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Lassila & Tikanoja plc: Interim Report 1 January–31 March 2021

Lassila & Tikanoja Oyj
·17-min read

Lassila & Tikanoja plc
Stock exchange release
29 April 2021 at 8:00 a.m.

Lassila & Tikanoja plc: Interim Report 1 January–31 March 2021

FAVOURABLE DEVELOPMENT ACROSS ALL BUSINESSES

Unless otherwise mentioned, the figures in brackets refer to the corresponding period in the previous year.

  • Net sales for the first quarter were EUR 192.0 million (184.4).

  • Adjusted operating profit was EUR 3.6 million (2.9) and operating profit was EUR 3.7 million (2.9).

  • Comparable operating profit grew across all of the Group’s businesses.

  • Earnings per share were EUR 0.07 (0.00). Earnings per share were positively influenced by a reduction in net financial expenses to EUR -0.6 million (-2.8). Exchange differences amounted to EUR +0.2 million (-1.8).

Outlook for the year 2021

Net sales in 2021 are estimated to be at the same level and adjusted operating profit at the same level or better compared to the previous year.

PRESIDENT AND CEO EERO HAUTANIEMI:

Conditions were somewhat challenging in the first quarter. The COVID-19 pandemic continued to have a negative impact on all business operations as the number of infections began to increase again early in the year. The stricter restrictions on movement led to closures of customer sites, a contraction in service demand and reduced waste volumes. The amount of snowfall in Southern Finland was higher than in the comparison period, which increased production costs particularly in Environmental Services and Facility Services.

Net sales grew by 4.1 per cent in the first quarter. Most of the growth came from low-margin snow clearing operations in Southern Finland. Comparable adjusted operating profit increased in all business areas in spite of the challenging circumstances.

The implementation of our strategy and development projects progressed according to plan in January–March. New ERP system development began in Environmental Services and continued in Industrial Services. The new ERP systems will enable more efficient operations and even more transparent sustainability reporting for our customers.

Starting from this interim report, we will report on the development of our key sustainability indicators on a quarterly basis. The emission reductions achieved through L&T’s operations in January–March 2021 amounted to 360,500 tCO2e, which corresponds to the average annual carbon footprint of 35,000 Finns. We also made progress towards our science-based emission reduction target by adding eight new biogas-powered heavy vehicles to our fleet during the quarter and expanding the use of renewable diesel. Our target is to reduce our carbon footprint by 50 per cent per kilometer by 2030, using 2018 as the baseline.

GROUP NET SALES AND FINANCIAL PERFORMANCE

January–March

Lassila & Tikanoja’s net sales for the first quarter amounted to EUR 192.0 million (184.4), up 4.1% year-on-year. Adjusted operating profit was EUR 3.6 million (2.9), representing 1.9% (1.6%) of net sales. Operating profit was EUR 3.7 million (2.9), representing 1.9% (1.6%) of net sales. Earnings per share were EUR 0.07 (0.00).

Net sales and operating profit increased in Facility Services Finland and Facility Services Sweden. Comparable net sales and operating profit (excluding the comparison period’s figures for operations in Russia) increased in Environmental Services. In Industrial Services, net sales declined but operating profit improved.

The Group’s operating profit was influenced by decreasing of the expenses recognised last year in connection to the discontinuation of Russian operations by EUR 0.7 million and costs of EUR 0.5 million related to the incorporation of L&T’s divisions. In the comparison period, non-recurring items had a positive net effect of EUR 0.9 million on the Group’s operating profit. The items in question are not included in the figures of the Group’s businesses. Earnings per share were positively influenced by a reduction in net financial expenses to EUR -0.6 million (-2.8).

Financial summary

1–3/2021

1–3/2020

Change %

1–12/2020

Net sales, EUR million

192.0

184.4

4.1

751.9

Adjusted operating profit, EUR million

3.6

2.9

24.3

39.0

Adjusted operating margin, %

1.9

1.6

5.2

Operating profit, EUR million

3.7

2.9

29.3

28.2

Operating margin, %

1.9

1.6

3.8

EBITDA, EUR million

16.4

20.4

-19.7

85.2

EBITDA, %

8.5

11.1

11.3

Profit before tax, EUR million

3.2

0.1

23.3

Earnings per share, EUR

0.07

0.00

0.50

Net cash flow from operating
and investing activities per share, EUR

0.11

0.46

-76.0

1.15

EVA, EUR million

-2.5

-3.4

26.6

3.7

Return on equity (ROE), %

5.6

0.1

9.6

Invested capital, EUR million

363.4

364.7

379.2

Return on invested capital (ROI), %

4.1

3.2

7.5

Equity ratio, %

31.6

29.3

33.0

Gearing, %

84.9

95.6

70.9




NET SALES AND OPERATING PROFIT BY DIVISION

Environmental Services

January–March
The division’s net sales for the first quarter totalled EUR 76.2 million (77.1). Operating profit declined to EUR 4.5 million (4.7). Excluding the share of Russian operations in the comparison period, the Environmental Services division’s net sales increased to EUR 76.2 million (74.7) and its operating profit improved to EUR 4.5 million (4.3).

In Environmental Services, the net sales of renewable energy sources grew substantially due to the cold winter. In waste management and the recycling business, the COVID-19 pandemic reduced the operating volume of customer companies, resulting in a decrease in the demand for waste management services and the volumes of secondary raw materials. Economic uncertainty was reflected in lower volumes particularly in the hotel and restaurant industry as well as the construction sector. Production costs were increased by the difficult winter conditions in Southern Finland and the substantial rise in fuel prices. Despite the before mentioned, profitability remained at a good level.

Industrial Services

January–March

The division’s net sales for the first quarter decreased to EUR 19.6 million (20.2). Operating profit improved to EUR 0.2 million (-0.3).

The net sales of Industrial Services decreased slightly year-on-year due to seasonal variation in the project business. The division’s net sales and market share in factory sites grew, but this did not fully compensate for the decline in the project business. Profitability improved year-on-year due to improved operational efficiency and service development. The growth of net sales was supported by close cooperation with customers and the improved predictability of demand.

Facility Services Finland

January–March

The division’s net sales for the first quarter grew to EUR 61.2 million (58.2). Operating profit improved to EUR -1.3 million (-1.8).

The net sales of Facility Services Finland grew thanks to successful sales work and the high snowfall during the first months of the year. The COVID-19 pandemic continued to have a negative impact on service demand, especially in the maintenance of technical systems. The segment’s operating profit improved year-on-year due to improved operational efficiency and quality as well as adaptation measures. Operating profit improved particularly in the cleaning business. In property maintenance, the high volume of work due to the high snowfall during the first quarter had a negative impact despite the fact that it increased net sales.

Facility Services Sweden

January–March


The division’s net sales for the first quarter increased to EUR 36.2 million (30.3). Operating profit improved to EUR 0.4 million (0.2).

The COVID-19 pandemic-related situation continued to be challenging in Sweden and sickness-related absences increased year-on-year. Nevertheless, net sales and operating profit improved due to the growth of the contract portfolio and improved operational efficiency.

FINANCING

Net cash flow from operating and investing activities amounted to EUR 4.3 million (17.7). A total of EUR 1.8 million (6.9) in working capital was released. Cash flow in the comparison period was favourably affected by the sale of property included in property, plant and equipment as well as a reduction in working capital.

At the end of the period, interest-bearing liabilities amounted to EUR 184.6 million (200.6). Net interest-bearing liabilities totalled EUR 151.7 million (156.9). The average interest rate on long-term loans excluding IFRS 16 liabilities, with interest rate hedging, was 1.3% (1.3).

Of the EUR 100.0 million commercial paper programme, EUR 11.0 million (20.0) was in use at the end of the period. A committed credit limit totalling EUR 30 million was not in use, as was the case in the comparison period.

Net financial expenses in the first quarter amounted to EUR -0.6 million (-2.8). The effect of exchange rate changes on net financial expenses was EUR 0.2 million (-1.8). This was attributable to fluctuations in the rate of the Swedish krona. Net financial expenses were 0.3% (1.5%) of net sales.

The equity ratio was 31.6% (29.3%) and the gearing rate was 84.9% (95.6%). Liquid assets at the end of the period amounted to EUR 32.9 million (43.7). In response to the COVID-19 pandemic, the Group has taken measures to ensure its liquidity. Overdue trade receivables and credit losses have not increased during the pandemic.


DISTRIBUTION OF ASSETS

The Annual General Meeting held on 18 March 2021 resolved that a dividend of EUR 0.40 per share be paid on the basis of the balance sheet that was adopted for the financial year 2020. The dividend, totalling EUR 15.2 million, was paid to shareholders on 29 March 2021.

CAPITAL EXPENDITURE

Gross capital expenditure in the first quarter totalled EUR 9.4 million (9.0), consisting primarily of machine and equipment purchases and investments in information systems and buildings.

SUSTAINABILITY

Environmental responsibility

Climate benefits for customers created by L&T

Q1/2021

2020

Target

Target to be achieved by

Carbon handprint (tCO2e)

360,500

1,230,000

> growth of net sales

2024

The carbon handprint illustrates the climate benefits of a product, process or service, i.e. the emission reduction potential for the user. L&T’s carbon handprint reduces the customer’s carbon footprint. Our services generated emission reductions for customers through, for example, customers replacing virgin raw materials with secondary raw materials and fossil fuels with biofuels and solid recovered fuels.

Progress towards science-based emission reduction targets, using 2018 as the baseline

Q1/2021

2020

Target

Target to be achieved by

Carbon footprint (tCO2e)

9,600

36,700



Carbon footprint intensity (gCO2e/km)

-12%

-14.1%

-50% vs 2018

2030

L&T’s strategic objective is to halve the carbon footprint of its operations by 2030 and to reduce the indirect emissions generated by its supply chain. The objective set by L&T has been validated by the Science Based Targets initiative. The achievement of this objective will be promoted by switching to zero-emission transport technologies and fuels and by opting for renewable energy at L&T’s properties. We increased the number of biogas-powered heavy vehicles by eight (2020: 10) and continued to engage the supply chain’s commitment to L&T’s emission reduction targets.

Social responsibility

Overall accident frequency

Q1/2021

2020

Target

Target to be achieved by

Overall accident frequency (TRIF)

26

24

20

2024

L&T continued to take active measures to prevent the spread of COVID-19 amongst employees. Pandemic-related guidelines were tightened throughout the country and the procurement of personal protective equipment was enhanced. L&T’s overall accident frequency (TRIF) increased mainly due to the winter conditions during the period. The number of proactive occupational safety observations and actions increased and a growing proportion of the Group’s personnel participated in safety efforts.

Well-being at work

Q1/2021

2020

Target

Target to be achieved by

Occupational health rate (proportion of employees with no sickness-related absences)

77

50

45

2024



Sickness-related absences (%)

5.4

4.7

4.5

2024

The sickness rate of personnel in Finland remained at a moderate level. In Sweden, sickness-related absences were still at a high level. Employee well-being was supported in a number of ways, including a COVID-19 helpline and digital chat services that help employees cope with the mental stress created by the pandemic.

Current issues related to sustainability

The Personnel Committee of Lassila & Tikanoja’s Board of Directors was renamed as the Personnel and Sustainability Committee in January. In February, Lassila & Tikanoja published its Annual Review 2020, which includes a sustainability report in accordance with the Global Reporting Standard (GRI) as well as a report on risks and opportunities related to climate change in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. L&T also published a preliminary assessment related to the EU taxonomy on its website. The assessment focuses on the proportion of our business operations that is related to the mitigation of, and adaptation to, climate change. The preliminary assessment was carried out in early 2021 on the basis of data available at that time. We are monitoring the development of the taxonomy and will update our assessment accordingly.

We continued to expand our carbon handprint calculations in Industrial Services and Facility Services. We began the implementation of the diversity plan approved in December 2020.

PERSONNEL

In the final quarter, the average number of employees converted into full-time equivalents was 6,846 (7,237). At the end of the period, L&T had 8,033 (8,306) full-time and part-time employees. Of these, 6,577 (6,673) worked in Finland and 1,456 (1,633) in other countries.

The Group held negotiations concerning operations in Finland pursuant to the Act on Co-operation within Undertakings as customers scaled down their operations in response to the COVID-19 pandemic. At the end of the review period, the total number of temporarily laid-off employees throughout the Group was approximately 120.

SHARES AND SHARE CAPITAL

Traded volume and price

The volume of trading in L&T’s shares in January–March was 4.2 million shares, which is 11.0% (12.7) of the average number of outstanding shares. The value of trading was EUR 61.0 million (68.3). The highest share price was EUR 16.10 and the lowest EUR 13.46. The closing price was EUR 13.98. At the end of the review period, the market capitalisation excluding the shares held by the company was EUR 542.4 million (438.2).

Own shares

At the end of the period, the company held 686,396 of its own shares, representing 1.8% of all shares and votes.

Share capital and number of shares

The company’s registered share capital amounts to EUR 19,399,437 and the number of outstanding shares is 38,112,478. The average number of shares excluding the shares held by the company was 38,107,763.

Shareholders

At the end of the period, the company had 23,944 (17,989) shareholders. Nominee-registered holdings accounted for 8.9% (10.4%) of the total number of shares.

Authorisations for the Board of Directors

The Annual General Meeting held on 18 March 2021 authorised Lassila & Tikanoja plc’s Board of Directors to decide on the repurchase of the company’s own shares using the company’s unrestricted equity. In addition, the Annual General Meeting authorised the Board of Directors to decide on a share issue and the issuance of special rights entitling their holders to shares.

The Board of Directors is authorised to purchase a maximum of 2,000,000 company shares (5.2% of the total number of shares). The repurchase authorisation is effective for 18 months.

The Board of Directors is authorised to decide on the issuance of new shares or shares which may be held by the company through a share issue and/or issuance of option rights or other special rights conferring entitlement to shares, referred to in Chapter 10, Section 1 of the Finnish Companies Act, so that under the authorisation, a maximum of 2,000,000 shares (5.2% of the total number of shares) may be issued and/or conveyed. The authorisation is effective for 18 months.

RESOLUTIONS BY THE ANNUAL GENERAL MEETING
The Annual General Meeting, which was held on 18 March 2021, adopted the financial statements and consolidated financial statements for 2020, released the members of the Board of Directors and the President and CEO from liability and approved the Remuneration Report for the Governing Bodies.
The Annual General Meeting resolved that a dividend of EUR 0.40 per share, totalling EUR 15.2 million, be paid on the basis of the balance sheet adopted for the financial year 2020. It was decided that the dividend be paid on 29 March 2021.
The Annual General Meeting confirmed the number of members of the Board of Directors as seven. Heikki Bergholm, Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Laura Tarkka and Pasi Tolppanen were re-elected to the Board until the end of the following Annual General Meeting, and Jukka Leinonen was elected as a new member.
KPMG Oy Ab, Authorised Public Accountants, was elected auditor. KPMG Oy Ab named Leenakaisa Winberg, Authorised Public Accountant, as its principal auditor.
The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 18 March 2021.

BOARD OF DIRECTORS

The members of Lassila & Tikanoja plc’s Board of Directors are Heikki Bergholm, Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Laura Tarkka and Pasi Tolppanen. At its constitutive meeting after the Annual General Meeting, the Board of Directors elected Heikki Bergholm as Chairman of the Board and Sakari Lassila as Vice Chairman.

Sakari Lassila was elected as the Chairman of the Audit Committee and Teemu Kangas-Kärki, Laura Lares and Jukka Leinonen as members. Heikki Bergholm was elected as the Chairman of the Personnel and Sustainability Committee and Laura Tarkka and Pasi Tolppanen as members.

KEY EVENTS DURING THE REVIEW PERIOD

The key events are discussed in the other sections of this release.

EVENTS AFTER THE REVIEW PERIOD

The company’s management is not aware of any events of material importance after the review period that might have affected the preparation of the financial statements release.


NEAR-TERM RISKS AND UNCERTAINTIES

The measures and recommendations issued by the authorities to restrict the COVID-19 pandemic and the resulting customer-specific production restrictions and adjustment may still cause disruptions in service production during 2021. Customers are adapting their service agreements to the changed circumstances and the volumes of waste and secondary raw materials decrease when customer volumes decline. The uncertainty caused by COVID-19 is reflected particularly in the demand for separately ordered services and makes it difficult to predict.

Fluctuations in the price of oil influence both fuel costs and the prices of oil-based secondary raw materials, such as recycled plastic and regenerated lubricants.

The company has several ERP system renewal projects under way. Temporary additional costs arising from system deployments and establishing the operating model may weigh down the company’s result.

More detailed information on Lassila & Tikanoja’s risks and risk management are provided in the 2020 Annual Report and in the Report of the Board of Directors and the consolidated financial statements.

Outlook for the year 2021

Net sales in 2021 are estimated to be at the same level and adjusted operating profit at the same level or better compared to the previous year.

Helsinki, 29 April 2021

LASSILA & TIKANOJA PLC

Board of Directors
Eero Hautaniemi
President and CEO

For additional information, please contact:
Eero Hautaniemi, President and CEO, tel. +358 10 636 2810
Valtteri Palin, CFO, tel. +358 40 734 7749

Lassila & Tikanoja is a service company that is putting the circular economy into practice. Together with our customers, we keep materials and properties in productive use for as long as possible and we enhance the use of raw materials and energy. This is to create more value with the circular economy for our customers, personnel and society in a broader sense. Achieving this also means growth in value for our shareholders. Our objective is to continuously grow our actions’ carbon handprint, our positive effect on the climate. We assume our social responsibility by looking after the work ability of our personnel as well as offering jobs to those who are struggling to find employment, for example. With operations in Finland and Sweden, L&T employs 8,100 people. Net sales in 2020 amounted to EUR 751.9 million. L&T is listed on Nasdaq Helsinki.

Distribution:
Nasdaq Helsinki
Major media
www.lt.fi/en

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