MARTELA CORPORATION INTERIM REPORT 29 April 2014, 8.30 a.m. MARTELA CORPORATION INTERIM REPORT, 1 January - 31 March 2014 First quarter revenue increased on the previous year and the operating result remained the same as the previous year. Key figures:
| 1-3 | 1-3 | 1-12 | |
| EUR million | 2014 | 2013 | 2013 |
| - Revenue | 34.1 | 31.9 | 132.3 |
| - Change in revenue, % | 7.0 | -0.5 | -7.3 |
| - Operating result | -1.4 | -1.4 | -2.9 |
| - Operating result, % | -4.0 | -4.5 | -2.2 |
| - Earnings/share, EUR | -0.37 | -0.42 | -0.97 |
| - Return on investment, % | -14.9 | -15.0 | -7.9 |
| - Return on equity, % | -28.7 | -27.2 | -16.3 |
| - Equity ratio, % | 37.6 | 43.1 | 37.6 |
| - Gearing ratio, % | 44.9 | 28.5 | 51.2 |
The Martela Group anticipates that its revenue in 2014 will remain at the previous year’s level and that its operating result will show a year-on-year improvement. Due to normal seasonal variation, the Group’s operating result is weighted towards the second half of the year. Market There was no improvement in the demand for office furniture in Finland during the early part of the year. Demand in Finland is still largely focused on office alteration and enhancement projects of different kinds rather than on new offices. Demand in Sweden has also remained weak. Despite weak demand, the Activity Based Office concept, which is well-suited for alteration and enhancement projects, has attracted considerable interest among customers in Sweden, Norway and Finland. The Polish market remained at the normal level during the first quarter. The latest statistics on office construction in Finland refer to 2013. Martela’s previous interim reports have presented the figures on a quarterly basis. However due to the short time span covered by the statistics, there has been a great deal of variation between the quarters. Therefore, from now on, the statistics will be presented on the basis of a 12-month rolling average.
| Finnish construction statistics (m2): | ||
| 12-month rolling average, change | 31 Dec 2013 vs 31 Dec. 2012* | |
| Building completions | -48% | |
| Building permits granted | -45% | |
| Building starts | -53% |
* Change in the 12-month rolling average between the dates is compared. Martela has used the above office construction statistics as a key indicator when assessing overall market developments. However, it should be remembered that there are also many other factors, such as overall economic growth and the need for companies to use their premises more efficiently, that are impacting the demand for Martela products. The need to boost efficiency often prompts companies to initiate office alteration projects, which naturally generates demand for Martela products. However, these projects also result in companies allocating less space, when measured in terms of square metres, for each employee, which means that they purchase fewer pieces of traditional office furniture, such as desks and cabinets. On the other hand, the demand for products and solutions for different types of assembly areas and lobbies is on the increase. Consolidated revenue and result Consolidated revenue for January-March was EUR 34.1 million (31.9). There was a substantial decline in revenue in Finland. The Finnish market remained stagnant and there were no significant projects in Finland during the first quarter and most the revenue was generated by small and medium-sized deliveries. L ike the previous year, there were no major deliveries in Poland during the early months of 2014 and for this reason, the revenue generated by Martela's operations in Poland also remained low. However, there were major customer deliveries in Sweden and Norway during the review period and, as a result, the revenue of the Business Unit in these countries grew substantially from the previous year. As a result of the major customer deliveries in Sweden and Norway, the consolidated revenue also increased during the first quarter. In Russia, revenue continued to increase, compared with 2013, even though the figures remained fairly low. The operating result for the first quarter was EUR -1.4 million (-1.4). The Group’s fixed costs declined somewhat on the previous year as planned due to adjustment measures taken already in the previous year. At the same time, however, the sales margin of the Group’s products was slightly lower than a year earlier, a result of large customer projects. As a result of all these factors, Martela’s consolidated operating result remained at previous year’s levels. In the third quarter of 2013, the Group began to plan measures to reduce its costs, targeting an annual cost saving of about EUR 6 million. The savings programme will be implemented by the end of 2014, after which the full impact of the savings will be felt. It is estimated that due to the timing of the measures the cost reduction impact of the programme in 2014 will be equivalent to about one third of the total savings target. The measures will allow the Group to adjust its cost structure to correspond to the company’s changed operating environment. In January 2014, as part of the savings programme, the Group began codetermination negotiations aimed at improving production efficiency. Improvements will be sought by production transfers between the Group’s units located in Nummela and Riihimäki in Finland, and in Warsaw, Poland. In April 2014, after the review period, Martela also started negotiations to redistribute the production of selected products between its production units in Sweden and Finland. The aim is to create a distinctive role for each of Martela’s production units in order to ensure a more flexible and efficient service for customers. It is estimated that the measures implemented and under way will account for approximately EUR 4.5 million annually of the total savings programme of six million. In February 2014, it was decided that P.O. Korhonen Oy, a joint enterprise of Martela Corporation and Artek Oy Ab, would cease operations due to the fact that they are unprofitable. As part of the efforts to boost the efficiency of the operations, the personnel in the registers of Grundell Henkilöstöpalvelut Oy who are on standby and called to work when needed will be transferred to an external personnel services company outside the Martela Group. The persons in question have been employed in Martela’s service production and will continue in the same tasks. However, in the future they will work for two selected personnel services companies outside the Group. The arrangement will provide more flexibility and increase the availability of the personnel, allowing Martela to meet its personnel needs in a strongly fluctuating service production environment. It became increasingly clear during the first quarter that there is growing demand for Activity Based Office solutions. The Group will thus continue to focus on providing even more high-quality comprehensive solutions and associated services in the Activity Based Working field. The Group’s aim is to strengthen its pioneering position as a supplier of comprehensive solutions and as the leading service provider for offices and other working environments. The result before taxes was EUR -1.5 million (-1.6), and the result after taxes was EUR -1.5 million (-1.7). Martela’s full interim report for January - March 2014 is included in PDF format as an attachment to this release. The interim report is also available on the company’s website at www.martela.com. Martela Oyj Board of Directors Heikki Martela CEO ATTACHEMENT: Martela’s interim report January – March 2014 For more information, please contact Heikki Martela, CEO, tel. +358 50 502 4711 Markku Pirskanen, CFO, tel. +358 40 517 4606 Distribution NASDAQ OMX Nordic Main News Media www.martela.com
