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SAF Tehnika
Quarterly Report • May 9, 2012
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Quarterly Report
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SAF Tehnika Interim Report for 9 months of financial year 2011/12 (July 1, 2011 – March 31, 2012)
TABLE OF CONTENTS
| KEY DATA…………………………………………………………………… | 3 |
|---|---|
| Share and Shareholdings……………………………………………………… | 4 |
| Information on management board and supervisory council members…… | 5 |
| Statement of Board's Responsibility…………………………………… | 8 |
| Management Report………………………………………………………… | 9 |
| Balance Sheet………………………………………………… | 13 |
| Income Statement for Q3 and 9 months of the financial year 2011/12……. | 14 |
| Cash Flow Statement………………………………………… | 15 |
| Statement of Changes in Equity……………………………………………… | 15 |
| Notes for Interim Report……………………………………………………… | 16 |
| Note 1 Short-term investments……………………………………………… | 16 |
| Note 2 Customer receivables………………………………………………… | 16 |
| Note 3 Other current receivables ………………………………………………. | 16 |
| Note 4 Loans ………………………………………………………………… | 16 |
| Note 5 Inventories…………….………………………………….…………. | 17 |
| Note 6 Shares in Companies……………….………………………………… | 17 |
| Note 7 Non-current physical assets …………………………………………. | 17 |
| Note 8 Accounts payable…………………………………………………… | 17 |
| Note 9 Tax liabilities …………………………………………………………… | 18 |
| Note 10 Salary related accrued expenses …………………………………… | 18 |
| Note 11 Segment information …………………………………………… | 18 |
| Note 12 Bad receivables ….…………………………………………………. | 20 |
| Note 13 Salaries, bonuses and social expenses …………………………… | 21 |
KEY DATA
SAF Tehnika is a telecommunications Equipment Company engaged in the development, production and distribution of digital microwave radio equipment. SAF Tehnika products provide wireless backhaul solutions for digital voice and data transmission covering wide frequency range and providing equipment for both licensed and un-licensed frequencies.
Know-how in modern wireless data transmission technologies, creativity in solutions, accuracy in design, precision in production and logistics make SAF Tehnika a unique designer and manufacturer of point-to-point microwave data transmission equipment. Located in Northern Europe, SAF Tehnika managed to acquire and consolidate valuable locally available intellectual resources of the microelectronics industry and spread its presence to 100 countries, covering all relevant market segments worldwide within just a decade.
The complete product range offers solutions to mobile network operators, data service providers, and government and private companies. Since its establishment in 1999, SAF Tehnika competes with such multinational corporations as Ericsson, Huawei, Alcatel and NEC.
SAF Tehnika JSC is a public joint stock company incorporated under the laws of the Republic of Latvia. The shares of AS SAF Tehnika are quoted on NASDAQ OMX Riga.
| Legal address: | Ganibu Dambis 24a | ||
|---|---|---|---|
| Riga, LV – 1005 | |||
| Latvia | |||
| Commercial Registry Nr.: | 40003474109 | ||
| VAT Registry Nr.: | LV40003474109 | ||
| Beginning of financial year: | 01.07.2011 | ||
| End of financial year: | 30.06.2012 | ||
| Phone: | +371 67046840 | ||
| Fax: | +371 67046809 | ||
| E-mail: | [email protected] | ||
Share and Shareholdings
SAF Tehnika shareholders (over 5%) as of 02.11.2011
| Name | Ownership interest (%) |
|---|---|
| Didzis Liepkalns | 17.05% |
| Andrejs Grišans | 10.03% |
| Normunds Bergs | 9.74% |
| SEB Luxemburg clients | 9.68% |
| Juris Ziema | 8.71% |
| Vents Lācars | 6.08% |
SAF Tehnika share price and OMX Riga index development for the reporting period
SAF Tehnika (SAF1R)
Period: July 1, 2011 – March 31, 2012
Currency: LVL
Marketplace: NASDAQ OMX Riga
Information on management and supervisory board members
| Name | Position | Ownership interest (%) | |||
|---|---|---|---|---|---|
| Normunds Bergs | Chairman | owns 9.74% of shares | |||
| Didzis Liepkalns | Vice Chairman | owns 17.05% of shares | |||
| Jānis Ennitis | Member | owns 0.73% of shares | |||
| Aira Loite | Member | owns 0.24% of shares |
SAF Tehnika Management Board:
SAF Tehnika Supervisory Board:
| Name | Position | Ownership interest (%) | |||
|---|---|---|---|---|---|
| Vents Lacars | Chairman | owns 6.08% of shares | |||
| Juris Ziema | Vice-Chairman | owns 8.71% of shares | |||
| Andrejs Grisans | Member | owns 10.03% of shares | |||
| Ivars Senbergs | Member | owns 4.79 % of shares | |||
| Juris Imaks | Member till | - | |||
| 11/11/2011 |
Information on professional and educational background of the management board members
Normunds Bergs
Normunds Bergs, born in 1963, is Chairman of the Board and Chief Executive Officer of SAF Tehnika AS. Mr. Bergs is one of the founders of SIA Fortech (co-founding company of SAF Tehnika AS) where during the periods from 1990 to 1992 and 1999 to 2000 he acted as Managing Director and General Director, respectively. Following SIA Fortech's merger with AS Microlink in 2000, Mr. Bergs became Chief Executive Officer of SAF Tehnika AS and a member of the Management Board of AS Microlink. From 1992 to 1999, Mr. Bergs worked for World Trade Centre Riga, where he held the position of General Director and became a Member of the Board of Directors in 1998. Mr. Bergs graduated from the Riga Technical University with a degree in radio engineering in 1986.
Didzis Liepkalns
Didzis Liepkalns, born in 1962, is Vice-Chairman of the Board and Technical Director of SAF Tehnika. D. Liepkalns founded a private enterprise SAF in 1995 and co-founded the company SAF Tehnika AS in 1999. From 1985 to 1990 he worked as an engineer at the Institute of Electronic Engineering and Computer Sciences. D. Liepkalns has graduated Riga Technical University with a degree in radio engineering in 1985.
Jānis Ennitis
Janis Ennitis, born in 1970, is Member of the Board and he holds the position of Vice-President Sales and Marketing in the Company. Prior to joining the Company in July 2006, Janis Ennitis was employed by information technology and electronics distribution company GNT Latvia (now ALSO) as Sales and Marketing Director. J. Ennitis holds a Master degree of Microelectronics from Riga Technical University which he graduated in 1996. Post graduate studies during 1996/1997 were held at the Technical University of Lausanne in Switzerland.
Aira Loite
Aira Loite, born in 1965, Member of the Board and Chief Operating Officer of SAF Tehnika. Prior to joining the company in November, 2007, she worked for SIA Lattelecom (2006/2007) initially as a Business Performance Director and later as a Director of Business Information and Control division. From 2000 till 2006 she held the position of the Head of Finances and Administration of SIA Microlink Latvia being the Board member as well. From 2004 till 2005 she was Chief Financial Officer of Microlink Group. A. Loite has graduated University of Latvia with a degree in applied mathematics in 1988. She has the degree of Master of Business Administration by the University of Salford (UK) in 2009.
Information on professional and educational background of the supervisory council members Vents Lācars,
born in 1968, is Chairman of the Supervisory Council and Vice-President Business Development of SAF Tehnika. Before co-founding the Company, from 1992 to 1999, he worked in SIA Fortech, where throughout his career he held positions of programmer, leading programmer, and project manager in the networking department and networking department manager. From 1990 to 1992 V. Lacars worked as a programmer at state electric utility company Latvenergo. V. Lacars has studied in Faculty of Physics and Mathematics, University of Latvia.
Juris Ziema,
born in 1964, co-founder of the Company, is Vice-Chairman of the Supervisory Council and Production Department Director. From 1998 to 1999 he worked as an engineer at Didzis Liepkalns private enterprise SAF. From 1987 to 1999 J. Ziema worked as an engineer at the Institute of Electronic Engineering and Computer Sciences. J. Ziema has graduated Riga Technical University with a degree in radio engineering in 1987.
Andrejs Grišāns
born in 1957, is Member of the Supervisory Council and Production Department Manager. A. Grisans is one of the co-founders of SAF Tehnika. Prior to joining the Company, he owned and managed a private company specializing in electronic equipment engineering, production and distribution. From 1992 to 1999 A. Grisans was involved in entrepreneurial activities in the field of radio engineering. He worked as an engineer-constructor at the Institute of Polymer Mechanics from 1984 to 1992 and in the constructing bureau Orbita from 1980 to 1984. A. Grisans has graduated Riga Technical University with a degree in radio engineering in1980.
Ivars Šenbergs,
born in 1962, Member of the Supervisory Council, also Chairman of the Board of SIA Juridiskais Audits, SIA Namipasumu parvalde, SIA Synergy Consulting, SIA IŠMU, SIA Dzirnavu centrs and Member of the Supervisory Council of AS MFS bookkeeping. From 1999 until 2000 he worked as Finance and Administrative Director at SIA Fortech. I. Senbergs has graduated Faculty of Law, University of Latvia.
Juris Imaks,
Member of the Supervisory Council till 11.11.2011. Born in 1971, worked for VAS "Latvijas Hipotēku un zemes banka" from 1997 up to 2002 as the Head of the Securities trading department. J.Imaks held the office of the Member of the Supervisory Council in the Regulator of public services of the Riga municipality (2005-2007), SIA "Rīgas nami" (2005-2009), AAS "RSK" (2007-2009), but in SIA "Latvijas Garantiju aģentūra" he held the office of the Chairman of the Supervisory Council (2008-2009). J.Imaks has graduated University of Latvia, Faculty of Economics and Management in 1994 as the Engineer-Economist, but in 2004 reached the Master's degree in Business Management.
Statement of Board's Responsibilities
The Board of SAF Tehnika JSC (hereinafter – the Company) is responsible for preparing the interim financial statements of the Company and its subsidiary. Interim financial statements of the Company have not been audited or otherwise checked by auditors.
The interim financial statements are prepared in accordance with the source documents and present fairly the financial position of the Company as at March 31, 2012 and the results of its operations and cash flows for the 9 month period ended March 31, 2012.
The interim financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU on a going concern basis. Appropriate accounting policies have been applied on a consistent basis. The interim financial statements have been prepared based on the same accounting principles applied in the Financial Statements for the year ended on June 30, 2011. Prudent and reasonable judgments and estimates have been made by the management in the preparation of the interim financial statements.
The Board of SAF Tehnika is responsible for the maintenance of proper accounting records, the safeguarding of the Company's assets and the prevention and detection of fraud and other irregularities in the Company. The Board is also responsible for the compliance with the laws of the countries in which the Company operates.
The interim financial statements have been prepared in Latvian Lats and Euro.
Currency Exchange rate for LVL/EUR is 0.702804
_________________________
Aira Loite COO, Member of the Management Board
Management Report
The Company's non-audited net sales for the third quarter of financial year 2011/12 were 2.15 million LVL (3.05 million EUR), showing a 23% decrease comparing to the respective reporting quarter of the previous financial year. The result well reflects the overall situation in telecommunications market which continues show general price erosion in all markets SAF is present.
During the reporting quarter, the Company's products were sold in 62 countries. Sales volumes have been distributed rather equal among all three reporting regions. Similar to previous reporting quarter of the current financial year Europe, CIS region posted the best results bringing 38% of the 3rd quarter's turnover. Compared to the respective reporting quarter in previous financial year, Europe and CIS regions has experienced a drop of 20% or 0.2 million LVL (0.28 million EUR) in turnover, meanwhile still posting on-average results if compared to combined results of both previous reporting quarters of the financial year.
The revenue from Asia, Middle East and African regions increased by 34% from the previous quarter of the financial year, however still did not reach similar results as previously experienced and posted a 5% year-to-year decrease in revenue generated. The decrease in demand from Asian customers for SAF's products and continuous political instability in the Middle East and Africa regions have been the main factors influencing the Company's revenue performance in these regions.
Although the company faced decline in total revenue generated during the reporting quarter from Americas region posting a 39% year-to-year drop, the region retained it's leadership position generating 37% from the company's 9 month turnover and showing a 33% year-to-year growth in the same comparison period. This further illustrates the strategic importance of the region and more intense demand for the Company's products for both Latin America and especially USA market. While continuing to work on establishing subsidiary's SAF North America activities and further investing in SAF brand and product recognition Company expects to improve it's performance in this region. SAF designed product manufacturing in Brazil are expected to begin generating a stronger foothold and brand recognition in the MERCOSUR countries.
During the reporting quarter company has successfully taken part in several industry exhibitions and events, from which the most notable have been: North America - Animal Farm (Salt Lake City, USA), ISC West 2012 (Las Vegas, USA), Europe – Cebit 2012 (Hanover, Germany).
Chart 1. Quarter 3 revenue breakdown comparative charts:
The Company's 2011/12 financial year's 9 month unaudited net turnover was 7.47 million LVL (10.63 million EUR), which represents a 16% year-to-year decrease. Both Europe, CIS and Asia, Africa and Middle East regions has shown a reduction in total turnover, whereas the Americas region continues to shown positive trends by showing a 33% year-to-year increase in revenue amounting 2.72 million LVL (3.87 million EUR), comprising 37% of the total the Company's turnover. The European customers have shown continuous appreciation for quality of equipment produced in European Union and the sales from the region summed up to 34%. Meanwhile the Asia, Africa and Middle East regions respectively captured 29% from the total revenue.
Chart 2. 9 months revenue breakdown comparative charts:
While the sales volume for CFIP product line slightly shrunk it still represent 71% from the total sales of the reporting quarter strengthening it's position as the main product line in SAF portfolio. Meanwhile FreeMile product line continues to shown positive trend by posting a growth of 31% in sales volumes compared to the previous quarter of the current year. The demand for CFM line products still remained stable posting slight growth, thus affirming that the product line is still popular among the customers.
While still providing high quality, customized solutions for its' clients, the company also continued to offer complementary data transmission products and accessories along it's own manufactured equipment. Within the Company's current reporting quarters revenue structure, the own produced equipment still captured the major part (70% - 75%) of the total revenue generated.
As the substantial part of long lasting overdue payments was paid during reporting quarter, it left positive impact on Company's financial result and allowed to decrease allowances for bad receivables. Although during the reporting quarter the Company posted losses related to foreign exchange rates, the same position still remained positive impact on company's financial year's 9 month profit, largely by taking the advantage of high USD to LVL exchange rate.
Company ended the third quarter of 2011/12 financial year with a net profit of 24 981 LVL (35 546 EUR), which is by 293 thousand LVL (416 thousand EUR), lower than in respective quarter of previous financial year. Meanwhile the Company's' unaudited net profit for the 9 months of 2011/12 financial year was 570 127 LVL (811 218 EUR). The main reason for such decrease in profit has been the diminished volume of sales and margins earned.
The Company's the financial year's 9 month net cash flow was negative -364 thousand LVL (-517 thousand EUR). As of March 31, 2012, the Company carried a net cash balance (excluding interest bearing liabilities) of 1.73 million LVL (2.47 million EUR).
Market overview
Based on the industry outlook for the next years, it is expected that the microwave radio market, where the company is operating, will continue to experience growth by delivering high capacity data traffic to actively growing customer base worldwide. Market researches predict that mobile data solutions will comprise the main part this segment. It is also expected that LTE will take over as the main market technology actively supported with Wi-Fi solutions in the areas with high customer density. Initial concerns against microwave technologies as not being capable to deliver high data capacity and suggestions of this technology soon being replaced by fiber connectivity is now overruled as new technologies are developed and introduced capable of delivering more than 1 GB data capacity.
The concept of mobile microcells which will be connected with network by means of wireless solution could be next wave for the development bringing new direction for microwave products.
In such growing conditions microwave market could approach the mass production structure showing high production volumes and substantial erosion of prices levels. In reaction to such developments, further consolidation between all active product manufacturers in this segment is expected. To maintain competitive edge even more active product and technology development competition will be seen among the surviving competitors. Therefore the attractiveness of product proposals will significantly increase at the same time bringing much lower total cost of the solution. This will give the opportunity for the customers with limited budgets to be able to capitalize on the advantages of microwave solutions in their networks.
Erosion on the general market price levels and rapid technology development requirements could further increase the entry barriers of some market segments.
Generally a very fierce competition is experienced in the microwave segment. SAF Tehnika continues to follow the approved strategy of maintaining competitiveness through constant technology development and delivering customized solutions that directly meets the customer's needs.
Guidance
Today SAF Tehnika is proceeding with research and development of next generation wireless data transmission devices with the aim to enrich its long-term competence in the market niche of microwave radio. Company is also looking into expanding its product portfolio with one of the incremental steps already made by recently announcing an addition to CFIP product line with releasing FreeMile 5.8GHz radio. By adding the product to the SAF-lastmile.com webshop, together with the earlier introduced license-free FreeMile products in 17 and 24 GHz frequency range, Company continues to pursue the improvement of its distribution mechanism to make the products more accessible to our customers. In addition, one of the key factors for better reaching out to customers has been the strengthening of local presence in regions rather distant from the manufacturing site. This has led to more localized approach and customer support and is expected to streamline and speed up the product deliveries and support to the region's customers.
Concerning other regions we see substantial business perspectives both in Brazilian as well as Arab Gulf state markets that are expected to yield returns in the near future. The Company will continue strengthening local presence in these and other target markets, following the positive indications of such activities already performed in North American market.
Apart from that company also sees continuous demand for it's main product: CFIP Lumina and by continuing to build the confidence in excellent product quality and performance SAF was proud to introduce the 5-year warranty policy for customers in our flagship regions of Europe and North America.
Due to uncertainty in the global financial situation and telecommunication market the Board of the Company cannot provide certain prognosis for sales figures and operational results despite positive results of the reporting quarter.
On March 31, 2011 the Company employed 163 people (168 people on March 31, 2011).
12
Balance sheet As of March 31, 2012
| Note | 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|---|
| CURRENT ASSETS | LVL | LVL | EUR | EUR | |
| Cash and bank | 1 743 031 | 2 141 414 | 2 480 110 | 3 046 958 | |
| Short-term investments | 1 | 932 293 | 1 416 035 | 1 326 533 | 2 014 836 |
| Customer receivables | 2 | ||||
| Accounts receivable | 2 170 344 | 2 439 296 | 3 088 121 | 3 470 806 | |
| Allowance for uncollectible receivables | -323 442 | -355 682 | -460 217 | -506 090 | |
| Total | 1 846 902 | 2 083 614 | 2 627 905 | 2 964 716 | |
| Other receivables | |||||
| Other current receivables | 3 | 131 651 | 110 | 187 322 | 157 |
| Short-term loans | 4 | 22 772 | 22 772 | 32 402 | 32 402 |
| Total | 154 423 | 22 882 | 219 724 | 32 558 | |
| Prepaid expenses | |||||
| Prepaid taxes | 160 297 | 33 353 | 228 082 | 47 457 | |
| Other prepaid expenses | 132 598 | 57 777 | 188 670 | 82 209 | |
| Total | 292 895 | 91 130 | 416 752 | 129 666 | |
| Inventories | 5 | ||||
| Raw materials | 972 301 | 891 195 | 1 383 460 | 1 268 056 | |
| Work-in-progress | 1 519 931 | 1 281 557 | 2 162 667 | 1 823 491 | |
| Finished goods | 899 194 | 832 830 | 1 279 438 | 1 185 010 | |
| Prepayments to suppliers | 26 803 | 46 037 | 38 137 | 65 505 | |
| Total | 3 418 229 | 3 051 619 | 4 863 702 | 4 342 063 | |
| TOTAL CURRENT ASSETS | 8 387 773 | 8 806 694 | 11 934 726 | 12 530 797 | |
| NON-CURRENT ASSETS | |||||
| Long-term financial assets | |||||
| Shares in subsidiaries | 6 | 511 | 0 | 727 | 0 |
| Shares in companies | 500 | 500 | 711 | 711 | |
| Long-term receivables | 2 | 0 | 186 970 | 0 | 266 034 |
| Deffered income tax | 73 032 | 57 179 | 103 915 | 81 358 | |
| Long-term loans | 4 | 7 591 | 30 363 | 10 801 | 43 203 |
| Total | 81 634 | 275 012 | 116 155 | 391 307 | |
| NON-CURRENT physical assets | 7 | ||||
| Plant and equipment | 2 202 934 | 2 106 367 | 3 134 493 | 2 997 090 | |
| Other equipment and fixtures | 1 142 306 | 1 140 824 | 1 625 355 | 1 623 246 | |
| Accumulated depreciation | -2 868 228 | -2 738 172 | -4 081 121 | -3 896 068 | |
| Prepayments for noncurrent physical assets | 8 484 | 3 845 | 12 072 | 5 471 | |
| Total | 485 496 | 512 864 | 690 799 | 729 740 | |
| Intagible assets | |||||
| Purchased licenses, trademarks etc. | 95 097 | 53 086 | 135 311 | 75 535 | |
| Total | 95 097 | 53 086 | 135 311 | 75 535 | |
| TOTAL NON-CURRENT ASSETS | 662 227 | 840 962 | 942 264 | 1 196 581 | |
| TOTAL ASSETS | 9 050 000 | 9 647 656 | 12 876 990 | 13 727 378 |
| LIABILITIES AND OWNERS' EQUITY | Note | 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 |
|---|---|---|---|---|---|
| CURRENT LIABILITIES | LVL | LVL | EUR | EUR | |
| Debt obligations | |||||
| Short-term loans from financial institutons | 10 395 | 11 161 | 14 792 | 15 882 | |
| Customer prepayments for goods and services | 53 888 | 174 718 | 76 676 | 248 601 | |
| Accounts payable | 8 | 1 028 676 | 1 105 315 | 1 463 674 | 1 572 722 |
| Tax liabilities | 9 | 173 322 | 270 466 | 246 615 | 384 838 |
| Salary-related accrued expenses | 10 | 262 761 | 394 023 | 373 875 | 560 644 |
| Provisions for guarantees | 50 512 | 27 994 | 71 872 | 39 832 | |
| Prepaid revenue | 10 603 | 3 874 | 15 088 | 5 513 | |
| TOTAL CURRENT LIABILITIES | 1 590 157 | 1 987 551 | 2 262 593 | 2 828 033 | |
| OWNERS' EQUITY | |||||
| Share capital | 2 970 180 | 2 970 180 | 4 226 185 | 4 226 185 | |
| Paid in capital over par | 2 004 204 | 2 004 204 | 2 851 725 | 2 851 725 | |
| Retained earnings | 1 915 332 | 1 797 640 | 2 725 272 | 2 557 811 | |
| Net profit for the financial year | 570 127 | 888 081 | 811 218 | 1 263 625 | |
| TOTAL OWNERS' EQUITY | 7 459 843 | 7 660 105 | 10 614 399 | 10 899 346 | |
| TOTAL LIABILITIES AND OWNERS' EQUITY | 9 050 000 | 9 647 656 | 12 876 990 | 13 727 378 |
| Note | 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|---|
| LVL | LVL | EUR | EUR | ||
| Net sales | 11 | 7 474 273 | 8 900 904 | 10 634 932 | 12 664 845 |
| Other operating income | 19 274 | 53 761 | 27 424 | 76 495 | |
| Total income | 7 493 547 | 8 954 665 | 10 662 357 | 12 741 340 | |
| Direct cost of goods sold or services rendered | -4 186 367 | -4 584 741 | -5 956 664 | -6 523 499 | |
| Marketing, advertising and public relations expenses | -320 033 | -259 221 | -455 366 | -368 838 | |
| Bad receivables | 12 | 124 021 | -152 349 | 176 466 | -216 773 |
| Operating expenses | -584 478 | -549 657 | -831 637 | -782 091 | |
| Salaries and social expenses | 13 | -1 523 720 | -1 422 269 | -2 168 058 | -2 023 706 |
| Bonuses and social expenses | 13 | -241 892 | -491 230 | -344 181 | -698 957 |
| Depreciation expense | -180 834 | -148 801 | -257 304 | -211 725 | |
| Other expenses | -54 352 | -127 933 | -77 336 | -182 032 | |
| Operating expenses | -6 967 655 | -7 736 201 | -9 914 080 | -11 007 622 | |
| EBIT | 525 892 | 1 218 464 | 748 277 | 1 733 718 | |
| Financial income (except ForEx rate difference) | 28 443 | 67 777 | 40 471 | 96 438 | |
| Financial costs (except ForEx rate difference) | -649 | 0 | -923 | 0 | |
| Foreign exchange +gain/(loss) | 109 687 | -200 024 | 156 071 | -284 609 | |
| Financial items | 137 481 | -132 247 | 195 618 | -188 171 | |
| EBT | 663 373 | 1 086 217 | 943 895 | 1 545 548 | |
| Corporate income tax | -93 246 | -198 136 | -132 677 | -281 922 | |
| Net profit | 570 127 | 888 081 | 811 218 | 1 263 625 |
*Earnings per share EPS 31.03.2012. = 0.19 LVL (0.27 EUR) EPS 31.03.2011. = 0.30 LVL (0.43 EUR)
Income Statement for Q3 of the financial year 2011/12
| 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|
| LVL | LVL | EUR | EUR | |
| Net sales | 2 144 255 | 2 771 775 | 3 051 000 | 3 943 881 |
| Other operating income | 2 349 | 44 862 | 3 342 | 63 833 |
| Total income | 2 146 604 | 2 816 637 | 3 054 342 | 4 007 713 |
| Direct cost of goods sold or services rendered | -1 219 455 | -1 375 682 | -1 735 128 | -1 957 419 |
| Marketing, advertising and public relations expenses | -111 760 | -101 850 | -159 020 | -144 919 |
| Bad receivables | 91 852 | 68 453 | 130 694 | 97 400 |
| Operating expenses | -187 377 | -186 411 | -266 613 | -265 239 |
| Salaries and social expenses | -523 921 | -520 124 | -745 472 | -740 070 |
| Bonuses and social expenses | -26 605 | -163 085 | -37 856 | -232 049 |
| Depreciation expense | -65 753 | -48 440 | -93 558 | -68 924 |
| Other expenses | -29 024 | -13 610 | -41 297 | -19 365 |
| Operating expenses | -2 072 043 | -2 340 749 | -2 948 252 | -3 330 586 |
| EBIT | 74 561 | 475 888 | 106 091 | 677 128 |
| Financial income (except ForEx rate difference) | 7 086 | 16 337 | 10 082 | 23 245 |
| Financial costs (except ForEx rate difference) | 0 | 0 | 0 | 0 |
| Foreign exchange +gain/(loss) | -52 052 | -110 371 | -74 063 | -157 044 |
| Financial items | -44 966 | -94 034 | -63 980 | -133 797 |
| EBT | 29 595 | 381 854 | 42 111 | 543 330 |
| Corporate income tax | -4 614 | -64 200 | -6 565 | -91 348 |
| Net profit | 24 981 | 317 654 | 35 546 | 451 982 |
*Earnings per share EPS 31.03.2012. = 0.01 LVL (0.01 EUR) EPS 31.03.2011. = 0.11 LVL (0.15 EUR)
Cash flow statement for 9 months of the financial year 2011/12
| 31.03.2012 31.03.2011 31.03.2012 31.03.2011 | ||||
|---|---|---|---|---|
| LVL | LVL | EUR | EUR | |
| CASH GENERATED FROM OPERATIONS (of which) | -68 121 | 124 563 | -96 927 | 177 237 |
| Cash received from customers | 7 554 227 | 8 329 853 | 10 748 698 | 11 852 314 |
| Cash paid to suppliers and employees | -7 330 500 | -8 207 243 | -10 430 362 | -11 677 855 |
| Received tax | -291 848 | 1 953 | -415 262 | 2 779 |
| NET CASH USED IN INVESTING ACTIVITIES (of which) | 317 530 | 228 830 | 451 804 | 325 596 |
| Cash paid for purchasing shares in subsidiary | -511 | 0 | -727 | 0 |
| Cash paid for other long-term investments (e.g. purchase of <50% shares) | 0 | -500 | 0 | -711 |
| Cash paid/received for short-term investments | 446 788 | 243 854 | 635 722 | 346 973 |
| Cash paid for purchasing non-current physical assets | -173 887 | -108 504 | -247 419 | -154 387 |
| Interest received | 45 140 | 93 980 | 64 228 | 133 721 |
| NET CASH USED IN FINANCING ACTIVITIES (of which) | -613 038 | -625 666 | -872 274 | -890 243 |
| Repayment of short-term loans | 1 291 | 4 981 | 1 837 | 7 087 |
| Repayment of long-term loans | 17 081 | 15 184 | 24 304 | 21 605 |
| Cash paid of long-term loans | 0 | -68 317 | 0 | -97 206 |
| Cash received from EU fonds | 51 731 | 105 627 | 73 607 | 150 294 |
| Dividends paid | -683 141 | -683 141 | -972 022 | -972 022 |
| TOTAL CASH FLOW: | -363 629 | -272 273 | -517 397 | -387 410 |
| Cash and cash equivalents as at the beginning of period | 2 106 660 | 2 413 687 | 2 997 507 | 3 434 367 |
| Cash and cash equivalents as at the end of period | 1 743 031 | 2 141 414 | 2 480 110 | 3 046 958 |
| NET INCREASE / DECREASE IN CASH AND CASH EQUIVALENTS | -363 629 | -272 273 | -517 397 | -387 410 |
Statement of changes in consolidated equity for the 9 months period ended March 31 2012
| Share capital |
Share premium |
Retained earnings |
Total | |
|---|---|---|---|---|
| LVL | LVL | LVL | LVL | |
| As at 30 June 2010 | 2 970 180 | 2 004 204 | 2 480 781 | 7 455 165 |
| Dividend relating to 2009/2010 | - | - | -683 141 | -683 141 |
| Profit for the year | - | - | 800 833 | 800 833 |
| As at 30 June 2011 | 2 970 180 | 2 004 204 | 2 598 473 | 7 572 857 |
| Dividend relating to 2010/2011 | - | - | -683 141 | -683 141 |
| Profit for the period | - | - | 570 127 | 570 127 |
| As at 31 March 2012 | 2 970 180 | 2 004 204 | 2 485 459 | 7 459 843 |
Statement of changes in consolidated equity for the 9 months period ended March 31 2012
| Share capital |
Share premium |
Retained earnings |
Total | ||
|---|---|---|---|---|---|
| EUR | EUR | EUR | EUR | ||
| As at 30 June 2010 | 4 226 185 | 2 851 725 | 3 529 833 | 10 607 744 | |
| Dividend relating to 2009/2010 | - | - | -972 022 | -972 022 | |
| Profit for the year | - | - | 1 139 482 | 1 139 482 | |
| As at 30 June 2011 | 4 226 185 | 2 851 725 | 3 697 293 | 10 775 204 | |
| Dividend relating to 2010/2011 | - | - | -972 022 | -972 022 | |
| Profit for the period | - | - | 811 218 | 811 218 | |
| As at 31 March 2012 | 4 226 185 | 2 851 725 | 3 536 489 | 10 614 400 |
Notes for interim report
Note 1 Short-term investments
| 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|
| Short-term investments | 932 293 | 1 416 035 | 1 326 533 | 2 014 836 |
| Short-term investments consist of deposits with a maturity period of more than 90 days commencing from 31/03/2012. |
Note 2 Customer receivables
| 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|
| LVL | LVL | EUR | EUR | |
| Long-term receivables | - | 186 970 | - | 266 034 |
| Accounts receivable Provisions for bad and doubtful accounts receivable |
2 170 344 (323 442) |
2 439 296 (355 682) |
3 088 121 (460 217) |
3 470 806 (506 090) |
| Total accounts receivable | 1 846 902 | 2 083 614 | 2 627 905 | 2 964 716 |
| Total receivables | 1 846 902 | 2 270 584 | 2 627 905 | 3 230 750 |
Total receivables were by 19% lower compared with the previous year reflecting decreasing sales in the reporting quarter Q3. Provisions for doubtful accounts receivable has decreased by 9%.
Long term receivables include those whose due date is more than 360 days from the balance date. There are no long term receivables on reporting date.
Note 3 Other current receivables
| 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|
| Other current receivables | 131 651 | 110 | 187 322 | 157 |
| Three research projects initiated by the Company are realised in "LEO kompetences centrs"(LEO) since summer 2011. LEO is the company co-founded by Latvian Electrical Engineering and electronic Industry Association (LETERA) members. The Company has paid-in for LEO 128 thousand LVL (182 thousand EUR) as a deposit for execution of projects. |
Note 4 Loans
| 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|
| Short-term loans | 22 772 | 22 772 | 32 402 | 32 402 |
| Long-term loans | 7 591 | 30 363 | 10 801 | 43 203 |
| 30 363 | 53 135 | 43 203 | 75 605 |
In order to facilitate the Company's product sales, encourage clients to buy the Company's products and at the same time following tender requirements, financing was assigned for a Belorussian client in 2010. Up to now all payments have been made according to schedule.
Note 5 Inventories
| 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|
| LVL | LVL | EUR | EUR | |
| Raw materials | 1 416 101 | 1 146 509 | 2 014 930 | 1 631 335 |
| Allowance for slow-moving items | (443 800) | (255 314) | (631 471) | (363 279) |
| Work-in- progress | 1 519 931 | 1 281 557 | 2 162 667 | 1 823 491 |
| Finished goods | 899 194 | 832 830 | 1 279 438 | 1 185 010 |
| Prepayments to suppliers | 26 803 | 46 037 | 38 137 | 65 505 |
| 3 418 229 | 3 051 619 | 4 863 702 | 4 342 063 |
Inventories in comparison with March 31, 2011 increased by 13% as the Company had to make inventory reserves in order to be able to produce large scale orders in competitive terms for all kind of products currently being in the Company's product list. Company also keeps components for previously produced and sold product types for repair and maintenance purpose.
During Q3 additional allowances for slow-moving items was recorded and in total increased year-to-year by 74% as components were consumed slower due to turnover decrease.
Note 6 Shares in Subsidiaries
| 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|
| LVL | LVL | EUR | EUR | |
| Shares in subsidiaries | 511 | - | 727 | - |
| With the aim to facilitate demand for SAF Tehnika products in USA and provide efficient | ||||
| local support for current and potential USA clients a subsidiary SAF North America was established. | ||||
| The Company owns 100% of SAF North America shares and has invested 511 LVL (1 000 USD) in |
its share capital on reporting date.
Note 7 Non-current assets
| 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|
| Plant and equipment | 2 202 934 | 2 106 367 | 3 134 493 | 2 997 090 |
| Other equipment and fixtures | 1 142 306 | 1 140 824 | 1 625 355 | 1 623 246 |
| Accumulated depreciation | (2 868 228) | (2 738 172) | (4 081 121) | (3 896 068) |
| Prepayments for noncurrent physical assets | 8 484 | 3 845 | 12 072 | 5 471 |
| 485 496 | 512 864 | 690 799 | 729 740 | |
Purchased licences, trademarks etc. 95 097 53 086 135 311 75 535 During 9 months of financial year 2011/12 the Company invested 184 thousand LVL (262 thousand EUR) in product certification, product development software, production equipment and IT.
Note 8 Accounts payable
| 31.03.2012 | 31.03.2011 | 31.03.2012 | 31.03.2011 | |
|---|---|---|---|---|
| LVL | LVL | EUR | EUR | |
| Accounts payable | 1 028 676 | 1 105 315 | 1 463 674 | 1 572 722 |
Note 9 Tax liabilities
| 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|
| Tax liabilities | 173 322 | 270 466 | 257 123 | 384 838 |
As the Company operates with profit corporate income tax (CIT) liabilities were calculated and accrued. Actually 54% out of all tax liabilities are accruals for CIT. The remaining part are running liabilities for social tax and personal income tax – 44%.
Note 10 Salary-related accrued expenses
| Salary-related accrued expenses | 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|---|
| 262 761 | 394 023 | 373 875 | 560 644 | ||
Salary–related accrued expenses were decreased by 33% in comparison with March 31, 2011. As financial targets were no reached lower individual bonus amounts were accrued.
Note 11 Segment information
a) The Company's operations are divided into two major structural units – SAF branded equipment designed and produced in-house – CFM (Hybrid/ PDH Radios), CFIP (Etherent/Hybrid/ superPDH systems) and FreeMile (Hybrid Radios for unlicensed frequency bands) as the first structural unit and 3rd party products for resale, like Antennas, cables, some OEMed products and accessories as the second unit.
CFIP – the major product line is represented by 4 respectable models:
-
a split mount PhoeniX hybrid radio system with Gigabit Ethernet + 20 E1 interfaces;
-
Lumina high capacity Full Outdoor all-in-one radio with Gigabit Ethernet traffic interface;
-
CFIP-108 entry level radio - perfect for upgrade of E1 networks into packet data networks;
-
Marathon FIDU low frequency low capacity system for servicing rural and industrial applications.
All CFIP radios are offered in most widely used frequency bands from 1.4 to 38 GHz, thus enabling the use of CFIP radios all across the globe.
PhoeniX radio represents the type of microwave radio which is taking the commanding role on the market at present. Full Outdoor units of Lumina and 108 modifications are of growing and developing radio type 'all-in-one' which has biggest potential as part of future data/packet networks.
SAF Tehnika was one of the first companies offering Full Outdoor radios from 2003, thus is well positioned to use the past experience for development of next generation product.
CFM microwave radio product line has been the main type of radio SAF has been supplying to the market over many years and is still demanded. Such medium capacity, mature, yet extremely reliable and feature rich radio is still required to deploy telecom networks in developing markets.
FreeMile product line is represented by 3 models covering unlicensed frequency bands in 5.8, 17 and 24 GHz, which are made available for use in a growing number of countries around the globe.
As demand for CFQ products has decreased substantially, it has been decided to phase out the entire CFQ product line starting from summer 2011, providing the CFQ basic functionality with CFIP PhoeniX M split mount system. The clients' requirements will be covered by full spectrum of CFIP and CFM products. Information about phased out CFQ line is included in the other products unit in order to provide unequivocal information for comparison purpose.
This note provides information about division of the Group's turnover and balance items by structural units by product type for 9 month of the financial year 2011/12 and financial year 2010/11.
| CFM; CFIP; FreeMile | Other | Total | ||||
|---|---|---|---|---|---|---|
| 2011/12 LVL |
2010/11 LVL |
2011/12 LVL |
2010/11 LVL |
2011/12 LVL |
2010/11 LVL |
|
| Segment assets | 3 986 677 | 3 820 416 | 2 308 484 | 2 153 288 | 6 295 161 | 5 973 704 |
| Undivided assets | 2 754 839 | 3 673 952 | ||||
| Total assets | 9 050 000 | 9 647 656 | ||||
| Segment liabilities | 888 378 | 1 042 880 | 398 243 | 441 776 | 1 286 621 | 1 484 656 |
| Undivided liabilities | 303 536 | 502 895 | ||||
| Total liabilities | 1 590 157 | 1 987 551 | ||||
| Net sales | 5 295 049 | 6 705 946 | 2 179 223 | 2 194 958 | 7 474 272 | 8 900 904 |
| Segment results | 1 609 382 | 2 847 759 | 687 581 | 721 714 | 2 296 963 | 3 569 473 |
| Undivided expenses | -1 790 401 | -2 404 806 | ||||
| Profit from operations | 506 562 | 1 164 667 | ||||
| Other income | 47 772 | 53 791 | ||||
| Financial expenses, net | 109 039 | -132 241 | ||||
| Profit before taxes | 663 373 | 1 086 217 | ||||
| Corporate income tax | -93 246 | -198 136 | ||||
| Net profit | 570 127 | 888 081 | ||||
| Other information | ||||||
| Additions of property plant and equipment and | ||||||
| intangible asets Undivided additions |
97 026 | 34 182 | 2 360 | 1 340 | 99 386 84 618 |
35 522 72 540 |
| Total additions of property plant and | ||||||
| equipment and intangible asets | 184 004 | 108 062 | ||||
| Depreciation and amortization Undivided depreciation |
100 979 | 76 541 | 5 907 | 8 056 | 106 886 73 948 |
84 597 64 204 |
| Total depreciation and amortization | 180 834 | 148 801 | ||||
| CFM; CFIP; FreeMile | Other | Total | ||||
|---|---|---|---|---|---|---|
| 2011/12 | 2010/11 | 2011/12 | 2010/11 | 2011/12 | 2010/11 | |
| EUR | EUR | EUR | EUR | EUR | EUR | |
| Segment assets | 5 672 530 | 5 435 962 | 3 284 676 | 3 063 853 | 8 957 205 | 8 499 815 |
| Undivided assets | 3 919 785 | 5 227 563 | ||||
| Total assets | 12 876 990 | 13 727 378 | ||||
| Segment liabilities | 1 264 048 | 1 483 885 | 566 649 | 628 591 | 1 830 697 | 2 112 475 |
| Undivided liabilities | 431 893 | 715 558 | ||||
| Total liabilities | 2 262 590 | 2 828 033 | ||||
| Net sales | 7 534 176 | 9 541 702 | 3 100 755 | 3 123 144 | 10 634 931 | 12 664 845 |
| Segment results | 2 289 944 | 4 051 996 | 978 340 | 1 026 908 | 3 268 284 | 5 078 903 |
| Undivided expenses | -2 547 510 | -3 421 731 | ||||
| Profit from operations | 720 773 | 1 657 172 | ||||
| Other income | 67 973 | 76 538 | ||||
| Financial expenses, net | 155 149 | -188 162 | ||||
| Profit before taxes | 943 895 | 1 545 548 | ||||
| Corporate income tax | -132 677 | -281 922 | ||||
| Net profit | 811 218 | 1 263 625 | ||||
| Other information | ||||||
| Additions of property plant and equipment and | ||||||
| intangible asets | 138 056 | 48 637 | 3 358 | 1 907 | 141 414 | 50 543 |
| Undivided additions | 120 401 | 103 215 | ||||
| Total additions of property plant and | ||||||
| equipment and intangible asets | 261 815 | 153 758 | ||||
| Depreciation and amortization | 143 680 | 108 908 | 8 405 | 11 463 | 152 085 | 120 371 |
| Undivided depreciation | 105 218 | 91 354 | ||||
| Total depreciation and amortization | 257 303 | 211 725 |
b) This note provides information about division of the Company's turnover and assets by geographical regions (customer location) for 9 month of the financial year 2011/12 and financial year 2010/11.
| Net sales | Assets | Net sales | Assets | |||||
|---|---|---|---|---|---|---|---|---|
| 2011/12 | 2010/11 | 31.03.2012 | 31.03.2011 | 2011/12 | 2010/11 | 31.03.2012 | 31.03.2011 | |
| LVL | LVL | LVL | LVL | EUR | EUR | EUR | EUR | |
| America | 2 720 260 | 2 051 345 | 563 646 | 599 406 | 3 870 581 | 2 918 800 | 801 996 | 852 878 |
| Europe, CIS | 2 578 445 | 3 279 454 | 556 019 | 394 115 | 3 668 796 | 4 666 242 | 791 144 | 560 775 |
| Asia, Africa, Middle East | 2 175 567 | 3 570 105 | 727 237 | 1 277 063 | 3 095 555 | 5 079 803 | 1 034 764 | 1 817 097 |
| 7 474 272 | 8 900 904 | 1 846 902 | 2 270 584 | 10 634 932 | 12 664 845 | 2 627 904 | 3 230 750 | |
| Unallocatted assets | - | - | 7 203 098 | 7 377 072 | - | - | 10 249 086 | 10 496 628 |
| 7 474 272 | 8 900 904 | 9 050 000 | 9 647 656 | 10 634 932 | 12 664 845 | 12 876 990 | 13 727 378 | |
| Note 12 Bad receivables | 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
The Company records accruals based on its accrual policy for bad and doubtful debtors. Africa customers' who delayed payments substantially continued debt repayment although payments were made slower than promised in a schedule submitted by customers.
Bad receivables 124 021 (152 349) 176 466 (216 773)
This quarter, provisions for doubtful debtors was decreased by 92 thousand LVL (131 thousand EUR).
Note 13 Salaries, bonuses and social expenses
| 31.03.2012 LVL |
31.03.2011 LVL |
31.03.2012 EUR |
31.03.2011 EUR |
|
|---|---|---|---|---|
| Salaries and social expenses | (1 523 720) | (1 422 269) | (2 168 058) | (2 023 706) |
| Bonuses and social expenses | (241 892) | (491 230) | (344 181) | (698 957) |
| (1 765 612) | (1 913 499) | (2 512 239) | (2 722 663) |
Salaries and social expenses, in comparison with the 9 month period of the previous financial year increased due to increased headcount and changes in fixed salaries for employees of Product development and Production department.
As the Company's financial targets for Q3 were not fulfilled - Bonuses for Q3 were much lower than for Q3 FY 2010/11. In total bonuses and social expenses for 9 months of FY 2011/12 were by 51% lower than for 9 months of FY 2010/11.