Martela Oyj

Quarterly Report • Aug 6, 2008

MARTELA CORPORATION'S INTERIM REPORT, 1 JANUARY – 30 JUNE, 2008

Net revenue for January-June was EUR 69.4 million (60.2), an increase of 15.2 per cent. Operating profit was EUR 5.1 million (4.2), including non-recurring income from the sale of assets totalling EUR 0.7 million (2.8). The equity-toassets ratio was 49.8 per cent (45.3) and gearing was 1.3 per cent (31.2).

It is expected that the net revenue for 2008 will exceed last year's level, and that the whole year's operating profit before non-recurring items will be better than the previous year.

Key figures

	4-6	4-6	1-6	1-6	1-12
	2008	2007	2008	2007	2007
Revenue	33.3	30.4	69.4	60.2	128.4
Change in revenue %	9.7	11.6	15.2	11.4	7.3
Operating profit excluding
non-recurring items	1.6	1.3	4.4	1.4	5.8
Operating profit %	4.9	4.3	6.3	2.4	4.5
Return on investment, %			23.7	20.4	19.6
Return on equity, %			23.0	23.2	19.8
Equity to asset ratio, %			49.8	45.3	46.7
Gearing, %			1.3	31.2	16.0
Average staff			680	648	663
Revenue/employee			102.1	93.0	193.7

Accounting policies

The interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, as approved by the EU.

Market

The demand for office furniture continued to grow in 2007 and in the first halfyear of 2008. Office construction is expected to continue to be lively in the second half of 2008.

Group structure

There were no changes in Group structure during the review period or the comparison period.

Segment reporting

Martela has a single primary segment, namely the furnishing of offices and public spaces. Net revenue and result are as recorded in the consolidated financial statements. The Group's secondary reporting segment is its customers by geographical location.

Net revenue

Net revenue for January-June grew to EUR 69.4 million (60.2), an increase of 15.2 per cent. The large projects carried out during the first quarter contributed to this growth. Net revenue for the second quarter grew to EUR 33.3 million (30.4), an increase of 9.7 per cent. Growth was particularly strong in Finland, and in Poland and its neighbouring areas.

During the first half-year, performance in Scandinavia was not according to plan and net revenue decreased by 12.5 per cent.

Invoicing by main market areas

	4-6	4-6	1-6	1-6	1-12
	2008	2007	2008	2007	2007
Finland	23.5	20.7	49.5	40.3	85.8
Scandinavia	5.2	5.9	10.9	12.4	26.4
Poland and surrounding areas	3.4	2.7	6.5	4.9	11.1
Other areas	1.1	1.0	2.4	2.7	5.4
Total	33.2	30.3	69.3	60.3	128.7

Change in invoicing and proportion of consolidated invoicing

	1-6	1-6			1-12
	2008	2007	Change	Percentage		2007 Percentage
Finland	49.5	40.3	22.7 %	71.4 %	85.8	66.7 %
Scandinavia	10.9	12.4	-12.5 %	15.7 %	26.4	20.5 %
Poland and surrounding
areas	6.5	4.9	33.7 %	9.4 %	11.1	8.6 %
Other areas	2.4	2.7	-9.0 %	3.5 %	5.4	4.2 %
Total	69.3	60.3	14.9 %	100.0 %	128.7	100.0 %

Consolidated result

The consolidated result for the second quarter was according to plan and the operating profit was EUR 1.7 million (2.6). The result was increased by EUR 0.1 million in non-recurring income from the sale of assets (1.3).

The result for the first half-year was a clear improvement and the operating profit was EUR 5.1 million (4.2). This includes EUR 0.7 million (2.8) in nonrecurring income from the sale of assets. The sales gain recognised in early 2008 relates to the sale of land in Poland. The operating profit excluding nonrecurring items was EUR 4.4 million (1.4). This year, profit has developed positively in Finland, and in Poland and its neighbouring areas. A decrease in net revenue in Scandinavia has negatively affected the area's profit performance.

Profit before taxes rose to EUR 4.8 million (3.9), and profit after taxes was EUR 3.5 million (3.0).

The operating profit percentage excluding non-recurring items was 6.3 per cent (2.4).

Financial position

The Group's financial position remained stable. At the end of the review period, net interest-bearing liabilities were EUR 13.0 million (15.4), and the net debt was EUR 0.4 million (8.4). At the beginning of 2008, the net debt was EUR 4.7 million. At the end of the review period, gearing was 1.3 per cent (31.2) and the equity-to-assets ratio was 49.8 per cent (45.3%) Net financial expenses were EUR -0.3 million (-0.3).

Cash flow from operating activities in January-June was EUR 6.3 million (5.0).

The end-of-period balance sheet total was EUR 63.0 million (59.9).

Capital expenditure

The Group's gross capital expenditure for January-June was EUR 1.6 million (1.8) and mainly concerned production replacements and IT investments. Of the capital expenditure for the comparison period in 2007, EUR 0.7 million was attributable to the ownership rearrangement at the Bodafors plant, as a result of which the long-term lease liability for the part leased back by Martela was activated in the consolidated balance sheet in accordance with the IFRS.

Staff

In January-June, the group employed an average of 680 (648) persons, representing growth of 4.9 per cent. At the end of June, the Group employed 723 (689) persons.

Average staff by region

	1-6	1-6	1-12
	2008	2007	2007
Finland	518	516	518
Scandinavia	73	67	71
Poland	89	65	74
Group total	680	648	663

Product development and collection

Product development and collection management are the responsibility of two Group-level organisations: the Office product line, responsible for workstation furniture, and the Surroundings product line, responsible for furniture for surroundings and other public spaces.

Exhibited at Martela's stand at the Stockholm Furniture Fair in February were new products representing both product lines, as well as two fascinating new concepts. The exhibited new pieces of workstation furniture were the James task chair designed by Iiro Viljanen and the Pinta ES, the newest member of the Pinta range, by Pekka Toivola and Iiro Viljanen. The surroundings furniture displayed for the first time featured the Skybar chair designed by Geir Sætveit and the Movie sofa by Rane Vaskivuori. The concepts presented by Martela in Stockholm were favourably received; both the Mybox desk by Iiro Viljanen and the Book shelf/space divider by Pekka Toivola aroused discussion and interest, as had been hoped for.

At the Milan Furniture Fair in April, Martela set up its own exhibition with the theme "under THE tree". The exhibition was named after The Tree space divider, designed by Professor Eero Aarnio.

Shares

During January-June, 483,137 (969,714) of the company's A shares were traded on the OMX Nordic Exchange Helsinki, corresponding to 13.6 per cent (27.3) of all A shares. The higher trading figure of the comparison period in 2007 was due partly to the acquisition of shares by Evli Alexander Management Oy for the three-year share-based incentive system. At that time, 143,166 shares were acquired for EUR 1.2 million in cash.

The value of trading during the review period was EUR 4.4 million (8.3), and the share price was EUR 8.35 at the beginning and EUR 8.40 at the end of the period. During January-June the share price was EUR 10.05 at its highest and EUR 7.32 at its lowest. At the end of June, equity per share was EUR 7.65 (6.62).

Treasury shares

The company did not purchase any Martela shares for the treasury in January-June. On 30 June 2008, Martela owned 67,700 Martela A shares, purchased at an average price of EUR 10.65. Martela's holding of treasury shares amounts to 1.6 per cent of all shares and 0.4 per cent of all votes.

2008 Annual General Meeting

The Annual General Meeting was held on 1 April 2008. The meeting approved the financial statements and discharged the responsible parties from liability for the 2007 financial year. The AGM decided, in accordance with the Board of Directors' proposal, to distribute a dividend of EUR 0.50 per share, totalling EUR 2,043,950. Heikki Ala-Ilkka, Tapio Hakakari, Heikki Martela, Pekka Martela, Jori Keckman and Jaakko Palsanen were elected as members of the Board of Directors for the next term. KPMG Oy Ab, a firm of Authorised Public Accountants, was elected as the company's auditor.

The AGM also approved the Board of Directors' proposals, detailed in the meeting notice, to authorise the Board to acquire and/or dispose of the company's own shares.

Furthermore, the AGM decided, in accordance with the Board of Directors' proposal, to amend the company's Articles of Association pursuant to the new Companies' Act which entered into force on 1 September, 2006.

The new Board of Directors convened after the Annual General Meeting and elected Heikki Ala-Ilkka as Chairman and Pekka Martela as Vice Chairman.

Post-balance sheet events

No significant events requiring reporting have taken place since the January-June period and operations have continued according to plan.

Short-term risks

The greatest risk to profit performance is related to the continuation of general economic growth and the consequent overall demand for office furniture. The price trend of purchased materials and components also affects the shortterm outlook.

The company's 2007 annual report presents the risks related to Martela's business operations in more detail.

Outlook for 2008

The overall outlook for 2008 is still favourable. The outlook is supported, among other things, by the solid growth of sales and profit early in the year and the general positive trend in office construction. It is expected that the whole year's operating profit before non-recurring items will be better than the previous year.

GROUP INCOME STATEMENT (EUR 1000)

	2008 1-6	2006 1-6	2008 4-6	2007 4-6	2007 1-12
Revenue Other operating income Employee benefits expenses Operating expenses Depreciation and impairment	69.419 0.981 -16.248 -47.615 -1.456	60.240 2.961 -14.557 -42.839 -1.564	33.329 0.252 -8.368 -22.773 -0.722	30.373 1.280 -7.589 -20.705 -0.788	128.445 3.023 -28.723 -91.236 -3.231
Operating profit/loss	5.081	4.241	1.719	2.571	8.278
Financial income and expenses	-0.262	-0.320	-0.073	-0.154	-0.726
Profit/loss before taxes	4.818	3.921	1.645	2.417	7.552
Income tax	-1.332	-0.910	-0.555	-0.704	-2.165
Profit/loss for the period	3.487	3.011	1.091	1.713	5.387
Basic earnings per share, eur Diluted earnings per share, eur	0.85 0.85	0.74 0.74	0.26 0.26	0.42 0.42	1.32 1.32
GROUP BALANCE SHEET (EUR 1000)		30.6.2008		31.12.2007	30.06.2007
ASSETS
Non-current assets Intangible assets Tangible assets Investments Deferred tax assets Pension receivables Receivables Investment properties Total		0.654 14.148 0.039 0.246 0.035 0.630 0.600 16.353		0.633 14.151 0.053 0.240 0.035 0.623 1.203 16.938	0.773 14.286 0.054 0.246 0.018 0.000 1.175 16.552
Current assets Inventories Receivables Financial assets at fair value through profit and loss Cash and cash equivalents Total		13.601 20.425 2.033 10.538 46.597		13.635 23.536 2.004 7.686 46.861	15.088 21.322 1.979 4.940 43.329
Total assets		62.950		63.800	59.881
EQUITY AND LIABILITIES
Equity attributable to shareholders of the parent Share capital Share premium account Other reserves Translation differences Retained earnings Treasury shares Share-based incentives Total		7.000 1.116 0.117 -0.085 23.671 -0.721 0.157 31.255 30.6.2008		7.000 1.116 0.117 -0.129 22.060 -0.721 0.067 29.510 31.12.2007	7.000 1.116 0.117 -0.143 19.704 -0.721 0.000 27.073 30.06.2007

Non-current liabilities
Interest-bearing liabilities	9.280	10.453	11.558
Deferred tax liability	1.486	1.553	0.529
Total	10.766	12.006	12.087
Current liabilities
Interest-bearing	3.710	3.969	3.800
Non-interest bearing	17.218	18.315	16.922
Total	20.928	22.284	20.722
Total liabilities	31.695	34.290	32.808
Equity and liabilities, total	62.950	63.800	59.881

STATEMENT OF CHANGES IN EQUITY (EUR 1000)

Equity attributable to equity holders of the parent

	Share capital	Share account	Other premium reserves diff.	Trans.	Retained earnings and share- based inc.	Treasury shares	Total
01.01.2007 Translation diff.	7.000	1.116	0.117	-0.129 -0.014	17.542	-0.721	24.925 -0.014
Other change Profit/loss for					0.173		0.173
the period Total rec. income					3.011		3.011
and expense				-0.014	3.184		3.170
Dividends					-1.022		-1.022
30.06.2007	7.000	1.116	0.117	-0.143	19.704	-0.721	27.073
1.1.2008 Translation diff.	7.000	1.116	0.117	-0.129 0.044	22.127	-0.721	29.510 0.044
Other change Profit/loss for					0.258		0.258
the period Total rec. income					3.487		3.487
and expense				0.044	3.745		3.789
Dividends					-2.044		-2.044

30.06.2008 7.000 1.116 0.117 -0.085 23.828 -0.721 31.255

CONSOLIDATED CASH FLOW STATEMENT (EUR 1000)
	2008	2007	2007
	1-6	1-6	1-12
Cash flows from operating activities
Cash flow from sales	71.396	64.122	130.833
Cash flow from other operating income	0.277	0.243	0.550
Payments on operating costs	-64.227	-59.012	-121.090
Net cash from operating activities
before financial items and taxes	7.446	5.353	10.294
Interest paid	-0.378	-0.374	-0.842
Interest received	0.117	0.021	0.082
Other financial items	-0.020	-0.005	-0.021
Dividends received	-	0.001	0.001
Taxes paid	-0.897	-0.025	0.382
Net cash from operating activities (A)	6.268	4.972	9.895
Cash flows from investing activities
Capital expenditure on tangible and
intangible assets	-1.321	-0.989	-2.256
Proceeds from sale of tangible and
intangible assets	1.492	3.877	2.028
Proceeds from sale of shares in subsidiaries	-	-	2.150
Loans granted	-	-1.193	-1.193
Repayments of loans receivables	0.022	0.011	0.011
Net cash used in investing activities (B)	0.193	1.706	0.740
Cash flows from financing activities
Proceeds from short-term loans	-	-	0.976
Repayments of short-term loans	-0.482	-0.355	-1.704
Repayments of long-term loans	-1.190	-2.296	-3.108
Dividends paid and other profit distribution	-1.972	-1.022	-1.022
Net cash used in financial activities (C)	-3.644	-3.672	-4.858
Change in cash and
cash equivalents (A+B+C)	2.817	3.006	5.778
(+ increase, - decrease)
Cash and cash equivalents at the beginning of
period	9.691	3.911	3.911
Translation differences	0.063	0.002	0.002
Cash and cash equivalents at the end of period	12.571	6.919	9.691

SEGMENT REPORTING

One primary segment has been defined for Martela, namely the furnishing of offices and public places. The revenue and result are as recorded in the consolidated financial statements. The Group's secondary reporting segment has been defined according to the geographical location of customers.

	Land areas	Buildings	Machinery & equipment	Other	Work in tangibles progress
Acquisitions	0.000	0.020	0.823	0.005	0.569
Decreases	0.000	-0.008	-0.126	0.000	0.000

TANGIBLE ASSETS 1.1-30.6.2007

	Land areas	Buildings	Machinery & equipment	Other	Work in tangibles progress
Acquisitions	0.000	0.688	0.565	0.006	0.328
Decreases	-0.614	-0.988	-0.022	0.000	0.000

RELATED PARTY AND SHARE-BASED INCENTIVE PROGRAMME

The CEO and the group's management and some key-persons are included in a longterm incentive scheme, extending from 2007 to the end of 2009.

KEY FIGURES/RATIOS

	2008	2007	2007
	1-6	1-6	1-12
Operating profit/loss	5.081	4.241	8.278
- in relation to revenue	7.3	7.0	6.4
Profit/loss before taxes	4.818	3.921	7.552
- in relation to revenue	6.9	6.5	5.9
Profit/loss for the period	3.487	3.011	5.387
- in relation to revenue	5.0	5.0	4.2
Basic earnings per share, eur	0.85	0.74	1.32
Diluted earnings per share, eur	0.85	0.74	1.32
Equity/share, eur	7.65	6.62	7.22
Equity ratio	49.8	45.3	46.7
Return on equity *	23.0	23.2	19.8
Return on investment *	23.7	20.4	19.6
Interest-bearing net-debt, eur million	0.4	8.4	4.7
Gearing ratio	1.3	31.2	16.0
Capital expenditure, eur million	1.6	1.8	3.2
- in relation to revenue, %	2.3	3.0	2.5
Personnel at the end of period	723	689	655
Average personnel	680	648	663
Revenue/employee, eur thousand	102.1	93.0	193.7

Key figures are calculated according to formulae as presented in Annual Report 2007.

* When calculating return on equity and return on investment the profit/loss for the period has been multiplied in interim reports.

CONTINGENT LIABILITIES
	30.6.2008	31.12.2007	30.6.2007
Mortgages and shares pledged Guarantees Other commitments	18.841 0.000 0.322	18.851 0.000 0.317	18.916 0.104 0.314
RENTAL COMMITMENTS	9.989	10.674	11.701
DEVELOPMENT OF SHARE PRICE	2008 1-6	2007 1-6	2007 1-12
Share price at the end of period, EUR Highest price, EUR Lowest price, EUR Average price, EUR	8.40 10.05 7.32 9.04	9.10 9.56 6.39 8.53	8.35 10.35 6.39 8.64
This interim report has not been audited
Helsinki, August 5, 2008
Martela Oyj Board of Directors Heikki Martela CEO
For more information, please contact Heikki Martela, CEO, tel. +358 50 502 4711 Mats Danielsson, Finance Director, tel. +358 50 394 8575
Distribution OMX Nordic Exchange Main news media

www.martela.com