Increasing uncertainty and reduced profitability within core repair business

Transcription

1 Interim Report 1 January - 30 June COMPANY ANNOUNCEMENT NO. 03/ 30 August Increasing uncertainty and reduced profitability within core repair business Mobylife has in Q2 experienced a continued negative market development and reduced profitability within the core repair business. Profitability is under pressure due to the continued market transformation, increasing repair times due to more complex devices, and significant competition and price pressure. Mobylife has taken the first steps towards an operational and financial restructuring of the company to improve efficiency and financial performance in the core repair business, and to enable investments in new value adding customer channels and offerings. Year to date, 1 January 30 June, the number of repairs amounted to 464k, compared to 580k in the same period last year. This reduction is caused by the development in the customer portfolio during and a general market decline. Revenue YTD amounted to DKK million, which was an increase of DKK 56.3 million compared to the same period last year. The core repair business had a decline in revenue of DKK 17.5 million, compensated by increased spare part trading. EBITDA YTD amounted to DKK 15.6 million, an increase of DKK 6.3 million over same period last year. The EBITDA from the core repair business YTD amounted to DKK 4.3 million including the Q1 reversal of prior years payable accrual. The free cash flow YTD amounted to DKK (16.2) million, an improvement of DKK 2.3 million from the same period last year. The cash flow from operating activities YTD worsened by DKK 3.8 million. Based on the increasing uncertainty in the market, Mobylife will no longer be providing an outlook in the quarterly reports. The worsening market conditions experienced in Q2 leads to reduced profitability and increased uncertainty within the core repair business. The Q2 result is not at a satisfactory level. The market is undergoing significant transformation, and Mobylife has taken the first steps towards an operational and financial restructuring of the company and implementation of a new strategy to respond to the changing market conditions. says Jakob H. Kraglund, CEO. HIGHLIGHTS YTD vs. same period Net revenue amounted to DKK million, an increase of 20.8%. EBITDA amounted to DKK 15.6 million, an increase of DKK 6.3 million. EBIT amounted to DKK 7.1 million, an increase of DKK 4.8 million. Profit before tax amounted to DKK 10.7 million, an improvement of DKK 1.6 million. Free cash flow amounted to DKK (16.2) million, an improvement of DKK 2.3 million. NIBD at market value amounted to DKK million, a reduction of DKK 58.3 million. NIBD at nominal value ex. vendor loan was DKK million, a reduction of DKK 54.2 million. Mobylife Holding A/S, Sydmarken 32F, DK-2860 Søborg, CVR NO PAGE 1 OF 21

2 For further information on this announcement: Jakob H. Kraglund, CEO, tel Martin Nyberg, CFO, tel Mobylife will host a conference call on 1 September CET. Dial in , pin: Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 2 OF 21

3 CONTENTS Page Highlights 1 Financial Highlights and Key Ratios 4 Management s Review 5 Financial Review 6 Bond compliance 8 Business changes 9 Outlook 9 Statement by the Supervisory and Executive Boards on the Interim Report 10 Financial Statements Income Statement 11 Statement of Comprehensive Income 12 Assets & Liabilities and Equity 13 Cash Flow Statement 15 Statement of Changes in Equity 16 Notes 17 Financial Highlights and Key Ratios for the Period 1 January 30 June Practical Information Financial Calendar 21 Disclaimer 21 Mobylife Holding A/S repair mobile devices across Denmark, Sweden, Norway and Finland. The Group is authorised by all major OEM brands and has repair agreements with a large number of Telco-operators, retailers and insurance companies. The Group has local service sites in each country and has a combined annual turnover of DKK 615 million and a repair volume of 1 million devices, based on consolidated figures. To read more, visit Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 3 OF 21

4 FINANCIAL HIGHLIGHTS AND KEY RATIOS (Q1-Q2 unaudited) 1/1-31/12 Number of repairs ( 000) ,048 Income Statement (mdkk) Net revenue EBITDA before special items (0.3) 33.9 EBITDA after special items (3.2) 27.6 Earnings before interest and tax (EBIT) (4.3) 20.9 EBIT margin (%) 2,2 0,9 0,0 (3,0) 3.4 Other financials, net Profit before tax Profit for the period Balance Sheet (mdkk) Non-current assets Total assets Equity Net interest-bearing debt Net working capital (15.2) (19.0) (15.2) (19.0) (1.9) Cash Flows (mdkk) From operating activities (7.7) (3.9) (0.7) (8.2) 1.5 From investing activities (8.5) (14.4) (3.8) (5.5) (21.5) Free cash flow (16.2) (18.5) (4.4) (13.9) (20.0) Financial ratios (%) Free cash flow as a percentage of net revenue (4.9) (6.8) (2.6) (9.9) (3.2) Cash conversion (25.4) (29.6) (6.5) (30.6) (23.2) Equity ratio Ratios have been calculated according to the Recommendations and Financial Ratios issued by the Danish Society of Financial Analysts. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 4 OF 21

5 MANAGEMENT S REVIEW STRATEGIC MAIN PRIORITIES FOR Mobylife will in continue its focus on maintaining and developing a strong Nordic market presence within mobile device after sales services. The strategic main priorities are: Strengthening relationships with customers Securing customer service levels Expanding working relationships with customers New business development New services complementing repair business Closer to the customer presence Operational efficiency: Improving efficiency and achieving economies of scale Optimisation of capital resources: Continued focus on optimising working capital Mobylife is adapting the strategy and has taken the first steps towards an operational and financial restructuring of the company to respond to the worsening market conditions. Once ready, this will be communicated to the market. BUSINESS DEVELOPMENT The core repair market is under increasing pressure. The worsening market conditions are caused by development in device quality and complexity, in addition to increased competition. This is a development that has accelerated from and Q1/, and Mobylife expects the worsening market conditions to continue for the near future. Revenue in Q2 has increased compared to last year. This development is caused by a reduction in repair revenue and a growth in spare part trading revenue, as also seen in Q1. The decline in repair revenue is impacted by lower volumes in general, and development in the customer portfolio. Compared to Q1, the number of repairs has increased, leading to also increased repair revenue in Q2. The development in spare part trading has been positive. During Q2 Mobylife has agreed with a Swedish carrier customer to end the collaboration. This has impacted the Swedish volume ultimo Q2, with full impact from Q3. The Swedish market remains as the largest across the four Nordic countries measured on volumes. Earnings before interest and tax (EBIT) amounted to DKK 0.1 million, which was DKK 4.4 million above the figure. This result is not satisfactory, despite the positive development compared to last year. Profitability is under pressure due to the continued market transformation, increasing repair times driven by device complexity, and significant competition and price pressure. Mobylife has taken the first steps towards an operational and financial restructuring of the company to improve efficiency and financial performance in the core repair business and to enable investments in new value adding customer channels and offerings. Financial and legal advisors are retained to support Mobylife in the restructuring process. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 5 OF 21

6 FINANCIAL REVIEW INCOME STATEMENT Developments in activities for the period 1 January 30 June Sales (Repair orders 000) Growth (%) Net revenue (mdkk) Growth (%) 21.0 Gross Profit Personnel costs (mdkk) EBITDA (mdkk) before special items EBITDA (mdkk) after special items EBIT (mdkk) EBIT margin (%) The volume in the period 1 January 30 June was 464k device repair orders, a decrease of 20% compared to the figure. Net revenue was 21% higher in the period 1 January - 30 June than in the same period in, amounting to DKK million compared to DKK million in. Gross profit for the period 1 January 30 June was DKK 85.5 million, a decrease of DKK 1.9 million compared to the same period last year. Gross Profit margin (%) decreased by 6.1 percentage points, and amounted to 26.2% for the period 1 January 31 June. This decline in Gross Profit margin is driven by changed mix between repair and spare parts trading, in addition to decreased relative profitability in warranty repairs following more complex and expensive products. Personnel costs for the period 1 January 30 June amounted to DKK 69.9 million, which was 11% below the figure. During there has been a reduction in number of employees, aligning the workforce to the repair volume. The reduction in personnel cost is not at the same level as the decline in volume, due to increased repair time and productivity pressure. Earnings before interest, tax, depreciation and amortisation (EBITDA) for the period 1 January 30 June was DKK 15.6 million, an improvement of DKK 6.6 million compared to the figure covering the same period. The improvement was related to Q2 included overcapacity. Earnings before interest and tax (EBIT) amounted to DKK 7.1 million for the period 1 January 31 June, which was DKK 4.8 million above the figure. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 6 OF 21

7 BALANCE SHEET The balance sheet of Mobylife is dominated by bond debt and goodwill, in addition the payables and receivables and intangible assets. According to IA39 under IFRS, the bond debt has been obtained to fair market value, based upon market pricing following hierarchy level 3. The bond debt at fair market value amounts to DKK million as at 30 June, representing total outstanding amount of SEK 282 million at nominal value. Mobylife s balance sheet amounted to DKK million as at 30 June, which was a decrease of DKK 27.7 million from 31 December. The main driver of this decrease is a reduction of the working capital balance, in addition to regulation of bond debt following market price and exchange rate adjustment. The YTD equity ratio amounted to 36.9% compared to 32.9% as at 31 December. YTD Equity amounted to DKK million. Net interest-bearing debt, using fair market value, increased by DKK 2.4 million in the period 1 January 30 June, due to lower cash balance and bond debt reduction following market price and exchange rate adjustments. CASH FLOW STATEMENT Cash flow from operating activities for the period 1 January 30 June amounted to DKK (7.7) million, a worsening of DKK 3.8 million compared to the same period last year. During Q2 Mobylife has implemented a non-recourse factoring solution, which stand-alone is improving the operating cash flow. The Cash flow from investing activities for the period 1 January 30 June amounted to DKK (8.5) million, compared to last year when the level was DKK (14.4) million. Last year in Q1 there was increased activity around investments in software development, branding and finance ERP setup. Free cash flow for the period 1 January 30 June amounted to DKK (16.2) million compared to DKK (18.6) million in the same period last year. The result in Q2 was impacted by the development in operational cash flow following the implementation of a non-recourse factoring solution. The Cash flow from financing activities for the period 1 January 30 June amounted to DKK (0.0) million, compared to last year when the level was DKK (0.2) million. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 7 OF 21

8 BOND COMPLIANCE In May 2014, Telecare (now Mobylife) issued a SEK 350 million bond used for financing the acquisitions of Deltaservice and Optima as well as refinancing existing bank debt. In accordance with the bond agreement, the Terms and Conditions of the bond are available for download on the Mobylife website under the corporate section. As at 30 June, Mobylife are in compliance with the undertakings listed in section 12 of the Terms and Conditions. There is one financial covenant attached to the bond. As at 30 June, the Net Debt to EBITDA shall not exceed We hereby confirm that: 1. no Event of Default has occurred or is continuing and; 2. the Net Debt to EBITDA Ratio as per 30 June was 5.13 The Net Debt was: DKK million The EBITDA was: DKK million Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 8 OF 21

9 BUSINESS CHANGES Mobylife has in Q2 updated the organizational structure, changing from a functional structure to a market unit structure. This development is done to come closer to our customers. OUTLOOK Based on the increasing uncertainty in the market, Mobylife will no longer be providing an outlook in the quarterly reports. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 9 OF 21

10 STATEMENT BY THE SUPERVISORY AND EXECUTIVE BOARDS ON THE INTERIM REPORT The Executive and Supervisory Boards have been presented the Interim Report of Mobylife Holding A/S. The Interim Report has today been considered and adopted. The Interim Report, which has not been audited or reviewed by the Company s independent auditors, was prepared in accordance with IFRS. In our opinion, the Interim Financial Statements give a true and fair view of the financial position of the Group as at 30 June as well as of the results of the Group operations and cash flows for the period 1 January 30 June. In our Opinion, the Management Review gives a true and fair account of the development in the activities and financial circumstances of the Group, of the results of operations for the period and of the overall financial position of the Group, and a description of the key risks and uncertainties facing the Group. Søborg, 30 August Executive Board Jakob H. Kraglund CEO Supervisory Board Mads Middelboe Chairman Vilhelm Hahn-Petersen Deputy Chairman Jacob Thygesen Peter Ryttergaard Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 10 OF 21

11 INCOME STATEMENT (MDKK) 1/1-31/12 Net revenue Production costs (224.7) (164.1) (121.2) (93.5) (391.9) Other external costs (16.6) (19.0) (9.3) (9.4) (32.7) Gross profit Personnel costs (69.9) (78.4) (34.6) (38.4) (156.5) Depreciation and Amortisation of tangible and intangible fixed (4.3) (2.3) (2.3) (1.1) (6.7) assets Operating profit / (loss) before special items 11.3 (6.7) 1.8 (1.4) (27.3) Special items, note 4 (4.2) (4.4) (1.7) (2.9) (6.4) Operating Profit / (loss) after special items (4.3) 20.9 Financial income /expenses, net Profit before income tax Income tax (1.4) 1.9 (0.9) 2.1 (16.6) Profit Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 11 OF 21

12 STATEMENT OF COMPREHENSIVE INCOME (MDKK) 1/1-31/12 Net profit for the period Other comprehensive income Value and exchange adjustments of foreign group enterprises (0.1) (0.6) (11.4) Other comprehensive income after tax (0.1) (0.6) (11.4) Total comprehensive income Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 12 OF 21

13 ASSETS (MDKK) 30/6 30/6 31/3 31/3 31/12 ASSETS Goodwill Development projects Software Land and buildings Plant and machinery Leasehold improvements Other receivables Deferred tax assets Non-current assets Inventories Receivables Tax receivables Cash in bank and in hand Current assets Total assets Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 13 OF 21

14 LIABILITIES AND EQUITY (MDKK) LIABILITIES AND EQUITY 30/6 30/6 31/3 31/3 31/12 Share capital Other reserves (11.6) 0.7 (4.6) 0.6 (11.8) Retained earnings Equity Bonds / Credit institutions Vendor loan Finance lease debt Deferred tax liabilities Non-current liabilities Credit institutions Bonds Trade payables Current income tax liabilities Finance lease debt Other payables Current liabilities Total liabilities Total liabilities and equity Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 14 OF 21

15 CASH FLOW STATEMENT (MDKK) 1/1-31/12 Note Profit / (loss) for the period Adjustments for non-cash operating items (4.6) 0.2 (19.1) 14.8 Change in working capital 3 (2.9) Cash flow from operating activities before financial items and expenses (1.6) 32.5 Interest paid (9.0) (11.3) (5.0) (5.6) (21.4) Income tax paid (7.6) (8.0) (2.1) (1.0) (9.6) Cash flow from operating activities (7.7) (3.9) (0.7) (8.2) 1.5 Purchases of property, plant and equipment (0.6) (0.7) (0.4) (0.3) (1.1) Purchases of intangible assets (7.9) (13.7) (3.4) (5.2) (20,4) Cash flow from investing activities (8.5) (14.4) (3.8) (5.5) (21.5) Proceeds from borrowings (0,1) 0.0 (0.1) Proceeds from leasing debt 0.1 (0.2) 0.1 (0.2) (0.9) Repayment of borrowings (37.9) Capital increases Cash flow from financing activities 0.0 (0.2) 0.0 (0.2) 11.3 Net(decrease ) /increase in cash and cash equivalents (16.2) (18.5) (4.5) (13.9) (8.7) Cash and cash equivalents at beginning of year Cash and cash equivalents at 30June Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 15 OF 21

16 STATEMENT OF CHANGES IN EQUITY (MDKK) Share Share Other Retained Total Capital Premium Reserves earnings Equity Balance as at 1 January (11.8) Profit for the period Other comprehensive income for the period Balance as at 30 June (11.6) Balance as at 1 January (0.4) Profit for the period Other comprehensive income for the period Balance as at 30 June Balance as at 1 January (0.4) Profit for the Year Other comprehensive income for the year - - (11.4) - (11.4) Capital increase (11.8) Internal transfer - (41.8) Balance as at 31 December (11.8) Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 16 OF 21

17 NOTES ON THE INTERIM REPORT Note 1 Significant Accounting Policies; Accounting Estimates and Judgements ACCOUNTING POLICIES The present interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the EU, and Danish regulations governing presentation of interim reports by listed companies. The consolidated financial statements have been prepared using the same accounting policies as the consolidated financial statements for. The consolidated financial statements for contain a complete description of the accounting policies to which reference is made. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 17 OF 21

18 Note 2 Cash Flow Statement (mdkk) 1/1-31/12 Adjustments for non-cash operating items Depreciations Financial income / Expenses, net (3.6) (6,8) (3.0) (18.8) (10.1) Income tax for the period 1.3 (1.9) 1.0 (2.1) 16.6 Other adjustments 0.5 1, Total 2.5 (4.6) 0.2 (19.1) 14.8 Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 18 OF 21

19 Note 3 Cash Flow Statement (mdkk) 1/1-31/12 Change in working capital Change in inventories 0.0 (0.6) (1.6) (0.2) 2.1 Change in receivables 15.6 (19.7) (1.9) (22.6) (21.1) Change in payables (18.5) Total (2.9) Note 4 Income statement (mdkk) 1/1-31/12 Operating items: Transaction costs, Delta Group Transaction costs, Optima Group Non-recurring: Bond prospect and waivers 0.0 (0.8) 0.0 (0.8) (2.1) Non-recurring: IFRS conversion and accounting costs (1.0) (1.7) (0.5) (1.0) (1.7) Non-recurring: Re-organisation (1.0) (1.9) (0.1) (1.1) (2.6) Non-recurring: Branding (0.3) Non-recurring: Ongoing litigation (2.2) 0.0 (1.2) 0.0 (0.7) Total (4.2) (4.4) (1.8) (2.9) (6.4) Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 19 OF 21

20 FINANCIAL HIGHLIGHTS AND KEY RATIOS 1 January 30 June Number of repairs ( 000) Income Statement (mdkk) Net revenue , EBITDA before special items EBITDA after special items (10.1) Earnings before interest and tax (EBIT) (13.7) - EBIT margin (%) (11.2) - Other financials, net (1.9) - Profit before tax (15.6) - Profit for the period (14.4) - Balance Sheet (mdkk) Non-current assets Total assets Equity Net interest-bearing debt Net working capital (15.2) (19.0) Cash Flows (mdkk) From operating activities (7.7) (3.9) (19.1) - From investing activities (8.5) (14.4) (254.7) - Free cash flow (16.2) (18.5) 71,7 - Financial ratios (%) Cash conversion (25.4) (29.6) Equity ratio Ratios have been calculated according to the Recommendations and Financial Ratios issued by the Danish Society of Financial Analysts. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 20 OF 21

21 PRACTICAL INFORMATION FINANCIAL CALENDAR 10 March Annual Report for 13 May Interim Report for the period 1 January 31 March 30 August Interim Report for the period 1 January 30 June 30 November Interim Report for the period 1 January - 30 September DISCLAIMER This announcement contains forward-looking statements. Undue reliance should not be placed on forward-looking statements because they relate to and depend on circumstances that may or may not occur in the future and actual results may differ materially from those in forward-looking statements. Forward-looking statements include, without limitation, statements regarding our business, financial circumstances, strategy, results of operations, financing and other plans, objectives, assumptions, expectations, prospects, beliefs and other future events and prospects. We undertake no liability, and do not intend to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise. Mobylife Holding A/S, CVR NO COMPANY ANNOUNCEMENT NO. 3/ - PAGE 21 OF 21