|[October 24, 2013]
Enea AB: Interim Report, July - September 2013
KISTA, Sweden --(Business Wire)--
Further improvement to profitability
The operating margin and earnings per share continued to improve, while
Enea's (News - Alert) (STO:ENEA) sales for the third quarter were lower than in the
third quarter last year. The profitability target of a 20 percent
operating margin was reached for the second consecutive quarter.
Net sales for the third quarter amounted to SEK 97.1 (107.3) million.
Software related income increased slightly while service sales declined,
which in all is equivalent to a decline of 9.5 percent over the quarter.
Net sales fell by 12.5 percent for the first nine months of the year.
The operating profit for the third quarter amounted to SEK 21.0 (18.0)
million, which is equivalent to an operating margin of 21.6 (16.8)
percent. For the first nine months of the year, operating profit
amounted to SEK 57.0 (52.1) million, corresponding to an operating
margin of 18.9 (15.1) percent.
Earnings per share increased to SEK 0.92 (0.77) for the third quarter
and SEK 2.66 (2.31) for the first nine months of the year.
Cash flow from operations amounted to SEK 38.3 (26.6) million for the
third quarter and SEK 81.0 (60.0) million for the first nine months of
the year. Cash and cash equivalents amounted to SEK 156.4 (134.6)
million at the end of the third quarter.
July to September 2013
(third quarter previous year in brackets)
Net sales, SEK 97.1 (107.3) million
Growth, -9.5 (6.1)%
Growth, currency adjusted, -8.4 (5.8)%
Operating profit, SEK 21.0 (18.0) million
Operating margin, 21.6 (16.8)%
Net profit before tax, SEK 19.9 (19.5) million
Net profit after tax, SEK 15.1 (12.9) million
Net profit, divested business, SEK - (-) million
Earnings per share, SEK 0.92 (0.77)1
Cash flow from operations, SEK 38.3 (26.6) million
Cash and cash equivalents, SEK 156.4 (134.6) million
January to September 2013
(January to September previous year in brackets)
Net sales, SEK 302.1 (345.3) million
Growth, -12.5 (7.2)%
Growth, currency adjusted, -10.6 (5.2)%
Operating profit, SEK 57.0 (52.1) million
Operating margin, 18.9 (15.1)% · Net profit before tax, SEK 58.5
Net profit after tax, SEK 43.8 (39.0) million
Net profit, divested business, SEK - (61.7) million
Earnings per share, SEK 2.66 (2.31)1
Cash flow from operations, SEK 81.0 (60.0) million
Cash and cash equivalents, SEK 156.4 (134.6) million
1) Earnings per share is calculated based on profit after tax for the
Anders Lidbeck, President and CEO comments:
"We have improved our operating margin in every quarter of 2013. We
achieved an operating margin of 21.6 percent over the third quarter,
which is also better than our long-term profitability target of 20
percent. This is the second consecutive quarter in which we have
exceeded our target. Enea has shown that it is possible to create high
profit margins despite a weak market. This is due to organizational and
structural changes implemented over the last 24 months. We now have an
efficient organization with a lot of flexibility, and we focus on areas
offering high profitability. This has allowed us to maintain a high
level of investment in research and development.
The market in which we operate continues to be very exciting. We are
seeing a massive increase in numbers of onnected devices and data
traffic on mobile networks, but there is great price pressure.
Manufacturers of telecom equipment is challenged with operators wanting
to increase capacity while they at the same time has difficulties
charging for their services. For Enea the result is fewer new customer
projects which is balanced by an increase in installations of network
equipment. In all, this resulted in an increase in software related
income over the third quarter compared with the period last year.
Service income decreased with app. 30 percent over the third quarter.
Enea has seen declining service revenues during a number of quarters,
especially on the American market where general reduction in government
funding have had an impact on Enea's customers' projects. One third of
the service revenue is dependent on defense projects financed within the
scope of the American state budget. We are also seeing challenges in
terms of software sales on the American market, albeit to a lesser
extent than we are seeing in respect of services.
The high level of profitability does not mean that Enea is failing to
make important investments. We are constantly investing in both the
marketing organization and product development. For instance, Enea
continuously reinvests about one-third of its software revenue in
product development, and this has resulted in a number of new product
releases during the year. OSE is currently our most popular product, and
having a strong product offering is a very important element of our
strategy. Alongside OSE, Linux is our biggest product development
investment. However, it will take some time for our Linux sales to reach
a level which will make it one of our bigger products in net sales
terms, and ongoing investments will be required to achieve this.
However, our focus on Linux has already had a beneficial effect on sales
of Enea's other products and services.
Within our service organization, we have concluded a number of contracts
which will be very profitable for us in the long term. A leading
American defense company has re-selected Enea as preferred supplier
following a major review of all service suppliers. We were selected as
one of more than 30 suppliers following an evaluation and negotiation
process lasting six months. With this new frame agreement, Enea can
continue to do service business worth an estimated SEK 125 million over
three years. Securing a frame agreement and confirming the customer's
willingness to invest is extremely important to us. We competed with
many larger companies and we managed to be selected without having to
compromise in any significant area. Another important transaction
concluded in the service sector involved a leading American medtech
company, which granted us an extended agreement for the rest of the year
in a deal worth SEK 6.9 million. And at the end of the second quarter, a
frame agreement was entered into with a leading American manufacturer of
secure electronic payment solutions. This customer is expected to
develop into one of our three biggest customers in the service sector
over the next few years. However, these new deals will not balance out
the decline we experienced with government-funded projects in 2013
because of the startup time that will be required for these new projects.
We are continuing to adopt a long-term approach to our biggest customers
and our most important partners in order to extend their use of Enea's
products and services. Continuing good relations with these players are
the most important factor in securing our future business. With Enea
Linux, we have created opportunities for new discussions on how the
communication systems of the future can be constructed.
We will be continuing our attempts to improve growth and profitability.
Achieving a 20 percent margin during a couple of quarters is good, but
the long-term objective is to be able to deliver a 20 percent operating
margin annually. Enea is prepared to face a market which remains weak,
but we are investing and planning for growth.
We are standing by our outlook for 2013. Even if demand remains weak for
the rest of the year, it is our opinion that we will improve both our
operating margin and earnings per share over the whole year compared
with last year."
Press and analyst meeting
Press and financial analysts are invited to a press and analyst meeting
where Anders Lidbeck, President and CEO, will present and comment on the
Time: Thursday October 24 at 10:00 am CET.
Link: Financial Hearings (http://financialhearings.nu/131024/enea/)
Phone (News - Alert) number: SE: +46 8 519 993 68 or UK: +44 207 660 20 81
The full report is published at www.enea.com/investors
This information is such that Enea AB (publ) is to publish in accordance
with the Swedish Securities Markets Act and/or the Financial Instruments
Trading Act. The information was submitted for publication on October
24, 2013 at 7.30 CET.
Enea is a global vendor of Linux and Real-time operating system
solutions including middleware, tools, protocols and services. The
company is a world leader in developing software platforms for
communication-driven products in multiple verticals, with extreme
demands on high-availability and performance. Enea's expertise in
operating systems and high availability middleware shortens development
cycles, brings down product costs and increases system reliability. The
company's vertical solutions cover telecom handsets and infrastructure,
medtech, automotive and mil/aero. Enea has offices in Europe, North
America and Asia, and is listed on NASDAQ OMX Nordic Exchange Stockholm
AB. For more information please visit enea.com or contact us at email@example.com.
Enea®, Enea OSE®, Netbricks®, Polyhedra® and Zealcore® are registered
trademarks of Enea AB and its subsidiaries. Enea OSE®ck, Enea OSE®
Epsilon, Enea® Element, Enea® Optima, Enea® Optima Log Analyzer, Enea®
Black Box (News - Alert) Recorder, Enea® LINX, Enea® Accelerator, Polyhedra® Lite,
Enea® dSPEED Platform, Enea® System Manager and Embedded for Leaders(TM)
are unregistered trademarks of Enea AB or its subsidiaries. Any other
company, product or service names mentioned above are the registered or
unregistered trademarks of their respective owner. © Enea AB 2013.
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