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Martela announce 2nd Quarter’s results

Wednesday 6 August 2014

Sales for Q2 to 30 June 2014 at 34.1m Euros were 16.3% up on the same quarter last year with a pre-tax profit of 400,000 Euros compared with a loss of 1m Euros in 2013.


The Group anticipates that its revenue and operating result for 2014
will show an improvement on the previous year's figures.

Market

The demand for office furniture in Finland and Sweden continued to be weak in
the early part of the year. Demand in Finland and Sweden is still largely
focused on office alteration and enhancement projects of different kinds rather
than new offices. Despite the weakness in the market, the Activity Based Office
concept, which is well-suited for alteration and enhancement projects, has
attracted considerable interest among customers in Sweden, Norway, Finland and
Russia. The Polish market continued to be stable during the first half of the
year.

Martela has used office construction statistics as a key indicator
when assessing overall market developments. However, it should be remembered
that there are also many other factors that affect the demand for Martela
products, such as overall economic growth and the need for companies to use
their premises more efficiently. The need to boost efficiency often leads to
office alteration projects, which in turn generates demand for Martela
products. However, these projects also result in companies allocating fewer
square metres of space for each employee, which means that they purchase fewer
pieces of traditional office furniture, such as desks and cabinets. On the
other hand, the demand for products and solutions for all kinds of meeting
spaces and lobbies is on the increase.

Consolidated revenue and result

Consolidated revenue for the second quarter was EUR 34.1 million (29.3), an
increase of 16.3 per cent on the previous year. Consolidated revenue for
January-June was EUR 68.1 million (61.1), an increase of 11.5 per cent on the
previous year. January-June revenue in Finland was down year on year, but
revenue in Finland nevertheless increased slightly in the second quarter
compared to the previous year. There were no significant large customer
projects in the first six months in Finland, and revenue was largely from small
and medium-sized deliveries. As in the previous year, there were no major
deliveries in Poland during the first half of 2014, and for this reason, the
revenue generated also remained low. By contrast, there were major customer
deliveries in Sweden and Norway during the review period and, as a result, the
revenue of the Business Unit in these countries grew substantially from the
previous year. The most significant deliveries in Sweden and Norway were made
in the first quarter, but the second quarter also saw some large deliveries. As
a result of the major customer deliveries in Sweden and Norway, the
consolidated revenue increased significantly during the first six months.
Revenue in Russia also continued to show year-on-year growth.

The consolidated operating result for the second quarter was EUR 0.4 million
(-2.6). The operating result for January-June was EUR -1.0 million (-4.0). The
Group's fixed costs decreased slightly on the previous year, as anticipated,
due to the adjustment measures taken in 2013. The January-June sales margin on
the Group's products was unchanged from the previous year. The combined effect
of these factors and the increase in revenue was a year-on-year improvement in
Martela's consolidated operating result.

In the third quarter of 2013, the Group began to plan measures to reduce its
costs, targeting an annual cost saving of about EUR 6 million. The savings
programme will be implemented by the end of 2014, after which the full impact
of the savings will be felt. It is estimated that due to the timing of the
measures the programme's impact on costs in 2014 will be equivalent to about
one third of the total savings target. The measures will allow the Group to
adjust its cost structure to correspond to the company's changed operating
environment.

In February 2014, as part of the savings programme, the Group concluded the
first codetermination negotiations aimed at improving production efficiency.
The efficiency improvements will be sought by production transfers between the
Group's units located in Nummela and Riihimäki in Finland, and in Warsaw,
Poland. In addition, negotiations to transfer the manufacture of certain
products between the Swedish and Finnish production units were concluded in
June 2014. These measures will create a distinct role for each of Martela's
production units and ensure a more flexible and efficient service for
customers. The measures taken so far or in progress are expected to achieve the
targeted annual savings of EUR 6 million.

It became increasingly clear during the first six months of the year that there
is growing demand for activity based office solutions. Martela will thus
continue to focus on providing ever higher quality comprehensive solutions and
associated services in the field of activity based working. The Group's aim is
to strengthen its pioneering position as a supplier of comprehensive solutions
and as the leading service provider for offices and other working environments.

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