Martela Oyj - Company Announcement

Martela Corporation interim report, 1 January – 30 September 2015

MARTELA CORPORATION  INTERIM REPORT  29 October 2015 at 8.30 a.m.



MARTELA CORPORATION INTERIM REPORT, 1 January - 30 September 2015

Consolidated revenue for January-September declined, operating result slightly
better than last year 

Key figures:

                            7-9   7-9   1-9    1-9   1-12
EUR million                2015  2014  2015   2014   2014
- Revenue                  38.7  36.5  95.3  104.7  135.9
- Change in revenue, %      5.8   6.5  -8.9    9.7    2.7
- Operating result          3.0   2.2   2.0    1.2    0.2
- Operating result, %       7.9   6.0   2.1    1.2    0.1
- Earnings/share, EUR      0.59  0.44  0.24   0.10  -0.18
- Return on investment, %  34.9  23.7   7.7    4.3    0.5
- Return on equity, %      47.1  33.1   6.4    2.5   -3.4
- Equity ratio, %                      36.8   39.8   38.1
- Gearing ratio, %                     41.6   39.8   33.4

The Martela Group anticipates that its revenue in 2015 will remain at the
previous year's level or that there will be a slight decline. A slight
improvement in the operating result is expected. 

Market

During the third quarter, the market environment remained as it had been during
the first half of the year. The overall demand for office furniture continued
to be low in the review period in the Group's main market areas: Finland,
Sweden, Poland and Russia. Even though the overall demand continues to be low,
the many office alteration projects that are at the planning stage in the
Nordic countries are improving the market situation slightly. Martela's
Lifecycle model and activity-based office solutions are excellently suited to
office alteration and enhancement projects. However, decision-making is being
slowed by the general economic uncertainty and the extent of long-term leases.
The situation in the Russian market continues to be more challenging than
elsewhere. 

In addition to office construction, the demand for Martela's products and
services is significantly affected by the general economic situation and by the
extent to which companies need to use their office space more efficiently. The
need to boost efficiency often leads to office alteration projects, which in
turn generate demand for Martela's products and services. The annual change in
gross domestic product (GDP) can be regarded as a good indicator of general
economic development. In Finland, this change was -0.1% in 2014. According to
most forecasts, the change in Finland's GDP is estimated to be near zero or
even slightly negative in 2015. Thus, a strong recovery is still not likely in
the near future. 

Consolidated revenue and result

Consolidated revenue for the third quarter was EUR 38.7 million (36.5), an
increase of 5.8% on a year-on-year basis. Consolidated revenue for
January-September was EUR 95.3 million (104.7), a decrease of 8.9% from the
previous year. Despite the challenging market situation in Finland, the Group's
revenue in Finland was substantially higher than in the same period last year.
Martela's Lifecycle model, which is intended for companies, has been well
received in Finland. The model allows companies to make savings in overall
costs, while at the same time it provides them with better-functioning work
facilities. There were no individual major customer projects in Finland in the
review period; instead the revenue was generated by small and medium-sized
deliveries. There was a substantial decrease in the revenue of the Business
Unit International compared with the previous year. Since 1 May 2015, the unit
has been responsible for sales in Poland and Russia and exports to countries
where Martela does not have a subsidiary. Russia accounted for most of the
decrease, whereas the revenue in Poland was almost at the previous year's
level. As expected, there were major customer deliveries in Sweden and Norway
during the third quarter and as a result, the revenue in July-September was
substantially higher than in the same period the previous year. Despite this,
the revenue of the Business Unit Sweden & Norway during the first nine months
of the year was well below that of the previous year's levels. As a result of
this and the decrease in the revenue in Russia, the consolidated revenue
decreased in the review period. 

The consolidated operating result for the third quarter was EUR 3.0 million
(2.2) and the figure for the first nine months of the year was EUR 2.0 million
(1.2). The Group's operating result tends to accumulate more during the second
half of the year as a result of normal seasonal fluctuations and this year the
trend will be accentuated by the fact that there are large projects taking
place during the latter half of the year. Efficiency improvement measures and
growth in revenue helped the Business Unit Finland to improve its operating
result compared with the same period in 2014. As a result of strong revenue,
the operating result of the Business Unit Sweden & Norway was slightly positive
in the third quarter. However, the cumulative operating result remained well
below zero. In the Business Unit International, both the third quarter
operating result and the operating result for the review period were negative.
Efficiency improvement measures were initiated in the Business Unit Poland
(part of the Business Unit International) in October and the aim of these is to
revamp the sales structure and to speed up the process of spreading the word
about Martela's Lifecycle strategy. 

The Group introduced a number of adjustment and efficiency improvement measures
in 2014 and 2015. They have helped the Group to achieve substantial reductions
in fixed costs on a year-on-year basis. Furthermore, the sales margin on the
Group's products was slightly higher than in 2014. These measures helped the
Martela Group to improve its operating result despite a drop in revenue
compared with the same period last year. 

In April Martela launched a new savings programme with the aim of annually
reducing costs by EUR 4 million by the end of 2016, so that the savings will
take full effect in 2017. As part the programme, the company launched statutory
employee negotiations in April that included all office employees at Martela
Corporation. The measures agreed in the negotiations will help to generate
annual savings of about EUR 1.2 million by the end of 2016. At the beginning of
October, a decision was made to reorganise the sales operations in Poland and
these measures are expected to bring savings of about EUR 0.5 million in 2016.
During the year under review, Martela has also reorganised its office premises,
which will help to reduce annual costs by about EUR 0.6 million. Some of the
reorganisation will take place in 2015 and it will have full impact in 2016.
Thus, the measures already introduced will allow the Group to achieve EUR 2.3
million of the targeted savings of EUR 4 million. The search for sources of
additional savings is continuing. 

Over the past year, interest in activity-based office solutions has continued
to increase in Martela's main market areas. The Group has introduced novel
solutions suitable for activity-based offices and continues to invest in its
ability to provide even more high-quality comprehensive solutions and services
in the field of activity-based working. The Group has strengthened its
pioneering position as a supplier of comprehensive solutions and as a leading
service provider for offices and other working environments. 

The result before taxes was EUR 1.5 million (0.7), and the result after taxes
was EUR 1.0 million (0.4). 

Martela's full interim report for January - September 2015 is included in PDF
format as an attachment to this release. The interim report is also available
on the company's website at www.martela.com. 

Martela Oyj
Board of Directors
Matti Rantaniemi
CEO

ATTACHEMENT: Martela's interim report January - September 2015

For more information, please contact
Matti Rantaniemi, CEO, tel. +358 50 465 8194
Markku Pirskanen, CFO, tel. +358 40 517 4606

Distribution
Nasdaq Helsinki
Main News Media

www.martela.com

Attachments:

2015 1029 Interim report Q3.pdf