FINNLINES Plc Stock Exchange Release 14 February, 2007
FINANCIAL STATEMENT BULLETIN 2006
Overview
During the first half of the reporting year, the result was burdened by
increases in expenses, especially caused by the rise of fuel oil price
and partly incorrectly estimated fleet. The company cut roro capacity on
some lines and reorganized the operations. Due to the late delivery of
the first two newbuildings, Finnlines practically lost the summer season
in the passenger traffic.
Finnlines decided to concentrate on its core businesses, the roro/ropax
liner shipping and port operations and sold its container feeder
subsidiary Team Lines in the summer.
Due to the positive economic development in Finnlines' main market area
and the company's competitive new fleet, the transported volumes started
to increase more than expected towards the end of the year. The positive
volume growth has continued during the first weeks of 2007.
Significant events during the reporting period
Finnlines Plcs Annual General Meeting, held on 10 April 2006, approved
the financial statements and discharged the Companys Board of Directors
and CEO from liability for the financial year 2005. The Meeting decided
to pay a dividend of EUR 0.30 per share, i.e. a total of EUR 12.2
million. The dividend payment date was 25 April 2006.
Jukka Laaksovirta, Chief Operating Officer of Finnlines Plc, resigned
from his duty in March.
At the end of June, the ownership of Grimaldi Group Naples increased to
30.50% of the voting rights and share capital in Finnlines Plc.
Two ropax vessels of the series of five newbuildings were delivered to
Finnlines by Fincantieri at the end of July and in early August. The
vessels, MS Finnstar and MS Finnmaid, are plying under the Finnish flag
between Helsinki, Finland and Travemünde, Germany since mid-August.
In October 2006, Grimaldi Group's ownership increased to 46.2% of all
shares in Finnlines and Grimaldi made a voluntary public tender offer
for all Finnlines shares. Grimaldi paid a cash consideration of EUR
15.95 for each share in Finnlines, which was considered as too low
by the Board of Directors of Finnlines Plc. The tender offer period
ended on 1 December 2006 and Grimaldi was offered 85,503 shares, after
which Grimaldi Group's ownership in Finnlines increased to 46.4%.
On 29 December Grimaldi informed that it had acquired 1,500,000
Finnlines shares and that their ownership was 50.1% of Finnlines.
As Grimaldi now had more than 50% of all Finnlines shares, they
had to make a mandatory tender offer for all shares at a price of
EUR 17.00. Having bought shares at a higher price than was paid in the
voluntary tender offer in December, Grimaldi had to pay
EUR 1.05 to all the shareholders who had offered their shares
in the voluntary tender offer which ended early December.
This compensation was paid at the end of January.
Events after the reporting period
In January 2007, Grimaldi Compagnia di Navigazione S.p.A. made
an unconditional mandatory tender offer for all Finnlines shares
at a cash consideration of EUR 17.00 per share. The offer period
started on 22 January and will, according to Grimaldi's announcement,
end on 16 February 2007. The Board of Directors of Finnlines evaluated
the mandatory tender offer and its conditions based on Grimaldis tender
offer document published on 22 January 2007. The Board of Directors of
Finnlines considered the Offer price to be too low taking into account
the companys new competitive capacity and strong position in the Baltic
Seas rapidly growing market area,
but reminded that shareholders should independently decide
for their part on the acceptance of the mandatory tender offer while
taking into account all information presented in the tender offer
document and the opinion of the Board of Directors published on 26
January 2007. The Board of Directors drew the attention of Finnlines
shareholders, in particular, to the fact that Grimaldi, at the time of
the Board's announcement, held already 50.1% of the votes in Finnlines
and was consequently in a position to (i) nominate a new Board of
Directors to the company and (ii) resolve on the distributable amount of
dividend at the companys General Meeting of Shareholders, among other
things. The Board of Directors believed that the composition of the
Board of Directors and the top management of the company will change
significantly. The Board of Directors has no information about the
strategy or dividend policy of the new Board of Directors to be elected
in the Annual General Meeting of Shareholders.
The attention of the shareholders was also drawn to the fact that
Grimaldi will not have an obligation to make a mandatory tender offer
regarding the Finnlines shares in the future. There may be reduced
trading in the Finnlines shares and the price formation of the shares on
the stock exchange may be less certain than currently.
The members of the Board of Directors, Emanuele Grimaldi, Jukka Härmälä
and Timo Jouhki did not participate in the handling of the mandatory
tender offer in the Board of Directors or the issuing of the opinion.
Mandatum & Co. Ltd has been acting as the financial adviser for the
Board of Directors of Finnlines. The legal counsel for the Board of
Directors of Finnlines has been Hannes Snellman Attorneys at Law Ltd.
The Board of Directors also published Finnlines' prelimary 2006 result
on 26 January 2007.
The third newbuilding of the series of five was delivered to
Finnlines in Ancona, Italy at the beginning of February.
The vessel was registerd to the Finnish Ship Register under the name
Finnlady and she will start plying between Helsinki and Travemünde
on 22 February 2007.
The result for the fiscal year 2006 does not include any compensations
relating to the newbuildings and their delivery. Finnlines estimates
these compensations, which are to be received by the company, to be
substantial. However, the negotiations are continuing, as two of the
vessels are still under construction.
Reporting
Finnlines Plc transferred to IFRS reporting starting on January 1 2005.
The 2006 financial statements are prepared according to the same
accounting principles as the financial statements of 2005.
Financial performance
The Finnlines Group's continuing operations recorded revenue totalling
EUR 632.7 (584.1 in 2005) million during the reporting period. This is
equivalent to an 8.3% growth. Continuing operations of the Shipping and
Sea Transport Services generated revenue amounting to EUR 539.0 (505.5)
million and Port Operations EUR 123.1 (105.5) million. Other income from
operations amounted to EUR 2.1 (3.5) million. Operating profit of the
continuing operations was EUR 58.2 (42.0) million.
Continuing operations are presented without Team Lines figures both in
2006 and in 2005 and the result of Team Lines is presented separately as
discontinuing operations, EUR 18.7 million. This item consists of Team
Lines result for 8 months, EUR 0.6 million, and the profit on the sale
of Team Lines, EUR 18.1 million.
Financial income was EUR 10.8 (5.9) million and financial expenses
totalled EUR 21.6 (-11.9) million. Profit before taxes from the
continuing operations was EUR 47.7 (36.3) million. Return on equity
(ROE) was 14.1 (7.2) % and return on investment (ROI) was 9.9 (6.0) %.
Investments and financing
Investments were EUR 238.8 (73.0) million. Main part of this amount
consists of the payments for the two newbuildings, which were delivered
late July and early August. Interest-bearing net debt amounted to EUR
441.4 (313.5) million. The equity ratio calculated from the balance
sheet was 39.7 (41.7) %. Gearing was 104.2 (82.8) %.
MS Finntrader is at Remontowa shipyard in Poland in order to be
converted. It will start operating in NordöLink traffic in February. Her
sister vessel MS Finnpartner will go to the shipyard in February-March
2007 and will start plying in NordöLink traffic in August 2007. The
conversion of the above mentioned Hansa vessels will make them drive-
through vessels with an increased passenger capacity.
MS Finnclipper, a vessel in FinnLink's traffic, went to the shipyard at
the end of December 2006 and will be back in service in March 2007. The
cargo capacity of MS Finnclipper will be added by 500 lane metres and
after the conversion it will have a capacity of 2900 lane metres. These
conversions caused approx. EUR 10 million cash payments in 2006.
The third newbuilding will start plying between Helsinki and
Travemünde at the end of February. The fourth vessel is estimated to be
delivered in March 2007 and the last of the series of five vessels in
June 2007.
Corporate structural changes
In November 2005, Finnlinessubsidiary Finnsteve acquired 100% of shares
in TBE System Oy Ltd. Through the acquisition, the companys stevedoring
operations in Kotka and some 30 permanent employees were transferred to
Finnsteve as of 1 January 2006.
In July, Finnlines sold the German container feeder operator Team Lines
GmbH & Co. KG together with its subsidiaries in Finland, Sweden and
Norway for EUR 40 million (a debt-free price) to the Belgian container
shipping company Delphis NV. The net sales of Team Lines Group were EUR
187 million in 2005. Competition authorities gave their approval to the
deal and it was closed early September 2006. The net profit on the deal,
EUR 18.1 million, is booked under the discontinued operations. Team
Lines business is handled as discontinued operation in this report.
Prior periods have been adjusted accordingly.
Permanent establishment of Finnlines Plc in Poland was changed to
a limited liability company at the end of 2006.
From 1 January 2007, all Finnlines' Swedish subsidiaries started to use
Euro as their functional and bookkeeping currency. This is a natural
change, because substantial amount of revenues and costs of these
companies are recognised in Euros.
Personnel
The Group continuing operations employed an average of 2.196 (2.090)
people during the period, consisting of 1.451 (1.367) persons on shore
and 745 (723) at sea.
Board of directors and auditors
The Annual General Meeting decided that the companys Board of Directors
has six members. Peter Fagernäs, Jukka Härmälä, Timo Jouhki, Antti
Lagerroos and Pertti Laine were re-elected and as a new member Mr.
Emanuele Grimaldi, Managing Director of Grimaldi Group, Naples was
elected. The Board of Directors decided to elect Pertti Laine chairman
and Jukka Härmälä vice-chairman of the Company. The firm of authorised
public accountants PricewaterhouseCoopers Oy was appointed as the
companys auditors.
The Finnlines share
The Companys registered share capital on 31 December 2006 was EUR
81,383,916 divided into 40,691,958 shares. A total of 32,200 shares were
subscribed in 2006 through options issued by Finnlines Plc in 2001. This
increased the Group share capital by EUR 64,400.
A total of 47.2 million Finnlines shares were traded on the Helsinki
Stock Exchange during the reporting period. The market capitalisation of
the Companys stock at the end of December was EUR 699.9 million.
Earnings per share (EPS) were EUR 1.38 (0.66). Earnings per share (EPS)
for continuing operations were EUR 0.92 (0.70). Shareholders equity per
share was EUR 10.36 (9.26).
Outlook for 2007
At the beginning of 2007 the freight volumes in all Finnlines routes
have been clearly bigger than in the same period of previous years. This
is due to the positive economic development in Finland and in its most
important trading countries and also due to Finnlines' faster timetable
between Finland and Germany.
Despite one-time expenses relating to the new vessels coming into
service, rotation of the fleet and three vessels being under conversion,
the whole year operating profit for 2007 is expected to be better than
in 2006.
Dividend distribution proposal
The Board of Directors proposes to the Annual General Meeting that a
dividend of EUR 0.30 per share be paid out for the financial year ending
on 31 December 2006. If the Boards proposal is approved, the dividend
will be paid out on 28 March 2007 to shareholders registered in the
shareholder register maintained by the Finnish Central Securities
Depository Ltd no later than the dividend record date
of 21 March 2007.
Annual General Meeting
Finnlines Plcs Annual General Meeting will be held from 10 am on
Friday, 16 March 2007 at the Hotel SAS Radisson Royal, Kamppi,
Runeberginkatu 2, Helsinki, Finland.
Finnlines' first interim report for the period of 1 January-31 March
2007 will be published on 3 May 2007.
Finnlines Plc
Board of Directors
Antti Lagerroos
President and CEO
Attached: Profit and Loss Account
Balance Sheet
Changes in Shareholders Equity
Cash Flow Statement
Revenue by business division
Financial indicators
Contingencies and Commitments
Continuing operations by quarter
Distribution Helsinki Stock Exchange
Main media
All figures audited
CONSOLIDATED PROFIT AND LOSS
ACCOUNT
1000 EUR 10- 10- 1-12/06 1-12/05
12/06 12/05
Continuing Operations
Revenue 159,137 163,435 632,666 584,085
Other income from 561 1,026 2,078 3,497
operations
Materials and services -44,993 -49,647 -196,042 -173,229
Personnel expenses -29,705 -26,768 -111,266 -101,770
Depreciation,
amortisation -11,273 -8,641 -39,875 -33,848
and other write-offs
Other operating -58,086 -60,221 -229,337 -236,781
expenses
Total operating expenses - - -576,521 -545,628
144,057 145,276
Operating profit 15,641 19,184 58,223 41,954
Financial income 8,229 1,159 10,784 5,927
Financial expenses -11,018 -3,163 -21,557 -11,852
Share of associated
companies profits 274 263 274 263
Profit before taxes 13,127 17,443 47,725 36,291
Income taxes -2,028 -4,724 -9,989 -7,738
Profit for the reporting
period, continuing 11,099 12,719 37,736 28,553
operations
Discontinuing operations
Profit for the reporting
period, discontinuing
operations -234 -1,764 18,742 -1,442
Profit for the reporting
period 10,865 10,956 56,477 27,112
Distribution:
Parent company 10,728 10,871 56,053 26,651
shareholders
Minority interest 137 85 425 461
10,865 10,956 56,477 27,112
Profit attributable to parent company shareholders
calculated as earnings per share (EUR/share)
Undiluted earnings per 0.26 0.27 1.38 0.66
share
Diluted earnings per 0.26 0.27 1.38 0.66
share
Profit attributable to parent company shareholders,
continuing operations,
calculated as earnings per share (EUR/share)
Undiluted earnings per 0.27 0.31 0.92 0.70
share
Diluted earnings per 0.27 0.31 0.92 0.69
share
Profit attributable to parent company shareholders,
discontinuing operations,
calculated as earnings per share (EUR/share)
Undiluted earnings per -0.01 -0.04 0.46 -0.04
share
Diluted earnings per -0.01 -0.05 0.46 -0.04
share
CONSOLIDATED BALANCE SHEET,
IFRS
1000 EUR 31/12/06 31/12/05
ASSETS
Non-current assets
Property, plant and equipment 817,977 619,727
Goodwill 108,660 109,011
Other intangible assets 10,136 11,935
Investment properties 1,588 1,591
Share of associated companies 2,349 2,105
Other financial assets 4,892 5,513
Receivables 5,839 8,647
Deferred tax assets 617 410
952,057 758,941
Current assets
Inventories 5,412 6,640
Accounts receivable and other
receivables 91,538 103,843
Tax receivables for revenue 512 9,974
earned
Bank and cash 18,436 28,735
115,898 149,194
Total assets 1,067,95 908,134
6
SHAREHOLDER'S EQUITY
Equity attributable to parent company
shareholders
Share capital 81,384 81,314
Share issue 0 6
Share issue premium 24,525 24,301
Translation differences 28 -1,046
Retained earnings 315,791 271,946
421,728 376,520
Minority interest 2,028 2,002
Total shareholders equity 423,757 378,523
LIABILITIES
Long-term liabilities
Deferred tax liabilities 98,352 89,505
Pension liabilities 2,565 4,628
Provisions 3,659 4,354
Interest-bearing liabilities 360,067 269,425
Other liabilities 0 0
464,643 367,913
Current liabilities
Accounts payable and other
liabilities 79,155 87,710
Tax liabilities for revenues
earned 430 514
Provisions 230 665
Current interest-bearing
liabilities 99,739 72,809
179,555 161,699
Total liabilities 644,199 529,612
Total shareholders equity
and liabilities 1,067,95 908,134
6
CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
1000 EUR Share Share Share Transla- Treasur
capital issue issue tion y
premium diffe- shares
rences
Shareholder
s´ equity
1.1.2005 79,916 13,774 -192 -5,961
Translation
differences -853
Profit for
reporting
period
Total
recognised
income for
the period -853
Dividend
Stock
options 2,510 6 9,416
exercised
Invalidatio
n of
treasury -1,112 1,112 5,961
shares
1,398 6 10,528 5,961
Shareholder
s´ equity
31.12.2005 81,314 6 24,301 -1,046 0
1000 EUR Retained Total Minority Total
earnings interest equity
Shareholder
s´ equity
1.1.2005 281,485 369,021 2,049 371,070
Translation
differences -853 -853
Profit for
reporting
period 26,651 26,651 461 27,112
Total
recognised
income for
the period 26,651 25,798 461 26,258
Dividend -30,229 -30,229 -508 -30,737
Stock
options 11,931 11,931
exercised
Invalidatio
n of
treasury -5,961 0 0
shares
-36,190 -18,298 -508 -18,805
Shareholder
s´ equity
31.12.2005 271,946 376,520 2,002 378,523
CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY
1000 EUR Share Share Share Trans- Treasur
capital issue issue lation y
premium diffe- shares
rences
Shareholder
s´ equity
1.1.2006 81,314 6 24,301 -1,046
Translation
differences 1,074
Profit for
reporting
period
Total
recognised
income for
the period 1,074
Dividend
Sale of
Teamlines
Share issue 70 -6 224
70 -6 224
Shareholder
s´ equity
31.12.2006 81,384 24,525 28
1000 EUR Retained Total Minority Total
earnings interest equity
Shareholder
s´ equity
1.1.20006 271,946 376,520 2,002 378,523
Translation
differences 1,074 1,074
Profit for
reporting
period 56,053 56,053 427 56,480
Total
recognised
income for
the period 56,053 57,127 427 57,554
Dividend -12,208 -12,208 -392 -12,600
Sale of
Teamlines -9 -9
Share issue 289 289
-12,208 -11,919 -401 -12,320
Shareholder
s´ equity
31.12.2006 315,791 421,728 2,028 423,757
CONSOLIDATED CASH FLOW STATEMENT
1000 EUR 1-12/06 1-
12/05
Cash flow from operations:
Profit for reporting 56,477 27,112
period
Adjustments:
Non-cash transactions 13,913 28,174
Interest expense and
other 11,762 9,873
financial expenses
Interest income -2,013 -1,024
Dividend income -34 -54
Taxes 9,989 7,854
Realized currency
differences 1,028
Changes in working
capital:
Change in accounts
receivable and other
receivables 4,525 -
11,187
Change in current assets 1,228 -2,539
Change in accounts
payable -11,646 9,554
and other liabilities
Change in provisions -2,096 -2,861
Interest paid -11,473 -
10,868
Interest received 2,008 1,211
Taxes 7,174 -2,004
Realized currency 1,475
differences
Net cash flow from 82,318 53,241
operations
Cash flow from investing
activities:
Acquisition of -1,727
subsidiaries
Sale of subsidiaries 35,708
Investments in tangible - -
assets 229,537 66,749
Investments in intangible
assets -2,207 -2,022
Sale of tangible assets 1,625 3,217
Dividends received 34 54
Net cash flow from
investing activities - -
196,104 65,500
Cash flow from financing
activities:
Proceeds from issue of 289 11,931
shares
Borrowing 202,881 41,818
Net increase in current
interest-bearing -27,816 37,627
liabilities
Repayment of loans -59,394 -
78,507
Decrease of long-term
receivables 2,190 -850
Dividends paid -12,600 -
30,229
Financing expenses -2,063 -891
Net cash flow from
financing activities 103,487 -
19,101
Change in cash and cash
equivalents -10,299 -
31,360
Cash and cash equivalents
on 1 January 28,735 60,081
Effect of foreign exchange
rate changes 14
Cash and cash equivalents
on September 30 / December 18,436 28,735
31
REVENUE AND OPERATING RESULT BY BUSINESS SEGMENTS (PRIMARY SEGMENT)
1- 1-12/05
12/06
EUR % EUR %
(1000) (1000)
Shipping and sea
transport 538,99 85.2 505,499 86.5
6
Port operations 123,09 19.5 105,544 18.1
2
Eliminations
(intragroup) - -4.7 -26,959 -4.6
29,422
External sales 632,66 100. 584,085 100.
6 0 0
Operating profit
Shipping and sea
transport 50,771 36,969
Port operations 7,452 4,985
Operating profit
total 58,223 41,954
Share of
associated
companies 274 263
Financial items - -5,925
10,773
Profit
before taxes 47,725 36,291
Income taxes -9,989 -7,738
Profit for
reporting period
continuing 37,736 28,553
operations
FINANCIAL INDICATORS
1- 1-12/05
12/06
Operating profit as % of
revenue (continuing
operations) 9.2 7.2
ROE, % 14.1 7.2
ROI, % 9.9 6.0
Gearing, % 104.2 82.8
Gross capital
expenditure, MEUR *) 238.8 73.0
% of revenue 37.7 12.5
Equity ratio, % 39.7 41.7
Shareholders equity/
share, EUR 10.36 9.26
Number of shares during
period, average (1000) 40,685 40,236
Number of shares at
end of period (1000) 40,692 40,660
Market capitalisation,
EUR million 699.9 585.5
Average personnel
(continuing operations)
Shore-based personnel 1,451 1,367
Sea-borne personnel 745 723
Personnel total 2,196 2,090
*) Includes continuing and discontinuing operations
CONTINGENCIES AND 31/12/06 31/12/05
COMMITMENTS
1000 EUR
Vessel hires (continuing
operations):
Within 12 months 88,258 95,422
Between one and five 102,301 161,953
years
After five years 0 0
190,559 257,375
Other leases (continuing
operations):
Within 12 months 5,515 5,301
Between one and five 11,899 11,419
years
After five years 9,937 11,414
27,351 28,134
Collateral given:
Borrowings secured by given mortgages
Loans from financial
institutions 300,637 125,859
Vessel mortgages provided
as guarantees for the 461,000 231,000
above loans
Other guarantees given on behalf of the Group :
Collateral 2,485 2,566
Mortgages 0 0
Other guarantees given on behalf of the others :
Collateral 1,027 1,910
Mortgages 0 431
Other commitments given by group on behalf of subsidiaries:
Commitments 6,000 0
Other obligations 239,883 399,757
Open derivative instruments:
1000 EUR 31/12/0 31/12/0 31/12/0 31/12/0
6 5 6 5
Net fair values Contract
amounts
Currency forwards 0 0 0 0
Interest rate swaps 0 0 0 0
REVENUE AND OPERATING RESULT BY QUARTER, CONTINUING OPERATIONS
Q1/0 Q1/0 Q2/0 Q2/0 Q3/0 Q3/0 Q4/0 Q4/0
6 5 6 5 6 5 6 5
MEUR MEUR MEUR MEUR MEUR MEUR MEUR MEUR
Shipping and
sea transport 129. 118. 142. 117. 132. 125. 135. 143.
1 7 2 7 1 4 6 7
Port 30.4 25.2 31.5 25.6 29.6 27.2 31.6 27.5
operations
Eliminations
(intragroup) -6.6 -6.6 -7.9 -6.1 -6.8 -6.6 -8.0 -7.7
External sales 152. 137. 165. 137. 154. 146.0 159. 163.
9 4 8 3 9 1 4
Operating
profit
Shipping and
sea transport 7.9 8.4 16.1 3.9 13.2 6.5 13.6 18.2
Port 1.9 1.3 1.8 0.7 1.8 1.9 2.0 1.1
operations
Operating
profit total 9.7 9.7 17.9 4.6 14.9 8.5 15.6 19.2
Share of
associated
companies 0 0 0 0 0 0 0.3 0.3
Financial -3.3 -0.9 -3.9 -1.2 -0.7 -1.8 -2.8 -2.0
items
Profit
before taxes 6.4 8.8 14.0 3.4 14.2 6.6 13.1 17.5
Income taxes -1.4 -1.9 -3.3 -0.3 -3.2 -0.9 -2.0 -4.6
Profit for
reporting 5.0 7.0 10.6 3.1 11.0 5.8 11.1 12.7
period
Continuing
operations
EPS 0.12 0.17 0.26 0.07 0.27 0.14 0.27 0.31
(undiluted)
EPS (diluted) 0.12 0.17 0.26 0.07 0.27 0.14 0.27 0.31