Lassila & Tikanoja plc: Financial Statements 1 January - 31

Helsinki, Finland, 2014-02-05 07:06 CET (GLOBE NEWSWIRE) -- Net sales for the final quarter EUR 169.7 million (EUR 171.8 million); operating loss EUR 1.6 million (operating profit EUR 9.7 million); operating profit excluding non-recurring items EUR 11.5 million (EUR 10.5 million); earnings per share EUR -0.03 (EUR 0.18) Full-year net sales EUR 668.2 million (EUR 674.0 million); operating profit EUR 33.2 million (EUR 48.4 million); operating profit excluding non-recurring items EUR 51.8 million (EUR 47.4 million); earnings per share EUR 0.57 (EUR 0.89) Full-year net sales in 2014 are expected to remain at the 2013 level. Operating profit, excluding non-recurring items, is expected to remain at the 2013 level or improve slightly. The Board of Directors proposes a dividend of EUR 0.50 per share. CEO PEKKA OJANPÄÄ: "We are following our strategy and are now close to completing restructuring and efficiency enhancement measures, which caused non-recurring costs last year. Financial uncertainty is continuing to have an impact on demand in the industrial sector and on material flows in the construction and retail sectors. This will hold back net sales growth. Nevertheless, we were able to improve our profitability during the year and to generate a strong cash flow." GROUP NET SALES AND FINANCIAL PERFORMANCE Final quarter Lassila & Tikanoja’s net sales for the final quarter decreased by 1.2% to EUR 169.7 million (EUR 171.8 million). Operating loss was EUR 1.6 million (operating profit EUR 9.7 million), and operating profit excluding non-recurring items was EUR 11.5 million (EUR 10.5 million), representing 6.8% (6.1%) of net sales. Earnings per share were EUR -0.03 (EUR 0.18). Operating loss for the final quarter includes the following non-recurring costs: EUR 7.0 million impairment of goodwill in Swedish business operations and EUR 1.2 million associated with the discontinuation of the sewer repair business. During 2013, L&T reviewed the risks associated with major land areas currently and previously in its use. Following the risk review process, the company recorded a non-recurring provision of EUR 5.0 million for the potential costs of closure of land areas divested during previous financial periods. Fixed cost management and efficiency enhancement measures improved profitability in all business segments. Year 2013 Lassila & Tikanoja’s net sales for the year 2013 amounted to EUR 668.2 million (EUR 674.0 million); a decrease of 0.9%. Operating profit was EUR 33.2 million (EUR 48.4 million), and operating profit excluding non-recurring items was EUR 51.8 million (EUR 47.4 million), representing 7.8% (7.0%) of net sales. Earnings per share were EUR 0.57 (EUR 0.89). Comparable net sales includes EUR 8.0 million worth of net sales generated by L&T Recoil and the divested parts of the eco product business. Comparable operating net sales, excluding non-recurring items, increased by 0.2%. Factors contributing to the decrease in operating profit included the EUR 1.0 million non-recurring reorganisation costs (EUR 2.9 million), EUR 5.0 million impairment on EcoStream Oy's shares, EUR 7.0 million impairment of goodwill in Swedish business operations, a EUR 5.0 million provision associated with land areas divested in previous financial periods, and costs of EUR 1.2 million recorded for the discontinuation of the sewer repair business. A sales gain of EUR 4.2 million on the divestment of L&T Recoil shares improved the reported operating profit in the comparison period. Financial summary

* Breakdown of operating profit excluding non-recurring items is presented below the division reviews. ** Proposal by the Board of Directors NET SALES AND FINANCIAL PERFORMANCE BY DIVISION Environmental Services Final quarter The division’s net sales for the final quarter increased by 1.6% to EUR 65.7 million (EUR 64.7 million). Operating profit totalled EUR 2.9 million (EUR 6.6 million) and operating profit excluding non-recurring items was EUR 7.9 million (EUR 6.6 million). Profitability developed favourably in the final quarter, due to greater operational efficiency. Year 2013 The Environmental Services division’s net sales for 2013 amounted to EUR 257.9 million (EUR 265.7 million), showing a decrease of 2.9%. Operating profit totalled EUR 30.1 million (EUR 34.3 million) and operating profit excluding non-recurring items was EUR 35.1 million (EUR 30.6 million). Comparable net sales includes EUR 8.0 million worth of net sales generated by L&T Recoil and the divested parts of the eco product business. Operational efficiency improvement contributed to the increase in operating profit. Industrial Services Final quarter The division’s net sales for the final quarter totalled EUR 20.9 million (EUR 18.8 million), showing an increase of 11.1%. Operating profit totalled EUR 1.6 million (EUR 1.2 million) and operating profit excluding non-recurring items was EUR 2.7 million (EUR 1.3 million). The division's net sales improved, primarily as a result of the increase in net sales in environmental construction. Operating profit excluding non-recurring items rose due to efficiency improvement measures and effective cost control. Year 2013 The division’s net sales for 2013 totalled EUR 75.5 million (EUR 70.0 million), showing an increase of 7.9%. Operating profit totalled EUR 5.2 million (EUR 3.9 million) and operating profit excluding non-recurring items was EUR 6.7 million (EUR 4.4 million). Net sales grew following an increase in demand for process cleaning. Demand for sewer maintenance services and environmental construction was modest at the start of the year, but improved during the second half. Hazardous waste services enjoyed healthy demand and strong profitability throughout the review period. Facility Services Final quarter The division’s net sales for the final quarter were down by 4.1% to EUR 71.7 million (EUR 74.8 million). Operating loss totalled EUR 5.6 million (operating profit EUR 2.5 million) and operating profit excluding non-recurring items was EUR 1.4 million (EUR 3.1 million). The major restructuring process being deployed in the division continues to burden business profitability. The division's net sales fell from the comparison period, due to business downsizing in Sweden and reduced demand for property maintenance services in the final quarter. Year 2013 The division’s net sales for the year 2013 were down by 2.3% to EUR 292.5 million (EUR 299.5 million). Operating profit totalled EUR 4.4 million (EUR 13.0 million) and operating profit excluding non-recurring items was EUR 11.9 million (EUR 14.7 million). The division's net sales fell from the comparison period, due to business downsizing in Sweden and reduced demand for property maintenance services in the second half of the year. Costs incurred from the expansion of technical systems services had a negative effect on profitability, as did the weak profitability of damage repair services. The Facility Services division implemented efficiency enhancement measures to improve its profitability. The benefits of these measures will materialise during 2014. Profitability improved in the cleaning business, particularly in Sweden. The entire division is currently engaged in a major restructuring and reorganisation process, the purpose of which is to adapt operations to the changes in market conditions, especially in Cleaning and Property Maintenance. Renewable Energy Sources Final quarter Final quarter net sales of Renewable Energy Sources (L&T Biowatti) were down by 13.5% to EUR 15.8 million (EUR 18.3 million). The division recorded an operating profit and operating profit excluding non-recurring items of EUR 0.6 million (EUR 0.3 million). The decline in net sales could be attributed to business downsizing in Eastern Finland and the late start of the heating season. Year 2013 Full-year net sales of Renewable Energy Sources (L&T Biowatti) were up by 3.7% to EUR 58.0 million (EUR 55.9 million). Operating profit amounted to EUR 1.4 million (operating loss EUR 0.1 million), and operating profit excluding non-recurring items was EUR 1.1 million (EUR 0.1 million). The division’s net sales improved from the comparison period, due to strong demand for wood-based fuels. In the first half, profitability suffered from the weaker energy content of fuels and higher logistics costs. Meanwhile, net sales growth and the efficiency improvement measures taken improved the operating profit. BREAKDOWN OF OPERATING PROFIT EXCLUDING NON-RECURRING ITEMS  

FINANCING Cash flows from operating activities amounted to EUR 86.4 million (EUR 80.5 million). A total of EUR 7.9 million in working capital was released (EUR 6.4 million released). At the end of the period, interest-bearing liabilities amounted to EUR 122.8 million (EUR 96.9 million). In the final quarter, the company took out long-term loans in the amount of EUR 30.0 million to balance the maturity of its interest-bearing liabilities. Guarantees of EUR 16.4 million associated with L&T Recoil to other providers of finance are still in force. In addition, L&T has receivables of EUR 3.3 million from EcoStream Group. Net interest-bearing liabilities amounted to EUR 64.4 million, showing a decrease of EUR 17.9 million from the beginning of the year and EUR 0.9 million in the final quarter. Net financial expenses in 2013 amounted to EUR 2.9 million (EUR 5.4 million). Net financial expenses were 0.4% (0.8%) of net sales. The amount of repaid loans and the expiry of high-interest interest rate swaps contributed to the decrease in net financial expenses. Costs in the comparison period included a write-down of EUR 2.0 million on the receivables from a subordinated loan from Recoil Oy. The average interest rate on long-term loans (with interest-rate hedging) was 1.7% (2.2%). Long-term loans totalling EUR 22.1 million will mature during the year 2014. The equity ratio was 43.7% (49.4%) and the gearing rate 30.4 (35.3). Liquid assets at the end of the period amounted to EUR 58.5 million (EUR 14.6 million). Of the EUR 100 million commercial paper programme, EUR 35.0 million (EUR 12.0 million) was in use at the end of the period. A committed limit totalling EUR 30.0 million was not in use, as was the case in the comparison period. DISTRIBUTION OF ASSETS The Annual General Meeting held on 12 March 2013 resolved that the profit for 2012 be placed in retained earnings and that no dividend be paid. A capital repayment of EUR 0.60 per share was paid for the financial year 2012. The capital repayment, totalling EUR 23.2 million, was paid to the shareholders on 22 March 2013. The Extraordinary General Meeting held on 18 November 2013, resolved that an extra dividend of EUR 0.35 per share as well as an additional capital repayment of EUR 0.15 per share will be distributed to shareholders in addition to already paid capital repayment of EUR 0.60 per share decided by the Annual General Meeting on 12 March 2013. Thus, the cumulative amount of the extra dividend and the additional capital repayment will be EUR 0.50 per share. The extra dividend and capital repayment, totalling EUR 18.1 million, was paid to the shareholders on 28 November 2013. CAPITAL EXPENDITURE In 2013, gross capital expenditure totalled EUR 32.7 million (EUR 49.4 million) and was mainly comprised of machine and equipment purchases. PERSONNEL In 2013, the average number of employees converted into full-time equivalents was 8,267 (8,399). The total number of full-time and part-time employees at the end of the period was 8,847 (8,962). Of them 7,088 (7,035) people worked in Finland and 1,759 (1,927) people in other countries. PROPOSAL FOR THE DISTRIBUTION OF ASSETS According to the financial statements, Lassila & Tikanoja plc's unrestricted equity amount to EUR 86,373,918.28 with the operating profit for the period representing EUR 14,210,767.64. There were no substantial changes in the financial standing of the company after the end of the period, and the solvency test referred to in Chapter 13, section 2 of the Companies Act does not affect the amount of distributable assets. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.50 per share be paid.  The dividend is paid to shareholders included in the company shareholder register maintained by Euroclear Finland Oy on the record date, 24 March 2014. The Board proposes to the Annual General Meeting that the dividend be paid on 31 March 2014. No dividend shall be paid on shares held by the company on the record date of 24 March 2014. On the day the proposal for the distribution of assets was made, the number of shares entitling to dividend was 38,706,627, which means the total amount of the dividend would be EUR 19,353,313.50. Earnings per share amounted to EUR 0.57. The proposed dividend is 87.7% of the earnings per share. SHARE AND SHARE CAPITAL Traded volume and price The volume of trading excluding the shares held by the company in Lassila & Tikanoja plc shares on NASDAQ OMX Helsinki in 2013 was 7,206,872 which is 18.7% (25.8%) of the average number of outstanding shares. The value of trading was EUR 99.5 million (EUR 105.1 million). The trading price varied between EUR 11.60 and EUR 15.59. The closing price was EUR 15.23. The market capitalisation excluding the shares held by the company was EUR 589.5 million (EUR 450.4 million) at the end of the period. Own shares At the end of the period the company held 92,247 of its own shares, representing 0.2% of all shares and votes. Share capital and number of shares The company’s registered share capital amounts to EUR 19,399,437, and the number of outstanding shares to 38,706,627 shares. The average number of shares excluding the shares held by the company totalled 38,703,933. Shareholders At the end of the period, the company had 9,320 (9,382) shareholders. Nominee-registered holdings accounted for 21.7% (17.2%) of the total number of shares. Authorisation for the Board of Directors The Annual General Meeting held on 12 March 2013 authorised Lassila & Tikanoja plc’s Board of Directors to make decisions on the repurchase of the company’s own shares using the company’s unrestricted equity. In addition, the Annual General Meeting authorised the Board of Directors to decide on the share issue and the issuance of special rights entitling to shares. The Board of Directors is authorised to purchase a maximum of 500,000 company shares, which is 1.3% of the total number of shares. The repurchase authorisation will be effective for 18 months. The Board of Directors is authorised to decide on issuance of new shares or shares possibly held by the Company through share issue and/or issuance of option rights or other special rights entitling to shares, referred to in Chapter 10, Section 1 of the Finnish Companies Act, so that by virtue of the authorisation altogether 500,000 shares, which is 1.3% of the total number of shares, may be issued and/or conveyed at the maximum. The share issue authorisation will be effective for 18 months. RESOLUTIONS BY THE GENERAL MEETINGS The Annual General Meeting of Lassila & Tikanoja plc, which was held on 12 March 2013, adopted the financial statements for the financial year 2012 and released the members of the Board of Directors and the President and CEO from liability. The AGM resolved that the profit for 2012 be placed in retained earnings and that no dividend be paid. A capital repayment of EUR 0.60 per share, as proposed by the Board of Directors, was paid for the financial year 2012 on the basis of the balance sheet adopted. The capital repayment, totalling EUR 23.2 million, payment date was on 22 March 2013. The AGM confirmed the number of the members of the Board of Directors five. The following Board members were re-elected to the Board until the end of the following AGM: Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala. KPMG Oy Ab, Authorised Public Accountants, was elected auditor. KPMG Oy Ab named Lasse Holopainen, Authorised Public Accountant, as its principal auditor. The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 12 March 2013. The Extraordinary General Meeting held on 18 November 2013, resolved that an extra dividend and an additional capital repayment be paid. The extra dividend of EUR 0.35 per share as well as an additional capital repayment of EUR 0.15 per share was distributed to the shareholders. The extra dividend and capital repayment, totalling EUR 18.1 million, was paid on 28 November 2013. BOARD OF DIRECTORS The members of the Board of Directors are Heikki Bergholm, Eero Hautaniemi, Hille Korhonen, Sakari Lassila and Miikka Maijala. In its constitutive meeting the Board elected Heikki Bergholm as Chairman of the Board and Eero Hautaniemi as Vice Chairman. From among its members, the Board elected Eero Hautaniemi as Chairman and Sakari Lassila and Miikka Maijala as members of the audit committee. Heikki Bergholm was elected as Chairman of the remuneration committee and Hille Korhonen as member of the committee. SUMMARY OF STOCK EXCHANGE RELEASES PURSUANT TO ARTICLE 4, CHAPTER 6 OF THE SECURITIES MARKETS ACT In a release published on 25 March 2013, the company announced the comparable figures for 2012 based on the new business structure. In a release published on 9 April 2013, the company announced that as part of EcoStream Oy’s capital arrangements, Lassila & Tikanoja plc subscribed for EcoStream Oy shares for a total of EUR 2.0 million on 8 April 2013. The subscription price was EUR 3.00 per share. This subscription was financed through a conversion of Lassila & Tikanoja’s remaining sale price receivable from the L&T Recoil Oy divestment, EUR 2.0 million, into EcoStream Oy shares. Consequently, the arrangement had no direct impact on cash flow. Following this arrangement and EcoStream Oy’s other capital arrangements, Lassila & Tikanoja’s ownership in EcoStream Oy fell to approximately 16.4 per cent. In connection with the arrangement, Lassila & Tikanoja’s Board of Directors decided on a write-down of all shares held by Lassila & Tikanoja plc to EUR 3.00 per share. As a result of this write-down, the company will record an impairment of EUR 5.1 million on EcoStream Oy’s shares for the second quarter. After the write-down, the balance sheet value of the EcoStream shares held by L&T will be approximately EUR 3.6 million. The impairment will be treated as a non-recurring cost item, with no impact on cash flow. In a release published on 1 July 2013, the company announced that the consideration of charges relating to L&T's overtime investigation was complete. The police investigation and the consideration of charges were aimed at the overtime work of 25 of L&T's property maintenance employees. On the basis of the consideration of charges, the District Prosecutor for Helsinki has decided to press charges against 21 former and current management staff at Lassila & Tikanoja, including Pekka Ojanpää, President and CEO since 1 November 2011. In a release published on 23 September 2013, in conjunction with the Capital Markets Day, the company announced that its financial targets for the year 2016 remain unchanged. The theme of the Capital Markets Day was: “L&T moving from re-structuring to profitable growth”. In a release published on 19 December 2013, the company announced that it recognises a total of EUR 7.0 million in impairment of goodwill in its Swedish business operations in the fourth quarter. In the Group, the impairment is allocated to the Facility Services division. The impairment is due to the decrease in yield expectations in Swedish operations, particularly in the Öst-Göta region. After the impairment loss, the amount of goodwill remaining in the Group’s balance sheet totals about EUR 3.5 million in relation to Swedish operations. EVENTS AFTER THE BALANCE SHEET DATE The company’s management is not aware of any events of material importance after the balance sheet date, which might have affected the preparation of the financial statements. NEAR-TERM RISKS AND UNCERTAINTIES Economic uncertainty may cause major changes in the Environmental Services division’s secondary raw material markets and in the demand for Industrial Services. Uncertainties associated with government subsidies for renewable fuels and with their continuity could affect demand for the Renewable Energy Sources division's services. L&T's total risks in the EcoStream Group amount to EUR 23.3 million, and if the risks materialised, there would be an impact on cash flow of approximately EUR 16.4 million. The EUR 16.4 million guarantee given by L&T to other financiers on L&T Recoil Oy's bank loans is still in effect. Furthermore, L&T has outstanding receivables from the EcoStream Group totalling EUR 3.3 million, and holds EcoStream Oy shares worth EUR 3.6 million. More detailed information on L&T's risks and risk management is available in the Annual Report for 2012, in the report of the Board of Directors, and in the consolidated financial statements. OUTLOOK FOR THE YEAR 2014 Full-year net sales in 2014 are expected to remain at the 2013 level. Operating profit, excluding non-recurring items, is expected to remain at the 2013 level or improve slightly. CONDENSED FINANCIAL STATEMENTS 1 JANUARY-31 DECEMBER 2013 CONSOLIDATED INCOME STATEMENT  

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME  

TAX EFFECTS OF COMPONENTS OF OTHER COMPREHENSIVE INCOME  

CONSOLIDATED STATEMENT OF FINANCIAL POSITION  

CONSOLIDATED STATEMENT OF CASH FLOWS  

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY  

KEY FIGURES  

* Proposal by the Board of Directors ACCOUNTING POLICIES This financial statements release is in compliance with IAS 34 standard. The financial statements release has been prepared with application of the IFRS standards and interpretations in effect on 31 December 2013.  The figures are presented as thousands of euros. All figures have been rounded and, consequently, the sum of individual figures may deviate from the sum total presented. More detailed information on accounting policies is presented in the consolidated financial statements of Lassila & Tikanoja plc, which will be released on 26 February 2014. The interim report has not been audited. SEGMENT INFORMATION Net sales

Operating profit

Other segment information

INCOME STATEMENT BY QUARTER  

BUSINESS ACQUISITIONS In 2013, Lassila & Tikanoja made no business acquisitions. The accounting policy concerning business combinations is presented under Note 2 of the consolidated financial statements and under Summary on significant accounting policies. CHANGES IN INTANGIBLE ASSETS  

CHANGES IN PROPERTY, PLANT AND EQUIPMENT  

CAPITAL COMMITMENTS  

RELATED-PARTY TRANSACTIONS (Joint ventures and L&T sickness fund)  

The support paid by the parent company to L&T sickness fund was EUR 786 thousand (2012: EUR 780 thousand). FINANCIAL ASSETS AND LIABILITIES BY CATEGORY  

CONTINGENT LIABILITIES Securities for own commitments

Off balance sheet liabilities Lassila & Tikanoja plc has given a guarantee for a share of 50 percent of L&T Recoil Oy’s financial liabilities. The guarantee is valid no later than the maturity date of the liabilities on 31 August 2014. The financial liabilities of L&T Recoil totalled EUR 32.8 million on 31 December 2013. Operating lease liabilities

Liabilities associated with derivative agreements Interest rate swaps

* The interest rate swaps are used to hedge cash flow related to a floating rate loan, and hedge accounting under IAS 39 has been applied to it. The hedges have been effective, and the changes in the fair values are shown in the consolidated statement of comprehensive income for the period. The fair values of the swap contracts are based on the market data at the balance sheet date. Commodity derivatives

Commodity derivative contracts were concluded, for hedging of future diesel oil purchases. IAS 39 -compliant hedge accounting will be applied to these contracts, and the effective change in fair value will be recognised in the hedging reserve within equity. The fair values of commodity derivatives are based on market prices at the balance sheet date. Currency forwards

Hedge accounting under IAS 39 has not been applied to forward contracts. Changes in fair values have been recognised in financial income and expenses. Cross currency interest rate swaps

The contracts are used to hedge cash flow related to foreign currency floating rate loans. The changes in the fair values are shown in the consolidated statement of comprehensive income for the period. On the balance sheet date, the value of foreign currency loans was approximately EUR 0.1 million negative. CALCULATION OF KEY FIGURES Earnings per share: profit attributable to equity holders of the parent company / adjusted average basic number of shares Earnings per share, diluted: profit attributable to equity holders of the parent company / adjusted average diluted number of shares Cash flows from operating activities/share: cash flow from operating activities as in the statement of cash flows / adjusted average number of shares EVA: operating profit - cost calculated on invested capital (average of four quarters) WACC 2012: 7.1% WACC 2013: 6.5% Equity per share: equity attributable to equity holders of the parent company / adjusted basic number of shares at end of period Return on equity, % (ROE): (profit for the period / equity (average)) x 100 Return on investment, % (ROI): (profit before tax + financial expenses) / (total equity and liabilities - non-interest-bearing liabilities (average)) x 100 Equity ratio, %: equity / (total equity and liabilities - advances received) x 100 Gearing, %: net interest-bearing liabilities / equity x 100 Net interest-bearing liabilities: interest-bearing liabilities - liquid assets Operating profit excluding non-recurring items: operating profit +/- non-recurring items Helsinki, 4 February 2014 LASSILA & TIKANOJA PLC Board of Directors Pekka Ojanpää President and CEO For additional information please contact: Pekka Ojanpää, President and CEO, tel. +358 10 636 2810 or Timo Leinonen, CFO, tel. +358 400 793 073. Lassila & Tikanoja is a service company that is transforming the consumer society into an efficient recycling society. In co-operation with our customers we are reducing waste volumes, extending the useful lives of properties, recovering materials and decreasing the use of raw materials and energy. We help our customers to focus on their core business and to save the environment. Together, we create well-being and jobs. With operations in Finland, Sweden, Latvia and Russia, L&T employs 9,000 persons. Net sales in 2013 amounted to EUR 668 million. L&T is listed on NASDAQ OMX Helsinki. Distribution: NASDAQ OMX Helsinki Major media www.lassila-tikanoja.com