Lassila & Tikanoja plc
Stock exchange release
3 May 2023 at 8:00 a.m.
Lassila & Tikanoja plc: Interim Report 1 January-31 March 2023
THE PROFIT PERFORMANCE OF FACILITY SERVICES FINLAND IMPROVED
Unless otherwise mentioned, the figures in brackets refer to the corresponding period in the previous year.
- Net sales for the first quarter were EUR 192.7 million (210.4). Net sales decreased by 8.4%, mainly due to the divestment of the renewable energy sources business in the previous financial year. Net sales growth excluding the renewable energy sources business was 2.9%.
- Adjusted operating profit was EUR 1.4 million (0.0) and operating profit was EUR 1.4 million (-0.3). Earnings per share were EUR 0.03 (-0.02).
- Net cash flow from operating activities after investments per share was strong at EUR 0.50 (-0.16).
- The result of Facility Services Finland improved substantially.
Outlook for the year 2023
Net sales and adjusted operating profit in 2023 are estimated to be at the same level as in the previous year even though the comparison period includes net sales from the renewable energy sources business in the amount of EUR 35.4 million.
PRESIDENT AND CEO EERO HAUTANIEMI:
"Net sales, excluding the renewable energy sources business, increased by 2.9 per cent, and adjusted operating profit amounted to EUR 1.4 million (0.0).
The financial performance of L&T's circular economy businesses, namely Environmental Services and Industrial Services, was stable. In Environmental Services, the number of B2B customers increased thanks to active sales efforts. In Industrial Services, the hazardous waste business line saw strong demand, and new customer projects started in the environmental construction business line.
In Facility Services Finland, the measures taken in the latter half of 2022 to streamline the cost structure improved the profit performance, and the rising costs caused by high inflation were, for the most part, passed on to customer prices. In Facility Services Sweden, the effort to simplify operating models and adapt them to the changed business environment continued.
The number of sickness-related absences was lower than in the comparison period, but still higher than usual.
Net cash flow from operating activities was strong, as was the company's financial position.
The Waste Act that entered into force in Finland in 2021 requires changes concerning the separate collection of packaging waste, and these changes are now under way. While the aim is to achieve increasingly ambitious recycling targets, a growing proportion of waste is directed to waste-to-energy plants. Measures are needed to prevent material flows that are suitable for recycling from being disposed of by incineration."
GROUP NET SALES AND FINANCIAL PERFORMANCE
January-March
Net sales for the first quarter amounted to EUR 192.7 million (210.4), a decrease of 8.4% year-on-year. Excluding the effect of the renewable energy sources business, net sales increased by 2.9%, and the rate of organic growth was 2.3%. Adjusted operating profit was EUR 1.4 million (0.0), representing 0.7% (0.0%) of net sales. Operating profit was EUR 1.4 million (-0.3), representing 0.7% (-0.1%) of net sales. Earnings per share were EUR 0.03 (-0.02).
Net sales increased in Environmental Services (excluding the effect of the renewable energy sources business), Industrial Services and Facility Services Sweden. Net sales decreased in Facility Services Finland. Operating profit improved in Environmental Services and Facility Services Finland, and declined in Facility Services Sweden. In the Industrial Services division, operating profit was on a par with the comparison period. The number of sickness-related absences was lower than in the comparison period, but still higher than usual.
The result for the review period was negatively affected by net financial expenses rising to EUR -1.6 million (-1.0). The result for the review period was favourably affected by the profit of the joint venture Laania plc, which amounted to EUR 1.5 million.
Financial summary
| 1-3/2023 | 1-3/2022 | Change % | 1-12/2022 | |
| Net sales, EUR million | 192.7 | 210.4 | -8.4 | 844.1 |
| Adjusted operating profit, EUR million | 1.4 | 0.0 | 40.9 | |
| Adjusted operating margin, % | 0.7 | 0.0 | 4.8 | |
| Operating profit, EUR million | 1.4 | -0.3 | 42.9 | |
| Operating margin, % | 0.7 | -0.1 | 5.1 | |
| EBITDA, EUR million | 15.4 | 13.5 | 14.3 | 98.3 |
| EBITDA, % | 8.0 | 6.4 | 11.6 | |
| Earnings per share, EUR | 0.03 | -0.02 | 0.83 | |
| Net cash flow from operating activities after investments per share, EUR | 0.50 | -0.16 | 1.08 | |
| Return on equity (ROE), % | 2.2 | -1.5 | 14.6 | |
| Capital employed, EUR million | 421.8 | 413.0 | 2.1 | 437.2 |
| Return on capital employed (ROCE), %1 | 11.4 | 9.9 | 10.4 | |
| Equity ratio, %1 | 32.7 | 30.9 | 34.3 | |
| Gearing, % | 84.5 | 103.3 | 75.9 |
1 The figures for the first quarter of 2022 have been adjusted. More detailed information on the restatements are provided in the section on key figures in this interim report.
NET SALES AND OPERATING PROFIT BY DIVISION
Environmental Services
January-March
The division's net sales for the first quarter decreased to EUR 66.3 million (87.3). Operating profit was EUR 3.2 million (2.9). Excluding the effect of the renewable energy sources business, net sales increased by 2.0%. The renewable energy sources business was reported as a part of the Environmental Services division until the end of the second quarter of 2022.
In Environmental Services, the number of B2B customers increased thanks to active sales efforts. The prices of recycled raw materials remained at the low level seen in late 2022. Industrial action in the transport sector made resource allocation more difficult, and increased overtime led to higher costs in the review period.
Industrial Services
January-March
The division's net sales for the first quarter increased to EUR 26.1 million (23.1). Operating profit was EUR 0.1 million (0.2).
In Industrial Services, the hazardous waste business line saw strong demand, and the prices of recycled raw materials were at a good level. In the environmental construction business line, demand remained high and new customer projects were started. In the process cleaning business in Finland, blast cleaning services at power plants saw strong demand. Industrial action in the transport sector and the facility services sector in Finland had a negative impact on the process cleaning business in particular. In the process cleaning business in Sweden, demand was lower compared to the high level seen in the comparison period.
Facility Services Finland
January-March
The division's net sales for the first quarter decreased to EUR 67.1 million (68.3). Operating profit was EUR 0.2 million (-2.3).
In Facility Services Finland, unprofitable customer contracts ended during the review period. The measures taken in the latter half of 2022 to streamline the cost structure improved the profit performance. In the cleaning business, the efficiency of production improved and personnel turnover decreased from the high level seen in late 2022. The rising costs caused by high inflation were, for the most part, passed on to customer prices. The impacts of the industrial action in the facility services industry were limited.
Facility Services Sweden
January-March
The division's net sales for the first quarter increased to EUR 34.5 million (32.9). Operating profit declined to EUR -1.0 million (-0.2). Operating profit before the amortisation of purchase price allocations of acquisitions was EUR -0.7 million (0.3).
Customer agreements in the Swedish business are mostly fixed-price contracts, and the increased production costs could not be passed on to customers in the form of price increases. The division has a programme ongoing to simplify operating models and adapt them to the changed business environment and the results of the programme are expected to realize during the next 18 months.
FINANCING
Net cash flow from operating activities in the first quarter of 2023 amounted to EUR 26.8 million (13.9). Net cash flow after investments came to EUR 19.2 million (-6.0). In the comparison period, net cash flow after investments was reduced by acquisitions, which had a total impact of approximately EUR 13 million. A total of EUR 8.9 million in working capital was released (EUR 2.5 million released).
At the end of the review period, interest-bearing liabilities amounted to EUR 219.0 million (220.8). Net interest-bearing liabilities totalled EUR 171.4 million (198.5). The average interest rate on long-term loans, excluding lease liabilities, with interest rate hedging, was 2.8% (1.1%). Of the company's floating rate loans totalling EUR 50 million, EUR 30 million have been converted into fixed rate loans by means of an interest rate swap.
The EUR 100.0 million commercial paper programme was unused at the end of the review period (EUR 20.0 million in use). The account limit totalling EUR 10.0 million and the committed credit limit totalling EUR 40.0 million were not in use, as was the case in the comparison period.
Net financial expenses amounted to EUR -1.6 million (-1.0). The increase in net financial expenses was attributable to the higher general interest rate level. The effect of exchange rate changes on net financial expenses was EUR -0.0 million (0.0). Net financial expenses were 0.8% (0.5%) of net sales.
The equity ratio was 32.7% (30.9%) and the gearing ratio was 84.5% (103.3%). The Group's total equity was EUR 202.8 million (192.2). Translation differences caused by the depreciation of the Swedish krona affected equity by EUR -1.0 million. Cash and cash equivalents at the end of the period amounted to EUR 47.6 million (22.3).
DIVIDEND DISTRIBUTION
The Annual General Meeting held on 23 March 2023 resolved that a dividend of EUR 0.47 per share, totalling EUR 17.9 million, be paid on the basis of the balance sheet that was adopted for the financial year 2022. The dividend was paid to shareholders at the end of the review period.
CAPITAL EXPENDITURE
Gross capital expenditure for the first quarter totalled EUR 13.8 million (28.5). The capital expenditure consisted primarily of machine and equipment purchases, as well as investments in information systems and facilities with environmental permissions. Acquisitions accounted for approximately EUR 21 million of the gross capital expenditure in the comparison period.
SUSTAINABILITY
Environmental responsibility
Climate benefits for customers created by L&T
| 1-3/2023 | 1-3/2022 | 2022 | Target | Target to be achieved by | |
| Carbon handprint (tCO2e) | -126,500 | -125,800 | -534,500 | growth faster than net sales |
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 solid recovered fuels.
The carbon handprint of the joint venture Laania is not reported as part of L&T's carbon handprint for the full year 2022.
Progress towards science-based emission reduction targets, using 2018 as the baseline
| 1-3/2023 | 1-3/2022 | 2022 | Target | Target to be achieved by | |
| Carbon footprint (tCO2e) | 7,543 | 8,500 | 31,700 | 24,400 | 2030 |
L&T's strategic objective is to halve the carbon footprint of its operations by 2030, using 2018 as the baseline, and to reduce the indirect emissions generated by its supply chain. The emission reduction target 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. Transport operations account for 95 per cent of the emissions generated by L&T's own operations.
The fuel distribution obligation was adjusted in 2022 by reducing the biofuel component by 7.5 per cent in July. The change has not been taken into account in the emissions calculations reported in this release, as Statistics Finland has yet to update its fuel classification data in accordance with the change. Statistics Finland is expected to publish updated fuel classification data during spring 2023.
Social responsibility
Overall accident frequency
| 1-3/2023 | 1-3/2022 | 2022 | Target | Target to be achieved by | |
Overall accident frequency (TRIF) | 23 | 26 | 23 | 19 | 2026 |
L&T eliminates hazards and improves its own safety as well as the safety of customers and other stakeholders through effective proactive measures, such as risk assessments, safety observations, Safety Walks and occupational safety sessions.
Well-being at work
| 1-3/2023 | 1-3/2022 | 2022 | Target | Target to be achieved by | |
| Occupational health rate (proportion of employees with no sickness-related absences) | 61 | 59 | 40 | 57 | 2026 |
| Sickness-related absences (%) | 5.6 | 6.5 | 5.6 | 4.3 | 2026 |
The objective of L&T's personnel policies and plans is to ensure that the number, competence and retention of personnel are at the level required for effective performance. For a labour-intensive company, employees' ability to work and function and maintain it throughout their careers until retirement on old-age pension is important.
Current issues related to sustainability
Lassila & Tikanoja updated its sustainability programme in February to better correspond to the company's mission of being a leader in the regenerative society. The renewed sustainability programme is built around three focal points: the environment, people and governance. With the new programme, L&T will further deepen its sustainability work in the supply chain, and the promotion of biodiversity was added to the programme as a completely new part.
In March, Lassila & Tikanoja published its Annual Review 2022, 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 Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
PERSONNEL
In the first quarter of 2023, the average number of employees converted into full-time equivalents was 6,889 (7,055). At the end of the review period, L&T had 8,244 (8,367) full-time and part-time employees. Of these, 6,875 (7,015) worked in Finland and 1,369 (1,352) in Sweden.
SHARES AND SHARE CAPITAL
Traded volume and price
The volume of trading in L&T's shares in January-March was 2.0 million shares, which is 5.3% (12.2%) of the average number of outstanding shares. The value of trading was EUR 21.9 million (55.1). The highest share price was EUR 11.84 and the lowest EUR 9.85. The closing price was EUR 10.10. At the end of the review period, the market capitalisation excluding the shares held by the company was EUR 385.3 million (412.6).
Own shares
At the end of the period, the company held 653,256 of its own shares, representing 1.7% of all shares and votes.
Share capital and number of shares
The company's registered share capital was EUR 19,399,437 and the number of outstanding shares was 38,145,618 at the end of the period. The average number of shares excluding the shares held by the company was 38,145,618.
Shareholders
At the end of the review period, the company had 25,228 (24,318) shareholders. Nominee-registered holdings accounted for 8.5% (7.4%) of the total number of shares.
Authorisations for the Board of Directors
The Annual General Meeting held on 23 March 2023 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 of Lassila & Tikanoja plc, which was held on 23 March 2023, adopted the financial statements and consolidated financial statements for the financial year 2022, discharged the members of the Board of Directors and the President and CEO from liability and adopted the remuneration report for the company's governing bodies. The Annual General Meeting resolved on the use of the profit shown on the balance sheet and the payment of dividend, the composition and remuneration of the Board of Directors, the election and remuneration of the auditor, amendment of Articles of Association, and authorising the Board of Directors to decide on the repurchase of the company's own shares and on a share issue and the issuance of special rights entitling to shares.
The Annual General Meeting resolved that a dividend of EUR 0.47 per share be paid on the basis of the balance sheet adopted for the financial year 2022. It was decided that the dividend be paid on 3 April 2023.
The Annual General Meeting confirmed the number of members of the Board of Directors as six in accordance with the proposal of the Shareholders' Nomination Board. Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen and Pasi Tolppanen were re-elected, and Anni Ronkainen was elected as a new member, to the Board for a term ending at the conclusion of the next Annual General Meeting. Jukka Leinonen was elected as the Chairman of the Board and Sakari Lassila was elected as the Vice Chairman.
The Annual General Meeting elected PricewaterhouseCoopers Oy, Authorised Public Accountants, as the company's auditor. PricewaterhouseCoopers Oy has announced that it will name Samuli Perälä, Authorised Public Accountant, as the principal auditor.
The Annual General Meeting resolved to amend Article 10 of the Articles of Association to enable the holding of a general meeting without a meeting venue, as a remote meeting.
The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 23 March 2023.
BOARD OF DIRECTORS
The members of Lassila & Tikanoja plc's Board of Directors are Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Anni Ronkainen and Pasi Tolppanen. Lassila & Tikanoja plc's Annual General Meeting held on 23 March 2023 elected Jukka Leinonen as the Chairman of the Board and Sakari Lassila as the Vice Chairman.
In its constitutive meeting held after the Annual General Meeting, the Board of Directors elected the members of the Audit Committee and the Personnel and Sustainability Committee from amongst its members. Sakari Lassila (Chairman), Teemu Kangas-Kärki and Anni Ronkainen were elected to the Audit Committee. Jukka Leinonen (Chairman), Laura Lares and Pasi Tolppanen were elected to the Personnel and Sustainability Committee.
CHANGES IN THE GROUP EXECUTIVE BOARD
On 31 March 2023, the company announced that Tina Hellstadius, the Senior Vice President for Facility Services Sweden, will leave Lassila & Tikanoja on 31 March 2023.
On 18 April 2023, the company announced that Mikko Taipale (Master of Laws) has been appointed Senior Vice President, Facility Services Sweden and a member of the Group Executive Board effective from 19 April 2023.
NEAR-TERM RISKS AND UNCERTAINTIES
General economic uncertainty may affect the level of economic activity among customers, which may reduce the demand for L&T's services.
Higher costs, such as the rising prices of fuel and energy, potential interest rate hikes and wage-related decisions in the labour market may have a negative impact on the company's financial performance.
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.
Production costs may be increased by challenges related to employee turnover, labour availability and higher sickness rates.
Russia's invasion of Ukraine has only minor direct impacts on the company. However, indirect impacts on overall economic activity in Finland and Sweden may have a negative impact on net sales and profit.
The Group company Lassila & Tikanoja FM AB is a claimant and a defendant in legal proceedings in Sweden concerning unpaid receivables invoiced from a former customer of the Group. In June 2022, Lassila & Tikanoja FM AB took legal action in the District Court of Solna against the former customer company of L&T, demanding payment of approximately SEK 18 million for unpaid receivables. In March 2023, the L&T's former customer in question rejected Lassila & Tikanoja FM AB's claims and the payment obligation, and brought a counterclaim demanding approximately SEK 102 million from Lassila & Tikanoja FM AB. The dispute is still pending. Lassila & Tikanoja considers the counterclaim to be without merit.
More detailed information on Lassila & Tikanoja's risks and risk management will be provided in the 2022 Annual Review and in the Report by the Board of Directors and the consolidated financial statements.
Helsinki, 2 May 2023
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, manufacturing sites 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 approximately 8,300 people. Net sales in 2022 amounted to EUR 844.1 million. L&T is listed on Nasdaq Helsinki.
Distribution:
Nasdaq Helsinki
Major media
www.lt.fi/en/
