MARTELA CORPORATION INTERIM REPORT, 1 January – 30 June 2015

MARTELA CORPORATION      INTERIM REPORT     11 August 2015 at 8.30 a.m.

MARTELA CORPORATION INTERIM REPORT, 1 January – 30 June 2015

Substantial decrease in revenue in the first half of the year, but operating result remained at previous year’s level

Key figures:

The Martela Group anticipates that its revenue in 2015 will remain at the previous year’s level or that there will be a slight decline. A slight improvement in the operating result is expected. The Group’s operating result is weighted towards the second half of the year due to normal seasonal variation, and this year the trend will be further emphasised by the fact that there are large projects taking place during the final months of the year.

Market

The market environment has remained largely unchanged. The overall demand for office furniture continued to be low in the review period in the Group’s main market areas: Finland, Sweden, Poland and Russia. Demand currently focuses on alteration and enhancement projects, which is reflected in an increasing interest in activity-based office solutions and the Martela Lifecycle model. Even though the overall demand continues to be low, the many office alteration projects that are at the planning stage in the Nordic countries are improving the market situation slightly. However, decision-making is being slowed by the general economic uncertainty and the extent of long-term leases. In the Russian market, the situation has been even more challenging than elsewhere.

In addition to office construction, the demand for Martela’s products and services is significantly affected by the general economic situation and by the extent to which companies need to use their office space more efficiently. The need to boost efficiency often leads to office alteration projects, which in turn generate demand for Martela’s products and services. The annual change in gross domestic product (GDP) can be regarded as a indicator of general economic development. In Finland, this change was -0.1% in 2014. According to most forecasts, the change in Finland’s GDP is estimated to be near zero or only slightly positive in 2015. Judging from these forecasts, there can still be no expectation of a strong recovery in the near future. 

Consolidated revenue and result
 

Consolidated revenue for the second quarter was EUR 30.0 million (34.1), a decrease of 12.0 per cent on the previous year. Consolidated revenue for January-June was EUR 56.6 million (68.1), a decrease of 16.9 per cent. Despite the challenging market situation in Finland, the Group’s revenue in Finland in the review period was slightly higher than in the previous year. This was due to the positive response to the activity-based office solutions and the Martela Lifecycle model in Finland.  There were no major customer projects in the first half of the year in Finland. Instead, revenue consisted of small and medium-sized deliveries. There was a substantial decrease in the revenue of Business Unit International compared with the previous year. Since 1 May 2015, the unit has been responsible for sales in Poland and Russia and exports to countries where Martela does not have a subsidiary. Russia accounted for most of the decrease, whereas the revenue in Poland was at the previous year’s level. In Sweden and Norway, Martela had major customer deliveries in the first half of 2014, but in 2015 there are major deliveries taking place in the second half of the year. For this reason, the revenue generated by Business Unit Sweden & Norway decreased considerably year-on-year in the first half of 2015. As a result of the developments in Sweden and Norway and the decrease in the revenue in Russia, the Group’s revenue decreased in the first half of the year.

The consolidated operating result for the second quarter was EUR 0.2 million (0.4) and the figure for the first half of the year was EUR -1.1 million (-1.0). Efficiency improvement measures helped the Business Unit Finland to achieve a good operating result during the review period. At the same time, however, the operating results of Martela’s foreign business units weakened due to the decrease in revenue.  In autumn 2013, the Group launched a savings programme of EUR 6 million, which was completed in 2014. About one third of the savings were implemented in 2014 and the rest will be put into effect during 2015. The adjustment measures helped the Group to cut its fixed costs on a year-on-year basis as planned. At the same time, as a result of the production efficiency measures implemented in 2014, the sales margin on the Group’s products was slightly higher than in the previous year. Due to the measures taken, the Group’s operating result for the first half of 2015 remained at the previous year’s level, even though at the same time there was a substantial decrease in revenue.

Measures to improve supply chain efficiency continued in the first half of the year. In January Martela Corporation launched statutory employee negotiations to increase the efficiency of its logistics centre in Nummela and its subsidiary, Kidex Oy, in Kitee. As a result of the negotiations, the number of personnel was reduced by four employees in the Nummela logistics centre and by 13 employees at Kidex. In addition, a decision was made to implement temporary lay-offs of no more than 90 days. The lay-offs concerned employees in Nummela and the entire staff at Kidex. The purpose of these measures is to adjust capacity to the market demand and the changes in the structure of demand.

Martela also launched a new savings programme in April. The aim is to reduce costs by EUR 4 million at the annual level by the end of 2016, such that these cost savings will take full effect in 2017. As part the programme, the company launched statutory employee negotiations in April that covered all office employees at Martela Corporation. As a consequence of the negotiations the decision was taken to give notice to a total of 15 employees. It was also agreed that, if necessary, Martela will resort to temporary lay-offs lasting for a maximum of 90 days. Costs savings will also be made as a result of normal retirements and other personnel reductions, as these positions will not be filled but instead the work will be reorganised. As a result of the above-mentioned measures, Martela expects to achieve yearly cost savings of about EUR 1.2 million by the end of 2016.

To enhance operational efficiency, it was decided to integrate Business Unit Poland into Business Unit International. From 1 May 2015, Business Unit International has consisted of sales operations in Poland and Russia as well as exports to countries where Martela does not have a subsidiary.

Over the past year, interest in activity-based office solutions has continued to increase in Martela’s main market areas. The Group has introduced novel solutions suitable for activity-based offices and continues to invest in its ability to provide even more high-quality comprehensive solutions and services in the field of activity-based working. The Group has strengthened its pioneering position as a supplier of comprehensive solutions and as a leading service provider for offices and other working environments.

The result before taxes was EUR -1.4 million (-1.3), and the result after taxes was EUR -1.4 million (-1.4).

Martela’s full interim report for January - June 2015 is included in PDF format as an attachment to this release. The interim report is also available on the company’s website at www.martela.com.

Martela Oyj
Board of Directors
Heikki Martela
CEO

ATTACHEMENT: Martela’s interim report January – June 2015


For more information, please contact
Heikki Martela, CEO, tel. +358 50 502 4711
Markku Pirskanen, CFO, tel. +358 40 517 4606

Distribution
Nasdaq Helsinki
Main News Media
www.martela.com