The Jaakko Pöyry Group's net sales for the period under review were EUR 302.0 million (300.0 million during the same period 2002). The profit before extraordinary items was EUR 27.8 (13.3) million, including a gain of EUR 11.0 million from the sale of Jaakko Pöyry Group Oyj's headquarter property. The profit before extraordinary items for the third quarter was EUR 6.2 (3.1) million.
The Group's consolidated balance sheet is healthy. The equity ratio was 53.0 (48.0) per cent and the net debt/equity ratio (gearing)
-26.9 (7.9) per cent.
The Jaakko Pöyry Group's earnings per share were EUR 1.31 (0.59) and the return on investment 28.8 (13.1) per cent.
The Group's order stock was EUR 324.9 million. It has increased by EUR 16.5 million during the period under review.
The Group's profit before extraordinary items will improve clearly in 2003. In addition, the earnings will be improved by the EUR 11 million gain from the sale of the headquarter property.
The Group's Board of Directors foresees the proposed dividend for 2003 to be in the range of EUR 0.90-1.10 per share.
Business groups
Forest Industry
Net sales for the period under review were EUR 129.3 (132.1) million. Operating profit amounted to EUR 11.5 (11.8) million. Taking into account the market situation, the result was good. Investment activity in the forest industry has remained low and demand for consulting services has also been depressed. The business group's order stock has remained high, amounting to EUR 91.6 million (EUR 85.2 million at the end of 2002). The most significant new order received in the third quarter was the pulp mill project for Veracel Celulose S.A. in Brazil. This project added about EUR 10 million to the order stock.
Energy
Net sales for the period under review were EUR 72.3 (82.8) million. Operating profit was EUR 2.8 (-2.2) million. The improvement in operating profit is due to a strengthening of the business group's market position and the cost-cutting programme implemented during 2001-2002. The business group's order stock amounted to EUR 107.0 (123.8) million. The decrease is due to the low investment activity in this sector and a decline in the order stock for turnkey projects.
Infrastructure & Environment
Net sales for the period under review were EUR 101.0 (85.9) million. Operating profit was EUR 6.2 (5.9) million. The business group's profitability has remained good, though the strong growth has caused its relative profitability to decline slightly. The order stock was EUR 126.3 (99.4) million. The order stock was improved by several transportation system projects in Western Europe, Asia and Latin America.
Other operations
On February 5, 2003 Nordisk Renting Oy, a subsidiary of Nordea Bank, bought Jaakko Pöyry Group Oyj's headquarter property in Vantaa, Finland. At the same time, Jaakko Pöyry Group Oyj and Nordisk Renting Oy signed a rental agreement for the property extending over the next 20 years.
Before the present deal, the Jaakko Pöyry Group rented its headquarter office building from Nordea Finance Ltd, with the option to buy back the property. Following the deal, the entire office property, including the Jaakko Pöyry Group's headquarter office building, the site and half of the Martinparkki Oy car park were taken over by Nordisk Renting Oy. Jaakko Pöyry Group Oyj has an option to buy back these at a later date.
The deal is a continuation of Jaakko Pöyry Group Oyj's effort to focus its financial resources on the company's core business, consulting and engineering. The deal improved the Jaakko Pöyry Group's profit before extraordinary items by EUR 11 million for the period under review.
Group structure
Efforts to further develop the Group's structure and business operations continued during the period under review.
Jaakko Pöyry Group Oyj reshaped its organisational structure as of May 1, 2003 by integrating the forest industry consulting and engineering businesses into one business group. Following the integration the Jaakko Pöyry Group consists of three business groups: Forest Industry, Energy, and Infrastructure & Environment. Each business group offers a full range of consulting, investment planning and implementation as well as maintenance planning and operations improvement services to its clients in the entire life-cycle of their business. The target of the new structure is also to streamline overlapping operations and to improve the efficiency of business operations.
Acquisitions
Forest Industry
The business group has in March acquired the business of Redbeard Consulting B.V. Redbeard Consulting's line of business included strategic and IT consulting services to the European paper industry. The company employed 4 people, who have taken up new positions within the Forest Industry business group.
Energy
The business group has in June expanded its energy consulting operations by acquiring ILEX Energy Consulting Ltd, situated in Oxford, United Kingdom. The company's net sales for 2002 were EUR 3.7 million. With this acquisition Electrowatt-Ekono will become the leading energy management consultant serving the European energy sector. ILEX Energy Consulting Ltd employs 25 people.
Infrastructure & Environment
In February, JP-Terasto Oy acquired HT-Rakennuttajat Oy of Turku, Finland, thereby expanding its operations in the southwestern parts of the country. HT-Rakennuttajat specialises in project and construction management services. HT-Rakennuttajat Oy employs 10 people.
In April, the business group acquired Fintact Oy, Finland, which specialises in soil, bedrock and groundwater studies. Fintact Oy employs 11 people.
In June, the business group acquired 74 per cent of the shares in TransTec Consult GmbH. The company is active in Germany as well as internationally and specialises in operation, system and organisation consulting for light rail train systems. In 2002 the company's net sales amounted to EUR 3.0 million and it employs 25 people.
In September, the business group acquired an additional 50 per cent stake in EPStar Oy from Elisa Oyj. Following the acquisition, Jaakko Pöyry Group Oyj owns 80 per cent of EPStar Oy, which focuses on consulting services and network planning for the telecommunications sector. EPStar Oy's net sales were EUR 2.5 million in 2002 and it employs 25 people.
Taxation
According to a decision given on August 15, 2003, the Supreme Administrative Court of Finland has ruled that Jaakko Pöyry Group Oyj's subsidiary Electrowatt Infra AG is not a controlled foreign company as defined in the Controlled Foreign Company (CFC) tax legislation.
The decision made by the Supreme Administrative Court on August 15, 2003 confirms the earlier decision made by the Administrative Court of Helsinki. The decision is final and no appeal is allowed. In practical terms the decision confirms the tax treatment of the Jaakko Pöyry Group informed in the Notes to the Financial Statements 2002.
Order stock
The Group's order stock is good. It has increased by EUR 16.5 million during the period under review, totalling EUR 324.9 million at the end of September (EUR 301.8 million at the end of September 2002).
Capital expenditure
The Group's capital expenditure for the period under review totalled EUR 12.9 (9.0) million, of which EUR 6.6 (6.5) million consisted of computer software, systems and hardware. Capital expenditure due to business acquisitions was EUR 6.3 (2.5) million.
Share capital and shares
The total number of shares at the end of 2002 was 13 791 601. During the period under review 45 150 new shares were subscribed based on warrants pursuant to the Bond Loan with Warrants of 1998. In addition, 93 800 new shares were subscribed in October. Following these subscriptions, the number of shares totals 13 930 551.
The warrants related to the Bond Loan with Warrants issued by Jaakko Pöyry Group Oyj in 1998 to the Group personnel and the parent company's Board of Directors carry subscription rights for a total of 1.3 million of the company's shares, with the subscription period having begun partly (390 000 shares) on April 1, 2000, partly (390 000 shares) on April 1, 2001, and partly on April 1, 2002 (520 000 shares). The subscription period ends for all warrants on April 30, 2005. A total of 569 565 shares have been subscribed based on the warrants.
The Annual General Meeting on March 5, 2003 authorised the Board of Directors to decide on an increase of the share capital by a new issue and/or by taking a convertible loan and/or by issuing option rights so that based on the new issue, the convertible bonds and option rights, the share capital can be increased by a maximum of EUR 1.0 million by issuing for subscription a maximum of 1.0 million new shares. The authorisation is in force until March 5, 2004.
The Annual General Meeting authorised the Board of Directors to acquire and convey the company's own shares to a maximum of 689 500, which is less than 5 per cent of the company's share capital. The Board of Directors decided on March 5, 2003 to exercise the authorisations. The authorisations are in force until March 5, 2004. The company has acquired a total of 152 700 own shares during the period February 18 - June 19, 2003. The average acquisition price was EUR 14.63. During 2002 a total of 10 000 shares were acquired.
The company's shares are quoted on the Helsinki Exchanges. The average trading price during the period under review was EUR 15.65, with a high of EUR 19.00 and a low of EUR 13.00. A total of 2.5 million of the company's shares (equalling 18.0 per cent of the total number of shares) were traded, corresponding to a turnover of EUR 38.9 million.
The Annual General Meeting approved the Board of Directors' proposal that a dividend of EUR 0.60 be paid per share for 2002 (EUR 0.60 for 2001), totalling EUR 8.3 million. The dividend was paid on March 17, 2003.
Financial position and dividend
The Jaakko Pöyry Group's financing structure is healthy. The Group's cash in hand and at banks exceeds its interest-bearing debts by EUR 30.9 million. The net debt/equity ratio (gearing) was -26.9 (7.9) per cent and the equity ratio 53.0 (48.0) per cent.
Because the Group's liquidity clearly exceeds the level needed to sustain operations, the Board of Directors intends to propose to the Annual General Meeting in 2004 an increase in the distribution of dividend. The Board will submit its proposal following the completion of the Group's annual accounts for 2003. The dividend to be proposed for 2003 is foreseen to be in the range of EUR 0.90-1.10 per share. In addition to increasing the dividend, the Group intends to use its liquidity to expand operations through acquisitions, to further develop its current operations and to expand its network of offices.
Prospects
The year 2003 will be characterised by slow world economic growth. The world economy has not recovered according to expectations and a return to growth is only foreseen in 2004.
The forest industry's investment activity has remained low and any major recovery is unlikely during the remaining months of the year. Demand for forest industry consulting services has also been depressed. However, demand for consulting and engineering services in emerging markets such as China and Brazil has grown. Taking into account the market situation, the Forest Industry business group's earnings have developed favourably during the period under review. Its order stock has also grown. The business group's operating profit for 2003 will improve compared with 2002.
Demand for services related to renewable energy resources, plant modernisations and consulting expertise is growing in the energy sector. There are also signs of renewed investment activity in the production of primary energy. The Energy business group streamlined its activities in 2001-2002 in line with the reduced demand. As a result of its stronger market position and streamlining actions, the business group's earnings have improved during the period under review, and its operating profit for 2003 will be significantly up on 2002.
The Infrastructure & Environment business group has continued to grow steadily. Its order stock has grown and its operating profit for 2003 will improve slightly compared with 2002.
The Jaakko Pöyry Group's order stock, market position and balance sheet structure have strengthened during the period under review. The earnings for the third quarter were significantly up on 2002. The earnings for the final quarter will also be better than last year's. The earnings for 2003 as a whole will be clearly better than in 2002. In addition, the Group's earnings will be improved by the EUR 11 million gain from the sale of the headquarter property.
Vantaa, October 30, 2003
JAAKKO PÖYRY GROUP OYJ
Board of Directors
JAAKKO PÖYRY GROUP OYJ
Erkki Pehu-Lehtonen
President and CEO
Teuvo Salminen
Deputy to President and CEO
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