OLVI PLC                INTERIM REPORT 31 OCTOBER 2018 at 9:00 am

OLVI GROUP’S INTERIM REPORT, 1 JANUARY TO 30 SEPTEMBER 2018
(9 MONTHS)

INTERIM REPORT IN BRIEF

Olvi Group’s performance was strong also in the third quarter. The Group’s sales volume, net sales and operating profit improved substantially.

January to September 2018 in brief:
- Olvi Group’s sales volume was 551.0 (500.5) million litres
- The Group’s net sales amounted to 298.1 (269.6) million euro
- The Group’s operating profit amounted to 44.4 (40.4) million euro
- Olvi Group’s earnings per share stood at 1.72 (1.54) euro per share
- The equity to total assets ratio was 63.9 (63.4) percent

July to September 2018 in brief:
- Olvi Group’s sales volume was 200.3 (171.9) million litres
- The Group’s net sales amounted to 110.7 (90.7) million euro
- The Group’s operating profit amounted to 18.9 (15.2) million euro
- Olvi Group’s earnings per share stood at 0.77 (0.61) euro per share

Olvi estimates that the Group’s sales volume, net sales and operating profit for 2018 will increase slightly on the previous year.

CONSOLIDATED KEY RATIOS

 7-9/ 20187-9/ 2017Change % / pp1-9/ 20181-9/ 2017Change % / pp1-12/ 2017
Sales volume, Mltr200.3171.916.5551.0500.510.1643.0
Net sales, MEUR110.790.722.0298.1269.610.6345.2
Gross margin, MEUR24.320.120.759.655.08.465.5
% of net sales21.922.2 20.020.4 19.0
Operating profit, MEUR18.915.224.544.440.410.144.7
% of net sales17.116.7 14.915.0 13.0
Net profit for the period16.012.726.136.132.112.436.1
% of net sales14.414.0 12.111.9 10.5
Earnings per share, EUR0.770.6126.21.721.5411.71.73
Gross capital expenditure, MEUR8.35.453.324.215.358.321.7
Equity per share, EUR   11.1010.208.810.41
Equity to total assets, %   63.963.40.564.1
Gearing, %   –5.5–5.8–0.3–7.1

BUSINESS DEVELOPMENT
LASSE AHO, MANAGING DIRECTOR:

Olvi Group’s business development in the third quarter was strong all across the Group. All country-specific operating segments improved their net sales and operating profit in the third quarter. The good development is attributable to increased sales volumes, with the exception of the local market in Estonia.

In Finland, sales volume, net sales and operating profit improved on the corresponding period last year both in the third quarter and for the entire year so far. Good business development was backed by the continuously warm summer in July and August, which boosted the demand for non-alcoholic beverages in particular. Market shares have also increased in several product categories compared to the previous year. The sales of strong beers have continued to increase, and this improves the average price of the sales volume. Our planned expansion to stronger alcoholic product segments has started through acquisitions.

In Estonia, third-quarter performance was clearly better than in the previous year, thanks to substantial cost savings, strong growth in export sales and exceptionally warm summer weather. In the previous year, the third quarter was hampered by excise tax hikes implemented earlier in the year, and as a consequence of this, the Estonian domestic market is challenging. The consumption of brewery products has declined by almost 20 percent while increasing almost 2.5-fold in cross-border trade between Estonia and Latvia during the last two years.

Also in Latvia and Lithuania, sales volume, net sales and operating profit developed favourably during the third quarter. Factors contributing to this included increased export sales, a higher share of premium products in relation to total sales, as well as exceptionally warm weather in the high season. Furthermore, successful launches of new products within the core brands boosted our market share and increased the average price of sales.

In Belarus, sales volume development has been strong in the third quarter as well as the entire year so far. Sales figures have increased both in the domestic market and most particularly in exports to Russia. At the same time, the market position has become stronger particularly in beers and soft drinks. Net sales and operating profit have developed favourably both in euro and particularly in the local currency (BYN); measured in the latter, net sales have increased by 21 percent and operating profit by 25 percent. Accumulated operating profit has already exceeded the previous year’s 12-month total both in euro and in the local currency. The Belarusian economy has continued to revive during the operating year, and in the near term, improved consumer purchasing power is also estimated to increase consumption in product groups where Olvi Group is involved.

We continued to strengthen our growth prospects in new product groups through acquiring a majority holding in The Helsinki Distilling Company in early July. This expands our operations to stronger alcoholic beverages such as gin and whisky, and provides opportunities for growth in the Premium Craft market. The acquisition is in line with our earlier acquisition this year: the private importer of alcoholic beverages Servaali, which brought wines to the product portfolio. Furthermore, we are expanding our own production to strong alcoholic beverages and sparkling wines in the Baltic states.

We are creating strong foundations for Olvi Group’s profitable business through efficiently developing our everyday operations and seeking opportunities of growth in exports, new product categories and business units. During the current year, we have made significant investments in ensuring future sales volumes and profitability. Gross capital expenditure has exceeded 24 million euro, which is 8.1 percent of net sales. Investments have been made in increasing capacity and the level of automation. In addition acquisitions have been made to enter new business areas.

SEASONAL NATURE OF THE OPERATIONS

The Group’s business operations are characterised by seasonal variation. The net sales and operating profit from the reported segments do not accumulate evenly but vary according to the time of the year and the characteristics of each season.

SALES DEVELOPMENT 
 

Sales volume development

Olvi Group’s sales volume in January–September increased by 10.1 percent to 551.0 (500.5) million litres. The sales volume in July–September was 200.3 (171.9) million litres.

From January to September, sales volumes increased in all other countries except Estonia and Latvia. In the third quarter, sales volumes increased in all countries.

Sales volume development by segment:

Sales volume, million litres7-9/ 20187-9/ 2017Change %1-9/ 20181-9/ 2017Change %
Finland (Olvi plc, Servaali Oy and The Helsinki Distilling Company)56.752.67.9161.8151.36.9
Estonia (AS A. Le Coq)31.624.131.087.491.3–4.3
Latvia (AS Cēsu Alus)22.219.215.760.461.4–1.6
Lithuania (AB Volfas Engelman)28.723.223.975.066.113.4
Belarus (OAO Lidskoe Pivo)68.558.517.0184.3154.119.6
Eliminations–7.5–5.7 –17.9–23.7 
Total200.3171.916.5551.0500.510.1

Net sales development

The Group’s net sales in January–September increased by 10.6 percent and amounted to 298.1 (269.6) million euro. Net sales in July–September amounted to 110.7 (90.7) million euro. For the year so far, net sales increased in all units except Estonia.

Net sales development by segment:

Net sales, million euro7-9/ 20187-9/ 2017Change %1-9/ 20181-9/ 2017Change %
Finland (Olvi plc, Servaali Oy and The Helsinki Distilling Company)44.534.927.4119.899.320.7
Estonia (AS A. Le Coq)20.216.422.955.660.1–7.5
Latvia (AS Cēsu  Alus)11.99.623.731.730.24.9
Lithuania (AB Volfas Engelman)13.110.919.833.730.410.7
Belarus (OAO Lidskoe Pivo)24.021.313.064.959.98.4
Eliminations–3.0–2.5 –7.7–10.4 
Total110.790.722.0298.1269.610.6

EARNINGS DEVELOPMENT

The Group’s operating profit in January–September increased by 10.1 percent and amounted to 44.4 (40.4) million euro. Operating profit was 14.9 (15.0) percent of net sales. The operating profit for January–September increased in all units except Estonia. Operating profit in July–September stood at 18.9 (15.2) million euro, which was 17.1 (16.7) percent of net sales.

Operating profit development by segment:

Operating profit, million euro7-9/ 20187-9/ 2017Change %1-9/ 20181-9/ 2017Change %
Finland (Olvi plc, Servaali Oy and The Helsinki Distilling Company)7.35.336.515.311.631.8
Estonia (AS A. Le Coq)5.03.737.212.213.2–7.6
Latvia (AS Cēsu Alus)1.91.620.04.14.02.4
Lithuania (AB Volfas Engelman)1.51.314.43.43.013.0
Belarus (OAO Lidskoe Pivo)3.53.35.69.68.612.6
Eliminations–0.3–0.0 –0.2–0.0 
Total18.915.224.544.440.410.1


The Group’s profit after taxes in January–September increased by 12.4 percent on the previous year, amounting to 36.1 (32.1) million euro. Profit after taxes in July–September amounted to 16.0 (12.7) million euro. Earnings per share calculated from the profit belonging to parent company shareholders stood at 1.72 (1.54) euro in January–September, and the July–September figure was 0.77 (0.61) euro.

BALANCE SHEET, FINANCING AND INVESTMENTS

Olvi Group’s balance sheet total at the end of September 2018 was 365.0 (335.4) million euro. Equity per share at the end of September 2018 stood at 11.10 (10.20) euro. The equity ratio improved again to 63.9 (63.4) percent and the gearing ratio was –5.5 (–5.8) percent.

The amount of interest-bearing liabilities degreased strongly and at the end of September interest-bearing liabilities were 7.5 (16.1) million euro, including current liabilities of 5.9 (8.3) million euro.

Olvi Group’s gross capital expenditure in January–September amounted to 24.2 (15.3) million euro. Finland accounted for 9.5 million euro, the Baltic subsidiaries for 11.7 million euro and Lidskoe Pivo in Belarus for 3.0 million euro of the total.

PRODUCT DEVELOPMENT AND NEW PRODUCTS

Research and development includes projects to design and develop new products, packages, processes and production methods, as well as further development of existing products and packages. The R&D costs have been recognised as expenses. The main objective of Olvi Group’s product development is to create new products for profitable and growing beverage segments.

The Group’s new products are presented by market on each company’s Web site.

PERSONNEL

Olvi Group’s average number of personnel in January–September was 1,805 (1,804). The average number in July–September was 1,875 (1,812).

The Group's average number of personnel remained on the previous year’s level. The number of personnel increased in Belarus and Finland due to the increase in litres manufactured. In Finland, the increase came mostly from fixed-term seasonal employees as well as the personnel of Servaali and The Helsinki Distilling Company being added to the figures.

Olvi Group’s average number of personnel by country:

 7-9/20187-9/2017Change %1-9/20181-9/2017Change %
Finland40636012.83723438.5
Estonia313330–5.2304333–8.7
Latvia196200–2.0197204–3.4
Lithuania215229–6.1213228–6.6
Belarus7456937.57196963.3
Total187518123.5180518040.1

MANAGEMENT AND AUDITORS

The company’s Board of Directors consists of Chairman Pentti Hakkarainen, M.Sc. (Econ), LL.M., Vice Chairperson Nora Hortling, M.Sc. (Econ), as well as members Lasse Heinonen, M.Sc. (Econ), Elisa Markula, M.Sc. (Econ), Päivi Paltola, M.Sc. (Econ), and Heikki Sirviö, Honorary Industrial Counsellor, M.Sc. (Engineering).

The company’s auditor is the authorised public accounting firm PricewaterhouseCoopers Oy, with Juha Toppinen, Authorised Public Accountant, as auditor in charge.

MANAGEMENT

In the review period, the Management Group of Olvi plc consisted of Lasse Aho, Managing Director (Chairman), Ilkka Auvola, Sales Director, Olli Heikkilä, Marketing Director, Pia Hortling, Public Relations and Purchasing Director, Kati Kokkonen, Chief Financial Officer until 31 August 2018, followed by Tiina-Liisa Liukkonen as of 1 September 2018, Lauri Multanen, Production Director, as well as Marjatta Rissanen, Customer Service and Administrative Director.

The Managing Directors of the subsidiaries are:
AS A. Le Coq, Tartu, Estonia – Tarmo Noop
AS Cēsu Alus, Cēsis, Latvia – Eva Sietiņsone 
AB Volfas Engelman, Kaunas, Lithuania – Marius Horbačauskas
OAO Lidskoe Pivo, Lida, Belarus – Audrius Mikšys
Servaali Oy, Helsinki, Finland – Teemu Lehto
The Helsinki Distilling Company, Helsinki, Finland – Séamus Holohan

The Managing Directors of the subsidiaries report to Lasse Aho, the Managing Director of Olvi plc. The Board of Directors of the subsidiaries in the Baltic states and Belarus consists of Lasse Aho (Chairman), Pia Hortling, Tiina-Liisa Liukkonen and Lauri Multanen. The Management Group of each subsidiary consists of the corresponding Managing Director and two to four sector directors.

GROUP STRUCTURE

On 2 July 2018, Olvi plc acquired 67 percent of the stock of The Helsinki Distilling Company, and since that date, the company has been consolidated in Olvi Group. The Helsinki Distilling Company is a rapidly growing company established in 2013 and the first distillery in Helsinki in a century. The acquisition is a part of Olvi’s new growth strategy aimed at strengthening Olvi’s product portfolio both in the domestic alcoholic beverages market and in the international Premium Craft market.

In Olvi Group’s segment reporting, The Helsinki Distilling Company’s business operations are included in the figures for Finland. Detailed information on the acquisition is presented in Note 13 to Table 5 in the tables section of the interim report bulletin.

There were no other changes in Olvi’s holdings in subsidiaries in July–September 2018.

Olvi’s holdings in the subsidiaries are:

 30 Sep 201831 Dec 2017Change
AS A. Le Coq, Estonia100.00100.00-
A/S Cēsu Alus, Latvia99.8899.88-
AB Volfas Engelman, Lithuania99.5899.58-
OAO Lidskoe Pivo, Belarus95.8795.87-
Servaali Oy, Finland80.00-80.00
The Helsinki Distilling Company, Finland67.00-67.00


SHARES

Olvi’s share capital at the end of September 2018 stood at 20.8 million euro. The total number of shares was 20,722,232, of these 16,989,976 or 82.0 percent being publicly traded Series A shares and 3,732,256 or 18.0 percent Series K shares.

Each Series A share carries one (1) vote and each Series K share carries twenty (20) votes. Series A and Series K shares have equal rights to dividends.

Detailed information on Olvi’s shares and share capital can be found in the tables attached to this interim report, in Table 5, Section 4.

The total trading volume of Olvi A shares on Nasdaq OMX Helsinki Ltd (Helsinki Stock Exchange) in January–September 2018 was 1,164,965 (722,192) shares, which represented 6.9 (4.2) percent of all Series A shares. The value of trading was 35.1 (20.9) million euro.

The Olvi A share was quoted on Nasdaq OMX Helsinki Ltd at 28.60 (29.00) euro at the end of September 2018. In January–September, the highest quote for the Series A share was 34.00 (32.49) euro and the lowest quote was 27.00 (25.05) euro. The average price in January–September was 30.10 (28.91) euro.

At the end of September 2018, the market capitalisation of Series A shares was 485.8 (492.6) million euro and the market capitalisation of all shares was 592.5 (600.8) million euro.

The number of shareholders at the end of September 2018 was 11,616 (10,395). Foreign holdings plus foreign and Finnish nominee-registered holdings represented 24.1 (22.4) percent of the total number of book entries and 5.4 (5.1) percent of total votes.

Foreign and nominee-registered holdings are reported in Table 5, Section 9 of the tables attached to this interim report, and the largest shareholders are reported in Table 5, Section 10.

Treasury shares

At the beginning of January 2018, Olvi plc held 41,125 of its own shares as treasury shares. During January–September 2018, the following changes have occurred in treasury shares.

On 9 May 2018, the Board of Directors of Olvi plc has decided to initiate a scheme of acquiring treasury shares based on the authorisation issued by the Annual General Meeting on 16 April 2018. On this basis, the Board will repurchase a maximum of 36,280 Series A shares. The acquired shares shall be used for the purpose of financing or executing any upcoming corporate acquisitions or other arrangements, implementing the company’s incentive schemes or for other purposes decided upon by the Board of Directors. The acquisition of shares started on 11 May 2018 and ended on 8 June 2018. At the start of the repurchase scheme, Olvi held 41,125 Series A shares as treasury shares. After the end of the scheme, Olvi plc holds 77,405 Series A shares as treasury shares. The total purchase price of treasury shares was 1,332,427 euro.

Olvi plc’s Annual General Meeting on 21 April 2017 made a decision concerning abandoned or “ghost” shares held in a joint book-entry account. The decision was that the right to a share incorporated in the book-entry system and placed in the joint account, and the rights that the share carries have been forfeited, and authorised the Board of Directors to take all measures called for by the decision. On this basis, 36,576 shares have been transferred from Olvi’s joint account to treasury shares on 18 May 2017. At its meeting on 28 May 2018, the Board of Directors of Olvi plc decided to cancel the shares that were gratuitously transferred to Olvi on 18 May 2017. The cancellation of shares was recorded in the Trade Register on 15 June 2018.

Olvi Group’s share-based incentive plan for key personnel, the performance period of which was from 1 July 2016 to 30 June 2018, has expired. The target group of the plan included approximately 50 people, and in accordance with the terms and conditions of the plan, rewards

were paid in Olvi plc Series A shares and partially in cash. A total of 35,830 Series A shares were handed over as share-based rewards.

At the end of September 2018, Olvi holds 4,999 treasury shares, which is 0.02 percent of the total number of shares. Treasury shares held by the company itself are ineligible for voting.

Detailed information on treasury shares is provided in Table 5, Section 6 of the tables attached to this interim report.

Flagging notices

During January-September 2018, Olvi has not received any flagging notices in accordance with Chapter 2, Section 10 of the Securities Markets Act.

BUSINESS RISKS AND THEIR MANAGEMENT

Risk management

Risk management is a part of Olvi Group’s everyday management and operations. The objective of risk management is to ensure the realisation of the company’s strategy and secure its financial development and the continuity of business. The task of risk management is to operate proactively and create operating conditions in which business risks are managed comprehensively and systematically in all of the Group companies and all levels of the organisation.

Business risks and uncertainties in the near term

The most substantial factor hampering the predictability of Olvi Group’s business relates to Belarus and its economic and political outlook for the next few years. Furthermore, changes in the Russian economy may impose challenges on the Belarusian operating environment.

Operations in Belarus involve foreign exchange risks arising from the cash flows of purchases and sales in foreign currency, as well as the investment in the Belarusian subsidiary and the conversion of its income statement and balance sheet items into euro. The Group’s other foreign exchange risks can be considered minor.

Other short-term risks and uncertainties are related to the development of the general economic circumstances, changes in the competitive situation, as well as the impacts these may have on the company’s operations. In addition to the risks described above, there have been no significant changes in Olvi Group’s business risks. A more detailed description of the risks is provided in the Board of Directors’ report and the notes to the financial statements, as well as in the Investors/Corporate Governance section of the company’s Web site.

NEAR-TERM OUTLOOK

Olvi estimates that the Group’s sales volume, net sales and operating profit for 2018 will increase slightly on the previous year.

OLVI PLC
Board of Directors

Further information: Lasse Aho, Managing Director, Olvi plc
Phone +358 290 00 1050 or +358 400 203 600

TABLES:
- Statement of comprehensive income, Table 1
- Balance sheet, Table 2
- Changes in shareholders’ equity, Table 3
- Cash flow statement, Table 4
- Notes to the interim report bulletin, Table 5

DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Key media
www.olvi.fi


OLVI GROUP   TABLE 1
      
INCOME STATEMENT     
EUR 1,000     
 7-9/
2018
7-9/
2017
1-9/
2018
1-9/
2017
1-12/
2017
      
Net sales11066190677298085269611345185
Other operating income502604118114382034
Operating expenses–86906–71182–239673–216071–281717
Depreciation and impairment–5360–4918–15146–14613–20755
Operating profit1889715181444474036544747
      
Financial income50723311886477
Financial expenses–932–543–1245–2786–2819
Share of profit in associates0000–69
      
Earnings before tax1801514710435333946542336
Taxes *)–2036–2034–7482–7399–6212
NET PROFIT FOR THE PERIOD1597912676360513206636124
      
Other comprehensive income items that    
may be subsequently reclassified to profit and loss:

 
   
Translation differences related to   
foreign subsidiaries–3285–2681–2260–7599–7278
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD126949995337912446728846
      
      
Distribution of profit:    
- parent company shareholders1586612614356773190235956
- non-controlling interests11362374164168
      
Distribution of comprehensive income:   
 - parent company shareholders126709992334782447428872
 - non-controlling interests243313–7–26
      
Earnings per share calculated from the profit belonging   
to parent company shareholders, EUR     
-  undiluted0.770.611.721.541.73
-  diluted0.770.611.721.541.73

*) Taxes calculated from the profit for the review period.

OLVI GROUP TABLE 2
    
BALANCE SHEET   
EUR 1,000   
 30 Sep 201830 Sep 201731 Dec 2017
ASSETS   
Non-current assets   
Tangible assets193065189816188155
Goodwill261691536115279
Other intangible assets1044950805340
Shares in associates111311831113
Financial assets available for sale543543543
Loans receivable and other non-current receivables264280433
Deferred tax receivables706350379
Total non-current assets232309212613211242
    
Current assets   
Inventories417623598634336
Accounts receivable and other receivables712105841964181
Income tax receivable00235
Liquid assets197312838328625
Total current assets132703122788127377
TOTAL ASSETS365012335401338619
    
SHAREHOLDERS’ EQUITY AND LIABILITIES   
Shareholders’ equity held by parent company shareholders 
Share capital207592075920759
Other reserves109210921092
Treasury shares–1332–228–228
Translation differences–46305–44450–44106
Retained earnings255737234070238242
 229951211243215759
Share belonging to non-controlling interests338712471228
Total shareholders’ equity233338212490216987
    
Non-current liabilities   
Financial liabilities160378254651
Other liabilities48512328
Deferred tax liabilities787689106443
    
Current liabilities   
Financial liabilities591482568573
Accounts payable and other liabilities10956596221100052
Income tax liability186516761885
Total liabilities131674122911121632
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES365012335401338619

 

OLVI GROUP     TABLE 3
       
CHANGES IN SHAREHOLDERS’ EQUITY      


 EUR 1,000
Share capitalOther reservesTreasury shares reserveTranslation differencesRetained earningsShare of non-controlling interestsTotal
        
Shareholders’ equity 1 Jan 2017207591092–228–370222172341714203549
Comprehensive income:       
  Net profit for the period    3190216432066
  Other comprehensive income items:      
  Translation differences   –7428 –171–7599
Total comprehensive income for the period  –742831902–724467
Transactions with shareholders:      
  Payment of dividends    –15561–35–15596
  Share-based incentives    416 416
Total transactions with shareholders  –15145–35–15180
Changes in holdings in subsidiaries:     
  Acquisition of shares from non-controlling interests 258 258
  Change in share belonging to non-controlling interests  –179–425–604
Total changes in holdings in subsidiaries 79–425–346
Shareholders’ equity 30 Sep 2017207591092–228–444502340701247212490
 
EUR 1,000

 
 

Share capital
 

Other reserves
 

Treasury shares reserve
 

 

Translation differences
 

Retained earnings
Share of non-controlling interests 

 

Total
Shareholders’ equity 1 Jan 2018207591092–228–441062382421228216987
Comprehensive income:       
  Net profit for the period    3567737436051
  Other comprehensive income items:      
  Translation differences   –2199 –61–2260
Total comprehensive income for the period  –21993567731333791
Transactions with shareholders:      
  Payment of dividends    –16574–34–16608
  Acquisition of treasury shares–1104   –1104
  Share-based incentives  391 391
Total transactions with shareholders–1104 –16183–34–17321
Changes in holdings in subsidiaries:     
  Obligation to redeem shares from non-controlling interests –1999 –1999
  Change in share belonging to non-controlling interests   18801880
Total changes in holdings in subsidiaries–19991880–119
Shareholders’ equity 30 Sep 2018207591092–1332–463052557373387233338
        
Other reserves include the share premium account, legal reserve and other reserves. 


OLVI GROUP TABLE 4
    
CASH FLOW STATEMENT   
EUR 1,000   
 1-9/20181-9/20171-12/2017
    
Net profit for the period360513206636124
Adjustments to profit for the period251462344629649
Change in net working capital–4334–5511–3764
Interest paid–370–380–491
Interest received299208271
Dividends received344
Taxes paid–6665–3411–4713
Cash flow from operations (A)501304642257080
    
Investments in tangible and intangible 
assets–21609–14162–22108
Sales gains from tangible and intangible 
assets15919151682
Acquisition of shares from non-controlling interests0–345–345
Shares purchased in subsidiaries–1605900
Cash flow from investments (B)–36077–13592–20771
    
Withdrawals of loans1364800
Repayments of loans–18602–8920–11491
Acquisition of treasury shares–110400
Dividends paid–16587–15574–15574
Increase (-) / decrease (+) in current interest- 
bearing business receivables1191515
Cash flow from financing (C)–22526–24479–27050
    
Increase (+)/decrease (-) in liquid assets (A+B+C)–847383519259
    
Liquid assets 1 January286252029720297
Effect of exchange rate changes–421–265–931
Liquid assets 30 Sep/31 Dec197312838328625

OLVI GROUP                                                                                        TABLE 5

NOTES TO THE INTERIM REPORT

This interim report has been prepared in accordance with IFRS recognition and measurement principles but all of the requirements in IAS 34 have not been observed. The accounting policies have been the same as for the financial statements of 31 December 2017, with the exception of the new standards adopted as described below.

Olvi Group has adopted the following new standards as of 1 January 2018:

IFRS 9 Financial Instruments

The adoption of IFRS 9 affects particularly the presentation of information in the financial statements, and has a slight effect on the timing of recognition of credit losses, among other things. The Group has introduced a provision matrix for credit losses on accounts receivable. According to this, a credit loss provision is booked to the amount of expected credit losses over the entire life of an asset when a financial asset is initially recognised on the balance sheet. The special characteristics of each country are accounted for. However, this introduction has not had any substantial effect on the Group’s interim report, and retained earnings have not been retroactively adjusted.

IFRS 15 Revenue from Contracts with Customers

The adoption of IFRS 15 affects the presentation of information in Olvi Group’s financial statements and may affect the recognition of income in special sales situations. The Group’s net sales consist of the sales of beverage products, which are recognised at one specific time when control is transferred. Due to the characteristics of Olvi Group’s business, the adoption of IFRS 15 has not affected the time of income recognition or the amount of net sales.

The Group has provided more information on the adoption of these standards in its annual financial statements for 2017.

The information in the interim report is presented in thousands of euros (EUR 1,000). For the sake of presentation, individual figures and totals have been rounded to full thousands, which causes rounding differences in additions. The information disclosed in the interim report is unaudited.

                                                                                                                       

 

1. SEGMENT INFORMATION
 
SALES BY SEGMENT (1,000 litres) 
      
  7-9/
2018
 7-9/
2017
 1-9/
2018
 1-9/
2017
 1-12/
2017
      
Olvi Group total200283171880551000500526643024
Finland5673152588161826151313199717
Estonia31582241148737791279112794
Latvia2221619195603836139076326
Lithuania2872023187750126613685381
Belarus6850958528184277154068196389
- sales between segments–7475–5732–17875–23660–27583
      
NET SALES BY SEGMENT (EUR 1000) 
      
  7-9/
2018
 7-9/
2017
 1-9/
2018
 1-9/
2017
 1-12/
2017
      
Olvi Group total11066190677298085269611345185
Finland445023492911980899296131457
Estonia2020216435556416012373751
Latvia118959619317113024137512
Lithuania1305910903336923043739155
Belarus2403221271649205990675437
- sales between segments–3029–2480–7687–10392–12127
 

 

 

OPERATING PROFIT BY SEGMENT (EUR 1000)
 
      
  7-9/
2018
 7-9/
2017
 1-9/
2018
 1-9/
2017
 1-12/
2017
      
Olvi Group total1889715181444474036544747
Finland72955343152771159612763
Estonia50333668122071321514734
Latvia19131595409840044437
Lithuania15281335344030443365
Belarus34533269962585509435
- eliminations–325–29–200–4413

                                                                                                       

2. PERSONNEL ON AVERAGE      
       
  7-9/
2018
7-9/
2017
1-9/
2018
 1-9/
2017
1-12/
  2017
 
       
Finland406360372343337 
Estonia313330304333327 
Latvia196200197204196 
Lithuania215229213228228 
Belarus745693719696695 
Total18751812180518041783 
      
 

3.  RELATED PARTY TRANSACTIONS
    
Employee benefits to management
 
Salaries and other short-term employee benefits to the Board of Directors and Managing Director
EUR 1,000     
  1-9/
2018
 1-9/
2017
 1-12/
2017
 
     
Managing Director738606689 
Chairman of the Board515169 
Other members of the Board117104148 
Total906761906 

 

4. SHARES AND SHARE CAPITAL  
   
 30 Sep 2018  %
   
Number of A shares1698997682.0
Number of K shares373225618.0
Total20722232100.0
   
Total votes carried by A shares1698997618.5
Total votes carried by K shares7464512081.5
Total number of votes91635096100.0
   
Votes per Series A share1 
Votes per Series K share20 

The registered share capital on 30 September 2018 totalled 20,759 thousand euro.

Olvi plc’s shares received a dividend of 0.80 euro per share for 2017 (0.75 euro per share for 2016), totalling 16.6 (15.6) million euro. The dividends were paid on 30 April 2018. The Series K and Series A shares entitle to equal dividend. The Articles of Association include a redemption clause concerning Series K shares.

5. SHARE-BASED PAYMENTS

During the review period, Olvi Group has had an active share-based incentive plan for key personnel. The aim of the share-based incentive plan was to combine the objectives of the shareholders and the key employees in order to increase the value of the company, to make the key employees committed to the company, and to offer them a competitive reward plan based on earning the company’s shares.

The share-based incentive plan for key personnel that started in 2016 has been active during the review period and expired on 30 June 2018. The performance period for the share-based incentive plan was two years. The prerequisite for receiving a reward was that a key employee purchases the company’s Series A shares up to the maximum number determined by the Board of Directors. Furthermore, entitlement to a reward was tied to the continuance of employment upon reward payment. Rewards were paid partly in the company’s Series A shares and partly in cash in July 2018. The cash proportion was intended to cover taxes and tax-related costs arising from the rewards to the key employees. The plan was directed to approximately 50 people. The rewards paid on the basis of the plan were 35,830 Series A shares in Olvi plc and a cash payment needed for taxes and tax-related costs arising from the shares. The costs of the plan were recognised over the performance period from 1 July 2016 to 30 June 2018. From January to September 2018, costs associated with the plan were recognised for a total of 772.4 thousand euro.

Olvi Group does not have any share-based plans or option plans valid at the moment.

6. TREASURY SHARES                                                                                                                                                                
Authorisations related to treasury shares

On 16 April 2018, the General Meeting of Shareholders of Olvi plc decided to revoke any unused authorisations to acquire treasury shares and authorise the Board of Directors of Olvi plc to decide on the acquisition of a maximum of 500,000 Series A shares using distributable funds.

The Annual General Meeting also decided to revoke all existing unused authorisations for the transfer of own shares and authorise the Board of Directors to decide on the issue of a maximum of 1,000,000 new Series A shares and the transfer of a maximum of 500,000 Series A shares held as treasury shares.

Transactions related to treasury shares

On 9 May 2018, the Board of Directors of Olvi plc has decided to initiate a scheme of acquiring treasury shares based on the authorisation issued by the Annual General Meeting on 16 April 2018. On this basis, the Board will repurchase a maximum of 36,280 Series A shares. The acquired shares shall be used for the purpose of financing or executing any upcoming corporate acquisitions or other arrangements, implementing the company’s incentive schemes or for other purposes decided upon by the Board of Directors. The acquisition of shares started on 11 May 2018 and ended on 8 June 2018. The total acquisition price for the 36,280 shares acquired was 1,104,266 euro. At the start of the repurchase scheme, Olvi held 41,125 Series A shares as treasury shares.

Olvi plc’s Annual General Meeting on 21 April 2017 made a decision concerning abandoned or “ghost” shares held in a joint book-entry account. The decision was that the right to a share incorporated in the book-entry system and placed in the joint account, and the rights that the share carries have been forfeited, and authorised the Board of Directors to take all measures called for by the decision. On this basis, 36,576 shares have been transferred from Olvi’s joint account to treasury shares on 18 May 2017. At its meeting on 28 May 2018, the Board of Directors of Olvi plc decided to cancel the shares that were gratuitously transferred to Olvi on 18 May 2017. The cancellation of shares was recorded in the Trade Register on 15 June 2018.

Olvi Group’s share-based incentive plan for key personnel, the performance period of which was from 1 July 2016 to 30 June 2018, has expired. The target group of the plan included approximately 50 people, and in accordance with the terms and conditions of the plan, rewards were paid in Olvi plc Series A shares and partially in cash. A total of 35,830 Series A shares were handed over as share-based rewards at the beginning of July.

Series A shares held by Olvi plc as treasury shares on 30 September 2018 (4,999 shares) represent 0.02 percent of all shares and 0.005 percent of the aggregate number of votes. The treasury shares represented 0.03 percent of all Series A shares and associated votes. The total purchase price of treasury shares was 1,332,427 euro. Treasury shares held by the company itself are ineligible for voting.

7. NUMBER OF SHARES *) 1-9/2018 1-9/2017 1-12/2017
    
  - average207104962073163120728115
  - at end of period207172332071768320717683
    
*) Treasury shares deducted. 
 

8. TRADING OF SERIES A SHARES ON THE HELSINKI STOCK EXCHANGE
  
    
  1-9/2018 1-9/2017 1-12/2017
    
Trading volume of Olvi A shares11649657221921464747
Total trading volume, EUR 1,000350672087441884
Traded shares in proportion to   
all Series A shares, %6.94.28.6
    
Average share price, EUR30.1028.9128.59
Price on the closing date, EUR28.6029.0029.87
Highest quote, EUR34.0032.4932.49
Lowest quote, EUR27.0025.0525.05

                                                                                                                         

9. FOREIGN AND NOMINEE-REGISTERED HOLDINGS ON 30 SEPTEMBER 2018 
     

 
  
 Book entriesVotesShareholders 
 qty%qty%qty% 
Finnish total1573622275.948664908694.561156699.57 
Foreign total4523862.184523860.49410.35 
Nominee-registered (foreign) total1020460.491020460.1130.03 
Nominee-registered (Finnish) total443157821.3944315784.8460.05 
Total20722232100.0091635096100.0011616100.00 

                                                              

10. LARGEST SHAREHOLDERS ON 30 SEPTEMBER 2018    
       
 Series KSeries ATotal%Votes%
1. Olvi Foundation 2363904890613325451715.714816869352.57
2. The Estate of Hortling Heikki *)90348810328010067684.861817304019.83
3. The Estate of Hortling Kalle
  Einari
187104252482123521.0237673284.11
4. Hortling Timo Einari 165824376582034820.9833541383.66
5. OP Corporate Bank plc, nominee register2153674215367410.3921536742.35
6. Hortling-Rinne Marit10228827801050680.5120485402.24
7. Nordea Bank Abp, nominee register125808112580816.0712580811.37
8. Skandinaviska Enskilda Banken AB (publ)     
  Helsinki branch, nominee register9461939461934.579461931.03
9. Ilmarinen Mutual Pension Insurance Company9014019014014.359014010.98
10. Varma Mutual Pension Insurance Company8280758280754.008280750.90
Others96489842973985262147.541003593310.96
Total37322561698997620722232100.0091635096100.00
       
*) The figures include the shareholder’s own holdings and shares held by parties in its control.

 

11. PROPERTY, PLANT AND EQUIPMENT 
EUR 1,000   
  1-9/2018 1-9/2017  1-12/2017
    
Opening balance188155196239196239
Additions243541478320806
Deductions and transfers–3725–1401–3655
Depreciation–14007–13830–18498
Exchange rate differences–1712–5975–6737
Total193065189816188155
    
 
12. CONTINGENT LIABILITIES   
EUR 1,000   
 30 Sep 201830 Sep 201731 Dec 2017
    
Pledges and contingent liabilities  
  For own commitments191618861886
    
Leasing and rental liabilities:  
  Due within one year104611151163
  Due within 1 to 5 years9761052739
  Due in more than 5 years3022
Leasing and rental liabilities total205221691904
    
Other liabilities200020002000

13. BUSINESS COMBINATIONS

The Helsinki Distilling Company

On 2 July 2018, Olvi plc acquired 67 percent of the stock of The Helsinki Distilling Company. The Helsinki Distilling Company focuses on the manufacture of strong alcoholic products, of which Helsinki Whiskey and Helsinki Dry Gin are the best known. The company also has a subsidiary called Tislaamo – Distillery Bar, which operates an exhibition space and restaurant. Through the acquisition, Olvi expands its operations to strong alcoholic beverages. The Helsinki Distilling Company brings a substantial addition to our expertise in this sector.

The acquisition was executed through a share purchase, and the debt-free sales price for a 67 percent stake was about 2.3 million euro, paid on 2 July 2018. Furthermore, Olvi subscribed to 195,643 Series B shares in a private placing. The agreement also includes a conditional additional sales price that will be due for payment on 30 April 2019.

The agreement includes an option for Olvi to redeem the remaining 33% within the next few years, and accordingly includes the right of minority shareholders to sell this remainder to Olvi. A liability has been recognised in the interim report for this obligation of redemption.

The Helsinki Distilling Company has been consolidated in Olvi Group since the beginning of July 2018. The share of non-controlling interests has not been recognised but the acquisition has been treated as a 100-percent takeover. In Olvi Group’s segment reporting, The Helsinki Distilling Company’s business operations are included in the figures for Finland.

The operating profit for January-September includes 181.3 thousand euro of expenses related to the acquisition.

The following tables present a summary of the acquisition price and the fair value of the assets acquired and liabilities assumed at the time of acquisition. The balance sheet has been prepared in its essential parts in accordance with IFRS and Olvi Group’s accounting policies. The acquisition has been booked in Olvi Group’s figures as preliminary.

Acquisition price
EUR 1,000  
   
Paid in cash2261 
Estimated fair value of conditional
additional sales price
27 
Estimated fair value of redemption obligation899 
Total acquisition price (100%)3187 
   
   
Amounts recognised for assets acquired and liabilities assumed (100%)
EUR 1,000  
   
Tangible assets561 
Intangible assets  
  Intangible rights based on customers207 
  Intangible rights related to markets653 
  Other intangible assets312 
Inventories1373 
Accounts receivable and other receivables355 
Deferred tax receivables165 
Liquid assets8 
Accounts payable and other liabilities730 
Deferred tax liabilities402 
Interest-bearing liabilities518 
Identifiable net assets total1984 
   
Goodwill1203 

Servaali Oy

On 3 April 2018, Olvi plc acquired 80 percent of the stock of Servaali Oy. Servaali Oy is one of Finland’s largest private importers of alcoholic beverages. With the acquisition, Olvi is expanding its product portfolio to wines, strengthening its market position in mild alcoholic beverages and responding actively to the potential for growth provided by the changing operating environment.

The acquisition was executed through a share purchase, and the debt-free sales price for a 80 percent stake was 15.8 million euro, paid on 3 April 2018. The agreement also includes an additional sales price based on the company’s profitability development over an agreed review period of several years. The additional sales price has been determined on the basis of the current value of estimated future cash flows. The applicable discount rate of interest has been 9%. The conditional additional sales price will be due for payment on 30 November 2021.

The agreement includes an option for Olvi to redeem the remaining 20% of Servaali within the next few years, and accordingly includes the right of Momentin Group Oy to sell this remainder to Olvi. A liability has been recognised for this obligation of redemption.

Servaali Oy has been consolidated in Olvi Group since the beginning of April 2018. In Olvi Group’s segment reporting, Servaali’s business operations are included in the figures for Finland.

The operating profit for January-September includes 573.4 thousand euro of expenses related to the acquisition.

The following tables present a summary of the acquisition price and the fair value of the assets acquired and liabilities assumed at the time of acquisition. The balance sheet has been prepared in its essential parts in accordance with IFRS and Olvi Group’s accounting policies. The acquisition has been booked in Olvi Group’s figures as preliminary.

Acquisition price 
EUR 1,000   
   
Paid in cash15800 
Estimated fair value of conditional additional sales price1592 
Share belonging to non-controlling interests (20%)1880 
Total acquisition price (100%)19272 
   
Amounts recognised for assets acquired and liabilities assumed (100%) 
EUR 1,000   
   
Tangible assets190 
Intangible assets  
  Intangible rights based on customers3325 
  Intangible rights related to markets1122 
  Inventories3261 
Accounts receivable and other receivables5992 
Deferred tax receivables93 
   
Liquid assets1994 
Accounts payable and other liabilities5300 
Deferred tax liabilities935 
Interest-bearing liabilities343 
Identifiable net assets total9400 
   
Goodwill9872 
   
Share of net assets belonging to non-controlling interests (20%) *)1880 

*) The company has measured the share of non-controlling interests (20%) as a share of the fair value of the object’s net assets. 

If the companies had been included in the Group since the beginning of the accounting period, the net sales for January-September would have been approximately 304,1 million euro and the operating profit 44,5 million euro.

14. CALCULATION OF FINANCIAL RATIOS

In the summary of financial indicators (page 1), the Group presents figures directly derived from the consolidated income statement: net sales, operating profit and profit for the period, the corresponding percentages in proportion to net sales, as well as the earnings per share ratio. (Earnings per share = Profit belonging to parent company shareholders / Average number of shares during the period, adjusted for share issues). 

In addition to the consolidated financial statements prepared in accordance with IFRS, Olvi Group presents Alternative Performance Measures that describe the financial development of its business and provide a commensurate overall view of the company’s profitability, financial position and liquidity.

The Group has applied the ESMA (European Securities and Markets Authority) new guidelines on Alternative Performance Measures that entered into force on 3 July 2016 and defined APMs as described below.

As an APM supporting net sales, the Group presents sales volumes in millions of litres. Sales volume is an important indicator of the extent of operations generally used in the industry.

The definition of gross margin is operating profit plus depreciation and impairment.

Gross capital expenditure consists of total expenditure on fixed assets, including the effect of any corporate acquisitions.

Equity per share = Shareholders’ equity held by parent company shareholders / Number of shares at end of period, adjusted for share issues.

Equity to total assets, % = 100 * (Shareholders’ equity held by parent company shareholders + non-controlling interests) / (Balance sheet total).

Gearing, % = 100 * (Interest-bearing debt – cash in hand and at bank) / (Shareholders’ equity held by parent company shareholders + non-controlling interests).

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