MARTELA CORPORATION INTERIM REPORT 22.10.2008 at 09.00 a.m.
MARTELA CORPORATION'S INTERIM REPORT, 1 JANUARY - 30 SEPTEMBER, 2008
Net revenue for January-September was EUR 100.1 million (91.5), an increase of
9.4 per cent. Operating profit was EUR 7.0 million (5.7), including gains from
the sale of assets totalling EUR 0.7 million (2.6). The equity-to-assets ratio
was 53.1 per cent (46.0) and gearing was 0.5 per cent (38.9).
It is expected that net revenue for the entire year 2008 will exceed last year's
level and that operating profit excluding non-recurring items will be better
than last year.
Key figures
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| | 7-9 | 7-9 | 1-9 | 1-9 | 1-12 |
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| EUR million | 2008 | 2007 | 2008 | 2007 | 2007 |
--------------------------------------------------------------------------------
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| Net revenue | 30.7 | 31.2 | 100.1 | 91.5 | 128.4 |
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| Change in revenue % | -1.8 | 8.4 | 9.4 | 10.3 | 7.3 |
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| Operating profit | 1.9 | 1.6 | 6.3 | 3.1 | 5.8 |
| excluding non-recurring | | | | | |
| items | | | | | |
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| Operating profit % | 6.2 | 5.0 | 6.3 | 3.4 | 4.5 |
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| Return on investment, % | | | 21.9 | 18.0 | 19.6 |
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| Return on equity, % | | | 19.1 | 18.7 | 19.8 |
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| Equity to asset ratio, % | | | 53.1 | 46.0 | 46.7 |
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| Gearing, % | | | 0.5 | 38.9 | 16.0 |
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| Average staff | | | 684 | 654 | 663 |
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| Revenue/employee (EUR | | | 146.3 | 139.8 | 193.7 |
| 1.000) | | | | | |
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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 has been good during the first three quarters of
2008. New office construction has slowed down from 2007 and fewer building
permits have been granted than last year, too.
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-September grew to EUR 100.1 million (91.5), an increase
of 9.4 per cent. Large projects carried out during the first quarter contributed
to this growth. Net revenue for the third quarter increased to EUR 30.7 million
(31.2), showing a decrease of 1.8 per cent. Growth was particularly strong in
Finland, and in Poland and its neighbouring areas.
Financial performance in Scandinavia has not been according to plan this year,
with net revenue decreasing 20.1 per cent.
Invoicing by main market areas
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| | 7-9 | 7-9 | 1-9 | 1-9 | 1-12 |
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| EUR million | 2008 | 2007 | 2008 | 2007 | 2007 |
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| Finland | 22.4 | 20.7 | 71.9 | 61.0 | 85.8 |
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| Scandinavia | 4.5 | 6.8 | 15.3 | 19.2 | 26.4 |
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| Poland and surrounding | 2.9 | 2.4 | 9.5 | 7.3 | 11.1 |
| areas | | | | | |
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| Other areas | 1.0 | 1.4 | 3.4 | 4.1 | 5.4 |
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| Total | 30.8 | 31.3 | 100.1 | 91.6 | 128.7 |
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Change in invoicing and percentage of consolidated invoicing
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| | 1-9 | 1-9 | | | 1-12 | |
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| EUR million | 2008 | 2007 | Change | Percenta | 2007 | Percentag |
| | | | | ge | | e |
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| Finland | 71.9 | 61.0 | 17.8 | 71.8 % | 85.8 | 66.7 % |
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| Scandinavia | 15.3 | 19.2 | -20.1 | 15.3 % | 26.4 | 20.5 % |
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| Poland and | 9.5 | 7.3 | 29.7 | 9.5 % | 11.1 | 8.6 % |
| surrounding | | | | | | |
| areas | | | | | | |
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| Other areas | 3.4 | 4.1 | -16.1 | 3.4 % | 5.4 | 4.2 % |
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| Total | 100.1 | 91.6 | 9.3 | 100.0 % | 128.7 | 100.0 % |
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Consolidated result
The consolidated result for the third quarter was according to plan and the
operating profit was EUR 1.9 million (1.5).
The result for the January-September period shows clear improvement and the
operating profit was EUR 7.0 million (5.7). This includes EUR 0.7 million (2.6)
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 6.3 million (3.1). Profit development has been
positive in Finland, and in Poland and its neighbouring areas in 2008. In
Scandinavia, a decrease in net revenue has negatively affected the area's profit
development.
Profit before taxes rose to EUR 6.6 million (5.2), and profit after taxes was
EUR 4.4 million (3.7).
The operating profit excluding non-recurring items was 6.3 per cent of net
revenue (3.4%).
Financial position
The Group's financial position has still strengthened. At the end of the review
period, net interest-bearing liabilities were EUR 11.8 million (15.9), and net
debt was EUR 0.1 million (10.8). At the beginning of 2008, net debt was EUR 4.7
million. At the end of the review period, gearing was 0.5 per cent (38.9) and
the equity-to-assets ratio was 53.1 per cent (46.0%) Net financial expenses were
EUR -0.5 million (-0.5).
The net cash generated by operating activities in January-September was EUR 7.3
million (3.0).
During the period under review, the company decided to launch a project to
reduce working capital. We expect the project to produce results mainly in 2009.
The end-of-period balance sheet total was EUR 60.8 million (60.6).
Capital expenditure
The Group's gross capital expenditure totalled EUR 2.3 million (2.3) in
January-September. The capital expenditure 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-September, the Group employed an average of 684 (654) persons,
representing growth of 4.6 per cent. At the end of September, the Group employed
673 (644) persons.
Average staff by region
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| Average staff by region | | | |
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| | 1-9 | 1-9 | 1-12 |
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| | 2008 | 2007 | 2007 |
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| Finland | 522 | 520 | 518 |
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| Scandinavia | 72 | 67 | 71 |
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| Poland | 90 | 67 | 74 |
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| Group total | 684 | 654 | 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, which is responsible for
workstation furniture, and the Surroundings product line, which is responsible
for surroundings and other public-space furniture.
At the Stockholm Furniture Fair in February, Martela exhibited 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. New 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-September, 625,159 (1,080,853) of the company's A shares were
traded on NASDAQ OMX Helsinki, corresponding to 17.6 per cent (30.4) 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.
The value of trading was EUR 5.5 million (9.3), and the share price was EUR 8.35
at the beginning of the year and EUR 7.52 at the end of the period. During
January-September the share price was EUR 10.05 at its highest and EUR 7.32 at
its lowest. At the end of September, equity per share was EUR 7.87 (6.80).
On 23 May 2008, Nordea Investment Fund Company Finland Ltd announced that its
holding in Martela Oyj fell to 0.57 per cent following a share transaction made
on 22 May, 2008.
Treasury shares
The company did not purchase any of its own shares in January-September. On 30
September 2008, Martela owned a total of 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, 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-September 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 trends of purchased materials and components also affect the
short-term outlook.
The 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, thanks to, among other things,
the positive trend in sales and profit. The operating profit excluding
non-recurring items is expected to be better in 2008 than in 2007.
GROUP INCOME STATEMENT (EUR 1000)
2008 2007 2008 2007 2007
1-9 1-9 7-9 7-9 1-12
Revenue 100.076 91.453 30.657 31.213 128.445
Other operating income 1.141 2.955 0.160 -0.006 3.023
Employee benefits expenses -23.070 -20.889 -6.822 -6.332 -28.723
Operating expenses -68.802 -65.417 -21.188 -22.578 -91.236
Depreciation and impairment -2.312 -2.406 -0.856 -0.842 -3.231
Operating profit/loss 7.032 5.696 1.951 1.455 8.278
Financial income and expenses -0.457 -0.544 -0.195 -0.224 -0.726
Profit/loss before taxes 6.575 5.152 1.757 1.231 7.552
Income tax -2.141 -1.451 -0.808 -0.541 -2.165
Profit/loss for the period 4.435 3.701 0.948 0.690 5.387
Basic earnings per share, eur 1.08 0.91 0.23 0.17 1.32
Diluted earnings per share, eur 1.08 0.91 0.23 0.17 1.32
GROUP BALANCE SHEET (EUR 1000) 30.9.2008 31.12.2007 30.09.2007
ASSETS
Non-current assets
Intangible assets 0.718 0.633 0.748
Tangible assets 13.841 14.151 13.936
Investments 0.039 0.053 0.054
Deferred tax assets 0.245 0.240 0.247
Pension receivables 0.035 0.035 0.018
Receivables 0.630 0.623 0.000
Investment properties 0.600 1.203 1.174
Total 16.108 16.938 16.177
Current assets
Inventories 13.505 13.635 13.654
Receivables 19.537 23.536 25.650
Financial assets at fair value 2.031 2.004 1.987
through profit and loss
Cash and cash equivalents 9.588 7.686 3.137
Total 44.661 46.861 44.428
Total assets 60.770 63.800 60.605
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 -0.093 -0.129 -0.136
Retained earnings 24.552 22.060 20.376
Treasury shares -0.721 -0.721 -0.721
Share-based incentives 0.210 0.067 0.050
Total 32.181 29.510 27.802
Non-current liabilities
Interest-bearing liabilities 8.989 10.453 11.215
Deferred tax liability 1.477 1.553 1.070
Total 10.466 12.006 12.285
Current liabilities
Interest-bearing 2.777 3.969 4.711
Non-interest bearing 15.346 18.315 15.807
Total 18.123 22.284 20.518
Total liabilities 28.589 34.290 32.803
Equity and liabilities, total 60.770 63.800 60.605
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. -0.007 -0.007
Other change 0.205 0.205
Profit/loss for 3.701 3.701
the period
Total rec. income -0.007 3.906 3.899
and expense
Dividends -1.022 -1.022
30.09.2007 7.000 1.116 0.117 -0.136 20.426 -0.721 27.802
1.1.2008 7.000 1.116 0.117 -0.129 22.127 -0.721 29.510
Translation diff. 0.036 0.036
Other change 0.244 0.244
Profit/loss for 4.435 4.435
the period
Total rec. income
and expense 0.036 4.679 4.715
Dividends -2.044 -2.044
30.09.2008 7.000 1.116 0.117 -0.093 24.762 -0.721 32.181
CONSOLIDATED CASH FLOW STATEMENT (EUR 1000)
2008 2007 2007
1-9 1-9 1-12
Cash flows from operating activities
Cash flow from sales 102.768 91.484 130.833
Cash flow from other operating income 0.392 0.331 0.550
Payments on operating costs -93.953 -88.166 -121.090
Net cash from operating activities
before financial items and taxes 9.207 3.649 10.294
Interest paid -0.544 -0.564 -0.842
Interest received 0.175 0.033 0.082
Other financial items -0.048 -0.022 -0.021
Dividends received - 0.001 0.001
Taxes paid -1.500 -0.070 0.382
Net cash from operating activities (A) 7.289 3.027 9.895
Cash flows from investing activities
Capital expenditure on tangible and
intangible assets -1.928 -1.623 -2.256
Proceeds from sale of tangible and
intangible assets 1.602 4.068 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) -0.303 1.263 0.740
Cash flows from financing activities
Proceeds from short-term loans - 0.965 0.976
Repayments of short-term loans -0.627 -0.424 -1.704
Repayments of long-term loans -2.506 -2.599 -3.108
Dividends paid and other profit distribution -1.972 -1.022 -1.022
Net cash used in financial activities (C) -5.105 -3.080 -4.858
Change in cash and
cash equivalents (A+B+C) 1.881 1.210 5.778
(+ increase, - decrease)
Cash and cash equivalents at the beginning of
period 9.691 3.911 3.911
Translation differences 0.048 0.003 0.002
Cash and cash equivalents at the end of period 11.619 5.125 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 1.1-30.9.2008
Land Buildings Machinery Other Work in
areas & equipment tangibles progress
Acquisitions 0.000 0.028 2.003 0.021 -0.132
Decreases 0.000 -0.008 -0.127 0.000 0.000
TANGIBLE ASSETS 1.1-30.9.2007
Land Buildings Machinery Other Work in
areas & equipment tangibles progress
Acquisitions 0.000 1.009 0.797 0.059 0.130
Decreases -0.616 -0.991 -0.027 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
1-9 1-9 1-12
Operating profit/loss 7.032 5.696 8.278
- in relation to revenue 7.0 6.2 6.4
Profit/loss before taxes 6.575 5.152 7.552
- in relation to revenue 6.6 5.6 5.9
Profit/loss for the period 4.435 3.701 5.387
- in relation to revenue 4.4 4.0 4.2
Basic earnings per share, eur 1.08 0.91 1.32
Diluted earnings per share, eur 1.08 0.91 1.32
Equity/share, eur 7.87 6.80 7.22
Equity ratio 53.1 46.0 46.7
Return on equity * 19.1 18.7 19.8
Return on investment * 21.9 18.0 19.6
Interest-bearing net-debt, eur million 0.1 10.8 4.7
Gearing ratio 0.5 38.9 16.0
Capital expenditure, eur million 2.3 2.3 3.2
- in relation to revenue, % 2.3 2.5 2.5
Personnel at the end of period 673 644 655
Average personnel 684 654 663
Revenue/employee, eur thousand 146.3 139.8 193.7
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
30.9.2008 31.12.2007 30.9.2007
Mortgages and shares pledged 17.055 18.851 18.929
Guarantees 0.000 0.000 0.100
Other commitments 0.267 0.317 0.314
RENTAL COMMITMENTS 9.399 10.674 11.016
DEVELOPMENT OF SHARE PRICE 2008 2007 2007
1-9 1-9 1-12
Share price at the end of period, EUR 7.52 9.31 8.35
Highest price, EUR 10.05 10.35 10.35
Lowest price, EUR 7.32 6.39 6.39
Average price, EUR 8.85 8.62 8.64
This interim report has not been audited
Helsinki, 21 October 2008
Martela Corporation
Board of Directors
Heikki Martela
CEO
Additional information
Heikki Martela, CEO, tel. +358 50 502 4711
Mats Danielsson, Finance Director, tel. +358 50 394 8575
Distribution
NASDAQ OMX Nordic
Main news media
www.martela.com
