Panostaja Oyj PANOSTAJA GROUP FINAL STATEMENT BULLETIN

Stock Exchange Bulletin, 16 Dec. 2010 -

at 10:00 PANOSTAJA GROUP FINAL STATEMENT BULLETIN 1 NOV. 2009 – 31 OCT. 2010  

-    Net turnover MEUR 140.5 (MEUR 120.0), growth 17%

-    Operating loss MEUR -1.6 (MEUR 4.3) -    Operating loss for the first quarter was MEUR -2.6, operating profit for the second quarter was MEUR 0.0, operating profit for the third quarter was MEUR 0.8 and operating profit for the fourth quarter was MEUR 0.2.

-    Earnings per share (undiluted) -6 cents (2 cents)

-    Equity per share EUR 0.61 (EUR 0.80)

-    Equity ratio 31.9% (37.9%)

-    The growth in net turnover resulted from the business acquisitions realised during the current and previous financial periods, the effect of which was MEUR 27.6 on the net turnover for the period under review.

-    Operating loss in the Environmental Technology segment (MEUR -4.5) and segments serving technology industries decreased Group profitability overall. Operating loss in the Environmental Technology segment included a MEUR -0.7 second quarter sales loss resulting from an asset deal as well as a consolidated goodwill write-down of MEUR 1.5.

-    Operating profit of business areas is expected to improve significantly due to which the Group's operating profit will be clearly positive. 

-    The Board of directors proposes dividend of €0.05 per share  GROUP  FINANCIAL DEVELOPMENT Panostaja Group Panostaja Group's net turnover for the past financial period was MEUR 140.5 (MEUR 120.0). The growth in net turnover resulted from the business acquisitions realised during the current and previous financial periods, the effect of which was MEUR 27.6 on net turnover for the period under review, and from the recovery of the construction market. Group net turnover was particularly affected by the continued slump in the technology sector as well as a decline in net turnover for the Environmental Technology segment resulting from a still unfavourable market situation.  

Of the Group segments engaged in business, nine exceeded and four fell below the net turnover for the previous year. Net turnover rose in the following segments: Spare Parts for Motor Vehicles, Digital Printing Services, Fittings, Supports, Value-Added Logistics, HEPAC Wholesale, Carpentry Industry, Takoma and Security. Net turnover declined in the following segments: Fasteners, Heat Treatment, Technochemical and Environmental Technology. The Group's operating loss was MEUR -1.6 (MEUR 4.3 operating profit) and profit before taxes was MEUR -4.0 (MEUR 2.1). The operating profit margin was -1.1%(3.6%). The net financing costs of the Group were approx. MEUR -2.6 (MEUR -2.3). The average total number of personnel in the Group during the period under review was 967 (790) people. At the end of the period, the total number of Group employees was 970 (921). Of the thirteen Group segments engaged in business, five showed an increase and eight a decrease in operating profit from the previous year. Segments showing an improvement in profitability were Security, Digital Printing Services, Spare Parts for Motor Vehicles, Carpentry Industry and Technochemical. Other segments showed a decline. Profitability was weakened by the operating loss in the Environmental Technology segment and the reduced profitability of segments serving the technology industry: Takoma, Value-added Logistics and Heat Treatment. Operating loss in the Environmental Technology segment (MEUR -4.5) included a MEUR -0.7 sales loss resulting from an asset deal made on 9 April 2010 as well as a consolidated goodwill write-down of MEUR -1.5. Group real estate disposals realised in the previous financial period affected the MEUR 4.2 operating profit for the period under review.

Segment inspection  

As of the beginning of the financial period 1 November 2009 – 31 October 2010, the business operations of Panostaja Group will be reported in fourteen segments: Safety, HEPAC Wholesale, Takoma, Digital Printing Services, Fittings, Value-added Logistics, Heat Treatment, Spare Parts for Motor Vehicles, Environmental Technology, Carpentry Industry, Supports, Fasteners, Technochemical and Others (parent company). The new reporting segments were formed because they produce various products and services amongst themselves.

The Group's primary segment reporting is based on the business segments. Net turnover in the Security segment increased from MEUR 18.8 to MEUR 21.9. Operating profit grew from MEUR 0.4 to MEUR 1.2. The development of both net turnover and operating profit was greatly affected by the acquisition of Bewator Oy and by the consolidation of its business operations into the operations of the Security segment.  Net turnover in the HEPAC Wholesale segment increased from MEUR 17.3 to MEUR 19.6, while the operating profit amounted to MEUR 0.3 (MEUR 1.6). The operating profit for the previous financial period included MEUR 1.4 of sales profit from real estate.

Growth in the segment's net turnover and profitability is especially supported by positive trends in renovation construction and the recovery of the construction market. Net turnover in Takoma segment grew from MEUR 15.4 to MEUR 19.0 while operating loss increased from MEUR -0.3 to MEUR -1.7. On 31 October 2010, Takoma completed a business acquisition, in which the entire share capital of Moventas Parkano Oy was acquired. The company (Takoma Gears Oy) was integrated into the Group at the beginning of April, which affected the increase in net turnover. The result for the period under review was burdened by the valuation at fair value of the acquired assets and by direct acquisition costs in the amount of MEUR 0.5. The slump among customers in the technology industry had a negative impact on both the turnover and operating loss, and the later improvements in the customers' situation did not have time to affect the segment's fourth quarter result.  Net turnover for the Digital Printing Services segment grew from MEUR 13.5 to MEUR 21.7 and operating profit from MEUR 2.0 to MEUR 3.2. This growth was the result of both the acquisition of Sokonet and positive developments in operative functions. The Digital Printing Services segment grew with the business acquisition on 3 June 2010 in which Domus Print Oy changed from an affiliate to a subsidiary. The acquisition had a positive effect on both the net turnover and operating profit of the segment.  Net turnover in the Fittings segment increased from MEUR 11.7 to MEUR 12.3.

Operating profit dropped from MEUR 1.2 to MEUR 0.7. In both construction and fixture supports, customer demand is slowly recuperating, thus improving net turnover. In June, the company moved to a new rented logistics centre located in Seinäjoki and centralised the operations of the segment into a single organisation and location. Net turnover in the Value-added Logistics segment grew from MEUR 9.4 to MEUR 15.1, but operating income dropped from MEUR 0.3 to MEUR -0.5. The operating profit for the previous financial period included MEUR 0.7 of sales profit from real estate. Net turnover was increased by the corporate acquisition of CLO Pakkaukset Oy and decreased by the low volume of customers operating in the technology sector as well as by operational and organisational integration costs. Net turnover in the Heat Treatment segment declined from MEUR 7.4 to MEUR 6.6, and the MEUR 0.5 operating profit dropped to MEUR 0.2. The demand for Heat Treatment services and investments in new equipment stock are low due to the slump in the technology sector. Net turnover in the Spare Parts for Motor Vehicles segment grew from MEUR 7.3 to MEUR 8.5 and operating profit increased from MEUR 0.7 to MEUR 0.8. A decline in the sale of new vehicles and the age distribution of Mercedes-Benz and BMW passenger cars have resulted in an increased demand for original spare parts from the manufacturers in question. 

Net turnover in the Environmental Technology segment declined from MEUR 6.4 to MEUR 2.6. Operating loss grew from MEUR -2.2 to MEUR -4.5. Due to the recession, investments in environmental technology have plateaued since the end of 2008. Planned or tendered client projects have been postponed. The company sold its light and medium-duty product group via an asset deal. The asset deal resulted in a MEUR -0.7 sales loss. Furthermore, as a result of a devaluation test, a MEUR -1.4 goodwill write-down was made as regards the Environmental Technology segment.     Net turnover in the Carpentry Industry segment grew from MEUR 4.8 to MEUR 5.3 while operating loss increased from MEUR 0.1 to MEUR 0.4. The improvements in net turnover and profitability are due to expanded market share and improvements in operative functions. In the Supports segment, net turnover increased from MEUR 3.3 to MEUR 3.6, whereas operating profit dropped from MEUR 1.0 to MEUR 0.3. The recovery of new construction, which began in spring, increased the demand for supports.The operating profit for the previous financial period included MEUR 0.8 of sales profit from real estate.

 In the Fasteners segment, net turnover remained level with the previous financial period at MEUR 2.8. Operating loss grew from MEUR -0.0 to MEUR -0.3. The activity level of clients operating in the segment's technology sector is still low. Net turnover in the Technochemical segment declined from MEUR 2.5 to MEUR 2.0. Operating loss decreased from MEUR -0.4 to MEUR -0.1. The economic recession has reduced the demand for technochemical products, particularly in the machine shop product group. However, the cost structure was successfully adapted to the lowered demand. In the Others segment the operating profit for the previous financial period included MEUR 1.1 of sales profit from real estate.   INVESTMENTS AND FINANCING The Group's gross investments for the period under review amounted to MEUR 15.7 (MEUR 23.0). The largest single investments made by the Group were the acquisitions of Moventas Parkano Oy and Domus Print Oy. The Group's liquidity was good and the cash flow from business operations was positive (MEUR 1.3). The Group's liquid assets and securities for the period under review amounted to MEUR 11.4 (MEUR 28.3). The Group's equity ratio was 31.9% (37.9%) and net debts with interest totalled MEUR 51.8 (MEUR 30.2). Panostaja Oyj's convertible capital as net liabilities amounted to MEUR 17.2 (MEUR 17.2).  The Annual General Meeting (27 January 2010) approved the dividend distribution proposed by the Board. The dividend paid was EUR 0.12 per share. The record date for dividend distribution was 1 February 2010 with payment from 8 February 2010. The dividend paid to the parent company's shareholders totalled MEUR 5.5. 

The net debt ratio was 123.1% (58.9%). The return on equity was -6,9% (2.6%). The return on investment was -1,1% (4.7%).

GROUP STRUCTURE CHANGES In March 2010, Panostaja Oyj's subsidiary Takoma Oyj acquired the entire share capital of transmission component manufacturer Moventas Parkano Oy. Moventas Parkano employs 103 people, and the company's net turnover from 1 January to 31 December 2009 was MEUR 22.6.

Panostaja Oyj restructured its Environmental Technology operations in April 2010 and sold the Ecosir Group's light and medium-duty product groups to companies owned by Harri Salomaa, a significant minority shareholder in Ecosir Group, in an asset deal. The restructuring significantly streamlined the cost structure of the Ecosir Group. 25 of the company's employees were transferred to the buyer's company as existing employees. In June 2010, Panostaja Oyj subsidiary Digiprint Finland Oy acquired a 37.5% shareholding in digital printing service provider Domus Print Oy from Karhukopio Oy. As Digiprint Finland already owned a 37.5% shareholding in Domus Print, the acquisition increased the Panostaja Group shareholding in Domus Print to 75%, thus changing the company from an affiliate to a subsidiary. In September, Digiprint Finland Oy acquired Managing Director Risto Jalo's 25% share in Domus Print Oy via a share trade, in which Jalo subscribed for Digiprint Finland Oy's shares. Domus Print Oy's net turnover for 2009 was MEUR 4.3, and it employs about 40 persons. The company is also the main owner of the translation agency Lingoneer Oy.  ADMINISTRATION AND ANNUAL MEETING 

Panostaja Oyj's Annual General Meeting was held on 27 January 2010 in Tampere. Matti Koskenkorva, Jukka Ala-Mello, Hannu Tarkkonen, Hannu Martikainen and Hannu Ketola were re-elected to Panostaja Oyj's Board of Directors along with new member Satu Eskelinen. Immediately after the AGM, in the Board's organisational meeting, Matti Koskenkorva was appointed Chairperson with Jukka Ala-Mello as Vice-Chairperson. APA Eero Suomela and authorised body of public accountants PricewaterhouseCoopers Oy were selected as general chartered accountants with APA Janne Rajalahti as the accountant with main responsibility.

The AGM approved the financial statement for 1 November 2008–31 October 2009 and the proposal of the Board to transfer the profit for the financial period to retained earnings and issue a dividend of EUR 0.12 per share. The record date for dividend distribution was 1 February 2010 with payment from 8 February 2010. The AGM also discharged from liability the members of the Board and the Managing Director.

Moreover, the AGM cancelled the authorisation it had given on 26 January 2009 for acquisition of the company's own shares and authorised the Board of Directors to decide on the acquisition of these shares, so that personal shares would be acquired together or in several instalments so that, on the basis of the authorisation, it would be possible to acquire personal shares to a maximum of one-tenth of all the company's shares, together with the personal shares held by the company or as security by others in its subsidiaries. Shares, other than holdings of the shareholders, are acquired in relation to the prevailing market price in public trading on NASDAQ OMX Helsinki Oy. The acquisition of shares is in compliance with the rules of NASDAQ OMX Helsinki Oy and Euroclear Finland Oy's rules. The authorisation is valid for 18 months from the date of its issue.  The Board of Directors has not used the authorisation granted by the AGM to acquire the company's own shares during the review period. 

In addition, the AGM approved the proposal of the Board to revise Section 8 of the Articles of Association as follows:

"Section 8 - Invitation to Annual Meeting and participation therein The invitation to the Annual Meeting must be delivered to the shareholders at the earliest two (2) months and at the latest three (3) weeks prior to the meeting, and at least nine days prior to the Annual Meeting's record date by registered letters posted with the addresses marked in the company's list of shareholders, in another demonstrable manner, or by publishing the invitation to the meeting in at least one national newspaper specified at the Annual Meeting. In order to be able to participate in the Annual Meeting, the shareholder must register with the company no later than the day mentioned in the invitation to the meeting, which may be no earlier than ten (10) days prior to the Annual Meeting." 

Panostaja Oyj's Financial Director Veli Ollila resigned from his post in September 2010 and took up duties as the manager of ThermiSol Oy's Element business unit as of December 2010.

 Simo Mustila M.Sc. (Econ. and Bus. Adm.), MBA was appointed as the Financial Director of the Panostaja Group. Mustila will be in charge of the Group's financial and administrative matters. Mustila has previously worked as Vice President of Corporate Finance and Administration of the DNA Group, and his latest post was F&I Manager at Delta Motor Group Oy.

SHARE CAPITAL AND OWN SHARES

At the close of the period under review, Panostaja Oyj's share capital was EUR 5,529,081.60. The total number of shares is 47,403,110.

In accordance with decisions made by the AGM on 26 January 2009 and the Board of Directors, Panostaja Oyj awarded Board members a total of 5,585 shares as meeting remuneration on 18 December 2009 as well as a total of 7,023 shares on 11 March 2010, 7,222 shares on 10 June 2010 and 6,875 shares on 9 September 2010 in accordance with the decisions made by the AGM on 27 January 2010 and the Board of Directors.

At the end of the review period, the company held 1,289,209 own shares. At the end of the reporting period, the number of own shares corresponded to 2.7 per cent of the total number of shares and voting rights.   CONVERTIBLE CAPITAL LOAN At the end of the reporting period, the amount of convertible capital loan from 2006 was EUR 17,212,500 and this enables the subscription for a total of 10,125,000 shares. During the review period, capital loan was not used to subscribe for new shares.

 SHARE PRICE DEVELOPMENT AND SHARE OWNERSHIP Panostaja Oyj's share price fluctuated between EUR 1.32 and EUR 1.75 during the period under review.The exchange of shares totalled 5,301,507 individual shares, which represents 11.2% of share capital. The January share closing rate was EUR 1.46. At the end of the period, the company's market capitalisation stood at MEUR 69.2 and the company had 4,050 shareholders (3,910). 

During the period under review, Panostaja Oyj received two notifications pursuant to Chapter 2, Section 9 of the Securities Markets Act concerning changes to ownership in a company.

Due to a debenture loan issue on 15 January 2007, the Etera Mutual Pension Insurance Company's potential future shareholding in Panostaja Oyj is a total of 6,250,000 shares and votes, provided that Etera makes full use of its 2006 exchange rights for Panostaja's convertible capital loan. The shareholding is equivalent to 11.98% of the number of Panostaja Oyj's post-exchange shares and votes, taking into consideration the shares issued by the date of the bulletin. The Fennia Mutual Pension Insurance Company's potential future shareholding in Panostaja Oyj is a total of 4,324,576 shares and votes, provided that Fennia makes full use of its 2006 exchange rights for Panostaja's convertible capital loan. The shareholding is equivalent to 8.74% of the number of Panostaja Oyj's post-exchange shares and votes, taking into consideration the shares issued by the date of the bulletin. BOARD'S DIVIDEND PROPOSAL Panostaja Oyj's Board of Directors has decided to propose to the AGM that a dividend of EUR 0.05 per outstanding share be paid for the period under review. According to the proposal, the dividend will be paid to those shareholders who, on the recording date 1 February 2011, are on the Euroclear Finland Oy's list of shareholders. The proposal states that the dividend will be distributed on 8 February 2011 and that dividend will not be paid on own shares held by the company. 

Furthermore, the Board proposes that the Annual General Meeting authorise the Board to use its discretion to decide on a potential distribution of assets to shareholders – the financial situation permitting –either as a dividend of profits or asset distribution from the invested unrestricted equity fund. The maximum total value of the asset distribution is EUR 4,000,000.

The authorisation is proposed to include the right of the Board to decide on all other terms and conditions relating to the above-mentioned asset distribution.

The authorisation is proposed to remain valid until the next AGM.

Panostaja Oyj's AGM will be held on 27 January 2011 in Tampere.  IMMINENT RISKS AND FACTORS OF UNCERTAINTY The most significant risks of the Panostaja Group have been described in the financial statement. The risks the Group faces in the near future are mainly tied to the uncertainty resulting from the global economic situation as well as its possible impact on achieving the goals set for the various segments. The instability of the economic situation may lead to a recurrent decline in customer demand as well as the postponement of major investments, particularly in segments serving the technology sector, which may result in a need for consolidated goodwill write-downs. In the current financial period, credit loss risks are a significant uncertainty factor in some segments. The availability of financing may become an uncertainty factor if the general economic situation, particularly in the euro area, causes liquidity problems on the financial market.   

EVENTS FOLLOWING THE FINANCIAL PERIOD

On 22 November Panostaja Oyj's subsidiary Takoma Oyj issued a bulletin stating that it estimated the operating loss for the financial period to total approx. MEUR -1.7. Even though Takoma Oyj's operating profit for the period has a significant impact on Panostaja Group's operating profit, Panostaja Oyj's Board decided to maintain the Group's profit projection. Panostaja Group's operating loss for the period 11/2009–10/2010 was estimated at approx. MEUR -1.5.

  PROSPECTS FOR THE NEXT FINANCIAL PERIOD 

The Panostaja group will continue to focus on its business idea following its fundamental business strategy and on the development of existing business segments. In the coming years, the retirement of the 'baby boom' generation, ever worsening changes in the business environment and globalisation will bring to the market a large number of companies that can be acquired. Active development of shareholder value and financial opportunities create a solid foundation for significant operational expansion. The increasing range of SMEs operating in traditional fields enables both expansion into new business areas and growth in existing ones.

Economic trend expectations in the fields of existing business areas are strongly tied to the prospects of client enterprises. Although the trend expectations have generally moved in a positive direction, a move toward permanent economic growth is still uncertain, particularly due to the credit crisis in the euro area. On the other hand, the weakening of the euro is gives competitive advantage to the Group's client companies that engage in export. In the various business areas of Panostaja Group, the prospects still vary from cautiously positive to positive.

Even if the economic trends have already taken a permanent turn for the better, the market also offers sufficient opportunities for corporate acquisitions. Indeed, the objective of Panostaja's growth strategy is to achieve growth through controlled corporate acquisitions, especially in existing business areas. A more permanent turn in economic trends would also enable the divestment of some business areas.

Panostaja Group net turnover for the period under review is expected to exceed the turnover for the previous period. Operating profit of business areas is expected to improve significantly due to which the Group's operating profit will be clearly positive.

  Panostaja Oyj Board of Directors  For further information, contact Juha Sarsama, Managing Director: tel. +358 (0)40 774 2099. Panostaja Oyj  Juha SarsamaManaging Director All forecasts and assessments presented in this financial statement are based on the current outlook of the Group and the Management of the various business areas with regard to the state of the economy and its development, and the results attained may even be substantially different. The numbers in the statement have been audited.  

The nominal or book value has been used as the value of liabilities.

SEGMENT INFORMATION

As of the beginning of the financial period, the Group has implemented the renewed IFRS 8 Operation Segments standard.

The Group reported on fourteen business segments from the review period. 

Panostaja Oyj is an active majority shareholder in Finnish SMEs. The core of our operations is based on Finnish enterprise and long-term company development. Together with our entrepreneur partners, we help build companies to become industry leaders, thus creating Finnish success stories.

At present, the firm maintains operations in thirteen business areas. Oy Alfa-Kem Ab (Technochemical) manufactures and markets industrial chemicals, cleaning agents and institutional kitchen agents. Ecosir Group Oy (Environmental Technology) specialises in waste and property management equipment solutions.

Flexim Security Oy (Security) is a specialist in security technology and services, locking, door automation and access control products and solutions. Heatmasters Group (Heat Treatment) offers thermal treatment services for metals in Finland and internationally in addition to producing, developing and marketing heat treatment technology. KL-Varaosat (Spare Parts for Motor Vehicles) is an importer, wholesale dealer and retailer for original spare parts and supplies intended for Mercedes Benz and BMW cars. Kopijyvä Oy and Domus Print Oy (Digital Printing Services) combined are one of Finland's largest companies offering digital printing services. Lämpö-Tukku Oy (HEPAC Wholesale) specialises in HEPAC wholesale operations. Suomen Helakeskus Oy (Fittings) is a significant wholesale dealer in Finland, specialising in construction- and furniture-based fixtures.

Suomen Kiinnikekeskus Oy (Fasteners) is a fixture supply retailer. Matti-Ovi Oy (Carpentry Industry) manufactures and markets solid wood interior doors as its main product. Takoma Oyj (Takoma) is a machine shop group with an entrepreneurial business model and is registered on the stock exchange. Toimex Oy (Supports) manufactures and sells supports for the HEPAC industry. Vindea Oy (Value-added Logistics) specialises in added-value logistics services for the Finnish metal industry.