Lassila & Tikanoja plc
Stock exchange release
27 April 2017 at 8:00 a.m.
- Net sales for the first quarter were EUR 161.9 million (EUR 160.7 million)
- Operating profit was EUR 5.1 million (EUR 6.8 million)
- Earnings per share were EUR 0.11 (EUR 0.14)
- Full-year net sales and operating profit in 2017 are expected to remain at the 2016 level
CEO PEKKA OJANPÄÄ:
“Lassila & Tikanoja’s result for the first quarter was weaker than in the previous year. Environmental Services business developed well. Also Industrial Services grew and improved their profitability year-on-year. These were not sufficient to compensate for the weaker result of Facility Services and Renewable Energy Sources. The weaker result of Facility Services was due to the poor result of the renovation business. Also property maintenance result was less than in the comparison period. The profitability of the Renewable Energy Sources division was affected by the low demand for forest energy. In line with our strategy, our focus in 2017 remains 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 0.8% to EUR 161.9 million (EUR 160.7 million). Operating profit totalled EUR 5.1 million (EUR 6.8 million), representing 3.2% (4.2%) of net sales. Earnings per share were EUR 0.11 (EUR 0.14).
Net sales grew in Environmental Services and Industrial Services, but decreased year-on-year in Facility Services and Renewable Energy Sources.
Operating profit improved in Environmental Services and Industrial Services. The profitability of Renewable Energy Sources and Facility Services declined year-on-year.
Financial summary
|
1–3/ 2017 |
1–3/ 2016 |
Change |
1–12/ 2016 |
|
| Net sales, EUR million | 161.9 | 160.7 | 0.8% | 661.8 |
| Operating profit, EUR million | 5.1 | 6.8 | -24.5% | 50.5 |
| Operating margin, % | 3.2 | 4.2 | 7.6 | |
| Profit before tax, EUR million | 5.2 | 6.9 | -24.0% | 50.1 |
| Earnings per share, EUR | 0.11 | 0.14 | -24.0% | 1.13 |
| Cash flow from operating activities/share, EUR | 0.18 | -0.49 | 136.0% | 1.99 |
| EVA, EUR million | 0.1 | 1.8 | -95.2% | 30.7 |
NET SALES AND OPERATING PROFIT BY DIVISION
January–March
Environmental Services
The division’s net sales saw organic growth of 1.7% in the first quarter and amounted to EUR 62.9 million (EUR 61.8 million). Operating profit totalled EUR 5.9 million (EUR 5.4 million). The Environmental Services division’s operating profit was boosted by improvements in production efficiency and growth in net sales.
Industrial Services
The division’s net sales for the first quarter increased by 12.2% to EUR 17.9 million (EUR 15.9 million). Operating profit was EUR -0.2 million (EUR -0.3 million).
Net sales grew across all of the division’s service lines, particularly in environmental construction and hazardous waste management.
The operating loss was reduced by the improved profitability of hazardous waste management. The profitability of the process cleaning business was unchanged from the comparison period. Profitability declined in sewer maintenance and environmental construction.
Facility Services
The division’s net sales for the first quarter were down by 1.1% to EUR 71.4 million (EUR 72.2 million). Operating profit totalled EUR -0.3 million (EUR 1.2 million).
Net sales grew in renovation but declined in cleaning, property maintenance and the maintenance of technical systems.
The operating profit of the cleaning business grew year-on-year due to previously implemented efficiency improvement measures. The operating profit of the division’s other service lines declined. The decrease in profitability was mainly caused by the weak result of the renovation business. The result of the property maintenance business was weighed down by the deployment of a new ERP system in the Facility Services division.
Renewable Energy Sources
The first quarter net sales of Renewable Energy Sources (L&T Biowatti) decreased by 5.3% to EUR 12.1 million (EUR 12.8 million). Operating profit totalled EUR 0.3 million (EUR 0.7 million).
The year-on-year decline in the division’s net sales and operating profit was caused by the weak demand for forest energy and the low price of competing fuels.
FINANCING
Cash flow from operating activities amounted to EUR 6.8 million (-18.9). A total of EUR 4.4 million in working capital was committed (EUR 31.9 million committed). The negative cash flow from operating activities in the comparison period was due to the use of a different payment practice for employment pension contributions in 2016.
At the end of the period, interest-bearing liabilities amounted to EUR 109.7 million (EUR 115.6 million).
Net interest-bearing liabilities amounted to EUR 72.5 million (EUR 96.5 million), showing an increase of EUR 33.8 million from the beginning of the year and a decrease of EUR 24.0 million from the comparison period.
Net financial expenses in the first quarter amounted to EUR 0.1 million (EUR 0.1 million) Net financial expenses were 0.0% (0.0%) of net sales.
The average interest rate on long-term loans (with interest rate hedging) was 1.1% (1.5%). Loans totalling EUR 42.6 million will mature in 2017, including the short-term commercial papers currently in use.
The equity ratio was 42.3% (40.0%) and the gearing rate was 37.8 (52.4). Liquid assets at the end of the period amounted to EUR 37.2 million (EUR 19.1 million).
Of the EUR 100 million commercial paper programme, EUR 40 million (EUR 20.0 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 16 March 2017 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 2016. The dividend, totalling EUR 35.3 million, was paid to shareholders on 27 March 2017.
CAPITAL EXPENDITURE
Gross capital expenditure in the first quarter of 2017 totalled EUR 10.2 million (EUR 7.9 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 took place in late 2016 and early 2017.
PERSONNEL
In the first quarter, the average number of employees converted into full-time equivalents was 6,807 (6,891). At the end of the period, Lassila & Tikanoja had 7,959 (8,034) full-time and part-time employees. Of these, 7,028 (7,168) worked in Finland and 931 (866) in other countries.
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 1,651,281 shares, which is 4.3% (4.4%) of the average number of outstanding shares. The value of trading was EUR 31.6 million (EUR 27.5 million). The highest share price was EUR 20.89 and the lowest EUR 17.86. The closing price was EUR 18.39. At the end of the review period, the market capitalisation excluding the shares held by the company was EUR 706.1 million (EUR 613.7 million).
Own shares
At the end of the period, the company held 400,862 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 38,398,012. The average number of shares excluding the shares held by the company was 38,385,613.
Shareholders
At the end of the period, the company had 11,895 (10,413) shareholders. Nominee-registered holdings accounted for 17.1% (19.9%) of the total number of shares.
Authorisation for the Board of Directors
The Annual General Meeting held on 16 March 2017 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 share issue authorisation is effective for 18 months.
RESOLUTIONS BY THE ANNUAL GENERAL MEETING
The Annual General Meeting, which was held on 16 March 2017, adopted the financial statements and consolidated financial statements for 2016 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 2016. It was decided that the dividend be paid on 27 March 2017.
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 and Miikka Maijala were re-elected, and Laura Tarkka 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 16 March 2017.
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 21 April 2017, the company announced that, starting from the interim report for January–March 2017, it will report its results through an income statement categorised by expense type. The stock exchange release presented cumulative quarterly comparison data by expense type for 2016 in accordance with the new income statement scheme. Previously, the company has used an income statement categorised by operation type in its reporting. The change has no impact on the Group’s segment reporting. The presentation method was changed to correspond to the income statement scheme used in the management’s reporting.
EVENTS AFTER THE REVIEW PERIOD
The company’s management is not aware of any events of material importance after the review period that might have affected the preparation of the interim report.
NEAR-TERM RISKS AND UNCERTAINTIES
Changes in the economy may result in significant changes in the secondary raw material markets for Environmental Services and the demand for Facility Services and Industrial Services.
Fluctuations in the prices of fossil fuels may affect the demand of the recovered and renewable fuels produced by the company.
The deployment of the company’s new ERP system, which began last year, will continue in 2017 and 2018. The deployment of the new system may lead to temporary 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 2016 Annual Report, and in the Report of the Board of Directors and the consolidated financial statements.
OUTLOOK FOR THE YEAR 2017
Full-year net sales and operating profit in 2017 are expected to remain at the 2016 level.
CONDENSED FINANCIAL STATEMENTS 1 JANUARY – 31 MARCH 2017
CONSOLIDATED INCOME STATEMENT
| EUR million | 1–3/2017 | 1–3/2016 | 1–12/2016 |
| Net sales | 161.9 | 160.7 | 661.8 |
| Other operating income | 0.9 | 0.9 | 4.8 |
| Change of inventory | 0.8 | -0.1 | 1.1 |
| Materials and services | -54.1 | -50.3 | -206.3 |
| Employee benefit expenses | -70.6 | -71.6 | -280.8 |
| Other operating expenses | -24.0 | -22.9 | -91.4 |
| Depreciation and impairment | -9.9 | -9.9 | -38.8 |
| Operating profit | 5.1 | 6.8 | 50.5 |
| Financial income and expenses | 0.1 | 0.1 | -0.4 |
| Profit before tax | 5.2 | 6.9 | 50.1 |
| Income taxes | -1.1 | -1.4 | -6.7 |
| Profit for the period | 4.1 | 5.5 | 43.4 |
| Attributable to: | |||
| Equity holders of the company | 4.1 | 5.5 | 43.4 |
| Non-controlling interest | 0.0 | 0.0 | 0.0 |
| Earnings per share attributable to equity holders of the parent company: | |||
| Earnings per share, EUR | 0.11 | 0.14 | 1.13 |
| Diluted earnings per share, EUR | 0.11 | 0.14 | 1.13 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR million | 1–3/2017 | 1–3/2016 | 1–12/2016 |
| Profit for the period | 4.1 | 5.5 | 43.4 |
| Items not to be recognised through profit or loss | |||
| Items arising from re-measurement of defined benefit plans | 0.0 | 0.0 | 0.0 |
| Items not to be recognised through profit or loss, total | 0.0 | 0.0 | 0.0 |
| Items potentially to be recognised through profit or loss | |||
| Hedging reserve, change in fair value | -0.1 | 0.0 | 0.4 |
| Currency translation differences | 0.1 | 0.0 | -0.1 |
| Currency translation differences, non-controlling interest | 0.0 | 0.0 | 0.0 |
| Items potentially to be recognised through profit or loss, total | 0.1 | 0.1 | 0.3 |
| Total comprehensive income, after tax | 4.2 | 5.5 | 43.7 |
| Attributable to: | |||
| Equity holders of the company | 4.2 | 5.5 | 43.7 |
| Non-controlling interest | 0.0 | 0.0 | 0.0 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR million | 3/2017 | 3/2016 | 12/2016 |
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | |||
| Goodwill | 117.2 | 116.6 | 116.5 |
| Customer contracts arising from acquisitions | 5.4 | 5.8 | 5.2 |
| Agreements on prohibition of competition | 0.1 | 0.2 | 0.1 |
| Other intangible assets arising from business acquisitions | 0.6 | 0.6 | 0.6 |
| Other intangible assets | 21.4 | 16.9 | 20.8 |
| 144.7 | 140.0 | 143.2 | |
| Property, plant and equipment | |||
| Land | 5.3 | 5.0 | 5.3 |
| Buildings and constructions | 39.4 | 39.6 | 40.7 |
| Machinery and equipment | 103.1 | 103.7 | 104.8 |
| Other | 0.1 | 0.1 | 0.1 |
| Prepayments and construction in progress | 6.7 | 5.9 | 5.3 |
| 154.7 | 154.3 | 156.1 | |
| Other non-current assets | |||
| Available-for-sale investments | 0.6 | 0.6 | 0.6 |
| Finance lease receivables | 0.9 | 1.8 | 1.2 |
| Deferred tax assets | 5.5 | 2.3 | 5.5 |
| Other receivables | 2.5 | 1.9 | 1.7 |
| 9.4 | 6.6 | 9.0 | |
| Total non-current assets | 308.7 | 301.0 | 308.3 |
| Current assets | |||
| Inventories | 25.8 | 23.5 | 24.9 |
| Trade and other receivables | 90.9 | 88.1 | 90.5 |
| Derivative receivables | 0.1 | 0.0 | 0.3 |
| Prepayments | 3.4 | 41.1 | 0.6 |
| Current available-for-sale financial assets | 0.0 | 0.0 | 0.0 |
| Cash and cash equivalents | 37.2 | 19.1 | 28.2 |
| Total current assets | 157.4 | 171.9 | 144.5 |
| Total assets | 466.1 | 472.9 | 452.8 |
EQUITY AND LIABILITIES