NEO INDUSTRIAL PLC INTERIM REPORT 4 August 2015 at 2.00 pm
NEO INDUSTRIAL PLC’S INTERIM REPORT FOR JANUARY–JUNE 2015
The Cable segment’s turnover improved, investments in cable manufacturing technology and in production personnel. Operating result was burdened by extraordinary costs.
January-June
- The Neo Industrial Group´s turnover was EUR 43.6 million (42.0 million)
- Its operating result was EUR -0.6 million (0.6 million). Operating result was burdened by extraordinary costs total circa EUR 0.9 million
- The Cable segment´s operating result was EUR 0.1 million (1.3 million).
- The Group´s result for the period was EUR -1.3 million (-0.6 million).
MANAGING DIRECTOR JARI SALO:
The Cable segment´s turnover for the first half of year 2015 increased EUR 1.6 million comparing to the corresponding period of the previous year. The sales volume in the cable market of Nordic countries, the main market area of Reka Cables Ltd, was as a whole on the same level as the year before. The growth in sales is mainly due to increased sales volumes in the other markets.
The Cable segment´s operating result was EUR 1.2 million lower than the comparable figures 2014. It contains circa EUR 0.4 million of extraordinary costs due to management changes. The result is also burdened by costs due to recruiting new production personnel and training as well as larger than normal variations of factories´ load situations, total EUR 0.5 million. In the beginning of the year circa 24 persons more were recruited to production in the Cable segment comparing to the situation in the year end 2014. Received orders have mainly been underground cable deliveries compared to the corresponding period of the previous year and it has effected on load rates of factories and also to utilisation rates.
The Cable segment continues the operations to improve profitability, process development and working capital management, which is believed to effect positively on result development during the end of the year. The cable manufacturing investment of EUR 1.5 million in Hyvinkää factory also increases the efficiency in production. The investment enables launching new product groups in the future.
Cable segment has strong seasonal fluctuations. The high season is during spring, summer and autumn months. During the high season the usage of factoring financing and seasonal funding is at highest and also the stock levels are in the high level. Equity ratio June 30 2015 was lower than 31 December 2014 showing the capital employed impact of high season and the effect of the result for the period. Equity ratio June 30 2015 was better than 30 June 2014 showing the growth of inventory turnover rate due to Lean-operations.
Strong financial situation of Cable segment in turn of the year 2014/2015 enabled additional installment of EUR 1.5 million to the financing agreement signed earlier. The payment was made in January 2015.
Improvement of grids with underground cables continues particularly in Finland. Development is contributed by a change made to legislation of electricity market concerning assurance of electricity supply and substantial disorders in distribution of electricity due to weather conditions in winter and storms. The Cable segment pays particularly attention to the delivery capacity of underground cables.
The financial arrangements carried out in 2014 have a positive effect on Neo Industrial Group´s liabilities, balance and particularly on cash flow during decrease of financial expenses. During the review period Neo Industrial´s financial expenses have been almost EUR 0.5 million smaller than during the corresponding period of the previous year.
KEY FIGURES
| 1-6/2015 | 1-6/2014 | 1-12/2014 | |
| Turnover (EUR million) | 43.6 | 42.0 | 80.1 |
| Operating result (EUR million) | -0.6 | 0.6 | -0.7 |
| Result for the period (EUR million) | -1.3 | -0.6 | 1.8 |
| Earnings per share, EUR | -0.21 | 0.11 | 0.30 |
| Return on investment, (ROI,%) | -1.5 | 2.2 | 12.1 |
| Equity ratio, % | 14.2 | 11.0 | 21.1 |
RISKS AND UNCERTAINTY FACTORS
Neo Industrial’s financial risks include currency, interest rate, commodity, liquidity, credit and investment market risks. Financial risks and the related protection measures are described in more detail in the notes to the latest financial statements. The company’s future risk factors are related to the business development of its portfolio companies. The uncertainty of the global economy and financial market poses a risk to the financial arrangements of the Group.
Due to the significant financial arrangements carried out in 2014 the financial situation got better. However, Neo Industrial continues to pay extra attention to ensure the sufficient funding and ensuring liquidity situation. The financial negotiations are continued and to assure liquidity, company intensifies the working capital management and negotiates adjustments to payment terms and agreements.
In the Cable segment, the most significant risks are related to market development, fluctuations of raw material prices and currencies as well as working capital management in various situations. During considerable seasonal changes, suppliers’ terms of payment effect significantly on the ability to ensure competitive delivery times through sufficient inventories.
NEAR-TERM OUTLOOK
The construction has been picking up slightly in Nordic countries and in Western Europe. The management believes that grid constructors will boost ground cabling projects to ensure distribution reliability. The turnover of the Cable segment is believed to slightly exceed the turnover in 2014 and the operating result of the Cables segment is believed to be positive.
The company will continue to pay special attention to liquidity and funding for growth. In addition to negotiations on financing and payment terms, the measures for boosting inventory turnover and freeing up capital assets are taken into action.
DISCLOSURE POLICY OF INTERIM REPORT
Neo Industrial discloses relevant information related to its Interim Report with this Stock Exchange Release. The entire Interim Report for January-June 2015 is attached to this release and is also available on company's website at www.neoindustrial.fi.
Hyvinkää, 4 August 2015
Neo Industrial Plc
Board of Directors
Further information:
Jari Salo, Managing Director, tel. +358 20 720 9196
All comments in this report that do not refer to actual facts are future estimates. Such estimates include expectations concerning market trends, growth and profitability as well as statements including the words "believe", "assume" or "will be" or a similar expression. Since thses estimates are based on current plans and estimates, they involve risks and uncertainty factors that may cause the actual results to differ substantially from current statements.
Among other things, such factors include 1) operating conditions, such as continued success in production and the ensuing efficiency benefits, availability and cost of production inputs, demand for new products and changes in circumstances affecting the acquisition of capital under acceptable conditions; 2) sector-specific circumstances, such as the intensity of demand for products, the competition, current and future market prices for the Group´s products and related pricing pressures, the financial situation of the Group´s customers and competitors and competitors´ possible new products; and 3) the general economic situation, such as economic growth in the Group´s main market areas and change in exchange rates and interest rates.
Neo Industrial's strategy is to invest mainly in industrial companies with similar synergic benefits. The aim of investments is with active ownership to develop the purchased companies and establish additional value. Returns are sought through both dividend flow and an increase in value. Neo Industrial's class B shares are listed on the NASDAQ OMX Helsinki Stock Exchange. Neo Industrial's business segment is Cable Industry.
ENCL: Neo Industrial's Interim Report for January-June 2015
