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