LASSILA & TIKANOJA PLC STOCK EXCHANGE RELEASE 6 FEBRUARY 2007 8.00 A.M. - Net sales for the fourth quarter EUR 115.4 million, growth 18.8%; operating profit EUR 10.3 million, growth 13.9%; earnings per share EUR 0.18 (EUR 0.16) - Full-year net sales EUR 436.0 million, growth 15.5%; operating profit EUR 50.2 million, growth 27.8 %; earnings per share EUR 0.90 (EUR 0.70) - In 2007, the growth in net sales is estimated to clearly exceed 20% and financial performance is estimated to improve. The financial statements release has been prepared in accordance with the accounting and valuation principles of IFRS. No audit report has been submitted. GROUP NET SALES AND FINANCIAL PERFORMANCE Fourth quarter net sales and financial performance Net sales for the final quarter stood at EUR 115.4 million (EUR 97.1 million). This represented an increase of 18.8%, 7.5 percentage points of which came from corporate acquisitions. The operating profit was EUR 10.3 million (EUR 9.1 million), which is 8.9% (9.3%) of net sales. Strong organic growth continued in all divisions thanks to successful new and additional sales. Exceptionally warm weather had a positive effect on the earnings of Environmental Services and Industrial Services. Net sales and financial performance for 2006 The full-year net sales increased by 15.5% and stood at EUR 436.0 million (EUR 377.4 million), 5.8 percentage points of this growth coming from corporate acquisitions. Earnings per share were EUR 0.90 (EUR 0.70). Organic growth was strong, which was attributable to good sales management, successful sales work and improved customer satisfaction. In the latter half of the year, the efficiency of product development was improved and several new service products were launched on the market. L&Ts market position strengthened. Sweden was introduced as a new operating country. Recycling plant investments were held back by delays in obtaining environmental permits. The emphasis for management in 2006 was on improving productivity and cost-based management. Industrial Services and Environmental Services were particularly successful in improving their efficiency, and the profitability of both divisions improved substantially. The Finnish operations of Property and Office Support Services achieved their targets, but the expansion of international operations caused an earnings burden that exceeded that planned. Centralisation of customer service improved cost-efficiency. Non-recurring sales gains amounting to almost EUR 2 million improved earnings. Financial summary 10-12 10-12 Change 1-12 1-12 Change /2006 /2005 % /2006 /2005 % Net sales, EUR million 115.4 97.1 18.8 436.0 377.4 15.5 Operating profit, EUR million 10.3 9.1 13.9 50.2 39.3 27.8 Operating margin, % 8.9 9.3 11.5 10.4 Profit before taxes, EUR million 10.0 9.0 11.1 48.5 37.5 29.4 Earnings per share, EUR 0.18 0.16 12.5 0.90 0.70 28.6 EVA, EUR million 4.6 3.4 35.3 28.6 18.3 56.3 NET SALES AND FINANCIAL PERFORMANCE BY DIVISION Environmental Services October to December The net sales of Environmental Services (waste management, recycling services, environmental products) in the fourth quarter amounted to EUR 55.5 million (EUR 47.3 million), an increase of 17.2%. The operating profit was EUR 7.4 million (EUR 5.9 million). Strong organic growth continued and production conditions were good. The volume of recycling services increased and production costs were successfully kept under control, which resulted in a substantial earnings improvement. The joint venture, Salvor Oy, was also able to increase its net sales and improve performance. Year 2006 Environmental Services net sales for the entire year amounted to EUR 207.3 million (EUR 180.7 million), an increase of 14.7%. The operating profit was EUR 32.5 million (EUR 24.0 million). Investments in improving productivity and recycling plants were continued. Together with strong organic growth, they resulted in a substantial improvement in profitability. The efficiency of recycling plants was improved, and the company was able to process its increasing production volumes at the planned costs. Measures to improve productivity will be continued by increasing training in economical driving, introducing a driving guidance and monitoring system based on vehicle computers and starting the phased introduction of a new production management system. A fairly large recycling plant was built in Turku, and Suomen Keräystuote Oy was acquired. An extension to Suomen Keräystuote Oys processing plant will be completed during the first quarter of 2007. Suomen Keräystuote is a wholesaler of recycled paper and board, as well as a recycled paper producer organisation. Appeals filed against environmental permits caused some delays in recycling plant investments. However, currently valid and pending permits will also enable the construction of new recycling plants in 2007. A few plants are currently under construction and several are being planned. International operations made good progress, and greater efficiency in production and price increases in Latvia and Russia brought a clear improvement to the financial performance. In the late summer, a new recycling plant began operating in Latvia. A decision has been made to build the first recycling plant in Russia, scheduled to begin operating at the beginning of 2008. The company also intends to expand its operations by other means in the northern part of the Moscow region. Environmental Products financial performance improved as a result of reorganisation and efficiency measures. Environmental Products established a dedicated sales organisation in Russia. The joint venture, Salvor Oy, increased its net sales substantially but clearly fell short of its earnings target. Its performance improved in the fourth quarter, but the full-year result showed a loss. Property and Office Support Services October to December The net sales of Property and Office Support Services (property maintenance and cleaning services) totalled EUR 44.6 million (EUR 36.5 million), an increase of 22.0%. The operating profit was EUR 1.2 million (EUR 2.4 million). The division met its targets in Finland. New sales and additional sales to contract customers continued strongly. The costs of cleaning operations abroad burdened earnings, while non-recurring costs were attributable to units outside Finland. New sales in Russia and Latvia have started according to plan. Mild weather did not improve performance much, because snow ploughing is mainly covered by advance agreements with fixed prices with subcontractors. There were no snow transports that would have provided for additional invoicing. Year 2006 The full-year net sales of Property and Office Support Services totalled EUR 168.4 million (EUR 142.9 million), an increase of 17.9%. Their operating profit was EUR 8.8 million (EUR 11.9 million). Price competition in Finland was intense during the first half of the year, but the situation normalised during the second half, and new sales were very successful. Lost contracts in the first half of the year were successfully replaced by additional sales to existing customers, and cleaning services within Finland exceeded their earnings target. The first outsourcing agreements for support services were made with forest industry customers. Employment pension costs regained typical levels after having been exceptionally low in 2005. Most of the net sales growth in cleaning services occurred abroad. However, investment in expanding business operations abroad had a detrimental effect on the divisions financial performance. Cleaning operations abroad ran at a loss. Earnings were burdened by the costs of initiating operations and certain other non-recurring items. Cleaning operations in Sweden were started through the acquisitions of Allied Service Partners AB (ASP) and All Clean & Consulting Entrepreneur i Sverige AB (Accent). At the beginning of 2007, L&T acquired the food industry hygiene services company, Skånsk Allservice AB, with its subsidiaries. Through these acquisitions, L&T achieved its targeted position in the Swedish market and is now the third largest commercial operator in the Swedish cleaning market. During 2007, the focus in Sweden will be on integrating acquisitions, seeking organic growth and improving financial performance. Lassila & Tikanoja now provides cleaning services in Sweden, Latvia, Russia and Norway. We reorganised our cleaning services in Moscow, reallocating their resources. New sales gained momentum in Moscow and Latvia during the latter half of the year. Net sales for property maintenance increased through organic growth and the financial performance improved. In a fairly demanding competitive situation, the product line outperformed market growth. It was able to improve cost control and sell additional services to contract customers. In particular, the maintenance of technical systems showed clear growth, and operations expanded to new locations. The division was renamed Property and Office Support Services. This new name better describes the expanded service offering. Property services refer to the maintenance, servicing and operation of buildings, equipment and rooms, while office support services help the users of premises focus on their core business. Office support services include reception, mailing, attendant, security and catering services, as well as the administration of premises. These extensive service packages are either provided by L&T itself, or by networking with the leading company in each sector. Industrial Services October to December The net sales of Industrial Services (hazardous waste management, industrial cleaning, damage repair services and wastewater services) in the fourth quarter totalled EUR 16.6 million (EUR 14.4 million), an increase of 15.3%. The operating profit was EUR 2.7 million (EUR 0.9 million). The net sales of all product lines increased, and all growth was organic. Favourable weather conditions increased demand. Demand for hazardous waste management increased and has remained at a healthy level since August. The net sales of industrial cleaning increased, even though this was the first year with no maintenance shutdowns in the fourth quarter. The largest proportional increase in net sales was seen in damage repair services. The earnings of Industrial Services improved substantially, mainly due to the improved performance of hazardous waste management. Industrial cleaning was able to adapt its costs to seasonal variations in demand. During the period, EUR 0.7 million was recognised in other income due to a change in the fair value of oil derivatives purchased by L&T Recoil in October. Changes in the fair value of oil derivatives have a quarterly earnings effect. Year 2006 Industrial Services net sales for the entire year amounted to EUR 64.4 million (EUR 57.6 million), an increase of 11.9%. The operating profit was EUR 9.6 million (EUR 4.7 million). All product lines were able to increase their net sales, with damage repair services accounting for the greatest improvement. The divisions growth was completely organic and its market position strengthened. The divisions financial performance improved clearly, due to increased net sales and improved productivity. An increased volume was managed with lower fixed costs. All product lines clearly improved their performance. The most significant part of the performance improvement was attributable to a reorganisation programme carried out in industrial cleaning in 2005. Within hazardous waste management, L&T managed to raise the rate of waste recovery, which further reduced the expensive delivery of hazardous waste for destruction by a third party. The industrial cleaning market established itself and demand increased after a very difficult year in 2005. There were many fires and other accidents in 2006 that increased the net sales of damage repair services. Demand for wastewater services remained at an equally strong level for the entire year. In September, L&T and key personnel from GT Trading Oy established the joint venture, L&T Recoil Oy, which will build a waste oil re-refinery in Hamina. L&Ts share of ownership is 50%. The plant will be completed in early 2008 and the total value of the investment exceeds EUR 20 million. This plant is a step forward in the hazardous waste processing chain in accordance with the companys strategy. It will also present new opportunities for growth and internationalisation. FINANCING Interest-bearing liabilities amounted to EUR 6.4 million less than a year earlier. Net interest-bearing liabilities, totalling EUR 52.5 million, decreased by EUR 24.0 million. The exceptionally high amount of liquid assets at the end of the year was attributable to very positive cash flow from operations during the fourth quarter, as well as an arrangement carried out just before the year end through which L&T sold a major part of its lightweight vehicle fleet to a leasing company. In October-December, interest expenses exceeded those in the comparison period by EUR 0.1 million. In January-December they were on the same level as in the previous year. EUR 0.1 million (EUR 0.4 million) resulting from changes in the fair values of interest rate swaps was recognised in the income statement under finance income in October-December. The total income for the whole year amounted to EUR 0.5 million (EUR 0.8 million). Net finance costs for the whole year decreased by 5.7%, being 0.4% (0.5%) of net sales and 3.4% (4.6%) of operating profit. A total of EUR 0.4 million arising from the changes in the fair value of an interest rate swap to which hedge accounting under IAS 39 is applied, was recognised in equity in 2006. The equity ratio was 50.4% (49.5%). The gearing rate was 29.7 (49.3). Cash flow from operating activities amounted to EUR 69.9 million (EUR 48.9 million). EUR 1.7 million were released from the working capital (EUR 3.3 million were tied up). CAPITAL EXPENDITURE Capital expenditure totalled EUR 47.2 million (EUR 60.9 million). Approximately EUR 13 million were spent on nine corporate acquisitions. The combined annual net sales of the acquired companies totalled EUR 28.8 million. In October a Swedish company All Clean & Consulting Entrepreneur i Sverige AB (Accent) providing cleaning and office support services was acquired. The net sales of Accent amounted to about EUR 9.2 million in 2005, and it employs 180 persons. The property maintenance and cleaning operations of Sisä-Suomen Kiinteistöapu Oy LKV were also acquired. The following acquisitions were made in the third quarter: A Latvian Property and Office Support Services company SIA Evus was acquired for Property and Office Support Services in August. The net sales for Evus amounted to 0.6 million euros in 2005, and it employs around 100 people. In September, the business operations of Kiimingin Kiinteistöpalvelu Oy, a minor property and office support services company, were acquired. The following acquisitions were made in the second quarter: In April majority of the shares of Suomen Keräystuote Oy was acquired, and the company, being previously an associate, became a group company. L&T holds presently 100 per cent of the shares. Suomen Keräystuote Oy is a marketing company of Finnish paper collection companies. It supplies collected recoverable paper and board to industry. The net sales for Suomen Keräystuote amounted to EUR 7 million in 2005, but the effect on the group net sales on annual level is only EUR 3.8 million due to intra-group net sales. In addition, the rental operations of WeeCee Finland Oy were acquired. The following acquisitions were made in the first quarter: Hämeenlinnan Puhtaanapito Oy, a waste management company, was acquired for Environmental Services. Its net sales totalled EUR 4.4 million in 2005 and it employed 36 people. Allied Service Partners AB (ASP), a Swedish company specialising in property maintenance services, was acquired for Property and Office Support Services. ASP operates in Stockholm and Gothenburg. The net sales of ASP were EUR 10.3 million in 2005, and it employs 390 people. The property maintenance operations of Kempeleen Kiinteistöhuolto Oy were also acquired. In addition to corporate acquisitions, machinery and equipment were replaced, production premises were expanded, and new information systems were built. Depreciation and amortisation amounted to EUR 28.2 million (EUR 24.8 million) in January-December. Capital expenditure by division was as follows: Environmental Services EUR 22.0 million (EUR 40.5 million), Property and Office Support Services EUR 19.5 million (EUR 11.5 million), and Industrial Services EUR 5.7 million (EUR 8.8 million). In December an agreement was signed on the acquisition of the majority (70%) of the shares of Biowatti Oy from the acting management of the company for Environmental Services. L&T also made a commitment to redeem the remaining thirty percent of the shares by the end of the year 2011. The acquisition price for the seventy percent portion was EUR 30.1 million. No interest-bearing liabilities were transferred in the acquisition. Biowatti is the leading Finnish bio energy supplier utilising renewable energy sources, operating in the procurement, processing, marketing and delivery of bio fuels. The main products are by-products of forest and wood processing industries and logging chips. The net sales of Biowatti for the year 2006 amounted to EUR 64.2 million. Bio fuel sales account for two thirds and industrial raw materials sales for one third of the net sales. The acquisition became effective on 1 February 2007. In the consolidated financial statements the whole acquisition price (100%) of Biowatti is recognised as acquisition cost. No minority interest is separated from the profit or equity, but the estimated acquisition price of the remaining 30 percent (EUR 6 million) is recognised as interest-bearing non-current liability. The final price of the 30 percent portion will be determined based on the future earnings of Biowatti. In early January 2007, Skånsk Allservice AB together with subsidiaries Hygienutveckling AB and Hygienutvickling A/S operating in Norway were acquired. The consolidated net sales of the group totalled about EUR 10 million in 2006, most of which came from hygiene services for the food industry. PERSONNEL In 2006, the average number of employees converted into full-time equivalents was 6,775 (5,918). At year end the total number of full-time and part-time employees was 8,328 people (7,512). Of them 1,822 people (1,222) worked outside Finland. PROPOSAL FOR THE DISTRIBUTION OF PROFIT According to the financial statements, Lassila & Tikanoja plcs distributable assets amount to EUR 40,900,168.17, of which EUR 24,648,860.77 constitutes profit for the financial period. There were no substantial changes in the financial standing of the company after the end of the financial 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 General Meeting of Shareholders that distributable assets be used as follows: A dividend of EUR 0.55 per share will be paid on each of the 38,549,719 shares, totalling EUR 21,202,345.45 To be retained and carried forward EUR 19,697,822.72 Total EUR 40,900,168.17 In accordance with the resolution of the Board of Directors, the record date is 29 March 2007. The Board of Directors proposes to the Annual General Meeting that the dividend be paid on 5 April 2007. Earnings per share amounted to EUR 0.90. The proposed dividend is 61.1% of the earnings per share. SHARES AND SHARE CAPITAL Traded volume and price The volume of trading in Lassila & Tikanoja plc shares on the Helsinki Stock Exchange during the year 2006 was 12,807,684, which is 33.3% (40.0) of the average number of shares. The value of trading was EUR 217.6 million. The trading price varied between EUR 14.75 and EUR 22.46. The closing price was EUR 21.66. The market capitalisation went up by 45.9% and was EUR 834.5 million (EUR 571.8 million) at year end. Share capital At the beginning of the year the companys registered share capital amounted to EUR 19,188,887. During the year 2006, a total of 150,400 shares were subscribed for pursuant to the 2002B and 2002C options rights. After these subscriptions, the companys share capital amounts to EUR 19,264,087 and the number of the shares is 38,528,174. On 5 February 2007, the Board approved the subscriptions of 21,545 new shares made pursuant to the 2002C share options. As a result of these subscriptions, the companys registered share capital will increase by EUR 10.772,50 to EUR 19,274,859.50 and the number of the shares will increase to 38,549,719 shares after the increase has been entered in the Trade Register. Dividend for the financial year 2005 The Annual General Meeting held on 23 March 2006 resolved on a dividend of EUR 0.40 per share for the financial year 2005. The dividend, totalling EUR 15.4 million, was paid on 4 April 2006. Option plans 2002 and 2005 The subscription periods for 2002A and 2002B share options have ended. The subscription period for the 2002B-options ended on 30 October 2006, and 255,800 shares were subscribed for. The rest 200 outstanding options and the 4,000 options held by L&T Advance Oy expired. 280,000 2002C options have been issued. 274,000 have been granted to key persons of the company. Until 29 January 2007, a total of 39,245 shares have been subscribed for pursuant to the 2002C options. Pursuant to the remaining outstanding 2002C options a maximum of 234,755 shares can be subscribed for, which is 0.6% of the current number of shares. The subscription period ends on 30 October 2007. The share subscription price is EUR 11.46. The 2002C options have been listed on the Helsinki Stock Exchange since 2 May 2006. In 2005, 600,000 share options were issued, each entitling its holder to subscribe for one share of Lassila & Tikanoja plc. Presently, 26 key persons hold 165,000 2005A options and 35 key persons hold 195,000 2005B options. L&T Advance Oy, a wholly-owned subsidiary of Lassila & Tikanoja plc, holds 8,000 2005A options, 7,000 2005B options and 230,000 2005C options. The share subscription price for the 2005A options is EUR 14.22, and for 2005B options EUR 16.98.The options issued under the share option plan 2005 entitle their holders to subscribe for a maximum of 1.6% of the current number of shares. Notifications on major holdings On 10 April 2006, Tapiola Group reported that its holding in the share capital and votes of Lassila & Tikanoja plc had decreased to 4.6%. Authorisation for the Board of Directors The Board of Directors is not authorised to effect any share issues or to launch a convertible bond or a bond with warrants. Neither is the Board authorised to decide on the repurchase nor disposal of the companys own shares. BOARD OF DIRECTORS AND AUDITORS The Annual General Meeting of Shareholders held on 23 March 2006 confirmed five as the number of the members of the Board of Directors. The following Board members were re-elected to the Board until the end of the following AGM: Heikki Hakala, Lasse Kurkilahti, Juhani Lassila, Juhani Maijala and Soili Suonoja. PricewaterhouseCoopers Oy, Authorised Public Accountants, were elected auditors. Principal Auditor is Heikki Lassila, Authorised Public Accountant. In a meeting held after the Annual General Meeting the Board of Directors re- elected Juhani Maijala as Chairman of the Board and Heikki Hakala as Vice Chairman. SUMMARY OF STOCK EXCHANGE RELEASES PURSUANT TO ARTICLE 7, CHAPTER 2 OF THE SECURITIES MARKETS ACT On 23 March 2006, the Board of Directors resolved to apply for listing of 2002C share option rights on the main list of the Helsinki Stock Exchange starting from 2 May 2006. EVENTS AFTER THE BALANCE SHEET DATE An agreement to acquire a majority holding of Biowatti Oy was signed in December. The acquisition was subject to approval of the competition authority. The approval was given on 18 January 2007, and the acquisition became effective on 1 February 2007. NEAR-TERM UNCERTAINTIES The most significant uncertainty factor in the near term is that the performance of foreign units within Property and Office Support Services may not improve on the planned schedule. The slowness of environmental and other permit procedures may cause delays in the implementation of planned recycling plant investments in Finland as well as Russia. Changes in the fair value of oil derivatives related to L&T Recoils operations depend on the development of world market prices for oil. This may have a substantial effect on the earnings of Industrial Services. PROSPECTS FOR THE YEAR 2007 The prospects in Lassila & Tikanojas markets are good, and the companys market position has strengthened. Among other things, the demand for Environmental Services in Finland will be increased by the fact that many landfills will have to be closed down towards the end of the year due to new EU regulations. The forest energy market should develop favourably, due to a continuing trend towards increasing the use of renewable energy sources. The market outlook for Property and Office Support Services in Finland is better than last year, and the competitive situation has normalised. The market outlook for Industrial Services is quite positive. Strong demand seems to be continuing, and the companys position in the market has clearly improved. Clear growth will also be seen in markets outside Finland. Successful new sales in the latter half of 2006 provided the preconditions for continuing strong organic growth. Corporate acquisitions, Biowatti in particular, will strongly increase net sales. Biowattis operations require very little capital and do not call for an operating profit level as high as that of other operations within Environmental Services. This will decrease the operating profit of Environmental Services in comparison with net sales. During the year, two or three new recycling plants and terminals will be built, including one in Russia. Investments will increase due to completed corporate acquisitions and other investment decisions. The management emphasis in 2006 was on improving productivity and cost-based management. This concept will be further elaborated, particularly in Property and Office Support Services. We estimate that the growth in net sales will clearly exceed 20% and financial performance will improve. INCOME STATEMENT EUR 1000 10-12/2006 10-12/2005 1-12/2006 1-12/2005 Net sales 115 362 97 097 436 004 377 448 Cost of goods sold -100 226 -83 633 -367 968 -320 536 Gross profit 15 136 13 464 68 036 56 912 Selling and marketing -3 739 -2 988 -12 844 -11 508 costs Administrative expenses -2 445 -1 614 -8 660 -7 304 Other operating income 1 360 192 3 653 1 154 and expenses Operating profit 10 312 9 054 50 185 39 254 Finance income 462 577 1 526 1 431 Finance costs -828 -697 -3 225 -3 232 Share of profit of 18 27 18 27 associates Profit before income tax 9 964 8 961 48 504 37 480 Income tax expense -2 956 -2 585 -13 249 -10 250 Profit for the period 7 008 6 376 35 255 27 230 Attributable to: Equity holders of the 6 858 6 360 34 613 26 822 parent Minority interest 150 16 642 408 Earnings per share for profit attributable to the equity holders of the parent: Earnings per share, EUR 0.18 0.16 0.90 0.70 Earnings per share, EUR 0.18 0.16 0.70 -diluted 0.90 BALANCE SHEET EUR 1000 12/2006 12/2005 ASSETS Non-current assets Goodwill 106 611 99 120 Intangible assets from acquisitions 9 893 9 859 Other intangible assets 7 903 5 893 Property, plant and equipment 134 038 135 404 Other non-current assets 6 785 6 676 Total non-current assets 265 230 256 952 Current assets Inventories 4 315 4 744 Trade and other receivables 58 249 45 898 Cash and cash equivalents 24 790 7 252 Total current assets 87 354 57 894 TOTAL ASSETS 352 584 314 846 EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital 19 264 19 189 Share premium reserve 47 666 46 606 Revaluation and other reserves 326 -179 Retained earnings 72 291 60 428 Profit for the period 34 613 26 822 Total equity attributable to equity 174 160 152 866 holders of the parent Minority interest 2 709 2 166 Total equity 176 869 155 032 Non-current liabilities Deferred income tax liabilities 22 350 15 768 Pension obligations 352 176 Provisions 936 684 Interest-bearing liabilities 59 031 59 629 Other non-current liabilities 431 224 Total non-current liabilities 83 100 76 481 Current liabilities Interest-bearing liabilities 18 231 24 077 Trade and other non-interest-bearing 74 112 58 956 payables Provisions 272 300 Total current liabilities 92 615 83 333 TOTAL EQUITY AND LIABILITIES 352 584 314 846 CASH FLOW STATEMENT EUR 1000 12/2006 12/2005 Cash generated from operations before 62 490 change in working capital 75 911 Change in working capital 1 746 -3 214 Net finance cost -1 987 -2 880 Taxes -5 776 -7 455 Net cash flows from operating activities 69 894 48 941 Investments in group companies -10 658 -15 801 Other investments -34 885 -40 175 Proceeds from sales of property, plant and 14 089 1 775 equipment Net cash flows from investing activities -31 454 -54 201 Proceeds from share subscriptions 1 018 1 795 Dividends paid -15 339 -9 525 Change in borrowings -6 566 475 Net cash flows from financing activities -20 887 -7 255 Net change in liquid assets 17 553 -12 515 Liquid assets at beginning of period 7 252 19 759 Changes in exchange rates and fair values -15 8 Liquid assets in balance sheet 24 790 7 252 STATEMENT OF CHANGES IN EQUITY EUR 1000 Share Share Re- Retained Equity Mi-nor- Total capital premium valua- earnings attrib. ity equity reserve Trans- tion re- to intere lation serves equity st differ- holders ence of the reserve parent Equity at 19 068 44 932 13 69 515 133 239 1 550 134 789 1.1.2005 -289 Current -12 -12 -12 available-for- sale investments, change in fair value Currency 109 109 translation 109 differences Items -12 97 97 recognised 109 directly in equity Profit for 26 822 26 822 408 27 230 the period Total -12 26 822 26 919 408 27 327 recognised income and 109 expenses Share option remuneration Sub- 121 1 674 1 795 1 795 scriptions pursuant to 2002 options Remuneration 448 448 448 expense of share options Dividends -9 535 -9 535 -9 535 paid Investment by 208 208 a minority holder Equity at 19 189 46 606 1 87 250 152 866 2 166 155 032 31.12.2005 -180 Equity at 19 189 46 606 1 87 250 152 866 2 166 155 032 1.1.2006 -180 Hedging fund, 384 384 384 change in fair value Current 10 10 10 available-for- sale investments, change in fair value Currency 111 -1 110 translation 111 differences Items 394 505 -1 504 recognised 111 directly in equity Profit for 34 613 34 613 642 35 255 the period Total 394 34 613 35 118 641 35 759 recognised income and 111 expenses Share option remuneration Sub- 75 1 060 1 135 1 135 scriptions pursuant to 2002 options Remuneration 396 396 396 expense of share options Dividends -15 355 -15 355 -164 -15 519 paid Investment by 66 66 a minority holder Equity at 19 264 47 666 395 106 904 174 160 2 709 176 869 31.12.2006 -69 KEY FIGURES 10-12 10-12 2006 2005 /2006 /2005 Earnings per share, EUR 0.18 0.16 0.90 0.70 Earnings per share, EUR - diluted 0.18 0.17 0.90 0.70 Cash flows from operating 0.72 0.47 1.82 1.28 activities per share, EUR EVA, EUR million* 4.6 3.4 28.6 18.3 Capital expenditure, EUR 1000 15 074 11 259 47 162 60 852 Depreciation and amortisation, EUR 7 519 6 598 28 155 24 774 1000 Equity per share, EUR 4.52 3.98 Dividend per share, EUR 0.55** 0.40 Dividend/earnings, % 61.1** 57.0 Dividend yield, % 2.5** 2.7 P/E ratio 24.1 21.2 Return on equity, ROE, % 21.2 18.8 Return on invested capital, ROI, % 21.0 17.9 Equity ratio, % 50.4 49.5 Gearing, % 29.7 49.3 Net interest-bearing liabilities 52 471 76 455 Average number of employees in 6 775 5 918 full-time equivalents Adjusted number of shares, 1000 shares average during the period 38 445 38 193 at end of period 38 528 38 378 average during period, diluted 38 601 38 421 *EVA = operating profit cost calculated on invested capital (average of four quarters). WACC 2006: 8.75%; 2005: 9.0% **Proposal by the Board of Directors SEGMENT REPORTING NET SALES EUR 1000 10-12/ 10-12/ Change 1-12/ 1-12/ Change 2006 2005 % 2006 2005 % Environmental Services 55 463 47 333 17.2 207 252 180 679 14.7 Property and Office Support Services 44 584 36 545 22.0 168 403 142 890 17.9 Industrial Services 16 554 14 362 15.3 64 416 57 584 11.9 Group admin. and other 3 92 118 366 Inter-division net -1 242 -1 235 -4 185 -4 071 sales Total 115 362 97 097 18.8 436 004 377 448 15.5 OPERATING PROFIT EUR 1000 10-12/ % 10-12/ 1-12/ 1-12/ % 2006 2005 % 2006 % 2005 Environmental 5 862 Services 7 390 13.3 12.4 32 498 15.7 23 986 13.3 Property and Office Support Services 1 154 2.6 2 393 6.5 8 758 5.2 11 947 8.4 Industrial Services 2 739 16.5 909 6.3 9 601 14.9 4 746 8.2 Group admin. and other -971 -110 -672 -1 425 Lassila & Tikanoja 10 312 8.9 9 054 9.3 50 185 11.5 39 254 10.4 OTHER SEGMENT REPORTING EUR 1000 10-12 10-12 1-12 1-12/ /2006 /2005 /2006 2005 Assets Environmental Services 199 872 189 844 Property and Office 59 394 50 330 Support Services Industrial Services 63 508 59 997 Group admin. and other 2 804 5 211 Non-allocated assets 27 006 9 464 Lassila & Tikanoja 352 584 314 846 Liabilities Environmental Services 33 388 29 947 Property and Office 29 708 20 910 Support Services Industrial Services 10 367 8 787 Group admin. and other 1 084 269 Non-allocated liabilities 101 168 99 901 Lassila & Tikanoja 175 715 159 814 Capital expenditure Environmental Services 5 436 7 249 21 940 40 542 Property and Office 7 613 2 622 19 472 11 471 Support Services Industrial Services 2 025 1 398 5 696 8 785 Group admin. and other -10 54 54 Lassila & Tikanoja 15 074 11 259 47 162 60 852 Depreciation and amortisation Environmental Services 4 240 3 595 16 002 13 567 Property and Office 2 045 1 548 7 274 5 674 Support Services Industrial Services 1 225 1 427 4 796 5 422 Group admin. and other 9 28 83 111 Lassila & Tikanoja 7 519 6 598 28 155 24 774 INCOME STATEMENT BY QUARTER EUR 1000 10-12 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ /2006 2006 2006 2006 2005 2005 2005 2005 Net sales Environmental 55 463 52 973 51 692 47 124 47 333 46 588 47 234 39 524 Services Property and 41 463 41 243 41 113 36 545 35 645 35 955 34 745 Office Support 44 584 Services Industrial 16 554 18 223 16 513 13 126 14 362 15 838 15 746 11 638 Services Group admin. and 3 19 26 70 92 91 92 91 other Inter-division -1 242 -1 030 -1 044 -869 -1 235 -1 064 -966 -806 net sales Total 115 362 111 648 108 430 100 564 97 097 97 098 98 061 85 192 Operating profit Environmental 7 390 9 986 7 828 7 294 5 862 7 017 6 390 4 717 Services Property and 4 833 1 499 1 272 2 393 4 462 2 868 2 224 Office Support 1 154 Services Industrial 2 739 3 800 2 277 785 909 2 260 1 820 -243 Services Group admin. and -971 1 233 -547 -388 -110 -439 -524 -352 other Total 10 312 19 852 11 057 8 963 9 054 13 300 10 554 6 346 Operating margin Environmental 13,3 18,9 15,1 15,5 12,4 15,1 13,5 11,9 Services Property and 11,7 3,6 3,1 6,5 12,5 8,0 6,4 Office Support 2,6 Services Industrial 16,5 20,9 13,8 6,0 6,3 14,3 11,6 -2,1 Services Group 8,9 17,8 10,2 8,9 9,3 13,7 10,8 7,4 Finance costs, -366 -740 -391 -201 -120 -263 -1 010 -408 net Share of profits 27 of associates 18 Profit before 9 964 19 112 10 666 8 762 8 961 13 037 9 544 5 938 tax CONTINGENT LIABILITIES EUR 1000 12/2006 12/2005 Securities given for own commitments Real estate mortgages 10 484 105 Corporate mortgages 12 778 500 Other securities 197 188 Bank guarantees required for environmental permits 2 026 1 969 Other securities are security deposits. The Group has given no pledges, mortgages or guarantees on behalf of outsiders. Operating lease liabilities EUR 1000 12/2006 12/2005 Maturity not later than one year 6 107 2 809 Maturity later than one year and not 12 742 7 016 later than five years Maturity later than five years 3 614 4 357 Total 22 463 14 182 Derivative financial instruments EUR 1000 12/2006 12/2005 Nominal values of interest rate swaps* Maturity not later than one year 13 500 6 000 Maturity later than one year and not 44 000 later than five years 30 500 Total 44 000 50 000 Fair value of interest rate swaps 726 237 * Hedge accounting under IAS 39 has not been applied to these interest rate swaps. Changes in fair values have been recognised in finance income and costs. Nominal value of interest rate swap** Maturity not later than one year 1 429 Maturity later than one year and not 5 714 later than five years Maturity later than five years 7 857 Total 15 000 Fair value of interest rate swap 519 ** The interest rate swap is used to hedge cash flow related to a floating rate loan, and hedge accounting under IAS 39 has been applied to it. The hedge has been effective, and the total change in the fair value has been recognised in the hedging fund under equity. 12/2006 12/2006 Quantity Fair 1000 bbl value EUR 1000 Maturity of raw oil put options held for trading Later than one year and not later 453 2 288 than five years Oil derivatives were entered into in order to hedge the base oil price risk associated with the re-refinery plant under construction for the joint venture L&T Recoil. Hedge accounting under IAS 39 has not been applied, but the changes in fair values have been recognised in other operating income and expenses. The fair values of all derivative contracts are based on market prices on the balance sheet date. The fair values of the oil options have been determined on the basis of a generally used measurement model. Helsinki 5 February 2007 LASSILA & TIKANOJA PLC Board of Directors Jari Sarjo President and CEO For further information, please contact Jari Sarjo, President and CEO, tel. +358 10 636 2810.
LASSILA & TIKANOJA PLC: FINANCIAL STATEMENTS RELEASE 1 JANUARY 31 DECEMBER
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