Lassila & Tikanoja plc
Stock exchange release
26 April 2018 at 8:00 am
Lassila & Tikanoja plc: Interim Report 1 January – 31 March 2018
- Net sales for the first quarter were EUR 196.5 million (161.3)
- Operating profit was EUR 3.7 million (5.0)
- Earnings per share were EUR 0.06 (0.11)
- Full-year net sales and operating profit in 2018 are expected to increase compared to 2017
CEO PEKKA OJANPÄÄ:
“Lassila & Tikanoja’s net sales for the first quarter increased 22%, organic growth was over 4%. Operating profit was lower than during the comparison period. The business operations of the Technical Services division and the Industrial Services division developed favourably in the first quarter, but the result of the Environmental Services and Renewable Energy Sources divisions declined year-on-year. The operating profit of Environmental Services was weighed down by higher production costs, the effects of municipalisation and seasonal services being delivered later in the year. In Facility Services, the result of property maintenance developed favourably and the operating profit of renovation services showed a substantial year-on-year improvement, while the operating profit of the cleaning business declined. The business of the Technical Services division saw positive development, and the integration of L&T FM AB was completed according to plan. The business of the Industrial Services division saw positive development and operating profit increased across all service lines. We will continue to enhance our production and processes as well as improve our profitability.”
GROUP NET SALES AND FINANCIAL PERFORMANCE
January–March
Lassila & Tikanoja’s net sales for the first quarter amounted to EUR 196.5 million (161.3), up 21.8% year-on-year. Operating profit totalled EUR 3.7 million (5.0), representing 1.9% (3.1) of net sales. Earnings per share were EUR 0.06 (0.11).
Net sales saw organic growth in all divisions except Environmental Services. Excluding the effect of L&T FM AB, the rate of organic growth was 4.2%.
Operating profit declined year-on-year in Environmental Services, but improved in Facility Services and particularly in Industrial Services.
Financial summary
| 1–3/ 2018 | 1–3/ 2017 | Change | 1–12/ 2017 | |
| Net sales, EUR million | 196.5 | 161.3 | 21.8 | 709.5 |
| Operating profit, EUR | 3.7 | 5.0 | -26.3 | 44.0 |
| Operating margin, % | 1.9 | 3.1 | 6.2 | |
| Profit before tax, EUR million | 2.8 | 5.1 | -46.0 | 42.5 |
| Earnings per share, EUR | 0.06 | 0.11 | -46.2 | 0.87 |
| Cash flow from operating activities/share, EUR | 0.37 | 0.18 | 107.4 | 1.61 |
| EVA, EUR million | -2.2 | 0.0 | N/A | 21.1 |
NET SALES AND OPERATING PROFIT BY DIVISION
January–March
Environmental Services
The division’s net sales for the first quarter totalled EUR 62.8 million (62.3). Operating profit decreased from the previous year and amounted to EUR 4.4 million (6.4).
The result was weighed down by higher production costs as well as the recording of revenue from seasonal services being postponed to the second quarter. The division’s market position improved in the retail and industrial segments, but this was not enough to compensate for the impact of municipalisation on operating profit in the first quarter.
Industrial Services
The division’s net sales for the first quarter increased by 7.3% to EUR 19.2 million (17.9). Operating profit was EUR 0.4 million (-0.2).
Operating profit improved across all the division’s service lines thanks to a stronger market position and improved efficiency of operations. The expanded service offering, new customer accounts and favourable market climate contributed to the positive development of the business.
Facility Services
The division’s net sales for the first quarter increased by 4.0% to EUR 65.8 million (63.3). Operating profit was EUR -0.5 million (-1.0).
The operating profit of the property maintenance business developed favourably. The renovation business saw its operating profit improve significantly year-on-year. The result of cleaning and support services declined from the previous year, mainly due to preparations for ERP system deployment.
Technical Services
The division’s net sales for the first quarter totalled EUR 36.4 million (8.3). Operating profit was EUR 0.7 million (0.1) and adjusted operating profit was EUR 1.3 million (0.1).
The division’s net sales increased in Sweden due to strong demand and developed in line with expectations in Finland. Operating profit adjusted for the purchase price allocation amortisation of the Swedish business was at a good level and the integration process has been successfully completed. The deployment of the new ERP system has started in the Technical Services division’s Finnish operations and is progressing according to plan.
Renewable Energy Sources
The first quarter net sales of Renewable Energy Sources (L&T Biowatti) increased by 21.1% and amounted to EUR 14.7 million (12.1). Operating profit was EUR 0.1 million (0.3).
Net sales grew year-on-year thanks to strong demand during the heating season and new customer accounts. The weak energy content of delivered fuels had a negative impact on sales margins and operating profit.
FINANCING
Cash flow from operating activities amounted to EUR 14.1 million (6.8). A total of EUR 3.1 million in working capital was released (4.4 committed).
At the end of the period, interest-bearing liabilities amounted to EUR 177.8 million (109.7).
Net interest-bearing liabilities amounted to EUR 141.8 million (72.5), showing an increase of EUR 23.9 million from the start of the year and an increase of EUR 69.3 million from the comparison period, due to business acquisitions.
Net financial expenses in the first quarter amounted to EUR -0.9 million (0.1) Net financial expenses were -0.4% (0.1) of net sales.
The average interest rate on long-term loans (with interest rate hedging) was 1.1% (1.1). Loans totalling EUR 32.6 million will mature in 2018, including the short-term commercial papers currently in use.
The equity ratio was 33.5% (41.6) and the gearing rate was 78.5 (38.0). Liquid assets at the end of the period amounted to EUR 36.0 million (37.2).
Of the EUR 100.0 million commercial paper programme, EUR 30.0 million (40.0) 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 during the comparison period.
DISTRIBUTION OF ASSETS
The Annual General Meeting held on 15 March 2018 resolved that a dividend of EUR 0.92 per share be paid on the basis of the balance sheet that was adopted for the financial year 2017. The dividend, totalling EUR 35.3 million, was paid to shareholders on 26 March 2018.
CAPITAL EXPENDITURE
Gross capital expenditure in the first quarter of 2018 totalled EUR 8.2 million (10.9), consisting primarily of machine and equipment purchases and investments in information systems. Of the significant ongoing information system projects, the deployment of the new ERP system continued in the Technical Services division and in the Facility Services division’s cleaning and support services business.
PERSONNEL
In the first quarter, the average number of employees converted into full-time equivalents was 7,497 (6,807). At the end of the period, Lassila & Tikanoja had 8,513 (7,959) full-time and part-time employees. Of these, 6,883 (7,028) worked in Finland and 1,630 (931) in other countries. Because of the acquisition, the amount of personnel increased in Sweden.
SHARES AND SHARE CAPITAL
Traded volume and price
The volume of trading on Nasdaq Helsinki in the first quarter, excluding the shares held by the company in Lassila & Tikanoja plc, was 1,567,007 shares, which is 4.1% (4.3) of the average number of outstanding shares. The value of trading was EUR 33.3 million (31.6). The highest share price was EUR 20.0 and the lowest EUR 16.18. The closing price was EUR 16.86. At the end of the review period, the market capitalisation excluding the shares held by the company was EUR 647.4 million (706.1).
Own shares
At the end of the period, the company held 392,952 of its own shares, representing 1.0% 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 38,405,922. The average number of shares excluding the shares held by the company was 38,401,540.
Shareholders
At the end of the period, the company had 12,793 (11,895) shareholders. Nominee-registered holdings accounted for 19.4% (17.1) of the total number of shares.
Authorisation for the Board of Directors
The Annual General Meeting held on 15 March 2018 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 a share issue and the issuance of special rights entitling their holders 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 which may be held by the company through a share issue and/or issuance of option rights or other special rights conferring entitlement 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 authorisation is effective for 18 months.
RESOLUTIONS BY THE ANNUAL GENERAL MEETING
The Annual General Meeting, which was held on 15 March 2018, adopted the financial statements and consolidated financial statements for 2017 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 0.92 per share, totalling EUR 35.3 million, be paid on the basis of the balance sheet adopted for the financial year 2017. It was decided that the dividend be paid on 26 March 2018.
The Annual General Meeting confirmed the number of members of the Board of Directors as six. Heikki Bergholm, Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Miikka Maijala and Laura Tarkka were re-elected 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 15 March 2018.
BOARD OF DIRECTORS
The members of Lassila & Tikanoja plc’s Board of Directors are Heikki Bergholm, Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Miikka Maijala and Laura Tarkka. At its constitutive meeting after the Annual General Meeting, the Board of Directors elected Heikki Bergholm as Chairman of the Board and Sakari Lassila as Vice Chairman.
Sakari Lassila was elected as the Chairman of the Audit Committee and Teemu Kangas-Kärki and Laura Tarkka as members. Heikki Bergholm was elected as the Chairman of the Personnel Committee and Laura Lares and Miikka Maijala as members.
SUMMARY OF STOCK EXCHANGE RELEASES PURSUANT TO ARTICLE 4, CHAPTER 6 OF THE SECURITIES MARKET ACT
On 24 April, the company published financial key figures adjusted according to the IFRS 9 and IFRS 15 standards as well as comparison data for the 2017 financial year according to the new segment reporting structure.
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
Fluctuations in the prices of fuels may affect the demand for the recovered fuels produced by the company.
The company has begun the deployment of a new ERP system and will continue the deployment process in 2018. The deployment of the new system may lead to temporary overlapping costs arising from changes in the operating model, which can have a negative effect on the company’s result.
More detailed information on Lassila & Tikanoja’s risks and risk management is available in the 2017 Annual Report, and in the Report of the Board of Directors and the consolidated financial statements.
OUTLOOK FOR THE YEAR 2018
Lassila & Tikanoja’s net sales and operating profit in 2018 are expected to be above the 2017 levels.
CONDENSED FINANCIAL STATEMENTS 1 JANUARY – 31 MARCH 2018
CONSOLIDATED INCOME STATEMENT
| EUR million | 1–3/2018 | 1–3/2017 | 1–12/2017 |
| Net sales | 196.5 | 161.3 | 709.5 |
| Other operating income | 1.1 | 0.9 | 5.7 |
| Change of inventory | -1.8 | 0.8 | -1.0 |
| Materials and services | -72.2 | -53.4 | -231.9 |
| Employee benefit expenses | -81.5 | -70.6 | -296.9 |
| Other operating expenses | -27.8 | -24.0 | -100.3 |
| Depreciation and impairment | -10.6 | -10.0 | -41.1 |
| Operating profit | 3.7 | 5.0 | 44.0 |
| Financial income and expenses | -0.9 | 0.1 | -1.4 |
| Share of the result of associated companies | -0.1 | 0.0 | -0.1 |
| Profit before tax | 2.8 | 5.1 | 42.5 |
| Income taxes | -0.6 | -1.0 | -8.9 |
| Profit for the period | 2.2 | 4.1 | 33.5 |
| Attributable to: | |||
| Equity holders of the company | 2.2 | 4.1 | 33.5 |
| Non-controlling interest | 0.0 | 0.0 | 0.0 |
| Earnings per share attributable to equity holders of the parent company: | |||
| Earnings per share, EUR | 0.06 | 0.11 | 0.87 |
| Diluted earnings per share, EUR | 0.06 | 0.11 | 0.87 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR million | 1–3/2018 | 1–3/2017 | 1–12/ 2017 |
| Profit for the period | 2.2 | 4.1 | 33.5 |
| Items not to be recognised through profit or loss | |||
| Items arising from reassessment of defined benefit plans | 0.0 | 0.0 | 0.1 |
| Items not to be recognised through profit or loss, total | 0.0 | 0.0 | 0.1 |
| Items potentially to be recognised through profit or loss | |||
| Hedging reserve, change in fair value | 0.0 | -0.1 | -0.1 |
| Currency translation differences | -3.6 | 0.1 | -2.7 |
| Currency translation differences, non-controlling interest | 0.0 | 0.0 | 0.0 |
| Items potentially to be recognised through profit or loss, total | -3.6 | 0.1 | -2.8 |
| Total comprehensive income, after tax | -1.4 | 4.2 | 30.7 |
| Attributable to: | |||
| Equity holders of the company | -1.4 | 4.1 | 30.7 |
| Non-controlling interest | 0.0 | 0.0 | 0.0 |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||
| EUR million | 3/2018 | 3/2017 | 12/2017 |
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Goodwill | 146.9 | 117.2 | 150.2 |
| Customer contracts arising from acquisitions | 21.1 | 5.4 | 22.6 |
| Agreements on prohibition of competition | 0.0 | 0.1 | 0.0 |
| Other intangible assets arising from business acquisitions | 0.5 | 0.6 | 0.5 |
| Other intangible assets | 23.2 | 21.4 | 22.9 |
| 191.8 | 144.7 | 196.3 | |
| Property, plant and equipment | |||
| Land | 5.2 | 5.3 | 5.3 |
| Buildings and constructions | 38.9 | 39.4 | 40.3 |
| Machinery and equipment | 112.6 | 107.8 | 113.0 |
| Other tangible assets | 0.1 | 0.1 | 0.1 |
| Prepayments and construction in progress | 1.5 | 6.7 | 2.0 |
| 158.3 | 159.3 | 160.5 | |
| Other non-current assets | |||
| Available-for-sale investments | 0.6 | 0.6 | 0.6 |
| Finance lease receivables | 0.1 | 0.9 | 0.3 |
| Deferred tax assets | 6.9 | 5.8 | 6.8 |
| Other receivables | 2.5 | 2.5 | 2.6 |
| 10.2 | 9.7 | 10.3 | |
| Total non-current assets | 360.3 | 313.7 | 367.2 |
| Current assets | |||
| Inventories | 21.8 | 25.8 | 23.9 |
| Trade and other receivables | 132.4 | 90.9 | 137.6 |
| Derivative receivables | 0.1 | 0.1 | 0.1 |
| Prepayments | 2.3 | 3.4 | 0.5 |
| Cash and cash equivalents | 36.0 | 37.2 | 48.1 |
| Total current assets | 192.7 | 157.4 | 210.2 |
| Total assets | 552.9 | 471.1 | 577.3 |
| EUR million | 3/2018 | 3/2017 | 12/2017 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Equity attributable to equity holders of the parent company | |||
| Share capital | 19.4 | 19.4 | 19.4 |
| Other reserves | -9.5 | -3.0 | -5.9 |
| Invested unrestricted equity reserve | 0.6 | 0.6 | 0.6 |
| Retained earnings | 167.7 | 169.6 | 169.7 |
| Profit for the period | 2.2 | 4.1 | 33.5 |
| 180.4 | 190.7 | 217.2 | |
| Non-controlling interest | 0.2 | 0.2 | 0.2 |
| Total equity | 180.6 | 190.9 | 217.4 |
| Liabilities | |||
| Non-current liabilities | |||
| Deferred tax liability | 28.2 | 24.0 | 29.2 |
| Retirement benefit obligations | 1.4 | 1.0 | 1.4 |
| Provisions | 5.0 | 4.8 | 5.0 |
| Borrowings | 122.5 | 66.0 | 140.9 |
| Other liabilities | 0.3 | 0.4 | 0.4 |
| 157.4 | 96.2 | 177.0 | |
| Current liabilities | |||
| Borrowings | 55.3 | 43.7 | 25.0 |
| Trade and other payables | 157.9 | 139.3 | 155.7 |
| Derivative liabilities | 0.2 | 0.1 | 0.2 |
| Tax liabilities | 0.4 | 0.0 | 0.1 |
| Provisions | 1.2 | 0.8 | 1.9 |
| 215.0 | 184.0 | 183.0 | |
| Total liabilities | 372.4 | 280.2 | 359.9 |
| Total equity and liabilities | 552.9 | 471.1 | 577.3 |