MARTELA OYJ STOCK EXCHANGE RELEASE 15 February, 2007 1 (12)
MARTELA OYJ'S FINANCIAL STATEMENTS FOR 1 JANUARY - 31 DECEMBER, 2006
The market situation improved and the revenue for 2006 increased by 17.1 per cent
to EUR 119.7 million (102.2). The profit before taxes rose, thanks to a strong
final quarter, to EUR 3.7 million (1.0). Other operating income of EUR 1.4
million (1.0) also contributed to the improved result. The financial situation
remained good and the equity-to-assets ratio rose to 42.4 per cent (40.8). It is
estimated that this growth will continue in 2007 and that the result will
improve.
Market situation
The demand for office furniture started to increase for the first time for years.
The market situation improved in all of the Group's main market areas.
Group structure
No changes took place in the Group structure in 2006. As this was the case also
in 2005, the Group structure and financial statements figures are comparable.
Segment reporting
Martela has one primary segment, namely the furnishing of offices and public
spaces. The revenue and result are as reported in the consolidated financial
statements. The Group's secondary segment consists of customers according to
geographic location.
Revenue
Revenue for 2006 rose to EUR 119.7 million (102.2), an increase of 17.1 per cent.
Revenue increased in all of the Group's main market areas. The growth is
primarily due to the improved market situation, more efficient sales and
successful product launches.
Invoicing by main market areas, January-December
2006 Percentage 2005 Percentage Change, %
Finland 83.0 69.3% 71.0 69.2% +16.9%
Scandinavia 22.3 18.6% 19.5 19.0% +14.3%
Other regions *) 14.5 12.1% 12.1 11.8% +19.1%
Total 119.8 100.0% 102.7 100.0% +16.7%
*) includes the invoicing of Profit Centre Poland, which in 2006 was EUR 8.5
million (6,2) and growth 37 %. The invoicing of the Polish unit also includes its
export to Central Eastern Europe.
2 (12)
Quarterly invoicing by main market areas
1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06
Finland 16.3 17.0 17.0 20.6 19.0 18.4 19.5 26.1
Scandinavia 4.5 4.3 5.5 5.3 5.1 4.6 6.2 6.4
Other areas 3.2 2.9 2.5 3.5 2.8 4.3 3.0 4.3
Total 24.0 24.2 25.0 29.5 26.9 27.3 28.8 36.8
As in the previous years, revenue for the final quarter was the highest. Growth
was particularly strong on the Finnish market.
Group result
The profit before taxes of the final quarter rose to EUR 2.7 million (1.2),
thanks to a substantial increase in revenue.
The profit before taxes for 2006 was EUR 3.7 million (1.0). The key factors
behind the improved result were the strong growth in revenue, and proceeds from
the sale of assets. Proceeds from the sale of real estate and shares totalled EUR
1.0 million (0.3). The comparability of the 2006 and 2005 figures is also
affected by the fact that the 2005 result was improved by a reversal, in the
final quarter of 2005, of a EUR 0.7 million impairment made in the 2004 opening
IFRS balance sheet.
The increase in financial items resulted from a decrease in financial income and
foreign exchange gains.
The majority of the year's profit was made in the final quarter.
Improved results were recorded in all of the Group's units.
The taxes in the income statement derive mainly from a decrease in deferred tax
assets recognised earlier. They are not cash-based.
Result by quarter-year
1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06
Revenue 23.9 24.1 25.0 29.3 26.9 27.2 28.8 36.8
Other income 0.3 0.1 0.1 0.5 0.2 0.6 0.1 0.5
Operating profit -0.2 -0.9 1.3 1.4 -0.1 0.9 0.8 2.8
Operating profit, % -1.0% -3.7% 5.1% 4.6% -0.2% 3.2% 2.9% 7.7%
Profit before -0.4 -0.9 +1.1 +1.2 -0.3 +0.6 +0.7 +2.7
taxes
3 (12)
Key figures
2006 2005 2004
Revenue 119.7 102.2 100.7
Change in revenue, % 17.1 1.5 -1.4
Operating profit 4.5 1.5 -1.6
Operating profit, % 3.8 1.5 -1.5
Return on investment, % 11.0 4.3 -2.2
Return on equity, % 11.4 -0.5 -8.1
Equity to assets ratio, % 42.4 40.8 39.3
Gearing, % 53.0 62.8 56.4
Average staff 626 610 662
Revenue/employee 191.3 167.6 152.2
Capital expenditure
The Group's gross capital expenditure totalled EUR 1.8 million (1.6). Capital
expenditure mainly concerned production line automation at the Nummela and Kitee
plants, other production equipment replacements and IT expenditure.
A contract was signed in December 2006 on the sale and partial leasing back of
the Martela AB's Bodafors plant in Sweden. The property's sales price was EUR 1.7
million and the right of possession was to be transferred at the turn of
March/April 2007. Martela AB has leased about 40 per cent of the plant's area for
its own use on a 10-year lease. Proceeds of EUR 0.8 million will be realised on
the property sale at the turn of March/April 2007.
Organisation
The Group's operational organisation was renewed on 1 April, 2006. The main
objective was to increase the focus on surroundings furniture collections and
collections for other public premises, and on their competitiveness. Martela's
target is to become a major international player in this area, as well as in
workstation furniture. To reach this target, it was decided to divide the Group's
product and product development resources into two business units responsible for
the collection and for product development respectively. The "Office" business
unit is responsible for workstation furniture, while "Surroundings" is
responsible for furniture for lobbies and other public premises.
At the same time, the Nummela logistics centre, which mainly serves the Finnish
market, was integrated in the operational organisation for Finland. The logistics
centres in Bodafors, Sweden and Warsaw, Poland were already part of their
respective local organisations.
The logistics centres' operating concept and technology development and Group
acquisitions were reorganised into a Group production and logistics process,
which is also responsible for the Kidex Oy and P.O.Korhonen Oy production
companies.
4 (12)
Staff
The Group employed 626 (610) people on average, up by 2.6 per cent. There were
632 (604) employees at work at the end of 2006.
Staff 2006 2005 2004
Average staff 626 610 662
- change, % +2.6 -7.9 -13.7
Staff at end of review period 632 604 613
Revenue/employee (EUR 1,000) 191.3 167.6 152.2
- change, % +14.1 +10.1 +14.3
Pay and bonuses during the financial year 21.9 19.4 19.9
Average staff by region 2006 2005 2004
Finland 501 489 514
Scandinavia 75 70 98
Poland 50 51 50
Group total 626 610 662
Staff by quarter-year
1/05 2/05 3/05 4/05 1/06 2/06 3/06 4/06
Average staff 611 627 613 593 611 632 636 632
Staff at end of review period 610 641 600 604 600 660 629 632
Revenue/employee (EUR 1,000) 39.1 38.4 40.8 49.5 44.0 43.0 45.3 58.3
5 (12)
Product development
Product development and collection management is the responsibility of two Group
organisations: the "Office" business unit takes care of workstation furniture,
while "Surroundings" takes care of furniture for lobbies and other public
premises.
During 2006, product development employed 21 (20) people and product development
expenses accounted for 2.1 (2.0) per cent of the revenue.
During the year, the product range was renewed and supplemented with task chairs
and other workstation furniture, furniture for schools and other teaching
facilities, and auditorium furniture.
At the beginning of the year, loudspeakers and air purifiers that can be
integrated in the workstation were launched at the Stockholm Furniture Fair. In
response to the positive feedback, they were developed into saleable products and
presented in the autumn at numerous work wellbeing events. Lobby furniture by
several designers was presented last autumn at the Design Partners Exhibition in
Helsinki.
The development of the Pinta desk collection into a saleable product family was a
significant achievement. This extensive range of desks enables more individual,
efficient and modifiable workstation solutions which can also be adapted to
changing needs in the future. The range was launched at the Stockholm Furniture
Fair in February 2007.
The Environment
The aim of Martela's environmental management policy is to provide customers with
durable, long lasting products that promote safety and high quality in the
working environment, and whose production harms the natural environment as little
as possible.
Martela Oyj applies the ISO 14001:2004 standard in environmental management. The
aim of the environmental management programs is to reduce the environmental load
of Martela's products throughout their life cycles, and to increase the reuse and
recycling of materials. Martela has paid particular attention to the recycling
and potential re-use of discarded furniture by offering recycling services to
customers. Martela Oyj's environmental system certification will be valid until
the end of 2008 and also includes Kidex Oy's operations. P.O. Korhonen Oy also
has its own certified environmental system.
Finance
The net cash from operating activities of EUR 0.9 million (1.0) was affected by a
working capital increase of EUR 7.8 million accumulated from the beginning of the
year. The change in working capital was mainly due to an increase in trade
receivables as revenue rose sharply at the end of the year. The net cash from
investing activities was positive at EUR +1.2 million (-1.1) as a result of the
disposal of fixed assets.
Net interest-bearing debt decreased by EUR 2.2 million to EUR 17.1 million (19.3)
at the end of the year. Liquid assets at the end of the year amounted to EUR 3.9
million (5.0). The key figures related to solvency improved. The equity-to-assets
ratio was 42.4 (40.8) per cent and gearing was 53.0 (62.8) per cent.
Shares 6 (12)
During the financial year, 1,076,693 (966,453) of the company's A shares were
traded on the Helsinki Stock Exchange, corresponding to 30.3 (27.2) per cent of
the entire stock. The value of trading turnover was EUR 7.3 million (6.8). The
value of a share was EUR 7.26 at the beginning of the year and EUR 6.50 at the
end of the year. During the financial year the share price was EUR 8.16 at its
highest and EUR 5.99 at its lowest. At the end of 2006, equity per share was EUR
6.1.
2006 Annual General Meeting
The Annual General Meeting held on 21 March 2006 decided to distribute a dividend
of EUR 0.15 per share. The AGM elected Heikki Ala-Ilkka, Tapio Hakakari, Heikki
Martela, Pekka Martela, Jori Keckman and Jaakko Palsanen to the Board of
Directors for the next term. Matti Lindström was elected as the staff
representative and Raimo Santala as his deputy. The Board chose Heikki Ala-Ilkka
as Chairman and Pekka Martela as Deputy Chairman. Reino Tikkanen, Authorised
Public Accountant, was elected as the auditor of the company, with KPMG Oy Ab as
the deputy auditor.
The AGM renewed the authorisation of the Board to decide for the following year
on raising the share capital, issuing convertible bonds and acquiring and/or
disposing of the company's shares in deviation from the pre-emptive rights of
shareholders.
Treasury shares
Martela did not purchase any of its own shares for the Treasury in 2006. On 31
December, 2006, Martela owned 67,700 of its own A shares, which had been
purchased at an average price of EUR 10.65. Martela's holding of Treasury shares
amounts to 1.6 per cent of all shares and 0.4 per cent of all votes.
Outlook for the future
Demand for office furniture increased in 2006. The consolidated revenue
increased, by Martela's estimate, at a faster rate than the market, and the
profit was much improved. Demand will probably continue to rise in 2007, but not
as sharply as in 2006. As a result of the revenue increase and cost structure
efficiency measures, the Group's result is expected to be a further improvement
on that of 2006.
In 2006, the consolidated revenue increased towards the end of the year, as is
usual. This is expected to happen also in 2007, and the result of the first
quarter of 2007 is expected to fall clearly below that of the final quarter of
2006.
The areas of focus for operational development will be:
- further sales development and introduction of new operating concepts
- expansion and strengthening of sales channels
- increasing the efficiency of the order-delivery chain by utilising more
comprehensive Group IT solutions
- The "Office" business unit will present new key products and services, which
are expected to increase competitiveness in the basic business of
workstation furniture and in the equipping of workstations
- In accordance with its strategy, the "Surroundings" business unit will
increase sales in all its sectors, with the aim of turning Martela into a
significant supplier of furniture for lobbies and other public premises
- Kidex Oy, which is a component contract manufacturer, will strive to become
profitable by further increasing volumes to customers outside the Group.
Their proportion has been increasing.
7 (12)
Risks
It is estimated that the greatest risks to the improvement of profit performance
relate to the continuation of general economic growth and the consequent overall
demand for office furniture.
Another risk is posed by the above-mentioned challenging development projects and
the timetables and implementation of objectives. Any delays would affect growth,
competitiveness and development of the cost structure.
2007 Annual General Meeting and the Board's proposal for distribution of profit
Martela Oyj's AGM will be held on Tuesday, 20 March, 2007. The Board of Directors
proposes that the AGM decides to authorize the Board of Directors to decide on
acquisition and disposal of own shares as in the previous years. The Board of
Directors will further propose that a dividend of EUR 0.25 per share be
distributed for 2006. Shareholders register in the shareholder register
maintained at the Finnish Central Securities Depository Ltd on the record date
for dividend payment, Friday, 23 March, 2007, will be entitled to the dividend
declared by the Company. Dividend payments will be made on Friday, 30 March,
2007. A separate Stock Announcement will be published.
Board members and auditors
Shareholders representing a total of over 50 per cent of the company's votes have
informed the company of their intention to propose that the following members be
re-elected to the Board: Heikki Ala-Ilkka, Tapio Hakakari, Jori Keckman, Heikki
Martela, Pekka Martela and Jaakko Palsanen. They will also propose that Matti
Lindström be elected as staff representative, with Raimo Santala as deputy. The
above shareholders have also announced that they will propose that Reino
Tikkanen, Authorised Public Accountant, be elected as the company's auditor, with
KPMG Oy, Authorised Public Accountants, as deputy, until the end of the following
AGM.
Events after the end of the financial year
Non-business-related assets were sold in early 2007, and this will improve the
result of the first quarter by EUR 0.5 million. Moreover, proceeds of EUR 0.8
million from the sale of the Bodafors plant in Sweden will be realised at the
turn of March/April.
Martela's Board of Directors decided on 14 February, 2007 on a share-based
incentive scheme for key personnel for 2007-2009. The key personnel will be
eligible to receive Martela's A shares if the targets set for specified earnings
periods are achieved. These periods are the calendar years 2007, 2008 and 2009.
Any incentives paid on the basis of the above scheme will be paid in both shares
and cash at the end of each earnings period. The maximum incentive for the whole
scheme is 153,000 Martela Oyj A shares and the amount of cash needed to cover
taxes and similar charges, which amounts to approximately the value of the shares
to be paid. The achievement of the targets set for an earnings period determines
the percentage of the maximum bonus to be paid to a key person.
The company is planning to outsource the administration of this incentive plan to
Alexander Management Oy which will, for this purpose, acquire the Company's A-
shares from the Helsinki Stock Exchange to be used for hedging and implementation
of the incentive plan.
GROUP INCOME STATEMENT (EUR 1000) 8 (12)
2006 2005 2006 2005
1-12 1-12 10-12 10-12
Revenue 119.727 102.246 36.845 29.337
Other operating income 1.429 0.987 0.568 0.487
Employee benefits expenses -27.562 -24.617 -8.373 -6.742
Operating expenses -85.763 -74.344 -25.335 -21.562
Depreciation and impairment -3.332 -2.756 -0.868 -0.157
Operating profit/loss 4.499 1.516 2.837 1.363
% of turnover 3.8 1.5 7.7 4.7
Financial income and expenses -0.798 -0.544 -0.143 -0.195
Profit/loss before taxes 3.701 0.972 2.694 1.168
% of turnover 3.1 1.0 7.3 4.0
Income tax -0.977 -1.085 -0.484 -1.203
Profit/loss for the period 2.723 -0.112 2.209 -0.034
% of turnover 2.3 -0.1 6.0 -0.1
Basic earnings per share, eur 0.7 0.0 0.5 0.0
Diluted earnings per share, eur 0.7 0.0 0.5 0.0
GROUP BALANCE SHEET (EUR 1000) 31.12.2006 31.12.2005
ASSETS
Non-current assets
Intangible assets 0.662 0.517
Tangible assets 15.784 18.991
Investments 0.062 0.078
Deferred tax assets 0.776 1.819
Pension obligations 0.018 0.000
Investment properties 1.166 1.161
Total 18.468 22.566
Current assets
Inventories 11.938 10.057
Receivables 24.792 18.512
Financial assets at fair value
through profit and loss 1.943 2.875
Cash and cash equivalents 1.968 2.088
Total 40.641 33.532
Total assets 59.109 56.098
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Share capital 7.000 7.000
Share premium account 1.116 1.116
Other reserves 0.121 0.117
Translation differences -0.133 -0.108
Retained earnings 17.542 15.432
Treasury shares -0.721 -0.721
Total 24.925 22.836
Non-current liabilities 9 (12)
Interest-bearing liabilities 12.844 15.605
Deferred tax liability 0.175 0.297
Other non-current liabilities - -
Pension obligations 0.000 0.001
Total 13.019 15.902
Current liabilities
Interest-bearing 4.271 3.707
Non-interest bearing 16.894 13.653
Total 21.165 17.360
Total liabilities 34.184 33.262
Equity and liabilities, total 59.109 56.098
STATEMENT OF CHANGES IN EQUITY (EUR 1000)
Equity attributable to equity holders of the parent
Share Share Other Trans. Retained Treasury Total
capital premium reserves diff. earnings shares
account
01.01.2005 7.000 1.116 0.122 -0.165 16.157 -0.721 23.509
Dividends paid -0.613 -0.613
Translation diff. -0.005 0.057 0.052
Profit/loss for
the period -0.112 -0.112
31.12.2005 7.000 1.116 0.117 -0.108 15.432 -0.721 22.836
1.1.2006 7.000 1.116 0.117 -0.108 15.432 -0.721 22.836
Dividends paid -0.613 -0.613
Translation diff. 0.004 -0.025 -0.021
Profit/loss for
the period 2.723 2.723
31.12.2006 7.000 1.116 0.121 -0.133 17.542 -0.721 24.925
CONSOLIDATED CASH FLOW STATEMENT (EUR 1000)
2006 2005
1-12 1-12
Cash flows from operating activities
Cash flow from sales 114.537 100.325
Cash flow from other operating income 0.364 0.635
Payments on operating costs -113.292 -99.364
Net cash from operating activities
before financial items and taxes 1.609 1.596
Interest paid -0.691 -0.734
Interest received 0.048 0.043
Other financial items -0.084 0.123
Dividends received 0.003 0.002
Taxes paid -0.018 -0.076
Net cash from operating activities (A) 0.867 0.954
Cash flows from investing activities 2006 2005 10
(12)
1-12 1-12
Capital expenditure on tangible and
intangible assets -1.840 -1.664
Proceeds from sale of tangible and
intangible assets 2.992 0.580
Loans granted - -
Repayments of loans receivables 0.006 -
Net cash used in investing activities (B) 1.158 -1.084
Cash flows from financing activities
Proceeds from short-term loans 1.783 -
Repayments of short-term loans -1.546 -1.443
Proceeds from long-term loans - 0.170
Repayments of long-term loans -2.689 -0.818
Dividends -0.613 -0.613
Net cash used in financing activities (C) -3.065 -2.704
Change in cash and
cash equivalents (A+B+C) -1.041 -2.834
(+ increase, - decrease)
Cash and cash equivalents at the beginning of
period 4.963 7.812
Translation differences -0.010 -0.015
Cash and cash equivalents at the end of period 3.911 4.963
KEY FIGURES/RATIOS 2006 2005
1-12 1-12
Revenue EUR million 119.7 102.2
Change in revenue, % 17.1 1.5
Exports and international operations, 36.7 31.6
EUR million
In relation to revenue, % 30.7 30.9
Gross capital expenditure on fixed 1.8 1.6
assets, EUR million
In relation to revenue, % 1.5 1.6
Research and development expenses, 2.5 2.0
EUR million
In relation to revenue, % 2.1 2.0
Average personnel 626 610
Change in personnel, % 2.6 -7.9
Personnel at year end 632 604
Turnover / employee, EUR thousand 191.3 167.6
Return on equity, % 11.4 -0.5
Return on investment, % 11.0 4.3
Equity ratio, % 42.4 40.8
Interest-bearing net-debt, EUR million 13.2 14.3
Gearing ratio, % 53.0 62.8
Key share-related figures 11 (12)
Number of shares, at the end of period (1000) 4155.6 4155.6
Basic earnings per share, EUR 0.7 0.0
Diluted earnings per share, EUR 0.7 0.0
Price/earnings ratio (PE) 9.8 -265.2
Equity per share, EUR 6.1 5.6
Dividend/share, EUR 0.25* 0.15
Dividend/earnings, EUR 37.5 -547.9
Effective dividend yield, % 3.8 2.1
Price of A-share 31.12. EUR 6.50 7.26
*) Proposal of the Board of Directors
The largest shareholders, 31.12.2006
No.of shares % of total
(A+K-series) votes
Marfort Oy 524 574 38.8
Ilmarinen Mutual Pension Insurance Company 335 400 2.1
Odin Förvaltnings AS 228 400 1.5
Mutual Fund Nordea Nordic Small Cap 200 247 1.3
Palsanen Leena 199 634 9.6
FIM Fenno Mutual Fund 193 900 1.2
OP-Suomi arvo-Mutual Fund 178 700 1.1
Pohjola P & C Insurance company 170 000 1.1
Martela Heikki 158 356 7.3
Suomen Argentor Oy 154 600 1.0
Martela Matti 115 238 7.8
Lindholm Tuija 112 546 6.0
Mutual Fund Aktia Capital 106 500 0.7
Palsanen Jaakko 85 868 0.8
Ålandsbanken Nordic Value 77 500 0.5
Martela Pekka 75 667 8.9
Other shareholders 1 238 470 10.3
Total 4 155 600 100.0
The number of registered Martela Oyj shares on 31.12.2006 was 4.155,600.
The shares are divided into A and K shares. Each A share carries 1 vote and
each K share 20 votes in a general shareholders' meeting.
The company's board of directors and CEO together hold 8.5% of the shares and
17.2% of the votes.
Segments
2006 (EUR 1,000)
Geographical segments Finland Scandinavia Other Elim. Unalloc. Total
areas
Turnover 82.920 22.364 14.414 0.029 119.727
Segment assets 49.215 10.003 4.377 -8.684 4.198 59.109
Capital expenditure 1.598 0.078 0.148 1.824
12 (12)
2005 (EUR 1,000)
Geographical segments Finland Scandinavia Other Elim. Unalloc. Total
areas
Turnover 70.680 19.450 12.115 102.246
Segment assets 42.895 7.191 4.286 -3.538 5.264 56.098
Capital expenditure 1.290 0.113 0.207 1.610
CONTINGENT LIABILITIES
31.12.2006 31.12.2005
Mortgages and shares pledged 20.739 20.560
Guarantees 0.115 0.113
Other commitments 0.323 0.315
Rental commitments 9.753 11.621
DEVELOPMENT OF SHARE PRICE 2006 2005
1-12 1-12
Share price at the end of period, EUR 6.50 7.26
Highest price, EUR 8.16 8.99
Lowest price, EUR 5.99 6.08
Average price, EUR 6.82 7.01
Annual Reports in Finnish and English will be published during the week 10.
The first Interim Report for the period January 1 - March 31, 2007 will be
published on April 24, 2007.
Helsinki, February 14, 2007
Martela Oyj
Board of Directors
Heikki Martela
CEO
For more information, please contact
Heikki Martela, CEO, tel. +358 50 502 4711
Distribution
Helsinki Exchanges
Main news media
www.martela.com