- Net sales for the first quarter EUR 160.7 million (EUR 157.3 million)
- Operating profit EUR 6.8 million (EUR 6.5 million)
- Earnings per share EUR 0.14 (EUR 0.14).
- Full-year net sales and operating profit in 2016 are expected to remain at the 2015 level or improve slightly.
CEO PEKKA OJANPÄÄ:
“The economic recession kept the business environment challenging. Nevertheless, our net sales increased, primarily due to strategically targeted acquisitions. The company’s profitability remained at a good level considering the market situation due to previously implemented efficiency improvement measures. In line with our strategy, our focus in the prevailing economic climate is on strengthening our market position and ensuring profitability and cash flow.”
GROUP NET SALES AND FINANCIAL PERFORMANCE
January–March
Lassila & Tikanoja’s net sales for the first quarter increased by 2.1% to EUR 160.7 million (EUR 157.3 million). Operating profit totalled EUR 6.8 million (EUR 6.5 million). The result of the comparison period was weighed down by restructuring costs of EUR 0.9 million. Earnings per share were EUR 0.14 (EUR 0.14).
In the first quarter, net sales grew organically in Industrial Services and through acquisitions in Facility Services and Environmental Services. Net sales decreased slightly in Renewable Energy Sources.
Operating profit improved in Facility Services and Industrial Services and declined in Environmental Services. The operating profit of Renewable Energy Sources was unchanged from the comparison period.
The operating profit in the comparison period in 2015 was affected by non-recurring restructuring costs of EUR 0.9 million related to the loss-making renovation business (formerly the damage repair services business) that were recognised in the first quarter.
Financial summary
| 1–3/2016 | 1–3/2015 | Change % | 1–12/ 2015 | |
| Net sales, EUR million | 160.7 | 157.3 | 2.1 | 646.3 |
| Operating profit, EUR million | 6.8 | 6.5 | 4.4 | 49.9 |
| Operating margin, % | 4.2 | 4.1 | 7.7 | |
| Profit before tax, EUR million | 6.9 | 7.0 | -2.5 | 47.7 |
| Earnings per share, EUR | 0.14 | 0.14 | -1.4 | 0.98 |
| EVA, EUR million | 1.8 | 1.7 | 5.9 | 30.3 |
NET SALES AND OPERATING PROFIT BY DIVISION
Environmental Services
The division’s net sales for the first quarter increased by 1.4% to EUR 61.8 million (EUR 60.9 million). The increase in net sales was due to acquisitions. Operating profit totalled EUR 5.4 million (EUR 6.5 million).
The operating profit of the Environmental Services division was decreased by the lower volume of recyclable materials at recycling plants and the continued low market prices of secondary raw materials.
Net sales decreased slightly in operations in Russia. Operating profit improved year-on-year.
Industrial Services
The division’s net sales for the first quarter increased by 7.2% to EUR 15.9 million (EUR 14.8 million). Operating profit was EUR -0.3 million (EUR -0.4 million).
The net sales of the division’s services grew particularly in process cleaning and, with the exception of hazardous waste services, were higher than in the comparison period across all service lines.
Reduced demand for services led to lower operating profit for hazardous waste services. Operating profit improved in process cleaning and sewer maintenance. The operating profit of environmental construction was unchanged from the comparison period.
Facility Services
The division’s net sales for the first quarter increased by 2.2% to EUR 72.2 million (EUR 70.7 million). The growth in net sales was primarily due to acquisitions. Operating profit totalled EUR 1.2 million (EUR 0.3 million). The operating profit in the comparison period in 2015 was affected by non-recurring restructuring costs of EUR 0.9 million related to the loss-making renovation business (formerly the damage repair services business) that were recognised in the first quarter.
Net sales grew in cleaning and renovation services but declined in property maintenance. Net sales increased in the maintenance of technical systems business due to acquisitions.
The maintenance of technical systems and renovation businesses achieved a substantial increase in profitability following efficiency improvement measures implemented last year. The positive development of the result of the renovation business was also supported by the demand for services being higher than in the comparison period.
The profitability of the cleaning business was weighed down by intense price competition. The business in Sweden was similar to the previous year.
Renewable Energy Sources
The first quarter net sales of Renewable Energy Sources (L&T Biowatti) decreased by 1.1% to EUR 12.8 million (EUR 12.9 million). Operating profit totalled EUR 0.7 million (EUR 0.7 million).
The division’s net sales was influenced particularly by the demand for forest energy being weaker than in the previous year. Nevertheless, operating profit remained unchanged year-on-year due to the more efficient operations.
FINANCING
Cash flow from operating activities in the first quarter was affected by EUR 52 million in advance payments of employment pension contributions. Unlike in the previous year, in 2016 the entire year’s contributions were paid in January. In previous years, the payments have been made in four instalments. The change in the payment schedule will have no effect on the full-year cash flow.
Cash flow from operating activities amounted to EUR -18.9 million (EUR 18.6 million). A total of EUR 31.9 million in working capital was committed (EUR 3.3 million released).
At the end of the period, interest-bearing liabilities amounted to EUR 115.6 million (EUR 105.2 million).
Net interest-bearing liabilities amounted to EUR 96.5 million (EUR 71.9 million), showing an increase of EUR 54.7 million from the beginning of the year and an increase of EUR 24.6 million from the comparison period.
Net financial expenses in the first quarter were positive, amounting to EUR 0.1 million (EUR 0.5 million) Net financial expenses were 0.0% (0.3%) of net sales.
The average interest rate on long-term loans (with interest rate hedging) was 1.5% (1.6%). Long-term loans totalling EUR 34.6 million will mature in 2016.
The equity ratio was 40.0% (41.9%) and the gearing rate was 52.4 (39.2). Liquid assets at the end of the period amounted to EUR 19.1 million (EUR 33.2 million).
Of the EUR 100 million commercial paper programme, EUR 20 million (EUR 10.0 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 17 March 2016 resolved that a dividend of EUR 0.85 per share be paid on the basis of the balance sheet that was adopted for the financial year 2015. The dividend, totalling EUR 32.6 million, was paid to shareholders on 30 March 2016.
CAPITAL EXPENDITURE
Gross capital expenditure in the first quarter of 2016 totalled EUR 7.9 million (EUR 9.5 million), consisting primarily of machine and equipment purchases, investments in information systems and acquisitions. Of the significant ongoing information system projects, the deployment of the new ERP system for Facility Services and the first deployments of new financial systems will take place in late 2016 and early 2017.
PERSONNEL
In the first quarter, the average number of employees converted into full-time equivalents was 6,891 (6,762). At the end of the period, Lassila & Tikanoja had 8,034 (7,842) full-time and part-time employees. Of these, 7,168 (7,041) worked in Finland and 866 (801) in other countries.
SHARES AND SHARE CAPITAL
Traded volume and price
The volume of trading on Nasdaq Helsinki in January–March 2016, excluding the shares held by the company in Lassila & Tikanoja plc, was 1,702,567 shares, which is 4.4% (9.0%) of the average number of outstanding shares. The value of trading was EUR 27.5 million (EUR 59.3 million). The highest share price was EUR 18.25 and the lowest EUR 14.56. The closing price was EUR 15.99. At the end of the period, the market capitalisation excluding the shares held by the company was EUR 613.7 million (EUR 667.3 million).
Own shares
At the end of the period, the company held 420,868 of its own shares, representing 1.1% 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 38,378,006. The average number of shares excluding the shares held by the company was 38,365,943.
Shareholders
At the end of the period, the company had 10,413 (9,958) shareholders. Nominee-registered holdings accounted for 19.9% (19.3%) of the total number of shares.
Authorisation for the Board of Directors
The Annual General Meeting held on 17 March 2016 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 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 share issue authorisation is effective for 18 months.
RESOLUTIONS BY THE ANNUAL GENERAL MEETING
The Annual General Meeting, which was held on 17 March 2016, adopted the financial statements and consolidated financial statements for 2015 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 0.85 per share, totalling EUR 32.6 million, be paid on the basis of the balance sheet adopted for the financial year 2015. It was decided that the dividend be paid on 30 March 2016.
The Annual General Meeting confirmed the number of members of the Board of Directors as six. Heikki Bergholm, Eero Hautaniemi, Laura Lares, Sakari Lassila and Miikka Maijala were re-elected, and Teemu Kangas-Kärki 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 17 March 2016.
BOARD OF DIRECTORS
The members of Lassila & Tikanoja plc’s Board of Directors are Heikki Bergholm, Eero Hautaniemi, Teemu Kangas-Kärki, 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 Teemu Kangas-Kärki as members of the Audit Committee. Heikki Bergholm was elected as the Chairman of the Personnel Committee and Miikka Maijala and Laura Lares as members of the committee.
SUMMARY OF STOCK EXCHANGE RELEASES PURSUANT TO ARTICLE 4, CHAPTER 6 OF THE SECURITIES MARKET ACT
On 4 January 2016, the company announced that it had concluded the repurchase of its own shares that was announced on 2 September 2015. The repurchase of the company’s own shares began on 15 September 2015 and the repurchase programme ended on 31 December 2015. The final share purchase was realised on 21 December 2015. A total of 253,406 shares were purchased during the repurchase programme. As of the conclusion of the repurchase programme, the company holds a total of 437,721 of its own shares, which corresponds to 1.1% of shares and votes.
On 3 February 2016, the company announced a change to its target range for gearing for the strategy period 2014–2018. The new range is 0–70 per cent. The previous range was 30–80 per cent. The change is based on the company’s strong cash flow as well as the need to prepare for potential acquisitions and other capital expenditure.
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.
Low prices for fossil fuels may affect the demand of the recovered and renewable fuels produced by the company.
The company is preparing to deploy new ERP and financial management systems in late 2016 and early 2017. The deployment of the new systems 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 L&T’s risks and risk management is available in the 2015 Annual Report, and in the Report of the Board of Directors and the consolidated financial statements.
OUTLOOK FOR THE YEAR 2016
Full-year net sales and operating profit in 2016 are expected to remain at the 2015 level or improve slightly.
CONDENSED FINANCIAL STATEMENTS 1 JANUARY – 31 MARCH 2016
CONSOLIDATED INCOME STATEMENT
| EUR million | 1–3/2016 | 1–3/2015 | 1-12/2015 |
| Net sales | 160.7 | 157.3 | 646.3 |
| Cost of sales | -147.7 | -143.1 | -572.0 |
| Gross profit | 12.9 | 14.2 | 74.2 |
| Other operating income | 0.9 | 0.4 | 3.7 |
| Sales and marketing expenses | -3.4 | -3.3 | -12.9 |
| Administrative expenses | -3.0 | -3.3 | -13.0 |
| Other operating expenses | -0.6 | -1.5 | -2.1 |
| Operating profit | 6.8 | 6.5 | 49.9 |
| Financial income | 0.4 | 1.0 | 0.3 |
| Financial expenses | -0.3 | -0.5 | -2.5 |
| Profit before tax | 6.9 | 7.0 | 47.7 |
| Income taxes | -1.4 | -1.5 | -9.7 |
| Profit for the period | 5.5 | 5.6 | 37.9 |
| Attributable to: | |||
| Equity holders of the company | 5.5 | 5.6 | 37.9 |
| Non-controlling interest | 0.0 | 0.0 | 0.0 |
| Earnings per share attributable to equity holders of the parent company: | |||
| Earnings per share, EUR | 0.14 | 0.14 | 0.98 |
| Diluted earnings per share, EUR | 0.14 | 0.14 | 0.98 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR million | 1–3/2016 | 1–3/2015 | 1-12/2015 |
| Profit for the period | 5.5 | 5.6 | 37.9 |
| Items not to be recognised through profit or loss | |||
| Items arising from re-measurement of defined benefit plans | 0.0 | - | 0.1 |
| Items not to be recognised through profit or loss, total | 0.0 | - | 0.1 |
| Items potentially to be recognised through profit or loss | |||
| Hedging reserve, change in fair value | 0.0 | 0.2 | 0.4 |
| Currency translation differences | 0.0 | 0.5 | 0.1 |
| Currency translation differences recognised in profit or loss | 0.0 | 0.0 | 0.0 |
| Currency translation differences, non-controlling interest | 0.0 | 0.0 | 0.0 |
| Items potentially to be recognised through profit or loss, total | 0.1 | 0.7 | 0.4 |
| Total comprehensive income, after tax | 5.5 | 6.3 | 38.4 |
| Attributable to: | |||
| Equity holders of the company | 5.5 | 6.3 | 38.5 |
| Non-controlling interest | 0.0 | 0.0 | 0.0 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR million | 3/2016 | 3/2015 | 12/2015 |
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Goodwill | 116.6 | 110.9 | 113.7 |
| Customer contracts arising from acquisitions | 5.8 | 5.7 | 5.4 |
| Agreements on prohibition of competition | 0.2 | 0.1 | 0.2 |
| Other intangible assets arising from business acquisitions | 0.6 | 0.7 | 0.6 |
| Other intangible assets | 16.9 | 10.5 | 15.0 |
| 140.0 | 127.9 | 134.9 | |
| Property, plant and equipment | |||
| Land | 5.0 | 5.1 | 5.0 |
| Buildings and constructions | 39.6 | 43.1 | 39.9 |
| Machinery and equipment | 103.7 | 109.7 | 111.0 |
| Other | 0.1 | 0.1 | 0.1 |
| Prepayments and construction in progress | 5.9 | 2.2 | 5.5 |
| 154.3 | 160.2 | 161.5 | |
| Other non-current assets | |||
| Available-for-sale investments | 0.6 | 0.6 | 0.6 |
| Finance lease receivables | 1.8 | 2.9 | 2.1 |
| Deferred tax assets | 2.3 | 2.8 | 2.4 |
| Other receivables | 1.9 | 2.2 | 2.0 |
| 6.6 | 8.4 | 7.0 | |
| Total non-current assets | 301.0 | 296.5 | 303.4 |
| Current assets | |||
| Inventories | 23.5 | 23.7 | 23.6 |
| Trade and other receivables | 88.1 | 93.8 | 84.4 |
| Derivative receivables | 0.0 | 0.0 | 0.0 |
| Prepayments | 41.1 | 3.2 | 0.3 |
| Current available-for-sale financial assets | 0.0 | 0.0 | 5.0 |
| Cash and cash equivalents | 19.1 | 33.2 | 49.0 |
| Total current assets | 171.9 | 154.1 | 162.4 |
| Total assets | 472.9 | 450.5 | 465.8 |
EQUITY AND LIABILITIES