2008-04-23 09:00:00 CEST
2008-04-23 09:01:13 CEST
REGULATED INFORMATION
Rapala VMC - Quarterly report
INTERIM REPORT - JANUARY TO MARCH 2008
STOCK EXCHANGE RELEASE
April 23, 2008
Record sales for the first quarter
- Despite of the weakening of the US dollar, timing of the Easter
holidays and challenging winter weather conditions, first quarter net
sales reached a record level at 65.1 MEUR (I/2007: 63.4 MEUR).
Weakening of US dollar and some other currencies decreased net sales
by 3.6 MEUR. Comparable net sales increased 8%.
- Operating profit decreased from last year and amounted to 10.6 MEUR
(12.0 MEUR). Operating margin was 16.3% (18.9%). Comparable operating
profit, excluding non-recurring items and effects of foreign exchange
movements, was 10.5 MEUR (10.7 MEUR) and comparable operating margin
15.3% (16.9%).
- Net profit for the first quarter amounted to 6.8 MEUR (7.7 MEUR).
Earnings per share were 0.16 EUR (0.20 EUR).
- Cash flow from operating activities was below last year levels. Net
interest-bearing debt was up to 96.5 MEUR (Dec 2007: 80.2 MEUR) due
to seasonal increase in working capital but was clearly below March
2007 level (109.1 MEUR). Accordingly, equity-to-asset ratio decreased
to 36.3% (Dec 2007: 38.2%) and gearing increased to 96.7% (Dec 2007:
82.8%) while both indicators improved clearly compared to March 2007.
- Rapala continued to implement its strategy for profitable growth.
Consolidation of French operations and restructuring of the Chinese
manufacturing unit proceeded on plan. Ramp-up of the new lure factory
in Russia progressed and the Irish lure factory will be closed in the
end of April. These savings will start to materialize from the latter
half of 2008 onwards and full effect will be seen in 2009.
Distribution joint venture in East Europe with Shimano started well
with increased sales. Negotiations for new acquisitions and business
combinations continued.
- It is expected that the Group's net sales for the financial year
2008 will increase 8-12% from 2007 assuming comparable exchange
rates. With comparable exchange rates and excluding non-recurring
items, operating margin is expected to improve from 2007.
The attachment presents the interim review by the Board of Directors
as well as accounts.
A conference call on the first quarter 2008 result will be arranged
today at 2.00 pm Finnish time (1.00 pm CET). Please dial +44 207 750
9950 or +1 866 676 5870 five minutes before the beginning of the
event and request to be connected to Rapala teleconference. A replay
facility will be available for 5 working days following the
teleconference. The number (pin code: 220622#) to dial is +44 207 750
99 28. 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: OMX Nordic Exchange in Helsinki and Main Media
Market Situation and Sales
During the first quarter, the fishing tackle season started quite
well in Western Europe and Canada. In the end of the first quarter,
some US customers started to reduce their inventories as a reaction
to the increased uncertainties in the US economy. Despite these
actions of certain customers, the consumer demand continued healthy
in the key product categories for Rapala. Northern US market was also
affected by very cold and long winter, which postponed the start of
the peak season for fishing tackle sales. In Australia and
South-Africa, the markets continued strong and the summer season has
now come to its end. In Eastern Europe, the markets continued to grow
strongly. Due to an unusually short and mild winter season in the
Nordic countries, especially in Finland, the market for both winter
fishing and winter sports equipment was very slow. Easter holidays
were this year in March instead of April, which reduced the number of
business days in March compared to 2007.
Net sales for the first quarter, which is normally and seasonally the
second best quarter for sales, were in line with Group expectations
and reached a new record for the first quarter at 65.1 MEUR (I/07:
63.4 MEUR) boosted mainly by good sales performance in Nordic and
Rest of Europe segments, latter one boosted by the distribution
co-operation with Shimano in Eastern Europe. Net sales were
negatively affected by the mild and short winter in Nordic countries,
especially cold and long winter in the Northern USA and the timing of
Easter holidays. Weakening of the US dollar and some other
currencies, especially the South African rand, decreased the net
sales by 3.6 MEUR. Excluding the effect of foreign exchange
movements, Group net sales were up 8%. With comparable exchange
rates, net sales were down 2% in North America.
Financial Results and Profitability
MEUR I/2008 I/2007 I-IV/2007
Net sales 65.1 63.4 242.5
EBITDA 12.2 12.3 33.8
Operating profit (EBIT) 10.6 12.0 28.3
Profit before taxes 9.3 11.0 23.3
Net profit for the period 6.8 7.7 17.5
Operating profit for January to March decreased from last year and
totaled 10.6 MEUR (12.0 MEUR). Operating margin was 16.3% (18.9%) and
return on capital employed 22.8% (25.4%). First quarter result was
negatively affected by bad winter season for winter fishing and
winter sports in Nordic countries, cold and long winter in the
Northern US, weakening of the US dollar (-0.4 MEUR net for all
currencies), timing of Easter holidays in March and 0.3 MEUR of
non-recurring costs related to restructurings in Europe and Asia. The
Group has entered into derivative contracts to fix part of its USD
exposure related to purchases for the next 14 months. Since hedge
accounting is not applied to these derivatives, the unrealized loss
for these contracts (0.5 MEUR) decrease the operating profit for the
first quarter. On the other hand, the result includes a non-recurring
gain of 1.3 MEUR from the real estate sold in France. The comparable
period in 2007 included a negative goodwill of 1.2 MEUR from the
Terminator deal and 0.1 MEUR other non-recurring gains. The result of
currency hedging related to operating profit (+0.1 MEUR) is booked in
financial items.
Comparable operating profit, excluding non-recurring items and
effects of foreign exchange movements, was 10.5 MEUR (10.7 MEUR) and
comparable operating margin 15.3% (16.9%).
Management Analysis
MEUR I/2008 I/2007 I/2008 I/2007
Net sales as Operating profit as
reported 65.1 63.4 reported 10.6 12.0
Foreign exchange Non-recurring items
effects 3.6 0.0 (net) -1.0 -1.3
Foreign exchange
Comparable net sales 68.7 63.4 effects 0.9 0.0
Comparable operating
profit 10.5 10.7
Operating margin as Comparable operating
reported 16.3% 18.9% margin 15.3% 16.9%
Operating profit of Nordic countries was down 0.8 MEUR as a result of
currency movements and it suffered also from the mild winter
affecting winter sports and winter fishing equipment sales. Rest of
Europe's result was boosted by good sales and one-off gain of 1.3
MEUR from the real estate sold in France. Operating profit in North
America and Rest of the World were down in line with the decrease in
sales taking into account that the comparable figure for North
America in 2007 included the negative goodwill from the Terminator
acquisition.
Financial expenses increased from last year mainly due to decrease in
currency exchange gains. Net interest expenses decreased slightly.
Net profit for the quarter amounted to 6.8 MEUR (7.7 MEUR) and
earning per share was 0.16 EUR (0.20 EUR).
Cash Flow and Financial Position
Cash flow from operating activities was below last year level due to
decreased result and higher increase in working capital. Working
capital was up from December 2007 as inventories and especially trade
receivables increased seasonally and new inventories were built up
for new sales of Shimano products in Eastern Europe. Net cash used in
investing activities, including acquisitions, amounted to 2.0 MEUR
(3.0 MEUR).
Net interest-bearing debt increased seasonally to 96.5 MEUR (Dec
2007: 80.2 MEUR) but was clearly below March 2007 levels (109.1
MEUR). Equity-to-asset ratio decreased to 36.3% (Dec 2007: 38.2%) and
gearing increased to 96.7% (Dec 2007: 82.8%) while both of these
ratios improved clearly compared to March 2007.
Strategy Implementation - Growth
During the first quarter of 2008, Rapala continued to develop its
product portfolio and market coverage to implement its strategy for
profitable growth. Also discussions and negotiations regarding
acquisitions and business combinations continued.
Rapala's competitive position both in the global and regional fishing
tackle markets has strengthened in the past years thanks to
innovative product development, high quality products, good service,
extension of product offering for both global and regional markets as
well as wide distribution network covering almost all fishing tackle
markets.
Rapala-Shimano distribution joint venture started its operations in
East Europe in the beginning of 2008 and has already proven to be a
success. Rapala has consistently aimed at developing and deepening
its fishing tackle distribution alliance with Shimano. South East
European distribution center established with Shimano in early 2007
in Hungary has also progressed positively increasing both its sales
and profitability. With the combined high quality product offering of
Rapala and Shimano covering all key price points, the customers are
able to fulfill majority of their fishing tackle needs. After these
expansions of distribution alliance with Shimano, Rapala distributes
Shimano fishing tackle, mainly rods and reels, in South Africa and in
22 countries in Europe. In Russia, the joint venture also distributes
bicycle parts.
The new lure assembly factory in Russia is fully operational and
increases its production volumes on a quarterly basis. The business
of the new sales company established in 2007 in South Korea is
proceeding on plan.
Strategy Implementation - Profitability
In addition to M&A negotiations and development of new products and
organic growth, the emphasis on performance improvement initiatives
continued. The target is to further improve the Group's profitability
in 2008.
The consolidation of the Group's French operation into Morvillars
proceeded on plan. The relocation of distribution unit Ragot was
completed in the end of 2007 and the moves of distribution unit
Waterqueen and fishing line supplier Tortue are planned for mid-2008
and hook distributor VMC Europe later in 2008. The sale of the real
estate owned by Waterqueen was signed in January with a non-recurring
gain of 1.3 MEUR. The real estate of Ragot will also be sold in 2008.
After all relocations have been made and the new organisation is up
and running, the annual savings are expected to reach 1-2 MEUR. These
savings will start to materialize from the latter half of 2008
onwards and full effect will be seen in 2009.
The restructuring and development of Rapala's lure manufacturing
operations in Europe proceeds on plan. The manufacturing operations
in Ireland will discontinue in the end of April 2008. The
manufacturing functions of the Irish factory will be taken over by
the Group's lure factory in Estonia that will continue finalizing,
testing and packaging the products. At the same time, significant
part of assembly work is being transferred from Estonia to the new
factory in Russia. After the closing of the Irish factory and
transfer of its duties to the Estonian factory, the annual savings
are expected to reach some 0.7 MEUR. This restructuring will
strengthen the Group's position as the world's leading manufacturer
of hard-bodied lures and increase production efficiencies and
capacity.
Operational changes and improvements started in the Group's Chinese
manufacturing facility in 2007 have progressed with a target to
enhance the production efficiencies and shorten the lead time. These
changes also include the ongoing physical split of the fishing tackle
and gift businesses into separate buildings. This is done to develop
both businesses more on a standalone basis but with good cooperation
to decrease the effects of the seasonality of the fishing tackle
business. The first results of these initiatives have started to
capitalize but the full benefits are expected to materialize from
2009 onwards when the new production planning system and related new
processes are implemented.
The distribution joint ventures established with Shimano in 2007 have
proven to be a success not only regarding sales growth but also
profitability. The impact of several cost cutting initiatives
completed by the end of 2007 in distribution units have started to
gradually materialize from the beginning of 2008. New reorganizations
took place during the first quarter in some of the Asian distribution
units.
Short-term Outlook
In general, the outlook for 2008 remains unchanged. The market
outlook for 2008 is though two-folded. The fishing tackle business,
especially the product categories where Rapala operates, has
traditionally not been strongly influenced by the increased
uncertainties and downturns in the general economic climate. This
together with a good start for the fishing tackle sales in Europe and
Canada indicates that the market could be quite stable for the rest
of 2008. On the other hand, the increased uncertainties and downturns
in the economic environment may influence, at least for a short
while, the sales of fishing tackle if retailers reduce their
inventory levels further. This risk remains especially in the USA.
Australia and Africa are now heading for their winter season, which
will seasonally slow down their business for few months.
The profitability of the Group's ongoing operations continues to be
good. Special initiatives are being implemented to further improve
the profitability. In addition, prices have been increased and
further price increases are planned to compensate for increases in
raw material costs and wages especially in China. Business
development and integration expenses and start-up costs will continue
in 2008 while the new initiatives are planned and implemented. These
costs are not expected to exceed the comparable costs in 2007.
It is expected that the Group's net sales for the financial year 2008
will increase 8-12% from 2007 assuming comparable exchange rates.
Possible additional acquisitions during 2008 would further increase
the sales. Assuming comparable exchange rates and excluding
non-recurring items, operating margin is expected to improve from
2007.
Group management continues planning and negotiations regarding
further acquisitions and business combinations to implement the
Group's strategy. Also the project to manage working capital
continues.
The launch of new products for season 2009 will take place during the
next three months.
The second quarter interim report will be published on July 23.
Helsinki, April 23, 2008
Board of Directors of Rapala VMC Corporation
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
CONSOLIDATED INCOME STATEMENT I I I-IV
MEUR 2008 2007 2007
Net sales 65.1 63.4 242.5
Other operating income 1.5 0.3 6.7
Cost of sales 34.7 32.5 135.8
Other costs and expenses 19.8 18.8 79.6
EBITDA 12.2 12.3 33.8
Depreciation 1.6 0.3 5.4
Operating profit (EBIT) 10.6 12.0 28.3
Financial income and expenses 1.3 1.0 5.0
Share of results in associated companies 0.0 0.0 0.0
Profit before taxes 9.3 11.0 23.3
Income taxes 2.5 3.3 5.8
Net profit for the period 6.8 7.7 17.5
Attributable to:
Equity holders of the Company 6.3 7.6 17.3
Minority interest 0.5 0.1 0.3
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (diluted = non-diluted) 0.16 0.20 0.45
CONSOLIDATED CASH FLOW STATEMENT I I I-IV
MEUR 2008 2007 2007
Net profit for the period 6.8 7.7 17.5
Adjustments to net profit for the period * 5.0 4.7 14.8
Financial items and taxes paid and received -2.8 -1.9 -11.1
Change in working capital -25.3 -17.8 -3.1
Net cash generated from operating activities -16.3 -7.3 18.2
Investments -1.7 -1.4 -7.2
Proceeds from sales of assets 0.1 0.0 0.4
Acquisition of subsidiaries, net of cash -0.3 -1.6 -2.7
Proceeds from disposal of subsidiaries, net of cash - - 5.9
Change in interest-bearing receivables 0.0 0.0 -0.1
Net cash used in investing activities -2.0 -3.0 -3.7
Dividends paid - - -4.6
Net funding 16.7 7.8 -11.5
Proceeds from share subscriptions - 0.0 5.0
Net cash generated from financing activities 16.7 7.8 -11.1
Adjustments -0.2 - 0.4
Change in cash and cash equivalents -1.8 -2.5 3.8
Cash & cash equivalents at the beginning of the
period 27.3 24.4 24.4
Foreign exchange rate effect -0.7 -0.2 -0.9
Cash and cash equivalents at the end of the period 24.9 21.8 27.3
* Includes reversal of non-cash items, income taxes and financial
income and expenses.
CONSOLIDATED BALANCE SHEET Mar 31 Mar 31 Dec 31
MEUR 2008 2007 2007
ASSETS
Non-current assets
Intangible assets 49.4 53.4 51.1
Property, plant and equipment 27.8 29.3 28.4
Non-current financial assets
Interest-bearing 0.6 0.6 0.6
Non-interest-bearing 7.6 6.3 8.0
85.4 89.6 88.1
Current assets
Inventories 89.0 79.9 84.3
Current assets
Interest-bearing 0.1 0.0 0.1
Non-interest-bearing 75.1 77.6 52.8
Cash and cash equivalents 24.9 21.8 27.3
189.1 179.3 164.6
Assets classified as held-for-sale 0.5 - 0.9
Total assets 275.0 268.8 253.7
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
Company 98.6 87.8 96.0
Minority interest 1.2 0.6 0.9
99.8 88.4 96.9
Non-current liabilities
Interest-bearing 48.6 75.4 49.8
Non-interest-bearing 6.7 6.6 6.4
55.2 82.0 56.3
Current liabilities
Interest-bearing 73.5 56.1 58.4
Non-interest-bearing 46.4 42.4 42.0
119.9 98.5 100.5
Total equity and liabilities 275.0 268.8 253.7
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
Cumu- Fund for
lative invested
Share trans- non- Re- Mino-
pre- Fair lation rest- tained rity
Share mium value diffe- ricted earn- inte- Total
MEUR capital fund reserve rences equity ings rest equity
Equity on Jan 1,
2007 3.5 16.7 0.1 -7.1 - 67.6 0.6 81.3
Change in
translation
differences - - - -0.8 - - - -0.8
Gains and losses
on hedges of net
investments, net
of tax - - - 0.0 - - - 0.0
Fair value gains
on
available-for-sale
investments, net
of tax - - 0.0 - - - - 0.0
Net income
recognized
directly in equity - - 0.0 -0.8 - - - -0.8
Net profit for the
period - - - - - 7.6 0.1 7.7
Total recognized
income and
expenses - - 0.0 -0.8 - 7.6 0.1 6.9
Shares subscribed
with options 0.0 0.0 - - - - - 0.0
Share option
program - - - - - 0.2 - 0.2
Other changes - - - - - 0.0 0.0 0.0
Equity on Mar 31,
2007 3.5 16.7 0.1 -7.9 - 75.4 0.6 88.4
Equity on Jan 1,
2008 3.6 16.7 0.0 -9.8 4.9 80.6 0.9 96.9
Change in
translation
differences - - - -3.6 - - - -3.6
Gains and losses
on cash flow
hedges, net of tax - - -0.2 - - - - -0.2
Gains and losses
on hedges of net
investments, net
of tax - - - -0.1 - - - -0.1
Net income
recognized
directly in equity - - -0.2 -3.6 - - - -3.8
Net profit for the
period - - - - - 6.3 0.5 6.8
Total recognized
income and
expenses - - -0.2 -3.6 - 6.3 0.5 3.0
Share option
program - - - - - 0.1 - 0.1
Other changes - - - - - 0.0 -0.2 -0.2
Equity on Mar 31,
2008 3.6 16.7 -0.2 -13.4 4.9 87.1 1.2 99.8
SEGMENT INFORMATION I I I-IV
MEUR 2008 2007 2007
Net Sales by Area**
North America 17.4 21.1 66.7
Nordic 30.6 24.9 96.0
Rest of Europe 29.7 25.4 92.1
Rest of the world 13.4 14.8 62.9
Intra-Group -25.9 -22.8 -75.2
Total 65.1 63.4 242.5
Operating Profit by Area**
North America 1.9 3.8 7.5
Nordic 2.2 2.7 12.5
Rest of Europe 6.7 4.2 3.4
Rest of the world 0.7 1.1 5.4
Intra-Group -0.9 0.2 -0.3
Total 10.6 12.0 28.3
Net Sales by Product line***
Lures 19.5 23.1 73.9
Fishing Hooks 4.6 4.9 16.9
Fishing Accessories 10.6 10.7 43.5
Third Party Fishing Products 21.1 16.8 63.4
Other 10.3 8.8 47.8
Intra-Group -0.9 -1.0 -3.2
Total 65.1 63.4 242.5
** 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 include Group branded
fishing tackle products. Third Party Fishing Products include
non-Group branded fishing products, mostly rods and reels. Other
Products include non-Group branded (third party) products for
hunting, outdoor and winter sports and Group branded products for
winter sports and some other businesses.
KEY FIGURES I I I-IV
2008 2007 2007
EBITDA margin, % 18.8% 19.5% 13.9%
Operating margin, % 16.3% 18.9% 11.7%
Return on capital employed, % 22.8% 25.4% 15.9%
Capital employed at end of period, MEUR 196.3 197.5 177.1
Net interest-bearing debt at end of period, MEUR 96.5 109.1 80.2
Equity-to-assets ratio at end of period, % 36.3% 32.9% 38.2%
Debt-to-equity ratio at end of period, % 96.7% 123.5% 82.8%
Earnings per share, EUR 0.16 0.20 0.45
Average number of shares outstanding (1000) 39 468 38 577 38 781
Fully diluted earnings per share, EUR 0.16 0.20 0.45
Fully diluted average number of shares (1000) 39 468 38 580 38 781
Equity per share at end of period, EUR 2.50 2.27 2.43
Number of shares outstanding at end of period
(1000) 39 468 38 579 39 468
Average personnel for the period 4 398 4 051 4 577
KEY FIGURES BY QUARTERS I II III IV I-IV I
MEUR 2007 2007 2007 2007 2007 2008
Net sales 63.4 73.4 52.0 53.7 242.5 65.1
EBITDA 12.3 12.6 4.6 4.3 33.8 12.2
Operating profit (EBIT) 12.0 11.0 2.9 2.4 28.3 10.6
Profit before taxes 11.0 9.8 1.4 1.1 23.3 9.3
Net profit for the period 7.7 6.7 1.1 2.0 17.5 6.8
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This 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 2007,
except for the adoption of new interpretations: IFRIC 11 (IFRS 2
Group and Treasury Share Transactions), IFRIC 12 (Service Concession
Arrangements) and IFRIC 14 (IAS 19 - The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction). Adoption
of these interpretations did not result in any changes in the
accounting principles that would have affected the information
presented in this interim 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
2007.
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 January-March 2008. Material events after the end of
the interim period, if any, have been discussed in the interim review
by the Board of Directors.
Inventories
At March 31, 2008, the book value of inventories differed from its
net realizable value by 2.3 MEUR (1.0 MEUR at March 31, 2007 and 2.4
MEUR at December 31, 2007).
Assets held-for-sale and sale of assets
As part of the consolidation of French operations, Rapala signed a
sale agreement for the warehouse and office building in Saint Marcel
in January 2008. This resulted in a capital gain of 1.3 MEUR. The
plan is also to sell the building in Loudeac during 2008.
Impact of acquisitions on the consolidated financial statements
Rapala increased its ownership in the Finnish cross country ski
manufacturer Peltonen Ski Oy from 80% to 90% in January 2008 and
ownership in the Lithuanian distribution company from 82% to 100% in
March 2008. These acquisitions do not have a material impact on the
Group's financial statements for January-March 2008. Also in
February, Rapala made the final payment of the Terminator acquisition
(0.2 MEUR) closed in 2007 and the final payment of the Freetime
acquisition (0.1 MEUR) closed in 2005.
Open derivatives
Nominal Positive fair Negative fair Net fair
MEUR amount values values values
Mar 31 2008
Foreign currency
forwards 9.5 - 0.5 -0.5
Interest rate swaps 14,4 0.0 0.4 -0.4
Total 23,9 0.0 0.9 -0.9
Mar 31 2007
Foreign currency
forwards 2.7 - 0.0 0.0
Total 2.7 - 0.0 0.0
Dec 31 2007
Foreign currency
forwards 7.9 - 0.1 -0.1
Interest rate swaps 12.9 - 0.0 0.0
Total 20.8 - 0.2 -0.2
Group's financial risks and hedging principles are described in
detail in the Annual Report 2007.
Commitments
Mar 31 Mar 31 Dec 31
MEUR 2008 2007 2007
On own behalf
Business mortgage 16.1 16.1 16.1
Guarantees 3.2 1.0 3.1
On behalf of other parties
Guarantees 0.8 0.8 0.6
Minimum future lease payments on operating
leases 9.2 13.2 9.5
Related party transactions
Rents Other
MEUR Purchases paid expenses Receivables Payables
I 2008
Associated company
Lanimo Oü - - - 0.0 -
Entity with
significant influence* - 0.1 0.0 0.0 -
Business Unit
Management 0.0 0.0 - 0.0 -
I 2007
Associated company
Lanimo Oü 0.0 - - - 0.0
I-IV 2007
Associated company
Lanimo Oü 0.1 - - 0.0 -
Entity with
significant influence* - 0.1 0.1 0.0 -
* Lease agreement for the real estate for the consolidated operations
in France and a service fee.
Non-recurring income and expenses in operating profit
I I I-IV
MEUR 2008 2007 2007
Sale of 50% of Rapala Shimano East Europe Oy - - 4.9
Consolidation of French operations - - -2.5
Closure of Irish lure factory - - -1.1
Sale of French warehouse and office building 1.3 - -
Other disposals of assets 0.0 0.0 0.4
Excess of Group's interest in the net fair values of
acquired net assets over costs (negative goodwill) - 1.2 1.0
Other restructuring costs -0.3 - -1.3
Other non-recurring items - - 0.1
Total 1.0 1.3 1.6
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 Report 2007. 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 programs is 5.2 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
counterparty have a shared understanding of the terms and conditions
of the arrangement. 1 909 500 share options 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, 2008, the exercise period
for the 2003B stock option program expired. 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
0.8 MEUR in January-December 2007, 0.3 MEUR in Jan-Mar 2007 and 0.2
in Jan-Mar 2008.
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 by using funds in
the unrestricted equity. This amount of shares corresponds to less
than 10% of all shares of the company. The shares may be repurchased
in deviation from the proportion of the shares held by the
shareholders. The shares will be repurchased through public trading
arranged by OMX Nordic Exchange in Helsinki at the market price of
the acquisition date. The shares will be acquired and paid in
pursuance of the rules of OMX Nordic Exchange in Helsinki and
applicable rules regarding the payment period and other terms of the
payment. This authorization is effective until the end of the next
Annual General Meeting.
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 121 110
EUR and the number of shares by a maximum of 1 345 668 shares. The
shares that can be subscribed with these stock options correspond to
3.4% of the Company's shares and voting rights.
During the first three months 1 141 649 shares (2 131 888 shares)
were traded. The shares traded at a high of 5.65 EUR and a low of
4.02 EUR during the period. The closing share price at the end of the
period was 5.00 EUR.
Short term risks and uncertainties
The objective of Rapala's risk management is to support the
implementation of the Group's strategy and execution of business
targets. The importance of risk management has increased when Rapala
Group has continued to expand its operations fast. Accordingly, Group
management allocated more resources to risk management and developed
risk management practices during 2007 and this work has continued in
2008. Detailed description of Group's strategic, operative and
financial risks and risk management principles are included in the
Annual Report 2007, see www.rapala.com.
Due to the nature of the fishing tackle business and the geographical
scope of Group's operations, Group's deliveries and sales as well as
operating profit have traditionally been seasonally stronger in the
first half of the financial year compared to the second half. In
early 2008, deliveries to customers have realized according to plan,
without any material operative problems in the supply chain. Group's
sales are also to some extent affected by the weather. Mild winter
affected negatively the winter sports equipment sales especially in
Finland.
Even if the fishing tackle business has traditionally not been
strongly influenced by the increased uncertainties and downturns in
the general economic climate, this may influence, at least for a
short while, the sales of fishing tackle if retailers reduce their
inventory levels.
Group's sales and profitability are impacted by the changes in
foreign exchange rates, especially US Dollar. Group is actively
monitoring the currency position and risks and using e.g. foreign
currency nominated loans to manage the natural hedging. In order to
fix the exchange rate of future USD-nominated purchases, the Group
has entered into currency hedging agreements. As the Group is not
applying hedge accounting in accordance to IAS 39, also the change in
fair value of these unrealized currency hedging agreements have
impact on the Group's operating profit.
Increase of prices of certain raw materials and salaries especially
in China have impact on Group's profitability. Group has successfully
introduced price increases targeted to offset at least part of these
effects.
No significant changes are identified in the Group's strategic risks
or business environment.
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