2007-07-26 09:03:49 CEST
2007-07-26 09:03:49 CEST
REGULATED INFORMATION
Rapala VMC - Interim report (Q1 and Q3)
RAPALA VMC CORPORATION INTERIM REPORT - JANUARY TO JUNE 2007
STOCK EXCHANGE RELEASE
July 26, 2007
Record sales and strong profitability during the second quarter
* Net sales for second quarter reached a record level, up 14%
from last year, and amounted to 73.4 MEUR (II/06: 64.2 MEUR). Net
sales for the first six months increased 7% to 136.8 MEUR
(I-II/06:127.6 MEUR) despite of negative currency movements. With
comparable exchange rates, the six-month net sales were up 12%.
* Operating profit for April-June increased markedly from
last year as a result of strong sales and first results of
performance improvement initiatives and totaled 11.0 MEUR (8.1
MEUR). Operating profit for the first half of the year was up 27%
and reached 23.0 MEUR (18.1 MEUR).
* Net profit for the second quarter increase clearly and
amounted to 6.7 MEUR (4.5 MEUR) and 14.4 MEUR (10.1 MEUR) for the
first half of the year. Earnings per share (basic) was 0.17 EUR
(0.11 EUR) for the quarter and 0.37 EUR (0.26 EUR) for the first
six months.
* Cash flow from operating activities improved in the second
quarter clearly from last year, and from the first quarter of 2007.
Working capital decreased moderately from March.
* Net interest-bearing debt decreased from March to 101.9
MEUR (Dec 2006: 99.3 MEUR). Equity-to-asset ratio increased
slightly from March to 33.2% (Dec 2006: 33.4%) and gearing
decreased from March to 112.3% (Dec 2006: 122.2%).
* Rapala continued to implement its strategy for profitable
growth. The Group continued discussion for further acquisitions and
business combinations. In May, Shimano became a minority
shareholder to the Group's South East European distribution center
in Hungary. The ramp-up of the lure assembly factory in Russia is
proceeding on plan. During the second quarter, major emphasis was
also on performance improvement initiatives.
* It is expected that the net sales for the financial year
2007 will increase 7-12% from last year assuming 2006 average
exchange rates. With comparable exchange rates and excluding
non-recurring items during the second half of the year, full year
operating profit is expected to increase in double digit and
operating profit margin to improve from 2006.
The attachment presents the interim review by the Board of Directors
as well as the accounts.
A conference call on the interim report will be arranged today at 4
pm Finnish time (3 pm CET). To participate, please dial +358 (0) 2069
9121 five minutes before the beginning of the event and request to be
connected to Rapala teleconference. There will be a replay facility
available for 72 hours following the teleconference. The number
(pin-code: 4657) to dial is +358 (0) 800 160 842. Rapala's financial
information is also available at www.rapala.com.
For further information, please contact:
Jorma Kasslin, President and Chief Executive Officer, +358 9 7562 540
Jouni Grönroos, Chief Financial Officer, +358 9 7562 540
Olli Aho, Investor Relations, +358 9 7562 540
Distribution: Helsinki Stock Exchange and Main Media
Market Situation and Sales
Market situation was good in many areas during the second quarter
with the advantage of early spring in many countries. In Nordic
countries, sales were up 16% for the second quarter and 6% for the
first six months. The growth continued in Europe where sales were up
14% for April to June and 9% for January to June. Sales in Asia,
South Africa and Australia continued to grow fast for both the second
quarter and the first half of the year. North American sales
increased 2% for the second quarter and were on the last year level
for the first six months, despite of the weakening of the US dollar.
Second quarter net sales for the Group reached a record level being
up 14% from last year, and amounted to 73.4 MEUR (II/06: 64.2 MEUR).
Net sales for the first six months increased 7% to 136.8 MEUR
(I-II/06:127.6 MEUR). Weakening of US dollar and some other
currencies affected January to June net sales negatively (-6.3 MEUR).
With comparable exchange rates, the six-month net sales were up 12%.
Out of this, 1 percentage point came from the Terminator acquisition
while the rest was organic growth. All product lines increased their
sales for the second quarter, and all but Fishing Accessories for the
six months.
Second quarter of the year is traditionally the strongest period for
Group sales since the fishing tackle deliveries to dealers and shops
are normally at their peak from February to May. This peak season may
sometimes change due to weather conditions but seldom more than a
month one way or another.
New products and product catalogues for the 2008 season were
introduced in June at EFTTEX trade show in Czech Republic and in July
at ICAST trade show in the USA. The new introductions were well
received by the fishing professionals and distributors.
Financial Results
II II I-II I-II I-IV
MEUR 2007 2006 2007 2006 2006
Net sales 73.4 64.2 136.8 127.6 226.6
EBITDA 12.6 9.7 24.9 21.3 28.0
Operating profit (EBIT) 11.0 8.1 23.0 18.1 21.7
Profit before taxes 9.8 6.1 20.8 13.9 14.6
Net profit for the period 6.7 4.5 14.4 10.1 11.0
Operating profit for April to June increased to 11.0 MEUR (8.1 MEUR).
Operating profit margin was up to 15.0% (12.6%) and return on capital
employed reached 23.6% (18.0%). Operating profit margin continued to
improve for the second quarter in a row compared to last year.
Operating profit for the first half of the year was up 27% and
reached 23.0 MEUR (18.1 MEUR). Operating profit margin improved and
was 16.8% (14.2%). This increase is mainly an outcome of good sales
of Group branded fishing tackle products and a negative goodwill from
the acquisition of Terminator lure business (1.2 MEUR). Operating
profit was negatively affected by the weakening of US dollar and some
other currencies (-0.6 MEUR). The result of currency hedging related
to operating profit (+0.8 MEUR) is booked in financial expenses in
accordance with IFRS. Comparable 6-month operating profit margin,
excluding one-time items and foreign exchange effects, improved from
2006 and is in line with the guidance published for this year since
February.
Geographically largest improvement in operating profit came from
Europe both for the second quarter and the first six months. For the
first six months all geographical segments but Rest of the world
improved their operating profit. Rest of the world suffered from the
strongly increased metal prices that reduced the profitability of the
Chinese manufacturing operations.
Financial income and expenses decreased from last year as a result of
currency exchange gains. Net interest expenses were 1.5 MEUR (1.2
MEUR) for the second quarter and 3.0 MEUR (2.5 MEUR) for the first
six months. Currency exchange gains were 0.4 MEUR (loss of 0.8 MEUR)
for April to June and 0,8 MEUR (loss of 1.7 MEUR) for January to
June.
Net profit for the second quarter improved clearly and amounted to
6.7 MEUR (4.5 MEUR) and to 14.4 MEUR (10.1 MEUR) for the first half
of the year. Earnings per share (basic) was 0.17 EUR (0.11 EUR) for
the quarter and 0.37 EUR (0.26 EUR) for the first six months.
Cash Flow and Financial Position
Cash flow from operating activities improved in the second quarter
clearly from last year and from the first quarter. Working capital
decreased moderately from March in line with decrease in inventories
and trade receivables. Comparable inventories (excluding the effect
of acquired and started businesses) were at last year levels.
Capital expenditure for the second quarter amounted to 1.9 MEUR (1.1
MEUR), including the final payment of 0.2 MEUR for the Guigo
acquisition closed in 2004, and the first settlement (0.8 MEUR) of
the final payment of acquisition of Australian Freetime closed in
2005. The latter part of the final payment (0.1 MEUR) for Freetime is
due in early 2008. The ownership of the Group's Hungarian
distribution company was restructured with local management and
Shimano. Capital expenditure for the first half of the year amounted
to 4.9 MEUR (7.3 MEUR), including the acquisition of Terminator lures
that was closed in January.
Net interest-bearing debt decreased from March to 101.9 MEUR (Dec
2006: 99.3 MEUR). Equity-to-asset ratio increased from March to 33.2%
(Dec 2006: 33.4%) and gearing decreased from March to 112.3% (Dec
2006: 122.2%).
Strategy Implementation
Rapala's strategic objective is profitable growth. During the second
quarter, management continued discussions and negotiations regarding
acquisitions and business combinations to implement the Group's
strategy. In addition to these negotiations, the focus was on
performance improvement initiatives to turnaround the declining trend
in operating profit margin and to further improve the Group's
profitability. Development of organic growth also in terms of new
product lines, extensions of current product categories as well as
special marketing, sales and brand initiatives continued.
The actions taken to implement the Group's strategy have started to
capitalize in earnings. Manufacturing and distributing of Terminator
products is proceeding on plan. Manufacturing of Luhr Jensen products
at Group's Chinese factory is on full speed while the high demand for
these lures continues. The ramp-up of the lure assembly factory in
Russia is proceeding on plan, and first batches of products at the
factory have been assembled and delivered.
In May, the Group strengthened its distribution alliance with Shimano
in South East Europe. As part of the restructuring of operations,Shimano subscribed 33.4% shareholding in Rapala's Hungarian
distribution company, Rapala Eurohold, who is now distributing Rapala
and Shimano products to Hungary, Rumania, Bulgaria, Slovenia,
Croatia, Bosnia, Serbia, Macedonia and Albania. All together, Rapala
distributes currently Shimano rods and reels and other Shimano
branded fishing tackle products to South Africa and 20 countries in
Europe.
In early July, the Group announced its plans to consolidate its
operations in France. With the consolidation of the operations to one
location in France the Group would gain major savings and efficiency
improvements in deliveries and transportation, customer service and
marketing, procurement and supplies, maintenance, operational
synergies and other location and logistics benefits. No provisions
have been booked in the first half of 2007 but, if this plan is
realized, costs will start to materialize and provisions will be
booked during the second half of the year.
Major operational changes and improvements have also been planned and
partly already implemented in the Group manufacturing facilities in
China to enhance its production efficiencies and shorten lead times.
Also few organizational changes have been made in distribution units
with unsatisfactory performance. In addition, the Group has
introduced and implemented several cost cutting initiatives.
Short-term Outlook
Market outlook for the rest of 2007 looks quite stable. Fishing
tackle sales in North America and Europe are developing well but the
third quarter is traditionally the slowest period in those areas.
Australia and South Africa are heading for their spring season, which
will boost their business for the third and fourth quarter. The
distribution of third party products for hunting and towards the end
of the quarter also winter sports is relatively the highest in the
third quarter. Since the margins of these products are on average
lower than those of fishing tackle, this will traditionally affect
the profitability of the third quarter.
It is expected that the Group's net sales for the financial year 2007
will increase 7-12% assuming 2006 average exchange rates. Possible
additional acquisitions or business combinations during 2007 would
further increase the sales.
Profitability of the Group's ongoing operations continues to be good.
Special initiatives are being implemented to further improve the
profitability. Business development and integration expenses and
start-up costs will continue in 2007. These costs, excluding the
possible non-recurring costs for the plans to consolidate operations
in France, are not expected to exceed the comparable costs in 2006.
With comparable exchange rates and excluding non-recurring items
during the second half of the year, full year operating profit is
expected to increase in double digit and operating profit margin to
improve from 2006. Investments and development initiatives
implemented since 2005 will continue to capitalize gradually while
the full effect will be seen from the latter half of 2008 onwards.
The project to reduce working capital, especially inventories, and to
improve cash flow from operations, continues. The target is to see an
improvement on ongoing operations while newly acquired businesses,
start-ups and strongly growing units will tie additional working
capital.
Group management continues planning and negotiations regarding
further acquisitions and business combinations to implement the
Group's strategy.
Third quarter interim report will be published on October 25.
Helsinki, July 26, 2007
Board of Directors of Rapala VMC Corporation
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
CONSOLIDATED INCOME STATEMENT II II I-II I-II I-IV
MEUR 2007 2006 2007 2006 2006
Net sales 73.4 64.2 136.8 127.6 226.6
Other operating income 0.6 0.1 0.9 0.3 1.5
Cost of sales 42.0 36.2 74.5 69.6 128.3
Other costs and expenses 19.4 18.4 38.2 37.0 71.9EBITDA 12.6 9.7 24.9 21.3 28.0
Depreciation 1.6 1.6 1.9 3.1 6.3
Operating profit (EBIT) 11.0 8.1 23.0 18.1 21.7
Financial income and expenses 1.2 2.0 2.2 4.2 7.1
Share of results in associated companies 0.0 0.0 0.0 0.0 0.0
Profit before taxes 9.8 6.1 20.8 13.9 14.6
Income taxes 3.1 1.7 6.4 3.8 3.6
Net profit for the period 6.7 4.5 14.4 10.1 11.0
Attributable to:
Equity holders of the Company 6.6 4.3 14.3 10.1 10.8
Minority interest 0.1 0.2 0.1 0.1 0.2
Earnings per share for profit
attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted =
non-diluted) 0.17 0.11 0.37 0.26 0.28
CONSOLIDATED STATEMENT OF CASH FLOWS II II I-II I-II I-IV
MEUR 2007 2006 2007 2006 2006
Net profit for the period 6.7 4.5 14.4 10.1 11.0
Adjustments to net profit for the period
* 5.8 6.6 10.5 13.4 19.2
Financial items and taxes paid and
received -2.3 -2.6 -4.2 -5.1 -12.1
Change in working capital 3.4 1.1 -14.4 -18.5 -8.1
Net cash generated from operating
activities 13.6 9.5 6.2 -0.1 10.0
Investments -1.7 -1.3 -3.1 -2.5 -7.2
Proceeds from sales of assets 0.2 0.4 0.3 0.5 0.6
Acquisition of subsidiaries, net of cash -1.1 -0.1 -2.7 -5.3 -8.3
Proceeds from disposal of subsidiaries,
net of cash 0.5 0.0 0.5 0.0 0.0
Change in loans receivable 0.0 0.0 0.0 0.0 0.2
Net cash used in investing activities -1.9 -1.1 -4.9 -7.3 -14.7
Dividends paid -4.6 -4.2 -4.6 -4.2 -4.2
Net funding 1.9 3.8 9.7 16.2 14.7
Proceeds from share subscriptions 0.0 0.0 0.0 0.4 0.4
Net cash generated from financing
activities -2.7 -0.4 5.1 12.3 10.9
Adjustments 0.2 0.0 0.2 0.0 0.0
Change in cash and cash equivalents 8.9 8.1 6.4 5.0 6.2
Cash & cash equivalents at the beginning
of the period 21.8 15.9 24.4 19.2 19.2
Foreign exchange rate effect 0.0 -0.7 -0.2 -0.9 -1.0
Cash and cash equivalents at the end of
the period 30.9 23.3 30.9 23.3 24.4
* Includes reversal of non-cash items, income taxes and financial
income and expenses.
CONSOLIDATED BALANCE SHEET June 30 June 30 Dec 31
MEUR 2007 2006 2006
ASSETS
Non-current assets
Intangible assets 53.1 54.8 53.3
Property, plant and equipment 29.4 29.6 29.4
Non-current financial assets
Interest-bearing 0.6 0.6 0.6
Non-interest-bearing 6.4 5.6 6.3
89.5 90.6 89.6
Current assets
Inventories 78.9 77.5 73.0
Current financial assets
Interest-bearing 0.0 0.1 0.2
Non-interest-bearing 74.1 62.2 56.5
Cash and cash equivalents 30.9 23.3 24.4
183.9 163.0 154.0
Total assets 273.5 253.5 243.6
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of
the Company 90.1 82.3 80.7
Minority interest 0.7 0.4 0.6
90.8 82.6 81.3
Non-current liabilities
Interest-bearing 61.8 54.5 64.6
Non-interest-bearing 5.7 5.2 6.6
67.5 59.7 71.1
Current liabilities
Interest-bearing 71.6 75.8 59.9
Non-interest-bearing 43.6 35.3 31.3
115.2 111.1 91.2
Total equity and liabilities 273.5 253.5 243.6
Rounding of figures
All figures in these accounts have been rounded. Consequently the sum
of individual figures can deviate from the presented sum figure. Key
figures have been calculated using exact figures.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the
Company
Share Fair Cumulative
Share premium value translation Retained Minority Total
MEUR capital fund reserve differences earnings interest equity
Equity on Jan 1,
2006 * 3.5 16.3 - -4.5 60.0 0.2 75.4
Change in
translation
differences - - - -0.1 - - -0.1
Net income
recognized
directly in equity - - - -0.1 - - -0.1
Net profit for the
period - - - - 10.1 0.1 10.1
Total recognized
income and
expenses - - - -0.1 10.1 0.1 10.0
Dividends paid - - - - -4.2 - -4.2
Shares subscribed
with options 0.0 0.4 - - - - 0.4
Stock option
program - - - - 0.4 - 0.4
Other changes - - - - 0.5 0.2 0.7
Equity on June 30,
2006 * 3.5 16.7 - -4.6 66.7 0.4 82.6
Equity on Jan 1,
2007 3.5 16.7 0.1 -7.1 67.6 0.6 81.3
Change in
translation
differences - - - -0.4 - - -0.4
Net investments in
a foreign
subsidiaries - - - -0.1 - - -0.1
Fair value gains
on
available-for-sale
investments, net
of tax - - - - - - -
Net income
recognized
directly in equity - - - -0.5 - - -0.5
Net profit for the
period - - - - 14.3 0.1 14.4
Total recognized
income and
expenses - - - -0.5 14.3 0.1 13.9
Dividends paid - - - - -4.6 - -4.6
Shares subscribed
with options 0.0 0.0 - - - - 0.0
Stock option
program - - - - 0.2 - 0.2
Other changes - - - - 0.0 0.0 0.0
Equity on June 30,
2007 3.5 16.7 0.1 -7.6 77.5 0.7 90.8
* Note: 2005 and II/2006 comparables have been changed, see notes to
the income statement and balance sheet for more details
KEY FIGURES BY
QUARTERS I II III IV I-IV I II
MEUR 2006 2006 2006 2006 2006 2007 2007
Net sales 63.4 64.2 49.8 49.2 226.6 63.4 73.4
EBITDA 11.6 9.7 4.4 2.4 28.0 12.3 12.6
Operating profit
(EBIT) 10.0 8.1 2.8 0.7 21.7 12.0 11.0
Profit before
taxes 7.8 6.1 1.0 -0.3 14.6 11.0 9.8
Net profit for
the period 5.7 4.5 0.4 0.5 11.0 7.7 6.7
KEY FIGURES II II I-II I-II I-IV
2007 2006 2007 2006 2006
EBITDA margin, % 17.2% 15.1% 18.2% 16.7% 12.4%
Operating profit margin, % 15.0% 12.6% 16.8% 14.2% 9.6%
Return on capital employed,
% 23.6% 18.0% 24.7% 20.1% 12.3%
Capital employed at end of
period, MEUR 192.7 189.0 192.7 189.0 180.6
Net interest-bearing debt
at end of period, MEUR 101.9 106.4 101.9 106.4 99.3
Equity-to-assets ratio at
end of period, % 33.2% 32.6% 33.2% 32.6% 33.4%
Debt-to-equity ratio at end
of period, % 112.3% 128.7% 112.3% 128.7% 122.2%
Earnings per share, EUR 0.17 0.11 0.37 0.26 0.28
Average number of shares
outstanding (1000) 38 579 38 556 38 578 38 556 38 565
Fully diluted earnings per
share, EUR 0.17 0.11 0.37 0.26 0.28
Fully diluted average
number of shares (1000) 38 579 38 621 38 578 38 621 38 609
Equity per share at end of
period, EUR 2.34 2.13 2.34 2.13 2.09
Number of shares
outstanding at end of
period (1000) 38 579 38 576 38 579 38 576 38 576
Average personnel for the
period 4 337 3 835 4 622 3 873 3 987
SEGMENT INFORMATION** II II I-II I-II I-IV
MEUR 2007 2006 2007 2006 2006
Net Sales by Area**
North America 20.6 20.1 41.7 41.7 69.7
Nordic 30.5 26.4 55.5 52.2 94.2
Rest of Europe 27.8 24.4 53.2 48.8 83.0
Rest of the world 15.9 9.2 30.7 20.0 43.7
Intra-Group -21.5 -16.0 -44.2 -35.1 -64.0
Total 73.4 64.2 136.8 127.6 226.6
Operating Profit by Area**
North America 2.2 2.6 6.0 4.5 6.4
Nordic 4.8 2.3 7.6 5.8 6.9
Rest of Europe 3.4 2.3 7.6 6.2 7.0
Rest of the world 0.4 0.5 1.5 2.6 2.8
Intra-Group 0.2 0.3 0.4 -0.9 -1.4
Total 11.0 8.1 23.0 18.1 21.7
Net Sales by Product line***
Lures 25.3 22.8 48.4 44.4 73.0
Fishing Hooks 4.5 4.1 9.3 8.5 14.8
Fishing Accessories 11.8 11.2 22.5 22.6 45.8
Third Party Fishing Products 21.2 18.7 38.0 36.1 53.5
Other 11.6 8.2 20.4 17.5 42.4
Intra-Group -0.9 -0.8 -1.9 -1.5 -2.9
Total 73.4 64.2 136.8 127.6 226.6
** Note: This primary segment information is by geographical areas
and it has been prepared on source basis i.e. based on the location
of the business unit. Each area shows the sales/profit generated in
that area excluding intra-Group transaction within that area, which
have been eliminated. Intra-Group line includes the eliminations of
intra-Group transactions between geographical areas.
*** Note: This secondary segment information is by product lines.
Lures, Fishing Hooks and Fishing Accessories consist of Group branded
fishing tackle products. Third Party Fishing Products consist of
non-Group branded fishing products, mostly rods and reels. Other
Products consist of non-Group branded (third party) products for
hunting, outdoor and winter sports and Group branded products for
winter sports and some other businesses.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This interim report has been prepared in accordance with IAS 34
(Interim Financial Reporting). The accounting principles adopted in
the preparation of the interim report are consistent with those
followed in the preparation of the Group's Annual Financial
Statements 2006, except for the adoption of new interpretations:
IFRIC 8 (Scope of IFRS 2), IFRIC 9 (Reassessment of Embedded
Derivatives) and IFRIC 10 (Interim Financial Reporting and
Impairment). Adoption of these interpretations did not result in any
changes in the accounting principles that would have affected the
information presented in this report.
Use of estimates
Complying with the IFRS standards in preparing financial statements
requires the management to make estimates and assumptions. Such
estimates affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the amounts of
revenues and expenses. Although these estimates are based on the
management's best knowledge of current events and actions, actual
results may differ from these estimates.
Definition of key figures
The definitions of key figures used in the interim report are
consistent with those used in the Group's Annual Financial Statements
2006.
Changes in comparable figures
Comparable figures were changed at year end 2006. For more
information on the changes and effects see Annual Report 2006.
Inventories
In June 30, 2007 the book value of inventories differed from its net
realizable value by 1.0 MEUR, the same as at December 31, 2006. In
June 30, 2006 the book value of inventories differed 0.1 MEUR from
its net realizable value.
Hedging of net investments in foreign subsidiaries
During the first quarter the Group started to hedge its net
investments in USD (partially), AUD, JPY and NOK currency denominated
foreign subsidiaries using equivalent currency loans. The Group will
start to partially hedge its net investment in SEK currency
denominated foreign subsidiaries during the second half of 2007.
Hedging relationships are treated according to IAS 39 as effective
hedges of a net investment in a foreign subsidiary, which means that
the effective portion of foreign exchange effect on these loans is
recorded directly in equity.
Open currency derivatives
June 30 June 30 Dec 31
MEUR 2007 2006 2006
Net fair values -0.1 0.0 0.0
Contract amount 3.0 1.0 1.0
Commitments
June 30 June 30 Dec 31
MEUR 2007 2006 2006
Mortgages and pledges
On own behalf 16.2 41.8 17.6
Guarantees
On own behalf 2.1 0.8 1.1
On behalf of other parties 0.8 0.6 0.6
Minimum future lease payments on operating
leases 13.2 6.6 12.6
Related party transactions
In Jan-June 2007, purchases from associated company Lanimo Oü were
0.1 MEUR (0.1 MEUR in Jan-June 2006 and 0.1 MEUR in Jan-Dec 2006). At
June 30, 2007, trade payables to Lanimo Oü were 0.0 MEUR (0.0 MEUR at
June 30, 2006 and 0.1 MEUR at Dec 31, 2006) and loans receivable from
Lanimo Oü 0.0 MEUR (0.0 MEUR at June 30, 2006 and 0.0 MEUR at Dec 31,
2006).
Non-recurring income and expenses in operating profit
II II I-II I-II I-IV
MEUR 2007 2006 2007 2006 2006
Gains/losses on disposals of intangible,
tangible assets and subsidiaries 0.4 0.0 0.4 0.0 -0.1
Excess of Group's interest in the net fair
value of acquired net assets over cost 0.0 0.0 1.2 0.0 0.0
Restructuring costs -0.5 0.0 -0.5 0.0 -0.2
Start-up costs 0.0 0.0 0.0 0.0 -0.1
Other 0.1 0.0 0.1 0.0 0.0
Total 0.0 0.0 1.3 0.0 -0.4
Impact of acquisitions and disposals on the consolidated financial
statements
In January, Rapala acquired the fishing tackle business of Outdoor
Innovations LLC and Horizon Lures LP, USA based manufacturers and
distributors of Terminator branded spinner baits and other fishing
lures. The deal includes patents for the use of nickel titanium wire
in fishing lures, trade marks, customer lists, inventories and some
other assets.
In April, Rapala acquired 10% minority stake of Rapala's Hungarian
distribution company, Rapala Eurohold Ltd ("Rapala Eurohold"), from
Mr Agh Senior. Acquisition raised Rapala's ownership to 80%. In May,
Rapala and Shimano, one of the leading manufacturers of rods and
reels worldwide, strengthened their distribution alliance in Hungary
and South-East Europe. Shimano subscribed a 33.4% shareholding in
Rapala Eurohold. Rapala's ownership is now 56.6% and the Managing
Director of Rapala Eurohold, Mr Agh Jr, has the remaining 10%
ownership. The funds from this transaction are invested in
strengthening the sales and marketing in South-East Europe.
Also in February and April, Rapala made a 0.2 MEUR final payment of
the Guigo acquisition closed in 2004 and in May a 0.8 MEUR first
settlement of final payment of the Freetime acquisition closed in
2005.
Acquisitions by June 30, 2007 Seller's
Fair carrying
MEUR value amount
Working capital 2.6 2.6
Intangible assets 0.7 0.1
Tangible assets 0.1 0.1
Deferred tax liability -0.1 0.0
Fair value of acquired net assets 3.2 2.8
MEUR II 2007
Cash paid 1.5
Cash to be paid 0.4
Payment of the Freetime acquisition closed in 2005 0.8
Final payment of the Guigo acquisition closed in 2004 0.2
Cost associated with the acquisition 0.1
Total purchase consideration 3.0
Excess of Group's interest in the net fair value of
acquired net assets over cost -1.2
Goodwill 0.1
Net -1.2
Cash paid for the acquisitions 2.7
Cash and cash equivalents acquired 0.0
Net cash flow 2.7
Partial disposals of subsidiaries by June 30, 2007
Share of disposed goodwill 0.2
Share of disposed minority interest 0.0
Gain on disposals 0.4
Total consideration 0.5
Consideration received in cash 0.5
Share-based payments
The Group has three separate share-based payment programs: two stock
option programs and one synthetic option program settled in cash.
Terms and conditions of the option program are described in detail in
the Annual Financial Report 2006. The options are valued at fair
value on the grant date by using the Black-Scholes option-pricing
model. The total estimated value of the program is 5.6 MEUR.
Share-based payment programs are valued at fair value on the grant
date and recognized as an expense in the income statement during the
vesting period with a corresponding adjustment to the equity or
liability.
Grant date is the date at which the entity and another party agree to
a share-based payment arrangement, being when the entity and the
counter party have a shared understanding of the terms and conditions
of the arrangement. 1 909 500 share option where granted on June 8,
2004, 92 500 share options on February 14, 2006 and 978 500 synthetic
options on December 14, 2006. On March 31, 2007, the exercise period
for the 2003A stock option program expired. All 500 000 shares were
subscribed. The 2003B stock option program is exercisable between
March 31, 2006 and March 31, 2008 at an exercise price of 6.02 EUR
per share, the 2004A stock option program is exercisable between
March 31, 2007 to March 31, 2009 at an exercise price of 5.96 EUR per
share, the 2004B stock option program is exercisable between March
31, 2008 and March 31, 2010 at an exercise price of 6.09 EUR, the
2006A synthetic option program is exercisable between March 31, 2009
and March 31, 2011 at an exercise price of 6.32 EUR and the 2006B
synthetic option program is exercisable between March 31, 2010 and
March 31, 2012 at an exercise price of 6.32 EUR. The exercise prices
have been reduced by the amount of dividends distributed after the
subscription period for option rights has ended and before the
commencement of the subscription period. Applying of IFRS 2 reduced
operating profit with 0.9 MEUR in 2006, 0.5 MEUR in Jan-June 2006 and
0.5 MEUR in Jan-June 2007.
Shares and share capital
Based on authorization given by the Annual General Meeting in April
2007, the Board can decide to issue shares through issuance of
shares, options or special rights entitling to shares in one or more
issues. The number of new shares to be issued including the shares to
be obtained under options or special rights shall be no more than 10
000 000 shares. This authorization includes the right for the Board
to resolve on all terms and conditions of the issuance of new shares,
options and special rights entitling to shares, including issuance in
deviation from the shareholders' preemptive rights. This
authorization is in force for a period of 5 years from the resolution
by the Annual General Meeting. The Board is also authorized to
resolve to repurchase a maximum of 2 000 000 shares. This amount of
shares corresponds to less than 10% of all shares of the company.
This authorization is in force until September 30, 2008.
2 500 new Rapala shares where subscribed with 2003A option rights in
March 2007. The share capital increased with 225.00 EUR and the
subscriptions were registered in the Trade Register on April 4, 2007
and listed on the main list of the Helsinki Stock Exchange on April
5, 2007. As a result of the share capital increase the company's
share capital is 3 472 089.21 EUR and the number of shares 38 578 769
on June 30, 2007. All 500 000 shares have now been subscribed with
2003A option rights. Each share (RAP1V) is entitled to one vote.
As a result of the share subscriptions with the 2003 and 2004 stock
option programs, and if all stock options are fully exercised, the
Group's share capital may still be increased by a maximum of 121 830
EUR and the number of shares by a maximum of 1 353 668 shares. The
shares that can be subscribed with these stock options correspond to
3.5% of the Company's shares and voting rights.
During the first six months 4 800 770 shares (5 971 693 shares) were
traded. The shares traded at a high of 6.27 EUR and a low of 5.55 EUR
during the period. The closing share price at the end of the period
was 5.76 EUR.
Business risks and seasonality of the business
Rapala currently operates in 29 countries in all major continents.
There are no signs of significant changes in markets or fishing
tackle business as such due to new product launches, product category
introductions or competitor actions. Group's customers are acting
mainly in local markets, consisting mainly of mass retailers offering
a wide range of products and specialized fishing tackle and outdoor
retailers. Group's sales and operating profit have traditionally been
quite seasonal due to the geographic location of the Group operations
and the seasonality of the fishing tackle business. The seasonality
has been slightly mitigated in the last two years through the
acquisitions of distribution companies on the southern hemisphere.
For more information on the Group's financial risk and risk
management see Annual Report 2006 on www.rapala.com.
Events after the end of the interim period
The Group has no knowledge of any significant events after the end of
the interim period that would have a material impact on the financial
statements for Jan-June 2007. Material events after the end of the
interim period, if any, have been discussed in the interim review by
the Board of Directors.
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