INTERIM REPORT 1 JANUARY - 31 MARCH 2008

 | Source: AFRY AFRY

PÖYRY PLC               Stock Exchange Notice        22 April 2008 at 8.30 a.m.   
 
 
The Pöyry Group's net sales for the period under review were EUR 196.2 million (167.0 million in the same period 2007). Profit before taxes was EUR 22.6 (16.5) million.
 
The Group's consolidated balance sheet is healthy. The equity ratio was 43.2 (46.0) per cent and the net debt/equity ratio (gearing) -29.6 (-33.2) per cent.
 
Earnings per share were EUR 0.26 (0.19) and the return on investment 46.8 (39.5) per cent.
 
The order stock increased by EUR 11.5 million during the period under review to EUR 574.3 million. The number of personnel increased, amounting to 7417 at the end of the review period (7269 at the end of 2007).
 
Consolidated net sales will increase during 2008. Profit before taxes will improve in 2008.
 
The interim report has been prepared in accordance with the IAS 34 following the same accounting principles as in the annual financial statements for 2007. In the Financial Statements for 2008 the Group will also adopt the new pronouncement "IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction". The pronouncement has no significant effect for the Group.
 
The data in this interim report are unaudited.
 
Business groups
 
Energy
 
Net sales for the period under review were EUR 58.1 (51.4) million. Operating profit was EUR 5.6 (5.3) million.
 
Demand for energy-related services has remained good in Europe. The demand situation in other geographical market areas is stable. Investments in the energy sector have grown strongly during the past few years, resulting in a shortage of project implementation capacity. This has also resulted in increased investment costs. These factors have contributed to the delays in implementing certain projects.
 
The order stock is good, amounting to EUR 205.8 million at the end of the review period (212.7 at the end of 2007).
 
Forest Industry
 
Net sales for the period under review were EUR 76.8 (64.6) million. Operating profit amounted to EUR 12.8 (7.8) million. The favourable earnings development during the review period is due to good capacity utilisation, the successful completion of some major projects, and the good demand situation in Latin America.
 
New investments in the forest industry have mostly taken place in emerging markets. Demand for chemical industry-related and local services has remained stable, as has demand for management consulting services.
 
The business group's order stock has increased and is on a good level, amounting to EUR 135.6 million (123.8 at the end of 2007). The most important new projects received during the review period were the engineering contract with Propapier GmbH for their paper machine project at a new site in Eisenhüttenstadt, Germany (EUR 10 million) and the EPCM (Engineering, Procurement and Construction Management) services contract with Roal Oy for an enzyme plant development project in Rajamäki, Finland (EUR 3 million).
 
Infrastructure & Environment
 
Net sales for the period under review were EUR 60.9 (50.8) million. Operating profit was EUR 4.4 (3.7) million.
 
Demand for infrastructure and environment-related services has remained stable. The business group continued to strengthen its position in local and international markets.
 
The order stock amounted to EUR 232.5 million (226.3 at the end of 2007), which is a good level. The most important new projects were the extension to the existing consultancy engineering contract with Metro de Maracaibo C.A., Venezuela (EUR 5.5 million), the consultancy assignments for three water projects in Nigeria, West Africa, financed by the World Bank (EUR 3 million), the consultancy assignment in a water sector project in Vietnam, financed by the World Bank (EUR 2.5 million) and the engineering contract with the Ministry of Transport of Bulgaria for the rehabilitation of the railway line between Sofia and Plovdiv (EUR 1.3 million).
 
Group structure
 
Forest Industry
 
During the period under review, Pöyry acquired the remaining 30 per cent of the shares of ZAO "Giprobum-Pöyry" (formerly ZAO Giprobum Engineering), based in St. Petersburg, Russia. Pöyry now owns the company's entire share capital. The company was consolidated into Pöyry 100 per cent in 2007.  The company is Russia's leading forest industry engineering firm, which employs about 250 experts.
 
Infrastructure & Environment
 
IDP Consult Incorporated in the Philippines, which was acquired in 2007, has been consolidated into Pöyry as of the beginning of 2008. The company has a staff of 30 and annual net sales of about EUR 1.0 million.
 
Pöyry is expanding its transportation business and market presence in the infrastructure sector by acquiring 100 per cent of the shares of Consilier Construct Srl, Romania. The closure of this transaction is subject to a number of conditions that are expected to be fulfilled during April 2008.
 
Established in 1995, Consilier Construct is today a leading engineering consulting firm, employing about 220 experts. The company focuses on the transportation market, in particular on the road and rail sectors. Consilier Construct has a strong position in the transportation sector but is also active in the water and environment and the building sectors. In 2007 the company's net sales amounted to about EUR 10 million.
 
The acquisition represents an important step in developing Pöyry's transportation sector activities in the Eastern European market, which is expected to benefit substantially from the integration of Romania and the other new EU member states into the European Union. Consilier Construct will also play an active role in expanding other Pöyry Group activities in Eastern Europe. Consilier Construct will be consolidated into Pöyry as of 1 May 2008 if the transaction has been concluded.
 
Order stock
 
The Group's order stock is good. It increased by EUR 11.5 million during the period under review, totalling EUR 574.3 million at the end of March. At the end of 2007 the order stock was EUR 562.8 million.
 
Personnel
 
The number of personnel in the Group has increased, amounting to 7417 (7269 at the end of 2007).
 
Balance sheet structure and financial position
 
The Group's consolidated balance sheet is healthy. The equity ratio at the end of the review period was 43.2 (50.7 at the end of 2007) per cent. The Group's liquidity is good. The net debt/equity ratio (gearing) was -29.6 (-47.4 at the end of 2007) per cent.
 
Capital expenditure
 
The Group's capital expenditure for the period under review totalled EUR 2.8 (2.0) million, of which EUR 2.6 (2.0) million was invested mainly in IT hardware, software and systems. Capital expenditure due to share investments was EUR 0.2 (0.0) million.
 
Risks and uncertainties
 
No such new major risks or uncertainties were identified during the reporting period which, if realised, could be estimated to have a significant impact on the Group. A detailed report on the Group's risks and risk management is given in the Financial Statements of 2007.
 
Share capital and shares
 
The total number of shares at the end of 2007 was 58 652 614. During the period under review there were no changes in the number of shares.
 
Option programme 2004
 
Pöyry PLC issued in 2004 stock options to the management of the Group as well as to a wholly-owned subsidiary of Pöyry PLC. The number of stock options is 550 000, entitling to subscription of four shares each, i.e. a total of 2 200 000 shares in Pöyry PLC.
 
The share subscription periods are the following: for stock options 2004A (660 000 shares) between 1 March 2007 and 31 March 2010, for 2004B (660 000 shares) between 1 March 2008 and 31 March 2011, and for 2004C (880 000 shares) between 1 March 2009 and 31 March 2012. All stock options have been issued and their receipt confirmed.
 
During 2007 173 768 new shares were subscribed with 43 442 stock options 2004A. During the period under review no subscriptions were made. After the period under review a total amount of 69 600 new shares were subscribed with 10 000 stock options 2004A and 7 400 stock options 2004B. The shares will be registered in the Trade Register after the period under review. Following the registration of the subscribed shares the number of shares totals 58 722 214.
 
Performance share plan 2008-2010
 
In December 2007 the Board of Directors of Pöyry PLC has approved a new share-based incentive plan for key personnel of Pöyry.
 
The plan comprises three earning periods, which are the calendar years 2008, 2009 and 2010. The rewards will be paid partly in the company's shares and partly in cash in 2009, 2010 and 2011.
 
The shares must be held for an approximate period of two years from the transfer date. No rewards shall be paid if the person or the company gives notice of termination before the end of an earning period. The paid reward must be returned to the company if the person or the company gives notice of termination within two years from the end of the earning period.
 
In the first earning period 2008, the incentive plan will include approximately 300 persons. The value of the plan for the earning period 2008 will correspond to the value of 270 000 shares if the performance of the Group is in line with the earnings criteria for target performance set by the Board of Directors. If the Group's performance exceeds the target and reaches maximum performance, as defined by the Board, the value of the plan can reach up to the value of 540 000 shares for the earning period 2008. The potential reward from the plan for the first earning period 2008 will be based on the Group's earnings per share (EPS) and net sales growth.
 
During the period under review 35.7 per cent of the maximum rewards for the earning period 2008 have been granted. After the period under review 55.1 per cent of the rewards have been granted, so 90.8 per cent of the maximum grantable shares for the earning period 2008 have been granted.
 
The fair value of the reward is expensed until the target group is entitled to the reward and the shares are freely transferable. The fair value of the share is the share price on the date at which the target group has agreed to the conditions of the plan reduced by the estimated dividends. The fair value of the cash proportion is remeasured at each reporting date based on the share price at the reporting date.
 
Authorisation to issue shares
 
The Annual General Meeting (AGM) on 10 March 2008 authorised the Board of Directors to decide to issue new shares and to convey the company's own shares held by the company in one or more tranches. The share issue can be carried out as a share issue against payment or without consideration on terms to be determined by the Board of Directors and in relation to a share issue against payment at a price to be determined by the Board of Directors.
 
A maximum of 11 600 000 new shares can be issued. A maximum of 5 800 000 own shares held by the company can be conveyed.
 
The authorisation is in force for three years from the decision of the AGM.
 
The decision made by the AGM was published in its entirety in a stock exchange notice on 10 March 2008.
 
The Board has not exercised the authorisation during the period under review.
 
Authorisation to acquire the company's own shares
 
The AGM on 10 March 2008 authorised the Board of Directors to decide to acquire the company's own shares with distributable funds on the terms given below. The acquisition of shares reduces the company's distributable shareholders' equity.
 
A maximum of 5 800 000 shares can be acquired. The company's own shares can be acquired in accordance with the decision of the Board of Directors either through public trading or by public offer at their market price at the time of purchase.
 
The authorisation is in force for 18 months from the decisions of the AGM.
 
The decision made by the AGM was published in its entirety in a stock exchange notice on 10 March 2008.
 
The AGM on 5 March 2007 authorised the Board of Directors to decide to acquire a maximum of 5 800 000 own shares of the company. On 10 December 2007 the Board of Directors resolved to exercise the authorisation for the implementation of the Performance share plan 2008-2010 described above. 237 557 own shares were acquired during the period 6 February to 7 March 2008. On 10 March 2008 the Board of Directors resolved to exercise the authorisation given by the Annual General Meeting 2008 and to continue the share buy back. By the end of March 2008, 43 529 own shares have been acquired based on this authorisation. The average price of the shares acquired on the basis of the said authorisations was EUR 15.01. Furthermore a subsidiary of Pöyry PLC owns 8 914 Pöyry PLC shares and thus the total amount of own shares held by the company on 31 March 2008 was 290 000 representing 0.5 per cent of all shares and 0.5 per cent of all votes.
 
Dividend
 
The Annual General Meeting decided that a dividend of EUR 0.65 be distributed per outstanding share for 2007 (EUR 0.50 for 2006), totalling EUR 38.0 million. The dividend was paid on 20 March 2008.
 
Share price
 
The company's shares are quoted on the OMX Nordic Exchange in Helsinki. The average trading price during the period under review was EUR 14.55, with a high of EUR 17.44 and a low of EUR 11.79. A total of 6.6 million of the company's shares were traded, equalling 11.3 per cent of the total number of shares and corresponding to a turnover of EUR 95.7 million.
 
Prospects
 
Energy
 
The economic development in China, Russia and Latin America, combined with the expansion of the EU, create the basis for the demand for energy-related services. The EU's expanding energy legislation will continue to increase demand for management consulting services in the energy sector. In addition, environmental legislation, focused in particular on combating climate change, will boost demand for services related to renewable energy and power plant modernisation. The price of crude oil is not expected to decline much, which creates new business opportunities in the oil and gas sectors. In the thermal power sector, clients' actions will focus on diversifying the structure of their energy supply to secure the continued availability of energy. Nuclear power will acquire greater importance in diversifying the energy supply. Because of the partly overheated investment situation in the energy sector the implementation of certain projects may be postponed. The business group has a strong market position and a good order stock. The business group's operating profit will improve in 2008.
 
Forest Industry
 
Overall demand for engineering services is not expected to change much during 2008. Chemical pulp mill investments will mostly take place in South America, Asia and Russia. The focus of paper machine investments will be in the emerging markets of Asia and in some economies in transition. Because of overcapacity and cost pressures the challenging situation in the European and North American forest industry will continue. Demand for project implementation and local services will be promoted by new investments in biofuels and chemical industry. To improve the competitiveness of the forest industry, new solutions and actions will be needed to improve the efficiency of operations and overall productivity. Possible forest industry restructuring measures may result in increased demand for management consulting and investment banking services. The global market position of the business group is good and its order stock has increased.
The business group's operating profit will improve in 2008.
 
Infrastructure & Environment
 
Transportation system investments will increase in Eastern Europe, Asia and Latin America. The investment growth is supported by inputs in this sector by various financial institutions. Transportation system investments in Western Europe will remain stable. Climate change and environmental problems create a need for services in the water and environment sector. The strong growth of construction will continue in Russia. The volume growth in the Finnish construction market is levelling off during 2008. The business group's comprehensive service packages and its focus on specific competence areas will improve its competitiveness. The business group's order stock has increased and its market position is good. The business group's operating profit will improve clearly in 2008.
 
Group
 
The Group has a strong market position in all of its business areas. The order stock is good and has increased by EUR 11.5 million during the period under review. Consolidated net sales will increase in 2008. Profit before taxes will improve in 2008. The repercussions in other national economies of the uncertainty in the US economy may have a negative impact on investment demand during 2008.
 
Vantaa, Finland, 21 April 2008
 
PÖYRY PLC
Board of Directors
 
PÖYRY PLC
 
 
 
Erkki Pehu-Lehtonen
President and CEO
 
Teuvo Salminen
Deputy to President and CEO
 
Additional information by:
Erkki Pehu-Lehtonen, President and CEO, Pöyry PLC
tel. +358 10 33 22999, +358 400 468 084
Teuvo Salminen, Deputy to President and CEO, Pöyry PLC
tel. +358 10 33 22872, +358 400 420 285
 
www.poyry.com
 
DISTRIBUTION:
OMX Nordic Exchange Helsinki
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INTERIM REPORT 1 JANUARY - 31 MARCH 2008
GlobeNewswire