Martela Oyj

Quarterly Report • Aug 16, 2024

MARTELA CORPORATION HALF YEAR REPORT 1 JANUARY – 30 JUNE 2024

1

MARTELA CORPORATION'S HALF YEAR REPORT 1 JANUARY – 30 JUNE

January-June 2024 revenue and operating loss decreased compared to the corresponding period in the previous year. Operating profit was still negative in April-June 2024.

April–June 2024

• Revenue was EUR 21.0 million (19.4), representing a change of 8.3 %
• Operating result was EUR -1.6 million (-2.9)
• Operating profit per revenue was -7.7% (-15.2%)
• The result for the period was EUR -2.1 million (-3.0)
• Earnings per share amounted to EUR -0.45 (-0.65)

January–June 2024

• Revenue was EUR 41.2 million (43.5), representing a change of -5.2 %
• Operating result was EUR -3.8 million (-4.8)
• Operating profit per revenue was -9.3% (-10.9%)
• The result for the period was EUR -4.8 million (-5.2)
• Earnings per share amounted to EUR -1.04 (-1.13)

Outlook

Outlook for 2024

Martela anticipates its revenue to increase in full-year 2024 compared to previous year and operating result to be positive.

Key figures, EUR million

	2024	2023	Change	2024	2023	Change	2023
	4-6	4-6	%	1-6	1-6	%	1-12
Revenue	21.0	19.4	8.3 %	41.2	43.5	-5.2 %	94.4
Operating result	-1.6	-2.9		-3.8	-4.8		-2.4
Operating result %	-7.7 %	-15.2 %		-9.3 %	-10.9 %		-2.5 %
Result before taxes	-1.9	-3.0		-4.5	-5.1		-3.3
Result for the period	-2.1	-3.0		-4.8	-5.2		-3.5
Earnings/share, EUR	-0.45	-0.65		-1.04	-1.13		-0.77
Return on investment %	-24.2	-43.1		-57.9	-33.8		-7.5
Return on equity %	-34.5	-119.8		-79.9	-52.3		-31.3
Equity ratio %				11.4	16.6	-31.6 %	20.0
Gearing %				331.6	179.6	84.6 %	137.2

Ville Taipale, CEO:

"As in the first quarter, market uncertainty and rather weak economic development continued in the second quarter of this year, especially in Finland and the other Nordic countries, although towards the end of the quarter we already saw clear signs of strengthening customer demand and reducing uncertainty. In the second quarter, our revenue increased to EUR 21,0 million, which was 8.3 % higher than in the corresponding period last year and 3.9 % higher compared to the first quarter of this year. Our revenue in January-June amounted to EUR 41.2 million, which was 5.2 % lower than in the same period last year.

The Group's new orders decreased in the second quarter by approximately 15 % compared to the corresponding period in the previous year. In the second quarter, orders increased in Sweden and decreased in Finland, Norway and the Group others. The order backlog strengthened towards the end of the review period.

Our operating loss decreased in the second quarter compared to the corresponding period last year and was EUR -1.6 million (-2.9). The improvement in operating result was mainly due to higher revenue and improved productivity and operational efficiency. Operating profit for January-June was EUR -3.8 million and for the corresponding period last year EUR -4.8 million. The result for the first quarter of the review period was burdened by strikes in Finland and structural changes implemented in Finland, Sweden and Norway. The effects of structural changes on improving efficiency will be fully realised in the second half of the year.

Major changes are underway in the ways of working and thus in working environments, which are expected to increase demand for Martela's products and services as a whole. The pandemic accelerated and permanently changed the meaning of the office. Companies are looking for more attractive and diverse working environments, while more and more attention is paid to home office furnishings and ergonomics. In addition, the importance of issues related to the circular economy and corporate responsibility will be further emphasised in the future.

We will continue to lead the way, in collaboration with our customers, in creating the best and more flexible work environments that improve employee experience, efficiency, innovation and lower total cost of ownership.

We respond to our customers' increased demand for flexibility with our "Workplace as a Service concept", which we have continued to develop actively. Interest in the service model has been encouraging and we expect the service model to have a positive impact on the development of our business. In addition, our ongoing digital development project will enable us to bring even more diverse sales channels to our offering in the future.

The entire personnel is committed to the determined implementation of the strategy, which provides a good foundation for the future."

Market situation

Economic development in the Nordic countries was modest in the first half of 2024, which was also reflected in the prudent purchasing decisions of Martela's customers. The market situation is expected to improve in the second half of the year, and demand has already picked up towards the end of the first half of the year and towards the end of the summer. However, uncertainty about the timing and size of the downward trend in interest rates continues to maintain uncertainty, and thus there are still uncertainties related to the improvement in investment demand and sales of Martela's products.

Revenue and operating result

Revenue and result for April–June 2024

Revenue for January–June was EUR 21.0 million (19.4) and increased by 8.3% from previous year. Revenue increased in Finland by 15.9% and in Sweden by 106.7%. In Norway revenue decreased by 16.2%, and in Other countries by 42.5% compared to previous year.

The Group's operating result in April–June was EUR -1.6 million (-2.9).

The April–June result before taxes was EUR -1.9 million (-3.0) and net result EUR -2.1 million (-3.0).

Revenue and result for January–June 2024

Revenue for January–June was EUR 41.2 million (43.5) and decreased by 5.2% from previous year. Revenue decreased in Finland by 0.7%, in Sweden it decreased by 15.3%, in Norway by 35.8%, and in Other countries by 5.2% compared to previous year.

The Group's operating result in January–June was EUR -3.8 million (-4.8).

The January–June result before taxes was EUR -4.5 million (-5.1) and net result EUR -4.8 million (-5.2).

Revenue by country, EUR million
	2024	2023	Change	2024	2023	Change	2023
	4-6	4-6	%	1-6	1-6	%	1-12
Finland	16.7	14.4	15.9 %	31.9	32.1	-0.7 %	67.3
Sweden	1.5	0.7	106.7 %	3.3	3.9	-15.3 %	9.6
Norway	1.2	1.4	-16.2 %	2.2	3.4	-35.8 %	7.0
Other	1.6	2.8	-42.5 %	3.8	4.1	-5.2 %	10.5

Income from the sale of goods 17.2 15.9 8.2 % 33.2 35.6 -6.6 % 77.7 Income from the sale of services 3.8 3.5 8.9 % 8.0 7.9 1.4 % 16.7

Revenue total 21.0 19.4 8.3 % 41.2 43.5 -5.2 % 94.4

Cumulative revenue from the sale of goods includes EUR 2,216 thousand (2,026) income from furniture which is based on customer agreements and is classified as rental income.

Financial position

The cash flow from operating activities in January–June was EUR -0.3 million (-4.1).

At the end of the period, interest-bearing liabilities stood at EUR 20.2 million including EUR 17.5 million lease liabilities according to IFRS 16. At the end of the comparison period the interest-bearing liabilities stood at EUR 18.2 million including EUR 16.7 million lease liabilities according to IFRS 16.

Net liabilities were EUR 16.4 million (14.3). At the end of the period, short-term limits of EUR 0.0 million were in use (0.0).

The gearing ratio at the end of the period was 331.6% (179.6) and the equity ratio was 11.4% (16.6). Financial income and expenses were EUR -0.6 million (-0.3).

The balance sheet total stood at EUR 51.0 million (56.3) at the end of the period.

Capital expenditure

The Group's gross capital expenditure for January–June was EUR 0.2 million (1.2).

Personnel

The Group employed an average of 375 people (404), change -7.2%. The number of employees in the Group was 382 (426) at the end of the review period. The number of personnel at the end of the review period includes 19 (23) temporary summer employees. Personnel costs in January–June totalled EUR 12.1 million (12.4).

Personnel on average	2024	2023	Change	2023
by country	1-6	1-6	%	1-12
Finland	301	327	-8.0 %	326
Sweden	27	28	-3.6 %	29
Norway	14	15	-6.7 %	15
Other	33	34	-2.9 %	33
Total	375	404	-7.2 %	403

Martela's offering

In line with its Lifecycle strategy Martela creates high-quality services for workplaces and learning environments along their full lifecycle. Our offering includes workplace and learning environment specification and planning, implementation and furnishing as well as continuous measurement and optimisation.

To add to the traditional way of purchasing Martela has introduced two new service models, Workplace as a Service and Learning environment as a Service. The monthly service fees can include everything from one to all of the lifecycle phases.

OTHER MATTERS

Shares

In January–June, a total of 828,261 (469,918) of the company's series A shares were traded on the NASDAQ OMX Helsinki exchange, corresponding to 20.5% (11.9) of the total number of series A shares.

The value of trading turnover was EUR 1.1 million (1.1), and the share price was EUR 1.10 at the end of the period (2.04). During January–June the share price was EUR 1.59 at its highest and EUR 1.02 at its lowest. At the end of June, equity per share was EUR 1.06 (1.75).

Treasury shares

Martela did not purchase any of its own shares in January–June.

Martela owns a total of 1 425 Martela A shares and its holding of treasury shares amounted to 0.0% of all shares and 0.0% of all votes. Out of the shares 379 were purchased at an average price of EUR 10.65 and 1 046 were transferred from Martela Corporation's joint account to the treasury shares reserve based on the decision by AGM on March 13, 2018.

Share-based Incentive Plan

The old share-based incentive plan

In the effective Performance-based Share Plan 2021–2023, there were three earning periods, which were financial years 2021, 2022 and 2023. The prerequisite for participating in the new plan was that a participant acquires the company´s series A shares up to the number determined by the Board of Directors. Approximately 40 key employees, including the CEO and other Martela's Management Team members, were belonging to the target group of the share-based incentive plan. In the plan, the target group was given an opportunity to earn Martela Corporation series A shares based on performance and on their personal investment in Martela Corporation series A shares. The Board of Directors decided the earning criteria and the goals for each criterion of the plan at the beginning of each earning period. 53,881 additional shares based on the program were paid as rewards in 2023 and 11,657 in 2022. In 2024, no reward will be paid on the basis of the plan, because the goals of the earning period 2023 were not achieved.

The new share-based incentive plan

On March 13, 2024, Martela Oyj's Board of Directors decided on a new share-based incentive plan for the group's key employees. The new system largely follows the principles of the old system.

Participating in the new plan requires that the participant acquire new or transfer already acquired company A shares up to the amount decided by the Board of Directors. In order to implement the plan, the Board of Directors decided on April 29, 2024, on a share issue of 65,717 company A shares aimed at the target group of the plan. In addition to this, the employees who participated in the old plan have transferred 172,644 of the company's A shares from their investments in the old plan to the new plan.

The new shares were entered into the Trade Register on 4 June 2024 and trading on the new shares at the Main market administered by Nasdaq Helsinki Ltd began on 5 June 2024.

In the plan, it is possible for the target group to earn Martela Oyj's A shares based on performance and personal investment in Martela Oyj's A shares. The board decides the earning criteria of the plan and the goals set for each earning criterion at the beginning of the earning period.

The rewards paid based on the plan are estimated to correspond to a maximum of 712,000 Martela Oyj's A shares, including the portion paid in cash.

37 people, including the CEO and other members of Martela's Management Team, were part of the plan's target group when the plan started.

The new performance-based additional share plan 2024—2026 has three earning periods, the fiscal years 2024, 2025 and 2026. In the earning period 2024, the rewards are based on the group's operating profit (EBIT).

The rewards will be paid partly in Martela Corporation series A shares and partly in cash. The cash proportions of the rewards are intended for covering taxes and tax-related expenses arising from the rewards to the participants.

As part of the implementation of the performance-based share plan, the Board of Directors granted interest-bearing loans of EUR 42,100 to persons participating in the program to finance the acquisition of the company's shares. With the loans in question, the participants financed the acquisition of 65,717 of the company's A shares in the above-mentioned share issue. The maximum amount of the loans in question is 70 percent of the participant's share investment. In addition to this, for persons who participated in the old plan and have transferred to the new plan, the Bord of Directors has decided to extend the maturity of the loans granted in 2021 by two years until the end of 2027.

2024 Annual General Meeting

Martela Corporation's Annual General Meeting was held on Friday, April 5, 2024. The Meeting approved the Financial Statements, discharged the members of the Board of Directors and CEO's from liability for the year of 2023 and approved remuneration report and new remuneration policy. The Board of Directors proposal that no dividends would be paid was approved.

The Annual General Meeting confirmed that the Board of Directors will consist of six members and Mr. Eero Martela, Ms. Hanna Mattila, Mr. Jan Mattsson, Mr. Johan Mild and Ms. Anni Vepsäläinen be re-elected as members of the Board of Directors and a new member Mr. Jacob Kragh was elected to replace Ms. Katarina Mellström. The Annual General Meeting resolved a monthly compensation of EUR 3,700 be paid for the Chairman of the Board and EUR 1,850 for the Board Members, and an additional compensation of EUR 1,600 per year to the Board members belonging to a committee.

Authorized Public Accountant Ernst & Young Oy was elected as the company's auditor. The remuneration of the auditor will be paid according to the invoice that has been accepted by the Audit Committee of the company. Ernst & Young Oy has informed that Authorized Public Accountant Mr. Osmo Valovirta will act as the principal auditor.

The Annual General Meeting authorized the board in accordance with the proposal of the Board of Directors to decide on the repurchase of own shares, issuance of own shares and/or to dispose of the own shares held by the Company.

The Board of Directors elected by Martela Corporation's Annual General Meeting had its organisational meeting after the Annual General Meeting and elected from among its members Johan Mild as the Chairman and Anni Vepsäläinen as the Vice Chairman of the Board.

Corporate responsibility and quality

Corporate responsibility forms an integral part of Martela's strategy and operations. We support the responsibility of our customer companies by offering sustainable solutions for the workplace throughout its entire lifecycle and by taking care of unnecessary furniture needed in a sustainable way. The company's Martela Lifecycle model covers the entire lifecycle of a workplace. The Group has an occupational health and safety (ISO 45001) management system and a quality (ISO9001) and environmental (ISO14001) management system certified by an independent certifier, which guarantee that operations are continuously improved, client expectations met, and environmental matters taken into consideration.

Further information on the corporate responsibility of the Group's operations can be found in the annually published responsibility report. Martela's Sustainability reporting includes extensive non-financial information (NFI) required by the new accounting legislation. It has been published since 2011. All reports are available on the Martela website.

Administration

Martela Corporation is a Finnish limited liability company that is governed in its decision-making and management by Finnish legislation, especially the Finnish Limited Liability Companies Act, by other regulations concerning public listed companies, and by its Articles of Association. The company complies with the NASDAQ OMX Guidelines for Insiders and the Corporate Governance Code 2020 for Finnish listed companies published by the Securities Market Association. More information on Martela's governance can be found on the company's website.

EVENTS AFTER THE END OF THE REPORTING PERIOD

There were no events after the reporting period.

SHORT-TERM RISKS

The principal risk regarding profit performance and liquidity development is related to the general economic uncertainty and weak development in the main market areas and the consequent effects on the overall demand in Martela's operating environment. The market situation continues to be negatively affected by uncertainty about the economic development. Due to the project-based nature of the sector, forecasting short-term development is challenging in normal circumstances. This challenge is further accentuated by the increased economic uncertainty.

Outlook

Outlook for 2024

Martela anticipates its revenue to increase in full-year 2024 compared to previous year and operating result to be positive.

TABLES

Accounting policies

Martela Corporation's consolidated financial statements have been prepared in compliance with the IAS 34 standard and the International Financial Reporting Standards (IFRS) valid on December 31, 2023. The figures in the release have been rounded and the total sum of individual figures may differ from the total presented in the release. The figures presented in this release have not been audited. Same accounting principles have been applied in this report as in the financial statements 2023.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(EUR 1000)
	2024	2023	2024	2023	2023
	4-6	4-6	1-6	1-6	1-12
Revenue	21,012	19,393	41,232	43,482	94,389
Other operating income	39	8	57	52	149
Employee benefit expenses	-5,792	-6,208	-12,010	-12,405	-22,995
Operating expenses	-15,200	-14,586	-29,661	-32,643	-67,150
Depreciation and impairment	-1,683	-1,555	-3,459	-3,238	-6,773
Operating profit/loss	-1,625	-2,947	-3,842	-4,754	-2,380
Financial income and expenses	-315	-31	-620	-319	-912
Profit/loss before taxes	-1,940	-2,978	-4,461	-5,072	-3,292
Taxes	-139	13	-350	-106	-222
Profit/loss for the period	-2,079	-2,965	-4,811	-5,179	-3,514
Other comprehensive income:
Translation differences Actuarial gains and losses Actuarial gains and losses, deferred	-193	-326	98	-280	-415 45
taxes
Other comprehensive income for the period	-193	-326	98	-280	-370
Total comprehensive income	-2,272	-3,291	-4,713	-5,459	-3,884
Basic earnings per share, eur	-0,45	-0,65	-1,04	-1,13	-0,77
Diluted earnings per share, eur	-0,45	-0,65	-1,04	-1,13	-0,77
Allocation of net profit for the period: To equity holders of the parent	-2,079	-2,965	-4,811	-5,179	-3,514
Allocation of total comprehensive income:
To equity holders of the parent	-2,272	-3,291	-4,713	-5,459	-3,884

GROUP BALANCE SHEET (EUR 1000)	30/6/2024	30/6/2023	31/12/2023
ASSETS
Non-current assets
Intangible assets	3,857	4,505	4,334
Tangible assets	15,323	13,314	14,408
Investments	7	7	7
Deferred tax assets	2,741	2,895	3,003
Non-current loan receivables	567	546	532
Total	22,495	21,267	22,283
Current assets
Inventories	10,522	12,574	9,235
Receivables	14,176	18,611	19,115
Cash and cash equivalents	3,823	3,849	5,053
Total	28,520	35,033	33,403
Total assets	51,015	56,300	55,686
EQUITY AND LIABILITIES
Equity
Share capital	7,000	7,000	7,000
Share premium account	1,116	1,116	1,116
Reserve for invested unrestricted equity	1,080	995	995
Other reserves	-9	-9	-9
Translation differences	-972	-935	-1,071
Retained earnings	-3,281	-181	1,530
Treasury shares	-4	-4	-4
Total	4,931	7,983	9,558
Non-current liabilities
Interest-bearing liabilities	14,323	13,907	13,776
Other non-current liabilities	309	254	306
Pension obligations	105	115	105
Total	14,738	14,277	14,187
Current liabilities
Interest-bearing	5,747	4,166	4,287
Non-interest bearing	25,598	29,874	27,654
Total	31,345	34,041	31,941
Total liabilities	46,083	48,317	46,128
Equity and liabilities, total	51,015	56,300	55,686

CONSOLIDATED CASH FLOW STATEMENT	2024	2023	2023
(EUR 1000)	1-6	1-6 *)	1-12 *)
Cash flow from operating activities
Profit/loss before taxes	-4,461	-5,072	-3,292
Depreciation and impairment	3,459	3,238	6,773
Unrealized exchange rate gains and losses	75	11	-141
Financial income and expenses	620	319	912
Other adjustments and income and expense non-cash	-478	-1,856	-2,841
Cash flow before change in working capital	-786	-3,360	1,411
Change in working capital
Non-interest-bearing receivables, increase (-) / decrease (+)	4,964	-382	-786
Inventories, increase (-) / decrease (+)	-1,287	-792	2,546
Non-interest-bearing liabilities, increase (+) / decrease (-)	-2,056	1,039	-1,181
Cash flow before financial items and taxes	834	-3,945	1,991
Interest and other financial items paid	-191	-97	-330
Interest and other financial items received	22	15	29
Interest on lease liabilities	-345	-346	-694
Income tax paid	-611	-154	-677
Net cash from operating activities (A)	-292	-4,077	320
Cash flows from investing activities
Capital expenditure on tangible and intangible assets	-210	-1,151	-2,332
Cash flow from investing activities (B)	-210	-1,151	-2,332
Cash flow from financing activities
Proceeds from short-term loans	1,302	0	0
Repayments of short-term loans	0	-267	-417
Repayments of lease liabilities	-1,994	-1,627	-3,457
Dividends paid and other profit distribution	0	-452	-452
Cash proceeds from issuing shares	43	0	0
Cash flow from financing activities (C)	-649	-2,346	-4,326
Change in cash and cash equivalents ( A+B+C)	-1,150	-7,575	-6,338
Cash and cash equivalents in the Beginning of the period	5,053	11,295	11,295
Translation differences	-80	129	96
Cash and cash equivalents at the end of period	3,823	3,849	5,053

*) The presentation method has been changed to previously published, the figures for the comparison period are unaudited.

	STATEMENT OF CHANGES IN EQUITY

	Share	Share	Reserve for	Other	Translation	Retained	Treasury	Equity
(EUR 1000) Equity attributable to equity holders of	capital	premium	invested unrestricted	reserves	differences	earnings	shares	total
the parent		account	equity
01/01/2023	7,000	1,116	995	-9	-655	5,406	-4	13,850
Profit/loss for the period						-5,179		-5,179
Translation differences					-280			-280
Other comprehensive income Other comprehensive income for the					-280			-280
period					-280	-5,179		-5,459
Share issue								0
Dividend						-452		-452
Share-based incentives						44		44
30/6/2023	7,000	1,116	995	-9	-935	-181	-4	7,983
01/01/2024	7,000	1,116	995	-9	-1,070	1,530	-4	9,558
Profit/loss for the period						-4,811		-4,811
Translation differences					98			98
Other comprehensive income Other comprehensive income for the					98			98
period					98	-4,811		-4,713
Share issue			85					85
Dividend								0
Share-based incentives								0
30/6/2024	7,000	1,116	1,080	-9	-972	-3,281	-4	4,931

CONTINGENT LIABILITIES	30/6/2024	30/6/2023	31/12/2023
Mortgages and shares pledged Other commitments	9,895 855	9,732 900	9,895 854
Rental commitments	550	711	589
DEVELOPMENT OF SHARE PRICE	2024	2023 1-6 1-6	2023 1-12
Share price at the end of period, eur Highest price, eur Lowest price, eur Average price, eur	1.02	1.10 2.04 1.59 2.72 1.96 1.29 2.31	1.28 2.72 1.22 1.83

KEY FIGURES/RATIOS	2024	2023	2023
	1-6	1-6	1-12
Operating profit/loss, EUR thousand	-3.842	-4.754	-2.380
-% in relation to revenue	-9.3	-10.9	-2.5
Profit/loss before taxes, EUR thousand	-4.461	-5.072	-3.292
-% in relation to revenue	-10.8	-11.7	-3.5
Profit/loss for the period, EUR thousand	-4.811	-5.179	-3.514
-% in relation to revenue	-11.7	-11.9	-3.7
Basic earnings per share, eur	-1.04	-1.13	-0.77
Diluted earnings per share, eur	-1.04	-1.13	-0.77
Equity/share, eur	1.06	1.75	2.09
Equity ratio %	11.4	16.6	20.0
Return on equity %	-79.9	-52.3	-31.3
Return on investment %	-57.9	-33.8	-7.5
Interest-bearing net-debt, EUR million	16.4	14.3	13.1
Gearing %	331.6	179.6	137.2
Capital expenditure, EUR million	0.2	1.2	2.3
-% in relation to revenue	0.5	2.6	2.4
Personnel at the end of period	382	426	386
Personnel on average	375	401	403
Revenue/employee, EUR thousand	110.0	107.6	234.2

Formulas for Calculation of Key Figures

Earnings / share	=	Profit attributable to the equity holders of the parent Average share issue-adjusted number of shares
Equity / share, EUR	=	Equity attributable to the equity holders of the parent Share issue-adjusted number of shares at year end
Return on equity, %	=	Profit/loss for the financial year x 100 Equity (average during the year)
Return on investment, %	=	(Pre-tax profit/loss + interest expenses + other financial expenses) x 100 Balance sheet total - Non-interest-bearing liabilities (average during year)
Equity ratio, %	=	Equity x 100 Balance sheet total - advances received
Gearing, %	=	Interest-bearing liabilities-cash and cash equivalents and liquid asset securities x 100 Equity
Personnel on average	=	Month-end average number of personnel in active employment
Interest-bearing net debt	=	Interest-bearing debt – cash and other liquid financial assets

BRIEFING

A briefing will not be held, but additional information can be asked by telephone from CEO Ville Taipale and CFO Henri Berg on Friday August 16, 2024 from 12 a.m. to 2 p.m. EET.

Martela Corporation Board of Directors

Ville Taipale CEO

Further information Ville Taipale, CEO, +358 50 557 2611 Henri Berg, CFO, +358 40 836 5464

Distribution Nasdaq OMX Helsinki Key news media

www.martela.com

Martela is a Nordic leader specialising in user-centric working and learning environments. We create the best places to work and offer our customers the Martela Lifecycle solutions which combine furniture and related services into a seamless whole.