2007-05-11 08:32:37 CEST
2007-05-11 08:32:37 CEST
REGULATED INFORMATION
Neomarkka - Company Announcement
NEOMARKKA TARGETING ITS INVESTMENT STRATEGY AT LONG-TERM INDUSTRIAL INVESTMENTS AND BUYING REKA CABLES LTD
Neomarkka Plc STOCK EXCHANGE RELEASE May 11, 2007 1(6) NEOMARKKA TARGETING ITS INVESTMENT STRATEGY AT LONG-TERM INDUSTRIAL INVESTMENTS AND BUYING REKA CABLES LTD Neomarkka Plc (‘Neomarkka') has May 10, 2007 agreed to buy all shares of Reka Cables Ltd (‘deal'). Reka Cables is one of the leading Finnish manufacturers of installation and power cables. The seller is Reka Corporation, a Finnish family-owned company in the group to which also Neomarkka belongs. The debt-free value of the deal is EUR 30 million, based on the December 31, 2006 consolidated FAS value of net liabilities of Reka Cables Group. The deal is being financed out of Neomarkka's current investment assets and through a new long-term bank loan. It is conditional on approval by an extraordinary meeting of Neomarkka shareholders to be held on June 1, 2007. Members of the press are invited to a briefing to be held today at 11.00 at the Neomarkka offices, Aleksanterinkatu 48 A, 8th floor. NEW INVESTMENT STRATEGY The present deal is the first investment under Neomarkka's new investment strategy. The aim of the new development company strategy is to target Neomarkka's investment portfolio at synergic industrial investments. New investments will be sought specifically in areas where it will be possible to benefit from Neomarkka's growing industrial know-how and experience of business operations in the Nordic and Baltic countries and Russia. The aim of investments is to develop the target company and thus raise the return on capital invested. The investment horizon is long-term, and no fixed timetable for exiting is set. Neomarkka aims to achieve a return on investment both through dividend flow and higher market valuation. As a result of its new investment strategy, Neomarkka's risk level will rise but on the other hand its return expectations are thought to be higher. In future, the risk factors are attached to the development of a few portfolio companies' operations and to normal business risks compared with the present situation, in which Neomarkka's risk is spread more widely over the market. "In future Neomarkka will be focusing on a limited number of investments where a better than average market return will be made possible through development of the target companies, thereby raising Neomarkka's own shareholder value. The present deal with Reka Cables is the first step towards implementation of this new strategy. Reka Cables is a company with a good market standing and financial status, and has a clear strategy for expanding in the Nordic and Baltic countries, and particularly in Russia,” says Pekka Kainulainen, Chairman of Neomarkka Board of Directors. PURCHASE OF REKA CABLES Reka Cables is one of the leading manufacturers of installation and power cables in the Nordic and Baltic countries. Reka Cables was founded in 1961 and on March 31, 2007 it employed 233 people in Finland and 30 abroad. Reka Cables' Finnish production plants are in Hyvinkää, Keuruu and Riihimäki. In 2006 the company bought a cable factory in Podolsk, Russia, with the intention of expanding its business in Russia. Of Reka Cables' 2006 turnover, about 90% was from EU countries. The total FAS turnover of Reka Cables in 2006 was EUR 79.1 million, the operating result EUR 5.6 million, and the solvency ratio 46%. Reka Cables will initially be consolidated into the Neomarkka Group on June 1, 2007. The deal will have a positive effect on Neomarkka's profit per share. After the deal the Group's solvency ratio will be round 60%, and its ability to finance new investments will be good. The debt-free value of the deal is EUR 30 million and the purchase price of the shares is around EUR 26 million based on the December 31, 2006 consolidated FAS value of net liabilities of Reka Cables Group. In addition, the parties have agreed to review the price, based on Reka Cables' average operating profit figures for 2007 and 2008. The price can be raised or lowered by a maximum of EUR 3.5 million. Neomarkka plans to finance about 50% of the purchase of Reka Cables' shares from current investment assets and the rest through a long-term bank loan. The Neomarkka Board of Directors has asked OKO Corporate Finance Oy for the fairness opinion of the deal's financial terms from the Neomarkka shareholders' perspective. This opinion will be on view in full as a part of the shareholders' meetings material at the Neomarkka offices one week before the shareholders´ meeting June 1, 2007 and at the meeting. “Now undergoing deal is a natural next step in the development of Reka Cables. Reka Cables have a strong market position in Finland and Sweden. Along with the new owner the possibilities to develop and increase especially in the international business activities will improve clearly”, says Jorma Wiitakorpi, Chairman of Reka Oy Board of Directors. CHANGES IN OTHER INVESTMENT OPERATIONS The capital invested by Neomarkka in Reka Cables represents about 23% of its net asset value as at March 31, 2007. Neomarkka will continue to manage its present investment assets following the same principles as before. The investment assets awaiting targets under the new strategy are invested in mainly hedge funds for the time being. Neomarkka has, however, arranged its hedge fund investments and the financing of its investment portfolio in such a way that the company will no longer have any direct hedge fund investments. Rather, Neomarkka will own bonds issued by Nordea Pankki Oyj, the yield on which is tied to the return on the eQ Active Hedge fund. Short-term bank lending will come to an end when the loans mature in May. The portfolio management related to Neomarkka's hedge fund investments will end as a result of the change in strategy. At the same time the advisory services to eQ Bank related to the portfolio management of the eQ Active Hedge fund and related provisions will end by June 1, 2007. ADMINISTRATION AND EXTRAORDINARY SHAREHOLDERS' MEETING On May 10, 2007, the Neomarkka Board of Directors appointed Markku E. Rentto (43), currently Managing Director of the Reka Corporation, the new Managing Director of Neomarkka. In addition the present Financial Director of the Reka Corporation, Sari Tulander (40), was appointed Neomarkka's new Financial Director. Neomarkka's present Managing Director, Samuel von Martens, will transfer to another company that will act as eQ Bank's advisor on the portfolio management of the eQ Active Hedge fund. Reka Cables Ltd's present Managing Director, Vesa Siitari (45), will continue in his present job. As part of the deal, the Board of Directors will propose to the extraordinary shareholders' meeting changes in the Articles of Association, most importantly an adjustment of the clause on the company's sphere of operations to make it correspond better to the new strategy. The Board proposal for new Articles will be attached in full to the separate invitation to the shareholders' meeting. The shareholders´ which represent more than 50% of the votes, have announced, that they will propose to the shareholders´ meeting, that the number of the members of the Board of Directors to be six (6) and the following persons are proposed as new members of the Board of Directors: Chairman Jorma Wiitakorpi, President and CEO, Porvoo, Vice Chairman Matti Lainema, Ph.D. (Econ), Helsinki and members Ilpo Helander, Commercial counsellor, Espoo and Pekka Soini, Managing Director, Helsinki and to be re-elected Hannu Anttila, Executive Vice President, Strategy, Espoo and Taisto Riski, Managing Director, Oulu. From the present members of the Board of Directors, Pekka Kainulainen and Stig-Erik Bergström, have announced to Neomarkka, that they are not available when electing new members to the Board of Directors. The invitation to the shareholders' meeting will be published in a separate stock exchange release. FIGURES FOR REKA CABLES Consolidated FAS financial result, balance sheet and cash flow statement, Reka Cables: -------------------------------------------------------------------------------- | Reka Cables Group | -------------------------------------------------------------------------------- | CONSOLIDATED INCOME STATEMENT, FAS | -------------------------------------------------------------------------------- | (€ million) | 2006 | 2005 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Turnover | 79.1 | 53.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Change in stocks of finished and unfinished | 2.2 | 1.2 | | goods | | | -------------------------------------------------------------------------------- | Production for own use | 0.1 | 0.0 | -------------------------------------------------------------------------------- | Other operating income | 0.1 | 0.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Materials and services | -57.0 | -36.7 | -------------------------------------------------------------------------------- | Personnel costs | -8.7 | -7.4 | -------------------------------------------------------------------------------- | Depreciation and value adjustments | -1.4 | -1.3 | -------------------------------------------------------------------------------- | Other operating expenses | -9.0 | -7.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating result | 5.6 | 1.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial income and expenses | -0.3 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit before extraordinary items | 5.3 | 1.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Extraordinary items | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit/loss before tax | 5.3 | 1.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Appropriations | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Income tax | -1.7 | -0.6 | -------------------------------------------------------------------------------- | Change in deferred tax liability | 0.1 | 0.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit for the period | 3.6 | 1.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Reka Cables Group | | -------------------------------------------------------------------------------- | CONSOLIDATED BALANCE SHEET, FAS | | -------------------------------------------------------------------------------- | (€ million) | 2006 | 2005 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSETS | | | -------------------------------------------------------------------------------- | Fixed assets | | | -------------------------------------------------------------------------------- | Intangible assets | 2.0 | 0.3 | -------------------------------------------------------------------------------- | Tangible assets | 8.3 | 4.1 | -------------------------------------------------------------------------------- | Other investments | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Total fixed assets | 10.3 | 4.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current assets | | | -------------------------------------------------------------------------------- | Inventories | 10.9 | 7.8 | -------------------------------------------------------------------------------- | Short-term receivables | 11.6 | 10.8 | -------------------------------------------------------------------------------- | Cash and cash equivalents | 0.4 | 0.1 | -------------------------------------------------------------------------------- | Total current assets | 22.9 | 18.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSETS | 33.3 | 23.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | LIABILITIES AND SHAREHOLDERS' EQUITY | | | -------------------------------------------------------------------------------- | Shareholders' equity | | | -------------------------------------------------------------------------------- | Share capital | 1.7 | 1.7 | -------------------------------------------------------------------------------- | Premium fund | 7.4 | 7.4 | -------------------------------------------------------------------------------- | Profit from previous periods | 2.4 | 2.6 | -------------------------------------------------------------------------------- | Profit for the period | 3.6 | 1.0 | -------------------------------------------------------------------------------- | Total shareholders' equity | 15.2 | 12.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Minority share | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Appropriations | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Provisions | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities | | | -------------------------------------------------------------------------------- | Long-term liabilities | 1.6 | 2.0 | -------------------------------------------------------------------------------- | Short-term liabilities | 16.4 | 8.4 | -------------------------------------------------------------------------------- | Total liabilities | 18.0 | 10.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | LIABILITIES AND SHAREHOLDERS' EQUITY | 33.3 | 23.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Reka Cables Group | -------------------------------------------------------------------------------- | CONSOLIDATED CASH FLOW STATEMENT, FAS | -------------------------------------------------------------------------------- | (€ million) | 2006 | 2005 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from business operations | | -------------------------------------------------------------------------------- | Income from sales | 76.5 | 53.3 | -------------------------------------------------------------------------------- | Other operating income | 0.1 | 0.2 | -------------------------------------------------------------------------------- | Payments on operating expenses | -68.0 | -50.0 | -------------------------------------------------------------------------------- | Change in inventories | -3.0 | -1.6 | -------------------------------------------------------------------------------- | Interest paid and payments on other | -0.3 | -0.1 | | financing expenses | | | -------------------------------------------------------------------------------- | Interest received from business operations | 0.0 | 0.1 | -------------------------------------------------------------------------------- | Direct taxes paid | -2.2 | -0.7 | -------------------------------------------------------------------------------- | Cash flow from extraordinary business | 0.0 | 0.0 | | items | | | -------------------------------------------------------------------------------- | Cash flow from business operations | 3.2 | 1.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from investments | | | -------------------------------------------------------------------------------- | Investments in tangible and intangible | -8.3 | -0.1 | | assets | | | -------------------------------------------------------------------------------- | Cash flow from investments | -8.3 | -0.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from financing activities | | -------------------------------------------------------------------------------- | Change in short-term loans | 1.8 | 0.0 | -------------------------------------------------------------------------------- | Change in long-term loans | 1.5 | -1.1 | -------------------------------------------------------------------------------- | Change in Group receivables | 3.1 | 0.0 | -------------------------------------------------------------------------------- | Dividend paid | -1.0 | 0.0 | -------------------------------------------------------------------------------- | Cash flow from financing activities | 5.4 | -1.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Decrease/increase in cash and cash | 0.3 | 0.1 | | equivalents | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at start of | 0.1 | 0.0 | | financial period | | | -------------------------------------------------------------------------------- | Cash and cash equivalents at end of | 0.4 | 0.1 | | financial period | | | -------------------------------------------------------------------------------- | Change in cash and cash equivalents | -0.3 | -0.1 | -------------------------------------------------------------------------------- Helsinki, May 11, 2007 Neomarkka Plc Board of Directors pp. Markku E. Rentto Managing Director For more details: Pekka Kainulainen, Board Chairman, tel.+358 500 404 157 Markku E. Rentto, Managing Director, tel. +358 40 500 1858 Jorma Wiitakorpi, Board Chairman, Reka Oy, tel.+358 20 469 2002 DISTRIBUTION Helsinki Stock Exchange Main media www.neomarkka.fi
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