Lassila & Tikanoja plc: Financial Statements Release 1 January - 31 December 2012

Helsinki, Finland, 2013-02-01 07:00 CET (GLOBE NEWSWIRE) --

Net sales for the final quarter EUR 171.8 million (EUR 167.0 million); operating profit EUR 9.7 million (operating loss EUR 7.9 million); operating profit excluding non-recurring items EUR 10.5 million (EUR 9.6 million); earnings per share EUR 0.18 (EUR -0.18)
Full-year net sales EUR 674.0 million (EUR 652.1 million); operating profit EUR 48.4 million (EUR 25.6 million); operating profit excluding non-recurring items EUR 47.4 million (EUR 44.3 million); earnings per share EUR 0.89 (EUR 0.44)
Full-year net sales in 2013 are expected to remain at the 2012 level. Operating profit, excluding non-recurring items, is expected to remain at the 2012 level or improve slightly.
Distribution of assets: The Board of Directors proposes a capital repayment EUR 0.60 per share.

 
CEO PEKKA OJANPÄÄ:

“Our performance in the fourth quarter was in line with our expectations. Operating profit excluding non-recurring items picked up from the comparison period, even though both fluctuations in the demand for services required by the industry and substantially greater snowfall in the early winter than in 2011 posed challenges to production efficiency. Our new organisation came into effect at the turn of the year and we are now focusing on its implementation in accordance with our strategy. We are building a consistent L&T in order to provide even better service to our customers.”


GROUP NET SALES AND FINANCIAL PERFORMANCE

Final quarter
Lassila & Tikanoja’s net sales for the final quarter increased by 2.9% to EUR 171.8 million (EUR 167.0 million). Operating profit totalled EUR 9.7 million (operating loss EUR 7.9 million), representing 5.6% (-4.7%) of net sales. Operating profit excluding non-recurring items was EUR 10.5 million (EUR 9.6 million). Earnings per share were EUR 0.18 (earnings per share EUR -0.18).

Net sales saw year-on-year growth primarily due to the improved competitiveness of wood-based fuels. Fluctuations in the demand for process cleaning services for industry and the divestment of L&T’s holding in the joint venture L&T Recoil in June cut into net sales.

In the fourth quarter, overall performance improved from the comparison period thanks to the higher profitability of Renewable Energy Sources and Swedish cleaning operations. More snow fell in the early winter than in the comparison period, which hampered production efficiency in property maintenance and Environmental Services in particular, and also increased subcontracting and production costs. Non-recurring costs totalling EUR 0.8 million were recognised in the fourth quarter from the reorganisation of operations.

An impairment loss of EUR 17.1 million for the goodwill and other assets of the Renewable Energy Sources division was recorded as a non-recurring cost in the comparison period.

Year 2012
Lassila & Tikanoja's full-year net sales grew by 3.4% to 674.0 EUR million (EUR 652.1 million). Operating profit was EUR 48.4 million (EUR 25.6 million), representing 7.2% (3.9%) of net sales, and operating profit excluding non-recurring items was EUR 47.4 million (EUR 44.3 million). Earnings per share were EUR 0.89 (EUR 0.44).

Net sales saw year-on-year growth primarily thanks to the higher demand for wood-based fuels, the volume growth of Environmental Services and the expansion of the damage repair network. Waste and recycling volumes remained at a good level during the entire year. Demand for process cleaning services for industry fluctuated greatly in the latter half of the year.  

The overall performance improvement from the comparison period could be largely attributed to the divestment of holdings in the loss-making joint venture L&T Recoil at the end of June and the higher profitability of Renewable Energy Sources. The smaller loss posted by Swedish operations also improved performance. Full-year profitability was eroded by the non-recurring compensation of about EUR 0.7 million paid in the second quarter in accordance with the collective labour agreement and the increase in subcontracting and labour costs, particularly in Property Maintenance.

A non-recurring capital gain of EUR 4.2 million was recognised in the second quarter from the divestment
of holdings in L&T Recoil Oy. At the same time, a non-recurring cost of EUR 2.0 million was recorded in financial expenses, consisting of interest receivable from subordinated loans granted to the joint venture. Furthermore, non-recurring costs totalling EUR 3.2 million from the rearrangement and efficiency enhancement measures taken in Environmental Services, Property Maintenance and the Swedish business were recognised during the report year.


Financial summary

* Breakdown of operating profit excluding non-recurring items is presented below the division reviews.
** Proposal by the Board of Directors

NET SALES AND FINANCIAL PERFORMANCE BY DIVISION
Environmental Services

Final quarter
The division’s net sales for the final quarter decreased by 2.1 % to EUR 82.3 million (EUR 84.0 million). Operating profit amounted to EUR 7.8 million (EUR 8.3 million), and operating profit excluding non-recurring items was EUR 7.9 million (EUR 8.3 million).

Both the seasonal weak demand for process cleaning services for industry and the divestment of the holding in the joint venture L&T Recoil cut into the division’s net sales. Waste and recycling volumes were on a par with the comparison period, and the prices of secondary raw materials (fibres, plastics, metals) remained good.

The division’s profitability saw a year-on-year decline primarily due to the seasonal weak demand for process cleaning services for industry.

The net sales of the Environmental Services division’s international operations declined from the comparison period due to the tougher competitive situation in Latvia.

Year 2012
The division’s full-year net sales increased by 1.5% to EUR 330.7 million (EUR 325.9 million). Operating profit amounted to EUR 38.1 million (EUR 34.0 million), and operating profit excluding non-recurring items was EUR 35.0 million (EUR 34.0 million).

The healthy demand for waste management and industrial services was the key driver of net sales growth. However, industrial demand weakened during the latter half of the year. Waste volumes and the prices of secondary raw materials (fibres, plastics, metals) remained robust throughout the report year.

The division's operating profit remained on a par with the comparison period. Operating profit was boosted by higher profitability following the L&T Recoil divestment and successful production efficiency measures. However, performance was taxed by the increase seen in fuel and repair costs, particularly in the first half of the year, as well as weaker profitability in international operations.

At the end of the second quarter, L&T sold its 50 per cent holding in the joint venture L&T Recoil to the co-owner, EcoStream Oy. After this arrangement, L&T owns slightly less than 20 per cent of EcoStream’s shares and continues to serve as one of the suppliers of raw materials to the regeneration plant. A non-recurring capital gain of EUR 4.2 million on the arrangement was recorded for the second quarter.

Cleaning and Office Support Services

Final quarter
The division’s net sales for the final quarter totalled EUR 40.2 million (EUR 40.1 million); an increase of 0.3%. Operating profit amounted to EUR 2.0 million (EUR 0.9 million), and operating profit excluding non-recurring items was EUR 2.4 million (EUR 1.1 million).

The division’s net sales remained on a par with the comparison period, even though competition made it harder to achieve the target price levels in new sales and commissioned assignments.

Operating profit saw year-on-year growth, primarily thanks to higher profitability in Swedish operations. Fixed cost management in Finnish operations was also successful.

Year 2012
The Cleaning and Office Support Services division's full-year net sales grew by 2.7% to EUR 161.5 million (EUR 157.3 million). Operating profit amounted to EUR 7.6 million (EUR 7.1 million), and operating profit excluding non-recurring items was EUR 9.1 million (EUR 7.5 million).

The division’s net sales saw slight year-on-year growth as a result of acquisitions made in the previous spring. Demand for commissioned assignments remained good throughout the year in spite of heavy price competition.

The division’s operating profit improved substantially on the comparison period thanks to good performance in commissioned assignments and the higher profitability of Swedish operations. Operating profit is burdened by a rise in labour costs, which were not fully set off by service price hikes.

A non-recurring cost of EUR 1.0 million was recorded in the second quarter for the reorganisation of the Swedish operations.

Property Maintenance

Final quarter
The division’s net sales for the final quarter increased by 3.3% to EUR 34.6 million (EUR 33.5 million). Operating profit amounted to EUR 0.5 million (EUR 1.9 million), and operating profit excluding non-recurring items was EUR 0.7 million (EUR 1.9 million).

The division’s net sales saw slight year-on-year growth, primarily because more snow fell in the latter part of the year than in 2011.

Profitability weakened significantly from the comparison period due to a rise in production and subcontracting costs. Operating profit was also burdened by the smaller-than-usual size of commissioned assignments in damage repair services.

Year 2012
The Property Maintenance division’s full-year net sales increased by 2.5% to EUR 138.0 million (EUR 134.6 million). Operating profit amounted to EUR 5.3 million (EUR 8.2 million), and operating profit excluding non-recurring items was EUR 5.6 million (EUR 8.2 million).

Net sales saw a year-on-year increase primarily due to the growth in the workload following the expansion of the damage repair service network.

The division’s operating profit weakened from the comparison period due to tighter price competition in property maintenance and higher subcontracting costs. Profitability was also burdened by the fact that snowfall was heavier in the latter part of the year than in the comparison period.

In damage repair services, even more new co-operation agreements were signed with insurance companies in the latter half of the year. These agreements are expected to bolster L&T’s market position in the future and provide a steadier workload.

Renewable Energy Sources

Final quarter
Final-quarter net sales for Renewable Energy Sources (L&T Biowatti) were up by 45.4%, to EUR 18.3 million (EUR 12.6 million). Operating profit amounted to EUR 0.3 million (a loss of EUR 18.2 million), and operating profit excluding non-recurring items was EUR 0.3 million (a loss of EUR 1.1 million).

Net sales saw substantial year-on-year growth due to better competitiveness of wood-based fuels. The division’s profitability also improved significantly on the comparison period thanks to volume growth, lower depreciation and the management of fixed costs.

Year 2012
The full-year net sales of Renewable Energy Sources (L&T Biowatti) were up by 23.2% to EUR 55.9 million (EUR 45.4 million). Operating loss amounted to EUR 0.1 million (a loss of EUR 21.3 million), and operating profit excluding non-recurring items was EUR 0.1 million (a loss of EUR 3.8 million).

Net sales saw substantial year-on-year growth, as new sales rose thanks to the better demand for wood-based fuels in comparison with fossil fuels.

Operating profit also improved substantially due to volume growth and the more efficient cost structure, although the rainy summer and early autumn weakened the energy content of forest processed chips.


BREAKDOWN OF OPERATING PROFIT EXCLUDING NON-RECURRING ITEMS

FINANCING

Cash flows from operating activities amounted to EUR 80.5 million (EUR 74.5 million). EUR 6.4 million was released from the working capital (EUR 3.2 released).

At the end of the year, interest-bearing liabilities amounted to EUR 96.9 million (EUR 135.2 million). L&T Recoil accounted for EUR 18.1 million of the interest-bearing liabilities in the reference period. Guarantees of EUR 16.4 million given by Lassila & Tikanoja to other providers of finance for these liabilities are still in force. In addition L&T had receivables from EcoStream Group of EUR 4.9 million, of which EUR 4.2 million were past due on 31 December 2012. L&T’s receivables and liabilities related to EcoStream holding were in total EUR 21.3 million.

Net interest-bearing liabilities amounted to EUR 82.3 million, showing a decrease of EUR 20.0 million on the final quarter and EUR 44.9 million from the beginning of the year.

Net finance costs decreased significantly in the final quarter and amounted to EUR 0.5 million (EUR 1.1 million). In 2012 net finance costs amounted to EUR 5.4 million (EUR 4.6 million). This increase could be attributed to the non-recurring cost recognition of EUR 2.0 million on interest receivable from subordinated loans given to L&T Recoil Oy in the second quarter. Due to the cost recognition, net finance costs were 0.8% (0.7%) of net sales.

The average interest rate on long-term loans (with interest-rate hedging) was 2.2% (3.1%). The interest hedging of loans remained unchanged at 68% (68%). Long-term loans totalling EUR 26.9 million will mature during 2013.

The equity ratio was 49.4% (44.5%) and the gearing rate 35.3 (58.3). Liquid assets at the end of the period amounted to EUR 14.6 million (EUR 8.1 million).

Of the EUR 100 million commercial paper programme, EUR 12.0 million (EUR 17 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 15 March 2012 resolved that the profit for 2011 be placed in retained earnings and that no dividend be paid. A capital repayment of EUR 0.55 per share would be paid for the financial year 2011. The capital repayment, totalling EUR 21.3 million, was paid to the shareholders on 27 March 2012.


CAPITAL EXPENDITURE

In 2012, gross capital expenditure amounted to EUR 49.4 million (EUR 70.6 million), of which EUR 9.4 million were related to acquisitions, including the slightly under 20 per cent holding in EcoStream Oy that was part of the L&T Recoil arrangement.

In the first quarter, the Property Maintenance division acquired the property maintenance businesses of IK Kiinteistöpalvelu Oy and the business of Jyvässeudun Talonmiehet Oy and Kiinteistöhuolto Markku Hyttinen Oy.

In the second quarter, the Environmental Services division acquired the waste management business of Sita Finland Oy in Oulu.

In the fourth quarter, the Environmental Services acquired business operations of the Munaistenmetsä material recovery area in Uusikaupunki.


PERSONNEL

In 2012 the average number of employees converted into full-time equivalents was 8,399 (8,513). The total number of full-time and part-time employees at the end of the period was 8,962 (9,357). Of them 7,035 (7,381) people worked in Finland and 1,927 (1,976) people in other countries.


PROPOSAL FOR THE DISTRIBUTION OF ASSETS

According to the financial statements, Lassila & Tikanoja plc's unrestricted equity amount to EUR 114,473,686.13 with the operating profit for the period representing EUR 24,083,220.00. There were no substantial changes in the financial standing of the company after the end of the period, and the solvency test referred to in Chapter 13, section 2 of the Companies Act does not affect the amount of distributable assets.

The Board of Directors proposes to the Annual General Meeting that the profit for 2012 be placed in retained earnings and that no dividend be paid.

The Board of Directors proposes to the Annual General Meeting that, based on the balance sheet to be adopted for 2012, a capital repayment of EUR 0.60 per share be made. Capital is repaid from the reserve for invested unrestricted equity. Capital is repaid to shareholders included in the company shareholder register maintained by Euroclear Finland Oy on the record date, 15 March 2013. The Board proposes to the Annual General Meeting that the capital repayment be made on 22 March 2013.

No capital repayment shall be paid on shares held by the company on the dividend payment record date of 15 March 2013. On the day the proposal for the distribution of assets was made, the number of shares entitling to capital repayment was 38,692,064, which means the total amount of the capital repayment would be EUR 23,215,238.40.


SHARE AND SHARE CAPITAL

Traded volume and price
The volume of trading excluding the shares held by the company in Lassila & Tikanoja plc shares on NASDAQ OMX Helsinki in 2012 was 9,973,989 which is 25.8% (23.0%) of the average number of outstanding shares. The value of trading was EUR 105.1 million (EUR 108.2 million). The trading price varied between EUR 8.59 and EUR 12.15. The closing price was EUR 11.64. The market capitalisation excluding the shares held by the company was EUR 450.4 million (EUR 444.5 million) at the end of the period.

Own shares
At the beginning of the period, the company held 113,305 of its own shares and at the end 106,810 of its own shares, representing 0.3% 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 to 38,692,064 shares. The average number of shares excluding the shares held by the company totalled 38,688,373.

Share-based incentive programme 2012
Lassila & Tikanoja plc’s Board of Directors decided on 14 December 2011 on a share-based incentive programme. Rewards was based on the EVA result of Lassila & Tikanoja group without L&T Recoil. Based on the programme a maximum of 65,520 shares of the company could be granted. The programme covered 22 persons. Under the programme, 13,983 shares will be granted for 2012.

Share-based incentive programme 2013
Lassila & Tikanoja plc’s Board of Directors decided on 17 December 2012 on a new share-based incentive programme. The programme’s earnings period began on 1 January 2013 and ends on 31 December 2013. Potential rewards to be paid for the year 2013 will be based on the EVA result of Lassila & Tikanoja group. Potential rewards will be paid partly as shares and partly in cash. A maximum total of 53,300 Lassila & Tikanoja plc shares may be paid out on the basis of the programme. The programme covers 10 persons.

Shareholders
At the end of the financial period, the company had 9,382 (9,365) shareholders. Nominee-registered holdings accounted for 17.2% (13.0%) of the total number of shares.

Authorisation for the Board of Directors
The Annual General Meeting held on 15 March 2012 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.

The Board of Directors is authorised to purchase a maximum of 500,000 company shares, which is 1.3% of the total number of shares. The share issue authorisation will be effective for 18 months.

The Board of Directors is authorised to transfer a maximum of 500,000 company shares, which is 1.3% of the
total number of shares. The share issue authorisation will be effective until 31 March 2014.


RESOLUTIONS BY THE GENERAL MEETING

The Annual General Meeting of Lassila & Tikanoja plc, which was held on 15 March 2012, adopted the financial statements for the financial year 2011 and released the members of the Board of Directors and the Presidents and CEOs from liability.

The AGM resolved that the profit for 2011 be placed in retained earnings and that no dividend be paid. A capital repayment of EUR 0.55 per share, as proposed by the Board of Directors, would be paid for the financial year 2011 on the basis of the balance sheet adopted. The capital repayment, totalling EUR 21.3 million, payment date was resolved to be on 27 March 2012.
The Annual General Meeting confirmed the number of the members of the Board of Directors five. The following Board members were re-elected to the Board until the end of the following AGM: Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala.

KPMG Oy Ab, Authorised Public Accountants, was elected auditor. KPMG Oy Ab has announced that it will name 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 2012.


BOARD OF DIRECTORS

The members of the Board of Directors are Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala. In its constitutive meeting the Board elected Heikki Bergholm as Chairman of the Board and Eero Hautaniemi as Vice Chairman.

From among its members, the Board elected Eero Hautaniemi as Chairman and Sakari Lassila and Miikka Maijala as members of the audit committee. Heikki Bergholm was elected as Chairman of the remuneration committee and Hille Korhonen as member of the committee.


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

In a release published on 13 January 2012 the company announced that Antti Tervo has been appointed Chief Procurement Officer and Group Executive of Lassila & Tikanoja plc as of 14 February 2012.

In a release on 9 February 2012 the company announced that Lassila & Tikanoja plc has redeemed the remaining 30 percent of share capital of L&T Biowatti Oy as agreed in an agreement signed 18 December 2006.

In a release published on 26 April 2012 the company announced that it is launching a new operational enhancement programme to improve its profitability and to adapt operations to the current market environment.

In a release published on 2 May 2012 the company announced that Jorma Mikkonen, Vice President, Environmental Services, leaves the Group Executive Board of Lassila & Tikanoja plc.

In a release published on 8 May 2012 the company announced that Lassila & Tikanoja plc and EcoStream Oy are negotiating on a business transaction in which Lassila & Tikanoja will sell its 50 percent holding in the joint venture L&T Recoil Oy to EcoStream Oy, a co-owner.

In a release published on 25 June 2012 the company announced that it has sold its 50 percent holding in joint venture L&T Recoil Oy to the co-owner, EcoStream Oy.

In a release published on 7 September 2012 the company announced its new strategy. The core businesses of the new clarified portfolio are environmental, industrial and facility services. From 1 January 2013, L&T’s reporting segments are Environmental Services, Industrial Services, Facility Services, and Renewable Energy Sources. The new financial targets are: organic growth over 5%, return on investment (ROI) 20%, operating profit 9% and gearing 30-80%.

In a release published on 7 September 2012 the company announced changes in company’s management. Petri Salermo (QBA, born 1970) has been appointed Vice President, Environmental Services effective from 1 January 2013, Ville Rantala (M.Sc. Econ., born 1971) has been appointed Vice President, Industrial Services effective from 1 January 2013 and Petri Myllyniemi (M.Sc. Econ.; B.Sc. Eng., born 1964) has been appointed Vice President, Facility Services, effective from 7 January 2013. For the time being, Juha Simola and Henri Turunen will continue to act as the Vice Presidents of the current Property Maintenance and Cleaning and Office Support Services divisions and as members of the Group Executive Board.

In a release published on 14 September 2012 the company announced it is hosting a Capital Markets Day. The aim of the day was to present L&T’s new strategy.
In a release published on 24 October 2012 the company announced that Timo Leinonen has been appointed Chief Financial Officer and Group Executive of Lassila & Tikanoja plc as of 23 January 2013.
In a release published on 9 November 2012 the company announced that Juha Simola, Vice President, Property Maintenance and Group Executive will leave his position at Lassila & Tikanoja plc on 9 November 2012.

In a release published on 14 November 2012 the company announced that Henri Turunen, Vice President, Cleaning and Office Support Services and Group Executive will leave Lassila & Tikanoja plc on 20 November 2012.


NEAR-TERM RISKS AND UNCERTAINTIES

Economic uncertainty may cause major changes in the Environmental Services division’s secondary raw material markets and in industrial customer relationships.

Uncertainties associated with government subsidies for renewable fuels and with their continuity could affect demand for the Renewable Energy Sources division's services.

More detailed information on L&T's risks and risk management is available in the Annual Report for 2011, in the
report of the Board of Directors, and in the consolidated financial statements.


OUTLOOK FOR THE YEAR 2013

Full-year net sales in 2013 are expected to remain at the 2012 level. Operating profit, excluding non-recurring items, is expected to remain at the 2012 level or improve slightly.


CONDENSED FINANCIAL STATEMENTS 1 JANUARY-31 DECEMBER 2012


CONSOLIDATED INCOME STATEMENT

Earnings per share for profit attributable to the equity holders of the company:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME