Association include a clause related to redemption obligation. is article stipulates that a shareholder with a share of all company stocks, either alone or together with other shareholders, as specifi ed in more detail in the Articles of Association, that reaches or exceeds 33 1/3 per cent or 50 per cent, respectively – the shareholder obliged to redeem – is under obligation to redeem stocks in possession of the other shareholders – the ones entitled to be redeemed – at their call, including securities entitling to stocks by the Companies Act, to the degree a person entitled to be redeemed requires. is clause involving the redemption obligation has been specifi ed in detail in the Articles of Association.
| Key Figures by Share | ||||
|---|---|---|---|---|
| 2007 | 2006 | 2005 | 2004 | |
| Earnings per share, eur | 0.55 | 0.41 | 0.35 | 0.23 |
| Earnings per share fully diluted, eur | 0.52 | 0.38 | 0.33 | 0.22 |
| Shareholders equity per share, eur | 2.69 | 2.22 | 1.92 | 1.65 |
| Dividend distribution, Meur | 4.2 | 3.4 | 2.7 | 2.0 |
| Dividend per share, Meur | *0.24 | 0.20 | 0.16 | 0.12 |
| Dividend per net result, % | 43.9 | 49.5 | 45.7 | 52.2 |
| Eff ective dividend yield, % | 3.6 | 1.7 | 2.1 | 2.0 |
| Closing price, eur | 6.71 | 11.63 | 7.45 | 6.02 |
| Hinta/voittosuhde (P/E) | 12.3 | 28.6 | 21.0 | 25.8 |
| Price per earnings | 118.6 | 202.2 | 129.2 | 101.4 |
| Turnover, Meur | 72.4 | 138.9 | 75.3 | 74.2 |
| Turnover, number in millions | 7.2 | 14.16 | 10.8 | 12.3 |
| Turnover, % of share capital | 40.5 | 81.4 | 62.3 | 70.9 |
| Average number of shares | 17 494 435 | 17 363 102 | 17 339 752 | 17 334 235 |
| Number of shares at the year-end | 17 671 305 | 17 389 302 | 17 339 752 | 17 339 752 |
*e Board's proposal to the Annual General Meeting
Teleste published 26 stock exchange releases during year 2007.
12.1.2007 Teleste receives an order from Kabel Deutschland worth over fi ve million euros.
30.1.2007 Teleste Corporation's Interim Report 1.1.–31.12.2006. Net sales was EUR 101.8 and operating profi t EUR 9.8 million.
31.1.2007 Teleste receives an order from Cableway Communications in Korea worth EUR 1.3 million. e order concerned EttH equipment for Hanaro Telecom.
6.2.2007 Shares subscribed with Teleste 2002B stock options.
16.2.2007 Disposal of Teleste Corporation own shares to the CEO and members of the Management Team in accordance with the incentive plan determined by the Board of Directors.
5.3.2007 Teleste's annual summary of stock exchange releases in 2006.
14.3.2007 Notice of Annual General Meeting of Shareholders on 3 April 2007.
21.3.2007 Shares subscribed with Teleste 2002A and 2002B stock options´.
3.4.2007 Decision of the Annual General Meeting held on 3 April 2007.
4.4.2007 Teleste strengthens its technology and service off ering by acquiring DINH Telecom.
24.4.2007 Teleste Corporation's Interim Report 1.1.–31.3.2007. Net sales was EUR 31,4 and operating profi t EUR 2,8 million.
7.5.2007 Shares subscribed with Teleste 2002A stock options.
15.6.2007 Johan Slotte is appointed Deputy CEO of Teleste Corporation and Hanno Narjus Senior Vice President in charge of Video Networks business area.
21.6.2007 Shares subscribed with Teleste 2002A and 2002B stock option.
17.7.2007 Teleste Corporation's Interim Report 1.1.–30.6.2007. Net sales was EUR 61.8 and operating profi t EUR 5.5 million.
17.7.2007 Teleste signs a frame contract worth over EUR two million concerning the French market.
16.8.2007 Teleste applies for listing of the 2004A stock options on the Helsinki Stock Exchange.
22.8.2007 Shares subscribed with Teleste 2002A and 2002B stock option.
7.9.2007 Teleste receives an order from Kabel Deutschland worth over EUR one million.
10.9.2007 Stock options 2007A distributed to the Group key personnel.
10.10.2007 Teleste receives on order from the French National Railways Company, SNCF worth over one million euros.
18.10.2007 Shares subscribed with Teleste 2002A and 2002B stock option.
23.10.2007 Teleste Corporation's Interim Report 1.1.–30.9.2007. Net sales was EUR 94.0 and operating profi t EUR 10.1 million.
23.10.2007 Teleste publishes its fi nancial calendar for 2008.
31.10.2007 Teleste receives of order from Digicable Network in India worth over EUR one million.
21.12.2007 Shares subscribed with Teleste 2002B stock option.
% of net sales
We at Teleste act responsibly in matters involving environmental issues and wish to adopt an overall approach in support of sustainable development. Based on continuous improvement and in line with our environmental policy we are committed to reduce the environmental impacts of our own operations. In its operations Teleste Corporation complies with the principles of international standard ISO 14001 developed for the management of environmental issues. Our environmental system based on ISO 14001:2004 was certifi ed in 2006 by SGS Fimko Oy.
Teleste complies with environmental legislation and regulations in all its operations. Product-driven environmental policies of the EU have shifted the statutory focus from the conventional regulation of production to addressing the environmental impact of the product life-cycle as a whole. In the past few years the electrical and electronics industry has faced some considerable legislative changes. Such topical legislation includes, for instance, the WEEE and RoHS Directives issued by the EU. ese Directives contribute to appropriate recycling of electrical and electronic equipment while pursuing to remove any hazardous substances from the relevant material.
Across the board statutory developments are becoming increasingly product-driven. We at Teleste keep a keen eye on developments in diff erent markets and their implications to our operations. One topical body of legislation to monitor in 2007 was that of the Chinese RoHS designed, in terms of scope, to outperform its counterpart in the EU legislation.
We consider environmental protection a strategic choice, which is in line with Teleste's economic and qualitative objectives
We recognize the value of environmental responsibility while being committed to the principles of sustainable development, pollution prevention and
Teleste complies with the relevant environmental legislation, regulations and other requirements to
Teleste is guided by its environmental policy, which has been communicated to each member of our work community and is subject to regular reviews. In spring 2007 as our environmental policy was last inspected the corporate management confi rmed it still up-to-date.
At Teleste, environmental load caused by the production process is relatively low compared to the impact of the product life-cycle as a whole. Our production is based on assembly of printed circuit boards and electronic equipment, which give no rise to signifi cant emissions. Teleste is one of the pioneers in lead-free production: our production adopted lead-free wave soldering as early as 1999. With coming into eff ect of the RoHS legislation Teleste's production has entered a completely lead-free era. e primary sources of environmental load related to Teleste's operative activities include generation of waste, energy consumption and transport.
Teleste aspires to reduce generation of waste in all its operations. All waste is sorted and most of it is recycled or used for energy. Only a small fraction of it currently ends up as landfi ll. e amount of hazardous waste is very small and, moreover, most of it can still be recycled.
Items consuming energy include heating and power for production facilities, testing equipment and offi ce equipment. Our policy concerning procurement of electricity is based on sustainable development and we do our bit for the prevention of climate change. In 2007 the electrical power used by Teleste Corporation in Finland was produced exclusively by means of renewable sources of energy with no carbon dioxide emissions loading the atmosphere. In comparison with power supply produced by means of general, non-renewable sources of energy, the environmental load of our company is, as far as this particular issue is concerned, considerably lower.
We endeavour to reduce the environmental load caused by duty travel by increasing access to modern IT facilities such as teleconferencing.
At Teleste environmental issues have been worked into the assessment procedures for suppliers and subsuppliers and, thus, we require commitment to continuous improvement in the fi eld of environmental issues.
At Teleste, management of environmental issues is focused on environmental impact control encompassing the product's life-cycle as a whole, which put a greater
| Statutory requirements relevant to the electronics industry | ||||
|---|---|---|---|---|
| EU WEEE Directive Waste from Electrical and Electronic Equipment |
||||
| Governs processing and recycling of disposed of electrical and electronic | ||||
| material | ||||
| EU RoHS Directive | e Restriction of the Use of Hazardous Substances |
|||
| Limits the use of certain hazardous substances in electrical and electronic | ||||
| equipment | ||||
| China RoHS Legislation | Applies to the same hazardous materials as the EU RoHS | |||
| Additionally requi rements involving markings to be made on the relevant equipment |
emphasis on the signifi cance of co-operation with our suppliers, sub-suppliers and customers. Product development provides a great tool for minimising the environmental impact of a given product.
Currently, our fi nal products consist mainly of recyclable materials such as metals. In comparison with consumer electronics, for instance, the cable network equipment and video surveillance systems constitute relatively long-term investments. In addition, they are maintainable as well as upgradable, in other words their life-cycle can be extended even more. is is to say that the single most signifi cant environmental aspect related to our products is the power they consume.
At Teleste we also pay particular attention to the end-product packaging and their environmental friendliness. e relevant materials are mainly fi brous and, thus, easily recyclable. In 2007 the amount of recyclable packaging materials against all packaging materials used by Teleste Corporation was 97%.
Regarding its operations Teleste has defi ned long-term environmental objectives, which are subject to annual specifi cation by way of more detailed environmental goals.
e Environmental Objectives |
|---|
| Promotion of product-driven environmental thinking |
| Reducing the amount of waste |
| Reduction in energy consumption |
| Continuous environmental improvement in logistics and transport |
| Promotion of environmentally conscious thinking in supply chain |
| Increasing environmental awareness among staff |
In 2007 to achieve the specifi ed goals the following operations and objectives were implemented: A. In Finland a number of persons in managerial positions from production and other units took a course in sorting of waste and environmental legislation. e training was attended by 31 persons in total. B. Evolvement and effects of the Chinese RoHS legislation to Teleste's operations were monitored and the adequate measures were taken to meet the relevant statutory requirements. C. Monitoring and gathering of environmental indicators continued. D. A packaging project was carried out. Consequently specifi ed plastic materials having formerly been used for packaging were replaced by fi bre-based recyclable materials. E. A project designed to reduce the amount of printed matter involving product information for customers was successfully carried out for a number of specifi ed products. As a result the total environmental load was successfully reduced.
e Teleste way of doing business is to apply innovative technology and solid competence based on an exhaustive understanding of each customer's business and needs. As a result we deliver fully optimized end-to-end solutions. We are among the global leaders in supplying both broadband cable networks and video surveillance networks.
At the core of each of our three business units is video, and we continue to focus on processing, transmission and management of video and data for the operators that are off ering video-related services to end users. We serve both network operators and service operators, with cable and CCTV operators being the major customer groups. Using our core technologies, we also provide cost effi cient and reliable services that improve our customers' operational effi ciency. Our services include design and planning, implementation, operation and maintenance, integration, consultancy and training.
Teleste Broadband Cable Networks business units aim at promoting the business mainly of cable operators, but also of other operators by utilizing our technology competence. We pave the way towards a new versatile media world for end users both at home and in businesses by off ering, already today, the video quality and data speeds that will be needed tomorrow. By helping prepare operators to meet the growing expectations of their customers, our advanced network solutions position the operators well to face the ever more stringent market competition.
e Teleste Video Networks business unit delivers world-class network solutions globally with government and the public sector representing the primary clientele. We aim to improve the security and effi ciency of society, by manufacturing and delivering high-quality video surveillance network solutions for processing, transmission and management of video, data and audio.
It is at the business unit level that Teleste leverages its genuine knowledge of customer needs and its comprehensive technological expertise. As a result, each individual business unit is recognized for its ability to produce technically cutting edge solutions optimized year after year. In providing enduring network solutions, Teleste will always go several steps further than competitors that are off ering standard solutions.
| 2007 | 2006 | Growth | |
|---|---|---|---|
| Net Sales | 108,2 Meur | 85,6 Meur | 26% |
| Order Intake | 101,4 Meur | 92,8 Meur | 9% |
| Export sales share | |||
| Net sales | 2007 | 2006 | 2007 2006 |
| Finland | 8,0 Meur | 7,0 Meur | |
| Export | 100,2 Meur | 78,6 Meur | 93% 88% |
| Total | 108,2 Meur | 85,6 Meur | |
| Video Networks | |||
|---|---|---|---|
| 2007 | 2006 | Growth | |
| Net Sales | 16,9 Meur | 16,2 Meur | 4% |
| Order Intake | 17,1 Meur | 14,4 Meur | 19% |
| Export sales share | |||
| Net sales | 2007 | 2006 | 2007 2006 |
| Finland | 3,0 Meur | 2,6 Meur | |
| Export | 13,9 Meur | 13,6 Meur | 82% 84% |
Clientele of Teleste's Fibre and Coaxial Networks and Services (HFCNS) Business Unit consists of cable operators and distributors providing network equipment for cable operators. e cable operators, in turn, provide their end-users with three main basic services: TV channels, tele phone connections and broadband data communication services.
e HFCNS business unit off ers cable operators hardware and software for building combined fi bre-optic and coax cable networks, as well as services related to the construction and maintenance thereof. ese solutions contain both stand-alone applications and integrated turn key network deliveries.
Cable network refers to solutions for signal transmission in both fi bre-optic and copper cabling. e actual transmission technology consists of both digital and analogue technology.
Our main market area is Europe, where the business unit currently has 19 offi ces in addition to a number of sales partners.
European cable operators continue to expand their provision of services. Cable network customers are tempted by new, high-quality services requiring ever increasing network capacity. At the same time the cable network must be more and more reliable, which pushes up the technical requirements set to the related equipment and solutions.
Intelligent network element of the next generation featuring user-friendliness, which is completely in a class of its own. e team behind the innovation.
Basically, there are two ways to increase the capacity of an HFC network. First, one can expand the available RF band and/or, second, segment the existing cable network structure into smaller cell areas. e fi rst option requires technical solutions covering a wider RF bandwidth whereas the latter one necessitates costeff ective fi bre-optic and amplifi er solutions adapted specifi cally to small-scale cell areas. An exclusive fi bre-optic system with no remaining coaxial sections can be considered the ultimate end-point in HFC network development.
Nevertheless, considering the current types of HFC network infrastructure, we at Teleste subscribe to the view that pure fi bre-optic networks will not provide operators with a commercially viable and costeff ective access solution. is is because in such a case investments per end-user would get considerably higher compared to those using the copper-based coaxial network infrastructure. Indeed, as a rule the cable operators tend to make use of the existing coaxial infrastructure as long as technically possible. Along with the segmentation described above the cable network will gradually turn into fi bre-optic network even if the timeframe for this transition is long.
Our customer market is undergoing essential change. A number of operators have successfully completed the upgrading of their coaxial networks after which their
focus will shift to refurbishing the fi bre-optic part of the network. e number of suppliers is axed and those remaining will be off ered more comprehensive systems to provide. Quite often products and services related to the upgrade and maintenance of networks are bundled together and subjected to competitive bidding involving a number of tenderers. is particular trend will also create opportunities for the HFCNSbusiness in terms of developing local services.
In 2007 consolidation among the operators went on. However, cable networks are also sold in areas with no estimated prospects for growth. Some large international cable operators have clearly chosen Eastern Europe for their growth area, which can be seen in terms of investments made in networks and network technology. Redistribution of cable networks is particularly clear in Germany where in 2007 the ownership structure of cable networks was streamlined vertically (from head-end to end-user).
HFCNS business considers Eastern European market as one strategic growth area. In addition to this, the developed and in terms of cable networks dense and large Western European market enables strong momentum for the business. Taken as a single market Germany is in the period of transition, which side by side with the growing demand for fi bre-optical connections is characterised by the main emphasis in cable network upgrading shifting to the so-called house networks. e Nordic countries represent technically the most advanced area accommodating new innovative solutions. As to Asia, India provides
the main market for business opportunities.
Operators in all of the above markets are interested in solutions allowing, in particular, the cost structure related to cable network maintenance to be lightened. What is involved here includes increasingly high-quality technical solutions for remote control and reliability enhancement of the network. To a degree the operators are prepared to outsource operations related to the upgrading and maintenance of their networks, and this, in turn provides fresh need for services in line with our business strategy.
e most notable competing network technologies include the IP-based data network solutions off ered by the city carriers. Compared to the aforementioned networks the greatest benefi t provided by the cable network technology is its ability to provide ample capacity for the transfer of analogue and digital video. All currently available telecommunication services can be supplied to households through this type of network.
HFCNS business unit will proceed in accordance with its chosen strategy.
e technology strategy is based on the increased use of fi bre-optical transfer in cable networks and, through this, on decreased coaxial transfers. Nodes between fi bre-optical and coaxial segments require a number of technical applications while transmitter/receiver solutions will be needed for the actual fi bre-optical transfer. is change in Europe is superbly supported by the business unit's current competence profi le, product solutions and the company image.
In our technology strategy internal cable networks of buildings and households constitute one priority area. As to equipment, the required solutions for house networks are often somewhat simpler, but we expect them to make up a particularly signifi cant potential for business in Europe in the coming years. Technically we are focusing our development eff orts on this area, a clear indication of which is the acquisition of DINH Telecom last Spring.
In line with our strategy we will continue to strengthen our local off ering of services for the European operators. We will
put particular emphasis on services and their provision related to upgrading and maintenance of cable networks. e target market here includes Central Europe, Germany and UK. In the Nordic countries we will focus on network management systems and their related system integration services.
Development of equipment and solutions related to the HFC network has been our core competence since decades. We will continue to promote our expertise in the fi eld as this particular area represents the single biggest sector in our product development. e software component in our solutions continues to gain in signifi cance to ensure the user friendliness of the equipment and to increase degree of automation. In addition to broadband technology and electronics, know-how involving software has indeed become one of the major factors supporting our HFC product development.
e strategic objective involving house network solutions necessitates commitment into R&D expertise concerning costeff ective series of high-volume. Our goal is further to strengthen the R&D of DINH Telecom and turn it into a special expertise resource for the In-house network business. In 2007 DINH Telecom commenced design of a range of amplifi ers suited for house networks in countries such as Germany.
Network management systems and their integration to other software applications used by the operators will require increased know-how in software development and architecture. With regard to the related eff orts we will rely on our software partners while strengthening our own product development expertise in the selected areas.
Year 2007 continued very strong thanks to signifi cant coaxial network refurbishment projects launched in Central and Northern Europe. In terms of bare numbers of manufactured amplifi ers Teleste's previous records were again broken and the
production capacity was expanded from that of the previous year. Improvement of profi tability was successful owing to some targeted R&D projects and through shifts of production over to China.
Deliveries in large-scale customer projects continued strong and, for the part of amplifi er deliveries, several framework agreements were extended in the beginning of the year. e framework agreement with the French Altice Group and the continued amplifi er deliveries to a major Central European operator would deserve particular mentioning. Amplifi ers designed in compliance with the German BK Standard brought in a new framework agreement, which in terms of volume led to an all time high in the relevant fi eld.
New openings were made particularly in Eastern Europe where both amplifi ers and the so-called cost-eff ective fi bre-optical receivers were sold. e new AC3000 amplifi er solution met with excellent reception in this market and fi rst deliveries are due right in the beginning of 2008.
Net sales in the Nordic countries developed positively. Here, the growth in net sales was predominantly based on the sale of basic amplifi ers and various cable network accessories. e sell of fi rst ever network management integration project to a Finnish cable operator signifi ed a breakthrough in the provision of services in line with the new strategy.
Unit volumes of the fairly new HDO fi bre optical transmitter unit grew at a steady pace. Its main markets include Switzerland, UK and the Nordic countries. e sale of the transmitter unit is expected to develop favourably also in 2008.
In the United Kingdom a contract for network design services was made with the top cable operator of the country. is in turn, led to the establishment of a network design unit of approximately 40 persons in the middle of 2007.
Net sales from house network business of DINH Telecom failed to reach the forecast whereas its profi tability remained very good. e reduced sales were caused by house amplifi er orders delayed by a large Belgian operator. Commercial talks were initiated to off er house network solutions by DINH Telecom outside Belgium, mainly in the Nordic countries and Eastern Europe.
| HFCNS Business Unit | |
|---|---|
| Vision | To be the leading supplier of HFC solutions in the world |
| Mission | To enable enhanced entertainment content to households via innovative and reliable network |
| solutions and services | |
| Solution | Wide-ranging and innovative product portfolio supported with strong local services |
| Key markets | Europe |
| Primary clientele | Cable operators and of cable network equipment distributors |
e Teleste business unit Digital Video and Broadband Solutions (DVBS) delivers turnkey solutions for both video signal processing and broadband distribution networks. e business is organised in three sections complementing one another.
Our video business focuses on delivery of central video systems combining analogue, digital and IP technology solutions tailored to customer-specifi c needs. Our advanced system deliveries enable introducing to the market interactive services within a short timeframe while supporting their further development tailored to the customer.
Our broadband business delivers next generation distribution networks for particularly developed markets characterised by high requirements in terms of transfer rate and quality. e relevant architectures include EttH (Ethernet to the Home) and FttH (Fiber to the Home). In coaxial networks EttH supports the data transfer rate of 100 Mb/s while solutions based on FttH in fi bre-optical networks carry rates that are even higher. From the end-user's perspective, in majority of applications the
most critical requirement involves real-time transfer of video signal, which is highly sensitive to interference and capacity restraints.
Our third main area includes valueadded services that support speedy commissioning and reliable maintenance of the above solutions while providing our customers with vital competitive edge.
Our regular customers include cable operators, telephone companies, city carriers, power companies and hospitality system providers in Europe and, increasingly, in Asia. DVBS operates globally with the business unit HFCNS – short for Hybrid Fiber Coaxial Networks and Services – through Teleste's joint sales and distributor network.
Our comprehensive experience in the development and delivery of dependable network solutions tailored to the customer promote cost-effi ciency and favourable development of our customers business.
Year 2007 was a turning point in the digitalisation of the Finnish video transfer as analogue television broadcasting in terrestrial networks came to an end. In cable networks analogue transmissions were shut down in February 2008. In Europe, too, digitalisation of television services proceeds with leaps and bounds with terrestrial analogue television broadcasting set to end by the year 2012.
Yet another signifi cant market trend is the powerful expansion of telephone companies in the television services, an area having been dominated for decades by traditional cable operators. Even power companies are now entering the same market although often in cooperation with specialised service operators.
e technological solution preferred by the telephone and power companies for their television services is almost exclusively the IPTV with its inbuilt interactive operability. is option tends to encourage the traditional cable operators to invest increasingly in the scope and quality of their provided services, and thus, be able to meet the ever toughening competition.
Although video processing and broadband distribution can be seen as two separate markets, there are a number of needs and solutions where these worlds
| Vision | Being a global leader in the fi eld of broadband and video solutions for cable networks and |
|---|---|
| next generation access networks | |
| Mission | To provide innovative solutions & services in the fi eld of video and broadband over existing and |
| next generation networks to enhance the competitiveness of cable and next generation network | |
| operators | |
| Solution | Enduring next generation broadband networks & cost eff ective video headend solutions |
| Key markets | Europe and selected markets in Asia |
| Key clientele | Cable Operators, City Carries, Hospitality Integrators, Small Telco´s |
come together and aff ect one another. Increased need for video processing and transfer through multimode/multiform distribution networks commands more and more guaranteed bandwidth and faster real-time data transfer rates.
To meet the needs for high-capacity video and data transfer we believe Teleste's 100 Mb/s EttH technology will be the future choice for a growing number of operators.
Introduction of these new services will be signifi cantly speeded up by exploitation of the existing coaxial networks, which will also bring in considerable savings in terms of cost-effi ciency when put against an all-out reconstruction of the distribution network.
FttH together with its spin-off technology of Fibre to the Building (FttB) are expected to reach a prominent position in new distribution networks and in enhancements to the existing networks. Solutions based on fi bre-optical cabling are particularly popular with new operators creating their required cable networks from scratch.
We expect the above trends to continue in the coming years. is will improve prospects for the DVBS business in the specifi ed technologies and the related value-added services. Geographically, Europe will remain a strong market with Eastern Europe providing an area of special growth. Similarly, major developing countries in Asia such as India and China provide excellent opportunity to strengthen our market position globally.
Concerning our video business in the next few years the focus will be on digital video centres and extension deliveries involving analogue video centres to our current clientele. Volume deliveries of IP-based video centres will start in early 2008. e new IP headend video centre will provide another key product among Teleste's IPTV system deliveries. is will be complemented by special products tailored to client application and delivered by Teleste's extensive network of strategic partners.
In the broadband business our primary objective is to support the leading cable
MSO's and other operators having access to cable infrastructure in their smooth and cost-eff ective migration to the next generation broadband networks. e EttH range provides customers with a cost-eff ective network solution for introduction to the market of high-speed data transfer solutions that will be required by applications such as transfer of HDTV video to private households. e EttH product range is accompanied by the continually expanding FttH family, based on Teleste's R&D, and complemented by special products delivered by our partners.
In our service business the focus will remain on further processing of our service products with the intention of bringing them up to meet, ever more precisely, the customers' requirements both in terms of technical advancement and cost-effi ciency. A training programme covering the entire personnel provides an essential part of our comprehensive range of services. is programme is designed to put an added emphasis on special features involved in the IP technology, which makes part of the conventional cable network solutions and service packages.
As to all of the above product ranges, to ensure the favourable development of profi tability for our deliveries as a whole we will keep a keen eye on cost-effi ciency. Customers in Eastern Europe and in populous Asian countries such as China and India put a special emphasis on costeffi ciency. Another wide-ranging development priority is to maintain high-speed and reliable delivery logistics in all of Teleste's markets providing us with an essential competitive advantage. irdly, we extend our knowledge in, and the business of, our new clientele representing segments such as telephony and power generation.
On the whole, the business of DVBS is very R&D intensive. Our product ranges involve RF components and fi bre optic technology complemented by software applications requiring comprehensive expertise in all of the above areas. Our international partner network provides strong support for our R&D eff orts.
As for the video solutions, in 2008 our R&D focuses on the introduction, in several steps, of an IP-based video centre. At the same time we will further develop and complement the range of digital headend solutions currently in production.
In the EttH product ranges the focus is shifting towards maintenance and development of client-specifi c versions tailored to particular requirements within specifi ed delivery schedule. At present, the EttH technology is applied both to standalone solutions and used as an integral component in the development of the FttB architecture.
Year 2008 will be a signifi cant step forward in the product development of Teleste FttH operations leading to the fullfi bre data transfer distribution all the way to the end-user.
At the Amsterdam IBC Fair Teleste introduced the IP-based video centre promoted under the name of Luminato.
India became one of our key markets for deliveries of digital headend solutions.
e leading South Korean cable operator Hanaro Telecom continued to implement Teleste's EttH technology as part of the 100 Mb/s distribution network architecture.
In the Netherlands favourable development continued in deliveries of high-speed EttH and FttH systems.
PromaCom AB, acquired by Teleste, continued successfully our FttH business in all customer segments in the Nordic countries.
Luminato is Teleste's next generation headend platform leading the operators to the new IP-based cable television and IPTV services. Part of the core development team.
Teleste Video networks provides total CCTV solutions for video surveillance applications, specialising in areas such as high-quality real-time video, audio and data transmission, networking and recording.
Teleste Video Networks is off ering total video surveillance solutions, comprised of a combination of state of the art products and technologies, complemented with professional services ranging from system design through project deployment to system maintenance and training. ere is a growing trend to integrate video surveillance system with other sub-systems, like traffi c management systems, alarm & crisis management systems etc. Our System Integration skills are used to off er such integration services.
Teleste Video Networks has presence in all the major geographical markets: Europe, North-America and Southeast Asia with our own local offi ces. e end-users are typically reached through channel partners, the only exception being Finland where the end-users are approached directly by Teleste Video Networks, through our subsidiary Suomen Turvakamera.
Teleste Video Networks is focusing on end user segments which have needs for large systems, frequently with complex functionalities. Most signifi cant segments have public sector background, such as local police for urban surveillance, rail operators and road administration authorities. In private sector, focus end-user segments represent process industries as well as utilities. ese target market segments demand advanced video surveillance systems requiring high-quality and real-time video, audio and data transmission, networking and recording. ese are highly specialised segments distinct from the mainstream
video surveillance market by the level of the technology excellence required.
With adoption of digital video and IP networking, the CCTV systems are becoming increasingly complex to design, implement and maintain. Parallel to this, the end-customers are looking for comprehensive integrated solutions to an increasing degree. Major corporations and public authorities are seeking for increased effi ciencies and improving their security levels through centralising and automating the work of security professionals. To reach this, individual sites will be networked together and monitoring work will migrate from small sites to centralised monitoring centers.
For these complex demands, the endcustomers are seeking for partners who can deliver a customer tailored solution, including maintenance and operations of the infrastructure. For this opportunity, Teleste Video Networks has established a Services and Integration unit with highly skilled team of digital video and IP networking professionals. is team is responsible of the portfolio of professional services we deliver to our customers.
In the coming years we expect to see growth in every Teleste Video Networks' target market segment. We expect this growth to spread out to all geographical markets and some regions such as the United States and France stand out by the more promising potential they provide. Another unfolding feature is that large-scale integrated network solutions will continue to gain in importance.
Teleste Video Networks is focusing business development on three areas: Products & Systems off ering; further expansion of our Services and Integration business and expanding our sales of IP-based
solutions through go-to-market partnerships with system integrators from IT and telecoms background.
Products and Systems portfolio is comprised of a comprehensive range of products needed between the camera and the control room. In general, our extensive expertise on technology, combined with our insight in the needs of end-users, provide us with a competitive edge in the market. Particular attention is paid on adding more intelligence into our system off ering, resulting in higher effi ciency and cost savings in the tasks of the security professionals. Examples of such development is complementing our system off ering with wireless transmission, as well as enabling automatic object detection to facilitate the work of the monitoring personnel and speed-up searches into the huge volume of stored video in modern video surveillance systems. A key success factor is building strategic partnerships on technology areas which are not core to Teleste Video Networks' competence base, and create user-friendly system off ering, hiding the complexity of technology behind a simple user interface.
e demand for professional services is growing rapidly in conjunction with more and more systems built on digital video, routed over IP networks. e all-digital systems, built on IP networking infrastructure are signifi cantly more complex to design and deploy, as well as require new expertise to maintain them, compared to the traditional analogue video systems, using baseband video transmission. At the same time, there is shortage of competences on the market, with expertise on both video surveillance end-user needs as well as on IP networking technologies. Teleste Video Networks is addressing this demand through off ering high-level professional services and system integration, ranging from system design and consultancy through project deployment services
| Vision | A leading provider of integrated video surveillance solutions |
|---|---|
| Mission | Enable high-quality and effi cient work of security professionals through provision of video |
| surveillance technologies | |
| Solution | All-digital video surveillance solutions between the camera and control room |
| Key markets | e business focus is on high-quality video surveillance networks for road, rail and public places |
| monitoring and corporate security systems on a global scale | |
| Primary clientele | e systems developed by Teleste are supplied mainly to the public sector |
| Teleste delivers its solutions to the end-clients mostly through system integrators |
to maintenance & operating services. On top of this, learning solutions are off ered ranging from comprehensive system administrator level to training the security professionals to execute their tasks effi ciently, using the surveillance system as a daily tool. Teleste Video Networks is currently focusing on productizing the services portfolio and building a competence base with global coverage.
Teleste Video Networks is continuously expanding its network of channel partners in order to address new markets and maximising our reach to end-users. Our aim is to establish long-term partnerships through promotion of mutually profi table growth. Key development is to win new channel partners with IT or Telecoms system integration background, as the all-digital video surveillance systems will be demanding integration competences from the IT domain. Recently, the most notable win is France Telecom partnership, targeting the growing public places surveillance market in France.
e video surveillance market is in the phase of transitioning from analogue video to all-digital video surveillance systems, built on generic IP networking infrastructure. Teleste Video Networks has been an early adopter of digital video & IP technologies and continues to invest for future growth of the next generation video surveillance technologies. e focus in R&D has shifted towards application software development, as well as implementing new system level functionality, encompassing both video encoding, recording and client application.
When the complexity of the systems is growing, it is of paramount importance to have strategic partnerships in place to complement own resources and capabilities. e main areas of partnering for Teleste Video Networks are image analysis technologies as well as wireless transmission. ese are new competence areas where Teleste is focusing on adapting the use of such technologies to high-end video surveillance applications, but not investing in the core technologies themselves.
In 2007 Teleste completed the deliveries to the French National Railway Company SNCF. e project involves a comprehensive IP-based management system for integrating a number of existing local video surveillance networks under a common management system. Encompassing more than 120 railway stations in the Paris metropolitan area with over 3 000 cameras, this video surveillance network is one of the largest in the world. In addition, Teleste Video Networks received an order to include Gare du Nord and StDenis stations into the network, as well as build digital recording systems to these major stations. SNCF is planning to launch another project in the early 2008 for further stations in the Paris area and other French cities.
In 2007 Teleste concluded a framework agreement with France Telecom. With this agreement, France Telecom and Teleste target to win market share particularly in the growing French market for City Monitoring. is partnership strengthens our presence in the French market, addressing both the rail segment as well as public places surveillance market.
Another signifi cant market entry has taken place in Australia. Teleste has been awarded several projects to build stateof-the-art digital recording systems for Queensland government. To enable further business growth in Australia, Teleste has established a sales offi ce in Brisbane.
New business opportunities have been captured also in Eastern Europe, like city monitoring projects for Bucharest (Romania), Sofi a (Bulgaria), Szczecin (Poland) and Tbilisi (Georgia).
Teleste Video Network continued to further the development of our all-digital system off ering, comprised of MP-X video encoding and networking products as well as MoRIS software suite for management, recording and monitoring. is intensive development will continue in 2008, focusing on introduction of new system level innovation like optimised wireless transmission for CCTV and automatic object detection functionality integrated to the encoding products, with comprehensive alarm management capabilities. e CFO fi bre modem system off ering is constantly updated and expanded to keep its competitive edge in the market.
Teleste Video Networks expects the market situation to develop favourably in 2008.
Teleste project manager is handing over the key to SNCF project manager in Paris Gare du Nord station. Teleste has delivered a 400 video channels recording system to that station as turn-key delivery.
As an innovative technology group Teles te's expertise and competitive edge are based on a motivated and professional personnel. Our personnel policy is designed to meet our business units' requirements so that the number, availability, skills and motivation of our personnel are optimal for achieving the set strategic objectives. An open interaction on every level of the corporate organisation contributes to a committed personnel. An open interaction is also part of good management and supports the understanding and implementation of strategic objectives. At the end of 2007, the number of Teleste's employees was at 672. e corresponding fi gure for the previous year was 621. Moreover, in 2007 Teleste hired, on average, 64 temporary employees assigned mainly to production. In 2007 Teleste obtained strategic skills and personnel from Belgium (DINH Telecom S.A.), in addition to which a new company, Flomatik Network Services Ltd, was set up in UK.
In 2007 the number of Teleste personnel grew by some 50 people. As to required skills, geographic distribution and other criteria our recruitment has been geared to meet the specifi ed strategic objectives. Recruitment and employment relations are based on the corporate equality scheme and operation in compliance with the corporate values. One of the cornerstones of Teleste's personnel policy is to provide its personnel with a possibility of job rotation. For instance, open positions are as far as possible sought to be fi lled through internal transfers.
Personnel competence was developed in a number of areas. As in previous years, our personnel participated in professional development programmes set up in course of the year by taking courses in subjects such as product and technology training. Superior training programme carried out in autumn 2006 for persons in managerial positions in Finland was followed in early 2007 by a similar course involving Teleste's superiors outside Finland. e tailor-made Leading Excellence management training programme carried out jointly with some local high-tech companies continues. e group having started the one-calendar year Leading Excellence training programme in autumn 2006 completed their course in early autumn 2007 and a new group started shortly thereafter. e main objective with this training programme is to promote managerial skills and all-round business thinking. e chosen participants in the programme include makers of Teleste's future. e programme is designed to support the company's future potential of success and to secure the commitment of our key personnel segments.
Performance appraisal discussions conducted annually with each Teleste employee provide an essential tool for development of our personnel and our entire work community. e forms used for appraisal discussions are updated annually as is the theme for these discussions without, however, forgetting their ultimate purpose. e theme for 2007 included Teleste's management culture and the clarity of strategic direction of one's own unit. Our corporate management is strongly committed to the development of our human resources and take part in the shaping and implementation of personnel
training both in the role of so-called sponsors as well as actually participating in the courses.
Teleste's system of payroll and incentives is designed to support the corporate business strategy. Performance appraisal and target-setting discussions provide a base for the defi nition of personal goals, which, in turn, are designed to promote performance while placing a special emphasis on personal development.
Incentive schemes are designed to promote performance on both a company and individual levels. Teleste's personnel incentive schemes consist of a number of intangible and tangible inducements. Material incentives in place include systems of bonus pay and payment by results as well as those of share bonus scheme and options. ese schemes have been – and will continue to be – developed to enhance the infl uence of units, teams and individuals as well as to establish a closer linkage between personal goals and performance and company strategic goals.
We at Teleste believe that a good climate and work motivation strongly aff ect well-being at work and that, in addition to signalling a positive image of the company and contributing to the willingness to stay of competent employees, a healthy work community is more productive both in terms of quality and quantity. At us well-being at work is manifested among others in terms of long years in service.
| Personnel on December 31 | |||
|---|---|---|---|
| 2007 | 2006 | 2005 | |
| Total | 672 | 621 | 557 |
| Research and Development | 158 | 146 | 127 |
| Operations | 289 | 282 | 286 |
| Sales and marketing | 186 | 159 | 114 |
| Admin & IT | 39 | 34 | 30 |
| Finland | 443 | 435 | 408 |
| Other Countries | 229 | 186 | 149 |
| Female | 226 | 208 | 194 |
| Male | 446 | 413 | 363 |
In 2007 fi ve persons celebrated their 10th anniversary in the company service while 29 of our personnel commemorated their respectable 20th year at Teleste. Teleste's commitment in the well-being at work will be on-going in the future.
Our free-time committee, Vapari, is elected annually from among Teleste person nel and it organises diff erent events such as sports and cultural events. e company also supports personal exercise activities of diff erent kinds for its personnel.
In 2007 market situation in the sector remained good. Continuous interactionand communication between the personneland the company is ensured by way of monthly meetings between the representatives of the employer and the employees. Furthermore, the positive interaction between the management and the personnel is maintained by setting up joint meetings participated by the management group and the union representatives. rough this way we have succeeded in establishing a fl exible mode of collaboration, which allows us quickly to adapt to both quiet spells andpeaks in demand alike. Acceptable policies regarding use of temporary labour
in production have been subject of mutual understanding so that we can respond to market fl uctuations by adjusting the available capacity. Application and development of various arrangements designed to increase fl exibility in work will be continued in co-operation with the personnel.
We have continued our co-operation with universities and other educational establishments to promote our image of a positive workplace for future top professionals. is co-operation has taken diff erent forms such as collaboration inthefi elds of testing and research, or Teleste's representation in various bodies of universities and educational institutes. is activity is designed to ensure the utilisation of top expertise of the scientifi c community and the taking into account of Teleste's strategic needs in the learning programs of the respective educational establishments. e build-up of a positive employer image for future top professionals has been continued by keeping contact with, among others, student organisations in Universities of Technology and by taking part in graduate recruitment fairs.
Final testing of an EttH piece of equipment at Teleste's plant in Littoinen.
Teleste Corporation aims at organising its management in a consistent and functional manner. e governance is based on the Finnish Companies Act and Teleste Articles of Association. Teleste has its shares listed on OMX Nordic Exchange Helsinki. e company complies with the rules and regulations for listed companies as set by the Nordic Exchanges. As of 1 March 2000, the company has followed the insider regulations drawn up by the Board of Directors of the Nordic Exchanges (revised on January 1, 2006). ese regulations have been supplemented by the Company's internal guidelines. Teleste's corporate governance practices comply with the Corporate Governance Recommendation for Listed Companies approved by the Nordic Exchanges, the Central Chamber of Commerce of Finland and the Confederation of Finnish Industry and Employers in December 2003. e company has confi rmed the set of applied key values.
e Annual General Meeting (AGM) of Teleste Corporation is the highest decision-making body of the company. e Annual General Meeting is held at least once a year. e General Meeting shall be held annually by the end of June. e Annual General Meeting is held in Helsinki. e Annual General Meeting decides on any specifi ed tasks in compliance with the Finnish Companies Act. Issues decided by the AGM include:
Responsibilities of the AGM also include: • Making amendments to the Articles of
Notice of the Annual General Meeting shall be announced in a newspaper as determined by the Board of Directors or verifi ably delivered, in writing, to each shareholder using the address marked in the register of shareholders, no earlier than two months and no later than 17 days prior to the meeting.
e Board of Directors of Teleste is responsible for managing the company in accordance with the law, offi cial rulings, Articles of Association and the decisions as set out by the Annual General Meeting. e operating procedures and main duties of the Board of Directors have been specifi ed in the Board's Rules of Procedure.
e Board shall resolve matters of great importance in terms of scope and magnitude to the group's operation. e Board oversees and assesses the operation of the CEO and the Management Group. e Board decides on the criteria of the company's compensation system and makes decisions on any other far-reaching issues related to personnel.
In line with the view adopted by the Board of Teleste Corporation, the proceedings of the Board will be carried out in an optimum way without formation of separate committees but by involving the entire Board in the so-called committee proceedings. e Board shall conduct an annual evaluation of its performance and working methods.
e Board of Teleste Corporation has laid down rules of procedure according to which the essential duties of the Board include the following:
Jukka Rinnevaara Johan Slotte Erja Saarikoski Juha Järvenreuna
e Chairman and other members of the Board of Directors are elected by the Annual General Meeting. According to the Articles of Association the Board of Directors shall have a minimum of three and a maximum of eight members. In its meeting held on 3 April 2007, the Annual General Meeting elected fi ve members to the Board of Directors of Teleste Corporation for a term of one year.
e Teleste Corporation Board of Directors: Tapio Hintikka, Chairman of the Board Tero Laaksonen, Member of the Board Pertti Raatikainen, Member of the Board Timo Toivila, Member of the Board Pekka Vennamo, Member of the Board.
With the exception of the Member of the Board of Directors Pertti Raatikainen (expert member of the steering group in charge of the company technological development) the Members of the Board are not employed by the company and can be considered independent in line with the Finnish recommendations.
Esa Kinnunen Hanno Narjus Esko Myllylä
were as follows:
During 2007 the Board of Directors of Teleste Corporation held 10 meetings two of which were set up as a telephone con-
the Board meetings was 98%. In addition to the Members of the Board the meetings were attended by the CEO, the deputy CEOand concerning Interim Reports also the CFO and persons invited separately as
Remuneration for the Members of the
e remuneration of the members of the Board is decided by the Annual General Meeting. On 3 April 2007 the Annual General Meeting decided that the Chairman of the Board be paid annually EUR 36,000 and each Member will receive EUR 20,000 a year. Attendance allowance, which is paid separately, stands at EUR 250 per meeting. Remuneration for the Members of the Board will be paid so that 40% of the specifi ed amount will be company shares and the rest will be remitted in money.
Salaries, remuneration and other benefi ts paid in 2007 to the Board of Directors
• Tapio Hintikka EUR 38,000, part of which were remitted in Teleste shares
• Tero Laaksonen EUR 21,750, part of which were remitted in Teleste shares
• Pertti Raatikainen EUR 22,000, part of which were remitted in Teleste shares
EUR 14,400 (1,240 pcs),
EUR 8,000 (690 pcs),
EUR 8,000 (690 pcs), • Timo Toivila EUR 22,200, part of which were remitted in Teleste shares
EUR 8,000 (690 pcs),
e attendance of the Directors at
ference. -
required.
Board -
M.Sc (Econ.), born in 1961 President and CEO Joined Teleste in 2002
ABB Installaatiot,
ABB Building Systems, Group Senior Vice President 2001–2002
LL.M, MBA, born in 1959 Deputy CEO Uponor Poland, Managing Director
Business school graduate, born in 1953 CFO Joined Teleste in 1984
M.Sc. (Eng.), born in 1964 HFC Networks and Services Joined Teleste in 2004
Operations, Director 1998–2003
Quality Director 2003–2004
M.Sc. (Econ.), B.Sc. (Eng.), born in 1967 Digital Video and Broadband Solutions Joined Teleste in 2006
Nokia Group, Nokia Networks, Director 1994–2005
Solectron Corporation, Vice President 2005–2006
M.Sc. (Econ.), born in 1962 Joined Teleste in 2006
Teleste Corporation, Director, Sales/ Continental Europe 1989–1996
Nokia Corporation, Various managerial positions 1996–2006
B.Sc. (Eng.), CBA, born in 1966 CTO, Research and Development Joined Teleste in 1994
• Pekka Vennamo EUR 22,000, part of which were remitted in Teleste shares EUR 8,000 (690 pcs).
e scope of duties of the Teleste Corporation CEO is determined by the law, the Articles of Association and instructions issued by the Board. Detailed terms of employment of the CEO are specifi ed in a separate contract subject to the Board approval.
e CEO is not a member of the Board of Directors.
e current CEO of Teleste, Jukka Rinnevaara, assumed his present responsibilities on 1 November 2002. e salary, fees and other benefi ts received by the CEO are determined by the Board of Directors. Salary, remuneration and other benefi ts paid in 2007 to the CEO of Teleste Corporation totalled EUR 512,043. e aggregate compensation of the CEO included share bonus for the year 2007 in the amount of EUR 68,000. e contractual age of retirement of CEO Jukka Rinnevaara is 60. e insurance premium of the voluntary retirement insurance policy of the CEO was EUR 57,236, which amount is not included in the paid salary and remuneration. As to the contract of Mr. Rinnevaara, his term of notice has been specifi ed as six (6) months in case the CEO decides to withdraw, and eighteen (18) months should the contract be terminated by the company.
e company Management Group is chaired by the CEO who reports to the Board of Directors. Members of the Management Group consist of the directors of Teleste Corporation business sectors and the group management. e Management Group handles the issues that concern managing the company, such as issues related to strategy, budget, Interim Reports and corporation deals, and prepares investments for approval by the Board of Directors.
e Management Group meets once a month or at other times, as required.
Salary for all Members of the Management Group consists of a fi xed basic salary and a results-based bonus. e amount of results-based bonus is determined by the company performance, the business area in question and other key operative objectives. e Board is in charge of bonus systems applied to the Management Group. For a detailed description of the option specifi cs see Teleste Annual Report 2007 page 11. For holdings and stock options of the President and CEO and the Management Group see page 12.
e term of offi ce of the company auditor expires at the closing of the fi rst Annual General Meeting following the election. On 3 April 2007, the Teleste Annual General Meeting selected KPMG Oy Ab as the company auditor and decided that the auditor's fee will be paid as invoiced. e company's chief auditor is Sixten Nyman.
In addition to their statutory duties the auditors report to the Teleste Corporation Board of Directors and attend the Board meetings at least once a year.
In 2007, the Group's auditing expenses totalled EUR 90,000 in which the share of KPMG was EUR 49,000. Moreover, auditing units of KPMG have supplied the Group companies with other consultation worth total EUR 95,700 and other than KPMG auditors for EUR 200.
Teleste has an internal auditing unit, which is in charge of internal auditing for the parent company and its subsidiaries, reporting to the specifi ed Member of the Board. e internal auditing evaluates business operations, the related processes, their involved risks and effi ciency of the conducted supervision while making suggestions for developmental measures. ese activities are performed in co-operation with controllers and any other relevant bodies. Furthermore, the internal auditing carries out any special assignments issued by the Management. e internal auditing covers all organisational levels. e internal auditing reports to the Board of Directors twice a year.
Risk management is used to ensure that Teleste achieves its operational goals and that the essential risks impacting business activity are recognised and followed up appropriately. e risk management meth-
ods are specifi ed and the implementation of risk prevention is carried out through the same. Further, all such risks are insured that for economic or other reasons are reasonable to insure.
In risk management, the regular evaluation of more signifi cant risks and exercising control in a cost-eff ective manner are emphasised. e starting point for risk management is found in Teleste's business objectives. e risks threatening these objectives are identifi ed, and they are monitored and assessed on a continuous basis.
Teleste's risk management system covers, for instance, the following classes of risk:
Risk management supports the business activity and adds value to the decisionmaking of the management in charge of business. e risk management system is based on monthly reporting, by which the development of the orders received, turnover, order backlog, trade receivables and cash fl ow is monitored and, through the same, the profi t development of the entire Group.
As from 1 March 2000, the company has complied with the insider regulations approved by Nordic Exchanges' Board of Directors (revised on January 1, 2006).
To support these regulations the company has introduced a set of internal guidelines.
Membership in the Teleste permanent inner circle is based on position. us, the group consists of members of the Board of Directors, the CEO and the auditors. Furthermore, the extended inner register includes members of the Management Group and the CEO's assistant.
Moreover, insider rules and regulations include provisions concerning temporary commercial activities. Project-specifi c insider register includes personnel who, based on their position, have access to companyrelated information, which upon publication may aff ect the value formation of the company's share. e CEO will assess, on a case-by-case basis, whether an issue or arrangement under preparation will be defi ned as a project.
It is recommendable for those included in the insider register to time any intended trading involving company shares and derivatives in such a manner that optimum information aff ecting the value of the shares is available in the market at the time. e permanent members of Teleste's insider register are obliged by the so-called Silent Period during which trading on company shares is banned completely for 14 days preceding publication of Interim Reports and the Financial Statements. During the specifi ed period Teleste will not engage in any meetings with investors or analysts and Group representatives are not allowed to comment upon company results.
e company insider administration is included in the SIRE system of the Finnish Central Securities Depository.
M.Sc. (Eng.), born in 1942 Member of the Board since 2001 2001–2002
Chairman of the Board since 2003
Hackman Oyj Abp, CEO 1997–2002
Board 2001–2002
TeliaSonera AB (Publ.), Chairman of the Board 2002–2004
since 2004
Vice Chairman since 2005
M.Sc. (Math.), born in 1946 Member of the Board since 1999
Telia Finland Oy, CEO 1998–2001
Comptel Corporation CEO 2002–2004
Tieto-X Plc, Member of the Board Chairman of the Board since 2005
Dr. Sc. (Technology), born in 1956 Member of the Board since 2003 professor (fi xed term) 1997 VTT Information Technology, Research
Docent since 2002
M.Sc. (Eng.), born in 1950 Member of the Board 1995–1997 Chairman of the Board 1996–1997 Member of the Board since 2003
1994–1995
Sponsor Oy, Director 1994–1997
Teleste Corporation CEO 1996–2002
the Board since 2001
Student in technology, born in 1944 Chairman of the Board 2000–2001 Member of the Board since 2000
Suomen PT Oy, CEO 1994–1998
Sonera Corporation, CEO 1998–1999
and CEO since 1998
Saunalahti Group Oyj, Chairman of the Member of the Board 2003–2005, Chairman of Board since 2005
As to deliveries and profi tability Teleste's growth continued on a good level. Framework contractual deliveries to Europe and the reference delivery of the 100 Mb/s broadband solution (EttH) to South Korea were particularly signifi cant. A new sales offi ce was set up in Australia. e service business was developed in compliance with the strategy by way of acquisition in April of the Belgian DINH Telecom S.A. and establishment in June of the network engineering company in the UK. R&D eff orts mainly involved the IP-headend solution drawing on the Internet Protocol technology. e new IP-headend product was well received including the developing Indian market.
Teleste net sales totalled EUR 125.1 (101.8) million, an increase of 22.9% over the previous year. Net sales in Q4 amounted to EUR 31.1 (28.4) million.
Operating profi t stood at EUR 13.2 (9.8) million making 10.5% (9.6%) of net sales. Operating profi t for Q4 stood at EUR 3.0 (2.2) million making 9.8% (7.6%) of net sales.
Teleste's orders received improved by 10.5% standing at EUR 118.5 (107.2) million. Orders received in Q4 stood at EUR 29.7 (33.9) million. Teleste's order backlog reduced by 23.5% amounting to EUR 21.5 (28.1) million at the year-end. is decline in order backlog was caused by stabilisation in growth of orders involving Broadband Cable Networks amplifi ers and the reduction in the order backlog for EttH. e order backlog was additionally aff ected by shortened delivery times achieved through the investments made in fl exibility of the production capacity, on the one hand, and the increased service business, on the other.
Profi t after fi nancial items totalled EUR 12.7 (9.3) million while the net profi t equalled EUR 9.4 (6.9) million. e Group's undiluted result per share stood at EUR 0.55 (EUR 0.41). Tax rate for the period was 26.1% (25.9%). Return on capital employed amounted to 27.1% (24.3%) while return on equity was 22.2% (19.7%).
R&D expenditure for the period under review totalled EUR 13.1 (9.8) million making 10.5% (9.7%) of net sales. e single most important R&D initiative involved the IP-headend solution based on the Internet Protocol technology. R&D eff orts included development of the platforms Ethernet-to-the-Home (EttH), Fiber to the X (FttX), GigaHerz amplifi er technology Access, video surveillance transfer system MP-X and video surveillance management system MoRIS. Some 40% of the R&D expenses involved maintenance of solution platforms currently in production. Activated product development expenses stood at EUR 2.7 (1.4) million. is capitalisation involved the broadband technology platforms of IP-headend, EttH, MP-X and GigaHerz. Depreciation on R&D expenses for the period under review activated earlier amounted to EUR 1.4 (0.9) million. e R&D expenditure in Q4 amounted to EUR 3.5 (3.9) million. A number of Teleste's projects involved co-operation with Finnish universities and research institutes. Almost 23% (22%/2006, 20%/2005, 20%/2004) of the Group personnel was involved in R&D.
Investments for the period under review totalled EUR 12.3 (6.2) million making 9.8% (6.1%) of net sales; acquisition of DINH Telecom S.A. involved EUR 6.1 million. Other investments included essentially a new SMT line, R&D and IT. As to investments for the period, EUR 1.8 (0.5) million was carried out by fi nancial leasing.
Liquidity of the Group remained good. Operating cash fl ow improved standing at EUR 12.0 (2.7) million. Teleste is prepared for strategic investments and increased need for working capital driven by growth by means of stand-by credits. e amount of unused stand-by credits at the end of the period amounted to EUR 23.0 (23.0) million. e relevant credit limits are valid until November 2008 and negotiations over new fi nancing arrangements are on-going. e Group's equity ratio was 60.2% (55.3%) with gearing standing at 3.8% (3.2%). Interest bearing debt on 31 December 2007 was EUR 9.5 (8.0) million.
In 2007 the Group employed an average of 681 people (608/2006, 546/2005). At the year-end, the fi gure totalled 672 (621/2006, 557/2005) of which approximately 34% (30%/2006, 27%/2005) were stationed overseas. e stated number of personnel does not include temporary labour averaging 64 (50) persons in the fi nancial period. e number of temporary labour at the year-end was 36 (59). Employees stationed outside Europe accounted for less than 10% of the Group's personnel. Expenditure on employee benefi ts amounted to EUR 31.5 (27.1/2006, 24.1/2005) million.
Founded in 1954, Teleste is a technology company currently running the business units of Broadband Cable Networks and Video Networks. In line with its strategy Teleste continues to focus on the chosen product and technology segments as well service business and technical integration. Integrated deliveries of solutions pave the way for brisk growth even if the involved resource allocation and technical implementation also pose a challenge involving reasonable risks. In addition, appropriately chosen technology and its correct timing
are instrumental for the success of the businesses not forgetting market dynamics such as the importance of consolidation of clients and competition. Much of Teleste's competition comes from America and, therefore, strong euro up against the US dollar erodes our
price competitiveness. e company has covered risks involving any damage in operative functions of the businesses mainly through insurance policies, with no credit loss risks included. For Teleste no such risks materialised in 2007 and no such legal proceedings or juridical procedures were pending that would have had any essential signifi cance for the Group operation.
Broadband Cable Networks delivers its main clientele of cable operators with equipment and systems designed for the construction of transmission network and signal processing. Deliveries include individual pieces of equipment and turnkey networks alike. e business also makes available a number of services related to maintenance and engineering of network infrastructure. e main market area of Broadband Cable Networks is Europe, which business area involves 19 own sales offi ces supported by a number of retail and integration partners. Outside Europe, Broadband Cable Networks has own offi ces located in China and India.
As to the framework contractual deliveries to the biggest European cable operators Broadband Cable Networks succeeded as planned. Deliveries involving EttH technology for the South Korean Hanaro Telecom materialized for the main part in Q1. Concerning our European clientele and competition, mergers and changes in ownership relations continued. ese developments may aff ect Teleste's position in view of the operators'
choices of suppliers for products and services. e unit continued to invest in R&D, shortening of turnaround times in deliveries, strengthening of its partner network and expansion of its service business. In April the unit acquired the Belgian DINH Telecom S.A. and in the following June the service business was expanded by setting up in UK a network engineering company with approximately 40 employees. Marketing eff orts involving the IP-headend product solution were initiated in Q4 continuing over to Q1 of 2008. Orders received by Broadband Cable Networks increased by 9.3% (27.4%) amounting to EUR 101.4 (92.8) million. Net sales grew by 26.5% (27.3%) standing at EUR 108.2 (85.6) million. Operating profi t went up by 41.7% (22.9%) standing at EUR 12.8 (9.1) million. At the year-end order backlog stood at EUR 19.7 (26.7) million. Orders received in Q4 of the period stood at EUR 25.2 (29.7) million. Reduction in the order backlog was attributed to stabilisation of growth in demand for amplifi ers, reduction in the order backlog for the EttH, the short order backlog typical for service business and shortening of turnaround times in deliveries.
Net sales for Q4 amounted to EUR 25.5 (23.8) million while operating profi t stood at EUR 2.3 (1.8) million. As a whole we estimate the market situation for the business unit to remain favourable also in 2008. However, the market situation varies by market area depending on the need faced by the operators to invest in their networks.
Clientele of Video Networks mainly includes public sector organisations and system integrators. e business area has focussed on high-quality video surveillance systems transferring real-time video, audio and data. In July Video Networks made a two-year framework agreement with a signifi cant French telecommunications company on deliveries involving video surveillance equipment and network solutions to the French market. Additional deliveries for the French National Railway Authority (SNCF) involving video surveillance management systems played a key part. e implemented R&D eff orts involved development of the IP-based video surveillance system MP-X and technical integration.
e business has seven sales offi ces in Europe and offi ces outside Europe are located in the United States, Australia, China and ailand.
Orders received by Video Networks increased by 18.9% (15.5%) amounting to EUR 17.1 (14.4) million. Net sales grew by 4.3% (5.3%) standing at EUR 16.9 (16.2) million. Operating profi t stood at EUR 0.3 (0.7) million. Reduced profi tability was due to smaller net sales from mid-market systems and R&D eff orts such as strengthening of the technical integration organisation. At the year-end order backlog stood at EUR 1.8 (1.5) million. In Q4 orders received amounted to EUR 4.5 (4.2) million with net sales equalling EUR 5.5 (4.6) million. Operating profi t stood at EUR 0.7 (0.3) million.
In 2008 price competition will continue to intensify especially in the area of network solutions. Large companies have entered the market by force. Signifi cance of technical integration in operations of the business area will increase. e technology involved in these applications is renewed rapidly.
Based on the developments in order backlog we estimate our business area to develop favourably in 2008.
In geographical terms, the Group's business areas are divided up into Scandinavia, rest of Europe and others. Scandinavia: Net sales in the Nordic countries amounted to EUR 35.5 (32.2) million. Investments for the area totalled EUR 6.1 (5.8) million.
Rest of Europe: Net sales for the rest of Europe stood at EUR 78.3 (62.1) million while the investments made in the area amounted to EUR 6.1 (0.1) million. Others: Net sales were up to EUR 11.3 (7.4) million. Investments totalled EUR 0.1 (0.3) million.
In the period under review Teleste acquired the entire share capital of the Belgian DINH Telecom S.A. and founded a network engineering company in UK to promote growth of its service business. e parent company of Teleste Group operates through branch offi ces in Australia, Belgium, China, Denmark, France, India, the Netherlands, Poland, Spain and ailand while running subsidiaries in 11 countries exclusive of Finland.
e Annual General Meeting (AGM) held on 3 April 2007 confi rmed the fi nancial statements for 2006 and discharged the Board and the CEO from liability for the fi nancial period. e AGM confi rmed the dividend of EUR 0.20 per share as proposed by the Board of Directors. e dividend was paid out on 17 April 2007.
Composition of Teleste's Board remained unchanged: Mr. Tapio Hintikka was re-elected as Chairman whilst Mr. Tero Laaksonen, Mr. Pertti Raatikainen, Mr. Timo Toivila and Mr. Pekka Vennamo continued as members on the Board of Directors.
Authorised Public Accountants KPMG Oy Ab continue as the auditor until the next AGM.
e AGM authorised the Board to acquire the maximum of 1,290,000 of the company's own shares and to convey the maximum of 1,730,000 company's own shares. Based on authorisations of 2001 and 2002 the company is in possession of 352,482 of its own shares.
e AGM also authorised the company to issue 4,500,000 new shares. e maximum number of signifi cant shares accommodated by the special rights granted by the company equals 1,730,000. ese authorisations will be valid until the AGM due to be held in 2008. Nominal value of the company share was renounced. e AGM accepted a share option plan involving key personnel. According to this, 840,000 new shares may be subscribed; the plan's possible dilution eff ect might be 4.6%.
In the fi nancial period authorisations granted by the AGM were used by conveying 0.53% of the number of shares, i.e. 92,338 own shares, on acquiring the capital stock of DINH Telecom S.A. 10,180 shares, in other words 0.06% of the number of shares, were conveyed for payment of the share bonus of the Management Group. Other authorisations were not used.
CEO of the company has been Mr. Jukka Rinnevaara. e AGM elected KPMG Oy Ab as the auditor.
Largest single shareholder at the end of 2007 was the Sampo Life Insurance Company Ltd with the holding of 9.19%.
As to the company share price in 2007 the low was EUR 6.47 (6.46) and the high EUR 12.34 (12.75). Closing price at the end of the year stood at EUR 6.71 (11.63). In 2007 7.2 (14.2) million shares standing for 40.5% (81.4%) of the share capital were traded on the OMX Nordic Exchange Helsinki.
e 2004A options distributed to the Teleste key personnel were listed on the main list of OMX Nordic Exchange Helsinki on 24 August 2007. In the period 221,965 own shares were subscribed using 2002A options and 60,038 using 2002B options.
At the balance sheet date the company's registered share capital amounted to EUR 6,966,932.80, divided up into 17,671,305 shares; out of these the company was holding 352,482 shares. At the balance sheet date, when put against the total amount of shares and votes the shares in company possession equalled 1.99%.
Other matters aff ecting the company governance will be stated in the Annual Report under section Good Governance.
Regardless of the general uncertainty in the world market we estimate the favourable market situation to continue in our business areas. New services provided by the cable operators and the increased competition for customers call for investments in greater capacity of transfer networks. e demand for solutions involving next generation high-speed data communication solutions like EttH and FttX will increase together with those concerning smart fi bre-optical and coaxial networks (HFC). Digitalisation of IPTV and TV services will lead to growth in sales of the new IP-headend solution. e market situation of Broadband Cable Networks varies by market area depending on the needs for investment related to the networks' technical status. e cost-eff ective range of products and services of the business area create preconditions for continued profi table growth also in 2008. Increased needs for security and more eff ective traffi c infrastructure raise demand for the Video Networks' solutions. We estimate demand for our top-quality network management applications and tailored-to-industry solutions to pick up in 2008 as well as improvement in profi tability for the business area.
In 2008 Teleste will grow profi tably even if the fi gures of the previous year may not be reached in the fi rst quarter.
In 2008 we continue to focus on speeding up R&D and turnaround times in deliveries, opening up new saleschannels and growth in the integration and service business.
As to the Annual General Meeting scheduled for 1 April 2008, the Board proposes that a dividend of EUR 0.24 (EUR 0.20) per share will be paid for the outstanding shares for the year 2007.
29 January 2008
TELESTE CORPORATION Jukka Rinnevaara Board of Directors President and CEO
| 1 000 euros | Note | 1.1.–31.12.2007 | 1.1.–31.12.2006 | Change, % |
|---|---|---|---|---|
| Net sales | 1 | 125 100 | 101 773 | 22.9 |
| Other operating income | 2 | 1 772 | 2 158 | –17.9 |
| Changes in inventories of fi nished goods and work in progress | –673 | 6 066 | n/a | |
| Raw material and consumables used | –59 692 | –54 743 | 9.0 | |
| Employee benefi ts expense | 3 | –31 455 | –27 100 | 16.1 |
| Depreciation and amortisation expense | 4 | –3 552 | –2 393 | 48.4 |
| Other operating expenses | 5 | –18 324 | –16 006 | 14.5 |
| Operating profi t | 13 176 | 9 755 | 35.1 | |
| Financial income | 6 | 627 | 194 | 223.8 |
| Financial expenses | 7 | –1 131 | –661 | 71.1 |
| Profi t before tax | 12 672 | 9 288 | 36.4 | |
| Income tax expense | 8 | –3 309 | –2 408 | 37.4 |
| Profi t for the period | 9 363 | 6 879 | 36.1 | |
| Attributable to: | 9 | |||
| Equity holders of the parent | 9 363 | 6 879 | 36.1 | |
| Earnings per share for profi t of the year attributable to the equity holders of the parent (expressed in euros per share): |
||||
| Basic | 0.55 | 0.41 | 34.3 | |
| Diluted | 0.52 | 0.38 | 36.4 |
36
| Balance Sheet | ||||
|---|---|---|---|---|
| 1 000 euros | Note | 31.12.2007 | 31.12.2006 | Change, % |
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 10 | 7 757 | 5 578 | 39.1 |
| Goodwill | 11 | 12 686 | 12 127 | 4.6 |
| Other intangible assets | 11 | 6 629 | 3 614 | 83.4 |
| Available-for-sale investments | 12 | 723 | 1 116 | –35.2 |
| 27 795 | 22 435 | 23.9 | ||
| Current assets | ||||
| Inventories | 14 | 15 936 | 16 604 | –4.0 |
| Trade and other receivables Cash and cash equivalents |
15 16 |
26 455 7 702 |
22 409 6 789 |
18.1 13.5 |
| 50 093 | 45 801 | 9.4 | ||
| Total assets | 77 888 | 68 236 | 14.1 | |
| Equity and liabilities | ||||
| Equity attributable to equity holders of the parent | ||||
| Share capital Share premium |
17 17 |
6 967 1 504 |
6 955 1 417 |
0.2 6.1 |
| Translation diff erences | 17 | –53 | 65 | n/a |
| Invested nonrestricted equity | 17 | 2 531 | 0 | n/a |
| Retained earnings | 17 | 35 720 | 29 224 | 22.2 |
| 46 669 | 37 661 | 23.9 | ||
| Non-current liabilities | ||||
| Interest-bearing liabilities | 18 | 1 700 | 742 | 129.1 |
| Deferred tax liabilities | 13 | 1 197 | 368 | 225.3 |
| Provisions | 19 | 425 | 425 | 0.0 |
| 3 322 | 1 535 | 116.4 | ||
| Current liabilities | ||||
| Trade and other payables | 20 | 19 016 | 20 045 | –5.1 |
| Current tax payable | 21 | 580 | 875 | –33.7 |
| Provisions | 19 | 518 | 850 | –39.1 |
| Interest-bearing liabilities | 18 | 7 783 | 7 270 | 7.1 |
| 27 897 | 29 040 | –3.9 | ||
| Total liabilities | 31 219 | 30 575 | 2.1 | |
| Total equity and liabilities | 77 888 | 68 236 | 14.1 |
| 1 000 euros | Note | 1.1.–31.12.2007 | 1.1.–31.12.2006 | Change, % |
|---|---|---|---|---|
| Cash fl ows from operating activities | ||||
| Profi t for the period | 9 363 | 6 879 | 36.1 | |
| Adjustments for: | ||||
| Non-cash transactions | 23 | 4 202 | 3 407 | 23.3 |
| Interest and other fi nancial expenses | 1 131 | 661 | 71.1 | |
| Interest income | –617 | –188 | 228.2 | |
| Dividend income | –10 | –6 | 66.7 | |
| Income tax expense | 3 309 | 2 100 | 57.6 | |
| Changes in working capital and provisions: | ||||
| Increase in trade and other receivables | –1 209 | –3 938 | –69.3 | |
| Increase in inventories | 1 216 | –6 651 | n/a | |
| Increase in trade and other payables | –1 414 | 3 392 | n/a | |
| Decrease in provisions | –332 | –742 | –55.3 | |
| Paid interests and dividends | –647 | –521 | 24.2 | |
| Received interests and dividends | 208 | 194 | 7.2 | |
| Paid taxes | –3 211 | –1 912 | 68.0 | |
| Net cash from operating activities | 11 988 | 2 675 | 348.2 | |
| Cash fl ows from investing activities | ||||
| Acquisition of subsidiary, net of cash acquired | –5 301 | –3 078 | 72.2 | |
| Purchases of property, plant and equipment (PPE) | –1 257 | –699 | 79.8 | |
| Purchases of intangible assets | –2 724 | –1 734 | 57.1 | |
| Proceeds from sales of PPE | 814 | 0 | n/a | |
| Proceeds from sale of other investments | 0 | 376 | n/a | |
| Net cash used in investing activities | –8 468 | –5 136 | 64.9 | |
| Cash fl ows from fi nancing activities | ||||
| Proceeds from borrowings | 11 000 | 4 000 | 175.0 | |
| Repayments of borrowings | –11 113 | –460 | 2 315.9 | |
| Payment of fi nance lease liabilities | –594 | –273 | 117.6 | |
| Dividends paid | –3 413 | –2 697 | 26.5 | |
| Proceeds from issuance of ordinary shares | 1 630 | 161 | 912.4 | |
| Net cash used in fi nancing activities | –2 490 | 731 | n/a | |
| Cash and cash equivalents | ||||
| Cash and cash equivalents 1.1. | 6 789 | 8 524 | –20.3 | |
| Eff ect of currency changes | –118 | –5 | 2 260.0 | |
| Cash and cash equivalents 31.12. | 7 702 | 6 789 | 13.4 |
| Attributable to equity holders of the parent Total equity | Total equity |
|||||
|---|---|---|---|---|---|---|
| 1 000 euros | Share capital |
Share premium |
Translation diff erences |
Retained earnings |
Invested non- restricted equity |
|
| 1.1.2006 | 6 935 | 1 276 | 70 | 24 025 | 32 306 | |
| Exchange diff erences | –5 | –5 | ||||
| Profi t for the year | 6 879 | 6 879 | ||||
| Total recognised income and expense for the year | 0 | 0 | –5 | 6 879 | 6 874 | |
| Dividends | –2 697 | –2 697 | ||||
| Equity-settled share-based payments | 1 017 | 1 017 | ||||
| Used share options | 20 | 141 | 161 | |||
| 20 | 141 | 0 | –1 680 | –1 519 | ||
| 31.12.2006 | 6 955 | 1 417 | 65 | 29 224 | 37 661 | |
| Profi t for the year | 9 363 | 9 363 | ||||
| Total recognised income and expense for the year | 0 | 0 | 0 | 9 363 | 9 363 | |
| Dividends | –3 413 | –3 413 | ||||
| Equity-settled share-based payments | 546 | 1 000 | 1 546 | |||
| Used share options | 12 | 87 | 1 531 | 1 630 | ||
| Exchange diff erences | –118 | –118 | ||||
| 12 | 87 | –118 | –2 867 | 2 531 | –355 | |
| 31.12.2007 | 6 967 | 1 504 | –53 | 35 720 | 2 531 | 46 669 |
Teleste Corporation is a Finnish public limited liability company organised under the laws of Finland and domiciled in Turku in Finland. Its registered address is Seponkatu 1, 20660 Littoinen.
Founded in 1954 Teleste is a technology company running its two business units Broadband Cable Networks and Video Networks. Our Broadband Cable Networks business aims at promoting the business of cable operators making up our clientele. is is achieved by making available network solutions. Our Video Networks business manufactures and delivers high-quality video surveillance network solutions for the transmission of video, data and audio with offi cial authorities and integrators as the primary clientele. e parent company of Teleste Group, Teleste Corporation, has operations in Belgium, China, Denmark, France, India, the Netherlands, Poland and Spain, and a subsidiary in ten countries outside Finland. Teleste Corporation has been listed on the Helsinki Stock Exchange since 1999.
A copy of the consolidated fi nancial statements can be obtained either from Teleste's website (www.teleste. com) or from the parent company's head offi ce, the address of which is mentioned above.
ese fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) in force as at 31 December 2007. International fi nancial reporting standards, referred to in the Finnish Accounting Act and in ordinances issued based on the provisions of this Act, refer to the standards and their interpretations adopted in accordance with the procedure laid down in regulation (EC) No 1606/2002 of the EU. e notes to the consolidated fi nancial statements also include additional information in accordance with the Finnish accounting and company legislation.
Teleste adopted IFRS as from 1 January 2005. Prior to IFRS Teleste's fi nancial statements were based on Finnish accounting standards (FAS) applicable to listed companies in Finland. IFRS 1 First-time adoption of IFRS was applied in the transition. Teleste's date of transition to IFRS was 1 January 2004.
e consolidated fi nancial statements are presented in thousands of euro (TEUR) and have been prepared under the historical cost convention, unless otherwise stated in the accounting principles.
e preparation of fi nancial statements in conformity with IFRS requires management to make estimates and assumptions that aff ect the contents of the fi nancial statements as well as use judgement when applying accounting principles. e estimates and assumptions are based on the management's current best knowledge refl ecting historical experience and other reasonable assumptions. Actual results may diff er from these estimates. Accounting estimates mainly relate to goodwill, obsolete inventories and warranty provisions. e chapter "Accounting policies requiring management's judgement and key sources of estimation uncertainty" discusses judgements made by management and those fi nancial statement items on which judgements have a signifi cant eff ect.
e consolidated fi nancial statements include the accounts of the parent company Teleste Corporation and all those subsidiaries in which it holds, directly or indirectly, over 50 per cent of the voting rights or in which it otherwise has control (together referred to as "Group" or "Teleste"). Control exists when the Group has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. e companies acquired during the fi nancial periods presented have been consolidated from the date of acquisition, when control commenced. e companies disposed during a fi nancial period are included in the consolidated fi nancial statements up to the date of disposal.
Associates included in the consolidated fi nancial statements are those entities in which Teleste Group holds voting rights over 20 per cent or in which it otherwise has signifi cant infl uence, but not control, over the fi nancial and operating policies. Holdings in associates are accounted for using the equity method from the date that signifi cant infl uence commences until the date that signifi cant infl uence ceases. e Group's proportionate share of associates' net income for the fi nancial year is presented as a separate line item in the consolidated income statement. e unrealised profi ts between the Group and associates are eliminated in proportion to share ownership. e carrying amount of an investment in an associate includes the carrying amount of goodwill resulted from its acquisition. When Teleste's share in an associate's losses exceeds its interest in the associate, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate or made payments on behalf of the associate. As at 31 December 2006 the Group had no investments in associates.
Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. e consolidated fi nancial statements include the Group's proportionate share of the joint ventures' assets, liabilities, revenue and expenses on a line by line basis, from the date that joint control commences until the date that joint control ceases. As at 31 December 2006 the Group had no interests in joint ventures.
Acquisitions of companies are accounted for by using the purchase method. All intercompany income and expenses, receivables, liabilities and unrealised profi ts arising from intercompany transactions, as well as distribution of profi ts within the Group are eliminated as part of the consolidation process. e allocation of the profi t for the period attributable to equity holders of the parent company and minority interest is presented on the face of the income statement and minority interest is also disclosed as a separate item within equity. Minority interest in the loss is recorded in the consolidated fi nancial statements at the investment value at most.
Teleste has applied the exemption under IFRS 1 according to which the classifi cation and accounting treatment of business combinations occurred prior to the IFRS transition date do not have to be restated but previous values under FAS are taken as a deemed cost.
e functional currency of the parent company is euro and the consolidated fi nancial statements are presented in euro. e functional currency is the currency that best refl ects the economic substance of the underlying events and circumstances relevant to that entity. In preparing the consolidated fi nancial statements income statements and cash fl ows of those foreign subsidiaries whose functional and presentation currency are not the euro, are translated into euro at the average exchange rate during the fi nancial period. eir balance sheets are translated at the closing rate at the balance sheet date. Goodwill and fair value adjustments to assets and liabilities that arose on the acquisition of a foreign entity occurred prior to 1 January 2004 are translated into euro using the rate that prevailed on the date of the acquisition. Goodwill and fair value adjustments arisen on the acquisitions after 1 January 2004 are treated as part of the assets and liabilities of the acquired entity and are translated at the closing rate.
All translation diff erences arising from consolidation of foreign shareholdings are recognised as a separate item to equity. In accordance with the exemption included in IFRS 1 those cumulative translation diff erences arisen until the transition date have been reclassifi ed to retained earnings and consequently they will not be later released in the income statement. From the transition date onwards translation diff erences arising on the consolidation are presented as a separate component of equity. If an interest in a foreign entity is disposed of all, or part of, that entity, related cumulative translation differences deferred in equity are recognised in the income statement as part of the gain or loss on sale.
Transactions in foreign currencies are translated at the rates of exchange prevailing on the dates of the transactions. At the end of the accounting period, foreign currency monetary balances are translated at the closing rate at the balance sheet date. Non-monetary items stated at fair value in a foreign currency are translated at foreign exchange rates ruling at the dates the fair value was determined. Other non-monetary items are translated using the exchange rate at the date of the transaction. Gains and losses resulting from transactions in foreign currencies and translation of monetary items are recognised in the income statement. Foreign exchange gains and losses on trade receivables and payables are adjusted to revenues and operating expenses, respectively. Other foreign exchange gains and losses are presented as fi nancial income and expenses.
Items of property, plant and equipment are stated at historical cost less cumulative depreciation and any impairment losses. Where parts of an item of property, plant and equipment have diff erent useful lives, they are accounted for as separate items of property, plant and equipment. Interest expenses are not capitalised as part of the cost of non-current assets. Ordinary maintenance, repairs and renewals are expensed during the fi nancial period in which they are incurred. In Teleste there are no such signifi cant inspection or maintenance costs that should be capitalised. e Group recognises in the carrying amount of an item of property, plant and equipment the subsequent costs when that cost is incurred if it is probable that future economic benefi ts in excess of the originally assessed standard of performance of the existing asset will fl ow to the Group and the cost of the item can be measured reliably. Such renewals and repairs are depreciated on a systematic basis over the remaining useful life of the related asset. Gains and losses on sales and disposals are calculated as a diff erence between the received proceeds and the carrying amount and are included in other operating income and expenses, respectively.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Expected useful lives and residual values of non-current assets are reassessed at each balance sheet date and where they diff er from previous estimates, depreciation periods are changed accordingly. e estimated useful lives are as follows:
Land is not depreciated.
Leases of property, plant and equipment where substantially all the risks and rewards incidental to ownership have been transferred to the Group are classifi ed as fi nance leases. ese assets are capitalised and are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease less cumulative depreciation and any impairment losses. e associated lease liabilities are included in interest-bearing liabilities in accordance with their maturity.
ese assets acquired under fi nance leases are depreciated as comparable owned assets over the shorter of the useful lives disclosed above for property, plant and equipment or lease period and are adjusted for impairment charges, if any. Lease payments are apportioned between the reduction of the outstanding lease liability and fi nance charge. In respect of fi nance leases, the depreciation on the leased assets and the fi nancial charge
on the lease liability are shown in the income statement. e fi nancial charge is allocated to the income statement so as to achieve a constant interest rate on the outstanding liability during the lease term.
An operating lease is a lease of property, plant and equipment where the lessor retains signifi cant risks and rewards incidental to ownership. Payments made thereunder are charged to the income statement as rental expense on a straight-line basis over the lease term.
ose leases under which Teleste is a lessor are classifi ed as operating leases. Leased assets are presented in the lessor's balance sheet under property, plant and equipment according to the nature of the asset. ey are depreciated over their estimated useful lives in accordance with the depreciation policy used for comparable assets in own use. Lease income is recognised in the income statement on a straight-line basis over the lease term.
An intangible asset is recognised only when it is probable that future economic benefi ts that are attributable to the asset will fl ow to the Group and if the cost of the asset can be measured reliably. All other expenditure is expensed as incurred.
After 1 January 2004 goodwill represents the Group's share of diff erence between the cost of the acquisition and the fair value measured at the acquisition date of the net identifi able assets, liabilities and contingent liabilities acquired. e diff erence is fi rst allocated, where applicable, to the underlying assets. e rest of the excess is presented as goodwill as a separate item in the consolidated balance sheet. Goodwill has been allocated to segments and in respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. Goodwill is stated at cost less any cumulative impairment losses. Goodwill (together with other intangible assets with indefi nite lives) is not amortised but is tested annually for impairment. Consequently goodwill was amortised on a straight-line basis over the expected useful life until 31 December 2003, after which the amortisation was discontinued.
Research and development costs are expensed as they are incurred, except for certain development costs, which are capitalised when certain criteria are met. Signifi cant future product platforms for which the potential demand and future cash fl ows can be estimated with suffi cient degree of accuracy have been capitalised as intangible assets. Amortisation of such capitalised development projects is commenced after the completion of the subprojects related to the product platform concerned. ey are amortised on a systematic basis over their expected useful life, which is three years.
Other intangible assets of the Group mainly consist of connection fees and these are not amortised.
ose intangible assets which have estimated useful lives are depreciated on a straight-line basis over their known or estimated useful lives.
A non-current asset (or disposal group) is classifi ed as held for sale when its carrying amount will be recovered principally through a sale transaction rather than through continuing use. It is measured at the lower of carrying amount and fair value less costs to sell. Such assets and associated liabilities are presented separately in the balance sheet. Assets held for sale are not depreciated (or amortised) after the classifi cation as held for sale.
A discontinued operation is a component of the Group's business that represents a separate major line of business or a geographical area of operations or is a subsidiary acquired exclusively with a view to resale. e result of discontinued operations is presented separately on the face of the consolidated income statement.
e carrying amounts of assets are assessed for potential impairment at each balance sheet date and whenever there is any indication that an asset may be impaired. For the purposes of assessing impairment, assets are grouped at the cash generating unit level, which is the lowest level for which there are separately identifi able, mainly independent, cash infl ows and outfl ows. Goodwill, unfi nished intangible assets and intangible assets with indefi nite useful lives, if any, are in all cases tested annually. All goodwill items of the Group have been allocated to segments. If there is an indication of an impairment, the Group estimates the recoverable amount of the asset or cash generating unit. When the recoverable amount of the asset or cash generating unit is lower than the carrying amount, the diff erence is immediately recognised as an impairment loss in the income statement. If the impairment loss is to be allocated for a cash-generating unit, it is allocated fi rst by writing down any goodwill and then on pro rata basis to other assets of the unit.
e recoverable amount is the higher of an asset's or cash generating unit's fair value less costs to sell or value in use. Teleste has applied value in use in its calculations in which case the estimated future net cash fl ows expected to be derived from the asset or cash generating unit are discounted to their present value. Expenditures to improve assets' performance, investments or future restructurings are excluded from the cash fl ow estimates.
An impairment loss relating to property, plant and equipment and other intangible assets excluding goodwill is reversed if there is an indication that the impairment loss may no longer exist and there has been a positive change in the estimates used to determine the recoverable amount of an asset or cash generating unit. An impairment loss is only reversed to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. However, an impairment loss in respect of goodwill is never reversed.
Inventories are stated at the lower of cost or net realisable value. Cost is assigned by using the fi rst-in, fi rstout (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. e cost of inventories comprises all direct costs incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
In Teleste hedge accounting as defi ned under IAS 39 is not applied. IAS 1 has been applied since 1 January 2007.
Since 1 January 2004 fi nancial assets are classifi ed into categories as follows: fi nancial assets at fair value through profi t or loss, held-to-maturity assets, loans or receivables (assets) and available-for-sale assets. Financial assets are classifi ed when initially acquired based on their purpose of use. In the case of a fi nancial asset not measured at fair value through profi t or loss, transaction costs are included in the acquisition cost. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. All purchases or sales of fi nancial assets are recognised or derecognised using trade date accounting.
A fi nancial asset is derecognised when the Group has lost its contractual rights to the cash fl ows from the fi nancial asset or when it has transferred substantially all the signifi cant risks and rewards of ownership of the fi nancial asset to an external party.
Financial assets at fair value through profi t or loss are either classifi ed as held for trading, or they are designated by the Group as at fair value through profi t or loss upon initial recognition. A fi nancial asset is classifi ed as held for trading if it is acquired or incurred principally for the purpose of short-term profi ttaking from changes in market prices or it is a derivative that does not qualify for hedge accounting. Currently Teleste does not apply hedge accounting as defi ned under IAS 39. Financial assets and liabilities at fair value through profi t or loss are recognised on the balance sheet using trade date accounting. ey are measured at their fair values, which is the bid price at the balance sheet date based on published price quotations in an active market. Both fi nancial assets held for trading and other fi nancial assets maturing in 12 months after the balance sheet date are included in the current assets. A gain or loss arising from a change in the fair value, realised or unrealised, is recognised in the income statement as incurred.
Derivatives, including embedded derivatives, are included in the fi nancial assets at fair value through profi t or loss. ey are recognised on the balance sheet at cost, equivalent to the fair value, and are subsequently fair valued at each balance sheet date. e Group uses forward exchange agreements and the Group's hedging policy is to cover all material currency risks at least six months ahead. Since Teleste does not currently apply hedge accounting as defi ned under IAS 39, changes in fair value of instruments designated as hedging instruments are recognised in profi t or loss. Gains and losses arising from changes in fair value are included in operating profi t unless the hedged item relates to fi nancing when fair value changes are recognised in fi nancial income or expenses. Fair values are determined utilising public price quotations and rates as well as generally used valuation models. e data and assumptions used in the valuation model are based on verifi able market prices. Derivatives that mature within 12 months after the balance sheet date are included in current assets or liabilities. Derivatives are not used for speculative purposes.
is category comprises those non-derivative fi nancial assets that are designated as available for sale or are not classifi ed into other categories. In Teleste available-forsale investments consist of holdings in listed and unlisted companies and they are normally measured at their fair value. Investments in listed companies are measured at the bid price at the balance sheet date based on published price quotations in an active market. Such unlisted shares whose fair value cannot be reliably determined, are measured at cost. Unrealised changes in value of available-for-sale investments, net of tax, are recognised in equity in fair value reserve. Cumulative fair value changes are released to the income statement when the investment is sold or disposed of. Such signifi cant impairment losses for which there is objective evidence, are recognised in the income statement immediately. Normally available-for-sale investments are included in non-current assets unless the Group has the intention to hold them for less than 12 months after the balance sheet date.
Financial assets that belong to this category meet the following criteria: they are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. e Group does not hold them for trading purposes either. Loans and receivables arise when money, goods or services are delivered to a debtor. ey are included in current or non-current assets in accordance with their maturity. Loans granted by the Group are measured at cost. An impairment loss is recognised on loan receivables if their carrying amount exceeds their recoverable amount.
Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturity that the Group has the positive intent and ability to hold to maturity. ey are stated at amortised cost less impairment losses and presented within non-current assets. As at 31 December 2007 the Group had no assets classifi ed as held-to-maturity investments.
Since 1 January 2004 fi nancial liabilities are classifi ed either as fi nancial liabilities at fair value through profi t or loss or as other liabilities. Teleste only has liabilities classifi ed to the latter category. On initial recognition a loan is measured at its fair value that is based on the consideration received. Subsequent to initial recognition, these liabilities are stated at amortised cost calculated using the eff ective interest method. Interest expenses are recognised in the income statement over the term of the loan using the eff ective interest method.
Trade receivables are recognised at the original invoice amount to customers and stated at their cost less impairment losses, if any. e amount of doubtful receivables and assessment of a potential impairment is based on risk of individual receivables. Trade receivables are measured at their probable value at the highest. An impairment loss is recorded when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Bad debts recognised in the income statement are included in other operating expenses.
Cash and cash equivalents comprises cash balances, call deposits and other short-term highly liquid investments with original maturities of three months or less from the date of acquisition. Bank overdrafts, if any, are included within current liabilities.
Teleste Corporation's own shares acquired by the Group, including directly attributable costs, are presented as a deduction from total equity in the consolidated fi nancial statements. Purchases or subsequent sales of treasury shares are presented as changes in equity.
e dividend proposed by the Board of Directors is not recognised until approved by a general meeting of shareholders.
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, a reliable estimate can be made of the amount of the obligation and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. e amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the eff ect of the time value of money on the amount of a provision is material, a provision is discounted. Provisions can arise from warranties, onerous contracts and restructurings. A warranty provision is recognised when the underlying products are sold. e provision is based on historical warranty data and an estimate. A provision for non-cancellable purchase commitments of the Group is recognised, if these commitments result in inventory in excess of forecasted requirements. A provision for onerous contracts is recognised when the expected benefi ts to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. A reimbursement from a third party related to a provision is recognised as a receivable only when the reimbursement is virtually certain.
A provision for restructuring is recognised when the Group has a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly to those it concerns. e plan identifi es at least the following: the business concerned, the principal locations aff ected, the location, function, and approximate number of employees who will be compensated for terminating their services, the expenditures that will be undertaken and when the plan will be implemented. Future operating costs are not provided for.
Revenue from the sale of goods is recognised in the income statement when all signifi cant risks and rewards of ownership have been transferred to the buyer, which normally takes place when a commodity is delivered. Revenue from services is recognised when the service has been performed.
Revenue from construction contracts is recognised either on a percentage-of-completion basis, using units of delivery (based on predetermined milestones) or by applying the cost-to-cost method of accounting as the measurement basis. Estimated contract profi ts are recognised in earnings in proportion to recorded sales, when a certain predetermined milestone has been achieved. In the cost-to-cost method, revenue and profi ts are recognised after considering the ratio of cumulative costs incurred to estimated total costs to complete each contract (the stage of completion). Recognition of profi t requires the outcome of a construction contract be estimated reliably. If this is not the case, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable; and contract costs are expensed in the period in which they are incurred. In the event that the Group can be held as the main contractor of a construction contract, various product expenses including raw materials and labour costs will be accounted for in the calculation of the stage of completion. Possible changes in the expected total expenses of a construction contract are expensed as incurred. e expected loss is charged to the income statement immediately.
Costs related to a construction contract for which revenue is not yet recognised are included in inventories under unfi nished construction contracts. If costs incurred together with recognised profi ts exceed the amount billed, the diff erence is included in the balance sheet item "trade and other receivables". When costs incurred together with recognised profi ts are lower than the amount billed, the diff erence is shown under "trade and other payables".
Net sales include revenue from services rendered and goods sold, adjusted for discounts granted, salesrelated taxes and eff ects of the translation diff erences.
Other operating income comprises income not generated from primary activities, such as rental income and gains from disposal of assets.
Government grants that compensate the Group for expenses incurred are recognised as revenue in the income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised by deducting the grant from the carrying amount of the asset.
Pension plans are classifi ed as either defi ned contribution plans or defi ned benefi t plans. e plans the Group has currently are classifi ed as defi ned contribution plans. Contributions to defi ned contribution pension plans are recognised as an expense in the income statement in the year to which they relate. e statutory pension plans of Finnish subsidiaries in the Group are funded through pension insurance. Subsidiaries outside Finland have various pension schemes in accordance with local requirements and practices.
Teleste has applied IFRS 2 Share-based payments to granted share options to the extent that such share option plans are in the scope of this standard, i.e. to those share option arrangements in which share options have been granted after 7 November 2002 that had not yet vested until 1 January 2005. e options granted before this have not been expensed in the income statement. e granted share options are measured at their fair values using the Black-Scholes option pricing model at the grant date and are recognised as an employee expense during the vesting period with a corresponding increase in equity. When the options are exercised, the proceeds received, net of any transactions costs, are credited to share capital (nominal value) and the share premium reserve.
Operating profi t is not defi ned under IAS 1 Presentation of Financial Statements. In Teleste it is defi ned as a net amount that is comprised of the following items: net sales
other operating income
raw material and consumables used adjusted for changes in inventories of fi nished goods and work in progress
= operating profi t/loss
All other items not mentioned above are presented under the operating profi t. Translation diff erences relating to sales and purchases are treated as adjustments to these items. All other translation diff erences are included in fi nancial income and expenses.
Borrowing costs are generally expensed in the period in which they are incurred. However, incremental transaction costs directly related to acquiring a loan are included in the initial cost and are amortised as an interest expense using the eff ective interest rate method. e Group had no such capitalised transaction costs in its balance sheet at 31 December 2006.
Interest income is recognised using the eff ective interest method. Dividend income is recognised when the right to the dividend has established.
e income taxes in the consolidated income statement consist of current tax and the change in the deferred tax assets and liabilities. Current tax includes taxes of the Group companies calculated on the taxable profi t for the period determined in accordance with local tax rules, as well as the tax adjustments related to previous years. Deferred tax relating to items charged or credited directly to equity is itself charged or credited directly to equity.
Deferred tax assets and liabilities are provided in the consolidated fi nancial statements using the balance sheet liability method, providing for all temporary diff erences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and the amounts used for taxation purposes. e main temporary diff erences arise from the treatment of development costs, the depreciation diff erence on property, plant and equipment and eff ects of consolidation and eliminations. Deferred taxes are not provided for impairment of goodwill, which is not deductible for tax purposes, nor for undistributed profi ts of subsidiaries to the extent that is it probable that the temporary diff erence will not reverse in the foreseeable future. Deferred tax liabilities are recognised at their full amounts in the balance sheet, and deferred tax assets are recognised at estimated realisable amounts. e enacted or substantially enacted tax rate at the balance sheet date is used as the tax rate.
Management's estimates regarding obsolete inventories, bad debts and warranties are based on approved fi nancial models and case-specifi c judgments. Both historical experience and management's current view on the market situation have been employed when using the fi nancial models. Management has used the best information available during the process of preparing the fi nancial statements when making case-specifi c judgements. Impairment tests refl ect assumptions made by management and underlying sensitivity analyses of the future cash fl ows.
By the issuance of the consolidated fi nancial statements Teleste is not aware of any signifi cant uncertainties regarding estimates made at the balance sheet date, nor of such future key assumptions that might have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year.
Teleste will adopt in 2006 pronounced IFRS 8 Operating Segments in 2009. Teleste is investigating the impact on the fi nancial statements. In 2009 the revised IAS 1 Presentation of Finanacial statements standard will also be adpoted. is will aff ect the presentation of the fi nancial statements and IFRS 3 Business combinations and also recognition of business combination transactions from 1 January 2009 onwards.
Teleste Group is organised in the primary reporting segments that are its business segments and secondary reporting segments that are geographical segments. ese segments are based on the Group's organisational and internal reporting structure.
e Group comprises two business segments that are Broadband Cable Networks and Video Networks.
Broadband Cable Networks segment's clientele consists almost exclusively of cable operators. Teleste supplies cable operators with equipment and systems designed to be used for building transmission networks and processing of video and data signals. Deliveries by Teleste include both individual pieces of equipment and comprehensive networks. Teleste also makes available a number of services related to the maintenance of network infrastructure.
Video Networks is in the business of manufacturing and supplying solutions for video surveillance networks between camera outputs and control rooms. e focus area is video surveillance applications requiring high-quality and real-time video, audio and data. With authorities as the main end-user group of Teleste systems, the most important applications are traffi c control systems for both road and rail transport, urban surveillance systems and applications related to public safety in areas such as border control, ports and airports. One of Teleste's special know-how area is to integrate video surveillance network with hundreds cameras to one entirety.
Secondary geographical segment is divided into three geographical areas:
e main market area of Broadband Cable Networks is Europe where the business unit is present with its 17 dedicated offi ces supported by several support and integration partners. Apart from Europe, offi ces have been established in China and India. rough its own offi ces Teleste Video Networks is present locally in all the major geographical markets: Europe, America and Southeast Asia.
Sales of geographical segments are shown based on customer location. Assets and investments are presented by geographical location of assets.
ere are no inter-segment sales in the Group.
Segment assets and liabilities include items directly attributable to the segment as well as those that can be allocated on a reasonable basis.
Unallocated income statement items include costs and incomes which follow earnings after depreciations. Assets not allocated to the segments represent cash. Unallocated liabilities are intereste bearing liabilities and tax liabilities.
| Business segments | |||||
|---|---|---|---|---|---|
| 2007 | 1 000 euros | Broadband Cable Networks |
Video Networks | Group | |
| External sales Services |
4 681 | 363 | 5 044 | ||
| Goods | 103 523 | 16 533 | 120 056 | ||
| Total external sales | 108 204 | 16 896 | 125 100 | ||
| Total revenue Operating profi t of segments |
108 204 12 837 |
16 896 339 |
125 100 13 176 |
||
| Operating profi t Unallocated expenses |
13 176 –3 813 |
||||
| Profi t for the period | 9 363 | ||||
| Segment assets Unallocated assets |
54 952 | 15 234 | 70 186 7 702 |
||
| Total assets | 77 888 | ||||
| Segment liabilities Unallocated liabilities |
17 165 | 2 794 | 19 959 11 260 |
||
| Total liabilities | 31 219 | ||||
| Capital expenditure | 11 082 | 1 201 | 12 283 | ||
| Depreciation and amortisation | 2 800 | 752 | 3 552 | ||
| 2006 | 1 000 euros | Broadband Cable Networks |
Video Networks | Group | |
| External sales | |||||
| Services | 2 813 | 195 | 3 008 | ||
| Goods Total external sales |
82 738 85 551 |
16 027 16 222 |
98 765 101 773 |
||
| Total revenue | 85 551 | 16 222 | 101 773 | ||
| Operating profi t of segments | 9 055 | 700 | 9 755 | ||
| Operating profi t Unallocated expenses |
9 755 –2 876 |
||||
| Profi t for the period | 6 879 | ||||
| Segment assets Unallocated assets |
46 927 | 14 520 | 61 447 6 789 |
||
| Total assets | 68 236 | ||||
| Segment liabilities Unallocated liabilities |
17 909 | 3 411 | 21 320 9 255 |
||
| Total liabilities | 30 575 | ||||
| Capital expenditure Depreciation and amortisation |
2 032 1 863 |
4 143 530 |
6 175 2 393 |
||
| Geographical segments | |||||
| 2007 | 1 000 euros | Nordic Countries | Other Europe | Others | Group |
| Sales by origin | 35 535 | 78 260 | 11 305 | 125 100 | |
| Assets | 57 483 | 18 837 | 1 568 | 77 888 | |
| Capital expenditure | 6 113 | 6 120 | 50 | 12 283 | |
| 2006 | 1 000 euros | Nordic Countries | Other Europe | Others | Group |
Sales by origin 32 200 62 100 7 473 101 773 Assets 51 381 15 115 1 740 68 236 Capital expenditure 5 838 87 250 6 175
e range of products and services of Broadband Cable Networks was strengthened by acquisition of 100% of shares of Belgian DINH Telecom S.A. at 4 April 2007. e purchase price was EUR 6.1 million. Treasury shares was conveyed as a part of the payment for the consideration of EUR 1 million i.e. 92,338 numbers. e conveyance was based on authorisation granted by the annual meeting of Teleste Corporation at 3 April 2007. e shares conveyed were measured at the average trading share price quoted in OMX Helsinki Stock Exchange between 5 March and 30 March 2007, which was EUR 10.83 per share. e number of shares then conveyed accounted for 0.53 per cent of the shares of the Teleste Corporation.
e acquisition resulted in 1,785 thousand of intangible assets, which was allocated to trade marks, customer relationships and technology. e goodwill, amounted EUR 460 thousand, is mainly due to synergy eff ects in the future. During the fi rst quarter of 2007 the fi nal conditional supplementary contract price of EUR 99 thousand related to the acquisition of Teleste Video Networks AB (former S-Link AB) in November 2003 were recognised in the books. e conditional supplementary contract price in its entirety was booked in the goodwill.
e net profi t of DINH Telecom S.A. for the period 4 April–31 December 2007 is included in the consolidated income statement for the year 2007. If the companies had been consolidated since 1 January 2007, the Group revenue would have been EUR 1.1 million higher and the Group profi t would have increased EUR 0.1 million.
e fair values determined in the business combination are based on the following estimates:
e range of products and services of Video Networks for certain midmarket segments was strenghtened by the acquisition of the Suomen Turvakamera Oy on May 2006. e purchase price of the share capital was EUR 3,067 thousand. e goodwill, amounted EUR 2,607 thousand, is mainly due to expected increase in demand of existing products of Video Networks business area. Treasury shares were conveyed as a part of the payment for the consideration EUR 311 thousand i.e. 30,000 numbers. e conveyance was based on the authorisation granted by the Annual General Meeting of Teleste Corporation at 4 April 2006. e shares conveyed were measured at the average trading share price quoted in the OMX Helsinki Stock Exchange at 31 May 2006 being EUR 10.37 per share. e number of the shares
then conveyed accounted for 0.17 per cent of the total number of the shares of Teleste Corporation.
e FttH knowledge of Broadband Cable Networks was strenghtened by the acquisition of the share capital of Swedish PromaCom AB on June 2006. e purchase price of the share capital was EUR 322 thousand. e goodwill, amounted EUR 305 thousand, is mainly due to expected increase in demand of existing products of Broadband Cable Networks business area.
e net profi t of PromaCom AB for the period 16 June–31 December 2006 and Suomen Turvakamera Oy for the period 1 June–31 December are included in the consolidated income statement for the year 2006. If the companies had been consolidated since 1 January 2006, the Group revenue would have been EUR 1.6 million higher and the Group profi t would have decreased EUR 0.6 million.
During the third quarter of 2006 EUR 191 thousand were recognised as a probable additional consideration. A conditional supplementary contract price EUR 191 thousand related to the acquisition of Teleste Video Networks AB (former S-Link AB) in November 2003 was entered in the books in the third quarter of 2006. e conditional supplementary contract price in its entirety was booked in the goodwill.
| Recognised | |
|---|---|
| fair values | |
| 1 000 euros | on acquisition |
| Fair values used in consolidation | |
| Trade marks (inc. in intangible assets) | 400 |
| Customer relationship (inc. in intangible assets) | 893 |
| Technology (inc. in intangible assets) | 492 |
| Book values used in consolidation | |
| Tangible assets | 481 |
| Shares and other rights | 307 |
| Inventories | 548 |
| Trade receivables | 1 064 |
| Other receivables | 2 850 |
| Cash and cash equivalents | 377 |
| Total assets | 7 412 |
| Book values used in consolidation | |
| Interest-bearing liabilities | 253 |
| Deferred tax liabilities | 464 |
| Other liabilities | 1 065 |
| Total liabilities | 1 782 |
| Net identifi able assets and liabilities | 5 630 |
| Total consideration | 6 000 |
| Other acquisition costs | 90 |
| Goodwill on acquisition | 460 |
| Consideration paid in cash | –5 000 |
| Cash and cash equivalents in acquired subsidiary | 377 |
| Total net cash outfl ow on the acquisition | –4 623 |
Group revenue includes EUR 159 thousand (EUR 4,030 thousand) of income from construction contracts.
Revenue recognised in the consolidated income statement from construction contracts in progress amounted to EUR 159 thousand on 31 December 2007 (31 Dec. 2006: EUR 4,030 thousand). No advance payments included to balance sheet at the closing time.
| 1 000 euros | 2007 | 2006 |
|---|---|---|
| 2 Other operating income | ||
| Government grants related to development costs | 1 530 | 1 854 |
| Rental income | 120 | 106 |
| Government grants | 122 | 198 |
| Total | 1 772 | 2 158 |
| 3 Employee benefi ts | ||
| Wages and salaries | –24 684 | –21 068 |
| Pension expenses | ||
| Defi ned contribution plans | –4 962 | –4 274 |
| Other post employment benefi ts | –2 415 | –2 055 |
| Activated R&D salaries and social costs | 1 030 | 1 003 |
| Equity-settled share-based transactions | –424 | –706 |
| Total | –31 455 | –27 100 |
| Information on the remuneration of (and loans to) the Group management is presented in the note Related party transactions. |
||
| e average number of employees in the Group during the fi nancial year broken down by following categories | ||
| Research and Development | 158 | 131 |
| Production and Material Management | 305 | 297 |
| Sales and Marketing, Log. Services | 179 | 148 |
| Finance and IT | 39 | 32 |
| Total | 681 | 608 |
| 4 Depreciation, amortisation and impairment |
| Depreciation and amortisation by asset type: | ||
|---|---|---|
| Tangible assets | ||
| Buildings | –298 | –297 |
| Machinery and equipment | –938 | –761 |
| Other tangible assets | –434 | –316 |
| Total | –1 670 | –1 374 |
| Intangible assets | ||
| Capitalised development expenses | –1 429 | –939 |
| Other intangible assets | –452 | –80 |
| Total | –1 881 | –1 019 |
No impairment test losses are booked to Profi t and Loss Account during 2007 or 2006.
| Total | –18 324 | –16 006 |
|---|---|---|
| Other expenses | –4 509 | –4 658 |
| R&D costs | –3 174 | –2 564 |
| Travel and IT costs | –4 726 | –4 440 |
| Other cariable costs | –2 566 | –1 551 |
| Impairment loss on trade receivables | 0 | –20 |
| External services | –1 335 | –1 198 |
| Rental expenses | –2 014 | –1 575 |
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 6 Financial income | ||
| Interest income Dividend income Other fi nancial income |
210 10 407 |
108 6 80 |
| Total | 627 | 194 |
Other fi nancial income includes EUR 353 thousand gain from sales of other fi nancial assets during the period (EUR 0 thousand in 2006)
| Total | –1 131 | –661 |
|---|---|---|
| Other fi nancial expenses | –141 | –74 |
| Exchange losses | –289 | –206 |
| Interest expenses | –701 | –381 |
Other fi nancial expenses includes interests from fi nancial leasing expensed during the period EUR 141 thousand (EUR 74 thousand in 2006). Losses from forward exchange contratcs are included in operating profi t.
| Recognised in the income statement Current tax expense Current year |
–3 221 | –2 085 |
|---|---|---|
| Adjustments for prior years | 21 | –15 |
| Deferred tax expense | –109 | –308 |
| Total | –3 309 | –2 408 |
| Reconciliation of the income tax expense in the income statement, EUR 3,309 thousand, and the income tax expense calculated using the Teleste Group's domestic corporation 26% tax rate. |
||
| Profi t before tax | 12 672 | 9 288 |
| Income tax using the domestic corporation tax rate 26% | –3 295 | –2 415 |
| Eff ect of tax rates in foreign jurisdictions | –147 | 161 |
| Tax exempt revenues | 55 | 12 |
| Tax debt increase related to balance sheet items | –109 | –308 |
| Non-deductible expenses | –133 | –5 |
| Taxes from prevoius year | 21 | –15 |
| Eff ect of tax losses utilised | 299 | 161 |
| Income tax expense reported in the consolidated income statement | –3 309 | –2 408 |
|---|---|---|
| e basic earnings per share is calculated as follows: | e diluted earnings per share is calculated as follows: | ||
|---|---|---|---|
| Profi t for the year attributable to equity holders of the parent | Profi t for the year attributable to equity holders of the parent (diluted) | ||
| Weighted average number of ordinary shares outstanding during the fi nancial year |
Weighted average number of ordinary shares outstanding during the fi nancial year (diluted) |
||
| e number of ordinary shares outstanding excludes the treasury shares. |
e changes in the number of the shares are presented in the note 17 Capital and reserves. |
||
| 2007 | 2006 | ||
| Profi t for the year attributable to equity holders of the parent (1 000 euros) Weighted average number of ordinary shares outstanding during the fi nancial year (1 000 shares) |
9 363 17 117 |
6 879 16 896 |
|
| Basic earnings per share (euros/share) | 0.55 | 0.41 | |
| Weighted average number of ordinary shares outstanding during the fi nancial year (1 000 shares) Eff ect of share options on issue (1 000 shares) |
17 117 854 |
16 896 1 127 |
|
| Weighted average number of ordinary shares outstanding during the fi nancial year (diluted) (1 000 shares) | 17 971 | 18 023 |
e share options granted by the Group have a dilutive eff ect, i.e. they increase the number of the ordinary shares when their subscription price is below the fair value of the share. e fair value is calculated based on the average share price during the period. e dilutive eff ect equals the number of the shares gratuitously issued; this diff erence arises when the Group can not issue the same number of shares at their fair value using the proceeds received on the exercise of the options.
Diluted earnings per share (euros) 0.52 0.38
| Notes | ||||||
|---|---|---|---|---|---|---|
| 1 000 euros | Land areas | Buildings | Machinery and equipment |
Other tangible assets |
Advance payments |
Total |
| 10 Property, plant and equipment | ||||||
| Balance at 1.1.2007 | 108 | 5 384 | 14 419 | 2 939 | 37 | 22 887 |
| Additions | 0 | 233 | 2 385 | 754 | 0 | 3 372 |
| Acquisitions through business combinations | 54 | 200 | 227 | 0 | 0 | 481 |
| Transfers between classes | 0 | 26 | 9 | 0 | –37 | –2 |
| Balance at 31.12.2007 | 162 | 5 843 | 17 040 | 3 693 | 0 | 26 738 |
| Depreciation and impairment losses balance 1.1.2007 | 0 | –2 589 | –12 326 | –2 395 | 0 | –17 310 |
| Depreciation charge for the year | 0 | –298 | –938 | –434 | 0 | –1 670 |
| Depreciation and impairment losses, balance 31.12.2007 | 0 | –2 887 | –13 264 | –2 829 | 0 | –18 980 |
| Carrying amounts 1.1.2007 | 108 | 2 795 | 2 093 | 544 | 37 | 5 578 |
| Carrying amounts 31.12.2007 | 162 | 2 956 | 3 776 | 864 | 0 | 7 757 |
| 1 000 euros | Land areas | Buildings | Machinery and equipment |
Other tangible assets |
Advance payments |
Total |
| Balance 1.1.2006 | 108 | 5 523 | 13 421 | 2 684 | 59 | 21 795 |
| Additions | 0 | 59 | 917 | 196 | 37 | 1 209 |
| Acquisitions through business combinations | 0 | 0 | 118 | 0 | 0 | 118 |
| Transfers between classes | 0 | 0 | 0 | 59 | –59 | 0 |
| Disposals | 0 | –198 | –37 | 0 | 0 | –235 |
| Balance 31.12.2006 | 108 | 5 384 | 14 419 | 2 939 | 37 | 22 887 |
| Depreciation and impairment losses, balance 1.1.2006 | 0 | –2 292 | –11 564 | –2 079 | 0 | –15 935 |
| Depreciation charge for the year | 0 | –297 | –762 | –316 | 0 | –1 375 |
| Depreciation and impairment losses, balance 31.12.2006 | 0 | –2 589 | –12 326 | –2 395 | 0 | –17 310 |
| Carrying amounts 1.1.2006 | 108 | 3 231 | 1 857 | 605 | 59 | 5 860 |
| Carrying amounts 31.12.2006 | 108 | 2 795 | 2 093 | 544 | 37 | 5 578 |
| Carrying amount of production machinery and equipment 31.12.2007 | 2 906 |
Carrying amount of production machinery and equipment 31.12.2006 1 784
Property, plant and equipment include assets leased under fi nancial leases as follows:
| 1 000 euros | Machinery and equipment |
|---|---|
| 31.12.2007 | |
| Historical cost | 3 205 |
| Cumulative depreciation | –917 |
| Carrying amount 31.12.2007 | 2 288 |
| 31.12.2006 | |
| Historical cost | 1 383 |
| Cumulative depreciation | –407 |
| Carrying amount 31.12.2006 | 976 |
| Notes | ||||
|---|---|---|---|---|
| 1 000 euros | Goodwill | Development | Other intangible assets |
Total |
| 11 Intangible assets | ||||
| Balance 1.1.2007 | 12 127 | 5 107 | 775 | 18 009 |
| Additions | 99 | 2 736 | 0 | 2 835 |
| Acquisitions through business combinations | 460 | 0 | 2 160 | 2 620 |
| Balance 31.12.2007 | 12 686 | 7 843 | 2 935 | 23 464 |
| Amortisation and impairment losses, balance 1.1.2007 | 0 | –2 188 | –80 | –2 268 |
| Amortisation for the year | 0 | –1 428 | –452 | –1 880 |
| Amortisation and impairment losses, balance 31.12.2007 | 0 | –3 616 | –532 | –4 148 |
| Carrying amounts 1.1.2007 | 12 127 | 2 919 | 695 | 15 741 |
| Carrying amounts 31.12.2007 | 12 686 | 4 226 | 2 403 | 19 315 |
| 1 000 euros | Goodwill | Development | Other intangible assets |
Total |
| Balance 1.1.2006 | 9 205 | 3 763 | 75 | 13 043 |
| Additions | 194 | 1 344 | 72 | 1 610 |
| Acquisitions through business combinations | 2 728 | 0 | 628 | 3 356 |
| Balance 31.12.2006 | 12 127 | 5 107 | 775 | 18 009 |
| Amortisation and impairment losses, balance 1.1.2006 | 0 | –1 249 | 0 | –1 249 |
| Amortisation for the year | 0 | –939 | –80 | –1 019 |
| Amortisation and impairment losses, balance 31.12.2006 | 0 | –2 188 | –80 | –2 268 |
| Carrying amounts 1.1.2006 | 9 205 | 2 514 | 75 | 11 794 |
| Carrying amounts 31.12.2006 | 12 127 | 2 919 | 695 | 15 741 |
For the purposes of impairment testing goodwill items of the Group have been allocated to the segments, each of which represents a separate cash-generating unit. e aggregate goodwill amount totalled EUR 12,7 million at 31 December 2007. Goodwill has been allocated to the following cash-generating units: Teleste Broadband Cable Networks EUR 6,3 million (including Flomatik AS, PromaCom AB, Teleste Electronics (SIP) Co. Ltd. and DINH Telecom S.A.), Teleste Video Networks EUR 6,4 million (including Teleste Video Networks AB and Suomen Turvakamera Oy).
e recoverable amount of the segments is based on value-in-use calculations. ose calculations use cash fl ow projections based on the strategy approved by the management. Calculations prepared cover 10 years' period, the cash fl ow for the fi rst year is based on budgets and during the next 4 years the expected growth rate is 20 per cent. e expected future cash fl ows for a further 5 year period are extrapolated using a 5 per cent growth rate. Management's view on the cash fl ows after the fi rst fi ve years' period is cautious as the changes of the industry are diffi cult to foresee. 5 per cent growth rate has been used for all segments. A discount rate of 12,6 per cent (12,1 per cent) has been used in discounting the projected cash fl ows. e terminal value of the segments is calculated by discounting the future cash fl ows after the 10 year period, assumption is that cash fl ows are the same as at last year of the period.
Management is of the opinion that potential changes of any key parameters used in the calculations moderately assessed would not result the carrying amount of the segment to exceed the recoverable amount. Impairment losses would occur partly on Video Networks segment, if growth rate decreased by half and the discount rate would increase by 3 per cent units.
e Group received a grant amounting to EUR 2,1 million from Tekes (National Technology Agency of Finland) towards development costs in 2007 (2006: EUR 2,5 million). From the grant received EUR 0,66 thousand (2005: EUR 0,67 million) has been recognised to deduct the carrying amount of the asset. e grant has the condition, according to which 10% of the total costs of the project have to be incurred through subcontracting work in Finnish small and medium-sized companies.
| 1 000 euros | 2007 | 2006 |
|---|---|---|
| 12 Available-for-sale investments | ||
| Unlisted shares | 723 | 1 116 |
| Total | 723 | 1 116 |
e Group has sold unlisted shares during 2007 and recognised a sales gain of EUR 353 thousand for the biggest transaction. e rest of the unlisted shares have been valued to the historical purchase value. is is the prudent estimation by the management.
| Notes | |||
|---|---|---|---|
| 1 000 euros | 1.1.2007 Recognised in the income statement |
31.12.2007 | |
| 13 Deferred tax assets and liabilities | |||
| Movements in temporary diff erences during 2007. | |||
| Deferred tax assets: | |||
| Eff ects of consolidation and eliminations | 392 | 271 | 663 |
| Provisions | 306 | –75 | 231 |
| Cumulative depreciation diff erence | 349 | –64 | 285 |
| Total | 1 047 | 132 | 1 179 |
| Deferred tax liabilities: | |||
| Capitalisation of intangible assets | –758 | –341 | –1 099 |
| Fair value adjustments to intangible and tangible assets on acquisition | –143 | 80 | –527 |
| Cumulative depreciation diff erence | –516 | 49 | –467 |
| Other taxable temporary diff erences | 3 | –286 | –283 |
| Total | –1 414 | –498 | –2 376 |
In the consolidated fi nancial statements deferred tax receivables and liabilities have been off set.
e change in liabilities doesn't match the deferred tax recognised in the income statement due recognition of deferred tax liabilities for other intangible assets and group internal eliminations.
| 1 000 euros | 1.1.2006 Recognised in the income statement |
31.12.2006 | |
|---|---|---|---|
| Movements in temporary diff erences during 2006. | |||
| Deferred tax assets: | |||
| Eff ects of consolidation and eliminations | 200 | 192 | 392 |
| Provisions | 432 | –126 | 306 |
| Tax losses carried forward | 25 | –25 | 0 |
| Cumulative depreciation diff erence | 450 | –101 | 349 |
| Total | 1 107 | –60 | 1 047 |
| Deferred tax liabilities: | |||
| Capitalisation of intangible assets | –653 | –105 | –758 |
| Fair value adjustments to intangible and tangible assets on acquisition | 0 | –143 | –143 |
| Cumulative depreciation diff erence | –514 | –2 | –516 |
| Other taxable temporary diff erences | 0 | 3 | 3 |
| Total | –1 167 | –247 | –1 414 |
In the consolidated fi nancial statements deferred tax receivables and liabilities have been off set.
At 31 December 2007 the Group had unused tax losses in foreign subsidiaries amounting to EUR 411 thousand. No deferred tax asset has been recognised in respect of this because it is not probable that future taxable profi t will be available against which the Group can utilise the benefi t therefrom. is tax loss has no expiry date.
No deferred tax liability has been provided for the undistributed profi ts of the foreign subsidiaries amounting to EUR 5,724 thousand at 31 Dec. 2007 (31 Dec. 2006: EUR 4,994 thousand). is is because the group has the power to decide the time when the tax obligation would realize. e realization of this tax is unlikely in the near future.
| Total | 15 936 | 16 604 |
|---|---|---|
| Finished goods | 7 104 | 6 919 |
| Work in progress | 4 980 | 5 839 |
| Raw materials and consumables | 3 851 | 3 846 |
| 14 Inventories | ||
| 1 000 euros | 2007 | 2006 |
e amount of the impairment losses of inventories to the net realisable value recognised as an expense during the fi nancial period is EUR 1,187 thousand. At the end of the fi nancial year EUR 4,539 thousand was deducted from the inventory value to the net realisable value (31 Dec. 2006: EUR 3,352 thousand).
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 15 Trade and other current receivables | ||
| Trade receivables Accrued income and prepayments Other receivables |
23 498 2 061 896 |
17 873 4 082 454 |
| Total | 26 455 | 22 409 |
| 16 Cash and cash equivalents | ||
| Cash at bank and in hand and call deposits | 7 702 | 6 789 |
| Total | 7 702 | 6 789 |
| Cash and cash equivalents in the statement of cash fl ows | 7 702 | 6 789 |
| 1 000 euros | Number of shares, 1 000 pcs |
Number of 1 000 pcs |
Number of own shares, shares, total, 1 000 pcs |
Share capital, 1 000 euros |
Reserve fund, 1 000 euros |
|---|---|---|---|---|---|
| 17 Capital and reserves | |||||
| 1.1.2006 Share options exercised by employees Own shares sold |
16 855 50 30 |
485 0 –30 |
17 340 50 0 |
6 935 20 0 |
1 277 141 0 |
| 31.12.2006 | 16 934 | 455 | 17 389 | 6 955 | 1 418 |
| Share options exercised by employees Own shares sold |
282 103 |
0 –103 |
282 0 |
12 0 |
87 0 |
| 31.12.2007 | 17 319 | 352 | 17 671 | 6 967 | 1 504 |
e number of Teleste Oyj shares was 17,671,305 at 31 December 2007 (31 Dec. 2006: 17,389,302 shares). All shares issued have been fully paid.
e Annual General Meeting of Teleste Oyj held on 3 April 2007 authorised the Board to acquire the maximum of 1,290,000 Teleste's own shares, convey at most 1,730,000 own shares. e authorisations given to the Board by the Annual General Meeting for acquisition of own shares and increasing the share capital were not used during 2007. e number of treasury shares conveyed for the purchase price of DINH Telecom was 92,388 shares and 10,180 shares for share payments in 2007.
e Annual General Meeting of Teleste Oyj held on 4 April 2006 authorised the Board to acquire the maximum of 1,215,000 Teleste's own shares, convey at most 1,700,000 own shares and increase the share capital by a new issue of no more than 3,400,000 shares. e authorisations given to the Board by the Annual General Meeting for acquisition of own shares and increasing the share capital were not used during 2006. e number of treasury shares conveyed for the purchase price of Suomen Turvakamera Oy was 30,000 in 2005.
Shares subscribed for pursuant to the share option plans will entitle to dividend when the increase of the share capital is registered with the Finnish trade register. Voting and other shareholder rights will commence on the date on which the increase of the share capital is registered with the Finnish trade register.
e translation diff erence comprises all foreign exchange diff erences arising from the translation of the fi nancial statements of foreign subsidiaries.
After the balance sheet date the dividend of EUR 0.24 per share (2006: EUR 0.20 per share) was proposed by the Board of Directors.
Teleste had three option schemes in operation during the period. e schemes were approved by Teleste Annual General Shareholders' Meetings in 2002, 2004 and 2007. e Annual General Meeting of shareholders has authorized Teleste management board grant options to the Group key employees. e stock options have a term up to 6 years from the grant date. After expiration of a 3 to 4 year waiting period, the options may be exercised as shares. e options are forfeited if the employee leaves the Group before the options vest. e options are also subject to certain performance criteria. Key characteristics and terms of Teleste option schemes are listed in the table below. CEO and management team are involved in a share-based remuneration arrangement. Additional information about this arrangement is presented in the Note Related Party Transactions.
Teleste has applied IFRS 2 to all grants after 7 November 2002 and that were unvested as of January 2005. e fair value of the options is determined at the grant date and expensed over the vesting period.
| Options 2002 Options 2004 2002B 2004A 8.4.2002 16.3.2004 15.4.2003 15.6.2004 15.10.2004 4.4.2006 4.4.2006 15.11.2006 275 000 300 000 1 |
|---|
| 2.73 5.98 Yes Yes 2.45 5.86 2.29 5.70 2.09 5.50 1.2.2006 1.4.2007 1.10.2008 30.4.2009 |
Vesting conditions
| * will be determined in April 2008 ** will be determined in April 2009 |
||||||||
|---|---|---|---|---|---|---|---|---|
| Options 2002 | Options 2004 | Options 2007 | ||||||
| 2002A | 2002B | 2004A | 2004B | 2007A | 2007B | 2007C | ||
| Employment until beginning Employment until Employment until beginning of exercise of exercise period. For beginning of exercise period options granted in 2006: period 9 months' service required |
||||||||
| 2006 orders: 100 Meur 2006 earnings: 10 Meur |
For options granted in 2006 performance criteria include: |
2006 orders: 100 Meur 2006 earnings: 10 Meur |
For options granted in 2006 performance criteria include: |
|||||
| EPS | ||||||||
| 0.30 | 0.35 | |||||||
| ROCE | ||||||||
| 20% | 25% | |||||||
| Members of the top man 20% of the income earned by the stock options to acquire Teleste shares worth annual salary |
agement are obliged to use | Members of the top man agement are obliged to use 20% of the income earned by the stock options to acquire Teleste shares worth annual salary |
| Notes | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Changes during the period 2007 | Options 2002 | Options 2004 | Options 2007 | Total | Weighted average exercise, euro |
||||
| 2002A | 2002B | 2004A | 2004B | 2007A | 2007B | 2007C | |||
| Number of options 1.1.2007 | |||||||||
| Granted | 265 100 | 263 100 | 291 700 | 294 300 | 0 | 0 | 0 | 1 114 200 | 5.35 |
| Returned | 11 550 | 11 550 | 43 600 | 28 400 | 0 | 0 | 0 | 95 100 | 5.62 |
| Invalidated | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -- |
| Exercised | 10 000 | 39 550 | 0 | 0 | 0 | 0 | 0 | 49 550 | 3.23 |
| Outstanding | 243 550 | 212 000 | 248 100 | 265 900 | 0 | 0 | 0 | 969 550 | 5.44 |
| Non-distributed | 21 450 | 23 450 | 51 900 | 34 100 | 0 | 0 | 0 | 130 900 | 5.45 |
| Exercisable | 265 000 | 235 450 | 300 000 | 300 000 | 0 | 0 | 0 | 1 100 450 | 5.44 |
| Changes during the period 2007 | |||||||||
| Granted | 0 | 0 | 0 | 0 | 260 000 | 0 | 0 | 260 000 | 12.69 |
| Returned | 0 | 0 | 0 | 12 000 | 0 | 0 | 0 | 12 000 | 6.11 |
| Invalidated | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -- |
| Exercised | 221 965 | 60 038 | 0 | 0 | 0 | 0 | 0 | 282 003 | 5.76 |
| Weighted average price of share during the exercise period, euro |
10.87* | 10.10** | 9.54*** | -- | -- | -- | -- | 0 | -- |
| Expired | 43 035 | 0 | 0 | 0 | 0 | 0 | 0 | 43 035 | -- |
| Number of options 31.12.2007 | -- | ||||||||
| Granted | 265 100 | 263 100 | 291 700 | 294 300 | 260 000 | 0 | 0 | 1 374 200 | 6.58 |
| Returned | 11 550 | 11 550 | 43 600 | 40 400 | 0 | 0 | 0 | 107 100 | 5.50 |
| Invalidated | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -- |
| Expired | 43 035 | 0 | 0 | 0 | 0 | 0 | 0 | 43 035 | 6.75 |
| Exercised | 231 965 | 99 588 | 0 | 0 | 0 | 0 | 0 | 331 553 | 5.35 |
| Outstanding | 0 | 151 962 | 248 100 | 253 900 | 260 000 | 0 | 0 | 913 962 | 7.15 |
| Non-distributed | 0 | 23 450 | 51 900 | 46 100 | 20 000 | 0 | 0 | 141 450 | 6.15 |
| Exercisable | 0 | 175 412 | 300 000 | 300 000 | 280 000 | 0 | 0 | 1 055 412 | 7.01 |
* For 2002A options weighted average price of Teleste share during 1.1.–1.10.2007
** For 2002B options weighted average price of Teleste share during 1.1.–31.12.2007
*** For 2004A options weighted average price of Teleste share during 1.4.–31.12.2007
| Notes | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Changes during the period 2006 | Options 2002 | Options 2004 | Options 2007 | Total | Weighted average exercise, euro |
||||
| 2002A | 2002B | 2004A | 2004B | 2007A | 2007B | 2007C | |||
| Number of options 1.1.2006 | |||||||||
| Granted Returned Invalidated Exercised |
242 000 | 240 000 | 264 000 | 275 000 | 1 021 000 | 5.52 | |||
| Outstanding | 242 000 | 240 000 | 264 000 | 275 000 | 1 021 000 | 5.52 | |||
| Non-distributed | 33 000 | 35 000 | 36 000 | 25 000 | 129 000 | 5.37 | |||
| Exercisable | 275 000 | 275 000 | 300 000 | 300 000 | 1 150 000 | 5.50 | |||
| Changes during the period 2006 | |||||||||
| Granted | 23 100 | 23 100 | 27 700 | 19 300 | 93 200 | 5.29 | |||
| Returned Invalidated |
11 550 | 11 550 | 43 600 | 28 400 | 95 100 | 5.62 | |||
| Exercised Weighted average price of share |
10 000 | 39 550 | 0 | 0 | 49 550 | 3.23 | |||
| during the exercise period, euro Expired |
9.81* | 10.21** | -- | -- | |||||
| Number of options 31.12.2006 | |||||||||
| Granted | 265 100 | 263 100 | 291 700 | 294 300 | 1 114 200 | 5.35 | |||
| Returned Invalidated |
11 550 | 11 550 | 43 600 | 28 400 | 95 100 | 5.62 | |||
| Exercised | 10 000 | 39 550 | 0 | 0 | 49 550 | 3.23 | |||
| Outstanding | 243 550 | 212 000 | 248 100 | 265 900 | 969 550 | 5.44 | |||
| Non-distributed | 21 450 | 23 450 | 51 900 | 34 100 | 130 900 | 5.45 | |||
| Exercisable | 265 000 | 235 450 | 300 000 | 300 000 | 1 100 450 | 5.44 |
* For 2002A options weighted average price of Teleste share during 1.1.–31.12.2006
** For 2002B options weighted average price of Teleste share during 1.2.–31.12.2006
e fair value of options have been determined at grant date and the fair value is recognised to personnel expenses during the vesting period. e fair value of stock options have been determined by using Black-Scholes valuation model. Total fair value of the options granted during the period was EUR 322,400 and the eff ect of all options on the Group's earnings during the period was: EUR 424,408. e inputs into Black-Scholes model were as follows:
| Options | 2002A | 2002B | 2004A | 2004B | 2007A |
|---|---|---|---|---|---|
| Number of options granted Share price, euro |
265 100 | 263 100 | 291 700 | 294 300 | 260 000 9.03 |
| Exercise price, euro | 6.75 | 2.09 | 5.50 | 6.11 | 12.69 |
| Expected volatility * | 40%/20% | 40%/20% | 35%/20% | 30%/20% | 33.7%* |
| Maturity in years | 4.5 | 5.5 | 4.8 | 4.9 | 4.7 |
| Risk-free rate | 4%/2.5% | 4%/2.5% | 4%/2.5% | 4%/2.5% | 4.2% |
| Expected dividends | 0 | 0 | 0 | 0 | 0 |
| Valuation model | BS | BS | BS | BS | BS |
| Expected forfeitures | 0% | ||||
| Fair value, euro | 322 400 | ||||
| Earnings eff ect, euro | 115 906 | 240 729 | 67 773 |
* Expected volatility was determined by calculating the historical volatility of the Group's share using monthly observations over corresponding maturity
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 18 Interest-bearing liabilities | ||
| Non-current Finance lease liabilities |
1 700 | 742 |
| Total | 1 700 | 742 |
| Current | ||
| Loans from fi nancial institutions | 7 140 | 7 000 |
| Finance lease liabilities, current portion | 643 | 270 |
| Total | 7 783 | 7 270 |
Interest-bearing loans from fi nancial institutions are carried at amortised cost and fi nance lease liabilities are carried at fair value.
e currency mix of the Group long-term interest-bearing liabilities was as follows:
| 1 000 euros | 31.12.2007 | 31.12.2006 |
|---|---|---|
| EUR | 1 700 | 742 |
| Group long-term interest-bearing liabilities – interest rates: | 1 700 | 742 |
| Finance lease liabilities | 4,6% | 3,9%–4,2% |
| e currency mix of the Group short-term interest-bearing liabilities: | ||
| EUR | 100% | 100% |
| 100% | 100% | |
| Group short-term interest-bearing liabilities – interest rates are as follows: | ||
| Bank loans | 4,8% | 3,7% |
| Finance lease liabilities | 4,6% | 3,9%–4,2% |
| Finance lease liabilities of the Group are payable as follows: | ||
| Minimum lease payments | ||
| Less than one year | 723 | 270 |
| Between one and fi ve years | 1 806 | 813 |
| Total | 2 529 | 1 083 |
| Present value of minimum lease payments | ||
| Less than one year | 644 | 274 |
| Between one and fi ve years | 1 700 | 735 |
| Total | 2 344 | 1 009 |
| Future fi nance charges | 185 | 74 |
| Total fi nance lease liabilities | 2 529 | 1 083 |
| Notes | |||
|---|---|---|---|
| 1 000 euros | Warranties | Restruc- turing |
Total |
| 19 Provisions | |||
| 1.1.2007 | 1 168 | 107 | 1 275 |
| Provisions made during the year | –225 | –107 | –332 |
| Provisions used during the year | 0 | 0 | 0 |
| 31.12.2007 | 943 | 0 | 943 |
| 2007 | |||
| Non-current | 425 | ||
| Current | 518 | ||
| Total | 943 |
e Group grants 12–36 months guarantees for its certain products. If defects are detected during the warranty period, the Group either repairs the product or delivers a comparable new product. e amount of the warranty provision is based on the past experience on defective products and an estimate of related expenses.
e provision is based on the restructuring of sales organisation carried out in 2002.
| 1 000 euros | 2007 | 2006 |
|---|---|---|
| 20 Trade and other current liabilities | ||
| Current | ||
| Trade payables | 7 724 | 9 462 |
| Personnel, social security and pensions | 4 159 | 3 879 |
| Accrued interest expenses and other fi nancial items | 190 | 140 |
| Other accrued expenses and deferred income | 3 865 | 3 608 |
| Other liabilities | 3 658 | 3 831 |
| Total | 19 596 | 20 920 |
Includes the income tax payable for the period.
e item other accrued expenses includes the income tax payable, EUR 580 thousand, on the profi t for the period (31 Dec. 2006: EUR 857 thousand).
e objective of the Group's fi nancial risk management is to identify, evaluate and hedge fi nancial risks to reduce the impacts of price fl uctuations in fi nancial markets and of other factors on earnings, balance sheet and cash fl ows as well as to guarantee cost-effi cient funding for the Group at all times.
e Board has approved fi nancial risk management guidelines and the allocation of responsibilities defi ned in the Group risk management policy and related operating policies covering specifi c areas. e Board oversees the Group's risk management framework. e Group's administration is responsible for the coordination and control of the Group's total fi nancial risk position and external hedging transactions with banks in the name of the parent company. Teleste is risk averse in its treasury activities. e identifi cation of the exposure is a common task of the business units and the Group administration.
Currently the hedge accounting principles as defi ned in IAS 39 are not applied in Teleste as the Group's volatility has not increased to a major extent.
Financial risks comprise market, credit, liquidity and cash fl ow interest rate risk, which are discussed more in detail below. e Group's exposure to price risk is low.
Market risk includes three types of risk: currency risk, price risk and fair value interest rate risk. Fluctuations of foreign exchange rates, market prices or market interest rates may cause a change in the value of a fi nancial instrument. ese changes may have an eff ect on the consolidated earnings, balance sheet and cash fl ows.
e Group's currency position is divided into the transaction position and net investments in foreign operations. Foreign exchange exposures of the Group's units arise from receivables and accounts payables denominated in foreign currency, sales and purchase contracts and from forecast sales and purchases. Major part of the Group's sales is in Euro. e most signifi cant non-euro sales currencies are US dollar (accounts for 3 per cent of the net sales), Swedish and Norwegian crowns (15 per cent) and UK pound sterling (7 per cent). Signifi cant part of expenses, 68 per cent, arise in euro and in US dollar almost 25 per cent. e hedging decisions are based on the expected net cash fl ow for the following six months.
Assets and liabilities in foreign currency translated at closing rate
| 2007 | 2006 | |||||||
|---|---|---|---|---|---|---|---|---|
| USD | SEK | NOK | GBP | USD | SEK | NOK | GBP | |
| Current assets Current liabilities |
313 1 287 |
2 937 739 |
1 341 366 |
2 724 34 |
738 1 482 |
2 156 988 |
641 808 |
1 474 60 |
| Currency position | |||||
|---|---|---|---|---|---|
| Currency | Exposure | Hedge | Net | Hedge instrument |
Hedge |
| USD | 3 077 | 2717 | 360 | Forward exchange contract |
88% |
| SEK | 1 643 | 1 165 | 478 | Forward exchange contract |
71% |
| NOK | 889 | 753 | 136 | Forward exchange contract |
85% |
| GBP | 3 317 | 3 052 | 265 | Forward exchange contract |
92% |
| Currency position | |||||
|---|---|---|---|---|---|
| Currency | Exposure | Hedge | Net | Hedge instrument |
Hedge |
| USD | 3 829 | 3 796 | 33 | Forward exchange contract Forward exchange |
99% |
| SEK | 2 290 | 1 991 | 299 | contract Forward exchange |
87% |
| NOK | 1 635 | 1 213 | 422 | contract Forward exchange |
74% |
| GBP | 3 793 | 2 978 | 815 | contract | 79% |
In principle Teleste hedges forecast and probable cash fl ows. e Group only uses forward exchange agreements. According to the Group's currency risk management policy all material currency risks are hedged at least six months ahead and the Group's transaction position shall at all times be hedged 80–100% by currency. e level of hedges is monitored on a monthly basis. Currency risk is also managed through, among others, operational planning, pricing and off er terms.
At the year-end 2007 the fair value of currency derivatives amounted to EUR 7.4 million (31. Dec 2006: EUR 10.1 million).
Since the Group's currency risk exposure regarding net investments in foreign operations is relatively low, the equity position, i.e. diff erences in the calculatory euro values of these amounts (translation risk) is not actively hedged. At 31 December 2007 the total non-euro-denominated equity of the Group's foreign subsidiaries amounted to EUR 5.2 million (31 Dec. 2006: EUR 5.6 million).
| Sensitivity to market risks arising from fi nancial instruments as required by IFRS 7 Profi t or Loss | 2007 Profi t or Loss |
2006 Profi t or Loss |
|---|---|---|
| +–10% change in EUR/USD exchange rate | +–36 | +–3 |
| +–10% change in EUR/SEK exchange rate | +–48 | +–30 |
| +–10% change in EUR/NOK exchange rate | +–14 | +–42 |
| +–10 % change in EUR/GBP exchange rate | +–27 | +–81 |
Teleste's interest rate risk mainly comprises cash fl ow interest rate risk that arises from the interest-bearing liabilities. e loans have short-term interest rate as a reference rate. e interest period is of less than one year in all the Group's interest-bearing liabilities at the year-end 2007. All Group loans are denominated in euro. In 2007, the average interest rate of the loan portfolio was 4.3%. All fi nance lease agreements are fi xed-rate.
e Group does not hedge the risk position resulting from the fair value interest rate risk as the position is small.
| Period in which repricing occurs | Within 1 year |
Within 1 year– 5 years |
over 5 years |
Total |
|---|---|---|---|---|
| Financial instruments with fl oating interest rate Financial liabilities Loan from fi nancial institutions |
7 140 | 7 140 |
e Group's accounts receivables are dispersed to a number of customers worldwide. us the primary responsibility for commercial credit risks lies with the Group's geographical areas. Commercial credit risks are managed in accordance with the Group's credit policy and are reduced for example with collaterals. Credit risks are approved and monitored by the Group management team.
e credit risk related to fi nancial instruments, i.e. counterparty risk is managed in the Group administration. Counterparty risk realises if a counterparty is unable to meet its obligations. In order to minimise counterparty risks, Teleste seeks to limit the counterparties, such as banks and other fi nancial institutions, to those which have good credit rating. Liquid funds are invested in liquid instruments with low credit risk, e.g. in short-term bank deposits and commercial papers.
All receivables are without collateral. ere are no signifi cant concentrations of credit risk with respect to the receivables of the Group. Impairment losses on trade receivables are shown in note 5 Other operating expenses.
| 2007 | 2006 | |||||
|---|---|---|---|---|---|---|
| Analysis of trade receivables by age | Gross | Impairment loss |
Total | Gross | Impairment loss |
Total |
| Overdue trade receivables | 17 353 | 17 353 | 13 329 | 13 329 | ||
| 1–30 days | 4 122 | 4 122 | 3 190 | 3 190 | ||
| 31–60 days | 937 | 937 | 406 | 406 | ||
| Over 60 days | 1 086 | 1 086 | 982 | 20 | 962 | |
| Total | 23 498 | 23 498 | 17 907 | 20 | 17 887 |
| e maximum exposure to credit risk at the reporting date was: | 2007 | 2006 |
|---|---|---|
| Loans and receivables | 26 455 | 22 409 |
| Available for sale fi nancial assets | 732 | 1 116 |
Liquidity risk is monitored through Group's cash fl ow forecasts. e Group seeks to reduce liquidity risk through suffi cient cash reserves and credit facility arrangements as well as with balanced maturity profi le of loans. Effi cient cash and liquidity management also reduces liquidity risk. At the year-end 2007 the Group's cash reserves totaled EUR 7.7 million and its interest-bearing net debt EUR 9.5 million. e Group administration raises the Group's interest-bearing debt centrally. At 31 December 2007 Teleste had committed and available credit facilities as well as other agreed and undrawn loans amounting to EUR 23 million. Group's loan agreements and committed loan facilities include profi tability and cash fl ow covenants.
e recognition and measurement principles applied to derivatives are described in the accounting principles for the consolidated fi nancial statements. e nominal and fair values of derivatives at the balance sheet date are presented in the note Commitments and contingencies to the consolidated fi nancial statements.
As of 31 December 2007, the contractual maturity of interest-bearing liabilities was as follows:
| 2008 | 2009 | 2010 | 2011 | 2012 | |
|---|---|---|---|---|---|
| Loans from fi nancial institutions | 7 287 | ||||
| Trade payables | 7 724 | ||||
| Finance lease liabilities | 720 | 653 | 653 | 393 | 110 |
| Forward exchange contracts | |||||
| Outfl ow | –8 181 | ||||
| Infl ow | 8 029 | ||||
| Other liabilities | 190 |
As of 31 December 2006, the contractual maturity of interest-bearing liabilities was as follows:
| 2007 | 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|---|
| Loans from fi nancial institutions | 7 112 | ||||
| Trade payables | 9 462 | ||||
| Finance lease liabilities | 307 | 306 | 276 | 165 | 29 |
| Forward exchange contracts | |||||
| Outfl ow | –9 979 | ||||
| Infl ow | 10 124 | ||||
| Other liabilities | 140 |
e group's objective when managing capital is to secure the continuity of the business and to make investments possible with optimal capital structure. e capital structure of the Group is reviewed by the Board of Directors on a regular basis.
e Group monitors its capital on the basis of leverage ratio, the ratio of interest-bearing net debt to interest-bearing net debt, plus total equity. Interest-bearing net debt is calculated as borrowings less cash and cash equivalents. e Group's objective to maintain the leverage less than 50%.
| 2007 | 2006 | |
|---|---|---|
| Total borrowings | 9 483 | 8 012 |
| Cash and cash equivalents | 7 702 | 6 789 |
| Interest-bearing net debt | 1 781 | 1 223 |
| Total equity | 46 669 | 37 661 |
| Interest-bearing net debt and total equity | 48 450 | 38 884 |
| Leverage ratio | 3.7% | 3.1% |
All other fi nancial assets and liabilities are measured at their fair values in the consolidated balance sheet except for the long-term bank loan, which is measured at amortised cost.
Teleste uses forward exchage contracts to hedge its balance sheet items against transaction risk. So far Teleste does not apply hedge accounting as defi ned under IAS 39 in its IFRS fi nancial statements. Consequently the changes in the fair values of fi nancial instruments designated as hedging instruments are fully recognised through profi t and loss. e fair value changes of forward exchange contracts amounted to EUR 144 thousand in 2006 (2005: EUR 94 thousand) and they are recognised as adjustements to sales.
Available-for-sale fi nancial assets comprise unlisted shares that are measured at cost. e fair value of these investments could not be determined reliably and the estimate fl uctuates signifi cantly or the probabilities within the range of diff erent estimates are not reasonably determinable to be used to estimate the fair value.
e fair values of fi nance lease liabilities are based on the discounted future cash fl ows. e discount rate used is the market interest rates for homogeneous lease agreements.
For trade payables and other receivables than those arising from derivative instruments the notional amount equals their fair value as the discounting has no material eff ect considering the short maturity of these items.
Following discount rates were used for determining fair value:
| 2007 | 2006 | |
|---|---|---|
| Finance lease liabilities | 4.6% | 4.1% |
| Note | Financial assets and liabilities at fair values through income statement |
Loans and receivables |
Available for sale assets |
Financial liabilities measured at amortized cost |
Carrying amount by balance sheet item |
Fair value |
|
|---|---|---|---|---|---|---|---|
| 2007 Balance item | |||||||
| Non current fi nancial assets | |||||||
| Other fi nancial assets | 12 | 732 | 732 | 732 | |||
| Current fi nancial assets | |||||||
| Trade and other receivables | 15 | 26 455 | 26 455 | 26 455 | |||
| Carrying amount by category | 0 | 26 455 | 732 | 0 | 27 187 | 27 187 | |
| Non current fi nancial liabilities | |||||||
| Interest-bearing liabilities | 18 | 1 700 | 1 700 | 1 700 | |||
| Current fi nancial liabilities | |||||||
| Interest-bearing liabilities | 18 | 644 | 7 140 | 7 784 | 7 784 | ||
| Forward exchange contracts | 25 | 152 | 152 | 152 | |||
| Trade and other payables | 20 | 7 724 | 7 724 | 7 724 | |||
| Other current liabilities | 20 | 190 | 190 | 190 | |||
| Carrying amount by category | 2 496 | 0 | 0 | 15 054 | 17 550 | 17 550 | |
| 2006 Balance item | |||||||
| Non current fi nancial assets | |||||||
| Other fi nancial assets | 12 | 1 116 | 1 116 | 1 116 | |||
| Current fi nancial assets | |||||||
| Trade and other receivables | 15 | 22 265 | 22 265 | 22 265 | |||
| Forward exchange contracts | 25 | 144 | 144 | 144 | |||
| Carrying amount by category | 144 | 22 265 | 1 116 | 0 | 23 525 | 23 525 | |
| Non current fi nancial liabilities | |||||||
| Interest-bearing liabilities | 18 | 742 | 742 | 742 | |||
| Current fi nancial liabilities | |||||||
| Interest-bearing liabilities | 18 | 270 | 7 000 | 7 270 | 7 270 | ||
| Trade and other payables | 20 | 9 462 | 9 462 | 9 462 | |||
| Other current liabilities | 20 | 140 | 140 | 140 | |||
| Carrying amount by category | 1 012 | 0 | 0 | 16 602 | 17 614 | 17 614 |
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 23 Adjustments to cash fl ows from operating activities | ||
| Non-cash transactions: | ||
| Depreciation and amortisation | 3 552 | 2 393 |
| Employee benefi ts | 541 | 706 |
| Deferred taxes | 109 | 308 |
| Total | 4 202 | 3 407 |
| 24 Operating leases | ||
| Group as lessee | ||
| Minimum lease payments on non-cancellable operating leases are payable as follows: | ||
| Less than one year Between one and fi ve years |
1 097 1 539 |
955 1 910 |
e Group leases factory and offi ce facilities outside Finland under operating leases. e leases typically run for a period of 2–5 years, normally with an option to renew the lease after that date. According to the index clauses of the leases lease payments are increased every two years.
e Group has sublet part of its production and offi ce property in Finland to an external company. e agreeement is valid until further notice. In 2007 the lease payments in respect of this part of property amounted to EUR 120 thousand (2006: EUR 106 thousand).
| 1 000 euros | 2007 | 2006 |
|---|---|---|
| 25 Commitments and contingencies | ||
| Collateral for own commitments Guarantees Other commitments |
184 365 |
819 731 |
| Rental and leasing liabilities Rental liabilities Lease liabilities |
1 112 1 523 |
928 1 937 |
| Currency derivatives Value of the underlying forward contracts Market value of the forward contracts |
7 746 –152 |
9 980 144 |
Teleste Group has related party relationships with its Board members and CEO.
| Companies owned by the Group and parent company | Group | Group |
|---|---|---|
| holding, | voting, | |
| % | % | |
| Parent company Teleste Oyj, Turku, Finland | ||
| DINH Technicom, Herstal, Belgium | 100 | 100 |
| DINH Telecom S.A, Herstal, Belgium | 100 | 100 |
| DINH Vlaanderen, Herstal, Belgium | 100 | 100 |
| Flomatik A/S, Porsgrun, Norway | 100 | 100 |
| Flomatik Network Services Ltd. Fareham, UK | 100 | 100 |
| Kaavisio Oy, Turku, Finland | 100 | 100 |
| PromaCom AB, Stockholm, Sweden | 100 | 100 |
| PromaCom Intressenten AB, Stockholm, Sweden | 100 | 100 |
| Suomen Turvakamera Oy, Vantaa, Finland | 100 | 100 |
| Suomen Yhteisantennit Oy, Turku, Finland | 100 | 100 |
| Teleste Belgium SPRL, Bryssel, Belgium | 100 | 100 |
| Teleste d.o.o., Ljutomer, Slovenia | 100 | 100 |
| Teleste Electronics (SIP), Shuzhou, China | 100 | 100 |
| Teleste France SAS, Paris, France | 100 | 100 |
| Teleste Försäljning AB, Malmö, Sweden | 100 | 100 |
| Teleste GmbH, Hannover, Germany | 100 | 100 |
| Teleste Kaurakatu Oy, Turku, Finland | 100 | 100 |
| Teleste LLC, Georgetown Texas, USA | 100 | 100 |
| Teleste s.r.o., Bratislava, Slovakia | 100 | 100 |
| Teleste Sweden AB (former Flomatik AB), Stockholm, Sweden | 100 | 100 |
| Teleste UK Ltd, Cambridge, UK | 100 | 100 |
| Teleste Video Networks AB (former S-Link AB), Täby, Sweden | 100 | 100 |
| Teleste Video Networks Sp zoo (former S-Link ssp), Krakow, Poland | 100 | 100 |
e key management personnel compensations
| 1 000 euros | 2007 | 2006 |
|---|---|---|
| CEO Salaries and other short-term benefi ts Performance share arrangement Share-based payments |
379 68 47 |
417 283 62 |
| Total | 494 | 762 |
During 2007 40,000 options were granted to the management of Teleste (2006: 0 options). e terms of the management share option plans are similar to those of other employees' share option plans, except for the terms of 2004 and 2007 options. According to the 2004 and 2007 option terms the recipient has to subscribe Teleste shares to the amount that equals his net annual salary. At 31 December 2007 management had 149,500 (2006: 135,000) options, of which 69,500 were exercisable (2006: 55,000). Management of the parent company has 0,67% or 118,525 of the parent company's shares (2006: 0,63% or 109,329 shares).
A voluntary pension fee for CEO amounted EUR 51 thousand (EUR 47 thousand in 2006).
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| Remuneration to Board members and Managing Director | ||
| Chairman of the Board Tapio Hintikka | 38 | 38 |
| Members of the Board | 88 | 88 |
| Tero Laaksonen | 22 | 22 |
| Pertti Raatikainen | 22 | 22 |
| Timo Toivila | 22 | 22 |
| Pekka Vennamo | 22 | 22 |
| CEO Jukka Rinnevaara | 494 | 762 |
| Total | 620 | 888 |
e contractual age of retirement of CEO of the parent company, Jukka Rinnevaara, is 60. As to the contract, his term of notice has been specifi ed as six (6) months in case the President and CEO decides to withdraw, and eighteen (18) months should the contract be terminated by the company. A fi xed remuneration for the Board is paid as shares of the company in accordance with the decision of the General Meeting. Remuneration of Board Meetings are paid in cash.
No cash loans were granted to nor commitments assumed or collaterals given regarding CEO or the members of the Board of Directors in 2007 and 2006.
e Group management is not aware of any signifi cant events occurred after the balance sheet date, which would have had an impact on the fi nancial statements.
| 1 000 euros | Note | 2007 | 2006 |
|---|---|---|---|
| Net sales | 1 | 99 879 | 87 217 |
| Change in inventories of fi nished goods | –1 149 | 5 065 | |
| Other operating income | 2 | 2 339 | 2 703 |
| Materials, supplies and services | 3 | –47 499 | –49 509 |
| Wages, salaries and social expenses | 4 | –22 479 | –20 106 |
| Depreciation and amortisation | 5 | –1 783 | –1 735 |
| Other operating expenses | –21 265 | –17 953 | |
| Operating profi t | 8 043 | 5 683 | |
| Financial income and expenses | 6 | 1 272 | 4 481 |
| Profi t before taxes | 9 315 | 10 165 | |
| Appropriations | 7 | 75 | 162 |
| Paid group contribution | 7 | –350 | 0 |
| Direct taxes | 8 | –1 910 | –1 475 |
| Profi t for the fi nancial period | 7 130 | 8 852 |
| Assets | |||
|---|---|---|---|
| 1 000 euros | Note | 2007 | 2006 |
| Non-current assets | |||
| Intangible assets | 9 | 807 | 1 558 |
| Property, plant and equipment | 9 | 4 320 | 4 166 |
| Investments | 10 | 20 767 | 14 977 |
| 25 894 | 20 701 | ||
| Current assets | |||
| Inventories | 11 | 10 644 | 12 501 |
| Trade and other receivables | 12 | 19 358 | 19 009 |
| Cash and cash equivalents | 13 | 2 492 | 4 080 |
| 32 494 | 35 590 | ||
| Total assets | 58 388 | 56 291 | |
| Shareholders' equity | |||
| Share capital | 14 | 6 967 | 6 955 |
| Share premium | 14 | 1 504 | 1 417 |
| Invested non-restricted equity | 14 | 2 531 | 0 |
| Retained earnings | 14 | 16 141 | 10 583 |
| Profi t for the fi nancial period | 14 | 7 130 | 8 852 |
| 34 273 | 27 807 | ||
| Appropriations | 7 | 1 047 | 1 122 |
| Provisions | 15 | 889 | 1 176 |
| Liabilities | |||
| Short-term liabilities | 17 | 22 179 | 26 186 |
| Total equity and liabilities | 58 388 | 56 291 |
| Cash Flow Statement | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| Cash fl ow from operations | ||
| Operating profi t | 8 043 | 5 683 |
| Adjustments to operating profi t | 1 614 | 1 250 |
| Change in net working capital | –1 768 | –8 715 |
| Interest income | 223 | 134 |
| Interest expenses | –727 | –303 |
| Dividend income | 1 602 | 4 806 |
| Paid group contribution | –350 | 0 |
| Other fi nancial items | –142 | –156 |
| Taxes paid | –2 090 | –1 085 |
| Cash fl ow from operations | 6 405 | 1 614 |
| Investments | ||
| Other tangible assets | –1 080 | –723 |
| Sale of shares | 705 | 0 |
| Investments in subsidiary shares | –5 835 | –3 677 |
| Cash fl ow from investments | –6 210 | –4 400 |
| Cash fl ow before fi nancing | 195 | –2 786 |
| Financing | ||
| Short-term liabilities | 0 | 4 000 |
| Paid dividends | –3 413 | –2 697 |
| Share issue | 1 630 | 161 |
| Financing total | –1 783 | 1 464 |
| Change in liquid funds | –1 588 | –1 322 |
| Liquid funds 1.1. | 4 080 | 5 402 |
| Liquid funds 31.12. | 2 492 | 4 080 |
Teleste Corporation is the parent company of the Teleste Group. Business ID of Teleste Corporation is 1102267-8 with registered offi ce in Turku. e company registered address is Seponkatu 1, 20660 Littoinen.
Transactions in foreign currencies are recorded at the rates of exchange prevailing on the date of the transaction. At the end of the accounting period, unsettled foreign currency balances are translated into the accounting currency at the closing rate on the balance sheet date. Foreign exchange gains and losses on trade accounts receivable and payable are adjusted to revenues and operating expenses, respectively. Other foreign exchange gains and losses are recorded as fi nancial income and expenses.
e company has no other currency derivatives except for forward exchange agreements. Exchange agreements are designed to eliminate the eff ect of currency exposures on the company performance and fi nancial standing.
Our corporate hedging policy is to cover all material currency risks at least six months ahead. e eff ect on company performance of the exchange rate agreements is recorded on their exercise day.
e balance sheet values for fi xed assets are stated as historical cost, less the accumulated depreciation and amortisation. Depreciation and amortisation is calculated on straight-line basis over the expected useful lives of the assets. Estimated useful lives for various assets are:
| Intangible assets 3 years | |
|---|---|
| Goodwill 10 years | |
| Other capitalised expenditure 3 years | |
| Buildings 25 to 33 years | |
| Machinery 3 to 5 years | |
| Computers 0 to 3 years | |
Write-downs on permanent impairment of the assets are recorded when it becomes evident that the carrying amount is not recoverable.
Companies acquired or established during the fi nancial period are included in the subsidiary shares as of date of acquisition or formation. Companies disposed of in the fi nancial period have been included in the subsidiary shares up to the date of disposal.
Long-term investments and receivables include fi nancial assets, which are intended to be held for over one year.
Purchases made under operating leases and capital leases are entered into income statement as renting expenses.
Inventories are stated at the lower of cost or net realisable value. Acquisition cost is determined using the fi rstin-fi rst-out (FIFO) method. In addition to variable expenditure, value of inventory includes their share of the fi xed expenditure under purchases and manufacturing.
Cash and cash equivalents include cash in hand and in bank. Short-term investments include other funds equivalent to cash, such as commercial papers.
Net sales include revenue from services rendered and goods sold, adjusted for discounts granted, sales-related taxes and eff ects of the translation diff erences. Revenue is recognised when services are rendered, or when the goods are delivered to the customer.
Percentage of completion method: sales and anticipated profi ts under signifi cant long-term engineering and construction contracts are recorded on a percentage-ofcompletion basis, using units of delivery (based on predetermined milestones) or the cost-to-cost method of accounting as the measurement basis. Estimated contract profi ts are recorded in earnings in proportion to recorded sales. In the cost-to-cost method, sales and profi ts are recorded after considering the ratio of accumulated costs to estimated total costs to complete each contract. In the event that the company can be held as the main contractor of a long-term delivery contract, various product expenses, including raw materials and labour costs, will be accounted for in the calculation of the completion percentage. Possible changes in the anticipated total expenses or loss related to a long-term delivery contract are expensed as incurred.
R&D expenses are recorded as revenue expenditure.
e statutory pension liabilities of Finnish subsidiaries in the company are funded through pension insurance.
Income tax includes tax on profi t for the current fi nancial period and the accrual adjustment for the preceding fi nancial period.
Treasury shares acquired by the Group are not included in balance. As to this, fi nal accounts for the year of comparison have been adjusted by eliminating the value of treasury shares from the company fi xed assets and the equity. is adjustment is based on an amendment of the Finnish accounting legislation. Use of own shares are recognised in invested non-restricted equity since 3 May 2007.
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 1 Net sales | ||
| Net sales by segments | ||
| Broadband Cable Networks Video Networks |
88 067 11 812 |
73 934 13 283 |
| Total | 99 879 | 87 217 |
| Net sales by market area | ||
| Finland | 8 704 | 7 848 |
| Scandinavia Other Europe |
14 210 71 830 |
14 136 58 733 |
| Others | 5 135 | 6 500 |
| Total | 99 879 | 87 217 |
| 2 Other operating income | ||
| R&D subvention and others | 2 339 | 2 703 |
| Total | 2 339 | 2 703 |
| 3 Materials and services | ||
| Purchases | 44 049 | 47 837 |
| Change in inventories | 708 | –291 |
| Purchased services | 44 757 2 742 |
47 546 1 963 |
| Total | 47 499 | 49 509 |
| 4 Personnel expenses | ||
| Wages and salaries | 18 542 | 16 578 |
| Pension costs Other personnel costs |
2 678 1 261 |
2 401 1 127 |
| Total | 22 479 | 20 106 |
| Remuneration to Board members and Managing Directors | 572 | 847 |
| Cash loans, securities or contingent liabilities were not granted to the President | ||
| or to the members of the Board of Directors. | ||
| Year-end personnel | 443 | 435 |
| Average personnel | 467 | 436 |
| Personnel by function at the year-end | ||
| Research and Development | 143 | 119 |
| Production and Material Management | 237 | 252 |
| Sales and marketing Finance and IT |
33 30 |
39 25 |
| Total | 443 | 435 |
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 5 Depreciation according to plan | ||
| Other capitalized expenditure | 392 | 305 |
| Buildings | 297 | 297 |
| Machinery and equipment | 342 | 381 |
| Goodwill on consolidation | 752 | 752 |
| Total | 1 783 | 1 735 |
| Change in accumulated depreciation diff erence | ||
| Buildings | 187 | 170 |
| Other capitalized expenditure | –112 | –8 |
| Total | 75 | 162 |
| 6 Financial income and expenses | ||
| Interest income | 108 | 92 |
| Interest income from Group companies | 115 | 42 |
| Interest expenses | –671 | –303 |
| Interest expenses to Group companies | –56 | 0 |
| Currency diff erences | –142 | –171 |
| Other fi nancial income and expenses | 316 | 15 |
| Dividend income from Group companies | 1 592 | 4 800 |
| Dividend income | 10 | 6 |
| Total | 1 272 | 4 481 |
| 7 Appropriations and deferred tax assets and liabilities in the parent company | ||
| Accumulated depreciation in excess of plan | 1 047 | 1 122 |
| 8 Income taxes | ||
| Direct taxes | 1 966 | 1 490 |
| Taxes from previous years | –56 | –15 |
| Total | 1 910 | 1 475 |
| Intangible assets | Tangible assets | |||||
|---|---|---|---|---|---|---|
| Intangible rights |
Land | Buildings | Machinery | Other capitalized expenditure |
Total | |
| Acquisition cost 1.1. | 7 579 | 108 | 5 041 | 8 180 | 2 833 | 16 162 |
| Increases | 0 | 16 | 233 | 296 | 664 | 1 209 |
| Decreases | 0 | 0 | 0 | 0 | –24 | –24 |
| Acquisition cost 31.12. | 7 579 | 124 | 5 274 | 8 476 | 3 473 | 17 347 |
| Accumulated depreciation 1.1. | 6 020 | 0 | 2 246 | 7 522 | 2 228 | 11 996 |
| Depreciation | 752 | 0 | 298 | 339 | 394 | 1 031 |
| Accumulated depreciation 31.12. | 6 772 | 0 | 2 544 | 7 861 | 2 622 | 13 027 |
| Book value 31.12.2007 | 807 | 124 | 2 730 | 615 | 851 | 4 320 |
| Book value of machinery and equipment 31.12.2007 | 412 | |||||
| Book value of machinery and equipment 31.12.2006 | 492 |
| Notes | |||
|---|---|---|---|
| Parent company | Shares in group companies |
Shares others |
Total |
| 10 Investments | |||
| Acquisition cost 1.1. Increase Acquisition cost 31.12. |
14 546 6 181 20 727 |
1 116 –391 725 |
15 662 5 790 21 452 |
| Accumulated depreciation 1.1. Accumulated depreciation 31.12. |
–685 –685 |
0 0 |
–685 –685 |
| Book value 31.12.2007 | 20 042 | 725 | 20 767 |
| 11 Inventories | 2007 | 2006 | |
| Raw materials and consumables Work in progress Finished goods |
2 382 3 844 4 418 |
3 090 5 363 4 048 |
|
| Total | 10 644 | 12 501 | |
| 12 Current assets | |||
| Accounts receivables Accounts receivables from Group companies Other receivables from Group companies Accrued income |
12 311 4 642 797 1 608 |
14 540 1 173 685 2 611 |
|
| Total | 19 358 | 19 009 | |
| 13 Liquid funds | |||
| Cash and cash equivalents | 2 492 | 4 080 | |
| 14 Changes in shareholders' equity | 2007 | 2006 | |
| Share capital 1.1. Share issue Share capital 31.12. |
6 955 12 6 967 |
6 955 0 6 955 |
|
| Share premium fund 1.1. Share issues Use of own shares |
1 416 87 0 |
1 276 141 –1 |
|
| Share premium fund 31.12. | 1 503 | 1 416 | |
| Invested non-restricted equity 1.1. Share issues Own share Invested non-restricted equity 31.12. |
0 1 531 1 000 2 531 |
0 0 0 0 |
|
| Retained earnings 1.1. Dividends |
19 435 –3 413 |
12 968 –2 697 |
|
| Transfer from treasury shares Retained earnings 31.12. Profi t for the fi nancial period |
118 16 141 7 130 |
311 10 583 8 852 |
|
| Accumulated profi t 31.12. Total |
23 271 34 273 |
19 435 27 807 |
Company's registered share capital consists of one serie and is divided into 17,671,305 shares at 1 vote each.
| Notes | ||
|---|---|---|
| 1 000 euros | 2007 | 2006 |
| 15 Obligatory provisions | ||
| Provision for guarantees | 889 | 1 069 |
| Provision for restructuring Total |
0 889 |
107 1 176 |
| 16 Long-term liabilities | ||
| Other interestbearing liabilities | 0 | 0 |
| Total | 0 | 0 |
| 17 Short term liabilities | ||
| Bank loans | 7 000 | 7 000 |
| Advance payments received | 95 | 95 |
| Accounts payables | 4 757 | 6 914 |
| Accounts payables from Group companies | 1 911 | 2 418 |
| Other current liabilities | 443 | 2 779 |
| Other current liabilities from Group companies | 1 691 | 1 691 |
| Accrued liabilities | 6 282 | 5 289 |
| Total | 22 179 | 26 186 |
| 18 Contingent liabilities and pledged assets | ||
| Leasing liabilities: | ||
| For next year | 526 | 476 |
| For later years | 458 | 921 |
| Total | 984 | 1 397 |
| Rental liabilities | 268 | 257 |
| Liabilities on own behalf | ||
| Bank guarantees | 184 | 819 |
| Guarantees given on behalf of subsidiaries | 700 | 0 |
| 19 Currency derivates | ||
| Value of underlying forward contracts | 7 746 | 9 980 |
| Market value of forward contracts | –112 | 144 |
Forward contracts are used only for hedging currency exchange risks.
21 Own shares
| Group's share, % |
Parent company's share, % |
|
|---|---|---|
| 20 Companies owned by the Group and parent company | ||
| DINH Technicom, Herstal, Belgium | 100 | 100 |
| DINH Telecom S.A, Herstal, Belgium | 100 | 0 |
| DINH Vlaanderen, Herstal, Belgium | 100 | 0 |
| Flomatik A/S, Porsgrun, Norway | 100 | 100 |
| Flomatik Network Services Ltd. Fareham, UK | 100 | 100 |
| Kaavisio Oy, Turku, Finland | 100 | 100 |
| PromaCom AB, Stockholm, Sweden | 100 | 100 |
| PromaCom Intressenten AB, Stockholm, Sweden | 100 | 0 |
| Suomen Turvakamera Oy, Vantaa, Finland | 100 | 100 |
| Suomen Yhteisantennit Oy, Turku, Finland | 100 | 100 |
| Teleste Belgium SPRL, Bryssel, Belgium | 100 | 100 |
| Teleste d.o.o., Ljutomer, Slovenia | 100 | 0 |
| Teleste Electronics (SIP), Shuzhou, China | 100 | 100 |
| Teleste France SAS, Paris, France | 100 | 100 |
| Teleste Försäljning AB, Malmö, Sweden | 100 | 100 |
| Teleste GmbH, Hannover, Germany | 100 | 100 |
| Teleste Kaurakatu Oy, Turku, Finland | 100 | 100 |
| Teleste LLC, Georgetown Texas, USA | 100 | 100 |
| Teleste s.r.o., Bratislava, Slovakia | 100 | 100 |
| Teleste Sweden AB (former Flomatik AB), Stockholm, Sweden | 100 | 0 |
| Teleste UK Ltd, Cambridge, UK | 100 | 100 |
| Teleste Video Networks AB (former S-Link AB), Täby, Sweden | 100 | 100 |
| Teleste Video Networks Sp zoo (former S-Link ssp), Krakow, Poland | 100 | 100 |
Number of shares Percentage of share capital and votes
| Teleste Oyj owns own shares 31.12.2007 | 352 482 | 1.99 |
|---|---|---|
| Number of shares | Percentage of share capital and votes |
|
| 22 Major Shareholders 31.12.2007 | ||
| Sampo Life Insurance Company Ltd. | 1 624 200 | 9.19 |
| Ilmarinen Mutual Pension Insurance Company | 894 776 | 5.06 |
| Kaleva Mutual Insurance Company | 798 541 | 4.52 |
| FIM Fenno Mutual Fund | 603 868 | 3.42 |
| State Pension Fund | 500 000 | 2.83 |
| Varma Mutual Insurance Company | 498 650 | 2.82 |
| Aktia Capital Mutual Fund | 487 200 | 2.76 |
| Op-Suomi Small Cap | 461 016 | 2.61 |
| Skagen Vekst Verdipapierfond | 437 000 | 2.47 |
| Fondita Nordic Small Cap Placfond | 375 000 | 2.12 |
| Teleste Corporation | 352 482 | 1.99 |
| Nordea Nordic Small Cap Mutual Fund | 302 156 | 1.71 |
| Odin Finland | 284 050 | 1.61 |
| Mutual Insurance Company Pension-Fennia | 220 000 | 1.24 |
| FIM Forte Mutual Fund | 200 240 | 1.13 |
| Evli Bank Plc. | 190 219 | 1.08 |
| Mandatum Suomi Kasvuosake Mutual Fund | 189 999 | 1.08 |
| Veritas Pension insurance company | 175 000 | 0.99 |
| Carnegie Osake Mutual Fund | 170 136 | 0.96 |
| Aktia Secura Mutual fund | 146 150 | 0.83 |
| Nordea Fennia Plus Mutual fund | 143 017 | 0.81 |
| Sumato Oy | 142 610 | 0.81 |
| Svenska litteratursällskapet i Finland r.f. | 121 000 | 0.68 |
| Fondita Nordic Micro Cap Mutual Fund | 110 000 | 0.62 |
| Evli Nordic Tmt | 105 887 | 0.60 |
| Foreign and nominee register accounts | 3 625 268 | 20.51 |
| Others | 4 512 840 | 25.54 |
| Total | 17 671 305 | 100.00 |
| Shareholder's by segments | Number of shares | Percentage of share |
|---|---|---|
| Corporations | 1 818 473 | 10.29 |
| Financial and insurance institutions | 5 350 876 | 30.28 |
| Public organizations | 2 318 476 | 13.12 |
| Non-profi t organizations | 1 072 319 | 6.07 |
| Households | 3 485 893 | 19.73 |
| Foreign and nominee register accounts | 3 625 268 | 20.51 |
| Total | 17 671 305 | 100.00 |
| Shares | Number of shareholders | of shares | Percentage Number of shares | Percentage of shares |
|---|---|---|---|---|
| 1–100 | 1 263 | 24.01 | 90 689 | 0.51 |
| 101–1 000 | 3 146 | 59.81 | 1 280 667 | 7.25 |
| 1 001–10 000 | 757 | 14.39 | 2 212 740 | 12.52 |
| 10 001–100 000 | 69 | 1.31 | 1 864 801 | 10.55 |
| 100 001– | 25 | 0.48 | 9 533 197 | 53.95 |
| Total | 5 260 | 100.00 | 14 982 094 | 84.78 |
| Nominee register accounts | 2 689 211 | 15.22 | ||
| Total | 17 671 305 | 100.00 |
| Number of shares | Percentage of shares |
Percentage of votes |
|
|---|---|---|---|
| CEO and Board Members | 118 525 | 0.67 | 0.67 |
Number of shares entitled to subscribe with options
| Number of shares | Percentage of shares and votes |
|
|---|---|---|
| CEO | 149 500 | 0.8 |
| Other option holders | 764 462 | 4.1 |
| 2002 program warrants hold by the group | 23 450 | 0.1 |
| 2004 program warrants hold by the group | 98 000 | 0.5 |
| 2007 program warrants hold by the group | 20 000 | 0.1 |
| Total | 1 055 412 | 5.64 |
As to the Annual General meeting scheduled for 1 April 2008, the Board proposes that a dividend of EUR 0,24 (EUR 0,20) per share be paid for the outstanding shares for the year 2007.
Signatories to the Annual Report and Financial Statements
Helsinki 29 January 2008
TELESTE CORPORATION Board of Directors
Chairman Member Member
Tapio Hintikka Tero Laaksonen Pertti Raatikainen
Timo Toivila Pekka Vennamo Jukka Rinnevaara Member Member President and CEO
e above fi nancial statements and the report of Board of Directors have been prepared in accordance with generally accepted accounting principles in Finalnd. Our auditors report have been issued today.
Helsinki 29 January 2008
KPMG OY AB
Sixten Nyman Authorised Public Accountant
We have audited the accounting records, the report of the Board of Directors, the fi nancial statements and the administration of Teleste Oyj for the period 1.1.–31.12.2007. e Board of Directors and the Managing Director have prepared the consolidated fi nancial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, containing the consolidated balance sheet, income statement, cash fl ow statement, statement on the changes in equity and notes to the fi nancial statements, as well as the report of the Board of Directors and the parent company's fi nancial statements, prepared in accordance with prevailing regulations in Finland, containing the parent company's balance sheet, income statement, cash fl ow statement and notes to the fi nancial statements. Based on our audit, we express an opinion on the consolidated fi nancial statements, as well as on the report of the Board of Directors, the parent company's fi nancial statements and the administration.
We conducted our audit in accordance with Finnish Standards on Auditing. ose standards require that we perform the audit to obtain reasonable assurance about whether the report of the Board of Directors and the fi nancial statements are free of material misstatement. An audit includes examining on a test basis evidence supporting the amounts and disclosures in the report and in the fi nancial statements, assessing the accounting principles used and signifi cant estimates made by the management, as well as evaluating the overall fi nancial statement presentation. e purpose of our audit of the administration is to examine whether the members of the Board of Directors and the Managing Director of the parent company have complied with the rules of the Companies Act.
In our opinion the consolidated fi nancial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view, as defi ned in those standards and in the Finnish Accounting Act, of the consolidated results of operations as well as of the fi nancial position.
In our opinion the parent company's fi nancial statements have been prepared in accordance with the Finnish Accounting Act and other applicable Finnish rules and regulations. e parent company's fi nancial statements give a true and fair view of the parent company's result of operations and of the fi nancial position.
In our opinion the report of the Board of Directors has been prepared in accordance with the Finnish Accounting Act and other applicable Finnish rules and regulations. e report of the Board of Directors is consistent with the consolidated fi nancial statements and the parent company's fi nancial statements and gives a true and fair view, as defi ned in the Finnish Accounting Act, of the result of operations and of the fi nancial position.
e consolidated fi nancial statements and the parent company's fi nancial statements can be adopted and the members of the Board of Directors and the Managing Director of the parent company can be discharged from liabilityfor the period audited by us. e proposal by the Board of Directors regarding the disposal of distributable funds is in compliance with the Companies Act.
Helsinki January 29, 2008
KPMG OY AB
Sixten Nyman Authorised Public Accountant
| Financial Indicators 2003–2007 | FAS 2003 | IFRS 2004 | IFRS 2005 | IFRS 2006 | IFRS 2007 |
|---|---|---|---|---|---|
| Profi t and loss account, balance sheet | |||||
| Net sales, Meur | 54.2 | 66.0 | 82.6 | 101.8 | 125.1 |
| Change, % | –18.8 | 21.8 | 25.1 | 23.2 | 22.9 |
| Sales outside Finland, % | 81.9 | 85.1 | 89.3 | 90.6 | 91.2 |
| Operating profi t, Meur | 1.8 | 5.6 | 8.6 | 9.8 | 13.2 |
| % of net sales | 3.3 | 8.5 | 10.4 | 9.6 | 10.5 |
| Profi t after fi nancial items, Meur | 1.5 | 5.4 | 8.3 | 9.3 | 12.7 |
| % of net sales | 2.8 | 8.2 | 10.1 | 9.1 | 10.1 |
| Profi t before taxes, Meur | 1.5 | 5.4 | 8.3 | 9.3 | 12.7 |
| % of net sales | 2.8 | 8.2 | 10.1 | 9.1 | 10.1 |
| Profi t for the fi nancial period, Meur | 1.7 | 3.9 | 6.0 | 6.9 | 9.4 |
| % of net sales | 3.1 | 5.9 | 7.2 | 6.8 | 7.5 |
| R&D expenditure, Meur | 5.8 | 6.9 | 8.6 | 9.8 | 13.1 |
| % of net sales | 10.7 | 10.4 | 10.5 | 9.7 | 10.5 |
| Gross investments, Meur | 3.4 | 5.4 | 4.1 | 6.2 | 12.3 |
| % of net sales | 6.3 | 8.2 | 4.9 | 6.1 | 9.8 |
| Interest bearing liabilities, Meur | 10.0 | 10.8 | 3.9 | 8.0 | 9.5 |
| Shareholder's equity, Meur | 27.0 | 27.7 | 32.4 | 37.7 | 46.7 |
| Total assets, Meur | 48.1 | 54.4 | 54.8 | 68.2 | 77.9 |
| Personnel and orders | |||||
| Average personnel | 452 | 492 | 546 | 608 | 681 |
| Order backlog at year end, Meur | 6.6 | 20.7 | 22.7 | 28.1 | 21.5 |
| Orders received, Meur | 52.2 | 80.5 | 85.4 | 107.2 | 118.5 |
| Key metrics | |||||
| Return on equity, % | 7.1 | 15.1 | 19.8 | 19.7 | 22.2 |
| Return on capital employed, % | 5.3 | 16.1 | 23.7 | 24.3 | 27.1 |
| Equity ratio, % | 49.3 | 51.1 | 59.1 | 55.3 | 60.2 |
| Gearing, % | –17.7 | –22.9 | –14.3 | 3.2 | 3.8 |
| Earnings per share, euro | 0.10 | 0.23 | 0.35 | 0.41 | 0.55 |
| Earnings per share fully diluted, euro | n/a | 0.22 | 0.33 | 0.38 | 0.52 |
| Shareholders equity per share, euro | 1.41 | 1.65 | 1.92 | 2.22 | 2.69 |
| Teleste share | |||||
| Highest price, euro | 6.49 | 7.06 | 8.35 | 12.75 | 12.34 |
| Lowest price, euro | 2.40 | 5.14 | 5.85 | 6.46 | 6.47 |
| Closing price, euro | 5.41 | 6.02 | 7.45 | 11.63 | 6.71 |
| Average price, euro | 4.41 | 6.03 | 6.97 | 9.83 | 10.10 |
| Price per earnings | 53.7 | 25.8 | 21.0 | 28.6 | 12.3 |
| Market capitalization, Meur | 90.3 | 101.4 | 129.2 | 202.2 | 118.6 |
| Stock turnover, Meur | 43.7 | 74.2 | 75.3 | 138.9 | 72.4 |
| Turnover, number in millions | 9.9 | 12.3 | 10.8 | 14.2 | 7.2 |
| Turnover, % of capital stock | 57.2 | 70.9 | 62.3 | 81.4 | 40.5 |
| Average number of shares | 17 094 910 | 17 334 235 17 339 752 17 363 102 17 494 435 | |||
| Number of shares at the year-end | 17 304 248 | 17 339 752 17 339 752 17 389 302 17 671 305 | |||
| Number of shares subscribed, not registered 31.12. |
23 304 | 0 | 0 | 0 | 0 |
| Average number of shares, diluted w/o own shares |
18 715 000 | 17 918 580 18 001 437 18 022 505 17 971 752 | |||
| Number of shares at the year-end, diluted w/o own shares |
18 715 000 | 17 999 752 18 004 752 18 034 752 17 972 785 | |||
| Paid dividend, Meur | 1.3 | 2.0 | 2.7 | 3.4 | *4.2 |
| Dividend per share, euro | 0.08 | 0.12 | 0.16 | 0.20 | *0.24 |
| Dividend per net result, % | 79.4 | 52.2 | 45.7 | 49.1 | 43.9 |
| Eff ective dividend yield, % | 1.5 | 2.0 | 2.1 | 1.7 | 3.6 |
* e Board's proposal to the AGM
| Profi t/loss for the fi nancial period | x 100 | |
|---|---|---|
| Return on equity: | Shareholders' equity (average) |
|
| Return on capital employed: | Profi t/loss for the period after fi nancial items + fi nancing charges |
x 100 |
| Total assets – non-interest-bearing liabilities (average) |
||
| Equity ratio: | Shareholders' equity | x 100 |
| Total assets – advances received | ||
| Gearing: | Interest bearing liabilities – cash in hand and in bank – interest bearing assets |
x 100 |
| Shareholders' equity | ||
| Earnings per share: | Profi t for the period attributable to equity holder of the parent |
|
| Weighted average number of ordinary shares outstanding during the period |
||
| Earnings per share, diluted: | Profi t for the period attributable to equity holder of the parent (diluted) |
|
| Average number of shares – own shares + number of options at the period-end |
||
| Equity per share: | Shareholders' equity | |
| Number of shares – number of own shares at year-end | ||
| Price per earnings (P/E): | Share price at year-end | |
| Earnings per share | ||
| Eff ective dividend yield: | Dividend per share | |
| Share price at year-end |
| Video Networks - Sales | SWEDEN |
|---|---|
| FINLAND | Teleste Video Networks AB Services & Integration |
| (Nordic, Baltic & Russia) Teleste Corporation |
Catalinavägen 2 SE-18362 Täby |
| FI-20660 Littoinen Seponkatu 1 |
Telephone +46 8 6226 890 Sweden |
| FI-20101 Turku P.O. Box 323 |
+46 8 6226 891 Telefax |
| Telephone +358 2 2605 611 Finland |
UNITED KINGDOM Teleste UK |
| +358 2 2605 880 E-mail: [email protected] Telefax |
Middle East & Africa) (UK, Greece, Turkey, |
| Suomen Turvakamera Oy | Willie Snaith Road, Newmarket Suite 17, 8 Kings Court |
| Services & Integration Martinkyläntie 67 FI-01720 Vantaa |
Suff olk CB8 7SG United Kingdom |
| Finland | Telephone +44 1638 604 200 +44 1638 604 201 Telefax |
| +358 9 4778 1410 Telephone +358 9 4778 140 Telefax |
USA |
| E-mail: [email protected] | Teleste LLC |
| GERMANY | 1911 North Austin Avenue, Suite 404 |
| Teleste GmbH | Georgetown TX 78626 |
| (Germany, Austria, Switzerland & Italy) |
Telephone +1 512 8682 009 USA |
| Bundeskanzlerplatz 2-10 DE-53113 Bonn |
+1 512 8688 112 Telefax |
| Germany | AUSTRALIA |
| +49 7000 2288 366 +49 7000 2288 529 Telephone Telefax |
Unit 1, 45 Alexandra Place Teleste Australia |
| FRANCE | Queensland 4172 Murarrie |
| Teleste France SAS | Australia |
| 124, Avenue du Président (France, Spain & Portugal) |
Telephone +61 7 3890 0499 +61 7 3890 5988 Telefax |
| FR-93210 Saint-Denis la Plaine Wilson |
CHINA |
| Telephone +33 1 5593 4414 France |
Representative Offi ce Teleste Sanghai |
| +33 1 5593 1416 Telefax |
Apt 2701 |
| POLAND | Summit Service Apart Shanghai 200052 |
| Teleste Video Networks Sp zoo Ul. Krowoderskich Zuchow 14 |
Telephone +86 21 6212 3078 China |
| PL-31-272 Krakow (level II) |
+86 21 6212 5541 Telefax |
| Poland | INDIA |
| +48 12 6267 441 Telephone +48 12 6230 936 Telefax |
(India & Sri Lanka) Teleste India |
| P.O. Box 323 (Seponkatu 1), |
Sabinovská 12 SK-82102 Bratislava Slovakia Telephone +421 2 4820 8525 Telefax +421 2 4820 8510 SLOVENIA Teleste Slovenia d.o.o. Cezanjevci 50 SI-9240 Ljutomer Slovenia Telephone +386 2 5809 100 Telefax +386 2 5809 110 SPAIN Teleste Spain Rep. Offi ce Calle Cavanilles 5, 1-B ES-28007 Madrid Spain Telephone +34 91 4341 840 Telefax +34 91 5018 090 SWEDEN Teleste Försäljning AB Trehögsgatan 11 SE-21376 Malmö Sweden Telephone +46 40 552 170 Telefax +46 40 552 175 Teleste Sweden AB Ellipsvägen 5 SE-14175 Kungens Kurva Sweden Telephone +46 87 102 190 Telefax +46 87 102 191
Headquarters Teleste Corporation Seponkatu 1 FI-20660 Littoinen P.O. Box 323, FI-20101 Turku
Teleste Electronics (SIP) Co., Ltd.
FRANCE Teleste France
SLOVAKIA Teleste s.r.o.
Finland Switchboard: Telephone +358 2 2605 611 Telefax +358 2 2446 928
www.teleste.com Teleste Corporation
R&D Kaurakatu 44 FI-20740 Turku P.O. Box 323, FI-20101 Turku
Finland
Telephone +358 2 2605 611 Telefax +358 2 2605 797
Teleste Corporation
R&D
Kaskimäenkatu 1 FI-33900 Tampere
Finland
Telephone +358 2 2605 611 Telefax +358 2 2662 829
Teleste Corporation
R&D
Ul. Jana Paradowskiego 1 PL-54-622 Wroclaw
POLAND
Telephone +48 71 3736 029 Telefax +48 71 3574 763 Teleste Corporation Manufacturing Seponkatu 1 FI-20660 Littoinen P.O. Box 323, FI-20101 Turku
Finland Switchboard: Telephone +358 2 2605 611 Telefax +358 2 2446 928
Teleste Corporation Manufacturing Mietoistentie 124 FI-21270 Nousiainen
Finland
Telephone +358 2 2605 611 Telefax +358 2 2605 925
3 Rue Courtalin FR-77700 Magny le Hongre Telephone +33 1 6463 3223 Telefax +33 1 6043 6710 DE-31135 Hildesheim Telephone +49 5121 7509 80 Telefax +49 5121 7509 831 E-mail: [email protected] Telephone +91 98118 31959 Statybininku pr. 7A-58 Telephone +370 6 8746 048 Telefax +370 46 360 014 THE NETHERLANDS Teleste Netherlands NL-3831PE Leusden NL-3831AM Leusden Telephone +31 33 4321 220 Telefax +31 33 4321 222 Tormod Gjestelandsvei 21 NO-3936 Porsgrunn Telephone +47 3556 0500 Telefax +47 3556 0501 NO-1366 Lysaker, Oslo Telephone +47 6711 1660 Telefax +47 6711 1661 Telephone +7 499 747 41 85 Mobile +7 915 205 48 65
Telefax +45 4346 7613 France GERMANY Teleste GmbH Daimlerring 13 Germany INDIA Teleste India LITHUANIA Teleste Lithuania Klaipeda 94237 Lithuania Speelkamp 34 Postbus 451 Netherlands NORWAY Flomatik AS Norway Flomatik AS Oslo Fornebuveien 33 Norway RUSSIA Teleste Russia
Telephone +45 4346 7612
Manufacturing Building #52 DK-2600 Glostrup Denmark
DongJing Industrial Square #2 Dongfu Road Suzhou Jiangsu 215123 Naverland 2, 3rd Floor
P.R. China Telephone +86 512 6288 3652 Telefax +86 512 6288 3653 Broadband Cable Networks - Sales FINLAND Teleste Corporation Seponkatu 1 FI-20660 Littoinen P.O. Box 323, FI-20101 Turku Finland Switchboard: Telephone +358 2 2605 611 Telefax +358 2 2446 928 BELGIUM Teleste Belgium Paepsem Business Park Paepsemlaan 18 a BE-1070 Brussels Belgium Telephone +32 2 7110 090 Telefax +32 2 7110 099 Dinh-Telecom Rue d'Abhooz 22 BE-4040 Herstal Belgium Telephone +32 4 2403 535 Telefax +32 4 2403 536 E-mail: [email protected] CHINA Teleste Corporation Beijing Rep. Offi ce Rm 504. A Building Fuhua Mansion No 8 Chaoyangmen North Avenue Beijing 100027 China Telephone +86 10 6554 3132 Telefax +86 10 6554 3134 DENMARK Teleste Denmark
PromaCom AB Pyramidvägen 2D SE-16903 Solna Sweden Telephone +46 8 5149 4800 Telefax +46 8 5149 4801
UNITED KINGDOM Teleste UK Ltd 1 Gloster Court Whittle Avenue Segensworth West Fareham PO15 5SH United Kingdom Telephone +44 1489 604 060 Telefax +44 1489 604 065
| Notes |
|---|
Teleste Corporation Investor Relations Seponkatu 1, FI-20660 Littoinen, Finland P.O. Box 323, FI-20101 Turku, Finland Telephone (switchboard) +358 (0)2 2605 611 E-mail: [email protected]
The Annual Report can be downloaded as PDF-file from the corporate website: www.teleste.com The publication is available in Finnish and English.
Seponkatu 1, FI-20660 Littoinen P.O. Box 323, FI-20101 Turku, Finland Telephone +358 2 2605 611 Telefax +358 2 2446 928
Business ID 1102267-8
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