Net sales and operating profit increased in the Forest Industry and Infrastructure & Environment business groups. The operating profit of the Forest Industry Consulting business group does not include any major fees from mergers & acquisitions activities. In 2000 the most notable fees from mergers & acquisitions activities materialized during the second quarter of the year.
The Group's liquidity remained good during the period under review. At the end of June, cash in hand and at banks amounted to EUR 33.7 million, and interest-bearing debts to EUR 37.1 million, hence interest-bearing net debts amounted to EUR 3.4 million. The net debt/equity ratio (gearing) was 3.3 (25.7) per cent.
A decision to close down the alcohol plant contracting business, which is a part of the Energy business group, has been made and hence a EUR 6 million expense burdens the result of the Energy business group.
The surplus refunded by the Swedish Staff Pension Society, SPP, which was confirmed during the year 2000 but not taken into account in the operating profit for last year, was booked during the period under review. The refund, totalling EUR 4.9 million, is included on the line "other" in the key figure specification by business group.
Business Groups
Forest Industry
Net sales for the period under review were EUR 78.9 (73.4) million. Operating profit amounted to EUR 9.8 (5.6) million. Profitability
was good. The order stock amounted to EUR 82.2 (71.8 at the end of 2000) million.
Forest Industry Consulting
Net sales for the period under review were EUR 23.8 (27.1) million. Operating profit was EUR 0.6 (3.4) million. The order stock amounted to EUR 23.0 (25.6) million.
The weakening economic growth has resulted in reduced demand for consulting services, affecting the business group's result. A program to improve the business group's internal processes and efficiency was started at the beginning of the year 2001. No major consultancy fees from mergers & acquisitions activities were booked during the period under review.
Energy
Net sales for the period under review were EUR 67.1 (88.7) million. Operating profit was EUR -3.8 (4.7) million. The order stock amounted to EUR 91.2 (111.6) million.
The decrease in net sales was primarily due to the reduced volume of the turn-key projects business. A decision to discontinue the loss-making alcohol plant contracting business has been made. This business generated net sales of about EUR 31 million in the year 2000. The Group's aim is to improve its relative profitability and to raise its operating profit to more than eight per cent of net sales. Because of the nature of the contracting business its profitability is lower than that of consulting and engineering projects. To cover the expenses of discontinuing the alcohol plant contracting business, the business group has booked an expense of EUR 6 million.
Decisions on new energy investments have been postponed due to the weakening economic growth and the uncertainty of the energy market development. This has had an impact on the capacity utilization rate and operating profit of the business group. The business group's capacity has been adjusted to correspond to the demand.
Infrastructure & Environment
Net sales for the period under review were EUR 53.2 (48.9) million. Operating profit was EUR 3.5 (3.1) million. The profitability was in accordance with set targets. The order stock was EUR 96.2 (96.5) million.
The target set for the telecommunications business, which is part of the Infrastructure & Environment business group, is to double the sales volume to EUR 20 million in 2001. Investments in third-generation telecommunications networks in Europe have been postponed by 6 to 12 months. For this reason, the planned doubling of the sales volume will not be achieved in 2001. Because the volume growth target is primarily based on realignment and training of the Group's current project implementation resources, the failure to reach the planned growth target will not weaken the business group's result for 2001.
Group Structure
Efforts to further develop the Group's structure and business operations have continued during the current year. Jaakko Pöyry AB, Sweden, which is a part of the Forest Industry business group, has acquired the remaining shareholding, 49 per cent, of Rigel Konsult i Gävle AB. In response to the globalisation of the forest products industry, the local office network of the Forest Industry business group will be expanded in North America and Western Europe. There are also plans to expand the operations of the Energy and the Infrastructure & Environment business groups.
Order Stock
The Group's order stock has remained good, totalling EUR 292.6 million at the end of June, compared with EUR 305.5 million at the end of the year 2000. The order stock for consulting and engineering work declined by EUR 6.1 million and the order stock for turn-key projects by EUR 6.8 million during the period under review.
Capital Expenditure
The Group's capital expenditure for the period under review totalled EUR 3.7 (6.0) million. The capital expenditure consisted mostly of costs related to computer software, systems and hardware.
Share Capital and Shares
The total number of shares at the end of the year 2000 was 13 724 136. A total of 152 400 new shares were subscribed during the review period based on warrants pursuant to the bond loan with warrants of 1998. In addition, 56 025 new shares were subscribed in July 2001. Following these subscriptions, the number of shares totals 13 932 561.
The bond loan with warrants issued in 1998 to all Jaakko Pöyry Group employees carries subscription rights for a total of 1.3 million of the company's shares, with the subscription period beginning 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 262 275 shares have been subscribed based on the warrants.
The Annual General Meeting on March 8, 2001 authorised the Board of Directors to decide on an increase of 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 8, 2002.
The Annual General Meeting authorised the Board of Directors to acquire and convey the company's own shares to a maximum of 5.0 per cent of the company's share capital. The Board of Directors decided
on March 8, 2001 to exercise the authorisations. The authorisations are in force until March 8, 2002.
The company's shares are quoted on the Helsinki Exchanges. The average trading price during the period under review was EUR 19.59, with a high of EUR 21.00 and a low of EUR 17.00. A total of 1.3 million of the company's shares (equalling 9.2 per cent of the total number of shares) were traded, corresponding to a turnover of EUR 24.7 million.
The Annual General Meeting approved the Board of Directors' proposal that a dividend of EUR 0.60 be paid per share for the year 2000 (EUR 0.45 for the year 1999), totalling EUR 8.2 million. The dividends were paid on March 20, 2001.
Prospects
Jaakko Pöyry Group's order stock has remained firm during the first half year, creating a good basis for the Group's operations for the rest of the year. However the economic conditions have weakened during the spring and summer in Europe, which is the Group's main market area. This might have an impact on the Group's operations toward the end of 2001.
The Forest Industry business group's earnings and order stock are good. The business group's operating profit will increase compared with last year. The Forest Industry Consulting business group's earnings will depend on the general economic development within the forest products industry and particularly on the amount of investment banking success fees and their timing. The business group has currently assignments that will most probably materialise during 2001. The earnings of the Energy business group will depend on investment decisions in the energy sector and their timing. The earnings development of the Infrastructure & Environment business group will be stable during the second half of the year.
The Jaakko Pöyry Group's main financial targets are to improve earnings per share by an average of 15.0 per cent per year and to achieve a return of investment (ROI) of at least 20.0 per cent. The Group's earnings, order stock and market position are good. Although the overall economic environment has declined during 2001, the Group has the potential to achieve its financial targets.
Vantaa, August 2, 2001
JAAKKO PÖYRY GROUP OYJ
Board of Directors
JAAKKO PÖYRY GROUP OYJ
Erkki Pehu-Lehtonen Teuvo Salminen
The full report including tables can be downloaded from the enclosed link.
