Lassila & Tikanoja plc: Interim Report 1 January - 31 March 2015

Helsinki, Finland, 2015-04-29 07:00 CEST (GLOBE NEWSWIRE) --

Lassila & Tikanoja plc: Interim Report 1 January - 31 March 2015


Net sales for the first quarter EUR 157.3 million (EUR 159.4 million)
Operating profit excluding non-recurring items EUR 7.4 million (EUR 7.4 million)
Operating profit EUR 6.5 million (EUR 2.1 million)
Earnings per share EUR 0.14 (EUR -0.42).
Full-year net sales and operating profit excluding non-recurring items in 2015 are expected to remain at the 2014 level.


CEO PEKKA OJANPÄÄ:

“The economic recession kept the business environment challenging, which slowed down the growth of business operations. However, net sales were supported by strategically targeted acquisitions and a focus on sales and customer relationships. In spite of the challenging circumstances, profitability remained on the same level with the previous year. Profitability was improved by the successful integration of acquired businesses and good cost control. In line with our strategy, our focus in the prevailing economic situation is on strengthening our market position and ensuring profitability and cash flow through the development of our business operations and by business acquisitions.”


GROUP NET SALES AND FINANCIAL PERFORMANCE

January-March
Lassila & Tikanoja’s net sales for the first quarter decreased by 1.3% to EUR 157.3 million (EUR 159.4 million). Operating profit totalled EUR 6.5 million (EUR 2.1 million). Operating profit excluding non-recurring items was EUR 7.4 million (EUR 7.4 million), representing 4.7% (4.7%) of net sales. Earnings per share were EUR 0.14 (EUR -0.42).

In the first quarter, the company’s net sales declined primarily due to demand in Renewable Energy Sources and Industrial Services being lower than in the comparison period. In Facility Services, net sales increased year-on-year despite weakened demand for damage repair services. In Environmental Services, net sales were on the same level with the comparison period.

In the comparison period, the company’s reported operating profit included EUR 6.4 million in non-recurring costs relating to holdings in EcoStream Oy, which filed for bankruptcy, and to outstanding receivables from the EcoStream Group and L&T Recoil.

Operating profit excluding non-recurring items was on the same level with the comparison period due to the improved profitability of Facility Services. In the first quarter, the company recorded non-recurring restructuring costs of EUR 0.9 million related to the loss-making damage repair services business. The company will continue to adapt the damage repair services business to the weakened market situation.


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 were unchanged from the previous year at EUR 60.9 million (EUR 60.9 million). Operating profit and operating profit excluding non-recurring items were EUR 6.5 million (EUR 6.6 million).

Due to the challenging market situation, the demand for solid recovered fuel (SRF) declined year-on-year, which affected the entire division’s net sales. In addition, the net sales of waste management services, recycling services and environmental products declined due to lower demand in Russia and fluctuations in the rouble exchange rate. Nevertheless, net sales remained at the previous year’s level due to business acquisitions made by the Group.

The division’s profitability remained on the same level with the previous year thanks to a high level of operational efficiency.

Industrial Services

The division’s net sales for the first quarter were down by 7.1% to EUR 14.8 million (EUR 16.0 million). Operating loss and operating loss excluding non-recurring items were EUR 0.4 million (EUR 0.1 million).

In Industrial Services, demand in the first quarter is typically low due to seasonality. With the exception of process cleaning, the division’s services had lower net sales in the first quarter than in the comparison period. The division’s profitability declined particularly due to lower volume in hazardous waste management.

Facility Services

The division’s net sales for the first quarter increased by 2.3% to EUR 70.7 million (EUR 69.0 million). Operating profit totalled EUR 0.3 million (EUR 0.6 million). Operating profit excluding non-recurring items was EUR 1.2 million (EUR 0.6 million).

The demand for property maintenance services improved year-on-year, and the maintenance of technical systems saw continued strong growth due to factors such as acquisitions carried out early in the year. The demand for damage repair services continued to decline. The company has closed down unprofitable business locations in the damage repair services business, which affected the entire division’s net sales and operating profit.

Business operations and profitability developed favourably in property maintenance and the maintenance of technical systems, as well as in Swedish cleaning operations. The result of Finnish cleaning operations was weighed down by several large-scale customer start-ups.

The profitability of damage repair services weakened. The company will continue to adapt the loss-making damage repair services business to the prevailing market situation. In the first quarter, the company recorded non-recurring restructuring costs of EUR 0.9 million related to the damage repair services business, of which EUR 0.3 million are actual costs incurred in the first quarter and EUR 0.6 million are provisions for future adjustment measures.

Renewable Energy Sources

First quarter net sales of Renewable Energy Sources (L&T Biowatti) were down by 18.3% to EUR 12.9 million (EUR 15.8 million). Operating profit and operating profit excluding non-recurring items were EUR 0.7 million (EUR 0.8 million).

The division’s net sales declined mainly due to the short heating season and the challenging market situation for biofuels.

Profitability remained nearly at the previous year’s level due to the implemented efficiency improvement measures.


BREAKDOWN OF OPERATING PROFIT EXCLUDING NON-RECURRING ITEMS
 

FINANCING

Cash flows from operating activities amounted to EUR 18.6 million (EUR 13.7 million). A total of EUR 3.3 million in working capital was released (EUR 0.9 million committed).

At the end of the period, interest-bearing liabilities amounted to EUR 105.2 million (EUR 112.1 million).

Net interest-bearing liabilities amounted to EUR 71.9 million (EUR 83.3 million), showing an increase of EUR 19.9 million from the beginning of the year and a decrease of EUR 11.4 million year-on-year.

Net financial expenses in the first quarter were positive at EUR 0.5 million (EUR -17.6 million), including EUR 0.9 million in exchange rate gains resulting from changes in the exchange rate of the Russian rouble. Net financial expenses were 0.3% (-11.0%) of net sales. The amount of net financial expenses in the comparison period was primarily due to the EUR 16.7 million payment made under the L&T Recoil Oy guarantee commitment.

The average interest rate on long-term loans (with interest-rate hedging) was 1.6% (1.7%). Long-term loans totalling EUR 23.1 million will mature during the rest of the year.

The equity ratio was 41.9% (40.1%) and the gearing rate was 39.2 (47.4). Liquid assets at the end of the period amounted to EUR 33.2 million (EUR 28.7 million).

Of the EUR 100 million commercial paper programme, EUR 10.0 million (EUR 30.0 million) was in use at the end of the period.

The company issued a EUR 30 million senior unsecured bond in 2014. The bond matures on 15 September 2019 and carries a fixed annual interest rate of 2.125 per cent.

The Group has granted internal loans to its subsidiaries in Russia totalling RUB 270 million (EUR 3.7 million), some of which are hedged against fluctuations in the rouble exchange rate.


DISTRIBUTION OF ASSETS

The Annual General Meeting held on 18 March 2015 resolved that a dividend of EUR 0.75 per share be paid on the basis of the balance sheet that was adopted for the financial year 2014. The dividend, totalling EUR 29.0 million, was paid to shareholders on 27 March 2015.


CAPITAL EXPENDITURE

In the first quarter of 2015, gross capital expenditure totalled EUR 9.5 million (EUR 9.0 million), consisting mainly of machine and equipment purchases and small targeted acquisitions.


PERSONNEL

In January-March, the average number of employees converted into full-time equivalents was 6,762 (7,683). At the end of the period, Lassila & Tikanoja had 7,842 (7,836) full-time and part-time employees. Of these, 7,041 (7,040) worked in Finland and 801 (796) in other countries.


SHARES AND SHARE CAPITAL

Traded volume and price
The volume of trading on Nasdaq Helsinki in January-March 2015, excluding the shares held by the company in Lassila & Tikanoja plc, was 3,471,056 shares, which is 9.0% (5.3%) of the average number of outstanding shares. The value of trading was EUR 59.3 million (EUR 29.9 million). The highest share price was EUR 18.26 and the lowest EUR 14.54. The closing price was EUR 17.28. At the end of the period, the market capitalisation excluding the shares held by the company was EUR 667.3 million (EUR 561.2 million).

Own shares
At the end of the period, the company held 184,315 of its own shares, representing 0.5% 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 38,614,559. The average number of shares excluding the shares held by the company was 38,610,104.

Shareholders
At the end of the period, the company had 9,958 (9,326) shareholders. Nominee-registered holdings accounted for 19.3% (21.3%) of the total number of shares.

Authorisation for the Board of Directors
The Annual General Meeting held on 18 March 2015 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 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 share issue authorisation is effective for 18 months.


RESOLUTIONS BY THE ANNUAL GENERAL MEETING

The Annual General Meeting, which was held on 18 March 2015, adopted the financial statements and consolidated financial statements for 2014 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 0.75 per share, totalling EUR 29.0 million, be paid on the basis of the balance sheet adopted for the financial year 2014. It was decided that the dividend be paid on 27 March 2015.

The Annual General Meeting confirmed the number of members of the Board of Directors as five. Heikki Bergholm, Eero Hautaniemi, Laura Lares, Sakari Lassila and Miikka Maijala 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 18 March 2015.


BOARD OF DIRECTORS

The members of Lassila & Tikanoja plc’s Board of Directors are Heikki Bergholm, Eero Hautaniemi, Laura Lares, Sakari Lassila and Miikka Maijala. At its constitutive meeting 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 the Chairman of the Remuneration Committee and Miikka Maijala as a member of the committee.


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

On 20 January 2015, the company announced that, according to the preliminary financial statements figures for 2014, the company’s net sales are estimated to be approximately EUR 639 million (2013: EUR 668.2 million) and the operating profit excluding non-recurring items is estimated to be EUR 53.8 million (2013: EUR 51.8 million).

Previously, the company had estimated that the 2014 net sales were expected to remain at the 2013 level or slightly below and operating profit excluding non-recurring items would also remain at the 2013 level or slightly below.


EVENTS AFTER THE REVIEW PERIOD

The company’s management is not aware of any events of material importance after the balance sheet date that might have affected the preparation of the interim report.


NEAR-TERM RISKS AND UNCERTAINTIES

Economic uncertainty may result in significant changes in the secondary raw material markets for Environmental Services and the demand for Facility Services and Industrial Services.

Uncertainties related to government subsidies for renewable fuels and to the continuity of such subsidies may affect demand for the services of Renewable Energy Sources. In addition, low prices for fossil fuels may affect the demand of the recovered and renewable fuels produced by the company.

More detailed information on L&T’s risks and risk management is available in the Annual Report for 2014, in the Report of the Board of Directors and in the consolidated financial statements.


OUTLOOK FOR THE REST OF THE YEAR

Full-year net sales and operating profit excluding non-recurring items in 2015 are expected to remain at the 2014 level.


CONDENSED FINANCIAL STATEMENTS 1 JANUARY - 31 MARCH 2015


CONSOLIDATED INCOME STATEMENT
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION