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Etteplan Oyj — Interim / Quarterly Report 2017
Aug 10, 2017
3264_rns_2017-08-10_c4fb9303-b657-4ec8-b2c3-08bc8c9a39f2.pdf
Interim / Quarterly Report
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02
Half Year Financial Report January-June 2017
Good organic growth
continued, operating
profit rose to record
level
Etteplan
Etteplan
ETTEPLAN Oyj Half Year Financial Report August 10, 2017 at 2:00 pm
ETTEPLAN Q2 2017: Good organic growth continued, operating profit rose to record level
Review period April-June 2017
- The Group's revenue increased by 8.2 per cent and was EUR 54.3 million (4-6/2016: EUR 50.2 million). At comparable exchange rates, revenue increased by 9.0 per cent.
- Organic growth in revenue was 7.8 per cent. At comparable exchange rates, organic growth was 8.6 per cent.
- EBIT from business operations* improved and amounted to EUR 4.7 (2.9) million, or 8.6 (5.8) per cent of revenue. EBIT from business operations included exceptional items with a combined negative effect of EUR 0.2 (1.0) million.
- Operating profit (EBIT) was EUR 4.2 (2.4) million, or 7.8 (4.7) per cent of revenue.
- The profit for the review period was EUR 3.2 (1.8) million.
- Operating cash flow improved and was EUR 5.4 (1.1) million.
- Undiluted earnings per share were EUR 0.12 (0.08).
- Etteplan continued to invest in growth by acquiring companies in Finland and Sweden.
- Etteplan is updating its estimate of market outlook and keeping its financial guidance from May 3, 2017 unchanged.
Review period January-June 2017
- The Group's revenue increased by 22.9 per cent and was EUR 109.1 million (1-6/2016: EUR 88.8 million). At comparable exchange rates, revenue increased by 23.7 per cent.
- Organic growth in revenue was 10.9 per cent. At comparable exchange rates, organic growth was 11.8 per cent.
- EBIT from business operations* improved and amounted to EUR 9.0 (5.1) million, or 8.2 (5.7) per cent of revenue. EBIT from business operations included exceptional items with a combined negative effect of EUR 0.6 (1.2) million.
- Operating profit (EBIT) was EUR 8.0 (4.2) million, or 7.4 (4.8) per cent of revenue.
- The profit for the review period was EUR 6.0 (3.2) million.
- Operating cash flow improved and was EUR 7.3 (-0.5) million.
- Undiluted earnings per share were EUR 0.24 (0.15).
- The number of personnel increased and the Group had 2,731 employees at the end of the review period (2,487).
*EBIT from business operations is an alternative performance measure, which reflects the Company's operational performance: it does not include acquisition-related items such as amortization on PPA allocations and earn-out revaluations.
Espotel Oy and Soikea Solutions Oy, acquired in spring 2016, are included in Etteplan's figures in the second quarter 2017 in full.
Market outlook 2017
The most important factor in the development of Etteplan's business is the global development of the machinery and metal industry. Our business environment is currently developing favorably
Etteplan
in all market areas. The development of the Central European markets is expected to remain unchanged. The favorable situation in the Swedish market is expected to continue. The market situation in Finland has improved and good demand is expected to continue. In Asia, the growth of the service market is expected to continue.
Financial guidance 2017, updated on May 3, 2017
We expect the revenue and operating profit for the full year 2017 to grow significantly compared to 2016.
Key figures
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | 1-6/2017 | 1-6/2016 | 1-12/2016 |
|---|---|---|---|---|---|
| Revenue | 54,314 | 50,211 | 109,116 | 88,814 | 183,938 |
| EBIT from business operations | 4,669 (8.6 %) | 2,911 (5.8 %) | 8,998 (8.2 %) | 5,090 (5.7 %) | 12,071 (6.6 %) |
| Operating profit (EBIT) | 4,218 (7.8 %) | 2,352 (4.7 %) | 8,045 (7.4 %) | 4,248 (4.8 %) | 10,131 (5.5 %) |
| Basic earnings per share, EUR | 0.12 | 0.08 | 0.24 | 0.15 | 0.33 |
| Equity ratio, % | 40.1 | 38.1 | 40.1 | 38.1 | 40.0 |
| Operating cash flow | 5,400 | 1,148 | 7,305 | -533 | 5,661 |
| ROCE, % | 19.3 | 13.9 | 18.6 | 12.8 | 14.8 |
| Personnel at end of the period | 2,731 | 2,487 | 2,731 | 2,487 | 2,545 |
President and CEO Juha Näkki:
Our business developed well in the second quarter, as it did in the first quarter. The market situation in Finland improved during the review period and the good situation in our other market areas continued. We were able to leverage our service offering and strong market position. Our revenue for the second quarter increased by 9.0 per cent year-on-year at comparable exchange rates, in spite of the quarter being shorter than the comparison period. The majority of the growth was organic. Our determined strategy execution enabled us to further improve our profitability and increase our operating profit to a record level. The measures implemented in previous quarters to improve cash flow also produced good results and cash flow was at record levels for the second quarter.
In the Engineering services service area, demand for machinery and equipment engineering improved particularly in Finland and some new plant engineering investment projects started. Supported by our service solutions, the service area's business developed favorably and we achieved a clear improvement in our result. We also invested in future growth by strengthening our engineering expertise in the shipbuilding industry and steel structure engineering by acquiring SDS Aura Oy in Finland.
Our business saw stable development in the Embedded systems and IoT service area. Revenue grew in line with our expectations, but profitability was slightly burdened by investments in organic growth made in the first quarter as well as excess hours in certain projects. Nevertheless, the service area's demand is at an excellent level, which provides us with good growth opportunities going forward.
In Technical documentation, the development of our business was again excellent. Our out-sourcing solutions, in particular, provided an stable foundation for growth and the positive development of our business. We also expanded our operations in Sweden by acquiring Sorona Innovation AB. Sorona complements our service offering particularly in structured documentation and strengthens our position in Southern Sweden.
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Etteplan
I am satisfied with our development in the first half of the year. We were winning on many fronts and carried out investments that support our growth. After the end of the review period, we acquired full ownership of our Chinese joint venture. The acquisition supports our progress in China, a market that has very high potential.
Although visibility in our main markets remains low, the uncertainty has decreased and we enter the second half of the year with confidence.
Operating environment
Etteplan's business is affected by global megatrends as well as industry-specific developments. The Internet of Things, digitalization, requirements concerning environmentally friendly products and shorter product life cycles are creating a need for intelligent and efficient engineering solutions in all industrial sectors. Companies continue to direct their investments to these areas, which creates opportunities for operators in the engineering industry. The continued trend of service outsourcing had a positive effect on the industry's development. The trend of centralizing service purchasing continued, presenting growth opportunities for global engineering companies.
The most important factor in Etteplan's development is the global development of the machinery and metal industry. Our operating environment developed favorably and the market situation was good in all of our market areas. While uncertainty decreased, the second quarter nevertheless continued to be characterized by unpredictable changes in Etteplan's main markets and various customer industries.
There were no significant changes in the demand for our services by industry in the second quarter of the year, but customer-specific differences were substantial. Activity in the mining industry has increased. Demand in the paper industry remained strong. Demand among lifting and hoisting equipment manufacturers remained at a good level on average. Demand in the energy and power transmission industry continued at a relatively good level. Demand among forest industry equipment manufacturers remained at a good level. Demand from aerospace and defense equipment manufacturers was at a good level. In the transportation and vehicle industry, good demand for testing and analysis services requiring special expertise continued. Demand in the ICT industry was at a good level.
The demand for plant engineering picked up in all industries, particularly in the form of maintenance investments. Demand for embedded systems and industrial internet solutions remained good in all customer industries.
There were differences in market development between Etteplan's main markets. Competition for employees and the lower availability of specialized experts in certain areas due to the good market situation affected the development of the sector as a whole in all market areas.
In Finland, the total revenue of the technology industry grew slightly in 2016 and continues to remain on a rising trend. In April-June 2017, the value of new orders received by companies in the technology industry was up 25 per cent compared to January-March 2017, and 47 per cent compared to the corresponding period last year. The number of requests for tenders increased further. The number of orders received by Etteplan's central customer base in April-June was at the same level, on average, as in the first quarter of the year. In Finland, the demand for engineering services was at a slightly weaker level than in the rest of Europe.
In Sweden, market demand remained at a very good level. In Germany, the Netherlands and Poland, the demand for engineering services remained at a good level.
Etteplan
Market uncertainty has decreased in China and demand remained at a good level. Demand was high particularly in automated production systems and robotics. The opening up of the service market continued to present growth opportunities for operators in the engineering industry.
Revenue
Etteplan's revenue increased by 8.2 per cent in April-June and was EUR 54.3 million (4-6/2016: EUR 50.2 million). Revenue increased by 9.0 per cent at comparable exchange rates. Organic growth was 7.8 per cent. At comparable exchange rates, organic growth was 8.6 per cent.
In January-June, revenue increased by 22.9 per cent and was EUR 109.1 million (1-6/2016: EUR 88.8 million). Revenue increased by 23.7 per cent at comparable exchange rates. Organic growth was 10.9 per cent. At comparable exchange rates, organic growth was 11.8 per cent.
The number of working days in the second quarter was lower than in the comparison period due to the Easter holidays falling in the second quarter in 2017 and the first quarter in 2016. Nevertheless, Etteplan's good organic growth continued in the second quarter thanks to Etteplan's good service offering and strong market position. The growth was supported by the improved market situation.
Etteplan's business is subject to periodic fluctuation. The periodic fluctuations are affected by holiday seasons and the timing of product development and investment projects in customer companies mainly in the spring and the latter part of the year. The revenue in the third quarter is typically lower than that of other quarters.
Result
EBIT from business operations improved in April-June by 60.4 per cent and was EUR 4.7 million (4-6/2016: EUR 2.9 million), or 8.6 (5.8) per cent of revenue. Exceptional items had a combined negative effect of EUR 0.2 million (EUR 1.0 million) on EBIT from business operations.
In January-June, EBIT from business operations improved by 76.8 per cent and was EUR 9.0 million (1-6/2016: EUR 5.1 million), or 8.2 (5.7) per cent of revenue. Exceptional items had a combined negative effect of EUR 0.6 million (EUR 1.2 million) on EBIT from business operations. Operational costs increased by 19.3 (30.5) per cent.
The improved demand situation and the growth in the share of Managed Services enhanced Etteplan's capacity management and improved profitability.
EBIT from business operations is an alternative performance measure, which reflects the Company's operational performance: it does not include acquisition-related items such as amortization on PPA allocations and earn-out revaluations.
In April-June, operating profit (EBIT) improved by 79.3 per cent and was EUR 4.2 million (4-6/2016: EUR 2.4 million), or 7.8 (4.7) per cent of revenue. In January-June, operating profit (EBIT) improved by 89.4 per cent and was EUR 8.0 million (1-6/2016: EUR 4.3 million), or 7.4 (4.8) per cent of revenue.
In January-June, financial expenses amounted to EUR 0.6 million (1-6/2016: EUR 0.8 million).
Profit before taxes for January-June was EUR 7.7 million (1-6/2016: EUR 3.9 million). Taxes in the income statement amounted to 21.8 (16.6) per cent of the result before taxes. The amount of taxes was EUR 1.7 million (EUR 0.6 million).
The profit for January-June was EUR 6.0 million (1-6/2016: EUR 3.2 million).
Etteplan
In January-June, undiluted earnings per share were EUR 0.24 (1-6/2016: EUR 0.15). Equity per share was EUR 2.20 (June 30, 2016: EUR 1.99). Return on capital employed (ROCE) before taxes was 18.6 (12.8) per cent.
Financial position and cash flow
The Group's cash and cash equivalents stood at EUR 4.3 million at the end of June (June 30, 2016: EUR 5.9 million). The Group's interest-bearing debt amounted to EUR 35.9 million (EUR 38.6 million). The total of unused short-term credit facilities stood at EUR 4.7 million (EUR 6.1 million).
Operating cash flow improved significantly and was EUR 5.4 million in April-June (4-6/2016: EUR 1.1 million) and EUR 7.3 million in January-June (1-6/2016: EUR -0.5 million). In January-June cash flow after investments was EUR 3.6 million (1-6/2016: EUR -22.5 million). Cash flow improved due to the optimization of working capital and a better distribution of customers' payment terms, particularly in the companies acquired in 2016. Cash flow accrues unevenly over the four quarters of the year due to periodic fluctuation in business.
Total assets on June 30, 2017 were EUR 138.6 million (June 30, 2016: EUR 129.9 million). Goodwill on the balance sheet was EUR 59.5 million (EUR 57.9 million).
At the end of June, the equity ratio was 40.1 per cent (June 30, 2016: 38.1 per cent).
Capital expenditures
The Group's gross investments in January-June were EUR 5.5 million (1-6/2016: EUR 28.0 million). The gross investments mainly consisted of acquisitions, growth-related equipment purchases and license fees for engineering software.
Personnel
The average number of personnel increased by 14.9 per cent compared to the corresponding period in the previous year. The Group employed 2,638 (1-6/2016: 2,295) people on average and 2,731 people at the end of June (June 30, 2016: 2,487). At the end of June, 934 people were employed by the Group outside of Finland (June 30, 2016: 822). A total of 15 employees were temporarily laid off at the end of June.
Business review
The significant acquisitions carried out in 2016 and the success of the outsourcing business strengthen Etteplan's market position and support the Company's growth. The demand for Managed Services and digitalization-related services remained at a good level.
As in the first quarter, the general market demand developed favorably and showed a clear improvement compared to the corresponding period last year. The number of new product development and equipment engineering projects was higher than before. Some new plant engineering investments were started.
The number of working days in the second quarter was lower than in the comparison period due to the Easter holidays falling in the second quarter in 2017 and the first quarter in 2016. Nevertheless, Etteplan's good organic growth continued in the second quarter.
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Etteplan
The market situation in Finland has improved. The lower availability of specialized experts in certain areas affected the development of our business to some extent.
In Sweden, Etteplan's market position has strengthened and we won several significant orders. The general market demand also remained at a good level. Attrition and the competition for experts continued to burden the business in Sweden. Demand has developed favorably in the Netherlands and Germany. In Poland, the demand situation remained good and the business developed favorably.
Boosted by the better market situation and the opening up of the service markets, the number of hours sold in the Chinese market increased by 45.0 per cent in April-June and 55.5 per cent in January-June.
Key accounts grew by 23.4 per cent in January-June compared to the previous year, thanks to the improved general market situation and Etteplan's comprehensive service offering.
Etteplan's target is to achieve a share of 65 per cent of revenue for Managed Services (Managed Services Index, MSI) by 2019. The share of revenue represented by Managed Services was 57 per cent in January-June (1-6/2016: 50 per cent). The growth in the share of Managed Services enhances Etteplan's capacity management and improves profitability.
The demand for our digitalization-related services continued to develop very well. Etteplan's customers are investing in digitalization and intelligent devices, which presents significant growth opportunities for the Company.
Engineering services
Engineering services refer to the innovation, engineering, and technical calculations of machinery or equipment for the purpose of product development and manufacturing. Assignments are typically product development projects for a new product, plant engineering projects or Engineering-to-Order projects, involving the customization of the product in accordance with end customer requirements and the market area's legislation.
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | Change to prev. year | 1-6/2017 | 1-6/2016 | Change to prev. year | 1-12/2016* |
|---|---|---|---|---|---|---|---|
| Revenue | 30,790 | 29,687 | 3.7 % | 61,850 | 59,658 | 3.7 % | 112,823 |
| EBIT from business operations | 2,691 | 1,910 | 40.9 % | 5,033 | 3,294 | 52.8 % | 6,493 |
| EBIT from business operations, % | 8.7 | 6.4 | 8.1 | 5.5 | 5.8 | ||
| Managed Services index | 53 | 49 | 53 | 49 | 49 |
*Embedded systems and IoT was included in Engineering services in Q1 2016.
The Embedded systems competence area, which was previously part of the Engineering services service area, was transferred to the Embedded systems and IoT service area in the second quarter of 2016. Etteplan's revenue from embedded systems was approximately EUR 11 million in 2015 and the competence area employed a total of approximately 130 people. The Embedded systems competence area is included in the Engineering services service area's comparison figures for the first quarter of 2016.
Engineering services accounted for 57 per cent of Etteplan's revenue in April-June (4-6/2016: 59 per cent). In January-June, the corresponding figure was also 57 per cent (1-6/2016: 67 per cent).
The service area's revenue in April-June grew by 3.7 per cent, amounting to EUR 30.8 million (4-6/2016: EUR 29.7 million). In January-June, revenue increased by 3.7 per cent, amounting to
Etteplan
EUR 61.9 million (1-6/2016: EUR 59.7 million). Revenue development was affected by the Embedded systems competence area being transferred to the Embedded systems and IoT service area in the second quarter of 2016.
Outsourcing agreements signed in 2016 improved revenue growth. The number of new product development and equipment engineering projects was higher than before. New plant engineering investments were started to some extent. Demand in the mining industry remained better than before.
In Engineering services, EBIT from business operations in April-June was EUR 2.7 million (4-6/2016: EUR 1.9 million), or 8.7 (6.4) per cent of revenue. In January-June, EBIT from business operations was EUR 5.0 million (1-6/2016: EUR 3.3 million), or 8.1 (5.5) per cent of revenue. The profitability indicators were affected by the Embedded systems competence area being transferred to the Embedded systems and IoT service area in the second quarter of 2016. Growth in the share of Managed Services and the good utilization rate improved profitability.
The Managed Services Index (MSI), which reflects the share of revenue represented by Managed Services, rose to 53 per cent in April-June (4-6/2016: 49 per cent). In January-June, their share was 53 per cent (1-6/2016: 49 per cent). The utilization rate of engineering services was generally at a good level in January-June 2017.
In China, Etteplan began cooperation with TROX Air Conditioning Components (Suzhou) Co., Ltd and Neusoft Medical Systems Co., Ltd., among others.
Etteplan strengthened its engineering expertise by acquiring SDS Aura Oy, a Finnish company that specializes in shipbuilding strength calculations and steel structure engineering. SDS Aura's personnel, a total of 16 people, were transferred to Etteplan as existing employees.
Embedded systems and IoT
Embedded systems and IoT refer to product development services and technology solutions that allow the controlling of machines and equipment and enable their digital connectivity as part of the Internet of Things. A common challenge faced by our customer is often the need to develop a service based on a new business model that takes advantage of the opportunities presented by digitalization.
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | Change to prev. year | 1-6/2017 | 1-6/2016 | Change to prev. year | 1-12/2016* |
|---|---|---|---|---|---|---|---|
| Revenue | 13,232 | 11,653 | 13.5 % | 26,786 | 11,653 | 129.9 % | 35,400 |
| EBIT from business operations | 1,169 | 1,224 | -4.5 % | 2,500 | 1,224 | 104.2 % | 3,956 |
| EBIT from business operations, % | 8.8 | 10.5 | 9.3 | 10.5 | 11.2 | ||
| Managed Services index | 55 | 49 | 55 | 49 | 54 |
*Embedded systems and IoT was included in Engineering services in Q1 2016.
Etteplan acquired Espotel Oy and Soikea Solutions Oy in April 2016 and expanded its business operations in Embedded systems and into the Internet of Things (IoT). Embedded systems and IoT is Etteplan's third service area and the Company began reporting on it in the half year financial report for 2016. The acquired companies are included in Etteplan's figures starting from April 1, 2016.
The Embedded systems competence area, which was previously part of the Engineering services service area, was transferred to the Embedded systems and IoT service area in the second quarter of 2016. Etteplan's revenue from embedded systems was approximately EUR 11
Etteplan
million in 2015 and the competence area employed a total of approximately 130 people. The Embedded systems competence area is included in the Engineering services service area's comparison figures for the first quarter of 2016.
The share of Etteplan's revenue represented by Embedded systems and IoT was 24 (4-6/2016: 23) per cent in April-June and also 24 (1-6/2016: 13) per cent in January-June. The service area's revenue in April-June grew by 13.5 per cent, amounting to EUR 13.2 million (4-6/2016: EUR 11.7 million). In January-June, the rate of growth was 129.9 per cent and revenue amounted to EUR 26.8 million (1-6/2016: EUR 11.7 million). The service area's demand situation remained very good in all market areas. The lower availability of specialized experts in certain areas affected the development of revenue to some extent.
In Embedded systems and IoT, EBIT from business operations in April-June was EUR 1.2 million (4-6/2016: EUR 1.2 million), or 8.8 (10.5) per cent of revenue. In January-June, EBIT from business operations was EUR 2.5 million (EUR 1.2 million), or 9.3 (10.5) per cent of revenue. Profitability was burdened to some extent by investments in organic growth made in the first quarter as well as excess hours in certain projects.
The Managed Services Index (MSI), which reflects the share of revenue represented by Managed Services, was 55 (49) per cent of the service area's revenue in April-June. In January-June, their share was 55 (1-6/2016: 49 per cent). The utilization rate of the Embedded systems and IoT service area was at a good level in the second quarter.
Technical documentation
Technical documentation refers to the documentation of a product's technical attributes, such as manuals and service instructions for the users of a product, as well as related content management and distribution in print or digital form. For an industrial customer, technical documentation is typically a non-core operation that has a significant impact on the efficiency of the end customer's maintenance service operations.
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | Change to prev. year | 1-6/2017 | 1-6/2016 | Change to prev. year | 1-12/2016 |
|---|---|---|---|---|---|---|---|
| Revenue | 10,268 | 8,867 | 15.8 % | 20,391 | 17,493 | 16.6 % | 35,714 |
| EBIT from business operations | 972 | 550 | 76.7 % | 1,774 | 1,224 | 45.0 % | 2,838 |
| EBIT from business operations, % | 9.5 | 6.2 | 8.7 | 7.0 | 7.9 | ||
| Managed Services index | 78 | 71 | 77 | 69 | 70 |
The share of Etteplan's revenue represented by Technical documentation in April-June was 19 (4-6/2016: 18) per cent. In January-June, the share was 19 per cent (1-6/2016: 20 per cent).
The service area's revenue in April-June grew by 15.8 per cent, amounting to EUR 10.3 million (4-6/2016: EUR 8.9 million). In January-June, the rate of growth was 16.6 per cent and revenue amounted to EUR 20.4 million (1-6/2016: EUR 17.5 million). The service area's good development was again characterized by strong organic growth and the success of the outsourcing business.
In Technical documentation, EBIT from business operations in April-June was EUR 1.0 million (4-6/2016: EUR 0.6 million), or 9.5 per cent (6.2 per cent) of revenue. In January-June, EBIT from business operations was EUR 1.8 million (1-6/2016: EUR 1.2 million), or 8.7 (7.0) per cent of revenue.
The Managed Services Index (MSI), which reflects the share of revenue represented by Managed Services, grew to 78 (4-6/2016: 71) per cent of the service area's revenue in April-June. In
Etteplan
January-June, the share was 77 per cent (1-6/2016: 69 per cent) of revenue. The utilization rate of Technical documentation was generally at a good level in the second quarter of 2017.
Etteplan expanded its operations in Sweden and acquired Sorona Innovation AB, which specializes in technical documentation solutions. In the transaction, Sorona Innovation's personnel, 9 people in total, were transferred to Etteplan as existing employees.
Etteplan and CoolStuff AB signed a cooperation agreement that makes Etteplan CoolStuff AB's strategic partner for technical documentation in Sweden.
GOVERNANCE
Annual General Meeting
The Annual General Meeting of Shareholders of Etteplan Oyj (the "Company") was held on April 4, 2017, at the premises of the Company in Vantaa.
The Annual General Meeting approved the financial statements and discharged the members of the Board of Directors and the President and CEO from liability for the financial year 2016.
In accordance with the proposal of the Nomination and Remuneration Committee of the Board of Directors, the Annual General Meeting resolved that the Board of Directors shall consist of six members. In accordance with the proposal of the Nomination and Remuneration Committee of the Board of Directors, the Annual General Meeting re-elected Patrick von Essen, Matti Huttunen, Robert Ingman, and Leena Saarinen as members of the Board of Directors. The Annual General Meeting further elected Cristina Andersson and Mikko Tepponen as new members of the Board of Directors.
KPMG Oy Ab, Authorized Public Accountants, with Authorized Public Accountant Ari Eskelinen as the main responsible auditor and Certified Auditor Olli Wesamaa, were elected as the Company's auditors. The auditors' fees were resolved to be paid according to invoices approved by the Company.
Board authorizations
The Annual General Meeting authorized the Board of Directors to resolve on the repurchase of the Company's own shares in one or more tranches using the Company's unrestricted equity. A maximum of 2,000,000 shares in the Company may be repurchased. The Company may deviate from the obligation to repurchase shares in proportion to the shareholders' current holdings, i.e., the Board has the right to decide on a directed repurchase of the Company's own shares.
The authorization includes the right for the Board to resolve on the repurchase of the Company's own shares through a tender offer made to all shareholders on equal terms and conditions and at the price determined by the Board, or in public trading organized by the Nasdaq Helsinki Ltd at the market price valid at any given time, so that the Company's total holding of own shares does not exceed ten (10) per cent of all the shares in the Company. The minimum price for the shares to be repurchased is the lowest market price quoted for the shares in the Company in public trading and, correspondingly, the maximum price is the highest market price quoted for the shares in the Company in public trading during the validity of the authorization.
Should the shares in the Company be repurchased in public trading, such shares will not be purchased in proportion to the shareholders' current holdings. In that case, there must be a weighty financial reason for the Company to repurchase its own shares. The shares may be repurchased in order to be used as consideration in potential acquisitions or in other structural arrangements.
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The shares may also be used for carrying out the Company's incentive schemes for its personnel. The repurchased shares may be retained by the Company, invalidated or transferred further.
The repurchase of the Company's own shares will reduce the non-restricted equity of the Company.
The authorization is valid for 18 months from the date of the resolution of the Annual General Meeting starting on April 4, 2017 and ending on October 4, 2018. The authorization replaces the corresponding previous authorization.
The Annual General Meeting authorized the Board of Directors to resolve on the issuance of a maximum of 2,500,000 shares through issuance of shares, option rights or other special rights entitling to shares under Chapter 10, Section 1 of the Finnish Companies Act in one or more issues. The authorization includes a right to issue new shares or assign the Company's own shares held by the Company.
The authorization includes the right to deviate from the existing shareholders' pre-emptive subscription right as set forth in Chapter 9, Article 3 of the Companies Act. Therefore, the Board of Directors has the right to direct the share issue, or issuance of the option rights or other special rights conferring entitlement to shares. The authorization also includes the right to decide on all the terms of share issue, option rights or other special rights conferring entitlement to shares. The authorization therefore includes the right to determine share subscription prices, persons entitled to subscribe the shares and other terms and conditions applicable to the subscription. In order to deviate from the shareholders' pre-emptive subscription right, the Company must have a weighty financial reason such as financing of a company acquisition, other arrangement in connection with the development of the Company's business or equity or an incentive scheme to the personnel. In connection with the share issuance, the Board of Directors is entitled to decide that the shares may be subscribed against contribution in kind or otherwise under special terms and conditions. The authorization includes the right to determine whether the subscription price will be entered into the share capital or into the reserve of invested unrestricted equity.
The authorization is valid for two (2) years from the date of the resolution of the Annual General Meeting, starting on April 4, 2017 and ending on April 4, 2019.
Dividend
The Annual General Meeting on April 4, 2017 resolved, in accordance with the proposal of the Board of Directors, to pay a dividend of EUR 0.16 per share for the financial year 2016. The remaining funds were to be left in unrestricted equity. The dividend was paid to the shareholders registered on the record date, April 6, 2017, in the shareholders' register maintained by Euroclear Finland Ltd. The dividend was paid on April 13, 2017.
Shares
Etteplan's shares are listed in Nasdaq Helsinki Ltd's Small Cap market capitalization group in the Industrials sector under the ETTE ticker. Etteplan changed its ticker in February 2017. The old ticker was ETT1V.
The Company's share capital on June 30, 2017 was EUR 5,000,000.00, and the total number of shares was 24,771,492. The Company has one series of shares. All shares confer an equal right to a dividend and the Company's funds.
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Etteplan
The number of Etteplan Oyj shares traded in January-June was 1,124,344 (1-6/2016: 624,377) for a total value of EUR 7.8 million (EUR 2.8 million). The share price low was EUR 5.56, the high EUR 9.49, the average EUR 6.93 and the closing price EUR 9.11. Market capitalization on June 30, 2017, was EUR 225.3 million (EUR 110.9 million).
Treasury shares
On April 28, 2017, the Company transferred a total of 169,939 treasury shares to the Company's key personnel in accordance with the terms of the incentive plan established in 2014.
On June 21, 2017, the Board of Directors of Etteplan Oyj decided to initiate a share repurchase program of own shares. The repurchased shares are used to fulfil obligations pertaining to the Company's share-based incentive plan for the Group's key personnel and they will be purchased in public trading on Nasdaq Helsinki Ltd at the market price quoted at the time of the repurchase. The repurchasing of shares began on June 26, 2017, and it will end on September 30, 2017, at the latest. The number of repurchased shares will not exceed 30,000 shares and the corresponding number of voting rights, which corresponds to approximately 0.12 per cent of the current total number of Etteplan's shares. A maximum sum of EUR 285,000 can be spent on the repurchase program.
On June 30, 2017, the Company held 45,289 (June 30, 2016: 138,192) of its own shares, which corresponds to 0.18 per cent of all shares and voting rights (June 30, 2016: 0.56 per cent).
Incentive plan for key personnel
In order to advance the achievement of Etteplan's long-term growth and other targets, the Board of Directors of Etteplan Oyj resolved on May 31, 2017, to establish a new share-based incentive plan for the Group's key personnel. The aim of the incentive plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the Company, to commit the key personnel to the Company, and to offer them a competitive reward plan based on holding the Company's shares. The incentive plan includes one earning period, comprising the calendar years 2017-2019. The earnings criteria are Etteplan Group's revenue increase and the development of Total Shareholder Return (TSR). The potential reward will be paid partly in the Company's shares and partly in cash. The proportion to be paid in cash is intended to cover taxes and tax-related costs arising from the reward to the key personnel. Approximately 20 people belong to the target group of the incentive plan. The rewards to be paid on the basis of the plan will correspond to the value of an approximate maximum total of 260,000 Etteplan Oyj shares (including also the proportion to be paid in cash). The shares to be paid out as potential rewards will be transferred from the shares held by the Company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the value of the share.
Flaggings
Etteplan Oyj received no flagging notices in January-June 2017.
Termination of liquidity providing agreement
S-Pankki Oy has terminated the liquidity providing (LP) agreement with Etteplan. The agreement and liquidity providing in accordance with the agreement ended on May 31, 2017. Etteplan is not planning to sign a new liquidity providing (LP) agreement.
11
Etteplan
Events after the review period
Etteplan strengthened its position in China and acquired from Vataple Group full ownership of Etteplan Vataple Technology Centre, Ltd, which has previously operated as a joint venture. The 30 per cent stake being acquired will be paid for by 35,000 Etteplan shares and partly in cash. The shares will be handed over to the seller once the acquisition is registered in China, approximately in September 2017.
Operating risks and uncertainty factors
Etteplan's financial results are exposed to a number of strategic, operational and financial risks. The uncertainty caused by the general economic development continues to be a risk for Etteplan's business. The uncertainty in the global economy poses a risk to Etteplan's business. The possibility of changes in customers' business operations is a significant risk to Etteplan's operations.
The Company's operations are based on skilled staff. The availability of competent professionals is an important factor for ensuring profitable growth and operations. The increased difficulties in recruiting professional staff, particularly in certain expert disciplines, continued to present a business risk.
The uncertainty caused by the general economic development continued in the second quarter of 2017. Risks related to business operations are still at a significant level, but they are not estimated to grow. Etteplan's risk management review was published on pages 80-83 of the Financial Review 2016.
Market outlook 2017
The most important factor in the development of Etteplan's business is the global development of the machinery and metal industry. Our business environment is currently developing favorably in all market areas. The development of the Central European markets is expected to remain unchanged. The favorable situation in the Swedish market is expected to continue. The market situation in Finland has improved and the positive development is expected to continue. In Asia, the growth of the service market is expected to continue.
Financial guidance 2017, updated on May 3, 2017
We expect the revenue and operating profit for the full year 2017 to grow significantly compared to 2016.
Financial information in 2017
Interim report 1-9/2017 Wednesday, October 25, 2017
Vantaa, August 10, 2017
Etteplan Oyj
Board of Directors
12
13
Etteplan
Additional information: Juha Näkki, President and CEO, tel. +358 400 606 372
Outi Torniainen, SVP, Communications and Marketing, tel. +358 40 512 1375
APPENDICES:
- Financial Statement Summary and Notes
- Consolidated Statement of Comprehensive Income
- Consolidated Statement of Financial Position
- Consolidated Statement of Cash Flows
- Consolidated Statement of Changes in Equity
- Notes to the Financial Statement Summary
The information presented herein has not been audited.
Releases and other corporate information are available on Etteplan’s website at www.etteplan.com.
Etteplan
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | 1-6/2017 | 1-6/2016 | 1-12/2016 |
|---|---|---|---|---|---|
| Revenue | 54,314 | 50,211 | 109,116 | 88,814 | 183,938 |
| Other operating income | 80 | 47 | 133 | 302 | 517 |
| Materials and services | -5,112 | -3,410 | -9,711 | -5,291 | -13,893 |
| Staff costs | -36,463 | -35,718 | -74,630 | -64,590 | -129,172 |
| Other operating expenses | -7,293 | -7,434 | -14,212 | -12,727 | -26,440 |
| Depreciation and amortization | -1,309 | -1,343 | -2,651 | -2,260 | -4,818 |
| Operating profit (EBIT) | 4,218 | 2,352 | 8,045 | 4,248 | 10,131 |
| Financial income | 61 | 185 | 229 | 430 | 555 |
| Financial expenses | -164 | -483 | -550 | -801 | -1,245 |
| Profit before taxes | 4,115 | 2,055 | 7,725 | 3,877 | 9,441 |
| Income taxes | -942 | -304 | -1,684 | -642 | -1,838 |
| Profit for the financial year | 3,173 | 1,750 | 6,041 | 3,235 | 7,604 |
| Other comprehensive income, that may be subsequently reclassified to profit or loss | |||||
| --- | --- | --- | --- | --- | --- |
| Foreign subsidiary net investment hedge | 0 | 26 | 0 | 34 | 82 |
| Currency translation differences | -359 | -653 | -234 | -782 | -1,157 |
| Change in fair value of investments available-for-sale | 6 | -4 | 12 | -6 | -6 |
| Other comprehensive income, net of tax | -353 | -630 | -222 | -754 | -1,080 |
| Total comprehensive income for the year | 2,820 | 1,120 | 5,819 | 2,480 | 6,524 |
| Income attributable to | |||||
| --- | --- | --- | --- | --- | --- |
| Equity holders of the parent company | 3,090 | 1,696 | 5,941 | 3,167 | 7,436 |
| Non-controlling interest | 83 | 54 | 100 | 68 | 168 |
| 3,173 | 1,750 | 6,041 | 3,235 | 7,604 | |
| Total comprehensive income attributable to | |||||
| Equity holders of the parent company | 2,748 | 1,067 | 5,731 | 2,413 | 6,356 |
| Non-controlling interest | 71 | 53 | 88 | 67 | 168 |
| 2,820 | 1,120 | 5,819 | 2,480 | 6,524 | |
| Earnings per share calculated from the result attributable to equity holders of the parent company | |||||
| --- | --- | --- | --- | --- | --- |
| Basic earnings per share, EUR | 0.12 | 0.08 | 0.24 | 0.15 | 0.33 |
| Diluted earnings per share, EUR | 0.12 | 0.08 | 0.24 | 0.15 | 0.33 |
Etteplan
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| (EUR 1,000) | Jun 30, 2017 | Jun 30, 2016 | Dec 31, 2016 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Tangible assets | 3,120 | 2,671 | 2,910 |
| Goodwill | 59,515 | 57,854 | 58,128 |
| Other intangible assets | 18,906 | 19,537 | 18,036 |
| Investments available-for-sale | 695 | 680 | 680 |
| Other non-current receivables | 91 | 71 | 41 |
| Deferred tax assets | 188 | 260 | 365 |
| Non-current assets, total | 82,513 | 81,073 | 80,159 |
| Current assets | |||
| Inventory | 307 | 394 | 255 |
| Trade and other receivables | 51,329 | 42,339 | 49,180 |
| Current tax assets | 145 | 182 | 139 |
| Cash and cash equivalents | 4,273 | 5,948 | 4,750 |
| Current assets, total | 56,054 | 48,863 | 54,324 |
| TOTAL ASSETS | 138,567 | 129,937 | 134,483 |
| EQUITY AND LIABILITIES | |||
| Capital attributable to equity holders of the parent company | |||
| Share capital | 5,000 | 5,000 | 5,000 |
| Share premium account | 6,701 | 6,701 | 6,701 |
| Unrestricted equity fund | 18,524 | 18,541 | 18,524 |
| Own shares | -139 | 35 | -386 |
| Cumulative translation adjustment | -2,202 | -1,640 | -1,981 |
| Other reserves | 231 | 219 | 219 |
| Retained earnings | 20,452 | 17,085 | 17,099 |
| Profit for the financial year | 5,941 | 3,167 | 7,436 |
| Capital attributable to equity holders of the parent company, total | 54,507 | 49,107 | 52,613 |
| Non-controlling interest | 252 | 64 | 165 |
| Equity, total | 54,759 | 49,171 | 52,777 |
| Non-current liabilities | |||
| Deferred tax liabilities | 3,487 | 3,443 | 3,293 |
| Interest-bearing liabilities | 19,856 | 26,359 | 23,807 |
| Other non-current liabilities | 726 | 1,641 | 649 |
| Non-current liabilities, total | 24,068 | 31,442 | 27,750 |
| Current liabilities | |||
| Interest-bearing liabilities | 16,029 | 12,275 | 10,461 |
| Trade and other payables | 42,623 | 36,184 | 42,513 |
| Current income tax liabilities | 1,087 | 864 | 982 |
| Current liabilities, total | 59,740 | 49,323 | 53,956 |
| Liabilities, total | 83,808 | 80,765 | 81,706 |
| TOTAL EQUITY AND LIABILITIES | 138,567 | 129,937 | 134,483 |
Etteplan
CONSOLIDATED STATEMENT OF CASH FLOWS
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | 1-6/2017 | 1-6/2016 | 1-12/2016 |
|---|---|---|---|---|---|
| Operating cash flow | |||||
| Cash receipts from customers | 53,176 | 47,885 | 106,897 | 85,330 | 174,644 |
| Operating expenses paid | -47,123 | -45,469 | -97,902 | -84,032 | -165,607 |
| Operating cash flow before financial items and taxes | 6,052 | 2,417 | 8,995 | 1,298 | 9,037 |
| Interest and payment paid for financial expenses | -105 | -373 | -331 | -482 | -813 |
| Interest received | 15 | -2 | 25 | 12 | 44 |
| Income taxes paid | -561 | -893 | -1,384 | -1,362 | -2,606 |
| Operating cash flow (A) | 5,400 | 1,148 | 7,305 | -533 | 5,661 |
| Investing cash flow | |||||
| Purchase of tangible and intangible assets | -564 | -808 | -961 | -896 | -1,879 |
| Acquisition of subsidiaries | -1,657 | -20,843 | -2,750 | -21,262 | -22,262 |
| Proceeds from contingent asset | 0 | 0 | 0 | 215 | 215 |
| Proceeds from sale of tangible and intangible assets | 0 | 12 | 3 | 18 | 24 |
| Purchase of investments | 0 | 0 | 0 | 0 | -10 |
| Loan receivables, decrease | 0 | 5 | 0 | 5 | 45 |
| Investing cash flow (B) | -2,220 | -21,633 | -3,707 | -21,920 | -23,866 |
| Cash flow after investments (A+B) | 3,180 | -20,485 | 3,598 | -22,453 | -18,204 |
| Financing cash flow | |||||
| Share issue net of cost | 0 | 13,954 | 0 | 13,954 | 13,937 |
| Purchase of own shares | -50 | -16 | -50 | -163 | -693 |
| Short-term loans, increase | 2,521 | 10,185 | 3,278 | 10,520 | 11,685 |
| Short-term loans, decrease | -844 | -13,259 | -2,552 | -17,137 | -22,547 |
| Long-term loans, increase | 0 | 19,991 | 0 | 20,601 | 20,601 |
| Long-term loans, decrease | 109 | -4,549 | 0 | -4,549 | -4,569 |
| Payment of finance lease liabilities | -421 | -295 | -796 | -584 | -1,184 |
| Dividend paid and other profit distribution | -3,930 | -3,046 | -3,930 | -3,046 | -3,046 |
| Financing cash flow (C) | -2,615 | 22,966 | -4,051 | 19,595 | 14,184 |
| Variation in cash (A+B+C) increase (+) / decrease (-) | 565 | 2,481 | -453 | -2,858 | -4,020 |
| Assets at the beginning of the period | 3,728 | 3,412 | 4,750 | 8,807 | 8,807 |
| Exchange gains or losses on cash and cash equivalents | -20 | 56 | -25 | -1 | -37 |
| Assets at the end of the period | 4,273 | 5,948 | 4,273 | 5,948 | 4,750 |
16
Etteplan
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Legends for table columns
A) Share Capital
F) Cumulative Translation Adjustment
B) Share Premium Account
G) Retained Earnings
C) Unrestricted Equity Fund
H) Total
D) Other Reserves
I) Non-controlling Interest
E) Own Shares
J) Equity total
| (EUR 1,000) | A | B | C | D | E | F | G | H | I | J |
|---|---|---|---|---|---|---|---|---|---|---|
| Equity Jan 1, 2016 | 5,000 | 6,701 | 4,406 | 225 | -949 | -863 | 20,101 | 34,621 | -3 | 34,618 |
| Comprehensive income | ||||||||||
| Profit for the financial year | 0 | 0 | 0 | 0 | 0 | 0 | 7,436 | 7,436 | 168 | 7,604 |
| Fair value reserve available-for-sale assets | 0 | 0 | 0 | -6 | 0 | 0 | 0 | -6 | 0 | -6 |
| Foreign subsidiary net investment hedge | 0 | 0 | 0 | 0 | 0 | 82 | 0 | 82 | 0 | 82 |
| Cumulative translation adjustment | 0 | 0 | 0 | 0 | 0 | -1,200 | 44 | -1,157 | 0 | -1,157 |
| Total comprehensive income for the year | 0 | 0 | 0 | -6 | 0 | -1,118 | 7,480 | 6,356 | 168 | 6,524 |
| Transactions with owners | ||||||||||
| Dividends | 0 | 0 | 0 | 0 | 0 | 0 | -3,046 | -3,046 | 0 | -3,046 |
| Share issue net of cost | 0 | 0 | 13,937 | 0 | 0 | 0 | 0 | 13,937 | 0 | 13,937 |
| Directed share issue | 0 | 0 | 181 | 0 | 928 | 0 | 0 | 1,109 | 0 | 1,109 |
| Purchase of own shares | 0 | 0 | 0 | 0 | -693 | 0 | 0 | -693 | 0 | -693 |
| Share-based incentive plan | 0 | 0 | 0 | 0 | 328 | 0 | 0 | 328 | 0 | 328 |
| Transactions with owners, total | 0 | 0 | 14,118 | 0 | 563 | 0 | -3,046 | 11,635 | 0 | 11,635 |
| Equity Dec 31, 2016 | 5,000 | 6,701 | 18,524 | 219 | -386 | -1,981 | 24,535 | 52,613 | 165 | 52,777 |
| (EUR 1,000) | A | B | C | D | E | F | G | H | I | J |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Equity Jan 1, 2017 | 5,000 | 6,701 | 18,524 | 219 | -386 | -1,981 | 24,535 | 52,613 | 165 | 52,777 |
| Comprehensive income | ||||||||||
| Profit for the financial year | 0 | 0 | 0 | 0 | 0 | 0 | 5,941 | 5,941 | 100 | 6,041 |
| Fair value reserve available-for-sale assets | 0 | 0 | 0 | 12 | 0 | 0 | 0 | 12 | 0 | 12 |
| Cumulative translation adjustment | 0 | 0 | 0 | 0 | 0 | -221 | 0 | -221 | -12 | -234 |
| Total comprehensive income for the year | 0 | 0 | 0 | 12 | 0 | -221 | 5,941 | 5,731 | 88 | 5,819 |
| Transactions with owners | ||||||||||
| Dividends | 0 | 0 | 0 | 0 | 0 | 0 | -3,930 | -3,930 | 0 | -3,930 |
| Share-based incentive plan | 0 | 0 | 0 | 0 | 297 | 0 | -154 | 143 | 0 | 143 |
| Transactions with owners, total | 0 | 0 | 0 | 0 | 247 | 0 | -4,084 | -3,837 | 0 | -3,837 |
| Equity Jun 30, 2017 | 5,000 | 6,701 | 18,524 | 231 | -139 | -2,202 | 26,392 | 54,507 | 252 | 54,759 |
| (EUR 1,000) | A | B | C | D | E | F | G | H | I | J |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Equity Jan 1, 2016 | 5,000 | 6,701 | 4,406 | 225 | -949 | -863 | 20,101 | 34,621 | -3 | 34,618 |
| Comprehensive income | ||||||||||
| Profit for the financial year | 0 | 0 | 0 | 0 | 0 | 0 | 3,167 | 3,167 | 68 | 3,234 |
| Fair value reserve available-for-sale assets | 0 | 0 | 0 | -6 | 0 | 0 | 0 | -6 | 0 | -6 |
| Foreign subsidiary net investment hedge | 0 | 0 | 0 | 0 | 0 | 34 | 0 | 34 | 0 | 34 |
| Cumulative translation adjustment | 0 | 0 | 0 | 0 | 0 | -810 | 30 | -781 | -1 | -782 |
| Total comprehensive income for the year | 0 | 0 | 0 | -6 | 0 | -777 | 3,196 | 2,413 | 67 | 2,480 |
| Transactions with owners | ||||||||||
| Dividends | 0 | 0 | 0 | 0 | 0 | 0 | -3,046 | -3,046 | 0 | -3,046 |
| Share issue net of cost | 0 | 0 | 13,954 | 0 | 0 | 0 | 0 | 13,954 | 0 | 13,954 |
| Directed share issue | 0 | 0 | 181 | 0 | 928 | 0 | 0 | 1,109 | 0 | 1,109 |
| Purchase of own shares | 0 | 0 | 0 | 0 | -163 | 0 | 0 | -163 | 0 | -163 |
| Share-based incentive plan | 0 | 0 | 0 | 0 | 219 | 0 | 0 | 219 | 0 | 219 |
| Transactions with owners, total | 0 | 0 | 14,135 | 0 | 984 | 0 | -3,046 | 12,073 | 0 | 12,073 |
| Equity Jun 30, 2016 | 5,000 | 6,701 | 18,541 | 220 | 35 | -1,640 | 20,251 | 49,107 | 64 | 49,171 |
Etteplan
NOTES TO THE FINANCIAL STATEMENT SUMMARY
General
Etteplan provides industrial equipment and plant engineering, embedded systems, IoT (Internet of Things), and technical documentation solutions to the world's leading companies in the manufacturing industry. Our services are geared to improve the competitiveness of our customers' products and engineering processes throughout the product life cycle. The results of Etteplan's innovative engineering can be seen in numerous industrial solutions and everyday products.
In 2016, Etteplan had a turnover of EUR 183.9 million. The company currently has more than 2,600 professionals in Finland, Sweden, the Netherlands, Germany, Poland and China. Etteplan's shares are listed on Nasdaq Helsinki Ltd under the ETTE ticker.
The Etteplan Oyj Board of Directors has approved this Interim Report for publication at its meeting on August 10, 2017.
Basis for Preparation
The Half Year Financial Report has been prepared in accordance with the requirements in IAS 34 (Interim Financial Reporting) standard. The Half Year Financial Report has been prepared according to the recognition and valuation principles presented in the 2016 Annual Financial Statements. Changes in standards and interpretations in effect in 2017 did not have material effect to the Consolidated Financial Statements.
IFRS 15, 'Revenue from contracts with customers' establishes principles for recognizing revenue from the entity's contracts with customers and for the related disclosures. Recognition of revenue can happen over time or at a certain point in time depending on when a customer obtains control of a good or service. The standard is effective for annual periods beginning on or after January 1, 2018.
Management is assessing the impact of the standard. An impact analysis has been made for the major revenue streams. At this stage of the assessment, it seems likely that the implementation of the new standard will not have a material effect neither on the amount nor timing of revenue recognition. There are no material variable considerations or financing components involved in determining the Group's transaction prices. The Group has not identified incremental costs of obtaining a contract or costs to fulfill a contract to be activated. The Group is planning to adopt the standard fully retrospectively on January 1, 2018.
The Annual Financial Statements 2016 are available at www.etteplan.com with the accounting policies detailed on pages 14-22.
Formulas for the key figures are detailed at the end of this release.
Use of Estimates
This release includes forward-looking statements, which are based on the current expectations, known factors, decisions and plans of the management. The management believes that the expectations reflected in such forward looking statements are reasonable. However, outcomes could differ materially from those implied in the forward-looking statements as a result of, among other factors, changes in economic, market and competitive conditions as well as changes in the regulatory environment and fluctuations in exchange rates.
Etteplan
Key Figures
| (EUR 1,000) | 1-6/2017 | 1-6/2016 | 1-12/2016 | Change to prev. year |
|---|---|---|---|---|
| Revenue | 109,116 | 88,814 | 183,938 | 22.9 % |
| EBIT from business operations | 8,998 | 5,090 | 12,071 | 76.8 % |
| EBIT from business operations, % | 8.2 | 5.7 | 6.6 | |
| Operating profit (EBIT) | 8,045 | 4,248 | 10,131 | 89.4 % |
| EBIT, % | 7.4 | 4.8 | 5.5 | |
| Profit before taxes | 7,725 | 3,877 | 9,441 | 99.2 % |
| Profit before taxes, % | 7.1 | 4.4 | 5.1 | |
| Return on equity, % | 22.5 | 15.4 | 17.4 | |
| ROCE, % | 18.6 | 12.8 | 14.8 | |
| Equity ratio, % | 40.1 | 38.1 | 40.0 | |
| Gross interest-bearing debt | 35,885 | 38,634 | 34,269 | -7.1 % |
| Net gearing, % | 57.7 | 66.5 | 55.9 | |
| Balance sheet, total | 138,567 | 129,937 | 134,483 | 6.6 % |
| Gross investments | 5,477 | 27,979 | 30,186 | -80.4 % |
| Operating cash flow | 7,305 | -533 | 5,661 | 1469.2 % |
| Basic earnings per share, EUR | 0.24 | 0.15 | 0.33 | 60.0 % |
| Diluted earnings per share, EUR | 0.24 | 0.15 | 0.33 | 60.0 % |
| Equity per share, EUR | 2.20 | 1.99 | 2.14 | 10.6 % |
| Personnel, average | 2,638 | 2,295 | 2,407 | 14.9 % |
| Personnel at end of the period | 2,731 | 2,487 | 2,545 | 9.8 % |
Revenue and operating profit (EBIT) quarterly
| (EUR 1,000) | 1-3/2017 | 1-3/2016 | 4-6/2017 | 4-6/2016 |
|---|---|---|---|---|
| Revenue | 54,802 | 38,603 | 54,314 | 50,211 |
| Operating profit (EBIT) | 3,827 | 1,896 | 4,218 | 2,352 |
| EBIT, % | 7.0 | 4.9 | 7.8 | 4.7 |
Exceptional Items
Items that are material either because of their size or their nature, and that are non-recurring are considered as exceptional items and are presented within the line items to which they best relate. The line items in which they are included in the income statement are specified in the table below:
Etteplan
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | 1-6/2017 | 1-6/2016 | 1-12/2016 |
|---|---|---|---|---|---|
| Other operating income | 0 | 0 | 15 | 215 | 215 |
| Staff costs and other operating expenses | -196 | -997 | -579 | -1,388 | -1,886 |
| Operating profit (EBIT) | -196 | -997 | -564 | -1,173 | -1,671 |
Reconciliation of EBIT from Business Operations
EBIT from business operations is an alternative performance measure, which reflects the Company's operational performance: it does not include acquisition-related items such as amortization on PPA allocations and earn out revaluations. The table below shows a reconciliation between EBIT from business operations and Operating profit (EBIT).
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | 1-6/2017 | 1-6/2016 | 1-12/2016 |
|---|---|---|---|---|---|
| EBIT | 4,218 | 2,352 | 8,045 | 4,248 | 10,131 |
| Amortization on PPA allocations | 451 | 559 | 968 | 842 | 1,939 |
| Earn-out revaluation items | 0 | 0 | -15 | 0 | 0 |
| EBIT from business operations | 4,669 | 2,911 | 8,998 | 5,090 | 12,071 |
Business combinations
SDS Aura Oy
On June 1, 2017 Etteplan reinforced its engineering expertise by buying SDS Aura Oy, a company specializing in shipbuilding strength calculations and steel structure engineering, based in Turku, Finland. The acquisition further reinforced Etteplan's growth strategy, which has at its heart organic growth and the expansion of expertise through acquisitions. SDS Aura employed a total of 16 people at the time of the acquisition.
The acquisition consideration is EUR 1,100 thousand consisting of a cash payment and contingent considerations. The cash consideration amounted to EUR 550 thousand in total. In addition to this payment contingent considerations of EUR 0-550 thousand (undiscounted amount) are agreed upon. The contingent considerations will be paid in full provided that SDS Aura Oy's result in the financial year 2017 and 2018 reaches the thresholds set in the share transfer agreement and certain attrition related terms are fulfilled. The fair value of the contingent considerations is estimated by applying the income approach. At the time of acquisition the fair value of the contingent considerations was EUR 550 thousand.
The goodwill of EUR 794 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the company's operating model. None of the goodwill recognized is expected to be deductible for income tax purposes.
Sorona Innovation AB
On June 12, 2017 Etteplan expanded its Swedish operations by acquiring Sorona Innovation AB which specializes in technical documentation solutions. The transaction will bolster Etteplan's position as one of the leading suppliers of technical documentation and create new growth opportunities, not only in Sweden, but also globally. Sorona Innovation AB employs a total of 9 people.
The acquisition consideration is EUR 1,616 thousand in total consisting of a cash payment and contingent considerations. The contingent considerations, EUR 0-412 thousand (undiscounted
21
Etteplan
amount), will be paid in full provided that the Sorona Innovation AB's result in the financial year 2017 reaches the threshold set in the purchase agreement and other terms of the contingent considerations, related to integration of the company to Etteplan group, are met. The fair value of the contingent considerations is estimated by applying the income approach. At the time of acquisition the fair value of the contingent considerations was EUR 412 thousand.
The goodwill of EUR 907 thousand arising from the acquisition is attributable to the knowledge and competence acquired as well as the synergies expected from combining the operations of the Group and the acquired company. None of the goodwill recognized is expected to be deductible for income tax purposes.
Acquisitions total
The following table summarizes the consideration paid for the acquisitions and the provisional amounts of assets acquired and liabilities assumed recognized at the time of acquisitions.
| Consideration transferred: | (EUR 1,000) |
|---|---|
| Cash payment | 1,754 |
| Contingent consideration | 962 |
| Total consideration transferred | 2,716 |
| Assets and liabilities | |
| Tangible assets | 54 |
| Intangible assets | 21 |
| Customer relationships (intangible assets) | 975 |
| Trade and other receivables | 567 |
| Cash and cash equivalents | 97 |
| Total assets | 1,714 |
| Current liabilities | 490 |
| Deferred tax liability | 208 |
| Total liabilities | 698 |
| Total identifiable net assets | 1,015 |
| Formation of Goodwill: | |
| Consideration transferred | 2,716 |
| Total identifiable net assets | -1,015 |
| Goodwill | 1,701 |
Costs related to acquisitions, EUR 43 thousand, are included in other operating expenses in the consolidated statement of comprehensive income.
Etteplan
Tangible assets
| TANGIBLE ASSETS 2017 (EUR 1,000) | Land and water | Machinery and equipment | Machinery and equipment, finance lease | Other tangible assets | Total |
|---|---|---|---|---|---|
| Acquisition cost Jan 1 | 19 | 12,954 | 7,639 | 842 | 21,454 |
| Translation difference | 0 | -62 | -9 | -3 | -73 |
| Acquisition of subsidiaries | 0 | 54 | 0 | 0 | 54 |
| Additions | 0 | 428 | 518 | 30 | 976 |
| Reclassifications between items | 0 | 16 | 0 | 0 | 16 |
| Disposals | 0 | -5 | 0 | 0 | -5 |
| Acquisition cost Jun 30 | 19 | 13,386 | 8,148 | 869 | 22,422 |
| Cumulative depreciation Jan 1 | 0 | -11,250 | -6,551 | -743 | -18,544 |
| Translation difference | 0 | 54 | 7 | 2 | 64 |
| Cumulative depreciation on reclassifications | 0 | 2 | 0 | 0 | 2 |
| Cumulative depreciation on disposals | 0 | 0 | 0 | 0 | 0 |
| Depreciation for the financial period | 0 | -364 | -443 | -17 | -824 |
| Cumulative depreciation Jun 30 | 0 | -11,558 | -6,987 | -758 | -19,303 |
| Book value Jun 30, 2017 | 19 | 1,828 | 1,162 | 111 | 3,120 |
| TANGIBLE ASSETS 2016 (EUR 1,000) | Land and water | Machinery and equipment | Machinery and equipment, finance lease | Other tangible assets | Total |
| --- | --- | --- | --- | --- | --- |
| Acquisition cost Jan 1 | 19 | 11,760 | 7,022 | 832 | 19,633 |
| Translation difference | 0 | -100 | -22 | -2 | -124 |
| Acquisition of subsidiaries | 0 | 724 | 0 | 0 | 724 |
| Additions | 0 | 175 | 284 | 23 | 482 |
| Reclassifications between items | 0 | 1 | 0 | 0 | 1 |
| Disposals | 0 | -1 | -14 | -12 | -26 |
| Acquisition cost Jun 30 | 19 | 12,560 | 7,270 | 840 | 20,689 |
| Cumulative depreciation Jan 1 | 0 | -10,910 | -5,832 | -713 | -17,454 |
| Translation difference | 0 | 89 | 16 | 1 | 106 |
| Cumulative depreciation on acquisitions | 0 | -38 | 0 | 0 | -38 |
| Cumulative depreciation on disposals | 0 | 4 | 14 | 0 | 18 |
| Depreciation for the financial period | 0 | -253 | -382 | -15 | -650 |
| Cumulative depreciation Jun 30 | 0 | -11,108 | -6,184 | -727 | -18,019 |
| Book value Jun 30, 2016 | 19 | 1,452 | 1,086 | 113 | 2,671 |
22
Etteplan
Intangible assets
| INTANGIBLE ASSETS 2017 (EUR 1,000) | Intangible rights | Internally created intangible assets | Other intangible assets | Other intangible assets, finance lease | Advance payments | Goodwill | Total |
|---|---|---|---|---|---|---|---|
| Acquisition cost Jan 1 | 11,689 | 2,581 | 20,237 | 2,293 | 73 | 58,128 | 95,002 |
| Translation difference | -64 | 0 | -30 | -3 | 0 | -315 | -411 |
| Acquisition of subsidiaries | 21 | 0 | 0 | 0 | 0 | 0 | 21 |
| Additions | 122 | 138 | 978 | 1,285 | 198 | 1,701 | 4,422 |
| Reclassifications between items | -1 | 0 | 0 | 0 | -15 | 0 | -16 |
| Disposals | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Acquisition cost Jun 30 | 11,766 | 2,719 | 21,185 | 3,576 | 256 | 59,515 | 99,018 |
| Cumulative amortization Jan 1 | -10,374 | -1,480 | -5,093 | -1,891 | 0 | 0 | -18,839 |
| Translation difference | 46 | 0 | 19 | 2 | 0 | 0 | 68 |
| Amortization for the financial period | -332 | -175 | -968 | -352 | 0 | 0 | -1,827 |
| Cumulative amortization Jun 30 | -10,659 | -1,655 | -6,042 | -2,241 | 0 | 0 | -20,597 |
| Book value Jun 30, 2017 | 1,107 | 1,065 | 15,144 | 1,335 | 256 | 59,515 | 78,421 |
| INTANGIBLE ASSETS 2016 (EUR 1,000) | Intangible rights | Internally created intangible assets | Other intangible assets | Other intangible assets, finance lease | Advance payments | Goodwill | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Acquisition cost Jan 1 | 11,212 | 1,799 | 9,610 | 2,000 | 106 | 42,734 | 67,461 |
| Translation difference | -52 | 0 | -43 | -7 | 0 | -676 | -778 |
| Acquisition of subsidiaries | 189 | 175 | 10,861 | 0 | 0 | 0 | 11,225 |
| Additions | 258 | 118 | 5 | 274 | 33 | 15,797 | 16,485 |
| Reclassifications between items | -76 | 182 | 0 | 0 | -106 | 0 | 0 |
| Acquisition cost Jun 30 | 11,530 | 2,274 | 20,434 | 2,267 | 33 | 57,854 | 94,393 |
| Cumulative amortization Jan 1 | -9,485 | -1,130 | -3,176 | -1,519 | 0 | 0 | -15,311 |
| Translation difference | 30 | 0 | 20 | 6 | 0 | 0 | 55 |
| Cumulative amortization on acquisitions | -114 | -27 | 0 | 0 | 0 | 0 | -142 |
| Cumulative amortization on reclassifications | -1 | 0 | 0 | 0 | 0 | 0 | -1 |
| Amortization for the financial period | -392 | -178 | -841 | -195 | 0 | 0 | -1,605 |
| Cumulative amortization Jun 30 | -9,961 | -1,336 | -3,997 | -1,708 | 0 | 0 | -17,003 |
| Book value Jun 30, 2016 | 1,569 | 938 | 16,437 | 559 | 33 | 57,854 | 77,391 |
Interest-bearing liabilities
| (EUR 1,000) | Jun 30, 2017 | Jun 30, 2016 | Dec 31, 2016 |
|---|---|---|---|
| Non-current | 19,856 | 26,359 | 23,807 |
| Current | 16,029 | 12,275 | 10,461 |
| Total | 35,885 | 38,634 | 34,269 |
Etteplan
Pledges, mortgages and guarantees
| (EUR 1,000) | Jun 30, 2017 | Jun 30, 2016 | Dec 31, 2016 |
|---|---|---|---|
| For own debts | |||
| Business mortgages | 320 | 320 | 320 |
| Pledged shares | 120 | 120 | 120 |
| Other contingencies | 100 | 0 | 0 |
| Leasing liabilities | |||
| For payment under one year | 2,250 | 2,117 | 2,195 |
| For payment 1-5 years | 2,615 | 1,588 | 2,486 |
| Total | 5,405 | 4,145 | 5,121 |
Segment reporting
The Group has one operating segment, the revenue of which consists mainly of rendering of services. The Group operates mainly in seven geographical areas. The table below presents the division of external revenue and non-current assets by geographical area. The external revenue of each geographical area is presented according to the location of the seller. Non-current assets are presented according to the location of the asset. Etteplan China operations sell their services both locally and through other Group companies thus this revenue is partly included in the revenue from other countries.
| (EUR 1,000) | 4-6/2017 | 4-6/2016 | 1-6/2017 | 1-6/2016 | 1-12/2016 |
|---|---|---|---|---|---|
| Revenue | |||||
| Finland | 37,319 | 34,780 | 75,785 | 59,337 | 125,749 |
| Poland | 1,260 | 499 | 1,950 | 499 | 1,558 |
| Sweden | 11,329 | 11,504 | 22,871 | 22,278 | 41,778 |
| China | 1,384 | 995 | 2,524 | 1,711 | 3,863 |
| Holland | 2,110 | 1,856 | 4,069 | 3,878 | 7,960 |
| USA | 70 | 83 | 349 | 105 | 398 |
| Germany | 842 | 495 | 1,568 | 1,006 | 2,631 |
| Total | 54,314 | 50,211 | 109,116 | 88,814 | 183,938 |
| (EUR 1,000) | Jun 30, 2017 | Jun 30, 2016 | Dec 31, 2016 | ||
| --- | --- | --- | --- | ||
| Non-current assets * | |||||
| Finland | 48,399 | 46,288 | 46,643 | ||
| Poland | 94 | 90 | 103 | ||
| Sweden | 25,108 | 24,262 | 23,800 | ||
| China | 2,395 | 2,644 | 2,575 | ||
| Holland | 4,530 | 5,229 | 4,894 | ||
| USA | 0 | 0 | 0 | ||
| Germany | 1,105 | 1,621 | 1,099 | ||
| Total | 81,631 | 80,133 | 79,114 |
*Other non-current assets excluding financial instruments, deferred tax assets and assets related to compensation after termination of employment contract.
In Interim period Jan 1 - Jun 30, 2017 revenue from one individual customer was EUR 10,984 thousand, which is over 10 per cent of the Group's total revenue.
24
Etteplan
Fair value of financial instruments
Fair value hierarchy
The tables below analyse financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs that are not based on observable market data (that is, unobservable inputs).
Available-for-sale financial assets recognized at fair value through profit or loss
| (EUR 1,000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Listed shares | 185 | 0 | 0 | 185 | 170 | 0 | 0 | 170 |
| Premises shares | 0 | 480 | 0 | 480 | 0 | 480 | 0 | 480 |
| Unlisted shares | 0 | 0 | 30 | 30 | 0 | 0 | 30 | 30 |
| Total Jun 30 | 185 | 480 | 30 | 695 | 170 | 480 | 30 | 680 |
Reconciliation of available-for-sale financial assets recognized at fair value through profit or loss
| (EUR 1,000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Listed shares | Premises shares | Unlisted shares | Total | Listed shares | Premises shares | Unlisted shares | Total | |
| Opening balance at Jan 1 | 170 | 480 | 30 | 680 | 177 | 480 | 30 | 687 |
| Gain/loss recognized in other comprehensive income | 15 | 0 | 0 | 15 | -7 | 0 | 0 | -7 |
| Additions | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Closing balance Jun 30 | 185 | 480 | 30 | 695 | 170 | 480 | 29 | 680 |
Financial liabilities recognized at fair value through profit or loss
| (EUR 1,000) | 2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| acquisitions | 0 | 0 | 1,643 | 1,643 | 0 | 0 | 1,250 | 1,250 |
| Total Jun 30 | 0 | 0 | 1,643 | 1,643 | 0 | 0 | 1,250 | 1,250 |
Reconciliation of financial liabilities recognized at fair value through profit or loss
| (EUR 1,000) | 2017 | 2016 | ||
|---|---|---|---|---|
| Contingent liability in acquisitions | Total | Contingent liability in acquisitions | Total | |
| Opening balance at Jan 1 | 1,568 | 1,568 | 0 | 0 |
| Additions | 962 | 962 | 1,250 | 1,250 |
| Gain/loss recognized in income statement | -15 | -15 | 0 | 0 |
| Payment | -871 | -871 | 0 | 0 |
| Closing balance Jun 30 | 1,643 | 1,643 | 1,250 | 1,250 |
Etteplan
Related party transactions
The Group's related-party includes such persons that have control, joint control or significant influence over the Group. Also the Group's key personnel, that is, the members of the Board of Directors and Management Group including the CEO are included in the related-party. Companies in control or joint control of the before mentioned persons are considered as other related parties. The ultimate controlling party Ingman Group Oy Ab and its group companies are also included in related-parties.
The following transactions were carried out with related parties:
| (EUR 1,000) | Jun 30, 2017 | Jun 30, 2016 | Dec 31, 2016 |
|---|---|---|---|
| Sales and purchases of services and related receivables and payables | |||
| Sales of services to other related parties | 306 | 0 | 217 |
| Purchases of services from other related parties | 18 | 18 | 36 |
| (EUR 1,000) | Jun 30, 2017 | Jun 30, 2016 | Dec 31, 2016 |
| Loans received from other related parties | |||
| At the beginning of period | 0 | 0 | 0 |
| Additions | 0 | 10,000 | 10,000 |
| Interest | 0 | 28 | 28 |
| Conversion to shares | 0 | -9,807 | -9,807 |
| Repayments | 0 | -221 | -221 |
| At the end of period | 0 | 0 | 0 |
Etteplan
Formulas for Key Figures
Organic growth
(Revenue current period - revenue comparison period - revenue from acquiree current period) x 100
Revenue comparison period
EBIT from business operations
Operating profit (EBIT) + amortization on PPA allocations +/- earn out revaluation items
Return on equity (ROE)
(Profit before taxes and non-controlling interest - taxes) x 100
(Shareholders' equity + minority interest) average
Return on capital employed (ROCE), before taxes
(Profit before taxes and non-controlling interest + interest and other financial expenses) x 100
(Balance sheet total - non-interest bearing debts) average
Equity ratio, %
(Shareholders' equity + non-controlling interest) x 100
Balance sheet total - advances received
Net gearing, %
(Interest-bearing debts - cash and cash equivalents and marketable securities) x 100
Shareholders' equity + non-controlling interest
Earnings per share
(Profit before taxes and non-controlling interest - taxes - non-controlling interest)
Adjusted average number of shares during the financial year
Equity per share
Shareholders' equity
Adjusted number of shares at the end of the financial year
27