Helsinki, Finland, 2014-02-28 08:30 CET (GLOBE NEWSWIRE) -- REVIEW OF VAAHTO GROUP PLC OYJ’S FINANCIAL STATEMENTS 28 FEBRUARY 2014 AT 09:30
REVIEW OF VAAHTO GROUP’S FINANCIAL STATEMENTS FOR 1 JANUARY–31 DECEMBER 2013
Development of business operations
Vaahto Group’s turnover from continuing operations during the period ending in December 2013 was 36.5 M euros (comparative: 30.4 M euros) and operating profit 1.0 M (operating loss of 4.1 M euros). Turnover increased by 60% in relation to an annualized reference figure, and the operating result improved significantly. The improvement in profitability is due to cost savings and an increase in order volumes. The Group’s order backlog was 6.4 M euros (20.1 M euros) at the closing of the financial year. The period under review is 12 months long, while the reference figures cover 16 months.
By decision of the Extraordinary Meeting of Shareholders, the financial year of Vaahto Group was changed to run from 1 January to 31 December starting in 2013. Previous financial years ran from 1 September to 31 August. For this reason the financial year 2011-2012 was extended to cover 16 months, from 1 September 2011 to 31 December 2012. Hence, the reference data in the financial statements for 2013 refer to 16 months.
Vaahto Process Technology
Vaahto Process Technology’s turnover was 32.2 M euros (24.0 M euros), and the result showed an operating profit of 2.6 M euros (an operating loss of 0.7 M euros).
Vaahto Process Technology’s market situation in the vessel business was good at the beginning of the period under review but tightened somewhat toward its end. Japrotek Oy Ab delivered a significant order to Sasol Technology in South Africa. Most of that order’s value was booked in as income for 2013. The order involved the design, manufacture, and installation of eight large vessel structures. This project is expected to be complete in the first quarter of the 2014 financial year.
The market situation for Japrotek Oy Ab’s vessel business remains difficult, but the offer book for 2014 is solid and additional orders from the existing customers have been agreed.
Vaahto Process Technology’s market situation in the agitator business was good, and new orders were received steadily over the course of the period. In December 2013, Stelzer Rührtechnik International GmbH delivered its largest order ever, to an Asian chemical company. The order was for 1,200 kW agitators intended for high?technology polymer production. Involving a comprehensive delivery, the challenging nature of this order required world-class project expertise and product development. The agitators were manufactured in Germany, at Stelzer’s Warburg plant.
The profitability of the agitator business unit is nearly in line with the objectives set, and the outlook for the current financial year is good.
Vaahto Paper Technology
Vaahto Paper Technology’s turnover from continuing operations was 4.5 M euros (6.4 M euros) and the operating loss of 0.8 M euros (operating loss of 3.4 M euros). The division’s result was very weak.
The operating loss from discontinued operations was 4.4 M euros (operating loss -2.3 M euros). This operating loss includes the cost from both the sale of business and discontinued operations. The sale price of the business is not yet final; it includes items to be specified later.
In the 2012 financial statement, the Group described the sale of Vaahto Paper Technology’s project-business unit and the spare-parts and small-project operations belonging to the company’s service unit as discontinued operations. This business was sold to Gebr. Bellmer GmbH Maschinenfabrik in April 2013. All projects in progress at the time of the sale were transferred to the buyer. Completed projects that are within their warranty period remain with Vaahto Paper Technology Ltd. All estimated liabilities associated with the completion of these projects are included in the balance sheet under “Operations for sale.”
Vaahto Group intends to divest or discontinue operations of the unprofitable Paper Technology business in its entirety. The Board of Directors is considering various options for the discontinued Paper Technology business, the primary option being a sale of the business. The Service unit of Vaahto Paper Technology Oy is presented in the profit and loss statement as discontinued operations and on the balance sheet as assets and liabilities for sale. AP-Tela Oy, which belongs to Paper Technology -division, is shown under continuing operations.
The effect of discontinued operations on profit/loss is shown on its own line, separate from continued operations.
Financing and liquidity
The cash flow from the Group’s business operations was -2,4 M euros (-4,4 M euros), and the Group’s net financing costs came to 1.0 M euros (1.2 M euros). The cash flow from investments made during the financial year was 0.3 M euros (-1.0 M euros). The Group’s consolidated balance sheet total was 23.6 M euros (30.5 M euros).
Loans from credit-institutions entail re-payment covenants linked to the Group’s solvency ratio. The year-end accounts of 31 December 2013 are in breach of a covenant, but the Group received assurance from the creditors in question at the close of the 2013 financial period that no consequences of the breach would arise for the Group.
The financing negotiations of Vaahto Group were concluded on 18 December 2013. The final agreement provides the Group companies with a grace period for receivables of credit institutions for 2014. In addition to the further 2.0 M euros provided by certain shareholders, the financiers of the Group also waived repayment of loans amounting to 1 M euros: 0.83 M euros for the parent company and 0.17 M euros for Vaahto Paper Technology Ltd. These amounts are shown in the financial items of the financial statement.
Moreover, the Group’s financiers agreed to waive loans totaling 2 M euros, provided that certain conditions of the financing agreement are met. While the Company is likely to meet the conditions set for that waiver during the first quarter of 2014, the financiers will honor the waiver even after the first quarter, when the conditions are met. The financing arrangement includes a further commitment by the financiers to waive loans totaling 1 M euros, provided that the Company can raise at least 1 M euros in new equity by means of a share issue. Conditional waiver of loans totaling 3 M euros from the financial arrangement reached, planned divestment of Paper Technology and Board’s plans for a new share issue, will, once they have been realized, clarify the new, strategy-driven direction and support the financial position and liquidity of the Group.
However, the Group’s liquidity remains low and the financing will suffice only if the management’s plans succeed and profitability improves.
Investments
The Group’s capital expenditure during the period under review came to 0.9 M euros (1.3 M euros). Most of the investments went toward asphalting of the grounds of the Hollola production plant: in total, 0.6 M euros. The other investments consisted mostly of machine and equipment investments for Vaahto Paper Technology’s Service business.
Environmental affairs
The financial period saw the conclusion of the work required by the company’s environmental permit for the processing of drainage water on the courtyard of the Hollola plant.
Research and development
The Group’s research and development activities focused on the expansion of Vaahto Paper Technology’s range of service products. The scope of research and development activities remained at the previous financial year’s level.
Human resources
The average number of personnel employed by the Group during the period under review was 256 (333). In total, 181 of these people were employed in continuing operations. With the sale of the Projects unit on 15 April 2013, 56 people working in business operations in Hollola and 16 in Tampere transferred to Bellmer.
Risks and uncertainty factors
Demand for Vaahto Group’s products is highly dependent on economic developments and other trends in both the global economy and the Group’s main customer industries. The risks created by fluctuations in demand are addressed through adaptation of the Group’s sales operations to current trends in the relevant market areas and customer industries.
Large-scale projects entail the risk of inaccurate assessment of project costs and other risks inherent to projects in the tender stage, which may cause a project’s financial result to be lower than expected. To keep the risks involved in large-scale projects under control, the Group employs several means, such as multiple quality-management systems, profitability analyses, operation guidelines, and approval procedures.
The objective of the efforts to manage the Group’s financing risks is to minimize the negative impact of changes in financial markets on the Group’s result and to ensure the availability of internal and external funding on competitive terms.
The risk of property losses, consequential losses, and liability losses caused by business operations is addressed by means of appropriate insurance arrangements.
The most significant risks associated with continued operations center on the liquidity and solvency of Vaahto Group, on meeting the conditions set by its financiers, on the adequacy of the development measures aimed at increasing profitability, and on the development of customers’ demand and market situations.
A cash flow forecast extending through February 2015 was prepared to assess the sufficiency of the Group’s working capital. That forecast indicates that the working capital will cover the needs of the coming 12 months, provided that the profitability goals set are reached. However the working capital situation will be tight and its adequacy shall be actively monitored.
Negotiations with Group’s main financiers on financial restructuring are scheduled for fall 2014.
Equity capital
The financial statements of 31 December 2013 include depreciation of 11.1 M euros declared by the parent company, Vaahto Group Plc Oyj, for its subordinated loans to subsidiary Vaahto Paper Technology Ltd. This entry leaves the equity capital of Vaahto Group Plc Oyj at negative 4.3 M euros. On account of the operating loss, also the equity of Vaahto Paper Technology Ltd is negative. The Trade Register has been duly notified of the negative equities.
After the close of the financial year, the Board of Directors of Vaahto Group Plc Oyj announced that, to strengthen Vaahto Group’s financial position, it intends to issue new shares in the first half of 2014. The Board is also considering various options for divestment of the Paper Technology business, with the primary option being sale of the business. The financial arrangements made and planned are described under “Financing and liquidity.”
The Annual General Meeting held on 10 April 2013 authorized the Board of Directors to decide on the issuing of new shares in one or more tranches. The maximum number of shares that may be issued is 2,000,000. The authorization is valid until 31 May 2014.
The Board of Directors has no authorization to issue convertible bonds or warrant bonds or for purchasing or transferring the Group’s own stock.
Deferred tax liabilities and receivables
In total, 0.3 M euros of value adjustments for deferred tax receivables from confirmed business losses and deferred depreciations have been booked for the 2013 financial period. After this, the Group has no further deferred tax receivables.
Administration
The Annual General Meeting held on 10 April 2013 nominated the following persons as members of the Vaahto Group Plc Oyj Board of Directors:
Reijo Järvinen, chairman
Sami Alatalo, deputy chairman
Topi Karppanen, member
Mikko Vaahto, member
Vaahto Group’s CEO during the period under review was Ari Viinikkala.
After the close of the financial year, Vesa Alatalo was appointed as CEO from 16 January 2014 onward.
The Group’s accounts have been audited by certified auditing company Ernst & Young Oy. The head auditor was Panu Juonala, Certified Public Accountant.
The Company follows the 2010 Corporate Governance Code issued for companies listed on the NASDAQ OMX Helsinki exchange. A report on the Group management and steering system is available on the Group’s Web site.
Development prospects
Demand for Vaahto Group’s products and its financial situation both are highly dependent on global economic developments and other trends affecting its customer industries.
Vaahto Paper Technology’s market situation remains uncertain. The market situation for Vaahto Process Technology is expected to be more stable.
The financing arrangement reached with our financiers, including a conditional waiver of loan repayments, planned divestment of the Paper Technology business, and the Board’s planned share issue, will, once they have been realized, strengthen the strategy of focusing on the Process Technology business and support the financial position and liquidity of the Group.
The operating result from Vaahto Group’s continuing operations in 2014 is expected to be positive.
The year-end accounts have been drafted under the going-concern assumption. This requires that the Company in 2014 reaches the result and profitability objectives set in the management forecasts and be able to obtain additional financing and renegotiate the payment terms for its liabilities.
Developments since the end of the financial year
Vesa Alatalo was appointed as CEO of Vaahto Group Plc Oyj, with effect from 16 January 2014.
On 3 February 2014, Vaahto Group Plc Oyj announced a plan to strengthen its strategy focusing on Process Technology’s operations. The Group engages in process technology business through subsidiaries, Japrotek Oy Ab and Stelzer Rührtechnik International GmbH. In line with the strategy change initiated in spring 2013, Vaahto Group intends to divest the unprofitable Paper Technology business. The Board of Directors is considering various options for discontinuation of the associated operations and capital, with the primary option being sale of the relevant business.
Distribution of profit
The parent company made a business loss of 8,120,359.08 euros, and the company has no distributable funds.
The Board of Directors proposes to the General Meeting that no dividends be distributed and that the loss be covered with funds from the profit account.
The General Meeting of Shareholders
The General Meeting of Shareholders of Vaahto Group Plc Oyj will be held in Sibelius Hall, Lahti, on 15 April 2014, at 13:00.
Vaahto Group’s interim management statement
Instead of an interim report for the first quarter of the 2014 financial year, Vaahto Group Plc Oyj will publish the Interim Management Statement on 16 May 2014.
| VAAHTO GROUP CONSOLIDATED FIGURES | ||||
| CONSOLIDATED | 1.1.-31.12.2013 | % of | 1.9.2011-31.12.2012 | % of |
| STATEMENT OF | 12 | turn- | 16 | turn- |
| COMPREHENSIVE | months | over | months | over |
| INCOME, IFRS | ||||
| 1000 EUR | ||||
| CONTINUING OPERATIONS | ||||
| NET TURNOVER | 36 516 | 30 369 | ||
| Change in finished | ||||
| goods and work | ||||
| in progress | 1 873 | -1 499 | ||
| Production | ||||
| for own use | -101 | -270 | ||
| Other operating | ||||
| income | 65 | 93 | ||
| Share of results of | ||||
| affiliated companies | 25 | |||
| Material and | ||||
| services | 18 225 | 16 010 | ||
| Employee benefits | ||||
| expenses | 9 853 | 12 585 | ||
| Depreciations | 739 | 1 564 | ||
| Other operating | ||||
| expenses | 5 038 | 6 216 | ||
| OPERATING PROFIT | ||||
| OR LOSS | 953 | 2,6 | -4 120 | -13,6 |
| Financing income | 1 107 | 61 | ||
| Financing expenses | -1 122 | -1 263 | ||
| PROFIT BEFORE TAXES | 939 | 2,6 | -5 321 | -17,5 |
| Tax on income | ||||
| from operations | -630 | -2 257 | ||
| PROFIT OR LOSS | ||||
| FOR THE PERIOD, | ||||
| CONTINUING | ||||
| OPERATIONS | 309 | 0,8 | -7 579 | -25,0 |
| DISCONTINUING | ||||
| OPERATIONS | ||||
| Profit or loss for the period, | ||||
| discontinuing operations | -4 399 | -2 347 | ||
| PROFIT OR LOSS | ||||
| FOR THE PERIOD | -4 090 | -9 926 | ||
| OTHER COMPREHENSIVE | ||||
| INCOME: | ||||
| Translation | ||||
| differences | -10 | 38 | ||
| OTHER COMPREHENSIVE | ||||
| INCOME, NET OF TAX | -10 | 38 | ||
| TOTAL COMPREHENSIVE | ||||
| INCOME | -4 099 | -9 888 | ||
| TOTAL COMPREHENSIVE | ||||
| INCOME ATTRIBUTABLE | ||||
| Equity holders of the parent | -4 090 | -9 926 | ||
| Earnings per share calculated on profit attributable | ||||
| to equity holders of the parent: | ||||
| EPS continuing operations | ||||
| undiluted, euros/share | 0,08 | -2,19 | ||
| diluted, euros/share | 0,08 | -2,19 | ||
| EPS discontinuing operations | ||||
| undiluted, euros/share | -1,11 | -0,68 | ||
| diluted, euros/share | -1,11 | -0,68 | ||
| EPS | ||||
| undiluted, euros/share | -1,03 | -2,68 | ||
| diluted, euros/share | -1,03 | -2,68 | ||
| Average number of | ||||
| shares (1000 shares): | ||||
| undiluted | 3 977 | 3 977 | ||
| diluted | 3 977 | 3 977 | ||
| CONSOLIDATED | 31.12.2013 | 31.12.2012 | ||
| BALANCE SHEET,IFRS | ||||
| 1000 EUR | ||||
| ASSETS | ||||
| NON-CURRENT ASSETS: | ||||
| Intangible assets | 60 | 233 | ||
| Goodwill | 1 692 | 1 692 | ||
| Tangible assets | 5 241 | 7 596 | ||
| Shares in affiliated | ||||
| companies | 74 | 83 | ||
| Available for sale | ||||
| investments | 35 | 43 | ||
| Non-current trade | ||||
| and other | ||||
| receivables | 3 | |||
| Deferred tax asset | 271 | |||
| NON-CURRENT ASSETS | 7 102 | 9 921 | ||
| CURRENT ASSETS: | ||||
| Inventories | 2 788 | 5 783 | ||
| Trade receivables | ||||
| and other | ||||
| receivables | 6 992 | 6 531 | ||
| Current receivables | ||||
| for revenue recognised | ||||
| in part prior to | ||||
| project completion | 1 727 | 1 293 | ||
| Cash and bank | 129 | 400 | ||
| CURRENT ASSETS | 11 637 | 14 007 | ||
| NON-CURRENT ASSETS | ||||
| HELD FOR SALE | 4 886 | 6 557 | ||
| TOTAL ASSETS | 23 624 | 30 484 | ||
| CONSOLIDATED | 31.12.2013 | 31.12.2012 | ||
| BALANCE SHEET, IFRS | ||||
| 1000 EUR | ||||
| EQUITY AND | ||||
| LIABILITIES | ||||
| SHAREHOLDERS' | ||||
| EQUITY: | ||||
| Share capital | 2 872 | 2 872 | ||
| Share premium | ||||
| account | 6 | 6 | ||
| Fair value reserve and | ||||
| other reserves | 5 063 | 5 063 | ||
| Translation | ||||
| differences | 48 | 56 | ||
| Retained earnings | -14 251 | -10 160 | ||
| SHAREHOLDERS' | ||||
| EQUITY | -6 262 | -2 163 | ||
| NON-CURRENT LIABILITIES: | ||||
| Deferred | ||||
| tax liability | 649 | 699 | ||
| Long-term | ||||
| liabilities, | ||||
| interest-bearing | 11 763 | 3 608 | ||
| Non-current | ||||
| provisions | 362 | 395 | ||
| NON-CURRENT | ||||
| LIABILITIES | 12 774 | 4 701 | ||
| CURRENT LIABILITIES: | ||||
| Short-term | ||||
| liabilities, | ||||
| interest-bearing | 6 758 | 14 045 | ||
| Trade payables and | ||||
| other liabilities | 7 787 | 10 662 | ||
| Tax liability, | ||||
| income tax | 200 | 264 | ||
| CURRENT LIABILITIES | 14 745 | 24 971 | ||
| LIABILITIES OF DISPOSAL | ||||
| GROUP HELD FOR SALE | ||||
| Interest-bearing | ||||
| liabilities held for sale | 573 | |||
| Interest-free | ||||
| liabilities held for sale | 2 367 | 2 402 | ||
| LIABILITIES OF DISPOSAL | ||||
| GROUP HELD FOR SALE | 2 367 | 2 975 | ||
| TOTAL EQUITY AND | ||||
| LIABILITIES | 23 624 | 30 484 | ||
| KEY FIGURES, IFRS | 2013 | 2011-2012 | ||
| Shareholders' | ||||
| equity per share, | ||||
| euros | -1,57 | -0,54 | ||
| Earnings per | ||||
| share, euros 1) | -1,03 | -2,15 | ||
| Equity ratio % | neg. | neg. | ||
| Gross investments | 869 | 1 289 | ||
| Total average | ||||
| number of | ||||
| personnel | 256 | 333 | ||
| Order backlog at | ||||
| the end of the fiscal | ||||
| period 2) | 6 401 | 20 111 | ||
| 1) Earnings per share (EPS) includes also profit/loss of the discontinuing operations. | ||||
| EPS for the period 2011-2012 has been calculated by converting the profit or loss | ||||
| to correspond the profit or loss for 12 months. | ||||
| 2) Continuing operations. The amount of contract revenue recognized as income has been deducted from the order backlog. | ||||
| OTHER LIABILITIES | 31.21.2013 | 31.12.2012 | ||
| 1000 EUR | ||||
| Bank guarantees: | ||||
| Bank guarantee | ||||
| limits total | 6 163 | 8 860 | ||
| Bank guarantee | ||||
| limits used | 4 598 | 7 405 | ||
| Lease liabilities, | ||||
| excluded financial | ||||
| lease liabilities: | ||||
| Current lease | ||||
| liabilities | 266 | 272 | ||
| Lease liabilities | ||||
| maturing | ||||
| in 1-5 years | 276 | 296 | ||
| Total | 541 | 568 | ||
| Rent liabilities: | ||||
| Current lease | ||||
| liabilities | 792 | 804 | ||
| Lease liabilities | ||||
| maturing | ||||
| in 1-5 years | 3 166 | 3 216 | ||
| Later | 1 885 | 2 144 | ||
| Total | 5 843 | 6 164 | ||
| Other liabilities: | ||||
| Granted guarantees | ||||
| to customers and | ||||
| creditors | 730 | |||
| Guarantees granted | ||||
| to secure bank | ||||
| guarantee limits | 4 110 | 8 860 | ||
| Guarantees granted | ||||
| to secure bank | ||||
| guarantees | 315 | |||
| Guarantees granted | ||||
| to secure bank loans | 3 580 | 3 780 | ||
| Guarantees granted | ||||
| to secure guarantee | ||||
| insurances | 2 175 | 750 | ||
| Guarantees granted | ||||
| to secure trial | ||||
| guarantees | 1 500 | |||
| Guarantees granted | ||||
| to secure rent | ||||
| guarantees | 400 | 400 | ||
| Other liabilities | 427 | |||
| Total | 10 692 | 16 335 | ||
| Derivative contracts: | ||||
| Currency forward agreements are as a rule used to hedge | ||||
| against exchange rate risks. The currency forward agreements | ||||
| have been used to protect receivables and future assets. | ||||
| Interest rate agreements are used to hedge against the | ||||
| changes of the interests. | ||||
| The derivative agreements of the group are booked according | ||||
| to IAS 39: Financial instruments. Derivative agreements are | ||||
| initially recognized at their purchase cost which is | ||||
| equivalent to the fair value and they are subsequently | ||||
| remeasured at fair value. | ||||
| Fair values | Nominal | Fair | Fair | Fair |
| of derivative | value | value, | value, | value |
| agreements | pos. | neg. | total | |
| 31.12.2013 | ||||
| 1000 EUR | ||||
| Interest rate swap | ||||
| agreements | 2 986 | 0 | -94 | -94 |
| Fair values of derivative agreements are determined by using | ||||
| the market prices for the equivalent agreements on the day of | ||||
| the closing of the accounts. Fair values state for the income | ||||
| or expenses the group would book if the derivative agreements | ||||
| were closed at the end of the fiscal period. | ||||
| CONSOLIDATED FLOW | 1.1.-31.12.2013 | 1.9.2011-31.12.2012 | ||
| OF FUNDS | 12 | 16 | ||
| STATEMENT, IFRS | months | months | ||
| 1000 EUR | ||||
| Flow of funds | ||||
| from operations: | ||||
| Adjustments | -146 | 2 876 | ||
| Change in working | ||||
| capital | 1 418 | 587 | ||
| Financial income and | ||||
| expenses and taxes | 459 | 2 080 | ||
| Flow of funds from | ||||
| operations | -2 359 | -4 382 | ||
| Flow of funds from | ||||
| investments: | ||||
| Investments in | ||||
| tangible and | ||||
| intangible assets | -869 | -1 289 | ||
| Increase caused by the | ||||
| change in the Group | ||||
| structure | -18 | |||
| Income from sales | ||||
| of tangible and | ||||
| intangible assets | 1 188 | 319 | ||
| Payments of loans | 8 | |||
| Flow of funds from | ||||
| investments | 320 | -980 | ||
| Flow of funds from | ||||
| financial items: | ||||
| Issue of shares | 1 861 | |||
| Withdrawals of | ||||
| short-term loans | 244 | 2 946 | ||
| Payments of | ||||
| short-term loans | -597 | -1 136 | ||
| Withdrawals of | ||||
| long-term loans | 3 430 | 3 000 | ||
| Payments of | ||||
| long-term loans | -1 308 | -1 684 | ||
| Flow of funds from | ||||
| financial items | 1 769 | -4 987 | ||
| Change of liquid | ||||
| funds | -270 | -375 | ||
Figures are in thousand euros unless stated otherwise. Figures are unaudited.
Lahti 28 February 2014
VAAHTO GORUP PLC OYJ
Board of Directors
Information: Vesa Alatalo, CEO, Vaahto Group Plc Oyj +358 40 7268 923 www.vaaahto.fi
