Revenue totalled EUR 29.9 million (26.9), an increase of 11.2 per cent. Growth was strong in markets outside Finland. The result climbed to EUR 1.5 million (-0.3), which includes EUR 1.6 million in gains from property sales. The equity-to-assets ratio increased to 44.7 per cent (41.0). Growth is expected to continue in 2007, and the result for the entire year is estimated to be an improvement on last year. Accounting policies The Interim Report has been prepared in accordance with IAS 34, Interim Financial Reporting, as approved by the EU. Market The market situation continued to be favourable in all the main market areas. Group structure There were no changes in Group structure during the review period or the comparison period. 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. Revenue Revenue in the first quarter increased to EUR 29.9 million (26.9), representing growth of 11.2 per cent. Growth was strong in markets outside Finland. Invoicing by main market areas, January-March 1-3/07 % 1-3/06 % Change % Finland 19.6 65.3 % 19.0 70.6 % + 3.0 % Scandinavia 6.5 21.8 % 5.1 18.9 % +28.1 % Other regions 3.9 12.9 % 2.8 10.5 % +36.3 % Total 30.0 100.0 % 27.0 100.0 % +11.1 % The Polish unit's invoicing increased by 34.4 per cent and totalled EUR 2.2 million (1.6). 2 (8) Quarterly invoicing by main market areas 1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06 1/07 Finland 16.3 17.0 17.0 20.6 19.0 18.4 19.5 26.1 19.6 Scandinavia 4.5 4.3 5.5 5.3 5.1 4.6 6.2 6.4 6.5 Other regions 3.2 2.9 2.5 3.5 2.8 4.3 3.0 4.3 3.9 Total 24.0 24.2 25.0 29.5 26.9 27.3 28.8 36.8 30.0 As expected and in line with previous years, invoicing for the first quarter of 2007 was at a clearly lower level than that for the preceding quarter. Group's consolidated result Overall profit performance was as anticipated. The consolidated result before taxes was positive at EUR 1.5 million (-0.3). The result was improved by non-recurring gains from property sales, totalling EUR 1.6 million. The review period's operating profit excluding gains from property sales was EUR 0.1 million (-0.3). Result by quarter-year 1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06 1/07 Revenue 23.9 24.1 25.0 29.3 26.9 27.2 28.8 36.8 29.9 Other income 0.3 0.1 0.1 0.5 0.2 0.6 0.1 0.5 1.7 Operating profit -0.2 -0.9 1.3 1.4 -0.1 0.9 0.8 2.8 1.7 Operating profit, % -1.0% -3.7% 5.1% 4.6% -0.2% 3.2% 2.9% 7.7% 5.6% Result before -0.4 -0.9 1.1 1.2 -0.3 0.6 0.7 2.7 1.5 taxes Capital expenditure The Group's gross capital expenditure totalled EUR 1.3 million (0.4). EUR 0.7 million of the review period's capital expenditure is due to the partial leasing back of the divested Bodafors plant property and the resulting lease liabilities activated in the balance sheet. The remaining capital expenditure mainly concerned production replacements and IT equipment. Staff At the end of the review period, the Group employed 628 people, which is almost at the level of the year's beginning. During the first quarter, the Group employed 629 people (611) on average. Average staff by region 1/07 1/06 Change % Finland 501 486 + 3.1 Scandinavia 64 72 - 11.1 Poland 64 53 + 20.8 Group total 629 611 + 2.9 3 (8) Staff by quarter-year 1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06 1/07 Average staff 611 627 613 593 611 632 636 632 629 Staff at end of period 610 641 600 604 600 660 629 632 628 Revenue/person (EUR 1,000) 39.1 38.4 40.8 49.5 44.0 43.0 45.3 58.3 47.5 Share-based incentive programme Martela's Board of Directors decided on 14 February 2007 on a share-based bonus programme for key personnel for 2007-2009. The number of A shares that can be earned through the system depends on the reaching of targets. The maximum bonus for the whole system is 153,000 Martela Oyj A shares and cash to the amount needed to cover taxes and similar charges, which amounts to approximately the value of the shares to be paid. The company has outsourced management of the bonus system to Alexander Management Oy, which acquired all the necessary shares from the Helsinki Stock Exchange during the first quarter with a EUR 1.2 million loan granted by Martela. Product development During the first quarter, the new Pinta desk product family was launched. It was introduced publicly for the first time at the Stockholm Furniture Fair in February. The product family has a uniform desktop selection and allows the base to be selected purposefully according to customer needs. In the same connection, the possibilities to affect acoustics through different furniture solutions were demonstrated and new chairs were presented. The Surroundings business unit presented its furniture solutions for public premises and lobbies for the first time at the Milan Furniture Fair in April. Among the products presented were the Menu chair designed by Stefan Lindfors, and the Sides chair designed by Samuli Naamanka. Finance The net cash generated by operating activities was EUR 2.6 (2.6) million. The cash flow from investing activities was positive at EUR 0.8 million as a result of gains from property sales. EUR 1.2 million in loans were granted to Alexander Management Oy to finance the acquisition of shares for the share-based bonus programme. Interest-bearing liabilities decreased by EUR 0.8 million and totalled EUR 16.4 million (19.0) at the end of the review period. Liquid assets amounted to EUR 4.9 million (6.5) at the end of the review period. The equity-to-assets ratio improved to 44.7 per cent (41.0), and gearing improved correspondingly to 45.5 per cent (57.0). Shares During the review period, 670,567 (206,225) of the company's A shares were traded on the Helsinki Stock Exchange, corresponding to 18.9 per cent (5.8) of the entire stock. The value of the trading turnover was EUR 5.5 million (1.5). The value of a share was EUR 6.50 at the beginning of the year and EUR 9.0 million at the end of the period. During the review period the share price was EUR 9.56 at its highest and EUR 6.39 at its lowest. At the end of the first quarter, equity per share was EUR 6.2. 4 (8) Own shares Martela did not purchase any of its own shares in the first quarter of 2007. On 31 March 2007, Martela owned 67,700 of its own A shares, which had been purchased at an average price of EUR 10.65. Martela's holding of its own shares amounts to 1.6 per cent of all shares and 0.4 per cent of all votes. 2007 Annual General Meeting The Annual General Meeting of Martela Oyj was held on Tuesday, 20 March 2007. The Meeting adopted the Financial Statements and discharged those responsible for the accounts from further liability. The Annual General Meeting decided, in accordance with the Board of Directors' proposal, to distribute a dividend of EUR 0.25 per share. The Meeting appointed Heikki Ala-Ilkka, Tapio Hakakari, Jori Keckman, Heikki Martela, Pekka Martela and Jaakko Palsanen to the Board of Directors for the next term, and elected Matti Lindström as the staff representative and Raimo Santala as his deputy. Reino Tikkanen, Authorized Public Accountant, was elected as the auditor of the company, with KPMG Oy Ab as the deputy auditor. The Annual General Meeting also approved the Board of Directors' proposals mentioned in the Meeting notice to authorise the Board to acquire and/or dispose of the company's own shares. The Board convened after the Annual General Meeting and elected Heikki Ala-Ilkka as Chairman and Pekka Martela as Deputy Chairman. Outlook for 2007 As a whole, the first quarter of 2007 progressed as expected. Revenue is expected to continue growing, although not as steeply as in 2006. Revenue will probably increase towards the end of the year, as in previous years. The result is also expected to improve towards the end of the year, and the result for the entire year is expected to be better than that of last year. 5 (8) GROUP INCOME STATEMENT (EUR 1000) 2007 2006 2006 1-3 1-3 1-12 Revenue 29.867 26.868 119.727 Other operating income 1.681 0.216 1.429 Employee benefits expenses -6.968 -6.481 -27.562 Operating expenses -22.134 -19.838 -85.763 Depreciation and impairment -0.776 -0.815 -3.332 Operating profit/loss 1.670 -0.050 4.499 In relation to revenue, % 5.6 -0.2 3.8 Financial income and expenses -0.166 -0.243 -0.798 Profit/loss before taxes 1.504 -0.293 3.701 In relation to revenue, % 5.0 -1.1 3.1 Income tax -0.206 -0.036 -0.977 Profit/loss for the period 1.298 -0.329 2.723 In relation to revenue, % 4.4 -1.2 2.3 Basic earnings per share, eur 0.3 -0.1 0.7 Diluted earnings per share, eur 0.3 -0.1 0.7 GROUP BALANCE SHEET (EUR 1000) 31.3.2007 31.3.2006 31.12.2006 ASSETS Non-current assets Intangible assets 0.744 0.555 0.662 Tangible assets 15.414 18.456 15.784 Investments 0.054 0.072 0.062 Deferred tax assets 0.550 1.748 0.776 Pension obligations 0.018 0.000 0.018 Investment properties 1.160 1.150 1.166 Total 17.940 21.981 18.468 Current assets Inventories 12.680 10.374 11.938 Receivables 21.167 14.884 24.792 Financial assets at fair value through profit and loss 1.961 2.891 1.943 Cash and cash equivalents 2.909 3.596 1.968 Total 38.717 31.746 40.641 Total assets 56.656 53.727 59.109 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 0.118 0.117 0.121 Translation differences -0.193 -0.129 -0.133 Retained earnings 17.935 14.490 17.542 Treasury shares -0.721 -0.721 -0.721 Total 25.255 21.873 24.925 6 (8) Non-current liabilities Interest-bearing liabilities 12.452 15.251 12.844 Deferred tax liability 0.149 0.261 0.175 Other non-current liabilities 0.000 0.000 0.000 Pension obligations 0.000 0.001 0.000 Total 12.601 15.513 13.019 Current liabilities Interest-bearing 3.904 3.708 4.271 Non-interest bearing 14.896 12.632 16.894 Total 18.800 16.340 21.165 Total liabilities 31.401 31.854 34.184 Equity and liabilities, total 56.656 53.727 59.109 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 01.01.2006 7.000 1.116 0.117 -0.108 15.432 -0.721 22.836 Translation diff. -0.021 -0.021 Profit/loss for the period -0.329 -0.329 Total rec. income and expense -0.021 -0.329 -0.350 Dividends paid -0.613 -0.613 31.03.2006 7.000 1.116 0.117 -0.129 14.490 -0.721 21.873 1.1.2007 7.000 1.116 0.121 -0.133 17.542 -0.721 24.925 Translation diff. -0.003 -0.060 -0.063 Profit/loss for the period 1.298 1.298 Other change 0.117 0.117 Tot rec. income and expense -0.003 -0.060 1.415 1.352 Dividends paid -1.022 -1.022 31.03.2007 7.000 1.116 0.118 -0.193 17.935 -0.721 25.255 CONSOLIDATED CASH FLOW STATEMENT (EUR 1000) 2007 2006 2006 1-3 1-3 1-12 Cash flows from operating activities Cash flow from sales 33.969 30.427 114.537 Cash flow from other operating income 0.086 0.122 0.364 Payments on operating costs -31.282 -27.779 -113.292 Net cash from operating activities before financial items and taxes 2.773 2.770 1.609 Interest paid -0.157 -0.148 -0.691 Interest received 0.011 0.008 0.048 7 (8) Other financial items 0.005 -0.042 -0.084 Dividends received 0.000 0.000 0.003 Taxes paid -0.006 -0.001 -0.018 Net cash from operating activities (A) 2.626 2.588 0.867 Cash flows from investing activities 2007 2006 2006 1-3 1-3 1-12 Capital expenditure on tangible and intangible assets -0.297 -0.191 -1.840 Proceeds from sale of tangible and intangible assets 2.307 0.108 2.992 Loans granted -1.203 0.000 0.000 Repayments of loans receivables 0.000 0.000 0.006 Net cash used in investing activities (B) 0.808 -0.083 1.158 Cash flows from financing activities Proceed from short-term loans 0.000 0.000 1.783 Repayments of short-term loans -0.268 -0.194 -1.546 Proceed from long-term loans 0.000 0.000 0.000 Repayments of long-term loans -1.255 -0.213 -2.689 Dividends paid and other profit distribution -0.939 -0.566 -0.613 Net cash used in financial activities (C) -2.462 -0.973 -3.065 Change in cash and cash equivalents (A+B+C) 0.972 1.532 -1.041 (+ increase, - decrease) Cash and cash equivalents at the beginning of period 3.911 4.963 4.963 Translation differences -0.013 -0.007 -0.010 Cash and cash equivalents at the end of period 4.870 6.487 3.911 Tangible assets 1.1-31.3 2007 Land Buildings Machinery Other Work in areas & equipment tangibles progress Acquisitions 0.000 0.669 0.282 0.001 0.167 Decreases -0.591 -2.943 -0.033 -0.000 -0.000 KEY FIGURES/RATIOS 2007 2006 2006 1-3 1-3 1-12 Basic earnings per share, eur 0.3 -0.1 0.7 Diluted earnings per share, eur 0.3 -0.1 0.7 Equity/share, eur 6.2 5.4 6.1 Equity ratio 44.7 41.0 42.4 Return on equity 20.7 -5.9 11.4 Return on investment 16.3 -0.2 11.0 Interest-bearing net-debt, eur million 11.5 12.5 13.2 Gearing ratio 45.5 57.0 53.0 8 (8) Capital expenditure, eur million 1.3 0.4 1.8 - in relation to revenue, % 4.2 1.3 1.5 Personnel at the end of period 628 600 632 Average personnel 629 611 626 Revenue/employee, eur thousand 47.5 44.0 191.3 CONTINGENT LIABILITIES 31.3.2007 31.3.2006 31.12.2006 Mortgages and shares pledged 19.418 20.529 20.739 Guarantees 0.103 0.111 0.115 Other commitments 0.318 0.304 0.323 Rental commitments 9.615 11.178 9.753 DEVELOPMENT OF SHARE PRICE 2007 2006 2006 1-3 1-3 1-12 Share price at the end of period, EUR 9.00 7.45 6.50 Highest price, EUR 9.56 8.16 8.16 Lowest price, EUR 6.39 7.20 5.99 Average price, EUR 8.25 7.47 6.82 This interim report has not been audited Helsinki, April 24, 2007 Martela Oyj Board of Directors Heikki Martela CEO For more information, please contact Heikki Martela, CEO, tel. +358 50 502 4711 Distribution Helsinki Exchanges Main news media www.martela.com