MARTELA CORPORATION INTERIM REPORT 6.8.2008 AT 9.00 a.m.
MARTELA CORPORATION'S INTERIM REPORT, 1 JANUARY - 30 JUNE, 2008
Net revenue for January-June was EUR 69.4 million (60.2), an increase of 15.2
per cent. Operating profit was EUR 5.1 million (4.2), including non-recurring
income from the sale of assets totalling EUR 0.7 million (2.8). The
equity-to-assets ratio was 49.8 per cent (45.3) and gearing was 1.3 per cent
(31.2).
It is expected that the net revenue for 2008 will exceed last year's level, and
that the whole year's operating profit before non-recurring items will be better
than the previous year.
Key figures
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| | 4-6 | 4-6 | 1-6 | 1-6 | 1-12 |
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| | 2008 | 2007 | 2008 | 2007 | 2007 |
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| Revenue | 33.3 | 30.4 | 69.4 | 60.2 | 128.4 |
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| Change in revenue % | 9.7 | 11.6 | 15.2 | 11.4 | 7.3 |
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| Operating profit | 1.6 | 1.3 | 4.4 | 1.4 | 5.8 |
| excluding non-recurring | | | | | |
| items | | | | | |
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| Operating profit % | 4.9 | 4.3 | 6.3 | 2.4 | 4.5 |
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| Return on investment, % | | | 23.7 | 20.4 | 19.6 |
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| Return on equity, % | | | 23.0 | 23.2 | 19.8 |
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| Equity to asset ratio, % | | | 49.8 | 45.3 | 46.7 |
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| Gearing, % | | | 1.3 | 31.2 | 16.0 |
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| Average staff | | | 680 | 648 | 663 |
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| Revenue/employee | | | 102.1 | 93.0 | 193.7 |
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Accounting policies
The interim report has been prepared in accordance with IAS 34, Interim
Financial Reporting, as approved by the EU.
Market
The demand for office furniture continued to grow in 2007 and in the first
half-year of 2008. Office construction is expected to continue to be lively in
the second half of 2008.
Group structure
There were no changes in Group structure during the review period or the
comparison period.
Segment reporting
Martela has a single primary segment, namely the furnishing of offices and
public spaces. Net revenue and result are as recorded in the consolidated
financial statements. The Group's secondary reporting segment is its customers
by geographical location.
Net revenue
Net revenue for January-June grew to EUR 69.4 million (60.2), an increase of
15.2 per cent. The large projects carried out during the first quarter
contributed to this growth. Net revenue for the second quarter grew to EUR 33.3
million (30.4), an increase of 9.7 per cent. Growth was particularly strong in
Finland, and in Poland and its neighbouring areas.
During the first half-year, performance in Scandinavia was not according to plan
and net revenue decreased by 12.5 per cent.
Invoicing by main market areas
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| | 4-6 | 4-6 | 1-6 | 1-6 | 1-12 |
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| | 2008 | 2007 | 2008 | 2007 | 2007 |
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| Finland | 23.5 | 20.7 | 49.5 | 40.3 | 85.8 |
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| Scandinavia | 5.2 | 5.9 | 10.9 | 12.4 | 26.4 |
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| Poland and surrounding | 3.4 | 2.7 | 6.5 | 4.9 | 11.1 |
| areas | | | | | |
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| Other areas | 1.1 | 1.0 | 2.4 | 2.7 | 5.4 |
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| Total | 33.2 | 30.3 | 69.3 | 60.3 | 128.7 |
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Change in invoicing and proportion of consolidated invoicing
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| | 1-6 | 1-6 | | | 1-12 | |
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| | 2008 | 2007 | Change | Percenta | 2007 | Percentag |
| | | | | ge | | e |
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| Finland | 49.5 | 40.3 | 22.7 % | 71.4 % | 85.8 | 66.7 % |
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| Scandinavia | 10.9 | 12.4 | -12.5 | 15.7 % | 26.4 | 20.5 % |
| | | | % | | | |
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| Poland and | 6.5 | 4.9 | 33.7 % | 9.4 % | 11.1 | 8.6 % |
| surrounding | | | | | | |
| areas | | | | | | |
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| Other areas | 2.4 | 2.7 | -9.0 % | 3.5 % | 5.4 | 4.2 % |
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| Total | 69.3 | 60.3 | 14.9 % | 100.0 % | 128.7 | 100.0 % |
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Consolidated result
The consolidated result for the second quarter was according to plan and the
operating profit was EUR 1.7 million (2.6). The result was increased by EUR 0.1
million in non-recurring income from the sale of assets (1.3).
The result for the first half-year was a clear improvement and the operating
profit was EUR 5.1 million (4.2). This includes EUR 0.7 million (2.8) in
non-recurring income from the sale of assets. The sales gain recognised in early
2008 relates to the sale of land in Poland. The operating profit excluding
non-recurring items was EUR 4.4 million (1.4). This year, profit has developed
positively in Finland, and in Poland and its neighbouring areas. A decrease in
net revenue in Scandinavia has negatively affected the area's profit
performance.
Profit before taxes rose to EUR 4.8 million (3.9), and profit after taxes was
EUR 3.5 million (3.0).
The operating profit percentage excluding non-recurring items was 6.3 per cent
(2.4).
Financial position
The Group's financial position remained stable. At the end of the review period,
net interest-bearing liabilities were EUR 13.0 million (15.4), and the net debt
was EUR 0.4 million (8.4). At the beginning of 2008, the net debt was EUR 4.7
million. At the end of the review period, gearing was 1.3 per cent (31.2) and
the equity-to-assets ratio was 49.8 per cent (45.3%) Net financial expenses were
EUR -0.3 million (-0.3).
Cash flow from operating activities in January-June was EUR 6.3 million (5.0).
The end-of-period balance sheet total was EUR 63.0 million (59.9).
Capital expenditure
The Group's gross capital expenditure for January-June was EUR 1.6 million (1.8)
and mainly concerned production replacements and IT investments. Of the capital
expenditure for the comparison period in 2007, EUR 0.7 million was attributable
to the ownership rearrangement at the Bodafors plant, as a result of which the
long-term lease liability for the part leased back by Martela was activated in
the consolidated balance sheet in accordance with the IFRS.
Staff
In January-June, the group employed an average of 680 (648) persons,
representing growth of 4.9 per cent. At the end of June, the Group employed 723
(689) persons.
Average staff by region
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| | 1-6 | 1-6 | 1-12 |
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| | 2008 | 2007 | 2007 |
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| Finland | 518 | 516 | 518 |
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| Scandinavia | 73 | 67 | 71 |
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| Poland | 89 | 65 | 74 |
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| Group total | 680 | 648 | 663 |
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Product development and collection
Product development and collection management are the responsibility of two
Group-level organisations: the Office product line, responsible for workstation
furniture, and the Surroundings product line, responsible for furniture for
surroundings and other public spaces.
Exhibited at Martela's stand at the Stockholm Furniture Fair in February were
new products representing both product lines, as well as two fascinating new
concepts. The exhibited new pieces of workstation furniture were the James task
chair designed by Iiro Viljanen and the Pinta ES, the newest member of the Pinta
range, by Pekka Toivola and Iiro Viljanen. The surroundings furniture displayed
for the first time featured the Skybar chair designed by Geir Sætveit and the
Movie sofa by Rane Vaskivuori. The concepts presented by Martela in Stockholm
were favourably received; both the Mybox desk by Iiro Viljanen and the Book
shelf/space divider by Pekka Toivola aroused discussion and interest, as had
been hoped for.
At the Milan Furniture Fair in April, Martela set up its own exhibition with the
theme “under THE tree”. The exhibition was named after The Tree space divider,
designed by Professor Eero Aarnio.
Shares
During January-June, 483,137 (969,714) of the company's A shares were traded on
the OMX Nordic Exchange Helsinki, corresponding to 13.6 per cent (27.3) of all A
shares. The higher trading figure of the comparison period in 2007 was due
partly to the acquisition of shares by Evli Alexander Management Oy for the
three-year share-based incentive system. At that time, 143,166 shares were
acquired for EUR 1.2 million in cash.
The value of trading during the review period was EUR 4.4 million (8.3), and the
share price was EUR 8.35 at the beginning and EUR 8.40 at the end of the period.
During January-June the share price was EUR 10.05 at its highest and EUR 7.32 at
its lowest. At the end of June, equity per share was EUR 7.65 (6.62).
Treasury shares
The company did not purchase any Martela shares for the treasury in
January-June. On 30 June 2008, Martela owned 67,700 Martela A shares, purchased
at an average price of EUR 10.65. Martela's holding of treasury shares amounts
to 1.6 per cent of all shares and 0.4 per cent of all votes.
2008 Annual General Meeting
The Annual General Meeting was held on 1 April 2008. The meeting approved the
financial statements and discharged the responsible parties from liability for
the 2007 financial year. The AGM decided, in accordance with the Board of
Directors' proposal, to distribute a dividend of EUR 0.50 per share, totalling
EUR 2,043,950. Heikki Ala-Ilkka, Tapio Hakakari, Heikki Martela, Pekka Martela,
Jori Keckman and Jaakko Palsanen were elected as members of the Board of
Directors for the next term. KPMG Oy Ab, a firm of Authorised Public
Accountants, was elected as the company's auditor.
The AGM also approved the Board of Directors' proposals, detailed in the meeting
notice, to authorise the Board to acquire and/or dispose of the company's own
shares.
Furthermore, the AGM decided, in accordance with the Board of Directors'
proposal, to amend the company's Articles of Association pursuant to the new
Companies' Act which entered into force on 1 September, 2006.
The new Board of Directors convened after the Annual General Meeting and elected
Heikki Ala-Ilkka as Chairman and Pekka Martela as Vice Chairman.
Post-balance sheet events
No significant events requiring reporting have taken place since the
January-June period and operations have continued according to plan.
Short-term risks
The greatest risk to profit performance is related to the continuation of
general economic growth and the consequent overall demand for office furniture.
The price trend of purchased materials and components also affects the
short-term outlook.
The company's 2007 annual report presents the risks related to Martela's
business operations in more detail.
Outlook for 2008
The overall outlook for 2008 is still favourable. The outlook is supported,
among other things, by the solid growth of sales and profit early in the year
and the general positive trend in office construction. It is expected that the
whole year's operating profit before non-recurring items will be better than the
previous year.
GROUP INCOME STATEMENT (EUR 1000)
2008 2006 2008 2007 2007
1-6 1-6 4-6 4-6 1-12
Revenue 69.419 60.240 33.329 30.373 128.445
Other operating income 0.981 2.961 0.252 1.280 3.023
Employee benefits expenses -16.248 -14.557 -8.368 -7.589 -28.723
Operating expenses -47.615 -42.839 -22.773 -20.705 -91.236
Depreciation and impairment -1.456 -1.564 -0.722 -0.788 -3.231
Operating profit/loss 5.081 4.241 1.719 2.571 8.278
Financial income and expenses -0.262 -0.320 -0.073 -0.154 -0.726
Profit/loss before taxes 4.818 3.921 1.645 2.417 7.552
Income tax -1.332 -0.910 -0.555 -0.704 -2.165
Profit/loss for the period 3.487 3.011 1.091 1.713 5.387
Basic earnings per share, eur 0.85 0.74 0.26 0.42 1.32
Diluted earnings per share, eur 0.85 0.74 0.26 0.42 1.32
GROUP BALANCE SHEET (EUR 1000) 30.6.2008 31.12.2007 30.06.2007
ASSETS
Non-current assets
Intangible assets 0.654 0.633 0.773
Tangible assets 14.148 14.151 14.286
Investments 0.039 0.053 0.054
Deferred tax assets 0.246 0.240 0.246
Pension receivables 0.035 0.035 0.018
Receivables 0.630 0.623 0.000
Investment properties 0.600 1.203 1.175
Total 16.353 16.938 16.552
Current assets
Inventories 13.601 13.635 15.088
Receivables 20.425 23.536 21.322
Financial assets at fair value 2.033 2.004 1.979
through profit and loss
Cash and cash equivalents 10.538 7.686 4.940
Total 46.597 46.861 43.329
Total assets 62.950 63.800 59.881
EQUITY AND LIABILITIES
Equity attributable to shareholders
of the parent
Share capital 7.000 7.000 7.000
Share premium account 1.116 1.116 1.116
Other reserves 0.117 0.117 0.117
Translation differences -0.085 -0.129 -0.143
Retained earnings 23.671 22.060 19.704
Treasury shares -0.721 -0.721 -0.721
Share-based incentives 0.157 0.067 0.000
Total 31.255 29.510 27.073
Non-current liabilities
Interest-bearing liabilities 9.280 10.453 11.558
Deferred tax liability 1.486 1.553 0.529
Total 10.766 12.006 12.087
Current liabilities
Interest-bearing 3.710 3.969 3.800
Non-interest bearing 17.218 18.315 16.922
Total 20.928 22.284 20.722
Total liabilities 31.695 34.290 32.808
Equity and liabilities, total 62.950 63.800 59.881
STATEMENT OF CHANGES IN EQUITY (EUR 1000)
Equity attributable to equity holders of the parent
Share Share Other Trans. Retained Treasury Total
capital premium reserves diff. earnings shares
account and share-
based inc.
01.01.2007 7.000 1.116 0.117 -0.129 17.542 -0.721 24.925
Translation diff. -0.014 -0.014
Other change 0.173 0.173
Profit/loss for
the period 3.011 3.011
Total rec. income
and expense -0.014 3.184 3.170
Dividends -1.022 -1.022
30.06.2007 7.000 1.116 0.117 -0.143 19.704 -0.721 27.073
1.1.2008 7.000 1.116 0.117 -0.129 22.127 -0.721 29.510
Translation diff. 0.044 0.044
Other change 0.258 0.258
Profit/loss for
the period 3.487 3.487
Total rec. income
and expense 0.044 3.745 3.789
Dividends -2.044 -2.044
30.06.2008 7.000 1.116 0.117 -0.085 23.828 -0.721 31.255
CONSOLIDATED CASH FLOW STATEMENT (EUR 1000)
2008 2007 2007
1-6 1-6 1-12
Cash flows from operating activities
Cash flow from sales 71.396 64.122 130.833
Cash flow from other operating income 0.277 0.243 0.550
Payments on operating costs -64.227 -59.012 -121.090
Net cash from operating activities
before financial items and taxes 7.446 5.353 10.294
Interest paid -0.378 -0.374 -0.842
Interest received 0.117 0.021 0.082
Other financial items -0.020 -0.005 -0.021
Dividends received - 0.001 0.001
Taxes paid -0.897 -0.025 0.382
Net cash from operating activities (A) 6.268 4.972 9.895
Cash flows from investing activities
Capital expenditure on tangible and
intangible assets -1.321 -0.989 -2.256
Proceeds from sale of tangible and
intangible assets 1.492 3.877 2.028
Proceeds from sale of shares in subsidiaries - - 2.150
Loans granted - -1.193 -1.193
Repayments of loans receivables 0.022 0.011 0.011
Net cash used in investing activities (B) 0.193 1.706 0.740
Cash flows from financing activities
Proceeds from short-term loans - - 0.976
Repayments of short-term loans -0.482 -0.355 -1.704
Repayments of long-term loans -1.190 -2.296 -3.108
Dividends paid and other profit distribution -1.972 -1.022 -1.022
Net cash used in financial activities (C) -3.644 -3.672 -4.858
Change in cash and
cash equivalents (A+B+C) 2.817 3.006 5.778
(+ increase, - decrease)
Cash and cash equivalents at the beginning of
period 9.691 3.911 3.911
Translation differences 0.063 0.002 0.002
Cash and cash equivalents at the end of period 12.571 6.919 9.691
SEGMENT REPORTING
One primary segment has been defined for Martela, namely the furnishing of
offices and public places. The revenue and result are as recorded in the
consolidated financial statements. The Group's secondary reporting segment has
been defined according to the geographical location of customers.
TANGIBLE ASSETS 1.1-30.6.2008
Land Buildings Machinery Other Work in
areas & equipment tangibles progress
Acquisitions 0.000 0.020 0.823 0.005 0.569
Decreases 0.000 -0.008 -0.126 0.000 0.000
TANGIBLE ASSETS 1.1-30.6.2007
Land Buildings Machinery Other Work in
areas & equipment tangibles progress
Acquisitions 0.000 0.688 0.565 0.006 0.328
Decreases -0.614 -0.988 -0.022 0.000 0.000
RELATED PARTY AND SHARE-BASED INCENTIVE PROGRAMME
The CEO and the group's management and some key-persons are included in a long-
term incentive scheme, extending from 2007 to the end of 2009.
KEY FIGURES/RATIOS
2008 2007 2007
1-6 1-6 1-12
Operating profit/loss 5.081 4.241 8.278
- in relation to revenue 7.3 7.0 6.4
Profit/loss before taxes 4.818 3.921 7.552
- in relation to revenue 6.9 6.5 5.9
Profit/loss for the period 3.487 3.011 5.387
- in relation to revenue 5.0 5.0 4.2
Basic earnings per share, eur 0.85 0.74 1.32
Diluted earnings per share, eur 0.85 0.74 1.32
Equity/share, eur 7.65 6.62 7.22
Equity ratio 49.8 45.3 46.7
Return on equity * 23.0 23.2 19.8
Return on investment * 23.7 20.4 19.6
Interest-bearing net-debt, eur million 0.4 8.4 4.7
Gearing ratio 1.3 31.2 16.0
Capital expenditure, eur million 1.6 1.8 3.2
- in relation to revenue, % 2.3 3.0 2.5
Personnel at the end of period 723 689 655
Average personnel 680 648 663
Revenue/employee, eur thousand 102.1 93.0 193.7
Key figures are calculated according to formulae as presented in Annual Report
2007.
* When calculating return on equity and return on investment the profit/loss for
the period has been multiplied in interim reports.
CONTINGENT LIABILITIES
30.6.2008 31.12.2007 30.6.2007
Mortgages and shares pledged 18.841 18.851 18.916
Guarantees 0.000 0.000 0.104
Other commitments 0.322 0.317 0.314
RENTAL COMMITMENTS 9.989 10.674 11.701
DEVELOPMENT OF SHARE PRICE 2008 2007 2007
1-6 1-6 1-12
Share price at the end of period, EUR 8.40 9.10 8.35
Highest price, EUR 10.05 9.56 10.35
Lowest price, EUR 7.32 6.39 6.39
Average price, EUR 9.04 8.53 8.64
This interim report has not been audited
Helsinki, August 5, 2008
Martela Oyj
Board of Directors
Heikki Martela
CEO
For more information, please contact
Heikki Martela, CEO, tel. +358 50 502 4711
Mats Danielsson, Finance Director, tel. +358 50 394 8575
Distribution
OMX Nordic Exchange
Main news media
www.martela.com
