Martela Oyj : Annual Report 2020

March 10, 2021 at 05:52 am EST

2020

Annual report

Contents

Martela in brief 3

Martela 2020 4

Highlights of the year 5

CEO's review 6

Operational environment 8

Martela Lifecycle 9

Board of Directors' report and

ﬁnancial statements 10

Martela 2020

Highlights of the year

CEO's review

Martela Lifecycle

Martela in brief

Martela is a Nordic leader specialising in user-cen-tric working and learning environments. We offer our customers a single point of contact through-out the workplace lifecycle, from specifying needs to maintenance and optimisation of the workplace.

Martela is a family company founded in 1945 and its shares are quoted on the OMX Nordic Ex-change Helsinki. Our main market areas are Fin-land, Sweden and Norway, and our solutions are also sold globally through our network of dealers.

Our production facilities are located in Finland and Poland.

In 2020, the Martela Group's revenue was EUR 88.4 million and it employed an average of 451 employees.

Martela 2020

In 2020, Martela's revenue declined, and prof-it performance was weak. Operations remained loss-making. The main reason for the proﬁt per-formance was the change in the general econom-ic situation and in customer behaviour caused by the coronavirus pandemic. Many companies were forced to put their ofﬁce space related acquisi-tions on hold as a result of the prolonged period of remote working and ﬁnancial distress.

We completed our cost-efﬁciency programme that was announced in 2019 and achieved savings of about EUR 4 million. The programme's results started to be visible during the second quarter of 2020. When the pandemic spread to the Nordic countries in the spring, we took rapid measures to streamline our cost structure by, among other things, temporarily laying off employees.

Despite the coronavirus crisis, our delivery reli-ability remained excellent, and we focused on pro-viding an excellent customer experience. Our net promoter score (NPS), which describes customer satisfaction, improved.

The transformation of working life, which was already in progress, accelerated suddenly as a re-sult of the pandemic. Martela fulﬁls the require-ments created by this transformation with ﬂexible and responsible solutions for the future.

Revenue (EUR million)

88.4 -4.0 451

Revenue by country (EUR million)

Finland 72.4

Norway 3.8

Sweden 9.2

Other 3.1

Operating profit (EUR million)

Equity ratio (%)

39.2

Personnel (on average)

2018

2019

2020

Highlights of the year

WORKPLACE AS A SERVICE PROVED ITSELF IN THE PANDEMIC

Changes are constantly and rapidly taking place in organisations' situations and their number of em-ployees, management culture and ways of work-ing. The coronavirus pandemic accelerated these changes and the amount of remote working in-creased. Workplaces must adapt to these changes. Martela's Workplace as a Service helps companies adapt to change, avoid unnecessary investments and develop their workplace in a user-centric and responsible way. The model proved its beneﬁts during the pandemic. The ﬂexible model adapts to changing requirements and enables workplace op-timisation. The service model can be used, for ex-ample, to lease home workstations for employees, to optimise the needed ofﬁce space and to develop a hybrid working environment.

ALVA OY'S NEW WORKPLACE SUPPORTS NEW WAYS OF WORKING

Alva-yhtiöt's new ofﬁce space was designed to serve new ways of working and the wellbeing of personnel. The ofﬁce's furniture and interior were all acquired through Martela's ﬂexible service mod-el, which also includes smart solutions that meas-ure ofﬁce utilisation rate and the optimisation and circular economy model in the monthly fee. Imple-mentation was delayed due to the pandemic, but the main goal of the project, ﬂexibility, became even more important.

"We had a strong desire to focus on cozy sur-roundings, in addition to a functional workplace. As we gain more data on user experience, we can modify the premises and the furniture," says Tiina Mikkola, Vice President of Business Development at Alva.

CONTROLLED RETURN TO THE OFFICE WITH SMART SOLUTIONS

Our digital workplace solutions help create safe and functional workplaces and optimise the use of premises, for example when we return to the ofﬁce after this period of remote working. The solutions allow the users of the premises and the organisa-tion's management to base their decision-making on data instead of gut feeling. Smart solutions make it possible to manage an ofﬁce's capacity, monitor use in real time, and analyse whether the safety measures and changes have been successful. Em-ployees can be directed to a suitable workstation, observing social distancing requirements, and data on usage can be shared with property services to allow enhanced cleaning, for example, to be target-ed correctly.

MARTELA CELEBRATED ITS 75-YEAR JOURNEY WITH RENEWAL

To celebrate its anniversary, Martela renewed itself in many ways. During the spring, the entire person-nel was involved in deﬁning the values that best describe Martela's core and operations: Together, Boldly, Listening and Caring. Martela's brand image was also refreshed. The Happy Mondays since 1945 theme describes Martela's mission to promote bet-ter work and wellbeing.

Empty offices showed us the value of flexible solutions

The pandemic catalysed the transformation of working life, and now is the time for Martela's workplace solutions to prove their benefits. The coronavirus pandemic showed that customer satisfaction is our strength.

The past year has not been easy for anyone, but there is light at the end of the tunnel. The coro-navirus pandemic that spread to Europe in March drove workers from their ofﬁces to their homes to work remotely and was particularly tough on the private sector. As the economy stalled, many compa-nies put their ofﬁce renewal projects on ice. Project sales were relatively good, but the more fast-paced sales for customers' small-scale needs slowed down. Sales of our ﬂexible Workplace as a Service solution grew quickly as organisations experienced more uncertainty in their ﬁnancial situations. The public sector reacted more slowly than the private, but price pressure has been great in both sectors.

As total demand fell, Martela's revenue declined and the result remained negative. We completed the EUR 4 million cost-efﬁciency programme that was announced in 2019, and results started to show during the second quarter.

Pandemic accelerated change

The coronavirus pandemic helped to accelerate the transformation of working life that was already in progress. For a long time, it has been possible to work remotely and this has been normal in many companies, but the pandemic forced the remaining organisations and employees to adopt new ways of working very quickly.

We believe that the state of emergency caused by the pandemic will permanently change workplac-es and the ways people work. The transition to a hybrid work model, which combines remote work-ing and ofﬁce working, will accelerate and organisa-tions will need to re-evaluate their workplaces and their lifecycle. New solutions are needed to ensure smooth working and to keep ofﬁce space costs under control in the midst of the transformation. Therefore, the transformation of work will increase demand for ﬂexible workplace services.

Our Workplace as a Service (WaaS) solution meets this demand and sales of the model grew during the year. In the Workplace as a Service model, a customer's workspaces are able to adapt to even rapid changes in requirements and situa-tions. In addition, customers avoid the risk associ-ated with the ownership of the furniture and the capital tied up in furniture is freed up. The solu-tion offered by Martela is economically smart and responsible.

In addition to ofﬁces, our lifecycle model meets the needs of learning environments. The operating culture at education institutions is already chang-ing radically and teaching and learning methods are becoming increasingly varied. The pandemic accelerated the increase of the role of distance learning and teaching.

New needs require new products

We responded to the increase in demand for mo-bile meeting rooms and added a new member to the Pod product family. PodBooth Meeting, which waslaunched in February, is a soundproofed space for meetings and work for 1-6 people. The product fam-ily now includes furniture for work requiring concen-tration, for relaxation and for spontaneous meetings.

After the pandemic began, we started offering our customers furniture packages that facilitate their employees' remote working and improve the ergonomics of home ofﬁces in the form of a rental service. Sales of home workstations began to rise considerably after the summer.

Our survey-based Martela Remote Work In-sights 2020 report increased our understanding of remote work: Many people like the fact that they can concentrate at home and that they can spend the time usually spent on commuting to work on something more enjoyable, but there are deﬁciencies in furniture and ergonomics of their home ofﬁces. Face-to-face interaction and spon-taneous, informal meetings are, however, need-ed in certain jobs and to maintain a feeling of belonging in a working community. Though the amount of remote work we do is expected to in-crease, it will not completely replace work carried out at the ofﬁce.

Sustainability is growing in importance

The constantly growing demand for sustainability and the rise of the circular economy are also sig-niﬁcant trends. Products must be durable, and, for example, a certain proportion of recycled materials may be one of the criteria that needs to be met in an organisation's acquisitions.

Sustainability and responsibility are Martela's strengths, as sustainable choices generally also have economic beneﬁts. Our Lifecycle model guar-antees sustainability in all stages of the lifecycle of our working and learning environments. For ex-ample, from the perspective of energy consump-tion, it is essential that ofﬁce spaces are the right size and suitable: the environmental impacts of an unused space are completely unnecessary.

Our furniture is manufactured to stand the test of time and use. We recycle furniture that is no longer required and ﬁnd new owners for them and reuse the materials of furniture that can no longer be repaired. We sell cleaned and serviced furniture in our Martela Outlet chain.

Martela Outlet's sales grew during 2020 as peo-ple furnished their home ofﬁces. Both consumer and corporate customers have noticed that used furniture is a very good option - especially when it is genuinely as good as new.

Customer satisfaction at its highest level

In the midst of the pandemic, Martela's net pro-moter score (NPS) rose from 48 to 49, which is the highest level it has ever been. Martela's com-petent and committed employees deserve all the thanks for this as they are dedicated to ensur-ing customer satisfaction. Our delivery reliability remained high throughout the coronavirus crisis, which is an indication of our excellent supply chain management.

Martela's brand image also strengthens custom-er satisfaction. The brand was updated to mark Martela's 75th anniversary. We also clariﬁed the values that guide our work with the help of the entire personnel.

Ahead of our time for 75 years

The 75-year-old Martela has always been ahead of its time. The company's long history is an indi-cation of its pioneering spirit, which is precisely what we need to keep forging ahead. Martela is a pioneer and expert in workplace lifecycle manage-ment, and our Workplace as a Service model rein-forces our position as a provider of expert services and continuous comprehensive solutions.

We see signiﬁcant growth potential in the area of workplaces and Martela must seize this poten-tial in order to make its core operations proﬁtable. In the aftermath of the coronavirus pandemic, we will have the opportunity to offer our customers even better solutions than before. The past year has shown that even in situations requiring ﬂexi-bility, we can still improve customer satisfaction. We will continue our work to promote a good working life.

Artti Aurasmaa, CEO

Pandemic accelerated the transformation of working life

The coronavirus pandemic accelerated the transformation of working life, as office workers started working remotely. We got used to remote work, but it doesn't replace face-to-face meetings.

The transformation of the way we work, which has been in progress for a long time, accelerated rap-idly in the spring of 2020 as the coronavirus pan-demic drove workers from ofﬁces to their homes to work remotely.

The development of technology and digitalisa-tion have made it possible for people to work at any time and any place and have increased the share of knowledge work. However, in many com-panies, ofﬁce space is still the largest cost item af-ter personnel expenses. The need to reduce costs and a growing awareness of climate change have created pressure to reduce energy consumption. These trends have encouraged companies to in-tensify their use of space and have prompted the transformation of ofﬁce spaces from conventional individual ofﬁces to open-plan ofﬁces and now to activity-based ofﬁces.

Remote work has long been an option in many organisations, but employees have continued to come to the ofﬁce to work and have meetings. Of-ﬁces are primarily designed for a more old-fash-ioned type of work, even when they have been turned into open-plan ofﬁces due to cost pres-sures and the organisation's low hierarchy. The pandemic emptied ofﬁces for a long period and raised questions as to whether the type of ofﬁces we have now really are the best to meet our needs.

The decision to transition to remote work in spring 2020 was based on reasons of public health security, but the ﬁnancial difﬁculties caused by the pandemic are likely to increase demand for more cost-effective and ﬂexible ofﬁce space solutions. Ofﬁce spaces must adapt to the rapid change in requirements.

Face-to-face meetings still important

For a long time, we have already been working re-motely on those days when we need to concentrate without distractions, but the possibilities of mobile work became increasingly evident during the coro-navirus pandemic. We were even able to take care

of many of our tasks better at home than the ofﬁce.

However, we will still need to have face-to-face meetings. In order for creative problem solving and collaboration to be successful, people need to be physically present. Working together, genuine in-teraction and spontaneous intercommunication form the glue that keeps an organisation togeth-er. As remote working will never be able to replace meetings or working together at the same location, more and more working communities will transfer to a hybrid work model.

In other words, ofﬁce spaces will need to con-tinue to offer work communities opportunities to meet together and spaces for work requiring con-centration. The premises may be smaller than be-fore, but they must also be more attractive so that people will want to come to the workplace.

Sustainability is a requirement

The pandemic is also likely to accelerate the trans-formation of learning environments. Though tradi-tional classroom solutions are no longer favoured in new educational institutions, remote schooling was a completely new experience for many last spring. Learning environments are typically de-signed to last decades, so they have been slow to develop. The beneﬁts of distance teaching were also observed at educational institutions. In the fu-ture, we will be able to supplement contact teach-ing with distance teaching to a certain extent.

Organisations and consumers are increasingly interested in the responsibility and sustainabili-ty of their purchases. The transition to a circular economy has started. Lifecycle thinking is already a consideration in the acquisitions of pioneering organisations, but price is still a major aspect.

As a result of the pandemic, there are now many home ofﬁce decorators who are interested in furniture that facilitates working and improves ergonomics. Many employers want to support their employees in their remote work by providing an er-gonomic remote workstation.

Service models adapt to change

WORKPLACE AS A SERVICE

to only pay for what it genuinely needs, which means that the problems related to owning fur-niture do not exist. InImapdldemitieontatotiothne company's ofﬁce space, the service is also suitable for thedevelopment of employees' home ofﬁces and ﬂex-ible co-workingUfsaUecrsil-eictrei-encste.rnetdred plapnlnaninnging

Optimisation the best possible workplace at their disposal. In-stead of individual pieces of furniture, the organi-sation will have a comprehensive solution for the

SpSepciecciatciaotnioonf of entire lifecyclenoefendetehdeecodhfﬁcacnhega,newgehich constantlytakes care of the premises, the furniture - and the people. An essential aspect of the service is

The post-pandemic world of work will be built on hybrid work. People will have the freedom to choose where and when to work, together with others or alone. Thanks to the Workplace as a

Service model, your employees will always have

LEARNING ENVIRONMENT AS A SERVICE The operating culture at educational institutions is changing radically and teaching and learning methods are increasingly varied. New practices and methods also require a new type of learning en-vironment. Developed through service design and

the continuous optimisation of the workplace in accordance with the changing needs of the us-ers. The service model enables the organisation

Value for organisation

Working environment is always up-to-date and optimised

es the circular economy to schools in a practical manner. Furniture that is in good condition but no longer needed due to the service model is repUaisredr-centred and sold through the Martela Outlet stores oprltahnening webshop or utilised in energy generaVtaiolnueorfaosr soercg-anisation ondary raw material.

Improved employee experience and wellbeing

Speci cation of needed change ronment as a Service responds to this challenge.

together with customers, Martela's Learning envi-

Lifecycle®

The new service model means that schools and eMducatiaonarl intstietutelsano longer need to own a sin-gle piece of furniture, as the whole package can be acquired as a service instead. The greatest beneﬁt

of the Learning environment as a Service model is

that it creates a framework for redesigning learning environments in a user-centric way and introduc-

OptimisationImplementation

Working environment

is always up-to-date and

optimised

Increase in productivity and ability to innovate

Renewal of operational and management cultureImproved employee experience and wellbeingCost-effective and responsible method of acquisition - Waste Nothing.

Increase in productivity and ability to innovate

Speci cation of needed changeUser-centred planning

Renewal of operational and management cultureCost-effective and responsible method of acquisition - Waste Nothing.

purcotdivuitcytiavnitdy and nteovate

ReneRweanleowfaolpoefroatpieornaatlioanadl andmanamgaenmaegnetmceunltucruelture

CostC-eofsfte-cetfifveectainved arensdproensspibonlesible methmoedthoofdacoqfuaicsiqtuioisnit-ion - WasWteaNstoethNinogth. ing.

Board of Directors' Report and Financial Statements

Board of Directors' Report 11

Consolidated ﬁnancial statements IFRS 18

Accounting principles for the consolidated ﬁnancial statements 21

Parent company ﬁnancial statements FAS 46

Accounting principles for the parent company ﬁnancial statements 49

Auditor's report 57

Corporate governance statement 2020 60

Board of Directors 65

Group Management Team 67

Information for shareholders 69

Board of directors' report

Key ﬁgures

The Group's revenue for the ﬁnancial year was EUR 88.4 million (106.2). The operating result for the year was EUR -4.0 million (-2.0). Earnings per share were EUR -1.16 (-0.61). Cash ﬂow from operating activities totalled EUR 5.7 (6.3) million. The equity-to-assets ratio was 22.7 % (28.8) and gearing was 37.9 % (31.5). The return on investment for the year was -13.4 % (-6.4).

Description of the business

Martela is one of the Nordic leaders in the workplace industry. Martela designs and implements best workplace and learning environments. Martela supplies user-centric solutions into today's workplaces - mobile work and activity-based ofﬁces. Martela also offers the widest selection of services support-ing changes in interior planning as well as supporting maintenance. Our total offering comprises of the change of the whole workplace from its speciﬁcation and planning to implementation and maintenance.

Martela's offering and product development

In line with its Lifecycle strategy Martela creates high-quality services for workplaces and learning en-vironments along the full lifecycle. Our offering includes workplace and learning environment speciﬁca-tion and planning, implementation and furnishing as well as continuous measurement and optimisation.

To add to the traditional way of purchasing Martela has introduced two new service models, Workplace as a Service and Learning Environment as a Service. The monthly service fees can include everything from one to all of the lifecycle phases.

During 2020 Martela has expanded the Pod product family by introducing the meeting space called PodBooth meeting. Martela also launched a new cabinet solution called Capa.

EUR -2.0 (-2.2) million has been entered in the Group proﬁt and loss statement as research and de-velopment expenses.

Market situation

The coronavirus pandemic has had a negative impact on the whole market environment of Martela, both in Scandinavia and in other countries. This has impacted especially the commercial sector. The negative impact has been smaller on the Finnish Public sector compared to the commercial sector, but the com-petition has toughened and prices have decreased also in the Public sector. At the moment it is chal-lenging to say what the short- and midterm impacts to general market conditions will be and how long the uncertainty in the markets will continue.

Group structure

Kiinteistöyhtiö Ylähanka Oy, a subsidiary of Martela Oyj, was merged into the parent company during the ﬁrst quarter of 2020.

Revenue and operating result

The January-December 2020 revenue was EUR 88.4 million (106.2) a decrease of 16.8 % from previous year. Compared to the previous year, revenue decreased in Sweden 14.0% and in Norway 51.6%. Revenue from Finland decreased 13.0% and in Other countries 32.5%.

The Group's operating result for the January-December was EUR -4.0 million (-2.0).

The January-December result before taxes was EUR -4.8 million (-2.7). The January-December result was EUR -4.8 million (-2.5).

REVENUE (EUR MILLION)

150

100

129.1

109.5

2016

2017

Financial position

OPERATING PROFIT (EUR MILLION)

103.1

6.2

106.2

88.4

0.3

2018

2019

2020

0-1 -2

-3 -4

-2.1

-2.0

2016

2017

2018

2019

The cash ﬂow from operating activities in January-December was EUR 5.7million (6.3).

-4.0

2020

At the end of the period, interest-bearing liabilities stood at EUR 15.4 million including EUR 6.0 mil-lion lease liabilities according to IFRS 16. At the end of comparison period the interest bearing liabilities stood at EUR 14.6 million. Net liabilities were EUR 4.3 million (5.0). At the end of the period, short-term limits of EUR 4.0 million were in use (5.0) and available limits stood at EUR 0.7 million (2.0).

The gearing ratio at the end of the period was 37.9% (31.5) and the equity ratio was 22.7% (28.8). The key ratios were negatively impacted by the lease liabilities according to IFRS 16 EUR 6.0 million (5.3). Financial income and expenses were EUR -0.8 million (-0.7).

Financing arrangements include covenant clauses in which the ratio between the Group's net liabili-ties and EBITDA and the Group's equity ratio are examined. The key ﬁgures calculated at the end of the review period didn't in all ﬁnancial arrangements fulﬁll the covenant clauses. Financing arrangements where covenant clauses were not fulﬁlled equaled approximatley 10% of all ﬁnancing arrangements.

The balance sheet total stood at EUR 51.7 million (55.9) at the end of the period.

CAPITAL EXPENDITURE AND DEPRECIATIONS (EUR MILLION)

2016

2017

Capital expenditure

2018

Depreciations

Capital expenditure

EARNINGS/SHARE AND DIVIDENDS

2.0

1.5

1.0

0.5

2019

2020

-0.5

-1.0

-1.5

2016 2017 2018

Earnings/share

Dividends paid (EUR million)

2019

The Group's gross capital expenditure for January-December came to EUR 1.2 million (2.3).

The group management team

2020

Kristiina Hoppu, VP Human Recources, has been appointed a member of the Martela Group's Manage-ment Team since August 1, 2020. MartelaGroup's Board of Directors has appointed Artti Aurasmaa as the company's new CEO since October 19, 2020. Aurasmaa has solid experience in enabling the growth of the service business in a variety of operating environments. For this moment onwards Group Manage-ment Team has consisted of CEO Artti Aurasmaa, CFO Kalle Lehtonen, VP Sales and Marketing Johan Westerlund, VP Human Recources Kristiina Hoppu and VP Customer Supply Management Ville Taipale.

GEARING

eur. million 40

-10

2016

2017

2018

Interest-bearing net debt

Gearing (%)

Personnel

2019

2020

Equity

EQUITY RATIO

% 100

eur. million

80 100

-25

60 75

20 25

40 50

2016 2017 2018

Balance sheet total

Equity ratio (%)

2019

2020

Equity

The Group employed an average of 451 people (494), which represents a decrease of 43 persons or 8.7%. Personnel on average employed in Finland was 375 (423), in Sweden 24 (22), in Norway 15 (10) and in group other countries 37 (39).

The number of employees in the Group was 435 (464) at the end of the review period. Personnel costs in January-December totalled EUR 23.1 million (26.7).

Non-ﬁnancial information

MANAGEMENT OF CORPORATE RESPONSIBILITY

Responsibility forms an integral part of Martela's strategy and operations. The VP, Customer Supply Man-agement is responsible for the corporate responsibility as well as quality, environmental and occupational health and safety management system of the Group. Sustainability Steering Group supervises corporate

responsibility with members from the Management Group and the Sustainability Manager as the secretary.

More detailed information on the Group's corporate responsibility principles, goals and achievementscan be found in a separate Sustainability Report published annually. The 2020 Sustainability Report will be published after the annual report.

Since 2011, Martela's corporate responsibility has been guided by the Martela Corporate Code of Con-duct approved by the Board of Directors. The principles contain references to international corporate re-sponsibility commitments. The company has engaged itself in the UN Global Compact challenge, which aims at promoting human rights, rights in working life, environmental protection and the eradication of corruption and bribery.

As Martela operates in an international market, it also takes into account any international treaties, commitments and recommendations that concern its work. The most important ones are:

• The UN Universal Declaration of Human Rights
• OECD Guidelines for Multinational Enterprises
• The ILO Declaration on Fundamental Principles and Rights at Work and other ILO conventions relat-ed to its activities

Since 2011, the practical activities of the company have been guided by the corporate responsibility pol-icies approved by the Management Group concerning matters related to personnel, the environment and purchasing management. The principles and policies published on Martela's websitewww.martela.com/ about-us/sustainability/corporate-responsibility are reviewed and, when necessary, updated annually un-der the coordination of the Sustainability Steering Group. The principles and policies cover social and em-ployee matters and matters related to respecting human rights and eradication of corruption and bribery.

DESCRIPTION OF THE BUSINESS OPERATING MODEL

The Martela Lifecycle model takes into account the entire lifecycle of the workplace. Martela supports the sustainability of its client companies by offering sustainable workplace solutions throughout their entire lifecycle and by ensuring responsible recycling of any furniture that is no longer needed.

The Group units have had, since the 1990s, the ISO 9001 quality and ISO 14001 environmental man-agement system certiﬁcations, granted by an independent party, as proof of continuous improvement of its operations, meeting customer expectations and taking environmental matters into account. During 2014, the systems were uniﬁed into a certiﬁed, multi-site quality and environmental system covering the entire Group's operations. During 2020, a multi-site occupational health and safety system certiﬁcation in accordance with the ISO 45001 standard was also achieved.

In the manufacturing process, there is an emphasis on a strong supplier chain. Martela's own manu-facturing is focused on ﬁnal assembly and remanufacturing production at its logistics centre in Numme-la, Finland, which also houses most of the company's R&D and purchasing. The assembly of upholstery components takes place at Martela's own plant in Poland. The manufacture of table top and storage components takes place mainly at Kidex Oy, Martela's subsidiary located in Kitee, Finland.

The Martela headquarters in Pitäjänmäki, Helsinki, houses sales and support functions in addition to the Group administration. Martela has several sales ofﬁces in Finland, Sweden and Norway. In other countries, the sale of Martela's products takes place mostly through a dealer network.

The purchasing of products and services from service providers accounts for more than 70% of Mar-tela Group's turnover, while Martela itself concentrates on ﬁnal assembly and service business. Martela had about 150 suppliers of materials and components for standard products.

Almost a quarter of the Group's turnover goes on salaries and social security payments. Martela values local manufacturing and employment. As the share of its service business is growing, the company will keep creating more new jobs close to its markets. The distribution of ﬁnancial value will be discussed in further detail in the forthcoming Sustainability Report.

ENVIRONMENTAL MATTERS

Martela's Environmental Policy, approved by the Group Management Team, aims to decrease the compa-ny's environmental impacts and promote recycling. The policy gives instructions on taking environmental matters into account in the development of its offering, through which the company will also have an indirect impact on the environmental effects of its customers.

The essential environmental aspects in Martela's operations are presented in the materiality assess-ment found in the Sustainability Report. Martela has the best opportunities to inﬂuence the reduction of greenhouse gas emissions and energy use in its market area through its customers' premises. Martela is constantly working to help its customers create facilities that support knowledge work and improve space efﬁciency.

By far the most signiﬁcant climate impact of Martela arises from the use of materials related to the products delivered to customers. During 2019, Martela's calculated greenhouse gas emissions totalled almost 14 million kg. Of the greenhouse gas emissions, 89% were due to material use (scope 3), 4% to indirect energy use (scope 2) and 6% to the distribution of ﬁnished products to customers (scope 1).

The total amount of indirect energy used for heating, lighting and ventilation in Martela's sites was slightly more than 36,000 GJ (10 GWh) in 2019. 87% of the total energy consumption was renewable. Martela procured almost 10 million kilos of materials, of which 60% were wood-based materials and 30%metal-based materials. Through the recycling business, Martela collected more than three and a half million kilos of mostly recoverable material from customers. In its own operations, Martela generated al-most two million kilos of waste, almost all of which is utilised as energy or recycled material, with haz-ardous waste accounting for only one-tenth of one per cent. Hazardous waste is generated mainly from the maintenance of properties and equipment.

There are no signiﬁcant environmental risks in Martela's own operations, but global changes in, for example, energy sources, pricing, availability of materials and changes in the way of working may affect Martela's operations in the future.

Environmental goals, their realisation and more detailed environmental metrics are published annually in the Sustainability Report.

SOCIAL MATTERS AND HUMAN RESOURCES

The People Policy includes the principles of responsible human resources management, clariﬁes and uniﬁes the management of human resources and promotes maintenance and development of the corpo-rate and employer image.

According to the materiality assessment in the Sustainability Report, improvement of occupational well-

PERSONNEL BY AREAS, ON AVERAGE 2019

Finland 423Scandinavia 32Other 39

PERSONNEL BY AREAS, ON AVERAGE 2020

Finland 375Scandinavia 39Other 37

being is the most important social and human resources area in Martela's operations. The Martela Lifecy-cle model is utilised for improving occupational well-being of knowledge workers, which is about half of Martela's personnel. Occupational well-being included in the Sustainability Programme is monitored with the help of People Spirit employee satisfaction survey, for example. Due to the exceptional changes in cir-cumstances caused by the pandemic, the People Spirit survey was not conducted during 2020.

A survey concerning the impact of the exceptional circumstances caused by the pandemic on man-agement, work ﬂow and the well-being of the work community was conducted among people managers in the early autumn. The positive results showed that Martela has succeeded in supporting both people managers and personnel in the changed working conditions. In addition, a work environment survey was conducted for all personnel. The obtained results are used to improve the functionality of both ofﬁce and remote working.

During 2020, strong investments were made in the occupational health and safety management sys-tem, and at the end of the year Martela was awarded the ISO45001 certiﬁcate. In the Martela Group, the greatest occupational safety risks are related to the personnel of the removal services, who work in vary-ing customer locations under changing circumstances. After Martela was granted a training center status by Traﬁcom in 2019, occupational safety card training has been carried out internally.

The company's Sustainability Report contains a comprehensive description of the social and human resource issues.

RESPECTING HUMAN RIGHTS

Matters related to respecting human rights are discussed in, for example, the company's People Policy and Sustainability Policy for Supply Chain. The main principle is to offer equal opportunities to all of employees and to treat each employee equally. In the requirements for the suppliers, the focus is on ob-serving national legislation and ILO conventions, depending on which of them is found more demanding from the viewpoint of employee rights. No breaches of respecting human rights have been observed in Martela's operations or supply chain.

Martela's products are manufactured on the basis of customer orders, which means that the supply chains are short and that the acquisitions mainly take place from the neighbouring areas and from else-where in Europe. In Europe, where there is a long tradition of follow-up of working conditions and leg-islation, the risks related to respecting human rights are smaller. The social risks of Martela's suppliers have been thoroughly investigated and are always reviewed when selecting new suppliers and in con-junction with supplier audits.

Martela's material supplier base is subject to an annual country-speciﬁc, social responsibility risk anal-ysis. Based on the risk analysis, the necessary supplier speciﬁc assessment of compliance is planned, for example, by own or third-party evaluation. During 2020 the pandemic prevented nearly all of supplier visits by Martela and only one third-party assessment was made. The ﬁndings of the assessment were mainly related to occupational safety and management of chemicals, although the supplier is ISO 14001 and ISO 45001 certiﬁed. Due to the pandemic, assessment of suppliers had to be limited to question-naires and written supplier commitments related to Möbelfakta labelling.

The 2020 sustainability training was implemented in the autumn and was attended by 80% of the personnel. The training was used to study how comprehensively the employees perceive that the prin-ciples in Martela's code of conduct are present in team meetings and how well they are aware of the operating models for dealing with inappropriate behaviour. About half of the staff remembered that the absolute ban on corruption and bribery had been discussed in team meetings. Nearly 70% remembered that the ban on inappropriate behaviour had been discussed. Employees were also asked for their com-mitment to the principles of code of conduct and to achieving accident-free and smooth working. 96% of employees committed to the principles of responsible business practice, and almost everyone com-mitted to striving for accident-free and smooth working. Reviewing and discussing the principles is an important part of everyday work enabling one to be committed to them.

PREVENTION OF CORRUPTION AND BRIBERY

Matters related to prevention of corruption and bribery are discussed in, for example, the Corporate Code of Conduct and Sustainability Policy for Supply Chain. Martela does not accept bribery in any form in its business in any of its market areas. Giving or receiving bribes is not permitted under any circumstances.

All transactions are recorded through the ﬁnancial management/bookkeeping of each subsidiary. Martela's and all its subsidiaries bookkeeping and transactions are subject to an annual statutory audit. The bookkeeping is transparent to the CFO of the Group.

Martela has two share series, A and K, with each K share entitling its holder to 20 votes at a General Meeting and each A share entitling its holder to one vote. Private holders of K shares have shareholder agreement that restricts the sale of K shares to any party outside the existing holders of K shares. There is a total of 604,800 K shares and a total of 3,550,800 A series, together 4,155,600 shares.

In January-December, a total of 1,786,397 (822,862) of the company's series A shares were traded on the NASDAQ OMX Helsinki exchange, corresponding to 50.3% (23.2) of the total number of series A shares.

The value of trading turnover was EUR 4.3 million (2.6), and the share price was EUR 3.09 at the end

of the period (3.36). During January-December the share price was EUR 3.58 at its highest and EUR 1.78 at its lowest. At the end of December, equity per share was EUR 2.71 (3.80).

There were no disclosure notiﬁcations in 2020. More information on the Martela Corporation shares and shareholders can be found under note 27 of the Notes to the ﬁnancial statements.

TREASURY SHARES

Martela did not purchase any of its own shares in January-December. Martela owns a total of 13 082 Martela A shares and its holding of treasury shares amounted to 0.3% of all shares and 0.1% of all votes. Out of the shares 12,036 were purchased at an average price of EUR 10.65 and 1,046 were transferred from Martela Corporation's joint account to the treasury shares by the decision made by the Annual Gen-eral Meeting on March 13, 2018.

SHARE-BASED INCENTIVE PROGRAMME

In the effective share-based incentive programme there are two earning periods, which are 2017-2018 and 2019-2020. The Board of Directors will decide the earning criteria and the goals for each criterion of the programme at the beginning of each earning period.

The target group for the 2017-2018 and 2019-2020 earning periods is the Group's Management Team. The potential reward of the programme from the earning period 2017-2018 is based on the Group´s Earn-ings before Interest and Taxes (EBIT) and from the earning period 2019-2020 based on the Group's rev-enue and Earnings before Interest and Taxes (EBIT). No incentives will be paid for the earning period 2017-2018. The cash portion is aimed to cover taxes and other costs related to the reward. Management of the share-based incentive scheme has been outsourced to an external service provider.

2020 Annual General Meeting

Martela Corporation's Annual General Meeting was held on Thursday, March 12, 2020. The Meeting ap-proved the Financial Statements, discharged the members of the Board of Directors and CEO from li-ability for the year of 2019 and adopted Remuneration Policy for the Company's governing bodies. The Board of Directors proposal that no dividend will be distributed was approved.

The Annual General Meeting conﬁrmed that the Board of Directors will consist of seven members and Ms. Minna Andersson, Mr. Jan Mattsson, Mr. Eero Martela, Mr. Heikki Martela, Ms. Katarina Mellström and Ms. Anni Vepsäläinen be re-elected as members of the Board of Directors and Mr. Johan Mild elected as a new member of the Board of Directors.

Authorised Public Accountant Ernst & Young Oy was elected as the company's auditor.

The Annual General Meeting authorised the Board in accordance with the proposal of the Board of Directors to decide on the repurchase of own shares, issuance of own shares and/or to dispose of the own shares held by the Company.

The Board of Directors elected by Martela Corporation's Annual General Meeting had its organisation-al meeting after the Annual General Meeting and re-elected from among its members Heikki Martela as the Chairman and Katarina Mellström as the new Vice Chairman of the Board.

Administration

Martela Corporation is a Finnish limited liability company that is governed in its decision-making and management by Finnish legislation, especially the Finnish Limited Liability Companies Act, by other reg-ulations concerning public listed companies, and by its Articles of Association. The company complies with the NASDAQ OMX Guidelines for Insiders and the Corporate Governance Code 2020 for Finnish listed companies published by the Securities Market Association. More information on Martela's govern-ance can be found on the company's website.

Martela Responsibility Report includes extensively the non-ﬁnancial information (NFI) required by the accounting law reforms. The Responsibility Report of 2020 will be published after the Annual Report.

Risks and uncertainties

The principal risk regarding proﬁt performance relates to the general economic uncertainty and the con-sequent effects on the overall demand in Martela's operating environment. Due to the project-based na-ture of the sector, forecasting short-term developments is challenging. In accordance with Martela's risk management model, the risks are classiﬁed and guarded against in different ways.

Production of Martela's products is based on orders placed by customers, supply chain is short and purchases are mainly from neighbouring area and from other parts of Europe. Extensive warehousing is not needed. The product assembly is automated and based on component subcontracting and on as-sembly carried out by Martela.

Risks of damage are covered with appropriate insurance and this provides comprehensive coverage for property, business interruption, supplier interruption loss and loss liability risks. The services of an external partner are used in insurance as well as in legal matters.

Finance risks are discussed in note 22 of the notes to the ﬁnancial statements.

SHORT-TERM RISKS

The principal risk regarding proﬁt performance relates to the general economic uncertainty and the con-sequent effects on the overall demand in Martela's operating environment. The coronavirus pandemic and the uncertainty caused by it have had a negative impact on the market situation. Due to the project-based nature of the sector, forecasting short-term development is challenging in normal circumstances. This has been further been emphasised by the general uncertainty caused by the pandemic.

Events after the end of the ﬁnancial year

Head of Innovation to Market -organisation and management team member VP, Mikko Mäkelä, is head-ing for new challenges outside Martela and leaves the company at the end of January. Artti Aurasmaa, CEO, will take as interim position to lead the Innovation to Market business in addition to his duties as the CEO. The change has been announced in the stock exchange release on January 14, 2021.

Martela Plans restructuring measures to improve operational efﬁciency and starts co-operation ne-gotiations. This has been announced in the stock exchange release on January 27, 2021.

No other signiﬁcant events requiring reporting have taken place since the January-December period, and operations have continued according to plan.

Outlook for 2021

The Martela Group anticipates that its revenue and operating result in 2021 will improve compared to the previous year. Due to normal seasonal variations, the Group's operating result accumulates during the second half of the year.

Proposal of the board of directors for distribution of proﬁt

The Board of Directors will propose to the AGM that no dividend will be distributed for 2021.

Annual general meeting

The Annual General Meeting is planned to be held on Thursday 18 March 2021. The notice of the Annual General Meeting will be published in a separate release.

Consolidated comprehensive income statement

Consolidated balance sheet

(EUR 1,000)

Revenue

Other operating income

Changes of inventories of ﬁnished goods and work in progress Raw material and consumables used*

Production for own use

Employee beneﬁts expenses Other operating expenses* Depreciation and impairment Operating proﬁt (-loss)

Financial income Financial expenses

Proﬁt (-loss) before taxes Income taxes

Proﬁt (-loss) for the ﬁnancial year

Other comprehensive income:

Items that will not later be recognised through proﬁt or loss

Items resulting from remeasurement of the net debt related to deﬁned beneﬁt plans Taxes from items that will not later be recognised through proﬁt or loss

Items that may later be recognised through proﬁt or loss

Other changes

Translation differences

Other comprehensive income for the period

Total comprehensive income

Allocation of proﬁt (-loss) for the ﬁnancial year Equity holders of the parent

Allocation of total comprehensive income Equity holders of the parent

Earnings per share of the proﬁt attributable to the equity holders of the parent Basic earnings/share, EUR

Diluted earnings/share, EUR

Note

3 4 5

9 9

7 7

-23,072 -26,651

1.1.-31.12.2019 106,207

356 Non-current assets
116 Intangible assets

-63,977 172

-10,498 -13,304

-6,523 -4,949

-3,996 -2,031

103 -772

-4,813 -2,701

7 159

-4,806 -2,541

-37 6

-38

-98 -167

-2,708

-2,541

-2,708

-0,61 -0,61

(EUR 1,000)

Note

ASSETS

Tangible assets Available-for-sale ﬁnancial assets Deferred tax assets

Non-current assets, total

Current assets Inventories

Trade receivables and other receivables Cash and cash equivalents

Current assets, total

ASSETS, TOTAL

31.12.2020

31.12.2019

14 12, 15

5,792 7,605

10,387 9,582

7 7

314 287

16,499 17,481

9,473 8,587

14,562 20,179

11,172 9,621

35,207 38,387

55,868

Consolidated cash ﬂow statement

(EUR 1,000)

EQUITY AND LIABILITIES

Note

Equity attributable to holders of the parent Share capital

Share premium account Other reserves Treasury shares* Translation differences Retained earnings Equity, total

Non-current liabilities Deferred tax liabilities Pension obligations Financial liabilities Provisions

Non-current liabilities, total

Current liabilities

Financial liabilities Advances received Trade payables

Accrued liabilities and prepaid income Other current liabilities

Provisions

Non-interest-bearing current liabilities, total

LIABILITIES, TOTAL

EQUITY AND LIABILITIES, TOTAL

31.12.2020

13 19 12, 18 20

12, 18

12, 21

7,000 7,000

1,116 1,116

-9 -9

-128 -128

-1,060 -1,038

4,292 9,138

11,212 16,080

198 283

492 472

6,277 5,924

282 282

* The shares acquired for and assigned to share-based incentive scheme are shown in accounting terms as treasury shares. See notes 17.

31.12.2019

(EUR 1,000)

1.1.-31.12.2020

55,868

70 32,827

39,788

2,826

3,728

9,839

8,188

8,176

6,961

Cash ﬂows from operating activities Cash ﬂow from sales

Cash ﬂow from other operating income Payments on operating costs

Net cash from operating activities before ﬁnancial items and taxes

Interest paid

Interest received Other ﬁnancial items Dividends received Taxes paid

Net cash from operating activities (A)

Cash ﬂows from investing activities

Capital expenditure on tangible and intangible assets Proceeds from sale of tangible and intangible assets Net cash used in investing activities (B)

Cash ﬂows form ﬁnancing activities

Proceeds from short-term loans Repayments of short-term loans Repayments of lease liabilities Proceeds of long-term loans

Dividends paid and other proﬁt distribution Net cash used in ﬁnancing activities (C)

Change in cash and cash equivalents (A+B+C), increase +, decrease -

Cash and cash equivalents at the beginning of year

Translation differences

Cash and cash equivalents at the end of year

-88,199 -101,324

6,564 6,634

-545 -360

18 5

-252 -208

8 0

-74 203

-9,333 -1,152

-3,027 -2,631

-2,960 -4,197

1,599 -957

9,621 10,594

1.1.-31.12.2019

107,633 325

6,274

-3,040 5 -3,034

0 -414

-16 9,621

Statement of changes in equity

Equity attributable to equity holders of the parent (EUR 1,000)

Equity 1.1.2019

Share capital 7,000

Correction of errors in previous periods Other comprehensive income

Proﬁt (-loss) for the ﬁnancial year

Other items of comprehensive income adjusted by tax effects Translation differences

Items resulting from remeasurement of the net debt related to deﬁned beneﬁt plans (incl. Deferred taxes)

Other change

Total comprehensive income Share-based incentives

Business transactions with owners Dividends

0 0

Share premium account 1,116

Other reserves -9

Treasury shares -128

Translation diff.

-940

-98 -98

-31 -31

-98

Retained earnings 11,751

Equity total 18,790

340 340

-2,541 -2,541

-38 -38

-2,610 72

-2,708 72

-414

Equity 31.12.2019

7,000

1,116

-9

-128

-1,038

9,138

16,080

Equity 1.1.2020	7,000 1,116 -9 -128 -1,038 9,138 16,080
Correction of errors in previous periods
Other comprehensive income	, ,
Proﬁt (-loss) for the ﬁnancial year	-4,806 -4,806
Other items of comprehensive income adjusted by tax effects
Translation differences	-22 -22
Items resulting from remeasurement of the net debt related to deﬁned beneﬁt plans (incl. Deferred taxes)	32 32
Other change	0
Total comprehensive income	-22 -4,774 -4,796
Share-based incentives	-72 -72
Business transactions with owners
Dividends	0 0

Equity 31.12.2020	7,000 1,116 -9 -128 -1,060 4,292 11,212

More information in Notes 16 Equity and 17 share-based payments.

Accounting Principles for the Consolidated Financial Statements

Martela Group

Martela Corporation supplies ergonomic and innovative furniture solutions and provides interior plan-ning services.

The Group's parent company is Martela Oyj, a Finnish public limited company domiciled in Helsinki, street address Takkatie 1, FI-00370 Helsinki. The company's A-shares are listed on Nasdaq Helsinki.

Copies of the Group's ﬁnancial statements are available at Takkatie 1, FI-00370 Helsinki, and on the Internet at Martela's home pageswww.martela.com.

These ﬁnancial statements were authorised for issue by the Board of Directors of Martela Oyj on Feb-ruary 4, 2021. The Finnish Limited Liability Companies Act permits the shareholders to approve or reject the ﬁnancial statements in the general meeting that is held after publishing the ﬁnancial statements. As well, the general meeting has a possibility to amend the ﬁnancial statements.

BASIS OF PREPARATION

Martela's consolidated ﬁnancial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as on December 31, 2020. As referred to in the Finnish Accounting Act and in ordinances issued pursuant to the provisions of this Act, the International Financial Reporting Stand-ards refer to the standards and their interpretations adopted in accordance with the procedure laid down in Regulation (EC) No 1606/2002 of the EU. The notes to the consolidated ﬁnancial statements also conform with additional requirements of the Finnish accounting and company legislation.

The consolidated ﬁnancial statements are presented in thousands of euros and have been prepared on the historical cost basis except as disclosed in the accounting policies. All presented ﬁgures have been rounded, which is why the sum of individual ﬁgures might deviate from the presented sum. The key ﬁnancial indicators have been calculated using exact ﬁgures. Martela's consolidated ﬁnancial state-ments cover the full calendar year, and this represents the ﬁnancial period for the parent company and the Group companies.

USE OF ESTIMATES

The preparation of the ﬁnancial statements in conformity with IFRS requires Group management to make certain estimates and to use judgement when applying accounting policies. The section "Account-ing policies requiring management's judgement and key sources of estimation uncertainty" refers to the judgements made by management and those ﬁnancial statement items on which judgements have a sig-niﬁcant effect.

Principles of consolidation

The consolidated ﬁnancial statements include the parent company, Martela Oyj, and all the subsidiaries in which the parent company controls, directly or indirectly, more than 50% of the voting power of the shares, or otherwise has control. Martela is considered to be in control of a subsidiary when it is ex-posed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are included in the consolidated ﬁnancial statements by using the acquisition method. The intra-group transactions, unrealised margins on intra-group deliveries, intra-group receivables and liabilities and proﬁt distribution are eliminated.

Items denominated in foreign currency

Transactions in foreign currencies are translated at the exchange rate prevailing on the date of the trans-action - in practice, for transactions taking place within any given month, a rate is used that approxi-mates the rate of the transaction date. At the end of the reporting period, the monetary assets and lia-bilities are translated into functional currencies at the exchange rate at the end of the reporting period. Exchange rate gains and losses related to business operations are treated as adjustments to the pur-chases and sales. Exchange rate gains and losses in ﬁnancing are treated as adjustments to ﬁnancial income and expenses.

The statements of comprehensive income and cash ﬂows of foreign subsidiaries for the period are translated into euros at the average rates for the ﬁnancial year, and the balance sheets at the average rates of the European Central Bank at the end of the reporting period. The translation of the proﬁt or loss and comprehensive income for the period at different exchange rates in the statement of compre-hensive income and in the balance sheet causes a translation difference which is recognised in other comprehensive income. The exchange rate differences arising from the elimination of the cost of the foreign subsidiaries and the exchange rate differences arising from the translation of post-acquisition equity are also recognised in other comprehensive income. Similar treatment is applied to intra-group non-current loans which in substance are equity and form a part of the net investment in the operation in question. When a subsidiary is disposed of, all or in part, the accumulated translation differences are reclassiﬁed to proﬁt and loss as part of the gain or loss on disposal.

Government grants

Grants received from the states or other similar sources are recognised and presented as other operating income when they meet the recognition criteria. Grants related to the acquisition of tangible and intan-gible assets are recognised as deductions from the carrying amount of the assets in question. Grants are recognised as income over the useful life of a depreciable / amortisable asset by way of a reduced depreciation / amortisation charge. The public grants received during the ﬁnancial year 2020 consist of grants granted by Business Finland to Group companies.

Revenue recognition principles

Furniture is mainly delivered as installed at customer. The control of the furniture is transferred to the customer when the deliverables form the contract are fulﬁlled, i.e. the furniture is delivered and installed at customer and the customer has approved the delivery. The signiﬁcant risks and rewards of ownership of the furniture is also transferred to the buyer through the approval of the delivery. Revenue from sold goods is recognised as the control of the goods is transferred to the buyer according to the agreement. The normal warranty for standard Martela produced products in normal use is ﬁve years and for other standard products two years.

Consultative services consist of workshops and interviews for speciﬁcation of the demands placed on the work environment and interior planning services. The deliverable is fulﬁlled and the control is transferred to the customer as the product of the service is delivered to the customer. Revenue from consultative services is recognised as the deliverable is fulﬁlled.

In removals services the value of the service is received by the customer as Martela provides theservice. In such cases the revenue is recognised over time. The removal services provided by Martela are mainly short in duration. In case a removal services project lasts for several months is the revenue recognised based on either invoicing of the achieved project milestones or based on actual work hours registered for the project.

The transaction prices for the sold goods and services are deﬁned for each deliverable on the sales orders and no variable considerations are in use. Martela does not have capitalised costs for obtaining or of fulﬁlling customer contracts. Sales receivables are typically due latest within two months from in-voicing. The customer contracts do not include signiﬁcant ﬁnancing components provided by Martela.

Revenue consists of income from customer contracts according to IFRS 15 and income from custom-er contracts that are classiﬁed as leases based on the contract contents, and are treated in accordance to IFRS 16.

Leases in which substantially all the risks and rewards incidental to ownership of an asset remain with the lessor are classiﬁed as operative lease contracts and recognised as revenue in the statement of comprehensive income on a straight-line basis over the lease term. In ﬁnance leases, the risks and bene-ﬁts of ownership have been substantially transferred to the lessee. The gain on the sale of the contract is recognised in the same way as for the sale of an asset.

Employee beneﬁts

PENSION LIABILITIES

The Group has arranged deﬁned contribution plans and deﬁned beneﬁt plans for retirement. A deﬁned contribution plan is a pension plan under which the Group pays ﬁxed contributions into a separate enti-ty. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufﬁcient assets to pay all employees the beneﬁts relating to employee service in the current and prior periods. A deﬁned beneﬁt plan is a pension plan that is not a deﬁned contribution plan. Contribu-tions made to deﬁned contribution plans are recognised in proﬁt or loss as an expense as incurred.

The obligations of deﬁned beneﬁt plans are calculated separately for each plan. The projected unit credit method is used in the calculation. Pension costs are recognised as an expense over the service period of personnel on the basis of calculations performed by qualiﬁed actuaries. In calculating the pres-ent value of a pension obligation, the market yield of corporate high-grade bonds or the interest rate of government bonds are used as the discount rate. Their maturity corresponds to a signiﬁcant extent with the maturity of the computed pension liability.

Pension expenses (service cost in the period) and the net interest for the net debt related to the de-ﬁned beneﬁt pension plan are recognised through proﬁt or loss. Pension expenses are included in em-

ployee beneﬁt expenses. Items resulting from the remeasurement of the net debt (or net asset) related to the deﬁned beneﬁt plan are recorded in items of other comprehensive income in the ﬁnancial period during which they emerge. These include actuarial gains and losses and returns on assets included in the plan, among other items. Past service costs are recognised in expenses through proﬁt or loss on the earlier of the following dates: the date when the plan is amended or reduced, or the date when the entity recognises the reorganisation expenses related to this or the beneﬁts related to the termination of the employment relationship.

SHARE-BASED PAYMENTS

In the Group's share-based incentive system, with vesting periods 2017-2018 and 2019-2020, payments are made in a combination of shares and cash. Share rewards are measured at fair value at the grant date and recognised as expenses over the vesting period. The vesting conditions are taken into account in the number of shares which are expected to vest by the end of the validity period. Measurements are adjusted at the end of each reporting period and the settlement is recognised under equity. The expense determined at the time of granting the share-based incentives is based on the Group's estimate of the number of shares which are expected to vest by the end of the vesting period. The assumed vesting takes account of the maximum incentive, the assumed achievement of non-market-based earnings tar-gets and the reduction of persons participating the plan. The Group updates the estimate of the ﬁnal number of shares at the end of each reporting period. Their impact on proﬁt or loss is presented in the statement of comprehensive income under employment beneﬁts expenses.

OPERATING PROFIT

Operating proﬁt is the Group's proﬁt from operations before ﬁnancial items and income taxes. Exchange rate differences arisen in the translation of trade receivables and payables denominated in foreign cur-rencies are included in operating proﬁt.

INCOME TAXES

The taxes recognised in the consolidated statement of comprehensive income include current tax based on the taxable income of the Group companies for the ﬁnancial year, taxes for previous years and the change in deferred taxes. For transactions and other events recognised in proﬁt or loss, any related tax effects are also recognised in proﬁt or loss. For transactions and other events recognised outside proﬁt or loss (either in other comprehensive income or directly in equity), any related tax effects are also rec-

ognised either in other comprehensive income or directly in equity, respectively.

Deferred tax assets and liabilities are recognised on temporary differences between the tax bases and IFRS carrying values of assets and liabilities in the ﬁnancial statements. A deferred tax asset is rec-ognised only to the extent that it is probable that taxable proﬁt will be available against which it can be used. Deferred tax liabilities are recognised to the full extent in the balance sheet. Deferred taxes are measured by using the tax rates enacted or substantively enacted by the end of the reporting period.

Intangible assets

GOODWILL

Goodwill resulting from business combinations represents the excess of the consideration transferred over the fair value of the net identiﬁable assets acquired.

Goodwill is tested annually or more frequently if there are indications that the value might be impaired. Testing is performed at least at the end of each ﬁnancial year. For this purpose goodwill is allocated to cash generating units. An impairment loss is recognised whenever the carrying amount of cash-generat-ing unit exceeds the recoverable amount. Impairment losses are recognised in the comprehensive income statement. An impairment loss in respect of goodwill is never reversed.

RESEARCH AND DEVELOPMENT

Research and development is active and continuous in the Group and if individual development projects are of such a scope in relation to operations and if the capitalisation criteria are fulﬁlled these projects are capitalised. Research expenditure is recognised as an expense when incurred. R&D-related equipment is capitalised in machinery and equipment. There has been no development costs that met the capitali-sation criteria during the ﬁnancial year.

OTHER INTANGIBLE ASSETS

An intangible asset is initially capitalised in the balance sheet at cost if the cost can be measured relia-bly and it is probable that the expected future economic beneﬁts that are attributable to the asset will ﬂow to the Group. Other intangible assets include software licences, IT-programmes, patents and other corresponding rights. Patents, licences and other rights are measured at historical cost, less amortisa-tion and any impairment.

The useful lives of intangible assets are as follows: Licences_______________________ 3-5 years IT-programmes___________________ 3-10 years Customership____________________ 4 years Brands_________________________ 6 years Patents and other corresponding rights_ 10 yearsAmortisation is recognised using the straight-line method.

pairment loss is recognised if the balance sheet value of an asset or a cash-generating unit exceeds the recoverable amount of it. Impairment losses are recognised in the statement of comprehensive income.

If there are indications that impairment losses no longer exist or that they have diminished, the recov-erable amount is estimated. An impairment loss previously recognised in the statement of comprehensive income is reversed if the estimates used in measuring the recoverable income have changed. However, an impairment loss cannot be reversed to an extent more than what the carrying amount of the asset or cash-generating unit would be without recognition of an impairment loss.

Tangible assets

Land, buildings, machinery and equipment constitute the majority of tangible assets. They are measured in the balance sheet at historical cost, less accumulated depreciation and any impairment.

When a part of an item of property, plant and equipment (accounted for as a separate asset) is re-newed, the expenditure related to the new item is capitalised and the possibly remaining balance sheet value removed from the balance sheet. Other expenditure arising later is capitalised only when future economic beneﬁts will ﬂow to the Group. Other expenditure for repairs or maintenance is expensed when it is incurred. Those borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. A tan-gible asset once classiﬁed as held for sale is not depreciated. Land is not depreciated. The estimated depreciation periods are as follows:

Buildings________________ 15-30 years Machinery and equipment____ 3-8 yearsThe residual values and useful lives of tangible assets are reviewed at least at each ﬁnancial year-end and, if necessary, are adjusted to reﬂect changes in the expected future economic beneﬁts.

Gains and losses from the sale or disposal of tangible assets are recognised in proﬁt and loss and presented under other operating income or other operating expenses.

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

The carrying amounts of assets are assessed at the end of each reporting period to observe whether there are any indications that an asset may be impaired. If such indications exist, the recoverable amount of the asset will be estimated at the higher of its fair value less costs to sell and its value in use. An im-

Leases

Martela's lease contracts consist mainly of ofﬁce spaces, cars and IT-equipment. The lease contracts of cars and IT-equipment are time limited whereas the contracts for ofﬁce spaces are mainly open end-ed. The lease contracts do not include variable lease payments and Martela does not have any sale and leaseback transactions.

Lease agreements, for which the lease period is beyond 12 months, are according to IFRS 16 recognised on the balance sheet as a right-of-use assets and lease liabilities. The right-of-use assets decreased with the accumulated depreciations are recognised as tangible assets. The right-of-use assets are depreci-ated over the lease period or an estimated period if longer. Estimated rental periods, are used for lease agreements of indeﬁnite duration. The estimated rental periods are 2 years for rented ofﬁces and sales facilities and 1 year for warehouses. Martela applies the exemptions to IFRS 16 and does not apply IFRS 16 to short-term leases for which the lease term ends within 12 months and leases of low-value assets, which are not ofﬁces or warehouses in use by Martela.

Short term lease contracts and leases of low-value assets, are disclosed as other rental agreements from which the payments are recognised as equal instalments over the rental period in the consolidated statement of comprehensive income.

The lease liabilities have been discounted at the borrowing rate. The weighted average discount rate is 2,6%

Martela has one lease agreement concerning a real estate in which Martela acts as a lessor. This con-tact is disclosed as other rental agreements and the rental income is recognized as equal instalments over the rental period in the consolidated statement of comprehensive income.

Inventories

Inventories are measured at the lower of cost and net realisable value. The value of inventories is de-termined by using weighted average purchase prices and it includes all direct expenditure incurred by

acquiring the inventories and also a part of the production overhead costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Inventory value includes adjustments caused by obsolescence.

Financial assets

Group's ﬁnancial assets are classiﬁed into the following groups: ﬁnancial assets at fair value through proﬁt or loss, ﬁnancial assets at fair value through other comprehensive income and ﬁnancial assets measured at amortised costs. The classiﬁcation depends on the purpose of acquiring the ﬁnancial as-sets, and they are classiﬁed at the time of initial acquisition. All purchases and sales of ﬁnancial assets are recognised and derecognised on the trade date. The Group derecognises ﬁnancial assets when it has lost its right to receive the cash ﬂows or when it has transferred substantially all the risks and re-wards to an external party.

Financial assets measured at amortised costs include assets that are held in a business model whose object is achieved by holding the assets and collecting contractual cash ﬂows until the due date. The cash ﬂow from the assets consists of solely payments of principal and interest on the principal amount outstanding. They are originally recognised at fair value and subsequently measured at amortised cost. The group recognises a deduction in the ﬁnancial assets recognised at amortised cost based on expect-ed credit losses. These assets are included in either current or non-current ﬁnancial assets (they are included in the latter if they mature over 12 months later). The category includes loan, trade and other receivables that are not derivatives.

Cash and cash equivalents comprise cash in hand, in banks and in demand bank deposits, as well as other current, very liquid investments. Items qualifying as cash and cash equivalents have original ma-turities of three months or less from the date of acquisition.

IMPAIRMENT OF FINANCIAL ASSETS

At the end of each reporting period, the Group assesses whether objective evidence exists of the im-pairment of an individual ﬁnancial asset or a group of ﬁnancial assets. Impairment will be recognised through proﬁt or loss.

A simpliﬁed model according to IFRS 9 is used in assessing the expected credit losses on trade re-ceivables: credit losses are recognised to an amount that represents the expected credit losses for the full lifetime. The expected credit losses are assessed based on historical information on credit losses and on the information on the future ﬁnancial circumstances available on the review date.

FINANCIAL LIABILITIES

The Group classiﬁes its ﬁnancial liabilities as ﬁnancial liabilities measured at amortised cost (mainly in-cludes borrowings from ﬁnancial institutions, IFRS 16 lease liabilities and trade payables) .

Financial liabilities are initially recognised at fair value and are subsequently measured either at am-ortised cost or at fair value, based on the classiﬁcation made. Financial liabilities are included in current and non-current liabilities and they can be interest-bearing or non-interest-bearing. Bank overdrafts are included in current interest-bearing liabilities. Financial liabilities are regarded as current, unless the Group has an absolute right to postpone the repayment of the debt until a minimum of 12 months after the end of the reporting period. Financial liabilities (in full or in part) are not eliminated from the balance sheet until the debt has ceased to exist - in other words, when the obligation speciﬁed in the agreement has been fulﬁlled or rescinded or ceases to be valid.

Share capital

Outstanding ordinary shares are shown as share capital. The share capital consists of K and A series shares. The shares of both series have identical dividend rights but K series shares confer 20 votes and A series shares 1 vote at general meetings of shareholders.

Expenses related to the issuance and acquisition of own equity instruments are presented as deduc-tions from equity. If Martela Oyj buys back its own equity instruments, their cost is deducted from equity.

DIVIDENDS

Dividends proposed by the Board of Directors are not recorded in the ﬁnancial statements but the relat-ed liability is only recognised when approved by a general meeting of shareholders.

Provisions

A provision is recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable that on outﬂow of economic beneﬁts will be required to settle the obligation and the amount can be estimated reliably. The amount recognised as a provision is equal to the best estimate of the expenditure required to settle the present obligation at the end of the reporting period.

Accounting policies requiring management's judgement and key sources of estimation uncertainty

In preparing the ﬁnancial statements it is necessary to make forward-looking estimates and assump-tions which may not, in fact, turn out to be true. In addition, it is necessary to use judgement in apply-ing accounting policies to the ﬁnancial statements. The foremost estimates concern the utilisation of deferred tax assets against future taxable income and the assumptions used in the impairment test-ing. Other estimates requiring management's judgement mainly concerns the amount of non-marketable inventories, impairment of trade receivables, the amount of guarantee provisions and the deﬁnition of the lease period in lease contracts of indeﬁnite duration under IFRS 16. Estimates and assumptions are based on management's current best knowledge at the end of the reporting period, reﬂecting historical experience and other reasonable assumptions.

Impairment testing

The carrying amounts of non-current assets are assessed at the end of each reporting period to observe whether there are any indications that the balance sheet value of an asset or a cash-generating unit ex-ceeds the recoverable amount of it.

If such indications exist, the recoverable amount of the asset will be estimated at the higher of its fair value less costs to sell and its value in use. Value in use is calculated based on discounted forecast cash ﬂows. An impairment loss is recognised if the balance sheet value of an asset or a cash-gener-ating unit exceeds the recoverable amount of it. Impairment losses are recognised in the statement of comprehensive income.

Goodwill is tested for impairment annually regardless of whether there is any indication of impair-ment. An impairment loss in respect of goodwill is never reversed. (Note 10)

The recoverable amounts of cash generating units have been determined using calculations based on value in use. In the calculations, forecast cash ﬂows are based on ﬁnancial plans approved by man-agement, covering a period of ﬁve years. The central assumptions concern development of growth and proﬁtability. The cash ﬂows beyond the ﬁve-year period are estimated based on 1,5% growth.

The usability of inventory items in the valid sales product portfolio is investigated in the valuation of inventories. If the sales portfolio does not include products where an inventory item is used, the value of such an item is written down.

Deferred tax receivables

The prerequisites for recognition of deferred tax receivables are assessed at the end of each reporting period. Assumptions made by the managers of the Group companies on taxable income in future ﬁnan-cial periods have been taken into account when evaluating the amount of deferred tax assets. Various internal and external factors can have a positive or negative effect on deferred tax assets. These include restructuring in the Group, amendments to tax laws (such as changes to tax rates or a change to the period of utilisation of conﬁrmed deductible tax losses) and changes to the interpretations of tax regu-lations. Deferred tax assets recognised in an earlier reporting period are recognised in expenses in the consolidated statement of comprehensive income if the unit in question is not expected to accumulate sufﬁcient taxable income to be able to utilise the temporary differences, such as conﬁrmed tax losses, on which the deferred tax assets are based.

Deferred tax assets are not recorded for taxation losses in subsidiaries.

1. Segment reporting

As a result of harmonising and combining processes, the organisation, reporting and systems, as of 2017 the company reports consolidated ﬁgures as a single segment and in addition reports revenue by country. Revenue will be reported by the location of a customer in following countries: Finland, Sweden, Norway and Other countries.

Liikevaihto (EUR 1,000)

1.1.-31.12.2020

Revenue by area Finland Sweden Norway Other areas Total

Income from the sale of goods Income from the sale of services Total

72,350 83,170

9,172 10,663

3,770 7,792

3,093 4,582

88,385 106,207

74,209 91,494

14,176 14,713

88,385 106,207

1.1.-31.12.2019

Revenue includes EUR 579 thousand (196) income from sold furniture that based on the customer agreement is classiﬁed as ren-tal income.

(EUR 1,000)

1.1.-31.12.2020

Assets and liabilities from contracts with customers Trade receivables

Accrued income based on customer contracts Prepayments based on customer contracts

1.1.-31.12.2019

Assets

Information about geographical regions Non-current assets (EUR 1,000)

Finland

Sweden Other regions Total

Non-current assets (EUR 1,000)

Finland

Sweden Other regions Total

2. Other operating income

16,847 (EUR 1,000)
Intangible assets 31.12.2020
Intangible assets 31.12.2019
7,592 9,328
0 88
13 165
7,605 9,582
1.1.-31.12.2020
3,728 Rental income
1,358 Gains on sale of tangible assets
Public subsidies
Tangible assets 31.12.2019
1.1.-31.12.2019
Other income from operations Total

62 5

257 261

16 3

205 88

540 356

Tangible assets 31.12.2020

Governance 27

3. Employee beneﬁts expenses

(EUR 1,000)

Salaries and wages

1.1.-31.12.2020

Pension expenses, deﬁned contribution plans Pension expenses, deﬁned beneﬁt plans Part paid as share-based incentives Other salary-related expenses

Personnel expenses in the income statement Other fringe beneﬁts

Total

Vehicles Real estate Other Total

1.1.-31.12.2019

-171 Administration
-1,196 Marketing

A total of EUR - 729 thousand for 2020 and EUR - 750 thousand from 2019 were recognised in the result from the incentives and salary-related expenses associated with the incentive scheme. Salaries and fees and share-based payments are presented in more detail under Note 24 Related-party transactions.

More information about share-based incentive programme is in note 17.

Personnel

2020 2019

Personnel on average, workers Personnel on average, ofﬁcials Personnel on average, total

Personnel at year end

Personnel on average in Finland Personnel on average in Sweden Personnel on average in Norway Personnel on average in Poland Total

4. Other operating expenses

Other operating expenses are reported by type of expense.

(EUR 1,000)

1.1.-31.12.2020

Auditors' fees Auditing Other services Total

-527 -1,376

-448 -1,021

-1,582 -2,010

-2,833 -2,617

-1,198 -1,264

-214 -254

-1,065 -1,441

-2,631 -3,319

-73 -86

-7 -79

-80 -165

Auditors' fees are included in administration expenses.

5. Depreciation and impairment

(EUR 1,000)

1.1.-31.12.2020

Depreciation Intangible assets Tangible assets Buildings and structures Machinery and equipment Depreciation, total

Depreciation of right-of-use assets according to IFRS 16 Buildings and structures

Machinery and equipment Depreciation, total

-2,196 -900

-484 -540

-695 -790

1.1.-31.12.2019

-13,304

1.1.-31.12.2019

-2,230

-2,110 -609 -2,719

6. Research and development expenses
The income statement includes research and development expenses of EUR -1,971 thousand (EUR -2,211 thousand in 2019).	(EUR 1,000)	1.1.-31.12.2020	1.1.-31.12.2019
Income taxes, ﬁnancial year	-25	-20
Taxes for previous years	-77	3
7. Financial income and expenses
Change in deferred tax liabilities and assets	110	176
Total	7	159

(EUR 1,000)

1.1.-31.12.2020

1.1.-31.12.2019

Financial income

Interest income on loans and other receivables Foreign exchange gain on loans and other receivables Ohter ﬁnancial income

Total

Financial expenses

Interest expenses from ﬁnancial liabilities measured at amortised cost Foreign exchange losses on loans and other receivables

Interest expenses of lease liabilities according to IFRS 16 Other ﬁnancial expenses

Total

Financial income and expenses, total

Total exchange rate differences affecting proﬁt and loss are as follows: Exchange rate differences, sales (included in revenue)

Exchange rate differences, purchases (included in adj.of purchases) Exchange rate differences, ﬁnancial items

Exchange rate differences, total

18 5

95 96

10 2

123 103

-403 -285

-224 -176

-162 -165

-152 -146

-940 -772

-818 -670

-33 -43

-72 -68

-128 -80

-234 -191

8. Income taxes

(EUR 1,000)	1.1.-31.12.2020	1.1.-31.12.2019
Proﬁt attributable to equity holders of the parent	-4,806	-2,541
Weighted average number of shares (1000)	4,143	4,143
Basic earnings per share (EUR/share)	-1,16	-0,61
The company has no diluting instruments 31.12.2020 or 31.12.2019.
29

Reconciliation between the income statement's tax expense and the income tax expense calculated using the Martela Group's do-mestic corporation tax rate 20.0%.

(EUR 1,000)

Proﬁt before taxes

Taxes calculated using the domestic corporation tax rate Different tax rates of subsidiaries abroad

Taxes for previous years

Recognition of unused tax losses not booked earlier Tax-exempt income

Non-deductible expenses

Unbooked deferred tax assets on losses in taxation Other items

Income taxes for the year in the p/l (+ = expense, - = proﬁt)

-4,813 -2,701

-963 -540

-46 -31

-77 3

-116 -116

0 -3

44 36

1908 731

-758 -239

-7 -159

9. Earnings per share

The basic earnings per share is calculated dividing the proﬁt attributable to equity holders of the parent by the weighted average number of shares outstanding during the year.

1.1.-31.12.2020

1.1.-31.12.2019

10. Intangible assets

(EUR 1,000)

Accumulated depreciation 1.1. Accumulated depreciation, decreases Depreciation for the year 1.1.-31.12. Impairment

Acquisition cost 1.1. Increases Decreases

Acquisition cost 31.12.

Exchange rate differences Accumulated depreciation 31.12.

Carrying amount 1.1.

Carrying amount 31.12.

The Group's Goodwill EUR 883 thousand (EUR 883 thousand in 2019) relates to the Grundell acquisition Martela made December 31, 2011. The expected future cash ﬂows will be generated through more extensive service solutions encompassing also products and the already implemented proﬁt improving actions. The revenue growth is also supported by the renewed strategy of Martela that increases the emphasis on service within the Group.

Goodwill

Impairment testing

Goodwill is tested annually or more frequently if there are indications that the amount might be impaired. In assessing whether goodwill has been impaired, the carrying value of the cash generating unit has been compared to the recoverable amount of the cash carrying unit. The recoverable amount of the goodwill is determined based on the value in use calculations. The value in use is calculated based on the discounted forecast cash ﬂows. The cash ﬂow forecasts rely on the plans approved by the management concerning proﬁtability and the growth rate of revenue. The plans cover a ﬁve-year period taking into account the recent development of the business.

In impairment testing the average growth is estimated to be 2.0% and EBIT 3.0%. The use of testing model requires making es-timates and assumptions concerning market growth and general interest rate level. The used pre-tax discount rate is 9.4% (11.6%) which equals the weighted average cost of capital.

The cash ﬂows after the ﬁve-year period have been forecasted by estimating the future growth rate of revenue to be 1.5%. Based on the impairment test there is no need to recognise an impairment loss.

Sensitivity analysis of impairment testing

The carrying value of the cash generating unit is EUR 4.3 million higher than the book value according to the performed impair-menttest. The rise in discount rate by 24 %-units or the actual operating proﬁt (EBIT) level on the terminal year to be 3 %-units lo-wer than estimated would cause that the recoverable amount of the cash generating units would be the same as the book value."

1.1.-31.12.2019 Intangible assets

Goodwill 883

13,135

Work in progress

478 14,496

164

2,159 2,323

Total

-31

-600 -631

13,267

883

-7,721 31 -892

0 0 0

2,038 16,188

0 -7,721

0 31

0 -892

-8,582

5,414 4,685

0 0

883 883

478 2,038

-8,582

6,776 7,605

The implementation of IFRS 16 increased the 2019 opening balance book value by EUR 786 thousand for machinery and equipment and EUR 5 329 thousand for buildings.

11. Tangible assets

1.1.2020-31.12.2020 (EUR 1,000)

Acquisition cost 1.1.

Carrying amount 31.12.

Carrying amount 1.1.

Accumulated depreciation 1.1. Accumulated depreciation, decreases Depreciation for the year 1.1.-31.12. Exchange rate differences Accumulated depreciation 31.12.

Exchange rate differences Acquisition cost 31.12.

Increases Decreases

1.1.2019-31.12.2019 (EUR 1,000)

Acquisition cost 1.1.

Land areas 66

Increases Decreases

Buildings

24,410

-15

Exchange rate differences Acquisition cost 31.12.

Accumulated depreciation 1.1. Accumulated depreciation, decreases Depreciation for the year 1.1.-31.12. Exchange rate differences Accumulated depreciation 31.12.

3 0 0 1 4

MARTELA

Carrying amount 1.1.

Carrying amount 31.12.

-12

24,462

-22,171 14 -545

-22,702

69 70

2,239 1,760

Buildings IFRS 16

-3,162

-1,059

6,666

5,329 4,337

7,500

-2110 7

1462

-606

-22

ANNUAL REPORT 2020
Machinery and	Machinery and
equipment IFRS 16	Other tangible assets	Work in progress	Total
5,614	34	119	71,124
1606	34	5,392
-4582	-4,784
-2	-2
2,637	34	152	71,732
-4,776	0	0	-61,543
4383	0	0	4,536
-662	0	0	-4,339
0	0	0
-1,054	0	0	-61,346
839	34	119	9,582
1,582	34	152	10,387
Machinery and
equipment IFRS 16	Other tangible assets	Work in progress	Total
5,253	34	0	68,599
416	119	3,371
-51	-809
-2	-37
5,614	34	119	71,124
-4,166	0	0	-57,327
0	0	157
-609	0	0	-4,383
0	0	8
-4,776	0	0	-61,545
1,070	34	0	10,981
839	34	119	9,582
Governance	31

Machinery and equipment

32,170

1295

-136

33,329

-29,933 143

-1117

-30,907

2,237 2,422

12. Book values of ﬁnancial assets and liabilities by group

(EUR 1,000)

Financial assets measured at amortised costs

Financial liabilities measured at amortised cost

Book values of balance sheet items

Fair valueHierarchy level

2020 BALANCE SHEET ITEMS Non-current ﬁnancial assets Other ﬁnancial assets Current ﬁnancial assets Trade and other receivables Book value by group

Non-current ﬁnancial liabilities Interest-bearing liabilities Current ﬁnancial liabilities Interest-bearing liabilities

Trade payables and other liabilities Book value by group

(EUR 1,000)

Financial assets measured at amortised costs

2019 BALANCE SHEET ITEMS Non-current ﬁnancial assets Other ﬁnancial assets Current ﬁnancial assets Trade and other receivables Book value by group

16,847 16,847

Financial liabilities measured at amortised cost

Book values of balance sheet items

Fair valueHierarchy level

16,847 16,899

2 15

Note

Other ﬁnancial assets include investments in unlisted equities. They have been measured at ac-quisition cost as fair value cannot be assessed reliably. The book values of trade receivables and receivables other than those based on derivatives are estimated to essentially correspond to their fair values due to the short maturity of the receivables. The book values of debts are estimated to correspond to their fair values. Interest rate level has no material effect. The book values of trade and other non-interest-bearing liabilities are also estimated to corres-pond to their fair values. Discounting has no material effect. Fair values of each ﬁnancial asset and liability group are presented in more detail under the note indicated in the table above.

Assets and liabilities recognised at fair value in the ﬁnancial statements are categorised into three levels in the fair value hierarchy based on the inputs used in the valuation technique to de-termine their fair value. The three levels are:

Level 1. Quoted prices(unadjusted) in active markets for identical assets or liabilities.

Level 2. Inputs other than quoted prices included within Level 1 that are observable for the as-set or liability either directly or indirectly e.g. discounted cash ﬂows or valuation models.

Level 3. Inputs for the asset or liability that are not based on observable market data and the fair value determination is widely based on management's judgement and the use of that in commonly approved valuation models.

Note

Non-current ﬁnancial liabilities Interest-bearing liabilities Current ﬁnancial liabilities Interest-bearing liabilities

Trade payables and other liabilities Book value by group

5,924

8,188 12,789

5,924

8,188 12,789

2 21

26,901

2 18

MARTELA	ANNUAL REPORT 2020
13. Deferred tax assets and liabilities
Recognised in the	Recognised in the other	Exchange rate
Changes in deferred taxes during 2020 (EUR 1,000)	1.1.2020	income statement	comprehensive income	differences	31.12.2020
Deferred tax assets
Pension obligations	64	0	4	0	68
Other temporary differences*	153	23	0	70	245
Total	217	23	4	70	314
Deferred tax liabilities
On buildings measured at the fair value of the transition date	264	-66	0	0	198
Other temporary differences	19	-20	0	0	0
Total	283	-86	0	0	198
Deferred tax assets and liabilities, total	-67	108	4	70	115
Recognised in the	Recognised in the other	Exchange rate
Changes in deferred taxes during 2019 (EUR 1 000)	1.1.2019	income statement	comprehensive income	differences	31.12.2019
Deferred tax assets
Pension obligations	58	0	6	0	64
Other temporary differences	76	77	0	0	153
Total	134	77	6	0	217
Deferred tax liabilities
On buildings measured at the fair value of the transition date	330	-66	0	0	264
Other temporary differences	53	-33	0	0	19
Total	383	-99	0	0	283
Deferred tax assets and liabilities, total	-249	176	6	0	-66

Deferred tax assets have not been recognised on unused tax losses that probably cannot be utilised in the future against taxable income. The amount of such losses is EUR 24.6 million (17.7 in 2019) including current year results.

*The implementation of IFRS 16 caused and increase of EUR 12 thousand in the opening balance.

Of these losses EUR 4.9 million expires from 2028 and the remainder, according to current knowledge, have no expiration date The losses originate mainly from foreign subsidiaries.

14. Inventories

Raw materials and consumables Work in progress

(EUR 1,000)

Finished goods Total

The value of inventories has been written down by -229 thousand (-263 thousand 2019) due to obsolescence.

In the valuation of inventories the fair value of an item as well as its usage in current product portfolio offered is monitored. Should the current product portfolio no longer carry the product to which the item is used the item is written down. If the pro-duct is still on sale but there has been decision to ﬁnish its selling, it will be written down to equal half of its value.

15. Current trade receivables and other receivables

31.12.2019

The age distribution of Group trade receivables on the balance sheet date 31 December is presented in the following table:

Age distribution of trade receivables (EUR 1,000)

6,738 Undue
8,587
1,081 0-6 months overdue
768 6-12 months overdue

12-24 months overdue Over 24 months overdue Total

2020

Incl. credit loss provision

55 33 12

2,399 310

12 638 751

75 608

2019

Incl. credit loss provision

14,051 59

211 181

111 82

16,847 1,240

A provision is made to the trade receivables according to following, unless it is highly likely to receive payment for the receivable: undue receivables 0.5%, 0-6 months overdue 2%, 6-12 months overdue 10%, 12-24 months overdue 50% and over 24 months over-due 100%.

The credit loss provision includes also the total receivables of a reseller of Martela that went bankrupt. The sales invoices are interest-fre and the most general payment term is 7 days.

The maximum trade receivable credit risk amount on the balance sheet date 31 December by country or region:

(EUR 1,000)

Trade receivables

Accrued income and prepaid expenses of Personnel expenses

Advances

Accrued income and prepaid expenses total

Total

31.12.2020	31.12.2019	Region (EUR 1,000)	2020	2019
12,656	16,847	Finland	9,883	10,890
Scandinavia	1,627	4,744
Other European countries	806	746
150	151	Other regions	340	467
1,755	3,182	Total	12,656	16,847
1,905	3,332
Credit risks from trade receivables are not concentrated.
14,562	20,179
Martela 2020	CEO's review

In 2020 credit losses of EUR -79 thousand (EUR -398 thousand in 2019) has been recognised as expenses and are presented in other operating expenses.

16. Equity

Share capital

The paid share capital entered in the Trade register is 7,000,000 eur. According to the Articles of Association the maximum share capital is EUR 14,000,000 and the minimum capital EUR 3,500,000. the counter value of a share is 1.68. The K-shares carry 20 vo-tes at the annual general meeting and the A-shares 1 vote each. Both share series have the same dividend rights.

Number of sharesChanges in share capital (EUR 1,000) 1.1.2019

A- shares 3,537,718

K-shares 604,800

Acq.of shares for share-based incentive system* Shares given*

Share capital 7,000

Share premium account 1,116

Shares returned Share issue 31.12.2019

3,537,718

Acq.of shares for share-based incentive system* Shares given*

604,800

Shares returned Share issue 31.12.2020

3,537,718

604,800

Martela Oyj owns 13,082 A-shares purchased at an average price of 10.65. The number of treasury shares is equivalent to 0.31% of all shares and 0.08% of all votes.

* Acquisition of shares for the share-based incentive scheme and the management of the scheme have been outsourced to an ex-ternal service provider.

A retrospective adjustment of EUR 352 thousand guarantee provision plus the deferred tax effect of EUR 70 thousand have been made to equity. More information can be found in the note 20. Moreover a retrospective correction of the inventory of EUR 621 has also been made to equity.

Translation differences in equity comprises translation differences of ﬁnancial statements of foreign subsidiaries when translat-ed into euros and of investments in foreign units. Other reserves consists of reserve funds.

The share premium account is a fund established in accordance with the previous Finnish Companies Act. According to the present Liability Companies Act (effective from September 1, 2006) it is included in restricted shareholders' equity and can no longer be accumulated. The share premium account can be reduced in accordance with the regulations on the reduction of share capital, and it can be used as a fund increase to increase share capital. The acquisition cost of treasury shares is deducted from shareholders' equity (including the related transaction costs).

The parent company's distributable equity was 18 350 thousand on December 31, 2020.

7,000

Treasury shares -128

1,116

-128

Treasury shares, share-based incentive-system 0

7,000

1,116

-128

Total 7,988

7,988

17. Share-based payments

Share-based incentive programme 2017-2018 and 2019-2020

In the effective share-based incentive programme there are two earning periods, which are 2017-2018 and 2019-2020. The Bo-ard of Directors will decide the earning criteria and the goals for each criterion of the programme at the beginning of each ear-ning period. The target group for the 2017-2018 and 2019-2020 earning periods is the Group's Management Team. The potential reward of the programme from the earning period 2017-2018 is based on the Group´s Earnings before Interest and Taxes (EBIT) and from the earning period 2019-2020 based on the Group's revenue and Earnings before Interest and Taxes (EBIT). No incenti-ves will be paid for the earning period 2017-2018.

Program Type Instrument Issuing date Maximum amount, pcs Dividend adjustment Grant date

Share-based incentive programme 2017-2018 and 2019-2020

Earning period 2017-2018

15.12.2016

80,000

7.4.2017 13.12.2018

Beginning of earning period End of earning period

31.12.2018 31.12.2020

1.1.2017 1.1.2019

End of restriction period Vesting conditions Maximum contractual life, yrs Remaining contractual life, yrs

15.4.2019 30.4.2021

EBIT

Revenue and EBIT

ShareEarning period 2019-2020

13.12.2018

100,000

3,3 3,3

0,0 0,0

Number of persons at the end of reporting year Payment method

Cash & Equity

0 5

Cash & Equity

Changes during the period 2020 1.1.2020

Earning period 2017-2018

Earning period 2019-2020

Total

Outstanding at the beginning of the reporting period, pcs

Changes during the period Granted

0 0

Forfeited Shares given

0 0

Outstanding at the end of the period

Effects from the share based incentive programme on the ﬁnancial year 2020, (EUR 1,000)

91,000

91,000 91,000

Expenses for the ﬁnancial year, share-based payments, equity settled -72

Liabilities arising from share-based payments on 31.12.2020 0

IFRS 2 requires an entity to measure the award at its fair value and recognised over the vesting period. The award is recognised in equity in its full extent. The fair value of the share-based scheme when granted was the value of a company's share.

18. Financial liabilities

(EUR 1,000)

31.12.2020

Lease liabilities, IFRS 16

Total

Current Bank loans

Non-current Bank loans

Lease liabilities, IFRS 16

Total

3,086 No later than one year

2,838 Later than one year and no later than ﬁve years

5,924 Later than ﬁve years 0

5,748 Lease liabilities - present value of minimum lease payments 2440 No later than one year

31.12.2019

8,188 Later than one year and no later than ﬁve years Later than ﬁve years

The Group's bank loans have either variable or ﬁxed interest rates. The Group's average interest rate is 4.2% (3.9% 2019). The cur-rent portions of debt are presented more in detail under Note 22 Management of ﬁnancial risks.

A covenant linked to net debt to EBITDA-ratio and the Group's equity ratio was attached to the Group's bank loans. The net debt to EBITDA-ratio can be at maximum 3.7 according to one of the contracts and according to the other contract the net debt to EBITDA without the effect of IFRS 16 can be a maximum of 4.0 and the equity ratio can be 25% at minimum. When calculating these ﬁgures, the net debt is the net debt of the review date and the EBITDA is the sum of the four preceding quarter EBITDA. The effect of IFRS 16 implementation has been reduced in the calculations. If Martela breaches this covenant, the loans will fall due immediately unless Martela manages to recover the ratio during the following quarter or the lender gives a waiver. The to-tal value of loans submitted to these covenants were EUR 8.9 million on 31.12.2020 and Martela didn't meet one of the contracts (Calculated ﬁgures: net debt/EBITDA without the effect of IFRS 16 5.8 and equity ratio 25.8) The amount of the broken covenant loan is EUR 1 million and will be repaid in accordance with the original payment schedule in April 2021.

Mortgages and guarantees given by credit institutions and, to a minor degree, pledged shares in housing corporations owned by the company are used as collateral for bank and pension loans.

More information in Note 23 Pledges granted and contingent liabilities.

Lease liabilities are payable as follows:

Lease liabilities - total amount of minimum lease payments

31.12.2020

Lease liabilities, IFRS 16

Total

TotalUnearned ﬁnance expense

2,782 2543

3,439 3043

6,221 5,586

2,656 2,440

3,339 2,838

The average interest of ﬁnancial leases was 3.7% in 2020 and 3.1% in 2019.

Amounts recognised in proﬁt or loss (EUR 1 000)

Interest on lease liabilities

Expenses related to short-term leases

Non cash changesCash ﬂows

4,400 -4,333

Non cash changesCash ﬂows

0 -1,152

-1,152

Transfer between groups

-4,459 4,459

Transfer between groups

6,020

-870 870

Finance lease liabilities, IAS 17

31.12.2019

0 5,278

308

31.12.2020 -236

-830

31.12.2019

-156

-1 069

IFRS 16 increaseIFRS 16 repayments 31.12.2020

2,851 3,169

-2,311 6,277

-2,953 8,656

-5,265 14,933

IFRS 16 increaseIFRS 16 repayments 31.12.2019

2,711 5,797

5,131

-2,853 8,315

7,842 14,112

19. Pension obligations

Martela's deﬁned beneﬁt plans concern its operations in Finland. The arrangements are made through insurance companies. The plans are partly funded.

On the balance sheet, the commitment to those insured is presented as a pension liability, and the part of this liability that falls under the responsibility of insurance company is presented as an asset. As the funds belong to the insurance companies, they cannot be itemised in Martela's consolidated ﬁnancial statements.

In insurance arrangements, the amount of funds is calculated using the same discount rate used for the determination of pensi-on liabilities. This means that a change in discount rate does not pose a signiﬁcant risk. In addition, an increase in life expectancy does not pose a signiﬁcant risk for Martela, as insurance companies will bear most of the impact of this.

The pensions are ﬁxed to 2017salary levels and accounted for accordingly.

Changes in deﬁned beneﬁt liability (EUR 1,000)

Present value of the deﬁned beneﬁt liability

2020

Fair value of the funds included in the plan

Net debt of the deﬁned beneﬁt liability

2019

2020

2019

2020 2019

1.1. 292 Recognised in proﬁt or loss

3,059	2,961	-2,737	-2,669	322

148	141	148
0	0	0	0	,
34	53	-31	-49	3
0	-400	0	400
181	-206	-31	351	150


0	0	0
279	373	279
-6	-55	-6
-301	-281	-301
273	318	-301	-281	-27

0	-14	-102	-138	-102
0	-14	-102	-138	-102
3,513	3,059	-3,172	-2,737	342

Service cost in the period 141

Past service cost

Interest expense or income Settlements

Recognised in other comprehensive income

Items resulting from remeasurement:

Gains (-) or losses (+) resulting from changes in demographical assumptions Actuarial gain (-) and losses (+) resulting from changes in ﬁnancial assumptions Experience based proﬁts (-) or losses (+)

Return on the funds included in the plan, excluding items in interest expenses or income (+/-)

Other items

Employer's payments (+)

31.12.

The Group anticipates that it will pay a total of EUR 158 thousand to deﬁned beneﬁt pension plans in the ﬁnancial period of 2021.

Sensitivity analysis

The following table illustrates the effects of changes in the most signiﬁcant actuarial assumptions on the funds related to the deﬁned beneﬁt pension liability and plans.

Deﬁned beneﬁt liability

Increase in salaries (0.5% change)

Effect of a change in the assumption employed

Discount rate (0.5% change)

Morality rate (a change of 5% points)

, 4

145

0 373 -55 -281 38

-152 -152 322

Fair value of the funds included in the plan

The weighted average of the duration of the plans is 18,4 years.

20. Provisions

22. Management of ﬁnancial risks

(EUR 1,000)

31.12.2020

Long-term provisions Short-term provisions Total

282 282

70 70

352 352

31.12.2019

The normal warranty for standard Martela produced products is ﬁve years. The warranty provision has been calculated as an estimate of the 5-year warranties for Martela products and the sale of Martela products.

21. Current liabilities

(EUR 1,000)

31.12.2020

31.12.2019

Advances received Trade payables Total

Accrued liabilities and prepaid income of Personnel expenses

Interests

Royalties Residual expenses Other

Total

Other current liabilities Other

Provisions*

Current liabilities

8,656 8,188

2,281 3,728

8,885 9,839

19,822 21,755

5,432 4,874

170 124

155 183

2,530 2,984

2 10

8,289 8,176

5,063 2,826

70 70

Financial risks are unexpected exceptions relating to exchange rates, liquidity, customer liquidity, investments and interest rates. The objective of ﬁnancial risk management is to ensure that the company has sufﬁcient ﬁnancing on a cost-efﬁcient basis and to reduce the adverse effects of ﬁnancial market ﬂuctuations on the Group's result and net assets. The general principles of risk ma-nagement are approved by Board of Directors and the practical implementation of ﬁnancial risk management is on the responsibi-lity of the parent company's ﬁnancial administration.

Market risks

Market risks comprise the following three risks: Currency risk, interest rate risk and price risk. The associated ﬂuctuations in exchange rates, market interest rates and market prices may lead to changes in the fair value of ﬁnancial instruments and in the future cash ﬂows and hence they impact the result and balance sheet of the Gruop.

Currency risks

The Group has operations in Finland, Sweden, Norway and Poland and it is therefore exposed to currency that arise in intra-group transactions, exports and imports, the ﬁnancing of foreign subsidiaries and equity that is denominated in foreign currencies. Translation risks result from incoming cash ﬂows denominated in foreign currencies. Translation risk arise when the value of the capital invested in the parent company's foreign subsidiaries, annual proﬁts and loans change as a result of exchange rate ﬂuc-tuations.

Transaction risks

Martela's major trading currencies are EUR, SEK, NOK and PLN. The SEK, NOK and PLN currency positions are reviewed mainly on a half-yearly basis. The Group's policy is to hedge the net positions remaining after reconciliation if seen necessary.

The Group has not hedged against transaction risks during the ﬁnancial periods of 2019 and 2020.

The following table presents currency risks per instrument and currency.

Transaction risks per instrument and currency 31.12.2020

(EUR 1,000)

Trade receivables Trade payables Total

Transaction risks per instrument and currency 31.12.2019 (EUR 1,000)

32,827

Trade receivables Trade payables Total

EUR 0 44 44

SEK 1,918 390 2,308

NOK 2002 38 2,040

*For more information see note 20.

The impact of other currencies is minor.

Analysis of sensitivity to transaction risk

The following table presents the average impact of 10 per cent change in exchange rates on 31 December on the company's ﬁnan-cial result before taxes and capital for 2020 (2019). The estimates are based on the assumption that no other variables change.

Analysis of sensitivity to transaction risk (EUR 1,000) 31.12.2020

Impact on result

EUR

+/- 0

SEK NOK

+/- 144

+/- 140

31.12.2019

EUR

+/- 4

SEK NOK

+/- 231 +/- 204

Interest rate risks

The Group's interest rate risks relate mainly to the Group's loan portfolio. The duration of loans varies between 1-5 years. The Group can raise either ﬁxed-interest or variable-interest loans and can use interest rate swaps.

The following table presents the distribution of the Group's ﬁnancial instruments into ﬁxed interest rate and variable interest rate on the balance sheet date.

Financial instruments (EUR 1,000)

Fixed rate

31.12.2020

Financial liabilities Variable rate Financial liabilities Total

Analysis of sensitivity to interest rate risks

31.12.2019

5,278

8,833 14,111

Impact of 1 per cent increase in interest rate on ﬁnancial result before taxes and capital on the balance sheet date 31 December. Decrease in interest rate would have an opposite impact of equal size.

Analysis of sensitivity to interest rate risks (EUR 1,000)

31.12.2020

Financial liabilities

Variable rate ﬁnancial instruments

Impact on result

-89

31.12.2019

Financial liabilities

Variable rate ﬁnancial instruments

Price risk

Available-for-sale shares included in ﬁnancial assets are not deemed subject to resale price risk.

Credit risk

Credit risk arises from the possibility that a counterparty will not meet its contractual payment obligations. Hence the serious-ness of the risk is determined on the basis of the counterparty's creditworthiness. The objective of credit risk management is to minimise the losses that would arise should the counterparty not meet its obligations.

The turnover and maturity structure of Group's companies trade receivables are reported monthly and are monitored by the pa-rent company's ﬁnancial management.

The principles of credit risk management are conﬁrmed by Martela's Board of Directors. Risk management is based on the aut-horisations given to the organisation.

Credit risks related to the company's trade and other receivables are minimised by using short terms of payment, effective col-lection measures and accounting for the counterparty's creditworthiness. Supply agreements are used when the customer com-pany is unknown and the available credit information is insufﬁcient. In this context a supply agreement is an agreement which se-cures andy receivables arising from an order by withholding the right of ownership with Martela Oyj until the customer has paid the sale price in full.

Supply agreements are only used in sales in Finland. A customer may also be required to make prepayment before sold products are delivered if it is considered necessary in light of the potential credit risk associated with the customer. Counterparties may also be granted to credit limits. The creditworthiness of customers is monitored regularly on the basis of payment history and credit rating.

Collateral may be required from certain customers based on their creditworthiness and in the case of exports, for example, Mar-tela may use conﬁrmed irrevocable Letters of Credit.

The book value of ﬁnancial assets corresponds to the maximum amount of the credit risk.

The maximum ﬁnancial asset credit risk amount on the balance sheet date 31 December is presented in the following table:See note 15 for additional information on trade receivables and the related credit loss provisions.

31.12.2019 52

16,847 9,621

26,520

-88

Liquidity risks

The Group strives to assess and monitor the amount of funding required by business operations so that there are sufﬁcient liquid assets for operating expenses and repayment of maturing loans. In addition, the Group continually maintains sufﬁcient liquidi-ty by means of effective cash management solutions such as cash reserves and overdrafts. The reﬁnancing risk is managed byCash and cash equivalent at the year end 2020 were EUR 11 172 thousand and unused credit limits EUR 883 thousand.

Contractual cash ﬂows mature as follows (EUR 1,000)

Bank loans

Finance leases Trade payables

Loan interest and guarantee fees Total

balancing the maturity schedules of loans and bank overdrafts according to forecast cash ﬂows and by using several banks in ﬁ-nancial operations. A covenant is linked to the bank's loans in by the group. For more information on the bank loans and the cove-nants see note 18.

Cash and cash equivalent at the year end 2019 were EUR 9,621 thousand and unused credit limits EUR 1,950 thousand.

Contractual cash ﬂows mature as follows (EUR 1,000)

Bank loans

2020

5,748

Pension loans Financial leases Trade payables

2,440

9,839

Bank overdrafts, used

Loan interest and guarantee fees Total

135 18,162

Management of capital structure

It is the Group's objective to ensure an effective capital structure that will secure its operating capacity in the capital markets in all circumstances irrespective of volatility. The Group's Board of Directors assess the capital structure on a regular basis, The Group uses the equity ratio to monitor its capital structure.

The equity ratio formula is presented in the following table:

Equity ratio Shareholders' equity

Balance sheet total - advance payments Equity to assets ratio %

31.12.2019 16,080 55,868 28,8

3,086

2021

2022

2023

1,659

1,080

31 4,776

0 99 0 0

0 1,080

2024

Later

Total 8,833

Balance sheet value

8,833

5,278 5,278

9,839 9,839

0 0 166

24,117

Governance 41

23. Pledges granted and contingent liabilities

(EUR 1,000)

Debts secured by mortgages Bank and pension loans Property mortgages Corporate mortgages Total mortgages

Other pledges

Guarantees as security for rents

24. Related party transactions

31.12.2020

31.12.2019

8,900 8,833

7,565 7,565

14,358 14,240

21,923 21,805

321

Martela Group's related party transactions comprise the CEO, members of the Board and the Group's management team, as well as their family members. Martela Group's related parties also include a shareholder who holds at least 20% of the company's total number of votes.

Members of the Board hold a total of 6.6% of the share capital and 14.0% of the votes.

Persons in the management own a total of 5,000 Martela Corporation shares as at 31st December, 2020.

Group structure Parent company Martela OyjDomicileHolding (%) 31.12.2020

Of votes (%)

31.12.2020

Sales company

Subsidiaries Kidex Oy

Grundell Muuttopalvelut Martela AB, Nässjö

Aski Avvecklingsbolag AB, Malmö Martela AS, Oslo

Martela Sp.z o.o., Varsova Tehokaluste Oy

Management employee beneﬁts

The Group has determined key persons in management to be: Members of the Board of Directors

CEO

Group's Management Team

Production company

The table below presents the employee beneﬁts received by key persons in management. Voluntary pension plans, which include both deﬁned contribution plans and deﬁned beneﬁt plans, are recognised as post-employment beneﬁts.

(EUR 1,000)

Management employee beneﬁts

2020

Salaries and other short-term employee beneﬁts Total

Salaries and fees Board members CEO*

Management team members (excl. CEO)

-1,211 -1,038

-173 -173

-392 -261

-646 -604

-1,211 -1,038

2019

*In connection with the dismissal of Martela's President and CEO, a total of EUR 66 thousand was paid in 2020, including social security costs.

Fees paid to Board members: Andersson Minna

Komi Kirsi* -5.5

Leskinen Eero Martela Eero Martela Heikki Mattson Jan** Mellström Katarina *** Mild Johan*** Vepsäläinen Anni Total

* in Board until Q1 2019 ** new member, in Board from Q2 2019 *** new member, in Board from Q2 2020

-22 -22

-20.4 -20.4

-5.5 -22

-22 -22

-42.4 -42.4

-22 -16.5

-22 -22

Fees based on board membership are not paid to members employed by the company.

2020

2019

-172.8

25. Key ﬁnancial indicators for the Group

Salaries, fees and pension commitment to CEO Salaries and fees

2020

2019

Statutory earnings-related pension payment (TyEL) on salaries

Salaries include also share-based incentives.

The period of notice is 6 months with respect to both the present CEO and the company, and in the event of dismissal by the company, the CEO is entitled, besides of the notice period, to a lump-sum compensation equalling hies salary for 6 months.

CEO and the Group management team has long term share-based incentive programme, in which is possible to receive Martela A-shares when the set targets are met. The earning periods are 2017-2018 individually and cumulative and 2019-2020. Fees ba-sed on the programme are paid as a combination of cash and shares.

No share-based incentives are paid based on any of the earning periods.

More information in Note 17 Share-based payments.

Martela Group 2016-2020

Revenue

Change in revenue

Export and operations outside Finland In relation to revenue

Exports from Finland Gross capital expenditure In relation to revenue Depreciation

Research and development In relation to revenue Personnel on average Change in personnel Personnel at the end of year of which in Finland

Proﬁtability Operating proﬁt

In relation to revenue Proﬁt before taxes In relation to revenue Proﬁt for the year * In relation to revenue Revenue / employee Return on equity Return on investment

Finance and ﬁnancial position Balance sheet total

Equity

Interest-bearing net liabilities In relation to revenue

Equity ratio

Gearing

Net cash ﬂow from operations Dividends paid

MEUR % MEUR % MEURMEUR % MEURMEUR %

%MEUR % MEUR % MEUR % teur % %

MEUR MEURMEUR MEUR MEUR % % %

*) Change in deferred tax liability included in proﬁt for the year

2020

2019

2018

2017

106.2

103.1

109.5 129.1

3.0

-5.9

-15.2 -2.8

23.1

17.0

22.3 33.1

21.7

16.5

20.4 25.6

22.7

16.3

2.3 2.1 4.9

1.7 1.6 2.6

2.1 2.2

18.4 16.5

2.2 2.9

2.6 2.9

2.2 2.1 494

1.9 1.8 510

1.8 1.5

508 550

2.0 1.9

-3.1 464 385

0.4 501 425

507 506

435 435

-7.3 -11.6

-2.0

-2.1

0.3 6.2

-1.9

-2.0

0.2 4.8

-2.7

-2.5

0.0 5.6

-2.5

-2.4

0.0 4.4

-2.5

-2.4

-0.6 3.3

-2.4

-2.3

-0.6 2.6

215

202

216 235

-14.7

-11.4

-2.7 13.9

-6.4

-4.9

1.6 18.2

55.9

50.0

56.4 56.2

16.1

18.8

22.6 25.2

5.0

0.1

6.6 -4.8

4.7

0.1

6.0 -3.7

28.8

39.2

40.8 45.3

31.5

0.7

28.9 -18.9

6.3

7.4

-7.6 11.7

0.4

1.3

1.5 1.0

2016

26. Key share-related ﬁgures

Formulas to key ﬁgures

Martela Group 2016-2020

Earnings per share Earnings per share (diluted) Share par value

Dividend *) Dividend/earnings per share Effective dividend yield Equity per share

Price of A-share 31.12.

Share issue-adjusted number of shares Average share-issue adjusted number of shares Price/earnings ratio

Market value of shares **

* Proposal by the Board of Directors ** Price of A-shares used as value of K shares

2020

MEURtpcsEUR tpcsEUREUREUR EUREUR

% %

2019

-0.61

-0.61 1.68

0.0 0.00

3.80

2018

-0.57

-0.57 1.68

1.68 1.68

0.10

-17.5 3.38

4.30 2.90

4.54

3.36 4,155.60

2017

-0.15 0.81

0.32 0.37

-208.4 45.8

5.47 6.13

2.96 4,155.60

4,155.60 4,155.60

7.47 12.84

4,155.60

2016

4,155.60

4,155.60 4,155.60

-5.48

-5.18

-48.64 15.90

13.92

12.26

30.95 52.75

Earnings / sharePrice /earnings multiple (P/E)Equity / share, EURDividend / share, EUR

Proﬁt attributable to equity holders of the parent Average share issue-adjusted number of shares

Share issue-adjusted share price at year end Earnings / share

Equity attributable to the equity holders of the parent Share issue-adjusted number of share at year end

Dividend for the ﬁnancial year

Share issue-adjusted number of share at year end

Dividend / share x 100

Dividend / earnings, %

Earnings / share

Market value of shares, EUR

=Total number of shares at year end x share price on the balance sheet dateReturn on equity, %

=Proﬁt/loss for the ﬁnancial year x 100 Equity (average during the year)Return on investment, %Equity ratio, %Gearing, %Personnel on average

(Pre-tax proﬁt/loss + interest expenses + other ﬁnancial items) x 100 Balance sheet total - Non-interest-bearing liabilities (average during the year)

Equity x 100

Balance sheet total - advances received

Interest-bearing-liab. - cash, cash equiv.and liq. asset securities x 100

Equity

Month-end average number of personnel in active employmentInterest-bearing net debt

Interest-bearing debt - cash and other liquid ﬁnancial assets

27. Shares and shareholders

Share capital

The number of registered Martela Oyj shares on 31.12.2020 was 4,155,600. The shares are divided into A and K shares. Each A share carries 1 vote and each K share 20 votes in annual general shareholders' meeting.

Both share series have the same dividend rights. The company's maximum share capital is EUR 14,000,000 and the minimum is EUR 3,500,000.

Martela Oyj's shares were entered in the book-entry register on 10.2.1995. The counter-book value of each share is EUR 1.68.

The A shares are quoted on the Small Cap list of Nasdaq Helsinki.

The list includes all shareholders holding over 1% of the shares or votes.

The Board of Directors hold 6.6% of shares and 14.0% of votes.

Martela Oyj owns 13,082 pcs A shares. Out of the shares 12,036 were purchased at an average price of EUR 10.65 and 1,046 were transferred from Martela Corporation's joint account to the treasury shares reserve based on the decision by AGM on March 13, 2018. The number of treasury shares is equivalent to 0.31% of all shares and 0.08% of all votes.

The Annual General Meeting has in 2020 re-authorised the Board of Directors to decide, for the following year, on share issue, on acquiring and/or disposing of the company's shares in deviation from the pre-emptive rights of shareholders.

The AGM approved the Board of Directors' proposals, detailed in the meeting notice, to authorise the Board to acquire and/or dispose of Martela shares. The authorisation is for a maximum 415,560 of the company's A series shares.

Breakdown of share ownership by number of shares held 31.12.2020.

Distribution of shares 31.12.2020

Number, pcs

Total EUR

% of Share

Capital

Votes

K-shares

A-shares Total

The largest shareholders by number of shares 31.12.2020

Marfort Oy

K series shares

292,000

Keskinäinen Eläkevakuutusyhtiö Ilmarinen Martela Heikki Juhani

52,122

Palsanen Leena Maire Sinikka Palsanen Jaakko Antero Etelä-Pohjanmaan Turve Oy Kelhu Markku Juhani

4,486

1,600

Ac Invest Oy Meissa-Capital Oy

Sijoitusrahasto Nordea Nordic Small Cap Lindholm Tuija Elli Annikki

43,122

Martela Pekka Kalevi Andersson Minna Sinikka Martela Mari Kaarina Martela Ille Ilari

69,274

49,200

20,219

13,218

Martela Jarmo Matti Tapani Other shareholders

8,919

50,640

Total

604,800

A series sha-res

232,574

335,400

130,942

131,148

132,140

133,000

110,000

103,777

86,487

76,286

28,221

9,596

8,368

2,032,853

3,550,800

2,083,493

4,155,600

Total number of shares

%Number of votes

% of total votes

% of Votes

524,574

12.6

6,072,574 38.8

335,400

8.1

335,400 2.1

183,064

4.4

1,173,382 7.5

135,634

3.3

220,868 1.4

133,740

3.2

164,140 1.0

133,000

3.2

133,000 0.9

110,000

2.6

110,000 0.7

103,777

2.5

103,777 0.7

86,487

2.1

86,487 0.6

76,286

1.8

76,286 0.5

71,343

1.7

890,661 5.7

69,282

1.7

1,385,488 8.9

49,200

1.2

984,000 6.3

29,815

0.7

413,976 2.6

21,586

0.5

272,728 1.7

8,919

0.2

178,380 1.1

50.1

3,045,653 19.5

100

15,646,800 100

1,001 - 5,000
Number of sharehol-ders
Over 5,000 Total

of which nominee-registered

In the waiting list and collective account

Total

% of total sharehol-ders

Breakdown of shareholding by sector 31.12.2020

Private companies

Number of share-holders

% of total share-holders

Number of sharesNumber of shares

%Number of votes

Financial and insurance institutions Public corporations

Non-proﬁt entities Households Foreign investors Total of which nominee-registered In the waiting list and collective account Total

% of Votes

Parent Company Income Statement

(EUR 1,000)

Revenue

Change in inventories of ﬁnished goods and work in progress Production for own use

Other operating income Materials and services Personnel expenses Other operating expenses Depreciation and impairment Operating proﬁt (-loss)

Financial income and expenses

Proﬁt (-loss) before appropriations and taxes Group contributions

Depreciation difference and Group contributions Income taxes

Proﬁt (-loss) for the ﬁnancial year

Note 1

521 -195

1.1-31.12.2019 102,234

90 172

1,203 1,237

-64,006 -76,371

-13,329 -16,073

-9,376 -11,281

-3,520 -2,216

-3,076 -2,493

-3,483 -1,953

-6,559 -4,446

500 1,300

2 -3,144

Parent Company Balance Sheet

Assets (EUR 1,000)

Note

NON-CURRENT ASSETS Intangible assets Intangible rights Goodwill

Other long-term expenditure Advance payments

Tangible assets Land and water areas Buildings and structures Machinery and equipment Other tangible assets

Investments

Share is subsidiaries Receivables from subsidiaries Other shares and participations

CURRENT ASSETS Inventories

Materials and supplies Work in progress Finished goods

Advances paid to suppliers

Non-current receivables Trade receivables

Loan receivables

Accrued income and prepaid expenses

Cash and cash equivalents

80 80

185 Share capital
7,360 Share premium account
4,547 Reserve fund
2,038 Retained earnings

1,866 1,895

920 878

23 23

2,889 2,876

7,489 7,498

4,973 5,425

12,469 12,930

6,484 5,441

988 1,019

1,040 1,109

10 429

8,522 7,998

13,567 17,515

3,220 5,059

1,636 2,759

18,424 25,333

10,393 8,918

64,083 72,185

31.12.2020

31.12.2019

14,131

Equity and liabilities (EUR 1,000)

Note

SHAREHOLDERS' EQUITY Shareholders' equity

Proﬁt for the year Total

Compulsory reservations Other compulsory reservations LIABILITIES

Non-current

Loans from ﬁnancial institutions Accrued liabilities and prepaid income

Current

Loans from ﬁnancial institutions

Advances received

Trade payables

Accrued liabilities and prepaid income

Other current liabilities

Liabilities, total

7,000 7,000

1,116 1,116

11 11

352 352

2,900 3,086

150 150

3,050 3,236

6,000 5,743

461 2,533

13,908 13,581

9,037 12,025

4,798 2,180

28,203 30,318

37,254 39,297

64,083 72,185

Other compulsory reservations are corrected in the comparison year 2019.

31.12.2020

31.12.2019

27,552 -3,144 32,535

Parent Company's Cash Flow Statement

(EUR 1,000)

CASH FLOWS FROM OPERATING ACTIVITIES Cash ﬂows from sales

Cash ﬂow from other operating income Payments on operating costs

Net cash from operating activities before ﬁnancial items and taxes Interests paid and other ﬁnancial payments

Dividends received

Taxes paid

Net cash from operating activities (A)

CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditure on tangible and intangible assets Proceeds from sale of tangible and intangible assets Loans granted

Net Cash used in investing activities (B)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from current loans

Repayments of current loans Proceeds from non-current loans Dividends and other proﬁt distribution Net cash used in ﬁnancing activities (C)

CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C) (+ increase, - decrease)

Cash and cash equivalent at the beginning of ﬁnancial year*

Cash and cash equivalent at the end of ﬁnancial year*

* Includes cash and bank receivables

1.1.-31.12.2020

85,287 106,331

1.1.-31.12.2019

1,210 1,237

-102,847 4,721

-402 -346

0 0

0 184

4,558

-1,949 0

-123 -1,319

-1,134 -3,267

-9,329 -1,143

0 -414 -1,557

1,474 -266

8,918 9,185

10,393 8,918

Accounting Policies for the

Parent Company Financial Statements

Martela Oyj's Financial Statements have been prepared in accordance with Finnish Accounting Standards (FAS). Items in the ﬁnancial statements have been recognised at cost. No assets have been recorded to appreciated values, unless separately mentioned.

Items denominated in foreign currency:

Transactions denominated in foreign currencies are recognised at the rate of exchange on the date of their occurrence. Receivables and liabilities in the balance sheet are translated at the average rate on the bal-ance sheet date. Exchange rate differences arising from trade receivables are recognised in revenue and those of trade payables in adjustment items for purchases. Exchange rate differences arising from bal-ance sheet ﬁnancial items, such as loans, are recognised in exchange rate differences of ﬁnance.

Shareholders loans denominated in foreign currency to subsidiaries are considered as investments. Cur-rency exchange rate differences are hence not recognised in parent company ﬁnancial statements. Exchange rate differences related to shareholder loans are recognised in the Consolidated ﬁnancial statements.

Intangible assets:

Intangible assets are reported in the balance sheet at cost and depreciated according to the plan (by straight line method). Intangible assets are depreciated according to their estimated useful life in 3-10 years. Goodwill is depreciated by straight-line method in 10 years.

Tangible assets:

Buildings, machinery, equipment and other tangible assets are reported in the balance sheet at cost. No depreciation is recognised on revaluations of buildings or on land areas. Otherwise, depreciation is cal-culated on a straight line basis according to the estimated useful life. The change in accumulated depre-ciation difference is presented as a separate item in the parent company's proﬁt and loss statement and the accumulated depreciation difference as a separate item in the balance sheet.

Depreciation periods for tangible assets: Buildings and structures 20-30 years Machinery and equipment 4-8 years Other tangible assets 3-5 years

Impairment testing of long-term assets

Goodwill and investments in subsidiaries are tested for impairment annually regardless if there are any indications that the amount might be impaired. The recoverable cash amount from the subsidiaries is based on value in use calculations in the testing. The forecasted cash ﬂows are based on 5-year ﬁnancial plans approved by management. The central assumptions of the plans comprise of subsidiary growth-and proﬁtability assumptions. The cash ﬂows beyond the ﬁve-year period are estimated based on 1,5% growth.

Inventories:

Inventories are recognised at weighted average purchase prices. The value of inventories is reduced with respect to nonmarketable items. The cost of goods includes also a share of the overhead costs of pro-duction.

Income tax:

The company income taxes are recognised on accrual basis and are calculated according to local tax legislation with adjustments from previous ﬁnancial years. In the ﬁnancial statements the company does not recognise deferred tax receivables or deferred tax liabilities.

Revenue and recognition policies:

Revenue is recognised on accrual basis. Direct taxes, discounts and exchange rate differences are de-ducted from sales income in calculating revenue.

Research and development:

Research and development expenses are recognised normally in proﬁt or loss in the year they arise. Re-search and development-related equipment is capitalised in machinery and equipment.

Other operating income and expenses:

Proceeds from sale of assets, public subsidies and other income (e.g. rent income) are recognised in "Other operating income". Losses from disposal of assets and other costs are recognised in "Other op-erating expenses".

Operating leases:

All leasing payments are reported as rent expenses.

Share-based payments:

In the effective share-based incentive programme there are two earning periods, which are 2017-2018 and 2019-2020, and payment are made as a combination of shares and cash. No incentives will be paid for the earning periods.

Treasury shares:

The treasury shares held by the parent company are reported as a deduction from equity.

Other compulsory reservations

The normal warranty for standard Martela produced products is ﬁve years. The warranty provision (EUR 352 thousand) has been calculated as an estimate of the ﬁve-year warranties for Martela products and the sale of Martela products.

1. Breakdown of revenue by market area

4. Personnel expenses and number of personnel

% of revenue Finland Scandinavia Other

2020 2019

Total

100 100

16 19

3 5

81 76

2. Other operating income

(EUR 1,000)

Rental income Government grants Other operating income

Other operating income, Group Total

3. Materials and services

2020 2019

842 970

251 245

70 0

40 22

1,237

(EUR 1,000)

2020

Salaries, CEO Pension expenses

Salaries of Board and directors

Salaries of Board and directors and managing director, total Other salaries

Pension expenses

Other salary-related expenses

Personnel expenses in the income statement Fringe beneﬁts

Total

Personnel

Personnel on average, workers Personnel on average, ofﬁcials Personnel on average, total

Personnel at the year end

-320 -262

-71 0

-173 -173

-564 -435

-10,565 -12,776

-1,921 -2,443

-279 -418

58 82

170 186

227 268

227 238

2019

-16,073 -232 -16,305

(EUR 1,000)

Purchasing during the ﬁnancial year

2020

Change in inventories of materials and suppliers External services

Materials and supplies, total

-15,375 -18,655

-63,486 -76,566

2019 -57,570 -341

5. Other operating expenses

(EUR 1,000)

2020

Auditor's fees Auditing Other services Auditor's fees, total

-73 -58

-2 -79

-75 -137

2019

6. Depreciation and write-down

9. Income Taxes

(EUR 1,000)

2020

Depreciation according to plan Intangible assets

Tangible assets Buildings and structures Machinery and equipment Depreciation according to plan, total Impairments

Depreciations and impairments, total

-3,173 -1,907

-29 -34

-318 -275

7. Financial income and expenses

(EUR 1,000)

Financial income and expenses

Interest income from short-term investments

2020

Interest income from short-term investments from Group companies Foreign exchange gains

Interest expenses

Losses on foreign exchange Other ﬁnancial expenses Impairment

Total

26 3

52 55

0 5

-478 -293

-19 -105

-60 -83

-3,005 -1,535

-3,483 -1,953

Impairments include a write-down of subordinated loans to Martela AS based on impairment tests.

2019

(EUR 1,000)

2020 2019

Income taxes from operations Taxes from previous years Total

0 2

0 0

0 2

-2,216 0 -2,216

Deferred tax liabilities and assets have not been included into income statement nor balance sheet. There was no deferred tax asset related to periodisation differences nor losses in 2019 and 2020.

10. Intangible assets

2019

1.1.2020 - 31.12.2020 (EUR 1,000)

Carrying amount 31.12.

Carrying amount 1.1.

Accumulated depreciation 31.12.

Depreciation for the year 1.1.-31.12.

Accumulated depreciation 1.1.

Acquisition cost 31.12.

Increases Decreases

Acquisition cost 1.1.

1.1.2019 - 31.12.2019 (EUR 1,000)

8. Depreciations and Group contributions

(EUR 1,000)

Appropriations

Group contributions, received

2020

Group contributions, given - /received + Group contributions total Appropriations, total

500 1,300

Acquisition cost 1.1.

Increases

2019

Acquisition cost 31.12.

Accumulated depreciation 1.1.

Depreciation for the year 1.1.-31.12.

Accumulated depreciation 31.12.

Intangible rights

3,215

3,312 -3,108

-20 -3,128

Carrying amount 1.1.

Carrying amount 31.12.

Goodwill 9,200 0

9,200 -920

-920 -1,840

107 185

8,280 7,360

Other long-term expenses

12,339

12,416 -6,907

0 -10,936

-962 -7,868

0 -12,837

5,430 4,547

2,038 14,131

Work in progressIntangible assets total

478 25,232

2,159 2,336

2,038 26,969

0 -1,901

478 14,295

11. Tangible assets

12. Investments

1.1.2020 - 31.12.2020 (EUR 1,000)

Acquisition cost 1.1.

Increases

Acquisition cost 31.12.

Accumulated depreciation 1.1.

Depreciation for the year 1.1.-31.12.

Accumulated depreciation 31.12.

Carrying amount 1.1.

Carrying amount 31.12.

1.1.2020 - 31.12.2020 (EUR 1,000)

1.1.2019 - 31.12.2019 (EUR 1,000)

Acquisition cost 1.1.

Increases

Acquisition cost 31.12.

Accumulated depreciation 1.1.

Depreciation for the year 1.1.-31.12.

Accumulated depreciation 31.12.

Land areasBuildings

80 0 80 0 0 0

Carrying amount 1.1.

Carrying amount 31.12.

10,623 0 10,623 -8,694 -34 -8,728

0 -20,295

80 80

Machinery and equipment

1,929 1,895

Revaluations included in buildings 2020 total EUR 1 850 thousand (1 850).

23,538 Decreases / Impairment

Other tangible assets

11,999 446 12,445 -11,286 -281 -11,567

23 0 23 0 0 0

713 878

23 23

Carrying amount of production machinery and equipment in 2020 was EUR 55 thousand (90 in 2019).

Work inprogress

23,171 Balance sheet value at beginning of year
Total
0 22,725
0 446
0 23,170
0 0
-19,980 -315
0 2,745
0 2,876
Balance sheet value at end of yearSubsidiary shares
Shares in associated Other shares andundertakingsShareholderparticipations loan receivablesTotal
1.1.2019 - 31.12.2019 (EUR 1,000)
Subsidiary shares
Shares in associated Other shares and
Balance sheet value at beginning of year Increases
7,498
0
Decreases / Impairment
Balance sheet value at end of yearSubsidiary shares: Kidex Oy
Muuttopalvelu Grundell Oy Kiinteistö Oy Ylähanka Martela AB, BodaforsFinland FinlandFinland Sweden
Aski avvecklingsbolag AB, Malmö Martela AS, Oslo
Sweden Norway
0 7,498
undertakings 0 0 0 0
Parent company's holding, %
100 100
100 100
100 100
Martela Sp.z o.o., Varsova Tehokaluste Oy
Poland Finland
participations loan receivablesShareholder
9 0 -1 7
Of total votes, %
100 100
100 100
100 100
100 100
Total
Number of shares
200 100
EUR 8 4,440
510 50,000
SEK 5,000 550
12,500 200
NOK 200 24
100 100
3,483 1
EUR 0 0 7,490
6,960 0 -1,535 5,425
Par value 1,000
Total 14,466 0 -1,536 12,930
Book value EUR 1,000
EUR 2,208 2,208
EUR 0 0
SEK 1,250 132
PLN 3,483 135
Other shares and participations 7
Kiinteistö Oy Ylähanka merged with its parent company Martela Oyj on February 6, 2020.
Governance 53

13. Receivables

14. Changes in shareholders' equity

(EUR 1,000)

Current receivables

2020

Receivables from Group companies Trade receivables

Loan receivables

Accrued income and prepaid expenses Receivables from others

Trade receivables

Accrued income and prepaid expenses Current receivables, total

1,875 1,502

3,220 5,059

11,692 16,013

1,636 2,759

18,424 25,333

Related to payments in advance

Accrued income and prepaid expenses, main items; Related to personnel expenses

Other accrued income or prepaid expenses Periodization of revenue

Accrued income and prepaid expenses total

164 Unrestricted equity
2019
Distribution of shares 31.12.2020
2,759 Dividends
1,358 Entries in retained earnings
2019
K-shares (20 votes/share)
A-shares (1 vote/share)
Total
0
Treasury shares
Number of shares outstanding
Shareholders' equity Restricted equity
Share capital 1.1.and 31.12.
Share premium account 1.1. and 31.12.
Number of shares
Total EUR % of share capital
463 Reserve fund 1.1. and 31.12.
774 Retained earnings 1.1.
Shareholders' equity total

Proﬁt (-loss) for the year
Retained earnings 31.12.
Votes
% of Votes
The distributable equity of the parent company is EUR 18,349 thousand in 2020.
A correction of an inventory difference of previous periods of EUR 621 thousand and a guarantee provision of EUR 352 have been recorded in retained earnings.
Treasury shares held by Martela Oyj are reported as a deduction from retained earnings.
Martela Oyj owns 13,082 A shares (13,082 in 2019). Out of the shares 12,036 were purchased at an average price of EUR 10.65 and 1,046 were transferred from Martela Corporation's joint account to the treasury shares reserve based on the decision by AGM on March 13, 2018.
The acquisition cost of shares for the incentive scheme has been treated in the IFRS consolidated ﬁnancial statement as an item comparable to treasury shares.
Market value of treasury shares on 31.12.2020 was EUR 3.09 per share (3.36), a total of EUR 40.4 thousand (43.9 thousand in 2019)

15. Non-current liabilities

16. Current liabilities

(EUR 1,000)

Total

Loans from ﬁnancial institutions Accrued expenses

3,086 Current liabilities
150 Liabilities to Group companies
Changes and repayments of non-current liabilities
Loans from ﬁnancial institutions
2020
Loans 1.1.
Additions Repayments Loans 31.12.
Accrued liabilities
Related to the personnel expenses
1,400 0
-1,586 -343
2,900 3,086
150 150
Repayments
2021
Loans from ﬁnancial institutions Total
1,000 1,000
2022
2019
3,236 Trade payables to Group companies Accrued liabilities to Group companies

2019

3,429

2023 2024

1,000 1,000

900 0

(EUR 1,000)

2020

Total

Other current liabilities

Loans from ﬁnancial institutions Advances received

Trade payables

Other current liabilities Accrued liabilities Total

Current liabilities, total

6,812 5,480

5,106 7,727

11,918 13,208

6,000 5,743

461 2,533

7,096 8,101

4,798 2,180

3,931 4,297

22,285 22,854

34,203 36,061

Current liabilities are speciﬁed in Notes because items are combined in Balance sheet.

Essential items of accrued liabilities

Personnel expenses

2020

Interest and ﬁnancing accruals Royalties

Residual expenses Accrued liabilities, total

2,303 2,261

170 124

127 159

1,331 1,753

3,931 4,297

2019

17. Pledges granted and contingent liabilities

(EUR 1,000)

2020

Debts secured by mortgages Bank loans

Property mortgages Corporate mortgages Shares pledged

Other pledges

Guarantees as security for rents

Guarantees given on behalf of Group companies Total

Other liabilities

Residual value liabilities related to the service business Total

Leasing commitments Falling due within 12 months Falling due after 12 months Total

Rent commitments

7,565 7,565

11,368 11,368

18,933 18,933

395 321

1,598 1,834

1,992 2,155

813 301

796 365

1,098 214

1,894 579

3,013 3,447

2019

8,829

Auditor's report

(TRANSLATION OF THE FINNISH ORIGINAL)

To the Annual General Meeting of Martela Oyj

Report on the Audit of the Financial Statements

Opinion

We have audited the ﬁnancial statements of Martela Oyj (business identity code 0114891-2) for the year ended 31 December, 2020. The ﬁnancial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash ﬂows and notes, including a summary of signiﬁcant accounting policies, as well as the parent company's balance sheet, income statement, statement of cash ﬂows and notes.

We are independent of the parent company and of the group companies in accordance with the eth-ical requirements that are applicable in Finland and are relevant to our audit, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regard-ing these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 4. to the consolidated ﬁnancial statements.

We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our opinion.

In our opinion

• the consolidated ﬁnancial statements give a true and fair view of the group's ﬁnancial position as well as its ﬁnancial performance and its cash ﬂows in accordance with International Financial Re-porting Standards (IFRS) as adopted by the EU.
• the ﬁnancial statements give a true and fair view of the parent company's ﬁnancial performance and ﬁnancial position in accordance with the laws and regulations governing the preparation of ﬁ-nancial statements in Finland and comply with statutory requirements.

Our opinion is consistent with the additional report submitted to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of Financial Statements section of our report.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the ﬁnancial statements of the current period. These matters were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not pro-vide a separate opinion on these matters.

We have fulﬁlled the responsibilities described in the Auditor's responsibilities for the audit of the ﬁnancial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the ﬁnancial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying ﬁnancial statements.

We have also addressed the risk of management override of internal controls. This includes consider-ation of whether there was evidence of management bias that represented a risk of material misstate-ment due to fraud.

Key Audit Matter

REVENUE RECOGNITION

We refer to the Group's accounting policies and the note 1

Revenue recognition is considered as a key audit matter because revenues are a key performance measure which could create an incentive for revenue to be recognized prematurely. Revenue recognition was determined to be a key audit matter and a signiﬁcant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2).

Our audit procedures to address the risk of material misstatement in respect of revenue recognition included among others:

• We assessed the appropriateness of the group's accounting policies over revenue recognition compared to IFRS standards.
• We assessed the group's processes and controls over timing of revenue recognition.
• We tested the correct timing of revenue recognition by using analytical procedures and transaction level testing. Our procedures included data analytics, obtaining external conﬁrmations and transaction level testing before and after the balance sheet date as well as inspection of credit notes prepared after the balance sheet date.
• We considered the appropriateness of the group's disclosures in respect of revenues.

VALUATION OF SUBSIDIARY SHARES AND RECEIVABLE AND GOODWILL IN PARENT COMPANY'S BALANCE SHEET We refer to parent company's accounting policies and notes 7, 10 and 12

As of balance sheet date December 31, 2020 the subsidiary shares and receivable amounted to 12,5 M€ and goodwill to 6,4 M€. Together these compose 29 % of parent company's total assets and 71 % of parent company's equity.

The management of the parent company prepares annually impairment calculation for balance sheet value of the in-vestments and goodwill based on their value in use. These calculations include signiﬁcant management judgements, like forecasted revenue growth, EBITDA and discount rate used in discounting cash ﬂows. Based on the calculation an im-pairment loss of 3,0 M€ was recognized on the loan receivab-le of Martela AS.

This matter was also determined to be a signiﬁcant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2).

How our audit addressed the Key Audit Matter

Our audit procedures to address the risk of material misstatement in respect of valuation of subsidiary shares and receivable and goodwill included among others:

• We assessed the basis and appropriateness of the forecasts used in the impairment calculations, like revenue growth, EBITDA and discount rate.
• We tested the mathematical accuracy of the calculations.
• We involved our valuation specialists to assist us in evaluating the methodologies and assumptions in relation to market and industry information.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director are responsible for the preparation of consolidated ﬁnancial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of ﬁnancial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of ﬁnancial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also re-sponsible for such internal control as they determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the ﬁnancial statements, the Board of Directors and the Managing Director are responsi-ble for assessing the parent company's and the group's ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The ﬁnancial statements are prepared using the going concern basis of accounting unless there is an inten-tion to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance on whether the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that in-cludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of the ﬁnancial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the ﬁnancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evi-dence that is sufﬁcient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit proce-dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting es-timates and related disclosures made by management.
• Conclude on the appropriateness of the Board of Directors' and the Managing Director's use of the going concern basis of accounting and based on the audit evidence obtained, whether a materi-al uncertainty exists related to events or conditions that may cast signiﬁcant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material un-certainty exists, we are required to draw attention in our auditor's report to the related disclosures in the ﬁnancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclu-sions are based on the audit evidence obtained up to the date of our auditor's report. However, fu-ture events or conditions may cause the parent company or the group to cease to continue as a go-ing concern.
• Evaluate the overall presentation, structure and content of the ﬁnancial statements, including the disclosures, and whether the ﬁnancial statements represent the underlying transactions and events so that the ﬁnancial statements give a true and fair view.
• Obtain sufﬁcient appropriate audit evidence regarding the ﬁnancial information of the entities or business activities within the group to express an opinion on the consolidated ﬁnancial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant deﬁciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with rel-evant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, relat-ed safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most signiﬁcance in the audit of the ﬁnancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regula-tion precludes public disclosure about the matter or when, in extremely rare circumstances, we determine

that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest beneﬁts of such communication.

Other Reporting Requirements

INFORMATION ON OUR AUDIT ENGAGEMENT

We were ﬁrst appointed as auditors by the Annual General Meeting on March 12, 2020.

OTHER INFORMATION

The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report but does not include the ﬁnancial statements and our auditor's report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor's report, and the Annual Report is expected to be made available to us after that date.

Our opinion on the ﬁnancial statements does not cover the other information.

In connection with our audit of the ﬁnancial statements, our responsibility is to read the other infor-mation identiﬁed above and, in doing so, consider whether the other information is materially inconsist-ent with the ﬁnancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the ap-plicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the informa-tion in the ﬁnancial statements and the report of the Board of Directors has been prepared in accord-ance with the applicable laws and regulations.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Helsinki 5.2.2021

Ernst & Young Oy

Authorized Public Accountant FirmOsmo Valovirta

Authorized Public Accountant

Corporate governance statement 2020

Corporate Governance

The company complies with the NASDAQ OMX Guidelines for Insiders and the Finnish Corporate Governance Code 2020 published by the Securities Market Association. Martela complies with all of the Code's guidelines.

Organisation

The Group is managed according to both its operational organisation and legal Group organisation. The Group's management is based primarily on an operational matrix organisation.

In 2020 The Group was organised in units as:

• Sales and Marketing (SM), which is responsible for customer relationships, sales, workplace servic-es and marketing.
• The Innovation to Market (ITM), which is responsible for the company's brand and the development and management of the product portfolio.
• The Customer Supply Management (CSM), which is responsible for after-sales activities, including sourcing, production, removal services, product development, quality assurance, the research labo-ratory, planning of material ﬂows and logistics as well as environmental management. The plants have been concentrated at three locations: Nummela (ﬁnal product assembly) and Kitee (manu-facturing of melamine and laminate composites), both in Finland, and Warsaw (upholstery compo-nents), Poland.
• People & Communication, which is responsible for human resources, communications and responsi-bility management.
• The Group's Finance, IT and IR, which is responsible for the Group's ﬁnancial planning and report-ing, investor relations as well as IT and legal matters.

Annual general meeting

The General Meeting is the company's supreme decision-making body. The Annual General Meeting must be held within six months of the end of the ﬁnancial year. The ﬁnancial statements, Board of Directors' report and the auditor's report are presented at the Annual General Meeting. The Meeting decides on the approval of the ﬁnancial statements, use of the proﬁt shown on the balance sheet, discharging the mem-bers of the Board of Directors and the CEO from liability, the fees of the Board members and auditors and the number of members on the Board. The General Meeting also elects the Directors of the Board and the auditor. Other matters on the agenda of the General Meeting are mentioned in the notice of meeting.

Martela has two share series ('K shares' and 'A shares'), with each K share entitling its holder to 20 votes at a General Meeting and each A share entitling its holder to one vote. The redeeming of K shares is re-ferred to in the Articles of Association. Private owners of K shares have a valid shareholder agreement that restricts the sale of these shares to other than existing holders of K shares. The company's total share capital on 31 December 2020 was EUR 7 million.

Board of directors

The Board of Directors, elected by the Annual General Meeting each year, is responsible for the manage-ment and proper arrangement of the operations of the company in compliance with the Limited Liability Companies Act and the Articles of Association.

Preparations concerning the composition of the Board of Directors are carried out by the principal shareholders, who propose Board candidates to the Annual General Meeting based on their preparato-ry work. In accordance with the Articles of Association, the Board of Directors consists of no less than ﬁve and no more than nine members. There may be no more than two deputy members. The Board of

Directors elects from among its members a Chairman and Vice Chairman to serve until the end of the next Annual General Meeting.

According to the principles of the Board diversity, the members of the Board of Directors must have sufﬁcient and complementary experience and expertise in Martela's most important business sectors and markets.

The Board must have both sexes and a diverse age distribution. Board members should have sufﬁ-ciently diverse professional and educational background, strategy development and implementation skills, economic expertise, experience in managing companies at various stages of development, innovation, decision-making and questioning skills, and sufﬁcient time for working in the board. The achievement and development of diversity in reaching the goals is assessed in the Board Self-Evaluation Discussion

The Board has conﬁrmed a Charter deﬁning the duties of the Board, meeting practices, the matters to be dealt with at meetings, the targets set by the Board for its operations, a self-evaluation of these operations, and the Board's committees.

In addition to the duties mentioned in the Limited Liability Companies Act and the Articles of Associa-tion, the Board of Directors is responsible for:

• deciding on the Group strategy
• deciding on the Group structure
• approving ﬁnancial statements, interim ﬁnancial statements and interim reports
• approving the Group's operating plans, budgets, major investments and donations
• deciding on business expansion and reduction, acquisitions and divestments
• deciding on the Risk management policy and principles of the internal control
• deciding on dividend policy and make a proposal to the Annual General Meeting on the amount of dividend to be paid
• deciding on the Treasury policy
• approving and dismissing the CEO and to decide on his salary
• authorising the Remuneration Committee to decide on the appointments and remuneration of the members of the Group Management Team and the general principles of the Group's performance bonus scheme
• deciding on Management's share-based incentive schemes
• regularly approving and revising corporate governance principles and internal policies
• annually approving the company's internal control and risk management principles and addressing the most signiﬁcant risks and uncertainties associated with the company's operations

• appointing board committees and deciding on their reporting
• accepting stock exchange releases related to the Board's decisions
• conﬁrming the principles of the Board diversity
• the other statutory provisions of the Limited Liability Companies Act, the Corporate Governance Code or elsewhere

Following persons are members of the Board:

• Heikki Martela, b. 1956, KTM, Board member, direct ownership 130,942 A shares and 52,122 K shares and indirectly 232,574 A shares ja 292,000 K shares
• Minna Andersson, b. 1973, MEng, Head of Sales and Marketing Canter Oy, ownership 49,200 K shares
• Eero Martela, b. 1984, DI, General Manager Columbia Road Oy, ownership 6,710 A shares and 400 K shares
• Jan Mattson, b. 1966, M Sc. Architecture, CEO Tengbom Ab
• Katarina Mellström, b. 1962, KTM, IMM Consulting Ab owner
• Johan Mild, b. 1974, KTM, CEO Remeo Oy
• Anni Vepsäläinen, b. 1963, DI, CEO Suomen Messut Osuuskunta, ownership 2,000 A shares

The Board convened sixteen times during the ﬁnancial year. Members of the Board attended the meet-ings following way:

Heikki Martela

16 0

Eero Martela

Present

16 0

Johan Mild (from March 12) Eero Leskinen (until March 12) Minna Andersson

1 0

15 0

15 1

Anni Vepsäläinen Jan Mattsson Katarina Mellström

16 0

14 2

16 0

Absent

The Board reviews its own activities annually, either by self-assessment or assessment made by an ex-ternal consultant. In both cases a summary of the evaluations is jointly discussed at a Board meeting.

The Board has evaluated the independence of its members and determined that Eero Martela, Heik-ki Martela, Jan Mattsson, Katarina Mellström, Johan Mild and Anni Vepsäläinen are independent of the company. Of the company's largest shareholders Jan Mattsson, Katarina Mellström, Johan Mild and Anni Vepsäläinen are independent members of the Board.

The Board has formed from among its members a Human Resource and Rewarding Committee and an Audit Committee, which both have written Charters.

According to the Charter, the key duties of the Human Resource and Rewarding Committee include:

• deciding, with authorisation from the Board, on the remuneration issues and annual performance bonuses of the CEO and the Group Management Team as well as general principles for the Group's performance bonus scheme for the entire personnel
• preparing for the Board the structure, criteria and target levels of the long-term incentive plans for key personnel processing the appointments of the CEO and Group Management Team members, deputy arrangements and successor issues.

The Compensation Committee also handles remuneration statements in connection with the ﬁnancial statements

The Board's Human Resource and Rewarding Committee comprises Heikki Martela, Jan Mattsson and Katarina Mellström.

The committee convened four times during the ﬁnancial year. Members of committee attended the meetings following way:

Present

Heikki Martela Katarina Mellström Jan Mattsson

4 0

• assessing the independence of the auditor or the audit ﬁrm, and in particular the provision of ancil-lary services to the company,
• evaluating the fees charged on auditing and ancillary services and their criteria,
• preparing a proposal for a decision on the election of the auditor,
• assessing the compliance process with laws and regulations and respect for ethical principles in the organisation,

• conducting reports on the company's most signiﬁcant legal and regulatory procedures

The Board's Audit Committee comprises Eero Martela, Johan Mild and Anni Vepsäläinen.

The committee convened ﬁve times during the ﬁnancial year. Members of committee attended the meetings following way:

Present	Absent
Johan Mild	4	0
Eero Leskinen	1	0
Eero Martela	5	0
Anni Vepsäläinen	3	2

Absent

The secretary of the Board of Directors is a lawyer from the same company from where other legal ser-vices is provided to the Group. The Chairman of the Board is in direct contact with the CFO as necessary and regularly with the Company's auditor.

According to the Charter, the key duties of the Audit Committee include:

• monitoring the ﬁnancial reporting and interim report processes,
• supervising the ﬁnancial reporting process,
• monitoring the company's ﬁnancial condition,
• monitoring the adequacy and effectiveness of the company's internal control and risk management systems,
• processing the description of the internal control and risk management systems related to the ﬁ-nancial reporting process included in the Corporate Governance Statement,
• monitoring the statutory audit of the ﬁnancial statements and the consolidated ﬁnancial statements,
• observing, together with the auditors and the management of the company, the ﬁndings of the au-diting carried out and the possible difﬁculties in carrying out the audit,

CEO

The Board appoints Martela Corporation's CEO and decides on the terms and conditions of his service relationship, which are deﬁned in a written CEO's service contract. The CEO is responsible for the oper-ational management and supervision of the parent company and the Group according to the guidelines set by the Board.

• CEO Artti Aurasmaa, b. 1975, M Econ, does not own Martela shares

Group management team

The Board of Directors and the CEO appoints the members of the Group Management Team. The CEO of Martela Corporation acts as the Chairman of the Group Management Team. The directors responsible for the units and processes are also represented in the Group Management Team. The Group Manage-ment Team drafts and reviews strategies, budgets and investment proposals and monitors the ﬁnancial situation of the Group and its business areas and processes and the attainment of operational targets and plans. The Group Management Team meets once a month.

Following persons are members of the Group Management team:

• Kristiina Hoppu, b.1966, M Laws, People & Communication
• Kalle Lehtonen, b. 1974, M Econ., Group Finance and IR, indirect ownership 5,000 A shares
• Ville Taipale, b. 1971, M S. Technology, Customer Supply Management
• Johan Westerlund, b. 1975, M Econ., Sales and Marketing

Financial reporting in the group

Martela Corporation's Board of Directors is provided with monthly reports on the ﬁnancial performance and forecasts of the Group. The reports and forecasts are also presented by the CEO at Board meetings, where they are reviewed.

The Group Management Team meets about once a month to evaluate the ﬁnancial performance, out-look and risks of the Group.

Auditing

The auditing of Group companies is carried out in accordance with the valid laws in each country and each company's Articles of Association. The principally responsible auditor of the parent company co-or-dinates the auditing of the Group's subsidiaries together with the Group's CEO and CFO. The auditors of Martela Corporation and the Group are the authorised public accountants Ernst & Young, with Osmo Valovirta, Authorised Public Accountant, as the principally responsible auditor. All the auditors of the Group's companies are in the Ernst & Young chain.

In year 2020 audit fees were EUR 73 thousand and other advisory services EUR 7thousand.

Internal control

The reliability of ﬁnancial reporting is one of the principal objectives of Martela Corporation's internal control. The CEO is responsible for the operational management and supervision of the Group according to the guidelines set by the Board.

Martela's strategy is updated and its targets deﬁned on an annual basis. Strategic planning forms the basis of all planning at Martela and is carried out on a rolling basis for the forthcoming period of 2-3 years. Target setting is an internal control prerequisite because the targets of the companies, business areas, functions and supervisors are derived from Group-level targets. For each business area, speciﬁc ﬁnancial and non-ﬁnancial targets are set in accordance with the business plan, and their attainment is monitored regularly through comprehensive reporting to executive management, for example.

The CFO has overall responsibility for ﬁnancial reporting in the Group. Reporting to executive man-agement is carried out separately and independently of business operations. Controllers and ﬁnancial managers (controller function) are responsible for Group, company and other ﬁnancial reporting. At Mar-tela, ﬁnancial reporting is carried out in compliance with guidelines, laws and regulations in a consist-ent manner throughout the Group. The reliability of ﬁnancial reporting depends on the appropriateness and reliability of ﬁnancial and reporting processes and on the control measures taken to ensure these. In 2020, the internal control focused on sales, quote to cash processes and management of inventories.

The CFO is responsible for the maintenance and development of reporting processes and deﬁning and implementing control measures. Control measures include guidelines, matching, management reviews and reporting on deviations. The CFO monitors compliance with deﬁned processes and controls. He also monitors the reliability of ﬁnancial reporting.

The Board of Directors approves Martela's strategy and annual operating plans. It also approves the principles and rules of risk management, and monitors on a regular basis the effectiveness and sufﬁcien-cy of the internal control and risk management. Furthermore, the Board is responsible for the internal control of the ﬁnancial reporting process.

Auditors and other external controllers assess the control measures in terms of the reliability of ﬁ-nancial reporting.

Risk management and internal audit

Martela's Board of Directors has conﬁrmed the principles of risk management. The purpose of risk management is to identify, monitor and manage risks that could pose a threat to business and to the achievement of business objectives. Group management has supreme operational responsibility for risk management policy.

In the Group, risks are analysed and decisions are made to manage these risks as a part of the regu-lar monitoring carried out by the Board and the management teams as described above. Risks are also evaluated when planning and making decisions on signiﬁcant projects and investments. Risk manage-ment is integrated with the strategy process as a separate stage of analysis. There is no separate risk

management organisation, but the associated responsibilities are assigned in line with the rest of the business operations and organisation. The company's Board of Directors has included an annual review of risk management in its schedule of work.

Taking into consideration the nature and scope of Martela's business, the company has not consid-ered it appropriate to form a separate internal audit function. The internal control is carried out in the form of controls in business processes, and the company will either make its own or, if necessary, con-duct separate internal audit reports with external experts.

Risks

In accordance with Martela's risk management model, risks are classiﬁed and prepared for in different ways. The manufacture of Martela's products is largely based on the company performing the ﬁnal assem-bly and using subcontractors for components. Production control is based on orders placed by custom-ers, which means that there is no need for any large-scale warehousing. Risks of damage are covered by appropriate insurance policies, and these provide comprehensive coverage for property, business interrup-tion, supplier interruption loss and loss liability risks. Martela uses the services of an external insurance broker to manage insurance matters. The services of an external partner are also used in legal matters.

The responsibility perspectives regarding the supply chain are discussed as part of the annual re-sponsibility report.

Finance risks are discussed in the notes to the ﬁnancial statements.

Management remuneration, beneﬁts and incentive plans

Information on the effect of management remuneration and the share-based incentive plan on the result for the year can be found in the notes of the ﬁnancial statements and on the company's website.

Insider administration

Martela complies with the Guidelines for Insiders issued by Nasdaq Helsinki Ltd. In addition, Martela's Board of Directors has conﬁrmed speciﬁc insider guidelines for the company to complement Nasdaq Helsinki Ltd's Guidelines for Insiders.

The company has deﬁned as permanent insider people who work at Martela Group and who have ac-cess to all inside information concerning Martela due to their position or task. The information in the permanent insider list is not public. In addition to the permanent insider list, non-public project-speciﬁc insider lists shall be established, if necessary, as deﬁned in Nasdaq Helsinki Ltd's Guidelines for Insiders. Permanent insiders are not entered into the project-speciﬁc insider lists.

The persons discharging managerial responsibilities, other permanent insiders and persons partici-pating in preparing of ﬁnancial reports of the company must not trade in Martela's ﬁnancial instruments prior to the publication of an interim report and ﬁnancial statement release of the company. The length of the closed period is 30 days at Martela.

Martela discloses inside information that directly concerns Martela or its ﬁnancial instrument as soon as possible, unless the conditions for delay of disclosure of inside information are met. Martela has deﬁned an internal process in order to evaluate and disclose the inside information and to monitor and evaluate the duration and the conditions for the delay. Martela continuously monitors the situation to ensure that the conditions for the delay are met and the company has the ability to publicly disclose the information immediately in the case of a data leakage.

In accordance with MAR, Martela has an obligation to disclose transactions with Martela's ﬁnancial instruments conducted by persons discharging managerial responsibilities at the company and persons closely associated with them.

The obligation to disclose transactions applies to the following persons discharging managerial responsibilities at Martela:

• Members of Martela's Board of Directors and CEO, and
• Members of Martela Group's Management Team.

Transactions between companies in the Martela Group conducted by persons discharging managerial responsibilities at Martela and persons closely associated with them are monitored. In 2020 there were no material related party transactions.

Heikki Martela

Board of Directors

CHAIRMAN OF THE BOARD Born in 1956, M.Sc. (Econ.), MBA

Member of the Board of Martela Oyj since 1986,

Chairman of the Board of Martela Oyj 2000-

2002 and again starting 2015.

Managing Director of Martela Oyj 2002-2015.

Other key duties:

Chairman of the Board, Marfort Oy

Member of the Board, Lappset Group Oy, Net-control Oy, and Filosoﬁan Akatemia Oy

Owns 130,942 Martela Oyj A shares and 52,122 K shares.

Minna Andersson

BOARD MEMBER

Born in 1973, MEng, MKT (Marketing Degree) Member of the Board of Martela Oyj since 2017. Marketing and Responsibility Director of Martela Oyj, 2011-2017

Other key duties:

Head of Sales and Marketing, Canter Oy Member of the Board, Canter Oy and Marfort OyOwns 49,200 Martela Oyj K shares.

Eero Martela

BOARD MEMBER

Born in 1984, M.Sc. (Tech.)

Member of the Board of Martela Oyj since 2015.

Other key duties:

General Manager, Finland, Columbia Road OyOwns 6,710 Martela Oyj A shares and 400 K shares.

Jan Mattsson

BOARD MEMBER

Born in 1966, M.Sc. (Architecture), KHT Royal In-stitute of Technology

Member of the Board of Martela Oyj since 2019.

Other key duties:

CEO and partner, Tengbomgruppen AB Chairman of the Board, Tovatt Architects & plan-ners AB

Member of the Board, Svenska Innovationsföre-tagen

Anni Vepsäläinen

BOARD MEMBER

Born in 1963, M.Sc. (Tech.) Member of the Board since 2016.

Other key duties:

Member of the Board, Cinia Oy

Managing Director, Finnish Fair Corporation Chairman of the Board, Helsinki Region Chamber of Commerce

Member of the Board, Finnish Chamber of CommerceOwns 2,000 Martela Oyj A shares

Johan Mild

BOARD MEMBER

Born in 1974, M.Sc. (Accounting)

Member of the Board of Martela Oyj since 2020.

Other key duties: CEO, Remeo Oy

Member of the Board, Ympäristöteollisuus ja -palvelut YTP ry

Katarina Mellström

BOARD MEMBER

Born in 1962, M.Sc. (Econ.)

Member of the Board of Martela Oyj since 2018.

Other key duties:

Owner, IMM Consulting AB Member of the Board, Vectura AB

Artti Aurasmaa

Management team

CHIEF EXECUTIVE OFFICER (CEO)

Born in 1975, M.Sc. (Economy)

Area of responsibility: Martela Corporation CEO and member of the management team since 2020.

Other Key Duties:

Ropo Capital Oy, CEO, 2016-2020 Stella Care Oy, CEO, 2014-2016 3StepIT Oy, CEO, 2005-2014

Current Board Memberships:

Ropo Capital Oy, member of the Board, 2020- Bookers Group Oy, Chairman of the Board, 2020-

Vincit Oyj, Chairman of the Board, 2019- Yleinen työttömyyskassa YTK, member of the Board, 2015-

Kalle Lehtonen

Kristiina Hoppu

CHIEF PEOPLE OFFICER Born in 1966, Master of Laws Area of responsibility: Group HR

Joint the company in 2019, member of the man-agement team since 2020.

Other Key Duties:

CGI Suomi Oy, Leadership roles in human re-sources, 2010-2018

Pohjolan Voima Oy, VP, Human Resources and Le-gal Affairs, 2007-2008

Tecnotree Oyj, Leadership roles in legal and hu-man resources, 1998-2007

CHIEF FINANCIAL OFFICER (CFO)

Born in 1974, M.Sc (Econ.)

Area of responsibility: Group Finance, Investor Relations, Legal Affairs, HR and IT.

CFO and member of the management team since 2018.

Other Key Duties:

Tantalus Rare Earths AG, CFO, 2013-2018

Ruukki Group Oyj, CFO, 2012-2013

Ruukki Group Oyj, Wood Processing Division, CFO, 2009-2012

Aldata Solution Oyj, Group Controller, 2003-2008

ABB Oy, managerial positions in ﬁnancial administration, 1998-2003

Owns 5,000 Martela Oyj A shares.

Mikko Mäkelä

VP, INNOVATION TO MARKET Born in 1973, M.Sc. (Tech.)

Area of responsibility: Development of Group's Product and Service Offering, Workspace Professional Service and In-terior Design.

Vice President and member of manage-ment team since 2017.

Key work experience:

Wärtsilä Oyj, Director, Strategy and Business Development, 2015-2017 F-Secure Oyj, Leadership in product management and strategy, 2009-2015 Nokia Oyj, Leadership and other tasks of product management and strategy, 2002-2009

McKinsey & Co, Management consultant, 2000-2002

Andersen Consulting (Accenture), Man-agement consultant, 1998-2000

Ville Taipale

VP, CUSTOMER SUPPLY MANAGEMENT VP, Customer Supply Management

Born in 1971, DI

Area of responsibility: Group Sourcing, Product Development, Quality Control, Sustainability, Production, Logistics and Removal Service. Vice President and member of the management team since 2018.

Other Key Duties:

Patria Land Systems Oy, Vice President, Sourcing and Logistics

2015-2018

Componenta Oyj, Vice President, Sourcing and Procurement 2010-

2015

Fiskars Oyj, Director, Sourcing Unit, 2007-2010

Nokia Oyj, Supply chain management and development positions,

1998-2007

VTT, Researcher, 1997-1998

Johan Westerlund

VP, SALES & MARKETING Born in 1975, M.Sc. (Econ.)

Area of responsibility: Group Customers, Marketing and Sales in Finland, Sweden, Norway and International Dealer Network.

Vice President and member of the management team since 2017.

Other Key Duties:

Ricchetti Group S.p.a, Managing Director Nordics, 2015-2017

Pukkila Oy, CEO, 2012-2015

Newtop Oy, CFO, 2010-2012

BearingPoint Oy, Management consultant, 2003-2010

Kraft Foods, Economy and Business Controller positions, 2000-

2003

Information for shareholders

Annual General Meeting

The Annual General Meeting of Martela Oyj will be held on Thursday 18 March 2021 at 1 p.m. at Itämer-entori 2, 00180 Helsinki. The names of shareholders wishing to attend the meeting should be entered in the shareholder register at Euroclear Finland Ltd no later than 8 March 2021 and the shareholder should register by email toagm@innovatics.ﬁ,by post to Innovatics Oy, Yhtiökokous / Martela Oyj, Ratame-starinkatu 13 A, 00520 Helsinki, or on the internet site of the Corporationwww.martela.com/about-us/ about-martela/investors no later than March 12, 2021 at 4 p.m.

Payment of dividends

The Board of Directors proposes to the Annual General Meeting that no dividend would be paid for the ﬁnancial year 1 January 2020-31 December 2020.

Publication of ﬁnancial information

Martela Corporation's ﬁnancial information in 2021 will be published as follows:

• January-March (Q1) Financial Review on Friday May 5, 2021
• January-June (H1) Half-Year Report on Friday August 13, 2021
• January-September (Q3) Financial Review on Friday November 5, 2021

Financial reports are available in Finnish and English on the company's website (www.martela.com/ﬁ andwww.martela.com). Annual reports are available on the company's website in pdf format. After pub-lished, stock exchange releases are available on the company's website, where you can ﬁnd all stock ex-change releases in chronological order.

Contact
FINLAND	SWEDEN
Martela Oyj	Martela AB
Takkatie 1, PL 44	Storgatan 49A
FI-00371 Helsinki	57132 Nässjö
tel. +358 10 345 50	tel. +46 380 37 19 00
www.martela.com/ﬁ	www.martela.com/sv
Kidex Oy	NORWAY
Savikontie 25	Martela AS
FI-82500 Kitee	Drammensveien 130
tel. +358 10 345 7211	N-0277 Oslo
www.kidex.ﬁ	tel. +47 23 28 38 50
www.martela.com/no
Muuttopalvelu Grundell Oy
Tikkurilantie 146	POLAND
FI-01530 Vantaa	Martela Sp. z o.o.
tel. +358 10 480 4200	ul Geodetów 156
www.martela.com/services/	05-500 Józefosław
implementation-of-interiors/removal-services	www.martela.com

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Martela Oyj published this content on 10 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 March 2021 10:50:04 UTC.

Real-time Estimate Cboe Europe Other stock markets 10:00:54 2024-05-10 am EDT			5-day change	1st Jan Change
1.34 ^EUR	-2.55%		-0.74%	+5.88%

Apr. 05	Martela Oyj Announces Committee Changes	CI
Apr. 05	Martela Oyj Appoints Jacob Kragh as New Member of the Board of Directors	CI

Martela Oyj Announces Committee Changes	Apr. 05	CI
Martela Oyj Appoints Jacob Kragh as New Member of the Board of Directors	Apr. 05	CI
Martela Corporation Proposes No Dividend for the Year 2023	Mar. 08	CI
Martela Oyj Completes Plans for Streamlining and Reorganising Operations	Feb. 15	CI
Martela Oyj Provides Earnings Guidance for the Year 2024	Feb. 14	CI
Martela Oyj Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 14	CI
Martela Oyj Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Feb. 14	CI
Martela to Cut Jobs, Adjust Operations to Lower Costs	Jan. 03	MT
Martela Plans to Streamline and Reorganise Operations	Jan. 03	CI
Martela Oyj Revises Earnings Guidance for the Full Year 2023	Dec. 20	CI
Martela Oyj Provides Earnings Guidance for the Year 2023	Nov. 10	CI
Martela Oyj Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 10	CI
Martela Oyj Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	23-08-11	CI
Martela Corporation Revises Earnings Guidance for the Year 2023	23-08-11	CI
Martela Corporations Appoints Suvi-Maarit Kario (M.Soc.Sc.) as Sustainability and Member of Management Team, Effective August 7, 2023	23-08-01	CI
Finland's Martela Appoints New CFO	23-06-30	MT
Martela Oyj Appoints Henri Berg as New CFO	23-06-30	CI
Furniture Group Martela's Finance Chief to Step Down	23-05-26	MT
Kalle Lehtonen, CFO Resigns from Martela Corporation, Effective August 24, 2023	23-05-26	CI
Kalle Lehtonen, Member of the Group Management Team Resigns from Martela Corporation, Effective August 24, 2023	23-05-26	CI
Martela Oyj Reports Earnings Results for the First Quarter Ended March 31, 2023	23-05-05	CI
Martela Approves Dividend for 2022	23-03-29	CI
Martela Oyj Reports Earnings Results for the Full Year Ended December 31, 2022	23-02-10	CI
Martela Oyj Reports Earnings Results for the Fourth Quarter Ended December 31, 2022	23-02-10	CI
Martela Oyj Proposes Dividend for the Year 2022	23-02-10	CI

	1st Jan change	Capi.
MARTELA OYJ	+5.88%	6.69M
MILLERKNOLL, INC.	+2.89%	1.96B
ITOKI CORPORATION	+39.20%	591M
UE FURNITURE CO., LTD.	+9.69%	555M
NANJING INFORM STORAGE EQUIPMENT (GROUP) CO., LTD.	-6.81%	443M
ITAB SHOP CONCEPT AB	+66.12%	380M
FURSYS INC.	+22.79%	250M
VIRCO MFG. CORPORATION	+5.74%	204M
INABA SEISAKUSHO CO., LTD.	+23.18%	190M
I JANG INDUSTRIAL CO.,LTD.	+7.55%	77.07M

Martela Oyj

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FI0009900385

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Sector Office Furniture