MARTELA CORPORATION INTERIM REPORT 29 October 2015 at 8.30 a.m.
MARTELA CORPORATION INTERIM REPORT, 1 January – 30 September 2015
Consolidated revenue for January-September declined, operating result slightly better than last year
Key figures:
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| EUR million | 2015 | 2014 | 2015 | 2014 | 2014 |
| - Revenue | 38.7 | 36.5 | 95.3 | 104.7 | 135.9 |
| - Change in revenue, % | 5.8 | 6.5 | -8.9 | 9.7 | 2.7 |
| - Operating result | 3.0 | 2.2 | 2.0 | 1.2 | 0.2 |
| - Operating result, % | 7.9 | 6.0 | 2.1 | 1.2 | 0.1 |
| - Earnings/share, EUR | 0.59 | 0.44 | 0.24 | 0.10 | -0.18 |
| - Return on investment, % | 34.9 | 23.7 | 7.7 | 4.3 | 0.5 |
| - Return on equity, % | 47.1 | 33.1 | 6.4 | 2.5 | -3.4 |
| - Equity ratio, % | 36.8 | 39.8 | 38.1 | ||
| - Gearing ratio, % | 41.6 | 39.8 | 33.4 |
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.
Market
During the third quarter, the market environment remained as it had been during the first half of the year. 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. 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. Martela's Lifecycle model and activity-based office solutions are excellently suited to office alteration and enhancement projects. However, decision-making is being slowed by the general economic uncertainty and the extent of long-term leases. The situation in the Russian market continues to be 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 good 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 even slightly negative in 2015. Thus, a strong recovery is still not likely in the near future.
Consolidated revenue and result
Consolidated revenue for the third quarter was EUR 38.7 million (36.5), an increase of 5.8% on a year-on-year basis. Consolidated revenue for January-September was EUR 95.3 million (104.7), a decrease of 8.9% from the previous year. Despite the challenging market situation in Finland, the Group’s revenue in Finland was substantially higher than in the same period last year. Martela's Lifecycle model, which is intended for companies, has been well received in Finland. The model allows companies to make savings in overall costs, while at the same time it provides them with better-functioning work facilities. There were no individual major customer projects in Finland in the review period; instead the revenue was generated by small and medium-sized deliveries. There was a substantial decrease in the revenue of the 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 almost at the previous year’s level. As expected, there were major customer deliveries in Sweden and Norway during the third quarter and as a result, the revenue in July-September was substantially higher than in the same period the previous year. Despite this, the revenue of the Business Unit Sweden & Norway during the first nine months of the year was well below that of the previous year's levels. As a result of this and the decrease in the revenue in Russia, the consolidated revenue decreased in the review period.
The consolidated operating result for the third quarter was EUR 3.0 million (2.2) and the figure for the first nine months of the year was EUR 2.0 million (1.2). The Group's operating result tends to accumulate more during the second half of the year as a result of normal seasonal fluctuations and this year the trend will be accentuated by the fact that there are large projects taking place during the latter half of the year. Efficiency improvement measures and growth in revenue helped the Business Unit Finland to improve its operating result compared with the same period in 2014. As a result of strong revenue, the operating result of the Business Unit Sweden & Norway was slightly positive in the third quarter. However, the cumulative operating result remained well below zero. In the Business Unit International, both the third quarter operating result and the operating result for the review period were negative. Efficiency improvement measures were initiated in the Business Unit Poland (part of the Business Unit International) in October and the aim of these is to revamp the sales structure and to speed up the process of spreading the word about Martela's Lifecycle strategy.
The Group introduced a number of adjustment and efficiency improvement measures in 2014 and 2015. They have helped the Group to achieve substantial reductions in fixed costs on a year-on-year basis. Furthermore, the sales margin on the Group's products was slightly higher than in 2014. These measures helped the Martela Group to improve its operating result despite a drop in revenue compared with the same period last year.
In April Martela launched a new savings programme with the aim of annually reducing costs by EUR 4 million by the end of 2016, so that the savings will take full effect in 2017. As part the programme, the company launched statutory employee negotiations in April that included all office employees at Martela Corporation. The measures agreed in the negotiations will help to generate annual savings of about EUR 1.2 million by the end of 2016. At the beginning of October, a decision was made to reorganise the sales operations in Poland and these measures are expected to bring savings of about EUR 0.5 million in 2016. During the year under review, Martela has also reorganised its office premises, which will help to reduce annual costs by about EUR 0.6 million. Some of the reorganisation will take place in 2015 and it will have full impact in 2016. Thus, the measures already introduced will allow the Group to achieve EUR 2.3 million of the targeted savings of EUR 4 million. The search for sources of additional savings is continuing.
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 1.5 million (0.7), and the result after taxes was EUR 1.0 million (0.4).
Martela’s full interim report for January - September 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
Matti Rantaniemi
CEO
ATTACHEMENT: Martela’s interim report January – September 2015
For more information, please contact
Matti Rantaniemi, CEO, tel. +358 50 465 8194
Markku Pirskanen, CFO, tel. +358 40 517 4606
Distribution
Nasdaq Helsinki
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