For Tecnotree, the year 2016 was one of change and new beginnings.
We significantly progressed in our transformation journey into a full-fledged product company under a new leadership team, and aggressively consolidated our operations across the globe to reduce overall cost of operations. While endeavoring to do this, we actively won new customers throughout the year and also renewed the relationships with our leading customers in LATAM and Middle-East & Africa. In addition, we successfully received the approval for our debt restructuring program, reached a settlement on a long-accrued receivable with our LATAM customer.
In addition we continued to complete several of our long-standing customer projects, and won a number of important new deals with our new open source based BSS offering. These events , further confirmed that our product strategy and roadmap are on the right track. We also further consolidated and harmonized our BSS product offerings in order to align our products to our vision of enabling a digital market-place for our customers and to an eco-system of our partners.
However, the company continued to experience an extremely tight cash position and liquidity. The company took several measures throughout 2016 to improve this situation including a one- time cost savings program, aggressive collection of receivables from its customers and seeking external funding and investments. The financial situation continues still to be critical.
CEO’s adjusted consolidated key figures:
In order to review the performance of 2016 without the impact of prior year issues and one-time costs related to the 5 million EUR cost saving program, I would like the share the table above that can help truly assess our performance of 2016:
During the year, the revenues from the LATAM region were lower and some revenues in MEA were deferred to 2017, due to delayed customer deliveries and acceptance. Hence, our revenues for the year were lower than target at 60.1 million euros (76.4).
As a part of driving towards profitable growth and further optimization of costs, we announced in August 2016 a company-wide cost saving program with the target to reduce personnel costs by EUR 5.0 million on an annual level, representing 100 man years. In conjunction with the cost saving program we announced the plans to reduce our personnel globally, including Finland, India, Brazil, APAC and other locations. As the result of the consultation process, Tecnotree’s personnel was decreased by 116 globally. By the end of 2016 the gains from the cost saving program were EUR 2.3 million.
After elimination of the exceptional one time issue of the LATAM settlement costs and prior year write-offs, our earnings before interest and tax (EBIT) for 2016 is EUR 3.1 million (12.0). With the debt restructuring plan approved by the Espoo District court in 2016, our actual net income is a positive 1.4 million euros (0.6).
Along with the confirmation of the payment program, the group recorded a one-off positive income effect of approximately 6.6 million euros as result of debt rearrangement. In addition, the company cancelled provisions for interest expenses to the total of 2.7 million euros.
2016 Overall Performance:
Tecnotree had a record year in 2016 in terms of the acquisition of new clients for our new BSS suite of products based on open source technologies:
* Ukkoverkot in Finland chose Tecnotree’s BSS Express solution for its cloud based on BSS platform delivered in a SaaS mode, and we also signed a deal to supply a Convergent Billing Platform to a West African operator with 60 million customers
* Nepal Telecom – a South Asian operator – chose Tecnotree’s AgilityTM Mediation and Interconnect system to replace their existing systems for USD 3 million, and EMTEL Mauritius – part of the Airtel Group – chose Tecnotree solutions for expanding its reachability and content management platforms
* We won a USD 8 million contract for a full BSS transformation project with a South East African operator for its omni-channel, quad play offerings on GSM, FXL, ISP and IPTV. The deliveries are expected to be completed in 2017.
During Q4, Tecnotree reached a settlement of 6.0 million euros with a Latin American customer on a long-accrued receivable. Following the outcome of these negotiations, Tecnotree took an impairment charge of approximately 9 million euros, booked in Q4 2016.
Tecnotree reduced its overall operating expenses to 50.9 million euros (53.2) (difference 2.3) working across the geographical centers and looking to optimize and consolidate its operations in LATAM, Europe, MEA and APAC. In 2016, we also significantly rationalized our portfolio of products to ensure that we maintain a relevant set of products that will complete our BSS offering and significantly reduce time-to-market.
Our risk of working in countries where there are severe foreign exchange constraints that affect our cash in-flow, and also countries where withholding taxes are varied and high, continued in 2016.
In 2017 we are committed to continuing our internal transformation journey to simplify our portfolio of products, and go-to-market with improved execution, quality and agility and innovative business models.
Given the current critical financial situation of the company, Tecnotree will plan further to reduce operating expenses in 2017 to the tune of an additional 5 million EUR. We will plan to achieve this goal through further reductions in real estate rentals, travel and accommodation cost, consolidation of branch operations, reduction of outsourced services and additional savings in personnel costs.
We will continue to minimize currency exchange risks and withholding taxes by initiating actions to further improve our current structures and processes.
We will continue increased focus on ensuring timely collections of receivables by further improving the quality and timeliness of our deliveries.
Going forward, in 2017 and beyond we continue with our vision as a product company. We will compound our deep telecom experience with creating a delightful customer experience on our BSS platform engaged with signature Finnish design and quality excellence. Our cloud enabled micro-services based interoperable products help us create a ‘digital marketplace’ with our own products and an ecosystem of partner products and services that fosters true business value for our customers.
Padma Ravichander, Chief Executive Officer
We have aggressively consolidated and reduced our cost of operations.