2016-05-10 08:00:01 CEST
2016-05-10 08:00:01 CEST
REGULATED INFORMATION
Honkarakenne Oyj - Interim report (Q1 and Q3)
HONKARAKENNE OYJ’S INTERIM REPORT, 1 JANUARY – 31 MARCH 2016
HONKARAKENNE OYJ INTERIM REPORT 10 May 2016 at 9:00 a.m.
HONKARAKENNE OYJ’S INTERIM REPORT, 1 JANUARY – 31 MARCH 2016
SUMMARY
First-quarter net sales decreased by 21 % year-on-year. The operating result
excluding non-recurring items weakened by MEUR 0.6 to MEUR -1.8 (MEUR -1.2).
Accounting for non-recurring items, the operating result was down MEUR 0.2 to
MEUR -1.8 (-1.6).
January - March 2016
-- Honkarakenne Group's net sales for the first quarter of the year amounted
to MEUR 4.6 (MEUR 5.8 in 2015),
representing a decrease over the same period the previous year of 21 %.
-- The operating result was MEUR -1.8 (MEUR -1.6).
Operating result without non-recurring items was MEUR -1.8 (MEUR -1.2).
-- The loss before taxes was MEUR -1.9 (MEUR -2.0).
-- Earnings per share amounted to EUR -0.40 (EUR -0.33).
According the Honkarakenne’s view the net sales and result before non-recurring
items and taxes in 2016 will be lower than in the previous year.
At the end of March, the Group's order book stood at MEUR 16.9, up 2% on the
corresponding period of the previous year, when it amounted to MEUR 16.6. The
order book refers to orders whose delivery date falls within the next 24
months. Some orders may include terms and conditions relating to financing or
building permits.
KEY INDICATORS 1-3/ 1-3/ 1-12/
2016 2015 2015
Net sales, MEUR 4.6 5.8 39.1
Operating profit/loss, MEUR -1.8 -1.6 -1.1
Operating profit before non-recurring items, MEUR -1.8 -1.2 -0.2
Profit/loss before taxes, MEUR -1.9 -2.0 -1.7
Average number of personnel 136 145 139
Personnel in person-years, average 98 93 115
Earnings/share (EPS), EUR -0.40 -0.33 -0.23
Equity ratio, % 30 32 37
Return on equity, % -27 -20 -13
Shareholders' equity/share, EUR 1.22 1.51 1.61
Gearing, % 130 117 81
Marko Saarelainen, President and CEO of Honkarakenne Oyj, in connection with
the interim report:
“The weak market situation in Finland and uncertainty in the Russian market are
felt in the trend in net sales. The Group’s net sales development has fallen
short of the previous year. The order book was at a higher level than in
previous year.
Sales went well in the Finnish market at the end of last year, but slackened in
the first quarter. Our view is that healthiness and natural living are strong
selling points when customers are considering buying a house these days.
General economic uncertainty in Russia & CIS is evident in Honkarakenne’s order
book for the first months of the year. To date, Honkarakenne has weathered the
difficult market situation well thanks to our strong brand. However, based on
the first months of the year, 2016 will be a difficult year in Russia. To
bolster our net sales, we seek to focus on several larger-scale major projects.
In Global Markets, we are currently seeking growth particularly in Asia. We now
have new dealers in Japan, which we expect to generate additional net sales. In
addition, Honkarakenne gained product approval for the Chinese market in the
second quarter, which we believe will contribute substantially to net sales
growth.
After the end of the review period, Honkarakenne started an efficiency-boosting
programme with a view to adapting costs to the lower net sales. The
efficiency-boosting programme seeks savings of about 60 person-years and about
MEUR 1.5 in fixed costs annually.”
NET SALES
The Group’s first-quarter net sales in 2016 decreased by 21 per cent to MEUR
4.6 (MEUR 5.8).
Geographical distribution of net sales:
DEVELOPMENT OF SALES
Distribution of 1-3/2016 1-3/2015
net sales, %
Finland & Baltics 52 % 40 %
Russia & CIS 19 % 32 %
Global Markets 28 % 28 %
Total 100 % 100 %
Net sales, MEUR 1-3/2016 1-3/2015 % change 1-12/2015
Finland & Baltics 2.4 2.3 4 % 16.3
Russia & CIS 0.9 1.9 -53 % 12.0
Global Markets 1.3 1.6 -19 % 10.8
Total 4.6 5.8 -21 % 39.1
Finland & Baltics includes the following countries: Finland, Estonia, Latvia
and Lithuania. It includes also Process waste sales for recycling.
Russia & CIS includes the following countries: Russia, Azerbaijan, Kazakhstan
and other CIS countries excluding Ukraine.
Global Markets includes other countries than above-mentioned and CIS country
Ukraine.
The Group’s order book stood at MEUR 16.9 at the end of March. In the previous
year at the same time period it was MEUR 16.6.
TRENDS IN PROFIT AND PROFITABILITY
The operating result without non-recurring items for the January–March period
was MEUR -1.8 (MEUR -1.2) and the result before taxes was MEUR -1.9 (MEUR
-2.0).
The trend in operating result was impacted negatively by the year-on-year
decrease in net sales and positively by the cost efficiency-boosting programme
carried out in 2015.
FINANCING AND INVESTMENTS
The financial position of the Group was satisfactory at the end of the report
period. The equity ratio stood at 30 % (32 %) and net financial liabilities at
MEUR 8.0 (MEUR 8.8). MEUR 2.7 (MEUR 2.6) of the financial liabilities carries a
30 % equity ratio covenant term. Group liquid assets totalled MEUR 0.5 (MEUR
1.2). The Group also has a MEUR 7.8 (MEUR 7.8) bank overdraft facility, MEUR
3.3 of which had been drawn on at the end of the report period (MEUR 4.8).
Gearing stood at 130 % (117 %).
The Group’s capital expenditure on fixed assets totalled MEUR 0.0 (MEUR 0.0).
PRODUCTS AND MARKETING
In Finland & Baltics, sales developed weaker than expected. Healthiness and
natural living are strong selling points for Honkarakenne. For instance, Kaisa
Mäkäräinen, one of Finland’s top athletes, chose Honkarakenne – one of her
major reasons was health and good indoor air.
In Russia & CIS, the general economic uncertainty is evident in Honkarakenne’s
order book for the first months of the year. To date, Honkarakenne has
weathered the difficult market situation well thanks to its strong brand.
However, based on the first months of the year, 2016 will be a difficult year
in Russia. To bolster net sales, Honkarakenne will focus on several
larger-scale major projects.
In Global Markets, the company is currently seeking growth particularly in
Asia. Honkarakenne now has new dealers in Japan, which are expected to generate
additional net sales. In addition, Honkarakenne gained product approval for the
Chinese market in the second quarter, which is expected to contribute
substantially to net sales growth.
RESEARCH AND DEVELOPMENT
In the January–March period, the Group's R&D expenditure totalled MEUR 0.1
(MEUR 0.1), representing 2.2 % of net sales (1.5 %). The Group did not
capitalise any development expenditure during the report period.
PERSONNEL
During the first quarter, the Group employed a total of 98 (93) people on
average in terms of person-years. The Group had an average of 136 (145)
employees during the first quarter, representing a year-on-year decrease of 9.
In November 2015, the Group conducted negotiations under the act on
co-operation within undertakings that resulted in temporary lay-offs of maximum
90 days for all clerical and managerial employees in Finland until the end of
May 2016. In August–September 2015, the Group also conducted negotiations under
the act on co-operation within undertakings that resulted in temporary lay-offs
of maximum 90 days for all production employees in Finland until the end of May
2016.
EVENTS AFTER THE REVIEW PERIOD
Honkarakenne sold the Alajärvi factory property, inclusive of movables, to the
City of Alajärvi at a price of MEUR 0.95. The Alajärvi factory property was
categorised under non-current assets held for sale, and the transaction has no
earnings impact on the result for 2016.
In May, Honkarakenne started an efficiency-boosting programme with a view to
adapting costs to the lower net sales. The efficiency-boosting programme seeks
savings of about 60 person-years and about MEUR 1.5 in fixed costs.
LONG-TERM INCENTIVE PLAN
In the second quarter of 2013, the Board of Directors decided on a long-term
share-based incentive plan for members of the Executive Group. The performance
period of the new plan began on 1 January 2013 and will end on 31 December
2016. The potential reward for the performance period is based on the
cumulative earnings per share (EPS) for 2013 - 2016 and on the average return
on capital employed (ROCE) for 2013 - 2016. Any rewards for the performance
period 2013 - 2016 will be paid partly as B shares and partly in cash in 2017.
The rewards to be paid on the basis of the performance period will correspond
to a total maximum of about 340,000 B shares, including the amount to be paid
in cash.
At the end of 2015, payouts from the share scheme were assessed as zero for the
entire performance period 2013- 2016, and any amounts previously recognised for
the scheme were cancelled.
HONKARAKENNE OYJ’S 2016 ANNUAL GENERAL MEETING, BOARD OF DIRECTORS, AND AUDITORS
The Annual General Meeting of Honkarakenne Oyj was held at the company’s
headquarters in Tuusula on 15 April 2016. The AGM approved the parent company's
and the consolidated Financial Statements, and discharged the members of the
Board of Directors and the CEO from liability for 2015. The AGM decided not to
pay a dividend for the 2015 financial year.
Kati Rauhaniemi, Anita Saarelainen, Jukka Saarelainen, Mauri Saarelainen and
Arto Tiitinen were re-elected to the company's Board of Directors. Rainer
Häggblom was elected as a new member. At the Board's constituent meeting, Arto
Tiitinen was elected Chairman of the Board and Mauri Saarelainen was elected as
Deputy Chairman. At the same meeting, the Board decided to establish a
Nomination and Remuneration Committee. The following directors were elected as
members of the committee: Arto Tiitinen (as Chairman of the Committee), Anita
Saarelainen and Mauri Saarelainen.
PricewaterhouseCoopers Oy, member of the Finnish Institute of Authorised Public
Accountants, was re-appointed as auditor of the company, with Maria Grönroos,
APA, as chief auditor.
OWN SHARES AND AUTHORISATIONS OF THE BOARD OF DIRECTORS
Honkarakenne has not acquired its own shares during the report period. At the
end of the report period, the Group held 364,385 of its Honkarakenne B shares
with a total purchase price of EUR 1,381,750.23. These shares represent 6.99 %
of the company's all shares and 3.34 % of all votes. The purchase cost has been
deducted from shareholders' equity in the consolidated financial statements.
On 15 April 2016, the AGM decided that the Board of Directors will be
authorised to acquire a maximum of 400,000 of the company’s own B shares with
assets included in the company’s unrestricted equity. In addition, the AGM
authorised the Board to decide on a rights issue or bonus issue and on granting
special rights to shares referred to in Section 1 of Chapter 10 of the Limited
Liability Companies Act in one or more instalments. By virtue of the
authorisation, the Board may issue a maximum total of 1,500,000 new shares
and/or relinquish old B shares held by the company, including those shares that
can be issued by virtue of special rights. Both authorisations will remain in
force until the next Annual General Meeting, however expiring at the latest on
June 30, 2017.
CORPORATE GOVERNANCE
Honkarakenne Oyj follows the Limited Liability Companies Act and the Finnish
Corporate Governance Code effective as of 1 January 2016, for listed companies
issued by the Finnish Securities Market Association. The company's website,
www.honka.com, provides more information on the corporate governance systems.
FORTHCOMING RISKS AND UNCERTAINTIES
Russia is one of Honkarakenne’s major business territories. The sanctions
connected to Ukrainian crisis, the trend in the price of oil and strong
exchange rate fluctuations currently cause instability in the Russian market.
This might have major impacts on Honkarakenne’s operations.
It is currently more difficult to acquire funding from the financial markets.
Some of the company’s loans carry a 30 % equity ratio covenant term. At the end
of the first quarter, the equity ratio stood at 30 % (32). If the company’s
sales do not develop sufficiently well, it is possible that the terms of the
covenant will be broken during the second half of the year. The company has
launched negotiations on new loan financing with banks and other potential
financiers.
The assessment of amounts in the balance sheet is based on current assessments
by the management. If these assessments are changed, this may result in changes
to the Group's result.
Deferred tax assets include MEUR 1.6 in tax losses carried forward. In
Honkarakenne's opinion, these deferred tax assets can be utilised by using the
company's estimated taxable income, which is based on Honkarakenne's business
plans including current efficiency-boosting programme. If earnings do not
develop as expected in the long term, it is possible that the tax assets might
not be utilised in time and must be impaired. No new tax assets were recognised
in the balance sheet for the first quarter of 2016.
REPORTING
This report contains statements that relate to the future, and these statements
are based on hypotheses that the company's management hold currently as well as
on the decisions and plans that are currently in place. Although the management
believes that the hypotheses relating to the future are well-founded, there is
no guarantee that the said hypotheses will prove to be correct.
This interim report release has been drafted in line with IFRS recognition and
valuation principles. However, not all of the requirements of IAS 34 have been
complied with in its drafting. The interim report should be read together with
the 2015 financial statements. The figures have not been examined by the
auditor.
THE OUTLOOK FOR 2016
According the Honkarakenne’s view the net sales and result before non-recurring
items and taxes in 2016 will be lower than in the previous year.
HONKARAKENNE OYJ
Board of Directors
Further information:
Marko Saarelainen, President and CEO, tel. +358 40 542 0254,
marko.saarelainen@honka.com
or
Mikko Jaskari, CFO tel. +358 400 535 337, mikko.jaskari@honka.com
This and previous releases are available for viewing on the company’s website
at www.honka.com. Next Interim Reports for 2016 will be published on 4 August
2016 and 27 October 2016.
DISTRIBUTION
NASDAQ OMX Helsinki
Key media
Financial Supervisory Authority
www.honka.com
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited 1-3 1-3 1-12
/2016 /2015 /2015
MEUR
Net sales 4.6 5.8 39.1
Other operating income 0.1 0.1 0.3
Change in inventories 0.6 0.6 -0.6
Materials and services -4.1 -4.2 -24.8
Employee benefit expenses -1.5 -2.2 -7.5
Depreciations and amortisation -0.5 -0.5 -2.0
Impairment -0.0 -0.0 -0.3
Other operating expenses -1.1 -1.2 -5.3
Operating profit/loss -1.8 -1.6 -1.1
Financial income 0.1 0.1 0.2
Financial expenses -0.1 -0.5 -0.8
Share of associated companies' result 0.0 0.0 -0.1
Profit/loss before taxes -1.9 -2.0 -1.7
Taxes -0.0 0.4 0.6
Profit/loss for the period -1.9 -1.6 -1.1
Other comprehensive income
Translation differences 0.0 0.2 0.2
Total comprehensive -1.9 -1.4 -0.9
income for the period
Result for the period attributable to
Equity holders of the parent -1.9 -1.6 -1.1
Non-controlling interest 0.0 0.0 -0.0
-1.9 -1.6 -1.1
Comprehensive income attributable to
Equity holders of the parent -1.9 -1.4 -0.9
Non-controlling interest 0.0 0.0 0.0
-1.9 -1.4 -0.9
Calculated from the result for the period attributable to
equity holders of parent
Earnings/share (EPS), EUR
Basic -0.40 -0.33 -0.23
Diluted -0.40 -0.33 -0.23
Honkarakenne Oyj has two series of shares: A shares and B shares, which have
different right to dividend. Profit distribution of 0.20 EUR per share will be
paid first for B shares, then 0.20 EUR per share for A shares, followed by
equal distribution of remaining profit distribution between all shares.
CONSOLIDATED BALANCE SHEET
Unaudited
31.3.2016 31.3.2015 31.12.2015
MEUR
Assets
Non-current assets
Property, plant and equipment 11.0 14.0 11.4
Goodwill 0.1 0.1 0.1
Other intangible assets 0.2 0.3 0.2
Investments in associated companies 0.2 0.3 0.2
Receivables 0.2 0.2 0.2
Deferred tax assets 2.7 2.5 2.7
14.4 17.4 14.8
Current assets
Inventories 4.9 5.6 4.2
Trade and other receivables 4.0 3.7 3.8
Cash and bank receivables 0.5 1.2 1.1
9.3 10.5 9.1
Non-current assets held for sale 1.0 0.0 1.0
Total assets 24.7 27.9 24.9
Shareholders' equity and liabilities 31.3.2016 31.3.2015 31.12.2015
Equity attributable to equity holders
of the parent company
Share capital 9.9 9.9 9.9
Share premium account 0.5 0.5 0.5
Fund for invested unrestricted equity 6.5 6.5 6.5
Own shares -1.4 -1.4 -1.4
Translation differences 0.0 0.0 -0.0
Retained earnings -9.7 -8.3 -7.8
5.9 7.3 7.8
Non-controlling interests 0.2 0.2 0.2
Total equity 6.1 7.5 8.0
Non-current liabilities
Provisions 0.2 0.3 0.2
Financial liabilities 4.8 9.0 4.5
Other liabilities 0.1 0.1
5.1 9.4 4.9
Current liabilities
Trade and other payables 9.5 8.9 8.5
Current tax liabilities 0.1 0.1 0.1
Provisions 0.2 1.0 0.3
Current financial liabilities 3.6 1.0 3.1
13.5 11.0 12.0
Liabilities of non-current assets held for 0.0 0.0 0.1
sale
Total liabilities 18.6 20.4 16.9
Total equity and liabilities 24.7 27.9 24.9
STATEMENT OF CHANGES IN EQUITY
abridged
Unaudited
EUR thousand Equity attributable to equity holders of
the parent
a) b) c) d) e) f) Total g) Total
equity
Total equity 9898 520 6534 -215 -1382 -6638 8716 204 8920
1.1.2015
Profit/loss for the -1610 -1610 0 -1610
period
Translation 215 215 215
difference
Management -13 -13 -13
incentive plan
Total equity 9898 520 6534 0 -1382 -8260 7308 205 7513
31.3.2015
EUR thousand Equity attributable to equity holders of
the parent
a) b) c) d) e) f) Total g) Total
equity
Total equity 9898 520 6534 -27 -1382 -7757 7786 204 7990
1.1.2016
Profit/loss for the -1920 -1920 0 -1920
period
Translation 50 50 50
difference
Total equity 9898 520 6534 22 -1382 -9678 5915 205 6119
31.3.2016
a) Share capital
b) Share premium account
c) Fund for invested unrestricted equity
d) Translation difference
e) Own shares
f) Retained earnings
g) Non-controlling interests
CONSOLIDATED STATEMENT OF CASH FLOWS 1.1.- 1.1.- 1.1.-
abridged 31.3.2016 31.3.2015 31.12.2015
Unaudited
MEUR
Cash flow from operating activities -1.4 -0.6 1.8
Cash flow from investing activities, net -0.0 -0.0 -0.1
Total cash flows from financing activities 0.8 0.8 -1.6
Proceeds from borrowings 0.8 0.8 0.2
Repayment of borrowings 0.0 0.0 -1.7
Other financial items -0.0 -0.0 -0.1
Change in cash and cash equivalents -0.6 0.3 0.1
Cash and cash equivalents at the beginning of 1.1 1.0 1.0
period
Cash and cash equivalents at the close of 0.5 1.2 1.1
period
NOTES TO THE REPORT
Accounting policies
This interim report release has been drafted in line with IFRS recognition and
valuation principles. However, not all of the requirements of IAS 34 have been
complied with in its drafting. The interim report should be read together with
the 2015 financial statements. The new revised standards or interpretations
effective as of 1 January 2016 have no bearing on the figures presented for the
report period. The figures have not been examined by the auditor.
Honka Management Oy, which is owned by the senior management of Honkarakenne
Oyj and was established in 2010, is included in the consolidated financial
statements due to the terms and conditions of the shareholder agreement
concluded between it and Honkarakenne Oyj.
Honkarakenne has three geographical operating segments that have been combined
into one segment for reporting purposes. Geographically, sales are divided as
follows: Finland & Baltics, Russia & CIS and Global Markets. The internal
reporting of the management is in line with IFRS reporting. For this reason,
separate reconciliations are not presented.
Property, plant and equipment
Unaudited
MEUR Property, plant and
equipment
Cost 1.1.2016 51.0
Translation differences (+/-) 0.0
Increase 0.0
Disposals -0.2
Cost 31.3.2016 50.8
Accumulated depreciation 1.1.2016 -39.6
Translation differences (+/-) -0.0
Accumulated depreciation of disposals and 0.2
reclassifications
Depreciation for the period -0.4
Accumulated depreciation 31.3.2016 -39.8
Carrying amount 1.1.2016 11.4
Carrying amount 31.3.2016 11.0
Own shares
Honkarakenne has not acquired its own shares during the report period. At the
end of the report period, the Group held 364,385 of its Honkarakenne B shares
with a total purchase price of EUR 1,381,750.23. These shares represent 6.99 %
of the company's all shares and 3.34 % of all votes. The purchase cost has been
deducted from shareholders' equity in the consolidated financial statements.
Contingent liabilities
Unaudited 31.3.2016 31.3.2015
MEUR
For own loans
- Mortgages 25.7 25.7
- Other quarantees 2.2 2.6
Rental liabilities 0.2 0.4
Leasing liabilities 0.2 0.3
Nominal values of forward exchange contracts 1.2 1.5
Derivative contracts 0.2 0.3
Events with related parties
The Group’s related parties consist of subsidiaries and associated companies;
the company's management and any companies in which they exert influence; and
those involved in the Saarelainen shareholder agreement and any companies
controlled by them. The management personnel considered to be related parties
comprise the Board of Directors, President & CEO, and the company's Executive
Group. The pricing of goods and services in transactions with related parties
conforms to market-based pricing.
During the report period, ordinary business transactions with related parties
were made as follows: sales of goods and services to related parties amounted
to EUR 55 thousand and purchases from related parties amounted to EUR 166
thousand. In 2010 and 2011, Honkarakenne Oyj granted long-term loans totalling
MEUR 0.9 to Honka Management Oy, which is owned by the company’s senior
management. Impairments amounting total EUR 393 thousand was recognised in
2014-2015 for this loan in the parent company.
KEY INDICATORS
1-3 1-3 1-12
Unaudited 2016 2015 2015
Earnings/share (EPS) euro -0.40 -0.33 -0.23
Return on equity % -27 -20 -13
Equity ratio % 30 32 37
Shareholders equity/share euro 1.22 1.51 1.61
Net financial liabilities MEUR 8.0 8.8 6.5
Gearing % 130 117 81
Gross investments MEUR 0.0 0.0 0.1
% of net sales 0 0 0
Order book MEUR 16.9 16.6 15.0
Personnel in person-years, average Clerical 67 77 71
Workers 69 68 68
Total 136 145 139
Personnel in person-years, average Clerical 63 57 63
Workers 35 34 51
Total 98 93 115
Adjusted number of shares (’000) At period-end 4847 4847 4847
Average during period 4847 4847 4847
Calculation of key indicators:
Profit / loss for the period attributable to equity
holders of parent
Earnings/share ------------------------------------------------
(EPS):
Average number of outstanding shares
Profit / loss before taxes – taxes
Return on equity %: ------------------------------------------------ x 100
Total equity, average
Total equity
Equity ratio, %: ------------------------------------------------ x 100
Balance sheet total - advances received
Net financial Financial liabilities – cash and cash equivalents
liabilities:
Financial liabilities – cash and cash equivalents
Gearing, %: ------------------------------------------------ x 100
Total equity
Shareholders’ equity
Shareholders ------------------------------------------------
equity/share:
Number of outstanding shares at the close of period
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