Martela Oyj : Interim report Q1

2021

Interim report

1 January - 31 March 2021

MARTELA CORPORATION INTERIM REPORT 1 JANUARY - 31 MARCH 2021

MARTELA CORPORATION'S INTERIM REPORT 1 JANUARY - 31 MARCH

The January-March 2021 revenue decreased and operating result improved compared to previous year.

January-March 2021

• Revenue was EUR 19.9 million (21.7), representing a change of -8.2 %
• Comparable operating result was EUR -1.4 million (-2.8)
• Operating result was EUR -2.0 million (-2.8)
• Operating profit per revenue was -10.1 % (-13.1%)
• The result for the period was EUR -2.3 million (-3.5 )
• Earnings per share amounted to EUR -0.56(-0.84)

Outlook

Outlook for 2021

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

Key figures, EUR million
	2021	2020	Change	2020
	1-3	1-3	%	1-12
Revenue	19.9	21.7	-8.2 %	88.4
Operating result	-2.0	-2.8		-4.0
Operating result %	-10.1 %	-13.1 %		-4.5 %
Result before taxes	-2.4	-3.5		-4.8
Result for the period	-2.3	-3.5		-4.8
Earnings/share, euro	-0.56	-0.84		-1.16
Return on investment %	-7.9	-37.4		-13.4
Return on equity %	-23.2	-24.1		-35.7
Equity ratio %	21.0	29.5	-28.9 %	22.7
Gearing %	56.7	64.3	-11.8 %	37.9

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MARTELA CORPORATION INTERIM REPORT 1 JANUARY - 31 MARCH 2021

Artti Aurasmaa, CEO:

"First quarter this year was defined by still continuing corona pandemic and related strong remote work recommendation as well as general uncertainty in the market. Our revenue decreased by 8.2 % in the first quarter compared to same period last year. Revenue in the first quarter was EUR 19.9 million.

As expected also the new orders continued to decrease in the first quarter. Orders decreased especially in the commercial sector. Like in decrease of revenue, uncertainty in the market caused by the pandemic also impacted the volume of new orders. The timetable of the recovery in the demand will be strongly dependent on the progress of the pandemic and how that will affect decisions of our customers on returning to offices.

Our operating result improved in the first quarter compared to the same period last year and was EUR -2.0 million. Operating result includes onetime expenses of EUR 0.6 million, which relates to layoffs resulting from cooperation negotiations concluded earlier this. Our comparable operating result was EUR -1.4 million which is a significant improvement to same period last year where our operating result was EUR -2.8 million. Improvement was related to cost efficiency, temporary layoffs cause by the Pandemic as well as decrease in our fixed expenses.

We have renewed our organisation structure and announced in February a new Management Team, which will further imporve our position as a leading sustainable workplace specialists. We have also today announced result of share issue published in March. In the share issue almost 40 key employees subscribed in total 352 440 shares from the offered amount of 432 260 shares. I am extremely pleased with the result of the share issue, which demonstrates during these extreme times a strong commitment of our key employees to the company and to our position as a leading workplace specialists. Commited and professional employees are the most important asset which will enable us to rise from last years loss making cycle back to porfitable operations and strenghten our position in workplace development area driven by the circular economy.

The coronavirus pandemic and the uncertainty caused by it is still impacting negatively to the market situation. We are not expecting the market conditions to imporove during the first six months of this year. It is still difficult to estimate how the current conditions will impact our midterm revenue and operating result development. However I believe that turn for the better is closer and we are ready to meet the increase in demand driven by the positive market development. Despite the Pandemic we have maintained excellent delivery accuracy and customer satisfaction level and this gives us good foothold to spring for new growth when Pandemic and remote work recommendations finally end.

We believe that working environments will permanently change in the future. The coronavirus pandemic has accelerated the process of changing the way we work. The office is just one of the many places where we work from, and for some of us the amount of remote work will increase for good. This will increase the demand for multipurpose working spaces and the need to invest to remote working conditions. We will continue together with our customers to be a forerunner in creating user centric working environments, which will improve user experience, efficiency and innovation capabilities as well as lower the overall costs. We will meet our customers needs for increased flexibility in workplace with our WaaS concept, which we have piloted and actively developed further during the last winter. Interest towards our concept has been encouraging and we expect it to have an positive impact to our business in the second half of this year."

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 slightly smaller on the public sector. At the moment it is challenging to say what the midterm impacts to general market conditions will be and how long the uncertainty in the markets will continue.

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MARTELA CORPORATION INTERIM REPORT 1 JANUARY - 31 MARCH 2021

Revenue and operating result

Revenue and result for January-March 2021

Revenue for January-March was EUR 19.9 million (21.7) and declined by 8.2 % from previous year. Revenue in Norway increased by 204.2 % and in Other countries by 40.7 % compared to previous year. In Finland revenue declined by 14.3 % and in Sweden by 29.1 %.

The Group's comparable operating result in January-March was EUR -1.4 million (-2.8 ) and operating result was EUR -2.0million(-2.8).

The January-March result before taxes was EUR -2.4 million (-3.5) and net result EUR -2.3 million (-3.5).

Revenue by country, EUR million

	2021	2020		Change	2020
	1-3	1-3	%	1-12
Finland	15.4	18.0	-14.3 %	72.4
Sweden	1.6	2.3	-29.1 %	9.2
Norway	1.7	0.6	204.2 %	3.8
Other	1.1	0.8	40.7 %	3.1
Revenue total	19.9	21.7	-8.2 %	88.4
Income from the sale of goods	16.8	18.0	-6.6 %	74.2
Income from the sale of services	3.1	3.7	-15.7 %	14.2

Cumulative revenue includes EUR 207 thousand (113) income from sold furniture that based on the customer agreement is classified as rental income.

Financial position

The cash flow from operating activities in January-March was EUR -0.5 million (-0.7).

At the end of the period, interest-bearing liabilities stood at EUR 14.5 million including EUR 5.6 million lease liabilities according to IFRS 16. At the end of comparison period the interest-bearing liabilities stood at EUR 15.6 million. Net liabilities were EUR 5.1 million (8.4). At the end of the period, short-term limits of EUR 5.2 million were in use (4.0) and available limits stood at EUR 0.9 million.

The gearing ratio at the end of the period was 56.7 % (64.3) and the equity ratio was 21.0 % (29.5). Financial income and expenses were EUR -0.4 million (-0.7).

Financing arrangements include covenant clauses in which the ratio between the Group's net liabilities and EBITDA and the Group's equity ratio are examined. The key figures calculated at the end of the review period did not fulfil the covenant clauses concerning one of the contracts. 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. The balance sheet total stood at EUR 45.1 million (46.9) at the end of the period.

Capital expenditure

The Group's gross capital expenditure for January-March was EUR 0.0 million (0.9).

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MARTELA CORPORATION INTERIM REPORT 1 JANUARY - 31 MARCH 2021

Personnel

The Group employed an average of 431 people (452), which represents a decrease of 21 persons or 4.6 %. The number of employees in the Group was 432 (451) at the end of the review period. Personnel costs in January-March totalled EUR 6.6 million (6.7).

Personnel on average	2021	2020	Change	2020
by country	1-3	1-3	%	1-12
Finland	358	377	-5.0 %	375
Sweden	22	21	4.8 %	24
Norway	15	15	0.0 %	15
Other	36	39	-7.7 %	37
Total	431	452	-4.6 %	451

Martela's offering

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

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.

OTHER MATTERS

Changes in Management Team

Head of Innovation to Market -organization and management team member VP, Mikko Mäkelä, has left the company at the end of January. The change has been announced in the stock exchange releases on January 14, 2021.

Martela has restructured its leadership team to reflect the ongoing market change and accelerate the implementation of the strategy in selected core business areas.

The new Leadership Team that has taken effect on March 1, 2021, consists of the following functions and leadership team members, led by CEO Artti Aurasmaa:

• The Brand & Design business unit is responsible for brand and product portfolio management and marketing. Kari Leino has been appointed to lead the unit.
• Martela Design Studio business unit is responsible for the planning and development of work and learning environment projects. Eeva Terävä has been appointed to lead the unit.
• Operations business unit is responsible for production and supply chain management. Ville Taipale will continue to lead the unit.
• Sales unit is responsible for global sales operations and customer service. Johan Westerlund will continue to lead the unit.
• Business Support unit is responsible for finance, human resources and IT. Kalle Lehtonen will continue to lead the unit.

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