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Plc Uutechnic Group Oyj: Correction to the Half Year Report 1 January – 30 June 2018

PLC UUTECHNIC GROUP OYJ: CORRECTION TO THE HALF YEAR REPORT 1 JANUARY-30 JUNE 2018, December 12, 2018 at: 14:45

Plc Uutechnic Group Oyj corrects its Half Year report published on July 28, 2018. In the review, the order backlog for continuing operations on June 30, 2018 was incorrectly reported 12,0 thousand euros. The correct figure is 10,6 thousand euros.
Below is the corrected Half Year report in its entirety.

PLC UUTECHNIC GROUP OYJ: HALF YEAR REPORT 1 JANUARY-30 JUNE 2018

Uutechnic Group’s turnover from continuing operations for 1 January-30 June 2018 was EUR 10.0 million (8.5 million), and its operating profit was EUR 0.7 million (0.2 million). The order book of Uutechnic Group’s continuing operations stood at EUR 10,6 million (7.8 million) on 30 June 2018. The earnings per share from continuing operations was EUR 0.01 (0.00).

On 4 June 2018, Plc Uutechnic Group Oyj announced that it had signed a binding agreement according to which it will sell 81% of Japrotek Oy Ab’s shares to the company’s management. With this transaction, Uutechnic Group will increasingly focus on developing its Mixing Technology business in accordance with its strategy. The implementation of the transaction is conditional on the final decisions of the financiers and the finalisation of the required financial arrangements. The financing decisions are expected to be made by the end of September 2018. In the consolidated half year report, Japrotek Oy Ab has been classified as assets held for sale.

The result for the discontinued operations include impairment losses of EUR 1.6 million recognised in conjunction with the classification.

OUTLOOK

The Group strives to be a globally known and preferred cooperation partner, with a good financial standing, in selected product and market segments. The Group pursues growth organically while considering opportunities for growth through acquisitions. Moreover, the aim is to grow the mixing technology business by developing and harmonising the sales and delivery process and expanding into new markets.

BUSINESS REPORTING

Uutechnic Group focuses on improving the competitiveness of its customers by providing advanced process technology and a unique service concept worldwide. The product range of the continuing operations includes agitators as well as various types of long welded and machined axially symmetrical parts, such as rolls, cylinders, pipes and cones.

The Group’s main industries are hydrometallurgy and the mining, pulp, paper and food industries as well as the fertiliser industry and other chemical industries, and environmental technology.

Plc Uutechnic Group Oyj, the parent company of Uutechnic Group, is listed on Nasdaq Helsinki. The Group’s subsidiaries are wholly owned by the parent company. The parent company is responsible for the Group’s management, strategic planning, financial administration, IT, financing and HR management. The continuing operations are carried out by the subsidiaries AP-Tela Oy, Uutechnic Oy and Stelzer Rührtechnik International GmbH. Japrotek Oy Ab has been classified as assets held for sale.  

All of the Group’s continuing business operations are reported under one segment.

Mixing technology business

Strong demand has continued across all industries. The order intake for the first half of the year increased year-on-year. Moreover, the orders received have been larger than the previous year on average. In addition, new markets and customer accounts have been secured through projects. The order book at the beginning of the second half of the year is at a record-high level. The high order book necessitates a rapid increase in production capacity, which is partly reflected on the profitability of projects.

The mixing technology business is expected to remain on the growth track as planned this year.

Roll and pipe business

During the first half of the year, the demand for rolls was very stable in the forest and energy industries. The order book was at a good level at the end of the first half of the year. Turnover increased significantly and profitability improved year-on-year.

With decreasing paper production, the demand for paper machine rolls also decreased during the first half of the year. On the other hand, the increase in the demand for pulp and packaging board was seen as a clear increase in the demand for rolls and cylinders for packaging board and pulp drying machines. The demand for special pipes and structures manufactured for marine and offshore customers continued to be very low during the first half of the year.

Vessel business

On 4 June 2018, Uutechnic Group signed a binding agreement according to which it will sell 81% of Japrotek Oy Ab’s shares to the company’s management and announced that it will increasingly focus on developing its mixing technology business in accordance with its strategy. The implementation of the transaction is conditional on the final decisions of the financiers and the finalisation of the required financial arrangements The financing decisions are expected to be made by the end of September 2018.

Japrotek Oy Ab was classified as assets held for sale on 30 June 2018.

NEW ORDERS AND ORDER BOOK 

The new orders of Uutechnic Group’s continuing operations amounted to EUR 14.0 million (11.8 million) during the period under review. The order intake has grown in both the mixing technology business and the roll and pipe business. 

The order book of the Group’s continuing operations stood at EUR 10,6 million (7.8 million). The order book extends to 2019. The order book of the mixing technology business is at a record-high level and the order book of the roll and pipe business is at a good level.

TURNOVER

The turnover of Uutechnic Group’s continuing operations for the period under review amounted to 10.0 million (8.5 million). Finland accounted for 34.5% of turnover. Rest of Europe accounted for 60.8%, Asia for 3.5%, South America for 0.3% and North America for 0.9%.

RESULT AND PROFITABILITY

The operating profit of the Group’s continuing operations was EUR 0.5 million (0.1 million) for 1 January-30 June 2018. Japrotek Oy Ab was classified as a discontinued operation, and its effect on the result is presented on one line in the income statement, separately from continuing operations. The discontinued operations include impairment losses of EUR 1.4 million from goodwill and intangible assets allocated to Japrotek and EUR 0.2 million from deferred tax assets, recognised in connection with the classification.    

FINANCIAL STANDING AND LIQUIDITY

At the end of the review period, Uutechnic Group’s balance sheet total stood at EUR 21.3 million (20.3 million). The interest-bearing liabilities of the Group’s continuing operations totalled EUR 4.8 million (3.7 million), including EUR 1 million in subordinated loans. The Group’s cash flow from operations for the period under review year was EUR -1.1 million (-3 million).

At the end of the review period, the Group’s equity ratio was 59% (59.6%) and net gearing was 51.6% (66%). Return on investment and return on equity for the review period and comparison period were negative. Non-cash impairment charges relating to discontinued operations had a significant effect on the indicators.

Non-current assets on the balance sheet of Uutechnic Group’s continuing operations totalled EUR 9.2 million (10.6 million).

EQUITY

The Group’s equity stood at EUR 8.6 million (9.9 million) at the end of the period under review.

The company has unsecured subordinated loans granted by two shareholders, totalling EUR 1 million. These loans are subordinated loans in accordance with chapter 12 of the Limited Liability Companies Act, and their capital repayments and interest payments must meet the conditions provided in the Act. The annual interest rate on the outstanding loan capital is 4%. In accordance with the loan terms, the loans will be repaid as a one-off payment on 31 December 2019. However, the company is entitled to repay early.

RESEARCH, PRODUCT DEVELOPMENT AND INVESTMENTS

The Group’s investments in fixed assets totalled EUR 0.2 million (0.1 million). The investments were primarily minor purchases of equipment.

The commercialisation and production digitalisation project aiming to increase the efficiency of operations in the mixing technology business advanced to the deployment phase. The first components of the new systems will increase operational efficiency already during the second half of the year.

A development project aiming at a new product advanced to an industrial-scale pilot phase carried out in cooperation with the customer.

PERSONNEL

At the end of the review period, Uutechnic Group’s continuing operations had 130 (132) employees, of who 59 (59) were white collar and 71 (73) were blue collar. Of the employees, 66 worked in Finland and 64 in Germany.

SHARES AND SHAREHOLDERS

The total number of shares and votes in Plc Uutechnic Group Oyj is 56,501,730. On 30 June 2018, the Group had 1,483 registered shareholders. There were in total 4,473,856 nominee-registered shares.

The total number of shares owned directly or through controlled companies by the Board of Directors, CEO and Group Management Team was 11,103,800 shares, or 20.0% of all shares.

Board members, CEO, Deputy CEO or other members of the Group Management Team have no holdings or special rights based on the company’s share-based incentive systems.

Shares in Plc Uutechnic Group Oyj are listed on Nasdaq Helsinki. Their trading code is UUTEC, and their ISIN code is FI0009900708.

Plc Uutechnic Group Oyj did not pay dividends during the review period.

AUTHORISATION TO ISSUE SHARES

In accordance with the proposal of the Board of Directors, the Annual General Meeting of 12 April 2018 authorised the Board of Directors to resolve on the issue of at most 10,000,000 new shares or special rights entitling to shares. The authorisation entitled the Board to decide on all terms and conditions for the issuance of shares and special rights, including any deviations from the shareholders’ pre-emptive right.

BOARD OF DIRECTORS AND CEO

On 12 April 2018, the Annual General Meeting re-elected Sami Alatalo, Hannu Kottonen, Kristiina Lagerstedt and Jouko Peräaho as Board members. Hannu Kottonen and Kristiina Lagerstedt are independent of the company and its major shareholders. Sami Alatalo was re-elected as the Chairman of the Board.

Jouko Peräaho has served as the CEO since 9 March 2017.

The Company adheres to the Finnish Corporate Governance Code 2015 for companies listed on Nasdaq Helsinki.

REMARKABLE RISKS AND UNCERTAINTY FACTORS AND THEIR MANAGEMENT

The demand for Uutechnic Group’s products is dependent on trends and developments in the global economy and the Group’s customer industries, which poses a general external risk to its operations. The Group seeks to mitigate the risks arising from changes in demand by targeting its sales operations in line with current trends in various market areas and customer industries.

According to the Board of Directors of the Group’s parent company, other significant risks and uncertainty factors to which the Group is exposed are related to at least the following aspects:

• The sale of Japrotek Oy Ab, classified as assets held for sale, will not take place as planned.
   
• The Group will continue to implement consolidation processes and pursue identified synergies to improve profitability. It is possible that not all of the identified synergies will be achieved, or that processes will fail.    
   
• The Group aims to grow organically as well as through acquisitions. There is no certainty that the Group will be able to find suitable candidates for acquisition, obtain the financing required for acquisitions or acquire businesses on satisfactory terms.    
   
• The acquisition prices paid in the context of business combinations in 2015 and the goodwill generated by them also involve risks. The Group’s calculations to test goodwill are based on financial forecasts and assumptions prepared by the management.
   
• Part of the Group’s business operations consist of major or large project deliveries. Extensive and complicated projects involve the risk that the future costs and any other risks related to the delivery cannot be estimated sufficiently accurately in the bidding phase. In such cases, the result of the project may prove weaker than expected. In contracts for extensive projects, the claims for compensation for delayed delivery or deficient performance may be significant.
   
• Unfavorable changes in the financial markets may have an effect on the Group’s results and the availability of equity and debt financing on competitive terms. Uncertainty in the international economy may lead to payment delays and an increased risk of credit losses.

The Group seeks to protect itself against risks using all measures that can reasonably be implemented. These include, among other things, measures aimed at improving profitability and productivity, training for employees, guidelines and instructions, insurance policies, critical examination of the terms and conditions of commercial agreements and the systematic monitoring and development of operations.

STOCK EXCHANGE RELEASES PUBLISHED DURING THE REVIEW PERIOD

28.02.2018  Review of the financial statements for 1 January – 31 December 2017

09.03.2018  Financial statements, corporate governance statement and remuneration statement for 2017 published

19.0.32018  Invitation to the annual general meeting of Plc Uutechnic Group Oyj

23.03.2018  Uutechnic Group received a remarkable order for complete delivery to Norway

12.4.2018  The resolutions of the annual general meeting of Plc Uutechnic Group Oyj and the decisions of the board of directors

27.04.2018  Uutechic Group’s business review from January to March 2018

04.06.2018  Uutechnic Group to sell 81% of Japrotek Oy Ab’s shares to the company’s management. The implementation of this transaction is conditional on the final decisions of the financiers.

29.06.2018  Finalization for selling majority of Japrotek Oy Ab’s shares is postponed, financial negotiations will continue.

ACCOUNTING PRINCIPLES

This half year financial report was prepared in accordance with the IAS 34 standard. It does not include all of the notes or other information to be presented with financial statements. For this reason, the interim report should be read together with the financial statements for 2017.

The half year financial report was prepared in line with the accounting principles presented in the financial statements for 2017.

The information included in this half year financial report has not been audited. The figures are presented in thousands of euros (EUR 1,000), unless otherwise mentioned.

Japrotek Oy Ab is classified as a discontinued/held-for-sale operation in the half year financial report for 2018. The comparison figures for the previous year have been adjusted accordingly.

KEY FIGURES OF UUTECHNIC GROUP’S HALF YEAR REPORT

The figures are presented in thousands of euros (EUR 1,000), unless otherwise mentioned. The figures are unaudited.

IFRS 15 Revenue from Contracts with Customers took effect on 1 January 2018. With regard to Uutechnic’s products and services, performance obligations satisfied over time in accordance with IFRS 15 primarily include project deliveries and modernisations dimensioned and customised according to the customer’s needs, treated as long-term projects and recognised as revenue based on the degree of completion. There is no alternative use for these performance obligations as referred to in IFRS 15, and they comprise a single performance obligation.

The company applies the same principle to performance obligations satisfied over time as to revenue recognition based on the degree of completion (share of costs incurred of the estimated costs of the project). An exception to this main rule are individual long-term projects previously recognised as revenue based on the degree of completion in which the customer has not undertaken to compensate for the costs incurred and a sufficient margin in situations in which the customer unilaterally discontinues the fulfilment of the contract or the customer fails to fulfil their contractual obligations. In future, these individual projects will be treated as performance obligations fulfilled at a point in time. According to the current estimates, the volume of such projects is minor.

The reliefs allowed by the retrospective model have been applied in the adoption of IFRS 15 so that the effect accumulated due to the application of the standard, totalling EUR 0.1 million, has been recognised as an adjustment to the retained earnings at the time of application, and the comparison figures have not been adjusted. The change in the revenue recognition principles increased the turnover of the Group’s continuing operations by EUR 1.3 million and operating profit by EUR 0.5 million.

In Uusikaupunki July 27, 2018

PLC UUTECHNIC GROUP OYJ

Board of Directors

Further information:

Jouko Peräaho, CEO Plc Uutechnic Group Oyj, +358 500 740 808

www.uutechnicgroup.fi

Uutechnic Group is focused on improving the competitiveness of its customers by providing them advanced equipment technology and unique service concept worldwide. The product range includes agitators and different types of long welded and machined axially symmetrical parts as rolls, cylinders, tubes and cones.

The main industries are hydrometallurgy, mining-, pulp and paper-, food-, fertilizer-, other chemical industries and environmental technology.