Teleoperator Elisa’s stock price plummets after profit warning

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on publication of preliminary information about the company's  January-March 2008 Interim Report, the stock price of the Finnish telecommunications operator Elisa plummeted by 9.6 per cent by the close of trading in Helsinki on Tuesday.
      Elisa’s revenue was lower compared to the same quarter in 2007. Moreover, it was below the analysts' expectations.
      The closing price for Tuesday was EUR 15.02, a level last seen in the summer of 2006. Since then the company has distributed more than EUR 1 billion to its shareholders in the form of substantial dividends, among some other refunds of capital.
     
Tuesday’s price fall was accelerated by the company’s estimate for the future development, which was more cautious than previously. Elisa’s turnover and net operating profit are expected to remain at the same level as in 2007, even though the company was still in February anticipating an improvement compared with last year.
      According to CFO Jari Kinnunen, the change is a result of the weaker overall market situation.
      ”The general economic situation and the related outlook on economic trend development are bound to reflect on our market as well. In addition, a number of various campaigns are likely to affect future prospects”, noted Kinnunen.
      Elisa’s revenue was negatively affected by the implementation costs of the new billing and CRM system. Over the first three months, these additional costs weakened the company’s profit by EUR 5 million.
      The additional implementation costs of the billing and CRM system will continue until the end of the year, but they will gradually decline, reported Kinnunen.
     
Elisa started to upgrade its billing and CRM system already last year, but there are still certain improvements to be made which will bring further cost items.
      ”In addition, the number of staff at Elisa’s customer services is higher than normal in order to make sure that the queues become shorter”, Kinnunen reported.
      Elisa’s January-March 2008 revenue was down by 3 per cent from 2007, reaching EUR 367 million, while the net operating profit dropped from the EUR 68 million in Q1/2007 to EUR 57 million.
      The additional implementation costs of the new billing and CRM system accounted for EUR 12 million.
     
Elisa’s customer billing lagged behind until the end of March, which is why the company has partly had to estimate its revenue for January-March 2008.
      Moreover, the company’s revenue was negatively affected by a 2007 revenue adjustment of the mobile segment, approximately EUR 7 million. This was due to a correction of the 2007 revenue estimate of delayed customer billing.
      Analyst Janne Rantanen from Carnegie Investment Bank AB regards an adjustment of EUR 7 million as substantial. It indicates that the amount of customer billing was lower than expected at the end of last year.
      In Rantanen’s view, Elisa has also lost a number of customers over the first months of the current year.
     
Elisa published preliminary information about its January-March 2008 Interim Report after its Board of Directors had held a meeting on Tuesday. Initially, Elisa was supposed to announce its results on Friday.
      On Monday, just before the crash of Elisa’s stock price, the State of Finland sold its 0.65 per cent stake in the company to insurance company Ilmarinen, the second largest shareholder of Elisa, raising Ilmarinen’s stake to 4.97 per cent.
      ”The stake was insignificant and it was clear that the state would sell it at some point”, noted Senior Financial Counsellor Jarmo Väisänen, from the Ownership Steering Department of the Prime Minister’s Office.
      Väisänen noted further that the moment of sale was a coincidence, and was not based on any insider information.


Links:
  Elisa Stock Exchange release 22.4.2008: Preliminary Information about Elisa´s Interim Report January-March 2008

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