Jukka Harju, CEO
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CEO's Review

In 2014 EB's net sales grew by 12.5 per cent from previous year to EUR 224.1 million. Operating profit was almost double compared to previous year and was EUR 16.8 million (corresponding to 7.5 per cent of net sales). Both the growth in net sales and mainly also the improved operating profit were due to the good development of Automotive Business Segment. I am pleased to state that EBīs financial development during 2014 continued good and the company reached its main goal to improve operating profit from previous year.

The demand for EB's software products and R&D services in Automotive Business Segment remained good, as carmakers continued to invest into the development of new car models. During the reporting period the net sales grew strongly, 24.0 per cent from previous year to EUR 171.4 million and operating profit improved to be 9.3 per cent from net sales. Also e.solutions GmbH, the jointly owned company of EB and AUDI that develops infotainment software systems for Volkswagen group car models, continued its growth and proceeded according to its targets. The growth in operating profit was driven by the growth in net sales of R&D services and by the good performance in projects, the growth of software license sales and lower R&D investments than in the previous year. In the last quarter, R&D investments were higher than in the previous year. In addition to connected car area, autonomous driving was strengthened as a key trend and area of development in automotive markets.

The net sales of the Wireless Business Segment decreased by 13.4% from the previous year to EUR 53.0 million due to the decreased demand for R&D services for mobile telecommunications network equipment and other markets. The product-based sales increased clearly from the previous year to EUR 14.1 million (approximately 26.7 per cent of net sales in 2014), which however did not fully compensate the decreased R&D services sales. The product-based sales in 2014 was generated mainly from the Finnish authority markets and the net sales resulting from the international defense and other authority markets remained low due to these customersī slower than estimated purchase decisions. Wireless Business Segmentīs operating result for the whole year improved year-on-year and was slightly positive due to the strong fourth quarter. Operating profit without non-recurring items was at the same level as in the previous year.

In 2014 EB strengthened its R&D investments in the Wireless Business Segment clearly from previous year to EUR 6.9 million (13 per cent of net sales) and launched EB Tough Mobile LTE (Long Term Evolution) smart phone for demanding security and authorities markets and EB IoT Device Platform. In the beginning of January 2015 EB acquired SafeMove business which provides high-quality information security solutions for mobile devices and portable computers. This acquisition strengthens Wireless Business Segmentīs competitiveness as a provider of secure communication solutions for defense, public safety and other authority markets.

EBīs balance sheet remained strong in 2014. At the end of the reporting period the equity ratio was 62.3 per cent and cash and other liquid assets were EUR 43.3 million. A total of EUR 3.0 million of altogether EUR 20 million credit facilities were in use at the end of the year.

At the end of 2014 the parent company of the group and its subsidiaries employed 1,804 people, e.solutions GmbH, the jointly owned company with EB and AUDI employed 431 people. The amount of EB personnel in total grew during 2014 in Automotive Business Segment with 186 employees and decreased in Wireless Business Segment by 29 employees. In the autumn 2014, EB expanded its offices and opened a new R&D site in Oulu, in Finland. The operations had a good start and at the end of the year 2014 21 employees were working there.

During 2014, the company's share price grew 26.3 per cent year-on-year and share price volume on the NASDAQ OMX Helsinki grew from previous year representing more than 50 per cent of the share capital.

In accordance with the strategic guidelines, published on February 19, 2015, the markets of both Automotive and Wireless Business Segments offer EB good growth potential in the coming years. In both Business Segments, our goal is to grow the net sales and continue good profitability development during 2015–2017. In 2015 our goal is to grow EB's net sales and operating profit from the previous year.

On February 18, 2015 EB's Board has accepted the partial demerger plan of Elektrobit Corporation and the listing of Wireless Business Segment as Bittium Corporation on the Nasdaq Helsinki stock exchange. In case the extraordinary general meeting, planned to be held on June 11, 2015, approves the plan, the demerger will come effective on June 30, 2015. Automotive business would remain in the current company, which will continue to be listed as before. The demerger plan and the updated strategic guidelines have been announced in more detail in this annual report in section 1 as well as in the stock exchange release, on February 19, 2015.