Quarterly Report • Nov 2, 2017
Quarterly Report
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1 January – 30 September 2017
The January-September 2017 revenue and operating result declined from the comparison period. The third quarter operating result was EUR 1.7 million.
Challenges related to the implementation of the new IT systems made it difficult to retain the profitability and delivery accuracy reached in the previous year. Due to this we concentrated to stabilise the delivery accuracy on the third quarter and at the end of the quarter reached the 2016 level. Our operations have normalised and we estimate that we have overcome the biggest challenges related to the IT system project.
Martela Group anticipates that its 2017 revenue will decrease clearly and operating result will decrease compared to the previous year. Due to normal seasonal variations, the Group's operating result accumulates mainly during the second half of the year.
| 2017 | 2016 | Change | 2017 | 2016 | Change | 2016 | |
|---|---|---|---|---|---|---|---|
| 7-9 | 7-9 | % | 1-9 | 1-9 | % | 1-12 | |
| Revenue | 29.4 | 35.2 | -16.6 | 80.0 | 94.9 | -15.7 | 129.1 |
| Operating result | 1.7 | 3.6 | -52.1 | 0.2 | 4.1 | -95.5 | 6.2 |
| Operating result % | 5.9 | 10.2 | 0.2 | 4.3 | 4.8 | ||
| Result before taxes | 1.6 | 3.5 | -55.3 | -0.1 | 3.6 | -102.9 | 5.6 |
| Result for the period | 1.5 | 2.7 | -44.5 | -0.4 | 2.6 | -113.8 | 3.3 |
| Earnings/share, eur | 0.37 | 0.67 | -0.09 | 0.62 | 0.81 | ||
| Return on investment % | 19.0 | 42.6 | 1.2 | 16.0 | 18.2 | ||
| Return on equity % | 25.1 | 46.8 | -1.9 | 14.5 | 13.9 | ||
| Equity ratio % | 41.2 | 46.3 | 45.3 | ||||
| Gearing % | 30.2 | -8.9 | -18.9 |
"The January-September 2017 revenue and operating result declined from the comparison period. Challenges related to the implementation of the new IT systems made it difficult to retain the profitability and delivery accuracy reached in the previous year. Due to this we concentrated to stabilise the delivery accuracy on the third quarter and at the end of the quarter reached the 2016 level, supported by improvement of the functionalities of the IT system and implementation of the new procedures throughout the organization.
The whole Martela organization concentrated into implementing the IT systems and new procedures, resulting in revenue decline in almost all the markets. Biggest impact was into Finland revenue. However, on the third quarter the new orders started to pick up in Finland and exceeded the previous year level.
Revenue decline in Sweden was in addition to IT system challenges due to lack of big projects and to the ongoing transformation of sales channel into Martela Lifecycle strategy format. In Norway our revenue increased accordingly to our strategy. Discontinuation of own sales operations in Poland and Russia has as expected declined our revenue in group Other countries.
Implementation of the comprehensive Martela Lifecycle in Nordics has developed well towards the strategic targets for the year 2018 of which one example is the Nordic contract with the construction and property group NCC.
The IT reforms caused somewhat more investments and expenditure than anticipated, but the effects from the earlier completed savings programme resulted in declined personnel and real estate expenditure. The third quarter cash flow from the operating activities was EUR 2.9 million positive, however the cash flow from the operating activities of January – September was negative by EUR 8.3 million (8.1).
In the remaining year we will focus on improving the sales volumes, profitability and cash flow as well as on finetuning the procedures by utilisating the new IT systems effectively. We will direct more resources into sales and into its back office in order to secure customer satisfaction.
Our operations have normalised and we estimate that we have overcome the biggest challenges related to the IT system project as well as by the end of first quarter next year the IT systems will fully support our new strategy but still leading to some nonrecurring expenditure. "
No material changes took place in the market during the period. The demand for Martela's products and services is fundamentally affected by the general economic situation and by the extent to which companies and the public sector need to use their space more efficiently and make their workplaces more effective management tools.
Revenue for July – September declined 16.6 % from the previous year and was EUR 29.4 million (35.2). Revenue declined in Finland by 9.4 % in Sweden by 50.1 %, and in Other countries by 37.9 %. Revenue grew in Norway by 18.7 %.
Operating result for third quarter was EUR 1.7 million (3.6). Result before taxes for July – September was EUR 1.6 million (3.5) and result for the period was EUR 1.5 million (2.7).
Revenue for January – September was EUR 80.0 million (94.9) and declined by 15.7 % from the previous year. Revenue declined in Finland by 8.9 %, and in Sweden by 44.7 %. Revenue in Norway grew by 26.6 %. Revenue in group Other areas declined by 28.7 %.
Operating result for January – September was EUR 0.2 million (4.1). Result before taxes for January – September was EUR -0.1 million (3.6) and result for the period was EUR -0.4 million (2.6).
| Revenue by country |
2017 7-9 |
2016 7-9 |
Change % |
2017 1-9 |
2016 1-9 |
Change % |
2016 1-12 |
|---|---|---|---|---|---|---|---|
| Finland | 24.0 | 26.5 | -9.4 | 62.5 | 68.6 | -8.9 | 95.2 |
| Sweden | 2.2 | 4.5 | -50.1 | 8.8 | 15.9 | -44.7 | 20.4 |
| Norway | 1.0 | 0.9 | 18.7 | 3.0 | 2.3 | 26.6 | 3.7 |
| Other | 2.1 | 3.4 | -37.9 | 5.7 | 8.0 | -28.7 | 9.8 |
| Revenue by country |
29.4 | 35.2 | -16.6 | 80.0 | 94.9 | -15.7 | 129.1 |
As reported earlier, as a result of harmonising and combining processes, the organisation, reporting and systems, the company reports consolidated figures as a single segment and in addition reports revenue by country as of 2017. Revenue will be reported by the location of a customer into following countries: Finland, Sweden, Norway and Other countries
Cash flow from operating activities in January–September was EUR -8.3 million (8.1) and it improved EUR 2.9 million on the third quarter. The implementation of the IT reforms caused still some delays in invoicing that resulted in slower sales cash inflow than in the previous year.
At the end of the period, interest-bearing liabilities stood at EUR 16.2 million (9.4) and net liabilities were EUR 7.1 million (-2.2). At the end of the period, short-term limits of EUR 8.7 million were in use (0.0) and available limits stood at EUR 0.8 million.
The gearing ratio at the end of the period was 30.2 % (-8.9) and the equity ratio was 41.2 % (46.3). Financial income and expenses were EUR -0.3 million (-0.4).
Financing arrangements include covenant clauses in which the ratio between the Group's net liabilities and EBITDA and the Group's equity ratio are calculated. The key figures calculated at the end of the review period fulfilled the covenant clauses.
The balance sheet total stood at EUR 57.7 million (52.8) at the end of the period
The Group's gross capital expenditure for January–September came to EUR 2.1 million (1.4). The majority of the investments concerned the IT system reforms (New Business Platform).
The Group employed an average of 509 people (561), which represents a decrease of 52 persons or -9.3 %. The number of employees in the Group was 504 (544) at the end of the review period. Personnel costs in January – September totalled to EUR 20.6 million (21.5).
| Personnel on average | 2017 | 2016 | Change | 2016 |
|---|---|---|---|---|
| 1-9 | 1-9 | % | 1-12 | |
| Finland | 437 | 432 | 1.2 | 428 |
| Sweden | 27 | 39 | -30.8 | 37 |
| Norway | 9 | 8 | 12.5 | 8 |
| Other | 35 | 82 | -57.3 | 77 |
| Total | 509 | 561 | -9.3 | 550 |
The change in personnel in Sweden is related to the closure of the Bodafors assembly and logistic unit and in group Other countries to the discontinuation of Martela's own sales operations in Poland and Russia. The personnel at sales was increased in all sales units in the period.
Instead of individual changes, Martela Lifecycle offers an approach that covers the entire lifecycle of a workplace. In the Martela Lifecycle model, the maintenance of premises and furniture is continuous and the workplace evolves with changing needs.
The documents concerning the discontinuation of our Russian subsidiary, LLC Martela, were approved by the authorities and the company was closed down in the second quarter. There were no other changes in Group structure during the review period.
In January–September, a total of 1,277,141 (1,635,960) of the company's series A shares were traded on the NASDAQ OMX Helsinki exchange, corresponding to 36.0 % (46.1) of the total number of series A shares.
The value of trading turnover was EUR 14.7 million (9.6), and the share price was EUR 9.08 at the end of the period (9.01). During January–September, the highest quotation of the share was EUR 14.0 and the lowest EUR 8.61 At the end of September 2017, equity per share was EUR 5.64 (5.90).
Martela did not purchase any of its own shares in January–September. After the transfer of treasury shares based on the share-based incentive scheme as reported on 19 April 2017 Martela owned a total of 12,036 Martela A shares and its holding of treasury shares amounted to 0.3 % of all shares and 0.1 % of all votes. Own shares are purchased at an average price of EUR 10.65
In the effective share-based incentive programme there are two earning periods, which are 2017–2018 and 2019– 2020. The Board of Directors will decide the earning criteria and the goals for each criterion of the programme at the beginning of each earning period.
The target group for the 2017–2018 earning period is the Group's Management Team. The potential reward of the plan from the earning period 2017—2018 is based on the Group´s Earnings before Interest and Taxes (EBIT). Fees to be paid of the 2017–2018 earning period correspond to a maximum of approximately 100,000 Martela Corporation series A shares in total and also include the cash portion. Management of the share-based incentive scheme has been outsourced to an external service provider.
Related to the last earning period of the earlier share-based incentive program 35,110 shares were distributed on 19 April 2017. Totally 94,311 shares have been distributed based on the program.
Martela Corporation's Annual General Meeting was held on 14 March 2017. The AGM approved the financial statements for 2016 and discharged the members of the Board of Directors and the Managing Director from liability. The AGM decided, in accordance with the Board of Directors' proposal, to distribute a dividend of EUR 0.37 per share. The dividend was paid on 23 March 2017.
The number of members on the Board of Directors was confirmed as seven. Kirsi Komi, Eero Leskinen, Eero Martela, Heikki Martela, Yrjö Närhinen and Anni Vepsäläinen were re-elected to the Board, and Minna Andersson was elected as a new member.
KPMG Oy Ab, Authorised Public Accountants, was reappointed as the company's auditor.
The AGM approved the Board of Directors' proposals, detailed in the meeting notice, to authorise the Board to acquire and/or dispose of Martela shares. The new Board of Directors convened after the AGM and elected from its members Heikki Martela as Chairman and Eero Leskinen as Vice Chairman.
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 2015 for Finnish listed companies published by the Securities Market Association. More information on Martela's governance can be found on the company's website.
On 23 October 2017 Martela changed its financial guidance for 2017.
No other significant events requiring reporting have taken place since the January–September period, and operations have continued according to plan.
The principal risk regarding profit performance relates to the general economic uncertainty and the consequent effects on the overall demand in Martela's operating environment. Due to the project-based nature of the sector, forecasting short-term developments is challenging.
Our operations have normalised and we estimate that we have overcome the biggest challenges related to the IT system project as well as by the end of first quarter next year the IT systems will fully support our new strategy but still leading to some nonrecurring expenditure.
Martela Group anticipates that its 2017 revenue will decrease clearly and operating result will decrease compared to the previous year. Due to normal seasonal variations, the Group's operating result accumulates mainly during the second half of the year.
This financial report has been prepared in accordance with the IAS 34 standard as approved by EU.
The calculation methods of the report are the same as those applied in the 2016 financial statements.
The figures in this release have been rounded, and so the combined sum of individual figures may differ from the sums presented.
This report is unaudited.
IFRS 15 Revenue from Contracts with Customers standard is effective for financial years beginning on or after 1 January 2018. Martela has assessed the impacts of the implementation of the standard for different revenue streams and has come to the solution that the impact will not be significant. Martela's customer agreements consist mainly of one-off product or service deliveries, combinations of services and products and continuous services. The new standard will have almost no effect in the time of revenue recognition compared to earlier.
| (EUR 1000) | |||||
|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | 2016 | |
| 7-9 | 7-9 | 1-9 | 1-9 | 1-12 | |
| Revenue | 29 350 | 35 174 | 79 957 | 94 854 | 129 127 |
| Other operating income | 291 | 35 | 394 | 219 | 464 |
| Employee benefits expenses | -6 109 | -6 845 | -20 626 | -21 493 | -29 671 |
| Operating expenses | -21 049 | -24 040 | -57 452 | -67 338 | -90 854 |
| Depreciation and impairment | -757 | -720 | -2 089 | -2 189 | -2 908 |
| Operating profit/loss | 1 727 | 3 604 | 184 | 4 053 | 6 158 |
| Financial income and expenses | -152 | -79 | -289 | -409 | -540 |
| Profit/loss before taxes | 1 575 | 3 525 | -105 | 3 644 | 5 618 |
| Income tax | -54 | -782 | -248 | -1 087 | -2 302 |
| Profit/loss for the period | 1 521 | 2 743 | -353 | 2 557 | 3 316 |
| Other comprehensive income: | |||||
| Translation differences | 50 | -8 | -38 | -16 | 161 |
| Actuarial gains and losses | 43 | ||||
| Actuarial gains and losses, deferred taxes | -41 | ||||
| Other | -35 | ||||
| Total comprehensive income | 1 571 | 2 735 | -391 | 2 541 | 3 444 |
| Basic earnings per share, eur | 0,37 | 0,67 | -0,09 | 0,62 | 0,81 |
| Diluted earnings per share, eur | 0,37 | 0,67 | -0,09 | 0,62 | 0,81 |
| Allocation of net profit for the period: | |||||
| To equity holders of the parent | 1 521 | 2 743 | -353 | 2 557 | 3 316 |
| Allocation of total comprehensive income: To equity holders of the parent |
1 571 | 2 735 | -391 | 2 541 | 3 444 |
| GROUP BALANCE SHEET (EUR 1 000) | 30.9.2017 | 30.9.2016 | 31.12.2016 | |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Intangible assets | 7 426 | 5 139 | 6 321 | |
| Tangible assets | 5 459 | 7 270 | 6 632 | |
| Investments | 53 | 55 | 55 | |
| Deferred tax assets | 138 | 390 | 144 | |
| Investment properties | 600 | 600 | 600 | |
| Total | 13 676 | 13 454 | 13 752 | |
| Current assets | ||||
| Inventories | 10 128 | 8 717 | 7 709 | |
| Receivables | 24 724 | 19 150 | 21 351 | |
| Cash and cash equivalents | 9 136 | 11 512 | 13 425 | |
| Total | 43 988 | 39 379 | 42 485 | |
| Total assets | 57 663 | 52 833 | 56 238 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 7 000 | 7 000 | 7 000 | |
| Share premium account | 1 116 | 1 116 | 1 116 | |
| Other reserves | -9 | -9 | -9 | |
| Translation differences | -617 | -756 | -579 | |
| Retained earnings | 14 912 | 16 460 | 17 135 | |
| Treasury shares | -128 | -502 | -502 | |
| Share-based incentives | 1 094 | 913 | 1 013 | |
| Total | 23 368 | 24 222 | 25 174 | |
| Non-current liabilities | ||||
| Interest-bearing liabilities | 6 241 | 8 213 | 6 283 | |
| Deferred tax liabilities | 511 | 653 | 577 | |
| Other non-current liabilities | 2 | 0 | 0 | |
| Pension obligations | 521 | 574 | 371 | |
| Total | 7 274 | 9 440 | 7 231 | |
| Current liabilities | ||||
| Interest-bearing | 9 425 | 569 | 2 005 | |
| Non-interest bearing | 17 597 | 18 602 | 21 827 | |
| Total | 27 022 | 19 171 | 23 832 | |
| Total liabilities | 34 296 | 28 611 | 31 063 | |
| Equity and liabilities, total | 57 663 | 52 833 | 56 238 |
| CONSOLIDATED CASH FLOW STATEMENT | ||||
|---|---|---|---|---|
| (EUR 1000) | 2017 | 2016 | 2016 | |
| Cash flows from operating activities | 1-9 | 1-9 | 1-12 | |
| Cash flow from sales | 77 340 | 98 247 | 129 898 | |
| Cash flow from other operating income | 159 | 201 | 317 | |
| Payments on operating costs | -84 388 | -88 684 | -116 264 | |
| Net cash from operating activities | -6 889 | 9 764 | 13 951 | |
| before financial items and taxes | ||||
| Interest paid | -173 | -188 | -375 | |
| Interest received | 1 | 4 | 4 | |
| Other financial items | -68 | -136 | -193 | |
| Dividends received | 0 | 5 | 18 | |
| Taxes paid | -1 216 | -1 311 | -1 743 | |
| Net cash from operating activities (A) | -8 345 | 8 139 | 11 662 | |
| Cash flows from investing activities | ||||
| Capital expenditure on tangible and intangible assets | -2 018 | -1 318 | -2 579 | |
| Proceeds from sale of tangible and intangible assets | 235 | 18 | 146 | |
| Net cash used in investing activities (B) | -1 784 | -1 300 | -2 433 | |
| Cash flows from financing activities | ||||
| Proceeds from short-term loans | 8 761 | |||
| Repayments of short-term loans Proceeds from long-term loans |
-1 384 | -1 331 | -1 395 | |
| Repayments of long-term loans | -791 | -1 221 | ||
| Dividends paid and other profit distribution | -1 520 | -998 | -1 022 | |
| Net cash used in financial activities (C) | 5 857 | -3 119 | -3 638 | |
| Change in cash and cash equivalents ( A+B+C) | -4 272 | 3 720 | 5 591 | |
| (+ increase, - decrease) | ||||
| Cash and cash equivalents in the beginning of period | 13 425 | 7 724 | 7 724 | |
| Translation differences | -17 | 68 | 110 | |
| Cash and cash equivalents at the end of period | 9 136 | 11 512 | 13 425 |
Equity attributable to equity holders of the parent
| Share capital |
Share premium account |
Other reserves |
Transl. diff. |
Retained earnings |
Treasury shares |
Total | |
|---|---|---|---|---|---|---|---|
| 01.01.2016 | 7 000 | 1 116 | -9 | -740 | 15 968 | -673 | 22 662 |
| Total comprehensive income | 2 557 | 2 557 | |||||
| Translation diff. Dividends |
-16 | -884 | -16 -884 |
||||
| Withholding taxes from dividends | -139 | -139 | |||||
| Share-based incentives | -129 | 171 | 42 | ||||
| 30.09.2016 | 7 000 | 1 116 | -9 | -756 | 17 373 | -502 | 24 222 |
| 01.01.2017 | 7 000 | 1 116 | -9 | -579 | 18 148 | -502 | 25 174 |
| Total comprehensive income | -353 | -353 | |||||
| Other changes | 23 | 23 | |||||
| Translation diff. | -38 | -38 | |||||
| Dividends | -1 290 | -1 290 | |||||
| Withholding taxes from dividends | -230 | -230 | |||||
| Share-based incentives | -292 | 374 | 82 | ||||
| 30.09.2017 | 7 000 | 1 116 | -9 | -617 | 16 006 | -128 | 23 368 |
| CONTINGENT LIABILITIES | 30.9.2017 | 30.9.2016 | 31.12.2016 |
| Mortgages and shares pledged | 26 750 | 26 755 | 26 781 |
|---|---|---|---|
| Other commitments | 243 | 346 | 329 |
| Rental commitments | 6 283 | 8 231 | 7 929 |
| DEVELOPMENT OF SHARE PRICE | 2017 | 2016 | 2016 |
| 1-9 | 1-9 | 1-12 | |
| Share price at the end of period, eur | 9.08 | 9.01 | 12.84 |
| Highest price, eur | 14.00 | 9.50 | 13.50 |
| Lowest price, eur | 8.61 | 3.29 | 3.29 |
| Average price, eur | 11.47 | 5.86 | 6.80 |
| KEY FIGURES/RATIOS | 2017 | 2016 | 2016 | |
|---|---|---|---|---|
| 1-9 | 1-9 | 1-12 | ||
| Operating profit/loss | 184 | 4053 | 6158 | |
| - in relation to revenue | 0,2 | 4,3 | 4,8 | |
| Profit/loss before taxes | -105 | 3644 | 5618 | |
| - in relation to revenue | -0,1 | 3,8 | 4,4 | |
| Profit/loss for the period | -353 | 2557 | 3316 | |
| - in relation to revenue | -0,4 | 2,7 | 2,6 | |
| Basic earnings per share, eur | -0,09 | 0,62 | 0,81 | |
| Diluted earnings per share, eur | -0,09 | 0,62 | 0,81 | |
| Equity/share, eur | 5,64 | 5,90 | 6,13 | |
| Equity ratio | 41,2 | 46,3 | 45,3 | |
| Return on equity * | -1,9 | 14,5 | 13,9 | |
| Return on investment * | 1,2 | 16,0 | 18,2 | |
| Interest-bearing net-debt, eur million | 7,1 | -2,2 | -4,8 | |
| Gearing ratio | 30,2 | -8,9 | -18,9 | |
| Capital expenditure, eur million | 2,1 | 1,4 | 2,9 | |
| - in relation to revenue | 2,6 | 1,5 | 2,2 | |
| Personnel at the end of period | 504 | 544 | 506 | |
| Average personnel | 509 | 561 | 550 | |
| Revenue/employee, eur thousand | 157,1 | 169,1 | 234,8 |
| 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 |
| Average personnel | = | Month-end average calculation of the number of personnel in active employment |
| Interest-bearing net debt | = | Interest-bearing debt - cash and other liquid financial assets |
Key figures are calculated according to formulas as presented in Annual Report 2016 *) When calculating return % the profit/loss for the period has been multiplied in interim reports.
An event for analysts, portfolio managers and media will be held on Thursday 2 November 2017 from 11:30 to 12:30 at Martela house in address Takkatie 1, Helsinki. The result will be presented by CEO Matti Rantaniemi.
Martela Corporation Board of Directors
Matti Rantaniemi CEO
Further information
CEO Matti Rantaniemi, tel +358 50 465 8194 CFO Riitta Järnstedt, tel +358 40 508 4993
Distribution
NASDAQ OMX Helsinki Main news media www.martela.com
Our strategic direction is defined by our mission "Better working" and our vision "People-centric workplaces". Martela provides people centric workplaces where the users and their wellbeing are in the core. We focus on the Nordic countries, as the Nordic countries are forerunner in hybrid working environments with common open work culture background and needs.
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