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Interim report 1 January - 31 March 2008
INTERIM REPORT 1 JANUARY - 31 MARCH 2008 (Unaudited)
The Finnlines Group recorded revenue from the continuing operations totalling EUR 185.1 (157.4)million. Operating profit was EUR 14.0 (13.5) million. Profit before taxes from the continuing operations was EUR 5.5 (8.3) million. Return on equity (ROE) was 4.2 (6.3) % and return on investment (ROI) was 5.0 (5.7) %.
The Finnish sea imports of unitized goods grew 5.6 % during January-March while exports fell by 3.1% in comparison with the corresponding period of previous year (measured in tons). This development widens the import-export gap of unitized goods. The trailer and lorry volumes transported by sea between the Southern Sweden and Germany continued to develop favourably and grew 3.4 % compared to previous year. The passenger traffic between Finland and Germany decreased by 1% and increased by 3.2 % between Finland and Sweden.
Finnlines is one of the largest European shipping companies specialised in liner cargo services. The Group's operations are centred on sea transports in the Baltic Sea and North Sea areas and on providing port services in Finland and Norway. Through its subsidiaries and associated companies, the Group has operations in eight northern European countries and in Russia. The Group's services are also offered throughout Europe via an extensive network of agents. There were no significant changes in the Group structure during the reporting period.
SIGNIFICANT EVENTS DURING THE REPORTING PERIOD
According to Finnlines' strategy, the target is to own a bigger part of the fleet to reduce the dependence on time-chartered vessels.
At the end of February, the Finnlines Group made an initial agreement with the owners of MS Finnmill and MS Finnpulp to buy these vessels and two other vessels, MS Finnkraft and MS Finnhawk, which all were under time charter to Finnlines traffic, at the total amount of EUR 121 million. This deal was closed during April and it settled the litigation process relating to the purchase options of Finnpulp and Finnmill. Finnkraft and Finnhawk will ply under the Finnish flag and Finnmill and Finnpulp under the Swedish flag.
By this transaction together with the investment programme launched in 2007 Finnlines will own about half of the roro fleet and all 15 ropax vessels in its services.
The operations at the terminals of Lübecker Hafengesellschaft in Lübeck harbours suffered again from actions of the stevedoring workers' union during the first quarter of the year. The union protested against the planned privatisation of Lübecker Hafengesellschaft. Despite the actions the transport volumes of the Group were favourable. The cargo volumes transported during the first quarter of the year totalled approximately 208,000 (190,000 in 2007) units, 28,000 (25,000) cars (not including cars of the passengers) and, in addition, 768,000 (665,000) tonnes of freight not possible to measure as units. In addition, some 127,000 passengers were transported (around 97,000 in 2007), which figure includes freight-related passengers.
The Finnlines Group recorded revenue from the continuing operations totalling EUR 185.1 (157.4 in 2007) million. Shipping and Sea Transport Services generated revenue amounting to EUR 160.0 (132.5) million and Port Operations EUR 32.4 (33.3) million. Other income from operations amounted to EUR 0.6 (0.6) million. Operating profit from the continuing operations was EUR 14.0 (13.5) million. The port operations in Oslo (Norsteve) was moved to a new harbour location resulting in losses of revenue and one-time costs for the Port Operations segment. Financial income was EUR 1.1 (2.2) million and financial expenses totalled EUR -9.6 (-7.4) million. Profit before taxes from the continuing operations was EUR 5.5 (8.3) million. Return on equity (ROE) was 4.2 (6.3) % and return on
investment (ROI) was 5.0 (5.7) %.
INVESTMENTS AND FINANCING
The Group's investments were EUR 24.6 (188.7) million, consisting mainly of pre-payments of purchased four roro vessels and of investments in Vuosaari harbour. Interest-bearing net debt amounted to EUR 755.6 (633.8) million. The equity ratio calculated from the balance sheet was 30.9 (32.9) %. Gearing was 172.8 (153.4) %.
The Group employed an average of 2,313 (2,235) people during the period, consisting of 1,428 (1,460) employees on shore and 885 (775) persons at sea.
THE FINNLINES SHARE
The Company's registered share capital on 31 March 2008 was EUR 81,383,916 divided into 40,691,958 shares. A total of 2,7 million Finnlines shares were traded on the Helsinki Exchange during the period. The market capitalisation of the Company's stock at the end of March was EUR 549.3 million. Earnings per share (EPS) during the period were EUR 0.11 (0.16). Shareholders' equity per
share was EUR 10.70 (10.11).
In addition to the earlier published investment programme Finnlines has purchased four roro vessels at the price of EUR 121 million. The deal was financed with the long term debt.
The company has invested and will invest during 2003-2011 over one billion euros in the renewal of the fleet and ports. Due to the investment programme the net interest bearing debt has increased and will continue to increase in the future. This also has a negative effect on the equity ratio of the Group. Otherwise there are no material changes in the risks disclosed in the notes to the financial statements 2007.
The Arbitration proceedings commenced last year between the owners of MS Finnmill and MS Finnpulp and Finnlines Plc have now been withdrawn. The main dispute concerned the validity and terms of the purchase options of the vessels. Parties agreed the dispute over the purchase option of MS Finnmill and MS Finnpulp when concluding the above mentioned vessel deal.
EVENTS AFTER THE REPORTING PERIOD
THE ANNUAL GENERAL MEETING
The Board of Directors of Finnlines Plc proposed to the AGM held on 15 April that no dividend be paid out from the fiscal year 2007 due to the sizeable investment in the 5 vessels already in operation and the commitments of the vessel renewal programme as well as to the investments in the Vuosaari harbour.
The minority shareholders (more than 10% of the shares) used their rights to require the postponement of the handling of the closing of the books and the discharge of the Board to a continued meeting. The meeting also decided to postpone the Board of Directors' proposal for authorization to increase the share capital to the same meeting. The continued meeting will be held on 20th of May 2008, 14:00 hours, at the Scandic Continental hotel, Mannerheimintie 46, Helsinki.
The meeting decided that the company's Board of Directors has seven members. Mr. Emanuele Grimaldi, Mr. Gianluca Grimaldi, Mr. Diego Pacella, Mr. Heikki Laine, Mr. Antti Pankakoski, Mr. Olav K. Rakkenes and Mr. Jon-Aksel Torgersen were unanimously re-elected. Finnlines' Board of Directors elected Mr. Jon-Aksel Torgersen as Chairman and Mr. Diego Pacella as Vice Chairman of the Board. The firm of authorised public accountants Deloitte & Touche Oy was appointed as the company's auditors, with Mikael Leskinen, APA, as the principally responsible auditor.
OUTLOOK FOR 2008
Finnlines has increased its transportation capacity and frequency considerably on its main routes and implemented a faster timetable between Finland and Germany. With its current fleet and traffic concept Finnlines has excellent potential to increase its market share on its main routes.
The new Vuosaari harbour will most probably be operational as planned at the end of 2008. There will be some none-recurring expenses arising from the start-up phase of the new harbour. Those expenses are related mainly to transportation and re-location of the machinery, equipment and personnel and to closure of the current premises.
The economic development in Europe creates uncertainty for the business environment. Company expenses are affected due to the new labour agreements in the sector, and by the increase in the bunker oil price. Due to the investments in the new vessels, vessel conversions and Vuosaari harbour, there will be a substantial increase in the depreciation and interest expenses compared to 2007.
The next interim report for 1 January - 30 June, 2008 will be published on 31 July, 2008.
The Board of Directors
Profit and Loss Account
Changes in Shareholders Equity
Cash Flow Statement
Revenue and operating result by business segments
Property, plant and equipment
Contingencies and Commitments