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Vaahto Group Interim Report from 1 January to 30 June 2014

VAAHTO GROUP PLC OYJ INTERIM REPORT 22.8.2014 AT 10.00

VAAHTO GROUP INTERIM REPORT FROM 1 JANUARY TO 30 JUNE 2014

Turnover from Vaahto Group’s continuing operations from 1 January to 30 June 2014 was 8.8 million euros (15.7 M euros) with an operating loss of 0.2 million euros (profit 0.3 M euros). The order backlog of the continuing operations on 30 June 2014 was 9.7 M euros (16.4 M euros). Turnover and order backlog stayed behind the reference period due to market situation which remained challenging. Global economy continued to reflect on customers’ investment decisions, postponing them. However, the order backlog grew during the first half of the year and the number of offers has remained on a good level.

In the previous Interim Management Statement, the operating profit of the Vaahto Group’s continuing operations was expected to be positive for the fiscal year 2014. During the first half of the year, however, the profit target was not entirely met. The company lowered the 2014 operating profit estimate in the stock exchange release published on 31 July 2014. The latest management estimation is that the operating profit of the Group’s continuing operations will be negative for the fiscal year 2014.

 

Business reporting

In February 2014, Vaahto Group announced to divest or discontinue operations of the unprofitable Paper Technology business in its entirety and to focus on the Process Technology business, in accordance to the group strategy. In the financial statements for 2013, the Service Unit of the Vaahto Paper Technology Ltd. was presented as discontinued operations as were the remaining parts of the Projects Unit, which was sold during the fiscal period of 2013.

On 30 June 2014, the Board of Directors resolved to present AP-Tela Oy as discontinued operations in the interim report. Thus, the entire Vaahto Paper Technology business has been classified as discontinued operations. From now on, Vaahto Group will report one segment which consists of Vaahto Process Technology business.

The effect of discontinued operations on profit/loss is shown on its own line, separately from continuing operations. Earlier, the group’s overhead costs have been allocated also to operations now discontinued. As the costs will no longer be allocated to discontinued operations, they affect solely continuing operations. As the volume of the continuing operations reduces, the relative effect of these costs has increased. The group is currently adjusting its administrative costs, especially regarding the group’s ICT.

 

Vaahto Process Technology

Vaahto Process Technology business includes all of the company’s continuing operations. Turnover of the business from 1 January to 30 June 2014 was 8.8 million euros (15.7 M euros) with an operating loss of 0.2 million euros (profit 0.3 M euros).

Vaahto Process Technology business is divided into two business areas: Japrotek Vessels and Stelzer Mixing Technology. Japrotek Vessels designs and manufactures demanding vessel structures for process industry as well as complete vessel and agitator combinations. Stelzer Mixing Technology focuses on the mixing technology for process industry and related maintenance services.

For Japrotek Vessels business area, the year started in tough market situation that improved slightly during spring as the customers began making investment decisions for their projects. In May, Japrotek Vessels received new orders, the most significant of which was a delivery to Valmet AB in Sweden consisting of tanks and digester. The number of offers remains on a good level and increased during the period. Signs of decrease in demand have not been detected although some customers postponed their investment decisions until the end of the summer vacation period.

For Stelzer Mixing Technology business area, the year started well but the market situation worsened in April. The traditional backbone of the business, food industry, began postponing investments and the markets in China slowed down. The situation in Ukraine and weakening value of the Russian ruble also reflected on the business volume. Market situation started improving only by the end of June. The number of offers, however, remains on a good level and the market position is unchanged.

As resolved in February, the Group focuses on the Process Technology business. The deployment of the strategy has begun and continues in the latter half of the year. Japrotek Vessels will increase its focus on demanding process industry projects where vessel and agitator combinations are complemented with know-how of the customers’ process model. Stelzer Mixing Technology will focus on industrial mixing products and seek strong growth in new market areas as well as industrial segments. Japrotek Vessels will support its business with the mixing know-how of Stelzer Mixing Technology. Japrotek and Stelzer will both specialize in their own specific product categories that complement each other, thus gaining synergy in production. This will both streamline the production and increase the volume by utilizing the Group’s existing resources.

 

Financing and investments

During the period, the cash flow from the Group’s business operations was 0.8 million euros (-0.4 M euros) and the cash flow from investments was -0.2 million euros (1.0 M euros). Interest-bearing liabilities amounted to 12.2 million euros (18.5 M euros). The Group’s consolidated balance sheet total was 19.3 million euros (23.6 M euros).

Group’s capital expenditure during the period was 0.2 million euros (0.2 M euros).

After the financing negotiations, finished in December 2013, the Group was provided with a grace period for loans from financial institutions for 2014. Additionally, conditions of the financing agreement for 2014 were met during the first quarter and the Group received a debt relief totaling 3 million euros; 2.7 million euros for the parent company and 0.3 million euros for Vaahto Paper Technology Ltd. For financial restructuring, negotiations with the Group’s main financiers are scheduled for fall 2014.

 

Directed share issue

On 10 March 2014, the board of directors of Vaahto Group Plc resolved to issue up to 2,000,000 new shares in a directed share issue based on an authorization by the general meeting of shareholders on 10 April 2013.

In the share issue, the 10 largest shareholders had a subscription right. The basis for the deviation from the pre-emptive subscription right was, according to the resolution to issue shares, the strengthening of the company’s financial standing and the securing of the continuance of the company’s operations. In the share issue, Hannu Laakkonen subscribed for 1,000,000 shares and Mikko Laakkonen subscribed for 1,000,000 shares. The subscription price per share for all the shares was 0.52 euro. The subscription price was determined on the basis of bids received by the company.

The issued new shares have been registered with the Trade Register on 31 March 2014. Subsequent to the share issue, the total number of shares in the company and the number of votes carried by the shares is 5,977,360. The issued new shares represent 33.5% of the total amount of shares of the company. The issued new shares carry shareholder rights in the company from the date of registration with the Trade Register.

The subscribers have given the company an undertaking not to sell, transfer, donate, or otherwise dispose of the shares issued in the share issue within 180 calendar days from the registering of the shares with the trade register. The company will apply for the listing of the shares at the latest within one year from the issuance of the shares. In connection with the application, the company will publish a listing prospectus in accordance with the Finnish Securities Market Act and the EU Prospectus Regulation.

 

Equity

On 30 June 2014, the Group has classified AP-Tela Oy as discontinued operations. Also the liquidation processes of the discontinued operations previously classified have progressed. Concerning these, the Group has specified its estimate on the appreciation of the balance sheet items as well as cost related to divestments and written off an additional 1.8 million euros. The cost will be reported in the operating profit of the discontinued operations.

In the financial statements 2013, the equity of the parent company Vaahto Group Plc Oyj was negative by 4.3 million euros. The issue of the new shares in the first quarter of 2014 as well as the waiver of loans had a positive impact on the equity of the parent company. Along with the classification of AP-Tela Oy as discontinued operations, the parent company impaired the shares of AP-Tela, which lowered the equity of the parent company. On 30 June 2014, the equity was negative by 4,6 million euros.

 

Authorization to decide on a share issue

On 15 April 2014, the Annual General Meeting authorized the Board to decide on an issue of new shares as well as option rights and other special rights entitling to shares referred to in Chapter 10 Section 1 of the Finnish Companies Act in one or several lots. The number of new shares issued would be no more than 10,000,000, including shares to be issued based on the special rights.

The authorization is in effect until 31 May 2015, unless the General Meeting amends or cancels the authorization prior to that.

 

Risks

The liquidity of the Group remains tight and includes significant risks. Sufficiency of the working capital is followed actively with cash flow forecasts. For the continuity of the operations, it is important that in 2014, the company reaches the result and profitability objectives set in the management forecasts. Negotiations with the Group’s main financiers on financial restructuring are scheduled for fall 2014.

Negotiations with the financiers, planned divestments of the Paper Technology business together with the authorization of the Board of Directors to decide on a share issue if used, will support the improving of the Group’s financial position and liquidity.

 

Personnel

During the period, the average number of personnel in the Group was 225 (275).

Vesa Alatalo was appointed as CEO from 16 January 2014 onward. Ari Viinikkala served as CEO until 15 January 2014.

 

Outlook for the fiscal year 2014

Global economy and business fluctuation of customer industries have a direct impact on the demand of the Vaahto Group’s products as well as its financial situation. The order backlog grew during spring and markets are expected to be recovering, although slower than anticipated in the beginning of the year.

In the tough market situation the Group businesses have focused on their key segments, where the customer receives added value through the Group’s strong process know-how. Customers’ willingness to invest increased towards the end of the first half, which will have a positive impact on the Vaahto Process Technology business. The number of offers has increased and particularly Japrotek Vessels has received new orders. This trend is expected to continue steadily during the second half.

In accordance with the new strategy, the Group will focus on process industry and the deployment of the strategy is currently ongoing. Focusing will become more visible during fall. Streamlining of operations will also continue. During the period, the Group’s cost structure has been under scrutiny. The effects of the changes in the cost structure are expected to become visible during the second half. However, the operating profit of the Vaahto Group’s continuing operations is expected to be negative for the fiscal year 2014.

 

Events after the period

The CEO of Vaahto Group Plc Oyj Vesa Alatalo is leaving the company on 31 August 2014 to become Managing Director of Oy SKF Ab. The Board of Directors appointed M.Sc. (Tech.) Topi Karppanen as acting CEO starting on 1 September 2014. Karppanen has been a member of the Board of Vaahto Group Plc Oyj since 2010.

 

 

Consolidated Statement of Comprehensive Income, IFRS      
        
1 000 EUR

Interim Report

Interim Report

Interim Report

Interim Report

Annual Report

  
 

1.1.-30.6.2014

1.1.-30.6.2013

1.4.-30.6.2014

1.4.-30.6.2013

1.1.-31.12.2013

  
 

6 months

6 months

3 months

3 months

12 months

  
 

 

 

 

 

 

  
NET TURNOVER

8 783

15 681

4 407

7 570

32 165

  
Change in finished goods and work in progress

47

-1 031

63

220

-1 524

  
Other operating income

189

3

1

2

22

  
Material and services

-3 213

-7 667

-1 796

-4 342

-16 617

  
Employee benefit expenses

-4 011

-4 039

-2 046

-2 057

-7 911

  
Depreciations

-128

-273

-41

-72

-393

  
Other operating expenses

-1 909

-2 367

-914

-1 234

-4 313

  
OPERATING PROFIT OR LOSS

-242

307

-326

87

1 428

  
        
Financial income

3 026

80

341

64

1 107

  
Financial expenses

-815

-503

-559

-279

-1 087

  
PROFIT OR LOSS BEFORE TAXES

1 969

-116

-545

-128

1 448

  
        
Tax on income from operations

-67

-80

-23

-54

-586

  
PROFIT OR LOSS FROM THE CONTINUING OPERATIONS

1 902

-195

-567

-182

862

  
        
DISCONTINUED OPERATIONS       
Profit or loss from the discontinued operations

-2 076

-1 912

-2 285

-729

-4 952

  
        
PROFIT OR LOSS

-174

-2 107

-2 852

-911

-4 090

  
        
OTHER COMPREHENSIVE INCOME       
Translation differences

-5

-4

0

-3

-10

  
OTHER COMPREHENSIVE INCOME, NET OF TAX

-5

-4

0

-3

-10

  
        
TOTAL COMPREHENSIVE INCOME

-179

-2 112

-2 852

-914

-4 099

  
        
Earnings per share calculated on profit attributable to equity holders of the parent  
EPS undiluted, euros/share, continuing operations

0,38

-0,05

-0,11

-0,05

0,22

  
EPS diluted, euros/share, continuing operations

0,38

-0,05

-0,11

-0,05

0,22

  
EPS undiluted, euros/share, discontinued operations

-0,42

-0,48

-0,46

-0,18

-1,24

  
EPS diluted, euros/share, discontinued operations

-0,42

-0,48

-0,46

-0,18

-1,24

  
EPS undiluted, euros/share

-0,04

-0,53

-0,57

-0,23

-1,03

  
EPS diluted, euros/share

-0,04

-0,53

-0,57

-0,23

-1,03

  
        
Average number of shares       
-undiluted

4 977 360

3 977 360

4 977 360

3 977 360

3 977 360

  
-diluted

4 977 360

3 977 360

4 977 360

3 977 360

3 977 360

  
        
        
Consolidated Balance Sheet, IFRS       
        
1 000 EUR

Interim Report

Annual Report

     
 

30.6.2014

31.12.2013

     
 

 

 

     
ASSETS       
        
NON-CURRENT ASSETS       
Intangible assets

30

60

     
Goodwill

1 583

1 692

     
Tangible assets

2 264

5 241

     
Shares in affiliated companies

0

74

     
Available for sale investments

35

35

     
NON-CURRENT ASSETS

3 912

7 102

     
        
CURRENT ASSETS       
Inventories

2 640

2 788

     
Trade receivables and other receivables

4 160

6 992

     
Current receivables for revenue recognized in part prior to project completion

216

1 727

     
Cash and bank

96

129

     
CURRENT ASSETS

7 113

11 637

     
        
NON-CURRENT ASSETS HELD FOR SALE

8 291

4 886

     
        
ASSETS

19 316

23 624

     
        
EQUITY AND LIABILITIES       
        
SHAREHOLDER’S EQUITY       
Share capital

2 872

2 872

     
Share premium account

6

6

     
Fair value reserve and other reserves

6 060

5 063

     
Translation differences

51

48

     
Retained earnings

-14 433

-14 251

     
SHAREHOLDER’S EQUITY

-5 444

-6 262

     
        
NON-CURRENT LIABILITIES       
Deferred tax liability

632

649

     
Long-term liabilities, interest-bearing

5 287

11 763

     
Non-current provisions

262

362

     
NON-CURRENT LIABILITIES

6 181

12 774

     
        
CURRENT LIABILITIES       
Short-term liabilities, interest-bearing

6 915

6 758

     
Trade payables and other liabilities

6 555

7 787

     
Tax liability, income tax

232

200

     
CURRENT LIABILITIES

13 702

14 745

     
        
LIABILITIES HELD FOR SALE       
Interest-bearing liabilities held for sale

90

0

     
Interest-free liabilities held for sale

4 788

2 367

     
LIABILITIES HELD FOR SALE

4 878

2 367

     
        
EQUITY AND LIABILITIES

19 316

23 624

     
        
        
Key Figures, IFRS       
        
1 000 EUR

Interim Report

Interim Report

Annual Report

    
 

1.1.-30.6.2014

1.1.-30.6.2013

1.1.-31.12.2013

    
 

6 months

6 months

12 months

    
The business indicators       
Operating profit or loss, continuing operations

-242

307

1 428

    
% of turnover

-2,8

2,0

-93,7

    
Profit or loss before taxes, continuing operations

1 969

-116

1 448

    
% of turnover

22,4

-0,7

101,4

    
Profit or loss from the discontinued operations

-2 076

-1 912

-4 952

    
Earnings per share calculated on profit attributable to equity holders of the parent

-174

-2 107

-4 090

    
% of turnover

-0,7

-4,8

-6,8

    
Return on equity (ROE), %

neg

neg

neg

    
Return on investment (ROI), %

neg

neg

neg

    
Earnings per share EUR

-0,04

-0,53

-1,03

    
Shareholders’ equity per share EUR

neg

neg

neg

    
Equity ratio, %

neg

neg

neg

    
Gearing

na

na

na

    
Gross investments in fixed assets

181

166

869

    
Order book, continuing operations

9 693

16 361

5 793

    
Total average number of personnel

225

275

256

    
        
        
Consolidated Flow of Funds Statement, IFRS       
        
1 000 EUR

Interim Report

Interim Report

Annual Report

    
 

1.1.-30.6.2014

1.1.-30.6.2013

1.1.-31.12.2013

    
 

6 months

6 months

12 months

    
        
Profit or loss before taxes

-174

-2 134

-4 090

    
Adjustments

80

340

1 383

    
Change in working capital

1 605

1 671

1 418

    
Financial income and expenses and taxes

-671

-294

-1 070

    
Flow of funds from operations

840

-417

-2 359

    
        
Investments in tangible and intangible assets

-181

-166

-869

    
Income from sales of tangible and intangible assets

0

1 188

1 188

    
Flow of funds from investments

-181

1 022

320

    
        
Share issue

1 040

0

0

    
Increase of the interest-bearing liabilities

221

27

3 673

    
Decrease of the interest-bearing liabilities

-1 953

-891

-1 904

    
Flow of funds from financial items

-692

-865

1 769

    
        
Change of liquid funds total

-33

-260

-271

    
Change of liquid funds from discontinued operations

-488

522

235

    
        
        
Statement of Changes in Shareholders’ Equity, IFRS       
        
1 000 EUR       
Changes in shareholders’ equity 1.1.-30.6.2014

Share capital

Share premium account

Unrestricted equity reserve

Reserve fund

Translation differences

Retained earnings

Total

Shareholders’ equity in the beginning of the period

2 872

6

3 068

1 995

48

-14 251

-6 262

Comprehensive income       
Profit or loss for the period     

-174

-174

Translation differences    

3

-8

-5

Total comprehensive income

0

0

0

0

3

-182

-179

Transactions with owners       
Share issue  

1 040

   

1 040

Transaction costs for equity  

-32

   

-32

Deferred taxes due to period changes  

6

   

6

Effect of change in tax rate  

-17

   

-17

Transactions with owners total

0

0

997

0

0

0

997

Shareholders’ equity at the end of the fiscal period

2 872

6

4 065

1 995

51

-14 433

-5 444

        
 

 

 

 

 

 

 

 

Changes in shareholders’ equity 1.1.-30.6.2013

Share capital

Share premium account

Unrestricted equity reserve

Reserve fund

Translation differences

Retained earnings

Total

Shareholders’ equity in the beginning of the period

2 872

6

3 068

1 995

56

-10 160

-2 163

Comprehensive income       
Profit or loss for the period     

-2 107

-2 107

Translation differences    

-1

-4

-4

Total comprehensive income

0

0

0

0

-1

-2 111

-2 112

Shareholders’ equity at the end of the fiscal period

2 872

6

3 068

1 995

56

-12 271

-4 275

        
Securities and Responsibilities       
        
1 000 EUR

Interim Report

Annual Report

     
 

30.6.2014

31.12.2013

     
Granted securities       
        
Debt secured by real estate and corporate mortgages       
Loans from financial institutions and pension loans

6 051

11 092

     
Other loans

2 000

3 350

     
Credit limits in use

3 698

3 872

     
Total

11 749

18 313

     
        
Loans from financial institutions are secured by real estate and corporate mortgages and share pledges. Other loans are secured by share pledges and bank deposits. Share pledges are the share capitals of Vaahto Group Plc Oyj’s subsidiaries.     
        
Mortgages granted to secure loans and bank guarantees       
Real estate mortgages

2 543

2 543

     
Corporate mortgages

4 928

4 928

     
Total

7 471

7 471

     
        
Mortgages granted to secure the bank guarantee limit       
Corporate mortgages granted to secure the bank guarantee limit

8 235

8 235

     
Total

8 235

8 235

     
        
Other granted securities for own behalf       
Deposits

1 483

1 483

     
Total

1 483

1 483

     
        
Other granted securities        
        
Vaahto Group Plc Oyj has granted as securities the share capitals of  its subsidiaries Vaahto Paper Technology Ltd, Japrotek Oy Ab, AP-Tela Oy and Stelzer Rührtechnik International GmbH.     
        
Contingent liabilities and other liabilities       
        
Bank guarantees       
Bank guarantee limits total

4 990

6 163

     
Bank guarantee limits, used

4 652

4 598

     
        
Operating lease agreements       
Within a year

185

266

     
More than one year but no more than 5 years

234

276

     
Total

418

542

     
        
Contracts other than financial leasing contracts consist mainly of short-term leasing contracts for IT equipment and software. The terms and conditions are of leasing agreements correspond to those of normal operational leasing agreements.     
        
Arrangements according to IFRIC 4       
The Group has no arrangements meant in IFRIC 4.       
        
Other rent agreements       
The Group has rented production and office buildings for its use with various types of terminable rental agreements.     
        
Rent liabilities       
Within a year

792

792

     
More than one year but no more than 5 years

3 166

3 166

     
Later

1 885

1 885

     
Total

5 843

5 843

     
        
Annual rent payments under lease agreements that are in effect until further notice total 454 thousand euros.     
        
Other contingent liabilities       
Granted guarantees to customers and creditors       
Guarantees granted to secure bank guarantee limit

4 990

4 110

     
Guarantees granted to secure bank loans

2 552

3 580

     
Guarantees granted to secure guarantee insurances

2 175

2 175

     
Guarantees granted to secure rent guarantees

400

400

     
Others guarantees

427

427

     
Total

10 544

10 692

     
        
        
Discontinued Operations       
        
1 000 EUR

Interim Report

Interim Report

Annual Report

    
 

1.1. – 30.6.2014

1.1. – 30.6.2013

1.1.-31.12.2013

    
 

6 months

6 months

12 months

    
Profit or loss of the discontinued operations       
        
Turnover

4 529

6 294

12 115

    
Other income

119

295

463

    
Expenses

-4 991

-7 918

-15 222

    
Amortizations, Sales gains and losses

-1 593

-171

-1 500

    
Depreciations

-162

-518

-880

    
Profit or loss before taxes

-2 097

-2 018

-5 023

    
Taxes

21

106

71

    
Profit or loss from the discontinued operations

-2 076

-1 912

-4 952

    
        
Flow of funds from the discontinued operations       
Flow of funds from operations

-465

-615

-902

    
Flow of funds from investments

0

1 188

1 188

    
Flow of funds from financial items

-23

-52

-52

    
Flow of funds total

-488

522

235

    
        
Non-current assets held for sale of discontinued operations

30.6.2014

30.6.2013

31.12.2013

    
        
Intangible assets

12

1

4

    
Tangible assets

5 140

0

2 250

    
Inventories

789

708

434

    
Receivables

2 350

2 170

2 197

    
Assets total

8 291

2 878

4 886

    
        
        
Liabilities of disposal group held for sale of discontinued operations

30.6.2014

30.6.2013

31.12.2013

    
        
Non-current liabilities held for sale, interest-bearing

43

0

0

    
Current liabilities held for sale, interest-bearing

47

0

0

    
Current liabilities held for sale, interest-free

4 788

1 348

2 367

    
Liabilities total

4 878

1 348

2 367

    
        
        
Figures are in thousand euros unless stated otherwise. Figures are unaudited.    
        
        
Notes required by IAS 34       
        
Accounting principles       
        
The interim report was drawn up according to the same accounting principles and calculation methods as the previous financial statement, for the fiscal period that ended on December 31, 2013.    
        
Dividends paid       
        
During the period under review, Vaahto Group Plc Oyj paid no dividends.       

 

 

In Lahti on 22 August 2014

VAAHTO GROUP PLC OYJ

The Board of Directors

 

For additional information:

Vesa Alatalo

CEO, Vaahto Group Plc Oyj

Tel. +358 40 726 8923

 

Vaahto Group is a globally operating high technology company serving process industry.