Lassila & Tikanoja plc: Interim Report 1 January - 31 March 2014

Helsinki, Finland, 2014-04-25 13:00 CEST (GLOBE NEWSWIRE) --  

Lassila & Tikanoja plc: Interim Report 1 January - 31 March 2014

Lassila & Tikanoja plc
Interim Report
25.4.2014 2.00 pm
 

• Net sales for the first quarter EUR 159.4 million (EUR 167.7 million)
• Operating profit EUR 2.1 million (EUR 6.3 million), including EUR 6.4 million of non-recurring impairment related to the insolvency of the EcoStream Group.
• Operating profit excluding non-recurring items EUR 7.4 million (EUR 6.8 million)
• Earnings per share EUR -0.42 (EUR 0.12)
• In the first quarter, the company divested its Latvian business operations and recognised a non-recurring capital gain of EUR 1.1 million on the divestment.
• Comparable net sales in 2014 are expected to remain at the 2013 level. Operating profit, excluding non-recurring items, is expected to remain at the 2013 level or improve slightly.

CEO PEKKA OJANPÄÄ:

‘Economic uncertainty decreases the demand in the industrial sector and on material flows in the construction and retail sectors. Nevertheless, both Environmental and Industrial Services grew organically. In a challenging operating environment in Facility Services and Renewable Energy Sources, we continued to improve the efficiency of operations. The divestment of the Latvian business operations was part of the streamlining of L&T’s business portfolio. The operating result reported for the first quarter of 2014 was significantly affected by the non-recurring impairment of EUR 6.4 million related to the insolvency of the EcoStream Group. Nevertheless, we were able to improve the Group’s profitability year-on-year.’


GROUP NET SALES AND FINANCIAL PERFORMANCE

Lassila & Tikanoja’s net sales for the first quarter decreased by 4.9% to EUR 159.4 million (EUR 167.7 million). Operating profit was EUR 2.1 million (EUR 6.3 million). Operating profit excluding non-recurring items was EUR 7.4 million (EUR 6.8 million), representing 4.7% (4.1%) of net sales. Earnings per share were EUR -0.42 (EUR 0.12).

The operating profit recorded for the first quarter includes EUR 6.4 million of non-recurring costs relating to holdings in EcoStream Oy, which has filed for bankruptcy, and to outstanding receivables from the EcoStream Group and L&T Recoil. In addition, a non-recurring capital gain of EUR 1.1 million was recognised on the Latvian business operations.

Furthermore, the Group’s net profit was affected by the payment of EUR 16.7 million, in accordance with the loan guarantee commitment of to L&T Recoil, recognised in financial expenses. After the entries related to EcoStream Group’s insolvency, the company has no liabilities related to EcoStream Oy and L&T Recoil.

Profitability improved due to the good development of Environmental and Industrial Services.

Financial summary

* Breakdown is presented below the division reviews.


NET SALES AND OPERATING PROFIT BY DIVISION

Environmental Services

The division’s net sales for the first quarter increased by 1.2% to EUR 60.9 million (EUR 60.2 million). Operating profit and operating profit excluding non-recurring items were EUR 6.6 million (EUR 6.2 million).

The division’s net sales improved year-on-year both in Finland and internationally as a result of high demand. However, growth was restricted by the decrease in the volume of recyclable material, due to the market conditions.

Profitability developed favourably, thanks to improved operational efficiency.
                     
Industrial Services

The division’s net sales for the first quarter totalled EUR 16.0 million (EUR 13.7 million), showing an increase of 16.4%. Operating loss and operating loss excluding non-recurring items were EUR 0.1 million (EUR 0.5 million).

Net sales increased in all of the division’s service lines. In particular, demand increased in environmental construction and process cleaning.

The result was in the red, due to the seasonal nature of the business. However, the loss decreased year-on-year, particularly as a result of the good profitability of hazardous waste services.

Facility Services

The division’s net sales for the first quarter were down by 8.9% to EUR 69.0 million (EUR 75.8 million). Operating profit totalled EUR 0.6 million (EUR 0.4 million). Operating profit excluding non-recurring items was EUR 0.6 million (EUR 0.8 million).

The division’s net sales declined year-on-year, due to business downsizing in Sweden and lower than normal demand for seasonal work in Property Maintenance.

The division’s profitability was weakened by the low profitability of damage repair services and property maintenance.

The entire division is undergoing a major reorganisation process in order to adapt operations to the changes in market conditions. This affects the profitability of business. The benefits of the process will gradually start to materialise in the second half of 2014.

Renewable Energy Sources

First quarter net sales of Renewable Energy Sources (L&T Biowatti) were down by 27.2% to EUR 15.8 million (EUR 21.8 million). Operating profit and operating profit excluding non-recurring items were EUR 0.8 million (EUR 1.0 million).

The decrease in net sales could mostly be attributed to the very short heating season. This weighted the result. As a result of efficiency improvement measures, relative profitability improved year-on-year.


BREAKDOWN OF OPERATING PROFIT EXCLUDING NON-RECURRING ITEMS
 

FINANCING

Cash flows from operating activities amounted to EUR 13.7 million (EUR 27.0 million). A total of EUR 3.8 million in working capital was released (EUR 12.9 million released).

At the end of the period, interest-bearing liabilities amounted to EUR 112.1 million (EUR 97.4 million).

During the period, the company made a payment of EUR 16.7 million to the financing banks of the bankrupt company L&T Recoil Oy, in accordance with the loan guarantee commitment as announced on 21 March 2014.

Net interest-bearing liabilities amounted to EUR 83.3 million, showing an increase of EUR 18.9 million from the beginning of the year and a decrease of EUR 0.3 million year-on-year.

Net financial expenses in the first quarter amounted to EUR 17.6 million (EUR 0.4 million) Net financial expenses were 11.0% (0.2%) of net sales. The increase in net financial expenses was mostly due to the EUR 16.7 million payment made under the L&T Recoil Oy guarantee commitment. In addition, changes in exchange rates of unhedged loan receivables from foreign subsidiaries had an effect of EUR 0.5 million on the expenses.

The average interest rate on long-term loans (with interest-rate hedging) was 1.7% (2.2%). Long-term loans totalling EUR 16.3 million will mature during the rest of the year.

The equity ratio was 40.1% (46.3%) and the gearing rate was 47.4 (38.9). Liquid assets at the end of the period amounted to EUR 28.7 million (EUR 13.8 million).

Of the EUR 100 million commercial paper programme, EUR 30.0 million (EUR 16.0 million) was in use at the end of the period. A committed limit totalling EUR 30.0 million was not in use, as was the case in the comparison period.


DISTRIBUTION OF ASSETS

The Annual General Meeting held on 19 March 2014 resolved that a dividend of EUR 0.50 per share be paid on the basis of the balance sheet that was adopted for the financial year 2013. The dividend, totalling EUR 19.4 million, was paid to shareholders on 31 March 2014.


CAPITAL EXPENDITURE

In the first quarter of 2014, gross capital expenditure totalled EUR 9.0 million (EUR 5.9 million), consisting mainly of machine and equipment purchases.


PERSONNEL

In the first quarter of the year, the average number of employees converted into full-time equivalents was 7,683 (7,938). At the end of the period, Lassila & Tikanoja had 7,836 (8,988) full-time and part-time employees. Of these, 7,040 (7,074) worked in Finland and 796 (1,914) in other countries.


SHARE AND SHARE CAPITAL

Traded volume and price
The volume of trading on NASDAQ OMX Helsinki in January-March 2014, excluding the shares held by the company in Lassila & Tikanoja plc, was 2,065,476 shares, which is 5.3% (4.9%) of the average number of outstanding shares. The value of trading was EUR 29.9 million (EUR 23.8 million). The trading price varied between EUR 13.99 and EUR 15.84. The closing price was EUR 14.50. At the end of the period, the market capitalisation excluding the shares held by the company was EUR 561.2 million (EUR 485.3 million).

Own shares
At the beginning of the year, the company held 92,246 of its own shares and at the end of the period 51,409, representing 0.1% of all shares and votes.

Share capital and number of shares
The company’s registered share capital amounts to EUR 19,399,437 and the number of outstanding shares is 38,747,465. The average number of shares excluding the shares held by the company was 38,717,933.

Share-based incentive programme 2014
On 18 December 2013, Lassila & Tikanoja plc’s Board of Directors decided on a new share-based incentive programme for 2014 as part of the key personnel’s incentive and commitment system. The earnings period of the programme began on 1 January 2014 and ends on 31 December 2014. Any rewards to be paid for 2014 will be based on the Group’s EVA result. Possible rewards will be paid partly as shares and partly in cash. A maximum of 39,105 Lassila & Tikanoja shares may be paid out under the programme. The programme covers 10 persons.

Shareholders
At the end of the period, the company had 9,326 (9,759) shareholders. Nominee-registered holdings accounted for 21.3% (16.6%) of the total number of shares.

Authorisation for the Board of Directors
The Annual General Meeting held on 19 March 2014 authorised Lassila & Tikanoja plc’s Board of Directors to make decisions on the repurchase of the company’s own shares using the company’s unrestricted equity. In addition, the Annual General Meeting authorised the Board of Directors to decide on the share issue and the issuance of special rights entitling to shares.

The Board of Directors is authorised to purchase a maximum of 2,000,000 company shares (5.2% of the total number of shares). The repurchase authorisation is effective for 18 months.

The Board of Directors is authorised to decide on the issuance of new shares or shares possibly held by the company through a share issue and/or issuance of option rights or other special rights entitling to shares, referred to in Chapter 10, Section 1 of the Finnish Companies Act, so that under the authorisation a maximum of 2,000,000 shares (5.2% of the total number of shares) may be issued and/or conveyed. The share issue authorisation is effective for 18 months.


RESOLUTIONS BY THE ANNUAL GENERAL MEETING

The Annual General Meeting, which was held on 19 March 2014, adopted the financial statements and consolidated financial statements for 2013 and released the members of the Board of Directors and the President and CEO from liability.

The Annual General Meeting resolved that a dividend of EUR 0.50 per share, totalling EUR 19.4 million, be paid on the basis of the balance sheet to be adopted for the financial year 2013. It was decided that the dividend be paid on 31 March 2014.

The Annual General Meeting confirmed the number of members of the Board of Directors as six. Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala were re-elected and Laura Lares was elected as a new member to the Board until the end of the following Annual General Meeting.

KPMG Oy Ab, Authorised Public Accountants, was elected auditor. KPMG Oy Ab named Lasse Holopainen, Authorised Public Accountant, as its principal auditor.

The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 19 March 2014.


BOARD OF DIRECTORS

The members of Lassila & Tikanoja plc’s Board of Directors are Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Laura Lares, Sakari Lassila and Miikka Maijala. At its organising meeting held after the Annual General Meeting, the Board of Directors elected Heikki Bergholm as Chairman of the Board and Eero Hautaniemi as Vice Chairman.

Eero Hautaniemi was elected as Chairman and Sakari Lassila and Laura Lares as members of the audit committee. Heikki Bergholm was elected as Chairman and Hille Korhonen and Miikka Maijala as members of the remuneration committee.


SUMMARY OF STOCK EXCHANGE RELEASES PURSUANT TO ARTICLE 4, CHAPTER 6 OF THE SECURITIES MARKET ACT

In a release published on 3 March 2014, the company announced that Lassila & Tikanoja and Bioinvest SIA have signed an agreement on the sale of L&T’s business operations in Latvia to Bioinvest SIA. In a release published on 13 March 2014, the company announced that the divestment of the business operations has been completed. The total net sales of the divested business operations amount to approximately EUR 16 million, most of which is allocated to the Environmental Services division. As a result of the divestment, approximately 950 employees transferred to Bioinvest.

In a release published on 21 March 2014, the company announced that it had been informed that the financiers of the EcoStream Group had called in a loan granted to L&T Recoil Oy, part of the EcoStream Group. In addition, the company announced that it had received a claim from the financing banks to pay approximately EUR 16.7 million on the basis of a loan guarantee commitment associated with L&T Recoil Oy’s loans.

Lassila & Tikanoja’s total risk associated with the EcoStream Group, including the above guarantee commitment, is approximately EUR 23.4 million as announced earlier. Of this amount, the above guarantee commitment of approximately EUR 16.7 has an effect on cash flow.


EVENTS AFTER THE REVIEW PERIOD

The company management is not aware of any events of material importance that might have affected the preparation of the interim report.


NEAR-TERM RISKS AND UNCERTAINTIES

Economic uncertainty may result in major changes in Environmental Services’ secondary raw material markets and in demand for Industrial Services.

Uncertainties associated with government subsidies for renewable fuels and with the continuity of such subsidies may affect demand for the services of Renewable Energy Sources.

More detailed information on L&T’s risks and risk management is available in the Annual Report for 2013, in the Report of the Board of Directors and in the consolidated financial statements.


OUTLOOK FOR THE REST OF THE YEAR

Comparable net sales in 2014 are expected to remain at the 2013 level. Operating profit, excluding non-recurring items, is expected to remain at the 2013 level or improve slightly.


CONDENSED FINANCIAL STATEMENTS 1 JANUARY - 31 MARCH 2014


CONSOLIDATED INCOME STATEMENT
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION